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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 9, 1996
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DELMARVA POWER & LIGHT COMPANY
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(Exact Name of Registrant as Specified in Charter)
Delaware and Virginia I-1405 51-0084283
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 302-429-3448
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None
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
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MERGER AGREEMENT WITH ATLANTIC ENERGY, INC.
Delmarva Power & Light Company, a Delaware and Virginia Corporation
headquartered in Wilmington, Delaware ("Delmarva"), and Atlantic Energy,
Inc., a New Jersey corporation headquartered in Egg Harbor Township, New
Jersey ("AE"), DS, Inc., a Delaware corporation which has been newly formed
to accomplish this transaction ("Newco"), and DS Sub, Inc., a newly-formed
Delaware corporation and a wholly-owned subsidiary of Newco ("Sub"), have
entered into an Agreement and Plan of Merger, dated as of August 9, 1996
(the "Merger Agreement"), which provides for a business combination of
Delmarva and AE as peer firms in a merger of equals (the "Transaction").
The outstanding stock of Newco is owned 50% by Delmarva and 50% by AE. The
Transaction, which was approved unanimously by the Boards of Directors of
Delmarva and AE on August 9, 1996, is expected to close shortly after all
of the conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived. The
regulatory approval process is expected to take approximately 12 to 18
months.
As a result of the Transaction, Newco will become the holding company
of the combined enterprise and will be registered under the Public Utility
Holding Company Act of 1935, as amended. The name of Newco will be changed
at a later date as agreed upon by the Boards of Directors of Delmarva and
AE. Newco will be the parent company of both Delmarva and Atlantic City
Electric Company ("Atlantic Electric"), which currently is AE's regulated
utility subsidiary.
The Merger Agreement and the joint press release issued in connection
therewith are filed as exhibits hereto and are incorporated herein by
reference. The description of the Merger Agreement set forth herein does
not purport to be complete and is qualified in its entirety by the
provisions of the Merger Agreement.
Under the terms of the Merger Agreement the following will occur
simultaneously: (1) Sub will be merged with and into Delmarva, and shares
of Delmarva's common stock, par value $2.25 per share ("Delmarva Common
Stock"), will be exchanged for shares of Newco's common stock, par value
$.01 per share ("Newco Common Stock"), with Delmarva the surviving
corporation in the merger (the "Delmarva Merger"); and (2) AE will be
merged with and into Newco, and AE's shares of common stock, no par value
("AE Common Stock"), will be exchanged for shares of Newco Common Stock and
Newco's Class A Common Stock, par value $.01 per share (the "Class A
Stock"), with Newco being the surviving corporation in the merger (the
"Atlantic Merger"). As a result of the foregoing mergers, Newco will be
the parent of Delmarva and its subsidiaries, of Atlantic Electric and of
AE's other subsidiaries.
Delmarva stockholders will receive one share of Newco Common Stock for
each share of Delmarva Common Stock they hold immediately prior to the
Transaction. AE stockholders will receive .75 shares of Newco Common Stock
and 0.125 shares of Class A Stock for each share of AE Common Stock they
hold immediately prior to the Transaction. As of June 30, 1996, Delmarva
had outstanding 60,697,635 shares of common stock and AE had outstanding
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52,702,052 shares of common stock. Delmarva's outstanding Preferred Stock
and Preferred Stock--$25 Par will be unchanged and remain outstanding after
the Transaction. The Preferred Stock of Atlantic Electric also will be
unchanged and remain outstanding after the Transaction.
The Class A Stock is intended to reflect the growth prospects and
regulatory environment of Atlantic Electric, AE's regulated electric
utility business. When the Transaction is consummated, the shares of Class
A Stock received by AE's stockholders will represent, in aggregate, a 30%
interest in any earnings of Atlantic Electric (regulated electric utility
business only) in excess of $40 million per year. The first $40 million of
earnings of Atlantic Electric and the remaining 70% of Atlantic Electric's
earnings in excess of $40 million after adding back goodwill, as well as
all of Newco's earnings not attributable to Atlantic Electric's electric
utility business, will be for the benefit of Newco's stockholders. See
Exhibit A--Form of Certificate of Incorporation of Newco, which is attached
to the Merger Agreement, for the terms, conditions and designations of the
Class A Stock.
It is anticipated that the initial annual dividend for the Newco
Common Stock would be $1.54 (the same annual dividend as currently paid by
both Delmarva and AE on their respective shares of common stock). The
Merger Agreement provides that, subject to declaration by the Board of
Directors of Newco and the obligation of such Board to react to Newco's
financial condition, regulatory environment and results of operations, the
annual dividend on the Class A Stock will be $3.20 ($.40 for each .125
share received in the exchange) per share per annum until the earlier of
July 1, 2001, or the end of the 12th calendar quarter following the
calendar quarter in which the Transaction is consummated (the "Initial
Period"). Thereafter, Newco intends, subject to declaration by the Board
of Directors of Newco and the obligation of such Board to react to Newco's
financial condition, regulatory environment and results of operations, to
pay annual dividends on the Class A Common Stock at a rate equal to 90% of
earnings in excess of $40 million attributable to Atlantic Electric's
regulated utility business; provided that if and to the extent the annual
dividends paid on the Class A Stock during the Initial Period exceed 100%
of earnings in excess of $40 million attributable to such business during
such period, Newco's Board of Directors may consider this fact in
determining the appropriate annual dividend rate on the Class A Stock
thereafter.
A preliminary estimate indicates that the Transaction will result in
net savings in excess of $500 million in costs over a 10-year period. The
allocation of net savings between the ratepayers of Newco's utility
subsidiaries and the stockholders of Newco will be determined by various
regulatory agencies.
The Transaction is subject to customary closing conditions, including,
without limitation: (a) the receipt of required stockholder approvals of
Delmarva and AE; (b) the making of all necessary filings with, and receipt
of all requisite approvals from, governmental authorities, including the
approvals of the utility regulators in Delaware, New Jersey and Virginia,
the approval of the Federal Energy Regulatory Commission, the Nuclear
Regulatory Commission and the Securities and Exchange Commission, and the
filing of the requisite notification with the Federal Trade Commission and
the Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration of the applicable
waiting periods
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thereunder; and (c) the receipt of opinions of counsel to
the effect that, under the Internal Revenue Code, the Delmarva Merger,
taken together with the Atlantic Merger, will be treated as a tax-free
exchange and that the Atlantic Merger will be treated as a reorganization.
It is expected that stockholder meetings to approve the Transaction will be
held in early 1997.
The Merger Agreement contains certain covenants restricting the
conduct of Delmarva's and AE's respective businesses during the period
between execution of the Merger Agreement and consummation of the
Transaction. Generally, the parties: must conduct their businesses in the
ordinary course consistent with past practice; may not increase dividends
beyond specified levels; may not issue any capital stock beyond certain
limits; may not amend their charters or bylaws in a manner adverse to the
other party; may not make acquisitions, dispositions or capital
expenditures nor incur debt beyond certain limits; may not discharge or
satisfy liabilities nor change any material contracts except in the
ordinary course of business; and may not make any changes affecting their
accounting rules, the tax-free status of the Transaction or the tax-exempt
status of any of their tax-exempt bonds. Additionally, the parties agreed
to discuss with each other any changes in rates or charges, standards of
service or accounting with respect to regulated utility operations, and
agreed not to make any filings to change rates or charges if doing so would
have a material adverse effect on the benefits associated with the
Transaction. AE also agreed to terminate its retirement plan for
nonemployee directors, and not to make any changes in its or Atlantic
Electric's utility status under the Public Utility Holding Company Act of
1935, as amended.
The Merger Agreement provides that, after consummation of the
Transaction, Newco will be headquartered in Wilmington, Delaware, with
significant presence in New Jersey. The Merger Agreement provides that
Delmarva may nominate 10 directors to the initial post-Transaction Board of
Directors of Newco, that AE may nominate 8 directors to the initial post-
Transaction Board, and that all directors of Delmarva and AE serving
immediately prior to consummation of the Transaction will be offered
positions on the Newco Board. Mr. Howard E. Cosgrove, the current Chairman
of the Board, President and Chief Executive Officer ("CEO") of Delmarva,
will serve as Chairman of the Board and CEO of Newco. Mr. Jerrold L.
Jacobs, the current Chairman of the Board and CEO of AE, will serve as
Vice-Chairman of the Board of Newco until the second anniversary of the
consummation of the Transaction. Mr. Michael J. Chesser, the current
President and Chief Operating Officer ("COO") of AE, will serve as
President and COO of Newco.
The Merger Agreement may be terminated under certain circumstances,
including: (1) by mutual consent of the Boards of Directors of Delmarva
and AE; (2) by Delmarva or AE if the Transaction is not consummated on or
before 18 months from signing of the Merger Agreement (subject to automatic
extension to 30 months from signing if, on or before 18 months from
signing, all of the statutory approvals have not been obtained and all
other conditions to closing of the Transaction then are capable of being
satisfied); (3) by Delmarva or AE if approval of the Transaction by either
Delmarva or AE stockholders is not obtained; (4) by Delmarva or AE if any
state or federal law, rule or regulation or court order prohibits the
Transaction; (5) by Delmarva or AE on five days' prior notice if its Board
of Directors determines in good faith on the basis of a written opinion of
outside counsel that the acceptance of an acquisition proposal by a third
party is
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necessary for such Board of Directors to act consistent with its
fiduciary duties, after the other party has first been given an opportunity
to negotiate and make adjustments in the terms of the Merger Agreement;
(6) by one party if there exists a material breach by the other party of
any representation, warranty, covenant or agreement, which breach is not
remedied within 20 days after receipt of notice by the nonbreaching party;
(7) by either party if the Board of Directors of the other party shall
withdraw or adversely modify its recommendation of the Transaction, fail to
reaffirm such recommendation, approve any third party acquisition proposal,
or resolve to take any of the aforesaid actions; and (8) by either party if
(A) a third party acquires more than 50% of the voting power of the
outstanding securities of the other party, or (B) a majority of the members
of the Board of Directors of the other party as of the signing of the
Merger Agreement (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of
such other party was approved by a vote of a majority of the directors of
such other party then still in office who are either directors as of the
date of the Merger Agreement or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors of such other party then in office.
The Merger Agreement provides that if it is terminated pursuant to the
provisions described in clauses (5), (6), (7) or (8) of the preceding
paragraph, the breaching party or the party whose board has terminated on
the basis of its fiduciary duties or changed its recommendation or whose
voting stock has been acquired or whose board has changed shall pay to the
other party out-of-pocket expenses and fees incurred in connection with the
Transaction up to $10 million ("Out-of-Pocket Expenses"); provided that in
the event of a willful breach by the other party, the terminating party may
in addition pursue any remedies available to it under law or equity. In
addition, if the Merger Agreement is terminated pursuant to the provisions
described in clause (2), (3), (5), (6) or (7) of the preceding paragraph or
as a result of a breach of the requirement to seek stockholder approval and
at the time of such termination a third party acquisition proposal is
outstanding for Delmarva or AE (as the case may be, the "Target Party") and
such third party offer is consummated or accepted by the Target party or
the Target Party or any of its affiliates becomes a subsidiary of the
offeror or enters into a written agreement to consummate such transaction,
in any case within 2 1/2 years after the termination, the Target Party must
pay the other party $30 million plus Out-of-Pocket Expenses. If the Merger
Agreement is terminated pursuant to the provisions described in clause (8)
of the preceding paragraph, the nonterminating party must pay the other
party $30 million plus Out-of-Pocket Expenses. Notwithstanding the
foregoing, the total amount of fees payable by Delmarva or AE upon
termination of the Merger Agreement shall not exceed $40 million, including
Out-of-Pocket Expenses.
Delmarva recognizes that the divestiture of its existing gas
operations and certain nonutility operations is a possibility under the new
registered holding company structure, but Delmarva will seek approval from
the SEC to maintain such businesses. If divestiture is ultimately
required, the SEC historically has allowed companies sufficient time to
accomplish divestitures in a manner that protects stockholder value.
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The information set forth above includes forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements reflect numerous assumptions
and involve a number of risks and uncertainties. Among the factors that
could cause actual results to differ materially from those set forth above
are: electric load and customer growth; abnormal weather conditions,
available sources and cost of fuel and generating capacity; the speed and
degree to which competition enters the power generation, wholesale and
retail sectors of the electric utility industry; state and federal
regulatory initiatives that increase competition, threaten cost and
investment recovery and impact rate structures; the ability of Newco to
reduce successfully its cost structure; operating performance of the
nuclear generating facilities, decommissioning costs associated with such
facilities and impact on future operational and financial condition
associated with the uncertain status of the Salem Nuclear Generating
Station; the degree to which Newco develops non-regulated business
ventures; the economic climate and growth in the service territories of
Delmarva and Atlantic Electric following the Transaction; economies
generated by the Transaction; inflationary trends and interest rates and
other risks detailed from to time in the reports filed with the Securities
and Exchange Commission by Delmarva and AE.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
Exhibit No. Description of Exhibit
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2 Agreement and Plan of Merger dated as of
August 9, 1996, by and among Delmarva Power
& Light Company, Atlantic Energy, Inc., DS,
Inc. and DS Sub, Inc.
99 Joint press release, dated August 12, 1996,
of Delmarva Power & Light Company and
Atlantic Energy, Inc.
As part of Exhibit No. 2 to this report, Delmarva is filing Exhibit
A--Form of Certificate of Incorporation of Newco. Pursuant to Item
601(b)(2) of Regulation S-K, Delmarva is not filing any other attachments
or schedules to the Merger Agreement as part of the Exhibit No. 2, but is
providing the following list of such attachments and schedules as required
by such Item:
Exhibit B--Form of Bylaws of Newco
Exhibit C--Form of Affiliate Agreement (regarding the obligations of
affiliates pursuant to Rule 144 under the Securities Act of
1933, as amended)
Delmarva agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted attachments or schedules.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Delmarva Power & Light Company
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(Registrant)
Date: August 14, 1996 /s/DALE G. STOODLEY
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Dale G. Stoodley
Vice President and
General Counsel
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AGREEMENT AND PLAN OF
MERGER
dated as of August 9, 1996
by and among
DELMARVA POWER & LIGHT COMPANY
ATLANTIC ENERGY, INC.
DS, INC.
and
DS SUB, INC.
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AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGERS . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Mergers . . . . . . . . . . . . . . . 2
Section 1.2 Effects of the Mergers . . . . . . . . . 3
Section 1.3 Effective Time of the Mergers . . . . . . 4
ARTICLE II TREATMENT OF SHARES . . . . . . . . . . . . . . 4
Section 2.1 Effect of Mergers on Capital Stock . . . 4
Section 2.2 Exchange of Common Stock Certificates . . 7
ARTICLE III THE CLOSING . . . . . . . . . . . . . . . . . . 11
Section 3.1 Closing . . . . . . . . . . . . . . . . . 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DELMARVA . . . 11
Section 4.1 Organization and Qualification . . . . . 11
Section 4.2 Subsidiaries . . . . . . . . . . . . . . 12
Section 4.3 Capitalization . . . . . . . . . . . . . 13
Section 4.4 Authority; Noncontravention; Statutory
Approvals; Compliance . . . . . . . . . . . . . 14
Section 4.5 Reports and Financial Statements . . . . 17
Section 4.6 Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities . . . . . . 18
Section 4.7 Litigation . . . . . . . . . . . . . . . 19
Section 4.8 Registration Statement and Proxy
Statement . . . . . . . . . . . . . . . . . . . 19
Section 4.9 Tax Matters . . . . . . . . . . . . . . . 20
Section 4.10 Employee Matters; ERISA . . . . . . . . 26
Section 4.11 Environmental Protection . . . . . . . . 33
Section 4.12 Regulation as a Utility . . . . . . . . 37
Section 4.13 Vote Required . . . . . . . . . . . . . 37
Section 4.14 Opinion of Financial Advisor . . . . . . 38
Section 4.15 Insurance . . . . . . . . . . . . . . . 38
Section 4.16 Applicability of Certain Delaware and
Virginia Law . . . . . . . . . . . . . . . . . 38
Section 4.17 Ownership of Atlantic Common Stock . . . 38
Section 4.18 Operations of Delmarva Nuclear Power
Plants . . . . . . . . . . . . . . . . . . . . 39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ATLANTIC . . . 39
Section 5.1 Organization and Qualification . . . . . 39
Section 5.2 Subsidiaries . . . . . . . . . . . . . . 40
Section 5.3 Capitalization . . . . . . . . . . . . . 41
Section 5.4 Authority; Noncontravention; Statutory
Approvals; Compliance . . . . . . . . . . . . . 41
Section 5.5 Reports and Financial Statements . . . . 44
Section 5.6 Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities . . . . . . 45
Section 5.7 Litigation . . . . . . . . . . . . . . . 46
Section 5.8 Registration Statement and Proxy
Statement . . . . . . . . . . . . . . . . . . . 46
Section 5.9 Tax Matters . . . . . . . . . . . . . . . 47
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TABLE OF CONTENTS (Continued)
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Page
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Section 5.10 Employee Matters; ERISA . . . . . . . . 52
Section 5.11 Environmental Protection . . . . . . . . 59
Section 5.12 Regulation as a Utility . . . . . . . . 61
Section 5.13 Vote Required . . . . . . . . . . . . . 62
Section 5.14 Opinion of Financial Advisor . . . . . . 62
Section 5.15 Insurance . . . . . . . . . . . . . . . 62
Section 5.16 Applicability of Certain New Jersey Law 62
Section 5.17 Ownership of Delmarva Common Stock . . . 62
Section 5.18 Operations of Atlantic Nuclear Power
Plants . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGERS . . . . 63
Section 6.1 Ordinary Course of Business . . . . . . . 64
Section 6.2 Dividends . . . . . . . . . . . . . . . . 65
Section 6.3 Issuance of Securities . . . . . . . . . 66
Section 6.4 Charter Documents . . . . . . . . . . . . 67
Section 6.5 Acquisitions . . . . . . . . . . . . . . 67
Section 6.6 No Dispositions . . . . . . . . . . . . . 68
Section 6.7 Indebtedness . . . . . . . . . . . . . . 68
Section 6.8 Capital Expenditures . . . . . . . . . . 69
Section 6.9 Compensation, Benefits . . . . . . . . . 69
Section 6.10 1935 Act . . . . . . . . . . . . . . . . 70
Section 6.11 Accounting . . . . . . . . . . . . . . . 71
Section 6.12 Tax-Free Status . . . . . . . . . . . . 71
Section 6.13 Discharge of Liabilities . . . . . . . . 71
Section 6.14 Cooperation, Notification . . . . . . . 72
Section 6.15 Rate Matters . . . . . . . . . . . . . . 72
Section 6.16 Third-Party Consents . . . . . . . . . . 73
Section 6.17 No Breach, Etc . . . . . . . . . . . . . 73
Section 6.18 Tax-Exempt Status . . . . . . . . . . . 73
Section 6.19 Transition Management . . . . . . . . . 73
Section 6.20 Insurance . . . . . . . . . . . . . . . 74
Section 6.21 Permits . . . . . . . . . . . . . . . . 74
Section 6.22 Contracts; Agreements . . . . . . . . . 74
ARTICLE VII ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 75
Section 7.1 Access to Information . . . . . . . . . . 76
Section 7.2 Joint Proxy Statement and Registration
Statement . . . . . . . . . . . . . . . . . . . 76
Section 7.3 Regulatory Matters . . . . . . . . . . . 78
Section 7.4 Shareholder Approvals . . . . . . . . . . 79
Section 7.5 Directors' and Officers' Indemnification 80
Section 7.6 Disclosure Schedules . . . . . . . . . . 83
Section 7.7 Public Announcements . . . . . . . . . . 83
Section 7.8 Rule 145 Affiliates . . . . . . . . . . . 83
Section 7.9 Employee Agreements and Workforce
Matters . . . . . . . . . . . . . . . . . . . . 84
Section 7.10 Employee Benefit Plans . . . . . . . . . 85
Section 7.11 Incentive, Stock and Other Plans . . . . 86
Section 7.12 No Solicitations . . . . . . . . . . . . 87
Section 7.13 Company Board of Directors . . . . . . . 89
Section 7.14 Company Officers . . . . . . . . . . . . 89
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TABLE OF CONTENTS (Continued)
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Page
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Section 7.15 Location of Corporate Offices and
Operations; Company Name . . . . . . . . . . . 90
Section 7.16 Company Certificate of Incorporation and
Bylaws. . . . . . . . . . . . . . . . . . . . . 90
Section 7.17 Expenses . . . . . . . . . . . . . . . . 91
Section 7.18 Letter Stock Dividend Policy . . . . . . 91
Section 7.19 Further Assurances . . . . . . . . . . . 92
ARTICLE VIII CONDITIONS . . . . . . . . . . . . . . . . . . 93
Section 8.1 Conditions to Each Party's Obligation to
Effect the Merger to Which it is Party . . . . 93
Section 8.2 Conditions to Obligation of Atlantic to
Effect the Atlantic Merger . . . . . . . . . . 95
Section 8.3 Conditions to Obligation of Delmarva to
Effect the Delmarva Merger . . . . . . . . . . 96
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER . . . . . . . 98
Section 9.1 Termination . . . . . . . . . . . . . . . 98
Section 9.2 Effect of Termination . . . . . . . . . . 102
Section 9.3 Certain Damages, Payments and Expenses . 102
Section 9.4 Amendment . . . . . . . . . . . . . . . . 104
Section 9.5 Waiver . . . . . . . . . . . . . . . . . 105
ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . . . . 105
Section 10.1 Nonsurvival of Representations,
Warranties, Covenants and Agreements . . . . . 105
Section 10.2 Brokers . . . . . . . . . . . . . . . . 106
Section 10.3 Notices . . . . . . . . . . . . . . . . 106
Section 10.4 Entire Agreement; Assignment; Governing
Law; Waiver of Jury Trial; Etc. . . . . . . . . 107
Section 10.5 Interpretation . . . . . . . . . . . . . 108
Section 10.6 Counterparts; Effect . . . . . . . . . . 108
Section 10.7 Parties in Interest . . . . . . . . . . 108
Section 10.8 Specific Performance . . . . . . . . . . 109
EXHIBITS
Exhibit A - Form of Certificate of Incorporation of the
Company
Exhibit B - Form of Bylaws of the Company
Exhibit C - Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 9,
1996 (this "Agreement"), by and among Delmarva Power & Light
Company, a corporation formed under the laws of the State of
Delaware and the Commonwealth of Virginia ("Delmarva"), Atlantic
Energy, Inc., a corporation formed under the laws of the State of
New Jersey ("Atlantic"), DS, Inc., a corporation formed under the
laws of the State of Delaware, 50% of whose outstanding capital
stock is owned by Delmarva and 50% of whose capital stock is
owned by Atlantic (the "Company"), and DS Sub, Inc., a
corporation formed under the laws of the State of Delaware and a
wholly owned subsidiary of the Company ("DS Sub").
WHEREAS, Delmarva and Atlantic have determined to
engage in a business combination as peer firms in a merger of
equals;
WHEREAS, in furtherance thereof, the respective
Boards of Directors of Delmarva, Atlantic, the Company and DS Sub
have approved the consummation of a reorganization provided for
in this Agreement, pursuant to which Atlantic will merge with and
into the Company and DS Sub will merge with and into Delmarva, in
each case upon the terms and subject to the conditions set forth
in this Agreement (such transactions being referred to herein
respectively as the Atlantic Merger and the Delmarva Merger, each
individually as a "Merger" and together as the "Mergers"), as a
result of which the common shareholders of Delmarva and Atlantic
will together own all of the outstanding shares of common stock
of the Company, including, in the case of the common shareholders
of Atlantic, the Letter Stock (as defined in Section 2.1(b)), and
each share of each other class of capital stock, if any, of
<PAGE>
Delmarva and Atlantic shall be unaffected and remain outstanding;
and
WHEREAS, for federal income tax purposes, it is
intended that (i) the Delmarva Merger will qualify as an
exchange under the provisions of Section 351 of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and
(ii) the Atlantic Merger will qualify as a reorganization under
the provisions of Section 368(a) of 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 MERGERS
Section 1.1 The Mergers. Upon the terms and subject
to the conditions of this Agreement:
(a) At the Effective Time (as defined in Section
1.3), Atlantic shall be merged with and into the Company (the
"Atlantic Merger") in accordance with the applicable provisions
of the laws of the State of Delaware and New Jersey. The Company
shall be the surviving corporation in the Atlantic Merger and
shall continue its corporate existence under the laws of the
State of Delaware. The effects and the consequences of the
Atlantic Merger shall be as set forth in Section 1.2(a).
Throughout this Agreement, the term "Company" shall refer to the
Company prior to the Atlantic Merger or to the Company in its
capacity as the surviving corporation in the Atlantic Merger, as
the context requires.
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(b) At the Effective Time, DS Sub shall be merged
with and into Delmarva (the "Delmarva Merger") in accordance with
the laws of the State of Delaware and the Commonwealth of
Virginia. Delmarva shall be the surviving corporation in the
Delmarva Merger and shall continue its corporate existence under
the laws of the State of Delaware and the Commonwealth of
Virginia. The effects and the consequences of the Delmarva
Merger shall be as set forth in Section 1.2(b).
Section 1.2 Effects of the Mergers.
(a) At the Effective Time, (i) the certificate of
incorporation of the Company, as in effect immediately prior to
the Effective Time (which shall be amended and restated pursuant
to Section 7.17), shall be the certificate of incorporation of
the surviving corporation in the Atlantic Merger until thereafter
amended as provided by law and such certificate of incorporation,
and (ii) the bylaws of the Company, as in effect immediately
prior to the Effective Time (which shall be amended and restated
pursuant to Section 7.17), shall be the bylaws of the surviving
corporation in the Atlantic Merger until thereafter amended as
provided by law, the certificate of incorporation of the
surviving corporation in the Atlantic Merger and such bylaws.
Subject to the foregoing, the additional effects of the Atlantic
Merger shall be as provided in the applicable provisions of the
Delaware General Corporation Law (the "DGCL") and the New Jersey
Business Corporation Act (the "NJBCA").
(b) At the Effective Time, (i) the certificate and
articles of incorporation of Delmarva, as in effect immediately
prior to the Effective Time, shall be the certificate and
articles of incorporation of the surviving corporation in the
Delmarva Merger until thereafter amended as provided by law and
such certificate and articles of incorporation, and (ii) the
bylaws of Delmarva, as in effect immediately prior to the
Effective Time, shall be the bylaws of the surviving corporation
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in the Delmarva Merger until thereafter amended as provided by
law, the certificate and articles of incorporation of the
surviving corporation in the Delmarva Merger and such bylaws.
Subject to the foregoing, the additional effects of the Delmarva
Merger shall be as provided in the applicable provisions of the
DGCL and the Virginia Stock Corporation Act (the "VSCA").
Section 1.3 Effective Time of the Mergers.
On the Closing Date (as defined in Section 3.1): (a) a
certificate of merger with respect to the Delmarva Merger shall
be executed and filed by Delmarva with the Secretary of State of
the State of Delaware pursuant to Section 251 of the DGCL and
articles of merger with respect to the Delmarva Merger shall be
executed and filed by Delmarva with the State Corporation
Commission of Virginia (the "Virginia Commission") pursuant to
Section 13.1-720 of the VSCA; and (b) a certificate of merger
with respect to the Atlantic Merger shall be executed and filed
by the Company with the Secretary of State of the State of
Delaware pursuant to Section 252 of the DGCL and a certificate of
merger with respect to the Atlantic Merger shall be executed and
filed by Atlantic and the Company with the Secretary of State of
the State of New Jersey pursuant to Section 14A:10-4.1 of the
NJBCA. The Mergers shall become effective simultaneously and at
the time that Delmarva and Atlantic shall agree, which time shall
be specified in the respective certificates and articles of
merger for the Mergers (such time being herein referred to as the
"Effective Time").
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of Mergers on Capital
Stock. At the Effective Time, by virtue of the Mergers and
without any action on the part of any holder of any capital stock
of Delmarva, Atlantic, the Company or DS Sub:
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(a) Cancellation of Certain Common Stock. Each
share of (i) Delmarva common stock, par value $2.25 ("Delmarva
Common Stock"), that is owned by Delmarva as treasury stock or by
Atlantic or by any wholly owned subsidiary (as defined in
Section 4.1) of Delmarva or Atlantic, (ii) Atlantic common stock,
no par value ("Atlantic Common Stock"), that is owned by Atlantic
as treasury stock or by Delmarva or by any wholly owned
subsidiary of Atlantic or Delmarva and (iii) Company Common
Stock, par value $.01 per share ("Company Common Stock"), that is
owned by Delmarva, Atlantic or any wholly owned subsidiary of
Delmarva or Atlantic, in each case shall be cancelled and shall
cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Conversion of Certain Common Stock. Each share
of Delmarva Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares cancelled pursuant to
Section 2.1(a)) shall be converted into the right to receive one
fully paid and nonassessable share of Company Common Stock (the
"Delmarva Conversion Ratio"), and each share of Atlantic Common
Stock issued and outstanding immediately prior to the Effective
Time (other than shares cancelled pursuant to Section 2.1(a))
shall be converted into the right to receive 0.75 fully paid and
nonassessable share(s) of Company Common Stock and 0.125 fully
paid and nonassessable share(s) of Class A common stock, par
value $0.01 per share ("Letter Stock") of the Company, the
provisions of which are set forth in Article IV of the form of
certificate of incorporation of the Company attached hereto as
Exhibit A (the "Atlantic Conversion Ratio"). Upon such
conversions as provided for herein, each holder of a certificate
formerly representing any such shares of Delmarva Common Stock or
Atlantic Common Stock shall cease to have any rights with respect
thereto, except the right to receive the shares of Company Common
Stock and, in the case of holders of Atlantic Common Stock, the
shares of Letter Stock to be issued in consideration therefor
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(and cash in lieu of fractional shares) upon the surrender of
such certificate in accordance with Section 2.2.
(c) Conversion of DS Sub Common Stock. Each share
of DS Sub Common Stock, par value $.01 per share, issued and
outstanding immediately prior to the Effective Time shall be
converted into and become one share of Common Stock, par value
$2.25, of the surviving corporation in the Delmarva Merger.
(d) Delmarva Preferred Stock Unchanged. Each share
of Delmarva Preferred Stock and each share of Delmarva Preferred
Stock -- $25 par (together, "Delmarva Preferred Stock"), shall be
unchanged in and shall remain outstanding after the Mergers.
(e) Shares of Dissenting Holders. Any issued and
outstanding shares of Delmarva stock which is neither (i) listed
on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Security Dealers, Inc., nor (ii) held of
record by more than 2,000 holders, and which are held by a person
who objects to the Merger and who has demanded appraisal for such
shares in accordance with all applicable provisions of the DGCL
or the VSCA concerning the right of such person to dissent from
the Mergers and demand appraisal of such shares (each, a
"Dissenting Holder") shall, if the DGCL or the VSCA provides for
appraisal rights with respect to such shares in the Mergers, from
and after the Effective Time represent only the right to receive
such consideration as may be determined to be due to such
Dissenting Holder with respect to such shares pursuant to the
DGCL or the VSCA, as applicable; provided, however, that shares
outstanding immediately prior to the Effective Time and held by a
Dissenting Holder who shall withdraw the demand for appraisal, or
lose the right of appraisal of such shares, pursuant to the DGCL
or the VSCA, as applicable, shall be unchanged in and remain
outstanding after the Mergers, without interest.
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Section 2.2 Exchange of Common Stock Certificates.
(a) Deposit with Exchange Agent. On or before the
Effective Time, the Company shall deposit with a bank, trust
company or other agent selected by Delmarva and Atlantic (the
"Exchange Agent") certificates representing shares of Company
Common Stock and Letter Stock required to effect the conversion
of Delmarva Common Stock or Atlantic Common Stock, as the case
may be, into Company Common Stock and, in the case of Atlantic
Common Stock, Letter Stock as described in Section 2.1(b).
(b) Exchange Procedures. As soon as practicable
after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates that
immediately prior to the Effective Time represented issued and
outstanding shares of Delmarva Common Stock or Atlantic Common
Stock (collectively, "Certificates") that were converted
("Converted Shares") into the right to receive shares of Company
Common Stock and, in the case of Atlantic Common Stock, Letter
Stock (collectively, "Company Shares") pursuant to Section
2.1(b), (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 Exchange Agent) and (ii) instructions for use
in effecting the exchange of Certificates for certificates
representing Company Shares. Upon delivery of a Certificate to
the Exchange Agent for exchange, together with a duly executed
letter of transmittal and such other documents as the Exchange
Agent shall require, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate
representing that number of whole Company Shares and the amount
of cash in lieu of fractional share interests that such holder
has the right to receive pursuant to the provisions of this
Article II. In the event of a transfer of ownership of Converted
Shares that is not registered in the transfer records of Delmarva
or Atlantic, as the case may be, a certificate representing the
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proper number of Company Shares may be issued to a transferee if
the Certificate representing such Converted Shares is presented
to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence satisfactory to
the Exchange Agent that any applicable stock transfer taxes have
been paid. Until delivered as contemplated by this Section 2.2,
each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such delivery
the certificate representing Company Shares and cash in lieu of
any fractional shares of Company Common Stock as contemplated by
this Section 2.2.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions declared or made
after the Effective Time with respect to Company Shares with a
record date after the Effective Time shall be paid to the holder
of any undelivered Certificate with respect to the Company Shares
represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section
2.2(d), until the holder of record of such Certificate (or a
transferee as described in Section 2.2(b)) shall have delivered
such Certificate as contemplated in Section 2.2(b). Subject to
the effect of unclaimed property, escheat and other applicable
laws, following delivery of any such Certificate there shall be
paid to the record holder (or transferee) of the certificates
representing whole Company Shares issued in exchange therefor,
without interest, (i) at the time of such delivery, the amount of
any cash payable in lieu of a fractional share of Company Shares
to which such holder (or transferee) is entitled pursuant to
Section 2.2(d) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with
respect to such whole Company 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 such delivery
and a payment date subsequent to such delivery payable with
respect to such whole Company Shares.
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(d) No Fractional Shares. (i) No certificates or
scrip representing fractional shares of Company Shares shall be
issued upon the delivery for exchange of Certificates, and such
fractional share interests shall not entitle the owner thereof to
vote or to any rights of a shareholder of the Company.
(ii) As promptly as practicable following the
Effective Time, the Exchange Agent shall determine the excess of
(x) the number of full shares of Company Shares delivered to the
Exchange Agent by the Company pursuant to Section 2.2(a) over
(y) the aggregate number of full shares of Company Common Stock
and Letter Stock to be distributed to holders of Delmarva Common
Stock and Atlantic Common Stock, respectively, pursuant to
Section 2.1 (such excess being hereinafter referred to as the
"Excess Shares"). As soon after the Effective Time as
practicable, the Exchange Agent, as agent for the holders of
Atlantic Common Stock, shall sell the Excess Shares at then
prevailing prices on the New York Stock Exchange (the "NYSE"),
all in the manner provided in Section 2.2(d)(iii).
