Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 29, 2002, is among
PENNICHUCK CORPORATION, a New Hampshire corporation (the "Company"),
PHILADELPHIA SUBURBAN CORPORATION, a Pennsylvania corporation ("Parent"), and
RALEIGH ACQUISITION CORPORATION, a New Hampshire corporation and a wholly owned
subsidiary of Parent ("Acquisition Sub").
WHEREAS, the Boards of Directors of Parent, Acquisition Sub and the
Company have each approved the acquisition of the Company by Parent, by means of
a merger of Acquisition Sub with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company (the "Board") adopted
this Agreement and the transactions contemplated hereby and resolved to
recommend approval of the Merger and approval of this Agreement by the
shareholders of the Company, subject to the terms of this Agreement;
WHEREAS, the Boards of Directors of Parent and Acquisition Sub have
each approved the Merger of Acquisition Sub with and into the Company in
accordance with the New Hampshire Business Corporation Act (the "New Hampshire
Law") upon the terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Acquisition Sub hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER.
(a) EFFECTIVE TIME. Subject to and upon the terms and conditions of
this Agreement, and in accordance with the New Hampshire Law, Acquisition Sub
shall be merged with and into the Company at the Effective Time. Following the
Merger, the separate corporate existence of Acquisition Sub shall cease, and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
(b) CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the
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satisfaction or waiver of the conditions set forth in Article VI, the
consummation of the Merger will take place as promptly as practicable (and in
any event within two business days) after satisfaction or waiver of the
conditions set forth in Article VI, at the Boston office of Xxxxxx, XxXxxxxxx &
Fish, LLP, unless another date and time or place is agreed to in writing by the
parties hereto (the "Closing Date").
Section 1.2 EFFECTIVE DATE. On the Closing Date, the parties hereto
shall cause the Merger to be consummated by filing articles of merger as
contemplated by the New Hampshire Law (the "Articles of Merger"), together with
any required related certificate, with the Secretary of State of the State of
New Hampshire, in such form as required by, and executed in accordance with the
relevant provisions of, the New Hampshire Law (the time of such filings being
the "Effective Time").
Section 1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Articles of Merger and
the applicable provisions of the New Hampshire Law.
Section 1.4 ARTICLES OF INCORPORATION, BY-LAWS.
(a) ARTICLES OF INCORPORATION. At the Effective Time, the Articles of
Incorporation of the Acquisition Sub (the "Acquisition Sub Articles") as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the New Hampshire Law and the Acquisition Sub Articles.
(b) BY-LAWS. At the Effective Time, the By-Laws of the Acquisition Sub
(the "Acquisition Sub By-Laws"), as in effect immediately prior to the Effective
Time, shall be the By-Laws of the Surviving Corporation until thereafter amended
as provided by the New Hampshire Law, the Articles of Incorporation of the
Surviving Corporation and the Acquisition Sub By-Laws.
Section 1.5 DIRECTORS AND OFFICERS. At the Effective Time, the
directors of Acquisition Sub immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and By-Laws of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed.
Section 1.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, Acquisition Sub,
the Company, or the holders of any of the following securities:
(a) COMMON STOCK OF ACQUISITION SUB. Each share of common stock of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into one share of the common stock, par value
$1.00 per share, of the Surviving Corporation.
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(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED COMMON STOCK. Each
share of common stock, par value $1.00 per share, of the Company (the "Company
Common Stock") that is owned by the Company or by any subsidiary of the Company,
and each share of Company Common Stock that is owned by Parent, Acquisition Sub
or any other subsidiary of Parent shall automatically be cancelled and retired,
and no cash, Parent Common Stock (as defined Section 1.6(d)) or other
consideration shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OF COMMON STOCK. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares cancelled pursuant to Section 1.6(b) and any Dissenting Shares (as
defined in and to the extent provided in Section 1.9)), together with each
associated right under the Rights Agreement (together, a "Share"), shall be
converted into the right to receive that number of shares of Parent Common Stock
as shall be equal to the Exchange Ratio (the "Merger Consideration"). The
Exchange Ratio will be determined as follows:
(i) if the Parent Average Closing Price is not less than $23.000
but not greater than $25.000, the Exchange Ratio will be equal to the
quotient, rounded to the nearest thousandth, of 33.000 divided by the
Parent Average Closing Price; or
(ii) if the Parent Average Closing Price is less than $23.000,
the Exchange Ratio will be 1.435; or
(iii) if the Parent Average Closing Price is greater than
$25.000, the Exchange Ratio will be 1.320.
As used herein, the term "Parent Average Closing Price" means the average of the
daily closing sales prices of Parent Common Stock as reported on the New York
Stock Exchange ("NYSE") Composite Transaction reporting system (as reported by
the Wall Street Journal or, if not so reported thereby, by another authoritative
source as mutually agreed by Parent and the Company) for the twenty (20)
consecutive full trading days in which such shares are traded on the NYSE ending
at the closing of trading on the third full trading day prior to the Closing
Date.
(d) CANCELLATION AND RETIREMENT OF COMMON STOCK. As of the Effective
Time of the Merger, all shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall no longer be
outstanding and shall automatically be cancelled and retired, and each holder of
a certificate representing any such shares of Company Common Stock
(collectively, the "Certificates") shall, to the extent such Certificate
represents such shares, cease to have any rights with respect thereto, except
the right to receive the Merger Consideration (and cash in lieu of fractional
shares of Common Stock, par value $0.50 per share, of Parent (the "Parent Common
Stock")) to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 1.7.
Section 1.7. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time of the Merger, Parent
shall enter into an agreement with such bank or trust company as may be
designated by Parent and reasonably
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acceptable to the Company (the "Exchange Agent") which shall provide that Parent
shall deposit with the Exchange Agent, for the benefit of the holders of
Certificates, for exchange in accordance with this Article I, certificates
representing the shares of Parent Common Stock (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time of the Merger, and any cash payable in lieu
of any fractional shares of Parent Common Stock being hereinafter referred to as
the "Exchange Fund") issuable pursuant to Section 1.6(c) in exchange for
outstanding shares of Company Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of Certificates immediately prior to the Effective Time of the Merger
whose shares were converted into shares of Parent Common Stock pursuant to
Section 1.6(c), (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 delivery of the Certificates to the Exchange Agent, and which shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Prior to
the Effective Time, Parent shall afford the Company a reasonably opportunity to
review and comment on such transmittal materials and obtain the Company's
approval of such materials, which approval shall not be unreasonably withheld.
Upon surrender of a Certificate for cancellation (or indemnity reasonably
satisfactory to Parent and the Exchange Agent, if any of such Certificates are
lost, stolen or destroyed) to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock and cash in lieu of fractional shares of Parent
Common Stock which such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article I (after
taking into account all shares of Company Common Stock then held by such
holder), and the Certificate so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a transferee
if the Certificate is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.7, subject to the provisions of Section 1.9, each
Certificate shall be deemed at any time after the Effective Time of the Merger
to represent only the Parent Common Stock into which the shares of Company
Common Stock represented by such Certificate have been converted as provided in
this Article I and the right to receive upon such surrender cash in lieu of any
fractional shares of Parent Common Stock as contemplated by this Section 1.7(e).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 1.7(e) until the surrender of such
Certificate in accordance with this Article I. Subject to the effect of
applicable laws, following surrender of
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any such Certificate, there shall be paid to the holder of the certificate
representing the whole shares of Parent Common Stock issued in exchange therefor
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of any fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 1.7(e) and the amount of any dividends or
other distributions with a record date after the Effective Time of the Merger
theretofore paid (but withheld pursuant to the immediately preceding sentence)
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of any dividends or other distributions
with a record date after the Effective Time of the Merger and a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All shares of Parent
Common Stock issued upon conversion of shares of Company Common Stock in
accordance with the terms hereof, and all cash paid pursuant to Sections 1.7(c)
and 1.7(e), shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock, subject, however, to
the Surviving Corporation's obligation to pay any dividends or any other
distributions with a record date prior to the Effective Time, which may have
been declared or made by the Company on the Shares prior to the date of this
Agreement and which remain unpaid at the Effective Time. There shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding prior
to the Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article I.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of Parent. In lieu of such
issuance of fractional shares, Parent shall pay each holder of Certificates an
amount in cash (rounded to the nearest cent) equal to the product obtained by
multiplying (a) the fractional share interest to which such holder (after taking
into account all shares of Company Common Stock held immediately prior to the
Effective Time of the Merger by such holder) would otherwise be entitled by (b)
the Parent Average Closing Price.
(ii) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates with respect to
any fractional share interests, the Exchange Agent shall make available such
amounts to such holders of Certificates, subject to and in accordance with the
terms of Section 1.7(c).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
deposited with the Exchange Agent pursuant to this Section 1.7 which remains
undistributed to the holders of the Certificates twelve months after the
Effective Time of the Merger shall be delivered to the Parent, upon demand, and
any holders of Certificates who have not theretofore complied with this Article
I shall thereafter look only to the Parent and only as general creditors thereof
for payment of their claim for Parent Common Stock, cash in lieu of fractional
shares of Parent
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Common Stock and any dividends or distributions with respect to Parent Common
Stock to which such holders may be entitled.
(g) NO LIABILITY. None of Parent, Acquisition Sub, the Company or the
Exchange Agent shall be liable to any person in respect of any shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to three years after the Effective Time of the Merger, or
immediately prior to such earlier date on which any Merger Consideration, any
cash in lieu of fractional shares of Parent Common Stock or any dividends or
distributions with respect to Parent Common Stock would otherwise escheat to or
become the property of any Governmental Authority (as defined in Section
2.5(c)), any such Merger Consideration or cash shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The portion of the Exchange Fund used
to satisfy the cash payable to the holders of Certificates shall be invested by
the Exchange Agent as directed by Parent, provided that such investments shall
be limited to (i) direct obligations of the United States of America, (ii)
obligations for which the full faith and credit of the United States of America
is pledged to provide for the payment of principal and interest, (iii)
commercial paper rated of the highest quality by Xxxxx'x Investors Service, Inc.
or Standard & Poor's Corporation, or (iv) certificates of deposit issued by a
commercial bank the deposits of which are insured, up to applicable limits, by
the United States Federal Deposit Insurance Corporation and which is "well
capitalized" within the meaning of applicable United States regulations and has
at least $75,000,000,000 in assets.
(i) ADJUSTMENT PROVISIONS. In the event Parent changes (or establishes
a record date for changing) the number of shares of Parent Common Stock issued
and outstanding prior to the Effective Time of the Merger as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect to
the outstanding Parent Common Stock and the record date therefor shall be prior
to the Effective Time of the Merger, the Exchange Ratio shall be proportionately
adjusted. If, between the date hereof and the Effective Time of the Merger,
Parent shall merge, be acquired or consolidate with, by 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 as part of the terms
of such Business Combination 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 (provided that nothing herein
shall be construed so as to release the acquiring entity in any such Business
Combination from its obligations under this Agreement as the successor to
Parent).
(j) WITHHOLDING RIGHTS. Each of the Surviving Corporation, Parent and
the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise
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payable pursuant to this Agreement to any holder of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving Corporation,
Parent or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by the Surviving
Corporation, Parent or the Exchange Agent.
Section 1.8. TREATMENT OF OPTIONS.
(a) At the Effective Time of the Merger, each outstanding option to
purchase Company Common Stock (a "Company Stock Option") granted under the
Company's stock option plans, director deferred compensation plan and other
agreements listed on Section 2.11(c) of the Company Disclosure Schedule (as
hereinafter defined) (collectively, the "Company Stock Option Plans"), whether
or not then exercisable, shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Company Stock
Option, the same number of shares of Parent Common Stock (a "Parent Stock
Option") as the holder of such Company Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time of the Merger, at a price per share
equal to (y) the aggregate exercise price for the shares of Company Common Stock
otherwise purchasable pursuant to such Company Stock Option divided by (z) the
number of full shares of Parent Common Stock deemed purchasable pursuant to such
Company Stock Option (rounded down to the nearest whole number of shares of
Parent Common Stock); provided, however, that in the case of any ISO (as defined
below), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time of the Merger,
Parent shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the Company Stock Plans and the
agreements evidencing the grants of such Company Stock Options shall continue in
effect on the same terms and conditions (subject to adjustments required by this
Section 1.8 after giving effect to the Merger and the provisions set forth
above). Subject to the adjustments provided for in Section 1.8(a) and if
necessary, Parent shall comply with the terms of the Company Stock Plans and
ensure, to the extent required by, and subject to the provisions of, the Company
Stock Plans, that Company Stock Options that qualified as incentive stock
options prior to the Effective Time of the Merger continue to qualify as
incentive stock options after the Effective Time of the Merger.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Stock Options. As soon as practicable after the Effective
Time of the Merger, Parent shall file a registration statement on Form S-8 (or
any successor or other appropriate forms), or another appropriate form, with
respect to the shares of Parent Common Stock subject to such options and shall
use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding. With respect to those
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individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act (as defined below), where
applicable, Parent shall administer the Company Stock Plans in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent the
Company Stock Plans complied with such rule prior to the Merger.
Section 1.9. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
the shares of any holder of Company Common Stock who has demanded and perfected
appraisal rights of such shares in accordance with New Hampshire Law and who, as
of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("Dissenting Shares"), shall not be converted into or represent a right
to receive Parent Common Stock pursuant to Section 1.6(c), but the holder
thereof shall only be entitled to such rights as are granted by New Hampshire
Law.
