SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 22, 1999
Connecticut Energy Corporation
(Exact Name of Registrant as Specified in Charter)
Connecticut 1-8369 06-0869582
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
855 Main Street, Bridgeport, Connecticut 06604
(Address of Principal Executive Offices (Zip Code)
Registrant's telephone number, including area code (800) 760-7776
None
(Former Name or Former Address, if Changed Since Last Report)
Connecticut Energy Corporation ("Connecticut Energy" or "Company") and its
subsidiaries and their representatives may, from time to time, make written
or oral statements, including statements contained in the Company's filings
with the Securities and Exchange Commission and in its annual report to
shareholders, including its Form 10-K for the fiscal year ended September 30,
1998, which constitute or contain "forward-looking" information as that term
is defined in the Private Securities Litigation Reform Act of 1995.
All statements other than the financial statements and other statements of
historical facts included in this Form 8-K regarding the Company's financial
position and strategic initiatives and addressing industry developments are
forward-looking statements. Where, in any forward-looking statement, the
Company, or its management, expresses an expectation or belief as to future
results, such expectation or belief is expressed in good faith and believed
to have a reasonable basis, but there can be no assurance that the statement
of expectation or belief will result or be achieved or accomplished. Factors
which could cause actual results to differ materially from those stated in the
forward-looking statements may include, but are not limited to, general and
specific economic, financial and business conditions; federal and state
regulatory, legislative and judicial developments which affect the Company or
significant groups of its customers; the impact of competition on the Company's
revenues; fluctuations in weather from normal levels; changes in development
and operating costs; the availability and cost of natural gas; the availability
and terms of capital; exposure to environmental liabilities; the costs and
effects of unanticipated legal proceedings; the successful implementation and
achievement of internal performance goals; the impact of unusual items
resulting from ongoing evaluations of business strategies and asset
valuations; and changes in business strategy.
Item 5. Other Events
A. On April 23, 1999, Connecticut Energy Corporation issued the following
press release:
ENERGY EAST CORPORATION AND CONNECTICUT ENERGY CORPORATION AGREE TO
MERGE
Merger Promotes Increased Competition in the Northeast
FOR IMMEDIATE RELEASE
Albany, NY, and Bridgeport, CT, April 23, 1999 -- The board of
directors of Energy East Corporation [NYSE: NEG] and Connecticut Energy
Corporation (CNE) [NYSE: CNE] today announced that the companies have signed a
definitive merger agreement under which CNE will become a wholly-owned
subsidiary of Energy East. The transaction, which is valued at $617 million,
including the assumption of debt, will add 160,000 natural gas customers in
southern Connecticut to Energy East's existing base of over one million
customers.
Shareholders of CNE will receive $42 per share, 50% payable in stock
and 50% in cash. Shareholders will be able to specify the percentage of the
consideration they wish to receive in stock and in cash, subject to proration.
CNE shareholders who elect to receive stock will receive between 1.82 and 1.43
shares of Energy East stock for each share of CNE stock, depending on the
average price of Energy East's stock during a 20-day period prior to closing.
This equates to a collar of between $23.10 and $29.40 for Energy East shares.
Based upon Energy East's closing price of $26.25 on April 22, 1999, the CNE
shareholder would receive 1.60 Energy East shares for each CNE share. The
transaction is expected to be tax-free to CNE shareholders to the extent they
receive common stock of Energy East. The combination will be accounted for using
the purchase method of accounting and is expected to be accretive in the first
full year following closing.
Under the agreement, one director of the CNE board will be elected to
the Energy East board. The corporate headquarters for CNE will remain in
Bridgeport and its major subsidiary, The Southern Connecticut Gas Company, would
remain as the operating utility.
Wes von Schack, chairman, president and chief executive officer of
Energy East said, "We are excited to be combining forces with the people of CNE.
Our combined focus on service excellence in the distribution of electricity and
natural gas will enhance competition in the Northeast."
"I am enthusiastic and thrilled by the opportunities this merger
presents for our employees, customers and shareholders," said J.R. Crespo,
chairman, president and chief executive officer of CNE and The Southern
Connecticut Gas Company. "We will bring a strong, dynamic company into the state
and the region. Such size and stature are necessary for success in the new
competitive energy environment."
Crespo will remain as chairman, president and chief executive officer
of CNE and The Southern Connecticut Gas Company, and he will also serve in the
same capacity with respect to Energy East Enterprises and XENERGY Enterprises,
Energy East affiliates. "Joe's experience and knowledge will be critical to our
success in meeting the challenges of competition," von Schack said.
The merger is conditioned on, among other things, the approval of CNE
shareholders and various regulatory agencies, including the Connecticut
Department of Public Utility and the Securities and Exchange Commission. The
companies anticipate that these approvals can be obtained within 12 months.
Morgan Stanley Dean Witter acted as financial advisor to CNE. Chase
Securities, Inc. acted as financial advisor to Energy East. LeBeouf, Lamb,
Greene & MacRae, LLP acted as counsel to CNE, and Wachtell, Lipton, Rosen & Katz
acted as counsel to Energy East.
Energy East is an energy delivery, products and services company doing
business in New York, Massachusetts, Maine and New Hampshire. Its largest
subsidiary, New York State Electric & Gas Corporation (NYSEG) supplies, markets
and delivers electricity and natural gas to over one million customers across
more than 40% of upstate New York.
Connecticut Energy Corporation, through its wholly-owned subsidiary,
The Southern Connecticut Gas Company, delivers natural gas to 160,000 customers
in 22 communities in southern Connecticut, including the cities of Bridgeport
and New Haven.
This press release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. The
forward-looking statements are subject to various risks and uncertainties.
Discussion of factors that could cause actual results to differ materially from
management's projections, forecasts, estimates and expectations may include
factors that are beyond the company's ability to control or estimate precisely,
such as estimates of future market conditions, the ability to realize cost
savings and the terms associated with obtaining regulatory approvals. Other
factors include, but are not limited to, weather conditions, economic conditions
in the company's service territory, fluctuations in energy-related commodity
prices, marketing efforts and other uncertainties. Other risk factors are
detailed from time to time in the two companies' SEC reports.
B. On April 23, 1999, Connecticut Energy Corporation entered into an
Agreement and Plan of Merger with Energy East Corporation, a New York
corporation, and Merger Co., a Connecticut corporation and a wholly owned
subsidiary of Energy East Corporation. This Agreement and Plan of Merger
is attached as Exhibit I.
C. On April 22, 1999, Connecticut Energy Corporation and BankBoston, N.A.,
as Rights Agent, executed the First Amendment to the Rights Agreement, dated
as of July 28, 1998. This Amendment is attached as Exhibit II.
SIGNATURES
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.
CONNECTICUT ENERGY CORPORATION
(Registrant)
Date: April 28, 1999 By: /s/ Samuel W. Bowlby
Samuel W. Bowlby
Vice President, General Counsel and
Secretary
EXHIBIT I
AGREEMENT AND PLAN OF MERGER
by and among
CONNECTICUT ENERGY CORPORATION,
ENERGY EAST CORPORATION
and
MERGER CO.,
dated as of April 23, 1999
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TABLE OF CONTENTS
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Page
ARTICLE I
THE MERGER
Section 1.1 The Merger............................................................................ 1
Section 1.2 Effects of the Merger................................................................. 1
Section 1.3 Effective Time of the Merger.......................................................... 2
Section 1.4 Directors............................................................................. 2
Section 1.5 Officers.............................................................................. 2
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock................................................. 2
Section 2.2 Exchange of Certificates.............................................................. 6
ARTICLE III
THE CLOSING
Section 3.1 Closing............................................................................... 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification........................................................ 9
Section 4.2 Subsidiaries.......................................................................... 9
Section 4.3 Capitalization........................................................................ 10
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance......................... 10
Section 4.5 Reports and Financial Statements...................................................... 12
Section 4.6 Absence of Certain Changes or Events.................................................. 13
Section 4.7 Litigation............................................................................ 13
Section 4.8 Registration Statement and Proxy Statement............................................ 13
Section 4.9 Tax Matters........................................................................... 13
Section 4.10 Employee Matters; ERISA............................................................... 15
Section 4.11 Environmental Protection.............................................................. 19
Section 4.12 Regulation as a Utility............................................................... 21
Section 4.13 Vote Required......................................................................... 21
Section 4.14 Opinion of Financial Advisor.......................................................... 21
Section 4.15 Ownership of Parent Common Stock...................................................... 21
Section 4.16 Takeover Laws; Rights Plans........................................................... 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.1 Organization and Qualification........................................................ 22
Section 5.2 Subsidiaries.......................................................................... 22
Section 5.3 Capitalization........................................................................ 23
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance......................... 23
Section 5.5 Reports and Financial Statements...................................................... 24
Section 5.6 Absence of Certain Changes or Events.................................................. 25
Section 5.7 Litigation............................................................................ 25
Section 5.8 Registration Statement and Proxy Statement............................................ 25
Section 5.9 Regulation as a Utility............................................................... 26
Section 5.10 Ownership of the Company Common Stock................................................. 26
Section 5.11 Environmental Protection.............................................................. 26
Section 5.12 Operations of Nuclear Power Plant..................................................... 26
Section 5.13 Code Section 368(a)................................................................... 27
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Parties.............................................................. 27
Section 6.2 Covenant of the Company; Alternative Proposals........................................ 31
Section 6.3 Covenant of Parent; Employment Agreements............................................. 32
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information................................................................. 32
Section 7.2 Proxy Statement and Registration Statement............................................ 33
Section 7.3 Regulatory Matters.................................................................... 33
Section 7.4 Shareholder Approval.................................................................. 34
Section 7.5 Directors'and Officers'Indemnification................................................ 34
Section 7.6 Disclosure Schedules.................................................................. 35
Section 7.7 Public Announcements.................................................................. 36
Section 7.8 Rule 145 Affiliates................................................................... 36
Section 7.9 Certain Employee Agreements........................................................... 36
Section 7.10 Employee Benefit Plans................................................................ 37
Section 7.11 Company Stock Plans................................................................... 37
Section 7.12 Expenses.............................................................................. 38
Section 7.13 Further Assurances.................................................................... 38
Section 7.14 Corporate Offices..................................................................... 38
Section 7.15 Community Involvement................................................................. 38
Section 7.16 Advisory Board........................................................................ 38
Section 7.17 Tax-Free Status....................................................................... 39
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger............................ 39
Section 8.2 Conditions to Obligation of Parent to Effect the Merger............................... 40
Section 8.3 Conditions to Obligation of the Company to Effect the Merger.......................... 41
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination........................................................................... 42
Section 9.2 Effect of Termination................................................................. 43
Section 9.3 Termination Fee; Expenses............................................................. 44
Section 9.4 Amendment............................................................................. 44
Section 9.5 Waiver................................................................................ 45
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties................................ 45
Section 10.2 Brokers............................................................................... 45
Section 10.3 Notices............................................................................... 45
Section 10.4 Miscellaneous......................................................................... 46
Section 10.5 Interpretation........................................................................ 47
Section 10.6 Counterparts; Effect.................................................................. 47
Section 10.7 Parties in Interest................................................................... 47
Section 10.8 Waiver of Jury Trial and Certain Damages.............................................. 47
Section 10.9 Enforcement........................................................................... 47
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AGREEMENT AND PLAN OF MERGER, dated as of April 23, 1999 (this
"Agreement"), by and among Connecticut Energy Corporation, a Connecticut
corporation (the "Company"), Energy East Corporation, a New York corporation
("Parent"), and Merger Co., a Connecticut corporation and a wholly owned
subsidiary of Parent ("Merger Sub").
WHEREAS, the Company and Parent have determined to engage in a
business combination transaction on the terms stated herein;
WHEREAS, the Boards of Directors of the Company and Parent
have approved and deemed it advisable and in the best interests of their
respective shareholders to consummate the transactions contemplated herein under
which the businesses of the Company and Parent would be combined by means of the
merger of the Company with and into Merger Sub; and
WHEREAS, it is intended that the Merger (as defined below)
shall constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement:
At the Effective Time (as defined in Section 1.3), the Company
shall be merged with and into Merger Sub (the "Merger") in accordance with the
laws of the State of Connecticut. Merger Sub shall be the surviving corporation
in the Merger and shall continue its corporate existence under the laws of the
State of Connecticut. The effects and the consequences of the Merger shall be as
set forth in Section 1.2. Throughout this Agreement, the term "Merger Sub" shall
refer to Merger Sub prior to the Merger and the term "Surviving Corporation"
shall refer to Merger Sub in its capacity as the surviving corporation in the
Merger.
Section 1.2 Effects of the Merger. At the Effective Time, (i) the
certificate of incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such certificate of
incorporation, except that the name of the Surviving Corporation shall be
"Connecticut Energy Corporation," and (ii) the by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the by-laws of the
Surviving Corporation until thereafter amended as provided by law, the
certificate of incorporation of the Surviving Corporation and such by-laws.
Subject to the foregoing, the additional effects of the Merger shall be as
provided in Section 33-820 of the Connecticut Business Corporation Act (the
"CBCA").
Section 1.3 Effective Time of the Merger. On the Closing Date (as defined
in Section 3.1), with respect to the Merger, a certificate of merger complying
with Section 33-819 of the CBCA (the "Certificate of Merger") shall be delivered
to the Secretary of the State of Connecticut for filing. The Merger shall become
effective upon the filing of the Certificate of Merger, or at such later date
and time as may be set forth in the Certificate of Merger (the "Effective
Time").
Section 1.4 Directors. The directors of Merger Sub immediately prior to
the Effective Time and Mr. Joseph R. Crespo shall be the directors of the
Surviving Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the certificate of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the CBCA. In addition, in accordance
with the by-laws of Parent, the Board of Directors of Parent shall increase by
one the number of directors on the Board of Directors of Parent and shall
thereupon elect as a director a director of the Company designated by the
Company and reasonably acceptable to Parent (which director shall not be an
employee of the Surviving Corporation).
