Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 25, 2006
between
NATIONAL GRID PLC,
NATIONAL GRID US8 INC.
and
KEYSPAN CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER..............................................................................................1
1.1. Effective Time of the Merger....................................................................1
1.2. Closing.........................................................................................1
1.3. Effects of the Merger...........................................................................1
1.4. Certificate of Incorporation and By-Laws........................................................2
1.5. Directors and Officers..........................................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES....................................................2
2.1. Effect on Capital Stock.........................................................................2
2.2. Surrender of Certificates.......................................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................5
3.1. Representations and Warranties of KeySpan.......................................................5
3.2. Representations and Warranties of Parent and Merger Sub........................................18
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.............................................................21
4.1. Covenants of KeySpan...........................................................................21
4.2. Covenants of Parent............................................................................26
4.3. Advice of Changes; Governmental Filings........................................................26
4.4. Transition Planning............................................................................27
4.5. Control of Other Party's Business..............................................................27
ARTICLE V ADDITIONAL AGREEMENTS..................................................................................27
5.1. Preparation of Proxy Statement and Circular; Stockholders Meetings.............................27
5.2. Corporate Governance...........................................................................29
5.3. Access to Information..........................................................................29
5.4. Reasonable Best Efforts........................................................................30
5.5. No Solicitation by KeySpan.....................................................................32
5.6. KeySpan Stock Options and Other Stock Awards; Employee Benefits Matters........................34
5.7. Fees and Expenses..............................................................................36
5.8. Directors' and Officers' Indemnification and Insurance.........................................36
5.9. Public Announcements...........................................................................37
5.10. Conveyance Taxes...............................................................................37
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5.11. Restructuring of Merger........................................................................37
ARTICLE VI CONDITIONS PRECEDENT..................................................................................38
6.1. Conditions to Each Party's Obligation to Effect the Merger.....................................38
6.2. Additional Conditions to Obligations of Parent and Merger Sub..................................38
6.3. Additional Conditions to Obligations of KeySpan................................................39
ARTICLE VII TERMINATION AND AMENDMENT............................................................................39
7.1. Termination....................................................................................39
7.2. Effect of Termination..........................................................................41
7.3. Amendment......................................................................................42
7.4. Extension; Waiver..............................................................................42
ARTICLE VIII GENERAL PROVISIONS..................................................................................43
8.1. Non-Survival of Representations, Warranties and Agreements.....................................43
8.2. Notices........................................................................................43
8.3. Interpretation.................................................................................44
8.4. Counterparts...................................................................................44
8.5. Entire Agreement; Third Party Beneficiaries....................................................44
8.6. Governing Law..................................................................................44
8.7. No Limitation on Other Representation..........................................................44
8.8. Severability...................................................................................44
8.9. Assignment.....................................................................................45
8.10. Submission to Jurisdiction; Waivers............................................................45
8.11. Enforcement....................................................................................46
8.12. Definitions....................................................................................46
8.13. Other Agreements...............................................................................48
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INDEX OF DEFINED TERMS
Page(s)
Acquisition Agreement...............................................................................32
Additional KeySpan Consents.........................................................................31
Agreement............................................................................................1
Antitrust Law.......................................................................................31
Benefit Plans.......................................................................................14
Blue Sky Laws........................................................................................8
Board of Directors..................................................................................46
Business Day........................................................................................46
Canceled Option.....................................................................................34
Certificate of Merger................................................................................1
Certificates.........................................................................................3
Circular............................................................................................27
Closing..............................................................................................1
Closing Date.........................................................................................1
Code.................................................................................................4
Companies Act.......................................................................................20
Confidentiality Agreement...........................................................................30
Constituent Corporations.............................................................................2
DOJ.................................................................................................30
Effective Time.......................................................................................1
End Date............................................................................................41
Environmental Laws..................................................................................17
Environmental Permits...............................................................................17
ERISA...............................................................................................14
Exchange Act.........................................................................................8
Exchange Agent.......................................................................................3
Exchange Fund........................................................................................3
FCC..................................................................................................8
Federal Power Act....................................................................................8
FERC................................................................................................10
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Final Order.........................................................................................38
GAAP.................................................................................................9
Governmental Entity..................................................................................8
HSR Act..............................................................................................8
Indemnified Parties.................................................................................36
Joint Venture........................................................................................5
KeySpan..............................................................................................1
KeySpan Benefit Plans...............................................................................14
KeySpan Board Approval..............................................................................12
KeySpan Certificates.................................................................................3
KeySpan Common Stock.................................................................................2
KeySpan Disclosure Schedule..........................................................................5
KeySpan Employees...................................................................................35
KeySpan Financial Advisor...........................................................................13
KeySpan Financial Statements.........................................................................9
KeySpan Intellectual Property.......................................................................17
KeySpan Material Contracts..........................................................................17
KeySpan Required Approvals...........................................................................8
KeySpan SEC Reports..................................................................................9
KeySpan Stockholders Meeting........................................................................28
Knowledge...........................................................................................46
Law..................................................................................................8
Liens................................................................................................7
LSE.................................................................................................19
Material Adverse Effect.............................................................................46
Materials of Environmental Concern..................................................................17
Merger...............................................................................................1
Merger Consideration.................................................................................2
Merger Sub...........................................................................................1
Merger Sub Common Stock..............................................................................2
NHPUC................................................................................................8
NLRB................................................................................................15
NYBCL................................................................................................1
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NYPSC................................................................................................8
Order................................................................................................8
Other KeySpan Stock Awards..........................................................................34
Parent...............................................................................................1
Parent Acquisition Transaction......................................................................42
Parent Board Approval...............................................................................21
Parent Disclosure Schedule..........................................................................18
Parent Required Approvals...........................................................................20
Parent Shareholders Meeting.........................................................................29
Parent Termination Fee..............................................................................42
Permits.............................................................................................11
Person..............................................................................................47
Process Agent.......................................................................................45
Proxy Statement.....................................................................................27
PUHCA...............................................................................................10
Required KeySpan Vote...............................................................................12
Required Parent Vote................................................................................21
Restraints..........................................................................................38
SEC..................................................................................................9
Securities Act.......................................................................................9
Significant Subsidiary..............................................................................47
SOX..................................................................................................9
Subsidiary..........................................................................................47
Superior Proposal...................................................................................33
Surviving Corporation................................................................................2
Surviving Corporation By-laws........................................................................2
Surviving Corporation Certificate of Incorporation...................................................2
Takeover Proposal...................................................................................33
Tax.................................................................................................14
Tax Return..........................................................................................14
Termination Fee.....................................................................................41
The Other Party.....................................................................................47
UK Listing Rules....................................................................................20
v
UKLA................................................................................................20
Violation............................................................................................8
WARN Act............................................................................................16
vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 25, 2006 (this
"Agreement"), by and among NATIONAL GRID PLC, a public limited company
incorporated under the laws of England and Wales with registration number
4031152 ("Parent"), NATIONAL GRID US8 INC. a New York corporation ("Merger Sub")
and KEYSPAN CORPORATION, a New York corporation ("KeySpan").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of Parent, Merger Sub and KeySpan have
each approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the business combination transaction
provided for herein pursuant to which Merger Sub would merge with and into
KeySpan (the "Merger"), with KeySpan as the surviving entity, as a result of
which Parent will, directly or indirectly, own all of the issued and outstanding
common shares of KeySpan; and
WHEREAS, Parent, Merger Sub and KeySpan desire to make certain
representations, warranties covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. Effective Time of the Merger. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger") shall be duly
prepared and executed by KeySpan as the Surviving Corporation (as defined in
Section 1.3) and thereafter delivered to the Secretary of State of the State of
New York for filing, in such form as is required by and executed in accordance
with the New York Business Corporation Law (the "NYBCL"), on the Closing Date
(as defined in Section 1.2). The Merger shall become effective upon the filing
of the Certificate of Merger with the Secretary of State of the State of New
York or at such subsequent time thereafter as is provided in the Certificate of
Merger (the "Effective Time").
1.2. Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m. (New York City time) on the date (the "Closing Date") that is the
fifth business day after the satisfaction or waiver (subject to applicable law)
of the conditions set forth in Article VI (excluding conditions that, by their
terms, are to be satisfied on the Closing Date), unless another time or date is
agreed to by the parties hereto. The Closing shall be held at the offices of
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
unless another place is agreed to by the parties hereto.
1.3. Effects of the Merger. At and after the Effective Time, Merger Sub
shall be merged with and into KeySpan and the separate existence of Merger Sub
shall cease. The Merger will have the effects set forth in ss.906 of the NYBCL.
As used in this Agreement, "Constituent Corporations" shall mean each of Merger
Sub and KeySpan, and "Surviving Corporation" shall mean KeySpan, at and after
the Effective Time, as the surviving corporation in the Merger.
1.4. Certificate of Incorporation and By-Laws. The Certificate of
Incorporation of Merger Sub as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
(the "Surviving Corporation Certificate of Incorporation") except that the name
of the Surviving Corporation shall be changed to KeySpan. The By-laws of Merger
Sub as in effect immediately prior to the Effective Time, shall be the By-laws
of the Surviving Corporation (the "Surviving Corporation By-laws") except that
the name of the Surviving Corporation shall be changed to KeySpan.
1.5. Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation. At the Effective Time,
the officers of the Surviving Corporation shall be the officers of Merger Sub
immediately prior to the Effective Time, together with any additional officers
as may be agreed upon prior thereto by Parent and KeySpan or as may be appointed
thereafter.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES
2.1. Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof:
(a) Merger Consideration. Each share of common stock par value $0.01 per
share of KeySpan ("KeySpan Common Stock"), including, without limitation, each
restricted share of KeySpan Common Stock granted under the KeySpan Benefit
Plans, that is issued and outstanding immediately prior to the Effective Time
(other than shares of KeySpan Common Stock to be cancelled in accordance with
Section 2.1(c)), shall automatically be converted into the right to receive
$42.00 in cash per share (such per share amount, as adjusted pursuant to the
following sentence, the "Merger Consideration"), without interest, payable to
the holder of such shares of KeySpan Common Stock, upon surrender, in the manner
provided in Section 2.2, of the certificate that formerly evidenced such share
of KeySpan Common Stock. All such shares of KeySpan Common Stock, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of KeySpan Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor, without interest, upon the surrender of such certificate
in accordance with Section 2.2.
(b) Conversion of Merger Sub Common Stock. Each share of common stock par
value $0.01 per share of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into one
duly authorized, fully paid and nonassessable share of KeySpan Common Stock.
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(c) Cancellation of Certain KeySpan Capital Stock. Each share of KeySpan
Common Stock that is owned as treasury stock by KeySpan or owned by any
wholly-owned Subsidiary of KeySpan, and all shares of KeySpan Common Stock that
are owned by Parent, Merger Sub or any other wholly-owned subsidiary of Parent
shall be canceled and retired and shall cease to exist and no cash or other
consideration shall be delivered in exchange therefor.
2.2. Surrender of Certificates.
--------------------------
(a) Exchange Agent. Prior to the Effective Time, Parent shall select a bank
or trust company reasonably acceptable to KeySpan to act as the exchange agent
(the "Exchange Agent") for the holders of shares of KeySpan Common Stock in
connection with the Merger and shall enter into an agreement with the Exchange
Agent which is reasonably acceptable to KeySpan. As of the Effective Time,
Parent shall deposit, or shall cause to be deposited, with the Exchange Agent,
in trust for the benefit of the holders of certificates or evidence of shares in
book entry form which immediately prior to the Effective Time evidenced shares
of KeySpan Common Stock (collectively, the "KeySpan Certificates"), cash in an
aggregate amount equal to the product of (i) the number of shares of KeySpan
Common Stock issued and outstanding at the Effective Time (other than shares of
KeySpan Common Stock to be cancelled in accordance with Section 2.1(c)) and (ii)
the Merger Consideration. Any funds deposited with the Exchange Agent shall
hereinafter be referred to as the "Exchange Fund."
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates (the "Certificates") which represented
shares of KeySpan Common Stock immediately prior to the Effective Time and whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1: (i) a letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the KeySpan
Certificates shall pass, only upon delivery of the KeySpan Certificates to the
Exchange Agent, and which letter shall be in such form and have such other
provisions as KeySpan may reasonably specify prior to the Effective Time and
(ii) instructions for use in effecting the surrender of the KeySpan Certificates
in exchange for the Merger Consideration to which such holder is entitled
pursuant to Section 2.1. Upon surrender of a KeySpan Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, completed in accordance with the instructions thereto, and such
other documents as the Exchange Agent may reasonably require, the holder of such
KeySpan Certificate shall be entitled to receive in exchange therefor the
aggregate Merger Consideration which such holder has the right to receive
pursuant to Section 2.1 (after taking into account all shares of KeySpan Common
Stock surrendered by such holder) and the Certificate so surrendered shall
forthwith be cancelled. Until so surrendered, each Certificate will represent,
from and after the Effective Time, only the right to receive the Merger
Consideration in cash as contemplated by this Article II. No interest shall
accrue or be paid on the amounts payable pursuant to this Article II upon
surrender of a Certificate.
(c) No Further Ownership Rights in KeySpan Common Stock. From and after the
Effective Time, the holders of KeySpan Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of KeySpan Common Stock except as otherwise provided herein or by
applicable law. The Merger Consideration paid in exchange for shares of KeySpan
Common Stock in accordance with the terms hereof shall be deemed to have been
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paid in full satisfaction of all rights pertaining to such shares of KeySpan
Common Stock previously represented by such Certificates. As of the Effective
Time, the stock transfer books of KeySpan shall be closed and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of KeySpan Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, such Certificates
shall be cancelled and exchanged as provided for in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of KeySpan Certificates for twelve months
after the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any holders of KeySpan Certificates who have not theretofore
complied with this Article II shall thereafter look only to the Surviving
Corporation for payment, as general creditors thereof, of their claim for the
Merger Consideration, without interest, to which such holders would be entitled
pursuant to Section 2.1.
(e) No Liability. None of Parent, Merger Sub, KeySpan or the Surviving
Corporation shall be liable to any Person in respect of any Merger Consideration
for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Lost, Stolen or Destroyed Certificates. If any KeySpan Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such KeySpan Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against claim that may be made against it with respect to
such KeySpan Certificate, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed KeySpan Certificate the Merger Consideration to which
the holder thereof is entitled pursuant to this Article II.
(g) Withholding. Each of the Exchange Agent, KeySpan, Parent, Merger Sub
and the Surviving Corporation shall be entitled to deduct and withhold from
payments otherwise payable pursuant to this Agreement to any holder of shares of
KeySpan Common Stock such amounts as they are respectively required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended, (the "Code") and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign Tax law. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of KeySpan Common Stock in respect of which such deduction and
withholding was made.
(h) Transfers of Ownership. If the Merger Consideration is to be paid to a
Person other than the Person in whose name the surrendered Certificate formerly
evidencing shares of KeySpan Common Stock is registered, it will be a condition
of payment that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the Person requesting such
payment will have paid to Parent or any agent designated by it any transfer or
other Taxes required by reason of the payment of the amount specified in Section
4
2.1(a) to a Person other than the registered holder of the Certificates
surrendered, or established to the satisfaction of the Parent or any agent
designated by it that such Tax has been paid or is not payable.
