<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1996
REGISTRATION NO. 333-11329
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------
HOUSTON LIGHTING & POWER COMPANY
HOUSTON INDUSTRIES INCORPORATED
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
TEXAS 4911 74-0694415
TEXAS 4911 74-1885573
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
HUGH RICE KELLY
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
1111 LOUISIANA 1111 LOUISIANA
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 207-1111 (713) 207-1111
(Address, including zip code, and telephone (Name, address, including zip code, and telephone number,
number, including area code, of Registrant's including
principal executive offices) area code, of agent for service)
</TABLE>
---------------------
COPIES TO:
<TABLE>
<S> <C>
STEPHEN A. MASSAD GERRY OSTERLAND
BAKER & BOTTS, L.L.P. JONES, DAY, REAVIS & POGUE
ONE SHELL PLAZA 555 WEST 5TH STREET
910 LOUISIANA SUITE 4600
HOUSTON, TEXAS 77002 LOS ANGELES, CALIFORNIA 90013
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: as soon as practicable after the effective date of this Registration
Statement and the effective time of the merger of NorAm Energy Corp. with and
into HI Merger, Inc. or Houston Lighting & Power Company, as the case may be
(the "NorAm Merger"), as described in the Agreement and Plan of Merger, dated as
of August 11, 1996 (the "Merger Agreement"), attached as Appendix A to the Joint
Proxy Statement/Prospectus forming a part of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[HI LETTERHEAD]
October , 1996
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Houston Industries Incorporated ("HI"), which will be held in the Auditorium of
Houston Industries Plaza, 1111 Louisiana Street, Houston, Texas on Tuesday,
December 17, 1996, at 2:00 p.m., Houston time.
At the Special Meeting, shareholders will be asked to approve and adopt an
Agreement and Plan of Merger (the "Merger Agreement") among HI, its subsidiaries
Houston Lighting & Power Company ("HL&P") and HI Merger, Inc. ("Merger Sub"),
and NorAm Energy Corp. ("NorAm"). Pursuant to the Merger Agreement,
- HI will merge into HL&P, as a result of which each outstanding share
of HI common stock will be converted into one share of common stock of the
surviving corporation, which will be renamed "Houston Industries
Incorporated" ("Houston") and will continue to conduct HL&P's electric
utility business under HL&P's name, and
- NorAm will merge into Merger Sub, as a result of which NorAm will
become a wholly owned subsidiary of Houston.
The Merger Agreement also provides that one of two alternative merger structures
could be used rather than the above two mergers in certain circumstances. The
term "Transaction" refers to the business combination between HI and NorAm,
regardless of the structure used to implement the combination.
In the Transaction, each outstanding share of NorAm common stock will be
converted into either cash or Houston common stock. The cash amount per share of
NorAm common stock will be $16.00 (subject to increase if the Transaction closes
after May 11, 1997). The number of shares of Houston common stock issued per
share of NorAm common stock will be not less than 0.6154 shares nor more than
0.7529 shares. (The actual number will depend upon the average closing price of
HI common stock on the New York Stock Exchange during a specified period prior
to the closing date of the Transaction.) The value (based on the average closing
price) of the Houston common stock issued per share of NorAm common stock will
be $16.00 per share if the average price of HI common stock is greater than or
equal to $21.25 and less than or equal to $26.00; the value will be more or less
than $16.00 if the average price is outside that range. Each NorAm stockholder
will be entitled to elect to receive either cash or Houston common stock.
However, elections may be prorated in order that the total number of cash
election shares and the total number of stock election shares will be
approximately equal.
In connection with the Transaction, T. Milton Honea, Robert C. Hanna, O.
Holcombe Crosswell and Joseph M. Grant, who are currently directors of NorAm,
will become directors of Houston at the effective time of the Transaction.
The Transaction and related matters are described more fully in the
accompanying Joint Proxy Statement/Prospectus. A copy of the Merger Agreement is
attached to the Joint Proxy Statement/Prospectus as Appendix A.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER AGREEMENT, WHICH WAS
APPROVED UNANIMOUSLY BY THE BOARD, IS IN THE BEST INTERESTS OF HI AND RECOMMENDS
THAT YOU VOTE FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT. In addition,
the Board of Directors has received the opinion of CS First Boston Corporation
that the consideration to be paid to holders of NorAm common stock was fair from
a financial
<PAGE> 3
point of view to HI at the date of such opinion. Approval and adoption of the
Merger Agreement require the affirmative vote of the holders of two-thirds of
the outstanding shares of HI common stock. Approval of the Merger Agreement will
constitute approval of the Transaction and the other transactions contemplated
by the Merger Agreement, including the election of the four directors named
above.
You are urged to read carefully the Joint Proxy Statement/Prospectus and
the Appendices in their entirety for a complete description of the Transaction
and the Merger Agreement. Whether or not you plan to be at the Special Meeting
of Shareholders, please be sure to date, sign and return the proxy card in the
enclosed envelope as promptly as possible so that your shares may be represented
at the meeting and voted in accordance with your wishes. Your vote is important
regardless of the number of shares you own.
Sincerely,
Don D. Jordan
Chairman, Chief Executive Officer and
President
<PAGE> 4
HOUSTON INDUSTRIES INCORPORATED
HOUSTON INDUSTRIES PLAZA
1111 LOUISIANA STREET
HOUSTON, TEXAS 77002
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Houston
Industries Incorporated, a Texas corporation ("HI"), will be held in the
Auditorium of Houston Industries Plaza, 1111 Louisiana Street, Houston, Texas on
Tuesday, December 17, 1996, at 2:00 p.m., Houston time, to vote upon adoption
and approval of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of August 11, 1996, as amended, among HI, its subsidiaries Houston Lighting &
Power Company ("HL&P") and HI Merger, Inc. ("Merger Sub"), and NorAm Energy
Corp. ("NorAm"), which is described in the attached Joint Proxy
Statement/Prospectus. Pursuant to the Merger Agreement,
- HI will merge into HL&P, as a result of which each outstanding share
of HI common stock will be converted into one share of common stock of the
surviving corporation, which will be renamed "Houston Industries
Incorporated" ("Houston") and will continue to conduct HL&P's electric
utility business under HL&P's name, and
- NorAm will merge into Merger Sub, as a result of which NorAm will
become a wholly owned subsidiary of Houston.
The Merger Agreement also provides that one of two alternative merger structures
could be used rather than the above two mergers in certain circumstances. The
term "Transaction" refers to the business combination between HI and NorAm,
regardless of the structure used to implement the combination.
As part of the Transaction, T. Milton Honea, Robert C. Hanna, O. Holcombe
Crosswell and Joseph M. Grant, who are currently directors of NorAm, will be
elected as directors of Houston effective as of the effective time of the
Transaction.
The Transaction and related matters are described more fully in the
accompanying Joint Proxy Statement/Prospectus. A copy of the Merger Agreement is
attached to the Joint Proxy Statement/Prospectus as Appendix A.
Only HI shareholders of record at the close of business on October 18, 1996
are entitled to notice of and to vote at the Special Meeting.
Your vote is important -- as is the vote of every shareholder -- and the
Board of Directors of HI appreciates the cooperation of shareholders in
directing proxies to vote at the meeting. It is important that your shares be
represented at the meeting by your signing and returning the enclosed proxy card
in the accompanying envelope as promptly as possible, whether or not you expect
to be present in person.
You may revoke your proxy at any time by following the procedures set forth
in the accompanying Joint Proxy Statement/Prospectus.
By order of the Board of Directors
Hugh Rice Kelly
Corporate Secretary
Houston, Texas
October , 1996.
<PAGE> 5
[NORAM LETTERHEAD]
October , 1996
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
NorAm Energy Corp. ("NorAm"), which will be held in the Granger A Room of the
Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas on Tuesday,
December 17, 1996, at 10:00 a.m., Houston time.
At the Special Meeting, stockholders will be asked to approve and adopt an
Agreement and Plan of Merger (the "Merger Agreement") among NorAm, Houston
Industries Incorporated ("HI") and HI's subsidiaries Houston Lighting & Power
Company ("HL&P") and HI Merger, Inc. ("Merger Sub"), which provides that NorAm
will merge into Merger Sub and as a result will become a wholly owned subsidiary
of Houston (as defined below).
The Merger Agreement also provides that HI will merge into HL&P, as a
result of which each outstanding share of HI common stock will be converted into
one share of common stock of the surviving corporation, which will be renamed
"Houston Industries Incorporated" ("Houston") and will continue to conduct
HL&P's electric utility business under HL&P's name. The Merger Agreement further
provides that one of two alternative merger structures could be used in certain
circumstances. The term "Transaction" refers to the business combination between
HI and NorAm, regardless of the structure used to implement the combination.
In the Transaction, each outstanding share of NorAm common stock will be
converted into either cash or Houston common stock. The cash amount per share of
NorAm common stock will be $16.00 (subject to increase if the Transaction closes
after May 11, 1997). The number of shares of Houston common stock issued per
share of NorAm common stock will be not less than 0.6154 shares nor more than
0.7529 shares. (The actual number will depend upon the average closing price of
HI common stock on the New York Stock Exchange during a specified period prior
to the closing date of the Transaction.) The value (based on the average closing
price) of the Houston common stock issued per share of NorAm common stock will
be $16.00 per share if the average price of HI common stock is greater than or
equal to $21.25 and less than or equal to $26.00; the value will be more or less
than $16.00 if the average price is outside that range. Each NorAm stockholder
will be entitled to elect to receive either cash or Houston common stock.
However, elections may be prorated in order that the total number of cash
election shares and the total number of stock election shares will be
approximately equal.
In connection with the Transaction, T. Milton Honea, Robert C. Hanna, O.
Holcombe Crosswell and Joseph M. Grant, who are currently directors of NorAm,
will become directors of Houston at the effective time of the Transaction.
The Transaction and related matters, including the merger consideration,
are described more fully in the accompanying Joint Proxy Statement/Prospectus. A
copy of the Merger Agreement is attached to the Joint Proxy Statement/Prospectus
as Appendix A.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION, WHICH WAS APPROVED
UNANIMOUSLY BY THE BOARD, IS IN THE BEST INTERESTS OF NORAM AND RECOMMENDS THAT
YOU VOTE FOR ADOPTION AND APPROVAL OF THE MERGER
<PAGE> 6
AGREEMENT. In addition, the Board of Directors has received the opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated that the consideration to be
received by holders of NorAm common stock pursuant to the Transaction, taken as
a whole, was fair to such stockholders from a financial point of view as of the
date of such opinion. Approval and adoption of the Merger Agreement require the
affirmative vote of the holders of a majority of the outstanding shares of NorAm
common stock. Approval of the Merger Agreement will constitute approval of the
Transaction and the other transactions contemplated by the Merger Agreement.
You are urged to read carefully the Joint Proxy Statement/Prospectus and
the Appendices in their entirety for a complete description of the Transaction
and the Merger Agreement. Whether or not you plan to be at the Special Meeting
of Stockholders, please be sure to date, sign and return the proxy in the
enclosed envelope as promptly as possible so that your shares may be represented
at the meeting and voted in accordance with your wishes. Your vote is important
regardless of the number of shares you own. PLEASE DO NOT SEND STOCK
CERTIFICATES WITH YOUR PROXY CARDS.
Sincerely,
T. Milton Honea
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 7
NORAM ENERGY CORP.
1600 SMITH STREET
HOUSTON, TEXAS 77002
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of NorAm
Energy Corp., a Delaware corporation ("NorAm"), will be held in the Granger A
Room of the Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas
on Tuesday, December 17, 1996, at 10:00 a.m., Houston time, to vote upon
adoption and approval of the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of August 11, 1996, as amended, among NorAm, Houston
Industries Incorporated ("HI") and HI's subsidiaries Houston Lighting & Power
Company ("HL&P") and HI Merger, Inc. ("Merger Sub"), whereby NorAm will merge
into Merger Sub and as a result of which NorAm will become a wholly owned
subsidiary of Houston (as defined below).
The Merger Agreement is described in the attached Joint Proxy
Statement/Prospectus. The Merger Agreement also provides that HI will merge into
HL&P, as a result of which each outstanding share of HI common stock will be
converted into one share of common stock of the surviving corporation, which
will be renamed "Houston Industries Incorporated" ("Houston") and will continue
to conduct HL&P's electric utility business under HL&P's name. The Merger
Agreement further provides that one of two alternative merger structures could
be used in certain circumstances. The term "Transaction" refers to the business
combination between HI and NorAm, regardless of the structure used to implement
the combination.
In connection with the Transaction, T. Milton Honea, Robert C. Hanna, O.
Holcombe Crosswell and Joseph M. Grant, who are currently directors of NorAm,
will be elected as directors of Houston effective as of the effective time of
the Transaction.
The Transaction and related matters, including the merger consideration,
are described more fully in the accompanying Joint Proxy Statement/Prospectus. A
copy of the Merger Agreement is attached to the Joint Proxy Statement/Prospectus
as Appendix A.
Only NorAm stockholders of record at the close of business on October 18,
1996 are entitled to notice of and to vote at the Special Meeting.
We hope you will be represented at the meeting by signing and returning the
enclosed proxy card in the accompanying envelope as promptly as possible,
whether or not you expect to be present in person. Your vote is important -- as
is the vote of every stockholder -- and the Board of Directors of NorAm
appreciates the cooperation of stockholders in directing proxies to vote at the
meeting. PLEASE DO NOT SEND STOCK CERTIFICATES WITH YOUR PROXY CARDS.
Your proxy may be revoked at any time by following the procedures set forth
in the accompanying Joint Proxy Statement/Prospectus.
By order of the Board of Directors
Hubert Gentry, Jr.
Secretary
Houston, Texas
October , 1996.
<PAGE> 8
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION *
* IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* JURISDICTION. *
* *
***************************************************************************
SUBJECT TO COMPLETION DATED OCTOBER 28, 1996
HOUSTON INDUSTRIES INCORPORATED
HOUSTON LIGHTING & POWER COMPANY
NORAM ENERGY CORP.
JOINT PROXY STATEMENT/PROSPECTUS
This Joint Proxy Statement/Prospectus relates to an Agreement and Plan of
Merger, dated as of August 11, 1996, as amended (the "Merger Agreement"), among
Houston Industries Incorporated ("HI"), its subsidiaries, Houston Lighting &
Power Company ("HL&P") and HI Merger, Inc. ("Merger Sub"), and NorAm Energy
Corp. ("NorAm"). The Merger Agreement provides for
- the merger of HI into HL&P (the "HI/HL&P Merger"), as a result of
which each outstanding share of HI common stock will be converted into one
share of common stock of HL&P, which will be renamed "Houston Industries
Incorporated" ("Houston") and will continue to conduct HL&P's electric
utility business under HL&P's name, and
- the merger of NorAm into Merger Sub (the "NorAm Merger," and
together with the HI/HL&P Merger, the "Basic Mergers"), as a result of
which NorAm will become a wholly owned subsidiary of Houston and the
outstanding shares of common stock of NorAm will be converted into the
right to receive cash or Houston common stock as more fully described
herein. See "The Transaction -- Merger Consideration."
The Merger Agreement also provides that one of two alternative merger
structures (the "Alternative Mergers") could be used rather than the Basic
Mergers in certain circumstances. See "The Transaction -- The Alternative
Mergers." The term "Transaction" refers to the business combination between HI
and NorAm, whether implemented using the Basic Mergers or one of the Alternative
Mergers.
HL&P has filed a registration statement pursuant to the Securities Act of
1933 (the "Securities Act") covering up to 315,402,570 shares of its common
stock, without par value ("Houston Common Stock"), issuable in connection with
the Transaction. Each share includes an associated preference stock purchase
right ("Houston Right"). This Joint Proxy Statement/Prospectus constitutes the
Prospectus filed as a part of the registration statement and is being furnished
to stockholders of HI and NorAm in connection with the solicitation of proxies
by the respective Boards of Directors of HI and NorAm for use at their
respective special meetings of stockholders (or any adjournment or postponement
thereof), both scheduled to be held on December 17, 1996 (the "HI Special
Meeting" and the "NorAm Special Meeting" and, collectively, the "Special
Meetings").
HI common stock is listed for trading on the New York Stock Exchange (the
"NYSE") under the symbol "HOU," and HL&P will make application to have Houston
Common Stock listed for trading on the NYSE under the same symbol. On October
25, 1996, the average of the high and low sales prices of HI common stock and
NorAm common stock, as reported on the NYSE composite tape, were $23 1/8 and
$15 3/8 per share, respectively.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE TRANSACTION HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of HI and NorAm on or about October ,
1996.
---------------------
The date of this Joint Proxy Statement/Prospectus is October , 1996.
<PAGE> 9
AVAILABLE INFORMATION
HI, HL&P and NorAm are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports and other
information may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the SEC:
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can also be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site that contains reports, proxy and information
statements and other information filed electronically by HI, HL&P and NorAm with
the SEC which can be accessed over the Internet at http://www.sec.gov. In
addition, reports, proxy statements and other information filed by HI can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005,
and at the offices of The Chicago Stock Exchange, 440 S. LaSalle Street,
Chicago, Illinois 60605. Such material filed by NorAm can be inspected at the
offices of the NYSE.
HL&P and HI have filed with the SEC a registration statement on Form S-4
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Houston
Common Stock or, if the Second Alternative Merger (as hereinafter defined) is
effected in lieu of the Basic Mergers, HI Common Stock (as defined below),
including associated preference stock purchase rights, to be issued pursuant to
the Merger Agreement. The information contained herein with respect to HI and
its subsidiaries (other than HL&P) has been provided by HI, the information with
respect to HL&P has been provided by HL&P and the information with respect to
NorAm and its subsidiaries has been provided by NorAm. This Joint Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. The
Registration Statement and any amendments hereto, including exhibits filed as a
part thereof, are available for inspection and copying as set forth above.
Statements contained in this Joint Proxy Statement/Prospectus or in any document
incorporated in this Joint Proxy Statement/Prospectus by reference as to the
contents of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement or
such other document, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, UPON REQUEST FROM, IN THE CASE OF DOCUMENTS RELATING TO HI OR HL&P,
ROBERT E. SMITH, INVESTOR SERVICES, 1111 LOUISIANA, HOUSTON, TEXAS 77002,
TELEPHONE NUMBER (713) 207-3060, AND IN THE CASE OF DOCUMENTS RELATING TO NORAM,
RANDY BURKHALTER, DIRECTOR OF INVESTOR RELATIONS, 1600 SMITH STREET, 32ND FLOOR,
HOUSTON, TEXAS 77002, TELEPHONE NUMBER (713) 654-7502. IN ORDER TO ENSURE TIMELY
DELIVERY OF THESE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER 9, 1996.
HI, HL&P and NorAm hereby undertake to provide, without charge, to each
person, including any beneficial owner of common stock, without par value, of HI
("HI Common Stock") or common stock, par value $0.625 per share, of NorAm
("NorAm Common Stock"), to whom a copy of this Joint Proxy Statement/Prospectus
has been delivered, upon the written or oral request of any such person, a copy
of any and all of the documents referred to below which have been or may be
incorporated herein by reference, other than exhibits to such documents, unless
such exhibits are specifically incorporated herein by reference. Requests for
such documents should be directed to one of the persons indicated in the
immediately preceding paragraph.
2
<PAGE> 10
The following documents, which have been previously filed by HI (File No.
1-7629), HL&P (File No. 1-3187) and NorAm (File No. 1-3751) with the SEC
pursuant to the Exchange Act, are hereby incorporated herein by reference:
(1) HI and HL&P's Combined Annual Report on Form 10-K for their
respective fiscal years ended December 31, 1995;
(2) HI and HL&P's Combined Quarterly Report on Form 10-Q for the
period ended March 31, 1996;
(3) HI and HL&P's Combined Quarterly Report on Form 10-Q for the
period ended June 30, 1996;
(4) HI and HL&P's Combined Current Report on Form 8-K dated August 11,
1996;
(5) HI Proxy Statement for the 1996 Annual Meeting of Shareholders
held on May 22, 1996;
(6) The descriptions of each of (a) the HI Common Stock, which is
contained in HI's Registration Statement on Form 8-A dated January 14,
1977, as amended by Form 8 dated July 14, 1986, and (b) the rights ("HI
Rights") to purchase one two-hundredth of a share of Series A Preference
Stock, no par value, of HI associated with the HI Common Stock, which is
contained in HI's Registration Statement on Form 8-A dated July 16, 1990;
(7) NorAm's Annual Report on Form 10-K for its fiscal year ended
December 31, 1995;
(8) NorAm's Quarterly Report on Form 10-Q for the period ended March
31, 1996;
(9) NorAm's Quarterly Report on Form 10-Q for the period ended June
30, 1996;
(10) NorAm's Current Reports on Form 8-K dated February 7, 1996, June
10, 1996 and August 11, 1996; and
(11) NorAm Proxy Statement for the 1996 Annual Meeting of Stockholders
held on May 14, 1996.
All documents and reports filed by HI, HL&P or NorAm pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date that the Transaction is consummated
shall be deemed to be incorporated by reference herein and to be a part hereof
from the respective dates of filing of such documents or reports. All
information appearing in this Joint Proxy Statement/Prospectus or in any
document incorporated herein by reference is not necessarily complete and is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference and
should be read together with such information and documents.
Any statement contained herein or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein (or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this Joint
Proxy Statement/Prospectus except as so modified or superseded.
No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement/Prospectus, and, if
given or made, such information or representation must not be relied upon as
having been authorized. This Joint Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, any of
the securities offered by this Joint Proxy Statement/Prospectus, or the
solicitation of a proxy, in any jurisdiction in which, or to any person to whom,
it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this Joint Proxy Statement/Prospectus nor
any distribution of the securities offered hereby shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof or that there has been no
change in the affairs of HI, HL&P or NorAm since the date hereof.
3
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 2
SUMMARY............................................................................... 6
The Special Meetings................................................................ 6
The Transaction..................................................................... 7
The Companies....................................................................... 13
Comparative Per Share Prices of HI and NorAm Common Stock........................... 14
Selected Historical Financial Information for HI.................................... 15
Selected Historical Financial Information for NorAm................................. 16
Summary Pro Forma Combined Financial Information.................................... 17
Comparative Per Share Data of HI and NorAm.......................................... 17
THE COMPANIES......................................................................... 18
Houston Industries Incorporated..................................................... 18
NorAm Energy Corp. ................................................................. 18
Forward-Looking Statements.......................................................... 19
THE MEETINGS.......................................................................... 20
HI Special Meeting.................................................................. 20
NorAm Special Meeting............................................................... 20
Quorum.............................................................................. 20
Vote Required....................................................................... 21
Record Date; Stock Entitled to Vote................................................. 21
Voting of Proxies................................................................... 21
Revocation of Proxies............................................................... 21
Solicitation of Proxies............................................................. 22
Security Ownership of Certain Persons............................................... 22
THE TRANSACTION....................................................................... 23
General............................................................................. 23
The HI/HL&P Merger.................................................................. 23
The NorAm Merger.................................................................... 23
Merger Consideration................................................................ 24
Election Procedure.................................................................. 26
Proration........................................................................... 28
Procedures for Exchange of Certificates; the Payment Fund........................... 29
Fractional Shares................................................................... 30
The Alternative Mergers............................................................. 30
Corporate Structure................................................................. 31
Background of the Transaction....................................................... 33
HI's Reasons for the Transaction.................................................... 34
NorAm's Reasons for the Transaction................................................. 36
Recommendations of the Boards of Directors.......................................... 37
Opinion of HI's Financial Advisor................................................... 38
Opinion of NorAm's Financial Advisor................................................ 42
Certain Federal Income Tax Consequences............................................. 48
Accounting Treatment................................................................ 50
Funding of Cash Consideration....................................................... 50
NorAm Employee Matters.............................................................. 51
Interests of Certain Persons in the Transaction..................................... 53
Amendment of Articles of Incorporation.............................................. 55
Dissenters' Appraisal Rights........................................................ 55
NYSE Listing of Common Stock........................................................ 58
Resales of Houston Common Stock..................................................... 58
</TABLE>
4
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Litigation.......................................................................... 59
CERTAIN REGULATORY MATTERS............................................................ 59
Antitrust Considerations............................................................ 59
Public Utility Holding Company Act of 1935.......................................... 59
Atomic Energy Act of 1954........................................................... 60
State Regulatory Matters............................................................ 60
Other Regulatory Matters............................................................ 60
CERTAIN PROVISIONS OF THE MERGER AGREEMENT............................................ 60
Conditions to the Transaction....................................................... 61
Representations and Warranties...................................................... 63
Certain Covenants -- Conduct of Business of NorAm................................... 63
Certain Covenants -- Conduct of Business of HI and HL&P............................. 67
Additional Agreements............................................................... 68
Amendment and Waiver................................................................ 69
Termination......................................................................... 69
Expenses and Termination Fee........................................................ 70
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 72
RELATIONSHIPS OF THE PARTIES.......................................................... 79
Prior to the Transaction............................................................ 79
Following the Transaction........................................................... 79
DESCRIPTION OF HOUSTON CAPITAL STOCK.................................................. 80
Common Stock........................................................................ 80
Preferred Stock..................................................................... 81
Preference Stock.................................................................... 82
Certain Provisions of the Houston Articles of Incorporation and Bylaws.............. 82
Rights Plan......................................................................... 82
COMPARATIVE RIGHTS OF STOCKHOLDERS.................................................... 85
General............................................................................. 85
Mergers and Other Fundamental Transactions.......................................... 85
Mergers Without Stockholder Approval................................................ 85
Appraisal Rights.................................................................... 86
Amendments to Charter............................................................... 86
Preference Stock Purchase Rights.................................................... 87
Special Meetings of Stockholders.................................................... 87
Cumulative Voting................................................................... 87
No Preemptive Rights................................................................ 87
Stockholder Action by Written Consent............................................... 87
Newly Created Directorships......................................................... 88
Classification of the Houston Board of Directors.................................... 88
Removal of Directors................................................................ 88
EXPERTS............................................................................... 88
LEGAL MATTERS......................................................................... 89
STOCKHOLDER PROPOSALS................................................................. 89
APPENDIX A -- Agreement and Plan of Merger
APPENDIX B -- Opinion of CS First Boston Corporation
APPENDIX C -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
APPENDIX D -- Section 262 of the Delaware General Corporation Law
APPENDIX E -- Glossary of Certain Terms Relating to the Transaction
</TABLE>
5
<PAGE> 13
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus and does not purport to be complete.
Stockholders are urged to carefully read this Joint Proxy Statement/Prospectus
and the Appendices hereto in their entirety.
Unless otherwise indicated, capitalized terms used in this Joint Proxy
Statement/Prospectus are defined in the Glossary of Certain Terms Relating to
the Transaction attached hereto as Appendix E.
THE SPECIAL MEETINGS
MEETINGS OF STOCKHOLDERS... The HI Special Meeting will be held on December 17,
1996 at 2:00 p.m., Houston time, in the Auditorium
of Houston Industries Plaza, 1111 Louisiana Street,
Houston, Texas.
The NorAm Special Meeting will be held on December
17, 1996 at 10:00 a.m., Houston time, in the
Granger A Room of the Doubletree Hotel at Allen
Center, 400 Dallas Street, Houston, Texas.
MATTERS TO BE CONSIDERED AT
THE SPECIAL MEETINGS....... At the Special Meetings, stockholders will be asked
to approve and adopt the Merger Agreement, which
provides for the Transaction.
VOTE REQUIRED.............. Approval of the Merger Agreement requires the
affirmative vote of the holders of:
- two-thirds of the outstanding shares of HI Common
Stock, and
- a majority of the outstanding shares of NorAm
Common Stock.
No approval by the holders of outstanding shares of
HL&P preferred stock is required to approve the
Merger Agreement, and such holders are not entitled
to vote on the Merger Agreement.
RECORD DATE................ Only stockholders of record of HI Common Stock at
the close of business on October 18, 1996 (the "HI
Record Date") are entitled to notice of and to vote
at the HI Special Meeting. On that date, there were
250,478,269 shares of HI Common Stock outstanding.
Holders of HI Common Stock are entitled to one vote
with respect to the Merger Agreement for each share
held.
Only stockholders of record of NorAm Common Stock
at the close of business on October 18, 1996 (the
"NorAm Record Date") are entitled to notice of and
to vote at the NorAm Special Meeting. On that date,
there were 137,249,845 shares of NorAm Common Stock
outstanding. Holders of NorAm Common Stock are
entitled to one vote with respect to the Merger
Agreement for each share held.
6
<PAGE> 14
THE TRANSACTION
EFFECT OF THE HI/HL&P
MERGER................... In the HI/HL&P Merger, HI will merge into HL&P.
HL&P will be the surviving corporation and will be
renamed "Houston Industries Incorporated"
("Houston").
TREATMENT OF HI COMMON
STOCK.................... Each share of HI Common Stock (and associated HI
Right) outstanding prior to the effective time of
the HI/HL&P Merger will be converted into one share
of Houston Common Stock (and one associated Houston
Right).
EFFECT OF THE NORAM
MERGER..................... In the NorAm Merger, NorAm will merge into Merger
Sub. Merger Sub will be the surviving corporation
and will be renamed "NorAm Energy Corp." As a
result, NorAm will become a wholly owned subsidiary
of Houston.
TREATMENT OF NORAM
COMMON STOCK............. In the Transaction, each share of NorAm Common
Stock outstanding immediately prior to the
effective time of the Transaction (the "Effective
Time") (other than dissenting shares) will be
converted into either cash or Houston Common Stock,
as elected by the NorAm stockholder but subject to
proration as described below.
The cash amount to be paid per share of NorAm
Common Stock will be $16.00. If the Transaction is
not consummated by May 11, 1997, the $16.00 cash
amount will increase after that date by 2% (simple
interest) per quarter until consummation (the "Cash
Consideration").
The number of shares of Houston Common Stock to be
issued per share of NorAm Common Stock will be not
less than 0.6154 shares nor more than 0.7529
shares. The actual number of shares will depend
upon the average daily closing prices of HI Common
Stock on the NYSE during a 20-trading-day period
commencing 25 trading days prior to the Closing
Date. (The actual number of shares of Houston
Common Stock to be issued to NorAm stockholders, as
so determined, is called the "Stock
Consideration.") Accordingly, the value (based on
the average closing price) of the Stock
Consideration will be $16.00 per share of NorAm
Common Stock if the average price of HI Common
Stock is greater than or equal to $21.25 and less
than or equal to $26.00; such value will be more or
less than $16.00 if the average price is outside
that range. Cash will be paid in lieu of fractional
shares.
NORAM MERGER ELECTION
PROCEDURES............... Each record holder of NorAm Common Stock (other
than dissenting shares) will be entitled to elect
to receive either Cash Consideration (a "Cash
Election") or Stock Consideration (a "Stock
Election"), subject to proration as described
below. As indicated in the Election Form, each
record holder of NorAm Common Stock has a right to
elect Cash Consideration or Stock Consideration for
each share of NorAm Common Stock held by the
holder.
All elections are to be made on a form of election
and letter of transmittal (the "Election Form") to
be mailed to record holders of NorAm Common Stock
at least 20 business days prior to the Closing
7
<PAGE> 15
Date. Stockholders may also obtain copies of the
Election Form upon request from First Chicago Trust
Company of New York (the "Exchange Agent") either
in writing by mail to First Chicago Trust Company
of New York, Tenders & Exchanges Unit, Suite 4660,
P.O. Box 2565, Jersey City, New Jersey 07303-2565,
or by telephone at (201) 324-0137. HI will issue a
public announcement of the anticipated Closing Date
as soon as practicable, but in no event less than
five trading days prior to the Closing Date.
Election Forms must be received by the Exchange
Agent at its designated office no later than 5:00
p.m., New York City time, on the trading day
immediately preceding the Closing Date (the
"Election Deadline"). The shares of NorAm Common
Stock of a holder who fails to properly complete
and return the Election Form, together with
certificates representing such holder's shares of
NorAm Common Stock or an appropriate guarantee of
delivery of certificates for such shares, to the
Exchange Agent by the Election Deadline, or who
fails to comply with the election procedures
described in this Joint Proxy Statement/ Prospectus
and the Election Form, will be deemed by Houston,
in its sole and absolute discretion, to be shares
in respect of which either Cash Elections or Stock
Elections have been made. In such case there is no
assurance as to the type, or mix, if any, of Merger
Consideration that will be received.
PRORATION.................. If either Cash Elections or Stock Elections are
made with respect to more than half the total
outstanding shares of NorAm Common Stock, those
elections will be adjusted pro rata so that the
total number of Cash Election Shares and the total
number of Stock Election Shares will be
approximately equal. (For this purpose, dissenting
shares will be treated as Cash Election shares.)
However, HI has the option to change the aggregate
amounts of Cash Consideration and Stock
Consideration to more closely follow the actual
elections of the NorAm stockholders.
RECOMMENDATIONS OF THE
BOARDS OF DIRECTORS........ The Boards of Directors of HI and NorAm believe
that the terms of the Transaction are fair to and
in the best interests of their respective
stockholders and have unanimously approved the
Merger Agreement and the transactions contemplated
thereby. THE BOARD OF DIRECTORS OF HI UNANIMOUSLY
RECOMMENDS THAT HI STOCKHOLDERS APPROVE THE MERGER
AGREEMENT. THE BOARD OF DIRECTORS OF NORAM
UNANIMOUSLY RECOMMENDS THAT NORAM STOCKHOLDERS
ADOPT THE MERGER AGREEMENT.
HI'S REASONS FOR THE
TRANSACTION.............. HI's Board of Directors believes that the
Transaction offers the following significant
strategic and financial benefits to HI and its
stockholders, as well as to its employees and
customers:
- NorAm brings to the combined companies more than
2.1 million additional retail distribution
customers (net of its approximately 600,000
customers who overlap with HL&P's approximately
1.5 million retail customers).
- NorAm has a fast-growing gas and electric
wholesale trading organization, which can be
combined with HL&P's electric power expertise to
build a leading wholesale energy trading and risk
management business.
8
<PAGE> 16
- NorAm's international strategy, with its emphasis
on gas transmission and distribution, complements
HI's international strategy, which is focused on
power plant development and acquisition of
electric distribution systems.
NORAM'S REASONS FOR THE
TRANSACTION.............. NorAm's Board of Directors believes that the
Transaction is the best alternative for achieving
the strategic objectives of NorAm and enhancing
value for its stockholders because, among other
things:
- The values to NorAm's stockholders which could be
achieved either by NorAm remaining an independent
company or choosing other possible alternatives
were considered unlikely to equal the value to
NorAm's stockholders to be achieved by the
Transaction.
- NorAm's stockholders who receive Stock
Consideration can participate in the continued
growth of NorAm and HI through their ownership of
stock of Houston, a company with greater
financial strength, financial flexibility and
cash available for investments than NorAm on a
stand-alone basis.
OPINIONS OF FINANCIAL
ADVISORS................... CS First Boston Corporation ("CS First Boston") has
delivered its written opinion dated August 11, 1996
to the Board of Directors of HI that, as of the
date of such opinion, the Merger Consideration was
fair from a financial point of view to HI.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") has delivered its written opinion
dated August 11, 1996 to the Board of Directors of
NorAm that, as of the date of such opinion, the
Merger Consideration to be received by the holders
of NorAm Common Stock, taken as a whole, was fair
from a financial point of view to the holders of
NorAm Common Stock.
For information on the assumptions made, matters
considered and limits of the reviews by CS First
Boston and Merrill Lynch, see "The
Transaction -- Opinion of HI's Financial Advisor"
and "-- Opinion of NorAm's Financial Advisor."
Stockholders are urged to read in their entirety
the opinions of CS First Boston and Merrill Lynch,
attached as Appendices B and C, respectively, to
this Joint Proxy Statement/ Prospectus.
HOUSTON BOARD OF DIRECTORS
FOLLOWING THE
TRANSACTION.............. In connection with the Transaction, T. Milton
Honea, Robert C. Hanna, O. Holcombe Crosswell and
Joseph M. Grant, who are currently directors of
NorAm, will be elected as directors of Houston
effective as of the Effective Time.
EFFECT OF THE ALTERNATIVE
MERGERS.................. Pursuant to the Merger Agreement, one of two
alternative merger structures could be utilized in
lieu of the Basic Mergers under certain
circumstances. If HL&P determines that, upon
consummation of the Basic Mergers, Houston would
not be an exempt "public utility holding company"
under the Public Utility Holding Company Act of
1935 (the "1935 Act"), NorAm and HI will both be
merged into HL&P, with HL&P being the surviving
corporation.
9
<PAGE> 17
Alternatively, if at the time all conditions to
consummating the Transaction have been satisfied or
waived, the 1935 Act does not constrain the
structure of the Transaction, then (i) HI will not
merge into HL&P and (ii) NorAm will merge into
Merger Sub with Merger Sub being the surviving
corporation. In that event, both HL&P and NorAm
would be wholly owned subsidiaries of HI.
EFFECTIVE TIME OF THE
TRANSACTION.............. The closing of the Transaction (the "Closing") will
occur on the fifth business day after all of the
conditions to the Transaction contained in the
Merger Agreement have been satisfied or waived or
on such other date as to which NorAm and HI
mutually agree. The Transaction will become
effective promptly after the Closing.
CONDITIONS TO THE
TRANSACTION................ The obligations of HI and NorAm to consummate the
Transaction are subject to certain conditions,
including:
- the approval of the stockholders of HI and NorAm;
- the expiration or termination of the relevant
waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR
Act");
- the receipt of consents and approvals from
certain Governmental Entities and third parties;
and
- other conditions customary for transactions of
this nature.
AMENDMENT AND WAIVER....... The Merger Agreement may be amended at any time
before or after stockholder approval. After
stockholder approval has been obtained, no
amendment may change the Merger Consideration,
change any term of the certificate of incorporation
of the surviving corporation of the NorAm Merger or
the articles of incorporation of Houston, or change
the Merger Agreement in such a way as to adversely
affect the holders of any class or series of stock
of HI, HL&P or NorAm without further approval of
stockholders.
Either HI or NorAm may extend the time for
performance of any of the obligations of the other
party or may waive compliance with any of the
agreements or conditions contained in the Merger
Agreement. Neither HI nor NorAm currently has any
intention to allow for any such extension or make
any such waiver.
REGULATORY MATTERS......... Consummation of the Transaction is conditioned on
the approvals of utility regulatory commissions in
Arkansas, Louisiana, Minnesota, Oklahoma and
Mississippi under applicable state laws and four
municipalities, including the City of Houston,
under NorAm's franchises with the municipalities.
The required filings and applications have been
made in each state and with the City of Houston.
Consummation is also conditioned on the expiration
or termination of the applicable waiting period
under the HSR Act.
Houston has filed an application with the SEC
requesting an exemption from regulation as a
registered public utility holding company under the
1935 Act. If the SEC does not grant the exemption,
both HI and NorAm will be merged into HL&P pursuant
to the First Alternative Merger.
10
<PAGE> 18
TERMINATION................ The Merger Agreement may be terminated at any time
prior to the Effective Time by mutual consent of HI
and NorAm. It may also be terminated by either
party in certain events, including if the
Transaction has not been consummated by August 11,
1997 (unless on such date all conditions to the
consummation of the Transaction have been fulfilled
or are capable of being fulfilled other than the
condition that all material required consents,
approvals and authorizations of Governmental
Entities be obtained, in which case such date will
automatically be extended to December 31, 1997).
NorAm may also terminate the Merger Agreement,
prior to approval by NorAm's stockholders, if NorAm
receives from another party an unsolicited
acquisition proposal that is financially superior
to the Transaction, subject to certain conditions,
including that NorAm's Board of Directors shall
have concluded that such action is necessary in
order to satisfy its fiduciary duties under
applicable law. HI may terminate the Merger
Agreement if the Board of Directors of NorAm has
recommended to the NorAm stockholders an
alternative acquisition proposal.
Upon termination of the Merger Agreement under
certain circumstances, HI or NorAm may be required
to pay the other a fee, ranging from $10 million to
$35 million in the case of a payment by HI and from
$10 million to $75 million in the case of a payment
by NorAm.
APPRAISAL RIGHTS........... Under Texas law, HI stockholders will not be
entitled to any dissenter's rights in connection
with the Transaction. Under Delaware law, NorAm
stockholders will be entitled to appraisal rights
in connection with the Transaction. A copy of the
Delaware statutory provisions regarding appraisal
rights is attached hereto as Appendix D and those
provisions are described more fully elsewhere
herein.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............. Counsel to HI has opined that each of the mergers
in the Transaction will qualify as a reorganization
within the meaning of Section 368(a) of the
Internal Revenue Code of 1986 (the "Code") and,
accordingly, for federal income tax purposes, no
gain or loss will be recognized by HI, HL&P, NorAm
or Merger Sub as a result of the Transaction.
A citizen or resident of the United States or a
domestic corporation (a "U.S. Holder") who holds HI
Common Stock and exchanges such stock for Houston
Common Stock pursuant to the Transaction will not
recognize any gain or loss on such exchange.
A U.S. Holder who holds NorAm Common Stock and
exchanges such stock pursuant to the Transaction
solely for Cash Consideration will recognize
capital gain or loss in an amount equal to the
difference between the amount of Cash Consideration
received by such holder and such holder's tax basis
in the shares of NorAm Common Stock surrendered
therefor. A U.S. Holder of NorAm Common Stock who
exchanges NorAm Common Stock pursuant to the
Transaction solely for Stock Consideration will not
recognize any gain or loss on such exchange. A U.S.
Holder of NorAm Common Stock who exchanges NorAm
Common Stock pursuant to the Transaction for both
Cash Consideration and Stock Consideration
generally will realize capital gain or loss in an
amount equal to the difference between the fair
market value of the Merger Consideration received
by such holder and the
11
<PAGE> 19
holder's adjusted tax basis in the shares of NorAm
Common Stock surrendered therefor. Such gain, if
any, will be recognized, however, only to the
extent of the amount of Cash Consideration received
by such holder; any loss will not be recognized.
ACCOUNTING TREATMENT....... The acquisition of NorAm will be accounted for as a
"purchase" by Houston in accordance with generally
accepted accounting principles.
INTERESTS OF CERTAIN
PERSONS IN THE
TRANSACTION.............. In considering the recommendation of the Board of
Directors of NorAm with respect to the Transaction,
stockholders should be aware that certain members
of the Board of Directors of NorAm and certain
executive officers of NorAm have interests in the
Transaction separate from their interests as NorAm
stockholders, including executive severance
agreements.
COMPARISON OF STOCKHOLDER
RIGHTS................... As a result of the Transaction (unless the Second
Alternative Merger is implemented), holders of HI
Common Stock will become stockholders of Houston.
The terms and provisions of Houston Common Stock
are substantially similar to those of HI Common
Stock.
As a result of the Transaction, holders of NorAm
Common Stock will become stockholders of Houston
and will have certain different rights as
stockholders of Houston than they had as
stockholders of NorAm.
12
<PAGE> 20
THE COMPANIES
HI is a holding company operating principally in the electric utility
business. HL&P is the principal subsidiary of HI and is engaged in the
generation, transmission, distribution and sale of electric energy. HL&P is the
nation's ninth-largest electric utility in terms of kilowatt-hour sales. HL&P's
service area covers a 5,000-square mile area on the Texas Gulf Coast, including
Houston (the nation's fourth largest city). HL&P serves approximately 1.5
million residential, commercial and industrial customers. The business and
operations of HL&P account for substantially all of HI's income from continuing
operations and common stock equity. Houston Industries Energy, Inc. ("HI
Energy") participates in domestic and foreign power generation projects and
invests in the privatization of foreign electric utilities. Merger Sub is a
direct wholly owned subsidiary of HI incorporated for purposes of the
Transaction. The principal executive offices of HI and HL&P are located at
Houston Industries Plaza, 1111 Louisiana Street, Houston, Texas 77002. HI's
telephone number is (713) 207-3000 and HL&P's telephone number is (713)
207-1111. See "The Companies -- Houston Industries Incorporated."
NorAm is principally engaged in the distribution and transmission of
natural gas, including the gathering, storage and marketing of natural gas.
Through its Entex, Arkla and Minnegasco gas distribution divisions, NorAm is the
nation's third-largest natural gas utility in terms of customers served, serving
over 2.7 million customers in six states. NorAm operates interstate gas pipeline
facilities through NorAm Gas Transmission Company and Mississippi River
Transmission Corporation, natural gas gathering assets in Oklahoma, Louisiana,
Arkansas and Texas and is engaged in various other energy-related businesses,
including natural gas and electric wholesale trading, gas storage, wholesale
electric services and providing unregulated retail energy services to industrial
and large commercial customers. The principal executive offices of NorAm are
located at 1600 Smith Street, 32nd Floor, Houston, Texas 77002, and its
telephone number is (713) 654-5699. See "The Companies -- NorAm Energy Corp."
RECENT DEVELOPMENTS OF HOUSTON INDUSTRIES
On October 25, 1996, HI announced financial results for the quarter ended
September 30, 1996. HI had consolidated earnings of $240 million or $.98 per
share for the third quarter of 1996, compared to earnings of $854 million or
$3.44 per share for the third quarter of 1995. Earnings for the third quarter of
1995 included a $618 million or $2.49 per share gain in connection with the sale
of HI's cable television subsidiary.
HI had consolidated earnings of $369 million or $1.49 per share for the
first nine months of 1996, which included non-recurring after-tax charges of $67
million taken primarily in connection with the settlement of litigation claims
relating to the South Texas Project Electric Generating Station. Earnings for
the first nine months of 1995 were $1.1 billion or $4.45 per share, including a
$709 million or $2.86 per share gain on the sale of HI's cable television
subsidiary and charges related to HL&P's rate case settlement.
Excluding one-time gains and charges, year to date 1996 earnings for HI
would have been $436 million or $1.76 per share compared to $399 million or
$1.61 per share for the first nine months of 1995. The increase in earnings,
after adjusting for such one-time items, is due primarily to strong sales at
HL&P resulting from favorable weather conditions, steady customer growth and
increased electricity usage per customer, and to dividend income from the Time
Warner Inc. securities which HI received as part of the sale of its cable
television subsidiary.
13
<PAGE> 21
COMPARATIVE PER SHARE PRICES OF HI AND NORAM COMMON STOCK
HI Common Stock is traded on the NYSE, the Chicago Stock Exchange and the
London Stock Exchange under the symbol "HOU." NorAm Common Stock is traded on
the NYSE under the symbol "NAE." The following table sets forth the high and low
sales prices of HI Common Stock and NorAm Common Stock for the calendar quarters
indicated, as reported in The Wall Street Journal's NYSE Composite Transactions
Reports. It also sets forth certain dividend information.
<TABLE>
<CAPTION>
HI COMMON STOCK(1) NORAM COMMON STOCK
---------------------------------- ----------------------------------
MARKET PRICE MARKET PRICE
------------ DIVIDEND DECLARED ------------ DIVIDEND DECLARED
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- --- ----------------- ---- --- -----------------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter................... $23 7/8 $17 3/8 $ 0.375 $ 9 $ 6 3/4 $0.07
Second Quarter.................. $18 5/8 $15 $ 0.375 $ 6 1/2 $ 5 5/8 $0.07
Third Quarter................... $18 5/16 $16 1/4 $ 0.375 $ 7 3/4 $ 5 3/4 $0.07
Fourth Quarter.................. $18 1/4 $16 $ 0.375 $ 6 1/2 $ 5 1/4 $0.07
1995
First Quarter................... $20 1/2 $17 11/16 $ 0.375 $ 6 $ 5 1/8 $0.07
Second Quarter.................. $21 7/8 $18 15/16 $ 0.375 $ 6 3/4 $ 5 1/4 $0.07
Third Quarter................... $22 3/4 $21 1/16 $ 0.375 $ 8 1/8 $ 6 1/4 $0.07
Fourth Quarter.................. $24 1/2 $22 1/16 $ 0.375 $ 9 $ 7 5/8 $0.07
1996
First Quarter................... $25 5/8 $21 1/2 $ 0.375 $ 9 3/8 $ 7 7/8 $0.07
Second Quarter.................. $24 3/4 $20 1/2 $ 0.375 $11 1/8 $ 8 3/8 $0.07
Third Quarter................... $24 3/4 $21 1/8 $ 0.375 $14 7/8 $10 1/4 $0.07
Fourth Quarter (through October
25)........................... $23 1/2 $22 $ 0.375 $15 1/2 $14 3/4
</TABLE>
- ---------------
(1) All HI Common Stock data reflect a two-for-one common stock dividend
distribution in December 1995.
The following table sets forth the closing price per share of HI Common
Stock and NorAm Common Stock on the NYSE and the equivalent per share price (as
explained below) of NorAm Common Stock on August 9, 1996, the business day
preceding public announcement of the Transaction, and on October 25, 1996:
<TABLE>
<CAPTION>
HI NORAM EQUIVALENT PER
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK SHARE PRICE
---------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
August 9, 1996................................ $ 23.625 $ 11.625 $16.00
October 25, 1996.............................. $ 23.125 $ 15.375 $16.00
</TABLE>
The equivalent per share price of a share of NorAm Common Stock represents
an estimation of the Stock Consideration, assuming that the Effective Time had
occurred on the respective dates set forth in the table above. See "The
Transaction -- Merger Consideration."
Stockholders are advised to obtain current market quotations for HI Common
Stock and NorAm Common Stock. No assurance can be given as to the market price
of HI Common Stock or NorAm Common Stock at, or in the case of Houston Common
Stock after, the Effective Time.
DIVIDEND POLICY OF HOUSTON
It is currently anticipated that a $1.50 per share annual dividend will be
maintained on Houston Common Stock following consummation of the Transaction.
However, future dividends will be subject to determination based upon the
results of operations and financial condition of Houston, Houston's future
business prospects, any applicable contractual restrictions and such other
factors as the Houston Board of Directors considers relevant.
14
<PAGE> 22
SELECTED HISTORICAL FINANCIAL INFORMATION FOR HI
The following table sets forth selected financial data for HI for each of
the five fiscal years in the period ended December 31, 1995 and the six months
ended June 30, 1996 and 1995. This data should be read in conjunction with the
financial statements and the related notes incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." Selected unaudited financial
data for the six months ended June 30, 1996 and 1995 for HI include all
adjustments (consisting only of normally recurring accruals) that HI considers
necessary for a fair presentation of consolidated operating results for such
interim periods. Results for the interim periods are not necessarily indicative
of results for the full year. On July 6, 1995, HI closed the sale of its cable
television subsidiary. The operations and net assets of that subsidiary have
been accounted for as discontinued operations.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................................... $1,938.2 $1,745.0 $3,730.2 $3,754.1 $4,083.7 $3,857.9 $3,707.6
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations before
cumulative effect of change in
accounting(1)............................... 128.6 157.1 397.4 424.0 440.5 370.0 484.3
Loss from discontinued operations............. (16.5) (24.5) (29.5) (67.5)
Gain on sale of cable television subsidiary... 90.6 708.1
Cumulative effect of change in
accounting(2)............................... (8.2) 94.2
-------- -------- -------- -------- -------- -------- --------
Net income(1)................................. $ 128.6 $ 247.7 $1,105.5 $ 399.3 $ 416.0 $ 434.7 $ 416.8
======== ======== ======== ======== ======== ======== ========
Earnings per common share(3):
Continuing operations before cumulative
effect of change in accounting(1)......... $ .52 $ .63 $ 1.60 $ 1.72 $ 1.69 $ 1.43 $ 1.88
Loss from discontinued operations........... (.07) (.09) (.11) (.26)
Gain on sale of cable television
subsidiary................................ .37 2.86
Cumulative effect of change in
accounting(2)............................. (.03) .36
-------- -------- -------- -------- -------- -------- --------
Earnings per common share(1).................. $ .52 $ 1.00 $ 4.46 $ 1.62 $ 1.60 $ 1.68 $ 1.62
======== ======== ======== ======== ======== ======== ========
Cash dividends declared per common
share(3)(4)................................. $ .75 $ .75 $ 1.50 $ 1.50 $ 1.875 $ 1.49 $ 1.48
At period-end:
Total assets of continuing operations....... $ 12,175 $ 11,526 $ 11,820 $ 10,784 $ 10,868 $ 11,076 $ 10,821
Net assets of discontinued operations....... 619 487 231 170
-------- -------- -------- -------- -------- -------- --------
Total assets.................................. $ 12,175 $ 11,526 $ 11,820 $ 11,403 $ 11,355 $ 11,307 $ 10,991
======== ======== ======== ======== ======== ======== ========
Common stock equity(5)........................ $ 4,052 $ 3,444 $ 4,124 $ 3,369 $ 3,274 $ 3,285 $ 3,232
Long-term obligations including current
maturities:
Continuing operations(6).................... $ 3,482 $ 3,794 $ 3,769 $ 3,906 $ 3,951 $ 4,244 $ 4,489
Discontinued operations..................... $ 505 $ 515 $ 740 $ 813
</TABLE>
- ---------------
(1) HI adopted Statement of Position (SOP) 93-6, "Employers' Accounting for
Employee Stock Ownership Plans," effective January 1, 1994, which had the
effect of reducing net income while increasing earnings per share. SOP 93-6
is effective only with respect to financial statements for periods after
January 1, 1994, and no restatement was permitted for prior periods.
(2) The 1994 cumulative effect relates to the change in accounting for
postemployment benefits. The 1992 cumulative effect relates to the change in
accounting for revenues.
(3) All common share data reflect a two-for-one common stock dividend
distribution in December 1995.
(4) Year ended December 31, 1993 includes five quarterly dividends of $.375 per
share due to a change in the timing of HI's Board of Directors' declaration
of dividends. Dividend payout was $1.50 per share for 1993.
(5) Pursuant to a stock repurchase program, HI had purchased approximately 13.5
million shares of HI Common Stock for approximately $302.7 million from July
1, 1996 through October 25, 1996.
(6) Includes Cumulative Preferred Stock subject to mandatory redemption.
15
<PAGE> 23
SELECTED HISTORICAL FINANCIAL INFORMATION FOR NORAM
The following table sets forth selected financial data for NorAm for each
of the five fiscal years in the period ended December 31, 1995 and the six
months ended June 30, 1996 and 1995. This data should be read in conjunction
with the financial statements and the related notes incorporated by reference
herein. See "Incorporation of Certain Documents by Reference." Selected
unaudited financial data for the six months ended June 30, 1996 and 1995 for
NorAm include all adjustments (consisting only of normally recurring accruals)
that NorAm considers necessary for a fair presentation of consolidated operating
results for such interim periods. Results for the interim periods are not
necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................................ $2,309.0 $1,454.0 $2,964.7 $2,857.9 $2,988.3 $2,782.2 $2,759.2
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations before
extraordinary items............................... 63.5 44.9 65.5 51.3 39.9 6.2 16.5
Loss from discontinued operations(1)................ (2.1) (34.8) (6.9)
Cumulative effect of change in accounting
principles(2)..................................... (4.9) (64.4)
Extraordinary item(3)............................... (4.7) (.1) .0 (1.1) (3.8) (195.0) .0
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................................... $ 58.8 $ 44.8 $ 65.5 $ 48.1 $ 36.1 $ (228.5) $ (54.8)
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per common share:
Continuing operations............................. $ .48 $ .33 $ .47 $ .36 $ .26 $ (.01) $ .08
Loss from discontinued operations................. (.02) (.29) (.06)
Cumulative effect of change in accounting
principles...................................... (.04) (.56)
Extraordinary item................................ (.04) .00 .00 (.01) (.03) (1.60) .00
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) per common share.................... $ .44 $ .33 $ .47 $ .33 $ .23 $ (1.94) $ (.54)
======== ======== ======== ======== ======== ======== ========
Cash dividends declared per common share............ $ .14 $ .14 $ .28 $ .28 $ .28 $ .48 $ 1.08
At period-end:
Total assets of continuing operations............. $ 3,596 $ 3,408 $ 3,666 $ 3,561 $ 3,728 $ 4,059 $ 4,470
Common stock equity............................... $ 788 $ 631 $ 637 $ 587 $ 578 $ 583 $ 818
Long-term obligations including current
maturities...................................... $ 1,555 $ 1,545 $ 1,594 $ 1,565 $ 1,727 $ 1,903 $ 1,675
</TABLE>
- ---------------
(1) Includes (i) in 1994, a pre-tax loss of $3.3 million, less related tax
benefit of $1.2 million, associated with the discontinued operations of a
former savings and loan subsidiary of Entex, (ii) in 1992, pre-tax income of
$31.4 million, less related tax expense of $66.2 million, associated with
the discontinued operations and disposal of NorAm's former operations in the
exploration and production, radio communications, savings and loan and gas
grill manufacturing businesses and (iii) in 1991, a pre-tax loss of $7.1
million, less related tax benefit of $.2 million, associated with the
discontinued operations of NorAm's former exploration and production, gas
grill manufacturing and radio communications businesses.
(2) Represents the after-tax effect of (i) in 1992, the cumulative effect of
NorAm's adoption of Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" and (ii) in 1991, the
cumulative effect of NorAm's adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
(3) Represents (i) in the six months ended June 30, 1996 and 1995, and in 1995,
1994 and 1993, losses recognized upon early extinguishment of debt, less
taxes and (ii) in 1992, the charge associated with NorAm's discontinuance of
the application of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" to its NorAm Gas
Transmission Company subsidiary effective December 31, 1992.
16
<PAGE> 24
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth certain unaudited pro forma combined
financial information giving effect to the Transaction accounted for as a
purchase in accordance with generally accepted accounting principles. The
information below may not be indicative of the results that actually would have
occurred if the Transaction had been consummated on the dates indicated or which
will be obtained in the future. The summary pro forma financial data for the
periods indicated have been derived from the unaudited pro forma combined
condensed financial statements and related notes appearing elsewhere in this
Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
(MILLIONS OF DOLLARS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $4,247.2 $ 6,694.9
Income from continuing operations available for common
stock..................................................... $ 145.1 $ 366.8
Earnings per common share from continuing operations........ $ .48 $ 1.22
Cash dividends declared per common share.................... $ .68 $ 1.36
At period-end:
Total assets.............................................. $ 17,576 --
Long-term obligations including current maturities........ $ 6,195 --
</TABLE>
COMPARATIVE PER SHARE DATA OF HI AND NORAM
The following tables present comparative per share information for HI and
NorAm on a historical basis and on a pro forma basis assuming that the
Transaction had occurred at the beginning of the periods presented for cash
dividends and earnings per common share purposes and as of June 30, 1996 for
book value per common share purposes. The tables should be read in conjunction
with the financial statements of HI and NorAm incorporated by reference in this
Joint Proxy Statement/Prospectus and the unaudited pro forma combined condensed
financial statements and related notes included elsewhere herein. See "Unaudited
Pro Forma Combined Condensed Financial Statements."
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
<S> <C> <C>
(UNAUDITED)
HI -- HISTORICAL
Book value per common share................................. $16.36 $ 16.61
Cash dividends per common share............................. .75 1.50
Earnings per common share from continuing operations........ .52 1.60
HI -- PRO FORMA (UNAUDITED)
Book value per common share................................. $17.62 $ 17.82
Cash dividends per common share............................. .68 1.36
Earnings per common share from continuing operations........ .48 1.22
NORAM -- HISTORICAL
Book value per common share................................. $ 5.75 $ 5.11
Cash dividends per common share............................. .14 .28
Earnings per common share from continuing operations........ .48 .47
NORAM -- EQUIVALENT PRO FORMA(1) (UNAUDITED)
Book value per equivalent common share...................... $11.93 $ 12.07
Cash dividends per equivalent common share.................. .46 .92
Earnings per equivalent common share from continuing
operations................................................ .33 .83
</TABLE>
- ---------------
(1) The NorAm equivalent pro forma per share amounts were calculated by
multiplying the HI pro forma per share amounts by 0.6772. The 0.6772
represents the number of shares that a holder of NorAm Common Stock
receiving Stock Consideration would receive per NorAm share assuming a
20-trading-day average price of HI Common Stock of $23.625 (the mid-point of
the $21.25 to $26.00 range).
17
<PAGE> 25
THE COMPANIES
HOUSTON INDUSTRIES INCORPORATED
HI is a holding company operating principally in the electric utility
business. HI is a holding company as defined in the 1935 Act; however, based
upon the intrastate operations of HL&P and the exemptions applicable to the
affiliates of HI Energy, HI is exempt from regulation as a "registered" holding
company under the 1935 Act except with respect to the acquisition of voting
securities of other domestic public utility companies and utility holding
companies.
HOUSTON LIGHTING & POWER COMPANY. HL&P is the principal subsidiary of HI
and is engaged in the generation, transmission, distribution and sale of
electric energy. HL&P is the nation's ninth-largest electric utility in terms of
kilowatt-hour sales. HL&P's service area covers a 5,000-square mile area on the
Texas Gulf Coast, including Houston (the nation's fourth largest city). HL&P
serves approximately 1.5 million residential, commercial and industrial
customers. HL&P is a member of the Electric Reliability Council of Texas, Inc.
and is interconnected to a transmission grid encompassing most of the State of
Texas. The business and operations of HL&P account for substantially all of HI's
income from continuing operations and common stock equity. HL&P operates under a
certificate of convenience and necessity granted by the Public Utility
Commission of Texas which covers HL&P's present service area and facilities. In
addition, HL&P holds franchises to provide electric service within the
incorporated municipalities in its service territory.
HOUSTON INDUSTRIES ENERGY, INC. HI formed HI Energy in 1993 to seek
investment opportunities in domestic and foreign power generation projects and
the privatization of foreign electric utilities. HI Energy's major foreign
investments include interests in two Argentine electric utility companies and
two power generation projects being developed in Argentina and India.
Additionally, in May 1996, a subsidiary of HI acquired, as part of a consortium
which acquired a controlling interest, 11.35 percent of the common shares of
Light -- Servicos de Eletricidade S.A., a publicly held Brazilian corporation,
for $392 million.
MERGER SUB. Merger Sub is a direct wholly owned subsidiary of HI
incorporated in Delaware in August 1996 for purposes of the Transaction. Merger
Sub engages in no other business.
NORAM ENERGY CORP.
NorAm is principally engaged in the distribution and transmission of
natural gas, including the gathering, storage and marketing of natural gas.
NorAm is currently organized into five operating units: (i) natural gas
distribution; (ii) interstate pipelines; (iii) wholesale energy marketing; (iv)
retail energy marketing; and (v) natural gas gathering.
NATURAL GAS DISTRIBUTION. NorAm's natural gas distribution business is
conducted through three divisions, Arkla, Entex and Minnegasco, which
collectively form the nation's third-largest gas distribution operation in terms
of customers served with over 400 billion cubic feet ("Bcf") of annual
throughput to over 2.7 million customers. Through these divisions, NorAm engages
in both the sale and transportation of natural gas. The facilities and terms of
service related to these three divisions are largely regulated by state public
service commissions and municipalities.
INTERSTATE PIPELINES. NorAm's interstate natural gas pipeline business is
conducted principally through NorAm Gas Transmission Company and Mississippi
River Transmission Corporation, two wholly owned subsidiaries of NorAm, together
with certain subsidiaries and affiliates. Through these subsidiaries and
affiliates, NorAm engages in the transmission, sale and storage of natural gas.
These operations are subject to regulation principally by the Federal Energy
Regulatory Commission ("FERC").
WHOLESALE ENERGY MARKETING. NorAm's wholesale energy marketing business
principally consists of marketing natural gas and providing risk management
services to natural gas resellers and certain large volume customers. This
business is principally conducted by NorAm Energy Services, Inc., together with
certain affiliates ("NES"). NES is a fast-growing marketer, having increased its
average daily volumes from 0.9 Bcf per day in 1994 to 1.4 Bcf per day in 1995
and 2.1 Bcf per day during the second quarter of 1996. NES has
18
<PAGE> 26
begun to market electricity in wholesale markets in recent periods. NES's
activities are not generally subject to rate regulation.
RETAIL ENERGY MARKETING. NorAm's retail energy marketing business is
principally conducted by NorAm Energy Management, Inc. and certain affiliates
("NEM"). NEM was created in 1995 to consolidate the existing unregulated retail
marketing activities of NorAm's distribution companies into one business
segment. NEM is focusing on industrial and large commercial customers. Services
offered to these customers include natural gas supply, electric power services,
management of commodity pricing risks, total energy management, and supply and
financing of gas burning equipment, including inside-the-fence cogeneration.
NEM's activities are not generally subject to traditional cost-of-service
regulation.
NATURAL GAS GATHERING. NorAm's natural gas gathering activities are
principally carried out by NorAm Field Services Corp. and certain affiliates
("NFS"). NFS operates approximately 3,500 miles of gathering pipelines which
collect gas from more than 200 separate systems located in major producing
fields in Oklahoma, Louisiana, Arkansas and Texas. NFS is implementing plans to
provide additional services including compression, line looping and
administrative services to its customers.
For a more complete description of the businesses of HI and NorAm, see
"Incorporation of Certain Documents by Reference."
FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Although HI and NorAm believe their expectations are based on reasonable
assumptions, no assurance can be given that actual results may not differ
materially from those in the forward-looking statements herein for reasons
including the effects of competition, legislative and regulatory changes,
fluctuations in the weather, the timing and extent of changes in commodity
prices for crude oil, natural gas and interest rates, conditions of the capital
markets and equity markets, and the ability of HI and NorAm to achieve the goals
described in "The Transaction -- HI's Reasons for the Transaction" and
"-- NorAm's Reasons for the Transaction," as well as other factors discussed in
or incorporated by reference into this Joint Proxy Statement/Prospectus.
19
<PAGE> 27
THE MEETINGS
HI SPECIAL MEETING
The HI Special Meeting will be held on December 17, 1996 at 2:00 p.m.,
Houston time, in the Auditorium of Houston Industries Plaza, 1111 Louisiana
Street, Houston, Texas.
At the HI Special Meeting, the stockholders of HI will be asked to consider
and vote upon the approval and adoption of the Merger Agreement. Pursuant to the
terms of the Merger Agreement,
- HI will merge into HL&P, as a result of which each currently
outstanding share of HI Common Stock will be converted into one share of
Houston Common Stock, and
- NorAm will merge into Merger Sub, as a result of which NorAm will
become a wholly owned subsidiary of Houston and the outstanding shares of
NorAm Common Stock will be converted into the right to receive the Cash
Consideration or the Stock Consideration, as the holder thereof has elected
or is deemed to have elected (collectively, the "Merger Consideration").
See "The Transaction -- Merger Consideration."
In connection with the Transaction, T. Milton Honea, Robert C. Hanna, O.
Holcombe Crosswell and Joseph M. Grant, who are currently directors of NorAm,
will be elected as directors of Houston effective as of the effective time of
the Transaction (the "Effective Time").
In addition, the Merger Agreement provides that one of two alternative
merger structures could be used rather than the Basic Mergers in certain
circumstances. See "The Transaction -- The Alternative Mergers." Approval of the
Merger Agreement will constitute approval of the Transaction, the issuance of up
to 57,167,123 shares of Houston Common Stock to the holders of NorAm Common
Stock and the election of directors. See "The Transaction." A copy of the Merger
Agreement is attached hereto as Appendix A.
THE BOARD OF DIRECTORS OF HI HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
NORAM SPECIAL MEETING
The NorAm Special Meeting will be held on December 17, 1996 at 10:00 a.m.,
Houston time, in the Granger A Room of the Doubletree Hotel at Allen Center, 400
Dallas Street, Houston, Texas.
At the NorAm Special Meeting, stockholders of NorAm will be asked to
approve and adopt the Merger Agreement pursuant to which NorAm will merge into
Merger Sub. As a result, NorAm will become a wholly owned subsidiary of Houston
and the outstanding shares of NorAm Common Stock will be converted into the
right to receive the Merger Consideration.
The Merger Agreement provides that one of two alternative merger structures
could be used rather than the Basic Mergers in certain circumstances. See "The
Transaction -- The Alternative Mergers."
THE BOARD OF DIRECTORS OF NORAM HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER
AGREEMENT.
Pursuant to certain provisions of NorAm's Bylaws, all proxies and ballots
shall be received, and all questions regarding the qualification of voters and
the validity of proxies, and the acceptance or rejection of votes shall be
decided by two inspectors.
QUORUM
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of HI Common Stock is necessary to constitute a quorum at the
HI Special Meeting. Similarly, the presence, in person or by proxy, of the
holders of a majority of the outstanding shares of NorAm Common Stock is
necessary to constitute a quorum at the NorAm Special Meeting.
20
<PAGE> 28
VOTE REQUIRED
The affirmative vote of the holders of two-thirds of the outstanding HI
Common Stock is required to approve the Merger Agreement. Approval of the Merger
Agreement constitutes approval of the Transaction and the other transactions
contemplated by the Merger Agreement.
The affirmative vote of the holders of a majority of the outstanding NorAm
Common Stock is required to approve the Merger Agreement. Approval of the Merger
Agreement constitutes approval of the Transaction and the other transactions
contemplated by the Merger Agreement.
No approval by the holders of outstanding shares of preferred stock of HL&P
is required to approve the Merger Agreement, and such holders are not entitled
to vote on the Merger Agreement.
RECORD DATE; STOCK ENTITLED TO VOTE
The HI Board of Directors has established October 18, 1996 as the date to
determine those record holders of HI Common Stock entitled to notice of and to
vote at the HI Special Meeting. On that date, there were 250,478,269 shares of
HI Common Stock outstanding. Holders of HI Common Stock are entitled to one vote
with respect to the Merger Agreement for each share held.
The NorAm Board of Directors has established October 18, 1996 as the date
to determine those record holders of NorAm Common Stock entitled to notice of
and to vote at the NorAm Special Meeting. On that date, there were 137,249,845
shares of NorAm Common Stock outstanding. Holders of NorAm Common Stock are
entitled to one vote with respect to the Merger Agreement for each share held.
VOTING OF PROXIES
Shares represented by all properly executed proxies received in time for
each respective Special Meeting will be voted at such meeting in the manner
specified by the holders thereof. Proxies that do not contain voting
instructions will be voted FOR adoption and approval of the Merger Agreement at
the respective Special Meeting. It is not expected that any matter other than
those referred to herein will be brought before either of the Special Meetings.
If, however, other matters are properly presented, the persons named as proxies
will vote in accordance with their judgment with respect to such matters.
If a holder of HI Common Stock or NorAm Common Stock does not return a
signed proxy card, his or her shares will not be voted and thus will have the
effect of a vote against the Merger Agreement at the respective Special Meeting.
Abstentions and broker non-votes (shares held by brokers and other nominees or
fiduciaries that are present at either Special Meeting but not voted on a
particular matter) will have the effect of a vote against the Merger Agreement
at the respective Special Meeting.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
All elections by NorAm stockholders as to the form of the Merger
Consideration are to be made on the Election Form to be mailed to NorAm
stockholders of record at least 20 business days prior to the Closing Date. See
"The Transaction -- Election Procedure."
REVOCATION OF PROXIES
Any holder of HI Common Stock has the unconditional right to revoke his or
her proxy at any time prior to the voting thereof at the HI Special Meeting by
(i) filing a written revocation with the Corporate Secretary of HI prior to the
voting of such proxy, (ii) giving a duly executed proxy bearing a later date or
(iii) attending the HI Special Meeting and voting in person. Attendance by a
stockholder at the HI Special Meeting will not by itself revoke his or her
proxy.
Any holder of NorAm Common Stock has the unconditional right to revoke his
or her proxy at any time prior to the voting thereof at the NorAm Special
Meeting by (i) filing a written revocation with the Secretary of NorAm prior to
the voting of such proxy, (ii) giving a duly executed proxy bearing a later date
or
21
<PAGE> 29
(iii) attending the NorAm Special Meeting and voting in person. Attendance by a
stockholder at the NorAm Special Meeting will not by itself revoke his or her
proxy.
SOLICITATION OF PROXIES
Solicitation of proxies for use at the HI Special Meeting and the NorAm
Special Meeting may be made in person or by mail, telephone, telecopy or
telegram. Each of HI and NorAm will bear the cost of the solicitation of proxies
from its own stockholders, except that HI and NorAm will share equally the
Registration Statement filing fees and the cost of printing this Joint Proxy
Statement/Prospectus. In addition to solicitation by mail, the directors,
officers and regular employees of each company and its subsidiaries may solicit
proxies from stockholders of such company by telephone, telecopy or telegram or
in person. HI and NorAm have requested banking institutions, brokerage firms,
custodians, trustees, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of HI Common Stock and NorAm Common Stock held of
record by such entities, and HI and NorAm will, upon the request of such record
holders, reimburse reasonable forwarding expenses. In addition, HI and NorAm
have engaged Morrow & Co. to assist in the solicitation of proxies. HI and NorAm
anticipate that they will incur total fees of approximately $13,500 and $8,500,
respectively, plus reimbursement of certain out-of-pocket expenses for this
service, with each company to pay for its own solicitation costs.
SECURITY OWNERSHIP OF CERTAIN PERSONS
As of October 18, 1996, the directors and executive officers of HI as a
group and NorAm as a group beneficially owned (excluding shares purchasable upon
exercise of stock options) less than 1% of the outstanding shares of HI Common
Stock and NorAm Common Stock, respectively, and all of such directors and
executive officers who had the right to vote, as of the respective Record Date,
have indicated that they intend to vote in favor of the proposal to approve and
adopt the Merger Agreement.
22
<PAGE> 30
THE TRANSACTION
GENERAL
HI, HL&P, Merger Sub and NorAm have entered into the Merger Agreement,
which provides that, subject to the satisfaction of the conditions thereof (see
"Certain Provisions of the Merger Agreement -- Conditions to the Transaction"),
the HI/HL&P Merger and the NorAm Merger will be effected, or under certain
circumstances, as more fully described below under "-- The Alternative Mergers,"
one of the Alternative Mergers will be effected in lieu of the Basic Mergers
(the "Selected Alternative Merger"). THE DESCRIPTION OF THE MERGER AGREEMENT
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS INCLUDED AS APPENDIX A
TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED IN ITS ENTIRETY
HEREIN BY REFERENCE.
THE HI/HL&P MERGER
The Merger Agreement provides for the merger of HI into HL&P. HL&P will be
the surviving corporation and will be renamed "Houston Industries Incorporated."
In the Transaction, each share of HI Common Stock (including each associated HI
Right) outstanding immediately prior to the Effective Time (other than shares
owned immediately prior to such time directly or indirectly by HI or HL&P, which
will be canceled) will be automatically converted into one share of Houston
Common Stock (and one associated Houston Right). Stockholders of HI will not
need to exchange stock certificates formerly representing shares of HI Common
Stock for stock certificates representing shares of Houston Common Stock. Each
unexpired employee or director stock option to purchase HI Common Stock issued
by HI that is outstanding at the Effective Time will automatically be converted
into an option to purchase the number of shares of Houston Common Stock equal to
the number of shares of HI Common Stock that could be purchased under such
option at a price per share of Houston Common Stock equal to the per share
exercise price of such option. Each outstanding share of cumulative preferred
stock of HL&P will not be converted or otherwise affected by the Transaction and
will remain outstanding after the Transaction.
HOLDERS OF HI COMMON STOCK SHOULD NOT SUBMIT CERTIFICATES REPRESENTING
THEIR SHARES OF HI COMMON STOCK FOR EXCHANGE.
The Closing will occur on the fifth business day after all of the
conditions to the Transaction contained in the Merger Agreement have been
satisfied or waived unless another date is agreed to by HI and NorAm. As soon as
practicable after the Closing, Articles of Merger with respect to the HI/HL&P
Merger will be filed with the Secretary of State of the State of Texas, and the
HI/HL&P Merger will become effective upon the issuance of the HI/HL&P Merger
Certificate of Merger by the Secretary of State of the State of Texas, or at
such time thereafter as is provided in the Articles of Merger with respect
thereto. The effective time of the HI/HL&P Merger will be immediately prior to
the effective time of the NorAm Merger.
Pursuant to the Merger Agreement, the Restated Articles of Incorporation of
HL&P, as amended by the amendments thereto set forth as Exhibit A to the Merger
Agreement (the "Amendments") (see "-- Amendment of Articles of Incorporation"),
will be the Articles of Incorporation of Houston and the Bylaws of HI will be
the Bylaws of Houston. The directors and officers of HI at the effective time of
the HI/HL&P Merger will be the initial directors and officers of Houston. In
addition, T. Milton Honea, Robert C. Hanna, O. Holcombe Crosswell and Joseph M.
Grant, each of whom is currently a director of NorAm, will be elected as
directors of Houston effective as of the Effective Time. See "Relationships of
the Parties -- Following the Transaction -- Board of Directors of Houston."
However, if the Transaction is accomplished using the Second Alternative
Merger (as hereinafter defined), HI will not be merged into HL&P. In that event,
HL&P will remain a subsidiary of HI and the shares of HI capital stock will not
be affected.
THE NORAM MERGER
The Merger Agreement provides for the merger of NorAm into Merger Sub (or
into Houston, if the First Alternative Merger (as hereinafter defined) is
implemented). Merger Sub will be the surviving corporation
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and will be renamed "NorAm Energy Corp." In the Transaction, each share of NorAm
Common Stock outstanding immediately prior to the Effective Time (other than
dissenting shares and shares owned immediately prior to such time directly or
indirectly by NorAm or HI, which will be canceled) will be automatically
converted into the right to receive the Merger Consideration, as described
below. See "-- Merger Consideration."
The Closing will occur on the fifth business day after all of the
conditions to the Transaction contained in the Merger Agreement have been
satisfied or waived unless another date is agreed to by HI and NorAm. As soon as
practicable after the Closing, the Certificate of Merger relating to the NorAm
Merger will be filed with the Secretary of State of the State of Delaware, and
the time of such filing will be the Effective Time unless otherwise provided in
the Certificate of Merger. The effective time of the HI/HL&P Merger will be
immediately prior to the effective time of the NorAm Merger.
Pursuant to the Merger Agreement, the Certificate of Incorporation of
Merger Sub, as amended to change its name to "NorAm Energy Corp.," will be the
Certificate of Incorporation of, and the Bylaws of Merger Sub will be the Bylaws
of, the surviving corporation of the NorAm Merger. The directors of Merger Sub
at the Effective Time and the officers of NorAm at the Effective Time will be
the initial directors and officers of the surviving corporation of the NorAm
Merger.
MERGER CONSIDERATION
NORAM COMMON STOCK. Except for shares as to which appraisal rights have
been perfected under Delaware law (the "Dissenting Shares") and shares owned
directly or indirectly by NorAm or HI (which will be canceled at the Effective
Time), each share of NorAm Common Stock outstanding immediately prior to the
Effective Time will be converted at the Effective Time into the right to receive
from Houston the Merger Consideration. The Merger Consideration will consist of
(i) Cash Consideration of $16.00 or (ii) Stock Consideration (including a
corresponding number of Houston Rights), as the holders of NorAm Common Stock
thereof shall have elected or be deemed to have elected as described in
"-- Election Procedure" below.
The Merger Agreement contains certain provisions generally designed to
result in 50% of the outstanding shares of NorAm Common Stock being converted
into the Stock Consideration and 50% of the outstanding shares of NorAm Common
Stock being converted into the Cash Consideration. See "-- Proration."
Notwithstanding the foregoing, HI has the option, in its sole discretion, to
change the Cash Election Number and the Stock Election Number to more closely
follow the actual elections of NorAm stockholders so long as such modification
does not prevent tax counsel to NorAm or tax counsel to HI from delivering their
respective tax opinions which are conditions to consummating the Transaction.
See "-- Certain Federal Income Tax Consequences."
If the Closing does not occur by May 11, 1997, the Cash Consideration (but
not the Stock Consideration) will increase thereafter by two percent (simple
interest based on a year of 365 days) per quarter until the consummation of the
Transaction. The increase, if any, will be payable pro rata on a daily basis for
the period from May 11, 1997 until consummation. Otherwise, no interest will be
payable on the Merger Consideration. As used in this Joint Proxy
Statement/Prospectus, the term "Cash Consideration" includes any such increase.
The "Stock Consideration" will be determined as follows:
- if the Average Price of HI Common Stock (as defined below) is $21.25
or lower, the Stock Consideration will be 0.7529 shares of Houston Common
Stock;
- if the Average Price of HI Common Stock is $26.00 or greater, the
Stock Consideration will be 0.6154 shares of Houston Common Stock; or
- if the Average Price of HI Common Stock is greater than $21.25 but
less than $26.00, the Stock Consideration will be that portion of a share
of Houston Common Stock equal to the quotient of $16.00 divided by the
Average Price of HI Common Stock.
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In each case, the Stock Consideration includes a corresponding number of
associated Houston Rights. The "Average Price" of HI Common Stock will be the
average of the closing sales prices per share of HI Common Stock, rounded to
four decimal places, as reported in The Wall Street Journal's New York Stock
Exchange Composite Transactions Reports, for each of the first 20 consecutive
trading days in the period commencing 25 trading days prior to the Closing Date.
NORAM CONVERTIBLE SECURITIES. The NorAm 6% Convertible Subordinated
Debentures due 2012 (the "6% Convertible Debentures") and the NorAm 6 1/4%
Convertible Junior Subordinated Debentures (the "6 1/4% Convertible Debentures")
which are outstanding at the Effective Time shall continue to be outstanding
subsequent to the Effective Time as debt instruments of the surviving
corporation of the NorAm Merger, subject to their respective terms and
conditions and the execution and delivery of a supplemental indenture in the
form required thereby. NorAm Financing I, a Delaware statutory business trust
(the "Trust"), holds all of the 6 1/4% Convertible Debentures. The Trust
publicly issued 3,450,000 shares of 6 1/4% Convertible Trust Originated
Preferred Securities (the "Convertible Preferred Securities" and together with
the 6% Convertible Debentures, the "Convertible Securities"). The ability of the
Trust to pay distributions on the Convertible Preferred Securities is solely
dependent on the Trust's receipt of interest payments from NorAm on the 6 1/4%
Convertible Debentures. The Convertible Preferred Securities which are
outstanding at the Effective Time shall continue to be outstanding subsequent to
the Effective Time as securities of the Trust. Following the Effective Time,
each outstanding 6% Convertible Debenture and each outstanding Convertible
Preferred Security will be convertible into the amount of Stock Consideration
and Cash Consideration which the holder thereof would have had the right to
receive after the Effective Time if such Convertible Security had been converted
immediately prior to the Effective Time and the holder thereof had received
Stock Consideration with respect to 50% of such holder's shares received upon
conversion and Cash Consideration with respect to the remaining 50% of such
holder's shares received upon conversion. At June 30, 1996, $130.0 million in
principal amount of 6% Convertible Debentures were issued and outstanding (which
are convertible at $28.625 per share into approximately 4,541,485 shares of
NorAm Common Stock), and $172.5 million in principal amount of Convertible
Preferred Securities were issued and outstanding (which are convertible at
$12.125 per share into approximately 14,226,765 shares of NorAm Common Stock).
NORAM 10% DEBENTURES DUE 2019. In the event that within a specified period
following public announcement of the consummation of the Transaction, the rating
of the NorAm 10% Debentures due 2019 (the "NorAm 10% Debentures") (i) falls
below Investment Grade (as defined in the indenture governing the NorAm 10%
Debentures), assuming the NorAm 10% Debentures are rated by one of certain
rating agencies as Investment Grade on the date which is 121 days prior to
public announcement of the consummation of the Transaction (the "Rating Date")
or (ii) falls at least one Full Rating Category (as defined in such indenture)
below the rating of the NorAm 10% Debentures on the Rating Date, then each
holder of NorAm 10% Debentures will have the right, at the holder's option, to
require NorAm's successor to purchase all or any part of such holder's NorAm 10%
Debentures by a specified date at 100% of the principal amount thereof, plus
accrued interest to the repurchase date.
NORAM EMPLOYEE STOCK OPTIONS. Each holder of an unexpired employee stock
option to purchase NorAm Common Stock, along with any tandem stock appreciation
right, that is outstanding at the Effective Time (a "NorAm Stock Option"),
whether or not then exercisable, will be entitled to elect either to have all or
any portion of his or her NorAm Stock Options canceled and "cashed out" as
described below or to have all or any portion of his or her NorAm Stock Options
assumed by Houston. Holders of NorAm Stock Options will make such elections on
forms to be provided by NorAm to such holders. To be effective, an election form
must be properly completed, signed and submitted to HL&P or its designated agent
by 5:00 p.m. on the business day immediately prior to the Closing Date. A holder
of NorAm Stock Options who does not make a proper election will be deemed to
have elected to have his or her NorAm Stock Options "cashed out." If a holder of
NorAm Stock Options elects to be "cashed out" or does not properly make an
election, the NorAm Stock Options of such holder will be canceled by NorAm
immediately prior to the Effective Time, and each holder of a canceled NorAm
Stock Option will be entitled to receive, as soon as practicable after the
Effective Time, in consideration for the cancellation of such NorAm Stock
Option, an amount in cash equal to the product of (i) the total number of shares
of NorAm Common Stock subject to such holder's NorAm Stock
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Option and (ii) the excess, if any, of (x) the Cash Consideration over (y) the
exercise price per share of the NorAm Common Stock previously subject to such
NorAm Stock Option. Generally, each NorAm Stock Option of a holder who has
properly elected to have Houston assume his or her NorAm Stock Options will be
deemed to be an option to acquire, on the same terms and conditions as were
applicable under such NorAm Stock Option, a number of shares of Houston Common
Stock equal to the number of shares of NorAm Common Stock purchasable pursuant
to such NorAm Stock Option multiplied by the Stock Consideration, at a price per
share equal to the per-share exercise price for the shares of NorAm Common Stock
purchasable pursuant to such NorAm Stock Option divided by the Stock
Consideration.
ELECTION PROCEDURE
Subject to the proration procedures described below, each record holder of
shares of NorAm Common Stock (other than Dissenting Shares and shares owned
immediately prior to the Effective Time directly or indirectly by NorAm or HI,
which shares will be canceled) outstanding immediately prior to the Effective
Time shall be entitled to elect to receive in respect of each such share either
Cash Consideration or Stock Consideration. Alternatively, a record holder may
indicate that the record holder has no preference as between Cash Consideration
and Stock Consideration for such shares. Shares of NorAm Common Stock in respect
of which no election is made or deemed to have been made, or shares of NorAm
Common Stock as to which the holder thereof has tried to avail himself or
herself of the appraisal right provisions of Delaware law but has failed to
properly comply with such provisions (collectively, the "Non-Election Shares"),
will be deemed by Houston, in its sole and absolute discretion, to be shares in
respect of which either Cash Elections or Stock Elections have been made. SHARES
OF NORAM COMMON STOCK IN RESPECT OF WHICH A VALID ELECTION IS NOT MADE WILL BE
DEEMED TO BE NON-ELECTION SHARES.
All elections are to be made on the Election Form to be mailed to NorAm
stockholders of record at least 20 business days prior to the Closing Date.
Stockholders may also obtain copies of the Election Form upon request from the
Exchange Agent either in writing by mail to First Chicago Trust Company of New
York, Tenders & Exchanges Unit, Suite 4660, P.O. Box 2565, Jersey City, New
Jersey 07303-2565, or by telephone at (201) 324-0137. HI will issue a public
announcement of the anticipated Closing Date as soon as practicable, but in no
event less than five trading days prior to the Closing Date.
Election Forms must be received by the Exchange Agent at its designated
office no later than 5:00 p.m., New York City time, on the trading day
immediately preceding the Closing Date (the "Election Deadline"). For an
Election Form to be effective, holders of NorAm Common Stock must properly
complete, sign and submit such Election Form, and such form must be received by
the Exchange Agent at First Chicago Trust Company of New York, Tenders &
Exchanges Unit, if by mail, to Suite 4660, P.O. Box 2565, Jersey City, New
Jersey 07303-2565 or, if by courier, to 525 Washington Blvd., Suite 4660, Jersey
City, New Jersey 07310, and not withdrawn, by the Election Deadline. HI will
issue a public announcement of the Average Price of HI Common Stock and the
number of shares of Houston Common Stock to be issued as Stock Consideration as
soon as practicable after such amounts are determinable.
COMPLETING THE ELECTION FORM. To make a proper election, a holder of shares
of NorAm Common Stock must have delivered to the Exchange Agent at the address
specified above prior to the Election Deadline the following:
(i) an Election Form properly completed in accordance with the
instructions thereon and signed by the record holder of the shares of NorAm
Common Stock as to which such election is being made; and
(ii) either (a) the certificates for such shares or (b) an appropriate
guarantee of delivery of certificates for such shares.
Holders of record of NorAm Common Stock who hold such shares as nominees,
trustees or in other such representative capacities may submit multiple Election
Forms.
A form of the guarantee of delivery accompanies the Election Form, and,
unless stock certificates are submitted with the Election Form, a guarantee of
delivery must be properly executed by a firm which is a
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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, and certificates for the shares covered by such guarantee
must in fact be received by the Exchange Agent by the time specified in such
guarantee for a valid Election Form to have been deemed submitted.
WITHDRAWAL AND CHANGE OF ELECTIONS. Any NorAm stockholder may revoke his or
her election by submitting to the Exchange Agent written notice and a properly
completed and signed revised Election Form, by withdrawing his or her
certificates for shares of NorAm Common Stock, or by withdrawing the guarantee
of delivery of such certificates previously deposited with the Exchange Agent,
provided that the Exchange Agent receives all necessary materials prior to the
Election Deadline. Upon any such revocation, unless a duly completed Election
Form is thereafter submitted, such shares will be Non-Election Shares.
All elections will be revoked automatically if the Exchange Agent is
notified in writing by HI or NorAm that the Merger Agreement has been
terminated.
DISCRETIONARY AUTHORITY. HL&P will determine in its sole and absolute
discretion whether Election Forms have been properly completed, signed and
submitted or revoked. The determinations of Houston in such matters will be
conclusive and binding.
TIMING OF ELECTION PROCEDURES. The following diagram sets forth the
anticipated procedures (and certain related events) that a NorAm stockholder
will need to follow in connection with his or her election to receive Cash
Consideration or Stock Consideration.
--Description of Omitted Chart--
The omitted graphic material consists of a time line showing certain
events leading up to the Closing Date. According to the time line, HI will
mail Election Forms to record holders of NorAm Common Stock at least 20 days
prior to the Closing Date. Such holders will be able to complete, sign and
submit (or change) their Election Forms until the Election Deadline, which is
represented on the time line as being one (1) trading day prior to the Closing
Date. As depicted on the time line, a public announcement of the Closing Date
and of the Average Price of the HI Common Stock will be made at least (5)
trading days before the Closing Date.