Section 1.5 Officers. Commencing at the Effective Time, and continuing
until his successor is duly elected or appointed and qualified in the manner
provided in the by-laws of the Surviving Corporation, Mr. Crespo shall be the
President, Chief Executive Officer and Chairman of the Board of Directors of the
Surviving Corporation and shall hold officer positions in other subsidiary
corporations of Parent as specified in his Employment Agreement (as defined in
Section 6.3 hereof). Except for the President, Chief Executive Officer and
Chairman of the Board of Directors of Merger Sub, the officers of Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the certificate of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the CBCA.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of any
capital stock of the Company or Merger Sub:
(a) Shares of Merger Sub Stock. Each share of common stock, par value $1.00 per
share, of Merger Sub (the "Merger Sub Common Stock") that is issued and
outstanding immediately prior to the Effective Time shall remain outstanding
unchanged by reason of the Merger as one fully paid and nonassessable share of
common stock, par value $1.00 per share, of the Surviving Corporation.
(b) Cancellation of Certain Company Common Stock. Each share of common stock,
par value $1.00 per share, of the Company, including each attached right (a
"Company Right") issued pursuant to the Rights Agreement, dated July 28, 1998
(the "Company Rights Agreement"), between the Company and BankBoston, N.A. (the
"Company Common Stock"), that is owned by the Company as treasury stock and all
shares of Company Common Stock that are owned by Parent shall be canceled and
shall cease to exist, and no stock of Parent or other consideration shall be
delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to the provisions of this
Section 2.1, each share of Company Common Stock, other than Dissenting Shares
(as defined in Section 2.1(n)) and shares canceled pursuant to Section 2.1(b),
issued and outstanding immediately prior to the Effective Time (other than
shares held as treasury shares by the Company) shall by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive (i) $42 in cash (the "Cash Consideration") or (ii) a number of
validly issued, fully paid and nonassessable shares of Parent Common Stock equal
to the Exchange Ratio (as defined below) (the "Stock Consideration") or (iii)
the right to receive a combination of cash and shares of Parent Common Stock
determined in accordance with this Section (the "Mixed Consideration"). The
"Exchange Ratio" shall be equal to the Cash Consideration divided by either (i)
the Parent Share Price (as defined below) if the Parent Share Price is equal to
or less than $29.40 and equal to or more than $23.10, (ii) $29.40 if the Parent
Share Price is greater than $29.40, in which case the Exchange Ratio shall equal
1.43, or (iii) $23.10 if the Parent Share Price is less than $23.10, in which
case the Exchange Ratio shall equal 1.82. The "Parent Share Price" shall be
equal to the average of the closing prices of the shares of Parent Common Stock
on the New York Stock Exchange ("NYSE") Composite Transactions Reporting System,
as reported in The Wall Street Journal, for the 20 trading days immediately
preceding the second trading day prior to the Effective Time.
(d) Cash Election. Subject to the immediately following sentence, each record
holder of shares of Company Common Stock immediately prior to the Effective Time
shall be entitled to elect to receive cash for all or any part of such holder's
shares of Company Common Stock (a "Cash Election"). Notwithstanding the
foregoing and subject to Section 2.1(l), the aggregate number of shares of
Company Common Stock that may be converted into the right to receive cash in the
Merger (the "Cash Election Number") will be 50% of the total number of shares of
Company Common Stock issued and outstanding as of the close of business on the
third trading day prior to the Effective Time. Cash Elections shall be made on a
form designed for that purpose (a "Form of Election"). A holder of record of
shares of Company Common Stock who holds such shares as nominee, trustee or in
another representative capacity (a "Representative") may submit multiple Forms
of Election, provided that such Representative certifies that each such Form of
Election covers all the shares of Company Common Stock held by such
Representative for a particular beneficial owner.
(e) Cash Election Shares. If the aggregate number of shares of Company Common
Stock covered by Cash Elections (the "Cash Election Shares") exceeds the Cash
Election Number, each Cash Election Share shall be converted into (i) the right
to receive an amount in cash, without interest, equal to the product of (a) the
Cash Consideration and (b) a fraction (the "Cash Fraction"), the numerator of
which shall be the Cash Election Number and the denominator of which shall be
the total number of Cash Election Shares, and (ii) a number of shares of Parent
Common Stock equal to the product of (a) the Exchange Ratio and (b) a fraction
equal to one minus the Cash Fraction.
(f) Stock Election. Subject to the immediately following sentence, each record
holder of shares of Company Common Stock immediately prior to the Effective Time
shall be entitled to elect to receive shares of Parent Common Stock for all or
any part of such holder's shares of Company Common Stock (a "Stock Election").
Notwithstanding the foregoing and subject to Section 2.1(l), the aggregate
number of shares of Company Common Stock that may be converted into the right to
receive shares of Parent Common Stock in the Merger (the "Stock Election
Number") shall be 50% of the total number of shares of Company Common Stock
issued and outstanding as of the close of business on the third trading day
prior to the Effective Time. Stock Elections shall be made on a Form of
Election. A Representative may submit multiple Forms of Election, provided that
such Representative certifies that each such Form of Election covers all the
shares of Company Common Stock held by such Representative for a particular
beneficial owner.
(g) Stock Election Shares. If the aggregate number of shares of Company Common
Stock covered by Stock Elections (the "Stock Election Shares") exceeds the Stock
Election Number, each Stock Election Share shall be converted into (i) the right
to receive a number of shares of Parent Common Stock, equal to the product of
(a) the Exchange Ratio and (b) a fraction (the "Stock Fraction"), the numerator
of which shall be the Stock Election Number and the denominator of which shall
be the total number of Stock Election Shares, and (ii) an amount in cash,
without interest, equal to the product of (a) the Cash Consideration and (b) a
fraction equal to one minus the Stock Fraction.
(h) Mixed Election. Subject to the immediately following sentence, each record
holder of shares of Company Common Stock immediately prior to the Effective Time
shall be entitled to elect to receive shares of Parent Common Stock for part of
such holder's shares of Company Common Stock and cash for the remaining part of
such holder's shares of Company Common Stock (the "Mixed Election" and,
collectively with Stock Election and Cash Election, the "Election"). Mixed
Elections shall be made on a Form of Election. A Representative may submit
multiple Forms of Election, provided that such Representative certifies that
each such Form of Election covers all the shares of Company Common Stock held by
such Representative for a particular beneficial owner. With respect to each
holder of Company Common Stock who makes a Mixed Election, the shares of Company
Common Stock such holder elects to be converted into the right to receive Cash
Consideration shall be treated as Cash Election Shares for purposes of the
provisions contained in Sections 2.1(d), (e) and (l), and the shares such holder
elects to be converted into the right to receive shares of Parent Common Stock
shall be treated as Stock Election Shares for purposes of the provisions
contained in Sections 2.1(f), (g) and (l).
(i) Form of Election. To be effective, a Form of Election must be properly
completed, signed and submitted to Parent's transfer agent and registrar, as
paying agent (the "Paying Agent"), and accompanied by the certificates
representing the shares of Company Common Stock ("Company Certificates") as to
which the election is being made (or by an appropriate guarantee of delivery of
such Company Certificate signed by a firm that is a member of any registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program). Parent
shall have the discretion, which it may delegate in whole or in part to the
Paying Agent, to determine whether Forms of Election have been properly
completed, signed and submitted or revoked and to disregard immaterial defects
in Forms of Election. The decision of Parent (or the Paying Agent) in such
matters shall be conclusive and binding. Neither Parent nor the Paying Agent
shall be under any obligation to notify any person of any defect in a Form of
Election submitted to the Paying Agent. The Paying Agent shall also make all
computations contemplated by this Section 2.1, and all such computations shall
be conclusive and binding on the holders of shares of Company Common Stock.
(j) Deemed Non-Election. For the purposes hereof, a holder of shares of Company
Common Stock who does not submit a Form of Election that is received by the
Paying Agent prior to the Election Deadline (as defined in Section 2.1(k)) (the
"No Election Shares") shall be deemed not to have made a Cash Election, Stock
Election or Mixed Election. If Parent or the Paying Agent shall determine that
any purported Election was not properly made, the shares subject to such
improperly made Election shall be treated as No Election Shares. No Election
Shares may be treated by the Company as Cash Election Shares or Stock Election
Shares.
(k) Election Deadline. Parent and the Company shall each use its best efforts to
cause copies of the Form of Election to be mailed to the record holders of the
Company Shares not less than thirty days prior to the Effective Time and to make
the Form of Election available to all persons who become record holders of
Company Shares subsequent to the date of such mailing and no later than the
close of business on the seventh business day prior to the Effective Time. A
Form of Election must be received by the Paying Agent by 5:00 p.m., New York
City time, on the second day after the Effective Time (the "Election Deadline")
in order to be effective. All elections may be revoked until the Election
Deadline in writing by the record holders submitting Forms of Election.
(l) Adjustment Per Tax Opinion. Notwithstanding anything in this Article II to
the contrary (other than the last sentence of Section 2.1(m)), the number of
shares of Company Common Stock to be converted into the right to receive the
Stock Consideration in the Merger shall be not less than that number which would
cause the ratio of (i) the closing price per share of Parent Common Stock on the
Closing Date times the aggregate number of shares of Parent Common Stock to be
issued as Stock Consideration pursuant to Section 2.1(c), to (ii) the sum of (v)
the amount set forth in the preceding clause (i) plus (w) the aggregate Cash
Consideration to be issued pursuant to Section 2.1(c) plus (x) the number of
Dissenting Shares times the per share Cash Consideration plus (y) any other
amounts paid by the Company (or any affiliate thereof) to, or on behalf of, any
Company shareholder in connection with the sale, redemption or other disposition
of any Company stock in connection with the Merger for purposes of Treasury
Regulation Sections 1.368-1(e) and 1.368-1T(e) plus (z) any extraordinary
dividend distributed by the Company prior to and in connection with the Merger
for purposes of Treasury Regulation Sections 1.368-1(e) and 1.368-1T(e), to be
45%. To the extent the application of this Section 2.1(l) results in the number
of shares of Company Common Stock to be converted into the right to receive the
Stock Consideration in the Merger being increased, the number of such shares to
be converted into the right to receive the Cash Consideration will be decreased.
(m) Anti-Dilution Provisions. In the event Parent (i) changes (or establishes a
record date for changing) the number of shares of Parent Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, stock combination, recapitalization, reclassification, reorganization
or similar transaction with respect to the outstanding Parent Common Stock or
(ii) pays or makes an extraordinary dividend or distribution in respect of
Parent Common Stock (other than a distribution referred to in clause (i) of this
sentence) and, in either case, the record date therefor shall be prior to the
Effective Time, the Merger Consideration (as defined in Section 2.2(b)) shall be
proportionately adjusted. Regular quarterly cash dividends and increases thereon
shall not be considered extraordinary for purposes of the preceding sentence.
If, between the date hereof and the Effective Time, Parent shall merge or
consolidate with or into any other corporation (a "Business Combination") and
the terms thereof shall provide that Parent Common Stock shall be converted into
or exchanged for the shares of any other corporation or entity, then provision
shall be made so that shareholders of the Company who would be entitled to
receive shares of Parent Common Stock pursuant to this Agreement shall be
entitled to receive, in lieu of each share of Parent Common Stock issuable to
such shareholders as provided herein, the same kind and amount of securities or
assets as shall be distributable upon such Business Combination with respect to
one share of Parent Common Stock and the parties hereto shall agree on an
appropriate restructuring of the transactions contemplated herein.
(n) Dissenting Shares. Each outstanding share of Company Common Stock the holder
of which has perfected his right to dissent under applicable law and has not
effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consideration, and the holder thereof shall be entitled only to such
rights as are granted by applicable law; provided, however, that any Dissenting
Share held by a person at the Effective Time who shall, after the Effective
Time, withdraw the demand for payment for shares or lose the right to payment
for shares, in either case pursuant to the Business Corporation Law of the State
of Connecticut, shall be deemed to be converted into, as of the Effective Time,
the right to receive cash pursuant to Section 2.1(c) in the same manner as if
such shares were Cash Election Shares. The Company shall give Parent prompt
notice upon receipt by the Company of any such written demands for payment of
the fair value of such shares of Company Common Stock and of withdrawals of such
notice and any other instruments provided pursuant to applicable law. Any
payments made in respect of Dissenting Shares shall be made by the Surviving
Corporation.
Section 2.2 Exchange of Certificates. (a) Deposit with Exchange Agent. As
soon as practicable after the Effective Time, the Surviving Corporation shall
deposit with a bank or trust company mutually agreeable to Parent and the
Company (the "Exchange Agent"), pursuant to an agreement in form and substance
reasonably acceptable to Parent and the Company an amount of cash and
certificates representing shares of Parent Common Stock required to effect the
conversion of Company Common Stock into Parent Common Stock and cash in
accordance with Section 2.1(c).
(b) Exchange and Payment Procedures. As soon as practicable after the Effective
Time, Parent shall cause the Paying Agent to mail to each holder of record as of
the Effective Time of a Certificate or Certificates that have been converted
pursuant to Section 2.1: (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon actual delivery of the Certificates to the Paying Agent) and
(ii) instructions for effecting the surrender of the Certificates and receiving
the Merger Consideration (as defined below) to which such holder shall be
entitled therefor pursuant to Section 2.1. Upon surrender of a Certificate to
the Paying Agent for cancellation, together with a duly executed letter of
transmittal and such other documents as the Paying Agent may require, the holder
of such Certificate shall be entitled to receive in exchange therefor (i) a
certificate representing that number of shares of Parent Common Stock (the
"Parent Shares") into which the shares of Company Common Stock previously
represented by such Certificate are converted in accordance with Section 2.1(c),
(ii) the cash to which such holder is entitled in accordance with Section
2.1(c), and (iii) the cash in lieu of fractional Parent Shares to which such
holder has the right to receive pursuant to Section 2.2(d) (the shares of Parent
Common Stock and cash described in clauses (i), (ii) and (iii) above being
referred to collectively as the "Merger Consideration"). In the event the Merger
Consideration is to be delivered to any person who is not the person in whose
name the Certificate surrendered in exchange therefor is registered in the
transfer records of Company, the Merger Consideration may be delivered to a
transferee if the Certificate is presented to the Paying Agent, accompanied by
all documents required to evidence and effect such transfer and by evidence
satisfactory to the Paying Agent that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 2.2, each
Certificate (other than a certificate representing shares of Company Common
Stock to be canceled in accordance with Section 2.1(b)) shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration contemplated by this Section 2.2. No interest
will be paid or will accrue on any cash payable to holders of Certificates
pursuant to provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Shares with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the Parent Shares represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(d) until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of unclaimed
property, escheat and other applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole Parent Shares issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2(d) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole Parent Shares and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole Parent Shares.
