EXHIBIT 1
AGREEMENT OF MERGER
BETWEEN
SOUTHERN UNION COMPANY
AND
FALL RIVER GAS COMPANY
Dated as of October 4, 1999
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms
Section 1.2 Other Defined Terms
ARTICLE II THE MERGER; OTHER TRANSACTIONS 9
Section 2.1 The Merger
Section 2.2 Effective Time of the Merger
Section 2.3 Closing
Section 2.4 Certificate of Incorporation; Bylaws
Section 2.5 Directors and Officers
ARTICLE III CONVERSION OF SHARES 10
Section 3.1 Effect of the Merger
Section 3.2 Exchange of FAL Common Stock Certificates
Section 3.3 Dissenting Shares
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SUG 14
Section 4.1 Organization, Existence and Qualification
Section 4.2 Capitalization
Section 4.3 Subsidiaries; Investments
Section 4.4 Authority Relative to this Agreement and Binding Effect
Section 4.5 Governmental Approvals
Section 4.6 Public Utility Holding Company Status; Regulation as a Public
Utility
Section 4.7 Compliance with Legal Requirements; Governmental Authorizations
Section 4.8 Legal Proceedings; Orders
Section 4.9 SEC Documents
Section 4.10 Taxes
Section 4.11 Intellectual Property
Section 4.12 Contracts
Section 4.13 Indebtedness
Section 4.14 Employee Benefit Plans
Section 4.15 Environmental Matters
Section 4.16 No Material Adverse Change
Section 4.17 Brokers
Section 4.18 Proxy Statement; Registration Statement
Section 4.19 No Vote Required
Section 4.20 Disclaimer of Representations and Warranties
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF FAL 22
Section 5.1 Organization, Existence and Qualification
Section 5.2 Capitalization
Section 5.3 Subsidiaries; Investments
Section 5.4 Authority Relative to this Agreement and Binding Effect
Section 5.5 Governmental Approvals
Section 5.6 Public Utility Holding Company Status; Regulation as a Public
Utility
Section 5.7 Compliance with Legal Requirements; Governmental Authorizations
Section 5.8 Legal Proceedings; Orders
Section 5.9 SEC Documents
Section 5.10 Taxes
Section 5.11 Intellectual Property
Section 5.12 Title to Assets
Section 5.13 Indebtedness
Section 5.14 Machinery and Equipment
Section 5.15 Applicable Contracts
Section 5.16 Insurance
Section 5.17 Employees
Section 5.18 Employee Benefit Plans
Section 5.19 Environmental Matters
Section 5.20 No Material Adverse Change
Section 5.21 Brokers
Section 5.22 Regulatory Proceedings
Section 5.23 Proxy Statement; Registration Statement
Section 5.24 Vote Required
Section 5.25 Opinion of Financial Advisor
Section 5.26 Disclaimer of Representations and Warranties
ARTICLE VI COVENANTS 32
Section 6.1 Covenants of FAL
(a) Conduct of the Business Prior to the Closing Date 32
(b) Customer Notifications 34
(c) Access to the Acquired Companies' Offices,
Properties and Records; Updating Information 34
(d) Governmental Approvals; Third Party Consents 35
(e) Dividends 35
(f) Issuance of Securities 36
(h) No Shopping 36
(i) Solicitation of Proxies; FAL Proxy Statement 38
(j) FAL Stockholders' Approval 38
(k) Rule 145 Letters 39
(l) Financing Activities 39
(m) FAL Disclosure Schedule 39
(n) FAL Bondholders' Consent 39
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Section 6.2 Covenants of SUG
(a) Governmental Approvals; Third Party Consents 40
(b) Employees; Benefits 40
(c) Blue Sky Permits 40
(d) Listing Application 40
(e) Collective Bargaining Agreements 41
(f) SUG Disclosure Schedule 41
(g) Conduct of the Business Prior to the Closing Date 41
(h) Access to SUG's Offices, Properties and Records;
Updating Information 41
Section 6.3 Additional Agreements
(a) The Registration Statement and the FAL Proxy
Statement 42
(b) Further Assurances 43
(c) Financial Statements to be Provided 43
ARTICLE VII CONDITIONS 43
Section 7.1 Conditions to SUG's Obligation to Effect the
Merger
(a) Representations and Warranties True as of the
Closing Date 43
(b) Compliance with Agreements 43
(c) Certificate 44
(d) Governmental Approvals 44
(e) Third Party Consents 44
(f) Injunctions 44
(g) Resignations 44
(h) Opinion of Tax Counsel 44
(i) FAL Stockholders' Approval 44
(j) Appraisal Rights 45
(k) Rule 145 Letters 45
(l) Registration Statement 45
(m) Listing of SUG Common Stock 45
(n) FAL Bondholders' Consent 45
Section 7.2 Conditions to FAL's Obligations to Effect the
Merger
(a) Representations and Warranties True as of the
Closing Date 45
(b) Compliance with Agreements 45
(c) Certificate 45
(d) Governmental Approvals 45
(e) Injunctions 46
(f) Opinion of Counsel 46
(g) FAL Stockholders' Approval 46
(h) Registration Statement 46
(i) Listing of SUG Common Stock 46
ARTICLE VIII TERMINATION 46
Section 8.1 Termination Rights
Section 8.2 Effect of Termination
Section 8.3 Termination Fee; Expenses
(a) Termination Fee 48
(b) Expenses 48
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ARTICLE IX INDEMNIFICATION; REMEDIES 48
Section 9.1 Directors' and Officers' Indemnification
(a) Indemnification and Insurance 48
(b) Successors 49
(c) Survival of Indemnification 49
Section 9.2 Representations and Warranties
ARTICLE X GENERAL PROVISIONS 49
Section 10.1 Expenses
Section 10.2 Notices
Section 10.3 Assignment
Section 10.4 Successor Bound
Section 10.5 Governing Law; Forum; Consent to Jurisdiction
Section 10.6 Waiver of Trial By Jury
Section 10.7 Cooperation; Further Documents
Section 10.8 Construction of Agreement
Section 10.9 Publicity; Organizational and Operational Announcements
Section 10.10 Waiver
Section 10.11 Parties in Interest
Section 10.12 Specific Performance
Section 10.13 Section and Paragraph Headings
Section 10.14 Amendment
Section 10.15 Entire Agreement
Section 10.16 Counterparts
Disclosure Schedules:
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FAL Disclosure Schedule
SUG Disclosure Schedule
AGREEMENT OF MERGER
This AGREEMENT OF MERGER (this "Agreement") is made as of the 4th day of
October, 1999, by and between SOUTHERN UNION COMPANY, a Delaware corporation
("SUG"), and FALL RIVER GAS COMPANY, a Massachusetts corporation ("FAL").
RECITALS
WHEREAS, the Board of Directors of each of SUG and FAL has approved and
deems it advisable and in the best interests of their respective stockholders to
consummate the merger of FAL with and into SUG upon the terms and subject to the
conditions set forth herein; and
WHEREAS, in furtherance thereof, the Board of Directors of each of SUG and
FAL has approved this Agreement and the merger of FAL with and into SUG, with
SUG being the surviving corporation (the "Merger");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, SUG
and FAL hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Article I
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Acquired Companies"--FAL and its Subsidiaries, collectively, and each, an
"Acquired Company."
"Affiliate"--with respect to any Person, any other Person that directly, or
through one or more intermediaries, controls or is controlled by or is under
common control with such first Person. As used in this definition, "control"
(including with correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
"Applicable Contract"--any Contract (a) under which any Acquired Company
has any rights, (b) under which any Acquired Company has any obligation or
liability, or (c) by which any Acquired Company or any of the assets owned or
used by it is bound.
"Average Trading Price"--of SUG Common Stock, as of any date, will equal
the average of the reported closing market prices of such stock for the ten
consecutive trading days ending on the third trading day prior to such date
(counting from and including the trading day immediately preceding such date).
The closing market price for each day in question will be the last sale price,
regular way or, if no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system of the principal national
securities exchange on which SUG Common Stock is listed or admitted to trading.
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"CERCLA"--the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Closing Date"--the date on which the Closing actually takes place.
"Contract"--any agreement, contract, document, instrument, obligation,
promise or undertaking (whether written or oral) that is legally binding.
"DGCL"--the Delaware General Corporation Law.
"Encumbrance"--any charge, adverse claim, lien, mortgage, pledge, security
interest or other encumbrance.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful; or
(e) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries
done to public assets or for damages to natural resources.
"ERISA"--the Employee Retirement Income Security Act of 1974, as amended,
or any successor law, and regulations and rules issued pursuant to that act or
any successor law.
"Exchange Act"--the Securities Exchange Act of 1934, as amended, or any
successor law, and regulations and rules issued by the SEC pursuant to that act
or any successor law.
"Facilities"--any real property, leaseholds, or other interests currently
or formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.
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"FAL Balance Sheet"--the audited consolidated balance sheet of the Acquired
Companies at September 30, 1998 (including the notes thereto), provided by FAL
to SUG as part of the FAL Financial Statements.
"FAL Common Stock"--the common stock, par value $.83/1//\\3\\ per share, of
FAL.
"FAL Disclosure Schedule"--the disclosure schedule delivered by FAL to SUG
concurrently with the execution and delivery of this Agreement.
"FAL Material Adverse Effect"--a material adverse effect (i) on the
business, operations, financial condition or results of operations of FAL and
its Subsidiaries, taken as a whole, or (ii) on the ability of FAL and its
Subsidiaries to consummate the Merger in accordance with this Agreement.
"FAL Permitted Liens"--Encumbrances securing Taxes, assessments,
governmental charges or levies, or the claims of materialmen, mechanics,
carriers and like persons, all of which are not yet due and payable or which are
being contested in good faith; Encumbrances (other than any Encumbrance imposed
by ERISA) incurred on deposits made in the Ordinary Course of Business in
connection with worker's compensation, unemployment insurance or other types of
social security; the Encumbrances created by the Indenture of First Mortgage,
dated as of December 1, 1952, between FAL and State Street Bank and Trust
Company, successor in interest to the First National Bank of Boston, successor
by merger to Old Colony Trust Company, as Trustee, as amended or supplemented
from time to time; in the case of leased real property, Encumbrances (not
attributable to an Acquired Company as lessee) affecting the landlord's (and any
underlying landlord's) interest in any leased real property; and such other
Encumbrances which are not, individually or in the aggregate, reasonably likely
to have a FAL Material Adverse Effect.
"Final Order"--an action by a Governmental Body as to which: (a) no request
for stay of the action is pending, no such stay is in effect and if any time
period is permitted by statute or regulation for filing any request for such
stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the time
for filing any such petition or application has passed; (c) such Governmental
Body does not have the action under reconsideration on its own motion and the
time in which such reconsideration is permitted has passed; and (d) no appeal to
a court, or a request for stay by a court of the Governmental Body's action is
pending or in effect and the deadline for filing any such appeal or request has
passed.
"GAAP"--generally accepted United States accounting principles, applied on
a consistent basis.
"Governmental Authorization"--any approval, consent, license, franchise,
certificate of public convenience and necessity, permit, waiver or other
authorization issued, granted, given, or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
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(b) federal, state, county, local, municipal or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity
and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, any other act, business,
operation, or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the Facilities, or
that may affect the value of the Facilities or the Acquired Companies.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR Act"--the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, or any successor law, and regulations and rules issued by the U.S.
Department of Justice or the Federal Trade Commission pursuant to that act or
any successor law.
"IRC"--the Internal Revenue Code of 1986, as amended.
"IRS"--the Internal Revenue Service or any successor agency.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving as a director or officer of such Person or any material Subsidiary of it
or other management employee with direct responsibility for such particular fact
or other matter of such Person or any material Subsidiary of it (or in any
similar capacity) has actual knowledge of such fact or other matter.
"Legal Requirement"--any federal, state, county, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, rule, tariff, franchise
agreement, statute or treaty.
"Material Contract"--a Contract involving a total commitment by or to any
party thereto of at least $65,000 on an annual basis or at least $250,000 on its
remaining term which cannot be terminated on no more than sixty (60) days'
notice without penalty or additional cost to the Acquired Company as the
terminating party.
"MBCL"--the Massachusetts Business Corporation Law.
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"Order"--any award, decision, decree, injunction, judgment, order, writ,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action and authorization therefor is consistent with the past
practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; and
(b) such action is not required by law to be authorized by the board
of directors (or similar authority) of such Person or of such Person's
parent company (if any).
"Organizational Documents"--(a) the articles or certificate of
incorporation or organization and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the certificate of formation and the members,
operating or similar agreement of a limited liability company; (e) any charter
or similar document adopted or filed in connection with the creation, formation
or organization of a Person; and (f) any amendment to any of the foregoing.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, organized group
of persons, entity of any other type, or Governmental Body.
"Proceeding"--any action, arbitration, hearing, litigation or suit (whether
civil, criminal, administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.
"PUHCA"--the Public Utility Holding Company Act of 1935, as amended, or any
successor law, and regulations and rules issued by the SEC pursuant to that act
or any successor law.
"Related Documents"--any Contract provided for in this Agreement to be
entered into by one or more of the parties hereto or their respective
Subsidiaries in connection with the Merger.
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SEC"--the United States Securities and Exchange Commission or any
successor agency.
"Securities Act"--the Securities Act of 1933, as amended, or any successor
law, and regulations and rules issued by the SEC pursuant to that act or any
successor law.
"Subsidiary"--with respect to any Person (the "Owner"), any Person of which
securities or other interests having the power to elect a majority of that other
Person's board of directors or
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similar governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of FAL.
"SUG Balance Sheet"--the audited consolidated balance sheet of SUG at June
30, 1999 (including the notes thereto), provided by SUG to FAL as part of the
SUG Financial Statements.
"SUG Common Stock"--the common stock, par value $1.00 per share, of SUG.
"SUG Disclosure Schedule"--the disclosure schedule delivered by SUG to FAL
concurrently with the execution and delivery of this Agreement.
"SUG Material Adverse Effect"--a material adverse effect (i) on the
business, operations, financial condition or results of operations of SUG and
its Subsidiaries, taken as a whole, or (ii) on the ability of SUG to consummate
the Merger in accordance with this Agreement.
"Tax"--any tax (including any income tax, capital gains tax, value-added
tax, sales and use tax, franchise tax, payroll tax, withholding tax or property
tax), levy, assessment, tariff, duty (including any customs duty), deficiency,
franchise fee or payment, payroll tax, utility tax, gross receipts tax or other
fee or payment, and any related charge or amount (including any fine, penalty,
interest or addition to tax), imposed, assessed or collected by or under the
authority of any Governmental Body or payable pursuant to any tax-sharing
agreement or any other Contract relating to the sharing or payment of any such
tax, levy, assessment, tariff, duty, deficiency or fee.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstance exists, that would
lead a director, officer or management employee of a comparable gas distribution
company to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken or otherwise pursued in the
future.
Section 1.2 Other Defined Terms. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement as
indicated below and, whenever such terms are used in this Agreement, they shall
have their respective defined meanings.