(iii) The sale of the Excess 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. Until the proceeds of such sale or sales
have been distributed to the holders of Atlantic Common Stock,
the Exchange Agent shall, until remitted pursuant to Section
2.2(f), hold such proceeds in trust for the holders of Atlantic
Common Stock (the "Common Shares Trust"). The Company 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 the
Excess Shares. The Exchange Agent shall determine the portion of
the proceeds comprising the Common Shares Trust to which each
holder of Atlantic Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate proceeds comprising the
Common Shares Trust by a fraction the numerator of which is the
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amount of the fractional share interest to which such holder of
Atlantic Common Stock is entitled and the denominator of which is
the aggregate amount of fractional share interests to which all
holders of Atlantic Common Stock are entitled.
(iv) As soon as practicable after the sale of
Excess Shares pursuant to clause (iii) above and the
determination of the amount of cash, if any, to be paid to
holders of Atlantic Common Stock in lieu of any fractional share
interests, the Exchange Agent shall distribute such amounts to
holders of Atlantic Common Stock who have theretofore delivered
Certificates for Atlantic Common Stock for exchange pursuant to
this Article II.
(e) Closing of Transfer Books. From and after the
Effective Time, the stock transfer books of Delmarva with respect
to shares of Delmarva Common Stock, and of Atlantic with respect
to shares of Atlantic Common Stock, issued and outstanding prior
to the Effective Time shall be closed and no transfer of any such
shares shall thereafter be made. If after the Effective Time
Certificates are presented to the Company, they shall be
cancelled and exchanged for certificates representing the
appropriate number of whole Company Shares and cash in lieu of
fractional shares of Company Common Stock as provided in this
Section 2.2.
(f) Termination of Exchange Agent. Any certificates
representing Company Shares deposited with the Exchange Agent
pursuant to Section 2.2(a) and not exchanged within one year
after the Effective Time pursuant to this Section 2.2 shall be
returned by the Exchange Agent to the Company, which shall
thereafter act as Exchange Agent. All funds held by the Exchange
Agent for payment to the holders of undelivered Certificates and
unclaimed at the end of one year from the Effective Time shall be
remitted to the Company, after which time any holder of
undelivered Certificates shall look as a general creditor only to
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the Company for payment of such funds to which such holder may be
due, subject to applicable law. The Company shall not be liable
to any person for such shares or funds delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing (the "Closing") of
the Mergers shall take place at a place to be mutually agreed
upon by the parties hereto at 10:00 A.M., local time, on the
second business day immediately following the date on which the
last of the conditions set forth in Article VIII is fulfilled or
waived, or at such other time and date as Delmarva and Atlantic
shall mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DELMARVA
Delmarva represents and warrants to Atlantic as
follows:
Section 4.1 Organization and Qualification. Except
as disclosed in Section 4.1 of the Delmarva Disclosure Schedule
(as defined in Section 7.6(ii)), (i) Delmarva is a corporation
duly organized, validly existing and in good standing under the
laws of its jurisdictions of incorporation, (ii) each of
Delmarva's subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation and (iii) each of Delmarva and each of its
subsidiaries has all requisite corporate power and authority, and
has been duly authorized by all necessary regulatory approvals
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and orders, to own, lease and operate its assets and properties
and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business
or the ownership or leasing of its assets and properties makes
such qualification necessary other than in such jurisdictions
where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a
material adverse effect on the business, operations, properties,
assets, condition (financial or otherwise), prospects or results
of operations of Delmarva and its subsidiaries taken as a whole
or on the consummation of this Agreement (any such material
adverse effect being hereinafter referred to as a "Delmarva
Material Adverse Effect"). As used in this Agreement the term
"subsidiary" with respect to any person shall mean any
corporation or other entity (including partnerships and other
business associations) in which such person directly or
indirectly owns outstanding capital stock or other voting
securities having the power, under ordinary circumstances, to
elect a majority of the directors or similar members of the
governing body of such corporation or other entity or otherwise
to direct the management and policies of such corporation or
other entity.
Section 4.2 Subsidiaries. Section 4.2 of the
Delmarva Disclosure Schedule contains a description as of the
date hereof of all subsidiaries and joint ventures of Delmarva,
including the name of each such entity, the state or jurisdiction
of its incorporation, a brief description of the principal line
or lines of business conducted by each such entity and Delmarva's
interest therein. Except as disclosed in Section 4.2 of the
Delmarva Disclosure Schedule, none of such entities is a "public
utility company," a "holding company," a "subsidiary company" or
an "affiliate" of any public utility company within the meaning
of Section 2(a)(5), 2(a)(7), 2(a)(8) and 2(a)(11) of the Public
Utility Holding Company Act of 1935, as amended (the "1935 Act"),
respectively. Except as disclosed in Section 4.2 of the Delmarva
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Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each subsidiary of Delmarva are validly issued,
fully paid, nonassessable and free of preemptive rights and are
owned directly or indirectly by Delmarva free and clear of any
liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever, and there are no
outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of its capital stock or obligating it to grant,
extend or enter into any such agreement or commitment. As used
in this Agreement, the term "joint venture" with respect to any
person shall mean any corporation or other entity (including
partnerships and other business associations and joint ventures)
in which such person or one or more of its subsidiaries owns an
equity interest that is less than a majority of any class of the
outstanding voting securities or equity, other than equity
interests held for passive investment purposes that are less than
5% of any class of the outstanding voting securities or equity.
Section 4.3 Capitalization. The authorized
capital stock of Delmarva consists of 90,000,000 shares of
Delmarva Common Stock, 1,800,000 shares of Delmarva Preferred
Stock, 3,000,000 shares of Delmarva Preferred Stock -- $25 Par,
and 10,000,000 shares of Delmarva Preferred Stock -- $1 Par. As
of the close of business on June 30, 1996, 60,697,635 shares of
Delmarva Common Stock, 1,280,850 shares of Delmarva Preferred
Stock and 1,600,000 shares of Delmarva Preferred Stock -- $25 Par
were issued and outstanding and no shares of Delmarva Preferred
Stock -- $1 Par were issued and outstanding. All of the issued
and outstanding shares of the capital stock of Delmarva are
validly issued, fully paid, nonassessable and free of preemptive
rights. Except as disclosed in Section 4.3 of the Delmarva
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Disclosure Schedule, as of the date hereof, there are no
outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating Delmarva or any of its
subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock or
other voting securities of Delmarva or obligating Delmarva or any
of its subsidiaries to grant, extend or enter into any such
agreement or commitment.
Section 4.4 Authority; Noncontravention; Statutory
Approvals; Compliance.
(a) Authority. Delmarva has all requisite power and
authority to enter into this Agreement and, subject to the
Delmarva Shareholders' Approval (as defined in Section 4.13) and
the Delmarva Required Statutory Approvals (as defined in
Section 4.4(c)), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation by Delmarva of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on
the part of Delmarva, subject to obtaining the Delmarva
Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by Delmarva and, assuming the due
authorization, execution and delivery of this Agreement by the
other signatories hereto constitutes the legal, valid and binding
obligation of Delmarva enforceable against Delmarva in accordance
with its terms.
(b) Noncontravention. Except as disclosed in
Section 4.4(b) of the Delmarva Disclosure Schedule, the execution
and delivery of this Agreement by Delmarva 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
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or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination,
cancellation or acceleration of any obligation under or the loss
of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the
properties or assets (any such violation, conflict, breach,
default, right of termination, cancellation or acceleration, loss
or creation, a "Violation") of Delmarva or any of its
subsidiaries or, to the best knowledge of Delmarva, any of its
joint ventures, under any provisions of (i) the certificate or
articles of incorporation, bylaws or similar governing documents
of Delmarva or any of its subsidiaries or joint ventures,
(ii) subject to obtaining the Delmarva Required Statutory
Approvals and the receipt of the Delmarva Shareholders' Approval,
any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court,
governmental or regulatory body (including a stock exchange or
other self-regulatory body) or authority, domestic or foreign
(each, a "Governmental Authority") applicable to Delmarva or any
of its subsidiaries or joint ventures or any of their respective
properties or assets or (iii) subject to obtaining the third-
party consents or other approvals set forth in Section 4.4(b) of
the Delmarva Disclosure Schedule (the "Delmarva 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 Delmarva
or any of its subsidiaries or joint ventures is now a party or by
which any of them or any of their respective properties or assets
may be bound or affected, excluding from the foregoing clauses
(ii) and (iii) such Violations as, in the aggregate, are not
reasonably likely to have a Delmarva Material Adverse Effect.
(c) Statutory Approvals. Except as disclosed in
Section 4.4(c) of the Delmarva Disclosure Schedule, no
declaration, filing or registration with, or notice to or
authorization, consent, finding by or approval of, any
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Governmental Authority is necessary for the execution and
delivery of this Agreement by Delmarva or the consummation by
Delmarva of the transactions contemplated hereby, the failure to
obtain which, in the aggregate, is reasonably likely to have a
Delmarva Material Adverse Effect (the "Delmarva Required
Statutory Approvals"), it being understood that references in
this Agreement to "obtaining" such Delmarva Required Statutory
Approvals shall mean making such declarations, filings or
registrations, giving such notice, obtaining such authorizations,
consents or approvals and having such waiting periods expire as
are, in each case, necessary to avoid a violation of law.
(d) Compliance. Except as disclosed in Section
4.4(d), 4.7, 4.10 or 4.11 of the Delmarva Disclosure Schedule or
as disclosed in the Delmarva SEC Reports (as defined in Section
4.5), neither Delmarva nor any of its subsidiaries nor, to the
best knowledge of Delmarva, any of its joint ventures is in
violation of or under investigation with respect to, or has been
given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment
(including without limitation any applicable Environmental Laws
(as defined in Section 4.11(g)(ii)) of any Governmental
Authority, except for violations that, in the aggregate, do not
have, and to the best knowledge of Delmarva are not reasonably
likely to have, a Delmarva Material Adverse Effect. Except as
disclosed in Section 4.4(d) or 4.11 of the Delmarva Disclosure
Schedule, Delmarva, its subsidiaries and, to the best knowledge
of Delmarva, its joint ventures have all permits, licenses,
franchises and other governmental authorizations, consents and
approvals necessary to conduct their respective businesses as
currently conducted (collectively, "Permits"), except those the
failure to obtain which, in the aggregate, are not reasonably
likely to have a Delmarva Material Adverse Effect. Except as set
forth in Section 4.4(b), 4.4(d) or 4.11 of the Delmarva
Disclosure Schedule, neither Delmarva nor any of its subsidiaries
nor, to the best knowledge of Delmarva, any of its joint
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ventures, is 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 or
articles of incorporation or its bylaws or (ii) except where such
breaches, violations and defaults, in the aggregate, are not
reasonably likely to have a Delmarva Material Adverse Effect, 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.
Section 4.5 Reports and Financial
Statements. Except as disclosed in Section 4.5 of the Delmarva
Disclosure Schedule, the filings required to be made by Delmarva
and its subsidiaries since January 1, 1991 under the Securities
Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), applicable
Delaware, Maryland, Virginia and Pennsylvania laws and
regulations, the Federal Power Act, as amended (the "Power Act"),
the 1935 Act and the Atomic Energy Act of 1954, as amended (the
"Atomic Energy Act"), have been filed with the Securities and
Exchange Commission (the "SEC"), the Delaware Public Service
Commission (the "Delaware Commission"), the Maryland Public
Service Commission (the "Maryland Commission"), the Virginia
Commission, the Pennsylvania Public Utility Commission (the
"Pennsylvania Commission"), the Federal Energy Regulatory
Commission (the "FERC") and the Nuclear Regulatory Commission
(the "NRC"), respectively, including all forms, statements,
reports, agreements (oral or written) and all documents,
exhibits, amendments and supplements appertaining thereto, and,
as of their respective dates, complied in all material respects
with all applicable requirements of the appropriate act and the
rules and regulations thereunder. Delmarva has made available to
Atlantic a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by
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Delmarva with the SEC since January 1, 1991 and through the date
hereof (as such documents have since the time of their filing
been amended, the "Delmarva SEC Reports"). The Delmarva SEC
Reports, including without limitation any financial statements or
schedules included therein, at the time filed, and any forms,
reports or other documents filed by Delmarva with the SEC after
the date hereof, did not and will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Delmarva
included in the Delmarva SEC Reports (collectively, the "Delmarva
Financial Statements") have been prepared, and will be 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) and fairly
present the consolidated financial position of Delmarva as of the
respective dates thereof or the consolidated results of
operations and cash flows for the respective periods then ended,
as the case may be, subject, in the case of the unaudited interim
financial statements, to normal, recurring audit adjustments.
True, accurate and complete copies of the certificate and
articles of incorporation and the bylaws of Delmarva, as in
effect on the date hereof, have been delivered to Atlantic.
Section 4.6 Absence of Certain Changes or
Events; Absence of Undisclosed Liabilities. (a) Except as
disclosed in the Delmarva SEC Reports filed prior to the date
hereof or as disclosed in Section 4.6 of the Delmarva Disclosure
Schedule, from December 31, 1995 through the date hereof each of
Delmarva and each of its subsidiaries has conducted its business
only in the ordinary course of business consistent with past practice
and no event has occurred which has had, and no fact or condition
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exists that would have or, to the best knowledge of Delmarva, is
reasonably likely to have, a Delmarva Material Adverse Effect.
(b) Neither Delmarva nor any of its subsidiaries has
any liabilities or obligations (whether absolute, contingent,
accrued or otherwise) of a nature required by GAAP to be
reflected in a consolidated corporate balance sheet, except
liabilities, obligations or contingencies that are accrued or
reserved against in the consolidated financial statements of
Delmarva or are reflected in the notes thereto for the year ended
December 31, 1995 or that were incurred after December 31, 1995
in the ordinary course of business and are not reasonably likely
to have a Delmarva Material Adverse Effect.
Section 4.7 Litigation. Except as
disclosed in the Delmarva SEC Reports filed prior to the date
hereof or as disclosed in Section 4.7, 4.9, 4.10 or 4.11 of the
Delmarva Disclosure Schedule, (i) there are no claims, suits,
actions or proceedings pending or to the best knowledge of
Delmarva threatened, nor are there any investigations or reviews
pending or, to the best knowledge of Delmarva, threatened
against, relating to or affecting Delmarva or any of its
subsidiaries, (ii) there have not been any developments since
December 31, 1995 with respect to any such disclosed claims,
suits, actions, proceedings, investigations or review and (iii)
there are no judgments, decrees, injunctions, rules or orders of
any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to
Delmarva or any of its subsidiaries that, in the aggregate, are
reasonably likely to have a Delmarva Material Adverse Effect.
Section 4.8 Registration Statement and Proxy
Statement. None of the information supplied or to be supplied by
or on behalf of Delmarva for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be
filed with the SEC by the Company in connection with the issuance
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of shares of Company Common Stock and Letter Stock
in the Mergers (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 joint proxy in definitive form, relating to the meetings
of the shareholders of Delmarva and Atlantic to be held in
connection with the Mergers and the prospectus relating to the
Company Common Stock and Letter Stock to be issued in the Mergers
(the "Joint Proxy Statement") will, at the date mailed to such
shareholders and, as the same may be amended or supplemented, at
the times of such meetings, contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The
Registration Statement and the Joint Proxy Statement will comply
as to form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and regulations
thereunder.
Section 4.9 Tax Matters. "Taxes", as used
in this Agreement, means any federal, state, county, local or
foreign taxes, charges, fees, levies, or other assessments,
including 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 and any expenses incurred in
connection with the determination, settlement or litigation of
any tax liability. "Tax Return", as used in this Agreement,
means a report, return or other 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
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Delmarva or any of its subsidiaries, on the one hand, or Atlantic
or any of its subsidiaries, on the other hand.
(a) Filing of Timely Tax Returns. Except as
disclosed in Section 4.9(a) of the Delmarva Disclosure Schedule,
Delmarva and each of its subsidiaries have filed all Tax Returns
required to be filed by each of them under applicable law. All
Tax Returns were in all material respects (and, as to Tax Returns
not filed as of the date hereof, will be) true, complete and
correct and filed on a timely basis.
(b) Payment of Taxes. Except as disclosed in
Section 4.9(b) of the Delmarva Disclosure Schedule, Delmarva and
each of its subsidiaries have, within the time and in the manner
prescribed by law, paid (and until the Closing Date will pay
within the time and in the manner prescribed by law) all 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. Delmarva and its subsidiaries
have established (and until the Closing Date will maintain) on
their books and records reserves adequate to pay all Taxes and
reserves for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the
assets of Delmarva or any of its subsidiaries except liens for
Taxes not yet due.
(e) Withholding Taxes. Delmarva and each of its
subsidiaries have complied (and until the Closing Date will
comply) in all material respects with the provisions of the Code
relating to the payment and withholding of Taxes, including
without limitation the withholding and reporting requirements
under Code Sections 1441 through 1464, 3401 through 3606, and 6041 and
6049, as well as similar provisions under any other laws, and
have within the time and in the manner prescribed by law withheld
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from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns.
Except as disclosed in Section 4.9(f) of the Delmarva Disclosure
Schedule, neither Delmarva nor any of its subsidiaries has
requested any extension of time within which to file any Tax
Return which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as
disclosed in Section 4.9(g) of the Delmarva Disclosure Schedule,
neither Delmarva nor any of its subsidiaries has executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as
disclosed in Section 4.9(h) of the Delmarva Disclosure Schedule,
the statute of limitations for the assessment of all Taxes has
expired for all applicable Tax Returns of Delmarva and each of
its subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any Taxes has been proposed,
asserted or assessed against Delmarva or any of its subsidiaries
that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings.
Except as disclosed in Section 4.9(i) of the Delmarva Disclosure
Schedule, no audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax
Returns of Delmarva or any of its subsidiaries.
(j) Powers of Attorney. Except as disclosed in
Section 4.9(j) of the Delmarva Disclosure Schedule, no power of
attorney currently in force has been granted by Delmarva or any
of its subsidiaries concerning any Tax matter.
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(k) Tax Rulings. Except as disclosed in Section
4.9(k) of the Delmarva Disclosure Schedule, neither Delmarva 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.
(l) Availability of Tax Returns. Delmarva and its
subsidiaries have made available to Atlantic complete and
accurate copies, covering all open years, of (i) all Tax Returns,
and any amendments thereto, filed by Delmarva or any of its
subsidiaries, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by Delmarva or any of
its subsidiaries and (iii) any Closing Agreements entered into by
Delmarva or any of its subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Except as disclosed in
Section 4.9(m) of the Delmarva Disclosure Schedule, no agreements
relating to the allocation or sharing of Taxes exist between or
among Delmarva and any of its subsidiaries.
(n) Code Section 341(f). Neither Delmarva nor any of its
subsidiaries has filed a consent pursuant to Code Section 341(f) or has
agreed to have Code Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in
Code Section 341(f)(4)) owned by Delmarva or any of its subsidiaries.
(o) Code Section 168. Except as disclosed in Section
4.9(o) of the Delmarva Disclosure Schedule, no property of
Delmarva or any of its subsidiaries is property that Delmarva or
any such subsidiary or any party to this transaction is or will
be required to treat as being owned by another person pursuant to
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the provisions of Code Section 168(f)(8) (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is tax-exempt use
property within the meaning of Code Section 168.
(p) Code Section 481 Adjustments. Except as disclosed in
Section 4.9(p) of the Delmarva Disclosure Schedule, neither
Delmarva 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 Delmarva or
any of its subsidiaries, and, to the best of the knowledge of
Delmarva, the Internal Revenue Service (the "IRS") has not
proposed any such adjustment or change in accounting method.
(q) Code Sections 6661 and 6662. Except as disclosed in
Section 4.9(q) of the Delmarva Disclosure Schedule, all
transactions that could give rise to an understatement of federal
income tax (within the meaning of Code Section 6661 for Tax Returns
filed on or before December 31, 1990, and within the meaning of
Code Section 6662 for tax returns filed after December 31, 1990) that
could reasonably be expected to result in a Delmarva Material
Adverse Effect have been adequately disclosed (or, with respect
to Tax Returns filed following the Closing, will be adequately
disclosed) on the Tax Returns of Delmarva and its subsidiaries in
accordance with Code Section 6661(b)(2)(B) for Tax Returns filed on or
prior to December 31, 1990, and in accordance with Code
Section 6662(d)(2)(B) for Tax Returns filed after December 31, 1990.
(r) Code Section 280G. Except as disclosed in Section
4.9(r) of the Delmarva Disclosure Schedule, neither Delmarva nor
any of its subsidiaries is a party to any agreement, contract, or
arrangement that could reasonably be expected to result, on
account of the transactions contemplated hereunder, separately or
in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Code Section 280G.
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(s) NOLS. As of December 31, 1994, Delmarva and its
subsidiaries had net operating loss carryovers available to
offset future income as disclosed in Section 4.9(s) of the
Delmarva Disclosure Schedule. Section 4.9(s) of the Delmarva
Disclosure Schedule discloses the amount of and year of
expiration of each company's net operating loss carryovers.
(t) Credit Carryover. As of December 31, 1994,
Delmarva and its subsidiaries had tax credit carryovers available
to offset future tax liability as disclosed in Section 4.9(t) of
the Delmarva Disclosure Schedule. Section 4.9(t) of the Delmarva
Disclosure Schedule discloses the amount and year of expiration
of each company's tax credit carryovers.
(u) Code Section 338 Elections. Except as disclosed in
Section 4.9(u) of the Delmarva Disclosure Schedule, no election
under Code Section 338 (or any predecessor provision) has been made by
or with respect to Delmarva or any of its subsidiaries or any of
their respective assets or properties.
(v) Acquisition Indebtedness. Except as disclosed
in Section 4.9(v) of the Delmarva Disclosure Schedule, no
indebtedness of Delmarva or any of its subsidiaries is "corporate
acquisition indebtedness" within the meaning of Code Section 279(b).
(w) Intercompany Transactions. Except as disclosed
in Section 4.9(w) of the Delmarva Disclosure Schedule, neither
Delmarva nor any of its subsidiaries have 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.
(x) Liability for Others. Except as disclosed in
Section 4.9(x) of the Delmarva Disclosure Schedule, neither
Delmarva nor any of its subsidiaries has any liability for Taxes
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of any person other than Delmarva and its subsidiaries (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision
of state, local or foreign law) as a transferee or successor,
(ii) by contract or (iii) otherwise.
Section 4.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the Delmarva
Disclosure Schedule contains a true and complete list of:
(i) each employee benefit plan, program or arrangement covering
employees, former employees or directors of Delmarva (or any of
its subsidiaries) or any of their dependents or beneficiaries, or
providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") (whether or not terminated, if Delmarva or any of its
subsidiaries could have statutory or contractual liability with
respect thereto on or after the date hereof); (ii) each
management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change
in control), bonus or other contract for personal services with
or covering any current officer, key employee or director or any
consulting contract with any person who prior to entering into
such contract was a director or officer of Delmarva or any of its
subsidiaries (whether or not terminated, if Delmarva or any of
its subsidiaries could have statutory or contractual liability
with respect thereto on or after the date hereof); (iii) each
"employee pension benefit plan" (within the meaning of ERISA
Section 3(2)) subject to Title IV of ERISA or the minimum funding
requirements of Code Section 412 maintained or contributed to by
Delmarva or any entity required to be aggregated therewith
pursuant to Code Section 414(b) or (c) (each, a "Delmarva ERISA
Affiliate") at any time during the seven-year period immediately
preceding the date hereof (collectively, the "Delmarva Benefit
Plans") and (iv) with respect to each Delmarva Benefit Plan, the
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source or sources of benefit payments under the plan (including,
where applicable, the identity of any trust (whether or not a
grantor trust), insurance contract, custodial account, agency
agreement, or other arrangement that holds the assets of, or
serves as a funding vehicle or source of benefits for, such
Delmarva Benefit Plan).
(b) Contributions. Except as disclosed in Section
4.10(b) of the Delmarva Disclosure Schedule, all material
contributions and other payments required to have been made by
Delmarva or any of its subsidiaries pursuant to any Delmarva
Benefit Plan (or to any person pursuant to the terms thereof)
have been timely made or the amount of such payment or
contribution obligation has been reflected in the Delmarva
Financial Statements.
(c) Qualification; Compliance. Except as disclosed
in Section 4.10(c) of the Delmarva Disclosure Schedule, each
Delmarva Benefit Plan that is intended to be "qualified" within
the meaning of Code Section 401(a) has been determined by the IRS to be
so qualified, and, to the best knowledge of Delmarva, no event or
condition exists or has occurred that could reasonably be
expected to result in the revocation of any such determination.
Delmarva and each of its subsidiaries are in compliance with, and
each Delmarva Benefit Plan is and has been operated in compliance
with, all applicable laws, rules and regulations governing such
plan, including without limitation ERISA and the Code, except for
violations that could not reasonably be expected to have a
Delmarva Material Adverse Effect. To the best knowledge of
Delmarva, no individual or entity has engaged in any transaction
with respect to any Delmarva Benefit Plan as a result of which
Delmarva or any of its subsidiaries could reasonably expect to be
subject to liability pursuant to ERISA Section 409 or Section 502, or subject
to an excise tax pursuant to Code Section 4975. To the best knowledge
of Delmarva, (i) no Delmarva Benefit Plan is subject to any
ongoing audit, investigation, or other administrative proceeding
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of the Internal Revenue Service, the Department of Labor, or any
other federal, state or local governmental entity and (ii) no
Delmarva Benefit Plan is the subject of any pending application
for administrative relief under any voluntary compliance program
of any governmental entity (including without limitation the
IRS's Voluntary Compliance Resolution Program or Walk-in Closing
Agreement Program, or the Department of Labor's Delinquent Filer
Voluntary Compliance Program).
(d) Liabilities. With respect to the Delmarva
Benefit Plans, individually and in the aggregate, no termination
or partial termination of any Delmarva Benefit Plan or other
event has occurred, and, to the best knowledge of Delmarva, there
exists no condition or set of circumstances, that could subject
Delmarva or any of its subsidiaries to any liability arising
under the Code, ERISA or any other applicable law (including
without limitation any liability to or under any such plan or to
the Pension Benefit Guaranty Corporation (the "PBGC"), or under
any indemnity agreement to which Delmarva, any of its
subsidiaries or any Delmarva ERISA Affiliate is a party, which
liability, excluding liability for benefit claims and funding
obligations payable in the ordinary course and liability for PBGC
insurance premiums payable in the ordinary course, is reasonably
likely to have a Delmarva Material Adverse Effect.
(e) Welfare Plans. Except as disclosed in Section
4.10(e) of the Delmarva Disclosure Schedule, no Delmarva Benefit
Plan that is a "welfare plan" (within the meaning of ERISA
Section 3(1)) provides benefits for any retired or former employees
(other than as required pursuant to ERISA Section 601).
(f) Documents Made Available. Delmarva has made
available to Atlantic a true and correct copy of each collective
bargaining agreement to which Delmarva is a party or under which
Delmarva has obligations and, with respect to each Delmarva
Benefit Plan, as applicable (i) the current plan document
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(including all amendments adopted since the most recent
restatement) and its most recently prepared summary plan
description and all summaries of material modifications prepared
since the most recent summary plan description, (ii) the most
recently prepared annual report (IRS Form 5500 Series) including
financial statements, (iii) each related trust agreement,
insurance contract, service provider or investment management
agreement (including all amendments to each such document), (iv)
the most recent IRS determination letter with respect to the
qualified status under Code Section 401(a) of such plan and a copy of
any application for an IRS determination letter filed since the
most recent IRS determination letter was issued and (v) the most
recent actuarial report or valuation.
(g) Payments Resulting from Mergers. Other than as
disclosed in Section 4.10(g) of the Delmarva Disclosure Schedule,
the consummation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the occurrence
of any additional or further acts or events) result in any (i)
payment (whether of severance pay or otherwise) becoming due from
the Company or Delmarva or any of its subsidiaries under any
applicable Delmarva Benefit Plans to any officer, employee,
former employee or director thereof or to the trustee under any
"rabbi trust" or similar arrangement, or (ii) benefit under any
Delmarva Benefit Plan being established or becoming accelerated,
vested or payable, except for a payment or benefit that would
have been payable under the same terms and conditions without
regard to the transactions contemplated by this Agreement.
(h) Funded Status of Plans. Except as disclosed in
Section 4.10(h) of the Delmarva Disclosure Schedule, each
Delmarva Benefit Plan that is subject to either or both of the
minimum funding requirements of ERISA Section 302 or to Title IV of
ERISA has assets that, as of the date hereof, have a fair market
value equal to or exceeding the present value of the accrued
benefit obligations thereunder on a termination basis, as of the
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date hereof based on the actuarial methods, tables and
assumptions theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation
report, except to the extent that applicable law would require
the use of different actuarial assumptions if such plan was to be
terminated as of the date hereof. No Delmarva Benefit Plan
subject to the minimum funding requirements of ERISA Section 302 has
incurred any "accumulated funding deficiency" (within the meaning
of ERISA Section 302).
(i) Multiemployer Plans. Except as disclosed in
Section 4.10(i) of the Delmarva Disclosure Schedule, no Delmarva
Benefit Plan is or was a "multiemployer plan" (within the meaning
of ERISA Section 4001(a)(3)), a multiple employer plan described in
Code Section 413(c), or a "multiple employer welfare arrangement"
(within the meaning of ERISA Section 3(40)); and none of Delmarva, any
subsidiary thereof or any Delmarva ERISA Affiliate has been
obligated to contribute to, or otherwise has or has had any
liability with respect to, any multiemployer plan, multiple
employer plan, or multiple employer welfare arrangement. With
respect to any Delmarva Benefit Plan that is listed in Section
4.10(i) of the Delmarva Disclosure Schedule as a multiemployer
plan, Delmarva and its subsidiaries have not made or incurred a
"complete withdrawal" or a "partial withdrawal," as such terms
are defined in ERISA Sections 4203 and 4205, therefrom at any time
during the five calendar year period immediately preceding the
date of this Agreement and the transactions contemplated by the
Agreement will not, in and of themselves, give rise to such a
"complete withdrawal" or "partial withdrawal."
(j) Modification or Termination of Plans. Except as
disclosed in Section 4.10(j) of the Delmarva Disclosure Schedule:
(i) neither Delmarva nor any subsidiary of Delmarva is subject
to any legal, contractual, equitable or other obligation to
establish as of any date any employee benefit plan of any nature,
including without limitation any pension, profit sharing,
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welfare, post-retirement welfare, stock option, stock or cash
award, nonqualified deferred compensation or executive
compensation plan, policy or practice; and (ii) to the best
knowledge of Delmarva, after review of all Delmarva Benefit Plan
documents, the Company, Delmarva or one or more of its
subsidiaries may, in any manner, and without the consent of any
employee, beneficiary or dependent, employees' organization or
other person, terminate, modify or amend any Delmarva Benefit
Plan or any other employee benefit plan, policy, program or
practice (or its participation in any such Delmarva Benefit Plan
or other employee benefit plan, policy, program or practice) at
any time sponsored, maintained or contributed to by Delmarva or
any of its subsidiaries, effective as of any date before, on or
after the Effective Time except to the extent that any
retroactive amendment would be prohibited by ERISA Section 204(g) or
would deprive a plan participant of a benefit in which such
participant has a vested right.
(k) Reportable Events; Claims. Except as disclosed
in Section 4.10(k) of the Delmarva Disclosure Schedule, (i) no
event constituting a "reportable event" (within the meaning of
ERISA Section 4043(b)) for which the 30-day notice requirement has not
been waived by the PBGC has occurred with respect to any Delmarva
Benefit Plan and (ii) no liability, claim, action or litigation
has been made, commenced or, to the best knowledge of Delmarva,
threatened, by or against Delmarva or any of its subsidiaries
with respect to any Delmarva Benefit Plan (other than for
benefits or PBGC premiums payable in the ordinary course) that is
reasonably likely to have a Delmarva Material Adverse Effect.
(l) Labor Agreements. Except as disclosed in
Section 4.10(l) of the Delmarva Disclosure Schedule, to the best
knowledge of Delmarva, as of the date hereof, there is no current
labor union representation question involving employees of
Delmarva or any of its subsidiaries, nor does Delmarva or any of
its subsidiaries know of any activity or proceeding of any labor
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organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees. Except
as disclosed in the Delmarva SEC Reports or as disclosed in
Section 4.10(l) of the Delmarva Disclosure Schedule: (i) neither
Delmarva nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor agreement with any union or
labor organization; (ii) there are no unfair labor practice
charges or grievances arising out of a collective bargaining
agreement or other grievance procedure against Delmarva or any of
its subsidiaries pending, or to the best knowledge of Delmarva
threatened, that, in the aggregate, are reasonably likely to have
a Delmarva Material Adverse Effect; (iii) there are no
complaints, lawsuits or proceedings in any forum or forums by or
on behalf of any present or former employees, any applicants for
employment or classes of the foregoing alleging breach of any
express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with
the employment relationship against Delmarva or any of its
subsidiaries pending, or to the best knowledge of Delmarva
threatened, that, in the aggregate, are reasonably likely to
have, a Delmarva Material Adverse Effect; (iv) there are no
strikes, disputes, slowdowns, work stoppages or lockouts pending,
or to the best knowledge of Delmarva threatened, against or
involving Delmarva or any of its subsidiaries that, in the
aggregate, are reasonably likely to have a Delmarva Material
Adverse Effect; (v) Delmarva and each of its subsidiaries are in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, except for
noncompliance that, in the aggregate, is not reasonably likely to
have a Delmarva Material Adverse Effect; and (vi) there is no
proceeding, claim, suit, action or governmental investigation
pending, or to the best knowledge of Delmarva threatened, in
respect to which any director, officer, employee or agent of
Delmarva or any of its subsidiaries is or may be entitled to
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claim indemnification from Delmarva or any of its subsidiaries
pursuant to their respective certificates or articles of
incorporation or bylaws or as provided in the indemnification
agreements listed on Section 4.10(l) of the Delmarva Disclosure
Schedule.
Section 4.11 Environmental Protection.
(a) Compliance. Except as disclosed in Section
4.11(a) of the Delmarva Disclosure Schedule or as disclosed in
the Delmarva SEC Reports, Delmarva and each of its subsidiaries
are and have been in material compliance with all applicable
Environmental Laws (as defined in Section 4.11(g)), except where
the failure to be or to have been so in material compliance, in
the aggregate, is not reasonably likely to have a Delmarva
Material Adverse Effect. Except as disclosed in Section 4.11(a)
of the Delmarva Disclosure Schedule, neither Delmarva nor any of
its subsidiaries has received any written notice from any person
or Governmental Authority that alleges that Delmarva or any of
its subsidiaries is not or has not been in material compliance
with applicable Environmental Laws, except where the failure to
be or to have been so in material compliance, in the aggregate,
is not reasonably likely to have a Delmarva Material Adverse
Effect.
(b) Environmental Permits. Except as disclosed in
Section 4.11(b) of the Delmarva Disclosure Schedule or as
disclosed in the Delmarva SEC Reports, Delmarva and each of its
subsidiaries have obtained or have applied for all material
environmental, health and safety permits and authorizations
(collectively, "Environmental Permits") necessary for the
construction of their facilities and the conduct of their
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 Delmarva and its
subsidiaries are in material compliance with all terms and
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conditions of all such Environmental Permits and are not required
to make any material expenditures in connection with any renewal
application pending agency approval, except where the failure to
obtain or be in such compliance and the requirement to make such
expenditures, in the aggregate, is not reasonably likely to have
a Delmarva Material Adverse Effect.