(d) No Fractional Securities. In lieu of any such fractional securities, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article II will be paid an amount in cash (without
interest) equal to such holder's proportionate interest in the net proceeds from
the sale or sales in the open market by the Exchange Agent, on behalf of all
such holders, of the aggregate fractional shares of Parent Common Stock issued
pursuant to this Article II. As soon as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (i) the number of full
shares of Parent Common Stock delivered to the Exchange Agent by Parent over
(ii) the aggregate number of full shares of Parent Common Stock to be
distributed to holders of Company Common Stock (such excess being herein called
the "Excess Parent Common Shares"). The Exchange Agent, as agent for the former
holders of Company Common Stock, shall sell the Excess Parent Common Shares at
the prevailing prices on the New York Stock Exchange (the "NYSE"). The sales of
the Excess Parent Common Shares by the Exchange Agent shall be executed on the
NYSE through one or more member firms of the NYSE and shall be executed in round
lots to the extent practicable. Parent shall pay all commissions, transfer taxes
and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale of
Excess Parent Common Shares. Until the net proceeds of such sale have been
distributed to the former holders of Company Common Stock, the Exchange Agent
will hold such proceeds in trust for such former holders. As soon as practicable
after the determination of the amount of cash to be paid to former holders of
Company Common Stock in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such amounts to such
former holders.
(e) Closing of Transfer Books. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing the appropriate number of Parent Shares and the
appropriate amount of cash as provided in Section 2.1 and in this Section 2.2.
(f) Termination of Exchange Agent. Any certificates representing Parent Shares
deposited with the Exchange Agent pursuant to Section 2.2(a) and not exchanged
within six months after the Effective Time pursuant to this Section 2.2 shall be
returned by the Exchange Agent to Parent, which shall thereafter act as Exchange
Agent. All funds held by the Exchange Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of one year from the
Effective Time shall be returned to the Surviving Corporation, after which time
any holder of unsurrendered Certificates shall look as a general creditor only
to Parent for payment of such funds to which such holder may be due, subject to
applicable law.
(g) Escheat. The Company shall not be liable to any person for such 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 of the Merger (the "Closing") shall take
place at the offices of Wachtell, Lipton, Rosen & Katz, at 10:00 a.m., New York
City time, on the second business day immediately following the date on which
the last of the conditions set forth in Article VIII hereof is fulfilled or
waived (other than conditions that by their nature are required to be performed
on the Closing Date, but subject to satisfaction of such conditions), or at such
other time and date and place as the Company and Parent shall mutually agree
(the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
Section 4.1 Organization and Qualification. Except as set forth in Section
4.1 of the Company Disclosure Schedule (as defined in Section 7.6(ii)), the
Company and each of its subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a material adverse
effect on the business, properties, financial condition or results of operations
of the Company and its subsidiaries taken as a whole or on the consummation of
this Agreement (any such material adverse effect being hereafter referred to as
a "Company Material Adverse Effect"). As used in this Agreement, the term
"subsidiary" of a person shall mean any corporation or other entity (including
partnerships and other business associations) of which a majority of the
outstanding capital stock or other voting securities having voting power under
ordinary circumstances to elect directors or similar members of the governing
body of such corporation or entity shall at the time be held, directly or
indirectly, by such person.
Section 4.2 Subsidiaries. Section 4.2 of the Company Disclosure Schedule
sets forth a description as of the date hereof, of all material and certain
other subsidiaries and joint ventures of the Company, including the name of each
such entity, the state or jurisdiction of its incorporation or organization, the
Company's interest therein and a brief description of the principal line or
lines of business conducted by each such entity. Except as set forth in Section
4.2 of the Company Disclosure Schedule, none of the Company's subsidiaries 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) or 2(a)(11) of the Public Utility Holding Company Act of 1935,
as amended (the "1935 Act"). Except as set forth in Section 4.2 of the Company
Disclosure Schedule, all of the issued and outstanding shares of capital stock
owned by the Company of each Company subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by the Company free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever, and
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies 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, except for any of the foregoing
that could not reasonably be expected to have a Company Material Adverse Effect.
As used in this Agreement, the term "joint venture" of a person shall mean any
corporation or other entity (including partnerships and other business
associations) that is not a subsidiary of such person, in which such person or
one or more of its subsidiaries owns an equity interest, other than equity
interests held for passive investment purposes which are less than 10% of any
class of the outstanding voting securities or equity of any such entity.
Section 4.3 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, par value $1.00 per share, of the Company ("Company Preferred
Stock"). As of the close of business on March 31, 1999, there were issued and
outstanding 10,373,528 shares of Company Common Stock and no shares of Company
Preferred Stock. All of the issued and outstanding shares of the capital stock
of the Company are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 4.3 of the Company Disclosure
Schedule, as of the date hereof, and except for the Company Rights Agreement,
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 the
Company or any of the subsidiaries of the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
the Company, or obligating the Company to grant, extend or enter into any such
agreement or commitment.
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to obtaining the Company Shareholders'
Approval (as defined in Section 4.13) and the Company Required Statutory
Approvals (as defined in Section 4.4(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company
subject to obtaining the applicable Company Shareholders' Approval. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by the other signatories
hereto, constitutes the valid and binding obligations of the Company enforceable
against it in accordance with their terms.
(b) Non-Contravention. Except as set forth in Section 4.4(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
do not, and the consummation of the transactions contemplated hereby will not,
violate, conflict with, or result in a breach of any provision of, or constitute
a default (with or without notice or lapse of time or both) under, or result in
the termination or modification of, or accelerate the performance required by,
or result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a benefit under, or result in the creation of any
lien, security interest, charge or encumbrance ("Liens") upon any of the
properties or assets of the Company or any of its subsidiaries or any of its
joint ventures (any such violation, conflict, breach, default, right of
termination, modification, cancellation or acceleration, loss or creation, a
"Violation" with respect to the Company (such term when used in Article V having
a correlative meaning with respect to Parent) pursuant to any provisions of (i)
the articles of organization, by-laws or similar governing documents of the
Company, any of its subsidiaries or any of its joint ventures, (ii) subject to
obtaining the Company Required Statutory Approvals and the receipt of the
Company Shareholders' Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any Governmental
Authority (as defined in Section 4.4(c)) applicable to the Company, any of its
subsidiaries or any of its joint ventures, or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 4.4(b) of the Company Disclosure Schedule (the
"Company Required Consents") any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which the Company, any of its
subsidiaries or any of its joint ventures is a party or by which it or any of
its properties or assets may be bound or affected, excluding from the foregoing
clauses (i), (ii) and (iii) such Violations as would not have, in the aggregate,
a Company Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 4.4(c) of the Company
Disclosure Schedule, no declaration, filing or registration with, or notice to
or authorization, consent or approval of, any court, federal, state, local or
foreign governmental or regulatory body (including a stock exchange or other
self-regulatory body) or authority (each, a "Governmental Authority") is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, the failure
to obtain, make or give which would have, in the aggregate, a Company Material
Adverse Effect (the "Company Required Statutory Approvals"), it being understood
that references in this Agreement to "obtaining" such Company Required Statutory
Approvals shall mean making such declarations, filings or registrations, giving
such notices, obtaining such authorizations, consents or approvals and having
such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.4(d) or Section 4.11 of the
Company Disclosure Schedule, or as disclosed in the Company SEC Reports (as
defined in Section 4.5) filed prior to the date hereof, neither the Company, nor
any of its subsidiaries nor any of its joint ventures is in violation of, is
under investigation with respect to any violation of, 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 Law, as defined in Section 4.11(f)(ii)) of any Governmental
Authority except for violations that, in the aggregate, do not have and are not
reasonably likely to have a Material Adverse Effect. Except as set forth in
Section 4.4(d) of the Company Disclosure Schedule or in Section 4.11 of the
Company Disclosure Schedule, the Company and its subsidiaries and joint ventures
have all permits, licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct their respective businesses as
currently conducted in all respects, except those which the failure to obtain
would, in the aggregate, not have a Company Material Adverse Effect. Except as
set forth in Section 4.4(d) of the Company Disclosure Schedule, the Company and
each of its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, could result in a default
under, (i) its articles of organization or by-laws or (ii) any material
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is a party or by
which it is bound or to which any of its property is subject, except for
breaches, violations or defaults that, in the aggregate, do not have and are not
reasonably likely to have, a Company Material Adverse Effect.
(e) Except as set forth in Section 4.4(e) of the Company Disclosure Schedule,
there is no "non-competition" or other similar contract, commitment, agreement
or understanding that restricts the ability of the Company or any of its
affiliates to conduct business in any geographic area or that would reasonably
be likely to restrict the Surviving Corporation or any of its affiliates to
conduct business in any geographic area.
Section 4.5 Reports and Financial Statements. The filings required to be
made by the Company and its subsidiaries since January 1, 1995 under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the 1935 Act and
applicable state public utility laws and regulations have been filed with the
Securities and Exchange Commission (the "SEC"), the Federal Energy Regulatory
Commission (the "FERC") or the appropriate state public utilities commission, as
the case may be, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statute and the rules and
regulations thereunder. The Company has made available to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since January 1, 1995 (as such
documents have since the time of their filing been amended, the "Company SEC
Reports"). As of their respective dates, the Company SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of the Company included in the Company SEC Reports (collectively, the
"Company Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
the consolidated financial position of the Company as of the dates thereof and
the consolidated results of operations and cash flows for the periods then
ended. True, accurate and complete copies of the articles of organization and
by-laws of the Company, as in effect on the date hereof, have been made
available to Parent.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date hereof or as set forth in
Section 4.6 of the Company Disclosure Schedule, from December 31, 1998 the
Company and each of its subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice, and there has not
been, and no fact or condition exists which would have or, insofar as reasonably
can be foreseen, could have, a Company Material Adverse Effect.
Section 4.7 Litigation. Except as disclosed in the Company SEC Reports
filed prior to the date hereof or as set forth in Section 4.7, Section 4.9 or
Section 4.11 of the Company Disclosure Schedule, (i) there are no claims, suits,
actions or proceedings, pending or threatened, nor are there any investigations
or reviews pending or threatened against, relating to or affecting the Company
or any of its subsidiaries, and (ii) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any of its subsidiaries, except for any of the foregoing under clauses (i)
and (ii) that individually or in the aggregate would not reasonably be expected
to have a Company Material Adverse Effect.
Section 4.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC in connection with the issuance of shares of
Parent Common Stock in the Merger (the "Registration Statement") will, at the
time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the proxy statement, in definitive form (the "Proxy
Statement"), relating to the Company Special Meeting (as defined below) shall
not, at the dates mailed to shareholders and at the time of the Company Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy Statement, insofar as they
relate to the Company or any of its subsidiaries, shall comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder.
Section 4.9 Tax Matters. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipts, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties (civil or criminal) on or
additions to any such taxes. "Tax Return," as used in this Agreement, means a
report, return or other written information required to be supplied to a
governmental entity with respect to Taxes.
Except as disclosed in Section 4.9 of the Company Disclosure Schedule:
(a) Filing of Timely Tax Returns. The Company and each of its subsidiaries have
duly filed (or there has been filed on its behalf) within the time prescribed by
law all material Tax Returns (including withholding Tax Returns) required to be
filed by each of them under applicable law. All such Tax Returns were and are in
all material respects true, complete and correct.
(b) Payment of Taxes. The Company and each of its subsidiaries have, within the
time and in the manner prescribed by law, paid all material Taxes (including
withholding 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. All material Taxes payable by the Company and its subsidiaries
for all taxable periods and portions thereof through the date of the most recent
financial statements contained in the Company Financial Statements filed prior
to the date of this Agreement are properly reflected in such financial
statements in accordance with GAAP, and the unpaid Taxes of the Company and its
subsidiaries do not exceed the amount shown therefor on such financial
statements adjusted for the passage of time through the Effective Time in
accordance with past custom and practice of the Company and its subsidiaries in
filing their Tax Returns.
(d) Extensions of Time for Filing Tax Returns. Neither the Company nor any of
its subsidiaries have requested any extension of time within which to file any
material Tax Return, which Tax Return has not since been filed.
(e) Waivers of Statute of Limitations. Neither the Company nor any of its
subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
material Taxes or material Tax Returns.
(f) Expiration of Statute of Limitations. The statute of limitations for the
assessment of all material Taxes has expired for all applicable material Tax
Returns of the Company and each of its subsidiaries, or those material Tax
Returns have been examined by the appropriate taxing authorities for all periods
through the date hereof, and no deficiency for any material Taxes has been
proposed, asserted or assessed against the Company or any of its subsidiaries
that has not been resolved and paid in full.
(g) Audit, Administrative and Court Proceedings. No material claims, audits,
disputes, controversies, examinations, investigations or other proceedings are
presently pending with regard to any Taxes or Tax Returns of the Company or any
of its subsidiaries.
(h) Tax Rulings. Neither the Company nor any of its subsidiaries has received a
Tax Ruling (as defined below) or entered into a Closing Agreement (as defined
below) with any taxing authority that would have a continuing adverse effect
after the Closing Date. "Tax Ruling," as used in this Agreement, shall mean a
written ruling of a taxing authority relating to Taxes. "Closing Agreement," as
used in this Agreement, shall mean a written and legally binding agreement with
a taxing authority relating to Taxes.
(i) Availability of Tax Returns. The Company has provided or made available to
Parent complete and accurate copies of (i) all Tax Returns, and any amendments
thereto, filed by the Company or any of its subsidiaries since 1994, (ii) all
audit reports received from any taxing authority relating to any Tax Return
filed by the Company or any of its subsidiaries and (iii) any Closing Agreements
entered into by the Company or any of its subsidiaries with any taxing
authority.
(j) Tax Sharing Agreements. Neither the Company nor any of its subsidiaries is a
party to any agreement, understanding or arrangement relating to allocating or
sharing of Taxes.
(k) Liability for Others. Neither the Company nor any of its subsidiaries has
any liability for any material Taxes of any person other than the Company and
its subsidiaries (i) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract or (iv) otherwise.
(l) Code Section 897. To the best knowledge of the Company after due inquiry, no
foreign person owns or has owned beneficially more than five percent of the
total fair market value of Company Common Stock during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(m) Code Section 368(a). The Company has no knowledge of any fact, nor has the
Company taken any action that would, or would be reasonably likely to, adversely
affect the qualification of the Merger as a reorganization described in Section
368(a) of the Code.
