EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of June 25, 2007
among
IBERDROLA, S.A.,
GREEN ACQUISITION CAPITAL, INC.
and
ENERGY EAST CORPORATION
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER......................................................................1
SECTION 1.1 The Merger..............................................................1
SECTION 1.2 Closing.................................................................1
SECTION 1.3 Effective Time..........................................................2
SECTION 1.4 Effects of the Merger...................................................2
SECTION 1.5 Certificate of Incorporation and Bylaws of the Surviving Corporation....2
SECTION 1.6 Directors and Officers of the Surviving Corporation.....................2
SECTION 1.7 Conversion of Securities................................................2
SECTION 1.8 Exchange of Certificates................................................3
SECTION 1.9 Effect on Company Equity Plans..........................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................7
SECTION 2.1 Organization, Standing and Corporate Power..............................8
SECTION 2.2 Capitalization..........................................................9
SECTION 2.3 Authority; Noncontravention; Voting Requirements.......................10
SECTION 2.4 Governmental Approvals.................................................12
SECTION 2.5 Company SEC Documents; Financial Statements; Undisclosed Liabilities...12
SECTION 2.6 Absence of Certain Changes.............................................15
SECTION 2.7 Legal Proceedings......................................................15
SECTION 2.8 Compliance With Laws and Orders; Permits...............................16
SECTION 2.9 Proxy Statement........................................................16
SECTION 2.10 Tax Matters............................................................17
SECTION 2.11 Employee Benefits and Labor Matters....................................19
SECTION 2.12 Contracts..............................................................22
SECTION 2.13 Environmental Matters..................................................23
SECTION 2.14 Intellectual Property..................................................24
SECTION 2.15 Insurance..............................................................25
SECTION 2.16 Certain Business Relationships with Affiliates.........................25
SECTION 2.17 Nuclear Generating Facilities..........................................26
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SECTION 2.18 Hedging Activities.....................................................26
SECTION 2.19 Foreign Corrupt Practices and International Trade Sanctions............27
SECTION 2.20 Opinion of Financial Advisors..........................................27
SECTION 2.21 Brokers and Other Advisors.............................................27
SECTION 2.22 Section 912 of the NYBCL Not Applicable; State Takeover Statutes.......27
SECTION 2.23 Regulatory Proceedings.................................................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................28
SECTION 3.1 Organization and Standing..............................................28
SECTION 3.2 Authority; Noncontravention............................................28
SECTION 3.3 Governmental Approvals.................................................29
SECTION 3.4 Compliance.............................................................30
SECTION 3.5 Information Supplied...................................................30
SECTION 3.6 Ownership and Operations of Merger Sub.................................30
SECTION 3.7 Capital Resources......................................................30
SECTION 3.8 Legal Proceedings......................................................30
SECTION 3.9 Brokers and Other Advisors.............................................30
SECTION 3.10 Ownership of Company Common Stock......................................30
ARTICLE IV ADDITIONAL COVENANTS AND AGREEMENTS...........................................31
SECTION 4.1 Conduct of Business....................................................31
SECTION 4.2 Other Offers; Etc......................................................35
SECTION 4.3 Proxy Statement........................................................38
SECTION 4.4 Company Shareholders Meeting...........................................39
SECTION 4.5 Reasonable Best Efforts................................................39
SECTION 4.6 Public Announcements...................................................41
SECTION 4.7 Access to Information; Confidentiality.................................41
SECTION 4.8 Notification of Certain Matters........................................41
SECTION 4.9 Indemnification and Insurance..........................................42
SECTION 4.10 Fees and Expenses......................................................44
SECTION 4.11 Rule 16b-3.............................................................44
SECTION 4.12 Employee Matters.......................................................44
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SECTION 4.13 Delisting..............................................................46
SECTION 4.14 Transfer Taxes.........................................................46
SECTION 4.15 Governance; Support....................................................46
SECTION 4.16 Company Nuclear Assets.................................................46
SECTION 4.17 Rate Matters...........................................................46
SECTION 4.18 Company Investor Services Program......................................47
SECTION 4.19 Restructuring Transactions.............................................47
ARTICLE V CONDITIONS TO THE MERGER.......................................................47
SECTION 5.1 Conditions to Each Party's Obligation to Effect the Merger.............47
SECTION 5.2 Conditions to the Obligations of Parent and Merger Sub.................48
SECTION 5.3 Conditions to the Obligations of the Company...........................48
SECTION 5.4 Frustration of Closing Conditions......................................49
ARTICLE VI TERMINATION...................................................................49
SECTION 6.1 Termination............................................................49
SECTION 6.2 Effect of Termination..................................................51
SECTION 6.3 Termination Fee........................................................51
SECTION 6.4 Acknowledgment.........................................................51
ARTICLE VII MISCELLANEOUS................................................................52
SECTION 7.1 Nonsurvival of Representations, Warranties and Agreements..............52
SECTION 7.2 Amendment or Supplement................................................52
SECTION 7.3 Extension of Time, Waiver, Etc.........................................52
SECTION 7.4 Assignment.............................................................52
SECTION 7.5 Counterparts...........................................................53
SECTION 7.6 Entire Agreement; Third-Party Beneficiaries............................53
SECTION 7.7 Governing Law; Jurisdiction............................................53
SECTION 7.8 Specific Enforcement...................................................54
SECTION 7.9 Notices................................................................54
SECTION 7.10 Severability...........................................................55
SECTION 7.11 Definitions............................................................55
SECTION 7.12 Interpretation.........................................................61
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SECTION 7.13 No Limitation on Other Representation..................................61
Exhibit A: Form of Employment Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 25, 2007 (this
"Agreement"), is among IBERDROLA, S.A., a corporation (sociedad anonima)
organized under the Laws of the Kingdom of Spain ("Parent"), GREEN ACQUISITION
CAPITAL, INC., a New York corporation and a wholly owned Subsidiary of Parent
("Merger Sub"), and ENERGY EAST CORPORATION, a New York corporation (the
"Company") (Parent, Merger Sub and the Company being hereinafter collectively
referred to as the "Parties"). Certain terms used in this Agreement without
definition shall have their meanings as defined in Section 7.11.
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors or similar governing
bodies of Parent, Merger Sub and the Company each deems it advisable that Parent
acquire the Company on the terms and subject to the conditions provided for in
this Agreement;
WHEREAS, in furtherance thereof it is proposed that such acquisition
be accomplished by the merger of Merger Sub with and into the Company, with the
Company as the surviving corporation, in accordance with the New York Business
Corporation Law (the "NYBCL"), pursuant to which all of the shares of common
stock, $0.01 par value, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (each, a "Share" and,
collectively, the "Shares") (other than certain Shares as provided in Section
1.7(b)) will be converted into the right to receive the Merger Consideration, on
the terms and subject to the conditions provided for in this Agreement (the
"Merger"); and
WHEREAS, the respective Boards of Directors or similar governing
bodies of Parent (on its own behalf and as the sole shareholder of Merger Sub),
Merger Sub and the Company have each approved this Agreement and the Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, Parent, Merger Sub and the Company hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the NYBCL, at the
Effective Time, Merger Sub shall be merged with and into the Company, and the
separate corporate existence of Merger Sub shall thereupon cease, and the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation").
SECTION 1.2 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. (New York time) on a date to be specified by the
Parties (the "Closing Date"), which date shall be no later than the second (2nd)
business day after satisfaction or waiver of the conditions set forth in Article
V (other than those conditions that by
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their nature are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions at such time), at the offices of Milbank, Tweed,
Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New York 10005, unless
another time, date or place is agreed to in writing by the Parties.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, the Company as the Surviving Corporation shall duly prepare and
execute a certificate of merger in accordance with the relevant provisions of
the NYBCL (the "Certificate of Merger") and on the Closing Date file the
Certificate of Merger with the Secretary of State of the State of New York. The
Merger shall become effective upon such filing of the Certificate of Merger or
at such later time as is agreed to by the Parties and specified in the
Certificate of Merger (the time at which the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in Section 906 of the NYBCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.5 Certificate of Incorporation and Bylaws of the
Surviving Corporation. The certificate of incorporation and bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation and bylaws of the Surviving Corporation until
thereafter amended as provided therein or by applicable Law (and subject to
Section 4.9).
SECTION 1.6 Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation immediately following
the Effective Time, until their respective successors are duly elected or
appointed and qualified or their earlier death, resignation or removal in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation.
(b) The officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation until their respective
successors are duly appointed and qualified or their earlier death, resignation
or removal in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation.
SECTION 1.7 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
securities of Merger Sub or the Company:
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(a) Conversion of Merger Sub Common Stock. Each share of common stock,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one (1) validly
issued, fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.
(b) Cancellation of Certain Company Capital Stock. Any shares of
Company Common Stock that are owned by the Company as treasury stock and any
Shares owned by Parent, Merger Sub, any Subsidiary of Parent or any Subsidiary
of the Company shall be automatically canceled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Merger Consideration. Each Share, including each restricted share
of Company Common Stock granted under Company Plans (other than Shares to be
canceled in accordance with Section 1.7(b)), shall automatically be converted
into the right to receive $28.50 in cash, without interest (the "Merger
Consideration"), payable to the holder of such shares of Company Common Stock in
the manner provided in Section 1.8. All such Shares, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration therefor,
without interest, in accordance with this Agreement.
(d) Adjustment to Prevent Dilution. If after the date hereof and on or
prior to the Effective Time, the issued and outstanding shares of Company Common
Stock or securities convertible or exchangeable into or exercisable for Company
Common Stock shall be changed into a different number of shares or a different
class by reason of any merger, issuer tender, exchange offer, consolidation or
other business combination, reclassification, recapitalization, stock-split
(including a reverse stock-split), split-up, combination or exchange of shares,
or any dividend or distribution payable in stock or other securities is declared
thereon with a record date within such period, or any similar event shall occur,
the Merger Consideration will be adjusted accordingly to provide to the
shareholders of the Company the same economic effect, including any premiums, as
contemplated by this Agreement prior to such event.
SECTION 1.8 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate
and enter into an agreement with a bank or trust company reasonably acceptable
to the Company to act as agent for the holders of Shares in connection with the
Merger (the "Paying Agent") to receive, on terms reasonably acceptable to the
Company, for the benefit of holders of Shares, the aggregate Merger
Consideration to which holders of Shares shall become entitled pursuant to
Section 1.7(c). Parent shall deposit, or cause to be deposited, such aggregate
Merger Consideration with the Paying Agent prior to the Effective Time. Such
aggregate Merger Consideration deposited with the Paying Agent shall, pending
its disbursement to such holders, be invested by the Paying Agent in (i) direct
obligations of the United States of America, (ii) obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, (iii) commercial paper rated the highest
quality by either Moody's Investors Service, Inc. or Standard and Poor's Ratings
Services or (iv) money
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market funds investing solely in a combination of the foregoing. Any interest
and other income resulting from such investments shall be the property of, and
shall be paid to, Parent. No such investment or loss thereon shall affect the
Merger Consideration and Parent shall promptly replace any funds deposited with
the Paying Agent lost through any investment made pursuant to this clause (a).
(b) Exchange Procedures. Promptly after the Effective Time (but in no
event more than three (3) business days thereafter), the Surviving Corporation
shall cause the Paying Agent to (i) mail to each holder of Shares represented by
book-entry on the records of the Company or the Company's transfer agent on
behalf of the Company ("Book-Entry Shares"), whose shares were converted
pursuant to Section 1.7(c) into the right to receive the Merger Consideration, a
check in the amount of the number of Shares held by such holder as Book-Entry
Shares multiplied by the Merger Consideration and (ii) mail to each holder of
record of a certificate or certificates, which immediately prior to the
Effective Time represented outstanding Shares (the "Certificates"), whose shares
were converted pursuant to Section 1.7(c) into the right to receive the Merger
Consideration: (x) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent, and which shall be
in such form and shall have such other provisions as Parent may reasonably
specify prior to the Effective Time); and (y) instructions for use in effecting
the surrender of the Certificates in exchange for payment of the Merger
Consideration to which such holder is entitled pursuant to Section 1.7(c). Upon
surrender of a Certificate for cancellation to the Paying Agent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto (and such other customary documents as may
reasonably be required by the Paying Agent), the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration to
which such holder has a right to receive pursuant to Section 1.7(c) (less any
applicable withholding Taxes in accordance with Section 1.8(g)), without
interest, for each Share formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be canceled. If payment of the Merger
Consideration is to be made to a Person other than the Person in whose name the
surrendered Certificate is registered, it will be a condition of payment that
(i) the Certificate so surrendered will be properly endorsed or will otherwise
be in proper form for transfer and (ii) the Person requesting such payment will
have paid to Parent or any agent designated by Parent any transfer and other
Taxes required by reason of the payment of the Merger Consideration to a Person
other than the registered holder of such Certificate surrendered or will have
established to the reasonable satisfaction of the Surviving Corporation that
such Tax either has been paid or is not payable. Until surrendered as
contemplated by this Section 1.8, each Certificate shall be deemed at any time
from and after the Effective Time to represent only the right to receive the
Merger Consideration in cash, without interest, as contemplated by this Article
I. For the avoidance of doubt, no interest shall accrue or be paid on the
amounts payable pursuant to this Section 1.8 upon surrender of a Certificate.
(c) Transfer Books; No Further Ownership Rights in Company Stock. The
Merger Consideration paid in respect of Shares upon the surrender for exchange
of Certificates in accordance with the terms of this Article I, shall be deemed
to have been paid in full satisfaction of all rights pertaining to the Shares
previously represented by such Certificates, and at the close of business on the
day on which the Effective Time occurs, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers on
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the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. From and after the
Effective Time, the holders of Book-Entry Shares or Certificates that evidenced
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares, except as otherwise
provided for herein or by applicable Law. Subject to the last sentence of
Section 1.8(e), if, at any time after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, such
Certificates shall be canceled and exchanged as provided in this Article I.
(d) Lost, Stolen or Destroyed Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such Person of a
bond, in such reasonable amount as Parent may direct, as indemnity against any
claim that may be made against it with respect to such Certificate, the Paying
Agent will pay, in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration to which the holder of the Shares formerly represented by
such Certificate is entitled pursuant to this Article I.
(e) Termination of Fund. At any time following the first anniversary
of the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it, upon demand, any funds (including any
interest received with respect thereto) that had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look only to the Surviving
Corporation (subject to applicable abandoned property, escheat or other similar
Laws) as general creditors thereof with respect to the payment of any Merger
Consideration, without any interest thereon, that may be payable upon surrender
of any Certificates held by such holders, as determined pursuant to this
Agreement. Any amounts remaining unclaimed by such holders at such time at which
such amounts would otherwise escheat to or become property of any Governmental
Authority shall become, to the extent permitted by applicable Law, the property
of the Surviving Corporation free and clear of all claims or interests of any
Person previously entitled thereto.
(f) No Liability. Notwithstanding any provision of this Agreement to
the contrary, none of the Parties, the Surviving Corporation or the Paying Agent
shall be liable to any Person in respect of any Merger Consideration for any
amount properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(g) Withholding Taxes. Except as provided in Section 4.14, each of the
Parties, the Surviving Corporation and the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable to a holder of
Shares pursuant to the Merger such amounts as they may be respectively required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"), or under any provision of applicable state,
local or foreign Tax Law; provided however, that any such Taxes that are imposed
as a result of or arising out of Parent not being a U.S. person (as such term is
defined pursuant to Section 7701(a)(30) of the Code (and any similar provisions
of state or local law)) or with respect to any transfer of funds between Parent
and Merger Sub shall be solely the liability of Parent and neither Parent nor
Merger Sub shall deduct any such amounts from the amounts paid for the
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Shares. Subject to the above proviso, to the extent amounts are so withheld and
paid over to the appropriate taxing authority, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made.
(h) Further Action. After the Effective Time, the officers and
directors of Parent and the Surviving Corporation will be authorized to execute
and deliver, in the name and on behalf of the Company and Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company and Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
SECTION 1.9 Effect on Company Equity Plans. As soon as
practicable after the date hereof, the Company shall take all actions necessary
to provide that:
(a) Stock Options. Each option or other right of any kind to acquire
shares of Company Common Stock under the Company Stock Plans that is outstanding
immediately prior to the Effective Time (whether or not then vested or
exercisable), and the tandem stock appreciation rights issued with each such
option (collectively, the "Company Employee Stock Options") shall be terminated
and converted at the Effective Time into the right to receive a cash amount
equal to the Option Consideration for each share of Company Common Stock then
subject to the Company Employee Stock Option. The Option Consideration shall be
paid as soon after the Effective Time as shall be practicable, without interest.
Notwithstanding the foregoing, Parent and the Company shall be entitled to
deduct and withhold from the Option Consideration otherwise payable such amounts
as may be required to be deducted and withheld with respect to the making of
such payment under the Code, or any provision of applicable state, local or
foreign Tax Law. For purposes of this Agreement, "Option Consideration" means,
with respect to any share of Company Common Stock issuable under a particular
Company Employee Stock Option, an amount equal to the excess, if any, of (i) the
Merger Consideration over (ii) the exercise price payable in respect of such
share of Company Common Stock issuable under such Company Employee Stock Option.
From and after the Effective Time, no such Company Employee Stock Option shall
be exercisable by the former holder thereof, but shall only entitle such holder
to the payment of the Option Consideration, and prior to the payment of such
Option Consideration, the Company shall obtain all necessary consents to ensure
that former holders of such Company Employee Stock Options will have no rights
other than the right to receive the Option Consideration by taking all actions
determined by the Company Board (or, if appropriate, any committee thereof
administering any Company Plan under which shares of Company Common Stock or
equity-based awards may be issued) to be necessary or appropriate under the
provisions of the relevant Company Stock Plans regarding termination of Company
Employee Stock Options in connection with certain corporate transactions. As of
the Effective Time, any Company Employee Stock Option with an exercise price
equal to or greater than the Merger Consideration shall be canceled without
consideration and be of no further force or effect. As soon as practicable after
the Effective Time, Parent shall deliver or cause to be delivered to each holder
of a canceled Company Employee Stock Option an appropriate notice setting forth
such holder's rights, if any, to receive cash payments with respect to such
Company Employee Stock Options pursuant to the Company Plans and this Section
1.9(a).
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(b) Director Share Plan. Each Phantom Share outstanding immediately
prior to the Effective Time under the Company's Director Share Plan shall be
converted into the right to receive the Merger Consideration in accordance with
Section 1.8. Subject to Section 1.8(g), which shall apply to the Merger
Consideration paid for a Phantom Share, all amounts payable pursuant to this
Section 1.9(b) shall be paid as promptly as practicable following the Effective
Time, without interest, or to the extent of any elections made prior to the
Effective Time, paid in accordance with the Company's Deferred Compensation Plan
- - Director Share Plan.
(c) Restricted Stock. As of the Effective Time, each share of Company
Common Stock outstanding immediately prior to the Effective Time that is subject
to future vesting requirements, risk of forfeiture back to the Company, a right
of repurchase by the Company or similar restrictions (each, a share of
"Restricted Stock") which have not lapsed immediately prior to the Effective
Time shall become fully vested and free of all restrictions and converted at the
Effective Time into the right to receive the Merger Consideration, without
interest, in accordance with Section 1.8. Notwithstanding the foregoing, Parent,
the Company and the Paying Agent shall be entitled to deduct and withhold from
the Merger Consideration otherwise payable such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code,
or any provision of applicable state, local or foreign Tax Law.
(d) Employee Stock Purchase Programs. With respect to each employee
stock purchase plan maintained by the Company or any of its Subsidiaries (each,
an "ESPP"), each participant's accumulated payroll deductions shall be used to
purchase shares of Company Common Stock immediately prior to the Effective Time
in accordance with the terms of the relevant ESPP, and the shares of Company
Common Stock purchased thereunder shall be canceled at the Effective Time and
converted into the right to receive the Merger Consideration, without interest,
in accordance with Section 1.8. Except as specified on Section 1.9(d) of the
Company Disclosure Letter, the Company shall use its commercially reasonable
efforts to cause all ESPPs to terminate at the Effective Time, so that no
further purchase rights shall be granted or exercised under such ESPPs
thereafter. Subject to applicable confidentiality, legal and regulatory
requirements, the Company shall cooperate with and provide such information to
Parent relating to all ESPPs as Parent reasonably requires in order to plan and
make proposals to participants of the ESPPs and, if necessary, to communicate
with such participants in respect to such proposals.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that
except as set forth in (a) the letter, dated as of the date hereof, delivered by
the Company to Parent simultaneously with the execution and delivery of this
Agreement (the "Company Disclosure Letter"), with specific reference to the
particular Section or clause of this Agreement to which the information set
forth in such letter relates, (it being agreed that disclosure of any item in
any section or subsection of the Company Disclosure Letter shall be deemed
disclosure with respect to any other section or subsection to which the
relevance of such
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item is reasonably apparent), or (b) the Company SEC Documents filed by the
Company with, or furnished by the Company to, the U.S. Securities and Exchange
Commission (the "SEC") at any time on or after January 1, 2004 through the date
hereof and publicly available on the website of the SEC through the Electronic
Data Gathering, Analysis and Retrieval System prior to the date hereof (the
"Filed Company SEC Documents"), other than risk factor disclosure contained in
any such Filed Company SEC Document under the headings "Risk Factors", "Forward
Looking Statements" or any similar sections and any other disclosure that is
predictive or forward-looking in nature; provided, however, that nothing in the
Filed Company SEC Documents shall be deemed to qualify, or be deemed to have
been disclosed for the purposes of, Sections 2.2 or 2.3:
SECTION 2.1 Organization, Standing and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of New York and has all requisite
corporate power and authority necessary to own, lease or operate all of its
properties and assets and to carry on its business as it is being conducted as
of the date hereof. The Company is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets owned
or leased or held under license by it makes such licensing or qualification
necessary, except where the failure to be so licensed, qualified or in good
standing would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect or to impair in any material respect the
ability of the Company to perform its obligations hereunder or prevent or
materially delay consummation of the Transactions.
