<PAGE> 1
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
Date of Report (Date of earliest event reported)
August 11, 1996
NORAM ENERGY CORP.
(Exact name of Registrant as specified in its charter)
Delaware 1-3751 72-0120530
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
NorAm Energy Corp.
1600 Smith
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 654-5699
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5. Other Events
At a Special Meeting of the Board of Directors of NorAm Energy Corp.
(the "Company") on August 11, 1996, the Company approved an Agreement and Plan
of Merger (the "Merger Agreement") with Houston Industries Incorporated
("Houston Industries"), Houston Lighting & Power Company ("HL&P") and HI Merger,
Inc., a new Delaware subsidiary of Houston Industries ("HI Merger, Inc."). Under
the Merger Agreement, the Company would merge with and into HI Merger, Inc.,
which would be renamed "NorAm Energy Corp." and would be a wholly-owned
subsidiary of HII (as defined below). Houston Industries would merge with and
into HL&P and the currently outstanding common stock of Houston Industries would
become the common stock of HL&P, which would be renamed "Houston Industries
Incorporated" ("HII") (collectively the mergers are referred to herein as the
Merger).
The transaction is valued at $3.8 billion, consisting of $2.4 billion
for the Company's common stock and equivalents and $1.4 billion of Company debt.
Under the Merger Agreement, holders of Company common stock would receive at
their election (at any time up to the trading day immediately prior to the
closing date of the Merger): (1) cash in the amount of $16 per share or (2) HII
voting common stock. The shareholders' election would, however, be subject to
the right of Houston Industries to prorate share and cash purchases to hold the
percentage of cash and stock at or near 50/50. At HII's election, if the Company
Shareholders elect more than 50% stock, they could receive more than 50% HII
common stock. The value of the stock component would be held generally equal to
the cash component within the range described below, with the number of HII
shares to be issued in exchange for each share of Company common stock being
that number of shares of HII common stock equal to the quotient obtained by
dividing $16.00 by the average NYSE closing sales price of a share of Houston
Industries common stock over a 20 consecutive trading day period commencing 25
trading days prior to the closing date of the Merger (the "Average Price")
provided that the Average Price will be deemed to be not less than $21.25 and
not more than $26.00. In addition, if the closing does not occur by May 11,
1997, the cash (but not stock) consideration increases thereafter by two percent
(simple interest) per quarter until closing.
<PAGE> 3
Houston Industries' regulated subsidiary, HL&P is the nation's
ninth-largest electric utility in terms of kilowatt-hour sales. HL&P's service
territory includes the City of Houston and surrounding communities with a total
of 1.5 million customers. Houston Industries' principal unregulated subsidiary,
HI Energy pursues foreign utility privatizations and the development of
unregulated power generator projects. It has projects and interests in
Argentina, Brazil and India.
The Merger Agreement has also been approved by the Boards of Directors
of Houston Industries and HL&P. Consummation of the Merger is subject to
customary closing conditions, including approval by shareholders of the Company
and Houston Industries. The parties presently contemplate that shareholder
meetings to consider approval of the transactions will be held prior to the end
of 1996. Consummation of the Merger is also subject to receipt of favorable
opinions of counsel that the Merger will qualify as a tax free reorganization
and certain regulatory filings or approvals, including notice to or approvals
from certain state regulatory agencies and municipal franchise authorities and
the filing of the requisite notifications 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 applicable waiting periods
thereunder. The parties have agreed to certain undertakings and limitations
regarding the conduct of their businesses prior to the closing of the Merger.
Under the Merger structure, HII would be both a public utility company
and a public utility holding company under the Public Utility Holding Company
Act of 1935 (PUHCA). The Merger Agreement contemplates that the merged companies
will be exempt from registration under PUHCA. Alternative structures are
required should existing administrative positions or legislative changes
adversely affect the structure described above or permit structures not
presently authorized by PUHCA. One of the alternate structures contemplates a
non-holding company structure in which all regulated operations would be
conducted within one company.
The Merger Agreement provides for termination by either the Company or
Houston Industries if the transactions have not been consummated by August 11,
1997, which date may be
<PAGE> 4
extended until December 31, 1997, only in the event that
the unsatisfied condition to closing is receipt of pending regulatory approvals.
The agreement may be terminated by the Company or Houston Industries in the
event that ( 1) the other party fails to hold its shareholders meeting by
February 15, 1997, (2) the other party fails to cure material noncompliance with
its covenants in the agreement, (3) the other party's representations are or
become materially incorrect, (4) there is a material adverse change in the other
party (other than general economic changes or changes affecting the parties'
industries generally), (5) the other party's board of directors withdraws or
modifies, in an adverse manner, its recommendation for approval of the
transactions or (6) the Company accepts a superior, unsolicited offer. The
Merger Agreement provides for a termination fee to be paid by a party
terminating the Merger Agreement in certain circumstances, which fee is from $10
million to $35 million for Houston Industries and which ranges from $10 million
to $75 million in the case of the Company, depending on the circumstances of
termination. The $75 million level is required if the Company terminates the
Merger Agreement to accept a superior, unsolicited offer or if the agreement is
terminated under certain other circumstances and such an offer is accepted
within twelve months of termination of the Merger Agreement.
The descriptions of the Merger Agreement set forth herein do not
purport to be complete and are qualified in their entirety by the provisions of
the Merger Agreement, which are attached hereto and are incorporated herein by
reference.
Item 7. Financial Statements and Exhibits.
The following exhibit is filed herewith:
2(a) - Agreement and Plan of Merger dated as of August 11,
1996 among Houston Industries Incorporated, Houston Lighting & Power Company,
HI Merger, Inc. and NorAm Energy Corp.
<PAGE> 5
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
NORAM ENERGY CORP.
By: /s/ Jack W. Ellis
Name: Jack W. Ellis
Title: Vice President & Controller
Date: August 12, 1996
<PAGE> 6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2(a) Agreement and Plan of Merger dated as of August 11, 1996
among Houston Industries Incorporated, Houston Lighting &
Power Company, HI Merger, Inc. and NorAm Energy Corp.
<PAGE> 1
EXHIBIT 2a
AGREEMENT AND PLAN OF MERGER
AMONG
HOUSTON INDUSTRIES INCORPORATED,
HOUSTON LIGHTING & POWER COMPANY,
HI MERGER, INC.
AND
NORAM ENERGY CORP.
DATED AS OF AUGUST 11, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.1 The Mergers; Effective Time of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
(a) The HII/HL&P Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
(b) The NorAm Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.3 Effects of the HII/HL&P Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
1.4 Effects of the NorAm Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
ARTICLE II EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.1 Effect of HII/HL&P Merger on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
(a) Cancellation of HL&P Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
(b) Cancellation of Treasury Stock and HL&P-Owned Stock . . . . . . . . . . . . . . . . . . . . -4-
(c) Exchange of HII Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
(d) Treatment of HII Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
(e) HL&P Preferred Stock Unchanged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.2 Effect of NorAm Merger on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
(a) Merger Sub Capital Stock Unchanged . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
(b) Cancellation of Treasury Stock and HL&P-Owned Stock . . . . . . . . . . . . . . . . . . . . -6-
(c) Exchange Ratio for NorAm Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
(d) NorAm Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
(e) Treatment of NorAm Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
(f) NorAm Convertible Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
(g) NorAm Convertible Junior Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
(a) Exchange of HII Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
(b) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
(c) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
(d) Distributions with Respect to Unexchanged Shares . . . . . . . . . . . . . . . . . . . . -10-
(e) No Further Ownership Rights in NorAm Common Stock . . . . . . . . . . . . . . . . . . . . -11-
(f) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
(g) Termination of Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
(h) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.4 Allocation of Merger Consideration; Election Procedures . . . . . . . . . . . . . . . . . . . . -12-
(a) Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
(b) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
(c) Procedure for Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
(d) Revocation of Election; Return of Certificates . . . . . . . . . . . . . . . . . . . . . -14-
(e) Proration of Cash Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
</TABLE>
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<TABLE>
<S> <C> <C>
(f) Proration of Stock Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
(g) No Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
(h) Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.1 Representations and Warranties of NorAm . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(c) Authority; No Violations; Consents and Approvals . . . . . . . . . . . . . . . . . . . . -18-
(d) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
(f) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
(g) No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
(h) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
(i) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
(j) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
(l) Employee Matters; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
(m) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
(n) Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
(o) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
(q) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
(r) Regulatory Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
(s) Regulation as a Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
(t) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
(u) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
(v) Beneficial Ownership of HII Common Stock . . . . . . . . . . . . . . . . . . . . . . . . -36-
(w) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
(x) Article Fifth of NorAm Restated Certificate of Incorporation and
Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . . . . . . . . . . -36-
(y) Change in Control Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
3.2 Representations and Warranties of HL&P and HII . . . . . . . . . . . . . . . . . . . . . . . . -37-
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
(c) Authority; No Violations; Consents and Approvals . . . . . . . . . . . . . . . . . . . . -39-
(d) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
(f) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
(g) No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
(h) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
(i) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
(j) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
</TABLE>
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<TABLE>
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(l) Employee Matters; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
(m) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(n) Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
(o) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
(p) Regulation as a Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
(q) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
(r) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
(s) Beneficial Ownership of NorAm Common Stock . . . . . . . . . . . . . . . . . . . . . . . -52-
(t) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
(u) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
(v) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
(w) Regulatory Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
(x) Representations with Respect to Merger Sub . . . . . . . . . . . . . . . . . . . . . . . -53-
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
4.1 Conduct of Business by NorAm Pending the Mergers . . . . . . . . . . . . . . . . . . . . . . . -53-
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
(b) Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(e) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(f) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(g) No Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(h) Certain Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(i) Indebtedness; Leases; Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . -56-
(j) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
(k) Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
(l) Rate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
(n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
(o) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
(p) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
(q) Discharge of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
(r) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
(s) Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
4.2 Certain Restrictions in Respect of HII and HL&P . . . . . . . . . . . . . . . . . . . . . . . . -58-
(a) Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
(b) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
(c) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
(d) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
(e) Certain Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
(f) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
(g) Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
4.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
</TABLE>
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ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
5.1 Preparation of S-4 and the Joint Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . -60-
5.2 Letter of NorAm's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.3 Letter of HII's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.5 NorAm Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.6 HII Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
5.7 Regulatory and Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
(a) HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
(b) Other Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
(c) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
5.8 Agreements of Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
5.9 Authorization for Shares and Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . -63-