(b) Notwithstanding the foregoing, if any holder of shares of Company
Common Stock who demands appraisal of such shares under New Hampshire Law shall
effectively withdraw the right to appraisal, then, as of the later of the
Effective Time of the Merger and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock, without interest thereon, upon surrender of the
Certificate representing such shares as provided in Section 1.6(c).
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to New Hampshire Law and
received by the Company which relate to any such demand for appraisal and (ii)
the right to conduct and control all negotiations and proceedings which take
place prior to the Effective Time of the Merger with respect to demands for
appraisal under New Hampshire Law. The Company shall not, except with the prior
written consent of Parent or as may be required by applicable law, voluntarily
make any payment with respect to any demands for appraisal of the Company Common
Stock or offer to settle or settle any such demands.
Section 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall
deliver in exchange for such lost, stolen or destroyed Certificate, upon the
making of an affidavit of that fact by the holder thereof, (a) the Merger
Consideration as may be required pursuant to Section 1.6 and (b) any dividends
payable in accordance with Section 1.7(c) less any required withholding of taxes
as provided in Section 1.7(j); provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
Section 1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of
Parent, Acquisition Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effect the Merger in
accordance with this Agreement as
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promptly as possible. If at any time after the Effective Time, any such further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company and
Acquisition Sub, the officers and directors of the Company and Acquisition Sub
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
Section 1.12 MATERIAL ADVERSE EFFECT. When used in connection with the
Company or any of the Company Subsidiaries, or Parent or any of its
subsidiaries, as the case may be, the term "Material Adverse Effect" means any
change, effect or circumstance that is materially adverse to the business,
assets, financial condition or results of operations of the Company and the
Company Subsidiaries, or Parent and its subsidiaries, as the case may be, in
each case taken as a whole, other than any such changes, effects or
circumstances (i) set forth or contemplated by the Company Disclosure Schedule
or the Parent Disclosure Schedule (each as hereinafter defined), as the case may
be, or (ii) set forth or described in the Company SEC Reports or the Parent SEC
Reports (each as hereinafter defined), and provided that none of the following
shall be deemed by itself or by themselves, either alone or in combination with
one another, to constitute a Material Adverse Effect on the Company or Parent
(as applicable): (a) any change in the market price or trading volume of the
Company Common Stock or the Parent Common Stock; (b) any failure by the Company
or Parent to meet the revenue or earnings, predictions or expectations of equity
analysts for any period ending (or for which earnings are released) on or after
the date of this Agreement; (c) any adverse effect due to employee attrition of
the Company or Parent; (d) any adverse effect on the Company arising out of or
attributable to the announcement of this Agreement and the transactions
contemplated hereby, or resulting from or attributable to actions of the parties
contemplated by this Agreement; (e) any change arising out of conditions
affecting the industry in which the Company or Parent operates as a whole or the
U.S. economy as a whole; (f) reductions in consumer demand or reductions in
supply sources as a result of climatic conditions in the watersheds or in the
areas serviced by the Company or any of the Company Subsidiaries; (g) any change
in Laws or Orders or interpretations thereof by courts or Governmental
Authorities generally applicable to public utilities or public services
companies or their holding companies; (h) the expenses reasonably incurred by
the Company or Parent in entering into this Agreement and consummating the
transactions contemplated hereby and the expenses associated with the
termination of any Company Employee Plans (as defined below) as and to the
extent contemplated herein; or (i) any action or omission by either Parent or
any of its subsidiaries, or the Company or any of the Company Subsidiaries, as
the case may be, taken with the written permission of the other party in
connection with the transactions contemplated hereby.
Section 1.13 TAX XXXXXXXXXXXX.Xx is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations. Accordingly, both prior to and after the
Closing, each party's books and records shall be maintained and all federal,
state and local income tax returns and schedules thereto shall be filed in a
manner consistent with the Merger being qualified as a reverse triangular merger
under Section 368(a)(2)(E) of the Code. Each party shall provide to each other
such information, reports, returns or schedules as may be
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reasonably required to assist such party in accounting for and reporting the
Merger being so qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Sub that on the date hereof, except as set forth in the written disclosure
schedule delivered on or prior to the date hereof by the Company to Parent (the
"Company Disclosure Schedule"):
Section 2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. All of the subsidiaries of the
Company are set forth in Section 2.1 of the Company Disclosure Schedule (the
"Company Subsidiaries"). Each Company Subsidiary is a corporation duly
organized, validly existing and in good standing under the respective laws of
the jurisdictions of their incorporation. The Company and each of the Company
Subsidiaries have the requisite corporate power and authority and are in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders (the "Approvals")
necessary to own, lease and operate the properties they purport to own, lease or
operate and to carry on their business as they are now being conducted, except
where the failure to have such power, authority and Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company and each of the Company Subsidiaries are duly qualified or licensed
as a foreign corporation to do business and are in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
them or the nature of their activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. A true and complete list of all of the Company
Subsidiaries, together with the jurisdiction of incorporation of each Company
Subsidiary and the percentage of each Company Subsidiary's outstanding capital
stock owned by the Company, another Company Subsidiary or any third party along
with a list of all partnerships or joint ventures in which the Company or any
Company Subsidiary is a party, is set forth in Section 2.1 of the Company
Disclosure Schedule. No capital stock or other ownership units of any Company
Subsidiary is or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock or other ownership units of any
Company Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which Company or any of Company Subsidiaries is or may be bound
to issue, redeem, purchase or sell additional shares of capital stock or other
ownership units of any Company Subsidiary. The Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
person, other than the Company Subsidiaries set forth in Section 2.1 of the
Company Disclosure Schedule.
Section 2.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to Parent a true, complete and correct copy of the
Company's Articles of Incorporation
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(the "Company Articles") and the Company's By-Laws (the "Company By-Laws"), each
as amended to date, and has furnished or made available to Parent the articles
of incorporation and by-laws (or equivalent organizational documents) of each of
the Company Subsidiaries (the "Subsidiary Documents"). The Company Articles, the
Company By-Laws and Subsidiary Documents are in full force and effect. Neither
the Company nor any of the Company Subsidiaries is in violation of any of the
provisions of the Company Articles or the Company By-Laws or Subsidiary
Documents.
Section 2.3 CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 100,000 shares of preferred stock, no par value per share, and
15,000 shares of preferred stock, par value $100 per share ("Preferred Stock"),
none of which is issued and outstanding, none of which is held in treasury and
25,000 of which are currently designated Series A Junior Participating Preferred
Stock, and (ii) 11,500,000 shares of Company Common Stock. As of April 19, 2002,
(i) 2,391,439 shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable, and 1,952 shares of
Company Common Stock were held in treasury, (ii) no shares of Company Common
Stock were held by the Company Subsidiaries, and (iii) 85,395 shares of Company
Common Stock were reserved for future issuance pursuant to outstanding Company
Stock Options granted under the Company Stock Option Plans. Section 2.3 of the
Company Disclosure Schedule sets forth a true and complete list of all
outstanding Company Stock Options, the name of each holder thereof, the number
of shares purchasable or acquirable thereunder or upon conversion or exchange
thereof and (if any) the per share exercise or conversion price or exchange rate
of each Company Stock Option. There are no options, warrants or other similar
rights, agreements, arrangements, commitments or understandings to which the
Company is a party, whether or not in writing, of any character relating to the
issued or unissued capital stock or other securities of the Company or any of
the Company Subsidiaries or obligating the Company or any of the Company
Subsidiaries to issue (whether upon conversion, exchange or otherwise) or sell
any share of capital stock of, or other equity interests in or other securities
of, the Company or any of the Company Subsidiaries other than those listed in
Section 2.3 of the Company Disclosure Schedule. All shares of Company Common
Stock subject to issuance as aforesaid upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable shall be duly
authorized, validly issued, fully paid and nonassessable. There are no
obligations, contingent or otherwise, of the Company or any of the Company
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or capital stock of any Company Subsidiary or any other securities
of the Company or any of the Company Subsidiaries or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such Company Subsidiary or any other entity. All of the outstanding shares of
capital stock of each of the Company Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights, and
all such shares are owned by the Company or another Company Subsidiary free and
clear of all security interests, liens, claims, pledges, agreements, limitations
in the Company's voting rights, charges or other encumbrances of any nature
whatsoever (collectively, "Liens").
Section 2.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution
11
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby,
other than the approval of this Agreement by the holders a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the New Hampshire Law and the Company Articles and the Company By-Laws (the
"Requisite Company Vote"). The Requisite Company Vote is the only vote of the
holders of any class or series of the Company's capital stock necessary (under
the Company Articles and the Company By-Laws, the New Hampshire Law, other
applicable law or otherwise) to approve this Agreement and the Merger. The Board
has adopted this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Acquisition
Sub, as applicable, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
Section 2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list
of all contracts, agreements, arrangements or understandings, whether or not in
writing, to which the Company or any of the Company Subsidiaries is a party or
by which any of them is bound as of the date hereof, (i) that are required to be
filed as "material contracts" with the SEC pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"); (ii) under which the consequences
of a default, nonrenewal or termination could have a Material Adverse Effect on
the Company; or (iii) pursuant to which payments might be required or
acceleration of benefits may occur upon a "change of control" of the Company or
the Company Subsidiaries (collectively, the "Material Contracts").
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Company Articles or the Company By-Laws or any Subsidiary
Document, (ii) conflict with or violate any law, rule or regulation, whether
federal, state, local or foreign (collectively, "Laws"), or any order, judgment
or decree, whether federal, state, local or foreign (collectively, "Orders"),
applicable to the Company or any of the Company Subsidiaries or by which its or
any of their respective properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or result in a modification of any right
or benefit under, or impair the Company's or any of the Company Subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
repayment, repurchase or increased payment under, any Material Contract, or
result in the creation of a Lien on any of the properties or assets of the
Company or any of the Company Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of the Company
Subsidiaries is a party or by which the Company or any of the Company
Subsidiaries or its or any of their respective properties is bound or affected,
except in the case of (ii) or (iii) only for any such conflicts,
12
violations, breaches, defaults or other occurrences that would not, individually
or in the aggregate, have a Material Adverse Effect on the Company and subject
to obtaining or making the Company Required Consents (as defined below).
(c) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require any
consent approval, authorization or permit of, or filing with or notification to,
any national, federal, state, provincial or local governmental, regulatory or
administrative authority, agency, commission, court, tribunal, arbitral body or
self-regulated entity, domestic or foreign (collectively, the "Governmental
Authorities"), except for (i) applicable requirements of the Exchange Act, (ii)
the premerger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (iii) the filing and
recordation of appropriate merger or other documents as required by the New
Hampshire Law, (iv) Laws, Orders and practices of any state public utility
control or public service commissions or similar state regulatory bodies
("PUCs"), each of which is identified in Section 2.5(c) of the Company
Disclosure Schedule, (v) Laws, Orders and practices of any state or local
departments of public health or departments of health or similar state or local
regulatory bodies or of any federal, state or local regulatory body having
jurisdiction over environmental protection or environmental conservation or
similar matters ("Health Agencies"), each of which is identified in Section
2.5(c) of the Company Disclosure Schedule, and (vi) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent or delay the Company from performing its obligations under
this Agreement, or would not otherwise have, individually or in the aggregate, a
Material Adverse Effect on the Company. Consents, approvals, permits, Orders,
authorizations, registrations, declarations and filings required under or in
relation to any of the foregoing clauses (i) through (vi) are hereinafter
referred to as "Company Required Consents." The parties hereto agree that
references in this Agreement to "obtaining" Company Required Consents means
obtaining such consents, approvals or authorizations, making such registrations,
declarations or filings, giving such notices, and having such waiting periods
expire as are necessary to avoid a violation of Law or an Order.
Section 2.6 COMPLIANCE, PERMITS.
(a) Neither the Company nor any of the Company Subsidiaries is in
conflict with, or in default or violation of (i) any Law or Order applicable to
the Company or any of the Company Subsidiaries or by which its or any of their
respective properties is bound or affected (excluding for purposes of this
Section 2.6(a) Environmental Laws) or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of the Company Subsidiaries is a party or
by which the Company or any of the Company Subsidiaries or its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(b) The Company and the Company Subsidiaries hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from Governmental Authorities that are necessary to the operation of
the business of the Company and
13
the Company Subsidiaries as it is now being conducted (collectively, the
"Company Permits"), except when the failure to have such Company Permits would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company and the Company Subsidiaries are in compliance with the
terms of the Company Permits except, in each case, where the failure to so
comply would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(c) All filings required to be made by the Company or any of the
Company Subsidiaries since December 31, 1996 under any applicable Laws or Orders
relating to the regulation of public utilities have been filed with the
appropriate PUC or Health Agency or any other appropriate Governmental Authority
(including, without limitation, to the extent required, the state public utility
regulatory agencies in New Hampshire), as the case may be, including all forms,
statements, reports and agreements and all documents, exhibits, amendments and
supplements appertaining thereto, including but not limited to all rates,
tariffs, franchises, service agreements and related documents and all such
filings complied, as of their respective dates, in all material respects with
all applicable requirements of the appropriate Laws or Orders, except for such
filings or such failures to comply that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 2.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998, and each other form, report and document filed or to be
filed by it under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act") or the Exchange Act
with the Securities and Exchange Commission ("SEC") subsequent to December 31,
1998 (collectively, the "Company SEC Reports") (i) was prepared in all material
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time it was filed (or
if amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company Subsidiaries is
required to file any form, report or other document with the SEC or any national
securities exchange or quotation service or comparable Governmental Authority.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto), and each fairly
presents in all material respects the consolidated financial position of the
Company and the Company Subsidiaries as of the respective dates thereof or for
the respective periods set forth therein, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
Section 2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Company SEC Reports, since December 31, 2001, the Company and the Company
Subsidiaries
14
have conducted their business in the ordinary course and there has not occurred:
(i) any Material Adverse Effect on the Company; (ii) any amendments or changes
in the Company Articles or the Company By-laws; (iii) any material change by the
Company or the Company Subsidiaries in their accounting methods, principles or
practices; and (iv) any sale of a material amount of property of the Company or
any of the Company Subsidiaries, except in the ordinary course of business.