(i) Further Action. After the Effective Time, the officers and directors of
Parent and the Surviving Corporation will be authorized to execute and deliver,
in the name and on behalf of KeySpan and Merger Sub, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of
KeySpan and Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of KeySpan. Except as set forth in the
Disclosure Schedule delivered by KeySpan to Parent prior to the execution of
this Agreement (the "KeySpan Disclosure Schedule") and except as set forth in
the KeySpan SEC Reports (as defined in Section 3.1(e)) filed prior to the date
of this Agreement (only to the extent the qualifying nature of such disclosure
is readily apparent from the face of such KeySpan SEC Reports):
(a) Organization, Standing and Power. (i) Each of KeySpan and each of its
Subsidiaries (as defined in Section 8.12) is a corporation or other entity duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except in each case as would not reasonably be expected to result in a Material
Adverse Effect (as defined in Section 8.12) on KeySpan. The copies of the
certificate of incorporation and by-laws of KeySpan which were previously
furnished to Parent are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(ii) Each of the Joint Ventures of KeySpan (as defined below) is a
corporation or other entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except in each case as would
not reasonably be expected to result in a Material Adverse Effect on KeySpan. As
used in this Agreement, "Joint Venture" with respect to any person shall mean
any corporation or other entity (including partnerships and other business
associations and joint ventures) in which such person or one or more of its
Subsidiaries owns an equity interest that is less than a majority of any class
of the outstanding voting securities or equity, other than equity interests held
for investment purposes that (a) are less than 10% of any class of the
5
outstanding voting securities or equity or (b) with respect to which the net
book value as of December 31, 2005 of such person's interest does not exceed
$35,000,000.
(b) Subsidiaries. Section 3.1(b) of the KeySpan Disclosure Schedule
contains a description as of the date hereof of all Subsidiaries and Joint
Ventures of KeySpan, including the name of each such entity, the state or
jurisdiction of its incorporation or organization and KeySpan's interest
therein.
(c) Capital Structure.
------------------
(i) As of February 23, 2006, the authorized capital stock of KeySpan
consisted of (A) 450,000,000 shares of KeySpan Common Stock, of which
174,573,840 shares were outstanding, (B) 16,000,000 shares of Preferred
Stock, par value $25 per share, of which no shares were outstanding, (C)
1,000,000 shares of Preferred Stock, par value $100 per share, of which no
shares were outstanding and (D) 83,000,000 shares of Preferred Stock, par
value $.01 per share, of which no shares were outstanding. From February
23, 2006 to the date of this Agreement, there have been no issuances of
shares of the capital stock of KeySpan or any other securities of KeySpan
other than issuances of shares pursuant to options or rights outstanding as
of February 23, 2006 under the KeySpan Benefit Plans (as defined in Section
3.1(o)) and shares of the capital stock of KeySpan or any other securities
of KeySpan issued pursuant to The KeySpan Investor Program. All issued and
outstanding shares of the capital stock of KeySpan are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock
is entitled to preemptive rights. There were outstanding as of February 23,
2006 no options, warrants or other rights to acquire capital stock from
KeySpan, and no options or warrants or other rights to acquire capital
stock from KeySpan have been issued or granted from February 23, 2006 to
the date of this Agreement. There are no outstanding or authorized deferred
stock units, stock appreciation rights, security-based performance units,
"phantom" stock, profit participation or other similar rights or other
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive
any payment or other value based on the revenues, earnings or financial
performance, stock price performance or other attribute of KeySpan or any
of its Subsidiaries or assets or calculated in accordance therewith. There
are no contractual obligations for KeySpan or any of its Subsidiaries to
file a registration statement under the Securities Act or which otherwise
relate to the registration of any securities of KeySpan or its Subsidiaries
under the Securities Act.
(ii) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of KeySpan having the right to vote on any matters on
which stockholders may vote are issued or outstanding.
(iii) All of the outstanding shares of capital stock of, or other
equity interests in, each of KeySpan's Subsidiaries and to the Knowledge of
KeySpan all of the shares of capital stock or other equity interests which
KeySpan owns in all of its Joint Ventures have been duly authorized and
validly issued and are fully paid and nonassessable and are owned directly
or indirectly by KeySpan, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature
6
whatsoever (collectively, "Liens") (other than any customary provisions
contained in the applicable investment, stockholder, joint venture or
similar agreements governing any Joint Venture of KeySpan which have been
provided to Parent prior to the date hereof).
(iv) Except as otherwise set forth in this Section 3.1(c) or as
contemplated by Section 5.6, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which KeySpan or any of its
Subsidiaries is a party, or by which any of them is bound, obligating
KeySpan or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
voting securities of KeySpan or any of its Subsidiaries or obligating
KeySpan or any of its Subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are no
outstanding obligations of KeySpan or any of its Subsidiaries containing
any right of first refusal with respect to, or obligations to repurchase,
redeem or otherwise acquire, any shares of capital stock of KeySpan or any
of its Subsidiaries.
(v) Neither KeySpan nor any of its Subsidiaries is a party to any
voting agreement with respect to the voting of any shares of capital stock
or other voting securities or other equity interests in KeySpan or any of
its Subsidiaries.
(vi) There are no outstanding contractual obligations of KeySpan or
any of its Subsidiaries to make any loan to, or any equity or other
investment (in the form of a capital contribution or otherwise) in, any
Subsidiary of KeySpan or any other Person, other than guarantees by KeySpan
of any indebtedness (pursuant to agreements that have been made available
to Parent) or of any other obligations of any wholly-owned Subsidiary of
KeySpan.
(d) Authority; No Conflicts.
------------------------
(i) KeySpan has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
subject in the case of the consummation of the Merger to the adoption of
this Agreement by the Required KeySpan Vote (as defined in Section 3.1(j)).
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of KeySpan, subject in the case of the
consummation of the Merger to the adoption of this Agreement by the
Required KeySpan Vote. This Agreement has been duly executed and delivered
by KeySpan and constitutes a valid and binding agreement of KeySpan,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally or
by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by KeySpan do not,
and the consummation by KeySpan of the Merger and the other transactions
contemplated hereby will not, result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under, or give
7
rise to a right of termination, amendment, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of
a lien, pledge, security interest, charge or other encumbrance on any
assets (any such conflict, violation, default, right of termination,
amendment, cancellation or acceleration, loss or creation, a "Violation")
pursuant to: (A) any provision of the certificate of incorporation or
by-laws of KeySpan or (B) except as would not reasonably be expected to
result in a Material Adverse Effect on KeySpan, subject to obtaining or
making the consents, approvals, orders, permits, authorizations,
registrations, declarations, notices and filings referred to in paragraph
(iii) below, any loan or credit agreement, note, contract, mortgage, bond,
indenture, lease, Benefit Plan (as defined below) or other agreement,
obligation, instrument, permit, concession, franchise, license, or
judgment, order, writ or decree (collectively "Order"), statute, law,
ordinance, rule or regulation (collectively "Law") of any kind to which
KeySpan or any of its Subsidiaries is now subject to, a party to or by
which any of them or any of their respective properties or assets may be
bound or affected.
(iii) No material consent, approval, order, license, permit or
authorization of, or registration, declaration, notice or filing with, any
supranational, national, state, municipal or local government, any
instrumentality, subdivision, court, administrative agency or commission or
other authority thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "Governmental Entity") is necessary or
required to be obtained or made by or with respect to KeySpan or any
Subsidiary of KeySpan in connection with the execution and delivery of this
Agreement by KeySpan or the performance and consummation by KeySpan of the
Merger and the other transactions contemplated hereby, except for those
required under or in relation to (A) the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) state securities
or "blue sky" laws (the "Blue Sky Laws"), (C) the Securities Exchange Act
of 1934, as amended and the rules and regulations promulgated thereunder
(the "Exchange Act"), (D) the NYBCL with respect to the filing of the
Certificate of Merger, (E) rules and regulations of the NYSE and the
Pacific Stock Exchange, (F) applicable state public utility Laws, rules and
regulations promulgated by the New York Public Service Commission
("NYPSC"), and the New Hampshire Public Utilities Commission ("NHPUC"), (G)
Section 203 of the Federal Power Act, as amended and the rules and
regulations promulgated thereunder (the "Federal Power Act"), (H) Federal
Communications Commission ("FCC"), (I) antitrust or other competition laws
of other jurisdictions, and (J) the consents, approvals, orders, permits,
authorizations, registrations, declarations, notices and filings set forth
in Section 3.1(d)(iii) of the KeySpan Disclosure Schedule. Consents,
approvals, orders, permits, authorizations, registrations, declarations,
notices and filings required under or in relation to any of the foregoing
clauses (A) through (H) are hereinafter referred to as the "KeySpan
Required Approvals".
(e) Reports and Financial Statements.
---------------------------------
(i) KeySpan and its Subsidiaries have filed each form, report,
schedule, registration statement, registration exemption, if applicable,
definitive proxy statement and other document (together with all amendments
8
thereof and supplements thereto) required to be filed by KeySpan or any of
its Subsidiaries pursuant to 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") since
January 1, 2003 (as such documents have since the time of their filing been
amended or supplemented, the "KeySpan SEC Reports"). As of their respective
dates, the KeySpan SEC Reports (A) complied as to form in all material
respects with the requirements of the Securities Act or the Exchange Act,
if applicable, as the case may be, and, to the extent in effect and
applicable, the Xxxxxxxx-Xxxxx Act of 2002 ("SOX"), and (B) did not 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 light of the circumstances under which they were made, not
misleading.
(ii) KeySpan has provided to Parent copies of all correspondence sent
to or received from the SEC by or on behalf of KeySpan and its Subsidiaries
since December 31, 2003.
(iii) Each of the principal executive officers of KeySpan and the
principal financial officer of KeySpan (or each former principal executive
officer of KeySpan and each former principal financial officer of KeySpan,
as applicable) has made all certifications required by Rule 13a-14 or
15d-14 under the Exchange Act or Sections 302 and 906 of SOX and the rules
and regulations of the SEC promulgated thereunder with respect to the
KeySpan SEC Reports. For purposes of the preceding sentence, "principal
executive officer" and "principal financial officer" shall have the
meanings given to such terms in SOX. Since the effectiveness of SOX,
neither KeySpan nor any of its Subsidiaries has arranged any outstanding
"extensions of credit" to directors or executive officers within the
meaning of Section 402 of SOX.
(iv) The audited consolidated financial statements and unaudited
interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the KeySpan SEC Reports (the "KeySpan
Financial Statements") complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto and
except with respect to unaudited statements as permitted by rules and
regulations promulgated by the SEC) and fairly present (subject, in the
case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments that have not or are not reasonably expected to
result in a Material Adverse Effect on KeySpan) the consolidated financial
position of KeySpan and its consolidated Subsidiaries as of the respective
dates thereof and the consolidated results of their operations and cash
flows for the respective periods then ended. No restatement of the KeySpan
Financial Statements has occurred or is reasonably likely to occur.
(v) All filings (other than immaterial filings) required to be made by
KeySpan or any of its Subsidiaries since January 1, 2003 and in the case of
any filing made pursuant to the Public Utility Holding Company Act of 1935,
9
as amended and in effect prior to its repeal effective February 8, 2006
(the "PUHCA"), prior to February 8, 2006, under the Federal Power Act, the
Communications Act of 1934, as amended by the Telecommunications Act of
1996, the Natural Gas Act of 1938, as amended, the PUHCA and applicable
state laws and regulations, have been filed with the Federal Energy
Regulatory Commission ("FERC"), the Department of Energy, the SEC and the
FCC or any applicable state public utility commissions (including, to the
extent required, the NYPSC, the Massachusetts Department of
Telecommunications and Energy, and the NHPUC), as the case may be,
including all forms, statements, reports, agreements (oral or written) and
all documents, exhibits, amendments and supplements appertaining thereto,
including all rates, tariffs, franchises, service agreements and related
documents and all such filings complied, as of their respective dates, with
all applicable requirements of the applicable statute and the rules and
regulations thereunder, except for filings the failure of which to make or
the failure of which to make in compliance with all applicable requirements
of the applicable statute and the rules and regulations thereunder, have
not had and could not reasonably be expected to have a Material Adverse
Effect on KeySpan.
(vi) KeySpan maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences. Since December 31, 2003, KeySpan has not received any oral or
written notification of a (x) "reportable condition" or (y) "material
weakness" in its internal controls. The terms "reportable condition" and
"material weakness" shall have the meanings assigned to them in the
Statements of Auditing Standards 60, as in effect on the date hereof.
(vii) The management of KeySpan has (x) designed disclosure controls
and procedures (as defined in Rule 13a-15(e) of the Exchange Act), or
caused such disclosure controls and procedures to be designed under their
supervision, to ensure that material information relating to KeySpan,
including its consolidated Subsidiaries, is made known to the management of
KeySpan by others within those entities and (y) has disclosed, based on its
most recent evaluation of internal control over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act), to KeySpan's outside
auditors and the audit committee of the Board of Directors of KeySpan (A)
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect KeySpan's ability to record, process, summarize
and report financial information and (B) any fraud, whether or not
material, that involves management or other employees who have a
significant role in KeySpan's internal control over financial reporting.
KeySpan has disclosed to Parent all matters set forth in clauses (A) and
(B) above discovered or disclosed since December 31, 2003. Since December
31, 2003, any material change in internal control over financial reporting
required to be disclosed in any KeySpan SEC Report has been so disclosed.
10
(viii) Since December 31, 2003, (x) neither KeySpan nor any of its
Subsidiaries nor, to the Knowledge of the Executive Officers (for the
purposes of this Section 3.1(e)(viii), as such term is defined in Section
3b-7 of the Exchange Act) of KeySpan, any director, officer, employee,
auditor, accountant or representative of KeySpan or any of its Subsidiaries
has received or otherwise obtained Knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of
KeySpan or any of its Subsidiaries or their respective internal accounting
controls relating to periods after December 31, 2003, including any
material complaint, allegation, assertion or claim that KeySpan or any of
its Subsidiaries has engaged in questionable accounting or auditing
practices (except for any of the foregoing after the date hereof which have
no reasonable basis), and (y) to the Knowledge of the Executive Officers of
KeySpan, no attorney representing KeySpan or any of its Subsidiaries,
whether or not employed by KeySpan or any of its Subsidiaries, has reported
evidence of a material violation of securities laws, breach of fiduciary
duty or similar violation, relating to periods after December 31, 2003, by
KeySpan or any of its officers, directors, employees or agents to the Board
of Directors of KeySpan or any committee thereof or to any director or
Executive Officer of KeySpan.
(f) Compliance; Permits. KeySpan and its Subsidiaries hold all permits,
licenses, certificates, franchises, consents, authorizations and approvals of
all Governmental Authorities ("Permits") necessary for the lawful conduct of
their respective businesses as currently conducted, except where failures to so
hold has not had and could not reasonably be expected to have a Material Adverse
Effect on KeySpan. KeySpan and its Subsidiaries are in compliance with the terms
of such Permits, except where failure to so comply has not had and could not
reasonably be expected to have a Material Adverse Effect on KeySpan. KeySpan,
and its Subsidiaries and the Joint Ventures of KeySpan are not in violation of
or default under any Law or Order of any Governmental Entity, except for such
violations or defaults that have not had and could not reasonably be expected to
have a Material Adverse Effect on KeySpan. Without limitation to the foregoing,
KeySpan is, and has been, in compliance in all material respects with the
applicable listing standards and corporate governance rules and regulations of
the NYSE and the Pacific Stock Exchange. This Section 3.1(f) does not relate to
matters with respect to Taxes, such matters being the subject of Section 3.1(n),
benefits plans, such matters being the subject of Section 3.1(o), labor matters,
such matters being the subject of Section 3.1(p) and Environmental Laws, such
matters being the subject of Section 3.1(r).
