SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
December 11, 1998
________________________________________________
Date of Report (Date of Earliest Event Reported)
New England Electric System
________________________________________________
(Exact Name of Registrant as Specified in Charter)
Massachusetts 1-3446 04-1663060
_____________________ ___________ _____________
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
25 Research Drive
Westborough, Massachusetts 01582
___________________________________________________
(Address of Principal Executive Offices and Zip Code)
(508) 389-2000
___________________________________________________
(Registrant's Telephone Number, Including Area Code)
N/A
________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On December 11, 1998, New England Electric System, a Massachusetts
business trust, (the "Company"), The National Grid Group plc, a public
limited company incorporated under the laws of England and Wales with
registration number 2367004 ("National Grid") and Iosta LLC, a
Massachusetts limited liability company which is directly and indirectly
wholly owned by National Grid ("Iosta"), entered into an Agreement and Plan
of Merger, dated as of December 11, 1998 (the "Merger Agreement"),
providing for a merger transaction among the Company, National Grid and
Iosta. The Merger Agreement and the press release issued in connection
therewith are filed herewith as Exhibits 10 (mm) and 99, respectively, and
are incorporated herein by reference. The description of the Merger
Agreement set forth herein does not purport to be complete and is qualified
in its entirety by the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, Iosta will merge with and into the
Company (the "Merger"), with the Company being the surviving entity and
becoming a wholly-owned subsidiary of National Grid (the "Surviving
Entity"). The Merger, which was unanimously approved by the boards of
directors of each of the Company, National Grid and Iosta, is expected to
occur shortly after all of the conditions to the consummation of the
Merger, including the receipt of certain regulatory approvals, are met or
waived. The Company anticipates that the Merger can be consummated in
early 2000.
Under the terms of the Merger Agreement, each outstanding share of the
Company's common stock, $1.00 par value per share (the "Company Common
Stock"), other than shares, if any, owned by the Company as treasury shares
(except those treasury shares which are held pursuant to the Company's
Rabbi Trust), National Grid, Iosta or any other wholly-owned subsidiary of
National Grid, will be converted into the right to receive $53.75 in cash,
as may be adjusted (the "Merger Consideration"). Such adjustment will
occur if the Closing Date does not occur on or prior to the date that is
the six month anniversary of the date on which the Company Shareholders'
Approval is attained (the "Adjustment Date") then the per share amount
shall be increased by $.003288 each day up to a maximum adjustment of $0.60
per share, for a total of $54.35 per share.
The Board of Directors of the Company has received an opinion from its
investment banker, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to
the effect that, as of the date of the Merger Agreement, the Merger
Consideration to be received by the holders of Company Common Stock in the
Merger is fair from a financial point of view to holders of Company Common
Stock.
The Merger is subject to certain customary closing conditions,
including, without limitation, the receipt of the required approval of the
Company's shareholders, the receipt of the required approval of National
Grid's shareholders, and the receipt of all necessary governmental
approvals and the making of all necessary governmental filings, including
the consent or approval of certain state utility regulators, the approval
of the Federal Energy Regulatory Commission ("FERC"), the approval of the
Securities and Exchange Commission under the Public Utility Holding Company
Act of 1935, as amended (the "1935 Act"), the approval of the Nuclear
Regulatory Commission, the filing of the requisite notification with the
Federal Trade Commission and the Department of Justice under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
expiration of the applicable waiting period thereunder, and the filing of
the requisite notification under the Exon-Florio Provisions of the Omnibus
Trade and Competitiveness Act of 1988, and the termination of the review
and investigation with no action taken by the President thereunder. A
meeting of the Company's shareholders to vote upon the Merger will be
convened as soon as practicable and is expected to be held in the first
quarter of 1999. A meeting of National Grid's shareholders to vote upon
the Merger will be convened as soon as practicable and is expected to be
held in the first quarter of 1999.
The Merger Agreement contains certain covenants of the parties pending
the consummation of the Merger. Generally, except as required by the terms
of the Company's Settlement Agreements with FERC and certain state utility
regulators, the Company must carry on its business in the ordinary course
consistent with past practice, comply with all laws and preserve intact its
goodwill. The Company is permitted to declare and pay its regular
quarterly dividends. The Merger Agreement contains certain restrictions on
the Company including limitations on, or procedures for: issuance of
securities, termination or failure to renew material contracts, amendments
to the Company's Declaration of Trust or similar governing documents of the
Company's Subsidiaries, capital expenditures, acquisitions, dispositions,
incurrence of indebtedness, modification of employee compensation and
benefits, rate matters, changes in accounting policies and discharge of
liabilities. (See Article VI of the Merger Agreement.)
The Merger Agreement prevents the Company and its subsidiaries from
knowingly initiating, soliciting or encouraging, directly or indirectly,
any inquiry or proposal or offer, or engaging in negotiations with, or
providing confidential information to any third party relating to a
business combination proposal, and requires the Company to terminate
immediately any existing discussions or negotiations and notify National
Grid of any such inquiries relating to a business combination proposal,
unless prior to the Company shareholder approval: (i) the Company's Board
determines, in good faith based upon the advice of its outside legal
counsel with respect to the Board's fiduciary duties, that taking such
action is necessary for the Board to act in a manner consistent with its
fiduciary duties under applicable law; (ii) the Company's Board reasonably
concludes, in good faith after consultation with its financial advisors,
that (A) the party making such proposal has adequate financing sources and
(B) such proposal is likely to be more favorable to stockholders of the
Company than the Merger (a "Superior Proposal"); (iii) prior to furnishing
nonpublic information or entering into negotiations, the Company notifies
National Grid in writing of such furnishing of information or negotiations
(identifying the party making the proposal and the material terms of such
proposal) and enters into a confidentiality agreement with such third
party; and (iv) the Company keeps National Grid promptly informed of the
status and all material information with respect to such discussions or
negotiations. The Company may terminate the Merger Agreement to accept a
Superior Proposal (in which case, the termination fee provision described
below would be applicable). However, before so terminating, the Company
must negotiate with National Grid to adjust the Merger Agreement so as to
enable the parties to proceed with the adjusted Merger Agreement, and the
Company's Board must determine that, based on advice of counsel with
respect to the Board's fiduciary duties and notwithstanding a binding
commitment to consummate the Merger Agreement and notwithstanding all
concessions that may be offered by National Grid in further negotiations
with the Company, the Superior Proposal is more favorable to the Company's
shareholders than the Merger. (See Section 7.08 and Article IX of the
Merger Agreement.)
The Company CEO and one outside director of the Company's Board of
Directors, mutually determined by National Grid and the Company, will be
appointed to the Board of Directors of National Grid. In addition, the
Surviving Entity will have an advisory board, with eleven members from the
Company's Board immediately prior to the Closing, that will advise the
Surviving Entity with respect to general business, among other things. The
Merger Agreement provides that, after the effectiveness of the Merger (the
"Effective Time"), the headquarters of the Surviving Entity will be in
Massachusetts, and utility operations offices will remain in Massachusetts,
New Hampshire and Rhode Island. (See Section 7.07 of the Merger
Agreement.)
The Merger Agreement may be terminated under certain circumstances,
including: (i) by mutual written agreement of the boards of directors of
the parties; (ii) by either party if the Merger has not been effected by
the date nine months from the receipt of the Company shareholder approval
(the "Initial Termination Date"), provided that if the parties are
otherwise ready to close, but certain statutory approvals are not yet
obtained, the Initial Termination date will be extended to the date fifteen
months from the receipt of the Company shareholder' approval (the "Extended
Termination Date"), and provided further that if on the Initial or Extended
Termination Date, a "Financial Disruption" exists, then the Company will
have the right, but not the obligation, to extend such Termination Date six
months beyond such Termination Date (a "Financial Disruption" means any
significant disruption in the financial or capital markets which makes it
impracticable for a company having financial characteristics similar to
those of National Grid as of the date of the Merger Agreement to finance a
transaction of the size and nature as that contemplated under the Merger
Agreement on commercially reasonable financing terms that are available as
of the date of such financing); and (iii) by either party if: (A) the
Company shareholder approval or the National Grid shareholder approval has
not been obtained; or (B) any law, rule or regulation is adopted which
makes the Merger illegal or any final order or injunction permanently
prohibits the Merger. In addition, the Company may terminate the Merger
Agreement: (i) under certain circumstances, in order to accept a Superior
Proposal (subject to the limitations and procedures described above and to
payment of the termination fee described below); (ii) if there has been a
material breach of certain of National Grid's representations and
warranties or a failure by National Grid to perform and comply with its
covenants under the Merger Agreement and such breach or failure has not
been cured; (iii) if National Grid fails to deliver the merger
consideration at a time when all conditions to National Grid's obligation
to close have been satisfied or waived, and such failure is as a result of
Financial Disruption; and (iv) if the Board of National Grid withdraws or
modifies its approval of the merger or its recommendation to its
shareholders. National Grid may terminate the Merger Agreement if: (i)
the Board of the Company approves, recommends or takes no position with
respect to an alternative business combination proposal; (ii) twelve months
after the Company Shareholders' Approval is obtained, the order of the SEC
approving the Merger under the 1935 Act has not been issued, and National
Grid certifies to the Company that it reasonably believes that the SEC will
not issue an order that would comply with the requirements of the
regulatory condition; (iii) the Board of the Company withdraws or modifies
its approval of the merger or its recommendation to its shareholders; and
(iv) there has been a material breach of the Company's representations and
warranties or a failure by the Company to perform and comply with its
covenants under the Merger Agreement and such breach or failure has not
been cured. (See Articles VIII and IX of the Merger Agreement.)
National Grid will pay the Company a termination fee of: (i) $100
million if the Company terminates the Merger Agreement because National
Grid was unable to pay the merger consideration, at a time when all of the
National Grid's closing conditions were met or waived, because of a
Financial Disruption; (ii) $75 million plus up to $10 million for
documented out-of-pocket expenses if National Grid terminates after the
twelve month anniversary of the Company's shareholder approval because an
order from the SEC approving the Merger has not been issued, and National
Grid certifies to the Company that it reasonably believes that the SEC will
not issue an order that would comply with the requirements of the
regulatory condition; and (iii) documented out-of-pocket expenses up to $10
million if the Company terminates because of National Grid's (A) material
breach of its representations and warranties, (B) failure to perform and
comply with its covenants under the Merger Agreement or (C) failure to
obtain its shareholder vote. (See Articles VIII and IX of the Merger
Agreement.)
The Company will pay National Grid a termination fee of (i) $100
million plus up to $10 million for documented out-of-pocket expenses if the
Company terminates the Merger Agreement because the Company became the
target of a third party alternative proposal, and the Company's Board
determined in good faith based upon the advice of outside counsel with
respect to the Board's fiduciary duties, that termination was necessary for
the Board to act consistently with its fiduciary duties under applicable
law; (ii) $100 million plus up to $10 million for documented out-of-pocket
expenses if, at a time when an alternative business proposal is pending,
National Grid terminates the Merger Agreement because: (A) the Company has
materially breached its representations and warranties or has failed to
materially perform and comply with its covenants under the Merger
Agreement, (B) the Company shareholder approval was not obtained, or (C)
the Company terminates the Merger Agreement because the Closing has not
occurred by the termination date, provided, that in the case of (A), (B) or
(C), the Company enters into a merger or acquisition agreement with the
party offering such alternative proposal within two years of such
termination; and (iii) documented out-of-pocket expenses up to $10 million
if National Grid terminates at a time when no alternative business proposal
was outstanding because of the Company's (A) material breach of its
representations and warranties, (B) failure to perform and comply with its
covenants under the Merger Agreement or (C) failure to obtain its
shareholder vote. (See Article IX of the Merger Agreement.)
If the Merger Agreement is terminated because either party's Board
has withdrawn or changed its recommendation with respect to the Merger
prior to such party's shareholder meeting, then the other party must pay a
$100 million termination fee plus documented out-of-pocket expenses up to
$10 million. (See Article IX of the Merger Agreement.)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
10(mm) Agreement and Plan of Merger, dated as of December 11, 1998,
by and among The National Grid Group plc, Iosta LLC and New
England Electric System.
99 Press Release of New England Electric System issued December
14, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: December 16, 1998
NEW ENGLAND ELECTRIC SYSTEM
By: /s/ Michael E. Jesanis
__________________________
Michael E. Jesanis
Senior Vice President and
Chief Financial Officer
Exhibit Index
Exhibit Description
10(mm) Agreement and Plan of Merger, dated as of December 11, 1998,
among New England Electric System, The National Grid Group plc,
and Iosta LLC.
99 Press Release of New England Electric System issued December 14,
1998.
Exhibit 10(mm)
EXECUTION COUNTERPART
AGREEMENT AND PLAN OF MERGER
dated as of December 11, 1998
by and among
THE NATIONAL GRID GROUP PLC
IOSTA LLC
and
NEW ENGLAND ELECTRIC SYSTEM
TABLE OF CONTENTS
Page
No.
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Effective Time . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Effects of the Merger . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.01 Conversion of Capital Stock . . . . . . . . . . . . . . . . 2
2.02 Surrender of Shares . . . . . . . . . . . . . . . . . . . . 3
2.03 Withholding Rights . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . 5
4.01 Organization and Qualification . . . . . . . . . . . . . . 5
4.02 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 6
4.03 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.04 Non-Contravention; Approvals and Consents . . . . . . . . . 7
4.05 SEC Reports, Financial Statements and Utility Reports . . . 8
4.06 Absence of Certain Changes or Events . . . . . . . . . . . 9
4.07 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 9
4.08 Information Supplied . . . . . . . . . . . . . . . . . . . 10
4.09 Compliance . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . 14
4.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 15
4.13 Environmental Matters . . . . . . . . . . . . . . . . . . . 16
4.14 Regulation as a Utility . . . . . . . . . . . . . . . . . . 18
4.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.16 Nuclear Facilities . . . . . . . . . . . . . . . . . . . . 19
4.17 Vote Required . . . . . . . . . . . . . . . . . . . . . . . 19
4.18 Opinion of Financial Advisor . . . . . . . . . . . . . . . 20
4.19 Ownership of Parent Ordinary Shares . . . . . . . . . . . . 20
4.20 State Anti-Takeover Statutes . . . . . . . . . . . . . . . 20
4.21 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.22 Company Associates . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND LLC . . . . . . . . . . . 21
5.01 Organization and Qualification . . . . . . . . . . . . . . 21
5.02 Share Capital . . . . . . . . . . . . . . . . . . . . . . . 21
5.03 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.04 Non-Contravention; Approvals and Consents . . . . . . . . . 23
5.05 Information Supplied . . . . . . . . . . . . . . . . . . . 23
5.06 Compliance . . . . . . . . . . . . . . . . . . . . . . . . 24
5.07 Financing. . . . . . . . . . . . . . . . . . . . . . . . . 24
5.08 Vote Required . . . . . . . . . . . . . . . . . . . . . . . 25
5.09 Ownership of Company Shares . . . . . . . . . . . . . . . . 25
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.01 Covenants of the Company . . . . . . . . . . . . . . . . . 25
6.02 Covenants of Parent . . . . . . . . . . . . . . . . . . . . 30
6.03 Additional Covenants by Parent and the Company. . . . . . . 32
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 33
7.01 Access to Information . . . . . . . . . . . . . . . . . . . 33
7.02 Proxy Statement and Circular . . . . . . . . . . . . . . . 33
7.03 Approval of Shareholders . . . . . . . . . . . . . . . . . 34
7.04 Regulatory and Other Approvals . . . . . . . . . . . . . . 35
7.05 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 35
7.06 Labor Agreements and Workforce Matters . . . . . . . . . . 37
7.07 Post Merger Operations . . . . . . . . . . . . . . . . . . 37
7.08 No Solicitations . . . . . . . . . . . . . . . . . . . . . 38
7.09 Directors' and Officers' Indemnification and Insurance . . 39
7.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11 Brokers or Finders . . . . . . . . . . . . . . . . . . . . 41
7.12 Anti-Takeover Statutes . . . . . . . . . . . . . . . . . . 41
7.13 Public Announcements . . . . . . . . . . . . . . . . . . . 42
7.14 Restructuring of Merger . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.01 Conditions to Each Party's Obligation to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.02 Conditions to Obligation of Parent and LLC to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . 43
8.03 Conditions to Obligation of the Company to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . 45
9.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . 45
9.02 Effect of Termination . . . . . . . . . . . . . . . . . . . 47
9.03 Termination Fees . . . . . . . . . . . . . . . . . . . . . 47
9.04 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.05 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.01 Non-Survival of Representations, Warranties,
Covenants and Agreements . . . . . . . . . . . . . . . . 49
10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.03 Entire Agreement; Incorporation of Exhibits . . . . . . . . 51
10.04 No Third Party Beneficiary . . . . . . . . . . . . . . . . 52
10.05 No Assignment; Binding Effect . . . . . . . . . . . . . . . 52
10.06 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.07 Invalid Provisions . . . . . . . . . . . . . . . . . . . . 52
10.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 52
10.09 Submission to Jurisdiction; Waivers . . . . . . . . . . . . 52
10.10 Enforcement of Agreement . . . . . . . . . . . . . . . . . 53
10.11 Certain Definitions . . . . . . . . . . . . . . . . . . . . 53
10.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 54
10.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . 54
EXHIBITS
EXHIBIT A Form of Employment Agreement for Richard P. Sergel
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the
meanings ascribed to them in the corresponding Sections of this Agreement
listed below:
"1935 Act" -- Section 4.05(b)
"1935 Act Order" -- Section 9.01(h)
"Adjustment Date" -- Section 2.01(c)
"Affected Employee" -- Section 7.05(a)
"affiliate" -- Section 10.11(a)
"Agreement" -- Preamble
"Alternative Proposal" -- Section 7.07
"beneficially" -- Section 10.11(b)
"business day" -- Section 10.11(c)
"Canceled Shares" -- Section 2.02(b)
"Certificates" -- Section 2.02(b)
"Circular" -- Section 4.08(b)
"Closing" -- Article III
"Closing Agreement" -- Section 4.10(j)
"Closing Date" -- Article III
"Code" -- Section 2.03
"Companies Act" -- Section 5.02(a)
"Company" -- Preamble
"Company Associates" -- Section 4.01(b)
"Company Shares" -- Preamble
"Company Disclosure Letter" -- Section 4.01(a)
"Company Employee Benefit Plans" -- Section 4.11(a)
"Company Financial Statements" -- Section 4.05(a)
"Company Nuclear Facilities" -- Section 4.16
"Company Material Adverse Effect" -- Section 4.01(a)
"Company Required Consents" -- Section 4.04(a)
"Company Required Statutory Approvals" -- Section 4.04(b)
"Company SEC Reports" -- Section 4.05(a)
"Company Shareholders' Approval" -- Section 7.03(b)
"Company Shareholders' Meeting" -- Section 7.03(b)
"Company Significant Subsidiary" -- Section 7.08
"Company Share Plans" -- Section 4.02(a)
"Confidentiality Agreement" -- Section 7.01
"Constituent Entities" -- Section 1.01
"Contracts" -- Section 4.04(a)
"control," "controlling," "controlled by"
and "under common control with" -- Section 10.11(a)
"DOE" -- Section 4.05(b)
"Effective Time" -- Section 1.02
"Environmental Claim" -- Section 4.13(f)(i)
"Environmental Laws" -- Section 4.13(f)(ii)
"Environmental Permits" -- Section 4.13(b)
"ERISA" -- Section 4.11(a)
"ERISA Affiliate" -- Section 4.11(c)
"Evaluation Material" -- Section 7.01
"Exchange Act" -- Section 4.05(a)
"Exchange Fund" -- Section 2.02(a)
"Exon Florio" -- Section 8.01(d)
"Extended Termination Date" -- Section 9.01(b)
"FCC" -- Section 4.05(b)
"FERC" -- Section 4.05(b)
"Final Order" -- Section 8.01(e)
"Financial Disruption" -- Section 9.03(d)
"Governmental Authority" -- Section 4.04(a)
"Hazardous Materials" -- Section 4.13(f)(iii)
"Houston Agreement" -- Section 7.05(f)
"HSR Act" -- Section 7.04(a)
"Indemnified Liabilities" -- Section 7.09(a)
"Indemnified Party" -- Section 7.09(a)
"Initial Termination Date" -- Section 9.01(b)
"Integration Team" -- Section 6.03(b)
"IRS" -- Section 4.10(m)
"knowledge" -- Section 10.11(d)
"laws" -- Section 4.04(a)
"Lien" -- Section 4.02(b)
"LLC" -- Preamble
"LLC Agreement" -- Section 5.01
"LSE" -- Section 4.08(b)
"Massachusetts Secretary" -- Section 1.02
"Merger" -- Preamble
"Merger Consideration" -- Section 2.01(b)(ii)
"MGL" -- Section 1.01
"NGC" -- Section 5.01
"NRC" -- Section 4.05(b)
"Options" -- Section 4.02(a)
"orders" -- Section 4.04(a)
"Out-of-Pocket Expenses" -- Section 9.03(a)
"Parent" -- Preamble
"Parent Disclosure Letter" -- Section 5.02(a)
"Parent Material Adverse Effect" -- Section 5.01(a)
"Parent Ordinary Share" -- Section 5.02(a)
"Parent Reports" -- Section 5.02(a)
"Parent Required Consents" -- Section 5.04(a)
"Parent Required Statutory Approvals" -- Section 5.04(b)
"Parent Shareholders' Approval" -- Section 7.03(a)
"Parent Shareholders' Meeting" -- Section 7.03(a)
"Parent Voting Debt" -- Section 5.02(d)
"Paying Agent" -- Section 2.02(a)
"PBGC" -- Section 4.11(g)
"person" -- Section 10.11(e)
"Per Share Amount" -- Section 2.01(b)(ii)
"Post Closing Plans" -- Section 7.05(c)
"Proxy Statement" -- Section 4.08(a)
"Rabbi Trust Shares" -- Section 2.01(b)(i)
"Regulatory Termination Fee" -- Section 9.03(e)
"Release" -- Section 4.13(f)(iv)
"Representatives" -- Section 10.11(f)
"SEC" -- Section 4.05(a)
"Securities Act" -- Section 4.05(a)
"Special Share" -- Section 5.02(a)
"Subsidiary" -- Section 10.11(g)
"Surviving Entity" -- Section 1.01
"Tax Ruling" -- Section 4.10(j)
"Tax Return" -- Section 4.10
"Taxes" -- Section 4.10
"Trust Agreement" -- Section 1.03
"US GAAP" -- Section 4.05(a)
"Voting Debt" -- Section 4.02(d)
"Yankee Companies" -- Section 4.16
This AGREEMENT AND PLAN OF MERGER, dated as of December 11, 1998
(this "Agreement"), is made and entered into by and among THE NATIONAL GRID
GROUP PLC, a public limited company incorporated under the laws of England
and Wales with registration number 2367004 ("Parent"), IOSTA LLC, a
Massachusetts limited liability company which is directly and indirectly
wholly owned by Parent ("LLC"), and NEW ENGLAND ELECTRIC SYSTEM, a
Massachusetts business trust (the "Company").