Section 2.9 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of
the Company Subsidiaries has any liability or obligation of any nature
whatsoever (whether known, unknown, absolute, accrued, contingent or otherwise)
except liabilities (a) in the aggregate adequately provided for in the Company's
audited balance sheet (including any related notes thereto) as of December 31,
2001 (the "December Company Balance Sheet"), (b) incurred on or before December
31, 2001 in the ordinary course of business and not required under GAAP to be
reflected on the December Company Balance Sheet, (c) incurred since December 31,
2001 in the ordinary course of business substantially consistent with past
practice, (d) incurred in connection with this Agreement, (e) disclosed in the
Company SEC Reports or (f) which would not individually or in the aggregate have
a Material Adverse Effect on the Company.
Section 2.10 ABSENCE OF LITIGATION. Except for claims, actions, suits,
proceedings or investigations that would not, individually or in the aggregate,
have a Material Adverse Effect on the Company (collectively, "Claims"), there
are no claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company or any of the Company
Subsidiaries, or any properties or rights of the Company or any of the Company
Subsidiaries, before any Governmental Authority. Neither the Company nor any of
the Company Subsidiaries is subject to any outstanding Order that could
reasonably be expected to result in a Material Adverse Effect on the Company or
that could reasonably be expected to prevent or delay the Company in any
material respect from performing its obligations under, or consummating the
transactions contemplated by, this Agreement.
15
Section 2.11 EMPLOYEE BENEFIT PLANS, EMPLOYMENT AGREEMENTS.
(a) Section 2.11(a) of the Company Disclosure Schedule lists, with
respect to the Company and the Company Subsidiaries, the following plans,
agreements or arrangements (collectively the "Company Employee Plans"):(i) all
employee pension plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) intended to qualify under
Section 401(a) of the Code, (ii) all employee welfare plans (as defined in
Section 3(1) of ERISA) maintained or contributed to by the Company or the
Company Subsidiaries on behalf of employees, (iii) all other stock option or
stock purchase arrangements with employees, (iv) all other employment, executive
compensation, consulting or severance agreements, written or otherwise, between
the Company or any of the Company Subsidiaries and any employee of or consultant
to the Company or any of the Company Subsidiaries where the aggregate amount of
expense during the last fiscal year or the aggregate amount of payments in any
future one year period exceeds $25,000 and (v) all other pension, excess
benefit, bonus, incentive or deferred compensation arrangements with employees.
There have been made available to Parent copies of (i) each such written Company
Employee Plan, (ii) the most recent annual report on Form 5500, with
accompanying schedules and attachments, filed with respect to each Company
Employee Plan required to make such a filing, and (iii) the most recent
actuarial valuation for each Company Employee Plan subject to Title IV of ERISA.
(b) Except as set forth on Section 2.11(a) of the Company Disclosure
Schedule, (i) none of the Company Employee Plans provides retiree medical or
life insurance benefits to any former employee of the Company or a Company
Subsidiary (other than post-employment benefits provided in accordance with the
health care continuation provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or comparable state law), and none of
the Company Employee Plans is a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA; (ii) all Company Employee Plans are in material
compliance with the applicable requirements prescribed by ERISA and the Code,
and the Company and the Company Subsidiaries have performed all material
obligations required to be performed by it under each of the Company Employee
Plans; (iii) each Company Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of the Code
is the subject of a favorable determination letter from the Internal Revenue
Service (the "IRS") or the time within which an application for such a
determination with respect to any such plan may be filed has not expired; (iv)
all contributions required to be made to any Company Employee Plan pursuant to
Section 412 of the Code, or the terms of the Company Employee Plan or any
collective bargaining agreement, have been made on or before their due dates;
(v) with respect to each Company Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30 day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA has
occurred; (vi) neither the Company nor any Company Subsidiary has incurred, and
neither the Company nor any Company Subsidiary reasonably expects to incur, any
liability under Title IV of ERISA (other than liability for premium payments to
the Pension Benefit Guaranty Corporation arising in the ordinary course); (vii)
there is no pending or, to the knowledge of the Company or any Company
Subsidiary, threatened litigation, administrative action or proceeding relating
to any Company Employee Plan (other than claims for benefits in the ordinary
course of business) that can reasonably be expected to give rise to any material
16
liability to the Company or any Company Subsidiary or to affect adversely the
tax-qualified status of any Company Employee Plan; and (viii) the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not increase the amount of, accelerate the time of payment of, or
the vesting of compensation (including, by way of clarification and not
limitation, any severance or displacement pay) payable to any employee under any
Company Employee Plan.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a
true and complete list of each individual who holds any Company Stock Option as
of the date hereof, together with the number of shares of Company Common Stock
subject to such Company Stock Option, the option price of such Company Stock
Option (to the extent determined as of the date hereof), whether such Company
Stock Option is intended to qualify as an incentive stock option within the
meaning of Section 422(b) of the Code (an "ISO") and the expiration date of such
option.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth a
true and complete list of (i) all employment agreements by and between the
Company or any of the Company Subsidiaries and its employees and officers; (ii)
all agreements with consultants who are individual, natural persons obligating
the Company or any of the Company Subsidiaries to make annual cash payments in
an amount exceeding $50,000; and (iii) all plans, programs, agreements and other
arrangements of the Company or any of the Company Subsidiaries with or relating
to its employees which contain change in control provisions.
Section 2.12 EMPLOYMENT AND LABOR MATTERS.
(a) There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company or any of the Company Subsidiaries and
any of their respective employees, which controversies could, individually or in
the aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any of the Company Subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or the Company Subsidiaries, except for the Labor
Contract (as defined in Schedule 2.5(a) of the Company Disclosure Schedule). The
Company has no knowledge of any activities or proceedings of any labor union to
organize any employees other than those covered by the Labor Contract; and the
Company has no knowledge of any strikes or lockouts, or any material slowdowns,
work stoppages, or threats thereof, by or with respect to any employees of the
Company or any of the Company Subsidiaries which would have a Material Adverse
Effect on the Company.
(b) Neither the Company nor any of the Company Subsidiaries has
violated, in a manner that would reasonably be expected to have a Material
Adverse Effect on the Company, any provision of Law or Order regarding the terms
and conditions of employment of employees, former employees, or prospective
employees or other labor related matters, including without limitation, Laws,
Orders and awards relating to discrimination, fair labor standards and
occupational health and safety, wrongful discharge or violation of the personal
rights of employees, former employees or prospective employees.
17
Section 2.13 TITLE TO PROPERTY. The Company and each of the Company
Subsidiaries have good and marketable title to all of their properties and
assets, free and clear of all Liens, except Liens for taxes not yet due and
payable and such Liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company; and to the knowledge of the
Company all leases pursuant to which the Company or any of the Company
Subsidiaries lease from others material amounts of real or personal property are
in good standing, valid and effective in accordance with their respective terms
and there is not, to the knowledge of the Company, under any of such leases, any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default), except where the lack of such good
standing, validity and effectiveness or the existence of such default would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Section 2.14 REAL AND PERSONAL PROPERTY. Except for such matters that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company:
(a) The Company and the Company Subsidiaries own or have sufficient
rights and consents to use under existing franchises, leases, easements and
license agreements all real property (including all buildings, fixtures and
other improvements thereto) necessary for the conduct of their businesses and
operations as currently conducted; and all such property is in good condition
and repair and is suitable in all material respects for the purpose for which it
is now being used in the conduct of the businesses of the Company and the
Company Subsidiaries.
(b) All personal property that is owned by the Company or any of the
Company Subsidiaries or used by any of them in the conduct of the businesses of
the Company and the Company Subsidiaries is in good working condition, subject
to normal wear and tear, and is suitable in all material respects for the
purposes for which it is now being used in the conduct of the businesses of the
Company and the Company Subsidiaries.
Section 2.15 WATER QUALITY. The quality of water supplied by the
Company and the Company Subsidiaries to their respective customers complies with
all applicable standards for quality and safety of water imposed by applicable
Laws and Orders, except where lack of compliance with such standards would not
have a Material Adverse Effect on the Company.
Section 2.16 REGULATION AS A UTILITY. Certain Company Subsidiaries are
regulated as public utilities in New Hampshire. Neither the Company nor any
"subsidiary company" or "affiliate" (as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended (the "1935 Act")) of the Company
is subject to regulation as a public utility or public service company (or
similar designation) by any other state in the United States, by the United
States or any agency or instrumentality of the United States or by any foreign
country. The Company is not a holding company under the 1935 Act. Except as
disclosed in Section 2.16 of the Company Disclosure Schedule, no assets of the
Company or any of Company Subsidiaries have been disallowed in any ratemaking
procedure before any Governmental Authority.
18
Section 2.17 TAXES.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
fees, levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without limitation) (i)
income, franchise, profits, gross receipts, ad valorem, net worth, value added,
sales, use, service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
(ii) interest, penalties, additional taxes and additions to tax imposed with
respect thereto; and "Tax Returns" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the IRS or any other
taxing authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
(b) The Company and the Company Subsidiaries have timely filed all Tax
Returns required to be filed by them, except for any Tax Returns as to which the
failure to file, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. All such filed Tax Returns are complete and
correct, in all material respects. The Company and the Company Subsidiaries have
paid and discharged all Taxes as shown as due on such Tax Returns in connection
with or with respect to the periods or transactions covered by such Tax Returns
and have paid all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings (to the extent that any such proceedings
are required) and except as may be determined to be owed upon completion of any
Tax Return not yet filed based upon an extension of time to file, and there are
no other Taxes that would have a Material Adverse Effect on the Company if
asserted by a taxing authority, except with respect to which the Company is
maintaining reserves to the extent currently required. All tax reserves that the
Company is maintaining are disclosed on the Company Disclosure Schedule. There
are no Tax liens on any assets of the Company or any Company Subsidiary thereof
and (ii) neither the Company nor any of the Company Subsidiaries has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. The accruals and reserves for Taxes
(including deferred taxes) reflected in the December Company Balance Sheet are
in all material respects adequate to cover all Taxes required to be accrued
through the date thereof (including interest and penalties, if any, thereon and
Taxes being contested) in accordance with GAAP. Neither the Company nor any
Company Subsidiary: (i) has made the election under Section 341(f) of the Code;
(ii) has any unamortized adjustments attributable to a change in accounting
method under Section 481 of the Code; (iii) has liability for the Taxes of any
other entity or person under Treasury Regulation Section 1.1502-6 as a
transferee or successor, by contract or otherwise; (iv) has ever been included
in a consolidated or combined Tax return (other than a consolidated group the
common parent of which is the Company); (v) has made, or is obligated to make,
in connection with the transactions contemplated by this Agreement or under any
agreement, plan or arrangement to make a payment or payments to any employee or
other service provider that would be subject to Section 280G or Section 162(m)
of the Code; or (vi) is currently under examination or audit by any Tax
authority or has been notified that it will be under examination or audit.
19
Section 2.18 ENVIRONMENTAL MATTERS. Except in all cases as, in the
aggregate, have not had and would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, the Company and each of the Company
Subsidiaries (i) have given all notifications and obtained all applicable
permits, licenses and other authorizations (collectively, the "Environmental
Permits") that are required to be given or obtained under all applicable
federal, state or local laws or any regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder relating to pollution or protection of human health and the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, wastes or hazardous or toxic
materials or substances into ambient air, surface water, ground water, or land
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, wastes or hazardous or toxic materials or substances
("Environmental Laws") by the Company or the Company Subsidiaries (or their
respective agents), which Environmental Permits are in full force and effect;
(ii) are in compliance with all terms and conditions of such Environmental
Permits; (iii) are in compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in applicable Environmental Laws; (iv) as of the date hereof, are not
aware of nor have received written or, to the Company's knowledge, oral notice
of any past or present violations of Environmental Laws or Environmental Permits
or any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with Environmental Permits or which would give rise to any common law
or statutory liability, or otherwise form the basis of any claim, action, suit
or proceeding, against the Company or any of the Company Subsidiaries based on
or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or release
into the environment, of any pollutant, contaminant, waste or hazardous or toxic
material or substance; and (v) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by the Company or the Company Subsidiaries (or any of their
respective agents) thereunder.
