Exhibit 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CTG RESOURCES, INC.,
ENERGY EAST CORPORATION
AND
OAK MERGER CO.,
DATED AS OF JUNE 29, 1999
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER.............................................................1
Section 1.1 The Merger................................................1
Section 1.2 Effects of the Merger.....................................1
Section 1.3 Effective Time of the Merger..............................2
Section 1.4 Directors.................................................2
Section 1.5 Officers..................................................2
ARTICLE II
TREATMENT OF SHARES....................................................2
Section 2.1 Effect of the Merger on Capital Stock.....................2
Section 2.2 Exchange of Certificates..................................6
ARTICLE III
THE CLOSING............................................................9
Section 3.1 Closing...................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................9
Section 4.1 Organization And Qualification............................9
Section 4.2 Subsidiaries..............................................9
Section 4.3 Capitalization...........................................10
Section 4.4 Authority; Non-contravention; Statutory Approvals;
Compliance.............................................10
Section 4.5 Reports and Financial Statements.........................12
Section 4.6 Absence of Certain Changes or Events.....................13
Section 4.7 Litigation...............................................13
Section 4.8 Registration Statement and Proxy Statement...............13
Section 4.9 Tax Matters..............................................13
Section 4.10 Employee Matters; ERISA..................................15
Section 4.11 Environmental Protection.................................19
Section 4.12 Regulation as a Utility..................................21
Section 4.13 Vote Required............................................21
Section 4.14 Opinion of Financial Advisor.............................21
Section 4.15 Ownership of Parent Common Stock.........................21
Section 4.16 Takeover Laws; Rights Plans..............................21
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT..............................22
Section 5.1 Organization and Qualification...........................22
Section 5.2 Subsidiaries.............................................22
Section 5.3 Capitalization...........................................23
Section 5.4 Authority; Non-contravention; Statutory Approvals;
Compliance.............................................23
Section 5.5 Reports and Financial Statements.........................24
Section 5.6 Absence of Certain Changes or Events.....................25
Section 5.7 Litigation...............................................25
Section 5.8 Registration Statement and Proxy Statement...............25
Section 5.9 Regulation as a Utility..................................25
Section 5.10 Ownership of the Company Common Stock....................26
Section 5.11 Environmental Protection.................................26
Section 5.12 Operations of Nuclear Power Plant........................26
Section 5.13 Code Section 368(a)......................................27
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER................................27
Section 6.1 Covenants of the Parties.................................27
Section 6.2 Covenant of the Company; Alternative Proposals...........31
Section 6.3 Employment Agreement.....................................32
Section 6.4 Additional Statutory Approvals...........................32
ARTICLE VII
ADDITIONAL AGREEMENTS.................................................32
Section 7.1 Access to Information....................................32
Section 7.2 Proxy Statement and Registration Statement...............33
Section 7.3 Regulatory Matters.......................................34
Section 7.4 Company Shareholders' Approval...........................34
Section 7.5 Directors' and Officers' Indemnification.................34
Section 7.6 Disclosure Schedules.....................................36
Section 7.7 Public Announcements.....................................36
Section 7.8 Rule 145 Affiliates......................................36
Section 7.9 Certain Employee Agreements..............................36
Section 7.10 Employee Benefit Plans...................................37
Section 7.11 Company Stock and Other Plans............................38
Section 7.12 Expenses.................................................39
Section 7.13 Further Assurances.......................................39
Section 7.14 Corporate Offices........................................39
Section 7.15 Parent Board of Directors................................39
Section 7.16 Community Involvement....................................40
Section 7.17 Advisory Board...........................................40
Section 7.18 Tax-free Status..........................................40
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ARTICLE VIII
CONDITIONS............................................................40
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger.............................................40
Section 8.2 Conditions to Obligation of Parent to Effect
the Merger.............................................41
Section 8.3 Conditions to Obligation of the Company to Effect
the Merger.............................................42
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.....................................43
Section 9.1 Termination..............................................43
Section 9.2 Effect of Termination....................................45
Section 9.3 Termination Fee; Expenses................................45
Section 9.4 Amendment................................................46
Section 9.5 Waiver...................................................46
ARTICLE X
GENERAL PROVISIONS....................................................46
Section 10.1 Non-survival; Effect of Representations and
Warranties.............................................46
Section 10.2 Brokers..................................................47
Section 10.3 Notices..................................................47
Section 10.4 Miscellaneous............................................48
Section 10.5 Interpretation...........................................48
Section 10.6 Counterparts; Effect.....................................48
Section 10.7 Parties in Interest......................................48
Section 10.8 Waiver of Jury Trial and Certain Damages.................48
Section 10.9 Enforcement..............................................49
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INDEX OF DEFINED TERMS
Term Page
- ---- ----
1935 Act....................................................................10
Advisory Board..............................................................40
Affiliate Agreement.........................................................36
Agreement....................................................................1
Alternative Proposal........................................................32
Business Combination.........................................................6
Cash Consideration...........................................................3
Cash Election................................................................3
Cash Election Number.........................................................3
Cash Election Shares.........................................................3
Cash Fraction................................................................3
CBCA.........................................................................1
Certificate of Merger........................................................2
Closing......................................................................9
Closing Agreement...........................................................15
Closing Date.................................................................9
Code.........................................................................1
Company......................................................................1
Company Certificates.........................................................4
Company Common Stock.........................................................2
Company Disclosure Schedule.................................................36
Company Financial Statements................................................12
Company Material Adverse Effect..............................................9
Company Preferred Stock.....................................................10
Company Required Consents...................................................11
Company Required Statutory Approvals........................................11
Company Right................................................................2
Company Rights Agreement.....................................................2
Company SEC Reports.........................................................12
Company Shareholders' Approval..............................................21
Company Special Meeting.....................................................34
Company Stock Plans.........................................................38
Confidentiality Agreement...................................................33
Controlled Group Liability..................................................15
Covered Company Employee....................................................37
Disclosure Schedules........................................................36
Dissenting Shares............................................................6
Effective Time...............................................................2
Election.....................................................................4
Election Deadline............................................................5
Employee Benefit Plan.......................................................16
Employment Agreement........................................................32
Environmental Claim.........................................................20
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Environmental Laws..........................................................20
Environmental Permits.......................................................19
ERISA.......................................................................15
ERISA Affiliate.............................................................16
Excess Parent Common Shares..................................................8
Exchange Act................................................................12
Exchange Agent...............................................................6
Exchange Ratio...............................................................3
Expenses....................................................................45
FERC........................................................................12
Final Order.................................................................41
Form of Election.............................................................3
GAAP........................................................................12
Governmental Authority......................................................11
Hazardous Materials.........................................................20
Indemnified Liabilities.....................................................35
Indemnified Parties.........................................................34
Indemnified Party...........................................................34
Initial Termination Date....................................................43
IRS.........................................................................16
joint venture...............................................................10
Liens.......................................................................11
Merger.......................................................................1
Merger Consideration.........................................................7
Merger Sub...................................................................1
Merger Sub Common Stock......................................................2
Mixed Consideration..........................................................3
Mixed Election...............................................................4
Multiemployer Plan..........................................................16
Multiple Employer Plan......................................................18
No Election Shares...........................................................5
Nuclear Facility............................................................26
NYSE.........................................................................3
Parent.......................................................................1
Parent Common Stock..........................................................3
Parent Disclosure Schedule..................................................36
Parent Financial Statements.................................................25
Parent Material Adverse Effect..............................................22
Parent Preferred Stock......................................................23
Parent Required Consents....................................................23
Parent Required Statutory Approvals.........................................24
Parent SEC Reports..........................................................25
Parent Share Price...........................................................3
Parent Shares................................................................7
Paying Agent.................................................................4
PBGC........................................................................18
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PCBs........................................................................20
Plan........................................................................16
Post-Merger Period..........................................................39
Power Act...................................................................24
Proxy Statement.............................................................13
Proxy/Registration Statement................................................33
Qualified Plans.............................................................17
Registration Statement......................................................13
Release.....................................................................21
Representative...............................................................3
Representatives.............................................................32
Restricted Stock Plan.......................................................39
Schedule 7.11(c) Employees..................................................39
SEC.........................................................................12
Securities Act..............................................................12
SERP........................................................................38
Stock Consideration..........................................................3
Stock Election...............................................................4
Stock Election Number........................................................4
Stock Election Shares........................................................4
Stock Fraction...............................................................4
Stock Option Plan...........................................................39
subsidiary...................................................................9
Surviving Corporation........................................................1
Takeover Laws...............................................................21
Tax Return..................................................................13
Tax Ruling..................................................................14
Taxes.......................................................................13
Termination Fee.............................................................45
VEBA........................................................................17
Violation...................................................................11
Withdrawal Liability........................................................16
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AGREEMENT AND PLAN OF MERGER, dated as of June 29, 1999 (this
"Agreement"), by and among CTG Resources, Inc., a Connecticut corporation (the
"Company"), Energy East Corporation, a New York corporation ("Parent"), and Oak
Merger Co., a Connecticut corporation and a wholly owned subsidiary of Parent
("Merger Sub").
WHEREAS, the Company and Parent have determined to engage in a business
combination transaction on the terms stated herein;
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have approved and deemed it advisable and in the best interests of
their respective shareholders to consummate the transactions contemplated herein
under which the businesses of the Company and Parent would be combined by means
of the merger of the Company with and into Merger Sub; and
WHEREAS, it is intended that the Merger (as defined below) shall
constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and that this Agreement
shall constitute a plan of reorganization;
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement:
At the Effective Time (as defined in Section 1.3), the Company shall be
merged with and into Merger Sub (the "Merger") in accordance with the laws of
the State of Connecticut. Merger Sub shall be the surviving corporation in the
Merger and shall continue its corporate existence under the laws of the State of
Connecticut. The effects and the consequences of the Merger shall be as set
forth in Section 1.2. Throughout this Agreement, the term "Merger Sub" shall
refer to Merger Sub prior to the Merger and the term "Surviving Corporation"
shall refer to Merger Sub in its capacity as the surviving corporation in the
Merger.
Section 1.2 Effects of the Merger. At the Effective Time, (i) the
certificate of incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such certificate of
incorporation, except that the name of the Surviving Corporation shall be "CTG
Resources, Inc.," and (ii) 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 amended as provided by law, the certificate of incorporation of
the Surviving Corporation and such by-laws. Subject to the foregoing, the
additional effects of the Merger shall be as provided in Section 33-820 of the
Connecticut Business Corporation Act (the "CBCA").
Section 1.3 Effective Time of the Merger. On the Closing Date (as
defined in Section 3.1), with respect to the Merger, a certificate of merger
complying with Section 33-819 of the CBCA (the "Certificate of Merger") shall be
delivered to the Secretary of the State of Connecticut for filing. The Merger
shall become effective upon the filing of the Certificate of Merger, or at such
later date and time as may be set forth in the Certificate of Merger (the
"Effective Time").
Section 1.4 Directors. The directors of Merger Sub immediately prior to
the Effective Time and Mr. Arthur C. Marquardt shall be the directors of the
Surviving Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the certificate of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the CBCA.
Section 1.5 Officers. Commencing at the Effective Time, and continuing
until his successor is duly elected or appointed and qualified in the manner
provided in the by-laws of the Surviving Corporation, Mr. Marquardt shall be
President and Chief Executive Officer of the Surviving Corporation and shall
hold other positions in other subsidiary corporations of Parent as specified in
his Employment Agreement (as defined in Section 6.3 hereof) subject to the terms
and conditions therein contained. The officers of Merger Sub immediately prior
to the Effective Time shall be the initial officers of the Surviving Corporation
(except that Mr. Marquardt shall be the President and Chief Executive Officer of
the Surviving Corporation) and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the certificate of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the CBCA.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company or Merger Sub:
(a) Shares of Merger Sub Stock. Each share of common stock,
without par value, of Merger Sub (the "Merger Sub Common Stock") that is issued
and outstanding immediately prior to the Effective Time shall remain outstanding
unchanged by reason of the Merger as one fully paid and nonassessable share of
common stock, without par value, of the Surviving Corporation.
(b) Cancellation of Certain Company Common Stock. Each share of
common stock, without par value, of the Company, together with each associated
preferred share purchase right (a "Company Right") under the Rights Agreement,
dated as of December 1, 1998 (the "Company Rights Agreement"), between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Company Common Stock"), that is owned by the Company as treasury stock and all
shares of Company Common Stock that are owned by Parent shall be
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canceled and shall cease to exist, and no stock of Parent or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to the provisions
of this Section 2.1, each share of Company Common Stock, other than Dissenting
Shares (as defined in Section 2.1(n)) and shares canceled pursuant to Section
2.1(b), issued and outstanding immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive (i) $41.00 in cash (the "Cash
Consideration") or (ii) a number of validly issued, fully paid and nonassessable
shares of Common Stock, par value $.01 per share, of Parent ("Parent Common
Stock") equal to the Exchange Ratio (as defined below) (the "Stock
Consideration") or (iii) the right to receive a combination of cash and shares
of Parent Common Stock determined in accordance with this Section (the "Mixed
Consideration"). The "Exchange Ratio" shall be equal to the Cash Consideration
divided by either (i) the Parent Share Price (as defined below) if the Parent
Share Price is equal to or less than $30.13 and equal to or more than $23.67,
(ii) $30.13 if the Parent Share Price is greater than $30.13, in which case the
Exchange Ratio shall equal 1.3609, or (iii) $23.67 if the Parent Share Price is
less than $23.67, in which case the Exchange Ratio shall equal 1.7320. The
"Parent Share Price" shall be equal to the average of the closing prices of the
shares of Parent Common Stock on the New York Stock Exchange ("NYSE") Composite
Transactions Reporting System, as reported in The Wall Street Journal, for the
20 trading days immediately preceding the second trading day prior to the
Effective Time.
(d) Cash Election. Subject to the immediately following sentence,
each record holder of shares of Company Common Stock immediately prior to the
Effective Time shall be entitled to elect to receive cash for all or any part of
such holder's shares of Company Common Stock (a "Cash Election").