Term Section
-------------------------------- --------------------------
Agreement Introductory Paragraph
Business Combination 6.1(h)(4)
Cash Consideration 3.1(a)
Cash Election 3.1(b)
Cash Election Number 3.1(b)
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Cash Election Shares 3.1(c)
Cash Fraction 3.1(c)
Certificates 3.2(c)
Closing 2.3
Confidentiality Agreement 6.11(c)(1)
Dissenting Shares 3.3
Effective Time 2.2
Election Deadline 3.2(b)
Employees 6.2(b)
Exchange Ratio 3.1(a)
FAL Introductory Paragraph
FAL Benefit Plans 5.18(a)
FAL Commonly Controlled Entity 5.18(e)
FAL Financial Statements 5.9
FAL Meeting 6.1(j)(1)
FAL Proxy Statement 4.18
FAL SEC Documents 5.9
FAL Stockholders' Approval 5.24
Form of Election 3.2(b)
Indemnified Parties 9.1(a)
Initial Termination Date 8.1(k)
Maximum Value 3.1(a)
Merger Recitals
Merger Consideration 3.1(a)
Minimum Value 3.1(a)
NYSE 3.1(e)
Paying Agent 3.2(a)
PBGC 4.14(b)
PEI 4.2
PEI Merger Agreement 4.2
Registration Statement 4.18
Rule 145 Affiliates 6.1(k)
Rule 145 Letters 6.1(k)
Stock Consideration 3.1(a)
SUG Introductory Paragraph
SUG Benefit Plans 4.14(a)
SUG Commonly Controlled Entity 4.14(d)
SUG Financial Statements 4.9
SUG SEC Documents 4.9
Superior Proposal 6.1(h)(4)
Surviving Corporation 2.1
Third Party Beneficiary 10.11
Total Consideration 3.1(e)
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ARTICLE II
THE MERGER; OTHER TRANSACTIONS
Section 2.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, FAL will be merged with and into SUG in
accordance with the laws of the State of Delaware and the Commonwealth of
Massachusetts. SUG will be the surviving corporation in the Merger (the
"Surviving Corporation") and will continue its corporate existence under the
laws of the State of Delaware. The Merger will have the effect as provided in
the applicable provisions of the DGCL and the MBCL. Without limiting the
generality of the foregoing, upon the Merger, all the rights, privileges,
immunities, powers and franchises of FAL and SUG will vest in the Surviving
Corporation and all obligations, duties, debts and liabilities of FAL and SUG
will be the obligations, duties, debts and liabilities of the Surviving
Corporation.
Section 2.2 Effective Time of the Merger. On the Closing Date, with
respect to the Merger, (i) a duly executed certificate of merger complying with
the requirements of the DGCL will be executed and filed with the Secretary of
State of the State of Delaware and (ii) duly executed articles of merger
complying with the requirements of the MBCL will be filed with the Secretary of
State of the Commonwealth of Massachusetts. The Merger will become effective
upon filing the certificate of merger with the Secretary of State of the State
of Delaware and the articles of merger with the Secretary of State of the
Commonwealth of Massachusetts (the "Effective Time").
Section 2.3 Closing. Unless this Agreement has been terminated and the
transactions contemplated herein have been abandoned pursuant to Article VIII
hereof, the closing of the transactions contemplated by this Agreement (the
"Closing") will take place at 10:00 a.m., Eastern Time, on the Closing Date to
be specified by the parties, which shall be no later than the tenth business day
after satisfaction or waiver of all of the conditions set forth in Article VII
hereof (other than Sections 7.1(a), 7.1(b), 7.1(c), 7.1(f), 7.1(g), 7.1(h),
7.1(k), 7.1(l), 7.2(a), 7.2(b), 7.2(c), 7.2(e), 7.2(f) and 7.2(h), which shall
be satisfied or waived on the Closing Date) at the offices of Xxxxxx Xxxxxxx &
Xxxx LLP, New York, counsel to SUG, unless another date or place is agreed to in
writing by the parties hereto.
Section 2.4 Certificate of Incorporation; Bylaws. Pursuant to the
Merger, the Restated Certificate of Incorporation of SUG, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and (ii) the bylaws of SUG as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by law.
Section 2.5 Directors and Officers. The directors and officers of SUG
immediately prior to the Effective Time will be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and bylaws of the Surviving Corporation.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Effect of the Merger. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares of
FAL Common Stock:
(a) Each issued and outstanding share of FAL Common Stock (other than
Dissenting Shares) will be converted into the right of each holder thereof to
receive (i) that number
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of fully paid and nonassessable shares of SUG Common Stock (the "Stock
Consideration") equal to $23.50 divided by the Exchange Ratio rounded to the
nearest hundred-thousandth or (ii) upon a valid Cash Election as provided in
Section 3.1(b), $23.50 in cash (the "Cash Consideration"), subject to the
limitations set forth in Section 3.1(b), 3.1(c), and 3.1(e). In the case of the
consideration to be received by the holders of FAL Common Stock in the
aggregate, "Merger Consideration" shall mean the Cash Consideration together
with the Stock Consideration. In the case of the consideration to be received by
an individual holder of FAL Common Stock, "Merger Consideration" shall mean the
Cash Consideration and/or the Stock Consideration to be received by such holder,
as the case may be.
"Exchange Ratio" shall mean the Average Trading Price of SUG Common Stock
as of the Closing Date. Notwithstanding the foregoing, if the Exchange Ratio as
calculated pursuant to the preceding sentence and without regard to this
sentence (i) is less than the Minimum Value, then the Exchange Ratio will be
equal to the "Minimum Value," or (ii) is greater than the "Maximum Value," then
the Exchange Ratio will be equal to the "Maximum Value." "Minimum Value" will
be $16.875 and "Maximum Value" will be $19.6875.
(b) Subject to the immediately following sentence and to Section
3.1(c) and 3.1(e), each record holder of shares of FAL Common Stock immediately
prior to the Effective Time shall be entitled to elect to receive cash for all
or any part of such shares of FAL Common Stock (a "Cash Election").
Notwithstanding the foregoing, the aggregate number of shares of FAL Common
Stock that may be converted into the right to receive cash consideration shall
not exceed the Cash Election Number. To the extent not covered by a properly
given Cash Election, all shares of FAL Common Stock issued and outstanding
immediately prior to the Effective Time shall, except as provided in Section
3.1(g), be converted solely into shares of SUG Common Stock.
"Cash Election Number" shall equal, subject to reduction pursuant to
Section 3.1(e), the amount by which (i) 50% of the number of shares of FAL
Common Stock outstanding immediately prior to the Effective Time, exceeds (ii)
the sum of (a) the number of shares of FAL Common Stock to be exchanged for cash
in lieu of fractional shares pursuant to Section 3.1(g), and (b) the number of
Dissenting Shares.
(c) If the aggregate number of shares of FAL Common Stock covered by
Cash Elections (the "Cash Election Shares") exceeds the Cash Election Number,
each Cash Election Share shall be converted into (i) the right to receive an
amount in cash, without interest, equal to the product of (a) $23.50 and (b) a
fraction (the "Cash Fraction"), the numerator of which shall be the Cash
Election Number and the denominator of which shall be the total number of Cash
Election Shares, and (ii) a number of shares of SUG Common Stock equal to the
product of (a) $23.50 divided by the Exchange Ratio and (b) a fraction equal to
one minus the Cash Fraction.
(d) SUG will make all computations to give effect to this Section 3.1.
(e) If, after having made the calculation under Section 3.1(b), the
value of the SUG Common Stock (excluding fractional shares to be paid in cash)
to be issued in the Merger, valued at the lesser of the Average Trading Price as
of the Closing Date and the closing price of SUG Common Stock on the last
trading day before the Closing Date (or, if determined to be more appropriate to
ensure the status of the Merger as a reorganization under Section 368(a)(1)(A)
of the IRC, the trading price as of the time of the Closing), as reported on the
New York Stock Exchange ("NYSE"), is less than 50% of the total consideration to
be paid in exchange for the shares of FAL
9
Common Stock (including, without limitation, the amount of cash to be paid in
lieu of fractional shares and treating any Dissenting Shares as having been
exchanged for the Cash Consideration) (the "Total Consideration"), then the Cash
Election Number shall be reduced to the extent necessary so that the value of
the SUG Common Stock to be issued in the Merger (as determined above) is 50% of
the Total Consideration.
(f) Each holder of FAL Common Stock shall surrender all such holder's
certificates formerly representing ownership of FAL Common Stock in the manner
provided in Section 3.2. All such shares of FAL Common Stock, when so
converted, shall no longer be outstanding and shall be canceled and
automatically converted into the right to receive the Merger Consideration (and
cash in lieu of fractional shares) therefor upon the surrender of such
certificate in accordance with Section 3.2. Any payment made pursuant to this
Section 3.1 shall be made net of applicable withholding taxes to the extent such
withholding is required by law.
(g) No fractional share of SUG Common Stock shall be issued in
connection with the Merger. Each holder of shares of FAL Common Stock shall be
entitled to receive in lieu of any fractional share of SUG Common Stock to which
such holder otherwise would have been entitled pursuant to this Section 3.1
(after taking into account all shares of FAL Common Stock then held of record by
such holder) a cash payment in an amount equal to the product of (i) the
fractional interest of a share of SUG Common Stock to which such holder
otherwise would have been entitled and (ii) the closing price of a share of SUG
Common Stock on the NYSE on the trading day immediately prior to the Effective
Time. Payment of such amounts shall be made by SUG.
Section 3.2 Exchange of FAL Common Stock Certificates.
(a) SUG's registrar and transfer agent, or such other bank or trust
company as may be selected by SUG and be reasonably acceptable to FAL, will act
as paying agent ("Paying Agent") for the holders of FAL Common Stock in
connection with the Merger, pursuant to an agreement providing for the matters
set forth in this Section 3.2 and such other matters as may be appropriate and
the terms of which shall be reasonably satisfactory to SUG and FAL.
(b) (i) Not fewer than 15 business days prior to the Closing Date,
SUG will cause the Paying Agent to mail a form of election (the "Form of
Election") to holders of record of shares of FAL Common Stock (as of a record
date as close as practicable to the date of mailing). In addition, the Paying
Agent will use its reasonable efforts to make the Form of Election available to
the Persons who become stockholders of FAL during the period between such record
date and the Election Deadline. Any election to receive Cash Consideration
contemplated by Section 3.1(b) will have been properly made only if the Paying
Agent shall have received at its designated office or offices, by 4:00 p.m.,
Eastern Time, on the third business day prior to the Closing Date (the "Election
Deadline"), a Form of Election properly completed, as set forth in such Form of
Election. An election may be revoked only by written notice received by the
Paying Agent prior to the Election Deadline. In addition, all elections shall
automatically be revoked if the Paying Agent is notified by SUG and FAL that the
Merger has been abandoned. SUG shall have the discretion, which it may delegate
in whole or in part to the Paying Agent, to determine whether Forms of Election
have been properly completed, signed and submitted or revoked pursuant to this
Section 3.2(b), and to disregard immaterial defects in Forms of Election. The
decision of SUG (or the Paying Agent, as the case may be) in such matters shall
be conclusive and binding.
10
(c) At the Effective Time of the Merger, SUG will instruct the Paying
Agent to promptly, and in any event not later than three (3) business days
following the Effective Time, mail (and to make available for collection by
hand) to each holder of record of a certificate or certificates, which
immediately prior to the Effective Time represented outstanding shares of FAL
Common Stock (the "Certificates"), whose shares of FAL Common Stock were
converted pursuant to Section 3.1(a) into the right to receive the Merger
Consideration (and cash in lieu of fractional shares) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as SUG may reasonably specify) and (ii) instructions (which shall
provide that at the election of the surrendering holder Certificates may be
surrendered, and payment therefor collected, by hand delivery) for use in
effecting the surrender of the Certificates in exchange for payment of the
Merger Consideration (and cash in lieu of fractional shares). Upon surrender of
a Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by SUG, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each share of FAL Common Stock
formerly represented by such Certificate (and cash in lieu of fractional
shares), to be mailed (or made available for collection by hand if so elected by
the surrendering holder) within three (3) business days of receipt thereof, and
the Certificate so surrendered shall forthwith be canceled. If payment of the
Merger Consideration (and cash in lieu of fractional shares) is to be made to a
Person other than the Person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have paid any
transfer and other Taxes required by reason of the payment of the Merger
Consideration (and cash in lieu of fractional shares) to a Person other than the
registered holder of the Certificate surrendered or shall have established to
the satisfaction f the Surviving Corporation that such Tax either has been paid
or is not applicable. Until surrendered as contemplated by this Section 3.2,
each Certificate (other than Certificates representing FAL Common Stock held by
SUG or Dissenting Shares) shall be deemed at any time after the Effective Time
to represent only the right to receive the Merger Consideration (and cash in
lieu of fractional shares) as contemplated by this Section 3.2.
(d) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
(and cash in lieu of fractional shares) deliverable in respect thereof as
determined in accordance with this Article III, provided that the Person to whom
the Merger Consideration (and cash in lieu of fractional shares) is paid shall,
as a condition precedent to the payment thereof, give the Paying Agent a bond in
such sum as it may ordinarily require and indemnify the Surviving Corporation in
a manner satisfactory to it against any claim that may be made against the
Surviving Corporation with respect to the Certificate claimed to have been lost,
stolen or destroyed.
(e) After the Effective Time, the stock transfer books of FAL shall be
closed and there shall be no transfers on the stock transfer books of the
Surviving Corporation of shares of FAL Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the Merger Consideration (and cash in lieu of fractional
shares) as provided in this Article III.
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(f) The Surviving Corporation shall not be liable to any holder of FAL
Common Stock for Merger Consideration (and cash in lieu of fractional shares)
delivered to a public official pursuant to any applicable abandonment, escheat
or similar law. Any amounts remaining unclaimed by holders of any such shares
of FAL Common Stock seven years after the Effective Time (or such earlier date
immediately prior to the time at which such amounts would otherwise escheat to
or become property of any Governmental Body) shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of any claims or interest of any such holders or their successors, assigns or
personal representatives previously entitled thereto.
Section 3.3 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, the shares of any holder of FAL Common Stock who has
demanded and perfected appraisal rights for such shares in accordance with the
MBCL and who, as of the Effective Time, has not effectively withdrawn or lost
such appraisal rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive the Merger Consideration (and cash in lieu of
fractional shares) pursuant to Section 3.1, but the holder thereof shall only be
entitled to such rights as are granted by the MBCL. Notwithstanding the
foregoing, if any holder of shares of FAL Common Stock who demands appraisal of
such shares under the MBCL shall effectively withdraw the request for appraisal
or lose the right to appraisal, then, as of the later of the Effective Time and
the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive the Merger Consideration
and cash in lieu of fractional shares, without interest thereon, upon surrender
of the certificate representing such shares. FAL shall give SUG prompt notice
of any demands received by FAL for appraisal of FAL Common Stock, and, prior to
the Effective Time, SUG shall have the right to participate in all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, FAL
shall not, except with the prior written consent of SUG, make any payment with
respect to or offer to settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUG
SUG, as to SUG and its Subsidiaries, represents and warrants to FAL that:
Section 4.1 Organization, Existence and Qualification. SUG is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, to perform its obligations under all
Contracts to which it is a party, and to execute and deliver this Agreement.
SUG is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
business conducted by it, requires such qualification as a foreign corporation
except for such failures to be so qualified or in good standing as are not,
individually or in the aggregate, reasonably likely to have a SUG Material
Adverse Effect.