WHEREAS, the Board of Directors of Parent and the Company and the
members of LLC have each determined that it is advisable and in the best
interests of their respective shareholders and members to consummate, and
have approved, the business combination transaction provided for herein in
which LLC would merge with and into the Company, with the Company being the
surviving entity (the "Merger"), pursuant to the terms and conditions of
this Agreement, as a result of which Parent will own, directly or
indirectly, all of the issued and outstanding common shares of the Company
(the "Company Shares");
WHEREAS, Parent, LLC and the Company desire to make certain
representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.02), LLC shall be
merged with and into the Company in accordance with Section 2 of
Chapter 182 and Section 59 of Chapter 156C of the Massachusetts General
Laws ("MGL"). At the Effective Time, the separate existence of LLC shall
cease and the Company shall continue as the surviving entity in the Merger.
The Company, after the Effective Time, is sometimes referred to herein as
the "Surviving Entity" and the Company and LLC are sometimes referred to
herein as the "Constituent Entities". The effect and consequences of the
Merger shall be as set forth in Article II.
1.02 Effective Time. Subject to the provisions of this Agreement, on
the Closing Date (as defined in Article III), a certificate of merger shall
be executed and filed by the Company and LLC with the Secretary of the
Commonwealth of Massachusetts (the "Massachusetts Secretary"). The Merger
shall become effective at the time of the filing of the certificate of
merger relating to the Merger with the Massachusetts Secretary, or at such
later time as is specified in the certificate of merger (such date and time
being referred to herein as the "Effective Time").
1.03 Effects of the Merger. At the Effective Time, the Agreement and
Declaration of Trust of the Company (the "Trust Agreement") as in effect
immediately prior to the Effective Time shall be the agreement and
declaration of trust of the Surviving Entity, until thereafter amended as
provided by law and such agreement and declaration of trust. Subject to
the foregoing, the additional effects of the Merger shall be as provided in
the applicable provisions of Section 2 of Chapter 182 of the MGL and
Section 62 of the Limited Liability Company Act of Massachusetts.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
(a) Membership Interests of LLC. Each one percent of the issued
and outstanding membership interests in LLC shall be converted into one
transferable certificate of participation or share of the Surviving Entity.
(b) Conversion of Company Shares.
(i) Cancellation of Treasury Shares and Shares Owned by
Parent and Subsidiaries. All Company Shares that are owned by the Company
as treasury shares (excluding shares held as treasury shares pursuant to
the New England Electric System Companies' Rabbi Trust effective January 1,
1994, amended October 3, 1994 and amended December 2, 1996 (the "Rabbi
Trust Shares")) and any Company Shares owned by Parent, LLC or any other
wholly owned Subsidiary (as defined in Section 10.11) of Parent shall be
canceled and retired and shall cease to exist and no cash or other
consideration shall be delivered in exchange therefor.
(ii) Conversion of Company Shares. Each Company Share
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.01(b)(i)) and each Rabbi
Trust Share shall be canceled and converted in accordance with the
provisions of this Section 2.01 into the right to receive cash in the
amount (the "Per Share Amount") of $53.75, as such amount may hereafter be
adjusted in accordance with Section 2.01(c) hereof (the "Merger
Consideration"), payable, without interest, to the holder of such Company
Share, upon surrender, in the manner provided in Section 2.02 hereof, of
the certificate formerly evidencing such share.
(c) Adjustment in Amount of Merger Consideration. In the event
that the Closing Date shall not have occurred on or prior to the date that
is the six (6) month anniversary of the date on which the Company
Shareholders' Approval is obtained (the "Adjustment Date"), the Per Share
Amount shall be increased, for each day after the Adjustment Date up to and
including the day which is one day prior to the Closing Date, by an amount
equal to $0.003288; provided, however that the Per Share Amount shall not
exceed $54.35.
2.02 Surrender of Shares. (a) Deposit with Paying Agent. Prior to
the Effective Time, Parent or LLC shall designate a bank or trust company
reasonably acceptable to the Company to act as agent (the "Paying Agent")
for the benefit of the holders of Company Shares in connection with the
Merger to receive the funds to which holders of Company Shares shall become
entitled pursuant to Section 2.01(b)(ii) (the "Exchange Fund"). From time
to time at, immediately prior to or after the Effective Time, Parent or LLC
shall make or cause to be made available to the Paying Agent immediately
available funds in amounts and at the times necessary for the payment of
the Merger Consideration upon surrender of Certificates (as defined in
Section 2.02(b)) in accordance with Section 2.02(b), it being understood
that any and all interest or other income earned on funds made available to
the Paying Agent pursuant to this Section 2.02(a) shall belong to and shall
be paid (at the time provided for in Section 2.02(e)) as directed by Parent
or LLC. Any such funds deposited with the Paying Agent by Parent shall be
invested by the Paying Agent as directed by Parent or LLC.
(b) Exchange Procedure. As soon as practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding Company Shares (the "Canceled
Shares") that were canceled and became instead the right to receive the
Merger Consideration pursuant to Section 2.01(b)(ii): (i) a letter of
transmittal in such form as Parent or LLC and the Company may reasonably
agree (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of
the Certificates to the Paying Agent) and (ii) instructions for effecting
the surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate or Certificates to the Paying Agent for
cancellation (or to such other agent or agents as may be appointed by
Parent or LLC and are reasonably acceptable to the Company), together with
a duly executed letter of transmittal and such other documents as the
Paying Agent shall require, the holder of such Certificate shall be
entitled to receive the Merger Consideration in exchange for each Company
Share formerly evidenced by such Certificate which such holder has the
right to receive pursuant to Section 2.01(b)(ii). In the event of a
transfer of ownership of Canceled Shares which is not registered in the
transfer records of the Company, the Merger Consideration in respect of
such Canceled Shares may be given to the transferee thereof if the
Certificate or Certificates representing such Canceled Shares is presented
to the Paying Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence satisfactory to the Paying Agent that
any applicable stock transfer taxes have been paid. At any time after the
Effective Time, each Certificate shall be deemed to represent only the
right to receive the Merger Consideration subject to and upon the surrender
of such Certificate as contemplated by this Section 2.02. No interest
shall be paid or will accrue on the Merger Consideration payable to holders
of Certificates pursuant to Section 2.01(b)(ii).
(c) No Further Ownership Rights in Company Shares. The Merger
Consideration paid upon the surrender of Certificates in accordance with
the terms of Section 2.01(b)(ii) shall be deemed to have been paid at the
Effective Time in full satisfaction of all rights pertaining to the Company
Shares represented thereby. From and after the Effective Time, the share
transfer books of the Company shall be closed and there shall be no further
registration of transfers thereon of the Company Shares which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Parent for any reason, they
shall be canceled and exchanged as provided in this Section 2.02.
(d) Lost, Stolen or Destroyed Certificates. In the event any
owner of any Certificate shall claim that such Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the owner of such Certificate and delivery of that affidavit to the Paying
Agent and, if required by Parent or LLC, the posting by such person of a
bond in customary amount as indemnity against any claim that may be made
against Parent LLC, the Company or the Surviving Entity with respect to
such Certificate, the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable upon due
surrender of, and deliverable pursuant to this Section 2.02 in respect of,
the Company Shares to which such Certificate relates.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the shareholders of the Company for one
(1) year after the Effective Time shall be delivered to the Surviving
Entity, upon demand, and any Shareholders of the Company who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Entity (subject to abandoned property, escheat and other similar
laws) as general creditors for payment of their claim for the Merger
Consideration payable upon due surrender of the Certificates held by them.
None of Parent, LLC or the Surviving Entity shall be liable to any former
holder of Company Shares for the Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
2.03 Withholding Rights. Each of the Surviving Entity and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Company Shares such
amounts as it is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law, including the
tax laws of the United Kingdom; provided, however, that if such withholding
may be eliminated or reduced through the delivery of any certificate or
other documentation, each of the Surviving Entity and the Parent shall
provide each holder of Company Shares with a reasonable opportunity to
deliver such certificate or other documentation. To the extent that
amounts are so withheld by the Surviving Entity or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Shares in respect of
which such deduction and withholding was made by the Surviving Entity or
Parent, as the case may be.
ARTICLE III
THE CLOSING
The closing of the Merger and other transactions contemplated
hereby (the "Closing") will take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., 260 Franklin Street, Boston, MA 02110, at 10:00
a.m., local time, on the second business day following satisfaction or
waiver (where applicable) of the conditions set forth in Article VIII
(other than those conditions that by their nature are to be fulfilled at
the Closing, but subject to the fulfillment or waiver of such conditions),
unless another date, time or place is agreed to in writing by the parties
hereto (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and LLC as follows:
4.01 Organization and Qualification. (a) The Company is a voluntary
association duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has full power, authority and
legal right to own its property and assets and to transact the business in
which it is engaged. Each of the Company's Subsidiaries is a corporation
duly organized or incorporated, validly existing and in good standing under
the laws of its jurisdiction of organization or incorporation and has full
corporate power and authority to conduct its business as and to the extent
now conducted and to own, use and lease its assets and properties, except
where failure to be so organized or incorporated, existing and in good
standing or to have such power and authority, individually or in the
aggregate, could not reasonably be expected to have a Company Material
Adverse Effect. As used in this Agreement, the term "Company Material
Adverse Effect" means a material adverse effect on the business, assets,
results of operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries taken as a whole. Each of the Company and
its Subsidiaries is duly qualified, licensed or admitted to do business and
is in good standing in each jurisdiction in which the ownership, use or
leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary,
except where failure to be so qualified, licensed or admitted and in good
standing, individually or in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect. Section 4.01 of the
letter dated the date hereof and delivered to Parent and LLC by the Company
concurrently with the execution and delivery of this Agreement (the
"Company Disclosure Letter") sets forth (i) the name and jurisdiction of
incorporation or organization of each Subsidiary of the Company, (ii) such
Subsidiary's authorized capital stock, (iii) the number of issued and
outstanding shares of capital stock of such Subsidiary and (iv) the number
of shares of such Subsidiary held of record by the Company. The Company
has previously delivered to Parent correct and complete copies of the Trust
Agreement and the certificate or articles of organization or incorporation
and bylaws (or other comparable charter documents) of its Subsidiaries.
(b) Section 4.01 of the Company Disclosure Letter sets forth a
description as of the date hereof, of all Company Associates, including
(i) the name of each such entity and the Company's interest therein and
(ii) a brief description of the principal line or lines of business
conducted by each such entity. For purposes of this Agreement "Company
Associates" shall mean any corporation or other entity (including
partnerships and other business associations) that is not a Company
Subsidiary in which the Company and/or one or more of its Subsidiaries,
directly or indirectly, owns an equity interest (other than short-term
investments in the ordinary course of business) if such corporation or
other entity (including partnerships and other business associations)
contributes five percent or more of the Company's consolidated revenues,
assets, income or costs.
4.02 Capital Stock. (a) The authorized equity securities of the
Company consists of 150,000,000 Company Shares, of which 59,170,986 shares
were issued and outstanding as of the close of business on December 11,
1998. As of the close of business on December 11, 1998, 5,798,666 Company
Shares were held in the treasury of the Company (including 184,262 Rabbi
Trust Shares). Since such date, except as described in the Company SEC
Reports filed prior to the date of this Agreement or in Section 4.02 of the
Company Disclosure Letter, there has been no change in the sum of the
issued and outstanding Company Shares and Company Shares held in the Rabbi
Trust. All of the issued and outstanding Company Shares are duly
authorized, validly issued, fully paid and nonassessable. Except pursuant
to this Agreement or as may be provided by the New England Electric System
Companies' Incentive Share Plan, the New England Electric System Companies
Incentive Thrift Plan I, the New England Electric System Companies
Incentive Thrift Plan II, the New England Electric Companies Long-Term
Performance Share Award Plan, and the New England Electric System
Directors' annual retainer shares (the "Company Share Plans"), and except
as described in Section 4.02 of the Company Disclosure Letter, on the date
hereof there are no outstanding subscriptions, options, warrants, rights
(including share appreciation rights), preemptive rights or other
contracts, commitments, understandings or arrangements, including any right
of conversion or exchange under any outstanding security, instrument or
agreement (together, "Options"), obligating the Company or any of its
Subsidiaries to issue or sell any shares of equity securities of the
Company or to grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement or Section 4.02 of the Company Disclosure
Letter, all of the outstanding shares of capital stock of each Subsidiary
of the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of record, by the Company or
a Subsidiary, which is wholly owned, directly or indirectly, by the
Company, free and clear of any liens, claims, mortgages, encumbrances,
pledges, security interests, equities and charges of any kind (each a
"Lien"). Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or Section 4.02 of the Company Disclosure Letter,
there are no (i) outstanding Options obligating the Company or any of its
Subsidiaries to issue or sell any shares of capital stock of any Subsidiary
of the Company or to grant, extend or enter into any such Option or
(ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than the Company
or a Subsidiary which is wholly owned, directly or indirectly, by the
Company with respect to the voting of, or the right to participate in,
dividends or other earnings on any capital stock of any Subsidiary of the
Company.
