EXHIBIT 2.1
EXECUTION COPY
--------------
AGREEMENT AND PLAN OF MERGER
dated as of
September 26, 2001
by and
among
RELIANT RESOURCES, INC.
RELIANT ENERGY POWER GENERATION MERGER SUB, INC.
and
ORION POWER HOLDINGS, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
GENERAL
Section 1.01. Defined Term Index.............................................1
ARTICLE II
THE MERGER
Section 2.01. The Merger.....................................................3
Section 2.02. Closing........................................................4
Section 2.03. Effective Time.................................................4
Section 2.04. Effects of the Merger..........................................4
Section 2.05. Certificate of Incorporation and By-laws.......................4
Section 2.06. Directors......................................................4
Section 2.07. Officers.......................................................4
Section 2.08. Effect on Capital Stock........................................5
Section 2.09. Surrender and Payment..........................................6
Section 2.10. Options........................................................7
Section 2.11. Warrants.......................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Section 3.01. Organization and Qualification.................................8
Section 3.02. Authority; Non-Contravention; Approvals........................8
Section 3.03. Interim Operations of Merger Sub...............................9
Section 3.04. Capital Resources.............................................10
Section 3.05. Proxy Statement...............................................10
Section 3.06. Ownership of Capital Stock....................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01. Organization and Qualification................................10
Section 4.02. Capitalization................................................11
Section 4.03. Subsidiaries..................................................12
Section 4.04. Authority; Non-Contravention; Approvals.......................13
-i-
Section 4.05. Reports and Financial Statements..............................14
Section 4.06. Absence of Undisclosed Liabilities; Material Adverse Effect...15
Section 4.07. Litigation....................................................15
Section 4.08. Proxy Statement...............................................16
Section 4.09. No Violation of Law...........................................16
Section 4.10. Compliance with Agreements....................................16
Section 4.11. Taxes.........................................................16
Section 4.12. Employee Benefit Plans; ERISA.................................17
Section 4.13. Labor Controversies...........................................19
Section 4.14. Environmental Matters.........................................19
Section 4.15. Intellectual Property.........................................20
Section 4.16. Opinion of Financial Advisor..................................20
Section 4.17. Brokers and Finders...........................................20
Section 4.18. Insurance.....................................................20
Section 4.19. PUHCA; Regulation as Utility..................................21
Section 4.20. Exempt Wholesale Generator Status; No QF......................21
Section 4.21. Allowances....................................................21
Section 4.22. Non-Competes..................................................21
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business Pending the Merger........................21
Section 5.02. Certain Restrictions..........................................25
Section 5.03. No Solicitation...............................................25
Section 5.04. Access to Information; Confidentiality........................26
Section 5.05. Merger Sub....................................................27
Section 5.06. Employee Benefits.............................................27
Section 5.07. Meeting of Stockholders and Proxy Statement...................29
Section 5.08. Section 16 Matters............................................30
Section 5.09. Public Announcements..........................................30
Section 5.10. Expenses and Fees.............................................30
Section 5.11. Agreement to Cooperate........................................31
Section 5.12. Directors' and Officers' Indemnification......................32
Section 5.13. Supplemental Indenture........................................34
Section 5.14. Further Assurances............................................34
Section 5.15. Control of Other Party's Business.............................34
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to the Obligations of Each Party...................34
Section 6.02. Conditions to the Obligations of Parent and Merger Sub........35
Section 6.03. Conditions to the Obligations of the Company..................35
-ii-
ARTICLE VII
TERMINATION
Section 7.01. Termination...................................................36
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Effect of Termination.........................................37
Section 8.02. Non-Survival of Representations and Warranties................38
Section 8.03. Notices.......................................................38
Section 8.04. Interpretation................................................39
Section 8.05. Miscellaneous.................................................39
Section 8.06. Counterparts..................................................40
Section 8.07. Amendments; Extensions........................................40
Section 8.08. Entire Agreement..............................................40
Section 8.09. Severability..................................................41
Section 8.10. Specific Performance..........................................41
Section 8.11. No Admission..................................................41
-iii-
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of September 26, 2001 (this
"AGREEMENT"), by and among Reliant Resources, Inc., a Delaware corporation
("PARENT"), Reliant Energy Power Generation Merger Sub, Inc., a Delaware
corporation and wholly owned subsidiary of Parent ("MERGER SUB"), and Orion
Power Holdings, Inc. a Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have approved this Agreement, and deem it advisable, and in the
best interests of their respective stockholders to consummate the merger of
Merger Sub with and into the Company on the terms and conditions set forth
herein (the "MERGER") whereby each issued and outstanding share of common stock,
par value $0.01, of the Company, together with the associated Company Rights
(the "COMPANY COMMON STOCK"), other than the Company Common Stock owned by
Parent, Merger Sub or the Company (or any of their respective direct or indirect
wholly owned subsidiaries) and other than the Appraisal Shares, shall be
converted into the right to receive an amount per share in cash as set forth in
this Agreement;
WHEREAS, concurrently with the execution and delivery hereof, the
persons and entities listed on Schedule A hereto, which in the aggregate own a
total of 62,562,903 shares of Company Common Stock, are each entering into a
Stockholder Agreement (the "STOCKHOLDER AGREEMENTS") with Parent providing for,
among other things, the voting of such shares in connection with the
transactions contemplated hereby; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE I
GENERAL
Section 1.01. DEFINED TERM INDEX.
------------------
TERM REFERENCE
---- ---------
Acquisition Proposal................................ Section 5.03(b)
Acquisition Tender................................... Section 5.10(b)
Acquisition Transaction............................. Section 5.03(a)
Action.............................................. Section 5.12(b)
Agreement........................................... Preamble
Appraisal Shares.................................... Section 2.08(d)
Bonus Plan.......................................... Section 5.06(f)
-1-
TERM REFERENCE
---- ---------
Certificate......................................... Section 2.08(c)
Certificate of Merger............................... Section 2.03
Change of Law....................................... Section 8.04
Closing............................................. Section 2.02
Closing Date........................................ Section 2.02
Code................................................ Section 2.09(f)
Company............................................. Preamble
Company 10-Q........................................ Section 4.05
Company 401(k) Plan................................. Section 5.06(e)
Company Budgets..................................... Section 5.01
Company Common Stock................................ Recitals
Company Disclosure Schedule......................... Article IV
Company Employees................................... Section 5.06(a)
Company Financial Advisor........................... Section 4.16
Company Meeting..................................... Section 3.05
Company Option...................................... Section 2.10
Company Option Plan................................. Section 4.02(c)
Company Permits..................................... Section 4.09
Company Plans....................................... Section 4.12(a)
Company Preferred Shares............................ Section 4.02(a)
Company Required Statutory Approvals................ Section 4.04(c)
Company Rights...................................... Section 4.02(b)
Company Rights Agreement............................ Section 4.02(b)
Company SEC Reports................................. Section 4.05
Company Stockholder Approval........................ Section 4.04(a)
Confidentiality Agreement........................... Section 5.04
Contract............................................ Section 3.02(b)
Convertible Notes................................... Section 4.02(a)
Convertible Notes Indenture......................... Section 5.13
DGCL................................................ Section 2.01
Effective Time...................................... Section 2.03
Environmental Law................................... Section 4.14(b)
ERISA............................................... Section 4.12(a)
ERISA Affiliate Plan................................ Section 4.12(d)
Exchange Act........................................ Section 3.02(c)
Existing Credit Facilities.......................... Section 5.01(d)
FERC................................................ Section 3.02(c)
Fraction............................................ Section 5.06(f)
GAAP................................................ Section 4.05
Governmental Authority.............................. Section 3.02(b)
Hazardous Substance................................. Section 4.14(c)
HSR Act............................................. Section 3.02(c)
Indemnified Parties................................. Section 5.12(b)
Indemnified Party................................... Section 5.12(b)
Intellectual Property............................... Section 4.15
-2-
TERM REFERENCE
---- ---------
IRS................................................. Section 4.11
Material Adverse Effect............................. Section 4.01
May 31 Debt Prospectus.............................. Section 4.03(a)
Merger.............................................. Recitals
Merger Consideration................................ Section 2.08(c)
Merger Sub.......................................... Preamble
Multiemployer Plan.................................. Section 4.12(f)
New Plans........................................... Section 5.06(b)
NYPSC............................................... Section 3.02(c)
Old Plans........................................... Section 5.06(b)
Parent.............................................. Preamble
Parent Disclosure Schedule.......................... Article III
Parent Required Statutory Approvals................. Section 3.02(c)
Paying Agent........................................ Section 2.09(a)
PBGC................................................ Section 4.12(d)
Potential Acquiror.................................. Section 5.03(b)
Proxy Statement..................................... Section 3.05
Requirement of Law.................................. Section 8.04
Retention Bonus..................................... Section 5.06(g)
Retention Pool...................................... Section 5.06(g)
SEC................................................. Section 4.01
Section 262......................................... Section 2.08(d)
Significant Subsidiary.............................. Section 4.03
Stockholder Agreements.............................. Recitals
Superior Proposal................................... Section 5.03(b)
Surviving Corporation............................... Section 2.01
Tax Returns......................................... Section 4.11
Taxes............................................... Section 4.11
Termination Date.................................... Section 7.01(b)
Warrants............................................ Section 2.11
ARTICLE II
THE MERGER
Section 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Merger Sub shall be merged with and into
the Company at the Effective Time. At the Effective Time, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (the "SURVIVING CORPORATION") and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the DGCL.
-3-
Section 2.02. CLOSING. Upon the terms and subject to the conditions
set forth in this Agreement, the closing of the Merger (the "CLOSING") shall
take place at 10:00 a.m., New York time, on the third business day after the
satisfaction or (to the extent permitted by applicable law) waiver of the
conditions set forth in Article VI (other than those conditions to be satisfied
or waived at the Closing), at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York 10019, or at such other time, date or place
agreed to in writing by Parent and the Company; provided, however, that the
Closing shall be delayed if and only for so long as necessary if a banking
moratorium, act of terrorism or war (whether or not declared) affecting United
States banking or financial markets generally prevents Parent (together with its
subsidiaries) from borrowing funds which (when added to the funds otherwise
available to it) would be sufficient to pay the cash consideration hereunder at
the time the Closing would otherwise occur. The date on which the Closing occurs
is referred to in this Agreement as the "CLOSING DATE".
Section 2.03. EFFECTIVE TIME. Upon the terms and subject to the
conditions set forth in this Agreement, as soon as practicable on or, if
permissible, prior to the Closing Date, a certificate of merger or other
appropriate documents (in any such case, the "CERTIFICATE OF MERGER") shall be
duly prepared, executed and acknowledged by the parties in accordance with the
relevant provisions of the DGCL and filed with the Secretary of State of the
State of Delaware. The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware or at
such subsequent time or date as Parent and the Company shall agree in writing
and specify in the Certificate of Merger. The time at which the Merger becomes
effective is referred to in this Agreement as the "EFFECTIVE TIME".
Section 2.04. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the DGCL.
Section 2.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) At the
Effective Time, subject to the requirements of the provisions of Section 5.12,
the Certificate of Incorporation of the Surviving Corporation shall be amended
in its entirety to read as the Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, until thereafter changed or
amended as provided therein or by applicable law.
(b) At the Effective Time, subject to the requirements of the
provisions of Section 5.12, the By-laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
Section 2.06. DIRECTORS. The directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 2.07. OFFICERS. The officers of Merger Sub immediately prior
to the Effective Time shall be the officers of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
-4-
Section 2.08. EFFECT ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company, Parent or Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each share of common stock of
Merger Sub, par value $1.00 per share, issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each
share of Company Common Stock that is owned by Parent, Merger Sub or the
Company (or any of their respective direct or indirect wholly owned
subsidiaries) immediately prior to the Effective Time (i) shall
automatically be cancelled and retired, (ii) shall cease to exist and (iii)
no consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares to be cancelled in accordance with Section 2.08(b) and the
Appraisal Shares) shall be converted into the right to receive in cash,
without interest, an amount equal to $26.80 (the "MERGER CONSIDERATION").