(b) Each of the Company's Subsidiaries is a corporation or other
organization duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its organization. Each of the Company's Subsidiaries
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased or held under
license by it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified or in good standing would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. Section 2.1(b) of the Company Disclosure Letter sets forth a true and
complete list of each such Subsidiary, the jurisdiction of incorporation or
organization of such Subsidiary and the Company's interest therein. All the
outstanding shares of capital stock of, or other equity interests in, each such
Subsidiary (except for directors' qualifying shares or the like) are duly
authorized, have been validly issued, are fully paid, nonassessable and free of
any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of applicable Law,
the Company Charter Documents or any Contract to which such Subsidiary is a
party or otherwise bound, and are owned directly or indirectly by the Company
beneficially and of record free and clear of any and all liens, claims,
mortgages, encumbrances, pledges, security interests, equities and charges of
any kind or nature whatsoever (each a "Lien") and transfer restrictions, except
for such transfer restrictions of general applicability as may be provided under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), and other applicable securities
Laws and rules and regulations promulgated thereunder.
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(c) Each Joint Venture of the Company or any of its Subsidiaries is a
corporation or other organization duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its organization and has all
requisite power and authority to own, lease and operate all of its properties
and assets and to carry on its business as it is being conducted as of the date
hereof. Each Joint Venture of the Company or any of its Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased or held under
license by it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified or in good standing would not, individually
or in the aggregate, reasonably be expected to result in a Company Material
Adverse Effect. To the Knowledge of the Company, all of the Shares of Capital
Stock or other equity interests which the Company or any of its Subsidiaries
owns in a Joint Venture are duly authorized, validly issued, fully paid and
nonassessable.
(d) The Company has previously made available to Parent complete and
correct copies of the certificate of incorporation and bylaws (or other
comparable organizational documents) of the Company and each of its
Subsidiaries, as amended to the date hereof (collectively, the "Company Charter
Documents").
SECTION 2.2 Capitalization.
(a) The authorized capital stock of the Company consists solely of
300,000,000 shares of Company Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share (the "Company Preferred Stock"). At the close
of business on June 20, 2007 (the "Measurement Date"): (i) 158,364,908 shares of
Company Common Stock were issued and outstanding, of which (x) 134,198 shares of
Company Common Stock were held by the Company in its treasury and (y) 1,010,204
shares were Restricted Stock; (ii) 7,238,225 shares of Company Common Stock were
reserved and available for issuance under the Company Stock Plans, of which
3,847,549 shares of Company Common Stock were subject to outstanding Company
Employee Stock Options; (iii) 124,034 Phantom Shares were outstanding under the
Company's Director Share Plan; (iv) no shares of Company Preferred Stock were
issued or outstanding; and (v) no other shares of capital stock, or rights to
acquire shares of capital stock, of the Company were outstanding, issuable or
reserved for issuance. All Shares (including shares of Restricted Stock) and all
shares of Company Common Stock reserved for issuance upon the exercise of the
Company Employee Stock Options have been duly authorized. All Shares (including
shares of Restricted Stock) are, and all shares of Company Common Stock reserved
for issuance upon the exercise of the Company Employee Stock Options in
accordance with their respective terms will upon issuance be, validly issued,
fully paid, nonassessable and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the NYBCL, the
Company Charter Documents or any Contract to which the Company is a party or
otherwise bound. Section 2.2(a) of the Company Disclosure Letter sets forth a
correct and complete list, as of the Measurement Date, of the outstanding
Company Employee Stock Options, the number of shares of Company Common Stock
underlying such Company Employee Stock Options, and the holders, exercise prices
and expiration dates thereof. Since the Measurement Date, except as would be
permissible under Section 4.1(a)(i) or as otherwise permitted by Parent in
writing, no (i) shares of capital stock or other securities or equity interests
of the Company (including
9
Restricted Stock and Phantom Shares) or any of its Subsidiaries, (ii) securities
convertible into or exchangeable or exercisable for any shares of capital stock
or other securities or equity interests of the Company (including Restricted
Stock and Phantom Shares) or any of its Subsidiaries, or (iii) preemptive rights
or other outstanding rights, options, warrants, redemption rights, repurchase
rights, agreements, arrangements, calls, commitments or rights of any kind that
obligate the Company or any of its Subsidiaries to issue or sell any shares of
capital stock or other equity securities of the Company or any of its
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person the right to subscribe for or acquire
any equity securities of the Company or any of its Subsidiaries (collectively,
"Options"), or stock appreciation rights, "phantom" stock rights, performance
awards, dividend equivalent awards of the Company or any of its Subsidiaries, or
other rights that are linked to the value of Company Common Stock were issued,
reserved for issuance or granted or reserved for granting, other than issuances
or grants of shares of Company Common Stock pursuant to the Company's Investor
Services Program, subject to the restrictions of Section 4.18.
(b) Except for provisions in the Company Charter Documents, there are
no outstanding contractual obligations of the Company or any of its Subsidiaries
(i) restricting the transfer of, (ii) affecting the voting rights of, (iii)
requiring the repurchase, redemption, acquisition or disposition of, or
containing any right of first refusal with respect to, (iv) requiring the
registration for sale of, or (v) granting any preemptive or anti-dilutive right
with respect to, any shares of Company Common Stock or any capital stock or
other securities or equity interests of the Company or any of its Subsidiaries.
There are no bonds, debentures, notes or other indebtedness of the Company or
any of its Subsidiaries having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any matters on which
holders of capital stock or other securities or equity interests of the Company
or any such Subsidiary may vote.
(c) Except as set forth above in Section 2.2(a), there are (i) no
Options to which the Company or any of its Subsidiaries is a party or by which
any of them is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, (A) shares of capital
stock or other securities or equity interests of, or any security convertible or
exercisable for or exchangeable into any capital stock or other securities or
equity interests of, the Company or any of its Subsidiaries or (B) any Company
Voting Debt, and (ii) no other rights, the value of which is in any way based on
or derived from, or that give any Person the right to receive any economic
benefit or right similar to or derived from the economic benefits and rights
accruing to holders of capital stock or other securities or equity interests of
the Company or any of its Subsidiaries.
SECTION 2.3 Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the Company
Shareholder Approval, to perform its obligations hereunder and to consummate the
Transactions. The execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the Transactions, have been duly
authorized and approved by the Company Board, and except for obtaining the
Company Shareholder Approval, no other corporate action on the part of the
10
Company is necessary to authorize the execution, delivery and performance by the
Company of this Agreement and the consummation by it of the Transactions. This
Agreement has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery hereof by the other Parties, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar Laws of general application affecting or relating
to the enforcement of creditors' rights generally, and (ii) is subject to
general principles of equity, whether considered in a proceeding at Law or in
equity (the "Bankruptcy and Equity Exception").
(b) The Company Board, at a meeting duly called and held and by
resolutions duly adopted at such meeting and not subsequently rescinded or
modified in any way, has (i) determined that this Agreement and the Transactions
are advisable and in the best interests of the Company and its shareholders,
(ii) adopted this Agreement and, subject to Section 4.2, approved the
Transactions (iii) directed, subject to Section 4.2, that this Agreement and the
Transactions be submitted to the shareholders of the Company for their adoption
and (iv) resolved, subject to Section 4.2, to recommend that the shareholders of
the Company adopt this Agreement and approve the Transactions.
(c) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the Transactions, nor compliance
by the Company with any of the terms or provisions hereof, will (i) conflict
with, result in any violation of, or constitute a default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a Lien on any assets (any such
conflict, violation, default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "Violation") of any provision of the Company
Charter Documents or (ii) assuming that the Permits, orders, registrations,
declarations referred to in Section 2.4 and the Company Shareholder Approval are
obtained and the notices and filings referred to in Section 2.4 are made, (x)
violate any order, judgment, writ, decree or injunction of any Governmental
Authority (collectively, "Order") or Law applicable to the Company or any of its
Subsidiaries or (y) constitute or result in a Violation under any of the terms,
conditions or provisions of any Contract or Company Plan to which the Company 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, except, in the case of
sub-clause (ii), for such Violations as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or
to impair in any material respect the ability of the Company to perform its
obligations hereunder or prevent or materially delay consummation of the
Transactions.
(d) Assuming the accuracy of Parent's representation and warranty
contained in Section 3.10, the affirmative vote (in person or by proxy) of the
holders of a majority of the outstanding shares of Company Common Stock in favor
of the adoption of this Agreement is the only vote or approval of the holders of
any class or series of capital stock of the Company which is necessary to adopt
this Agreement and approve the Transactions (the "Company Shareholder
Approval").
11
SECTION 2.4 Governmental Approvals. Except for (i) the filing
with the SEC of the Proxy Statement in definitive form, and other filings
required under, and compliance with other applicable requirements of, the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), the rules of the New York Stock
Exchange ("NYSE") and state securities or "blue sky" Laws (the "Blue Sky Laws"),
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of New York pursuant to the NYBCL, (iii) filings required under, and
compliance with other applicable requirements of, the HSR Act and any other
antitrust or competition Laws of any applicable jurisdiction, (iv) notices to,
or consents, approvals or waivers from, to the extent required, (A) the
Connecticut Department of Public Utility Control ("CTDPUC"), (B) the Maine
Public Utilities Commission ("MPUC"), (C) the Massachusetts Department of Public
Utilities (the "MDPU"), (D) the New Hampshire Public Utilities Commission
("NHPUC") and (E) the New York Public Service Commission ("NYPSC", and
collectively with CTDPUC, MPUC, MDPU and NHPUC, the "Company PUC Consents"), (v)
notices, consents, approvals or waivers required under, and compliance with
applicable requirements of, the Federal Energy Regulatory Commission (the
"FERC") pursuant to Section 203 of the Federal Power Act, as amended, and the
rules and regulations promulgated thereunder (the "Federal Power Act"), (vi)
notices to, or consents, approvals or waivers from, and compliance with
applicable requirements of, the United States Federal Communications Commission
("FCC") in connection with a change of control and/or assignment of the holder
of the FCC licenses of the Company and its Subsidiaries (the "Company License
Consents"), (vii) notices to, or consents, approvals or waivers from, and
compliance with applicable requirements of, the United States Nuclear Regulatory
Commission (the "NRC") under the Atomic Energy Act of 1954, as amended (the
"Atomic Energy Act"); (viii) notices to or filings required under, and
compliance with other applicable requirements of, the United States Committee on
Foreign Investment pursuant to the Exon-Florio amendment to the Defense
Production Act of 1950, as amended, and (ix) compliance with any such filings
and notices as may be required under applicable Environmental Laws (the
consents, approvals, waivers, filings, notices, declarations or registrations
set forth in sub-clauses (iii) through (ix) above being hereinafter collectively
referred to as the "Required Consents"), no consents, approvals or waivers of,
or filings, notices, declarations or registrations with, any Governmental
Authority are necessary for the execution, delivery and performance of this
Agreement by the Company or the consummation by the Company of the Transactions,
other than such consents, approvals, waivers, filings, notices, declarations or
registrations that, if not obtained, made or given, would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect or to impair in any material respect the ability of the Company to
perform its obligations hereunder or prevent or materially delay consummation of
the Transactions.
SECTION 2.5 Company SEC Documents; Financial Statements;
Undisclosed Liabilities.
(a) The Company has filed all required registration statements,
prospectuses, forms, reports and proxy statements with the SEC from and after
January 1, 2004 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "Company
SEC Documents"). As of their respective effective dates (in the case of Company
SEC Documents that are registration statements filed pursuant to the
requirements of the Securities Act) and as of their respective SEC filing dates
(in the case of all
12
other Company SEC Documents), the Company SEC Documents complied in all material
respects with the requirements of the Exchange Act, the Securities Act and the
Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC promulgated
thereunder (the "Sarbanes-Oxley Act"), as the case may be, applicable to such
Company SEC Documents, and none of the Company SEC Documents as of such
respective dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. To the Knowledge of the Company, as of the date hereof,
there are no material unresolved comments with respect to any Company SEC
Documents.
(b) With respect to each Company SEC Document that is a report on Form
10-K or 10-Q or an amendment thereto, each of the principal executive officer
and the principal financial officer of the Company and each Subsidiary of the
Company that is or was required to file reports under Sections 13(a) or 15(d) of
the Exchange Act (a "Company Reporting Utility") (or each former principal
executive officer and principal financial officer of the Company and each the
Company Reporting Utility, as applicable) has made all certifications required
by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act, from and after January 1, 2004 with respect to the Company
SEC Documents and similar reports of each Company Reporting Utility. For
purposes of the preceding sentence, "principal executive officer" and "principal
financial officer" shall have the meanings given to such terms in the
Sarbanes-Oxley Act. Since the effectiveness of the Sarbanes-Oxley Act, neither
the Company nor any of its Subsidiaries has arranged any "extensions of credit"
to directors or executive officers within the meaning of Section 402 of the
Sarbanes-Oxley Act.
(c) The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company (including, in each
case, the notes, if any, thereto) included in the Company SEC Documents (the
"Company Financial Statements") have been prepared in accordance with GAAP
(except, in the case of unaudited interim statements, as indicated in the notes
thereto) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations, cash flows and changes in common stock equity for the periods then
ended (subject, in the case of unaudited interim statements, to normal year-end
audit adjustments which were not and would not, individually or in the
aggregate, reasonably be expected to be material). No restatement of any of the
Company Financial Statements has occurred or is reasonably likely to occur.
(d) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations (whether absolute, contingent, accrued or otherwise)
which would be required to be reflected or reserved against on a consolidated
balance sheet of the Company prepared in accordance with GAAP or the notes
thereto, except liabilities (i) reflected or reserved against on the audited
consolidated balance sheet of the Company and its Subsidiaries as of December
31, 2006 (the "Balance Sheet Date") included in the Filed Company SEC Documents
(including the notes thereto), (ii) incurred after the Balance Sheet Date in the
ordinary course of business consistent with past practice, (iii) as contemplated
by this Agreement or otherwise in connection with the Transactions or (iv) as
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
13
(e) Neither the Company nor any of its Subsidiaries is a party to, or
has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract relating to any
transaction or relationship between or among the Company and any of its
Subsidiaries, on the one hand, and any unconsolidated affiliate, including any
structured finance, special purpose or limited purpose entity or person, on the
other hand or any "off-balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K promulgated by the SEC)), where the result, purpose or effect of
such Contract is to avoid disclosure of any material transaction involving, or
material liabilities of, the Company or any of its Subsidiaries, in the
Company's or any of its Subsidiary's audited financial statements or other
Company SEC Documents.
(f) Without limitation to Section 2.4, all filings required to be made
by the Company or any of its Subsidiaries since January 1, 2004 with any
Governmental Authority, including under the Federal Power Act, the Atomic Energy
Act, the Public Utility Holding Company Act of 1935 (prior to the effective date
of its repeal, February 8, 2006), the Public Utility Holding Company Act of
2005, the Communications Act of 1934, as amended by the Telecommunications Act
of 1996, the Natural Gas Act of 1938 and applicable state Laws and regulations,
have been filed with the appropriate Governmental Authority, including the SEC,
the FERC, the Department of Energy, the NRC, the FCC, the CTDPUC, the MPUC, the
MDPU, the NHPUC or the NYPSC, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements pertaining thereto, including all rates, tariffs,
compliance filings, franchises, service agreements and related documents, and
all such filings complied, as of their respective dates, with all applicable
requirements of the applicable statute and the rules and regulations thereunder,
except for filings the failure of which to make or the failure of which to make
in compliance with all applicable requirements of the applicable statute and the
rules and regulations thereunder, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect.
(g) Without limitation to clauses (d) and (e) above, the Company and
its Subsidiaries have designed and maintain a system of internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act) sufficient to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. The Company (i) has designed and maintains
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Exchange Act) to ensure that material information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and is accumulated and
communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure, and (ii) has disclosed, based on its
most recent evaluation of such disclosure controls and procedures prior to the
date hereof, to the Company's auditors and the audit committee of the Company
Board (A) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting that are reasonably
likely to adversely affect in any material respect the Company's ability to
record, process, summarize and report financial information and (B) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company's internal controls over financial reporting.
The Company has disclosed to Parent all matters set forth in sub-
14
clauses (A) and (B) above discovered or disclosed since December 31, 2004. Since
December 31, 2004, any material change in internal controls over financial
reporting required to be disclosed in any Company SEC Document has been so
disclosed.
(h) Since December 31, 2004, the Company has not received any oral or
written notification of a "reportable condition" in its internal controls. The
term "reportable condition" has the meaning assigned to it in the Statements of
Auditing Standards 60, as in effect on the date hereof.
(i) Since December 31, 2004, (i) neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any director, officer,
employee, auditor, accountant or representative of the Company or any of its
Subsidiaries has received or otherwise obtained actual knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Company or any of its Subsidiaries or their respective internal accounting
controls relating to periods after December 31, 2004, including any material
complaint, allegation, assertion or claim that the Company or any of its
Subsidiaries has engaged in questionable accounting or auditing practices
(except for any of the foregoing after the date hereof which have no reasonable
basis), and (ii) to the Knowledge of the Company, no attorney representing the
Company or any of its Subsidiaries, whether or not employed by the Company or
any of its Subsidiaries, has reported evidence of a material violation of
securities Laws, breach of fiduciary duty or similar violation, relating to
periods after December 31, 2004, by the Company or any of its officers,
directors, employees or agents to the Company Board (or any committee thereof)
or to any director or executive officer of the Company.
(j) Except as disclosed in Section 2.5(j) of the Company Disclosure
Letter, none of the Company's Subsidiaries is, or has at any time since January
1, 2004, been, subject to the reporting requirements of Sections 13(a) and 15(d)
of the Exchange Act.
SECTION 2.6 Absence of Certain Changes.
Since the Balance Sheet Date, except as set forth on Section 2.6 of
the Company Disclosure Letter:
(i) each of the Company and its Subsidiaries has carried on and
operated its businesses in the ordinary course of business, consistent with past
practice;
(ii) there have not been any events, changes or occurrences that,
individually or in the aggregate, have had or would reasonably be expected to
have a Company Material Adverse Effect; and
(iii) no action, event, occurrence or transaction has taken place
that would have been prohibited by sub-clauses (ii), (iii), (viii), (ix), (x),
(xi) or (xii) of Section 4.1(a) without the consent of Parent if this Agreement
had been in effect at the time thereof.
SECTION 2.7 Legal Proceedings. As of the date hereof, there is no
pending or, to the Knowledge of the Company, threatened, legal or administrative
proceeding,
15
claim, suit, action or investigation against or relating to the Company or any
of its Subsidiaries, nor is there any injunction, order, judgment, ruling, writ
or decree imposed upon the Company or any of its Subsidiaries, in each case, by
or before any Governmental Authority, that would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or
to impair in any material respect the ability of the Company to perform its
obligations hereunder or prevent or materially delay consummation of the
Transactions.
SECTION 2.8 Compliance With Laws and Orders; Permits. The Company
and its Subsidiaries and their respective Joint Ventures are in compliance with
all laws, statutes, ordinances, codes, rules, regulations, decrees and orders of
Governmental Authorities (collectively, "Laws") or Orders applicable to the
Company or any of its Subsidiaries or their respective Joint Ventures, including
the Federal Power Act, the Atomic Energy Act, the Public Utility Holding Company
Act of 1935 (prior to the effective date of its repeal, February 8, 2006), the
Public Utility Holding Company Act of 2005, the Communications Act of 1934, as
amended by the Telecommunications Act of 1996, the Natural Gas Act of 1938 and
applicable state Laws and regulations, except for such non-compliance as would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company and each of its Subsidiaries hold all
licenses, franchises, permits, certificates, consents, approvals, clearances,
qualifications, concessions and authorizations from Governmental Authorities
necessary for the lawful conduct of their respective businesses (collectively,
"Permits"), and all such Permits are valid and in full force and effect, except
where the failure to hold the same or of the same to be valid and in full force
and effect would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect or impair in any material respect the
ability of the Company and its Subsidiaries to perform its respective
obligations hereunder or prevent or materially delay consummation of the
Transactions. The Company and its Subsidiaries are in compliance with the terms
of all Permits, except for such non-compliance as would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Without limitation to the foregoing, the Company is, and has been, in compliance
in all material respects with the applicable listing standards and corporate
governance rules and regulations of the NYSE.
SECTION 2.9 Proxy Statement. Subject to the accuracy of the
representations and warranties of Parent and Merger Sub set forth in Section
3.5, the Proxy Statement, and any amendments or supplements thereto, will not,
on the date they are first mailed to the holders of Company Common Stock,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, and will not, at the time of the Company Shareholders Meeting, omit
to state any material fact necessary to correct any statement in any earlier
communication from the Company with respect to the Company Shareholders Meeting
which shall have become false or misleading in any material respect. The Proxy
Statement will comply as to form in all material respects with the applicable
requirements of the Exchange Act. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to information supplied by or
on behalf of Parent or Merger Sub for inclusion or incorporation by reference in
the Proxy Statement.
16
SECTION 2.10 Tax Matters.