5.10 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
5.11 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
5.12 Indemnification; Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . -67-
5.13 Compliance with WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
5.14 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
5.15 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
5.16 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
5.17 Advice of Changes; SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
5.18 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
5.19 HII/HL&P Merger Surviving Corporation Board of Directors . . . . . . . . . . . . . . . . . . . -69-
5.20 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
5.21 Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
5.22 Fairness Opinions Not Withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
6.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . -70-
(a) NorAm Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
(b) HII Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
(c) NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
(d) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
(e) S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
(f) No Injunctions or Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
6.2 Conditions of Obligations of HII, HL&P and Merger Sub . . . . . . . . . . . . . . . . . . . . . -71-
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
(b) Performance of Obligations of NorAm . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
(c) Letters from Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
(d) Number of NorAm Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
(e) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
(f) No Material Limitations or Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
(g) NorAm Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
</TABLE>
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<TABLE>
<S> <C> <C>
6.3 Conditions of Obligations of NorAm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
(b) Performance of Obligations of HII, HL&P and Merger Sub . . . . . . . . . . . . . . . . . -73-
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
(d) HII Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
ARTICLE VII TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -76-
7.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
ARTICLE VIII ALTERNATIVE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
8.1 Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
8.2 Effects of the Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -78-
8.3 Effect of the Alternative Merger on the Capital Stock of the Alternative
Merger Constituent Corporations; Exchange of Certificates . . . . . . . . . . . . . . . . . . . -79-
8.4 Amendment to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -79-
8.5 The Second Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -79-
8.6 Effects of the Second Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . -80-
8.7 Effect of the Second Alternative Merger on the Capital Stock of the
Second Alternative Merger Constituent Corporations; Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -80-
8.8 Amendment to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -81-
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -81-
9.1 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -81-
9.2 Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . -81-
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -81-
9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -83-
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -83-
9.6 Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . -83-
9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -83-
9.8 No Remedy in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -83-
9.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -84-
</TABLE>
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<PAGE> 7
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
1935 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(s)(i)
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(e)
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(k)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Alternative Merger Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
Alternative Merger Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
Alternative Merger Constituent Corporations . . . . . . . . . . . . . . . . . . . . . 8.2(a)
Alternative Merger Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
Alternative Merger Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . 8.2(a)
Average Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)(ii)
Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)(i)
Cash Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(b)
Cash Election Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(a)
Cash Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(c)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Confidentiality Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
CS First Boston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(q)
Cycle X Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(d)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.21
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
Election Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(c)
Environmental Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(i)(A)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(i)(B)
Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(iii)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)(D)
Excess Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(f)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
FERC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Form of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(c)
Fractional Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(f)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(i)(C)
HII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
HII Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l)(i)
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
HII Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l)(i)
HII Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
HII Common Stock Repurchase Program . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(f)
HII Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
HII/HL&P Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
HII/HL&P Merger Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
HII/HL&P Merger Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
HII/HL&P Merger Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
HII/HL&P Merger Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
HII/HL&P Merger Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
HII Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(n)
HII Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j)
HII Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j)
HII Pension Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l)(ii)
HII Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(i)
HII Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)(ii)
HII Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(c)(ii)
HII SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(d)
HII Series A Preference Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
HII Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6
HII Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(d)
HII Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)(ii)
HII Stock Purchase Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
HII Vote Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(c)(i)
HL&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
HL&P Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
HL&P Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
HL&P Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
HL&P Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)(i)
HL&P Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
HL&P SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(d)
HL&P Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
HL&P Stock Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
Initial Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(f)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)(ii)
Joint Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Merrill Lynch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(t)
Non-Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(b)
Non-Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(b)
NorAm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
NorAm 10% Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(y)
NorAm Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)(A)
NorAm Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)(B)
NorAm Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
NorAm Convertible Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(f)
NorAm Convertible Junior Debentures . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(g)
NorAm Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
NorAm Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(d)
NorAm Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(d)
NorAm Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(n)
NorAm Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
NorAm Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
NorAm Merger Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
NorAm Merger Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . 1.4(a)
NorAm Merger Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
NorAm Merger Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 1.4(a)
NorAm Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
NorAm Pension Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)(C)
NorAm Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(i)
NorAm Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
NorAm Rabbi Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(g)
NorAm Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
NorAm Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(ii)
NorAm SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
NorAm Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(e)(i)
NorAm Stock Option Election Form . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(e)(i)
NorAm Stock Option Election Period . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(e)(i)
NorAm Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
NorAm Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)(ii)
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)(E)
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(i)(D)
Reportable Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)(F)
Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)(i)
Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8
S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e)
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Second Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Second Alternative Merger Certificate of Merger . . . . . . . . . . . . . . . . . . . 8.5(b)
</TABLE>
-viii-
<PAGE> 10
<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
Second Alternative Merger Constituent Corporations . . . . . . . . . . . . . . . . . 8.6(a)
Second Alternative Merger Effective Time . . . . . . . . . . . . . . . . . . . . . . 8.5(b)
Second Alternative Merger Surviving Corporation . . . . . . . . . . . . . . . . . . . 8.6(a)
Section 5.10(b) Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(b)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(e)(ii)
Stock Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)(ii)
Stock Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(b)
Stock Election Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(a)
Stock Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)
TBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)(ii)
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
WARN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.13
</TABLE>
-ix-
<PAGE> 11
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1996
(this "Agreement"), by and among Houston Industries Incorporated, a Texas
corporation ("HII"), Houston Lighting & Power Company, a Texas corporation and
a wholly owned subsidiary of HII ("HL&P"), HI Merger, Inc., a Delaware
corporation and a direct wholly owned subsidiary of HII ("Merger Sub"), and
NorAm Energy Corp., a Delaware corporation ("NorAm").
WHEREAS, HII and NorAm have determined to engage in a
strategic business combination;
WHEREAS, in furtherance thereof, the respective Boards of
Directors of HII, HL&P, Merger Sub and NorAm have approved this Agreement and
the merger of NorAm with and into Merger Sub, with Merger Sub being the
surviving corporation (the "NorAm Merger"), and the respective Boards of
Directors of HII and HL&P have approved the merger of HII with and into HL&P,
with HL&P being the surviving corporation (the "HII/HL&P Merger," and together
with the NorAm Merger, the "Mergers"), which merger would occur immediately
prior to the NorAm Merger;
WHEREAS, the respective Boards of Directors of HII, HL&P,
Merger Sub and NorAm (i) have approved, but only in the circumstances set forth
in Section 8.1 and then in lieu of the Mergers, the merger of NorAm and HII
with and into HL&P, with HL&P being the surviving corporation (the "Alternative
Merger") and (ii) have approved, but only in the circumstances set forth in
Section 8.5 and then in lieu of the Mergers, the merger of NorAm with and into
Merger Sub, with Merger Sub being the surviving corporation (the "Second
Alternative Merger");
WHEREAS, the respective Boards of Directors of HII, HL&P,
Merger Sub and NorAm have determined that it is in the best interests of their
respective stockholders for the Mergers (or, if applicable, the Alternative
Merger or the Second Alternative Merger) to be effected upon the terms and
subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that
each of the HII/HL&P Merger and the NorAm Merger (or if applicable, the
Alternative Merger or the Second Alternative Merger) shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and this Agreement is intended to be and
is adopted as a plan of reorganization within the meaning of Section 368(b) of
the Code; and
WHEREAS, HII, HL&P, Merger Sub and NorAm desire to make
certain representations, warranties, covenants and agreements in connection
with the Mergers (or, if applicable, the Alternative Merger or the Second
Alternative Merger) and also to prescribe various conditions to the Mergers
(or, if applicable, the Alternative Merger or the Second Alternative Merger);
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<PAGE> 12
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers; Effective Time of the Mergers. Upon the
terms and subject to the conditions of this Agreement:
(a) The HII/HL&P Merger. At the HII/HL&P Merger
Effective Time (as hereinafter defined), HII shall be merged with and
into HL&P in accordance with the Texas Business Corporation Act (the
"TBCA"). As soon as practicable at or after the closing of the
Mergers (the "Closing"), articles of merger, prepared and executed in
accordance with the relevant provisions of the TBCA, with respect to
the HII/HL&P Merger (the "HII/HL&P Merger Articles of Merger") shall
be filed with the Secretary of State of the State of Texas. The
HII/HL&P Merger Articles of Merger shall state that the HII/HL&P
Merger is to become effective immediately upon filing of the HII/HL&P
Merger Articles of Merger with the Secretary of State of the State of
Texas or, if agreed to by HII, HL&P and NorAm, at such time thereafter
as is provided in the HII/HL&P Merger Articles of Merger. The
HII/HL&P Merger shall become effective at the time of the issuance of
the certificate of merger with respect to the HII/HL&P Merger (the
"HII/HL&P Merger Certificate of Merger") by the Secretary of State of
the State of Texas or, if a later effective time was provided in the
HII/HL&P Merger Articles of Merger, such later time (the "HII/HL&P
Merger Effective Time").