(c) Environmental Claims. Except as disclosed in
Section 4.11(c) of the Delmarva Disclosure Schedule or as
disclosed in the Delmarva SEC Reports, to the best knowledge of
Delmarva, there are no Environmental Claims (as hereinafter
defined in Section 4.11(g)) pending, or to the best knowledge of
Delmarva threatened, (i) against Delmarva or any of its
subsidiaries or joint ventures, (ii) against any person or entity
whose liability for any Environmental Claim Delmarva or any of
its subsidiaries or joint ventures has or may have retained or
assumed either contractually or by operation of law or (iii)
against any real or personal property or operations that Delmarva
or any of its subsidiaries or joint ventures owns, leases or
manages, in whole or in part, that, if adversely determined, are
in the aggregate reasonably likely to have a Delmarva Material
Adverse Effect.
(d) Releases. Except as disclosed in Section
4.11(c) or 4.11(d) of the Delmarva Disclosure Schedule or as
disclosed in the Delmarva SEC Reports, to the best knowledge of
Delmarva, there has been no Release (as hereinafter defined in
Section 4.11(g)) of any Hazardous Material (as hereinafter
defined in Section 4.11(g)) that would be reasonably likely to
form the basis of any Environmental Claim against Delmarva or of
any subsidiary or joint venture of Delmarva, or against any
person or entity whose liability for any Environmental Claim
Delmarva or any subsidiary or joint venture of Delmarva has or
may have retained or assumed either contractually or by operation
of law, except for Releases of Hazardous Materials the liability
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for which is not in the aggregate reasonably likely to have a
Delmarva Material Adverse Effect.
(e) Predecessors. Except as disclosed in Section
4.11(e) of the Delmarva Disclosure Schedule, or as disclosed in
the Delmarva SEC Reports, to the best knowledge of Delmarva, with
respect to any predecessor of Delmarva or of any subsidiary or
joint venture of Delmarva, there are no Environmental Claims
pending or threatened, or any Releases of Hazardous Materials
that would be reasonably likely to form the basis of any
Environmental Claims, that are reasonably likely to have, in the
aggregate, a Delmarva Material Adverse Effect.
(f) Disclosure. To the best knowledge of Delmarva,
Delmarva has disclosed to Atlantic all material facts that
Delmarva reasonably believes are likely to form the basis of a
material Environmental Claim or to require material expenditures
in order to comply with current or future applicable
Environmental Laws arising from (i) the cost of pollution control
equipment currently required or known to be required in the
future, (ii) current investigatory, removal, remediation or
response costs or investigatory, removal, remediation or response
costs known to be required in the future, in each case, both on-
site and off-site and (iii) any other environmental matters
affecting Delmarva or its subsidiaries.
(g) 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 without
limitation any Governmental Authority) alleging potential
liability (including without limitation potential liability
for enforcement costs, investigatory costs, cleanup costs,
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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, of
any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by Delmarva or any of its
subsidiaries or joint ventures (for purposes of this
Section 4.11 only), or by Atlantic or any of its
subsidiaries or joint ventures (for purposes of Section 5.11
only), (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
and local laws, rules and regulations relating to pollution
or protection of human health or the environment (including
without limitation ambient air, surface water, groundwater,
land surface or subsurface strata), 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 or petroleum wastes (including crude
oil or any fraction thereof), nuclear fuel or waste or other
radioactive materials, friable asbestos or friable asbestos-
containing material, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls, (B) any
chemicals, materials or substances which are now defined as
or included in the definition of "hazardous substances",
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"hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import,
under any Environmental Law and (C) any other chemical,
material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law
in a jurisdiction in which Delmarva or any of its
subsidiaries or joint ventures operates (for purposes of
this Section 4.11 only) or in which Atlantic or any of its
subsidiaries or joint ventures operates (for purposes of
Section 5.11 only).
(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 (indoors or outdoors).
Section 4.12 Regulation as a Utility.
Delmarva is regulated as a public utility in the States of
Delaware and Maryland and in the Commonwealth of Virginia and in
no other state. Except as disclosed in Section 4.12 of the
Delmarva Disclosure Schedule, neither Delmarva nor any
"subsidiary company" or "affiliate" (as such terms are defined in
the 1935 Act) of Delmarva is subject to regulation as a public
utility or public service company (or similar designation) by any
other state in the United States, by the United States or any
agency or instrumentality of the United States or by any foreign
country. Delmarva is not a holding company under the 1935 Act.
Section 4.13 Vote Required. The approval of
the Delmarva Merger by more than two-thirds of all votes entitled
to be cast by all holders of Delmarva Common Stock (or such
lesser percentage as may be required as a result of any change of
applicable law) (the "Delmarva Shareholders' Approval") is the
only vote of the holders of any class or series of the capital
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stock of Delmarva required to approve this Agreement, the Mergers
and the other transactions contemplated hereby.
Section 4.14 Opinion of Financial Advisor.
Delmarva has received the opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, dated the date hereof, to the effect
that, as of the date hereof, the consideration to be received by
the holders of Delmarva Common Stock are fair from a financial
point of view to the holders of Delmarva Common Stock.
Section 4.15 Insurance. Except as disclosed
in Section 4.15 of the Delmarva Disclosure Schedule, each of
Delmarva and each of its subsidiaries is, and has been
continuously since January 1, 1991, insured with financially
responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the respective
businesses conducted by Delmarva and its subsidiaries during such
time period. Except as disclosed in Section 4.15 of the Delmarva
Disclosure Schedule, neither Delmarva nor any of its subsidiaries
has received any notice of cancellation or termination with
respect to any material insurance policy thereof. All material
insurance policies of Delmarva and its subsidiaries are valid and
enforceable policies.
Section 4.16 Applicability of Certain
Delaware and Virginia Law. Assuming the accuracy of the
representation of Atlantic set forth in Section 5.17, none of the
control share acquisition restrictions of Section 13.1-728.1 et
seq. of the VSCA, the business combination restrictions of
Section 203 of the DGCL or the affiliated transactions
restrictions of Section 13.1-725 et seq. of the VSCA is
applicable to the transactions contemplated by this Agreement.
Section 4.17 Ownership of Atlantic Common Stock.
Delmarva does not "beneficially own" (as such term is defined in
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Rule 13d-3 under the Exchange Act) any shares of Atlantic Common
Stock.
Section 4.18 Operations of Delmarva Nuclear Power
Plants. Except as set forth in Section 4.18 of the Delmarva
Disclosure Schedule, to the best knowledge of Delmarva, the
operations of the Salem and Peach Bottom Nuclear Generating
Stations owned by Delmarva (together with Atlantic)
(collectively, the "Delmarva Facilities") are and have at all
times been conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the
failure to be in compliance in the aggregate does not and insofar
as can reasonably be foreseen would not have a Delmarva Material
Adverse Effect. To the best knowledge of Delmarva, each of the
Delmarva Facilities maintains emergency plans designed to respond
to an unplanned release therefrom of radioactive materials into
the environment and customary liability insurance consistent with
industry practice and consistent with Delmarva's view of the
risks inherent in the operation of a nuclear power facility
currently exists with respect to such Delmarva Facility. To the
best knowledge of Delmarva, plans for the decommissioning of each
of the Delmarva Facilities and for the short-term storage of
spent nuclear fuel conform with the requirements of applicable
law, and such plans have at all times been funded consistently
with reasonable budget projections for such plans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ATLANTIC
Atlantic represents and warrants to Delmarva as
follows:
Section 5.1 Organization and Qualification. Except as
disclosed in Section 5.1 of the Atlantic Disclosure Schedule (as
defined in Section 7.6(i)), (i) Atlantic is a corporation duly
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organized, validly existing and in good standing
under the laws of New Jersey, (ii) each of Atlantic's
subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization and (iii) each of Atlantic and its
subsidiaries has all requisite corporate or partnership power and
authority, and has been duly authorized by all necessary
regulatory approvals and orders, to own, lease and operate its
assets and properties and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business
or the ownership or leasing of its assets and properties makes
such qualification necessary other than in such jurisdictions
where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a
material adverse effect on the business, operations, properties,
assets, condition (financial or otherwise), prospects or results
of operations of Atlantic and its subsidiaries taken as a whole
or on the consummation of this Agreement (any such material
adverse effect being hereinafter referred to as a "Atlantic
Material Adverse Effect").
Section 5.2 Subsidiaries. Section 5.2 of the
Atlantic Disclosure Schedule contains a description as of the
date hereof of all subsidiaries and joint ventures of Atlantic,
including the name of each such entity, the state or jurisdiction
of its organization, a brief description of the principal line or
lines of business conducted by each such entity and Atlantic's
interest therein. Except as disclosed in Section 5.2 of the
Atlantic Disclosure Schedule, none of such entities is a "public
utility company," a "holding company," a "subsidiary company" or
an "affiliate" of any public utility company within the meaning
of Section 2(a)(5), 2(a)(7), 2(a)(8) and 2(a)(11) of the 1935
Act, respectively. Except as disclosed in Section 5.2 of the
Atlantic Disclosure Schedule, all of the issued and outstanding
shares of capital stock of each subsidiary of Atlantic are validly issued,
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fully paid, nonassessable and free of preemptive
rights and are owned directly or indirectly by Atlantic free and
clear of any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever, and there
are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of its capital stock or obligating it to grant,
extend or enter into any such agreement or commitment.
Section 5.3 Capitalization. The authorized
capital stock of Atlantic consists of 75,000,000 shares of
Atlantic Common Stock. As of the close of business on June 30,
1996, 52,702,052 shares of Atlantic Common Stock were issued and
outstanding. All of the issued and outstanding shares of the
capital stock of Atlantic are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as disclosed
in Section 5.3 of the Atlantic Disclosure Schedule, as of the
date hereof, there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating
Atlantic or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the
capital stock or other voting securities of Atlantic or
obligating Atlantic or any of its subsidiaries to grant, extend
or enter into any such agreement or commitment.
Section 5.4 Authority; Noncontravention; Statutory
Approvals; Compliance.
(a) Authority. Atlantic has all requisite power and
authority to enter into this Agreement and, subject to the
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Atlantic Shareholders' Approval (as defined in Section 5.13) and
the Atlantic Required Statutory Approvals (as defined in Section
5.4(c), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by
Atlantic of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
Atlantic, subject to obtaining the Atlantic Shareholders'
Approval. This Agreement has been duly and validly executed and
delivered by Atlantic and, assuming the due authorization,
execution and delivery of this Agreement by the other signatories
hereto, constitutes the legal, valid and binding obligation of
Atlantic enforceable against Atlantic in accordance with its
terms.
(b) Noncontravention. Except as disclosed in Section
5.4(b) of the Atlantic Disclosure Schedule, the execution and
delivery of this Agreement by Atlantic do not, and the
consummation of the transactions contemplated hereby will not
result in any Violation by Atlantic or any of its subsidiaries
or, to the best knowledge of Atlantic, any of its joint ventures
under any provisions of (i) the certificate or articles of
incorporation, bylaws or similar governing documents of Atlantic
or any of its subsidiaries or joint ventures, (ii) subject to
obtaining the Atlantic Required Statutory Approvals and the
receipt of the Atlantic Shareholders' Approval, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority applicable
to Atlantic or any of its subsidiaries or joint ventures or any
of their respective properties or assets, or (iii) subject to
obtaining the third-party consents or other approvals set forth
in Section 5.4(b) of the Atlantic Disclosure Schedule (the
"Atlantic 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 Atlantic or any of its subsidiaries or joint
ventures is now a party or by which any of them or any of their
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respective properties or assets may be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such
Violations as, in the aggregate, are not reasonably likely to
have an Atlantic Material Adverse Effect.
(c) Statutory Approvals. Except as disclosed in
Section 5.4(c) of the Atlantic Disclosure Schedule, no
declaration, filing or registration with, or notice to or
authorization, consent, finding by or approval of, any
Governmental Authority is necessary for the execution and
delivery of this Agreement by Atlantic or the consummation by
Atlantic of the transactions contemplated hereby, the failure to
obtain which, in the aggregate, is reasonably likely to have an
Atlantic Material Adverse Effect (the "Atlantic Required
Statutory Approvals"), it being understood that references in
this Agreement to "obtaining" such Atlantic Required Statutory
Approvals shall mean making such declarations, filings or
registrations, giving such notice, obtaining such authorizations,
consents or approvals and having such waiting periods expire as
are, in each case, necessary to avoid a violation of law.
(d) Compliance. Except as disclosed in Section
5.4(d), 5.7, 5.10 or 5.11 of the Atlantic Disclosure Schedule or
as disclosed in the Atlantic SEC Reports (as defined in
Section 5.5), neither Atlantic nor any of its subsidiaries nor,
to the best knowledge of Atlantic, any of its joint ventures is
in violation of or under investigation with respect to, or has
been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment
(including without limitation any applicable Environmental Laws)
of any Governmental Authority, except for violations that, in the
aggregate, do not have, and to the best knowledge of Atlantic are
not reasonably likely to have, an Atlantic Material Adverse
Effect. Except as disclosed in Section 5.4(d) or 5.11 of the
Atlantic Disclosure Schedule, Atlantic, its subsidiaries and, to
the best knowledge of Atlantic, its joint ventures have all
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Permits, except those the failure to obtain which, in the
aggregate, are not reasonably likely to have an Atlantic Material
Adverse Effect. Except as set forth in Section 5.4(b), 5.4(d) or
5.11 of the Atlantic Disclosure Schedule, neither Atlantic nor
any of its subsidiaries nor, to the best knowledge of Atlantic,
any of its joint ventures, is 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 or articles of incorporation or its bylaws or (ii)
except where such breaches, violations and defaults, in the
aggregate, are not reasonably likely to have an Atlantic Material
Adverse Effect, 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.
Section 5.5 Reports and Financial Statements.
Except as disclosed in Section 5.5 of the Atlantic Disclosure
Schedule, the filings required to be made by Atlantic and its
subsidiaries since January 1, 1991 under the Securities Act, the
Exchange Act, applicable New Jersey and Pennsylvania laws and
regulations, the Power Act, the 1935 Act and the Atomic Energy
Act have been filed with the SEC, the New Jersey Board of Public
Utilities (the "New Jersey Commission"), the Pennsylvania
Commission, the FERC and the NRC, respectively, including all
forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining
thereto, and, as of their respective dates, complied in all
material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder.
Atlantic has made available to Delmarva a true and complete copy
of each report, schedule, registration statement and definitive
proxy statement filed by Atlantic with the SEC since January 1,
1991 and through the date hereof (as such documents have since
the time of their filing been amended, the "Atlantic SEC
Reports"). The Atlantic SEC Reports, including
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without limitation any financial statements or schedules included
therein, at the time filed, and any forms, reports or other
documents filed by Atlantic with the SEC after the date hereof,
did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited
interim financial statements of Atlantic included in the Atlantic
SEC Reports (collectively, the "Atlantic Financial Statements")
have been prepared, and will be 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) and fairly present the consolidated financial position of
Atlantic as of the respective dates thereof or the consolidated
results of operations and cash flows for the respective periods
then ended, as the case may be, subject, in the case of the
unaudited interim financial statements, to normal, recurring
audit adjustments. True, accurate and complete copies of the
certificate of incorporation and bylaws of Atlantic, as in effect
on the date hereof, have been delivered to Delmarva.
Section 5.6 Absence of Certain Changes or
Events; Absence of Undisclosed Liabilities. (a) Except as
disclosed in the Atlantic SEC Reports filed prior to the date
hereof or as disclosed in Section 5.6 of the Atlantic Disclosure
Schedule, from December 31, 1995 through the date hereof, each of
Atlantic and each of its subsidiaries has conducted its business
only in the ordinary course of business consistent with past
practice and no event has occurred which has had, and no fact or
condition exists that would have or, to the best knowledge of
Atlantic, is reasonably likely to have, an Atlantic Material
Adverse Effect.
(b) Neither Atlantic nor any of its subsidiaries has
any liabilities or obligations (whether absolute, contingent,
accrued or otherwise) of a nature required by GAAP to be
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reflected in a consolidated corporate balance sheet, except
liabilities, obligations or contingencies that are accrued or
reserved against in the consolidated financial statements of
Atlantic or are reflected in the notes thereto for the year ended
December 31, 1995 or that were incurred after December 31, 1995
in the ordinary course of business and are not reasonably likely
to have an Atlantic Material Adverse Effect.
Section 5.7 Litigation. Except as disclosed
in the Atlantic SEC Reports filed prior to the date hereof or as
disclosed in Section 5.7, 5.9, 5.10 or 5.11 of the Atlantic
Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings pending or, to the best knowledge of Atlantic,
threatened, nor are there any investigations or reviews pending
or, to the best knowledge of Atlantic, threatened against,
relating to or affecting Atlantic or any of its subsidiaries,
(ii) there have not been any developments since December 31, 1995
with respect to any such disclosed claims, suits, actions,
proceedings, investigations or reviews and (iii) there are no
judgments, decrees, injunctions, rules or orders of any court,
governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to Atlantic or any of its
subsidiaries that, in the aggregate, are reasonably likely to
have an Atlantic Material Adverse Effect.
Section 5.8 Registration Statement and Proxy
Statement. None of the information supplied or to be supplied by
or on behalf of Atlantic 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 Joint Proxy Statement will, at the date mailed to the
shareholders of Atlantic and Delmarva and, as the same may be
amended or supplemented, at the times of the meetings of such
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shareholders to be held in connection with the Mergers, contain
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Joint Proxy
Statement will comply as to form in all material respects with
the provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder.
Section 5.9 Tax Matters.
(a) Filing of Timely Tax Returns. Except as disclosed
in Section 5.9(a) of the Atlantic Disclosure Schedule, Atlantic
and each of its subsidiaries have filed all Tax Returns required
to be filed by each of them under applicable law. All Tax
Returns were in all material respects (and, as to Tax Returns not
filed as of the date hereof, will be) true, complete and correct
and filed on a timely basis.
(b) Payment of Taxes. Except as disclosed in
Section 5.9(b) of the Atlantic Disclosure Schedule, Atlantic and
each of its subsidiaries have, within the time and in the manner
prescribed by law, paid (and until the Closing Date will pay
within the time and in the manner prescribed by law) all 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. Atlantic and its subsidiaries have
established (and until the Closing Date will maintain) on their
books and records reserves adequate to pay all Taxes and reserves
for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets
of Atlantic or any of its subsidiaries except liens for Taxes not
yet due.
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(e) Withholding Taxes. Atlantic and each of its
subsidiaries have complied (and until the Closing Date will
comply) in all material respects with the provisions of the Code
relating to the payment and withholding of Taxes, including
without limitation the withholding and reporting requirements
under Code Sections 1441 through 1464, 3401 through 3606, and 6041 and
6049, as well as similar provisions under any other laws, and
have within the time and in the manner prescribed by law withheld
from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Except
as disclosed in Section 5.9(f) of the Atlantic Disclosure
Schedule, neither Atlantic nor any of its subsidiaries has
requested any extension of time within which to file any Tax
Return which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as
disclosed in Section 5.9(g) of the Atlantic Disclosure Schedule,
neither Atlantic nor any of its subsidiaries has executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as
disclosed in Section 5.9(h) of the Atlantic Disclosure Schedule,
the statute of limitations for the assessment of all Taxes has
expired for all applicable Tax Returns of Atlantic and each of
its subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any Taxes has been proposed,
asserted or assessed against Atlantic or any of its subsidiaries
that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings.
Except as disclosed in Section 5.9(i) of the Atlantic Disclosure
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Schedule, no audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax
Returns of Atlantic or any of its subsidiaries.
(j) Powers of Attorney. Except as disclosed in
Section 5.9(j) of the Atlantic Disclosure Schedule, no power of
attorney currently in force has been granted by Atlantic or any
of its subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as disclosed in Section
5.9(k) of the Atlantic Disclosure Schedule, neither Atlantic nor
any of its subsidiaries has received a Tax Ruling or entered into
a Closing Agreement with any taxing authority that would have a
continuing adverse effect after the Closing Date.
(l) Availability of Tax Returns. Atlantic and its
subsidiaries have made available to Delmarva complete and
accurate copies, covering all open years, of (i) all Tax Returns,
and any amendments thereto, filed by Atlantic or any of its
subsidiaries, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by Atlantic or any of
its subsidiaries and (iii) any Closing Agreements entered into by
Atlantic or any of its subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Except as disclosed in
Section 5.9(m) of the Atlantic Disclosure Schedule, no agreements
relating to the allocation or sharing of Taxes exist between or
among Atlantic and any of its subsidiaries.
(n) Code Section 341(f). Neither Atlantic nor any of its
subsidiaries has filed a consent pursuant to Code Section 341(f) or has
agreed to have Code Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in Code
Section 341(f)(4)) owned by Atlantic or any of its subsidiaries.
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(o) Code Section 168. Except as disclosed in Section 5.9(o)
of the Atlantic Disclosure Schedule, no property of Atlantic or
any of its subsidiaries is property that Atlantic or any such
subsidiary or any party to this transaction is or will be
required to treat as being owned by another person pursuant to
the provisions of Code Section 168(f)(8) (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is tax-exempt use
property within the meaning of Code Section 168.
(p) Code Section 481 Adjustments. Except as disclosed in
Section 5.9(p) of the Atlantic Disclosure Schedule, neither
Atlantic 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 Atlantic or
any of its subsidiaries, and to the best of the knowledge of
Atlantic, the IRS has not proposed any such adjustment or change
in accounting method.
(q) Code Sections 6661 and 6662. Except as disclosed in
Section 5.9(q) of the Atlantic Disclosure Schedule, all
transactions that could give rise to an understatement of federal
income tax (within the meaning of Code Section 6661 for Tax Returns
filed on or before December 31, 1990, and within the meaning of
Code Section 6662 for tax returns filed after December 31, 1990) that
could reasonably be expected to result in an Atlantic Material
Adverse Effect have been adequately disclosed (or, with respect
to Tax Returns filed following the Closing will be adequately
disclosed) on the Tax Returns of Atlantic and its subsidiaries in
accordance with Code Section 6661(b)(2)(B) for Tax Returns filed on or
prior to December 31, 1990, and in accordance with Code
Section 6662(d)(2)(B) for Tax Returns filed after December 31, 1990.
(r) Code Section 280G. Except as disclosed in Section
5.9(r) of the Atlantic Disclosure Schedule, neither Atlantic nor
any of its subsidiaries is a party to any agreement, contract, or
arrangement that could reasonably be expected to result, on
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account of the transactions contemplated hereunder, separately or
in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Code Section 280G.
(s) NOLS. As of December 31, 1994, Atlantic and its
subsidiaries had net operating loss carryovers available to
offset future income as disclosed in Section 5.9(s) of the
Atlantic Disclosure Schedule. Section 5.9(s) of the Atlantic
Disclosure Schedule discloses the amount of and year of
expiration of each company's net operating loss carryovers.
(t) Credit Carryover. As of December 31, 1994,
Atlantic and its subsidiaries had tax credit carryovers available
to offset future tax liability as disclosed in Section 5.9(t) of
the Atlantic Disclosure Schedule. Section 5.9(t) of the Atlantic
Disclosure Schedule discloses the amount and year of expiration
of each company's tax credit carryovers.
(u) Code Section 338 Elections. Except as disclosed in
Section 5.9(u) of the Atlantic Disclosure Schedule, no election
under Code Section 338 (or any predecessor provision) has been made by
or with respect to Atlantic or any of its subsidiaries or any of
their respective assets or properties.
(v) Acquisition Indebtedness. Except as disclosed in
Section 5.9(v) of the Atlantic Disclosure Schedule, no
indebtedness of Atlantic or any of its subsidiaries is "corporate
acquisition indebtedness" within the meaning of Code Section 279(b).
(w) Intercompany Transactions. Except as disclosed in
Section 5.9(w) of the Atlantic Disclosure Schedule, neither
Atlantic nor any of its subsidiaries have 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.
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(x) Liability for Others. Except as disclosed in
Section 5.9(x) of the Atlantic Disclosure Schedule, neither
Atlantic nor any of its subsidiaries has any liability for Taxes
of any person other than Atlantic and its subsidiaries (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision
of state, local or foreign law) as a transferee or successor,
(ii) by contract or (iii) otherwise.
Section 5.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 5.10(a) of the Atlantic
Disclosure Schedule contains a true and complete list of:
(i) each employee benefit plan, program or arrangement covering
employees, former employees or directors of Atlantic (or any of
its subsidiaries) or any of their dependents or beneficiaries, or
providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any
"employee benefit plan" within the meaning of ERISA Section 3(3)
(whether or not terminated, if Atlantic or any of its
subsidiaries could have statutory or contractual liability with
respect thereto on or after the date hereof); (ii) each
management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change
in control), bonus or other contract for personal services with
or covering any current officer, key employee or director or any
consulting contract with any person who prior to entering into
such contract was a director or officer of Atlantic or any of its
subsidiaries (whether or not terminated, if Atlantic or any of
its subsidiaries could have statutory or contractual liability
with respect thereto on or after the date hereof); (iii) each
"employee pension benefit plan" (within the meaning of ERISA
Section 3(2)) subject to Title IV of ERISA or the minimum funding
requirements of Code Section 412 maintained or contributed to by
Atlantic or any entity required to be aggregated therewith
pursuant to Code Section 414(b) or (c) (each, an "Atlantic ERISA
Affiliate") at any time during the seven-year period immediately
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preceding the date hereof (collectively, the "Atlantic Benefit
Plans") and (iv) with respect to each Atlantic Benefit Plan, the
source or sources of benefit payments under the plan (including,
where applicable, the identity of any trust (whether or not a
grantor trust), insurance contract, custodial account, agency
agreement, or other arrangement that holds the assets of, or
serves as a funding vehicle or source of benefits for, such
Atlantic Benefit Plan).
(b) Contributions. Except as disclosed in Section
5.10(b) of the Atlantic Disclosure Schedule, all material
contributions and other payments required to have been made by
Atlantic or any of its subsidiaries pursuant to any Atlantic
Benefit Plan (or to any person pursuant to the terms thereof)
have been timely made or the amount of such payment or
contribution obligation has been reflected in the Atlantic
Financial Statements.
(c) Qualification; Compliance. Except as disclosed in
Section 5.10(c) of the Atlantic Disclosure Schedule, each
Atlantic Benefit Plan that is intended to be "qualified" within
the meaning of Code Section 401(a) has been determined by the IRS to be
so qualified, and, to the best knowledge of Atlantic, no event or
condition exists or has occurred that could reasonably be
expected to result in the revocation of any such determination.
Atlantic and each of its subsidiaries are in compliance with, and
each Atlantic Benefit Plan is and has been operated in compliance
with, all applicable laws, rules and regulations governing such
plan, including without limitation ERISA and the Code, except for
violations that could not reasonably be expected to have an
Atlantic Material Adverse Effect. To the best knowledge of
Atlantic, no individual or entity has engaged in any transaction
with respect to any Atlantic Benefit Plan as a result of which
Atlantic or any of its subsidiaries could reasonably expect to be
subject to liability pursuant to ERISA Section 409 or Section 502, or subject
to an excise tax pursuant to Code Section 4975. To the best knowledge
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of Atlantic, (i) no Atlantic Benefit Plan is subject to any
ongoing audit, investigation, or other administrative proceeding
of the Internal Revenue Service, the Department of Labor, or any
other federal, state or local governmental entity and (ii) no
Atlantic Benefit Plan is the subject of any pending application
for administrative relief under any voluntary compliance program
of any governmental entity (including without limitation the
IRS's Voluntary Compliance Resolution Program or Walk-in Closing
Agreement Program, or the Department of Labor's Delinquent Filer
Voluntary Compliance Program).
(d) Liabilities. With respect to the Atlantic Benefit
Plans, individually and in the aggregate, no termination or
partial termination of any Atlantic Benefit Plan or other event
has occurred, and, to the best knowledge of Atlantic, there
exists no condition or set of circumstances, that could subject
Atlantic or any of its subsidiaries to any liability arising
under the Code, ERISA or any other applicable law (including
without limitation any liability to or under any such plan or to
the PBGC), or under any indemnity agreement to which Atlantic,
any of its subsidiaries or any Atlantic ERISA Affiliate is a
party, which liability, excluding liability for benefit claims
and funding obligations payable in the ordinary course and
liability for PBGC insurance premiums payable in the ordinary
course is reasonably likely to have an Atlantic Material Adverse
Effect.
(e) Welfare Plans. Except as disclosed in Section
5.10(e) of the Atlantic Disclosure Schedule, no Atlantic Benefit
Plan that is a "welfare plan" (within the meaning of ERISA
Section 3(1)) provides benefits for any retired or former employees
(other than as required pursuant to ERISA Section 601).
(f) Documents Made Available. Atlantic has made
available to Delmarva a true and correct copy of each collective
bargaining agreement to which Atlantic is a party or under which
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Atlantic has obligations and, with respect to each Atlantic
Benefit Plan, as applicable (i) the current plan document
(including all amendments adopted since the most recent
restatement) and its most recently prepared summary plan
description and all summaries of material modifications prepared
since the most recent summary plan description, (ii) the most
recently prepared annual report (IRS Form 5500 Series) including
financial statements, (iii) each related trust agreement,
insurance contract, service provider or investment management
agreement (including all amendments to each such document), (iv)
the most recent IRS determination letter with respect to the
qualified status under Code Section 401(a) of such plan and a copy of
any application for an IRS determination letter filed since the
most recent IRS determination letter was issued and (v) the most
recent actuarial report or valuation.
(g) Payments Resulting from Mergers. Other than as
disclosed in Section 5.10(g) of the Atlantic Disclosure Schedule,
the consummation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the occurrence
of any additional or further acts or events) result in any (i)
payment (whether of severance pay or otherwise) becoming due from
the Company or Atlantic or any of its subsidiaries under any
applicable Atlantic Benefit Plans to any officer, employee,
former employee or director thereof or to the trustee under any
"rabbi trust" or similar arrangement, or (ii) benefit under any
Atlantic Benefit Plan being established or becoming accelerated,
vested or payable, except for a payment or benefit that would
have been payable under the same terms and conditions without
regard to the transactions contemplated by this Agreement.
(h) Funded Status of Plans. Except as disclosed in
Section 5.10(h) of the Atlantic Disclosure Schedule, each
Atlantic Benefit Plan that is subject to either or both of the
minimum funding requirements of ERISA Section 302 or to Title IV of
ERISA has assets that, as of the date hereof, have a fair market
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value equal to or exceeding the present value of the accrued
benefit obligations thereunder on a termination basis, as of the
date hereof based on the actuarial methods, tables and
assumptions theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation
report, except to the extent that applicable law would require
the use of different actuarial assumptions if such plan was to be
terminated as of the date hereof. No Atlantic Benefit Plan
subject to the minimum funding requirements of ERISA Section 302 has
incurred any "accumulated funding deficiency" (within the meaning
of ERISA Section 302).
(i) Multiemployer Plans. Except as disclosed in
Section 5.10(i) of the Atlantic Disclosure Schedule, no Atlantic
Benefit Plan is or was a "multiemployer plan" (within the meaning
of ERISA Section 4001(a)(3)), a multiple employer plan described in
Code Section 413(c), or a "multiple employer welfare arrangement"
(within the meaning of ERISA Section 3(40)); and none of Atlantic, any
subsidiary thereof or any Atlantic ERISA Affiliate has been
obligated to contribute to, or otherwise has or has had any
liability with respect to, any multiemployer plan, multiple
employer plan, or multiple employer welfare arrangement. With
respect to any Atlantic Benefit Plan that is listed in Section
5.10(i) of the Atlantic Disclosure Schedule as a multiemployer
plan, Atlantic and its subsidiaries have not made or incurred a
"complete withdrawal" or a "partial withdrawal," as such terms
are defined in ERISA Sections 4203 and 4205, therefrom at any time
during the five calendar year period immediately preceding the
date of this Agreement and the transactions contemplated by the
Agreement will not, in and of themselves, give rise to such a
"complete withdrawal" or "partial withdrawal."
(j) Modification or Termination of Plans. Except as
disclosed in Section 5.10(j) of the Atlantic Disclosure Schedule:
(i) neither Atlantic nor any subsidiary of Atlantic is subject
to any legal, contractual, equitable or other obligation to
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establish as of any date any employee benefit plan of any nature,
including without limitation any pension, profit sharing,
welfare, post-retirement welfare, stock option, stock or cash
award, nonqualified deferred compensation or executive
compensation plan, policy or practice; and (ii) to the best
knowledge of Atlantic after review of all Atlantic Benefit Plan
documents, the Company, Atlantic or one or more of its
subsidiaries may, in any manner, and without the consent of any
employee, beneficiary or dependent, employees' organization or
other person, terminate, modify or amend any Atlantic Benefit
Plan or any other employee benefit plan, policy, program or
practice (or its participation in any such Atlantic Benefit Plan
or other employee benefit plan, policy, program or practice) at
any time sponsored, maintained or contributed to by Atlantic or
any of its subsidiaries, effective as of any date before, on or
after the Effective Time except to the extent that any
retroactive amendment would be prohibited by ERISA Section 204(g) or
would deprive a plan participant of a benefit in which such
participant has a vested right.
(k) Reportable Events; Claims. Except as disclosed in
Section 5.10(k) of the Atlantic Disclosure Schedule, (i) no event
constituting a "reportable event" (within the meaning of ERISA
Section 4043(b)) for which the 30-day notice requirement has not been
waived by the PBGC has occurred with respect to any Atlantic
Benefit Plan and (ii) no liability, claim, action or litigation
has been made, commenced or, to the best knowledge of Atlantic,
threatened, by or against Atlantic or any of its subsidiaries
with respect to any Atlantic Benefit Plan (other than for
benefits or PBGC premiums payable in the ordinary course) that is
reasonably likely to have an Atlantic Material Adverse Effect.
(l) Labor Agreements. Except as disclosed in
Section 5.10(l) of the Atlantic Disclosure Schedule, to the best
knowledge of Atlantic, as of the date hereof, there is no current
labor union representation question involving employees of
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Atlantic or any of its subsidiaries, nor does Atlantic or any of
its subsidiaries know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees. Except
as disclosed in the Atlantic SEC Reports or as disclosed in
Section 5.10(l) of the Atlantic Disclosure Schedule: (i) neither
Atlantic nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor agreement with any union or
labor organization; (ii) there are no unfair labor practice
charges or grievances arising out of a collective bargaining
agreement or other grievance procedure against Atlantic or any of
its subsidiaries pending, or to the best knowledge of Atlantic
threatened, that, in the aggregate, are reasonably likely to have
an Atlantic Material Adverse Effect; (iii) there are no
complaints, lawsuits or proceedings in any forums by or on behalf
of any present or former employees, any applicants for employment
or classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship against Atlantic or any of its subsidiaries pending,
or to the best knowledge of Atlantic threatened, that, in the
aggregate, are reasonably likely to have an Atlantic Material
Adverse Effect; (iv) there are no strikes, disputes, slowdowns,
work stoppages or lockouts pending, or to the best knowledge of
Atlantic threatened, against or involving Atlantic or any of its
subsidiaries that, in the aggregate, are reasonably likely to
have an Atlantic Material Adverse Effect; (v) Atlantic and each
of its subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational
safety and health, except for noncompliance that, in the
aggregate, is not reasonably likely to have an Atlantic Material
Adverse Effect; and (vi) there is no proceeding, claim, suit,
action or governmental investigation pending, or to the best
knowledge of Atlantic threatened, in respect to which any
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director, officer, employee or agent of Atlantic or any of its
subsidiaries is or may be entitled to claim indemnification from
Atlantic or any of its subsidiaries pursuant to their respective
certificates or articles of incorporation or bylaws or as
provided in the indemnification agreements listed on Section
5.10(l) of the Atlantic Disclosure Schedule.
