EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
YANKEE ENERGY SYSTEM, INC.
AND
NORTHEAST UTILITIES
dated as of June 14, 1999
AGREEMENT AND PLAN OF MERGER, dated as of June 14, 1999 (this "Agreement"),
between Yankee Energy System, Inc., a Connecticut corporation (the "Company")
and Northeast Utilities, a Massachusetts business trust ("Parent").
WHEREAS, the Company and Parent have determined to engage in a business
combination transaction on the terms stated herein;
WHEREAS, the Board of Directors of the Company and the Board of Trustees of
Parent have approved and deemed it advisable and in the best interests of their
respective shareholders to consummate the transactions contemplated herein under
which the businesses of the Company and Parent would be combined by means of the
merger of the Company with and into Merger Sub, a Connecticut corporation to be
formed by Parent prior to Closing (as defined below) as a wholly-owned
subsidiary of Parent ("Merger Sub"); and
WHEREAS, it is intended that the Merger (as defined below) shall constitute
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code");
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
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Section 1.01 THE MERGER.
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Upon the terms and subject to the conditions of this Agreement:
At the Effective Time (as defined in Section 1.03), the Company shall be
merged with and into Merger Sub (the "Merger") in accordance with the laws of
the State of Connecticut. Merger Sub shall be the surviving corporation in the
Merger and shall continue its corporate existence under the laws of the State of
Connecticut. The effects and the consequences of the Merger shall be as set
forth in Section 1.02. Throughout this Agreement, the term "Merger Sub" shall
refer to Merger Sub prior to the Merger and the term "Surviving Corporation"
shall refer to Merger Sub in its capacity as the surviving corporation in the
Merger.
Section 1.02 EFFECTS OF THE MERGER. At the Effective Time, (i) the
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certificate of incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such certificate of
incorporation, except that the name of the Surviving Corporation shall be
"Yankee Energy System, Inc.," and (ii) the by-laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation until thereafter amended as provided by law,
the certificate of incorporation of the Surviving Corporation and such by-laws.
Subject to the foregoing, the additional effects of the Merger shall be as
provided in Section 33-820 of the Connecticut Business Corporation Act (the
"CBCA").
Section 1.03 EFFECTIVE TIME OF THE MERGER. On the Closing Date (as defined
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in Section 3.01), with respect to the Merger, a certificate of merger complying
with Section 33-819 of the CBCA (the "Certificate of Merger") shall be delivered
to the Secretary of the State of Connecticut for filing. The Merger shall become
effective upon the filing of the Certificate of Merger, or at such later date
and time as may be set forth in the Certificate of Merger (the "Effective
Time").
Section 1.04 DIRECTORS. The directors of Merger Sub immediately prior to
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the Effective Time and those persons listed in Section 1.04(a) of the Parent
Disclosure Schedule (as defined in Section 7.06(i)) shall be the directors of
the Surviving Corporation and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the certificate of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the CBCA. In addition, in accordance
with the Declaration of Trust of Parent (the "Declaration of Trust"), the Board
of Trustees of Parent shall take such action as may be necessary to cause, at
the next regularly scheduled annual meeting of the shareholders of Parent, an
increase of at least two in the number of trustees authorized to serve as
trustees on the Board of Trustees of Parent and shall, as soon as practicable
after the Effective Time, elect as trustees, two directors of the Company
designated by the Parent and reasonably acceptable to the Company.
Section 1.05 OFFICERS. The officers of the Company immediately prior to
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the Effective Time shall be the initial officers of, and shall hold the same
positions with, the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the certificate of incorporation and by-
laws of the Surviving Corporation, or as otherwise provided by the CBCA.
Section 1.06 MERGER SUB. Parent shall cause Merger Sub to be formed prior
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to the Closing Date as a wholly-owned subsidiary of Parent and to fulfill the
obligations of Merger Sub provided herein.
ARTICLE II
TREATMENT OF SHARES
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Section 2.01 EFFECT OF THE MERGER ON CAPITAL STOCK. At the Effective
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Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company or Merger Sub:
(a) Shares of Merger Sub Stock. Each share of common stock, no par
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value, of Merger Sub (the "Merger Sub Common Stock") that is issued and
outstanding immediately prior to the Effective Time shall remain outstanding
unchanged by reason of
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the Merger as one fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation.
(b) Cancellation of Certain Company Common Stock. Each share of
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common stock, par value $5.00 per share, of the Company (the "Company Common
Stock") that is owned by the Company as treasury stock and all shares of Company
Common Stock that are owned by Parent shall be canceled and shall cease to
exist, and no stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Subject to the provisions of
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this Section 2.01, each share of Company Common Stock, other than Dissenting
Shares (as defined in Section 2.01(n)) and shares canceled pursuant to Section
2.01(b), issued and outstanding immediately prior to the Effective Time (other
than shares held as treasury shares by the Company) shall by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive (i) $45.00 in cash (as such amount may be adjusted in
accordance with Section 2.01(o) hereof, the "Cash Consideration") or (ii) a
number of validly issued, fully paid and nonassessable shares of Parent Common
Stock equal to the Exchange Ratio (as defined below) (the "Stock Consideration")
or (iii) the right to receive a combination of cash and shares of Parent Common
Stock determined in accordance with this Section (the "Mixed Consideration").
The "Exchange Ratio" shall be equal to the Cash Consideration divided by the
Parent Share Price (as defined below). The "Parent Share Price" shall be equal
to the average of the closing prices of the shares of Parent Common Stock on the
New York Stock Exchange ("NYSE") Composite Transactions Reporting System, as
reported in The Wall Street Journal, for the 20 trading days immediately
preceding the second trading day prior to the Effective Time.
(d) Cash Election. Subject to the immediately following sentence,
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each record holder of shares of Company Common Stock immediately prior to the
Effective Time shall be entitled to elect to receive cash for all or any part of
such holder's shares of Company Common Stock (a "Cash Election").
Notwithstanding the foregoing and subject to Section 2.01(l), the aggregate
number of shares of Company Common Stock that may be converted into the right to
receive cash in the Merger (the "Cash Election Number") will be 55% of the total
number of shares of Company Common Stock issued and outstanding as of the close
of business on the third trading day prior to the Effective Time. Cash Elections
shall be made on a form designed for that purpose (a "Form of Election"). A
holder of record of shares of Company Common Stock who holds such shares as
nominee, trustee or in another representative capacity (a "Representative") may
submit multiple Forms of Election, provided that such Representative certifies
that each such Form of Election covers all the shares of Company Common Stock
held by such Representative for a particular beneficial owner.
(e) Cash Election Shares. If the aggregate number of shares of
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Company Common Stock covered by Cash Elections (the "Cash Election Shares")
exceeds the Cash Election Number, each Cash Election Share shall be converted
into (i) the right to receive an amount in cash, without interest, equal to the
product of (a) the Cash Consideration and (b) a fraction (the "Cash Fraction"),
the numerator of which shall be
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the Cash Election Number and the denominator of which shall be the total number
of Cash Election Shares, and (ii) a number of shares of Parent Common Stock
equal to the product of (a) the Exchange Ratio and (b) a fraction equal to one
minus the Cash Fraction.
(f) Stock Election. Subject to the immediately following sentence,
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each record holder of shares of Company Common Stock immediately prior to the
Effective Time shall be entitled to elect to receive shares of Parent Common
Stock for all or any part of such holder's shares of Company Common Stock (a
"Stock Election"). Notwithstanding the foregoing and subject to Section 2.01(l),
the aggregate number of shares of Company Common Stock that may be converted
into the right to receive shares of Parent Common Stock in the Merger (the
"Stock Election Number") shall be 45% of the total number of shares of Company
Common Stock issued and outstanding as of the close of business on the third
trading day prior to the Effective Time. Stock Elections shall be made on a Form
of Election. A Representative may submit multiple Forms of Election, provided
that such Representative certifies that each such Form of Election covers all
the shares of Company Common Stock held by such Representative for a particular
beneficial owner.
(g) Stock Election Shares. If the aggregate number of shares of
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Company Common Stock covered by Stock Elections (the "Stock Election Shares")
exceeds the Stock Election Number, each Stock Election Share shall be converted
into (i) the right to receive a number of shares of Parent Common Stock, equal
to the product of (a) the Exchange Ratio and (b) a fraction (the "Stock
Fraction"), the numerator of which shall be the Stock Election Number and the
denominator of which shall be the total number of Stock Election Shares, and
(ii) an amount in cash, without interest, equal to the product of (a) the Cash
Consideration and (b) a fraction equal to one minus the Stock Fraction.
(h) Mixed Election. Subject to the immediately following sentence,
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each record holder of shares of Company Common Stock immediately prior to the
Effective Time shall be entitled to elect to receive shares of Parent Common
Stock for part of such holder's shares of Company Common Stock and cash for the
remaining part of such holder's shares of Company Common Stock (the "Mixed
Election" and, collectively with Stock Election and Cash Election, the
"Election"). Mixed Elections shall be made on a Form of Election. A
Representative may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the shares
of Company Common Stock held by such Representative for a particular beneficial
owner. With respect to each holder of Company Common Stock who makes a Mixed
Election, the shares of Company Common Stock such holder elects to be converted
into the right to receive Cash Consideration shall be treated as Cash Election
Shares for purposes of the provisions contained in Sections 2.01(d), (e) and
(l), and the shares such holder elects to be converted into the right to receive
shares of Parent Common Stock shall be treated as Stock Election Shares for
purposes of the provisions contained in Sections 2.01(f), (g) and (l).
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(i) Form of Election. To be effective, a Form of Election must be
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properly completed, signed and submitted to Parent's transfer agent and
registrar, as paying agent (the "Paying Agent"), and accompanied by the
certificates representing the shares of Company Common Stock ("Company
Certificates") as to which the election is being made (or by an appropriate
guarantee of delivery of such Company Certificate signed by a firm that is a
member of any registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of the Securities Transfer Agent's Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program). Parent shall have the discretion, which it may delegate in
whole or in part to the Paying Agent, to determine whether Forms of Election
have been properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. The decision of Parent (or the Paying
Agent) in such matters shall be conclusive and binding. Neither Parent nor the
Paying Agent shall be under any obligation to notify any person of any defect in
a Form of Election submitted to the Paying Agent. The Paying Agent shall also
make all computations contemplated by this Section 2.01, and all such
computations shall be conclusive and binding on the holders of shares of Company
Common Stock.
(j) Deemed Non-Election. For the purposes hereof, a holder of shares
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of Company Common Stock who does not submit a Form of Election that is received
by the Paying Agent prior to the Election Deadline (as defined in Section
2.01(k)) (the "No Election Shares") shall be deemed not to have made a Cash
Election, Stock Election or Mixed Election. If Parent or the Paying Agent shall
determine that any purported Election was not properly made, the shares subject
to such improperly made Election shall be treated as No Election Shares. No
Election Shares may be treated by the Company, in its sole discretion, as Cash
Election Shares or Stock Election Shares.
(k) Election Deadline. Parent and the Company shall each use its
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best efforts to cause copies of the Form of Election to be mailed to the record
holders of Company Common Stock not less than thirty days prior to the Effective
Time and to make the Form of Election available to all persons who become record
holders of Company Common Stock subsequent to the date of such mailing and no
later than the close of business on the seventh business day prior to the
Effective Time. A Form of Election must be received by the Paying Agent by 5:00
p.m., New York City time, on the second day after the Effective Time, unless
extended by the Company (the "Election Deadline") in order to be effective. All
elections may be revoked until the Election Deadline in writing by the record
holders submitting Forms of Election.
(l) Adjustment Per Tax Opinion. Notwithstanding anything in this
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Article II to the contrary (other than the last sentence of Section 2.01(m)),
the number of shares of Company Common Stock to be converted into the right to
receive the Stock Consideration in the Merger shall be not less than that number
which would cause the ratio of (i) the closing price per share of Parent Common
Stock on the Closing Date times the aggregate number of shares of Parent Common
Stock to be issued as Stock Consideration pursuant to Section 2.01(c), to (ii)
the sum of (v) the amount set forth in the preceding clause (i) plus (w) the
aggregate Cash Consideration to be issued pursuant
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to Section 2.01(c) plus (x) the number of Dissenting Shares times the per share
fair value of such shares determined pursuant to Section 2.01(n) of this
Agreement or, if such fair value has not been determined as of the date the
calculation required by this Section 2.01(l) is required to be made, then times
the per share Cash Consideration, plus (y) any other amounts paid by the Company
(or any affiliate thereof) to, or on behalf of, any Company shareholder in
connection with the sale, redemption or other disposition of any Company stock
in connection with the Merger for purposes of Treasury Regulation Sections
1.368-1(e) and 1.368-1T(e) plus (z) any extraordinary dividend distributed by
the Company prior to and in connection with the Merger for purposes of Treasury
Regulation Sections 1.368-1(e) and 1.368-1T(e), to be 45%. To the extent the
application of this Section 2.01(l) results in the number of shares of Company
Common Stock to be converted into the right to receive the Stock Consideration
in the Merger being increased, the number of such shares to be converted into
the right to receive the Cash Consideration will be decreased.