(b) The NorAm Merger. At the NorAm Merger Effective Time
(as hereinafter defined), NorAm shall be merged with and into Merger
Sub in accordance with the Delaware General Corporation Law (the
"DGCL"). As soon as practicable at or after the Closing, a
certificate of merger, prepared and executed in accordance with the
relevant provisions of the DGCL, with respect to the NorAm Merger (the
"NorAm Merger Certificate of Merger") shall be filed with the
Secretary of State of the State of Delaware. The NorAm Merger
Certificate of Merger shall state that the NorAm Merger shall become
effective immediately following the HII/HL&P Merger Effective Time or,
if agreed to by HL&P, Merger Sub and NorAm, at such time thereafter as
is provided in the NorAm Merger Certificate of Merger. The NorAm
Merger shall become effective at the time that the NorAm Merger
Certificate of Merger shall be duly filed with the Secretary of State
of the State of Delaware or, if a later effective time was provided in
the NorAm Merger Certificate of Merger, such later time (the "NorAm
Merger Effective Time" or the "Effective Time"). The effective time
specified in the HII/HL&P Merger Articles of Merger shall be prior to
the effective time specified in the NorAm Merger Certificate of
Merger.
1.2 Closing. The Closing shall take place at 10:00 a.m.
on a date to be specified by the parties, which shall be no later than the
fifth business day after satisfaction (or waiver in
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<PAGE> 13
accordance with this Agreement) of the latest to occur of the conditions set
forth in Article VI (the "Closing Date"), at the offices of Baker & Botts,
L.L.P., 910 Louisiana, Houston, Texas 77002, unless another date or place is
agreed to in writing by the parties.
1.3 Effects of the HII/HL&P Merger.
(a) At the HII/HL&P Merger Effective Time: (i) HII shall
be merged with and into HL&P, the separate existence of HII shall
cease and HL&P shall continue as the surviving corporation (HII and
HL&P are sometimes referred to herein as the "HII/HL&P Merger
Constituent Corporations" and HL&P is sometimes referred to herein as
the "HII/HL&P Merger Surviving Corporation"); (ii) Article I and
Article VI of the Restated Articles of Incorporation of HL&P shall be
amended as set forth in Exhibit A hereto and, as so amended, such
Restated Articles of Incorporation shall be the Articles of
Incorporation of the HII/HL&P Merger Surviving Corporation; and (iii)
the Bylaws of HII as in effect immediately prior to the HII/HL&P
Merger Effective Time shall be the Bylaws of the HII/HL&P Merger
Surviving Corporation.
(b) The directors and officers of HII at the HII/HL&P
Merger Effective Time shall, from and after the HII/HL&P Merger
Effective Time, be the initial directors and officers of the HII/HL&P
Merger Surviving Corporation and shall serve until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
HII/HL&P Merger Surviving Corporation's Articles of Incorporation and
Bylaws. Each officer of HL&P at the HII/HL&P Merger Effective Time
shall, from and after the HII/HL&P Merger Effective Time, hold the
same office at the Houston Lighting & Power Company Division of the
HII/HL&P Merger Surviving Corporation as held at HL&P immediately
prior to the HII/HL&P Merger Effective Time and shall serve in such
office until his or her successor has been duly appointed and
qualified or until his or her earlier death, resignation or removal in
accordance with the HII/HL&P Merger Surviving Corporation's Articles
of Incorporation and Bylaws.
(c) The HII/HL&P Merger shall have the effects set forth
in this Section 1.3 and the applicable provisions of the TBCA.
1.4 Effects of the NorAm Merger.
(a) At the NorAm Merger Effective Time: (i) NorAm shall
be merged with and into Merger Sub, the separate existence of NorAm
shall cease and Merger Sub shall continue as the surviving corporation
(Merger Sub and NorAm are sometimes referred to herein as the "NorAm
Merger Constituent Corporations" and Merger Sub is sometimes referred
to herein as the "NorAm Merger Surviving Corporation"); (ii) the
Certificate of Incorporation of Merger Sub shall be amended to change
the name of Merger Sub to "NorAm Energy Corp.," and, as so amended,
such Certificate of Incorporation shall be the Certificate of
Incorporation of the NorAm Merger Surviving Corporation; and (iii) the
Bylaws of Merger
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<PAGE> 14
Sub as in effect immediately prior to the NorAm Merger Effective Time
shall be the Bylaws of the NorAm Merger Surviving Corporation.
(b) The directors of Merger Sub at the NorAm Merger
Effective Time shall, from and after the NorAm Merger Effective Time,
be the initial directors of the NorAm Merger Surviving Corporation and
the officers of NorAm at the NorAm Merger Effective Time shall, from
and after the NorAm Merger Effective Time, be the initial officers of
the NorAm Merger Surviving Corporation, and such directors and
officers shall serve until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or
removal in accordance with the NorAm Merger Surviving Corporation's
Certificate of Incorporation and Bylaws.
(c) The NorAm Merger shall have the effects set forth in
this Section 1.4 and the applicable provisions of the DGCL.
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect of HII/HL&P Merger on Capital Stock. At the
HII/HL&P Merger Effective Time, by virtue of the HII/HL&P Merger and without
any action on the part of the holder of any shares of common stock, no par
value, of HII ("HII Common Stock") or capital stock of HL&P:
(a) Cancellation of HL&P Common Stock. Each issued and
outstanding share of common stock, Class A, no par value, of HL&P
("HL&P Class A Common Stock") and each issued and outstanding share of
common stock, Class B, no par value, of HL&P ("HL&P Class B Common
Stock") that is owned directly or indirectly by HII shall be canceled
and retired and shall cease to exist and no stock of HL&P or other
consideration shall be delivered or deliverable in exchange therefor.
(b) Cancellation of Treasury Stock and HL&P-Owned Stock.
Each share of HII Common Stock and each associated right (a "HII Stock
Purchase Right") to purchase one two-hundredth of a share of Series A
Preference Stock, no par value, of HII ("HII Series A Preference
Stock"), and all other shares of capital stock of HII that are owned
by HII as treasury stock and any shares of HII Common Stock and all
other shares of capital stock of HII owned by HL&P, Merger Sub or any
other wholly owned Subsidiary (as hereinafter defined) of HL&P or HII
shall be canceled and retired and shall cease to exist and no stock of
HL&P or other consideration shall be delivered or deliverable in
exchange therefor. All references in this Agreement to HII Common
Stock shall be deemed to include the associated HII Stock Purchase
Right. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other
Subsidiary of such
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<PAGE> 15
party is a general partner (excluding partnerships, the general
partnership interests of which are held by such party or any
Subsidiary of such party that do not have a majority of the voting
interest in such partnership); or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is, directly or indirectly, owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and
any one or more of its Subsidiaries.
(c) Exchange of HII Common Stock. Each share of HII
Common Stock issued and outstanding immediately prior to the HII/HL&P
Merger Effective Time (other than shares to be canceled in accordance
with Section 2.1(b)) shall be converted into one share of common
stock, no par value, of HII/HL&P Merger Surviving Corporation ("HL&P
Common Stock"), together with the corresponding number of associated
rights ("HL&P Stock Purchase Rights") to purchase one one-hundredth of
a share of Series A Junior Preferred Stock, without par value, of
HII/HL&P Merger Surviving Corporation ("HL&P Series A Preferred
Stock") pursuant to an Amended and Restated Rights Agreement among
HII, HL&P and Texas Commerce Bank National Association, as Rights
Agent (the "HL&P Rights Agreement"). The HII Rights Agreement shall be
amended and restated to become the HL&P Rights Agreement and shall
provide for (i) the HII Stock Purchase Rights to be converted into
HL&P Stock Purchase Rights and (ii) the HL&P Stock Purchase Rights to
attach to shares of HL&P Common Stock issued as consideration in the
NorAm Merger, and to make such other changes as HL&P determines are
appropriate. All references in this Agreement to the HL&P Common
Stock to be received pursuant to the Mergers shall be deemed to
include the associated HL&P Stock Purchase Rights. All such shares of
HII Common Stock, when so converted, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right
to receive the shares of HL&P Common Stock.
(d) Treatment of HII Stock Options. Each unexpired
option to purchase HII Common Stock issued by HII that is outstanding
at the HII/HL&P Merger Effective Time (a "HII Stock Option"), whether
or not exercisable, shall automatically and without any action on the
part of the holder thereof be converted into an option to purchase the
number of shares of HL&P Common Stock equal to the number of shares of
HII Common Stock that could be purchased under such HII Stock Option
at a price per share of HL&P Common Stock equal to the per share
exercise price of such HII Stock Option.
(e) HL&P Preferred Stock Unchanged. Each issued and
outstanding share of cumulative preferred stock, no par value, of HL&P
shall not be converted or otherwise affected by the HII/HL&P Merger
and shall remain outstanding after the HII/HL&P Merger.
2.2 Effect of NorAm Merger on Capital Stock. At the
NorAm Merger Effective Time, by virtue of the NorAm Merger and without any
action on the part of the holder of any shares
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<PAGE> 16
of common stock, par value $.625 per share, of NorAm ("NorAm Common Stock") or
capital stock of Merger Sub:
(a) Merger Sub Capital Stock Unchanged. Each issued and
outstanding share of the capital stock of Merger Sub shall not be
converted or otherwise affected by the NorAm Merger and shall remain
outstanding after the NorAm Merger.
(b) Cancellation of Treasury Stock and HL&P-Owned Stock.
Each share of NorAm Common Stock and all other shares of capital stock
of NorAm that are owned by NorAm as treasury stock and any shares of
NorAm Common Stock and all other shares of capital stock of NorAm
owned by HL&P, Merger Sub or any other wholly owned Subsidiary of HL&P
or NorAm shall be canceled and retired and shall cease to exist and no
stock of HL&P or other consideration shall be delivered or deliverable
in exchange therefor.
(c) Exchange Ratio for NorAm Common Stock.