Section 4.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of SUG consists of (i) 50,000,000 shares of SUG Common
Stock, of which 31,288,321 shares were issued and 31,236,696 were outstanding on
September 30, 1999, and (ii) 1,500,000 shares of Cumulative Preferred Stock, no
par value, none of which are issued or outstanding. The issued and outstanding
shares of SUG Common Stock have been validly issued and are fully paid and
nonassessable. The shares of SUG Common Stock to be issued as the Merger
Consideration have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement,
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will have been validly issued and will be fully paid and nonassessable and the
issuance thereof is not subject to any preemptive or other similar right. Except
as specifically described in the SUG SEC Documents delivered to FAL prior to the
date of this Agreement, as of the date of this Agreement, no shares of SUG
Common Stock are held, in treasury or otherwise, by SUG or any of its
Subsidiaries and except as set forth in Section 4.2 of the SUG Disclosure
Schedule, as of the date of this Agreement, there are no outstanding (i)
securities convertible into SUG Common Stock or other capital stock of SUG or
any of its material Subsidiaries, (ii) warrants or options to purchase SUG
Common Stock or other securities of SUG or any of its material Subsidiaries or
(iii) commitments to issue shares of SUG Common Stock (other than pursuant to
the Merger and other than pursuant to the Agreement of Merger, dated as of June
7, 1999 (the "PEI Merger Agreement"), by and between SUG and Pennsylvania
Enterprises, Inc. ("PEI")) or other securities of SUG or any of its material
Subsidiaries.
Section 4.3 Subsidiaries; Investments. Except as set forth in Section
4.3 of the SUG Disclosure Schedule, as of the date of this Agreement, SUG has no
Subsidiaries or investments in any Person except for marketable securities
reflected in the SUG SEC Documents delivered to FAL prior to the date of this
Agreement, and SUG is the registered owner and holder of all of the issued and
outstanding shares of capital stock of its Subsidiaries and has good title to
such shares. The outstanding capital stock of each material Subsidiary of SUG
has been validly issued and is fully paid and nonassessable.
Section 4.4 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by SUG have been duly authorized by all requisite corporate action.
The execution, delivery and performance of this Agreement and the Related
Documents by SUG will not result in a violation or breach of any term or
provision of, constitute a default, or require a consent, approval or
notification, or accelerate the performance required under, the Organizational
Documents of SUG, any indenture, mortgage, deed of trust, security agreement,
loan agreement, or other Contract to which SUG is a party or by which its assets
are bound, or violate any Order, with such exceptions as are not, individually
or in the aggregate, reasonably likely to have a SUG Material Adverse Effect.
This Agreement constitutes and the Related Documents to be executed by SUG when
executed and delivered will constitute valid and binding obligations of SUG,
enforceable against SUG in accordance with their terms, except as enforceability
may be limited by (i) bankruptcy or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally or (ii) the
availability of equitable remedies generally.
Section 4.5 Governmental Approvals. Except as set forth in Section 4.5
of the SUG Disclosure Schedule and as required by the HSR Act, no approval or
authorization of any Governmental Body with respect to performance under this
Agreement or the Related Documents by SUG is required to be obtained by SUG in
connection with the execution and delivery by SUG of this Agreement or the
Related Documents or the consummation by SUG of the transactions contemplated
hereby or thereby, the failure to obtain which are, individually or in the
aggregate, reasonably likely to have a SUG Material Adverse Effect.
Section 4.6 Public Utility Holding Company Status; Regulation as a
Public Utility. SUG is a "gas utility company" (as such term is defined in
PUHCA). SUG indirectly owns a minority interest in a "foreign utility company"
(as such term is defined in PUHCA) that is exempt from, and is deemed not to be
a public utility company for purposes of, PUHCA pursuant to Section 33 thereof
with respect to which SUG has filed with the SEC a Form U-57 notification of
foreign
13
utility company status. Except as stated above in this Section 4.6, neither SUG
nor any of its Subsidiaries is a "holding company," a "subsidiary company," a
"public utility company" or an "affiliate" of a "public utility company," or a
"holding company" within the meaning of such terms in PUHCA.
Section 4.7 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Section 4.7 of the SUG Disclosure Schedule
or specifically described in the SUG SEC Documents delivered to FAL prior to the
date of this Agreement, and subject to Section 4.15 of this Agreement, to the
Knowledge of SUG, SUG is not in violation of any Legal Requirement that is
applicable to it, to the conduct or operation of its business, or to the
ownership or use of any of its assets, other than such violations, if any, which
are not, individually or in the aggregate, reasonably likely to have a SUG
Material Adverse Effect.
(b) The SUG SEC Documents delivered to FAL prior to the date of this
Agreement accurately describe all material regulation of SUG that relates to the
utility business of SUG as of the date of this Agreement. Except as set forth
in Section 4.7 of the SUG Disclosure Schedule, SUG has, and is in material
compliance with, all material Governmental Authorizations necessary to conduct
its business and to own, operate and use all of its assets as currently
conducted.
Section 4.8 Legal Proceedings; Orders. Except as set forth in Section
4.8 of the SUG Disclosure Schedule or as specifically described in the SUG SEC
Documents delivered to FAL prior to the date of this Agreement, there is no
pending Proceeding:
(1) that has been commenced by or against, or that otherwise
relates to, SUG or, if the merger with PEI is consummated, PEI, that
is reasonably likely to have a SUG Material Adverse Effect; or
(2) as of the date of this Agreement, that challenges, or that
may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, the Merger or any of the transactions
contemplated hereby.
To the Knowledge of SUG, no such Proceedings, audits or investigations have been
Threatened that are, individually or in the aggregate, reasonably likely to have
a SUG Material Adverse Effect. As of the date of this Agreement, SUG is not
subject to any Orders that are, individually or in the aggregate, reasonably
likely to have a SUG Material Adverse Effect.
Section 4.9 SEC Documents. SUG has made (and, with respect to such
documents filed after the date hereof through the Closing Date, will make)
available to FAL a true and complete copy of each report, schedule, registration
statement (other than on Form S-8), and definitive proxy statement filed by SUG
with the SEC since September 16, 1999 and through the Closing Date in
substantially the form filed with the SEC (the "SUG SEC Documents"). As of
their respective dates, the SUG SEC Documents, including without limitation any
financial statements or schedules included therein, complied (or will comply),
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SUG SEC Documents, and did not (or will not)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
14
misleading. The audited consolidated financial statements and unaudited interim
financial statements of SUG included in the SUG SEC Documents (collectively, the
"SUG Financial Statements") were (or will be) prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q) and fairly present (or will fairly present) in all material respects
the financial position of SUG as of the respective dates thereof or the results
of operations and cash flows for the respective periods then ended, as the case
may be, subject, in the case of unaudited interim financial statements, to
normal, recurring adjustments which are not material in the aggregate.
Section 4.10 Taxes. Except as set forth in Section 4.10 of the SUG
Disclosure Schedule:
(a) SUG and its Subsidiaries have timely filed all United States
federal, state and local income Tax Returns required to be filed by or with
respect to them or requests for extensions to file such Tax Returns have been
timely filed, granted and have not expired, and SUG and its Subsidiaries have
timely paid and discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have paid all other
Taxes as are due or made adequate provision therefor in accordance with GAAP
except where the failures to so file, pay or discharge are not, individually or
in the aggregate, reasonably likely to have a SUG Material Adverse Effect. As
of the date of this Agreement, there are no pending audits or other examinations
relating to any Tax matters. There are no Tax liens on any assets of SUG or its
Subsidiaries. As of the date of this Agreement, SUG and its Subsidiaries have
not granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. The accruals and reserves
(including deferred taxes) reflected in the SUG Balance Sheet are in all
material respects adequate to cover all material Taxes accruable through the
date thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with GAAP.
(b) Neither SUG nor any of its Subsidiaries is obligated under any
Contract with respect to industrial development bonds or other obligations with
respect to which the excludability from gross income of the holder for federal
or state income tax purposes could be affected by the Merger or any of the
transactions contemplated by this Agreement.
(c) SUG has no present plan or intention after the Merger to (i) sell
or otherwise dispose of any of the assets of the Surviving Corporation,
including the assets of FAL acquired pursuant to the Merger, except for
dispositions made in the ordinary course of business or to a corporation
controlled by the Surviving Corporation within the meaning of Section
368(a)(2)(C) of the IRC, or (ii) reacquire any of the SUG Common Stock included
in the Merger Consideration, other than repurchases in the open market pursuant
to stock repurchase plans undertaken for reasons unrelated to the transactions
contemplated by this Agreement.
Section 4.11 Intellectual Property. SUG has no Knowledge of (i) any
infringement or claimed infringement by it of any patent rights or copyrights of
others or (ii) any infringement of the patent or patent license rights,
trademarks or copyrights owned by or under license to it, except for any such
infringements of the type described in clause (i) or (ii) that are not,
individually or in the aggregate, reasonably likely to have a SUG Material
Adverse Effect.
Section 4.12 Contracts. Except as described in Section 4.12 of the SUG
Disclosure Schedule or as specifically described in the SUG SEC Documents
delivered to FAL prior to the date of this Agreement, and with such exceptions
as are not, individually or in the aggregate, reasonably
15
likely to have a SUG Material Adverse Effect, all of SUG's Contracts are in full
force and effect and neither SUG nor, to the Knowledge of SUG, any other party
thereto is in default thereunder nor has any event occurred or is any event
occurring that, with notice or the passage of time or otherwise, is reasonably
likely to give rise to an event of default thereunder by any party thereto.
Section 4.13 Indebtedness. All outstanding principal amounts of
indebtedness for borrowed money of SUG as of October 1, 1999 are set forth in
Section 4.13 of the SUG Disclosure Schedule.
Section 4.14 Employee Benefit Plans.
(a) Except as set forth in Section 4.14 of the SUG Disclosure
Schedule, each of the SUG Benefit Plans has been operated and administered in
all material respects in accordance with its governing documents and applicable
federal and state laws (including, but not limited to, ERISA and the IRC). For
purposes of this Agreement, "SUG Benefit Plans" shall mean all employee
retirement, welfare, stock option, stock ownership, deferred compensation, bonus
or other benefit plans, agreements, practices, policies, programs, or
arrangements that are applicable to any employee, director or consultant of SUG
or its Subsidiaries or maintained by or contributed to by SUG or its
Subsidiaries.
(b) Except as set forth in Section 4.14 of the SUG Disclosure
Schedule, as to any SUG Benefit Plan subject to Title IV of ERISA, there is no
event or condition which presents the material risk of plan termination, no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the IRC has been incurred for which any
liability is outstanding, no reportable event within the meaning of Section 4043
of ERISA (for which the notice requirements of Regulation (S)4043 promulgated by
the Pension Benefit Guaranty Corporation ("PBGC") have not been waived) has
occurred within the last six years, no notice of intent to terminate the SUG
Benefit Plan has been given under Section 4041 of ERISA, no proceeding has been
instituted under Section 4042 of ERISA to terminate the SUG Benefit Plan, there
has been no termination or partial termination of the SUG Benefit Plan within
the meaning of Section 411(d)(3) of the IRC within the last six years, except
with respect to the conversion of the retirement income plan to a cash balance
plan for which full vesting was granted with respect to affected employees, no
event described in Sections 4062 or 4063 of ERISA has occurred, all PBGC
premiums have been timely paid and no liability to the PBGC has been incurred,
except for PBGC premiums not yet due.
(c) Except as set forth in Section 4.14 of the SUG Disclosure
Schedule, each trust funding a SUG Benefit Plan, which trust is intended to be
exempt from federal income taxation pursuant to Section 501(c)(9) of the IRC,
satisfies the requirements of such section and has, whenever required by law,
received a favorable determination letter from the IRS regarding such exempt
status, and to the Knowledge of SUG has not, since receipt of the most recent
favorable determination letter, been amended or operated in any way which would
adversely affect such exempt status.
(d) Except as set forth in Section 4.14 of the SUG Disclosure
Schedule, with respect to any SUG Benefit Plan or any other "employee benefit
plan" as defined in Section 3(3) of ERISA which is established, sponsored,
maintained or contributed to, or has been established, sponsored, maintained or
contributed to or, to the Knowledge of SUG, with respect to any such plan which
has been established, sponsored, maintained or contributed to within six years
prior to the
16
Closing Date, by SUG or its Subsidiaries or any corporation, trade, business or
entity under common control or being a part of an affiliated service group with
SUG, within the meaning of Section 414(b), (c) or (m) of the IRC or Section 4001
of ERISA ("SUG Commonly Controlled Entity"), (i) no withdrawal liability, within
the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied and no such withdrawal liability is reasonably
expected to be incurred, (ii) no liability under Title IV of ERISA (including,
but not limited to, liability to the PBGC) has been incurred by SUG or any SUG
Commonly Controlled Entity, which liability has not been satisfied (other than
for PBGC premiums not yet due), (iii) no accumulated funding deficiency, whether
or not waived, within the meaning of Section 302 of ERISA or Section 412 of the
IRC has been incurred for which any liability is outstanding, (iv) there has
been no failure to make any contribution (including installments) to such plan
required by Section 302 of ERISA and Section 412 of the IRC which has resulted
in a lien under Section 302 of ERISA or Section 412 of the IRC and for which any
liability is currently outstanding, (v) to the Knowledge of SUG, no action,
omission or transaction has occurred with respect to any such plan or any other
SUG Benefit Plan which could subject SUG or the plan or trust forming a part
thereof to a material civil liability or penalty under ERISA or other applicable
laws, or a material Tax under the IRC, (vi) any such plan which is a Group
Health Plan has complied in all material respects with the provisions of
Sections 601-608 of ERISA and Section 4980B of the IRC, (vii) there are no
pending or, to the Knowledge of SUG, Threatened claims by or on behalf of any
such plan or any other SUG Benefit Plan, by any employees, former employees or
plan beneficiaries covered by such plan or otherwise by or on behalf of any
person involving any such plan (other than routine non-contested claims for
benefits) which could result in a material liability to SUG and its
Subsidiaries, taken as a whole, and (viii) neither SUG nor any SUG Commonly
Controlled Entity has engaged in, or is a successor or parent corporation to any
entity or person that has engaged in, a transaction described in Section 4069 of
ERISA.
(e) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) increase the amount of
benefits otherwise payable under any SUG Benefit Plan, (ii) result in the
acceleration of the time of eligibility to participate in any SUG Benefit Plan,
or of any payment, exercisability, funding or vesting of any benefit under any
SUG Benefit Plan, (iii) result in payment becoming due or with respect to any
current or former employee, director or consultant, or (iv) result in any
payment becoming due in the event of a termination of employment or service of
any employee, director or consultant.
(f) SUG is not a party to any Contract nor has it established any
policy or practice, which would require SUG to make a payment or provide any
other form of compensation or benefit to any Person performing (or who within
the past twelve months performed) services for SUG during or upon termination of
such services which would not be payable or provided in the absence of the
consummation of the transactions contemplated by this Agreement.
(g) Except as would affect unionized employees and/or retirees who are
covered by bargaining agreements, if any, and as otherwise set forth in Section
4.14 of the SUG Disclosure Schedule, each SUG Benefit Plan which is an "employee
welfare benefit plan," as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without any liability being
incurred by SUG or any Affiliate of SUG, except as to benefits accrued
thereunder prior to such amendment or termination.