(m) Anti-Dilution Provisions. In the event Parent (i) changes (or
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establishes a record date for changing) the number of shares of Parent Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, stock combination, recapitalization, reclassification,
reorganization or similar transaction with respect to the outstanding Parent
Common Stock or (ii) pays or makes an extraordinary dividend or distribution in
respect of Parent Common Stock (other than a distribution referred to in clause
(i) of this sentence) and, in either case, the record date therefor shall be
prior to the Effective Time, the Merger Consideration (as defined in Section
2.02(b)) shall be proportionately adjusted. Regular quarterly cash dividends and
increases thereon shall not be considered extraordinary for purposes of the
preceding sentence. If, between the date hereof and the Effective Time, Parent
shall merge or consolidate with or into any other corporation (a "Business
Combination") and the terms thereof shall provide that Parent Common Stock shall
be converted into or exchanged for the shares of any other corporation or
entity, then provision shall be made so that shareholders of the Company who
would be entitled to receive shares of Parent Common Stock pursuant to this
Agreement shall be entitled to receive, in lieu of each share of Parent Common
Stock issuable to such shareholders as provided herein, the same kind and amount
of securities or assets as shall be distributable upon such Business Combination
with respect to one share of Parent Common Stock and (subject to the
satisfaction of the condition set forth in Section 8.03(f)) the parties hereto
shall agree on an appropriate restructuring of the transactions contemplated
herein.
(n) Dissenting Shares. Each outstanding share of Company Common
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Stock the holder of which has perfected his right to dissent under applicable
law and has not effectively withdrawn or lost such right as of the Effective
Time (the "Dissenting Shares") shall not be converted into or represent a right
to receive the Merger Consideration (as defined below), and the holder thereof
shall be entitled only to such rights as are granted by applicable law;
provided, however, that any Dissenting Share held by a person at the Effective
Time who shall, after the Effective Time, withdraw the demand for payment for
shares or lose the right to payment for shares, in either case pursuant to the
Business Corporation Law of the State of Connecticut, shall be deemed to be
converted into, as of the Effective Time, the right to receive cash pursuant to
Section
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2.01(c) in the same manner as if such shares were Cash Election Shares. The
Company shall give Parent prompt notice upon receipt by the Company of any such
written demands for payment of the fair value of such shares of Company Common
Stock and of withdrawals of such notice and any other instruments provided
pursuant to applicable law. Any payments made in respect of Dissenting Shares
shall be made by the Surviving Corporation.
(o) Adjustment in Amount of Cash Consideration. In the event that the
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Closing Date shall not have occurred on or prior to the date that is the six (6)
month anniversary of the date on which the Company Shareholders' Approval (as
defined in Section 4.13) is obtained (the "Adjustment Date"), the Cash
Consideration shall be increased, for each day after the Adjustment Date up to
and including the day which is one day prior to the earlier of the Closing Date
or the Extended Termination Date (as defined in Section 9.01(b)), by an amount
equal to $0.005.
Section 2.02 EXCHANGE OF CERTIFICATES. (a) Deposit with Exchange Agent.
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As soon as practicable after the Effective Time, the Surviving Corporation shall
deposit with a bank or trust company mutually agreeable to Parent and the
Company (the "Exchange Agent"), pursuant to an agreement in form and substance
reasonably acceptable to Parent and the Company an amount of cash and
certificates representing shares of Parent Common Stock required to effect the
conversion of Company Common Stock into Parent Common Stock and cash in
accordance with Section 2.01(c).
(b) Exchange and Payment Procedures. As soon as practicable after the
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Effective Time, Parent shall cause the Paying Agent to mail to each holder of
record as of the Effective Time of a certificate or certificates representing
shares of Company Common Stock (the "Certificates") that have been converted
pursuant to Section 2.01: (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon actual delivery of the Certificates to the Paying Agent) and
(ii) instructions for effecting the surrender of the Certificates and receiving
the Merger Consideration to which such holder shall be entitled therefor
pursuant to Section 2.01. Upon surrender of a Certificate to the Paying Agent
for cancellation, together with a duly executed letter of transmittal and such
other documents as the Paying Agent may require, the holder of such Certificate
shall be entitled to receive in exchange therefor (i) a certificate representing
that number of shares of Parent Common Stock (the "Parent Shares") into which
the shares of Company Common Stock previously represented by such Certificate
are converted in accordance with Section 2.01(c), (ii) the cash to which such
holder is entitled in accordance with Section 2.01(c), and (iii) the cash in
lieu of fractional Parent Shares to which such holder has the right to receive
pursuant to Section 2.02(d) (the shares of Parent Common Stock and cash
described in clauses (i), (ii) and (iii) above being referred to collectively as
the "Merger Consideration"). In the event the Merger Consideration is to be
delivered to any person who is not the person in whose name the Certificate
surrendered in exchange therefor is registered in the transfer records of the
Company, the Merger Consideration may be delivered to a transferee if the
Certificate is presented to the Paying Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence satisfactory to
the Paying Agent that any applicable stock transfer taxes have been paid.
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Until surrendered as contemplated by this Section 2.02, each Certificate (other
than a certificate representing shares of Company Common Stock to be canceled in
accordance with Section 2.01(b)) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration contemplated by this Section 2.02. No interest will be paid or
will accrue on any cash payable to holders of Certificates pursuant to
provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
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other distributions declared or made after the Effective Time with respect to
Parent Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Shares
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.02(d) until the holder of record
of such Certificate shall surrender such Certificate. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole Parent Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole Parent Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Parent Shares.
(d) No Fractional Securities. In lieu of any such fractional
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securities, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to this Article II will be paid an amount in
cash (without interest) equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional shares of Parent Common
Stock issued pursuant to this Article II. As soon as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (i) the number
of full shares of Parent Common Stock delivered to the Exchange Agent by Parent
over (ii) the aggregate number of full shares of Parent Common Stock to be
distributed to holders of Company Common Stock (such excess being herein called
the "Excess Parent Common Shares"). The Exchange Agent, as agent for the former
holders of Company Common Stock, shall sell the Excess Parent Common Shares at
the prevailing prices on the New York Stock Exchange (the "NYSE"); provided,
however, that neither Parent nor any person related to Parent within the meaning
of Treasury Regulations Section 1.368-1(c)(2) shall be permitted to acquire,
directly or indirectly, any such Excess Parent Common Shares. The sales of the
Excess Parent Common Shares by the Exchange Agent shall be executed on the NYSE
through one or more member firms of the NYSE and shall be executed in round lots
to the extent practicable. Parent shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of Excess Parent
Common Shares. Until the net proceeds of such sale have been distributed to the
former holders of Company Common Stock, the Exchange Agent will
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hold such proceeds in trust for such former holders. As soon as practicable
after the determination of the amount of cash to be paid to former holders of
Company Common Stock in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such amounts to such
former holders.
(e) Closing of Transfer Books. If, after the Effective Time,
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Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for certificates representing the appropriate number of Parent
Shares and the appropriate amount of cash as provided in Section 2.01 and in
this Section 2.02.
(f) Termination of Exchange Agent. Any certificates representing
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Parent Shares deposited with the Exchange Agent pursuant to Section 2.02(a) and
not exchanged within six months after the Effective Time pursuant to this
Section 2.02 shall be returned by the Exchange Agent to Parent, which shall
thereafter act as Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of unsurrendered Certificates and unclaimed at the end of
one year from the Effective Time shall be returned to the Surviving Corporation,
after which time any holder of unsurrendered Certificates shall look as a
general creditor only to Parent for payment of such funds to which such holder
may be due, subject to applicable law.
(g) Escheat. The Company shall not be liable to any person for such
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shares or funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Withholding Rights. Each of the Surviving Corporation and Parent
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shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving Corporation or
the Parent, as the case may be, such withheld amounts shall be treated for all
purposes of the Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or Parent, as the case may be.
ARTICLE III
THE CLOSING
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Section 3.01 CLOSING. The closing of the Merger (the "Closing") shall
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take place at the offices of Winthrop, Stimson, Putnam & Xxxxxxx, Stamford,
Connecticut, at 10:00 a.m., New York City time, on the second business day
immediately following the date on which the last of the conditions set forth in
Article VIII hereof is fulfilled or waived (other than conditions that by their
nature are required to be performed on the Closing Date, but subject to
satisfaction of such conditions), or at such other time and date and place as
the Company and Parent shall mutually agree (the "Closing Date").
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to Parent as follows:
Section 4.01 ORGANIZATION AND QUALIFICATION. Except as set forth in
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Section 4.01 of the Company Disclosure Schedule (as defined in Section
7.06(ii)), the Company and each of its subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has all requisite
corporate power and authority, and has been duly authorized by all necessary
approvals and orders, to own, lease and operate its assets and properties to the
extent owned, leased and operated and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification necessary, other
than in such jurisdictions where the failure to be so qualified and in good
standing would not, when taken together with all other such failures, reasonably
be expected to have a material adverse effect on the business, properties,
financial condition or results of operations or prospects of the Company and its
subsidiaries taken as a whole or on the consummation of this Agreement (any such
material adverse effect being hereafter referred to as a "Company Material
Adverse Effect"). As used in this Agreement, the term "subsidiary" of a person
shall mean any corporation or other entity (including partnerships and other
business associations) of which a majority of the outstanding capital stock or
other voting securities having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such corporation or
entity shall at the time be held, directly or indirectly, by such person.
Section 4.02 SUBSIDIARIES. Section 4.02 of the Company Disclosure
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Schedule sets forth a description as of the date hereof, of all material
subsidiaries and joint ventures of the Company, including the name of each such
entity, the state or jurisdiction of its incorporation or organization, the
Company's interest therein and a brief description of the principal line or
lines of business conducted by each such entity. As of the date hereof, the
Company is an exempt holding company under the Public Utility Holding Company
Act of 1935, as amended (the "1935 Act"). Except as set forth in Section 4.02 of
the Company Disclosure Schedule, all of the issued and outstanding shares of
capital stock owned by the Company of each Company subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are owned,
directly or indirectly, by the Company free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment,
except for any of the foregoing that could not reasonably be expected to have a
Company Material Adverse Effect. As used in this Agreement, the term "joint
venture" of a person shall mean any
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corporation or other entity (including partnerships and other business
associations) that is not a subsidiary of such person, in which such person or
one or more of its subsidiaries owns an equity interest, other than equity
interests held for passive investment purposes which are less than 10% of any
class of the outstanding voting securities or equity of any such entity.
Section 4.03 CAPITALIZATION. The authorized capital stock of the Company
--------------
consists of 20,000,000 shares of Company Common Stock. As of the close of
business on June 11, 1999 there were issued and outstanding 10,625,886 shares of
Company Common Stock. All of the issued and outstanding shares of the capital
stock of the Company are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 4.03 of the Company Disclosure
Schedule, as of the date hereof, there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies, rights or warrants, including
any right of conversion or exchange under any outstanding security, instrument
or other agreement, obligating the Company or any of the subsidiaries of the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company, or obligating the Company
to grant, extend or enter into any such agreement or commitment.
Section 4.04 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
-------------------------------------------------
COMPLIANCE. (a) Authority. The Company has all requisite corporate power and
---------- ---------
authority to enter into this Agreement and, subject to obtaining the Company
Shareholders' Approval (as defined in Section 4.13) and the Company Required
Statutory Approvals (as defined in Section 4.04(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company subject to obtaining the Company Shareholders' Approval. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by the other signatories hereto,
constitutes the valid and binding obligations of the Company enforceable against
it in accordance with their terms.
(b) Non-Contravention. Except as set forth in Section 4.04(b) of the
-----------------
Company Disclosure Schedule, the execution and delivery of this Agreement by the
Company do not, and the consummation of the transactions contemplated hereby
will not, violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in a right of termination, cancellation, or acceleration of any
obligation under, or result in the creation of any lien, security interest,
charge or encumbrance ("Liens") upon any of the properties or assets of the
Company or any of its subsidiaries (any such violation, conflict, breach,
default, right of termination, cancellation or acceleration, loss or creation, a
"Violation" with respect to the Company (such term when used in Article V having
a correlative meaning with respect to Parent)) pursuant to any provisions of (i)
the articles of organization, by-laws or similar governing documents of the
Company, any of its subsidiaries or any of its joint ventures, (ii) subject to
obtaining the Company Required Statutory Approvals and the receipt of the
Company Shareholders' Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any
11
Governmental Authority (as defined in Section 4.04(c)) applicable to the
Company, any of its subsidiaries or any of its joint ventures, or any of their
respective properties or assets or (iii) subject to obtaining the third-party
consents or other approvals set forth in Section 4.04(b) of the Company
Disclosure Schedule (the "Company Required Consents") any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which the
Company, any of its subsidiaries or any of its joint ventures is a party or by
which it or any of its properties or assets may be bound or affected, excluding
from the foregoing clauses (i), (ii) and (iii) such Violations as would not
reasonably be expected to have, in the aggregate, a Company Material Adverse
Effect.
(c) Statutory Approvals. Except as described in Section 4.04(c) of
-------------------
the Company Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent or approval of, any court, federal, state,
local or foreign governmental or regulatory body (including a stock exchange or
other self-regulatory body) or authority (each, a "Governmental Authority") is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, the failure
to obtain, make or give which would reasonably be expected to have, in the
aggregate, a Company Material Adverse Effect (the "Company Required Statutory
Approvals"), it being understood that references in this Agreement to
"obtaining" such Company Required Statutory Approvals shall mean making such
declarations, filings or registrations, giving such notices, obtaining such
authorizations, consents or approvals and having such waiting periods expire, if
any, as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.04(d) or Section
----------
4.11 of the Company Disclosure Schedule, or as disclosed in the Company SEC
Reports (as defined in Section 4.05) filed prior to the date hereof, neither the
Company, nor any of its subsidiaries nor (to the best of its knowledge) any of
its joint ventures is in violation of or has been given notice of any purported
violation of, any law, statute, order, rule, regulation or judgment (including,
without limitation, any applicable Environmental Law, as defined in Section
4.11(f)(ii)) of any Governmental Authority except for violations that, in the
aggregate, are not reasonably expected to have a Material Adverse Effect. Except
as set forth in Section 4.04(d) of the Company Disclosure Schedule or in Section
4.11 of the Company Disclosure Schedule or as disclosed in the Company SEC
Reports, the Company and its subsidiaries have all permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their respective businesses as currently conducted in all respects,
except those which the failure to obtain would, in the aggregate, not reasonably
be expected to have a Company Material Adverse Effect. Except as set forth in
Section 4.04(d) of the Company Disclosure Schedule or as disclosed in the
Company SEC Reports, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (i) its certificate of
incorporation or by-laws or (ii) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which it is a party or by which it is bound or to which any of its
property is subject,
12
except for breaches, violations or defaults that, in the aggregate, are not
reasonably expected to have a Company Material Adverse Effect.