(i) Subject to the provisions of Section 2.3(f)
hereof, each share of NorAm Common Stock issued and
outstanding immediately prior to the NorAm Merger Effective
Time (other than NorAm Dissenting Shares (as defined in
Section 2.2(d)) and shares to be canceled in accordance with
Section 2.2(b)) shall be converted into (x) the Stock
Consideration (as defined in Section 2.2(c)(ii)) or (y) $16.00
in cash (the "Cash Consideration"), in each case as the holder
thereof shall have elected or be deemed to have elected, in
accordance with Section 2.4 (collectively, the "Merger
Consideration"); provided, however, that, in any event, if
between the date of this Agreement and the NorAm Merger
Effective Time the outstanding shares of NorAm Common Stock or
HII Common Stock shall have been changed into a different
number of shares or a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares (other than, with
respect to the HII Common Stock, pursuant to the HII/HL&P
Merger), the Cash Consideration and the Stock Consideration
shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. In the event the
Effective Time has not occurred by the date that is nine
months after the date hereof, the Cash Consideration shall be
increased by simple interest on such amount at the rate of 2%
per quarter from the date that is nine months after the date
hereof to the Effective Time (based on a year of 365 days).
All such shares of NorAm Common Stock, when so converted,
shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to
receive the Stock Consideration or the Cash Consideration, as
the case may be, and cash in lieu of fractional shares of HL&P
Common Stock as contemplated by Section 2.3(f), to be issued
or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 2.3, without interest.
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<PAGE> 17
(ii) As used in this Agreement:
"Average Price" means the average of the closing
prices of HII Common Stock, rounded to four decimal places (if
the fifth, sixth and seventh decimal places of such average
are (x) 499 or lower, then the fourth decimal place of such
average shall remain the same, or (y) 500 or higher, then the
fourth decimal place of such average shall be increased by 1),
as reported in The Wall Street Journal's New York Stock
Exchange Composite Transaction Reports, for each of the first
20 consecutive Trading Days in the period commencing 25
Trading Days prior to the Closing Date.
"Stock Consideration" is (x) if the Average Price of
HII Common Stock is $21.25 or lower, .7529 shares of HL&P
Common Stock; (y) if the Average Price of HII Common Stock is
$26.00 or greater, .6154 shares of HL&P Common Stock; or (z)
if the Average Price of the HII Common Stock is greater than
$21.25 but less than $26.00, that portion of a share of HL&P
Common Stock equal to the quotient of $16.00 divided by the
Average Price of the HII Common Stock.
"Trading Day" means a day on which the New York Stock
Exchange (the "NYSE") is open for trading.
(d) NorAm Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, no share of NorAm Common Stock, the
holder of which shall not have voted shares in favor of the NorAm
Merger and shall have properly complied with the provisions of Section
262 of the DGCL as to appraisal rights (a "NorAm Dissenting Share"),
shall be deemed converted into and to represent the right to receive
Merger Consideration hereunder; and the holders of NorAm Dissenting
Shares, if any, shall be entitled to payment, solely from the NorAm
Merger Surviving Corporation, of the appraised value of such NorAm
Dissenting Shares to the extent permitted by and in accordance with
the provisions of Section 262 of the DGCL; provided, however, that (i)
if any holder of NorAm Dissenting Shares shall, under the
circumstances permitted by the DGCL, subsequently deliver a written
withdrawal of his or her demand for appraisal of such NorAm Dissenting
Shares, (ii) if any holder fails to establish his or her entitlement
to rights to payment as provided in such Section 262 or (iii) if
neither any holder of NorAm Dissenting Shares nor the NorAm Merger
Surviving Corporation has filed a petition demanding a determination
of the value of all NorAm Dissenting Shares within the time provided
in such Section 262, such holder or holders (as the case may be) shall
forfeit such right to payment for such NorAm Dissenting Shares
pursuant to such Section 262 and each such NorAm Dissenting Share
shall thereupon be treated as a Non-Election Share for purposes of
Section 2.4. NorAm shall give HII (i) prompt notice of any written
demands for appraisal of any NorAm Common Stock, attempted withdrawals
of such demands and any other instruments received by NorAm relating
to stockholders' rights of appraisal and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for
appraisal under the DGCL. NorAm shall not, except with the prior
written consent of HII, voluntarily make any payment with respect to
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<PAGE> 18
any demands for appraisals of NorAm Common Stock, offer to settle or
settle any such demands or approve any withdrawal of any such demands.
(e) Treatment of NorAm Stock Options.
(i) Each holder of an unexpired employee stock
option to purchase NorAm Common Stock, along with any tandem
stock appreciation right, that is outstanding at the Effective
Time (a "NorAm Stock Option"), whether or not then
exercisable, shall be entitled within the NorAm Stock Option
Election Period (as hereinafter defined) to elect to either
(x) have all or any portion of his or her NorAm Stock Options
canceled and "cashed out" pursuant to Section 2.2(e)(ii) or
(y) have all or any portion of his or her NorAm Stock Options
assumed by HL&P as provided in Section 5.11. Elections to be
made by holders of NorAm Stock Options shall be made on a form
mutually agreed upon by NorAm and HL&P (a "NorAm Stock Option
Election Form") to be provided by NorAm to such holders on the
day on which HL&P publicly announces the Closing Date (which
date shall be no less than five Trading Days prior to the
Closing Date). To be effective, a NorAm Stock Option Election
Form must be properly completed, signed and submitted to HL&P
or its designated agent by 5:00 p.m. on the business day
immediately prior to the Closing Date. A holder of NorAm Stock
Options who does not make a proper election shall be deemed to
have elected to have his or her NorAm Stock Options "cashed
out" pursuant to Section 2.2(e)(ii). For purposes of this
Agreement, the "NorAm Stock Option Election Period" means the
period of time beginning on the day on which HL&P publicly
announces the Closing Date and ending at 5:00 p.m. on the
business day immediately prior to the Closing Date.
(ii) If a holder of NorAm Stock Options elects to
be "cashed out" pursuant to this Section or does not properly
make an election in accordance with Section 2.2(e)(i), the
NorAm Stock Options of such holder shall be canceled by NorAm
immediately prior to the Effective Time, and each such holder
of a canceled NorAm Stock Option shall be entitled to receive,
as soon as practicable after the Effective Time, in
consideration for the cancellation of such NorAm Stock Option
an amount in cash equal to the product (the "Spread") of (x)
the total number of shares of NorAm Common Stock subject to
such NorAm Stock Option and (y) the excess, if any, of (1) the
Cash Consideration over (2) the exercise price per share of
the NorAm Common Stock previously subject to such NorAm Stock
Option.
(f) NorAm Convertible Debentures. HL&P shall agree to
assume all of NorAm's obligations under NorAm's 6% Convertible
Subordinated Debentures due 2012 (the "NorAm Convertible Debentures"),
including, without limitation, the conversion provisions of the NorAm
Convertible Debentures. Following the Effective Time, each
outstanding NorAm Convertible Debenture will be convertible into the
amount of Stock Consideration (and cash in lieu of fractional shares
of HL&P Common Stock) and Cash Consideration which the holder thereof
would have had the right to receive after the Effective Time if such
NorAm
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<PAGE> 19
Convertible Debenture had been converted immediately prior to the
Effective Time and the holder thereof had made the Stock Election and
received the Stock Consideration with respect to 50% of the shares of
NorAm Common Stock issuable upon such conversion of the holder's NorAm
Convertible Debentures and made the Cash Election and received the Cash
Consideration with respect to the remaining 50% of such NorAm Common
Stock.
(g) NorAm Convertible Junior Debentures. HL&P shall
agree to assume all of NorAm's obligations under NorAm's 6 1/4%
Convertible Junior Subordinated Debentures (the "NorAm Convertible
Junior Debentures"), including, without limitation, the conversion
provisions of the NorAm Convertible Junior Debentures. Following the
Effective Time, each outstanding NorAm Convertible Junior Debenture
will be convertible into the amount of Stock Consideration (and cash
in lieu of fractional shares of HL&P Common Stock) and Cash
Consideration which the holder thereof would have had the right to
receive after the Effective Time if such NorAm Convertible Junior
Debenture had been converted immediately prior to the Effective Time
and the holder thereof had made the Stock Election and received the
Stock Consideration with respect to 50% of the shares of NorAm Common
Stock issuable upon such conversion of the holder's NorAm Convertible
Junior Debentures and made the Cash Election and received the Cash
Consideration with respect to the remaining 50% of such NorAm Common
Stock.
2.3 Exchange of Certificates.
(a) Exchange of HII Common Stock. Following the HII/HL&P
Merger Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of HII Common Stock may,
but shall not be required to, surrender the same to HL&P for
cancellation or transfer, and each such holder or transferee will be
entitled to receive certificates representing the same number of
shares of HL&P Common Stock as the shares of HII Common Stock
previously represented by the stock certificates surrendered. Until
so surrendered or presented for transfer, each outstanding
certificate which, prior to the HII/HL&P Merger Effective Time,
represented HII Common Stock shall be deemed and treated for all
purposes to represent the ownership of the same number of shares of
HL&P Common Stock as though such surrender or transfer and exchange
had taken place. The stock transfer books for the HII Common Stock
shall be deemed to be closed at the HII/HL&P Merger Effective Time and
no transfer of outstanding shares of HII Common Stock shall thereafter
be made on such books, but when certificates that formerly represented
shares of HII Common Stock are duly presented to HII/HL&P Merger
Surviving Corporation or its transfer agent for exchange or transfer,
HII/HL&P Merger Surviving Corporation will cause to be issued in
respect thereof certificates representing an equal number of shares of
HL&P Common Stock.