Except as set forth in Section 2.10 of the Company Disclosure Letter:
(a) Except for those matters that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (i)
each of the Company and its Subsidiaries has timely filed, or has caused to be
timely filed on its behalf (taking into account any extension of time within
which to file), all Tax Returns required to be filed by it, and all such filed
Tax Returns are correct and complete in all material respects, (ii) all Taxes
shown to be due on such Tax Returns have been timely paid, (iii) no deficiency
or claim with respect to any Taxes has been proposed, asserted or assessed, in
each case in writing, against the Company or any of its Subsidiaries which have
not been fully paid or adequately reserved for in accordance with GAAP in the
Company SEC Documents and (iv) no audit, assessment, dispute, claim or other
administrative or court proceedings is pending with any Governmental Authority
with respect to Taxes of the Company or any of its Subsidiaries, and no written
notice thereof has been received.
(b) Since the Balance Sheet Date, neither the Company nor any of its
Subsidiaries has incurred any material liability for Taxes outside the ordinary
course of business or otherwise inconsistent with past custom and practice.
(c) Except as disclosed in Section 2.10(c) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to any
Contract, arrangement or plan that is currently in effect and that has resulted
or would result, separately or in the aggregate, in the payment of any material
amount that is not deductible under Section 162(m) of the Code.
(d) Neither the Company nor any of its Subsidiaries is a party to or
bound by any Tax allocation, Tax sharing or similar agreement, understanding or
arrangement that is currently in force and provides for the sharing of Taxes
between members that file or have filed their Tax Returns on a consolidated,
group, combined or unified basis (other than any such agreement solely between
or among the Company and any of its Subsidiaries).
(e) Neither the Company nor any of its Subsidiaries (i) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (ii) has any
material liability for the Taxes of any Person (other than the Company or any of
its Subsidiaries) under United States Treasury Regulation ss.1.1502-6 (or any
similar provision of state, local, or foreign Law), as a transferee or
successor, or by contract (except to the extent set forth in any Company
Contract).
(f) There are no Liens for Taxes upon any material property or other
material assets of the Company or any of its Subsidiaries, except Liens for
Taxes (i) not yet due and payable or (ii) that have been accrued for or
otherwise taken into account in accordance with GAAP on the Company SEC
Documents.
(g) All Taxes required to be withheld, collected or deposited by or
with respect to the Company and each of its Subsidiaries have been timely
withheld, collected or deposited, as the case may be, and to the extent
required, have been paid to the relevant Tax authority or other Governmental
Authority, except for such failure to do any of the foregoing as
17
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(h) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" under Section
355 of the Code (i) in the two years prior to the date hereof or (ii) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(i) Neither the Company nor any of its Subsidiaries has engaged in any
transaction that constitutes a "listed transaction" for purposes of Section 6011
of the Code and Treasury Regulation Section 1.6011-4.
(j) No power of attorney with an outside consultant, advisor, counsel
or other party not employed by the Company or its Subsidiaries is currently in
force with respect to the Company or any of its Subsidiaries concerning any Tax
matter that will not be terminated as of the Closing Date.
(k) Neither the Company nor any of its Subsidiaries has requested (and
no request has been made on its behalf for) any extension of time within which
to file any Tax Return. Neither the Company nor any of its Subsidiaries has
executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations for any Taxes or Tax Returns (and no
extensions have been executed on their behalf).
(l) Neither the Company nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company or
any of its Subsidiaries. Other than to the extent of any reserves or accruals
reflected or taken into account on the Company SEC Documents, no income of the
Company or any of its Subsidiaries that economically accrued prior to the
Closing will be recognized as taxable income after the Closing as a result of
the Company or any of its Subsidiaries being a party to an installment sale or
an open transaction.
(m) The Tax Returns of the Company and its Subsidiaries delivered to
Parent or Parent's representatives, employees or advisors for inspection
represent true and complete copies of the filed versions of such Tax Returns.
(n) To the Knowledge of the Company, all material written
communications to or from any Governmental Authorities with respect to Taxes of
the Company or any of its Subsidiaries have been delivered to Parent or Parent's
representatives, employees or advisors to the extent such communications relate
to (i) a matter that has not been disclosed on the Company Disclosure Letter, or
(ii) a Tax liability that has not been (A) paid or accrued for or (B) otherwise
taken into account on the Company Financial Statements.
(o) All Tax years for United States federal income tax purposes and
for purpose of the income tax imposed by the states of New York, Massachusetts,
Connecticut and Maine ending on or prior to December 31, 2000 have been examined
and such tax years are closed by the Internal Revenue Service or the relevant
state tax authority, or the statute of limitations with respect to Tax Returns
filed for such tax period have expired.
18
(p) This Section 2.10 contains the sole and exclusive representations
and warranties of the Company with respect to all matters involving Taxes and
any liabilities for or relating to Taxes.
SECTION 2.11 Employee Benefits and Labor Matters.
(a) Section 2.11(a) of the Company Disclosure Letter lists each
Company Plan. The Company has made available to Parent correct and complete
copies of (i) each Company Plan (or, in the case of any such Company Plan that
is unwritten, descriptions thereof), (ii) the most recent annual reports on Form
5500 required to be filed with the Internal Revenue Service (the "IRS") with
respect to each Company Plan (if any such report was required), (iii) the most
recent summary plan description for each Company Plan for which such summary
plan description is required, (iv) each trust agreement and insurance or group
annuity Contract or other agreement relating to any Company Plan, (v) the most
recent financial statements prepared with respect to each Company Plan, and (vi)
the most recent actuarial report of the qualified actuary of any Company Plan
with respect to which actuarial valuations are conducted. Each Company Plan
maintained by the Company or any of its Subsidiaries has been administered in
accordance with its terms except for such non-compliance as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company, its Subsidiaries and all the Company Plans
are in compliance in all respects with the applicable provisions of Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Code and all
other applicable Laws, except for such non-compliance as would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. All Company Plans that are "employee pension plans" (as defined in
Section 3(2) of ERISA) that are intended to be Tax qualified under Section
401(a) of the Code (each, a "Company Pension Plan") that are maintained,
contributed to or required to be contributed to by the Company or any of its
Subsidiaries have received a favorable determination letter from the IRS and no
event has occurred that would reasonably be expected to adversely affect the
continued effectiveness of any such determination letter. The Company has made
available to Parent a correct and complete copy of the most recent opinion or
determination letter received with respect to each Company Pension Plan
maintained, contributed to or required to be contributed to by the Company or
any of its Subsidiaries as well as a correct and complete copy of each pending
application for an opinion or a determination letter, if any. Other than as set
forth in Section 2.11(a) of the Company Disclosure Letter, neither the Company
nor any of its Subsidiaries has contributed or has been obligated to contribute
to a Multiemployer Plan.
(b) With respect to the Company Plans, individually and in the
aggregate, no event has occurred and there exists no condition or set of
circumstances, in connection with which the Company or any of its Subsidiaries
could be subject to any liability under ERISA, the Code or any other applicable
Law, which would, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, other than liabilities for benefits or
ancillary administrative services provided in the ordinary course of business
consistent with past practice. Without limiting the generality of the foregoing,
(i) no material liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation ("PBGC") (which premiums
have been paid when due), (ii) the
19
PBGC has not instituted proceedings to terminate any Company Plan that is
subject to Title IV of ERISA (a "Title IV Plan") and no condition exists that
presents a risk that such proceedings will be instituted, (iii) no Title IV Plan
or any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 or ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
Title IV Plan ended prior to the Closing Date, and (iv) no termination,
re-establishment or spin-off re-establishment transaction has occurred with
respect to any Defined Benefit Plan. No Defined Benefit Plan has incurred any
accumulated funding deficiency, whether or not waived. No filing has been made
and no proceeding has been commenced for the complete or partial termination of,
or withdrawal from, any Company Plan that is a "pension benefit plan" within the
meaning of Section 3(2) of ERISA.
(c) Other than as set forth in Section 2.11(c) of the Company
Disclosure Letter, neither the execution and delivery of this Agreement nor the
consummation of the Transactions will (either alone or in conjunction with any
other event) result in or cause the payment or provision of benefits which are
"excess parachute payments" as the term is defined in Code Section 280G.
(d) The Company and each of its Subsidiaries is in compliance in all
material respects with all applicable Laws respecting labor, employment, fair
employment practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings, and wages and hours. Other than as set
forth in Section 2.11(d) of the Company Disclosure Letter, neither the Company
nor any of its Subsidiaries is a party to, bound by or in the process of
negotiating any collective bargaining agreement or other labor agreement and no
labor union or labor organization has been certified to represent any employee
of the Company or any of its Subsidiaries or, to the Knowledge of the Company,
has applied to represent or is attempting to organize so as to represent such
employees. No labor union, labor organization or group of employees of the
Company or any of its Subsidiaries has made a demand for recognition or
certification in the past three (3) years, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or, to the Knowledge of the Company, threatened to be brought
or filed with the National Labor Relations Board (the "NLRB") or any other
Governmental Authority.
(e) As of the date hereof, (i) there are no disputes, grievances or
arbitrations pending or, to the Knowledge of the Company, threatened between the
Company or any of its Subsidiaries and any labor union or other representatives
of its employees, (ii) there is no charge, complaint or investigation pending or
threatened in writing against the Company or any of its Subsidiaries before the
NLRB, the Department of Labor, the Equal Employment Opportunity Commission or
any similar Governmental Authority, (iii) there are no litigations, lawsuits,
claims, charges, complaints, arbitrations, actions, investigations or
proceedings pending or, to the Knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries and any of their respective
current or former employees, independent contractors, applicants for employment
or classes of the foregoing, except as would not, individually or in the
aggregate, have or be reasonably expected to have a Company Material Adverse
Effect.
(f) Since January 1, 2004, (i) there has been no work stoppage, strike
or slowdown by or affecting the employees of the Company or any of its
Subsidiaries and, to the
20
Knowledge of the Company, no such action has been threatened in writing, and
(ii) neither the Company nor any of its Subsidiaries has engaged in a lockout of
any employees of the Company or any of its Subsidiaries or engaged in any "plant
closing" or "mass layoff", as defined in the Worker Adjustment and Retraining
Notification Act or any comparable state or local Law (the "WARN Act"), without
complying in all material respects with the requirements of such Laws.
(g) To the Knowledge of the Company, none of the employees of the
Company or any of its Subsidiaries is in any material respect in violation of
any term of any employment agreement, nondisclosure agreement, common law
nondisclosure obligation, fiduciary duty, non-competition agreement, restrictive
covenant or other obligation to a former employer relating to the right of such
employee to be employed by the Company or any of its Subsidiaries or the
employee's knowledge or use of trade secrets or proprietary information.
(h) Other than as set forth in Section 2.11(h) of the Company
Disclosure Letter, there are no (i) severance or employment agreements with
directors, officers or employees of or consultants to the Company or any of its
Subsidiaries, (ii) severance programs or policies of the Company or any of its
Subsidiaries, with or relating to its employees or (iii) plans, programs,
agreements or other arrangements of the Company or any of its Subsidiaries with
or relating to its directors, officers, employees or consultants which contain
change-in-control (or comparable) provisions.
(i) Neither the Company nor any of its Subsidiaries has scheduled or
agreed (i) to establish any plan, program, policy or arrangement that would be
considered to be a Company Plan or (ii) to increase benefit levels (or to create
new benefits) with respect to any Company Plan. Except as disclosed in Section
2.11(i) of the Company Disclosure Letter, no loan is outstanding between the
Company or any of its Subsidiaries and any current or former employee thereof.
Each Company Plan intended to provide for the deferral of income, the reduction
of salary or other compensation or to afford other Tax benefits complies with
the requirements of the applicable provisions of the Code or other applicable
Laws required in order to provide such Tax benefits.
(j) Neither the Company nor any of its Subsidiaries is in default in
performing any of its contractual obligations under any of the Company Plans or
any related trust agreement or insurance contract, except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. All contributions and other payments required to be
made by the Company or any of its Subsidiaries to any Company Plan with respect
to any period ending before or at or including the Closing Date have been made
or reserves adequate for such contributions or other payments have been or will
be set aside therefor and have been or will be reflected in the Company
Financial Statements in accordance with GAAP. There are no material outstanding
liabilities of, or related to, any Company Plan, other than liabilities for
benefits to be paid in the ordinary course of business consistent with past
practice to participants in such Company Plan and their respective beneficiaries
in accordance with the terms of such Company Plan.
(k) Except as set forth in Section 2.11(k) of the Company Disclosure
Letter, no Company Plan provides welfare coverage that extends after the
termination of employment other than for continued coverage provided pursuant to
the requirements of Section 4980B of the
21
Code or other similar provision of state Law and each Company Plan providing
such coverage may be amended, modified or terminated after the Effective Time
without material cost or liability other than for claims for expenses actually
incurred prior to the date of such amendment, modification or termination.
SECTION 2.12 Contracts.
(a) All Contracts, including amendments thereto, required to be filed
as an exhibit to any report of the Company filed pursuant to the Exchange Act of
the type described in Item 601(b)(10) of Regulation S-K promulgated by the SEC
have been filed, and no such Contract has been amended or modified, except for
such amendments or modifications which have been filed as an exhibit to a
subsequently dated and filed Company SEC Document. All such filed Contracts
(excluding any redacted portions thereof) shall be deemed to have been made
available to Parent.
(b) Other than the Contracts set forth in clause (a) above which were
filed in an unredacted form, Section 2.12(b) of the Company Disclosure Letter
sets forth a correct and complete list as of the date of this Agreement, and the
Company has made available to Parent correct and complete copies (including all
material amendments, modifications, extensions or renewals with respect thereto,
but excluding all names, terms and conditions that have been redacted in
compliance with applicable Laws governing the sharing of information) of those
Contracts to which the Company or any of its Subsidiaries is a party which have
not expired prior to the date hereof in accordance with its terms (collectively
with the Contracts referred to in clause (a) above, the "Company Contracts"):
(i) that contain a covenant restricting the ability of the
Company or any of its Subsidiaries to compete in the business of providing
electric utility operations, natural gas utility operations, electricity
transmission, electricity distribution, natural gas transportation, natural gas
storage, natural gas distribution, energy delivery, energy services, power
purchases, utility support services or investing or financing activities related
thereto in any geographic area;
(ii) that provides for annual payments in excess of $1,000,000 to
or from the Company or any of its Subsidiaries and that contain any change in
control, right of termination, right of cancellation, right to accelerate
payments, or other similar provisions in favor of a third party which may be
triggered upon the execution and delivery of this Agreement by the Company or
the consummation by the Company of any of the Transactions;
(iii) with any Affiliate of the Company (other than any of its
Subsidiaries and other than employment or compensation related matters);
(iv) that provides for annual payments in excess of $1,000,000 to
or from the Company or any of its Subsidiaries and which primarily relate to (A)
the granting to the Company or any of its Subsidiaries of license rights in or
to any Company Intellectual Property owned by a third party, or (B) the granting
by the Company or any of its Subsidiaries of license rights to a third party in
or to any material Company Intellectual Property, in each of sub-clause (A) and
(B) above, excluding "click-wrap" or "shrink-wrap" agreements, agreements
contained
22
in or pertaining to "off-the-shelf" Software, or the terms of use or service for
any web site (collectively, "IP Licenses");
(v) relating to the Company's ownership in, or the governance or
funding of, any material Joint Venture or any liabilities (contingent or
otherwise) the Company has with respect thereto;
(vi) with a Governmental Authority (other than ordinary course
Contracts with Governmental Authorities as a customer) which provides for annual
payments in excess of $1,000,000 to or from the Company or any of its
Subsidiaries; and
(vii) pursuant to which any indebtedness for borrowed money of
the Company or any of its Subsidiaries in an amount in excess of $10,000,000 is
outstanding or may be incurred or pursuant to which the Company or any of its
Subsidiaries has guaranteed any indebtedness for borrowed money in an amount in
excess of $10,000,000 of any other Person (other than the Company or any of its
Subsidiaries and excluding trade payables arising in the ordinary course of
business).
(c) Each Company Contract is valid and binding on the Company and each
of its Subsidiaries which is party thereto and, to the Knowledge of the Company,
each other party thereto, and is in full force and effect and enforceable in
accordance with its terms (subject to the Bankruptcy and Equity Exemption), and
the Company and each of its Subsidiaries has performed all obligations required
to be performed by it prior to the date hereof under each Company Contract and,
to the Knowledge of the Company, each other party to each Company Contract has
performed all obligations required to be performed by it prior to the date
hereof under such Company Contract and has not violated any provision of such
Company Contract or committed any act which (with or without notice, lapse of
time or both) would constitute a default under any provisions of such Company
Contract, except for such failures to be in compliance as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
SECTION 2.13 Environmental Matters.
(a) The Company and each of its Subsidiaries is in compliance with and
has at all times in the past five (5) years complied with all Environmental Laws
and Environmental Permits, except for any such instances of non-compliance that
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(b) The Company and each of its Subsidiaries possess all Environmental
Permits, which Environmental Permits are (i) in good standing or, where
applicable, a renewal application has been timely filed with and is pending
approval by all applicable Governmental Authorities, and (ii) not subject to
challenge or appeal, except for any such failure to possess, standing,
application, approval, challenge or appeal would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(c) There are no (i) Hazardous Materials present at or migrating from
any current or, to the Knowledge of the Company, former, assets, facilities or
properties owned or operated by the Company or any of its Subsidiaries or, to
the Knowledge of the Company, any of
23
their respective predecessors, or (ii) circumstances related to Hazardous
Materials, including any relating to the on-site or off-site treatment, storage,
disposal, arrangement for disposal, transportation, handling or release of any
Hazardous Materials, in each case of (i) and (ii) above, that are reasonably
likely to result in a liability or investigatory, corrective or remedial
obligation of the Company or any of its Subsidiaries under any applicable
Environmental Laws, except for any such Hazardous Materials, circumstances
related to Hazardous Materials, liability or obligation that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(d) To the Knowledge of the Company, neither the Company, any of its
Subsidiaries, nor any of their predecessors, is subject to, by operation of law
or otherwise, or has contractually assumed or retained from any Person
(including any Governmental Authority), any liability or obligation for any
matters arising under or pursuant to any Environmental Laws or any Environmental
Permit or arising from or relating to Hazardous Materials, except for any such
liability or obligation that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(e) To the Knowledge of the Company, (i) neither the Company nor any
of its Subsidiaries has received any written notice or report from any Person
(including any Governmental Authority) in the past three (3) years regarding any
actual or alleged violation of any Environmental Law or any liabilities or
investigatory, corrective or remedial obligations arising under applicable
Environmental Laws concerning the Company, its Subsidiaries or any of their
respective predecessors, including concerning any release or threatened release
of Hazardous Materials, and (ii) none of the Company or any of its Subsidiaries
are subject to or have entered in to any consent decrees, orders, settlement
agreements or other contractual arrangements with any Person (including any
Governmental Authority) with respect to any Environmental Law or any
Environmental Permit, except for any such notice, decree, order, settlement or
other arrangement that would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
(f) Each of the Company and its Subsidiaries holds the rights to all
environmental credits, benefits, offsets and allowances (including emission
allowances under either Title IV of the federal Clean Air Act (42 U.S.C. ss.
7401 et seq.), any applicable emission budget programs or any other state,
regional or federal emission trading program) required under Environmental Laws
that have been allocated to or acquired for any of their facilities or
operations for (i) calendar year 2007, and (ii) future years for which
allowances have been established and are in effect as of the date of this
Agreement (collectively, "Emission Allowances"). The Company and all
Subsidiaries own or are entitled to (as a matter of law or contract) as of the
Closing Date those Emission Allowances identified on Section 2.13(f) of the
Company Disclosure Letter. None of the Company or any of its Subsidiaries has
entered into any Contract or pledge to sell the Emission Allowances.
SECTION 2.14 Intellectual Property.
(a) The Company and its Subsidiaries own, or are validly licensed or
otherwise have the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, copyrights and other proprietary
24
intellectual property rights and computer programs (collectively, "Intellectual
Property Rights") except as has not had and would not reasonably be expected to
have a Company Material Adverse Effect. No claims are pending or, to the
Knowledge of the Company, threatened that the Company or any of the Company
Subsidiaries is infringing or otherwise adversely affecting the rights of any
person with regard to any Intellectual Property Right except as has not had and
would not reasonably be expected to have a Company Material Adverse Effect. To
the Knowledge of the Company, no person is infringing the rights of the Company
or any of the Company Subsidiaries with respect to any Intellectual Property
Right except as has not had and would not reasonably be expected to have a
Company Material Adverse Effect.
(b) Except as would not, individually or in the aggregate, reasonably
be expected to result in a Company Material Adverse Effect:
(i) no settlement agreements, consents, orders, forbearances to
sue or similar obligations to which the Company or any of its Subsidiaries is a
party limit or restrict any rights of the Company or any of its Subsidiaries in
and to any Intellectual Property Rights that are owned by the Company or any of
its Subsidiaries; and
(ii) the consummation of the Transactions will not result in the
loss or impairment of any rights of the Company or any of its Subsidiaries to
own or use any Intellectual Property Rights or obligate the Company or any of
its Subsidiaries to pay any royalties or other amounts to any third party in
excess of the amounts that would have been payable by them absent the
consummation of the Transactions.