Notwithstanding the foregoing and subject to Section 2.1(l), the aggregate
number of shares of Company Common Stock that may be converted into the right to
receive cash in the Merger (the "Cash Election Number") plus any Dissenting
Shares shall be 55% of the total number of shares of Company Common Stock issued
and outstanding as of the Effective Time. Cash Elections shall be made on a form
designed for that purpose (a "Form of Election"). A holder of record of shares
of Company Common Stock who holds such shares as nominee, trustee or in another
representative capacity (a "Representative") may submit multiple Forms of
Election, provided that such Representative certifies that each such Form of
Election covers all the shares of Company Common Stock held by such
Representative for a particular beneficial owner.
(e) Cash Election Shares. If the aggregate number of shares of
Company Common Stock covered by Cash Elections (the "Cash Election Shares")
exceeds the Cash Election Number, each Cash Election Share shall be converted
into (i) the right to receive an amount in cash, without interest, equal to the
product of (A) the Cash Consideration and (B) a fraction (the "Cash Fraction"),
the numerator of which shall be the Cash Election Number and the denominator of
which shall be the total number of Cash Election Shares, and (ii) a number of
shares of Parent Common Stock equal to the product of (A) the Exchange Ratio and
(B) a fraction equal to one minus the Cash Fraction.
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(f) Stock Election. Subject to the immediately following sentence,
each record holder of shares of Company Common Stock immediately prior to the
Effective Time shall be entitled to elect to receive shares of Parent Common
Stock for all or any part of such holder's shares of Company Common Stock (a
"Stock Election"). Notwithstanding the foregoing and subject to Section 2.1(l),
the aggregate number of shares of Company Common Stock that may be converted
into the right to receive shares of Parent Common Stock in the Merger (the
"Stock Election Number") shall be 45% of the total number of shares of Company
Common Stock issued and outstanding as of the close of business on the third
trading day prior to the Effective Time. Stock Elections shall be made on a Form
of Election. A Representative may submit multiple Forms of Election, provided
that such Representative certifies that each such Form of Election covers all
the shares of Company Common Stock held by such Representative for a particular
beneficial owner.
(g) Stock Election Shares. If the aggregate number of shares of
Company Common Stock covered by Stock Elections (the "Stock Election Shares")
exceeds the Stock Election Number, each Stock Election Share shall be converted
into (i) the right to receive a number of shares of Parent Common Stock, equal
to the product of (A) the Exchange Ratio and (B) a fraction (the "Stock
Fraction"), the numerator of which shall be the Stock Election Number and the
denominator of which shall be the total number of Stock Election Shares, and
(ii) an amount in cash, without interest, equal to the product of (A) the Cash
Consideration and (B) a fraction equal to one minus the Stock Fraction.
(h) Mixed Election. Subject to the immediately following sentence,
each record holder of shares of Company Common Stock immediately prior to the
Effective Time shall be entitled to elect to receive shares of Parent Common
Stock for part of such holder's shares of Company Common Stock and cash for the
remaining part of such holder's shares of Company Common Stock (the "Mixed
Election" and, collectively with Stock Election and Cash Election, the
"Election"). Notwithstanding the foregoing and subject to Section 2.1(l), the
aggregate number of shares of Company Common Stock that may be converted into
the right to receive the Cash Consideration plus Dissenting Shares shall be 55%,
and the number of shares of Company Common Stock converted into the right to
receive the Stock Election Number shall be 45%, in each case, of the total
number of shares of Company Common Stock issued and outstanding as of the
Effective Time. Mixed Elections shall be made on a Form of Election. A
Representative may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the shares
of Company Common Stock held by such Representative for a particular beneficial
owner. With respect to each holder of Company Common Stock who makes a Mixed
Election, the shares of Company Common Stock such holder elects to be converted
into the right to receive Cash Consideration shall be treated as Cash Election
Shares for purposes of the provisions contained in Sections 2.1(d), (e) and (l),
and the shares such holder elects to be converted into the right to receive
shares of Parent Common Stock shall be treated as Stock Election Shares for
purposes of the provisions contained in Sections 2.1(f), (g) and (l).
(i) Form of Election. To be effective, a Form of Election must be
properly completed, signed and submitted to Parent's transfer agent and
registrar, as paying agent (the "Paying Agent"), and accompanied by the
certificates representing the shares of Company Common Stock ("Company
Certificates") as to which the election is being made (or by an
4
appropriate guarantee of delivery of such Company Certificate signed by a firm
that is a member of any registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of the Securities Transfer Agent's Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program). Parent shall have the discretion, which it may delegate in
whole or in part to the Paying Agent, to determine whether Forms of Election
have been properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. The decision of Parent (or the Paying
Agent) in such matters shall be conclusive and binding. Neither Parent nor the
Paying Agent shall be under any obligation to notify any person of any defect in
a Form of Election submitted to the Paying Agent. The Paying Agent shall also
make all computations contemplated by this Section 2.1, and all such
computations shall be conclusive and binding on the holders of shares of Company
Common Stock.
(j) Deemed Non-Election. For the purposes hereof, a holder of
shares of Company Common Stock who does not submit a Form of Election that is
received by the Paying Agent prior to the Election Deadline (as defined in
Section 2.1(k)) (the "No Election Shares") shall be deemed not to have made a
Cash Election, Stock Election or Mixed Election. If Parent or the Paying Agent
shall determine that any purported Election was not properly made, the shares
subject to such improperly made Election shall be treated as No Election Shares.
No Election Shares may be treated by the Company as Cash Election Shares or
Stock Election Shares.
(k) Election Deadline. Parent and the Company shall each use its
best efforts to cause copies of the Form of Election to be mailed to the record
holders of the Company Shares not less than thirty days prior to the Effective
Time and to make the Form of Election available to all persons who become record
holders of Company Shares subsequent to the date of such mailing and no later
than the close of business on the seventh business day prior to the Effective
Time. A Form of Election must be received by the Paying Agent by 5:00 p.m., New
York City time, on the second day after the Effective Time (the "Election
Deadline") in order to be effective. All elections may be revoked until the
Election Deadline in writing by the record holders submitting Forms of Election.
(l) Adjustment Per Tax Opinion. Notwithstanding anything in this
Article II to the contrary (other than the last sentence of Section 2.1(m)), the
number of shares of Company Common Stock to be converted into the right to
receive the Stock Consideration in the Merger shall be not less than that number
which would cause the ratio of (i) the closing price per share of Parent Common
Stock on the Closing Date times the aggregate number of shares of Parent Common
Stock to be paid as Stock Consideration pursuant to Section 2.1(c), to (ii) the
sum of (A) the amount set forth in the preceding clause (i) plus (B) the
aggregate Cash Consideration to be issued pursuant to Section 2.1(c) plus (C)
the number of Dissenting Shares times the per share Cash Consideration plus (D)
any other amounts paid by Parent or the Company (or any affiliate thereof) to,
or on behalf of, any Company shareholder in connection with the sale, redemption
or other disposition of any Company stock in connection with the Merger for
purposes of Treasury Regulation Sections 1.368-1(e) and 1.368-1T(e) plus (E) any
extraordinary dividend distributed by the Company prior to and in connection
with the Merger for purposes of Treasury Regulation Sections 1.368-1(e) and
1.368-1T(e), to be 45%. To the extent the application of this Section
5
2.1(l) results in the number of shares of Company Common Stock to be converted
into the right to receive the Stock Consideration in the Merger being increased,
the number of such shares to be converted into the right to receive the Cash
Consideration will be reduced.
(m) Anti-Dilution Provisions. In the event Parent (i) changes (or
establishes a record date for changing) the number of shares of Parent Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, stock combination, recapitalization, reclassification,
reorganization or similar transaction with respect to the outstanding Parent
Common Stock or (ii) pays or makes an extraordinary dividend or distribution in
respect of Parent Common Stock (other than a distribution referred to in clause
(i) of this sentence) and, in either case, the record date therefor shall be
prior to the Effective Time, the Merger Consideration (as defined in Section
2.2(b)) shall be proportionately adjusted. Regular quarterly cash dividends and
increases thereon shall not be considered extraordinary for purposes of the
preceding sentence. If, between the date hereof and the Effective Time, Parent
shall merge or consolidate with or into any other corporation (a "Business
Combination") and the terms thereof shall provide that Parent Common Stock shall
be converted into or exchanged for the shares of any other corporation or
entity, then provision shall be made so that shareholders of the Company who
would be entitled to receive shares of Parent Common Stock pursuant to this
Agreement shall be entitled to receive, in lieu of each share of Parent Common
Stock issuable to such shareholders as provided herein, the same kind and amount
of securities or assets as shall be distributable upon such Business Combination
with respect to one share of Parent Common Stock and the parties hereto shall
agree on an appropriate restructuring of the transactions contemplated herein.
(n) Dissenting Shares. Each outstanding share of Company Common
Stock the holder of which has perfected his right to dissent under applicable
law and has not effectively withdrawn or lost such right as of the Effective
Time (the "Dissenting Shares") shall not be converted into or represent a right
to receive the Merger Consideration, and the holder thereof shall be entitled
only to such rights as are granted by applicable law; provided, however, that
any Dissenting Share held by a person at the Effective Time who shall, after the
Effective Time, withdraw the demand for payment for shares or lose the right to
payment for shares, in either case pursuant to the CBCA, shall be deemed to be
converted into, as of the Effective Time, the right to receive cash pursuant to
Section 2.1(c) in the same manner as if such shares were Cash Election Shares.
The Company shall give Parent prompt notice upon receipt by the Company of any
such written demands for payment of the fair value of such shares of Company
Common Stock and of withdrawals of such notice and any other instruments
provided pursuant to applicable law. Any payments made in respect of Dissenting
Shares shall be made by the Surviving Corporation.
Section 2.2 Exchange of Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, the Surviving Corporation shall deposit with a bank or trust
company mutually agreeable to Parent and the Company (the "Exchange Agent"),
pursuant to an agreement in form and substance reasonably acceptable to Parent
and the Company, an amount of cash and certificates representing shares of
Parent Common Stock required to effect the conversion of Company Common Stock
into Parent Common Stock and cash in accordance with Section 2.1(c).
6
(b) Exchange and Payment Procedures. As soon as practicable after
the Effective Time, Parent shall cause the Paying Agent to mail to each holder
of record as of the Effective Time of a Certificate or Certificates that have
been converted pursuant to Section 2.1: (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates to the
Paying Agent) and (ii) instructions for effecting the surrender of the
Certificates and receiving the Merger Consideration (as defined below) to which
such holder shall be entitled therefor pursuant to Section 2.1. Upon surrender
of a Certificate to the Paying Agent for cancellation, together with a duly
executed letter of transmittal and such other documents as the Paying Agent may
require, the holder of such Certificate shall be entitled to receive in exchange
therefor (i) a certificate representing that number of shares of Parent Common
Stock (the "Parent Shares") into which the shares of Company Common Stock
previously represented by such Certificate are converted in accordance with
Section 2.1(c), (ii) the cash to which such holder is entitled in accordance
with Section 2.1(c), and (iii) the cash in lieu of fractional Parent Shares to
which such holder has the right to receive pursuant to Section 2.2(d) (the
shares of Parent Common Stock and cash described in clauses (i), (ii) and (iii)
above being referred to collectively as the "Merger Consideration"). In the
event the Merger Consideration is to be delivered to any person who is not the
person in whose name the Certificate surrendered in exchange therefor is
registered in the transfer records of Company, the Merger Consideration may be
delivered to a transferee if the Certificate is presented to the Paying Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence satisfactory to the Paying Agent that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section 2.2,
each Certificate (other than a certificate representing shares of Company Common
Stock to be canceled in accordance with Section 2.1(b)) shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration contemplated by this Section 2.2. No interest
will be paid or will accrue on any cash payable to holders of Certificates
pursuant to provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Shares
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(d) until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole Parent Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole Parent Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Parent Shares.
(d) No Fractional Securities. In lieu of any such fractional
securities, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a
7
share of Parent Common Stock upon surrender of Certificates for exchange
pursuant to this Article II will be paid an amount in cash (without interest)
equal to such holder's proportionate interest in the net proceeds from the sale
or sales in the open market by the Exchange Agent, on behalf of all such
holders, of the aggregate fractional shares of Parent Common Stock issued
pursuant to this Article II. As soon as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (i) the number of full
shares of Parent Common Stock delivered to the Exchange Agent by Parent over
(ii) the aggregate number of full shares of Parent Common Stock to be
distributed to holders of Company Common Stock (such excess being herein called
the "Excess Parent Common Shares"). The Exchange Agent, as agent for the former
holders of Company Common Stock, shall sell the Excess Parent Common Shares at
the prevailing prices on the NYSE. The sales of the Excess Parent Common Shares
by the Exchange Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent practicable.
Parent shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of Excess Parent Common Shares.
Until the net proceeds of such sale have been distributed to the former holders
of Company Common Stock, the Exchange Agent will hold such proceeds in trust for
such former holders. As soon as practicable after the determination of the
amount of cash to be paid to former holders of Company Common Stock in lieu of
any fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former holders.
(e) Closing of Transfer Books. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for certificates representing the appropriate number of Parent
Shares and the appropriate amount of cash as provided in Section 2.1 and in this
Section 2.2.
(f) Termination of Exchange Agent. Any certificates representing
Parent Shares deposited with the Exchange Agent pursuant to Section 2.2(a) and
not exchanged within six months after the Effective Time pursuant to this
Section 2.2 shall be returned by the Exchange Agent to Parent, which shall
thereafter act as Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of unsurrendered Certificates and unclaimed at the end of
one year from the Effective Time shall be returned to the Surviving Corporation,
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.
(g) Escheat. The Company shall not be liable to any person for
such shares or funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
8
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Wachtell, Lipton, Rosen & Katz, at 10:00 a.m.,
Eastern time, on the second business day immediately following the date on which
the last of the conditions set forth in Article VIII hereof is fulfilled or
waived (other than conditions that by their nature are required to be performed
on the Closing Date, but subject to satisfaction of such conditions), or at such
other time and date and place as the Company and Parent shall mutually agree
(the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
Section 4.1 Organization And Qualification. Except as set forth in
Section 4.1 of the Company Disclosure Schedule (as defined in Section 7.6), the
Company and each of its subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a material adverse
effect on the business, properties, financial condition or results of operations
of the Company and its subsidiaries taken as a whole or on the consummation of
this Agreement (any such material adverse effect being hereafter referred to as
a "Company Material Adverse Effect"). As used in this Agreement, the term
"subsidiary" of a person shall mean any corporation or other entity (including
partnerships and other business associations) of which a majority of the
outstanding capital stock or other voting securities having voting power under
ordinary circumstances to elect directors or similar members of the governing
body of such corporation or entity shall at the time be held, directly or
indirectly, by such person.