(c) Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement or Section 4.02 of the Company Disclosure
Letter, there are no outstanding contractual obligations of the Company or
any Subsidiary of the Company to repurchase, redeem or otherwise acquire
any Company Shares or any capital stock of any Subsidiary of the Company or
to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary of the Company or any other
person.
(d) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company or any Company Subsidiary having
the right to vote (or which are convertible into or exercisable for
securities having the right to vote) (together "Voting Debt") on any
matters on which Shareholders may vote are issued or outstanding nor are
there any outstanding Options obligating the Company or any of its
Subsidiaries to issue or sell any Voting Debt or to grant, extend or enter
into any Option with respect thereto.
4.03 Authority. The Company has full power and authority to enter
into this Agreement, to perform its obligations hereunder and, subject to
obtaining the Company Shareholders' Approval (as defined in
Section 7.03(b)) and the Company Required Statutory Approvals (as defined
in Section 4.04(b)), to consummate the Merger and other transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the Merger
and other transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Company, subject to obtaining the
Company Shareholders' Approval with respect to the consummation of the
Merger and the other transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents. (a) The execution
and delivery of this Agreement by the Company do not, and the performance
by the Company of its obligations hereunder and the consummation of the
Merger and other transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, result in or give to any person any
right of payment or reimbursement, termination, cancellation, modification
or acceleration of, or result in the creation or imposition of any Lien
upon any of the assets or properties of the Company or any of its
Subsidiaries or any of the terms, conditions or provisions of (i) the Trust
Agreement of the Company or the certificates or articles of incorporation
or organization or bylaws (or other comparable charter documents) of the
Company's Subsidiaries, or (ii) subject to the obtaining of the Company
Shareholders' Approval, the Company Required Consents, the Company Required
Statutory Approvals and the taking of any other actions described in this
Section 4.04, (x) any statute, law, rule, regulation or ordinance
(together, "laws"), or any judgment, decree, order, writ, permit or license
(together, "orders"), of any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States,
any foreign country or any domestic or foreign state, county, city or other
political subdivision (a "Governmental Authority") applicable to the
Company or any of its Subsidiaries or any of their respective assets or
properties, or (y) subject to obtaining the third-party consents set forth
in Section 4.04 of the Company Disclosure Letter (the "Company Required
Consents"), any note, bond, mortgage, security agreement, indenture,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind (together, "Contracts") to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective assets or
properties is bound, excluding from the foregoing clauses (x) and (y) such
conflicts, violations, breaches, defaults, payments or reimbursements,
terminations, cancellations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
(b) No declaration, filing or registration with, or notice to or
authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by the Company
or the consummation by the Company of the Merger and other transactions
contemplated hereby except as described in Section 4.04 of the Company
Disclosure Letter or the failure of which to obtain could not reasonably be
expected to result in a Company Material Adverse Effect (the "Company
Required Statutory Approvals," it being understood that references in this
Agreement to "obtaining" such Company Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such
notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law).
4.05 SEC Reports, Financial Statements and Utility Reports. (a) The
Company delivered to Parent prior to the execution of this Agreement a true
and complete copy of each form, report, schedule, registration statement,
registration exemption, if applicable, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto)
filed by the Company or any of its Subsidiaries with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act")
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") since December 31, 1995 (as
such documents have since the time of their filing been amended or
supplemented, the "Company SEC Reports"), which are all the documents
(other than preliminary materials) that the Company and its Subsidiaries
were required to file with the SEC under the Securities Act and the
Exchange Act since such date. As of their respective dates, the Company
SEC Reports (i) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the audited consolidated financial
statements and unaudited interim consolidated financial statements
(including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") 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 U.S.
generally accepted accounting principles ("US GAAP") applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments (which are not expected to be,
individually or in the aggregate, materially adverse to the Company and its
Subsidiaries taken as a whole)) the consolidated financial position of the
Company and its consolidated subsidiaries as at the respective dates
thereof and the consolidated results of their operations and cash flows for
the respective periods then ended. Except as set forth in Section 4.05 of
the Company Disclosure Letter, each Subsidiary of the Company is treated as
a consolidated subsidiary of the Company in the Company Financial
Statements for all periods covered thereby.
(b) All filings (other than immaterial filings) required to be
made by the Company or any of its Subsidiaries since December 31, 1995,
under the Public Utility Holding Company Act of 1935 (the "1935 Act"), the
Federal Power Act, the Atomic Energy Act of 1954, the Communications Act of
1934, and applicable state laws and regulations, have been filed with the
SEC, the Federal Energy Regulatory Commission (the "FERC"), the Department
of Energy (the "DOE"), the Nuclear Regulatory Commission (the "NRC"), the
Federal Communications Commission (the "FCC") or any appropriate state
public utility commissions (including, without limitation, to the extent
required, the state public utility regulatory agencies of Massachusetts,
Rhode Island, New Hampshire, Connecticut, Vermont and Maine), as the case
may be, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements
appertaining thereto, including but not limited to all rates, tariffs,
franchises, service agreements and related documents and all such filings
complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate statute and the rules and
regulations thereunder.
4.06 Absence of Certain Changes or Events. Except as set forth in
Section 4.06 of the Company Disclosure Letter or as disclosed in the
Company SEC Reports filed prior to the date of this Agreement since
December 31, 1997, the Company and each of the Company Subsidiaries have
conducted its business only in the ordinary course of business consistent
with past practice and there has not been, and no fact or condition exists
which, individually or in the aggregate, has or could reasonably be
expected to have a Company Material Adverse Effect.
4.07 Legal Proceedings. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 4.07 of the
Company Disclosure Letter and except for environmental matters which are
governed by Section 4.13, (i) there are no actions, claims, hearings,
suits, arbitrations or proceedings pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against, specifically
relating to or affecting, and, to the knowledge of the Company or any of
its Subsidiaries, there are no Governmental Authority investigations or
audits pending or threatened against, specifically relating to or
affecting, the Company or any of its Subsidiaries or any of their
respective assets and properties which, individually or in the aggregate,
could reasonably be expected to have a Company Material Adverse Effect and
(ii) neither the Company nor any of its Subsidiaries is subject to any
order of any Governmental Authority which, individually or in the
aggregate, could reasonably be expected to have a Company Material Adverse
Effect.
4.08 Information Supplied. (a) The proxy statement relating to the
Company Shareholders' Meeting, as amended or supplemented from time to time
(as so amended and supplemented, the "Proxy Statement"), and any other
documents to be filed by the Company with the SEC (including, without
limitation, under the 1935 Act) or any other Governmental Authority in
connection with the Merger and other transactions contemplated hereby will
comply as to form in all material respects with the requirements of the
Exchange Act, the Securities Act and the 1935 Act, as applicable, and will
not, on the date of their respective filings or, in the case of the Proxy
Statement, at the date it is mailed to Shareholders of the Company and at
the time of the Company Shareholders' Meeting (as defined in Section
7.03(b)), 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, except that no representation is made by the
Company with respect to information supplied in writing by or on behalf of
Parent or LLC expressly for inclusion therein and information incorporated
by reference therein from documents filed by Parent or any of its
Subsidiaries with the SEC.
(b) The information supplied or to be supplied by the Company
for inclusion in any filing by Parent with the SEC or the London Stock
Exchange Limited (the "LSE") in respect of the Merger (including, without
limitation, the Super Class 1 circular to be issued to Shareholders of
Parent (the "Circular")) will not, at the date mailed to the Parent's
Shareholders or at the time of the Parent Shareholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and will be in accordance with the facts and will not omit
anything likely to affect the import of such information.
(c) Notwithstanding the foregoing provisions of this
Section 4.08, no representation or warranty is made by the Company with
respect to statements made or incorporated by reference in the Proxy
Statement or the Circular based on information supplied by Parent or LLC
for inclusion or incorporation by reference therein.
4.09 Compliance. Except as set forth in Section 4.09 of the Company
Disclosure Letter, or as disclosed in the Company SEC Reports filed prior
to the date hereof, neither the Company nor any of the Company Subsidiaries
is in violation of, is, to the knowledge of the Company, under
investigation with respect to any violation of, or has been given notice or
been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any Governmental
Authority, except for possible violations which, individually or in the
aggregate, could not reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 4.09 of the Company
Disclosure Letter or as disclosed in the Company SEC Reports filed prior to
the date hereof, the Company and the Company Subsidiaries have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted
except for such failures which could not reasonably be expected to have a
Company Material Adverse Effect. Neither the Company nor any of the
Company Subsidiaries is in breach or violation of, or in default in the
performance or observance of any term or provision of, (i) its Trust
Agreement, in the case of the Company, or articles of incorporation or
organization or by-laws, in the case of the Company's Subsidiaries, or
(ii) any contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to
which it is a party or by which the Company or any Company Subsidiary is
bound or to which any of their respective property is subject, except for
possible violations, breaches or defaults which, individually or in the
aggregate, could not reasonably be expected to have a Company Material
Adverse Effect.
4.10 Taxes. Except as disclosed in Section 4.10 of the Company
Disclosure Letter and except as to any items that could not reasonably be
expected to have a Company Material Adverse Effect:
(a) Filing of Timely Tax Returns. The Company and each of its
Subsidiaries have filed all Tax Returns required to be filed by each of
them under applicable law. All Tax Returns were in all material respects
(and, as to Tax Returns not filed as of the date hereof, will be) true,
complete and correct and filed on a timely basis;
(b) Payment of Taxes. The Company and each of its Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until
the Closing Date will pay within the time and in the manner prescribed by
law) all Taxes that are currently due and payable except for those
contested in good faith and for which adequate reserves have been taken;
(c) Tax Reserves. The Company and its Subsidiaries have
established (and until the Closing Date will maintain) on their books and
records reserves adequate to pay all Taxes and reserves for deferred income
taxes in accordance with US GAAP;
(d) Extensions of Time for Filing Tax Returns. Neither the
Company nor any of its Subsidiaries has requested any extension of time
within which to file any Tax Return, which Tax Return has not since been
filed;
(e) Waivers of Statute of Limitations. Neither the Company nor
any of its Subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns;
(f) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all Taxes has expired for all applicable
Tax Returns of the Company and each of its Subsidiaries or those Tax
Returns have been examined by the appropriate taxing authorities for all
periods through December 31, 1993, and no deficiency for any Taxes has been
proposed, asserted or assessed against the Company or any of its
Subsidiaries that has not been resolved and paid in full;
(g) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently pending
or threatened with regard to any Taxes or Tax Returns of the Company or any
of its Subsidiaries (other than those being contested in good faith and for
which adequate reserves have been established) and no issues have been
raised in writing by any Tax authority in connection with any Tax or Tax
Return;
(h) Tax Liens. There are no Tax liens upon any asset of the
Company or any of its Subsidiaries except liens for Taxes not yet due.
(i) Powers of Attorney. No power of attorney currently in force
has been granted by the Company or any of its Subsidiaries concerning any
Tax matter;
(j) Tax Rulings. Neither the Company nor any of its
Subsidiaries has, during the five year period prior to the date of this
Agreement, received a Tax Ruling (as defined below) or entered into a
Closing Agreement (as defined below) with any taxing authority. "Tax
Ruling", as used in this Agreement, shall mean a written ruling of a taxing
authority relating to Taxes. "Closing Agreement", as used in this
Agreement, shall mean a written and legally binding agreement with a taxing
authority relating to Taxes;
(k) Availability of Tax Returns. The Company and its
Subsidiaries have made available to Parent complete and accurate copies,
covering all years ending on or after December 31, 1993, of (i) all United
States federal Tax Returns, and any amendments thereto, filed by the
Company or any of its Subsidiaries, (ii) all audit reports received from
any taxing authority relating to any Tax Return filed by the Company or any
of its Subsidiaries and (iii) any Closing Agreements entered into by the
Company or any of its Subsidiaries with any taxing authority. The Company
and its Subsidiaries have made available to Parent complete and accurate
copies, covering all years ending on or after December 31, 1997, of all
material state Tax Returns, and any amendments thereto, filed by the
Company or any of its Subsidiaries. For purposes of this Section 4.10(k),
a "material state Tax Return" shall mean any state Tax Return showing as
due and payable a Tax of greater than or equal to $1 million.
(l) Tax Sharing Agreements. No agreements relating to the
allocation or sharing of Taxes exist between or among the Company and any
of its Subsidiaries and neither the Company nor any of its Subsidiaries
(i) has been a member of an affiliated group filing a consolidated federal
income tax return (other than a group the comon parent of which was the
Company) or (ii) has any liability for Taxes of any Person (other than the
Company or its Subsidiaries) under United States Treasury Regulation
Section 1.1502-6 (or any provision of state, local), or foreign law, as a
transferee or successor, by contract or otherwise;
(m) Code Section 481 Adjustments. Neither the Company nor any
of its Subsidiaries is required to include in income any adjustment
pursuant to Code Section 481(a) by reason of a voluntary change in
accounting method initiated by the Company or any of its Subsidiaries, and,
the Internal Revenue Service (the "IRS") has not proposed any such
adjustment or change in accounting method;
(n) Code Sections 6661 and 6662. All transactions that could
give rise to an understatement of federal income tax (within the meaning of
Code Section 6661 for Tax Returns filed on or before December 31, 1989, and
within the meaning of Code Section 6662 for tax returns filed after
December 31, 1989) have been adequately disclosed (or, with respect to Tax
Returns filed following the Closing, will be adequately disclosed) on the
Tax Returns of the Company and its Subsidiaries in accordance with Code
Section 6661(b)(2)(B) for Tax Returns filed on or prior to December 31,
1989, and in accordance with Code Section 6662(d)(2)(B) for Tax Returns
filed after December 31, 1989;
(o) Intercompany Transactions. Neither the Company nor any of
its Subsidiaries have engaged in any intercompany transactions within the
meaning of Treasury Regulations section 1.1502-13 for which any income or
gain will remain unrecognized as of the close of the last taxable year
prior to the Closing Date;
(p) Foreign Tax Returns. Neither the Company nor any of its
Subsidiaries is required to file a foreign tax return; and
(q) Section 897. To the knowledge of the Company, no person
owns more than 5% of the Company Shares.
"Taxes" as used in this Agreement, shall mean any federal, state,
county, local or foreign taxes, charges, fees, levies, or other
assessments, including all net income, gross income, premiums, sales and
use, ad valorem, transfer, gains, profits, windfall profits, excise,
franchise, real and personal property, gross receipts, capital stock,
production, business and occupation, employment, disability, payroll,
license, estimated, stamp, custom duties, severance or withholding taxes,
other taxes or similar charges of any kind whatsoever imposed by any
governmental entity, whether imposed directly on a Person or resulting
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign Law), as a transferee or successor, by contract or
otherwise and includes any interest and penalties (civil or criminal) on or
additions to any such taxes or in respect of a failure to comply with any
requirement relating to any Tax Return. "Tax Return" as used in this
Agreement, shall mean a report, return or other information required to be
supplied to a governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities.
4.11 Employee Benefit Plans; ERISA. (a) Each "employee benefit plan"
(as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), bonus, deferred compensation, share option
or other written agreement relating to employment or fringe benefits for
employees, former employees, officers or directors of the Company or any of
its Subsidiaries effective as of the date hereof or providing benefits as
of the date hereof to current employees, former employees, officers or
directors of the Company or pursuant to which the Company or any of its
subsidiaries has or could reasonably be expected to have any liability
(collectively, the "Company Employee Benefit Plans") is listed in
Section 4.11(a) of the Company Disclosure Letter, is in material compliance
with applicable law, and has been administered and operated in all material
respects in accordance with its terms. Each Company Employee Benefit Plan
which is intended to be qualified within the meaning of Section 401(a) of
the Code has received a favorable determination letter from the IRS as to
such qualification and, to the knowledge of the Company, no event has
occurred and no condition exists which could reasonably be expected to
result in the revocation of, or have any adverse effect on, any such
determination.
(b) Complete and correct copies of the following documents have
been made available to Parent as of the date of this Agreement: (i) all
Company Employee Benefit Plans and any related trust agreements or
insurance contracts, (ii) the most current summary descriptions of each
Company Employee Benefit Plan subject to ERISA, (iii) the three most recent
Form 5500s and Schedules thereto for each Company Employee Benefit Plan
subject to such reporting, (iv) the three most recent determinations of the
Internal Revenue Service with respect to the qualified status of each
Company Employee Benefit Plan that is intended to qualify under
Section 401(a) of the Code, (v) the most recent accountings with respect to
each Company Employee Benefit Plan funded through a trust and (vi) the most
recent actuarial report of the qualified actuary of each Company Employee
Benefit Plan with respect to which actuarial valuations are conducted.
(c) Except as set forth in Section 4.11(c) of the Company
Disclosure Letter, neither the Company nor any Subsidiary maintains or is
obligated to provide benefits under any Company Employee Benefit Plan
(other than as an incidental benefit under a Plan qualified under
Section 401(a) of the Code) which provides health or welfare benefits to
retirees or other terminated employees other than benefit continuations as
required pursuant to Section 601 of ERISA. Each Company Employee Benefit
Plan subject to the requirements of Section 601 of ERISA has been operated
in material compliance therewith. The Company has not contributed to a
nonconforming group health plan (as defined in Code Section 5000(c)) and no
person under common control with the Company within the meaning of
Section 414 of the Code ("ERISA Affiliate") has incurred a tax liability
under Code Section 5000(a) that is or could reasonably be expected to be a
liability of the Company's.
(d) Except as set forth in Section 4.11(d) of the Company
Disclosure Letter, each Company Employee Benefit Plan covers only employees
who are employed by the Company or a Subsidiary (or former employees or
beneficiaries with respect to service with the Company or a Subsidiary).
(e) Except as set forth in Section 4.11(e) of the Company
Disclosure Letter, neither the Company, any Subsidiary, any ERISA Affiliate
nor any other corporation or organization controlled by or under common
control with any of the foregoing within the meaning of Section 4001 of
ERISA has, within the five-year period preceding the date of this
Agreement, at any time contributed to any "multiemployer plan," as that
term is defined in Section 4001 of ERISA.