SECTION 2.15 Insurance. Except for failures to maintain insurance or
self-insurance that have not had and would not reasonably be expected to have a
Company Material Adverse Effect, from January 1, 2004, each of the Company and
its Subsidiaries has been continuously insured with financially responsible
insurers or has self-insured, in each case in such amounts and with respect to
such risks and losses as are customary for companies in the United States of
America conducting the business conducted by the Company and its Subsidiaries
from January 1, 2004 through the date hereof and, to the Knowledge of the
Company, there is no condition specific to the Company or its Subsidiaries which
would prevent the Company or its Subsidiaries from obtaining insurance policies
for such risks and losses. All premiums due and payable through the date hereof
under all such policies and Contracts have been paid and the Company and its
Subsidiaries are otherwise in compliance in all respects with the terms of such
policies and Contracts, except for such failures to be in compliance which would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received any notice of cancellation or termination with respect to any such
policy or Contract, except with respect to any cancellation or termination that,
has not had and would not reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 2.16 Certain Business Relationships with Affiliates. Except as
disclosed in the Filed Company SEC Documents, from and after January 1, 2005 and
prior to the date hereof, no event has occurred, and there has been no
transaction, or series of similar transactions, agreements, arrangements or
understandings to which the Company or any
25
of its Subsidiaries is a party, that would be required to be reported pursuant
to Statement of Financial Accounting Standards No. 57 or Item 404 of Regulation
S-K promulgated by the SEC.
SECTION 2.17 Nuclear Generating Facilities.
(a) Other than the interests and stations described in Section 2.17 of
the Company Disclosure Letter (collectively, the "Nuclear Facilities"), none of
the Company, its Subsidiaries, or any of the Joint Ventures of the Company,
currently owns, directly or indirectly, or operates or manages any nuclear
generation station, decommissioned nuclear generation station, nuclear fuel,
spent nuclear fuel or special nuclear material, either in whole or in part. The
operation of each of the Nuclear Facilities is and has been in compliance with
all applicable Laws and Permits, except for such failures to comply that,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
(b) Each of the Nuclear Facilities maintains, and is in compliance
with, (i) emergency plans designed to respond to an unplanned release of a
Hazardous Materials therefrom and (ii) plans for the storage and disposal of
spent nuclear fuel, and each such plan enumerated in sub-clauses (i) and (ii)
conforms with the requirements of applicable Law.
(c) The Company has funded to the extent required consistent with NRC
regulations its portion of the decommissioning costs of each Nuclear Facility.
(d) Neither the Company nor any of its Subsidiaries has been given
written notice of or been charged with an actual or potential violation of, or,
to the Knowledge of the Company, is the subject of any ongoing proceeding,
inquiry, special inspection, diagnostic evaluation or other NRC action of which
the Company or any of its Subsidiaries has received notice under the Atomic
Energy Act or the terms and conditions of any license granted to the Company or
any of its Subsidiaries regarding the Nuclear Facilities that, individually or
in the aggregate, would reasonably be expected to have a Company Material
Adverse Effect.
SECTION 2.18 Hedging Activities.
(a) The Company has established risk parameters, limits and guidelines
in compliance with the risk management policy approved by the Company Board (or
committee thereof) (the "Company Hedging Guidelines") to (i) restrict the level
of risk that the Company and its Subsidiaries are authorized to take with
respect to, among other things, the net position resulting from all physical and
financial electricity contacts, natural gas hedge contracts, gas adjustment
clauses, exchange-traded futures and options transactions, over-the-counter
transactions and derivatives thereof, interest rate swap agreements, and similar
transactions (the "Company Net Position") and (ii) monitor compliance with the
Company Hedging Guidelines by the Company and its Subsidiaries with such risk
parameters. The Company has provided the Company Hedging Guidelines to Parent
prior to the date hereof.
(b) As of the date hereof, (i) the Company Net Position is within the
risk parameters that are set forth in the Company Hedging Guidelines and (ii)
the exposure of the Company and its Subsidiaries with respect to the Company Net
Position resulting from all transactions described in clause (a) above would not
reasonably be expected to result in a material loss to the Company and its
Subsidiaries, taken as a whole, based on market prices in
26
existence as of the date hereof. From the Balance Sheet Date through the date
hereof, neither the Company nor any of its Subsidiaries has, in accordance with
its mark-to-market accounting policies, experienced an aggregate net loss in its
hedging and relating operations that would be material to the Company and its
Subsidiaries taken as a whole taking into account the recognition of any
underlying commodity sales and the regulatory treatment and allowances for hedge
transactions.
SECTION 2.19 Foreign Corrupt Practices and International Trade
Sanctions. Without limitation to any provision of Section 2.5, to the Knowledge
of the Company, neither the Company nor any of its Subsidiaries, nor any of
their respective directors, officers, agents, employees or any other Persons
acting on their behalf has, in connection with the operation of their respective
businesses, (a) used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful expenditures relating to
political activity to officials, candidates or members of any Government
Authority or political party or organization, or established or maintained any
unlawful or unrecorded funds in violation of Section 104 of the Foreign Corrupt
Practices Act of 1977, as amended, or any other similar applicable foreign,
federal or state Law, (b) paid, accepted or received any unlawful contributions,
payments, expenditures or gifts, or (c) violated or operated in noncompliance
with any export restrictions, anti-boycott regulations, embargo regulations or
other applicable domestic or foreign Laws.
SECTION 2.20 Opinion of Financial Advisors. The Company Board has
received the opinions of JPMorgan Securities Inc. and Greenhill & Co., LLC,
dated the date hereof, to the effect that, as of such date, and subject to the
various assumptions and qualifications set forth therein, the Merger
Consideration is fair to the holders of Company Common Stock from a financial
point of view, copies of which opinions will be made available to Parent
promptly after the date hereof.
SECTION 2.21 Brokers and Other Advisors. Except for JPMorgan
Securities Inc. and Greenhill & Co., LLC, the fees and expenses of which will be
paid by the Company, no broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, or the reimbursement of expenses, in connection with
the Transactions based upon arrangements made by or on behalf of the Company or
any of its Subsidiaries. The Company has provided Parent with true and complete
information with respect to the fees payable to such advisors by the Company in
connection with the Transactions.
SECTION 2.22 Section 912 of the NYBCL Not Applicable; State
Takeover Statutes. Assuming the accuracy of Parent's representation and warranty
contained in Section 3.10, the Company has taken all necessary actions so that
the provisions of Section 912 of the NYBCL will not, before the termination of
this Agreement, apply to this Agreement or any of the Transactions. To the
Knowledge of the Company, no "fair price," "moratorium," "control share
acquisition" or other similar federal or state antitakeover statute or
regulation is applicable to the Merger or the other Transactions.
SECTION 2.23 Regulatory Proceedings. Other than fuel adjustment
or purchase gas adjustment or similar adjusting rate mechanisms and except as
27
disclosed in Section 2.23 of the Company Disclosure Letter or as otherwise
permitted by the terms of this Agreement, none of the Company nor any of its
Subsidiaries all or part of whose rates or services are regulated by a
Governmental Authority (a) is a party to any rate proceeding before a
Governmental Authority with respect to rates charged by the Company or any of
its Subsidiaries, (b) has rates in any amounts that have been or are being
collected subject to refund, pending final resolution of any rate proceeding
pending before a Governmental Authority or on appeal to a court or (c) is a
party to any Contract with any Governmental Authority entered into other than in
the ordinary course of business consistent with past practice imposing
conditions on rates or services in effect as of the date hereof or which, to the
Knowledge of the Company, are as of the date hereof scheduled to go into effect
at a later time, except in the cases of clauses (a) through (c) above that,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. No representation or warranty with respect to
the Permits is made by this Section 2.23.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company that, except as set forth in the letter, dated as of the date
hereof, delivered by the Parent to the Company simultaneously with the execution
and delivery of this Agreement (the "Parent Disclosure Letter"), with specific
reference to the particular Section or clause of this Agreement to which the
information set forth in such letter relates (it being agreed that disclosure of
any item in any section or subsection of the Parent Disclosure Letter shall be
deemed disclosure with respect to any other section or subsection to which the
relevance of such item is reasonably apparent):
SECTION 3.1 Organization and Standing. Parent is a corporation
(sociedad anonima), duly organized, validly existing and in good standing under
the Laws of the Kingdom of Spain and Merger Sub is a corporation duly organized,
validly existing and in good standing under the Laws of the State of New York.
Parent is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased or held under
license by it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified or in good standing would not, individually
or in the aggregate, reasonably be expected to impair in any material respect
the ability of Parent to perform its obligations hereunder or prevent or
materially delay consummation of the Transactions. Parent has previously made
available to the Company complete and correct copies of a certificate in respect
of the Parent issued by the Mercantile Registry of Vizcaya as to incorporation,
existence, registration and absence of any filing for bankruptcy or liquidation
and the certificate of incorporation and bylaws of Merger Sub, as amended to the
date hereof.
SECTION 3.2 Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all necessary power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to
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consummate the Transactions. The execution, delivery and performance by Parent
and Merger Sub of this Agreement, and the consummation by Parent and Merger Sub
of the Transactions, have been duly authorized and approved by their respective
Boards of Directors or similar governing bodies (and not subsequently rescinded
or modified in any way) and adopted by Parent as the sole shareholder of Merger
Sub, and no other action on the part of Parent and Merger Sub is necessary to
authorize the execution, delivery and performance by Parent and Merger Sub of
this Agreement and the consummation by them of the Transactions. This Agreement
has been duly executed and delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery hereof by the Company, constitutes a
legal, valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of them in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(b) Neither the execution and delivery of this Agreement by Parent and
Merger Sub, nor the consummation by Parent or Merger Sub of the Transactions,
nor compliance by Parent or Merger Sub with any of the terms or provisions
hereof, will (i) result in a Violation of any provision of the certificate of
incorporation or bylaws (or similar governing instruments) of Parent or Merger
Sub or (ii) assuming that the Permits, orders, registrations and declarations
referred to in Section 3.3 are obtained and the notices and filings referred to
in Section 3.3 are made, (x) violate any Order or Law applicable to Parent,
Merger Sub or any of their respective Subsidiaries, or (y) constitute or result
in a Violation under any of the terms, conditions or provisions of any Contract
to which Parent, Merger Sub or any of their respective Subsidiaries is a party
or by which any of them or any of their respective properties or assets may be
bound or affected, except, in the case of sub-clause (ii), for such Violations
as would not, individually or in the aggregate, reasonably be expected to impair
the ability of Parent or Merger Sub to perform its respective obligations
hereunder or prevent or materially delay consummation of the Transactions.
(c) No vote of the holders of any class or series of Parent's capital
stock or other securities is necessary for the consummation by Parent of the
Transactions.
SECTION 3.3 Governmental Approvals. Except for (i) the filing
with the SEC of any filings required under, and compliance with other applicable
requirements of, the Exchange Act and the rules and regulations of the NYSE and
Blue Sky Laws, (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of New York pursuant to the NYBCL, (iii) the Required
Consents and (iv) the consents, approvals, waivers, filings, notices,
declarations and registrations set forth in Section 3.3 of the Parent Disclosure
Letter (the consents, approvals, waivers, filings, notices, declarations and
registrations set forth in sub-clauses (iii) and (iv) above being hereinafter
referred to as the "Parent Consents"), no consents, approvals or waivers of, or
filings, notices, declarations or registrations with, any Governmental Authority
are necessary for the execution, delivery and performance of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
Transactions, other than such other consents, approvals, waivers, filings,
notices, declarations or registrations that, (i) if not obtained, made or given,
would not, individually or in the aggregate, reasonably be expected to impair in
any material respect the ability of Parent or Merger Sub to perform its
respective obligations hereunder or prevent or materially delay consummation of
the Transactions; or (ii) would reasonably be expected to be obtained from the
relevant Governmental Authority at or prior to the Outside Date.
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SECTION 3.4 Compliance. None of Parent, Merger Sub or their
Affiliates are in Violation of any Law or Order of any Governmental Authority,
except for such Violations that would not, individually or in the aggregate,
reasonably be expected to impair in any material respect the ability of Parent
or Merger Sub to perform its respective obligations hereunder or prevent or
materially delay consummation of the Transactions.
SECTION 3.5 Information Supplied. The information supplied in
writing by Parent for inclusion or incorporation by reference in the Proxy
Statement will not, on the date it is first mailed to the holders of Company
Common Stock, 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, and will not, at the time of the Company Shareholders
Meeting, omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the Company Shareholders Meeting which
shall have become false or misleading in any material respect.
SECTION 3.6 Ownership and Operations of Merger Sub. Parent owns
beneficially and of record all of the outstanding capital stock of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the Transactions,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
SECTION 3.7 Capital Resources. Parent and Merger Sub will have at
the Effective Time sufficient immediately available funds to pay the Merger
Consideration, consummate the Merger and the other Transactions and to pay all
related fees and expenses contemplated hereby as being paid by Parent or Merger
Sub.
SECTION 3.8 Legal Proceedings. As of the date hereof, there is no
pending or, to the Knowledge of Parent, threatened, legal or administrative
proceeding, claim, suit, action or investigation against or relating to Parent
or any of its Subsidiaries, nor is there any injunction, order, judgment,
ruling, writ or decree imposed upon Parent or any of its Subsidiaries, in each
case, by or before any Governmental Authority, that would, individually or in
the aggregate, reasonably be expected to impair in any material respect the
ability of Parent to perform its obligations hereunder or prevent or materially
delay consummation of the Transactions.
SECTION 3.9 Brokers and Other Advisors. The Company shall have no
liability for any broker's, finder's, financial advisor's or other similar fee
or commission, or the reimbursement of expenses, of any broker, investment
banker, financial advisor or other Person in connection with the Transactions
based upon arrangements made by or on behalf of Parent or any of its
Subsidiaries.
SECTION 3.10 Ownership of Company Common Stock. Neither Parent
nor any of its Affiliates beneficially owns (as defined in Rule 13d-3 of the
Exchange Act) any Shares.
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ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 4.1 Conduct of Business.
(a) Except as contemplated or permitted by this Agreement or as
required by applicable Law or as contemplated by Section 4.1(a) of the Company
Disclosure Letter, during the period from the date of this Agreement until the
Effective Time, unless Parent otherwise consents in writing (which consent shall
not be unreasonably withheld or delayed), the Company shall, and shall cause
each of its Subsidiaries to, conduct its business in the usual, regular and
ordinary course consistent with past practice and good utility practice and (i)
use its reasonable best efforts to preserve intact in all material respects (w)
its business organization, (x) its relationships with customers, suppliers and
other Persons having material business dealings with it, and (y) its goodwill,
and (ii) subject to prudent management of its workforce and business needs, use
its reasonable best efforts to keep available in all material respects the
services of its officers and employees, in each case as of the date hereof, and,
without limiting the generality of the foregoing, the Company shall not, and
shall not permit any Subsidiary of the Company to:
(i) issue, sell, pledge, grant, transfer, encumber, dispose of,
or authorize the issuance, sale, pledge, grant, transfer, encumbrance or
disposition of any shares of its capital stock, or any securities or rights
convertible into, exchangeable or exercisable for, or evidencing the right to
subscribe for any shares of its capital stock, or any Options; provided that the
Company may issue shares of Company Common Stock in the ordinary course of
business consistent with past practice in connection with (A) the issuance of
Company Common Stock pursuant to the terms of the Company ESPPs, (B) the
issuance of Company Common Stock upon exercise or settlement of the Company
Employee Stock Options, (C) the granting of awards of restricted shares, stock
options, stock appreciation or similar rights, as the case may be, pursuant to
Company Plans in the ordinary course of the operation of such Company Plans,
provided that the aggregate number of shares of Company Common Stock issuable
upon the exercise or settlement, as the case may be, of any such awards granted
after the date hereof shall not exceed (x) in the case of restricted shares,
500,000 shares, and (y) in the case of Company Employee Stock Options, stock
appreciation or similar rights, 1,100,000 shares, or (D) subject to the
restrictions in Section 4.18, the issuance of securities by the Company pursuant
to the Company Investor Services Program;
(ii) (A) 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, (B) split, combine, subdivide or reclassify any shares of its
capital stock, or (C) enter into any agreement with respect to the voting of its
capital stock;
(iii) declare, set aside for payment or pay any dividend on, or
make any other distribution in respect of, any shares of its capital stock other
than (A) by a Subsidiary of the Company (provided that the Company or a
Subsidiary of the Company receives its proportionate share of such dividend or
distribution), (B) dividends required to be paid on preferred stock of any
Subsidiaries in accordance with their terms, (C) regular dividends on the
Company Common Stock with usual record and payment dates at a rate not in excess
of $0.30
31
per share per quarter and, beginning in the fourth quarter of 2007, at a rate
not in excess of $0.31 per share per quarter, or (D) with respect to any quarter
in which the Effective Time occurs, a special dividend with respect to Company
Common Stock in an amount consisting of the pro rata portion of the dividend
permitted under sub-clause (C), for the period from and including the
ex-dividend date (as referred to in Rule 235 of the New York Stock Exchange
Constitution and Rules) through, but not including, the day of the Effective
Time;
(iv) directly or indirectly redeem, purchase or otherwise acquire
any of its outstanding shares of capital stock or any Options, except in the
ordinary course of business consistent with past practice and pursuant to
written commitments in effect as of the date hereof, including Company Plans in
the ordinary course of the operation of such plans and the terms of any series
of preferred stock of any Subsidiary;
(v) (A) incur any new indebtedness for borrowed money or
guarantee any such indebtedness, other than amounts not in excess of
$300,000,000 in the aggregate outstanding at any time, (B) enter into any "keep
well" or other agreement to maintain the financial condition of any Person other
than the Company or any of its Subsidiaries, (C) make any loans, advances or
capital contributions to, or investments in, any Person other than the Company
or any of its Subsidiaries in excess of $50,000,000 in the aggregate, (D)
repurchase or prepay any indebtedness for borrowed money in excess of
$100,000,000 in the aggregate, except as required by the terms of such
indebtedness or for payments of amounts outstanding under the Company's existing
credit facility in the ordinary course of business, or (E) enter into any
Contract having the economic effect of any of the foregoing (including any
capital leases, "synthetic" leases or conditional sale or other title retention
agreements) other than (i) refinancing and new indebtedness in the amounts set
forth in Section 4.1(a)(v) of the Company Disclosure Letter, (ii) short-term
borrowings up to the current limit of any revolving credit facility set forth on
Section 2.12 of the Company Disclosure Letter and for new short-term facilities
in an aggregate principal amount not to exceed $50,000,000 outstanding at any
time for working capital in the ordinary course of business consistent with past
practice, (iii) letters of credit obtained in the ordinary course of business
consistent with past practice; (iv) indebtedness for borrowed money in
connection with the refinancing of existing indebtedness (including any
pre-funding, repurchase or exchange) at its stated maturity or a lower cost of
funds (calculating such cost on an aggregate present-value after-Tax basis), in
each case, in an amount equal to or less than the amount of indebtedness to be
refinanced;
(vi) sell, lease, transfer, pledge, grant any security interest
in or otherwise dispose of or encumber any of its properties or assets that are,
individually or in the aggregate, material to the Company and its Subsidiaries,
except (A) dispositions of obsolete or worthless equipment or assets, (B)
dispositions of assets being replaced, (C) dispositions of assets in accordance
with the terms of restructuring and divestiture plans required by Governmental
Authorities prior to the date hereof and disclosed in Section 4.1(a)(vi)(C) of
the Company Disclosure Letter, (D) pursuant to Contracts in force at the date
hereof and disclosed in Section 4.1(a)(vi)(D) of the Company Disclosure Letter,
or (E) dispositions of properties or assets set forth in Section 4.1(a)(vi)(E)
of the Company Disclosure Letter;
(vii) make capital expenditures that in the aggregate, exceed one
hundred ten per cent (110%) of the amount to be expended (taking into account
the anticipated
32
timing of such expenditures) in any fiscal year as reflected in the Company's
2007 - 2008 forecasts of capital expenditures (copies of which have been
provided to Parent prior to the date of this Agreement), except (A) capital
expenditures required by applicable Law or Governmental Authorities, (B) capital
expenditures in connection with the repair or replacement of facilities
destroyed or damaged due to casualty or accident (whether or not covered by
insurance) necessary to provide or maintain safe, adequate and reliable electric
and natural gas service (after prior consultation with Parent), or (C) capital
expenditures relating to matters identified in Section 4.1(a)(vii) of the
Company Disclosure Letter;
(viii) make or agree to make any acquisition of or investment in
(including by merger, consolidation, acquisition of stock or otherwise) the
capital stock of any Person other than the Company or any of its Subsidiaries or
(except in the ordinary course of business consistent with past practice) a
material portion of the assets of any Person other than the Company or any of
its Subsidiaries for consideration in excess of $50,000,000 in the aggregate,
other than acquisitions or investments identified in Section 4.1(a)(viii) of the
Company Disclosure Letter;
(ix) (A) increase in any respect the compensation, bonus or
fringe benefits of any director, officer, employee or consultant, other than (x)
as required by Contract or pursuant to applicable Law, and (y) increases in
salaries, wages and benefits of employees (other than executive officers) made
in the ordinary course of business consistent with past practice, or (B) enter
into or renew any Contract (other than a renewal occurring in accordance with
the terms thereof) providing for the payment to any director, officer, employee
or consultant compensation or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions contemplated
by this Agreement;
(x) other than in the ordinary course of business consistent with
past practice or pursuant to any Contract or any Company Plan in existence on
the date hereof or entered into after the date hereof to the extent permitted by
the terms of this Agreement, (A) pay any benefit not provided for under any
Contract or Company Plan (other than the payment of cash compensation in the
ordinary course of business consistent with past practice), (B) take any action
to fund or in any other way secure the payment of compensation or benefits under
any Contract or Company Plan (C) exercise any discretion to accelerate the
vesting or payment of any compensation or benefit under any Contract or Company
Plan, other than as provided in the Employment Agreement, (D) enter into or
adopt any new employee benefit plan or arrangement or amend, modify or terminate
(except as may be required (i) by applicable Law, (ii) to avoid the imposition
of any tax or penalty under Section 409A of the Code or (iii) applicable Tax
qualification requirements) any existing Company Plan, other than as provided in
the Employment Agreement, (E) grant the right to receive any severance,
termination or retention pay, or increases therein, or (F) pay any benefit or
grant to or amend or modify any award, including in respect of stock options or
other equity-related award, in each case described in sub-clauses (A) through
(F) above for the benefit of any current or former director, officer, employee
or consultant of the Company or any Subsidiary of the Company;
(xi) other than in the ordinary course of business consistent
with past practice (A) make, revoke, amend or change any material election
concerning Taxes, (B) settle or compromise any material Tax liability that has
not been accrued or otherwise reflected on the
33
Company Financial Statements, (C) file any amended Tax Return to the extent such
amendment could negatively affect the Company's Financial Statements in a
material manner, (D) enter into any closing agreement to the extent any such
agreement would negatively affect the Company's Financial Statements in a
material manner , or (E) extend or waive the application of any statute of
limitations regarding the assessment or collection of any material Tax (except
with respect to regular and routine extensions of Tax Returns), provided,
however, that Parent shall be deemed to have consented to any request with
respect to sub-clauses (A) and (C) above to the extent that Parent does not
notify the Company or any of its Subsidiaries of its consent or withholding of
consent within ten (10) business days of receipt of the request made by the
Company or any of its Subsidiaries;
(xii) make any material changes in financial or Tax accounting
methods, policies, principles or practices (or change an annual accounting
period), except insofar as may be required by GAAP (or a change in GAAP) or
applicable Law or regulation;
(xiii) amend or propose to amend any of the Company Charter
Documents;
(xiv) adopt a plan or agreement of complete or partial
liquidation or dissolution;
(xv) adopt, enter into, renew or extend any collective bargaining
agreement or other labor union Contract applicable to the employees of the
Company or any Subsidiary of the Company, except (x) as may be required to
comply with Section 1.9(d), (y) in connection with any collective bargaining
agreement or other labor union Contract currently being renewed or extended, or
(z) as is necessary to prevent the expiration of any such agreement or Contract;
(xvi) fail to maintain with financially responsible insurance
companies (or through self-insurance not inconsistent with past practice)
insurance in such amounts and against such risks and losses consistent with the
insurance policies presently maintained by the Company;
(xvii) notwithstanding anything to the contrary contained herein,
make any acquisition or investment in or enter into any line of business that is
not conducted by the Company or any of its Subsidiaries as of the date hereof;
(xviii) except to the extent permitted under any other clause of
this Section 4.1(a), enter into, amend or modify any Contract which (A) is
reasonably expected to remain in effect after the Effective Time, and (B) could
reasonably be expected to involve payments to or by the Company or any of its
Subsidiaries that exceed $10,000,000 in the aggregate.