Section 2.19 INTELLECTUAL PROPERTY. The Company or the Company
Subsidiaries owns, leases or licenses all Intellectual Property Rights necessary
to conduct the business of the Company, except where the failure to own, lease
or license would not have a Material Adverse Effect on the Company. Except for
such claims, infringements and misappropriations that would not have a Material
Adverse Effect on the Company, (i) there has been no claim made against the
Company or any of the Company Subsidiaries asserting the invalidity, misuse or
unenforceability of any Intellectual Property Rights, (ii) the Company is not
aware of any infringement or misappropriation of any of its Intellectual
Property Rights, and (iii) to the Company's knowledge, neither the Company nor
any of the Company Subsidiaries has infringed or misappropriated any
Intellectual Property Rights of any other entity. As used herein, "Intellectual
Property Rights" means any trademark, servicemark, registration therefor or
application for registration therefor, trade name, invention, patent, patent
application, trade secret, know-how, copyright, copyright registration,
application for copy registration, or any other similar type of proprietary
intellectual property, in each case owned, leased or licensed and used or held
for use by the Company or any of the Company Subsidiaries.
20
Section 2.20 INSURANCE. All property, automobile liability, workers
compensation, employer's liability, fire and casualty, general liability,
business interruption, product liability, professional liability and sprinkler
and water damage insurance policies maintained by the Company or any of the
Company Subsidiaries are, to the Company's knowledge, with reputable insurance
carriers, provide, to the Company's knowledge, full and adequate coverage for
all normal risks incident to the business of the Company and the Company
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by entities engaged in similar
businesses and subject to the same or similar perils or hazards, except as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 2.21 OPINION OF FINANCIAL ADVISER. The Board has received the
opinion of the Company's financial advisor, XX Xxxx Xxxxxx ("SGBD"), to the
effect that, as of the date of this Agreement, the Merger Consideration is fair
from a financial point of view to the Company's shareholders.
Section 2.22 BROKERS. No broker, finder or investment banker (other
than SGBD) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of the Company
Subsidiaries. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and SGBD pursuant to which
such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
Section 2.23 RIGHTS AGREEMENT. The Board has taken all action necessary
so that the execution of this Agreement, the announcement and consummation of
the Merger and the other transactions contemplated by this Agreement will not
cause the preferred share purchase rights pursuant to the Rights Agreement dated
as of April 20, 2000 between the Company and Fleet National Bank, as Rights
Agent (the "Rights Agreement"), to become exercisable or result in either Parent
or Acquisition Sub or any of their affiliates being considered as an "Acquiring
Person" or the occurrence of a "Distribution Date" or a "Shares Acquisition
Date" (as such terms are defined in the Rights Agreement).
Section 2.24 CHANGE OF CIRCUMSTANCE. Neither the Company nor any of
Company Subsidiaries has knowledge of any event or circumstance that indicates
that, whether on account of the transactions contemplated by this Agreement or
otherwise, any customer, agent, representative or supplier of the Company or any
of Company Subsidiaries intends to discontinue, diminish or change its
relationship with the Company or any of Company Subsidiaries in any way that
would be reasonably likely to have a Material Adverse Effect.
21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
Parent and Acquisition Sub hereby, jointly and severally, represent and
warrant to the Company that, except as set forth in the written disclosure
schedule delivered by Parent to the Company on or prior to the date hereof (the
"Parent Disclosure Schedule"):
Section 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Parent and Acquisition Sub is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation. Each
of Parent and Acquisition Sub has the requisite corporate power and authority
and is in possession of all Approvals necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted, except where the failure to have such power,
authority and Approvals would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Each of Parent and Acquisition Sub is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
Section 3.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of consists of
100,000,000 shares of Parent Common Stock. and 1,770,819 shares of Parent
Preferred Stock. As of the close of business on March 31, 2002, there were: (i)
68,568,615 shares of Parent Common Stock issued and outstanding; (ii) 925,624
shares of Parent Common Stock held as treasury shares; (iii) 1,923,079 shares of
Parent Common Stock reserved for issuance upon exercise of options available for
grant pursuant to Parent's stock option plans; (iv) 100,000 shares of Series A
Parent Preferred Stock reserved for issuance under the Parent's Shareholder
Rights Plan; (v) 8,160 shares of Series B Parent Preferred Stock outstanding;
(vi) 500,000 shares of Parent Preferred Stock reserved for issuance under
Parent's shelf registration; and (vii) up to 10,000,000 shares of Parent Common
Stock reserved for issuance under Parent's stock option plans, Dividend
Reinvestment and Direct Stock Purchase Plan, Employee Stock Purchase Plan,
Consumers Water Company 401(k) Plan and Parent's shelf registration statement.
Except as set forth above, as of the close of business on March 31, 2002, there
were no shares of capital stock or other equity securities of Parent issued,
reserved for issuance or outstanding. There are no options, warrants or other
similar rights, agreements, arrangements, commitments or understandings to which
Parent is a party, whether or not in writing, of any character relating to the
issued or unissued capital stock or other securities of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue (whether
upon conversion, exchange or otherwise) or sell any share of capital stock of,
or other equity interests in or other securities of, Parent or any of its
subsidiaries other than those listed in Section 3.2 of the Parent Disclosure
Schedule. There are no obligations, contingent or otherwise, of Parent or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or capital stock of any subsidiary or any other securities of
Parent or any of its subsidiaries or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any such
subsidiary or any other entity. All outstanding shares of capital stock of
Parent are, and all shares which may be issued as described above will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. The shares of Parent Common Stock to be
22
issued in connection with the Merger will, when issued, be duly authorized,
validly issued, fully paid and nonassessable. As of the Effective Time of the
Merger, the Board of Directors of the Parent shall have reserved for issuance
upon exercise of options available for grant pursuant to the Company Stock Plans
a number of shares of Parent Common Stock equal to the number of shares of
Company Common Stock subject to Company Stock Options granted under the Company
Stock Plans multiplied by the Exchange Ratio.
(b) As of the date hereof, the authorized capital stock of Acquisition
Sub consists of 1,000 shares of common stock, par value $1.00 per share, 1,000
of which have been validly issued, are fully paid and nonassessable and are
owned by Parent, free and clear of any Lien, and as of the Closing Date, all the
issued and outstanding shares of the common stock of Acquisition Sub will be
owned by Parent free and clear of any Lien. All of the outstanding shares of
capital stock of each of Parent's subsidiaries other than Acquisition Sub are
duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by Parent or another subsidiary of Parent free and clear of all
Liens.
Section 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Acquisition Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Parent and Acquisition Sub and the consummation by
each of Parent and Acquisition Sub of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of Parent and Acquisition Sub, and no other corporate proceedings on the part of
Parent or Acquisition Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been
approved by Parent, as the sole shareholder of Acquisition Sub. No other vote of
holders of any class or series of securities of Parent or Acquisition Sub is
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Acquisition Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Parent and Acquisition Sub enforceable against each of
them in accordance with its terms.
23
Section 3.4 NO CONFLICT, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and
Acquisition Sub do not, and the performance of this Agreement by Parent and
Acquisition Sub will not, (i) conflict with or violate the certificate of
incorporation (or equivalent organizational documents) or by-laws of Parent or
Acquisition Sub, (ii) conflict with or violate any Law or Order applicable to
Parent or any of its subsidiaries or by which its or their respective properties
are bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or modification in a manner materially adverse to Parent or its
subsidiaries of any right or benefit under, or impair Parent's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration,
repayment or repurchase, increased payments or cancellation under, or result in
the creation of a Lien on any of the properties or assets of Parent or any of
its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its respective properties are bound or affected, except in the case of (ii)
or (iii) only, for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent or its subsidiaries and subject to obtaining or making
the consents, approvals, authorizations, permits, filings or notifications
referred to in Section 3.4(b).
(b) The execution and delivery of this Agreement by each of Parent and
Acquisition Sub does not, and the performance of this Agreement by each of
Parent and Acquisition Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, except for (i) applicable requirements of the Exchange Act, (ii) the
pre-merger notification requirements of the HSR Act, (iii) the filing and
recordation of appropriate merger or other documents as required by the New
Hampshire Law, (iv) Laws of any of the PUCs, each of which is identified in
Section 2.5(c) of the Company Disclosure Schedule, and (v) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise prevent Parent or Acquisition Sub from performing their respective
obligations under this Agreement, and would not have, individually or in the
aggregate, a Material Adverse Effect on Parent. Consents, approvals, permit,
Orders, authorizations, registrations, declarations and filings required under
or in relation to any of the foregoing clauses (i) through (v) are hereinafter
referred to as the "Parent Required Consents". The parties hereto agree that
references in this Agreement to "obtaining" Parent Required Consents means
obtaining such consents, approvals or authorizations, making such registrations,
declarations or filings, giving such notices; and having such waiting periods
expire as are necessary to avoid a violation of Law or an Order.
Section 3.5 NO PRIOR ACTIVITIES; FINANCING; VOTE IN FAVOR OF MERGER.
(a) Acquisition Sub was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. As of the date hereof and the
Effective Time, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Acquisition Sub has not and will
24
not have incurred, directly or indirectly, through any subsidiary or affiliate,
any obligation or liability or engaged in any business activity of any type or
kind whatsoever or entered into any agreement or arrangement with any person.
(b) Parent has immediately available to it cash necessary to satisfy
Parent's and Acquisition Sub's payment obligations hereunder including, without
limitation, the obligation to pay all Merger related fees and expenses.
(c) Parent does not own, directly or indirectly, any shares of Company
Common Stock or other capital stock of the Company, or any options, warrants or
other rights to acquire any shares of Company Common Stock or any other capital
stock of the Company, or in each case, any interests therein, other than
pursuant to the Merger as contemplated by this Agreement.
Section 3.6 ABSENCE OF LITIGATION. Except for claims, actions, suits,
proceedings or investigations that would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of Parent
or any of its subsidiaries, before any Governmental Authority. Neither Parent
nor any of its subsidiaries is subject to any outstanding Order that could
reasonably be expected to result in a Material Adverse Effect on Parent or that
could reasonably be expected to prevent or delay Parent in any material respect
from performing its obligations under, or consummating the transactions
contemplated by, this Agreement.
Section 3.7 COMPLIANCE, PERMITS.
(a) Neither Parent nor any of its subsidiaries is in conflict with, or
in default or violation of (i) any Law or Order applicable to Parent or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not have a Material Adverse Effect on Parent.
(b) Parent and its subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
Governmental Authorities that are necessary to the operation of the business of
Parent and its subsidiaries as it is now being conducted (collectively, the
"Parent Permits"), except when the failure to have such Parent Permits would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
Parent and its subsidiaries are in compliance with the terms of the Parent
Permits except, in each case, where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(c) All filings required to be made by Parent or any of its
subsidiaries since December 31, 1996 under any applicable Laws or Orders
relating to the regulation of public utilities have been filed with the
appropriate PUC or Health Agency or any other appropriate
25
Governmental Authority, as the case may be, including all forms, statements,
reports and agreements and all documents, exhibits, amendments and supplements
appertaining thereto, including but not limited to all rates, tariffs,
franchises, service agreements and related documents and all such filings
complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate Laws or Orders, except for such
filings or such failures to comply that would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
Section 3.8 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and each other form, report and document filed or to be filed
by it under the Securities Act or the Exchange Act with the SEC subsequent to
December 31, 1998 (collectively, the "Parent SEC Reports") (i) was prepared in
all material respects in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and (ii) did not at the time it was
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any form, report or other document with the SEC
or any national securities exchange or quotation service or comparable
Governmental Authority.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports was
prepared in accordance with United States GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto), and each fairly presents in all material respects the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof or for the respective periods set forth therein, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
Section 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Parent SEC Reports, since December 31, 2001, Parent and its subsidiaries
have conducted their business in the ordinary course and there has not occurred:
(i) any Material Adverse Effect on Parent; (ii) any amendments or changes in
Parent's Certification of Incorporation or Parent's By-laws; (iii) any material
change by Parent or its subsidiaries in their accounting methods, principles or
practices; and (iv) any sale of a material amount of property of Parent or any
of its subsidiaries, except in the ordinary course of business.
26
Section 3.10 NO UNDISCLOSED LIABILITIES. Neither Parent nor any of its
subsidiaries has any liabilities (whether absolute, accrued, contingent or
otherwise) except liabilities (a) in the aggregate adequately provided for in
Parent's audited balance sheet (including any related notes thereto) as of
December 31, 2001 (the "December Parent Balance Sheet"), (b) incurred on or
before December 31, 2001 in the ordinary course of business and not required
under GAAP to be reflected on the December Parent Balance Sheet, (c) incurred
since December 31, 2001 in the ordinary course of business substantially
consistent with past practice, (d) incurred in connection with this Agreement,
(e) disclosed in the Parent SEC Reports or (f) which would not individually or
in the aggregate have a Material Adverse Effect on Parent.
Section 3.11 TAX MATTERS. Parent and each of its subsidiaries
(a) have timely filed all Tax Returns required to be filed by Parent and each of
its subsidiaries, except for any Tax Returns as to which the failure to file,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, (b) have paid all Taxes shown thereon to be due, and (c) have provided
adequate accruals in accordance with GAAP in its financial statements for any
Taxes that have not been paid. No audit or other examination of any Tax Return
of Parent or any of its subsidiaries is presently being conducted by a Tax
authority, nor has Parent or any of its subsidiaries been notified of any
request for such an audit or other examination. No extension of the statute of
limitations on the assessment of any Taxes has been granted by Parent or any of
its subsidiaries and is currently in effect. As of the date hereof, neither
Parent nor any of its subsidiaries has taken any action or failed to take any
action that could reasonably be expected to cause the Merger to fail to qualify
as a "reorganization" within the meaning of Section 368 of the Code.