17
(h) As of the date of this Agreement, SUG has not contributed nor been
obligated to contribute to any "multi-employer plan" within the meaning of
Section 3(37) of ERISA within the last six years and has no outstanding
liability with respect to any such plan.
Section 4.15 Environmental Matters. Except as set forth in Section 4.15
of the SUG Disclosure Schedule or as specifically described in the SUG SEC
Documents delivered to FAL prior to the date of this Agreement, and with such
other exceptions as are not, individually or in the aggregate, reasonably likely
to have a SUG Material Adverse Effect:
(a) To the Knowledge of SUG, SUG and any Person for whose conduct SUG
is reasonably likely to be held responsible, is currently and at all times has
been, in material compliance with any Environmental Law. SUG has not received
any Order, notice, or other communication from (i) any Governmental Body or
private citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any violation or failure to comply with
any Environmental Law, or of any obligation to undertake or bear the cost of any
environmental cleanup, or with respect to any property or Facility at which
Hazardous Materials generated by SUG or any other Person for whose conduct SUG
may be held responsible were transported for disposal; and
(b) There are no pending or, to the Knowledge of SUG, Threatened
claims or Encumbrances arising under or pursuant to any Environmental Law with
respect to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which SUG has or had a direct or indirect
interest (including by ownership or use).
Section 4.16 No Material Adverse Change. Except as described in the SUG
SEC Documents that have been provided to FAL prior to the date of this
Agreement, since the date of the SUG Balance Sheet, there has not been any SUG
Material Adverse Effect, and no events have occurred or circumstances exist that
are, individually or in the aggregate, reasonably likely to have a SUG Material
Adverse Effect, except that any SUG Material Adverse Effect that results from or
relates to (a) general business or economic conditions, (b) conditions generally
affecting the industries in which SUG competes or (c) the announcement of the
transactions contemplated by this Agreement shall be disregarded.
Section 4.17 Brokers. SUG is not a party to, or in any way obligated
under any Contract, and there are no outstanding claims against SUG, for the
payment of any broker's or finder's fees in connection with the origin,
negotiation, execution or performance of this Agreement.
Section 4.18 Proxy Statement; registration statement. None of the
information supplied or to be supplied to FAL by or on behalf of SUG for
inclusion in the proxy statement, in definitive form, relating to the FAL
Meeting to be held in connection with the Merger (the "FAL Proxy Statement"), or
supplied by or on behalf of SUG in the Registration Statement on Form S-4 (and
any amendments thereto) to be filed by SUG with the SEC pursuant to the
Securities Act to register the shares of SUG Common Stock constituting the Stock
Consideration (the "Registration Statement") will, in the case of the
Registration Statement, at the effective time of the Registration Statement, at
any time the Registration Statement is amended or supplemented, at the date the
FAL Proxy Statement is first mailed to FAL's stockholders, at any time the FAL
Proxy Statement is amended or supplemented, at the time of the FAL Meeting and
at the Effective Time, and in the case of the FAL Proxy Statement, at the date
the FAL Proxy Statement is first mailed to FAL's stockholders, at any time the
FAL Proxy Statement is amended or supplemented and at the time of
18
the FAL Meeting (giving effect to any documents incorporated by reference
therein), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form and in substance
in all material respects with the applicable provisions of the Securities Act
and the rules and regulations thereunder.
Section 4.19 No Vote Required. No vote of the holders of any class or
series of the capital stock of SUG is required to approve this Agreement and the
Merger.
Section 4.20 Disclaimer of Representations and Warranties. EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE IV, SUG MAKES NO
OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND SUG HEREBY
DISCLAIMS ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES, WHETHER BY SUG, ANY
SUBSIDIARY OF SUG, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON, WITH RESPECT TO THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO FAL OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
REPRESENTATIVES, OR ANY OTHER PERSON, OF ANY DOCUMENTATION OR OTHER INFORMATION
BY SUG, ANY SUBSIDIARY OF SUG, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON, WITH RESPECT TO ANY
OF THE FOREGOING.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FAL
FAL, as to the Acquired Companies, represents and warrants to SUG as
follows:
Section 5.1 Organization, Existence and Qualification.
(a) Each Acquired Company is a corporation duly incorporated, validly
existing, and in good standing under the laws of its state of incorporation or
organization, with full corporate power and authority to conduct its business as
it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under all Applicable
Contracts. Section 5.1(a) of the FAL Disclosure Schedule sets forth the name of
each Acquired Company, the state or jurisdiction of its incorporation or
organization, and each state or jurisdiction where such Acquired Company is duly
qualified as a foreign corporation. Each Acquired Company is duly qualified to
do business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the business conducted by it,
requires such qualification as a foreign corporation except for such failures to
be so qualified or in good standing as are not, individually or in the
aggregate, reasonably likely to have a FAL Material Adverse Effect.
(b) FAL has delivered to SUG copies of the Organizational Documents,
as currently in effect, of each Acquired Company.
Section 5.2 Capitalization. The capital stock of FAL consists of
2,951,334 shares of FAL Common Stock, of which 2,220,086 shares are issued and
19
outstanding. The issued and outstanding shares of FAL Common Stock have been
validly issued and are fully paid and nonassessable. Except as specifically
described in the FAL SEC Documents delivered to SUG prior to the date of this
Agreement, no shares of FAL Common Stock are held, in treasury or otherwise, by
FAL or any of its Subsidiaries and there are no outstanding (i) securities
convertible into FAL Common Stock or other capital stock of FAL or any of its
Subsidiaries, (ii) warrants or options to purchase FAL Common Stock or other
securities of FAL or any of its Subsidiaries or (iii) other commitments to issue
shares of FAL Common Stock or other securities of FAL or any of its
Subsidiaries.
Section 5.3 Subsidiaries; Investments. Except as set forth in Section
5.3 of the FAL Disclosure Schedule, FAL has no Subsidiaries or investments in
any Person (except for marketable securities disclosed to SUG prior to the date
of this Agreement) and FAL is the registered owner and holder of all of the
issued and outstanding shares of capital stock of its Subsidiaries and has good
title to such shares. The outstanding capital stock of each Subsidiary has been
validly issued and is fully paid and nonassessable. All such capital stock
owned by any Acquired Company is free and clear of any Encumbrance (except for
any Encumbrance disclosed in the FAL SEC Documents delivered to SUG prior to the
date of this Agreement, or created or incurred by this Agreement in favor of
SUG, or imposed by federal or state securities laws).
Section 5.4 Authority Relative to this Agreement and Binding Effect.
The execution, delivery and performance of this Agreement and the Related
Documents by FAL have been duly authorized by all requisite corporate action,
except, as of the date of this Agreement, for the FAL Stockholders' Approval.
Except as set forth in Section 5.4 of the FAL Disclosure Schedule, the
execution, delivery and performance of this Agreement and the Related Documents
by FAL will not result in a violation or breach of any term or provision of, or
constitute a default, require a consent, approval or notification, or accelerate
the performance required under, the Organizational Documents of any of the
Acquired Companies, any indenture, mortgage, deed of trust, security agreement,
loan agreement, or other Applicable Contract to which any of the Acquired
Companies is a party or by which its assets are bound, or violate any Order,
with such exceptions as are not, individually or in the aggregate, reasonably
likely to have a FAL Material Adverse Effect. This Agreement constitutes and
the Related Documents to be executed by any of the Acquired Companies when
executed and delivered will constitute valid and binding obligations of such
Acquired Company, enforceable against such Acquired Company in accordance with
their terms, except as enforceability may be limited by (i) bankruptcy or
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally or (ii) the availability of equitable remedies generally.
Section 5.5 Governmental Approvals. Except as set forth in Section 5.5
of the FAL Disclosure Schedule and as required by the HSR Act, no approval or
authorization of any Governmental Body with respect to performance under this
Agreement or the Related Documents by any Acquired Company is required to be
obtained by FAL in connection with the execution and delivery by FAL of this
Agreement or the Related Documents or the consummation by the Acquired Companies
of the transactions contemplated hereby or thereby, the failure to obtain which
are, individually or in the aggregate, reasonably likely to have a FAL Material
Adverse Effect.
Section 5.6 Public Utility Holding Company Status; regulation as a
public utility. None of the Acquired Companies is a "holding company," a
"subsidiary company," a "public utility company," or an "affiliate" of a "public
utility company" or a "holding company" within the meaning of such terms in
PUHCA.
20
Section 5.7 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Section 5.7(a) of the FAL Disclosure
Schedule or as specifically described in the FAL SEC Documents delivered to SUG
prior to the date of this Agreement, and subject to Section 5.19 of this
Agreement, to the Knowledge of any Acquired Company, no Acquired Company is in
violation of any Legal Requirement that is applicable to it, to the conduct or
operation of its business, or to the ownership or use of any of its assets,
other than such violations, if any, which are not, individually or in the
aggregate, reasonably likely to have a FAL Material Adverse Effect.
(b) The FAL SEC Documents delivered to SUG prior to the date of this
Agreement accurately describe all material regulation of each Acquired Company
that relates to the utility business of any Acquired Company. Except as set
forth on Section 5.7(a) of the FAL Disclosure Schedule, each Acquired Company
has, and is in material compliance with, all material Governmental
Authorizations necessary to conduct its business and to own, operate and use all
of its assets as currently conducted.
Section 5.8 Legal Proceedings; Orders. Except as set forth in Section
5.8 of the FAL Disclosure Schedule or as specifically described in the FAL SEC
Documents delivered to SUG prior to the date of this Agreement, there is no
pending Proceeding:
(1) that has been commenced by or against, or that otherwise
relates to, any Acquired Company that is reasonably likely to have a
FAL Material Adverse Effect; or
(2) as of the date of this Agreement, that challenges, or that
may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, the Merger or any of the transactions
contemplated hereby.
To the Knowledge of FAL, except as set forth in Section 5.8 of the FAL
Disclosure Schedule, as of the date of this Agreement, no such Proceedings,
audits or investigations have been Threatened that are, individually or in the
aggregate, reasonably likely to have a FAL Material Adverse Effect. As of the
date of this Agreement, none of the Acquired Companies is subject to any Orders
that are, individually or in the aggregate, reasonably likely to have a FAL
Material Adverse Effect.
Section 5.9 SEC Documents. FAL has made (and, with respect to such
documents filed after the date hereof through the Closing Date, will make)
available to SUG a true and complete copy of each report, schedule, registration
statement (other than on Form S-8), and definitive proxy statement filed by FAL
with the SEC since September 30, 1998 through the Closing Date in substantially
the form filed with the SEC (the "FAL SEC Documents"). As of their respective
dates, the FAL SEC Documents, including without limitation any financial
statements or schedules included therein, complied (or will comply), in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such FAL SEC Documents, and did not (or will not) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
FAL included in the FAL SEC Documents (collectively, the "FAL Financial
Statements") were (or will be) prepared in accordance with GAAP (except as may
be indicated therein or in the notes
21
thereto and except with respect to unaudited statements as permitted by Form 10-
Q) and fairly present (or will fairly present) in all material respects the
financial position of FAL and its Subsidiaries, as of the respective dates
thereof or the results of operations and cash flows for the respective periods
then ended, as the case may be, subject, in the case of unaudited interim
financial statements, to normal, recurring adjustments which are not material in
the aggregate.
Section 5.10 Taxes. Except as set forth in Section 5.10 of the FAL
Disclosure Schedule:
(a) The Acquired Companies have timely filed all United States
federal, state and local income Tax Returns required to be filed by or with
respect to them or requests for extensions to file such Tax Returns have been
timely filed, granted and have not expired, and the Acquired Companies have
timely paid and discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have paid all other
Taxes as are due or made adequate provision therefor in accordance with GAAP
except where failures to so file, pay or discharge are not, individually or in
the aggregate, reasonably likely to have a FAL Material Adverse Effect. There
are no pending audits or other examinations relating to any Tax matters. There
are no Tax liens on any assets of the Acquired Companies. As of the date of
this Agreement, none of the Acquired Companies has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves (including deferred taxes)
reflected in the FAL Balance Sheet are in all material respects adequate to
cover all material Taxes accruable through the date thereof (including interest
and penalties, if any, thereon and Taxes being contested) in accordance with
GAAP.
(b) None of the Acquired Companies is obligated under any Applicable
Contract with respect to industrial development bonds or other obligations with
respect to which the excludability from gross income of the holder for federal
or state income tax purposes could be affected by the Merger or any of the
transactions contemplated by this Agreement.
Section 5.11 Intellectual Property. No Acquired Company has any
Knowledge of (i) any infringement or claimed infringement by any Acquired
Company of any patent rights or copyrights of others or (ii) any infringement of
the patent or patent license rights, trademarks or copyrights owned by or under
license to any Acquired Company, except for any such infringements of the type
described in clause (i) or (ii) that are not, individually or in the aggregate,
reasonably likely to have a FAL Material Adverse Effect.
Section 5.12 Title to Assets. Except (i) as set forth in Section 5.12 of
the FAL Disclosure Schedule, (ii) as specifically described in the FAL SEC
Documents delivered to SUG prior to the date of this Agreement, (iii) as set
forth in Section 5.19 of this Agreement or (iv) as set forth in Section 5.19 of
the FAL Disclosure Schedule, none of the Acquired Companies' assets are subject
to any Encumbrance other than FAL Permitted Liens.
Section 5.13 Indebtedness. All outstanding principal amounts of
indebtedness for borrowed money of the Acquired Companies as of October 4, 1999
are set forth in Section 5.13 of the FAL Disclosure Schedule.
Section 5.14 Machinery and Equipment. Except for normal wear and tear,
and with such exceptions as are not, individually or in the aggregate,
reasonably likely to have a FAL Material Adverse Effect, the machinery and
equipment of the Acquired Companies necessary for the conduct
22
by the Acquired Companies of their respective businesses as presently conducted
are in good operating condition and in a state of reasonable maintenance and
repair.
Section 5.15 Applicable Contracts. Set forth in Section 5.15(a) of the
FAL Disclosure Schedule is a list as the date hereof of all Applicable Contracts
to which any Acquired Company is a party involving a total commitment by or to
any party thereto of more than $65,000 on an annual basis or more than $250,000
on its remaining term which cannot be terminated on no more than sixty (60)
days' notice without penalty or additional cost to the Acquired Company as the
terminating party. Except as specifically described in the FAL SEC Documents
delivered to SUG prior to the date of this Agreement, and with such exceptions
as are not, individually or in the aggregate, reasonably likely to have a FAL
Material Adverse Effect, all Applicable Contracts of the Acquired Companies are
in full force and effect and no Acquired Company nor, to the Knowledge of FAL,
any other party thereto is in default thereunder nor has any event occurred or
is any event occurring that with notice or the passage of time or otherwise, is
reasonably likely to give rise to an event of default thereunder by any party
thereto.