Section 4.2 Subsidiaries. Section 4.2 of the Company Disclosure Schedule
sets forth a description as of the date hereof, of all material and certain
other subsidiaries and joint ventures of the Company, including the name of each
such entity, the state or jurisdiction of its incorporation or organization, the
Company's interest therein and a brief description of the principal line or
lines of business conducted by each such entity. Except as set forth in Section
4.2 of the Company Disclosure Schedule, none of the Company's subsidiaries is a
"public utility company," a "holding company," a "subsidiary company" or an
"affiliate" of any public utility company within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company
9
Act of 1935, as amended (the "1935 Act"). Except as set forth in Section 4.2 of
the Company Disclosure Schedule, all of the issued and outstanding shares of
capital stock owned by the Company of each Company subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are owned,
directly or indirectly, by the Company free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment,
except for any of the foregoing that could not reasonably be expected to have a
Company Material Adverse Effect. As used in this Agreement, the term "joint
venture" of a person shall mean any corporation or other entity (including
partnerships and other business associations) that is not a subsidiary of such
person, in which such person or one or more of its subsidiaries owns an equity
interest, other than equity interests held for passive investment purposes which
are less than 10% of any class of the outstanding voting securities or equity of
any such entity.
Section 4.3 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 2,000,000 shares of
preferred stock, without par value, of the Company ("Company Preferred Stock").
As of the close of business on June 29, 1999, there were issued and outstanding
8,648,029 shares of Company Common Stock and no shares of Company Preferred
Stock. As of the close of business on June 29, 1999, 64,600 shares of Company
Common Stock were reserved for issuance upon exercise of outstanding Company
stock options. All of the issued and outstanding shares of the capital stock of
the Company are validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 4.3 of the Company Disclosure Schedule,
as of the date hereof, and except for the Company Rights Agreement, there are no
outstanding subscriptions, options, stock appreciation rights, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating the
Company or any of the subsidiaries of the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
the Company, or obligating the Company to grant, extend or enter into any such
agreement or commitment.
Section 4.4 Authority; Non-contravention; Statutory Approvals;
Compliance.
(a) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to obtaining the Company
Shareholders' Approval (as defined in Section 4.13) and the Company Required
Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company subject to obtaining the applicable Company Shareholders' Approval. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution
10
and delivery by the other signatories hereto, constitutes the valid and binding
obligations of the Company enforceable against it in accordance with their
terms.
(b) Non-Contravention. Except as set forth in Section 4.4(b) of
the Company Disclosure Schedule, the execution and delivery of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
will not, violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in the termination or modification of, or accelerate the performance
required by, or result in a right of termination, cancellation, or acceleration
of any obligation or the loss of a benefit under, or result in the creation of
any lien, security interest, charge or encumbrance ("Liens") upon any of the
properties or assets of the Company or any of its subsidiaries or any of its
joint ventures (any such violation, conflict, breach, default, right of
termination, modification, cancellation or acceleration, loss or creation, a
"Violation" with respect to the Company (such term when used in Article V having
a correlative meaning with respect to Parent)) pursuant to any provisions of (i)
the articles of organization, by-laws or similar governing documents of the
Company, any of its subsidiaries or any of its joint ventures, (ii) subject to
obtaining the Company Required Statutory Approvals and the receipt of the
Company Shareholders' Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any Governmental
Authority (as defined in Section 4.4(c)) applicable to the Company, any of its
subsidiaries or any of its joint ventures, or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 4.4(b) of the Company Disclosure Schedule (the
"Company Required Consents") any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which the Company, any of its
subsidiaries or any of its joint ventures is a party or by which it or any of
its properties or assets may be bound or affected, excluding from the foregoing
clauses (i), (ii) and (iii) such Violations as would not have, in the aggregate,
a Company Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 4.4(c) of
the Company Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent or approval of, any court, federal, state,
local or foreign governmental or regulatory body (including a stock exchange or
other self-regulatory body) or authority (each, a "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, the failure
to obtain, make or give which would have, in the aggregate, a Company Material
Adverse Effect (the "Company Required Statutory Approvals"), it being understood
that references in this Agreement to "obtaining" such Company Required Statutory
Approvals shall mean making such declarations, filings or registrations, giving
such notices, obtaining such authorizations, consents or approvals and having
such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.4(d) or Section
4.11 of the Company Disclosure Schedule, or as disclosed in the Company SEC
Reports (as defined in Section 4.5) filed prior to the date hereof, neither the
Company, nor any of its subsidiaries nor any of its joint ventures is in
violation of, is under investigation with respect to any violation of, or has
been given notice or been charged with any violation of, any law, statute,
order, rule, regulation,
11
ordinance or judgment (including, without limitation, any applicable
Environmental Law, as defined in Section 4.11(f)(ii)) of any Governmental
Authority except for violations that, in the aggregate, do not have and are not
reasonably likely to have a Material Adverse Effect. Except as set forth in
Section 4.4(d) of the Company Disclosure Schedule or in Section 4.11 of the
Company Disclosure Schedule, the Company and its subsidiaries and joint ventures
have all permits, licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct their respective businesses as
currently conducted in all respects, except those which the failure to obtain
would, in the aggregate, not have a Company Material Adverse Effect. Except as
set forth in Section 4.4(d) of the Company Disclosure Schedule, 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, could result in a default
under, (i) its articles of organization or by-laws or (ii) any material
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is a party or by
which it is bound or to which any of its property is subject, except for
breaches, violations or defaults that, in the aggregate, do not have and are not
reasonably likely to have, a Company Material Adverse Effect.
(e) Except as set forth in Section 4.4(e) of the Company
Disclosure Schedule, there is no "non-competition" or other similar contract,
commitment, agreement or understanding that restricts the ability of the Company
or any of its affiliates to conduct business in any geographic area or that
would reasonably be likely to restrict the Surviving Corporation or any of its
affiliates to conduct business in any geographic area.
Section 4.5 Reports and Financial Statements. The filings required to be
made by the Company and its subsidiaries since January 1, 1996 under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the 1935 Act and
applicable state public utility laws and regulations have been filed with the
Securities and Exchange Commission (the "SEC"), the Federal Energy Regulatory
Commission (the "FERC") or the appropriate state public utilities commission, as
the case may be, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statute and the rules and
regulations thereunder. The Company has made available to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since January 1, 1996 (as such
documents have since the time of their filing been amended, the "Company SEC
Reports"). As of their respective dates, 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
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of the Company included in the Company SEC Reports (collectively, the
"Company Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
the consolidated financial position of the Company as of the dates thereof and
the consolidated results of operations and cash flows for the
12
periods then ended. True, accurate and complete copies of the articles of
organization and by-laws of the Company, as in effect on the date hereof, have
been made available to Parent.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date hereof or as set forth in
Section 4.6 of the Company Disclosure Schedule, from December 31, 1998 the
Company and each of its subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice, and there has not
been, and no fact or condition exists which would have or, insofar as reasonably
can be foreseen, could have, a Company Material Adverse Effect.
Section 4.7 Litigation. Except as disclosed in the Company SEC Reports
filed prior to the date hereof or as set forth in Section 4.7, Section 4.9 or
Section 4.11 of the Company Disclosure Schedule, (a) there are no claims, suits,
actions or proceedings, pending or threatened, nor are there any investigations
or reviews pending or threatened against, relating to or affecting the Company
or any of its subsidiaries, and (b) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any of its subsidiaries, except for any of the foregoing under clauses (a)
and (b) that individually or in the aggregate would not reasonably be expected
to have a Company Material Adverse Effect.
Section 4.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in (a) the registration statement on
Form S-4 to be filed with the SEC in connection with the issuance of shares of
Parent Common Stock in the Merger (the "Registration Statement") will, at the
time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (b) the proxy statement, in definitive form (the "Proxy
Statement"), relating to the Company Special Meeting (as defined below) shall
not, at the dates mailed to shareholders and at the time of the Company Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy Statement, insofar as they
relate to the Company or any of its subsidiaries, shall comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder.
Section 4.9 Tax Matters. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipts, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties (civil or criminal) on or
additions to any such taxes. "Tax Return," as used in this Agreement, means a
report, return or other written information required to be supplied to a
governmental entity with respect to Taxes.
13
Except as disclosed in Section 4.9 of the Company Disclosure Schedule:
(a) Filing of Timely Tax Returns. The Company and each of its
subsidiaries have duly filed (or there has been filed on its behalf) within the
time prescribed by law all material Tax Returns (including withholding Tax
Returns) required to be filed by each of them under applicable law. All such Tax
Returns were and are in all material respects true, complete and correct.
(b) Payment of Taxes. The Company and each of its subsidiaries
have, within the time and in the manner prescribed by law, paid all material
Taxes (including withholding Taxes) that are currently due and payable except
for those contested in good faith and for which adequate reserves have been
taken.
(c) Tax Reserves. All material Taxes payable by the Company and
its subsidiaries for all taxable periods and portions thereof through the date
of the most recent financial statements contained in the Company Financial
Statements filed prior to the date of this Agreement are properly reflected in
such financial statements in accordance with GAAP, and the unpaid Taxes of the
Company and its subsidiaries do not exceed the amount shown therefor on such
financial statements adjusted for the passage of time through the Effective Time
in accordance with past custom and practice of the Company and its subsidiaries
in filing their Tax Returns.
(d) Extensions of Time for Filing Tax Returns. Neither the Company
nor any of its subsidiaries have requested any extension of time within which to
file any material Tax Return, which Tax Return has not since been filed.
(e) Waivers of Statute of Limitations. Neither the Company nor any
of its subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
material Taxes or material Tax Returns.
(f) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all material Taxes has expired for all
applicable material Tax Returns of the Company and each of its subsidiaries, or
those material Tax Returns have been examined by the appropriate taxing
authorities for all periods through the date hereof, and no deficiency for any
material Taxes has been proposed, asserted or assessed against the Company or
any of its subsidiaries that has not been resolved and paid in full.
(g) Audit, Administrative and Court Proceedings. No material
claims, audits, disputes, controversies, examinations, investigations or other
proceedings are presently pending with regard to any Taxes or Tax Returns of the
Company or any of its subsidiaries.
(h) Tax Rulings. Neither the Company nor any of its subsidiaries
has received a Tax Ruling (as defined below) or entered into a Closing Agreement
(as defined below) with any taxing authority that would have a continuing
adverse effect after the Closing Date. "Tax Ruling," as used in this Agreement,
shall mean a written ruling of a taxing authority relating to Taxes.
14
"Closing Agreement," as used in this Agreement, shall mean a written and legally
binding agreement with a taxing authority relating to Taxes.
(i) Availability of Tax Returns. The Company has provided or made
available to Parent complete and accurate copies of (i) all Tax Returns, and any
amendments thereto, filed by the Company or any of its subsidiaries since 1994,
(ii) all audit reports received from any taxing authority relating to any Tax
Return filed by the Company or any of its subsidiaries and (iii) any Closing
Agreements entered into by the Company or any of its subsidiaries with any
taxing authority.
(j) Tax Sharing Agreements. Neither the Company nor any of its
subsidiaries is a party to any agreement, understanding or arrangement relating
to allocating or sharing of Taxes.
(k) Liability for Others. Neither the Company nor any of its
subsidiaries has any liability for any material Taxes of any person other than
the Company and its subsidiaries (i) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a transferee
or successor, (iii) by contract or (iv) otherwise.
(l) Code Section 897. To the best knowledge of the Company after
due inquiry, no foreign person owns or has owned beneficially more than five
percent of the total fair market value of Company Common Stock during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(m) Code Section 368(a). The Company has no knowledge of any fact,
nor has the Company taken any action that would, or would be reasonably likely
to, adversely affect the qualification of the Merger as a reorganization
described in Section 368(a) of the Code.
(n) Code Section 355(e). Neither the Company nor any of its
subsidiaries has constituted a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (i) in the past 24 month period or (ii) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
Section 4.10 Employee Matters; ERISA. Except as set forth in the
appropriate subsection of Section 4.10 of the Company Disclosure Schedule:
(a) For purposes of this Section 4.10, the following terms have
the definitions set forth below:
(i) "Controlled Group Liability" means any and all
liabilities (a) under Title IV of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), (b) as a result of a failure to comply
with the minimum funding requirements of Section 302 of ERISA or Section
412 of the Code, (c) under Section 4971 of the Code, and (d) as a result
of a failure to comply with the continuation coverage requirements of
15
Section 601 et seq. of ERISA and Section 4980B of the Code, other than
such liabilities that arise solely out of, or relate solely to, the
Employee Benefit Plans.
(ii) "ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is a member of
a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
(iii) An "Employee Benefit Plan" means any material employee
benefit plan, program, policy, practice, or other arrangement providing
benefits to any current or former employee, officer or director 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, whether or not written, including without
limitation any employee welfare benefit plan within the meaning of Section
3(1) of 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, severance, employment, change of control or fringe
benefit plan, program or agreement.
(iv) A "Plan" means any Employee Benefit Plan other than a
Multiemployer Plan.
(v) A "Multiemployer Plan" means any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA.
(vi) "Withdrawal Liability" means liability to a Multi-
employer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as those terms are defined in Part I of Subtitle E of
Title IV of ERISA.
(b) Section 4.10(b) of the Company Disclosure Schedule includes a
complete list of all material Employee Benefit Plans and, with respect to
executive welfare benefit plans and nonqualified pension, savings and deferred
compensation plans, states the number of employees participating in or covered
by such plans.
(c) With respect to each Plan, the Company has delivered to
Parent a true, correct and complete copy of: (i) each writing constituting a
part of such Plan, including without limitation all material plan documents,
trust agreements, and insurance contracts and other funding vehicles; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying schedules, if any;
(iii) the current summary plan description and any material modifications
thereto, if required to be furnished under ERISA; (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 Internal Revenue Service (the
"IRS"), if any. Except as specifically provided in the foregoing documents
delivered to Parent, there are no amendments to any Plan that have been adopted
or
16
approved nor has the Company or any of its subsidiaries undertaken to make any
such amendments or to adopt or approve any new Plan.