Section 5.11 Environmental Protection.
(a) Compliance. Except as disclosed in Section
5.11(a) of the Atlantic Disclosure Schedule or as disclosed in
the Atlantic SEC Reports, Atlantic and each of its subsidiaries
are and have been in material compliance with all applicable
Environmental Laws, except where the failure to be or to have
been so in material compliance, in the aggregate, is not
reasonably likely to have an Atlantic Material Adverse Effect.
Except as disclosed in Section 5.11(a) of the Atlantic Disclosure
Schedule, neither Atlantic nor any of its subsidiaries has
received any written notice from any person or Governmental
Authority that alleges that Atlantic or any of its subsidiaries
is not or has not been in material compliance with applicable
Environmental Laws, except where the failure to be or to have
been so in material compliance, in the aggregate, is not
reasonably likely to have an Atlantic Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in
Section 5.11(b) of the Atlantic Disclosure Schedule or as
disclosed in the Atlantic SEC Reports, Atlantic and each of its
subsidiaries have obtained or have applied for all material
Environmental Permits necessary for the construction of their
facilities and the conduct of their 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 Atlantic and its subsidiaries are in compliance
with all terms and conditions of all such Environmental Permits
and are not required to make any material expenditures in
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connection with any renewal application pending agency approval,
except where the failure to obtain or be in such compliance and
the requirement to make such expenditures, in the aggregate, is
not reasonably likely to have an Atlantic Material Adverse
Effect.
(c) Environmental Claims. Except as disclosed in
Section 5.11(c) of the Atlantic Disclosure Schedule or as
disclosed in the Atlantic SEC Reports, to the best knowledge of
Atlantic, there are no Environmental Claims (as defined in
Section 4.11(g)) pending, or to the best knowledge of Atlantic
threatened, (i) against Atlantic or any of its subsidiaries or
joint ventures, (ii) against any person or entity whose liability
for any Environmental Claim Atlantic or any of its subsidiaries
or joint ventures has or may have retained or assumed either
contractually or by operation of law or (iii) against any real or
personal property or operations that Atlantic or any of its
subsidiaries or joint ventures owns, leases or manages, in whole
or in part, that, if adversely determined are in the aggregate
reasonably likely to have an Atlantic Material Adverse Effect.
(d) Releases. Except as disclosed in Section 5.11(c)
or 5.11(d) of the Atlantic Disclosure Schedule or as disclosed in
the Atlantic SEC Reports, to the best knowledge of Atlantic,
there has been no Release of any Hazardous Material that would be
reasonably likely to form the basis of any Environmental Claim
against Atlantic or any subsidiary or joint venture of Atlantic,
or against any person or entity whose liability for any
Environmental Claim Atlantic or any subsidiary or joint venture
of Atlantic has or may have retained or assumed either
contractually or by operation of law, except for Releases of
Hazardous Materials the liability for which is not in the
aggregate reasonably likely to have an Atlantic Material Adverse
Effect.
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(e) Predecessors. Except as disclosed in Section
5.11(e) of the Atlantic Disclosure Schedule or as disclosed in
the Atlantic SEC Reports, to the best knowledge of Atlantic with
respect to any predecessor of Atlantic or of any subsidiary or
joint venture of Atlantic, there are no Environmental Claims
pending or threatened, or any Releases of Hazardous Materials
that would be reasonably likely to form the basis of any
Environmental Claims, that are reasonably likely to have, in the
aggregate, an Atlantic Material Adverse Effect.
(f) Disclosure. To the best knowledge of Atlantic,
Atlantic has disclosed to Delmarva all material facts that
Atlantic reasonably believes are likely to form the basis of a
material Environmental Claim or to require material expenditures
in order to comply with current or future applicable
Environmental Laws arising from (i) the cost of pollution control
equipment currently required or known to be required in the
future, (ii) current investigatory, removal, remediation or
response costs or investigatory, removal, remediation or response
costs known to be required in the future, in each case, both on-
site and off-site and (iii) any other environmental matters
affecting Atlantic or its subsidiaries.
Section 5.12 Regulation as a Utility. One of
Atlantic's wholly owned subsidiaries is regulated as a public
utility in the State of New Jersey and by the FERC. Except as
disclosed in Section 5.12 of the Atlantic Disclosure Schedule,
neither Atlantic nor any "subsidiary company" or "affiliate" (as
such terms are defined in the 1935 Act) of Atlantic is subject to
regulation as a public utility or public service company (or
similar designation) by any other state in the United States, by
the United States or any agency or instrumentality of the United
States or by any foreign country. Atlantic is a holding company
exempt from all provisions of the 1935 Act except Section 9(a)(2)
pursuant to Section 3(a)(1) of the 1935 Act.
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Section 5.13 Vote Required. The approval of
the Atlantic Merger by a majority of all votes cast by the
holders of Atlantic Common Stock (the "Atlantic Shareholders'
Approval"), is the only vote of the holders of any class or
series of the capital stock of Atlantic required to approve this
Agreement, the Mergers and the other transactions contemplated
hereby.
Section 5.14 Opinion of Financial Advisor.
Atlantic has received the opinion of Morgan Stanley & Co.
Incorporated, dated the date hereof, to the effect that, as of
the date hereof, the Atlantic Conversion Ratio, taking into
account the Delmarva Conversion Ratio, is fair from a financial
point of view to the holders of Atlantic Common Stock.
Section 5.15 Insurance. Except as disclosed
in Section 5.15 of the Atlantic Disclosure Schedule, each of
Atlantic and each of its subsidiaries is, and has been
continuously since January 1, 1991, insured with financially
responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the respective
businesses conducted by Atlantic and its subsidiaries during such
time period. Except as disclosed in Section 5.15 of the Atlantic
Disclosure Schedule, neither Atlantic nor any of its subsidiaries
has received any notice of cancellation or termination with
respect to any material insurance policy thereof. All material
insurance policies of Atlantic and its subsidiaries are valid and
enforceable policies.
Section 5.16 Applicability of Certain New
Jersey Law. Assuming the accuracy of the representation of
Delmarva set forth in Section 4.17, the New Jersey Shareholders
Protection Act (Section 14A:10A-1 et seq. of the NJBCA) is not
applicable to the transactions contemplated by this Agreement.
Section 5.17 Ownership of Delmarva Common Stock.
Atlantic does not "beneficially own" (as such term is defined in
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Rule 13d-3 under the Exchange Act) any shares of Delmarva Common
Stock.
Section 5.18 Operations of Atlantic Nuclear
Power Plants. Except as set forth in Section 5.18 of the
Atlantic Disclosure Schedule, to the best knowledge of Atlantic,
the operations of the Hope Creek Nuclear Generating Station owned
by Atlantic and the Salem and Peach Bottom Nuclear Generating
Stations owned by Atlantic together with Delmarva (collectively,
the "Atlantic Facilities") are and have at all times been
conducted in compliance with applicable health, safety,
regulatory and other legal requirements, except where the failure
to be in compliance in the aggregate does not and insofar as can
reasonably be foreseen would not have an Atlantic Material
Adverse Effect. To the best knowledge of Atlantic, each of the
Atlantic Facilities maintains emergency plans designed to respond
to an unplanned release therefrom of radioactive materials into
the environment and customary liability insurance consistent with
industry practice and consistent with Atlantic's view of the
risks inherent in the operation of a nuclear power facility
currently exists with respect to such Atlantic Facility. To the
best knowledge of Atlantic, plans for the decommissioning of each
of the Atlantic Facilities and for the short-term storage of
spent nuclear fuel conform with the requirements of applicable
law, and such plans have at all times been funded consistently
with reasonable budget projections for such plans.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Delmarva and Atlantic have each delivered to the other
a budget for the years 1996 through 1998 (respectively, the
"Delmarva Budget" and the "Atlantic Budget"), which Delmarva or
Atlantic, as the case may be, may update or otherwise modify in
writing for purposes of this Article VI only with the consent in
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writing of Atlantic or Delmarva, as the case may be. After the
date hereof and prior to the Effective Time or earlier
termination of this Agreement, each of Delmarva and Atlantic
agrees as to itself and its subsidiaries, except as expressly
contemplated or permitted in this Agreement, or to the extent
Atlantic or Delmarva, as the case may be, shall otherwise consent
in writing, as follows:
Section 6.1 Ordinary Course of Business.
Each of Delmarva and Atlantic shall, and each shall cause its
respective subsidiaries to, carry on its and their respective
businesses in the usual, regular and ordinary course consistent
with past practice and use all commercially reasonable efforts to
preserve intact their present business organizations and
goodwill, preserve the goodwill and relationships with customers,
suppliers and others having business dealings with them and,
subject to prudent management of their workforces, including
(without limitation) ongoing or planned activities, benefits,
programs, practices, and policies related to effecting their
business strategies and downsizing, re-engineering and similar
matters, keep available the services of their present officers
and employees, to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect at the
Effective Time. Neither Delmarva nor Atlantic shall, nor shall
either permit any of its subsidiaries to, (i) enter into a new
line of business that is not described, in the case of Delmarva,
in Section 6.1 of the Delmarva Disclosure Schedule, or, in the
case of Atlantic, in Section 6.1 of the Atlantic Disclosure
Schedule (in each case, a "Listed Activity") involving any
material investment of assets or resources or any material
exposure to liability or loss (including without limitation any
loans or capital contributions to, and the undertaking of any
guarantees in favor of or any "keepwell" or other agreements to
maintain the financial condition of, another person), in the case
of Delmarva, to Delmarva and its subsidiaries taken as a whole,
and, in the case of Atlantic, to Atlantic and its subsidiaries taken as a
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whole, (ii) make aggregate investments (including
without limitation any loans or capital contributions to, and the
undertaking of any guarantees in favor of or any "keep well" or
other agreements to maintain the financial condition of, another
person) during the period from the date of this Agreement to the
Effective Time in or in respect of Listed Activities in excess of
$250,000,000 in the aggregate, or (iii) make any such investment
in or in respect of any Listed Activity, other than an investment
by Atlantic in thermal (heating and cooling) services, in excess
of $7,500,000 per year in any Listed Activity without
consultations with each other concerning the investment. For
purposes of this Article VI, "consistent with past practice" as
applied to Atlantic and its subsidiaries shall mean among other
things that, unless otherwise required by applicable law or
regulation, the allocation of benefits and burdens to Atlantic
City Electric Company ("Atlantic Utility") in comparison with those
allocated to Atlantic and its subsidiaries other than Atlantic Utility
shall be on a basis not more favorable to Atlantic Utility than
has previously been the case.
Section 6.2 Dividends. Neither Delmarva nor
Atlantic shall, nor shall either permit any of its subsidiaries
to: (a) declare or pay any dividends on or make other
distributions in respect of any of their capital stock other than
(i) to such party or its wholly-owned subsidiaries, (ii)
dividends required to be paid on any Delmarva Preferred Stock or
any preferred stock issued by Atlantic City Electric Company
("Atlantic Subsidiary Preferred Stock") in accordance with their
respective terms, (iii) regular quarterly dividends on Delmarva
Common Stock with usual record and payment dates at an annual
rate not in excess of $1.54 per share and (iv) regular quarterly
dividends on Atlantic Common Stock with usual record and payment
dates at an annual rate not in excess of $1.54 per share;
(b) split, combine or reclassify any of their capital stock or
issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for,
shares of its capital stock; or
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(c) redeem, repurchase or
otherwise acquire any shares of their capital stock other than
(i) redemptions, repurchases and other acquisitions of shares of
capital stock in the ordinary course of business consistent with
past practice including without limitation, (w) repurchases,
redemptions and other acquisitions 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, (x) redemptions, purchases or
acquisitions required by the respective terms of any series of
Delmarva Preferred Stock or Atlantic Subsidiary Preferred Stock,
(y) in connection with the refunding of Delmarva Preferred Stock
or Atlantic Subsidiary Preferred Stock through the issuance of
additional Delmarva Preferred Stock or Atlantic Utility Preferred
Stock or indebtedness, as the case may be, at a lower cost of
funds (calculating such cost on an aggregate after-tax basis) or
through the issuance of long-term indebtedness as permitted under
Section 6.7 and (z) open-market repurchases of Delmarva Common
Stock or Atlantic Common Stock, as the case may be, utilized to
fund up to $50,000,000 in any fiscal year (when aggregated with
common stock so utilized by Delmarva or Atlantic, as the case may
be, pursuant to clause (c) of Section 6.3) of the cost of any
acquisitions permitted under Section 6.5 and (ii) intercompany
acquisitions of capital stock.
Section 6.3 Issuance of Securities. Neither
Delmarva nor Atlantic shall, nor shall either permit any of its
subsidiaries to, issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of their capital
stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire,
any such shares or convertible or exchangeable securities, except
as provided in the Delmarva Budget or the Atlantic Budget, as the
case may be, and except for (a) the issuance of common stock or
stock appreciation or similar rights, as the case may be,
pursuant to (i) the Dividend Reinvestment and Common Share
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Purchase Plan, the Savings and Thrift Plan, and the Long-Term
Incentive Plan of Delmarva or (ii) the Employee Incentive Plan,
the Directors' Restricted Stock Plan, the Employee Stock Purchase
Plan and the Dividend Reinvestment Plan of Atlantic, in each case
consistent with past practice in kind and amount and in the
ordinary course of business under such plans substantially in
accordance with their present terms, (b) the issuance by a wholly
owned subsidiary of shares of its capital stock to its parent and
(c) the issuance of common stock by Delmarva or Atlantic, as the
case may be, utilized to fund up to $50,000,000 in any fiscal
year (when aggregated with common stock so utilized by Delmarva
or Atlantic, as the case may be, pursuant to clause (c)(i)(z) of
Section 6.2) of the cost of any acquisitions permitted under
Section 6.5.
Section 6.4 Charter Documents. Neither
Delmarva nor Atlantic shall amend or propose to amend its
certificate or articles of incorporation or its bylaws, except as
necessary to provide for the issuance of securities as permitted
pursuant to Section 6.3 or as required by law.
Section 6.5 Acquisitions. Except as
permitted by Section 6.1 in respect of Listed Activities or as
may be disclosed in Section 6.5 of the Delmarva Disclosure
Schedule or the Atlantic Disclosure Schedule, and except for
acquisitions not exceeding $20,000,000 in the aggregate during
any fiscal year, or more than $40,000,000 in the aggregate during
the period from the date of this Agreement to the Effective Time,
in the case of, on the one hand, Delmarva and its subsidiaries
and, on the other hand, Atlantic and its subsidiaries, neither
Delmarva nor Atlantic shall, nor shall either permit any of its
subsidiaries to, acquire or agree or publicly propose 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 other business organization or division thereof,
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or otherwise acquire or agree to acquire any material amount of
assets other than in the ordinary course of business consistent
with past practice.
Section 6.6 No Dispositions. Except as
disclosed in Section 6.6 of the Delmarva Disclosure Schedule or
the Atlantic Disclosure Schedule, and other than (a) dispositions
not exceeding $5,000,000 during any fiscal year in the case of,
on the one hand, Delmarva and its subsidiaries and, on the other
hand, Atlantic and its subsidiaries, (b) as may be required by
law to consummate the transactions contemplated hereby or (c) in
the ordinary course of business consistent with past practice,
neither Delmarva nor Atlantic shall, nor shall either permit any
of its subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, any of its assets that are material,
individually or in the aggregate, to such party and its
subsidiaries taken as a whole.
Section 6.7 Indebtedness. Except as
disclosed in Section 6.7 of the Delmarva Disclosure Schedule or
the Atlantic Disclosure Schedule and except as provided in the
Delmarva Budget and the Atlantic Budget, as the case may be,
neither Delmarva nor Atlantic shall, nor shall either permit any
of its subsidiaries to, incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise assumed,
including without limitation the issuance of debt securities or
warrants or rights to acquire debt) or enter into any "keepwell"
or other agreement to maintain the financial condition of another
person or enter into arrangements having the effect of any of the
foregoing other than (a) short-term indebtedness in the ordinary
course of business consistent with past practice, (b) long-term
indebtedness in connection with the refinancing of existing
indebtedness either at its stated maturity or at a lower cost of
funds (calculating such cost on an aggregate after-tax basis),
(c) long-term indebtedness in connection with the refunding of
Delmarva Preferred Stock or Atlantic Preferred Stock at a lower
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cost of funds (calculated as aforesaid), and (d) additional
indebtedness in any fiscal year not exceeding $25,000,000 more
than the amount provided therefor in the Delmarva Budget for such
fiscal year with respect to Delmarva and its subsidiaries and in
the Atlantic Budget for such fiscal year with respect to Atlantic
and its subsidiaries.
Section 6.8 Capital Expenditures. Except as
permitted by Section 6.1 in respect of Listed Activities or as
may be disclosed in Section 6.8 of the Delmarva Disclosure
Schedule or the Atlantic Disclosure Schedule or as required by
law, neither Delmarva nor Atlantic shall, nor shall either permit
any of its subsidiaries to, make any capital expenditures, other
than (a) capital expenditures incurred in connection with the
construction of new facilities, (b) capital expenditures to
repair or replace facilities destroyed or damaged due to casualty
or accident (whether or not covered by insurance) and
(c) additional capital expenditures in any year of not more than
10% of the amount provided therefor in the Delmarva Budget for
that year with respect to Delmarva and its subsidiaries and in
the Atlantic Budget for that year with respect to Atlantic and
its subsidiaries.
Section 6.9 Compensation, Benefits. Except
as disclosed in Section 6.9 of the Delmarva Disclosure Schedule
or the Atlantic Disclosure Schedule, neither Delmarva nor
Atlantic shall, nor shall either permit any of its subsidiaries
to, (i) enter into, adopt or amend (except as may be required by
applicable law), or increase the amount or accelerate the payment
or vesting of any benefit or amount payable under, any employee
benefit plan or other contract, agreement, commitment,
arrangement, plan or policy maintained by, contributed to or
entered into by such party or any of its subsidiaries, or
increase, or enter into any contract, agreement, commitment or
arrangement to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the
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engagement, employment or any related rights, of any director,
officer or other employee of such party or any of its
subsidiaries, except pursuant to binding legal commitments and
except for normal (including incentive) increases, extensions,
expansions, enhancements, amendments or adoptions in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to such party and its subsidiaries taken as
a whole or (ii) enter into or amend any employment, severance,
special pay arrangement with respect to termination of employment
or other similar contract, agreement or arrangement with any
director or officer other than in the ordinary course of business
consistent with past practice. Notwithstanding the foregoing,
(i) Atlantic shall terminate its retirement plan for non-employee
directors and pay in cash all accrued benefits thereunder as
described in Section 6.9 of the Atlantic Disclosure Schedule
prior to the Effective Time, and (ii) each of Delmarva and
Atlantic may, with the agreement of the other, modify the
benefits payable under its severance arrangements with management
employees in a manner which makes the aggregate level of
severance benefits received by such management employees
comparable to the aggregate level of severance benefits which
are, on the date of this Agreement, provided to comparable
employees of the other.
Section 6.10 1935 Act. Atlantic shall not,
nor shall it permit any of its subsidiaries to, except as
required or contemplated by this Agreement, engage in any
activities that would cause a change in its status, or that of
its subsidiaries, under the 1935 Act, that would impair the
ability of Atlantic to claim an exemption from all provisions of
the 1935 Act except Section 9(a)(2) under Section 3(a)(1) of the
1935 Act or that would impair the ability of Atlantic Utility to
claim an exemption from all provisions of the 1935 Act except
Section 9(a)(2) under Section 3(a)(2) of the 1935 Act, other than
(i) the application to the SEC under the 1935 Act contemplated by this
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Agreement for approval to the extent required of the
transactions contemplated hereby and (ii) the registration of the
Company pursuant to the 1935 Act.
Section 6.11 Accounting. Neither Delmarva
nor Atlantic shall, nor shall either permit any of its
subsidiaries to, make any changes in their accounting methods,
except as required by law, rule, regulation or GAAP.
Section 6.12 Tax-Free Status. No party
shall, nor shall any party permit any of its subsidiaries to,
take any actions that would, or would be reasonably likely to,
adversely affect the status of the Mergers as a tax-free
transaction (except as to dissenters' rights and fractional
shares) under Code Section 368(a) and/or Code Section 351, and each party
shall use all commercially reasonable efforts to achieve such
result.
Section 6.13 Discharge of Liabilities.
Neither Delmarva nor Atlantic shall, nor shall either permit any
of its subsidiaries to, pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than (i) the
payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice (which includes the
payment of final and unappealable judgments and the refinancing
of existing indebtedness for borrowed money either at its stated
maturity or at a lower cost of funds) 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 such party included in such
party's reports filed with the SEC, or incurred in the ordinary
course of business consistent with past practice, or pursuant
to Section 6.7 or as disclosed in Section 6.7 of the Delmarva
Disclosure Schedule or the Atlantic Disclosure Schedule, or
(ii) as part of or pursuant to any settlement of any rate filings
before the public
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utility commission of any state or the FERC pending on the date
of this Agreement.
Section 6.14 Cooperation, Notification. Each
of Delmarva and Atlantic shall: (a) confer on a regular and
frequent basis with one or more representatives of the other to
discuss, subject to applicable law, material operational matters
and the general status of its ongoing operations; (b) promptly
notify the other of any significant changes in its business
(including the entry into material new lines of business or
material extensions or expansions of existing lines of business),
properties, assets, condition (financial or other), prospects or
results of operations; (c) advise the other of any change or
event that has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in, a Delmarva Material Adverse
Effect or an Atlantic Material Adverse Effect, as the case may
be; and (d) promptly provide the other with copies of all filings
made by it 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.
Section 6.15 Rate Matters. Other than
currently pending rate filings and matters related to the
recovery of costs associated with outages at the Salem Nuclear
Generating Station, each of Delmarva and Atlantic shall, and
shall cause its subsidiaries to, discuss with the other any
changes in its or its subsidiaries' regulated rates or charges,
standards of service or accounting from those in effect on the
date hereof and consult with the other parties prior to making
any filing (or any amendment thereto), or effecting any
agreement, commitment, arrangement or consent with governmental
regulators, whether written or oral, formal or informal, with
respect thereto, and neither shall make any filing to change its
rates or charges on file with the public utility commission of
any state or FERC that
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would have a material adverse effect on the benefits associated
with the Mergers.
Section 6.16 Third-Party Consents. Delmarva
shall, and shall cause its subsidiaries to, use all commercially
reasonable efforts to obtain all Delmarva Required Consents.
Delmarva shall promptly notify Atlantic of any failure or
anticipated failure to obtain any such consents and, if requested
by Atlantic, shall provide copies of all Delmarva Required
Consents obtained by Delmarva to Atlantic. Atlantic shall, and
shall cause its subsidiaries to, use all commercially reasonable
efforts to obtain all Atlantic Required Consents. Atlantic shall
promptly notify Delmarva of any failure or anticipated failure to
obtain any such consents and, if requested by Delmarva, shall
provide copies of all Atlantic Required Consents obtained by
Atlantic to Delmarva.
Section 6.17 No Breach, Etc. No party shall,
nor shall any party permit any of its subsidiaries to, take any
action that would or is reasonably likely to result in a material
breach of any covenant or agreement 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.
Section 6.18 Tax-Exempt Status. No party
shall, nor shall any party permit any subsidiary to, take any
action that would, or would be reasonably likely to, jeopardize
the qualification of the outstanding revenue bonds issued for the
benefit of Delmarva (or any subsidiary thereof) or for the
benefit of Atlantic (or any subsidiary thereof) that qualify on
the date hereof under Code Section 142(a) as "exempt facility bonds" or
as tax-exempt industrial development bonds under Section
103(b)(4) of the Internal Revenue Code of 1954, as amended prior
to the Tax Reform Act of 1986.
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Section 6.19 Transition Management. Delmarva
and Atlantic shall create a special transition management task
force (the "Task Force") to be headed by Howard E. Cosgrove (or
an individual designated by him who shall be reasonably
satisfactory to the other Task Force head) and Michael J. Chesser
(or an individual designated by him and reasonably satisfactory
to the other Task Force head). The Task Force shall examine
various alternatives regarding the manner in which best to
organize and manage the business of the Company after the
Effective Time, subject to applicable law. From time to time,
the Task Force shall report its findings to the Board of
Directors of each of Delmarva and Atlantic.
Section 6.20 Insurance. Each of Delmarva and
Atlantic 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 utility industry and employing
methods of generating electric power and fuel sources similar to
those methods employed and fuels used by such party or such
party's subsidiaries.
Section 6.21 Permits. Delmarva and Atlantic
shall, and shall each cause its subsidiaries to, use all
reasonable efforts to maintain in effect all existing Permits (as
defined in Section 4.4) pursuant to which it or its subsidiaries
operate.
Section 6.22 Contracts; Agreements. Neither
Delmarva nor Atlantic shall, nor shall either permit any of its
subsidiaries to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or
fail to use reasonable business efforts to renew any material
contract or agreement to which such party or any subsidiary of
such party is a party or waive, release or assign any material
rights or claims. Neither Delmarva nor Atlantic shall, nor shall
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either permit any of its subsidiaries to, agree in writing to
take any action not permitted by this Article VI.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon
reasonable notice and during normal business hours, each party
shall, and shall cause its subsidiaries to, afford to the
officers, directors, employees, accountants, counsel, investment
banker, financial advisor and other representatives of the other
(collectively, "Representatives") reasonable access, during
normal business hours throughout the period prior to the
Effective Time, to all of its properties, books, contracts,
commitments and records (including, but not limited to, Tax
Returns) and, during such period, each party shall, and shall
cause its subsidiaries to, furnish promptly to the other (i)
access to each report, schedule and other document filed or
received by it or any of its subsidiaries pursuant to the
requirements of federal or state securities laws or filed with
the SEC, the FERC, the NRC, the Department of Justice, the
Federal Trade Commission, the Delaware Commission, the Maryland
Commission, the Virginia Commission, the New Jersey Commission,
the Pennsylvania Commission or any other federal or state
regulatory agency or commission, and (ii) access to all
information concerning themselves, their subsidiaries, directors,
officers and shareholders and such matters as may be reasonably
requested by the other party in connection with any filings,
applications or approvals required or contemplated by this
Agreement. All documents and information furnished pursuant to
this Section 7.1 shall be subject to the confidentiality
agreement dated April 10, 1996 between Delmarva and Atlantic, as
it may be amended from time to time (the "Confidentiality
Agreement"). The party requesting copies of any documents from
any other party hereto shall be responsible for all out-of-pocket
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expenses incurred by the party to whom such request is made in
complying with such request, including any cost of reproducing
and delivering any required information.
Section 7.2 Joint Proxy Statement and Registration
Statement.
(a) Preparation and Filing. As promptly as reasonably
practicable after the date hereof, the parties shall prepare and
file with the SEC the Registration Statement and the Joint Proxy
Statement (together, the "Joint Proxy/Registration Statement").
The parties shall take such actions as may be reasonably required
to cause the Registration Statement to be declared effective
under the Securities Act as promptly as practicable after such
filing. The parties shall also take such action as may be
reasonably required to cause the shares of Company Common Stock
and Letter Stock issuable in connection with the Mergers to be
registered or to obtain an exemption from registration under
applicable state "blue sky" or securities laws; provided,
however, that none of the Company, Atlantic or Delmarva shall be
required to register or qualify as a foreign corporation or to
take any other action that would subject it to general service of
process in any jurisdiction in which the Company will not,
following the Mergers, be so subject. Each of the parties shall
furnish all information concerning itself that is required or
customary for inclusion in the Joint Proxy/Registration
Statement. No representation, covenant or agreement contained in
this Agreement is made by any party with respect to information
supplied by any other party for inclusion in the Joint
Proxy/Registration Statement. The Joint Proxy/Registration
Statement shall comply as to form in all material respects with
the Securities Act and the rules and regulations thereunder. The
parties shall take such action as may be reasonably required to
cause the shares of Company Common Stock and Letter Stock to be
issued in the Mergers to be approved for listing on the NYSE and
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any other stock exchanges agreed to by the parties, each upon
official notice of issuance.
(b) Letter of Delmarva's Accountants. Following
receipt by Coopers & Lybrand, Delmarva's independent auditors, of
an appropriate request from Atlantic pursuant to SAS No. 72,
Delmarva shall use best efforts to cause to be delivered to the
Company and Atlantic a letter of Coopers & Lybrand, dated a date
within two business days before the effective date of the
Registration Statement, and addressed to the Company and
Atlantic, in form and substance reasonably satisfactory to the
Company and Atlantic and customary in scope and substance for
"cold comfort" letters delivered by independent public
accountants in connection with registration statements and proxy
statements similar to the Joint Proxy/Registration Statement.
(c) Letter of Atlantic's Accountants. Following
receipt by Deloitte & Touche, LLP, Atlantic's independent
auditors, of an appropriate request from Delmarva pursuant to SAS
No. 72, Atlantic shall use best efforts to cause to be delivered
to the Company and Delmarva a letter of Deloitte & Touche, LLP,
dated a date within two business days before the effective date
of the Registration Statement, and addressed to the Company and
Delmarva, in form and substance satisfactory to the Company and
Delmarva and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the
Joint Proxy/Registration Statement.
(d) Fairness Opinions. It shall be a condition to the
mailing of the Joint Proxy Statement to the shareholders of
Atlantic and Delmarva that (i) Delmarva shall have received an
opinion from Merrill Lynch, Pierce, Fenner & Smith Incorporated,
dated the date of the Joint Proxy Statement, to the effect that,
as of the date thereof, the Delmarva Conversion Ratio is fair to
the holders of Delmarva Common Stock, and (ii) Atlantic shall
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have received an opinion from Morgan Stanley & Co. Incorporated,
dated the date of the Joint Proxy Statement, to the effect that,
as of the date thereof, the Atlantic Conversion Ratio is fair to
the holders of Atlantic Common Stock.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party shall file or cause to be
filed with the Federal Trade Commission and the Department of
Justice any notifications required to be filed by their
respective "ultimate parent" companies under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations promulgated thereunder with
respect to the transactions contemplated hereby. The parties
shall use all commercially reasonable efforts to make such
filings promptly and shall respond promptly to any requests for
additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party 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 all
necessary permits, consents, approvals and authorizations of all
Governmental Authorities and all other persons necessary or
advisable to consummate the transactions contemplated by this
Agreement, including without limitation the Delmarva Required
Statutory Approvals and the Atlantic Required Statutory
Approvals. Atlantic shall have the right to review and approve
in advance all characterizations of the information relating to
Atlantic, on the one hand, and Delmarva shall have the right to
review and approve in advance all characterizations of the
information relating to Delmarva, on the other hand, in either
case which appear in any filing made in connection with the
transactions contemplated by this Agreement. Delmarva and
Atlantic shall each consult with the other with respect to the
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obtaining of all such necessary or advisable permits, consents,
approvals and authorizations of Governmental Authorities.
Section 7.4 Shareholder Approvals.
(a) Approval of Atlantic Shareholders. Atlantic
shall, as promptly as reasonably practicable after the date
hereof (i) take all steps reasonably necessary to call, give
notice of, convene and hold a special meeting of its shareholders
(the "Atlantic Special Meeting") for the purpose of securing the
Atlantic Shareholders' Approval, (ii) distribute to its
shareholders the Joint Proxy Statement in accordance with
applicable federal and state law and its articles of
incorporation and bylaws, (iii) subject to the fiduciary duties
of its Board of Directors, recommend to its shareholders the
approval of the Atlantic Merger, this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult
with Delmarva with respect to each of the foregoing matters.
(b) Approval of Delmarva Shareholders. Delmarva
shall, as promptly as reasonably practicable after the date
hereof (i) take all steps reasonably necessary to call, give
notice of, convene and hold a special meeting of its shareholders
(the "Delmarva Special Meeting") for the purpose of securing the
Delmarva Shareholders' Approval, (ii) distribute to its
shareholders the Joint Proxy Statement in accordance with
applicable federal and state law and its articles of
incorporation and bylaws, (iii) subject to the fiduciary duties
of its Board of Directors, recommend to its shareholders the
approval of the Delmarva Merger, this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult
with Atlantic with respect to each of the foregoing matters.
(c) Meeting Date. The Delmarva Special Meeting and
the Atlantic Special Meeting shall be held on the same day unless
otherwise agreed by Delmarva and Atlantic.
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(d) Fairness Opinions Not Withdrawn. It shall be a
condition to the obligation of Delmarva to hold the Delmarva
Special Meeting that the opinion of Merrill Lynch, Pierce, Fenner
& Smith Incorporated referred to in Section 7.2(d) shall not have
been withdrawn, and it shall be a condition to the obligation of
Atlantic to hold the Atlantic Special Meeting that the opinion of
Morgan Stanley & Co. Incorporated referred to in Section 7.2(d)
shall not have been withdrawn.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not
provided by an existing right of indemnification or other
agreement or policy, from and after the Effective Time, the
Company shall, to the fullest extent not prohibited by applicable
law, indemnify, defend and hold harmless the present and former
directors, officers and management employees of the parties
hereto and their respective subsidiaries (each, an "Indemnified
Party" and, collectively, the "Indemnified Parties") against (i)
all losses, expenses (including reasonable attorneys' fees and
expenses), claims, damages, costs, liabilities, judgments or
(subject to the proviso of the next succeeding sentence) amounts
that are paid in settlement of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such
person is or was a director, officer or management employee of
such party or any subsidiary thereof, whether pertaining to any
matter existing or occurring at or prior to or after the
Effective Time and whether asserted or claimed prior to, at or
after the Effective Time and (ii) all liabilities based in whole
or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated
hereby. In the event of any such loss, expense, claim, damage,
cost, liability, judgment or settlement (whether or not arising
before the Effective Time), (x) the Company shall pay the
reasonable fees and expenses of counsel selected by the
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Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company, promptly after statements therefor
are received, and otherwise advance to the Indemnified Parties
upon request reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by
applicable law, (y) the Company shall cooperate in the defense of
any such matter and (z) any determination required to be made
with respect to whether an Indemnified Party's conduct complies
with the standards under applicable law or as set forth in the
Company's certificate of incorporation or bylaws shall be made by
independent counsel mutually acceptable to the Company and the
Indemnified Party; provided, however, that the Company shall not
be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld or delayed).
The Indemnified Parties as a group may retain only one law firm
(other than local counsel) with respect to each related matter
except to the extent there is, in the sole opinion of counsel to
an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of
any two or more Indemnified Parties, in which case each
Indemnified Party with a conflicting position on a significant
issue shall be entitled to separate counsel. In the event any
Indemnified Party is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is
successful in such action, the Company shall reimburse such
Indemnified Party for all of its expenses in bringing and
pursuing such action. Each Indemnified Party shall be entitled
to the advancement of expenses to the full extent contemplated in
this Section 7.5(a) in connection with any such action.