Section 5.16 Insurance. Section 5.16(a) of the FAL Disclosure Schedule
sets forth a list of all policies of insurance held by the Acquired Companies as
of the date of this Agreement. Since June 30, 1994, the assets and the business
of the Acquired Companies have been continuously insured with what FAL believes
are reputable insurers against all risks and in such amounts normally insured
against by companies of the same type and in the same line of business as any of
the Acquired Companies. As of the date of this Agreement, no notice of
cancellation, non-renewal or material increase in premiums has been received by
any of the Acquired Companies with respect to such policies, and no Acquired
Company has Knowledge of any fact or circumstance that could reasonably be
expected to form the basis for any cancellation, non-renewal or material
increase in premiums, except for such cancellations, non-renewals and increases
which are not, individually or in the aggregate, reasonably likely to have a FAL
Material Adverse Effect. None of the Acquired Companies is in default with
respect to any provision contained in any such policy or binder nor has there
been any failure to give notice or to present any claim relating to the business
or the assets of the Acquired Companies under any such policy or binder in a
timely fashion or in the manner or detail required by the policy or binder,
except for such defaults or failures which are not, individually or in the
aggregate, reasonably likely to have a FAL Material Adverse Effect. As of the
date of this Agreement, there are no outstanding unpaid premiums (except
premiums not yet due and payable), and no notice of cancellation or renewal with
respect to, or disallowance of any claim under, any such policy or binder has
been received by the Acquired Companies as of the date hereof, except for such
non-payments of premiums, cancellations, renewals or disallowances which are
not, individually or in the aggregate, reasonably likely to have a FAL Material
Adverse Effect.
Section 5.17 Employees. Section 5.17(a) of the FAL Disclosure Schedule
sets forth a list as of no more than thirty (30) days prior to the date of this
Agreement of all the present officers and employees of the Acquired Companies,
indicating each employee's base salary or wage rate and identifying those who
are union employees and those who are part-time employees. Except as set forth
in Section 5.17(b) of the FAL Disclosure Schedule, as of the date of this
Agreement, no labor union or other collective bargaining unit has been certified
or recognized by any of the Acquired Companies, and, to the Knowledge of the
Acquired Companies, as of the date of this Agreement, there are no elections,
organizing drives or material controversies pending or Threatened between any of
the Acquired Companies and any labor union or other collective bargaining unit
representing any of the Acquired Companies' employees. There is no pending or,
to the Knowledge of FAL,
23
Threatened labor practice complaint, arbitration, labor strike or other material
labor dispute (excluding grievances) involving any of the Acquired Companies
which are, individually or in the aggregate, reasonably likely to have a FAL
Material Adverse Effect. Except for collective bargaining agreements or as set
forth in Section 5.17(c) of the FAL Disclosure Schedule, none of the Acquired
Companies is a party to any employment agreement with any employee pertaining to
any of the Acquired Companies.
Section 5.18 Employee Benefit Plans.
(a) Each of the FAL Benefit Plans has been operated and administered
in all material respects in accordance with its governing documents and
applicable federal and state laws (including, but not limited to, ERISA and the
IRC). For purposes of this Agreement, "FAL Benefit Plans" shall mean all
employee retirement, welfare, stock option, stock ownership, deferred
compensation, bonus or other benefit plans, agreements, practices, policies,
programs, or arrangements, that are applicable to any employee, director or
consultant of the Acquired Companies or maintained by or contributed to by any
of the Acquired Companies.
(b) As to any FAL Benefit Plan subject to Title IV of ERISA, there is
no event or condition which presents the material risk of plan termination, no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the IRC has been incurred for which any
liability is outstanding, no reportable event within the meaning of Section 4043
of ERISA (for which the notice requirements of Regulation (S)4043 promulgated by
the PBGC have not been waived) has occurred within the last six years, no notice
of intent to terminate the FAL Benefit Plan has been given under Section 4041 of
ERISA, no proceeding has been instituted under Section 4042 of ERISA to
terminate the FAL Benefit Plan, there has been no termination or partial
termination of the FAL Benefit Plan within the meaning of Section 411(d)(3) of
the IRC within the last six years, no event described in Sections 4062 or 4063
of ERISA has occurred, all PBGC premiums have been timely paid and no liability
to the PBGC has been incurred, except for PBGC premiums not yet due.
(c) There is no matter pending (other than qualification determination
applications and filings and other required periodic filings) with respect to
any of the FAL Benefit Plans before the IRS, the Department of Labor, the PBGC
or in or before any other governmental authority.
(d) Each trust funding a FAL Benefit Plan, which trust is intended to
be exempt from federal income taxation pursuant to Section 501(c)(9) of the IRC,
satisfies the requirements of such section and has received a favorable
determination letter from the IRS regarding such exempt status and to the
Knowledge of any Acquired Company has not, since receipt of the most recent
favorable determination letter, been amended or operated in any way which would
adversely affect such exempt status.
(e) With respect to any FAL Benefit Plan or any other "employee
benefit plan" as defined in Section 3(3) of ERISA which is established,
sponsored, maintained or contributed to, or to the Knowledge of the Acquired
Companies, with respect to any such plan which has been established, sponsored,
maintained or contributed to within six years prior to the Closing Date, by the
Acquired Companies or any corporation, trade, business or entity under common
control or being a part of an affiliated service group with any of the Acquired
Companies, within the meaning of Section 414(b), (c) or (m) of the IRC or
Section 4001 of ERISA ("FAL Commonly Controlled
24
Entity"), (i) no withdrawal liability, within the meaning of Section 4201 of
ERISA, has been incurred, which withdrawal liability has not been satisfied and
no such withdrawal liability is reasonably expected to be incurred, (ii) no
liability under Title IV of ERISA (including, but not limited to, liability to
the PBGC) has been incurred by the Acquired Companies or any FAL Commonly
Controlled Entity, which liability has not been satisfied (other than for PBGC
premiums not yet due), (iii) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the IRC has
been incurred for which any liability is outstanding, (iv) there has been no
failure to make any contribution (including installments) to such plan required
by Section 302 of ERISA and Section 412 of the IRC which has resulted in a lien
under Section 302 of ERISA or Section 412 of the IRC and for which any liability
is currently outstanding, (v) to the Knowledge of any Acquired Company, no
action, omission or transaction has occurred with respect to any such plan or
any other FAL Benefit Plan which could subject any of the Acquired Companies,
the plan or trust forming a part thereof, or SUG to a material civil liability
or penalty under ERISA or other applicable laws, or a material Tax under the
IRC, (vi) any such plan which is a Group Health Plan has complied in all
material respects with the provisions of Sections 601-608 of ERISA and Section
4980B of the IRC, (vii) there are no pending or, to the Knowledge of any
Acquired Company, Threatened claims by or on behalf of any such plan or any
other FAL Benefit Plan, by any employees, former employees or plan beneficiaries
covered by such plan or otherwise by or on behalf of any person involving any
such plan (other than routine non-contested claims for benefits) which could
result in a material liability to the Acquired Companies taken as a whole, and
(viii) neither the Acquired Companies nor any FAL Commonly Controlled Entity has
engaged in, or is a successor or parent corporation to any entity or person that
has engaged in, a transaction described in Section 4069 of ERISA.
(f) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) increase the amount of
benefits otherwise payable under any FAL Benefit Plan, (ii) result in the
acceleration of the time of eligibility to participate in any FAL Benefit Plan,
or any payment, exercisability, funding or vesting of any benefit under any FAL
Benefit Plan, (iii) result in any payment becoming due to or with respect to any
current or former employee, director or consultant, or (iv) result in any
payment becoming due in the event of a termination of employment or service of
any employee, director or consultant.
(g) None of the Acquired Companies is a party to any Applicable
Contract nor has it established any policy or practice, which would require it
or SUG to make a payment or provide any other form of compensation or benefit to
any Person performing (or who within the past twelve months performed) services
for any of the Acquired Companies during or upon termination of such services
which would not be payable or provided in the absence of the consummation of the
transactions contemplated by this Agreement.
(h) Except as would affect unionized employees and/or retirees who had
been unionized employees, each FAL Benefit Plan which is an "employee welfare
benefit plan," as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without any liability being
incurred by any of the Acquired Companies, SUG or any Affiliate of SUG, except
as to benefits accrued thereunder prior to such amendment or termination.
(i) None of the Acquired Companies has contributed nor been obligated
to contribute to any "multi-employer plan" within the meaning of Section 3(37)
of ERISA within the last six years, and none of the Acquired Companies has any
outstanding liability with respect to any such plan.
25
(j) Section 5.18(j) of the FAL Disclosure Schedule contains a true and
complete list of each FAL Benefit Plan, and any management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus, or other contract for personal services with any
current or former officer, director or employee, any consulting contract with
any person who prior to entering this such contract was a director or officer or
owner of 5% or more of the stock of any Acquired Company or family member of any
such director, officer or stockholder, or any plan, agreement, arrangement or
understanding similar to any of the foregoing. There are no outstanding options
to purchase FAL capital stock or other securities. FAL has provided to SUG a
complete and correct copy of each FAL Benefit Plan (or written summary of any
unwritten FAL Benefit Plan), and with respect to each FAL Benefit Plan, the
current summary plan description, related trust agreements, related insurance
contracts, the latest IRS determination letter, the last three annual reports on
Form 5500 series (including all required schedules), and the most recent
actuarial report and annual financial statements.
Section 5.19 Environmental Matters. Except as set forth in Section 5.19
of the FAL Disclosure Schedule or as specifically described in the FAL SEC
Documents delivered to SUG prior to the date of this Agreement, and with such
other exceptions as are not, individually or in the aggregate, reasonably likely
to have a FAL Material Adverse Effect:
(a) To the Knowledge of any Acquired Company, no Facility owned or
operated by any Acquired Company is currently, or was at any time, listed on the
National Priorities List promulgated under CERCLA, or on any comparable state
list, and no Acquired Company has received any written notification of potential
or actual liability or a written request for information from any Person under
or relating to CERCLA or any comparable Legal Requirement with respect to any
Acquired Company or the Facilities;
(b) To the Knowledge of any Acquired Company, each Acquired Company
and any Person for whose conduct any Acquired Company is reasonably likely to be
held responsible, is currently and at all times has been, in material compliance
with any Environmental Law. No Acquired Company has received any Order,
notice, or other communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or operator of
any Facilities, of any violation or failure to comply with any Environmental
Law, or of any obligation to undertake or bear the cost of any environmental
cleanup, or with respect to any property or Facility at which Hazardous
Materials generated by any Acquired Company were transported for disposal;
(c) There are no pending or, to the Knowledge of any Acquired Company,
Threatened claims arising under or pursuant to any Environmental Law with
respect to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which any Acquired Company has or had a
direct or indirect interest (including by ownership or use); and
(d) FAL has delivered or made available to SUG true and complete
copies and results of any environmental site assessments, studies, analyses,
tests or monitoring possessed by any Acquired Company of which any Acquired
Company has Knowledge pertaining to Hazardous Materials or Hazardous Activities
in, on or under the Facilities, or concerning compliance by any Acquired Company
or any other Person for whose conduct any Acquired Company is reasonably likely
to be held responsible, with Environmental Laws.
26
Section 5.20 No Material Adverse Change. Since the date of the FAL
Balance Sheet, except as specifically described in the FAL SEC Documents
delivered to SUG prior to the date of this Agreement, there has not been any FAL
Material Adverse Effect, and no events have occurred or circumstances exist that
are, individually or in the aggregate, reasonably likely to have a FAL Material
Adverse Effect, except that any FAL Material Adverse Effect that results from or
relates to (a) general business or economic conditions, (b) conditions
generally affecting the industries in which the Acquired Companies compete or
(c) the announcement of the transactions contemplated by this Agreement shall be
disregarded.
Section 5.21 Brokers. No Acquired Company is a party to, or in any way
obligated under any Applicable Contract, and there are no outstanding claims
against any Acquired Company, for the payment of any broker's or finder's fees
in connection with the origin, negotiation, execution or performance of this
Agreement.
Section 5.22 Regulatory Proceedings. Except as set forth in Section 5.22
of the FAL Disclosure Schedule, other than purchase gas adjustment provisions,
none of FAL or its Subsidiaries all or part of whose rates or services are
regulated by a Governmental Body (a) has rates that have been or are being
collected subject to refund, pending final resolution of any rate proceeding
pending before a Governmental Body or on appeal to the courts, or (b) is a party
to any rate proceeding before a Governmental Body that are, individually or in
the aggregate, reasonably likely to result in any Orders having a FAL Material
Adverse Effect.
Section 5.23 Proxy Statement; Registration Statement. None of the
information supplied or to be supplied by or on behalf of the Acquired Companies
in either the FAL Proxy Statement or supplied or to be supplied by the Acquired
Companies to SUG for inclusion in the Registration Statement, will, in the case
of the Registration Statement, at the effective time of the Registration
Statement, at any time the Registration Statement is amended or supplemented, at
the date the FAL Proxy Statement is first mailed to FAL's stockholders, at any
time the FAL Proxy Statement is amended or supplemented, at the time of the FAL
Meeting and at the Effective Time, and in the case of the FAL Proxy Statement,
at the date the FAL Proxy Statement is first mailed to FAL's stockholders, at
any time the FAL Proxy Statement is amended or supplemented and at the time of
the FAL Meeting (giving effect to any documents incorporated by reference
therein), 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 FAL Proxy Statement will comply as to form and in substance in
all material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder.
Section 5.24 Vote Required. Other than the approval of the Merger by the
holders of two thirds of the outstanding shares of FAL Common Stock entitled to
vote on the question (the "FAL Stockholders' Approval"), no vote of the holders
of any class or series of the capital stock of any Acquired Company is required
to approve this Agreement and the Merger.
Section 5.25 Opinion of Financial Advisor. FAL has provided SUG a copy
of the opinion of Xxxx Xxxxx Xxxx Xxxxxx, Incorporated, dated as of the date
hereof, with respect to the Merger Consideration to be received by the holders
of FAL Common Stock pursuant to the transactions contemplated by this Agreement.