(e) Except as set forth in Section 4.04(e) of the Company Disclosure
Schedule, there is no "non-competition" or other similar consensual contract or
agreement that restricts the ability of the Company or any of its affiliates to
conduct business in any geographic area or that would reasonably be likely to
restrict the Surviving Corporation or any of its affiliates to conduct business
in any geographic area.
Section 4.05 REPORTS AND FINANCIAL STATEMENTS. The filings required to be
--------------------------------
made by the Company and its subsidiaries since September 30, 1996 under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the 1935 Act, the Federal
Power Act, as amended (the "Power Act") and applicable state public utility laws
and regulations have been filed with the Securities and Exchange Commission (the
"SEC"), the Federal Energy Regulatory Commission (the "FERC") or the appropriate
state public utilities commission, as the case may be, including all forms,
statements, reports, exhibits and amendments appertaining thereto, and complied,
as of their respective dates, in all material respects with all applicable
requirements of the appropriate statute and the rules and regulations
thereunder. The Company has made available to Parent a true and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by the Company with the SEC since September 30, 1996 (as such documents
have since the time of their filing been amended, the "Company SEC Reports"). As
of their respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
the Company included in the Company SEC Reports (collectively, the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP") (except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present the
consolidated financial position of the Company as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended.
True and complete copies of the articles of organization and by-laws of the
Company, as in effect on the date hereof, have been made available to Parent.
Section 4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
------------------------------------
the Company SEC Reports filed prior to the date hereof or as set forth in
Section 4.06 of the Company Disclosure Schedule, since September 30, 1998, the
Company and each of its subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice, and there has not
been, and no fact or condition exists which has or could reasonably be expected
to have, a Company Material Adverse Effect.
Section 4.07 LITIGATION. Except as disclosed in the Company SEC Reports
----------
filed prior to the date hereof or as set forth in Section 4.07, Section 4.09 or
13
Section 4.11 of the Company Disclosure Schedule, (i) there are no claims, suits,
actions or proceedings, pending or threatened, nor are there any investigations
or reviews pending or threatened against, relating to or affecting the Company
or any of its subsidiaries, and (ii) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any of its subsidiaries, except for any of the foregoing under clauses (i)
and (ii) that individually or in the aggregate would not reasonably be expected
to have a Company Material Adverse Effect.
Section 4.08 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
------------------------------------------
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC in connection with the issuance of shares of
Parent Common Stock in the Merger (the "Registration Statement") will, at the
time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the proxy statement, in definitive form (the "Proxy
Statement"), relating to the Company Special Meeting (as defined below) shall,
at the dates mailed to shareholders and at the time of the Company Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading; provided that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference in the Proxy
Statement based on information supplied by Parent or Merger Sub for inclusion or
incorporation by reference therein. The Registration Statement and the Proxy
Statement, insofar as they relate to the Company or any of its subsidiaries,
shall comply as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder.
Section 4.09 TAX MATTERS. "Taxes," as used in this Agreement, means any
-----------
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipts, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties (civil or criminal) on or
additions to any such taxes. "Tax Return," as used in this Agreement, means a
report, return or other written information required to be supplied to a
governmental entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company or any of its subsidiaries, on the one hand, or Parent or
any of its subsidiaries, on the other hand.
Except as disclosed in Section 4.09 of the Company Disclosure Schedule:
(a) Filing of Timely Tax Returns. The Company and each of its
----------------------------
subsidiaries have duly filed (or there has been filed on its behalf) within the
time
14
prescribed by law all material Tax Returns required to be filed by each of them
under applicable law. All such Tax Returns were and are in all material respects
true, complete and correct.
(b) Payment of Taxes. The Company and each of its subsidiaries have,
----------------
within the time and in the manner prescribed by law, paid all material Taxes
that are currently due and payable except for those contested in good faith and
for which adequate reserves have been taken.
(c) Tax Reserves. The Company and its subsidiaries have established
------------
on their books and records adequate reserves for all Taxes and for any liability
for deferred income taxes in accordance with GAAP.
(d) Extensions of Time for Filing Tax Returns. Neither the Company nor
-----------------------------------------
any of its subsidiaries have requested any extension of time within which to
file any material Tax Return, which Tax Return has not since been filed.
(e) Waivers of Statute of Limitations. Neither the Company nor any of
---------------------------------
its subsidiaries has in effect any extension, outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect to
any material Taxes or material Tax Returns.
(f) Expiration of Statute of Limitations. The federal and state income
------------------------------------
Tax Returns of the Company and each of its subsidiaries either have been
examined and settled with the appropriate Tax authority or closed by virtue of
the expiration of the applicable statute of limitations for all years through
and including 1994, and no deficiency for any Taxes has been proposed, asserted
or assessed against the Company or any of its subsidiaries that has not been
resolved and paid in full except for those contested in good faith and for which
adequate reserves have been established.
(g) Audit, Administrative and Court Proceedings. No material audits or
-------------------------------------------
other administrative proceedings are presently pending or threatened with regard
to any Taxes or Tax Returns of the Company or any of its subsidiaries and no
currently pending issue has been raised in writing by any Tax authority in
connection with any Tax or Tax Return (other than those being contested in good
faith and for which adequate reserves have been established).
(h) Tax Rulings. Neither the Company nor any of its subsidiaries has
-----------
received a Tax Ruling (as defined below) or entered into a Closing Agreement (as
defined below) with any taxing authority that would have a continuing adverse
effect after the Closing Date. "Tax Ruling," as used in this Agreement, shall
mean a written ruling of a taxing authority relating to Taxes. "Closing
Agreement," as used in this Agreement, shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
(i) Availability of Tax Returns. The Company has provided or made
---------------------------
available to Parent complete and accurate copies of (i) all Tax Returns, and any
amendments thereto, filed by the Company or any of its subsidiaries covering all
years
15
ending on or after December 31, 1993, (ii) all audit reports received from any
taxing authority relating to any Tax Return filed by the Company or any of its
subsidiaries covering all years ending on or after December 31, 1993, (iii) any
Closing Agreements entered into by the Company or any of its subsidiaries with
any taxing authority since December 31, 1993 and (iv) any Tax Ruling received by
the Company or any of its subsidiaries from any taxing authority since December
31, 1993.
(j) Tax Sharing Agreements. Neither the Company nor any of its
----------------------
subsidiaries is a party to any agreement relating to allocating or sharing of
Taxes.
(k) Liability for Others. Neither the Company nor any of its
--------------------
subsidiaries has any liability for any material Taxes of any person other than
the Company and its subsidiaries (i) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a transferee
or successor, (iii) by contract or (iv) otherwise.
(l) Code Section 481 Adjustments. Neither the Company nor any of its
----------------------------
subsidiaries is required to include in income any adjustment pursuant to Code
Section 481(a) by reason of a voluntary change in accounting method initiated by
the Company or any of its subsidiaries for any tax year, and, to the knowledge
of the Company, the IRS has not proposed any such adjustment or change in
accounting method for any tax year for which the statute of limitations remains
open.
(m) Indebtedness. No indebtedness of the Company or any of its
------------
subsidiaries is "corporate acquisition indebtedness" within the meaning of Code
Section 279(b).
(n) Intercompany Transactions. Neither the Company nor any of its
-------------------------
subsidiaries has engaged in any intercompany transactions within the meaning of
Treasury Regulations Section 1.1502-13 for which any income or gain will remain
unrecognized as of the close of the last taxable year prior to the Closing Date.
(o) Code Section 897. To the best knowledge of the Company, no
----------------
foreign person owns or has owned beneficially more than five percent of the
total fair market value of Company Common Stock during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(p) Code Section 355. Neither the Company nor any of its subsidiaries
----------------
has constituted a "distributing corporation" in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code in the past 24
month period or in a distribution which could otherwise constitute part of a
"plan" or a series of "related transactions" (within the meaning of Code Section
355(e)).
Section 4.10 EMPLOYEE MATTERS; ERISA. (a) Each "employee benefit plan"
-----------------------
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), bonus, severance, change in control, deferred
-----
compensation, share option or other written agreement, plan, commitment or
arrangement relating to employment or fringe benefits for employees, former
employees, officers, trustees or directors of the Company or any of its
subsidiaries effective as of the date hereof or providing benefits as of the
date hereof to current employees, former employees, officers,
16
trustees or directors of the Company or pursuant to which the Company or any of
its subsidiaries has or could reasonably be expected to have any liability
(collectively, the "Company Employee Benefit Plans") is listed in Schedule
4.10(a) of the Company Disclosure Schedule, is in material compliance with
applicable law, and has been administered and operated in all material respects
in accordance with its terms. Each Company Employee Benefit Plan which is
intended to be qualified within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the IRS as to such qualification
and, to the knowledge of the Company, no event has occurred and no condition
exists which could reasonably be expected to result in the revocation of, or
have any adverse effect on, any such determination.
(b) Complete and correct copies of the following documents have been
made available to Parent as of the date of this Agreement: (i) all Company
Employee Benefit Plans and any related trust agreements or insurance contracts
or funding agreement, (ii) the most current summary descriptions and summary of
material modifications of each Company Employee Benefit Plan subject to ERISA,
(iii) the three most recent Form 5500s and Schedules thereto for each Company
Employee Benefit Plan subject to such reporting, (iv) the most recent
determination of the IRS with respect to the qualified status of each Company
Employee Benefit Plan that is intended to qualify under Section 401(a) of the
Code, (v) the most recent accountings with respect to each Company Employee
Benefit Plan funded through a trust and (vi) the most recent actuarial report of
the qualified actuary of each Company Employee Benefit Plan with respect to
which actuarial valuations are conducted.
(c) Each Company Employee Benefit Plan subject to the requirements of
Section 601 of ERISA has been operated in material compliance therewith. The
Company has not contributed to a nonconforming group health plan (as defined in
Code Section 5000(c)) and no person under common control with the Company within
the meaning of Section 414 of the Code ("ERISA Affiliate") has incurred a tax
liability under Code Section 5000(a) that is or could reasonably be expected to
be a liability of the Company.
(d) Except as set forth in Schedule 4.10(d) of the Company Disclosure
Schedule, each Company Employee Benefit Plan covers only employees who are
employed by the Company or a subsidiary (or former employees or beneficiaries
with respect to service with the Company or a subsidiary).
(e) Except as set forth in Schedule 4.10(e) of the Company Disclosure
Schedule, neither the Company, any subsidiary, any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has at any time
contributed to any "multiemployer plan," as that term is defined in Section 4001
of ERISA.
(f) No event has occurred, and there exists no condition or set of
circumstances in connection with any Company Employee Benefit Plan, under which
the
17
Company or any subsidiary, directly or indirectly (through any indemnification
agreement or otherwise), could be subject to any liability under Section 409 of
ERISA, Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code
except for instances of non-compliance which, individually or in the aggregate,
could not reasonably be expected to have a Company Material Adverse Effect.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation (the "PBGC") under Section
302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise that has not been
satisfied in full and no event or condition exists or has existed which could
reasonably be expected to result in any such material liability. As of the date
of this Agreement, no "reportable event" within the meaning of Section 4043 of
ERISA has occurred with respect to any Company Employee Benefit Plan that is a
defined benefit plan under Section 3(35) of ERISA.
(h) Except as set forth in Schedule 4.10(h) of the Company Disclosure
Schedule, no employer securities, employer real property or other employer
property is included in the assets of any Company Employee Benefit Plan.
(i) Except as set forth in Section 4.10(i) of the Company Disclosure
Schedule, full payment has been made of all material amounts which the Company
or any affiliate thereof was required under the terms of Company Employee
Benefit Plans to have paid as contributions to such plans on or prior to the
Effective Time (excluding any amounts not yet due) and no Company Employee
Benefit Plan which is subject to Part III of Subtitle B of Title I of ERISA has
incurred any "accumulated funding deficiency" within the meaning of Section 302
of ERISA or Section 412 of the Code, whether or not waived.
(j) Except as set forth in Schedule 4.10(j) of the Company Disclosure
Schedule, no material amounts payable under any Company Employee Benefit Plan or
other agreement, contract, or arrangement will fail to be deductible for federal
income tax purposes by virtue of Section 280G or Section 162(m) of the Code.
Except as set forth in Schedule 4.10(j), the transactions contemplated by this
Agreement will not result in accelerated vesting or accelerated payment of
benefits under any Company Employee Benefit Plan.
(k) Except as set forth in Section 4.10(k) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor agreement with any union or labor
organization. No labor organization or group of employees of the Company or any
of its subsidiaries has made a pending demand for recognition or certification,
and there are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or, to the knowledge of
the Company, threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or authority. The Company
has delivered or otherwise made available to Parent true, correct and complete
copies of the collective bargaining agreements listed in Section 4.10(k) of the
Company Disclosure Schedule, together with all amendments, modifications or
supplements
18
thereto. Except as set forth in Schedule 4.10(k) of the Company Disclosure
Schedule, there are no organizing activities, strikes, work stoppages,
slowdowns, lockouts, arbitrations or grievances, or other labor practice charges
or disputes pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its subsidiaries which could reasonably be
expected to have a Company Material Adverse Effect. Each of the Company and its
subsidiaries is in compliance with all applicable laws and collective bargaining
agreements respecting employment and employment practices, terms and conditions
of employment, wages and hours and occupational safety and health, except for
non-compliances which in the aggregate could not reasonably be expected to have
a Company Material Adverse Effect.