(xix) settle any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, except
(A) in the ordinary course of business consistent with past practice, (B)
settlements to the extent subject to reserves existing as of the date hereof in
accordance with GAAP, or (C) the settlement of any claim, action, suit,
34
proceeding or investigation that would not reasonably be expected to have a
Company Material Adverse Effect;
(xx) enter into any Contracts that materially limit or otherwise
materially restrict the Company or any of its Subsidiaries or any of their
respective Affiliates or any successor thereto or that could, after the
Effective Time, materially limit or restrict Parent or any of its Affiliates
(including the Surviving Corporation) or any successor thereto, from engaging or
competing in any line of business or product line or in any geographic area;
(xxi) (x) enter into any Contract for the purchase and/or sale of
capacity or energy (a "Power Agreement") other than any Power Agreement entered
into in the ordinary course of business consistent with past practice or any
Power Agreement that is fully compliant with the Company Hedging Guidelines or
(y) change the Company Hedging Guidelines in any material respect;
(xxii) except as disclosed in Section 4.1(a)(xxii) of the Company
Disclosure Letter, retire, commit to retire or otherwise indicate an intention
to retire any generation facility of the Company or any of its Subsidiaries;
(xxiii) take any action that is intended or is reasonably likely
to result in any of the conditions to the Merger set forth in Article V not
being satisfied; or
(xxiv) enter into any Contract with respect to, or otherwise
commit or agree to take, any of the foregoing actions in this Section 4.1(a).
(b) Except as contemplated or permitted by this Agreement, required by
applicable Law or as otherwise indicated in Section 4.1(b) of the Parent
Disclosure Letter, during the period from the date of this Agreement until the
Effective Time, unless the Company otherwise consents in writing (which consent
shall not be unreasonably withheld or delayed), Parent shall not, and shall not
permit any of its Subsidiaries to take, or agree or commit to take, any action
that would reasonably be expected to (i) impose any material delay in the
obtaining of any Company PUC Consent, or significantly increase the risk of not
obtaining, any authorizations, consents, orders, waivers, declarations,
registrations or approvals of any Governmental Authority necessary to consummate
the Transactions or for the expiration or termination of any applicable waiting
period, (ii) significantly increase the risk of any Governmental Authority
entering an order prohibiting the consummation of the Transactions or (iii)
otherwise prevent or materially delay the consummation of the Transactions.
SECTION 4.2 Other Offers; Etc.
(a) The Company shall, and shall use its reasonable best efforts to
cause its and its Subsidiaries' respective directors, officers, employees,
agents, investment bankers and other representatives (collectively,
"Representatives") to, immediately cease any negotiations that may be ongoing as
of the date hereof with any Person with respect to a Takeover Proposal and shall
request the prompt return or destruction of all confidential information
furnished in connection therewith. During the period from the date of this
Agreement until the Effective Time, or such earlier date as this Agreement may
be terminated in accordance with its terms, the Company and its Subsidiaries
shall not, and the Company shall direct and use its reasonable best
35
efforts to cause its and its Subsidiaries' Representatives not to, (i) solicit,
initiate, facilitate or knowingly encourage any inquiries, proposals or offers
with respect to, or the making or completion of a Takeover Proposal or any
inquiry, proposal or offer that is reasonably likely to lead to a Takeover
Proposal or (ii) except to inform Persons of the existence of the provisions
contained in this Section 4.2, participate in any discussions or negotiations
with, or furnish any non-public information to, any Person regarding, or that is
reasonably likely to lead to, any written Takeover Proposal. Notwithstanding the
foregoing, at any time prior to, but not after, obtaining the Company
Shareholder Approval, (x) the Company and its Representatives may have
discussions with any Person that has made an unsolicited written Takeover
Proposal after the date hereof in order to clarify and understand the terms and
conditions of such proposal and (y) if the Company Board (A) receives an
unsolicited written Takeover Proposal after the date hereof that it determines
in good faith (after consultation with outside legal counsel and a financial
advisor of nationally recognized reputation) constitutes or could reasonably be
expected to lead to a Superior Proposal and (B) determines in good faith (after
consultation with outside legal counsel) that the failure to take any of the
following actions could be inconsistent with the fiduciary duties of the Company
Board under applicable Law, the Company may furnish information with respect to
the Company and its Subsidiaries to the Person making such Takeover Proposal
(provided that the Company shall only provide non-public information pursuant to
a confidentiality and standstill agreement not less restrictive to the recipient
thereof in the aggregate than the Confidentiality Agreement, provided that such
confidentiality agreement may allow such Person to submit to the Company a
proposal or offer relating to such Takeover Proposal), and participate in
discussions and negotiations with such Person regarding such Takeover Proposal
and, to the extent reasonably required to evaluate a Takeover Proposal that
includes the issuance of securities by the Person making such Takeover Proposal,
may enter into a customary confidentiality agreement in order to obtain
non-public information with respect to such Person. The Company shall not, and
shall cause each of its Subsidiaries not to, terminate, waive, amend or modify
any provision of, or grant permission or request under, any standstill or
confidentiality agreement to which it or any of its Subsidiaries is a party, and
the Company shall, and shall cause its Subsidiaries to, use reasonable best
efforts to enforce the provisions of any such agreement; provided, however, that
the Company may allow submission to the Company of a proposal or offer relating
to a Takeover Proposal. Any violation of the restrictions set forth in this
Section 4.2 by any Representative of the Company or its Subsidiaries, whether or
not such Representative is purporting to act on behalf of the Company or
otherwise, shall be deemed to be a breach of this Section 4.2 by the Company. To
the extent that the Company provides any material non-public information
concerning the Company or any of its Subsidiaries to any person making a
Takeover Proposal which was not previously provided or made available to Parent,
the Company shall make such information available to Parent as soon as
practicable after making such information available to the person making the
Takeover Proposal.
(b) Except as expressly permitted by this Section 4.2(b), (i) the
Company Board shall not (A) withdraw or modify, in a manner adverse to Parent,
or publicly propose to withdraw or modify in any manner adverse to the Parent,
its recommendation that the holders of Company Common Stock adopt this Agreement
(the "Company Recommendation") or (B) publicly approve or recommend or publicly
propose to approve or recommend to the holders of Company Common Stock a
Takeover Proposal (any action described in this sub-clause (i) being referred to
as a "Company Adverse Recommendation Change") and (ii) neither the Company nor
36
any of its Subsidiaries shall enter into any letter of intent or merger,
acquisition or similar agreement with respect to any Takeover Proposal (each, a
"Company Acquisition Agreement"), other than a confidentiality agreement subject
to the requirements of Section 4.2(a). Notwithstanding the foregoing, prior to
the Company Shareholder Approval, subject to Section 4.2(c), if the Company
Board (A) receives an unsolicited written Takeover Proposal after the date
hereof that it determines in good faith (after consultation with outside legal
counsel and a financial advisor of nationally recognized reputation) constitutes
a Superior Proposal and did not result from a breach of this Section 4.2 and (B)
determines in good faith (after consultation with outside legal counsel) that
the failure to take any of the following actions would be inconsistent with the
fiduciary duties of the Company Board under applicable Law, the Company Board
may (1) make a Company Adverse Recommendation Change and/or (2) cause the
Company to enter into a Company Acquisition Agreement with respect to such
Superior Proposal, but only if the Company shall have concurrently with entering
into such Company Acquisition Agreement terminated this Agreement pursuant to
Section 6.1(c)(i).
(c) If the Company Board determines to effect a Company Adverse
Recommendation Change as provided in sub-clause (1) of the second sentence of
Section 4.2(b) or to authorize the Company to enter into a Company Acquisition
Agreement as provided in sub-clause (2) of the second sentence of Section
4.2(b), such Company Adverse Recommendation Change or Company Acquisition
Agreement (as applicable) may only become effective after the end of the fourth
(4th) calendar day following Parent's receipt of written notice from the Company
(an "Adverse Recommendation Notice") advising Parent that the Company Board
intends to effect such Company Adverse Recommendation Change or to authorize the
Company to enter into such Company Acquisition Agreement, which notice shall
contain the identity of the Person making the Superior Proposal and the material
terms and conditions of such Superior Proposal to the extent such information
has not previously been provided to Parent; provided that any material amendment
to the terms of such Superior Proposal after the initial Adverse Recommendation
Notice shall require a new Adverse Recommendation Notice and restart the notice
period referred to above, but such notice period shall then be two (2) business
days. In determining whether to permit the Company to effect a Company Adverse
Recommendation Change or to enter into a Company Acquisition Agreement in
response to a Superior Proposal, the Company Board shall take into account in
good faith any changes to the terms of this Agreement proposed by Parent.
(d) The Company shall promptly (and in any event within twenty-four
(24) hours) advise Parent orally and in writing of (i) any inquiries, proposals
or offers regarding any Takeover Proposal, (ii) any request for information
relating to the Company or its Subsidiaries, other than requests for information
not reasonably expected to be related or lead to a Takeover Proposal, and (iii)
any inquiry or request for discussion or negotiation regarding or that would
reasonably be expected to result in a Takeover Proposal, including in each case
the identity of the person making any such Takeover Proposal or indication or
inquiry or offer or request and the material terms and conditions of any such
Takeover Proposal or indication or inquiry or offer. Without limiting the
foregoing, the Company shall promptly (and in any event within twenty-four (24)
hours) notify Parent in writing if it determines to provide non-public
information to a Person contemplating making, or to engage in discussions or
negotiations concerning, a Takeover Proposal pursuant to this Section 4.2. The
Company shall keep Parent reasonably informed on a current basis of the
occurrence of any significant changes regarding
37
any such Takeover Proposal or indication or inquiry or offer or any material
developments relating thereto.
(e) Nothing in this Section 4.2 shall prohibit the Company Board from
taking and disclosing to the Company's shareholders a position contemplated by
Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation MA promulgated under the
Exchange Act, or other applicable Law, if the Company Board determines, after
consultation with outside legal counsel, that failure to so disclose such
position could constitute a violation of applicable Law and any such disclosure
which would otherwise constitute a Company Adverse Recommendation Change, shall
be deemed to be a Company Adverse Recommendation Change unless the Company Board
expressly publicly reaffirms its Company Recommendation within five (5) business
days after such communication. In addition, it is understood and agreed that,
for purposes of this Section 4.2, a factually accurate public statement by the
Company that describes the Company's receipt of a Takeover Proposal and the
operation of this Agreement with respect thereto and contains a
"stop-look-and-listen communication" shall not be deemed a Company Adverse
Recommendation Change.
SECTION 4.3 Proxy Statement.
(a) As promptly as practicable after the date hereof, the Company
shall prepare and file with the SEC a preliminary proxy statement relating to
the Company Shareholders Meeting (together with any amendments thereof or
supplements thereto, the "Proxy Statement") in compliance with the applicable
provisions of the Exchange Act. The Company will use all commercially reasonable
efforts to respond to any comments made by the SEC with respect to the Proxy
Statement. Parent shall cooperate with the Company in connection with the
preparation of the Proxy Statement, and shall furnish all information concerning
Parent and Merger Sub as the Company may reasonably request in connection with
the preparation of the Proxy Statement. The Company will provide Parent with a
reasonable opportunity to review and comment on the Proxy Statement, any
amendment or supplement to the Proxy Statement and any written response to any
comments or inquiry from the SEC prior to filing or providing such with or to
the SEC, shall include in such document or response any comments reasonably
proposed by Parent and will provide Parent with a copy of all such filings made
with the SEC. Subject to Section 4.2(b), the Proxy Statement shall include the
Company Recommendation.
(b) The Company will advise Parent as promptly as practicable after it
receives notice of any request by the SEC for amendment of the Proxy Statement
or comments thereon and responses thereto or requests by the SEC for additional
information.
(c) The Company agrees that none of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement or any supplemental proxy, at the time of mailing thereof and at the
time of the Company Shareholders Meeting, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Parent agrees that none of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in the Proxy Statement or any supplemental proxy, at the time of mailing thereof
and at the time of
38
the Company Shareholders Meeting, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.4 Company Shareholders Meeting. The Company shall duly
call, give notice of, convene and hold an annual or special meeting of the
Company's shareholders (the "Company Shareholders Meeting") as promptly as
reasonably practicable following the date hereof (it being understood that the
Company's current intention is to use its reasonable efforts to hold such
meeting prior to December 31, 2007) for the purpose of voting upon the adoption
of this Agreement and approval of the Merger and the other Transactions and, in
connection therewith, the Company shall mail the Proxy Statement to the holders
of Company Common Stock in advance of such meeting. Subject to Section 4.2, the
Company shall take all lawful action to (i) solicit from the holders of Company
Common Stock proxies in favor of the adoption of this Agreement and approval of
the Merger and the other Transactions and (ii) take all other actions necessary
or advisable to secure the vote or consent of the holders of Company Common
Stock required by applicable Law to obtain such approval; provided that the
Company may (and at the request of the Parent shall) extend the date of the
Company Shareholders Meeting to the extent (A) necessary in order to obtain a
quorum of its shareholders or (B) the Company reasonably determines that such
delay is required by applicable Law. At the Company Shareholders Meeting, Parent
and its Affiliates will vote all Shares owned by them, if any, in favor of
adoption of this Agreement and approval of the Merger. The Company shall not be
required to hold the Company Shareholders Meeting if this Agreement is
terminated before that meeting is held.
SECTION 4.5 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of the
Parties shall cooperate with the other Parties and use (and shall cause their
respective Subsidiaries to use) their respective reasonable best efforts to
promptly (i) take, or cause to be taken, all actions, and do, or cause to be
done, all things, necessary, proper or advisable to cause the conditions to
Closing to be satisfied as promptly as practicable and to consummate and make
effective, in the most expeditious manner practicable, the Transactions,
including preparing and filing promptly and fully all documentation to effect
all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents (including any
required or recommended filings under applicable federal and state securities
Laws, Antitrust Laws or the Required Consents), (ii) obtain all approvals,
consents, registrations, permits, authorizations and other confirmations from,
and make all appropriate filings and submissions with, any Governmental
Authority or other Person necessary, proper or advisable to consummate the
Transactions and obtain the Required Consents and (iii) ensure that all
proceedings to be taken on its part in connection with the Transactions at the
Closing shall be reasonably satisfactory in form and substance to the other
Party, and that the other Party shall receive copies of all such documents and
other evidences as such Party shall reasonably request in order to establish the
consummation of the Transactions and the taking of all proceedings in connection
therewith.
(b) In furtherance and not in limitation of the foregoing, (i) each
Party agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with
39
respect to the Transactions and to supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act and to take, or cause to be taken, all other actions consistent
with this Section 4.5 necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable and (ii) the
Company and Parent shall each use its reasonable best efforts to (x) take all
action necessary to ensure that no state takeover statute or similar Law is or
becomes applicable to any of the Transactions and (y) if any state takeover
statute or similar Law becomes applicable to any of the Transactions, take all
action necessary to ensure that the Transactions may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise
minimize the effect of such Law on the Transactions.
(c) In furtherance and not in limitation of the covenants of the
Parties contained in this Section 4.5, each of the Parties shall use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing, submission or other communication with a
Governmental Authority in connection with the Transactions (including obtaining
the Required Consents or the Parent Consents, as applicable) and in connection
with any action, proceeding, investigation or other inquiry instituted (or
threatened to be instituted) by or before a Governmental Authority or other
Person relating to the Transactions, including any action or proceeding
initiated by a private party and (ii) keep the other Parties informed in all
material respects and on a reasonably timely basis of any material communication
received by such Party from, or given by such Party to, the Federal Trade
Commission, the Antitrust Division of the Department of Justice, or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by any other Person, in each case regarding any
of the Transactions. Subject to applicable Laws relating to the exchange of
information, each of the Parties shall have the right to review in advance, and
to the extent practicable each will consult the other on, all the information
relating to the other Parties and their respective Subsidiaries, as the case may
be, that appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Authority in connection with the
Transactions (including obtaining the Required Consents or the Parent Consents,
as applicable).
(d) Each of the Parties shall use its reasonable best efforts to
resolve such objections or suits, if any, as may be asserted or instituted (or
threatened to be asserted or instituted) by a Governmental Authority or other
Person with respect to the Transactions. Without limiting any other provision
hereof, each of the Parties shall each (i) use its reasonable best efforts to
avoid the entry of, or to have vacated or terminated, any Order that would
restrain, prevent or delay the consummation of the Transactions on or before the
Outside Date, including by defending through litigation on the merits any claim
asserted in any court by any Person and (ii) avoid or eliminate each and every
impediment under any Antitrust Law that may be asserted by any Governmental
Authority with respect to the Transactions so as to enable the consummation of
the Transactions to occur as soon as reasonably possible (and in any event no
later than the Outside Date) including, in order to resolve such objections or
suits, by taking all such actions, including (x) proposing, negotiating,
committing to and effecting, by consent decree, hold separate order, or
otherwise, the sale, divestiture or disposition of such assets or businesses of
the Company or its Subsidiaries and (y) otherwise taking or committing to take
actions with respect to, or its ability to retain, one or more of its, or its
Subsidiaries', businesses, product lines or assets, in each case, as may be
required in order to resolve such objections or
40
suits or to avoid the entry of, or to effect the dissolution of, any Order in
any suit or proceeding, which would otherwise have the effect of preventing or
materially delaying the consummation of the Transactions.
SECTION 4.6 Public Announcements. The initial press release with
respect to the execution of this Agreement shall be a joint press release to be
reasonably agreed upon by Parent and the Company. Thereafter, the Company and
Parent shall cooperate to develop a joint communications plan and cooperate (i)
to ensure that all press releases and other public statements with respect to
the Transactions shall be consistent with such joint communications plan, and
(ii) unless otherwise required by Law, applicable fiduciary duties or by any
listing standard of the NYSE, to consult with each other before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the Transactions.
SECTION 4.7 Access to Information; Confidentiality. Subject to
applicable Laws relating to the exchange of information and upon reasonable
notice, the Company shall afford to Parent and Parent's Representatives
reasonable access during normal business hours to the officers, employees,
accountants, properties, books, Contracts and records of the Company and its
Subsidiaries (including any Tax Returns) and the Company shall (and shall cause
its Subsidiaries to) furnish promptly to Parent (i) a copy of each report,
schedule and other document filed, published, announced or received by it prior
to the Effective Time pursuant to the requirements of applicable federal or
state securities Laws and rules and regulations promulgated thereunder and (ii)
other information concerning the business, properties, assets and personnel of
the Company and its Subsidiaries as Parent may reasonably request; provided,
however, that the Company shall not be obligated to provide such access or
information if the Company determines, in its reasonable judgment, that doing so
would violate applicable Law or a Contract or obligation of confidentiality
owing to a third Person or jeopardize the protection of an attorney-client
privilege. Until the Effective Time, the information provided pursuant to this
Agreement will be subject to the terms of the letter, dated as of October 11,
2006, between Parent and the Company (as it may be amended from time to time,
the "Confidentiality Agreement"), which shall survive the termination of this
Agreement in accordance with the terms of the Confidentiality Agreement.