At the Effective Time all such shares shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and each holder
of a certificate that immediately prior to the Effective Time represented
any such shares (a "CERTIFICATE") shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
(d) APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time that are held by any holder who is
entitled to demand and properly demands appraisal of such shares pursuant
to, and who complies in all respects with, the provisions of Section 262 of
the DGCL ("SECTION 262") (the "APPRAISAL SHARES") shall not be converted
into the right to receive the Merger Consideration as provided in Section
2.08(c), but instead such holder shall be entitled to such rights (but only
such rights) as are granted by Section 262. At the Effective Time, all
Appraisal Shares shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and except as otherwise provided by
applicable law, each holder of Appraisal Shares shall cease to have any
rights with respect thereto other than such rights as are granted by
Section 262. Notwithstanding the foregoing, if any such holder shall fail
to validly perfect or shall otherwise waive, withdraw or lose the right to
appraisal under Section 262 or if a court of competent jurisdiction shall
determine that such holder is not entitled to the relief provided by
Section 262, then the rights of such holder under Section 262 shall cease
and such Appraisal Shares shall be deemed to have been converted at the
Effective Time into, and shall have become, the right to receive the Merger
Consideration as provided in Section 2.08(c). The Company shall give prompt
notice to Parent of any demands for appraisal of any shares of Company
Common Stock, and Parent shall have the opportunity to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not,
-5-
without the prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands, or agree to do any of
the foregoing.
Section 2.09. SURRENDER AND PAYMENT. (a) Prior to the Effective
Time, for the benefit of holders of Company Common Stock, Company Options and
Warrants, Parent shall designate, or shall cause to be designated (pursuant to
an agreement in form and substance reasonably acceptable to Parent and the
Company), a bank or trust company acceptable to the Company in its reasonable
discretion to act as agent for the payment of the Merger Consideration upon
surrender of Certificates and for the payment of cash in respect of Company
Options and Warrants in accordance with this Article II (the "PAYING AGENT"),
from time to time after the Effective Time. Prior to the Effective Time, Parent
shall deposit, or cause Merger Sub to deposit, with the Paying Agent (i) cash in
amounts sufficient for the payment of the Merger Consideration pursuant to
Section 2.08(c) upon surrender of Certificates, and (ii) cash payable pursuant
to Sections 2.10 and 2.11 in respect of Company Options and Warrants.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time but in no event later than the first business day following the
Closing Date, the Paying Agent shall mail to each holder of record of a
Certificate (and appropriate documentation for holders of Company Options and
Warrants) (i) a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates held by such
person shall pass, only upon proper delivery of the Certificates to the Paying
Agent and shall be in customary form and have such other provisions as Parent
and the Company may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly completed and validly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount of
cash into which the shares formerly represented by such Certificate shall have
been converted pursuant to Section 2.08(c), and the Certificate so surrendered
shall forthwith be cancelled. Parent's agreement with the Paying Agent shall
provide that, upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, any
holders of more than five thousand shares of Company Common Stock (including
shares issuable upon the exercise of Warrants and Company Options) shall be
entitled to receive payment of the Merger Consideration in respect of the shares
of Company Common Stock and an amount of cash determined pursuant to Sections
2.10 and 2.11 with respect to any Warrants and Company Options, respectively,
held by them by wire transfer of immediately available funds as promptly as
practicable after the Effective Time, but in no event later than the first
business day following the Closing Date, to the account(s) designated by such
stockholder. In the event of a transfer of ownership of Company Common Stock
that is not registered in the stock transfer books of the Company, the proper
amount of cash may be paid in exchange therefor to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate. Upon the delivery
to the Paying Agent of the appropriate documentation in respect
-6-
of Company Options and Warrants, the holder of such Company Option or Warrant
will be entitled to receive an amount of cash determined pursuant to Sections
2.10 and 2.11.
(c) STOCK TRANSFER BOOKS. 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 there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for transfer or any other reason, they shall be cancelled and
exchanged as provided in this Article II.
(d) NO LIABILITY. None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. All funds held by the Paying Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of one year after the
Effective Time shall be returned to Parent, after which time any holder of
unsurrendered Certificates shall look as a general creditor only to Parent for
payment of such funds to which such holder may be due, subject to applicable
law.
(e) LOST 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 the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall pay in respect of such lost, stolen or
destroyed Certificate the Merger Consideration.
(f) WITHHOLDING RIGHTS. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock, Company Options or Warrants such amounts as Parent, the Surviving
Corporation or the Paying Agent is 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
any provision of state, local or foreign tax law. To the extent that amounts are
so withheld and paid over to the appropriate taxing authority by Parent, the
Surviving Corporation or the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock, Company Options or Warrants in respect of
which such deduction and withholding was made by Parent, the Surviving
Corporation or the Paying Agent.
Section 2.10. OPTIONS. At the Effective Time, each then outstanding
and unexercised option or right to purchase shares of Company Common Stock
granted under the Company Option Plan or otherwise granted by the Company (each,
a "COMPANY OPTION"), whether or not then exercisable or vested, shall be
converted into an obligation of the Company to pay, and a right of the holder
thereof to receive thereupon in full satisfaction of such Company Option, cash
in an amount in respect thereof equal to the product of (a) the excess, if any,
of the
-7-
Merger Consideration over the exercise price thereof and (b) the number of
shares of Company Common Stock subject to such Company Option.
Section 2.11. WARRANTS. At the Effective Time, each outstanding
warrant to purchase shares of Company Common Stock (the "WARRANTS") shall be
converted into an obligation of Parent to pay, and a right of the holder thereof
to receive thereupon in full satisfaction of such Warrant, cash in an amount in
respect thereof equal to the product of (a) the excess, if any, of the Merger
Consideration over the exercise price of such Warrant and (b) the number of
shares of Company Common Stock subject to such Warrant.
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 forms, reports, schedules,
registration statements and definitive proxy statements that Parent has filed
with the SEC prior to the date hereof or in the disclosure schedule dated as of
the date hereof delivered by Parent and Merger Sub to the Company (the "PARENT
DISCLOSURE SCHEDULE"), each of which exceptions applies to the section of this
Agreement corresponding to the number and subsection of the schedule on which it
appears and to those other sections of this Agreement where the applicability of
such exception is reasonably apparent:
Section 3.01. ORGANIZATION AND QUALIFICATION. Each of Parent and
Merger Sub is a corporation duly organized and validly existing under the laws
of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted or as contemplated herein. Merger Sub
is a wholly owned subsidiary of Parent. Attached as Exhibit A hereto is a true
and complete copy of each of the provisions of Merger Sub's Certificate of
Incorporation and By-laws (and any other constitutive documents) with respect to
indemnification and exculpation in the forms that will be effective as of the
Effective Time.
Section 3.02. AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Each of
Parent and Merger Sub has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been approved by the Board of Directors of each of Parent and Merger Sub,
and by Parent as sole stockholder of Merger Sub, and no other corporate
proceedings on the part of either Parent or Merger Sub are necessary to
authorize the execution and delivery of this Agreement or the consummation by
each of Parent and Merger Sub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub,
and, assuming the due authorization, execution and delivery hereof by the
Company, constitutes a valid and legally binding agreement of each of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms.
(b) The execution, delivery and performance of this Agreement by
each of Parent and Merger Sub and the consummation of the transactions
contemplated hereby do not
-8-
and will not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or require any offer to purchase or any prepayment of any
debt or result in the creation of any lien, security interest or encumbrance
upon any of the properties or assets of Parent or any of its subsidiaries under
any of the terms, conditions or provisions of (i) the respective certificates of
incorporation or by-laws or similar organizational documents of Parent, Merger
Sub or any subsidiary of Parent, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
federal, state, local or other governmental authority or regulatory agency,
commission, department or other governmental subdivision, court, tribunal or
body, taxing authority or quasi-governmental or private body exercising any
regulatory, taxing or other governmental or quasi-governmental authority (each,
a "GOVERNMENTAL Authority") applicable to Parent, Merger Sub or any subsidiary
of Parent or any of their respective properties or assets, subject in the case
of consummation, to obtaining the Parent Required Statutory Approvals, or (iii)
any loan or credit agreement, interest rate swap, cap or collar agreement or
other agreement designed to protect against fluctuations in interest rates,
pledge agreement, security agreement, deed of trust, bond, debenture, note,
mortgage, indenture, guarantee, lease or other contract, commitment, obligation,
undertaking, concession, franchise or license (each, including all amendments
thereto, a "CONTRACT") to which Parent, Merger Sub or any subsidiary of Parent
is a party or by which Parent, Merger Sub or any subsidiary of Parent or any of
their respective properties or assets may be bound or affected, other than, in
the case of (ii) and (iii) above, such violations, conflicts, breaches,
defaults, terminations, accelerations, offers, prepayments or creations of
liens, security interests or encumbrances that would not reasonably be expected
to have a material adverse effect on Parent and its subsidiaries, taken as a
whole, or prevent or materially impede or delay the consummation of the Merger
or the other transactions contemplated hereby.
(c) Except for (i) the filings by Parent and Merger Sub required by
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (ii) the applicable requirements of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT") and the rules and regulations promulgated
thereunder, (iii) the filing and recordation of appropriate merger documents as
required by the DGCL and (iv) any filings with or approvals from (x) the Federal
Energy Regulatory Commission ("FERC"), (y) the New York State Public Service
Commission ("NYPSC") and (z) such other Governmental Authorities, if any, listed
on Schedule 3.02 (c) of the Parent Disclosure Schedule (the filings and
approvals referred to in clauses (i) through (iv) collectively referred to as
the "PARENT REQUIRED STATUTORY APPROVALS"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by Parent or Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, individually and in the aggregate, would not
impair in any material respect the ability of Parent or Merger Sub to perform
its obligations under this Agreement or prevent or materially impede or delay
the consummation of the Merger.
Section 3.03. INTERIM OPERATIONS OF MERGER SUB. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated
hereby and has engaged in no
-9-
business and has incurred no liabilities other than in connection with the
transactions contemplated by this Agreement.
Section 3.04. CAPITAL RESOURCES. Parent has, or will have prior to
the Closing, sufficient cash resources to pay the aggregate Merger Consideration
and to pay all amounts in respect of the Company Options and Warrants and all
associated costs and expenses.
Section 3.05. PROXY STATEMENT. The information supplied by Parent
for inclusion in any proxy statement to be sent to stockholders of the Company
in connection with a meeting of the Company's stockholders to consider and vote
upon adoption of this Agreement (the "COMPANY MEETING") (such proxy statement,
as amended or supplemented, the "PROXY STATEMENT"), on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, will not 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 shall not, at the
time of the Company Meeting, omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Meeting which shall have become false or
misleading. Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to any information supplied by or on
behalf of the Company which is contained in the Proxy Statement or any amendment
or supplement thereto.
Section 3.06. OWNERSHIP OF CAPITAL STOCK. As of the date hereof,
neither Parent, Merger Sub nor any of their respective "affiliates" or
"associates" (as those terms are defined under Rule 12b-2 under the Exchange
Act) beneficially owns any shares of Company Common Stock or any other security
of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the Company SEC Reports filed prior to the date hereof or
in the disclosure schedule dated as of the date hereof , delivered by the
Company to Parent and Merger Sub (the "COMPANY DISCLOSURE SCHEDULE"), each of
which exceptions applies to the section of this Agreement corresponding to the
number and subsection of the schedule on which it appears and to those other
sections of this Agreement where the applicability of such exception is
reasonably apparent:
Section 4.01. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted or as contemplated herein. The Company is qualified to transact
business and, where applicable, is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except as would not
reasonably be expected to have a Material Adverse Effect. True, accurate and
complete copies of the Company's Certificate of
-10-
Incorporation and By-laws, in each case as amended and in effect on the date
hereof, including all amendments thereto, have heretofore been filed with the
Securities and Exchange Commission (the "SEC") or delivered to Parent.