Section 3.12 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Acquisition Sub.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 COVENANTS OF COMPANY. During the period from the date of
this Agreement and continuing until the Effective Time, the Company agrees as to
itself and the Company Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or as otherwise indicated in Section 4.1 of the
Company Disclosure Schedule or as required by a Governmental Authority of
competent jurisdiction, written notice of which will be given promptly to
Parent, or to the extent that Parent shall otherwise consent in writing):
(a) ORDINARY COURSE.
(i) The Company and each of the Company Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary
course, in all material respects, in substantially the same manner as
heretofore conducted, and shall use all commercially reasonable efforts
to preserve intact their present lines of business, business
organizations and reputations, maintain their rights, franchises and
permits, keep available the services
27
of their officers and key employees, maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, and preserve their relationships with customers, suppliers
and others having business dealings with them to the end that their
ongoing businesses shall not be impaired in any material respect at
the Effective Time; provided, however, that no action by the Company
or the Company Subsidiaries with respect to matters specifically
addressed by any other provision of this Section 4.1 shall be deemed a
breach of this Section 4.1(a)(i) unless such action would constitute a
breach of one or more of such other provisions. Nothing in this
Section 4.1(a)(i) shall require the Company or the Company
Subsidiaries to deviate from their respective normal business
practices or to offer any additional compensation or incentives to
employees, customers, suppliers or others.
(ii) Other than with the consent of Parent, which shall not be
unreasonably withheld, the Company shall not, and shall not permit any
of the Company Subsidiaries to, (A) enter into any new material line of
business or (B) incur or commit to any capital expenditures other than
capital expenditures contemplated in the Company's capital budget,
reasonable amounts required to meet emergencies, and such additional
amounts as may be required to comply with Laws and Orders then in
effect or required by a Governmental Authority. Notwithstanding the
foregoing, the Company shall give Parent thirty (30) days prior written
notice before committing to any non-emergency capital expenditure in
excess of $500,000 and shall consult with and shall cause its Vice
President - Engineering to consult with Parent's Chief Engineer
regarding such expenditure, including without limitation the proposed
design, implementation and expense of the capital item in question.
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall not, and
shall not permit any of the Company Subsidiaries to, and shall not propose to,
(i) declare, set aside or pay any dividends on or make other distributions
(whether in cash or otherwise) in respect of any of its capital stock, except
(x) dividends by wholly owned subsidiaries of the Company to such subsidiary's
parent or another wholly owned subsidiary of the Company and (y) the regular
quarterly dividends on the Company Common Stock in the amount of no more than
$0.195 per share of Company Common Stock, (ii) split, combine, subdivide or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned subsidiary of the Company which remains a wholly owned subsidiary of the
Company after consummation of such transaction, (iii) adopt a plan of complete
or partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (iv) directly or indirectly
repurchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock,
except that the Company may cause the plan administrator of the Company's
Dividend Reinvestment and Common Stock Purchase Plan (the "DRSPP") to purchase
shares of Company Common Stock in the open market or in one or more privately
negotiated transactions with any person who is not an affiliate of the Company,
as contemplated by Section 5.10 of this Agreement.
28
(c) ISSUANCE OF SECURITIES. Except for the issuance of shares of
Company Common Stock issuable pursuant to the Company Stock Options outstanding
as of the date of this Agreement, the Company shall not, and shall not permit
any of the Company Subsidiaries to, issue, deliver or sell, pledge or encumber,
or authorize or propose the issuance, delivery or sale, pledge or encumbrance
of, any shares of its capital stock of any class, or any securities convertible
into or exercisable for, or any rights, warrants or options to acquire, any such
shares, or enter into any agreement with respect to any of the foregoing, other
than issuances by a wholly owned subsidiary of the Company of capital stock to
such subsidiary's parent or another wholly owned subsidiary of the Company.
(d) GOVERNING DOCUMENTS. Except to the extent required to comply with
their respective obligations hereunder or, following written notice to Parent,
as may be required by Law or Order or required by the rules and regulations of
The Nasdaq Stock Market ("Nasdaq"), the Company shall not, and shall not permit
any of the Company Subsidiaries to, amend or propose to amend their respective
Articles of Incorporation, By-Laws or other governing documents.
(e) NO ACQUISITIONS. Other than with the consent of Parent, which shall
not be unreasonably withheld, the Company shall not, and shall not permit any of
the Company Subsidiaries to, acquire or agree to acquire for a purchase price
greater than $500,000 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
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets other than the acquisition of assets as are used in the
operations of the business of the Company and the Company Subsidiaries in the
ordinary course, consistent with past practice. Notwithstanding the foregoing,
the Company shall give Parent thirty (30) days prior written notice of any such
acquisition for a purchase price greater than $250,000 and shall consult with
Parent's Chief Executive Officer regarding such acquisition.
(f) NO DISPOSITIONS. Other than (i) with the consent of Parent, which
shall not be unreasonably withheld, (ii) as set forth in Section 4.1(f) of the
Company Disclosure Schedule and (iii) transfers between the Company and the
wholly owned subsidiaries of the Company and between the wholly owned
subsidiaries of the Company, the Company shall not, and shall not permit any
Company Subsidiary to, sell, lease, transfer, encumber or otherwise dispose of,
or agree to sell, lease, transfer, encumber or otherwise dispose of, any of its
assets (including capital stock of the Company Subsidiaries) that are material
to the Company.
(g) INVESTMENTS; INDEBTEDNESS. The Company shall not, and shall not
permit any of the Company Subsidiaries to, (i) make any loans, advances or
capital contributions to, or investments in, any other person, other than loans,
advances, capital contributions and investments by the Company or a Company
Subsidiary to or in the Company or any wholly owned subsidiary of the Company,
(ii) pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
payments, discharges, settlements or satisfactions incurred or committed to in
the ordinary course of business substantially consistent with past practice or
reflected in the most recent consolidated financial statements (or the notes
thereto) of the Company included in the most
29
recent Company SEC Reports filed prior to the date of this Agreement, or (iii)
create, incur, assume or suffer to exist any indebtedness, guarantees, loans or
advances or any debt securities or any warrants or rights to acquire any debt
securities not in existence as of the date of this Agreement except for
short-term indebtedness incurred under the Company's current short-term
facilities (and any replacements thereof) in the ordinary course of business,
substantially consistent with past practices, and which shall not exceed
$500,000 in the aggregate without the consent of Parent, which shall not be
unreasonably withheld, in each case as such facilities and other existing
indebtedness may be amended, extended, modified, refunded, renewed, refinanced
or replaced after the date of this Agreement, but only if the aggregate
principal amount thereof is not increased thereby, the term thereof is not
extended thereby (or, in the case of replacement indebtedness, the term of such
indebtedness is not for a longer period of time than the period of time
applicable to the indebtedness so replaced) and the other terms and conditions
thereof, taken as a whole, are not materially less advantageous to the Company
and the Company Subsidiaries than those in existence as of the date of this
Agreement.
(h) COMPENSATION. The Company shall not enter into or amend or renew
any employment, consulting, severance or similar agreements or arrangements with
any director, officer or employee of the Company or the Company Subsidiaries, or
grant any salary or wage increase or increase any employee benefit (including
incentive or bonus payments), or modify or terminate or establish any Company
Employee Plans, except (i) for normal individual increases in compensation to
employees in the ordinary course of business substantially consistent with past
practice, (ii) for other changes that are required by applicable Law, (iii) to
satisfy contractual obligations disclosed in the Company Disclosure Schedule,
(iv) for grants of awards to newly hired employees substantially consistent with
past practice, (v) bonuses disclosed in the Company Disclosure Schedule,
including, without limitation, the retention bonuses described in Schedule 4.1
of the Company Disclosure Schedule (the "Retention Bonuses"), (vi) modification
of any Company Employee Plan required by Law, or (vii) termination of any
Company Employee Plan with the consent of Parent, which shall not be
unreasonably withheld. Other than with the prior written consent of Parent,
which shall not be unreasonably withheld, the Company shall not increase the
aggregate number of employees of the Company and the Company Subsidiaries.
(i) OTHER ACTIONS. The Company shall not, and shall not permit any of
the Company Subsidiaries to take any action that would, or fail to take any
action which failure would, or that could reasonably be expected to, result in,
(i) a material breach of any provision of this Agreement, or (ii) any of the
conditions to the Merger set forth in Article VI not being satisfied.
(j) ACCOUNTING METHODS; INCOME TAX MATTERS. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, or as required by
a Governmental Authority, the Company shall not, nor shall it permit any of the
Company Subsidiaries to, change its methods of accounting or accounting
practices in effect at December 31, 2001, except as required by GAAP. The
Company shall not, nor shall it permit any of the Company Subsidiaries to, (i)
change its fiscal year, (ii) make or rescind any material tax election, (iii)
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit, or controversy in respect of Taxes for any
amount in excess of the amount reserved therefor and reflected in the most
recent consolidated financial statements (or the notes thereto)
30
of the Company included in the most recent Company SEC Report, or (iv) change in
any material respect any of its methods of reporting income, deductions or
accounting for federal income Tax purposes from those employed in the
preparation of its federal income Tax Return for the taxable year ending
December 31, 2000.
(k) CONTRACTS. The Company shall not, nor shall it permit any of the
Company Subsidiaries, except in the ordinary course of business substantially
consistent with past practice (i) to modify, amend, terminate or fail to use
commercially reasonable efforts to renew any Material Contract or waive, release
or assign any material rights or claims under a Material Contract to which the
Company or any of the Company Subsidiaries is a party or (ii) to enter into any
new Material Contracts.
(l) REGULATORY MATTERS. Except for filings in the ordinary course of
business substantially consistent with past practice, the Company shall inform
Parent reasonably in advance of making a filing to implement any change in any
of its or the Company Subsidiaries' rates or surcharges for water service or
executing any agreement with respect thereto that is otherwise permitted under
this Agreement and shall, and shall cause the Company Subsidiaries to, deliver
to Parent a copy of each such filing or agreement. Other than with the consent
of Parent, which shall not be unreasonably withheld, the Company shall, and
shall cause the Company Subsidiaries to, make all such filings (A) only in the
ordinary course of business substantially consistent with past practice or (B)
as required by a Governmental Authority.
(m) COMPROMISE; SETTLEMENT. Neither the Company nor any of the Company
Subsidiaries shall settle or compromise any pending or threatened claims or
arbitrations (other than any Claims or arbitrations relating to matters set
forth in the Company SEC Reports), other than settlements which involve solely
the payment of money (without admission of liability) that would not result in
an uninsured payment by or liability of the Company in excess of $50,000 in the
aggregate above the reserves established specifically therefor on the books of
the Company as of the date hereof.
(n) TRANSACTION COSTS. The Company shall expense all costs related to
this transaction as incurred, and shall ensure that any amounts not paid by the
Closing Date are accrued on the Company's books prior to the Closing Date,
including but not limited to (a) investment banking fees and expenses, which in
no event shall exceed $2,600,000, which fee shall cover SGBD providing to Parent
or the Company after the Closing such cooperation and assistance as Parent or
the Company may request to document the investment banker's services in order to
assess the tax deductibility of the fees and expenses for the Company, and (b)
the Retention Bonuses, which in no event shall exceed the amounts set forth in
Schedule 4.1 of the Company Disclosure Schedule.
(o) NEW ACCOUNTING SYSTEM. The Company shall cooperate with Parent in a
joint project to install the Parent's Xxxxxx accounting system at the Company
during 2002 in anticipation of implementation effective January 1, 2003 (or the
Closing Date whichever is later). All costs related to such installation will be
paid by Parent but necessary cooperation by Company employees (including
accounting and information service employees) will not be unreasonably withheld.
31
(p) DIRECTOR DEFERRED COMPENSATION PLAN. The Company shall use all
commercially reasonable efforts to terminate the Company's Director Deferred
Compensation Plan as soon as practicable after the date of this Agreement.
Section 4.2 COVENANTS OF PARENT.
(a) During the period from the date of this Agreement and continuing
until the Effective Time, Parent agrees as to itself and its subsidiaries that
(except as expressly contemplated or permitted by this Agreement or as required
by a Governmental Authority of competent jurisdiction (written notice of which
will be given promptly to the Company) or to the extent that the Company shall
otherwise consent in writing) Parent shall not, and shall not permit any of its
subsidiaries to, take or fail to take any action, including making or agreeing
to make any acquisition (i) that would prevent Parent's ability to have
authorized and available a sufficient shares of Parent Common Stock to pay the
Merger Consideration pursuant to this Agreement ; provided, however, that this
clause shall not restrict Parent's ability to agree to make any acquisition if
such acquisition would require approval of Parent stockholders and, concurrently
with seeking such stockholder approval, Parent shall also seek stockholder
approval of an increase in the number of authorized and available shares of
Parent Common Stock or (ii) that would result in a Material Adverse Effect on
Parent or (iii) that could reasonably be expected to prevent Parent from
performing its obligations under, or consummating the transactions contemplated
by, this Agreement; provided, however, that the foregoing shall not prohibit (x)
internal reorganizations or consolidations involving existing subsidiaries of
Parent or (y) the creation of new subsidiaries of Parent organized to conduct or
continue activities otherwise permitted by this Agreement; and provided further,
that notwithstanding the foregoing if the acquisition provides for more than
$100 million of consideration (excluding the assumption of debt) then Parent
shall (i) consult with the President of the Company with respect to the
acquisition prior to entering into a definitive acquisition agreement; and (ii)
the Board of Directors of Parent shall have determined that such acquisition is
in the best interest of Parent (including Surviving Corporation).