(d) Section 4.10(b) of the Company Disclosure Schedule identifies
each Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("Qualified Plans"). The IRS has issued a favorable
determination letter with respect to each Qualified Plan and the related trust
that has not been revoked, and except as would not have a Company Material
Adverse Effect, there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of any Qualified Plan
or the related trust. Section 4.10(b) of the Company Disclosure Schedule
identifies each Plan or related trust which is intended to meet the requirements
of Code Section 501(c)(9) (a "VEBA"), and except as would not have a Company
Material Adverse Effect, each such VEBA meets such requirements and provides no
disqualified benefits (as such term is defined in Code Section 4976(b)).
(e) All material contributions required to be made to any Plan by
applicable law or regulation or by any Plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any Plan, for any period through the date hereof have been
timely made or paid in full or, to the extent not required to be made or paid on
or before the date hereof, have been fully reflected on the Company Financial
Statements. Each Plan that is an employee welfare benefit plan under Section
3(1) of ERISA (i) is funded through an insurance company contract or a contract
with a health maintenance organization, (ii) is, or is funded through, a VEBA
identified as such in Section 4.10(b) of the Company Disclosure Schedule, or
(iii) is unfunded.
(f) Except as would not have a Company Material Adverse Effect,
with respect to each Employee Benefit Plan, 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 such Employee Benefit Plans and each
Plan has been administered in all material respects in accordance with its
terms. There is not now, nor do any circumstances exist that could reasonably be
expected to give rise to, any requirement for the posting of security with
respect to a Plan or the imposition of any lien on the assets of the Company or
any of its subsidiaries under ERISA or the Code. To the knowledge of the
Company, no non-exempt prohibited transaction (as defined in Section 406 of
ERISA or Section 4975 of the Code) has occurred with respect to any Plan.
(g) With respect to each Plan that is subject to Title IV of
ERISA, the minimum funding requirements of Section 302 of ERISA or Section 412
of the Code, or Section 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived, in respect of any plan year ended
prior to the date hereof and for which the time for making contributions in
order to avoid occurring an accumulated funding deficiency for such year has
expired; (ii) the fair market value of the assets of each such Plan that is a
defined benefit plan equals or exceeds the actuarial present value of the
accumulated benefit obligation (as of the date of the most recent actuarial
report prepared for such Plan) under such Plan (whether or not vested), based
upon the actuarial assumptions set forth in the most recent actuarial report for
such Plan; (iii) no reportable event within the meaning of Section 4043(c) of
ERISA for which the 30-day notice requirement
17
has not been waived has occurred since December 31, 1993 in respect of any such
Plan which is a defined benefit Plan; (iv) all material premiums to the Pension
Benefit Guaranty Corporation ("PBGC") have been timely paid in full; (v) no
material liability (other than for premiums to the PBGC and for the payment of
benefits and contributions in the ordinary course) under Title IV of ERISA has
been or could reasonably be expected to be incurred by the Company or any of its
subsidiaries; and (vi) to the knowledge of the Company, the PBGC has not
instituted proceedings to terminate any such Plan and no condition exists that
presents a material risk that such proceedings will be instituted or which would
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan.
(h) No Employee Benefit Plan is a Multiemployer Plan or a plan
that has two or more contributing sponsors at least two of which are not under
common control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan"). None of the Company and its subsidiaries nor any of their
respective ERISA Affiliates has, at any time during the last six years,
contributed to or been obligated to contribute to any Multiemployer Plan or
Multiple Employer Plan. None of the Company and its subsidiaries nor any ERISA
Affiliates has incurred any Withdrawal Liability that has not been satisfied in
full.
(i) There does not now exist, nor do any circumstances exist that
could reasonably be expected to result in, any Controlled Group Liability that
would have a Company Material Adverse Effect following the Closing. Without
limiting the generality of the foregoing, neither the Company nor any of its
subsidiaries, nor any of their respective ERISA Affiliates, has engaged in any
transaction described in Section 4069 or Section 4204 or 4212 of ERISA since
December 31, 1993.
(j) Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA or applicable state law, the
Company and its subsidiaries have no material liability for life, health,
medical or other welfare benefits to former employees or beneficiaries or
dependents of former employees.
(k) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will (either alone
or in conjunction with any other event) result in, cause the accelerated
funding, vesting 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. Section 4.10(k) of the Company Disclosure Schedule
sets forth the estimated amount that will be required to be contributed to each
trust listed thereon as a result of the consummation of the transactions
contemplated hereby.
(l) No labor organization or group of employees of the Company or
any of its subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or, to the
knowledge of the Company, threatened to be brought or filed, with the National
Labor Relations Board or any other labor relations tribunal or authority. There
are no organizing activities, strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances, or other material labor disputes
pending or, to the knowledge of the Company, threatened against or involving the
Company or any of its subsidiaries. Each of the
18
Company and its subsidiaries is in compliance in all material respects with all
applicable laws and collective bargaining agreements respecting employment and
employment practices, terms and conditions of employment, wages and hours and
occupational safety and health.
(m) There are no pending or, to the knowledge of the Company,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits or arbitrations which have been asserted or instituted, and there is no
set of circumstances which may reasonably give rise to a claim or lawsuit,
against the Plans, any fiduciaries thereof with respect to their duties to the
Plans or the assets of any of the trusts under any of the Plans which could
reasonably be expected to result in a Company Material Adverse Effect.
(n) The Company, its subsidiaries and each member of their
respective business enterprise has complied with the Worker Adjustment and
Retraining Notification Act.
Section 4.11 Environmental Protection. Except as set forth in
Section 4.11 of the Company Disclosure Schedule or in the Company SEC Reports
filed prior to the date hereof:
(a) Compliance. Except where the failure to be in such compliance
would not in the aggregate have a Company Material Adverse Effect, (i) the
Company and each of its subsidiaries are in compliance with all applicable
Environmental Laws (as defined in Section 4.11(f)(ii)) and (ii) neither the
Company nor any of its subsidiaries has received any communication from any
Governmental Authority or any written communication from any other person that
alleges that the Company or any of its subsidiaries is not in compliance with
applicable Environmental Laws.
(b) Environmental Permits. The Company and each of its
subsidiaries has obtained or has applied for all environmental, health and
safety permits and governmental authorizations (collectively, the "Environmental
Permits") necessary for the construction of its facilities or the conduct of its
operations, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the Company and its subsidiaries are in compliance with all terms
and conditions of the Environmental Permits, and the Company reasonably believes
that any transfer, renewal or reapplication for any Environmental Permit
required as a result of the Merger can be accomplished in the ordinary course of
business, except where the failure to obtain or to be in such compliance would
not, in the aggregate, have a Company Material Adverse Effect.
(c) Environmental Claims. There are no Environmental Claims (as
defined in Section 4.11(f)(i)) pending (i) against the Company or any of its
subsidiaries or joint ventures, or (ii) against any real or personal property or
operations that the Company or any of its subsidiaries owns, leases or manages,
in whole or in part that, if adversely determined, would have, in the aggregate,
a Company Material Adverse Effect.
(d) Releases. Except for Releases of Hazardous Materials the
liability for which would not have, in the aggregate, a Company Material Adverse
Effect, there have been no Releases (as defined in Section 4.11(f)(iv)) of any
Hazardous Material (as defined in Section 4.11(f)(iii)) that would be reasonably
likely to (i) form the basis of any Environmental Claim
19
against the Company or any of its subsidiaries, or (ii) to the knowledge of the
Company, cause, damage or diminution of value to any of the operations or real
properties owned, leased or managed, in whole or in part, by Company or any of
its subsidiaries.
(e) Predecessors. The Company has no knowledge of any
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any Environmental
Claim, in each case against any person or entity (including, without limitation,
any predecessor of the Company or any of its subsidiaries) whose liability the
Company or any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law or against any real or personal property
which the Company or any of its subsidiaries formerly owned, leased or managed,
in whole or in part, except for Releases of Hazardous Materials the liability
for which would not have, in the aggregate, a Company Material Adverse Effect.
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including any
Governmental Authority) alleging potential liability (including, without
limitation, potential responsibility for or liability for enforcement
costs, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural-resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on
or resulting from (A) the presence, or Release or threatened Release into
the environment, of any Hazardous Materials at any location, whether or
not owned, operated, leased or managed by the Company, Parent or any of
their respective subsidiaries or joint ventures; or (B) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law; or (C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(ii) "Environmental Laws" means all federal, state, local
laws, rules, ordinances and regulations relating to pollution, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation,
laws and regulations relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, coal tar residue,
and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls ("PCBs") in regulated concentrations;
and (B) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances", "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic
20
substances," "toxic pollutants," "hazardous constituents" or words of
similar import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Parent, the Company or any of their subsidiaries
or joint ventures operates or has stored, treated or disposed of Hazardous
Materials.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
Section 4.12 Regulation as a Utility. Except as set forth in Section
4.12 of the Company Disclosure Schedule, neither the Company nor any "associate
company," "subsidiary company" or "affiliate" (as such terms are defined in the
1935 Act) of the Company is subject to regulation as (a) a "holding company," a
"public-utility company," a "subsidiary company" or an "affiliate" of a "holding
company," within the meaning of Sections 2(a)(7), 2(a)(5), 2(a)(8) and 2(a)(11),
respectively, of the 1935 Act, (b) a "public utility" under the Power Act, (c) a
"natural-gas company" under the Natural Gas Act or (d) a public utility or
public service company (or similar designation) by any state in the United
States other than Connecticut or by any foreign country.
Section 4.13 Vote Required. The approval of the Merger by two-thirds of
the votes entitled to be cast by all holders of Company Common Stock (the
"Company Shareholders' Approval") is the only vote of the holders of any class
or series of the capital stock of the Company or any of its subsidiaries
required to approve this Agreement, the Merger and the other transactions
contemplated hereby.
Section 4.14 Opinion of Financial Advisor. The Company has received the
opinion of PaineWebber Incorporated, to the effect that, as of June 29, 1999,
the Merger Consideration is fair from a financial point of view to the holders
of Company Common Stock.
Section 4.15 Ownership of Parent Common Stock. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, the Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of Parent Common Stock or Parent Preferred Stock.
Section 4.16 Takeover Laws; Rights Plans. (a) The Company has taken all
action required to be taken by it in order to exempt this Agreement and the
transactions contemplated hereby from, and this Agreement and the transactions
contemplated hereby are exempt from, the requirements of any "moratorium,"
"control share," "fair price" or other anti-takeover laws and regulations
(collectively, "Takeover Laws") of the State of Connecticut, including Sections
33-841 and 33-844 of the CBCA.
(b) The Company has (i) duly entered into an appropriate amendment
to the Company Rights Agreement which amendment has been provided to Parent and
(ii) taken all other action necessary or appropriate so that the entering into
of this Agreement and the consummation of the transactions contemplated hereby
(including the Merger) do not and will not result in the ability of any person
to exercise any Company Rights under the Company Rights
21
Agreement or enable or require the Company Rights to separate from the shares of
Company Common Stock to which they are attached or to be triggered or become
exercisable, and the Company Rights Agreement will expire immediately prior to
the Effective Time, and the Company Rights Agreement, as so amended, has not
been further amended or modified except in accordance herewith. Copies of such
amendments to the Company Rights Agreement have been previously provided to
Parent.
(c) No "Distribution Date" or "Triggering Event" (as such terms
are defined in the Company Rights Agreement) has occurred.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Except as set forth in
Section 5.1 of the Parent Disclosure Schedule (as defined in Section 7.6),
Parent and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power and authority,
and has been duly authorized by all necessary approvals and orders, to own,
lease and operate its assets and properties to the extent owned, leased and
operated and to carry on its business as it is now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its assets and properties
makes such qualification necessary, other than in such jurisdictions where the
failure to be so qualified and in good standing will not, when taken together
with all other such failures, have a material adverse effect on the business,
properties, financial condition or results of operations of Parent and its
subsidiaries taken as a whole or on the consummation of this Agreement (any such
material adverse effect being hereafter referred to as a "Parent Material
Adverse Effect").
Section 5.2 Subsidiaries. Section 5.2 of the Parent Disclosure Schedule
sets forth a description as of the date hereof of all material subsidiaries and
joint ventures of Parent, including the name of each such entity, the state or
jurisdiction of its incorporation or organization, Parent's interest therein,
and a brief description of the principal line or lines of business conducted by
each such entity. As of the date hereof, Parent is an exempt holding company
under the 1935 Act, and, except as set forth in Section 5.2 of the Parent
Disclosure Schedule, none of the subsidiaries of Parent is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935 Act. Except as set
forth in Section 5.2 of the Parent Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Parent subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are owned
directly or indirectly by Parent free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Parent subsidiary to issue, deliver or sell, or
cause to be issued,
22
delivered or sold, additional shares of its capital stock or obligating it to
grant, extend or enter into any such agreement or commitment; except for any of
the foregoing that could not reasonably be expected to have a Parent Material
Adverse Effect.
Section 5.3 Capitalization. (a) Except as set forth in Section 5.3 of
the Parent Disclosure Schedule the authorized capital stock of Parent consists
of 300,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share, of Parent ("Parent Preferred Stock"). As of the
close of business on June 29, 1999, there were issued and outstanding
115,902,728 shares of Parent Common Stock and no shares of Parent Preferred
Stock. All of the issued and outstanding shares of the capital stock of Parent
are, and will be, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 5.3 of the Parent Disclosure
Schedule, as of the date hereof, there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating Parent or any of its subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of Parent, or obligating Parent to grant, extend or enter into any
such agreement or commitment.
(b) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, without par value ("Merger Sub Common Stock"). As of the
close of business on June 29, 1999, there were issued and outstanding 1,000
shares of Merger Sub Common Stock, all of which were owned by Parent.
Section 5.4 Authority; Non-contravention; Statutory Approvals;
Compliance.