For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT"
shall mean any change or event or effect that, individually or together with
other changes, events or effects, is materially adverse to the business, assets
or financial condition of the Company and its subsidiaries, taken as a whole,
except for any such change, event or effect resulting from or arising out of (i)
changes or developments in international, national, regional, state or local
wholesale or retail markets for electric power or fuel or related products
including those due to actions by competitors, (ii) changes or developments in
national, regional, state or local electric transmission or distribution systems
except to the extent caused by a material worsening of current conditions caused
by acts of terrorism or war (whether or not declared) occurring after the date
of this Agreement which materially impair the Company's ability to conduct its
operations except on a temporary basis, (iii) changes or developments in
financial or securities markets or the economy in general except to the extent
caused by a material worsening of current conditions caused by acts of terrorism
or war (whether or not declared) occurring after the date of this Agreement,
(iv) effects of weather or meteorological events, except to the extent causing
damage to the physical facilities of the Company and its subsidiaries, or (v)
any Change of Law.
Section 4.02. CAPITALIZATION. (a) The authorized capital stock of
the Company consists of 200,000,000 shares of Company Common Stock and
10,000,000 shares of preferred stock, par value $0.01 (the "COMPANY PREFERRED
SHARES"). As of June 30, 2001, (i) 103,497,186 shares of Company Common Stock,
including in each case the associated Company Rights, and no Company Preferred
Shares, were issued and outstanding, all of which shares of Company Common Stock
were validly issued and are fully paid, nonassessable and free of preemptive
rights, (ii) no shares of Company Common Stock were held in the treasury of the
Company, (iii) 5,604,443 and 7,106,300 shares of Company Common Stock were
subject to or reserved for issuance upon exercise of Company Options and
Warrants issued and outstanding, respectively and (iv) 5,850,100 shares of
Company Common Stock were subject to or reserved for issuance upon conversion of
the outstanding 4.50% Convertible Senior Notes due June 1, 2008 (the
"CONVERTIBLE NOTES"). Since June 30, 2001 through the date hereof, (i) no shares
of capital stock of the Company have been issued, except in connection with the
exercise of Company Options or Warrants issued and outstanding on June 30, 2001
or in connection with the conversion of the Convertible Notes and (ii) no
options, warrants, securities convertible into, or commitments with respect to
the issuance of, shares of capital stock of the Company have been issued,
granted or made except Company Rights in accordance with the terms of the
Company Rights Agreement.
(b) Except for (i) the Preferred Share Purchase Rights (the "COMPANY
RIGHTS") issued pursuant to the Rights Agreement, as amended (the "COMPANY
RIGHTS AGREEMENT"), dated as of November 1, 2000, by and between the Company and
LaSalle Bank National Association, (ii) Company Options issued and outstanding,
(iii) Convertible Notes and (iv) the Warrants, as of the date hereof, there were
no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other anti-takeover
agreement, obligating the
-11-
Company or any subsidiary of the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of the Company
or obligating the Company or any subsidiary of the Company to grant, extend or
enter into any such agreement or commitment. As of the date hereof, there are no
obligations, contingent or otherwise, of the Company to (i) repurchase, redeem
or otherwise acquire any shares of Company Common Stock or the capital stock or
other equity interests of any subsidiary of the Company except in connection
with the exercise of Company Options issued and outstanding or (ii) provide
material funds to, or make any material investment in (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with respect to the
obligations of, any person other than a subsidiary. There are no outstanding
stock appreciation rights or similar rights of the Company or any of its
subsidiaries. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or, except for the Convertible Notes,
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote. There are no voting
trusts, irrevocable proxies or other agreements or understandings to which the
Company or any subsidiary of the Company is a party or is bound with respect to
the voting of any shares of Company Common Stock. The Board of Directors of the
Company has taken all action to amend the Company Rights Agreement to provide
that, for so long as this Agreement is in full force and effect, (i) none of
Parent and its subsidiaries (including Merger Sub) shall become an "acquiring
person" and no "stock acquisition date" shall occur as a result of the
execution, delivery and performance of this Agreement and the Stockholder
Agreements in accordance with their terms and the consummation of the Merger as
provided herein, (ii) no "distribution date" shall occur as a result of the
announcement of or the execution of this Agreement or the Stockholder Agreements
or the consummation of the Merger and (iii) each of Parent and Merger Sub will
not be an "acquiring person" as a result of the transactions contemplated hereby
and by the Stockholder Agreements. As used in this Section 4.02(b), the terms
"acquiring person," "distribution date" and "stock acquisition date" shall have
the meanings ascribed to such terms in the Company Rights Agreement.
(c) The Company has filed with the SEC or previously made available
to Parent complete and correct copies of the 1998 Stock Incentive Plan including
all amendments thereto (the "COMPANY OPTION PLAN"). The Company has included in
Schedule 4.02(c) of the Company Disclosure Schedule a complete and correct list
setting forth as of September 24, 2001, the number of Company Options and
Warrants outstanding, the weighted average exercise price for all such
outstanding Company Options and Warrants and the aggregate number of Company
Options and Warrants outstanding at each exercise price.
Section 4.03. SUBSIDIARIES. Each direct and indirect significant
subsidiary of the Company (each a "SIGNIFICANT SUBSIDIARY", defined as such term
is defined in Rule 1-02 of Regulation S-X of the Exchange Act) is duly
organized, validly existing and, where applicable, in good standing under the
laws of its jurisdiction of organization and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted and each Significant Subsidiary of the
Company is qualified to transact business, and is in good standing, in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary;
except in all cases as would not reasonably be expected to have a Material
Adverse Effect. All of the outstanding shares of capital stock or other equity
interests of each Significant Subsidiary of the Company are validly issued,
fully paid, nonassessable and free of preemptive rights and
-12-
are owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, except for (a) the security interests granted
pursuant to the Orion Power New York, L.P. Credit Facility, the Orion Power
MidWest, L.P. Credit Facility and the Liberty Electric Power, LLC Credit
Facility, as set forth in the Company's prospectus dated May 31, 2001 as filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended, relating
to the Company's 4.50% Convertible Senior Notes due June 1, 2008 (the "MAY 31
DEBT PROSPECTUS") and (b) such liens, encumbrances, equities or claims that
would not have a Material Adverse Effect. There are no subscriptions, options,
warrants, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements to which the Company or any of its Significant
Subsidiaries is a party relating to the issuance, sale, voting or transfer of
any shares of capital stock or other equity interests of any Significant
Subsidiary of the Company, including any right of conversion or exchange under
any outstanding security, instrument or agreement. The Company has no material
investment in any entity other than its Significant Subsidiaries.
Section 4.04. AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) The
Company has full corporate power and authority to enter into this Agreement and,
subject to the approval of the stockholders of the Company as required by the
DGCL (the "COMPANY STOCKHOLDER APPROVAL"), to consummate the transactions
contemplated hereby. This Agreement has been approved by the Board of Directors
of the Company and no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or, except
for the Company Stockholder Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Merger Sub, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby do not and
will not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation or the
loss of any benefit under, or require any offer to purchase or any prepayment of
any debt or result in the creation of any lien, security interest or encumbrance
upon or right of first refusal or first offer with respect to any of the
properties or assets of the Company or any of its subsidiaries under any of the
terms, conditions or provisions of (i) the respective certificates of
incorporation or by-laws or similar organizational documents of the Company or
any of its subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
Governmental Authority applicable to the Company or any of its subsidiaries or
any of their respective properties or assets, subject in the case of
consummation, to obtaining the Company Required Statutory Approvals and the
Company Stockholder Approval, or (iii) any Contract, Company Permit, Company
Plan, Multiemployer Plan or Intellectual Property to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties or assets may be bound or affected, other
than, in the case of (ii) and (iii) above, such violations, conflicts, breaches,
defaults, terminations, accelerations, offers, prepayments or creations of
liens, security interests or encumbrances that would not reasonably be expected
to have a Material Adverse Effect.
-13-
Schedule 4.04(b) of the Company Disclosure Schedule sets forth a correct and
complete list of all material contracts within the meaning of Item 601 of
Regulation S-K, of the Company and its subsidiaries pursuant to which consents
or waivers are required as a result of consummation of the Merger.
(c) Except for (i) the filings by the Company required by the HSR
Act, (ii) the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder, (iii) the filing and recordation of
appropriate merger documents as required by the DGCL and (iv) any filings with
or approvals from (x) the FERC, (y) the NYPSC and (z) the other Governmental
Authorities listed on Schedule 4.04(c) of the Company Disclosure Schedule (the
filings and approvals referred to in clauses (i) through (iv) collectively
referred to as the "COMPANY REQUIRED STATUTORY APPROVALS"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any Governmental Authority is necessary for the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not reasonably be expected to have a
Material Adverse Effect.
(d) The Board of Directors of the Company, at a meeting duly called
and held, adopted resolutions that are still in full force and effect as of the
date hereof, (i) approving and declaring advisable the Merger and this
Agreement, (ii) declaring that the Merger and this Agreement are in the best
interests of the Company's stockholders, (iii) recommending that the Company's
stockholders approve and adopt this Agreement, and (iv) exempting this
Agreement, the Stockholder Agreements and the transactions contemplated hereby
and thereby from the restrictions of Section 203 of the DGCL. The resolutions
referred to in the preceding sentence were approved unanimously by all
directors.
(e) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock is the only vote of the holders of
any class or series of capital stock of the Company necessary to approve this
Agreement, the Merger and the other transactions contemplated hereby.
Section 4.05. REPORTS AND FINANCIAL STATEMENTS. Since November 13,
2000, the Company has filed with the SEC all forms, reports, schedules,
registration statements, prospectuses and definitive proxy statements (the
"COMPANY SEC REPORTS") required to be filed by it under each of the Securities
Act of 1933, as amended, the Exchange Act and the respective rules and
regulations thereunder, all of which, as amended if applicable, complied in all
material respects as to form with all applicable requirements of the appropriate
act and the rules and regulations thereunder. As of their respective dates
(taking into account any amendments or supplements thereto filed prior to the
date hereof), the Company SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The audited consolidated financial
statements of the Company included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000 and the unaudited financial statements of
the Company included in the Company's Quarterly Report on Form 10-Q (the
"COMPANY 10-Q") for the period ended June 30, 2001 have been prepared in
accordance with United States generally accepted accounting
-14-
principles ("GAAP") applied on a consistent basis (except as may be indicated
therein or in the notes thereto or as may be permitted by the rules and
regulations applicable to the quarterly report on Form 10-Q) and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods reported (subject, in the case of
the unaudited financial statements, to normal year-end adjustments). Except as
disclosed in the Company SEC Reports, there are no agreements, arrangements or
understandings, or relationships or items of indebtedness, involving the Company
or any of its Significant Subsidiaries of the type which would be required to be
disclosed pursuant to Item 404(a), (b) or (c) of Regulation S-K under the
Exchange Act.
Section 4.06. ABSENCE OF UNDISCLOSED LIABILITIES; MATERIAL ADVERSE
EFFECT. (a) Except as disclosed in the unaudited financial statements included
in the Company 10-Q, neither the Company nor any of its subsidiaries has as of
the date hereof any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) which are accrued or reserved against in the financial
statements in the Company 10-Q or reflected in the notes thereto or (ii) which
were incurred in the ordinary course of business after June 30, 2001 and (b)
liabilities, obligations or contingencies which (i) would not reasonably be
expected to have a Material Adverse Effect, or (ii) have been discharged or paid
in full prior to the date hereof.
(b) Since June 30, 2001, except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, there has not occurred (i)
any circumstance, development or event or series of such occurrences that has
had or would reasonably be expected to have a Material Adverse Effect; (ii) any
loss or interference with the business of the Company and its subsidiaries from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or action, order or decree of any Governmental
Authority which would reasonably be expected to have a Material Adverse Effect;
(iii) through the date hereof, any declaration, setting aside or payment of any
dividend, or other distribution in cash, stock or property in respect of the
capital stock of the Company, or any repurchase, redemption or other acquisition
by the Company or any of its subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in, the Company; (iv)
through the date hereof, any split in the Company's capital stock, combination,
subdivision or reclassification of any of the Company's capital stock or
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, except as
expressly contemplated by this Agreement; (v) through the date hereof, any
amendment of any term of any outstanding security of the Company; or (vi)
through the date hereof, any change by the Company or its subsidiaries in
financial accounting principles, practices or methods, except as required by
GAAP or by a Change of Law.