IN MAKING AN ELECTION FOR CASH CONSIDERATION OR STOCK CONSIDERATION, NORAM
STOCKHOLDERS ARE URGED TO CONSIDER THE POSSIBLE IMPACT OF THE FLUCTUATING MARKET
VALUE OF HI COMMON STOCK ON THE VALUE OF TOTAL CONSIDERATION RECEIVED IN THE
TRANSACTION. UNDER THE MERGER AGREEMENT, THE STOCK CONSIDERATION PER SHARE OF
NORAM COMMON STOCK WILL BE FIXED AT NOT LESS THAN 0.6154 SHARES AND NOT MORE
THAN 0.7529 SHARES OF HOUSTON COMMON STOCK. THIS WILL RESULT IN STOCK
CONSIDERATION HAVING A VALUE OF $16.00 PER SHARE OF NORAM COMMON STOCK BASED
UPON THE AVERAGE PRICE OF HI COMMON STOCK, IF THE AVERAGE PRICE OF HI COMMON
STOCK IS GREATER THAN OR EQUAL TO $21.25 AND LESS THAN OR EQUAL TO $26.00. IF
THE AVERAGE PRICE OF HI COMMON STOCK IS LESS THAN $21.25 PER SHARE, THE VALUE OF
THE STOCK CONSIDERATION BASED UPON THE AVERAGE PRICE WILL BE LESS THAN $16.00.
CONVERSELY, IF THE AVERAGE PRICE OF HI COMMON STOCK IS MORE THAN $26.00 PER
SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED UPON THE AVERAGE PRICE WILL BE
MORE THAN $16.00. IN ANY EVENT, THERE IS NO ASSURANCE THAT THE AVERAGE PRICE
(WHICH IS BASED UPON A 20-TRADING-DAY AVERAGE CLOSING SALES PRICE DETERMINED
PRIOR TO THE CLOSING DATE) OF HI COMMON STOCK WILL APPROXIMATE THE ACTUAL VALUE
OF HOUSTON COMMON STOCK AT THE CLOSING DATE OR AT ANY TIME THEREAFTER.
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NORAM STOCKHOLDERS WHO PERFECT AN ELECTION MAY NOT RECEIVE THE ELECTED
STOCK CONSIDERATION OR CASH CONSIDERATION IN FULL DUE TO PRORATION LIMITATIONS
IN THE MERGER AGREEMENT, WHICH GENERALLY ARE DESIGNED TO EXCHANGE ONE-HALF OF
THE OUTSTANDING SHARES OF NORAM COMMON STOCK FOR STOCK CONSIDERATION AND ONE-
HALF OF SUCH SHARES (INCLUDING DISSENTING SHARES) FOR CASH CONSIDERATION. NORAM
STOCKHOLDERS ARE ALSO URGED TO CONSIDER THE DIFFERING FEDERAL INCOME TAX
CONSEQUENCES IN MAKING THE ELECTION, AS DISCUSSED BELOW.
THE SHARES OF NORAM COMMON STOCK OF A HOLDER WHO FAILS TO PROPERLY COMPLETE
AND RETURN THE ELECTION FORM, TOGETHER WITH CERTIFICATES REPRESENTING SUCH
HOLDER'S SHARES OF NORAM COMMON STOCK OR AN APPROPRIATE GUARANTEE OF DELIVERY OF
CERTIFICATES FOR SUCH SHARES, TO THE EXCHANGE AGENT BY THE ELECTION DEADLINE, OR
WHO FAILS TO COMPLY WITH THE ELECTION PROCEDURES DESCRIBED IN THIS JOINT PROXY
STATEMENT/ PROSPECTUS AND THE ELECTION FORM, WILL BE DEEMED BY HOUSTON, IN ITS
SOLE AND ABSOLUTE DISCRETION, TO BE SHARES IN RESPECT OF WHICH EITHER CASH
ELECTIONS OR STOCK ELECTIONS HAVE BEEN MADE. IN SUCH CASE THERE IS NO ASSURANCE
AS TO THE TYPE, OR MIX, IF ANY, OF MERGER CONSIDERATION THAT WILL BE RECEIVED.
PRORATION
If the aggregate number of shares in respect of which Cash Elections have
been made (the "Cash Election Shares") exceeds the Cash Election Number (as
defined below), (1) not all Cash Election Shares will be converted into the Cash
Consideration, and the Cash Election Shares to be converted into the Cash
Consideration will be prorated and (2) all shares of NorAm Common Stock in
respect of which Stock Elections have been made (the "Stock Election Shares")
and all Non-Election Shares in respect of which Stock Elections are deemed to
have been made will be converted into the right to receive Stock Consideration.
The proration of Cash Election Shares to be converted into the right to receive
Stock Consideration or Cash Consideration will be performed as follows: (i) Cash
Election Shares will be deemed to be Stock Election Shares on a pro rata basis
for each record holder of NorAm Common Stock with respect to those shares of
NorAm Common Stock, if any, of such record holder which are Cash Election
Shares, so that the number of Cash Election Shares so deemed to be Stock
Election Shares, when added to the other Stock Election Shares and all
Non-Election Shares in respect of which Stock Elections are deemed to have been
made, will equal as closely as practicable the Stock Election Number, and all
such Cash Election Shares so deemed to be Stock Election Shares will be
converted into the right to receive Stock Consideration; and (ii) the remaining
Cash Election Shares will be converted into the right to receive Cash
Consideration. The "Cash Election Number" is the aggregate number of shares of
NorAm Common Stock to be converted into the right to receive Cash Consideration,
which will be equal to (i) 50% of the number of shares of NorAm Common Stock
outstanding immediately prior to the Effective Time less (ii) the sum of (A) the
number of Dissenting Shares determined as of the Effective Time, (B) the number
of shares of NorAm Common Stock owned immediately prior to the Effective Time
directly or indirectly by NorAm or HI (which will be canceled) and (C) the
number of shares of NorAm Common Stock to be exchanged for cash in lieu of
fractional shares.
If the aggregate number of Stock Election Shares exceeds the Stock Election
Number (as defined below), all Cash Election Shares and all Non-Election Shares
in respect of which Cash Elections are deemed to have been made will be
converted into the right to receive Cash Consideration, and all Stock Election
Shares will be converted into the right to receive Stock Consideration or Cash
Consideration as follows: (i) Stock Election Shares will be deemed to be Cash
Election Shares on a pro rata basis for each record holder of NorAm Common Stock
with respect to those shares of NorAm Common Stock, if any, of such record
holder which are Stock Election Shares, so that the number of Stock Election
Shares so deemed to be Cash Election Shares, when added to the other Cash
Election Shares and all Non-Election Shares in respect of which Cash Elections
are deemed to have been made, will equal as closely as practicable the Cash
Election Number, and all such shares of NorAm Common Stock so deemed to be Cash
Election Shares will be converted into the right to receive the Cash
Consideration; and (ii) the remaining Stock Election Shares will be converted
into the right to receive the Stock Consideration. The "Stock Election Number"
is the aggregate number of shares of NorAm Common Stock to be converted into the
right to receive Stock Consideration, which will be equal to (i) the number of
shares of NorAm Common Stock outstanding immediately prior to the Effective Time
less (ii) the sum of the Cash Election Number and the sum of (A) the number of
Dissenting Shares determined as of the Effective Time, (B) the number of shares
of NorAm Common Stock
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owned immediately prior to the Effective Time directly or indirectly by NorAm or
HI (which will be canceled) and (C) the number of shares of NorAm Common Stock
to be exchanged for cash in lieu of fractional shares.
Notwithstanding the foregoing, HI has the option, in its sole discretion,
to change the Cash Election Number and the Stock Election Number to more closely
follow the actual elections of NorAm stockholders so long as the total amount of
Cash Consideration (including (a) the amount of cash paid to holders of
Dissenting Shares, (b) the amount of cash paid in lieu of fractional shares, (c)
the value of the Stock Consideration that would have been issued with respect to
shares of NorAm Common Stock held directly or indirectly by HI or NorAm, if any,
if such shares of NorAm Common Stock had been exchanged for Houston Common Stock
or HI Common Stock pursuant to the Transaction, and the value of Stock
Consideration that is issued with respect to shares of NorAm Common Stock, if
any, which are held by management of NorAm and holders of 5% or more of the
outstanding NorAm Common Stock who do not make certain representations as of the
Closing Date and (d) the 2% simple interest per quarter payable if the
Transaction is not consummated by May 11, 1997) paid to holders of NorAm Common
Stock does not exceed 58.7% of the sum of the total Cash Consideration and the
value of the Stock Consideration (based upon the average of the high and low
sales prices of HI Common Stock on the Closing Date).
EXAMPLES OF PRORATION. The following examples illustrate the application of
the proration provisions of the Merger Agreement described above. For purposes
of the examples, it is assumed that: (i) there will be 120,000,000 shares of
NorAm Common Stock outstanding immediately prior to the Effective Time and (ii)
the total number of Dissenting Shares, shares owned directly or indirectly by HI
or NorAm and shares exchanged for cash in lieu of fractional shares is 2,000,000
shares of NorAm Common Stock.
In the first example, it is assumed that: (i) the holders of 70,000,000
shares of NorAm Common Stock elected to receive Cash Consideration, (ii) the
holders of 40,000,000 shares of NorAm Common Stock elected to receive Stock
Consideration and (iii) the holders of 8,000,000 shares of NorAm Common Stock
indicated no Merger Consideration preference or did not timely submit a duly
completed Election Form to the Exchange Agent prior to the Election Deadline. In
this example, the Cash Election Number would be 58,000,000 (120,000,000 X 50% -
2,000,000) and the Stock Election Number would be 60,000,000 (120,000,000 -
(58,000,000 + 2,000,000)). As a result of such elections or non-elections (a)
the 8,000,000 Non-Election Shares and the 40,000,000 Stock Election Shares would
receive Stock Consideration, (b) 58,000,000 out of the 70,000,000 Cash Election
Shares would receive Cash Consideration and (c) 12,000,000 (i.e., the number of
Cash Election Shares in excess of the Cash Election Number) out of the
70,000,000 Cash Election Shares would receive Stock Consideration.
In the second example, it is assumed that: (i) the holders of 30,000,000
shares of NorAm Common Stock elected to receive Cash Consideration, (ii) the
holders of 80,000,000 shares of NorAm Common Stock elected to receive Stock
Consideration and (iii) the holders of 8,000,000 shares of NorAm Common Stock
indicated no Merger Consideration preference or did not timely submit a duly
completed Election Form to the Exchange Agent prior to the Election Deadline. In
this example as in the previous example, the Cash Election Number would be
58,000,000 and the Stock Election Number would be 60,000,000. As a result of
such elections or non-elections (a) the 8,000,000 Non-Election Shares and the
30,000,000 Cash Election Shares would receive Cash Consideration, (b) 60,000,000
out of the 80,000,000 Stock Election Shares would receive Stock Consideration
and (c) 20,000,000 (i.e., the number of Stock Election Shares in excess of the
Stock Election Number) out of the 80,000,000 Stock Election Shares would receive
Cash Consideration.
PROCEDURES FOR EXCHANGE OF CERTIFICATES; THE PAYMENT FUND
Upon the surrender of each certificate (a "Certificate") that prior to the
Effective Time represented shares of NorAm Common Stock, the Exchange Agent will
pay the holder of such Certificate the Merger Consideration multiplied by the
number of shares of NorAm Common Stock formerly represented by such Certificate
in exchange therefor, and such Certificate will forthwith be canceled. If the
Transaction is not consummated by May 11, 1997, the Cash Consideration (but not
the Stock Consideration) will increase thereafter by two percent (simple
interest based upon a year of 365 days) per quarter until the consummation
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of the Transaction. The increase, if any, will be payable pro rata on a daily
basis for the period from May 11, 1997 until consummation. Otherwise, no
interest will be paid or will accrue on the Merger Consideration.
As of the Effective Time, HL&P will deposit or cause to be deposited, in
trust with the Exchange Agent, for the benefit of the holders of shares of NorAm
Common Stock, for exchange as provided herein, the aggregate Merger
Consideration.
The Election Form contains instructions with respect to the surrender of
certificates representing NorAm Common Stock to be exchanged for the Merger
Consideration, including in the case of the Stock Consideration, certificates
representing Houston Common Stock. In order to make a proper election, a holder
of shares of NorAm Common Stock must have delivered to the Exchange Agent prior
to the Election Deadline (i) a properly completed Election Form and (ii) either
(a) the certificates for such shares or (b) an appropriate guarantee of delivery
of certificates for such shares.
NORAM STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of Houston Common Stock will be paid to the holder
of any unsurrendered Certificate with respect to the shares of Houston Common
Stock such holder is entitled to receive and no cash payment in lieu of
fractional shares will be paid to any such holder until the surrender of such
Certificate in accordance with the Merger Agreement.
After the Effective Time, there will be no transfers on the stock transfer
books of the surviving corporation of the NorAm Merger of any shares of NorAm
Common Stock. If, after the Effective Time, Certificates formerly representing
shares of NorAm Common Stock are presented to the surviving corporation of the
NorAm Merger or the Exchange Agent, they will be canceled and (subject to
applicable abandoned property, escheat and similar laws and, in the case of
Dissenting Shares, subject to applicable law) exchanged for the applicable
Merger Consideration.
Promptly following the first anniversary of the Effective Time, the
Exchange Agent will deliver to Houston all cash, shares of Houston Common Stock,
Certificates and other documents in its possession relating to the Transaction,
and thereafter Houston will act as the Exchange Agent. Thereafter, each holder
of a Certificate may surrender such Certificate to Houston and (subject to
applicable abandoned property, escheat and similar laws and, in the case of
Dissenting Shares, subject to applicable law) receive in exchange therefor the
applicable Merger Consideration, without any interest or dividends or other
payments thereon.
HI shall not be liable to any holder of shares of NorAm Common Stock for
any Merger Consideration in respect of such shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
FRACTIONAL SHARES
No fractional shares of Houston Common Stock will be issued to any NorAm
stockholder upon consummation of the Transaction. For each fractional share that
would otherwise be issued, Houston will pay by check an amount equal to a pro
rata portion of the net proceeds of the sale by the Exchange Agent of shares of
Houston Common Stock representing the aggregate of all such fractional shares
and the aggregate dividends or other distributions that are payable with respect
to such shares of Houston Common Stock. Such sale is to be executed by the
Exchange Agent as soon as practicable after the Effective Time at then
prevailing prices on the NYSE.
THE ALTERNATIVE MERGERS
The Merger Agreement provides that under certain circumstances (as more
fully described below) one of two alternative merger structures could be
utilized in lieu of the Basic Mergers. If an Alternative Merger is utilized in
lieu of the Basic Mergers, such Alternative Merger is sometimes referred to
herein as the "Selected Alternative Merger."
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THE FIRST ALTERNATIVE MERGER. HI is filing an application with the SEC
requesting an order granting Houston an exemption from regulation as a
registered public utility holding company under the 1935 Act. If the order is
not granted and HL&P, after consultation with its legal counsel, determines that
upon consummation of the Basic Mergers, Houston would not be an exempt public
utility holding company under the 1935 Act, NorAm and HI will both be merged
with and into HL&P (the "First Alternative Merger") with HL&P being the
surviving corporation and being renamed "Houston Industries Incorporated."
HL&P's determination to consummate the First Alternative Merger in lieu of the
Basic Mergers may be made before or after the Special Meetings. The primary
difference to HI stockholders and NorAm stockholders caused by consummating the
First Alternative Merger in lieu of the Basic Mergers is that NorAm would not be
a wholly owned subsidiary of Houston and all of the regulated utility assets of
HL&P and NorAm would be held within the same corporation. The parties to the
Merger Agreement have agreed that, if the First Alternative Merger is to be
effected, they will execute an appropriate amendment to the Merger Agreement to
reflect all changes required to be made in the Merger Agreement to effect the
First Alternative Merger in lieu of the Basic Mergers.
THE SECOND ALTERNATIVE MERGER. The parties to the Merger Agreement have
acknowledged that in the absence of applicable regulatory constraints under the
1935 Act, it would be preferable for the HI/HL&P Merger not to be effected and
for NorAm to merge with and into Merger Sub, with Merger Sub being the surviving
corporation and being renamed "NorAm Energy Corp." In that event, both NorAm and
HL&P would be wholly owned subsidiaries of HI. Accordingly, if, at the time at
which all of the conditions to consummating the Transaction have been satisfied
or waived, the 1935 Act does not constrain the structure of the Transaction,
then (i) HI will not merge with and into HL&P and (ii) NorAm will merge with and
into Merger Sub (the "Second Alternative Merger"). The primary differences to
NorAm stockholders caused by consummating the Second Alternative Merger in lieu
of the Basic Mergers are: (i) HI would remain a holding company and HL&P and
NorAm would be wholly owned subsidiaries of HI and (ii) such stockholders would
receive HI Common Stock rather than Houston Common Stock. The terms and
provisions of HI Common Stock are substantially similar to the Houston Common
Stock described under "Description of Houston Capital Stock -- Common Stock." A
description of HI Common Stock and associated HI Rights is incorporated by
reference herein. See item 6 of the list of documents incorporated by reference
into this Joint Proxy Statement/Prospectus in "Incorporation of Certain
Documents by Reference." The parties to the Merger Agreement have agreed that,
if the Second Alternative Merger is to be effected, they will execute an
appropriate amendment to the Merger Agreement to reflect all changes required to
be made in the Merger Agreement to effect the Second Alternative Merger in lieu
of the Basic Mergers.
CORPORATE STRUCTURE
The diagrams set forth below illustrate the corporate structure of HI and
NorAm prior to and following consummation of the Transaction.
CORPORATE STRUCTURE PRIOR TO THE TRANSACTION
The omitted graphic material consists of a diagram depicting the current
corporate structure of HI and NorAm. The diagram on the left side of the page
depicts HI as the parent company of HL&P and as the parent company of a group
of companies consisting of HI Energy and other nonregulated subsidiaries. The
diagram on the right side of the page depicts NorAm as the parent company of a
group of existing subsidiaries.
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CORPORATE STRUCTURE FOLLOWING TRANSACTION
1) IF THE BASIC MERGERS ARE UTILIZED:
The omitted graphic material consists of a diagram depicting the
corporate structure of HI and NorAm following the Transaction if the Basic
Mergers are utilized. The diagram depicts the former stockholders of HI and
NorAm as the stockholders of a new entity, Houston, which is the parent company
of NorAm and a group of subsidiaries consisting of HI Energy and other
nonregulated subsidiaries of HI existing prior to the Basic Mergers. NorAm is
depicted as the parent of a group of subsidiaries existing prior to the Basic
Mergers. Houston is the entity resulting from the HI/HL&P Merger.
2) IF THE FIRST ALTERNATIVE MERGER IS UTILIZED IN LIEU OF THE BASIC MERGERS:
The omitted graphic material consists of a diagram depicting the
corporate structure of HI and NorAm following the Transaction if the First
Alternative Merger is utilized in lieu of the Basic Mergers. The diagram
depicts the former stockholders of HI and NorAm as the stockholders of Houston,
the post-merger entity consisting of HI, HL&P and NorAm. Houston is depicted
as the parent company of a new group of subsidiaries consisting of HI Energy
and other nonregulated subsidiaries of HI existing prior to the First
Alternative Merger and as the parent company of certain subsidiaries of NorAm
existing prior to the First Alternative Merger.
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3) IF THE SECOND ALTERNATIVE MERGER IS UTILIZED IN LIEU OF THE BASIC MERGERS:
The omitted graphic material consists of a diagram depicting the
corporate structure of HI and NorAm following the Transaction if the Second
Alternative Merger is utilized in lieu of the Basic Mergers. The stockholders
of HI and the former stockholders of NorAm are shown as the stockholders of HI.
HI is shown as the parent company of HL&P, NorAm and a group of subsidiaries
consisting of HI Energy and other nonregulated subsidiaries of HI. NorAm is
depicted as the parent company of certain subsidiaries of NorAm existing prior
to the Second Alternative Merger.
BACKGROUND OF THE TRANSACTION
In May 1996, a representative of CS First Boston, at the request of HI, met
with T. Milton Honea, the Chief Executive Officer of NorAm, and suggested that
HI would be interested in exploring the possibility of a business combination
with NorAm. Subsequently, the CS First Boston representative contacted Mr. Honea
to suggest that he meet with Don D. Jordan, the Chief Executive Officer of HI.
Following a phone call from Mr. Jordan, Mr. Jordan and Mr. Honea met on June 24,
and Mr. Jordan proposed that the two companies explore the possibility of a
business combination. Mr. Jordan said that HI would consider a possible purchase
price of $15 per share of NorAm Common Stock, payable in a combination of
Houston Common Stock and cash, subject to due diligence and further analysis.
The two CEOs determined that they shared similar visions of likely future
developments affecting the electric and gas utility industries. The discussions
continued at a meeting between Mr. Jordan and Mr. Honea on June 27 when the two
CEOs further discussed the possibility of a business combination, the potential
benefits to NorAm stockholders of a business combination and the expected timing
of obtaining required regulatory approvals.
Prior to NorAm's regularly scheduled July 10 Board of Directors meeting,
Mr. Honea called the Board members individually to discuss with them HI's
expressions of interest and the fact that a detailed presentation related to HI
would be made at the July 10 meeting. Presentations were made at the July 10
meeting by management and Merrill Lynch. The NorAm Board directed management to
continue exploration of a transaction and discussions with HI.
Mr. Jordan and Mr. Honea met again on July 12, with Mr. Honea accompanied
by a representative of Merrill Lynch. On July 15, the two companies signed
parallel confidentiality and standstill agreements. On July 16, Mr. Jordan and
several other senior officers of HI and HL&P met with Mr. Honea and several
other senior officers of NorAm. Representatives of CS First Boston and Merrill
Lynch were also present. At this meeting, certain officers of each company made
presentations regarding business activities and strategies of their respective
organizations. Mr. Jordan and Mr. Honea met again on July 17 and confirmed to
each other an increasing interest in the possibility of a combination.
On July 19, the Board of Directors of HI, at a special meeting, discussed
the status of the matter. Presentations were made by management, CS First Boston
and counsel. The HI Board directed management
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to continue exploration of a transaction and discussions with NorAm. The HI
Board had also discussed the feasibility and desirability of a business
combination with NorAm at earlier board meetings.
Thereafter, and continuing into early August, the possibility of a
transaction and related matters were discussed and negotiated at various
meetings between Mr. Jordan and Mr. Honea, among other senior officers of the
two companies, between CS First Boston and Merrill Lynch and between counsel for
the two companies. During this time period, the two companies exchanged detailed
operational, financial and other business information.
On August 2, HI representatives told NorAm representatives that HI had
substantially completed its review of relevant NorAm business information and
was prepared to confirm its offer to pay $15 per NorAm share (payable half in
cash and half in stock), provided the other terms of a merger agreement could be
agreed upon. HI also sent NorAm a draft of a merger agreement.
After several meetings early in the week of August 5, which included
substantial negotiation regarding price and discussion of due diligence results,
Mr. Jordan and Mr. Honea agreed on August 7 that a price of $16 per share (half
in cash and half in stock) would be an appropriate price to present to their
respective boards of directors if the parties successfully concluded
negotiations regarding the other terms and provisions of the merger agreement.
Following meetings between counsel on August 7 and 8, a substantially complete
form of the proposed merger agreement was delivered to the directors of each
company.
On the afternoon of Friday, August 9, the Board of Directors of HI met to
consider the proposed transaction. Presentations were made by management, CS
First Boston and counsel. The HI Board reviewed and discussed the terms of the
transaction and management's assessment of the transaction from financial,
strategic, operating and regulatory standpoints. Representatives of CS First
Boston presented certain financial and other analyses and delivered CS First
Boston's opinion, later confirmed in writing, that as of the date of the board
meeting, the consideration to be paid in the transaction was fair from a
financial point of view to HI. After discussion, the Board of Directors, by a
unanimous vote of those present, approved the Merger Agreement and voted to
recommend approval of the Merger Agreement to HI's stockholders. The only
director who was absent from the meeting subsequently informed Mr. Jordan of his
approval of the Merger Agreement. The Boards of Directors of HL&P and Merger Sub
also approved the Merger Agreement.
On Sunday, August 11, the Board of Directors of NorAm met to consider the
proposed transaction. Presentations were made by management, Merrill Lynch and
counsel. The NorAm Board reviewed and discussed the terms of the transaction and
management's assessment of the transaction from financial, strategic, operating
and regulatory standpoints. Representatives of Merrill Lynch presented certain
financial and other analyses and delivered Merrill Lynch's opinion, later
confirmed in writing, that as of the date of the board meeting, the
consideration to be received in the transaction by the holders of NorAm Common
Stock, taken as a whole, was fair from a financial point of view to such
holders. After discussion, the NorAm Board unanimously approved the Merger
Agreement and voted to recommend approval of the Merger Agreement to NorAm's
stockholders.
Later on August 11, the parties executed and delivered the Merger
Agreement. On the morning of Monday, August 12, the transaction was publicly
announced.
HI'S REASONS FOR THE TRANSACTION
STRATEGIC OVERVIEW. In the fall of 1995, senior management of HI conducted
a strategic review of its business and of ongoing developments in the electric
utility and related industries regarding competition, regulation and
consolidation. Management concluded that the pace of change affecting the
electric utility industry was likely to accelerate, albeit in a state-by-state
fashion. Management also concluded that the markets for electricity and natural
gas were converging and consolidating and that these trends and competition for
customers would alter the structure and business practices of companies serving
these markets in the future. They observed a trend toward performance-based
rate-making for regulated distribution and transmission operations that should
provide an opportunity for favorable returns for better, more efficient
operators.
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Based on that analysis, in February 1996, HI reorganized its internal
operations, establishing five new Strategic Business Units ("SBUs"). Three of
the SBUs are within HL&P: Energy Production (fossil-fueled electric generation),
Energy Delivery and Customer Services (transmission and distribution of
electricity and engineering, as well as marketing and other customer services)
and the South Texas Project (nuclear operations). The other two SBUs are new
nonregulated units created to focus on wholesale energy trading and retail
marketing nationwide. The reorganization was designed to position HI to compete
more effectively in the future.
Management also concluded that to increase its ability to compete
effectively in the new environment, HI should consider development or
acquisition of additional assets, skills and infrastructure. With respect to
wholesale energy marketing, management identified wholesale gas marketing
capability, trading and risk management skills, and ownership of or access to
physical gas assets. With respect to retail energy marketing, management
concluded that mass marketing expertise and an expanded retail customer base
would be desirable.
Both before and after the February reorganization, management discussed
with the HI Board of Directors management's analysis and conclusions regarding
the nature and pace of change affecting the electric utility industry and the
appropriate responses for HI.
In the spring of 1996, HI began to analyze potential candidates for
acquisition, merger or other strategic alliance which could fill these needs
with respect to both wholesale and retail marketing. That process ultimately
identified NorAm as a company possessing attractive attributes in both
categories.
BENEFITS OF THE TRANSACTION. HI's Board of Directors believes that the
Transaction offers the following significant strategic and financial benefits to
HI and its stockholders, as well as to its employees and customers:
- NorAm brings to the combined companies more than 2.1 million additional
retail distribution customers (net of its approximately 600,000 customers
who overlap with HL&P's approximately 1.5 million retail customers). The
Transaction will increase the combined companies' domestic retail customer
base to approximately 3.6 million customers in six states. HI expects to
enjoy opportunities to provide additional energy-related services to these
customers.
- NorAm has a fast-growing gas and electric wholesale trading organization.
By combining the expertise of the NorAm trading organization with HL&P's
electric power expertise, the Board believes HI can build a leading
wholesale energy trading and risk management business.
- NorAm's international strategy, with its emphasis on gas transmission and
distribution, complements HI's international strategy, which is focused on
power plant development and acquisition of electric distribution systems.
The same gas/electric convergence trends that are developing in the United
States are becoming evident elsewhere, and the Transaction should create a
competitive advantage to HI in pursuing international energy
opportunities.
All of the benefits listed above were considered as a whole by the HI Board in
reaching its conclusions, and it is impracticable to assign relative weights to
the benefits considered.
MERGER OF HI INTO HL&P. In light of 1935 Act considerations, the Merger
Agreement provides that HI will be merged into HL&P. The HI Board believes the
merger of HI into HL&P is desirable because it will permit Houston to acquire
NorAm without becoming a registered public utility holding company under the
1935 Act. (If the 1935 Act is repealed or modified prior to the Closing Date and
does not constrain the structure of the Transaction, the Second Alternative
Merger will be used and HI will not be merged into HL&P.)
CONCLUSION. The HI Board of Directors believes that Houston and NorAm as a
combined enterprise will be better positioned, due to expanded skills, larger
customer base and greater resources, to take advantage of the opportunities
expected to be presented by convergence and consolidation trends in the gas and
electric utility and energy service industries. These factors will also enhance
the companies' ability to serve the
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communities in which they do business. Accordingly, the HI Board believes the
Transaction should help Houston meet its objective of becoming a leading
national and international energy services provider.
NORAM'S REASONS FOR THE TRANSACTION
STRATEGIC OVERVIEW. During much of 1995, NorAm management engaged in a
comprehensive strategic planning process involving a large number of its key
executives. The strategic plan which resulted was presented to NorAm's Board of
Directors in a multi-day meeting in October 1995.
The strategic plan concluded that the domestic natural gas business was
undergoing a process of deregulation, which would lead, over the next several
years, to complete "unbundling" at the residential level. That is, residential
consumers would be able to choose from a number of unregulated service providers
to sell them the natural gas which would be physically transported through
existing distribution systems. The plan further concluded that the domestic
electricity markets would follow the same course, although perhaps on a
different time frame, leading to the convergence of the two markets.
Additionally the plan concluded that there was great potential for growth in
natural gas distribution in a number of developing areas of the world,
particularly Latin America and Asia.
NorAm identified as its greatest strength its directly served base of 2.7
million customers and made "customer class" the driving force of its strategy.
It further identified as strengths its rapidly growing wholesale gas and power
marketing and trading business, its interstate pipeline business, and its early
position in Latin America.
NorAm also identified certain weaknesses or "gaps," including financial
strength, size, electricity expertise, and mass marketing skills and associated
information systems, which needed to be addressed to enable NorAm to succeed in
pursuing its strategy.
Given NorAm's rapidly improving operating results and strong customer base,
the Board concluded that management should pursue the proposed strategy and
develop plans to fill the identified gaps.
FACTORS CONSIDERED. Prior to taking action on the Merger Agreement, the
NorAm Board reviewed various materials relevant to the Transaction and received
presentations from NorAm's management, its legal counsel, Jones, Day, Reavis &
Pogue and Hubert Gentry, Jr., and its financial advisor, Merrill Lynch, and
reviewed carefully with them the terms and conditions of the transactions
contemplated by the Merger Agreement.
The NorAm Board considered numerous factors in reaching the conclusions
described below. The factors considered by the Board included, but were not
limited to, the following:
- The substantial premium over historical market prices to be received
by NorAm's stockholders. Based on the market prices of the HI Common
Stock and the NorAm Common Stock on August 9, 1996, the last trading
day prior to the date the Merger Agreement was executed, NorAm
stockholders would receive a premium of approximately 38% over the
closing sale price of NorAm Common Stock of $11.625. The premium is
approximately 45.5% over the closing sale price of NorAm Common Stock
on August 2, 1996, one week earlier.
- The opinion of Merrill Lynch that as of the date of the opinion, the
Merger Consideration, taken as a whole, was fair, from a financial
point of view, to NorAm's stockholders.
- The federal income tax consequences of the Transaction, including the
ability of NorAm's stockholders to elect Stock Consideration, and
thereby, if all Stock Consideration is received, to have a tax-free
exchange of their NorAm Common Stock.
- HL&P's strength as the ninth largest electric utility, as well as its
domestic and international power projects, providing a strategic
opportunity to complement NorAm's growth plans.
- The continuing equity interest in the larger combined electric and gas
operations of HI and NorAm provided by the Stock Consideration offered
to NorAm's stockholders which, depending
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on the price of HI Common Stock, would range from approximately 16% to
19% of the outstanding shares of HI Common Stock (assuming 50% Stock
Consideration).
- The creation of a more competitive company for both the domestic and
international energy markets because of the financial strength,
prospects and cash flow available for investment of the combined
HI/NorAm.
- The combined HI/NorAm would have a lower debt to equity ratio than
NorAm on a stand alone basis and the resulting stronger balance sheet
would create a more competitive company with greater financial
flexibility.
- The expected immediate increase in dividends that will be received by
a NorAm stockholder who receives all Stock Consideration. This
dividend increase will range from $.64 to $.85 per equivalent NorAm
share (depending on the Average Price of the HI Common Stock), as
compared to the current annual NorAm dividend of $.28 per share.
- The impact of the Transaction on NorAm's employees.
- Other strategic alternatives for NorAm, including remaining an
independent company or entering into other business combinations.
- The recent substantial activity in utility restructuring, combinations
and developing convergence strategies related to the development of
energy services companies, as opposed to separate electric and gas
companies, and the size and scale requirements necessary for future
success.
- The terms and conditions of the Merger Agreement, including the
ability of the NorAm Board, in the exercise of its fiduciary duties,
to cooperate and negotiate with a third party an alternative
unsolicited transaction that is financially superior to the
Transaction, and to recommend such alternative transaction to NorAm's
stockholders, all subject to compliance with certain provisions of the
Merger Agreement. NorAm's only obligations in such an event would be
to allow HI an opportunity to improve the terms of the Merger
Agreement, and if not sufficiently improved, to accept the alternative
transaction and to pay HI a $75,000,000 termination fee.
All of the factors listed above were considered as a whole by the NorAm Board in
reaching its conclusions, and it is impracticable to assign relative weights to
the factors considered.
The NorAm Board determined to pursue the Transaction rather than other
alternatives (after review thereof with the assistance of Merrill Lynch) because
of the Board's view that (i) the values to NorAm's stockholders which could be
achieved by NorAm's either remaining an independent company or choosing other
possible alternatives were considered unlikely to equal the value to NorAm's
stockholders to be achieved by the Transaction, (ii) the ability of NorAm's
stockholders who receive Stock Consideration to participate in the continued
growth of NorAm and HI through their ownership of stock of Houston, a company
with greater financial strength, financial flexibility and cash available for
investments than NorAm on a stand-alone basis and (iii) the fact that the Merger
Agreement does not preclude any other party from making a proposal for a
business combination with NorAm.
The Board of Directors of NorAm believes that the terms of the Merger
Agreement are fair to, and in the best interests of, NorAm and its stockholders.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
For the reasons described above under "-- HI's Reasons for the Transaction"
and "-- NorAm's Reasons for the Transaction," the HI Board of Directors has
unanimously approved the Merger Agreement and the transactions contemplated
thereby and RECOMMENDS THAT HI STOCKHOLDERS VOTE FOR ADOPTION AND APPROVAL OF
THE MERGER AGREEMENT and the NorAm Board of Directors has unanimously approved
the Merger Agreement and the transactions contemplated thereby and RECOMMENDS
THAT NORAM STOCKHOLDERS VOTE FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
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OPINION OF HI'S FINANCIAL ADVISOR
HI retained CS First Boston to act as its financial advisor in connection
with the Transaction. CS First Boston was selected by HI based on CS First
Boston's experience, expertise and familiarity with HI and its businesses. CS
First Boston is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
In connection with CS First Boston's engagement, HI requested that CS First
Boston evaluate the fairness, from a financial point of view, to HI of the
Merger Consideration to be paid to the stockholders of NorAm in connection with
the Transaction. At a meeting of the Board of Directors of HI held on August 9,
1996, at which the HI Board approved the Transaction, CS First Boston rendered
to the HI Board an oral opinion to the effect that, as of such date and based
upon and subject to certain matters, the Merger Consideration proposed to be
paid by HI pursuant to the Transaction was fair to HI from a financial point of
view. CS First Boston confirmed this oral opinion by delivery of a written
opinion dated August 11, 1996.
THE FULL TEXT OF CS FIRST BOSTON'S WRITTEN OPINION TO THE HI BOARD DATED
AUGUST 11, 1996, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF
HI COMMON STOCK ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. THE SUMMARY OF
THE OPINION OF CS FIRST BOSTON SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
CS First Boston's opinion is addressed to the HI Board and addresses only
the fairness to HI from a financial point of view of the Merger Consideration
proposed to be paid to the NorAm stockholders pursuant to the Transaction and
does not constitute a recommendation to any HI stockholder as to how such
stockholder should vote at the HI Special Meeting. The Merger Consideration was
determined through negotiations between HI and NorAm and was approved by the HI
Board and the NorAm Board. CS First Boston provided advice to HI during the
course of such negotiations. The CS First Boston opinion does not address the
fairness of the Merger Consideration from a financial point of view or otherwise
to NorAm or NorAm's stockholders and, consequently, does not constitute a
recommendation to any NorAm stockholder in respect of such stockholder's
decision whether to vote in favor of adoption of the Transaction or in any other
respect.
In arriving at its opinion, CS First Boston reviewed the Merger Agreement,
which includes a description of the HI/HL&P Merger, the NorAm Merger and the
Alternative Mergers, and certain related documents, and certain publicly
available business and financial information relating to HI and NorAm. CS First
Boston also reviewed certain other information, including financial forecasts,
provided to it by HI and NorAm and met with the respective managements of HI and
NorAm to discuss the businesses and prospects of HI and NorAm. CS First Boston
evaluated the pro forma financial impact of the Transaction on HI and considered
and relied upon the views of the respective managements of HI and NorAm
concerning the strategic implications and operational benefits which might
result from the Transaction that are described under "-- HI's Reasons for the
Transaction -- Benefits of the Transaction," as well as the potential for cost
savings over time. CS First Boston also considered and relied upon the views of
management of, and regulatory counsel for, HI concerning the anticipated
regulatory treatment to be accorded to the Transaction. CS First Boston also
considered certain financial and stock market data of HI and NorAm and compared
such data with similar data for other publicly held companies in businesses
similar to those of HI and NorAm and considered, to the extent publicly
available, the financial terms of certain other business combinations and other
transactions which have recently been effected. CS First Boston also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria that CS First Boston deemed relevant.
In connection with its review, CS First Boston did not assume any
responsibility for independent verification of any of the foregoing information
and relied upon its being complete and accurate in all material respects. With
respect to the financial forecasts, CS First Boston assumed that such forecasts
were reasonably
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prepared on bases reflecting the best currently available estimates and
judgments of the managements of HI and NorAm as to the future financial
performance of HI and NorAm and the potential synergies and cost savings
(including the amount, timing and achievability thereof) expected to result from
the Transaction. In addition, CS First Boston has not made an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of HI or NorAm, nor was CS First Boston furnished with any such evaluations or
appraisals. CS First Boston's opinion is necessarily based upon financial,
economic, market and other conditions as they existed and could be evaluated on
the date of its opinion. CS First Boston did not express any opinion as to what
the value of HI Common Stock will be when issued to NorAm's stockholders
pursuant to the Transaction or the prices at which HI Common Stock will trade
subsequent to the Transaction. CS First Boston assumed that the Transaction will
be treated as a tax-free reorganization for federal income tax purposes and
that, in the course of obtaining the necessary regulatory and governmental
approvals for the Transaction, no restriction will be imposed that will have a
material adverse effect on the contemplated benefits of the Transaction.
In preparing its opinion for the HI Board, CS First Boston performed a
variety of financial and comparative analyses and considered a variety of
factors, including those described below performed by CS First Boston in
connection with its presentation to the HI Board on August 9, 1996. The summary
of CS First Boston's analyses set forth below does not purport to be a complete
description of the analyses underlying CS First Boston's opinion. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, CS First Boston made
qualitative judgments as to the significance and relevance of each analysis and
factor that it considered. Accordingly, CS First Boston believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying such analyses and
its opinion. All analyses and factors considered by CS First Boston that were
material and were presented to the HI Board of Directors are set forth herein.
In its analyses, CS First Boston made numerous assumptions with respect to
HI, NorAm, industry performance, regulatory, general business, economic, market
and financial conditions and other matters, many of which are beyond the control
of HI and NorAm. No company, transaction or business used in such analyses as a
comparison is identical to HI, NorAm or the Transaction, nor is an evaluation of
the results of such analyses entirely mathematical; rather, it involves complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the acquisition, public trading or other
values of the companies, business segments or transactions being analyzed. The
estimates contained in such analyses and the valuations resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, such estimates are inherently subject to substantial uncertainty.
CS First Boston's opinion (together with the related financial analyses) was
only one of many factors considered by the HI Board in its evaluation of the
Transaction and should not be viewed as determinative of the views of the HI
Board or management with respect to the Merger Consideration or the Transaction.
The following is a summary of the analyses performed by CS First Boston in
connection with its presentation to the HI Board on August 9, 1996.
DISCOUNTED CASH FLOW ANALYSIS. CS First Boston calculated ranges of
enterprise value for the Distribution Businesses (Entex, Arkla and Minnegasco),
the Pipeline Businesses (NorAm Gas Transmission Company and Mississippi River
Transmission Corporation), the Gathering Business (NFS) and the Marketing
Businesses (NES and NEM) of NorAm (each a "NorAm Business" and together, the
"NorAm Businesses"), based upon the present value of each NorAm Business'
10-year stream of forecasted unlevered free cash flows and fiscal year 2006
terminal value. The fiscal year 2006 terminal value was calculated using a range
of multiples of fiscal year 2006 operating cash flow ("EBITDA") of each NorAm
Business. The range of terminal multiples was selected primarily based on the
trading multiples of companies operating in
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businesses similar to those of each NorAm Business. In conducting its analysis,
CS First Boston relied on certain assumptions relating to volume growth, gross
margin, return on equity and capital expenditures of the NorAm Businesses
provided by HI's management. For the Distribution Businesses, CS First Boston
applied discount rates ranging from 8.0% to 8.5%, reflecting the weighted
average cost of capital, and multiples of terminal EBITDA ranging from 7.5x to
8.5x. For the Pipeline Businesses, CS First Boston applied discount rates
ranging from 8.5% to 9.0%, reflecting the weighted average cost of capital, and
multiples of terminal EBITDA ranging from 7.0x to 8.0x. CS First Boston applied
discount rates ranging from 9.0% to 10.0% and multiples of terminal EBITDA
ranging from 8.0x to 9.0x for the Gathering Business, and discount rates of
10.0% to 12.0% and multiples of terminal EBITDA ranging from 7.0x to 8.0x for
NES. CS First Boston applied discount rates ranging from 8.9% to 9.9% and a
perpetuity methodology to the terminal free cash flow of NEM. This analysis
resulted in an enterprise valuation reference range for the Distribution
Businesses of approximately $1,655 million to $1,840 million, the Pipeline
Businesses of approximately $1,175 million to $1,275 million, and the Gathering
and Marketing Businesses of approximately $507 million to $571 million. On an
aggregate basis, the Discounted Cash Flow analyses for the Distribution,
Pipeline and Gathering and Marketing Businesses of NorAm indicated an enterprise
valuation reference range of approximately $3,337 million to $3,686 million and
an equity valuation reference range per share (fully diluted) for NorAm of
approximately $13.68 to $16.01.
CS First Boston also calculated ranges of enterprise value for the electric
utility business and the international independent power business of HI (each an
"HI Business" and together, the "HI Businesses"). In conducting its analysis, CS
First Boston relied on certain assumptions relating to sales growth, operating
margins, return on equity and capital expenditures of the HI Businesses provided
by HI's management.
COMPARABLE COMPANIES ANALYSIS. CS First Boston reviewed and compared
certain actual and forecasted financial and operating information of the
Distribution Businesses with comparable information of the following publicly
traded companies in the natural gas distribution industry: Atlanta Gas Light,
Brooklyn Union Gas, MCN Corp., NICOR Inc., Pacific Enterprises and Washington
Gas Light (the "Distribution Comparable Companies"). In addition, CS First
Boston reviewed and compared certain actual and forecasted financial and
operating information of the Pipeline Businesses with comparable information of
the following publicly traded companies in the interstate natural gas
transmission industry: Coastal Corp., El Paso Natural Gas, Enron Corp., Pan
Energy Corp., Sonat Inc. and The Williams Companies, Inc. (the "Pipeline
Comparable Companies"). Finally, CS First Boston reviewed and compared certain
actual and forecasted financial and operating information of the Gathering and
Marketing Businesses with comparable information of the following publicly
traded companies in the natural gas gathering, processing and marketing ("GPM")
industry: Aquila Gas Pipeline Corporation, Delhi Group, KN Energy, NGC
Corporation, TPC Corp. (formerly, Tejas Power Corporation), Tejas Gas
Corporation and Western Gas Resources, Inc. (the "GPM Comparable Companies" and,
together with the Distribution Comparable Companies and the Pipeline Comparable
Companies, the "Comparable Companies").
CS First Boston selected these companies based on their activity in
businesses comparable to the NorAm Businesses. CS First Boston derived multiples
of enterprise value relative to EBITDA and earnings before interest and taxes
("EBIT") for the Comparable Companies based on (i) the latest twelve-month
period ending March 31, 1996 ("LTM") and (ii) forecasts for the 1996 calendar
year ("1996E"). CS First Boston then calculated imputed enterprise values for
the NorAm Businesses by applying LTM and 1996E EBITDA and EBIT for each NorAm
Business to the multiples derived from its analysis of the Comparable Companies.
This analysis resulted in an enterprise valuation reference range for the
Distribution Businesses of approximately $1,700 million to $2,000 million, the
Pipeline Businesses of approximately $1,025 million to $1,175 million, and the
Gathering and Marketing Businesses of approximately $467 million to $536
million. On an aggregate basis, the Comparable Companies analyses for the
Distribution, Pipeline and Gathering and Marketing Businesses of NorAm indicated
an enterprise valuation reference range of approximately $3,192 million to
$3,711 million and an equity valuation reference range per share (fully diluted)
for NorAm of approximately $12.72 to $16.18. All forecasted EBITDA and EBIT
multiples for the Comparable Companies were based on information contained in
equity research reports. The enterprise values of the Comparable Companies used
in the foregoing analyses were based on closing stock prices as of August 5,
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1996. CS First Boston also reviewed and compared certain actual and forecasted
financial and operating information of the HI Businesses with comparable
information of selected publicly traded companies in the electric utility
industry (the "Electric Utility Comparables") and the independent power producer
industry (the "IPP Comparables").
COMPARABLE ACQUISITIONS ANALYSIS. Using publicly available information, CS
First Boston analyzed the purchase prices and multiples paid in the following
transactions in the natural gas distribution industry: the proposed acquisition
of United Cities Gas by Atmos Energy, the proposed acquisition of ENSERCH by
Texas Utilities, the proposed acquisition of Washington Energy by Puget Sound
Power & Light and the acquisition of Wisconsin Southern Gas by Wisconsin Energy
(the "Distribution Comparable Acquisitions"). CS First Boston also analyzed the
purchase prices and multiples paid in the following transactions in the
interstate natural gas transmission industry: the proposed acquisition of
Tenneco Energy by El Paso Natural Gas, the acquisition of Kern River by The
Williams Companies, the acquisition of Transco Energy by The Williams Companies,
the acquisition of United Gas Pipe Line by Koch Industries and the acquisition
of Texas Eastern by Panhandle Eastern (the "Pipeline Comparable Acquisitions").
Finally, CS First Boston also analyzed the purchase prices and multiples paid in
the following transactions in the natural gas gathering, processing and
marketing industry: the proposed acquisition of Transok by Tejas Gas, the
acquisition of Hadson by LG&E, the acquisition of Trident NGL by Natural Gas
Clearinghouse and the acquisition of Associated Natural Gas by Panhandle Eastern
(the "GPM Comparable Acquisitions"). CS First Boston selected these acquisitions
based on the activity of the acquired companies in businesses comparable to that
of the NorAm Businesses. CS First Boston calculated the adjusted purchase price
(purchase price plus total assumed debt less assumed cash) as a multiple of
EBITDA and EBIT of each acquired company for the latest available twelve-month
period immediately preceding the announcement of the acquisition of such
company. CS First Boston then calculated imputed enterprise values of the NorAm
Businesses by applying LTM EBITDA and LTM EBIT for each NorAm Business to the
multiples derived from its analysis of the acquired companies. This analysis
resulted in an enterprise valuation reference range for the Distribution
Businesses of approximately $2,000 million to $2,350 million, the Pipeline
Businesses of approximately $1,050 million to $1,200 million, and the Gathering
and Marketing Businesses of approximately $457 million to $556 million. On an
aggregate basis, the Comparable Acquisitions analyses for the Distribution,
Pipeline and Gathering and Marketing Businesses of NorAm indicated an enterprise
valuation reference range of approximately $3,507 million to $4,106 million and
an equity valuation reference range per share (fully diluted) for NorAm of
approximately $14.82 to $18.81. CS First Boston also calculated imputed
enterprise values of HI by applying LTM EBITDA and EBIT results for HI to the
multiples derived from its analyses of selected comparable acquisitions in the
electric utility and IPP industries.
REFERENCE VALUE RANGE. The results of the Discounted Cash Flow, Comparable
Companies and Comparable Acquisitions analyses for the Distribution, Pipeline
and Gathering and Marketing Businesses of NorAm indicated an enterprise
valuation reference range of approximately $3,352 million to $3,841 million and
an equity valuation reference range per share (fully diluted) for NorAm of
approximately $13.78 to $17.04.
RELATIVE CONTRIBUTION ANALYSIS. Using 1995 actual data and 1997 forecasted
data provided by HI and NorAm, CS First Boston analyzed the contribution
attributable to NorAm to the revenues, EBITDA, EBIT, net capital employed and
total assets of HI following the Transaction and compared it to the exchange
ratio implied by comparing the current market price of HI Common Stock as of
August 6, 1996 ($23.50) to the proposed Merger Consideration of $16.00 per NorAm
share. The actual results achieved by the combined company may vary from
forecasted results, and the variations may be material.
PRO FORMA MERGER ANALYSIS. CS First Boston also analyzed certain pro forma
effects projected to result from the transaction, based upon financial forecasts
provided by HI's and NorAm's management and after giving effect to HI
management's net pre-tax cost savings estimates and certain assumptions as to,
among other things, the number of shares outstanding in each respective period.
CS First Boston was advised by the management of HI that the transaction will be
accounted for as a purchase under generally accepted accounting principles. This
analysis indicated that the transaction would be dilutive to the EPS of HI for
fiscal year 1997 and accretive to the EPS of HI for fiscal years 1998, 1999 and
2000. CS First Boston also reviewed
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certain 1997, 1998, 1999 and 2000 estimated financial coverage ratios of the
combined entity resulting from the Transaction, including EBITDA to estimated
interest expense, EBIT to estimated interest expense and estimated total debt to
total book capitalization. In this analysis, CS First Boston assumed that both
HI and NorAm would perform substantially in accordance with earnings forecasts
provided to CS First Boston by HI's and NorAm's management. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
MISCELLANEOUS. Pursuant to the terms of CS First Boston's engagement, HI
has agreed to pay CS First Boston for its services in connection with the
Transaction an aggregate transaction fee of $9.5 million, payable as follows:
(i) $250,000 payable upon execution of the engagement letter (the "Financial
Advisory Fee"), (ii) $1 million payable upon the rendering of CS First Boston's
oral fairness opinion to the HI Board on August 9, 1996 (the "Opinion Fee"),
(iii) $3 million payable upon public announcement of the Merger Agreement on
August 12, 1996 (the "Additional Fee"), against which the Opinion Fee was
credited, and (iv) a transaction fee of 0.25% of the aggregate consideration
(the "Transaction Fee"), payable upon the closing of HI's acquisition of all or
a substantial amount of the assets or capital stock of NorAm, against which the
previously paid fees are creditable. HI has also agreed to reimburse CS First
Boston for its reasonable out-of-pocket expenses, including the fees and
expenses of legal counsel and any other advisor retained by CS First Boston, and
to indemnify CS First Boston and certain related entities against certain
liabilities, including liabilities under the federal securities laws.
In the ordinary course of business, CS First Boston and its affiliates may
actively trade the debt and equity securities of HI and NorAm for their own
account and for accounts of customers and, accordingly, may at any time hold a
long or short position in such securities. CS First Boston in the past has
provided financial advisory and investment banking services to HI and NorAm
unrelated to the Transaction, for which services CS First Boston has received
compensation, and may provide additional services to HI in the future.
OPINION OF NORAM'S FINANCIAL ADVISOR
Merrill Lynch has acted as exclusive financial advisor to NorAm in
connection with the NorAm Merger and has assisted the Board of Directors of
NorAm in its examination of the fairness, from a financial point of view, of the
Merger Consideration to be received by NorAm stockholders in the NorAm Merger.
As described herein, Merrill Lynch's opinion dated August 11, 1996 (together
with the related presentations) to the NorAm Board of Directors was only one of
the many factors taken into consideration by the NorAm Board of Directors in
making its determination to approve the Merger Agreement.
On August 11, 1996, Merrill Lynch delivered its oral opinion to the NorAm
Board of Directors (subsequently confirmed in writing as of such date) to the
effect that as of such date and based upon and subject to certain matters stated
therein, the Merger Consideration to be received by NorAm stockholders in the
NorAm Merger, taken as a whole, was fair to NorAm stockholders from a financial
point of view.
THE FULL TEXT OF MERRILL LYNCH'S WRITTEN OPINION DATED AUGUST 11, 1996,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. MERRILL LYNCH'S
OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF NORAM AND ADDRESSES THE
FAIRNESS OF THE MERGER CONSIDERATION TO BE RECEIVED BY STOCKHOLDERS OF NORAM IN
THE NORAM MERGER, TAKEN AS A WHOLE, FROM A FINANCIAL POINT OF VIEW. IT DOES NOT
ADDRESS ANY OTHER ASPECT OF THE TRANSACTION (INCLUDING WHETHER ANY PARTICULAR
MIX OF CASH CONSIDERATION OR STOCK CONSIDERATION IS FAIR TO NORAM STOCKHOLDERS)
OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE NORAM SPECIAL MEETING.
THE SUMMARY OF THE OPINION OF MERRILL LYNCH SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In connection with its opinion, Merrill Lynch reviewed the Merger Agreement
and certain publicly available business and financial information relating to
NorAm and HI. Merrill Lynch also reviewed certain other information, including
financial forecasts, provided to Merrill Lynch by NorAm and HI and met with the
respective managements of NorAm and HI to discuss the businesses and prospects
of NorAm and HI. Merrill Lynch also considered certain financial and stock
market data of NorAm and HI and compared that
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data with similar data for other publicly held companies in businesses similar
to those of NorAm and HI and considered, to the extent publicly available, the
financial terms of certain other business combinations that recently have been
effected. Merrill Lynch also considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
that Merrill Lynch deemed relevant.
In connection with its review, Merrill Lynch did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by Merrill Lynch and relied upon such information being
complete and accurate in all material respects. With respect to the financial
forecasts, Merrill Lynch assumed that such forecasts were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of NorAm and HI as to the future financial performance of NorAm and
HI, respectively. In addition, Merrill Lynch did not make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of NorAm or HI, nor was Merrill Lynch furnished with any such evaluations or
appraisals. Merrill Lynch assumed that the NorAm Merger will be accounted for as
a purchase by Houston, that it qualifies as a reorganization under Section
368(a) of the Code, and that the Stock Consideration will be tax free to the
recipients thereof who receive all Stock Consideration. Merrill Lynch's opinion
was necessarily based on information available to it and on general economic,
financial, stock market, monetary and other conditions as they existed and could
be evaluated on the date of its opinion. Merrill Lynch expressed no opinion as
to what the value of the HI Common Stock actually would be when issued to
NorAm's stockholders pursuant to the NorAm Merger or the prices at which the HI
Common Stock would trade subsequent to the NorAm Merger. Although Merrill Lynch
evaluated the Merger Consideration from a financial point of view, Merrill Lynch
was not requested to, and did not, recommend the specific consideration payable
in the NorAm Merger.
In preparing its opinion for the Board of Directors of NorAm, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary of analyses performed by Merrill Lynch as set forth
below does not purport to be a complete description of the analyses underlying
Merrill Lynch's opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most appropriate and
relevant methods of financial analyses and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to partial or summary description. No company, business or
transaction used in such analyses as a comparison is identical to HI, NorAm or
the Transaction, nor is an evaluation of the results of such analyses entirely
mathematical; rather, it involves complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions being analyzed. The estimates contained in
such analyses and the ranges of valuations resulting from any particular
analysis are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses, companies or securities actually may be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty.
In arriving at its opinion, Merrill Lynch made qualitative judgments as to
the significance and relevance of each analysis and factor considered by it.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create an incomplete view of the
processes underlying such analyses and its opinion. In its analyses, Merrill
Lynch made numerous assumptions with respect to HI, NorAm, industry performance,
and with respect to regulatory, general business, economic, market and financial
conditions, as well as other matters, many of which are beyond the control of HI
and NorAm, and involve the application of complex methodologies and educated
judgment.
The following is a summary of the material analyses performed by Merrill
Lynch and presented to the Board of Directors of NorAm and is based upon the
relative values suggested by such analyses, in light of the judgment and
experience of Merrill Lynch. All analyses and factors considered by Merrill
Lynch that were material and were presented to the NorAm Board of Directors are
set forth herein.
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DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis of the future unleveraged free cash flows that NorAm's businesses
could be expected to generate during various periods utilizing projections
provided to Merrill Lynch by NorAm and certain other assumptions.
In conjunction with NorAm, Merrill Lynch utilized the information provided
and various assumptions regarding future allowed returns on equity, debt costs,
capital structures, book and tax depreciation rates and capital expenditures, to
project financial results for NorAm's natural gas distribution operations,
natural gas pipeline operations, natural gas gathering operations and energy
services operations through the year 2006. A terminal value of between 6.0x to
8.0x EBITDA was assigned to each of such businesses. The estimated future
unleveraged free cash flows generated in the analysis of NorAm's natural gas
distribution operations, natural gas pipeline operations and natural gas
gathering operations were discounted at after-tax discount rates of between 10%
and 12%, and such cash flows generated by its energy services operations were
discounted at after-tax discount rates of between 10% and 14%, producing a
reference enterprise valuation for NorAm of approximately $2,600 million to
$3,600 million.
ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS. Merrill Lynch also reviewed
publicly available information relating to certain merger and acquisition
transactions in respect of companies with primarily natural gas distribution
operations, companies with primarily natural gas pipeline operations, companies
with primarily natural gas gathering operations and companies with primarily
energy services operations. With respect to NorAm taken as a whole and to its
various businesses, Merrill Lynch examined multiples of the value of the common
equity and indebtedness assumed in each of the transactions to, among other
measures, such acquired companies' respective earnings before interest, taxes
and depreciation ("EBITDA") and EBIT, and examined multiples of the value of the
common equity in each of the transactions to, among other measures, net income
and book value.
The transactions in the natural gas distribution industry that Merrill
Lynch reviewed were Atmos Energy Corporation's acquisition of Western Kentucky
Gas (June 1987), Consolidated Natural Gas Co.'s acquisition of Virginia Natural
Gas Corp. (June 1989), British Gas plc's acquisition of Consumers Gas (March
1990), Arkla Inc.'s acquisition of Diversified Energy Inc. (July 1990), New York
Electric & Gas Corporation's acquisition of Columbia Gas of New York (August
1990), Citizens Utility Company's acquisition of La. General Services (September
1990), NIPSCO Industries, Inc.'s acquisition of Kokomo Gas & Fuel Co. (February
1992), NIPSCO Industries, Inc.'s acquisition of Northern Indiana Fuel & Light
(November 1992), Atmos Energy Corporation's acquisition of Greeley Gas Company
(March 1993), Puget Sound Power & Light Company's acquisition of Washington
Energy Company (October 1995) and Atmos Energy Corporation's proposed
acquisition of United Cities Gas Company (July 1996) (the "Comparable
Distribution Transactions"). For each of the Comparable Distribution
Transactions, relevant transaction multiples were analyzed. These transaction
multiples consisted of (i) the value of the common equity divided by the latest
twelve months ("LTM") earnings (the "Earnings Multiple"), (ii) the value of the
common equity divided by the book value (the "Book Value Multiple"), (iii) the
transaction value, as defined by the value of the common equity plus the
liquidation value of any preferred stock plus the principal amount of any debt
less cash, divided by the LTM EBITDA (the "EBITDA Multiple"), and (iv) the
transaction value divided by the LTM EBIT (the "EBIT Multiple"). In order to
determine an enterprise valuation range for NorAm's natural gas distribution
operations, the LTM financial results of such operations were multiplied by the
appropriate multiple ranges generated by the analysis described above. The
appropriate Earnings Multiple range was determined to be 15.0x to 18.0x. Such
multiples were applied to the distribution operations' LTM unleveraged net
income of $113.1 million to produce an enterprise valuation range of $1,696.5
million to $2,035.8 million. Merrill Lynch determined that the appropriate Book
Value Multiple range was 2.0x to 2.5x. These multiples were applied to the
distribution operations' book value of $602.9 million to produce an equity value
range of $1,205.8 million to $1,507.3 million. The implied debt of the
distribution operations of $444.2 million was added thereto, to produce the
enterprise valuation range of $1,650.0 million to $1,951.5 million. The
appropriate range of EBITDA Multiples and EBIT Multiples was determined to be
7.0x to 8.5x and 9.5x to 12.5x, respectively. Such multiples were applied to the
distribution operations' LTM EBITDA and EBIT of $281.1 million and $188.5
million, respectively, to produce enterprise valuation ranges of $1,967.7
million to $2,389.4 million and $1,790.8 million to $2,356.2 million.
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The transactions in the natural gas pipeline industry that Merrill Lynch
reviewed were Transco Energy Company's acquisition of Texas Gas Transmission
Corporation (December 1988), Koch Industries' acquisition of United Gas Pipeline
Corp. (December 1992), North States Power's acquisition of Viking Transmission
Corporation (June 1993), The Williams Companies, Inc.'s acquisition of Transco
Energy Company (May 1995), The Williams Companies, Inc.'s acquisition of 50% of
Kern River Gas Transmission Corporation (January 1996), El Paso Natural Gas
Company's proposed acquisition of Tenneco Energy and Coastal Corp.'s proposed
acquisition of Iroquois Pipeline (the "Comparable Pipeline Transactions"). For
each of the Comparable Pipeline Transactions, relevant transaction multiples
were analyzed. These transaction multiples consisted of (i) the Earnings
Multiple, (ii) the EBITDA Multiple and (iii) the EBIT Multiple. In order to
determine an enterprise valuation range for NorAm's natural gas pipeline
operations, the LTM financial results of such operations were multiplied by the
appropriate multiple ranges generated by the analysis described above. Merrill
Lynch determined that the appropriate Earnings Multiple range was 10.5x to
12.5x. Such multiples were applied to the natural gas pipeline operations' LTM
net income of $68.0 million to produce an enterprise value range of $714.0
million to $850.0 million. The appropriate range of EBITDA Multiples and EBIT
Multiples was determined to be 6.5x to 7.5x and 8.0x to 10.0x, respectively.
Such multiples were applied to the natural gas pipeline operations' LTM EBITDA
and EBIT of $143.6 million and $113.3 million, respectively, to produce
enterprise valuation ranges of $933.4 million to $1,077.0 million and $906.4
million to $1,133.0 million.
With respect to transactions in the natural gas gathering industry, Merrill
Lynch reviewed KN Energy Inc.'s acquisition of American Oil & Gas Corp. (March
1994), Red Cedar Gathering's acquisition of West Gas Gathering (August 1994),
NGC Corporation's acquisition of Trident NGL, Inc. (August 1994), PanEnergy
Company's acquisition of Associated Natural Gas Corp. (December 1994), The
Williams Companies, Inc.'s acquisition of Gas Company of New Mexico (June 1995),
El Paso Natural Gas Company's acquisition of Cornerstone Natural Gas, Inc. (June
1996), Tejas Gas Corporation's acquisition of Transok, Inc. (June 1996), NGC
Corporation's acquisition of Midstream Combination Corp. (August 1996) and
PanEnergy Company's acquisition of Mobil Natural Gas (August 1996) (the
"Comparable Gathering Transactions"). For each of the Comparable Gathering
Transactions, EBITDA Multiples and EBIT Multiples were analyzed. In order to
determine an enterprise valuation range for NorAm's natural gas gathering
operations, the LTM financial results of such operations were multiplied by the
appropriate multiple ranges generated by the analysis described above. The
appropriate range of EBITDA Multiples and EBIT Multiples was determined to be
9.5x to 10.5x and 13.5x to 17.0x, respectively. Such multiples were applied to
the natural gas gathering operations' LTM EBITDA and EBIT of $13.0 million and
$10.9 million, respectively, to produce enterprise valuation ranges of $123.5
million to $136.5 million and $147.2 million to $185.3 million.
Finally, the transactions in the energy services industry that Merrill
Lynch reviewed were Associated Natural Gas Corp.'s acquisition of Grand Valley
Gas Company (February 1995), LG & E Corp.'s acquisition of Hadson Corp. (May
1995), El Paso Natural Gas Company's acquisition of Eastex Energy Inc. (May
1995) and AGL Resources' acquisition of Sonat Gas Marketing (August 1995) (the
"Comparable Energy Services Transactions"). For each of the Comparable Energy
Services Transactions, EBITDA Multiples and EBIT Multiples were analyzed. In
order to determine an enterprise valuation range for NorAm's energy services
operations, the LTM financial results of such operations were multiplied by the
appropriate multiple ranges generated by the analysis described above. The
appropriate range of EBITDA Multiples and EBIT Multiples was determined to be
8.0x to 12.0x and 8.0x to 12.0x, respectively. Such multiples were applied to
the energy services operations' LTM EBITDA and EBIT of $40.5 million and $38.7
million, respectively, to produce enterprise valuation ranges of $324.0 million
to $486.0 million and $309.6 million to $464.4 million.
Because the reasons for, and circumstances surrounding, each of the
transactions analyzed were so diverse and due to the inherent differences
between the operations and financial conditions of NorAm and the selected
companies, Merrill Lynch believes that a purely quantitative comparable
transaction analysis would not be dispositive in the context of the NorAm
Merger. Merrill Lynch further believes that an appropriate use of a comparable
transaction analysis in this instance involves qualitative judgments concerning
the differences
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between the characteristics of these transactions and the NorAm Merger that
would affect the value of the acquired companies and businesses and NorAm, which
judgments are reflected in Merrill Lynch's opinion.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPARABLE COMPANIES. Using publicly
available information, Merrill Lynch compared selected historical stock,
financial and operating ratios for each of NorAm's natural gas distribution,
natural gas pipeline, natural gas gathering and energy services operations with
respective corresponding data and ratios of certain similar publicly traded
companies. These companies were selected by Merrill Lynch from the universe of
possible companies based upon Merrill Lynch's views as to the comparability of
financial and operating characteristics of these companies to NorAm and HI. With
respect to each such analysis, Merrill Lynch made such comparisons among the
following companies: AGL Resources, Inc., The Brooklyn Union Gas Company, NICOR,
Inc., Pacific Enterprises, Peoples Energy Corporation and Washington Gas and
Light Company (the "Comparable Distribution Companies"); El Paso Natural Gas
Company, PanEnergy, TransCanada Pipelines Limited and The Williams Companies,
Inc. (the "Comparable Pipeline Companies"); Aquila Gas Pipeline Corporation, NGC
Corporation, Tejas Gas Corporation, TPC Corp. (formerly Tejas Power Corporation)
and Western Gas Resources, Inc. (the "Comparable Gathering Companies"); Aquila
Gas Pipeline Corporation, NGC Corporation, Tejas Gas Corporation, TPC Corp. and
Western Gas Resources, Inc. (the "Comparable Energy Services Companies" and
together with the Comparable Distribution Companies, the Comparable Pipeline
Companies and the Comparable Gathering Companies, the "Comparable Companies").
With respect to the Comparable Distribution Companies, the EBITDA Multiple,
EBIT Multiple, Earnings Multiple and Book Value Multiples were calculated based
on 1996 projected financial results. In order to determine an enterprise
valuation range for NorAm's natural gas distribution operations utilizing
comparable company trading analysis, the LTM financial results of NorAm's
natural gas distribution operations were multiplied by appropriate multiple
ranges for each financial measure mentioned previously. Merrill Lynch determined
that the appropriate Earnings Multiple and Book Value Multiple ranges were 13.0x
to 14.5x and 1.5x to 2.0x, respectively. Such multiples were applied to the
natural gas distribution operations' LTM unleveraged net income of $113.1
million and book value of $602.9 million to produce enterprise valuation ranges
of $1,470.3 million to $1,639.9 million and $1,348.6 million to $1,650.0
million, respectively. The appropriate ranges of EBITDA Multiples and EBIT
Multiples were determined to be 6.0x to 7.5x and 9.5x to 10.5x, respectively.
Such multiples were applied to the natural gas distribution operations' LTM
EBITDA and EBIT of $281.1 million and $188.5 million, respectively, to produce
enterprise valuation ranges of $1,686.6 million to $2,108.3 million and $1,790.8
million to $1,979.3 million, respectively.
With respect to the Comparable Pipeline Companies, the EBITDA Multiple,
EBIT Multiple and Earnings Multiple based on 1996 projected financial results
were calculated. In order to determine an enterprise valuation range for NorAm's
natural gas pipeline operations based on comparable company trading analysis,
the LTM financial results of NorAm's natural gas pipeline operations were
multiplied by appropriate multiple ranges for each financial measure mentioned
previously. Merrill Lynch determined that the appropriate Earnings Multiple
range was 14.0x to 15.0x. Such multiples were applied to the natural gas
pipeline operations' LTM unleveraged net income of $68.0 million to produce an
enterprise valuation range of $952.0 million to $1,020.0 million. The
appropriate ranges of EBITDA Multiples and EBIT Multiples were determined to be
7.0x to 8.0x and 10.5x to 11.5x, respectively. Such multiples were applied to
the natural gas pipeline operations' LTM EBITDA and EBIT of $143.6 million and
$113.3 million, respectively, to produce enterprise valuation ranges of $1,005.2
million to $1,148.8 million and $1,189.7 million to $1,303.0 million,
respectively.
With respect to the Comparable Gathering Companies, the EBITDA Multiple and
EBIT Multiple based on 1996 projected financial results were calculated. In
order to determine an enterprise valuation range for NorAm's natural gas
gathering operations based on comparable company trading analysis, the LTM
financial results of NorAm's natural gas gathering operations were multipled by
appropriate multiple ranges for each financial measure mentioned previously. The
appropriate ranges of EBITDA Multiples and EBIT Multiples were determined to be
7.0x to 9.0x and 13.0x to 14.5x, respectively. Such multiples were applied to
the natural gas gathering operations' LTM EBITDA and EBIT of $13.0 million and
$10.9 million, respectively, to
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produce enterprise valuation ranges of $91.0 million to $117.0 million and
$141.7 million to $158.1 million, respectively.
With respect to the Comparable Energy Services Companies, the EBITDA
Multiple and EBIT Multiple based on 1996 projected financial results were
calculated. In order to determine an enterprise valuation range for NorAm's
energy services operations based on comparable company trading analysis, the LTM
financial results of NorAm's energy services operations were multiplied by
appropriate multiple ranges for each of the aforementioned financial measures.
The appropriate ranges of EBITDA Multiples and EBIT Multiples were determined to
be 7.0x to 9.0x and 13.0x to 14.5x, respectively. Such multiples were applied to
the energy services operations' LTM EBITDA and EBIT of $40.5 million and $38.7
million, respectively, to produce enterprise valuation ranges of $283.5 million
to $364.5 million and $503.1 million to $561.1 million, respectively.
Because of the inherent differences among the operations of NorAm and the
selected Comparable Companies, Merrill Lynch believes that a purely quantitative
comparable company analysis would not be dispositive in the context of the NorAm
Merger. Merrill Lynch further believes that an appropriate use of a comparable
company analysis in this instance involves qualitative judgments concerning
differences among the financial and operating characteristics of NorAm and the
selected Comparable Companies, which judgments are reflected in Merrill Lynch's
opinion.
PURCHASE PRICE ANALYSIS AND STOCK TRADING HISTORY. Merrill Lynch performed
analyses relating to the NorAm Merger Consideration to be paid assuming various
prices for the HI Common Stock. Merrill Lynch also examined the history of
trading prices and volume for the NorAm Common Stock and the HI Common Stock and
various historical information relating to such common stocks.
MERGER PREMIUM ANALYSES. Merrill Lynch also reviewed certain recent mergers
and acquisitions with equity values greater than $1,000 million in a variety of
industries (i) from January 1994 through July 1996, (ii) from January 1995
through July 1996 and (iii) from January 1996 through July 1996, and examined
the premiums paid for the targets' equity over the targets' equity market value
prior to announcement of the transactions. Such analysis indicated average
premiums over the targets' stock prices one day, one week and four weeks before
the announcement of each respective acquisition in the period examined of (i)
33.3%, 35.7% and 38.9%, (ii) 30.9%, 33.6% and 37.7% and (iii) 32.7%, 37.0% and
39.3%, respectively. This compared to premiums of NorAm Common Stock price for
similar periods before the announcement of the NorAm Merger of 37.6%, 45.5% and
41.7%, respectively. Merrill Lynch believes that the relative difference in
premium between the comparable transactions and the NorAm Merger may be due
largely to changes in market conditions and inherent differences between the
operations and financial conditions of NorAm and the selected acquisitions.
PRO FORMA NORAM MERGER ANALYSIS. Merrill Lynch analyzed certain pro forma
effects which could result from the NorAm Merger, based on financial forecasts
provided by NorAm's management for NorAm's 1997 and 1998 fiscal years and
financial forecasts provided by HI's management for HI's 1997 and 1998 fiscal
years. Merrill Lynch was advised by the management of HI that the NorAm Merger
will be accounted for as a "purchase" under generally accepted accounting
principles. This analysis indicated that the NorAm Merger would be dilutive to
the forecasted earnings per share of HI for its 1997 and 1998 fiscal years and
accretive to NorAm stockholders on a relative basis for 1997 and 1998. Merrill
Lynch also analyzed the effects of the NorAm Merger on the balance sheet of the
combined company. The combined company's estimated debt to debt plus common
equity and preferred stock ratio as of December 31, 1997 would be 55.3% as
compared to 48.5% for HI on a stand-alone basis.
VALUATION SUMMARY. Based upon the foregoing discounted cash flow analyses,
comparable acquisition analyses, comparable company analyses and other factors
considered, Merrill Lynch developed ranges of enterprise values for NorAm's
natural gas distribution operations of $1,800 million to $2,150 million, NorAm's
natural gas pipeline operations of $1,000 million to $1,150 million, NorAm's
natural gas gathering operations of $125 million to $150 million and NorAm's
energy services operations of $325 million to $450 million, for a total
enterprise range of $3,250 million to $3,900 million. From these totals, Merrill
Lynch deducted total debt and certain contingent liabilities of $1,412 million
to arrive at a range of equity values of $1,838 million to
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$2,488 million. Assuming conversion of $172.5 million of Convertible Preferred
Securities, the range of equity values was divided by the number of shares of
NorAm Common Stock outstanding to produce a range of equity value per share of
$12.18 to $16.49.
OTHER FACTORS AND ANALYSES. In the course of preparing its opinion, Merrill
Lynch performed certain other analyses and reviewed certain other matters,
including, among other things, (i) trading characteristics of the common stock
of NorAm and HI, (ii) financing considerations relating to the NorAm Merger and
(iii) pro forma capitalization of the combined company.
Merrill Lynch is an internationally recognized investment banking firm and,
as a part of its investment banking business, is regularly engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions. The Board of Directors of NorAm selected Merrill Lynch as its
financial advisor because of Merrill Lynch's experience and expertise and
because it is familiar with NorAm and its business.
Pursuant to the terms of Merrill Lynch's engagement, NorAm has agreed to
pay Merrill Lynch for its financial advisory services in connection with the
NorAm Merger fees payable as follows: (i) a financial advisory fee of $500,000,
payable upon a public announcement of an agreement; and (ii) a fee of
approximately $13.9 million (equal to 0.4% of the aggregate purchase price (as
defined in the engagement letter) to be paid on closing of the NorAm Merger,
less the $500,000 payment made upon public announcement of the agreement). NorAm
also has agreed to reimburse Merrill Lynch for its out-of-pocket expenses,
including the fees and expenses of legal counsel and any other adviser retained
by Merrill Lynch, and to indemnify Merrill Lynch against certain liabilities,
including liabilities under the federal securities laws, or to contribute to
payments Merrill Lynch may be required to make in respect thereof.
In the ordinary course of business, Merrill Lynch and its affiliates may
actively trade the equity securities of NorAm and HI for their own account and
for accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. Merrill Lynch has in the past provided financial
services to NorAm, including acting as co-manager for two public offerings in
1996, for which it received customary compensation.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material United States federal
income tax consequences of the Transaction and is not intended to be a complete
discussion of all potential tax effects that might be relevant to the
Transaction. Such discussion deals only with U.S. Holders. This summary assumes
that each of HI Common Stock and NorAm Common Stock has been held as a capital
asset. It may not be applicable to certain classes of taxpayers, including,
without limitation, insurance companies, tax-exempt organizations, financial
institutions, securities dealers, broker-dealers, foreign persons, persons who
hold HI Common Stock or NorAm Common Stock as part of a conversion transaction,
and persons who acquired HI Common Stock or NorAm Common Stock pursuant to an
exercise of employee stock options or rights or otherwise as compensation.
Moreover, the state, local, foreign and estate tax consequences to HI
stockholders or NorAm stockholders of the Transaction are not discussed.
This summary is based on laws, regulations, rulings, practice and judicial
decisions in effect at the date of this Joint Proxy Statement/Prospectus and the
opinion of Baker & Botts, L.L.P. However, legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to stockholders as described herein. EACH STOCKHOLDER IS URGED TO
CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO
THE HOLDER OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX
LAWS.
The discussion set forth below is the opinion of Baker & Botts, L.L.P. as
to the material United States federal income tax consequences of the
Transaction.
GENERAL. Each merger included in the Transaction will qualify as a
reorganization within the meaning of Section 368(a) of the Code. This conclusion
is based upon the assumption that the total amount of Cash
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Consideration paid to holders of NorAm Common Stock will not exceed 58.7% of the
sum of such Cash Consideration and the value of the Stock Consideration. For
purposes of the foregoing computation,
(i) In addition to Cash Consideration paid to the holders of NorAm
Common Stock, Cash Consideration will also include (a) the amount of cash
paid to holders of Dissenting Shares, (b) the amount of cash paid in lieu
of fractional shares, (c) the value of the Stock Consideration that would
have been issued with respect to shares of NorAm Common Stock held directly
or indirectly by HI or NorAm, if any, if such shares of NorAm Common Stock
had been exchanged for Houston Common Stock or HI Common Stock pursuant to
the Transaction, and the value of Stock Consideration that is issued with
respect to shares of NorAm Common Stock, if any, which are held by
management of NorAm and holders of 5% or more of the outstanding NorAm
Common Stock who do not make certain representations as of the Closing Date
and (d) the 2% simple interest per quarter payable if the Transaction is
not consummated by May 11, 1997.
(ii) The value of the Stock Consideration shall be determined based
upon the average of the high and low trading price for HI or Houston Common
Stock, as the case may be, on the Closing Date.
This conclusion is also based on the accuracy of certain representations of fact
made by HI, HL&P and NorAm.
It is a condition to the Transaction that HI will have received a tax
opinion of Baker & Botts, L.L.P., counsel to HI and HL&P, in form and substance
satisfactory to HI, dated as of the Closing Date, to the effect that each merger
included in the Transaction will be treated as a reorganization within the
meaning of Section 368(a) of the Code and that NorAm shall have received a tax
opinion of Jones, Day, Reavis & Pogue, counsel to NorAm, in form and substance
satisfactory to NorAm, dated as of the Closing Date, to the effect that the
NorAm Merger should be treated as a reorganization within the meaning of Section
368(a) of the Code. An opinion is not binding on the Internal Revenue Service or
the courts, and, therefore, the delivery of such tax opinions cannot assure that
the Internal Revenue Service or the courts will treat any of the mergers
included in the Transaction as a reorganization within the meaning of Section
368(a) of the Code. Such tax opinions will be based, among other things, on
assumptions relating to certain facts and circumstances of, and the intentions
of the parties to, the Transaction, which assumptions will either (i) have been
made with the consent of HI or NorAm or (ii) be based upon certain
representations of fact made by HI, HL&P, Merger Sub, NorAm or certain
stockholders or members of management of HI or NorAm.
HI, HL&P, MERGER SUB AND NORAM. No gain or loss will be recognized by HI,
HL&P, Merger Sub or NorAm as a result of the consummation of the Transaction.
HI/HL&P MERGER. A U.S. Holder of HI Common Stock who exchanges such U.S.
Holder's HI Common Stock for Houston Common Stock pursuant to the Transaction
will not recognize any gain or loss on such exchange. The aggregate adjusted tax
basis of such Houston Common Stock received will equal the U.S. Holder's
adjusted tax basis in the HI Common Stock surrendered.
EXCHANGE OF NORAM COMMON STOCK SOLELY FOR CASH CONSIDERATION. A U.S.
Holder of NorAm Common Stock who, pursuant to the Transaction, exchanges his or
her NorAm Common Stock solely for Cash Consideration generally will recognize
capital gain or loss in an amount equal to the difference between the amount of
Cash Consideration received by him or her and his or her adjusted tax basis in
the NorAm Common Stock surrendered therefor. Such capital gain or loss will be
long-term capital gain or loss if the U.S. Holder's holding period for the NorAm
Common Stock so surrendered is more than one year.
EXCHANGE OF NORAM COMMON STOCK SOLELY FOR STOCK CONSIDERATION. A U.S.
Holder of NorAm Common Stock who, pursuant to the Transaction, exchanges his or
her NorAm Common Stock solely for Stock Consideration will not recognize any
gain or loss on such exchange. The aggregate adjusted tax basis of the stock
received will equal the U.S. Holder's adjusted tax basis in the NorAm Common
Stock surrendered.
EXCHANGE OF NORAM COMMON STOCK FOR BOTH CASH CONSIDERATION AND STOCK
CONSIDERATION. A U.S. Holder of NorAm Common Stock who exchanges his or her
NorAm Common Stock for both Cash Consideration and Stock Consideration pursuant
to the Transaction will realize gain or loss equal to the
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difference between the fair market value of the Merger Consideration received by
him or her and his or her adjusted tax basis in the NorAm Common Stock
surrendered therefor. The U.S. Holder's gain, if any, will be recognized,
however, only to the extent of the amount of Cash Consideration received by the
U.S. Holder; any loss will not be recognized. Generally, complicated rules apply
for purposes of determining the character of any such recognized gain. However,
any gain recognized by a U.S. Holder who receives both Cash Consideration and
Stock Consideration will probably be treated as capital gain. The aggregate
adjusted tax basis of such Houston Common Stock or HI Common Stock received will
equal the U.S. Holder's adjusted tax basis in the NorAm Common Stock
surrendered, decreased by the amount of Cash Consideration received by the U.S.
Holder and increased by the amount of gain recognized by the U.S. Holder, if
any.
HOLDING PERIOD OF THE HOUSTON COMMON STOCK OR THE HI COMMON STOCK. The
holding period of the Houston Common Stock received by each U.S. Holder of HI
Common Stock who exchanges his or her HI Common Stock for Houston Common Stock
pursuant to the Transaction will include the holding period of the HI Common
Stock surrendered therefor. The holding period of the Houston Common Stock or
the HI Common Stock received by each U.S. Holder of NorAm Common Stock in the
Transaction will include the holding period of the NorAm Common Stock
surrendered therefor.
FRACTIONAL SHARES. No fractional shares of Houston Common Stock or HI
Common Stock will be issued pursuant to the Transaction. A U.S. Holder of NorAm
Common Stock who, pursuant to the Transaction, receives cash in lieu of a
fractional share of Houston Common Stock or HI Common Stock will be treated as
having received that fractional share of stock pursuant to the Transaction and
then as having received the cash in a redemption of the fractional share of
stock. The U.S. Holder will generally recognize capital gain or loss on the
deemed redemption equal to the difference between the amount of cash received
and the U.S. Holder's adjusted tax basis in the fractional share of Houston
Common Stock or HI Common Stock deemed surrendered therefor.
NORAM DISSENTING SHARES. A U.S. Holder of Dissenting Shares who, pursuant
to the Transaction, receives payment for such shares generally will recognize
capital gain or loss in an amount equal to the difference between the amount of
such payment received by him or her and his or her adjusted tax basis in the
Dissenting Shares surrendered therefor. Such capital gain or loss will be
long-term capital gain or loss if the U.S. Holder's holding period for the
Dissenting Shares so surrendered is more than one year.
ACCOUNTING TREATMENT
The acquisition of NorAm will be treated for accounting purposes in
accordance with the rules for purchase accounting, as a result of which the
assets and liabilities of NorAm will be recorded on Houston's books at their
estimated fair market values with the remaining purchase price reflected as
goodwill. See the Notes to the Unaudited Pro Forma Combined Condensed Financial
Statements included elsewhere in this Joint Proxy Statement/Prospectus.
FUNDING OF CASH CONSIDERATION
The cash portion of the Merger Consideration (approximately $1.25 billion)
will be funded through bank borrowings under new bank credit facilities (the
"Bank Facilities") to be arranged by Houston or by a newly formed finance
subsidiary of Houston (the "Borrower") with a group of commercial banks. As of
the date hereof, the structure, terms and provisions of the Bank Facilities are
being negotiated with prospective lenders and have not yet been finalized.
The Bank Facilities are expected to bear interest at a rate based upon
either the London Interbank Offered Rate plus a margin or a base rate plus a
margin or at a rate determined through a bidding process.
The borrowings may be secured by liens on or first priority security
interests in assets, which may include (i) the shares of common stock of the
surviving corporation of the NorAm Merger held by Houston or its affiliates;
(ii) the shares of common and preferred stock of Time Warner Inc. currently
owned by HI, (iii) the capital stock of subsidiaries of the Borrower, to the
extent permitted by legal and contractual limitations and (iv) intercompany
notes evidencing any loans made by the Borrower to Houston or its direct or
indirect
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subsidiaries. The obligations under the Bank Facilities are not expected to be
secured by the utility properties of HL&P or NorAm.
In order to provide liquidity to the Borrower to meet its financial
obligations, Houston may enter into a support agreement under which it would
agree to make cash contributions or advances to the Borrower with excess cash
flow (with calculations, definitions and payment mechanics to be agreed upon).
Houston may also agree to certain covenants, including certain limitations on
the payment of dividends on or the repurchase of Houston Common Stock. The net
proceeds of any disposition of the Time Warner stock may be used to prepay
borrowings under the Bank Facilities, subject to a corresponding release by the
banks of their security interest in the Time Warner stock to the extent of any
such prepayment.
The Bank Facilities will also contain customary covenants and default
provisions applicable to the Borrower and its subsidiaries, including the
ability of the Borrower and its subsidiaries to, among other things, incur
additional indebtedness (other than certain permitted indebtedness), create
liens and make investments or loans.
NORAM EMPLOYEE MATTERS
NorAm adopted, on July 10, 1996, the NorAm Energy Corp. 1996 Special
Severance Policy (the "Special Policy") and the NorAm Energy Corp. 1996 General
Severance Policy (the "General Policy" and together with the Special Policy, the
"Policies") to provide severance benefits for eligible employees who are not
covered by individual severance agreements. Two executive officers of NorAm,
Dale C. Earwood and W. Craig Elias, are participants under the Special Policy.
The Transaction will constitute a "change in control" pursuant to the Policies.
Under the Policies, a participant generally becomes eligible for severance
benefits if, within two years following a change in control, the participant's
employment is terminated, except in the case of termination by (i) death, (ii)
permanent disability, (iii) NorAm or its successor company for cause (as defined
in the respective Policy) or (iv) the participant, unless the termination
follows an announcement by NorAm regarding a reduction in the participants' pay
or relocation of the participants' place of employment by more than 50 miles.
Under the Special Policy (covering 72 NorAm employees), the severance cash
amount is equal to the greater of (a) 1.5 or 2.0 (depending on the factor
assigned to the particular employee) multiplied by annual "Compensation"
(defined as base pay plus variable pay based on the maximum level of performance
at time of termination or change in control, whichever is greater) or (b) three
weeks of Compensation multiplied by the participant's years of service, but not
less than six months of Compensation. Under the General Policy (covering all
employees who are not covered by the Special Policy or an individual severance
agreement), the severance cash amount is three weeks of Compensation multiplied
by years of service, but not less than six months of Compensation. In addition,
under both Policies, an eligible participant is entitled (upon a qualifying
termination of employment) to (i) a lump-sum payment equal to the COBRA premium
for medical and dental coverage for the lesser of 18 months or the number of
months taken into account in the cash severance formula, (ii) appropriate
outplacement services and (iii) if participant has reached age 45 and completed
five years of service but has not attained age 55, treatment as a retiree for
pension and retiree medical purposes, with benefits to commence at age 55 or
termination of service, if later. The Special Policy also contains a "gross-up"
payment if any compensation to the executive is subject to tax under Section
4999 of the Code as an "excess parachute payment."
Pursuant to the Merger Agreement, Houston has agreed to honor the General
Policy, the Special Policy, 15 individual executive severance agreements (see
"-- Interests of Certain Persons in the Transaction -- Executive Severance
Agreements and Other Arrangements"), certain NorAm employee benefit plans,
programs, policies, arrangements and agreements and certain NorAm incentive
compensation plans (the "Listed Plans") and will not adversely affect the
benefits accrued thereunder at the Effective Time (or, solely with respect to
the 15 severance agreements and the Policies accrued at termination of
employment after the Effective Time).
For one year after the Effective Time, the Merger Agreement generally
obligates Houston to continue without adverse change all NorAm employee benefit
plans other than the Listed Plans and the incentive and/or variable plans
described below, except that any NorAm Common Stock investment fund offered
under
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a NorAm employee benefit plan will be replaced by either a Houston Common Stock
fund or a traditional investment fund, as determined by Houston. Thereafter,
Houston will provide the employees of NorAm and each NorAm Affiliate (as defined
in the Merger Agreement) with benefits that in the aggregate are not less
favorable than those then provided to similarly situated employees of Houston.
In the event a Houston employee benefit plan is made available to employees of
NorAm and the NorAm Affiliates, all periods of service with NorAm and the NorAm
Affiliates will be credited to such employees for all purposes other than
accrual of benefits.