(f) No event has occurred, and there exists no condition or set
of circumstances in connection with any Company Employee Benefit Plan,
under which the Company or any Subsidiary, directly or indirectly (through
any indemnification agreement or otherwise), could be subject to any
material liability under Section 409 of ERISA, Section 502(i) of ERISA,
Title IV of ERISA or Section 4975 of the Code.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation (the "PBGC") under
Section 302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise that
has not been satisfied in full and no event or condition exists or has
existed which could reasonably be expected to result in any such material
liability. No "reportable event" within the meaning of Section 4043 of
ERISA has occurred with respect to any Company Employee Benefit Plan that
is a defined benefit plan under Section 3(35) of ERISA.
(h) Except as set forth in Section 4.11(h) of the Company
Disclosure Letter, no employer securities, employer real property or other
employer property is included in the assets of any Company Employee Benefit
Plan.
(i) Full payment has been made of all material amounts which the
Company or any affiliate thereof was required under the terms of the
Company Employee Benefit Plans to have paid as contributions to such plans
on or prior to the Effective Time (excluding any amounts not yet due) and
no Company Employee Benefit Plan which is subject to Part III of Subtitle B
of Title I of ERISA has incurred any "accumulated funding deficiency"
within the meaning of Section 302 of ERISA or Section 412 of the Code,
whether or not waived.
(j) Except as set forth in Section 4.11(j) of the Company
Disclosure Letter, no amounts payable under any Company Employee Benefit
Plan or other agreement, contract, or arrangement will fail to be
deductible for federal income tax purposes by virtue of Section 280G or
Section 162(m) of the Code.
4.12 Labor Matters. As of the date hereof, except as set forth in
Section 4.12 of the Company Disclosure Letter, neither the Company nor any
of its Subsidiaries is a party to any material collective bargaining
agreement or other labor agreement with any union or labor organization.
To the knowledge of the Company, as of the date hereof, there is no current
union representation question involving employees of the Company or any of
its Subsidiaries, nor does the Company know of any activity or proceeding
of any labor organization (or representative thereof) or employee group to
organize any such employees. Except as set forth in Section 4.12 of the
Company Disclosure Letter, (i) there is no unfair labor practice,
employment discrimination or other employment-related complaint against the
Company or any of its Subsidiaries pending or, to the knowledge of the
Company, threatened, which has or could reasonably be expected to have a
Company Material Adverse Effect, (ii) there is no strike, dispute,
slowdown, work stoppage or lockout pending, or, to the knowledge of the
Company, threatened, against or involving the Company or any of its
Subsidiaries which has or could reasonably be expected to have, a Company
Material Adverse Effect and (iii) there is no proceeding, claim, suit, or
action pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened, nor, to the knowledge of the Company or any of
its Subsidiaries is there any Governmental Authority investigation pending
or threatened, in respect of which any director, officer, employee or agent
of the Company or any of its Subsidiaries is or may be entitled to claim
indemnification from the Company or any of its Subsidiaries pursuant to the
Trust Agreement, in the case of the Company, and their respective articles
of incorporation and by-laws, in the case of the Company's Subsidiaries, or
as provided in the indemnification agreements listed in Section 4.12 of the
Company Disclosure Letter. Except as set forth in Section 4.12 of the
Company Disclosure Letter, the Company and its Subsidiaries are in
compliance with all Federal, State and local laws with respect to
employment practices, labor relations, safety and health regulations and
mass layoffs and plant closings except for such instances of noncompliance
which, individually or in the aggregate, could not reasonably be expected
to have a Company Material Adverse Effect.
4.13 Environmental Matters. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 4.13 of the
Company Disclosure Letter:
(a) (i) Each of the Company and its Subsidiaries is in
compliance with all applicable Environmental Laws (as hereinafter defined),
except where the failure to be in compliance, in the aggregate could not
reasonably be expected to result in a Company Material Adverse Effect; and
(ii) Neither the Company nor any of its Subsidiaries has
received any written communication from any person or Governmental
Authority that alleges that the Company or any of its Subsidiaries is not
in such compliance (including the materiality qualifier set forth in clause
(i) above) with applicable Environmental Laws.
(b) Each of the Company and its Subsidiaries has obtained all
environmental, health and safety permits and governmental authorizations
(collectively, the "Environmental Permits") necessary for the construction
of their facilities and the conduct of their operations, as applicable, and
all such Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and agency approval is expected
in the ordinary course of business, and the Company and its Subsidiaries
are in compliance with all terms and conditions of the Environmental
Permits, except where the failure have such Environmental Permits, file a
renewal application for such Environmental Permits, or to be in compliance
with such Environmental Permits, in the aggregate could not reasonably be
expected to result in a Company Material Adverse Effect.
(c) There is no Environmental Claim (as hereinafter defined)
that could, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect pending (i) against the Company or
any of its Subsidiaries; (ii) against any person or entity whose liability
for any Environmental Claim the Company or any of its Subsidiaries has or
may have retained or assumed either contractually or by operation of law;
or (iii) against any real or personal property or operations which the
Company or any of its Subsidiaries owns, leases or manages, in whole or in
part.
(d) To the knowledge of the Company there have not been any
material Releases (as hereinafter defined) of any Hazardous Material (as
hereinafter defined) that would be reasonably likely to form the basis of
any material Environmental Claim against the Company or any of its
Subsidiaries, or against any person or entity whose liability for any
material Environmental Claim the Company or any of its Subsidiaries has or
may have retained or assumed either contractually or by operation of law,
except for any Environmental Claim that, individually or in the aggregate,
could not reasonably be expected to have a Company Material Adverse Effect.
(e) To the knowledge of the Company with respect to any
predecessor of the Company or any of its Subsidiaries, there is no material
Environmental Claim pending or threatened, and there has been no Release of
Hazardous Materials that could reasonably be expected to form the basis of
any material Environmental Claim except for any Environmental Claim that,
individually or in the aggregate, could not be reasonably be expected to
have a Company Material Adverse Effect.
(f) As used in this Section 4.13:
(i) "Environmental Claim" means any and all written
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices
or noncompliance, liability or violation by any person or entity (including
any Governmental Authority) alleging potential liability (including,
without limitation, potential responsibility or 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
(A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any
location, whether or not owned, operated, leased or
managed by the Company or any of its Subsidiaries; or
(B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials;
(ii) "Environmental Laws" means all Federal, state and local
laws, rules and regulations and binding interpretation thereof, relating to
pollution, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or
protection of human health as it relates to the environment including,
without limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the manufacture,
generation, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, and transformers
or other equipment that contain dielectric fluid containing polychlorinated
biphenyls; and (B) any chemicals, materials or substances which are now
defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants", or
words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its Subsidiaries(x) operates or
(y) stores, treats or disposes of Hazardous Materials; and
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
4.14 Regulation as a Utility. (a) The Company is a public utility
holding company registered under Section 5, and subject to the provisions,
of the 1935 Act. Section 4.14 of the Company Disclosure Letter lists the
subsidiaries of the Company that are "public utility companies" within the
meaning of Section 2(a)(5) of the 1935 Act and lists the jurisdictions
where each such Subsidiary is subject to regulation as a public utility
company or public service company. Except as set forth above and as set
forth in Section 4.14 of the Company Disclosure Letter, neither the Company
nor any "subsidiary company" or "affiliate" of the Company is subject to
regulation as a public utility or public service company (or similar
designation) by the Federal government of the United States, any state in
the United States or any political subdivision thereof, or any foreign
country.
(b) As used in this Section 4.14, the terms "subsidiary company"
and "affiliate" shall have the respective meanings ascribed to them in
Section 2(a)(8) and Section 2(a)(11), respectively, of the 1935 Act.
4.15 Insurance. Except as set forth in Section 4.15 of the Company
Disclosure Letter, each of the Company and its Subsidiaries is, and has
been continuously since January 1, 1994, insured with financially
responsible insurers in such amounts and against such risks and losses as
are customary in all material respects for companies in the United States
conducting the business conducted by the Company and its Subsidiaries
during such time period. Except as set forth in Section 4.15 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has received any notice of cancellation or termination with respect to any
material insurance policy of the Company or any of its Subsidiaries. The
insurance policies of the Company and each of its Subsidiaries are valid
and enforceable policies.
4.16 Nuclear Facilities. One of the Subsidiaries of the Company is a
minority common stockholder of each of Connecticut Yankee Atomic Power
Company, Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power
Company and Yankee Atomic Electric Company (the "Yankee Companies") and a
minority joint owner in Millstone 3 and Seabrook 1 (collectively, as
described in Section 4.16 of the Company Disclosure Letter, the "Company
Nuclear Facilities"). With respect to its ownership of Millstone 3 and
Seabrook 1, the Company's Subsidiary holds the required operating licenses
from the NRC. With respect to the Yankee Companies, each Yankee Company
holds its own operating license from the NRC. Because it is a minority
stockholder or a minority joint owner, the Company's Subsidiary does not
have responsibility for the operation of the Company Nuclear Facilities.
Except as set forth in Section 4.16 of the Company Disclosure Letter or as
disclosed in the Company SEC Reports filed prior to the date hereof, to the
knowledge of the Company, neither the Company nor any of its Subsidiaries
is in violation of any applicable health, safety, regulatory and other
legal requirement, including NRC laws and regulations and Environmental
Laws, applicable to the Company Nuclear Facilities except for such failure
to comply as could not reasonably be expected to have a material adverse
effect with respect to the Company Nuclear Facilities and the ownership
interest of the Company therein. To the knowledge of the Company, each of
the Company Nuclear Facilities maintains emergency plans designed to
respond to an unplanned release therefrom of radioactive materials into the
environment and insurance coverages consistent with industry practice. The
Company has funded, or has caused the funding of, its portion of the
decommissioning cost of each of the Company Nuclear Facilities and the
storage of spent nuclear fuel consistent with the most recently approved
plan for each of the Company Nuclear Facilities and FERC authorized rates.
Except as set forth in Section 4.16 of the Company Disclosure Letter, to
the knowledge of the Company, no Company Nuclear Facility is as of the date
of this Agreement on the List of Nuclear Power Plants Warranting Increased
Regulatory Attention maintained by the NRC.
4.17 Vote Required. The affirmative vote of a majority of the
outstanding Company Shares voting as a single class (with each Company
Share having one vote per share) with respect to the approval of the Merger
and other transactions contemplated hereby is the only vote of the holders
of any class or series of equity securities of the Company or its
Subsidiaries required to approve this Agreement and approve the Merger and
other transactions contemplated hereby.
4.18 Opinion of Financial Advisor. The Company has received the
opinion of Merrill, Lynch, Pierce, Fenner & Smith Incorporated, dated the
date hereof, to the effect that, as of the date hereof, the consideration
to be received by the Shareholders of the Company in the Merger is fair
from a financial point of view to the Shareholders of the Company, and a
true and complete copy of such opinion has been delivered to Parent prior
to the execution of this Agreement.
4.19 Ownership of Parent Ordinary Shares. Neither the Company nor any
of its Subsidiaries or other affiliates beneficially owns any Parent
Ordinary Shares or American Depositary Shares of Parent, each representing
ten (10) Parent Ordinary Shares.
4.20 State Anti-Takeover Statutes. The Company has taken all
necessary actions so that the provisions of Chapters 110C, 110D or 110F of
the MGL and the provisions of Article 59A of the Company's Trust Agreement
will not apply to this Agreement, the Merger or other transactions
contemplated hereby or thereby.
4.21 Year 2000. The computer software operated by the Company and its
Subsidiaries which is used in the conduct of their business is capable of
providing or being adapted to provide uninterrupted millennium
functionality to record, store, process and present calendar dates falling
on or after January 1, 2000 in substantially the same manner and with the
same functionality as such software records, stores, processes and presents
such calendar dates falling on or before December 31, 1999 other than such
interruptions in millenium functionality that could not, individually or in
the aggregate, reasonably be expected to result in a Company Material
Adverse Effect. The Company reasonably believes as of the date hereof that
the remaining cost of adaptions referred to in the foregoing sentence will
not exceed the amounts reflected in the Form 10-Q filed by the Company for
the quarter ended September 30, 1998.
4.22 Company Associates. The representations and warranties set forth
in Sections 4.04(a), 4.06, 4.07, 4.09, 4.12 and 4.13 are true and correct
in all material respects with regard to the Company Associates.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND LLC
Parent and LLC represent and warrant to the Company as follows:
5.01 Organization and Qualification. (a) Each of Parent and its
Subsidiaries (other than LLC) is a corporation duly incorporated or
organized, validly existing and in good standing (with respect to
jurisdictions which recognize the concept of good standing) under the laws
of its jurisdiction of incorporation or organization and has full corporate
power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except for
where failure to be so incorporated, existing and in good standing (with
respect to jurisdictions which recognize the concept of good standing) or
to have such power and authority, individually or in the aggregate, could
not reasonably be expected to have a Parent Material Adverse Effect. As
used in this agreement, the term "Parent Material Adverse Effect" means a
material adverse effect on the business, assets, results of operations,
condition (financial or otherwise) or prospects of Parent and its
Subsidiaries taken as a whole. LLC is a limited liability company validly
existing under the laws of the Commonwealth of Massachusetts. LLC was
formed solely for the purpose of engaging in the Merger and other
transactions contemplated hereby, has engaged in no other business
activities (other than in connection with the formation and capitalization
of LLC pursuant to or in accordance with the LLC Agreement (as defined
below)) and has conducted its operations only as contemplated hereby and by
the LLC Agreement. Each of Parent and The National Grid Company Plc
("NGC") is duly qualified, licensed or admitted to do business in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such
qualification, licensing, admission or good standing necessary, except
where failure to be so qualified, licensed or admitted, individually or in
the aggregate, could not reasonably be expected to have a Parent Material
Adverse Effect. Parent has previously delivered to the Company correct and
complete copies of the memorandum and articles of association (or other
comparable charter documents) of Parent and NGC, and the Operating
Agreement of LLC (the "LLC Agreement") and has attached to such documents
copies of all resolutions and other documents required to be so attached.
5.02 Share Capital. (a) The authorized share capital of Parent
consists solely of (i) 2,125 million ordinary shares of 11 13/17 pence each
of Parent (each a "Parent Ordinary Share"), of which 1,474.4 million shares
were in issue as of March 31, 1998 and (ii) one Special Rights Redeemable
Preference Share of pound sterling1 (the "Special Share"), which was in
issue as of such date. Since March 31, 1998, except as disclosed in the
forms, reports, schedules, circulars and other filings with the LSE made by
Parent pursuant to its continuing obligations under LSE rules and
regulations (the "Parent Reports") filed prior to the date of this
Agreement or Section 5.02 of the letter dated the date hereof and delivered
by Parent and LLC to the Company concurrently with the execution and
delivery of this Agreement (the "Parent Disclosure Letter"), there has been
no change in the number of issued Parent Ordinary Shares other than the
issuance of Parent Ordinary Shares pursuant to options or rights
outstanding as of such date to subscribe or purchase Parent Ordinary
Shares. All of the issued Parent Ordinary Shares are duly authorized,
validly issued and fully paid, and no Parent Ordinary Share is entitled to
preemptive rights, except as provided in Section 89 of the Companies Act
1985, as amended (the "Companies Act"). Except pursuant to this Agreement,
and except as disclosed in Section 5.02 of the Parent Disclosure Letter, on
the date hereof there are no outstanding Options obligating Parent or any
of its Subsidiaries to issue or sell any Parent Ordinary Shares or to
grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in the Parent Reports filed prior to the
date of this Agreement or Section 5.02 of the Parent Disclosure Letter, all
of the outstanding shares of NGC are duly authorized, validly issued, fully
paid and are owned, beneficially and of record, by Parent or a Subsidiary,
which is wholly owned, directly or indirectly, by Parent, free and clear of
any Liens. Except as disclosed in the Parent Reports filed prior to the
date of this Agreement or Section 5.02 of the Parent Disclosure Letter,
there are no (i) outstanding Options obligating Parent or NGC to issue or
sell any shares of NGC or to grant, extend or enter into any such Option or
(ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than Parent or a
Subsidiary, which is wholly owned, directly or indirectly, by Parent, with
respect to the voting of or the right to participate in dividends or other
earnings in respect of any shares of NGC.
(c) Except as disclosed in the Parent Reports filed prior to the
date of this Agreement or Section 5.02 of the Parent Disclosure Letter and
except for the right of the holder of the Special Share to require Parent
to redeem the Special Share pursuant to the Articles of Association of
Parent, there are no outstanding contractual obligations of Parent or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any Parent
Ordinary Shares or any shares of NGC or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in,
NGC or any other person.
(d) Except as disclosed in the Parent Disclosure Letter, as
of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Parent or any of its Subsidiaries having the right to vote
(or which are convertible into or exercisable for securities having the
right to vote) (together, "Parent Voting Debt") on any matters on which
Parent Shareholders may vote are issued or are outstanding nor are there
any outstanding Options obligating Parent or any of its Subsidiaries to
issue or sell any Parent Voting Debt or to grant, extend or enter into any
Option with respect thereto.
5.03 Authority. Each of Parent and LLC has full power and authority
to enter into this Agreement, and, subject (in the case of this Agreement)
to obtaining the Parent Shareholders' Approval (as defined in
Section 7.03(a)), to perform its obligations hereunder, and to consummate
the Merger and other transactions contemplated hereby. The execution,
delivery and performance of this Agreement by each of Parent and LLC and
the consummation by each of Parent and LLC of the Merger and other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and all necessary action on the part
of LLC, subject to obtaining the Parent Shareholders' Approval. This
Agreement has been duly and validly executed and delivered by each of
Parent and LLC and constitutes a legal, valid and binding obligation of
each of Parent and LLC enforceable against each of Parent and LLC in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by each of Parent and LLC do not, and the
performance by each of Parent and LLC of its obligations hereunder and the
consummation of the Merger and other transactions contemplated hereby will
not, conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in or give
to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of Parent, LLC
or NGC under, any of the terms, conditions or provisions of (i) the
memorandum and articles of association (or other comparable charter
documents) of Parent, LLC or NGC, (ii) the LLC Agreement; or (iii) subject
to the obtaining of the Parent Shareholders' Approval and the taking of any
other actions described in paragraph (b) of this Section, (x) any laws or
orders of any Governmental Authority applicable to Parent, LLC or NGC or
any of their respective assets or properties, or (y) subject to obtaining
the third-party consents set forth in Section 5.04 of the Parent Disclosure
Letter (the "Parent Required Consents") any Contracts to which Parent, LLC
or NGC is a party or by which Parent or any of its Subsidiaries or any of
their respective assets or properties is bound, excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) No declaration, filing or registration with, or notice to or
authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by Parent or LLC
or the consummation by Parent or LLC of the Merger and other transactions
contemplated hereby except as described in Section 5.04 of the Parent
Disclosure Letter or the failure of which to obtain could not reasonably be
expected to result in a Parent Material Adverse Effect (the "Parent
Required Statutory Approvals," it being understood that references in this
Agreement to "obtaining" such Parent Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such
notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law).