Section 4.07. LITIGATION. There are no claims, suits, actions,
proceedings, hearings, inquiries, arbitrations, mediations or similar events or
matters pending, or, to the knowledge of the Company, threatened against,
relating to or affecting the Company or any of its subsidiaries, or to the
Company's knowledge, investigations pending, before any court, Governmental
Authority or any arbitrator, that in any such case would reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is subject to any judgment, decree, injunction, rule or order of
any Governmental Authority or any arbitrator
-15-
which prohibits the consummation of the Merger or would reasonably be expected
to have a Material Adverse Effect.
Section 4.08. PROXY STATEMENT. The Proxy Statement will not, on the
date the Proxy Statement (or any amendment or supplement thereto) is first
mailed to stockholders of the Company, 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 made therein, in the light of the
circumstances under which they are made, not misleading and will not, at the
time of the Company Meeting, omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Meeting which shall have become false or
misleading in any material respect. The Proxy Statement will, when filed by the
Company with the SEC, comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to information supplied by or on behalf of Parent or
Merger Sub which is contained in the Proxy Statement.
Section 4.09. NO VIOLATION OF LAW. Neither the Company nor any of
its subsidiaries is in violation of or has been given written notice of any
violation of, any law, statute, order, rule, regulation, ordinance or judgment
(including any applicable environmental law, ordinance or regulation) of any
Governmental Authority, except for violations which would not reasonably be
expected to have a Material Adverse Effect. To the knowledge of the Company, no
investigation or review relating individually to the Company or any of its
subsidiaries by any Governmental Authority is pending or threatened, other than,
in each case, those which would not reasonably be expected to have a Material
Adverse Effect. The Company and its subsidiaries have all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted (collectively, the "COMPANY PERMITS"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which would not reasonably be expected to have a
Material Adverse Effect. The Company and its subsidiaries are not in violation
of the terms of any Company Permit, except for violations which would not
reasonably be expected to have a Material Adverse Effect.
Section 4.10. COMPLIANCE WITH AGREEMENTS. The Company and each of
its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, would result in a default
under, (a) the respective articles or certificates of incorporation, by-laws or
similar organizational instruments of the Company or any of its Significant
Subsidiaries or (b) any Contract to which the Company or any of its Significant
Subsidiaries is a party or by which any of them is bound or to which any of
their property is subject, other than as would not reasonably be expected to
have a Material Adverse Effect.
Section 4.11. TAXES. The Company and its subsidiaries have (i) duly
filed with the appropriate Governmental Authorities all returns, reports or
similar statements (including any attached schedules) required to be filed with
respect to any Tax, including any information return, claim for refund, amended
return or declaration of estimated Tax ("TAX RETURNS") required to be filed by
them, and such Tax Returns are true, correct and complete, and (ii) duly
-16-
paid in full any and all federal, state, local, foreign or other taxes of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any taxing
authority, including taxes or other charges on or with respect to income,
franchise, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth, and taxes or other charges in the
nature of excise, withholding, ad valorem or value added (collectively, "TAXES")
shown as due on such Tax Returns, except in each case where the failure to file
such Tax Returns or pay such Tax or the failure of such Tax Returns to be true,
correct or complete, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. There are no liens for Taxes upon
any property or asset of the Company or any subsidiary thereof, except for liens
for Taxes not yet due or Taxes contested in good faith or reserved against in
accordance with GAAP or liens that would not reasonably be expected to have a
Material Adverse Effect. To the knowledge of the Company, there are not pending
or threatened in writing any audit, examination, investigation or other
proceeding in respect of Taxes or Tax matters that would reasonably be expected
to have a Material Adverse Effect, and there are no unresolved issues of law or
fact specifically set forth in writing in a notice of deficiency, proposed
deficiency or assessment from the Internal Revenue Service ("IRS") or any other
governmental taxing authority with respect to Taxes of the Company or any of its
subsidiaries, in each case, which would reasonably be expected to have a
Material Adverse Effect, except as reserved against in accordance with GAAP. All
material assessments for Taxes due with respect to any completed and settled
examinations or any concluded litigation have been fully paid. Except as would
not reasonably be expected to have a Material Adverse Effect, neither the
Company nor any of its subsidiaries has (i) been a member of an affiliated group
filing a consolidated United States federal income Tax Return (other than a
group the common parent of which was the Company) or (ii) any liability for the
Taxes of any person (other than any of the Company and its subsidiaries under
Treasury Regulations Section 1,1502-6 (or similar provision of state, local or
foreign law)) as a transferee or successor, by contract or otherwise.
Section 4.12. EMPLOYEE BENEFIT PLANS; ERISA. (a) Schedule 4.12(a) of
the Company Disclosure Schedule includes a complete list of each material
employee benefit plan, program or policy providing benefits to any current or
former employee, officer, director or independent contractor of the Company or
any of its subsidiaries or any beneficiary or dependent thereof that is
sponsored or maintained by the Company or any of its subsidiaries or to which
the Company or any of its subsidiaries contributes or is obligated to
contribute, including without limitation any employee welfare benefit plan
within the meaning of Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated thereunder ("ERISA"),
any employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any material bonus,
incentive, deferred compensation, vacation, stock purchase, stock option
(including the Company Option Plan), severance, employment, consulting, change
of control or fringe benefit agreement, plan, program or policy (collectively,
the "COMPANY PLANS"). The Company has no commitment or obligation to establish
or adopt any new or additional material Company Plans or to materially increase
the benefits under any existing Company Plan.
(b) With respect to each Company Plan, the Company has delivered or
made available to Parent a true, correct and complete copy of: (i) all plan
documents and trust agreements; (ii) the most recent Annual Report (Form 5500
Series) and accompanying schedule,
-17-
if any; (iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; (v) the most recent actuarial report, if any;
and (vi) the most recent determination letter from the IRS, if any.
(c) Except as would not reasonably be expected to have a Material
Adverse Effect, the IRS has issued a favorable determination or opinion letter
with respect to each Company Plan that is intended to be qualified within the
meaning of Section 401(a) or 501(c)(9) of the Code and its related trust that
has not been revoked, and, to the knowledge of the Company, there are no
circumstances or events that have occurred that would reasonably be expected to
result in a revocation of such letter, which cannot be cured without a Material
Adverse Effect.
(d) Except as would not reasonably be expected to have a Material
Adverse Effect: (i) the Company and its subsidiaries have complied, and are now
in compliance, with all provisions of ERISA, the Code and all laws and
regulations applicable to the Company Plans and each Company Plan has been
administered in all material respects in accordance with its terms; (ii) none of
the Company and any its subsidiaries nor, to the knowledge of the Company, any
other person, including any fiduciary, has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA),
which could subject any of the Company Plans or their related trusts, the
Company or any of its subsidiaries, to any tax or penalty imposed under Section
4975 of the Code or Section 502 of ERISA; (iii) no reportable event, within the
meaning of Section 4043(c) of ERISA, has occurred with respect to any Company
Plan or any plan sponsored by a trade or business, whether or not incorporated,
under common control or treated as a single employer with the Company under
Sections 414(b), (c) or (m) of the Code (an "ERISA AFFILIATE PLAN") for which
the notice requirement has not been waived; (iv) all contributions required to
be made under the terms of any Company Plan have been timely made; (v) no
Company Plan or ERISA Affiliate Plan has an "accumulated fending deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA), whether
or not waived; (vi) all premiums to the Pension Benefit Guaranty Corporation
("PBGC") have been timely paid in full; (vii) no liability (other than for
premiums to the PBGC) under Title IV of ERISA has been or is expected to be
incurred by the Company or with respect to an ERISA Affiliate Plan; and (viii)
there are no pending or, to the Company's knowledge, threatened claims (other
than claims for benefits in the ordinary course), lawsuits or arbitrations which
have been asserted or instituted against the Company Plans which could
reasonably be expected to result in any liability of the Company or any of its
subsidiaries to any Company Plan participant, to the PBGC, the Department of
Treasury, the Department of Labor, any Multiemployer Plan or any Company Plan.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any material payment
or benefit to any employee, officer or director of the Company or any of its
subsidiaries.
(f) No Company Plan or ERISA Affiliate Plan is a multiemployer plan
within the meaning of Section 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN") and
none of the
-18-
Company nor any of its subsidiaries has at any time since March 5, 1998
contributed to or been obligated to contribute to any Multiemployer Plan.
Section 4.13. LABOR CONTROVERSIES. There are no controversies
pending or, to the knowledge of the Company, threatened between the Company or
its subsidiaries and any representatives (including unions and any bargaining
unit) of any of their employees that would reasonably be expected to have a
Material Adverse Effect. To the knowledge of the Company, there are no
organizational efforts presently being made involving any of the presently
unorganized employees of the Company or its subsidiaries, except for such
organizational efforts which would not reasonably be expected to have a Material
Adverse Effect.
Section 4.14. ENVIRONMENTAL MATTERS. (a) Except as would not
reasonably be expected to have a Material Adverse Effect: (i) the Company and
its subsidiaries have conducted their respective businesses in compliance with
all applicable Environmental Laws, (ii) none of the properties owned by the
Company or any of its subsidiaries contains any Hazardous Substance as a result
of any activity of the Company or any of its subsidiaries in amounts exceeding
the levels permitted by applicable Environmental Laws, (iii) since June 30,
2001, neither the Company nor any of its subsidiaries has received any notices,
demand letters or requests for information from any federal, state, local or
foreign Governmental Authority indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of its businesses, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries relating to any
violation, or alleged violation, of any Environmental Law, (v) no Hazardous
Substance has been disposed of, released or transported in violation of any
applicable Environmental Law, or in a manner giving rise to any liability under
Environmental Law, from any properties owned by the Company or any of its
subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were owned, leased or operated by
the Company or any of its subsidiaries and (vi) neither the Company, its
subsidiaries nor any of their respective properties are subject to any
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law.
(b) As used herein, "ENVIRONMENTAL LAW" means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority relating to (x) the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource), or (y)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances, in each case and as in effect at the date hereof.
(c) As used herein, "HAZARDOUS SUBSTANCE" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
Governmental Authority or any Environmental
-19-
Law including any toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste, industrial substance or
petroleum or any derivative or byproduct thereof, radon, radioactive material,
asbestos, or asbestos containing material, urea formaldehyde, foam insulation or
polychlorinated biphenyls.
Section 4.15. INTELLECTUAL PROPERTY. Except as would not reasonably
be expected to have a Material Adverse Effect, (i) the Company and its
subsidiaries own, or are licensed to use, all patents, patent rights (including
patent applications and licenses), know-how, trade secrets, trademarks
(including trademark applications), trademark rights, trade names, trade name
rights, service marks, service mark rights, copyrights and other proprietary
intellectual property rights (collectively, "INTELLECTUAL PROPERTY") used in or
necessary for the conduct of the Company's business as it is currently
conducted, (ii) to the knowledge of the Company, the use of Intellectual
Property by the Company and its subsidiaries does not infringe on or otherwise
violate the rights of any third party, and is in accordance with the applicable
license pursuant to which the Company or its subsidiaries acquired the right to
use such Intellectual Property, (iii) to the knowledge of the Company, no third
party is challenging, infringing on or otherwise violating any right of the
Company or its subsidiaries in the Intellectual Property, (iv) neither the
Company nor any of its subsidiaries has received, granted, or is obligated to
grant, any license, sub-license, or assignment of any Intellectual Property, (v)
neither the Company nor any of its subsidiaries has received any notice of any
third party Intellectual Property or pending claim, order or proceeding with
respect to any material Intellectual Property used in or necessary for the
conduct of the Company's business as it is currently conducted, and (vi) to the
knowledge of the Company, no Intellectual Property is being used or enforced by
the Company in a manner that would reasonably be expected to result in the
abandonment, cancellation or unenforceability of any Intellectual Property used
in or necessary for the conduct of the Company's business as it is currently
conducted.