Section 4.11 ENVIRONMENTAL PROTECTION. Except as set forth in Section
------------------------
4.11 of the Company Disclosure Schedule or in the Company SEC Reports filed
prior to the date hereof:
(a) Compliance. The Company and each of its subsidiaries are in
----------
compliance with all applicable Environmental Laws (as defined in Section
4.11(f)(ii)) except where the failure to be in such compliance would not, in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, and
neither the Company nor any of its subsidiaries has received any written
communication from any person or Governmental Authority that alleges that the
Company or any of its subsidiaries is not in compliance with applicable
Environmental Laws.
(b) Environmental Permits. The Company and each of its subsidiaries
---------------------
has obtained or has applied for all permits, consents, licenses, variances,
certificates, exemptions, orders, franchises, authorizations and approvals
necessary under any Environmental Laws (collectively, the "Environmental
Permits") for the construction of its facilities or the conduct of its
operations, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the Company and its subsidiaries are in compliance with all terms
and conditions of the Environmental Permits, except where the failure to obtain
or to be in such compliance would not, in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
(c) Environmental Claims. There is no Environmental Claim (as defined
--------------------
in Section 4.11(f)(i)) pending (i) against the Company or any of its
subsidiaries, or (ii) against any real or personal property or operations that
the Company or any of its subsidiaries owns, leases or manages, in whole or in
part that, if adversely determined, would reasonably be expected to have, in the
aggregate, a Company Material Adverse Effect.
(d) Releases. Except for Releases of Hazardous Materials the
--------
liability for which would not reasonably be expected to have, in the aggregate,
a Company Material Adverse Effect, there have been no Releases (as defined in
Section 4.11(f)(iv)) of any Hazardous Material (as defined in Section
4.11(f)(iii)) that would be reasonably likely to form the basis of any
Environmental Claim against the Company or any of its subsidiaries.
19
(e) Predecessors. The Company has no knowledge of any Environmental
------------
Claim pending or threatened, or of any Release of Hazardous Materials that would
be reasonably likely to form the basis of any Environmental Claim, in each case
against any person or entity (including, without limitation, any predecessor of
the Company or any of its subsidiaries) whose liability the Company or any of
its subsidiaries has or may have retained or assumed either contractually or by
operation of law, except for Releases of Hazardous Materials the liability for
which would not reasonably be expected to have, in the aggregate, a Company
Material Adverse Effect.
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation by any person or entity (including any Governmental Authority)
alleging potential liability (including, without limitation, potential
responsibility for or liability for enforcement costs, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial costs,
natural-resources damages, property damages, personal injuries, fines or
penalties) arising out of, based on or resulting from (A) the presence, or
Release or threatened Release into the environment, of any Hazardous
Materials at any location, whether or not owned, operated, leased or
managed by the Company or any of their respective subsidiaries or joint
ventures; or (B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any and all claims by
any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local laws,
rules, ordinances and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of human health as it
relates to the environment including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, coal tar residue, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs") in regulated concentrations; and (B) any
chemicals, materials or substances which are now defined as or included in
the definition of "hazardous substances", "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," "hazardous constituents" or words
of similar import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which
20
is now prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its subsidiaries or joint
ventures operates or has stored, treated or disposed of Hazardous
Materials.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
Section 4.12 REGULATION AS A UTILITY. Except as set forth in Section 4.12
-----------------------
of the Company Disclosure Schedule, neither the Company nor (in the case of
clauses (ii), (iii) and (iv)) any "associate company," "subsidiary company" or
"affiliate" (as such terms are defined in the 0000 Xxx) of the Company is (i)
registered, or required to be registered, under the 1935 Act, (ii) subject to
regulation as a "public utility" under the Federal Power Act, (iii) subject to
regulation as a "natural-gas company" under the Natural Gas Act, or (iv) subject
to regulation as a public utility or public service company (or similar
designation) by any state in the United States other than Connecticut or by any
foreign country.
Section 4.13 VOTE REQUIRED. The approval of the Merger by two-thirds of
-------------
the votes entitled to be cast by all holders of Company Common Stock (the
"Company Shareholders' Approval") is the only vote of the holders of any class
or series of the capital stock of the Company or any of its subsidiaries
required to approve this Agreement, the Merger and the other transactions
contemplated hereby.
Section 4.14 OPINION OF FINANCIAL ADVISOR. The Company has received the
----------------------------
opinion of XX Xxxx Xxxxxx to the effect that, as of June 14, 1999, the Merger
Consideration is fair from a financial point of view to the holders of Company
Common Stock.
Section 4.15 OWNERSHIP OF PARENT COMMON STOCK. Except as set forth in
--------------------------------
Section 4.15 of the Company Disclosure Schedule, the Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of Parent Capital Stock.
Section 4.16 TAKEOVER PROVISIONS; RIGHTS PLANS. (a) The Company has taken
---------------------------------
(and will take) all action required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from, and this Agreement and
the transactions contemplated hereby are exempt from (i) the requirements of any
"moratorium," "control share," "fair price" or other anti-takeover laws and
regulations (collectively, "Takeover Laws") of the State of Connecticut,
including Sections 33-841 and 33-844 of the CBCA, and (ii) the provisions of
Section 1 of Article VII of the Restated Certificate of Incorporation of the
Company.
(b) The Company has taken all action necessary so that the entering
into of this Agreement and the consummation of the transactions contemplated
hereby (including the Merger) do not and will not result in the ability of any
person to exercise any Rights under the Rights Agreement, dated as of November
20, 1989, between the
21
Company and Mellon Bank, N.A., as Rights Agent, as amended (the "Company Rights
Agreement") or enable or require the Company Rights to separate from the shares
of Company Common Stock to which they are attached or to be triggered or become
exercisable.
(c) No "Distribution Date" or "Triggering Event" (as such terms are
defined in the Company Rights Plan) has occurred.
Section 4.17 INSURANCE. Except as set forth in Section 4.17(a) of the
---------
Company Disclosure Schedule, the Company and each of its subsidiaries is, and
has been continuously since January 1, 1993, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary in all material respects for companies conducting the business as
conducted by the Company and each of its subsidiaries during such time period.
Except as set forth in Section 4.17(b) of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy of the
Company or any of its subsidiaries. The insurance policies of the Company and
each of its subsidiaries are valid and enforceable policies in all material
respects.
Section 4.18 INTELLECTUAL PROPERTY. The Company and each of its
---------------------
subsidiaries own or have adequate rights to use all material trademarks, trade
names, patents, service marks, brand marks, brand names, computer programs,
databases, industrial designs and copyrights used in the operation of their
business (collectively, the "Company Intellectual Property"). Except as set
forth in Section 4.18(a) of the Company Disclosure Schedule, all of the Company
Intellectual Property owned by the Company or any of its subsidiaries is free
and clear of any and all encumbrances, and neither the Company nor any of its
subsidiaries has forfeited or otherwise relinquished any Company Intellectual
Property which forfeiture or relinquishment could reasonably be expected to have
a Company Material Adverse Effect. To the knowledge of the Company, except as
set forth in Section 4.18(b) of the Company Disclosure Schedule, the use of the
Company Intellectual Property by the Company or any of its subsidiaries does not
infringe upon, violate or constitute a misappropriation of any right, title or
interest in any intellectual property right (including, without limitation, any
trademark, trade name, patent, service xxxx, brand xxxx, brand name, computer
program, database, industrial design or copyright) of any other person, and
neither the Company nor any of its subsidiaries has received written notice of
any claim that any of the Company Intellectual Property is invalid or infringes
the asserted rights of any other person, and, to the knowledge of the Company,
the Company Intellectual Property owned by the Company has not been used or
enforced or has failed to be used or enforced in a manner that would reasonably
be expected to result in the abandonment, cancellation or unenforceability of
any of such Company Intellectual Property, except for such conflicts,
infringements, violations, interferences, claims, invalidity, abandonments,
cancellations or unenforceability that could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.19 YEAR 2000. The computer software, hardware and firmware
---------
(including microprocessors) operated or used by the Company or any of its
subsidiaries
22
which is used in the conduct of their business (in both information technology
and other applications) is, or by September 30, 1999 will be, capable of
providing or being adapted (i) to allow the conduct of the business of the
Company and its subsidiaries as currently conducted and (ii) to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software, hardware and firmware
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999 ("Year 2000 Compliance") other than such interruptions in
millennium functionality that could not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect; provided,
however, that the Company makes no representation or warranty with respect to
Year 2000 Compliance of any supplier, third-party vendor or governmental body,
agency or instrumentality. The Company reasonably believes as of the date hereof
that the remaining cost of adaptations referred to in the foregoing sentence
will not materially exceed the amounts reflected in the Form 10-Q filed by the
Company for the quarter ended March 31, 1999.
Section 4.20 COMMODITY DERIVATIVES AND CREDIT EXPOSURE MATTERS. Except as
-------------------------------------------------
set forth in Section 4.20 of the Company Disclosure Schedule, the Company and
each of its subsidiaries do not in the aggregate have (quantified on a
market-to-market basis and calculated with respect to physical and financial
positions exposure): (a) natural gas forward price exposure exceeding $1
million, (b) on-system pipeline transportation (basis) exposure exceeding $1
million or (c) off-system pipeline transportation (basis) exposure exceeding $1
million.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent represents and warrants to the Company as follows:
Section 5.01 ORGANIZATION AND QUALIFICATION. Except as set forth in
------------------------------
Section 5.01 of Parent Disclosure Schedule, Parent and each of its subsidiaries
is a Massachusetts business trust or corporation, as the case may be, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not, when taken together with all other such failures, reasonably be expected to
have a material adverse effect on the business, properties, financial condition,
results of operations or prospects of Parent and its subsidiaries taken as a
whole or on the consummation of this Agreement (any such material adverse effect
being hereafter referred to as a "Parent Material Adverse Effect").
23
Section 5.02 SUBSIDIARIES. Section 5.02 of Parent Disclosure Schedule sets
------------
forth a description as of the date hereof of all material subsidiaries and joint
ventures of Parent, including the name of each such entity, the state or
jurisdiction of its incorporation or organization, Parent's interest therein,
and a brief description of the principal line or lines of business conducted by
each such entity. As of the date hereof, Parent is a registered holding company
under the 1935 Act. Except as set forth in Section 5.02 of Parent Disclosure
Schedule, all of the issued and outstanding shares of capital stock of each
Parent subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned directly or indirectly by Parent free and clear
of any liens, claims, encumbrances, security interests, equities, charges and
options of any nature whatsoever, and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies, rights or warrants, including
any right of conversion or exchange under any outstanding security, instrument
or other agreement, obligating any such Parent subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of its capital
stock or obligating it to grant, extend or enter into any such agreement or
commitment; except for any of the foregoing that could not reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.03 CAPITALIZATION. (a) Except as set forth in Section 5.03 of
--------------
Parent Disclosure Schedule, the authorized capital stock of Parent consists of
225,000,000 shares of Parent Common Stock. As of the close of business on June
11, 1999, there were issued and outstanding 137,116,862 shares of Parent Common
Stock. All of the issued and outstanding shares of the capital stock of Parent
are, and will be, validly issued, fully paid, nonassessable and, except as set
forth in the Declaration of Trust, free of preemptive rights. Except as set
forth in Section 5.03 of Parent Disclosure Schedule, as of the date hereof,
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other agreement,
obligating Parent or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the capital stock of
Parent, or obligating Parent to grant, extend or enter into any such agreement
or commitment.
(b) The authorized capital stock of Merger Sub, when formed, will
consist of not less than 1,000 shares of common stock, no par value ("Merger Sub
Common Stock"). Immediately prior to the Effective Time, all of the issued and
outstanding shares of Merger Sub Common Stock will be owned by Parent.
Section 5.04 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
--------------------------------------------------
COMPLIANCE. (a) Authority. Parent has all requisite corporate power and
---------- ---------
authority to enter into this Agreement and, subject to the applicable Parent
Required Statutory Approvals (as defined in Section 5.04(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
and the consummation by Parent of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by the other signatories
hereto, constitutes a valid and binding obligation of Parent enforceable against
it in accordance with its terms.
24
(b) Non-Contravention. Except as set forth in Section 5.04(b) of
-----------------
Parent Disclosure Schedule, the execution and delivery of this Agreement by
Parent do not, and the consummation of the transactions contemplated hereby will
not, result in a Violation pursuant to any provisions of (i) the articles of
incorporation, by-laws or similar governing documents of Parent or any of its
subsidiaries or any of its joint ventures, (ii) subject to obtaining Parent
Required Statutory Approvals (as defined in Section 5.04(c)) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to Parent or any of its
subsidiaries or any of its joint ventures or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 5.04(b) of Parent Disclosure Schedule (the
"Parent Required Consents"), any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which Parent or any of its subsidiaries
or any of its joint ventures is a party or by which it or any of its properties
or assets may be bound or affected, excluding from the foregoing clauses (i),
(ii) and (iii) such Violations as would not reasonably be expected to have, in
the aggregate, a Parent Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 5.04(c) of
-------------------
Parent Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, the failure to
obtain, make or give which would reasonably be expected to have, in the
aggregate, a Parent Material Adverse Effect (the "Parent Required Statutory
Approvals"), it being understood that references in this Agreement to
"obtaining" such Parent Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire,
if any, as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 5.04(d) or Section
----------
5.11 of Parent Disclosure Schedule, or as disclosed in Parent SEC Reports (as
defined in Section 5.05) filed prior to the date hereof, neither Parent nor any
of its subsidiaries nor (to the best of its knowledge) any of its joint ventures
is in violation of, or has been given notice of any purported violation of, any
law, statute, or order, rule, regulation or judgment (including, without
limitation, any applicable Environmental Law) of any Governmental Authority,
except for violations that, in the aggregate, are not reasonably expected to
have, a Parent Material Adverse Effect. Except as set forth in Section 5.04(d)
of Parent Disclosure Schedule or in Section 5.11 of Parent Disclosure Schedule
or as disclosed in Parent SEC Reports, Parent and its subsidiaries and joint
ventures have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their respective
businesses as currently conducted in all respects, except those which the
failure to obtain would, in the aggregate, not reasonably be expected to have a
Parent Material Adverse Effect. Except as set forth in Section 5.04(d) of Parent
Disclosure Schedule or as disclosed in Parent SEC Reports, Parent and each of
its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of
25
time or action by a third party, could result in a default under (i) its
articles of organization or by-laws or (ii) any material contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which it is a party or by which it is bound or
to which any of its property is subject; except for breaches, violations or
defaults that, in the aggregate, are not reasonably expected to have, a Parent
Material Adverse Effect.