If the Effective Time does not occur by December 31, 1996, awards made by
NorAm under the NorAm 1994 Incentive Equity Plan (the "NorAm Incentive Plan")
for the performance cycle beginning January 1, 1997 (the "Cycle X Awards") will
be made by utilizing the same salary grade levels and corresponding award levels
that were utilized in making awards for the performance cycle beginning January
1, 1996. Each Cycle X Award shall be conditioned upon (1) the recipient's waiver
of the acceleration of incentive benefits provided for in any severance
agreement with respect to any outstanding Cycle X Awards, (2) the recipient's
agreement that (a) if the recipient becomes employed by Houston or an affiliate
of Houston at the Effective Time, each outstanding Cycle X Award shall
automatically expire, without consideration other than the grant of substitute
awards by Houston as described below, and (b) if the recipient does not become
employed by Houston or an affiliate of Houston at the Effective Time, (i) a
fraction of the options subject to each outstanding Cycle X Award shall become
immediately exercisable (and the option shall expire with respect to the
remaining shares) and (ii) a fraction of all nonforfeited shares of restricted
stock and opportunity shares subject to such award shall be immediately
delivered to the recipient (and the remaining restricted shares and opportunity
shares shall be forfeited), and that for purposes of determining the number of
such option shares that accelerate and the number of restricted shares and
opportunity shares that transfer, the related performance goals will be deemed
to have been achieved at the opportunity (maximum) level and the fraction will
reflect the number of days that have elapsed in the applicable performance
cycle, and (3) the recipient's agreement that the foregoing arrangement does not
constitute a reduction in the recipient's pay or benefits that would trigger a
right to voluntarily terminate employment and receive severance benefits.
As of the Effective Time, Houston shall cause substitute award(s) to be
granted under the HI 1994 Long Term Incentive Compensation Plan to each
individual whose award(s) under the NorAm Incentive Plan expired upon the
individual's employment with Houston on terms and conditions substantially equal
to the terms and conditions of the expired award. With respect to each
performance cycle commencing after the Effective Time, all employees of NorAm
and the NorAm Affiliates will be eligible to participate in all incentive
compensation plans or variable pay plans maintained by Houston on substantially
the same basis as similarly situated employees of Houston and the affiliates of
Houston. The Compensation Committee or Benefits Committee of Houston, as
applicable, shall have the sole and absolute authority to determine the NorAm
employees eligible to receive, and the amount of, the awards described in this
paragraph, whose good faith determination shall be conclusive and binding on all
parties, including any employee who was employed by NorAm prior to the Effective
Time.
For the calendar year ending December 31, 1996, NorAm will pay to each
employee of NorAm and the NorAm Affiliates who is a participant in a NorAm
annual incentive compensation plan or a variable pay program the amount of
annual incentive compensation or variable pay awarded to such employee for 1996
based on the level of performance goals actually attained by NorAm. The amount
of such pay will be determined in accordance with normal practice, will not be
prorated if the Effective Time is prior to December 31, 1996, and will be paid
on or before March 15, 1997. If the Effective Time occurs in 1997, annual
incentive compensation and variable pay awarded to employees of NorAm and the
NorAm Affiliates for calendar year 1997 will be paid as soon as practicable
after the Effective Time based on the level of performance goals NorAm actually
attained at the Effective Time (if such performance level can reasonably be
determined) or (if such performance level cannot reasonably be determined) based
on the target level of performance and will be prorated by multiplying the
amount of incentive compensation so determined by a fraction, the numerator of
which is the number of calendar days from and including January 1, 1997 through
the date of the Effective Time and the denominator of which is 365.
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For a period of at least two years after the Effective Time, Houston will
maintain and continue initiatives similar to those reflected in NorAm's
Operation Breakthrough, a program addressing NorAm's corporate culture, and will
consider extending or integrating such initiatives into Houston and the
affiliates of Houston in order to more fully integrate the businesses,
operations and employees of Houston and NorAm.
NorAm has previously established two "rabbi trusts" with Boatman's Trust
Company, as trustee (the "NorAm Rabbi Trusts"), to fund certain nonqualified
benefit plans, programs and compensation agreements for employees and directors.
Pursuant to resolutions adopted by the NorAm Board of Directors at the time the
NorAm Rabbi Trusts were established, the execution of the Merger Agreement by
NorAm would have caused the NorAm Rabbi Trusts to be funded. Pursuant to the
Merger Agreement, NorAm has agreed to take such action as is necessary to
rescind such funding resolutions. In exchange, Houston agreed to maintain the
NorAm Rabbi Trusts for an indefinite period of time and to terminate the NorAm
Rabbi Trusts only with the unanimous consent of those persons who would benefit
from the NorAm Rabbi Trusts if the NorAm Rabbi Trusts were fully funded. In
addition, Houston agreed to deliver to the trustee of the NorAm Rabbi Trusts, on
or before the occurrence of a change in control of Houston (a change in control
to have the same meaning as under the NorAm Rabbi Trusts as if the term
"Company" referred to Houston), an amount that is not less than 120% multiplied
by the aggregate "Fully Funded" amounts for all "subaccounts" as most recently
determined by the "Actuary" (as such terms are defined in the NorAm Rabbi
Trusts), unless those persons who would benefit from the funding of the NorAm
Rabbi Trusts unanimously waive such funding.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
In considering the recommendation of the NorAm Board of Directors with
respect to the Transaction, stockholders should be aware that certain members of
the Board of Directors of NorAm and certain executive officers of NorAm have the
following interests in the Transaction separate from their interests as NorAm
stockholders.
COMPOSITION OF THE HOUSTON BOARD. In connection with the Transaction, T.
Milton Honea, Robert C. Hanna, O. Holcombe Crosswell and Joseph M. Grant, who
are currently directors of NorAm, will be elected as directors of Houston
effective as of the Effective Time. See "Relationship of the
Parties -- Following the Transaction -- Board of Directors of Houston."
CERTAIN BENEFITS OF NON-EMPLOYEE DIRECTORS. As a result of the Transaction,
each non-employee Director of NorAm who has completed five or more years of
service as a non-employee Director will retire from such service and become
entitled, under the NorAm Directors' Retirement Plan, to receive an annual
retirement benefit equal to the annual cash fee paid to the Director for
services to NorAm as in effect at the time of the Director's retirement. The
retirement benefit will begin on the first day of the month following the later
of the Director's retirement or attainment of age 65, and will be paid annually
to the Director for a number of years equal to the Director's full years of
service, not to exceed ten years. In addition, under the NorAm 1994 Restricted
Stock Plan for Non-Employee Directors, all non-forfeited shares granted to any
non-employee Director under the plan in a year prior to the year of the
Transaction, and a portion of the non-forfeited shares granted to any
non-employee Director in the year of the Transaction (prorated to reflect the
period of the Director's service in the year of the Transaction), shall become
fully vested and non-forfeitable upon the Effective Time. The aggregate number
of shares of restricted stock of the non-employee Directors of NorAm which will
be fully vested and non-forfeitable upon the Effective Time are as follows: Joe
E. Chenoweth -- 3,627; O. Holcombe Crosswell -- 3,627; Walter A.
DeRoeck -- 3,627; Mickey P. Foret -- 2,716; Joseph M. Grant -- 2,716; Robert C.
Hanna -- 3,627; Jeffrey W. Hart -- 2,716; Weldon H. Johnson -- 676; Myra
Jones -- 3,627; and Bruce W. Wilkinson -- 1,127.
EFFECT OF CHANGE IN CONTROL. The Transaction will constitute a "change in
control" for compensation and benefit plans that contain a provision relating to
a change in control of NorAm. The NorAm Incentive Plan provides that all
outstanding options will become immediately exercisable in full in the event of
a change in control of NorAm and the restrictions on the restricted shares will
lapse (other than restrictions required by securities laws) and all opportunity
shares granted for the performance cycle will be issued to the employee
("Acceleration of Benefits"). The aggregate number of shares of NorAm Common
Stock that are covered by
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options which will be so accelerated and the aggregate number of shares of
restricted stock (including opportunity shares) in the NorAm Incentive Plan
which will be without restrictions held by the following executive officers of
NorAm are as follows: T. Milton Honea -- 151,369 (including 6,667 option shares
pursuant to his compensation arrangement) and 159,313 (including 31,112 shares
pursuant to his compensation arrangement); Charles M. Oglesby -- 80,717
(including 16,667 option shares pursuant to his compensation arrangement) and
73,450 (including 25,000 shares pursuant to his compensation arrangement);
Michael B. Bracy -- 71,334 and 55,301; William A. Kellstrom -- 40,667 and
30,300; Hubert Gentry, Jr. -- 32,601 and 24,575; Rollie G. Bohall -- 24,476 and
17,433; Michael A. Creel -- 12,734 and 9,900; Dale C. Earwood -- 17,301 and
13,001; William C. Elias -- 53,802 and 24,430; Jack W. Ellis -- 11,334 and
8,801; Robert N. Jones -- 32,512 and 23,625; William H. Kelly -- 26,901 and
21,050; Michael H. Means -- 32,601 and 24,575; Gary N. Peterson -- 32,601 and
24,575; Rick L. Spurlock -- 26,334 and 20,250.
The exercise prices of the stock options reflected above range from $5.25
to $8.625.
During an election period commencing on the date HL&P publicly announces
the date on which the Transaction will close and ending at 5:00 p.m. on the
business day immediately prior to the Closing Date, each holder of an unexpired
employee stock option to purchase NorAm Common Stock (including each of the
named executives) shall be entitled to elect to either (i) have all or any
portion of his or her stock options canceled and "cashed out" or (ii) have all
or any portion of his or her stock options assumed by Houston. See "The
Transaction -- Merger Consideration -- NorAm Employee Stock Options."
EXECUTIVE SEVERANCE AGREEMENTS AND OTHER ARRANGEMENTS. On July 10, 1996,
NorAm authorized severance agreements with 15 executive officers and other key
executives of NorAm, including the following executive officers of NorAm: T.
Milton Honea, Charles M. Oglesby, Michael B. Bracy, William A. Kellstrom, Hubert
Gentry, Jr., Rollie G. Bohall, Michael A. Creel, Jack W. Ellis, Robert N. Jones,
William H. Kelly, Michael H. Means, Gary N. Peterson and Rick L. Spurlock.
Messrs. Honea and Bracy are also directors of NorAm.
The severance agreements provide that on the date of the last regulatory
approval of a change in control, the Acceleration of Benefits will occur and
further provide for the payment of certain benefits to the executive if a
so-called "double trigger" exists, that is, that a change in control has
occurred and, within three years following a change in control, the executive's
employment is terminated, except in the case of termination by (i) death, (ii)
permanent disability, (iii) NorAm or its successor company for cause (as defined
in the agreements) or (iv) the executive for any reason other than those
expressly set forth in the severance agreement (generally including an adverse
change in the executive's status, authority or position; a reduction in the
executive's aggregate pay or benefits; failure by a successor company to assume
the obligations under the severance agreement; relocation of NorAm's principal
executive offices or the executive's principal location of work by more than 25
miles; or the requirement that the executive travel away from his office 20%
more than was required of the executive in any of the three full years
immediately prior to the change in control).
The benefits payable by NorAm or its successor under each severance
agreement in the event of a qualifying termination following a change of control
include (i) a lump-sum cash amount equal to 2.99 (2.00 in the case of two
executives) multiplied by the sum of (a) the executive's base salary (the
highest rate in effect for any period prior to the termination date) plus (b)
the annual bonus that would have been paid for the year in which the change in
control occurred if the performance goals had been achieved at the maximum
level, (ii) outplacement services, (iii) welfare benefits for a period of 36
months following termination of employment substantially similar to the benefits
previously applicable to the executive, (iv) 36 months of additional service
credit, treatment of the lump-sum severance payment as wages, and three
additional years of deemed age for purposes of benefit accrual and eligibility
for benefits under all benefit plans applicable to the executive, and (v)
retiree welfare benefits for the executive's lifetime.
The severance agreements provide for a "gross-up" payment if the executive
is subject to excise taxes under Section 4999 of the Code (which relates to
excess parachute payments under Section 280G of the Code). In addition, the
severance agreements provide for the payment of accounting expenses related to
any tax or severance agreement benefits for the executive and payment of legal
fees incurred by the executive, if
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needed, to enforce his rights under the agreement. Performance of NorAm's
obligation to pay legal fees under the severance agreements will be secured by a
trust previously established by NorAm.
INDEMNIFICATION. From and after the Effective Time, the surviving
corporation of the merger involving NorAm (the "NorAm Surviving Corporation")
will indemnify, defend and hold harmless each person who is at the date of the
Merger Agreement, or has been at any time prior to the date of the Merger
Agreement or who becomes prior to the Effective Time, an officer or director of
NorAm or any of its subsidiaries or an employee of NorAm or any of its
subsidiaries who acts as a fiduciary under any NorAm Benefit Plan (as defined in
the Merger Agreement) or NorAm Pension Benefit Plan (as defined in the Merger
Agreement) (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees), liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or such employee of NorAm or any of its
subsidiaries whether pertaining to any matter existing or occurring at or prior
to the Effective Time and whether asserted or claimed prior to, or at or after,
the Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to the Merger Agreement or the transactions contemplated thereby,
in each case to the full extent permitted under applicable law (and the NorAm
Surviving Corporation will pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the full extent
permitted by law). The NorAm Surviving Corporation will not have any obligation
under the Merger Agreement to any Indemnified Party when and if a court of
competent jurisdiction ultimately determines, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated by the Merger Agreement is prohibited by applicable law. NorAm, HI,
HL&P and Merger Sub have agreed that all rights to indemnification, including
provisions relating to advances of expenses incurred in defense of any action or
suit, existing in favor of the Indemnified Parties with respect to matters
occurring through the Effective Time, will survive the Transaction and will
continue in full force and effect for a period of six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
Indemnified Liabilities asserted or made within such period will continue until
the disposition of such Indemnified Liabilities.
Pursuant to the Merger Agreement, the NorAm Surviving Corporation is
obligated to maintain certain directors' and officers' liability insurance for a
period of six years after the Effective Time.
AMENDMENT OF ARTICLES OF INCORPORATION
Pursuant to the Merger Agreement and in connection with the Transaction
(other than in connection with the Second Alternative Merger), the Restated
Articles of Incorporation of HL&P will be amended to, among other things, (i)
change the name of HL&P to "Houston Industries Incorporated," (ii) change the
authorized capital stock from 20,001,100 shares to 720,000,000 shares and (iii)
change the terms of the common stock. See "Description of Houston Capital
Stock -- Common Stock." The change in authorized shares results from the
elimination of Class A (1,000 shares) and Class B (100 shares) common stock of
HL&P and the creation of a new, single class of Houston Common Stock
(700,000,000 shares). A copy of the proposed Amendment to HL&P's Restated
Articles of Incorporation is attached as Exhibit A to the Merger Agreement,
which is attached hereto as Appendix A, and is incorporated by reference herein.
DISSENTERS' APPRAISAL RIGHTS
Record holders of HI Common Stock are not entitled to appraisal rights
under Article 5.11 of the Texas Business Corporation Act (the "TBCA").
Record holders of NorAm Common Stock are entitled to appraisal rights under
Section 262 of the Delaware General Corporation Law (the "DGCL"). A holder of
NorAm Stock Options or NorAm Convertible Debentures must exercise such options
or convert such debentures in order to obtain NorAm Common Stock before such
holder will be entitled to appraisal rights as a stockholder of NorAm. A holder
of NorAm Stock Options or NorAm Convertible Debentures is not otherwise entitled
to appraisal rights.
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THIS DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO
APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262 OF THE DGCL ("SECTION 262"), WHICH IS REPRINTED IN ITS
ENTIRETY AS APPENDIX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS. ALL REFERENCES
IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" OR "HOLDER" ARE TO THE
RECORD HOLDER OF THE SHARES OF NORAM COMMON STOCK AS TO WHICH APPRAISAL RIGHTS
ARE ASSERTED.
Under the DGCL, record holders of NorAm Common Stock who follow the
procedures set forth in Section 262 and who do not vote in favor of the Merger
Agreement will be entitled to have their shares of NorAm Common Stock appraised
by the Delaware Court of Chancery and to receive payment of the "fair value" of
such shares, exclusive of any element of value arising from the accomplishment
or expectation of the Transaction, together with a fair rate of interest, if
any, as determined by such court. Such holders are, in such circumstances,
entitled to appraisal rights because they hold stock of constituent corporations
to the Transaction, and may be required by the Merger Agreement to accept Merger
Consideration in the form of Cash Consideration or Stock Consideration. A PERSON
HAVING A BENEFICIAL INTEREST IN SHARES OF NORAM COMMON STOCK HELD OF RECORD IN
THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO
CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A
TIMELY MANNER TO PERFECT THE APPRAISAL RIGHTS PROVIDED UNDER SECTION 262.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the NorAm Special Meeting, not
less than 20 days prior to the meeting, the corporation must notify each of its
stockholders who was such on the record date for such meeting with respect to
shares for which appraisal rights are available that appraisal rights are
available and include in each such notice a copy of Section 262.
This Joint Proxy Statement/Prospectus constitutes such notice to the record
holders of NorAm Common Stock and the applicable provisions of the DGCL are
attached to this Joint Proxy Statement/Prospectus as Appendix D. Any such
stockholder who wishes to exercise such appraisal rights should review the
following discussion and Appendix D carefully, because failure to timely and
properly comply with the procedures specified will result in the loss of
appraisal rights under the DGCL.
A holder of shares of NorAm Common Stock wishing to exercise his or her
appraisal rights (a) must deliver to the Secretary of NorAm, before the vote on
the Merger Agreement at the NorAm Special Meeting to be held on December 17,
1996, a written demand for appraisal of his or her shares of NorAm Common Stock
and (b) must not vote in favor of the Transaction. A proxy or vote against the
Transaction shall not constitute a demand. In addition, mere failure, after the
completion of the NorAm Merger, to execute and return an Election Form to the
Exchange Agent does not constitute a demand. A holder of NorAm Common Stock
electing to demand appraisal must do so before the taking of a vote on the
Merger Agreement by a separate written demand that reasonably informs NorAm of
the identity of the record holder of NorAm Common Stock and of such holder's
intention thereby to demand the appraisal of such holder's NorAm Common Stock.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO NORAM AT 1600
SMITH STREET, 32ND FLOOR, HOUSTON, TEXAS 77002, ATTENTION: SECRETARY.
A holder of shares of NorAm Common Stock wishing to exercise his or her
appraisal rights must hold his or her shares of record on the date the written
demand for appraisal is made and must hold his or her shares continuously
through the Effective Time. Accordingly, a record holder of NorAm Common Stock
who is the record holder of NorAm Common Stock on the date the written demand
for appraisal is made, but who thereafter transfers such stock prior to the
consummation of the Transaction, will lose any right to appraisal in respect of
such shares.
Only a holder of record of shares of NorAm Common Stock is entitled to
assert appraisal rights for the shares of NorAm Common Stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
holder of record, fully and correctly, as such holder's name appears on such
holder's stock certificates. If the shares of NorAm Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
NorAm Common Stock are owned of record by more than one person as in a joint
tenancy or tenancy in common, the demand should be executed by or on behalf of
all joint owners. An authorized agent, including
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one or more joint owners, may execute a demand for appraisal on behalf of a
holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
agent for such owner or owners. A record holder such as a broker who holds
shares of NorAm Common Stock as nominee for several beneficial owners may
exercise appraisal rights with respect to the shares of NorAm Common Stock held
for one or more beneficial owners while not exercising such rights with respect
to the shares of NorAm Common Stock held for other beneficial owners; in such
case, the written demand should set forth the number of shares of NorAm Common
Stock as to which appraisal is sought. When no number of shares of NorAm Common
Stock is expressly mentioned the demand will be presumed to cover all shares of
NorAm Common Stock held in the name of the record owner.
Stockholders who hold their shares of NorAm Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights must
take all necessary steps in order that a demand for appraisal is made by the
record holder of those shares and are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
the record holder.
Within ten days after the Effective Time, the NorAm Surviving Corporation
must send a notice as to the effectiveness of the appropriate merger to each
person who has properly asserted appraisal rights under Section 262 and has not
voted in favor of or consented to the Transaction. Within 120 days after the
Effective Time, but not thereafter, the NorAm Surviving Corporation, or any
holder of shares of NorAm Common Stock who has complied with the procedures
under Section 262 and who is entitled to appraisal rights under Section 262, may
file a petition in the Delaware Court of Chancery demanding a determination of
the value of the stock of all such stockholders. The NorAm Surviving Corporation
is not under any obligation, and Merger Sub has no present intention, to file a
petition with respect to the appraisal of the "fair value" of the shares of
NorAm Common Stock. Accordingly, it is the obligation of the stockholders to
initiate all necessary action to perfect their appraisal rights within the time
prescribed in Section 262.
Within 120 days after the Effective Time, any stockholder who has complied
with the requirements for exercise of appraisal rights will be entitled, upon
written request, to receive from the NorAm Surviving Corporation a statement
setting forth the aggregate number of shares of NorAm Common Stock not voted in
favor of adoption of the Merger Agreement and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares
of NorAm Common Stock. Such statements must be mailed within 10 days after a
written request therefor has been received by the NorAm Surviving Corporation or
within 10 days after expiration of the period for delivery of demands for
appraisal under Section 262, whichever is later.
A holder of shares of NorAm Common Stock will fail to perfect, or
effectively lose, his or her right to appraisal if, among other things, no
petition for appraisal of shares of NorAm Common Stock is filed within 120 days
after the Effective Time, or if the stockholder delivers to NorAm a written
withdrawal of his or her demand for appraisal. If a petition for an appraisal is
timely filed, after a hearing on such petition, the Delaware Court of Chancery
will determine the stockholders entitled to appraisal rights and will appraise
the "fair value" of their shares of NorAm Common Stock, exclusive of any element
of value arising from the accomplishment or expectation of the Transaction,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. Stockholders considering seeking appraisal
should be aware that the fair value of their shares of NorAm Common Stock as
determined under Section 262 could be more than, the same as or less than the
value of the Merger Consideration they would receive pursuant to the Merger
Agreement if they did not seek appraisal of their shares of NorAm Common Stock
and that investment banking opinions as to fairness from a financial point of
view are not necessarily opinions as to fair value under Section 262. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings.
The Delaware Court of Chancery will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose shares of NorAm
Common Stock have been appraised. The costs of the action may be determined by
the Delaware Court of Chancery and taxed upon the parties as the Delaware Court
of Chancery deems equitable. The Delaware Court of Chancery may also order that
all or a portion of
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the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the shares of NorAm Common Stock entitled
to appraisal.
If any holder of shares of NorAm Common Stock who demands appraisal of his
shares under Section 262 fails to perfect, or effectively withdraws or loses,
his right to appraisal, as provided in the DGCL, the shares of NorAm Common
Stock of such stockholder will be deemed to be Non-Election Shares in accordance
with the Merger Agreement. See "-- Election Procedure." A holder may withdraw
his demand for appraisal by delivering to the NorAm Surviving Corporation a
written withdrawal of his demand for appraisal and acceptance of the
Transaction, except that any such attempt to withdraw made more than 60 days
after the Effective Time will require the written approval of the NorAm
Surviving Corporation. Failure to follow the steps required by Section 262 of
the DGCL for perfecting appraisal rights may result in the loss of such rights
(in which event a stockholder will be entitled to receive the Merger
Consideration receivable with respect to such appraisal shares in accordance
with the Merger Agreement).
Any holder of shares of NorAm Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote the shares of NorAm Common Stock subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to holders of
record of shares of NorAm Common Stock as of a date prior to the Effective
Time). Pursuant to the Merger Agreement, NorAm shall not, except with the prior
written consent of HI, voluntarily make any payment with respect to any demands
for appraisals of NorAm Common Stock, offer to settle or settle any such demands
or approve any withdrawal of any such demands.
NYSE LISTING OF COMMON STOCK
It is a condition to the Transaction that the shares of Houston Common
Stock to be issued in the Transaction be authorized for listing on the NYSE,
subject to official notice of issuance. HI Common Stock is traded on the NYSE,
the Chicago Stock Exchange and the London Stock Exchange under the symbol "HOU."
RESALES OF HOUSTON COMMON STOCK
The shares of Houston Common Stock to be issued to the stockholders of HI
and NorAm pursuant to the Merger Agreement are being registered under the
Securities Act pursuant to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part. However, because some stockholders of HI or
NorAm are or may be affiliates of HI or NorAm and may be deemed to be affiliates
of Houston, such persons will not be able to resell the Houston Common Stock
received by them in the Transaction unless the Houston Common Stock is
registered for resale under the Securities Act, is sold in compliance with an
exemption from the registration requirements of the Securities Act or is sold in
compliance with Rule 145 under the Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Houston Common
Stock acquired by such former HI and NorAm stockholders pursuant to the
Transaction will be subject to certain restrictions. Such persons may sell
Houston Common Stock under Rule 145 only if (i) Houston has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months, (ii) the Houston Common Stock is sold in a "broker's
transaction," which is defined in Rule 144 under the Securities Act as a sale in
which (a) the seller does not solicit or arrange for orders to buy the
securities, (b) the seller does not make any payment other than to the broker,
(c) the broker does no more than execute the order and receive a nominal
commission and (d) the broker does not solicit customer orders to buy the
securities, and (iii) such sale and all other sales made by such person within
the preceding three months do not collectively exceed the greater of (x) 1% of
the outstanding shares of Houston Common Stock and (y) the average weekly
trading volume of Houston Common Stock on all national securities exchanges
during the four-week period preceding the sale.
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Persons who may be deemed to be affiliates of HI or NorAm generally include
individuals or entities which control, are controlled by, or are under common
control with, HI or NorAm, as the case may be, and may include certain officers
and directors of HI or NorAm, as well as principal stockholders of HI or NorAm,
as the case may be. The Merger Agreement requires NorAm to use its best efforts
to cause each of its affiliates to execute a written agreement to the effect
that the affiliate will not offer or sell or otherwise dispose of any shares of
Houston Common Stock issued to the affiliate in or pursuant to the Transaction
in violation of the Securities Act or the rules and regulations promulgated by
the SEC thereunder.
LITIGATION
On August 14, 1996, an action styled Shaw v. NorAm Energy Corp., et al. was
filed in the District Court of Harris County, Texas by a purported NorAm
stockholder against NorAm, certain of its officers and directors and HI to
enjoin the Transaction or to rescind the Transaction and/or to recover damages
in the event that the Transaction is consummated. The complaint alleges, among
other things, that the Merger Consideration is inadequate, that NorAm's Board of
Directors breached its fiduciary duties and that HI aided and abetted such
breaches of fiduciary duties. The complaint additionally alleges that the NorAm
directors' agreement to the terms of the Transaction and its timing, and their
alleged failure to auction NorAm, and to invite other bidders and provide a
market check, demonstrate an absence of the exercise of due care and of loyalty
to NorAm's public stockholders. In addition, the plaintiff seeks certification
as a class action. NorAm, the NorAm directors and HI believe that the claims
against them are without merit and intend to vigorously defend against the
lawsuit.
CERTAIN REGULATORY MATTERS
Set forth below is a summary of the regulatory requirements affecting the
Transaction. Failure to obtain any necessary regulatory approval or any adverse
conditions that are imposed with respect to any necessary regulatory approval
may affect the consummation of the Transaction.
ANTITRUST CONSIDERATIONS
The HSR Act and the rules and regulations thereunder provide that certain
transactions (including the Transaction) may not be consummated until certain
information has been submitted to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and the specified HSR Act waiting period requirements have been satisfied. HI
and NorAm submitted respective Premerger Notifications pursuant to the HSR Act
on August 23 and 26, 1996, respectively. On September 20, 1996, the Antitrust
Division made a request for additional information ("second request") to HI and
NorAm. This had the effect of suspending the waiting period until both parties
substantially complied with the second request at which point the waiting period
would run for an additional 20 days. The parties submitted documents and
information in response to the second request on October 11, 1996, and believe
that they substantially complied with the second request as of that date. The
expiration or earlier termination of the HSR Act waiting period would not
preclude the Antitrust Division or the FTC from challenging the Transaction on
antitrust grounds. Neither HI nor NorAm believes that the Transaction will
violate federal antitrust laws. If the Transaction is not consummated within 12
months after the expiration or earlier termination of the initial HSR Act
waiting period, HI and NorAm must submit new information to the Antitrust
Division and the FTC, and a new HSR Act waiting period must expire or be earlier
terminated before the Transaction can be consummated.
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
HI is a "public utility holding company" as defined in the 1935 Act and is
exempt from regulation as a registered public utility holding company under the
1935 Act except with respect to the acquisition of voting securities of other
domestic "public utility companies" and utility holding companies. HL&P and
NorAm are both public utility companies as defined in the 1935 Act. HI has filed
an application with the SEC requesting an order granting Houston an exemption
from regulation as a registered public utility holding company under
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section 3(a)(2) of the 1935 Act. Section 3(a)(2) of the 1935 Act provides that
the SEC shall exempt any public utility holding company, and each subsidiary
thereof, from the provisions of the 1935 Act (unless the SEC finds the exemption
detrimental to the public interest or the interest of investors or consumers),
if the public utility holding company is predominantly a public utility company
whose operations as such do not extend beyond the state in which it is organized
and states contiguous thereto. If the order is not granted and HL&P, after
consultation with its legal counsel, determines that upon consummation of the
Transaction, Houston would not be an exempt public utility holding company under
section 3(a)(2) of the 1935 Act, the Merger Agreement provides that the parties
will effect the First Alternative Merger in lieu of the Basic Mergers. In the
First Alternative Merger, HI and NorAm would both merge into HL&P. In that
event, no SEC approval would be required.
ATOMIC ENERGY ACT OF 1954
HL&P holds an operating license from the Nuclear Regulatory Commission (the
"NRC") in connection with its role as project manager of the South Texas Project
Electric Generating Station. HL&P has requested confirmation from the NRC that,
other than an administrative license amendment to reflect that HL&P's name will
change in the Transaction, no NRC action is required.
STATE REGULATORY MATTERS
NorAm's natural gas distribution operations are regulated as public
utilities in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.
Statutes and/or regulations in Arkansas, Louisiana, Minnesota, Mississippi and
Oklahoma require HI and NorAm to obtain prior approval of the Transaction from
utility regulatory commissions in those states. The Oklahoma Corporation
Commission approved the Transaction on October 15, 1996. The required filings
were made and are awaiting regulatory commission action in each of the other
states. HI and NorAm's filings will be reviewed under standards generally
requiring a determination that the Transaction is consistent with the public
interest.
OTHER REGULATORY MATTERS
The power marketing operations of NES are conducted pursuant to power
marketing authorization granted by the FERC. NorAm and HI have filed notice of a
change in the status of NES to reflect its post-merger affiliation with Houston
and for confirmation that NES may continue power marketing activities at
market-based rates following the Transaction.
NorAm possesses municipal franchises that require the consent of the
municipality to the Transaction. The required applications have been filed in
the four municipalities where approval is required. One municipality has
consented to the Transaction; the other three have not yet acted.
The parties to the Merger Agreement have agreed to cooperate and use their
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 (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption or nonopposition by, any Governmental Entity (as defined in the
Merger Agreement) required to be obtained or made by NorAm, HI, HL&P or any of
their subsidiaries in connection with the Transaction or the taking of any
action contemplated thereby or by the Merger Agreement.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
THE FOLLOWING DESCRIPTION OF THE MERGER AGREEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
A COPY OF WHICH IS INCLUDED AS APPENDIX A TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED IN ITS ENTIRETY HEREIN BY REFERENCE.
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CONDITIONS TO THE TRANSACTION
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE TRANSACTION
The respective obligations of each party to effect the Transaction are
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
STOCKHOLDER APPROVAL. The Merger Agreement, the Transaction and the
issuance of the Stock Consideration in the Transaction will have been
approved and adopted by the affirmative vote of the holders of two-thirds
of the outstanding shares of HI Common Stock entitled to vote thereon. The
Merger Agreement and the Transaction will have been approved and adopted by
the affirmative vote of the holders of a majority of the outstanding shares
of NorAm Common Stock entitled to vote thereon.
NYSE LISTING. The shares of Houston Common Stock issuable to HI
stockholders and NorAm stockholders pursuant to the Merger Agreement and
such other shares of Houston Common Stock required to be reserved for
issuance in connection with the Transaction will have been authorized for
listing on the NYSE upon official notice of issuance.
OTHER APPROVALS. The waiting period applicable to the consummation of
the Transaction under the HSR Act will have expired or been terminated and
all filings required to be made prior to the Effective Time with, and all
consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from any Governmental Entity in connection with
the execution and delivery of the Merger Agreement and the consummation of
the transactions contemplated thereby by NorAm, HI, HL&P and Merger Sub
will have been made or obtained (as the case may be), except for such
consents, approvals, permits and authorizations the failure of which to be
obtained would not, in the aggregate, be reasonably likely in the judgment
of HI to result in a Material Adverse Effect (as defined in the Merger
Agreement) on Houston (assuming the Transaction had taken place) or to
materially adversely affect the consummation of the Transaction, and no
such consent, approval, permit or authorization will impose terms or
conditions that would have, or would be reasonably likely to have, in the
judgment of HI, a Material Adverse Effect on NorAm or Houston (assuming the
Transaction had taken place). Unless otherwise agreed to by HI, no such
consent, approval, permit or authorization will then be subject to appeal.
THE REGISTRATION STATEMENT. The Registration Statement of which this
Joint Proxy Statement/Prospectus forms a part will have become effective
under the Securities Act and will not be the subject of any stop order or
proceedings seeking a stop order.
NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction, no order of any Governmental Entity having
jurisdiction over HL&P, HI or NorAm, and no other legal restraint or
prohibition will be in effect (an "Injunction") preventing or making
illegal the consummation of the Transaction; provided, however, that prior
to any party invoking this condition, such party will have complied fully
with its obligations to provide information and obtain such consents and
approvals from Governmental Entities in connection with the Transaction
and, in addition, use all commercially reasonable efforts to have any such
decree, ruling, injunction or order vacated, except as otherwise
contemplated by the Merger Agreement.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF HI, HL&P AND MERGER SUB
The obligations of HI, HL&P and Merger Sub to effect the Transaction are
subject to the satisfaction at or prior to the Closing Date of the following
additional conditions, any or all of which may be waived in whole or in part by
HI, HL&P and Merger Sub:
REPRESENTATIONS AND WARRANTIES. The representations and warranties of
NorAm set forth in the Merger Agreement will be true and correct in all
material respects as of the date of the Merger Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except
where the failure to be so true and correct (without giving effect to the
individual materiality qualifications and thresholds otherwise
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contained in the Merger Agreement) could not reasonably be expected to have
a Material Adverse Effect on NorAm or as otherwise contemplated by the
Merger Agreement, and HI will have received a certificate signed on behalf
of NorAm by the chief executive officer and by the chief financial officer
of NorAm to such effect.
PERFORMANCE OF OBLIGATIONS OF NORAM. NorAm will have performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date, and HI will have received
a certificate signed on behalf of NorAm by the chief executive officer and
by the chief financial officer of NorAm to such effect.
LETTERS FROM NORAM AFFILIATES AND OTHER STOCKHOLDERS. NorAm will
cause to be prepared and delivered to HL&P a list identifying all persons
who, at the time of the NorAm Special Meeting, may be deemed to be
"affiliates" of NorAm as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act (the "Affiliates"). NorAm will use its
best efforts to cause each person who is identified as an Affiliate in such
list to deliver to HL&P on or prior to the Effective Time, a written
agreement that such person will not sell, pledge, transfer or otherwise
dispose of any shares of Houston Common Stock issued to such Affiliate
pursuant to the Transaction, except pursuant to an effective registration
statement or in compliance with Rule 145 or an exemption from the
registration requirements of the Securities Act.
NUMBER OF DISSENTING SHARES. At the Effective Time, the aggregate
number of Dissenting Shares will not exceed 10% of the total number of
outstanding shares of NorAm Common Stock.
TAX OPINION. HI will have received an opinion, in form and substance
satisfactory to HI, dated the Closing Date, of Baker & Botts, L.L.P.,
counsel to HI, to the effect that, if the Transaction is consummated in
accordance with the terms of the Merger Agreement, each merger in the
Transaction will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
NO MATERIAL LIMITATIONS OR RESTRAINTS. No Injunction will be in
effect (i) imposing any material limitation upon the ability of HI or any
of its subsidiaries effectively to control the business or operations of
NorAm or any of its subsidiaries or (ii) prohibiting or imposing any
material limitation upon HI's or any of its subsidiaries' ownership or
operation of all or any material portion of the business or assets or
properties of HI or NorAm or any of their respective subsidiaries or
compelling HI or NorAm or any of their respective subsidiaries to divest or
hold separate all or any material portion of the business or assets or
properties of HI or NorAm or any of their respective subsidiaries or
imposing any other material limitation on any of them in the conduct of
their businesses and no such action by any Governmental Entity seeking such
an Injunction or an Injunction preventing or making illegal the
consummation of the Transaction shall be pending; provided, however, that
prior to invoking this condition, HI, HL&P and Merger Sub will have
complied fully with their obligations to provide information and obtain
such consents and approvals from Governmental Entities in connection with
the Transaction and, in addition, use all commercially reasonable efforts
to have any such decree, ruling, injunction or order vacated, except as
otherwise contemplated by the Merger Agreement.
NORAM REQUIRED CONSENTS. The NorAm Required Consents (as defined in
the Merger Agreement) will have been obtained, except for such NorAm
Required Consents the failure of which to be obtained would not have a
Material Adverse Effect on NorAm.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF NORAM
The obligations of NorAm to effect the Transaction are subject to the
satisfaction at or prior to the Closing Date of the following additional
conditions, any or all of which may be waived in whole or in part by NorAm:
REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of HI, HL&P and Merger Sub set forth in the Merger Agreement
will be true and correct in all material respects as of the date of the
Merger Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except where the
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failure to be so true and correct (without giving effect to the individual
materiality qualifications and thresholds otherwise contained in the Merger
Agreement) could not reasonably be expected to have a Material Adverse
Effect on HI or as otherwise contemplated by the Merger Agreement, and
NorAm will have received a certificate signed on behalf of HI by the chief
executive officer and by the chief financial officer of HI to such effect.
PERFORMANCE OF OBLIGATIONS OF HI, HL&P AND MERGER SUB. HI, HL&P and
Merger Sub will have performed in all material respects all obligations
required to be performed by them under the Merger Agreement at or prior to
the Closing Date, and NorAm will have received a certificate signed on
behalf of HI by the chief executive officer and by the chief financial
officer of HI to such effect.
TAX OPINION. NorAm will have received an opinion, in form and
substance satisfactory to NorAm, dated the Closing Date, of Jones, Day,
Reavis & Pogue, counsel to NorAm, to the effect that, if the Transaction is
consummated in accordance with the terms of the Merger Agreement, the NorAm
Merger (or in lieu thereof, the Selected Alternative Merger) should be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code.
HI REQUIRED CONSENTS. The HI Required Consents (as defined in the
Merger Agreement) will have been obtained, except for such HI Required
Consents the failure of which to be obtained would not have a Material
Adverse Effect on HI.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of HI, HL&P and NorAm relating to, among other things, (i) each of their
and certain of their respective subsidiaries' organization and similar corporate
matters, (ii) each of their capital structures, (iii) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
related matters, and the absence of conflicts, violations of or defaults under
the charters, as amended, or By-Laws, as amended, of each of HI, HL&P and NorAm,
or any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to HI, HL&P or
NorAm or any of their respective subsidiaries or any of their respective
properties or assets, (iv) the documents and reports filed by each of them with
the SEC and the accuracy of the information contained therein, (v) the accuracy
of the information provided by each of them with respect to the Registration
Statement and this Joint Proxy Statement/Prospectus, (vi) the absence of certain
events, changes or effects, (vii) the absence of undisclosed material
liabilities, (viii) compliance with certain laws, (ix) litigation, (x) taxes,
(xi) retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (xii) labor
matters, (xiii) intellectual property matters, (xiv) environmental matters, (xv)
maintenance of insurance, (xvi) contracts, (xvii) regulatory proceedings,
(xviii) regulation as a utility, (xix) fairness opinions, (xx) the stockholder
vote required to approve the Merger Agreement, (xxi) beneficial ownership of the
other party's common stock, (xxii) nonapplicability to the Merger of Article
Fifth of NorAm's Restated Certificate of Incorporation and Section 203 of the
DGCL, (xxiii) certain change of control provisions in NorAm's debt instruments
and (xxiv) broker's or similar fees.
CERTAIN COVENANTS -- CONDUCT OF BUSINESS OF NORAM
During the period from the date of the Merger Agreement and continuing
until the Effective Time, NorAm has agreed as to itself and its subsidiaries
that (except as expressly contemplated or permitted by the Merger Agreement, or
to the extent that HI has otherwise consented in writing):
ORDINARY COURSE. Each of NorAm and its subsidiaries will carry on its
businesses in the ordinary course in substantially the same manner as
heretofore conducted and will use all reasonable efforts to preserve intact
its present business organizations, keep available the services of its
current officers and employees, subject to certain NorAm employee matters,
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be impaired in any material respect at the Effective Time.
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DIVIDENDS; CHANGES IN STOCK. Except as specifically disclosed to HI,
NorAm will not and it will not permit any of its subsidiaries to: (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock or partnership interests, except for the
declaration and payment of (x) regular quarterly cash dividends not in
excess of $.07 per share of NorAm Common Stock with usual record and
payment dates for such dividend, (y) regular quarterly cash distributions
not in excess of $.7813 per share of 6 1/4% Convertible Trust Originated
Preferred Securities of NorAm Financing I with usual record and payment
dates for such distribution and (z) dividends from a subsidiary of NorAm to
NorAm or another subsidiary of NorAm and except for cash dividends or
distributions paid on or with respect to the capital stock or partnership
interests of a subsidiary of NorAm; (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
NorAm capital stock; or (iii) repurchase, redeem or otherwise acquire, or
permit any subsidiary to purchase, redeem or otherwise acquire, any shares
of its capital stock, except as required by the terms of its securities
outstanding on the date of the Merger Agreement or as contemplated by any
existing employee benefit plan.
ISSUANCE OF SECURITIES. Except as specifically disclosed to HI, NorAm
will not and it will not permit any of its subsidiaries to, issue, deliver
or sell, or authorize or propose to issue, deliver or sell, any shares of
its capital stock of any class, any Voting Debt (as defined in the Merger
Agreement) or other voting securities of NorAm or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Voting Debt or convertible securities, other than: (i) the issuance
of NorAm Common Stock upon the exercise of stock options granted under the
NorAm Stock Plans (as defined in the Merger Agreement) which are
outstanding on the date of the Merger Agreement, or in satisfaction of
stock grants or stock-based awards made prior to the date of the Merger
Agreement pursuant to NorAm Stock Plans or upon conversion of the NorAm
Convertible Debentures; and (ii) issuances by a wholly owned subsidiary of
its capital stock to its parent.
GOVERNING DOCUMENTS. NorAm will not amend or propose to amend its
Restated Certificate of Incorporation or Bylaws.
NO ACQUISITIONS. Other than acquisitions previously disclosed to HI
or whose purchase price does not exceed $25 million in the aggregate, NorAm
will not, and it will not 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 other business organization or division thereof.
NO DISPOSITIONS. Other than dispositions in the ordinary course of
business consistent with past practice which are not material, individually
or in the aggregate, to NorAm and its subsidiaries taken as a whole, or
dispositions as to which the aggregate market value is not in excess of $10
million, NorAm will not, and it will not permit any of its subsidiaries to,
sell, lease, encumber or otherwise dispose of, or agree to sell, lease
(whether such lease is an operating or capital lease), encumber or
otherwise dispose of, any of its assets.
NO DISSOLUTION, ETC. NorAm will not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of such party or any of its Significant Subsidiaries (as
defined in the Merger Agreement).
CERTAIN EMPLOYEE MATTERS. Except as may be required by applicable law
or any agreement to which NorAm or any NorAm Affiliate (as defined in the
Merger Agreement) is a party on the date of the Merger Agreement or as
expressly contemplated by the Merger Agreement, NorAm will not, nor will it
permit any NorAm Affiliate to:
(i) amend, or increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under, any employee benefit
plan or any other contract, agreement, commitment, arrangement, plan or
policy providing for compensation or benefits to any current or former
director, officer, employee or independent contractor who would be
deemed to be an employee under
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applicable guidelines published by the Internal Revenue Service, and
maintained by, contributed to or entered into by, NorAm or any NorAm
Affiliate;
(ii) increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement,
employment or any related rights, of any current or former director,
officer, employee or independent contractor who would be deemed to be an
employee under applicable guidelines published by the Internal Revenue
Service, of NorAm or any NorAm Affiliate (a "NorAm Covered Person"),
except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to NorAm or any
NorAm Affiliate;
(iii) adopt, establish or implement any plan, policy or other
arrangement providing for any form of benefits or other compensation to
any NorAm Covered Person;
(iv) enter into or amend any employment agreement, severance
agreement or other contract, agreement or arrangement with any NorAm
Covered Person; or
(v) pay or agree to pay any pension, retirement allowance or other
benefit not required or contemplated by any of the existing NorAm
Benefit Plans as in effect on the date of this Agreement to any NorAm
Covered Person.
INDEBTEDNESS; LEASES; CAPITAL EXPENDITURES. NorAm will not, nor will
NorAm permit any of its subsidiaries to, (i) incur any indebtedness for
borrowed money (except under NorAm's existing credit facilities, including
NorAm's receivable sales facility, and renewals thereof, and refinancings
of existing debt that permit prepayment of such debt without penalty) or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of such party or any of
its subsidiaries or guarantee any debt securities of others, (ii) except in
the ordinary course of business, enter into any lease (whether such lease
is an operating or capital lease) or create any mortgages, liens, security
interests or other encumbrances on the property of NorAm or any of its
subsidiaries in connection with any indebtedness thereof, or (iii) make or
commit to make capital expenditures not provided for in the capital budget,
as amended and approved by NorAm prior to the date of the Merger Agreement.
ACCOUNTING. NorAm will not, nor will it permit any of its
subsidiaries to, make any changes in their accounting methods which would
be required to be disclosed under the rules and regulations of the SEC,
except as required by law, rule, regulation or generally accepted
accounting principles.
AFFILIATE TRANSACTIONS. NorAm will not, nor will it permit any of its
subsidiaries to, enter into any agreement or arrangement with any of their
respective affiliates (as such term is defined in Rule 405 under the
Securities Act), other than with wholly owned subsidiaries of NorAm, on
terms materially less favorable to NorAm or such Subsidiary, as the case
may be, than could be reasonably expected to have been obtained with an
unaffiliated third party on an arm's-length basis.
RATE MATTERS. Subject to applicable law and except for non-material
filings in the ordinary course of business consistent with past practices,
ten business days prior to making any filing regarding any changes in its
or its subsidiaries' rates or charges (other than pass-through fuel and gas
rates or charges under existing tariffs or rate schedules), standards of
service, accounting or the services it provides (or any amendment thereto)
with any Governmental Entity, NorAm will, and will cause its subsidiaries
to, deliver a copy of such filing or amendment to HI. NorAm will, and will
cause its subsidiaries to, make all such filings only in the ordinary
course of business consistent with past practices.
CONTRACTS. NorAm will not, nor will it permit any of its subsidiaries
to, except in the ordinary course of business consistent with past practice
and NorAm policy, modify, amend, terminate, renew or fail to use reasonable
business efforts to renew any material contract or agreement to which it or
any of its subsidiaries is a party or waive, release or assign any material
rights or claims. NorAm will not, nor will it permit any of its
subsidiaries to, enter into any contract involving total consideration of
$10 million or more, or in the case of NES, any gas or power marketing
contract involving total consideration of $50
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million or more, with a term longer than one year which is not terminable
by NorAm or any such subsidiary of NorAm without penalty upon no more than
30 days' prior notice.
INSURANCE. NorAm will, and will 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
their respective businesses.
PERMITS. NorAm will, and will cause its subsidiaries to, use
reasonable efforts to maintain in effect all existing NorAm Permits (as
defined in the Merger Agreement) which are material to their respective
operations.
TAX MATTERS. NorAm will not (i) make or rescind any material express
or deemed election relating to Taxes (as defined in the Merger Agreement)
unless it is reasonably expected that such action will not adversely affect
NorAm, including elections for any and all joint ventures, partnerships,
limited liability companies, working interests or other investments where
NorAm has the capacity to make such binding election, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, except
where such settlement or compromise will not adversely affect NorAm or
(iii) change in any material respect any of its methods of reporting income
or deductions for federal income tax purposes from those expected to be
employed in the preparation of its federal income tax return for the
taxable year ending December 31, 1995, except as may be required by
applicable law or except for such changes that are reasonably expected not
to adversely affect NorAm.
DISCHARGE OF LIABILITIES. NorAm will not, nor will it permit any of
its subsidiaries to, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than 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 NorAm included in NorAm's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, or
incurred in the ordinary course of business consistent with past practice.
OTHER ACTIONS. NorAm will not, and will not permit any of its
subsidiaries to, take or fail to take any other action which would
reasonably be expected to prevent or materially impede, interfere with or
delay the Transaction.
AGREEMENTS. NorAm will not, nor will it permit any of its
subsidiaries to, agree in writing or otherwise to take any action
inconsistent with the foregoing.
NO SOLICITATION. From and after the date of the Merger Agreement,
NorAm will not, and will not authorize or permit any of its officers,
directors, employees, agents and other representatives or those of any of
its subsidiaries (collectively, "NorAm Representatives") to, directly or
indirectly, solicit, initiate or encourage (including by way of providing
information) any prospective buyer or the making of any proposal which
constitutes, or may reasonably be expected to lead to, an Acquisition
Proposal (as defined herein) from any person or engage in any discussions
or negotiations with respect thereto or otherwise cooperate with or assist
or participate in, or facilitate, any such proposal; provided, however,
that, notwithstanding any other provision of the Merger Agreement, (i)
NorAm's Board of Directors may take and disclose to NorAm's stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act
and (ii) prior to approval of the Merger Agreement by NorAm's stockholders
and following receipt from a third party (without any solicitation,
initiation, encouragement, discussion or negotiation, directly or
indirectly, by or with NorAm or any NorAm Representatives) of a bona fide
Acquisition Proposal that is financially superior to the Transaction and
reasonably capable of being financed (as determined in each case in good
faith by NorAm's Board of Directors after consultation with NorAm's
financial advisors), (x) NorAm may engage in discussions or negotiations
with such third party and may furnish such third party information
concerning NorAm and its business, properties and assets if such third
party executes a confidentiality and standstill agreement in reasonably
customary form and (y) the Board of Directors of NorAm may withdraw, modify
or not make its recommendation to its
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stockholders to approve the Merger Agreement or terminate the Merger
Agreement prior to the approval of the Merger Agreement by NorAm's
stockholders and after NorAm has given HI at least one week's prior notice
of its intention to effect such termination, has negotiated with HI to make
such adjustments to the terms and conditions of the Merger Agreement as
would enable NorAm to proceed with the transactions contemplated by the
Merger Agreement and has paid the appropriate termination fee to HI, but in
each case referred to in the foregoing clauses (i) and (ii) only to the
extent that the Board of Directors of NorAm shall conclude in good faith
based on the written advice of NorAm's outside counsel that such action is
necessary in order for the Board of Directors of NorAm to act in a manner
that is consistent with its fiduciary obligations under applicable law,
notwithstanding (1) a binding commitment to consummate an agreement of the
nature of the Merger Agreement entered into in the proper exercise of their
applicable fiduciary duties and (2) any concessions which may be offered by
HI in negotiations described above or otherwise. NorAm shall immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties
conducted heretofore by NorAm or any NorAm Representatives with respect to
any Acquisition Proposal. NorAm will promptly notify HI of any such
discussions or negotiations, requests for such information or the receipt
of any Acquisition Proposal, including the identity of the person or group
engaging in such discussions or negotiations, requesting such information
or making such Acquisition Proposal and the material terms and conditions
of any Acquisition Proposal. As used in the Merger Agreement, "Acquisition
Proposal" means any proposal or offer, other than a proposal or offer by HI
or any of its affiliates, for, or that could be reasonably expected to lead
to, a tender or exchange offer, a merger, consolidation or other business
combination involving NorAm or any Significant Subsidiary of NorAm or any
proposal to acquire in any manner a substantial equity interest in, or any
substantial portion of the assets of, NorAm or any of its Significant
Subsidiaries.
CERTAIN COVENANTS -- CONDUCT OF BUSINESS OF HI AND HL&P
During the period from the date of the Merger Agreement and continuing
until the Effective Time, HI and HL&P have agreed as to themselves and their
subsidiaries that (except as expressly contemplated or permitted by the Merger
Agreement, or to the extent that NorAm has otherwise consented in writing):
DIVIDENDS; CHANGES IN STOCK. Except as specifically disclosed to
NorAm, each of HI and HL&P will not (i) engage in any material repurchase
at a premium, recapitalization, restructuring or reorganization with
respect to its capital stock (other than (x) pursuant to HI's common stock
repurchase program or (y) in connection with the Transaction), including,
without limitation, by way of any extraordinary dividends on or other
extraordinary distributions in respect of any of its capital stock, (ii)
engage in any repurchase of HI Common Stock (other than pursuant to the HI
Stock Plans (as described in the Merger Agreement)) during the period
beginning 45 days prior to the Effective Time and ending at the Effective
Time or (iii) amend any material term or provision of the HL&P Common
Stock.
GOVERNING DOCUMENTS. HL&P will not amend or propose to amend its
Restated Articles of Incorporation with respect to the rights of the
holders of HL&P Common Stock except as contemplated in the Merger
Agreement.
INSURANCE. HI will, and will 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
their respective businesses.
PERMITS. HL&P and HI will use reasonable efforts to maintain in
effect all existing HI Permits (as defined in the Merger Agreement) which
are material to their respective operations.
CERTAIN ACQUISITIONS. Other than acquisitions as to which the
purchase price is not in excess of $200 million, HI will not, and it will
not 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 other
business organization or division thereof the principal business of which
is not related to the sale,
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transmission, distribution, marketing or generation of electric power or
gas or other regulated or unregulated utility operations. HI will consult
with appropriate NorAm personnel prior to any acquisition with a purchase
price in excess of $200 million and NorAm shall keep any such information
strictly confidential.
OTHER ACTIONS. Each of HI and HL&P will not, and will not permit any
of their subsidiaries to, take or fail to take any other action which would
reasonably be expected to prevent or materially impede, interfere with or
delay the Transaction.
AGREEMENTS. Each of HI and HL&P will not agree in writing or
otherwise to take any action inconsistent with the foregoing.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, HI, HL&P and NorAm have agreed that (i)
they will prepare and file this Joint Proxy Statement/Prospectus and have it
mailed to stockholders at the earliest practicable date, HL&P will prepare and
file with the SEC the Registration Statement, and each will use their best
efforts to have the Registration Statement declared effective, (ii) they will
use their best efforts to have timely delivered to the other letters from their
independent public accountants, (iii) they will each afford to the other access
to their respective officers, properties and other information as the other
party may reasonably request, (iv) they will each call meetings of their
respective stockholders to be held as promptly as practicable, (v) they will use
all commercially reasonable efforts to obtain any consent, authorization or
approval of any Governmental Entity required in connection with the Transaction
and to obtain all NorAm Required Consents and all HI Required Consents, (vi)
NorAm will provide a list of persons who may be "affiliates" as defined in Rule
145 of the Securities Act, and use its best efforts to obtain from each such
person an undertaking not to transfer shares of HI Common Stock issued to such
person pursuant to the Merger except pursuant to an effective registration
statement or in compliance with Rule 145, (vii) HL&P will take action necessary
to permit it to issue shares of Houston Common Stock pursuant to the Transaction
and will use all reasonable efforts to have approved for listing on the NYSE,
subject to official notice of issuance, the shares of Houston Common Stock to be
issued in the Transaction and shares of Houston Common Stock issued or reserved
for issuance under the NorAm Stock Plans, (viii) they each agree to certain
employee matters (see "the Transaction -- NorAm Employee Matters"), (ix) Houston
will assume certain outstanding stock options to purchase NorAm Common Stock,
convert such options to options to purchase Houston Common Stock (see "The
Transaction -- Merger Consideration -- NorAm Employee Stock Options") and file a
registration statement with respect to such Houston Common Stock subject to the
converted options, (x) Houston will, subject to certain limits, maintain
directors' and officers' liability insurance for officers and directors of NorAm
and its subsidiaries, (xi) Houston will comply with all laws governing the
shutdown of operations of facilities, (xii) HI will take certain actions with
respect to certain indebtedness and credit agreements of NorAm, (xiii) they each
agree to cooperate and use reasonable best efforts to defend any claim arising
from or in connection with the Transaction, (xiv) they will not take any action
that would cause the Transaction not to qualify as a reorganization under
Section 368(a) of the Code, (xv) they will cooperate and consult with the other
regarding press releases and changes that may have a Material Adverse Effect and
(xvi) the Board of Directors of Houston will take such action as may be
necessary to cause the election of four persons, each of whom is mutually agreed
upon by NorAm and HI and was a director of NorAm immediately prior to the date
of the Merger Agreement, to be directors of Houston immediately after the
Effective Time (see "Relationships of the Parties -- Following the
Transaction -- Board of Directors of Houston.").
Each of the parties to the Merger Agreement have agreed to take all
commercially reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on either of them with respect to the
Transaction (including, without limitation, furnishing all information required
under the HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and to promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon either of them
or any of their subsidiaries in connection with the Transaction. Each party to
the Merger Agreement has agreed to cooperate and use its best efforts to prepare
and file promptly all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and to use
68
<PAGE> 76
all commercially reasonable efforts to obtain (and will cooperate with each
other in obtaining) any consent, acquiescence, authorization, order or approval
of, or any exemption or nonopposition by, any Governmental Entity required to be
obtained or made by NorAm, HI, HL&P or any of their subsidiaries in connection
with the Transaction or the taking of any action contemplated thereby or by the
Merger Agreement. In addition, each party to the Merger Agreement has agreed to
take all commercially reasonable actions necessary to obtain all NorAm Required
Consents and all HI Required Consents, as the case may be.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval of the HI stockholders and NorAm stockholders, but, after any
such approval, no amendment which by law requires further approval by such
stockholders will be made without such further approval.
At any time prior to the Effective Time, the parties to the Merger
Agreement, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties; (ii)
waive any inaccuracies in the representations and warranties contained in the
Merger Agreement or in any document delivered pursuant thereto; and (iii) waive
compliance with any of the agreements or conditions contained therein.
TERMINATION
The Merger Agreement may be terminated and the Transaction may be abandoned
at any time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Transaction by the stockholders of
NorAm or HI:
(1) by mutual consent of NorAm and HI;
(2) by either NorAm or HI if (i) any Governmental Entity will have
issued any Injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the Transaction and
such Injunction or other action shall have become final and nonappealable;
or (ii) any required approval of the stockholders of the other party shall
not have been obtained by reason of the failure to obtain the required vote
upon a vote held at a duly held meeting of stockholders or at any
adjournment thereof;
(3) by either NorAm or HI if the Transaction will not have been
consummated by August 11, 1997 (the "Initial Termination Date"); provided,
however, that the right to so terminate the Merger Agreement shall not be
available to any party whose breach of any representation or warranty or
failure to fulfill any covenant or agreement under the Merger Agreement has
been the cause of or resulted in the failure of the Transaction to occur on
or before such date; and provided, further, that if on the Initial
Termination Date the conditions to consummating the Transaction set forth
under "-- Conditions to the Transaction -- Conditions to Each Party's
Obligation to Effect the Transaction -- Other Approvals" above will not
have been fulfilled but all other conditions to consummating the
Transaction will have been fulfilled or will be capable of being fulfilled,
then the Initial Termination Date will be extended to December 31, 1997;
(4) by HI if (i) for any reason NorAm fails to call and hold a
stockholders meeting for the purpose of voting upon the Merger Agreement
and the Transaction by February 15, 1997; (ii) NorAm will have failed to
comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement to be complied with or performed by NorAm
at or prior to such date of termination (provided such breach has not been
cured within 30 days following receipt by NorAm of notice of such breach
and is existing at the time of termination of the Merger Agreement); (iii)
any representation or warranty of NorAm contained in the Merger Agreement
will not be true in all material respects when made or on or at the time of
termination as if made on such date of termination (except to the extent it
relates to a particular date) provided such breach has not been cured
within 30 days following receipt by NorAm of notice of such breach and is
existing at the time of termination of the Merger Agreement, except where
69
<PAGE> 77
the failure to be so true and correct (without giving effect to the
individual materiality qualifications and thresholds otherwise contained in
the Merger Agreement) could not reasonably be expected to have a Material
Adverse Effect on NorAm; (iv) after the date of the Merger Agreement there
has been any Material Adverse Change (as defined in the Merger Agreement)
with respect to NorAm, except for general economic changes or changes that
may affect the industries of NorAm or any of its subsidiaries generally; or
(v) any Governmental Entity will have issued any Injunction or taken any
other action permanently imposing, prohibiting or compelling any of the
limitations, prohibitions or compulsions set forth above in "-- Conditions
to the Transaction -- Additional Conditions to Obligations of HI, HL&P and
Merger Sub -- No Material Limitations or Restraints" and such Injunction or
other action shall have become final and nonappealable;
(5) by NorAm if (i) other than pursuant to an Alternative Merger, the
Board of Directors of HI will have withdrawn or modified, in any manner
which is adverse to NorAm, its recommendation or approval of the
Transaction or the Merger Agreement and the transactions contemplated
thereby or will have resolved to do so; (ii) other than pursuant to an
Alternative Merger, for any reason HI fails to call and hold a stockholders
meeting for the purpose of voting upon the Merger Agreement and the
Transaction by February 15, 1997; (iii) HI, HL&P or Merger Sub will have
failed to comply in any material respect with any of the covenants or
agreements contained in the Merger Agreement to be complied with or
performed by it at or prior to such date of termination (provided such
breach has not been cured within 30 days following receipt by HI of notice
of such breach and is existing at the time of termination of the Merger
Agreement); (iv) any representation or warranty of HI or HL&P contained in
the Merger Agreement will not be true in all material respects when made or
on or at the time of termination as if made on such date of termination
(except to the extent it relates to a particular date) provided such breach
has not been cured within 30 days following receipt by HI of notice of such
breach and is existing at the time of termination of the Merger Agreement,
except where the failure to be so true and correct (without giving effect
to the individual materiality qualifications and thresholds otherwise
contained in the Merger Agreement) could not reasonably be expected to have
a Material Adverse Effect on HI; or (v) after the date of the Merger
Agreement there has been any Material Adverse Change with respect to HI,
except for general economic changes or changes that may affect the
industries of HI or any of its subsidiaries generally;
(6) by HI, if (i) the Board of Directors of NorAm will have withdrawn
or modified, in any manner which is adverse to HI, HL&P or Merger Sub, its
recommendation or approval of the Transaction or the Merger Agreement and
the transactions contemplated thereby or shall have resolved to do so, or
(ii) the Board of Directors of NorAm will have recommended to the
stockholders of NorAm any Acquisition Proposal or any transaction described
in the definition of Acquisition Proposal, or will have resolved to do so;
or
(7) by NorAm, prior to approval of the Merger Agreement by NorAm's
stockholders, if NorAm shall exercise its termination right described above
under "-- Certain Covenants -- Conduct of Business of NorAm -- No
Solicitation"; provided that NorAm may not effect such termination unless
and until (i) NorAm gives HI at least one week's prior notice of its
intention to effect such termination; (ii) during such week, NorAm will,
and will cause its respective financial and legal advisors to, negotiate
with HI to make such adjustments in the terms and conditions of the Merger
Agreement as would enable NorAm to proceed with the transactions
contemplated herein; and (iii) NorAm pays the appropriate termination fee
to HI concurrently with such termination.
EXPENSES AND TERMINATION FEE
Each party to the Merger Agreement is required to pay all costs and
expenses incurred by it in connection with the Merger Agreement and all the
transactions contemplated thereby except that the filing fees with respect to
this Joint Proxy Statement/Prospectus and the Registration Statement will be
shared equally by HL&P and NorAm.
70
<PAGE> 78
The Merger Agreement provides that:
(A) If (i) HI or NorAm terminates the Merger Agreement pursuant to
clause (ii) of item 6 above or item 7 above or (ii) HI terminates this
Agreement pursuant to clause (ii) of item 2 above or clause (i) of item 6
above and at the time of such termination or prior to the NorAm Special
Meeting there shall have been an Acquisition Proposal, NorAm will, on the
day of such termination, pay HI a fee of $75 million.
(B) If HI terminates the Merger Agreement pursuant to clause (i) or
(ii) of item 4 above, in either case as a result of a willful breach of the
Merger Agreement by NorAm, and clause (ii) of (A) above does not apply,
NorAm will, on the day of such termination, pay HI a fee of $35 million.
(C) If HI terminates the Merger Agreement pursuant to clause (ii) of
item 2 above or clause (i) of item 6 above and clause (ii) of (A) above
does not apply, NorAm will, on the day of such termination, pay HI a fee of
$10 million.
(D) If NorAm terminates the Merger Agreement pursuant to clause (ii)
or (iii) of item 5 above, in either case as result of a willful breach of
this Agreement by HL&P, HI or Merger Sub, HI will, on the day of such
termination, pay NorAm a fee of $35 million.
(E) If NorAm terminates the Merger Agreement pursuant to clause (ii)
of item 2 above or clause (i) of item 5 above, HI will, on the day of such
termination, pay NorAm a fee of $10 million.
(F) If within 12 months of any termination described in item (B) or
(C) above, NorAm agrees to or consummates an Acquisition Proposal, then
upon the signing of a definitive agreement relating to such an Acquisition
Proposal, or, if no such agreement is signed, then at the closing of such
Acquisition Proposal, NorAm will pay HI a fee equal to $75 million minus
any amounts as may have been previously paid by NorAm pursuant to items
described above.
71
<PAGE> 79
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the
Transaction. The unaudited pro forma condensed balance sheet as of June 30, 1996
is presented as if the Transaction had occurred on that date. The unaudited pro
forma condensed statements of income for the year ended December 31, 1995 and
the six months ended June 30, 1996 assume that the Transaction occurred at the
beginning of each period presented. The acquisition of NorAm will be treated as
a purchase for accounting purposes. The assets acquired and the liabilities
assumed will be recorded at their fair values.
The unaudited pro forma financial statements should be read in conjunction
with the historical financial statements of HI and NorAm and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of HI
and NorAm incorporated by reference herein. See "Incorporation of Certain
Documents by Reference." The unaudited pro forma condensed statements of income
are not necessarily indicative of the financial results that would have occurred
had the Transaction been consummated on the indicated dates, nor are they
necessarily indicative of future financial results. Results for the interim
periods do not necessarily indicate results for the full year.
The pro forma adjustments are based on preliminary assumptions and
estimates made by HI's management and do not reflect adjustments for anticipated
operating efficiencies and cost savings HI expects to achieve as a result of the
merger. The actual allocation of the consideration paid for NorAm may differ
from that reflected in the unaudited pro forma combined condensed financial
statements after a more extensive review of the fair market values of the assets
acquired and liabilities assumed has been completed. Amounts allocated will be
based upon the estimated fair values at the Effective Time of the Transaction,
which could vary significantly from the amounts as of June 30, 1996.
72
<PAGE> 80
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1996
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- ------------------------------
HI NORAM ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Property, Plant and Equipment............. $ 8,800,025 $2,405,904 $ 463,983 (d) $11,669,912
----------- ---------- ---------- -----------
Current Assets:
Cash and cash equivalents................... 5,150 21,600 (21,600 )(e) 5,150
Accounts and notes receivable -- net........ 94,335 336,714 431,049
Inventories................................. 199,359 80,164 279,523
Other....................................... 33,926 31,958 65,884
----------- ---------- ---------- -----------
Total................................... 332,770 470,436 (21,600 ) 781,606
----------- ---------- ---------- -----------
Investments and Other Assets:
Investment in Time Warner securities........ 1,029,250 1,029,250
Deferred plant costs -- net................. 600,243 600,243
Investments in and advances to
unconsolidated affiliates -- net.......... 479,958 479,958
Goodwill.................................... 474,032 (474,032 )(e) 1,868,226
1,868,226 (e)
Other....................................... 932,540 245,955 (31,700 )(i) 1,146,795
----------- ---------- ---------- -----------
Total................................... 3,041,991 719,987 1,362,494 5,124,472
----------- ---------- ---------- -----------
Total................................ $12,174,786 $3,596,327 $1,804,877 $17,575,990
=========== ========== ========== ===========
</TABLE>
CAPITALIZATION AND LIABILITIES
<TABLE>
<S> <C> <C> <C> <C>
Capitalization:
Common stock equity......................... $ 4,051,677 $ 787,895 $1,227,672 (a) $ 5,279,349
(787,895 )(e)
Preferred stock -- not subject to mandatory
redemption................................ 351,345 351,345
NorAm obligated mandatorily redeemable,
convertible preferred securities of
subsidiary trust.......................... 167,762 (167,762 )(e) 0
Long-term debt, less current maturities..... 3,062,281 1,106,969 1,274,595 (b) 5,494,911
51,066 (c)
----------- ---------- ---------- -----------
Total................................ 7,465,303 2,062,626 1,597,676 11,125,605
----------- ---------- ---------- -----------
Current Liabilities:
Notes payable............................... 832,136 832,136
Accounts payable............................ 166,658 421,652 588,310
Taxes accrued............................... 133,520 56,047 189,567
Interest accrued............................ 73,459 34,188 107,647
Dividends declared.......................... 98,056 98,056
Current portion of long-term debt and
preferred stock........................... 419,457 280,250 699,707
Other....................................... 140,069 138,272 278,341
----------- ---------- ---------- -----------
Total................................... 1,863,355 930,409 2,793,764
----------- ---------- ---------- -----------
Other Liabilities and Deferred Credits:
Accumulated deferred income taxes........... 2,054,248 313,296 93,701 (e) 2,461,245
Unamortized investment tax credit........... 382,425 382,425
Other....................................... 409,455 289,996 113,500 (i) 812,951
----------- ---------- ---------- -----------
Total................................... 2,846,128 603,292 207,201 3,656,621
----------- ---------- ---------- -----------
Total................................ $12,174,786 $3,596,327 $1,804,877 $17,575,990
=========== ========== ========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
73
<PAGE> 81
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- ------------------------------
HI NORAM ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Revenues:
Electric......................... $3,680,297 $ 3,680,297
Gas.............................. $2,964,679 2,964,679
Other............................ 49,876 49,876
---------- ---------- --------- -----------
Total.................... 3,730,173 2,964,679 6,694,852
---------- ---------- --------- -----------
Operating Expenses:
Electric fuel and purchased
power......................... 1,112,642 1,112,642
Gas purchased.................... 1,857,166 1,857,166
Operation and maintenance........ 866,170 570,508 $ (8,541)(i) 1,428,137
Depreciation and amortization.... 478,034 147,109 15,466(d) 673,115
32,506(e)
Taxes other than income taxes.... 245,890 102,591 348,481
Other............................ 122,504 122,504
---------- ---------- --------- -----------
Total.................... 2,825,240 2,677,374 39,431 5,542,045
---------- ---------- --------- -----------
Operating Income................... 904,933 287,305 (39,431) 1,152,807
---------- ---------- --------- -----------
Other Income (Expense):
Time Warner dividend income...... 20,132 20,132
Other............................ (1,770) (8,438) (10,208)
---------- ---------- --------- -----------
Total.................... 18,362 (8,438) 9,924
---------- ---------- --------- -----------
Interest and Other Charges......... 296,385 157,959 79,015(c) 533,359
---------- ---------- --------- -----------
From Continuing Operations:
Income before income taxes....... 626,910 120,908 (118,446) 629,372
Income taxes..................... 199,555 55,379 (30,079)(h) 224,855
---------- ---------- --------- -----------
Income before preferred
dividends..................... 427,355 65,529 (88,367) 404,517
Preferred dividends.............. 29,955 7,800 37,755
---------- ---------- --------- -----------
Income available for common
stock......................... $ 397,400 $ 57,729 $ (88,367) $ 366,762
========== ========== ========= ===========
Weighted average common shares
outstanding................... 247,706 123,868 299,671(g)
Earnings per common share........ $ 1.60 $ .47 $ 1.22
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
74
<PAGE> 82
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ---------------------------
HI NORAM ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues:
Electric................................... $1,911,936 $1,911,936
Gas........................................ $2,308,988 2,308,988
Other...................................... 26,248 26,248
---------- ---------- -------- ----------
Total.............................. 1,938,184 2,308,988 4,247,172
---------- ---------- -------- ----------
Operating Expenses:
Electric fuel and purchased power.......... 650,604 650,604
Gas purchased.............................. 1,712,539 1,712,539
Operation and maintenance.................. 430,814 253,640 $ (4,271)(i) 680,183
Depreciation and amortization.............. 258,858 71,572 7,733(d) 354,416
16,253(e)
Taxes other than income taxes.............. 127,868 62,638 190,506
Other...................................... 46,293 22,344 68,637
---------- ---------- -------- ----------
Total.............................. 1,514,437 2,122,733 19,715 3,656,885
---------- ---------- -------- ----------
Operating Income............................. 423,747 186,255 (19,715) 590,287
---------- ---------- -------- ----------
Other Income (Expense):
Litigation settlements..................... (95,000) (95,000)
Time Warner dividend income................ 20,805 20,805
Other...................................... 1,520 (5,753) (4,233)
---------- ---------- -------- ----------
Total.............................. (72,675) (5,753) (78,428)
---------- ---------- -------- ----------
38,742(c)
Interest and Other Charges................... 149,944 71,132 (425)(f) 259,393
---------- ---------- -------- ----------
From Continuing Operations:
Income before income taxes................. 201,128 109,370 (58,032) 252,466
Income taxes............................... 60,589 45,838 (14,623)(h) 91,804
---------- ---------- -------- ----------
Income before preferred dividends.......... 140,539 63,532 (43,409) 160,662
Preferred dividends........................ 11,945 3,597 15,542
---------- ---------- -------- ----------
Income available for common stock.......... $ 128,594 $ 59,935 $(43,409) $ 145,120
========== ========== ======== ==========
Weighted average common shares
outstanding............................. 248,561 125,995 300,526(g)
Earnings per common share.................. $ .52 $ .48 $ .48
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
75
<PAGE> 83
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) NorAm Common Stock to be exchanged:
<TABLE>
<CAPTION>
(THOUSANDS, EXCEPT
PRICE PER SHARE)
------------------
<S> <C>
NorAm common shares outstanding at June 30, 1996.................... 136,979
Common stock equivalents and other dilutive securities assumed to be
converted or exercised prior to closing:
NorAm obligated mandatorily redeemable, convertible preferred
securities of subsidiary trust ("Convertible Preferred
Securities") -- 3.45 million shares outstanding at June 30,
1996, to be converted at a rate of 4.1237 shares of common
stock per share of preferred stock, $50 par value.............. 14,227
NorAm stock options and restricted stock at June 30, 1996......... 2,253
----------
Pro forma NorAm common stock and stock equivalents outstanding at
June 30, 1996..................................................... 153,459
Purchase price per share............................................ $ 16
----------
Total consideration................................................. $2,455,344
==========
Value of HI common stock consideration......................... $1,227,672
==========
Cash consideration............................................. $1,227,672
==========
</TABLE>
Total consideration is calculated assuming a purchase price of $16 per
share of NorAm Common Stock, an HI Common Stock price per share of $23.625
(the closing price of HI Common Stock as of August 9, 1996), conversion of
all NorAm Convertible Preferred Securities, exercise of all outstanding
NorAm stock options and that the number of shares of NorAm Common Stock
outstanding at the effective date of the acquisition is equal to that
outstanding on June 30, 1996.
Total consideration is dependent upon the number of shares of NorAm Common
Stock outstanding as of the effective date of the acquisition and the price
per share of HI Common Stock as discussed following. The actual number of
equivalent HI common shares exchanged will depend upon the average daily
closing price of HI Common Stock on the NYSE during a 20-trading-day period
commencing 25 trading days prior to the effective date of the acquisition
("Average Price"). The Stock Consideration will have a value (based on the
average closing price) of $16.00 per share of NorAm Common Stock if the
Average Price of HI Common Stock is greater than or equal to $21.25 and
less than or equal to $26.00. The Stock Consideration will have a value
(based on the average closing price) greater than $16.00 per share of NorAm
Common Stock if the Average Price of HI Common Stock is greater than
$26.00, and a value (based on the average closing price) less than $16.00
per share of NorAm Common Stock if the Average Price of HI Common Stock is
less than $21.25.
(b) Acquisition debt is calculated based on the following assumptions:
<TABLE>
<CAPTION>
(THOUSANDS)
----------
<S> <C>
Cash consideration -- see note (a)....................................... $1,227,672
Transaction costs........................................................ 32,000
Severance costs.......................................................... 47,000
Less:
NorAm cash balance as of June 30, 1996................................. (21,600)
Proceeds from exercise of NorAm stock options.......................... (10,477)
----------
Total acquisition debt......................................... $1,274,595
==========
</TABLE>
76
<PAGE> 84
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(c) Interest expense and fair value adjustments for long-term debt are as
follows:
<TABLE>
<CAPTION>
(THOUSANDS)
-----------------------
<S> <C> <C>
Acquisition debt -- see note (b).......................................... $1,274,595
Assumed interest rate on acquisition debt................................. 7.25%(1)
----------
Adjustment to 1995 interest expense for acquisition debt................ 92,408
----------
Adjustment to interest expense for acquisition debt for the first
six months of 1996................................................... 46,204
----------
NorAm debt assumed at June 30, 1996:
Principal amount............................................ $1,387,219
Fair value.................................................. 1,438,285
----------
Revaluation adjustment of debt assumed to fair value........ $ 51,066
==========
Adjustment to 1995 interest expense for revaluation of long-term
debt assumed......................................................... (13,393)
----------
Adjustment to interest expense for revaluation of long-term debt assumed
for the first six months of 1996..................................... (7,462)
----------
Total interest expense adjustment for 1995................................ $ 79,015
==========
Total interest expense adjustment for the first six months of 1996........ $ 38,742
==========
</TABLE>
- ---------------
(1) For purposes of the unaudited pro forma condensed statements of
income, the annual interest rate on the acquisition debt is assumed
to be 7.25%. A 1% change in the interest rate on the acquisition
debt would change 1995 interest expense by $12.8 million and
interest expense for the first six months of 1996 by $6.4 million.
The cash portion of the consideration is expected to be obtained
through bank loans under a revolving credit and letter of credit
facility which will be negotiated with a syndicate of banks and
financial institutions. While the terms of the facility have not
been negotiated, HI believes that the interest rate assumed is
indicative of general market conditions for a BBB credit with a
medium term fixed rate obligation.
(d) Based upon preliminary analyses, the following adjustments have been made to
reflect the fair value of property, plant and equipment:
<TABLE>
<CAPTION>
(THOUSANDS)
----------
<S> <C>
Revaluation of property, plant and equipment to fair value................ $ 463,983
==========
Adjustment to 1995 depreciation expense (assumes 30-year average
depreciable life)....................................................... $ 15,466
==========
Adjustment to depreciation expense for the first six months of 1996....... $ 7,733
==========
</TABLE>
77
<PAGE> 85
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(e) The excess of the total purchase price over the allocation of fair value to
the net assets will be recorded as goodwill. HI's calculation of goodwill
is based on the following assumptions and calculations:
<TABLE>
<CAPTION>
(THOUSANDS)
----------
<S> <C>
Value of HI Common Stock consideration -- see note (a)................... $1,227,672
Acquisition debt -- see note (b)......................................... 1,274,595
Net asset value of NorAm at June 30, 1996:
Total stockholders' equity............................................. (787,895)
NorAm Convertible Preferred Securities................................. (167,762)
NorAm cash (used to offset acquisition debt)........................... 21,600
----------
Initial purchase price in excess of historical net asset value........... 1,568,210
Increase (decrease) from fair value allocations:
Property, plant and equipment -- see note (d).......................... (463,983)
Elimination of NorAm historical goodwill............................... 474,032
Unrecognized pension liability -- see note (i)......................... 31,700
Unrecognized postretirement benefits liability -- see note (i)......... 113,500
Debt assumed -- see note (c)........................................... 51,066
Deferred income tax on fair value allocation adjustments............... 93,701
----------
Total goodwill...................................................... $1,868,226
==========
Increase in goodwill amortization expense (assumes 40-year life)......... $ 46,706
Less NorAm historical goodwill amortization.............................. (14,200)
----------
Adjustment to 1995 amortization expense........................... $ 32,506
==========
Adjustment to amortization expense for the first six months of
1996................................................................... $ 16,253
==========
</TABLE>
(f) Assumes full conversion of NorAm Convertible Preferred Securities into
shares of NorAm Common Stock and cash at the effective date of the
acquisition (see note (a)). For a further description of the conversion
feature, see "The Transaction -- Merger Consideration -- NorAm Convertible
Securities." Because of the assumed conversion, $425,000 of preferred
dividends of subsidiary trust have been eliminated for the first six months
of 1996.
(g) Pro forma number of common shares outstanding represents the historical
weighted average shares outstanding of HI Common Stock in addition to the
pro forma number of shares of HI Common Stock assumed to be issued in
exchange for the NorAm Common Stock and stock equivalents.
<TABLE>
<CAPTION>
(THOUSANDS, EXCEPT
PRICE PER SHARE)
------------------
<S> <C>
Value of HI Common Stock consideration -- see note (a).............. $1,227,672
Divided by closing market price per share of HI Common Stock on
August 9, 1996.................................................... $ 23.625
----------
Assumed number of shares of HI Common Stock issued................ 51,965
==========
</TABLE>
(h) Represents the tax effect at the statutory rate of all pre-tax pro forma
adjustments after excluding nondeductible goodwill amortization.
(i) Pension and postretirement benefits liabilities:
<TABLE>
<CAPTION>
(THOUSANDS)
-----------
<S> <C>
Unrecognized pension liability -- see note (e)....................... $ 31,700
=========
Unrecognized postretirement benefits liability -- see note (e)....... $ 113,500
=========
Adjustment to 1995 operation and maintenance expense (assumes 17-year
amortization period).............................................. $ (8,541)
=========
Adjustment to operation and maintenance expense for the first six
months of 1996.................................................... $ (4,271)
=========
</TABLE>
78
<PAGE> 86
RELATIONSHIPS OF THE PARTIES
PRIOR TO THE TRANSACTION
Other than with respect to the Merger Agreement, the business relationships
and transactions between NorAm and its subsidiaries and HI and its subsidiaries
have been in the ordinary course of business and have not been in the aggregate
material to either NorAm or HI.
FOLLOWING THE TRANSACTION
BOARD OF DIRECTORS OF HOUSTON. Pursuant to the Merger Agreement, HI and
HL&P agreed that the Houston Board of Directors would take such action as may be
necessary to cause the election of four directors of NorAm as mutually agreed
upon by NorAm and HI, to be directors of Houston immediately after the Effective
Time. Accordingly, T. Milton Honea, Robert C. Hanna, O. Holcombe Crosswell and
Joseph M. Grant have been nominated to be elected as directors of Houston
effective as of the Effective Time. Mr. Honea has been nominated to be elected
as a Class II director (to serve until the 1997 annual meeting), Mr. Hanna has
been nominated to be elected as a Class III director (to serve until the 1998
annual meeting) and Messrs. Crosswell and Grant have been nominated to be
elected as Class I directors (to serve until the 1999 annual meeting). A vote
for approval of the Merger Agreement by the holders of HI Common Stock will be a
vote for the election of such nominees to serve as directors of Houston
effective of the Effective Time.
Set forth below is certain information about each of these nominees who,
following consummation of the Transaction, will be members of the Houston Board
of Directors:
<TABLE>
<CAPTION>
YEAR FIRST SERVED
AS A DIRECTOR OF OTHER BUSINESS POSITIONS
NAME NORAM AGE AND EXPERIENCE
- ------------------------- ----------------- --- -----------------------------------------------
<S> <C> <C> <C>
T. Milton Honea.......... 1992 63 Mr. Honea has been Chairman of the Board and
Chief Executive Officer of NorAm since December
1992. He was Vice Chairman of the Board of
NorAm from July 1992 through December 1992. He
was Executive Vice President of NorAm from
October 1991 until July 1992. He was President
and Chief Operating Officer of Arkansas
Louisiana Gas Company, a division of NorAm from
October 1984 to October 1991.
Robert C. Hanna.......... 1989 67 Mr. Hanna was President and Chief Executive
Officer of Imperial Holly Corporation and
Chairman of Holly Sugar Corporation prior to
his retirement on September 30, 1993 and was a
director of Imperial Holly Corporation until
July 1996. He is also currently serving as
Chairman of The George Foundation.
O. Holcombe Crosswell.... 1988 55 Mr. Crosswell is President of Griggs
Corporation, a real estate and investment
company in Houston, Texas.
Joseph M. Grant.......... 1995 57 Mr. Grant is the Senior Vice President and
Chief Financial Officer of Electronic Data
Systems Corporation ("EDS"), and has been with
EDS since December 1990. He is on the Board of
Directors of EDS, American Eagle Group,
Incorporated and Heritage Media Corporation.
Prior to December 1990, Mr. Grant was Executive
Vice President of American General Corporation.
</TABLE>
DIVIDENDS. It is currently anticipated that a $1.50 per share annual
dividend will be maintained on Houston Common Stock following consummation of
the Transaction. However, future dividends will be subject to determination
based upon the results of operations and financial condition of Houston,
Houston's future business prospects, any applicable contractual restrictions and
such other factors as the Houston Board of Directors considers relevant.
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<PAGE> 87
DESCRIPTION OF HOUSTON CAPITAL STOCK
The following description of the capital stock of Houston is subject to the
more complete descriptions set forth in the Houston Articles of Incorporation
(as defined below) and the Houston Bylaws (the HI Bylaws prior to the HI/HL&P
Merger Effective Time). The description set forth below assumes the consummation
of the Transaction (other than the Second Alternative Merger) and gives effect
to the proposed Amendment to Articles of Incorporation attached as Exhibit A to
the Merger Agreement (the "Houston Articles of Amendment"), which is attached
hereto as Appendix A, which will become effective at the HI/HL&P Merger
Effective Time. At the HI/HL&P Merger Effective Time, the authorized capital
stock of Houston will consist of 700,000,000 shares of Houston Common Stock,
10,000,000 shares of Houston Preferred Stock and 10,000,000 shares of Preference
Stock, without par value, of Houston (the "Houston Preference Stock"). The HL&P
Restated Articles of Incorporation, as amended and after giving effect to the
Houston Articles of Amendment, are referred to herein as the "Houston Articles
of Incorporation." As of October 18, 1996, there were outstanding 3,804,397
shares of Cumulative Preferred Stock, without par value, of HL&P and 250,478,269
shares of HI Common Stock.
If the Second Alternative Merger is consummated in lieu of the Basic
Mergers, then NorAm stockholders will receive HI Common Stock rather than
Houston Common Stock. The terms and provisions of HI Common Stock are
substantially similar to the Houston Common Stock described below, except as
otherwise described in "Comparative Rights of Stockholders -- Mergers and Other
Fundamental Transactions" and "-- Amendments to Charter." A description of HI
Common Stock and associated HI Rights is incorporated herein by reference. See
item G of the list of documents incorporated by reference into this Joint Proxy
Statement/Prospectus in "Incorporation of Certain Documents by Reference." The
authorized capital stock of HI consists of 400,000,000 shares of HI Common Stock
and 10,000,000 shares of Preference Stock. As of October 18, 1996, there were no
outstanding shares of Preference Stock of HI.
COMMON STOCK
VOTING RIGHTS. Holders of Houston Common Stock will be entitled to one
vote for each share at all meetings of shareholders. Such holders will not have
cumulative rights in the election of directors. No director of Houston may be
removed from office by vote or other action of the shareholders or otherwise
except (a) with cause, as defined in the Houston Bylaws, by the affirmative vote
of the holders of at least a majority of the voting power of all outstanding
shares of capital stock of Houston entitled to vote in the election of
directors, voting together as a single class, or (b) without cause by (i) the
affirmative vote of at least 80% of all directors then in office at any regular
or special meeting of the Houston Board of Directors called for that purpose or
(ii) the affirmative vote of the holders of at least 80% of the voting power of
all outstanding shares of capital stock of Houston entitled to vote in the
election of directors, voting together as a single class. The Houston Board of
Directors shall have the power to alter, amend or repeal the Bylaws or adopt new
Bylaws by the affirmative vote of at least 80% of all directors then in office
at any regular or special meeting of the Houston Board of Directors called for
that purpose, subject to repeal or change by the affirmative vote of the holders
of at least 80% of the voting power of all the shares of Houston entitled to
vote in the election of directors, voting together as a single class. The
Houston Articles of Incorporation provide that an amendment of the articles of
incorporation of, certain mergers and consolidations involving, the sale of all
or substantially all of the assets of or the dissolution of Houston requires the
approval of the holders of a majority (rather than the two-thirds normally
required by Texas law) of the outstanding shares entitled to vote on such
matters.
DIVIDENDS. Dividends may be paid on Houston Common Stock out of any assets
of Houston available for such dividends after full cumulative dividends on all
outstanding shares of capital stock of all series ranking senior to Houston
Common Stock in respect of dividends and liquidation rights have been paid, or
declared and a sum sufficient for the payment thereof set apart, for all past
quarterly dividend periods, and after or concurrently with making payment of or
provision for dividends on the stock ranking senior to Houston Common Stock for
the then-current quarterly dividend period. The rights of holders of Houston
Common Stock to receive dividends are further subject to the prior rights of
holders of any outstanding shares of capital stock of all series ranking senior
to Houston Common Stock to have contributions made to any sinking fund that may
be established for any such series.
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<PAGE> 88
LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding-up of Houston, or any reduction or decrease of its capital stock
resulting in a distribution of assets to the holders of Houston Common Stock,
the holders of Houston Common Stock shall be entitled to receive, pro rata, all
of the remaining assets of Houston available for distribution to its
shareholders but only after there shall have been paid to or set aside for the
holders of the stock ranking senior to the Houston Common Stock the full
preferential amounts fixed for each series thereof plus any dividends accrued or
in arrears thereon.
CLASSIFICATION OF BOARD OF DIRECTORS. The Houston Board of Directors is
divided into three classes, Class I, Class II and Class III. Such classes shall
be as nearly equal in number of directors as possible. The initial terms of
office of the Directors of Class I shall expire at the annual meeting of
shareholders in 1997, of Class II shall expire at the annual meeting of
shareholders in 1998 and of Class III shall expire at the annual meeting of
shareholders in 1999. At each annual meeting, the number of directors equal to
the number constituting the class whose term expires at the time of such meeting
shall be elected to hold office until the third succeeding annual meeting.