(g) Information Supplied. None of the information to be contained in the
Proxy Statement (as defined in Section 5.1) or any proxy supplement will, at the
date it is first mailed to KeySpan's stockholders or at the time of the KeySpan
Stockholders Meeting (as defined in Section 5.1), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by KeySpan with respect to statements made or
incorporated by reference therein based on information supplied by or on behalf
of Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement. None of the information supplied or to be supplied by KeySpan for
11
inclusion or incorporation by reference in the Circular (as defined in Section
5.1) will, at the date it is first mailed to Parent's Shareholders or at the
time of the Parent Shareholders Meeting (as defined in Section 5.1), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(h) Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities.
(i) Since December 31, 2005, KeySpan and its Subsidiaries have conducted
their business in the ordinary course of business and no event has occurred
which has had, and no fact or circumstance exists that has resulted in or would
reasonably be expected to result in, a Material Adverse Effect on KeySpan.
(ii) Neither KeySpan nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, contingent, accrued or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance sheet,
except liabilities, obligations or contingencies that are accrued or reserved
against in the consolidated financial statements of KeySpan or are reflected in
the notes thereto for the year ended December 31, 2005, that were incurred in
the ordinary course of business since December 31, 2005. Neither KeySpan nor any
of its Subsidiaries is a party to, or has any commitment to become a party to,
any joint venture, off-balance sheet partnership or any similar contract or
arrangement (including any contract relating to any transaction or relationship
between or among KeySpan and any of its Subsidiaries, on the one hand, and any
unconsolidated affiliate, including any structured finance, special purpose or
limited purpose entity or person, on the other hand or any "off-balance sheet
arrangements" (as defined in Item 303(a) of Regulation S-K of the SEC)), where
the result, purpose or effect of such contract is to avoid disclosure of any
material transaction involving, or material liabilities of, KeySpan or any of
its Subsidiaries, in KeySpan's or any of its Subsidiary's audited financial
statements or other KeySpan SEC Reports.
(i) Board Approval. The Board of Directors of KeySpan, by resolutions duly
adopted at a meeting duly called and held and not subsequently rescinded or
modified in any way (the "KeySpan Board Approval"), has duly (i) determined that
this Agreement and the Merger are advisable and in the best interests of KeySpan
and its stockholders, (ii) adopted this Agreement and approved the Merger and
(iii) recommended that the stockholders of KeySpan adopt this Agreement and
approve the Merger.
(j) Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of KeySpan Common Stock is the only vote of the holders of
any class or series of KeySpan capital stock necessary to adopt this Agreement
and approve the transactions contemplated hereby (the "Required KeySpan Vote").
(k) Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States applicable to KeySpan is applicable
to the Merger or the other transactions contemplated hereby.
12
(l) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based on arrangements made by or
on behalf of KeySpan, except Lazard Freres & Co. LLC (the "KeySpan Financial
Advisor"), whose fees and expenses will be paid by KeySpan in accordance with
KeySpan's agreement with such firm, based upon arrangements made by or on behalf
of KeySpan and previously disclosed to Parent.
(m) Opinion of KeySpan Financial Advisor. KeySpan has received the opinion
of KeySpan Financial Advisor, dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair to the holders of
KeySpan Common Stock from a financial point of view, a copy of which opinion has
been made available to Parent.
(n) Taxes. Each of KeySpan and each of its Subsidiaries have timely filed
with the relevant taxing authority all material Tax Returns required to be filed
by any of them, and have timely paid (or KeySpan has timely paid on their
behalf), or have set up an adequate reserve for the payment of, all material
Taxes in accordance with GAAP. Such Tax Returns are true, correct and complete
in all material respects. No material deficiencies or other claims for any Taxes
have been proposed, asserted or assessed against KeySpan or any of its
Subsidiaries that are not adequately reserved for in accordance with GAAP. There
are no Liens with respect to Taxes upon any of the assets or properties of
either KeySpan or its Subsidiaries, other than with respect to Taxes not yet due
and payable, or for Taxes that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided. There is no
outstanding audit, assessment, dispute, claim or administrative or judicial
proceeding concerning any material Tax liability of KeySpan or any of its
Subsidiaries either within KeySpan's knowledge or claimed, pending or raised by
any Governmental Entity in writing. All material Taxes required to be withheld,
collected or deposited by or with respect to KeySpan and each of its
Subsidiaries have been timely withheld, collected or deposited as the case may
be, and to the extent required, have been paid to the relevant taxing authority.
The tax years in the principal jurisdictions in which KeySpan and each of its
Subsidiaries pay income Tax are closed through the dates enumerated in Section
3.1(n) of the KeySpan Disclosure Schedule. Neither KeySpan nor any of its
Subsidiaries is a party to, bound by or has any material obligation under any
Tax allocation, Tax sharing, Tax indemnity or similar agreement, arrangement or
understanding. The income Tax Returns delivered to Parent for inspection are
true and complete copies. All material written communications to or from any
federal, New York State or New York City taxing authority have been delivered to
Parent for inspection. Neither KeySpan nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
under Section 355 of the Code (i) in the two years prior to the date of this
Agreement or (ii) in a distribution which could otherwise constitute part of a
"plan" or "series of related transactions" (within the meaning of Section 355(e)
of the Code) in conjunction with the Merger. Neither KeySpan nor any of its
Subsidiaries has participated in a "reportable transaction" as defined in
Treasury Regulation Section 1.6011-4 (as in effect at the relevant time) (or any
comparable regulations of jurisdictions other than the United States). Neither
KeySpan nor any of its Subsidiaries (A) has ever been a member of a
consolidated, combined, unitary or aggregate group filing a consolidated federal
income Tax Return (other than a group the common parent of which was KeySpan) or
(B) has any material liability arising from the application of Treasury
Regulation Section 1.1502-6 or any analogous provision of state, local or
13
foreign law, or as a transferee or successor, by contract or otherwise. All
closing agreements with the Internal Revenue Service have been provided to
Parent for inspection. For the purpose of this Agreement, the term "Tax"
(including, with correlative meaning, the terms "Taxes" and "Taxable") shall
mean all Federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise,
occupancy and other Taxes, duties or assessments of any nature whatsoever,
together with all interest, penalties and additions imposed with respect to such
amounts, and "Tax Return" shall mean any return, report, information return or
other document (including any related or supporting information) required to be
filed with any taxing authority with respect to Taxes, including information
returns, claims for refunds of Taxes and any amendments or supplements to any of
the foregoing.
(o) Benefit Plans. (i) With respect to each material employee benefit plan
(including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the meaning
of ERISA Section 3(37)) and all stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and other material employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA, (all the foregoing being herein called "Benefit Plans"), under which any
employee, former employee, consultant, former consultant or director of KeySpan
or any of its Subsidiaries has any present or future right to benefits,
maintained or contributed to by KeySpan or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with KeySpan would be
deemed a "single employer" within the meaning of Section 4001(b) of ERISA, or
under which KeySpan or any of its Subsidiaries has any present or future
liability or potential liability (the "KeySpan Benefit Plans"), KeySpan has made
available, or within 30 days after the execution hereof will make available, to
Parent a true and correct copy of (A) the most recent annual report (Form 5500)
filed with the IRS, (B) such KeySpan Benefit Plan, (C) each trust agreement
relating to such KeySpan Benefit Plan, (D) the most recent summary plan
description for each KeySpan Benefit Plan for which a summary plan description
is required by ERISA, (E) the most recent actuarial report or valuation relating
to a KeySpan Benefit Plan subject to Title IV of ERISA and (F) the most recent
determination letter issued by the IRS with respect to any KeySpan Benefit Plan
qualified under Section 401(a) of the Code.
(ii) With respect to the KeySpan Benefit Plans, individually and in the
aggregate, no event has occurred and there exists no condition or set of
circumstances, in connection with which KeySpan or any of its Subsidiaries could
be subject to any liability that would reasonably be expected to have a Material
Adverse Effect on KeySpan under ERISA, the Code or any other applicable law.
Without limiting the generality of the foregoing, except as would not reasonably
be expected to have a Material Adverse Effect on KeySpan, (i) no liability under
Title IV or section 302 of ERISA has been incurred by KeySpan or any ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a risk to KeySpan or any ERISA Affiliate of incurring any such
liability, other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due), (ii) the PBGC has
not instituted proceedings to terminate any KeySpan Benefit Plan that is subject
to Title IV of ERISA (a "Title IV Plan") and no condition exists that presents a
risk that such proceedings will be instituted and (iii) no Title IV Plan or any
trust established thereunder has incurred any "accumulated funding deficiency"
(as defined in Section 302 or ERISA and Section 412 of the Code), whether or not
14
waived, as of the last day of the most recent fiscal year of each Title IV Plan
ended prior to the Closing Date.
(iii) Prior to the date of this Agreement, KeySpan has delivered to Parent
a report that sets forth KeySpan's good faith estimate, as of the date of such
report, of (x) the amount to be paid under all KeySpan Benefit Plans (subject to
the exceptions described in such report and based upon the assumptions described
in such report) to the current officers and key employees of KeySpan and its
Subsidiaries who have contractual entitlements under any KeySpan Benefit Plan to
receive "gross-up" payments for golden parachute excise taxes that may be
imposed pursuant to Section 280G of the Code (or the amount by which any of
their benefits may be accelerated or increased) as a result of (i) the execution
of this Agreement, (ii) the obtaining of stockholder approval of the Merger,
(iii) the consummation of the Merger or (iv) the termination or constructive
termination of the employment of such officers or key employees following one of
the events set forth in clauses (i) through (iii) above and (y) the
ramifications of such payments under Sections 280G and 4999 of the Code.
(p) Labor Matters. As of the date hereof, neither KeySpan nor any of its
Subsidiaries is a party to, bound by or in the process of negotiating any
collective bargaining agreement or other labor agreement with any union or labor
organization. As of the date of this Agreement (i) there are no disputes,
grievances or arbitrations pending or, to the Knowledge of KeySpan, threatened
between KeySpan or any of its Subsidiaries and any trade union or other
representatives of its employees, (ii) there is no charge or complaint pending
or threatened in writing against KeySpan or any of its Subsidiaries before the
National Labor Relations Board (the "NLRB"), the Equal Employment Opportunity
Commission or any similar Governmental Entity, (iii) there are no litigations,
lawsuits, claims, charges, complaints, arbitrations, actions, investigations or
proceedings pending or, to the Knowledge of KeySpan, threatened between or
involving KeySpan or any of its Subsidiaries and any of their respective current
or former employees, independent contractors, applicants for employment or
classes of the foregoing, except in each case as have not had and could not
reasonably be expected to have a Material Adverse Effect on KeySpan and, (iv) to
the Knowledge of KeySpan, as of the date of this Agreement, there are no
material organizational efforts presently being made involving any of the
employees of KeySpan or any of its Subsidiaries. No labor union, labor
organization or group of employees of KeySpan or any of its Subsidiaries has
made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or filed
with the NLRB or any other Governmental Entity. From January 1, 2003, to the
date of this Agreement, there has been no work stoppage, strike, slowdown or
lockout by or affecting the employees of KeySpan or any of its Subsidiaries and,
to the Knowledge of KeySpan, no such action has been threatened in writing.
KeySpan and its Subsidiaries are in compliance with all material applicable Laws
respecting employment and employment practices, including, without limitation,
all material legal requirements respecting terms and conditions of employment,
equal opportunity, affirmative action, workplace health and safety, wages and
hours, child labor, immigration, discrimination, disability rights or benefits,
facility closures and layoffs, workers' compensation, labor relations, employee
leaves and unemployment insurance. Since January 1, 2003, neither KeySpan nor
any of its Subsidiaries has engaged in any "plant closing" or "mass layoff", as
defined in the Worker Adjustment Retraining and Notification Act or any
comparable state or local Law (the "WARN Act"), without complying with the
15
notice requirements of such Laws. To the Knowledge of KeySpan (i) none of the
employees of KeySpan or any of its Subsidiaries is in any material respect in
violation of any term of any employment agreement, nondisclosure agreement,
common law nondisclosure obligation, fiduciary duty, non-competition agreement,
restrictive covenant or other obligation to a former employer relating to the
right of such employee to be employed by KeySpan or any of its Subsidiaries or
the employee's knowledge or use of trade secrets or proprietary information, and
(ii) no employees of KeySpan or any of its Subsidiaries earning $100,000 or more
per year intend to terminate his or her employment with KeySpan or any of its
Subsidiaries.
(q) Litigation. Except for claims, actions, suits, proceedings or
investigations that would not reasonably be expected to result in a Material
Adverse Effect on KeySpan, there are no claims, actions, suits, proceedings,
audits, arbitrations or investigations pending or, to the Knowledge of KeySpan,
threatened against, relating to or affecting KeySpan or any of its Subsidiaries,
or any of their respective assets or properties, before or by any Governmental
Entity. As of the date hereof, neither KeySpan nor any of its Subsidiaries nor
any of their respective properties is or are subject to any order, writ,
judgment, injunction, decree or award having, or which would reasonably be
expected to result in, a Material Adverse Effect on KeySpan.
(r) Environmental Matters. Except as would not reasonably be expected to
result in a Material Adverse Effect on KeySpan: (i) KeySpan and each of its
Subsidiaries (x) comply, and at all times have complied, with all applicable
Environmental Laws (as defined below), and possess and comply with all
Environmental Permits (as defined below) required under any applicable
Environmental Laws to operate as they presently operate, which Environmental
Permits are in good standing or, where applicable, a renewal application has
been timely filed with and is pending approval by all applicable Governmental
Entities, and (y) possess all air emission allowances and air emissions
reduction credits required under any applicable Environmental Laws to operate as
they presently operate; (ii) to the Knowledge of KeySpan, there are no Materials
of Environmental Concern (as defined below) at any current or former assets,
facilities or properties owned or operated by KeySpan or any of its predecessors
or Subsidiaries, or under circumstances that are reasonably likely to result in
liability of KeySpan or any Subsidiary or any of their predecessors under any
applicable Environmental Laws; (iii) neither KeySpan nor any of its Subsidiaries
has received any written notification alleging that it is liable for, or has
received any request for information pursuant to Section 104(e) of the
Comprehensive Environmental Response, Compensation and Liability Act or similar
state statute or any other similar applicable Environmental Laws concerning, any
release or threatened release of Materials of Environmental Concern at any
location; (iv) to the Knowledge of KeySpan, no capital expenditures are or will
be required of KeySpan or any of its Subsidiaries to achieve or maintain
compliance with any applicable Environmental Laws; and (v) to the Knowledge of
KeySpan, neither KeySpan nor any of its Subsidiaries is subject to or has
contractually assumed or retained from any person or entity (including any
Governmental Entity), liability for any matters arising under or pursuant to any
Environmental Laws or arising from or relating to Materials of Environmental
Concern. For purposes of this Agreement, the following terms shall have the
following meanings: (x) "Environmental Laws" shall mean all foreign, federal,
state, or local statutes, regulations, ordinances, common law, codes, or decrees
and any binding administrative or judicial interpretation thereof relating to
the protection of the environment, including protection of the ambient air,
soil, natural resources, surface water or groundwater and protection of human
16
health or safety as affected by the environment, (y) "Environmental Permits"
shall mean all permits, licenses, registrations, and other authorizations under
applicable Environmental Laws; and (z) "Materials of Environmental Concern"
shall mean any hazardous, dangerous, radioactive, acutely hazardous, or toxic
substance or waste defined, characterized, regulated or as to which liability
could reasonably be expected to be imposed under any applicable Environmental
Laws, including without limitation the federal Comprehensive Environmental
Response, Compensation and Liability Act and the federal Clean Air Act, Clean
Water Act, Toxic Substances Control Act, Resource Conservation and Recovery Act
and any analogous state and local laws and regulations.