5.05 Information Supplied. (a) The Circular will, at all
relevant times, include all information relating to Parent, and information
which is within the knowledge of each of the directors of Parent (or which
it would be reasonable for them to obtain by making enquiries), which, in
each case, is required to enable the Circular and the parties hereto to
comply in all material respects with all United Kingdom statutory and other
legal and regulatory provisions (including, without limitation, the
Companies Act, the Financial Services Act 1986, as amended, and the rules
and regulations made thereunder, and the rules and requirements of the LSE)
and all such information contained in the Circular will be in accordance
with the facts and will not omit anything likely to affect the import of
such information.
(b) The information supplied by Parent or LLC and included in
the Proxy Statement with the written consent of Parent or LLC, as the case
may be, will not, at the date mailed to the Company's Shareholders or at
the time of the Company Shareholder's Meeting, contain any untrue
statements 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 were made, not misleading.
(c) Notwithstanding the foregoing provisions of this
Section 5.05, no representation or warranty is made by Parent with respect
to statements made or incorporated by reference in the Proxy Statement or
the Circular based on information supplied by the Company for inclusion or
incorporation by reference therein or based on information which is not
made in or incorporated by reference in such documents but which should
have been disclosed pursuant to this Section 5.05.
5.06 Compliance. Except as set forth in Section 5.06 of the Parent
Disclosure Letter, or as disclosed in the Parent Reports filed prior to the
date hereof, neither the Parent nor NGC is in violation of, is, to the
knowledge of the Parent, under investigation with respect to any violation
of, or has been given notice or been charged with any violation of, any
law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law, ordinance or
regulation) of any Governmental Authority, except for possible violations
which, individually or in the aggregate, could not reasonably be expected
to have a Parent Material Adverse Effect. Except as set forth in
Section 5.06 of the Parent Disclosure Letter or as disclosed in the Parent
Reports filed prior to the date hereof, Parent and NGC have all material
permits, licenses and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted
which are material to the operation of the businesses of the Parent and
NGC. Neither the Parent nor NGC is in breach or violation of, or in
default in the performance or observance of, any term or provision of, and
no event has occurred which, with lapse of time or action by a third party,
could result in a default by Parent or NGC under (i) its articles or
memorandum of association or by-laws or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which it is a party or by which Parent or
NGC is bound or to which any of their respective property is subject,
except for possible violations, breaches or defaults which, individually or
in the aggregate, could not reasonably be expected to have a Parent
Material Adverse Effect.
5.07 Financing. Parent has or will have available, prior to the
Effective Time, sufficient cash in immediately available funds to pay or to
cause LLC to pay the Merger Consideration pursuant to Article II hereof and
to consummate the Merger and other transactions contemplated hereby.
5.08 Vote Required. The only votes of the holders of any class of
shares of Parent that are required to approve the Merger and other
transactions contemplated thereby are the affirmative vote of a majority of
such ordinary Shareholders of Parent as (being entitled to do so) are
present in person and vote (or, in the case of a vote taken on a poll, the
affirmative vote by Shareholders representing a majority of the Parent
Ordinary Shares in respect of which votes were validly exercised) at the
Parent Shareholders' Meeting in relation to the Merger and other
transactions contemplated hereby.
5.09 Ownership of Company Shares. Neither Parent nor any of its
Subsidiaries or other affiliates beneficially owns any Company Shares.
ARTICLE VI
COVENANTS
6.01 Covenants of the Company. At all times from and after the date
hereof until the Effective Time, the Company covenants and agrees as to
itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or as set forth in Section 6.01 of the Company
Disclosure Letter, or to the extent that Parent shall otherwise previously
consent in writing):
(a) Ordinary Course. The Company and each of its Subsidiaries
shall conduct their businesses only in, and the Company and each of its
Subsidiaries shall not take any action except in the ordinary course
consistent with good utility practice. Without limiting the generality of
the foregoing, the Company and its Subsidiaries shall use all commercially
reasonable efforts to preserve intact in all material respects their
present business organizations and reputation, to maintain in effect all
existing permits, to keep available the services of their key officers and
employees, to maintain their assets and properties in good working order
and condition, ordinary wear and tear excepted, to maintain insurance on
their tangible assets and businesses in such amounts and against such risks
and losses as are currently in effect, to preserve their relationships with
customers and suppliers and others having significant business dealings
with them and to comply in all material respects with all laws and orders
of all Governmental Authorities applicable to them.
(b) Charter Documents. The Company shall not, nor shall it
permit any of its Subsidiaries to amend or propose to amend the Trust
Agreement, in the case of the Company, and its certificate or articles of
incorporation or organization or bylaws (or other comparable charter
documents), in the case of the Company's Subsidiaries.
(c) Dividends. The Company shall not, nor shall it permit any
of its Subsidiaries to, (i) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital stock or share
capital, except:
(A) that the Company may continue the declaration and
payment of regular quarterly dividends on Company
Shares with usual record and payment dates not, in any
fiscal year, in excess of the dividend for the
comparable period in the prior fiscal year;
(B) a special dividend on the Company Shares with respect
to the quarter in which the Effective Time occurs with
a record date on or prior to the date on which the
Effective Time occurs, which does not exceed an amount
equal to $.59 multiplied by a fraction, the numerator
of which is the number of days in such quarter prior to
the date on which the Effective Time occurs, and the
denominator of which is the total number of days in
such fiscal quarter; and
(C) for dividends and distributions (including liquidating
distributions) by a direct or indirect Subsidiary of
the Company to its parent,
(ii) split, combine, subdivide, reclassify or take similar action with
respect to any of its capital stock or share capital or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock or comprised in its
share capital, (iii) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization or (iv) directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock or comprised in its share
capital or any Option with respect thereto except:
(A) in connection with intercompany purchases of capital
stock or share capital,
(B) for the purpose of funding the Company Share Plans or
dividend reinvestment and share purchase plan in
accordance with past practice, or
(C) subject to the Company's obligations under the
Securities Act and the Exchange Act, pursuant to the
Company's previously announced share repurchase
program.
(d) Share Issuances. The Company shall not, nor shall it permit
any of its Subsidiaries to issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock or any
Option with respect thereto (other than (i) the issuance of Company Shares
or share appreciation, share awards or similar rights, as the case may be,
pursuant to the Company Share Plans, in each case outstanding on the date
of this Agreement and in accordance with their present terms, (ii) the
issuance of options or awards pursuant to the Company Share Plans in
accordance with their present terms and only in connection with the hiring
of new employees, and the issuance of Company Shares upon exercise of such
options or awards or (iii) the issuance by a wholly owned Subsidiary of its
capital stock to its direct or indirect parent corporation, or modify or
amend any right of any holder of outstanding shares of capital stock or
Options with respect thereto).
(e) Acquisitions. The Company shall not, nor shall it permit
any of its Subsidiaries to acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or 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
or otherwise acquire or agree to acquire any assets other than in the
ordinary course of its business consistent with past practice and having an
aggregate value of less than $7,500,000 for any one acquisition or
$50,000,000 in the aggregate through December 31, 1999 and, if the
Effective Time has not occurred on or prior to December 31, 1999,
$75,000,000 in the aggregate.
(f) Dispositions. The Company shall not, nor shall it permit
any of its Subsidiaries to sell, lease, securitize, grant any security
interest in or otherwise dispose of or encumber any of its assets or
properties, other than dispositions in the ordinary course of its business
consistent with past practice and having an aggregate value of less than
$5,000,000 for each disposition and $20,000,000 in the aggregate.
(g) Indebtedness. The Company shall not, nor shall it permit
any of its Subsidiaries to incur or guarantee any indebtedness (including
any debt borrowed or guaranteed or otherwise assumed, including, without
limitation, the issuance of debt securities or warrants or rights to
acquire debt) or enter into any "keep well" or other agreement to maintain
any financial condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing other than (i) short-
term indebtedness in the ordinary course of business consistent with past
practice (such as the issuance of commercial paper or the use of existing
credit facilities) in amounts not exceeding the amounts set forth in
Section 6.01(g) of the Company Disclosure Letter, (ii) long-term
indebtedness in connection with the refinancing of existing indebtedness
either at its stated maturity or at a lower cost of funds (calculating such
cost on an aggregate after-tax basis) or (iii) guarantees or "keep well"
agreements in favor of wholly owned Subsidiaries of the Company in
connection with the conduct of the business of such wholly owned
Subsidiaries of the Company not aggregating more than $15 million.
(h) Capital Expenditures. Except (i) as required by law or
(ii) as reasonably deemed necessary by the Company after consulting with
Parent following a catastrophic event, such as a major storm, the Company
shall not, nor shall it permit any of its Subsidiaries to make any capital
expenditures or commitments during any fiscal year that is in excess of
110% of (i) the aggregate amount set forth in Section 6.01(h) of the
Company Disclosure Letter with respect to the Company and its Subsidiaries
that are public utility companies within the meaning of Section 2(a)(5) of
the 1935 Act or (ii) the amount set forth in Section 6.01(h) of the Company
Disclosure Letter with respect to each of the Company's other Subsidiaries.
(i) Employee Benefits and Labor Matters. The Company shall not,
nor shall it permit any of its Subsidiaries to enter into, adopt, amend in
any material manner (except as may be required by applicable law) or
terminate any Company Employee Benefit Plan, or other agreement,
arrangement, plan or policy between the Company or one of its Subsidiaries
and one or more of its directors, officers, employees or former employees,
or, except for normal increases in the ordinary course of business, (a)
increase in any manner the compensation or fringe benefits of any director
or executive officer, (b) increase in any manner the compensation or fringe
benefits of any employee, (c) pay any benefit not required by any plan or
arrangement in effect as of the date hereof or, (d) cause any director,
officer, employee or former employee of the Company to accrue or receive
additional benefits, accelerate vesting or accelerate the payment of any
benefits under any Company Employee Benefit Plan, or other agreement,
arrangement, plan or policy. Notwithstanding the foregoing, nothing in
this Section 6.01(i) shall prevent the Company from (1) entering into
employment or consulting agreements or arrangements in the ordinary course
of business consistent with past practice or severance agreements intended
solely to implement the terms of severance policies or programs in effect
on the date hereof, (2) entering into any retention arrangements with
employees who are not senior executive officers (as determined by the
Company) that, in the aggregate, will not require the Company to make
payments in excess of $5,000,000 or (3) amending the Rabbi Trust to require
annual funding thereunder of an amount necessary to cause the fair market
value of the assets held under the Rabbi Trust to be equal to accumulated
benefit obligations under the Plans (as defined in the Rabbi Trust). The
Company, prior to the Closing Date, shall take all necessary actions, so
that on or after the Closing Date, neither the Company, the Surviving
Entity nor their affiliates' stock or securities will be required to be
held in, or distributed pursuant to, any Company Employee Benefit Plan.
Notwithstanding any other provision of this Agreement to the contrary, the
Company or its Subsidiaries may negotiate successor collective bargaining
agreements to those referenced in Section 4.12 hereof, and may negotiate
other collective bargaining agreements or arrangements as required by law
or for the purpose of implementing the agreements referenced in Section
4.12 hereof. The Company will keep Parent informed as to, and will consult
with Parent as to the strategy for, all negotiations with collective
bargaining representatives.
(j) Discharge of Liabilities. The Company shall not, nor shall
it permit 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 such party included in the Company SEC
Reports, or incurred in the ordinary course of business consistent with
past practice.
(k) Contracts. The Company shall not, nor shall it permit its
Subsidiaries, except in the ordinary course of business consistent with
past practice (i) to modify, amend, terminate or fail to use commercially
reasonable efforts to renew any material Contract to which the Company or
any of its Subsidiaries is a party or waive, release or assign any material
rights or claims or (ii) to enter into any new material Contracts except as
expressly permitted by Sections 6.01(i) and 7.06 hereof.
(l) Insurance. The Company shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance companies
(or through self-insurance, consistent with past practice) insurance in
such amounts and against such risks and losses as are customary for
companies engaged in their respective businesses.
(m) 1935 Act. The Company shall not, nor shall it permit any of
its Subsidiaries to, engage in any activities which would cause a change in
its status, or that of its Subsidiaries, under the 1935 Act.
(n) Regulatory Matters. Subject to applicable law and except
for non-material filings in the ordinary course of business consistent with
past practice, the Company shall consult with Parent prior to implementing
any changes in its or any of its Subsidiaries' rates or charges, standards
of service or accounting or executing any agreement with respect thereto
that is otherwise permitted under this Agreement and shall, and shall cause
its Subsidiaries to, deliver to Parent a copy of each such filing or
agreement at least four (4) business days prior to the filing or execution
thereof so that Parent may comment thereon. The Company shall, and shall
cause its Subsidiaries to, make all such filings (i) only in the ordinary
course of business consistent with past practice or (ii) as required by a
Governmental Authority or regulatory agency with appropriate jurisdiction.
(o) Accounting. The Company shall not, nor shall it permit any
of its Subsidiaries to make any changes in their accounting methods,
policies or procedures, except as required by law, rule, regulation or
applicable generally accepted accounting principles;
(p) Tax Status. Neither the Company nor any of its Subsidiaries
shall (i) make or rescind any material express or deemed election relating
to Taxes, (ii) make a request for a Tax Ruling or enter into a Closing
Agreement, (iii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit, or controversy
relating to Taxes or (iv) change in any material respect any of its methods
of reporting income, deductions or accounting for federal income tax
purposes from those employed in the preparation of its federal income Tax
Return for the taxable year ending December 31, 1997, except as may be
required by applicable law; provided, however that with respect to any
consent required by reason of this Section 6.01(p)(ii) or (iii) to be
obtained by the Company, such consent shall not be unreasonably withheld by
Parent.
(q) No Breach. The Company shall not, nor shall it permit any
of its Subsidiaries to willfully take or fail to take any action that would
or is reasonably likely to result in (i) a material breach of any provision
of this Agreement or (ii) its representations and warranties set forth in
this Agreement being untrue in any material respect on and as of the
Closing Date.
(r) Advice of Changes. The Company shall confer with Parent on
a regular and frequent basis with respect to the Company's business and
operations and other matters relevant to the Merger, and shall promptly
advise Parent, orally and in writing, of any material change or event,
including, without limitation, any complaint, investigation or hearing by
any Governmental Authority (or communication indicating the same may be
contemplated) or the institution or threat of material litigation; provided
that the Company shall not be required to make any disclosure to the extent
such disclosure would constitute a violation of any applicable law or
regulation.
(s) Notice and Cure. The Company will notify Parent in writing
of, and will use all commercially reasonable efforts to cure before the
Closing, any event, transaction or circumstance, as soon as practical after
it becomes known to the Company, that causes or will or may be likely to
cause any covenant or agreement of the Company under this Agreement to be
breached or that renders or will render untrue in any material respect any
representation or warranty of the Company contained in this Agreement. The
Company also will notify the Parent in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any material
violation or breach, as soon as practical after it becomes known to the
Company, of any representation, warranty, covenant or agreement made by the
Company. No notice given pursuant to this paragraph shall have any effect
on the representations, warranties, covenants or agreements contained in
this Agreement for purposes of determining satisfaction of any condition
contained herein.
(t) Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, the Company will take or cause to be taken
all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the other's
obligations contained in this Agreement and to consummate and make
effective the Merger and other transactions contemplated by this Agreement,
and the Company will not, nor will it permit any of its Subsidiaries to,
take or fail to take any action that could be reasonably expected to result
in the nonfulfillment of any such condition.
(u) Third Party Standstill Agreements. Except as provided in
Section 7.08 hereto, during the period from the date of this Agreement
through the Effective Time, neither the Company nor any of its Subsidiaries
shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. During
such period, the Company shall take all steps necessary to enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement.
6.02 Covenants of Parent. At all times from and after the date hereof
until the Effective Time, Parent covenants and agrees as to itself and NGC
that (except as expressly contemplated or permitted by this Agreement or to
the extent that the Company shall otherwise previously consent in writing):
(a) Certain Mergers. Parent shall not, and shall not permit any
of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of
or equity in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets if the
entering into of a definitive agreement relating to or the consummation of
such acquisition, merger or consolidation could reasonably be expected to
(i) impose any material delay in the obtaining of, or significantly
increase the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any Governmental Authority necessary to
consummate the Merger or the expiration or termination of any applicable
waiting period, (ii) significantly increase the risk of any Governmental
Authority entering an order prohibiting the consummation of the Merger,
(iii) significantly increase the risk of not being able to remove any such
order on appeal or otherwise or (iv) materially delay the consummation of
the Merger.
(b) No Breach. Parent shall not, nor shall it permit any of its
Subsidiaries to, except as otherwise expressly provided for in this
Agreement, willfully take or fail to take any action that would or is
reasonably likely to result in (i) a material breach of any of its
covenants or agreements contained in this Agreement or (ii) any of its
representations and warranties set forth in Sections 5.03, 5.04, 5.05,
5.06, 5.07, 5.08 and 5.09 of this Agreement being untrue in any material
respect on and as of the Closing Date.
(c) Advice of Changes. Parent shall confer with the Company on
a regular and frequent basis with respect to any matter having, or which,
insofar as can be reasonably foreseen, could reasonably be expected to
have, a Parent Material Adverse Effect or materially impair the ability of
Parent to consummate the Merger and other transactions contemplated hereby;
provided that Parent shall not be required to make any disclosure to the
extent such disclosure would constitute a violation of any applicable law
or regulation.