Section 5.05 REPORTS AND FINANCIAL STATEMENTS. The filings required to be
--------------------------------
made by Parent and its subsidiaries since January 1, 1996 under the Securities
Act, the Exchange Act, the 1935 Act, the Power Act and applicable state public
utility laws and regulations have been filed with the SEC, the FERC or the
appropriate state public utilities commission, as the case may be, including all
forms, statements, reports, exhibits and amendments appertaining thereto, and
complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate statute and the rules and regulations
thereunder. Parent has made available to the Company a true and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Parent or its predecessor with the SEC since January 1, 1996 (as such
documents have since the time of their filing been amended, "Parent SEC
Reports"). As of their respective dates, Parent SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Parent included in Parent SEC Reports (collectively, the "Parent Financial
Statements") have been prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present the
consolidated financial position of Parent as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended. A true and complete copy of the Declaration of Trust, as in effect on the
date hereof, has been made available to the Company.
Section 5.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
------------------------------------
Parent SEC Reports filed prior to the date hereof or as set forth in Section
5.06 of Parent Disclosure Schedule, since December 31, 1998, Parent and each of
its subsidiaries have as of the date hereof conducted their businesses only in
the ordinary course of business consistent with past practice and there has not
been, and no fact or condition exists, which has or could reasonably be expected
to have, a Parent Material Adverse Effect.
Section 5.07 LITIGATION. Except as disclosed in Parent SEC Reports filed
----------
prior to the date hereof or as set forth in Section 5.07 of Parent Disclosure
Schedule, (i) there are no claims, suits, actions or proceedings, pending or
threatened, nor are there any investigations or reviews pending or threatened
against, relating to or affecting Parent or any of its subsidiaries, which would
have a Parent Material Adverse Effect and (ii) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable
26
to Parent or any of its subsidiaries, except for such that would not reasonably
be expected to have a Parent Material Adverse Effect.
Section 5.08 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
------------------------------------------
information supplied or to be supplied by or on behalf of Parent for inclusion
or incorporation by reference in (i) the Registration Statement will, at the
time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the Proxy Statement shall, at the dates mailed to the
Company shareholders and at the time of the Company Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Registration
Statement and the Proxy Statement, insofar as they relate to Parent or any
Parent subsidiary, shall comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder.
Section 5.09 REGULATION AS A UTILITY. Parent is a public utility holding
-----------------------
company registered under, and subject to the provisions, of, the 1935 Act.
Section 5.09 of the Parent Disclosure Schedule lists the subsidiaries of Parent
that are "public utility companies" within the meaning of Section 2(a)(5) of the
1935 Act and lists the jurisdictions where each such subsidiary is subject to
regulation as a public utility company or public service company. Except as set
forth above and as set forth in Section 5.09 of the Parent Disclosure Schedule,
neither the Parent nor any "subsidiary company" or "affiliate" (as such terms
are defined in the 0000 Xxx) of Parent is subject to regulation as a public
utility or public service company (or similar designation) by the Federal
government of the United States, any state in the United States or any political
subdivision thereof, or any foreign country.
Section 5.10 OWNERSHIP OF THE COMPANY COMMON STOCK. Except as set forth in
-------------------------------------
Section 5.10 of Parent Disclosure Schedule, Parent does not "beneficially own"
(as such term is defined for purposes of Section 13(d) of the Exchange Act) any
shares of Company Common Stock.
Section 5.11 ENVIRONMENTAL PROTECTION. Except as would not, in the
------------------------
aggregate, reasonably be expected to result in a Parent Material Adverse Effect,
and except for matters disclosed in Parent SEC Reports, (i) Parent and its
subsidiaries are in compliance with all applicable Environmental Laws and the
terms and conditions of all applicable Environmental Permits, and neither Parent
nor any of its subsidiaries has received any written notice from any
Governmental Authority that alleges that Parent or any of its subsidiaries is
not in material compliance with applicable Environmental Laws or the terms and
conditions of all such Environmental Permits, (ii) there are no Environmental
Claims pending or threatened (A) against Parent or any of its subsidiaries, or
(B) against any person or entity whose liability for any Environmental Claim
Parent or any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law and (iii) there has been no Release of
Hazardous Materials that would be
27
reasonably likely to form the basis of any Environmental Claim against Parent or
any of its subsidiaries.
Section 5.12 FINANCING. Parent has or will have available, prior to the
---------
Effective Time, sufficient cash in immediately available funds to pay or to
cause Merger Sub to pay all Cash Consideration required to be paid pursuant to
Article II hereof and to consummate the Merger and other transactions
contemplated hereby.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
Section 6.01 COVENANTS OF THE PARTIES. After the date hereof and prior to
------------------------
the Effective Time or earlier termination of this Agreement, Parent and the
Company each agree as follows, each as to itself and to each of its
subsidiaries, except as expressly contemplated or permitted in this Agreement,
or to the extent the other parties hereto shall otherwise consent in writing:
(a) Ordinary Course of Business. Except as disclosed in Section
---------------------------
6.01(a) of the Company Disclosure Schedule, the Company shall, and shall cause
its subsidiaries to, carry on their respective businesses in the ordinary course
in substantially the same manner as heretofore conducted and use all
commercially reasonable efforts to (i) preserve intact their present business
organizations and goodwill and preserve the goodwill and relationships with
customers, suppliers and others having business dealings with them, (ii) subject
to prudent management of workforce needs and ongoing programs currently in
force, keep available the services of their present officers and employees as a
group, and (iii) maintain and keep material properties and assets in as good
repair and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past practice.
(b) Dividends. The Company shall not, nor shall it permit any of
---------
its subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any capital stock other than (A) dividends by a
direct or indirect subsidiary to the Company, (B) regular quarterly dividends on
Company Common Stock that do not exceed the current regular dividends on Company
Common Stock; provided that, the Company may increase the annualized amount of
such dividends by up to $.04 per share at the Company's regular Board of
Directors' meetings in each of June 1999 and June 2000; (ii) split, combine or
reclassify any capital stock or the capital stock of any subsidiary or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of, or in substitution for, shares of capital stock or the capital stock of any
subsidiary; or (iii) redeem, repurchase or otherwise acquire any shares of
capital stock or the capital stock of any subsidiary other than (A) redemptions,
repurchases and other acquisitions of shares of capital stock in connection with
the administration of employee benefit and dividend reinvestment plans as in
effect on the date hereof in the ordinary course of the operation of such plans
consistent with past practice, or (B) intercompany acquisitions of capital
stock. Prior to the Closing Date, each of the parties agrees to
28
cooperate so as not to adversely affect the Company shareholders because of the
timing of record, declaration or payment dates.
(c) Issuance of Securities. Except as set forth in Section 6.01(c) of
----------------------
the Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its subsidiaries to, issue, agree to issue, deliver, sell, pledge, dispose of
or otherwise encumber any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable securities,
other than (i) pursuant to outstanding stock options granted under Employee
Benefit Plans, (ii) pursuant to the Company's dividend reinvestment plan as in
effect on the date hereof, (iii) in the case of subsidiaries, for issuances of
capital stock to the Company or another subsidiary, or (iv) as may be required
by the Company Rights Agreement.
(d) Charter Documents; Other Actions. Neither party shall, nor shall
--------------------------------
any party permit any of its subsidiaries to, amend its respective articles of
organization, by-laws or regulations, or similar organic documents or to take or
fail to take any other action, which in any such case would reasonably be
expected to prevent or materially impede or interfere with the Merger (except to
the extent permitted by Section 6.02 and Article IX).
(e) Acquisitions. Except as disclosed in Section 6.01(e) of the
------------
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its subsidiaries to, acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or business organization or division thereof, or
otherwise acquire or agree to acquire any material amount of assets other than
(i) in the ordinary course of business, and (ii) acquisitions having an
aggregate acquisition consideration payable by the Company of not more than
$250,000.
(f) Capital Expenditures. Except (i) as set forth in Section 6.01(f)
--------------------
of the Company Disclosure Schedule, (ii) as may be required by law, or (iii) as
reasonably deemed necessary by the Company following a catastrophic event, the
Company shall not, nor shall it permit any of its subsidiaries to, make capital
expenditures in excess of 110% of the aggregate amount budgeted by the Company
or its subsidiaries for capital expenditures as set forth in Section 6.01(f) of
the Company Disclosure Schedule.
(g) No Dispositions. Except (i) as set forth in Section 6.01(g) of
---------------
the Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its subsidiaries to, sell, lease, or otherwise dispose of, any of its
respective assets, other than encumbrances or dispositions in the ordinary
course of business consistent with past practice.
(h) Indebtedness. Except as set forth in Section 6.01(h) of the
------------
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its subsidiaries to, incur or guarantee any indebtedness for borrowed money
(including any such debt
29
guaranteed or otherwise assumed including, without limitation, the issuance of
debt securities or warrants or rights to acquire debt) or enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person other than (i) short-term indebtedness and "keep well" or similar
assurances for the benefit of customers, in each case in the ordinary course of
business consistent with past practice; (ii) arrangements between the Company
and its subsidiaries or among its subsidiaries; or (iii) in connection with the
refunding of existing indebtedness at a lower cost of funds.
(i) Compensation, Benefits. Except as set forth in Section 6.01(i) of
----------------------
the Company Disclosure Schedule or as may be required by applicable law, or as
expressly contemplated by this Agreement, the Company shall not, nor shall it
permit any of its subsidiaries to, (i) enter into, adopt or amend or increase
the amount or accelerate the payment or vesting of any benefit or amount payable
under any Employee Benefit Plan, or otherwise increase the compensation or
benefits of any director, officer or other employee of such party or any of its
subsidiaries, except for normal increases in compensation and benefits in the
ordinary course of business consistent with past practice that, with respect to
employees who are not officers, in the aggregate, do not result in an increase
in benefits or compensation expense to the Company or any of its subsidiaries in
excess of five percent per year, or (ii) enter into or amend any employment,
severance or special pay arrangement with respect to the termination of
employment or other similar contract, agreement or arrangement with any director
or officer or other employee other than with respect to employees who are not
officers of the Company in the ordinary course of business consistent with
current industry practice.
(j) 1935 Act. Except as set forth in Section 6.01(j) of the Company
--------
Disclosure Schedule, and except as required or contemplated by this Agreement,
the Company shall not, nor shall it permit any of its subsidiaries to, engage in
any activities which would cause a change in its status, or that of its
subsidiaries, under the 1935 Act.
(k) Accounting. Except as set forth in Section 6.01(k) of the Company
----------
Disclosure Schedule, the Company shall not, nor shall it permit any of its
subsidiaries to, make any changes in their accounting methods, except as
required by law, rule, regulation or GAAP.
(l) Tax-Free Status. No party shall, nor shall any party permit any
---------------
of its subsidiaries to, take any actions which would, or would be reasonably
likely to, adversely affect the status of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and each party hereto shall use all
reasonable efforts to achieve such result.
(m) Cooperation, Notification. Each party shall, and shall cause its
-------------------------
subsidiaries to, (i) confer on a regular and frequent basis with one or more
representatives of the other party to discuss, subject to applicable law,
material operational and business matters; (ii) promptly notify the other party
of any significant changes in its business, properties, assets, condition
(financial or other), results of operations or prospects; (iii) advise the other
party of any change or event which has had or could reasonably be expected to
result in, in the case of the Company, a Company Material Adverse Effect or, in
the case of Parent, a Parent Material Adverse Effect; and (iv) promptly provide
the
30
other party with copies of all filings made by such party or any of its
subsidiaries with any state or federal court, administrative agency, commission
or other Governmental Authority in connection with this Agreement and the
transactions contemplated hereby; provided that no party shall be required to
make any disclosure to the extent such disclosure would constitute a violation
of any applicable law or regulation.
(n) Third-Party Consents. The Company shall, and shall cause its
--------------------
subsidiaries to, use all commercially reasonable efforts to obtain all the
Company Required Consents. The Company shall promptly notify Parent of any
failure or prospective failure to obtain any such consents and, if requested by
Parent shall provide copies of all the Company Required Consents obtained by the
Company to Parent. Parent shall, and shall cause its subsidiaries to, use all
commercially reasonable efforts to obtain all Parent Required Consents. Parent
shall promptly notify the Company of any failure or prospective failure to
obtain any such consents and, if requested by the Company, shall provide copies
of all Parent Required Consents obtained by Parent to the Company.
(o) No Breach, Etc. No party shall, nor shall any party permit any of
--------------
its subsidiaries to, willfully take any action that would or is reasonably
likely to result in a material breach of any provision of this Agreement or in
any of its representations and warranties set forth in this Agreement being
untrue on and as of the Closing Date.
(p) Discharge of Liabilities. The Company shall not pay, discharge or
------------------------
satisfy any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice (which includes the payment of final and unappealable judgments)
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company's reports filed with
the SEC, or incurred in the ordinary course of business consistent with past
practice.