SECTION 4.8 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of (i) any notice or other communication
received by such Party from any Governmental Authority in connection with the
Transactions or from any other Person alleging that the consent of such Person
is or may be required in connection with the Transactions and (ii) any actions,
suits, claims, investigations or proceedings commenced or, to such Party's
Knowledge, threatened against, relating to or involving or otherwise affecting
such Party or any of its Subsidiaries which, in the case of either sub-clause
(i) or (ii) above, would reasonably be likely to have a Company Material Adverse
Effect or prevent or materially delay consummation of the Transactions.
(b) Each of Parent, Merger Sub and the Company will notify the other
of, and will use its reasonable best efforts to cure before the Closing, any
event, transaction or circumstance, as soon as practical after it becomes known
to such party, that causes or will cause
41
any covenant or agreement of Parent, Merger Sub or the Company under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of Parent, Merger Sub or the Company contained in
this Agreement. Each of Parent, Merger Sub and the Company also will notify the
other in writing of, and will use its reasonable best efforts to cure, before
the Closing, any violation or breach, as soon as practical after it becomes
known to such party, of any representation, warranty, covenant or agreement made
by Parent, Merger Sub or the Company. No notice given pursuant to this Section
4.8 shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein.
SECTION 4.9 Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall, and shall cause
the Company and the Surviving Corporation to, (i) indemnify and hold harmless
each individual who at the Effective Time is, or at any time prior to the
Effective Time was, a director, officer, employee or agent of the Company or of
a Subsidiary of the Company (each, an "Indemnitee" and, collectively, the
"Indemnitees") with respect to all claims, liabilities, losses, damages,
judgments, fines, penalties, costs (including amounts paid in settlement or
compromise) and expenses (including reasonable fees and expenses of legal
counsel) in connection with any claim, suit, action, proceeding or investigation
(whether civil, criminal, administrative or investigative), whenever asserted,
based on or arising out of, in whole or in part, acts or omissions by an
Indemnitee in the Indemnitee's capacity as a director, officer, employee or
agent of the Company or such Subsidiary or taken at the request of the Company
or such Subsidiary (including in connection with serving at the request of the
Company or such Subsidiary as a director, officer, employee or agent of another
Person (including any employee benefit plan)), at, or at any time prior to, the
Effective Time (including in connection with the Transactions), to the fullest
extent permitted under applicable Law, and (ii) assume all obligations of the
Company and such Subsidiaries to the Indemnitees in respect of indemnification
and exculpation from liabilities for acts or omissions occurring at or prior to
the Effective Time as provided in (x) the Company Charter Documents as currently
in effect and (y) the indemnification agreements with any of the Indemnitees in
effect as of the date hereof, which shall survive the Transactions and continue
in full force and effect in accordance with their respective terms. Without
limiting the foregoing, Parent, from and after the Effective Time until the
applicable statute of limitation period shall have expired, shall cause the
certificate of incorporation and bylaws of the Surviving Corporation to contain
provisions no less favorable to the Indemnitees with respect to limitation of
liabilities of directors and officers and indemnification than are set forth as
of the date of this Agreement in the Company Charter Documents, which provisions
shall not be amended, repealed or otherwise modified in a manner that would
adversely affect the rights thereunder of the Indemnitees. In addition, from and
after the Effective Time, Parent shall, and shall cause the Company and the
Surviving Corporation to, pay any expenses (including reasonable fees and
expenses of legal counsel) of any Indemnitee under this Section 4.9 (including
in connection with enforcing the indemnity and other obligations provided for in
this Section 4.9) as incurred to the fullest extent permitted under applicable
Law; provided that the individual to whom expenses are advanced provides an
undertaking to repay such advances to the extent required by applicable Law.
42
(b) Any Indemnitee wishing to claim indemnification under this Section
4.9, upon learning of any such claim, action, suit, proceeding or investigation,
shall notify Parent, the Company and the Surviving Corporation, but the failure
to so notify Parent, the Company and the Surviving Corporation shall not relieve
such party from any liability which it may have under this paragraph except to
the extent such failure materially prejudices Parent, the Company and/or the
Surviving Corporation. An Indemnitee shall have the right, but not the
obligation, to assume and control the defense of any litigation, claim or
proceeding relating to any acts or omissions covered under this Section 4.9
(each, a "Claim") with counsel selected by the Indemnitee, which counsel shall
be reasonably acceptable to Parent; provided, however, that (i) Parent (A) shall
be permitted to participate in the defense of such Claim at its own expense and
(B) shall not be liable for any settlement effected without Parent's written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed and (ii) the Indemnitees 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 Indemnitees, in which case, the
Indemnitees may retain more than one law firm but Parent shall only be required
to pay the reasonable and documented fees and expenses of one additional law
firm as determined by Parent. Each of Parent, the Company, the Surviving
Corporation and the Indemnitees shall cooperate in the defense of any Claim and
shall provide access to properties and individuals as reasonably requested and
furnish or cause to be furnished records, information and testimony, and attend
such conferences, discovery proceedings, hearings, trials or appeals, as may be
reasonably requested in connection therewith.
(c) For the six-year period commencing immediately after the Effective
Time (and for so long thereafter as any Claims thereunder are being
adjudicated), Parent shall maintain in effect the Company's current directors'
and officers' liability insurance covering acts or omissions occurring at or
prior to the Effective Time with respect to those individuals who are as of the
date hereof (and any additional individuals who prior to the Effective Time
become) covered by the Company's directors' and officers' liability insurance
policy on terms with respect to such coverage, and in amount, not less favorable
to such individuals than those of such policy in effect on the date hereof (or
Parent may substitute therefor policies, issued by reputable insurers, of at
least the same coverage with respect to matters occurring prior to the Effective
Time); provided, however, that, if the aggregate annual premiums for such
insurance shall exceed two hundred per cent (200%) of the aggregate annual
premiums paid by the Company as of the date hereof, then Parent shall provide or
cause to be provided a policy for the applicable individuals with the best
coverage as shall then be available at an annual premium of two hundred per cent
(200%) of the current aggregate annual premium.
(d) The provisions of this Section 4.9 are (i) intended to be for the
benefit of, and shall be enforceable by, each Indemnitee, his heirs and his
representatives and (ii) in addition to, and not in substitution for, any other
rights to indemnification or contribution that any such individual may have by
Contract or otherwise. The obligations of Parent and the Surviving Corporation
under this Section 4.9 shall not be terminated or modified in such a manner as
to adversely affect the rights of any Indemnitee to whom this Section 4.9
applies unless (x) such termination or modification is required by applicable
Law or (y) the affected Indemnitee shall have consented in writing to such
termination or modification (it being expressly agreed that the Indemnitees to
whom this Section 4.9 applies shall be third-party beneficiaries of this Section
4.9).
43
(e) In the event that Parent, the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case,
proper provision shall be made so that the successors and assigns of Parent and
the Surviving Corporation shall assume all of the obligations thereof set forth
in this Section 4.9.
SECTION 4.10 Fees and Expenses. Except as provided in this
Section 4.10 and Section 6.4, all fees and expenses incurred in connection with
this Agreement and the Transactions shall be paid by the Party incurring such
fees or expenses, whether or not the Transactions are consummated.
SECTION 4.11 Rule 16b-3. Prior to the Effective Time, the Company
and Parent shall take such steps as may be reasonably requested by any Party to
cause dispositions of Company equity securities (including derivative
securities) pursuant to the Transactions by each individual who is a director or
officer of the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act in accordance with that certain No-Action Letter dated January 12,
1999 issued by the SEC regarding such matters.
SECTION 4.12 Employee Matters.
(a) Without limiting any of the obligations of Parent set forth in
this Section 4.12, effective as of the Effective Time, Parent shall continue or
establish, or cause to be continued or established, employee compensation and
benefit plans, programs, policies and arrangements (including fringe benefits
and severance pay) that will provide benefits and compensation to each of the
employees of the Company and its Subsidiaries (the "Continued Employees") (and,
if applicable, their eligible beneficiaries) for a period of at least 18 months
after the Effective Time (or such longer period as may be required by applicable
Law) that are substantially comparable in the aggregate to those provided by the
Company and its Subsidiaries to each of the Continued Employees (and, if
applicable, their eligible beneficiaries) immediately prior to the Effective
Time. Without limiting the foregoing, Parent and its Affiliates shall (i) honor
all employment, severance and change-in-control agreements by and between the
Company or its Subsidiaries and any current or former employee and (ii) for the
longer of 18 months following the Effective Time and the period during which
such benefits are required to be provided by the terms of the applicable Company
Plan, continue to maintain for each Continued Employee the severance
arrangements maintained by the Company or any of its Subsidiaries for each such
Continued Employee immediately prior to the Effective Time.
(b) For purposes of vesting, eligibility to participate and level of
benefits (but not benefit accrual under pension or similar plans) under the
employee benefit plans of Parent and its Affiliates which provide benefits to
any Continued Employees after the Effective Time (the "New Plans"), each
Continued Employee shall be credited with his years of service with the Company
and its Subsidiaries before the Effective Time, to the same extent as such
Continued Employee was entitled, before the Effective Time, to credit for such
service under any similar Continued Employee benefit plan in which such
Continued Employee participated or was eligible to participate immediately prior
to the Effective Time, provided that the foregoing shall not apply to the extent
that its application would result in a duplication of benefits. In addition,
44
and without limiting the generality of the foregoing: (i) each Continued
Employee shall be immediately eligible to participate, without any waiting time,
in any and all New Plans to the extent coverage under such New Plan is
comparable to a benefit plan or compensation arrangement or agreement in which
such Continued Employee participated immediately before the consummation of the
Merger (such plans, collectively, the "Old Plans") and (ii) for purposes of each
New Plan providing medical, dental, pharmaceutical and/or vision benefits to any
Continued Employee, Parent or its Affiliates shall cause (x) all pre-existing
condition exclusions and actively-at-work requirements of such New Plan to be
waived for such employee and his covered dependents, unless such conditions
would not have been waived under the comparable plans of the Company or its
Subsidiaries in which such employee participated immediately prior to the
Effective Time and (y) any eligible expenses incurred by such employee and his
covered dependents during the portion of the plan year of the Old Plan ending on
the date such employee's participation in the corresponding New Plan begins to
be taken into account under such New Plan only to the extent taken into account
by the Old Plan, for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his covered
dependents for the applicable plan year as if such amounts had been paid in
accordance with such New Plan.
(c) Parent shall cause the Surviving Corporation and each of its
Subsidiaries to honor all written employment-related obligations and agreements
with respect to any Continued Employees, including (i) recognizing and, as
required by applicable Law, bargaining with, or continuing to recognize and, as
required by applicable Law, bargain with, any current, as of the Effective Time,
exclusive collective bargaining representatives of Continued Employees and (ii)
honoring, or continuing to honor, all current, as of the Effective Time,
collective bargaining agreements. As of the Effective Time, each Continued
Employee covered by a collective bargaining agreement listed on Section 2.11(d)
of the Company Disclosure Letter shall remain covered by such collective
bargaining agreement to the extent required thereby.
(d) Notwithstanding the foregoing, nothing herein shall require the
continuation of any particular Company Plan or prevent the amendment or
termination thereof (subject to the maintenance of the benefits as provided in
clause (a) above and subject to satisfaction of any legal duty to bargain with
the collective bargaining representatives of Continued Employees with respect to
such matters). No provision of this Agreement is intended to be, and shall not
be construed as, any amendment of an employee benefit plan, program, policy or
arrangement or of a collective bargaining agreement or any agreement to make any
such amendment nor shall any provision of this Agreement be interpreted to
modify, waive or supplement the provisions of any employee benefit plan,
program, policy or arrangement or any collective bargaining agreement. It is
understood and agreed among the Parties that all provisions contained in this
Agreement with respect to employee benefit plans, employee compensation or other
employment-related obligations or agreements are included for the sole benefit
of the respective Parties and do not and shall not create, directly or
indirectly, any right in any other Person, including any Continued Employee, any
collective bargaining representative, any participant in any benefit or
compensation plan or any beneficiary thereof.
(e) Upon execution of this Agreement, Parent, the Company and the
Chief Executive Officer of the Company shall enter into an employment agreement
that shall become
45
effective as of the Closing Date in substantially the form attached as Exhibit A
hereto (the "Employment Agreement").
SECTION 4.13 Delisting. Parent shall cause the Company's
securities to be de-listed from the NYSE and de-registered under the Exchange
Act as soon as practicable following the Effective Time.
SECTION 4.14 Transfer Taxes. Parent, Merger Sub and the Company
shall cooperate in the preparation, execution and filing of Tax Returns relating
to any stock transfer, state real estate transfer, documentary, stamp, recording
and other similar Taxes (including interest, penalties and additions to any such
Taxes) ("Transfer Taxes") incurred in connection with the Merger that are
required or permitted to be paid prior to the Effective Time. Except as set
forth in Section 1.8(b), without deduction or withholding of any amount from the
Merger Consideration required to be paid pursuant to this Agreement with respect
to each Share, (i) the Company shall pay the amount of any Transfer Taxes
imposed on the Company, any Subsidiary of the Company, any holder of Shares, or
Merger Sub, as a result of the Merger and (ii) Parent shall pay, any Transfer
Taxes imposed on Parent as a result of the Merger.
SECTION 4.15 Governance; Support.
(a) In addition to the Company's current Chief Executive Officer, at
least three of the Company's directors immediately prior to the Effective Time
shall be requested to serve on an advisory board to the Surviving Corporation to
be established by Parent from and after the Effective Time for a period of at
least two (2) years.
(b) During the four-year period immediately following the Effective
Time, the Surviving Corporation shall provide, directly or indirectly,
charitable contributions and traditional local community support within the
service areas of the Company and each of its Subsidiaries that are utilities at
levels substantially comparable to and no less than the levels of charitable
contributions and community support provided by the Company and such
Subsidiaries within their service areas within the four-year period immediately
prior to the date of this Agreement, as set forth on Section 4.15 of the Company
Disclosure Letter. Without limitation to the foregoing, the Surviving
Corporation will for such period continue to support the Company Foundation in a
manner substantially comparable to the manner in which the Company supported the
Company Foundation within the four-year period immediately prior to the date of
this Agreement, as set forth on Section 4.15 of the Company Disclosure Letter.
SECTION 4.16 Company Nuclear Assets. Without limiting any of the
obligations of any Party set forth in this Article IV, Parent and the Company
shall take all actions required to be taken with respect to the Nuclear
Facilities, together with all related assets and liabilities, including
decommissioning funds (collectively, the "Company Nuclear Assets") as may be
required in connection with obtaining the approval and consent of, and the
issuances of licenses and license amendments by, the NRC under the Atomic Energy
Act necessary to consummate the Merger and the other Transactions.
SECTION 4.17 Rate Matters. To the extent permitted by applicable
Law, during the period commencing on the date hereof and ending on the Closing
46
Date, the Company shall, and shall cause each of its Subsidiaries to, (a) obtain
Parent's approval, not to be unreasonably withheld or delayed, prior to
initiating any general rate case, other than any such proceeding open on the
date of this Agreement or as is necessary to prevent the expiration of any rate
in effect on such date, (b) notify Parent in writing as soon as practicable and
in any event no later than five (5) business days prior to making any material
changes to the Company's or any of its Subsidiaries' generally applicable rates,
charges, standards of service, accounting or regulatory policy from those in
effect as of the date hereof so that Parent may comment thereon, and (c) deliver
to Parent a copy of each principal filing (or any amendment thereto), Contract
or consent related to any of the foregoing as soon as practicable and in any
event no later than three (3) business days prior to the filing, execution or
application thereof so that Parent may comment thereon.
SECTION 4.18 Company Investor Services Program. The Company shall
take all necessary action to either, in its sole discretion, (i) terminate the
Company Investor Services Program effective on or as soon as possible after the
date of this Agreement (taking into account any Company dividends that have been
declared but not yet paid as of the date hereof) or (ii) provide that all shares
to be issued to the participants in such program be purchased solely on the open
market. In addition, in the event of the effective termination of the Company
Investor Services Program, the Company shall distribute all shares of Company
Common Stock and the value of all cash held in each participant's plan accounts
in accordance with the terms of the Company Investor Services Program.
SECTION 4.19 Restructuring Transactions. Parent hereby declares
that it is its intention, for purposes of eliminating certain intermediate
holding companies, to cause one or more of the Company's primary operating
Subsidiaries to become direct Subsidiaries of the Parent (the "Restructuring")
and the Parties agree that they shall reasonably cooperate with each other in
order to request and obtain from all applicable Governmental Authorities all
requisite consents, approvals and waivers for the consummation of the
Restructuring. It is contemplated that the Restructuring would take place at or
following the Effective Time, subject to legal, regulatory and other applicable
conditions. The timing of, and the manner in which, the Restructuring is to be
effected shall be based on the Parties' analysis of all legal, financial and
regulatory implications of the Restructuring; provided, however, that no Party
shall take any action hereunder that could reasonably be expected to prevent or
materially delay the consummation of the Transactions.
ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each Party to effect the Transactions
shall be subject to the satisfaction (or waiver, if permissible under applicable
Law) on or prior to the Closing Date of the following conditions:
(a) The Company Shareholder Approval shall have been obtained.
47
(b) No Law, injunction, judgment or ruling enacted, promulgated,
issued, entered, amended or enforced by any Governmental Authority
(collectively, the "Restraints") shall be in effect enjoining, restraining,
preventing or prohibiting consummation of the Transactions or making the
consummation of the Transactions illegal.
(c) All of the Required Consents and the Parent Consents shall have
been obtained (including any applicable waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired) at or prior to the Effective Time, such consents shall
have become Final Orders and such Final Orders shall not, individually or in the
aggregate, impose terms or conditions that would reasonably be expected to have
a Company Material Adverse Effect or an adverse effect on the ability of Parent,
Merger Sub and the Company to consummate the Transactions.
SECTION 5.2 Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Transactions shall
be subject to the satisfaction (or waiver, if permissible under applicable Law)
on or prior to the Closing Date of the following additional conditions:
(a) (i) The representations and warranties of the Company set forth in
this Agreement shall be true and correct at and as of the Effective Time as if
made on such date (other than those representations and warranties that address
matters only as of a particular date, which shall be true and correct as of such
date), except where the failure of any such representation or warranty to be so
true and correct (without giving effect to any "materiality" or "Company
Material Adverse Effect" qualification set forth therein) would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, (ii) the representations and warranties of the Company
set forth in Sections 2.2(a) and 2.3(a) shall be true and correct at and as of
the Effective Time as if made on such date (other than those representations and
warranties that address matters as of a particular date, which shall be true and
correct as of such date) in all material respects, and (iii) the representations
and warranties of the Company set forth in Section 2.6(ii) shall be true and
correct without disregarding the "Company Material Adverse Effect" qualification
contained therein; and Parent shall have received a certificate of an executive
officer of the Company, dated as of the Closing Date, to that effect.
(b) The Company shall have performed or complied with in all material
respects all agreements and covenants required by this Agreement to be performed
or complied with by it on or prior to the Effective Time; and Parent shall have
received a certificate of an executive officer of the Company, dated as of the
Closing Date, to that effect.
SECTION 5.3 Conditions to the Obligations of the Company. The
obligations of the Company to effect the Transactions shall be subject to the
satisfaction (or waiver, if permissible under applicable Law) on or prior to the
Closing Date of the following additional conditions:
(a) Each of the representations and warranties of Parent and Merger
Sub set forth in this Agreement shall be true and correct at and as of the
Effective Time as if made on such date, except where the failure of any such
representation or warranty to be true and correct would not, individually or in
the aggregate, reasonably be expected to materially impair the
48
ability of Parent or Merger Sub to perform its obligations hereunder or prevent
or materially delay consummation of the Transactions; and the Company shall have
received a certificate of an executive officer of Parent, dated as of the
Closing Date, to that effect.
(b) Parent and Merger Sub shall each have performed or complied with
in all material respects all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time; and
the Company shall have received a certificate of an executive officer of Parent,
dated as of the Closing Date, to that effect.