(d) Notice and Cure. Parent will notify the Company in writing
of, and will use all commercially reasonable efforts to cure before the
Closing, any event, transaction or circumstance, as soon as practical after
it becomes known to Parent, that causes or will or may be likely to cause
any covenant or agreement of Parent under this Agreement to be breached or
that renders or will render untrue in any material respect any
representation or warranty of Parent contained in this Agreement. Parent
also will notify the Company in writing of, and will use all commercially
reasonable efforts to cure before the Closing, any material violation or
breach, as soon as practical after it becomes known to such party, of any
representation, warranty, covenant or agreement made by Parent. No notice
given pursuant to this paragraph shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition
contained herein.
(e) Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, Parent will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each condition to its obligations contained in
this Agreement and to consummate and make effective the Merger and other
transactions contemplated by this Agreement, and Parent will not, nor will
it permit any of its Subsidiaries to, take or fail to take any action that
could be reasonably expected to result in the nonfulfillment of any such
condition.
(f) Conduct of Business of LLC. Prior to the Effective Time,
except as may be required by applicable law and subject to the other
provisions of this Agreement, Parent shall cause LLC to (i) perform its
obligations under this Agreement in accordance with its terms, and (ii) not
engage directly or indirectly in any business or activities of any type or
kind and not enter into any agreements or arrangements with any person, or
be subject to or bound by any obligation or undertaking, which is
inconsistent with this Agreement.
6.03 Additional Covenants by Parent and the Company.
(a) Control of Other Party's Business. Nothing contained in
this Agreement shall give the Company, directly or indirectly, the right to
control or direct Parent's operations prior to the Effective Time. Nothing
contained in this Agreement shall give Parent, directly or indirectly, the
right to control or direct the Company's operations prior to the Effective
Time. Prior to the Effective Time, each of the Company and the Parent
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision over its respective operations.
(b) Integration Team. As soon as practicable after the date
hereof, Parent and the Company shall, subject to limitations imposed by
applicable law, create a special integration steering team (the
"Integration Team") which shall be chaired by David Jones and include David
Jones, Richard P. Sergel and such other designees of each of the Company
and Parent as David Jones and Richard P. Sergel shall deem appropriate.
The functions of the Integration Team shall include (i) to direct the
exchange of information and documents between the parties and their
Subsidiaries as contemplated by Section 7.01, (ii) to review and evaluate
proposed exceptions to the restrictions on the conduct of business pending
the Merger set forth in Article VI, and (iii) the development of regulatory
plans and proposals, corporate organizational and management plans,
workforce combination proposals, and such other matters as they deem
appropriate.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Access to Information. The Company shall, and shall cause each
of its Subsidiaries to, and shall use commercially reasonable efforts to
cause the Company Associates to, throughout the period from the date hereof
to the Effective Time to the extent permitted by law, (i) provide Parent
and its Representatives with full access, upon reasonable prior notice and
during normal business hours, to all facilities, operations, officers
(including the Company's environmental, health and safety personnel),
employees, agents and accountants of the Company and its Subsidiaries and
Associates and their respective assets, properties, books and records, to
the extent the Company or any Company Subsidiary or Company Associate is
not under a legal obligation not to provide access or to the extent that
such access would not constitute a waiver of the attorney client privilege
and does not unreasonably interfere with the business and operations of the
Company and its Subsidiaries and Associates and (ii) furnish promptly to
such persons (x) a copy of each report, statement, schedule and other
document filed or received by the Company or any of its Subsidiaries
pursuant to the requirements of federal or state securities laws and each
material report, statement, schedule and other document filed with any
other Governmental Authority, and (y) all other information and data
(including, without limitation, copies of Contracts, Company Employee
Benefit Plans, and other books and records) concerning the business and
operations of the Company and its Subsidiaries as Parent or any of its
Representatives reasonably may request. No review pursuant to this
Section 7.01 or otherwise shall affect any representation or warranty
contained in this Agreement or any condition to the obligations of the
parties hereto. Any such information or material obtained pursuant to this
Section 7.01 that constitutes "Evaluation Material" (as such term is
defined in the letter agreement dated as of June 23, 1998 between the
Company and NC (the "Confidentiality Agreement")) shall be governed by the
terms of the Confidentiality Agreement.
7.02 Proxy Statement and Circular. (a) Proxy Statement. As soon
as practicable after the date of this Agreement, the Company shall prepare
and file the Proxy Statement with the SEC. Parent and the Company shall
cooperate with each other in the preparation of the Proxy Statement and any
amendment or supplement thereto, and Company shall promptly notify Parent
of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information, and shall promptly provide to Parent
copies of all correspondence between the Company or any of its
Representatives and the SEC with respect to the Proxy Statement. Each of
the parties hereto shall furnish all information concerning itself which is
required or customary for inclusion in the Proxy Statement. The Company
shall consult with Parent regarding the Proxy Statement and have due regard
to any comments Parent may make in relation to the Proxy Statement. The
Company shall give Parent and its counsel the opportunity to review the
Proxy Statement and all responses to requests for additional information by
and replies to comments of the SEC before their being filed with, or sent
to, the SEC. Each of the Company and Parent agrees to use its reasonable
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC.
(b) Circular. Subject to applicable law, Parent shall, as soon
as reasonably practicable after the date of this Agreement and in
accordance with the listing rules of the LSE, prepare and submit to the LSE
for approval the Circular, and shall use its reasonable endeavors to have
such documents approved by the LSE as soon as reasonably practicable after
the date of this Agreement. Parent and Company shall cooperate with each
other in the preparation of the Circular and any amendment or supplement
thereto as well as the preparation of any responses to the LSE in
connection therewith. Each of the parties hereto shall furnish all
information concerning itself which is required or customary for inclusion
in the Circular. Each of Parent and the Company agrees to use its
reasonable best efforts to respond promptly to any requests of the LSE.
(c) Each of the Company and Parent shall, consistent with the
requirements of the securities laws of the United States and the United
Kingdom, use their reasonable best efforts to cause the Proxy Statement and
the Circular to be mailed or dispatched as soon as practicable to their
respective shareholders entitled to vote on the Merger and other
transactions contemplated hereby on or about the same day.
7.03 Approval of Shareholders. (a) Parent shall, through its Board
of Directors, duly call, give notice of, convene and hold a general meeting
of its shareholders (the "Parent Shareholders' Meeting"), for the purpose
of voting on the approval of the Merger and other transactions contemplated
hereby (the "Parent Shareholders' Approval") as soon as reasonably
practicable after the date hereof. Subject to fiduciary obligations and
the requirements of applicable law, Parent shall include in the Circular
the recommendation of the Board of Directors of Parent that the
Shareholders of Parent approve the Merger and the other transactions
contemplated hereby, and shall use its reasonable endeavors to obtain such
approval in accordance with its usual practices.
(b) The Company shall, through its Board of Directors, duly
call, give notice of, convene and hold a meeting of its shareholders (the
"Company Shareholders' Meeting") for the purpose of voting on the approval
of the Merger and other transactions contemplated hereby (the "Company
Shareholders' Approval") as soon as reasonably practicable after the date
hereof; provided, however, that if the scheduled meeting date for the
Company's annual shareholders' meeting is within thirty (30) days of the
planned date of the Company Shareholders Meeting, the Company may
accomplish the purposes of the Company Shareholders Meeting at the annual
shareholders' meeting. Subject to the fiduciary duties of its Board of
Directors and the requirements of applicable law, the Company shall include
in the Proxy Statement the recommendation of the Board of Directors of the
Company that the Shareholders of the Company approve the Merger and the
other transactions contemplated hereby, and shall use its reasonable best
efforts to obtain such approval.
7.04 Regulatory and Other Approvals. (a) HSR Filings. 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 its
respective "ultimate parent" Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations promulgated thereunder with respect to the Merger and other
transactions contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings in a timely manner 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 all necessary permits, consents, approvals and
authorizations of all Governmental Authorities necessary or advisable to
obtain the Company Required Statutory Approvals and the Parent Required
Statutory Approvals. The parties agree that they will consult with each
other with respect to obtaining the Company Required Statutory Approvals
and the Parent Required Statutory Approvals; provided, however, that it is
agreed that the Company shall have primary responsibility for the
preparation and filing of any related applications, filings or other
material with state utility commissions. Parent shall have the right to
review and approve in advance drafts of and final applications, filings and
other material submitted to or filed with state utility commissions, which
approval shall not be unreasonably withheld or delayed. The Company shall
not agree to the imposition of any condition in the Company Required
Statutory Approvals without the prior consent of Parent.
7.05 Employee Benefit Plans.
(a) Parent agrees that those individuals who are employed by the
Company or any of its Subsidiaries immediately prior to the Closing Date
shall continue to be employees of the Surviving Entity or its subsidiaries
as of the Closing Date (each such employee, an "Affected Employee");
provided, however, that this Section 7.05 shall not be construed to limit
the ability of the applicable employer to terminate the employment of any
Affected Employee at any time.
(b) For a period of twelve (12) months immediately following the
Closing Date, the compensation, benefits and coverage provided to the
Affected Employees pursuant to employee benefit plans or arrangements
maintained by Parent or the Surviving Entity shall be, in the aggregate,
not less favorable (as determined by the Parent and the Surviving Entity
using reasonable assumptions and benefit valuation methods) than those
provided to such Affected Employees immediately prior to the Closing Date.
Notwithstanding the foregoing and except as provided in the immediately
following sentence, any such employee benefit plan that provides as of the
date hereof for a continuation period longer than twelve (12) months shall
be honored by Parent or the Surviving Entity. In addition to the
foregoing, Parent shall. or shall cause Surviving Entity to, pay any
Affected Employee whose employment is terminated by Parent or Surviving
Entity within twelve (12) months of the Closing Date a severance benefit
package equivalent to that provided under the special severance plans
covering such Affected Employee as in effect as of the date hereof.
(c) Parent shall, or shall cause the Surviving Entity to, give
the Affected Employees full credit for purposes of eligibility, vesting,
benefit accrual (including, without limitation, benefit accrual under any
defined benefit pension plans) and determination of the level of benefits
under any employee benefit plans or arrangements maintained by the Parent
or the Surviving Entity in effect as of the Closing Date for such Affected
Employees' service with the Company or any Subsidiary of the Company to the
same extent recognized by the Company or such Subsidiary immediately prior
to the Closing Date. With respect to any employee benefit plan or
arrangement established by Parent, Company or the Surviving Entity after
the Closing Date (the "Post Closing Plans"), service shall be credited in
accordance with the terms of such Post Closing Plans.
(d) Parent shall, or shall cause the Surviving Entity to, (i)
waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable
to the Affected Employees under any welfare benefit plan established to
replace any Company welfare benefit plans in which such Affected Employees
may be eligible to participate after the Closing Date, other than
limitations or waiting periods that are already in effect with respect to
such Affected Employees and that have not been satisfied as of the Closing
Date under any welfare plan maintained for the Affected Employees
immediately prior to the Closing Date, and (ii) provide each Affected
Employee with credit for any co-payments and deductibles paid prior to the
Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such Affected Employees are
eligible to participate in after the Closing Date.
(e) Parent shall, or shall cause the Surviving Entity and its
subsidiaries to, honor, and shall guarantee the obligations of the
Surviving Entity and its subsidiaries under, all employment, severance,
consulting and retention agreements or arrangements and all Company
Employee Benefit Plans as in effect as of the date hereof, as set forth in
Section 7.05 of the Company Disclosure Letter, or that are entered into
prior to the Closing Date in accordance with Section 6.01(i) hereof;
provided, however, that this Section 7.05(e) is not intended to prevent
Parent or the Surviving Entity from exercising their rights with respect to
such agreements or arrangements and all Company Employee Benefit Plans in
accordance with their terms, including, but not limited to, the right to
alter, terminate or otherwise amend all such agreements and arrangements
and Company Employee Benefit Plans.
(f) Parent agrees and acknowledges that, by virtue of the
consummation of the Merger, Alfred D. Houston has, pursuant to the terms of
the Severance Agreement dated February 28, 1995, between Alfred D. Houston
and the Company (the "Houston Agreement"), Good Reason (as defined in the
Houston Agreement) to terminate his employment with the Company. Following
the Closing Date, Parent agrees and acknowledges that it shall enter into a
Consulting Agreement with Mr. Houston, containing the terms set forth in
Section 7.05(f) of the Parent Disclosure Letter.
7.06 Labor Agreements and Workforce Matters.
(a) Labor Agreements. Parent shall honor or shall cause the
appropriate subsidiaries of the Surviving Entity to honor all collective
bargaining agreements in effect as of Effective Time until their
expiration; provided, however, that this undertaking is not intended to
prevent Parent or the Surviving Entity and its subsidiaries from exercising
their rights with respect to such collective bargaining agreements and in
accordance with their terms, including any right to amend, modify, suspend,
revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment or portion thereof.
(b) Workforce Matters. Any workforce reductions carried out
following the Effective Time by the Surviving Entity and its subsidiaries
shall be done in accordance with all applicable collective bargaining
agreements and all laws and regulations governing the employment
relationship and termination thereof including, without limitation, the
Worker Adjustment and Retraining Notification Act and regulations
promulgated thereunder, and any comparable state or local law.
7.07 Post Merger Operations.
(a) Parent Board of Directors. Parent shall take such action as
is necessary to cause the number of directors comprising its Board of
Directors to be sufficient to permit the appointment of Richard P. Sergel
and one additional person presently serving as an outside director on the
Board of Directors of the Company on the date hereof, as determined by
mutual agreement of Parent and the Company, to serve on the Parent Board of
Directors at the Effective Time. In the event Richard P. Sergel is
unavailable to serve on the Parent Board of Directors, another
representative from the current Board of Directors of the Company shall be
chosen by mutual agreement of Parent and the Company.
(b) Surviving Entity Headquarters. At the Effective Time, the
headquarters of the Surviving Entity shall be located in Massachusetts and
offices for the Surviving Entity's utility operations in New England shall
be located in the Commonwealth of Massachusetts and the States of New
Hampshire and Rhode Island, consistent with the current operations of the
Company.
(c) Charities. The parties agree that provision of charitable
contribution and community support within the New England region serves a
number of important goals. After the Effective Time, Parent intends to
cause the Surviving Entity to provide charitable contributions and
community support within the New England region at annual levels
substantially comparable to the annual level of charitable contributions
and community support provided, directly or indirectly, by the Company and
its public utility subsidiaries within the New England region during 1997.
(d) Surviving Entity Board Of Directors and Trustee. After the
Effective Time, the initial board of directors of the Surviving Entity
shall have up to nine (9) members designated from among the officers of
Parent and the Surviving Entity, as mutually agreed by Parent and the
Company. Parent reserves the right to replace the trustee of the Surviving
Entity at the Effective Time.
(e) Advisory Board. Parent shall, promptly following the
Effective Time, cause to be established and be maintained for a period of
two (2) years an advisory board (the "Advisory Board") comprised of up to
eleven (11) persons who were, immediately prior to the Effective Time,
serving as non-executive members of the Company's Board of Directors and
who are willing to serve in such capacity on the Advisory Board. The
function of the Advisory Board shall be to advise the Surviving Entity's
Board of Directors with respect to general business as well as
opportunities and activities in the Surviving Entity's market area and to
maintain and develop customer relationships. The Advisory Board shall meet
no less frequently than semi-annually. The members of the Advisory Board
shall each be named to serve as members thereof for a period of two years;
provided, however, that Parent shall have no obligation to cause the
Surviving Entity to elect or appoint, and may cause the Surviving Entity to
remove, any member of the Advisory Board if Parent reasonably determines
that such member has a conflict of interest that compromises such member's
ability to serve effectively as a member of the Advisory Board or any cause
exists that otherwise would allow for removal of such person as a director
of the Surviving Entity if such person were a member of the Surviving
Entity's Board of Directors.
(f) Employment Agreements. At the Effective Time, Parent shall
enter into an employment agreement with Richard P. Sergel in the form set
forth in Exhibit A hereto.
7.08 No Solicitations. Prior to the Effective Time, the Company
agrees: (a) that neither it nor any of its Subsidiaries shall, and it
shall use its best efforts to cause its Representatives (as defined in
Section 10.11) not to, knowingly initiate, solicit or encourage, directly
or indirectly, any inquiries or any proposal or offer (including, without
limitation, any proposal or offer to its Shareholders) with respect to a
merger, consolidation or other business combination including the Company
or any of its significant Subsidiaries (as defined in Rule 1-02(W) of
Regulation S-X promulgated under the Exchange Act) (a "Company Significant
Subsidiary"), or any acquisition or similar transaction (including, without
limitation, a tender or exchange offer) involving the purchase of (i) all
or any significant portion of the assets of the Company and its
Subsidiaries taken as a whole, (ii) ten percent or more of the outstanding
Company Shares or (iii) 50% or more of the outstanding shares of the
capital stock of any Company Significant Subsidiary (any such proposal or
offer being hereinafter referred to as an "Alternative Proposal"), or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any other discussions with, any person or
group relating to an Alternative Proposal, or otherwise knowingly
facilitate any effort or attempt to make or implement an Alternative
Proposal other than from Parent and its affiliates; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties with respect to any
Alternative Proposal; and (c) that it will notify Parent immediately if any
such inquiries, proposals or offers are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it or any of such persons; provided, however,
that, prior to receipt of the Company Shareholders' Approval, nothing
contained in this Section 7.08 shall prohibit the Board of Directors of the
Company from (i) furnishing information to (but only pursuant to a
confidentiality agreement in customary form and having terms and conditions
no less favorable to the Company than the Confidentiality Agreement (as
defined in Section 7.01)) or entering into discussions or negotiations with
any person or group that makes an unsolicited Alternative Proposal, if, and
only to the extent that, (A) the Board of Directors of the Company, based
upon advice of outside counsel with respect to fiduciary duties, determines
in good faith that such action is necessary for the Board of Directors to
act in a manner consistent with its fiduciary duties to Shareholders under
applicable law, (B) the Board of Directors of the Company has reasonably
concluded in good faith (after consultation with its financial advisors)
that the person or group making such Alternative Proposal will have
adequate sources of financing to consummate such Alternative Proposal and
that such Alternative Proposal is likely to be more favorable to the
Company's shareholders than the Merger, (C) prior to furnishing such
information to, or entering into discussions or negotiations with, such
person or group, the Company provides written notice to Parent to the
effect that it is furnishing information to, or entering into discussions
or negotiations with, such person or group, which notice shall identify
such person or group and the material terms of the Alternative Proposal in
reasonable detail, and (D) the Company keeps Parent promptly informed of
the status and all material information with respect to any such
discussions or negotiations; and (ii) to the extent required, complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this Section 7.08 shall (x) permit the
Company to terminate this Agreement (except as specifically provided in
Article IX), (y) permit the Company to enter into any agreement with
respect to an Alternative Proposal for so long as this Agreement remains in
effect (it being agreed that for so long as this Agreement remains in
effect, the Company shall not enter into any agreement with any person or
group that provides for, or in any way knowingly facilitates, an
Alternative Proposal (other than a confidentiality agreement under the
circumstances described above)), or (z) affect any other obligation of the
Company under this Agreement.