(n) Code Section 355(e). Neither the Company nor any of its subsidiaries has
constituted a "distributing corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (x) in the past 24 month
period or (y) in a distribution which could otherwise constitute part of a
"plan" or "series of related transactions" (within the meaning of Section 355(e)
of the Code) in conjunction with the Merger.
Section 4.10 Employee Matters; ERISA. Except as set forth in the
appropriate subsection of Section 4.10 of the Company Disclosure Schedule:
(a) For purposes of this Section 4.10, the following terms have the definitions
set forth below:
(i) "Controlled Group Liability" means any and all liabilities (a) under Title
IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
(b) under the minimum funding requirements of Section 302 of ERISA or Section
412 of the Code, (c) under Section 4971 of the Code, and (d) as a result of a
failure to comply with the continuation coverage requirements of Section 601 et
seq. of ERISA and Section 4980B of the Code, other than such liabilities that
arise solely out of, or relate solely to, the Employee Benefit Plans.
(ii) "ERISA Affiliate" means, with respect to any entity, trade or business, any
other entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the first entity, trade or business, or that is a member of the same "controlled
group" as the first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
(iii) An "Employee Benefit Plan" means any material employee benefit plan,
program, policy, practice, or other arrangement providing benefits to any
current or former employee, officer or director of the Company or any of its
subsidiaries or any beneficiary or dependent thereof that is sponsored or
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute, whether or
not written, including without limitation any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, any employee pension benefit plan
within the meaning of Section 3(2) of ERISA (whether or not such plan is subject
to ERISA) and any material bonus, incentive, deferred compensation, vacation,
stock purchase, stock option, severance, employment, change of control or fringe
benefit plan, program or agreement.
(iv) A "Plan" means any Employee Benefit Plan other than a Multiemployer Plan.
(v) A "Multiemployer Plan" means any "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
(vi) "Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as those terms
are defined in Part I of Subtitle E of Title IV of ERISA.
(b) Section 4.10(b) of the Company Disclosure Schedule includes a complete list
of all material Employee Benefit Plans.
(c) With respect to each Plan, the Company has delivered to Parent a true,
correct and complete copy of: (i) each writing constituting a part of such Plan,
including without limitation all material plan documents, trust agreements, and
insurance contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description and any material modifications thereto, if required to
be furnished under ERISA; (iv) the most recent annual financial report, if any;
(v) the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service (the "IRS"), if any.
Except as specifically provided in the foregoing documents delivered to Parent,
there are no amendments to any Plan that have been adopted or approved nor has
the Company or any of its subsidiaries undertaken to make any such amendments or
to adopt or approve any new Plan.
(d) Section 4.10(b) of the Company Disclosure Schedule identifies each Plan that
is intended to be a "qualified plan" within the meaning of Section 401(a) of the
Code ("Qualified Plans"). The IRS has issued a favorable determination letter
with respect to each Qualified Plan and the related trust that has not been
revoked, and except as would not have a Company Material Adverse Effect, there
are no existing circumstances nor any events that have occurred that could
adversely affect the qualified status of any Qualified Plan or the related
trust. Section 4.10(b) of the Company Disclosure Schedule identifies each Plan
which is intended to meet the requirements of Code Section 501(c)(9) (a "VEBA"),
and except as would not have a Company Material Adverse Effect, each such VEBA
meets such requirements and provides no disqualified benefits (as such term is
defined in Code Section 4976(b)).
(e) All material contributions required to be made to any Plan by applicable law
or regulation or by any Plan document or other contractual undertaking, and all
material premiums due or payable with respect to insurance policies funding any
Plan, for any period through the date hereof have been timely made or paid in
full or, to the extent not required to be made or paid on or before the date
hereof, have been fully reflected on the Company Financial Statements. Each
Employee Benefit Plan that is an employee welfare benefit plan under Section
3(1) of ERISA (i) is funded through an insurance company contract and is not a
"welfare benefit fund" within the meaning of Section 419 of the Code, (ii) is,
or is funded through, a VEBA identified as such in Section 4.10(b) of the
Company Disclosure Schedule, or (iii) is unfunded.
(f) Except as would not have a Company Material Adverse Effect, with respect to
each Employee Benefit Plan, the Company and its subsidiaries have complied, and
are now in compliance, with all provisions of ERISA, the Code and all laws and
regulations applicable to such Employee Benefit Plans and each Employee Benefit
Plan has been administered in all material respects in accordance with its
terms. There is not now, nor do any circumstances exist that could reasonably be
expected to give rise to, any requirement for the posting of security with
respect to a Plan or the imposition of any lien on the assets of the Company or
any of its subsidiaries under ERISA or the Code. To the knowledge of the
Company, no non-exempt prohibited transaction (as defined in Section 406 of
ERISA or Section 4975 of the Code) has occurred with respect to any Plan.
(g) With respect to each Plan that is subject to Title IV of ERISA, the minimum
funding requirements of Section 302 of ERISA or Section 412 of the Code, or
Section 4971 of the Code: (i) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived; (ii) the fair market value of the assets of each
such Plan that is a defined benefit plan equals or exceeds the actuarial present
value of all accrued benefits under such Plan (whether or not vested), based
upon the actuarial assumptions set forth in the most recent actuarial report for
such Plan; (iii) no reportable event within the meaning of Section 4043(c) of
ERISA for which the 30-day notice requirement has not been waived has occurred
since December 31, 1993; (iv) all material premiums to the Pension Benefit
Guaranty Corporation ("PBGC") have been timely paid in full; (v) no material
liability (other than for premiums to the PBGC and for the payment of benefits
in the ordinary course) under Title IV of ERISA has been or could reasonably be
expected to be incurred by the Company or any of its subsidiaries; and (vi) to
the knowledge of the Company, the PBGC has not instituted proceedings to
terminate any such Plan and no condition exists that presents a material risk
that such proceedings will be instituted or which would constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any such Plan.
(h) No Employee Benefit Plan is a Multiemployer Plan or a plan that has two or
more contributing sponsors at least two of which are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"). None
of the Company and its subsidiaries nor any of their respective ERISA Affiliates
has, at any time during the last six years, contributed to or been obligated to
contribute to any Multiemployer Plan or Multiple Employer Plan. None of the
Company and its subsidiaries nor any ERISA Affiliates has incurred any
Withdrawal Liability that has not been satisfied in full.
(i) There does not now exist, nor do any circumstances exist that could
reasonably be expected to result in, any Controlled Group Liability that would
have a Company Material Adverse Effect following the Closing. Without limiting
the generality of the foregoing, neither the Company nor any of its
subsidiaries, nor any of their respective ERISA Affiliates, has engaged in any
transaction described in Section 4069 or Section 4204 or 4212 of ERISA since
December 31, 1992.
(j) Except for health continuation coverage as required by Section 4980B of the
Code or Part 6 of Title I of ERISA, the Company and its subsidiaries have no
material liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents of former employees.
(k) Neither the execution and delivery of this Agreement nor the consummation of
any of the transactions contemplated hereby will (either alone or in conjunction
with any other event) result in, cause the accelerated funding, vesting or
delivery of, or increase the amount or value of, any material payment or benefit
to any employee, officer or director of the Company or any of its subsidiaries.
(l) No labor organization or group of employees of the Company or any of its
subsidiaries has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the Company,
threatened to be brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority. There are no organizing
activities, strikes, work stoppages, slowdowns, lockouts, material arbitrations
or material grievances, or other material labor disputes pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
its subsidiaries. Each of the Company and its subsidiaries is in compliance in
all material respects with all applicable laws and collective bargaining
agreements respecting employment and employment practices, terms and conditions
of employment, wages and hours and occupational safety and health.
(m) There are no pending or, to the knowledge of the Company, threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted, and there is no set of
circumstances which may reasonably give rise to a claim or lawsuit, against the
Plans, any fiduciaries thereof with respect to their duties to the Plans or the
assets of any of the trusts under any of the Plans which could reasonably be
expected to result in a Company Material Adverse Effect.
(n) The Company, its subsidiaries and each member of their respective business
enterprise has complied with the Worker Adjustment and Retraining Notification
Act.
Section 4.11 Environmental Protection. Except as set forth in Section 4.11
of the Company Disclosure Schedule or in the Company SEC Reports filed prior to
the date hereof:
(a) Compliance. The Company and each of its subsidiaries are in compliance with
all applicable Environmental Laws (as defined in Section 4.11(f)(ii)); and
neither the Company nor any of its subsidiaries has received any communication
from any Governmental Authority or any written communication from any other
person that alleges that the Company or any of its subsidiaries is not in
compliance with applicable Environmental Laws, except where the failure to be in
such compliance would not in the aggregate have a Company Material Adverse
Effect.
(b) Environmental Permits. The Company and each of its subsidiaries has obtained
or has applied for all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary for the
construction of its facilities or the conduct of its operations, and all such
Environmental Permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency approval, and the
Company and its subsidiaries are in compliance with all terms and conditions of
the Environmental Permits, and the Company reasonably believes that any
transfer, renewal or reapplication for any Environmental Permit required as a
result of the Merger can be accomplished in the ordinary course of business,
except where the failure to obtain or to be in such compliance would not, in the
aggregate, have a Company Material Adverse Effect.
(c) Environmental Claims. There is no Environmental Claim (as defined in Section
4.11(f)(i)) pending (i) against the Company or any of its subsidiaries or joint
ventures, or (ii) against any real or personal property or operations that the
Company or any of its subsidiaries owns, leases or manages, in whole or in part
that, if adversely determined, would have, in the aggregate, a Company Material
Adverse Effect.
(d) Releases. Except for Releases of Hazardous Materials the liability for which
would not have, in the aggregate, a Company Material Adverse Effect, there have
been no Releases (as defined in Section 4.11(f)(iv)) of any Hazardous Material
(as defined in Section 4.11(f)(iii)) that would be reasonably likely to (A) form
the basis of any Environmental Claim against the Company or any of its
subsidiaries, or (B) to the knowledge of the Company, cause, damage or
diminution of value to any of the operations or real properties owned, leased or
managed, in whole or in part, by Company or any of its subsidiaries.
(e) Predecessors. The Company has no knowledge of any Environmental Claim
pending or threatened, or of any Release of Hazardous Materials that would be
reasonably likely to form the basis of any Environmental Claim, in each case
against any person or entity (including, without limitation, any predecessor of
the Company or any of its subsidiaries) whose liability the Company or any of
its subsidiaries has or may have retained or assumed either contractually or by
operation of law or against any real or personal property which the Company or
any of its subsidiaries formerly owned, leased or managed, in whole or in part,
except for Releases of Hazardous Materials the liability for which would not
have, in the aggregate, a Company Material Adverse Effect.
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation by
any person or entity (including any Governmental Authority)
alleging potential liability (including, without limitation,
potential responsibility for or liability for enforcement
costs, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural-
resources damages, property damages, personal injuries,
fines or penalties) arising out of, based on or resulting
from (A) the presence, or Release or threatened Release
into the environment, of any Hazardous Materials at any
location, whether or not owned, operated, leased or managed
by the Company, Parent or any of their respective subsidiaries
or joint ventures; or (B) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law;
or (C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of
any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local laws,
rules, ordinances and regulations relating to pollution, the
environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata)
or protection of human health as it relates to the environment
including, without limitation, laws and regulations relating
to Releases or threatened Releases of Hazardous Materials, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, coal tar
residue, and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls
("PCBs") in regulated concentrations; and (b) any chemicals,
materials or substances which are now defined as or included
in the definition of "hazardous substances", "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," "hazardous constituents" or words of similar
import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which
is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which the Parent,
the Company or any of their subsidiaries or joint ventures
operates or has stored, treated or disposed of Hazardous
Materials.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water,
groundwater or property.
Section 4.12 Regulation as a Utility. Except as set forth in Section 4.12
of the Company Disclosure Schedule, neither the Company nor any "associate
company," "subsidiary company" or "affiliate" (as such terms are defined in the
1935 Act) of the Company is subject to regulation as (i) a "holding company," a
"public-utility company," a "subsidiary company" or an "affiliate" of a "holding
company," within the meaning of Sections 2(a)(7), 2(a)(5), 2(a)(8) and 2(a)(11),
respectively, of the 1935 Act, (ii) a "public utility" under the Power Act,
(iii) a "natural-gas company" under the Natural Gas Act, or (iv) a public
utility or public service company (or similar designation) by any state in the
United States other than Connecticut or by any foreign country.
Section 4.13 Vote Required. The approval of the Merger by two-thirds of the
votes entitled to be cast by all holders of Company Common Stock (the "Company
Shareholders' Approval") is the only vote of the holders of any class or series
of the capital stock of the Company or any of its subsidiaries required to
approve this Agreement, the Merger and the other transactions contemplated
hereby.
Section 4.14 Opinion of Financial Advisor. The Company has received the
opinion of Morgan Stanley & Co. Incorporated, to the effect that, as of April
22, 1999, the Merger Consideration is fair from a financial point of view to the
holders of Company Common Stock.
Section 4.15 Ownership of Parent Common Stock. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, the Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of Parent Common Stock or Parent Preferred Stock.
Section 4.16 Takeover Laws; Rights Plans. (i) The Company has taken all
action required to be taken by it in order to exempt this Agreement and the
transactions contemplated hereby from, and this Agreement and the transactions
contemplated hereby are exempt from, the requirements of any "moratorium,"
"control share," "fair price" or other anti-takeover laws and regulations
(collectively, "Takeover Laws") of the State of Connecticut, including Sections
33-841 and 33-844 of the CBCA.
(ii) The Company has (1) duly entered into an appropriate amendment to the
Company Rights Agreement which amendment has been provided to Parent and (2)
taken all other action necessary or appropriate so that the entering into of
this Agreement and the consummation of the transactions contemplated hereby
(including the Merger) do not and will not result in the ability of any person
to exercise any Rights under the Company Rights Agreement or enable or require
the Company Rights to separate from the shares of Company Common Stock to which
they are attached or to be triggered or become exercisable, and the Company
Rights Agreement will expire immediately prior to the Effective Time, and the
Company Rights Agreement, as so amended, has not been further amended or
modified except in accordance herewith. Copies of such amendments to the Company
Rights Agreement have been previously provided to Parent.