(q) Contracts. Except as set forth in Section 6.01(q) of the Company
---------
Disclosure Schedule, the Company shall not, and shall cause its subsidiaries not
to, except in the ordinary course of business consistent with past practice,
enter into, modify, amend, terminate, renew or fail to use reasonable business
efforts to renew any material contract or agreement to which the Company or any
of its subsidiaries is a party or waive, release or assign any material rights
or claims therein.
(r) Insurance. The Company shall, and shall cause its subsidiaries
---------
to, maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies engaged
in the electric and gas utility industry.
(s) Permits. The Company shall, and shall cause its subsidiaries to,
-------
use reasonable efforts to maintain in effect all existing governmental permits
pursuant to which the Company or any of its subsidiaries operate except for
those permits the
31
expiration or termination of which would not reasonably be expected to have a
Company Material Adverse Effect.
(t) Takeover Laws. Neither party shall take any action that would
-------------
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law, and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from any applicable Takeover
Law, including Sections 33-841 and 33-844 of the CBCA.
(u) No Rights Triggered. The Company shall ensure that the entering
-------------------
into of this Agreement and the consummation of the transactions contemplated
hereby do not and will not result, directly or indirectly, in the grant of any
rights to any person under any material agreement (other than the agreements
disclosed in Section 6.01(u) of the Company Disclosure Schedule) to which it or
any of its subsidiaries is a party.
(v) Taxes. The Company shall not, and shall cause its subsidiaries
-----
not to, (A) make or rescind any express or deemed material election relating to
Taxes, (B) except as set forth on Schedule 6.01(v), settle or compromise any
material claim, audit, dispute, controversy, examination, investigation or other
proceeding relating to Taxes, (C) materially change any of its methods of
reporting income or deductions for federal income Tax purposes from those
employed in the preparation of its federal income Tax Return and state Tax
Returns for the taxable year ending December 31, 1997, except as may be required
by a change in applicable law after the date hereof, or (D) file any material
Tax Return other than in a manner consistent with its federal income Tax Return
and state Tax Returns for the taxable year ending December 31, 1997.
(w) Conduct of Business of Merger Sub. Following the incorporation of
---------------------------------
Merger Sub as required by Section 1.06, prior to the Effective Time, except as
may be required by applicable law and subject to the other provisions of this
Agreement, Parent shall cause Merger Sub to (i) perform its obligations under
this Agreement in accordance with its terms, and (ii) not engage directly or
indirectly in any business or activities of any type or kind and not enter into
any agreements or arrangements with any person, or be subject to or bound by any
obligation or undertaking, which is inconsistent with this Agreement.
(x) Certain Mergers. Except with the mutual consent of the Board of
---------------
Directors of the Company and the Board of Trustees of the Parent, Parent shall
not, and shall not permit any of its subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial portion
of the assets of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
divisions thereof, or otherwise acquire or agree to acquire any assets if the
entering into of a definitive agreement relating to or the consummation of such
acquisition, merger or consolidation could reasonably be expected to (i) impose
any material delay in the obtaining of, or significantly increase the risk of
not obtaining, any authorizations, consents, orders, declarations or approvals
of any Governmental Authority necessary to consummate the Merger or the
expiration or termination of any
32
applicable waiting period, (ii) significantly increase the risk of any
Governmental Authority entering an order prohibiting the consummation of the
Merger, (iii) significantly increase the risk of not being able to remove any
such order on appeal or otherwise or (iv) materially delay the consummation of
the Merger.
(y) Rate Matters. Subject to applicable law and except for non-
------------
material filings in the ordinary course of business consistent with regulatory
orders or past practice, the Company shall consult with Parent prior to
implementing any changes in its or any of its subsidiaries' rates or charges
(other than automatic cost pass-through rate adjustment clauses), standards of
service or accounting or executing any agreement with respect thereto that is
otherwise permitted under this Agreement and the Company shall, and shall cause
each of its subsidiaries to, deliver to Parent a copy of each such filing or
agreement at least three days prior to the filing or execution thereof so that
Parent may comment thereon.
(z) Gas Transmission and Storage. Except as set forth in Section
----------------------------
6.01(z) of the Company Disclosure Schedule or in the ordinary course of
business, neither the Company nor any of its subsidiaries shall commence
construction of any additional gas transmission, gas delivery or gas storage
capacity or obligate itself to purchase or otherwise acquire any additional
transmission, delivery or storage facilities, or to sell or otherwise dispose
of, or to share, any such facilities owned by it.
(aa) Third Party Standstill Agreements. During the period from the
---------------------------------
date of this Agreement through the Effective Time, neither the Company nor any
of its subsidiaries shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. During such
period, the Company shall take all steps necessary to enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreement;
provided that nothing in this subsection (aa) shall be deemed to affect the
Company's rights under Section 9.01(e) hereof.
Section 6.02 COVENANT OF THE COMPANY; ALTERNATIVE PROPOSALS. From and
----------------------------------------------
after the date hereof, the Company agrees (a) that it and its subsidiaries will
not, and it will use its best efforts to cause its and its subsidiaries'
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its subsidiaries or any of the foregoing) not to, directly or indirectly,
encourage, initiate or solicit (including by way of furnishing information) or
knowingly take any other action designed to facilitate any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to its shareholders) which constitutes or may reasonably be expected to
lead to an Alternative Proposal (as defined below) from any person or engage in
any discussion or negotiations concerning, or provide any non-public information
or data to make or implement an Alternative Proposal; (b) that it will
immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussions or negotiations with any
parties conducted heretofore with a view of formulating an Alternative Proposal;
and (c) that it will immediately notify Parent orally and in writing of the
receipt of any such inquiry, offer or proposals, and that it shall keep Parent
informed orally and in writing in reasonable detail
33
of the status of any such inquiry, offer or proposal; provided however, that
notwithstanding any other provision hereof, the Company may at any time prior to
the time the Company shareholders shall have voted to approve this Agreement (i)
engage in discussions or negotiations with a third party who, without
solicitation in violation of the terms hereof, seeks to initiate such
discussions or negotiations and may furnish such third party information
concerning the Company and its business, properties and assets if, and only to
the extent that, (A)(x) the third party has first made an Alternative Proposal
that, in the good faith judgment of the Company's Board of Directors (after
consultation with its financial advisors), is likely to be more favorable to the
Company's shareholders than the Merger, and has demonstrated that it will have
adequate sources of financing to consummate such Alternative Proposal, and (y)
the Company Board of Directors shall conclude in good faith, based upon the
advice of outside counsel and such other matters as the Company Board of
Directors deems relevant, that such actions are necessary for the Company Board
of Directors to act in a manner consistent with its fiduciary duties to
shareholders under applicable law, and (B) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
the Company (x) provides prompt written notice to Parent to the effect that it
intends to furnish information to, or intends to enter into discussions or
negotiations with, such person or entity, and of the identity of the person or
group making the Alternative Proposal and the material terms thereof and (y)
receives from such person an executed confidentiality agreement in reasonably
customary form on terms not in the aggregate materially more favorable to such
third party than the terms contained in the Confidentiality Agreement (as
defined in Section 7.01) except that such confidentiality agreement shall not
prohibit such person from making an unsolicited Alternative Proposal to the
Board of Directors of the Company, (ii) comply with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer and/or (iii) accept
an Alternative Proposal from a third party, provided the Company terminates this
Agreement pursuant to Section 9.01(e). "Alternative Proposal" shall mean any
merger, acquisition, consolidation, reorganization, share exchange, tender
offer, exchange offer or similar transaction involving the Company or any of the
Company's significant subsidiaries (as defined in Rule 1-02(w) of Regulation S-X
under the Exchange Act) or any proposal or offer to acquire in any manner,
directly or indirectly (x) ten percent or more of the outstanding Company Common
Stock, (y) any of the outstanding common stock of Yankee Gas Services Company,
or 50% or more of the outstanding capital stock of any other significant
subsidiary, or (z) all or a substantial portion of the assets of the Company and
its subsidiaries taken as a whole. Nothing herein shall prohibit a disposition
permitted by Section 6.01(g) hereof.
Section 6.03 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this
---------------------------------
Agreement shall give Parent, directly or indirectly, the right to control or
direct the Company's operations prior to the Effective Time. Nothing contained
in this Agreement shall give the Company, directly or indirectly, the right to
control or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, each of the Company and Parent shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
34
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
Section 7.01 ACCESS TO INFORMATION. Upon reasonable notice and during
---------------------
normal business hours, each party shall, and shall cause its subsidiaries to,
afford to the officers, directors, trustees, employees, agents and accountants
of the other (collectively, "Representatives") reasonable access, throughout the
period prior to the Effective Time, to all of its properties, books, contracts,
commitments and records to the extent that such party or any of its subsidiaries
is not under a legal obligation not to provide access or to the extent that such
access would not constitute a waiver of the attorney-client privilege and does
not unreasonably interfere with the business and operations of such party.
During such period, each party shall, and shall cause its subsidiaries to,
furnish promptly to the other (i) access to each material report, schedule and
other document filed or received by it or any of its subsidiaries pursuant to
the requirements of federal or state securities laws or filed with or sent to
the SEC, the FERC, the Department of Justice, the Federal Trade Commission or
any other federal or state regulatory agency or commission, and (ii) access to
all information concerning themselves, their subsidiaries, directors, trustees,
officers and shareholders and such other matters as may be reasonably requested
by the other party in connection with any filings, applications or approvals
required or contemplated by this Agreement. Each party shall, and shall cause
its subsidiaries and Representatives to, hold in strict confidence all
Evaluation Material (as defined in the Confidentiality and Standstill Agreement)
concerning the other parties furnished to it in connection with the transactions
contemplated by this Agreement in accordance with the Confidentiality and
Standstill Agreement, dated as of March 31, 1999, between the Company and
Parent, as it may be amended from time to time (the "Confidentiality
Agreement").
Section 7.02 PROXY STATEMENT AND REGISTRATION STATEMENT. (a) Preparation
------------------------------------------
and Filing. The parties will prepare and file with the SEC as soon as reasonably
practicable after the date hereof the Registration Statement and the Proxy
Statement (together, the "Proxy/Registration Statement"). The parties hereto
shall each use reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as practicable after
such filing. Each party hereto shall also take such action as may be reasonably
required to cause the shares of Parent Common Stock issuable in connection with
the Merger to be registered or to obtain an exemption from registration under
applicable state "blue sky" or securities laws; provided, however, that no party
shall be required to register or qualify as a foreign corporation or to take
other action which would subject it to service of process in any jurisdiction
where it will not be, following the Merger, so subject. Each of the parties
hereto shall furnish all information concerning itself which is required or
customary for inclusion in the Proxy/Registration Statement. The parties shall
use reasonable efforts to cause the shares of Parent Common Stock issuable in
the Merger to be approved for listing on the NYSE upon official notice of
issuance. The information provided by any party hereto for use in the
Proxy/Registration Statement shall be true and correct in all material respects
without omission of any material fact which is required to make such
information, in the circumstances under which it is provided, not false or
misleading. No
35
representation, covenant or agreement is made by or on behalf of any party
hereto with respect to information supplied by any other party for inclusion in
the Proxy Statement/ Registration Statement.
(b) Letter of the Company's Accountant. Following receipt by Xxxxxx
----------------------------------
Xxxxxxxx, LLP, the Company's independent auditor, of an appropriate request from
the Company pursuant to SAS No. 72, the Company shall use its best efforts to
cause to be delivered to Parent a letter of Xxxxxx Xxxxxxxx LLP dated a date
within two business days before the date of the Proxy/Registration Statement,
and addressed to Parent, in form and substance reasonably satisfactory to Parent
and customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements
similar to the Proxy/Registration Statement.
(c) Letter of Parent's Accountant. Following receipt by Xxxxxx
-----------------------------
Xxxxxxxx, LLP, Parent's independent auditor, of an appropriate request from
Parent pursuant to SAS No. 72, Parent shall use best efforts to cause to be
delivered to the Company a letter of Xxxxxx Xxxxxxxx, LLP, dated a date within
two business days before the date of the Proxy/Registration Statement, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the Proxy/Registration Statement.
Section 7.03 REGULATORY MATTERS. Each party hereto shall cooperate and use
------------------
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain no later
than the Initial Termination Date, as such date may be extended pursuant to
Section 9.01(b), all necessary permits, consents, approvals and authorizations
of all Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement, including, without limitation, the Company
Required Statutory Approvals and Parent Required Statutory Approvals.
Section 7.04 SHAREHOLDER APPROVAL.(a) The Company Shareholders. The
-------------------- ------------------------
Company shall, as soon as reasonably practicable after the date hereof (i) take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its shareholders (the "Company Special Meeting") for the purpose of securing the
Company Shareholders' Approval, (ii) distribute to its shareholders the Proxy
Statement in accordance with applicable federal and state law and with its
Certificate of Incorporation and by-laws, (iii) subject to the fiduciary duties
of its Board of Directors, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv) cooperate and
consult with Parent with respect to each of the foregoing matters.
Section 7.05 DIRECTORS' AND OFFICERS' INDEMNIFICATION.(a) Indemnification.
---------------------------------------- ---------------
To the extent, if any, not provided by an existing right of indemnification or
other agreement or policy, from and after the Effective Time, Parent and the
Surviving Corporation shall, to the fullest extent permitted by applicable law,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, an
officer, director
36
or employee of the Company or any of its subsidiaries (each an "Indemnified
Party" and collectively, the "Indemnified Parties") against (i) all losses,
expenses (including reasonable attorney's fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Effective Time (and whether asserted or claimed prior to, at or after the
Effective Time) that are, in whole or in part, based on or arising out of the
fact that such person is or was a director, officer or employee of the Company
or a subsidiary of the Company (the "Indemnified Liabilities") and (ii) all
Indemnified Liabilities to the extent they are based on or arise out of or
pertain to the transactions contemplated by this Agreement. In the event of any
such loss, expense, claim, damage or liability (whether or not arising before
the Effective Time), (i) Parent shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to Parent, promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred and (ii) any determination required to
be made with respect to whether an Indemnified Party's conduct complies with the
standards set forth in Section 33-756, 33-757 and 33-765 of the CBCA, and the
articles of organization or by-laws shall be made by independent counsel
mutually acceptable to Parent and the Indemnified Party; provided, however, that
Parent shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld).