27
Section 5.26 Disclaimer of Representations and Warranties. EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE V, FAL MAKES NO
OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND FAL HEREBY
DISCLAIMS ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES, WHETHER BY FAL, ANY
SUBSIDIARY OF FAL, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON, WITH RESPECT TO THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO SUG OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
REPRESENTATIVES, OR ANY OTHER PERSON, OF ANY DOCUMENTATION OR OTHER INFORMATION
BY FAL, ANY SUBSIDIARY OF FAL, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR REPRESENTATIVES, OR ANY OTHER PERSON, WITH RESPECT TO ANY
OF THE FOREGOING.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of FAL. FAL agrees to observe and perform the
following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date. With respect
-------------------------------------------------
to the Acquired Companies, except (i) as contemplated in this Agreement, (ii) as
required by law or regulation, or (iii) as otherwise expressly consented to in
writing by SUG which consent shall not be unreasonably withheld or delayed,
prior to the Closing, FAL will cause each Acquired Company to:
(1) Not make or permit any material change in the general nature
of its business;
(2) Maintain its Ordinary Course of Business in accordance with
prudent business judgment and consistent with past practice and
policy, and maintain its assets in good operating repair, order and
condition, reasonable wear and tear excepted, subject to retirements
in the Ordinary Course of Business;
(3) Preserve the Acquired Company as an ongoing business and use
reasonable efforts to maintain the goodwill associated with the
Acquired Company;
(4) Preserve all of the Acquired Companies' franchises, tariffs,
certificates of public convenience and necessity, licenses,
authorizations and other governmental rights and permits;
(5) Not enter into any material transaction or Material Contract;
(6) Not purchase, sell, lease, dispose of or otherwise transfer
or make any contract for the purchase, sale, lease, disposition or
transfer of, or subject to lien, any of the assets of the Acquired
Company other than in the Ordinary Course of Business;
28
(7) Not hire any new employee unless such employee is a bona fide
replacement for a presently-filled position with the Acquired Company
as of the date hereof;
(8) Not file any material applications, petitions, motions,
orders, briefs, settlement or agreements in any material Proceeding
before any Governmental Body which involves any Acquired Company, and
appeals related thereto;
(9) Not engage in or modify, except in the Ordinary Course of
Business, any material intercompany transactions involving any other
Acquired Company;
(10) Not voluntarily change in any material respect or terminate
any insurance policies disclosed on Section 5.16(a) of the FAL
Disclosure Schedule that presently are in effect unless equivalent
coverage is obtained;
(11) Except as disclosed or specifically contemplated in this
Agreement or in Section 6.1(a)(11) of the FAL Disclosure Schedule, and
with respect to budgeted expenditures known and specifically disclosed
in writing to SUG, subject to adjustments in the Ordinary Course of
Business and other deviations (which in the aggregate shall not exceed
5% on an annualized basis during the period from the date of this
Agreement until the Closing Date), not make any capital expenditure or
capital expenditure commitment;
(12) Not make any changes in financial policies or practices, or
strategic or operating policies or practices, in each case which
involve any Acquired Company;
(13) Comply in all material respects with all applicable material
Legal Requirements and permits, including without limitation those
relating to the filing of reports and the payment of Taxes due to be
paid prior to the Closing, other than those contested in good faith;
(14) Not adopt, amend (other than amendments that reduce the
amounts payable by SUG or any of its Subsidiaries or amendments
required by law) or assume an obligation to contribute to any FAL
Benefit Plan or collective bargaining agreement or enter into any
employment, consulting, severance or similar Contract with any Person
(including without limitation, contracts with management of any
Acquired Company or any of its Affiliates that might require payments
be made upon consummation of the transactions contemplated hereby) or
amend any such existing contracts;
(15) Except in the Ordinary Course of Business or as required by
the terms of any existing Contract, FAL Benefit Plan or collective
bargaining agreement, not grant any increase or change in total
compensation, benefits or pay any bonus to any employee, director or
consultant;
(16) Not grant or enter into or extend the term of any Contract
with respect to continued employment or service for any employee,
officer, director or consultant;
29
(17) Not make any loan or advance to any Person other than to any
officer, director, stockholder or employee in the Ordinary Course of
Business;
(18) Not terminate any existing gas purchase, exchange or
transportation contract necessary to supply firm gas at all city gate
delivery points or enter into any new contract for the supply,
transportation, storage or exchange of gas with respect to the
Acquired Companies' regulated gas distribution operations or renew or
extend or negotiate any existing contract providing for the same where
such contract is not terminable within sixty (60) days without
penalty;
(19) Not amend any of its Organizational Documents; and
(20) Subject to Section 6.1(l), not issue or assume any note,
debenture or other evidence of indebtedness which by its terms does
not mature within one year from the date of execution or issuance
thereof, unless otherwise redeemable or subject to prepayment at any
time at the option of the Acquired Company on not more than thirty
(30) days notice without penalty for such redemption or prepayment.
(b) Customer Notifications. At any time and from time to time
----------------------
reasonably requested by SUG prior to the Closing Date, each Acquired Company
will permit SUG at FAL's expense to insert preprinted single-page customer
education materials into billing documentation to be delivered to customers
affected by this Agreement; provided, however, that FAL has reviewed in advance
and consented to the content of such materials, which consent shall not be
unreasonably withheld or delayed. Other means of notifying customers may be
employed by either party, at the expense of the initiating party, but in no
event shall any notification be initiated without the prior consent of the other
party (which consent shall not be unreasonably withheld or delayed).
(c) Access to the Acquired Companies' Offices, Properties and Records;
------------------------------------------------------------------
Updating Information.
--------------------
(1) From and after the date hereof and until the Closing Date,
the Acquired Companies shall permit SUG and its Representatives to
have, on reasonable notice and at reasonable times, reasonable access
to such of the offices, properties and employees of the Acquired
Companies, and shall disclose, and make available to SUG and its
Representatives all books, papers and records to the extent that they
relate to the ownership, operation, obligations and liabilities of or
pertaining to the Acquired Companies, their businesses, assets and
liabilities. Without limiting the application of the Confidentiality
Agreement dated October 4, 1999 between FAL and SUG (the
"Confidentiality Agreement"), all documents or information furnished
by the Acquired Companies hereunder shall be subject to the
Confidentiality Agreement.
(2) FAL will notify SUG as promptly as practicable of any
significant change in the Ordinary Course of Business or operation of
any of the Acquired Companies and of any material complaints,
investigations or hearings (or communications indicating that the same
may be contemplated) by any Governmental Body, or the institution or
overt threat or settlement of any material Proceeding involving or
affecting any of the Acquired Companies or the transactions
30
contemplated by this Agreement, and shall use reasonable efforts to
keep SUG fully informed of such events and permit SUG's
Representatives access to all materials prepared in connection
therewith, consistent with any applicable Legal Requirement or
Contract.
(3) As promptly as practicable after SUG's request, FAL will
furnish such financial and operating data and other information
pertaining to the Acquired Companies and their businesses and assets
as SUG may reasonably request; provided, however, that nothing herein
will obligate any of the Acquired Companies to take actions that would
unreasonably disrupt its Ordinary Course of Business or violate the
terms of any Legal Requirement or Contract to which the Acquired
Company is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to
SUG's external auditors (or the Acquired Companies' external auditors
in the event a report by such auditors is requested by SUG) providing
accounting services with respect to issuing an auditor's report
required by or for SUG.
(d) Governmental Approvals; Third Party Consents. FAL will use its
--------------------------------------------
reasonable best efforts to obtain all necessary consents, approvals and waivers
from any Person required in connection with the transactions contemplated hereby
under any license, lease, permit or Contract applicable to the Acquired
Companies, including, without limitation, the approvals of those Governmental
Bodies and the consents of those third parties listed in Section 5.4 and Section
5.5 of the FAL Disclosure Schedule and as required by the HSR Act.
(e) Dividends. FAL shall not, nor shall it permit any of its
---------
Subsidiaries to: (i) declare or pay any dividends on or make other distributions
in respect of any of its or their capital stock other than (A) dividends by a
wholly-owned Subsidiary to FAL or another wholly-owned Subsidiary, or (B)
regular quarterly dividends on FAL Common Stock with usual record and payment
dates that do not exceed the current rate of $0.96 per fiscal year; (ii) split,
combine or reclassify any of its capital stock or the capital stock of any
Subsidiary or issue or authorize or propose the issuance of any other securities
in respect of, or in substitution for, shares of its capital stock or the
capital stock of any Subsidiary; or (iii) redeem, repurchase or otherwise
acquire any shares of its capital stock or the capital stock of any Subsidiary
other than redemptions, repurchases and other acquisitions of shares of capital
stock in connection with the administration of employee benefit and dividend
reinvestment and customer stock purchase plans as in effect on the date hereof
in the ordinary course of the operation of such plans consistent with past
practice.
(f) Issuance of Securities. FAL shall not, nor shall it permit any of
----------------------
its Subsidiaries to, issue, agree to issue, deliver, sell, award, pledge,
dispose of or otherwise encumber or authorize or propose the issuance, delivery,
sale, award, pledge, disposal or other encumbrance of, any shares of its or
their capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or convertible or exchangeable securities, other than as provided for in the FAL
Benefit Plans, and its dividend reinvestment plan in effect as of the date
hereof.
(g) Accounting. FAL shall not, nor shall it permit any of its
----------
Subsidiaries to, make any changes in their accounting methods, principles or
practices except as required by law, rule, regulation or GAAP.
31
(h) No Shopping.
-----------
(1) FAL shall not, and shall not authorize or permit any of its
(or any of its Subsidiaries') officers, directors, agents, financial
advisors, attorneys, accountants or other Representatives to, directly
or indirectly, solicit, initiate or encourage submission of proposals
or offers from any Person relating to, or that could reasonably be
expected to lead to, a Business Combination or participate in any
negotiations or discussions regarding, or furnish to any other Person
any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other Person to do or seek a Business Combination;
provided, however, that, prior to the FAL Stockholders' Approval, FAL
may, in response to an unsolicited written proposal from a third party
with respect to a Business Combination that FAL's Board of Directors
determines, in its good faith judgment, after consultation with and
the receipt of the advice of its financial advisor and outside counsel
with customary qualifications, is a Superior Proposal, (i) furnish
information to, and negotiate, explore or otherwise engage in
substantive discussions with such third party, only if FAL's Board of
Directors determines, in its good faith judgment after consultation
with its financial advisors and outside legal counsel, that it is
reasonably necessary in order to comply with its fiduciary duties
under applicable law and (ii) take and disclose to FAL's stockholders
a position with respect to another Business Combination proposal, or
amend or withdraw such position, pursuant to Rule 14d-9 and 14e-2
under the Exchange Act, or make such disclosure to FAL's stockholders
which in the good faith judgment of FAL's Board of Directors is
required by applicable law, based on the advice of its outside
counsel. Prior to furnishing any non-public information to, entering
into negotiations with or accepting a Superior Proposal from such
third party, FAL will (i) provide written notice to SUG to the effect
that it is furnishing information to or entering into discussions or
negotiations with such third party and (ii) receive from such third
party an executed confidentiality agreement containing substantially
the same terms and conditions as the Confidentiality Agreement. FAL
will immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or
negotiations with any parties conducted heretofore by FAL or any of
its representatives with respect to any Business Combination.
(2) Except as expressly permitted by this Section 6.1(h), neither
the FAL Board of Directors nor any committee thereof may, (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner
adverse to SUG, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, a
Business Combination or (iii) cause FAL to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement related to any Business Combination. Notwithstanding the
foregoing, prior to the time at which the FAL Stockholders' Approval
has been obtained, in response to an unsolicited Business Combination
proposal from a third party, if FAL's Board of Directors determines,
in its good faith judgment, after consultation with and the receipt of
the advice of its financial advisor and outside counsel with customary
qualifications, that such proposal is a Superior Proposal and that
failure to do any of
32
the actions set forth in clauses (i), (ii) or (iii) above would create
a reasonable possibility of a breach of the fiduciary duties of FAL's
Board of Directors under applicable law, FAL's Board of Directors may
(i) withdraw or modify its approval or recommendation of the Merger or
this Agreement, approve or recommend a Business Combination or cause
FAL to enter into a Business Combination and (ii) negotiate with a
third party with respect to such Business Combination proposal and,
subject to FAL having paid to SUG the fees described in Section 8.3(a)
hereof and having entered into a definitive agreement with respect to
such Business Combination proposal, terminate this Agreement;
provided, however, that prior to entering into a definitive agreement
with respect to a Business Combination proposal, FAL shall give SUG at
least five (5) day's notice thereof, and shall cause its
Representatives to, negotiate with SUG to make such adjustments in the
terms and conditions of this Agreement as would enable FAL to proceed
with the transactions contemplated herein on such adjusted terms;
provided, further, that if FAL and SUG are unable to reach an
agreement on such adjustments within five (5) days after such notice
from FAL, FAL may enter into such definitive agreement, subject to the
provisions of Article VIII.
(3) FAL shall notify SUG orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the
material terms and conditions of any such offer or proposal and the
identity of the Person making it), within one business day of the
receipt thereof, shall use all reasonable efforts to keep SUG informed
of the status and details of any such inquiry, offer or proposal and
shall give SUG two (2) days advance notice of the first delivery of
non-public information to such Person. If any such inquiry, offer or
proposal is in writing, FAL shall promptly deliver to SUG a copy of
such inquiry, offer or proposal.
(4) For purposes of this Agreement, (i) "Business Combination"
means (other than the transactions contemplated or permitted by this
Agreement) (A) a merger, consolidation or other business combination,
share exchange, sale of shares of capital stock, tender offer or
exchange offer or similar transaction involving FAL or any of its
Subsidiaries, (B) acquisition in any manner, directly or indirectly,
of a material interest in any capital stock of, or a material equity
interest in a substantial portion of the assets of, FAL or any of its
Subsidiaries, including any single or multi-step transaction or series
of related transactions that is structured to permit a third party to
acquire beneficial ownership of a majority or greater equity interest
in FAL or any of its Subsidiaries, or (C) the acquisition in any
manner, directly or indirectly, of any material portion of the
business or assets (other than immaterial or insubstantial assets or
inventory in the Ordinary Course of Business) of FAL or any of its
Subsidiaries and (ii) "Superior Proposal" means a proposed Business
Combination involving at least 50% of the shares of capital stock or a
material portion of the assets of FAL that FAL's Board of Directors
determines, after consulting with FAL's financial advisors and outside
counsel, is financially superior to the transactions contemplated
hereby and it appears that the party making the proposal is reasonably
likely to have the funds necessary to consummate the Business
Combination.
33
(i) Solicitation of Proxies; FAL Proxy Statement. Subject to Section
--------------------------------------------
6.1(h), FAL shall use its reasonable best efforts to solicit from its
stockholders proxies in favor of the Merger and shall take all other action
necessary or, in the reasonable opinion of SUG, advisable to secure the FAL
Stockholders' Approval.
(j) FAL Stockholders' Approval.
--------------------------
(1) Subject to the provisions of Section 6.1(h) and Section
6.1(j)(2), FAL shall, as soon as reasonably practicable after the date
hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its stockholders (including all
adjournments thereof, the "FAL Meeting") for the purpose of securing
the FAL Stockholders' Approval, (ii) distribute to its stockholders
the FAL Proxy Statement in accordance with applicable federal and
state law and with its Organizational Documents, (iii) subject to the
fiduciary duties of its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult with
SUG with respect to each of the foregoing matters.
(2) The FAL Meeting for the purpose of securing the FAL
Stockholders' Approval, including any adjournments thereof, will be
held on such date or dates as FAL and SUG mutually determine.
(k) Rule 145 Letters. FAL shall promptly identify to SUG all officers
----------------
and directors of any Acquired Company and any other persons who are "affiliates"
within the meaning of such term as used in Rule 145 under the Securities Act
("Rule 145 Affiliates"), and FAL shall use its reasonable efforts to provide to
SUG undertakings from such persons ("Rule 145 Letters") to the effect that no
disposition of shares of SUG Common Stock received in the Merger will be made by
such persons except within the limits and in accordance with the applicable
provisions of said Rule 145, as amended from time to time, or except in a
transaction which, in the opinion of legal counsel satisfactory to SUG, is
exempt from registration under the Securities Act.
(l) Financing Activities. FAL shall, and shall cause its Subsidiaries
--------------------
to, cooperate, to the fullest extent commercially reasonable and practicable,
with SUG's requests with respect to refinancing by the Acquired Companies of the
current maturities of any of their indebtedness, and any repurchase, redemption
or prepayment by any of the Acquired Companies of any of its indebtedness that
may be required prior to or because of the Merger or that SUG may request that
the Acquired Companies effect prior to the Merger, so as to permit SUG to have
the maximum opportunity to refinance, on or promptly after the Closing Date
without any penalty except as may be due pursuant to the terms of the Acquired
Companies' indebtedness as in effect on the date of this Agreement, any of the
Acquired Companies' indebtedness outstanding on the Closing Date; provided,
however, that no Acquired Company shall be required to consummate prior to the
Effective Time any such refinancing, repurchase, redemption or repayment
requested by SUG.