(s) Intellectual Property. KeySpan and its Subsidiaries own or have a valid
license to use all trademarks, service marks and trade names (including any
registrations or applications for registration of any of the foregoing)
(collectively, the "KeySpan Intellectual Property") necessary to carry on their
business substantially as currently conducted, except where such failures to own
or validly license such KeySpan Intellectual Property would not reasonably be
expected to have a Material Adverse Effect on KeySpan. Neither KeySpan nor any
such Subsidiary has received any notice of infringement of or conflict with, and
there are no infringements of or conflicts with, the rights of others with
respect to the use of any KeySpan Intellectual Property that, in either such
case, would reasonably be expected to have a Material Adverse Effect on KeySpan.
(t) Insurance. Except for failures to maintain insurance or self-insurance
that have not had and could not reasonably be expected to have a Material
Adverse Effect on KeySpan, from January 1, 2003, through the date of this
Agreement, each of KeySpan and its Subsidiaries has been continuously insured
with financially responsible insurers or has self-insured, in each case in such
amounts and with respect to such risks and losses as are customary for companies
in the United States conducting the business conducted by KeySpan and its
Subsidiaries during such time period. Neither KeySpan nor any of its
Subsidiaries has received any notice of cancellation or termination with respect
to any insurance policy of KeySpan or any of its Subsidiaries, except with
respect to any cancellation or termination that, has not had and could not
reasonably be expected to have a Material Adverse Effect on KeySpan.
(u) Interested Party Transactions. Since January 1, 2005, no event has
occurred that would be required to be reported as a Certain Relationship or
Related Transaction pursuant to Statement of Financial Accounting Standards No.
57 or Item 404 of Regulation S-K of the SEC.
(v) Material Contracts.
-------------------
(i) All "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) ("KeySpan Material Contracts")
required to be have been filed with the SEC have been filed, so and no such
material contract has been amended or modified, except for such amendments
or modifications which have been filed as an exhibit to a subsequently
dated and filed SEC document or are not required to be filed with the SEC.
17
(ii) No Breach. All KeySpan Material Contracts are valid and in full
force and effect and enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law), except to the extent that
(x) they have previously expired in accordance with their terms or (y) the
failure to be in full force and effect, individually or in the aggregate,
would not reasonably be likely to have a Material Adverse Effect. Neither
KeySpan nor any of its Subsidiaries, nor, to KeySpan's Knowledge, any
counterparty to any KeySpan Material Contract, has violated any provision
of, or committed or failed to perform any act which, with or without
notice, lapse of time or both, would constitute a default under the
provisions of any KeySpan Material Contract, except in each case for those
violations or defaults which, individually or in the aggregate, would not
reasonably be likely to have a Material Adverse Effect.
(w) Foreign Corrupt Practices and International Trade Sanctions(i) . To the
Knowledge of KeySpan, neither KeySpan, nor any of its Subsidiaries, nor any of
their respective directors, officers, agents, employees or any other Persons
acting on their behalf has, in connection with the operation of their respective
businesses, (i) used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful expenditures relating to
political activity to government officials, candidates or members of political
parties or organizations, or established or maintained any unlawful or
unrecorded funds in violation of Section 104 of the Foreign Corrupt Practices
Act of 1977, as amended, or any other similar applicable foreign, Federal or
state law, (ii) paid, accepted or received any unlawful contributions, payments,
expenditures or gifts, or (iii) violated or operated in noncompliance with any
export restrictions, anti-boycott regulations, embargo regulations or other
applicable domestic or foreign laws and regulations.
3.2. Representations and Warranties of Parent and Merger Sub. Except as set
forth in the Disclosure Schedule delivered by Parent and Merger Sub to KeySpan
prior to the execution of this Agreement (the "Parent Disclosure Schedule"),
Parent and Merger Sub, jointly and severally, represent and warrant to KeySpan
as follows:
(a) Organization, Standing and Power. (i) Each of Parent and Merger Sub is
a corporation duly incorporated, validly existing and, with respect to Merger
Sub only, in good standing under the laws of its respective jurisdiction of
incorporation, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary except in each case as would not reasonably be expected
to result in a Material Adverse Effect on Parent or Merger Sub, as the case may
be. The copies of the certificate of incorporation and by-laws (or similar
organizational documents) of Parent and Merger Sub which were previously
furnished to KeySpan are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(b) Authority; No Violations.
-------------------------
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(i) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject to approval of the consummation
of the Merger set forth in this Agreement by the Required Parent Vote (as
defined in Section 3.2(j)). The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Merger Sub, subject in the case of the consummation of the Merger to the
approval of this Agreement by the Required Parent Vote. This Agreement has
been duly executed and delivered by each of Parent and Merger Sub and
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally, by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) or by an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement by each of Parent
and Merger Sub does not, and the consummation by each of Parent and Merger
Sub of the Merger and the other transactions contemplated hereby will not,
result in a Violation pursuant to: (A) any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of Parent or
Merger Sub or (B) except (x) as would not reasonably be expected to result
in a Material Adverse Effect on Parent or Merger Sub or (y) would or would
reasonably be expected to, individually or in the aggregate, prevent Parent
or Merger Sub from performing, or materially impair the ability of Parent
or Merger Sub to perform, their respective obligations under this
Agreement.
(iii) No material consent, approval, order, license, permit or
authorization of, or registration, declaration, notice or filing with, any
Governmental Entity is necessary or required to be obtained or made by or
with respect to Parent, Merger Sub or any other Subsidiary of Parent in
connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the performance and consummation by Parent and Merger Sub of
the Merger and the other transactions contemplated hereby except for those
required under or in relation to (A) the HSR Act, (B) the Blue Sky Laws,
(C) the Exchange Act, (D) the NYBCL with respect to the filing of the
Certificate of Merger, (E) rules and regulations of the NYSE and the London
Stock Exchange plc (the "LSE") and the UK Listing Rules (as defined in
3.2(e)), (F) applicable state public utility Laws, rules --- and
regulations promulgated by the NYPSC, and the NHPUC, (G) Section 203 of the
Federal Power Act, (H) if required, the Atomic Energy Act, (I) the FCC, (J)
notice to the Committee on Foreign Investment (CFIUS) pursuant to the
Exon-Xxxxxx Act, (K) antitrust or other competition laws of other
jurisdictions, and (L) the consents, approvals, orders, permits,
authorizations, registrations, declarations, notices and filings set forth
in Section 3.2(b)(iii) of the Parent Disclosure Schedule. Consents,
approvals, orders, permits, authorizations, registrations, declarations,
notices and filings required under or in relation to any of the foregoing
clauses (A) through (J) are hereinafter referred to as the "Parent Required
Approvals".
(c) Compliance. Parent and Merger Sub and the Subsidiaries of Parent are
not in violation of or default under any Law or Order of any Governmental
19
Entity, except for such violations or defaults that have not had and could not
reasonably be expected to have a Material Adverse Effect on Parent or Merger
Sub.
(d) Litigation. Except for claims, actions, suits, proceedings or
investigations that would not reasonably be expected to, individually or in the
aggregate, prevent Parent or Merger Sub from performing, or materially impair
the ability of Parent or Merger Sub to perform, their respective obligations
under this Agreement, there are no claims, actions, suits, proceedings, audits,
arbitrations or investigations pending or, to the Knowledge of Parent,
threatened against, relating to or affecting Parent or any of Parent's
Subsidiaries, or any of their respective assets or properties, before or by any
Governmental Entity. As of the date hereof, neither Parent nor any of Parent's
Subsidiaries nor any of their respective properties is or are subject to any
order, writ, judgment, injunction, decree or award having, or which would
reasonably be expected to, individually or in the aggregate, prevent Parent or
Merger Sub from performing, or materially impair the ability of Parent or Merger
Sub to perform, their respective obligations under this Agreement.
(e) Information Supplied. None of the information to be contained in the
Circular or any supplementary circular will, at the date it is first mailed to
Parent's Shareholders or at the time of the Parent Shareholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Circular will comply in all material respects with all United
Kingdom statutory and other legal and regulatory provisions (including, without
limitation, the Companies Xxx 0000, as amended, (the "Companies Act"), the
Financial Services and Markets Xxx 0000, as amended, and the rules and
regulations made thereunder, the listing rules (the "UK Listing Rules")
promulgated by the United Kingdom Listing Authority (the "UKLA") and the rules
and requirements of the LSE except that no representation is made by Parent or
Merger Sub with respect to statements made or incorporated by reference therein
based on information supplied by or on behalf of KeySpan for inclusion or
incorporation by reference in the Circular. None of the information supplied or
to be supplied by Parent or Merger Sub for inclusion or incorporation by
reference in the Proxy Statement will, at the date it is first mailed to
KeySpan's stockholders or at the time of the KeySpan Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(f) Operations of Merger Sub. Merger Sub is an indirect, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
(g) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based on arrangements made by or
on behalf of Parent or Merger Sub, except Rothschild, Inc., whose fees and
expenses will be paid by Parent or Merger Sub in accordance with Parent or
Merger Sub's agreement with such firm, based upon arrangements made by or on
behalf of Parent or Merger Sub and previously disclosed to KeySpan.
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(h) Availability of Funds. Parent and Merger Sub will have at the Effective
Time sufficient immediately available funds to pay the Merger Consideration,
consummate the transactions contemplated hereby and to pay all related fees and
expenses.
(i) Board Approval. The Board of Directors of Parent, by resolutions duly
adopted at a meeting duly called and held and not subsequently rescinded or
modified in any way (the "Parent Board Approval"), has duly (i) determined that
this Agreement and the Merger are advisable and in the best interests of Parent
and its shareholders, (ii) approved this Agreement and approved the Merger and
(iii) will recommend that the shareholders of Parent approve this Agreement and
the Merger in connection with the mailing of the Circular.
(j) Vote Required. The only vote of the holders of any class of shares of
Parent that is required to approve the consummation of the Merger set out in
this Agreement and the other transactions contemplated thereby, but not, for the
avoidance of doubt, any fee payable by Parent pursuant to Article VII herein,
(in respect of which no vote shall be required) is the affirmative vote of a
majority of such ordinary shareholders of Parent as (being entitled to do so)
are present in person and vote (or, in the case of a vote taken on a poll, the
affirmative vote by shareholders representing a majority of the Parent Ordinary
Shares in respect of which votes were validly exercised) at the Parent
Shareholders' Meeting in relation to this Agreement, the Merger and other
transactions contemplated hereby (the "Required Parent Vote").
(k) Ownership of KeySpan Common Stock. Neither Parent nor any of its
subsidiaries or other affiliates beneficially owns any KeySpan Common Stock.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Covenants of KeySpan. During the period from the date of this
Agreement and continuing until the Effective Time, KeySpan agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on Section 4.1 of the KeySpan Disclosure
Schedule or as required by a Governmental Entity of competent jurisdiction or by
applicable law, rule or regulation, or to the extent that Parent shall otherwise
consent in writing (which consent not to be unreasonably delayed or withheld)):
(a) Ordinary Course of Business. KeySpan shall, and shall cause its
Subsidiaries to, carry on its and their businesses in the usual, regular and
ordinary course consistent with past practice and good utility practice and use
reasonable best efforts to preserve intact in all material respects their
present business organizations and relationships with customers, suppliers,
Governmental Entities and others having significant business dealings with them
and, subject to prudent management of their workforces and business needs, keep
available the services of their present officers and employees.
(b) Dividends and Distributions, etc. KeySpan shall not, and shall not
permit any of its Subsidiaries to: (i) declare or pay any dividends on or make
other distributions in respect of any of their capital stock other than (A) by a
wholly owned Subsidiary or by a partially owned Subsidiary (provided that
21
KeySpan or a Subsidiary of KeySpan receives its proportionate share of such
dividend or distribution), (B) dividends required to be paid on preferred stock
of any Subsidiaries in accordance with their terms, (C) regular dividends on
KeySpan Common Stock with usual record and payment dates at a rate not in excess
of $0.465 per share per quarter and (D) with respect to any quarter in which the
Effective Time occurs, a special dividend with respect to KeySpan Common Stock
in an amount consisting of the pro rata portion of the dividend permitted under
clause (C), for the period from and including the ex-dividend date (as referred
to in Rule 235 of the New York Stock Exchange Constitution and Rules) through,
but not including, the day of the Effective Time; (ii) split, combine or
reclassify any of their capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its capital stock; or (iii) directly or indirectly redeem,
repurchase or otherwise acquire any shares of their capital stock other than (x)
in the ordinary course of business consistent with past practice in connection
with: (1) repurchases, redemptions and other acquisitions in connection with the
administration of the KeySpan Benefit Plans in the ordinary course of operation
of such plans, (2) redemptions, purchases or acquisitions required by the terms
of any series of preferred stock of any Subsidiary or (3) in connection with the
refunding of the preferred stock of any Subsidiary through the issuance of
additional preferred stock of any Subsidiary or indebtedness either at its
stated maturity or at a lower cost of funds (calculating such cost on an
aggregate after-Tax basis) or through the incurrence of indebtedness permitted
under Section 4.1(h) and (y) intercompany redemptions, repurchases or
acquisitions, of capital stock.
(c) Issuance of Securities. KeySpan shall not, and shall not permit any of
its Subsidiaries to, issue, sell, pledge, dispose of, grant, transfer, encumber,
or authorize the issuance, sale, pledge, disposition, grant, transfer or
encumbrance of any shares of capital stock of, or other equity interests in,
KeySpan or any of its Subsidiaries of any class, or securities convertible or
exchangeable or exercisable for any shares of such capital stock or other equity
interests, or any options, warrants or other rights of any kind to acquire any
shares of such capital stock or other equity interests or such convertible or
exchangeable securities, or any other ownership interest, of KeySpan or any of
its Subsidiaries, except for (x) in the ordinary course of business consistent
with past practice in connection with: (1) the refunding of the preferred stock
of any Subsidiary through the issuance of additional preferred stock of any
Subsidiary either at its stated maturity or at a lower cost of funds
(calculating such cost on an aggregate after-Tax basis) or through the
incurrence of indebtedness permitted under Section 4.1(h), (2) the issuance of
KeySpan Common Stock pursuant to the terms of the KeySpan 401(k) Plans and the
KeySpan Employee Discount Stock Purchase Plan, (3) the issuance of KeySpan
Common Stock upon exercise or settlement of KeySpan stock options and Other
KeySpan Stock Awards, (4) the granting of awards of performance shares,
restricted shares, stock options, stock appreciation or similar rights, as the
case may be, pursuant to the KeySpan Benefit Plans in the ordinary course of the
operation of such plans, provided that the aggregate number of shares of KeySpan
Common Stock issuable upon the exercise or settlement, as the case may be, of
any such awards granted after the date of this Agreement shall not exceed
450,000 shares, (5) the issuance by a Subsidiary of shares of its capital stock
to KeySpan or a Subsidiary of KeySpan, and (6) the issuance of securities by
KeySpan pursuant to The KeySpan Investor Program.