OTHER PROVISIONS. The shares of Houston Common Stock, when issued, will be
fully paid and nonassessable; no personal liability will attach to holders of
such shares under the laws of the State of Texas. Subject to the provisions of
the Houston Bylaws imposing certain supermajority voting provisions, the rights
of the holders of shares of Houston Common Stock may not be modified otherwise
than by a vote of two-thirds or more of the shares outstanding, voting together
as a single class.
PREFERRED STOCK
The authorized Houston Preferred Stock is issuable in series having such
designations, dividend rates, general voting rights, liquidation prices,
redemption prices, sinking fund provisions and other terms as provided in the
Houston Articles of Incorporation or as may be established from time to time by
the Houston Board of Directors. The rights evidenced by, or amounts payable with
respect to, the shares of Houston Common Stock registered hereby may be
materially limited or qualified by the Houston Preferred Stock.
VOTING RIGHTS. The holders of Houston Preferred Stock have special voting
rights with respect to certain matters affecting the powers, preferences and
privileges of the Houston Preferred Stock of each respective series. Holders of
Houston Preferred Stock generally have the right to elect one-third of the
members of the Houston Board of Directors whenever dividends on any outstanding
Houston Preferred Stock are in arrears in an amount equal to the aggregate
dividends required to be paid on such Houston Preferred Stock in any 12-month
period, until no dividends are in arrears. However, holders of Houston Preferred
Stock have the right to elect a majority of the members of the Houston Board of
Directors whenever dividends on any outstanding Houston Preferred Stock are in
arrears in an amount equal to the aggregate dividends required to be paid on
such Houston Preferred Stock in any 24-month period, until no dividends are in
arrears. Whenever holders of any outstanding shares of Houston Preferred Stock
are entitled to elect members of the Houston Board of Directors pursuant to the
Houston Articles of Incorporation, a director elected by the holders of Houston
Preferred Stock as a class or of such other stock entitled to vote as a class
(or a director elected to fill a vacancy) shall be subject to removal by the
vote of the holders of a majority of the Houston Preferred Stock as a class or
of such other stock entitled to vote as a class for the election of directors,
as the case may be.
Directors elected by the holders of Houston Preferred Stock (or any
directors elected by such directors to fill a vacancy) shall not be classified
and shall serve for a term ending upon the election and qualification of their
successors following the termination at any time of a right of the holders of
Houston Preferred Stock to elect members of the Houston Board of Directors.
DIVIDENDS. Holders of Houston Preferred Stock are entitled to receive
cumulative dividends at the rate fixed for each such series and to have
contributions made to any sinking fund that may be established for any such
series before any dividends shall be paid or set apart for any shares of Houston
Common Stock.
LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of Houston, or any reduction or decrease of its capital stock
resulting in a distribution of assets to the holders of Houston Common Stock,
payment to the holders of any outstanding Houston Preferred Stock of the full
preferential
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<PAGE> 89
amounts fixed for each series thereof, plus an amount equal to any dividends
accrued or in arrears thereon, shall be made prior to the pro rata distribution
of the remaining assets of Houston to the holders of Houston Common Stock.
PREFERENCE STOCK
The Houston Board of Directors, without further action by the Houston
stockholders, will be authorized to issue the Houston Preference Stock in one or
more series and to fix and determine as to any series all the relative rights
and preferences of shares of such series so established, including, without
limitation, preferences, limitations or relative rights with respect to
redemption rights, conversion rights, if any, voting rights, if any, dividend
rights and any preferences on liquidation; provided, however, that the relative
rights of priority of Houston Preference Stock must rank junior to the relative
rights of priority of Houston Preferred Stock. One series of Houston Preference
Stock, the Series A Preference Stock, will be purchasable upon the exercise of a
Houston Right. See "-- Rights Plan."
CERTAIN PROVISIONS OF THE HOUSTON ARTICLES OF INCORPORATION AND BYLAWS
Neither the Houston Articles of Incorporation nor the Houston Bylaws
contain any provision that would have an effect of delaying, deferring or
preventing a change in control of Houston and that would operate only with
respect to an extraordinary corporate transaction including Houston or any of
its subsidiaries. However, the Houston Articles of Incorporation and the Houston
Bylaws do contain certain provisions that may have the effect of rendering more
difficult certain possible takeover proposals to acquire control of Houston and
of making removal of management of Houston more difficult. The Houston Articles
of Incorporation provide that the Houston Board of Directors is divided into
three classes serving staggered three-year terms such that approximately
one-third of the Houston Board of Directors is elected each year. The Houston
Bylaws provide that no director may be removed except (a) with cause, as defined
in the Bylaws, by a majority vote of the shareholders, or (b) without cause by
the affirmative vote of 80% of the directors or 80% of the shareholders. The
Houston Bylaws further provide that no person shall be eligible for election or
reelection or to continue to serve as a member of the Houston Board of Directors
if such person is an officer, director, agent, representative, partner,
employee, nominee or affiliate of another public utility company other than
Houston or any of Houston's subsidiaries that is a public utility company. The
Houston Bylaws also provide that they may be amended or repealed, or new Bylaws
may be adopted, only upon the affirmative vote of 80% of the directors or 80% of
the shareholders. The Houston Bylaws also impose certain procedural requirements
on shareholders who wish (i) to make nominations in the election of directors,
(ii) to propose that a director be removed and (iii) to propose any repeal or
change in the Houston Bylaws. The requirements include, among other things, the
timely delivery to Houston's Corporate Secretary of notice of the nomination or
proposal and evidence of (a) the shareholder's status as such, (b) the number of
shares he beneficially owns, (c) a list of the persons with whom the shareholder
is acting in concert and (d) the number of shares such persons beneficially own.
The Houston Bylaws further provide that when nominating directors, the
shareholder must also submit such information with respect to the nominee as
would be required by a proxy statement and certain other information. The
Houston Bylaws provide that failure to follow the required procedures renders
the nominee or proposal ineligible to be voted upon by the shareholders.
RIGHTS PLAN
On July 11, 1990, the Board of Directors of HI declared a dividend of one
HI Right to purchase preference stock for each outstanding share of HI Common
Stock to shareholders of record at the close of business on August 16, 1990.
Upon consummation of the Transaction, each share of Houston Common Stock will
include one Houston Right, and each Houston Right will entitle the registered
holder to purchase from Houston a unit consisting of one-thousandth of a share
(a "Fractional Share") of Series A Preference Stock, without par value (the
"Series A Preference Stock"), at a purchase price of $42.50 per Fractional
Share, subject to adjustment. The description and terms of the HI Rights and
Houston Rights are set forth in the Rights Agreement dated as of July 11, 1990
between HI and Texas Commerce Bank National Association, as
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<PAGE> 90
Rights Agent (the "Rights Agent"), as amended by an amendment thereto dated as
of the Closing Date (the "Rights Agreement").
DETACHMENT OF RIGHTS; EXERCISABILITY. The Houston Rights will be attached
to all Houston Common Stock certificates, and no separate Rights Certificates
(as defined in the Rights Agreement) will be distributed initially. The Houston
Rights will separate from the Houston Common Stock and a "Distribution Date"
will occur, with certain exceptions, upon the earlier of (i) ten days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Houston Common
Stock (the date of the announcement being the "Stock Acquisition Date"), or (ii)
ten business days following the commencement of a tender offer or exchange offer
that would result in a person's becoming an Acquiring Person. In certain
circumstances, the Distribution Date may be deferred by the Houston Board of
Directors. Certain inadvertent acquisitions will not result in a person's
becoming an Acquiring Person if the person promptly divests itself of sufficient
Houston Common Stock. Until the Distribution Date (or earlier redemption or
expiration of the Houston Rights), (a) the Houston Rights will be evidenced by
the Houston Common Stock certificates and will be transferred with and only with
such Houston Common Stock certificates, (b) new Houston Common Stock
certificates will contain a notation incorporating the Rights Agreement by
reference and (c) the surrender for transfer of any certificate representing
outstanding shares of Houston Common Stock will also constitute the transfer of
the Rights associated with the Houston Common Stock represented by such
certificate.
The Houston Rights are not exercisable until the Distribution Date and will
expire at the close of business on July 11, 2000 unless earlier redeemed or
exchanged by Houston as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Houston Common Stock as of the close of
business on the Distribution Date and, from and after the Distribution Date, the
separate Rights Certificates alone will represent the Houston Rights. All shares
of Houston Common Stock issued prior to the Distribution Date will be issued
with Houston Rights. Shares of Houston Common Stock issued after the
Distribution Date in connection with certain employee benefit plans or upon
conversion of certain securities will be issued with Houston Rights. Except as
otherwise determined by the Houston Board of Directors, no other shares of
Houston Common Stock issued after the Distribution Date will be issued with
Houston Rights.
FLIP-IN. In the event (a "Flip-In Event") that a person becomes an
Acquiring Person, except pursuant to a tender or exchange offer for all
outstanding shares of Houston Common Stock at a price and on terms that a
majority of the independent directors of Houston determines to be fair to and
otherwise in the best interests of Houston and its shareholders (a "Permitted
Offer"), each holder of a Houston Right will thereafter have the right to
receive, upon exercise of such Houston Right, a number of shares of Houston
Common Stock (or, in certain circumstances, cash, property or other securities
of Houston) having a Current Market Price (as defined in the Rights Agreement)
equal to two times the exercise price of the Houston Right. Notwithstanding the
foregoing, following the occurrence of any Triggering Event, all Houston Rights
that are, or (under certain circumstances specified in the Rights Agreement)
were, beneficially owned by or transferred to an Acquiring Person (or by certain
related parties) will be null and void in the circumstances set forth in the
Rights Agreement.
FLIP-OVER. In the event (a "Flip-Over Event") that, at any time from and
after the time an Acquiring Person becomes such, (i) Houston is acquired in a
merger or other business combination transaction (other than certain mergers
that follow a Permitted Offer), or (ii) 50% or more of Houston's assets or
earning power is sold or transferred, each holder of a Houston Right (except
Houston Rights that are voided as set forth above) shall thereafter have the
right to receive, upon exercise, a number of shares of common stock of the
acquiring company having a Current Market Price equal to two times the exercise
price of the Houston Right. Flip-In Events and Flip-Over Events are collectively
referred to as "Triggering Events."
SERIES A PREFERENCE STOCK. After the Distribution Date, each Houston Right
will entitle the holder to purchase a Fractional Share of Series A Preference
Stock, which will be essentially the economic equivalent of one share of Houston
Common Stock.
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<PAGE> 91
ANTIDILUTION. The number of outstanding Houston Rights associated with a
share of Houston Common Stock, or the number of Fractional Shares of Series A
Preference Stock issuable upon exercise of a Houston Right and the exercise
price, are subject to adjustment in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Houston Common Stock
occurring prior to the Distribution Date. The exercise price payable, and the
number of Fractional Shares of Series A Preference Stock or other securities or
property issuable, upon exercise of the Houston Rights are subject to adjustment
from time to time to prevent dilution in the event of certain transactions
affecting the Series A Preference Stock.
With certain exceptions, no adjustment in the exercise price will be
required until cumulative adjustments amount to at least 1% of the exercise
price. No fractional shares of Series A Preference Stock that are not integral
multiples of a Fractional Share are required to be issued and, in lieu thereof,
an adjustment in cash may be made based on the market price of the Series A
Preference Stock on the last trading date prior to the date of exercise.
Pursuant to the Rights Agreement, Houston reserves the right to require prior to
the occurrence of a Triggering Event that, upon any exercise of Houston Rights,
a number of Houston Rights be exercised so that only whole shares of Series A
Preference Stock will be issued.
REDEMPTION OF RIGHTS. At any time until the time a person becomes an
Acquiring Person, Houston may redeem the Houston Rights in whole, but not in
part, at a price of $.005 per Houston Right, payable, at the option of Houston,
in cash, shares of Houston Common Stock or such other consideration as the
Houston Board of Directors may determine. Immediately upon the effectiveness of
the action of the Houston Board of Directors ordering redemption of the Houston
Rights, the Houston Rights will terminate and the only right of the holders of
Houston Rights will be to receive the $.005 redemption price.
EXCHANGE OF RIGHTS. At any time after the occurrence of a Flip-In Event
and prior to a person's becoming the beneficial owner of 50% or more of the
shares of Houston Common Stock then outstanding or the occurrence of a Flip-Over
Event, Houston may exchange the Houston Rights (other than Houston Rights owned
by an Acquiring Person or an affiliate or an associate of an Acquiring Person,
which will have become void), in whole or in part, at an exchange ratio of one
share of Houston Common Stock, and/or other equity securities deemed to have the
same value as one share of Houston Common Stock, per Houston Right, subject to
adjustment.
SUBSTITUTION. If Houston has an insufficient number of authorized but
unissued shares of Houston Common Stock available to permit an exercise or
exchange of Houston Rights upon the occurrence of a Flip-In Event, it may
substitute certain other types of property for the Houston Common Stock so long
as the total value received by the holder of the Houston Rights is equivalent to
the value of the Houston Common Stock that would otherwise have been received.
Houston may substitute cash, property, equity securities or debt of Houston,
effect a reduction in the exercise price of the Houston Rights or use any
combination of the foregoing.
NO RIGHTS AS A SHAREHOLDER; TAXES. Until a Houston Right is exercised, the
holder thereof, as such, will have no rights as a shareholder of Houston,
including, without limitation, the right to vote or to receive dividends.
Shareholders may, depending upon the circumstances, recognize taxable income in
the event that the Houston Rights become exercisable for Common Stock (or other
consideration) of Houston or for the common stock of the acquiring company or
are exchanged as set forth above.
AMENDMENT OF TERMS OF RIGHTS. Other than certain provisions relating to
the principal economic terms of the Houston Rights, any of the provisions of the
Rights Agreement may be amended by the Houston Board of Directors prior to the
time a person becomes an Acquiring Person. Thereafter, the provisions of the
Rights Agreement may be amended by the Board of Directors in order to cure any
ambiguity, defect or inconsistency or to make changes that do not materially and
adversely affect the interests of holders of Houston Rights (excluding the
interests of any Acquiring Person).
RIGHTS AGENT. Texas Commerce Bank National Association will serve as
Rights Agent with regard to the Houston Rights. Because Houston will serve as
the transfer agent and registrar for the Houston Common Stock, Houston, at the
request of the Rights Agent, has agreed to perform certain ministerial functions
relating to the Houston Rights on behalf of the Rights Agent.
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<PAGE> 92
CERTAIN ANTI-TAKEOVER EFFECTS. The Houston Rights will have certain
anti-takeover effects. The Houston Rights will cause substantial dilution to any
person or group that attempts to acquire Houston without the approval of the
Houston Board of Directors. As a result, the overall effect of the Houston
Rights may be to render more difficult or discourage any attempt to acquire
Houston even if such acquisition may be favorable to the interests of Houston's
stockholders. Because the Houston Board of Directors can redeem the Houston
Rights or approve a Permitted Offer, the Houston Rights should not interfere
with a merger or other business combination approved by the Houston Board of
Directors.
RIGHTS AGREEMENT; SUMMARY. A copy of the Rights Agreement is available
free of charge from HI. This summary description of the Houston Rights does not
purport to be complete and is qualified by reference to the Rights Agreement,
which is incorporated herein by reference.
COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
As a result of the Transaction (other than pursuant to the Second
Alternative Merger), holders of HI Common Stock will become stockholders of
Houston. If the Second Alternative Merger is consummated in lieu of the Basic
Mergers, such holders will remain stockholders of HI. The terms and provisions
of Houston Common Stock are substantially similar to those of HI Common Stock,
except as otherwise described below in "-- Mergers and Other Fundamental
Transactions" and "-- Amendments to Charter."
As a result of the Transaction (other than pursuant to the Second
Alternative Merger), holders of NorAm Common Stock will become stockholders of
Houston and the rights of all such former NorAm stockholders will thereafter be
governed by the Houston Articles of Incorporation, Houston Bylaws and the TBCA.
If the Second Alternative Merger is consummated in lieu of the Basic Mergers,
such holders will remain stockholders of HI. The rights of the holders of NorAm
Common Stock currently are governed by the NorAm Certificate of Incorporation,
the NorAm By-Laws and the DGCL. The following summary, which does not purport to
be a complete statement of the general differences among the rights of the
stockholders of Houston and NorAm, sets forth certain differences between the
Houston Articles of Incorporation and the NorAm Certificate of Incorporation,
the Houston Bylaws and the NorAm By-Laws and the TBCA and the DGCL. This summary
is qualified by reference to the full text of each of such documents and the
TBCA and the DGCL.
MERGERS AND OTHER FUNDAMENTAL TRANSACTIONS
Texas law generally requires that a merger, consolidation, sale of all or
substantially all of the assets or dissolution of a corporation be approved by
the holders of at least two-thirds of the outstanding shares entitled to vote,
unless the corporation's articles of incorporation provide otherwise. The
Houston Articles of Incorporation, pursuant to Section 2.28D of the TBCA,
provide that such actions may be approved by the affirmative vote of holders of
a majority of the outstanding shares entitled to vote thereon. The Restated
Articles of Incorporation of HI, however, contain no such provision and, thus,
such actions require approval by the affirmative vote of holders of at least
two-thirds of the outstanding shares entitled to vote thereon. Under Delaware
law, all such transactions generally must be approved by the holders of at least
a majority of all outstanding shares entitled to vote, unless the certificate of
incorporation requires approval by a greater number of shares. The NorAm
Certificate of Incorporation provides that certain business combinations
(including mergers and sales of all or substantially all of the assets of NorAm)
involving a beneficial owner of at least 10% of the outstanding shares of
NorAm's capital stock ("Substantial Stockholder") require the affirmative vote
of the holders of at least 75% of the outstanding shares of capital stock held
by stockholders other than the Substantial Stockholder unless certain minimum
price or board approval requirements are met.
MERGERS WITHOUT STOCKHOLDER APPROVAL
Under Article 5.03 of the TBCA, unless the articles of incorporation
otherwise require (the Houston Articles of Incorporation do not require
otherwise), action by the stockholders of a corporation on a plan of merger will
not be required if: (i) the corporation is the sole surviving corporation in the
merger; (ii) the
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<PAGE> 93
articles of incorporation of the corporation following the merger will not
differ from its articles of incorporation before the merger; (iii) each
stockholder of the corporation prior to the merger will hold the same number of
shares, with identical designations, preferences, limitations and relative
rights, immediately after the merger as it held prior to the merger; (iv) the
voting power of the voting shares outstanding immediately after the merger, plus
the voting power of the voting shares issuable as a result of the merger, will
not exceed by more than 20% the voting power of the voting shares of the
corporation outstanding immediately before the merger; (v) the number of
participating shares outstanding immediately after the merger, will not exceed
by more than 20% the total number of participating shares of the corporation
outstanding immediately before the merger; and (vi) the board of directors of
the corporation adopts a resolution approving the plan of merger. Additionally,
no vote of stockholders is required for the merger of a Texas corporation with a
corporation in which it holds at least 90% of the outstanding shares of each
class and series of such corporation.
Unless the certificate of incorporation otherwise provides (the NorAm
Certificate of Incorporation does not provide otherwise), Delaware law permits a
corporation to consummate a merger in which a corporation is the surviving
corporation without stockholder approval (and stockholders do not have the right
to dissent from the merger and exercise appraisal rights) if (i) the merger does
not result in an amendment to the certificate of incorporation of the
corporation, (ii) each share of stock of the corporation outstanding immediately
prior to the merger is to be an identical outstanding or treasury share of the
surviving corporation after the merger and (iii) the shares of common stock of
the surviving corporation to be issued or delivered under the plan of merger
plus those initially issuable upon conversion of any other shares, securities or
obligations to be issued under such plan do not exceed 20% of the shares of
common stock of the corporation outstanding immediately prior to the merger.
Additionally, when certain conditions are met, no vote of stockholders is
required for the merger of a Delaware corporation with a corporation in which it
holds at least 90% of the outstanding shares of each class of such corporation.
APPRAISAL RIGHTS
Article 5.11 of the TBCA provides for appraisal rights in the case of a
plan of merger or exchange or a sale of all or substantially all of the
corporation's assets where stockholder approval is required. No appraisal rights
are available for a plan of merger or plan of exchange if (i) the shares of the
corporation held by the stockholder are listed on a national securities exchange
or held of record by at least 2,000 holders and (ii) the stockholder is not
required to accept any consideration other than (a) shares of a corporation that
will be listed on a national securities exchange or will be held of record by at
least 2,000 holders and (b) cash in lieu of fractional shares.
Section 262 of the DGCL provides for appraisal rights only in the case of a
statutory merger or consolidation of the corporation where the petitioning
stockholder does not consent to the transaction. No appraisal rights are
available where the corporation is to be the surviving corporation and a vote of
its stockholders is not required under Section 251(f) or (g) of the DGCL. There
also are no appraisal rights, unless otherwise provided in a corporation's
certificate of incorporation (the NorAm Certificate of Incorporation does not
provide otherwise), for shares of stock listed on a national securities exchange
or held by more than 2,000 holders of record, unless such stockholders would be
required to accept anything other than (i) shares of stock of the surviving
corporation, (ii) shares of another corporation so listed or held by such number
of holders of record, (iii) cash in lieu of fractional shares of such stock or
(iv) any combination thereof. Unless otherwise provided in the certificate of
incorporation (NorAm's Certificate of Incorporation does not provide otherwise),
under Delaware law stockholders are not entitled to appraisal rights upon a sale
of all or substantially all of the assets of the corporation not made in the
usual and regular course of its business, as they are under Texas law.
AMENDMENTS TO CHARTER
Article 4.02 of the TBCA provides that an amendment to a corporation's
articles of incorporation must be approved by the board of directors and by the
affirmative vote of holders of at least two-thirds of the outstanding shares
entitled to vote, unless the corporation's articles of incorporation provide
otherwise. The Houston Articles of Incorporation, pursuant to Section 2.28D of
the TBCA, lower the required shareholder
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vote from at least two-thirds to a majority of the outstanding shares entitled
to vote thereon. The Restated Articles of Incorporation of HI, however, contain
no such provision and, thus, the requirements of Article 4.02 of the TBCA
control. Section 242 of the DGCL provides that an amendment to a corporation's
certificate of incorporation must be approved by the board of directors and by
the affirmative vote of the holders of at least a majority of the outstanding
stock entitled to vote. The NorAm Certificate of Incorporation provides that
amendments to certain provisions regarding (i) cumulative voting and preemptive
rights must be approved by at least two-thirds of the outstanding shares of
capital stock and (ii) business combinations with a Substantial Stockholder must
be approved by the affirmative vote of holders of at least 75% of the
outstanding shares of voting stock of NorAm and by the affirmative vote of
holders of at least 75% of the outstanding shares of voting stock held by
stockholders other than the Substantial Stockholder.
PREFERENCE STOCK PURCHASE RIGHTS
Each share of Houston Common Stock to be issued in connection with the
Transaction will include one Houston Right. Each Houston Right entitles the
registered holder to purchase from Houston a Unit consisting of one-thousandth
of a share of Preference Stock, at a purchase price of $42.50 per Unit, subject
to adjustment. The Houston Right may have the effect of making more difficult
the acquisition of Houston by means of a tender offer, a proxy contest or
otherwise. As long as the Houston Rights are attached to the outstanding Houston
Common Stock, Houston will issue one Houston Right with each new share of
Houston Common Stock that becomes outstanding so that all such shares will have
attached Houston Rights. See "Description of Houston Capital Stock -- Rights
Plan." The NorAm Common Stock has no similar attached rights.
SPECIAL MEETINGS OF STOCKHOLDERS
The Houston Bylaws provide that a special meeting of the stockholders may
be called by the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary of Houston, the Houston Board of Directors, the
holders of at least 10% of the shares outstanding and entitled to vote at such
meeting or such other persons as may be authorized by the Houston Articles of
Incorporation. The NorAm Bylaws provide that a special meeting of the
stockholders may be called by the Chairman of the Board, a Vice Chairman of the
Board, the President, the Executive Committee or a majority of the directors of
NorAm, but may not be called by any other person.
CUMULATIVE VOTING
Holders of Houston Common Stock will have no right to vote cumulatively in
the election of directors. Holders of NorAm Common Stock are entitled to
cumulative voting rights in such instances.
NO PREEMPTIVE RIGHTS
No holder of any class of capital stock of Houston or NorAm has a
preemptive right to subscribe to any or all additional issues of the stock of
Houston or NorAm.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Article 9.10 of the TBCA provides that stockholders may act without a
meeting only by the unanimous written consent of all stockholders, unless the
articles of incorporation otherwise provide (the Houston Articles of
Incorporation do not provide otherwise). Under Section 228 of the DGCL,
stockholders may, unless otherwise provided in the certificate of incorporation
(the NorAm Certificate of Incorporation does not provide otherwise), act without
a meeting by written consent of holders of outstanding stock representing the
number of shares necessary to take such action at a meeting at which all shares
entitled to vote were present and voted.
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NEWLY CREATED DIRECTORSHIPS
Under Article 2.34 of the TBCA and the Houston Bylaws, newly created
directorships resulting from any increase in the number of directors may be
filled by the affirmative vote of a majority of the directors then in office for
a term of office continuing only until the next election of one or more
directors by the stockholders entitled to vote thereon, or may be filled by
election at an annual or special meeting of the stockholders called for that
purpose; provided, however, that the board of directors shall not fill more than
two such directorships during the period between two successive annual meetings
of stockholders.
Section 223 of the DGCL provides that vacancies and newly created
directorships may be filled by a majority of the directors then in office (even
though less than a quorum) unless (i) otherwise provided in the certificate of
incorporation or bylaws of the corporation (NorAm's Certificate of Incorporation
and Bylaws do not provide otherwise) or (ii) the certificate of incorporation
directs that a particular class is to elect such director, in which case a
majority of the other directors elected by such class, or a sole remaining
director so elected, shall fill such vacancy (NorAm's Certificate of
Incorporation does not have such a provision).
CLASSIFICATION OF THE HOUSTON BOARD OF DIRECTORS
The Houston Articles of Incorporation provide that the number of directors
of the Houston Board of Directors shall be such number as determined from time
to time by a majority of the Houston Board of Directors, but shall not be less
than three. The directors of Houston will be divided into three classes serving
staggered three-year terms such that approximately one-third of the Houston
Board of Directors is elected each year. The NorAm Bylaws provide that the
number of directors of the NorAm Board of Directors shall be as set forth from
time to time by resolution of the NorAm Board of Directors; however, the NorAm
Certificate of Incorporation provides that the number of directors may not be
less than three. The NorAm Board of Directors currently consists of 11
directors, all of one class, and has no staggered terms.
REMOVAL OF DIRECTORS
Under Article 2.32 of the TBCA, any director or the entire board of
directors may be removed in accordance with provisions of the corporation's
articles of incorporation or bylaws. The Houston Bylaws provide that no director
of Houston may be removed from office by vote or other action of the
stockholders or otherwise except (a) with cause (as defined in the Houston
Bylaws) by the affirmative vote of the holders of at least a majority of the
voting power of all outstanding shares of capital stock of Houston entitled to
vote in the election of directors, voting together as a single class, or (b)
without cause by (i) the affirmative vote of at least 80% of all directors then
in office at any regular or special meeting of the Houston Board of Directors
called for that purpose or (ii) the affirmative vote of the holders of at least
80% of the voting power of all outstanding shares of capital stock of Houston
entitled to vote in the election of directors, voting together as a single
class.
Under Section 141 of the DGCL, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the shares entitled to vote at an election of directors, except (i) unless the
certificate of incorporation otherwise provides, in the case of a corporation
having a classified board, stockholders may effect such removal only for cause
and (ii) in the case of a corporation having cumulative voting, if less than the
entire board is to be removed, no director may be removed without cause if the
votes cast against such director's removal would be sufficient to elect such
director if then cumulatively voted at an election of the entire board of
directors. Since the NorAm Certificate of Incorporation provides for cumulative
voting, clause (ii) of the previous sentence would apply to any attempted
removal of a NorAm director.
EXPERTS
The financial statements and the related financial statement schedules
included in the joint HI and HL&P Annual Report on Form 10-K for the year ended
December 31, 1995, incorporated herein by reference, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
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included in such Form 10-K, and have been incorporated by reference herein in
reliance upon such reports given upon the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheets of NorAm Energy Corp. as of December 31,
1995 and 1994 and the consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31, 1995
incorporated by reference in the Form 10-K, which is incorporated by reference
in this Joint Proxy Statement/Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
Baker & Botts, L.L.P., Houston, Texas, will pass on certain legal matters
in connection with the Transaction, including the validity of the shares of
Houston Common Stock or HI Common Stock, as the case may be, issued in
connection with the Transaction and certain United States federal income
taxation matters, on behalf of HI and HL&P. James A. Baker, III, a senior
partner in the law firm of Baker & Botts, L.L.P., is currently a director of HI
and beneficial owner of 1,500 shares of HI Common Stock. Jones, Day, Reavis &
Pogue, Dallas, Texas, is acting as special counsel for NorAm in connection with
certain legal matters, including certain United States federal income tax
matters, relating to the Transaction and the other transactions contemplated by
the Merger Agreement.
STOCKHOLDER PROPOSALS
Stockholders of HI may submit proposals to be included in HI's proxy
materials and considered for stockholder action at the 1997 HI Annual Meeting of
Shareholders if they do so in accordance with applicable regulations of the SEC.
Any such proposals must be submitted to the Secretary of HI no later than
December 11, 1996 in order to be considered for inclusion in HI's 1997 proxy
materials.
NorAm will not hold a 1997 annual meeting of stockholders unless the
Transaction is not consummated. In the event that such a meeting is held, any
proposals are required to be submitted to the Secretary of NorAm no later than
December 2, 1996 in order to be considered for inclusion in NorAm's 1997 proxy
materials.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
HOUSTON INDUSTRIES INCORPORATED,
HOUSTON LIGHTING & POWER COMPANY,
HI MERGER, INC.
AND
NORAM ENERGY CORP.
DATED AS OF AUGUST 11, 1996,
AS AMENDED
<PAGE> 98
TABLE OF CONTENTS
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ARTICLE I THE MERGERS................................................................... 1
1.1 The Mergers; Effective Time of the Mergers...................................... 1
(a) The HII/HL&P Merger........................................................ 1
(b) The NorAm Merger........................................................... 2
1.2 Closing......................................................................... 2
1.3 Effects of the HII/HL&P Merger.................................................. 2
1.4 Effects of the NorAm Merger..................................................... 3
ARTICLE II EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES...................................................... 3
2.1 Effect of HII/HL&P Merger on Capital Stock...................................... 3
(a) Cancellation of HL&P Common Stock.......................................... 3
(b) Cancellation of Treasury Stock and HL&P-Owned Stock........................ 3
(c) Exchange of HII Common Stock............................................... 4
(d) Treatment of HII Stock Options............................................. 4
(e) HL&P Preferred Stock Unchanged............................................. 4
2.2 Effect of NorAm Merger on Capital Stock......................................... 4
(a) Merger Sub Capital Stock Unchanged......................................... 4
(b) Cancellation of Treasury Stock and HL&P-Owned Stock........................ 4
(c) Exchange Ratio for NorAm Common Stock...................................... 4
(d) NorAm Dissenting Shares.................................................... 5
(e) Treatment of NorAm Stock Options........................................... 6
(f) NorAm Convertible Debentures............................................... 6
(g) NorAm Convertible Junior Debentures........................................ 6
2.3 Exchange of Certificates........................................................ 7
(a) Exchange of HII Common Stock............................................... 7
(b) Exchange Agent............................................................. 7
(c) Exchange Procedures........................................................ 7
(d) Distributions with Respect to Unexchanged Shares........................... 8
(e) No Further Ownership Rights in NorAm Common Stock.......................... 8
(f) No Fractional Shares....................................................... 8
(g) Termination of Exchange Agent.............................................. 9
(h) No Liability............................................................... 9
2.4 Allocation of Merger Consideration; Election Procedures......................... 9
(a) Allocation................................................................. 9
(b) Election................................................................... 10
(c) Procedure for Elections.................................................... 10
(d) Revocation of Election; Return of Certificates............................. 10
(e) Proration of Cash Election Shares.......................................... 11
(f) Proration of Stock Election Shares......................................... 11
(g) No Proration............................................................... 11
(h) Computations............................................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................................. 11
3.1 Representations and Warranties of NorAm......................................... 11
(a) Organization, Standing and Power........................................... 11
(b) Capital Structure.......................................................... 12
(c) Authority; No Violations; Consents and Approvals........................... 13
(d) SEC Documents.............................................................. 14
(e) Information Supplied....................................................... 14
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(f) Absence of Certain Changes or Events....................................... 15
(g) No Undisclosed Material Liabilities........................................ 15
(h) No Default................................................................. 15
(i) Compliance with Applicable Laws............................................ 15
(j) Litigation................................................................. 16
(k) Taxes...................................................................... 16
(l) Employee Matters; ERISA.................................................... 17
(m) Labor Matters.............................................................. 21
(n) Intangible Property........................................................ 21
(o) Environmental Matters...................................................... 22
(p) Insurance.................................................................. 24
(q) Contracts.................................................................. 24
(r) Regulatory Proceedings..................................................... 24
(s) Regulation as a Utility.................................................... 24
(t) Opinion of Financial Advisor............................................... 25
(u) Vote Required.............................................................. 25
(v) Beneficial Ownership of HII Common Stock................................... 25
(w) Brokers.................................................................... 25
(x) Article Fifth of NorAm Restated Certificate of Incorporation and Section
203 of
the DGCL Not Applicable.................................................... 25
(y) Change in Control Provisions............................................... 25
3.2 Representations and Warranties of HL&P and HII.................................. 25
(a) Organization, Standing and Power........................................... 25
(b) Capital Structure.......................................................... 25
(c) Authority; No Violations; Consents and Approvals........................... 27
(d) SEC Documents.............................................................. 28
(e) Information Supplied....................................................... 28
(f) Absence of Certain Changes or Events....................................... 29
(g) No Undisclosed Material Liabilities........................................ 29
(h) No Default................................................................. 29
(i) Compliance with Applicable Laws............................................ 29
(j) Litigation................................................................. 29
(k) Taxes...................................................................... 30
(l) Employee Matters; ERISA.................................................... 30
(m) Labor Matters.............................................................. 33
(n) Intangible Property........................................................ 34
(o) Environmental Matters...................................................... 34
(p) Regulation as a Utility.................................................... 35
(q) Opinion of Financial Advisor............................................... 35
(r) Vote Required.............................................................. 35
(s) Beneficial Ownership of NorAm Common Stock................................. 36
(t) Brokers.................................................................... 36
(u) Financing.................................................................. 36
(v) Insurance.................................................................. 36
(w) Regulatory Proceedings..................................................... 36
(x) Representations with Respect to Merger Sub................................. 36
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGERS...................................... 36
4.1 Conduct of Business by NorAm Pending the Mergers................................ 36
(a) Ordinary Course............................................................ 36
(b) Dividends; Changes in Stock................................................ 37
(c) Issuance of Securities..................................................... 37
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(d) Governing Documents........................................................ 37
(e) No Acquisitions............................................................ 37
(f) No Dispositions............................................................ 37
(g) No Dissolution, Etc........................................................ 37
(h) Certain Employee Matters................................................... 38
(i) Indebtedness; Leases; Capital Expenditures................................. 38
(j) Accounting................................................................. 38
(k) Affiliate Transactions..................................................... 38
(l) Rate Matters............................................................... 39
(m) Contracts.................................................................. 39
(n) Insurance.................................................................. 39
(o) Permits.................................................................... 39
(p) Tax Matters................................................................ 39
(q) Discharge of Liabilities................................................... 39
(r) Other Actions.............................................................. 39
(s) Agreements................................................................. 39
4.2 Certain Restrictions in Respect of HII and HL&P................................. 39
(a) Dividends; Changes in Stock................................................ 40
(b) Governing Documents........................................................ 40
(c) Insurance.................................................................. 40
(d) Permits.................................................................... 40
(e) Certain Acquisitions....................................................... 40
(f) Other Actions.............................................................. 40
(g) Agreements................................................................. 40
4.3 No Solicitation................................................................. 40
ARTICLE V ADDITIONAL AGREEMENTS......................................................... 41
5.1 Preparation of S-4 and the Joint Proxy Statement................................ 41
5.2 Letter of NorAm's Accountants................................................... 41
5.3 Letter of HII's Accountants..................................................... 42
5.4 Access to Information........................................................... 42
5.5 NorAm Stockholders' Meeting..................................................... 42
5.6 HII Shareholders' Meeting....................................................... 42
5.7 Regulatory and Other Approvals.................................................. 42
(a) HSR Act.................................................................... 42
(b) Other Regulatory Approvals................................................. 43
(c) Other Approvals............................................................ 43
5.8 Agreements of Others............................................................ 43
5.9 Authorization for Shares and Stock Exchange Listing............................. 43
5.10 Employee Matters................................................................ 43
5.11 Stock Options................................................................... 45
5.12 Indemnification; Directors' and Officers' Insurance............................. 46
5.13 Compliance with WARN Act........................................................ 47
5.14 Agreement to Defend............................................................. 47
5.15 Public Announcements............................................................ 47
5.16 Other Actions................................................................... 47
5.17 Advice of Changes; SEC Filings.................................................. 47
5.18 Reorganization.................................................................. 48
5.19 HII/HL&P Merger Surviving Corporation Board of Directors........................ 48
5.20 Execution of Supplemental Indentures............................................ 48
5.21 Disclosure Schedules............................................................ 48
5.22 Fairness Opinions Not Withdrawn................................................. 48
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ARTICLE VI CONDITIONS PRECEDENT......................................................... 48
6.1 Conditions to Each Party's Obligation to Effect the Merger...................... 48
(a) NorAm Stockholder Approval................................................. 48
(b) HII Shareholder Approval................................................... 48
(c) NYSE Listing............................................................... 48
(d) Other Approvals............................................................ 49
(e) S-4........................................................................ 49
(f) No Injunctions or Restraints............................................... 49
6.2 Conditions of Obligations of HII, HL&P and Merger Sub........................... 49
(a) Representations and Warranties............................................. 49
(b) Performance of Obligations of NorAm........................................ 49
(c) Letters from Rule 145 Affiliates........................................... 49
(d) Number of NorAm Dissenting Shares.......................................... 49
(e) Tax Opinion................................................................ 49
(f) No Material Limitations or Restraints...................................... 50
(g) NorAm Required Consents.................................................... 50
6.3 Conditions of Obligations of NorAm.............................................. 50
(a) Representations and Warranties............................................. 50
(b) Performance of Obligations of HII, HL&P and Merger Sub......................
50
(c) Tax Opinion.................................................................
50
(d) HII Required Consents.......................................................
50
ARTICLE VII TERMINATION AND AMENDMENT................................................... 51
7.1 Termination..................................................................... 51
7.2 Effect of Termination........................................................... 52
7.3 Expenses........................................................................ 53
7.4 Amendment....................................................................... 53
7.5 Extension; Waiver............................................................... 53
ARTICLE VIII ALTERNATIVE MERGER......................................................... 53
8.1 Alternative Merger.............................................................. 53
8.2 Effects of the Alternative Merger............................................... 54
8.3 Effect of the Alternative Merger on the Capital Stock of the Alternative Merger
Constituent Corporations; Exchange of Certificates.............................. 54
8.4 Amendment to This Agreement..................................................... 55
8.5 The Second Alternative Merger................................................... 55
8.6 Effects of the Second Alternative Merger........................................ 55
8.7 Effect of the Second Alternative Merger on the Capital Stock of the Second
Alternative Merger Constituent Corporations; Exchange of Certificates........... 56
8.8 Amendment to This Agreement..................................................... 56
ARTICLE IX GENERAL PROVISIONS........................................................... 56
9.1 Payment of Expenses............................................................. 56
9.2 Nonsurvival of Representations, Warranties and Agreements....................... 56
9.3 Notices......................................................................... 56
9.4 Interpretation.................................................................. 57
9.5 Counterparts.................................................................... 57
9.6 Entire Agreement; No Third Party Beneficiaries.................................. 57
9.7 Governing Law................................................................... 58
9.8 No Remedy in Certain Circumstances.............................................. 58
9.9 Assignment...................................................................... 58
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GLOSSARY OF DEFINED TERMS
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DEFINED TERM DEFINED IN SECTION
- ------------------------------------------------------------------------------ ------------------
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1935 Act...................................................................... 3.1(s)(i)
Acquisition Proposal.......................................................... 4.3(e)
Affiliate..................................................................... 4.1(k)
Agreement..................................................................... Preamble
Alternative Merger............................................................ Recitals
Alternative Merger Articles of Merger......................................... 8.1(b)
Alternative Merger Certificate of Merger...................................... 8.1(b)
Alternative Merger Constituent Corporations................................... 8.2(a)
Alternative Merger Effective Time............................................. 8.1(b)
Alternative Merger Surviving Corporation...................................... 8.2(a)
Average Price................................................................. 2.2(c)(ii)
Cash Consideration............................................................ 2.2(c)(i)
Cash Election................................................................. 2.4(b)
Cash Election Number.......................................................... 2.4(a)
Cash Election Shares.......................................................... 2.4(e)
Certificates.................................................................. 2.3(c)
Closing....................................................................... 1.1(a)
Closing Date.................................................................. 1.2
Code.......................................................................... Recitals
Confidentiality Agreements.................................................... 5.4
CS First Boston............................................................... 3.2(q)
Cycle X Awards................................................................ 5.10(d)
DGCL.......................................................................... 1.1(b)
Disclosure Schedules.......................................................... 5.21
Effective Time................................................................ 1.1(b)
Election Deadline............................................................. 2.4(c)
Environmental Claims.......................................................... 3.1(o)(i)(A)
Environmental Laws............................................................ 3.1(o)(i)(B)
Environmental Permits......................................................... 3.1(o)(iii)
ERISA......................................................................... 3.1(l)(i)(D)
Excess Securities............................................................. 2.3(f)
Exchange Act.................................................................. 3.1(c)(iii)
Exchange Agent................................................................ 2.3(b)
Exchange Fund................................................................. 2.3(b)
FERC.......................................................................... 3.1(c)(iii)
Form of Election.............................................................. 2.4(c)
Fractional Dividends.......................................................... 2.3(f)
GAAP.......................................................................... 3.1(d)
Governmental Entity........................................................... 3.1(c)(iii)
Hazardous Materials........................................................... 3.1(o)(i)(C)
HII........................................................................... Preamble
HII Affiliate................................................................. 3.2(l)(i)
HII Benefit Plan.............................................................. 3.2(l)(i)
HII Common Stock.............................................................. 2.1
HII Common Stock Repurchase Program........................................... 3.2(f)
HII Disclosure Schedule....................................................... 3.2
HII/HL&P Merger............................................................... Recitals
HII/HL&P Merger Articles of Merger............................................ 1.1(a)
HII/HL&P Merger Certificate of Merger......................................... 1.1(a)
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DEFINED TERM DEFINED IN SECTION
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HII/HL&P Merger Constituent Corporations...................................... 1.3(a)
HII/HL&P Merger Effective Time................................................ 1.1(a)
HII/HL&P Merger Surviving Corporation......................................... 1.3(a)
HII Intangible Property....................................................... 3.2(n)
HII Litigation................................................................ 3.2(j)
HII Order..................................................................... 3.2(j)
HII Pension Benefit Plan...................................................... 3.2(l)(ii)
HII Permits................................................................... 3.2(i)
HII Preferred Stock........................................................... 3.2(b)(ii)
HII Required Consents......................................................... 3.2(c)(ii)
HII SEC Documents............................................................. 3.2(d)
HII Series A Preference Stock................................................. 2.1(b)
HII Shareholders' Meeting..................................................... 5.6
HII Stock Option.............................................................. 2.1(d)
HII Stock Plans............................................................... 3.2(b)(ii)
HII Stock Purchase Right...................................................... 2.1(b)
HII Vote Matter............................................................... 3.2(c)(i)
HL&P.......................................................................... Preamble
HL&P Class A Common Stock..................................................... 2.1(a)
HL&P Class B Common Stock..................................................... 2.1(a)
HL&P Common Stock............................................................. 2.1(c)
HL&P Preferred Stock.......................................................... 3.2(b)(i)
HL&P Rights Agreement......................................................... 2.1(c)
HL&P SEC Documents............................................................ 3.2(d)
HL&P Series A Preferred Stock................................................. 2.1(c)
HL&P Stock Purchase Rights.................................................... 2.1(c)
HSR Act....................................................................... 3.1(c)(iii)
Indemnified Liabilities....................................................... 5.12(a)
Indemnified Parties........................................................... 5.12(a)
Initial Termination Date...................................................... 7.1(c)
Injunction.................................................................... 6.1(f)
IRS........................................................................... 3.1(k)(ii)
Joint Proxy Statement......................................................... 3.1(c)(iii)
Material Adverse Change....................................................... 3.1(a)
Material Adverse Effect....................................................... 3.1(a)
Merger Consideration.......................................................... 2.2(c)
Merger Sub.................................................................... Preamble
Mergers....................................................................... Recitals
Merrill Lynch................................................................. 3.1(t)
Non-Election.................................................................. 2.4(b)
Non-Election Shares........................................................... 2.4(b)
NorAm......................................................................... Preamble
NorAm 10% Debentures.......................................................... 3.1(y)
NorAm Affiliate............................................................... 3.1(l)(i)(A)
NorAm Benefit Plan............................................................ 3.1(l)(i)(B)
NorAm Common Stock............................................................ 2.2
NorAm Convertible Debentures.................................................. 2.2(f)
NorAm Convertible Junior Debentures........................................... 2.2(g)
NorAm Disclosure Schedule..................................................... 3.1
NorAm Dissenting Shares....................................................... 2.2(d)
NorAm Incentive Plan.......................................................... 5.10(d)
</TABLE>
vi
<PAGE> 104
<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN SECTION
- ------------------------------------------------------------------------------ ------------------
<S> <C>
NorAm Intangible Property..................................................... 3.1(n)
NorAm Litigation.............................................................. 3.1(j)
NorAm Merger.................................................................. Recitals
NorAm Merger Certificate of Merger............................................ 1.1(b)
NorAm Merger Constituent Corporations......................................... 1.4(a)
NorAm Merger Effective Time................................................... 1.1(b)
NorAm Merger Surviving Corporation............................................ 1.4(a)
NorAm Order................................................................... 3.1(j)
NorAm Pension Benefit Plan.................................................... 3.1(l)(i)(C)
NorAm Permits................................................................. 3.1(i)
NorAm Preferred Stock......................................................... 3.1(b)
NorAm Rabbi Trusts............................................................ 5.10(g)
NorAm Representatives......................................................... 4.3(a)
NorAm Required Consents....................................................... 3.1(c)(ii)
NorAm SEC Documents........................................................... 3.1(d)
NorAm Stock Option............................................................ 2.2(e)(i)
NorAm Stock Option Election Form.............................................. 2.2(e)(i)
NorAm Stock Option Election Period............................................ 2.2(e)(i)
NorAm Stock Plans............................................................. 3.1(b)
NorAm Stockholders' Meeting................................................... 5.5
NYSE.......................................................................... 2.2(c)(ii)
PBGC.......................................................................... 3.1(l)(i)(E)
Release....................................................................... 3.1(o)(i)(D)
Reportable Event.............................................................. 3.1(l)(i)(F)
Returns....................................................................... 3.1(k)(i)
Rule 145 Affiliates........................................................... 5.8
S-4........................................................................... 3.1(e)
SEC........................................................................... 3.1(a)
Second Alternative Merger..................................................... Recitals
Second Alternative Merger Certificate of Merger............................... 8.5(b)
Second Alternative Merger Constituent Corporations............................ 8.6(a)
Second Alternative Merger Effective Time...................................... 8.5(b)
Second Alternative Merger Surviving Corporation............................... 8.6(a)
Section 5.10(b) Plans......................................................... 5.10(b)
Securities Act................................................................ 3.1(d)
Significant Subsidiary........................................................ 3.1(a)
Spread........................................................................ 2.2(e)(ii)
Stock Consideration........................................................... 2.2(c)(ii)
Stock Election................................................................ 2.4(b)
Stock Election Number......................................................... 2.4(a)
Stock Election Shares......................................................... 2.4(e)
Subsidiary.................................................................... 2.1(b)
Taxes......................................................................... 3.1(k)
TBCA.......................................................................... 1.1(a)
Trading Day................................................................... 2.2(c)(ii)
Voting Debt................................................................... 3.1(b)
WARN.......................................................................... 5.13
</TABLE>
vii
<PAGE> 105
AGREEMENT AND PLAN OF MERGER*
*AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1996 (this "Agreement"),
by and among Houston Industries Incorporated, a Texas corporation ("HII"),
Houston Lighting & Power Company, a Texas corporation and a wholly owned
subsidiary of HII ("HL&P"), HI Merger, Inc., a Delaware corporation and a direct
wholly owned subsidiary of HII ("Merger Sub"), and NorAm Energy Corp., a
Delaware corporation ("NorAm").
WHEREAS, HII and NorAm have determined to engage in a strategic business
combination;
WHEREAS, in furtherance thereof, the respective Boards of Directors of HII,
HL&P, Merger Sub and NorAm have approved this Agreement and the merger of NorAm
with and into Merger Sub, with Merger Sub being the surviving corporation (the
"NorAm Merger"), and the respective Boards of Directors of HII and HL&P have
approved the merger of HII with and into HL&P, with HL&P being the surviving
corporation (the "HII/HL&P Merger," and together with the NorAm Merger, the
"Mergers"), which merger would occur immediately prior to the NorAm Merger;
WHEREAS, the respective Boards of Directors of HII, HL&P, Merger Sub and
NorAm (i) have approved, but only in the circumstances set forth in Section 8.1
and then in lieu of the Mergers, the merger of NorAm and HII with and into HL&P,
with HL&P being the surviving corporation (the "Alternative Merger") and (ii)
have approved, but only in the circumstances set forth in Section 8.5 and then
in lieu of the Mergers, the merger of NorAm with and into Merger Sub, with
Merger Sub being the surviving corporation (the "Second Alternative Merger");
WHEREAS, the respective Boards of Directors of HII, HL&P, Merger Sub and
NorAm have determined that it is in the best interests of their respective
stockholders for the Mergers (or, if applicable, the Alternative Merger or the
Second Alternative Merger) to be effected upon the terms and subject to the
conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that each of the
HII/HL&P Merger and the NorAm Merger (or if applicable, the Alternative Merger
or the Second Alternative Merger) shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and this Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368(b) of the Code; and
WHEREAS, HII, HL&P, Merger Sub and NorAm desire to make certain
representations, warranties, covenants and agreements in connection with the
Mergers (or, if applicable, the Alternative Merger or the Second Alternative
Merger) and also to prescribe various conditions to the Mergers (or, if
applicable, the Alternative Merger or the Second Alternative Merger);
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers; Effective Time of the Mergers. Upon the terms and subject
to the conditions of this Agreement:
(a) The HII/HL&P Merger. At the HII/HL&P Merger Effective Time (as
hereinafter defined), HII shall be merged with and into HL&P in accordance
with the Texas Business Corporation Act (the "TBCA"). As soon as
practicable at or after the closing of the Mergers (the "Closing"),
articles of merger, prepared and executed in accordance with the relevant
provisions of the TBCA, with respect to the HII/HL&P Merger (the "HII/HL&P
Merger Articles of Merger") shall be filed with the Secretary
- ---------------
* As amended by Amendment to Agreement and Plan of Merger dated as of October
23, 1996.
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of State of the State of Texas. The HII/HL&P Merger Articles of Merger
shall state that the HII/HL&P Merger is to become effective immediately
upon filing of the HII/HL&P Merger Articles of Merger with the Secretary of
State of the State of Texas or, if agreed to by HII, HL&P and NorAm, at
such time thereafter as is provided in the HII/HL&P Merger Articles of
Merger. The HII/HL&P Merger shall become effective at the time of the
issuance of the certificate of merger with respect to the HII/HL&P Merger
(the "HII/HL&P Merger Certificate of Merger") by the Secretary of State of
the State of Texas or, if a later effective time was provided in the
HII/HL&P Merger Articles of Merger, such later time (the "HII/HL&P Merger
Effective Time").
(b) The NorAm Merger. At the NorAm Merger Effective Time (as
hereinafter defined), NorAm shall be merged with and into Merger Sub in
accordance with the Delaware General Corporation Law (the "DGCL"). As soon
as practicable at or after the Closing, a certificate of merger, prepared
and executed in accordance with the relevant provisions of the DGCL, with
respect to the NorAm Merger (the "NorAm Merger Certificate of Merger")
shall be filed with the Secretary of State of the State of Delaware. The
NorAm Merger Certificate of Merger shall state that the NorAm Merger shall
become effective immediately following the HII/HL&P Merger Effective Time
or, if agreed to by HL&P, Merger Sub and NorAm, at such time thereafter as
is provided in the NorAm Merger Certificate of Merger. The NorAm Merger
shall become effective at the time that the NorAm Merger Certificate of
Merger shall be duly filed with the Secretary of State of the State of
Delaware or, if a later effective time was provided in the NorAm Merger
Certificate of Merger, such later time (the "NorAm Merger Effective Time"
or the "Effective Time"). The effective time specified in the HII/HL&P
Merger Articles of Merger shall be prior to the effective time specified in
the NorAm Merger Certificate of Merger.
1.2 Closing. The Closing shall take place at 10:00 a.m. on a date to be
specified by the parties, which shall be no later than the fifth business day
after satisfaction (or waiver in accordance with this Agreement) of the latest
to occur of the conditions set forth in Article VI (the "Closing Date"), at the
offices of Baker & Botts, L.L.P., 910 Louisiana, Houston, Texas 77002, unless
another date or place is agreed to in writing by the parties.
1.3 Effects of the HII/HL&P Merger.
(a) At the HII/HL&P Merger Effective Time: (i) HII shall be merged
with and into HL&P, the separate existence of HII shall cease and HL&P
shall continue as the surviving corporation (HII and HL&P are sometimes
referred to herein as the "HII/HL&P Merger Constituent Corporations" and
HL&P is sometimes referred to herein as the "HII/HL&P Merger Surviving
Corporation"); (ii) Article I and Article VI of the Restated Articles of
Incorporation of HL&P shall be amended as set forth in Exhibit A hereto
and, as so amended, such Restated Articles of Incorporation shall be the
Articles of Incorporation of the HII/HL&P Merger Surviving Corporation; and
(iii) the Bylaws of HII as in effect immediately prior to the HII/HL&P
Merger Effective Time shall be the Bylaws of the HII/HL&P Merger Surviving
Corporation.
(b) The directors and officers of HII at the HII/HL&P Merger Effective
Time shall, from and after the HII/HL&P Merger Effective Time, be the
initial directors and officers of the HII/HL&P Merger Surviving Corporation
and shall serve until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with the HII/HL&P Merger Surviving Corporation's Articles of
Incorporation and Bylaws. Each officer of HL&P at the HII/HL&P Merger
Effective Time shall, from and after the HII/HL&P Merger Effective Time,
hold the same office at the Houston Lighting & Power Company Division of
the HII/HL&P Merger Surviving Corporation as held at HL&P immediately prior
to the HII/HL&P Merger Effective Time and shall serve in such office until
his or her successor has been duly appointed and qualified or until his or
her earlier death, resignation or removal in accordance with the HII/HL&P
Merger Surviving Corporation's Articles of Incorporation and Bylaws.
(c) The HII/HL&P Merger shall have the effects set forth in this
Section 1.3 and the applicable provisions of the TBCA.
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1.4 Effects of the NorAm Merger.
(a) At the NorAm Merger Effective Time: (i) NorAm shall be merged with
and into Merger Sub, the separate existence of NorAm shall cease and Merger
Sub shall continue as the surviving corporation (Merger Sub and NorAm are
sometimes referred to herein as the "NorAm Merger Constituent Corporations"
and Merger Sub is sometimes referred to herein as the "NorAm Merger
Surviving Corporation"); (ii) the Certificate of Incorporation of Merger
Sub shall be amended to change the name of Merger Sub to "NorAm Energy
Corp.," and, as so amended, such Certificate of Incorporation shall be the
Certificate of Incorporation of the NorAm Merger Surviving Corporation; and
(iii) the Bylaws of Merger Sub as in effect immediately prior to the NorAm
Merger Effective Time shall be the Bylaws of the NorAm Merger Surviving
Corporation.
(b) The directors of Merger Sub at the NorAm Merger Effective Time
shall, from and after the NorAm Merger Effective Time, be the initial
directors of the NorAm Merger Surviving Corporation and the officers of
NorAm at the NorAm Merger Effective Time shall, from and after the NorAm
Merger Effective Time, be the initial officers of the NorAm Merger
Surviving Corporation, and such directors and officers shall serve until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the NorAm
Merger Surviving Corporation's Certificate of Incorporation and Bylaws.
(c) The NorAm Merger shall have the effects set forth in this Section
1.4 and the applicable provisions of the DGCL.
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect of HII/HL&P Merger on Capital Stock. At the HII/HL&P Merger
Effective Time, by virtue of the HII/HL&P Merger and without any action on the
part of the holder of any shares of common stock, no par value, of HII ("HII
Common Stock") or capital stock of HL&P:
(a) Cancellation of HL&P Common Stock. Each issued and outstanding
share of common stock, Class A, no par value, of HL&P ("HL&P Class A Common
Stock") and each issued and outstanding share of common stock, Class B, no
par value, of HL&P ("HL&P Class B Common Stock") that is owned directly or
indirectly by HII shall be canceled and retired and shall cease to exist
and no stock of HL&P or other consideration shall be delivered or
deliverable in exchange therefor.
(b) Cancellation of Treasury Stock and HL&P-Owned Stock. Each share of
HII Common Stock and each associated right (a "HII Stock Purchase Right")
to purchase one two-hundredth of a share of Series A Preference Stock, no
par value, of HII ("HII Series A Preference Stock"), and all other shares
of capital stock of HII that are owned by HII as treasury stock and any
shares of HII Common Stock and all other shares of capital stock of HII
owned by HL&P, Merger Sub or any other wholly owned Subsidiary (as
hereinafter defined) of HL&P or HII shall be canceled and retired and shall
cease to exist and no stock of HL&P or other consideration shall be
delivered or deliverable in exchange therefor. All references in this
Agreement to HII Common Stock shall be deemed to include the associated HII
Stock Purchase Right. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which: (i) such party or any
other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which are held by such
party or any Subsidiary of such party that do not have a majority of the
voting interest in such partnership); or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and any one or more of its
Subsidiaries.
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<PAGE> 108
(c) Exchange of HII Common Stock. Each share of HII Common Stock
issued and outstanding immediately prior to the HII/HL&P Merger Effective
Time (other than shares to be canceled in accordance with Section 2.1(b))
shall be converted into one share of common stock, no par value, of
HII/HL&P Merger Surviving Corporation ("HL&P Common Stock"), together with
the corresponding number of associated rights ("HL&P Stock Purchase
Rights") to purchase one one-thousandth of a share of Series A Preference
Stock, without par value, of HII/HL&P Merger Surviving Corporation pursuant
to an Amended and Restated Rights Agreement between the HII/HL&P Merger
Surviving Corporation and Texas Commerce Bank National Association, as
Rights Agent (the "HL&P Rights Agreement"). The HII Rights Agreement shall
be amended and restated to become the HL&P Rights Agreement and shall
provide for (i) the HII Stock Purchase Rights to be converted into HL&P
Stock Purchase Rights and (ii) the HL&P Stock Purchase Rights to attach to
shares of HL&P Common Stock issued as consideration in the NorAm Merger,
and to make such other changes as HL&P determines are appropriate. All
references in this Agreement to the HL&P Common Stock to be received
pursuant to the Mergers shall be deemed to include the associated HL&P
Stock Purchase Rights. All such shares of HII Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of HL&P Common
Stock.
(d) Treatment of HII Stock Options. Each unexpired option to purchase
HII Common Stock issued by HII that is outstanding at the HII/HL&P Merger
Effective Time (a "HII Stock Option"), whether or not exercisable, shall
automatically and without any action on the part of the holder thereof be
converted into an option to purchase the number of shares of HL&P Common
Stock equal to the number of shares of HII Common Stock that could be
purchased under such HII Stock Option at a price per share of HL&P Common
Stock equal to the per share exercise price of such HII Stock Option.
(e) HL&P Preferred Stock Unchanged. Each issued and outstanding share
of cumulative preferred stock, no par value, of HL&P shall not be converted
or otherwise affected by the HII/HL&P Merger and shall remain outstanding
after the HII/HL&P Merger.
2.2 Effect of NorAm Merger on Capital Stock. At the NorAm Merger Effective
Time, by virtue of the NorAm Merger and without any action on the part of the
holder of any shares of common stock, par value $.625 per share, of NorAm
("NorAm Common Stock") or capital stock of Merger Sub:
(a) Merger Sub Capital Stock Unchanged. Each issued and outstanding
share of the capital stock of Merger Sub shall not be converted or
otherwise affected by the NorAm Merger and shall remain outstanding after
the NorAm Merger.
(b) Cancellation of Treasury Stock and HL&P-Owned Stock. Each share of
NorAm Common Stock and all other shares of capital stock of NorAm that are
owned by NorAm as treasury stock and any shares of NorAm Common Stock and
all other shares of capital stock of NorAm owned by HL&P, Merger Sub or any
other wholly owned Subsidiary of HL&P or NorAm shall be canceled and
retired and shall cease to exist and no stock of HL&P or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Exchange Ratio for NorAm Common Stock.
(i) Subject to the provisions of Section 2.3(f) hereof, each share
of NorAm Common Stock issued and outstanding immediately prior to the
NorAm Merger Effective Time (other than NorAm Dissenting Shares (as
defined in Section 2.2(d)) and shares to be canceled in accordance with
Section 2.2(b)) shall be converted into (x) the Stock Consideration (as
defined in Section 2.2(c)(ii)) or (y) $16.00 in cash (the "Cash
Consideration"), in each case as the holder thereof shall have elected
or be deemed to have elected, in accordance with Section 2.4
(collectively, the "Merger Consideration"); provided, however, that, in
any event, if between the date of this Agreement and the NorAm Merger
Effective Time the outstanding shares of NorAm Common Stock or HII
Common Stock shall have been changed into a different number of shares
or a
4
<PAGE> 109
different class by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares (other than, with respect to the HII Common Stock, pursuant to
the HII/HL&P Merger), the Cash Consideration and the Stock Consideration
shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares. In the event the Effective Time has not occurred by
the date that is nine months after the date hereof, the Cash
Consideration shall be increased by simple interest on such amount at
the rate of 2% per quarter from the date that is nine months after the
date hereof to the Effective Time (based on a year of 365 days). All
such shares of NorAm Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive the Stock Consideration or the Cash Consideration, as
the case may be, and cash in lieu of fractional shares of HL&P Common
Stock as contemplated by Section 2.3(f), to be issued or paid in
consideration therefor upon the surrender of such certificate in
accordance with Section 2.3, without interest.
(ii) As used in this Agreement:
"Average Price" means the average of the closing prices of HII
Common Stock, rounded to four decimal places (if the fifth, sixth and
seventh decimal places of such average are (x) 499 or lower, then the
fourth decimal place of such average shall remain the same, or (y) 500
or higher, then the fourth decimal place of such average shall be
increased by 1), as reported in The Wall Street Journal's New York Stock
Exchange Composite Transactions Reports, for each of the first 20
consecutive Trading Days in the period commencing 25 Trading Days prior
to the Closing Date.
"Stock Consideration" is (x) if the Average Price of HII Common
Stock is $21.25 or lower, .7529 shares of HL&P Common Stock; (y) if the
Average Price of HII Common Stock is $26.00 or greater, .6154 shares of
HL&P Common Stock; or (z) if the Average Price of the HII Common Stock
is greater than $21.25 but less than $26.00, that portion of a share of
HL&P Common Stock equal to the quotient of $16.00 divided by the Average
Price of the HII Common Stock.
"Trading Day" means a day on which the New York Stock Exchange (the
"NYSE") is open for trading.
(d) NorAm Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, no share of NorAm Common Stock, the holder of
which shall not have voted shares in favor of the NorAm Merger and shall
have properly complied with the provisions of Section 262 of the DGCL as to
appraisal rights (a "NorAm Dissenting Share"), shall be deemed converted
into and to represent the right to receive Merger Consideration hereunder;
and the holders of NorAm Dissenting Shares, if any, shall be entitled to
payment, solely from the NorAm Merger Surviving Corporation, of the
appraised value of such NorAm Dissenting Shares to the extent permitted by
and in accordance with the provisions of Section 262 of the DGCL; provided,
however, that (i) if any holder of NorAm Dissenting Shares shall, under the
circumstances permitted by the DGCL, subsequently deliver a written
withdrawal of his or her demand for appraisal of such NorAm Dissenting
Shares, (ii) if any holder fails to establish his or her entitlement to
rights to payment as provided in such Section 262 or (iii) if neither any
holder of NorAm Dissenting Shares nor the NorAm Merger Surviving
Corporation has filed a petition demanding a determination of the value of
all NorAm Dissenting Shares within the time provided in such Section 262,
such holder or holders (as the case may be) shall forfeit such right to
payment for such NorAm Dissenting Shares pursuant to such Section 262 and
each such NorAm Dissenting Share shall thereupon be treated as a
Non-Election Share for purposes of Section 2.4. NorAm shall give HII (i)
prompt notice of any written demands for appraisal of any NorAm Common
Stock, attempted withdrawals of such demands and any other instruments
received by NorAm relating to stockholders' rights of appraisal and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. NorAm shall not, except with the
prior written consent of HII, voluntarily make any payment with respect to
any demands for appraisals of NorAm Common Stock, offer to settle or settle
any such demands or approve any withdrawal of any such demands.
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<PAGE> 110
(e) Treatment of NorAm Stock Options.
(i) Each holder of an unexpired employee stock option to purchase
NorAm Common Stock, along with any tandem stock appreciation right, that
is outstanding at the Effective Time (a "NorAm Stock Option"), whether
or not then exercisable, shall be entitled within the NorAm Stock Option
Election Period (as hereinafter defined) to elect to either (x) have all
or any portion of his or her NorAm Stock Options canceled and "cashed
out" pursuant to Section 2.2(e)(ii) or (y) have all or any portion of
his or her NorAm Stock Options assumed by HL&P as provided in Section
5.11. Elections to be made by holders of NorAm Stock Options shall be
made on a form mutually agreed upon by NorAm and HL&P (a "NorAm Stock
Option Election Form") to be provided by NorAm to such holders on the
day on which HL&P publicly announces the Closing Date (which date shall
be no less than five Trading Days prior to the Closing Date). To be
effective, a NorAm Stock Option Election Form must be properly
completed, signed and submitted to HL&P or its designated agent by 5:00
p.m. on the business day immediately prior to the Closing Date. A holder
of NorAm Stock Options who does not make a proper election shall be
deemed to have elected to have his or her NorAm Stock Options "cashed
out" pursuant to Section 2.2(e)(ii). For purposes of this Agreement, the
"NorAm Stock Option Election Period" means the period of time beginning
on the day on which HL&P publicly announces the Closing Date and ending
at 5:00 p.m. on the business day immediately prior to the Closing Date.
(ii) If a holder of NorAm Stock Options elects to be "cashed out"
pursuant to this Section or does not properly make an election in
accordance with Section 2.2(e)(i), the NorAm Stock Options of such
holder shall be canceled by NorAm immediately prior to the Effective
Time, and each such holder of a canceled NorAm Stock Option shall be
entitled to receive, as soon as practicable after the Effective Time, in
consideration for the cancellation of such NorAm Stock Option an amount
in cash equal to the product (the "Spread") of (x) the total number of
shares of NorAm Common Stock subject to such NorAm Stock Option and (y)
the excess, if any, of (1) the Cash Consideration over (2) the exercise
price per share of the NorAm Common Stock previously subject to such
NorAm Stock Option.
(f) NorAm Convertible Debentures. HL&P shall agree to be bound by the
conversion provisions of NorAm's 6% Convertible Subordinated Debentures due
2012 (the "NorAm Convertible Debentures"), such that following the
Effective Time, each outstanding NorAm Convertible Debenture will be
convertible into the amount of Stock Consideration (and cash in lieu of
fractional shares of HL&P Common Stock) and Cash Consideration which the
holder thereof would have had the right to receive after the Effective Time
if such NorAm Convertible Debenture had been converted immediately prior to
the Effective Time and the holder thereof had made the Stock Election and
received the Stock Consideration with respect to 50% of the shares of NorAm
Common Stock issuable upon such conversion of the holder's NorAm
Convertible Debentures and made the Cash Election and received the Cash
Consideration with respect to the remaining 50% of such NorAm Common Stock.
(g) NorAm Convertible Junior Debentures. HL&P shall agree to be bound
by the conversion provisions of NorAm's 6 1/4% Convertible Junior
Subordinated Debentures (the "NorAm Convertible Junior Debentures"), such
that following the Effective Time, each outstanding NorAm Convertible
Junior Debenture will be convertible into the amount of Stock Consideration
(and cash in lieu of fractional shares of HL&P Common Stock) and Cash
Consideration which the holder thereof would have had the right to receive
after the Effective Time if such NorAm Convertible Junior Debenture had
been converted immediately prior to the Effective Time and the holder
thereof had made the Stock Election and received the Stock Consideration
with respect to 50% of the shares of NorAm Common Stock issuable upon such
conversion of the holder's NorAm Convertible Junior Debentures and made the
Cash Election and received the Cash Consideration with respect to the
remaining 50% of such NorAm Common Stock.
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<PAGE> 111
2.3 Exchange of Certificates.
(a) Exchange of HII Common Stock. Following the HII/HL&P Merger
Effective Time, each holder of an outstanding certificate or certificates
theretofore representing shares of HII Common Stock may, but shall not be
required to, surrender the same to HL&P for cancellation or transfer, and
each such holder or transferee will be entitled to receive certificates
representing the same number of shares of HL&P Common Stock as the shares
of HII Common Stock previously represented by the stock certificates
surrendered. Until so surrendered or presented for transfer, each
outstanding certificate which, prior to the HII/HL&P Merger Effective Time,
represented HII Common Stock shall be deemed and treated for all purposes
to represent the ownership of the same number of shares of HL&P Common
Stock as though such surrender or transfer and exchange had taken place.
The stock transfer books for the HII Common Stock shall be deemed to be
closed at the HII/HL&P Merger Effective Time and no transfer of outstanding
shares of HII Common Stock shall thereafter be made on such books, but when
certificates that formerly represented shares of HII Common Stock are duly
presented to HII/HL&P Merger Surviving Corporation or its transfer agent
for exchange or transfer, HII/HL&P Merger Surviving Corporation will cause
to be issued in respect thereof certificates representing an equal number
of shares of HL&P Common Stock.
(b) Exchange Agent. As of the Effective Time, HL&P shall deposit with
such bank or trust company designated by HL&P and reasonably acceptable to
NorAm (the "Exchange Agent"), for the benefit of the holders of shares of
NorAm Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, cash equal to the total aggregate Cash
Consideration and certificates representing the shares of HL&P Common Stock
(such shares of HL&P Common Stock, together with any dividends or
distributions with respect thereto and the total aggregate Cash
Consideration, being hereinafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.2 in exchange for outstanding shares of
NorAm Common Stock. The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Stock Consideration and the Cash Consideration
contemplated to be issued pursuant to Section 2.2 out of the Exchange Fund.
The Exchange Fund shall not be used for any other purpose.
(c) Exchange Procedures. Upon surrender of a certificate or
certificates which, immediately prior to the Effective Time, represented
outstanding shares of NorAm Common Stock (the "Certificates") for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by HL&P, together with a properly completed, signed and
submitted Form of Election (as hereinafter defined), and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
HL&P Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II and cash in lieu of fractional shares of
HL&P Common Stock as contemplated by Section 2.3(f) if such holder is
entitled to receive the Stock Consideration, or cash, in an amount equal to
the Cash Consideration, if such holder is entitled to receive the Cash
Consideration, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of NorAm Common Stock
which is not registered in the transfer records of NorAm, a certificate
representing the appropriate number of shares of HL&P Common Stock may be
issued to a transferee if the Certificate representing such NorAm Common
Stock is presented to the Exchange Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to the
HL&P Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of persons entitled
thereto.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to HL&P Common Stock declared or made
after the Effective Time with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
right to receive shares of HL&P Common Stock represented thereby and no
cash payment in lieu of fractional
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shares shall be paid to any such holder pursuant to Section 2.3(f) until
the holder of such Certificate shall surrender such Certificate. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder thereof, without interest, if such holder
is entitled to receive the Stock Consideration: (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
HL&P Common Stock to which such holder is entitled pursuant to Section
2.3(f) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
shares of HL&P Common Stock; 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 shares of HL&P Common Stock.
(e) No Further Ownership Rights in NorAm Common Stock. All shares of
HL&P Common Stock issued upon the surrender for exchange of shares of NorAm
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.3(f)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of NorAm Common Stock,
subject, however, to the NorAm Merger Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record date prior
to the Effective Time that may have been declared or made by NorAm on such
shares of NorAm Common Stock in accordance with the terms of this Agreement
or prior to the date hereof and which remain unpaid at the Effective Time,
and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the NorAm Merger Surviving
Corporation of the shares of NorAm Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the NorAm Merger Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this
Article II.
(f) No Fractional Shares. No certificates or scrip representing
fractional shares of HL&P Common Stock shall be issued upon the surrender
for exchange of Certificates pursuant to this Article II, and, except as
provided in this Section 2.3(f), no dividend or other distribution, stock
split or interest shall relate to any such fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder of HL&P. In lieu of any fractional security,
each holder of shares of NorAm Common Stock who would otherwise have been
entitled to a fraction of a share of HL&P 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 sum of (i) the net proceeds from the sale or sales by the
Exchange Agent in accordance with the provisions of this Section 2.3(f), on
behalf of all such holders, of the aggregate fractional shares of HL&P
Common Stock issued pursuant to this Article II and (ii) the aggregate
dividends or other distributions that are payable with respect to such
shares of HL&P Common Stock pursuant to Section 2.3(d) (such dividends and
distributions being herein called the "Fractional Dividends"). As soon as
practicable following the Effective Time, the Exchange Agent shall
determine the excess of (x) the number of whole shares of HL&P Common Stock
delivered to the Exchange Agent by HL&P pursuant to Section 2.3(b) over (y)
the aggregate number of whole shares of HL&P Common Stock to be distributed
to the former holders of NorAm Common Stock pursuant to Section 2.3(c)
(such excess being herein called the "Excess Securities") and the Exchange
Agent, as agent for the former holders of NorAm Common Stock, shall sell
the Excess Securities at the prevailing prices on the NYSE. The sale of the
Excess Securities 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. HL&P 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 Securities. Until the net proceeds of such sale of Excess
Securities and the Fractional Dividends have been distributed to the former
stockholders of NorAm, the Exchange Agent will hold such proceeds and
dividends in trust for such former stockholders. As soon as practicable
after the determination of the amount of cash to be paid to former
stockholders of NorAm in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Agreement such amounts
to such former stockholders.
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<PAGE> 113
(g) Termination of Exchange Agent. Any portion of the Exchange Fund
and any cash in lieu of fractional shares of HL&P Common Stock made
available to the Exchange Agent that remain undistributed to the former
stockholders of NorAm for one year after the Effective Time shall be
delivered to HL&P, upon demand, which shall thereafter act as the Exchange
Agent, and any former stockholders of NorAm who have not theretofore
complied with this Article II shall thereafter look only as a general
creditor to HL&P for payment of their claim for the Merger Consideration
and any cash in lieu of fractional shares of HL&P Common Stock and any
dividends or distributions with respect to HL&P Common Stock if such holder
is entitled to receive the Stock Consideration.
(h) No Liability. None of HII, HL&P, Merger Sub or NorAm shall be
liable to any holder of shares of HII Common Stock, NorAm Common Stock or
HL&P Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto), cash in lieu of fractional shares of
HL&P Common Stock, Stock Consideration or Cash Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. Any amounts remaining unclaimed by holders of any such shares
six years after the Effective Time (or such earlier date immediately prior
to the time at which such amounts would otherwise escheat to or become
property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of HL&P free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
2.4 Allocation of Merger Consideration; Election Procedures.
(a) Allocation. Notwithstanding anything in this Agreement to the
contrary, the number of shares of NorAm Common Stock to be converted into
the right to receive the Cash Consideration in the NorAm Merger (the "Cash
Election Number") shall be equal to (i) 50% of the number of shares of
NorAm Common Stock issued and outstanding immediately prior to the
Effective Time (ignoring for this purpose any NorAm Common Stock held as
treasury shares and canceled pursuant to Section 2.2(b)) less (ii) the sum
of (A) the number of NorAm Dissenting Shares, if any, which are not to be
treated as Non-Election Shares (as defined in Section 2.4(b)) pursuant to
Section 2.2(d) determined as of the Effective Time, (B) the number of
shares of NorAm Common Stock held by HL&P, Merger Sub or any other wholly
owned Subsidiary of HL&P or NorAm to be canceled in accordance with Section
2.2(b) and (C) the number of shares of NorAm Common Stock to be exchanged
for cash pursuant to Section 2.3(f). The number of shares of NorAm Common
Stock to be converted into the right to receive the Stock Consideration in
the NorAm Merger (the "Stock Election Number") shall be equal to the number
of shares of NorAm Common Stock issued and outstanding immediately prior to
the Effective Time (ignoring for this purpose any NorAm Common Stock held
as treasury shares and canceled pursuant to Section 2.2(b)) less the sum of
(i) the Cash Election Number, (ii) the number of NorAm Dissenting Shares,
if any, which are not to be treated as Non-Election Shares pursuant to
Section 2.2(d) determined as of the Effective Time, (iii) the number of
shares of NorAm Common Stock held by HL&P, Merger Sub or any other wholly
owned Subsidiary of HL&P or NorAm to be canceled in accordance with Section
2.2(b) and (iv) the number of shares of NorAm Common Stock to be exchanged
for cash pursuant to Section 2.3(f). Notwithstanding anything to the
contrary herein, HII shall have the option, in its sole discretion, to
change the Cash Election Number and the Stock Election Number to more
closely follow the actual elections of the NorAm stockholders pursuant to
this Section 2.4, so long as such modification to the Cash Election Number
and the Stock Election Number does not prevent the conditions set forth in
Sections 6.2(e) and 6.3(c) from being satisfied. The parties hereto
acknowledge that (i) the number of NorAm Dissenting Shares, if any, which
are not to be treated as Non-Election Shares pursuant to Section 2.2(d)
determined as of the Effective Time, (ii) the number of shares of NorAm
Common Stock held by HL&P, Merger Sub or any other wholly owned Subsidiary
of HL&P or NorAm to be canceled in accordance with Section 2.2(b) and (iii)
the number of shares of NorAm Common Stock to be exchanged for cash
pursuant to Section 2.3(f) are all treated under the published guidelines
of the IRS as receiving cash in the mergers contemplated hereby.
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<PAGE> 114
(b) Election. Subject to allocation and proration in accordance with
the provisions of this Section 2.4, each record holder of shares of NorAm
Common Stock (other than NorAm Dissenting Shares, if any, which are not to
be treated as Non-Election Shares pursuant to Section 2.2(d) and shares to
be canceled in accordance with Section 2.2(b)) issued and outstanding
immediately prior to the Election Deadline (as defined in Section 2.4(c))
shall be entitled to elect to receive in respect of each such share (i) the
Cash Consideration (a "Cash Election") or (ii) the Stock Consideration (a
"Stock Election") or to indicate that such record holder has no preference
as to the receipt of the Cash Consideration or the Stock Consideration for
such shares (a "Non-Election"). Shares of NorAm Common Stock in respect of
which a Non-Election is made (including shares in respect of which such an
election is deemed to have been made pursuant to this Section 2.4 and
Section 2.2(d)) (collectively, "Non-Election Shares") shall be deemed by
HL&P, in its sole and absolute discretion, to be shares in respect of which
Cash Elections or Stock Elections have been made. If the number of shares
of NorAm Common Stock to which Cash Elections have been made is greater
than or equal to the Cash Election Number, then no Non-Election Shares
shall be deemed to be Cash Election Shares. If the number of shares of
NorAm Common Stock to which Stock Elections have been made is greater than
or equal to the Stock Election Number, then no Non-Election Shares shall be
deemed to be Stock Election Shares. If the number of shares of NorAm Common
Stock to which Cash Elections have been made is less than the Cash Election
Number, then a number of Non-Election Shares equal to the difference
between the Cash Election Number and the number of shares of NorAm Common
Stock to which Cash Elections have been made (but no more than such number)
shall be deemed to be Cash Election Shares. If the number of shares of
NorAm Common Stock to which Stock Elections have been made is less than the
Stock Election Number, then a number of Non-Election Shares equal to the
difference between the Stock Election Number and the number of shares of
NorAm Common Stock to which Stock Elections have been made (but no more
than such number) shall be deemed to be Stock Election Shares.
(c) Procedure for Elections. Elections pursuant to Section 2.4(b)
shall be made on a Form of Election and Letter of Transmittal to be
mutually agreed upon by NorAm and HL&P (a "Form of Election") to be
provided by the Exchange Agent for that purpose to holders of record of
NorAm Common Stock at least 20 business days prior to the Closing Date
(which date shall be publicly announced by HL&P as soon as practicable but
in no event less than five Trading Days prior to the Closing Date).
Elections shall be made by mailing to the Exchange Agent a duly completed
Form of Election. To be effective, a Form of Election must be (i) properly
completed, signed and submitted to the Exchange Agent at its designated
office by 5:00 p.m. on the business day that is the Trading Day immediately
prior to the Closing Date (the "Election Deadline") and (ii) accompanied by
the Certificates as to which the election is being made (or by an
appropriate guarantee of delivery of such Certificates by a trust company
organized in the United States or a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., provided such Certificates are in fact delivered to the
Exchange Agent no later than 5:00 p.m. on the fourth business day after the
Election Deadline). NorAm shall use its best efforts to make a Form of
Election available to all persons who become holders of record of NorAm
Common Stock between the date of mailing the Form of Election described in
the first sentence of this Section 2.4(c) and the Election Deadline. HL&P
shall determine, in its sole and absolute discretion, which authority it
may delegate in whole or in part to the Exchange Agent, whether Forms of
Election have been properly completed, signed and submitted or revoked. The
decision of HL&P (or the Exchange Agent, as the case may be) in such
matters shall be conclusive and binding. Neither HL&P nor the Exchange
Agent will be under any obligation to notify any person of any defect in a
Form of Election submitted to the Exchange Agent. A holder of shares of
NorAm Common Stock that does not submit (i) a properly completed Form of
Election and (ii) either (x) the Certificates as to which the election is
made or (y) an appropriate guarantee of delivery of such Certificates prior
to the Election Deadline shall be deemed to have made a Non-Election.
(d) Revocation of Election; Return of Certificates. An election may be
revoked, but only by written notice received by the Exchange Agent prior to
the Election Deadline. Any certificate(s) representing shares of NorAm
Common Stock which have been submitted to the Exchange Agent in connection
with an election shall be returned without charge to the holder thereof in
the event such election is revoked as
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aforesaid and such holder requests in writing the return of such
certificate(s). Upon any such revocation, unless a duly completed Form of
Election is thereafter submitted in accordance with Section 2.4(c), such
shares shall be Non-Election Shares. In the event that this Agreement is
terminated pursuant to the provisions hereof and any shares of NorAm Common
Stock have been transmitted to the Exchange Agent pursuant to the
provisions hereof, such shares shall promptly be returned without charge to
the person submitting the same.
(e) Proration of Cash Election Shares. In the event that the aggregate
number of shares in respect of which Cash Elections have been made and, in
the case of Non-Election Shares, are deemed to have been made
(collectively, the "Cash Election Shares") exceeds the Cash Election
Number, all shares of NorAm Common Stock in respect of which Stock
Elections have been made and all Non-Election Shares in respect of which
Stock Elections are deemed to have been made (collectively, the "Stock
Election Shares") shall be converted into the right to receive the Stock
Consideration, and the Cash Election Shares shall be converted into the
right to receive the Stock Consideration or the Cash Consideration in the
following manner:
(i) Cash Election Shares shall be deemed to be Stock Election
Shares, on a pro-rata basis for each record holder of NorAm Common Stock
with respect to those shares of NorAm Common Stock, if any, of such
record holder which are Cash Election Shares, so that the number of Cash
Election Shares so deemed to be Stock Election Shares, when added to the
other Stock Election Shares, shall equal as closely as practicable the
Stock Election Number, and all such Cash Election Shares so deemed to be
Stock Election Shares shall be converted into the right to receive the
Stock Consideration (and cash in lieu of fractional interests in
accordance with Section 2.3(f)); and
(ii) any remaining Cash Election Shares shall be converted into the
right to receive the Cash Consideration.
(f) Proration of Stock Election Shares. In the event that the
aggregate number of Stock Election Shares exceeds the Stock Election
Number, all Cash Election Shares shall be converted into the right to
receive the Cash Consideration, and all Stock Election Shares shall be
converted into the right to receive the Stock Consideration or the Cash
Consideration in the following manner:
(i) Stock Election Shares shall be deemed to be Cash Election
Shares, on a pro-rata basis for each record holder of NorAm Common Stock
with respect to those shares of NorAm Common Stock, if any, of such
record holder which are Stock Election Shares, so that the number of
Stock Election Shares so deemed to be Cash Election Shares, when added
to the other Cash Election Shares, shall equal as closely as practicable
the Cash Election Number, and all such Stock Election Shares so deemed
to be Cash Election Shares shall be converted into the right to receive
the Cash Consideration; and
(ii) the remaining Stock Election Shares shall be converted into
the right to receive the Stock Consideration (and cash in lieu of
fractional interests in accordance with Section 2.3(f)).
(g) No Proration. In the event that neither paragraph (e) nor
paragraph (f) of this Section 2.4 is applicable, all Cash Election Shares
shall be converted into the right to receive the Cash Consideration and all
Stock Election Shares shall be converted into the right to receive the
Stock Consideration (and cash in lieu of fractional interests in accordance
with Section 2.3(f)).
(h) Computations. The Exchange Agent, in consultation with HL&P, shall
make all computations to give effect to this Section 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of NorAm. NorAm represents and warrants
to HII, HL&P and Merger Sub as follows, except as set forth in the disclosure
schedule dated as of the date hereof and signed by
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an authorized officer of NorAm and delivered to HII by NorAm on or prior to the
date hereof (the "NorAm Disclosure Schedule"), each of which exceptions shall
specifically identify the relevant Section hereof to which it relates:
(a) Organization, Standing and Power. Each of NorAm and its
Significant Subsidiaries (as hereinafter defined) is a corporation or
partnership duly organized, validly existing and in good standing under the
laws of its state of incorporation or organization, has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure
so to qualify would not have a Material Adverse Effect (as hereinafter
defined). NorAm has heretofore delivered to HII complete and correct copies
of its Restated Certificate of Incorporation and Bylaws. All Significant
Subsidiaries of NorAm and their respective jurisdictions of incorporation
or organization are identified on Schedule 3.1(a) of the NorAm Disclosure
Schedule. As used in this Agreement: (i) a "Significant Subsidiary" means
any Subsidiary of NorAm, HII or HL&P, as the case may be, that would
constitute a Significant Subsidiary of such party within the meaning of
Rule 1-02 of Regulation S-X of the Securities and Exchange Commission (the
"SEC"); and (ii) a "Material Adverse Effect" or "Material Adverse Change"
shall mean, in respect of NorAm or HII, as the case may be, any effect or
change that is or, as far as can be reasonably determined, may be,
materially adverse to the business, operations, assets, prospects,
condition (financial or otherwise) or results of operations of such party
and its Subsidiaries taken as a whole.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of NorAm consists of 250,000,000 shares of NorAm Common Stock and
10,000,000 shares of preferred stock, par value $0.10 per share (the "NorAm
Preferred Stock"). At the close of business on July 31, 1996: (i)
137,067,805 shares of NorAm Common Stock and no shares of NorAm Preferred
Stock were issued and outstanding, and 4,906,322 shares of NorAm Common
Stock and no shares of NorAm Preferred Stock were reserved for issuance
pursuant to NorAm's:
<TABLE>
<S> <C>
Incentive Equity Plan............................................. 3,035,010
1983 Non-Qualified Stock Option Plan.............................. 11,000
Diversified Energies Plan......................................... 57,229
Restricted Stock Plan for Non-Employee Directors.................. 79,742
Employee Stock Purchase Plan...................................... 1,723,341
</TABLE>
(collectively, the "NorAm Stock Plans"); (ii) no shares of NorAm Common
Stock were held by NorAm in its treasury; and (iii) except for the NorAm
Convertible Debentures and the NorAm Convertible Junior Debentures, no
bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on
which NorAm stockholders may vote ("Voting Debt") were issued or
outstanding. All outstanding shares of NorAm Common Stock are validly
issued, fully paid and nonassessable and are not subject to preemptive
rights. All outstanding shares of capital stock of the Subsidiaries of
NorAm are owned by NorAm, or a direct or indirect wholly owned Subsidiary
of NorAm, free and clear of all liens, charges, encumbrances, claims and
options of any nature. Except as set forth above and except for changes
since July 31, 1996 resulting from the exercise of employee stock options
granted pursuant to, or from issuances or purchases under, the NorAm Stock
Plans, NorAm's Direct Stock Purchase and Dividend Reinvestment Plans,
NorAm's Annual Incentive Plan, the Restricted Stock Agreement between
Milton Honea and NorAm dated January 31, 1996, the conversion of the NorAm
Convertible Debentures or the NorAm Convertible Junior Debentures or as
contemplated by this Agreement, there are outstanding: (A) no shares of
capital stock, Voting Debt or other voting securities of NorAm; (B) no
securities of NorAm or any Subsidiary of NorAm convertible into or
exchangeable for shares of capital stock, Voting Debt or other voting
securities of NorAm or any Subsidiary of NorAm; and (C) no options,
warrants, calls, rights (including preemptive rights), commitments or
agreements to which NorAm or any Subsidiary of NorAm is a party or by which
it is bound in any case obligating NorAm or any Subsidiary of NorAm to
issue, deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of
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capital stock or any Voting Debt or other voting securities of NorAm or of
any Subsidiary of NorAm, or obligating NorAm or any Subsidiary of NorAm to
grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. There are not as of the date hereof and there will
not be at the NorAm Merger Effective Time any stockholder agreements,
voting trusts or other agreements or understandings to which NorAm is a
party or by which it is bound relating to the voting of any shares of the
capital stock of NorAm that will limit in any way the solicitation of
proxies by or on behalf of NorAm from, or the casting of votes by, the
stockholders of NorAm with respect to the NorAm Merger. There are no
restrictions on NorAm to vote the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of NorAm has approved the NorAm Merger
and this Agreement, by the unanimous vote of all of the directors with
no negative vote, and declared the NorAm Merger and this Agreement to be
in the best interests of the stockholders of NorAm. The directors have
advised NorAm, HII and HL&P that they intend to vote or cause to be
voted all of the shares of NorAm Common Stock beneficially owned by them
and their affiliates in favor of approval of the NorAm Merger and this
Agreement. NorAm has all requisite corporate power and authority to
enter into this Agreement and, subject, with respect to consummation of
the NorAm Merger, to approval of this Agreement and the NorAm Merger by
the stockholders of NorAm in accordance with the DGCL, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of NorAm, subject, with respect to consummation of the NorAm Merger, to
approval of this Agreement and the NorAm Merger by the stockholders of
NorAm in accordance with the DGCL. This Agreement has been duly executed
and delivered by NorAm and, subject, with respect to consummation of the
NorAm Merger, to approval of this Agreement and the NorAm Merger by the
stockholders of NorAm in accordance with the DGCL, and assuming this
Agreement constitutes the valid and binding obligation of HII, HL&P and
Merger Sub, constitutes a valid and binding obligation of NorAm
enforceable in accordance with its terms, subject, as to enforceability,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
(ii) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of NorAm or any of
its Subsidiaries under, any provision of (A) the Restated Certificate of
Incorporation or Bylaws of NorAm or any provision of the comparable
charter or organizational documents of any of its Subsidiaries, (B)
subject to obtaining the third-party consents set forth in Section
3.1(c)(ii) of the NorAm Disclosure Schedule (the "NorAm Required
Consents"), any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to NorAm or any of its Subsidiaries or
(C) assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in Section 3.1(c)(iii) are duly and
timely obtained or made and the approval of the NorAm Merger and this
Agreement by the stockholders of NorAm in accordance with the DGCL has
been obtained, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to NorAm or any of its Subsidiaries or any
of their respective properties or assets, other than, in the case of
clause (B) or (C), any such conflicts, violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or
in the aggregate, would not have a Material Adverse Effect on NorAm,
materially impair the ability of NorAm to perform its obligations
hereunder or prevent the consummation of any of the transactions
contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is
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required by or with respect to NorAm or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by NorAm or
the consummation by NorAm of the transactions contemplated hereby, as to
which the failure to obtain or make would have a Material Adverse
Effect, except for: (A) the filing of a premerger notification report by
NorAm under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the expiration or termination of the
applicable waiting period with respect thereto; (B) the filing with the
SEC of (x) a joint proxy statement in preliminary and definitive form
relating to the meeting of NorAm's stockholders to be held in connection
with the NorAm Merger and the meeting of HII's shareholders to be held
in connection with the Mergers (the "Joint Proxy Statement") and (y)
such reports under Section 13(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and such other compliance with the
Exchange Act and the rules and regulations thereunder, as may be
required in connection with this Agreement and the transactions
contemplated hereby; (C) the filing of the NorAm Merger Certificate of
Merger with the Secretary of State of the State of Delaware; (D) filings
with, and the approval of, or notices to, the Arkansas Public Service
Commission, the Louisiana Public Service Commission, the Minnesota
Public Utilities Commission, the Oklahoma Corporation Commission and the
Mississippi Public Service Commission; (E) filings with, and the
approval of, or notices to, the Federal Energy Regulatory Commission
(the "FERC") in connection with the transfer of NorAm Energy Services,
Inc.'s power marketing certificate; (F) such filings and approvals as
are set forth on Section 3.1(c)(iii) of the NorAm Disclosure Schedule in
connection with the transfer of NorAm's municipal franchises; (G) such
filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws or environmental laws; and (H)
such filings and approvals as may be required by any foreign premerger
notification, securities, corporate or other law, rule or regulation.