SECTION 5.4 Frustration of Closing Conditions. Neither the
Company nor Parent or Merger Sub may rely on the failure of any condition set
forth in Sections 5.1, 5.2 or 5.3, as the case may be, to be satisfied if such
failure was caused by such Party's failure to use reasonable best efforts to
consummate the Transactions, to the extent required by and subject to Section
4.5 and the other applicable provisions of Article IV.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Effective Time, whether before
or after receipt of the Company Shareholder Approval:
(a) by the mutual written consent of the Company and Parent duly
authorized by the Company Board and the Board of Directors (or similar governing
body) of Parent; or
(b) by either the Company or Parent:
(i) if any Restraint having any of the effects set forth in
Section 5.1(b) shall be in effect and shall have become final and
non-appealable; provided that the right to terminate this Agreement under this
Section 6.1(b)(i) shall not be available to a Party if the issuance of such
final, non-appealable Restraint was primarily due to the failure of such Party
to perform any of its obligations under this Agreement;
(ii) if the Merger shall not have been consummated on or before
the Outside Date; provided; however, that if all other conditions set forth in
Article V (other than conditions which by their nature are to be satisfied on
the Closing Date) are satisfied other than the condition to the Closing set
forth in Section 5.1(c) and such condition remains capable of being fulfilled,
then either Parent or the Company by written notice delivered prior to the
Outside Date, may extend such period by six (6) months after the Outside Date;
provided; further, that the right to terminate this Agreement under this Section
6.1(b)(ii) shall not be available to any Party whose failure to perform any of
its obligations under this Agreement resulted in the failure of the Merger to be
so consummated by the Outside Date; or
(iii) if the Company Shareholder Approval shall not have been
obtained at the Company Shareholders Meeting (or at any adjournment or
postponement thereof) by reason of the failure to obtain the required vote; or
49
(c) by the Company:
(i) if concurrently it enters into a definitive Company
Acquisition Agreement providing for a Superior Proposal; provided, however, that
the Company may only exercise this termination right if the Company has complied
with its obligations under Section 4.2, including Section 4.2(c); and provided,
further, that such termination shall not be effective unless concurrently
therewith the Company fulfills its obligations under Section 6.3; or
(ii) if (A) the representations and warranties of Parent or
Merger Sub set forth in this Agreement shall not be true and correct on and as
of the date of such determination as if made on such date (other than those
representations and warranties that address matters only as of a particular date
which shall be true and correct as of such date), but only to the extent that
such failure would cause the condition contained in Section 5.3(a) not to be
satisfied as of such date or (B) Parent or Merger Sub shall have breached or
failed to perform or comply with any obligation, agreement or covenant required
by this Agreement to be performed or complied with by them, but only to the
extent that such breach or failure would cause the condition contained in
Section 5.3(b) not to be satisfied as of such date and such condition is, as a
result of any such breach or failure (in each case under sub-clauses (A) and
(B)), incapable of being satisfied by the Outside Date; or
(d) by Parent, if
(i) the representations and warranties of the Company set forth
in this Agreement shall not be true and correct on and as of the date of such
determination as if made on such date (other than those representations and
warranties that address matters only as of a particular date, which shall be
true and correct as of such date), but only to the extent that such failure
would cause the condition contained in Section 5.2(a) not to be satisfied as of
such date;
(ii) the Company shall have breached or failed to perform or
comply with any obligation, agreement or covenant required by this Agreement to
be performed or complied with by it, but only to the extent that such breach or
failure would cause the condition contained in Section 5.2(b) not to be
satisfied as of such date and such condition is, as a result of such breach or
failure (in each case under sub-clauses (i) and (ii)), incapable of being
satisfied by the Outside Date;
(iii) the Company effects a Company Adverse Recommendation
Change;
(iv) if the Company Board shall fail to reaffirm the Company
Recommendation within twenty (20) business days of receipt of Parent's written
request at any time when an unsolicited Takeover Proposal shall have been made
and not rejected by the Company Board;
(v) the Company fails to include in the Proxy Statement the
Company Recommendation; or
(vi) the Company willfully and materially breaches Section 4.2.
50
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 6.1, written notice thereof
shall be given to the other Party or Parties, specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void (other than Sections 2.21 (Brokers and Other Advisors), 3.9
(Brokers and Other Advisors), 4.10 (Fees and Expenses), (Effect of Termination)
and 6.3 (Termination Fee), Article VII (Miscellaneous) and the Confidentiality
Agreement in accordance with its terms, all of which shall survive termination
of this Agreement at any time) and there shall be no liability as a result
thereof on the part of Parent or the Company or their respective directors,
officers and Affiliates, except (i) the Company may have liability as provided
in Section 6.3, and (ii) nothing shall relieve any Party from liability for
fraud or any willful breach of this Agreement.
SECTION 6.3 Termination Fee.
In the event that:
(a) (i) after the date hereof a Takeover Proposal has been publicly
announced, (ii) after the date of such announcement and at a time that such
Takeover Proposal has not been withdrawn, this Agreement is terminated by either
Parent or the Company pursuant to Section 6.1(b)(ii) or (iii), and (iii) the
Company shall have entered into an agreement with respect to any Takeover
Proposal (x) on or prior to the first anniversary of such termination, if such
Takeover Proposal is received from a Person that, pursuant to Section 4.2(d),
was required to be identified by the Company to Parent as having made a Takeover
Proposal, or (y) on or prior to the date that is three (3) months after such
termination, if such Takeover Proposal is received from any other Person;
(b) after the date hereof a Takeover Proposal has been publicly
announced and at a time that such Takeover Proposal has not been withdrawn, this
Agreement is terminated by Parent pursuant to Section 6.1(d)(i) or (ii) as a
result of a willful breach by the Company that is not cured in accordance with
Section 4.8(b);
(c) this Agreement is terminated by Parent pursuant to Section
6.1(d)(iii), (iv), (v) or (vi); or
(d) this Agreement is terminated by the Company pursuant to Section
6.1(c)(i);
then the Company shall (i) in the case of a termination described in clause (a)
above, upon entry into a definitive agreement for such Takeover Proposal, or
(ii) in the case of a termination described in clauses (b), (c) or (d) above, on
the date of such termination, pay to Parent a fee equal to $45,000,000 (the
"Termination Fee") by wire transfer of immediately available funds to an account
designated by Parent.
SECTION 6.4 Acknowledgment. The Company acknowledges and agrees
that the agreements contained in Section 6.3 are an integral part of the
Transactions and that, without these agreements, Parent would not enter into
this Agreement. If the Company fails promptly to pay the Termination Fee and, in
order to obtain such payment, Parent commences a suit that results in a judgment
against the Company for the Termination Fee, the
51
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred in connection with such suit,
together with interest on the amount of the Termination Fee at the prime rate of
JPMorgan Chase Bank, N.A. in effect on the date such payment was required to be
made.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations and warranties contained herein or in
any other writing delivered pursuant hereto, nor any covenant or agreement of
the Parties, that by its terms contemplates performance exclusively prior to the
Effective Time, shall survive the Effective Time except this Article VII.
Nothing in this Section 7.1 shall limit any covenant or agreement of the Parties
that by its terms contemplates performance in whole or in part after the
Effective Time.
SECTION 7.2 Amendment or Supplement. At any time prior to the
Effective Time, this Agreement may be amended or supplemented in any and all
respects, whether before or after approval of the Transactions by the holders of
Company Common Stock, by written agreement of the Parties; provided, however,
that following the Company Shareholder Approval, there shall be no amendment or
change to the provisions hereof which by applicable Law or in accordance with
the rules of any relevant self regulatory organization would require further
approval by the holders of Company Common Stock without such further approval.
SECTION 7.3 Extension of Time, Waiver, Etc. At any time prior to
the Effective Time, any Party may, subject to applicable Law, (a) waive any
inaccuracies in the representations and warranties of any other Party, (b)
extend the time for the performance of any of the obligations or acts of any
other Party or (c) waive compliance by any other Party with any of the
agreements contained herein or, except as otherwise provided herein, waive any
of such Party's conditions; provided that after the Company Shareholder Approval
is obtained, there may not be any extension or waiver of this Agreement or any
portion thereof which, by applicable Law or in accordance with the rules of any
relevant self regulatory organization, requires further approval by the holders
of Company Common Stock without such further approval. Notwithstanding the
foregoing, no failure or delay by the Company, Parent or Merger Sub in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. Any agreement on the part
of a Party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such Party.
SECTION 7.4 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the Parties without the prior
written consent of the other Parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the Parties and their respective successors and permitted assigns. Any purported
assignment not permitted under this Section 7.4 shall be null and void.
52
SECTION 7.5 Counterparts. This Agreement may be executed in
counterparts (each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement) and shall become
effective when one or more counterparts have been signed by each of the Parties
and delivered to the other Parties.
SECTION 7.6 Entire Agreement; Third-Party Beneficiaries. This
Agreement, together with the Company Disclosure Letter, the Parent Disclosure
Letter and the Confidentiality Agreement, (a) constitutes the entire agreement,
and supersedes all other prior agreements and understandings, both written and
oral, among the Parties, or any of them, with respect to the subject matter
hereof and thereof and (b) except for (i) the provisions of Section 4.9 and (ii)
the right of the Company, on behalf of its shareholders, to pursue damages in
the event of Parent's or Merger Sub's willful or knowing breach of this
Agreement, are not intended to and shall not confer upon any Person other than
the Parties any rights or remedies hereunder.
SECTION 7.7 Governing Law; Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND
PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW THEREOF.
(b) All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any Federal Court sitting in the
State of New York, and the Parties hereby irrevocably submit to the exclusive
personal jurisdiction of such court (and, in the case of appeals, appropriate
appellate courts therefrom) in any such action or proceeding for any reason
other than the failure to serve process in accordance with this Section 7.7 and
irrevocably waive the defense of an inconvenient forum or an improper venue to
the maintenance of any such action or proceeding. Any service of process to be
made in such action or proceeding may be made by delivery of process in
accordance with the notice provisions contained in Section 7.9. In addition,
Parent consents to service of process upon Parent by mailing or delivering such
service to its agent, National Registered Agents, Inc., 875 Avenue of the
Americas, Suite 501, New York, New York, 10001 (the "Service Agent"), authorizes
and directs the Service Agent to accept such service, and shall take all such
action as may be necessary to continue such appointment in full force and effect
or to appoint another agent so that it will at all times have an agent for
service of process for the foregoing purposes in the State of New York. The
consents to jurisdiction set forth in this Section 7.7 shall not constitute
general consents to service of process in the State of New York and shall have
no effect for any purpose except as provided in this Section 7.7 and shall not
be deemed to confer rights on any Person other than the Parties. The Parties
agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by applicable Law.
(c) EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS
53
(WHETHER BASED IN CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY (I) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT
AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.7(C).
(d) This Agreement does not involve less than $1,000,000, and the
Parties intend that Sections 5-1401 and 5-1402 of the New York General
Obligations Law shall apply to this Agreement.
SECTION 7.8 Specific Enforcement. The Parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
Court sitting in the State of New York, without bond or other security being
required, this being in addition to any other remedy to which they are entitled
at law or in equity.
SECTION 7.9 Notices. All notices, requests and other
communications to any Party hereunder shall be in writing and shall be deemed
given if delivered personally, facsimiled (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses:
If to Parent or Merger Sub, to:
Iberdrola, S.A.
Calle Cardenal Gardoqui, 8
48008 Bilbao
Spain
Attention: Secretaria General
Facsimile: +34 94 466 47 35
with a copy (which shall not constitute notice) to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Attention: M. Douglas Dunn and Crayton L. Bell
Facsimile: +1 (212) 822-5062 and +1 (212) 822-5338
54
If to the Company, to:
Energy East Corporation
52 Farm View Drive
New Gloucester, ME 04260-5116
Attention: Paul K. Connolly, Vice President - General Counsel and
Robert D. Kump, Senior Vice President and Chief Financial Officer
Facsimile: +1 (617) 897-9068 and +1 (207) 688-4331
with a copy (which shall not constitute notice) to:
LeBoeuf, Lamb, Greene & MacRae LLP
125 West 55th Street
New York, NY 10019
Attention: William S. Lamb and Sheri E. Bloomberg
Facsimile: +1 (212) 649-9425 and +1 (212) 649-9340
or such other address or facsimile number as such Party may hereafter specify
for the purpose by notice to the other Parties. All such notices, requests and
other communications shall be deemed received on the date of receipt by the
recipient thereof if received prior to 5 P.M. in the place of receipt and such
day is a business day in the place of receipt. Otherwise, any such notice,
request or communication shall be deemed not to have been received until the
next succeeding business day in the place of receipt.
SECTION 7.10 Severability. If any term or other provision of this
Agreement is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other terms, provisions and conditions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible to the fullest extent permitted by
applicable Law in an acceptable manner to the end that the Transactions are
fulfilled to the extent possible.
SECTION 7.11 Definitions.
(a) As used in this Agreement, the following terms have the meanings
ascribed thereto below:
"Affiliate" shall mean, as to any Person, any other Person that
directly or indirectly controls, or is controlled by, or is under common control
with, such Person. For this purpose, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by Contract or
otherwise.
"Antitrust Laws" shall mean, together, and each as amended, (i) the
Sherman Act, (ii) the Clayton Act, (iii) the HSR Act, (iv) the Federal Trade
Commission Act, (v) Council Regulation (EC) 139/2004, and (vi) all other
applicable Laws or Orders issued by a
55
Governmental Authority that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition through merger or acquisition.
"business day" shall mean a day except a Saturday, a Sunday or other
day on which the SEC or banks in the City of New York or the City of Madrid are
authorized or required by Law to be closed.
"Company Board" shall mean the Company Board or any duly constituted
committee thereof which has been given the authority to act in the name, place
and stead of the Company Board with respect to this Agreement, the Merger and
the other Transactions.
"Company Foundation" shall mean the Energy East Foundation.
"Company Investor Services Program" means the Company's dividend
reinvestment and stock purchase plan as amended through the date of this
Agreement.
"Company Material Adverse Effect" shall mean any change, event,
occurrence or development which has a material adverse effect on the assets,
liabilities, business, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, other than
changes, events, occurrences or developments arising out of, resulting from or
attributable to: (i) changes in conditions in the United States of America or
global economy or capital or financial markets generally, including changes in
interest or exchange rates, provided, that such changes do not adversely affect
the Company and its Subsidiaries in a disproportionate manner as compared to
comparable participants in the utility industry; (ii) changes in general legal,
regulatory, political, economic or business conditions or changes in generally
accepted accounting principles that, in each case, generally affect the electric
or gas utility industry, provided, that such changes do not adversely affect the
Company and its Subsidiaries in a disproportionate manner as compared to
comparable participants in the utility industry; (iii) the execution or
announcement of this Agreement or the consummation of the Transactions,
including the impact thereof on relationships, contractual or otherwise, with
customers, suppliers, distributors, partners or employees; (iv) acts of war,
sabotage or terrorism, or any escalation or worsening of any such acts of war,
sabotage or terrorism threatened or underway as of the date hereof; (v) the
initiation of any litigation by any shareholder of the Company relating to this
Agreement or the Merger; (vi) the Restructuring or any action taken pursuant to
Section 4.19; or (vii) any decline in the market price or trading volume of the
Company's Common Stock on the NYSE; provided that the exception in this
sub-clause (vii) shall not prevent or otherwise affect a determination that any
change, effect, circumstance or development underlying such decline has resulted
in or contributed to a Company Material Adverse Effect.
"Company Plan" shall mean any bonus, incentive compensation, profit
participation, deferred compensation, pension, profit sharing, retirement,
equity-related, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, workmen's compensation
or other insurance, change in control, retention, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, including any "employee benefit plan" within the meaning of
Section 3(3) of ERISA, in each case, that is (i) sponsored or maintained by the
Company or any Subsidiary or
56
(ii) with respect to which the Company or any Subsidiary has any actual or
contingent obligations or liabilities.
"Company Stock Plans" shall mean, together, and each as amended, (i)
the Company 1997 Stock Option Plan, (ii) the Company 2000 Stock Option Plan, and
(iii) the tax-deferred savings plans maintained by the Company and its
Subsidiaries.
"Company Voting Debt" shall mean bonds, debentures, notes and other
indebtedness of the Company or any of its Subsidiaries which give the holder or
the beneficiary thereof the right to vote on any matters on which holders of
Company Capital Stock or other equity interests of the Company or its
Subsidiaries may vote.
"Contract" shall mean any contract, commitment, arrangement, note,
bond, mortgage, loan or credit agreement, debenture, security agreement,
indenture, deed of trust, lease or other instrument, obligation or agreement of
any kind.
"Defined Benefit Plan" means each Company Plan which is subject to
Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Director Share Plan" shall mean the Company's Director Share Plan, as
amended and restated effective September 6, 2000, as amended.
"Environmental Laws" shall mean all applicable federal, state, local
and foreign Laws (including common law) concerning pollution or protection of
health, safety, natural resources or the environment, including all those
relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control or cleanup of any Hazardous
Materials including the federal Comprehensive Environmental Response,
Compensation and Liability Act and the federal Clean Air Act, Clean Water Act,
Toxic Substances Control Act, Resource Conservation and Recovery Act and any
analogous state and local Laws and regulations.
"Environmental Permits" shall mean all permits, approvals, licenses,
authorizations or consents required under Environmental Laws for the Company and
its Subsidiaries to conduct their operations.
"Final Order" shall mean action by the relevant Governmental Authority
that has not been reversed, stayed, enjoined, set aside, annulled or suspended,
with respect to which any waiting period prescribed by Law before the
Transactions may be consummated has expired (but without the requirement for
expiration of any applicable rehearing or appeal period), and as to which all
conditions to the consummation of the Transactions prescribed by Law or Order
have been satisfied.
"GAAP" shall mean generally accepted accounting principles in the
United States of America consistently applied.
"Governmental Authority" shall mean any government, court, regulatory
or administrative agency, commission or authority or other governmental
instrumentality, federal, state or local, domestic, foreign or multinational, in
each case of competent jurisdiction.
57
"Hazardous Materials" shall mean any hazardous, dangerous,
radioactive, acutely hazardous, or toxic substance or waste defined,
characterized, regulated or as to which liability or standards of conduct are
imposed under Environmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Joint Venture" shall mean, with respect to any Person, 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 investment purposes, that (i) are less than ten per cent (10%) of any class
of the outstanding voting securities or equity or (ii) with respect to which the
net book value as of December 31, 2006 of such person's interest does not exceed
$20,000,000.
"Knowledge" shall mean, in the case of either the Company or Parent,
the actual knowledge, as of the date of this Agreement, of the executive
officers of such Party listed on Section 7.11 of such Party's Disclosure Letter.
"Multiemployer Plan" shall mean a plan defined in Section 3(37) of
ERISA.
"ordinary course of business consistent with past practice" shall mean
the ordinary course of business consistent with past practice, as such past
practice may be reasonably affected by, or change in reasonable response to, (i)
the growth of the applicable Person's business (or applicable segment thereof)
and/or (ii) changes in commodities prices.
"Outside Date" shall mean the date which is twelve (12) months
following the date hereof.
"Person" shall mean an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity, including a
Governmental Authority.
"Phantom Shares" shall mean awards under the Company's Director Share
Plan, the value of which are determined by the value of the Company Common Stock
and which are settled in cash.
"Subsidiary" when used with respect to any Person, shall mean any
corporation, limited liability company, partnership, association, trust or other
entity of which securities or other ownership interests representing more than
fifty per cent (50%) of the equity and more than fifty per cent (50%) of the
ordinary voting power (or, in the case of a partnership, more than fifty per
cent (50%) of the general partnership interests) are, as of such date, owned by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"Superior Proposal" shall mean a Takeover Proposal that the Company
Board determines in good faith, after consultation with the Company's outside
legal counsel and financial advisors, is more favorable to the Company than the
Merger and the other Transactions (taking into account (1) all legal, financial,
regulatory and other aspects of such Takeover
58
Proposal and the Merger and the other Transactions deemed relevant by the
Company Board, (2) the identity of the third party making such Takeover
Proposal, (3) the conditions and prospects for completion of such Takeover
Proposal and (4) all other factors that the Company Board is permitted to
consider pursuant to Section 717 of the NYBCL); provided, that for purposes of
this definition of "Superior Proposal" the references to "20%" in the definition
of Takeover Proposal shall be deemed to be references to 50%.
"Takeover Proposal" shall mean a bona fide proposal or offer from any
Person (other than Parent and its Subsidiaries) relating to any (i) direct or
indirect acquisition of assets of the Company and its Subsidiaries (including
securities of Subsidiaries, but excluding sales of assets in the ordinary course
of business consistent with past practice) equal to twenty per cent (20%) or
more of the Company's consolidated assets or to which twenty per cent (20%) or
more of the Company's revenues or earnings on a consolidated basis are
attributable, (ii) direct or indirect acquisition of 20% or more of the
outstanding Company Common Stock, (iii) tender offer or exchange offer that if
consummated would result in any Person beneficially owning twenty per cent (20%)
or more of the outstanding Company Common Stock or (iv) merger, consolidation,
share exchange, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company; other than, in each case, the
Transactions.
"Taxes" shall mean (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, and (ii) all interest, penalties, fines, additions to tax
or additional amounts imposed by any Governmental Authority in connection with
any item described in sub-clause (i).
"Tax Returns" shall mean any return, report, claim for refund,
estimate, information return or statement or other similar document required to
be filed with any Governmental Authority with respect to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Transactions" refers collectively to this Agreement and the
transactions contemplated hereby (but specifically excluding the Restructuring)
to take place on the Closing Date, including the Merger.