(m) FAL Disclosure Schedule. On the date hereof, FAL has delivered to
-----------------------
SUG the FAL Disclosure Schedule, accompanied by a certificate signed by an
executive officer of FAL stating the FAL Disclosure Schedule is being delivered
pursuant to this Section 6.1(m). The FAL Disclosure Schedule constitutes an
integral part of this Agreement and modifies the representations, warranties,
covenants or agreements of FAL contained herein to the extent that such
representations, warranties, covenants or agreements expressly refer to the FAL
Disclosure Schedule.
34
(n) FAL Bondholders' Consent. FAL shall use its reasonable best
------------------------
efforts to obtain consents from all holders of each series of First Mortgage
Bonds issued and outstanding under the Indenture of First Mortgage, dated as of
December 1, 1952, between FAL and State Street Bank and Trust Company, successor
in interest to the First National Bank of Boston, successor by merger to Old
Colony Trust Company, as Trustee, as amended or supplemented from time to time,
to such amendments to such Indenture as requested by SUG.
Section 6.2 Covenants of SUG. SUG agrees to observe and perform the
following covenants and agreements:
(a) Governmental Approvals; Third Party Consents. SUG will use its
--------------------------------------------
reasonable best efforts at SUG's sole expense to obtain all necessary consents,
approvals and waivers from any Person required in connection with the
transactions contemplated hereby under any license, lease, permit, Contract or
agreement applicable to SUG, including, without limitation, the approvals of
those Governmental Bodies and the consents of those third parties listed in
Section 4.5 of the SUG Disclosure Schedule and as required by the HSR Act.
(b) Employees; Benefits. With respect to the employees (excluding
-------------------
unionized employees) listed in Section 5.17(a) of the FAL Disclosure Schedule
(or their successors employed pursuant to Section 6.1(a)(7) above) (the
"Employees"), except as otherwise specified herein, SUG agrees as follows:
(1) During the 12 months immediately following the Closing Date,
to make available to the Employees who continue their service with the
Surviving Corporation or any Subsidiary of the Surviving Corporation
employee benefit plans or arrangements that are no less favorable, in
the aggregate, than the FAL Benefit Plans listed in Section 5.18(j) of
the FAL Disclosure Schedule offered to the Employees immediately prior
to the date of this Agreement.
(2) For purposes of eligibility, vesting and benefit accrual
under all benefit plans provided to the Employees after the Closing
Date, SUG will recognize the tenure of employment, as recognized by
the Acquired Companies as of the Closing Date.
(3) All vacation time earned by the Employees prior to the
Closing Date must be taken by the end of the calendar year in which
the Closing Date occurs, except where the Employee is requested by FAL
or SUG to forego their vacation for business-related reasons. For
purposes of awarding vacation time at the beginning of each calendar
year following the Closing Date, SUG will recognize the tenure of
employment, as recognized by the Acquired Company as of the Closing
Date.
(c) Blue Sky Permits. SUG shall use its reasonable best efforts to
----------------
obtain, prior to the effective date of the Registration Statement, all necessary
state securities laws or "blue sky" permits and approvals required to carry out
the transactions contemplated by the Agreement, and will pay all expenses
incident thereto.
(d) Listing Application. Prior to the Closing, SUG shall cause the
-------------------
shares of SUG Common Stock constituting the Stock Consideration to be listed on
the NYSE, subject to official notice of issuance thereof.
35
(e) Collective Bargaining Agreements. At the Effective Time, SUG
--------------------------------
agrees to assume all collective bargaining agreements covering employees of any
Acquired Company, and shall discharge when due any and all liabilities of any
Acquired Company under such collective bargaining agreements relating to periods
after the Effective Time.
(f) SUG Disclosure Schedule. On the date hereof, SUG has delivered to
-----------------------
FAL the SUG Disclosure Schedule, accompanied by a certificate signed by an
executive officer of SUG stating that the SUG Disclosure Schedule is being
delivered pursuant to this Section 6.2(f). The SUG Disclosure Schedule
constitutes an integral part of this Agreement and modifies the representations,
warranties, covenants or agreements of SUG contained herein to the extent that
such representations, warranties, covenants or agreements expressly refer to the
SUG Disclosure Schedule.
(g) Conduct of the Business Prior to the Closing Date. Except (i) as
-------------------------------------------------
contemplated in this Agreement, (ii) in connection with the transactions
contemplated by the PEI Merger Agreement, (iii) as required by law or regulation
or (iv) as otherwise expressly consented to in writing by FAL which consent will
not be unreasonably withheld or delayed, prior to the Closing, SUG will:
(1) Not make or permit any material change in the general nature
of its business;
(2) Maintain its present operations in the Ordinary Course of
Business in accordance with prudent business judgment and consistent
with past practice and policy, and maintain its assets in good repair,
order and condition, reasonable wear and tear excepted, subject to
retirements in the Ordinary Course of Business;
(3) Preserve SUG as an ongoing business and use reasonable
efforts to maintain the goodwill associated with SUG; and
(4) Preserve all of SUG's franchises, tariffs, certificates of
public convenience and necessity, licenses, authorizations and other
governmental rights and permits.
(h) Access to SUG's Offices, Properties and Records; Updating
---------------------------------------------------------
Information.
-----------
(1) From and after the date hereof and until the Closing Date,
SUG and its Subsidiaries shall permit FAL and its Representatives to
have, on reasonable notice and at reasonable times, reasonable access
to such of the offices, properties and employees of SUG and its
Subsidiaries, and shall disclose, and make available to FAL and its
Representatives all books, papers and records to the extent that they
relate to the ownership, operation, obligations and liabilities of or
pertaining to SUG, its Subsidiaries and their respective businesses
and assets. Without limiting the application of the Confidentiality
Agreement, all documents or information furnished by SUG and its
Subsidiaries hereunder shall be subject to the Confidentiality
Agreement.
(2) SUG will notify FAL as promptly as practicable of any
significant change in the Ordinary Course of Business or operation of
SUG or any of its
36
Subsidiaries and of any material complaints, investigations or
hearings (or communications indicating that the same may be
contemplated) by any Governmental Body, or the institution or overt
threat or settlement of any material Proceeding involving or affecting
SUG or any of its Subsidiaries or the transactions contemplated by
this Agreement, and shall use reasonable efforts to keep FAL fully
informed of such events and permit FAL's Representatives access to all
materials prepared in connection therewith consistent with any
applicable Legal Requirement or Contract.
Section 6.3 Additional Agreements.
(a) The Registration Statement and the FAL Proxy Statement. As soon
------------------------------------------------------
as practicable after the date hereof, FAL and SUG shall take such reasonable
steps as are necessary for the prompt preparation and filing with the SEC of (i)
the FAL Proxy Statement by FAL and (ii) the Registration Statement, which will
include certain information contained in the FAL Proxy Statement, by SUG. The
foregoing shall include without limitation: (i) obtaining and furnishing the
information required to be included therein, (ii) after consultation between FAL
and SUG, responding promptly to any comments made by the SEC with respect to the
FAL Proxy Statement and the Registration Statement and any amendments and
preliminary version thereof and (iii) causing the Registration Statement to
become effective, and the FAL Proxy Statement to be mailed to FAL's stockholders
at the earliest practicable date. FAL agrees, as to information with respect to
FAL, its officers, directors, stockholders and Subsidiaries contained in the
Registration Statement and the FAL Proxy Statement, and SUG agrees, as to
information with respect to SUG, its officers, directors, stockholders and
Subsidiaries contained in the Registration Statement and the FAL Proxy
Statement, that such information, in the case of the FAL Proxy Statement at the
time of the mailing of the FAL Proxy Statement and (as then amended or
supplemented) at the time of the FAL Meeting, or in the case of the Registration
Statement at the time of the mailing of the FAL Proxy Statement (as then amended
or supplemented), at the time of the FAL Meeting and at the effective time of
the Registration Statement, will not contain any untrue statement of 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. No representation, warranty, covenant or agreement is made by or on
behalf of FAL with respect to information supplied by any other Person for
inclusion in the FAL Proxy Statement or the Registration Statement. No
representation, warranty, covenant or agreement is made by or on behalf of SUG
with respect to information supplied by any other Person for inclusion in the
FAL Proxy Statement or the Registration Statement. No filing of, or amendment
or supplement to, the FAL Proxy Statement or the Registration Statement shall be
made by any party hereto without providing the other party with the opportunity
to review and comment thereon (except for any ongoing SEC reporting required of
SUG or FAL that will be incorporated by reference). If at any time prior to the
Effective Time any information relating to any party hereto or any of their
respective officers, directors, stockholders or Subsidiaries, should be
discovered by any party hereto which should be set forth in an amendment or
supplement to the FAL Proxy tatement or the Registration Statement so that the
FAL Proxy Statement or the Registration Statement would not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and an appropriate amendment or supplement
describing such information shall be promptly prepared, filed with the SEC and,
to the extent required by law, disseminated to the stockholders of FAL, as may
be necessary.
37
(b) Further Assurances. Each of SUG and FAL agrees, and FAL agrees to
------------------
cause its Subsidiaries, to take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the purpose
of this Agreement and to vest the Surviving Corporation with full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of the Acquired Companies, the officers and directors of the
Surviving Corporation will be fully authorized to take, and will take, all such
lawful and necessary action.
(c) Financial Statements to be Provided. Upon SUG's request, FAL
-----------------------------------
shall (i) provide to SUG audited and unaudited financial statements required to
be included in the proxy statements and the registration statement contemplated
by the PEI Merger Agreement and (ii) cause its independent accountants to
deliver to SUG and PEI the required consents in connection therewith.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to SUG's Obligation to Effect the Merger. The
obligation of SUG to effect the transactions contemplated by this Agreement
shall be subject to fulfillment at or prior to the Closing of the following
conditions:
(a) Representations and Warranties True as of the Closing Date. FAL's
----------------------------------------------------------
representations and warranties in this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date;
provided, however, that any such representation or warranty that is qualified by
any standard of materiality (including, but not limited to, FAL Material Adverse
Effect) shall have then been, and shall then be, accurate in all respects.
(b) Compliance with Agreements. The covenants, agreements and
--------------------------
conditions required by this Agreement to be performed and complied with by any
of the Acquired Companies shall have been performed and complied with in all
material respects prior to or at the Closing Date.
(c) Certificate. FAL shall execute and deliver to SUG a certificate
-----------
of an authorized officer of FAL, dated the Closing Date, stating that the
conditions specified in Sections 7.1(a) and 7.1(b) of this Agreement applicable
to the Acquired Companies have been satisfied.
(d) Governmental Approvals. All approvals, consents, opinions or
----------------------
rulings of all Governmental Bodies required in order to consummate the
transactions contemplated hereby shall have been obtained by Final Order in such
form as is, and with no conditions that are, individually or in the aggregate,
reasonably likely to have a FAL Material Adverse Effect or a material adverse
effect on the business, operations, properties, financial condition or results
of operations of the Surviving Corporation, or which would otherwise, in the
reasonable determination of SUG, be unduly burdensome to the Surviving
Corporation or any of its Affiliates. In addition, and without limitation of
the condition set forth in the immediately preceding sentence, the Massachusetts
Department of Telecommunications and Energy shall have resolved, by means of a
Final Order, the manner in which the Surviving Corporation as a whole and its
operating division in Massachusetts will be regulated under Chapter 164 of the
Massachusetts General Laws, and such resolution shall
38
be acceptable to SUG in its sole discretion. The applicable waiting period under
the HSR Act with respect to the transactions contemplated hereby shall have
expired or have been terminated.
(e) Third Party Consents. Each of the consents required under Section
--------------------
5.4 of this Agreement shall have been obtained to the reasonable satisfaction of
SUG, other than any such consents which, if not obtained, are not, individually
or in the aggregate, reasonably likely to result in a FAL Material Adverse
Effect after the Closing. In addition, all consents and approvals required,
under the terms of any note, bond or indenture listed in Section 5.4 of the FAL
Disclosure Schedule to which any of the Acquired Companies is a party, shall
have been obtained.
(f) Injunctions. On the Closing Date, there shall be no Orders which
-----------
operate to restrain, enjoin or otherwise prevent the consummation of this
Agreement or the Merger.
(g) Resignations. Each director of each Acquired Company shall resign
------------
any position as a director of an Acquired Company effective as of the Closing
Date in accordance with such Acquired Company's Organizational Documents and
applicable provisions of the MBCL; provided, however, that such resignations
shall not cause the termination of any such Person's employment as an employee
of an Acquired Company or reduce any such employee's then current level of
compensation.
(h) Opinion of Tax Counsel. On the Closing Date, SUG shall have
----------------------
received from Xxxxxx Xxxxxxx & Xxxx LLP, counsel to SUG, an opinion to the
effect that the Merger will constitute a "reorganization" within the meaning of
IRC Section 368(a)(1)(A), and that no gain or loss will be recognized by SUG or
FAL with respect to the Merger.
(i) FAL Stockholders' Approval. The FAL Stockholders' Approval shall
--------------------------
have been obtained.
(j) Appraisal Rights. Demand for payment for shares and appraisal
----------------
thereof by stockholders of FAL in accordance with the MBCL with respect to the
Merger shall not equal or exceed 5 percent of the shares of FAL Common Stock
entitled to vote on the Merger.
(k) Rule 145 Letters. Each Rule 145 Affiliate shall have executed and
----------------
delivered to SUG a Rule 145 Letter, in form and substance reasonably
satisfactory to SUG and its counsel.
(l) Registration Statement. The Registration Statement shall have
----------------------
become effective, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
(m) Listing of SUG Common Stock. The shares of SUG Common Stock
---------------------------
constituting the Stock Consideration shall have been authorized for listing,
upon official notice of issuance, on the NYSE.
(n) FAL Bondholders' Consent. All holders of each series of First
------------------------
Mortgage Bonds issued and outstanding under the Indenture of First Mortgage,
dated as of December 1, 1952, between FAL and State Street Bank and Trust
Company, successor in interest to the First National Bank of Boston, successor
by merger to Old Colony Trust Company, as Trustee, as amended or supplemented
from time to time, shall have consented to such amendments to such Indenture as
requested by SUG.
39
Section 7.2 Conditions to FAL's Obligations to Effect the Merger. The
obligation of FAL to effect the transactions contemplated by this Agreement
shall be subject to fulfillment at or prior to the Closing of the following
conditions:
(a) Representations and Warranties True as of the Closing Date. SUG's
----------------------------------------------------------
representations and warranties in this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date;
provided, however, that any such representation or warranty that is qualified by
any standard of materiality (including, but not limited to, SUG Material Adverse
Effect) shall have then been, and shall then be, accurate in all respects.
(b) Compliance with Agreements. The covenants, agreements and
--------------------------
conditions required by this Agreement to be performed and complied with by SUG
shall have been performed and complied with in all material respects prior to or
at the Closing Date.
(c) Certificate. SUG shall execute and deliver to FAL a certificate
-----------
of an authorized officer of SUG, dated the Closing Date, stating that the
conditions specified in Sections 7.2(a) and 7.2(b) of this Agreement applicable
to SUG have been satisfied.