(d) SEC Documents. NorAm has made available to HL&P a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by NorAm with the SEC since January 1,
1994 and prior to the date of this Agreement (the "NorAm SEC Documents")
which are all the documents (other than preliminary material) that NorAm
was required to file with the SEC since such date. As of their respective
dates, the NorAm SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such NorAm SEC Documents,
and none of the NorAm SEC Documents contained any untrue statement of a
material fact or omitted 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 financial
statements of NorAm included in the NorAm SEC Documents complied as to form
in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which will be
material) the consolidated financial position of NorAm and its consolidated
Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of NorAm and its consolidated
Subsidiaries for the periods presented therein. Except as disclosed in the
NorAm SEC Documents, there are no agreements, arrangements or
understandings between NorAm and any party who is at the date of this
Agreement or was at any time prior to the date hereof but after January 1,
1994 an Affiliate (as defined in Section 4.1(k)) of NorAm that are required
to be disclosed in the NorAm SEC Documents.
(e) Information Supplied. None of the information supplied or to be
supplied by NorAm for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by HL&P in
connection with the issuance of shares of HL&P Common Stock in the Mergers
(the "S-4") will, at the time the S-4 becomes effective under the
Securities Act or at the Effective Time, 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
none of the information supplied
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or to be supplied by NorAm and included or incorporated by reference in the
Joint Proxy Statement will, at the date mailed to stockholders of NorAm and
the shareholders of HII or at the time of the meeting of such stockholders
or shareholders to be held in connection with the Mergers or at the
Effective Time, 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. If at any time prior to the Effective Time
any event with respect to NorAm or any of its Subsidiaries, or with respect
to other information supplied by NorAm for inclusion in the Joint Proxy
Statement or the S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Joint Proxy Statement or the S-4,
such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of NorAm. The Joint Proxy Statement, insofar as it relates to
NorAm or its Subsidiaries or other information supplied by NorAm for
inclusion therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the NorAm SEC Documents,
or except as contemplated by this Agreement, since December 31, 1995, there
has not been: (i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to
any of NorAm's capital stock, except for regular quarterly cash dividends
of $.07 per share on NorAm Common Stock (or a pro rata amount for any
dividend less than a full quarter) with usual record and payment dates for
such dividends; (ii) any amendment of any material term of any outstanding
equity security of NorAm or any Subsidiary of NorAm; (iii) any repurchase,
redemption or other acquisition by NorAm or any Subsidiary of NorAm of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, NorAm or any Subsidiary of NorAm, except as
contemplated by any NorAm Benefit Plans (as defined in Section 3.1(l)) and
except for the exchange of NorAm's Series A Preferred Stock for NorAm
Convertible Debentures; (iv) any material change in any method of
accounting or accounting practice by NorAm or any Significant Subsidiary of
NorAm; or (v) any other transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) that could have a Material Adverse Effect on
NorAm, except for general economic changes and changes that may affect the
industries of NorAm or any of its Subsidiaries generally.
(g) No Undisclosed Material Liabilities. Except as disclosed in the
NorAm SEC Documents, as of the date hereof, there are no liabilities of
NorAm or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, that are
reasonably likely to have a Material Adverse Effect on NorAm, other than:
(i) liabilities adequately provided for on the balance sheet of NorAm dated
as of March 31, 1996 (including the notes thereto) contained in NorAm's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; and
(ii) liabilities under this Agreement.
(h) No Default. Neither NorAm nor any of its Subsidiaries is in
default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any
term, condition or provision of (i) their respective charter, bylaws or
respective formation documentation, (ii) any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which
NorAm or any of its Subsidiaries is now a party or by which NorAm or any of
its Subsidiaries or any of their respective properties or assets may be
bound (except for the requirement under certain of such instruments to file
supplemental indentures as a result of the transactions contemplated
hereby) or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to NorAm or any of its Subsidiaries, except in the
case of (ii) and (iii) for defaults or violations which in the aggregate
would not have a Material Adverse Effect on NorAm.
(i) Compliance with Applicable Laws. NorAm and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "NorAm Permits"), except where the failure
so to hold would not have a Material Adverse Effect on NorAm. NorAm and its
Subsidiaries are in compliance
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with the terms of the NorAm Permits, except where the failure so to comply
would not have a Material Adverse Effect on NorAm. Except as disclosed in
the NorAm SEC Documents, the businesses of NorAm and its Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on NorAm. As of the date of this Agreement, neither
NorAm nor any of its Subsidiaries has been notified of any pending
investigation or review by any Governmental Entity or, to the best
knowledge of NorAm, no investigation or review by any Governmental Entity
with respect to NorAm or any of its Subsidiaries is threatened, other than
those the outcome of which would not have a Material Adverse Effect on
NorAm.
(j) Litigation. Except as disclosed in the NorAm SEC Documents, there
is no suit, action or proceeding pending, or, to the best knowledge of
NorAm, threatened against or affecting NorAm or any Subsidiary of NorAm
("NorAm Litigation"), and NorAm and its Subsidiaries have no knowledge of
any facts that are likely to give rise to any NorAm Litigation, that (in
any case) is reasonably likely to have a Material Adverse Effect on NorAm,
nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against NorAm or any
Subsidiary of NorAm ("NorAm Order") that is reasonably likely to have a
Material Adverse Effect on NorAm or its ability to consummate the
transactions contemplated by this Agreement.
(k) Taxes. Except as would not, individually or in the aggregate, have
a Material Adverse Effect on NorAm:
(i) Each of NorAm, each of its Subsidiaries and any affiliated,
combined or unitary group of which any such corporation is or was a
member has (A) timely (taking into account any extensions) filed all
federal income tax and all other material federal and all material
state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed or
sent by or with respect to it in respect of any Taxes (as hereinafter
defined), (B) timely paid all Taxes that are due and payable (except for
audit adjustments not material in the aggregate or to the extent that
liability therefor is reserved for in NorAm's most recent audited
financial statements) for which NorAm or any of its Subsidiaries may be
liable, (C) established reserves that are adequate for the payment of
all Taxes not yet due and payable with respect to the results of
operations of NorAm and its Subsidiaries through the date hereof and (D)
to the knowledge of NorAm or any Subsidiary of NorAm, complied in all
material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and has in all material
respects timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over.
(ii) Section 3.1(k)(ii) of the NorAm Disclosure Schedule sets forth
the last taxable period through which the federal income tax Returns of
NorAm and any of its Subsidiaries have been examined by the Internal
Revenue Service ("IRS") or otherwise closed. Except to the extent being
contested in good faith, all material deficiencies asserted as a result
of such examinations and any examination by any applicable state or
local taxing authority have been paid, fully settled or adequately
provided for in NorAm's most recent audited financial statements. Except
as adequately provided for in the NorAm SEC Documents, no material
federal, state or local income or franchise tax audits or other
administrative proceedings or court proceedings are presently pending
with regard to any federal, state or local income or franchise Taxes for
which NorAm or any of its Subsidiaries would be liable, and no material
deficiency for any such income or franchise Taxes has been proposed,
asserted or assessed pursuant to such examination against NorAm or any
of its Subsidiaries by any federal, state or local taxing authority with
respect to any period.
(iii) Neither NorAm nor any of its Subsidiaries has executed or
entered into (or prior to the close of business on the Closing Date will
execute or enter into) with the IRS or any taxing authority (A) any
agreement or other document extending or having the effect of extending
the period for assessments or collection of any federal, state or local
income or franchise Taxes for which NorAm or any of its Subsidiaries
would be liable or (B) a closing agreement pursuant to Section 7121 of
the
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Code, or any predecessor provision thereof or any similar provision of
state or local income tax law that relates to the assets or operations
of NorAm or any of its Subsidiaries.
(iv) Neither NorAm nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such
term is defined in Section 341(f)(4) of the Code) owned by NorAm or any
of its Subsidiaries.
(v) Except as set forth in the NorAm SEC Documents, neither NorAm
nor any of its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing agreement or similar agreement or
arrangement.
For purposes of this Agreement, "Taxes" shall mean 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, charges, fees, levies or other
assessments, and any expenses incurred in connection with the
determination, settlement or litigation of any liability for any of the
foregoing.
(l) Employee Matters; ERISA.
(i) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(A) "NorAm Affiliate" means any Subsidiary of NorAm, and any other
trade or business, whether or not incorporated, that is under
common control, or treated as a single employer, with NorAm under
Section 414(b), (c), (m) or (o) of the Code;
(B) "NorAm Benefit Plan" means each benefit plan, program, policy,
contract or arrangement described in subsections
3.1(l)(ii)(A)(1), (2) and (3) below (whether or not terminated);
(C) "NorAm Pension Benefit Plan" means each "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) subject to
Title IV of ERISA or the minimum funding requirements of Section
302 of ERISA that is or was maintained or contributed to by NorAm
or any NorAm Affiliate at any time during the six calendar year
period immediately preceding the date hereof;
(D) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended;
(E) "PBGC" means the Pension Benefit Guaranty Corporation; and
(F) "Reportable Event" means an event constituting a "reportable
event" within the meaning of Section 4043(c) of ERISA for which
the 30-day notice requirement or penalty has not been waived by
the PBGC.
(ii) Benefit Plans.
(A) Section 3.1(l)(ii)(A) of the NorAm Disclosure Schedule contains a
true and complete list, as of the date hereof, of each item
described below, whether formal or informal, written or
unwritten, legally binding or not:
(1) each "employee benefit plan" within the meaning of Section
3(3) of ERISA that is or was maintained or contributed to at
any time during the six calendar year period immediately
preceding the date hereof by NorAm or any NorAm Affiliate and
each similar plan, program, policy or arrangement maintained
for non-employee directors or other non-employees who have
provided services to NorAm or any NorAm Affiliate;
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(2) each plan, program, policy, payroll practice or arrangement
not listed in (1) above that provides for bonuses,
profit-sharing, incentive compensation, deferred
compensation, equity-based compensation (including stock
options or other stock purchases, restricted stock, stock
appreciation rights, performance units and dividend
equivalents), holiday pay, vacation pay, sick pay, dependent
care benefits, flexible benefits (including any cafeteria
plan governed by Section 125 of the Code), paid or unpaid
leave (including sick leave, parental leave, military leave
and bereavement leave), tuition assistance, relocation or any
similar type of benefits, that has been adopted or
implemented by NorAm or any NorAm Affiliate (including any
such plan, program, policy or arrangement that has been
terminated before the date hereof, if NorAm or any NorAm
Affiliate could have statutory or contractual liability with
respect to the arrangement on or after the date hereof); and
(3) each employment contract, severance contract, parachute
agreement, option agreement, stock appreciation right
agreement, bonus or other incentive award agreement, deferred
compensation agreement, supplemental benefit agreement, split
dollar agreement or other personal service or benefit
contract or arrangement with or covering a current or former
officer, director, employee or independent contractor of
NorAm or any NorAm Affiliate.
(B) With respect to each NorAm Benefit Plan, Section 3.1(l)(ii)(B) of
the NorAm Disclosure Schedule fully and accurately identifies the
source or sources of benefit payments under the plan (including,
where applicable, the identity of any trust (whether or not a
grantor trust), insurance contract, custodial account, agency
agreement or other arrangement that holds the assets of, or
serves as a funding vehicle or source of benefits for, such NorAm
Benefit Plan).
(iii) Contributions. All material contributions and other material
payments required to have been made by NorAm or any NorAm Affiliate
under Section 412 of the Code or pursuant to any NorAm Benefit Plan (or
to any person pursuant to the terms thereof) have been timely made or
will be timely made in accordance with Section 404(a)(6) of the Code and
all such amounts properly accrued through the date of this Agreement
have been reflected in the financial statements of NorAm included in
NorAm's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(iv) Qualification; Compliance.
(A) Each NorAm Benefit Plan that is intended to be "qualified" within
the meaning of Section 401(a) of the Code (1) to the knowledge of
NorAm, currently meets all qualification requirements under the
Code both in form and in operation and (2) has received a
favorable determination letter from the IRS on its qualification
or application for such a determination has been made prior to
the expiration of the applicable remedial amendment period and
NorAm agrees to make such plan amendments as the IRS may require
in order to issue a favorable determination letter.
(B) To the knowledge of NorAm, NorAm and each NorAm Affiliate are in
compliance with, and each NorAm Benefit Plan is and has been
operated in compliance with, all applicable laws, rules and
regulations governing such plan, including, without limitation,
ERISA and the Code, except for violations that could not have a
Material Adverse Effect on NorAm. All amendments and actions
required to bring each of the NorAm Benefit Plans into conformity
with all of the applicable provisions of ERISA and the Code and
other applicable legal requirements have been made or taken
except to the extent that such amendments or actions are not
required by law to be made or taken until a date after the
Effective Time.
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<PAGE> 123
(C) To the knowledge of NorAm, each NorAm Benefit Plan or related
trust that is or was intended to satisfy the requirements of
Section 125, 401(k) or 501(c)(9) of the Code has met and
continues to meet all material requirements under the applicable
section of the Code.
(D) To the knowledge of NorAm, no individual or entity has engaged in
any transaction in connection with which NorAm or any NorAm
Affiliate, or any NorAm Benefit Plan or any trust, trustee or
administrator thereof, could be subject to liability pursuant to
Section 409 or Section 502 of ERISA, or subject to an excise tax
pursuant to Section 4975 of the Code, which could in either case
have a Material Adverse Effect on NorAm.
(E) To the knowledge of NorAm:
(1) no NorAm Benefit Plan is subject to any ongoing audit,
investigation or other administrative proceeding of the IRS,
the Department of Labor or any other Governmental Entity or
is scheduled to be subject to such an audit, investigation or
proceeding; and
(2) no NorAm Benefit Plan is the subject of any pending
application for administrative relief under any voluntary
compliance program of any Governmental Entity (including,
without limitation, the IRS' Voluntary Compliance Resolution
Program or Walk-in Closing Agreement Program, or the
Department of Labor's Delinquent Filer Voluntary Compliance
Program).
(v) Liabilities.
(A) Pension Benefit Plans. With respect to the NorAm Pension Benefit
Plans, individually and in the aggregate, no termination or
partial termination of any NorAm Pension Benefit Plan or other
event has occurred, and, to the knowledge of NorAm, there exists
no condition or set of circumstances that could subject NorAm or
any NorAm Affiliate to any liability arising under the Code,
ERISA or any other applicable law (including, without limitation,
any liability to or under any such plan or to the PBGC, or under
any indemnity agreement to which NorAm or any NorAm Affiliate is
a party), which liability could have a Material Adverse Effect on
NorAm (excluding liability for benefit claims and funding
obligations payable in the ordinary course and liability for PBGC
insurance premiums payable in the ordinary course).
(B) Insurance Policies. With respect to each NorAm Benefit Plan that
is funded wholly or partially through an insurance policy, there
will be no liability of NorAm or any NorAm Affiliate, which could
have a Material Adverse Effect on NorAm, in the nature of a
retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability under such policy and arising
wholly or partially out of events occurring prior to the
Effective Time.
(vi) Welfare Plans. (A) No NorAm Benefit Plan that is a "welfare
plan" (within the meaning of Section 3(1) of ERISA) provides benefits
for any retired or former employees (other than as required pursuant to
Section 601 of ERISA) and (B) to the knowledge of NorAm, no
circumstances exist that could subject NorAm or any NorAm Affiliate to
an excise tax under Section 4976 of the Code.
(vii) Documents Made Available. NorAm has made available to HII a
true and correct copy of each collective bargaining agreement to which
NorAm or any NorAm Affiliate is a party or under which NorAm has
obligations; and, with respect to each NorAm Benefit Plan, NorAm has
made available to HII a true and correct copy of each of the following,
as applicable:
(A) the current plan document (including all amendments adopted since
the most recent restatement) and its most recently prepared
summary plan description and all summaries
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of material modifications prepared since the most recent summary
plan description, and all material employee communications
relating to such plan;
(B) annual reports or Code Section 6039D information returns (IRS
Form 5500 Series), including financial statements, for the last
three years;
(C) all contracts relating to any plan with respect to which NorAm or
any NorAm Affiliate may have any liability, including, without
limitation, each related trust agreement, insurance contract,
service provider contract, subscription or participation
agreement, or investment management agreement (including all
amendments to each such document);
(D) the most recent IRS determination letter or other opinion letter
with respect to the qualified status under Code Section 401(a) of
such plan or under Code Section 501(c)(9) of the related trust;
and
(E) actuarial reports or valuations for the last three years.
(viii) Payments Resulting From Merger. The consummation or
announcement of any transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or further acts
or events) result in any:
(A) payment (whether of severance pay or otherwise) becoming due from
HII, any HII Affiliate (as defined in Section 3.2(l)(i)), NorAm
or any NorAm Affiliate to any current or former officer,
director, employee or independent contractor of NorAm or any
NorAm Affiliate or to the trustee under any "rabbi trust" or
other funding arrangement; or
(B) benefit under any NorAm Benefit Plan being established or
increased or becoming accelerated, vested or payable, except for
a payment or benefit that would have been payable under the same
terms and conditions without regard to the transactions
contemplated by this Agreement.
(ix) Funded Status of Plans. (A) Each NorAm Pension Benefit Plan
has assets that, as of January 1, 1996, have a fair market value equal
to or exceeding the present value of the accrued benefit obligations
thereunder on a termination basis, as of January 1, 1996, based on the
actuarial methods, tables and assumptions theretofore utilized by such
plan's actuary in preparing such plan's most recently prepared FAS 87
actuarial valuation report and provided by NorAm to HII, and NorAm is
not aware of any existing facts or circumstances that would materially
change the funded status of any NorAm Pension Benefit Plan and (B) no
NorAm Pension Benefit Plan has incurred any "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA or Section 412
of the Code).
(x) Multiemployer Plans.
(A) No NorAm Benefit Plan is or was a "multiemployer plan" (within
the meaning of Section 4001(a)(3) of ERISA), a multiple employer
plan described in Section 413(c) of the Code or a "multiple
employer welfare arrangement" (within the meaning of Section
3(40) of ERISA); and none of NorAm or any NorAm Affiliate has
been obligated to contribute to, or otherwise has or has had any
liability with respect to, any multiemployer plan, multiple
employer plan, or multiple employer welfare arrangement.
(B) With respect to any NorAm Benefit Plan that is listed in Section
3.1(l)(x)(A) of the NorAm Disclosure Schedule as a multiemployer
plan, neither NorAm nor any NorAm Affiliate has made or incurred
a "complete withdrawal" or a "partial withdrawal," as such terms
are defined in Sections 4203 and 4205 of ERISA, therefrom at any
time during the six calendar year period immediately preceding
the date of this Agreement and the transactions contemplated by
the Agreement will not, in and of themselves, give rise to such a
"complete withdrawal" or "partial withdrawal."
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(xi) Modification or Termination of Plans. Neither NorAm nor any
NorAm Affiliate is subject to any legal, contractual, equitable or other
obligation (nor have they any formal plan or commitment, whether legally
binding or not) to enter into any form of compensation or employment
agreement or to establish any employee benefit plan of any nature,
including (without limitation) any pension, profit sharing, welfare,
post-retirement welfare, stock option, stock or cash award, non-
qualified deferred compensation or executive compensation plan, policy
or practice or to modify or change any existing NorAm Benefit Plan.
NorAm or one or more NorAm Affiliates have the right to, in any manner,
and without the consent of any employee, beneficiary or dependent,
employees' organization or other person, terminate, modify or amend any
NorAm Benefit Plan (or their participation in any such NorAm Benefit
Plan) at any time sponsored, maintained or contributed to by NorAm or
any NorAm Affiliate, effective as of any date before, on or after the
Effective Time except to the extent that any retroactive amendment would
be prohibited by Section 204(g) of ERISA or would adversely affect a
vested accrued benefit or a previously granted award under any such plan
not subject to Section 204(g) of ERISA.
(xii) Reportable Events; Claims.
(A) No Reportable Event has occurred with respect to any NorAm
Pension Benefit Plan that could have a Material Adverse Effect on
NorAm, and
(B) no liability, claim, action or litigation exists, has been made,
commenced or, to the knowledge of NorAm, threatened, by or
against NorAm or any NorAm Affiliate with respect to any NorAm
Benefit Plan (other than for benefits or PBGC premiums payable in
the ordinary course) that could have a Material Adverse Effect on
NorAm.
(m) Labor Matters. Except as set forth in the NorAm SEC Documents:
(i) neither NorAm nor any of its Subsidiaries is a party to any
collective bargaining agreement or other current labor agreement with
any labor union or organization, and there is no current union
representation question involving employees of NorAm or any of its
Subsidiaries, nor does NorAm or any of its Subsidiaries know of any
activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize any
such employees;
(ii) there is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure
against NorAm or any of its Subsidiaries pending, or, to the knowledge
of NorAm or any of its Subsidiaries, threatened, that has, or could
have, a Material Adverse Effect on NorAm;
(iii) there is no complaint, lawsuit or proceeding in any forum by
or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any
express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship against NorAm or any of its Subsidiaries pending, or, to
the knowledge of NorAm or any of its Subsidiaries, threatened, that has,
or could have, a Material Adverse Effect on NorAm;
(iv) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the knowledge of NorAm or any of its
Subsidiaries, threatened, against or involving NorAm or any of its
Subsidiaries that has, or could have, a Material Adverse Effect on
NorAm;
(v) NorAm and each of its Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational
safety and health, except for non-compliance that does not have, and
could not have, a Material Adverse Effect on NorAm; and
(vi) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of NorAm or any of its
Subsidiaries, threatened, in respect to which any current or
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former director, officer, employee or agent of NorAm or any of its
Subsidiaries is or may be entitled to claim indemnification from NorAm
or any of its Subsidiaries pursuant to their respective charters or
bylaws, as provided in any indemnification agreement to which NorAm or
any Subsidiary of NorAm is a party or pursuant to applicable law that
has, or could have, a Material Adverse Effect on NorAm.
(n) Intangible Property. NorAm and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the
businesses of each of NorAm and its Subsidiaries (collectively, the "NorAm
Intangible Property"), except where the failure to possess or have adequate
rights to use such properties would not reasonably be expected to have a
Material Adverse Effect on NorAm. All of the NorAm Intangible Property is
owned by NorAm or its Subsidiaries free and clear of any and all liens,
claims or encumbrances, except those that are not reasonably likely to have
a Material Adverse Effect on NorAm, and neither NorAm nor any such
Subsidiary has forfeited or otherwise relinquished any NorAm Intangible
Property which forfeiture would result in a Material Adverse Effect. To the
knowledge of NorAm, the use of the NorAm Intangible Property by NorAm or
its Subsidiaries does not, in any material respect, conflict with, infringe
upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark,
brand mark, brand name, computer program, database, industrial design,
copyright or any pending application therefor of any other person and there
have been no claims made and neither NorAm nor any of its Subsidiaries has
received any notice of any claim or otherwise knows that any of the NorAm
Intangible Property is invalid or conflicts with the asserted rights of any
other person or has not been used or enforced or has been failed to be used
or enforced in a manner that would result in the abandonment, cancellation
or unenforceability of any of the NorAm Intangible Property, except for any
such conflict, infringement, violation, interference, claim, invalidity,
abandonment, cancellation or unenforceability that would not reasonably be
expected to have a Material Adverse Effect on NorAm.
(o) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Claims" means, with respect to any person, (x) any
and all administrative, regulatory or judicial actions, suits,
demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of non-compliance or
violation in writing by or from any person or entity (including
any Governmental Entity), or (y) any oral information provided by
a Governmental Entity that written action of the type described
in the foregoing clause is in process, which (in case of either
(x) or (y)) alleges potential liability (including, without
limitation, potential liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or
resulting from (1) the presence, or Release (as hereinafter
defined) or threatened Release into the environment, of any
Hazardous Materials (as hereinafter defined) at any location,
whether or not owned, operated, leased or managed by NorAm or any
of its Subsidiaries (for purposes of Section 3.1(o)) or by HII or
any of its Subsidiaries (for purposes of Section 3.2(o)), (2)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law (as hereinafter defined) or
(3) 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.
(B) "Environmental Laws" means all federal, state and local laws,
rules, regulations and guidances relating to pollution or the
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws and
regulations relating to Releases
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or threatened Releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials.
(C) "Hazardous Materials" means (x) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls, (y) 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" or "toxic pollutants," or
words of similar import, under any Environmental Law and (z) 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 NorAm or any of its Subsidiaries
operates (for purposes of Section 3.1(o)) or in which HII or any
of its Subsidiaries operates (for purposes of Section 3.2(o)).
(D) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, subsurface, surface water, groundwater
or property.
(ii) Compliance.
(A) Except as set forth in the NorAm SEC Documents, NorAm and each of
its Subsidiaries is in compliance with all applicable
Environmental Laws, except where the failure to be so in
compliance would not be reasonably likely to have a Material
Adverse Effect on NorAm.
(B) Except as set forth in the NorAm SEC Documents, neither NorAm nor
any of its Subsidiaries has received any written communication
from any person or Governmental Entity that alleges that NorAm or
any of its Subsidiaries is not in compliance with applicable
Environmental Laws, except where the failure to be so in
compliance would not be reasonably likely to have a Material
Adverse Effect on NorAm.
(iii) Environmental Permits. Except as set forth in the NorAm SEC
Documents, NorAm and each of its Subsidiaries has obtained or applied
for all environmental, health and safety permits and authorizations
(collectively, "Environmental Permits") necessary for the construction
of their facilities and the conduct of their operations, and all such
permits are in good standing or, where applicable, a renewal application
has been timely filed, is pending and agency approval is expected to be
obtained, and NorAm and its Subsidiaries are in compliance with all
terms and conditions of all such Environmental Permits and are not
required to make any expenditure in order to obtain or renew any
Environmental Permits, except where the failure to obtain or be in
compliance with such Environmental Permits and the requirement to make
such expenditures would not be reasonably likely to have a Material
Adverse Effect on NorAm.
(iv) Environmental Claims. Except as set forth in the NorAm SEC
Documents, there is no Environmental Claim pending or, to the knowledge
of NorAm and its Subsidiaries, threatened
(A) against NorAm or any of its Subsidiaries,
(B) against any person or entity whose liability for any
Environmental Claim NorAm or any of its Subsidiaries has retained
or assumed, either contractually or by operation of law, or
(C) against any real or personal property or operations that NorAm or
any of its Subsidiaries owns, leases or manages, in whole or in
part,
that, if adversely determined, would be reasonably likely to have a
Material Adverse Effect on NorAm.
(v) Releases. Except as set forth in the NorAm SEC Documents, and
except for Releases of Hazardous Materials the liability for which would
not be reasonably likely to have a Material
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Adverse Effect on NorAm, NorAm has no knowledge of any Release of any
Hazardous Materials that has occurred on any of the properties owned,
leased or occupied by NorAm or any Subsidiary of NorAm or any
predecessor of NorAm or any Subsidiary of NorAm which requires
investigation, assessment, monitoring, remediation or cleanup under
Environmental Laws.
(vi) Disclosure. NorAm has disclosed to HII all material facts that
NorAm reasonably believes form the basis of a Material Adverse Effect on
NorAm arising from the cost of pollution control equipment currently
required or known to be required in the future, current remediation
costs or remediation costs known to be required in the future, or any
other environmental matter affecting NorAm or its Subsidiaries that
would have a Material Adverse Effect on NorAm.
(p) Insurance. NorAm has delivered to HII an insurance schedule of
NorAm's and each of its Subsidiaries' directors' and officers' liability
insurance, primary and excess casualty insurance policies, providing
coverage for bodily injury and property damage to third parties, including
products liability and completed operations coverage, and worker's
compensation, in effect as of the date hereof. NorAm maintains insurance
coverage as is customary for the business of NorAm and each of its
Subsidiaries (taking into account the cost and availability of such
insurance), and the transactions contemplated hereby will not materially
adversely affect such coverage.
(q) Contracts. Neither NorAm nor any of its Subsidiaries is a party to
(i) any agreement under which it provides natural gas transportation,
gathering, distribution or processing services which provide revenues
(excluding gas costs) in excess of $5,000,000 per year and may be
terminated by the other party within 5 years of the date hereof; (ii) any
gas or power purchase contract which requires NorAm or any of its
Subsidiaries to take and/or pay for minimum contract volumes at prices
which exceed, or are expected to exceed, market prices and, at minimum take
and/or pay levels, in the aggregate would require payment of a premium of
$2,000,000 over the market price in any of the next 5 years; (iii) any gas
purchase contract which requires NorAm or any of its Subsidiaries to take
and/or pay for minimum contract volumes at prices which exceed, or are
expected to exceed, market prices and contain clauses permitting the seller
to commit additional properties or reserves to the contract; (iv) any
agreement relating to prior take or pay payments or to buy-out or buy-down
gas purchase contract obligations which require NorAm or any of its
Subsidiaries to reimburse royalty or severance tax which, in the aggregate,
could require NorAm or any of its Subsidiaries to make future payments
exceeding $2,000,000 per year; (v) any gas sales contract which provides
per year more than 5% of NorAm's or 10% of any of its Subsidiaries'
revenues and which may be terminated by the purchaser within 5 years of the
date hereof; (vi) any gas or power supply, marketing, transportation or
storage contract which provides revenues in excess of $10,000,000 per month
and has a term greater than one year; or (vii) any fixed-price gas or power
supply or marketing contract (other than (A) gas contracts involving a
volume less than 1,000 Mcf per day or (B) gas purchase contracts with a
price less than $2.00 per Mcf), or any swap, hedging or derivative
agreement or instrument, which has a term greater than one year. The
contract summaries which NorAm has provided to HII prior to the date hereof
are accurate and do not omit to include any material terms necessary to
make the summary thereof not misleading in all material respects. All gas
or power contracts which require NorAm or any of its Subsidiaries to take
and/or pay for minimum contract volumes at prices which exceed, or are
expected to exceed, market prices do not, at minimum take and/or pay
levels, require in the aggregate payment of premiums of more than
$10,000,000 per year over the market price in any of the next 5 years.
(r) Regulatory Proceedings. Except as set forth in the NorAm SEC
Documents, neither NorAm nor any of its Subsidiaries all or part of whose
rates or services are regulated by a Governmental Entity has rates which
have been or are being collected subject to refund, pending final
resolution of any proceeding pending before a Governmental Entity or on
appeal to the courts or is a party to any proceeding before the
Governmental Entity or on appeal from orders of the Governmental Entity
which could result in orders having a Material Adverse Effect on NorAm.
(s) Regulation as a Utility.
(i) Neither NorAm nor any of its Subsidiaries is a "holding
company," a "subsidiary company" or an "affiliate" of any public utility
company within the meaning of Section 2(a)(7),
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2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935,
as amended (the "1935 Act"), respectively, and none of the Subsidiaries
of NorAm is a "public utility company" within the meaning of Section
2(a)(5) of the 1935 Act.
(ii) NorAm is regulated as a public utility in the States of Texas,
Arkansas, Minnesota, Louisiana, Oklahoma and Mississippi, and in no
other state. Neither NorAm nor any "subsidiary company" or "affiliate"
(as each such term is defined in the 1935 Act) of NorAm is subject to
regulation as a public utility or public service company (or similar
designation) by any other state in the United States or any foreign
country.
(t) Opinion of Financial Advisor. The Board of Directors of NorAm has
received the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") to the effect that, as of the date on which the Board of
Directors of NorAm approved this Agreement, the Merger Consideration to be
received by the holders of NorAm Common Stock pursuant to this Agreement is
fair from a financial point of view to such holders.
(u) Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of NorAm Common Stock is the only vote of the
holders of any class or series of capital stock of NorAm necessary to
approve this Agreement, the NorAm Merger and the other transactions
contemplated hereby.
(v) Beneficial Ownership of HII Common Stock. As of the date hereof,
assuming the accuracy of the representation set forth in Section 3.2(b),
neither NorAm nor its Subsidiaries "beneficially owns" (as defined in Rule
13d-3 under the Exchange Act) any outstanding shares of HII Common Stock.
(w) Brokers. Except for the fees and expenses payable to Merrill
Lynch, which fees are reflected in its agreement with NorAm (a copy of
which has been delivered to HII), no broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of NorAm.
(x) Article Fifth of NorAm Restated Certificate of Incorporation and
Section 203 of the DGCL Not Applicable. Neither the provisions of Article
Fifth of NorAm's Restated Certificate of Incorporation nor the provisions
of Section 203 of the DGCL will, prior to the consummation of this
Agreement, assuming the accuracy of the representation contained in Section
3.2(s), apply to this Agreement, the NorAm Merger or the other transactions
contemplated hereby.
(y) Change in Control Provisions. The Board of Directors of NorAm has
taken all actions necessary to render inapplicable to the Mergers (and the
Alternative Merger and the Second Alternative Merger) and the other
transactions contemplated by this Agreement the repurchase rights afforded
to holders of NorAm's 10% Debentures due 2019 (the "NorAm 10% Debentures")
or to the holders of or trustees under indentures relating to any other
indebtedness of NorAm or any of its Subsidiaries in the event of a "change
in control" as defined in the indenture governing the NorAm 10% Debentures
or similar provisions contained in such other indentures or in any other
debt agreements of NorAm or any of its Subsidiaries, as the case may be.
3.2 Representations and Warranties of HL&P and HII. HL&P and HII, jointly
and severally, represent and warrant to NorAm as follows, except as set forth in
the disclosure schedule dated as of the date hereof and signed by an authorized
officer of each of HL&P and HII and delivered to NorAm by HL&P and HII on or
prior to the date hereof (the "HII Disclosure Schedule"), each of which
exceptions shall specifically identify the relevant Section hereof to which it
relates:
(a) Organization, Standing and Power. Each of HL&P and HII is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify would not
have a Material Adverse Effect
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on HII. HL&P and HII have each heretofore delivered to NorAm complete and
correct copies of their respective Restated Articles of Incorporation and
Bylaws.
(b) Capital Structure.
(i) As of the date hereof, the authorized capital stock of HL&P
consists of 1,000 shares of HL&P Class A Common Stock, 100 shares of
HL&P Class B Common Stock and 10,000,000 shares of Cumulative Preferred
Stock, no par value, of HL&P (the "HL&P Preferred Stock"). At the close
of business on July 31, 1996: (A) 1,000 shares of HL&P Class A Common
Stock were issued and outstanding; (B) 100 shares of HL&P Class B Common
Stock were issued and outstanding; (C) 3,804,397 shares of HL&P
Preferred Stock were issued and outstanding; and (D) no Voting Debt of
HL&P was outstanding. All outstanding shares of HL&P capital stock are,
and the shares of HL&P Common Stock when issued in accordance with this
Agreement, and upon exercise of the HII Stock Options and the NorAm
Stock Options to be assumed by HL&P pursuant to this Agreement, will be,
validly issued, fully paid and nonassessable and not subject to
preemptive rights. HL&P has no Subsidiaries. Except as set forth above,
there are outstanding: (A) no shares of capital stock, Voting Debt or
other voting securities of HL&P; (B) no securities of HL&P convertible
into or exchangeable for shares of capital stock, Voting Debt or other
voting securities of HL&P; and (C) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which HL&P
is a party or by which it is bound in any case obligating HL&P to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of
capital stock, Voting Debt or other voting securities of HL&P or
obligating HL&P to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. There are not as of the date
hereof and there will not be at the Effective Time any stockholder
agreements, voting trusts or other agreements or understandings to which
HL&P is a party or by which it is bound relating to the voting of any
shares of the capital stock of HL&P.
(ii) As of the date hereof, the authorized capital stock of HII
consists of 400,000,000 shares of HII Common Stock and 10,000,000 shares
of Cumulative Preferred Stock, no par value, of HII (the "HII Preferred
Stock"). At the close of business on July 31, 1996, (A) 261,352,547
shares of HII Common Stock were issued and outstanding and not more than
46,098,546 shares of HII Common Stock were reserved for issuance
pursuant to HII's:
<TABLE>
<S> <C>
Long-Term Incentive Compensation Plan.......................... 630,375
1994 Long-Term Incentive Compensation Plan..................... 3,999,362
Stock Benefit Plan............................................. 189,804
Stock Plan for Outside Directors............................... 94,500
Houston Industries Energy, Inc. Long-Term Project Incentive
Compensation Plan............................................ 470,650
Savings Plan................................................... 33,162,041
Investor's Choice Plan......................................... 7,551,814
</TABLE>
(collectively, the "HII Stock Plans"); (B) 1,395,900 shares of HII
Common Stock were held by HII in its treasury or by its wholly owned
Subsidiaries; (C) no shares of HII Preferred Stock are issued and
outstanding and 2,000,000 shares of HII Series A Preference Stock were
reserved for issuance in connection with the HII Stock Purchase Rights;
and (D) no Voting Debt of HII was outstanding. All outstanding shares of
HII capital stock are validly issued, fully paid and nonassessable and
not subject to preemptive rights. All outstanding shares of capital
stock of the Subsidiaries of HII are owned by HII or a direct or
indirect wholly owned Subsidiary of HII, free and clear of all liens,
charges, encumbrances, claims and options of any nature. Except as set
forth above and except for changes since July 31, 1996 resulting from
the exercise of employee stock options granted pursuant to, or from
issuances or purchases under, the HII Stock Plans, or as contemplated by
this Agreement, there are outstanding: (A) no shares of capital stock,
Voting Debt or other voting securities of HII; (B) no securities of HII
or any Subsidiary of HII convertible into or exchangeable for shares of
capital stock, Voting Debt or other voting securities of HII or any
Subsidiary of HII;
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and (C) no options, warrants, calls, rights (including preemptive
rights), commitments or agreements to which HII or any Subsidiary of HII
is a party or by which it is bound in any case obligating HII or any
Subsidiary of HII to issue, deliver, sell, purchase, redeem or acquire,
or cause to be issued, delivered, sold, purchased, redeemed or acquired,
additional shares of capital stock or any Voting Debt or other voting
securities of HII or of any Subsidiary of HII or obligating HII or any
Subsidiary of HII to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are not as of the
date hereof and there will not be at the HII/HL&P Merger Effective Time
any stockholder agreements, voting trusts or other agreements or
understandings to which HII is a party or by which it is bound relating
to the voting of any shares of the capital stock of HII.
(c) Authority; No Violations; Consents and Approvals.
(i) Each of HL&P and HII has all requisite corporate power and
authority to enter into this Agreement and, subject, with respect to
consummation of the Mergers, to approval of this Agreement and the
issuance of the HL&P Common Stock pursuant to the Mergers (collectively,
the "HII Vote Matter") by the shareholders of HII in accordance with the
TBCA and the NYSE listing requirements, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, including, but
not limited to, the issuance of the HL&P Common Stock pursuant to the
Mergers, have been duly authorized by all necessary corporate action on
the part of HL&P and HII, subject, with respect to consummation of the
Mergers, to approval of the HII Vote Matter by the shareholders of HII
in accordance with the TBCA and NYSE listing requirements. This
Agreement has been duly executed and delivered by HL&P and HII and,
subject, with respect to consummation of the Mergers, to approval of the
HII Vote Matter by the shareholders of HII in accordance with the TBCA
and NYSE listing requirements, and assuming this Agreement constitutes
the valid and binding obligation of NorAm, constitutes a valid and
binding obligation of HL&P and HII enforceable in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(ii) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of HII or any of its
Subsidiaries under, any provision of (A) the Restated Articles of
Incorporation or Bylaws of HII or any provision of the comparable
charter or organizational documents of any of its Subsidiaries, (B)
subject to obtaining the third-party consents set forth in Section
3.2(c)(ii) of the HII Disclosure Schedule (the "HII Required Consents"),
any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to HII or any of its Subsidiaries or (C) assuming the
consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.2(c)(iii) are duly and timely
obtained or made and the approval of the HII Vote Matter by the
shareholders of HII has been obtained, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to HII or any of
its Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (B) or (C), any such conflicts, violations,
defaults, rights, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not have a Material
Adverse Effect on HII, materially impair the ability of HII or HL&P to
perform its obligations hereunder or thereunder or prevent the
consummation of any of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to HII or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by HII or HL&P, or
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<PAGE> 132
the consummation by HII or HL&P of the transactions contemplated hereby,
as to which the failure to obtain or make would have a Material Adverse
Effect on HII, except for: (A) the filing of a premerger notification
report by HII under the HSR Act and the expiration or termination of the
applicable waiting period with respect thereto; (B) the filing with the
SEC of the Joint Proxy Statement, the S-4, such reports under Section
13(a) of the Exchange Act and such other compliance with the Securities
Act and the Exchange Act and the rules and regulations thereunder as may
be required in connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of such orders as
may be so required; (C) the filing with the SEC of a Form U-1 requesting
an order from the SEC granting the HII/HL&P Merger Surviving Corporation
an exemption under section 3(a)(2) of the 1935 Act and/or a Form U-3A-2
under the 1935 Act (unless the Alternative Merger or the Second
Alternative Merger, as the case may be, is effected in lieu of the
Mergers); (D) the filing of the HII/HL&P Merger Articles of Merger with
the Secretary of State of the State of Texas and the NorAm Merger
Certificate of Merger with the Secretary of State of the State of
Delaware; (E) filings with, and approval of, the NYSE; (F) such filings
and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws or environmental laws; and (G) such filings
and approvals as may be required by any foreign premerger notification,
securities, corporate or other law, rule or regulation.
(d) SEC Documents. Each of HL&P and HII has made available to NorAm a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by HL&P and HII, as the case may be, with
the SEC since January 1, 1994 and prior to the date of this Agreement (the
"HL&P SEC Documents" and the "HII SEC Documents," respectively) which are
all the documents (other than preliminary material) that HL&P or HII have
been required to file with the SEC since such date. As of their respective
dates, the HL&P SEC Documents and the HII SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such HL&P SEC Documents and HII SEC Documents, and
none of the HL&P SEC Documents or the HII SEC Documents contained any
untrue statement of a material fact or omitted 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 financial statements of HL&P contained in the HL&P SEC Documents and
the financial statements of HII included in the HII SEC Documents complied
as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and
fairly present in accordance with applicable requirements of GAAP (subject,
in the case of the unaudited statements, to normal, recurring adjustments,
none of which will be material) (x) the financial position of HL&P as of
their respective dates and the results of operations and the cash flows of
HL&P for the periods presented therein or (y) the consolidated financial
position of HII and its consolidated Subsidiaries as of their respective
dates and the consolidated results of operations and the consolidated cash
flows of HII and its consolidated Subsidiaries for the periods presented
therein, respectively.
(e) Information Supplied. None of the information supplied or to be
supplied by HL&P or HII for inclusion or incorporation by reference in the
S-4 will, at the time the S-4 becomes effective under the Securities Act or
at the Effective Time, 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 none of the information
supplied or to be supplied by HL&P or HII and included or incorporated by
reference in the Joint Proxy Statement will, at the date mailed to the
shareholders of HII and the stockholders of NorAm or at the time of the
meetings of such shareholders and stockholders to be held in connection
with the Mergers or at the relevant Effective Time, 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. If at
any time prior to the relevant Effective Time any event with respect to HII
or any of its Subsidiaries, or with respect to other information supplied
by HL&P or HII for inclusion in the Joint Proxy Statement or
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S-4, shall occur which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement or the S-4, such event shall be so
described, and such amendment or supplement shall be promptly filed with
the SEC. The Joint Proxy Statement, insofar as it relates to HII or the
Subsidiaries of HII or other information supplied by HL&P or HII for
inclusion therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the HL&P SEC Documents
or the HII SEC Documents, or except as contemplated by this Agreement,
since December 31, 1995, there has not been: (i) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to (x) any shares of HII's capital stock,
except for regular quarterly cash dividends of $.375 per share on HII
Common Stock (or a pro rata amount for any dividend less than a full
quarter) with usual record and payment dates for such dividends or (y) any
shares of HL&P Preferred Stock, except for regular cash dividends pursuant
to the terms of such series of HL&P Preferred Stock (or a pro rata amount
for any dividend less than a full dividend payment period) with usual
record and payment dates for such dividends or (z) any shares of HL&P Class
A Common Stock and HL&P Class B Common Stock; (ii) any amendment of any
material term of any outstanding equity security of HII or any Subsidiary
of HII; (iii) any repurchase, redemption or other acquisition by HII or any
Subsidiary of HII of any outstanding shares of capital stock or other
equity securities of, or other ownership interests in, HII or any
Subsidiary of HII, except pursuant to HII's previously publicly-announced
HII Common Stock repurchase program (the "HII Common Stock Repurchase
Program") or as contemplated by the HII Stock Plans; (iv) any material
change in any method of accounting or accounting practice by HII or any
Significant Subsidiary of HII; or (v) any other transaction, commitment,
dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) that could
have a Material Adverse Effect on HII, except for general economic changes
and changes that may affect the industries of HII or any of its
Subsidiaries generally.
(g) No Undisclosed Material Liabilities. As of the date hereof, there
are no liabilities of HII or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, that are reasonably likely to have a Material Adverse Effect
on HII, other than: (i) liabilities adequately provided for on the balance
sheet of HII dated as of March 31, 1996 (including the notes thereto)
contained in HII's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; and (ii) liabilities under this Agreement.
(h) No Default. Neither HII nor any of its Subsidiaries is in default
or violation (and no event has occurred which, with notice or the lapse of
time or both, would constitute a default or violation) of any term,
condition or provision of (i) their respective charter and bylaws, (ii) any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which HII or any of its Subsidiaries is now a party or by
which HII or any of its Subsidiaries or any of their respective properties
or assets may be bound (except for the requirement under certain of such
instruments to file supplemental indentures as a result of the transactions
contemplated hereby) or (iii) any order, writ, injunction, decree, statute,
rule or regulation applicable to HII or any of its Subsidiaries, except in
the case of (ii) and (iii) for defaults or violations which in the
aggregate would not have a Material Adverse Effect on HII.
(i) Compliance with Applicable Laws. HII and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders, franchises and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "HII Permits"), except where the failure so to
hold would not have a Material Adverse Effect on HII. HII and its
Subsidiaries are in compliance with the terms of the HII Permits, except
where the failure so to comply would not have a Material Adverse Effect on
HII. Except as disclosed in the HL&P SEC Documents or the HII SEC
Documents, the businesses of HII and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on HII. As of the date of this Agreement, no
investigation or review by any Governmental Entity with
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respect to HII or any of its Subsidiaries is pending or, to the best
knowledge of HII, threatened, other than those the outcome of which would
not have a Material Adverse Effect on HII.
(j) Litigation. Except as disclosed in the HL&P SEC Documents or the
HII SEC Documents, there is no suit, action or proceeding pending, or, to
the best knowledge of HII, threatened against or affecting HII or any
Subsidiary of HII ("HII Litigation"), and HII and its Subsidiaries have no
knowledge of any facts that are likely to give rise to any HII Litigation,
that (in any case) is reasonably likely to have a Material Adverse Effect
on HII, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against HII or any Subsidiary
of HII ("HII Order") that is reasonably likely to have a Material Adverse
Effect on HII or its or HL&P's ability to consummate the transactions
contemplated by this Agreement.
(k) Taxes. Except as would not, individually or in the aggregate, have
a Material Adverse Effect on HII:
(i) Each of HII, each of its Subsidiaries and any affiliated,
combined or unitary group of which any such corporation is or was a
member has (A) timely filed all federal income tax and all other
material federal and all material state, local and foreign Returns
required to be filed or sent by or with respect to it in respect of any
Taxes, (B) timely paid all Taxes that are due and payable (except for
audit adjustments not material in the aggregate or to the extent that
liability therefor is reserved for in HII's most recent audited
financial statements) for which HII or any of its Subsidiaries may be
liable, (C) established reserves that are adequate for the payment of
all Taxes not yet due and payable with respect to the results of
operations of HII and its Subsidiaries through the date hereof and (D)
to the knowledge of HII or any Subsidiary of HII, complied in all
material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes, and has in all
material respects timely withheld from employee wages and paid over to
the proper governmental authorities all amounts required to be so
withheld and paid over.
(ii) Section 3.2(k)(ii) of the HII Disclosure Schedule sets forth
the last taxable period through which the federal income tax Returns of
HII and any of its Subsidiaries have been examined by the IRS or
otherwise closed. Except to the extent being contested in good faith,
all deficiencies asserted as a result of such examinations and any
examination by any applicable state or local taxing authority have been
paid, fully settled or adequately provided for in HII's most recent
audited financial statements. Except as adequately provided for in the
HL&P SEC Documents or the HII SEC Documents, as the case may be, no
material federal, state or local income or franchise tax audits or other
administrative proceedings or court proceedings are presently pending
with regard to any federal, state or local income or franchise Taxes for
which HII or any of its Subsidiaries would be liable, and no material
deficiency for any such income or franchise Taxes has been proposed,
asserted or assessed pursuant to such examination against HII or any of
its Subsidiaries by any federal, state or local taxing authority with
respect to any period.
(iii) Neither HII nor any of its Subsidiaries has executed or
entered into (or prior to the close of business on the Closing Date will
execute or enter into) with the IRS or any taxing authority (A) any
agreement or other document extending or having the effect of extending
the period for assessments or collection of any federal, state or local
income or franchise Taxes for which HII or any of its Subsidiaries would
be liable or (B) a closing agreement pursuant to Section 7121 of the
Code, or any predecessor provision thereof or any similar provision of
state or local income tax law that relates to the assets or operations
of HII or any of its Subsidiaries.
(iv) Neither HII nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such
term is defined in Section 341(f)(4) of the Code) owned by HII or any of
its Subsidiaries.
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(v) Except as set forth in the HL&P SEC Documents or the HII SEC
Documents, as the case may be, neither HII nor any of its Subsidiaries
is a party to, is bound by or has any obligation under any tax sharing
agreement or similar agreement or arrangement.
(l) Employee Matters; ERISA.
(i) For purposes of this Agreement, "HII Benefit Plan" means:
(A) each "employee benefit plan" within the meaning of Section 3(3)
of ERISA that is or was maintained or contributed to at any time
during the six calendar year period immediately preceding the
date hereof by HII or any HII Affiliate and each similar plan,
program, policy or arrangement maintained for non-employee
directors or other non-employees who have provided services to
HII or any HII Affiliate;
(B) each plan, program, policy, payroll practice or arrangement not
listed in (A) above that provides for bonuses, profit-sharing,
incentive compensation, deferred compensation, equity-based
compensation (including stock options or other stock purchases,
restricted stock, stock appreciation rights, performance units
and dividend equivalents), holiday pay, vacation pay, sick pay,
dependent care benefits, flexible benefits (including any
cafeteria plan governed by Section 125 of the Code), paid or
unpaid leave (including sick leave, parental leave, military
leave and bereavement leave), tuition assistance, relocation or
any similar type of benefits, that has been adopted or
implemented by HII or any HII Affiliate (including any such plan,
program, policy or arrangement that has been terminated before
the date hereof, if HII or any HII Affiliate could have statutory
or contractual liability with respect to the arrangement on or
after the date hereof);
(C) each employment contract, severance contract, parachute
agreement, option agreement, stock appreciation right agreement,
bonus or other incentive award agreement, deferred compensation
agreement, supplemental benefit agreement, split dollar agreement
or other personal service or benefit contract or arrangement with
or covering a current or former officer, director, employee or
independent contractor of HII or any HII Affiliate.
(ii) For purposes of this Agreement, "HII Pension Benefit Plan"
means each "employee pension benefit plan" (within the meanings of
Section 3(2) of ERISA) subject to Title IV of ERISA or the minimum
funding requirements of Section 302 of ERISA that is or was maintained
or contributed to by HII or any HII Affiliate at any time during the six
calendar year period immediately preceding the date hereof, and "HII
Affiliate" means any trade or business, whether or not incorporated,
that is under common control, or treated as a single employer, with HII
under Section 414(b), (c), (m) or (o) of the Code.
(iii) Contributions. All material contributions and other material
payments required to have been made by HII or any HII Affiliate under
Section 412 of the Code or pursuant to any HII Benefit Plan (or to any
person pursuant to the terms thereof) have been timely made or will be
timely made in accordance with Section 404(a)(6) of the Code and all
such amounts properly accrued through the date of this Agreement have
been reflected in the financial statements of HII included in HII's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
(iv) Qualification; Compliance.
(A) Each HII Benefit Plan that is intended to be "qualified" within
the meaning of Section 401(a) of the Code (1) to the knowledge of
HII, currently meets all qualification requirements under the
Code both in form and in operation and (2) has received a
favorable determination letter from the IRS on its qualification
or application for such a determination has been made prior to
the expiration of the applicable remedial amendment period and
HII agrees to make such plan amendments as the IRS may require in
order to issue a favorable determination letter.
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(B) To the knowledge of HII, HII and each HII Affiliate are in
compliance with, and each HII Benefit Plan is and has been
operated in compliance with, all applicable laws, rules and
regulations governing such plan, including, without limitation,
ERISA and the Code, except for violations that could not have a
Material Adverse Effect on HII. All amendments and actions
required to bring each of the HII Benefit Plans into conformity
with all of the applicable provisions of ERISA and the Code and
other applicable legal requirements have been made or taken
except to the extent that such amendments or actions are not
required by law to be made or taken until a date after the
Effective Time.
(C) To the knowledge of HII, each HII Benefit Plan or related trust
that is or was intended to satisfy the requirements of Section
125, 401(k) or 501(c)(9) of the Code has met and continues to
meet all material requirements under the applicable section of
the Code.
(D) To the knowledge of HII, no individual or entity has engaged in
any transaction in connection with which HII or any HII
Affiliate, or any HII Benefit Plan or any trust, trustee or
administrator thereof, could be subject to liability pursuant to
Section 409 or Section 502 of ERISA, or subject to an excise tax
pursuant to Section 4975 of the Code, which could in either case
have a Material Adverse Effect on HII.
(E) To the knowledge of HII:
(1) no HII Benefit Plan is subject to any ongoing audit,
investigation or other administrative proceeding of the IRS,
the Department of Labor or any other Governmental Entity or
is scheduled to be subject to such an audit, investigation or
proceeding; and
(2) no HII Benefit Plan is the subject of any pending application
for administrative relief under any voluntary compliance
program of any Governmental Entity (including, without
limitation, the IRS' Voluntary Compliance Resolution Program
or Walk-in Closing Agreement Program, or the Department of
Labor's Delinquent Filer Voluntary Compliance Program).
(v) Liabilities.
(A) Pension Benefit Plans. With respect to the HII Pension Benefit
Plans, individually and in the aggregate, no termination or
partial termination of any HII Pension Benefit Plan or other
event has occurred, and, to the knowledge of HII, there exists no
condition or set of circumstances that could subject HII or any
HII Affiliate to any liability arising under the Code, ERISA or
any other applicable law (including, without limitation, any
liability to or under any such plan or to the PBGC, or under any
indemnity agreement to which HII or any HII Affiliate is a
party), which liability could have a Material Adverse Effect on
HII (excluding liability for benefit claims and funding
obligations payable in the ordinary course and liability for PBGC
insurance premiums payable in the ordinary course).
(B) Insurance Policies. With respect to each HII Benefit Plan that is
funded wholly or partially through an insurance policy, there
will be no liability of HII or any HII Affiliate, which could
have a Material Adverse Effect on HII, in the nature of a
retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability under such policy and arising
wholly or partially out of events occurring prior to the
Effective Time.
(vi) Welfare Plans. (A) No HII Benefit Plan that is a "welfare
plan" (within the meaning of Section 3(1) of ERISA) provides benefits
for any retired or former employees (other than as required pursuant to
Section 601 of ERISA) and (B) to the knowledge of HII, no circumstances
exist that could subject HII or any HII Affiliate to an excise tax under
Section 4976 of the Code.
(vii) Funded Status of Plans. (A) Each HII Pension Benefit Plan has
assets that, as of January 1, 1996, have a fair market value equal to or
exceeding the present value of the accrued benefit obligations
thereunder on a termination basis, as of January 1, 1996, based on the
actuarial methods, tables and assumptions theretofore utilized by such
plan's actuary in preparing such plan's
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most recently prepared FAS 87 actuarial valuation report and provided by
HII to NorAm, and HII is not aware of any existing facts or
circumstances that would materially change the funded status of any HII
Pension Benefit Plan and (B) no HII Pension Benefit Plan has incurred
any "accumulated funding deficiency" (within the meaning of Section 302
of ERISA or Section 412 of the Code).
(viii) Multiemployer Plans.
(A) No HII Benefit Plan is or was a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA), a multiple employer plan
described in Section 413(c) of the Code or a "multiple employer
welfare arrangement" (within the meaning of Section 3(40) of
ERISA); and none of HII or any HII Affiliate has been obligated
to contribute to, or otherwise has or has had any liability with
respect to, any multiemployer plan, multiple employer plan, or
multiple employer welfare arrangement.
(B) With respect to any HII Benefit Plan that is listed in Section
3.2(l)(viii)(A) of the HII Disclosure Schedule as a multiemployer
plan, neither HII nor any HII Affiliate has made or incurred a
"complete withdrawal" or a "partial withdrawal," as such terms
are defined in Sections 4203 and 4205 of ERISA, therefrom at any
time during the six calendar year period immediately preceding
the date of this Agreement and the transactions contemplated by
the Agreement will not, in and of themselves, give rise to such a
"complete withdrawal" or "partial withdrawal."
(ix) Modification or Termination of Plans. Neither HII nor any HII
Affiliate is subject to any legal, contractual, equitable or other
obligation (nor have they any formal plan or commitment, whether legally
binding or not) to enter into any form of compensation or employment
agreement or to establish any employee benefit plan of any nature,
including (without limitation) any pension, profit sharing, welfare,
post-retirement welfare, stock option, stock or cash award,
non-qualified deferred compensation or executive compensation plan,
policy or practice or to modify or change any existing HII Benefit Plan.
HII or one or more HII Affiliates have the right to, in any manner, and
without the consent of any employee, beneficiary or dependent,
employees' organization or other person, terminate, modify or amend any
HII Benefit Plan (or their participation in any such HII Benefit Plan)
at any time sponsored, maintained or contributed to by HII or any HII
Affiliate, effective as of any date before, on or after the Effective
Time except to the extent that any retroactive amendment would be
prohibited by Section 204(g) of ERISA or would adversely affect a vested
accrued benefit or a previously granted award under any such plan not
subject to Section 204(g) of ERISA.
(x) Reportable Events; Claims.
(A) No Reportable Event has occurred with respect to any HII Pension
Benefit Plan that could have a Material Adverse Effect on HII,
and
(B) no liability, claim, action or litigation exists, has been made,
commenced or, to the knowledge of HII, threatened, by or against
HII or any HII Affiliate with respect to any HII Benefit Plan
(other than for benefits or PBGC premiums payable in the ordinary
course) that could have a Material Adverse Effect on HII.
(m) Labor Matters. Except as set forth in the HII SEC Documents or the
HL&P SEC Documents:
(i) there is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure
against HII or any of its Subsidiaries pending, or, to the knowledge or
HII or any of its Subsidiaries, threatened, that has, or could have, a
Material Adverse Effect on HII;
(ii) there is no complaint, lawsuit or proceeding in any forum by
or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any
express or implied contract of employment, any law or regulation
governing employment or the
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termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship against HII or
any of its Subsidiaries pending, or, to the knowledge of HII or any of
its Subsidiaries, threatened, that has, or could have, a Material
Adverse Effect on HII;
(iii) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the knowledge of HII or any of its Subsidiaries,
threatened, against or involving HII or any of its Subsidiaries that
has, or could have, a Material Adverse Effect on HII;
(iv) HII and each of its Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational
safety and health, except for non-compliance that does not have, and
could not have, a Material Adverse Effect on HII; and
(v) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of HII or any of its
Subsidiaries, threatened, in respect to which any current or former
director, officer, employee or agent of HII or any of its Subsidiaries
is or may be entitled to claim indemnification from HII or any of its
Subsidiaries pursuant to their respective charters or bylaws, as
provided in any indemnification agreement to which HII or any Subsidiary
of HII is a party or pursuant to applicable law that has, or could have,
a Material Adverse Effect on HII.
(n) Intangible Property. HII and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the
businesses of each of HII and its Subsidiaries (collectively, the "HII
Intangible Property"), except where the failure to possess or have adequate
rights to use such properties would not reasonably be expected to have a
Material Adverse Effect on HII. All of the HII Intangible Property is owned
by HII or its Subsidiaries free and clear of any and all liens, claims or
encumbrances, except those that are not reasonably likely to have a
Material Adverse Effect on HII and neither HII nor any such Subsidiary has
forfeited or otherwise relinquished any HII Intangible Property which
forfeiture would result in a Material Adverse Effect on HII. To the
knowledge of HL&P and HII, the use of the HII Intangible Property by HII or
its Subsidiaries does not, in any material respect, conflict with, infringe
upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark,
brand mark, brand name, computer program, database, industrial design,
copyright or any pending application therefor of any other person and there
have been no claims made and neither HII nor any of its Subsidiaries has
received any notice of any claim or otherwise knows that any of the HII
Intangible Property is invalid or conflicts with the asserted rights of any
other person or has not been used or enforced or has been failed to be used
or enforced in a manner that would result in the abandonment, cancellation
or unenforceability of any of the HII Intangible Property, except for any
such conflict, infringement, violation, interference, claim, invalidity,
abandonment, cancellation or unenforceability that would not reasonably be
expected to have a Material Adverse Effect on HII.
(o) Environmental Matters.
(i) Compliance.
(A) Except as set forth in the HII SEC Documents or the HL&P SEC
Documents, HII and each of its Subsidiaries is in compliance with
all applicable Environmental Laws, except where the failure to be
so in compliance would not be reasonably likely to have a
Material Adverse Effect on HII.
(B) Except as set forth in the HII SEC Documents or the HL&P SEC
Documents, neither HII nor any of its Subsidiaries has received
any written communication from any person or Governmental Entity
that alleges that HII or any of its Subsidiaries is not in
compliance with applicable Environmental Laws, except where the
failure to be so in compliance would not be reasonably likely to
have a Material Adverse Effect on HII.
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(ii) Environmental Permits. Except as set forth in the HII SEC
Documents or the HL&P SEC Documents, HII and each of its Subsidiaries
has obtained or applied for all Environmental Permits necessary for the
construction of their facilities and the conduct of their operations,
and all such permits are in good standing or, where applicable, a
renewal application has been timely filed, is pending and agency
approval is expected to be obtained, and HII and its Subsidiaries are in
compliance with all terms and conditions of all such Environmental
Permits and are not required to make any expenditure in order to obtain
or renew any Environmental Permits, except where the failure to obtain
or be in compliance with such Environmental Permits and the requirement
to make such expenditures would not be reasonably likely to have a
Material Adverse Effect on HII.
(iii) Environmental Claims. Except as set forth in the HII SEC
Documents or the HL&P SEC Documents, there is no Environmental Claim
pending or, to the knowledge of HII and its Subsidiaries, threatened
(A) against HII or any of its Subsidiaries,
(B) against any person or entity whose liability for any
Environmental Claim HII or any of its Subsidiaries has retained
or assumed, either contractually or by operation of law, or
(C) against any real or personal property or operations that HII or
any of its Subsidiaries owns, leases or manages, in whole or in
part,
that, if adversely determined, would be reasonably likely to have a
Material Adverse Effect on HII.
(iv) Releases. Except as set forth in the HII SEC Documents or the
HL&P SEC Documents, and except for Releases of Hazardous Materials the
liability for which would not be reasonably likely to have a Material
Adverse Effect on HII, HII has no knowledge of any Release of any
Hazardous Materials that has occurred on any of the properties owned,
leased or occupied by HII or any Subsidiary of HII or any predecessor of
HII or any Subsidiary of HII which requires investigation, assessment,
monitoring, remediation or cleanup under Environmental Laws.
(p) Regulation as a Utility.
(i) HII is a "public utility holding company" as defined in the
1935 Act exempt from all provisions of the 1935 Act, except Section
9(a)(2), by order of the SEC pursuant to Section 3(a)(1) of the 1935
Act. HL&P is a "public utility company" within the meaning of Section
2(a)(5) of the 1935 Act. No other Subsidiary of HII is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935 Act.
(ii) HL&P is regulated as a public utility in the State of Texas
and in no other state. Neither HII nor any "subsidiary company" or
"affiliate" (as each such term is defined in the 1935 Act) of HII (other
than HL&P) is subject to regulation as a public utility or public
service company (or similar designation) by any other state in the
United States or any foreign country.
(q) Opinion of Financial Advisor. The Board of Directors of HII has
received the opinion of CS First Boston Corporation ("CS First Boston") to
the effect that, as of the date on which the Board of Directors of HII
approved this Agreement, the Merger Consideration is fair from a financial
point of view to HII.
(r) Vote Required.
(i) The affirmative vote of the holders of two-thirds of the
outstanding shares of each of the HL&P Class A Common Stock and the HL&P
Class B Common Stock, voting separately as a class, is the only vote of
the holders of any class or series of capital stock of HL&P necessary to
approve this Agreement and the transactions contemplated hereby. The
affirmative vote of HII, the sole holder of HL&P Class A Common Stock,
has been obtained prior to or on the date hereof. HII shall cause its
wholly owned subsidiary Houston Industries (Delaware) Incorporated, the
sole holder of
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HL&P Class B Common Stock, to approve this Agreement and the
transactions contemplated hereby as soon as practicable after the date
hereof.
(ii) The affirmative vote of the holders of two-thirds of the
outstanding shares of HII Common Stock is the only vote of the holders
of any class or series of capital stock of HII necessary to approve this
Agreement, the issuance of shares of HL&P Common Stock pursuant to the
Mergers and the other transactions contemplated hereby.
(s) Beneficial Ownership of NorAm Common Stock. As of the date hereof,
assuming the accuracy of the representation set forth in Section 3.1(b),
neither HII nor any of its Subsidiaries "beneficially owns" (as defined in
Rule 13d-3 under the Exchange Act) any of the outstanding NorAm Common
Stock.
(t) Brokers. Except for the fees and expenses payable to CS First
Boston, which fees are reflected in its agreement with HII (a copy of which
has been delivered to NorAm), no broker, investment banker or other person
is entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of HII or HL&P.
(u) Financing. HII has and will continue to have sufficient cash
resources available to it to pay the aggregate Cash Consideration.
(v) Insurance. HII maintains insurance coverage as is customary for
the business of HII and each of its Subsidiaries (taking into account the
cost and availability of such insurance), and the transactions contemplated
hereby will not materially adversely affect such coverage.
(w) Regulatory Proceedings. Except as set forth in the HII SEC
Documents or the HL&P SEC Documents, neither HII nor any of its
Subsidiaries all or part of whose rates or services are regulated by a
Governmental Entity has rates which have been or are being collected
subject to refund, pending final resolution of any proceeding pending
before a Governmental Entity or on appeal to the courts or is a party to
any proceeding before the Governmental Entity or on appeal from orders of
the Governmental Entity which could result in orders having a Material
Adverse Effect on HII.
(x) Representations with Respect to Merger Sub.
(i) Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. Merger Sub was formed
solely for the purpose of being an acquisition vehicle, has engaged in
no other business activities, has incurred no obligations or
liabilities, has no other assets and has no Subsidiaries.
(ii) As of the date hereof, the authorized capital stock of Merger
Sub consists of 1,000 shares of common stock, par value $0.01 per share,
of Merger Sub, all of which are validly issued, fully paid and
nonassessable and are owned by HII.
(iii) Merger Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation by Merger Sub of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Merger Sub. This Agreement has been duly executed and delivered by
Merger Sub and, assuming this Agreement constitutes the valid and
binding obligation of NorAm, constitutes a valid and binding obligation
of Merger Sub enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and
to general principles of equity.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGERS
4.1 Conduct of Business by NorAm Pending the Mergers. During the period
from the date of this Agreement and continuing until the Effective Time, NorAm
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Agreement, as provided in Section 4.1 of the NorAm
Disclosure Schedule (each of which exceptions shall specifically identify the
relevant subsection hereof to which it relates) or to the extent that HII shall
otherwise consent in writing):
(a) Ordinary Course. Each of NorAm and its Subsidiaries shall carry on
its businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and shall use all commercially
reasonable efforts to preserve intact its present business organizations,
keep available the services of its current officers and employees, subject
to Section 5.10, and endeavor to preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes in Stock. NorAm shall not, and it shall not
permit any of its Subsidiaries to: (i) declare or pay any dividends on or
make other distributions in respect of any of its capital stock or
partnership interests, except for the declaration and payment of (x)
regular quarterly cash dividends not in excess of $.07 per share of NorAm
Common Stock with usual record and payment dates for such dividend, (y)
regular quarterly cash distributions not in excess of $.7813 per share of
6 1/4% Convertible Trust Originated Preferred Securities of NorAm Financing
I with usual record and payment dates for such distribution and (z)
dividends from a Subsidiary of NorAm to NorAm or another Subsidiary of
NorAm and except for cash dividends or distributions paid on or with
respect to the capital stock or partnership interests of a Subsidiary of
NorAm; (ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of capital stock of NorAm; or
(iii) repurchase, redeem or otherwise acquire, or permit any of its
Subsidiaries to purchase, redeem or otherwise acquire, any shares of its
capital stock, except as required by the terms of its securities
outstanding on the date hereof or as contemplated by any existing NorAm
Benefit Plan.
(c) Issuance of Securities. Except for the issuance of NorAm Common
Stock and any rights and options to acquire such shares pursuant to NorAm
Stock Plans (which shares, rights or options awarded for periods subsequent
to 1996, if any, under NorAm's 1994 Incentive Equity Plan shall be made
strictly in accordance with the provisions of Section 5.10(d)), NorAm's
Direct Stock Purchase and Dividend Reinvestment Plan, NorAm's Annual
Incentive Plan and the Restricted Stock Agreement between Milton Honea and
NorAm dated January 31, 1996, NorAm shall not, and it shall not permit any
of its Subsidiaries to, issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock of any class, any
Voting Debt or other voting securities of NorAm or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Voting Debt or other voting securities or convertible securities,
other than: (i) the issuance of NorAm Common Stock upon the exercise of
stock options granted under the NorAm Stock Plans that are outstanding on
the date hereof, or in satisfaction of stock grants or stock-based awards
made prior to the date hereof pursuant to the NorAm Stock Plans or upon
conversion of the NorAm Convertible Debentures or NorAm Convertible Junior
Debentures; and (ii) issuances by a wholly owned Subsidiary of its capital
stock to its parent.
(d) Governing Documents. NorAm shall not amend or propose to amend its
Restated Certificate of Incorporation or Bylaws.
(e) No Acquisitions. Other than acquisitions as to which the aggregate
purchase price is not in excess of $25,000,000, NorAm shall not, and it
shall not 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 other
business organization or division thereof.
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(f) No Dispositions. Other than dispositions in the ordinary course of
business consistent with past practice that are not material, individually
or in the aggregate, to NorAm and its Subsidiaries taken as a whole, or
dispositions as to which the aggregate market value is not in excess of
$10,000,000, NorAm shall not, and it shall not permit any of its
Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease (whether such lease is an operating or capital lease), encumber
or otherwise dispose of, any of its assets.
(g) No Dissolution, Etc. NorAm shall not authorize, recommend, propose
or announce an intention to adopt a plan of complete or partial liquidation
or dissolution of NorAm or any of its Significant Subsidiaries.
(h) Certain Employee Matters. Except as may be required by applicable
law or any agreement to which NorAm or any NorAm Affiliate is a party on
the date hereof or as expressly contemplated by this Agreement, including
Section 4.1(c), NorAm shall not, nor shall it permit any NorAm Affiliate
to:
(i) amend, or increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under, any employee benefit
plan or any other contract, agreement, commitment, arrangement, plan or
policy providing for compensation or benefits to any current or former
director, officer, employee or independent contractor who would be
deemed to be an employee under applicable guidelines published by the
IRS, and maintained by, contributed to or entered into by, NorAm or any
NorAm Affiliate, including, without limitation, the existing NorAm
Benefit Plans and the NorAm Pension Benefit Plans;
(ii) increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement,
employment or any related rights, of any current or former director,
officer, employee or independent contractor who would be deemed to be an
employee under applicable guidelines published by the IRS, of NorAm or
any NorAm Affiliate, except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to
NorAm or any NorAm Affiliate;
(iii) adopt, establish or implement any plan, policy or other
arrangement providing for any form of benefits or other compensation to
any current or former director, officer, employee or independent
contractor who would be deemed to be an employee under applicable
guidelines published by the IRS, of NorAm or any NorAm Affiliate;
(iv) enter into or amend any employment agreement, severance
agreement, or other contract, agreement or arrangement with any current
or former director, officer, employee or independent contractor who
would be deemed to be an employee under applicable guidelines published
by the IRS, of NorAm or any NorAm Affiliate; or
(v) pay or agree to pay any pension, retirement allowance or other
benefit not required or contemplated by any of the existing NorAm
Benefit Plans as in effect on the date of this Agreement to any current
or former director, officer, employee or independent contractor who
would be deemed to be an employee under applicable guidelines published
by the IRS, of NorAm or any NorAm Affiliate.
(i) Indebtedness; Leases; Capital Expenditures. NorAm shall not, nor
shall NorAm permit any of its Subsidiaries to, (i) incur any indebtedness
for borrowed money (except under NorAm's existing credit facilities,
including NorAm's receivable sales facility, and renewals thereof, and
refinancings of existing debt that permit prepayment of such debt without
penalty (other than LIBOR breakage costs)) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of such party or any of its Subsidiaries or
guarantee any debt securities of others, (ii) except in the ordinary course
of business, enter into any lease (whether such lease is an operating or
capital lease) or create any mortgages, liens, security interests or other
encumbrances on the property of NorAm or any of its Subsidiaries in
connection with any indebtedness thereof or (iii) make or commit to
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make capital expenditures not provided for in the capital budget, as
amended and approved by NorAm prior to the date hereof and disclosed to HII
on Section 4.1(i) of the NorAm Disclosure Schedule.
(j) Accounting. NorAm shall not, nor shall it permit any of its
Subsidiaries to, make any changes in their accounting methods which would
be required to be disclosed under the rules and regulations of the SEC,
except as required by law, rule, regulation or GAAP.
(k) Affiliate Transactions. NorAm shall not, nor shall it permit any
of its Subsidiaries to, enter into any agreement or arrangement with any of
their respective affiliates (as such term is defined in Rule 405 under the
Securities Act, an "Affiliate"), other than with wholly owned Subsidiaries
of NorAm, on terms materially less favorable to NorAm or such Subsidiary,
as the case may be, than could be reasonably expected to have been obtained
with an unaffiliated third party on an arm's-length basis.
(l) Rate Matters. Subject to applicable law and except for
non-material filings in the ordinary course of business consistent with
past practices, 10 business days prior to making any filing regarding any
changes in its or its Subsidiaries' rates or charges (other than
pass-through fuel and gas rates or charges under existing tariffs or rate
schedules), standards of service, accounting, or the services it provides
(or any amendment thereto) with any Governmental Entity, NorAm shall, and
shall cause its Subsidiaries to, deliver a copy of such filing or amendment
to HII. NorAm shall, and shall cause its Subsidiaries to, make all such
filings only in the ordinary course of business consistent with past
practices.
(m) Contracts. NorAm shall not, nor shall it permit any of its
Subsidiaries to, except in the ordinary course of business consistent with
past practice and NorAm policy, modify, amend, terminate, renew or fail to
use reasonable business efforts to renew any material contract or agreement
to which it or any of its Subsidiaries is a party or waive, release or
assign any material rights or claims. NorAm shall not, nor shall it permit
any of its Subsidiaries to, enter into any contract involving total
consideration of $10,000,000 or more, or in the case of NorAm Energy
Services, Inc., any gas or power marketing contract involving total
consideration of $50,000,000 or more, with a term longer than one year
which is not terminable by NorAm or any such Subsidiary of NorAm without
penalty upon no more than 30 days' prior notice.
(n) Insurance. NorAm 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 their respective businesses.
(o) Permits. NorAm shall, and shall cause its Subsidiaries to, use
reasonable efforts to maintain in effect all existing NorAm Permits which
are material to their respective operations.
(p) Tax Matters. NorAm shall not (i) make or rescind any material
express or deemed election relating to Taxes unless it is reasonably
expected that such action will not adversely affect NorAm, including
elections for any and all joint ventures, partnerships, limited liability
companies, working interests or other investments where NorAm has the
capacity to make such binding election, (ii) settle or compromise any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, except where such
settlement or compromise will not adversely affect NorAm or (iii) change in
any material respect any of its methods of reporting income or deductions
for federal income tax purposes from those expected to be employed in the
preparation of its federal income tax Return for the taxable year ending
December 31, 1995, except as may be required by applicable law or except
for such changes that are reasonably expected not to adversely affect
NorAm.
(q) Discharge of Liabilities. NorAm shall not, nor shall it permit any
of its Subsidiaries to, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than 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 NorAm included in NorAm's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, or
incurred in the ordinary course of business consistent with past practice.
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(r) Other Actions. NorAm shall not, and shall not permit any of its
Subsidiaries to, take or fail to take any other action which would
reasonably be expected to prevent or materially impede, interfere with or
delay the Mergers.
(s) Agreements. NorAm shall not, nor shall it permit any of its
Subsidiaries to, agree in writing or otherwise to take any action
inconsistent with the foregoing.
4.2 Certain Restrictions in Respect of HII and HL&P. During the period
from the date of this Agreement and continuing until the Effective Time, HII and
HL&P agree as to themselves and their Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, as provided in Section 4.2 of the
HII Disclosure Schedule (each of which exceptions shall specifically identify
the relevant subsection hereof to which it relates) or to the extent that NorAm
shall otherwise consent in writing):
(a) Dividends; Changes in Stock. Each of HII and HL&P shall not (i)
engage in any material repurchase at a premium, recapitalization,
restructuring or reorganization with respect to its capital stock (other
than (x) pursuant to the HII Common Stock Repurchase Program or (y) in
connection with the HII/HL&P Merger), including, without limitation, by way
of any extraordinary dividends on or other extraordinary distributions in
respect of any of its capital stock, (ii) engage in any repurchase of HII
Common Stock (other than pursuant to the HII Stock Plans) during the period
beginning 45 days prior to the Effective Time and ending at the Effective
Time or (iii) amend any material term or provision of the HL&P Common
Stock.
(b) Governing Documents. HL&P shall not amend or propose to amend its
Restated Articles of Incorporation with respect to the rights of the
holders of HL&P Common Stock except as contemplated herein.
(c) Insurance. HII 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 their respective businesses.
(d) Permits. HL&P and HII shall use reasonable efforts to maintain in
effect all existing HII Permits which are material to their respective
operations.
(e) Certain Acquisitions. Other than acquisitions as to which the
purchase price is not in excess of $200,000,000, HII shall not, and it
shall not 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 other
business organization or division thereof the principal business of which
is not related to the sale, transmission, distribution, marketing or
generation of electric power or gas or other regulated or unregulated
utility operations. HII will consult with appropriate NorAm personnel prior
to any acquisition with a purchase price in excess of $200,000,000 and
NorAm shall keep any such information strictly confidential.
(f) Other Actions. Each of HII and HL&P shall not, and shall not
permit any of their Subsidiaries to, take or fail to take any other action
which would reasonably be expected to prevent or materially impede,
interfere with or delay the Mergers.
(g) Agreements. Each of HII and HL&P shall not agree in writing or
otherwise to take any action inconsistent with the foregoing.
4.3 No Solicitation.
(a) From and after the date hereof, NorAm will not, and will not
authorize or permit any of its officers, directors, employees, agents and
other representatives or those of any of its Subsidiaries (collectively,
"NorAm Representatives") to, directly or indirectly, solicit, initiate or
encourage (including by way of providing information) any prospective buyer
or the making of any proposal that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal (as hereinafter defined)
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from any person or engage in any discussions or negotiations with respect
thereto or otherwise cooperate with or assist or participate in, or
facilitate, any such proposal; provided, however, that, notwithstanding any
other provision of this Agreement, (i) NorAm's Board of Directors may take
and disclose to NorAm's stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act and (ii) prior to approval of
this Agreement by NorAm's stockholders and following receipt from a third
party (without any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with NorAm or any NorAm
Representatives) of a bona fide Acquisition Proposal that is financially
superior to the NorAm Merger and reasonably capable of being financed (as
determined in each case in good faith by NorAm's Board of Directors after
consultation with NorAm's financial advisors), (x) NorAm may engage in
discussions or negotiations with such third party and may furnish such
third party information concerning NorAm and its business, properties and
assets if such third party executes a confidentiality and standstill
agreement in reasonably customary form and (y) the Board of Directors of
NorAm may withdraw, modify or not make its recommendation referred to in
Section 5.5 or terminate this Agreement in accordance with Section 7.1(g),
but in each case referred to in the foregoing clauses (i) and (ii) only to
the extent that the Board of Directors of NorAm shall conclude in good
faith based on the written advice of NorAm's outside counsel that such
action is necessary in order for the Board of Directors of NorAm to act in
a manner that is consistent with its fiduciary obligations under applicable
law, notwithstanding (1) a binding commitment to consummate an agreement of
the nature of this Agreement entered into in the proper exercise of their
applicable fiduciary duties and (2) any concessions which may be offered by
HII in negotiations entered into pursuant to Section 7.1(g)(ii) or
otherwise.
(b) NorAm shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by NorAm or any NorAm
Representatives with respect to any Acquisition Proposal existing on the
date hereof.
(c) Prior to taking any action referred to in Section 4.3(a), if NorAm
intends to participate in any such discussions or negotiations or provide
any such information to any such third party, NorAm shall give reasonable
prior notice to HII of each such action. NorAm will promptly notify HII of
any such requests for such information or the receipt of any Acquisition
Proposal, including the identity of the person or group engaging in such
discussions or negotiations, requesting such information or making such
Acquisition Proposal, and the material terms and conditions of any
Acquisition Proposal.
(d) Nothing in this Section 4.3 shall permit NorAm to enter into any
agreement with respect to an Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement NorAm
shall not enter into any agreement with any person that provides for, or in
any way facilitates, an Acquisition Proposal other than a confidentiality
agreement in the form referred to above).
(e) As used in this Agreement, "Acquisition Proposal" means any
proposal or offer, other than a proposal or offer by HII or any of its
Affiliates, for, or that could be reasonably expected to lead to, a tender
or exchange offer, a merger, consolidation or other business combination
involving NorAm or any Significant Subsidiary of NorAm or any proposal to
acquire in any manner a substantial equity interest in, or any substantial
portion of the assets of, NorAm or any of its Significant Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement. As promptly as
practicable after the date hereof, HII, HL&P and NorAm shall prepare and file
with the SEC the Joint Proxy Statement and HL&P shall prepare and file with the
SEC the S-4, in which the Joint Proxy Statement will be included as a
prospectus. Each of HII, HL&P and NorAm shall use its best efforts to have the
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. Each of HII, HL&P and NorAm shall use its best efforts to cause the
Joint Proxy Statement to be mailed to the shareholders of HII and the
stockholders of NorAm at the earliest practicable date. HL&P shall use its best
efforts to obtain all necessary state securities laws or "blue sky" permits,
approvals and registrations in connection with the issuance of HL&P Common
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Stock in the Mergers and upon the exercise of the HII Stock Options and the
NorAm Stock Options assumed by HL&P and NorAm shall furnish all information
concerning NorAm and the holders of NorAm Common Stock as may be reasonably
requested in connection with obtaining such permits, approvals and
registrations.
5.2 Letter of NorAm's Accountants. NorAm shall use its best efforts to
cause to be delivered to HII a letter of Coopers & Lybrand, L.L.P., NorAm's
independent public accountants, dated a date within two business days before the
date on which the S-4 shall become effective and addressed to HII and NorAm, in
form and substance reasonably satisfactory to HII and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
5.3 Letter of HII's Accountants. HII shall use its best efforts to cause
to be delivered to NorAm a letter of Deloitte & Touche LLP, HII's independent
public accountants, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to NorAm and HII, in form and
substance reasonably satisfactory to NorAm and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice, NorAm, HII and HL&P
shall each (and shall cause each of their respective Subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of the
others, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, each of NorAm, HII and HL&P shall (and shall cause each
of their respective Subsidiaries to) furnish promptly to the other (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to SEC requirements and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Each of NorAm, HII and HL&P agrees that it will
not, and will cause its respective representatives not to, use any information
obtained pursuant to this Section 5.4 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. The
Confidentiality Agreements dated July 15, 1996 between HII and NorAm (the
"Confidentiality Agreements") shall apply with respect to information furnished
thereunder or hereunder and any other activities contemplated thereby.
5.5 NorAm Stockholders' Meeting. NorAm shall (i) call a meeting of its
stockholders (the "NorAm Stockholders' Meeting") to be held as promptly as
practicable after the date hereof for the purpose of voting upon this Agreement
and the NorAm Merger (or in lieu thereof and only in the circumstances set forth
in Section 8.1 or Section 8.5, the Alternative Merger or the Second Alternative
Merger, respectively), (ii) through its Board of Directors, recommend to its
stockholders approval of such matters and not rescind such recommendation, (iii)
use its best efforts to obtain approval and adoption of this Agreement and the
NorAm Merger by its stockholders and (iv) use all reasonable efforts to hold
such meeting as soon as practicable after the date upon which the S-4 becomes
effective; provided, however, that nothing herein obligates NorAm to take any
action that would cause its Board of Directors to act inconsistently with their
fiduciary duties as determined by the Board of Directors of NorAm in good faith
based on the written advice of NorAm's outside counsel. The NorAm Stockholders'
Meeting shall be held on such date as soon as practicable after the date upon
which the S-4 becomes effective as NorAm and HII shall mutually determine.
5.6 HII Shareholders' Meeting. HII (i) shall call the HII Shareholders'
Meeting to be held as promptly as practicable after the date hereof for the
purpose of voting upon this Agreement, the HII/HL&P Merger and the issuance of
the Stock Consideration in the NorAm Merger (or in lieu of the Mergers and only
in the circumstances set forth in Section 8.1 or 8.5, the Alternative Merger or
the Second Alternative Merger, respectively), (ii) through its Board of
Directors, recommend to its shareholders approval of such matters and not
rescind such recommendation, (iii) use its best efforts to obtain approval and
adoption of this Agreement, the HII/HL&P Merger and the issuance of the Stock
Consideration in the NorAm Merger by its shareholders and (iv) use all
reasonable efforts to hold such meeting as soon as practicable after the date
upon which the S-4 becomes effective; provided, however, that nothing herein
obligates HII to take any action that would cause its Board of Directors to act
inconsistently with their fiduciary duties as determined by the Board of
Directors of HII in good faith based on the written advice of HII's outside
counsel. The meeting of HII's shareholders for the purpose of voting upon this
Agreement, the HII/HL&P Merger and the issuance of the
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Stock Consideration in the NorAm Merger (the "HII Shareholders' Meeting") shall
be held on such date as soon as practicable after the date upon which the S-4
becomes effective as NorAm and HII shall mutually determine.