(b) REPRESENTATION ON PARENT BOARD. The Board of Directors of Parent
shall increase by one (1) the number of directors constituting the entire Board
of Directors of Parent as of the Effective Time and shall duly appoint Xxxxxxx
X. Xxxx (or such other person as shall be mutually agreed to by Parent and the
Board of Directors of the Company) to serve as a director of Parent effective as
of and contingent upon the occurrence of the Effective Time.
Section 4.3 ADVICE OF CHANGES; GOVERNMENTAL FILINGS. Each party shall
(a) confer on a regular and frequent basis with the other, with respect to
matters relevant to the Merger and (b) report (to the extent permitted by Law,
Order or any applicable confidentiality agreement) on operational matters with
respect to the Company and the Company Subsidiaries. The Company shall promptly
advise Parent, orally and in writing, of any material change or event affecting
its business or operations, including any complaint, investigation or hearing by
any Governmental Authority (or communication indicating the same may be
contemplated) or, to the Company's knowledge, the institution or threat of any
litigation. The Company shall timely file all reports required to be filed by it
with the SEC (and all other Governmental Authorities) between the date of this
Agreement and the Effective Time and shall (to the extent permitted by Law,
Order or any
32
applicable confidentiality agreement) deliver to Parent copies of all such
reports, announcements and publications promptly after the same are filed.
Except as otherwise required by Section 4.1(l) and subject to applicable Laws
and Orders relating to the exchange of information, each of the Company and
Parent shall have the right to review in advance, and will consult with the
other with respect to, all the information relating to the other party and each
of their respective subsidiaries, which appears in any filings, announcements or
publications made with, or written materials submitted to, any third party or
any Governmental Authority in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party agrees that,
to the extent practicable and as timely as practicable, it will consult with,
and provide all appropriate and necessary assistance to, the other party with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other party apprised of the status of matters relating to completion of
the transactions contemplated hereby.
Section 4.4 CONTROL OF THE COMPANY'S BUSINESS . Nothing contained in
this Agreement shall be deemed to give Parent, directly or indirectly, the right
to control or direct the Company's operations prior to the Effective Time. Prior
to the Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
operations.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 SHAREHOLDERS' MEETING; PREPARATION OF COMPANY PROXY
STATEMENT.
(a) The Company, acting through the Board, shall, in accordance with
applicable Law and unless the Board shall have determined in good faith, based
on the advice of counsel, that to do so could reasonably be determined by a
court of competent jurisdiction to constitute a breach of its fiduciary duties
to the Company's shareholders under applicable Law:
(i) in cooperation with Parent, prepare and file with the SEC
as soon as practicable following the execution of this Agreement
preliminary proxy materials (together with any supplement or amendment
thereto, the "Proxy Statement") relating to an annual or special
meeting of its shareholders (the "Shareholders' Meeting") for the
purpose of obtaining the Requisite Company Vote in accordance with the
Exchange Act and include in the Proxy Statement the recommendation of
the Board that shareholders of the Company vote in favor of the
approval of this Agreement and the transactions contemplated hereby;
(ii) at the earliest practicable date following the later of
(x) the date on which the registration statement on Form S-4 to be filed
with the SEC by Parent in connection with the issuance of Parent Common
Stock in the Merger (the "Form S-4") is declared effective by the SEC
and (y) Parent's submission of all filings with any PUC that may be
33
necessary, proper or advisable under applicable Laws or Orders in
respect of any of the transactions contemplated by this Agreement, the
Company shall use its reasonable best efforts to duly give notice of
the Shareholders' Meeting, cause the Proxy Statement to be mailed to
its shareholders, and convene and hold the Shareholders' Meeting; and
(iii) take all action necessary in accordance with applicable
law and its Articles of Incorporation and By-Laws to convene a meeting
of its shareholders (the "Company Shareholders' Meeting") to consider
and vote upon the approval of the Merger; subject to Section 5.4, the
Company, through its Board of Directors, recommend to its shareholders
approval of the Merger; and subject to Section 5.4 hereof, use its
reasonable best efforts to obtain the favorable vote of its
shareholders at the Company Shareholders' Meeting.
(b) Parent shall in cooperation with the Company, prepare and file with
the SEC as soon as practicable following the execution of this Agreement the
Form S-4, in which the Proxy Statement will be included. If the SEC requires a
Tax opinion in connection with the filing of the Form S-4, the Company shall
cause Xxxxxx, XxXxxxxxx & Fish, LLP, counsel to the Company, to provide such
opinion in the form required by the SEC. The issuance of such opinion shall be
conditioned upon the receipt by Xxxxxx, XxXxxxxxx & Fish, LLP, of customary
representation letters from each of the Company, Parent and Acquisition Sub in a
form previously agreed to by the parties.
(c) Parent and the Company shall each use its reasonable best efforts
to have the Form S-4 declared effective under the Securities Act and the Proxy
Statement cleared by the SEC as promptly as practicable after their respective
filings. Parent shall also take any action required to be taken under any
applicable state securities laws in connection with the registration and
qualification of the Parent Common Stock to be issued in the Merger, and the
Company shall furnish all information relating to the Company and its
shareholders as may be reasonably requested in connection with any such action.
(d) The Proxy Statement and the Form S-4 shall comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. Each party will notify the other party
promptly upon the receipt of any comments (whether written or oral) from the SEC
or its staff and of any request by the SEC or its staff or any government
officials for amendments or supplements to the Form S-4, the Proxy Statement, or
for any other filing or for additional information and will supply the other
party with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Form S-4, the Proxy
Statement, the Merger or any other filing. If at any time prior to the
Shareholders' Meeting there shall occur any event that should be disclosed in an
amendment or supplement to the Proxy Statement or the Form S-4, the Company and
Parent shall use their reasonable best efforts to promptly prepare, file with
the SEC (if required under applicable Law) and mail to the Company's
shareholders such amendment or supplement. Parent shall not be required to
maintain the effectiveness of the Form S-4 for the purpose of resale by the
Company's shareholders who may be affiliates of the Company or Parent pursuant
to Rule 145 under the Securities Act.
34
(e) Parent agrees that none of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement and the Form S-4, at the time of mailing thereof and at the time of
Shareholders' Meeting, will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees that none of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
the Proxy Statement and the Form S-4, at the time of mailing thereof and at the
time of Shareholders' Meeting, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(f) Parent will provide the Company and its counsel with a reasonable
opportunity to review and comment on the Form S-4 and all responses to requests
for additional information by and replies to comments of the SEC prior to filing
such with, or sending such to, the SEC, and will provide the Company and its
counsel with a copy of all such filings made with the SEC. Until such time as
the Board of Directors of the Company takes any of the actions with respect to
an Acquisition Proposal permitted pursuant to Section 5.4 of this Agreement, the
Company will provide Parent and its counsel with a reasonable opportunity to
review and comment on the Proxy Statement and all responses to requests for
additional information by and replies to comments of the SEC prior to filing
such with, or sending such to, the SEC, and will provide Parent and its counsel
with a copy of all such filings made with the SEC.
Section 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Upon reasonable notice, the Company shall, and shall cause each of
the Company Subsidiaries to, afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of Parent, Acquisition Sub
or the financing sources of Parent or Acquisition Sub reasonable access, during
normal business hours, during the period prior to the Effective Time to all its
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause each of the Company Subsidiaries to) furnish
promptly to Parent or Acquisition Sub all information concerning its business,
properties and personnel as Parent or Acquisition Sub may reasonably request,
and each shall make available to Parent and Acquisition Sub the appropriate
individuals (including attorneys, accountants, and other professionals) for
discussion of the Company's business, properties and personnel as either Parent
or Acquisition Sub may reasonably request. Parent and Acquisition Sub shall keep
such information confidential in accordance with the terms of the
confidentiality agreement dated January 9, 2002 between Parent and the Company
(the "Parent Confidentiality Agreement").
(b) Upon reasonable notice, Parent shall afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the Company reasonable access, during normal business hours, during the period
prior to the Effective Time to all its properties, books, contracts, commitments
and records and, during such period, Parent shall furnish promptly to the
Company all information concerning its business, properties and personnel as the
Company may reasonably request, and each shall make available to the Company the
appropriate individuals (including attorneys, accountants, and other
professionals) for discussion of Parent's business, properties and personnel as
the Company may reasonably
35
request. The Company shall keep such information confidential in accordance with
the terms of the confidentiality agreement dated April 20, 2002 between the
Company and Parent (the "Company Confidentiality Agreement"). The Parent
Confidentiality Agreement and the Company Confidentiality Agreement are referred
to together herein as the "Confidentiality Agreements".
Section 5.3 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party
will use its reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate the
Merger and the other transactions contemplated by this Agreement as soon as
practicable after the date hereof and to cause the conditions set forth in
Article VI to be satisfied on or prior to Closing. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby as promptly as practicable after the date
hereof and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and to take
all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable. Filing fees
relating to any required filings under the HSR Act shall be paid 50% by Parent
and 50% by the Company. Notwithstanding anything to the contrary contained
herein, in no event will any party or their respective subsidiaries be required
to waive any of the conditions to the Merger set forth in Article VI of this
Agreement as they apply to such party.
(b) Each of Parent and the Company shall, in connection with the
efforts referenced in Section 5.3(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Merger Agreement under
the HSR Act or any other applicable Law or Order, use its reasonable best
efforts to (i) make all appropriate filings and submissions with any PUC, Health
Agency or other Governmental Authority that may be necessary, proper or
advisable under applicable Laws or Orders in respect of any of the transactions
contemplated by this Agreement, (ii) cooperate in all respects with each other
in connection with any such filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (iii) promptly inform the other party of any communication received by
such party from, or given by such party to, PUCs, Health Agencies, the Antitrust
Division of the Department of Justice (the "DOJ"), the Federal Trade Commission
(the "FTC") or any other Governmental Authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby, and
(iv) permit the other party to review any communication given by it to, and
consult with each other in advance of any meeting or conference with, PUCs,
Health Agencies, the DOJ, the FTC or any such other Governmental Authority or,
in connection with any proceeding by a private party, with any other person, in
each case regarding any of the transactions contemplated hereby, and to the
extent permitted by PUCs, Health Agencies, the DOJ, the FTC or such other
applicable Governmental Authority or other person, give the other party the
opportunity to attend and participate in such meetings and conferences.
36
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 5.3(a) and 5.3(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any applicable Law or Order or
any objections are asserted with respect to the transactions contemplated hereby
under any applicable Law or Order, each of Parent and the Company shall
cooperate in all respects with each other and use its respective reasonable best
efforts to contest and resist or otherwise seek to settle on terms mutually
agreeable to Parent and the Company any such action proceeding or objection and
to have vacated, lifted, reversed or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the transactions
contemplated by this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 5.3 shall limit a party's
right to terminate this Agreement pursuant to Section 7.1(b) or 7.1(c) so long
as such party has up to then complied in all respects with its obligations under
this Section 5.3.
(d) The Company shall use all commercially reasonably efforts to
maintain the Company and the Company Subsidiaries in good standing under the
laws of the state of their respective jurisdiction of incorporation.
(e) Notwithstanding anything to the contrary contained in this Section
5.3, the Board shall not be required to take any action otherwise required by
this Section 5.3 that it has determined in good faith, based on the advice of
counsel, could reasonably be determined by a court of competent jurisdiction to
constitute a breach of its fiduciary duties to the Company's shareholders under
applicable Law. Parent shall take all action necessary to cause Acquisition Sub
to perform its obligations under this Agreement and to consummate the Merger on
the terms and subject to the conditions set forth in this Agreement.
Section 5.4 NO SOLICITATION; ACQUISITION PROPOSALS.
(a) The Company shall not, nor shall it permit any of the Company
Subsidiaries to, nor shall it authorize or permit any officer, director or
representative or agent of the Company or any of the Company Subsidiaries
(including, without limitation, any investment banker, financial advisor,
attorney or accountant retained by the Company or any of the Company
Subsidiaries) to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing non-public information), or take any
other action to facilitate the initiation of any inquiry or proposal regarding
an Acquisition Proposal (as hereinafter defined), (ii) engage in negotiations or
discussions concerning, or provide any nonpublic information to any person
relating to, any Acquisition Proposal, or (iii) agree to approve or recommend
any Acquisition Proposal; provided, however, that nothing contained in this
Section 5.4 shall prohibit the Company or the Board from taking and disclosing
to shareholders a position contemplated by Rule 14e-2 promulgated under the
Exchange Act; and provided, further, that (y) the Board on behalf of the Company
may upon the bona fide unsolicited request of a Third Party (as hereinafter
defined) furnish information or data (including, without limitation,
confidential or non-public information or data) relating to the Company or the
Company Subsidiaries for the purposes of an Acquisition Proposal and participate
in negotiations with a person making an unsolicited expression of interest
believed by the Board in good faith to be a bona fide indication of such
person's desire to
37
pursue the possibility of making an Acquisition Proposal that, in the good faith
judgment of the Board, could reasonably lead to a Superior Proposal (as
hereinafter defined) and (z) the Board may withdraw or modify its recommendation
relating to this Agreement or the Merger if the Board determines in good faith
after consultation with its financial advisor that the Merger is no longer in
the best interests of the Company's shareholders and that such withdrawal or
modification is, therefore, required in order to satisfy its fiduciary duties to
the Company's shareholders under applicable Law.