(a) Authority. Parent has all requisite corporate power and
authority to enter into this Agreement and, subject to the applicable Parent
Required Statutory Approvals (as defined in Section 5.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
and the consummation by Parent of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by the other signatories
hereto, constitutes a valid and binding obligation of Parent enforceable against
it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Section 5.4(b) of
the Parent Disclosure Schedule, the execution and delivery of this Agreement by
Parent do not, and the consummation of the transactions contemplated hereby will
not, result in a Violation pursuant to any provisions of (i) the articles of
incorporation, by-laws or similar governing documents of Parent or any of its
subsidiaries or any of its joint ventures, (ii) subject to obtaining the Parent
Required Statutory Approvals (as defined in Section 5.4(c)) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to Parent or any of its
subsidiaries or any of its joint ventures or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 5.4(b) of the Parent Disclosure Schedule (the
"Parent Required Consents"), any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit,
23
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Parent or any of its subsidiaries or any of its joint ventures is
a party or by which it or any of its properties or assets may be bound or
affected, excluding from the foregoing clauses (i), (ii) and (iii) such
Violations as would not have, in the aggregate, a Parent Material Adverse
Effect.
(c) Statutory Approvals. Except as described in Section 5.4(c) of
the Parent Disclosure Schedule, 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 the
consummation by Parent of the transactions contemplated hereby, the failure to
obtain, make or give which would have, in the aggregate, a Parent Material
Adverse Effect (the "Parent Required Statutory Approvals"), it being understood
that references in this Agreement to "obtaining" such Parent Required Statutory
Approvals shall mean making such declarations, filings or registrations; giving
such notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 5.4(d) or Section
5.11 of the Parent Disclosure Schedule, or as disclosed in the Parent SEC
Reports (as defined in Section 5.5) filed prior to the date hereof, neither
Parent nor any of its subsidiaries nor any of its joint ventures is in violation
of, is under investigation with respect to any violation of, or has been given
notice or been charged with any violation of, any law, statute, or order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
Environmental Law) of any Governmental Authority, except for violations that, in
the aggregate, do not have and are not reasonably likely to have, a Parent
Material Adverse Effect. Except as set forth in Section 5.4(d) of the Parent
Disclosure Schedule or in Section 5.11 of the Parent Disclosure Schedule, Parent
and its subsidiaries and joint ventures have all permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their respective businesses as currently conducted in all respects,
except those which the failure to obtain would, in the aggregate, not have a
Parent Material Adverse Effect. Except as set forth in Section 5.4(d) of the
Parent Disclosure Schedule, Parent 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, could result in a default under, (i) its articles of
organization or by-laws or (ii) any material contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which it is a party or by which it is bound or to which any
of its property is subject; except for breaches, violations or defaults that, in
the aggregate, do not have and are not reasonably likely to have, a Parent
Material Adverse Effect.
Section 5.5 Reports and Financial Statements. The filings required to be
made by Parent and its subsidiaries since January 1, 1996 under the Securities
Act, the Exchange Act, the 1935 Act, the Federal Power Act, as amended (the
"Power Act"), and applicable state public utility laws and regulations have been
filed with the SEC, the FERC or the appropriate state public utilities
commission, as the case may be, including all forms, statements, reports,
agreements and all documents, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statute and the rules and
regulations thereunder. Parent has made available to the
24
Company a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Parent or its predecessor with
the SEC since January 1, 1996 (as such documents have since the time of their
filing been amended, the "Parent SEC Reports"). As of their respective dates,
the Parent SEC Reports did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of Parent included in the Parent SEC
Reports (collectively, the "Parent Financial Statements") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-Q of the
SEC) and fairly present the consolidated financial position of Parent as of the
dates thereof and the consolidated results of its operations and cash flows for
the periods then ended. True, accurate and complete copies of the articles of
incorporation and by-laws of Parent as in effect on the date hereof, have been
made available to the Company.
Section 5.6 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Reports filed prior to the date hereof or as set forth in Section
5.6 of the Parent Disclosure Schedule, since December 31, 1998, Parent and each
of its subsidiaries have as of the date hereof conducted their businesses only
in the ordinary course of business consistent with past practice and there has
not been, and no fact or condition exists which has had or could reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.7 Litigation. Except as disclosed in the Parent SEC Reports
filed prior to the date hereof or as set forth in Section 5.7 of the Parent
Disclosure Schedule (a) there are no claims, suits, actions or proceedings,
pending or threatened, nor are there any investigations or reviews pending or
threatened against, relating to or affecting Parent or any of its subsidiaries,
which would have a Parent Material Adverse Effect and (b) there are no
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
applicable to Parent or any of its subsidiaries, except for such that would not
reasonably be expected to have a Parent Material Adverse Effect.
Section 5.8 Registration Statement and Proxy Statement. (a) None of the
information supplied or to be supplied by or on behalf of Parent for inclusion
or incorporation by reference in the Registration Statement will, at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and (b) the Proxy Statement shall not, at the dates mailed to the
Company shareholders and at the time of the Company Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement, insofar as they relate to Parent
or any Parent subsidiary, shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder.
Section 5.9 Regulation as a Utility. Except as set forth in Section 5.9
of the Parent Disclosure Schedule, neither Parent nor any "subsidiary company"
or "affiliate" (as such terms are
25
defined in the 1935 Act) of Parent is subject to regulation as (a) a "holding
company," a "public-utility company," a "subsidiary company" or an "affiliate"
of a "holding company," within the meaning of sections 2(a)(7), 2(a)(5), 2(a)(8)
or 2(a)(11), respectively, of the 1935 Act, (b) a "public utility" under the
Power Act, (c) a "natural-gas company" under the Natural Gas Act, or (d) a
public utility or public service company (or similar designation) by any state
in the United States other than New York or by any foreign country.
Section 5.10 Ownership of the Company Common Stock. Except as set forth
in Section 5.10 of the Parent Disclosure Schedule, Parent does not "beneficially
own" (as such term is defined for purposes of Section 13(d) of the Exchange Act)
any shares of Company Common Stock.
Section 5.11 Environmental Protection. (a) Except as would not, in the
aggregate, reasonably be expected to result in a Parent Material Adverse Effect,
and except for matters disclosed in Section 5.11(a) of the Parent Disclosure
Schedule or in the Parent SEC Reports, (i) Parent and its subsidiaries are in
compliance with all applicable Environmental Laws and the terms and conditions
of all applicable Environmental Permits, and neither Parent nor any of its
subsidiaries has received any written notice from any person or Governmental
Authority that alleges that Parent or any of its subsidiaries is not in material
compliance with applicable Environmental Laws or the terms and conditions of all
such Environmental Permits, (ii) there are no Environmental Claims pending or
threatened (A) against Parent or any of its subsidiaries, (B) against any person
or entity whose liability for any Environmental Claim Parent or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law or (C) against any real or personal property or operations that
Parent or any of its subsidiaries owns, leases or manages, in whole or in part,
and (iii) there has been no Release of Hazardous Materials that would be
reasonably likely to (A) form the basis of any Environmental Claim against
Parent or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim Parent or any of its subsidiaries has or
may have retained or assumed either contractually or by operation of law or (B)
cause damage or diminution of value to any of the operations or real properties
owned, leased or managed, in whole or in part, by Parent or any of its
subsidiaries.
(b) To the best knowledge of Parent, except as disclosed in the
Parent SEC Reports, there are no facts or circumstances that are likely to
require expenditures by Parent or any of its subsidiaries in order to comply
with currently applicable Environmental Laws, except for expenditures that are
not reasonably expected to have a Parent Material Adverse Effect.
Section 5.12 Operations of Nuclear Power Plant. To the knowledge of the
Parent, the operation of the nuclear generation plant (the "Nuclear Facility")
currently partially owned by the Parent is being conducted in substantial
compliance with current laws and regulations governing nuclear plant operations,
except for such failures to comply as would not, individually or in the
aggregate, have a Parent Material Adverse Effect. To the best of the Parent's
knowledge and except as would not reasonably be expected to have a Parent
Material Adverse Effect, (a) the Nuclear Facility maintains and is in
substantial compliance with emergency evacuation plans as required by the laws
and regulations governing nuclear plant operations and (b) as of the date of
this Agreement, the storage of spent nuclear fuel and the plans for the
decommissioning of the Nuclear Facility substantially conforms with the
requirements of applicable law.
26
Section 5.13 Code Section 368(a). Parent has no knowledge of any fact,
nor has Parent taken any action that would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization described
in Section 368(a) of the Code.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Parties. After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, Parent and the
Company each agree as follows, each as to itself and to each of its
subsidiaries, except as expressly contemplated or permitted in this Agreement,
or to the extent the other parties hereto shall otherwise consent in writing:
(a) Ordinary Course of Business. The Company shall, and shall
cause its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to (i) preserve intact
their present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them, (ii) subject to prudent management of workforce needs and ongoing programs
currently in force, keep available the services of their present officers and
employees as a group, and (iii) maintain and keep material properties and assets
in as good repair and condition as at present, subject to ordinary wear and
tear, and maintain supplies and inventories in quantities consistent with past
practice.
(b) Dividends. The Company shall not, nor shall it permit any of
its subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any capital stock other than (A) dividends by a
wholly owned subsidiary to the Company or another wholly owned subsidiary, (B)
dividends by a less than wholly owned subsidiary consistent with past practice,
(C) regular dividends on Company Common Stock with usual record and payment
dates that do not exceed the current regular dividends on Company Common Stock;
(ii) split, combine or reclassify any capital stock or the capital stock of any
subsidiary or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of, or in substitution for, shares of capital stock or
the capital stock of any subsidiary; or (iii) redeem, repurchase or otherwise
acquire any shares of capital stock or the capital stock of any subsidiary other
than (A) redemptions, repurchases and other acquisitions of shares of capital
stock in connection with the administration of employee benefit and dividend
reinvestment plans as in effect on the date hereof in the ordinary course of the
operation of such plans consistent with past practice, or (B) intercompany
acquisitions of capital stock. Prior to the Closing Date, each of the parties
agrees to coordinate dividend policies so as not to adversely affect either
party's shareholders because of the timing of record, declaration or payment
dates.
(c) Issuance of Securities. Except as set forth in Section 6.1(c)
of the Company Disclosure Schedule, the Company shall not, nor shall it permit
any of its subsidiaries to, issue, agree to issue, deliver, sell, award, pledge,
dispose of or otherwise encumber or authorize or propose the issuance, delivery,
sale, award, pledge, disposal or other encumbrance
27
of, any shares of their capital stock of any class or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire, any
such shares or convertible or exchangeable securities, other than pursuant to
currently outstanding stock options granted under Employee Benefit Plans and as
provided in the Company Rights Agreement.
(d) Charter Documents; Other Actions. Neither party shall, nor
shall any party permit any of its subsidiaries to, amend or propose to amend its
respective articles of organization, by-laws or regulations, or similar organic
documents or to take or fail to take any other action, which in any such case
would reasonably be expected to prevent or materially impede or interfere with
the Merger.
(e) Acquisitions. Except as disclosed in Section 6.1(e) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its subsidiaries to, acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or business organization or division thereof, or
otherwise acquire or agree to acquire any material amount of assets other than
in the ordinary course of business.
(f) Capital Expenditures. Except as set forth in Section 6.1(f) of
the Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its subsidiaries to, make capital expenditures in an aggregate amount in
excess of 110% of the amount budgeted by the Company or its subsidiaries for
capital expenditures as set forth in Section 6.1(f) of the Company Disclosure
Schedule.
(g) No Dispositions. Except as set forth in Section 6.1(g) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its subsidiaries to, sell, lease, license, encumber or otherwise dispose of, any
of its respective assets, other than encumbrances or dispositions in the
ordinary course of business consistent with past practice.
(h) Indebtedness. Except as set forth in Section 6.1(h) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its subsidiaries to, incur or guarantee any indebtedness (including any debt
borrowed or guaranteed or otherwise assumed including, without limitation, the
issuance of debt securities or warrants or rights to acquire debt) or enter into
any "keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing other than (i) short-term indebtedness in the ordinary
course of business consistent with past practice; (ii) arrangements between the
Company and its subsidiaries or among its subsidiaries; or (iii) in connection
with the refunding of existing indebtedness at a lower cost of funds.
(i) Compensation, Benefits. Except as set forth in Section 6.1(i)
of the Company Disclosure Schedule, as may be required by applicable law or
under existing Employee Benefit Plans or collective bargaining agreements, as
may be required to facilitate or obtain a determination letter from the IRS that
a plan is a Qualified Plan, or as expressly contemplated by this Agreement, the
Company shall not, nor shall it permit any of its subsidiaries to, (i) enter
into, adopt or amend or increase the amount or accelerate the payment or vesting
of any benefit or
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amount payable under any Employee Benefit Plan, or otherwise increase the
compensation or benefits of any director, officer or other employee of such
party or any of its subsidiaries, except for normal increases in compensation
and benefits, or grants of new incentive compensation awards, or actions in the
ordinary course of business, that are consistent with the Company's past
practice of adjusting compensation and benefits to reflect the average
compensation and benefits as determined by general industry or market surveys;
provided that prior to implementing any such increases on the basis of such
surveys the Company shall advise Parent of its intention so to increase
compensation or benefits and of the basis therefor and shall otherwise consult
with Parent concerning such proposed increases, or (ii) enter into or amend any
employment, severance or special pay arrangement with respect to the termination
of employment or other similar contract, agreement or arrangement with any
director or officer or other employee other than with respect to employees who
are not officers of the Company in the ordinary course of business consistent
with current industry practice. This subsection (i) is not intended to (A)
restrict the Company or its subsidiaries from granting promotions to officers or
employees based upon job performance or workplace requirements in the ordinary
course of business consistent with past practice, (B) restrict the Company's
ability to make available to employees the plans, benefits and arrangements that
have customarily and consistent with past practices been available to officers
and employees in the context of such merit-based promotion or (C) restrict the
Company from dealing with matters of employee retention in specific areas of
expertise through the use of specialized employment and benefit plans designed
for that specific purpose; provided, however, that the result of the use of such
specialized employment or benefit plans shall not, in the aggregate, result in
payments in excess of $600,000.
(j) 1935 Act. Except as set forth in Section 6.1(j) of the Company
Disclosure Schedule, and except as required or contemplated by this Agreement,
the Company shall not, nor shall it permit any of its subsidiaries to, engage in
any activities which would cause a change in its status, or that of its
subsidiaries, under the 1935 Act.
(k) Accounting. Except as set forth in Section 6.1(k) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its subsidiaries to, make any changes in their accounting methods, except as
required by law, rule, regulation or GAAP.
(l) Tax-Free Status. No party shall, nor shall any party permit
any of its subsidiaries to, take any actions which would, or would be reasonably
likely to, adversely affect the status of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and each party hereto shall use all
reasonable efforts to achieve such result.