5.7 Regulatory and Other Approvals.
(a) HSR Act. Each party hereto shall file or cause to be filed with
the Federal Trade Commission and the Department of Justice any
notifications required to be filed by their respective "ultimate parent"
companies under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such
parties will use all commercially reasonable efforts to make such filings
promptly and to respond on a timely basis to any requests for additional
information made by either of such agencies.
(b) Other Regulatory Approvals. 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 (and will cooperate with each other in obtaining) any consent,
acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity required to be obtained or made
by NorAm, HII, HL&P or any of their Subsidiaries in connection with the
Mergers or the taking of any action contemplated thereby or by this
Agreement.
(c) Other Approvals. Each party hereto will, and will cause its
Subsidiaries to, take all commercially reasonable actions necessary to
obtain (and will cooperate with each other in obtaining) all NorAm Required
Consents and all HII Required Consents, as the case may be.
5.8 Agreements of Others. Prior to the Effective Time, NorAm shall cause
to be prepared and delivered to HL&P a list identifying all persons who, at the
time of the NorAm Stockholders' Meeting, may be deemed to be "affiliates" of
NorAm as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Rule 145 Affiliates"). NorAm shall use its best efforts to
cause each person who is identified as a Rule 145 Affiliate in such list to
deliver to HL&P, at or prior to the Effective Time, a written agreement, in the
form to be approved by the parties hereto, that such Rule 145 Affiliate will not
sell, pledge, transfer or otherwise dispose of any shares of HL&P Common Stock
issued to such Rule 145 Affiliate pursuant to the NorAm Merger, except pursuant
to an effective registration statement or in compliance with Rule 145 or an
exemption from the registration requirements of the Securities Act.
5.9 Authorization for Shares and Stock Exchange Listing. Prior to the
Effective Time, HL&P shall have taken all action necessary to permit it to issue
the number of shares of HL&P Common Stock required to be issued pursuant to
Sections 2.1 and 2.2. HL&P shall use all reasonable efforts to cause the shares
of HL&P Common Stock to be issued in the Mergers and the shares of HL&P Common
Stock to be reserved for issuance upon exercise of the HII Stock Options and the
NorAm Stock Options assumed by HL&P pursuant to Section 5.11 and issuances under
the HII Stock Plans and the NorAm Stock Plans to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Closing Date.
5.10 Employee Matters.
(a) HL&P and NorAm agree that all employees of NorAm immediately prior
to the Effective Time shall be employed by the NorAm Merger Surviving
Corporation immediately after the Effective Time, it being understood that
neither the NorAm Merger Surviving Corporation nor HL&P shall have any
obligation to continue employing such employees for any length of time
thereafter.
(b) From and after the Effective Time, to the extent of the accrued
benefits described in this Section 5.10(b), HL&P will honor in accordance
with their respective terms the employee benefit plans, programs, policies,
arrangements and agreements listed on Section 5.10(b) to the NorAm
Disclosure Schedule (the "Section 5.10(b) Plans") and will not take, or
permit to be taken, any action that would reduce, eliminate or otherwise
adversely affect the compensation or benefits accrued at the Effective Time
(or, solely with respect to those three severance plans listed as Items 6,
7 and 8 on Section 5.10(b) to the NorAm Disclosure Schedule, if greater, at
termination of employment after the
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Effective Time) for any employee or former employee of NorAm or any NorAm
Affiliate under any Section 5.10(b) Plan. Nothing contained in this Section
5.10(b) shall preclude HL&P from amending any Section 5.10(b) Plan to cease
the accrual of benefits thereunder after the Effective Time (or, solely
with respect to those three severance plans listed as Items 6, 7 and 8 on
Section 5.10(b) to the NorAm Disclosure Schedule, if greater, at
termination of employment after the Effective Time). For purposes of any
Section 5.10(b) Plan that contains a provision relating to a change in
control of NorAm, HL&P acknowledges that the consummation of the NorAm
Merger constitutes such a change in control.
(c) For one year after the Effective Time, HL&P will continue or cause
to be continued without adverse change to any employee or former employee
of NorAm and the NorAm Affiliates all NorAm Benefit Plans other than the
Section 5.10(b) Plans and the types of plans described in Section 5.10(d)
and (e) below, except that any NorAm Common Stock investment fund offered
under a NorAm Benefit Plan will be replaced by either a HL&P Common Stock
fund or a traditional investment fund, as determined by HL&P. From and
after the expiration of the one-year period following the Effective Time,
HL&P will provide the employees of NorAm and each NorAm Affiliate with
benefits that in the aggregate are not less favorable than those then
provided to similarly situated employees of HL&P. In the event a HL&P
employee benefit plan is made available to employees of NorAm and the NorAm
Affiliates, all periods of service with NorAm and the NorAm Affiliates will
be credited to such employees for all purposes other than accrual of
benefits, including the eligibility to participate and receive benefits for
which a specified period of service is required under such HL&P employee
benefit plan. The foregoing provisions of this Section 5.10(c) will not
apply to any employee benefits provided to employees of NorAm and the NorAm
Affiliates who are covered by a collective bargaining agreement to the
extent such provisions are inconsistent with the terms of any applicable
collective bargaining agreement.
(d) If the Effective Time does not occur on or before December 31,
1996, awards made by NorAm under the NorAm 1994 Incentive Equity Plan (the
"NorAm Incentive Plan") with respect to the performance cycle beginning
January 1, 1997 (the "Cycle X Awards") will be made by utilizing the same
salary grade levels and the same award levels assigned to each salary grade
that were utilized in making awards under the NorAm Incentive Plan for the
performance cycle beginning January 1, 1996.
Each Cycle X Award shall be conditioned upon (1) if the recipient is
covered by an individual severance agreement, the recipient's waiver of the
acceleration of incentive benefits provided for in Section 3 of such
severance agreement solely with respect to any outstanding Cycle X Awards,
(2) the recipient's agreement that, notwithstanding any provision of any
outstanding award agreement to the contrary, (a) if the recipient becomes
employed by HL&P or an affiliate of HL&P at the Effective Time, each
outstanding Cycle X Award shall automatically expire without the payment of
any consideration to the recipient other than the grant of substitute
awards by HL&P as described below and (b) if the recipient does not become
employed by HL&P or an affiliate of HL&P at the Effective Time, (i) a
fraction of the options subject to each outstanding Cycle X Award under the
NorAm Incentive Plan shall become immediately exercisable by the recipient
(and the option shall expire with respect to the remaining shares) and (ii)
a fraction of all nonforfeited shares of restricted stock and opportunity
shares subject to such award shall be immediately delivered to the
recipient (and the remaining restricted shares and opportunity shares shall
be forfeited), the number of such option shares, restricted shares and
opportunity shares to be based on the opportunity (maximum) level of
performance and the fraction to be determined by multiplying the option
shares, restricted shares and opportunity shares by a fraction, the
numerator of which is the number of calendar days from and including the
effective date of the applicable performance cycle through the date of the
Effective Time and the denominator of which is the total number of days in
the applicable performance cycle and (3) the recipient's agreement that the
foregoing arrangement does not constitute a reduction in the aggregate of
the recipient's base pay and target variable pay (for individuals not
covered by individual severance agreements) or a reduction in the aggregate
of the recipient's base pay and incentive pay (for individuals covered by
individual severance agreements) or the termination or denial of the
recipient's rights to any employee benefits or a reduction in the scope or
value thereof.
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As of the Effective Time, HL&P shall cause one or more substitute
long-term incentive awards to be granted under the HII 1994 Long Term
Incentive Compensation Plan to each individual whose award(s) under the
NorAm Incentive Plan expired upon the individual's employment with HL&P as
of the Effective Time in accordance with the preceding paragraph. One
substitute award shall be granted for each award so expired on terms and
conditions to be determined in good faith by the Personnel Committee of
HL&P to be substantially equal to the terms and conditions of the expired
award. With respect to each performance cycle commencing after the
Effective Time, executive and management employees of NorAm and the NorAm
Affiliates will be eligible to participate in all long-term and short-term
incentive compensation, variable pay and similar plans maintained by HL&P
for other executive and management employees of HL&P and the affiliates of
HL&P on substantially the same basis as similarly situated executives and
management employees of HL&P and the affiliates of HL&P. In addition, all
other employees of NorAm and the NorAm Affiliates (including employees
covered by a collective bargaining agreement to the extent permitted by
such agreement) will be eligible to participate in variable pay plans and
programs of HL&P on substantially the same basis as similarly situated
employees of HL&P and the affiliates of HL&P. The Personnel or Benefits
Committee of HL&P, as applicable, shall have the sole and absolute
authority to determine the NorAm employees eligible to receive, and the
amount of, benefits provided under this Section 5.10(d), whose good faith
determination shall be conclusive and binding on all parties hereto,
including any employee who was employed by NorAm prior to the Effective
Time.
(e) For the calendar year ending December 31, 1996, NorAm will pay to
each employee of NorAm and the NorAm Affiliates who is a participant in a
NorAm annual incentive compensation plan or a variable pay program the
amount of annual incentive compensation or variable pay awarded to such
employee for 1996 based on the level of performance goals actually attained
by NorAm. The amount of such incentive compensation or variable pay will be
determined in accordance with normal practice, will not be prorated if the
Effective Time is prior to December 31, 1996, and will be paid on or before
March 15, 1997. If the Effective Time occurs in 1997, annual incentive
compensation and variable pay awarded to employees of NorAm and the NorAm
Affiliates for calendar 1997 will be paid to such employees as soon as
practicable after the Effective Time based on the level of performance
goals NorAm actually attained at the Effective Time (if such performance
level can reasonably be determined) or (if such performance level cannot
reasonably be determined) based on the level of performance goals that
would have been attained by NorAm at the target level of performance and
will be prorated by multiplying the amount of incentive compensation so
determined by a fraction, the numerator of which is the number of calendar
days from and including January 1, 1997, through the date of the Effective
Time and the denominator of which is 365.
(f) For a period of at least two years after the Effective Time, HL&P
will maintain and continue initiatives similar to those reflected in
NorAm's Operation Breakthrough and will consider extending or integrating
such initiatives into HL&P and the affiliates of HL&P in order to more
fully integrate the businesses, operations and employees of HL&P and NorAm.
(g) NorAm has previously established "rabbi trusts" (the "NorAm Rabbi
Trusts") to fund certain nonqualified benefit plans, programs and
compensation agreements for employees and directors. Pursuant to
resolutions adopted by the NorAm Board of Directors at the time the NorAm
Rabbi Trusts were established, the execution of this Agreement by NorAm
will cause the NorAm Rabbi Trusts to be funded. NorAm will take such action
as is necessary to rescind such funding resolutions. In exchange, HL&P
agrees to maintain the NorAm Rabbi Trusts for an indefinite period of time
and, notwithstanding any provision of the NorAm Rabbi Trusts that would
otherwise permit earlier termination, to terminate the NorAm Rabbi Trusts
only with the unanimous consent of those persons who, immediately prior to
any proposed termination, would benefit from the NorAm Rabbi Trusts if the
NorAm Rabbi Trusts were fully funded. In addition, HL&P agrees to deliver
to the trustee of the NorAm Rabbi Trusts, on or before the occurrence of a
change in control of HL&P (a change in control to have the same meaning as
under the NorAm Rabbi Trusts as if the term "Company" referred to HL&P), an
amount that is not less than 120% multiplied by the aggregate "Fully
Funded" amounts for all "subaccounts" as most recently
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determined by the "Actuary" (as such terms are defined in the NorAm Rabbi
Trusts), unless those persons who would benefit from the funding of the
NorAm Rabbi Trusts unanimously waive such funding.
5.11 Stock Options. (a) At the Effective Time, each outstanding NorAm
Stock Option, whether vested or unvested, of a holder who has properly elected
(in accordance with Section 2.2(e)(i)) to have HL&P assume his or her NorAm
Stock Options, shall be assumed by HL&P. Each such option shall be deemed to
constitute an option to acquire, on the same terms and conditions (giving effect
to any accelerated vesting caused by the NorAm Merger) as were applicable under
such NorAm Stock Option, a number of shares of HL&P Common Stock equal to the
number of shares of NorAm Common Stock purchasable pursuant to such NorAm Stock
Option multiplied by the Stock Consideration, at a price per share equal to the
per-share exercise price for the shares of NorAm Common Stock purchasable
pursuant to such NorAm Stock Option divided by the Stock Consideration;
provided, however, that in the case of any option to which Section 421 of the
Code applies by reason of its qualification under any of Sections 422-424 of the
Code, the option price, the number of shares purchasable pursuant to such option
and the terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code; and provided further, that the
number of shares of HL&P Common Stock that may be purchased upon exercise of
such NorAm Stock Option shall not include any fractional share and, upon
exercise of such NorAm Stock Option, a cash payment shall be made for any
fractional share based upon the closing price of a share of HL&P Common Stock on
the NYSE on the last Trading Day of the calendar month immediately preceding the
date of exercise.
(b) HL&P shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of HL&P Common Stock for delivery upon exercise of
the NorAm Stock Options assumed in accordance with this Section 5.11. As soon as
practicable after the Effective Time, HL&P shall file with the SEC a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of HL&P Common Stock subject to the
NorAm Stock Options assumed in accordance with this Section 5.11 and shall use
all commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as the
NorAm Stock Options remain outstanding.
5.12 Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, the NorAm Merger Surviving Corporation shall
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 or director of NorAm or any of its Subsidiaries or an employee of NorAm
or any of its Subsidiaries who acts as a fiduciary under any NorAm Benefit Plan
or NorAm Pension Benefit Plan (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including attorneys' fees), liabilities or
judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) of or in
connection with any threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director, officer, or such employee of
NorAm or any of its Subsidiaries whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after, the Effective Time ("Indemnified Liabilities"),
including all Indemnified Liabilities based in whole or in part on, or arising
in whole or in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, in each case to the full extent permitted under applicable
law (and the NorAm Merger Surviving Corporation will pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by law). Without limiting the foregoing, in the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or after the Effective
Time), (i) the NorAm Merger Surviving Corporation shall have the right to assume
the defense thereof (which it shall, in cooperation with the Indemnified
Parties, vigorously defend) and the NorAm Merger Surviving Corporation shall not
be liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if the NorAm Merger Surviving
Corporation elects not to assume such defense or there is a conflict of interest
between the NorAm Merger Surviving Corporation, on the one hand, and the
Indemnified Parties, on the other hand, including situations in which there are
one or more legal defenses
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available to the Indemnified Party that are different from or additional to
those available to the NorAm Merger Surviving Corporation, the Indemnified
Parties may retain counsel satisfactory to them, and the NorAm Merger Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however,that the NorAm Merger Surviving Corporation shall not, in connection
with any one such action or proceeding or separate but substantially similar
actions or proceedings arising out of the same general allegations, be liable
for the fees and expenses of more than one separate firm of attorneys at any
time for all Indemnified Parties except to the extent that local counsel, in
addition to such parties' regular counsel, is required in order to effectively
defend against such action or proceeding, (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) the NorAm Merger Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld), and
provided, further, that the NorAm Merger Surviving Corporation shall not have
any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final, that the indemnification of such Indemnified Party in the
manner contemplated hereby is prohibited by applicable law. NorAm, HII, HL&P and
Merger Sub agree that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the Indemnified Parties (including in NorAm's Restated
Certificate of Incorporation or Bylaws or in the indemnification agreements
previously provided to HII) with respect to matters occurring through the
Effective Time, shall survive the Mergers and shall continue in full force and
effect for a period of six years from the Effective Time; provided, however,
that all rights to indemnification in respect of any Indemnified Liabilities
asserted or made within such period shall continue until the disposition of such
Indemnified Liabilities.
(b) For a period of six years after the Effective Time, the NorAm Merger
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by NorAm and
its Subsidiaries (provided that the NorAm Merger Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions that are no less advantageous in any material
respect to the Indemnified Parties) with respect to matters arising before the
Effective Time, provided that the NorAm Merger Surviving Corporation shall not
be required to pay an annual premium for such insurance in excess of 150% of the
last annual premium paid by NorAm prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount. NorAm represents
that the last annual premium paid by NorAm for such insurance prior to the date
hereof is the amount set forth in Section 5.12(b) to the NorAm Disclosure
Schedule.
5.13 Compliance with WARN Act. HII shall, or shall cause HL&P or Merger
Sub to, comply with all laws governing the shutdown of operations of facilities,
including any action that could be construed as a "plant closing" or "mass
layoff" as those terms are defined in the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. sec. 2101.2109 ("WARN") or any "employment loss" as
defined in WARN which an employee of NorAm or any of its Subsidiaries may suffer
or may be deemed to suffer in connection with the NorAm Merger.
5.14 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
5.15 Public Announcements. HII, HL&P and Merger Sub, on the one hand, and
NorAm, on the other hand, will consult with each other before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with any national securities exchange or transaction reporting system.
5.16 Other Actions. Except as contemplated by this Agreement, neither HII,
HL&P nor NorAm shall, and none of them shall permit any of their respective
Subsidiaries to, take or agree or commit to take any
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action that is reasonably likely to result in any of its respective
representations or warranties hereunder being untrue in any material respect or
in any of the conditions to the Mergers set forth in Article VI not being
satisfied.
5.17 Advice of Changes; SEC Filings. HII, HL&P and NorAm shall confer on a
regular basis with each other, report on operational matters and promptly advise
each other orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, could have, a Material Adverse Effect on
HII or NorAm, as the case may be. NorAm, HII and HL&P shall promptly provide
each other (or their respective counsel) copies of all filings made by such
party with the SEC or any other Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
5.18 Reorganization. It is the intention of the parties hereto that the
Mergers will qualify as a reorganization described in Section 368(a) of the Code
(and any comparable provisions of applicable state law). Neither HL&P, HII nor
NorAm (nor any of their respective Subsidiaries) will take or omit to take any
action (whether before, on or after the Closing Date) that would cause the
Mergers not to be so treated. The parties will characterize the Mergers as such
a reorganization for purposes of all Returns and other filings.
5.19 HII/HL&P Merger Surviving Corporation Board of Directors. The Board
of Directors of the HII/HL&P Merger Surviving Corporation will take such action
as may be necessary (including the amendment of the HII/HL&P Merger Surviving
Corporation's bylaws) to cause the election of four persons, each of whom shall
be mutually agreed upon by NorAm and HII and shall have been a director of NorAm
immediately prior to the date hereof, to be directors of the HII/HL&P Merger
Surviving Corporation immediately after the Effective Time. One of such
directors shall be elected as a Class II director, one shall be elected as a
Class III director, and two shall be elected as Class I directors. Subject to
the fiduciary duties of its Board of Directors, HII/HL&P Merger Surviving
Corporation shall nominate and solicit proxies for the re-election of such Class
II director for an additional three-year period upon expiration of his initial
term, provided such director continues to be qualified and willing to serve.
5.20 Execution of Supplemental Indentures. At the Effective Time, the
NorAm Merger Surviving Corporation, and additionally in the case of the NorAm
Convertible Debentures and the NorAm Convertible Junior Debentures, the HII/HL&P
Merger Surviving Corporation, shall execute and deliver, supplemental
indentures, in form satisfactory to HII, assuming the obligations of NorAm under
the indentures governing NorAm's long-term indebtedness.
5.21 Disclosure Schedules. The NorAm Disclosure Schedule and the HII
Disclosure Schedule (collectively, the "Disclosure Schedules") are an integral
part of this Agreement and shall modify or otherwise affect the respective
representations, warranties, covenants or agreements of the parties hereto
contained in this Agreement. All of the representations and warranties of the
parties hereto contained herein shall apply as if any of the Mergers, the
Alternative Merger or the Second Alternative Merger are to be consummated.
5.22 Fairness Opinions Not Withdrawn. It shall be a condition to the
obligation of NorAm to mail the Joint Proxy Statement to its stockholders and to
hold the NorAm Stockholders' Meeting that the opinion of Merrill Lynch, referred
to in Section 3.1(t), shall not have been withdrawn, and it shall be a condition
to the obligation of HII to mail the Joint Proxy Statement to its shareholders
and to hold the HII Shareholders' Meeting that the opinion of CS First Boston,
referred to in Section 3.2(q), shall not have been withdrawn.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Mergers shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) NorAm Stockholder Approval. This Agreement and the NorAm Merger
shall have been approved and adopted by the affirmative vote of the holders
of a majority of the outstanding shares of NorAm Common Stock entitled to
vote thereon.
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(b) HII Shareholder Approval. This Agreement, the HII/HL&P Merger and
the issuance of the Stock Consideration in the NorAm Merger shall have been
approved and adopted by the affirmative vote of the holders of two-thirds
of the outstanding shares of HII Common Stock entitled to vote thereon.
(c) NYSE Listing. The shares of HL&P Common Stock issuable to HII
shareholders and NorAm stockholders pursuant to this Agreement and such
other shares of HL&P Common Stock required to be reserved for issuance in
connection with the Mergers shall have been authorized for listing on the
NYSE upon official notice of issuance.
(d) Other Approvals. The waiting period applicable to the consummation
of the Mergers under the HSR Act shall have expired or been terminated and
all filings required to be made prior to the relevant Effective Time with,
and all consents, approvals, permits and authorizations required to be
obtained prior to the relevant Effective Time from, any Governmental Entity
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by NorAm, HII, HL&P
and Merger Sub shall have been made or obtained (as the case may be),
except for such consents, approvals, permits and authorizations the failure
of which to be obtained would not, in the aggregate, be reasonably likely
in the judgment of HII to result in a Material Adverse Effect on HL&P
(assuming the Mergers have taken place) or to materially adversely affect
the consummation of the Mergers, and no such consent, approval, permit or
authorization shall impose terms or conditions that would have, or would be
reasonably likely to have, in the judgment of HII, a Material Adverse
Effect on NorAm or HL&P (assuming the Mergers have taken place). Unless
otherwise agreed to by HII, no such consent, approval, permit or
authorization shall then be subject to appeal.
(e) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(f) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction, no order of any Governmental Entity having
jurisdiction over HL&P, HII or NorAm, and no other legal restraint or
prohibition shall be in effect (an "Injunction") preventing or making
illegal the consummation of the Mergers; provided, however, that prior to
any party invoking this condition, such party shall have complied fully
with its obligations under Section 5.7.
6.2 Conditions of Obligations of HII, HL&P and Merger Sub. The obligations
of HII, HL&P and Merger Sub to effect the Mergers are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by HII, HL&P and Merger Sub.
(a) Representations and Warranties. Each of the representations and
warranties of NorAm set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date, except
where the failure to be so true and correct (without giving effect to the
individual materiality qualifications and thresholds otherwise contained in
Section 3.1 hereof) could not reasonably be expected to have a Material
Adverse Effect on NorAm or as otherwise contemplated by this Agreement, and
HII shall have received a certificate signed on behalf of NorAm by the
Chief Executive Officer and the Chief Financial Officer of NorAm to such
effect.
(b) Performance of Obligations of NorAm. NorAm shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and HII shall have received
a certificate signed on behalf of NorAm by the Chief Executive Officer and
the Chief Financial Officer of NorAm to such effect.
(c) Letters from Rule 145 Affiliates. HL&P shall have received from
each person named in the letter referred to in Section 5.8 an executed copy
of an agreement as provided in Section 5.8.
(d) Number of NorAm Dissenting Shares. At the Effective Time, the
aggregate number of NorAm Dissenting Shares shall not exceed 10% of the
total number of issued and outstanding shares of NorAm Common Stock.
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(e) Tax Opinion. HII shall have received an opinion, in form and
substance satisfactory to HII, dated the Closing Date, a copy of which will
be furnished to NorAm, of Baker & Botts, L.L.P., counsel to HII, to the
effect that, if the Mergers (or in lieu thereof, the Alternative Merger or
the Second Alternative Merger) are consummated in accordance with the terms
of this Agreement, each of the HII/HL&P Merger and the NorAm Merger (or in
lieu thereof, the Alternative Merger or the Second Alternative Merger) will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, such
counsel may receive and rely upon appropriate representations of fact
contained in certificates of HII, HL&P, Merger Sub, NorAm and certain
stockholders of HII and of NorAm, which representations are in form and
substance reasonably satisfactory to such counsel.
(f) No Material Limitations or Restraints. No Injunction shall be in
effect (i) imposing any material limitation upon the ability of HII or any
of its Subsidiaries effectively to control the business or operations of
NorAm or any of its Subsidiaries or (ii) prohibiting or imposing any
material limitation upon HII's or any of its Subsidiaries' ownership or
operation of all or any material portion of the business or assets or
properties of HII or NorAm or any of their respective Subsidiaries or
compelling HII or NorAm or any of their respective Subsidiaries to divest
or hold separate all or any material portion of the business or assets or
properties of HII or NorAm or any of their respective Subsidiaries or
imposing any other material limitation on any of them in the conduct of
their businesses and no such action by any Governmental Entity seeking such
an Injunction or an Injunction preventing or making illegal the
consummation of the Mergers shall be pending; provided, however, that prior
to invoking this condition, HII, HL&P and Merger Sub shall have complied
fully with their obligations under Section 5.7.
(g) NorAm Required Consents. The NorAm Required Consents shall have
been obtained, except for such NorAm Required Consents the failure of which
to be obtained would not have a Material Adverse Effect on NorAm.
6.3 Conditions of Obligations of NorAm. The obligation of NorAm to effect
the Merger is subject to the satisfaction of the following conditions, any or
all of which may be waived in whole or in part by NorAm:
(a) Representations and Warranties. Each of the representations and
warranties of HII, HL&P and Merger Sub set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement
and (except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the
Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 3.2 hereof) could not reasonably be expected
to have a Material Adverse Effect on HII or as otherwise contemplated by
this Agreement, and NorAm shall have received a certificate signed on
behalf of HII by the Chief Executive Officer and the Chief Financial
Officer of HII to such effect.
(b) Performance of Obligations of HII, HL&P and Merger Sub. HII, HL&P
and Merger Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and NorAm shall have received a certificate
signed on behalf of HII by the Chief Executive Officer and the Chief
Financial Officer of HII to such effect.
(c) Tax Opinion. NorAm shall have received an opinion, in form and
substance satisfactory to NorAm, dated the Closing Date, a copy of which
will be furnished to HII, of Jones, Day, Reavis & Pogue, counsel to NorAm,
to the effect that, if the Mergers (or in lieu thereof, the Alternative
Merger or the Second Alternative Merger) are consummated in accordance with
the terms of this Agreement, the NorAm Merger (or in lieu thereof, the
Alternative Merger or the Second Alternative Merger) should be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, such counsel may
receive and rely upon appropriate representations of fact contained in
certificates of HII, HL&P, Merger Sub, NorAm and certain stockholders and
members of management of NorAm, which representations are in form and
substance reasonably satisfactory to such counsel.
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(d) HII Required Consents. The HII Required Consents shall have been
obtained, except for such HII Required Consents the failure of which to be
obtained would not have a Material Adverse Effect on HII.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Mergers may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Mergers by the
shareholders of HII and the stockholders of NorAm:
(a) by mutual written consent of NorAm, HII and HL&P, or by mutual
action of their respective Boards of Directors;
(b) by either NorAm or HII if (i) any Governmental Entity shall have
issued any Injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the Mergers and such
Injunction or other action shall have become final and nonappealable; or
(ii) any required approval of the shareholders or stockholders of the other
party shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of shareholders or
stockholders, as the case may be, or at any adjournment thereof;
(c) by either NorAm or HII if the Mergers shall not have been
consummated by the first anniversary of the date hereof (the "Initial
Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Agreement has been the cause of or
resulted in the failure of the Mergers 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 6.1(d) shall not have been fulfilled
but all other conditions to the Closing shall have been fulfilled or shall
be capable of being fulfilled, then the Initial Termination Date shall be
extended to December 31, 1997;
(d) by HII if (i) for any reason NorAm fails to call and hold a
stockholders meeting for the purpose of voting upon this Agreement and the
NorAm Merger by February 15, 1997 (provided that the right to terminate
this Agreement under this Section 7.1(d) shall not be available to HII if
(x) the S-4 shall not have been declared effective by the SEC at least 45
days prior to the date of termination or (y) NorAm would be entitled to
terminate this Agreement under Section 7.1(e)); (ii) NorAm shall have
failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by
NorAm at or prior to such date of termination (provided such breach has not
been cured within 30 days following receipt by NorAm of notice of such
breach and is existing at the time of termination of this Agreement); (iii)
any representation or warranty of NorAm contained in this Agreement shall
not be true in all material respects when made or on or at the time of
termination as if made on such date of termination (except to the extent it
relates to a particular date) provided such breach has not been cured
within 30 days following receipt by NorAm of notice of such breach and is
existing at the time of termination of this Agreement, except where the
failure to be so true and correct (without giving effect to the individual
materiality qualifications and thresholds otherwise contained in Section
3.1 hereof) could not reasonably be expected to have a Material Adverse
Effect on NorAm; (iv) after the date hereof there has been any Material
Adverse Change with respect to NorAm, except for general economic changes
or changes that may affect the industries of NorAm or any of its
Subsidiaries generally; or (v) any Governmental Entity shall have issued
any Injunction or taken any other action permanently imposing, prohibiting
or compelling any of the limitations, prohibitions or compulsions set forth
in Section 6.2(f) and such Injunction or other action shall have become
final and nonappealable;
(e) by NorAm if (i) other than pursuant to Article VIII, the Board of
Directors of HII shall have withdrawn or modified, in any manner which is
adverse to NorAm, its recommendation or approval of the
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HII/HL&P Merger or this Agreement and the transactions contemplated hereby
or shall have resolved to do so; (ii) other than pursuant to Article VIII,
for any reason HII fails to call and hold a shareholders meeting for the
purpose of voting upon this Agreement and the HII/HL&P Merger by February
15, 1997 (provided that the right to terminate this Agreement under this
Section 7.1(e) shall not be available to NorAm if (x) the S-4 shall not
have been declared effective by the SEC at least 45 days prior to the date
of termination or (y) HII would be entitled to terminate this Agreement
under Section 7.1(d) or (f)); (iii) HII, HL&P or Merger Sub shall have
failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by
it at or prior to such date of termination (provided such breach has not
been cured within 30 days following receipt by HII of notice of such breach
and is existing at the time of termination of this Agreement); (iv) any
representation or warranty of HII or HL&P contained in this Agreement shall
not be true in all material respects when made or on or at the time of
termination as if made on such date of termination (except to the extent it
relates to a particular date) provided such breach has not been cured
within 30 days following receipt by HII of notice of such breach and is
existing at the time of termination of this Agreement, except where the
failure to be so true and correct (without giving effect to the individual
materiality qualifications and thresholds otherwise contained in Section
3.2 hereof) could not reasonably be expected to have a Material Adverse
Effect on HII; or (v) after the date hereof there has been any Material
Adverse Change with respect to HII, except for general economic changes or
changes that may affect the industries of HII or any of its Subsidiaries
generally;
(f) by HII, if (i) the Board of Directors of NorAm shall have
withdrawn or modified, in any manner which is adverse to HII, HL&P or
Merger Sub, its recommendation or approval of the NorAm Merger or this
Agreement and the transactions contemplated hereby or shall have resolved
to do so, or (ii) the Board of Directors of NorAm shall have recommended to
the stockholders of NorAm any Acquisition Proposal or any transaction
described in the definition of Acquisition Proposal, or shall have resolved
to do so; or
(g) by NorAm, prior to approval of this Agreement by NorAm's
stockholders, if NorAm shall exercise the right specified in clause (ii) of
Section 4.3(a); provided that NorAm may not effect such termination
pursuant to this Section 7.1(g) unless and until (i) NorAm gives HII at
least one week's prior notice of its intention to effect such termination
pursuant to this Section 7.1(g); (ii) during such week, NorAm shall, and
shall cause its respective financial and legal advisors to, negotiate with
HII to make such adjustments in the terms and conditions of this Agreement
as would enable NorAm to proceed with the transactions contemplated herein;
and (iii) NorAm pays the amounts required by Section 7.2 concurrently with
such termination.
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any party hereto
as provided in Section 7.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of HII, HL&P, Merger
Sub or NorAm except (i) with respect to this Section 7.2, the second and
third sentences of Section 5.4, and Section 9.1, and (ii) to the extent
that such termination results from the willful breach (except as provided
in Section 9.8) by a party hereto of any of its representations or
warranties or of any of its covenants or agreements contained in this
Agreement.
(b) If (i) HII or NorAm terminates this Agreement pursuant to Section
7.1(f)(ii) or 7.1(g) or (ii) HII terminates this Agreement pursuant to
Section 7.1(b)(ii) or 7.1(f)(i) and at the time of such termination or
prior to the NorAm Stockholders' Meeting there shall have been an
Acquisition Proposal, NorAm shall, on the day of such termination, pay HII
a fee of $75 million in cash by wire transfer of immediately available
funds to an account designated by HII.
(c) If HII terminates this Agreement pursuant to Section 7.1(d)(i) or
7.1(d)(ii), in either case as a result of a willful breach of this
Agreement by NorAm, and Section 7.2(b)(ii) shall not apply, NorAm shall, on
the day of such termination, pay HII a fee of $35 million in cash by wire
transfer of immediately available funds to an account designated by HII.
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(d) If HII terminates this Agreement pursuant to Section 7.1(b)(ii) or
7.1(f)(i) and Section 7.2(b)(ii) shall not apply, NorAm shall, on the day
of such termination, pay HII a fee of $10 million in cash by wire transfer
of immediately available funds to an account designated by HII.
(e) If NorAm terminates this Agreement pursuant to Section 7.1(e)(ii)
or (iii), in either case as result of a willful breach of this Agreement by
HL&P, HII or Merger Sub, HII shall, on the day of such termination, pay
NorAm a fee of $35 million in cash by wire transfer of immediately
available funds to an account designated by NorAm.
(f) If NorAm terminates this Agreement pursuant to Section 7.1(b)(ii)
or 7.1(e)(i), HII shall, on the day of such termination, pay NorAm a fee of
$10 million in cash by wire transfer of immediately available funds to an
account designated by NorAm.
(g) If within 12 months of any termination described in Section 7.2(c)
or (d) above, NorAm agrees to or consummates an Acquisition Proposal, then
upon the signing of a definitive agreement relating to such an Acquisition
Proposal, or, if no such agreement is signed, then at the closing of such
Acquisition Proposal, NorAm shall pay HII a fee equal to $75 million in
cash minus any amounts as may have been previously paid by NorAm pursuant
to this Section 7.2 by wire transfer of immediately available funds to an
account designated by HII.
7.3 Expenses. The parties agree that the agreements contained in Section
7.2 are an integral part of the transactions contemplated by this Agreement and
constitute liquidated damages and not a penalty. Notwithstanding anything to the
contrary contained in Section 7.2, if one party fails to promptly pay to the
other any fee due under Section 7.2, in addition to any amounts paid or payable
pursuant to such section, the defaulting party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of Citibank, N.A. from the date such fee was required to be paid.
7.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Mergers
by the shareholders of HII and/or the stockholders of NorAm, but, after any such
approval, no amendment shall be made which by law requires further approval by
such shareholders or stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
ALTERNATIVE MERGER
8.1 Alternative Merger.
(a) If HL&P, after consultation with its legal counsel, determines
that upon consummation of the transactions contemplated herein the HII/HL&P
Merger Surviving Corporation would not be an exempt "public utility holding
company" under Section 3(a)(2) of the 1935 Act, or any rules or regulations
promulgated by the SEC under the 1935 Act, then notwithstanding the other
provisions of this Agreement, NorAm and HII shall be merged with and into
HL&P, with HL&P being the surviving corporation (the "Alternative Merger"),
and the other provisions of Sections 8.1 through 8.4 shall be
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applicable to NorAm, HII, HL&P and the Alternative Merger. Such
determination may be made before or after (i) NorAm's stockholders approve
this Agreement and the NorAm Merger (or in lieu thereof and only in the
circumstances set forth in this Section 8.1 or Section 8.5, the Alternative
Merger or the Second Alternative Merger, respectively) or (ii) HII's
shareholders approve this Agreement, the HII/HL&P Merger and the issuance
of the Stock Consideration in the NorAm Merger (or in lieu of the Mergers
and only in the circumstances set forth in this Section 8.1 or Section 8.5,
the Alternative Merger or the Second Alternative Merger, respectively).
(b) At the Alternative Merger Effective Time (as hereinafter defined),
each of NorAm and HII shall be merged with and into HL&P in accordance with
the TBCA and the DGCL. As soon as practicable at or after the Closing,
articles of merger, prepared and executed in accordance with the relevant
provisions of the TBCA, with respect to the Alternative Merger (the
"Alternative Merger Articles of Merger"), shall be filed with the Secretary
of State of the State of Texas and a certificate of merger, prepared and
executed in accordance with the relevant provisions of the DGCL, with
respect to the Alternative Merger (the "Alternative Merger Certificate of
Merger"), shall be filed with the Secretary of State of the State of
Delaware. The Alternative Merger Articles of Merger and the Alternative
Merger Certificate of Merger shall state that the Alternative Merger shall
become effective immediately upon the later of (i) the filing of the
Alternative Merger Articles of Merger with the Secretary of State of the
State of Texas and (ii) the filing of the Alternative Merger Certificate of
Merger with the Secretary of State of the State of Delaware, or, if agreed
to by HL&P, HII and NorAm, at such time thereafter as is provided in the
Alternative Merger Articles of Merger and the Alternative Merger
Certificate of Merger. The Alternative Merger shall become effective at the
later of (i) the time of the issuance of the certificate of merger with
respect to the Alternative Merger by the Secretary of State of the State of
Texas and (ii) the time that the Alternative Merger Certificate of Merger
shall be duly filed with the Secretary of State of the State of Delaware
or, if a later effective time was provided in the Alternative Merger
Articles of Merger and the Alternative Merger Certificate of Merger, such
later time (the "Alternative Merger Effective Time").
8.2 Effects of the Alternative Merger.
(a) At the Alternative Merger Effective Time: (i) each of NorAm and
HII shall be merged with and into HL&P, the separate existence of NorAm and
HII shall cease and HL&P shall continue as the surviving corporation
(NorAm, HII and HL&P are sometimes referred to herein as the "Alternative
Merger Constituent Corporations" and HL&P is sometimes referred to herein
as the "Alternative Merger Surviving Corporation"); (ii) Article I and
Article VI of the Restated Articles of Incorporation of HL&P shall be
amended as set forth in Exhibit A hereto and, as so amended, such Restated
Articles of Incorporation shall be the Articles of Incorporation of the
Alternative Merger Surviving Corporation; and (iii) the Bylaws of HII as in
effect immediately prior to the Alternative Merger Effective Time shall be
the Bylaws of the Alternative Merger Surviving Corporation.
(b) The directors and officers of HII at the Alternative Merger
Effective Time shall, from and after the Alternative Merger Effective Time,
be the initial directors and officers of the Alternative Merger Surviving
Corporation and shall serve until their successors have been duly elected
or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Alternative Merger Surviving Corporation's
Articles of Incorporation and Bylaws.
(c) The Alternative Merger shall have the effects set forth in this
Section 8.2 and the applicable provisions of the TBCA and the DGCL.
8.3 Effect of the Alternative Merger on the Capital Stock of the
Alternative Merger Constituent Corporations; Exchange of Certificates. All of
the provisions of this Agreement shall apply to the Alternative Merger, except
that (i) references to the HII/HL&P Merger Effective Time, the NorAm Merger
Effective Time and the Effective Time shall be deemed to be references to the
Alternative Merger Effective Time, (ii) references to the HII/HL&P Merger
Surviving Corporation and the NorAm Merger Surviving Corporation shall be deemed
to be references to the Alternative Merger Surviving Corporation and
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(iii) references to the HII/HL&P Merger and the NorAm Merger shall be deemed to
be references to the Alternative Merger.
8.4 Amendment to This Agreement. If, pursuant to Section 8.1(a), it is
decided that the Alternative Merger should be consummated, the parties hereto
shall forthwith execute an appropriate amendment to this Agreement, which
amendment (i) shall reflect any and all changes required to be made to this
Agreement so that the representations, warranties, covenants and agreements of
the parties contained herein relating to (x) the HII/HL&P Merger or the NorAm
Merger or (y) the conduct of the HII/HL&P Merger Surviving Corporation or the
NorAm Merger Surviving Corporation after the relevant Effective Time, shall
apply to the Alternative Merger and the Alternative Merger Surviving
Corporation, respectively, and (ii) shall not require further approval of the
stockholders of NorAm or of the shareholders of HII.
8.5 The Second Alternative Merger.
(a) The parties hereto acknowledge that in the absence of applicable
regulatory constraints under the 1935 Act, it would be preferable for NorAm
to merge with and into Merger Sub, with Merger Sub being the surviving
corporation, and for the HII/HL&P Merger not to be effected. Accordingly,
if, at the time at which all of the conditions to the parties' respective
obligations to consummate the Mergers have been satisfied or waived, no
such constraints under the 1935 Act shall require the Mergers to occur,
then notwithstanding the other provisions of this Agreement, the parties
hereto shall effect the Second Alternative Merger in lieu of the Mergers
(and in lieu of the Alternative Merger), and other provisions of Sections
8.5 through 8.8 shall be applicable to NorAm, HII, HL&P and the Second
Alternative Merger.
(b) At the Second Alternative Merger Effective Time (as hereinafter
defined), NorAm shall be merged with and into Merger Sub in accordance with
the DGCL. As soon as practicable at or after the Closing, a certificate of
merger, prepared and executed in accordance with the relevant provisions of
the DGCL, with respect to the Second Alternative Merger (the "Second
Alternative Merger Certificate of Merger"), shall be filed with the
Secretary of State of the State of Delaware. The Second Alternative Merger
Certificate of Merger shall state that the Second Alternative Merger shall
become effective immediately upon the filing of the Second Alternative
Merger Certificate of Merger with the Secretary of State of the State of
Delaware, or, if agreed to by HII and NorAm, at such time thereafter as is
provided in the Second Alternative Merger Certificate of Merger. The Second
Alternative Merger shall become effective at the time that the Second
Alternative Merger Certificate of Merger shall be duly filed with the
Secretary of State of the State of Delaware or, if a later effective time
was provided in the Second Alternative Merger Certificate of Merger, such
later time (the "Second Alternative Merger Effective Time").
8.6 Effects of the Second Alternative Merger.
(a) At the Second Alternative Merger Effective Time: (i) NorAm shall
be merged with and into Merger Sub, the separate existence of NorAm shall
cease and Merger Sub shall continue as the surviving corporation (NorAm and
Merger Sub are sometimes referred to herein as the "Second Alternative
Merger Constituent Corporations" and Merger Sub is sometimes referred to
herein as the "Second Alternative Merger Surviving Corporation"); (ii) the
Certificate of Incorporation of Merger Sub shall be amended to change the
name of Merger Sub to "NorAm Energy Corp.," and, as so amended, such
Certificate of Incorporation shall be the Certificate of Incorporation of
the Second Alternative Merger Surviving Corporation; and (iii) the Bylaws
of Merger Sub as in effect immediately prior to the Second Alternative
Merger Effective Time shall be the Bylaws of the Second Alternative Merger
Surviving Corporation.
(b) The directors of Merger Sub at the Second Alternative Merger
Effective Time shall, from and after the Second Alternative Merger
Effective Time, be the initial directors of the Second Alternative Merger
Surviving Corporation and the officers of NorAm at the Second Alternative
Merger Effective Time shall, from and after the Second Alternative Merger
Effective Time, be the initial officers of the Second Alternative Merger
Surviving Corporation, and such directors and officers shall serve until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or
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removal in accordance with the Second Alternative Merger Surviving
Corporation's Certificate of Incorporation and Bylaws.
(c) The Second Alternative Merger shall have the effects set forth in
this Section 8.6 and the applicable provisions of the DGCL.
8.7 Effect of the Second Alternative Merger on the Capital Stock of the
Second Alternative Merger Constituent Corporations; Exchange of
Certificates. All of the provisions of this Agreement shall apply to the Second
Alternative Merger, except that (i) references to the HII/HL&P Merger Effective
Time, the NorAm Merger Effective Time and the Effective Time shall be deemed to
be references to the Second Alternative Merger Effective Time, (ii) references
to the HII/HL&P Merger Surviving Corporation and the NorAm Merger Surviving
Corporation shall be deemed to be references to the Second Alternative Merger
Surviving Corporation, (iii) references to the HII/HL&P Merger and the NorAm
Merger shall be deemed to be references to the Second Alternative Merger and
(iv) references to HL&P Common Stock shall be deemed to be references to HII
Common Stock.
8.8 Amendment to This Agreement. If, pursuant to Section 8.5(a), it is
decided that the Second Alternative Merger should be consummated, the parties
hereto shall forthwith execute an appropriate amendment to this Agreement, which
amendment (i) shall reflect any and all changes required to be made to this
Agreement so that the representations, warranties, covenants and agreements of
the parties contained herein relating to (x) the HII/HL&P Merger or the NorAm
Merger or (y) the conduct of the HII/HL&P Merger Surviving Corporation or the
NorAm Merger Surviving Corporation after the relevant Effective Time, shall
apply to the Second Alternative Merger and the Second Alternative Merger
Surviving Corporation, respectively, and (ii) shall not require further approval
of the stockholders of NorAm or of the shareholders of HII.
ARTICLE IX
GENERAL PROVISIONS
9.1 Payment of Expenses. Each party hereto shall pay its own expenses
incident to preparing for entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Mergers
shall be consummated, except that the filing fees with respect to the Joint
Proxy Statement and the S-4 shall be shared equally by HL&P and NorAm.
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
and any liability for breach or violation thereof shall terminate absolutely and
be of no further force and effect at and as of the Effective Time, except for
the agreements contained in Article II, Sections 5.10 through 5.14 and 7.2 and
Articles VIII and IX, the agreements delivered pursuant to Section 5.8 and the
representations, covenants and agreements contained in Section 5.18. The
Confidentiality Agreements shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreements shall apply to
all information and material delivered hereunder.
9.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
(a) if to HII, HL&P or Merger Sub, to:
Houston Industries Incorporated
Houston Industries Plaza
1111 Louisiana Street
Houston, Texas 77002-5231
Attention: Chief Executive Officer
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with copies to:
Hugh Rice Kelly
Senior Vice President and General Counsel
Houston Industries Incorporated
Houston Industries Plaza
1111 Louisiana Street
Houston, Texas 77002-5231
Stephen A. Massad
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
and (b) if to NorAm, to:
NorAm Energy Corp.
1600 Smith Street
11th Floor
Houston, Texas 77002
Attention: Chief Executive Officer
with copies to:
Hubert Gentry, Jr.
Senior Vice President and General Counsel
NorAm Energy Corp.
1600 Smith Street
11th Floor
Houston, Texas 77002
Gerry D. Osterland
Jones, Day, Reavis & Pogue
555 West Fifth Street
Suite 4600
Los Angeles, California 90013-1025
9.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms 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." Unless the
context otherwise requires, "or" is disjunctive but not necessarily exclusive,
and words in the singular include the plural and in the plural include the
singular.
9.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreements and any other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereto and (b) except as provided
in Sections 5.9 through 5.12, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder. Notwithstanding the
foregoing or any provision in this Agreement to the contrary, each individual
who is an
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employee or former employee of NorAm or any NorAm Affiliate at the Effective
Time shall be a third party beneficiary with respect to the provisions of
Sections 5.9 through 5.11 relating to such employee's compensation or benefits
with full authority to enforce such provision as if such employee or former
employee were a party to this Agreement.
9.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas, without giving effect to the
principles of conflicts of law thereof, except to the extent the DGCL is
required to govern the NorAm Merger, the Alternative Merger or the Second
Alternative Merger, as the case may be.
9.8 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article VII hereof. Except as otherwise contemplated by this
Agreement, to the extent that a party hereto took an action inconsistent
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent authority, such
party shall not incur any liability or obligation unless such party breached its
obligations under Section 5.7 or did not in good faith seek to resist or object
to the imposition or entering of such order or judgment.
9.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations hereunder to any newly formed, direct
wholly owned Subsidiary of HII, which Subsidiary would then be substituted for
Merger Sub for purposes of this Agreement. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
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IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
HOUSTON INDUSTRIES INCORPORATED
By: /s/ DON D. JORDAN
------------------------------------
Don D. Jordan
Chairman and Chief Executive Officer
HOUSTON LIGHTING & POWER COMPANY
By: /s/ DON D. JORDAN
------------------------------------
Don D. Jordan
Chairman and Chief Executive Officer
HI MERGER, INC.
By: /s/ DON D. JORDAN
------------------------------------
Don D. Jordan
Chairman and Chief Executive Officer
NORAM ENERGY CORP.
By: /s/ T. MILTON HONEA
------------------------------------
T. Milton Honea
Chairman of the Board, President and
Chief Executive Officer
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EXHIBIT A
AMENDMENTS TO RESTATED ARTICLES OF INCORPORATION
OF
HOUSTON LIGHTING & POWER COMPANY
The following amendments to the Restated Articles of Incorporation of HL&P
will be made, subject to shareholder approval, at the HII/HL&P Merger Effective
Time or the Alternative Merger Effective Time, as the case may be, in order to
(i) change the name of the HII/HL&P Merger Surviving Corporation or the
Alternative Merger Surviving Corporation, as the case may be, (ii) change the
authorized capital stock of the HII/HL&P Merger Surviving Corporation or the
Alternative Merger Surviving Corporation, as the case may be, and (iii) change
the terms of the common stock of the HII/HL&P Merger Surviving Corporation or
the Alternative Merger Surviving Corporation, as the case may be.
FIRST: The first amendment alters or changes Article I of the Restated
Articles of Incorporation and the full text of such altered article is as
follows:
"The name of this corporation is 'Houston Industries Incorporated.' "
SECOND: The second amendment alters or changes the first paragraph of
Article VI of the Restated Articles of Incorporation and the full text of such
altered paragraph is as follows:
"The number of shares of the total authorized capital stock of the
Company is 720,000,000 shares, of which 10,000,000 shares are classified as
Preferred Stock, without par value, 10,000,000 shares are classified as
Preference Stock, without par value, and the balance of 700,000,000 shares
are classified as Common Stock, without par value."
THIRD: The third amendment alters or changes "Division D -- Common Stock"
of Article VI of the Restated Articles of Incorporation and the full text of
such altered division is as follows:
"1. Dividends. Dividends may be paid on the Common Stock, as the Board
of Directors shall from time to time determine, out of any assets of the
Company available for such dividends after full cumulative dividends on all
outstanding shares of capital stock of all series ranking senior to the
Common Stock in respect of dividends and liquidation rights (referred to in
this Division D as "stock ranking senior to the Common Stock") have been
paid, or declared and a sum sufficient for the payment thereof set apart,
for all past quarterly dividend periods, and after or concurrently with
making payment of or provision for dividends on the stock ranking senior to
the Common Stock for the then current quarterly dividend period.
2. Distribution of Assets. In the event of any liquidation,
dissolution or winding up of the Company, or any reduction or decrease of
its capital stock resulting in a distribution of assets to the holders of
its Common Stock, after there shall have been paid to or set aside for the
holders of the stock ranking senior to the Common Stock the full
preferential amounts to which they are respectively entitled, the holders
of the Common Stock shall be entitled to receive, pro rata, all of the
remaining assets of the Company available for distribution to its
stockholders. The Board of Directors, by vote of a majority of the members
thereof, may distribute in kind to the holders of the Common Stock such
remaining assets of the Company, or may sell, transfer or otherwise dispose
of all or any of the remaining property and assets of the Company to any
other corporation or other purchaser and receive payment therefor wholly or
partly in cash or property, and/or in stock of any such corporation, and/or
in obligations of such corporation or other purchaser, and may sell all or
any part of the consideration received therefor and distribute the same or
the proceeds thereof to the holders of the Common Stock.
3. Voting Rights. Subject to the voting rights expressly conferred
under prescribed conditions upon the stock ranking senior to the Common
Stock, the holders of the Common Stock shall exclusively possess full
voting power for the election of directors and for all other purposes."
60
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APPENDIX B
[LETTERHEAD OF CS FIRST BOSTON]
August 11, 1996
Board of Directors
Houston Industries Incorporated
1111 Louisiana Street
Houston, TX 77002
Members of the Board:
You have asked us to advise you with respect to the fairness
to Houston Industries Incorporated (the "Acquiror") from a financial point of
view of the consideration to be paid to the stockholders of NorAm Energy Corp.
(the "Company") pursuant to the terms of the Agreement and Plan of Merger,
dated as of August 11, 1996 (the "Merger Agreement"), among the Acquiror,
Houston Lighting & Power Company ("HL&P"), a wholly owned subsidiary of the
Acquiror, HI Merger, Inc. ("Merger Sub"), a direct wholly owned subsidiary of
the Acquiror, and the Company.
The Merger Agreement provides for, among other things, the
merger of the Acquiror with and into HL&P (the "Acquiror Merger") pursuant to
which HL&P will be the surviving corporation, immediately prior to the merger
of the Company with and into Merger Sub (the "Company Merger" and, together
with the Acquiror Merger, the "Merger") pursuant to which Merger Sub will be
the surviving corporation, provided that upon the consummation of the Merger,
HL&P would qualify as an exempt "public utility holding company" under Section
3(a)(2) of the Public Utility Holding Company Act of 1935, as amended (the
"1935 Act"). Alternatively, if upon consummation of the Merger HL&P would not
be an exempt "public utility holding company" under Section 3(a)(2) of the 1935
Act, the Merger Agreement provides for the merger of the Acquiror and the
Company with and into HL&P (the "Alternative Merger") pursuant to which HL&P
will be the surviving corporation. Further, if no regulatory constraints exist
under the 1935 Act requiring either the Merger or the Alternative Merger, the
Merger Agreement provides for, among other things, the merger of the Company
with and into Merger Sub (the "Second Alternative Merger" and, together with
the Merger and the Alternative Merger, the "Transaction") pursuant to which
Merger Sub will be the surviving corporation. Pursuant to the Merger
Agreement, each outstanding share of common stock, par value $0.625 per share,
of the Company (the "Company Common Stock") will be converted into the right to
receive (i) (a) in the case of the Merger or the Alternative Merger, HL&P
common stock, no par value, or (b) in the case of the Second Alternative
Merger, Acquiror common stock, no par value (the HL&P common stock or the
Acquiror common stock, as the case may be, hereinafter referred to as the
"Acquisition Company Stock"), the number of shares of which will be determined
based upon an exchange ratio (the "Exchange Ratio") as described below (the
"Stock Consideration"), or (ii) $16.00 in cash (the "Cash
<PAGE> 166
Consideration"), in each case as the holder thereof shall elect or be deemed to
have elected pursuant to the Merger Agreement and subject to certain proration
provisions, all as more fully described in the Merger Agreement (the Stock
Consideration and the Cash Consideration hereinafter referred to as the "Merger
Consideration").
Pursuant to the Exchange Ratio, and subject to applicable
proration provisions, each stockholder of the Company who elects Stock
Consideration will receive for each share of Company Common Stock (i) the
equivalent of $16.00 of Acquisition Company Stock if the average closing price
of Acquiror common stock ("Average Price") is greater than $21.25 but less than
$26.00 for each of the first 20 consecutive trading days in the period
commencing 25 trading days prior to the effective time of the Transaction (the
"Average Price Period"), (ii) 0.7529 shares of Acquisition Company Stock if the
Average Price is $21.25 or lower during the Average Price Period, or (iii)
0.6154 shares of Acquisition Company Stock if the Average Price is $26.00 or
greater during the Average Price Period. The number of shares of Company
Common Stock to be converted into the right to receive the Cash Consideration
in the Transaction shall be equal to 50% of the number of shares of Company
Common Stock outstanding. Furthermore, the number of shares of Company Common
Stock to be converted into the right to receive the Stock Consideration shall
be equal to 50% of the number of shares of Company Common Stock outstanding.
In arriving at our opinion, we have reviewed certain publicly
available business and financial information relating to the Acquiror and the
Company, as well as the Merger Agreement. We have also reviewed certain other
information, including financial forecasts, provided to us by the Company and
the Acquiror, and have met with the respective managements of the Company and
the Acquiror to discuss the businesses and prospects of the Company and the
Acquiror. We have evaluated the pro forma financial impact of the Transaction
on the Acquiror and have considered and relied upon the views of the respective
managements of the Acquiror and the Company concerning certain strategic
implications and operational benefits which might result from the Transaction
and upon the views of management of, and regulatory counsel for, the Acquiror
concerning the anticipated regulatory treatment to be accorded to the
Transaction.
We have also considered certain financial and stock market
data of the Acquiror and the Company, and we have compared the data with
similar data for other publicly held companies in businesses similar to those
of the Acquiror and the Company and we have considered, to the extent publicly
available, the financial terms of certain other business combinations and other
transactions which have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have relied upon its being complete and accurate in all material respects.
With respect to the financial forecasts, we have assumed that such forecasts
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of the Company and the Acquiror as
to the future financial performance of the Acquiror
<PAGE> 167
and the Company and the potential synergies and cost savings (including the
amount, timing and achievability) expected to result from the Transaction. In
addition, we have not made an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of the Acquiror or the Company, nor
have we been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon financial, economic, market and other conditions as they
exist and can be evaluated on the date hereof. We are not expressing any
opinion as to what the value of the Acquisition Company Stock actually will be
when issued to the Company's stockholders pursuant to the Transaction or the
prices at which Acquisition Company Stock will trade subsequent to the
Transaction. We have assumed, with your consent, that the Transaction will be
treated as a tax-free reorganization for federal income tax purposes. We have
assumed, with your consent and based upon the views of management of, and
regulatory counsel for, the Acquiror, that in the course of obtaining the
necessary regulatory and governmental approvals for the proposed Transaction, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the Transaction.
We have acted as financial advisor to the Acquiror in
connection with the Transaction and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. We will also receive a fee for rendering this opinion. In the
past, we have performed certain investment banking services for the Acquiror
and the Company and have received customary fees for such services. In the
ordinary course of our business, CS First Boston and its affiliates may
actively trade the debt and equity securities of both the Company and the
Acquiror for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of
the Board of Directors of the Acquiror in connection with its evaluation of the
Transaction and is not intended to be and shall not be deemed to constitute a
recommendation to any stockholder as to how such stockholder should vote on the
Transaction. This letter is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without CS First Boston's
prior written consent.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the Merger Consideration to be paid to the
stockholders of the Company in the Transaction is fair to the Acquiror from a
financial point of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
<PAGE> 168
APPENDIX C
[LETTERHEAD OF MERRILL LYNCH]
August 11, 1996
Board of Directors
NorAm Energy Corp.
1600 Smith, 11th Floor
Houston, TX 77002
Gentlemen:
NorAm Energy Corp. (the "Company"), Houston Industries Incorporated
(the "Acquiror") and a wholly owned subsidiary of the Acquiror (the
"Acquisition Sub"), propose to enter into an agreement (the "Agreement")
pursuant to which the Company will be merged with and into the Acquisition Sub
(with the Acquisition Sub as the surviving company) in a transaction (the
"Merger") in which holders of the Company's common stock, par value $0.625 per
share (a "Share"), will become entitled to elect to receive, subject to
proration, $16.00 per share in cash (the "Cash Consideration") or shares of the
Acquirors' common stock, no par value per share (the "Acquiror Shares"), in an
amount calculated in accordance with the immediately following sentence (the
"Stock Consideration" and together with the Cash Consideration, the
"Consideration"). With respect to the Stock Consideration, if the average
closing price of the Acquiror Shares for the 20 consecutive trading days
commencing 25 trading days prior to the closing date of the Merger (the
"Average Price") is less than or equal to $21.25, the Stock Consideration shall
equal 0.7529 Acquiror Shares; if the Average Price is greater than or equal to
$26.00, the Stock Consideration shall equal 0.6154 Acquiror Shares; and if the
Average Price is greater than $21.25 but less than $26.00, the Stock
Consideration shall equal the ratio determined by dividing $16.00 by such
Average Price. The Cash Consideration is limited to 50% of the Consideration.
The Agreement also provides alternative means by which the transaction between
the Company and the Acquiror may be effected, none of which alter the
Consideration to be received by the stockholders of the Company. The Merger is
expected to be considered by the respective stockholders of the Company and the
Acquiror at special stockholders' meetings and consummated on or after the date
of such meetings, subject to receipt of applicable regulatory approvals.
You have asked us whether, in our opinion, the proposed Consideration
to be received by the holders of the Shares other than the Acquiror and its
affiliates pursuant to the Merger, taken as a whole, is fair to such
stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December
31, 1995 and the Company's Form 10-Q and the related unaudited
financial information for the quarterly period ending March
31, 1996;
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December
31, 1995, the Acquiror's Form 10-Q and the related unaudited
financial information for the quarterly period ending March
31, 1996, and a draft of the Acquiror's form 10-Q dated August
8, 1996 and the related unaudited financial information for
the quarterly period ending June 30, 1996;
<PAGE> 169
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Company and the Acquiror, furnished to us by
the Company and the Acquiror, respectively;
(4) Conducted discussions with members of senior management of the
Company and the Acquiror concerning their respective
businesses, assets, properties, liabilities and prospects;
(5) Reviewed the historical market prices and trading activity for
the Shares and the common stock of the Acquiror and compared
them with that of certain publicly traded companies which we
deemed to be reasonably similar to the Company and the
Acquiror, respectively;
(6) Compared the results of operations of the Company and the
Acquiror with that of certain companies which we deemed to be
reasonably similar to the Company and the Acquiror,
respectively;
(7) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of
certain other mergers and acquisitions which we deemed to be
relevant;
(8) Reviewed a draft of the Agreement dated August 8, 1996; and
(9) Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company and the Acquiror, and we have not independently verified such
information or undertaken an independent evaluation or appraisal of the assets
or liabilities of the Company or the Acquiror, nor were we provided with any
such evaluations or appraisals. With respect to the financial forecasts
furnished by the Company and the Acquiror, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgments of the Company's or the Acquiror's respective managements as to the
expected future financial performance of the Company or the Acquiror, as the
case may be. We have also assumed that the final form of the Agreement will not
differ in any material respect from the draft of the Agreement reviewed by us.
We have further assumed that the Merger qualifies as a reorganization under
Internal Revenue Code Section 368(a), that the Stock Consideration will be
tax-free to recipients who receive all Stock Consideration and that the
accounting treatment of the Merger is purchase accounting.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
We have, in the past, provided financial advisory and financing
services to the Company and have received fees for the rendering of such
services. In the ordinary course of our business, we may actively trade the
securities of the Company or the Acquiror for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
<PAGE> 170
On the basis of, and subject to the foregoing, we are of the opinion
that the proposed Consideration to be received by the holders of the Shares
other than the Acquiror and its affiliates pursuant to the Merger, taken as a
whole, is fair to such stockholders from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Richard K. Gordon
------------------------------------
Richard K. Gordon
Vice Chairman
Investment Banking Group
<PAGE> 171
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
sec. 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
subsection (g) of sec. 251), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
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constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock
D-3
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to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX E
GLOSSARY OF CERTAIN TERMS RELATING TO THE TRANSACTION
Unless the context otherwise requires, the following terms shall have the
following meanings when used in this Joint Proxy Statement/Prospectus.
"1935 Act" means the Public Utility Holding Company Act of 1935.
"Affiliates" means all persons who, at the time of the NorAm Special
Meeting, may be deemed "affiliates" of NorAm as that term is used in paragraphs
(c) and (d) of Rule 145 under the Securities Act.
"Alternative Mergers" means, collectively, the First Alternative Merger and
the Second Alternative Merger.
"Antitrust Division" means the Antitrust Division of the United States
Department of Justice.
"Average Price" of HI Common Stock means the average of the closing sales
prices per share of HI Common Stock, rounded to four decimal places, as reported
in The Wall Street Journal's New York Stock Exchange Composite Transactions
Reports, for each of the first 20 consecutive trading days in the period
commencing 25 trading days prior to the Closing Date.
"Basic Mergers" means, collectively, the HI/HL&P Merger and the NorAm
Merger.
"Cash Consideration" means $16.00, the cash amount per share of NorAm
Common Stock, plus any increase thereon caused by the Closing occurring after
May 11, 1997.
"Cash Election" means the election of a record holder of NorAm Common Stock
(other than dissenting shares and shares owned directly or indirectly by NorAm
or HI) to receive the Cash Consideration in exchange for such holder's shares of
NorAm Common Stock.
"Cash Election Number" means the aggregate number of shares of NorAm Common
Stock to be converted into the right to receive Cash Consideration, which shall
be equal to (i) 50% of the number of shares of NorAm Common Stock outstanding
immediately prior to the Effective Time less (ii) the sum of (A) the number of
Dissenting Shares determined as of the Effective Time, (B) the number of shares
of NorAm Common Stock owned immediately prior to the Effective Time directly or
indirectly by NorAm or HI (which will be canceled) and (C) the number of shares
of NorAm Common Stock to be exchanged for cash in lieu of fractional shares.
"Cash Election Shares" means the aggregate number of shares of NorAm Common
Stock with respect to which a Cash Election is made.
"Certificate" means each certificate representing shares of NorAm Common
Stock surrendered to the Exchange Agent prior to the Effective Time.
"Closing" means the closing of the Transaction.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"CS First Boston" means CS First Boston Corporation.
"DGCL" means the Delaware General Corporation Law, as amended.
"Dissenting Shares" means shares of NorAm Common Stock as to which
appraisal rights have been perfected under Delaware law.
"Effective Time" means the effective time of the Transaction.
"Election Deadline" means 5:00 p.m., New York City time, on the trading day
immediately preceding the Closing Date.
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"Election Form" means the form on which a record holder of NorAm Common
Stock makes the Cash Election, the Stock Election or the Non-Election.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exchange Agent" means First Chicago Trust Company of New York.
"FERC" means the Federal Energy Regulatory Commission.
"First Alternative Merger" means the merger of NorAm and HI with and into
HL&P, with HL&P being the surviving corporation and being renamed "Houston
Industries Incorporated," effected in lieu of the Basic Mergers.
"FTC" means United States Federal Trade Commission.
"Governmental Entity" means any court, governmental, regulatory or
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign.
"HI" means Houston Industries Incorporated, a Texas corporation.
"HI Common Stock" means the common stock, without par value, of HI.
"HI Energy" means Houston Industries Energy, Inc., a Delaware corporation
and wholly owned subsidiary of HI.
"HI/HL&P Merger" means the merger of HI into HL&P.
"HI Record Date" means October 18, 1996.
"HI Right" means each right associated with each share of HI Common Stock
to purchase one two-hundredth of a share of Series A Preference Stock, without
par value, of HI.
"HI Special Meeting" means the meeting of shareholders of HI to be held on
December 17, 1996 with respect to, among other things, approval by HI's
shareholders of the Merger Agreement and the transactions contemplated thereby.
"HL&P" means Houston Lighting & Power Company, a Texas corporation and
wholly owned subsidiary of HI.
"Houston" means the surviving corporation of the HI/HL&P Merger.
"Houston Articles of Amendment" means the proposed Amendment to the HL&P
Restated Articles of Incorporation attached as Exhibit A to the Merger
Agreement, which is attached hereto as Appendix A, which will become effective
at the HI/HL&P Merger Effective Time.
"Houston Articles of Incorporation" means the HL&P Restated Articles of
Incorporation, as amended and after giving effect to the Houston Articles of
Amendment.
"Houston Common Stock" means the common stock, without par value, of
Houston.
"Houston Right" means the preferred share purchase right associated with
each share of Houston Common Stock.
"Houston Rights Certificates" means certificates representing Houston
Rights.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Injunction" means any temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction, any order of any Governmental Entity having jurisdiction over
HL&P, HI or NorAm, or any other legal restraint or prohibition preventing or
making illegal the consummation of the Transaction.
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"Material Adverse Effect" or "Material Adverse Change" means, in the case
of NorAm or HI, as the case may be, any effect or change that is or, as far as
can be reasonably determined, may be, materially adverse to the business,
operations, assets, prospects, condition (financial or otherwise) or results of
operations of such party and its subsidiaries taken as a whole.
"Merger Agreement" means the Agreement and Plan of Merger, dated August 11,
1996, as amended, by and among HI, HL&P, Merger Sub and NorAm, a copy of which
is attached to this Joint Proxy Statement/Prospectus as Appendix A.
"Merger Consideration" means the Cash Consideration or the Stock
Consideration, as each NorAm stockholder has elected or deemed to have elected.
"Merger Sub" means HI Merger, Inc., a Delaware corporation and wholly owned
subsidiary of HI.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"NEM" means NorAm Energy Management, Inc., a Delaware corporation, and
certain affiliates.
"NES" means NorAm Energy Services, Inc., a Delaware corporation, and
certain affiliates.
"NFS" means NorAm Field Services Corp., a Delaware corporation, and certain
affiliates.
"Non-Election" means the indication by a record holder of NorAm Common
Stock (other than dissenting shares and shares owned directly or indirectly by
NorAm or HI) that such record holder has no preference as to the receipt of Cash
Consideration or Stock Consideration in exchange for such holder's shares of
NorAm Common Stock.
"Non-Election Shares" means the shares of NorAm Common Stock in respect of
which a Non-Election is made or shares of NorAm Common Stock to which the holder
thereof has tried to avail itself of the appraisal right provisions of Delaware
law but has failed to comply properly with such provisions.
"NorAm" means NorAm Energy Corp., a Delaware corporation.
"NorAm Common Stock" means the common stock, par value $0.625 per share, of
NorAm.
"NorAm Incentive Plan" means the NorAm 1994 Incentive Equity Plan.
"NorAm Merger" means the merger of NorAm into Merger Sub.
"NorAm Record Date" means October 18, 1996.
"NorAm Special Meeting" means the meeting of stockholders of NorAm to be
held on December 17, 1996 with respect to, among other things, approval by
NorAm's stockholders of the Merger Agreement and the transactions contemplated
thereby.
"NRC" means the Nuclear Regulatory Commission.
"NYSE" means the New York Stock Exchange, Inc.
"Registration Statement" means the registration statement on Form S-4
(together with all amendments, supplements and exhibits thereto) filed by HL&P
and HI pursuant to the Securities Act with respect to the Houston Common Stock
or, if the Second Alternative Merger is effected in lieu of the Basic Mergers,
HI Common Stock to be issued pursuant to the Merger Agreement.
"Rights Agent" means Texas Commerce Bank National Association.
"Rights Agreement" means the Rights Agreement dated as of July 11, 1990
between HI and the Rights Agent, as to be amended and restated on the Closing
Date.
"SEC" means the United States Securities and Exchange Commission.
"Second Alternative Merger" means the merger of NorAm with and into Merger
Sub, with Merger Sub being the surviving corporation and being renamed "NorAm
Energy Corp.," effected in lieu of the Basic Mergers.
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<PAGE> 178
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selected Alternative Merger" means one of the Alternative Mergers effected
in lieu of the Basic Mergers.
"Series A Preference Stock" means the Series A Preference Stock, without
par value, of Houston.
"Special Meetings" means, collectively, the HI Special Meeting and the
NorAm Special Meeting.
"Stock Consideration" means the amount of stock per share of NorAm Common
Stock, as determined at the Effective Time, which will not be less than 0.6154
shares nor more than 0.7529 shares of Houston Common Stock and a corresponding
number of Houston Rights (the actual number depending upon the average daily
closing prices of HI Common Stock on the NYSE during a 20-trading-day period
commencing 25 trading days prior to the Closing Date of the Transaction).
"Stock Election" means the election of a record holder of NorAm Common
Stock (other than dissenting shares and shares owned directly or indirectly by
NorAm or HI) to receive the Stock Consideration in exchange for such holder's
shares of NorAm Common Stock.
"Stock Election Number" means the aggregate number of shares of NorAm
Common Stock to be converted into the right to receive Stock Consideration,
which shall be equal to (i) the number of shares of NorAm Common Stock
outstanding immediately prior to the Effective Time less (ii) the sum of the
Cash Election Number and the sum of (A) the number of Dissenting Shares
determined as of the Effective Time, (B) the number of shares of NorAm Common
Stock owned immediately prior to the Effective Time directly or indirectly by
NorAm or HI (which will be canceled) and (C) the number of shares of NorAm
Common Stock to be exchanged for cash in lieu of fractional shares.
"Stock Election Shares" means the aggregate number of shares of NorAm
Common Stock with respect to which a Stock Election is made.
"TBCA" means the Texas Business Corporation Act, as amended.
"Transaction" means the Basic Mergers or one of the Alternative Mergers
effected in lieu of the Basic Mergers.
"Unit" means a unit consisting of one-thousandth of a share of Preference
Stock purchasable by the registered holders of Rights at a purchase price of
$42.50 per Unit, subject to adjustment.
"U.S. Holder" means a citizen or resident of the United States or a
domestic corporation who holds HI Common Stock and exchanges such stock for
Houston Common Stock pursuant to the Transaction.
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<PAGE> 179
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02.A.(16) and Article 2.02-1 of the Texas Business Corporation
Act and Article V of HI's Amended and Restated Bylaws (which will be Houston's
Bylaws) provide HI with broad powers and authority to indemnify its directors
and officers and to purchase and maintain insurance for such purposes. Pursuant
to such statutory and Bylaw provisions, HI has purchased insurance against
certain costs of indemnification that may be incurred by it and by its officers
and directors.
Additionally, Article IX of HL&P's Restated Articles of Incorporation
(which will be, as amended by the Houston Articles of Amendment, the Articles of
Incorporation of Houston) provides that a director of HL&P is not liable to HL&P
or its shareholders for monetary damages for any act or omission in the
director's capacity as director, except that Article IX does not eliminate or
limit the liability of a director for (i) breaches of such director's duty of
loyalty to HL&P and its shareholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or knowing violations of law, (iii)
transactions from which a director receives an improper benefit, irrespective of
whether the benefit resulted from an action taken within the scope of the
director's office, (iv) acts or omissions for which liability is specifically
provided by statute and (v) acts relating to unlawful stock repurchases or
payments of dividends.
Article IX also provides that any subsequent amendments to Texas statutes
that further limit the liability of directors will inure to the benefit of the
directors, without any further action by shareholders. Any repeal or
modification of Article IX shall not adversely affect any right of protection of
a director of the Company existing at the time of the repeal or modification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibits not incorporated by reference to a prior filing are designated by
a cross (+); all exhibits not so designated are incorporated herein by reference
to a prior filing as indicated. Exhibits designated by an asterisk (*) have been
previously filed.
(i) Houston Lighting & Power Company
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
2(a) Articles of Merger of Form 10-Q for the quarter 1-3187 2
Utility Fuels, Inc. with ended September 30, 1993
HL&P, effective October 8,
1993
2(b) Agreement and Plan of Form 8-K dated August 11, 1-3187 2(a)
Merger dated as of August 1996
11, 1996 among HL&P, HI,
Merger Sub and NorAm
2(c)+ Amendment to Agreement and
Plan of Merger dated as of
October 23, 1996 among
HL&P, HI, Merger Sub and
NorAm
3(a) Restated Articles of Form 10-Q for the quarter 1-3187 3
Incorporation of HL&P dated ended June 30, 1993
May 11, 1993
</TABLE>
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<PAGE> 180
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
3(b)+* Articles of Amendment to
the Articles of
Incorporation of HL&P dated
August 9, 1996
3(c)+ Form of Articles of
Amendment to the Articles
of Incorporation of HL&P
3(d) Amended and Restated Bylaws Form 10-Q for the quarter 1-3187 3
of HL&P (as of June 5, ended June 30, 1996
1996)
4(a)(1) Mortgage and Deed of Trust Form S-7 filed on August 2-59748 2(b)
dated November 1, 1944 25, 1977
between HL&P and South
Texas Commercial National
Bank of Houston (Texas
Commerce Bank National
Association, as successor
trustee), as Trustee, as
amended and supplemented by
20 Supplemental Indentures
thereto
4(a)(2) Twenty-First through Form 10-K for the year 1-3187 4(a)(2)
Fiftieth Supplemental ended December 31, 1989
Indentures to HL&P Mortgage
and Deed of Trust
4(a)(3) Fifty-First Supplemental Form 10-Q for the quarter 1-3187 4(a)
Indenture dated March 25, ended June 30, 1991
1991 to HL&P Mortgage and
Deed of Trust
4(a)(4) Fifty-Second through Fifty- Form 10-Q for the quarter 1-3187 4
Fifth Supplemental ended March 31, 1992
Indentures, each dated
March 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(5) Fifty-Sixth and Form 10-Q for the quarter 1-3187 4
Fifty-Seventh Supplemental ended September 30, 1992
Indentures, each dated
October 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(6) Fifty-Eighth and Form 10-Q for the quarter 1-3187 4
Fifty-Ninth Supplemental ended March 31, 1993
Indentures, each dated
March 1, 1993, to HL&P
Mortgage and Deed of Trust
4(a)(7) Sixtieth Supplemental Form 10-Q for the quarter 1-3187 4
Indenture dated as of July ended June 30, 1993
1, 1993 to HL&P Mortgage
and Deed of Trust
4(a)(8) Sixty-First through HL&P's Form 10-K for the 1-3187 4(a)(8)
Sixty-Third Supplemental year ended December 31,
Indentures to HL&P Mortgage 1993
and Deed of Trust
</TABLE>
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<PAGE> 181
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
4(a)(9) Sixty-Fourth and HL&P's Form 10-K for the 1-3187 4(a)(9)
Sixty-Fifth Supplemental year ended December 31,
Indentures, each dated as 1995
of July 1, 1995, to HL&P
Mortgage and Deed of Trust
4(b)+ Form of Rights Agreement
dated as of July 11, 1990,
as to be amended and
restated as of the Closing
Date, between Houston and
Texas Commerce Bank
National Association, as
Rights Agent, which
includes form of Statement
of Resolution Establishing
Series of Shares Designated
Series A Preference Stock
and form of Rights
Certificate
5+* Opinion of Baker & Botts,
L.L.P.
8+ Opinion of Baker & Botts,
L.L.P. as to certain tax
matters
</TABLE>
There have not been filed as exhibits to this Registration Statement on
Form S-4 certain long-term debt instruments, including indentures, under which
the total amount of securities do not exceed 10 percent of the total assets of
HL&P. HL&P hereby agrees to furnish a copy of any such instrument to the SEC
upon request.
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(a) Executive Benefit Plan of HI's Form 10-Q for the 1-7629 10(a)(1)
HI and First and Second quarter ended March 31, 10(a)(2)
Amendments thereto 1987 and
(effective as of June 2, 10(a)(3)
1982, July 1, 1984, May 7,
1986, respectively)
10(b)(1) Executive Incentive HI's Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1991
(effective as of January 1,
1982)
10(b)(2) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(a)
10(b)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(b)(3) Second Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(b)(3)
10(b)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(b)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(b)(4)
10(b)(1) (effective as of ended December 31, 1994
September 7, 1994)
</TABLE>
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<PAGE> 182
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(c)(1) Executive Incentive HI's Form 10-Q for the 1-7629 10(b)(1)
Compensation Plan of HI quarter ended March 31,
(effective as of January 1, 1987
1985)
10(c)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(b)(3)
10(c)(1) (effective as of ended December 31, 1988
January 1, 1985)
10(c)(3) Second Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(3)
10(c)(1) (effective as of ended December 31, 1991
January 1, 1985)
10(c)(4) Third Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(c)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(c)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(5)
10(c)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(c)(6) Fifth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(6)
10(c)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(d) Executive Incentive HI's Form 10-Q for the 1-7629 10(b)(2)
Compensation Plan of HL&P quarter ended March 31,
(effective as of January 1, 1987
1985)
10(e)(1) Executive Incentive HI's Form 10-Q for the 1-7629 10(b)
Compensation Plan of HI quarter ended June 30, 1989
(effective as of January 1,
1989)
10(e)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(e)(2)
10(e)(1) (effective as of ended December 31, 1991
January 1, 1989)
10(e)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(c)
10(e)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(e)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(4)
10(e)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(e)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(e)(5)
10(e)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(1) Executive Incentive HI's Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1990
(effective as of January 1,
1991)
10(f)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(2)
10(f)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(f)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(d)
10(f)(1) (effective as of quarter ended March 31,
January 1, 1991) 1992
</TABLE>
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<PAGE> 183
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(f)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(4)
10(f)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(f)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(5)
10(f)(1) (effective as of ended December 31, 1992
January 1, 1993)
10(f)(6) Fifth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(6)
10(f)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(a)
10(f)(1) quarter ended June 30, 1995
10(f)(8) Seventh Amendment to HI's Form 10-Q for the 1-7629 10(a)
Exhibit 10(f)(1) quarter ended June 30, 1996
10(g)(1) Benefit Restoration Plan of HI's Form 10-Q for the 1-7629 10(c)
HI (effective as of June 1, quarter ended March 31,
1985) 1987
10(g)(2) Benefit Restoration Plan of HI's Form 10-K for the year 1-7629 10(g)(2)
HI, as amended and restated ended December 31, 1991
(effective as of January 1,
1988)
10(g)(3) Benefit Restoration Plan of HI's Form 10-K for the year 1-7629 10(g)(3)
HI, as amended and restated ended December 31, 1991
(effective as of July 1,
1991)
10(h)(1) Deferred Compensation Plan HI's Form 10-Q for the 1-7629 10(d)
of HI (effective as of quarter ended March 31,
September 1, 1985) 1987
10(h)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(d)(2)
10(h)(1) (effective as of ended December 31, 1990
September 1, 1985)
10(h)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(e)
10(h)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(h)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(h)(4)
10(h)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(h)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(h)(5)
10(h)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(h)(6) Fifth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(d)
10(h)(1) quarter ended June 30, 1995
10(h)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(h)(1) (effective as of quarter ended June 30, 1996
December 1, 1995)
10(i)(1) Deferred Compensation Plan HI's Form 10-Q for the 1-7629 10(a)
of HI (effective as of quarter ended June 30, 1989
January 1, 1989)
10(i)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(e)(3)
10(i)(1) (effective as of ended December 31, 1989
January 1, 1989)
</TABLE>
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<PAGE> 184
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(i)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(f)
10(i)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(i)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(i)(4)
10(i)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(i)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(i)(5)
10(i)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(i)(6) Fifth Amendment Exhibit HI's Form 10-Q for the 1-7629 10(c)
10(i)(1) quarter ended June 30, 1995
10(i)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(c)
10(i)(1) (effective as of quarter ended June 30, 1996
December 1, 1995)
10(j)(1) Deferred Compensation Plan HI's Form 10-K for the year 1-7629 10(d)(3)
of HI (effective as of ended December 31, 1990
January 1, 1991)
10(j)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(2)
10(j)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(j)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(g)
10(j)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(j)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(4)
10(j)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(j)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(5)
10(j)(1) (effective as of ended December 31, 1993
December 1, 1993)
10(j)(6) Fifth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(6)
10(j)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(j)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(j)(1) quarter ended June 30, 1995
10(j)(8) Seventh Amendment to HI's Form 10-Q for the 1-7629 10(d)
Exhibit 10(j)(1) (effective quarter ended June 30, 1996
as of December 1, 1995)
10(k)(1) Long-Term Incentive HI's Form 10-Q for the 1-7629 10(c)
Compensation Plan of HI quarter ended June 30, 1989
(effective as of January 1,
1989)
10(k)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(2)
10(k)(1) (effective as of ended December 31, 1989
January 1, 1990)
10(k)(3) Second Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(k)(3)
10(k)(1) (effective as of ended December 31, 1992
December 22, 1992)
</TABLE>
II-6
<PAGE> 185
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(l) Form of stock option HI's Form 10-Q for the 1-7629 10(h)
agreement for nonqualified quarter ended March 31,
stock options granted under 1992
HI's 1989 Long-Term
Incentive Compensation Plan
10(m) Forms of restricted stock HI's Form 10-Q for the 1-7629 10(i)
agreement for restricted quarter ended March 31,
stock granted under HI's 1992
1989 Long-Term Incentive
Compensation Plan
10(n)(1) 1994 Long-Term Incentive HI's Form 10-K for the year 1-7629 10(n)(1)
Compensation Plan of HI ended December 31, 1993
(effective as of January 1,
1994)
10(n)(2) Form of Stock Option HI's Form 10-K for the year 1-7629 10(n)(2)
Agreement for Nonqualified ended December 31, 1993
Stock Options Granted under
HI's 1994 Long-Term
Incentive Compensation Plan
10(o)(1) Savings Restoration Plan of HI's Form 10-K for the year 1-7629 10(f)
HI (effective as of January ended December 31, 1990
1, 1991)
10(o)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(l)(2)
10(o)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(p) Director Benefits Plan, HI's Form 10-K for the year 1-7629 10(m)
effective as of January 1, ended December 31, 1991
1992
10(q)(1) Executive Life Insurance HI's Form 10-K for the year 1-7629 10(q)
Plan of HI (effective as of ended December 31, 1993
January 1, 1994)
10(q)(2) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(e)
10(q)(1) quarter ended June 30, 1995
10(r) Employment and Supplemental HI's Form 10-Q for the 1-7629 10(f)
Benefits Agreement between quarter ended March 31,
HL&P and Hugh Rice Kelly 1987
10(s)(1) HI's Master Savings Trust, HI's Form 10-Q for the 1-7629 10
as Amended and Restated quarter ended March 31,
effective as of January 1, 1994
1994, between HL&P and
Texas Commerce Bank
National Association
10(s)(2) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(a)
10(s)(1) quarter ended March 31,
1995
10(s)(3) Termination of Houston HI's Form 10-Q for the 1-7629 10(a)
Industries Incorporated quarter ended September 30,
Savings Plan and Trust 1995
Agreement as to KBLCOM
Incorporated Effective as
of June 30, 1995
</TABLE>
II-7
<PAGE> 186
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(s)(4) Houston Industries HI's Form 10-K for the year 1-7629 10(s)(4)
Incorporated Savings Trust ended December 31, 1995
(As Amended and Restated
Effective July 1, 1995)
10(s)(5) ESOP Trust Agreement HI's Form 10-K for the year 1-7629 10(j)(2)
between HI and State Street ended December 31, 1990
Bank and Trust Company, as
ESOP Trustee, dated October
5, 1990
10(s)(6) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(s)(5) quarter ended March 31,
1995
10(s)(7) Note Purchase Agreement HI's Form 10-K for the year 1-7629 10(j)(3)
between HI and the ESOP ended December 31, 1990
Trustee, dated as of
October 5, 1990
10(s)(8) Stock Purchase Agreement HI's Form 10-K for the year 1-7629 10(j)(4)
between HI and the ESOP ended December 31, 1991
Trustee, dated as of
October 9, 1990
10(t) Employment Agreement dated Form 10-K for the year 1-3187 10(t)
April 5, 1993 between HL&P ended December 31, 1994
and William T. Cottle
10(u) Form of Severance Form 10-K for the year 1-3187 10(u)
Agreements dated December ended December 31, 1994
22, 1994 between HI and (i)
the following executive
officers: Hugh Rice Kelly,
R. Steve Letbetter, William
T. Cottle and David M.
McClanahan, and (ii) the
following directors: Jack
D. Greenwade, Lee W. Hogan,
Stephen W. Nueve, Stephen
C. Schaeffer and Robert L.
Waldrop
10(v) Houston Industries HI's Form 10-K for the year 1-7629 10(z)
Incorporated Executive ended December 31, 1995
Deferred Compensation
Trust, effective as of
December 19, 1995
10(y) Agreement dated June 14, HI's Form 10-K for the year 1-7629 10(aa)
1991 between HI and David ended December 31, 1995
M. McClanahan
10(z) Agreement dated June 6, Form 10-Q for the quarter 1-7629 10(a)
1994 between HI and Don D. ended June 30, 1994
Jordan
10(aa)+* Supplemental Pension
Agreement dated July 17,
1996 between HI and Lee W.
Hogan
23(a)+ Consent of Deloitte &
Touche LLP
</TABLE>
II-8
<PAGE> 187
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
23(b)+ Consent of Coopers &
Lybrand L.L.P.
23(c)+* Consent of T. Milton Honea,
Robert C. Hanna, O.
Holcombe Crosswell and
Joseph M. Grant as Persons
Named to Become Directors
23(d)+ Consent of Baker & Botts,
L.L.P. (Included in
Exhibits 5 and 8)
24+* Powers of Attorney
99(a)+ Form of HI Proxy
99(b)+ Form of NorAm Proxy
99(c)+ Form of Election Form
99(d)+* Consent of CS First Boston
99(e)+* Consent of Merrill Lynch
</TABLE>
(ii) Houston Industries Incorporated
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
2(a) Articles of Merger of Form 10-Q for the quarter 1-7629 2
Houston Industries Finance, ended June 30, 1993
Inc. with HI, effective
June 8, 1993
2(b) Agreement and Plan of Form 8-K dated August 11, 1-7629 2(a)
Merger dated as of August 1996
11, 1996 among HL&P, HI,
Merger Sub and NorAm
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
2(c)+ Amendment to Agreement and
Plan of Merger dated as of
October 23, 1996 among
HL&P, HI, Merger Sub and
NorAm
3(a) Restated Articles of Form 10-Q for the quarter 1-7629 3
Incorporation of HI ended June 30, 1993
(Restated as of May 1993)
3(b) Amended and Restated Bylaws Form 10-Q for the quarter 1-7629 3
of HI (as of May 22, 1996) ended June 30, 1996
4(a)(1) Mortgage and Deed of Trust Form S-7 of HL&P filed on 2-59748 2(b)
dated November 1, 1944 August 25, 1977
between HL&P and South
Texas Commercial National
Bank of Houston (Texas
Commerce Bank National
Association, as successor
trustee), as Trustee, as
amended and supplemented by
20 Supplemental Indentures
thereto
</TABLE>
II-9
<PAGE> 188
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
4(a)(2) Twenty-First through HL&P's Form 10-K for the 1-3187 4(a)(2)
Fiftieth Supplemental year ended December 31,
Indentures to HL&P Mortgage 1989
and Deed of Trust
4(a)(3) Fifty-First Supplemental HL&P's Form 10-Q for the 1-3187 4(a)
Indenture dated March 25, quarter ended June 30, 1991
1991 to HL&P Mortgage and
Deed of Trust
4(a)(4) Fifty-Second through Fifty- HL&P's Form 10-Q for the 1-3187 4
Fifth Supplemental quarter ended March 31,
Indentures, each dated 1992
March 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(5) Fifty-Sixth and HL&P's Form 10-Q for the 1-3187 4
Fifty-Seventh Supplemental quarter ended September 30,
Indentures, each dated 1992
October 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(6) Fifty-Eighth and HL&P's Form 10-Q for the 1-3187 4
Fifty-Ninth Supplemental quarter ended March 31,
Indentures, each dated as 1993
of March 1, 1993 to HL&P
Mortgage and Deed of Trust
4(a)(7) Sixtieth Supplemental HL&P's Form 10-Q for the 1-3187 4
Indenture dated as of July quarter ended June 30, 1993
1, 1993 to HL&P Mortgage
and Deed of Trust
4(a)(8) Sixty-First through HL&P's Form 10-K for the 1-3187 4(a)(8)
Sixty-Third Supplemental year ended December 31,
Indentures to HL&P Mortgage 1993
and Deed of Trust
4(a)(9) Sixty-Fourth and HL&P's Form 10-K for the 1-3187 4(a)(9)
Sixty-Fifth Supplemental year ended December 31,
Indentures, each dated as 1995
of July 1, 1995, to HL&P
Mortgage and Deed of Trust
4(b)(1) Rights Agreement dated July Form 8-K dated July 11, 1-7629 4(a)(1)
11, 1990 between HI and 1990
Texas Commerce Bank
National Association, as
Rights Agent (Rights
Agent), which includes form
of Statement of Resolution
Establishing Series of
Shares designated Series A
Preference Stock and form
of Rights Certificate
4(b)(2) Agreement and Appointment Form 8-K dated July 11, 1-7629 4(a)(2)
of Agent dated as of July 1990
11, 1990 between HI and the
Rights Agent
</TABLE>
II-10
<PAGE> 189
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
4(b)(3)+ Form of Rights Agreement
dated as of July 11, 1990,
as to be amended and
restated as of the Closing
Date, between Houston and
Texas Commerce Bank
National Association, as
Rights Agent, which
includes form of Statement
of Resolution Establishing
Series of Shares Designated
Series A Preference Stock
and form of Rights
Certificate
4(c) Indenture dated as of April Form 10-Q for the quarter 1-7629 4(b)
1, 1991 between HI and ended June 30, 1991
NationsBank of Texas,
National Association, as
Trustee
4(d) Agreement and Plan of Form 8-K dated January 26, 1-7629 2(a)
Merger dated as of January 1995
26, 1995 among KBLCOM, HI,
Time Warner and TW KBLCOM
Acquisition Corp.