Section 4.16. OPINION OF FINANCIAL ADVISOR. The Company's financial
advisor, Goldman, Sachs & Co. (the "COMPANY FINANCIAL ADVISOR"), has delivered
to the Board of Directors of the Company an oral opinion, to be confirmed in
writing, to the effect that, as of the date of this Agreement, the Merger
Consideration to be received by the Company's stockholders is fair to such
holders from a financial point of view.
Section 4.17. BROKERS AND FINDERS. The Company has not entered into
any contract, arrangement or understanding with any person or firm which may
result in the obligation of the Company to pay any investment banking fees,
finder's fees, or brokerage commissions in connection with the transactions
contemplated hereby, other than fees payable to the Company Financial Advisor.
Section 4.18. INSURANCE. The Company and its subsidiaries maintain
insurance covering their respective properties, operations, personnel and
businesses which insures against such losses and risks as are adequate in
accordance with its reasonable business judgment to protect the Company, its
subsidiaries and their respective businesses. Except as would not have a
Material Adverse Effect, neither the Company nor any of its subsidiaries has
received written notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will have to be
made in order to continue such insurance.
-20-
Section 4.19. PUHCA; REGULATION AS UTILITY. Neither the Company nor
any of its subsidiaries is (a) subject to regulation as a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" of a subsidiary or
holding company or a "public utility company" under the Public Utility Holding
Company Act of 1935, (b) subject to regulation under the Federal Power Act, as
amended, other than due to its subsidiaries' status as power marketers and
owners of certain electric transmission facilities subject to the Federal Power
Act, and its subsidiaries have all exemptions and waivers from regulation as
typically granted by FERC to power marketers or entities with market based
authority affiliated with utilities, or (c) subject to any state law or
regulation with respect to the rates or financial or organizational regulation
of electric utilities, other than due to its subsidiaries' status as "electric
corporations" under New York law subject to lightened regulation, except as
otherwise disclosed in the May 31 Debt Prospectus.
Section 4.20. EXEMPT WHOLESALE GENERATOR STATUS; NO QF. Each of the
power generation projects in which the Company or its subsidiaries has an
interest that is subject to the requirements under the Federal Power Act
discussed in Section 4.19 above meets the requirements for, and has obtained
from FERC, Exempt Wholesale Generator Status, under Section 32 of the Public
Utility Holding Company Act of 1935, as amended, and FERC's applicable
regulations relating thereto. None of the power generation projects in which the
Company or its subsidiaries has an interest is a "qualifying facility" under the
Public Utility Regulatory Policies Act of 1978, as amended, and FERC's
regulations promulgated thereunder.
Section 4.21. ALLOWANCES. Except as would not reasonably be expected
to have a Material Adverse Effect, or as set forth on Schedule 4.21 of the
Company Disclosure Schedule, the Company and its subsidiaries own the quantity
of SO2 and NOx allowances reflected in the Company's Environmental Protection
Agency tracking accounts as of August 31, 2001.
Section 4.22. NON-COMPETES. Neither the Company nor any of its
subsidiaries is party to or bound by any material non-compete agreement.
ARTICLE V
COVENANTS
Section 5.01. CONDUCT OF BUSINESS PENDING THE MERGER. Except as
otherwise contemplated by this Agreement, required by law, disclosed in Schedule
5.01 of the Company Disclosure Schedule, or, subject to such Schedule 5.01,
provided for in the Company's Annual Budgets, including the draft budget for the
calendar year 2002 (as the same may be required to be revised by the Company's
lenders) and Capital Plan, as attached to the Company Disclosure Schedule and
identified as the Company Budgets and Capital Plan (collectively, the "COMPANY
BUDGETS") or except, in the case of clause (a) and clause (i) below only, in
connection with necessary repairs due to breakdown or casualty, or other
necessary actions taken in response to a business emergency or other unforeseen
operational matters, after the date hereof and prior to the Effective Time,
without Parent's consent (which shall not be unreasonably withheld or delayed),
the Company shall, and shall cause its subsidiaries to:
-21-
(a) conduct their respective businesses in the ordinary course of
business consistent with good operating practice in the electric generating
industry taking into account the age, type and location of the assets of
the Company and its subsidiaries;
(b) not (i) amend or propose to amend their respective certificates
of incorporation or by-laws or equivalent organizational documents, (ii)
split, combine or reclassify their outstanding capital stock or (iii)
declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise, except for the payment of dividends or
distributions to the Company or any of its subsidiaries by a direct or
indirect subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities which are convertible into or
exchangeable for such capital stock, except that (i) the Company may issue
shares of capital stock of the Company (A) upon exercise of Company Options
outstanding on the date hereof or hereafter granted in accordance with the
provisions of subclause (ii) of this clause (c), (B) upon conversion of the
Convertible Notes or in accordance with the Company Rights Agreement as in
effect on the date hereof and (C) upon exercise of Warrants outstanding on
the date hereof, (ii) the Company may grant Company Options pursuant to
existing contractual obligations as set forth in Schedule 5.01 of the
Company Disclosure Schedule, and (iii) issuances, sales or dispositions of
capital stock among the Company and its subsidiaries shall be permitted;
(d) except for transactions among the Company and its subsidiaries
or as otherwise provided in Schedule 5.01 of the Company Disclosure
Schedule, not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money or enter into any "keepwell" or other
agreement to maintain the financial condition of another person or enter
into arrangements having the effect of any of the foregoing (including any
capital leases, "synthetic" leases or conditional sale or other title
retention agreements) in excess of $25 million other than (A) borrowings in
the ordinary course of business under existing credit facilities of the
Company or any of its subsidiaries as such facilities may, if permitted by
clause (ii) of this Section 5.01(d), be amended or replaced in a manner
that does not have a Material Adverse Effect (the "EXISTING CREDIT
FACILITIES") and (B) if permitted by clause (ii) of this Section 5.01(d),
borrowings to refinance existing indebtedness, (ii) incur or become
contingently liable with respect to any indebtedness (other than
indebtedness to be incurred under Liberty Electric PA, LLC's Note Purchase
Agreement with the "Institutional Lenders" dated as of July 31, 2001 as
amended to the date of this Agreement, relating to the Liberty electric
generating station) that bears interest at a fixed rate or that requires
payment of a makewhole or other premium in the event of redemption or
repayment before stated maturity or enter into any interest rate swap, cap,
collar or similar agreements, (iii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock other than in
connection with the exercise of outstanding Company Options and Warrants
pursuant to the terms of the Company Option Plan and the relevant written
agreements evidencing the grant of Company
-22-
Options and Warrants, (iv) make any acquisition for consideration valued at
$25 million or more individually (for any single acquisition) or $50
million or more in the aggregate (for all acquisitions) of any operating
assets, securities or businesses other than acquisitions by the Company or
a subsidiary of the Company of any operating assets, securities or
businesses of a subsidiary of the Company, (v) sell or dispose of assets or
businesses having a value of $25 million or more individually or $50
million or more in the aggregate, or pledge or encumber any assets or
businesses, other than (A) pledges or encumbrances required pursuant to
Existing Credit Facilities or other permitted borrowings to the extent
replacing Existing Credit Facilities in whole or in part and in such case
only to the extent of the pledge or encumbrance required pursuant to
Existing Credit Facilities, (B) sales or dispositions of businesses or
assets by the Company or a subsidiary of the Company to a subsidiary of the
Company or as may be required by applicable law, (C) if permitted by
Section 5.01(j), sales of power and services and capacity and other current
assets or dispositions of obsolete assets or equipment, in each case, in
the ordinary course of business consistent with good operating practices in
the electric generating industry taking into account the age, type and
location of the assets of the Company and its subsidiaries, (D) if in
connection with an actual or threatened eminent domain proceeding where
fair value, in the Company's reasonable judgment, is paid for the asset or
business, or (vi) enter into any binding contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(e) use reasonable best efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present senior officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them;
(f) except as otherwise provided in Schedule 5.01 of the Company
Disclosure Schedule, not enter into or amend any employment, severance,
special pay arrangement with respect to termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees or pay any benefit not required by any plan or arrangement in
effect on the date hereof, except pursuant to (i) the requirements of
applicable law, (ii) the ordinary course of business consistent with past
practice, (iii) the Company Plans or collective bargaining agreements in
effect on the date of this Agreement or (iv) employment agreements entered
into with a person who is hired or promoted by the Company or one of its
subsidiaries after the date hereof in the ordinary course of business based
on job performance or workplace requirements and that are consistent with
past practice and comparable in form and amount to individual compensation
or benefit plans or agreements maintained by the Company and its
subsidiaries on the date of this Agreement;
(g) not increase the base salary or other monetary compensation of
any officer or employee, except for increases in the ordinary course of
business consistent with past practice or as permitted by Section 5.06(f)
or except pursuant to previously existing contractual obligations;
(h) not adopt, enter into, amend to materially increase benefits or
obligations of or accelerate the payment or vesting of any benefit or
amount payable under any
-23-
Company Plan, except (i) in the ordinary course of business, (ii) as
required pursuant to existing contractual obligations or this Agreement or
(iii) as required by applicable law;
(i) excluding expenditures made to support projects described in the
Company Budgets to the extent permitted by Schedule 5.01 of the Company
Disclosure Schedule, (i) except to the extent permitted by item (ii) of
this Section 5.01(i), not make any expenditures (capital or otherwise) in
respect of those projects and (ii) not make any capital expenditures
(whether on those projects or otherwise) in excess of $1 million
individually or $10 million in the aggregate, or, in either case, enter
into any binding commitment or contract to make such expenditures;
(j) not enter into, terminate, grant any material waiver or consent
under or materially amend any material contract or commitment or series of
related contracts or commitments, including any contract or commitment or
series of related contracts or commitments (i) providing for sales of goods
or services by the Company or any of its subsidiaries that has a term of
more than one year and which is reasonably expected to generate more than
$25 million in revenues over its term, excluding forward sales in respect
of the calendar year 2002 to the extent permitted under the Company's two
principal subsidiaries' credit agreements in their current form or (ii)
providing for purchases of goods or services by the Company or any of its
subsidiaries that has a term of more than one year and which is reasonably
expected to involve payments of more than $25 million over its term;
(k) maintain insurance coverages as contemplated by Section 4.18 and
file and prosecute any claims thereunder relating to the business of the
Company and its subsidiaries;
(l) invest available cash balances, to the extent not otherwise
required by the terms of the Existing Credit Facilities, in investments
that would qualify as "Permitted Investments" under the terms of the
Company's Credit Agreement, dated as of July 27, 2000, with Union Bank of
California, N.A., CIBC World Markets Corp., The Bank of Novia Scotia and
various other financial institutions;
(m) not make any tax election or settle or compromise any tax
liability or refund, except as would not reasonably be expected to have a
Material Adverse Effect;
(n) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) in excess of $10 million, net of any insurance benefit to
Company, in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports or incurred in the ordinary
course of business and consistent with past practices;
(o) not settle or compromise any pending or threatened suit, action
or claim relating to this Agreement and the transactions contemplated
hereby; and
(p) not commit or agree in writing or otherwise to do any act
restricted by this Section 5.01.
-24-
Section 5.02. CERTAIN RESTRICTIONS. Each of the Company and Parent
agrees that, from and after the date hereof and prior to the Effective Time, and
except as may be agreed in writing by the other or as may be expressly permitted
pursuant to this Agreement, it shall not, and shall not permit any of its
subsidiaries or affiliates, to make any acquisition, develop or construct any
electric generation facility, enter into any term, tolling or power purchase
agreement or otherwise obtain control over any electric generation facility, or
take any action with any regulatory authority, or agree, in writing or
otherwise, to do any of the foregoing, which could reasonably be expected to
materially delay the consummation of the Merger or result in the failure to
satisfy any condition to consummation of the Merger.