(m) Cooperation, Notification. Each party shall, and shall cause
its subsidiaries to, (i) confer on a regular and frequent basis with one or more
representatives of the other party to discuss, subject to applicable law,
material operational matters and the general status of its ongoing operations;
(ii) promptly notify the other party of any significant changes in its business,
properties, assets, condition (financial or other), results of operations or
prospects; (iii) advise the other party of any change or event which has had or,
insofar as reasonably can be foreseen, is reasonably likely to result in, in the
case of the Company, a Company Material Adverse Effect or, in the case of
Parent, a Parent Material Adverse Effect; and (iv) promptly provide the other
party with copies of all filings made by such party or any of its subsidiaries
with any state or federal
29
court, administrative agency, commission or other Governmental Authority in
connection with this Agreement and the transactions contemplated hereby.
(n) Third-Party Consents. The Company shall, and shall cause its
subsidiaries to, use all commercially reasonable efforts to obtain all the
Company Required Consents. The Company shall promptly notify Parent of any
failure or prospective failure to obtain any such consents and, if requested by
Parent shall provide copies of all the Company Required Consents obtained by the
Company to Parent. Parent shall, and shall cause its subsidiaries to, use all
commercially reasonable efforts to obtain all Parent Required Consents. Parent
shall promptly notify the Company of any failure or prospective failure to
obtain any such consents and, if requested by the Company, shall provide copies
of all Parent Required Consents obtained by Parent to the Company.
(o) No Breach, Etc. No party shall, nor shall any party permit any
of its subsidiaries to, willfully take any action that would or is reasonably
likely to result in a material breach of any provision of this Agreement or in
any of its representations and warranties set forth in this Agreement being
untrue on and as of the Closing Date.
(p) Discharge of Liabilities. The Company shall not pay, discharge
or satisfy any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice (which includes the payment of final and unappealable judgments)
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company's reports filed with
the SEC, or incurred in the ordinary course of business consistent with past
practice.
(q) Contracts. Except as set forth in Section 6.1(q) of the
Company Disclosure Schedule, the Company shall not, except in the ordinary
course of business consistent with past practice, modify, amend, terminate,
renew or fail to use reasonable business efforts to renew any material contract
or agreement to which the Company or any of its subsidiaries is a party or
waive, release or assign any material rights or claims.
(r) Insurance. The Company shall, and shall cause its subsidiaries
to, maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies engaged
in the electric and gas utility industry.
(s) Permits. The Company shall, and shall cause its subsidiaries
to, use reasonable efforts to maintain in effect all existing governmental
permits pursuant to which the Company or any of its subsidiaries operate.
(t) Takeover Laws. Neither party shall take any action that would
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law, and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if
30
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect, including Sections 33-841 through 33-844 of
the CBCA.
(u) No Rights Triggered. The Company shall ensure that the
entering into of this Agreement and the consummation of the transactions
contemplated hereby and any other action or combination of actions, or any other
transactions contemplated hereby, do not and will not result, directly or
indirectly, in the grant of any rights to any person under any material
agreement (other than the employment agreements disclosed in Section 6.1(u) of
the Company Disclosure Schedule) to which it or any of its subsidiaries is a
party (including the Company Rights Agreement) or in the exercise of any rights
under the Company Rights Agreement or otherwise. In addition, the Company shall
not amend or waive any rights under the Company Rights Agreement or otherwise in
a manner that would materially and adversely affect either party's ability to
consummate the Merger or the economic benefits of the Merger to either party.
(v) Taxes. Except as disclosed on Section 6.1(v) of the Company
Disclosure Schedule, the Company shall not, and shall cause its subsidiaries not
to, (A) make or rescind any express or deemed material election relating to
Taxes, (B) settle or compromise any material claim, audit, dispute, controversy,
examination, investigation or other proceeding relating to Taxes, (C) materially
change any of its methods of reporting income or deductions for federal income
Tax purposes, except as may be required by applicable law, or (D) file any
material Tax Return other than in a manner consistent with past custom and
practice.
Section 6.2 Covenant of the Company; Alternative Proposals. From and
after the date hereof, the Company agrees (a) that it will not, its subsidiaries
will not, and it will not authorize or permit any of its or its subsidiaries'
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its subsidiaries or any of the foregoing) to, directly or indirectly,
encourage, initiate or solicit (including by way of furnishing information) or
take any other action to facilitate knowingly any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders) which constitutes or may reasonably be expected to lead to an
Alternative Proposal (as defined below) from any person or engage in any
discussion or negotiations concerning, or provide any non-public information or
data to make or implement, an Alternative Proposal; (b) that it will immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussions or negotiations with any parties conducted
heretofore with a view of formulating an Alternative Proposal; and (c) that it
will notify Parent orally and in writing of any such inquiry, offer or proposals
(including, without limitation, the terms and conditions of any such proposal
and the identity of the person making it), within one business day of the
receipt thereof, and that it shall keep Parent informed of the status and
details of any such inquiry, offer or proposal and shall give Parent 48 hours'
prior notice of any agreement to be entered into or of the fact that it proposes
to commence providing information to any person making such inquiry, offer or
proposal; provided however, that notwithstanding any other provision hereof, the
Company may (i) at any time prior to the time at which the Company Shareholders'
Approval shall have been obtained engage in discussions or negotiations with a
third party who (without any solicitation, initiation, encouragement, discussion
or negotiation, directly or indirectly, by or with Company or its
representatives after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party
31
information concerning the Company and its business, properties and assets if,
and only to the extent that, (A) (x) the third party has first made an
Alternative Proposal that is financially superior to the Merger and has
demonstrated that any necessary financing has been obtained, or in the
reasonable judgment of the Company's financial advisor is obtainable, and (y)
the Board of Directors of the Company shall conclude in good faith, after
consultation with its financial advisor and based upon the advice of outside
counsel and such other matters as the Board of Directors of the Company deems
relevant, that failure to do so would likely result in a breach of its fiduciary
duties under applicable law, and (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, the
Company (x) provides prompt written notice to Parent to the effect that it
intends to furnish information to, or intends to enter into discussions or
negotiations with, such person or entity, (y) provides the Parent a reasonable
opportunity to respond to the Alternative Proposal and (z) receives from such
person an executed confidentiality agreement in reasonably customary form except
that such confidentiality agreement shall not prohibit such person from making
an unsolicited Alternative Proposal, and (ii) comply with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer and/or (iii)
accept an Alternative Proposal from a third party, provided the Company
terminates this Agreement pursuant to Section 9.1(e). "Alternative Proposal"
shall mean any merger, acquisition, consolidation, reorganization, share
exchange, tender offer, exchange offer or similar transaction involving the
Company or any of the Company's subsidiaries, or any proposal or offer to
acquire in any manner, directly or indirectly, a substantial equity interest in
or a substantial portion of the assets of the Company or any of the Company's
subsidiaries. Nothing herein shall prohibit a disposition permitted by Section
6.1(g) hereof.
Section 6.3 Employment Agreement. Parent, the Company and Mr. Marquardt
have entered into an employment agreement in the form attached hereto as Exhibit
A (the "Employment Agreement"), which will become effective upon consummation of
the Merger.
Section 6.4 Additional Statutory Approvals. Parent agrees not to, and it
will not permit any subsidiary to, and will use reasonable best efforts to cause
any prospective subsidiary not to, be a party to any transaction that would make
it necessary for Parent or the Company to make any declaration, filing or
registration with, or notice to or authorization, consent or approval of, any
Governmental Authority in connection with the consummation by Parent, Merger Sub
or the Company of the transactions contemplated by this Agreement, other than
those set forth in Section 5.4(c) of the Parent Disclosure Schedule or Section
4.4(c) of the Company Disclosure Schedule, in either case, that would reasonably
be expected to prevent or materially impede, interfere with, or delay
consummation of the Merger or the transactions contemplated by this Agreement
beyond the 18-month anniversary of the date hereof.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice and during
normal business hours, each party shall, and shall cause its subsidiaries to,
afford to the officers, directors, employees, accountants, counsel, investment
bankers, financial advisors and other representatives of the other
(collectively, "Representatives") reasonable access, throughout the period prior
to the
32
Effective Time, to all of its properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
each party shall, and shall cause its subsidiaries to, furnish promptly to the
other (a) access to each report, schedule and other document filed or received
by it or any of its subsidiaries pursuant to the requirements of federal or
state securities laws or filed with or sent to the SEC, the FERC, the Department
of Justice, the Federal Trade Commission or any other federal or state
regulatory agency or commission, and (b) access to all information concerning
themselves, their subsidiaries, directors, officers and shareholders and such
other matters as may be reasonably requested by the other party in connection
with any filings, applications or approvals required or contemplated by this
Agreement. Each party shall, and shall cause its subsidiaries and
Representatives to, hold in strict confidence all Proprietary Information (as
defined in the Confidentiality Agreement) concerning the other parties furnished
to it in connection with the transactions contemplated by this Agreement in
accordance with the Confidentiality Agreement, dated as of June 18, 1999,
between the Company and Parent, as it may be amended from time to time (the
"Confidentiality Agreement").
Section 7.2 Proxy Statement and Registration Statement.
(a) Preparation and Filing. The parties will prepare and file with
the SEC as soon as reasonably practicable after the date hereof the Registration
Statement and the Proxy Statement (together, the "Proxy/Registration
Statement"). The parties hereto shall each use reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing. Each party hereto shall also take
such action as may be reasonably required to cause the shares of Parent Common
Stock issuable in connection with the Merger to be registered or to obtain an
exemption from registration under applicable state "blue sky" or securities
laws; provided, however, that no party shall be required to register or qualify
as a foreign corporation or to take other action which would subject it to
service of process in any jurisdiction where it will not be, following the
Merger, so subject. Each of the parties hereto shall furnish all information
concerning itself which is required or customary for inclusion in the
Proxy/Registration Statement. The parties shall use reasonable efforts to cause
the shares of Parent Common Stock issuable in the Merger to be approved for
listing on the NYSE upon official notice of issuance. The information provided
by any party hereto for use in the Proxy/Registration Statement shall be true
and correct in all material respects without omission of any material fact which
is required to make such information not false or misleading. No representation,
covenant or agreement is made by or on behalf of any party hereto with respect
to information supplied by any other party for inclusion in the Proxy
Statement/Registration Statement.
(b) Letter of the Company's Accountant. Following receipt by
Arthur Andersen LLP, the Company's independent auditor, of an appropriate
request from the Company pursuant to SAS No. 72, the Company shall use its best
efforts to cause to be delivered to Parent a letter of Arthur Andersen LLP dated
a date within two business days before the date of the Proxy/Registration
Statement, and addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements similar to the Proxy/Registration Statement.
33
(c) Letter of Parent's Accountant. Following receipt by
PricewaterhouseCoopers LLP, Parent's independent auditor, of an appropriate
request from Parent pursuant to SAS No. 72, Parent shall use its best efforts to
cause to be delivered to the Company a letter of PricewaterhouseCoopers LLP,
dated a date within two business days before the date of the Proxy/Registration
Statement, and addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements similar to the Proxy/Registration Statement.
Section 7.3 Regulatory Matters. Each party hereto shall cooperate and
use its best efforts to promptly prepare and file all necessary documentation,
to effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain no later
than the Initial Termination Date, as such date may be extended pursuant to
Section 9.1(b), all necessary permits, consents, approvals and authorizations of
all Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Company Required Statutory Approvals and the Parent Required Statutory
Approvals.
Section 7.4 Company Shareholders' Approval.
(a) Company Special Meeting. Subject to the provisions of Section
7.4(b), the Company shall, as soon as reasonably practicable after the date
hereof (i) take all steps necessary to duly call, give notice of, convene and
hold a meeting of its shareholders (the "Company Special Meeting") for the
purpose of securing the Company Shareholders' Approval, (ii) distribute to its
shareholders the Proxy Statement in accordance with applicable federal and state
law and with its certificate of incorporation and by-laws, (iii) subject to the
fiduciary duties of its Board of Directors, recommend to its shareholders the
approval of this Agreement and the transactions contemplated hereby and (iv)
cooperate and consult with Parent with respect to each of the foregoing matters.
(b) Meeting Date. The Company Special Meeting for the purpose of
securing the Company Shareholders' Approval shall be held on such date as the
Company and Parent shall mutually determine.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, Parent and the Surviving Corporation shall, to the fullest
extent permitted by applicable law, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, director or employee of the
Company or any of its subsidiaries (each an "Indemnified Party" and
collectively, the "Indemnified Parties") against (i) all losses, expenses
(including reasonable attorney's fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Effective Time (and whether asserted or claimed prior to, at or after the
Effective Time) that are, in whole or in part, based on
34
or arising out of the fact that such person is or was a director, officer or
employee of the Company or a subsidiary of the Company (the "Indemnified
Liabilities"), and (ii) all Indemnified Liabilities to the extent they are based
on or arise out of or pertain to the transactions contemplated by this
Agreement. In the event of any such loss, expense, claim, damage or liability
(whether or not arising before the Effective Time), (i) Parent shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to Parent, promptly after
statements therefor are received and otherwise advance to such Indemnified Party
upon request reimbursement of documented expenses reasonably incurred, (ii) any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth in Section 33-756, 33-757 and
33-765 of the CBCA, and the certificate of incorporation or by-laws shall be
made by independent counsel mutually acceptable to Parent and the Indemnified
Party; provided, however, that Parent shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld). The Indemnified Parties as a group may retain only one law firm with
respect to each related matter except to the extent there is, in the opinion of
counsel to an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of such
Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time,
Parent shall (i) cause to be maintained in effect policies of directors' and
officers' liability insurance for the benefit of those persons who are currently
covered by such policies of the Company on terms no less favorable than the
terms of such current insurance coverage or (ii) provide tail coverage for such
persons which provides coverage for a period of six years for acts prior to the
Effective Time on terms no less favorable than the terms of such current
insurance coverage; provided, however, that Parent shall not be required to
expend in any year an amount in excess of 200% of the annual aggregate premiums
currently paid by the Company, for such insurance; and provided, further, that
if the annual premiums of such insurance coverage exceed such amount, Parent
shall be obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of Parent, for a cost not
exceeding such amount.