7.09 Directors' and Officers' Indemnification and Insurance.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and
after the Effective Time, Parent shall, or shall cause the Surviving Entity
to, to the fullest extent permitted by applicable law, indemnify, defend
and hold harmless each person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Time, (x) an officer
or director or (y) an employee covered as of the date hereof (to the extent
of the coverage extended as of the date hereof) of the Company or of any
Company Subsidiary (each an "Indemnified Party," and collectively, the
"Indemnified Parties") against (i) all losses, expenses (including
reasonable attorney's fees and expenses), claims, damages or liabilities
or, subject to the first proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or
prior to the Effective Time (and whether asserted or claimed prior to, at
or after the Effective Time) that are, in whole or in part, based on or
arising out of the fact that such person is or was a director, officer or
employee of the Company or any Company Subsidiary (the "Indemnified
Liabilities"), and (ii) all Indemnified Liabilities to the extent they are
based on or arise out of or pertain to the transactions contemplated by
this Agreement, in each case, to the extent permitted by the Trust
Agreement or the indemnification agreements set forth in Section 7.09 of
the Company Disclosure Letter. In the event of any such loss, expense,
claim, damage or liability (whether or not arising before the Effective
Time), (i) Parent shall, or shall cause the Surviving Entity to, pay the
reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to Parent or the
Surviving Entity, as appropriate, promptly after statements therefor are
received and otherwise advanced to such Indemnified Party upon request,
reimbursement of documented expenses reasonably incurred, in either case to
the extent not prohibited by the Trust Agreement or the indemnification
agreements set forth in Section 7.09 of the Company Disclosure Letter upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amounts as and to the extent required by the Trust Agreement or
the indemnification agreements set forth in Section 7.09 of the Company
Disclosure Letter, (ii) the Surviving Entity shall cooperate in the defense
of any such matter and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the
standards set forth under the Trust Agreement or the indemnification
agreements set forth in Section 7.09 of the Company Disclosure Letter and
the certificate of incorporation or by-laws or similar governing documents
of the Surviving Entity shall be made by independent counsel mutually
acceptable to the Surviving Entity and the Indemnified Party; provided,
however, that the Surviving Entity shall not be liable for any settlement
effected without its written consent (which consent shall not be
unreasonably withheld) and provided further that no indemnification shall
be made if such indemnification is prohibited by the Trust Agreement or the
indemnification agreements set forth in Section 7.09 of the Company
Disclosure Letter.
(b) Insurance. For a period of six years after the Effective
Time, Parent and the Surviving Entity shall at Parent's election, cause to
be maintained in effect an extended reporting period for current policies
of directors' and officers' liability insurance for the benefit of such
persons who are currently covered by such policies of the Company on terms
no less favorable than the terms of such current insurance coverage or
provide tail coverage for such persons which provides such persons with
coverage for a period of six years for acts prior to the Effective Time on
terms no less favorable than the terms of such current insurance coverage.
(c) Successors. In the event the Surviving Entity or any of its
successors or assigns (i) consolidates with or mergers into any other
person or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person or entity,
then and in either such case, proper provisions shall be made so that the
successors and assigns of the Surviving Entity, as applicable, shall assume
the obligations set forth in this Section 7.09.
(d) Survival of Indemnification. To the fullest extent
permitted by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees, agents,
directors and officers of the Company and the Company Subsidiaries with
respect to their activities as such prior to the Effective Time, as
provided in the Trust Agreement or the respective certificates of
incorporation and by-laws or similar governing documents in effect on the
date hereof, or otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.09 are intended
to be for the benefit of, and shall be enforceable by, each Indemnified
Party, his or her heirs and his or her representatives.
(f) Amendment of the Trust Agreement. Parent shall not, and
shall ensure that the Surviving Entity shall not, amend the Trust Agreement
to in any way limit the indemnification provided to the Indemnified Parties
under this Section 7.09.
7.10 Expenses. Except as set forth in Section 9.03, whether or not
the Merger is consummated, all costs and expenses incurred in connection
with the Merger and other transactions contemplated hereby shall be paid by
the party incurring such cost or expense, except that the filing fees in
connection with the filings required under the HSR Act, Exon Florio (as
defined in Section 8.01(d) hereof) and the 1935 Act shall be paid by Parent
or LLC.
7.11 Brokers or Finders. The Company represents, as to itself and its
affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the Merger
and other transactions contemplated by this Agreement except Merrill Lynch,
whose fees and expenses will be paid by the Company in accordance with the
Company's agreement with such firm, and the Company shall indemnify and
hold Parent harmless from and against any and all claims, liabilities or
obligations with respect to any other such fee or commission or expenses
related thereto asserted by any person on the basis of any act or statement
alleged to have been made by the Company or its affiliates.
7.12 Anti-Takeover Statutes. If any "fair price", "moratorium",
"business combination", "control share acquisition" or other form of anti-
takeover statute or regulation shall become applicable to the Merger or
other transactions contemplated hereby, the Company and the members of the
Board of Directors of the Company shall grant such approvals and take such
actions consistent with their fiduciary duties and in accordance with
applicable law as are reasonably necessary so that the Merger and other
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate
or minimize the effects of such statute or regulation on the Merger and
other transactions contemplated hereby.
7.13 Public Announcements. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system or
any other Regulatory Authority, so long as this Agreement is in effect,
Parent and the Company will not, and will not permit any of their
respective Subsidiaries or Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the Merger and other transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be
unreasonably withheld. Parent and the Company will cooperate with each
other in the development and distribution of all press releases and other
public announcements with respect to the Merger and other transactions
contemplated hereby, and will furnish the other with drafts of any such
releases and announcements as far in advance as practicable.
7.14 Restructuring of Merger. It may be preferable to effectuate a
business combination between Parent and the Company by means of an
alternative structure to the Merger. Accordingly, if, prior to
satisfaction of the conditions contained in Article VIII hereto, Parent
proposes the adoption of an alternative structure that otherwise
substantially preserves for Parent and the Company the economic benefits of
the Merger and will not materially delay the consummation thereof, then the
parties shall use their respective best efforts to effect a business
combination among themselves by means of a mutually agreed upon structure
other than the Merger that so preserves such benefits; provided that prior
to closing any such restructured transaction, all material third party and
Governmental Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary for the effectuation of
such alternative business combination shall have been obtained and all
other conditions to the parties' obligations to consummate the Merger and
other transactions contemplated hereby, as applied to such alternative
business combination, shall have been satisfied or waived.
ARTICLE VIII
CONDITIONS
8.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger and other
transactions contemplated hereby is subject to the satisfaction or waiver
on at or prior to the Closing, of each of the following conditions:
(a) Shareholder Approval. The Company Shareholders' Approval
shall have been obtained and the Parent Shareholders' Approval shall have
been obtained.
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under HSR shall have expired
or been terminated.
(c) Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making illegal or otherwise restricting, preventing or
prohibiting consummation of the Merger or other transactions contemplated
hereby.
(d) Exon-Florio. Review and investigation of the Merger under
the Exon-Florio Provisions of the Omnibus Trade and Competitiveness Act of
1988 ("Exon Florio") shall have been terminated and the President shall
have taken no action authorized thereunder.
(e) Governmental and Regulatory and Other Consents and
Approvals. The Parent Required Statutory Approvals and the Company
Required Statutory Approvals shall have been obtained prior to the
Effective Time, and shall have become Final Orders (as hereinafter
defined). The Final Orders shall not, individually or in the aggregate,
impose terms and conditions that (i) could reasonably be expected to have a
Company Material Adverse Effect; (ii) could reasonably be expected to have
a Parent Material Adverse Effect or (iii) materially impair the ability of
the parties to complete the Merger or transactions contemplated hereby.
"Final Order" for all purposes of this Agreement means action by the
relevant regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended with respect to which any
waiting period prescribed by law before the Merger and other transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to be satisfied before the consummation of such transactions
prescribed by law, regulation or order have been satisfied.
8.02 Conditions to Obligation of Parent and LLC to Effect the Merger.
The obligation of Parent and LLC to effect the Merger and other
transactions contemplated hereby is further subject to the satisfaction or
waiver at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Parent
and LLC in their sole discretion):
(a) Representations and Warranties. The representations and
warranties made by the Company in this Agreement, in each case made as if
none of such representations or warranties contained any qualification or
limitation as to "materiality" or "Company Material Adverse Effect", shall
be true and correct as so made as of the Closing Date as though so made on
and as of the Closing Date, except to the extent expressly given as of a
specified date, except where the failure of such representations and
warranties to be true and correct as so made does not have and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and the Company shall have delivered to Parent a
certificate, dated the Closing Date and executed in the name and on behalf
of the Company by its Chairman of the Board, President or any Executive or
Senior Vice President, to such effect.
(b) Performance of Obligations. The Company shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by the Company at or prior to the Closing, and the Company
shall have delivered to Parent a certificate, dated the Closing Date and
executed in the name and on behalf of the Company by its Chairman of the
Board, President or any Executive or Senior Vice President, to such effect.
(c) Material Adverse Effect. No Company Material Adverse Effect
shall have occurred and there shall exist no facts or circumstances which
in the aggregate could reasonably be expected to have a Company Material
Adverse Effect.
(d) Company Required Consents. All Company Required Consents
shall have been obtained by the Company, except where the failure to
receive such Company Required Consents could not reasonably be expected to
(i) have a Company Material Adverse Effect, or (ii) delay or prevent the
consummation of the Merger and other transactions contemplated hereby.
8.03 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger and other transactions
contemplated hereby is further subject to the satisfaction or waiver, at or
prior to the Closing, of each of the following additional conditions (all
or any of which may be waived in whole or in part by the Company in its
sole discretion):
(a) Representations and Warranties. The representations and
warranties made by Parent and LLC in Sections 5.03, 5.04, 5.05, 5.07, 5.08
and 5.09 of this Agreement, in each case made as if none of such
representations or warranties contained any qualification or limitation as
to "materiality" or "Parent Material Adverse Effect," shall be true and
correct as so made as of the Closing Date, except to the extent expressly
given as of a specified date and except where the failure of such
representations and warranties to be so true and correct as so made does
not have and could not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect or a material adverse
effect on LLC, and Parent and LLC shall each have delivered to the Company
a certificate, dated the Closing Date and executed in the name and on
behalf of Parent by any director of Parent and in the name and on behalf of
LLC by a member of its management committee to such effect.
(b) Parent Required Consents. All Parent Required Consents
shall have been obtained by Parent, except where the failure to receive
such Parent Required Consents could not reasonably be expected to (i) have
a Parent Material Adverse Effect or (ii) delay or prevent the consummation
of the Merger and other transactions contemplated hereby.
(c) Performance of Obligations. Parent and LLC shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by Parent or LLC at or prior to the Closing, and Parent and
LLC shall each have delivered to the Company a certificate, dated the
Closing Date and executed in the name and on behalf of Parent by any
director of Parent and in the name and on behalf of LLC by a member of its
management committee to such effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01 Termination. This Agreement may be terminated, and the Merger
and other transactions contemplated hereby may be abandoned, at any time
prior to the Effective Time, whether prior to or after the Company
Shareholders' Approval or the Parent Shareholders' Approval (except as
otherwise provided in Section 9.01(c) below):
(a) By mutual written agreement of the Board of Directors of
Parent and the Company, respectively;
(b) By the Company or Parent, by written notice to the other, if
the Closing Date shall not have occurred on or before the date that is the
nine (9) month anniversary of the date the Company Shareholders' Approval
is obtained (the "Initial Termination Date"); provided, however, that the
right to terminate the Agreement under this Section 9.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; and provided, further, that
(i) if on the Initial Termination Date the conditions to the Closing set
forth in Section 8.01(e)(i) shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then the Initial Termination Date shall be extended for six (6)
months beyond the Initial Termination Date (the "Extended Termination
Date") and (ii) if on the Initial Termination Date or, if the Initial
Termination Date has been extended as provided in the immediately preceding
clause (i), the Extended Termination Date, a Financial Disruption (as
defined in Section 9.03(d)) shall have occurred and be continuing, then the
Company shall have the right, but not the obligation, to postpone the
Closing to a date not later than the date that is the six (6) month
anniversary of the Initial Termination Date or the Extended Termination
Date, as the case may be, provided that no postponement of the Closing made
as permitted by this Section 9.01(b)(ii) shall operate as or be deemed to
be a waiver of any or all of the provisions of Section 8.02;
(c) By the Company or Parent, by written notice to the other, if
(i) the Company Shareholders' Approval shall not have been obtained at a
duly held meeting of such Shareholders, including any adjournments thereof
or (ii) the Parent Shareholders' Approval shall not have been obtained at a
duly held meeting of such shareholders, including any adjournments thereof;
(d) By the Company or Parent, if any applicable state or federal
law or applicable law of a foreign jurisdiction or any order, rule or
regulation is adopted or issued that has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the
Merger or other transactions contemplated hereby, or if any court of
competent jurisdiction or any Governmental Authority shall have issued a
nonappealable final order, judgment or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger or other transactions contemplated hereby (provided
that the right to terminate this Agreement under this Section 9.01(d) shall
not be available to any party that has not defended such lawsuit or other
legal proceeding (including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Authority
vacated or reversed)).
(e) By the Company upon ten (10) days' prior notice to Parent if
the Board of Directors of the Company determines in good faith, that
termination of this Agreement is necessary for the Board of Directors of
the Company to act in a manner consistent with its fiduciary duties to
Shareholders under applicable law by reason of an unsolicited Alternative
Proposal meeting the requirements of clauses (A) and (B) of Section 7.07
having been made; provided that
(A) The Board of Directors of the Company shall
determine based on advice of outside counsel with respect to the
Board of Directors' fiduciary duties that notwithstanding a
binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of its
applicable fiduciary duties, and notwithstanding all concessions
which may be offered by Parent in negotiation entered into
pursuant to clause (B) below, it is necessary pursuant to such
fiduciary duties that the directors reconsider such commitment as
a result of such Alternative Proposal, and
(B) prior to any such termination, the Company shall,
and shall cause its respective financial and legal advisors to,
negotiate with Parent to make such adjustments in the terms and
conditions of this Agreement as would enable the Company to
proceed with the Merger or other transactions contemplated hereby
on such adjusted terms;
and provided further that the Company's ability to terminate this Agreement
pursuant to this Section 9.01(e) is conditioned upon the concurrent payment
by the Company to Parent of any amounts owed by it pursuant to
Section 9.03(b);
(f) By the Company, by written notice to Parent, if (i) there
shall have been any material breach of any representation or warranty, or
any material breach of any covenant or agreement, of Parent hereunder
(other than a breach described in clause (ii)), and such breach shall not
have been remedied within twenty (20) days after receipt by Parent of
notice in writing from the Company, specifying the nature of such breach
and requesting that it be remedied; (ii) Parent shall fail to deliver or
cause to be delivered the amount of cash to the Paying Agent required
pursuant to Section 2.02(a) at a time when all conditions to Parent's
obligation to close have been satisfied or otherwise waived in writing by
Parent; or (iii) the Board of Directors of Parent shall withdraw or modify,
or resolve to withdraw or modify, in any manner adverse to the Company its
approval of the Merger and other transactions contemplated hereby or its
recommendation to its Shareholders regarding the approval of this
Agreement, the Merger or other transactions contemplated hereby.
(g) By Parent, by written notice to the Company, if (i) there
shall have been any material breach of any representation or warranty, or
any material breach of any covenant or agreement, of the Company hereunder,
and such breach shall not have been remedied within twenty (20) days after
receipt by the Company of notice in writing from Parent, specifying the
nature of such breach and requesting that it be remedied; or (ii) the Board
of Directors of the Company (A) shall withdraw or modify in any manner
adverse to Parent its approval of the Merger and other transactions
contemplated hereby or its recommendation to its shareholders regarding the
approval of this Agreement, the Merger and other transactions contemplated
hereby, (B) shall approve or recommend or take no position with respect to
an Alternative Proposal or (C) shall resolve to take any of the actions
specified in clause (A) or (B).
(h) By Parent, by written notice to the Company on or after the
twelve (12) month anniversary of the date on which the Company
Shareholders' Approval is obtained, if the Order of the SEC approving the
Merger under the 1935 Act (the "1935 Act Order") shall not have been issued
prior to the time such notice is given and Parent reasonably believes that
the 1935 Act Order is not likely to be issued on or prior to the Extended
Termination Date.
9.02 Effect of Termination. If this Agreement is validly terminated
by either the Company or Parent pursuant to Section 9.01, this Agreement
shall forthwith become null and void and there shall be no liability or
obligation on the part of either the Company, Parent or LLC (or any of
their respective Representatives or affiliates), except that the provisions
of this Section 9.02, Sections 7.10, 7.11 and 7.13, Section 9.03 and
Sections 10.09 and 10.10 shall continue to apply following any such
termination.