The following terms are defined on the page of this Agreement set forth opposite
such term below:
Adverse Recommendation Notice.......37 Certificates.........................4
Agreement............................1 Claim...............................43
Atomic Energy Act...................12 Closing..............................1
Balance Sheet Date..................13 Closing Date.........................1
Bankruptcy and Equity Exception.....11 Code.................................5
Blue Sky Laws.......................12 Company..............................1
Book-Entry Shares....................4 Company Acquisition Agreement.......37
Certificate of Merger................2
59
Company Adverse Recommendation Merger...............................1
Change............................36 Merger Consideration.................3
Company Charter Documents............9 Merger Sub...........................1
Company Common Stock.................1 MPUC................................12
Company Contracts...................22 New Plans...........................44
Company Disclosure Letter............7 NHPUC...............................12
Company Employee Stock Options.......6 NLRB................................20
Company Financial Statements........13 NRC.................................12
Company Hedging Guidelines..........26 Nuclear Facilities..................26
Company License Consents............12 NYBCL................................1
Company Net Position................26 NYPSC...............................12
Company Nuclear Assets..............46 NYSE................................12
Company Pension Plan................19 Old Plans...........................45
Company Preferred Stock..............9 Option Consideration.................6
Company PUC Consents................12 Options.............................10
Company Recommendation..............36 Order...............................11
Company Reporting Utility...........13 Parent...............................1
Company SEC Documents...............12 Parent Consents.....................29
Company Shareholder Approval........11 Parent Disclosure Letter............28
Company Shareholders Meeting........39 Parties..............................1
Confidentiality Agreement...........41 Paying Agent.........................3
Continued Employees.................44 PBGC................................19
CTDPUC..............................12 Permits.............................16
Effective Time.......................2 Power Agreement.....................35
Emission Allowances.................24 Proxy Statement.....................38
Employment Agreement................46 Representatives.....................35
ERISA...............................19 Required Consents...................12
ESPP.................................7 Restraints..........................48
Exchange Act........................12 Restricted Stock.....................7
FCC.................................12 Restructuring.......................47
Federal Power Act...................12 Sarbanes-Oxley Act..................13
FERC................................12 SEC..................................8
Filed Company SEC Documents..........8 Securities Act.......................8
Indemnitee..........................42 Service Agent.......................53
Indemnitees.........................42 Share................................1
Intellectual Property Rights........25 Shares...............................1
IP Licenses.........................23 Surviving Corporation................1
IRS.................................19 Termination Fee.....................51
Laws................................16 Title IV Plan.......................20
Lien.................................8 Transfer Taxes......................46
MDPU................................12 Violation...........................11
Measurement Date.....................9 WARN Act............................21
60
SECTION 7.12 Interpretation.
(a) The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
(b) The Parties have participated jointly in the negotiation and
drafting of this Agreement and, in the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as jointly drafted
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any provision of this
Agreement.
SECTION 7.13 No Limitation on Other Representation. Except as
otherwise expressly provided in this Agreement, nothing in any representation or
warranty in this Agreement shall in any way limit or restrict the scope,
applicability or meaning of any other representation or warranty made by the
Company herein. It is the intention of the Parties that, to the extent possible,
unless provisions are mutually exclusive and effect cannot be given to both or
all such provisions, the representations, warranties, covenants and conditions
in this Agreement shall be construed to be cumulative and that each
representation, warranty, covenant and condition in this Agreement shall be
given full separate and independent effect.
[Remainder of this page intentionally left blank.]
61
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
IBERDROLA, S.A.
By: /s/ Julian Martinez-Simancas
------------------------------
Name: Julian Martinez-Simancas
Title: General Secretary and
Secretary to the Board
GREEN ACQUISITION CAPITAL, INC.
By: /s/ Pedro Azagra Blazquez
------------------------------
Name: Pedro Azagra Blazquez
Title: President
ENERGY EAST CORPORATION
By: /s/ Robert D. Kump
------------------------------
Name: Robert D. Kump
Title: Senior Vice President and
Chief Financial Officer
62
Exhibit A
FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"), by and
among Iberdrola, S.A., a corporation (sociedad anonima) organized under the laws
of the Kingdom of Spain ("Parent"), Energy East Corporation, a New York
corporation (the "Company"), Energy East Management Corporation, a Delaware
corporation ("EEMC"), and Wesley W. von Schack (the "Executive"), amends and
restates that certain Amended and Restated Employment Agreement dated as of
December 31, 2006 by and among the Company, EEMC and the Executive (the "Prior
Agreement").
This Agreement shall become effective, if and only if, the Closing occurs
and shall be effective as of the Closing Date.
The Parent, the Board of Directors of the Company (the "Board") and the
Board of Directors of EEMC have determined that it is in the best interests of
the Parent, the Company and EEMC, respectively, that the Executive continue his
employment as a member of the management of the Company and of EEMC following
the Closing Date.
The Executive is willing to commit himself to serve the Parent, the Company
and EEMC, on the terms and conditions herein provided.
The Parent is willing to agree to cause the Company and EEMC to perform all
of their obligations under this Agreement.
In order to effect the foregoing, the Parent, the Company, EEMC and the
Executive wish to enter into an employment agreement on the terms and conditions
set forth below, and the Parent wishes to agree to cause the Company and EEMC to
perform their obligations under this Agreement as set forth below. Accordingly,
in consideration of the premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this Agreement,
unless otherwise defined herein, are provided in the last Section hereof.
2. Employment. EEMC hereby agrees to employ the Executive, and the Executive
hereby agrees to serve the Company and EEMC, on the terms and conditions set
forth herein, during the term of this Agreement (the "Term").
3. Term of Agreement. The Term will commence on the Closing Date and ends on the
second year anniversary thereof, unless further extended to the third year
anniversary of the Closing Date by mutual written agreement of the parties
hereto or if earlier the Date of Termination.
4. Position and Duties. The Executive shall serve as Chairman, President and
Chief Executive Officer of the Company and President and Chief Executive Officer
of EEMC and shall have such responsibilities, duties and authority that are
consistent with such positions as may from time to time be assigned to the
Executive by the Board or the Parent. The Executive shall devote substantially
all his working time and efforts to the business and affairs of the Company and
its subsidiaries and
affiliates; provided, however, that the Executive may also serve on the boards
of directors and as the chairman of the board of directors of Associated
Electric and Gas Services Limited and, as long as such service does not
substantially interfere with the performance of his duties hereunder, and are
consistent with the Company's Corporate Governance Guidelines, may also serve on
the boards of directors or trustees of other companies and organizations.
5. Compensation and Related Matters.
5.1. Base Salary. EEMC shall pay the Executive a base salary ("Base
Salary") during the period of the Executive's employment hereunder, which shall
be at an initial rate of Nine Hundred Thousand Dollars ($900,000.00) per annum.
The Base Salary shall be paid in substantially equal bi-weekly installments, in
arrears. The Base Salary may be discretionarily increased by the Board in
consultation with the Parent from time to time as the Board deems appropriate in
its reasonable business judgment. The Base Salary in effect from time to time
shall not be decreased during the Term. During the period of the Executive's
employment hereunder, the Board shall conduct an annual review of the
Executive's compensation. Compensation of the Executive by Base Salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company. The Base
Salary payments (including any increased Base Salary payments) hereunder shall
not in any way limit or reduce any other obligation of the Company or EEMC
hereunder, and no other compensation, benefit or payment hereunder shall in any
way limit or reduce the obligation of EEMC to pay the Executive's Base Salary
hereunder.
5.2. Annual Bonus. For each of the first two calendar years ending during
the Term of this Agreement, and through which the Executive is employed under
this Agreement, the Executive shall be paid an annual bonus with a target annual
bonus opportunity equal to 100% of annual Base Salary and a maximum annual bonus
opportunity equal to 200% of annual Base Salary (the "Annual Bonus") (assuming,
in the case of the first such calendar year, no annual bonus payments have been
made prior to the Closing Date in respect of performance for such first calendar
year). The amount of Annual Bonus paid shall be based upon the level of
attainment of goals to which the Company and the Executive mutually agree. For
each succeeding calendar year, any part of which this Agreement is in effect,
the Executive shall be paid an Annual Bonus equal to 100% of the Executive's
annual Base Salary multiplied by a fraction, the numerator of which is the
number of days in such calendar year this Agreement is in effect and the
denominator of which is 365; provided, however, that if this Agreement is in
effect for the entire third calendar year or any full succeeding calendar year,
the Executive's Annual Bonus for such year shall be paid pursuant to the first
two sentences of this Section 5.2, without proration. Each calendar year's
Annual Bonus shall be paid within the 2 1/2 month period following the end of
such calendar year.
5.3. Benefit and Long-Term Incentive Plans. The Executive shall be entitled
to participate in or receive compensation and/or benefits, as applicable, under
all "employee benefit plans" (as defined in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended from time to time ("ERISA"))
other than nonqualified pension benefit plans and all employee benefit
arrangements made available by the Company now or during the period of the
Executive's employment
2
hereunder to its and its subsidiaries executives, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements; provided, however, that there shall be no duplication of the
compensation and benefits created by this Agreement; and further provided that
on and after the Closing Date, the Executive shall no longer accrue benefits
under the Company's Supplemental Executive Retirement Plan (the "SERP") or
Excess Benefit Plan. Pursuant to an election made by the Executive, the Company
shall pay to the Executive a single lump sum payment in satisfaction of all
benefits under the SERP and Excess Benefit Plan in an amount equal to the
December 31, 2006 actuarially determined value of $21,786,794.00.
Pursuant to the Executive's participation in the long term incentive plan,
by March 1 of each calendar year during the Term, the Executive shall receive an
annual grant of equity or cash equivalent to be established by the Company with
a minimum value of $2,500,000.00 based upon and subject to the attainment of the
performance objectives established by the Executive at the beginning of the
preceding calendar year (provided that there shall be no duplication of award
for the same calendar year).
5.4. Retention Bonus. If the Executive is employed by the Company, EMCC or
any of their affiliates on the first annual anniversary of the Closing Date, the
Executive shall be paid a retention bonus of Nine Hundred Thousand Dollars
($900,000.00). If the Executive is employed by the Company, EMCC or any of their
affiliates on the second annual anniversary of the Closing Date, the Executive
shall be paid an additional retention bonus of Nine Hundred Thousand Dollars
($900,000.00). If the Term of this Agreement is extended for a third year
pursuant to Section 3 hereof, and the Executive is employed by the Company, EMCC
or any of their affiliates on the third annual anniversary of the Closing Date,
the Executive shall be paid an additional retention bonus of Nine Hundred
Thousand Dollars ($900,000.00). Each such retention bonus shall be paid in the
30 day period beginning on the applicable annual anniversary date.
If the Executive terminates employment with the Company, EMCC and all of
their affiliates by reason of death or Disability prior to any year's annual
anniversary, a pro-rata retention bonus shall be paid to the Executive (or his
Beneficiary) based on the number of days in such anniversary year prior to the
Date of Termination and no further retention bonus shall be payable to the
Executive or his Beneficiary. If the Executive is not employed by the Company,
EMCC or any of their affiliates on either the first or second annual anniversary
(and/or the third annual anniversary if the Term of the Agreement is extended
for the third year pursuant to Section 3 hereof) and the Executive's employment
was terminated by the Company, EEMC or any affiliate thereof for other than
Cause, the Executive shall be paid any such unpaid first or second annual
anniversary retention bonus, as the case may be, (or the third annual
anniversary retention bonus if the Term of the Agreement is extended for the
third year pursuant to Section 3 hereof). Any retention bonus under this second
paragraph of Section 5.2 shall be paid within 30 days of the Date of
Termination.
Except as otherwise provided in this Section 5.4, if the Executive is not
employed by the Company, EMCC or any of their affiliates on any annual
anniversary date, no retention bonus shall be paid with respect to that annual
anniversary date.
3
5.5. Expenses. Upon presentation of reasonably adequate documentation to
EEMC, the Executive shall receive prompt reimbursement from EEMC for all
reasonable and customary business expenses incurred by the Executive in
accordance with EEMC policy in performing services hereunder. EEMC agrees to
reimburse the Executive for any expenses he incurs in moving himself and his
family from Maine to any state in the Northeast at the request of Parent.
5.6. Vacation. The Executive shall be entitled to five (5) weeks of
vacation during each year of this Agreement, or such greater period as the Board
shall approve, without reduction in salary or other benefits.
5.7. Payments in lieu of Restricted Stock. If the Closing Date occurs prior
to July 1, 2008, in lieu of restricted stock awards which were to be provided
pursuant to the Prior Agreement, the Company shall pay to the Executive an
amount equal to the product of multiplying 143,478 by the closing price of
Company common stock on the day prior to the Closing Date (as reported in the
Wall Street Journal). If the Closing Date occurs prior to July 1, 2009, but
after July 1, 2008, in lieu of restricted stock awards which were to be provided
pursuant to the Prior Agreement, the Company shall pay to the Executive an
amount equal to the product of multiplying 95,652 by the closing price of
Company common stock on the day prior to the Closing Date. The payment under
this Section 5.7 shall be made no later than 10 days following the Closing Date
(as reported in the Wall Street Journal).
6. Compensation Related to Disability. During the Term of this Agreement, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company and EEMC as a result of incapacity due to physical or mental
illness, EEMC shall pay the Executive's Base Salary to the Executive at the rate
in effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company or any affiliate
during such period, until the Executive's employment is terminated by the
Company for Disability; provided, however, that such Base Salary payments shall
be reduced by the sum of the amounts, if any, payable to the Executive at or
prior to the time of any such Base Salary payment under disability benefit plans
of the Company or under the Social Security disability insurance program, which
amounts were not previously applied to reduce any such Base Salary payment.
7. Compensation Related to Termination.
7.1. Termination Without Cause. If the Executive's employment shall be
terminated by the Company, EEMC or any affiliate thereof for any reason other
than Cause, EEMC shall continue to pay to the Executive through the end of the
Term as if the Executive had remained employed through the end of the Term the
Executive's Base Salary at the rate in effect at the time the Notice of
Termination is given and Annual Bonus (at target opportunity level of 100% of
annual Base Salary) and the Executive shall continue to receive the annual
long-term term incentive awards provided for in the last paragraph of Section
5.3 hereof, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company or any affiliate during
such period.
4
7.2. Other Terminations. If the Executive's employment shall be terminated
for any reason other than as described in Section 7.1 during the Term of this
Agreement, EEMC shall pay the Executive's Base Salary (to the Executive or in
accordance with Section 13.3 if the Executive's employment is terminated by his
death) through the Date of Termination at the rate in effect at the time the
Notice of Termination is given, together with all compensation and benefits
payable to the Executive through the Date of Termination under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
or any affiliate during such period.
7.3. Further Obligations. Subject to Sections 6 and 8, after completing the
expense reimbursements required by Section 5.5 hereof and making the payments
and providing the benefits required by Sections 5.2, 5.3, 5.4, and 5.7 to the
extent not previously paid and this Section 7, the Company and EEMC shall have
no further obligations to the Executive under this Agreement.
8. Normal Post-Termination Payments Upon Termination of Employment. If the
Executive's employment shall be terminated for any reason during the Term of
this Agreement, EEMC shall pay the Executive's normal post-termination
compensation and benefits to the Executive as such payments become due. Such
post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Company's retirement, insurance and other compensation
or benefit plans, programs and arrangements (other than this Agreement).
9. Termination Procedures.
9.1. Notice of Termination. During the Term of this Agreement, any
purported termination of the Executive's employment (other than by reason of
death) shall be communicated by written Notice of Termination from one party
hereto to the other parties hereto in accordance with Section 14 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
9.2. Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment during the Term of this
Agreement, shall mean (i) if the Executive's employment is terminated by his
death, the date of his death, (ii) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the fulltime performance of the
Executive's duties during such thirty (30) day period), and (iii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which shall not be less
5
than ninety (90) days (except in the case of a termination for Cause), from the
date such Notice of Termination is given).
10. Confidentiality, Noncompetition, and Nonsolicitation.
10.1. The Executive will not, during or after the Term, disclose to any
entity or person any information which is treated as confidential by the Company
or any of its subsidiaries or affiliates and is not generally known or available
in the marketplace, and to which the Executive gains access by reason of his
position as an employee or director of the Company or any of its subsidiaries or
affiliates (each, an "EE Entity").
10.2. If, at any time prior to the end of the Term, the Executive
terminates his own employment (and not in connection with his Disability,
Retirement or death) or the Company terminates his employment with Cause, then
for a twelve-month period immediately following his Date of Termination, the
Executive shall not, except as permitted by the Company upon its prior written
consent, enter, directly or indirectly, into the employ of or render or engage
in, directly or indirectly, any services to any person, firm or corporation
within the "Restricted Territory," which is a major competitor of any EE Entity
with respect to products which any EE Entity is then producing or services any
EE Entity is then providing (a "Competitor"). However, it shall not be a
violation of the immediately preceding sentence for the Executive to be employed
by, or render services to, a Competitor, if the Executive renders those services
only in lines of business of the Competitor which are not directly competitive
with the primary lines of business of any EE Entity, or are outside of the
Restricted Territory. For purposes of this Section 10.2, the "Restricted
Territory" shall be the states of Connecticut, Maine, Maryland, Massachusetts,
New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.
10.3. If the Executive's employment is terminated for any reason, then for
the twelve month period immediately following his Date of Termination the
Executive shall not, except as permitted by the Company upon its previous
written consent, solicit on his own behalf or on behalf of another person or
entity any EE Entity employee for hire or retention as an employee, consultant,
or service provider.
11. Successors; Binding Agreement.
11.1. In addition to any obligations imposed by law upon any successor to
the Company or EEMC, the Company or EEMC will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or EEMC, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company or EEMC would be required to perform it if no
such succession had taken place. Failure of the Company or EEMC to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement. The Parent is a beneficiary of the benefits of
this Agreement and shall cause EEMC and Company to fully perform their
obligations hereunder.
11.2. This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount
6
would still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
12. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company and EEMC:
Energy East Corporation
Energy East Management Corporation
1387 Ithaca-Dryden Road
Ithaca, NY 14850-8810
Attention: Senior Vice-President & Chief Administrative Officer
To Parent:
Iberdrola, S.A.
Calle Cardenal Gardoqui, 8
48008 Bilbao
Spain
Attention: Secretaria General
To the Executive:
Wesley W. von Schack
217 Commercial Street
Portland, Maine 04101
13. Miscellaneous.
13.1. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the Executive and such officers as may be specifically designated by the
Board. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by any party
which are not expressly set forth in this Agreement. This Agreement sets forth
the entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject matter
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contained herein, including, without limitation, except as otherwise
specifically provided in this Agreement, the Prior Agreement, is hereby
terminated and cancelled. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York. There shall be withheld from any payments provided for hereunder any
amounts required to be withheld under federal, state or local law and any
additional withholding amounts to which the Executive has agreed. The
obligations under this Agreement of the Company, EEMC or the Executive which by
their nature and terms require satisfaction after the end of the Term shall
survive such event and shall remain binding upon such party.
13.2. References in this Agreement to employee benefit plans, compensation
plans, incentive plans, pension plans, disability policies or similar plans,
programs or arrangements of the Company include such plans, programs or
arrangements of NYSEG and EEMC if maintained for the benefit of the Company's
executives or employees of EEMC.
13.3. Notwithstanding any provision of this Agreement to the contrary, in
the event EEMC does not make any payment required to be made by it under this
Agreement, the Company shall be liable to the Executive and his personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees for all payment obligations of EEMC under
this Agreement.
14. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
15. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
16. Settlement of Disputes; Arbitration. All claims by the Executive, for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Executive's claim has been denied.
To the extent permitted by applicable law, any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in New York, New York in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
17. Definitions. For purposes of this Agreement, the following terms shall have
the meaning indicated below:
(A) "Base Salary" shall have the meaning stated in Section 5.1 hereof.
(B) "Board" shall mean the Board of Directors of the Company.
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(C) "Closing" shall have the meaning set forth in the Merger
Agreement.
(D) "Closing Date" shall have the meaning set forth in the Merger
Agreement.
(E) "Cause" for termination by the Company of the Executive's
employment, for purposes of this Agreement, shall mean (i) the willful
and continued failure by the Executive to substantially perform the
Executive's duties with the Company and EEMC (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the Executive
has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, no
act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
(F) "Company" shall mean Energy East Corporation and any successor to
its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(G) "Date of Termination" shall have the meaning stated in Section 9.2
hereof.
(H) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Company and EEMC for the maximum number of
months applicable to the Executive under the Company's Disability
Policy for Salaried Employees (or any successor policy) (but in no
event for less than six (6) consecutive months), the Company shall
have given the Executive a Notice of Termination for Disability, and,
within thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of the
Executive's duties.
(I) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(J) "Merger Agreement" shall mean Agreement and Plan of Merger dated
as of June 25, 2007, among Parent, Green Acquisition Capital, Inc., a
New York corporation, and the Company.
(K) "Notice of Termination" shall have the meaning stated in
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Section 9.1 hereof.
(L) "Parent" shall have the meaning set forth in the Merger Agreement.
(M) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such
employment is terminated in accordance with the Company's retirement
policy, generally applicable to its salaried employees, or in
accordance with any retirement arrangement established with the
Executive's consent with respect to the Executive. For purposes of
this Agreement, termination by the Company without Cause shall not
constitute Retirement.
(N) "Term" shall have the meaning stated in Section 3 hereof.
18. Compliance with Internal Revenue Code 409A. The parties agree that all
payments made to the Executive under this Agreement or any of the Company's
benefit plans are intended to be made in order to avoid the application of
excise tax, penalties and interest under Section 409A of the Internal Revenue
Code. The Company is authorized to adjust the timing of any payment (by delaying
such payment a minimum of six (6) months) to avoid the application of such
excise tax, penalties and interest.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
this 25th day of June 2007.
ENERGY EAST CORPORATION
By:
------------------------------
Name: John T. Cardis
Title: Chairman, Compensation and
Management Succession
Committee
By:
------------------------------
Name: Richard R. Benson
Title: Senior Vice President and
Chief Administrative Officer
ENERGY EAST MANAGEMENT CORPORATION
By:
-------------------------------
Name: Richard R. Benson
Title: Senior Vice President and
Chief Administrative Officer
IBERDROLA, S.A.
By:
------------------------------
Name: Julian Martinez-Simancas
Title: General Secretary and
Secretary to the Board
EXECUTIVE
------------------------------
Wesley W. von Schack
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