Section 5.03. NO SOLICITATION. (a) After the date hereof and prior
to the Effective Time or earlier termination of this Agreement, the Company and
each of its subsidiaries shall not, and the Company shall direct and use its
commercially reasonable efforts to cause its and its subsidiaries' officers,
directors and employees and any attorney, accountant, investment banker,
financial advisor or other agent retained by it or any of its subsidiaries, not
to, directly or indirectly, initiate, solicit or negotiate or provide nonpublic
or confidential information to facilitate, any proposal or offer with respect to
any merger, reorganization, share exchange, consolidation or similar transaction
involving the Company, or any purchase (pursuant to a new issuance, tender
offer, takeover bid or otherwise) of, or offer to purchase, 20% or more of the
voting securities of the Company, or any assets or businesses that generate 20%
or more of the Company's consolidated annual net revenues or net income for the
one-year period ended June 30, 2001 or constitute 20% or more of its
stockholders' equity at that date, in a single transaction or a series of
related transactions, or any combination of the foregoing (any such transaction
being referred to herein as an "ACQUISITION TRANSACTION").
(b) Notwithstanding the provisions of paragraph (a) above or any
other provision of this Agreement, prior to the receipt of the Company
Stockholder Approval, the Company may, in response to an unsolicited bona fide
written offer or proposal with respect to a potential or proposed Acquisition
Transaction (an "ACQUISITION PROPOSAL") from a corporation, partnership, person
or other entity or group (a "POTENTIAL ACQUIROR") which the Company's Board of
Directors determines, after consultation with its independent financial advisor
and legal counsel, could reasonably be expected to lead to a Superior Proposal,
furnish confidential or nonpublic information to, and engage in discussions and
negotiate with, such Potential Acquiror; PROVIDED that no information shall be
furnished to any Potential Acquiror unless such Potential Acquiror shall have
entered into a confidentiality agreement with the Company, containing terms and
conditions, with respect to confidentiality, of substantially the same effect as
those of the Confidentiality Agreement. For purposes of this Agreement,
"SUPERIOR PROPOSAL" means an Acquisition Proposal which the Company's Board of
Directors determines, in good faith and after consultation with its independent
financial advisor and legal counsel, is more favorable to the holders of the
Company Common Stock than this Agreement and the Merger, taking into account,
among other things, (i) the likelihood and timing of consummation, (ii) any
amendments to or modifications of this Agreement that Parent has offered or
proposed at the time of determination, and (iii) such other factors deemed
relevant by the Company's Board of Directors.
(c) The Company shall as soon as is reasonably practicable notify
Parent orally and in writing after receipt of any Acquisition Proposal. Such
notice to Parent shall
-25-
indicate in reasonable detail the identity of the Potential Acquiror and the
material terms and conditions of such Acquisition Proposal, to the extent known.
The Company shall notify Parent as soon as is reasonably practicable of any
material changes or modifications in the material terms of any such Acquisition
Proposal and provide to Parent, as soon as reasonably practicable, copies of the
form of merger agreement or acquisition agreement, as the case may be, in
connection with any such Acquisition Proposal, which the Company has negotiated
with a Potential Acquiror.
(d) At any time prior to the receipt of the Company Stockholder
Approval, the Board of Directors of the Company may withdraw or modify the
recommendation by the Board of Directors of the Company of this Agreement, or
the Merger, if the Board of Directors of the Company determines in good faith
(after consultation with outside counsel and its independent financial advisor)
that its failure to do so would be inconsistent with its fiduciary obligations.
(e) Nothing contained in this Section 5.03 or any other provision of
this Agreement shall prohibit the Company or the Board of Directors of the
Company from (i) taking and disclosing to the Company's stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rule
14d-9 and 14e-2 promulgated under the Exchange Act or (ii) making such
disclosure to the Company's stockholders as, in the good faith judgment of the
Board of Directors of the Company (after consultation with outside counsel), is
required under applicable law.
(f) The Company agrees that, to the extent it has not already done
so, it will immediately cease and cause to be terminated any existing
discussions or negotiations by it or its representatives with any person other
than Parent conducted heretofore with respect to any Acquisition Proposal.
Section 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Except for
competitively sensitive information as to which access, use and treatment is
subject to applicable law, the Company and its subsidiaries shall afford to
Parent and Merger Sub and their respective accountants, counsel, financial
advisors, lenders, potential lenders and other representatives reasonable access
during normal business hours upon reasonable notice throughout the period prior
to the Effective Time to their respective properties, books, contracts,
commitments and records and, during such period, shall furnish promptly such
information concerning its businesses, properties and personnel as Parent or
Merger Sub shall reasonably request; provided, however, such investigation shall
not unreasonably disrupt the Company's operations and shall not be deemed to
permit Parent or Merger Sub to conduct any on site environmental investigations
or examinations. All nonpublic information provided to, or obtained by, Parent
in connection with the transactions contemplated hereby shall be "Evaluation
Material" for purposes of the Confidentiality Agreement dated August 17, 2001
between Parent and the Company (the "CONFIDENTIALITY AGREEMENT"), the terms of
which shall continue in force until the Effective Time; provided that Parent,
Merger Sub and the Company may disclose such information as may be necessary in
connection with seeking the Parent Required Statutory Approvals, the Company
Required Statutory Approvals and the Company Stockholder Approval.
Notwithstanding the foregoing, the Company shall not be required to provide any
information which it reasonably believes it may not provide to Parent by reason
of applicable law, rules or
-26-
regulations, which constitutes information protected by attorney/client
privilege, or which the Company or any subsidiary is required to keep
confidential by reason of contract, agreement or understanding with third
parties if the Company has used commercially reasonable efforts to obtain the
consent of such third party to such inspection or disclosure. Except to the
extent prohibited by applicable law, the Company will consult with Parent from
time to time prior to the Effective Time regarding engineering and technical
aspects relating to the design and construction of its Astoria Repowering
Project and other material construction and development projects.
Section 5.05. MERGER SUB. Parent will take all action necessary (a)
to cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement
and (b) to ensure that, prior to the Effective Time, Merger Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement, or incur or guarantee any indebtedness.
Section 5.06. EMPLOYEE BENEFITS. (a) Parent agrees that the Company
will honor, and from and after the Effective Time, Parent and its affiliates
shall honor, all Company Plans in accordance with their terms as in effect
immediately before the Effective Time, subject to any amendment or termination
thereof that may be permitted by such terms and will honor the benefits
covenants with respect to the Company's acquisitions referenced in Schedule
5.06(a) of the Company Disclosure Schedule. For a period of not less than two
years following the Effective Time, Parent shall provide, or shall cause to be
provided, to the current and former employees of the Company and its
subsidiaries (other than Company Employees subject to a collective bargaining
agreement) (the "COMPANY EMPLOYEES") compensation and employee benefits that are
substantially equivalent, when taken together, to those provided to the Company
Employees in the aggregate immediately before the Effective Time. Subject to any
existing employment agreements, nothing in this Section 5.06 affects, or is
intended to affect, the at will employment status of the Company Employees at
any time after the Effective Time.
(b) For all purposes under the employee benefit plans of Parent and
its affiliates providing benefits to any Company Employees after the Effective
Time (the "NEW PLANS"), each Company Employee shall be credited with his or her
years of service with the Company and its affiliates before the Effective Time,
to the same extent as such Company Employee was entitled, before the Effective
Time, to credit for such service under any similar Company Plans. In addition,
and without limiting the generality of the foregoing: (i) each Company 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 replaces coverage
under a comparable Company Plan in which such Company Employee participated
immediately before the Effective Time (such plans, collectively, the "OLD
PLANS"); and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Company Employee, Parent shall
cause all pre-existing condition exclusions and actively-at-work requirements of
such New Plan to be waived for such employee and his or her covered dependents,
and Parent shall cause any eligible expenses incurred by such employee and his
or her 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 for purposes of satisfying
all deductible, coinsurance and maximum out-of-
-27-
pocket requirements applicable to such employee and his or her covered
dependents for the applicable plan year as if such amounts had been paid in
accordance with such New Plan.
(c) Parent hereby acknowledges that a "change of control" within the
meaning of the Company Plans, as applicable, will occur on the Effective Time.
(d) Parent hereby acknowledges that the executives listed on
Schedule 5.06(d) of the Company Disclosure Schedule shall have "Good Reason"
under their employment agreements as of the Effective Time. Accordingly, from
and after the Effective Time, such executives shall be eligible to terminate
employment and receive the severance benefits which are to be paid for a "Good
Reason" termination occurring on or immediately following the Effective Time.
(e) For so long after the Effective Time as the Company or any of
its subsidiaries maintains a 401(k) plan (all such plans, the "COMPANY 401(K)
PLAN"), and Parent maintains a 401(k) plan with a loan feature for similarly
situated employees, Parent shall cause the Company 401(k) Plan to retain the
loan feature of such plan. Effective as of the Effective Time, the Company will
fully vest the account balances of each participant in the Company 401(k) Plan
who is a Company Employee.
(f) If the Effective Time occurs in the 2001 calendar year, the
Company shall pay each Company Employee employed as of the Effective Time and
then participating in any Company Plan that is an annual bonus plan listed in
Schedule 5.06(f) of the Company Disclosure Schedule (a "BONUS PLAN") the greater
of (i) such Company Employee's deemed bonus entitlement under such plans for the
entire calendar year 2001, as if the Bonus Plan and the Company Employee's
participation in such Bonus Plan had continued through the end of 2001, based on
comparing the Company's annual performance goals for the year to the Company's
projected performance for the entire 2001 calendar year, determined by utilizing
actual performance for the period beginning on January 1, 2001 and ending as of
the end of the month immediately preceding the month in which the Effective Time
occurs (or as of the end of the month in which the Effective Time occurs, if the
Effective Time coincides with the end of the month) and assuming the Company's
performance for the remainder of the year equals the Company's monthly
performance goals for the balance of the year and (ii) such Company Employee's
target bonus award under such plans, in each case multiplied by a fraction, the
numerator of which shall equal the number of days in the calendar year in which
the Effective Time occurs through the Effective Time and the denominator of
which is 365 (the "FRACTION"). If the Effective Time occurs in the 2002 calendar
year, the Company shall pay each Company Employee employed as of the Effective
Time and then participating in a Bonus Plan a bonus equal to such Company
Employee's target bonus award multiplied by the Fraction. If the Company has not
established a Bonus Plan for 2002 as of the Effective Time, the payment in this
Section 5.06(f) described in the preceding sentence shall be made to those
participants in the Bonus Plan for 2001 and all new employees who, based on
their job title, would have been eligible to participate in the Bonus Plan for
2001 and who remain in the Company's employ as of the Effective Time and shall
be based on target bonus percentage equal to the actual (or deemed, with respect
to new employees) percentage applicable for the Bonus Plan for 2001. The Company
shall be permitted to establish a Bonus Plan for 2002, which shall be
substantially the same as the Bonus Plan for 2001. The remainder of the bonus
award (based upon the Bonus
-28-
Plan for 2001 or 2002, as the case may be), if any, for each Company Employee in
respect of the portion of the year which elapses after the Effective Time occurs
shall be paid during January of the following calendar year, to those Company
Employees who are employed with Parent or any of its affiliates at the end of
the calendar year in which the Effective Time occurs or who have been terminated
prior to such date by the Company or Parent without cause, or terminated due to
death or disability. Company performance in respect of calculations made under
the Bonus Plans and the Company Plans, to the extent applicable, for the
calendar years 2001 and 2002 shall be calculated without taking into account any
expenses or costs associated with or arising as a result of transactions
contemplated by this Agreement or any non-recurring charges that would not
reasonably be expected to have been incurred had the transactions contemplated
by this Agreement not occurred.