(b) Insurance. For a period of six years after the
Effective Time, the Company shall cause to be maintained in
effect the policies of directors' and officers' liability
insurance maintained by Delmarva and Atlantic; provided that the
Company may substitute therefor policies of at least the same
coverage containing terms that are no less advantageous with
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respect to matters occurring at or prior to the Effective Time to
the extent such liability insurance can be maintained annually at
a cost to the Company not greater than 200 percent of the current
annual premiums for the policies currently maintained by Delmarva
and Atlantic for their directors' and officers' liability
insurance; provided further that if such insurance cannot be so
maintained or obtained at such cost, the Company shall maintain
or obtain a policy providing the best coverage available, as
determined by the Board of Directors of the Company, for a
premium not exceeding 200 percent of the aggregate annual
premiums currently paid by Delmarva and Atlantic for their
directors' and officers' liability insurance and other indemnity
agreements.
(c) Successors. In the event the Company 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 provision
shall be made so that the successors and assigns of the Company
shall assume the obligations set forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest
extent not prohibited by law, from and after the Effective Time,
all rights to indemnification now existing in favor of the
employees, agents, directors or officers of Delmarva, Atlantic
and their respective subsidiaries with respect to their
activities as such prior to or at the Effective Time, as provided
in their respective articles of incorporation or bylaws or
indemnification agreements in effect on the date of such
activities or otherwise in effect on the date hereof, shall
survive the Mergers and shall continue in full force and effect
for a period of not less than six years from the Effective Time;
provided that in the event any claim or claims are asserted or
made within such six-year period, all such rights to
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indemnification in respect of such claim or claims shall continue
until the final disposition thereof.
Section 7.6 Disclosure Schedules. On or
before the date of this Agreement, (i) Atlantic has delivered to
Delmarva a schedule (the "Atlantic Disclosure Schedule")
accompanied by a certificate signed by the chief financial
officer of Atlantic stating that the Disclosure Schedule is being
delivered pursuant to this Section 7.6(i) and (ii) Delmarva has
delivered to Atlantic a schedule (the "Delmarva Disclosure
Schedule") accompanied by a certificate signed by the chief
financial officer of Delmarva stating that the Delmarva
Disclosure Schedule is being delivered pursuant to this
Section 7.6(ii). The Atlantic Disclosure Schedule and the
Delmarva 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 and agreements
of the parties hereto contained herein to the extent that such
representations, warranties, covenants or agreements expressly
refer to the Disclosure Schedules. 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 of this Agreement.
Section 7.7 Public Announcements. Delmarva
and Atlantic shall 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, subject to each party's
disclosure obligations imposed by law or any applicable national
securities exchange, shall not issue any public announcement or
statement prior to consultation with the other party.
Section 7.8 Rule 145 Affiliates. Atlantic shall
identify in a letter to Delmarva, and Delmarva shall identify in
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a letter to Atlantic, all persons who are and, to
such persons' best knowledge who will be, at the Closing Date,
"affiliates" of Atlantic and Delmarva, respectively, as such term
is used in Rule 145 under the Securities Act. Atlantic and
Delmarva shall use their respective best efforts to cause their
respective affiliates to deliver to the Company on or prior to
the Closing Date a written agreement substantially in the form
attached hereto as Exhibit C (each, an "Affiliate Agreement").
Section 7.9 Employee Agreements and Workforce Matters.
(a) Certain Employee Agreements. Subject to
Section 7.10 and Section 7.14, the Company and its subsidiaries
shall honor, without modification, all contracts, agreements,
collective bargaining agreements and commitments of the parties
that apply to any current or former employees or current or
former directors of the parties hereto; provided, however, that
this undertaking is not intended to prevent the Company from
enforcing such contracts, agreements, collective bargaining
agreements and commitments in accordance with their terms or from
exercising any right to amend, modify, suspend, revoke or
terminate any such contract, agreement, collective bargaining
agreement or commitment.
(b) Workforce Matters. Subject to applicable
collective bargaining agreements, for a period of two years
following the Effective Time, any reductions in workforce in
respect of employees of the Company shall be made on a fair and
equitable basis, in light of the circumstances and the objectives
to be achieved without regard to whether employment was with
Delmarva or its subsidiaries or Atlantic or its subsidiaries, and
any employees whose employment is terminated or jobs are
eliminated by the Company or any of its subsidiaries during such
period shall be entitled to participate on a fair and equitable
basis in the job opportunity and employment placement programs
offered by the Company or any of its subsidiaries. Any workforce
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reductions carried out following the Effective Time by the
Company and its subsidiaries shall be done in accordance with all
applicable collective bargaining agreements, and all laws and
regulations governing the employment relationship thereof
including without limitation the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder, and any
comparable state or local law. However, no provision contained
in this Section 7.9 shall be deemed to constitute an employment
contract between the Company and any individual, be construed as
conferring any rights on the collective bargaining representative
of any employee, or be considered a waiver of the Company's
right, subject to the provisions of any applicable collective
bargaining agreement, to discharge any employee at any time, with
or without cause.
(c) Subject to applicable collective bargaining
agreements, the Company shall develop employee benefit programs
and policies for all of its employees which minimize the
differences between the employee benefit programs and policies
maintained by Delmarva and Atlantic prior to the Effective Time
and which are fair and equitable and appropriate to the business
environment in which the Company will operate.
Section 7.10 Employee Benefit Plans. Each
of the Delmarva Benefit Plans and Atlantic Benefit Plans (other
than plans specifically provided for in Section 7.11), in effect
on the date hereof (or as amended in accordance with or as
permitted by this Agreement) shall be maintained in effect with
respect to the employees or former employees of Delmarva and any
of its subsidiaries and of Atlantic and any of its subsidiaries,
respectively, who are covered by such plans immediately prior to
the Closing Date until the Company determines otherwise on or
after the Effective Time; provided, however, that nothing herein
contained, other than the provisions of Section 6.9, shall limit
any reserved right contained in any such Delmarva Benefit Plan or
Atlantic Benefit Plan to amend, modify, suspend, revoke or
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terminate any such plan. Without limiting the foregoing, each
participant in any Delmarva Benefit Plan or Atlantic Benefit Plan
shall receive credit for purposes of eligibility to participate,
vesting and eligibility to receive benefits under any benefit
plan of the Company or any of its subsidiaries or affiliates for
service credited for the corresponding purpose under any such
benefit plan; provided, however, that such crediting of service
shall not operate to duplicate any benefit to any such
participant or the funding for any such benefit. However, no
provision contained in this Section 7.10 shall be deemed to
constitute an employment contract between the Company and any
individual, or a waiver of the Company's right to discharge any
employee at any time, with or without cause.
Section 7.11 Incentive, Stock and Other
Plans. With respect to each of (i) the Dividend Reinvestment and
Common Share Purchase Plan, the Savings and Thrift Plan and the
Long-Term Incentive Plan of Delmarva, and the Employee Incentive
Plan, the Directors' Restricted Stock Plan, the Employee Stock
Purchase Plan and the Dividend Reinvestment Plan of Atlantic, and
each other employee benefit plan, program or arrangement under
which the delivery of Delmarva Common Stock, Atlantic Common
Stock or Company Common Stock, as the case may be, is required to
be used for purposes of the payment of benefits, grant of awards
or exercise of options (each, a "Stock Plan"), (i) Delmarva and
Atlantic shall take such action as may be necessary so that,
after the Effective Time, such Stock Plan shall provide for the
issuance only of Company Common Stock and (ii) the Company shall
(x) take all corporate action necessary or appropriate to obtain
shareholder approval with respect to such Stock Plan to the
extent such approval is required for purposes of the Code or
other applicable law, or, to the extent the Company deems it
desirable, to enable such Stock Plan to comply with Rule 16b-3
promulgated under the Exchange Act, (y) reserve for issuance
under such Stock Plan or otherwise provide a sufficient number of
shares of Company Common Stock for delivery upon payment of
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benefits, grants of awards or exercise of options under such
Stock Plan and (z) as soon as practicable after the Effective
Time, file one or more registration statements under the
Securities Act with respect to the shares of Company Common Stock
subject to such Stock Plan to the extent such filing is required
under applicable law and use its best efforts to maintain the
effectiveness of such registration statement(s) (and the current
status of the prospectuses contained therein or related thereto)
so long as such benefits, grants or awards remain payable or such
options remain outstanding, as the case may be. With respect to
those individuals who subsequent to the Mergers will be subject
to the reporting requirements under Section 16(a) of the Exchange Act,
the Company shall administer the Stock Plans, where applicable,
in a manner that complies with Rule 16b-3 under the Exchange Act.
Each of Delmarva and Atlantic shall obtain any shareholder
approvals that may be necessary for the deduction of any
compensation payable under any Stock Plan or other compensation
arrangement.
Section 7.12 No Solicitations. From and
after the date hereof, Delmarva and Atlantic shall not, and shall
not authorize or permit any of their respective Representatives
to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other
action to facilitate knowingly any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead
to an Acquisition Proposal (as defined herein) from any person,
or engage in any discussion or negotiations relating thereto or
accept any Acquisition Proposal; provided, however, that
notwithstanding any other provision hereof, Delmarva or Atlantic
may (i) at any time prior to the time at which the Delmarva
Shareholders' Approval, in the case of Delmarva, or the Atlantic
Shareholders' Approval, in the case of Atlantic, has been
obtained, engage in discussions or negotiations with a third
party who (without any solicitation, initiation, encouragement,
discussion or negotiation, directly or indirectly, by or with
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Delmarva or Atlantic, as the case may be, or its Representatives
after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party information
concerning itself and its business, properties and assets if, and
only to the extent that, (A) (x) such third party shall first
have made an Acquisition Proposal that is financially superior to
the Mergers and have demonstrated that financing for such
Acquisition Proposal is reasonably likely to be obtained (as
determined in good faith in each case by the Board of Directors
of Delmarva or Atlantic, as the case may be, after consultation
with its financial advisors) and (y) the Board of Directors of
Delmarva or Atlantic, as the case may be, shall have concluded in
good faith on the basis of a written opinion of outside counsel
that such action is necessary for such Board of Directors to act
in a manner consistent with its fiduciary duties under applicable
law and (B) prior to furnishing such information to or entering
into discussions or negotiations with such third party, Delmarva
or Atlantic, as the case may be, (x) provides prompt notice to
Atlantic or Delmarva, as the case may be, to the effect that it
is furnishing information to or entering into discussions or
negotiations with such third party and (y) receives from such
third party 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, (ii) comply with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or
exchange offer, and (iii) accept an Acquisition Proposal from a
third party, provided Delmarva or Atlantic, as the case may be,
terminates this Agreement pursuant to Section 9.1(g) or 9.1(h),
as the case may be. Each party shall immediately cease and
terminate any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted
heretofore by such party or its Representatives with respect to
the foregoing. Atlantic and Delmarva shall each notify the other
orally and in writing of any such inquiries, offers or proposals
(including without limitation the terms and conditions of any
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such proposal and the identity of the person making it) within 24
hours of the receipt thereof, shall keep the other informed of
the status and details of any such inquiry, offer or proposal,
and shall give the other five days' advance notice of any
agreement to be entered into with, or any information to be
supplied to, any person making such inquiry, offer or proposal.
As used herein, "Acquisition Proposal" shall mean a proposal or
offer (other than by another party hereto) for a tender or
exchange offer, merger, consolidation or other business
combination involving a party or any material subsidiary of such
party or any proposal to acquire in any manner a substantial
equity interest in or a substantial portion of the assets of such
party or any material subsidiary of such party.
Section 7.13 Company Board of Directors.
The Board of Directors of Delmarva shall be entitled to nominate
10 members and the Board of Directors of Atlantic shall be
entitled to nominate 8 members to serve on the Board of Directors
of the Company at the Effective Time and shall each take such
action as may be necessary to cause each director of Delmarva and
Atlantic serving as such immediately prior to the Effective Time
to have the opportunity to serve as a director of the Company.
The directors nominated by the Delmarva Board and directors
nominated by the Atlantic Board shall be divided between the
classes of directors of the Company so that each class, to the
extent possible, has the same proportion of directors nominated
by each of the Delmarva Board and the Atlantic Board. At the
Effective Time, the Audit Committee of the Board of Directors of
the Company shall consist of an equal number of directors
nominated by the Delmarva Board and the Atlantic Board.
Section 7.14 Company Officers. At the
Effective Date, Howard E. Cosgrove shall be the Chief Executive
Officer and Chairman of the Board of Directors of the Company,
Jerrold L. Jacobs shall be the Vice Chairman of the Board of
Directors of the Company and Michael J. Chesser shall be the President and
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Chief Operating Officer of the Company. Jerrold L.
Jacobs shall serve as Vice Chairman of the Company until the
second anniversary of the Effective Date and, during his term as
Vice Chairman, shall be a member of the Executive Committee of
the Board of Directors of the Company. The other officers of the
Company at the Effective Time shall be such officers as may be
designated by the Board of Directors of the Company.
Section 7.15 Location of Corporate Offices
and Operations; Company Name. At and after the Effective Time,
the corporate headquarters and principal executive offices of the
Company shall be located in Wilmington, Delaware, and the Company
shall maintain a significant presence in New Jersey. After the
Effective Time, the Company shall provide charitable
contributions and community support within the service areas of
Delmarva and Atlantic and each of their respective subsidiaries
at levels substantially comparable to the historical levels of
charitable contributions and community support provided by
Delmarva and Atlantic and their respective subsidiaries within
their service areas. The Company's name shall be as agreed upon
by the Board of Directors of Delmarva and the Board of Directors
of Atlantic following the completion of marketing studies which
will give serious consideration to names containing "Atlantic" or
variations of the names of Atlantic and its subsidiaries.
Section 7.16 Company Certificate of
Incorporation and Bylaws. Delmarva, Atlantic and the Company
shall take all actions necessary so that (i) at or prior to the
Effective Time, the certificate of incorporation of the Company
shall be amended and restated so that, at the Effective Time,
such certificate of incorporation shall read in its entirety
substantially in the form attached hereto as Exhibit A and (ii)
at or prior to the Effective Time, the bylaws of the Company
shall be amended and restated so that, at the Effective Time,
such bylaws shall read in their entirety substantially in the
form attached hereto as Exhibit B.
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Section 7.17 Expenses. Subject to Section
7.1 and Section 9.3, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing the
Joint Proxy/Registration Statement, as well as the filing fee
relating thereto, shall be shared equally by Delmarva and
Atlantic.
Section 7.18 Letter Stock Dividend Policy.
Subject to declaration by the Board of Directors of the Company
and the obligation of the Board of Directors of the Company to
react to the financial condition and regulatory environment of
the Company and its results of operations, the dividends declared
and paid on the Letter Stock shall be maintained at a level of
$3.20 per share per annum until the earlier of July 1, 2001 or
the end of the twelfth calendar quarter following the calendar
quarter in which the Effective Date occurs. Thereafter, it is
the intention of the Company, subject to declaration by the Board
of Directors of the Company and the obligation of the Board of
Directors of the Company to react to the financial condition and
regulatory environment of the Company and the results of its
operations, to pay annual dividends on the Letter Stock at a rate
equal to 90% of Net Income (Loss) Attributable to the Atlantic
Utility Group (as that term is defined in the Company's Restated
Charter); provided that if, and to the extent that, the annual
dividends on the Letter Stock paid during the period referred to
in the preceding sentence exeeds 100% of Net Income (Loss)
Attributable to the Atlantic Utility Group during such period, the
Board of Directors of the Company may consider such fact in
determining the appropriate annual dividend rate on the Letter
Stock thereafter. Following the Effective Time, the Audit
Committee of the Board of Directors of the Company shall be
charged with the responsibility of advising the Board of
Directors of the Company with respect to certain intercompany
transactions and other fiduciary matters that may relate to the
Letter Stock.
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Section 7.19 Further Assurances.
(a) Each of Atlantic and Delmarva shall, and shall
cause its subsidiaries to, execute such further documents and
instruments and take such further actions as may reasonably be
requested by the other in order to consummate the Mergers and the
other transactions contemplated by this Agreement, and to use its
best efforts to take or cause to be taken all actions, and to do
or cause to be done all things, necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective the Mergers and the other transactions contemplated
hereby (subject to the votes of its shareholders described in
Sections 4.13 and 5.13, respectively), including fully
cooperating with the other in obtaining the Atlantic Required
Statutory Approvals, the Delmarva Required Statutory Approvals
and all other approvals and authorizations of any Governmental
Authorities necessary or advisable to consummate the transactions
contemplated hereby.
(b) Atlantic and Delmarva, respectively, shall be
responsible for the taking of any action necessary or advisable
to obtain the Atlantic Required Statutory Approvals and to obtain
the Delmarva Required Statutory Approvals. Atlantic and Delmarva
agree to cooperate in obtaining the necessary approvals from the
NRC, the FERC and the SEC under the 1935 Act, the Securities Act
and the Exchange Act and from the applicable state authorities
under state "blue sky", securities or utility regulatory laws.
Atlantic and Delmarva shall each provide the other with copies of
any filings made with any Governmental Authorities in connection
with the foregoing.
(c) It may be preferable to effectuate a business
combination between Delmarva and Atlantic by means of an
alternative structure in light of the conditions set forth in
Sections 8.1(e), 8.2(f) and 8.3(f). Accordingly, if the only
conditions to the parties' obligations to consummate the Mergers
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that are not satisfied or waived are receipt of any one or more
of the Delmarva Required Consents, Delmarva Statutory Approvals,
Atlantic Required Consents and Atlantic Statutory Approvals, and
the adoption of an alternative structure (that otherwise
substantially preserves for Delmarva and Atlantic the economic
benefits of the Mergers) would result in such conditions being
satisfied or waived, then the parties shall use their respective
best efforts to effect a business combination among themselves by
means of a mutually agreed upon structure other than the Mergers
that so preserves such benefits; provided that prior to closing
any such restructured transaction, all material third party and
Governmental Authority declarations, filings, registrations,
notices, authorizations, consents or approvals necessary for the
effectuation of such alternative business combination shall have
been obtained and all other conditions to the parties'
obligations to consummate the Mergers, as applied to such
alternative business combination, shall have been satisfied or
waived.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's
Obligation to Effect the Merger to Which it is Party. The
respective obligations of each party to effect the Merger to
which it is party shall be subject to the satisfaction on or
prior to the Closing Date of the following conditions, except, to
the extent permitted by applicable law, that such conditions may
be waived in writing pursuant to Section 9.5:
(a) Shareholder Approvals. The Atlantic Shareholders'
Approval and the Delmarva Shareholders' Approval shall have been
obtained.
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(b) No Injunction. No temporary restraining order or
preliminary or permanent injunction or other order by any federal
or state court preventing consummation of either or both of the
Mergers shall have been issued and continuing in effect, and the
Mergers and the other transactions contemplated hereby shall not
have been prohibited under any applicable federal or state law or
regulation.
(c) Registration Statement. The Registration
Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in effect.
(d) Listing of Shares. The shares of Company Common
Stock and the shares of Letter Stock issuable in the Mergers
pursuant to Article II shall have been approved for listing on
the NYSE upon official notice of issuance.
(e) Statutory Approvals. The Delmarva Required
Statutory Approvals and the Atlantic Required Statutory Approvals
shall have been obtained at or prior to the Effective Time, such
approvals shall have become Final Orders (as hereinafter
defined), and no Final Order shall impose terms or conditions
that would have, or would be reasonably likely to have, a
material adverse effect on the business, operations, properties,
assets, condition (financial or otherwise), prospects or results
of operations of Delmarva as if it were organized as a separate
subsidiary of the Company or a material adverse effect on the
business, operations, properties, assets, condition (financial or
other), prospects or results of operations of Atlantic as if it
were organized as a separate division of the Company, or which
would be materially inconsistent with the agreements of the
parties contained herein. A "Final Order" means action by the
relevant regulatory authority that has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which
any waiting period prescribed by law before the transactions
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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, and
as to which all opportunities for rehearing are exhausted
(whether or not any appeal thereof is pending).
Section 8.2 Conditions to Obligation of
Atlantic to Effect the Atlantic Merger. The obligation of
Atlantic to effect the Atlantic Merger shall be further subject
to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by Atlantic in
writing pursuant to Section 9.5:
(a) Performance of Obligations of Delmarva. Delmarva
shall have performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement required
to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The
representations and warranties of Delmarva set forth in this
Agreement qualified as to materiality shall be true in all
respects and those not so qualified shall be true and correct in
all material respects as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date, except as
otherwise contemplated by this Agreement.
(c) Closing Certificates. Atlantic shall have
received a certificate signed by the Chief Executive Officer and
Chief Financial Officer of Delmarva, dated the Closing Date, to
the effect that, to the best of each such officer's knowledge,
the conditions set forth in Section 8.2(a) and Section 8.2(b)
have been satisfied.
(d) Delmarva Material Adverse Effect. No Delmarva
Material Adverse Effect shall have occurred, and there shall
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exist no fact or circumstance that is reasonably likely to have a
Delmarva Material Adverse Effect.
(e) Tax Opinion. Atlantic shall have received an
opinion of Simpson Thacher & Bartlett, in form and substance
satisfactory to Atlantic, dated the Closing Date, which opinion
may be based on appropriate representations of Delmarva, Atlantic
and the Company that are in form and substance reasonably
satisfactory to such counsel, to the effect that the Atlantic
Merger will be treated as a reorganization described in Code
Section 368(a).
(f) Delmarva Required Consents. The material Delmarva
Required Consents shall have been obtained.
(g) Affiliate Certificates. The Company shall have
received Affiliate Agreements, duly executed by each "affiliate"
of Delmarva, substantially in the form of Exhibit C, as provided
in Section 7.8.
Section 8.3 Conditions to Obligation of
Delmarva to Effect the Delmarva Merger. The obligation of
Delmarva to effect the Delmarva Merger shall be further subject
to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by Delmarva in
writing pursuant to Section 9.5:
(a) Performance of Obligations of Atlantic. Atlantic
shall have performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement required
to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The
representations and warranties of Atlantic set forth in this
Agreement qualified as to materiality shall be true in all
respects and those not so qualified shall be true and correct in
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all material respects as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date, except as
otherwise contemplated by this Agreement.
(c) Closing Certificates. Delmarva shall have
received a certificate signed by the Chief Executive Officer and
Chief Financial Officer of Atlantic, dated the Closing Date, to
the effect that, to the best of each such officer's knowledge,
the conditions set forth in Section 8.3(a) and Section 8.3(b)
have been satisfied.
(d) Atlantic Material Adverse Effect. No Atlantic
Material Adverse Effect shall have occurred, and there shall
exist no fact or circumstance that is reasonably likely to have
an Atlantic Material Adverse Effect.
(e) Tax Opinion. Delmarva shall have received an
opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., in form and
substance satisfactory to Delmarva, dated the Closing Date, which
opinion may be based on appropriate representations of Delmarva,
Atlantic and the Company that are in form and substance
reasonably satisfactory to such counsel, to the effect that the
Delmarva Merger, taken together with the Atlantic Merger, will be
treated as a nontaxable exchange described in Code Section 351 .
(f) Atlantic Required Consents. The material Atlantic
Required Consents shall have been obtained.
(g) Affiliate Certificates. The Company shall have
received Affiliate Agreements, duly executed by each "affiliate"
of Share, substantially in the form of Exhibit C, as provided in
Section 7.7.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may
be terminated at any time prior to the Closing Date, whether
before or after approval by the shareholders of the respective
parties contemplated by this Agreement:
(a) by mutual written consent of the Boards of
Directors of Delmarva and Atlantic;
(b) by Delmarva or Atlantic, by written notice to the
other, if the Effective Time shall not have occurred on or before
18 months from signing; provided, however, that such date shall
automatically be extended to 30 months from signing if, on 18
months from signing: (i) the condition set forth in Section
8.1(e) has not been satisfied or waived; (ii) the other
conditions to the consummation of the transactions contemplated
hereby are then capable of being satisfied; and (iii) any
approvals required by Section 8.1(e) that have not yet been
obtained are being pursued with diligence; provided further that
the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or
before the termination date;
(c) by Delmarva or Atlantic, by written notice to the
other, if the Delmarva Shareholders' Approval shall not have been
obtained at a duly held Delmarva Special Meeting, including any
adjournments thereof, or the Atlantic Shareholders' Approval
shall not have been obtained at a duly held Atlantic Special
Meeting, including any adjournments thereof;
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(d) by Delmarva or Atlantic, if any state or federal
law, order, rule or regulation is adopted or issued that has the
effect, as supported by the written opinion of outside counsel
for such party, of prohibiting either or both of the Mergers, 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
either or both of the Mergers and such order, judgment or decree
shall have become final and nonappealable;
(e) by Delmarva, upon five days' prior notice to
Atlantic, if, as a result of an Acquisition Proposal by a party
other than Atlantic or any of its affiliates, the Board of
Directors of Delmarva determines in good faith on the basis of a
written opinion of outside counsel that acceptance of such
Acquisition Proposal is necessary for the Board of Directors to
act consistent with its fiduciary duties under applicable law;
provided, however, that (i) the Board of Directors of Delmarva
shall have been advised by outside counsel that, notwithstanding
a binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their
applicable fiduciary duties, and notwithstanding all concessions
that may be offered by Atlantic in negotiations entered into
pursuant to clause (ii) below, such fiduciary duties would also
require the directors to reconsider such commitment as a result
of such Acquisition Proposal and (ii) prior to any such
termination, Delmarva shall, and shall cause its respective
financial and legal advisors to, negotiate with Atlantic to make
such adjustments in the terms and conditions of this Agreement as
would enable Delmarva to proceed with the transactions
contemplated herein; provided further that Delmarva and Atlantic
acknowledge and affirm that, notwithstanding anything in this
Section 9.1(e) to the contrary, Delmarva and Atlantic intend this
Agreement to be an exclusive agreement and, accordingly, nothing
in this Agreement is intended to constitute a solicitation of an
Acquisition Proposal, it being acknowledged and agreed that any
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such proposal would interfere with the strategic advantages and
benefits that Delmarva and Atlantic expect to derive from the
Mergers and the other transactions contemplated hereby;
(f) by Atlantic, upon five days' prior notice to
Delmarva, if, as a result of an Acquisition Proposal by a party
other than Delmarva or any of its affiliates, the Board of
Directors of Atlantic determines in good faith on the basis of
written advice of outside counsel that acceptance of such
Acquisition Proposal is necessary for the Board of Directors to
act consistent with its fiduciary duties under applicable law;
provided, however, that (i) the Board of Directors of Atlantic
shall have been advised by outside counsel that, notwithstanding
a binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their
applicable fiduciary duties, and notwithstanding all concessions
that may be offered by Delmarva in negotiations entered into
pursuant to clause (ii) below, such fiduciary duties would also
require the directors to reconsider such commitment as a result
of such Acquisition Proposal and (ii) prior to any such
termination, Atlantic shall, and shall cause its respective
financial and legal advisors to, negotiate with Delmarva to make
such adjustments in the terms and conditions of this Agreement as
would enable Atlantic to proceed with the transactions
contemplated herein; provided further that Delmarva and Atlantic
acknowledge and affirm that, notwithstanding anything in this
Section 9.1(f) to the contrary, Delmarva and Atlantic intend this
Agreement to be an exclusive agreement and, accordingly, nothing
in this Agreement is intended to constitute a solicitation of an
Acquisition Proposal, it being acknowledged and agreed that any
such proposal would interfere with the strategic advantages and
benefits that Delmarva and Atlantic expect to derive from the
Mergers and the other transactions contemplated hereby;
(g) by Delmarva, by written notice to Atlantic, if (i)
there shall have been any material breach of any representation
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or warranty, or any material breach of any covenant or agreement,
of Atlantic hereunder, and such breach shall not have been
remedied within 20 days after receipt by Atlantic of notice in
writing from Delmarva, specifying the nature of such breach and
requesting that it be remedied, or (ii) the Board of Directors of
Atlantic or any committee thereof (A) shall withdraw or modify in
any manner adverse to Delmarva its approval or recommendation of
this Agreement or the Atlantic Merger, (B) shall fail to reaffirm
such approval or recommendation upon Delmarva's request,
(C) shall approve or recommend any Acquisition Proposal with
respect to Atlantic by a party other than Delmarva or any of its
affiliates or (D) shall resolve to take any of the actions
specified in clause (A), (B) or (C) above.
(h) by Atlantic, by written notice to Delmarva, if (i)
there shall have been any material breach of any representation
or warranty, or any material breach of any covenant or agreement,
of Delmarva hereunder, and such breach shall not have been
remedied within 20 days after receipt by Delmarva of notice in
writing from Atlantic, specifying the nature of such breach and
requesting that it be remedied, or (ii) the Board of Directors of
Delmarva or any committee thereof (A) shall withdraw or modify in
any manner adverse to Atlantic its approval or recommendation of
this Agreement or the Delmarva Merger, (B) shall fail to reaffirm
such approval or recommendation upon Atlantic's request, (C)
shall approve or recommend any Acquisition Proposal with respect
to Delmarva by a party other than Atlantic or any of its
affiliates or (D) shall resolve to take any of the actions
specified in clause (A), (B) or (C) above.
(i) by either Delmarva or Atlantic, by written notice
to the other party, if (i) a third party acquires securities
representing greater than 50% of the voting power of the
outstanding voting securities of Atlantic or Delmarva, as the
case may be, or (ii) individuals who as of the date hereof
constitute the Board of Directors of Atlantic or Delmarva, as the
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case may be (together with any new directors whose election by
such Board of Directors or whose nomination for election by the
shareholders of such party was approved by a vote of a majority
of the directors of such party then still in office who are
either directors as of the date hereof or whose election or
nomination for election was previously so approved), cease for
any reason to constitute a majority of the Board of Directors of
Atlantic or Delmarva, as the case may be, then in office.
Section 9.2 Effect of Termination. In the
event of termination of this Agreement by either Delmarva or
Atlantic pursuant to Section 9.1, there shall be no liability
hereunder on the part of either Delmarva or Atlantic or their
respective officers or directors, except that (i) Section 7.17
(expenses), Section 9.3 (termination fee) and the agreement
contained in the second to the last sentence of Section 7.1
(confidentiality) shall survive any such termination and (ii) no
such termination shall relieve any party from liability by reason
of any willful breach of any agreement, representation, warranty
or covenant contained in this Agreement.
Section 9.3 Certain Damages, Payments and Expenses.
(a) Damages Payable Upon Termination for Breach or
Withdrawal of Approval. If this Agreement is terminated pursuant
to Section 9.1(e) or (f) (fiduciary out), Section 9.1(g)(i) or
(ii) or Section 9.1(h)(i) or (ii) (breach or change of recommen-
dation) or Section 9.1(i) (acquisition of voting power or change
of board), then the breaching party or party whose board has
exercised its fiduciary out or changed its recommendation or
whose voting stock has been acquired or whose board has changed,
as the case may be, shall promptly (but not later than five
business days after receipt of notice that the amount is due from
the other party) pay to the other party, as liquidated damages,
an amount in cash equal to the out-of-pocket expenses and fees
incurred by the other party arising out of, in connection with or
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related to the Mergers and the other transactions contemplated by
this Agreement not in excess of $10 million ("Out-of-Pocket
Expenses"); provided, however, that 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 nonbreaching party may pursue any remedies available
to it at law or in equity and shall, in addition to the amount of
Out-of-Pocket Expenses set forth above, be entitled to recover
such additional amounts as such nonbreaching party may be
entitled to receive at law or in equity.
(b) Other Termination Payments. If (i) this Agreement
is terminated pursuant to (A) Section 9.1(b) (expiration date),
(B) Section 9.1(e) or (f) (fiduciary out), (C) Section 9.1(c)
(failure to obtain shareholder approval), (D) as a result of a
breach of Section 7.4 (approval of shareholders) or (E) pursuant
to Section 9.1(g)(i) or (ii) or 9.1(h)(i) or (ii) (breach or
change of recommendation); and (ii) at the time of such termina-
tion (or in the case of clause (i)(C) above, prior to the meeting
of such party's shareholders) there shall have been an Acquisi-
tion Proposal involving the Delmarva or Atlantic (as the case may
be, the "Target Party") or any of its affiliates which, at the
time of such termination (or such meeting, as the case may be)
shall not have been (x) rejected by the Target Party and its
Board of Directors and (y) withdrawn by the third party; and
(iii) within two and one-half years of any such termination
described in clause (i) above, the Target Party or any of its
affiliates becomes a subsidiary of such offeror or a subsidiary
of an affiliate of such offeror or accepts a written offer or
enters into a written agreement to consummate or consummates an
Acquisition Proposal with such offeror or an affiliate thereof,
then such Target Party (jointly and severally with its
affiliates), upon the signing of a definitive agreement relating
to such Acquisition Proposal, or, if no such agreement is signed,
then at the closing (and as a condition to the closing) of such
Target Party becoming such a subsidiary or of such Acquisition
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Proposal, shall pay Atlantic or Delmarva, as the case may be, a
termination fee equal to $30 million plus Out-of-Pocket Expenses.
If this Agreement is terminated by Delmarva or Atlantic pursuant
to Section 9.1(i) (third party acquisition of voting power or
change of board), then Atlantic or Delmarva, as the case may be,
shall pay the terminating party a termination fee equal to $30
million plus Out-of-Pocket Expenses.
(c) Expenses. Delmarva and Atlantic agree that the
agreements contained in this Section 9.3 are an integral part of
the transactions contemplated by this Agreement and constitute
liquidated damages and not a penalty. If one party fails to
promptly pay to the other any fees due hereunder, such 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. in effect from
time to time from the date such fee was required to be paid.
(d) Limitation of Fees. Notwithstanding anything
herein to the contrary, the aggregate amount payable by Delmarva
and its affiliates pursuant to Sections 9.3(a) and 9.3(b) shall
not exceed $40 million and the aggregate amount payable by
Atlantic and its affiliates pursuant to Sections 9.3(a) and
9.3(b) shall not exceed $40 million.
Section 9.4 Amendment. This Agreement may be
amended by the parties hereto or thereto pursuant to action of
the respective Boards of Directors of each of Delmarva and
Atlantic, the Company and DS Sub at any time before or after
approval hereof by the shareholders of Delmarva, Atlantic and
prior to the Effective Time, but after such approvals no such
amendment shall (a) alter or change the amount or kind of shares,
securities or cash to be received or exchanged for or on
conversion of any class or series of capital stock of either
Delmarva or Atlantic
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as provided in Article II, (b) alter or
change any of the terms and conditions of this Agreement if any
of the alterations or changes, alone or in the aggregate, would
adversely affect the rights of holders of any class or series of
stock of Delmarva or Atlantic or (c) alter or change any term of
the certificate of incorporation of the Company or Delmarva,
except for alterations or changes that could otherwise be adopted
by the Board of Directors of the Company, without the further
approval of such shareholders, as applicable. This Agreement may
not be amended except by an instrument in writing signed on
behalf of each of the parties hereto or thereto.