9.03 Termination Fees. (a) In the event that this Agreement is
terminated (i) by Parent pursuant to Section 9.01(g)(i) or Section 9.01(c)
as a result of the Company Shareholders' Approval not being obtained and at
such time no Alternative Proposal has been made and remains outstanding or
(ii) by the Company pursuant to Section 9.01(f)(i) or Section 9.01(c) as a
result of Parent Shareholders' Approval not being obtained, then in (A) the
event of termination pursuant to Section 9.01(g)(i) or Section 9.01(c) as a
result of the Company Shareholder's Approval not being obtained and at a
time when no Alternative Proposal remains outstanding the Company shall pay
to Parent and (B) in the event of termination pursuant to
Section 9.01(f)(i), or Section 9.01(c) as a result of Parent Shareholders'
Approval not being obtained, Parent shall pay to the Company, promptly (but
no later than five (5) business days after the date of termination of this
Agreement), cash in an amount equal to all documented out-of-pocket
expenses and fees incurred by the party arising out of, or in connection
with or related to, the Merger and other transactions contemplated hereby,
not in excess of $10 million (the "Out-of-Pocket Expenses").
(b) In the event that this Agreement is terminated (i) by the
Company pursuant to Section 9.01(f)(iii) or (ii) by Parent pursuant to
Section 9.01(g)(ii), and, in the case of a termination under clause (A) of
Section 9.01(g)(ii) is as a result of an action by the Board of Directors
of the Company prior to obtaining the Company Shareholders' Approval, then
(A) in the event of termination pursuant to Section 9.01(g)(ii), the
Company shall pay to Parent and (B) in the event of termination pursuant to
Section 9.01(f)(iii) as a result of an action by the Board of Directors of
the Parent prior to obtaining the Parent Shareholders' Approval, Parent
shall pay to the Company, (promptly but in each case no later than five (5)
business days after the date of termination of this Agreement) by wire
transfer of same day funds, a termination fee of $100,000,000, plus, in
each case, the terminating party's Out-of-Pocket Expenses.
(c) In the event that (i) this Agreement is terminated by the
Company pursuant to Section 9.01(e) or (ii) any person or group shall have
made an Alternative Proposal that has not been withdrawn and this Agreement
is terminated by Parent pursuant to Section 9.01(g)(i) or Section 9.01(c)
as a result of the Company Shareholders' Approval not being obtained or by
the Company pursuant to Section 9.01(b) and, in the case of this clause
(ii) only, a definitive agreement with respect to such Alternative Proposal
is executed within two years after such termination, then the Company shall
pay to Parent, by wire transfer of same day funds, either on the date
contemplated in Section 9.01(e) if applicable, or otherwise, within five
(5) business days after such termination, a termination fee of
$100,000,000, plus the Out-of-Pocket Expenses of Parent to the extent not
otherwise payable pursuant to Section 9.03(a) above.
(d) If this Agreement is terminated by the Company, pursuant to
Section 9.01(f)(ii) and the failure by Parent referred to in such Section
is because of the occurrence of any significant disruptions in the
financial or capital markets which make it impracticable for a company
having financial characteristics similar to those of Parent as of the date
of this Agreement to finance a transaction of the size and nature as that
contemplated hereunder on commercially reasonable financing terms that are
available as of the date of such financing (a "Financial Disruption"), then
Parent shall pay to the Company a termination fee of $100,000,000. The
parties hereby acknowledge that a failure by Parent to deliver or cause to
be delivered the appropriate amount of cash as a result of a Financial
Disruption shall not constitute a willful breach of any representation,
warranty, covenant or agreement of Parent hereunder.
(e) In the event this Agreement is terminated by Parent pursuant
to Section 9.01(h), then Parent shall pay the Company, in cash by wire
transfer of same day funds within five (5) business days of such
termination notice, a termination fee of $75,000,000 (the "Regulatory
Termination Fee") plus the Out-of-Pocket Expenses of the Company; provided,
however, that the Regulatory Termination Fee shall not be payable to the
Company if the failure to obtain the 1935 Act Order by the twelve (12)
month anniversary of the date on which the Company Shareholders' Approval
is obtained has been caused by breach of this Agreement by the Company
after the date hereof.
(f) Nature of Fees. The parties agree that the agreements
contained in this Section 9.03 are an integral part of the Merger and the
other transactions contemplated hereby and constitute liquidated damages
and not a penalty. The parties further agree that if any party is or
becomes obligated to pay a termination fee pursuant to Sections 9.03(b)-
(e), the right to receive such termination fee shall be the sole remedy of
the other party with respect to the facts and circumstances giving rise to
such payment obligation. If this Agreement is terminated by a party as a
result of a willful breach of a representation, warranty, covenant or
agreement by the other party, including a termination pursuant to Section
9.01(f)(ii) caused by reasons other than a Financial Disruption, the non-
breaching party may pursue any remedies available to it at law or in equity
and shall be entitled to recover any additional amounts thereunder.
Notwithstanding anything to the contrary contained in this Section 9.03,
if one party fails to promptly pay to the other any fee or expense due
under this Section 9.03, in addition to any amounts paid or payable
pursuant to 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.
9.04 Amendment. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the Board of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after the Company Shareholders' Approval or the Parent Shareholders'
Approval shall have been obtained, but after such adoption and approval
only to the extent permitted by applicable law. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed and delivered by or on behalf of each party
hereto.
9.05 Waiver. At any time prior to the Effective Time, Parent or the
Company, by action taken by or on behalf of its Board of Directors, may to
the extent permitted by applicable law (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
of the other parties hereto contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the covenants,
agreements or conditions of the other parties hereto contained herein. No
such extension or waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party extending the time of
performance or waiving any such inaccuracy or non-compliance. No waiver by
any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.
ARTICLE X
GENERAL PROVISIONS
10.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article I and Article II, in
Sections 7.05, 7.06, 7.08, 7.09 and 7.10, this Article X which shall
survive the Effective Time.
10.02 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given
only if delivered personally or by facsimile transmission or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses or facsimile numbers:
If to Parent or LLC, to:
The National Grid Group Plc
National Grid House
Kirby Corner Road
Coventry CV4 8JY
United Kingdom
Attn: David Jones
Chief Executive
Telephone: (011-44-1203) 423-006
Facsimile: (011-44-1203) 423-026
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, N.Y. 10019
Attn: Steven H. Davis, Esq.
and Douglas W. Hawes, Esq.
Telephone: (212) 424-8000
Facsimile: (212) 424-8500
and
Cameron McKenna
Mitre House
160 Aldersgate Street
London EC1A 4DD
United Kingdom
Attn: Sean M. Watson. Esq.
Telephone: (011) 44-1-71-367-3000
Facsimile: (011) 44-1-71-367-2000
If to the Company, to:
New England Electric System
25 Research Drive
Westborough, MA 01582
U.S.A.
Attn: Richard P. Sergel
President and Chief Executive Officer
Telephone: (508) 389-2764
Facsimile: (508) 366-5498
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, N.Y. 10022
Attn: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given when sent,
provided that the facsimile is promptly confirmed by telephone confirmation
thereof, and (iii) if delivered by mail in the manner described above to
the address as provided in this Section, be deemed given one business day
after delivery (in each case regardless of whether such notice, request or
other communication is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by
giving notice specifying such change to the other parties hereto.
10.03 Entire Agreement; Incorporation of Exhibits. (a) This
Agreement supersedes all prior discussions and agreements, both written and
oral, among the parties hereto with respect to the subject matter hereof,
other than the Confidentiality Agreement, which shall survive the execution
and delivery of this Agreement in accordance with its terms, and contains,
together with the Confidentiality Agreement, the sole and entire agreement
among the parties hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter, the Parent Disclosure Letter
and any Exhibit attached to this Agreement and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
10.04 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and except as provided in
Article II and Section 7.09 (which is intended to be for the benefit of the
persons entitled to therein, and may be enforced by any of such persons),
it is not the intention of the parties to confer third-party beneficiary
rights upon any other person.
10.05 No Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned, in whole or in
part, by operation of law or otherwise, by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so
will be void, except that LLC may assign any or all of its rights,
interests and obligations hereunder to another direct or indirect wholly
owned Subsidiary of Parent, provided that any such Subsidiary agrees in
writing to be bound by all of the terms, conditions and provisions
contained herein and provided further that such assignment (i) does not
require a greater vote for the Company's Shareholder Approval, (ii) does
not require a subsequent vote following the Company's Shareholders Meeting,
or (iii) is not reasonably likely to materially delay or prevent the
Company, LLC and Parent, as appropriate, from obtaining the Company
Required Statutory Approvals, the Company Required Consents, the Company
Shareholders' Approval, the Parent Required Shareholders' Approvals, the
Parent Required Consents or the Parent Shareholders' Approval. Subject to
the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
10.06 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define, modify or
limit the provisions hereof.
10.07 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future
law or order, and if the rights or obligations of any party hereto under
this Agreement will not be materially and adversely affected thereby,
(i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, and (iii) the remaining
provisions of this Agreement will remain in full force and effect and will
not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom.
10.08 Governing Law. Except to the extent that the MGL and the
Massachusetts Limited Liability Company Act is mandatorily applicable to
the Merger and the rights of the Shareholders of the Constituent
Corporations, this Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
10.09 Submission to Jurisdiction; Waivers. Each of Parent, LLC
and the Company irrevocably agree that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any
judgment in respect hereof brought by another party hereto or its
successors or assigns may be brought and determined in the Supreme Court of
the State of New York in New York County or in the United States District
Court for the Southern District of New York, and each of Parent, LLC and
the Company hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Any service of process to be made in such action or proceeding may be made
by delivery of process in accordance with the notice provisions contained
in Section 10.02. Each of Parent, LLC, and the Company hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) the defense of sovereign immunity, (b) any claim that it is
not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve process in accordance with this
Section 10.09, (c) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or
otherwise), and (d) to the fullest extent permitted by applicable law that
(i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
10.10 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or
was otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of competent jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
10.11 Certain Definitions. As used in this Agreement:
(a) except as provided in Section 4.14, the term "affiliate," as
applied to any person, shall mean any other person directly or indirectly
controlling, controlled by, or under common control with, that person; for
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of that person, whether through the ownership of voting
securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own securities if
such person would be the beneficial owner of such securities under
Rule 13d-3 under the Exchange Act, including securities which such person
has the right to acquire (whether such right is exercisable immediately or
only after the passage of time);
(c) the term "business day" means a day other than Saturday,
Sunday or any day on which banks located in the Massachusetts or London,
England are authorized or obligated to close;
(d) the term "knowledge" or any similar formulation of
"knowledge" shall mean, with respect to any party hereto, the actual
knowledge after due inquiry of the executive officers of Parent and its
Subsidiaries or the Company and its Subsidiaries, respectively, set forth
in Section 10.11(d) of the Parent Disclosure Letter or Section 10.11(d) of
the Company Disclosure Letter; provided, that as used in Section 4.13 the
term "knowledge" shall also include the knowledge of the environmental,
health and safety personnel of the Company;
(e) the term "person" shall include individuals, corporations,
partnerships, trusts, limited liability companies, other entities and
groups (which term shall include a "group" as such term is defined in
Section 13(d)(3) of the Exchange Act);
(f) the "Representatives of any entity shall have the same
meaning as set forth in the Confidentiality Agreement;
(g) the term "Subsidiary" means, with respect to the Company,
any corporation or other entity, whether incorporated or unincorporated, in
which such party directly or indirectly owns at least a majority of the
voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect a majority of the directors or similar members of the governing body,
or otherwise to direct the management and policies, or such corporation or
entity and with respect to Parent, any body corporate which is a subsidiary
or subsidiary undertaking, in each case within the meaning of the Companies
Act.
10.12 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument and will become
effective when one or more counterparts have been signed by each party and
delivered to the other parties.
10.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
IN WITNESS WHEREOF, each party hereto has caused this Agreement
to be signed by its officer thereunto duly authorized as of the date first
above written.
THE NATIONAL GRID GROUP PLC
By: /s/ David H. Jones
--------------------------------
Name: David H. Jones
Title: Chief Executive Officer
IOSTA LLC
By: /s/ Clare Phelan
---------------------------------
Name: Clare Phelan
Title: Manager and Vice President
NEW ENGLAND ELECTRIC SYSTEM
By: /s/ Richard P. Sergel
------------------------------------
Name: Richard P. Sergel
Title: President and Chief Executive
Officer
By: /s/ Michael E. Jesanis
-----------------------------------
Name: Michael E. Jesanis
Title: Senior Vice Presdient and
Chief Financial Officer
The name "New England Electric System" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an
Agreement and Declaration of Trust dated January 2, 1996, as amended, which
is hereby referred to, and a copy of which, as amended, has been filed with
the Secretary of the Commonwealth of Massachusetts. Any agreement,
obligation, or liability made, entered into, or incurred by or on behalf of
New England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof assumes or shall
be held to any liability therefor.
Exhibit 99
FOR RELEASE: DEC. 14, 1998
CONTACTS:
NEES NATIONAL GRID
INVESTORS: INVESTORS:
Bob Seega, 508-389-2178 Jill Sherrett
011-44-171-620-9191
MEDIA:
Until 6:00 a.m.: MEDIA:
Susan Stevens, 617-236-5800 x2811 Margaret Stewart
011-44-171-620-9191
After 6:00 a.m.:
Amy Tull, 508-389-3283
NEES AND NATIONAL GRID TO MERGE IN $3.2 BILLION TRANSACTION
WESTBOROUGH, Mass., Dec. 14, 1998 The National Grid Group plc
(LSE:NGG) and New England Electric System (NYSE:NES) announced today that
they have signed a merger agreement under which National Grid will acquire
all of the outstanding shares of NEES. Under the terms of the agreement,
NEES shareholders will receive $53.75 in cash (subject to upward
adjustment) for each NEES share held. The terms value the equity of NEES
at approximately $3.2 billion and represent a premium of 25% above the
closing price of NEES shares on Dec. 11, 1998.
National Grid is the owner and operator of the England and Wales high-
voltage transmission network, including interconnectors with Scotland and
France. National Grid is the world's largest privately owned transmission
company, and has almost a decade of experience running a transmission
network in a competitive market. It is listed on the London Stock Exchange
with a market capitalization of $12.4 billion.
NEES will become the base of U.S. operations for National Grid, and
will provide a regional platform for growth in transmission and
distribution
"For NEES and our employees, this transaction not only keeps jobs in
New England, it represents a tremendous opportunity for growth as the base
of U.S. operations for a large and successful company. For our customers
and the region, it is an opportunity to benefit from National Grid's proven
track record of delivering high-quality, low-cost transmission service in
the competitive UK market. National Grid's considerable experience should
benefit customers here as the competitive electricity market develops in
the northeast," said Rick Sergel, president and chief executive officer o
NEES.
"Most important, our customers will continue to receive the same great
service from the same people in the yellow trucks, 24 hours a day; and they
will continue to receive rates among the lowest in the region. The only
difference is that we will have the resources of an international leader
behind us," Sergel said.
Commenting on the acquisition, David Jones, chief executive of
National Grid, said: "NEES has a strong reputation for efficient service to
customers, and has already played a prominent role in the regulatory
developments in the region. The chemistry between the management teams is
excellent, and by combining our expertise with that of NEES, I am confident
that as a group we will be able to deliver on the exciting prospects in the
northeast U.S. and continue to enhance value for National Grid
shareholders."
According to National Grid, the acquisition:
o represents a significant investment in an efficient, focused
transmission and distribution business with a strong operational track
record, which will benefit further from National Grid's core skills;
o enhances National Grid's earnings per share before the amortization of
goodwill and significantly enhances National Grid's cash flow per
share immediately following the acquisition;
o provides the right point of entry into the U.S. for National Grid,
given New England's favorable economic climate and its advanced state
of regulatory evolution toward performance-based regulation;
o brings National Grid a high-quality management team with proven
distribution expertise and a shared view of the industry's future
development in the northeast U.S.; an
o provides an excellent regional platform for growth in transmission and
distribution.
Rick Sergel will continue as president and chief executive officer of
NEES and will join the National Grid Board as an executive director,
together with one of NEES's outside directors. Alfred D. Houston, NEES
chairman, will step down upon the closing of the merger, and will serve as
a consultant for two years. A NEES advisory board will be established for
two years.
Upon completion of the acquisition, NEES will become a wholly owned
subsidiary of National Grid. NEES and its subsidiary names will remain the
same. Headquarters for U.S. operations will remain in Massachusetts, and
the strong links forged by NEES with its local communities in
Massachusetts, Rhode Island and New Hampshire will be maintained, according
to National Grid.
The acquisition is subject to a number of regulatory and other
approvals and consents, including approvals by the U.S. Securities and
Exchange Commission, Federal Energy Regulatory Commission, and Nuclear
Regulatory Commission, support from the states in which NEES operates, and
Hart-Scott-Rodino approval. The acquisition also requires approval by
shareholders of both companies, and is expected to be completed by early
2000.
NEES shareholders will receive a cash payment of $53.75 for each share
held when the merger is completed. The cash payment will be subject to an
increase if the completion of the merger does not take place on or before
the date following six months after approval of the merger by NEES
shareholders. The amount of any such adjustment will be determined using a
daily accrual rate of $0.0033 until closing, up to a maximum increase of
$0.60 per share.
Merrill Lynch & Co. served as financial advisor and delivered a
fairness opinion to NEES. Rothschild and Dresdner Kleinwort Benson are
jointly advising National Grid. Dresdner Kleinwort Benson Securities and
HSBC Securities are brokers to National Grid.
More information on the merger agreement and both companies is
available on the NEES web site at www.nees.com, and the National Grid web
site at www.ngc.co.uk.
NEES is a public utility holding company headquartered in Westborough
Mass. Its subsidiaries Massachusetts Electric Company, Narragansett
Electric Company, Granite State Electric Company, and Nantucket Electric
Company serve approximately 1.3 million customers in Massachusetts, Rhode
Island and New Hampshire. Unregulated subsidiaries include AllEnergy, an
energy marketing company, and NEESCom, a telecommunications company.
This document contains statements that may be considered forward looking
under the securities laws. Actual results may differ materially. For a
list of factors that could influence results, please refer to NEES's Form
10-Q for the period ended Sept. 30, 1998. The transaction is also subject
to contingencies as discussed herein.