(iii) No "Distribution Date" or "Triggering Event" (as such terms are defined in
the Company Rights Plan) has occurred.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Except as set forth in Section
5.1 of the Parent Disclosure Schedule (as defined in Section 7.6(i)), Parent and
each of its subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite corporate power and authority, and has been duly
authorized by all necessary approvals and orders, to own, lease and operate its
assets and properties to the extent owned, leased and operated and to carry on
its business as it is now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its assets and properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified and in good standing will not, when taken together with all
other such failures, have a material adverse effect on the business, properties,
financial condition or results of operations of Parent and its subsidiaries
taken as a whole or on the consummation of this Agreement (any such material
adverse effect being hereafter referred to as a "Parent Material Adverse
Effect").
Section 5.2 Subsidiaries. Section 5.2 of the Parent Disclosure Schedule
sets forth a description as of the date hereof of all material subsidiaries and
joint ventures of Parent, including the name of each such entity, the state or
jurisdiction of its incorporation or organization, Parent's interest therein,
and a brief description of the principal line or lines of business conducted by
each such entity. As of the date hereof, Parent is an exempt holding company
under the 1935 Act, and, except as set forth in Section 5.2 of the Parent
Disclosure Schedule, none of the subsidiaries of Parent is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935 Act. Except as set
forth in Section 5.2 of the Parent Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Parent subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are owned
directly or indirectly by Parent free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies 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 Parent subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment;
except for any of the foregoing that could not reasonably be expected to have a
Parent Material Adverse Effect.
Section 5.3 Capitalization (a) Except as set forth in Section 5.3 of the
Parent Disclosure Schedule the authorized capital stock of Parent consists of
200,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share, of Parent ("Parent Preferred Stock"). As of
the close of business on April 23, 1999, there were issued and outstanding
117,127,142 shares of Parent Common Stock and no shares of Parent Preferred
Stock. All of the issued and outstanding shares of the capital stock of Parent
are, and will be, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 5.3 of the Parent 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 Parent or any of its subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of Parent, or obligating Parent to grant, extend or enter into any
such agreement or commitment.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $1.00 per share ("Merger Sub Common Stock"). As of the
close of business on April 22, 1999, there were issued and outstanding 1,000
shares of Merger Sub Common Stock, all of which were owned by Parent.
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. Parent has all requisite corporate power and authority to enter
into this Agreement and, subject to the applicable Parent Required Statutory
Approvals (as defined in Section 5.4(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by the other signatories
hereto, constitutes a valid and binding obligation of Parent enforceable against
it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Section 5.4(b) of the Parent
Disclosure Schedule, the execution and delivery of this Agreement by Parent do
not, and the consummation of the transactions contemplated hereby will not,
result in a Violation pursuant to any provisions of (i) the articles of
incorporation, by-laws or similar governing documents of Parent or any of its
subsidiaries or any of its joint ventures, (ii) subject to obtaining the Parent
Required Statutory Approvals (as defined in Section 5.4(c)) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to Parent or any of its
subsidiaries or any of its joint ventures or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 5.4(b) of the Parent Disclosure Schedule (the
"Parent Required Consents"), any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which Parent or any of its subsidiaries
or any of its joint ventures is a party or by which it or any of its properties
or assets may be bound or affected, excluding from the foregoing clauses (i),
(ii) and (iii) such Violations as would not have, in the aggregate, a Parent
Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 5.4(c) of the Parent
Disclosure Schedule, no declaration, filing or registration with, or notice to
or authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, the failure to
obtain, make or give which would have, in the aggregate, a Parent Material
Adverse Effect (the "Parent Required Statutory Approvals"), it being understood
that references in this Agreement to "obtaining" such Parent Required Statutory
Approvals shall mean making such declarations, filings or registrations; giving
such notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 5.4(d) or Section 5.11 of the
Parent Disclosure Schedule, or as disclosed in the Parent SEC Reports (as
defined in Section 5.5) filed prior to the date hereof, neither Parent nor any
of its subsidiaries nor any of its joint ventures is in violation of, is under
investigation with respect to any violation of, or has been given notice or been
charged with any violation of, any law, statute, or order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
Environmental Law) of any Governmental Authority, except for violations that, in
the aggregate, do not have and are not reasonably likely to have, a Parent
Material Adverse Effect. Except as set forth in Section 5.4(d) of the Parent
Disclosure Schedule or in Section 5.11 of the Parent Disclosure Schedule, Parent
and its subsidiaries and joint ventures have all permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their respective businesses as currently conducted in all respects,
except those which the failure to obtain would, in the aggregate, not have a
Parent Material Adverse Effect. Except as set forth in Section 5.4(d) of the
Parent Disclosure Schedule, Parent and each of its subsidiaries are not in
breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (i) its articles of
organization or by-laws or (ii) any material contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which it is a party or by which it is bound or to which any
of its property is subject; except for breaches, violations or defaults that, in
the aggregate, do not have and are not reasonably likely to have, a Parent
Material Adverse Effect.
Section 5.5 Reports and Financial Statements. The filings required to be
made by Parent and its subsidiaries since January 1, 1995 under the Securities
Act, the Exchange Act, the 1935 Act, the Federal Power Act, as amended (the
"Power Act"), and applicable state public utility laws and regulations have been
filed with the SEC, the FERC or the appropriate state public utilities
commission, as the case may be, including all forms, statements, reports,
agreements and all documents, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statute and the rules and
regulations thereunder. Parent has made available to the Company a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent or its predecessor with the SEC since January 1,
1995 (as such documents have since the time of their filing been amended, the
"Parent SEC Reports"). As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of Parent included in the Parent SEC Reports (collectively, the
"Parent Financial Statements") have been prepared in accordance with GAAP
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of Parent as of the dates thereof
and the consolidated results of its operations and cash flows for the periods
then ended. True, accurate and complete copies of the articles of incorporation
and by-laws of Parent as in effect on the date hereof, have been made available
to the Company.
Section 5.6 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Reports filed prior to the date hereof or as set forth in Section
5.6 of the Parent Disclosure Schedule, since December 31, 1998, Parent and each
of its subsidiaries have as of the date hereof conducted their businesses only
in the ordinary course of business consistent with past practice and there has
not been, and no fact or condition exists which has had or could reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.7 Litigation. Except as disclosed in the Parent SEC Reports
filed prior to the date hereof or as set forth in Section 5.7 of the Parent
Disclosure Schedule (i) there are no claims, suits, actions or proceedings,
pending or threatened, nor are there any investigations or reviews pending or
threatened against, relating to or affecting Parent or any of its subsidiaries,
which would have a Parent Material Adverse Effect and (ii) there are no
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
applicable to Parent or any of its subsidiaries, except for such that would not
reasonably be expected to have a Parent Material Adverse Effect.
Section 5.8 Registration Statement and Proxy Statement. (i) None of the
information supplied or to be supplied by or on behalf of Parent for inclusion
or incorporation by reference in the Registration Statement will, at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and (ii) the Proxy Statement shall not, at the dates mailed to the
Company shareholders and at the time of the Company Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement, insofar as they relate to Parent
or any Parent subsidiary, shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder.
Section 5.9 Regulation as a Utility. Except as set forth in Section 5.9 of
the Parent Disclosure Schedule, neither Parent nor any "subsidiary company" or
"affiliate" (as such terms are defined in the 1935 Act) of Parent is subject to
regulation as (i) a "holding company," a "public-utility company," a "subsidiary
company" or an "affiliate" of a "holding company," within the meaning of
sections 2(a)(7), 2(a)(5), 2(a)(8) or 2(a)(11), respectively, of the 1935 Act,
(ii) a "public utility" under the Power Act, (iii) a "natural-gas company" under
the Natural Gas Act, or (iv) a public utility or public service company (or
similar designation) by any state in the United States other than New York or by
any foreign country.
Section 5.10 Ownership of the Company Common Stock. Except as set forth in
Section 5.10 of the Parent Disclosure Schedule, Parent does not "beneficially
own" (as such term is defined for purposes of Section 13(d) of the Exchange Act)
any shares of Company Common Stock.
Section 5.11 Environmental Protection. (a) Except as would not, in the
aggregate, reasonably be expected to result in a Parent Material Adverse Effect,
and except for matters disclosed in Section 5.12(a) of the Parent Disclosure
Schedule or in the Parent SEC Reports, (i) Parent and its subsidiaries are in
compliance with all applicable Environmental Laws and the terms and conditions
of all applicable Environmental Permits, and neither Parent nor any of its
subsidiaries has received any written notice from any person or Governmental
Authority that alleges that Parent or any of its subsidiaries is not in material
compliance with applicable Environmental Laws or the terms and conditions of all
such Environmental Permits, (ii) there are no Environmental Claims pending or
threatened (A) against Parent or any of its subsidiaries, (B) against any person
or entity whose liability for any Environmental Claim Parent or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law or (C) against any real or personal property or operations that
Parent or any of its subsidiaries owns, leases or manages, in whole or in part,
and (iii) there has been no Release of Hazardous Materials that would be
reasonably likely to (A) form the basis of any Environmental Claim against
Parent or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim Parent or any of its subsidiaries has or
may have retained or assumed either contractually or by operation of law or (B)
cause damage or diminution of value to any of the operations or real properties
owned, leased or managed, in whole or in part, by Parent or any of its
subsidiaries.
(b) To the best knowledge of Parent, except as disclosed in
the Parent SEC Reports, there are no facts or circumstances that are likely to
require expenditures by Parent or any of its subsidiaries in order to comply
with currently applicable Environmental Laws, except for expenditures that are
not reasonably expected to have a Parent Material Adverse Effect.
Section 5.12 Operations of Nuclear Power Plant. To the knowledge of the
Parent, the operation of the nuclear generation plant (the "Nuclear Facility")
currently partially owned by the Parent is being conducted in substantial
compliance with current laws and regulations governing nuclear plant operations,
except for such failures to comply as would not, individually or in the
aggregate, have a Parent Material Adverse Effect. To the best of the Parent's
knowledge and except as would not reasonably be expected to have a Parent
Material Adverse Effect, (i) the Nuclear Facility maintains and is in
substantial compliance with emergency evacuation plans as required by the laws
and regulations governing nuclear plant operations and (ii) as of the date of
this Agreement, the storage of spent nuclear fuel and the plans for the
decommissioning of the Nuclear Facility substantially conforms with the
requirements of applicable law.
Section 5.13 Code Section 368(a). Parent has no knowledge of any fact, nor
has Parent taken any action that would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization described
in Section 368(a) of the Code.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Parties. After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, Parent and the
Company each agree as follows, each as to itself and to each of its
subsidiaries, except as expressly contemplated or permitted in this Agreement,
or to the extent the other parties hereto shall otherwise consent in writing:
(a) Ordinary Course of Business. The Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and use
all commercially reasonable efforts to (i) preserve intact their present
business organizations and goodwill, preserve the goodwill and relationships
with customers, suppliers and others having business dealings with them, (ii)
subject to prudent management of workforce needs and ongoing programs currently
in force, keep available the services of their present officers and employees as
a group, and (iii) maintain and keep material properties and assets in as good
repair and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past practice.
(b) Dividends. The Company shall not, nor shall it permit any of its
subsidiaries to: (i) declare or pay any dividends on or make other distributions
in respect of any capital stock other than (A) dividends by a wholly-owned
subsidiary to the Company or another wholly-owned subsidiary, (B) dividends by a
less than wholly-owned subsidiary consistent with past practice, (C) regular
dividends on Company Common Stock with usual record and payment dates that do
not exceed the current regular dividends on Company Common Stock; provided that,
in the event the Closing has not occurred by March 31, 2000 then the Company may
increase the rate of such dividends to $1.38 per annum; (ii) split, combine or
reclassify any capital stock or the capital stock of any subsidiary or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of, or in substitution for, shares of capital stock or the capital stock of any
subsidiary; or (iii) redeem, repurchase or otherwise acquire any shares of
capital stock or the capital stock of any subsidiary other than (A) redemptions,
repurchases and other acquisitions of shares of capital stock in connection with
the administration of employee benefit and dividend reinvestment plans as in
effect on the date hereof in the ordinary course of the operation of such plans
consistent with past practice, or (B) intercompany acquisitions of capital
stock. Prior to the Closing Date, each of the parties agrees to coordinate
dividend policies so as not to adversely affect either party's shareholders
because of the timing of record, declaration or payment dates.
(c) Issuance of Securities. Except as set forth in Section 6.1(c) of the Company
Disclosure Schedule, the Company shall not, nor shall it permit any of its
subsidiaries to, issue, agree to issue, deliver, sell, award, pledge, dispose of
or otherwise encumber or authorize or propose the issuance, delivery, sale,
award, pledge, disposal or other encumbrance of, any shares of their capital
stock of any class or any securities convertible into or exchangeable for, or
any rights, warrants or options to acquire, any such shares or convertible or
exchangeable securities, other than pursuant to currently outstanding stock
options granted under Employee Benefit Plans, as provided in the Company Rights
Agreement.
(d) Charter Documents; Other Actions. Neither party shall, nor shall any party
permit any of its subsidiaries to, amend or propose to amend its respective
articles of organization, by-laws or regulations, or similar organic documents
or to take or fail to take any other action, which in any such case would
reasonably be expected to prevent or materially impede or interfere with the
Merger.
(e) Acquisitions. Except as disclosed in Section 6.1(e) of the Company
Disclosure Schedule, the Company shall not, nor shall it permit any of its
subsidiaries to, acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or business organization or division thereof, or
otherwise acquire or agree to acquire any material amount of assets other than
in the ordinary course of business.
(f) Capital Expenditures. Except as set forth in Section 6.1(f) of the Company
Disclosure Schedule, the Company shall not, nor shall it permit any of its
subsidiaries to, make capital expenditures in excess of 110% of the amount
budgeted by the Company or its subsidiaries for capital expenditures as set
forth in Section 6.1(f) of the Company Disclosure Schedule.
(g) No Dispositions. Except as set forth in Section 6.1(g) of the Company
Disclosure Schedule, the Company shall not, nor shall it permit any of its
subsidiaries to, sell, lease, license, encumber or otherwise dispose of, any of
its respective assets, other than encumbrances or dispositions in the ordinary
course of business consistent with past practice.