22
(d) Charter Documents. KeySpan shall not amend or propose to amend its
certificate of incorporation or its bylaws or the certificate of incorporation
or the bylaws (or other organizational document) of any of its Subsidiaries.
(e) Acquisitions. Except for acquisitions of the entities, assets and
facilities identified in Section 4.1(e) of the KeySpan Disclosure Schedule,
KeySpan shall not, nor shall it permit any of its Subsidiaries to, acquire or
agree to acquire (whether by merger, consolidation, purchase or otherwise) any
person or assets or make any investment in any entity in excess of $150,000,000
in the aggregate. For the purposes of this Section 4.1(e), the value of any
acquisition or series of related acquisitions shall mean the greater of (i) the
book value or (ii) the sales price, in each case of the person, asset or
property which is the subject of such acquisition or capital expenditure,
including liabilities assumed. Notwithstanding anything to the contrary in this
Agreement, KeySpan shall not make any acquisition involving, or otherwise enter
into, in any manner, any line of business that is not conducted by KeySpan, its
Subsidiaries or Joint Ventures as of the date of this Agreement.
(f) Capital Expenditures. Except for (x) capital expenditures relating to
matters identified in Section 4.1(f) of the KeySpan Disclosure Schedule, and (y)
capital expenditures (1) required by law or Governmental Authorities or (2)
incurred in connection with the repair or replacement of facilities destroyed or
damaged due to casualty or accident (whether or not covered by insurance)
necessary to provide or maintain safe, adequate and reliable electric and
natural gas service (after consultation with Parent), KeySpan shall not, nor
shall it permit any of its Subsidiaries to, make any capital expenditures in
excess of $15,000,000 in the aggregate. For the purposes of this Section 4.1(f),
the value of any capital expenditure or series of related capital expenditures
shall mean the greater of (i) the book value or (ii) the sales price, in each
case of the person, asset or property which is the subject of such capital
expenditure, including liabilities assumed.
(g) No Dispositions. Except for (x) dispositions set forth in Section
4.1(g) of the KeySpan Disclosure Schedule, (y) dispositions of obsolete
equipment or assets or dispositions of assets being replaced and (z)
dispositions by KeySpan or its Subsidiaries of its assets in accordance with the
terms of restructuring and divestiture plans required by applicable local or
state regulatory agencies prior to the date hereof and previously disclosed to
Parent, KeySpan shall not, nor shall it permit any of its Subsidiaries to,
pledge, sell, lease, grant any security interest in or otherwise dispose of or
encumber any of its assets or properties in excess of $5,000,000 individually or
$25,000,000 in the aggregate. For the purposes of this Section 4.1(g), the value
of any disposition or series of related dispositions shall mean the greater of
(i) the book value or (ii) the sales price, in each case of the person, asset or
property which is the subject of such disposition, including liabilities
assigned.
(h) Indebtedness. KeySpan shall not, and shall not permit any of its
Subsidiaries to, incur or guarantee any indebtedness or enter into any "keep
well" or other agreement to maintain the financial condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
(including any capital leases, "synthetic" leases or conditional sale or other
title retention agreements) other than (i) indebtedness set forth in Section
4.1(h) of the KeySpan Disclosure Schedule, (ii) indebtedness incurred in
connection with the refinancing of existing indebtedness either at its stated
23
maturity or at a lower cost of funds (calculating such cost on an aggregate
after-Tax basis) and (iii) indebtedness and guarantees among KeySpan and its
Subsidiaries.
(i) Compensation and Benefits. During the period from the date of this
Agreement and continuing until the Effective Time, KeySpan agrees as to itself
and its Subsidiaries that it will not, without the prior written consent of
Parent, (i) other than in the ordinary course of business, enter into, adopt,
amend (except for such amendments as may be required by law or reasonably
necessary to avoid adverse tax consequences to KeySpan or its employees) or
terminate any KeySpan Benefit Plan, or any other employee benefit plan or any
agreement, arrangement, plan or policy or any equity-based award (or agreement
governing the terms of such award) between KeySpan or a Subsidiary of KeySpan
and one or more of its directors or officers, (ii) except for normal payments,
awards and increases in the ordinary course of business or as required by any
plan or arrangement as in effect as of the date hereof, increase in any manner
the compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan or arrangement as in effect as of the date
hereof or enter into any contract, agreement, commitment or arrangement to do
any of the foregoing or (iii) enter into or renew any contract, agreement,
commitment or arrangement (other than a renewal occurring in accordance with the
terms thereof) providing for the payment to any director, officer or employee of
such party of compensation or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions contemplated
by this Agreement.
(j) Accounting. KeySpan shall not, and shall not permit any of its
Subsidiaries to, make any changes in their accounting methods materially
affecting the reported consolidated assets liabilities or results of operations
of KeySpan, except as required by law or GAAP or permitted by GAAP and consented
to by its independent auditors.
(k) Collective Bargaining Agreements. KeySpan shall not, and shall not
permit any of its Subsidiaries to negotiate the renewal or extension of any of
the collective bargaining agreements listed in Section 3.1(p) of the KeySpan
Disclosure Schedule without providing Parent with access to all information
relating to the renewal or extension of any such collective bargaining agreement
and permitting Parent to consult with KeySpan or its Subsidiaries and their
counsel on the progress thereof from time to time.
(l) Regulatory Status. Except as disclosed in Section 4.1(k) of the KeySpan
Disclosure Schedule, KeySpan shall not, nor shall it permit any of its
Subsidiaries to, agree or consent to any material agreements or material
modifications of existing agreements or course of dealings with any Governmental
Entity in respect of the operations of their businesses, except as required by
law to obtain or renew Permits or agreements in the ordinary course of business
consistent with past practice.
(m) Insurance. KeySpan shall, and shall cause its Subsidiaries, to maintain
with financially responsible insurance companies (or through self-insurance not
inconsistent with such party's past practice), insurance in such amounts and
against such risks and losses as are customary for companies engaged in the
utility industry.
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(n) Certain Consents. If requested by Parent, KeySpan shall use reasonable
best efforts to obtain the consents identified in Sections 3.2(b)(ii) and
3.2(b)(iii) of the Parent Disclosure Schedule (provided that such consents and
any obligations thereunder shall not be effective until the Closing).
(o) Taxes. Neither KeySpan nor its Subsidiaries shall (i) change any Tax
accounting methods, policies or practices of KeySpan or its Subsidiaries, (ii)
make, revoke or amend any material Tax election of KeySpan or its Subsidiaries,
(iii) file any amended Tax Return of KeySpan or its Subsidiaries, (iv) enter
into any closing agreement affecting any Tax liability or refund of KeySpan or
its Subsidiaries, (v) settle or compromise any material Tax liability or refund
of KeySpan or its Subsidiaries, or (vi) extend or waive the application of any
statute of limitations regarding the assessment or collection of any material
Tax of KeySpan or its Subsidiaries (except with respect to regular and routine
extensions of Tax Returns); provided, however, that Parent shall be deemed to
have consented to any request with respect to clauses (i) and (iii) above to the
extent that Parent does not notify KeySpan or any of its Subsidiaries of its
consent or withholding of consent within ten (10) Business Days of receipt of
the request made by KeySpan or its Subsidiaries.
(p) Claims Settlement. KeySpan shall not settle any claim, action,
proceeding or investigation, whether civil, criminal, administrative or
investigative, except (A) in the ordinary course of business consistent with
past practice, (B) settlements to the extent subject to reserves existing as of
the date hereof in accordance with GAAP or (C) the settlement of any Claim that
would not reasonably be expected to have a Material Adverse Effect, except in
the case of clauses (A) and (C) for such claims as are set forth in Section
4.1(p) of the KeySpan Disclosure Schedule, which shall require the consent of
Parent.
(q) Waiver of Rights. KeySpan shall not modify, amend or terminate, or
waive, release or assign any material rights or claims with respect to any
confidentiality or standstill agreement to which KeySpan or any Subsidiary is a
party.
(r) No Restrictions on Future Business Activities. KeySpan shall not enter
into any agreements or arrangements that limit or otherwise restrict KeySpan or
any of its Subsidiaries or any of their respective Affiliates or any successor
thereto or that could, after the Effective Time, limit or restrict Parent or any
of its Affiliates (including the Surviving Corporation) or any successor
thereto, from engaging or competing in any line of business or product line or
in any geographic area.
(s) Actions to Impede Merger. KeySpan shall not take any action that is
intended or is reasonably likely to result in any of the conditions to the
Merger set forth in Article VI not being satisfied.
(t) Agreement to do the Foregoing. KeySpan shall not authorize or enter
into any agreement or otherwise make any commitment to do any of the foregoing
in this Section 4.1.
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4.2. Covenants of Parent. During the period from the date of this Agreement
and continuing until the Effective Time, Parent and Merger Sub each agree as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated on the Parent Disclosure Schedule or
as required by a Governmental Entity of competent jurisdiction or by applicable
law, rule or regulation, or to the extent that KeySpan shall otherwise consent
in writing (which consent not to be unreasonably delayed or withheld)):
(a) Conduct of Business of Merger Sub. Parent shall cause Merger Sub to (i)
perform its obligations under this Agreement, (ii) not engage directly or
indirectly in any business or activities of any type or kind and not enter into
any agreements or arrangements with any person, or be subject to or bound by any
obligation or undertaking, which is inconsistent with this Agreement.
(b) Conduct of Business of Parent. Parent agrees that, during the period
from the date hereof and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated or permitted
by this Agreement or as required by applicable law, and except as may be
consented to in writing by KeySpan (such consent not to be unreasonably withheld
or delayed), Parent shall not, and shall not permit any of its Subsidiaries to
enter into or consummate any agreements or transactions for an acquisition (via
stock purchase, merger, consolidation, purchase of assets or otherwise), merger
or joint venture or other agreement or otherwise if, in any such cases, such
agreement or transaction would or would reasonably be expected to, individually
or in the aggregate, prevent Parent or Merger Sub from performing, or materially
impair the ability of Parent or Merger Sub to perform, their respective
obligations under this Agreement.
4.3. Advice of Changes; Governmental Filings. KeySpan shall file all
reports required to be filed by it with the SEC (and all other Governmental
Entities) between the date of this Agreement and the Effective Time and shall
(to the extent permitted by law or regulation or any applicable confidentiality
agreement) deliver to Parent copies of all such reports, announcements and
publications promptly after the same are filed. Subject to applicable laws
relating to the exchange of information, each of Parent and KeySpan 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
Entity 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 Entities 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.
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4.4. Transition Planning. KeySpan and Parent shall each appoint one or more
representatives to a committee that will be responsible for coordinating
transition planning and implementation relating to the Merger.
4.5. Control of Other Party's Business. Nothing contained in this Agreement
shall be deemed to give Parent or Merger Sub, directly or indirectly, the right
to control or direct KeySpan's operations prior to the Effective Time. Prior to
the Effective Time, KeySpan shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Preparation of Proxy Statement and Circular; Stockholders Meetings.
(a) As promptly as practicable following the date hereof, KeySpan shall, in
cooperation with Parent, prepare and file with the SEC preliminary proxy
materials (such proxy statement, and any amendments or supplements thereto, the
"Proxy Statement"). The Proxy Statement shall comply as to form in all material
respects with the applicable provisions of the Exchange Act. KeySpan shall, as
promptly as practicable after receipt thereof, provide copies of any written
comments received from the SEC with respect to the Proxy Statement to Parent and
advise Parent of any oral comments with respect to the Proxy Statement received
from the SEC. KeySpan agrees that none of the information supplied or to be
supplied by KeySpan for inclusion or incorporation by reference in the Proxy
Statement or any supplemental proxy, at the time of mailing thereof and at the
time of the KeySpan Stockholders Meeting, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Parent agrees that none of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in the Proxy Statement or any supplemental proxy, at the time of mailing thereof
and at the time of the KeySpan Stockholders 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. For purposes of the
foregoing, it is understood and agreed that information concerning or related to
KeySpan and the KeySpan Stockholders Meeting will be deemed to have been
supplied by KeySpan and information concerning or related to Parent or Merger
Sub shall be deemed to have been supplied by Parent. KeySpan will provide Parent
with a reasonable opportunity to review and comment on the Proxy Statement and
any amendment or supplement to the Proxy Statement prior to filing such with the
SEC, and will provide Parent with a copy of all such filings made with the SEC.
No amendment or supplement to the information supplied by Parent for inclusion
in the Proxy Statement shall be made without the approval of Parent, which
approval shall not be unreasonably withheld or delayed.
(b) Parent shall, in cooperation with KeySpan, prepare and file with the
UKLA a circular to shareholders (such circular, and any amendments or
supplements thereto, the "Circular"). The Circular shall comply as to form in
all material respects with the applicable provisions of the UK Listing Rules.
Parent shall, as promptly as practicable after receipt thereof, provide copies
of any written comments received from the UKLA with respect to the Circular to
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KeySpan and advise KeySpan of any oral comments with respect to the Circular
received from the UKLA. Parent agrees that none of the information supplied or
to be supplied by Parent for inclusion or incorporation by reference in the
Circular or any supplementary circular, at the time of mailing thereof and at
the time of the Parent 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. KeySpan agrees that none of the
information supplied or to be supplied by KeySpan for inclusion or incorporation
by reference in the Circular or any supplementary circular, at the time of
mailing thereof and at the time of the Parent 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. For purposes of
the foregoing, it is understood and agreed that information concerning or
related to Parent or Merger Sub and the Parent Shareholders Meeting will be
deemed to have been supplied by Parent and information concerning or related to
KeySpan shall be deemed to have been supplied by KeySpan. Parent will provide
KeySpan with a reasonable opportunity to review and comment on any amendment or
supplement to the Circular prior to filing such with the UKLA, and will provide
KeySpan with a copy of all such filings made with the UKLA. No amendment or
supplement to the information supplied by KeySpan for inclusion in the Circular
shall be made without the approval of KeySpan, which approval shall not be
unreasonably withheld or delayed.
(c) KeySpan shall take all lawful action to solicit proxies in favor of the
adoption of this Agreement, and the transactions contemplated hereby, by the
Required KeySpan Vote and the Board of Directors of KeySpan shall recommend
adoption of this Agreement, and the transactions contemplated hereby, by the
stockholders of KeySpan unless the Board of Directors of KeySpan determines in
its reasonable good faith judgment, after consultation with outside counsel,
that taking any such action would be inconsistent with its fiduciary duties
under applicable law. KeySpan shall, as soon as reasonably practicable following
the date of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "KeySpan Stockholders Meeting") for the purpose
of obtaining the Required KeySpan Vote. Without limiting the generality of the
foregoing, KeySpan agrees that its obligations pursuant to the second sentence
of this Section 5.1(c) shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to KeySpan of any Takeover Proposal
(as defined in Section 5.5), (ii) the withdrawal or modification by the Board of
Directors of KeySpan of its approval or recommendation of this Agreement, the
Merger or the other transactions contemplated hereby, or (iii) subject to
KeySpan's right to terminate this Agreement under Section 7.1(e), the approval
or recommendation of any KeySpan Superior Proposal. Notwithstanding any of the
events set forth in clauses (i), (ii) and (iii) of the immediately preceding
sentence, in the event KeySpan fulfills its obligations pursuant to this Section
5.1(c) and the KeySpan Stockholder Approval is not obtained at the KeySpan
Stockholders Meeting, Parent shall not thereafter have the right to terminate
this Agreement pursuant to Section 7.1(d), as a result of the Board of Directors
of KeySpan (or any committee thereof) having withdrawn or modified, or proposed
publicly to withdraw or modify, the approval or recommendation by the KeySpan
Board of Directors of this Agreement or the Merger, provided Parent shall retain
all other rights to terminate this Agreement set forth in Section 7.1.