(b) Insurance. For a period of six years after the Effective Time,
---------
Parent shall (i) cause to be maintained in effect policies of directors' and
officers' liability insurance for the benefit of those persons who are currently
covered by such policies of the Company on terms no less favorable than the
terms of such current insurance coverage or (ii) provide tail coverage for such
persons which provides coverage for a period of six years for acts prior to the
Effective Time on terms no less favorable than the terms of such current
insurance coverage; provided, however, that Parent shall not be required to
expend in any year an amount in excess of 200% of the annual aggregate premiums
currently paid by the Company, for such insurance; and provided, further, that
if the annual premiums of such insurance coverage exceed such amount, Parent
shall be obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Trustees of Parent, for a cost not exceeding
such amount.
(c) Successors. In the event Parent or any of its successors or
----------
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in either such case, proper provisions shall be made so
that the successors and assigns of Parent shall assume the obligations set forth
in this Section 7.05.
(d) Survival of Indemnification. To the fullest extent permitted by
---------------------------
law, from and after the Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of the
Company, and its subsidiaries with respect to their activities as such prior to
the Effective Time, as provided in its respective articles of organization and
by-laws in effect on the date hereof,
37
or otherwise in effect on the date hereof, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time.
(e) Benefit. The provisions of this Section 7.05 are intended to be
-------
for the benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and his or her representatives.
Section 7.06 DISCLOSURE SCHEDULES. On the date hereof, (i) Parent has
--------------------
delivered to the Company a schedule (the "Parent Disclosure Schedule"),
accompanied by a certificate signed by an executive officer of Parent stating
that the Parent Disclosure Schedule is being delivered pursuant to this Section
7.06(i), and (ii) the Company has delivered to Parent a schedule (the "Company
Disclosure Schedule"), accompanied by a certificate signed by an executive
officer of the Company stating that the Company Disclosure Schedule is being
delivered pursuant to this Section 7.06(ii). The Company Disclosure Schedule and
Parent Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules constitute an integral part of
this Agreement and modify the respective representations, warranties, covenants
or agreements of the parties hereto contained herein to the extent that such
representations, warranties, covenants or agreements expressly refer to the
Disclosure Schedules. Anything to the contrary contained herein or in the
Disclosure Schedules notwithstanding, any and all statements, representations,
warranties or disclosures set forth in the Disclosure Schedules shall be deemed
to have been made on and as of the date hereof.
Section 7.07 PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
--------------------
obligations imposed by law or the rules of any applicable securities exchange or
Governmental Authority, the Company and Parent will cooperate with each other in
the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto without the consent of the other party (which
consent shall not be unreasonably withheld).
Section 7.08 RULE 145 AFFILIATES. Within 30 days after the date of this
-------------------
Agreement, the Company shall identify in a letter to Parent all persons who are,
and to such person's best knowledge who will be at the Closing Date,
"affiliates" of the Company, as such term is used in Rule 145 under the
Securities Act. The Company shall use all reasonable efforts to cause its
affiliates (including any person who may be deemed to have become an affiliate
after the date of the letter referred to in the prior sentence) to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit 7.08 (each, an "Affiliate Agreement").
Section 7.09 CERTAIN EMPLOYEE AGREEMENTS AND ARRANGEMENTS. Subject to
--------------------------------------------
Section 7.10, Parent and the Surviving Corporation and its subsidiaries shall
honor, without modification, all contracts, agreements, collective bargaining
agreements and commitments of the Company, or its subsidiaries, prior to the
date hereof which apply to any current or former employee or current or former
director of the Company, or its subsidiaries; provided, however, that the
foregoing shall not
38
prevent Parent or the Surviving Corporation from enforcing such contracts,
agreements, collective bargaining agreements and commitments in accordance with
their terms, including, without limitation, any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment. Any workforce reductions affecting employees of the
Company carried out within the twelve-month period following the Effective Time
by Parent or the Surviving Corporation or their respective subsidiaries shall be
done in accordance with (i) the provisions of this agreement, (ii) the
recommendations of the Transition Steering Team to be established pursuant to
Section 7.16 hereof, and (iii) all applicable collective bargaining agreements,
and all laws and regulations governing the employment relationship and
termination thereof including, without limitation, the Worker Adjustment and
Retraining Notification Act and regulations promulgated thereunder, and any
comparable state or local law.
Section 7.10 EMPLOYEE BENEFIT PLANS. (a) For a period of twelve months
----------------------
immediately following the Closing Date, the compensation, benefits and coverage
provided to those non-union individuals who are employees of the Company, or its
subsidiaries, and who continue to be employees of the Surviving Corporation,
Parent or their respective subsidiaries (the "Nonunion Continuing Company
Employees") pursuant to employee benefit plans or arrangements maintained by
Parent, the Surviving Corporation, or their respective subsidiaries shall be not
less favorable in the aggregate (as determined by Parent, the Surviving
Corporation, or their respective subsidiaries using reasonable assumptions and
benefit valuation methods) than those provided to each such employee immediately
prior to the Closing Date. In addition to the foregoing, Parent shall, or shall
cause the Surviving Corporation, or their respective subsidiaries, to pay any
Nonunion Continuing Company Employee whose employment is terminated by Parent,
the Surviving Corporation, or their respective subsidiaries, within twelve
months of the Closing Date a severance benefit package equivalent to the
severance benefit package that would be provided under the Company's Severance
Pay Plan, effective November 1, 1991, as in effect on the date hereof.
(b) Parent shall, or shall cause the Surviving Corporation to, give
the Nonunion Continuing Company Employee full credit for purposes of
eligibility, vesting, benefit accrual (including, without limitation benefit
accrual under any defined benefit pension plans) and determination of the level
of benefits under any employee benefit plans or arrangements maintained by
Parent or the Surviving Corporation in effect as of the Closing Date for such
Nonunion Continuing Company Employees' service with the Company or any
subsidiary of the Company (or any prior employer) to the same extent recognized
by the Company or such subsidiary immediately prior to the Closing Date. With
respect to any employee benefit plan or arrangement established by Parent or the
Surviving Corporation after the Closing Date (the "Post Closing Plans"), service
shall be credited in accordance with the terms of such Post Closing Plans.
(c) Parent shall, or shall cause the Surviving Corporation to, (i)
waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Nonunion Continuing Company Employees under any welfare benefit plan
established to replace any Company
39
welfare benefit plans in which such Nonunion Continuing Company Employees may be
eligible to participate after the Closing Date, other than limitations or
waiting periods that are already in effect with respect to such Nonunion
Continuing Company Employees and that have not been satisfied as of the Closing
Date under any welfare plan maintained for the Nonunion Continuing Company
Employees immediately prior to the Closing Date and (ii) provide each Nonunion
Continuing Company Employee with credit for any co-payments and deductibles paid
prior to the Closing Date in satisfying any applicable deductible or out-of-
pocket requirements under any welfare plans that such Nonunion Continuing
Company Employees are eligible to participate in after the Closing Date.
Section 7.11 COMPANY STOCK PLANS. With respect to each Plan that provides
-------------------
for benefits in the form of Company Common Stock ("Company Stock Plans"), the
Company and Parent shall take all corporate action necessary or appropriate to
(i) provide for the issuance or purchase in the open market of Parent Common
Stock rather than Company Common Stock, pursuant thereto, and otherwise to amend
such Company Stock Plans to reflect this Agreement and the Merger, (ii) obtain
shareholder approval with respect to such Company Stock Plans to the extent such
approval is required for purposes of the Code or other applicable law, or to
enable such Company Stock Plans to comply with Rule 16b-3 promulgated under the
Exchange Act, (iii) reserve for issuance under such Company Stock Plans or
otherwise provide a sufficient number of shares of Parent Common Stock for
delivery upon payment of benefits, grant of awards or exercise of options under
such Company Stock Plans and (iv) as soon as practicable after the Effective
Time, file registration statements on Form S-8 or amendments on such forms to
the Form S-4 Registration Statement, as the case may be (or any successor or
other appropriate forms), with respect to the shares of Parent Common Stock
subject to such Company Stock Plans to the extent such registration statement is
required under applicable law, and Parent shall use its best efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as such benefits and
grants remain payable and such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, the Company shall
administer the Company Stock Plans, where applicable, in a manner that complies
with Rule 16b-3 promulgated under the Exchange Act.
Section 7.12 EXPENSES. All costs and expenses incurred in connection with
--------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, except that those expenses incurred in connection
with printing the Proxy/Registration Statement, as well as the filing fee
relating thereto, shall be shared equally by the Company and Parent.
Section 7.13 FURTHER ASSURANCES. Each party will, and will cause its
------------------
subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Merger in accordance with the terms hereof.
Section 7.14 EMPLOYMENT CONTRACTS. Parent and Xx. Xxxxxx have entered into
--------------------
an employment agreement of even date herewith, and Parent shall, prior to
40
the Closing Date, offer to enter into binding employment arrangements having the
principal terms set forth in Section 7.14 of the Parent Disclosure Schedule with
the persons identified thereon and on the Closing Date shall enter into such
arrangements with those persons who have accepted such offers.
Section 7.15 TRANSITION STEERING TEAM. As soon as reasonably practicable
------------------------
after the date hereof, Parent and the Company shall create a special transition
steering team, with representation from Parent and the Company, that will
develop recommendations concerning the future structure and operations of the
Company after the Effective Time, subject to applicable law. The transition
steering team will be jointly chaired by the Chief Executive Officers of Parent
and the Company and the members of the transition steering team shall be
appointed by the co-chairmen. The functions of the transition steering team
shall include (i) to direct the exchange of information and documents between
the parties and their Subsidiaries as contemplated by Section 7.01 and (ii) the
development of regulatory plans and proposals, corporate organizational and
management plans, workforce combination proposals, and such other matters as
they deem appropriate.
Section 7.16 CONVEYANCE TAXES. The Company and Parent shall cooperate in
----------------
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfers or gains,
sales, use, transfer, value added, stock transfer or stamp taxes, any transfer,
recording, registration or other fees, or any similar taxes which become payable
in connection with the transaction contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. The Company
shall pay, without deduction or withholding (except where such deduction or
withholding is required by applicable law) from any amounts payable to the
holders of any Company Common Stock, any such Taxes which become payable in
connection with the transactions contemplated by this Agreement, on behalf of
the stockholders of the Company.
ARTICLE VIII
CONDITIONS
----------
Section 8.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction or waiver on or prior to the Closing Date of each of the
following conditions:
(a) Shareholder Approval. The Company Shareholders' Approval shall
--------------------
have been obtained.
(b) HSR Act. Any waiting period (and any extension thereof)
-------
applicable to the consummation of the Merger under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1978, as amended, shall have expired or been
terminated.
41
(c) No Injunction. No temporary restraining order or preliminary or
-------------
permanent injunction or other order by any federal or state court preventing
consummation of the Merger shall have been issued and be continuing in effect,
and the Merger and the other transactions contemplated hereby shall not have
been prohibited under any applicable federal or state law or regulation.
(d) Registration Statement. The Registration Statement shall have
----------------------
become effective in accordance with the provisions of the Securities Act, and no
stop order suspending such effectiveness shall have been issued and remain in
effect.
(e) Listing of Shares. The shares of Parent Common Stock issuable in
-----------------
the Merger pursuant to Article II shall have been approved for listing on the
NYSE upon official notice of issuance.
(f) Statutory Approvals. The Company Required Statutory Approvals
-------------------
and Parent Required Statutory Approvals shall have been obtained at or prior to
the Effective Time, such approvals shall have become Final Orders (as defined
below) and such Final Orders shall not impose terms or conditions which, in the
aggregate, could reasonably be expected to have a Company Material Adverse
Effect or a Parent Material Adverse Effect. A "Final Order" means action by the
relevant regulatory authority which has not been reversed, stayed, enjoined, set
aside, annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be consummated
has expired, and as to which all conditions to the consummation of such
transactions prescribed by law, regulation or order have been satisfied.
Section 8.02 CONDITIONS TO OBLIGATION OF PARENT TO EFFECT THE MERGER. The
-------------------------------------------------------
obligation of Parent to effect the Merger shall be further subject to the
satisfaction (or waiver by Parent), on or prior to the Closing Date, of each of
the following conditions:
(a) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects each of its agreements and covenants required
by this Agreement to be so performed by the Company at or prior to the Closing.
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that expressly speak only as of a
specific date or time other than the date hereof or the Closing Date, which need
only be true and correct as of such date or time) except for such failures of
representations or warranties to be true and correct (without regard to any
materiality qualifications contained therein) which, individually and in the
aggregate, would not reasonably be expected to result in a Company Material
Adverse Effect.
(c) Closing Certificates. Parent shall have received a certificate
--------------------
signed by the Chief Executive Officer or Chief Financial Officer of the Company,
dated the
42
Closing Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.02(a) and Section 8.02(b) have been satisfied.
(d) No Company Material Adverse Effect. No Company Material Adverse
----------------------------------
Effect shall have occurred, and there shall exist no fact or circumstance other
than facts and circumstances described in Section 8.02(d) of the Company
Disclosure Schedule or the Company SEC Reports filed prior to the date hereof
which could reasonably be expected to have a Company Material Adverse Effect.
(e) Company Required Consents. The Company Required Consents the
-------------------------
failure of which to obtain would reasonably be expected to have a Company
Material Adverse Effect shall have been obtained.