(c) Successors. In the event Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of 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 provisions shall be made so
that the successors and assigns of Parent shall assume the obligations set forth
in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent permitted
by law, from and after the Effective Time, all rights to indemnification as of
the date hereof in favor of the employees, agents, directors and officers of the
Company, and its subsidiaries with respect to their activities as such prior to
the Effective Time, as provided in its respective articles of organization and
by-laws in effect on the date hereof, or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
35
(e) Benefit. The provisions of this Section 7.5 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and his or her representatives.
Section 7.6 Disclosure Schedules. On the date hereof, (a) Parent has
delivered to the Company a schedule (the "Parent Disclosure Schedule"),
accompanied by a certificate signed by the Executive Vice President and General
Counsel of Parent stating the Parent Disclosure Schedule is being delivered
pursuant to this Section 7.6(a), and (b) the Company has delivered to Parent a
schedule (the "Company Disclosure Schedule"), accompanied by a certificate
signed by the Vice President, General Counsel and Secretary of the Company
stating the Company Disclosure Schedule is being delivered pursuant to this
Section 7.6(b). The Company Disclosure Schedule and the Parent Disclosure
Schedule are collectively referred to herein as the "Disclosure Schedules." The
Disclosure Schedules constitute an integral part of this Agreement and modify
the respective representations, warranties, covenants or agreements of the
parties hereto contained herein to the extent that such representations,
warranties, covenants or agreements expressly refer to the Disclosure Schedules.
Anything to the contrary contained herein or in the Disclosure Schedules
notwithstanding, any and all statements, representations, warranties or
disclosures set forth in the Disclosure Schedules shall be deemed to have been
made on and as of the date hereof.
Section 7.7 Public Announcements. Subject to each party's disclosure
obligations imposed by law, the Company and Parent will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto without the consent of the other party (which
consent shall not be unreasonably withheld).
Section 7.8 Rule 145 Affiliates. Within 30 days after the date of this
Agreement, the Company shall identify in a letter to Parent all persons who are,
and to such person's best knowledge who will be at the Closing Date,
"affiliates" of the Company, as such term is used in Rule 145 under the
Securities Act. The Company shall use all reasonable efforts to cause its
affiliates (including any person who may be deemed to have become an affiliate
after the date of the letter referred to in the prior sentence) to deliver to
Parent on or prior to the Closing Date an written agreement substantially in the
form attached as Exhibit 7.8 (each, an "Affiliate Agreement").
Section 7.9 Certain Employee Agreements. Subject to Section 7.10, Parent
and the Surviving Corporation and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements and
commitments of the parties which apply to any current or former employee or
current or former director of the parties hereto; provided, however, that the
foregoing shall not prevent Parent or the Surviving Corporation from enforcing
such contracts, agreements, collective bargaining agreements and commitments in
accordance with their terms, including, without limitation, any reserved right
to amend, modify, suspend, revoke or terminate any such contract, agreement,
collective bargaining agreement or commitment. It is the present intention of
Parent and the Company that following the Effective Time, there will be no
involuntary reductions in force at the Surviving Corporation or its
36
subsidiaries, but that Parent, the Surviving Corporation and their respective
subsidiaries will continue Parent's and the Company's present strategy of
achieving workforce reductions through attrition; however, if any reductions in
workforce in respect of employees of Parent and its subsidiaries, including the
Surviving Corporation and its subsidiaries, become necessary, they shall be made
on a fair and equitable basis, in light of the circumstances and the objectives
to be achieved, giving consideration to previous work history, job experience,
qualifications, and business needs without regard to whether employment prior to
the Effective Time was with the Company or its subsidiaries or Parent or its
subsidiaries, and any employees whose employment is terminated or jobs are
eliminated by Parent, the Surviving Corporation or any of their respective
subsidiaries shall be entitled to participate on a fair and equitable basis in
the job opportunity and employment placement programs offered by Parent, the
Surviving Corporation or any of their respective subsidiaries. Any workforce
reductions carried out following the Effective Time by Parent or the Surviving
Corporation and their respective subsidiaries shall be done in accordance with
all applicable collective bargaining agreements, and all laws and regulations
governing the employment relationship and termination thereof including, without
limitation, the Worker Adjustment and Retraining Notification Act and
regulations promulgated thereunder, and any comparable state or local law.
Section 7.10 Employee Benefit Plans.
(a) Except as may be required by applicable law and except as
provided in Section 7.11(b) with respect to the Stock Option Plan and Restricted
Stock Plan, each Plan in effect on the date hereof (or as amended or established
in accordance with or as permitted by this Agreement) shall be maintained in
effect with respect to the employees, former employees, directors or former
directors of the Company and any of its subsidiaries who are covered by such
plans, programs, agreements or arrangements immediately prior to the Effective
Time until Parent determines otherwise on or after the Effective Time, and
Parent shall assume or cause the Surviving Corporation to assume as of the
Effective Time each Plan maintained by the Company immediately prior to the
Effective Time and perform such plan, program, agreement or arrangement in the
same manner and to the same extent that the Company would be required to perform
thereunder; provided, however, that nothing herein contained shall limit any
reserved right contained in any such Plan to amend, modify, suspend, revoke or
terminate any such plan, program, agreement or arrangement; provided, further,
that Parent or its subsidiaries shall provide to each employee of the Company
and any of its subsidiaries who was covered by Plans immediately prior to the
Effective Time and who is not covered by a collective bargaining agreement (a
"Covered Company Employee") for a period of no less than 18 months following the
Effective Time, employer-provided benefits under Qualified Plans, supplemental
retirement benefit and deferred compensation plans which are not Qualified Plans
and welfare plans that are no less favorable in the aggregate than those
provided to the employee immediately prior to the Effective Time. Without
limiting the foregoing, each Covered Company Employee who is a participant in
any Plan shall receive credit for purposes of eligibility to participate,
vesting and eligibility to receive benefits (but specifically excluding for
benefit accrual purposes) under any replacement benefit plan of Parent or any of
its subsidiaries or affiliates in which such employee becomes a participant for
service credited for the corresponding purpose under any such Plan; provided,
however, that such crediting of service shall not operate to cause any such plan
or agreement to fail to comply with the applicable provisions of the Code and
ERISA. No provision
37
contained in this Section 7.10 shall be deemed to constitute an employment
contract between Parent or any of its subsidiaries and any individual, or a
waiver of Parent's or any of its subsidiaries' right to discharge any employee
at any time, with or without cause. Notwithstanding the foregoing, but subject
to Section 7.10(b), Parent acknowledges that each Covered Company Employee who
is a participant in the Connecticut Natural Gas Corporation Officers' Retirement
Plan (the "SERP") as of the date hereof shall continue to accrue benefits after
the Effective Time under terms at least as favorable as the terms of the SERP in
effect on the date of this Agreement, taking into account service and
compensation earned while employed by Parent and its subsidiaries after the
Effective Time.
(b) The Company shall take all necessary actions so that,
effective no later than immediately before the Effective Time, (i) each of the
SERP, the Connecticut Natural Gas Corporation Officers Deferred Compensation
Plan, the Connecticut Natural Gas Corporation Executive Life Insurance Plan and
all other executive benefit plans and programs of the Company and its
subsidiaries shall be amended to the extent necessary so that any provisions
therein that prohibit or limit the amendment or termination thereof following a
change of control do not apply to individuals who are not participants therein
as of the date of this Agreement and (ii) subject to applicable law and the
provisions of any applicable collective bargaining agreement, each Qualified
Plan shall be amended to the extent necessary so that any provisions therein
that call for the waiver or elimination of vesting requirements upon or
following a change in control shall apply only to individuals who are
participants therein immediately before the Effective Time.
Section 7.11 Company Stock and Other Plans.
(a) With respect to each Plan that provides for benefits in the
form of Company Common Stock ("Company Stock Plans"), the Company and Parent
shall take all corporate action necessary or appropriate to (i) provide for the
issuance or purchase in the open market of Parent Common Stock rather than
Company Common Stock, pursuant thereto, and otherwise to amend such Company
Stock Plans to reflect this Agreement and the Merger, (ii) obtain shareholder or
board of director approval with respect to such Company Stock Plans to the
extent such approval is required for purposes of the Code or other applicable
law, or to enable such Company Stock Plans to comply with Rule 16b-3 promulgated
under the Exchange Act, (iii) reserve for issuance under such Company Stock
Plans or otherwise provide a sufficient number of shares of Parent Common Stock
for delivery upon payment of benefits, grant of awards or exercise of options
under such Company Stock Plans and (iv) as soon as practicable after the
Effective Time, file registration statements on Form S-8 or amendments on such
forms to the Form S-4 Registration Statement, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Parent
Common Stock subject to such Company Stock Plans to the extent such registration
statement is required under applicable law, and Parent shall use its best
efforts to maintain the effectiveness of such registration statements (and
maintain the current status of the prospectuses contained therein) for so long
as such benefits and grants remain payable and such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, the
Company shall administer the Company Stock Plans, where applicable, in a manner
that complies with Rule 16b-3 promulgated under the Exchange Act.
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(b) The Company and its subsidiaries and the Parent and its
subsidiaries, including the Surviving Corporation and its subsidiaries, shall
take all actions necessary to provide that upon the Effective Time (i) each
outstanding option to purchase Company Common Stock granted under the Company's
1999 Stock Option Plan (the "Stock Option Plan"), whether or not then vested and
exercisable, shall be canceled in exchange for a cash payment equal to (A) the
excess of $41.00 over the exercise price thereof times (B) the number of shares
of Company Common Stock subject thereto, less applicable tax withholding, and
(ii) each outstanding restricted share of Company Common Stock granted under the
Connecticut Natural Gas Corporation Executive Restricted Stock Plan (the
"Restricted Stock Plan") shall become fully vested as provided in and subject to
the terms of the award agreements relating thereto and simultaneously converted
for Cash Consideration or Stock Consideration payable to the holder thereof as
provided in Section 2.1 hereof. The Company and its subsidiaries shall take all
actions needed to terminate the Stock Option Plan and Restricted Stock Plan as
of the Effective Time, subject, however, to the payments required under the
preceding sentence.
(c) Each employee of the Company who is a participant in the
Company's Annual Incentive Plan and who is not a party to a Change of Control
Employment Agreement with the Company is listed on Schedule 7.11(c) hereto (such
employees, the "Schedule 7.11(c) Employees"). Following the Effective Time, each
Schedule 7.11(c) Employee shall be entitled to participate in an annual
incentive plan of Parent or any of its subsidiaries for the portion of the
fiscal year of Parent or the applicable subsidiary in which the Effective Time
occurs that follows the Effective Time (the "Post-Merger Period"), under which
(i) the Schedule 7.11(c) Employee's award opportunity for the Post-Merger Period
shall equal the percentage of the Schedule 7.11(c) Employee's base salary set
forth opposite the Schedule 7.11(c) Employee's name on Schedule 7.11(c), and
(ii) the amount of such award opportunity that is earned shall be pro-rated
based upon the number of days occurring in such fiscal year that occur during
the Post-Merger Period.
Section 7.12 Expenses. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Proxy/Registration Statement,
as well as the filing fee relating thereto, shall be shared equally by the
Company and Parent.
Section 7.13 Further Assurances. Each party will, and will cause its
subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Merger in accordance with the terms hereof.
Section 7.14 Corporate Offices. At and subsequent to the
Effective Time, the corporate headquarters of the Surviving Corporation shall
be located in Hartford, Connecticut. At and subsequent to the Effective
Time, the corporate headquarters of XENERGY Enterprises, Inc. shall be
located in Connecticut.
Section 7.15 Parent Board of Directors. At the Effective Time, the Board
of Directors of Parent shall increase by one the number of directors on the
Board of Directors of Parent and
39
shall thereupon elect as a director a non-employee director of the Company
designated by the Company and reasonably acceptable to Parent.
Section 7.16 Community Involvement. After the Effective Time, Parent
will, or will cause the Surviving Corporation to make at least $500,000 per year
in charitable contributions to the communities served by the Surviving
Corporation and otherwise maintain a substantial level of involvement in
community activities in the State of Connecticut that is similar to, or greater
than, the level of community development and related activities carried on by
the Company.
Section 7.17 Advisory Board. At the Effective Time, there shall be
established an advisory board to the Surviving Corporation ("Advisory Board"),
which shall be comprised of the persons who were directors of the Company
immediately prior to the Effective Time. The Advisory Board shall meet no less
frequently than quarterly and shall provide advice to the board of directors of
the Surviving Corporation with respect to such issues as the board of directors
of the Surviving Corporation may from time to time request, including but not
limited to community relations, customer service, economic development, employee
development and relations and such other matters of community interest as may be
appropriate. The members of the Advisory Board, who shall serve at the
discretion of the Surviving Corporation, shall receive remuneration for their
services equivalent to the remuneration currently provided to non-employee
directors of the Company.
Section 7.18 Tax-free Status. No party shall, nor shall any party permit
any of its subsidiaries to, take any actions which would, or would be reasonably
likely to, adversely affect the status of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and each party hereto shall use all
reasonable efforts to achieve such result.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions,
except, to the extent permitted by applicable law, that such conditions may be
waived in writing pursuant to Section 9.5 by the joint action of the parties
hereto:
(a) Shareholder Approval. The Company Shareholders' Approval
shall have been obtained.
(b) No Injunction. No temporary restraining order or preliminary
or permanent injunction or other order by any federal or state court preventing
consummation of the Merger shall have been issued and be continuing in effect,
and the Merger and the other transactions contemplated hereby shall not have
been prohibited under any applicable federal or state law or regulation.
40
(c) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act, and no
stop order suspending such effectiveness shall have been issued and remain in
effect.
(d) Listing of Shares. The shares of Parent Common Stock issuable
in the Merger pursuant to Article II shall have been approved for listing on the
NYSE upon official notice of issuance.