(h) Indebtedness. Except as set forth in Section 6.1(h) of the Company
Disclosure Schedule, the Company shall not, nor shall it 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 "keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing other than (i) short-term indebtedness in the ordinary
course of business consistent with past practice; (ii) arrangements between the
Company and its subsidiaries or among its subsidiaries; or (iii) in connection
with the refunding of existing indebtedness at a lower cost of funds.
(i) Compensation, Benefits. Except as set forth in Section 6.1(i) of the Company
Disclosure Schedule or as may be required by applicable law, or as expressly
contemplated by this Agreement, the Company shall not, nor shall it permit any
of its subsidiaries to, (i) enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under any
Employee Benefit Plan, or otherwise increase the compensation or benefits of any
director, officer or other employee of such party or any of its subsidiaries,
except for normal increases in compensation and benefits in the ordinary course
of business consistent with past practice that, with respect to employees who
are not officers, in the aggregate, do not result in an increase in benefits or
compensation expense to the Company or any of its subsidiaries in excess of
three percent per year, or (ii) enter into or amend any employment, severance or
special pay arrangement with respect to the termination of employment or other
similar contract, agreement or arrangement with any director or officer or other
employee other than with respect to employees who are not officers of the
Company in the ordinary course of business consistent with current industry
practice.
(j) Act. Except as set forth in Section 6.1(j) of the Company Disclosure
Schedule, and except as required or contemplated by this Agreement, the Company
shall not, nor shall it permit any of its subsidiaries to, engage in any
activities which would cause a change in its status, or that of its
subsidiaries, under the 1935 Act.
(k) Accounting. Except as set forth in Section 6.1(k) of the Company Disclosure
Schedule, the Company shall not, nor shall it permit any of its subsidiaries to,
make any changes in their accounting methods, except as required by law, rule,
regulation or GAAP.
(l) Tax-Free Status. No party shall, nor shall any party permit any of its
subsidiaries to, take any actions which would, or would be reasonably likely to,
adversely affect the status of the Merger as a reorganization within the meaning
of Section 368(a) of the Code, and each party hereto shall use all reasonable
efforts to achieve such result.
(m) Cooperation, Notification. Each party shall, and shall cause its
subsidiaries to, (i) confer on a regular and frequent basis with one or more
representatives of the other party to discuss, subject to applicable law,
material operational matters and the general status of its ongoing operations;
(ii) promptly notify the other party of any significant changes in its business,
properties, assets, condition (financial or other), results of operations or
prospects; (iii) advise the other party of any change or event which has had or,
insofar as reasonably can be foreseen, is reasonably likely to result in, in the
case of the Company, a Company Material Adverse Effect or, in the case of
Parent, a Parent Material Adverse Effect; and (iv) promptly provide the other
party with copies of all filings made by such party or any of its subsidiaries
with any state or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby.
(n) Third-Party Consents. The Company shall, and shall cause its subsidiaries
to, use all commercially reasonable efforts to obtain all the Company Required
Consents. The Company shall promptly notify Parent of any failure or prospective
failure to obtain any such consents and, if requested by Parent shall provide
copies of all the Company Required Consents obtained by the Company to Parent.
Parent shall, and shall cause its subsidiaries to, use all commercially
reasonable efforts to obtain all Parent Required Consents. Parent shall promptly
notify the Company of any failure or prospective failure to obtain any such
consents and, if requested by the Company, shall provide copies of all Parent
Required Consents obtained by Parent to the Company.
(o) No Breach, Etc. No party shall, nor shall any party permit any of its
subsidiaries to, willfully take any action that would or is reasonably likely to
result in a material breach of any provision of this Agreement or in any of its
representations and warranties set forth in this Agreement being untrue on and
as of the Closing Date.
(p) Discharge of Liabilities. The Company shall not pay, discharge or satisfy
any material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
(which includes the payment of final and unappealable judgments) or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Company's reports filed with the SEC, or
incurred in the ordinary course of business consistent with past practice.
(q) Contracts. Except as set forth in Section 6.1(q) of the Company Disclosure
Schedule, the Company shall not, 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
the Company or any of its subsidiaries is a party or waive, release or assign
any material rights or claims.
(r) Insurance. The Company shall, and shall cause its subsidiaries to, maintain
with financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for companies engaged in the
electric and gas utility industry.
(s) Permits. The Company shall, and shall cause its subsidiaries to, use
reasonable efforts to maintain in effect all existing governmental permits
pursuant to which the Company or any of its subsidiaries operate.
(t) Takeover Laws. Neither party shall take any action that would cause the
transactions contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law, and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect, including Sections 33-841 and 33-844 of the CBCA.
(u) No Rights Triggered. The Company shall ensure that the entering into of this
Agreement and the consummation of the transactions contemplated hereby and any
other action or combination of actions, or any other transactions contemplated
hereby, do not and will not result, directly or indirectly, in the grant of any
rights to any person under any material agreement (other than the employment
agreements disclosed in Section 6.1(u) of the Company Disclosure Schedule) to
which it or any of its subsidiaries is a party (including the Company Rights
Agreement) or in the exercise of any rights under the Company Rights Agreement
or otherwise. In addition, the Company shall not amend or waive any rights under
the Company Rights Agreement or otherwise in a manner that would materially and
adversely affect either party's ability to consummate the Merger or the economic
benefits of the Merger to either party.
(v) Taxes. The Company shall not, and shall cause its subsidiaries not to, (A)
make or rescind any express or deemed material election relating to Taxes, (B)
settle or compromise any material claim, audit, dispute, controversy,
examination, investigation or other proceeding relating to Taxes, (C) materially
change any of its methods of reporting income or deductions for federal income
Tax purposes, except as may be required by applicable law, or (D) file any
material Tax Return other than in a manner consistent with past custom and
practice.
Section 6.2 Covenant of the Company; Alternative Proposals. From and after
the date hereof, the Company agrees (a) that it will not, its subsidiaries will
not, and it will not authorize or permit any of its or its subsidiaries'
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its subsidiaries or any of the foregoing) to, directly or indirectly,
encourage, initiate or solicit (including by way of furnishing information) or
take any other action to facilitate knowingly any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders) which constitutes or may reasonably be expected to lead to an
Alternative Proposal (as defined below) from any person or engage in any
discussion or negotiations concerning, or provide any non-public information or
data to make or implement an Alternative Proposal; (b) that it will immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussions or negotiations with any parties conducted
heretofore with a view of formulating an Alternative Proposal; and (c) that it
will notify Parent orally and in writing of any such inquiry, offer or proposals
(including, without limitation, the terms and conditions of any such proposal
and the identity of the person making it), within 24 hours of the receipt
thereof, and that it shall keep Parent informed of the status and details of any
such inquiry, offer or proposal and shall give Parent 48 hours' prior notice of
any agreement to be entered into or of the fact that it proposes to commence
providing information to any person making such inquiry, offer or proposal;
provided however, that notwithstanding any other provision hereof, the Company
may (i) at any time prior to the time the Company shareholders shall have voted
to approve this Agreement engage in discussions or negotiations with a third
party who (without any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with Company or its representatives
after the date hereof) seeks to initiate such discussions or negotiations and
may furnish such third party information concerning the Company and its
business, properties and assets if, and only to the extent that, (A)(x) the
third party has first made an Alternative Proposal that is financially superior
to the Merger and has demonstrated that any necessary financing has been
obtained and (y) the Company Board of Directors shall conclude in good faith,
based upon the advice of outside counsel and such other matters as the Company
Board of Directors deems relevant, that failure to do so would likely result in
a breach of its fiduciary duties under applicable law and (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, the Company (x) provides prompt written notice to
Parent to the effect that it intends to furnish information to, or intends to
enter into discussions or negotiations with, such person or entity, (y) provides
the Parent a reasonable opportunity to respond to the Alternative Proposal and
(z) receives from such person an executed confidentiality agreement in
reasonably customary form except that such confidentiality agreement shall not
prohibit such person from making an unsolicited Alternative Proposal, and (ii)
comply with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer and/or (iii) accept an Alternative Proposal from a
third party, provided the Company terminates this Agreement pursuant to Section
9.1(e). "Alternative Proposal" shall mean any merger, acquisition,
consolidation, reorganization, share exchange, tender offer, exchange offer or
similar transaction involving the Company or any of the Company's subsidiaries,
or any proposal or offer to acquire in any manner, directly or indirectly, a
substantial equity interest in or a substantial portion of the assets of the
Company or any of the Company's subsidiaries. Nothing herein shall prohibit a
disposition permitted by Section 6.1(g) hereof.
Section 6.3 Covenant of Parent; Employment Agreements. Parent and Mr.
Crespo have entered into an employment agreement, and Parent shall at the
Closing offer to enter into employment agreements on the terms set forth in
Exhibit 6.3 of the Company Disclosure Schedule with the persons identified
thereon.
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
bankers, financial advisors and other representatives of the other
(collectively, "Representatives") reasonable access, throughout the period prior
to the Effective Time, to all of its properties, books, contracts, commitments
and records (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 or sent to the SEC, the FERC, the
Department of Justice, the Federal Trade Commission or any other federal or
state regulatory agency or commission, and (ii) access to all information
concerning themselves, their subsidiaries, directors, officers and shareholders
and such other matters as may be reasonably requested by the other party in
connection with any filings, applications or approvals required or contemplated
by this Agreement. Each party shall, and shall cause its subsidiaries and
Representatives to, hold in strict confidence all Proprietary Information (as
defined in the Confidentiality Agreement) concerning the other parties furnished
to it in connection with the transactions contemplated by this Agreement in
accordance with the Confidentiality Agreement, dated as of April 14, 1999,
between the Company and Parent, as it may be amended from time to time (the
"Confidentiality Agreement").
Section 7.2 Proxy Statement and Registration Statement.
(a) Preparation and Filing. The parties will prepare and file with the SEC as
soon as reasonably practicable after the date hereof the Registration Statement
and the Proxy Statement (together, the "Proxy/Registration Statement"). The
parties hereto shall each use reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after such filing. Each party hereto shall also take such action as
may be reasonably required to cause the shares of Parent Common Stock issuable
in connection with the Merger to be registered or to obtain an exemption from
registration under applicable state "blue sky" or securities laws; provided,
however, that no party shall be required to register or qualify as a foreign
corporation or to take other action which would subject it to service of process
in any jurisdiction where it will not be, following the Merger, so subject. Each
of the parties hereto shall furnish all information concerning itself which is
required or customary for inclusion in the Proxy/Registration Statement. The
parties shall use reasonable efforts to cause the shares of Parent Common Stock
issuable in the Merger to be approved for listing on the NYSE upon official
notice of issuance. The information provided by any party hereto for use in the
Proxy/Registration Statement shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading. No representation, covenant or agreement is made by or
on behalf of any party hereto with respect to information supplied by any other
party for inclusion in the Proxy Statement/Registration Statement. (b) Letter of
the Company's Accountant. Following receipt by PricewaterhouseCoopers LLP, the
Company's independent auditor, of an appropriate request from the Company
pursuant to SAS No. 72, the Company shall use its best efforts to cause to be
delivered to Parent a letter of PricewaterhouseCoopers LLP dated a date within
two business days before the date of the Proxy/Registration Statement, and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements
similar to the Proxy/Registration Statement.
(b) Letter of the Company's Accountant. Following receipt by Pricewaterhouse
Coopers LLP, the Company's independent auditor, of an appropriate request from
the Company pursuant to SAS No. 72, the Company shall use its best efforts to
cause to be delivered to Parent a letter of PricewaterhouseCoopers LLP dated a
date within two business days before the date of the Proxy/Registration
Statement, and addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements similar to the Proxy/Registration Statement.
(c) Letter of Parent's Accountant. Following receipt by PricewaterhouseCoopers
LLP, Parent's independent auditor, of an appropriate request from Parent
pursuant to SAS No. 72, Parent shall use best efforts to cause to be delivered
to the Company a letter of PricewaterhouseCoopers LLP, dated a date within two
business days before the date of the Proxy/Registration Statement, and addressed
to the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements
similar to the Proxy/Registration Statement.
Section 7.3 Regulatory Matters. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain no later
than the Initial Termination Date, as such date may be extended pursuant to
Section 9.1(b), all necessary permits, consents, approvals and authorizations of
all Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Company Required Statutory Approvals and the Parent Required Statutory
Approvals.
Section 7.4 Shareholder Approval.
(a) The Company Shareholders. Subject to the provisions of Section 7.4(b), the
Company shall, as soon as reasonably practicable after the date hereof (i) take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its shareholders (the "Company Special Meeting") for the purpose of securing the
Company Shareholders' Approval, (ii) distribute to its shareholders the Proxy
Statement in accordance with applicable federal and state law and with its
articles of organization and by-laws, (iii) subject to the fiduciary duties of
its Board of Directors, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv) cooperate and
consult with Parent with respect to each of the foregoing matters.
(b) Meeting Date. The Company Special Meeting for the purpose of securing the
Company Shareholders' Approval shall be held on such date as the Company and
Parent shall mutually determine.
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,
Parent and the Surviving Corporation shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, an officer, director or employee of the Company or any of its
subsidiaries (each an "Indemnified Party" and collectively, the "Indemnified
Parties") against (i) all losses, expenses (including reasonable attorney's fees
and expenses), claims, damages or liabilities or, subject to the proviso of the
next succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time (and whether asserted or
claimed prior to, at or after the Effective Time) that are, in whole or in part,
based on or arising out of the fact that such person is or was a director,
officer or employee of the Company or a subsidiary of the Company (the
"Indemnified Liabilities"), and (ii) all Indemnified Liabilities to the extent
they are based on or arise out of or pertain to the transactions contemplated by
this Agreement. In the event of any such loss, expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) Parent shall
pay the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to Parent, promptly
after statements therefor are received and otherwise advance to such Indemnified
Party upon request reimbursement of documented expenses reasonably incurred,
(ii) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth in Section
33-756, 33-757 and 33-765 of the CBCA, and the articles of organization or
By-laws shall be made by independent counsel mutually acceptable to Parent and
the Indemnified Party; provided, however, that Parent shall not be liable for
any settlement effected without its written consent (which consent shall not be
unreasonably withheld). The Indemnified Parties as a group may retain only one
law firm with respect to each related matter except to the extent there is, in
the opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time, Parent shall
(i) cause to be maintained in effect policies of directors' and officers'
liability insurance for the benefit of those persons who are currently covered
by such policies of the Company on terms no less favorable than the terms of
such current insurance coverage or (ii) provide tail coverage for such persons
which provides coverage for a period of six years for acts prior to the
Effective Time on terms no less favorable than the terms of such current
insurance coverage; provided, however, that Parent shall not be required to
expend in any year an amount in excess of 200% of the annual aggregate premiums
currently paid by the Company, for such insurance; and provided, further, that
if the annual premiums of such insurance coverage exceed such amount, Parent
shall be obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of Parent, for a cost not
exceeding such amount.