5+* Opinion of Baker & Botts,
L.L.P.
8+ Opinion of Baker & Botts,
L.L.P. as to certain tax
matters
</TABLE>
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, HI has not filed as
exhibits to this Registration Statement on Form S-4 certain long-term debt
instruments, under which the total amount of securities authorized do not exceed
10 percent of the total assets of HI and its subsidiaries on a consolidated
basis. HI hereby agrees to furnish a copy of any such instrument to the SEC upon
request.
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(a) Executive Benefit Plan of Form 10-Q for the quarter 1-7629 10(a)(1)
HI and First and Second ended March 31, 1987 10(a)(2)
Amendments thereto and
(effective as of June 2, 10(a)(3)
1982, July 1, 1984, May 7,
1986, respectively)
10(b)(1) Executive Incentive Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1991
(effective as of January 1,
1982)
10(b)(2) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(a)
10(b)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(b)(3) Second Amendment to Exhibit Form 10-K for the year 1-7629 10(b)(3)
10(b)(1) (effective as of ended December 31, 1992
November 4, 1992)
</TABLE>
II-11
<PAGE> 190
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(b)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(b)(4)
10(b)(1) (effective as of ended December 31, 1995
September 7, 1994)
10(c)(1) Executive Incentive Form 10-Q for the quarter 1-7629 10(b)(1)
Compensation Plan of HI ended March 31, 1987
(effective as of January 1,
1985)
10(c)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(b)(3)
10(c)(1) (effective as of ended December 31, 1988
January 1, 1985)
10(c)(3) Second Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(3)
10(c)(1) (effective as of ended December 31, 1991
January 1, 1985)
10(c)(4) Third Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(c)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(c)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(5)
10(c)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(c)(6) Fifth Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(6)
10(c)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(d) Executive Incentive Form 10-Q for the quarter 1-7629 10(b)(2)
Compensation Plan of HL&P ended March 31, 1987
(effective as of January 1,
1985)
10(e)(1) Executive Incentive Form 10-Q for the quarter 1-7629 10(b)
Compensation Plan of HI ended June 30, 1989
(effective as of January 1,
1989)
10(e)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(e)(2)
10(e)(1) (effective as of ended December 31, 1991
January 1, 1989)
10(e)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(c)
10(e)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(e)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(4)
10(e)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(e)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(e)(5)
10(e)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(1) Executive Incentive Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1990
(effective as of January 1,
1991)
10(f)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(2)
10(f)(1) (effective as of ended December 31, 1991
January 1, 1991)
</TABLE>
II-12
<PAGE> 191
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(f)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(d)
10(f)(1) (effective as of ended March 31, 1992
January 1, 1991)
10(f)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(4)
10(f)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(f)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(5)
10(f)(1) (effective as of ended December 31, 1992
January 1, 1993)
10(f)(6) Fifth Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(6)
10(f)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(a)
10(f)(1) ended June 30, 1995
10(f)(8) Seventh Amendment to Form 10-Q for the quarter 1-7629 10(a)
Exhibit 10(f)(1) ended June 30, 1996
10(g)(1) Benefit Restoration Plan of Form 10-Q for the quarter 1-7629 10(c)
HI, (effective as of June ended March 31, 1987
1, 1985)
10(g)(2) Benefit Restoration Plan of Form 10-K for the year 1-7629 10(g)(2)
HI, as amended and restated ended December 31, 1991
(effective as of January 1,
1988)
10(g)(3) Benefit Restoration Plan of Form 10-K for the year 1-7629 10(g)(3)
HI, as amended and restated ended December 31, 1991
(effective as of July 1,
1991)
10(h)(1) Deferred Compensation Plan Form 10-Q for the quarter 1-7629 10(d)
of HI (effective as of ended March 31, 1987
September 1, 1985)
10(h)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(d)(2)
10(h)(1) (effective as of ended December 31, 1990
September 1, 1985)
10(h)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(e)
10(h)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(h)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(h)(4)
10(h)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(h)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(h)(5)
10(h)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(h)(6) Fifth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(d)
10(h)(1) ended June 30, 1995
10(h)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(h)(1) (effective as of ended June 30, 1996
December 1, 1995)
10(i)(1) Deferred Compensation Plan Form 10-Q for the quarter 1-7629 10(a)
of HI (effective as of ended June 30, 1989
January 1, 1989)
</TABLE>
II-13
<PAGE> 192
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(i)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(e)(3)
10(i)(1) (effective as of ended December 31, 1989
January 1, 1989)
10(i)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(f)
10(i)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(i)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(i)(4)
10(i)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(i)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(i)(5)
10(i)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(i)(6) Fifth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(c)
10(i)(1) ended June 30, 1995
10(i)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(c)
10(i)(1) (effective as of ended June 30, 1996
December 1, 1995)
10(j)(1) Deferred Compensation Plan Form 10-K for the year 1-7629 10(d)(3)
of HI (effective as of ended December 31, 1990
January 1, 1991)
10(j)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(2)
10(j)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(j)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(g)
10(j)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(j)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(4)
10(j)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(j)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(5)
10(j)(1) (effective as of ended December 31, 1993
December 1, 1993)
10(j)(6) Fifth Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(6)
10(j)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(j)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(j)(1) ended June 30, 1995
10(j)(8) Seventh Amendment to Form 10-Q for quarter ended 1-7629 10(d)
Exhibit 10(j)(1) (effective June 30, 1996
as of December 1, 1995)
10(k)(1) Long-Term Incentive Form 10-Q for the quarter 1-7629 10(c)
Compensation Plan of HI ended June 30, 1989
(effective as of January 1,
1989)
10(k)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(2)
10(k)(1) (effective as of ended December 31, 1989
January 1, 1990)
10(k)(3) Second Amendment to Exhibit Form 10-K for the year 1-7629 10(k)(3)
10(k)(1) (effective as of ended December 31, 1992
December 22, 1992)
</TABLE>
II-14
<PAGE> 193
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(l) Form of stock option Form 10-Q for the quarter 1-7629 10(h)
agreement for nonqualified ended March 31, 1992
stock options granted under
HI's 1989 Long-Term
Incentive Compensation Plan
10(m) Forms of restricted stock Form 10-Q for the quarter 1-7629 10(i)
agreement for restricted ended March 31, 1992
stock granted under HI's
1989 Long-Term Incentive
Compensation Plan
10(n)(1) 1994 Long-Term Incentive Form 10-K for the year 1-7629 10(n)(1)
Compensation Plan of HI ended December 31, 1993
(effective as of January 1,
1994)
10(n)(2) Form of stock option Form 10-K for the year 1-7629 10(n)(2)
agreement for non-qualified ended December 31, 1993
stock options granted under
HI's 1994 Long-Term
Incentive Compensation Plan
10(o)(1) Savings Restoration Plan of Form 10-K for the year 1-7629 10(f)
HI (effective as of January ended December 31, 1990
1, 1991)
10(o)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(l)(2)
10(o)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(p) Director Benefits Plan Form 10-K for the year 1-7629 10(m)
(effective as of January 1, ended December 31, 1991
1992)
10(q)(1) Executive Life Insurance Form 10-K for the year 1-7629 10(q)
Plan of HI (effective as of ended December 31, 1993
January 1, 1994)
10(q)(2) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10
10(q)(1) ended June 30, 1995
10(r) Employment and Supplemental Form 10-Q for the quarter 1-7629 10(f)
Benefits Agreement between ended March 31, 1987
HL&P and Hugh Rice Kelly
10(s)(1) Houston Industries Master Form 10-Q for the quarter 1-7629 10
Savings Trust, as Amended ended March 31, 1994
and Restated Effective
January 1, 1994, between HI
and Texas Commerce Bank
National Association
10(s)(2) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(a)
10(s)(1) ended March 31, 1995
10(s)(3) Termination of Houston Form 10-Q for the quarter 1-7629 10(a)
Industries Incorporated ended September 30, 1995
Savings Plan and Trust
Agreement as to KBLCOM
Incorporated Effective as
of June 30, 1995
</TABLE>
II-15
<PAGE> 194
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(s)(4) Houston Industries Form 10-K for the year 1-7629 10(s)(4)
Incorporated Savings Trust ended December 31, 1995
(As Amended and Restated
Effective July 1, 1995)
10(s)(5) ESOP Trust Agreement Form 10-K for the year 1-7629 10(j)(2)
between HI and State Street ended December 31, 1990
Bank and Trust Company, as
ESOP Trustee, dated October
5, 1990
10(s)(6) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(s)(5) ended March 31, 1995
10(s)(7) Note Purchase Agreement Form 10-K for the year 1-7629 10(j)(3)
between HI and the ESOP ended December 31, 1990
Trustee, dated as of
October 5, 1990
10(s)(8) Stock Purchase Agreement Form 10-K for the year 1-7629 10(j)(4)
between HI and the ESOP ended December 31, 1991
Trustee, dated as of
October 5, 1990
10(t) Agreement dated June 6, Form 10-Q for the quarter 1-7629 10(a)
1994 between HI and Don D. ended June 30, 1994
Jordan
10(u) Agreement dated June 6, Form 10-Q for the quarter 1-7629 10(b)
1994 between HI and Don D. ended June 30, 1994
Sykora
10(v) Letter Agreement between HI Form 10-K for the year 1-7629 10(v)
and Jack Trotter ended December 31, 1994
10(w) Form of Severance Form 10-K for the year 1-7629 10(w)
Agreements dated December ended December 31, 1994
22, 1994 between HI and
each of the following
executive officers: Hugh
Rice Kelly, R. Steve
Letbetter, David M.
McClanahan, Lee W. Hogan
and William T. Cottle
10(x) Employment Agreement dated Form 10-K for the year 1-3187 10(t)
April 5, 1993 between HL&P ended December 31, 1994
and William T. Cottle
10(y)(1) Stockholder's Agreement Schedule 13-D dated July 6, 5-19351 2
dated as of July 6, 1995 1995
between HI and Time Warner
Inc.
10(y)(2) Registration Rights Schedule 13-D dated July 6, 5-19351 3
Agreement dated as of July 1995
6, 1995 between HI and Time
Warner Inc.
</TABLE>
II-16
<PAGE> 195
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(y)(3) Certificate of Voting Schedule 13-D dated July 6, 5-19351 4
Powers, Designations, 1995
Preferences and Relative
Participating, Optional or
Other Special rights, and
Qualifications, Limitations
or Restrictions Thereof of
Series D. Convertible
Preferred Stock of Time
Warner Inc.
10(z) Houston Industries Form 10-K for the year 1-7629 10(z)
Incorporated Executive ended December 31, 1995
Deferred Compensation
Trust, effective as of
December 19, 1995
10(aa) Agreement dated June 14, Form 10-K for the year 1-7629 10(aa)
1991 between HI and David ended December 31, 1995
M. McClanahan
10(bb)+* Supplemental Pension
Agreement dated July 17,
1996 between HI and Lee W.
Hogan
11(a) Computation of Earnings Per Form 10-K for the year 1-7629 11
Common Share and Common ended December 31, 1995
Equivalent Share
11(b) Computation of Earnings Per Form 10-Q for the quarter 1-7629 11
Common Share and Common ended June 30, 1996
Equivalent Share
21 Subsidiaries of HI Form 10-K for the year 1-7629 21
ended December 31, 1995
23(a)+ Consent of Deloitte &
Touche LLP
23(b)+ Consent of Coopers &
Lybrand L.L.P.
23(c)+* Consent of T. Milton Honea,
Robert C. Hanna, O.
Holcombe Crosswell and
Joseph M. Grant as Persons
Named to Become Directors
23(d)+ Consent of Baker & Botts,
L.L.P. (Included in
Exhibits 5 and 8)
24+* Powers of Attorney
99(a)+ Form of HI Proxy
99(b)+ Form of NorAm Proxy
99(c)+ Form of Election Form
99(d)+* Consent of CS First Boston
99(e)+* Consent of Merrill Lynch
</TABLE>
(b) Financial Statement Schedule
Not Applicable
II-17
<PAGE> 196
(c) Reports, Opinions or Appraisals
1.1 Opinion of CS First Boston Corporation (attached as Appendix B to
the Joint Proxy Statement/Prospectus and incorporated by reference herein).
1.2 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(attached as Appendix C to the Joint Proxy Statement/Prospectus and
incorporated by reference herein).
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period on which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrants pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual reports pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The registrants undertake that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is
II-18
<PAGE> 197
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons for
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by either registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-19
<PAGE> 198
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF
TEXAS, ON OCTOBER 28, 1996.
HOUSTON LIGHTING & POWER COMPANY
(Registrant)
By: /s/ DON D. JORDAN
------------------------------------
(Don D. Jordan,
Chairman and Chief Executive
Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON OCTOBER 28, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ DON D. JORDAN Chairman and Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer and
(Don D. Jordan) Principal Financial Officer)
/s/ MARY P. RICCIARDELLO Vice President and Comptroller
- --------------------------------------------- (Principal Accounting Officer)
(Mary P. Ricciardello)
* Director
- ---------------------------------------------
(William T. Cottle)
/s/ CHARLES R. CRISP Director
- ---------------------------------------------
(Charles R. Crisp)
/s/ JACK D. GREENWADE Director
- ---------------------------------------------
(Jack D. Greenwade)
* Director
- ---------------------------------------------
(Lee W. Hogan)
/s/ HUGH RICE KELLY Director
- ---------------------------------------------
(Hugh Rice Kelly)
/s/ R. STEVE LETBETTER Director
- ---------------------------------------------
(R. Steve Letbetter)
/s/ DAVID M. MCCLANAHAN Director
- ---------------------------------------------
(David M. McClanahan)
/s/ STEPHEN W. NAEVE Director
- ---------------------------------------------
(Stephen W. Naeve)
/s/ S.C. SCHAEFFER Director
- ---------------------------------------------
(S.C. Schaeffer)
* Director
- ---------------------------------------------
(R. L. Waldrop)
* By /s/ HUGH RICE KELLY
-----------------------------------------
(Hugh Rice Kelly)
Attorney-in-Fact
</TABLE>
II-20
<PAGE> 199
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE HAS DULY CAUSED
THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS,
ON OCTOBER 28, 1996.
HOUSTON INDUSTRIES INCORPORATED
(Registrant)
By: /s/ DON D. JORDAN
------------------------------------
(Don D. Jordan,
Chairman, Chief Executive Officer
and President)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON OCTOBER 28, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ DON D. JORDAN Chairman, Chief Executive Officer and
- --------------------------------------------- President and Director (Principal Executive
(Don D. Jordan) Officer)
/s/ STEPHEN W. NAEVE Senior Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer)
(Stephen W. Naeve)
/s/ MARY P. RICCIARDELLO Vice President and Comptroller
- --------------------------------------------- (Principal Accounting Officer)
(Mary P. Ricciardello)
* Director
- ---------------------------------------------
(James A. Baker, III)
* Director
- ---------------------------------------------
(Richard E. Balzhiser)
* Director
- ---------------------------------------------
(Milton Carroll)
* Director
- ---------------------------------------------
(John T. Cater)
* Director
- ---------------------------------------------
(Robert J. Cruikshank)
* Director
- ---------------------------------------------
(Linnet F. Deily)
* Director
- ---------------------------------------------
(Lee W. Hogan)
* Director
- ---------------------------------------------
(Howard W. Horne)
</TABLE>
II-21
<PAGE> 200
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ R. STEVE LETBETTER Director
- ---------------------------------------------
(R. Steve Letbetter)
* Director
- ---------------------------------------------
(Alexander F. Schilt)
* Director
- ---------------------------------------------
(Jack T. Trotter)
* Director
- ---------------------------------------------
(Bertram Wolfe)
* By /s/ HUGH RICE KELLY
-----------------------------------------
(Hugh Rice Kelly)
Attorney-in-Fact
</TABLE>
II-22
<PAGE> 201
INDEX TO EXHIBITS
Exhibits not incorporated by reference to a prior filing are designated by
a cross (+); all exhibits not so designated are incorporated herein by reference
to a prior filing as indicated. Exhibits designated by an asterisk (*) have been
previously filed.
(i) Houston Lighting & Power Company
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
2(a) Articles of Merger of Form 10-Q for the quarter 1-3187 2
Utility Fuels, Inc. with ended September 30, 1993
HL&P, effective October 8,
1993
2(b) Agreement and Plan of Form 8-K dated August 11, 1-3187 2(a)
Merger dated as of August 1996
11, 1996 among HL&P, HI,
Merger Sub and NorAm
2(c)+ Amendment to Agreement and
Plan of Merger dated as of
October 23, 1996 among
HL&P, HI, Merger Sub and
NorAm
3(a) Restated Articles of Form 10-Q for the quarter 1-3187 3
Incorporation of HL&P dated ended June 30, 1993
May 11, 1993
3(b)+* Articles of Amendment to
the Articles of
Incorporation of HL&P dated
August 9, 1996
3(c)+ Form of Articles of
Amendment to the Articles
of Incorporation of HL&P
3(d) Amended and Restated Bylaws Form 10-Q for the quarter 1-3187 3
of HL&P (as of June 5, ended June 30, 1996
1996)
4(a)(1) Mortgage and Deed of Trust Form S-7 filed on August 2-59748 2(b)
dated November 1, 1944 25, 1977
between HL&P and South
Texas Commercial National
Bank of Houston (Texas
Commerce Bank National
Association, as successor
trustee), as Trustee, as
amended and supplemented by
20 Supplemental Indentures
thereto
4(a)(2) Twenty-First through Form 10-K for the year 1-3187 4(a)(2)
Fiftieth Supplemental ended December 31, 1989
Indentures to HL&P Mortgage
and Deed of Trust
4(a)(3) Fifty-First Supplemental Form 10-Q for the quarter 1-3187 4(a)
Indenture dated March 25, ended June 30, 1991
1991 to HL&P Mortgage and
Deed of Trust
</TABLE>
<PAGE> 202
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
4(a)(4) Fifty-Second through Fifty- Form 10-Q for the quarter 1-3187 4
Fifth Supplemental ended March 31, 1992
Indentures, each dated
March 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(5) Fifty-Sixth and Form 10-Q for the quarter 1-3187 4
Fifty-Seventh Supplemental ended September 30, 1992
Indentures, each dated
October 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(6) Fifty-Eighth and Form 10-Q for the quarter 1-3187 4
Fifty-Ninth Supplemental ended March 31, 1993
Indentures, each dated
March 1, 1993, to HL&P
Mortgage and Deed of Trust
4(a)(7) Sixtieth Supplemental Form 10-Q for the quarter 1-3187 4
Indenture dated as of July ended June 30, 1993
1, 1993 to HL&P Mortgage
and Deed of Trust
4(a)(8) Sixty-First through HL&P's Form 10-K for the 1-3187 4(a)(8)
Sixty-Third Supplemental year ended December 31,
Indentures to HL&P Mortgage 1993
and Deed of Trust
4(a)(9) Sixty-Fourth and HL&P's Form 10-K for the 1-3187 4(a)(9)
Sixty-Fifth Supplemental year ended December 31,
Indentures, each dated as 1995
of July 1, 1995, to HL&P
Mortgage and Deed of Trust
4(b)+ Form of Rights Agreement
dated as of July 11, 1990,
as to be amended and
restated as of the Closing
Date, between Houston and
Texas Commerce Bank
National Association, as
Rights Agent, which
includes form of Statement
of Resolution Establishing
Series of Shares Designated
Series A Preference Stock
and form of Rights
Certificate
5+* Opinion of Baker & Botts,
L.L.P.
8+ Opinion of Baker & Botts,
L.L.P. as to certain tax
matters
</TABLE>
There have not been filed as exhibits to this Registration Statement on
Form S-4 certain long-term debt instruments, including indentures, under which
the total amount of securities do not exceed 10 percent of the total assets of
HL&P. HL&P hereby agrees to furnish a copy of any such instrument to the SEC
upon request.
<PAGE> 203
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(a) Executive Benefit Plan of HI's Form 10-Q for the 1-7629 10(a)(1)
HI and First and Second quarter ended March 31, 10(a)(2)
Amendments thereto 1987 and
(effective as of June 2, 10(a)(3)
1982, July 1, 1984, May 7,
1986, respectively)
10(b)(1) Executive Incentive HI's Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1991
(effective as of January 1,
1982)
10(b)(2) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(a)
10(b)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(b)(3) Second Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(b)(3)
10(b)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(b)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(b)(4)
10(b)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(c)(1) Executive Incentive HI's Form 10-Q for the 1-7629 10(b)(1)
Compensation Plan of HI quarter ended March 31,
(effective as of January 1, 1987
1985)
10(c)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(b)(3)
10(c)(1) (effective as of ended December 31, 1988
January 1, 1985)
10(c)(3) Second Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(3)
10(c)(1) (effective as of ended December 31, 1991
January 1, 1985)
10(c)(4) Third Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(c)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(c)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(5)
10(c)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(c)(6) Fifth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(6)
10(c)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(d) Executive Incentive HI's Form 10-Q for the 1-7629 10(b)(2)
Compensation Plan of HL&P quarter ended March 31,
(effective as of January 1, 1987
1985)
10(e)(1) Executive Incentive HI's Form 10-Q for the 1-7629 10(b)
Compensation Plan of HI quarter ended June 30, 1989
(effective as of January 1,
1989)
10(e)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(e)(2)
10(e)(1) (effective as of ended December 31, 1991
January 1, 1989)
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(e)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(c)
10(e)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(e)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(c)(4)
10(e)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(e)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(e)(5)
10(e)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(1) Executive Incentive HI's Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1990
(effective as of January 1,
1991)
10(f)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(2)
10(f)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(f)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(d)
10(f)(1) (effective as of quarter ended March 31,
January 1, 1991) 1992
10(f)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(4)
10(f)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(f)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(5)
10(f)(1) (effective as of ended December 31, 1992
January 1, 1993)
10(f)(6) Fifth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(6)
10(f)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(a)
10(f)(1) quarter ended June 30, 1995
10(f)(8) Seventh Amendment to HI's Form 10-Q for the 1-7629 10(a)
Exhibit 10(f)(1) quarter ended June 30, 1996
10(g)(1) Benefit Restoration Plan of HI's Form 10-Q for the 1-7629 10(c)
HI (effective as of June 1, quarter ended March 31,
1985) 1987
10(g)(2) Benefit Restoration Plan of HI's Form 10-K for the year 1-7629 10(g)(2)
HI, as amended and restated ended December 31, 1991
(effective as of January 1,
1988)
10(g)(3) Benefit Restoration Plan of HI's Form 10-K for the year 1-7629 10(g)(3)
HI, as amended and restated ended December 31, 1991
(effective as of July 1,
1991)
10(h)(1) Deferred Compensation Plan HI's Form 10-Q for the 1-7629 10(d)
of HI (effective as of quarter ended March 31,
September 1, 1985) 1987
10(h)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(d)(2)
10(h)(1) (effective as of ended December 31, 1990
September 1, 1985)
10(h)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(e)
10(h)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
</TABLE>
<PAGE> 205
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(h)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(h)(4)
10(h)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(h)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(h)(5)
10(h)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(h)(6) Fifth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(d)
10(h)(1) quarter ended June 30, 1995
10(h)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(h)(1) (effective as of quarter ended June 30, 1996
December 1, 1995)
10(i)(1) Deferred Compensation Plan HI's Form 10-Q for the 1-7629 10(a)
of HI (effective as of quarter ended June 30, 1989
January 1, 1989)
10(i)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(e)(3)
10(i)(1) (effective as of ended December 31, 1989
January 1, 1989)
10(i)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(f)
10(i)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(i)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(i)(4)
10(i)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(i)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(i)(5)
10(i)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(i)(6) Fifth Amendment Exhibit HI's Form 10-Q for the 1-7629 10(c)
10(i)(1) quarter ended June 30, 1995
10(i)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(c)
10(i)(1) (effective as of quarter ended June 30, 1996
December 1, 1995)
10(j)(1) Deferred Compensation Plan HI's Form 10-K for the year 1-7629 10(d)(3)
of HI (effective as of ended December 31, 1990
January 1, 1991)
10(j)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(2)
10(j)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(j)(3) Second Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(g)
10(j)(1) (effective as of quarter ended March 31,
March 30, 1992) 1992
10(j)(4) Third Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(4)
10(j)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(j)(5) Fourth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(5)
10(j)(1) (effective as of ended December 31, 1993
December 1, 1993)
10(j)(6) Fifth Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(j)(6)
10(j)(1) (effective as of ended December 31, 1994
September 7, 1994)
</TABLE>
<PAGE> 206
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(j)(7) Sixth Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(j)(1) quarter ended June 30, 1995
10(j)(8) Seventh Amendment to HI's Form 10-Q for the 1-7629 10(d)
Exhibit 10(j)(1) (effective quarter ended June 30, 1996
as of December 1, 1995)
10(k)(1) Long-Term Incentive HI's Form 10-Q for the 1-7629 10(c)
Compensation Plan of HI quarter ended June 30, 1989
(effective as of January 1,
1989)
10(k)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(f)(2)
10(k)(1) (effective as of ended December 31, 1989
January 1, 1990)
10(k)(3) Second Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(k)(3)
10(k)(1) (effective as of ended December 31, 1992
December 22, 1992)
10(l) Form of stock option HI's Form 10-Q for the 1-7629 10(h)
agreement for nonqualified quarter ended March 31,
stock options granted under 1992
HI's 1989 Long-Term
Incentive Compensation Plan
10(m) Forms of restricted stock HI's Form 10-Q for the 1-7629 10(i)
agreement for restricted quarter ended March 31,
stock granted under HI's 1992
1989 Long-Term Incentive
Compensation Plan
10(n)(1) 1994 Long-Term Incentive HI's Form 10-K for the year 1-7629 10(n)(1)
Compensation Plan of HI ended December 31, 1993
(effective as of January 1,
1994)
10(n)(2) Form of Stock Option HI's Form 10-K for the year 1-7629 10(n)(2)
Agreement for Nonqualified ended December 31, 1993
Stock Options Granted under
HI's 1994 Long-Term
Incentive Compensation Plan
10(o)(1) Savings Restoration Plan of HI's Form 10-K for the year 1-7629 10(f)
HI (effective as of January ended December 31, 1990
1, 1991)
10(o)(2) First Amendment to Exhibit HI's Form 10-K for the year 1-7629 10(l)(2)
10(o)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(p) Director Benefits Plan, HI's Form 10-K for the year 1-7629 10(m)
effective as of January 1, ended December 31, 1991
1992
10(q)(1) Executive Life Insurance HI's Form 10-K for the year 1-7629 10(q)
Plan of HI (effective as of ended December 31, 1993
January 1, 1994)
10(q)(2) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(e)
10(q)(1) quarter ended June 30, 1995
10(r) Employment and Supplemental HI's Form 10-Q for the 1-7629 10(f)
Benefits Agreement between quarter ended March 31,
HL&P and Hugh Rice Kelly 1987
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(s)(1) HI's Master Savings Trust, HI's Form 10-Q for the 1-7629 10
as Amended and Restated quarter ended March 31,
effective as of January 1, 1994
1994, between HL&P and
Texas Commerce Bank
National Association
10(s)(2) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(a)
10(s)(1) quarter ended March 31,
1995
10(s)(3) Termination of Houston HI's Form 10-Q for the 1-7629 10(a)
Industries Incorporated quarter ended September 30,
Savings Plan and Trust 1995
Agreement as to KBLCOM
Incorporated Effective as
of June 30, 1995
10(s)(4) Houston Industries HI's Form 10-K for the year 1-7629 10(s)(4)
Incorporated Savings Trust ended December 31, 1995
(As Amended and Restated
Effective July 1, 1995)
10(s)(5) ESOP Trust Agreement HI's Form 10-K for the year 1-7629 10(j)(2)
between HI and State Street ended December 31, 1990
Bank and Trust Company, as
ESOP Trustee, dated October
5, 1990
10(s)(6) First Amendment to Exhibit HI's Form 10-Q for the 1-7629 10(b)
10(s)(5) quarter ended March 31,
1995
10(s)(7) Note Purchase Agreement HI's Form 10-K for the year 1-7629 10(j)(3)
between HI and the ESOP ended December 31, 1990
Trustee, dated as of
October 5, 1990
10(s)(8) Stock Purchase Agreement HI's Form 10-K for the year 1-7629 10(j)(4)
between HI and the ESOP ended December 31, 1991
Trustee, dated as of
October 9, 1990
10(t) Employment Agreement dated Form 10-K for the year 1-3187 10(t)
April 5, 1993 between HL&P ended December 31, 1994
and William T. Cottle
10(u) Form of Severance Form 10-K for the year 1-3187 10(u)
Agreements dated December ended December 31, 1994
22, 1994 between HI and (i)
the following executive
officers: Hugh Rice Kelly,
R. Steve Letbetter, William
T. Cottle and David M.
McClanahan, and (ii) the
following directors: Jack
D. Greenwade, Lee W. Hogan,
Stephen W. Nueve, Stephen
C. Schaeffer and Robert L.
Waldrop
</TABLE>
<PAGE> 208
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(v) Houston Industries HI's Form 10-K for the year 1-7629 10(z)
Incorporated Executive ended December 31, 1995
Deferred Compensation
Trust, effective as of
December 19, 1995
10(y) Agreement dated June 14, HI's Form 10-K for the year 1-7629 10(aa)
1991 between HI and David ended December 31, 1995
M. McClanahan
10(z) Agreement dated June 6, Form 10-Q for the quarter 1-7629 10(a)
1994 between HI and Don D. ended June 30, 1994
Jordan
10(aa)+* Supplemental Pension
Agreement dated July 17,
1996 between HI and Lee W.
Hogan
23(a)+ Consent of Deloitte &
Touche LLP
23(b)+ Consent of Coopers &
Lybrand L.L.P.
23(c)+* Consent of T. Milton Honea,
Robert C. Hanna, O.
Holcombe Crosswell and
Joseph M. Grant as Persons
Named to Become Directors
23(d)+ Consent of Baker & Botts,
L.L.P. (Included in
Exhibits 5 and 8)
24+* Powers of Attorney
99(a)+ Form of HI Proxy
99(b)+ Form of NorAm Proxy
99(c)+ Form of Election Form
99(d)+* Consent of CS First Boston
99(e)+* Consent of Merrill Lynch
</TABLE>
(ii) Houston Industries Incorporated
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
2(a) Articles of Merger of Form 10-Q for the quarter 1-7629 2
Houston Industries Finance, ended June 30, 1993
Inc. with HI, effective
June 8, 1993
2(b) Agreement and Plan of Form 8-K dated August 11, 1-7629 2(a)
Merger dated as of August 1996
11, 1996 among HL&P, HI,
Merger Sub and NorAm
2(c)+ Amendment to Agreement and
Plan of Merger dated as of
October 23, 1996 among
HL&P, HI, Merger Sub and
NorAm
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
3(a) Restated Articles of Form 10-Q for the quarter 1-7629 3
Incorporation of HI ended June 30, 1993
(Restated as of May 1993)
3(b) Amended and Restated Bylaws Form 10-Q for the quarter 1-7629 3
of HI (as of May 22, 1996) ended June 30, 1996
4(a)(1) Mortgage and Deed of Trust Form S-7 of HL&P filed on 2-59748 2(b)
dated November 1, 1944 August 25, 1977
between HL&P and South
Texas Commercial National
Bank of Houston (Texas
Commerce Bank National
Association, as successor
trustee), as Trustee, as
amended and supplemented by
20 Supplemental Indentures
thereto
4(a)(2) Twenty-First through HL&P's Form 10-K for the 1-3187 4(a)(2)
Fiftieth Supplemental year ended December 31,
Indentures to HL&P Mortgage 1989
and Deed of Trust
4(a)(3) Fifty-First Supplemental HL&P's Form 10-Q for the 1-3187 4(a)
Indenture dated March 25, quarter ended June 30, 1991
1991 to HL&P Mortgage and
Deed of Trust
4(a)(4) Fifty-Second through Fifty- HL&P's Form 10-Q for the 1-3187 4
Fifth Supplemental quarter ended March 31,
Indentures, each dated 1992
March 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(5) Fifty-Sixth and HL&P's Form 10-Q for the 1-3187 4
Fifty-Seventh Supplemental quarter ended September 30,
Indentures, each dated 1992
October 1, 1992, to HL&P
Mortgage and Deed of Trust
4(a)(6) Fifty-Eighth and HL&P's Form 10-Q for the 1-3187 4
Fifty-Ninth Supplemental quarter ended March 31,
Indentures, each dated as 1993
of March 1, 1993 to HL&P
Mortgage and Deed of Trust
4(a)(7) Sixtieth Supplemental HL&P's Form 10-Q for the 1-3187 4
Indenture dated as of July quarter ended June 30, 1993
1, 1993 to HL&P Mortgage
and Deed of Trust
4(a)(8) Sixty-First through HL&P's Form 10-K for the 1-3187 4(a)(8)
Sixty-Third Supplemental year ended December 31,
Indentures to HL&P Mortgage 1993
and Deed of Trust
4(a)(9) Sixty-Fourth and HL&P's Form 10-K for the 1-3187 4(a)(9)
Sixty-Fifth Supplemental year ended December 31,
Indentures, each dated as 1995
of July 1, 1995, to HL&P
Mortgage and Deed of Trust
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
4(b)(1) Rights Agreement dated July Form 8-K dated July 11, 1-7629 4(a)(1)
11, 1990 between HI and 1990
Texas Commerce Bank
National Association, as
Rights Agent (Rights
Agent), which includes form
of Statement of Resolution
Establishing Series of
Shares designated Series A
Preference Stock and form
of Rights Certificate
4(b)(2) Agreement and Appointment Form 8-K dated July 11, 1-7629 4(a)(2)
of Agent dated as of July 1990
11, 1990 between HI and the
Rights Agent
4(b)(3)+ Form of Rights Agreement
dated as of July 11, 1990,
as to be amended and
restated as of the Closing
Date, between Houston and
Texas Commerce Bank
National Association, as
Rights Agent, which
includes form of Statement
of Resolution establishing
Series of Shares Designated
Series A Preference Stock
and form of Rights
Certificate
4(c) Indenture dated as of April Form 10-Q for the quarter 1-7629 4(b)
1, 1991 between HI and ended June 30, 1991
NationsBank of Texas,
National Association, as
Trustee
4(d) Agreement and Plan of Form 8-K dated January 26, 1-7629 2(a)
Merger dated as of January 1995
26, 1995 among KBLCOM, HI,
Time Warner and TW KBLCOM
Acquisition Corp.
5+* Opinion of Baker & Botts,
L.L.P.
8+ Opinion of Baker & Botts,
L.L.P. as to certain tax
matters
</TABLE>
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, HI has not filed as
exhibits to this Registration Statement on Form S-4 certain long-term debt
instruments, under which the total amount of securities authorized do not exceed
10 percent of the total assets of HI and its subsidiaries on a consolidated
basis. HI hereby agrees to furnish a copy of any such instrument to the SEC upon
request.
<PAGE> 211
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(a) Executive Benefit Plan of Form 10-Q for the quarter 1-7629 10(a)(1)
HI and First and Second ended March 31, 1987 10(a)(2)
Amendments thereto and
(effective as of June 2, 10(a)(3)
1982, July 1, 1984, May 7,
1986, respectively)
10(b)(1) Executive Incentive Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1991
(effective as of January 1,
1982)
10(b)(2) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(a)
10(b)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(b)(3) Second Amendment to Exhibit Form 10-K for the year 1-7629 10(b)(3)
10(b)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(b)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(b)(4)
10(b)(1) (effective as of ended December 31, 1995
September 7, 1994)
10(c)(1) Executive Incentive Form 10-Q for the quarter 1-7629 10(b)(1)
Compensation Plan of HI ended March 31, 1987
(effective as of January 1,
1985)
10(c)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(b)(3)
10(c)(1) (effective as of ended December 31, 1988
January 1, 1985)
10(c)(3) Second Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(3)
10(c)(1) (effective as of ended December 31, 1991
January 1, 1985)
10(c)(4) Third Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(c)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(c)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(5)
10(c)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(c)(6) Fifth Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(6)
10(c)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(d) Executive Incentive Form 10-Q for the quarter 1-7629 10(b)(2)
Compensation Plan of HL&P ended March 31, 1987
(effective as of January 1,
1985)
10(e)(1) Executive Incentive Form 10-Q for the quarter 1-7629 10(b)
Compensation Plan of HI ended June 30, 1989
(effective as of January 1,
1989)
10(e)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(e)(2)
10(e)(1) (effective as of ended December 31, 1991
January 1, 1989)
</TABLE>
<PAGE> 212
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(e)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(c)
10(e)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(e)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(c)(4)
10(e)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(e)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(e)(5)
10(e)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(1) Executive Incentive Form 10-K for the year 1-7629 10(b)
Compensation Plan of HI ended December 31, 1990
(effective as of January 1,
1991)
10(f)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(2)
10(f)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(f)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(d)
10(f)(1) (effective as of ended March 31, 1992
January 1, 1991)
10(f)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(4)
10(f)(1) (effective as of ended December 31, 1992
November 4, 1992)
10(f)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(5)
10(f)(1) (effective as of ended December 31, 1992
January 1, 1993)
10(f)(6) Fifth Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(6)
10(f)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(f)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(a)
10(f)(1) ended June 30, 1995
10(f)(8) Seventh Amendment to Form 10-Q for the quarter 1-7629 10(a)
Exhibit 10(f)(1) ended June 30, 1996
10(g)(1) Benefit Restoration Plan of Form 10-Q for the quarter 1-7629 10(c)
HI, (effective as of June ended March 31, 1987
1, 1985)
10(g)(2) Benefit Restoration Plan of Form 10-K for the year 1-7629 10(g)(2)
HI, as amended and restated ended December 31, 1991
(effective as of January 1,
1988)
10(g)(3) Benefit Restoration Plan of Form 10-K for the year 1-7629 10(g)(3)
HI, as amended and restated ended December 31, 1991
(effective as of July 1,
1991)
10(h)(1) Deferred Compensation Plan Form 10-Q for the quarter 1-7629 10(d)
of HI (effective as of ended March 31, 1987
September 1, 1985)
10(h)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(d)(2)
10(h)(1) (effective as of ended December 31, 1990
September 1, 1985)
10(h)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(e)
10(h)(1) (effective as of ended March 31, 1992
March 30, 1992)
</TABLE>
<PAGE> 213
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(h)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(h)(4)
10(h)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(h)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(h)(5)
10(h)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(h)(6) Fifth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(d)
10(h)(1) ended June 30, 1995
10(h)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(h)(1) (effective as of ended June 30, 1996
December 1, 1995)
10(i)(1) Deferred Compensation Plan Form 10-Q for the quarter 1-7629 10(a)
of HI (effective as of ended June 30, 1989
January 1, 1989)
10(i)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(e)(3)
10(i)(1) (effective as of ended December 31, 1989
January 1, 1989)
10(i)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(f)
10(i)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(i)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(i)(4)
10(i)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(i)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(i)(5)
10(i)(1) (effective as of ended December 31, 1994
September 7, 1994)
10(i)(6) Fifth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(c)
10(i)(1) ended June 30, 1995
10(i)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(c)
10(i)(1) (effective as of ended June 30, 1996
December 1, 1995)
10(j)(1) Deferred Compensation Plan Form 10-K for the year 1-7629 10(d)(3)
of HI (effective as of ended December 31, 1990
January 1, 1991)
10(j)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(2)
10(j)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(j)(3) Second Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(g)
10(j)(1) (effective as of ended March 31, 1992
March 30, 1992)
10(j)(4) Third Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(4)
10(j)(1) (effective as of ended December 31, 1993
June 2, 1993)
10(j)(5) Fourth Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(5)
10(j)(1) (effective as of ended December 31, 1993
December 1, 1993)
10(j)(6) Fifth Amendment to Exhibit Form 10-K for the year 1-7629 10(j)(6)
10(j)(1) (effective as of ended December 31, 1994
September 7, 1994)
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(j)(7) Sixth Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(j)(1) ended June 30, 1995
10(j)(8) Seventh Amendment to Form 10-Q for quarter ended 1-7629 10(d)
Exhibit 10(j)(1) (effective June 30, 1996
as of December 1, 1995)
10(k)(1) Long-Term Incentive Form 10-Q for the quarter 1-7629 10(c)
Compensation Plan of HI ended June 30, 1989
(effective as of January 1,
1989)
10(k)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(f)(2)
10(k)(1) (effective as of ended December 31, 1989
January 1, 1990)
10(k)(3) Second Amendment to Exhibit Form 10-K for the year 1-7629 10(k)(3)
10(k)(1) (effective as of ended December 31, 1992
December 22, 1992)
10(l) Form of stock option Form 10-Q for the quarter 1-7629 10(h)
agreement for nonqualified ended March 31, 1992
stock options granted under
HI's 1989 Long-Term
Incentive Compensation Plan
10(m) Forms of restricted stock Form 10-Q for the quarter 1-7629 10(i)
agreement for restricted ended March 31, 1992
stock granted under HI's
1989 Long-Term Incentive
Compensation Plan
10(n)(1) 1994 Long-Term Incentive Form 10-K for the year 1-7629 10(n)(1)
Compensation Plan of HI ended December 31, 1993
(effective as of January 1,
1994)
10(n)(2) Form of stock option Form 10-K for the year 1-7629 10(n)(2)
agreement for non-qualified ended December 31, 1993
stock options granted under
HI's 1994 Long-Term
Incentive Compensation Plan
10(o)(1) Savings Restoration Plan of Form 10-K for the year 1-7629 10(f)
HI (effective as of January ended December 31, 1990
1, 1991)
10(o)(2) First Amendment to Exhibit Form 10-K for the year 1-7629 10(l)(2)
10(o)(1) (effective as of ended December 31, 1991
January 1, 1991)
10(p) Director Benefits Plan Form 10-K for the year 1-7629 10(m)
(effective as of January 1, ended December 31, 1991
1992)
10(q)(1) Executive Life Insurance Form 10-K for the year 1-7629 10(q)
Plan of HI (effective as of ended December 31, 1993
January 1, 1994)
10(q)(2) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10
10(q)(1) ended June 30, 1995
10(r) Employment and Supplemental Form 10-Q for the quarter 1-7629 10(f)
Benefits Agreement between ended March 31, 1987
HL&P and Hugh Rice Kelly
</TABLE>
<PAGE> 215
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(s)(1) Houston Industries Master Form 10-Q for the quarter 1-7629 10
Savings Trust, as Amended ended March 31, 1994
and Restated Effective
January 1, 1994, between HI
and Texas Commerce Bank
National Association
10(s)(2) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(a)
10(s)(1) ended March 31, 1995
10(s)(3) Termination of Houston Form 10-Q for the quarter 1-7629 10(a)
Industries Incorporated ended September 30, 1995
Savings Plan and Trust
Agreement as to KBLCOM
Incorporated Effective as
of June 30, 1995
10(s)(4) Houston Industries Form 10-K for the year 1-7629 10(s)(4)
Incorporated Savings Trust ended December 31, 1995
(As Amended and Restated
Effective July 1, 1995)
10(s)(5) ESOP Trust Agreement Form 10-K for the year 1-7629 10(j)(2)
between HI and State Street ended December 31, 1990
Bank and Trust Company, as
ESOP Trustee, dated October
5, 1990
10(s)(6) First Amendment to Exhibit Form 10-Q for the quarter 1-7629 10(b)
10(s)(5) ended March 31, 1995
10(s)(7) Note Purchase Agreement Form 10-K for the year 1-7629 10(j)(3)
between HI and the ESOP ended December 31, 1990
Trustee, dated as of
October 5, 1990
10(s)(8) Stock Purchase Agreement Form 10-K for the year 1-7629 10(j)(4)
between HI and the ESOP ended December 31, 1991
Trustee, dated as of
October 5, 1990
10(t) Agreement dated June 6, Form 10-Q for the quarter 1-7629 10(a)
1994 between HI and Don D. ended June 30, 1994
Jordan
10(u) Agreement dated June 6, Form 10-Q for the quarter 1-7629 10(b)
1994 between HI and Don D. ended June 30, 1994
Sykora
10(v) Letter Agreement between HI Form 10-K for the year 1-7629 10(v)
and Jack Trotter ended December 31, 1994
10(w) Form of Severance Form 10-K for the year 1-7629 10(w)
Agreements dated December ended December 31, 1994
22, 1994 between HI and
each of the following
executive officers: Hugh
Rice Kelly, R. Steve
Letbetter, David M.
McClanahan, Lee W. Hogan
and William T. Cottle
</TABLE>
<PAGE> 216
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
10(x) Employment Agreement dated Form 10-K for the year 1-3187 10(t)
April 5, 1993 between HL&P ended December 31, 1994
and William T. Cottle
10(y)(1) Stockholder's Agreement Schedule 13-D dated July 6, 5-19351 2
dated as of July 6, 1995 1995
between HI and Time Warner
Inc.
10(y)(2) Registration Rights Schedule 13-D dated July 6, 5-19351 3
Agreement dated as of July 1995
6, 1995 between HI and Time
Warner Inc.
10(y)(3) Certificate of Voting Schedule 13-D dated July 6, 5-19351 4
Powers, Designations, 1995
Preferences and Relative
Participating, Optional or
Other Special rights, and
Qualifications, Limitations
or Restrictions Thereof of
Series D. Convertible
Preferred Stock of Time
Warner Inc.
10(z) Houston Industries Form 10-K for the year 1-7629 10(z)
Incorporated Executive ended December 31, 1995
Deferred Compensation
Trust, effective as of
December 19, 1995
10(aa) Agreement dated June 14, Form 10-K for the year 1-7629 10(aa)
1991 between HI and David ended December 31, 1995
M. McClanahan
10(bb)+* Supplemental Pension
Agreement dated July 17,
1996 between HI and Lee W.
Hogan
11(a) Computation of Earnings Per Form 10-K for the year 1-7629 11
Common Share and Common ended December 31, 1995
Equivalent Share
11(b) Computation of Earnings Per Form 10-Q for the quarter 1-7629 11
Common Share and Common ended June 30, 1996
Equivalent Share
21 Subsidiaries of HI Form 10-K for the year 1-7629 21
ended December 31, 1995
23(a)+ Consent of Deloitte &
Touche LLP
23(b)+ Consent of Coopers &
Lybrand L.L.P.
23(c)+* Consent of T. Milton Honea,
Robert C. Hanna, O.
Holcombe Crosswell and
Joseph M. Grant as Persons
Named to Become Directors
23(d)+ Consent of Baker & Botts,
L.L.P. (Included in
Exhibits 5 and 8)
24+* Powers of Attorney
</TABLE>
<PAGE> 217
<TABLE>
<CAPTION>
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ----------- --------------------------- --------------------------- ----------- -----------
<S> <C> <C> <C> <C>
99(a)+ Form of HI Proxy
99(b)+ Form of NorAm Proxy
99(c)+ Form of Election Form
99(d)+* Consent of CS First Boston
99(e)+* Consent of Merrill Lynch
</TABLE>
<PAGE> 1
EXHIBIT 2(c)
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT (the "Amendment"), dated as of October 23, 1996, to the
Agreement and Plan of Merger, dated as of August 11, 1996 (the "Merger
Agreement"), by and among Houston Industries Incorporated, a Texas corporation
("HII"), Houston Lighting & Power Company, a Texas corporation and wholly owned
subsidiary of HII ("HL&P"), HI Merger, Inc., a Delaware corporation and direct
wholly owned subsidiary of HII ("Merger Sub"), and NorAm Energy Corp., a
Delaware corporation ("NorAm").
WHEREAS, HII, HL&P, Merger Sub and NorAm have agreed to amend the
Merger Agreement; and
WHEREAS, the respective Boards of Directors of HII, HL&P, Merger
Sub and NorAm have approved and adopted this Amendment.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Amendment of the Merger Agreement.
(a) Section 2.1(c) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(c) Exchange of HII Common Stock. Each share of HII Common
Stock issued and outstanding immediately prior to the HII/HL&P Merger
Effective Time (other than shares to be canceled in accordance with
Section 2.1(b)) shall be converted into one share of common stock, no
par value, of HII/HL&P Merger Surviving Corporation ("HL&P Common
Stock"), together with the corresponding number of associated rights
("HL&P Stock Purchase Rights") to purchase one one-thousandth of a share
of Series A Preference Stock, without par value, of HII/HL&P Merger
Surviving Corporation pursuant to an Amended and Restated Rights
Agreement between the HII/HL&P Merger Surviving Corporation and Texas
Commerce Bank National Association, as Rights Agent (the "HL&P Rights
Agreement"). The HII Rights Agreement shall be amended and restated to
become the HL&P Rights Agreement and shall provide for (i) the HII Stock
Purchase Rights to be converted into HL&P Stock Purchase Rights and (ii)
the HL&P Stock Purchase Rights to attach to shares of HL&P Common Stock
issued as consideration in the NorAm Merger, and to make such other
changes as HL&P determines are appropriate. All references in this
Agreement to the HL&P Common Stock to be received pursuant to the
Mergers shall be deemed to include the associated HL&P Stock Purchase
Rights. All such shares of HII Common Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing
any such shares shall cease to have any rights with respect thereto,
except the right to receive the shares of HL&P Common Stock."
<PAGE> 2
(b) Section 2.2(f) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(f) NorAm Convertible Debentures. HL&P shall agree to be
bound by the conversion provisions of NorAm's 6% Convertible
Subordinated Debentures due 2012 (the "NorAm Convertible Debentures"),
such that following the Effective Time, each outstanding NorAm
Convertible Debenture will be convertible into the amount of Stock
Consideration (and cash in lieu of fractional shares of HL&P Common
Stock) and Cash Consideration which the holder thereof would have had
the right to receive after the Effective Time if such NorAm Convertible
Debenture had been converted immediately prior to the Effective Time and
the holder thereof had made the Stock Election and received the Stock
Consideration with respect to 50% of the shares of NorAm Common Stock
issuable upon such conversion of the holder's NorAm Convertible
Debentures and made the Cash Election and received the Cash
Consideration with respect to the remaining 50% of such NorAm Common
Stock."
(c) Section 2.2(g) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(g) NorAm Convertible Junior Debentures. HL&P shall agree to
be bound by the conversion provisions of NorAm's 6 1/4% Convertible
Junior Subordinated Debentures (the "NorAm Convertible Junior
Debentures"), such that following the Effective Time, each outstanding
NorAm Convertible Junior Debenture will be convertible into the amount
of Stock Consideration (and cash in lieu of fractional shares of HL&P
Common Stock) and Cash Consideration which the holder thereof would have
had the right to receive after the Effective Time if such NorAm
Convertible Junior Debenture had been converted immediately prior to the
Effective Time and the holder thereof had made the Stock Election and
received the Stock Consideration with respect to 50% of the shares of
NorAm Common Stock issuable upon such conversion of the holder's NorAm
Convertible Junior Debentures and made the Cash Election and received
the Cash Consideration with respect to the remaining 50% of such NorAm
Common Stock."
(d) Section 2.3(c) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(c) Exchange Procedures. Upon surrender of a certificate or
certificates which, immediately prior to the Effective Time, represented
outstanding shares of NorAm Common Stock (the "Certificates") for
cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by HL&P, together with a properly completed, signed and
submitted Form of Election (as hereinafter defined), and any other
required documents, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of
whole shares of HL&P Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II and cash in lieu
of fractional shares of HL&P Common Stock as contemplated by Section
2.3(f) if such holder is entitled to receive the Stock Consideration, or
cash, in an amount equal to the Cash Consideration, if such holder is
entitled to receive the Cash Consideration, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of NorAm Common Stock which is not registered in the transfer
records of NorAm, a certificate representing the
2
<PAGE> 3
appropriate number of shares of HL&P Common Stock may be issued to a
transferee if the Certificate representing such NorAm Common Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable
stock transfer taxes have been paid. Until surrendered as contemplated
by this Section 2.3, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to the
HL&P Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of persons entitled
thereto."
(e) Section 2.4(b) of the Merger Agreement is hereby amended
by adding the following to the end of Section 2.4(b):
"If the number of shares of NorAm Common Stock to which Cash Elections
have been made is greater than or equal to the Cash Election Number,
then no Non-Election Shares shall be deemed to be Cash Election Shares.
If the number of shares of NorAm Common Stock to which Stock Elections
have been made is greater than or equal to the Stock Election Number,
then no Non-Election Shares shall be deemed to be Stock Election
Shares. If the number of shares of NorAm Common Stock to which Cash
Elections have been made is less than the Cash Election Number, then a
number of Non-Election Shares equal to the difference between the Cash
Election Number and the number of shares of NorAm Common Stock to which
Cash Elections have been made (but no more than such number) shall be
deemed to be Cash Election Shares. If the number of shares of NorAm
Common Stock to which Stock Elections have been made is less than the
Stock Election Number, then a number of Non-Election Shares equal to the
difference between the Stock Election Number and the number of shares of
NorAm Common Stock to which Stock Elections have been made (but no more
than such number) shall be deemed to be Stock Election Shares. "
(f) Section 2.4(c) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(c) Procedure for Elections. Elections pursuant to Section
2.4(b) shall be made on a Form of Election and Letter of Transmittal to
be mutually agreed upon by NorAm and HL&P (a "Form of Election") to be
provided by the Exchange Agent for that purpose to holders of record of
NorAm Common Stock at least 20 business days prior to the Closing Date
(which date shall be publicly announced by HL&P as soon as practicable
but in no event less than five Trading Days prior to the Closing Date).
Elections shall be made by mailing to the Exchange Agent a duly
completed Form of Election. To be effective, a Form of Election must be
(i) properly completed, signed and submitted to the Exchange Agent at
its designated office by 5:00 p.m. on the business day that is the
Trading Day immediately prior to the Closing Date (the "Election
Deadline") and (ii) accompanied by the Certificates as to which the
election is being made (or by an appropriate guarantee of delivery of
such Certificates by a trust company organized in the United States or a
member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., provided such
Certificates are in fact delivered to the Exchange Agent no later than
5:00 p.m. on the fourth business day after the Election Deadline).
NorAm shall use its best efforts
3
<PAGE> 4
to make a Form of Election available to all persons who become holders
of record of NorAm Common Stock between the date of mailing the Form of
Election described in the first sentence of this Section 2.4(c) and the
Election Deadline. HL&P shall determine, in its sole and absolute
discretion, which authority it may delegate in whole or in part to the
Exchange Agent, whether Forms of Election have been properly completed,
signed and submitted or revoked. The decision of HL&P (or the Exchange
Agent, as the case may be) in such matters shall be conclusive and
binding. Neither HL&P nor the Exchange Agent will be under any
obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. A holder of shares of NorAm Common
Stock that does not submit (i) a properly completed Form of Election and
(ii) either (x) the Certificates as to which the election is made or (y)
an appropriate guarantee of delivery of such Certificates prior to the
Election Deadline shall be deemed to have made a Non-Election."
(g) Exhibit A to the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"Amendments to Restated Articles of Incorporation
of
Houston Lighting & Power Company
The following amendments to the Restated Articles of
Incorporation of HL&P will be made, subject to shareholder approval, at the
HII/HL&P Merger Effective Time or the Alternative Merger Effective Time, as the
case may be, in order to (i) change the name of the HII/HL&P Merger Surviving
Corporation or the Alternative Merger Surviving Corporation, as the case may
be, (ii) change the authorized capital stock of the HII/HL&P Merger Surviving
Corporation or the Alternative Merger Surviving Corporation, as the case may
be, and (iii) change the terms of the common stock of the HII/HL&P Merger
Surviving Corporation or the Alternative Merger Surviving Corporation, as the
case may be.
FIRST: The first amendment alters or changes Article I of the
Restated Articles of Incorporation and the full text of such altered article is
as follows:
"The name of this corporation is 'Houston Industries
Incorporated.'"
SECOND: The second amendment alters or changes the first
paragraph of Article VI of the Restated Articles of Incorporation and the full
text of such altered paragraph is as follows:
"The number of shares of the total authorized capital stock of
the Company is 720,000,000 shares, of which 10,000,000 shares are classified as
Preferred Stock, without par value, 10,000,000 shares are classified as
Preference Stock, without par value, and the balance of 700,000,000 shares are
classified as Common Stock, without par value."
THIRD: The third amendment alters or changes "Division D--Common
Stock" of Article VI of the Restated Articles of Incorporation and the full
text of such altered division is as follows:
4
<PAGE> 5
"1. Dividends. Dividends may be paid on the Common Stock, as
the Board of Directors shall from time to time determine, out of any assets of
the Company available for such dividends after full cumulative dividends on all
outstanding shares of capital stock of all series ranking senior to the Common
Stock in respect of dividends and liquidation rights (referred to in this
Division D as "stock ranking senior to the Common Stock") have been paid, or
declared and a sum sufficient for the payment thereof set apart, for all past
quarterly dividend periods, and after or concurrently with making payment of or
provision for dividends on the stock ranking senior to the Common Stock for the
then current quarterly dividend period.
2. Distribution of Assets. In the event of any liquidation,
dissolution or winding up of the Company, or any reduction or decrease of its
capital stock resulting in a distribution of assets to the holders of its
Common Stock, after there shall have been paid to or set aside for the holders
of the stock ranking senior to the Common Stock the full preferential amounts
to which they are respectively entitled, the holders of the Common Stock shall
be entitled to receive, pro rata, all of the remaining assets of the Company
available for distribution to its stockholders. The Board of Directors, by
vote of a majority of the members thereof, may distribute in kind to the
holders of the Common Stock such remaining assets of the Company, or may sell,
transfer or otherwise dispose of all or any of the remaining property and
assets of the Company to any other corporation or other purchaser and receive
payment therefor wholly or partly in cash or property, and/or in stock of any
such corporation, and/or in obligations of such corporation or other purchaser,
and may sell all or any part of the consideration received therefor and
distribute the same or the proceeds thereof to the holders of the Common Stock.
3. Voting Rights. Subject to the voting rights expressly
conferred under prescribed conditions upon the stock ranking senior to the
Common Stock, the holders of the Common Stock shall exclusively possess full
voting power for the election of directors and for all other purposes."
SECTION 2. Consent to Amend HL&P Articles of Incorporation. Pursuant to
Section 4.2(b) of the Merger Agreement, NorAm hereby consents (i) to the
proposed amendment of HL&P's Restated Articles of Incorporation whereby a class
of Preference Stock, without par value, consisting of 10,000,000 authorized
shares would be created, which Preference Stock would rank junior to HL&P's
preferred stock, (ii) to the designation of a series of Preference Stock, the
Series A Preference Stock, the shares of which series will be purchasable upon
the exercise of the HL&P Stock Purchase Rights (as defined in the Merger
Agreement), and to the establishment of the terms, preferences, limitations and
relative rights of the Series A Preference Stock, and (iii) to the proposed
amendment of HL&P's Restated Articles of Incorporation whereby the two-thirds
vote required by the Texas Business Corporation Act in connection with (w)
certain plans of merger, consolidation or exchange, (x) certain dispositions of
assets, (y) dissolution and (z) certain amendments to HL&P's Restated Articles
of Incorporation would be amended to require only the approval of a majority of
HL&P's shareholders entitled to vote on such matters.
SECTION 3. Miscellaneous.
(a) Except as expressly set forth in Section 1, all the
provisions of the Merger Agreement are hereby ratified and confirmed by all the
parties and shall remain in full force and
5
<PAGE> 6
effect. All references in the Merger Agreement to "this Agreement" shall be
read as references to the Merger Agreement, as amended by this Amendment.
(b) This Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Texas, without giving effect to the
principles of conflicts of laws thereof.
6
<PAGE> 7
IN WITNESS WHEREOF, each party has caused this Agreement to be
signed by its respective officers thereunto duly authorized, all as of the date
first written above.
HOUSTON INDUSTRIES INCORPORATED
By: /s/ Don D. Jordan
----------------------------------------
Don D. Jordan
Chairman, Chief Executive Officer and President
HOUSTON LIGHTING & POWER COMPANY
By: /s/ Don D. Jordan
----------------------------------------
Don D. Jordan
Chairman, Chief Executive Officer and President
HI MERGER, INC.
By: /s/ Don D. Jordan
----------------------------------------
Don D. Jordan
Chairman, Chief Executive Officer and President
NORAM ENERGY CORP.
By: /s/ T. Milton Honea
----------------------------------------
T. Milton Honea
Chairman of the Board, President and
Chief Executive Officer
7
<PAGE> 1
EXHIBIT 3(C)
FORM OF
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
HOUSTON LIGHTING & POWER COMPANY
Pursuant to and in accordance with the provisions of Article
4.04 of the Texas Business Corporation Act (the "TBCA"), Houston Lighting &
Power Company, a Texas corporation (the "Corporation"), hereby adopts the
following Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is Houston Lighting & Power Company.
ARTICLE TWO
The following amendments to the articles of incorporation were
adopted (i) by the sole holder of Class A Common Stock of the Corporation on
November __, 1996 and (ii) by the sole holder of Class B Common Stock of the
Corporation on November __, 1996 in order to create a class of Preference Stock
ranking junior to the Preferred Stock of the Corporation and, pursuant to
Article 2.28(D) of the TBCA, provide that the vote of holders of Common Stock
and Preference Stock required for approval of certain matters shall be the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock and Preference Stock entitled to vote on such matters.
ARTICLE THREE
The first amendment alters or changes the first paragraph of
ARTICLE VI of the Restated Articles of Incorporation and the full text of such
altered paragraph is as follows:
"The number of shares of the total authorized capital stock of
the Company is 20,001,100 shares, of which 10,000,000 shares are classified as
Preferred Stock, without par value, 10,000,000 shares are classified as
Preference Stock, without par value, 1,000 shares are classified as Class A
Common Stock, without par value ("Class A Common Stock"), and 100 shares are
classified as Class B Common Stock, without par value ("Class B Common Stock"
and, together with the Class A Common Stock, "Common Stock")."
1
<PAGE> 2
ARTICLE FOUR
The second amendment alters or changes "Divisions C -- The
Common Stock" and "Division D -- Provisions Applicable to All Classes of Stock"
and creates a new "Division C -- Preference Stock" of ARTICLE VI of the
Restated Articles of Incorporation and the full text of such altered or created
divisions are as follows:
"DIVISION C -- PREFERENCE STOCK
The shares of Preference Stock may be divided into and issued
in one or more series, the relative rights and preferences of which series may
vary in any and all respects. The Board of Directors of the Company is hereby
vested with the authority to establish series of Preference Stock by fixing and
determining all the relative rights and preferences of the shares of any series
so established, to the extent not provided for in these Articles of
Incorporation or any amendment hereto, and with the authority to increase or
decrease the number of shares within each such series; provided, however, that
the relative rights and preferences of any series of Preference Stock must rank
junior to the relative rights and preferences of the Preferred Stock; and,
provided further, that the Board of Directors may not decrease the number of
shares within a series of Preference Stock below the number of shares within
such series that is then issued. The authority of the Board of Directors with
respect to such series of Preference Stock shall include, but not be limited
to, determination of the following:
(1) the distinctive designation and number of shares of that
series;
(2) the rate of dividend (or the method of calculation
thereof) payable with respect to shares of that series, the dates, terms and
other conditions upon which such dividends shall be payable, and the relative
rights of priority of such dividends to dividends payable on any other class or
series of capital stock of the Company; provided, however, that the relative
rights of priority of that series must rank junior to the relative rights of
priority of Preferred Stock;
(3) the nature of the dividend payable with respect to shares
of that series as cumulative, noncumulative or partially cumulative, and if
cumulative or partially cumulative, from which date or dates and under what
circumstances;
(4) whether shares of that series shall be subject to
redemption, and, if made subject to redemption, the times, prices, rates,
adjustments and other terms and conditions of such redemption (including the
manner of selecting shares of that series for redemption if fewer than all
shares of such series are to be redeemed);
(5) the rights of the holders of shares of that series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Company (which rights may be different if such action is voluntary than if it
is involuntary), including the relative rights of priority in such event as to
the rights of the holders of any other class or series of capital stock of the
Company;
2
<PAGE> 3
provided, however, that the relative rights of priority of that series must
rank junior to the relative rights of priority of Preferred Stock;
(6) the terms, amounts and other conditions of any sinking or
similar purchase or other fund provided for the purchase or redemption of
shares of that series;
(7) whether shares of that series shall be convertible into
or exchangeable for shares of capital stock or other securities of the Company
or of any other corporation or entity, and, if provision be made for conversion
or exchange, the times, prices, rates, adjustments, and other terms and
conditions of such conversion or exchange;
(8) the extent, if any, to which the holders of shares of
that series shall be entitled (in addition to any voting rights provided by
law) to vote as a class or otherwise with respect to the election of directors
or otherwise;
(9) the restrictions and conditions, if any, upon the issue
or reissue of any additional Preference Stock ranking on a parity with or prior
to shares of that series as to dividends or upon liquidation, dissolution or
winding up;
(10) any other repurchase obligations of the Company, subject
to any limitations of applicable law; and
(11) any other designations, preferences, limitations or
relative rights of shares of that series.
Any of the designations, preferences, limitations or relative rights (including
the voting rights) of any series of Preference Stock may be dependent on facts
ascertainable outside these Articles of Incorporation.
Shares of any series of Preference Stock shall have no voting
rights except as required by law or as provided in the relative rights and
preferences of such series.
DIVISION D -- COMMON STOCK
1. Dividends. Dividends may be paid on either or both
classes of Common Stock, as the Board of Directors shall from time to time
determine, out of any assets of the Company available for such dividends after
full cumulative dividends on all outstanding shares of capital stock of all
series ranking senior to the Common Stock in respect of dividends and
liquidation rights (referred to in this Division D as "stock ranking senior to
the Common Stock") have been paid, or declared and a sum sufficient for the
payment thereof set apart, for all past quarterly dividend periods, and after
or concurrently with making payment of or provision for dividends on the stock
ranking senior to the Common Stock for the then current quarterly dividend
period.
3
<PAGE> 4
2. Distribution of Assets. In the event of any liquidation,
dissolution or winding up of the Company, or any reduction or decrease of its
capital stock resulting in a distribution of assets to the holders of its
Common Stock, after there shall have been paid to or set aside for the holders
of the stock ranking senior to the Common Stock the full preferential amounts
to which they are respectively entitled, the holders of the Common Stock shall
be entitled to receive, pro rata, all of the remaining assets of the Company
available for distribution to its stockholders. The Board of Directors, by
vote of a majority of the members thereof, may distribute in kind to the
holders of the Common Stock such remaining assets of the Company, or may sell,
transfer or otherwise dispose of all or any of the remaining property and
assets of the Company to any other corporation or other purchaser and receive
payment thereof wholly or partly in cash or property, and/or in stock of any
such corporation, and/or in obligations of such corporation or other purchaser,
and may sell all or any part of the consideration received therefor and
distribute the same or the proceeds thereof to the holders of the Common Stock.
3. Voting Rights. Subject to the voting rights expressly
conferred under prescribed conditions upon the stock ranking senior to the
Common Stock, the holders of the Class A Common Stock shall exclusively possess
full voting power for the election of directors and for all other purposes.
The holders of the Class B Common Stock shall not be entitled to vote except as
may from time to time be mandatorily provided by the laws of the State of
Texas.
DIVISION E -- PROVISIONS APPLICABLE TO ALL CLASSES OF STOCK
1. Preemptive Rights. No holder of any stock of the Company
shall be entitled as of right to purchase or subscribe for any part of any
unissued or treasury stock of the Company, or of any additional stock of any
class, to be issued by reason of any increase of the authorized capital stock
of the Company, or to be issued from any unissued or additionally authorized
stock, or of bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the Company, but any such unissued or
treasury stock, or any such additional authorized issue of new stock or
securities convertible into stock, may be issued and disposed of by the Board
of Directors to such persons, firms, corporations or associations, and upon
such terms as the Board of Directors may, in its discretion, determine, without
offering to the stockholders then of record, or any class of stockholders, any
thereof, on the same terms or any terms.
2. Votes Per Share. Any stockholder of the Company having
the right to vote at any meeting of the stockholders or of any class or series
thereof, shall be entitled to one vote for each share of stock held by him,
provided that no holder of Common Stock of the Company shall be entitled to
cumulate his votes for the election of one or more directors or for any other
purpose."
ARTICLE FIVE
The third amendment creates a new ARTICLE X of the Restated
Articles of Incorporation and the full text of such new Article is as follows:
4
<PAGE> 5
"ARTICLE X
To the extent permitted by applicable law and except as
expressly provided in the relative rights and preferences of any series of
Preference Stock, the vote of stockholders required for approval of (1) any plan
of merger, consolidation, exchange or conversion for which the Texas Business
Corporation Act requires a stockholder vote, (2) any disposition of assets for
which the Texas Business Corporation Act requires a stockholder vote, (3) any
dissolution of the Company for which the Texas Business Corporation Act requires
a stockholder vote, and (4) any amendment of these Articles of Incorporation for
which the Texas Business Corporation Act requires a stockholder vote, shall be
(in lieu of any greater vote provided for by the Texas Business Corporation Act)
the affirmative vote of the holders of a majority of the outstanding shares
entitled to vote thereon, unless any class or series of shares is entitled to
vote as a class thereon, in which event the vote required shall be the
affirmative vote of the holders of a majority of the outstanding shares within
each class or series of shares entitled to vote thereon as a class and at least
a majority of the outstanding shares otherwise entitled to vote thereon;
provided, however, that the voting rights of the holders of Preferred Stock are
not affected by this ARTICLE X."
ARTICLE SIX
The number of shares of the Corporation outstanding at the
time of such adoption was 10,001,100 (10,000,000 shares of Preferred Stock,
1,000 shares of Class A Common Stock and 100 shares of Class B Common Stock);
and the number of shares entitled to vote thereon was 1,100 (Class A Common
Stock and Class B Common Stock).
The holders of all of the shares outstanding and entitled to
vote on said amendment has signed a consent in writing pursuant to Article 9.10
of the TBCA adopting said amendment and any written notice required by Article
9.10 of the TBCA has been given.
IN WITNESS WHEREOF, the Corporation has caused these Articles
of Amendment to the Articles of Incorporation to be duly executed as of the
____ day of November, 1996.
HOUSTON LIGHTING & POWER COMPANY
By:
--------------------------------------------
Name: Hugh Rice Kelly
Title: Senior Vice President and Secretary
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EXHIBIT 4(B)
Draft of October 11, 1996
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HOUSTON INDUSTRIES INCORPORATED
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
RIGHTS AGENT
---------------
RIGHTS AGREEMENT
DATED AS OF JULY 11, 1990
AS AMENDED AND RESTATED AS OF ______________, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . 8
Section 3. Issue of Rights Certificates . . . . . . . . . . . . . . . . . 8
Section 4. Form of Rights Certificates . . . . . . . . . . . . . . . . . 10
Section 5. Countersignature and Registration . . . . . . . . . . . . . . 10
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7. Exercise of Rights; Purchase Price . . . . . . . . . . . . . . 12
Section 8. Cancellation and Destruction of Rights Certificates . . . . . 14
Section 9. Reservation and Availability of Capital Stock . . . . . . . . 14
Section 10. Preference Stock Record Date . . . . . . . . . . . . . . . . . 15
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights . . . . . . . . . . . . . . . . . . 16
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . 26
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . 27
Section 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . 27
Section 17. Rights Certificate Holder Not Deemed a Shareholder . . . . . . 28
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . 28
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . 29
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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<TABLE>
<S> <C>
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . 31
Section 22. Issuance of New Rights Certificates . . . . . . . . . . . . . 32
Section 23. Redemption and Termination . . . . . . . . . . . . . . . . . . 32
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . 34
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . . 36
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 29. Determinations and Actions by the Board of
Directors, etc. . . . . . . . . . . . . . . . . . . . . . . . 36
Section 30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . 37
Section 31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . 37
Exhibit A - Form of Statement of Resolution Establishing Series of Shares
Designated Series A Preference Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights to Purchase Preference Stock
</TABLE>
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RIGHTS AGREEMENT
This Rights Agreement, dated as of July 11, 1990, as amended and
restated as of _______________, 1996 (the "Agreement"), between Houston
Industries Incorporated, a Texas corporation formerly named Houston Lighting &
Power Company (the "Company"), and Texas Commerce Bank National Association, a
national banking association (the "Rights Agent"),
W I T N E S S E T H:
WHEREAS, on July 11, 1990 (the "Rights Dividend Declaration
Date"), the Board of Directors of Houston Industries Incorporated, a Texas
corporation and a predecessor to the Company ("HI"), authorized and declared a
dividend of one right ("HI Right") for each share of common stock, without par
value, of HI (the "HI Common Stock") outstanding at the close of business on
August 16, 1990 (the "Record Date"), and authorized the issuance of one HI
Right for each share of HI Common Stock issued after the Record Date; and
WHEREAS, HI and the Rights Agent entered into a Rights Agreement
dated as of July 11, 1990 (the "Original Agreement") with respect to the HI
Rights; and
WHEREAS, each HI Right initially was to be exercisable to
purchase one one-hundredth of a share of Series A Preference Stock of HI for
$85.00; and
WHEREAS, effective as of December 9, 1995, HI effected a two-for-
one stock split in the form of a stock distribution and, in that connection,
adjusted the terms of the HI Rights so each HI Right was to be exercisable to
purchase one two-hundredth of a share of Series A Preference Stock of HI for
$42.50 and so each share of HI Common Stock outstanding thereafter included one
HI Right; and
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of
August 11, 1996, as amended ( the "Merger Agreement"), among HI, the Company
(at the time named Houston Lighting & Power Company), HI Merger, Inc. and NorAm
Energy Corp., HI has, effective as of _________________, 1996 (the "Effective
Date"), merged with and into the Company, and the Company has succeeded to HI's
obligations under the Rights Agreement; and
WHEREAS, in connection with the Merger Agreement, the Board of
Directors of the Company has authorized (i) the conversion of each HI Right
outstanding as of the Effective Date into one Right and (ii) the issuance of
one Right to accompany each share of common stock, without par value, of the
Company (the "Common Stock") issued pursuant to the Merger Agreement other than
shares issued in exchange for outstanding shares of HI Common Stock, with the
result that each share of Common Stock outstanding as of the Effective Date
shall include one Right, and has authorized the issuance of one Right (as such
number may hereinafter be adjusted pursuant to the provisions of Section 11(p)
hereof) for each share of Common Stock of the Company issued (whether
originally issued or delivered from the Company's treasury) between the
Effective Date and the earlier of the Distribution Date (as hereinafter
defined) and the Expiration Date (as hereinafter defined), and, in certain
circumstances provided for in Section 22 hereof, after the
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Distribution Date, each Right initially representing the right to purchase one
Fractional Share (as hereinafter defined) of Series A Preference Stock of the
Company, upon the terms and subject to the conditions hereinafter set forth
(the "Rights"); and
WHEREAS, as successor to HI, the Company desires to evidence its
succession to, and assumption of the terms of, the Original Agreement, to make
certain other amendments to the terms of the Original Agreement pursuant to
Section 27 thereof and to restate the Original Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms shall have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the shares of Common Stock then outstanding, but shall
not include any Exempt Person; provided, however, that a Person shall not be or
become an Acquiring Person if such Person, together with its Affiliates and
Associates, shall become the Beneficial Owner of 20% or more of the shares of
Common Stock then outstanding solely as a result of a reduction in the number
of shares of Common Stock outstanding due to the repurchase of Common Stock by
the Company, unless and until such time as such Person or any Affiliate or
Associate of such Person shall purchase or otherwise become the Beneficial
Owner of additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock or any other Person (or Persons) who is (or
collectively are) the Beneficial Owner of shares of Common Stock constituting
1% or more of the then outstanding shares of Common Stock shall become an
Affiliate or Associate of such Person, unless, in either such case, such
Person, together with all Affiliates and Associates of such Person, is not then
the Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding; and provided, further, that if the Board of Directors, with the
concurrence of a majority of the members of the Board of Directors who are not,
and are not representatives, nominees, Affiliates or Associates of, such Person
or an Acquiring Person, determines in good faith that a Person that would
otherwise be an "Acquiring Person" has become such inadvertently (including,
without limitation, because (i) such Person was unaware that it beneficially
owned a percentage of Common Stock that would otherwise cause such Person to be
an "Acquiring Person" or (ii) such Person was aware of the extent of its
Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company, and if such Person
as promptly as practicable divested or divests itself of Beneficial Ownership
of a sufficient number of shares of Common Stock so that such Person would no
longer be an "Acquiring Person," then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this Agreement.
At any time that the Rights are redeemable, the Board of
Directors may, generally or with respect to any specified Person or Persons,
determine to increase to a specified percentage greater than that set forth
herein or decrease to a specified percentage lower than that set forth herein
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or determine a number of shares to be (but in no event less than or equal to
the percentage or number of shares of Common Stock then beneficially owned by
such Person), the level of Beneficial Ownership of Common Stock at which a
Person or such Person or Persons becomes an Acquiring Person.
"Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in effect
on the date of the Original Agreement.
"Associate" shall mean, with reference to any Person, (1) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a Subsidiary of the Company) of which
such Person is an officer or general partner (or officer or general partner of
a general partner) or is, directly or indirectly, the Beneficial Owner of 10%
or more of any class of equity securities, (2) any trust or other estate in
which such Person has a substantial beneficial interest or as to which such
Person serves as trustee or in a similar fiduciary capacity and (3) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the date of the Original
Agreement) or otherwise has the right to vote or dispose of, including
pursuant to any agreement, arrangement or understanding (whether or not
in writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (i) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent
given in response to a public (i.e., not including a solicitation
exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under
the Exchange Act as in effect on the date of the Original Agreement)
proxy or consent solicitation made pursuant to, and in accordance with,
the applicable provisions of the General Rules and Regulations under the
Exchange Act and (B) is not then reportable by such Person on Schedule
13D under the Exchange Act (or any comparable or successor report);
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," (A) securities tendered pursuant to a tender or
exchange
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offer made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or
pursuant to Section 11(i) or (p) hereof in connection with an adjustment
made with respect to any Original Rights; or
(iii) that are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy or consent as described in the proviso to subparagraph
(i) of this definition) or disposing of any voting securities of the
Company or (B) any group (as that term is used in Rule 13d-5(b) of the
General Rules and Regulations under the Exchange Act) of which such
Person is a member;
provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition. For purposes of
this Agreement, "voting" a security shall include voting, granting a proxy,
acting by consent, making a request or demand relating to corporate action
(including, without limitation, calling a shareholder meeting) or otherwise
giving an authorization (within the meaning of Section 14(a) of the Exchange
Act as in effect on the date of the Original Agreement) in respect of such
security.
"Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York or Texas are
authorized or obligated by law or executive order to close.
"close of business" on any given date shall mean 5:00 p.m., New
York City time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
"Closing Price" of a security for any day shall mean the last
sales price, regular way, on such day or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, on such
day, in either case as reported in the principal transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which
such security is listed or admitted to trading, or, if such security is not
listed or admitted to trading on any national securities exchange but sales
price information is reported for such security, as reported by NASDAQ or such
other self-regulatory organization or registered securities information
processor (as such terms are used under the Exchange Act) that then reports
information concerning such security, or, if sales price information
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is not so reported, the average of the high bid and low asked prices in the
over-the-counter market on such day, as reported by NASDAQ or such other
entity, or, if on such day such security is not quoted by any such entity, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such security selected by the Board of
Directors of the Company. If on such day no market maker is making a market in
such security, the fair value of such security on such day as determined in
good faith by the Board of Directors of the Company shall be used.
"Common Stock" shall mean the common stock, without par value, of
the Company, except that "Common Stock" when used with reference to equity
interests issued by any Person other than the Company shall mean the capital
stock of such Person with the greatest voting power, or the equity securities
or other equity interest having power to control or direct the management, of
such Person.
"Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Company" shall mean the Person named as the "Company" in the
preamble of this Agreement until a successor Person shall have become such or
until a Principal Party shall assume, and thereafter be liable for, all
obligations and duties of the Company hereunder, pursuant to the applicable
provisions of this Agreement, and thereafter "Company" shall mean such
successor Person or Principal Party.
"Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
"Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Distribution Date" shall mean the earlier of (i) the close of
business on the tenth day (or, if such Stock Acquisition Date results from the
consummation of a Permitted Offer, such later date as may be determined by the
Company's Board of Directors as set forth below at any time when the Rights are
redeemable) after the Stock Acquisition Date or (ii) the close of business on
the tenth Business Day (or such later date as may be determined by the
Company's Board of Directors as set forth below before the Distribution Date
occurs) after the date that a tender offer or exchange offer by any Person
(other than any Exempt Person) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act as then in effect, if upon consummation thereof, such Person would
be an Acquiring Person, other than a tender or exchange offer that is
determined before the Distribution Date occurs to be a Permitted Offer. The
Board of Directors of the Company may, to the extent set forth in the preceding
sentence, defer the date set forth in clause (i) or (ii) of the preceding
sentence to a specified later date or to an unspecified later date to be
determined by a subsequent action or event (but in no event to a date later
than the close of business on the tenth day after the first occurrence of a
Triggering Event).
"Effective Date" shall have the meaning set forth in the recitals
clause at the beginning of this Agreement.
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"Equivalent Preference Stock" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
"Exempt Person" shall mean the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, and any Person organized, appointed or established by the Company for
or pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or
any Subsidiary of the Company.
"Expiration Date" shall mean the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof, (iii) the time at which the Rights expire pursuant to
Section 13(d) hereof and (iv) the time at which all Rights then outstanding and
exercisable are exchanged pursuant to Section 24 hereof.
"Final Expiration Date" shall mean the close of business on July
11, 2000.
"Flip-In Event" shall mean an event described in Section
11(a)(ii) hereof.
"Flip-In Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Flip-Over Event" shall mean any event described in clause (x),
(y) or (z) of Section 13(a) hereof, but excluding any transaction described in
Section 13(d) hereof that causes the Rights to expire.
"Fractional Share" with respect to the Preference Stock shall
mean one one-thousandth of a share of Preference Stock.
"NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.
"Original Rights" shall have the meaning set forth in the
definition of "Beneficial Owner."
"Permitted Offer" shall mean a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on terms determined
by at least a majority of the members of the Board of Directors who are not
officers or employees of the Company and who are not, and are not
representatives, nominees, Affiliates or Associates of, an Acquiring Person or
the person making the offer, after receiving advice from one or more investment
banking firms, to be (a) at a price and on terms that are fair to shareholders
(taking into account all factors that such members of the Board deem relevant
including, without limitation, prices that could reasonably be achieved if
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the Company or its assets were sold on an orderly basis designed to realize
maximum value) and (b) otherwise in the best interests of the Company and its
shareholders.
"Person" shall mean any individual, firm, corporation,
partnership, limited liability company, association, trust, unincorporated
organization or other entity.
"Preference Stock" shall mean shares of Series A Preference
Stock, without par value, of the Company having the rights, powers and
preferences set forth in the form of Certificate of Statement of Resolution
Establishing Series of Shares attached hereto as Exhibit A and, to the extent
that there is not a sufficient number of shares of Series A Preference Stock
authorized to permit the full exercise of the Rights, any other series of
Preference Stock, without par value, of the Company designated for such purpose
containing terms substantially similar to the terms of the Series A Preference
Stock.
"Principal Party" shall have the meaning set forth in Section
13(b) hereof.
"Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
"Record Date" shall have the meaning set forth in the recitals
clause at the beginning of this Agreement.
"Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
"Rights" shall have the meaning set forth in the recitals clause
at the beginning of this Agreement.
"Rights Agent" shall mean the Person named as the "Rights Agent"
in the preamble of this Agreement until a successor Rights Agent shall have
become such pursuant to the applicable provisions hereof, and thereafter
"Rights Agent" shall mean such successor Rights Agent. If at any time there is
more than one Person appointed by the Company as Rights Agent pursuant to the
applicable provisions of this Agreement, "Rights Agent" shall mean and include
each such Person.
"Rights Certificates" shall mean the certificates evidencing the
Rights.
"Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals clause at the beginning of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition and Section 23, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such.
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"Subsidiary" shall mean, with reference to any Person, any
corporation or other Person of which an amount of voting securities sufficient
to elect at least a majority of the directors or other persons performing
similar functions is beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Summary of Rights" shall mean the Summary of Rights to Purchase
Preference Stock sent pursuant to Section 3(b) hereof.
"Trading Day" with respect to a security shall mean a day on
which the principal national securities exchange on which such security is
listed or admitted to trading is open for the transaction of business, or, if
such security is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
such security is not so quoted, a Business Day.
"Triggering Event" shall mean any Flip-In Event or any Flip-Over
Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and to take certain
actions in respect of the holders of the Rights (who, in accordance with
Section 3 hereof, shall prior to the Distribution Date also be the holders of
the Common Stock) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such Co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the Distribution Date, (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Stock registered in the names of the holders of the
Common Stock and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class,
insured, postage prepaid mail, to each record holder of the Common Stock as of
the close of business on the Distribution Date (other than any Person referred
to in the first sentence of Section 7(e)), at the address of such holder shown
on the records of the Company, one or more Rights Certificates, evidencing one
Right for each share of Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
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(b) Promptly following the Record Date, HI sent a copy of a
Summary of Rights to Purchase Preference Stock, in substantially the form
attached to the Original Agreement as Exhibit C, by first-class, postage
prepaid mail, to each record holder of HI Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of HI. With respect to certificates for HI Common Stock outstanding as of the
Effective Date, until the Distribution Date or the earlier surrender thereof
for exchange for certificates representing Common Stock pursuant to the Merger
Agreement or the Expiration Date, the Rights associated with the shares of
Common Stock represented by such certificates shall be evidenced by such
certificates for HI Common Stock. Until the earlier of the Distribution Date
or the Expiration Date, the surrender of any of the certificates for HI Common
Stock outstanding on the Effective Date, with or without a copy of the Summary
of Rights, shall also constitute the surrender of the Rights associated with
the HI Common Stock represented by such certificates.
(c) Rights shall be issued in respect of all shares of Common
Stock that are issued (whether originally issued or delivered from the
Company's treasury) on or after the Effective Date but prior to the earlier of
the Distribution Date or the Expiration Date or, in certain circumstances
provided in Section 22 hereof, after the Distribution Date; provided that the
HI Rights outstanding as of the Effective Date shall be converted into Rights
and shall accompany the shares of Common Stock issued pursuant to the Merger
Agreement in exchange for shares of HI Common Stock. Certificates issued for
shares of Common Stock that shall so become outstanding or shall be transferred
or exchanged on or after the Effective Date but prior to the earlier of the
Distribution Date or the Expiration Date shall also be deemed to be
certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Houston
Industries Incorporated (the "Company") and Texas Commerce Bank National
Association (the "Rights Agent") dated as of July 11, 1990 as it may
from time to time be supplemented or amended (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such Rights
may be redeemed, may be exchanged, may expire or may be evidenced by
separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS, WAS OR
BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), AND CERTAIN TRANSFEREES
THEREOF, WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of
such
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<PAGE> 13
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof), when, as and
if issued, shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to time be listed or quoted,
or to conform to usage. Subject to the provisions of Section 11 and Section 22
hereof, the Rights Certificates, whenever issued, shall be dated as of the
Effective Date and on their face shall entitle the holders thereof to purchase
such number of Fractional Shares of Preference Stock as shall be set forth
therein at the price set forth therein (such exercise price per Fractional
Share (or, as set forth in this Agreement, for other securities), the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by a Person
described in the first sentence of Section 7(e), and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any such Rights, shall contain (to the extent
feasible) the following legend, modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby [will] [have] become null and void in
the circumstances and with the effect specified in Section 7(e) of such
Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate. The
Company shall give notice to the Rights Agent promptly after it becomes aware
of the existence of any Acquiring Person or any Associate or Affiliate thereof.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof, which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned by the Rights Agent,
either manually or
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<PAGE> 14
by facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at the office or offices designated by the Rights
Agent as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses
of the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the certificate
number and the date of each of the Rights Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e),
Section 13(d), Section 14 and Section 24 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of Fractional Shares of Preference Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Rights Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights Certificate or
Rights Certificates to be transferred, split up, combined or exchanged at the
office or offices designated by the Rights Agent for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) thereof or of the Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e), Section 13(d), Section 14 and
Section 24 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment by the holder of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split-up, combination or exchange of Rights Certificates.
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<PAGE> 15
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will, subject to Section 4(b), Section
7(e), Section 13(d), Section 14 and Section 24, execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price.
(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly completed and executed, to the
Rights Agent at the office or offices designated by the Rights Agent for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of Fractional Shares of Preference Stock (or other securities,
cash or other assets, as the case may be) as to which such surrendered Rights
are then exercisable, at or prior to the Expiration Date.