As used in this Agreement, "Acquisition Proposal" means any of the
following: (i) a transaction pursuant to which any person (or group of persons)
other than the Parent or its affiliates (a "Third Party") would acquire 50% or
more of the outstanding shares of the Company Common Stock of the Company
pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or
other business combination involving the Company pursuant to which any Third
Party would acquire 50% or more of the outstanding shares of the Company Common
Stock of the Company or of the entity surviving such merger or business
combination, (iii) any other transaction pursuant to which any Third Party would
acquire control of assets (including for this purpose the outstanding equity
securities of Company Subsidiaries, and the entity surviving any merger or
business combination including any of them) of the Company having a fair market
value equal to 50% or more of the fair market value of all the assets of the
Company on a consolidated basis immediately prior to such transaction, (iv) any
public announcement by a Third Party of a proposal, plan or intention to do any
of the foregoing or any agreement to engage in any of the foregoing, (v) a self
tender offer, or (vi) any transaction subject to Rule 13(e)-3 under the Exchange
Act.
As used in this Agreement, "Superior Proposal" means an Acquisition
Proposal that (i) is not subject to any financing contingencies or is, in the
good faith judgment of the Board after consultation with its financial advisor,
reasonably capable of being financed and (ii) the Board determines in good
faith, based upon such matters as it deems relevant would, if consummated,
result in a transaction more favorable to the Company's shareholders than the
Merger.
(b) Prior to providing any information to any person, to the extent
permitted under Section 5.4(a), in connection with an existing or possible
Acquisition Proposal, the Company shall receive from such person an executed
confidentiality agreement in a form reasonably customary in such circumstance.
(c) Prior to engaging in any substantive discussion, to the extent
permitted under Section 5.4(a), with any person in connection with an existing
or possible Acquisition Proposal, the Company shall notify Parent orally and in
writing of the existence of any Acquisition Proposal or any inquiry indicating
that any person is considering making or wishes to make an Acquisition Proposal,
as promptly as practicable (but in no case later than 48 hours) after its
receipt thereof. The Company will, to the extent reasonably practicable,
promptly inform Parent upon request of the status of any discussion or
negotiation with any such person, and any material change to the terms and
conditions of such Acquisition Proposal, and shall promptly give Parent a copy
of any information delivered to such person which has not previously been
provided by the Company or any of its advisors to Parent or any of its advisors.
38
(d) Subject to the foregoing provisions of this Section 5.4, the
Company shall immediately cease and cause to be terminated any existing
discussions or negotiations with any person (other than Parent and Acquisition
Sub) conducted heretofore with respect to any of the foregoing. The Company
agrees not to release any third party from the confidentiality provisions of any
confidentiality agreement to which the Company is a party.
(e) The Company shall use all commercially reasonable efforts to ensure
that the officers and directors of the Company and the Company Subsidiaries and
any investment banker, financial advisor, attorney, accountant or other advisor
or representative retained by the Company are aware of the restrictions
described in this Section 5.4.
Section 5.5 EMPLOYEE BENEFIT PLANS.
(a) Following the Effective Time, Parent shall, notwithstanding any
provision of this Agreement to the contrary, for a period of at least two (2)
years (i) either (x) maintain each Company Employee Plan, on the same or
substantially the same terms in effect immediately prior to the Effective Time
or (y)(1) arrange for any employees of the Company or any Company Subsidiary to
participate in all other benefit plans on the same basis as such other benefit
plans are made available to employees of Parent or Parent's subsidiaries having
substantially similar duties, responsibilities or compensation levels, or (2)
establish and/or maintain a combination of other benefit plans and Company
Employee Plans that, in the aggregate, provide such employees with benefits of
substantially equal value to those benefits they had immediately prior to the
Effective Time with respect to such employees who participate in such other
benefit plans, (ii) each such participant participating in such other benefit
plans shall receive full credit for all service with the Company or Company
Subsidiary prior to the Effective Time for all purposes for which such service
was recognized under the Company Employee Plans, including, but not limited to,
eligibility to participate, vesting, and, to the extent required by Law, the
amount of benefits, (iii) each such participant shall participate in such other
benefit plans on the same terms as such other benefit plans are made available
to employees of Parent or Parent's subsidiaries having substantially similar
duties, responsibilities or compensation levels, and (iv) to the extent
permitted by any third party insurance company or service provider and not
prohibited by Law, Parent shall cause any and all pre-existing condition
limitations, eligibility waiting periods and evidence of insurability
requirements under any such other plans to be waived with respect to each such
participant and his or her eligible dependents and shall provide each such
participant with credit for any co-payments and deductibles paid prior to the
Effective Time, but in the same plan or policy year that includes the Effective
Time for purposes of satisfying any applicable deductible out-of-pocket, or
similar requirements under any health plans in which each such participant is
eligible to participate after the Effective Time. Notwithstanding any of the
foregoing to the contrary, none of the provisions contained herein shall (i)
operate to duplicate any continuing benefit provided to any employee of the
Company or the funding of any such benefit, or (ii) prevent the Parent from
adjusting the terms of Company Employee Plans intended to qualify under Code
Section 401(a) to the extent necessary to maintain the tax-qualified status of
such plans.
(b) Following the Effective Time, Parent shall cause the Surviving
Corporation to honor and perform, pursuant to their terms, all obligations of
the Company under each and every
39
Company Employee Plan, provided, however, that nothing contained herein shall
limit any reserved right in any Company Employee Plan to amend, modify, suspend,
revoke or terminate any such plan as to non-vested benefits.
Section 5.6 INDEMNIFICATION AND INSURANCE.
(a) The Articles of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation set forth in the Company Articles and the Company By-Laws, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time or at any time prior
thereto were directors, officers, employees or agents of the Company, unless
such modification is required by Law.
(b) The Company shall, to the fullest extent permitted under applicable
Law or under the Company Articles or the Company By-Laws and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and, after
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Articles of
Incorporation or By-Laws, indemnify and hold harmless, each present and former
director, officer or employee of the Company or any of its subsidiaries or
affiliates (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages
and liabilities incurred in connection with, and amounts paid in settlement of,
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative and wherever asserted, bought or filed, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions or alleged acts or
omissions occurring at or prior to the Effective Time, to the same extent as
provided in the respective Articles of Incorporation or By-Laws of the Company
and its subsidiaries and affiliates or any applicable contract or agreement as
in effect on the date hereof, in each case for a period of six years after the
date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time shall be reasonably satisfactory to the Surviving Corporation, (ii) after
the Effective Time, the Surviving Corporation shall pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received, and
(iii) the Surviving Corporation will cooperate in the defense of any such
matter; provided, however, that the Surviving Corporation shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld, delayed or conditioned); and provided, further, that,
in the event that any claim for indemnification is asserted or made within such
six-year period, all rights to indemnification in respect of such claim shall
continue until the disposition of such claim. The Indemnified Parties as a group
may retain only one law firm in each jurisdiction to represent them with respect
to any single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. The indemnity agreements of Parent and the Surviving
Corporation in this Section 5.6(b) shall extend, on the same terms to, and shall
inure to the benefit of and shall be enforceable by any present or former
director, officer or employee of the Company or any of its subsidiaries or
affiliates and each
40
other person or entity who controls, or in the past controlled the Company or
any of its subsidiaries or affiliates.
(c) Not later than the Effective Time, Parent shall obtain, and provide
to each of the Company's then current directors and officers a certificate of
insurance coverage with respect to, so-called "tail insurance" with respect to
that portion of the Company's director's and officer's liability insurance
policy that serves to reimburse the present and former directors and officers
(determined as of the Effective Time) of the Company or any of its subsidiaries
or affiliates (the "Covered Persons") (as opposed to the portion that serves to
reimburse the Company) with respect to any claim brought against any such
director or officer during the six-year period beginning as of the Effective
Time and arising from facts or events which occurred before the Effective Time,
which insurance shall contain at least the same coverage and amounts, and
contain terms and conditions no less advantageous, as the coverage currently
provided by the Company; provided, however, that in no event shall Parent be
required to expend more than 250% of the current amount expended by the Company
to maintain or procure such directors and officers insurance coverage; provided,
further, that if Parent is unable to maintain or obtain the insurance called for
by this Section 5.6(c), Parent shall use its reasonable best efforts to obtain
as much comparable insurance as is available at such 250% of the annual premium.
(d) This Section 5.6 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Corporation, the Indemnified
Parties and the Covered Persons, shall be binding on all successors and assigns
of the Surviving Corporation and shall be enforceable by the Indemnified Parties
and the Covered Persons. In the event that Parent or the Surviving Corporation
or any of their successors or assigns (i) consolidates or merges into any other
person or entity and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person or entity, then and in such case,
proper provisions shall be made so that the successors and assigns of Parent or
the Surviving Corporation (as the case may be) assume the obligations of Parent
and the Surviving Corporation set forth in this Section 5.6.
(e) From and after the Effective Time, Parent unconditionally
guarantees the obligations of the Surviving Corporation arising under this
Section 5.6
Section 5.7 NOTIFICATION OF CERTAIN MATTERS.
(a) From time to time after the date of this Agreement and prior to the
Effective Time, the Company will (i) promptly supplement or amend the Company
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in the Company Disclosure Schedule or
which is necessary to correct any information in a schedule or in any
representation and warranty of the Company that has been rendered inaccurate
thereby, and (ii) give prompt notice to Parent of any failure of the Company
materially to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. For purposes of determining the
accuracy of the representations and warranties of the Company contained in this
Agreement in order to determine the fulfillment of the conditions set forth in
Section 6.2(a), the Company Disclosure Schedule shall be deemed to include only
that
41
information contained therein on the date of this Agreement and shall be deemed
to exclude any information contained in any subsequent supplement or amendment
thereto.
(b) From time to time after the date of this Agreement and prior to the
Effective Time, Parent will (i) promptly supplement or amend the Parent
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in the Parent Disclosure Schedule or which
is necessary to correct any information in a schedule or in any representation
and warranty of Parent or Acquisition Sub, as the case may be, that has been
rendered inaccurate thereby and (ii) give prompt notice to the Company of any
failure of Parent or Acquisition Sub, as the case may be, materially to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder. For purposes of determining the accuracy of the
representations and warranties of Parent and Acquisition Sub contained in this
Agreement in order to determine the fulfillment of the conditions set forth in
Section 6.3(a), the Parent Disclosure Schedule shall be deemed to include only
that information contained therein on the date of this Agreement and shall be
deemed to exclude any information contained in any subsequent supplement or
amendment thereto.
(c) Each of the Company and Parent shall, within a reasonable period of
time following any disclosure, supplement or amendment pursuant to Section
5.7(a) or Section 5.7(b), negotiate in good faith with respect to the
consequences of any such disclosure, supplement or amendment.
Section 5.8 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior written consent of the other party, which
shall not be unreasonably withheld, delayed or conditioned, provided however,
that a party may, without the prior written consent of the other part, issue
such press release or make such public statement as the party may determine, in
good faith based after consultation with counsel, is required by Law or the
rules and regulations of an exchange or Nasdaq, if it has used all commercially
reasonable efforts to consult with the other party.
Section 5.9 CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
Section 5.10 COMPANY DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE
PLAN The Company shall use all commercially reasonable efforts to amend or
otherwise modify the DRSPP as soon as practicable after the date of this
Agreement to provide that the DRSPP plan administrator shall satisfy any order
to purchase shares of Company Common Stock under the DRSPP, whether pursuant to
reinvestment of Company dividends or the election to make optional purchases,
only by acquiring shares of Company Common Stock in the open market or
42
in one or more privately negotiated transactions with any person who is not any
affiliate of the Company.
Section 5.11 STOCK EXCHANGE LISTING. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger
and the shares of Parent Common Stock to be reserved for issuance upon exercise
of Company Stock Options to be approved for listing on the NYSE, subject to
official notice of issuance.
Section 5.12 TAX-FREE REORGANIZATION TREATMENT. Neither the Company nor
Parent shall, and shall not permit any of their respective subsidiaries to,
intentionally take or cause to be taken any action not otherwise consistent with
the transactions contemplated by this Agreement which would reasonably be
expected to disqualify the Merger as a "reorganization" within the meaning of
Section 368(a) of the Code.
Section 5.13 RESERVATION OF SHARES. Parent shall at all times from and
after the date of this Agreement maintain a sufficient number of duly
authorized, unissued and reserved shares of Parent Common Stock necessary to
permit Parent to satisfy its obligations under this Agreement without the need
to seek approval of Parent's shareholders.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver to the extent permissible under law at or
prior to the Effective Time of all the following conditions:
(a) HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been earlier terminated.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other Order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other Governmental Authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
and there shall not be any action taken, or any Law or Order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal; provided, however, that prior to invoking this condition, the
party so invoking this condition shall have complied with its obligations under
Section 5.3.