(e) Statutory Approvals. The Company Required Statutory Approvals
and the Parent Required Statutory Approvals shall have been obtained at or prior
to the Effective Time, such approvals shall have become Final Orders (as defined
below) and such Final Orders shall not impose terms or conditions which, in the
aggregate, would have, or insofar as reasonably can be foreseen, could have, a
Company Material Adverse Effect or a Parent Material Adverse Effect; provided,
however, that a requirement that Parent become a registered holding company
pursuant to Section 5 of the 1935 Act as a result of the Merger shall not
constitute a term or condition which could have a "material adverse effect"
within the meaning of this Section 8.1(e) of the Agreement. In addition, the
inclusion of a condition or requirement of the Securities and Exchange
Commission's approval of the Merger under the 1935 Act that Parent divest its
ownership of New York State Electric & Gas Corporation, a New York corporation
and wholly owned subsidiary of Parent, shall constitute a term or condition
which could have a "material adverse effect" within the meaning of this Section
8.1(e) of the Agreement. A "Final Order" means action by the relevant regulatory
authority which has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to which
all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
Section 8.2 Conditions to Obligation of Parent to Effect the Merger. The
obligation of Parent to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by Parent in writing pursuant to Section 9.5:
(a) Performance of Obligations of the Company. The Company (and
its appropriate subsidiaries) shall have performed in all material respects its
agreements and covenants contained in Sections 6.1 and 6.2 and shall have
performed in all material respects its other agreements and covenants contained
in or contemplated by this Agreement to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
(i) on and as of the date hereof and (ii) on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date (except for representations and warranties that expressly
speak only as of a specific date or time other than the date hereof or the
Closing Date, which need only be true and correct as of such date or time)
except in each of cases (i) and (ii) for such failures of representations or
warranties to be true and correct (without regard
41
to any materiality qualifications contained therein) which, individually and in
the aggregate, would not be reasonably likely to result in a Company Material
Adverse Effect.
(c) Closing Certificates. Parent shall have received a certificate
signed by the chief financial officer of the Company, dated the Closing Date, to
the effect that, to the best of such officer's knowledge, the conditions set
forth in Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) No Company Material Adverse Effect. No Company Material
Adverse Effect shall have occurred, and there shall exist no fact or
circumstance other than facts and circumstances described in Section 8.2(d) of
the Company Disclosure Schedule or the Company SEC Reports filed prior to the
date hereof which is reasonably likely to have a Company Material Adverse
Effect.
(e) Company Required Consents. The Company Required Consents the
failure of which to obtain would have a Company Material Adverse Effect shall
have been obtained.
(f) Affiliate Agreements. Parent shall have received Affiliate
Agreements, duly executed by each "affiliate" of the Company, substantially in
the form of Exhibit 7.8, as provided in Section 7.8.
(g) Tax Opinion. Parent shall have received an opinion of
Wachtell, Lipton, Rosen & Katz to the effect that the Merger will be treated as
a reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, Wachtell, Lipton, Rosen & Katz may receive and rely upon
representations contained in certificates of Parent, the Company and others, in
each case in form and substance reasonably acceptable to such counsel.
Section 8.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by the Company in writing pursuant to
Section 9.5.
(a) Performance of Obligations of Parent. Parent (and its
appropriate subsidiaries) shall have performed in all material respects its
agreements and covenants contained in Section 6.1 and shall have performed in
all material respects its other agreements and covenants contained in or
contemplated by this Agreement to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and correct (i)
on and as of the date hereof and (ii) on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date (except for representations and warranties that expressly
speak only as of a specific date or time other than the date hereof or the
Closing Date, which need only be true and correct as of such date or time)
except in each of cases (i) and (ii) for such failures of representations or
warranties to be true and correct (without regard
42
to any materiality qualifications contained therein) which, individually and in
the aggregate, would not be reasonably likely to result in a Parent Material
Adverse Effect.
(c) Closing Certificates. The Company shall have received a
certificate signed by the Executive Vice President and General Counsel of
Parent, dated the Closing Date, to the effect that, to the best of such
officer's knowledge, the conditions set forth in Section 8.3(a) and Section
8.3(b) have been satisfied.
(d) No Parent Material Adverse Effect. No Parent Material Adverse
Effect shall have occurred, and there shall exist no fact or circumstance other
than facts and circumstances described in the Parent SEC Reports filed prior to
the date hereof which is reasonably likely to have a Parent Material Adverse
Effect.
(e) Parent Required Consents. The Parent Required Consents the
failure of which to obtain would have a Parent Material Adverse Effect shall
have been obtained.
(f) Tax Opinion. The Company shall have received an opinion from
Jones, Day, Reavis & Pogue to the effect that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, Jones, Day, Reavis & Pogue, may receive and rely upon
representations contained in certificates of Parent, the Company and others, in
each case in form and substance reasonably acceptable to such counsel.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the shareholders
of the respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of the
Company and Parent;
(b) by any party hereto, by written notice to the other parties,
if the Effective Time shall not have occurred on or before the date that is 12
months from the date hereof (the "Initial Termination Date"); provided, however,
that if on the Initial Termination Date the conditions to the Closing set forth
in Section 8.1(e) shall not have been fulfilled but all other conditions to the
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Initial Termination Date shall be extended to the 18-month anniversary of the
date hereof; and provided, further, that the right to terminate this Agreement
under this Section 9.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement or whose breach of any agreement or
covenant has been the cause of, or resulted directly or indirectly in, the
failure of the Effective Time to occur on or before the Initial Termination Date
or as it may be so extended.
43
(c) by any party hereto, by written notice to the other parties,
if the Company Shareholders' Approval shall not have been obtained at a duly
held Company Special Meeting, including any adjournments thereof by the Initial
Termination Date;
(d) by any party hereto, if any state or federal law, order, rule
or regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger, or
by any party hereto if any court of competent jurisdiction in the United States
or any State shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
(e) by the Company prior to the time at which the Company
Shareholders' Approval shall have been obtained, upon five days' prior notice to
Parent, if the Company is not in breach of this Agreement and, as a result of an
Alternative Proposal, the Board of Directors of the Company determines in good
faith, that (i) the Alternative Proposal is financially superior to the Merger
and the third party making the Alternative Proposal has demonstrated that any
necessary financing has been obtained, or in the reasonable judgment of the
Company's financial advisor such financing is obtainable, and (ii) after
consultation with its financial advisor and based upon the advice of outside
counsel and such other matters as the Board of Directors of the Company deems
relevant, after considering applicable provisions of state law and after giving
effect to all concessions which may be offered by the other party pursuant to
the proviso below, that failure to do so would likely result in a breach of its
fiduciary duties under applicable law; provided, however, that prior to any such
termination, the Company shall, and shall cause its respective financial and
legal advisors to, negotiate with Parent to make such adjustments in the terms
and conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated herein;
(f) by the Company, by written notice to Parent, if (i) there
exist breaches of the representations and warranties of Parent made herein as of
the date hereof which breaches, individually or in the aggregate, would or would
be reasonably likely to result in a Parent Material Adverse Effect, and such
breaches shall not have been remedied within 20 days after receipt by Parent of
notice in writing from the Company, specifying the nature of such breaches and
requesting that they be remedied, or (ii) Parent (or its appropriate
subsidiaries) shall have failed to perform and comply with, in all material
respects, its agreements and covenants hereunder, and such failure to perform or
comply shall not have been remedied within 20 days after receipt by Parent of
notice in writing from the Company, specifying the nature of such failure and
requesting that it be remedied; or
(g) by Parent, by written notice to the Company, if (i) there
exist material breaches of the representations and warranties of the Company
made herein as of the date hereof which breaches, individually or in the
aggregate, would or would be reasonably likely to result in a Company Material
Adverse Effect, and such breaches shall not have been remedied within 20 days
after receipt by the Company of notice in writing from Parent, specifying the
nature of such breaches and requesting that they be remedied, (ii) the Company
(or its appropriate subsidiaries) shall not have performed and complied with its
agreements and covenants contained in Sections 6.1(b) and 6.1(c) or shall have
failed to perform and comply with, in all material respects, its other
44
agreements and covenants hereunder, and such failure to perform or comply shall
not have been remedied within 20 days after receipt by the Company of notice in
writing from Parent, specifying the nature of such failure and requesting that
it be remedied; or (iii) the Board of Directors of the Company or any committee
thereof (A) shall withdraw or modify in any manner adverse to Parent its
approval or recommendation of this Agreement or the transactions contemplated
herein, (B) shall fail to reaffirm such approval or recommendation upon Parent's
request within two days of such request, (C) shall approve or recommend any
acquisition of the Company or a material portion of its assets or any tender
offer for the shares of capital stock of the Company, in each case by a party
other than Parent or any of its affiliates or (D) shall resolve to take any of
the actions specified in clause (A), (B) or (C).
Section 9.2 Effect of Termination. Subject to Section 10.1(b), in the
event of termination of this Agreement by either the Company or Parent pursuant
to Section 9.1, there shall be no liability on the part of either the Company or
Parent or their respective officers or directors hereunder, except that Section
7.12, Section 9.3, the agreement contained in the last sentence of Section 7.1,
Section 10.8 and Section 10.9 shall survive the termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee upon Breach or Withdrawal of Approval. If this
Agreement is terminated at such time that this Agreement is terminable pursuant
to one (but not both) of (x) Section 9.1(f)(i) or (ii) or (y) Section 9.1(g)(i)
or (ii), then: (i) the breaching party shall promptly (but not later than five
business days after receipt of notice from the non-breaching party) pay to the
non-breaching party in cash an amount equal to all documented out-of-pocket
expenses and fees incurred by the non-breaching party (including, without
limitation, fees and expenses payable to all legal, accounting, financial,
public relations and other professional advisors arising out of, in connection
with or related to the Merger or the transactions contemplated by this
Agreement) not in excess of $4 million ("Expenses"); provided, however, that, if
this Agreement is terminated by a party as a result of a willful breach by the
other party, the non-breaching party may pursue any remedies available to it at
law or in equity and shall, in addition to its out-of-pocket expenses (which
shall be paid as specified above and shall not be limited to $4 million), be
entitled to retain such additional amounts as such non-breaching party may be
entitled to receive at law or in equity.
(b) The Company shall pay Parent a fee of $14 million
("Termination Fee") plus Expenses, upon the termination of this Agreement by
Parent or the Company pursuant to Section 9.1(c) or the Company pursuant to
Section 9.1(e) or by Parent pursuant to Section 9.1(g)(iii); provided, however,
that in the event of termination under either Section 9.1(c) or Section
9.1(g)(iii), no payment of the Termination Fee or Expenses shall be required
unless and until within two years of such termination the Company enters into a
definitive agreement to consummate or consummates an Alternative Proposal, and,
in the case of a termination pursuant to Section 9.1(c), there shall have been
made and not withdrawn at the time of the Company Special Meeting an Alternative
Proposal and, in the case of a termination pursuant to Section 9.1(g)(iii),
there shall have been made and not withdrawn at the time of such termination an
Alternative Proposal.
45
(c) Liquidated Damages; Prompt Payment. The parties agree that the
agreements contained in this Section 9.3 are an integral part of the
transactions contemplated by the Agreement and constitute liquidated damages and
not a penalty. If one party fails to pay promptly to the other any fee or
expenses due hereunder, the defaulting party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of Chase Manhattan Bank, N.A., from the date such fee was required to be
paid.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the shareholders of the Company and prior to the Effective Time, but after such
approvals, no such amendment shall (a) alter or change the amount or kind of
shares, rights or any of the proceedings of the treatment of shares under
Article II, or (b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the rights of holders of Company capital stock,
except for alterations or changes that could otherwise be adopted by the Board
of Directors of the Company, without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-survival; Effect of Representations and Warranties. (a)
All representations, warranties and agreements in this Agreement shall not
survive the Merger, except as otherwise provided in this Agreement and except
for the agreements contained in this Section 10.1, in Articles I and II and in
Sections 7.5, 7.11, 10.7, 10.8 and 10.9.
(b) No party may assert a claim for breach of any representation
or warranty contained in this Agreement (whether by direct claim or
counterclaim) except in connection with the cancellation of this Agreement
pursuant to Section 9.1(f)(i) or Section 9.1(g)(i) (or pursuant to any other
subsection of Section 9.1, if the terminating party would have been entitled to
terminate this Agreement pursuant to Section 9.1(f)(i) or Section 9.1(g)(i)).
46
Section 10.2 Brokers. The Company represents and warrants that, except
for PaineWebber Incorporated whose fees have been disclosed to Parent prior to
the date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company. Parent represents and warrants that, except for
Morgan Stanley & Co. Incorporated whose fees have been disclosed to the Company
prior to the date hereof, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of Parent.
Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if (a) delivered personally, (b)
sent by reputable overnight courier service, (c) telecopied (which is confirmed)
or (d) five days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to the Company, to:
CTG Resources, Inc.
100 Columbus Boulevard
Hartford, Connecticut 06144
Attention: Reginald L. Babcock, Esq.
Vice President, General Counsel and Secretary
Telephone: (860) 727-3000
Telecopy: (860) 727-3064
with a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601
Attention: Robert A. Yolles, Esq.
Telephone: (312) 782-3939
Telecopy: (312) 782-8585
(ii) If to Parent or Merger Sub, to:
Energy East Corporation
One Canterbury Green
P.O. Box 1196
Stamford, Connecticut 06901
Attention: Kenneth J. Jasinski, Esq.
Executive Vice President and General Counsel
47
Telephone: (203) 325-0690
Telecopy: (203) 403-2000
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Employment Agreement and the Confidentiality Agreement; (b) shall
not be assigned by operation of law or otherwise; and (c) shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of law, rules or principles and except to the extent the
provisions of this Agreement (including the documents or instruments referred to
herein) are expressly governed by or derive their authority from the CBCA.
Section 10.5 Interpretation. When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Section 10.6 Counterparts; Effect. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.8 Waiver of Jury Trial and Certain Damages. Each party to
this Agreement waives, to the fullest extent permitted by applicable law, (a)
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of this Agreement and (b) without limiting the effect of
Section 9.3, any right it may have, other than in the case of a willful breach,
to receive damages from any other party based on any theory of liability for any
special, indirect, consequential (including lost profits) or punitive damages.
48
Section 10.9 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of New York.
[Signature Page Follows]
49
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
CTG RESOURCES, INC.
By: /s/ Arthur C. Marquardt
--------------------------------
Name: Arthur C. Marquardt
Title: President and Chief
Executive Officer
ENERGY EAST CORPORATION
By: /s/ Kenneth M. Jasinski
-------------------------------
Name: Kenneth M. Jasinski
Title: Executive Vice President and
General Counsel
OAK MERGER CO.
By: /s/ Kenneth M. Jasinski
--------------------------------
Name: Kenneth M. Jasinski
Title: Secretary, Treasurer and
Vice President