Section 9.5 Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement to any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer of each party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Nonsurvival of Representations,
Warranties, Covenants and Agreements. All representations,
warranties, covenants and agreements in this Agreement shall not
survive the Mergers, except the covenants and agreements
contained in this Section 10.1 and in Article II (Treatment of
Shares), the second to the last sentence of Section 7.1
(Confidentiality), Section 7.5 (Directors' and Officers'
Indemnification), Section 7.9 (Employee Agreements and Workforce
Matters), Section 7.10 (Employee Benefit Plans), Section 7.11
(Incentive, Stock and Other Plans), Section 7.13 (Company Board
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of Directors), Section 7.14 (Company Officers), Section 7.15
(Location of Corporate Offices and Operations; Company Name),
Section 7.17 (Expenses), Section 7.18 (Letter Stock Dividend
Policy) and Section 10.7 (Parties in Interest), each of which
shall survive in accordance with its terms.
Section 10.2 Brokers. Delmarva represents and
warrants that, except for Merrill Lynch, Pierce, Fenner & Smith
Incorporated, its investment banking firm, no broker, finder or
investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the Mergers or the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Delmarva. Atlantic
represents and warrants that, except for Morgan Stanley & Co.
Incorporated, its investment banking firm, no broker, finder or
investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the Mergers or the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Atlantic.
Section 10.3 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given (a) if delivered personally, or (b) if sent by overnight
courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or
(d) five days after being mailed by registered or certified mail
(return receipt requested) to the parties, in each case to the
following addresses (or at such other address for a party as
shall be specified by like notice):
(i) If to Delmarva, to:
Delmarva Power & Light Company
800 King Street
Wilmington, Delaware 19899
Attention: Barbara S. Graham
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with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: Douglas W. Hawes, Esq.
Steven H. Davis, Esq.
and a copy to:
Potter Anderson & Corroon
350 Delaware Trust Building
P.O. Box 951
Wilmington, Delaware 19899
Attention: Robert K. Payson, Esq.
Michael B. Tumas, Esq.
(ii) If to Atlantic, to:
Atlantic Energy, Inc.
6801 Black Horse Pike
Pleasantville, NJ 08232
Attention: Michael J. Barron
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: James M. Cotter
Vincent Pagano, Jr.
Section 10.4 Entire Agreement; Assignment;
Governing Law; Waiver of Jury Trial; Etc. This Agreement
(including the documents and instruments referred to herein)
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. This Agreement
shall not be assigned by operation of law or otherwise. This
Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts
executed in and to be fully performed in such state, without
giving effect to its conflicts of laws statutes, rules or
principles. Each party hereto acknowledges and agrees that any
controversy that may
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arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each such
party hereby irrevocably and unconditionally waives any right
such party may have to a trial by jury in respect of any
litigation directly or indirectly arising out of or relating to
this Agreement or the transactions contemplated hereby. Each
party certifies and acknowledges that (i) 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, (ii) each such
party understands and has considered the implications of this
waiver, (iii) each such party makes this waiver voluntarily, and
(iv) each such party has been induced to enter into this
Agreement by, among other things, the mutual waivers and
certifications of this Section 10.4. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect. The
parties hereto shall negotiate in good faith to replace any
provision of this Agreement so held invalid or unenforceable with
a valid provision that is as similar as possible in substance to
the invalid or unenforceable provision.
Section 10.5 Interpretation. When reference
is made in this Agreement to Articles, Sections or Exhibits, such
reference shall be to an Article, Section or Exhibit of this
Agreement, as the case may be, unless otherwise indicated. The
table of contents and headings contained in this Agreement are
for reference purposes 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." Whenever "or" is used in this Agreement it shall be
construed in the nonexclusive sense.
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<PAGE>
Section 10.6 Counterparts; Effect. This
Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
Section 10.7 Parties in Interest. This
Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and, except for rights of Indemnified
Parties as set forth in Section 7.5 (Directors' and Officers'
Indemnification), nothing in this Agreement, express or implied,
is intended to confer upon any person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 10.8 Specific Performance. The
parties hereto 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
hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
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<PAGE>
IN WITNESS WHEREOF, Delmarva, Atlantic, the Company and
DS Sub have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the date
first above written.
DELMARVA POWER & LIGHT COMPANY
By /s/ HOWARD E. COSGROVE
--------------------------------
Name: Howard E. Cosgrove
Title: President and Chairman
ATLANTIC ENERGY, INC.
By /s/ JERROLD L. JACOBS
--------------------------------
Name: Jerrold L. Jacobs
Title: President and Chief
Executive Officer
DS, INC.
By /s/ B. S. GRAHAM
--------------------------------
Name: Barbara S. Graham
Title: President
And By /s/ MICHAEL J. BARRON
----------------------------
Name: Michael J. Barron
Title: Vice President
DS SUB, INC.
By /s/ B. S. GRAHAM
--------------------------------
Name: Barbara S. Graham
Title: President
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<PAGE>
INDEX OF DEFINED TERMS
Term Page
---- ----
1935 Act . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . 89
Affiliate Agreement . . . . . . . . . . . . . . . . . . . . . 84
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Atomic Energy Act . . . . . . . . . . . . . . . . . . . . . . 17
Certificates . . . . . . . . . . . . . . . . . . . . . . . . 7
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Closing Agreement . . . . . . . . . . . . . . . . . . . . . . 23
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 11
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Shares Trust . . . . . . . . . . . . . . . . . . . . . 9
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Stock . . . . . . . . . . . . . . . . . . . . 5
Company Shares . . . . . . . . . . . . . . . . . . . . . . . 7
Confidentiality Agreement . . . . . . . . . . . . . . . . . . 75
Consistent with Past Practice . . . . . . . . . . . . . . . . 65
Converted Shares . . . . . . . . . . . . . . . . . . . . . . 7
Delaware Commission . . . . . . . . . . . . . . . . . . . . . 17
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DS Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . 83
Dissenting Holder . . . . . . . . . . . . . . . . . . . . . . 6
Delmarva . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Delmarva Benefit Plans . . . . . . . . . . . . . . . . . . . 26
Delmarva Budget . . . . . . . . . . . . . . . . . . . . . . . 63
Delmarva Common Stock . . . . . . . . . . . . . . . . . . . . 5
Delmarva Conversion Ratio . . . . . . . . . . . . . . . . . . 5
Delmarva Disclosure Schedule . . . . . . . . . . . . . . . . 83
Delmarva ERISA Affiliate . . . . . . . . . . . . . . . . . . 26
Delmarva Facilities . . . . . . . . . . . . . . . . . . . . . 39
Delmarva Financial Statements . . . . . . . . . . . . . . . . 18
Delmarva Material Adverse Effect . . . . . . . . . . . . . . 12
Delmarva Merger . . . . . . . . . . . . . . . . . . . . . . . 3
Delmarva Preferred Stock . . . . . . . . . . . . . . . . . . 6
Delmarva Required Consents . . . . . . . . . . . . . . . . . 15
Delmarva Required Statutory Approvals . . . . . . . . . . . . 16
Delmarva SEC Reports . . . . . . . . . . . . . . . . . . . . 18
Delmarva Shareholders' Approval . . . . . . . . . . . . . . . 37
Delmarva Special Meeting . . . . . . . . . . . . . . . . . . 79
Effective Time . . . . . . . . . . . . . . . . . . . . . . . 4
Environmental Claim . . . . . . . . . . . . . . . . . . . . . 35
Environmental Laws . . . . . . . . . . . . . . . . . . . . . 36
Environmental Permits . . . . . . . . . . . . . . . . . . . . 33
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . 9
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . 7
FERC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . 94
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A-1
<PAGE>
Term Page
---- ----
Governmental Authority . . . . . . . . . . . . . . . . . . . 15
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . 36
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . 80
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . 80
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Joint Proxy Statement . . . . . . . . . . . . . . . . . . . . 20
Joint Proxy/Registration Statement . . . . . . . . . . . . . 76
Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . 13
Letter Stock . . . . . . . . . . . . . . . . . . . . . . . . 5
Maryland Commission . . . . . . . . . . . . . . . . . . . . . 17
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
New Jersey Commission . . . . . . . . . . . . . . . . . . . . 44
NJBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
NRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Out-of-Pocket Expenses . . . . . . . . . . . . . . . . . . . 103
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Pennsylvania Commission . . . . . . . . . . . . . . . . . . . 17
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Power Act . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Registration Statement . . . . . . . . . . . . . . . . . . . 20
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Representatives . . . . . . . . . . . . . . . . . . . . . . . 75
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Securities Act . . . . . . . . . . . . . . . . . . . . . . . 17
Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Atlantic Benefit Plans . . . . . . . . . . . . . . . . . . . 53
Atlantic Budget . . . . . . . . . . . . . . . . . . . . . . . 63
Atlantic Common Stock . . . . . . . . . . . . . . . . . . . . 5
Atlantic Conversion Ratio . . . . . . . . . . . . . . . . . . 5
Atlantic Disclosure Schedule . . . . . . . . . . . . . . . . 83
Atlantic ERISA Affiliate . . . . . . . . . . . . . . . . . . 52
Atlantic Facilities . . . . . . . . . . . . . . . . . . . . . 63
Atlantic Financial Statements . . . . . . . . . . . . . . . . 45
Atlantic Material Adverse Effect . . . . . . . . . . . . . . 40
Atlantic Merger . . . . . . . . . . . . . . . . . . . . . . . 2
Atlantic Required Consents . . . . . . . . . . . . . . . . . 42
Atlantic Required Statutory Approvals . . . . . . . . . . . . 43
Atlantic SEC Reports . . . . . . . . . . . . . . . . . . . . 44
Atlantic Shareholders' Approval . . . . . . . . . . . . . . . 62
Atlantic Special Meeting . . . . . . . . . . . . . . . . . . 79
Atlantic Utility . . . . . . . . . . . . . . . . . . . . . . 65
Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . 86
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 12
Task Force . . . . . . . . . . . . . . . . . . . . . . . . . 74
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . 20
Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . 23
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Virginia Commission . . . . . . . . . . . . . . . . . . . . . 4
A-2
<PAGE>
Term Page
---- ----
VSCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A-3
<PAGE>
Exhibit A
FORM OF
RESTATED CERTIFICATE OF INCORPORATION OF NEWCO
Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware
NEWCO, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is NEWCO (the
"Corporation"). The Corporation was originally incorporated
under the name ________________. The original Certificate of
Incorporation was filed with the Secretary of State of the State
of Delaware on August __, 1996.
2. This Restated Certificate of Incorporation
restates and further amends the Certificate of Incorporation of
the Corporation and has been adopted and approved in accordance
with Sections 242 and 245 of the General Corporation Laws of the
State of Delaware.
3. The text of the Certificate of Incorporation as
heretofore amended is hereby amended and restated to read in its
entirety as follows:
ARTICLE I.
NAME
The name of the Corporation is [Newco]
ARTICLE II.
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation
is Booking Street, Wilmington, New Castle County, Delaware 19801,
and the name of the registered agent at such office is the
Corporation itself.
ARTICLE III.
PURPOSE
The Corporation is organized for the purpose of
engaging in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of
Delaware (the "GCLD").
ARTICLE IV
CAPITAL STOCK
SECTION I. Authorization. The aggregate number of
<PAGE>
shares of stock which the Corporation shall have authority to
issue is ___________________ (_______) shares, of which
_____________ (__________) shares shall be shares of a class of
common stock designated as "Residual Common Stock," having a par
value of $0.01 per share (the "Residual Common Stock"),
_____________ (________) shares shall be shares of a class of
common stock designated as "Class A Common Stock," having a par
value of $0.01 per share (the "Class A Common Stock"), and
__________________ (________) shares shall be shares of a class
of preferred stock having a par value of $.01 per share (the
"Preferred Stock") and issuable in one or more series as
hereinafter provided. The Residual Common Stock and the Class A
Common Stock shall hereinafter collectively be called "Common
Stock" and either shall sometimes be called a class of Common
Stock. Certain capitalized terms used in this Article IV shall
have the meanings set forth in Section II.7 of this Article. For
purposes of this Article IV, the Class A Common Stock, when
issued, shall be considered issued in respect of the Atlantic
Utility Group and the Residual Common Stock, when issued, shall
be considered issued in respect of the Residual Group.
SECTION II. Common Stock. The voting powers,
preferences and relative, participating, optional or other
special rights of the Common Stock, and the qualifications and
restrictions thereon, shall be as follows in this Section II.
1. Dividends. Subject to any preferences and
relative, participating, optional or special rights of any
outstanding series of Preferred Stock and any qualifications or
restrictions on the Common Stock or any class thereof created
thereby, dividends may be declared and paid upon the Residual
Common Stock and the Class A Common Stock, upon the terms with
respect to each such class, and subject to the limitations
provided for below in this subsection 1, as the Board of
Directors may determine.
1.1. Limitation on Dividends on Residual Common Stock.
Dividends on Residual Common Stock may be declared and paid only
out of the lesser of (i) the funds of the Corporation legally
available therefor and (ii) the Residual Group Available Dividend
Amount.
1.2. Limitation on Dividends on Class A Common Stock.
Dividends on Class A Common Stock may be declared and paid only
out of the lesser of (i) the funds of the Corporation legally
available therefor and (ii) the Atlantic Utility Group Available
Dividend Amount.
1.3. Discrimination in Dividends Between Classes of
Common Stock. The Board of Directors, subject to the provisions
of subsections 1.1 and 1.2, may at any time declare and pay
dividends exclusively on Residual Common Stock, exclusively on
Class A Common Stock or on both such classes in equal or unequal
amounts, notwithstanding the relative amounts of the Residual
Group Available Dividend Amount and the Atlantic Utility Group
Available Dividend Amount, the amount of dividends previously
declared on each class, the respective voting or liquidation
rights of each class or any other factor.
1.4. Share Distributions. Subject to subsections 1.1
<PAGE>
and 1.2, as the case may be, and except as permitted by
subsection 4.1, the Board of Directors may declare and pay
dividends or distributions of shares of Common Stock (or
Convertible Securities convertible into or exchangeable or
exercisable for shares of Common Stock) on shares of Common Stock
or shares of Preferred Stock only as follows:
(A) dividends or distributions of shares of Residual
Common Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of Residual Common
Stock) on shares of Residual Common Stock or shares of
Preferred Stock attributed to the Residual Group;
(B) dividends or distributions of shares of Class A
Common Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of Class A Common
Stock) on shares of Class A Common Stock or shares of
Preferred Stock attributed to the Atlantic Utility Group; and
(C) dividends or distributions of shares of Class A
Common Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of Class A Common
Stock) on shares of Residual Common Stock or shares of
Preferred Stock attributed to the Residual Group, but only
if the sum of (1) the number of shares of Class A Common
Stock to be so issued (or the number of such shares which
would be issuable upon conversion, exchange or exercise of
any Convertible Securities to be so issued) and (2) the
number of shares of Class A Common Stock which are issuable
upon conversion, exchange or exercise of any Convertible
Securities then outstanding that are attributed in
accordance with this Article IV to the Residual Group is
less than or equal to the Number of Shares Issuable with
Respect to the Intergroup Interest.
For purposes of this subsection 1.4, any outstanding Convertible
Securities that are convertible into or exchangeable or
exercisable for any other Convertible Securities which are
themselves convertible into or exchangeable or exercisable for
Residual Common Stock or Class A Common Stock (or other
Convertible Securities that are so convertible, exchangeable or
exercisable) shall be deemed to have been converted, exchanged or
exercised in full for such Convertible Securities.
2. Voting Powers. Except as otherwise provided by law
or by the terms of any outstanding series of Preferred Stock or
any provision of the certificate of incorporation of the
Corporation restricting the power to vote on a specified matter
to other stockholders, the entire voting power of the
stockholders of the Corporation shall be vested in the holders of
Common Stock of the Corporation, who shall be entitled to vote on
any matter on which the holders of stock of the Corporation
shall, by law or by the provisions of the certificate of
incorporation or bylaws of the Corporation, be entitled to vote,
and each class of Common Stock shall vote thereon together as
though one class. On each matter to be voted on by the holders
of all classes of Common Stock voting together as one class, (i)
each outstanding share of Residual Common Stock shall have one
vote and (ii) each outstanding share of Class A Common Stock
shall have one vote.
<PAGE>
3. Liquidation Rights. In the event of the voluntary
or involuntary dissolution of the Corporation or the liquidation
and winding up of the Corporation, after payment or provision for
payment of the debts and other liabilities of the Corporation and
the full preferential amounts (including any accumulated and
unpaid dividends) to which the holders of Preferred Stock are
entitled (regardless of the Group to which such shares of
Preferred Stock were attributed in accordance with this Article
IV), unless otherwise provided in respect of a series of
preferred stock by the resolution of the Board of Directors
fixing the liquidation rights and preferences of such series of
preferred stock, the holders of the outstanding shares of Common
Stock shall be entitled to receive the remaining assets of the
Corporation, regardless of the Group to which such assets are
attributed in accordance with this Article IV, divided among the
holders of Common Stock in accordance with the per share
"Liquidation Units" attributable to each class of Common Stock.
Each share of Residual Common Stock is hereby attributed one
"Liquidation Unit" and each share of Class A Common Stock is
hereby attributed one "Liquidation Unit," in the case of each
such class of Common Stock subject to adjustment as determined by
the Board of Directors to be appropriate to reflect any
subdivision (by stock split or otherwise) or combination (by
reverse stock split or otherwise) of such class of Common Stock
or any dividend or other distribution of shares of such class of
Common Stock to holders of shares of such class of Common Stock.
Neither the merger nor consolidation of the Corporation into or
with any other company, nor the merger or consolidation of any
other company into or with the Corporation, nor a sale, transfer
or lease of all or any part of the assets of the Corporation,
shall be deemed a liquidation or winding up of the Corporation,
or cause the dissolution of the Corporation, for purposes of this
subsection 3.
4. Conversion or Redemption of Common Stock. The
Class A Common Stock is subject to conversion or redemption upon
the terms provided below in this subsection 4.
4.1. Conversion or Redemption of Class A Common Stock.
(A) In the event of the Disposition, in one
transaction or a series of related transactions, by the
Corporation and/or its subsidiaries of all or substantially all
of the properties and assets attributed to the Atlantic Utility
Group to one or more persons or entities (other than (1) the
Disposition by the Corporation of its properties and assets in
one transaction or a series of related transactions in connection
with the dissolution or the liquidation and winding up of the
Corporation and the distribution of assets to stockholders as
referred to in subsection 3, (2) the Disposition of the
properties and assets of the Atlantic Utility Group to all holders
of shares of Class A Common Stock and to the Corporation or
subsidiaries thereof, divided among such holders and the
Corporation or subsidiaries thereof on a pro rata basis in
accordance with the number of shares of Class A Common Stock
outstanding and the Number of Shares Issuable with Respect to the
Intergroup Interest, (3) to any person or entity controlled (as
determined by the Board of Directors) by the Corporation or (4)
pursuant to a Related Business Transaction), the Corporation
<PAGE>
shall, on or prior to the 85th Trading Day after the date of
consummation of such Disposition (the "Atlantic Utility Group
Disposition Date"), pay a dividend on the Class A Common Stock or
redeem some or all of the Class A Common Stock or convert Class A
Common Stock into Residual Common Stock (or another class or
series of common stock of the Corporation), all as provided by
the following subparagraphs (1) and (2) of this paragraph (A)
and, to the extent applicable, by subsection 4.3, as the Board of
Directors shall have selected among such alternatives:
(1) provided that there are funds of the Corporation
legally available therefor:
(a) pay to the holders of the shares of Class A
Common Stock a dividend, as the Board of Directors
shall have declared subject to compliance with
subsection 1, in cash and/or in securities (other than
a dividend of Common Stock) or other property having a
Fair Value as of the Atlantic Utility Group Disposition
Date in the aggregate equal to the product of the
Outstanding Atlantic Utility Fraction as of the record
date for determining holders entitled to receive such
dividend multiplied by the Fair Value of the Net
Proceeds of such Disposition; or
(b) (i) subject to the last sentence of this
paragraph (A), if such Disposition involves all (not
merely substantially all) of the properties and assets
attributed to the Atlantic Utility Group, redeem as of the
Redemption Date provided by paragraph (C) of subsection
4.3, all outstanding shares of Class A Common Stock in
exchange for cash and/or for securities (other than
Common Stock) or other property having a Fair Value as
of the Atlantic Utility Group Disposition Date in the
aggregate equal to the product of the Outstanding Atlantic
Utility Fraction as of such Redemption Date multiplied
by the Fair Value of the Net Proceeds of such
Disposition; or
(ii) subject to the last sentence of this
paragraph (A), if such Disposition involves
substantially all (but not all) of the properties and
assets attributed to the Atlantic Utility Group, redeem as
of the Redemption Date provided by paragraph (D) of
subsection 4.3 such number of whole shares of Class A
Common Stock (which may be all of such shares
outstanding) as have in the aggregate an average Market
Value during the period of ten consecutive Trading Days
beginning on the sixteenth Trading Day immediately
succeeding the Atlantic Utility Group Disposition Date
closest to the product of the Outstanding Atlantic Utility
Fraction as of the date such shares are selected for
redemption multiplied by the Fair Value as of the Atlantic
Utility Group Disposition Date of the Net Proceeds of
such Disposition (but in no event more than all the
shares of Class A Common Stock then outstanding), in
consideration for cash and/or securities (other than
Common Stock) or other property having a Fair Value in
the aggregate equal to such product; or
<PAGE>
(2) declare that each outstanding share of Class A
Common Stock shall be converted as of the Conversion Date
provided by paragraph (E) of subsection 4.3 into a number of
fully paid and nonassessable shares of Residual Common Stock
(or, if the Residual Common Stock is not Publicly Traded at
such time and shares of another class or series of common
stock of the Corporation (other than Class A Common Stock)
are then Publicly Traded, of such other class or series of
common stock as has the largest Market Capitalization as of
the close of business on the Trading Day immediately preced-
ing the date of the notice of such conversion required by
paragraph (E) of subsection 4.3) equal to 110% of the ratio,
expressed as a decimal fraction rounded to the nearest five
decimal places, of the average Market Value of one share of
Class A Common Stock over the period of ten consecutive
Trading Days beginning on the sixteenth Trading Day
following the Atlantic Utility Group Disposition Date to the
average Market Value of one share of Residual Common Stock
(or such other class or series of common stock) over the
same ten Trading Day period.
Notwithstanding the foregoing provisions of this
paragraph (A), the Corporation shall redeem Class A Common Stock
as provided by subparagraph (1)(b)(i) or (1)(b)(ii) of this
paragraph (A) only if the amount to be paid in redemption of such
stock is less than or equal to the sum of (i) the Atlantic Utility
Group Available Dividend Amount as of the Redemption Date and
(ii) the amount determined to be capital in respect of the shares
to be redeemed in accordance with applicable corporation law as
of the Redemption Date.
(B) For purposes of this subsection 4.1:
(1) as of any date, "substantially all of the
properties and assets" attributed to the Atlantic Utility Group
shall mean a portion of such properties and assets (x) that
represents at least 80% of the Fair Value of the properties
and assets attributed to the Atlantic Utility Group as of such
date, or (y) from which were derived at least 80% of the
aggregate revenues for the immediately preceding twelve
fiscal quarterly periods of the Corporation (calculated on a
pro forma basis to include revenues derived from any of such
properties and assets acquired during such period) derived
from the properties and assets of the Atlantic Utility Group as
of such date;
(2) in the case of a Disposition of the properties and
assets attributed to the Atlantic Utility Group in a series of
related transactions, such Disposition shall not be deemed
to have been consummated until the consummation of the last
of such transactions; and
(3) the Board of Directors may pay any dividend or
redemption price referred to in paragraph (A) of this
subsection 4.1 in cash, securities (other than Common Stock)
or other property, regardless of the form or nature of the
proceeds of the Disposition.
(C) After the payment of the dividend or the
redemption price with respect to the Class A Common Stock
<PAGE>
provided for by subparagraph (1) of paragraph (A) of this
subsection 4.1, the Board of Directors may declare that each
share of Class A Common Stock remaining outstanding shall be
converted, but only as of a Conversion Date (determined as
provided by paragraph (E) of subsection 4.3) prior to the first
anniversary of the payment of such dividend or redemption price,
into a number of fully paid and nonassessable shares of Residual
Common Stock (or, if the Residual Common Stock is not Publicly
Traded at such time and shares of any other class or series of
common stock of the Corporation (other than Class A Common Stock)
are then Publicly Traded, of such other class or series of common
stock as has the largest Market Capitalization as of the close of
business on the Trading Day immediately preceding the date of the
notice of such conversion required by paragraph (E) of subsection
4.3) equal to 110% of the Market Value Ratio of the Class A
Common Stock to the Residual Common Stock as of the fifth Trading
Day prior to the date of the notice of such conversion required
by paragraph (E) of subsection 4.3.
(D) The Board of Directors may declare that each
outstanding share of Class A Common Stock shall be converted, as
of the Conversion Date provided by paragraph (E) of subsection
4.3, into the number of fully paid and nonassessable shares of
Residual Common Stock (or, if the Residual Common Stock is not
Publicly Traded at such time and shares of any other class or
series of common stock of the Corporation (other than Class A
Common Stock) are then Publicly Traded, of such other class or
series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately
preceding the date of the notice of conversion required by
paragraph (E) of subsection 4.3) equal to the applicable
percentage, on the Conversion Date, set forth below of the Market
Value Ratio of the Class A Common Stock to the Residual Common
Stock as of the fifth Trading Day prior to the date of the notice
of such conversion required by paragraph (E) of subsection 4.3:
12 Month Period Prior to
the Applicable Anniversary Percentage of
of the Effective Date Market Value Ratio
First 125%
Second 120%
Third 115%
Fourth and Thereafter 110%
(E) If the Corporation consummates (i) a tender offer
made by the Corporation for all of the outstanding shares of
Class A Common Stock at an all cash price of at least 110% of the
Time-Weighted Market Price of a share of Class A Common Stock as
of the Trading Day immediately preceding the date of such offer
or (ii) an exchange offer by the Corporation to exchange each
outstanding share of Class A Common Stock into a number of shares
of Residual Common Stock (or, if the Residual Common Stock is not
Publicly Traded at such time and shares of any other class or
series of common stock of the Corporation (other than Class A
Common Stock) are then Publicly Traded, of such other class or
series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately
preceding the date of such offer) equal to at least 110% of the
Market Value Ratio of the Class A Common Stock to the Residual
<PAGE>
Common Stock as of the Trading Day immediately preceding the date
of such offer, which, in either case, is accepted by the holders
of greater than 50% of the outstanding shares of Class A Common
Stock, then the Board of Directors may either (x) provided that
there are funds of the Corporation legally available therefor,
redeem as of the Redemption Date provided by paragraph (F) of
subsection 4.3 each share of Class A Common Stock remaining
outstanding in exchange for cash in an amount equal to the
highest cash price paid per share by the Corporation pursuant to
such tender offer or to the product of the highest number of
shares of Residual Common Stock (or such other class or series of
common stock of the Corporation) per share issued in exchange for
any share of Class A Common Stock pursuant to such exchange offer
and the Time-Weighted Market Price of a share of Residual Common
Stock (or such other class or series of common stock of the
Corporation) as of the Trading Day immediately preceding the date
of such exchange offer, as the case may be, or (y) declare that
each share of Class A Common Stock remaining outstanding shall be
converted as of the Conversion Date provided by paragraph (E) of
subsection 4.3 into a number of fully paid and nonassessable
shares of Residual Common Stock (or, if the Residual Common Stock
is not Publicly Traded at such time and shares of any other class
or series of common stock of the Corporation (other than Class A
Common Stock) are then Publicly Traded, of such other class or
series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by
paragraph (E) of subsection 4.3) equal to the quotient of the
highest cash price paid per share by the Corporation pursuant to
such tender offer and the Time-Weighted Market Price of a share
of Residual Common Stock (or such other class or series of common
stock of the Corporation) as of the Trading Day immediately
preceding the date of the notice of such conversion required by
paragraph (E) of subsection 4.3 or to the highest number of
shares of Residual Common Stock (or such other class or series of
common stock of the Corporation) per share issued in exchange for
any share of Class A Common Stock pursuant to such exchange
offer, as the case may be.
(F) If any person (including the Corporation) makes a
tender offer to purchase shares of Residual Common Stock (or, if
the Residual Common Stock is not Publicly Traded at such time and
shares of any other class or series of common stock of the
Corporation (other than Class A Common Stock) are then Publicly
Traded, of such other class or series of common stock as has the
largest Market Capitalization as of the close of business on the
Trading Day immediately preceding the date of such offer) for
cash, property or other securities or if the Corporation makes a
public announcement of a pending merger involving the Corporation
in which shares of Residual Common Stock (or, if the Residual
Common Stock is not Publicly Traded at such time and shares of
any other class or series of common stock of the Corporation
(other than Class A Common Stock) are then Publicly Traded, of
such other class or series of common stock as has the largest
Market Capitalization as of the close of business on the Trading
Day immediately preceding the date of such announcement) will be
converted into cash, property or other securities, the holders of
shares of Class A Common Stock will be entitled to convert each
and any such share of Class A Common Stock into the number of
fully paid and nonassessable shares of Residual Common Stock (or
<PAGE>
such other class or series of common stock, as the case may be)
equal to 100% of the Market Value Ratio of the Class A Common
Stock to the Residual Common Stock as of the Trading Day
immediately preceding the date of such tender offer or
announcement, as the case may be; provided, that (x) any election
by such holder to make such conversion may be fully revoked by
such holder with respect to any such share of Class A Common
Stock by giving written notice to the Corporation prior to the
consummation of such tender offer or merger, as the case may be,
and (y) such conversion will only be effective (i) in the case of
a tender offer, only with respect to such shares of Residual
Common Stock (or such other class or series of common stock of
the Corporation) issuable upon such conversion which are actually
accepted for purchase pursuant to such tender offer and (ii) in
the case of a pending merger, if such merger is actually
consummated.
(G) If any person (including the Corporation)
consummates a tender offer for all of the outstanding shares of
Residual Common Stock (or, if the Residual Common Stock is not
Publicly Traded at such time and shares of any other class or
series of common stock of the Corporation (other than Class A
Common Stock) are then Publicly Traded, of such other class or
series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately
preceding the date of such offer) at an all cash price which is
accepted by the holders of greater than 50% of the outstanding
shares of Residual Common Stock (or such other class or series of
common stock of the Corporation), then the Board of Directors may
either (x) redeem as of the Redemption Date provided by paragraph
(F) of subsection 4.3 each share of Class A Common Stock
outstanding in exchange for cash in an amount equal to the
product of the highest cash price paid per share by such person
pursuant to such tender offer and the Market Value Ratio of the
Class A Common Stock to the Residual Common Stock as of the fifth
Trading Day prior to the date of such tender offer or (y) declare
that each share of Class A Common Stock outstanding shall be
converted as of the Conversion Date provided by paragraph (E) of
subsection 4.3 into a number of fully paid and nonassessable
shares of Residual Common Stock (or, if the Residual Common Stock
is not Publicly Traded at such time and shares of any other class
or series of common stock of the Corporation (other than Class A
Common Stock) are then Publicly Traded, of such other class or
series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by
paragraph (E) of subsection 4.3) equal to the quotient of the
highest cash price paid per share by such person pursuant to such
tender offer and the Time-Weighted Market Price of a share of
Residual Common Stock (or such other class or series of common
stock of the Corporation) as of the Trading Day immediately
preceding the date of the notice of such conversion required by
paragraph (E) of subsection 4.3.
4.2. Treatment of Convertible Securities. After any
Conversion Date or Redemption Date on which all outstanding
shares of Class A Common Stock were converted or redeemed, any
share of Class A Common Stock that is to be issued on conversion,
exchange or exercise of any Convertible Securities shall,
immediately upon such conversion, exchange or exercise and
<PAGE>
without any notice from or to, or any other action on the part
of, the Corporation or its Board of Directors or the holder of
such Convertible Security:
(A) in the event the shares of Class A Common Stock
outstanding on such Conversion Date were converted into shares of
Residual Common Stock (or another class or series of common stock
of the Corporation) pursuant to subparagraph (A)(2) or paragraph
(C), (D), (E), (F) or (G) of subsection 4.1, be converted into
the amount of cash and/or the number of shares of the kind of
capital stock and/or other securities or property of the
Corporation that the number of shares of Class A Common Stock
that were to be issued upon such conversion, exchange or exercise
would have received had such shares been outstanding on such
Conversion Date; or
(B) in the event the shares of Class A Common Stock
outstanding on such Redemption Date were redeemed pursuant to
subparagraph (A)(1)(b) of subsection 4.1, be redeemed, to the
extent of funds of the Corporation legally available therefor,
for $.01 per share in cash for each share of Class A Common Stock
that otherwise would be issued upon such conversion, exchange or
exercise.
The provisions of the immediately preceding sentence
shall not apply to the extent that other adjustments in respect
of such conversion, exchange or redemption of Class A Common
Stock are otherwise made pursuant to the provisions of such
Convertible Securities.
4.3. Notice and Other Provisions.
(A) Not later than the tenth Trading Day following the
consummation of a Disposition referred to in paragraph (A) of
subsection 4.1, the Corporation shall announce publicly by press
release (1) the Net Proceeds of such Disposition, (2) the number
of shares outstanding of the Class A Common Stock, (3) the number
of shares of Class A Common Stock into or for which Convertible
Securities are then convertible, exchangeable or exercisable and
the conversion, exchange or exercise price thereof and (4) the
Outstanding Atlantic Utility Fraction on the date of such notice.
Not earlier than the 26th Trading Day and not later than the 30th
Trading Day following the consummation of such Disposition, the
Corporation shall announce publicly by press release which of the
actions specified in paragraph (A) of subsection 4.1 it has
irrevocably determined to take in respect of such Disposition.
(B) If the Corporation determines to pay a dividend on
shares of Class A Common Stock pursuant to subparagraph (A)(1)(a)
of subsection 4.1, the Corporation shall, not later than the 30th
Trading Day following the consummation of the Disposition
referred to in such subparagraph, cause notice to be given to
each holder of shares of Class A Common Stock and to each holder
of Convertible Securities that are convertible into or
exchangeable or exercisable for shares of Class A Common Stock
(unless alternate provision for such notice to the holders of
such Convertible Securities is made pursuant to the terms of such
Convertible Securities), setting forth (1) the record date for
determining holders entitled to receive such dividend, which
shall be not earlier than the 40th Trading Day and not later than
<PAGE>
the 50th Trading Day following the consummation of such
Disposition, (2) the anticipated payment date of such dividend
(which shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the type of property to be
paid as such dividend in respect of the outstanding shares of
Class A Common Stock, (4) the Net Proceeds of such Disposition,
(5) the Outstanding Atlantic Utility Fraction on the date of such
notice, (6) the number of outstanding shares of Class A Common
Stock and the number of shares of Class A Common Stock into or
for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion,
exchange or exercise price thereof and (7) in the case of notice
to be given to holders of Convertible Securities, a statement to
the effect that a holder of such Convertible Securities shall be
entitled to receive such dividend only if such holder properly
converts, exchanges or exercises such Convertible Securities on
or prior to the record date referred to in clause (1) of this
sentence. Such notice shall be sent by first-class mail, postage
prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation.