(b) Exchange Agent. As of the Effective Time, HL&P shall
deposit with such bank or trust company designated by HL&P and
reasonably acceptable to NorAm (the "Exchange Agent"), for the benefit
of the holders of shares of NorAm Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, cash
equal to the
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<PAGE> 20
total aggregate Cash Consideration and certificates representing the
shares of HL&P Common Stock (such shares of HL&P Common Stock, together
with any dividends or distributions with respect thereto and the
total aggregate Cash Consideration, being hereinafter referred to as
the "Exchange Fund") issuable pursuant to Section 2.2 in exchange for
outstanding shares of NorAm Common Stock. The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Stock Consideration
and the Cash Consideration contemplated to be issued pursuant to
Section 2.2 out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose.
(c) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates which,
immediately prior to the Effective Time, represented outstanding
shares of NorAm Common Stock (the "Certificates"), which holder's
shares of NorAm Common Stock were converted into the right to receive
the Merger Consideration: (i) a letter of transmittal (which shall
specify that delivery shall be effected and risk of loss and title to
the Certificates shall pass only upon delivery of the Certificates to
the Exchange Agent, and shall be in such form and have such other
provisions as HL&P may reasonably specify); and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by HL&P, together with such letter of transmittal,
duly executed, and any other required documents, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of HL&P Common
Stock which such holder has the right to receive pursuant to the
provisions of this Article II and cash in lieu of fractional shares of
HL&P Common Stock as contemplated by Section 2.3(f) if such holder is
entitled to receive the Stock Consideration, or cash, in an amount
equal to the Cash Consideration, if such holder is entitled to receive
the Cash Consideration, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of
NorAm Common Stock which is not registered in the transfer records of
NorAm, a certificate representing the appropriate number of shares of
HL&P Common Stock may be issued to a transferee if the Certificate
representing such NorAm Common Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section
2.3, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the
Merger Consideration. The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to the HL&P
Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of persons entitled
thereto.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to HL&P Common Stock
declared or made after the Effective Time with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the right to receive shares of HL&P Common
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<PAGE> 21
Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.3(f)
until the holder of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder thereof, without
interest, if such holder is entitled to receive the Stock
Consideration: (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of HL&P Common Stock to
which such holder is entitled pursuant to Section 2.3(f) and the
amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole shares
of HL&P Common Stock; and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of
HL&P Common Stock.
(e) No Further Ownership Rights in NorAm Common Stock.
All shares of HL&P Common Stock issued upon the surrender for exchange
of shares of NorAm Common Stock in accordance with the terms hereof
(including any cash paid pursuant to Section 2.3(f)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to
such shares of NorAm Common Stock, subject, however, to the NorAm
Merger Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time
that may have been declared or made by NorAm on such shares of NorAm
Common Stock in accordance with the terms of this Agreement or prior
to the date hereof and which remain unpaid at the Effective Time, and
after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the NorAm Merger Surviving
Corporation of the shares of NorAm Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the NorAm Merger Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(f) No Fractional Shares. No certificates or scrip
representing fractional shares of HL&P Common Stock shall be issued
upon the surrender for exchange of Certificates pursuant to this
Article II, and, except as provided in this Section 2.3(f), no
dividend or other distribution, stock split or interest shall relate
to any such fractional security, and such fractional interests shall
not entitle the owner thereof to vote or to any rights of a security
holder of HL&P. In lieu of any fractional security, each holder of
shares of NorAm Common Stock who would otherwise have been entitled to
a fraction of a share of HL&P Common Stock upon surrender of
Certificates for exchange pursuant to this Article II will be paid an
amount in cash (without interest) equal to such holder's proportionate
interest in the sum of (i) the net proceeds from the sale or sales by
the Exchange Agent in accordance with the provisions of this Section
2.3(f), on behalf of all such holders, of the aggregate fractional
shares of HL&P Common Stock issued pursuant to this Article II and
(ii) the aggregate dividends or other distributions that are payable
with respect to such shares of HL&P Common Stock pursuant to Section
2.3(d) (such dividends and distributions being herein called the
"Fractional Dividends"). As soon as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (x)
the number of whole shares of
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<PAGE> 22
HL&P Common Stock delivered to the Exchange Agent by HL&P pursuant to
Section 2.3(b) over (y) the aggregate number of whole shares of HL&P
Common Stock to be distributed to the former holders of NorAm Common
Stock pursuant to Section 2.3(c) (such excess being herein called the
"Excess Securities") and the Exchange Agent, as agent for the former
holders of NorAm Common Stock, shall sell the Excess Securities at the
prevailing prices on the NYSE. The sale of the Excess Securities by
the Exchange Agent shall be executed on the NYSE through one or more
member firms of the NYSE and shall be executed in round lots to the
extent practicable. HL&P shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such
sale of Excess Securities. Until the net proceeds of such sale of
Excess Securities and the Fractional Dividends have been distributed to
the former stockholders of NorAm, the Exchange Agent will hold such
proceeds and dividends in trust for such former stockholders. As soon
as practicable after the determination of the amount of cash to be paid
to former stockholders of NorAm in lieu of any fractional interests,
the Exchange Agent shall make available in accordance with this
Agreement such amounts to such former stockholders.
(g) Termination of Exchange Agent. Any portion of the
Exchange Fund and any cash in lieu of fractional shares of HL&P Common
Stock made available to the Exchange Agent that remain undistributed
to the former stockholders of NorAm for one year after the Effective
Time shall be delivered to HL&P, upon demand, which shall thereafter
act as the Exchange Agent, and any former stockholders of NorAm who
have not theretofore complied with this Article II shall thereafter
look only as a general creditor to HL&P for payment of their claim for
the Merger Consideration and any cash in lieu of fractional shares of
HL&P Common Stock and any dividends or distributions with respect to
HL&P Common Stock if such holder is entitled to receive the Stock
Consideration.
(h) No Liability. None of HII, HL&P, Merger Sub or NorAm
shall be liable to any holder of shares of HII Common Stock, NorAm
Common Stock or HL&P Common Stock, as the case may be, for such shares
(or dividends or distributions with respect thereto), cash in lieu of
fractional shares of HL&P Common Stock, Stock Consideration or Cash
Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts
remaining unclaimed by holders of any such shares six years after the
Effective Time (or such earlier date immediately prior to the time at
which such amounts would otherwise escheat to or become property of
any governmental entity) shall, to the extent permitted by applicable
law, become the property of HL&P free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
2.4 Allocation of Merger Consideration; Election
Procedures.
(a) Allocation. Notwithstanding anything in this
Agreement to the contrary, the number of shares of NorAm Common Stock
to be converted into the right to receive the Cash Consideration in
the NorAm Merger (the "Cash Election Number") shall be equal to
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<PAGE> 23
(i) 50% of the number of shares of NorAm Common Stock issued and
outstanding immediately prior to the Effective Time (ignoring for this
purpose any NorAm Common Stock held as treasury shares and canceled
pursuant to Section 2.2(b)) less (ii) the sum of (A) the number of
NorAm Dissenting Shares, if any, which are not to be treated as
Non-Election Shares (as defined in Section 2.4(b)) pursuant to Section
2.2(d) determined as of the Effective Time, (B) the number of shares of
NorAm Common Stock held by HL&P, Merger Sub or any other wholly owned
Subsidiary of HL&P or NorAm to be canceled in accordance with Section
2.2(b) and (C) the number of shares of NorAm Common Stock to be
exchanged for cash pursuant to Section 2.3(f). The number of shares of
NorAm Common Stock to be converted into the right to receive the Stock
Consideration in the NorAm Merger (the "Stock Election Number") shall
be equal to the number of shares of NorAm Common Stock issued and
outstanding immediately prior to the Effective Time (ignoring for this
purpose any NorAm Common Stock held as treasury shares and canceled
pursuant to Section 2.2(b)) less the sum of (i) the Cash Election
Number, (ii) the number of NorAm Dissenting Shares, if any, which are
not to be treated as Non-Election Shares pursuant to Section 2.2(d)
determined as of the Effective Time, (iii) the number of shares of
NorAm Common Stock held by HL&P, Merger Sub or any other wholly owned
Subsidiary of HL&P or NorAm to be canceled in accordance with Section
2.2(b) and (iv) the number of shares of NorAm Common Stock to be
exchanged for cash pursuant to Section 2.3(f). Notwithstanding anything
to the contrary herein, HII shall have the option, in its sole
discretion, to change the Cash Election Number and the Stock Election
Number to more closely follow the actual elections of the NorAm
stockholders pursuant to this Section 2.4, so long as such modification
to the Cash Election Number and the Stock Election Number does not
prevent the conditions set forth in Sections 6.2(e) and 6.3(c) from
being satisfied. The parties hereto acknowledge that (i) the number of
NorAm Dissenting Shares, if any, which are not to be treated as
Non-Election Shares pursuant to Section 2.2(d) determined as of the
Effective Time, (ii) the number of shares of NorAm Common Stock held by
HL&P, Merger Sub or any other wholly owned Subsidiary of HL&P or NorAm
to be canceled in accordance with Section 2.2(b) and (iii) the number
of shares of NorAm Common Stock to be exchanged for cash pursuant to
Section 2.3(f) are all treated under the published guidelines of the
IRS as receiving cash in the mergers contemplated hereby.
(b) Election. Subject to allocation and proration in
accordance with the provisions of this Section 2.4, each record holder
of shares of NorAm Common Stock (other than NorAm Dissenting Shares,
if any, which are not to be treated as Non-Election Shares pursuant to
Section 2.2(d) and shares to be canceled in accordance with Section
2.2(b)) issued and outstanding immediately prior to the Election
Deadline (as defined in Section 2.4(c)) shall be entitled to elect to
receive in respect of each such share (i) the Cash Consideration (a
"Cash Election") or (ii) the Stock Consideration (a "Stock Election")
or to indicate that such record holder has no preference as to the
receipt of the Cash Consideration or the Stock Consideration for such
shares (a "Non-Election"). Shares of NorAm Common Stock in respect of
which a Non-Election is made (including shares in respect of which
such an election is deemed to have been made pursuant to this Section
2.4 and Section 2.2(d)) (collectively, "Non-Election Shares") shall be
deemed by HL&P, in its sole and absolute
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<PAGE> 24
discretion, to be shares in respect of which Cash Elections or Stock
Elections have been made.