(c) GOVERNMENTAL ACTIONS. There shall not be in effect any judgment,
decree or order of any Governmental Authority, administrative agency or court of
competent jurisdiction, in either case, prohibiting or limiting Parent from
exercising all material rights and privileges pertaining to its ownership of the
Surviving Corporation or the ownership or operation by Parent or any of its
subsidiaries of all or a material portion of the business or assets of Parent or
any of its subsidiaries, or seeking to compel Parent or any of
43
its subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Parent or any of its subsidiaries (including the
Surviving Corporation and its subsidiaries), as a result of the Merger or the
transactions contemplated by this Agreement; provided, however, that prior to
invoking this condition, the party so invoking this condition shall have
complied with its obligations under Section 5.3.
(d) SHAREHOLDERS' APPROVAL. The Merger and this Agreement shall have
been duly approved by the Requisite Company Vote.
(e) CONSENTS AND APPROVALS. All Parent Required Consents and the
Company Required Consents shall have been obtained prior to the Effective Time
and shall have become Final Orders, except for consents the failure to obtain
which would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, with respect to Parent Required Consents, or on the Company,
with respect to the Company Required Consents. The Final Orders shall impose no
conditions that could reasonably be expected to have a Material Adverse Effect
on the Company after giving effect to the consummation of the Merger. "Final
Order" for purposes of this Agreement means action by the relevant regulatory
authority which has not been reversed, stayed, enjoined, set aside or annulled,
and with respect to which any waiting period prescribed by any Law or Order
before the Merger and other transactions contemplated hereby may be consummated
has expired, and as to which all conditions to be satisfied before the
consummation of such transactions prescribed by Law or Order have been
satisfied. Notwithstanding anything to the contrary contained in this Section
6.1(e), prior to invoking this condition, the party so invoking this condition
shall have complied with its obligations under Section 5.3.
(f) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the registration and qualification of the Parent Common Stock
issuable or required to be reserved for issuance pursuant to this Agreement
shall have been complied with.
(g) STOCK EXCHANGE LISTING. The shares of Parent Common Stock issuable
to Company shareholders pursuant to this Agreement and such other shares of
Parent Common Stock required to be reserved for issuance in connection with the
Merger shall have been authorized for listing on the NYSE upon official notice
of issuance.
Section 6.2 ADDITIONAL CONDITIONS TO OBLIGATION OF PARENT AND
ACQUISITION SUB TO EFFECT THE Merger. The obligations of each of Parent and
Acquisition Sub to effect the Merger and consummate the other transactions
contemplated hereby are also subject to the satisfaction or waiver by Parent and
Acquisition Sub at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement (i) that are qualified by materiality
or Material Adverse Effect shall be true at and as of the Closing as if made at
and as of such time (except in respect of
44
representations and warranties made as of a specified date which shall be true
as of such specified date), and (ii) that are not qualified by materiality or
Material Adverse Effect shall be true in all material respects at and as of the
Closing as if made at and as of such time (except in respect of representations
and warranties made as of a specific date which shall be true in all material
respects of such specified date), and Parent shall have received a certificate
(which certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained in this Agreement are so
qualified) signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date except where the failure
to perform such obligations would not have a Material Adverse Effect on the
Company, and Parent shall have received a certificate signed on behalf of the
Company by an executive officer of the Company to such effect.
Section 6.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER. The obligation of the Company to effect the Merger and
consummate the other transactions contemplated hereby is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each of Parent and Acquisition Sub contained in this Agreement (i) that are
qualified by materiality or Material Adverse Effect shall be true at and as of
the Closing as if made at and as of such time (except in respect of
representations and warranties made as of a specified date which shall be true
as of such specified date), and (ii) that are not qualified by materiality or
Material Adverse Effect shall be true in all material respects at and as of the
Closing as if made at and as of such time (except in respect of representations
and warranties made as of a specific date which shall be true in all material
respects of such specified date), and the Company shall have received a
certificate (which certificate may be qualified by knowledge to the same extent
as the representations and warranties of each of Parent and Acquisition Sub
contained in this Agreement are so qualified) signed on behalf of each of Parent
and Acquisition Sub by an executive officer of each of Parent and Acquisition
Sub.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB. Each of
Parent and Acquisition Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date except where the failure to perform such obligation would not
have a Material Adverse Effect on Parent, and the Company shall have received a
certificate signed on behalf of Parent and Acquisition Sub by an executive
officer of Parent to such effect.
(c) OPINION OF COUNSEL. The Company shall have received from Xxxxxx,
XxXxxxxxx & Fish, LLP, in a form reasonably satisfactory to the Company, an
opinion to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
addressed to the Company and dated as of the Closing Date, which
45
opinion shall rely in part upon customary and reasonable representation letters
from each of the Company, Acquisition Sub and Parent subject to customary
assumptions and qualifications.
(d) REPRESENTATION ON PARENT BOARD. The Board of Directors of Parent
shall have increased by one (1) the number of directors constituting the entire
Board of Directors of Parent as of the Effective Time and duly appointed Xxxxxxx
X. Xxxx (or such other person as shall be mutually agreed to by Parent and the
Board of Directors of the Company) to serve as a director of Parent effective as
of and contingent upon the occurrence of the Effective Time.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the boards of
directors or any committee thereof of Parent, Acquisition Sub and the Company;
(b) by either Parent or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a nonappealable final
order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger (provided
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party who has not complied with its obligations under
Section 5.3 and such noncompliance materially contributed to the issuance of any
such order, decree or ruling or the taking of such action);
(c) by either Parent or the Company if the Effective Time shall not
have occurred on or before March 31, 2003, provided that the right to terminate
this Agreement under this Section 7.1(c) shall not be available to any party
whose breach or failure to fulfill any obligation under this Agreement has been
the cause of or resulted in such failure of the Effective Time to occur;
(d) by Parent if the Board shall have (i) failed to recommend,
withdrawn or modified in a manner adverse to Parent or Acquisition Sub its
recommendation of the Merger, or (ii) approved, endorsed or recommended an
Acquisition Proposal;
(e) by Parent or the Company (i) if any representation or warranty of
the Company or Parent, respectively, set forth in this Agreement shall not be
true and correct as of the Closing Date, as though made on and as of the Closing
Date (except for any representation or warranty that is expressly limited by its
terms to another date or to a particular period, which need only be true and
correct as of such date or for such period), or (ii) upon a breach of or failure
to perform in any material respect any obligation of Parent or the Company,
respectively, set forth in this Agreement, except in each of (i) and (ii) above,
where the failure to perform such obligations or the failure of such
representations and warranties to be so true and correct would not have a
Material Adverse Effect on the Company with respect to failure by the Company
and on Parent with respect to a failure by Parent (either (i) or (ii) above
being a "Terminating Event");
46
provided, however, that, if such Terminating Event is curable by the Company or
Parent, as the case may be, through the exercise of its reasonable best efforts
and for so long as the Company or Parent, as the case may be, continues to
exercise such reasonable best efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.1(e), and
provided, further, that the right to terminate this Agreement pursuant to this
Section 7.1(e) shall not be available to any party whose breach of or failure to
fulfill its obligations under this Agreement resulted in the failure of any such
condition; or
(f) by the Company following the receipt by the Company after the date
hereof, under circumstances not involving any breach of the provisions of
Section 5.4, of an unsolicited bona fide Superior Proposal; provided that (i)
the Company has complied in all material respects with Section 5.4, including
the notice provisions therein, and (ii) the Company has authorized, subject to
complying with the terms of this Agreement, the execution of a definitive
agreement providing for a transaction that in the Board's good faith judgment
constitutes a Superior Proposal.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers, employees or shareholders except (i) as set
forth in Sections 7.3 and 8.1 hereof, and (ii) except as otherwise provided in
Section 7.3, nothing herein shall relieve any party from liability for any
Terminating Event caused by such party.
Section 7.3 FEES AND EXPENSES.
(a) Except as otherwise expressly provided in this Agreement, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated.
(b) The Company shall pay Parent a fee of $2,500,000 in cash, as
liquidated damages (the "Company Fee") if (i) this Agreement is terminated by
Parent pursuant to Section 7.1(d), so long as (x) an Acquisition Proposal with
respect to the Company is made following the date of this Agreement and at or
before the time of the event giving rise to such termination, and (y) within six
months following the termination of this Agreement, the Company enters into a
definitive agreement with a third party with respect to an Acquisition Proposal
or a tender offer is commenced by a third party with respect to an Acquisition
Proposal, or (ii) this Agreement is terminated by the Company pursuant to
Section 7.1(f). The Company Fee payable pursuant to this Section 7.3(b) shall be
paid within ten (10) business days after the Company becomes obligated to pay
the Company Fee; provided, that, in no event shall the Company be required to
pay the Company Fee to Parent if, immediately prior to the termination of this
Agreement, Parent was in breach of any of its material obligations under this
Agreement. The payment of the Company Fee shall be the Parent's sole and
exclusive remedy, in law or at equity, for the event giving rise to the payment
of the Company Fee.
47
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Except as otherwise provided in this Section 8.1, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties, covenants and agreements in
this Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Section 7.1, as the case may be, except that this
Section 8.1 shall not limit any covenant or any agreement of the parties which
by its terms contemplates performance after the Effective Time and which shall
survive in accordance with its respective terms. The Confidentiality Agreements
shall survive termination of this Agreement as provided therein.
Section 8.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) IF TO PARENT OR ACQUISITION SUB:
Philadelphia Suburban Corporation
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxxxx XxXxxxxxxxxx
Chairman, President and Chief Executive Officer
WITH A COPY TO:
Xxxx Xxxxx LLP
2500 One Liberty Place
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
48
(b) IF TO THE COMPANY:
Pennichuck Corporation
Four Xxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
President and Chief Executive Officer
WITH A COPY TO:
Xxxxxx, XxXxxxxxx & Fish, LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Section 8.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares;
(c) "business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(d) "control" (including the terms "controlled by", and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
49
(e) "knowledge" means, with respect to any matter in question, actual
knowledge of any executive officer of the entity in question with respect to
such matter after making reasonable inquiry of officers and other employees
charged with senior administrative or operational responsibility of such
matters;
(f) "person" means an individual, corporation, partnership, limited
liability company, association, joint venture, trust, unincorporated
organization, other entity or group (as defined in Section 13(d)(3) of the
Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any person or other legal entity
of which the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity, except for any entity that is expressly excluded from the
definition of Company Subsidiary in Schedule 2.1 of the Company Disclosure
Schedule.
Section 8.4 AMENDMENT. This Agreement may be amended by the mutual
agreement of the parties hereto by action duly authorized by or taken on behalf
of their respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after approval of the Merger by the shareholders of the
Company, no amendment may be made that by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section 8.5 WAIVER. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
Section 8.6 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.7 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
50
Section 8.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Agreements), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein.
Section 8.9 ASSIGNMENT; GUARANTEE OF ACQUISITION SUB OBLIGATIONS. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Acquisition Sub may assign all or any of their rights hereunder to
any affiliate provided that no such assignment shall relieve the assigning party
of its obligations hereunder. Parent unconditionally guarantees the full and
punctual performance by Acquisition Sub of all of the obligations hereunder of
Acquisition Sub or any such assignees.
Section 8.10 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Sections 5.4 and 5.6(b) and (c) (which are intended to be for the benefit
of the parties specified therein and may be enforced by such parties).
Section 8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 8.12 GOVERNING LAW; VENUE. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of New
Hampshire applicable to contracts executed and fully performed within the State
of New Hampshire, excluding any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of this agreement to
the substantive law of another jurisdiction. Any action brought in connection
with this Agreement shall be brought in the federal courts located in the State
of New Hampshire, and each party hereto hereby irrevocably consents to the
jurisdiction of such court and waives any objection to such court as the forum
for such action.
Section 8.13 COUNTERPARTS AND FACSIMILE DELIVERY . This Agreement may
be executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. The delivery of a signature page of this Agreement by one party to
each of the other parties via facsimile transmission shall constitute the
execution and delivery of this Agreement by the transmitting party.
Section 8.14 INTERPRETATION. The parties hereto acknowledge that
certain matters set forth in the Company Disclosure Schedule and certain matters
set forth in the Parent Disclosure Schedule are included for informational
purposes only, notwithstanding the fact that, because they do not rise above
applicable materiality thresholds or otherwise, they would not be required
51
to be set forth therein by the terms of this Agreement. The parties agree that
disclosure of such matters shall not be taken as an admission by the Company or
Parent, as the case may be, that such disclosure is required to be made under
the terms of any provision of this Agreement and in no event shall the
disclosure of such matters be deemed or interpreted to broaden or otherwise
amplify the representations and warranties contained in this Agreement or to
imply that such matters are or are not material and neither party shall use, in
any dispute between the parties, the fact of any such disclosure as evidence of
what is or is not material for purposes of this Agreement.
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IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
PHILADELPHIA SUBURBAN CORPORATION
By: /s/ Xxxxxxxx XxXxxxxxxxxx
--------------------------------------
Name: Xxxxxxxx XxXxxxxxxxxx
Title: Chairman, President and
Chief Executive Officer
RALEIGH ACQUISITION CORPORATION
By: /s/ Xxxxxxxx XxXxxxxxxxxx
--------------------------------------
Name: Xxxxxxxx XxXxxxxxxxxx
Title: Chairman and President
PENNICHUCK CORPORATION
By: /S/ XXXXXXX X. XXXX
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
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