(C) If the Corporation determines to redeem Class A
Common Stock pursuant to subparagraph (A)(1)(b)(i) of subsection
4.1, the Corporation shall, not earlier than the 35th Trading Day
and not later than the 45th Trading Day prior to the Redemption
Date, cause notice to be given to each holder of shares of Class
A Common Stock, and to each holder of Convertible Securities
convertible into or exchangeable or exercisable for shares of
Class A Common Stock (unless alternate provision for such notice
to the holders of such Convertible Securities is made pursuant to
the terms of such Convertible Securities), setting forth (1) a
statement that all shares of Class A Common Stock outstanding on
the Redemption Date shall be redeemed, (2) the Redemption Date
(which shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the type of property in
which the redemption price for the shares to be redeemed is to be
paid, (4) the Net Proceeds of such Disposition, (5) the
Outstanding Atlantic Utility Fraction on the date of such notice,
(6) the place or places where certificates for shares of Class A
Common Stock, properly endorsed or assigned for transfer (unless
the Corporation waives such requirement), are to be surrendered
for delivery of cash and/or securities or other property, (7) the
number of outstanding shares of Class A Common Stock and the
number of shares of Class A Common Stock into or for which such
outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or
exercise price thereof, (8) in the case of notice to be given to
holders of Convertible Securities, a statement to the effect that
a holder of such Convertible Securities shall be entitled to
participate in such selection for redemption only if such holder
properly converts, exchanges or exercises such Convertible
Securities on or prior to the Redemption Date referred to in
clause (2) of this sentence and a statement as to what, if
anything, such holder will be entitled to receive pursuant to the
terms of such Convertible Securities or, if applicable, this
subsection 4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (9) a statement to the
effect that, except as otherwise provided by paragraph (I) of
this subsection 4.3, dividends on such shares of Class A Common
Stock shall cease to be paid as of such Redemption Date. Such
<PAGE>
notice shall be sent by first-class mail, postage prepaid, to
each such holder at such holder's address as the same appears on
the transfer books of the Corporation.
(D) If the Corporation determines to redeem Class A
Common Stock pursuant to subparagraph (A)(1)(b)(ii) of subsection
4.1, the Corporation shall, not later than the 30th Trading Day
following the consummation of the Disposition referred to in such
subparagraph, cause notice to be given to each holder of shares
of Class A Common Stock and to each holder of Convertible
Securities that are convertible into or exchangeable or
exercisable for shares of Class A Common Stock (unless alternate
provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible
Securities) setting forth (1) a date not earlier than the 40th
Trading Day and not later than the 50th Trading Day following the
consummation of the Disposition in respect of which such
redemption is to be made on which shares of Class A Common Stock
shall be selected for redemption, (2) the anticipated Redemption
Date (which shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the type of property in
which the redemption price for the shares to be redeemed is to be
paid, (4) the Net Proceeds of such Disposition, (5) the
Outstanding Atlantic Utility Fraction, (6) the number of shares of
Class A Common Stock outstanding and the number of shares of
Class A Common Stock into or for which outstanding Convertible
Securities are then convertible, exchangeable or exercisable and
the conversion, exchange or exercise price thereof, (7) in the
case of notice to be given to holders of Convertible Securities,
a statement to the effect that a holder of such Convertible
Securities shall be eligible to participate in such selection for
redemption only if such holder properly converts, exchanges or
exercises such Convertible Securities on or prior to the record
date referred to in clause (1) of this sentence, and a statement
as to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if
applicable, this subsection 4 if such holder thereafter converts,
exchanges or exercises such Convertible Securities and (8) a
statement that the Corporation will not be required to register a
transfer of any shares of Class A Common Stock for a period of 15
Trading Days next preceding the date referred to in clause (1) of
this sentence. Promptly following the date referred to in clause
(1) of the preceding sentence, but not earlier than 40 Trading
Days nor later than 50 Trading Days following the consummation of
such Disposition, the Corporation shall cause a notice to be
given to each holder of record of shares of Class A Common Stock
to be redeemed setting forth (1) the number of shares of Class A
Common Stock held by such holder to be redeemed, (2) a statement
that Class A Common Stock shall be redeemed, (3) the Redemption
Date, (4) the kind and per share amount of cash and/or securities
or other property to be received by such holder with respect to
each share of Class A Common Stock to be redeemed, including
details as to the calculation thereof, (5) the place or places
where certificates for shares of Class A Common Stock, properly
endorsed or assigned for transfer (unless the Corporation shall
waive such requirement), are to be surrendered for delivery of
such cash and/or securities or other property, (6) if applicable,
a statement to the effect that the shares being redeemed may no
longer be transferred on the transfer books of the Corporation
after the Redemption Date and (7) a statement to the effect that,
<PAGE>
subject to paragraph (I) of this subsection 4.3, dividends on
such shares of Class A Common Stock shall cease to be paid as of
the Redemption Date. Such notices shall be sent by first-class
mail, postage prepaid, to each such holder at such holder's
address as the same appears on the transfer books of the
Corporation.
(E) If the Corporation determines to convert the Class
A Common Stock into Residual Common Stock (or another class or
series of common stock of the Corporation) pursuant to
subparagraph (A)(2) or paragraph (C), (D), (E) or (G) of
subsection 4.1, the Corporation shall, not earlier than the 35th
Trading Day and not later than the 45th Trading Day prior to the
Conversion Date, cause notice to be given to each holder of
shares of Class A Common Stock and to each holder of Convertible
Securities that are convertible into or exchangeable or
exercisable for shares of Class A Common Stock (unless alternate
provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible
Securities) setting forth (1) a statement that all outstanding
shares of Class A Common Stock shall be converted, (2) the
Conversion Date (which, in the case of a conversion after a
Disposition, shall not be more than 85 Trading Days following the
consummation of such Disposition and, in the case of a conversion
after a tender or exchange offer pursuant to paragraph (E) or (G)
of subsection 4.1, shall not be less than 35 or more than 85
Trading Days following the consummation of such offer), (3) the
per share number of shares of Class A Common Stock or another
class or series of common stock of the Corporation, as the case
may be, to be received with respect to each share of Class A
Common Stock, including details as to the calculation thereof,
(4) the place or places where certificates for shares of Class A
Common Stock, properly endorsed or assigned for transfer (unless
the Corporation shall waive such requirement), are to be
surrendered for delivery of certificates for shares of Class A
Common Stock, (5) the number of outstanding shares of Class A
Common Stock and the number of shares of Class A Common Stock
into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion,
exchange or exercise price thereof, (6) a statement to the effect
that, subject to paragraph (I) of this subsection 4.3, dividends
on such shares of Class A Common Stock shall cease to be paid as
of such Conversion Date and (7) in the case of notice to holders
of such Convertible Securities, a statement to the effect that a
holder of such Convertible Securities shall be entitled to
receive shares of common stock upon such conversion only if such
holder properly converts, exchanges or exercises such Convertible
Securities on or prior to such Conversion Date and a statement as
to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if
applicable, this subsection 4 if such holder thereafter converts,
exchanges or exercises such Convertible Securities. Such notice
shall be sent by first-class mail, postage prepaid, to each such
holder at such holder's address as the same appears on the
transfer books of the Corporation.
(F) If the Corporation determines to redeem Class A
Common Stock pursuant to subparagraph (E) or (G) of subsection
4.1, the Corporation shall, not earlier than the 35th Trading Day
and not later than the 45th Trading Day prior to the Redemption
<PAGE>
Date, cause notice to be given to each holder of shares of Class
A Common Stock, and to each holder of Convertible Securities
convertible into or exchangeable or exercisable for shares of
Class A Common Stock (unless alternate provision for such notice
to the holders of such Convertible Securities is made pursuant to
the terms of such Convertible Securities), setting forth (1) a
statement that all shares of Class A Common Stock outstanding on
the Redemption Date shall be redeemed, (2) the Redemption Date
(which shall not be less than 35 or more than 85 Trading Days
following the consummation of the applicable tender or exchange
offer), (3) the redemption price for the shares, (4) the place or
places where certificates for shares of Class A Common Stock,
properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), are to be surrendered for
delivery of cash, (5) the number of outstanding shares of Class A
Common Stock and the number of shares of Class A Common Stock
into or for which such outstanding Convertible Securities are
then convertible, exchangeable or exercisable and the conversion,
exchange or exercise price thereof, (6) in the case of notice to
be given to holders of Convertible Securities, a statement to the
effect that a holder of such Convertible Securities shall be
entitled to participate in such selection for redemption only if
such holder properly converts, exchanges or exercises such
Convertible Securities on or prior to the Redemption Date
referred to in clause (2) of this sentence and a statement as to
what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if
applicable, this subsection 4 if such holder thereafter converts,
exchanges or exercises such Convertible Securities and (7) a
statement to the effect that, except as otherwise provided by
paragraph (I) of this subsection 4.3, dividends on such shares of
Class A Common Stock shall cease to be paid as of such Redemption
Date. Such notice shall be sent by first-class mail, postage
prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation.
(G) If less than all of the outstanding shares of
Class A Common Stock are to be redeemed pursuant to subparagraph
(A)(1) of subsection 4.1, the shares to be redeemed by the
Corporation shall be selected from among the holders of shares of
Class A Common Stock outstanding at the close of business on the
record date for such redemption on a pro rata basis among all
such holders or by lot or by such other method as may be
determined by the Board of Directors to be equitable.
(H) The Corporation shall not be required to issue or
deliver fractional shares of any capital stock or of any other
securities to any holder of Class A Common Stock upon any
conversion, redemption, dividend or other distribution pursuant
to this subsection 4. If more than one share of Class A Common
Stock shall be held at the same time by the same holder, the
Corporation may aggregate the number of shares of any capital
stock that shall be issuable or any other securities or property
that shall be distributable to such holder upon any conversion,
redemption, dividend or other distribution (including any
fractional shares). If there are fractional shares of any
capital stock or of any other securities remaining to be issued
or distributed to the holders of Class A Common Stock, the
Corporation shall, if such fractional shares are not issued or
distributed to the holder, pay cash in respect of such fractional
<PAGE>
shares in an amount equal to the Fair Value thereof on the fifth
Trading Day prior to the date such payment is to be made (without
interest).
(I) No adjustments in respect of dividends shall be
made upon the conversion or redemption of any shares of Class A
Common Stock; provided, however, that if the Conversion Date or
Redemption Date, as the case may be, with respect to any shares
of Class A Common Stock shall be subsequent to the record date
for the payment of a dividend or other distribution thereon or
with respect thereto, the holders of Class A Common Stock at the
close of business on such record date shall be entitled to
receive the dividend or other distribution payable on or with
respect to such shares on the date set for payment of such
dividend or other distribution, in each case without interest,
notwithstanding the subsequent conversion or redemption of such
shares.
(J) Before any holder of Class A Common Stock shall be
entitled to receive any cash payment and/or certificates or
instruments representing shares of any capital stock and/or other
securities or property to be distributed to such holder with
respect to Class A Common Stock pursuant to this subsection 4,
such holder shall surrender at such place as the Corporation
shall specify certificates for Class A Common Stock, properly
endorsed or assigned for transfer (unless the Corporation shall
waive such requirement). The Corporation shall as soon as
practicable after receipt of certificates representing shares of
Class A Common Stock deliver to the person for whose account such
shares were so surrendered, or to such person's nominee or
nominees, the cash and/or the certificates or instruments
representing the number of whole shares of the kind of capital
stock and/or other securities or property to which such person
shall be entitled as aforesaid, together with any payment in
respect of fractional shares contemplated by paragraph (H) of
this subsection 4.3, in each case without interest. If less than
all of the shares of Class A Common Stock represented by any one
certificate are to be redeemed or converted, the Corporation
shall issue and deliver a new certificate for the shares of Class
A Common Stock not redeemed.
(K) From and after any applicable Conversion Date or
Redemption Date, as the case may be, all rights of a holder of
shares of Class A Common Stock that were converted or redeemed
shall cease except for the right, upon surrender of the
certificates representing such shares as required by paragraph
(J) of this subsection 4.3, to receive the cash and/or the
certificates or instruments representing shares of the kind of
capital stock and/or other securities or property for which such
shares were converted or redeemed, together with any payment in
respect of fractional shares contemplated by paragraph (H) of
this subsection 4.3 and rights to dividends as provided in
paragraph (I) of this subsection 4.3, in each case without
interest. No holder of a certificate that immediately prior to
the applicable Conversion Date represented shares of Class A
Common Stock shall be entitled to receive any dividend or other
distribution or interest payment with respect to shares of any
kind of capital stock or other security or instrument for which
Class A Common Stock was converted until the surrender as
required by this subsection 4 of such certificate in exchange for
<PAGE>
a certificate or certificates or instrument or instruments
representing such capital stock or other security. Upon such
surrender, there shall be paid to the holder the amount of any
dividends or other distributions (without interest) which
theretofore became payable on any class or series of capital
stock of the Corporation as of a record date after the Conversion
Date, but that were not paid by reason of the foregoing, with
respect to the number of whole shares of the kind of capital
stock represented by the certificate or certificates issued upon
such surrender. From and after a Conversion Date, the
Corporation shall, however, be entitled to treat the certificates
for Class A Common Stock that have not yet been surrendered for
conversion as evidencing the ownership of the number of whole
shares of the kind or kinds of capital stock of the Corporation
for which the shares of Class A Common Stock represented by such
certificates shall have been converted, notwithstanding the
failure to surrender such certificates.
(L) The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes that may be payable in
respect of the issuance or delivery of any shares of capital
stock and/or other securities upon conversion or redemption of
shares of Class A Common Stock pursuant to this subsection 4.
The Corporation shall not, however, be required to pay any tax
that may be payable in respect of any transfer involved in the
issuance or delivery of any shares of capital stock and/or other
securities in a name other than that in which the shares of Class
A Common Stock so converted or redeemed were registered, and no
such issuance or delivery shall be made unless and until the
person requesting such issuance or delivery has paid to the
Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
(M) Neither the failure to mail any notice required by
this subsection 4.3 to any particular holder of Class A Common
Stock or of Convertible Securities nor any defect therein shall
affect the sufficiency thereof with respect to any other holder
of outstanding shares of Class A Common Stock or of Convertible
Securities or the validity of any such conversion or redemption.
(N) The Board of Directors may establish such rules
and requirements to facilitate the effectuation of the
transactions contemplated by this subsection 4 as the Board of
Directors shall determine to be appropriate.
5. Mergers and Consolidations. In the event of a
merger or consolidation to which the Corporation is a party and
pursuant to which the holders of common stock of the Corporation
are entitled to receive consideration or shares of common stock
are converted into securities or other consideration, the holders
of the outstanding shares of each class or series of common stock
of the Corporation would be entitled to receive, or have their
shares converted into, a fraction of the consideration
attributable to the common stock of the Corporation pursuant to
the terms of any such merger or consolidation, where such
fraction is equal to the quotient of (A) the sum of (1) four
times the average ratio of x to y for the five-Trading Day period
ending on the Trading Day prior to the date of the first public
announcement of such merger or consolidation, (2) three times the
average ratio of x to y for the next preceding five-Trading Day
<PAGE>
period, (3) two times the average ratio of x to y for the next
preceding five-Trading Day period and (4) the average ratio of x
to y for the next preceding five-Trading Day period, divided by
(B) ten, where x is the Market Capitalization of such class or
series of common stock, and y is the aggregate Market
Capitalization of all classes and series of common stock of the
Corporation.
6. Board Determinations Binding. Subject to
applicable law, any determinations made in good faith by the
Board of Directors of the Corporation under any provision of
Article IV, and any determinations with respect to any Group or
the rights of the holders of any class of Common Stock made
pursuant to or in furtherance of this Article IV, shall be final
and binding on all stockholders.
7. Certain Definitions. As used in this Article IV,
the following terms shall have the following meanings (with terms
defined in the singular having comparable meaning when used in
the plural and vice versa), unless the context otherwise
requires. As used in this Article IV, references to the "Board
of Directors" shall refer to the Board of Directors of the
Corporation. As used in this subsection 7, a "contribution" or
"transfer" of assets or properties from one Group to another
shall refer to the reattribution of such assets or properties
from the contributing or transferring Group to the other Group
and correlative phrases shall have correlative meanings.
7.1. Company Net Income (Loss) Attributable to the
Residual Group, for any period through any date, shall mean (i)
the net income or loss of the Residual Group for such period (or
in respect of fiscal periods of the Corporation commencing prior
to the Effective Date, the pro forma net income or loss of the
Residual Group for such period as if the Effective Date had been
the first day of such period) determined in accordance with
generally accepted accounting principles in effect at such time,
reflecting income and expense of the Corporation attributed to
the Residual Group on a basis substantially consistent with
attributions of income and expense made in the calculation of
Company Net Income (Loss) Attributable to the Atlantic Utility
Group, including, without limitation, corporate administrative
costs, net interest and other financial costs and income taxes,
reduced by (ii) the amount of amortization of goodwill arising
from the Merger with respect to the Atlantic Utility Group (such
amount calculated for fiscal periods of the Corporation
commencing prior to the Effective Date on a pro forma basis as if
the Effective Date had been the first day of the relevant
period), determined in accordance with generally accepted
accounting principles in effect at such time applied on a basis
substantially consistent with that applied in determining Company
Net Income (Loss) Attributable to the Atlantic Utility Group
(excluding the portion thereof, if any, already applied to reduce
net income or increase net loss of the Residual Group for such
period by virtue of the Intergroup Interest) and increased by
(iii) the amount described in clause (iii) of the definition of
Company Net Income (Loss) Attributable to the Atlantic Utility
Group.
7.2. Company Net Income (Loss) Attributable to the
Atlantic Utility Group, for any period through any date, shall mean
<PAGE>
(i) the net income or loss of the Atlantic Utility Group for such
period (or in respect of the fiscal periods of the Corporation
commencing prior to the Effective Date, the pro forma net income
or loss of the Atlantic Utility Group for such period as if the
Effective Date had been the first day of such period) determined
in accordance with generally accepted accounting principles in
effect at such time, reflecting income and expense of the
Corporation attributed to the Atlantic Utility Group on a basis
substantially consistent with attributions of income and expense
made in the calculation of Company Net Income (Loss) Attributable
to the Residual Group, including, without limitation, corporate
administrative costs, net interest and other financial costs and
income taxes, increased by (ii) the amount of amortization of
goodwill arising from the Merger with respect to the Atlantic
Utility Group (such amount calculated for fiscal periods of the
Corporation commencing prior to the Effective Date on a pro forma
basis as if the Effective Date had been the first day of the
relevant period), determined in accordance with generally
accepted accounting principles in effect at such time applied on
a basis substantially consistent with that applied in determining
Company Net Income (Loss) Attributable to the Atlantic Utility Group
and reduced by (iii) an amount equal to $40 million per fiscal
year.
7.3. Conversion Date shall mean the date fixed by the
Board of Directors as the effective date for the conversion of
shares of Class A Common Stock into shares of Residual Common
Stock (or another class or series of common stock of the
Corporation) as shall be set forth in the notice to holders of
shares of Class A Common Stock and to holders of any Convertible
Securities that are convertible into or exchangeable or
exercisable for shares of Class A Common Stock required pursuant
to paragraph (E) of subsection 4.3.
7.4. Convertible Securities at any time shall mean any
securities of the Corporation or of any subsidiary thereof (other
than shares of Common Stock), including warrants and options,
outstanding at such time that by their terms are convertible into
or exchangeable or exercisable for or evidence the right to
acquire any shares of any class of Common Stock, whether
convertible, exchangeable or exercisable at such time or a later
time or only upon the occurrence of certain events, but in
respect of antidilution provisions of such securities only upon
the effectiveness thereof.
7.5. Disposition shall mean a sale, transfer,
assignment or other disposition (whether by merger,
consolidation, sale or contribution of assets or stock or
otherwise) of properties or assets (including stock, other
securities and goodwill).
7.6. Effective Date shall mean the date on which this
Restated Certificate of Incorporation shall become effective.
7.7. Fair Value shall mean, in the case of equity
securities or debt securities of a class or series that has
previously been Publicly Traded for a period of at least 15
months, the Market Value thereof (if such value, as so defined,
can be determined) or, in the case of an equity security or debt
security that has not been Publicly Traded for at least such
<PAGE>
period, shall mean the fair value per share of stock or per other
unit of such other security, on a fully distributed basis, as
determined by an independent investment banking firm experienced
in the valuation of securities selected in good faith by the
Board of Directors, or, if no such investment banking firm is, as
determined in the good faith judgment of the Board of Directors,
available to make such determination, in good faith by the Board
of Directors; provided, however, that in the case of property
other than securities, the "Fair Value" thereof shall be
determined in good faith by the Board of Directors based upon
such appraisals or valuation reports of such independent experts
as the Board of Directors shall in good faith determine to be
appropriate in accordance with good business practice. Any such
determination of Fair Value shall be described in a statement
filed with the records of the actions of the Board of Directors.
7.8. Group shall mean, as of any date, the Residual
Group or the Atlantic Utility Group, as the case may be.
7.9. Intergroup Interest Fraction as of any date shall
mean a fraction the numerator of which shall be the Number of
Shares Issuable with Respect to the Intergroup Interest on such
date and the denominator of which shall be the sum of (A) such
Number of Shares Issuable with Respect to the Intergroup Interest
and (B) the aggregate number of shares of Class A Common Stock
outstanding on such date. A statement setting forth the
Intergroup Interest Fraction as of the record date for any
dividend or distribution on any class of Common Stock, as of the
effective date of any conversion, exchange or exercise of
Convertible Securities into or for shares of Class A Common Stock
and as of the end of each fiscal quarter of the Corporation shall
be filed by the Secretary of the Corporation in the records of
the Board of Directors of the Corporation not later than ten days
after such date.
7.10. Market Capitalization of any class or series of
common stock on any date shall mean the product of (i) the Market
Value of one share of such class or series of common stock on
such date and (ii) the number of shares of such class or series
of common stock outstanding on such date.
7.11. Market Value of a share of any class or series
of capital stock of the Corporation on any day shall mean the
average of the high and low reported sales prices regular way of
a share of such class or series on such Trading Day or, in case
no such reported sale takes place on such Trading Day, the
average of the reported closing bid and asked prices regular way
of a share of such class or series on such Trading Day, in either
case as reported on the New York Stock Exchange Composite Tape
or, if the shares of such class or series are not listed or
admitted to trading on such Exchange on such Trading Day, on the
principal national securities exchange in the United States on
which the shares of such class or series are listed or admitted
to trading or, if not listed or admitted to trading on any
national securities exchange on such Trading Day, on the NASDAQ
National Market or, if the shares of such class or series are not
listed or admitted to trading on any national securities exchange
or quoted on such National Market System on such Trading Day, the
average of the closing bid and asked prices of a share of such
class or series in the over-the-counter market on such Trading
<PAGE>
Day as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation or, if such closing
bid and asked prices are not made available by any such New York
Stock Exchange member firm on such Trading Day, the Fair Value of
a share of such class or series; provided that, for purposes of
determining the market value of a share of any class or series of
capital stock for any period, (i) the "Market Value" of a share
of capital stock on any day prior to any "ex-dividend" date or
any similar date occurring during such period for any dividend or
distribution (other than any dividend or distribution
contemplated by clause (ii)(B) of this sentence) paid or to be
paid with respect to such capital stock shall be reduced by the
Fair Value of the per share amount of such dividend or
distribution and (ii) the "Market Value" of any share of capital
stock on any day prior to (A) the effective date of any
subdivision (by stock split or otherwise) or combination (by
reverse stock split or otherwise) of outstanding shares of such
class or series of capital stock occurring during such period or
(B) any "ex-dividend" date or any similar date occurring during
such period for any dividend or distribution with respect to such
capital stock to be made in shares of such class or series of
capital stock or Convertible Securities that are convertible,
exchangeable or exercisable for such class or series of capital
stock shall be appropriately adjusted, as determined by the Board
of Directors, to reflect such subdivision, combination, dividend
or distribution.
7.12. Market Value Ratio of the Class A Common Stock
to the Residual Common Stock as of any date shall mean the
fraction (which may be greater than 1/1), expressed as a decimal
(rounded to the nearest five decimal places), of a share of
Residual Common Stock (or another class or series of common stock
of the Corporation, if so provided by subsection 4.1 because
Residual Common Stock is not then Publicly Traded) to be issued
in respect of a share of Class A Common Stock upon a conversion
of Class A Common Stock into Residual Common Stock (or another
class or series of common stock of the Corporation) in accordance
with subsection 4.1, based on the ratio of the market value of a
share of Class A Common Stock to the market value of a share of
Residual Common Stock (or such other common stock) as of such
date, determined by the fraction the numerator of which shall be
the sum of (A) four times the average Market Value of one share
of Class A Common Stock over the period of five consecutive
Trading Days ending on such date, (B) three times the average
Market Value of one share of Class A Common Stock over the period
of five consecutive Trading Days ending on the fifth Trading Day
prior to such date, (C) two times the average Market Value of one
share of Class A Common Stock over the period of five consecutive
Trading Days ending on the tenth Trading Day prior to such date
and (D) the average Market Value of one share of Class A Common
Stock over the period of five consecutive Trading Days ending on
the fifteenth Trading Day prior to such date and the denominator
of which shall be the sum of (A) four times the average Market
Value of one share of Residual Common Stock (or such other common
stock) over the period of five consecutive Trading Days ending on
such date, (B) three times the average Market Value of one share
of Residual Common Stock (or such other common stock) over the
period of five consecutive Trading Days ending on the fifth
Trading Day prior to such date, (C) two times the average Market
Value of one share of Residual Common Stock (or such other common
<PAGE>
stock) over the period of five consecutive Trading Days ending on
the tenth Trading Day prior to such date and (D) the average
Market Value of one share of Residual Common Stock (or such other
common stock) over the period of five consecutive Trading Days
ending on the fifteenth Trading Day prior to such date.
7.13. Net Proceeds shall mean, as of any date with
respect to any Disposition of any of the properties and assets
attributed to the Atlantic Utility Group an amount, if any, equal to
what remains of the gross proceeds of such Disposition after
payment of, or reasonable provision is made as determined by the
Board of Directors for, (A) any taxes payable by the Corporation
(or which would have been payable but for the utilization of tax
benefits attributable to the Residual Group) in respect of such
Disposition or in respect of any resulting dividend or redemption
pursuant to subparagraph (A)(1)(a) or (b) of subsection 4.1, (B)
any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses, (C) any
liabilities (contingent or otherwise) of or attributed to the
Atlantic Utility Group, including, without limitation, any
liabilities for deferred taxes or any indemnity or guarantee
obligations of the Corporation incurred in connection with the
Disposition or otherwise, and any liabilities for future purchase
price adjustments and any preferential amounts plus any
accumulated and unpaid dividends in respect of Preferred Stock
attributed to the Atlantic Utility Group and (D) a capitalized
amount (as determined by the Board of Directors) of the notional
obligation of the Atlantic Utility Group to the Residual Group
described in clause (iii) of the definition of Company Net Income
(Loss) Attributable to the Atlantic Utility Group. For purposes of
this definition, any properties and assets attributed to the
Atlantic Utility Group remaining after such Disposition shall
constitute "reasonable provision" for such amount of taxes,
costs, liabilities (contingent or otherwise) and capitalized
amount as the Board of Directors determines can be expected to be
supported by such properties and assets.
7.14. Number of Shares Issuable with Respect to the
Intergroup Interest shall as of the Effective Date be
__________;<F1> provided, however, that such number shall
from time to time thereafter be:
<F1> This number equals 7/3 times the number of Class A Common
Stock to be issued pursuant to the Merger.
(A) adjusted as determined by the Board of Directors
to be appropriate to reflect any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise)
of the Class A Common Stock or any dividend or other distribution
of shares of Class A Common Stock to holders of shares of Class A
Common Stock or any reclassification of Class A Common Stock;
(B) decreased (but to not less than zero) by action of
the Board of Directors by (1) the number of shares of Class A
Common Stock issued or sold by the Corporation that, immediately
prior to such issuance or sale, were included (as determined by
the Board of Directors pursuant to paragraph (C) of this
subsection 7.14) in the Number of Shares Issuable with Respect to
the Intergroup Interest, (2) the number of shares of Class A
Common Stock issued upon conversion, exchange or exercise of
<PAGE>
Convertible Securities that, immediately prior to the issuance or
sale of such Convertible Securities, were included in the Number
of Shares Issuable with Respect to the Intergroup Interest, (3)
the number of shares of Class A Common Stock issued by the
Corporation as a dividend or other distribution (including in
connection with any reclassification or exchange of shares) to
holders of Residual Common Stock, (4) the number of shares of
Class A Common Stock issued upon the conversion, exchange or
exercise of any Convertible Securities issued by the Corporation
as a dividend or other distribution (including in connection with
any reclassification or exchange of shares) to holders of
Residual Common Stock, or (5) the number (rounded, if necessary,
to the nearest whole number) equal to the quotient of (a) the
aggregate Fair Value as of the date of contribution of properties
or assets (including cash) transferred from the Atlantic Utility
Group to the Residual Group in consideration for a reduction in
the Number of Shares Issuable with Respect to the Intergroup
Interest divided by (b) the Market Value of one share of Class A
Common Stock as of the date of such transfer; and
(C) increased by (1) the number of outstanding shares
of Class A Common Stock repurchased by the Corporation for
consideration that is attributed as provided by subsection 7.19
to the Residual Group and (2) the number (rounded, if necessary,
to the nearest whole number) equal to the quotient of (a) the
Fair Value of properties or assets (including cash) theretofore
attributed as provided by subsection 7.19 to the Residual Group
that are contributed to the Atlantic Utility Group in consideration
of an increase in the Number of Shares Issuable with Respect to
the Intergroup Interest, divided by (b) the Market Value of one
share of Class A Common Stock as of the date of such contribution
and (3) the number of shares of Class A Common Stock into or for
which Convertible Securities are deemed converted, exchanged or
exercised pursuant to the penultimate sentence of the definition
of "Residual Group" in subsection 7.19.
7.15. Outstanding Atlantic Utility Fraction, as of any
date, means the fraction (which may simplify to 1/1) the
numerator of which shall be the number of shares of Class A
Common Stock outstanding on such date and the denominator of
which shall be the sum of the number of shares of Class A Common
Stock outstanding on such date and the Number of Shares Issuable
with Respect to the Intergroup Interest on such date. A
statement setting forth the Outstanding Atlantic Utility Fraction as
of the record date for the payment of any dividend or
distribution on any class of Common Stock and as of the end of
each fiscal quarter of the Corporation shall be filed by the
Secretary of the Corporation in the records of the actions of the
Board of Directors not later than ten days after such date.
7.16. Publicly Traded with respect to any security
shall mean (i) registered under Section 12 of the Securities
Exchange Act of 1934, as amended (or any successor provision of
law), and (ii) listed for trading on the New York Stock Exchange
or the American Stock Exchange (or any national securities
exchange registered under Section 7 of the Securities Exchange
Act of 1934, as amended (or any successor provision of law), that
is the successor to either such exchange) or quoted in the
National Association of Securities Dealers Automation Quotation
System (or any successor system).
<PAGE>
7.17. Redemption Date shall mean the date fixed by the
Board of Directors as the effective date for a redemption of
shares of Class A Common Stock, as set forth in a notice to
holders thereof required pursuant to paragraph (C), (D) or (F) of
subsection 4.3.
7.18. Related Business Transaction means any
Disposition of all or substantially all the properties and assets
attributed to the Atlantic Utility Group in a transaction or series
of related transactions that result in the Corporation receiving
in consideration of such properties and assets primarily equity
securities (including, without limitation, capital stock, debt
securities convertible into or exchangeable for equity securities
or interests in a general or limited partnership or limited
liability company, without regard to the voting power or other
management or governance rights associated therewith) of (1) any
entity which (i) acquires such properties or assets or succeeds
(by merger, formation of a joint venture or otherwise) to the
business conducted with such properties or assets or controls
such acquiror or successor and (ii) is primarily engaged or
proposes to engage primarily in one or more businesses similar or
complementary to the businesses conducted by the Atlantic Utility
Group prior to such Disposition, as determined by the Board of
Directors.
7.19. Residual Group shall mean, as of any date from
and as of the Effective Date:
(A) the interest of the Corporation or any of its
subsidiaries on such date in all of the assets, liabilities and
businesses of the Corporation or any of its subsidiaries (and any
successor companies), other than any assets, liabilities and
businesses attributed in accordance with this Article IV to the
Atlantic Utility Group;
(B) a proportionate undivided interest in each and
every business, asset and liability attributed to the Atlantic
Utility Group equal to the Intergroup Interest Fraction as of
such date;
(C) all properties and assets transferred to the
Residual Group from the Atlantic Utility Group (other than pursuant
to paragraph (D) of this subsection 7.19) after the Effective
Date pursuant to transactions in the ordinary course of business
of both the Residual Group and the Atlantic Utility Group or
otherwise as the Board of Directors may have directed as
permitted by this Article IV;
(D) all properties and assets transferred to the
Residual Group from the Atlantic Utility Group in connection with a
reduction of the Number of Shares Issuable with Respect to the
Intergroup Interest;
(E) the interest of the Corporation or any of its
subsidiaries in any business or asset acquired and any
liabilities assumed by the Corporation or any of its subsidiaries
outside the ordinary course of business and attributed to the
Residual Group, as determined by the Board of Directors as
contemplated by Section 6; and
<PAGE>
(F) from and after the payment date of any dividend or
other distribution with respect to shares of Class A Common Stock
(other than a dividend or other distribution payable in shares of
Class A Common Stock, with respect to which adjustment shall be
made as provided in paragraph (A) of subsection 7.14, or in
securities of the Corporation attributed to the Atlantic Utility
Group, for which provision shall be made as set forth in the
third to last sentence of this definition), an amount of assets
or properties previously attributed to the Atlantic Utility Group of
the same kind as were paid in such dividend or other distribution
with respect to shares of Class A Common Stock as have a Fair
Value on the record date for such dividend or distribution equal
to the product of (1) the Fair Value on such record date of the
aggregate of such dividend or distribution to holders of shares
of Class A Common Stock declared multiplied by (2) a fraction the
numerator of which is equal to the Intergroup Interest Fraction
in effect on the record date for such dividend or distribution
and the denominator of which is equal to the Outstanding Atlantic
Utility Fraction in effect on the record date for such dividend
or distribution;
provided that from and after any transfer of any assets or
properties from the Residual Group to the Atlantic Utility Group,
the Residual Group shall no longer include such assets or
properties so transferred (other than as reflected in respect of
such a transfer by the Intergroup Interest Fraction, as provided
by paragraph (B) of this subsection 7.19).