(g) The Company may provide up to $20 million as a retention pool
(the "RETENTION POOL") for the purpose of retaining the services of key Company
Employees. The Chief Executive Officer of the Company shall determine, subject
to approval by the Board of Directors of the Company, the size of the Retention
Pool, the Company Employees eligible to receive retention awards from the
Retention Pool (each a "RETENTION BONUS") and any criteria for payment of the
Retention Bonus, and shall determine the final allocation of payments from the
Retention Pool. Any Retention Bonus shall be intended to retain the services of
the recipient through, and shall be payable (if such recipient still remains
employed by the Company at such time) on, the Closing Date in the case of the
Company's current Chief Executive Officer, Chief Financial Officer, Chief Legal
Officer, Senior Vice President (Operations) and Senior Vice President
(Development) or the date that is 90 days after the Closing Date (or such
earlier date as may be determined by Parent) in the case of other Company
Employees, provided, that participants who are constructively terminated or
terminated without cause or as a result of death or disability prior to the date
through which services were to be provided shall, upon such termination, receive
any Retention Bonus which would be payable to them following the date through
which services were to be provided.
Section 5.07. MEETING OF STOCKHOLDERS AND PROXY STATEMENT. The
Company shall take all action necessary, in accordance with applicable law and
its certificate of incorporation and by-laws, to convene as promptly as
reasonably practicable the Company Meeting. In connection with the Company
Meeting and the transactions contemplated hereby, the Company will (i) as
promptly as practicable prepare and file with the SEC, use its best efforts to
have cleared by the SEC, and thereafter mail to its stockholders as promptly as
practicable the Proxy Statement and any amendments or supplements thereto and
all other proxy materials for such meeting, (ii) use its reasonable best efforts
(including postponing or adjourning the Company Meeting to solicit additional
proxies) to obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby and (iii) otherwise comply with all
legal requirements applicable to such meeting. The Company shall provide Parent
and its legal counsel with sufficient opportunity to review the form and
substance of the Proxy Statement (including any amendments or supplements
thereto) prior to filing such with the SEC. The Company shall provide to Parent
copies of any comments received from the SEC in connection therewith. Subject to
Section 5.03, the Proxy Statement shall contain the unqualified recommendation
of the Board of Directors of the Company that its stockholders vote in favor of
the approval and adoption of this Agreement and the Merger. Notwithstanding any
other provision of this Agreement, unless this Agreement is terminated in
accordance with the terms
-29-
hereof, the Company shall submit this Agreement to its stockholders for a vote
at the Company Meeting, whether or not the Board of Directors of the Company
withdraws, modifies or changes its recommendation regarding the foregoing
matters.
Section 5.08. SECTION 16 MATTERS. Prior to the Effective Time,
Parent and the Company shall take all such steps as may be required and
permitted to cause the transactions contemplated by this Agreement, including
any dispositions of shares of Company Common Stock (including derivative
securities with respect to shares of Company Common Stock) by each individual
who is or will be subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
Section 5.09. PUBLIC ANNOUNCEMENTS. The initial press release by
Parent and the Company announcing the signing of this Agreement shall be a joint
press release in the form attached as Exhibit B and shall be released by Parent
and the Company. Except to the extent the immediately preceding sentence applies
and other than with respect to any public announcement made by the Company in
connection with Section 5.03, Parent and the Company will consult with each
other before issuing, and provide each other the opportunity to review and make
reasonable comment upon, any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with the NYSE,
will not issue any such press release or make any such public statement prior to
such consultation; provided, however, that each of Parent and the Company may
issue a press release or make any public statement in response to specific
questions by the press, analysts, investors or those attending industry
conferences or financial analyst conference calls, so long as any such
statements are not inconsistent with previous press releases, public disclosures
or public statements made by Parent or the Company, as the case may be.
Section 5.10. EXPENSES AND FEES. (a) All costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing the Proxy Statement shall be
shared equally by Parent and the Company. The Company has provided to Parent in
Schedule 5.10(a) of the Company Disclosure Schedule a good faith estimate of the
fees and expenses to be paid by the Company and its subsidiaries to all
professional advisors in connection with the Merger.
(b) The Company agrees to pay to Parent (without duplication) the
fees set forth below under the following circumstances:
(i) if the Company terminates this Agreement pursuant to clause
(e) of Section 7.01, the Company shall pay Parent a fee of $90
million, such fee to be payable by wire transfer of immediately
available funds to an account specified in writing by Parent at the
time of such termination;
(ii) (x) if Parent terminates this Agreement pursuant to clause
(f) of Section 7.01, or (y) if Parent or the Company terminates this
Agreement pursuant to clause (b)(iii) of Section 7.01, and in the case
of either of subclauses (x) or (y)
-30-
hereof (A) Parent was not at the time of termination in material
breach of its representations, warranties, covenants and agreements
contained in this Agreement, and (B) after the date hereof but prior
to the time of the Company Meeting a proposal by a third party
relating to an Acquisition Transaction had been publicly proposed or
publicly announced and not withdrawn, the Company shall pay Parent a
fee of $45 million within three business days following termination by
wire transfer of immediately available funds to an account specified
in writing by Parent. In addition, if a fee shall be payable pursuant
to the first sentence of this clause (b)(ii) and on or prior to the
nine-month anniversary of a termination of this Agreement which gives
rise to the obligation to pay a fee pursuant to such first sentence,
the Company enters into an agreement with respect to an Acquisition
Transaction or the Company or its Board of Directors recommends a
third-party tender- or exchange-offer which would result in the
offeror (other than The Goldman Sachs Group, Inc. and its affiliates)
beneficially owning in excess of 50% of the outstanding shares of the
Company Common Stock (an "ACQUISITION TENDER"), the Company shall pay
Parent an additional fee of $45 million upon consummation of an
Acquisition Transaction or Acquisition Tender, by wire transfer of
immediately available funds to an account specified in writing by
Parent, such additional fee to be payable at the time such an
Acquisition Transaction or Acquisition Tender is consummated. For the
purposes of Section 5.10 (b)(ii), in the definition of Acquisition
Transaction, all references to 20% shall instead be deemed to be 50%.
Section 5.11. AGREEMENT TO COOPERATE. (a) Subject to the terms and
conditions of this Agreement and applicable law, each of Parent and the Company
shall use its reasonable best efforts to take, or cause to be taken, all action
and do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including to obtain all necessary
or appropriate waivers, consents or approvals of third parties required in order
to preserve material contractual relationships of Parent and the Company and
their respective subsidiaries, all necessary or appropriate waivers, consents
and approvals to effect all necessary registrations, filings and submissions and
to lift any injunction or other legal bar to consummation of the Merger (and, in
such case, to proceed with the consummation of the Merger as expeditiously as
possible), including through all possible appeals.
(b) In addition to and without limitation of the foregoing, each of
Parent and the Company undertakes and agrees to (i) file (and Parent agrees to
cause any person or entity that may be deemed to be the ultimate parent entity
or otherwise to control Parent to file, if such filing is required by law) as
soon as practicable, and in any event prior to ten business days after the date
hereof, a Notification and Report Form under the HSR Act with the United States
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice (and shall file as soon as practicable any form or report
required by any other Governmental Authority relating to antitrust, competition,
trade or energy regulation matters) and (ii) take any act, make any undertaking
or receive any clearance or approval required by any Governmental Authority or
applicable law. Each of Parent and the Company shall (and Parent shall cause any
such parent entity to) (i) respond as promptly as practicable to any inquiries
or requests received from any Governmental Authority for additional information
or documentation, and (ii) not
-31-
extend any waiting period under the HSR Act or enter into any agreement with any
Governmental Authority not to consummate the transactions contemplated by this
Agreement, except with the prior consent of the other parties hereto (which
shall not be unreasonably withheld or delayed). Parent shall use its reasonable
best efforts to avoid or eliminate each and every impediment under any
antitrust, competition, or trade or energy regulation law (including the Federal
Power Act, as amended, and the FERC's regulations thereunder; any applicable New
York laws, and the NYPSC regulations thereunder; the HSR Act; and, if
applicable, the Public Utility Holding Company Act of 1935, as amended, and the
regulations promulgated thereunder) that may be asserted by any Governmental
Authority with respect to the Merger so as to enable the Effective Time to occur
as soon as reasonably possible, but in any event to insure that the Effective
Time occurs no later than the Termination Date. Each party shall (i) promptly
notify the other party of any written communication to that party or its
affiliates from any Governmental Authority and, subject to applicable law,
permit the other party to review in advance any proposed written communication
to any of the foregoing; (ii) not agree to participate, or to permit its
affiliates to participate, in any substantive meeting or discussion with any
Governmental Authority in respect of any filings, investigation or inquiry
concerning this Agreement or the Merger unless it consults with the other party
in advance and, to the extent permitted by such Governmental Authority, gives
the other party the opportunity to attend and participate thereat; and (iii)
furnish the other party with copies of all correspondence, filings, and
communications (and memoranda setting forth the substance thereof) between them
and their affiliates and their respective representatives on the one hand, and
any Governmental Authority or members of their respective staffs on the other
hand, with respect to this Agreement and the Merger.
(c) Nothing in this Agreement shall require Parent, the Company or
any of their respective subsidiaries to dispose of any of its assets or to limit
its freedom of action with respect to any of its assets or businesses, whether
prior to or after the Effective Time, or to commit or agree to any of the
foregoing, in order to obtain any consents, approvals, permits or authorizations
or to remove any impediments to the Merger relating to the HSR Act or any other
law, regulation or order or to avoid the entry of, or to effect the dissolution
of, any injunction or other order in any suit or proceeding relating thereto,
other than dispositions, limitations, commitments, or agreements that in each
such case may be conditioned upon the consummation of the Merger and the
transactions contemplated hereby and that in each such case do not and would not
reasonably be expected to, individually or in the aggregate, have a material
adverse effect on the business, assets or financial condition of the Company and
its subsidiaries together with Parent and its subsidiaries taken as a whole as
constituted after the Effective Time.
Section 5.12. DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
indemnification provisions of the Company's Certificate of Incorporation and
By-laws as in effect at the Effective Time shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers or employees of the Company;
provided, however, that all rights to indemnification in respect of any Action
pending or asserted or any claim made within such period shall continue until
the disposition of such Action or resolution of such claim. From and after the
Effective Time, Parent shall assume, be jointly and severally liable for, and
honor, guaranty and stand surety for, and shall cause the Company to
-32-
honor, in accordance with their respective terms, each of the covenants
contained in this Section 5.12, without limit as to time.
(b) Each of Parent and the Company and, from and after the Effective
Time, the Surviving Corporation, shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless (and advance funds in respect of
each of the foregoing) each present and former director, officer or employee of
the Company or any of its subsidiaries and each person who served as a director,
officer, member, trustee or fiduciary of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or enterprise (each,
together with such person's heirs, executors or administrators, an "INDEMNIFIED
PARTY" and collectively, the "INDEMNIFIED PARTIES") against any costs or
expenses (including advancing attorneys' fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative (an
"ACTION"), arising out of, relating to or in connection with any action or
omission occurring or alleged to have occurred whether before or after the
Effective Time (including acts or omissions in connection with such persons
serving as an officer, director or other fiduciary in any entity if such service
was at the request or for the benefit of the Company) or the Merger or the other
transactions contemplated by this Agreement or arising out of or pertaining to
the transactions contemplated by this Agreement. In the event of any such
Action, Parent and the Surviving Corporation shall cooperate with the
Indemnified Party in the defense of any such Action.
(c) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company and its subsidiaries
(provided that Parent may substitute therefor third-party policies of at least
the same coverage and amounts containing terms and conditions that are no less
advantageous to the Indemnified Parties, and which coverages and amounts shall
be no less than the coverages and amounts provided at that time for Parent's
directors and officers) with respect to matters arising on or before the
Effective Time; provided, that after the Effective Time, the Surviving
Corporation shall not be required to pay annual premiums in excess of 250% of
the last annual premium paid by the Company prior to the date hereof (the amount
of which premium is set forth in the Company Disclosure Schedule), but in such
case shall purchase as much coverage as reasonably practicable for such amount.
(d) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 5.12.
(e) The rights of each Indemnified Party hereunder shall be in
addition to, and not in limitation of, any other rights such Indemnified Party
may have under the Certificate of Incorporation or By-laws of the Company, any
other indemnification arrangement, the DGCL or otherwise. The provisions of this
Section 5.12 shall survive the consummation of the Merger and expressly are
intended to benefit each of the Indemnified Parties.