(c) Procedure for Elections. Elections pursuant to
Section 2.4(b) shall be made on a form to be mutually agreed upon by
NorAm and HL&P (a "Form of Election") to be provided by the Exchange
Agent for that purpose to holders of record of NorAm Common Stock,
together with appropriate transmittal materials, at the time of
mailing to holders of record of NorAm Common Stock of the Joint Proxy
Statement (as defined in Section 3.1(c)(iii)). Elections shall be
made by mailing to the Exchange Agent a duly completed Form of
Election. To be effective, a Form of Election must be (i) properly
completed, signed and submitted to the Exchange Agent at its
designated office by 5:00 p.m. on the business day that is the Trading
Day immediately prior to the Closing Date (which date shall be
publicly announced by HL&P as soon as practicable but in no event less
than five Trading Days prior to the Closing Date) (the "Election
Deadline") and (ii) accompanied by the Certificates as to which the
election is being made (or by an appropriate guarantee of delivery of
such Certificates by a commercial bank or trust company in the United
States or a member of a registered national security exchange or of
the National Association of Securities Dealers, Inc., provided such
Certificates are in fact delivered to the Exchange Agent within eight
Trading Days after the date of execution of such guarantee of
delivery). NorAm shall use its best efforts to make a Form of
Election available to all persons who become holders of record of
NorAm Common Stock between the date of mailing described in the first
sentence of this Section 2.4(c) and the Election Deadline. HL&P shall
determine, in its sole and absolute discretion, which authority it may
delegate in whole or in part to the Exchange Agent, whether Forms of
Election have been properly completed, signed and submitted or
revoked. The decision of HL&P (or the Exchange Agent, as the case may
be) in such matters shall be conclusive and binding. Neither HL&P nor
the Exchange Agent will be under any obligation to notify any person
of any defect in a Form of Election submitted to the Exchange Agent.
A holder of shares of NorAm Common Stock that does not submit an
effective Form of Election prior to the Election Deadline shall be
deemed to have made a Non-Election.
(d) Revocation of Election; Return of Certificates. An
election may be revoked, but only by written notice received by the
Exchange Agent prior to the Election Deadline. Any certificate(s)
representing shares of NorAm Common Stock which have been submitted to
the Exchange Agent in connection with an election shall be returned
without charge to the holder thereof in the event such election is
revoked as aforesaid and such holder requests in writing the return of
such certificate(s). Upon any such revocation, unless a duly
completed Form of Election is thereafter submitted in accordance with
Section 2.4(c), such shares shall be Non-Election Shares. In the
event that this Agreement is terminated pursuant to the provisions
hereof and any shares of NorAm Common Stock have been transmitted to
the Exchange Agent pursuant to the provisions hereof, such shares
shall promptly be returned without charge to the person submitting the
same.
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<PAGE> 25
(e) Proration of Cash Election Shares. In the event that
the aggregate number of shares in respect of which Cash Elections have
been made and, in the case of Non-Election Shares, are deemed to have
been made (collectively, the "Cash Election Shares") exceeds the Cash
Election Number, all shares of NorAm Common Stock in respect of which
Stock Elections have been made and all Non-Election Shares in respect
of which Stock Elections are deemed to have been made (collectively,
the "Stock Election Shares") shall be converted into the right to
receive the Stock Consideration, and the Cash Election Shares shall be
converted into the right to receive the Stock Consideration or the
Cash Consideration in the following manner:
(i) Cash Election Shares shall be deemed to be
Stock Election Shares, on a pro-rata basis for each record
holder of NorAm Common Stock with respect to those shares of
NorAm Common Stock, if any, of such record holder which are
Cash Election Shares, so that the number of Cash Election
Shares so deemed to be Stock Election Shares, when added to
the other Stock Election Shares, shall equal as closely as
practicable the Stock Election Number, and all such Cash
Election Shares so deemed to be Stock Election Shares shall be
converted into the right to receive the Stock Consideration
(and cash in lieu of fractional interests in accordance with
Section 2.3(f)); and
(ii) any remaining Cash Election Shares shall be
converted into the right to receive the Cash Consideration.
(f) Proration of Stock Election Shares. In the event
that the aggregate number of Stock Election Shares exceeds the Stock
Election Number, all Cash Election Shares shall be converted into the
right to receive the Cash Consideration, and all Stock Election Shares
shall be converted into the right to receive the Stock Consideration
or the Cash Consideration in the following manner:
(i) Stock Election Shares shall be deemed to be
Cash Election Shares, on a pro-rata basis for each record
holder of NorAm Common Stock with respect to those shares of
NorAm Common Stock, if any, of such record holder which are
Stock Election Shares, so that the number of Stock Election
Shares so deemed to be Cash Election Shares, when added to the
other Cash Election Shares, shall equal as closely as
practicable the Cash Election Number, and all such Stock
Election Shares so deemed to be Cash Election Shares shall be
converted into the right to receive the Cash Consideration;
and
(ii) the remaining Stock Election Shares shall be
converted into the right to receive the Stock Consideration
(and cash in lieu of fractional interests in accordance with
Section 2.3(f)).
(g) No Proration. In the event that neither paragraph
(e) nor paragraph (f) of this Section 2.4 is applicable, all Cash
Election Shares shall be converted into the right to receive
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<PAGE> 26
the Cash Consideration and all Stock Election Shares shall be converted
into the right to receive the Stock Consideration (and cash in lieu
of fractional interests in accordance with Section 2.3(f)).
(h) Computations. The Exchange Agent, in consultation
with HL&P, shall make all computations to give effect to this Section
2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of NorAm. NorAm
represents and warrants to HII, HL&P and Merger Sub as follows, except as set
forth in the disclosure schedule dated as of the date hereof and signed by an
authorized officer of NorAm and delivered to HII by NorAm on or prior to the
date hereof (the "NorAm Disclosure Schedule"), each of which exceptions shall
specifically identify the relevant Section hereof to which it relates:
(a) Organization, Standing and Power. Each of NorAm and
its Significant Subsidiaries (as hereinafter defined) is a corporation
or partnership duly organized, validly existing and in good standing
under the laws of its state of incorporation or organization, has all
requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in
which the business it is conducting, or the operation, ownership or
leasing of its properties, makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify would not
have a Material Adverse Effect (as hereinafter defined). NorAm has
heretofore delivered to HII complete and correct copies of its
Restated Certificate of Incorporation and Bylaws. All Significant
Subsidiaries of NorAm and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.1(a) of the
NorAm Disclosure Schedule. As used in this Agreement: (i) a
"Significant Subsidiary" means any Subsidiary of NorAm, HII or HL&P,
as the case may be, that would constitute a Significant Subsidiary of
such party within the meaning of Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission (the "SEC"); and (ii) a "Material
Adverse Effect" or "Material Adverse Change" shall mean, in respect of
NorAm or HII, as the case may be, any effect or change that is or, as
far as can be reasonably determined, may be, materially adverse to the
business, operations, assets, prospects, condition (financial or
otherwise) or results of operations of such party and its Subsidiaries
taken as a whole.
(b) Capital Structure. As of the date hereof, the
authorized capital stock of NorAm consists of 250,000,000 shares of
NorAm Common Stock and 10,000,000 shares of preferred stock, par value
$0.10 per share (the "NorAm Preferred Stock"). At the close of
business on July 31, 1996: (i) 137,067,805 shares of NorAm Common
Stock and no shares of NorAm Preferred Stock were issued and
outstanding, and 4,906,322 shares of NorAm
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<PAGE> 27
Common Stock and no shares of NorAm Preferred Stock were reserved for
issuance pursuant to NorAm's:
Incentive Equity Plan . . . . . . . . . . . . . . 3,035,010
1983 Non-Qualified Stock Option Plan . . . . . . . 11,000
Diversified Energies Plan . . . . . . . . . . . . 57,229
Restricted Stock Plan for Non-Employee Directors . 79,742
Employee Stock Purchase Plan . . . . . . . . . . . 1,723,341
(collectively, the "NorAm Stock Plans"); (ii) no shares of NorAm
Common Stock were held by NorAm in its treasury; and (iii) except for
the NorAm Convertible Debentures and the NorAm Convertible Junior
Debentures, no bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into securities having the right to
vote) on any matters on which NorAm stockholders may vote ("Voting
Debt") were issued or outstanding. All outstanding shares of NorAm
Common Stock are validly issued, fully paid and nonassessable and are
not subject to preemptive rights. All outstanding shares of capital
stock of the Subsidiaries of NorAm are owned by NorAm, or a direct or
indirect wholly owned Subsidiary of NorAm, free and clear of all
liens, charges, encumbrances, claims and options of any nature.