(c) Successors. In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in either such case, proper provisions shall be made so that
the successors and assigns of Parent shall assume the obligations set forth in
this Section 7.5.
(d) Survival of Indemnification. To the fullest extent permitted by law, from
and after the Effective Time, all rights to indemnification as of the date
hereof in favor of the employees, agents, directors and officers of the Company,
and its subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in its respective articles of organization and
by-laws in effect on the date hereof, or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 7.6 Disclosure Schedules. On the date hereof, (i) Parent has
delivered to the Company a schedule (the "Parent Disclosure Schedule"),
accompanied by a certificate signed by the Senior Vice President and General
Counsel of Parent stating the Parent Disclosure Schedule is being delivered
pursuant to this Section 7.6(i), and (ii) the Company has delivered to Parent a
schedule (the "Company Disclosure Schedule"), accompanied by a certificate
signed by the Vice President, General Counsel and Secretary of the Company
stating the Company Disclosure Schedule is being delivered pursuant to this
Section 7.6(ii). The Company Disclosure Schedule and the Parent Disclosure
Schedule are collectively referred to herein as the "Disclosure Schedules." The
Disclosure Schedules constitute an integral part of this Agreement and modify
the respective representations, warranties, covenants or agreements of the
parties hereto contained herein to the extent that such representations,
warranties, covenants or agreements expressly refer to the Disclosure Schedules.
Anything to the contrary contained herein or in the Disclosure Schedules
notwithstanding, any and all statements, representations, warranties or
disclosures set forth in the Disclosure Schedules shall be deemed to have been
made on and as of the date hereof.
Section 7.7 Public Announcements. Subject to each party's disclosure
obligations imposed by law, the Company and Parent will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto without the consent of the other party (which
consent shall not be unreasonably withheld).
Section 7.8 Rule 145 Affiliates. Within 30 days after the date of this
Agreement, the Company shall identify in a letter to Parent all persons who are,
and to such person's best knowledge who will be at the Closing Date,
"affiliates" of the Company, as such term is used in Rule 145 under the
Securities Act. The Company shall use all reasonable efforts to cause its
affiliates (including any person who may be deemed to have become an affiliate
after the date of the letter referred to in the prior sentence) to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit 7.8 (each, an "Affiliate Agreement").
Section 7.9 Certain Employee Agreements. Subject to Section 7.10, Parent
and the Surviving Corporation and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements and
commitments of the parties prior to the date hereof which apply to any current
or former employee or current or former director of the parties hereto;
provided, however, that the foregoing shall not prevent Parent or the Surviving
Corporation from enforcing such contracts, agreements, collective bargaining
agreements and commitments in accordance with their terms, including, without
limitation, any reserved right to amend, modify, suspend, revoke or terminate
any such contract, agreement, collective bargaining agreement or commitment. It
is the present intention of Parent and the Company that following the Effective
Time, there will be no involuntary reductions in force at the Surviving
Corporation, but that Parent, the Surviving Corporation and their respective
subsidiaries will continue Parent's and the Company's present strategy of
achieving workforce reductions through attrition; however, if any reductions in
workforce in respect of employees of the Company become necessary, they shall be
made on a fair and equitable basis, in light of the circumstances and the
objectives to be achieved, giving consideration to previous work history, job
experience, and qualifications, without regard to whether employment prior to
the Effective Time was with the Company or its subsidiaries or Parent or its
subsidiaries, and any employees whose employment is terminated or jobs are
eliminated by Parent, the Surviving Corporation or any of their respective
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 Parent, the Surviving Corporation or any of their respective subsidiaries.
Any workforce reductions carried out following the Effective Time by Parent or
the Surviving Corporation and their respective subsidiaries shall be done in
accordance with all applicable collective bargaining agreements, and all laws
and regulations governing the employment relationship and termination thereof
including, without limitation, the Worker Adjustment and Retraining Notification
Act and regulations promulgated thereunder, and any comparable state or local
law.
Section 7.10 Employee Benefit Plans
Each individual employed by the Company or any of its
subsidiaries immediately before the Effective Time who (i) remains employed by
Parent, the Surviving Corporation or any of their respective subsidiaries and
(ii) is not covered by a collective bargaining agreement (each such individual,
a "Nonunion Continuing Company Employee"), shall be provided with credit, for
all purposes other than benefit accrual under the employee benefit plans of
Parent and its Affiliates providing benefits after the Effective Time to
Nonunion Continuing Company Employees, for his or her years of service with the
Company and its subsidiaries before the Effective Time, to the same extent as
such Nonunion Continuing Company Employee was entitled, before the Effective
Time, to credit for such service under any similar Plans. In addition, and
without limiting the generality of the foregoing: (i) each Nonunion Continuing
Company Employee shall be immediately eligible to participate, without any
waiting time, in any and all employee benefit plans sponsored by Parent and its
subsidiaries for the benefit of Nonunion Continuing Company Employees (such
Plans, collectively, the "New Plans") to the extent coverage under such New Plan
replaces coverage under a comparable Plan in which such Nonunion Continuing
Company Employee participated immediately before the Effective Time (such plans,
collectively, the "Old Plans"); and (ii) for purposes of each New Plan providing
medical, dental, pharmaceutical and/or vision benefits to any Nonunion
Continuing Company Employee, Parent shall cause all pre-existing condition
exclusions and actively-at-work requirements of such New Plan to be waived for
such Nonunion Continuing Company Employee and his or her covered dependents, and
Parent shall cause any eligible expenses incurred by such Nonunion Continuing
Company Employee and his or her covered dependents during the portion of the
plan year of the Old Plan ending on the date such Nonunion Continuing Company
Employee's participation in the corresponding New Plan begins to be taken into
account under such New Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to such Nonunion
Continuing Company Employee and his or her covered dependents for the applicable
plan year as if such amounts had been paid in accordance with such New Plan;
provided, however, that to the extent permissible under applicable law, Parent
shall cause the Surviving Corporation to maintain the Old Plans in effect for
not less than two years following the Effective Time.
Section 7.11 Company Stock Plans. With respect to each Plan that provides
for benefits in the form of Company Common Stock ("Company Stock Plans"), the
Company and Parent shall take all corporate action necessary or appropriate to
(i) provide for the issuance or purchase in the open market of Parent Common
Stock rather than Company Common Stock, pursuant thereto, and otherwise to amend
such Company Stock Plans to reflect this Agreement and the Merger, (ii) obtain
shareholder approval with respect to such Company Stock Plans to the extent such
approval is required for purposes of the Code or other applicable law, or to
enable such Company Stock Plans to comply with Rule 16b-3 promulgated under the
Exchange Act, (iii) reserve for issuance under such Company Stock Plans or
otherwise provide a sufficient number of shares of Parent Common Stock for
delivery upon payment of benefits, grant of awards or exercise of options under
such Company Stock Plans and (iv) as soon as practicable after the Effective
Time, file registration statements on Form S-8 or amendments on such forms to
the Form S-4 Registration Statement, as the case may be (or any successor or
other appropriate forms), with respect to the shares of Parent Common Stock
subject to such Company Stock Plans to the extent such registration statement is
required under applicable law, and Parent shall use its best efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as such benefits and
grants remain payable and such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, the Company shall
administer the Company Stock Plans, where applicable, in a manner that complies
with Rule 16b-3 promulgated under the Exchange Act.
Section 7.12 Expenses. Subject to 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 Proxy/Registration Statement,
as well as the filing fee relating thereto, shall be shared equally by the
Company and Parent.
Section 7.13 Further Assurances. Each party will, and will cause its
subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Merger in accordance with the terms hereof.
Section 7.14 Corporate Offices. At and subsequent to the Effective Time,
the corporate headquarters of the Surviving Corporation shall be located in
Bridgeport, Connecticut. At and subsequent to the Effective Time, the corporate
headquarters of Energy East Enterprises, Inc., and Xenergy Enterprises, Inc.,
shall be located in Connecticut.
Section 7.15 Community Involvement. After the Effective Time, Parent will,
or will cause the Surviving Corporation to make at least $500,000 per year in
charitable contributions to the communities served by the Surviving Corporation
and otherwise maintain a substantial level of involvement in community
activities in the State of Connecticut that is similar to, or greater than, the
level of community development and related activities carried on by the Company.
Section 7.16 Advisory Board. At the Effective Time, there shall be
established an advisory board to the Surviving Corporation ("Advisory Board"),
which shall be comprised of the persons who were directors of the Company
immediately prior to the Effective Time. The Advisory Board shall meet no less
frequently than quarterly and shall provide advice to the board of directors of
the Surviving Corporation with respect to such issues as the board of directors
of the Surviving Corporation may from time to time request, including but not
limited to community relations, customer service, economic development, employee
development and relations and such other matters of community interest as may be
appropriate. The members of the Advisory Board, who shall serve at the
discretion of the Surviving Corporation, shall receive remuneration for their
services equivalent to the remuneration currently provided to non-officer
directors of the Southern Connecticut Gas Company, a Connecticut corporation.
Section 7.17 Tax-Free Status. No party shall, nor shall any party permit
any of its subsidiaries to, take any actions which would, or would be reasonably
likely to, adversely affect the status of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and each party hereto shall use all
reasonable efforts to achieve such result.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction 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 by the joint action of the parties
hereto:
(a) Shareholder Approval. The Company Shareholders' Approval shall have been
obtained.
(b) No Injunction. No temporary restraining order or preliminary or permanent
injunction or other order by any federal or state court preventing consummation
of the Merger shall have been issued and be continuing in effect, and the Merger
and the other transactions contemplated hereby shall not have been prohibited
under any applicable federal or state law or regulation.
(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 Parent Common Stock issuable in the Merger
pursuant to Article II shall have been approved for listing on the NYSE upon
official notice of issuance.
(e) Statutory Approvals. The Company Required Statutory Approvals and the Parent
Required Statutory Approvals shall have been obtained at or prior to the
Effective Time, such approvals shall have become Final Orders (as defined below)
and such Final Orders shall not impose terms or conditions which, in the
aggregate, would have, or insofar as reasonably can be foreseen, could have, a
Company Material Adverse Effect or a Parent Material Adverse Effect; provided,
however, that a requirement that Parent become a registered holding company
pursuant to Section 5 of the 1935 Act as a result of the Merger shall not
constitute a term or condition which could have a "material adverse effect"
within the meaning of this Section 8.1(e) of the Agreement; provided further
that the inclusion of a condition or requirement of the Securities and Exchange
Commission's approval of the Merger under the 1935 Act that Parent divest its
ownership of New York State Electric & Gas Corporation, a New York corporation
and wholly owned subsidiary of Parent, shall constitute a term or condition
which could have a "material adverse effect" within the meaning of this Section
8.1(e) of the Agreement. A "Final Order" means action by the relevant regulatory
authority which has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to which
all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
Section 8.2 Conditions to Obligation of Parent to Effect the Merger. The
obligation of Parent to effect the 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 Parent in writing pursuant to Section 9.5:
(a) Performance of Obligations of the Company. The Company (and its appropriate
subsidiaries) shall have performed in all material respects its agreements and
covenants contained in Sections 6.1 and 6.2 and shall have performed in all
material respects its other agreements and covenants contained in or
contemplated by this Agreement to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and warranties of the
Company set forth in this Agreement shall be true and correct (i) on and as of
the date hereof and (ii) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date (except for representations and warranties that expressly speak
only as of a specific date or time other than the date hereof or the Closing
Date, which need only be true and correct as of such date or time) except in
each of cases (i) and (ii) for such failures of representations or warranties to
be true and correct (without regard to any materiality qualifications contained
therein) which, individually and in the aggregate, would not be reasonably
likely to result in a Company Material Adverse Effect.
(c) Closing Certificates. Parent shall have received a certificate signed by the
chief financial officer of the Company, dated the Closing Date, to the effect
that, to the best of such officer's knowledge, the conditions set forth in
Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) No Company Material Adverse Effect. No Company Material Adverse Effect shall
have occurred, and there shall exist no fact or circumstance other than facts
and circumstances described in Section 8.2(d) of the Company Disclosure Schedule
or the Company SEC Reports filed prior to the date hereof which is reasonably
likely to have a Company Material Adverse Effect.
(e) Company Required Consents. The Company Required Consents the failure of
which to obtain would have a Company Material Adverse Effect shall have been
obtained.
(f) Affiliate Agreements. Parent shall have received Affiliate Agreements, duly
executed by each "affiliate" of the Company, substantially in the form of
Exhibit 7.8, as provided in Section 7.8.
(g) Tax Opinion. Parent shall have received an opinion of Wachtell, Lipton,
Rosen & Katz to the effect that the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion,
Wachtell, Lipton, Rosen & Katz may receive and rely upon representations
contained in certificates of Parent, the Company and others, in each case in
form and substance reasonably acceptable to such counsel.
(h) Termination of Operating Agreement. The Amended and Restated Operating
Agreement of Connectiv/CNE Energy Services, L.L.C., dated September 1, 1997
shall have been terminated and shall be of no further force or effect.
Section 8.3 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be further subject to
the satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by the Company in writing pursuant to Section 9.5.
(a) Performance of Obligations of Parent. Parent (and its appropriate
subsidiaries) shall have performed in all material respects its agreements and
covenants contained in Section 6.1 and shall have performed in all material
respects its other agreements and covenants contained in or contemplated by this
Agreement to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties of Parent
set forth in this Agreement shall be true and correct (i) on and as of the date
hereof and (ii) on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that expressly speak only as of a
specific date or time other than the date hereof or the Closing Date, which need
only be true and correct as of such date or time) except in each of cases (i)
and (ii) for such failures of representations or warranties to be true and
correct (without regard to any materiality qualifications contained therein)
which, individually and in the aggregate, would not be reasonably likely to
result in a Parent Material Adverse Effect.