(f) Affiliate Agreements. Parent shall have received Affiliate
--------------------
Agreements, duly executed by each "affiliate" of the Company, substantially in
the form of Exhibit 7.08, as provided in Section 7.08.
(g) Tax Opinion. Prior to the mailing of the Proxy Statement (and to
-----------
be reconfirmed at the Closing Date), Parent shall have received an opinion from
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P. to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P. may receive and
rely upon representations contained in certificates of Parent, the Company and
others, in each case in form and substance reasonably acceptable to such
counsel.
Section 8.03 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
-----------------------------------------------------
MERGER. The obligation of the Company to effect the Merger shall be further
------
subject to the satisfaction (or waiver by the Company), on or prior to the
Closing Date, of each of the following conditions:
(a) Performance of Obligations of Parent. Parent shall have performed
------------------------------------
in all material respects each of its agreements and covenants required by this
Agreement to be so performed by Parent at or prior to the Closing.
(b) Representations and Warranties. The representations and
------------------------------
warranties of Parent set forth in this Agreement shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date
or time other than the date hereof or the Closing Date, which need only be true
and correct as of such date or time) except for such failures of representations
or warranties to be true and correct (without regard to any materiality
qualifications contained therein) which, individually and in the aggregate,
would not reasonably be expected to result in a Parent Material Adverse Effect.
(c) Closing Certificates. The Company shall have received a
--------------------
certificate signed by the chief Executive Officer or Chief Financial Officer of
Parent, dated the Closing Date, to the effect that, to the best of such
officer's knowledge, the conditions set forth in Section 8.03(a) and Section
8.03(b) have been satisfied.
43
(d) No Parent Material Adverse Effect. No Parent Material Adverse
---------------------------------
Effect shall have occurred, and there shall exist no fact or circumstance other
than facts and circumstances described in Section 8.03(d) of the Parent
Disclosure Schedule or the Parent SEC Reports filed prior to the date hereof
which could reasonably be expected to have a Parent Material Adverse Effect.
(e) Parent Required Consents. Parent Required Consents the failure of
------------------------
which to obtain would reasonably be expected to have a Parent Material Adverse
Effect shall have been obtained.
(f) Tax Opinion. Prior to the mailing of the Proxy Statement (and to
-----------
be reconfirmed at the Closing Date), the Company shall have received an opinion
from Winthrop, Stimson, Xxxxxx & Xxxxxxx to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Winthrop, Stimson, Xxxxxx & Xxxxxxx may receive and rely
upon representations contained in certificates of Parent, the Company and
others, in each case in form and substance reasonably acceptable to such
counsel.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 9.01 TERMINATION. This Agreement may be terminated, and the
-----------
Merger and other transactions contemplated hereby may be abandoned, at any time
prior to the Effective Time, whether before or after approval by the
shareholders of the respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Board of Directors of the
Company and Board of Trustees of Parent;
(b) by Parent or the Company hereto, by written notice to the other
parties, if the Effective Time shall not have occurred on or before the date
which is ten months from the date hereof (the "Initial Termination Date");
provided, however, that the right to terminate the Agreement under this Section
9.01(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted directly or
indirectly in, the failure of the Effective Time to occur on or before such
date; and provided, further, that if on the Initial Termination Date the
conditions to the Closing set forth in Section 8.01(f) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Initial Termination Date shall be extended
to the 15th-month anniversary of the date hereof (the "Extended Termination
Date");
(c) by Parent or the Company, by written notice to the other parties,
if the Company Shareholders' Approval shall not have been obtained at a duly
held Company Special Meeting, including any adjournments thereof;
44
(d) by Parent or the Company, if any state or federal law, order,
rule or regulation is adopted or issued, which has the effect, as supported by
the written opinion of outside counsel for such party, of prohibiting the
Merger, or if any court of competent jurisdiction in the United States or any
State shall have issued an order, judgment or decree permanently restraining,
enjoining or otherwise prohibiting the Merger, and such order, judgment or
decree shall have become final and nonappealable; (provided that the right to
terminate this Agreement under this Section 9.01(d) shall not be available to
any party that has not defended such lawsuit or other legal proceeding
(including seeking to have any stay or temporary restraining order entered by
any court or other Governmental Authority vacated or reversed);
(e) by the Company upon ten (10) days' prior written notice to Parent
if the Board of Directors of the Company determines in good faith, that
termination of this Agreement is necessary for the Board of Directors of the
Company to act in a manner consistent with its fiduciary duties to shareholders
under applicable law by reason of an Alternative Proposal meeting the
requirements of Section 6.02 having been made; provided that
(A) the Board of Directors of the Company shall determine
based on advice of outside counsel with respect to the Board of
Directors' fiduciary duties that notwithstanding a binding commitment
to consummate an agreement of the nature of this Agreement entered
into in the proper exercise of its applicable fiduciary duties, and
notwithstanding all concessions which may be offered by Parent in
negotiation entered into pursuant to clause (B) below, it is necessary
pursuant to such fiduciary duties that the directors reconsider such
commitment as a result of such Alternative Proposal;
(B) prior to any such termination, the Company shall, and
shall cause its respective financial and legal advisors to, give
Parent a reasonable opportunity during such ten-day period following
receipt by Parent of such written notice to make such adjustments in
the terms and conditions of this Agreement as would enable the Company
to proceed with the Merger or other transactions contemplated hereby
on such adjusted terms and negotiate in good faith with Parent with
respect to any such adjustments; and
(C) the Company's ability to terminate this Agreement
pursuant to Section 9.01(e) is conditioned upon the payment by the
Company to Parent of any amounts owed by it pursuant to Section
9.03(b).
(f) by the Company, by written notice to Parent, if (i) there exist
material breaches of the representations and warranties of Parent made herein as
of the date hereof which breaches, individually or in the aggregate, would or
would reasonably be expected to result in a Parent Material Adverse Effect, and
such breaches shall not have been remedied within 20 days after receipt by
Parent of notice in writing from the Company, specifying the nature of such
breaches and requesting that they be remedied, or (ii) there
45
shall have been a material breach of any agreement or covenant of Parent
hereunder, and such breach shall not have been remedied within 20 days after
receipt by Parent of notice in writing from the Company, specifying the nature
of such failure and requesting that it be remedied; or
(g) by Parent, by written notice to the Company, if (i) there exist
material breaches of the representations and warranties of the Company made
herein as of the date hereof which breaches, individually or in the aggregate,
would or would reasonably be expected to result in a Company Material Adverse
Effect, and such breaches shall not have been remedied within 20 days after
receipt by the Company of notice in writing from Parent, specifying the nature
of such breaches and requesting that they be remedied, (ii) there shall have
been a material breach of any agreement or covenant of the Company hereunder,
and such failure to perform or comply shall not have been remedied within 20
days after receipt by the Company of notice in writing from Parent, specifying
the nature of such failure and requesting that it be remedied; or (iii) the
Board of Directors of the Company (A) shall withdraw or modify in any manner
materially adverse to Parent its approval or recommendation of this Agreement or
the transactions contemplated herein, (B) shall approve or recommend an
Alternative Proposal or (C) shall resolve to take any of the actions specified
in clause (A) or (B).
Section 9.02 EFFECT OF TERMINATION. In the event of a valid termination
---------------------
of this Agreement by either the Company or Parent pursuant to Section 9.01, this
Agreement shall forthwith become null and void and there shall be no liability
on the part of either the Company or Parent or their respective officers,
trustees or directors hereunder, except that Section 7.12, Section 9.03, the
agreement contained in the last sentence of Section 7.01, Section 10.08 and
Section 10.09 shall survive the termination.
Section 9.03 TERMINATION FEE; EXPENSES. (a) Payment of Expenses Following
------------------------- -----------------------------
Termination Pursuant to 9.01(f) and (g). If this Agreement is terminated
---------------------------------------
pursuant to Section 9.01(g)(i) or (ii), then the Company shall promptly (but not
later than five business days after receiving notice of termination) pay to
Parent in cash an amount equal to all documented out-of-pocket expenses and fees
incurred by Parent (including, without limitation, fees and expenses payable to
all legal, accounting, financial, and other professionals arising out of, in
connection with or related to the transactions contemplated by this Agreement)
not in excess of $5 million. If this Agreement is terminated pursuant to Section
9.01(f), then Parent shall promptly (but not later than five business days after
receiving notice of termination) pay to the Company in cash an amount equal to
all documented out-of-pocket expenses and fees incurred by the Company
(including, without limitation, fees and expenses payable to all legal,
accounting, financial, and other professionals arising out of, in connection
with or related to the transactions contemplated by this Agreement) not in
excess of $5 million.
(b) In the event that (i) this Agreement is terminated by the Company
pursuant to Section 9.01(e) or by Parent pursuant to Section 9.01(g)(iii) or
(ii) any person or group shall have made an Alternative Proposal that has not
been withdrawn and this Agreement is terminated by (A) Parent pursuant to
Section 9.01(c) or (B) by the Company pursuant to Section 9.01(b), then the
Company shall promptly (but in no event
46
later than the date of such termination) pay to Parent, by wire transfer of same
day funds, a termination fee of $19 million plus an amount equal to all
documented out-of-pocket expenses and fees incurred by Parent arising out of, or
in connection with or related to, the Merger and other transactions contemplated
hereby, not in excess of $5 million in the aggregate; provided, however, that if
this Agreement is terminated pursuant to the provisions of clause (ii) above,
then no payment of a termination fee or expenses by the Company to Parent shall
be required unless and until a definitive agreement with respect to the
applicable Alternative Proposal is executed within two years after such
termination and, in such event, a termination fee and expenses shall be payable
within five (5) business days after the execution of such definitive agreement.
(c) In the event that this Agreement is terminated by either Parent
or the Company pursuant to Section 9.01(b) or by mutual written consent of the
Company and Parent pursuant to 9.01(a), and, on the date of such termination,
there are no remaining conditions (unsatisfied or not waived) to the obligations
of either party to effect the Merger except for the receipt by Parent of any
Parent Required Statutory Approval under the 1935 Act as required by, and in
accordance with the terms of, Section 8.01(f), then Parent shall pay to the
Company, by wire transfer of same day funds within five (5) business days after
such termination, a termination fee of $10.625 million.
(d) Nature of Fees. The parties agree that the agreements contained
--------------
in this Section 9.03 are an integral part of the Merger and the other
transactions contemplated hereby and constitute liquidated damages and not a
penalty. The parties further agree that if any party is or becomes obligated to
pay a termination fee or expenses pursuant to Sections 9.03(a), 9.03(b) or
9.03(c), the right to receive such termination fee or expenses shall be the sole
remedy of the other party with respect to the facts and circumstances giving
rise to such payment obligation. If this Agreement is terminated by a party as a
result of a willful breach of a representation, warranty, covenant or agreement
by the other party, the non-breaching party may pursue any remedies available to
it at law or in equity and shall be entitled to recover any additional amounts
thereunder. Notwithstanding anything to the contrary contained in this Section
9.03, if one party fails to promptly pay to the other any fee or expense due
under this Section 9.03, in addition to any amounts paid or payable pursuant to
Section, the defaulting party shall pay the costs and expenses (including legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee at the publicly announced prime rate of
Citibank, N.A. from the date such fee was required to be paid.
Section 9.04 AMENDMENT. This Agreement may be amended by the Boards of
---------
Directors and Trustees of the parties hereto, at any time before or after
approval hereof by the shareholders of the Company and prior to the Effective
Time, but after such approval only to the extent permitted by applicable law.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.05 WAIVER. At any time prior to the Effective Time, the Parent
------
or the Company may (a) extend the time for the performance of any of the
obligations or
47
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
No waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.
ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.01 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND WARRANTIES. All
------------------------------------------------------
representations, warranties and agreements in this Agreement shall not survive
the Merger, except as otherwise provided in this Agreement and except for the
agreements contained in this Section 10.01, in Articles I and II and in Sections
7.05, 7.09, 7.10, 7.11, 10.07, 10.08 and 10.09.
Section 10.02 BROKERS. The Company represents and warrants that, except
-------
for XX Xxxx Xxxxxx whose fees have been disclosed to Parent prior to the date
hereof, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. Parent represents and warrants that, except for Credit
Suisse First Boston, ,whose fees have been disclosed to the Company prior to the
date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent.
Section 10.03 NOTICES. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if (i) delivered personally, (ii)
sent by reputable overnight courier service, (iii) telecopied (which is
confirmed), or (iv) five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to the Company, to:
Yankee Energy System, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
48
with a copy to:
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to Parent, to:
Northeast Utilities Service Company
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Section 10.04 MISCELLANEOUS. This Agreement (including the documents and
-------------
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; (ii) shall not be assigned by
operation of law or otherwise; and (iii) shall be governed by and construed in
accordance with the laws of the State of Connecticut applicable to contracts
executed in and to be fully performed in such State, without giving effect to
its conflicts of law, rules or principles.
Section 10.05 INTERPRETATION. When a reference is made in this Agreement
--------------
to Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
49
Section 10.06 COUNTERPARTS; EFFECT. This Agreement may be executed in one
--------------------
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 10.07 PARTIES IN INTEREST. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and, except for Article II
and for rights of Indemnified Parties as set forth in Section 7.05, nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 10.08 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
--------------------
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 10.09 ENFORCEMENT. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Connecticut or in Connecticut state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Connecticut
or any Connecticut state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Connecticut.
50
IN WITNESS WHEREOF, the Company and Parent have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
YANKEE ENERGY SYSTEM, INC.
By:
/s/ Xxxxxxx X. Xxxxxx
_______________________________
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
NORTHEAST UTILITIES
By:
/s/ Xxxxxxx X. Xxxxxx
_______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chairman, President and
Chief Executive Officer
51