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(d) Parent shall recommend approval of this Agreement, and the transactions
contemplated hereby, by the shareholders of Parent. Parent shall duly call, give
notice of, convene and hold its general meeting of shareholders (the "Parent
Shareholders Meeting") at which shareholders shall be asked to vote to approve
the Merger. Without limiting the generality of the foregoing, Parent agrees that
its obligations pursuant to the second sentence of this Section 5.1(d) shall not
be affected by (i) the commencement, public proposal, public disclosure or
communication to Parent of any Parent Acquisition Transaction (as defined in
Section 7.2) or (ii) the withdrawal or modification by the Board of Directors of
Parent of its approval or recommendation of this Agreement, the Merger or the
other transactions contemplated hereby.
(e) KeySpan and Parent will use their reasonable best efforts to hold the
KeySpan Stockholders Meeting and the Parent Shareholders Meeting as soon as
practicable after the date of this Agreement; provided, however, that Parent may
hold the Parent Shareholder Meeting as part of its Annual General Meeting
scheduled for July 31, 2006; provided, further that the Parent Shareholder
Meeting shall in any event be held no later than August 31, 2006.
5.2. Corporate Governance. (a) The name of the Surviving Corporation shall
initially be KeySpan. The headquarters of the Surviving Corporation shall be in
Brooklyn, New York.
(b) At or prior to the Effective Time, Parent shall take all actions
necessary to appoint two directors who immediately prior to the Effective Time
served as directors of KeySpan to the Board of Directors of Parent. One such
director shall be the Person specified on Exhibit A hereto and the second such
director shall be appointed pursuant to the conditions and process set forth on
Exhibit A hereto. Exhibit A hereto shall also set forth (i) as of the Effective
Time the Chairman of the Board of Directors of the Surviving Corporation, (ii)
the manner in which certain senior officers of the Surviving Corporation as of
the Effective Time will be selected after the date hereof and prior to the
Effective Time and (iii) certain other matters. All appointments made pursuant
to this Section 5.2 and Exhibit A hereto shall be effective as of the Effective
Time and shall comply with the applicable listing and corporate governance rules
of the NYSE, the UKLA, the LSE and the applicable provisions of the Exchange Act
and all other applicable laws and regulations, in each case, as in effect at the
Effective Time.
(c) During the four-year period immediately following the Effective Time,
the Surviving Corporation shall provide, directly or indirectly, charitable
contributions and traditional local community support within the service areas
of KeySpan and each of its Subsidiaries that are utilities at levels
substantially comparable to and no less than the levels of charitable
contributions and community support provided by KeySpan and such Subsidiaries
within their service areas within the four-year period immediately prior to the
date of this Agreement, as set forth on Section 5.2 of the KeySpan Disclosure
Schedule. Without limitation to the foregoing, the Surviving Corporation will
for such period continue to support the KeySpan Foundation in a manner
substantially comparable to the manner in which KeySpan supported the KeySpan
Foundation within the four-year period immediately prior to the date of this
Agreement, as set forth on Section 5.2 of the KeySpan Disclosure Schedule.
5.3. Access to Information. Upon reasonable notice, KeySpan shall (and
shall cause its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of Parent reasonable
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access during normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and records
(including, without limitation, any Tax Returns) and, during such period,
KeySpan shall (and shall cause its Subsidiaries to) furnish promptly to Parent
(a) a copy of each report, schedule, registration statement and other document
filed, published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under applicable law),
and (b) consistent with its legal obligations, all other information concerning
its business, properties and personnel as Parent may reasonably request;
provided however, that KeySpan may restrict the foregoing access to the extent
that (i) a Governmental Entity requires KeySpan or any of its Subsidiaries to
restrict access to any properties or information reasonably related to any such
contract on the basis of applicable laws and regulations with respect to
national security matters, (ii) any law, treaty, rule or regulation of any
Governmental Entity applicable to KeySpan requires KeySpan or its Subsidiaries
to restrict access to any properties or information, (iii) KeySpan or its
Subsidiaries is bound by a confidentiality agreement that requires KeySpan or
its Subsidiaries to restrict such access or (iv) where such access would be
reasonably likely to waive the attorney-client privilege. The parties will hold
any such information which is non-public in confidence to the extent required
by, and in accordance with, the provisions of the letter dated June 13, 2005
between KeySpan and Parent (the "Confidentiality Agreement"). Any investigation
by KeySpan or Parent shall not affect the representations and warranties of
KeySpan or Parent, as the case may be.
5.4. Reasonable Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each party shall, and shall cause its respective Subsidiaries
to, use its reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the Merger and the other
transactions contemplated by this Agreement as soon as practicable after the
date hereof. In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing (and to share equally in the filing
fees) of a Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby at a mutually agreed time 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.
(b) Each of Parent and KeySpan shall, and shall cause its respective
Subsidiaries to, in connection with the efforts referenced in Section 5.4(a) to
obtain all requisite approvals and authorizations for the transactions
contemplated by this Agreement under the HSR Act or any other applicable law or
regulation, use its reasonable best efforts to (i) make all appropriate filings
and submissions with any Governmental Entity that may be necessary, proper or
advisable under applicable laws or regulations 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, the Antitrust Division
of the Department of Justice (the "DOJ") or any other Governmental Entity and of
any material communication received or given in connection with any proceeding
30
by a private party, in each case regarding any of the transactions contemplated
hereby and (iv) as reasonably practical, 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, the DOJ or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person.
(c) Each of Parent and KeySpan shall, and shall cause its respective
Subsidiaries, in connection with the efforts referenced in Section 5.4 (a), to
obtain all requisite approvals and authorizations for the transactions
contemplated by the Agreement, and use its reasonable best efforts to obtain the
KeySpan Required Approvals and the Parent Required Approvals; provided, however,
that Parent shall have primary responsibility for the preparation and filing of
any applications, filings or other materials with the FERC, the NYPSC and the
NHPUC. If Parent determines to make a filing with the Massachusetts Department
of Telecommunications and Energy in connection with the Merger, KeySpan shall
cooperate with Parent in connection with such filing. KeySpan and Parent shall
cooperate in connection with seeking the consents set forth in Section 5.4(c) of
the KeySpan Disclosure Letter (the "Additional KeySpan Consents") subject to the
terms and conditions set forth therein. KeySpan shall have the right to review
and approve in advance all characterizations of the information relating to
KeySpan and the Merger that appear in any application, notice, petition or
filing made in connection with the Merger. KeySpan and Parent agree that they
will consult and cooperate with each other with respect to the obtaining of the
KeySpan Required Approvals, the Parent Required Approvals and the Additional
KeySpan Consents, as well as any additional necessary approvals and
authorizations of Governmental Authorities.
(d) In furtherance and not in limitation of the covenants of the parties
contained in Sections 5.4(a), (b) and (c), if any objections are asserted with
respect to the transactions contemplated by this Agreement or if any suit is
instituted (or threatened to be instituted) by any Governmental Entity or any
private party challenging any of the transactions contemplated hereby as
violative of any Antitrust Law or other Law or otherwise brought under any such
Law that would otherwise prohibit or materially impair or materially delay the
consummation of the transactions contemplated hereby, each of Parent, Merger Sub
and KeySpan shall use its reasonable best efforts to resolve any such objections
or suits so as to permit consummation of the transactions contemplated by this
Agreement, including in order to resolve such objections or suits which, in any
case if not resolved, could reasonably be expected to prohibit or materially
impair or delay the consummation of the transactions contemplated hereby,
including selling, holding separate or otherwise disposing of or conducting its
business in a manner which would resolve such objections or suits or agreeing to
sell, hold separate or otherwise dispose of or conduct its business in a manner
which would resolve such objections or suits or permitting the sale, holding
separate or other disposition of, any of its assets or the assets of its
Subsidiaries or the conducting of its business in a manner which would resolve
such objections or suits; provided, however, that no party shall be required to,
or may, in the case of KeySpan, take any such actions to resolve any such
objections or suits which actions, individually or in the aggregate, (x) are not
conditional on the consummation of the Merger, or (y) would have a Material
Adverse Effect on National Grid USA or KeySpan. Without excluding other
possibilities, the transactions contemplated by this Agreement shall be deemed
to be materially delayed if unresolved objections or suits delay or could
reasonably be expected to delay the consummation of the transactions
contemplated hereby beyond the End Date (as defined in Section 7.1(h)). For
purposes of this Agreement, "Antitrust Law" shall mean the Xxxxxxx Act, as
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amended, the Xxxxxxx Act, as amended, Council Regulation (EC) 139/2004, the HSR
Act, the FTC Act, as amended, and all other federal, state and foreign statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines and
other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade or
impeding or lessening of competition through merger or acquisition, in any case
that are applicable to the transactions contemplated by this Agreement.
(e) Subject to the obligations under Section 5.4(d), in the event that any
administrative or judicial action or proceeding is instituted (or threatened to
be instituted) by a Governmental Entity or private party challenging any
transaction contemplated by this Agreement, or any other agreement contemplated
hereby each of Parent and KeySpan shall cooperate in all respects with each
other and use its respective reasonable best efforts to contest and resist any
such action or proceeding.
(f) Notwithstanding the foregoing or any other provision of this Agreement,
nothing in this Section 5.4 shall limit a party's right to terminate this
Agreement pursuant to Section 7.1(h) so long as such party has up to then
complied in all material respects with its obligations under this Section 5.4.
5.5. No Solicitation by KeySpan. (a) From the date hereof until the earlier
of the Effective Time or the date on which this Agreement is terminated in
accordance with the terms hereof, KeySpan shall not, nor shall it permit any of
its Subsidiaries to, nor shall it or its Subsidiaries authorize or permit any of
their respective officers, directors, employees, representatives or agents to,
directly or indirectly, (i) solicit, initiate or knowingly encourage or
facilitate (including by way of furnishing non-public information) any inquiries
regarding, or the making of any proposal which constitutes or that may
reasonably be expected to lead to, any Takeover Proposal, (ii) enter into any
letter of intent or agreement related to any Takeover Proposal (each, an
"Acquisition Agreement") or (iii) participate in any discussions or negotiations
regarding, or take any other action to facilitate any inquiries or the making of
any proposal that constitutes, or that may reasonably be expected to lead to,
any Takeover Proposal; provided, however, that if, at any time after the date
hereof and prior to the KeySpan Stockholders Meeting, KeySpan receives an
unsolicited bona fide written Takeover Proposal from any third Person that in
the reasonable good faith judgment of KeySpan's Board of Directors constitutes,
or is reasonably likely to result in, a Superior Proposal and the Board of
Directors of KeySpan determines in its reasonable good faith judgment, after
consultation with outside counsel, that failure to take any such action would be
inconsistent with its fiduciary duties under applicable law, KeySpan may, in
response to such Superior Proposal, (x) furnish information with respect to
KeySpan to any such Person pursuant to a confidentiality agreement no more
favorable to such Person than the Confidentiality Agreement is to Parent and (y)
participate in negotiations with such Person regarding such Superior Proposal if
(A) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such third Person, KeySpan or any of its
Subsidiaries provides at least four business days advance written notice to
Parent of the identity of the third Person making, and the proposed terms and
conditions of, such Superior Proposal and a copy of all written materials
delivered by such third Person to KeySpan or any of its Subsidiaries, (B)
KeySpan shall have provided to Parent a copy of all written materials delivered
to the third Person making the Superior Proposal in connection with such
Superior Proposal and made available to Parent all materials and information
32
made available to the third Person making the Superior Proposal in connection
with such Superior Proposal and (C) KeySpan shall have fully complied with this
Section 5.5. For purposes of this Agreement, "Takeover Proposal" means any
inquiry, proposal or offer from any Person (other than Parent and its
Affiliates) relating to any direct or indirect acquisition or purchase of 20% or
more of the assets of KeySpan and its Subsidiaries or 20% or more of the voting
power of the capital stock of KeySpan or the capital stock of any of its
Significant Subsidiaries then outstanding, any tender offer or exchange offer
that if consummated would result in any Person beneficially owning 20% or more
of the voting power of the capital stock of KeySpan or the capital stock of such
Subsidiaries then outstanding, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving KeySpan or any of its Significant Subsidiaries, other than the
transactions with Parent and Merger Sub contemplated by this Agreement. For
purposes of this Agreement, a "Superior Proposal" means any unsolicited bona
fide written offer made by any Person (other than Parent and its Affiliates) to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the voting power of the capital stock of KeySpan
then outstanding or all or substantially all the assets of KeySpan and otherwise
on terms which the Board of Directors of KeySpan determines in its reasonable
good faith judgment (after consultation with its financial advisors) to be more
favorable (taking into account (i) all financial and strategic considerations,
including relevant legal, financial, regulatory and other aspects of such
Takeover Proposal and the Merger and the other transactions contemplated by this
Agreement deemed relevant by the Board of Directors, (ii) the identity of the
third party making such Takeover Proposal, (iii) the conditions and prospects
for completion of such Takeover Proposal and (iv) all other factors that the
Board of Directors of KeySpan are permitted to consider pursuant to ss.717 of
the NYBCL; provided, however, that no Takeover Proposal consisting of all cash
consideration may be deemed a Superior Proposal unless the per share cash
consideration proposed pursuant to the Takeover Proposal is greater than the
Merger Consideration (as such consideration may be proposed to be changed by
Parent pursuant to the terms of this Agreement) to KeySpan's stockholders than
the Merger and the other transactions contemplated by this Agreement (taking
into account all of the terms of any proposal by Parent to amend or modify the
terms of the Merger and the other transactions contemplated by this Agreement).
(b) Except as set forth in Section 7.1(e), neither the Board of Directors
of KeySpan nor any committee thereof shall (i) approve or recommend, or propose
to approve or recommend, any Takeover Proposal or (ii) authorize or permit
KeySpan or any of its Subsidiaries to enter into any Acquisition Agreement.
(c) Nothing contained in this Section 5.5 shall prohibit KeySpan from
complying with Rules 14d-9 or 14e-2 promulgated under the Exchange Act with
respect to a Takeover Proposal; provided, however, that compliance with such
rules shall not in any way limit or modify the effect that any action taken
pursuant to such rules has under any other provision of this Agreement,
including Section 7.1(d).
(d) KeySpan agrees that it and its Subsidiaries shall, and KeySpan shall
direct and cause its and its Subsidiaries' respective officers, directors,
employees, representatives and agents to, immediately cease and cause to be
terminated any activities, discussions or negotiations with any Persons with
respect to any Takeover Proposal. KeySpan agrees that it will notify Parent in
writing as promptly as practicable (and in any event within 24 hours) after any
33
Takeover Proposal is received by, any information is requested from, or any
discussions or negotiations relating to a Takeover Proposal are sought to be
initiated or continued with, KeySpan, its Subsidiaries, or their officers,
directors, employees, representatives or agents. The notice shall indicate the
name of the Person making such Takeover Proposal or taking such action, the
material terms and conditions of any proposals or offers and a copy of all
written materials delivered by such Person making the Takeover Proposal to
KeySpan or any of its Subsidiaries, and thereafter KeySpan shall keep Parent
informed, on a current basis, of the status and material terms of any such
proposals or offers and the status and details of any such discussions or
negotiations and provide Parent with copies of all written materials delivered
by such Person making the Takeover Proposal to KeySpan or any of its
Subsidiaries and keep Parent informed of any amendments or prospective
amendments to such information. KeySpan also agrees that it will promptly
request each Person that has heretofore executed a confidentiality agreement in
connection with any Takeover Proposal to return or destroy all confidential
information heretofore furnished to such Person by or on behalf of it or any of
its Subsidiaries. KeySpan shall provide Parent with reasonable advance notice of
any meeting of the KeySpan Board of Directors to discuss or consider a Takeover
Proposal.