Except as set forth above and except for changes since July 31, 1996
resulting from the exercise of employee stock options granted pursuant
to, or from issuances or purchases under, the NorAm Stock Plans,
NorAm's Direct Stock Purchase and Dividend Reinvestment Plans, NorAm's
Annual Incentive Plan, the Restricted Stock Agreement between Milton
Honea and NorAm dated January 31, 1996, the conversion of the NorAm
Convertible Debentures or the NorAm Convertible Junior Debentures or
as contemplated by this Agreement, there are outstanding: (A) no
shares of capital stock, Voting Debt or other voting securities of
NorAm; (B) no securities of NorAm or any Subsidiary of NorAm
convertible into or exchangeable for shares of capital stock, Voting
Debt or other voting securities of NorAm or any Subsidiary of NorAm;
and (C) no options, warrants, calls, rights (including preemptive
rights), commitments or agreements to which NorAm or any Subsidiary of
NorAm is a party or by which it is bound in any case obligating NorAm
or any Subsidiary of NorAm to issue, deliver, sell, purchase, redeem
or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Voting
Debt or other voting securities of NorAm or of any Subsidiary of
NorAm, or obligating NorAm or any Subsidiary of NorAm to grant, extend
or enter into any such option, warrant, call, right, commitment or
agreement. There are not as of the date hereof and there will not be
at the NorAm Merger Effective Time any stockholder agreements, voting
trusts or other agreements or understandings to which NorAm is a party
or by which it is bound relating to the voting of any shares of the
capital stock of NorAm that will limit in any way the solicitation of
proxies by or on behalf of NorAm from, or the casting of votes by, the
stockholders of NorAm with respect to the NorAm Merger. There are no
restrictions on NorAm to vote the stock of any of its Subsidiaries.
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<PAGE> 28
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of NorAm has approved
the NorAm Merger and this Agreement, by the unanimous vote of
all of the directors with no negative vote, and declared the
NorAm Merger and this Agreement to be in the best interests of
the stockholders of NorAm. The directors have advised NorAm,
HII and HL&P that they intend to vote or cause to be voted all
of the shares of NorAm Common Stock beneficially owned by them
and their affiliates in favor of approval of the NorAm Merger
and this Agreement. NorAm has all requisite corporate power
and authority to enter into this Agreement and, subject, with
respect to consummation of the NorAm Merger, to approval of
this Agreement and the NorAm Merger by the stockholders of
NorAm in accordance with the DGCL, to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of NorAm, subject, with respect to
consummation of the NorAm Merger, to approval of this Agreement
and the NorAm Merger by the stockholders of NorAm in accordance
with the DGCL. This Agreement has been duly executed and
delivered by NorAm and, subject, with respect to consummation
of the NorAm Merger, to approval of this Agreement and the
NorAm Merger by the stockholders of NorAm in accordance with
the DGCL, and assuming this Agreement constitutes the valid and
binding obligation of HII, HL&P and Merger Sub, constitutes a
valid and binding obligation of NorAm enforceable in accordance
with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general principles of equity.
(ii) The execution and delivery of this Agreement
does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof
will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of NorAm or any of its Subsidiaries under, any
provision of (A) the Restated Certificate of Incorporation or
Bylaws of NorAm or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, (B)
subject to obtaining the third-party consents set forth in
Section 3.1(c)(ii) of the NorAm Disclosure Schedule (the
"NorAm Required Consents"), any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
applicable to NorAm or any of its Subsidiaries or (C) assuming
the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.1(c)(iii) are duly
and timely obtained or made and the approval of the NorAm
Merger and this Agreement by the stockholders of NorAm in
accordance with the DGCL has been obtained, any judgment,
order, decree, statute, law, ordinance, rule
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<PAGE> 29
or regulation applicable to NorAm or any of its Subsidiaries or
any of their respective properties or assets, other than, in
the case of clause (B) or (C), any such conflicts,
violations, defaults, rights, liens, security interests,
charges or encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect on NorAm, materially
impair the ability of NorAm to perform its obligations
hereunder or prevent the consummation of any of the
transactions contemplated hereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or
permit from any court, governmental, regulatory or
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to NorAm
or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by NorAm or the consummation by
NorAm of the transactions contemplated hereby, as to which the
failure to obtain or make would have a Material Adverse Effect,
except for: (A) the filing of a premerger notification report
by NorAm under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the expiration or
termination of the applicable waiting period with respect
thereto; (B) the filing with the SEC of (x) a joint proxy
statement in preliminary and definitive form relating to the
meeting of NorAm's stockholders to be held in connection with
the NorAm Merger and the meeting of HII's shareholders to be
held in connection with the Mergers (the "Joint Proxy
Statement") and (y) such reports under Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and such other compliance with the Exchange Act and the
rules and regulations thereunder, as may be required in
connection with this Agreement and the transactions
contemplated hereby; (C) the filing of the NorAm Merger
Certificate of Merger with the Secretary of State of the State
of Delaware; (D) filings with, and the approval of, or notices
to, the Arkansas Public Service Commission, the Louisiana
Public Service Commission, the Minnesota Public Utilities
Commission, the Oklahoma Corporation Commission and the
Mississippi Public Service Commission; (E) filings with, and
the approval of, or notices to, the Federal Energy Regulatory
Commission (the "FERC") in connection with the transfer of
NorAm Energy Services, Inc.'s power marketing certificate; (F)
such filings and approvals as are set forth on Section
3.1(c)(iii) of the NorAm Disclosure Schedule in connection with
the transfer of NorAm's municipal franchises; (G) such filings
and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws or environmental laws;
and (H) such filings and approvals as may be required by any
foreign premerger notification, securities, corporate or other
law, rule or regulation.
(d) SEC Documents. NorAm has made available to HL&P a
true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by NorAm with the SEC
since January 1, 1994 and prior to the date of this Agreement (the
"NorAm SEC Documents") which are all the documents (other than
preliminary material)
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<PAGE> 30
that NorAm was required to file with the SEC since such date. As of
their respective dates, the NorAm SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to
such NorAm SEC Documents, and none of the NorAm SEC Documents contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of NorAm included in the NorAm
SEC Documents complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of
the SEC) and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal,
recurring adjustments, none of which will be material) the consolidated
financial position of NorAm and its consolidated Subsidiaries as of
their respective dates and the consolidated results of operations and
the consolidated cash flows of NorAm and its consolidated Subsidiaries
for the periods presented therein. Except as disclosed in the NorAm
SEC Documents, there are no agreements, arrangements or understandings
between NorAm and any party who is at the date of this Agreement or was
at any time prior to the date hereof but after January 1, 1994 an
Affiliate (as defined in Section 4.1(k)) of NorAm that are required to
be disclosed in the NorAm SEC Documents.
(e) Information Supplied. None of the information
supplied or to be supplied by NorAm for inclusion or incorporation by
reference in the Registration Statement on Form S-4 to be filed with
the SEC by HL&P in connection with the issuance of shares of HL&P
Common Stock in the Mergers (the "S-4") will, at the time the S-4
becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information
supplied or to be supplied by NorAm and included or incorporated by
reference in the Joint Proxy Statement will, at the date mailed to
stockholders of NorAm and the shareholders of HII or at the time of
the meeting of such stockholders or shareholders to be held in
connection with the Mergers or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any
event with respect to NorAm or any of its Subsidiaries, or with
respect to other information supplied by NorAm for inclusion in the
Joint Proxy Statement or the S-4, shall occur which is required to be
described in an amendment of, or a supplement to, the Joint Proxy
Statement or the S-4, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of NorAm. The Joint
Proxy Statement, insofar as it relates to NorAm or its Subsidiaries or
other information supplied by NorAm for inclusion
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<PAGE> 31
therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations
thereunder.
(f) Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the financial statements included in,
the NorAm SEC Documents, or except as contemplated by this Agreement,
since December 31, 1995, there has not been: (i) any declaration,
setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of NorAm's
capital stock, except for regular quarterly cash dividends of $.07 per
share on NorAm Common Stock (or a pro rata amount for any dividend
less than a full quarter) with usual record and payment dates for such
dividends; (ii) any amendment of any material term of any outstanding
equity security of NorAm or any Subsidiary of NorAm; (iii) any
repurchase, redemption or other acquisition by NorAm or any Subsidiary
of NorAm of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, NorAm or any
Subsidiary of NorAm, except as contemplated by any NorAm Benefit Plans
(as defined in Section 3.1(l)) and except for the exchange of NorAm's
Series A Preferred Stock for NorAm Convertible Debentures; (iv) any
material change in any method of accounting or accounting practice by
NorAm or any Significant Subsidiary of NorAm; or (v) any other
transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the
ordinary course of business) that could have a Material Adverse Effect
on NorAm, except for general economic changes and changes that may
affect the industries of NorAm or any of its Subsidiaries generally.
(g) No Undisclosed Material Liabilities. Except as
disclosed in the NorAm SEC Documents, as of the date hereof, there are
no liabilities of NorAm or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are reasonably likely to have a
Material Adverse Effect on NorAm, other than: (i) liabilities
adequately provided for on the balance sheet of NorAm dated as of
March 31, 1996 (including the notes thereto) contained in NorAm's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
and (ii) liabilities under this Agreement.
(h) No Default. Neither NorAm nor any of its
Subsidiaries is in default or violation (and no event has occurred
which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) their
respective charter, bylaws or respective formation documentation, (ii)
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which NorAm or any of its Subsidiaries is
now a party or by which NorAm or any of its Subsidiaries or any of
their respective properties or assets may be bound (except for the
requirement under certain of such instruments to file supplemental
indentures as a result of the transactions contemplated hereby) or
(iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to NorAm or any of its Subsidiaries, except in the case of
(ii) and (iii) for defaults or violations which in the aggregate would
not have a Material Adverse Effect on NorAm.