If the Corporation shall pay a dividend or make some
other distribution with respect to shares of Class A Common Stock
payable in securities of the Corporation that are attributed to
the Atlantic Utility Group for purposes of this Article IV (other
than Class A Common Stock), the Residual Group shall be deemed to
hold an interest in the Atlantic Utility Group equivalent to the
number or amount of such securities that is equal to the product
of the number or amount of securities so distributed to holders
of Class A Common Stock multiplied by the fraction specified in
clause (2) of paragraph (F) of this subsection 7.19 (determined
as of the record date for such distribution) and, to the extent
interest is or dividends are paid on the securities so
distributed, the Residual Group shall include, and there shall be
transferred thereto out of the Atlantic Utility Group, a
corresponding ratable amount of the kind of assets paid as such
interest or dividends as would have been paid in respect of such
securities so deemed to be held by the Residual Group if such
securities were outstanding. The Corporation may also, to the
extent the securities so paid as a dividend or other distribution
to the holders of Class A Common Stock are Convertible Securities
and at the time are convertible into or exchangeable or
exercisable for shares of Class A Common Stock, treat such
Convertible Securities as are so deemed to be held by the
Residual Group to be deemed to be converted, exchanged or
exercised, and shall do so to the extent such Convertible
Securities are mandatorily converted, exchanged or exercised (and
to the extent the terms of such Convertible Securities require
payment of consideration for such conversion, exchange or
exercise, the Residual Group shall then no longer include an
amount of the kind of properties or assets required to be paid as
such consideration for the amount of Convertible Securities
<PAGE>
deemed converted, exchanged or exercised (and the Atlantic Utility
Group shall be attributed such properties or assets)), in which
case, from and after such time, the securities into or for which
such Convertible Securities so deemed to be held by the Residual
Group were so considered converted, exchanged or exercised shall
be deemed held by the Residual Group (as provided in clause (3)
of paragraph (C) of subsection 7.14) and such Convertible
Securities shall no longer be deemed to be held by the Residual
Group. A statement setting forth the election to effectuate any
such deemed conversion, exchange or exercise of Convertible
Securities so deemed to be held by the Residual Group and the
properties or assets, if any, to be attributed to the Atlantic
Utility Group in consideration of such conversion, exchange or
exercise (if any) shall be filed in the records of the actions of
the Board of Directors and, upon such filing, such deemed
conversion, exchange or exercise shall be effectuated.
7.20. Residual Group Available Dividend Amount, on any
date, shall mean either
(i) (x) the amount equal to the fair market value of
the total assets attributed to the Residual Group less the
total amount of the liabilities attributed to the Residual
Group (provided that preferred stock shall not be treated as
a liability), in each case as of such date and determined on
a basis consistent with that applied in determining Company
Net Income (Loss) Attributable to the Residual Group, minus
(y) the aggregate par value of, or any greater amount
determined to be capital in respect of, all outstanding
shares of Residual Common Stock and shares of each class or
series of Preferred Stock attributed to the Residual Group,
minus (z) the amount, as of such date, of amortization of
goodwill during the period from the Effective Date through
such date arising from the Merger with respect to the Atlantic
Utility Group (determined as set forth in clause (ii) of the
definition of Company Net Income (Loss) Attributable to the
Residual Group and, as in such clause (ii), excluding the
portion thereof, if any, already applied to reduce net
income or increase net loss of the Residual Group for such
period by virtue of its Intergroup Interest), or
(ii) in case the total amount calculated pursuant to
clause (i) above is not a positive number, an amount equal
to Company Net Income (Loss) Attributable to the Residual
Group (if positive) for the fiscal year in which the
dividend is declared and/or the preceding fiscal year.
Notwithstanding the foregoing provisions of this subsection 7.20,
at any time when there are not outstanding both (i) one or more
shares of Residual Common Stock or Convertible Securities
convertible into or exchangeable or exercisable for Residual
Common Stock and (ii) one or more shares of Class A Common Stock
or Convertible Securities convertible into or exchangeable or
exercisable for Class A Common Stock, the "Available Dividend
Amount," on any calculation date during such time period, with
respect to the Residual Common Stock or the Class A Common Stock,
as the case may be (depending on which of such classes of Common
Stock or Convertible Securities convertible into or exchangeable
or exercisable for such class of Common Stock is outstanding),
shall mean the amount available for the payment of dividends on
<PAGE>
such Common Stock in accordance with law.
7.21. Atlantic Utility Group shall mean, as of any date
from and after the Effective Date:
(A) the interest of the Corporation on such date in
Atlantic City Electric Company, a New Jersey corporation (the
"Atlantic Utility Group Company"), and any successor companies, and
solely those lines of business in which the Atlantic Utility Group
Company was engaged as of August 9, 1996, and the assets and
liabilities attributable to those lines of business, and which
meet all of the criteria listed in clause (i) below, as of August
9, 1996, specifically excluding those businesses, lines of
business, and products and services listed in clause (ii) below,
and specifically including those businesses, lines of business
and products and services listed in clause (iii) below:
(i) only those businesses meeting all of the
following criteria as of August 9, 1996 shall be included in
the Atlantic Utility Group: (a) price regulated by the New
Jersey Board of Public Utilities, including, without
limitation, off-tariff agreements; (b) directly related to
the supply of electricity (generation and purchase of
electricity) or the delivery of electricity (transmission
and distribution of electricity); and (c) a line of business
for which Atlantic Utility Group Company has a franchise;
(ii) specifically excluded from the Atlantic Utility
Group are the following businesses, lines of business and
products and services, which list is not intended to be
inclusive: (a) Appliance Shield program, (b) lighting
upgrade programs, (c) water heater service business, (d)
thermostat sales, (e) telecommunications business and
investments, (f) energy services and consulting, (g) utility
services and consulting (e.g. plant services and electrical
equipment O&M services), (h) Atlantic Energy International,
and (i) Atlantic Energy Enterprises and its subsidiaries;
(iii) specifically included in the Atlantic Utility Group
is the Deepwater Operating Company.
(B) all assets and liabilities of the Corporation and
its subsidiaries (other than capital stock of a subsidiary) and
liabilities relating to the notional obligation of the Atlantic
Utility Group to the Residual Group described in clause (iii) of
the definition of Company Net Income (Loss) Attributable to the
Atlantic Utility Group on such date attributed by the Board of
Directors to any of the Atlantic Utility Group Company or the
businesses thereof, whether or not such assets or liabilities are
or were also assets and liabilities of the Atlantic Utility Group
Company, including, without limitation, the assets and
liabilities as of the Effective Date specified in the schedules
filed with the records of the actions of the Board of Directors
(a copy of which shall be made available to any stockholder of
the Corporation upon written request therefor);
(C) all properties and assets transferred to the Atlantic
Utility Group from the Residual Group (other than a transaction
pursuant to paragraph (D) of this subsection 7.21) after the
Effective Date pursuant to transactions in the ordinary course of
<PAGE>
business of both the Residual Group and the Atlantic Utility Group
or otherwise as the Board of Directors may have directed as
permitted by this Article IV;
(D) all properties and assets transferred to the Atlantic
Utility Group from the Residual Group in connection with an
increase in the Number of Shares Issuable with respect to the
Intergroup Interest; and
(E) the interest of the Corporation or any of its
subsidiaries in any business or asset acquired and any
liabilities assumed by the Corporation or any of its subsidiaries
outside of the ordinary course of business and attributed to the
Atlantic Utility Group, as determined by the Board of Directors as
contemplated by Section 6:
provided that (1) from and after the payment date of any dividend
or other distribution with respect to shares of Class A Common
Stock (other than a dividend or other distribution payable in
shares of Class A Common Stock, with respect to which adjustment
shall be made as provided in paragraph (A) of subsection 7.14, or
in securities of the Corporation attributed to the Atlantic Utility
Group, for which provision shall be made as set forth in clause
(2) of this proviso), the Atlantic Utility Group shall no longer
include an amount of assets or properties previously attributed
to the Atlantic Utility Group of the same kind as so paid in such
dividend or other distribution with respect of shares of Class A
Common Stock as have a Fair Value on the record date for such
dividend or distribution equal to the product of (a) the Fair
Value on such record date of the aggregate of such dividend or
distribution to holders of shares of Class A Common Stock
declared multiplied by (b) a fraction the numerator of which is
equal to the Intergroup Interest Fraction in effect on the record
date for such dividend or distribution and the denominator of
which is equal to the Outstanding Atlantic Utility Fraction in
effect on the record date for such dividend or distribution, (2)
if the Corporation shall pay a dividend or make some other
distribution with respect to shares of Class A Common Stock
payable in securities of the Corporation that are attributed to
the Atlantic Utility Group for purposes of this Article IV (other
than Class A Common Stock), there shall be excluded from the
Atlantic Utility Group an interest in the Atlantic Utility Group
equivalent to the number or amount of such securities that is
equal to the product of the number or amount of securities so
distributed to holders of Class A Common Stock multiplied by the
fraction specified in clause 1(b) of this proviso (determined as
of the record date for such distribution) (and such interest in
the Atlantic Utility Group shall be attributed to the Residual
Group) and, to the extent interest is or dividends are paid on
the securities so distributed, the Atlantic Utility Group shall no
longer include a corresponding ratable amount of the kind of
assets paid as such interest or dividends as would have been paid
in respect of the securities equivalent to such interest in the
Atlantic Utility Group deemed held by the Residual Group if the
securities equivalent to such interest were outstanding (and in
such eventuality such assets as are no longer included in the
Atlantic Utility Group shall be attributed to the Residual Group)
and (3) from and after any transfer of any assets or properties
from the Atlantic Utility Group to the Residual Group, the Atlantic
Utility Group shall no longer include such assets or properties
<PAGE>
so contributed or transferred. The Corporation may also, to the
extent a dividend or distribution on the Class A Common Stock has
been paid in Convertible Securities that are convertible into or
exchangeable or exercisable for Class A Common Stock, cause such
Convertible Securities as are deemed to be held by the Residual
Group in accordance with the third to last sentence of subsection
7.19 and clause (2) of the proviso to the immediately preceding
sentence to be deemed to be converted, exchanged or exercised as
provided in the penultimate sentence of subsection 7.19, in which
case such Convertible Securities shall no longer be deemed to be
held by the Residual Group.
7.22. Atlantic Utility Group Available Dividend Amount,
on any date, shall mean either:
(i) (x) the amount equal to the product of (1) the
Outstanding Atlantic Utility Fraction as of such date
multiplied by (2) an amount equal to the fair market value
of the total assets attributed to the Atlantic Utility Group
less the total amount of the liabilities attributed to the
Atlantic Utility Group (provided that preferred stock shall not
be treated as a liability), in each case as of such date and
determined on a basis consistent with that applied in
determining Company Net Income (Loss) Attributable to the
Atlantic Utility Group, minus (y) the aggregate par value of,
or any greater amount determined to be capital in respect
of, all outstanding shares of Class A Common Stock and
shares of each class or series of Preferred Stock attributed
to the Atlantic Utility Group, plus (z) the amount, as of such
date, of amortization of goodwill during the period from the
Effective Date through such date arising from the Merger
with respect to the Atlantic Utility Group (determined as set
forth in clause (ii) of the definition of Company Net Income
(Loss) Attributable to the Atlantic Utility Group), or
(ii) in case the total amount calculated pursuant to
clause (i) above is not a positive number, an amount equal
to Company Net Income (Loss) Attributable to the Atlantic
Utility Group (if positive) for the fiscal year in which the
dividend is declared and/or the preceding fiscal year.
Notwithstanding the foregoing provisions of this subsection 7.22,
and consistent with subsection 7.4, at any time when there are
not outstanding both (i) one or more shares of Residual Common
Stock or Convertible Securities convertible into or exchangeable
or exercisable for Residual Common Stock and (ii) one or more
shares of Class A Common Stock or Convertible Securities
convertible into or exchangeable or exercisable for Class A
Common Stock, the "Available Dividend Amount," on any calculation
date during such time period, with respect to the Residual Common
Stock or the Class A Common Stock, as the case may be (depending
on which of such classes of Common Stock or Convertible
Securities convertible into or exchangeable or exercisable for
such class of Common Stock is outstanding), shall mean the amount
available for the payment of dividends on such Common Stock in
accordance with law.
7.23. Time-Weighted Market Price as of any date with
respect to any class of Common Stock shall mean an amount equal
to (i) the sum of (A) four times the average Market Value of one
<PAGE>
share of such class of Common Stock over the period of five
consecutive Trading Days ending on such date, (B) three times the
average Market Value of one share of such class of Common Stock
over the period of five consecutive Trading Days ending on the
fifth Trading Day prior to such date, (C) two times the average
Market Value of one share of such class of Common Stock over the
period of five consecutive Trading Days ending on the tenth
Trading Day prior to such date and (D) the average Market Value
of one share of such class of Common Stock over the period of
five consecutive Trading Days ending on the fifteenth Trading Day
prior to such date, divided by (ii) ten (10).
7.24. Trading Day shall mean each weekday other than
any day on which the relevant class of common stock of the
Corporation is not traded on any national securities exchange or
quoted in the NASDAQ National Market or in the over-the-counter
market.
SECTION III. Preferred Stock. The Preferred Stock may
be issued from time to time in one or more series. The Board of
Directors is authorized, by resolution adopted and filed in
accordance with law, to fix the number of shares in each series,
the designation thereof, the voting powers, preferences and
relative participating, optional or other special rights thereof,
and the qualifications or restrictions thereon, of each series
and the variations in such voting powers and preferences and
rights as between series. Any shares of any class or series of
Preferred Stock purchased, exchanged, converted or otherwise
acquired by the Corporation, in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized
but unissued shares of Preferred Stock, without designation as to
series, and may be reissued as part of any series of Preferred
Stock created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance
set forth in this certificate of incorporation or in such
resolution or resolutions.
ARTICLE 8.
BOARD OF DIRECTORS
SECTION 8.1. Powers. The business and affairs of the
Corporation shall be managed by, or under the direction of, a
Board of Directors, which shall exercise all of the powers of the
Corporation except as are by law or by this Certificate of
Incorporation or the Bylaws of the Corporation conferred upon or
reserved to the stockholders of the Corporation.
SECTION 8.2. Number, Tenure and Qualifications of
Directors.
8.2.1 Number of Directors. The Board of Directors
shall consist of no fewer than 9 and no more than 18 directors,
as determined from time to time by resolution of the Board of
Directors
8.2.2 Terms of Directors. The directors shall be
divided into three classes for the purpose of providing for
<PAGE>
staggered director terms, to be designated Class I, Class II and
Class III. Each class shall consist, as nearly as possible, of
one-third of the total number of directors constituting the
entire Board of Directors. Class I directors shall be elected
for a term expiring on the first annual meeting of stockholders
following the effective date, if any, of the Mergers (the "Merger
Date"), Class II directors shall be elected for a term expiring
on the second annual meeting of stockholders following the Merger
Date, and Class III directors shall be elected for a term
expiring on the third annual meeting of stockholders following
the Merger Date. At each succeeding annual meeting of
stockholders, successors to the class of directors whose term
expires at that annual meeting shall be elected for three-year
terms. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining
term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting of
stockholders for the year in which his or her term expires and
until his or her successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Except as otherwise
required by law or in this Certificate of Incorporation, any
vacancy on the Board of Directors that results from an increase
in the number of directors and any other vacancy occurring in the
Board of Directors shall be filled by a majority of the
directors then in office, even if less than a quorum, or by the
sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall
have the same remaining term as that of his or her predecessor.
8.2.3 Removal of Directors. Any director, or the
entire Board of Directors, may be removed from office only for
cause and only by the affirmative vote of not less than a
majority of the votes entitled to be cast by the holders of all
the then outstanding shares of capital stock of the Corporation
of any class or series entitled to vote in the election of
directors generally ("Voting Stock"), voting together as one
class at an annual meeting or at a special meeting of the
stockholders called for such purpose.
8.2.4 Class Votes for Directors. Notwithstanding the
foregoing, whenever the holders of any one or more classes or
series of stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors, the
election, term of office, filling of vacancies and other features
of such directorships shall be governed by the terms of this
Certificate of Incorporation applicable thereto, as amended, and
such directors so elected shall not be divided into classes
pursuant to this Article V, Section II unless expressly provided
by such terms.
Section 8.3. Additional Authority of Board. In
furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
<PAGE>
SECTION 8.4. Nomination and Election of Directors.
Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation, dissolution or winding up of the Corporation,
nominations for the election of directors shall be made by a
nominating committee of the Board of Directors if then
constituted pursuant to the Bylaws of the Corporation, or if no
nominating committee has been constituted, by the Board of
Directors. In addition, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons
for election as directors at an annual meeting of stockholders,
but only if written notice of such stockholder's intent to make
such nomination or nominations has been received by the Secretary
of the Corporation not less than sixty nor more than ninety days
prior to the first anniversary of the preceding year's annual
meeting of stockholders. In the event that the date of the
annual meeting of stockholders is advanced by more than thirty
days or delayed by more than sixty days from such anniversary or
in the case of the Corporation's first annual meeting of
stockholders after the Merger Date, notice by the stockholder to
be timely must be received not earlier than the ninetieth day
prior to such annual meeting and not later than the close of
business on the later of (a) the sixtieth day prior to such
annual meeting or (b) the tenth day following the day on which
notice of the date of the annual meeting was mailed or public
disclosure thereof was made by the Corporation, whichever first
occurs. Each such notice by a stockholder shall set forth: (a)
the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at a meeting to nominate
the person or persons specified in the notice; (c) a description
of all arrangements or understandings between the stockholder or
any person that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such stockholder ( an "Affiliate" of such
stockholder) and each nominee and any other person or persons
(naming such person or persons) relating to the nomination or
nominations; (d) the class and number of shares of the
Corporation which are beneficially owned by such stockholder and
the person to be nominated as of the date of such stockholder's
notice and by any other stockholders known by such stockholder to
be supporting such nominees as of the date of such stockholder's
notice; (e) such other information regarding each nominee
proposed by such stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (f) the written consent
of each nominee to serve as a director of the Corporation if so
elected. The stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations thereunder,
with respect to the matters set forth in this Article V, Section
IV.
In addition, in the event the Corporation calls a
special meeting of stockholders for the purpose of electing one
or more directors, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons
<PAGE>
for election as directors at a special meeting only if written
notice of such stockholder's intent to make such nomination or
nominations, setting forth the information and complying with the
form described in the immediately preceding paragraph, has been
received by the Secretary of the Corporation not earlier than the
ninetieth day prior to such special meeting and not later than
the close of business on the later of (i) the sixtieth day prior
to such special meeting or (ii) the tenth day following the day
on which notice of the date of the special meeting was mailed or
public disclosure thereof was made by the Corporation, whichever
comes first. The stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in
this Article V, Section IV.
No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the
procedures set forth in this Article V, Section IV. The
presiding officer of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by this Article
V, Section IV, and if he or she should so determine, the
defective nomination shall be disregarded.
Elections of directors shall be by written ballot.
ARTICLE 9.
STOCKHOLDERS
SECTION 9.1. Meetings of Stockholders; Books.
Meetings of the stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. Any action
required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special
meeting of such stockholders and may not be effected by a consent
in writing by any such holders. Subject to the rights of holders
of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, dissolution or
winding up of the Corporation, special meetings of the
stockholders of the Corporation may be called only by the
Chairman of the Board or by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of
Directors. The books of the Corporation may be kept (subject to
any provision of law) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
Except as otherwise required by law or by this
Certificate of Incorporation, the holders of not less than a
majority in voting power of the shares entitled to vote at any
meeting of stockholders, present in person or by proxy, shall
constitute a quorum, and in all matters other than the election
of directors the act of the holders of a majority in voting power
of the shares present in person or by proxy and entitled to vote
on the subject matter shall be deemed the act of the
stockholders. Directors shall be elected by a plurality of the
vote of the shares present in person or represented by proxy at a
meeting of stockholders and entitled to vote in the election of
directors. If a quorum shall fail to attend any meeting, the
<PAGE>
presiding officer may adjourn the meeting to another place, date
or time.
SECTION 9.2. Proposals of Stockholders. At any
meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before such
meeting. To be properly brought before an annual meeting of
stockholders, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors or
(c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be
received no less than sixty days nor more than ninety days prior
to the first anniversary of the preceding year's annual meeting
of stockholders; provided, however, that in the event that the
date of the annual meeting is advanced by more than thirty days
or delayed by more than sixty days from such anniversary or in
the case of the Corporation's first annual meeting of
stockholders after the Merger Date, notice by the stockholder to
be timely must be received not earlier than the ninetieth day
prior to such annual meeting of stockholders and not later than
the close of business on the later of (a) the sixtieth day prior
to such annual meeting or (b) the tenth day following the date on
which notice of the date of the annual meeting was mailed or
public disclosure thereof was made, whichever first occurs. Each
such notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting of stockholders: (a)
a brief description of the business desired to be brought before
the annual meeting of stockholders and the reasons for conducting
such business at such meeting, (b) the name and address, as they
appear on the Corporation's books, of the stockholder proposing
such business, (c) the class, series and number of shares of the
Corporation which are beneficially owned by the stockholder, and
(d) any material interest of the stockholder or any Affiliate of
the stockholder in such business. The stockholder shall also
comply with all applicable requirements of the Exchange Act and
the rules and regulations thereunder with respect to the matters
set forth in this Article VI, Section II. To be properly brought
before a special meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors or (b) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors. No business may be brought before a special meeting
by stockholders.
No business shall be conducted at any meeting of the
stockholders except in accordance with the procedures set forth
in this Article VI, Section II. The presiding officer of the
meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Article VI,
Section II, and if he or she should so determine, any such
business not properly brought before the meeting shall not be
transacted. Nothing herein shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
<PAGE>
Exchange Act or any successor provision.
SECTION 9.3. Power to Amend Bylaws. The stockholders
shall have the power and authority to amend the Bylaws of the
Corporation only by the affirmative vote of 80% or more of the
aggregate number of votes that the holders of the then
outstanding shares of Common Stock and Preferred Stock are
entitled to cast on the amendment.
ARTICLE 10.
AMENDMENTS
The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation; provided, however, that
except with respect to the designation of the rights and
preferences of series of Preferred Stock pursuant to Article IV,
Section III, which is delegated to the Board of Directors, and
notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any lawful
amendment of this Certificate of Incorporation may be made by
affirmative vote by at least the proportion specified below of
the aggregate number of votes which the holders of the then
outstanding shares of Common Stock and Preferred Stock are
entitled to cast on the amendment and, if the shares of one or
more classes or series are entitled under this Certificate of
Incorporation or otherwise by law to vote thereon as a class,
affirmative vote by the same proportion of the aggregate number
of votes which the holders of the then outstanding shares of such
one or more classes or series are entitled to cast on the
amendment. The proportion referred to above in this Article VII
shall be 80% in the case of any amendment of the provisions set
forth in Section III of Article IV, Article V and Article VI of
this Certificate of Incorporation and this Article VII and shall
be a majority in all other cases.
ARTICLE 11.
LIMITATION ON DIRECTOR LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 11.1. Limited Liability. A person who is or
was a director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (a)
for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the GCLD, or (d) for
any transaction from which the director derived an improper
personal benefit. If the GCLD is amended to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of the directors of the Corporation
shall be eliminated or limited to the fullest extent permitted by
<PAGE>
the GCLD, as so amended. The elimination and limitation of
liability provided herein shall continue after a director has
ceased to occupy such position as to acts or omissions occurring
during such director's term or terms of office, and no amendment,
repeal or modification of this Article IX shall apply to or have
any effect on the liability or alleged liability of any director
of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment, repeal or
modification.
SECTION 11.2. Right to Indemnification.
11.2.1 Each person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or the person of whom he or
she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the GCLD, as the same exists
or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said
law permitted the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in
this Article VIII, Section II, the Corporation shall indemnify
any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he or she has met the
applicable standard set forth in the GCLD. Such a determination
shall be made (a) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than
a quorum; (b) by independent legal counsel (compensated by the
Corporation) in a written opinion; (c) by the stockholders; or
(d) in any other manner permitted by the GCLD. The right to
indemnification conferred in this Article VII, Section III, shall
be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that, if the GCLD requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a
director or officer of the Corporation (and not in any other
capacity in which service was or is rendered by such person while
a director or officer, including, without limitation, service to
an employee benefit plan) in advance of the final disposition of
a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer,
<PAGE>
to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this Section II or otherwise. The Corporation
may, by action of its Board of Directors, provide indemnification
to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and
officers.
11.2.2 If a claim under paragraph 1 of this Section II
is not paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim (including attorneys'
fees). It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition
where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the
standard of conduct which makes it permissible under the GCLD for
the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the com-
mencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the GCLD, nor an
actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct. In any
suit brought by the claimant to enforce a right to
indemnification or to an advancement of expenses hereunder, or
brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving
that the claimant is not entitled to be indemnified, or to such
advancement of expenses, under this Article VIII or otherwise
shall be on the Corporation.
11.2.3 The rights to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VIII, Section II,
shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this
Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
11.2.4 The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the Corporation or another corporation, partnership,
joint venture, trust or other enterprise against any such
expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense,
liability or loss under the GCLD.
11.2.5 The Corporation may enter into an indemnity
agreement with any director, officer, employee or agent of the
<PAGE>
Corporation, or of another corporation, partnership, joint
venture, trust or other enterprise, upon terms and conditions
that the Board of Directors deems appropriate, as long as the
provisions of the agreement are not impermissible under
applicable law.
11.2.6 Any amendment or repeal of this Article VIII,
Section II, shall not be retroactive in effect.
11.2.7 In case any provision in this Article VIII,
Section II, shall be determined at any time to be unenforceable
in any respect, the other provisions shall not in any way be
affected or impaired thereby, and the affected provision shall be
given the fullest possible enforcement in the circumstances, it
being the intention of the Corporation to afford indemnification
and advancement of expenses to the persons indemnified hereby to
the fullest extent permitted by law.
11.2.8 The Corporation may, by action of the Board of
Directors, authorize one or more officers to grant rights to
indemnification and advancement of expenses to employees or
agents of the Corporation on such terms and conditions as such
officer or officers deem appropriate under the circumstances.
IN WITNESS WHEREOF, the undersigned has caused this
Restated Certificate of Incorporation to be executed in its
corporate name by its ____________ this ___ day of ________,
199_.
______________________________________
Name:
Title:
<PAGE>
[DELMARVA POWER & LIGHT COMPANY AND ATLANTIC ENERGY, INC. LOGOS APPEAR HERE]
FOR IMMEDIATE RELEASE
Contact for Delmarva Power: Contact for Atlantic Energy:
Media: Michael Ratchford Media: Neely Crowley
302-429-3410 609-645-4328
Investors: Edric R. Mason Investors: Robert Marshall
302-429-3525 609-645-4655
Joele Frank/Judy Wilkinson
Abernathy MacGregor Group
212-371-5999
ATLANTIC ENERGY, INC. AND DELMARVA POWER & LIGHT COMPANY
ANNOUNCE MERGER VALUED AT $2.2 BILLION
CREATES REGIONAL PLATFORM FOR ACCELERATED GROWTH
Egg Harbor Township, NJ and Wilmington, DE, August 12, 1996 --
Atlantic Energy, Inc. (NYSE:ATE) and Delmarva Power & Light Company
(NYSE:DEW) today announced they have signed a definitive agreement to merge
in a tax-free, stock-for-stock transaction resulting in a new holding
company with an equity value of approximately $2.2 billion based upon the
closing stock prices on Friday, August 9, 1996 of $17.125 per Atlantic
Energy share and $20.625 per Delmarva Power share. This merger of equals,
which will be accounted for as a purchase, is expected to be accretive to
the new company beginning with the first year after completion of the
merger. The transaction, which has been unanimously approved by both
companies' boards of directors, would create a diversified energy company
with over one million customers and more than 5,500 megawatts of electric
generation resources.
Under the terms of the transaction, Atlantic Energy and Delmarva Power
will be merged into a new holding company. Delmarva Power shareholders
will receive one share of the new company's Common Stock for each share of
Delmarva Power they currently hold. Atlantic Energy shareholders will
receive 0.75 shares of the new company's Common Stock and 0.125 shares of
the new company's Class A common stock for each share of Atlantic Energy
common stock they currently hold.
Howard E. Cosgrove, chairman, president, and chief executive officer
of Delmarva Power, said, "By joining forces, we become a stronger company
that is better positioned to thrive in an increasingly competitive energy
industry. Together, we create a larger regional platform from which to
launch new energy-related products and services throughout the Mid-Atlantic
region. Our new combined company will provide more value to our customers
and shareholders than either company could have on a stand-alone basis."
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Jerrold L. Jacobs, chairman and chief executive officer of Atlantic
Energy, said, "This is a natural fit. Electric utilities throughout the
country are preparing for an even more competitive future through operating
and strategic initiatives. By combining, we are proactively confronting
this reality. This merger clearly demonstrates that our new company
intends to be an effective and successful competitor in the future world of
retail competition in which customers will be able to choose their energy
providers based on price, products, and service quality.
"Our combined territory sits in the center of a large market that is
growing bigger all the time," Jacobs continued. "In fact, approximately
one-third of the U.S. population lives within 350 miles of our territory.
The Atlantic City region is promising significant growth led by the
unprecedented expansion of the city's hotel casino industry. Delaware is
enjoying continued growth of its financial services industry. This
economic vitality creates expanded opportunities in the core utility
business and other new product areas. Through our merger, we will unlock
substantial synergies and realize merger savings that will benefit our
shareholders and customers."
"We believe that shareholders win when customers win. We expect the
effect on rates to be favorable for our customers," Cosgrove added. "As
synergies occur and certain costs are reduced, customers will benefit.
Over the long-term we believe that rates will be lower than they would have
been if this strategic combination had not occurred. We intend to maintain
overall base rates for Atlantic Energy and Delmarva Power customers at
least through the close of the merger. Atlantic Energy and Delmarva Power
together will continue our strong traditions of active community
involvement. We have clearly demonstrated our commitment to economic
development and community service in the territories we serve."
Class A common stock
The Class A common stock will reflect the growth prospects and
regulatory environment of Atlantic Energy's regulated electric utility
business. The shares of Class A common stock received by Atlantic Energy
shareholders will represent in aggregate a 30 percent interest in earnings
of Atlantic Energy's regulated electric utility business in excess of $40
million per year. The first $40 million of earnings of Atlantic Energy's
regulated electric utility business and the remaining 70 percent of the
earnings above this amount will be attributable to the holders of Common
Stock of the new holding company, together with all earnings of the
Delmarva Power businesses and the businesses of Atlantic Energy other than
Atlantic Energy's regulated electric utility business.
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Dividend Policy
It is anticipated that the initial annual dividend for the new holding
company's Common Stock would be $1.54 per share, the same annual dividend
both companies currently pay. The new company intends to pay an annual
dividend of $3.20 per share on the Class A common stock ($0.40 per 0.125
share) for the first three years after closing. Accordingly, after the
close of the merger, Delmarva Power shareholders will receive an annual per
share dividend of $1.54 and Atlantic Energy shareholders will receive an
aggregate annual per share dividend payment of $1.555. Subsequent to the
three-year time period, it is the intention of the new company, after
giving consideration to the financial condition, regulatory environment and
the results of operations, to pay annual dividends on the Class A common
stock at a rate equal to 90% of the net income, in excess of $40 million,
attributable to Atlantic Energy's regulated electric utility business.
Jacobs said, "We believe that the transaction will provide Atlantic
Energy shareholders with a modest premium compared to recent trading
levels, greater certainty of an attractive dividend into the future,
enhanced prospects of long-term capital appreciation, and a continuous
direct economic interest in the southern New Jersey electric utility
business."
Merger Related Savings
The companies anticipate savings related to the merger in excess of
$500 million over a ten-year period from the elimination of duplication in
corporate and administrative programs, greater efficiencies in operations
and business processes, increased purchasing efficiencies and the
combination of the two workforces. Employee reductions because of the
merger are expected to be approximately 10 percent of the consolidated
workforce equaling about 400 positions out of a total workforce of
approximately 4,000. Both companies will seek to minimize workforce
effects through a combination of reduced hiring, attrition, and separation
programs. All union contracts will be honored.
Management and Business Unit Structure
The companies intend to manage according to three strategic business
units applying the best practices of each company as appropriate. This
structure will best align the company's organization with the changing
needs of its customers and markets. The strategic business units will
serve the competitive regional market place. They will include:
- Energy Supply Unit which supplies energy to the regulated retail,
competitive wholesale and increasingly competitive unregulated
retail regional market.
- Energy Services Unit which packages and sells unregulated energy-
related premium products and services such as power quality
audits, thermal energy services and energy management consulting.
- Regulated Delivery Unit which provides high value utility delivery
services to customers.
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The new company will be a registered public utility holding company
which will be the parent for both Atlantic Electric and Delmarva Power.
The corporate headquarters of the holding company will be in Wilmington,
Delaware with significant executive presence in Atlantic City, New Jersey.
The board of the new holding company will consist of the current directors
of each company at the time of the merger.
Howard E. Cosgrove, currently chairman, president, and chief executive
officer of Delmarva Power, will become chairman of the board and chief
executive officer of the new company. Jerrold L. Jacobs, currently
chairman and chief executive officer of Atlantic Energy, will retire as an
active Atlantic Energy employee upon the completion of the merger and will
serve the new company as vice-chairman of the board. Michael J. Chesser,
currently president and chief operating officer of Atlantic Energy, will
become president and chief operating officer of the new company.
Approvals and Timing
The merger is conditioned, among other things, upon the approvals of
each company's shareholders and the necessary approvals of various
regulatory agencies, principally Delaware, New Jersey, and Virginia public
utility commissions, the Federal Energy Regulatory Commission (FERC), the
Nuclear Regulatory Commission (NRC) and the Securities and Exchange
Commission (SEC). The companies are hopeful that regulatory approvals can
be obtained in 12 to 18 months.
Morgan Stanley & Co. Incorporated is serving as financial advisor and
provided a fairness opinion to Atlantic Energy. Merrill Lynch & Co. is
serving as financial advisor and provided a fairness opinion to Delmarva
Power.
Atlantic Energy, Inc., headquartered in Egg Harbor Township, New
Jersey, is an investor-owned holding company for Atlantic Electric and
several non-regulated affiliates. Atlantic Electric, a regulated electric
utility, is Atlantic Energy's primary subsidiary and makes up 94% of the
Company's total assets. Atlantic Electric serves over 473,000 customers in
a 2,700 square mile area in southern New Jersey. Together the Atlantic
Energy companies provide a wide variety of energy-related products and
services including home energy management, commercial utility services,
energy system design and construction, fuel management services, thermal
energy services, bulk power marketing, and other energy services.
Delmarva Power & Light Company is an investor-owned utility providing
service to 436,000 electric customers and 98,000 gas customers in Delaware
and on the Eastern Shore of Maryland and Virginia. Headquartered in
Wilmington, Delaware, Delmarva Power's 6,000 square mile diverse service
territory includes urban areas, agricultural areas in the central and
southern parts of the Delmarva Peninsula, the beaches of Delaware and
Maryland as well as the Chesapeake Bay. During the past five years the
Company has experienced steady annual growth in electric and natural gas
sales. Delmarva Power's rates are among the lowest in the region while its
customer favorability ratings are among the highest in the country.
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The press release includes forward looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements reflect numerous assumptions, and involve a
number of risks and uncertainties. Among the factors that could cause
actual results to differ materially are: electric load and customer growth;
abnormal weather conditions; available sources and cost of fuel and
generating capacity; the speed and degree to which competition enters the
power generation, wholesale and retail sectors of the electric utility
industry; state and federal regulatory initiatives that increase
competition, threaten cost and investment recovery, and impact rate
structures; the ability of the combined company to successfully reduce its
cost structure; operating performance of nuclear generating facilities,
decommissioning costs associated with such facilities and impact on future
operational and financial condition associated with the uncertain status of
the Salem Nuclear Station; the degree to which the combined company
develops non-regulated business ventures; the economic climate and growth
in the service territories of the two companies; economies generated by the
merger; inflationary trends and interest rates and the other risks detailed
from time to time in the two companies' SEC reports.
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