5.6. KeySpan Stock Options and Other Stock Awards; Employee Benefits
Matters. (a) Options. KeySpan shall take all action reasonably necessary so
that, immediately prior to the Effective Time, each outstanding stock option
issued under the KeySpan Benefit Plans shall become vested and exercisable as of
the Effective Time and shall be canceled and the holder thereof shall be
entitled to receive at the Effective Time from KeySpan or as soon as practicable
thereafter (but in no event later than 10 days after the Effective Time) from
Parent or the Surviving Corporation in consideration for such stock option an
amount in cash equal to (A) the excess, if any, of the Merger Consideration per
share over the exercise price per share previously subject to such stock option,
less any required withholding taxes, multiplied by (B) the number of shares of
KeySpan Common Stock previously subject to such stock option (a "Canceled
Option"). As soon as practicable after the Effective Time, Parent shall deliver
or cause to be delivered to each holder of Canceled Options an appropriate
notice setting forth such holder's rights to receive cash payments with respect
to Cancelled Options pursuant to the KeySpan Benefit Plans and this Section
5.6(a).
(b) Other KeySpan Stock Awards. All shares of KeySpan Common Stock and any
other KeySpan stock unit awards (and any dividend equivalent rights thereunder)
granted subject to vesting, deferral or other lapse restrictions pursuant to any
KeySpan Benefit Plan (collectively, the "Other KeySpan Stock Awards") which are
outstanding immediately prior to the Effective Time shall vest and become free
of such restrictions as of the Effective Time, and shall be cancelled to the
extent provided by the terms of such KeySpan Benefit Plans and the award
agreements governing such Other KeySpan Stock Awards at the Effective Time, and
each holder thereof shall be entitled to receive the product of (i) the Merger
Consideration, multiplied by (ii) the total number of shares of KeySpan Common
stock subject to such Other KeySpan Stock Award, less any required withholding
taxes.
(c) Employment Related Obligations; Employee Benefits.
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(i) Obligations of Parent; Comparability of Benefits. Parent shall
cause the Surviving Corporation and each of its Subsidiaries to honor all
employment related obligations and agreements with respect to any current
34
and former employees, directors and consultants of KeySpan or any of its
Subsidiaries ("KeySpan Employees") (including without limitation (A)
recognizing and, as required by Law, bargaining with, or continuing to
recognize and, as required by Law, bargain with, the current exclusive
collective bargaining representatives of the KeySpan Employees and (B)
honoring, or continuing to honor, all current collective bargaining
agreements. As of the Effective Time, each KeySpan Employee covered by a
collective bargaining agreement listed on Section 3.1(p) of the KeySpan
Disclosure Schedule shall remain covered by such collective bargaining
agreement. In addition, each KeySpan Benefit Plan shall be assumed by the
Surviving Corporation at the Effective Time (and Parent shall cause the
Surviving Corporation to make all required payments pursuant to such
KeySpan Benefit Plans and any trusts thereunder). For at least two years
thereafter, Parent shall cause the Surviving Corporation and each of its
Subsidiaries to provide each KeySpan Employee, who is not covered by a
collective bargaining agreement listed on Section 3.1(p) of the KeySpan
Disclosure Schedule, with a base salary or hourly wages, as applicable, at
least equal to that provided to such KeySpan Employee immediately prior to
the Effective Time, and to provide benefits to KeySpan Employees, who are
not covered by a collective bargaining agreement listed on Section 3.1(p)
of the KeySpan Disclosure Schedule, that are no less favorable than the
benefits provided, in the aggregate, to KeySpan Employees immediately prior
to the Effective Time; provided, however, that for such two-year period,
each KeySpan Employee who is not covered by a collective bargaining
agreement listed on Section 3.1(p) of the KeySpan Disclosure Schedule shall
be eligible to receive severance payments and benefits no less favorable
than those provided under the KeySpan severance plans and policies as set
forth in Section 5.6(c) of the KeySpan Disclosure Schedule. Notwithstanding
the foregoing, nothing herein shall require the continuation of any
particular KeySpan Benefit Plan or prevent the amendment or termination
thereof (subject to the maintenance of the benefits as provided in the
preceding sentence and subject to satisfaction of any legal duty to bargain
with the collective bargaining representatives of KeySpan Employees with
respect to such matters).
(ii) Pre-Existing Limitations; Deductible; Service Credit. With
respect to any KeySpan Benefit Plans in which KeySpan Employees participate
after the Effective Time, Parent shall: (A) to the extent satisfied or
inapplicable under applicable KeySpan Benefit Plans immediately prior to
the Effective Time, waive all limitations as to pre-existing conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to KeySpan Employees under any Parent Benefit Plan
in which such employees may be eligible to participate after the Effective
Time, (B) provide each KeySpan Employee with credit for any co-payments and
deductibles paid prior to participation in such Parent Benefit Plan in
satisfying any applicable deductible or out-of-pocket requirements under
any welfare Parent Benefit Plan in which such employees may be eligible to
participate after the Effective Time, and (C) recognize all service except
to the extent such recognition would result in duplication of benefits
(unless such duplication is expressly contemplated in a plan, agreement or
other arrangement of, or approved by, Parent) of KeySpan Employees with
KeySpan and its current and former affiliates for purposes (of eligibility
to participate, vesting credit and entitlement for benefits (but not for
35
purposes of benefit accrual under any defined benefit pension plan) in any
Parent Benefit Plan in which such employees may be eligible to participate
after the Effective Time, to the same extent taken into account under a
comparable KeySpan Benefit Plan immediately prior to the Effective Time.
5.7. Fees and Expenses(a) . Except as provided in this Section 5.7 and
Section 7.2, all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that each of Parent and KeySpan shall bear and pay one-half
of the costs and expenses incurred in connection with the filings of the
premerger notification and report forms under the HSR Act (including filing
fees).
5.8. Directors' and Officers' Indemnification and Insurance. (a) After the
Effective Time through the sixth anniversary of the Effective Time, Parent
shall, or shall, cause the Surviving Corporation to, indemnify and hold harmless
each present (as of the Effective Time) or former officer, director or employee
of KeySpan and its Subsidiaries (the "Indemnified Parties"), against all claims,
losses, liabilities, damages, judgments, fines and reasonable fees, costs and
expenses (including attorneys' fees and expenses) incurred in connection with
any claim, action, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to (i) the fact
that the Indemnified Party is or was an officer, director or employee of KeySpan
or any of its Subsidiaries or (ii) matters existing or occurring at or prior to
the Effective Time (including this Agreement and the transactions and actions
contemplated hereby), whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent permitted under applicable law; provided
that no Indemnified Party may settle any such claim without the prior approval
of Parent (which approval shall not be unreasonably withheld or delayed). Each
Indemnified Party will be entitled to advancement of expenses incurred in the
defense of any claim, action, proceeding or investigation from Parent within ten
Business Days of receipt by Parent from the Indemnified Party of a request
therefor; provided that any person to whom expenses are advanced provides an
undertaking, to the extent required by the NYBCL, to repay such advances if it
is ultimately determined that such person is not entitled to indemnification.
(b) Parent shall cause the Surviving Corporation to maintain in effect (i)
in its certificate of incorporation and by-laws for a period of six years after
the Effective Time, the current provisions regarding elimination of liability of
directors and indemnification of, and advancement of expenses to, officers,
directors and employees contained in the certificate of incorporation and
by-laws of KeySpan and (ii) at the election of Parent, for a period of six years
after the Effective Time, (A) maintain in effect the current policies of
directors' and officers' liability insurance and fiduciary liability insurance
maintained by KeySpan (provided that Parent may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions which
are, in the aggregate, no less advantageous to the insured) with respect to
claims arising from facts or events that occurred on or before the Effective
Time; provided, however, that in no event shall the Surviving Corporation be
required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by KeySpan for such insurance; and, provided, further,
that if the annual premiums of such insurance coverage exceed such amount,
Parent or the Surviving Corporation shall be obligated to obtain a policy with
the greatest coverage available for a cost not exceeding such amount or (B)
provide tail coverage for such persons covered by current policies of directors'
36
and officers' liability insurance and fiduciary liability insurance maintained
by KeySpan which tail coverage shall provide coverage for a period of six years
for acts prior to the Effective Time on terms no less favorable than the terms
of such current insurance coverage.
(c) Notwithstanding anything herein to the contrary, if any claim, action,
proceeding or investigation (whether arising before, at or after the Effective
Time) is made against any Indemnified Party on or prior to the sixth anniversary
of the Effective Time, the provisions of this Section 5.8 shall continue in
effect until the final disposition of such claim, action, proceeding or
investigation.
(d) In the event that Parent, any of its successors or assigns or the
Surviving Corporation (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors or assigns of Parent or the
Surviving Corporation, as the case may be, shall succeed to the obligations set
forth in Section 5.6 and this Section 5.8.
5.9. Public Announcements. KeySpan and Parent shall cooperate to develop a
joint communications plan and cooperate (i) to ensure that all press releases
and other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (ii) unless
otherwise required by applicable law or by obligations pursuant to any listing
agreement with or rules of any securities exchange, to consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement or the transactions contemplated hereby.
5.10. Conveyance Taxes. KeySpan and Parent shall cooperate in the
preparation, execution and filing of all Tax 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 by this Agreement that
are required or permitted to be paid on or before the Effective Time.
5.11. Restructuring of Merger. It may be preferable to effectuate a
business combination between Parent and KeySpan by means of an alternative
structure to the Merger. Accordingly, if prior to satisfaction of the conditions
contained in Article VI hereto, Parent proposes the adoption of an alternative
structure that otherwise preserves for Parent and KeySpan the economic benefits
of the Merger and will not materially delay the consummation thereof, then the
parties shall use their respective reasonable best efforts to effect a business
combination among themselves by means of a mutually agreed upon structure other
than the Merger that so preserves such benefits; provided, however, that prior
to closing any such restructured transaction, all material third party and
Governmental Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary for the effectuation of such
alternative business combination shall have been obtained and all other
conditions to the parties' obligations to consummate the Merger and other
transactions contemplated hereby, as applied to such alternative business
combination, shall have been satisfied or waived.
37
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
obligations of KeySpan and Parent to effect the Merger are subject to the
satisfaction or mutual waiver on or prior to the Closing Date of the following
conditions:
(a) Required KeySpan Vote. KeySpan shall have obtained the Required KeySpan
Vote for the adoption of this Agreement by the stockholders of KeySpan.
(b) Required Parent Vote. Parent shall have obtained the Required Parent
Vote for the approval of this Agreement.
(c) No Injunctions or Restraints; Illegality. No federal, state, local or
foreign, law, statute, regulation, code, ordinance or decree shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction (collectively "Restraints") shall be in effect,
having the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(d) Approvals. The KeySpan Required Approvals and the Parent Required
Approvals shall have been obtained (including, in each case and without
limitation, the waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired) at or
prior to the Effective Time, such approvals shall have become Final Orders and
such Final Orders, together with the Additional KeySpan Consents, shall not
individually or in the aggregate, impose terms or conditions that would
reasonably be expected to result in a Material Adverse Effect on National Grid
USA or KeySpan. "Final Order" means action by the relevant Governmental Entity
that has not been reversed, stayed, enjoined, set aside, annulled or suspended,
with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired (but without the
requirement for expiration of any applicable rehearing or appeal period), and as
to which all conditions to the consummation of such transactions prescribed by
law, regulation or order have been satisfied. Any reference in this Agreement to
the "obtaining" of any such approvals shall mean making such declarations,
filings, registrations, giving such notice, obtaining such authorizations,
orders, consents, permits or approvals and having such waiting periods expire as
are, in each case, necessary to avoid a violation of law.
6.2. Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent and Merger Sub, on or prior to the Closing
Date of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of
KeySpan set forth herein shall be true and correct both when made and as of the
Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date), except where the
failure of such representations and warranties to be so true and correct
38
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) does not have, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
KeySpan; provided, that the representation and warranties of KeySpan in Section
3.1(h)(i) shall be true in all respects without disregarding the reference to
Material Adverse Effect therein.
(b) Performance of Obligations of KeySpan. KeySpan shall have performed or
complied in all material respects with all agreements and covenants required to
be performed by it under this Agreement at or prior to the Closing Date.
(c) Absence of Certain Changes or Events. Since the date of this Agreement,
no event has occurred which has had, and no fact or circumstance exists that has
resulted in or would reasonably be expected to result in, a Material Adverse
Effect on KeySpan.
(d) Certificate. Parent shall have received a certificate, dated as of the
closing date, executed on behalf of KeySpan by the chief executive officer or
the chief financial officer of KeySpan, to such effect that the conditions
specified in paragraphs (a), (b) and (c) of this Section 6.2 have been
satisfied.
6.3. Additional Conditions to Obligations of KeySpan. The obligations of
KeySpan to effect the Merger are subject to the satisfaction of, or waiver by
KeySpan, on or prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth herein shall be true and correct both when made
and at and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such date),
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) does not have, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent or Merger Sub.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed or complied in all material respects with all
agreements and covenants required to be performed by it under this Agreement at
or prior to the Closing Date.