(b) The Purchase Price for each Fractional Share of Preference
Stock pursuant to the exercise of a Right shall be $42.50 as of the Effective
Time, subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
on the reverse side thereof duly executed, accompanied by payment, with respect
to each Right so exercised, of the Purchase Price per Fractional Share of
Preference Stock (or other shares, securities, cash or other assets, as the
case may be) to be purchased as set forth below and an amount equal to any
applicable transfer tax, the Rights Agent shall, subject to Section 20(k)
hereof, thereupon promptly (i)(A) requisition from any transfer agent of the
shares of Preference Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of Fractional
Shares of Preference Stock to be purchased, and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company, in its sole discretion, shall have elected to deposit the shares of
Preference Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing interests in such number of Fractional Shares of Preference Stock
as are to be purchased (in which case certificates for the shares of Preference
Stock represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of cash,
if any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights
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<PAGE> 16
Certificate, registered in such name or names as may be designated by such
holder and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) may be made in cash or by certified check, cashier's or
official bank check or bank draft payable to the order of the Company or the
Rights Agent. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) or Section 13(a) hereof, the Company
will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon exercise of Rights, a number of Rights be
exercised so that only whole shares of Preference Stock would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise fewer than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by or transferred to (i) an Acquiring Person or an Associate
or Affiliate of an Acquiring Person other than any such Person that became such
pursuant to a Permitted Offer and the Board of Directors in good faith
determines was not involved in and did not cause or facilitate, directly or
indirectly, such Triggering Event, (ii) a direct or indirect transferee of such
Rights from such Acquiring Person (or any such Associate or Affiliate) who
becomes a transferee after such Triggering Event or (iii) a direct or indirect
transferee of such Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with such Triggering Event and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person (or such Affiliate or Associate) to
holders of equity interests in such Acquiring Person (or such Affiliate or
Associate) or to any Person with whom such Acquiring Person (or such Affiliate
or Associate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board of Directors
of the Company determines is part of a plan, arrangement or understanding that
has as a primary purpose or effect the avoidance of this Section 7(e), shall
become null and void without any further action, no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise, and such Rights shall not be
transferable. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and
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<PAGE> 17
(ii) provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split-up, combination or exchange shall, if surrendered to the
Company or any of its agents, be delivered to the Rights Agent for cancellation
or in canceled form, or, if surrendered to the Rights Agent, shall be canceled
by it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The
Rights Agent shall deliver all canceled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preference Stock (and, following the occurrence of a Triggering Event, out of
its authorized and unissued shares of Common Stock and/or other securities or
out of its authorized and issued shares held in its treasury), the number of
shares of Preference Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) that, as provided in this
Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as any shares of Preference Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights are listed on any
national securities exchange or quoted on any trading system, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange, or quoted on such system, upon official notice of issuance upon such
exercise. Following the occurrence of a Triggering Event, the Company will use
its best efforts to list (or continue the listing of) the Rights and the
securities issuable and deliverable upon the exercise of the Rights on one or
more national securities exchanges or to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by NASDAQ or such other
transaction reporting system then in use.
(c) The Company shall use its best efforts to (i) prepare and
file, as soon as practicable following the first occurrence of a Flip-In Event
or, if applicable, as soon as practicable following the earliest date after the
first occurrence of a Flip-In Event on which the consideration to be delivered
by the Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the
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<PAGE> 18
Rights are no longer exercisable for such securities and (B) the Expiration
Date. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed 90 days after the date
set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. In addition, if the Company shall
determine that the Securities Act requires an effective registration statement
under the Securities Act following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as such a
registration statement has been declared effective. Upon any such suspension,
the Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise thereof shall not be
permitted under applicable law or any required registration statement shall not
have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Fractional Shares of
Preference Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of Fractional Shares of
Preference Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax that may be payable in respect of any transfer or delivery
of Rights Certificates to a Person other than, or the issuance or delivery of a
number of Fractional Shares of Preference Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of Fractional
Shares of Preference Stock (or Common Stock and/or other securities, as the
case may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax is
due.
Section 10. Preference Stock Record Date. Each Person in whose
name any certificate for a number of Fractional Shares of Preference Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of such shares (fractional or otherwise) of Preference Stock (or
Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made;
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<PAGE> 19
provided, however, that if the date of such surrender and payment is a date
upon which the Preference Stock (or Common Stock and/or other securities, as
the case may be) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares (fractional or
otherwise) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preference Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are open. Prior
to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate, as such, shall not be entitled to any rights of a shareholder of
the Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
or other securities subject to purchase upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after
the Rights Dividend Declaration Date (A) declare a dividend on the
outstanding shares of Preference Stock payable in shares of Preference
Stock, (B) subdivide the outstanding shares of Preference Stock, (C)
combine the outstanding shares of Preference Stock into a smaller number
of shares or (D) otherwise reclassify the outstanding shares of
Preference Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section
11(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preference Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the
aggregate number and kind of shares of Preference Stock or capital
stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Preference Stock
transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs that
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Sections 23 and 24 of this Agreement, in
the event any Person shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing
such Person to become an Acquiring Person is (1) a Flip-Over Event or
(2) an acquisition of shares of Common Stock pursuant to a Permitted
Offer (provided that this clause (2) shall cease to apply if such
Acquiring Person thereafter becomes the Beneficial Owner of any
additional shares of Common Stock other than pursuant to such Permitted
Offer or a transaction set forth in Section 13(a) or 13(d) hereof),
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<PAGE> 20
then, unless applicable law prohibits the enforcement of the first
sentence of Section 7(e), (x) the Purchase Price shall be adjusted to be
the Purchase Price immediately prior to the first occurrence of a Flip-
In Event multiplied by the number of Fractional Shares of Preference
Stock for which a Right was exercisable immediately prior to such first
occurrence and (y) each holder of a Right (except as provided below in
Section 11(a)(iii) and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof at a price equal to the Purchase
Price in accordance with the terms of this Agreement, in lieu of shares
of Preference Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by dividing the Purchase
Price by 50% of the Current Market Price per share of Common Stock on
the date of such first occurrence (such number of shares, the
"Adjustment Shares"); provided that the Purchase Price and the number of
Adjustment Shares shall be further adjusted as provided in this
Agreement to reflect any events occurring after the date of such first
occurrence.
(iii) In the event that the number of shares of Common
Stock that are authorized by the Company's articles of incorporation but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii) of this
Section 11(a), the Company shall, to the extent permitted by applicable
law and regulation, (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (computed using
the Current Market Price used to determine the number of Adjustment
Shares) (the "Current Value") over (2) the Purchase Price (such excess
is herein referred to as the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for the Adjustment Shares,
upon the exercise of the Rights and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock
or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preference stock (including,
without limitation, the Preference Stock) that the Board of Directors of
the Company has determined to have the same value as shares of Common
Stock (such shares of preference stock are herein referred to as "Common
Stock Equivalents")), (4) debt securities of the Company, (5) other
assets or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the
advice of a nationally recognized investment banking firm selected by
the Board of Directors of the Company; provided, however, if the Company
shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the first occurrence of a
Flip-In Event (the "Flip-In Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock
(to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the Board
of Directors of the Company shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the 30-day
period set forth above may be extended to the extent necessary, but not
more than 90 days after the Flip-In Trigger Date, in order that the
Company may seek shareholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company or the Board of Directors
determines
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that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
any authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the
Common Stock shall be the Current Market Price per share of the Common
Stock on the Flip-In Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock on
such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preference Stock
entitling them to subscribe for or purchase (for a period expiring within 45
calendar days after such record date) Preference Stock (or shares having the
same rights, privileges and preferences as the shares of Preference Stock
("Equivalent Preference Stock")) or securities convertible into Preference
Stock or Equivalent Preference Stock at a price per share of Preference Stock
or per share of Equivalent Preference Stock (or having a conversion price per
share, if a security convertible into Preference Stock or Equivalent Preference
Stock) less than the Current Market Price per share of Preference Stock on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
shares of Preference Stock outstanding on such record date, plus the number of
shares of Preference Stock that the aggregate offering price of the total
number of shares of Preference Stock and/or Equivalent Preference Stock so to
be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price, and
the denominator of which shall be the number of shares of Preference Stock
outstanding on such record date, plus the number of additional shares of
Preference Stock and/or Equivalent Preference Stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid by delivery of consideration, part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Shares of Preference Stock
owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued, the Purchase Price shall be adjusted to
be the Purchase Price that would then be in effect if such record date had not
been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preference Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preference Stock, but including any dividend
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<PAGE> 22
payable in stock other than Preference Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price per share of
Preference Stock on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preference Stock and the denominator of which shall be
such Current Market Price per share of Preference Stock. Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock of a Person on any date shall be
deemed to be the average of the daily Closing Prices per share of such
Common Stock for the 30 consecutive Trading Days immediately prior to
such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "Current Market Price" per share of Common Stock
on any date shall be deemed to be the average of the daily Closing
Prices per share of such Common Stock for the 10 consecutive Trading
Days immediately following such date; provided, however, that in the
event that the Current Market Price per share of Common Stock is
determined during a period following the announcement of (A) a dividend
or distribution on such Common Stock other than a regular quarterly cash
dividend or the dividend of the Rights, or (B) any subdivision,
combination or reclassification of such Common Stock, and the ex-
dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, shall not have
occurred prior to the commencement of the requisite 30 Trading Day or 10
Trading Day period, as set forth above, then, and in each such case, the
Current Market Price shall be properly adjusted to take into account ex-
dividend trading. If the Common Stock is not publicly held or not so
listed or traded, "Current Market Price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share (or Fractional Share) of Preference
Stock shall be determined in the same manner as set forth above for the
Common Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the Current Market Price per share (or Fractional
Share) of Preference Stock cannot be determined in the manner provided
above or if the Preference Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the
"Current Market Price" per share of Preference Stock shall be
conclusively deemed to be an amount equal to 1000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock occurring after
the Effective Date) multiplied by the Current Market Price per share of
the Common Stock. If neither the Common Stock nor the Preference Stock
is publicly
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<PAGE> 23
held or so listed or traded, Current Market Price per share of the
Preference Stock shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall
be conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of a Fractional Share of Preference Stock shall be
equal to the Current Market Price of one share of Preference Stock
divided by 1000.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments that by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share or to the nearest ten-thousandth of a Fractional Share of
Preference Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive in respect of such Right any shares of capital
stock other than Preference Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price thereof shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preference
Stock contained in Sections 11(a), (b), (c), (e), (f), (g), (h), (i), (j), (k)
and (m) hereof, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preference Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Fractional Shares of
Preference Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Fractional Shares of Preference Stock (calculated to the nearest one ten-
thousandth of a Fractional Share) obtained by (i) multiplying (x) the number of
Fractional Shares of Preference Stock covered by a Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any
adjustment of the Purchase Price, to adjust the number of Rights in lieu of any
adjustment in the number of Fractional Shares of Preference Stock purchasable
upon the exercise of a Right. Each of the Rights outstanding
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<PAGE> 24
after the adjustment in the number of Rights shall be exercisable for the
number of Fractional Shares of Preference Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and countersigned
in the manner provided for herein (and may bear, at the option of the Company,
the adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of Fractional Shares of Preference Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per Fractional Share and the
number of Fractional Shares that were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, or the stated
capital of the number of Fractional Shares of Preference Stock or of the number
of shares of Common Stock or other securities issuable upon exercise of a
Right, the Company shall take any corporate action that may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of Fractional Shares of
Preference Stock or such number of shares of Common Stock or other securities
at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Fractional Shares of Preference Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Fractional Shares of Preference Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
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<PAGE> 25
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preference Stock, (ii) issuance wholly for
cash of any shares of Preference Stock at less than the current market price,
(iii) issuance wholly for cash of shares of Preference Stock or securities that
by their terms are convertible into or exchangeable for shares of Preference
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11 hereafter made by the Company to holders of its
Preference Stock shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any
time that there is an Acquiring Person, (i) consolidate with any other Person,
(ii) merge with or into or be acquired pursuant to a share exchange by any
other Person, or (iii) sell, lease or transfer (or permit one or more
Subsidiaries to sell, lease or transfer), in one transaction or a series of
related transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons, if (x) at the time of or immediately after such
consolidation, merger, share exchange, sale, lease or transfer there are any
rights, warrants or other instruments or securities of the Company or any other
Person outstanding or agreements, arrangements or understandings in effect that
would substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (y) prior to, simultaneously with or immediately after
such consolidation, merger, share exchange, sale, lease or transfer, the
shareholders or other equity owners of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof shall
have received a distribution of Rights previously owned by such Person or any
of its Affiliates or Associates, or (z) the identity, form or nature of
organization of the Principal Party (including without limitation the selection
of the Person that will be the Principal Party as a result of the Company's
entering into one or more consolidations, mergers, share exchanges, sales,
leases, transfers or transactions with more than one party) would preclude or
limit the exercise of Rights or otherwise diminish substantially or eliminate
the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, Section 24
or Section 27 hereof, take (or permit any Subsidiary to take) any action if the
purpose of such action is to, or if at the time such action is taken it is
reasonably foreseeable that such action will, diminish substantially or
eliminate the benefits intended to be afforded by the Rights.
(p) Notwithstanding Section 3(c) hereof or any other provision
of this Agreement to the contrary, in the event that the Company shall at any
time after the Rights Dividend Declaration Date and prior to the Distribution
Date (i) declare a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding shares of Common
Stock, (iii) combine the outstanding shares of Common Stock into a smaller
number of shares or (iv) otherwise reclassify the outstanding shares of Common
Stock (including any such reclassification
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<PAGE> 26
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately prior
to such event by a fraction (the "Adjustment Fraction") the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event. In lieu of such adjustment in the number of Rights
associated with one share of Common Stock, the Company may elect to adjust the
number of Fractional Shares of Preference Stock purchasable upon the exercise
of one Right and the Purchase Price. If the Company makes such election, the
number of Rights associated with one share of Common Stock shall remain
unchanged, and the number of Fractional Shares of Preference Stock purchasable
upon exercise of one Right and the Purchase Price shall be proportionately
adjusted so that (i) the number of Fractional Shares of Preference Stock
purchasable upon exercise of a Right following such adjustment shall equal the
product of the number of Fractional Shares of Preference Stock purchasable upon
exercise of a Right immediately prior to such adjustment multiplied by the
Adjustment Fraction and (ii) the Purchase Price following such adjustment shall
equal the product of the Purchase Price immediately prior to such adjustment
multiplied by the Adjustment Fraction.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preference Stock and the Common Stock, a copy of such certificate and (c) mail
a brief summary thereof to each registered holder of a Rights Certificate (or,
if prior to the Distribution Date, to each registered holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.
(a) In the event that, from and after the time an Acquiring
Person has become such, directly or indirectly, (x) 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, (y) any Person shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger, or the Company shall be party to a share
exchange, and, in connection with such consolidation or merger or share
exchange, all or part of the outstanding shares of Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other Person or cash or any other property, or (z) the Company shall sell,
lease or otherwise transfer (or one or more of its Subsidiaries shall sell,
lease or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of
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<PAGE> 27
the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any wholly owned Subsidiary of the Company or any
combination thereof in one or more transactions each of which complies (and all
of which together comply) with Section 11(o) hereof), then, and in each such
case (except as may be contemplated by Section 13(d) hereof), proper provision
shall be made so that: (i) the Purchase Price shall be adjusted to be the
Purchase Price immediately prior to the first occurrence of a Triggering Event
multiplied by the number of Fractional Shares of Preference Stock for which a
Right was exercisable immediately prior to such first occurrence; (ii) on and
after the Distribution Date, each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the Purchase Price in accordance with the terms of this
Agreement, in lieu of shares of Preference Stock or Common Stock of the
Company, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be
equal to the result obtained by dividing the Purchase Price by 50% of the
Current Market Price per share of the Common Stock of such Principal Party on
the date of consummation of such Flip-Over Event; provided that the Purchase
Price and the number of shares of Common Stock of such Principal Party issuable
upon exercise of each Right shall be further adjusted as provided in this
Agreement to reflect any events occurring after the date of such first
occurrence of a Triggering Event or after the date of such Flip-Over Event, as
applicable; (iii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Flip-Over Event, all the obligations and duties
of the Company pursuant to this Agreement; (iv) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Flip-Over Event; (v) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (vi) the provisions of Section
11(a)(ii) hereof shall be of no effect following the occurrence of any Flip-
Over Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), (A) the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation or share exchange,
or, if there is more than one such issuer, the issuer the Common Stock
of which has the greatest aggregate market value, or (B) if no
securities are so issued, (x) the Person that survives such
consolidation or is the other party to the merger and survives such
merger, or, if there is more than one such Person, the Person the Common
Stock of which has the greatest aggregate market value or (y) if the
Person that is the other party to the merger does not survive the
merger, the Person that does survive the merger (including the Company
if it survives); and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or
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<PAGE> 28
earning power transferred pursuant to such transaction or transactions,
or, if each Person that is a party to such transaction or transactions
receives the same portion of the assets or earning power so transferred,
or if the Person receiving the greatest portion of the assets or earning
power cannot be determined, the Person the Common Stock of which has the
greatest aggregate market value;
provided, however, that in any such case, if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve-month
period registered under Section 12 of the Exchange Act, and if (1) such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; (2) such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value; and (3) such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership
having an interest in such joint venture as if such party were a "Subsidiary"
of both or all of such joint venturers and the Principal Parties in each such
chain shall bear the obligations set forth in this Section 13 in the same ratio
as their direct or indirect interests in such Person bear to the total of such
interests.
(c) The Company shall not consummate any Flip-Over Event
unless each Principal Party (or Person that may become a Principal Party as a
result of such Flip-Over Event) shall have a sufficient number of authorized
shares of its Common Stock that have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and each such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and
further providing that, as soon as practicable after the date of such Flip-Over
Event, the Principal Party at its own expense will
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use its
best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the "blue
sky" laws of such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts, if the Common Stock of the Principal
Party is or shall become listed on a national securities exchange, to
list (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on such securities exchange and,
if the Common Stock of the Principal Party shall not be listed on a
national securities exchange, to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by NASDAQ or such
other transaction reporting system then in use; and
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<PAGE> 29
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10
under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. In the event that a Flip-Over
Event shall occur at any time after the occurrence of a Flip-In Event, the
Rights that have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Permitted Offer (or a wholly owned subsidiary of any such Person
or Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of Common Stock whose shares were purchased pursuant to such Permitted
Offer, and (iii) the form of consideration being offered to the remaining
holders of shares of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates or scrip evidencing fractional
Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the Closing Price of one Right for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable.
(b) The Company shall not be required to issue fractions of
shares of Preference Stock (other than, except as provided in Section 7(c)
hereof, fractions that are integral multiples of a Fractional Share of
Preference Stock) upon exercise of the Rights or to distribute certificates or
scrip evidencing fractional shares of Preference Stock (other than, except as
provided in Section 7(c) hereof, fractions that are integral multiples of a
Fractional Share of Preference Stock). Interests in fractions of shares of
Preference Stock in integral multiples of a Fractional Share of Preference
Stock may, at the election of the Company in its sole discretion, be evidenced
by depositary receipts, pursuant to an appropriate agreement between the
Company and a depositary selected by it, provided that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the shares of Preference Stock represented by such depositary receipts. In
lieu of fractional shares of Preference Stock that are not integral multiples
of a Fractional Share of Preference Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of one one-
thousandth of the Closing Price of a share of Preference Stock for the Trading
Day immediately prior to the date of such exercise.
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<PAGE> 30
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the Closing Price of one share of Common Stock for the
Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect
of this Agreement, other than rights of action vested in the Rights Agent
pursuant to Section 18 hereof, are vested in the respective registered holders
of the Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock) and, where applicable, the Company; and any
registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in his own behalf and for his own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this
Agreement. After a Triggering Event, holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees, incurred
by them in any action to enforce the provisions of this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not be
evidenced by Rights Certificates and will be transferable only in connection
with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates will
be transferable only on the registry books of the Rights Agent if surrendered
at the office or offices designated by the Rights Agent for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the form of
assignment set forth on the reverse side thereof and the certificate contained
therein duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the
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<PAGE> 31
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, the Company must
use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of
Fractional Shares of Preference Stock or any other securities of the Company
that may at any time be issuable upon the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other reasonable disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement,
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affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it, after proper inquiry or examination, to be
genuine and to be signed, executed and, where necessary, guaranteed, verified
or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, however, that
such corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of the
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring Person
and the determination of "Current Market Price") be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the
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<PAGE> 33
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct. In no event shall the Rights
Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of actual knowledge of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preference Stock or Common Stock or other securities to be issued pursuant
to this Agreement or any Rights Certificate or as to whether any shares of
Preference Stock or Common Stock or other securities will, when so issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or
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become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents (including the Company), and
the Rights Agent shall not be answerable or accountable for any act, omission,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, omission, default, neglect or
misconduct; provided, however, that reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and the Preference Stock, by registered or
certified mail, and to the registered holders, if any, of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or
any successor Rights Agent (with or without cause) upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock and the Preference Stock, by
registered or certified mail, and to the registered holders of the Rights
Certificates, if any, by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. Notwithstanding the foregoing
provisions of this Section 21, in no event shall the resignation or removal of
a Rights Agent be effective until a successor Rights Agent shall have been
appointed and have accepted such appointment. If the Company shall fail to
make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the registered
holder of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then the Rights Agent or the
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
of the State of New York or Texas (or of any other state of the United States
so long as such corporation is authorized to conduct
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a stock transfer or corporate trust business in the State of New York or
Texas), in good standing, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of a corporation described in clause (a) of
this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock and the Preference Stock, and mail a notice thereof
in writing to the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement granted
or awarded on or prior to the Distribution Date, or upon the exercise,
conversion or exchange of securities issued by the Company on or prior to the
Distribution Date, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences
to the Company or the Person to whom such Rights Certificate would be issued,
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the time a Person becomes an Acquiring Person, cause the
Company to redeem all but not less than all the then outstanding Rights at a
redemption price of $.005 per Right, as such amount may be appropriately
adjusted, if necessary, to reflect any stock split, stock dividend or similar
transaction occurring after the Effective Date (such redemption price being
hereinafter referred to as the "Redemption Price"). The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
Current Market Price of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors.
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(b) Immediately upon the effectiveness of the action of the
Board of Directors of the Company ordering the redemption of the Rights (the
effectiveness of which action may be conditioned on the occurrence of one or
more events or on the existence of one or more facts or may be effective at
some future time), evidence of which shall be filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly
after the effectiveness of the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the registered holders of the then outstanding Rights by
mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Company for the Common Stock.
Any notice that is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
shall state the method by which the payment of the Redemption Price will be
made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option,
at any time and from time to time after the occurrence of a Flip-In Event,
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 7(e) hereof) for shares of Common Stock or Common Stock Equivalents or
any combination thereof, at an exchange ratio of one share of Common Stock, or
such number of Common Stock Equivalents or units representing fractions thereof
as would be deemed to have the same value as one share of Common Stock, per
Right, appropriately adjusted, if necessary, to reflect any stock split, stock
dividend or similar transaction occurring after the Effective Date (such
exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors may not effect such
exchange at any time after (i) any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding
or (ii) the occurrence of a Flip-Over Event.
(b) Immediately upon the effectiveness of the action of the
Board of Directors of the Company ordering the exchange of any Rights pursuant
to and in accordance with subsection (a) of this Section 24 (the effectiveness
of which action may be conditioned on the occurrence of one or more events or
on the existence of one or more facts or may be effective at some future time)
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock and/or Common
Stock Equivalents equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the
registered holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the shares of Common Stock and/or Common Stock
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Equivalents for Rights will be effected and, in the event of any partial
exchange, the number of Rights that will be exchanged. Any partial exchange
shall be effected as nearly pro rata as possible based on the number of Rights
(other than Rights that have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In the event that the number of shares of Common Stock
that are authorized by the Company's articles of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit an exchange of Rights as contemplated in
accordance with this Section 24, the Company may, at its option, take all such
action as may be necessary to authorize additional shares of Common Stock for
issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates or scrip evidencing
fractional shares of Common Stock. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of Rights with regard to
which such fractional shares of Common Stock would otherwise be issuable an
amount in cash equal to the same fraction of the value of a whole share of
Common Stock. For purposes of this Section 24, the value of a whole share of
Common Stock shall be the Closing Price per share of Common Stock for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24, and the value of any Common Stock Equivalent shall be deemed to have the
same value as the Common Stock on such date.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preference Stock or to make any other distribution to the holders of
Preference Stock (other than a regular quarterly cash dividend out of earnings
or retained earnings of the Company), or (ii) to offer to the holders of
Preference Stock rights or warrants to subscribe for or to purchase any
additional shares of Preference Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preference Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preference Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a wholly
owned Subsidiary of the Company in a transaction that complies with Section
11(o) hereof), or to effect any sale, lease or other transfer of all or
substantially all the Company's assets to any other Person or Persons (other
than a wholly owned Subsidiary of the Company in a transaction that complies
with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to be acquired pursuant to a share exchange,
then, in each such case, the Company shall give to each holder of record of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, lease,
transfer, liquidation, dissolution or winding up is to take place and the date
of participation therein by the holders of the shares of Preference Stock, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the shares of Preference Stock for
purposes of such action,
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and in the case of any such other action, at least 20 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the shares of Preference Stock, whichever shall be the earlier. The
failure to give notice required by this Section 25 or any defect therein shall
not affect the legality or validity of the action taken by the Company or the
vote upon any such action.
(b) In case any Flip-In Event or Flip-Over Event shall occur,
then the Company shall as soon as practicable thereafter give to each
registered holder of a Rights Certificate (or if occurring prior to the
Distribution Date, the registered holders of Common Stock), in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) or Section 13(a) hereof, and all references in the preceding
paragraph to Preference Stock shall be deemed thereafter to refer to Common
Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Houston Industries Incorporated
1111 Louisiana
Houston, Texas 77002
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
Texas Commerce Bank National Association
600 Travis Street, 4th Floor
Houston, Texas 77002
Attention: Mr. Rodney Crowl
Vice President and Trust Officer
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the time a
Person becomes an Acquiring Person and subject to the penultimate sentence of
this Section 27, the Company may in its sole and absolute discretion and the
Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement in any respect without the approval of any holders
of
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Rights or holders of Common Stock. From and after the time a Person becomes an
Acquiring Person and subject to the penultimate sentence of this Section 27,
the Company may and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of
Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any
provision contained herein that may be defective or inconsistent with any other
provisions herein, or (iii) to change or supplement the provisions hereunder in
any manner that the Company may deem necessary or desirable; provided that no
such amendment or supplement shall materially and adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment;
provided, however, that the Rights Agent may, but shall not be obligated to,
enter into any such supplement or amendment that affects the Rights Agent's own
rights, duties or immunities under this Agreement. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall
be made that decreases the Redemption Price, shortens the Final Expiration
Date, increases the initial Purchase Price or decreases the number of one one-
thousandths of a share of Preference Stock for which a Right is initially
exercisable. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act as in effect on the date of the
Original Agreement. The Board of Directors of the Company (or, as set forth
herein, certain specified members thereof) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including,
without limitation, a determination to redeem or not redeem the Rights or to
amend this Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) that are done or made by the Board of Directors of
the Company in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights, as such, and all other
parties, and (y) not subject the Board of Directors to any liability to the
holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders
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of the Rights Certificates (and, prior to the Distribution Date, registered
holders of the Common Stock) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, registered holders of
the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Board of
Directors of the Company. Without limiting the foregoing, if any provision
requiring that a determination be made by less than the entire Board of
Directors of the Company is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then
be made by the entire Board of Directors of the Company.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Texas and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 33. Counterparts. This Agreement 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.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
HOUSTON INDUSTRIES INCORPORATED
By
------------------------------
Name:
Title:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By
------------------------------
Name:
Title:
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<PAGE> 42
Exhibit A
FORM OF
STATEMENT OF RESOLUTION ESTABLISHING SERIES OF SHARES
designated
SERIES A PREFERENCE STOCK
of
HOUSTON INDUSTRIES INCORPORATED
Pursuant to Article 2.13D of
the Texas Business Corporation Act
Pursuant to the provisions of Article 2.13D of the Texas Business
Corporation Act, the undersigned corporation submits the following statement
for the purpose of establishing and designating a series of shares of its
Preference Stock, without par value, designated "Series A Preference Stock" and
fixing and determining the relative rights and preferences thereof:
1. The name of the corporation is HOUSTON INDUSTRIES
INCORPORATED (the "Corporation").
2. The following resolution establishing and designating a
series of shares and fixing and determining the relative rights and preferences
thereof, was duly adopted by all necessary action on the part of the
Corporation, consisting of due adoption by the Board of Directors of the
Corporation at a meeting duly held on ____________, 1996:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Restated Articles of Incorporation, a series of Preference Stock,
without par value, of the Corporation be and hereby is created, and that
the designation and number of shares thereof and the preferences,
limitations and relative rights, including voting rights, of the shares
of such series and the qualifications, limitations and restrictions
thereof are as follows:
SERIES A PREFERENCE STOCK
1. Designation and Amount. There shall be a series of
Preference Stock that shall be designated as "Series A Preference Stock," and
the number of shares constituting such series shall be [600,000]. Such number
of shares may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the number of
shares of Series A Preference Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
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2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
(i) any shares of any series of Preference Stock ranking prior and superior to
the shares of Series A Preference Stock with respect to dividends and (ii) any
shares of Preferred Stock, the holders of shares of Series A Preference Stock,
in preference to the holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Preference Stock, shall be entitled
to receive, when, as and if declared by the Board of Directors out of assets of
the Corporation legally available for the purpose, quarterly dividends payable
in cash on the first day of January, April, July and October in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preference Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$2.00 or (b) the Adjustment Number (as defined below) times the aggregate per
share amount of all cash dividends, and the Adjustment Number times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, without par value, of the Corporation
(the "Common Stock") since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preference
Stock. The "Adjustment Number" shall initially be 1000. In the event the
Corporation shall at any time after the effectiveness of the merger of Houston
Industries Incorporated with and into the Corporation (the "Effective Date")
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted
by multiplying such Adjustment Number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preference Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $2.00 per share on the Series A
Preference Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preference Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preference Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of
Series A Preference Stock entitled to receive a quarterly dividend and before
such
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Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preference Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preference Stock entitled to
receive payment of a dividend or distribution declared thereon.
3. Voting Rights. The holders of shares of Series A
Preference Stock shall have the following voting rights:
(A) Each share of Series A Preference Stock shall entitle the
holder thereof to a number of votes equal to the Adjustment Number on all
matters submitted to a vote of the shareholders of the Corporation.
(B) Except as otherwise provided herein, in the Restated
Articles of Incorporation or by law, the holders of shares of Series A
Preference Stock, the holders of shares of any other class or series entitled
to vote with the Common Stock and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of shareholders
of the Corporation.
(C)(i) If at any time dividends on any Series A Preference Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") that shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preference Stock
then outstanding shall have been declared and paid or set apart for payment.
During each default period, (1) the number of Directors shall be increased by
two, effective as of the time of election of such Directors as herein provided,
and (2) the holders of Preference Stock (including holders of the Series A
Preference Stock) upon which these or like voting rights have been conferred
and are exercisable (the "Voting Preference Stock") with dividends in arrears
in an amount equal to six quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect such two Directors.
(ii) During any default period, such voting right of the
holders of Series A Preference Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of shareholders, and thereafter at annual meetings of
shareholders, provided that such voting right shall not be exercised unless the
holders of at least one-third in number of the shares of Voting Preference
Stock outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by the
holders of Voting Preference Stock of such voting right.
(iii) Unless the holders of Voting Preference Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any shareholder or
shareholders owning in the aggregate not less than ten percent of the total
number of shares of Voting Preference Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of Voting
Preference Stock, which meeting shall
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thereupon be called by the Chairman of the Board, the President, a Vice
President or the Secretary of the Corporation. Notice of such meeting and of
any annual meeting at which holders of Voting Preference Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of
record of Voting Preference Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 20 days and not later than
60 days after such order or request or, in default of the calling of such
meeting within 60 days after such order or request, such meeting may be called
on similar notice by any shareholder or shareholders owning in the aggregate
not less than ten percent of the total number of shares of Voting Preference
Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii),
no such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
shareholders.
(iv) In any default period, after the holders of Voting
Preference Stock shall have exercised their right to elect Directors voting as
a class, (x) the Directors so elected by the holders of Voting Preference Stock
shall continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy in
the Board of Directors may be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class or classes of stock
which elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular class
or classes of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preference Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the holders of
Voting Preference Stock as a class shall terminate and (z) the number of
Directors shall be such number as may be provided for in the Restated Articles
of Incorporation or By-Laws irrespective of any increase made pursuant to the
provisions of paragraph (C) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in the Restated
Articles of Incorporation or By-Laws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding sentence may
be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Preference
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preference Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preference Stock
outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior
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(either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preference Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preference Stock, except dividends paid ratably on the Series A
Preference Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preference Stock, or any shares of
stock ranking on a parity with the Series A Preference Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A
Preference Stock, or to all such holders and the holders of any such
shares ranking on a parity therewith, upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Preference
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preference Stock and may be reissued as part of a new series
of Preference Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preference Stock unless, prior thereto, the holders
of shares of Series A Preference Stock shall have received $1000 per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series A Preference Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series
A Liquidation Preference by (ii) the Adjustment Number. Following the payment
of the full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Preference Stock
and Common Stock, respectively, holders of Series A Preference Stock and
holders of shares of Common Stock shall, subject to the
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<PAGE> 47
prior rights of all other series of Preference Stock, if any, ranking prior
thereto, receive their ratable and proportionate share of the remaining assets
to be distributed in the ratio of the Adjustment Number to 1 with respect to
such Series A Preference Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preference
Stock, if any, that rank on a parity with the Series A Preference Stock, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance all or substantially all of the
Corporation's assets shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination, share exchange or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case each share of Series A Preference Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. Redemption. (A) The Corporation, at its option, may
redeem shares of the Series A Preference Stock in whole at any time and in part
from time to time, at a redemption price equal to the Adjustment Number times
the current per share market price (as such term is hereinafter defined) of the
Common Stock on the date of the mailing of the notice of redemption, together
with unpaid accumulated dividends to the date of such redemption. The "current
per share market price" on any date shall be deemed to be the average of the
closing price per share of such Common Stock for the ten consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Common Stock is determined during a period following the announcement of
(A) a dividend or distribution on the Common Stock other than a regular
quarterly cash dividend or (B) any subdivision, combination or reclassification
of such Common Stock and the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, shall not have occurred prior to the commencement of such ten
Trading Day period, then, and in each such case, the current per share market
price shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sales price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
transaction reporting system with respect to securities listed or admitted to
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trading on the New York Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange but sales price information is reported for such
security, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or such other self-regulatory
organization or registered securities information processor (as such terms are
used under the Securities Exchange Act of 1934, as amended) that then reports
information concerning the Common Stock, or, if sales price information is not
so reported, the average of the high bid and low asked prices in the over-the-
counter market on such day, as reported by NASDAQ or such other entity, or, if
on any such date the Common Stock is not quoted by any such entity, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors of the
Corporation. If on any such date no such market maker is making a market in
the Common Stock, the fair value of the Common Stock on such date as determined
in good faith by the Board of Directors of the Corporation shall be used. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange but is quoted by NASDAQ, a day
on which NASDAQ reports trades, or, if the Common Stock is not so quoted, a
Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in
the State of Texas are not authorized or obligated by law or executive order to
close.
(B) In the event that fewer than all the outstanding shares of
the Series A Preference Stock are to be redeemed, the number of shares to be
redeemed shall be determined by the Board of Directors and the shares to be
redeemed shall be determined by lot or pro rata as may be determined by the
Board of Directors or by any other method that may be determined by the Board
of Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing to
the holders of the shares of Series A Preference Stock to be redeemed a notice
of such redemption, first class postage prepaid, not later than the fifteenth
day and not earlier than the sixtieth day before the date fixed for redemption,
at their last address as the same shall appear upon the books of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on the
close of business on such redemption date. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the shareholder received such notice, and failure duly to give
such notice by mail, or any defect in such notice, to any holder of Series A
Preference Stock shall not affect the validity of the proceedings for the
redemption of any other shares of Series A Preference Stock that are to be
redeemed. On or after the date fixed for redemption as stated in such notice,
each holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such
notice and shall thereupon be entitled to receive payment
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<PAGE> 49
of the redemption price. If fewer than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(D) The shares of Series A Preference Stock shall not be
subject to the operation of any purchase, retirement or sinking fund.
9. Ranking. The Series A Preference Stock shall rank junior
to all series of the Corporation's Preferred Stock and to all other series of
the Corporation's Preference Stock (other than any such series of Preference
Stock the terms of which shall provide otherwise) in respect to dividend and
liquidation rights and shall rank senior to the Common Stock as to such
matters.
10. Amendment. At any time that any shares of Series A
Preference Stock are outstanding, the Restated Articles of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preference
Stock so as to affect them adversely without the affirmative vote of the
holders of two-thirds or more of the outstanding shares of Series A Preference
Stock, voting separately as a class.
11. Fractional Shares. Series A Preference Stock may be
issued in fractions of a share that shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preference Stock.
IN WITNESS WHEREOF, HOUSTON INDUSTRIES INCORPORATED has caused
this Statement to be executed on its behalf by the undersigned officer this ___
day of _______, 1996.
HOUSTON INDUSTRIES INCORPORATED
-------------------------------------
Name:
Title:
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<PAGE> 50
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER JULY 11, 2000 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.005 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY
OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND
WILL NO LONGER BE TRANSFERABLE.
RIGHTS CERTIFICATE
HOUSTON INDUSTRIES INCORPORATED
This certifies that _____________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of July 11, 1990 as it may from time to time be
supplemented or amended (the "Rights Agreement"), between Houston Industries
Incorporated, a Texas corporation (the "Company"), and Texas Commerce Bank
National Association, a national banking association (the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 p.m. (New York City time)
on July 11, 2000 at the office or offices designated by the Rights Agent for
such purpose, or its successors as Rights Agent, one one-thousandth of a fully
paid, nonassessable share (a "Fractional Share") of Series A Preference Stock
(the "Preference Stock") of the Company, at a purchase price of $42.50 per one
one-thousandth of a share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate set forth on the reverse hereof duly executed. The
Purchase Price may be paid in cash or by certified check, cashier's or official
bank check or bank draft payable to the order of the Company or the Rights
Agent. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per Fractional Share set forth above, are the number and
Purchase Price as of _____________, 1996, based on the Preference Stock as
constituted at such date. The Company reserves the right to require prior to
the occurrence of a Triggering Event (as such term is defined in the Rights
Agreement) that a number of Rights be exercised so that only whole shares of
Preference Stock will be issued.
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<PAGE> 51
From and after the first occurrence of a Triggering Event (as
such term is defined in the Rights Agreement), if the Rights evidenced by this
Rights Certificate are beneficially owned by or transferred to (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person (as such terms are
defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who, concurrently with or
after such transfer, became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, such Rights shall, with certain exceptions, become null
and void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preference Stock or other securities or assets
that may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Rights
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth in
the Rights Agreement. Copies of the Rights Agreement are on file at the above-
mentioned office of the Rights Agent and are also available upon written
request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices designated by the Rights
Agent for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of Fractional Shares of Preference
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at its option
at a redemption price of $.005 per Right, payable, at the election of the
Company, in cash or shares of Common Stock or such other consideration as the
Board of Directors may determine, at any time prior to the time a Person
becomes an Acquiring Person or (ii) may be exchanged in whole or in part for
shares of the Company's Common Stock, without par value, and/or other equity
securities of the Company deemed to have the same value as shares of Common
Stock, at any time prior to a person's becoming the beneficial owner of 50% or
more of the shares of Common Stock outstanding or the occurrence of a Flip-Over
Event.
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<PAGE> 52
No fractional shares of Preference Stock are required to be
issued upon the exercise of any Right or Rights evidenced hereby (other than,
except as set forth above, fractions that are integral multiples of a
Fractional Share of Preference Stock, which may, at the election of the
Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment may be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of shares
of Preference Stock or of any other securities of the Company that may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting shareholders (except
as provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of __________________, 1996
ATTEST: HOUSTON INDUSTRIES INCORPORATED
______________________________ By ______________________________
Secretary Title:
Countersigned:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By
_____________________________________
Authorized Signature
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<PAGE> 53
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer any Rights evidenced by the Rights Certificate.)
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto _____________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
_________ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
__________________ Attorney, to transfer the said Rights on the books of the
within-named Company, with full power of substitution.
Dated: _________________, 199__
_______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or another eligible guarantor institution (as defined pursuant to
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-4
<PAGE> 54
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being sold, assigned and transferred by or on behalf of a Person who
is or was an Acquiring Person or an Affiliate or Associate of an Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or who is a direct
or indirect transferee of an Acquiring Person or of an Affiliate or Associate
of an Acquiring Person.
Dated: _____________, 199__ _______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or another eligible guarantor institution (as defined pursuant to
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-5
<PAGE> 55
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: HOUSTON INDUSTRIES INCORPORATED
The undersigned hereby irrevocably elects to exercise _________
Rights represented by this Rights Certificate to purchase the shares of
Preference Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares (or
other securities) be issued in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ____________, 199__
_______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or another eligible guarantor institution (as defined pursuant to
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-6
<PAGE> 56
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or who is a direct or indirect
transferee of an Acquiring Person or of an Affiliate or Associate of an
Acquiring Person.
Dated: _____________, 199__
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or another eligible guarantor institution (as defined pursuant to
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
B-7
<PAGE> 57
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE PREFERENCE STOCK
Each outstanding share of Common Stock, without par value
("Common Stock"), of Houston Industries Incorporated (the "Company") currently
includes one right to purchase preference stock ("Right"). Each Right entitles
the registered holder to purchase from the Company a unit consisting of one
one-thousandth of a share (a "Fractional Share") of Series A Preference Stock,
without par value (the "Preference Stock"), at a purchase price of $42.50 per
Fractional Share, subject to adjustment (the "Purchase Price"). The
description and terms of the Rights are set forth in a Rights Agreement, as it
may from time to time be supplemented or amended (the "Rights Agreement"),
between the Company and Texas Commerce Bank National Association, as Rights
Agent.
Detachment of Rights; Exercisability. The Rights are attached to
all Common Stock certificates, and no separate certificates for the Rights
("Rights Certificates") have been distributed. The Rights will separate from
the Common Stock and a "Distribution Date" will occur, with certain exceptions,
upon the earlier of (i) ten days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Common Stock (the date of the announcement being
the "Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a
person's becoming an Acquiring Person. In certain circumstances, the
Distribution Date may be deferred by the Board of Directors. Certain
inadvertent acquisitions will not result in a person's becoming an Acquiring
Person if the person promptly divests itself of sufficient Common Stock. Until
the Distribution Date, (a) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (b) new Common Stock certificates issued will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any Common Stock certificate will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on July 11, 2000, unless earlier redeemed
or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Common Stock as of the
close of business on the Distribution Date and, from and after the Distribution
Date, the separate Rights Certificates alone will represent the Rights. All
shares of Common Stock issued prior to the Distribution Date will be issued
with Rights. Shares of Common Stock issued after the Distribution Date in
connection with certain employee benefit plans or upon conversion of certain
securities will be issued with Rights. Except as otherwise determined by the
Board of Directors, no other shares of Common Stock issued after the
Distribution Date will be issued with Rights.
Flip-In. In the event (a "Flip-In Event") that a person becomes
an Acquiring Person (except pursuant to a tender or exchange offer for all
outstanding shares of Common Stock at a price and on terms that a majority of
the independent directors of the Company determines to be fair to
C-1
<PAGE> 58
and otherwise in the best interests of the Company and its shareholders (a
"Permitted Offer")), each holder of a Right will thereafter have the right to
receive, upon exercise of such Right, a number of shares of Common Stock (or,
in certain circumstances, cash, property or other securities of the Company)
having a Current Market Price (as defined in the Rights Agreement) equal to two
times the exercise price of the Right. Notwithstanding the foregoing, following
the occurrence of any Triggering Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by or
transferred to an Acquiring Person (or by certain related parties) will be null
and void in the circumstances set forth in the Rights Agreement.
Flip-Over. In the event (a "Flip-Over Event") that, at any time
from and after the time an Acquiring Person becomes such, (i) the Company is
acquired in a merger or other business combination transaction (other than
certain mergers that follow a Permitted Offer), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights that are voided as set forth above) shall thereafter have
the right to receive, upon exercise, a number of shares of common stock of the
acquiring company having a Current Market Price equal to two times the exercise
price of the Right. Flip-In Events and Flip-Over Events are collectively
referred to as "Triggering Events."
Preference Stock. After the Distribution Date, each Right will
entitle the holder to purchase a Fractional Share of Preference Stock, which
will be essentially the economic equivalent of one share of Common Stock.
Antidilution. The number of outstanding Rights associated with a
share of Common Stock, or the number of Fractional Shares of Preference Stock
issuable upon exercise of a Right and the Purchase Price, are subject to
adjustment in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Common Stock occurring prior to the Distribution
Date. The Purchase Price payable, and the number of Fractional Shares of
Preference Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution in the
event of certain transactions affecting the Preference Stock.
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preference Stock that are not integral
multiples of a Fractional Share are required to be issued and, in lieu thereof,
an adjustment in cash may be made based on the market price of the Preference
Stock on the last trading date prior to the date of exercise. Pursuant to the
Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Preference Stock will be
issued.
Redemption of Rights. At any time until the time a person
becomes an Acquiring Person, the Company may redeem the Rights in whole, but
not in part, at a price of $.005 per Right, payable, at the option of the
Company, in cash, shares of Common Stock or such other consideration as the
Board of Directors may determine. Immediately upon the effectiveness of the
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and the only right of the holders of Rights will be to receive
the $.005 redemption price.
C-2
<PAGE> 59
Exchange of Rights. At any time after the occurrence of a Flip-
In Event and prior to a person's becoming the beneficial owner of 50% or more
of the shares of Common Stock then outstanding or the occurrence of a Flip-Over
Event, the Company may exchange the Rights (other than Rights owned by an
Acquiring Person or an affiliate or an associate of an Acquiring Person, which
will have become void), in whole or in part, at an exchange ratio of one share
of Common Stock, and/or other equity securities deemed to have the same value
as one share of Common Stock, per Right, subject to adjustment.
Substitution. If the Company has an insufficient number of
authorized but unissued shares of Common Stock available to permit an exercise
or exchange of Rights upon the occurrence of a Flip-In Event, it may substitute
certain other types of property for the Common Stock so long as the total value
received by the holder of the Rights is equivalent to the value of the Common
Stock that would otherwise have been received. The Company may substitute
cash, property, equity securities or debt of the Company, effect a reduction in
the exercise price of the Right or use any combination of the foregoing.
No Rights as a Shareholder; Taxes. Until a Right is exercised,
the holder thereof, as such, will have no rights as a shareholder of the
Company, including, without limitation, the right to vote or to receive
dividends. Shareholders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exercisable for Common Stock
(or other consideration) of the Company or for the common stock of the
acquiring company as set forth above or are exchanged as provided in the
preceding paragraph.
Amendment of Terms of Rights. Other than certain provisions
relating to the principal economic terms of the Rights, any of the provisions
of the Rights Agreement may be amended by the Board of Directors of the Company
prior to the time a Person becomes an Acquiring Person. Thereafter, the
provisions of the Rights Agreement may be amended by the Board of Directors in
order to cure any ambiguity, defect or inconsistency or to make changes that do
not materially and adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person).
Rights Agent. Texas Commerce Bank National Association serves as
Rights Agent with regard to the Rights. Because the Company currently serves
as the transfer agent and registrar for the Common Stock, the Company, at the
request of the Rights Agent, has agreed to perform certain ministerial
functions relating to the Rights on behalf of the Rights Agent.
Rights Agreement; Summary. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.
C-3
<PAGE> 1
EXHIBIT 8
[LETTERHEAD OF BAKER & BOTTS, L.L.P.]
October 28, 1996
Houston Industries Incorporated
Houston Industries Plaza
1111 Louisiana
Houston, Texas 77002-5231
Ladies and Gentlemen:
We have acted as your counsel in connection with the
transactions contemplated by the Agreement and Plan of Merger among Houston
Industries Incorporated ("HI"), Houston Lighting & Power Company ("HL&P"), HI
Merger, Inc. ("Merger Sub") and NorAm Energy Corp. ("NorAm"), dated as of
August 11, 1996 (the "Merger Agreement"). Pursuant to the Merger Agreement, HI
will merge with and into HL&P, and NorAm will merge with and into Merger Sub
(the "Basic Mergers"). Alternatively, under certain circumstances, both HI and
NorAm will merge with and into HL&P (the "First Alternative Merger") or NorAm
will merge with and into Merger Sub and HI will not merge with and into HL&P
(the "Second Alternative Merger"). In that connection, we have participated in
the preparation of a registration statement under the Securities Act of 1933, as
amended, of HL&P and of HI on Form S-4 (Registration No. 333-11329) in the form
thereof filed with the Securities and Exchange Commission as amended by
Amendment No. 1 thereto (the "Registration Statement"), including a Joint Proxy
Statement/Prospectus forming Part I of the Registration Statement (the "Proxy
Statement"). Capitalized terms not otherwise defined herein shall have the
meaning specified in the Proxy Statement.
We have examined the Merger Agreement, the Proxy Statement,
the representation letters of HI, HL&P and NorAm (the "Representation Letters")
delivered to us for purposes of this opinion, and such other documents and
corporate records as we have deemed necessary or appropriate for purposes of
this opinion. In addition, we have assumed (i) the Transaction will be
consummated in the manner contemplated in the Proxy Statement and in accordance
with the provisions of the Merger Agreement, (ii) the statements concerning the
Transaction set forth in the Proxy Statement are accurate and complete, and
(iii) the representations made to us in the Representation Letters are accurate
and complete.
<PAGE> 2
Houston Industries Incorporated -2- October 28, 1996
Based on certain assumptions set forth therein, statements of
legal conclusion set forth under the heading "The Transaction -- Certain Federal
Income Tax Consequences" in the Proxy Statement reflect our opinions on the
material tax consequences of the Transaction to the U.S. holders of the HI
Common Stock and NorAm Common Stock based on the Internal Revenue Code of 1986
and applicable regulations thereunder, both as in effect on the date hereof, and
on reported judicial decisions.
Our opinion is limited to tax matters specifically covered
hereby. This delivery of this opinion is not intended to satisfy the condition
to the closing of the Transaction set forth in Section 6.2(e) of the Merger
Agreement.
We hereby consent to the filing of this opinion as Exhibit 8 to
the Registration Statement and to the references to this Firm in the sections
captioned "The Transaction -- Certain Federal Income Tax Consequences" and
"Legal Matters" in the Proxy Statement. In giving this consent, we do not
thereby admit that we come within the category of a person whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
BAKER & BOTTS, L.L.P.
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to the
joint Registration Statement No. 333-11329 of Houston Industries Incorporated
("HII") and Houston Lighting & Power Company ("HL&P") on Form S-4 of our report
dated February 29, 1996 (March 26, 1996 as to Note 4), appearing in the Annual
Report on Form 10-K of HII for the year ended December 31, 1995 and of our
report dated February 29, 1996, appearing in the Annual Report on Form 10-K of
HL&P for the year ended December 31, 1995 and to the reference to us under the
heading "Experts" in the Joint Proxy Statement/Prospectus for HII, HL&P and
NorAm Energy Corp., which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
October 28, 1996
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Houston Lighting & Power
Company and Houston Industries Incorporated registration statement on Form S-4
of our report dated March 25, 1996, on our audits of the consolidated financial
statements of NorAm Energy Corp. and Subsidiaries as of December 31, 1995 and
1994, and for the years ended December 31, 1995, 1994 and 1993, which report is
incorporated by reference in NorAm Energy Corp. and Subsidiaries' Annual Report
on Form 10-K. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Houston, Texas
October 28, 1996
<PAGE> 1
EXHIBIT 99(A)
HOUSTON INDUSTRIES INCORPORATED
PROXY -- COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 17, 1996
The undersigned hereby appoints D.D. Jordan, R. Steve Letbetter and Lee W.
Hogan, and each of them as proxies, with full power of substitution, to vote as
designated on the reverse side, all shares of common stock held by the
undersigned at the special meeting of shareholders of Houston Industries
Incorporated to be held December 17, 1996 at 2:00 p.m., Houston time, in the
Auditorium of Houston Industries Plaza, 1111 Louisiana Street, Houston, Texas,
or any adjournments thereof, and with discretionary authority to vote on all
other matters that may properly come before the special meeting.
IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS'S
RECOMMENDATION TO APPROVE THE
AGREEMENT AND PLAN OF MERGER, YOU MAY
JUST SIGN AND DATE BELOW AND MAIL IN
THE POSTAGE-PAID ENVELOPE PROVIDED.
SPECIFIC CHOICES MAY BE MADE ON THE
REVERSE SIDE. IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY, THE
SHARES REPRESENTED WILL BE VOTED IN
ACCORDANCE WITH THE BOARD'S
RECOMMENDATION.
Dated: , 1996
--------------------------
Signature:
---------------------------
Signature:
---------------------------
(Note: Please sign exactly as name(s)
appears hereon. Joint owners should
each sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title.)
DO YOU PLAN TO ATTEND THE SPECIAL
MEETING? [ ]
<PAGE> 2
HOUSTON INDUSTRIES INCORPORATED
PROXY (CONTINUED)
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 17, 1996
This proxy when properly executed will be voted in the direction indicated
below by the shareholder. If no direction is made, this proxy will be voted FOR
Proposal To Approve and Adopt the Agreement and Plan of Merger, which proposal
was proposed by Houston Industries Incorporated.
PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, dated as of
August 11, 1996, as amended, by and among Houston Industries Incorporated, its
subsidiaries Houston Lighting & Power Company and HI Merger, Inc., and NorAm
Energy Corp. and the transactions contemplated thereby, including the election
of T. Milton Honea, Robert C. Hanna, O. Holcombe Crosswell and Joseph M. Grant
as directors effective as of the effective time of the merger of Houston
Industries Incorporated into Houston Lighting & Power Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE> 1
EXHIBIT 99(B)
- --------------------------------------------------------------------------------
NORAM ENERGY CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints T. Milton Honea, Michael B. Bracy
and Hubert Gentry, Jr., and each of them, proxies with power of
substitution, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all of the shares of stock of NorAm
Energy Corp. held of record by the undersigned on October 18, 1996, at
the Special Meeting of Stockholders to be held in Houston, Texas, on
December 17, 1996, and at all adjournments thereof, with all powers the
undersigned would possess if personally present. This card also
constitutes voting instructions for all shares (if any) votable by the
undersigned as a participant in the Minnegasco Employee Retirement
Savings Plan and the NorAm Employee Savings and Investment Plan and held
of record by the trustee of each plan and as a participant in the NorAm
Direct Stock Purchase and Dividend Reinvestment Plan and held of record
by the administrator of the plan. In their discretion, the proxies are
authorized to vote upon such other business that may properly come
before the meeting.
(continued on reverse side)
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
/X/ Please mark your ___ | 6937
vote as in this | |____
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE THIS PROXY WILL BE VOTED FOR ADOPTION OF THE AGREEMENT AND
PLAN OF MERGER.
APPROVAL OF THE AGREEMENT AND PLAN FOR AGAINST ABSTAIN
OF MERGER, dated as of August 11, / / / / / /
1996, as amended, by and among
Houston Industries Incorporated,
Houston Lighting & Power Company,
HI Merger, Inc. and NorAm Energy
Corp. and the transactions
contemplated thereby.
Please sign exactly as name
appears hereon. When shares
are held by Joint Tenants,
both should sign, and when
signing as attorney, as
executor, as administrator,
trustee or guardian, please
give full title as such. If
held by a corporation,
please sign in the full
corporate name by the
President or other
authorized officer. If held
by a partnership, please
sign in the partnership name
by an authorized person.
----------------------------
Signature
----------------------------
Signature
----------------------------------------------- Dated:----------------, 1996
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE
-----------------------------------------------
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
<PAGE> 1
EXHIBIT 99(c)
FORM OF ELECTION AND
LETTER OF TRANSMITTAL
FOR SHARES OF
NORAM ENERGY CORP.
COMMON STOCK
This Form of Election and Letter of Transmittal (this "Form of
Election") is to be used by record holders of common stock, par value $0.625
per share ("NorAm Common Stock"), of NorAm Energy Corp. ("NorAm") to make
Consideration Elections (as defined below) with respect to the type of Merger
Consideration (as defined below) to be received upon conversion of such
holder's shares of NorAm Common Stock in the Transaction (as defined below),
all as contemplated by the Agreement and Plan of Merger, dated as of August 11,
1996, as amended (the "Merger Agreement"), by and among Houston Industries
Incorporated ("HI"), Houston Lighting & Power Company, a wholly owned
subsidiary of HI ("HL&P"), HI Merger, Inc., a wholly owned subsidiary of HI
("Merger Sub"), and NorAm.
Pursuant to the Merger Agreement, (i) HI will merge into HL&P (the
"HI/HL&P Merger"), which will be renamed "Houston Industries Incorporated"
("Houston") and (ii) NorAm will merge into Merger Sub (the "NorAm Merger," and
together with the HI/HL&P Merger, the "Basic Mergers"), as a result of which
NorAm will become a wholly owned subsidiary of Houston. The Merger Agreement
also provides that one of two alternative merger structures (the "Alternative
Mergers") could be used rather than the Basic Mergers in certain circumstances.
The term "Transaction" refers to the business combination between HI and NorAm,
whether implemented using the Basic Mergers or one of the Alternative Mergers.
Except as otherwise indicated, capitalized terms used but not defined herein
have the meanings given to them in the Joint Proxy Statement/Prospectus dated
October __, 1996 of HL&P, HI and NorAm relating to the Transaction (the "Joint
Proxy Statement/Prospectus").
EXCHANGE AGENT: ________________________
Delivery by overnight courier, by hand or by mail:
___________________________________
___________________________________
___________________________________
Attention: _______________________
CONFIRM BY TELEPHONE: _________________
***************************************************************************
* *
* TO BE EFFECTIVE, THIS FORM OF ELECTION, TOGETHER WITH CERTIFICATES *
* FOR SHARES OF NORAM COMMON STOCK AND ANY OTHER DOCUMENTS REQUIRED *
* HEREBY, MUST BE RECEIVED BY THE EXCHANGE AGENT AT ITS ADDRESS SET *
* FORTH ABOVE PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE TRADING *
* DAY IMMEDIATELY PRECEDING THE CLOSING DATE OF THE TRANSACTION (THE *
* "ELECTION DEADLINE"). *
* *
***************************************************************************
SHARES OF NORAM COMMON STOCK HELD BY A RECORD HOLDER OF NORAM COMMON
STOCK (A "STOCKHOLDER") WHO DOES NOT TIMELY SUBMIT A PROPERLY COMPLETED FORM
OF ELECTION WILL BE DEEMED BY HOUSTON, IN ITS SOLE AND ABSOLUTE DISCRETION, TO
BE SHARES IN RESPECT OF WHICH EITHER CASH ELECTIONS OR STOCK ELECTIONS HAVE
BEEN MADE. THE FILING OF A FORM OF ELECTION WILL NOT CONSTITUTE A WAIVER OF A
STOCKHOLDER'S APPRAISAL RIGHTS. HOWEVER, STOCKHOLDERS WHO WITHDRAW OR FAIL TO
PERFECT APPRAISAL RIGHTS WILL BE DEEMED TO HAVE MADE NO ELECTION AND THEIR
SHARES OF NORAM COMMON STOCK WILL THEREFORE BE DEEMED BY HOUSTON, IN ITS SOLE
AND ABSOLUTE DISCRETION, TO BE SHARES IN RESPECT OF WHICH EITHER CASH ELECTIONS
OR STOCK ELECTIONS HAVE BEEN MADE, NOTWITHSTANDING ANYTHING TO THE CONTRARY
INDICATED ON A FORM OF ELECTION. ANY STOCKHOLDER MAY AT ANY TIME PRIOR TO THE
ELECTION DEADLINE CHANGE A PREVIOUSLY MADE ELECTION BY WRITTEN NOTICE TO THE
EXCHANGE AGENT ACCOMPANIED BY A PROPERLY COMPLETED, LATER-DATED FORM OF
ELECTION.
-1-
<PAGE> 2
DO NOT SEND THIS FORM OF ELECTION TO HL&P, HI OR NORAM.
DELIVERY OF THIS FORM OF ELECTION AND CERTIFICATES REPRESENTING SHARES
OF NORAM COMMON STOCK OTHER THAN TO THE EXCHANGE AGENT AT THE ADDRESS SHOWN
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS FORM OF
ELECTION WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED.
Ladies and Gentlemen:
In accordance with the Merger Agreement, the undersigned, as the
registered holder(s) of the certificates for shares of NorAm Common Stock
listed below or the assignee(s) of such registered holder(s), hereby makes the
Consideration Election(s) indicated below for the number of shares of NorAm
Common Stock specified below. Such Consideration Election(s) is subject to the
terms and conditions set forth in (i) the Joint Proxy Statement/Prospectus,
(ii) the Merger Agreement, a copy of which is attached as Appendix A to the
Joint Proxy Statement/Prospectus, and (iii) the Instructions hereto.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE JOINT PROXY STATEMENT/
PROSPECTUS.
The undersigned understands that delivery of the Merger Consideration
corresponding to the Consideration Election(s) made hereunder will be made as
promptly as practicable after the Effective Time, provided that surrender of
certificates for NorAm Common Stock is made in acceptable form. The
undersigned acknowledges that surrender is not made in acceptable form until
the Exchange Agent has received this Form of Election, or a copy hereof, duly
completed and signed, together, in the circumstances in which evidences of
authority are required hereby, with all accompanying evidences of authority in
satisfactory form to the Exchange Agent. Upon request, the undersigned will
execute and deliver any additional document that Houston (or HL&P prior to the
Effective Time) or the Exchange Agent reasonably deems necessary or
appropriate in connection with the surrender of certificates for NorAm Common
Stock or in connection with the exchange contemplated hereby. The undersigned
also understands that delivery of certificates for surrendered NorAm Common
Stock shall be made only to the Exchange Agent, and risk of loss and title to
certificates for NorAm Common Stock shall pass only upon proper delivery of
such certificates to the Exchange Agent.
The undersigned represents that the undersigned has full authority to
surrender the certificates for NorAm Common Stock surrendered hereby without
restriction, and that, upon payment by Houston of the Merger Consideration for
the shares represented by such certificates in accordance with the
Consideration Election(s) indicated below, Houston will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
Subject to consummation of the Transaction, the undersigned hereby appoints
__________________ as the undersigned's attorney-in-fact, with full power of
substitution, for the purpose of causing the shares of NorAm Common Stock
represented by the accompanying certificates to be converted into the Merger
Consideration corresponding to the Consideration Election(s) made above and the
instructions contained in this Form of Election. All authority conferred by
this Form of Election and the surrender of the enclosed certificates for NorAm
Common Stock are irrevocable, will bind the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and will
survive, and not be affected by, the death or incapacity of the undersigned.
If certificates for shares of NorAm Common Stock are not delivered herewith,
there is furnished below a guarantee of delivery of such shares from a trust
company organized in the United States or a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc.
The undersigned understands that the purpose of the election procedure
is to permit Stockholders to express their preferences for the type of Merger
Consideration they wish to receive in the Transaction, provided that generally
one-half of the outstanding shares of NorAm Common Stock will be exchanged for
Stock Consideration and one-half of such shares (including Dissenting Shares)
will be exchanged for Cash Consideration. Subject to the proration and the
limitations described below and in the Merger Agreement, the Exchange Agent
will honor the Stock Elections and Cash Elections made by Stockholders when it
issues Stock Consideration and Cash Consideration after the Effective Time.
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<PAGE> 3
The undersigned understands that in lieu of any fractional share of
Houston Common Stock, Houston will pay to each former stockholder of NorAm who
otherwise would be entitled to receive a fractional share of Houston Common
Stock an amount equal to a pro rata portion of the net proceeds of the sale by
the Exchange Agent of shares of Houston Common Stock representing the aggregate
of all such fractional shares and the aggregate dividends or other
distributions that are payable with respect to such shares of Houston Common
Stock, if any.
Unless otherwise directed by written instructions attached hereto,
please issue one stock certificate for the shares of Houston Common Stock
and/or one check for the cash portion of the Merger Consideration to which the
undersigned is entitled, as the case may be. Unless otherwise specified under
"Special Payment Instructions" or "Special Mailing Instructions" below, the
undersigned requests that the undersigned's certificate and/or check, as the
case may be, be issued in the name and mailed to the address of the undersigned
as set forth below.
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<PAGE> 4
Please complete the following boxes to indicate the NorAm Common Stock
to which this Form of Election relates and the Consideration Election(s) made
with respect to such NorAm Common Stock.
PLEASE READ THE INSTRUCTIONS SET FORTH AT THE END OF THIS FORM OF ELECTION
CAREFULLY BEFORE COMPLETING THIS FORM OF ELECTION.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NORAM COMMON STOCK SURRENDERED
- ----------------------------------------------------------------------------------------------------------------
CERTIFICATE(S) BEING SURRENDERED
(ATTACH SEPARATE SCHEDULE IF NECESSARY)
------------------------------------------------------------
NAME(S) OF REGISTERED HOLDER(S) NUMBER OF SHARES
AS SHOWN ON THE CERTIFICATE(S) AND ADDRESS(ES) CERTIFICATE REPRESENTED BY NUMBER OF SHARES
OF SUCH REGISTERED HOLDERS NUMBERS CERTIFICATES SURRENDERED*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TOTAL SHARES:
- ----------------------------------------------------------------------------------------------------------------
* Unless otherwise indicated, the holder(s) of certificates will be deemed to have surrendered all of the shares
represented by such certificates.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONSIDERATION ELECTION
- --------------------------------------------------------------------------------
Check one or more of the boxes below to make the indicated Consideration
Election and specify the number of shares to which such Consideration Election
applies:
Cash Consideration [ ] Number of Shares ______________________
Stock Consideration [ ] Number of Shares ______________________
No Preference [ ] Number of Shares ______________________
IF NO BOX IS CHECKED, THE SHARES OF NORAM COMMON STOCK OF THE REGISTERED
HOLDER(S) TO WHICH THIS FORM OF ELECTION RELATES WILL BE DEEMED BY HOUSTON, IN
ITS SOLE AND ABSOLUTE DISCRETION, TO BE SHARES IN RESPECT OF WHICH EITHER CASH
ELECTIONS OR STOCK ELECTIONS HAVE BEEN MADE.
- --------------------------------------------------------------------------------
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<PAGE> 5
NOTE: ALL STOCKHOLDERS MUST SIGN HERE AND
ON THE ACCOMPANYING SUBSTITUTE FORM W-9
Dated , 199
------------- --
SIGNATURE(S)
SIGN
HERE
--------------------------------------------------------------------------
------------------------------------------------------------------------------
(Signature(s) of Registered holder(s) or Authorized Signatory)
Telephone Number
--------------------------------------------------------------
(Include Area Code)
Must be signed above by registered holder(s) exactly as name(s) appear(s) on
the certificate(s) to which this Form of Election relates as indicated above
or by person(s) authorized to become registered holder(s). See Instruction 3.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information
and see instruction 3(e).
Name(s)
-----------------------------------------------------------------------
PLEASE PRINT
Capacity (full title)
---------------------------------------------------------
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL MAILING INSTRUCTIONS
(See Instructions 3(g), 4 and 7) (See Instruction 4)
To be completed ONLY if the To be completed ONLY if the
certificate(s) representing Houston certificate(s) representing Houston
Common Stock and any check(s) for Cash Common Stock and any check(s) for the
Consideration or cash issued in lieu of Cash Consideration or cash issued in lieu
fractional shares of Houston Common Stock of fractional shares of Houston Common
are to be issued in the name(s) of Stock are to be mailed to an address
someone other than the name(s) which other than indicated above.
appear above.
ISSUE TO: MAIL TO:
PLEASE PRINT PLEASE PRINT
(ATTACH SEPARATE SCHEDULE IF NECESSARY)
Name: Name:
----------------------------------- -------------------------------------
Address: Address:
--------------------------------- ----------------------------------
----------------------------------------- ------------------------------------------
----------------------------------------- ------------------------------------------
(Include Zip Code) (Include Zip Code)
Tax Identification or Social Security Attention:
Number(s) of Person(s) Named in this Box: --------------------------------
----------------------------------------- [ ] PLEASE CHECK BOX IF THIS IS A
PERMANENT ADDRESS CHANGE.
(Also complete the Substitute Form W-9)
</TABLE>
-5-
<PAGE> 6
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3(G))
Authorized Signature(s)
-------------------------------------------------------
Title
------------------------------------------------------------------------
Name of Firm
-----------------------------------------------------------------
Dated 199
------------------------------------------------------------------ ---
PLEASE RETURN THIS FORM OF ELECTION AND YOUR CERTIFICATE(S)
REPRESENTING SHARES OF NORAM COMMON STOCK COVERED HEREBY TO THE
EXCHANGE AGENT IN THE ENCLOSED ENVELOPE.
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee; to be used only if
certificates are not surrendered herewith. See Instruction 5.)
The undersigned, which is either a trust company organized in the United
States, a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., guarantees to deliver to
the Exchange Agent the certificates for shares of NorAm Common Stock to which
this Form of Election relates, no later than 5:00 p.m., New York City time, on
the fourth business day after the Election Deadline.
- -------------------------------------------------------------------------------
(Firm -- Please Print)
- -------------------------------------------------------------------------------
(Authorized Signature)
- -------------------------------------------------------------------------------
(Authorized Signature Name -- Please Print)
- -------------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------------
(Telephone Number, Including Area Code)
-6-
<PAGE> 7
*IMPORTANT TAX INFORMATION*
Please be advised that, regardless of whether you have previously
furnished a taxpayer identification number (social security number for
individual, or employer identification number for corporation(s)) (a "TIN") or
the certification on Form W-9 with respect to dividend payments, you must again
furnish this number, certified to be correct under penalties of perjury, to
assure that backup withholding of 31% will not be implemented. Certification
should be made to the Exchange Agent on the Substitute Form W-9 below. If the
certificates representing shares of NorAm Common Stock covered by this Form of
Election are registered in more than one name or are not registered in the name
of the actual holder, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W- 9 for additional guidance
on which number to report.
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT THE Social Security Number or
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW, OR Employer Identification Number
Please fill in your IF A TIN HAS NOT BEEN ISSUED TO YOU, PLEASE CHECK
Name and Address: THE BOX IN PART 3 BELOW. [ ]
-------------------
-------------------
-------------------
DEPARTMENT OF TREASURY PART 2 -- For payees exempt from backup withholding, see the enclosed
PAYER'S REQUEST FOR TAXPAYER Guidelines for Certification of Taxpayer Identification Number on
IDENTIFICATION NUMBER (TIN) Substitute Form W-9
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number
to be issued to me) and
(2) I am not subject to backup withholding under the provisions of Section 3406 of the Internal Revenue Code
of 1986, as amended, either because (i) I am exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends or (iii) the IRS has notified me that I am no longer subject
to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you
are subject to backup withholding because of under reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2).
PART 3
SIGNATURE Awaiting TIN [ ]
----------------------------------------------------------------
DATE , 199_
------------------
</TABLE>
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<PAGE> 8
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that,
notwithstanding that I have checked the box in Part 3 (and have completed this
Certificate of Awaiting Taxpayer Identification Number), all reportable
payments made to me prior to the time I provide the Exchange Agent with a
properly certified taxpayer identification number may be subject to a 31%
backup withholding tax.
SIGNATURE _______________________________ DATE ________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO
YOU.
-8-
<PAGE> 9
INSTRUCTIONS
1. GENERAL. This Form of Election is to be used by registered holders of
NorAm Common Stock to make an election to receive Cash Consideration or Stock
Consideration, or to indicate that they have no preference as to the form of
Merger Consideration to be received (individually, a "Consideration Election"
and, collectively, the "Consideration Elections") with respect to their shares
of NorAm Common Stock in the Transaction under the Merger Agreement. When
making elections, Stockholders should read carefully these Instructions and the
information set forth in the Joint Proxy Statement/Prospectus. A properly
completed and duly executed copy of this Form of Election, together with
certificates for NorAm Common Stock, and any other documents required by this
Form of Election must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the trading day
immediately preceding the Closing Date (the "Election Deadline"). The shares
of NorAm Common Stock held by a registered holder of NorAm Common Stock who
does not submit a Form of Election with respect to those shares that is
received by the Exchange Agent prior to the Election Deadline, or who indicates
no preference as to the form of Merger Consideration to be received, will be
deemed by Houston, in its sole and absolute discretion, to be shares in respect
of which either Cash Elections or Stock Elections have been made. The method
of delivery of this Form of Election, certificates for NorAm Common Stock and
all other required documents to the Exchange Agent is at the option and risk of
the electing holder and, except as otherwise provided below, the delivery will
be deemed made only when actually received by the Exchange Agent. Instead of
delivery by mail, it is recommended that the holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
delivery to the Exchange Agent before the Election Deadline. All Consideration
Elections will be void and of no effect if the Transaction is not consummated
and, in that event, certificates submitted in connection therewith will be
returned to the persons submitting them.
2. ELECTION AND SURRENDER BY HOLDER. Only a registered holder of NorAm
Common Stock may make a Consideration Election and surrender certificates for
the Merger Consideration corresponding to such Consideration Election. Any
beneficial owner of NorAm Common Stock who is not the registered holder and who
wishes to make a Consideration Election and surrender certificates should
arrange with the registered holder to execute and deliver this Form of Election
reflecting such Consideration Election or must, prior to completing and
executing this Form of Election and delivering the certificates, either make
appropriate arrangements to register ownership of the certificates in such
beneficial owner's name or obtain a properly completed stock power from the
registered holder.
3. SIGNATURES ON THIS FORM OF ELECTION; STOCK POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
(a) If this Form of Election is signed by the registered holder
of the certificates for NorAm Common Stock described above, the signature must
correspond exactly with the name as written on the face of the certificates
without alteration, enlargement or any change whatsoever.
(b) If any certificates for NorAm Common Stock are owned of
record by two or more joint owners, all such owners must sign this Form of
Election. If any certificates for NorAm Common Stock are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate copies of this Form of Election as there are
different registrations of certificates.
(c) When this Form of Election is signed by the registered holder
or holders of certificates listed herein and surrendered hereby, and the Merger
Consideration therefor is to be delivered to the registered holder, no
endorsements on certificates or separate stock powers are required. In any
other case, such holder or holders must either properly endorse the
certificates surrendered or transmit properly completed separate stock powers
with this Form of Election, with the signatures on the endorsement or stock
powers guaranteed by an Eligible Institution (as defined below).
(d) If this Form of Election is signed by a person other than the
registered holder or holders of any shares of NorAm Common Stock represented by
certificates listed herein, such certificates must be endorsed or accompanied
by appropriate stock powers, in each case signed as the name or names of the
registered holder or holders appears on the certificates, and the signatures on
such certificates or stock powers must be guaranteed by an Eligible
Institution.
(e) If this Form of Election or any certificate for NorAm Common
Stock or stock powers is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or
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<PAGE> 10
representative capacity, such persons should so indicate when signing, and,
unless waived by Houston, evidence satisfactory to Houston their authority so
to act must be submitted with this Form of Election.
(f) Endorsements on certificates for NorAm Common Stock or
signatures on stock powers required by this Instruction 3 must be guaranteed by
an Eligible Institution.
(g) Except as otherwise provided in this Instruction 3(g), all
signatures on this Form of Election must be guaranteed by a bank, brokerage
firm, savings and loan association or credit union, in any case with membership
in an approved Signature Guarantee Medallion Program (an "Eligible
Institution"). Signatures on this Form of Election need not be guaranteed if
this Form of Election is signed by the registered holder(s) of the NorAm Common
Stock surrendered herewith and such holder(s) have not completed the box set
forth herein entitled "Special Payment Instructions" or the box entitled
"Special Mailing Instructions."
4. SPECIAL PAYMENT AND MAILING INSTRUCTIONS. Electing holders of NorAm
Common Stock should indicate, in the applicable box or boxes, the name and
address to which certificates for Houston Common Stock or checks for cash are
to be issued or sent, if different from the name and address of the person
signing this Form of Election. In the case of issuance in a different name,
the taxpayer identification or social security number of the person named must
also be set forth.
5. GUARANTEED DELIVERY PROCEDURES. If any certificates representing
shares of NorAm Common Stock with respect to which this Form of Election
relates are not delivered herewith, there must be furnished a guarantee of
delivery of such shares on the Guarantee of Delivery form provided above from a
trust company organized in the United States, a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. A Form of Election containing such a guarantee of delivery shall
be subject to the condition that the certificates covered by such guarantee are
in fact delivered to the Exchange Agent no later than 5:00 p.m., New York City
time, on the fourth business day after the Election Deadline. Shares of NorAm
Common Stock represented by any such certificates that are not so delivered
will be deemed by Houston, in its sole and absolute discretion, to be shares in
respect of which either Cash Elections or Stock Elections have been made.
6. REVOCATION OF ELECTION. Any Consideration Election may be revoked
until the Election Deadline. To revoke a Consideration Election, a written
notice of revocation must be received by the Exchange Agent at its address set
forth on the cover of this Form of Election prior to the Election Deadline.
Any such notice or revocation must (i) specify the name of the registered
holder having made the Consideration Election to be revoked, (ii) identify the
certificate(s) for NorAm Common Stock with respect to which the Consideration
Election is to be revoked and (iii) be signed by the record holder in the same
manner as the original signature on the Form of Election by which such
Consideration Election was made. A new Consideration Election may be made by
submitting a new Form of Election.
7. TRANSFER TAXES. If certificates for Houston Common Stock are to be
delivered to or are to be registered or issued in the name of, any person other
than the registered holder of the NorAm Common Stock surrendered hereby, or if
certificates for surrendered NorAm Common Stock are registered in the name of
any person other than the person(s) signing this Form of Election, or if a
transfer tax is imposed for any reason other than solely as a result of the
surrender of certificates for NorAm Common Stock for the Merger Consideration,
then the amount of any such transfer taxes (whether imposed on the registered
holder or on any other persons) will be payable by the surrendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Form of Election, the amount of such transfer taxes will be
billed directly to such surrendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the NorAm Common Stock listed in this Form
of Election.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for NorAm Common Stock have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions as soon as possible. In the event of a mutilated, lost,
stolen or destroyed certificate, certain procedures will be required to be
completed before this Form of Election can be processed. Because these
procedures may take a substantial amount of time to complete, notice of any
mutilated, lost, stolen or destroyed certificate should be provided to the
Exchange Agent as soon as possible.
-10-
<PAGE> 11
9. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires
that a holder whose certificates for NorAm Common Stock are surrendered for the
Merger Consideration must provide Houston (as payor) with such holder's correct
Taxpayer Identification Number ("TIN") on Substitute Form W-9 above, which, in
the case of a surrendering holder who is an individual, is his or her social
security number. If the shares of NorAm Common Stock relating to this Form of
Election are held in more than one name or are not held in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer's
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions. If Houston (through the Exchange Agent) is not
provided with the current TIN, or if any other information is not correctly
provided, such surrendering holder may be subject to up to a $500 penalty
imposed by the Internal Revenue Service (plus additional penalties if a holder
willfully makes a false certification). In addition, delivery to such
surrendering holder of the Merger Consideration may be subject to backup
withholding in an amount equal to 31% of all reportable payments. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If backup withholding results in an overpayment
of taxes, a refund may be obtained provided that the required information is
furnished to the Internal Revenue Service.
Exempt holders of NorAm Common Stock (including, among others,
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. (In order to satisfy Houston that a
foreign individual qualifies as an exempt recipient, that holder must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent.) See
the enclosed W-9 Guidelines for additional instructions.
To prevent backup withholding, each electing holder of NorAm Common Stock
must provide its correct TIN by completing the Substitute Form W-9 set forth
above, certifying that the TIN provided is correct and that (i) the holder is
exempt from backup withholding, (ii) the holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of a failure to report all interest or dividends or (iii) the Internal
Revenue Service has notified the holder that such holder is no longer subject
to backup withholding. The box in Part 3 of the Substitute Form W-9 above may
be checked if the electing holder of NorAm Common Stock has not been issued a
TIN and has applied for a TIN or intends to apply for a TIN in the near future.
If the box in Part 3 is checked, the electing holder must also complete the
Certificate of Awaiting Taxpayer Identification Number contained in the
Substitute Form W-9 in order to avoid backup withholding. Notwithstanding that
the box in Part 3 is checked (and the Certificate of Awaiting Taxpayer
Identification Number is completed), Houston may withhold 31% of any Merger
Consideration provided in exchange for the NorAm Common Stock prior to the time
it is provided with a properly certified TIN. Backup withholding will continue
until such holder furnishes its TIN to Houston (through the Exchange Agent).
10. ELECTION PROCEDURE. Subject to the proration procedures described
below (See Instruction 15), each record holder of shares of NorAm Common Stock
(other than Dissenting Shares) outstanding immediately prior to the effective
time of the Transaction (the "Effective Time") is entitled to elect to receive
in respect of each such share either Cash Consideration or Stock Consideration.
Alternatively, a record holder may indicate that the record holder has no
preference as between Cash Consideration and Stock Consideration for such
shares.
All elections are to be made on this Form of Election. HI will issue a
public announcement of the anticipated Closing Date as soon as practicable, but
in no event less than five trading days prior to the Closing Date.
Election Forms must be received by the Exchange Agent at its office set
forth herein no later than 5:00 p.m., New York City time, on the trading day
immediately preceding the Closing Date. To make a proper election, a holder of
shares of NorAm Common Stock must have delivered to the Exchange Agent at the
address specified above prior to the Election Deadline the following:
(a) a Form of Election properly completed in accordance
with these Instructions and signed by the record holder of the
shares of NorAm Common Stock as to which such election is being
made; and
(b) either (i) the certificates for such shares or (ii)
an appropriate guarantee of delivery of certificates for such
shares.
-11-
<PAGE> 12
STOCKHOLDERS WHO PERFECT AN ELECTION MAY NOT RECEIVE THE ELECTED STOCK
CONSIDERATION OR CASH CONSIDERATION IN FULL DUE TO PRORATION LIMITATIONS IN THE
MERGER AGREEMENT (SEE INSTRUCTION 15), WHICH GENERALLY ARE DESIGNED TO EXCHANGE
ONE-HALF OF THE OUTSTANDING SHARES OF NORAM COMMON STOCK FOR STOCK
CONSIDERATION AND ONE-HALF OF SUCH SHARES (INCLUDING DISSENTING SHARES) FOR
CASH CONSIDERATION. STOCKHOLDERS ARE ALSO URGED TO CONSIDER THE DIFFERING
FEDERAL INCOME TAX CONSEQUENCES IN MAKING THE ELECTION, AS DISCUSSED IN THE
JOINT PROXY STATEMENT/PROSPECTUS.
11. MERGER CONSIDERATION. Except for Dissenting Shares and shares owned
directly or indirectly by NorAm or HI (which will be canceled at the Effective
Time), each share of NorAm Common Stock outstanding immediately prior to the
Effective Time will be converted at the Effective Time into the right to
receive from Houston the Merger Consideration. The Merger Consideration will
consist of (i) Cash Consideration or (ii) Stock Consideration (including a
corresponding number of Houston Rights).
12. CASH CONSIDERATION. The cash amount to be paid per share of NorAm
Common Stock will be $16.00. If the Transaction is not consummated by May 11,
1997, the $16.00 cash amount (but not the amount of Stock Consideration) will
increase after that date by 2% (simple interest) per quarter until consummation
(the "Cash Consideration"). The increase, if any, will be payable pro rata on
a daily basis for the period from May 11, 1997 until consummation. Otherwise,
no interest will be payable on the Merger Consideration.
13. STOCK CONSIDERATION. The "Stock Consideration" will be determined as
follows:
(a) If the Average Price of HI Common Stock (as defined
below) is $21.25 or lower, the Stock Consideration will be 0.7529 shares
of common stock, without par value, of Houston (the "Houston Common
Stock");
(b) If the Average Price of HI Common Stock is $26.00 or
greater, the Stock Consideration will be 0.6154 shares of Houston Common
Stock; or
(c) If the Average Price of HI Common Stock is greater
than $21.25 but less than $26.00, the Stock Consideration will be that
portion of a share of Houston Common Stock equal to the quotient of $16.00
divided by the Average Price of HI Common Stock.
In each case, the Stock Consideration includes a corresponding number of
associated Houston Rights. The "Average Price" of HI Common Stock will be the
average of the closing sales prices per share of common stock, without par
value, of HI (the "HI Common Stock"), rounded to four decimal places, as
reported in The Wall Street Journal's New York Stock Exchange Composite
Transactions Reports, for each of the first 20 consecutive trading days in the
period commencing 25 trading days prior to the Closing Date.
HI will issue a public announcement of the Average Price of HI Common
Stock and the number of shares of Houston Common Stock to be issued as Stock
Consideration as soon as practicable after such amounts are determinable.
IN MAKING AN ELECTION FOR CASH CONSIDERATION OR STOCK CONSIDERATION,
STOCKHOLDERS ARE URGED TO CONSIDER THE POSSIBLE IMPACT OF THE FLUCTUATING
MARKET VALUE OF HI COMMON STOCK ON THE VALUE OF TOTAL MERGER CONSIDERATION
RECEIVED IN THE TRANSACTION. UNDER THE MERGER AGREEMENT, THE STOCK
CONSIDERATION PER SHARE OF NORAM COMMON STOCK WILL BE FIXED AT NOT LESS THAN
0.6154 SHARES AND NOT MORE THAN 0.7529 SHARES OF HOUSTON COMMON STOCK. THIS
WILL RESULT IN STOCK CONSIDERATION HAVING A VALUE OF $16.00 PER SHARE OF NORAM
COMMON STOCK BASED UPON THE AVERAGE PRICE OF HI COMMON STOCK, IF THE AVERAGE
PRICE OF HI COMMON STOCK IS GREATER THAN OR EQUAL TO $21.25 AND LESS THAN OR
EQUAL TO $26.00. IF THE AVERAGE PRICE OF HI COMMON STOCK IS LESS THAN $21.25
PER SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED UPON THE AVERAGE PRICE
WILL BE LESS THAN $16.00. CONVERSELY, IF THE AVERAGE PRICE OF HI COMMON STOCK
IS MORE THAN $26.00 PER SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED UPON
THE AVERAGE PRICE WILL BE MORE THAN $16.00. IN ANY EVENT, THERE IS NO
ASSURANCE THAT THE AVERAGE PRICE (WHICH IS BASED UPON A 20-TRADING-DAY AVERAGE
CLOSING SALES PRICE DETERMINED PRIOR TO THE CLOSING DATE) OF HI COMMON STOCK
WILL APPROXIMATE THE ACTUAL VALUE OF HOUSTON COMMON STOCK AT THE CLOSING DATE
OR AT ANY TIME THEREAFTER.
14. ALTERNATIVE MERGERS. For purposes of this Form of Election and these
Instructions, the term "Houston" also means the surviving corporation of the
merger of both HI and NorAm into HL&P, if the First Alternative Merger is
effected in
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<PAGE> 13
lieu of the Basic Mergers. For purposes of this Form of Election and these
Instructions, if the Second Alternative Merger is effected in lieu of the Basic
Mergers, then references to Houston, Houston Common Stock and Houston Rights in
this Form of Election and these Instructions shall be deemed to be references
to HI, HI Common Stock and HI Rights.
15. PRORATION. The proration provisions of the Merger Agreement are
generally designed to exchange one-half of the outstanding shares of NorAm
Common Stock for Stock Consideration and one-half of such shares (including
Dissenting Shares) for Cash Consideration. HI has the option, in its sole
discretion, to change the Cash Election Number and the Stock Election Number to
more closely follow the actual elections of Stockholders so long as such
modification does not prevent tax counsel to NorAm or tax counsel to HI from
delivering their respective tax opinions which are conditions to consummating
the Transaction. For a more complete description of the proration provisions
of the Merger Agreement, see the section entitled "Proration" on pages 27 and
28 of the Joint Proxy Statement/Prospectus.
16. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for making a Consideration Election or surrendering certificates,
as well as requests for assistance or for additional copies of the Joint Proxy
Statement/Prospectus or this Form of Election, may be directed to the Exchange
Agent at the address or telephone number set forth on the cover of this Form of
Election.
17. MISCELLANEOUS. Houston (or HL&P prior to the Effective Time)
reserves the absolute right, which it may assign in whole or in part to the
Exchange 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 Houston (or HL&P prior to the Effective
Time) or the Exchange Agent in such matters shall be conclusive and binding.
NONE OF HL&P, HI, NORAM OR THE EXCHANGE AGENT WILL BE UNDER ANY OBLIGATION
WHATSOEVER TO NOTIFY ANY PERSON OF ANY DEFECT IN A FORM OF ELECTION SUBMITTED
TO THE EXCHANGE AGENT OR ANY OTHER IRREGULARITY IN CONNECTION WITH THE
SUBMISSION OF A FORM OF ELECTION AND ACCOMPANYING DOCUMENTS, NOR WILL ANY OF
THEM INCUR ANY LIABILITY FOR FAILURE TO GIVE SUCH NOTIFICATION. THE SHARES OF
NORAM COMMON STOCK OF A HOLDER COVERED BY THE SUBMISSION OF A FORM OF ELECTION
THAT IS DETERMINED BY HOUSTON (OR HL&P PRIOR TO THE EFFECTIVE TIME) OR THE
EXCHANGE AGENT TO BE INVALID AND THAT IS NOT CORRECTED BY THE ELECTION DEADLINE
WILL BE DEEMED BY HOUSTON, IN ITS SOLE AND ABSOLUTE DISCRETION, TO BE SHARES IN
RESPECT OF WHICH EITHER CASH ELECTIONS OR STOCK ELECTIONS HAVE BEEN MADE. ANY
DISPUTE CONCERNING THE VALIDITY OR EFFECTIVENESS OF A FORM OF ELECTION
(INCLUDING ANY DISPUTES INVOLVING THE INTERPRETATION OF THESE INSTRUCTIONS)
WILL BE DETERMINED BY HOUSTON (OR HL&P PRIOR TO THE EFFECTIVE TIME), WHOSE
DETERMINATION WILL BE CONCLUSIVE AND BINDING.
PLEASE RETURN THIS FORM OF ELECTION AND YOUR CERTIFICATE(S) REPRESENTING
SHARES OF NORAM COMMON STOCK COVERED HEREBY TO THE EXCHANGE AGENT IN THE
ENCLOSED ENVELOPE.
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