(c) Closing Certificates. The Company shall have received a certificate signed
by the Senior Vice President and General Counsel of Parent, dated the Closing
Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) No Parent Material Adverse Effect. No Parent Material Adverse Effect shall
have occurred, and there shall exist no fact or circumstance other than facts
and circumstances described in the Parent SEC Reports filed prior to the date
hereof which is reasonably likely to have a Parent Material Adverse Effect.
(e) Parent Required Consents. The Parent Required Consents the failure of which
to obtain would have a Parent Material Adverse Effect shall have been obtained.
(f) Tax Opinion. The Company shall have received an opinion from LeBoeuf, Lamb,
Greene & MacRae, L.L.P. to the effect that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, LeBoeuf, Lamb, Greene & MacRae, LLP, may receive and rely upon
representations contained in certificates of Parent, the Company and others, in
each case in form and substance reasonably acceptable to such counsel.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 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 hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of the Company and
Parent;
(b) by any party hereto, by written notice to the other parties, if the
Effective Time shall not have occurred on or before the date which is twelve
months from the date hereof (the "Initial Termination Date"); provided, however,
that the right to terminate the 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 directly or indirectly in, the
failure of the Effective Time to occur on or before such date; and provided,
further, that if on the Initial Termination Date the conditions to the Closing
set forth in Section 8.1(e), shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then the Initial Termination Date shall be extended to the
eighteen-month anniversary of the date hereof;
(c) by any party hereto, by written notice to the other parties, if the Company
Shareholders' Approval shall not have been obtained at a duly held Company
Special Meeting, including any adjournments thereof by the Initial Termination
Date;
(d) by any party hereto, if any state or federal law, order, rule or regulation
is adopted or issued, which has the effect, as supported by the written opinion
of outside counsel for such party, of prohibiting the Merger, or by any party
hereto if any court of competent jurisdiction in the United States or any State
shall have issued an order, judgment or decree permanently restraining,
enjoining or otherwise prohibiting the Merger, and such order, judgment or
decree shall have become final and nonappealable;
(e) by the Company prior to the approval of this Agreement by the shareholders
of the Company, upon five days' prior notice to Parent, if the Company is not in
breach of this Agreement and, as a result of an Alternative Proposal, the Board
of Directors of the Company determines in good faith, that (x) the Alternative
Proposal is financially superior to the Merger and the third party making the
Alternative Proposal has demonstrated that any necessary financing has been
obtained and (y) based upon the advice of outside counsel and such other matters
as the Company Board of Directors deems relevant, after considering applicable
provisions of state law and after giving effect to all concessions which may be
offered by the other party pursuant to the proviso below, that failure to do so
would likely result in a breach of its fiduciary duties under applicable law;
provided, however, that prior to any such termination, the Company shall, and
shall cause its respective financial and legal advisors to, negotiate with
Parent to make such adjustments in the terms and conditions of this Agreement as
would enable the Company to proceed with the transactions contemplated herein;
(f) by the Company, by written notice to Parent, if (i) there exist breaches of
the representations and warranties of Parent made herein as of the date hereof
which breaches, individually or in the aggregate, would or would be reasonably
likely to result in a Parent Material Adverse Effect, and such breaches shall
not have been remedied within 20 days after receipt by Parent of notice in
writing from the Company, specifying the nature of such breaches and requesting
that they be remedied, or (ii) Parent (or its appropriate subsidiaries) shall
have failed to perform and comply with, in all material respects, its agreements
and covenants hereunder, and such failure to perform or comply shall not have
been remedied within 20 days after receipt by Parent of notice in writing from
the Company, specifying the nature of such failure and requesting that it be
remedied; or
(g) by Parent, by written notice to the Company, if (i) there exist material
breaches of the representations and warranties of the Company made herein as of
the date hereof which breaches, individually or in the aggregate, would or would
be reasonably likely to result in a Company Material Adverse Effect, and such
breaches shall not have been remedied within 20 days after receipt by the
Company of notice in writing from Parent, specifying the nature of such breaches
and requesting that they be remedied, (ii) the Company (or its appropriate
subsidiaries) shall not have performed and complied with its agreements and
covenants contained in Sections 6.1(b) and 6.1(c) or shall have failed to
perform and comply with, in all material respects, its other agreements and
covenants hereunder, and such failure to perform or comply shall not have been
remedied within 20 days after receipt by the Company of notice in writing from
Parent, specifying the nature of such failure and requesting that it be
remedied; or (iii) the Board of Directors of the Company or any committee
thereof (A) shall withdraw or modify in any manner adverse to Parent its
approval or recommendation of this Agreement or the transactions contemplated
herein, (B) shall fail to reaffirm such approval or recommendation upon Parent's
request within two days of such request, (C) shall approve or recommend any
acquisition of the Company or a material portion of its assets or any tender
offer for the shares of capital stock of the Company, in each case by a party
other than Parent or any of its affiliates or (D) shall resolve to take any of
the actions specified in clause (A), (B) or (C).
Section 9.2 Effect of Termination. Subject to Section 10.1(b), in the
event of termination of this Agreement by either the Company or Parent pursuant
to Section 9.1, there shall be no liability on the part of either the Company or
Parent or their respective officers or directors hereunder, except that Section
7.12, Section 9.3, the agreement contained in the last sentence of Section 7.1,
Section 10.8 and Section 10.9 shall survive the termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee upon Breach or Withdrawal of Approval. If this Agreement is
terminated at such time that this Agreement is terminable pursuant to one (but
not both) of (x) Section 9.1(f)(i) or (ii) or (y) Section 9.1(g)(i) or (ii),
then: (i) the breaching party shall promptly (but not later than five business
days after receipt of notice from the non-breaching party) pay to the
non-breaching party in cash an amount equal to all documented out-of-pocket
expenses and fees incurred by the non-breaching party (including, without
limitation, fees and expenses payable to all legal, accounting, financial,
public relations and other professional advisors arising out of, in connection
with or related to the Merger or the transactions contemplated by this
Agreement) not in excess of $5 million ("Expenses"); provided, however, that, if
this Agreement is terminated by a party as a result of a willful breach by the
other party, the non-breaching party may pursue any remedies available to it at
law or in equity and shall, in addition to its out-of-pocket expenses (which
shall be paid as specified above and shall not be limited to $5 million), be
entitled to retain such additional amounts as such non-breaching party may be
entitled to receive at law or in equity.
(b) The Company shall pay Parent a fee of $17 million ("Termination Fee"), upon
the termination of this Agreement by Parent or the Company pursuant to Section
9.1(c) or by the Company pursuant to Section 9.1(e) or by Parent pursuant to
Section 9.1(g)(iii); provided, however, that in the event of termination under
either Section 9.1(c) or Section 9.1(g)(iii), no payment of the Termination Fee
or Expenses shall be required unless and until within two years of such
termination the Company enters into a definitive agreement to consummate or
consummates an Alternative Proposal, and, in the case of a termination pursuant
to Section 9.1(c), there shall have been made and not withdrawn at the time of
the Company Special Meeting an Alternative Proposal and, in the case of a
termination pursuant to Section 9.1(g)(iii), there shall have been made and not
withdrawn at the time of such termination an Alternative Proposal.
(c) Liquidated Damages; Prompt Payment. The parties agree that the agreements
contained in this Section 9.3 are an integral part of the transactions
contemplated by the Agreement and constitute liquidated damages and not a
penalty. If one party fails to pay promptly to the other any fee or expenses due
hereunder, the defaulting party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing of
any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Chase Manhattan Bank, N.A., from the date such fee was required to be paid.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the shareholders of the Company and prior to the Effective Time, but after such
approvals, no such amendment shall (i) alter or change the amount or kind of
shares, rights or any of the proceedings of the treatment of shares under
Article II, or (ii) 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
materially adversely affect the rights of holders of Company capital stock,
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.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties. (a)
All representations, warranties and agreements in this Agreement shall not
survive the Merger, except as otherwise provided in this Agreement and except
for the agreements contained in this Section 10.1, in Articles I and II and in
Sections 7.5, 7.11, 10.7, 10.8 and 10.9.
(b) No party may assert a claim for breach of any representation or warranty
contained in this Agreement (whether by direct claim or counterclaim) except in
connection with the cancellation of this Agreement pursuant to Section 9.1(f)(i)
or Section 9.1(g)(i) (or pursuant to any other subsection of Section 9.1, if the
terminating party would have been entitled to terminate this Agreement pursuant
to Section 9.1(f)(i) or Section 9.1(g)(i)).
Section 10.2 Brokers. The Company represents and warrants that, except for
Morgan Stanley & Co. Incorporated whose fees have been disclosed to Parent prior
to the date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company. Parent represents and warrants that, except for
Chase Securities, Inc. whose fees have been disclosed to the Company prior to
the date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent.
Section 10.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (i) delivered personally, (ii) sent
by reputable overnight courier service, (iii) telecopied (which is confirmed),
or (iv) five days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Company, to:
Connecticut Energy Corporation
855 Main Street
Bridgeport, Connecticut 06604-4918
Attention: Samuel L. Bowlby
Telephone: (203) 382-8100
Telecopy: (203) 382-8123
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
121 W. 55th Street
New York, New York 10019-5389
Attention: William S. Lamb, Esq.
Benjamin G. Clark, Esq.
Telephone: (212) 424-8000
Telecopy: (212) 424-8500
(b) If to Parent, to:
Energy East Corporation
One Canterbury Green, Fourth Floor
Stamford, Connecticut 06901
Attention: Kenneth M. Jasinski, Esq.
Telephone: (203) 325-0690
Telecopy:
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Employment Agreement and the Confidentiality Agreement; (ii)
shall not be assigned by operation of law or otherwise; and (iii) shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts executed in and to be fully performed in such State,
without giving effect to its conflicts of law, rules or principles and except to
the extent the provisions of this Agreement (including the documents or
instruments referred to herein) are expressly governed by or derive their
authority from the CBCA.
Section 10.5 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
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, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.8 Waiver of Jury Trial and Certain Damages. Each party to this
Agreement waives, to the fullest extent permitted by applicable law, (i) any
right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of this Agreement and (ii) without limiting the effect of
Section 9.3, any right it may have, other than in the case of a willful breach,
to receive damages from any other party based on any theory of liability for any
special, indirect, consequential (including lost profits) or punitive damages.
Section 10.9 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of New York.
IN WITNESS WHEREOF, the Company, Parent and Merger Co. have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
CONNECTICUT ENERGY CORPORATION
By: /s/ SAMUEL W. BOWLBY
Name: Samuel W. Bowlby
Title: Vice President, General Counsel and
Secretary
ENERGY EAST CORPORATION
By: /s/ KENNETH M. JASINSKI
Name: Kenneth M. Jasinski
Title: Senior Vice President and
General Counsel
MERGER CO.
By: /s/ KENNETH M. JASINSKI
Name: Kenneth M. Jasinski
Title: Secretary, Treasurer and Vice
President
EXHIBIT II
FIRST AMENDMENT TO THE RIGHTS PLAN
AMENDMENT, dated as of April 22, 1999, to the Rights
Agreement, dated as of July 28, 1998 (the "Rights Agreement"), between
Connecticut Energy Corporation (the "Company") and BankBoston, N.A., as Rights
Agent (the "Rights Agent").
WHEREAS, the parties hereto are parties to the Rights
Agreement;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the
Board of Directors deems it necessary and desirable and in the best interests of
the Company and its shareholders to amend the Rights Agreement as set forth
below; and
WHEREAS, the parties hereto desire to amend the Rights
Agreement, as provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises set forth herein and in the Rights Agreement, the parties hereto
agree as follows:
1. The definition of "Acquiring Person" as set forth in
Section 1(a) of the Rights Agreement is hereby amended by adding the following
provision at the end of the first sentence thereof:
; provided, however, that neither Energy East Corporation
("Parent") nor Merger Co. ("Merger Sub") shall be deemed an
"Acquiring Person" as a result of the execution, delivery and
performance of the Agreement and Plan of Merger (the "Merger
Agreement") dated as of April 23, 1999, among Connecticut
Energy Corporation, Parent and Merger Sub or the consummation
of the transactions contemplated by the Merger Agreement (the
"Merger").
2. Section 7(a) of the Rights Agreement is hereby amended by
adding "or (iv) immediately prior to the effective time of the Merger
contemplated by and in accordance with the Merger Agreement (the "Effective
Time")".
3 Clause (a)(x) of Section 13 of the Rights Agreement is
hereby amended to read in its entirety as follows:
"(a)(x) other than pursuant to the Merger Agreement, the
Company shall consolidate with, or merge with and into, any
other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,"
4. Section 23(a) of the Rights Agreement is hereby
amended:
(a) by replacing the word "earlier" with "earliest" in
the third line,
(b) by replacing the word "or" immediately preceding
"(y)" in the seventh line with a comma and
(c) by adding immediately before the word "redeem" in the
seventh line "or (z) the Effective Time,".
5. Section 23 is hereby amended by adding subsection (d) at
the end thereof as follows:
"(d) Notwithstanding anything in this Agreement to the
contrary, if any Right is not (i) exercised by the registered
holder of the Right Certificate evidencing such Right pursuant
to Section 7 or (ii) redeemed by the Board of Directors of the
Company pursuant to Section 23, in each case prior to the
Expiration Date, this Agreement shall immediately expire and
be terminated and all such Rights shall be canceled and shall
cease to exist."
3. This Amendment shall be governed by and construed in
accordance with the laws of the State of Connecticut applicable to contracts to
be made and performed entirely within such State.
4. Except as expressly amended hereby, the Rights Agreement
shall continue in full force and effect in accordance with the provisions
thereof.
5. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, Connecticut Energy Corporation and the
Rights Agent have executed this Amendment as of the date first above written.
CONNECTICUT ENERGY CORPORATION
By: /s/ Samuel W. Bowlby
Name: Samuel W. Bowlby
Title: Vice President and General Counsel
Attest:
By: /s/ Anne O. McCrory
Name: Anne O. McCrory
Title: Counsel
BANKBOSTON, N.A.
By: /s/ James P. Mitchell
Name: James P. Mitchell
Title: Senior Account Manager
Attest:
By: /s/ Michael Simeoni
Name: Michael Simeoni
Title: Account Manager