(d) Governmental Approvals. All approvals, consents, opinions or
----------------------
rulings of all Governmental Bodies required in order to consummate the
transactions contemplated hereby shall have been obtained by Final Order in such
form as is, and with no conditions that are, individually or in the aggregate,
reasonably likely to have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Surviving
Corporation. The applicable waiting period under the HSR Act with respect to the
transactions contemplated hereby shall have expired or have been terminated.
(e) Injunctions. On the Closing Date, there shall be no Orders which
-----------
operate to restrain, enjoin or otherwise prevent the consummation of this
Agreement or the Merger.
(f) Opinion of Counsel. On the Closing Date, FAL shall have received
------------------
from Rich, May, Xxxxxxxx & Xxxxxxxx, P.C., counsel to FAL, an opinion to the
effect that the Merger will be treated for federal income tax purposes as a
"reorganization" within the meaning of IRC Section 368(a), and that no gain or
loss will be recognized for federal income tax purposes by the stockholders of
FAL who receive SUG Common Stock in the Merger upon their receipt of the Merger
Consideration, except that any realized gain will be recognized to the extent of
the amount of cash received (including cash in lieu of the fractional shares).
(g) FAL Stockholders' Approval. The FAL Stockholders' Approval shall
--------------------------
have been obtained.
(h) Registration Statement. The Registration Statement shall have
----------------------
become effective, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
(i) Listing of SUG Common Stock. The shares of SUG Common Stock
---------------------------
constituting the Stock Consideration shall have been authorized for listing,
upon official notice of issuance, on the NYSE.
40
ARTICLE VIII
TERMINATION
Section 8.1 Termination Rights. This Agreement may be terminated in its
entirety at any time prior to the Closing:
(a) By the mutual written consent of SUG and FAL;
(b) By FAL, on the one hand, or SUG, on the other hand, in writing if
there shall be in effect a non-appealable order of a court of competent
jurisdiction prohibiting the consummation of the Merger in accordance with this
Agreement;
(c) By FAL, by written notice to SUG, if there is a breach of any
representation, warranty, covenant or agreement of SUG, which breach cannot be
cured and would cause the conditions set forth in Section 7.2(a) or (b) to be
incapable of being satisfied;
(d) By SUG, by written notice to FAL, if there is a breach of any
representation, warranty, covenant or agreement of FAL, which breach cannot be
cured and would cause the conditions set forth in Section 7.1(a) or (b) to be
incapable of being satisfied;
(e) By FAL, by written notice to SUG in accordance with Section
6.1(h)(2); provided, however, that the termination described in this clause (e)
shall not be effective unless and until FAL shall have paid SUG the fee
described in Section 8.3(a) and FAL has substantially contemporaneously entered
into a definitive agreement with respect to the proposed Business Combination;
(f) By FAL, by written notice to SUG, if the FAL Stockholders'
Approval is not obtained at the FAL Meeting or by SUG, by written notice to FAL,
if the FAL Stockholders' Approval is not obtained at the FAL Meeting; provided,
however, that there has not been a material misrepresentation or a material
breach of covenant, warranty or agreement contained herein on the part of the
party asserting its right to terminate pursuant to this Section 8.1(f);
(g) By SUG, by written notice to FAL, if the Board of Directors of FAL
or any committee thereof (i) withdraws or modifies, or proposes publicly to
withdraw or modify, in a manner adverse to SUG, the approval or recommendation
by the Board of Directors or such committee of the Merger or this Agreement,
(ii) approves or recommends, or proposes publicly to approve or recommend, a
Business Combination, (iii) causes FAL to enter into a definitive agreement
related to any Business Combination or (iv) resolves to take any of the actions
specified in clause (i), (ii) and (iii) above;
(h) By SUG, by written notice to FAL, if a third party, including a
group (as defined under the Exchange Act) acquires securities representing
greater than 50% of the voting power of the outstanding voting securities of
FAL; or
(i) By FAL, by written notice to SUG, if the Average Trading Price of
the SUG Common Stock as of the Closing is lower than $15.00.
(j) By either party in writing at any time after 5:00 p.m., Eastern
Time, on October 15, 2000 (the "Initial Termination Date"), if the Closing has
not occurred prior thereto; provided, however, that the right to terminate this
Agreement under this Section 8.1(j) will not be
41
available to any party that is in material breach of its representations,
warranties, covenants or agreements contained herein; and provided, further,
that if on the Initial Termination Date (i) the conditions to closing set forth
in Sections 7.1(d) and 7.2(d) shall not have been fulfilled or (ii) any approval
or authorization of any Governmental Body required in connection with the
consummation of the Merger shall have not been obtained and such approval or
authorizations shall not have become a Final Order, but all other conditions to
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Initial Termination Date will be extended to February 28, 2001.
Section 8.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall be of no further force and effect
and there shall be no further liability hereunder on the part of any party or
its Affiliates, directors, officers, stockholders, agents or other
Representatives; provided, however, that (i) any fee payable under Section
8.3(a) is paid to SUG and (ii) no such termination shall relieve any party of
liability for any claims, damages or losses suffered by the other party as a
result of the negligent or willful failure of a party to perform any obligations
required to be performed by it hereunder on or prior to the date of termination.
Notwithstanding anything to the contrary contained herein, the provisions of
Section 8.2, Sections 10.1 through 10.6 and Sections 10.8 through 10.11 of this
Agreement shall survive any termination of this Agreement.
Section 8.3 Termination Fee; Expenses.
(a) Termination Fee. If this Agreement is terminated pursuant to
---------------
Section 8.1(e), 8.1(g) or 8.1(h), then FAL shall pay to SUG promptly (but not
later than five business days after notice is received from FAL) an amount equal
to $1.5 million in cash.
(b) Expenses. The parties agree that the agreements contained in this
--------
Section 8.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
anything to the contrary contained in this Section 8.3, if FAL fails to pay
promptly to SUG the fee due under Section 8.3(a), in addition to any amounts
paid or payable pursuant to Section 8.3(a), FAL shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee calculated using an annual
percentage rate of interest equal to the prime rate published in the Wall Street
Journal on the date (or preceding business day if such date is not a business
day) such fee was required to be paid, compounded on a daily basis using a 360-
day year.
ARTICLE IX
INDEMNIFICATION; REMEDIES
Section 9.1 Directors' and Officers' Indemnification.
(a) Indemnification and Insurance. For a period of six years after
-----------------------------
the Effective Time, the Surviving Corporation will indemnify and hold harmless
the present and former officers and directors of FAL and its Subsidiaries (the
"Indemnified Parties") in respect of acts or omissions occurring prior to the
Effective Time to the extent provided under FAL's articles of organization and
bylaws in effect on the date hereof; provided, however, that if any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of such claims shall continue until the final
disposition of any and all such claims. For six years after the Effective Time,
the Surviving Corporation will use its reasonable best efforts to provide
officers' and directors' liability insurance in respect of acts or omissions
occurring prior to the Effective Time covering each
42
such person currently covered by FAL's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof; provided, however, that
in satisfying its obligation under this Section, if the annual premiums of such
insurance coverage exceed 200% of the previous year's premiums, the Surviving
Corporation will be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the Board of Directors of the Surviving
Corporation for a cost not exceeding such amount.
(b) Successors. In the event the Surviving Corporation or any of its
----------
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any Person, then and in either such case, proper provisions must be
made so that the successors and assigns of the Surviving Corporation will assume
the obligations set forth in this Section 9.1.
(c) Survival of Indemnification. To the fullest extent permitted by
---------------------------
law, from and after the Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of any
Acquired Company with respect to their activities as such prior to the Effective
Time, as provided in their respective Organizational Documents in effect on the
date hereof, or otherwise in effect on the date hereof, will survive the Merger
and will continue in full force and effect except for amendments to make changes
permitted by law that would enhance the rights of past or present officers and
directors to indemnification or advancement of expenses in respect of acts or
omissions occurring prior to the Effective Time for a period of not less than
six years from the Effective Time (or, in the case of matters occurring prior to
the Effective Time which have not been resolved prior to the sixth anniversary
of the Effective Time, until such matters are finally resolved).
Section 9.2 Representations and Warranties. Each and every
representation and warranty of either party shall expire at, and be terminated
and extinguished with, the Effective Time.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Expenses. Each of the parties will pay all costs and
expenses of its performance of and compliance with this Agreement, except (i) as
provided in Section 8.3 and as expressly provided otherwise herein, (ii) FAL
shall pay all fees and expenses of counsel for FAL, (iii) SUG will pay all real
estate transfer taxes and real estate recording fees, if any, including expenses
of counsel associated with real estate title, transfer and recording issues in
connection with the Merger, and all filing and application fees paid to
Governmental Bodies in connection with the Merger and (iv) SUG and FAL will each
pay half of the combined costs of printing and mailing to the FAL stockholders
the prospectus that is a part of the Registration Statement and the FAL Proxy
Statement.
Section 10.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given upon
receipt if either (a) personally delivered, (b) sent by prepaid first class
mail, and registered or certified and a return receipt requested or (c) by
facsimile telecopier with completed transmission acknowledged:
43
if to SUG, to:
Southern Union Company
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
President and Chief Operating Officer
Telecopier: (000) 000-0000
with a copy to:
Pennsylvania Enterprises, Inc.
Xxx XXX Xxxxxx
Xxxxxx-Xxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
President and Chief Executive Officer
Telecopier: (000) 000-0000
and
Xxxxxx Xxxxxxx & Xxxx LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
if to FAL, to:
Fall River Gas Company
000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
President and Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to:
Rich, May, Xxxxxxxx & Xxxxxxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Telecopier: (000) 000-0000
or at such other address or number as shall be given in writing by a party to
the other parties.
Section 10.3 Assignment. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties hereto. Any
assignment in violation of the terms of this Agreement shall be null and void ab
initio.
44
Section 10.4 Successor Bound. Subject to the provisions of Section 10.3,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
Section 10.5 Governing Law; Forum; Consent to Jurisdiction. This
Agreement shall be construed in accordance with and governed by the laws of the
State of New York except to the extent that the terms and consummation of the
Merger are subject to the DGCL or the MBCL in which case such laws shall govern.
Each party to this Agreement hereby irrevocably and unconditionally (i) consents
to submit to the exclusive jurisdiction of the federal courts of the Southern
District of New York in the county of New York and the borough of Manhattan and
the jurisdiction of the federal courts of the District of Massachusetts in the
county of Suffolk and the city of Boston for any proceeding arising in
connection with this Agreement (and each such party agrees not to commence any
such proceeding, except in such courts), (ii) to the extent such party is not a
resident of the State of New York or the Commonwealth of Massachusetts, agrees
to appoint agents in the State of New York and the Commonwealth of Massachusetts
as such party's agents for acceptance of legal process in any such proceeding
against such party with the same legal force and validity as if served upon such
party personally within the State of New York or the Commonwealth of
Massachusetts, respectively, and to notify promptly each other party hereto of
the name and address of each such agent, (iii) waives any objection to the
laying of venue of any such proceeding in the federal courts of the Southern
District of New York in the county of New York and the borough of Manhattan or
the federal courts of the District of Massachusetts in the county of Suffolk and
the city of Boston, and (iv) waives, and agrees not to plead or to make, any
claim that any such proceeding brought in any federal court of the Southern
District of New York or the District of Massachusetts has been brought in an
improper or otherwise inconvenient forum.
Section 10.6 Waiver of Trial by Jury. EACH PARTY TO THIS AGREEMENT
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH ANY SUCH PARTY
MAY BE A PARTY ARISING OUT OF OR IN ANY WAY PERTAINING TO (I) THIS AGREEMENT,
(II) THE MERGER, (III) THE CONFIDENTIALITY AGREEMENT OR (IV) ANY RELATED
DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES WHO ARE PARTIES TO THIS
AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH
PARTY HERETO, AND EACH SUCH PARTY HEREBY REPRESENTS AND WARRANTS THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON TO INDUCE THIS
WAIVER OR TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH
PARTY TO THIS AGREEMENT FURTHER REPRESENTS AND WARRANTS THAT EACH SUCH PARTY HAS
BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF EACH SUCH PARTY'S OWN FREE
WILL, AND THAT EACH SUCH PARTY HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL.
Section 10.7 Cooperation; Further Documents.
(a) Each of the parties hereto agrees to use its reasonable best
efforts to take or cause to be taken all action, and to do or cause to be done
all things necessary, proper or advisable under applicable laws, regulations or
otherwise, to consummate and to make effective the
45
transactions contemplated by this Agreement, including, without limitation, the
timely performance of all actions and things contemplated by this Agreement to
be taken or done by each of the parties hereto.
(b) Each party shall cooperate with the other party in such other
party's discharge of the obligations hereunder, which shall include making
reasonably available to the other party such of its personnel as have relevant
information, with respect thereto.
Section 10.8 Construction of Agreement. The terms and provisions of this
Agreement represent the results of negotiations between the parties hereto and
their Representatives, each of which has been represented by counsel of its own
choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement shall be interpreted and construed in accordance with their usual and
customary meanings, and FAL and SUG hereby waive the application in connection
with the interpretation and construction of this Agreement of any rule of law to
the effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement.
Section 10.9 Publicity; Organizational and Operational Announcements. No
party hereto shall issue, make or cause the publication of any press release or
other announcement with respect to this Agreement or the transactions
contemplated hereby, or otherwise make any disclosures relating thereto, without
the consent of the other party, such consent not to be unreasonably withheld or
delayed; provided, however, that such consent shall not be required where such
release or announcement is required by applicable law or the rules or
regulations of a securities exchange, in which event the party so required to
issue such release or announcement shall endeavor, wherever possible, to furnish
an advance copy of the proposed release to the other party.
Section 10.10 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
Section 10.11 Parties in Interest. This Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
Person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies hereunder, except that the parties hereto agree
and acknowledge that the agreements and covenants contained in Section 9.1 are
intended for the direct and irrevocable benefit of the Indemnified Parties
described therein and their respective heirs or legal representatives (each such
director or Indemnified Party, a "Third Party Beneficiary"), and that each such
Third Party Beneficiary, although not a party to this Agreement, shall be and is
a direct and irrevocable third party beneficiary of such agreements and
covenants and shall have the right to enforce such agreements and covenants
against the Surviving Corporation in all respects fully and to the same extent
as if such Third Party Beneficiary were a party hereto.
Section 10.12 Specific Performance. The parties hereto agree that
irreparable damage would occur to a party in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that any
party shall be entitled to an injunction or injunctions to prevent breaches of
this agreement by any
46
other party and to enforce specifically, to the fullest extent available, the
terms and provisions hereof, including each party's obligation to close, in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which any party is entitled at law or
in equity.
Section 10.13 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 10.14 Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 10.15 Entire Agreement. This Agreement, the exhibits, annexes and
schedules hereto and the documents specifically referred to herein and the
Confidentiality Agreement constitute the entire agreement, understanding,
representations and warranties of the parties hereto with respect to the subject
matter hereof.
Section 10.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
47
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
SOUTHERN UNION COMPANY
By:
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Name: Xxxxx X. Xxxxxx
Title: President and Chief Operating Officer
FALL RIVER GAS COMPANY
By:
----------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
By:
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and Treasurer
[SEAL]
48