(c) Certificate. KeySpan shall have received a certificate, dated as of the
closing date, executed on behalf of Parent by the chief executive officer or the
chief financial officer of Parent, to such effect that the conditions specified
in paragraphs (a) and (b) of this Section 6.3 have been satisfied.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the Required KeySpan Vote or the
Required Parent Vote:
(a) by mutual written consent of KeySpan and Parent;
39
(b) by either KeySpan or Parent if any Restraint having any of the effects
set forth in Section 6.1(c) shall be in effect and shall have become final and
nonappealable; provided that the party seeking to terminate this Agreement
pursuant to this Section 7.1(b) shall have fulfilled its obligations pursuant to
Section 5.4;
(c) by Parent if there has been a breach of any representation, warranty,
covenant or other agreement made by KeySpan in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, in each case such that Section 6.2(a) or Section 6.2(b) would not be
satisfied and such breach or condition is not curable or, if curable, is not
cured within 30 days after written notice thereof is given by Parent to KeySpan;
(d) by Parent if (i) the Board of Directors of KeySpan shall not have
recommended, or the Board of Directors of KeySpan (or any committee thereof)
shall have withdrawn or shall have qualified or modified in any manner adverse
to Parent its recommendation of, this Agreement or its approval of or
declaration that this Agreement and the Merger are advisable and fair to, and in
the best interests of, KeySpan and its stockholders or shall have taken any
other action or made any other statement in connection with the KeySpan
Stockholders Meeting inconsistent with such recommendation, approval or
declaration, (ii) the Board of Directors of KeySpan (or any committee thereof)
shall have approved or recommended any Takeover Proposal, (iii) the Board of
Directors of KeySpan (or any committee thereof) shall have proposed or resolved
to do any of the foregoing in clauses (i) and (ii) or (iv) a tender offer or
exchange offer for 20% or more of the outstanding shares of capital stock of
KeySpan is commenced, and the Board of Directors of KeySpan fails to recommend
against acceptance of such tender offer or exchange offer by its stockholders
within 10 business days after such commencement (including by taking no position
with respect to the acceptance of such tender offer or exchange offer by its
stockholders);
(e) by KeySpan prior to the KeySpan Stockholders Meeting if (A) the Board
of Directors of KeySpan authorizes KeySpan, subject to complying with the terms
of this Agreement, to enter into a definitive agreement concerning a transaction
that constitutes a Superior Proposal, (B) Parent does not make, or cause to be
made, within four business days of receipt of KeySpan's written notification of
its intention to enter into a definitive agreement for a Superior Proposal, an
offer that the Board of Directors of KeySpan determines, in its reasonable good
faith judgment after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to the stockholders of KeySpan as the
Superior Proposal and (C) KeySpan, prior to or concurrently with such
termination pays to Parent in immediately available funds the amount required by
Section 7.2(b). KeySpan agrees (x) that it will not enter into a definitive
agreement referred to in clause (A) above until at least the fifth business day
after it has provided the notice to Parent required thereby and (y) to notify
Parent promptly in writing if its intention to enter into a definitive agreement
referred to in its notification shall change at any time after giving such
notification;
(f) by KeySpan if there has been a breach of any representation, warranty,
covenant or other agreement made by Parent or Merger Sub in this Agreement, or
any such representation and warranty shall have become untrue after the date of
this Agreement, in each case such that Section 6.3(a) or Section 6.3(b) would
40
not be satisfied and such breach or condition is not curable or, if curable, is
not cured within 30 days after written notice thereof is given by KeySpan to
Parent;
(g) by either KeySpan or Parent if (i) at the KeySpan Stockholders Meeting
(including any adjournment or postponement thereof), the Required KeySpan Vote
shall not have been obtained, or (ii) at the Parent Shareholders Meeting
(including any adjournment or postponement thereof), the Required Parent Vote
shall not have been obtained; or
(h) by either Parent or KeySpan, if the Merger shall not have been
consummated by the 15-month anniversary of the date of this Agreement (the "End
Date"); provided, however, that if all other conditions set forth in Article VI
(other than conditions that by their nature are to be satisfied on the Closing
Date) are satisfied other than the condition to the Closing set forth in Section
6.1(d) which remains capable of being fulfilled, then either Parent or KeySpan
by written notice delivered prior to the End Date, may extend such period by
three months after the End Date; provided, further, that the right to terminate
this Agreement under this Section 7.1(h) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before the End Date.
7.2. Effect of Termination. (a) In the event of a termination of this
Agreement by either KeySpan or Parent as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Parent, Merger Sub or KeySpan or their respective officers or directors,
except with respect to Section 3.1(l), Section 3.2(g), Section 5.7, this Section
7.2 and Article VIII; provided, however, that nothing herein shall relieve any
party for liability for any willful or knowing breach hereof.
(b) In the event of a termination of this Agreement by Parent pursuant to
Section 7.1(d) or by KeySpan pursuant to Section 7.1(e), then KeySpan shall, on
the date of such termination, pay to Parent, by wire transfer of immediately
available funds, the amount of $250,000,000 (the "Termination Fee").
(c) In the event that between the date hereof and the termination of this
Agreement any Person shall have directly or indirectly publicly disclosed to
KeySpan and/or publicly disclosed or made known to KeySpan's stockholders (x) a
Takeover Proposal or (y) generally that if the Merger is not consummated such
Person or one of its Affiliates will make a Takeover Proposal and thereafter, in
each case, this Agreement is terminated by Parent or KeySpan pursuant to Section
7.1(g)(i) or Section 7.1(h), and if concurrently with such termination or within
twelve months of such termination KeySpan or any of its Subsidiaries enters into
a definitive agreement with respect to a Takeover Proposal or consummates a
Takeover Proposal, then KeySpan shall, upon the earlier of entry into a
definitive agreement with respect to a Takeover Proposal or consummation of a
Takeover Proposal, pay to Parent, by wire transfer of immediately available
funds, the Termination Fee.
(d) In the event that between the date hereof and the termination of this
Agreement (A) any Person shall have directly or indirectly publicly disclosed to
Parent and/or publicly disclosed or made known to Parent's shareholders (x) a
proposal with respect to a Parent Acquisition Transaction or (y) generally that
if the Merger is not consummated such Person or one of its Affiliates will
41
commence a Parent Acquisition Transaction and (B) thereafter this Agreement is
terminated by KeySpan or Parent pursuant to Section 7.1(g)(ii), and if
concurrently with such termination or within twelve months of such termination a
Parent Acquisition Transaction occurs or Parent or any of its Subsidiaries shall
enter into a definitive agreement with respect to a Parent Acquisition
Transaction then Parent shall, upon the earlier of the date on which such Parent
Acquisition Transaction occurs or the date on which Parent enters into a
definitive agreement with respect to a Parent Acquisition Transaction, pay to
KeySpan by wire transfer of immediately available funds the amount of the Parent
Termination Fee. For the purposes of this Agreement (i) "Parent Termination Fee"
means the lesser of $250,000,000 or one percent of the market capitalization of
Parent on the date such payment becomes due and payable and (ii) "Parent
Acquisition Transaction" means the acquisition, directly or indirectly, for
consideration consisting of cash and/or securities, of more than 50% of the
voting power of the capital stock of Parent then outstanding or all or
substantially all the assets of Parent.
(e) KeySpan and Parent acknowledge that the agreements contained in
Sections 7.2(b) through (e) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent or
KeySpan, as applicable, would not enter into this Agreement; accordingly, if
KeySpan or Parent, as applicable, fails to promptly pay the amount due pursuant
to Section 7.2(b), (c) or (d), as the case may be, and, in order to obtain such
payment, Parent or KeySpan, as applicable, commences a suit which results in a
judgment against KeySpan or Parent, as applicable, for any of the amounts set
forth in Section 7.2(b), (c) or (d), as the case may be, KeySpan or Parent, as
applicable, shall pay to Parent or KeySpan, as applicable, its costs and
expenses (including attorneys' fees) in connection with such suit. Interest
shall accrue on any amounts due under Section 7.2(b), (c), or (d) from and after
30 days of the date such amount is due at the prime rate of Citibank N.A. in
effect on the date such payment was required to be made.
7.3. Amendment. This Agreement may be amended by the parties at any time
before or after the Required KeySpan Vote or the Required Parent Vote; provided,
however, that after any such approval, there shall not be made any amendment
that by law requires further approval by the stockholders of KeySpan or
shareholders of Parent without the further approval of such stockholders or such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
7.4. Extension; Waiver. At any time prior to the Effective Time, a party
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance by the other parties with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
42
ARTICLE VIII
GENERAL PROVISIONS
8.1. Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time and
this Article VIII. Nothing in this Section 8.1 shall relieve any party for any
breach of any representation, warranty, covenant or other agreement in this
Agreement occurring prior to termination.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon confirmation of receipt, (b) on
the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the tenth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to Parent or Merger Sub to:
National Grid USA
00 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
(b) if to KeySpan to:
KeySpan Corporation
Xxx XxxxxXxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Xx.
Telecopy No.: (000) 000-0000
with a copy to:
43
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
8.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
8.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that the
parties need not sign the same counterpart.
8.5. Entire Agreement; Third Party Beneficiaries. (a) This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreements, which shall
survive the execution and delivery of this Agreement.
(b) 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, other than,
immediately after the Effective Time, Section 5.8 (which is intended to be for
the benefit of the Persons covered thereby and may be enforced by such Persons).
8.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8.7. No Limitation on Other Representation. Except as otherwise expressly
provided in this Agreement, nothing in any representation or warranty in this
Agreement shall in any way limit or restrict the scope, applicability or meaning
of any other representation or warranty made by KeySpan herein. It is the
intention of the parties that, to the extent possible, unless provisions are
mutually exclusive and effect cannot be given to both or all such provisions,
the representations, warranties, covenants and closing conditions in this
Agreement shall be construed to be cumulative and that each representation,
warranty, covenant and closing condition in this Agreement shall be given full
separate and independent effect.
8.8. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms 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 materially adverse to any
party. Upon such determination that any term or other provision is invalid,
44
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 in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.9. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
8.10. Submission to Jurisdiction; Waivers. Any suit, action or proceeding
against any party hereto may be brought in any federal or state court of
competent jurisdiction located in the Borough of Manhattan in the State of New
York, and each party hereto irrevocably consents to the jurisdiction and venue
in the United States District Court for the Southern District of New York and in
the courts hearing appeals therefrom unless no federal subject matter
jurisdiction exists, in which event, each party hereto irrevocably consents to
jurisdiction and venue in the Supreme Court of the State of New York, New York
County, and in the courts hearing appeals therefrom. Each party hereto hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to serve process in
accordance with this Section 8.10, that it or its property is exempt or immune
from jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable law, that the suit, action or
proceeding in any such court is brought in an inconvenient forum, that the venue
of such suit, action or proceeding is improper, or that this Agreement, or the
subject matter hereof or thereof, may not be enforced in or by such courts and
further irrevocably waives, to the fullest extent permitted by applicable law,
the benefit of any defense that would hinder, xxxxxx or delay the levy,
execution or collection of any amount to which the party is entitled pursuant to
the final judgment of any court having jurisdiction. Each party hereto agrees
that promptly following the date hereof (and in no event more than ten (10) days
following the date hereof) it shall irrevocably designate a New York Person,
such person, upon such designation, to be set forth (along with the address of
such U.S. Person) across from such party's name on Exhibit B hereto (each a
"Process Agent"), as the designees, appointees and agents of such party to
receive, for and on such party's behalf, service of process in such jurisdiction
in any legal action or proceeding with respect to this Agreement and such
service shall be deemed complete upon delivery thereof to the Process Agent;
provided that in the case of any such service upon a Process Agent, the party
effecting such service shall also deliver a copy thereof to the party who
designated such Process Agent in the manner provided in Section 8.2. Each party
shall take all such action as may be necessary to continue said appointment in
full force and effect or to appoint another agent so that it will at all times
have an agent for service of process for the above purposes in New York, New
York. Each party further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered airmail, postage prepaid, to such party at its
45
address set forth in this Agreement, such service of process to be effective
upon acknowledgement of receipt of such registered mail. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the other
party in any other jurisdiction in which the other party may be subject to suit.
Each party expressly acknowledges that the foregoing waiver is intended to be
irrevocable under the laws of the State of New York and of the United States of
America; provided that each such party's consent to jurisdiction and service
contained in this Section 8.10 is solely for the purpose referred to in this
Section 8.10 and shall not be deemed to be a general submission to said courts
or in the State of New York other than for such purpose. This Agreement does not
involve less than $250,000, and the parties intend that ss.5-1401 of the New
York General Obligations Law shall apply to this Agreement.
In the event of the transfer of all or substantially all of the assets and
business of a Process Agent to any other corporation by consolidation, merger,
sale of assets or otherwise, such other corporation shall be substituted
hereunder for such Process Agent with the same effect as if originally named
herein in place of such party's Process Agent.
8.11. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.12. Definitions. As used in this Agreement:
(a) "Board of Directors" means the Board of Directors of any specified
Person and any committees thereof.
(b) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York or the City of London.
(c) "Knowledge" when used with respect to any party means the knowledge,
after reasonable investigation, of any executive officer of such party and with
respect to KeySpan, shall also include those individuals listed in Section 8.12
of the KeySpan Disclosure Schedule.
(d) "Material Adverse Effect" means, when used with reference to any
entity, any event, effect, change or development that, individually or in the
aggregate with other events, effects, changes or developments (a) is, or would
reasonably be expected to be, material and adverse to the financial condition,
business, assets, liabilities (contingent or otherwise), operations or results
of operations of such entity and any of its Subsidiaries, taken as a whole, or
(b) prevents or has a material and adverse effect on the ability of such entity
to perform its material obligations under this Agreement or to consummate the
transactions contemplated hereby by the End Date; provided, however, that to the
extent any event, effect, change or development is caused by or results from any
of the following, in each case, it shall not be taken into account in
determining whether there has been (or would reasonably be expected to be) a
"Material Adverse Effect": (i) factors affecting the economy, financial markets
46
or capital markets as a whole except to the extent that such entity and any of
its Subsidiaries, taken as a whole, are materially and adversely affected in a
disproportionate manner as compared to comparable participants in the utility
industry, (ii) factors affecting the utility industry as a whole, except to the
extent that such entity and any of its Subsidiaries, taken as a whole, are
materially and adversely affected in a disproportionate manner as compared to
comparable participants in the utility industry, (iii) the announcement of the
execution of this Agreement, (iv) changes in laws, rules or regulations of any
Governmental Entity affecting the utility industry as a whole except to the
extent that such entity and any of its Subsidiaries, taken as a whole, are
materially and adversely affected in a disproportionate manner as compared to
comparable participants in the utility industry, (v) any change in generally
accepted accounting principles by the Financial Accounting Standards Board, the
SEC or any other regulatory body unless such change results in a cash impact on
such party or (vi) any matter to the extent identified in Section 8.12 of the
KeySpan Disclosure Schedule or Section 8.12 of the Parent Disclosure Schedule.
For the avoidance of doubt, it is expressly agreed that (a) the failure to
obtain any consent pursuant to the terms of items 9, 10 and 11 on Section
3.1(d)(ii) of the KeySpan Disclosure Schedule or necessary to prevent
consummation of the Merger from being a default under the terms of items 9, 10
and 11 on Section 3.1(d)(ii) of the KeySpan Disclosure Schedule, the costs of
obtaining any such consent and the impact of any agreements entered into in
connection with obtaining such consents, shall be included in determining
whether a Material Adverse Effect on KeySpan shall have occurred or shall be
reasonably expected to occur and (b) with respect to regulatory approvals sought
in connection with the Merger, only the terms and conditions of the KeySpan
Required Approvals, the Parent Required Approvals and the Additional KeySpan
Consents, as set forth in Section 6.1(d) of this Agreement, shall be included in
determining whether a Material Adverse Effect on KeySpan shall have occurred or
shall be reasonably expected to occur.
(e) "The Other Party" means, with respect to KeySpan, Parent and means,
with respect to Parent, KeySpan.
(f) "Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(g) "Significant Subsidiary" of any person means a Subsidiary of such
Person that would constitute a "significant subsidiary" of such Person within
the meaning of Rule 1.02(w) of Regulation S-X as promulgated by the SEC.
(h) "Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership), (ii) of which at least a majority of the securities or other
interests which have by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization are owned by such party or one or more of
its Subsidiaries or (iii) that is directly or indirectly controlled by such
party or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.
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8.13. Other Agreements. The parties hereto acknowledge and agree that,
except as otherwise expressly set forth in this Agreement, the rights and
obligations of KeySpan, Parent and Merger Sub under any other agreement between
the parties shall not be affected by any provision of this Agreement.
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IN WITNESS WHEREOF, Parent, Merger Sub and KeySpan have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first above written.
NATIONAL GRID PLC
By: /s/
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Name: Xxxxxx Xxxxxxxx
Title: Group Director
NATIONAL GRID US8 INC.
By: /s
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
KEYSPAN CORPORATION
By: /s
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Name: Xxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
49