-33-
(f) In the event Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.12.
Section 5.13. SUPPLEMENTAL INDENTURE. The Surviving Corporation
shall execute a supplemental indenture, effective at the Effective Time, by
which there shall be made the adjustments in the conversion provisions of the
indenture relating to the Convertible Notes (the "CONVERTIBLE NOTES INDENTURE")
that are required to be made as a result of the Merger in order to provide for
each of the Convertible Notes to be convertible from and after the Merger into
the amount of cash receivable upon the consummation of the Merger by a holder of
the number of shares of Company Common Stock into which such Convertible Note
might have been converted immediately prior to the Merger, in the manner and to
the extent required by the Convertible Notes Indenture.
Section 5.14. FURTHER ASSURANCES. Each party hereby agrees to
perform any further acts and to execute and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
Section 5.15. CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained
in this Agreement shall give the Company, directly or indirectly, the right to
control or direct Parent's operations prior to the Effective Time. Nothing
contained in this Agreement shall give Parent, directly or indirectly, the right
to control or direct the Company's operations prior to the Effective Time. Prior
to the Effective Time, each of the Company and Parent shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over their respective operations.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
respective obligations of the Company, Parent and Merger Sub to consummate the
Merger are subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the requisite vote of the stockholders of the Company;
(b) no judgment, injunction, order or decree of a court or other
Governmental Authority of competent jurisdiction shall be in effect which
has the effect of making the Merger illegal or otherwise restraining or
prohibiting the consummation of the Merger (each party agreeing to use its
best efforts, including appeals to higher courts, to have any judgment,
injunction, order or decree lifted); and
(c) (i) any waiting period applicable to consummation of the Merger
under the HSR Act shall have expired or been terminated, and (ii) all
registrations, filings,
-34-
applications, notices, consents, approvals, orders, qualifications and
waivers relating to the Merger to be obtained from the Governmental
Authorities listed in Schedule 3.02(c) of the Parent Disclosure Schedule or
Schedule 4.04(c) of the Company Disclosure Schedule and indicated therein
as being a condition to the consummation of the Merger shall have been
filed, made or obtained, as the case may be.
Section 6.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
Sub. The obligations of Parent and Merger Sub to consummate the Merger are
subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of the Company contained in
this Agreement (i) that are qualified as to Material Adverse Effect shall be
true and correct as of the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case as of such earlier date), and (ii) those not so qualified shall be true and
correct as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such earlier
date), except for failures of the representations and warranties referred to in
this clause (ii) to be true and correct as do not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(provided that this Material Adverse Effect exception shall not apply to (x) the
representations and warranties contained in the first sentence of Section 4.20,
and (y) prior to the distribution of the shares of common stock of Parent to the
stockholders of Reliant Energy, Incorporated, the representations and warranties
contained in the second sentence of Section 4.20); and
(c) Parent shall have received a certificate signed on behalf of the
Company by an executive officer of the Company indicating that the conditions
provided in Sections 6.02 (a) and (b) have been satisfied.
Section 6.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Sub shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time;
(b) the representations and warranties of Parent contained in this
Agreement (i) that are qualified as to "material adverse effect" shall be true
and correct in as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of such
earlier date), and (ii) those not so qualified shall be true and correct as of
the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such earlier date),
except for failures of the representations and warranties referred to in this
clause (ii) to be true and correct as do not and would not
-35-
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on Parent and its subsidiaries taken as a whole; and
(c) the Company shall have received a certificate signed on behalf
of Parent by an executive officer of Parent indicating that the conditions
provided in Section 6.03 (a) and (b) have been satisfied.
ARTICLE VII
TERMINATION
Section 7.01. TERMINATION. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time (notwithstanding any approval of this Agreement by the stockholders of the
Company):
(a) by mutual written consent of the Company and Parent;
(b) by either Parent or the Company:
(i) if the Merger has not been consummated on or before
September 30, 2002 (such date, as it may be extended under clause (A)
of this paragraph, the "TERMINATION DATE"); provided, however, that
(A) each of the Company and Parent shall have the option, in its sole
discretion, to extend the Termination Date for an additional period of
time not to exceed 90 days if the condition set forth in Section 6.01
(a) has been satisfied, all other conditions to consummation of the
Merger are satisfied or capable of then being satisfied and the sole
reason that the Merger has not been consummated by such date is that
the condition set forth in Section 6.01(b) or (c) has not been
satisfied due to the failure to obtain the necessary consents and
approvals under applicable laws or a judgment, injunction, order or
decree of a court or other Governmental Authority of competent
jurisdiction shall be in effect and Parent or the Company are still
attempting to obtain such necessary consents and approvals under
applicable laws, or are contesting (x) the refusal of the relevant
Governmental Authority to give such consents or approvals or (y) the
entry of any such judgment, injunction, order or decree, in court or
through other applicable proceedings; (B) the right to terminate this
Agreement pursuant to this Section 7.01(b)(i) shall not be available
to any party whose breach of any provision of this Agreement has been
the cause of, or resulted in, the failure of the Merger to be
consummated by the Termination Date (it being agreed that the date of
September 30, 2002 (or, if applicable, the 90-day period referred to
in clause (A) hereof) shall be extended by one day for each day that
the closing is delayed pursuant to the proviso to the first sentence
of Section 2.02);
(ii) if any court of competent jurisdiction in the United States
or other United States Governmental Authority shall have issued a
final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall
-36-
have become final and nonappealable, PROVIDED that the party seeking
to terminate this Agreement pursuant to this Section 7.01(b)(ii) shall
have used reasonable best efforts to prevent the entry of and to
remove such order, decree, ruling or final action; or
(iii) this Agreement shall not have been approved and adopted by
the Company's stockholders by reason of the failure to obtain the
required vote at a duly held meeting of stockholders (including any
adjournment thereof);
(c) by Parent if there has been a material breach by the Company of
any representation, warranty, covenant or agreement contained in this
Agreement which (x) would result in a failure of a condition set forth in
Section 6.02 (a) or (b) and (y) cannot be cured prior to the Termination
Date;
(d) by the Company if there has been a material breach by Parent or
Merger Sub of any representation, warranty, covenant or agreement contained
in this Agreement which (x) would result in a failure of a condition set
forth in Section 6.03 (a) or (b) and (y) cannot be cured prior to the
Termination Date;
(e) by the Company, after giving Parent three days prior (but
revocable) written notice of its receipt of an Acquisition Proposal, in
order to enter into a definitive agreement providing for an Acquisition
Transaction which is a Superior Proposal; provided that the Company has
complied with its obligations under Section 5.03 in all material respects;
and
(f) by Parent, if the Company's Board of Directors shall have
withdrawn or adversely amended in any material respect its approval or
recommendation of the Merger or this Agreement to the Company's
stockholders, it being understood that neither (x) disclosure of any
competing proposal that is not being recommended by the Board of Directors
of the Company nor (y) disclosure of any facts or circumstances, together
with a statement that the Board of Directors of the Company continues to
recommend approval and adoption of the Merger and this Agreement, shall be
considered to be a withdrawal or adverse amendment in any material respect
of such approval or recommendation.
The party desiring to terminate this Agreement pursuant to Section 7.01 (other
than pursuant to Section 7.01(a)) shall give notice of such termination to the
other party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either Parent or the Company prior to the Effective Time
pursuant to the provisions of Section 7.01, this Agreement shall forthwith
become void, and there shall be no liability or further obligation on the part
of the Company, Parent, Merger Sub or their respective officers or directors
(except as set forth in Sections 5.04, 5.10, 8.01 and 8.05, all of which shall
survive the termination). Nothing in this Section 8.01 shall relieve any party
from liability for
-37-
any willful or material breach of any covenant or agreement of such party
contained in this Agreement.
Section 8.02. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.02
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after such time.
Section 8.03. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
to, or mailed by registered or certified mail (return receipt requested) if and
when received by, or sent via facsimile if and when received by, the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
If to Parent or Merger Sub, to:
Reliant Resources, Inc.
1111 Louisiana
Houston, Texas 77002
Attention: Michael L. Jines
Facsimile: 713-207-0116
with copies to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002
Attention: Stephen A. Massad
Joe S. Poff
Facsimile: 713-229-7775
If to the Company, to:
Orion Power Holdings, Inc.
7 East Redwood Street
10th Floor
Baltimore, Maryland 21202
Attention: W. Thaddeus Miller
Facsimile: 410-468-0924
-38-
with copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Daniel A. Neff
David C. Karp
Facsimile: 212-403-2000
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Martin H. Neidell
Facsimile: 212-806-6006
Section 8.04. INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, (ii) "knowledge" shall mean
actual knowledge of the executive officers of the Company or Parent, as the case
may be, and (iii) reference to any Article or Section means such Article or
Section hereof. "CHANGE OF LAW" shall mean the adoption, implementation,
promulgation, repeal, modification, reinterpretation or proposal of any law,
rule, regulation, ordinance, order, protocol, practice or measure or any other
Requirement of Law of or by any federal, state, county or local government,
governmental agency, court, commission, department or regional transmission
operator, independent system operator or market administrator or similar
organization or other such entity which occurs subsequent to the date hereof.
"REQUIREMENT OF LAW" shall mean any federal, state, county or local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Authority or regional transmission operator,
independent system administrator or market administrator or similar
organization. The word "subsidiary" shall have the meaning assigned to that term
in Rule 1-02 of Regulation S-X of the Exchange Act. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Section 8.05. MISCELLANEOUS. This Agreement (including the documents
and instruments referred to herein) shall not be assigned by operation of law or
otherwise except that Merger Sub may assign its obligations under this Agreement
to any other wholly owned subsidiary of Parent subject to the terms of this
Agreement, but no such assignment shall relieve Merger Sub of its obligations
hereunder. The parties hereto 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 the Chancery Court or other Courts of the State
of Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition,
-39-
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of the Chancery Court or other Courts of the State of Delaware in
the event any dispute arises out of this Agreement or the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that it will not bring any action relating to this
Agreement or the transactions contemplated by this Agreement in any court other
than the Chancery Court or other Courts of the State of Delaware, and each of
the parties irrevocably waives the right to trial by jury, and (d) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH
STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
Section 8.06. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, and by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
Section 8.07. AMENDMENTS; EXTENSIONS. (a) This Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after the Company Stockholder
Approval has been obtained; PROVIDED that, after the Company Stockholder
Approval has been obtained, there shall be made no amendment that by law
requires further approval by stockholders of the Company without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties hereto, by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein; provided that after the Company
Stockholder Approval has been obtained, there shall be made no waiver that by
law requires further approval by stockholders of the Company without the further
approval of such stockholders. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure or delay of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
Section 8.08. ENTIRE AGREEMENT. This Agreement (including the
Company Disclosure Schedule and the Parent Disclosure Schedule) and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by any party hereto. Neither this Agreement nor any
-40-
provision hereof is intended to confer upon any person other than the parties
hereto any rights or remedies hereunder except for the provisions of Sections
5.06(c), 5.06(d) and 5.12, which are intended for the benefit of the Company's
former and present officers, directors, employees and agents, and Article II
hereof.
Section 8.09. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
Section 8.10. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.
Section 8.11. NO ADMISSION. Nothing herein shall be deemed an
admission by the Company, in any action or proceeding by or on behalf of a third
party, that such third party is not in breach or violation of, or in default in,
the performance or observance of any term or provision of any contract.
-41-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ORION POWER HOLDINGS, INC.
By: /s/ Jack A. Fusco
----------------------------------
Name: Jack A. Fusco
Title: Chief Executive Officer and
President
RELIANT RESOURCES, INC.
By: /s/ R. S. Letbetter
----------------------------------
Name: R. S. Letbetter
Title: Chairman, President & CEO
RELIANT ENERGY POWER GENERATION
MERGER SUB, INC.
By: /s/ R. S. Letbetter
----------------------------------
Name: R. S. Letbetter
Title: Chairman, President & CEO