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<PAGE> 32
(i) Compliance with Applicable Laws. NorAm and its
Subsidiaries hold all permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the
"NorAm Permits"), except where the failure so to hold would not have a
Material Adverse Effect on NorAm. NorAm and its Subsidiaries are in
compliance with the terms of the NorAm Permits, except where the
failure so to comply would not have a Material Adverse Effect on
NorAm. Except as disclosed in the NorAm SEC Documents, the businesses
of NorAm and its Subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity, except
for possible violations which would not have a Material Adverse Effect
on NorAm. As of the date of this Agreement, neither NorAm nor any of
its Subsidiaries has been notified of any pending investigation or
review by any Governmental Entity or, to the best knowledge of NorAm,
no investigation or review by any Governmental Entity with respect to
NorAm or any of its Subsidiaries is threatened, other than those the
outcome of which would not have a Material Adverse Effect on NorAm.
(j) Litigation. Except as disclosed in the NorAm SEC
Documents, there is no suit, action or proceeding pending, or, to the
best knowledge of NorAm, threatened against or affecting NorAm or any
Subsidiary of NorAm ("NorAm Litigation"), and NorAm and its
Subsidiaries have no knowledge of any facts that are likely to give
rise to any NorAm Litigation, that (in any case) is reasonably likely
to have a Material Adverse Effect on NorAm, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against NorAm or any Subsidiary of NorAm
("NorAm Order") that is reasonably likely to have a Material Adverse
Effect on NorAm or its ability to consummate the transactions
contemplated by this Agreement.
(k) Taxes. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on NorAm:
(i) Each of NorAm, each of its Subsidiaries and
any affiliated, combined or unitary group of which any such
corporation is or was a member has (A) timely (taking into
account any extensions) filed all federal income tax and all
other material federal and all material state, local and
foreign returns, declarations, reports, estimates, information
returns and statements ("Returns") required to be filed or
sent by or with respect to it in respect of any Taxes (as
hereinafter defined), (B) timely paid all Taxes that are due
and payable (except for audit adjustments not material in the
aggregate or to the extent that liability therefor is reserved
for in NorAm's most recent audited financial statements) for
which NorAm or any of its Subsidiaries may be liable, (C)
established reserves that are adequate for the payment of all
Taxes not yet due and payable with respect to the results of
operations of NorAm and its Subsidiaries through the date
hereof and (D) to the knowledge of NorAm or any Subsidiary of
NorAm, complied in all material respects with all applicable
laws, rules and regulations relating to the payment and
withholding of Taxes and has in all material respects timely
withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so
withheld and paid over.
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<PAGE> 33
(ii) Section 3.1(k)(ii) of the NorAm Disclosure
Schedule sets forth the last taxable period through which the
federal income tax Returns of NorAm and any of its
Subsidiaries have been examined by the Internal Revenue
Service ("IRS") or otherwise closed. Except to the extent
being contested in good faith, all material deficiencies
asserted as a result of such examinations and any examination
by any applicable state or local taxing authority have been
paid, fully settled or adequately provided for in NorAm's most
recent audited financial statements. Except as adequately
provided for in the NorAm SEC Documents, no material federal,
state or local income or franchise tax audits or other
administrative proceedings or court proceedings are presently
pending with regard to any federal, state or local income or
franchise Taxes for which NorAm or any of its Subsidiaries
would be liable, and no material deficiency for any such
income or franchise Taxes has been proposed, asserted or
assessed pursuant to such examination against NorAm or any of
its Subsidiaries by any federal, state or local taxing
authority with respect to any period.
(iii) Neither NorAm nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on
the Closing Date will execute or enter into) with the IRS or
any taxing authority (A) any agreement or other document
extending or having the effect of extending the period for
assessments or collection of any federal, state or local
income or franchise Taxes for which NorAm or any of its
Subsidiaries would be liable or (B) a closing agreement
pursuant to Section 7121 of the Code, or any predecessor
provision thereof or any similar provision of state or local
income tax law that relates to the assets or operations of
NorAm or any of its Subsidiaries.
(iv) Neither NorAm nor any of its Subsidiaries has
made an election under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by NorAm or any of its
Subsidiaries.
(v) Except as set forth in the NorAm SEC
Documents, neither NorAm nor any of its Subsidiaries is a
party to, is bound by or has any obligation under any tax
sharing agreement or similar agreement or arrangement.
For purposes of this Agreement, "Taxes" shall mean any
federal, state, county, local or foreign taxes, charges, fees, levies
or other assessments, including, without limitation, all net income,
gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and
includes any interest and penalties (civil or criminal) on or
additions to any such taxes, charges, fees, levies or other
assessments, and any expenses incurred in connection with the
determination, settlement or litigation of any liability for any of
the foregoing.
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<PAGE> 34
(l) Employee Matters; ERISA.
(i) Definitions. For purposes of this Agreement,
the following terms shall have the meanings set forth below:
(A) "NorAm Affiliate" means any Subsidiary of
NorAm, and any other trade or business,
whether or not incorporated, that is under
common control, or treated as a single
employer, with NorAm under Section 414(b),
(c), (m) or (o) of the Code;
(B) "NorAm Benefit Plan" means each benefit plan,
program, policy, contract or arrangement
described in subsections 3.1(l)(ii)(A)(1),
(2) and (3) below (whether or not
terminated);
(C) "NorAm Pension Benefit Plan" means each
"employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) subject to
Title IV of ERISA or the minimum funding
requirements of Section 302 of ERISA that is
or was maintained or contributed to by NorAm
or any NorAm Affiliate at any time during the
six calendar year period immediately
preceding the date hereof;
(D) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended;
(E) "PBGC" means the Pension Benefit Guaranty
Corporation; and
(F) "Reportable Event" means an event
constituting a "reportable event" within the
meaning of Section 4043(c) of ERISA for which
the 30-day notice requirement or penalty has
not been waived by the PBGC.
(ii) Benefit Plans.
(A) Section 3.1(l)(ii)(A) of the NorAm Disclosure
Schedule contains a true and complete list,
as of the date hereof, of each item described
below, whether formal or informal, written or
unwritten, legally binding or not:
(1) each "employee benefit plan" within
the meaning of Section 3(3) of ERISA
that is or was maintained or
contributed to at any time during the
six calendar year period immediately
preceding the date hereof by NorAm or
any NorAm Affiliate and each similar
plan, program, policy or arrangement
maintained for non-employee directors
or other
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<PAGE> 35
non-employees who have provided
services to NorAm or any NorAm
Affiliate;
(2) each plan, program, policy, payroll
practice or arrangement not listed in
(1) above that provides for bonuses,
profit-sharing, incentive
compensation, deferred compensation,
equity-based compensation (including
stock options or other stock
purchases, restricted stock, stock
appreciation rights, performance units
and dividend equivalents), holiday
pay, vacation pay, sick pay, dependent
care benefits, flexible benefits
(including any cafeteria plan governed
by Section 125 of the Code), paid or
unpaid leave (including sick leave,
parental leave, military leave and
bereavement leave), tuition
assistance, relocation or any similar
type of benefits, that has been
adopted or implemented by NorAm or any
NorAm Affiliate (including any such
plan, program, policy or arrangement
that has been terminated before the
date hereof, if NorAm or any NorAm
Affiliate could have statutory or
contractual liability with respect to
the arrangement on or after the date
hereof); and
(3) each employment contract, severance
contract, parachute agreement, option
agreement, stock appreciation right
agreement, bonus or other incentive
award agreement, deferred compensation
agreement, supplemental benefit
agreement, split dollar agreement or
other personal service or benefit
contract or arrangement with or
covering a current or former officer,
director, employee or independent
contractor of NorAm or any NorAm
Affiliate.
(B) With respect to each NorAm Benefit Plan,
Section 3.1(l)(ii)(B) of the NorAm Disclosure
Schedule fully and accurately identifies the
source or sources of benefit payments under
the plan (including, where applicable, the
identity of any trust (whether or not a
grantor trust), insurance contract, custodial
account, agency agreement or other
arrangement that holds the assets of, or
serves as a funding vehicle or source of
benefits for, such NorAm Benefit Plan).
(iii) Contributions. All material contributions
and other material payments required to have been made by
NorAm or any NorAm Affiliate under Section 412 of the Code or
pursuant to any NorAm Benefit Plan (or to any person pursuant
to the terms thereof) have been timely made or will be timely
made in accordance with Section 404(a)(6) of the Code and all
such amounts properly accrued through the date of this
Agreement have been reflected in the financial
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<PAGE> 36
statements of NorAm included in NorAm's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
(iv) Qualification; Compliance.
(A) Each NorAm Benefit Plan that is intended to
be "qualified" within the meaning of Section
401(a) of the Code (1) to the knowledge of
NorAm, currently meets all qualification
requirements under the Code both in form and
in operation and (2) has received a favorable
determination letter from the IRS on its
qualification or application for such a
determination has been made prior to the
expiration of the applicable remedial
amendment period and NorAm agrees to make
such plan amendments as the IRS may require
in order to issue a favorable determination
letter.
(B) To the knowledge of NorAm, NorAm and each
NorAm Affiliate are in compliance with, and
each NorAm Benefit Plan is and has been
operated in compliance with, all applicable
laws, rules and regulations governing such
plan, including, without limitation, ERISA
and the Code, except for violations that
could not have a Material Adverse Effect on
NorAm. All amendments and actions required
to bring each of the NorAm Benefit Plans into
conformity with all of the applicable
provisions of ERISA and the Code and other
applicable legal requirements have been made
or taken except to the extent that such
amendments or actions are not required by law
to be made or taken until a date after the
Effective Time.
(C) To the knowledge of NorAm, each NorAm Benefit
Plan or related trust that is or was intended
to satisfy the requirements of Section 125,
401(k) or 501(c)(9) of the Code has met and
continues to meet all material requirements
under the applicable section of the Code.
(D) To the knowledge of NorAm, no individual or
entity has engaged in any transaction in
connection with which NorAm or any NorAm
Affiliate, or any NorAm Benefit Plan or any
trust, trustee or administrator thereof,
could be subject to liability pursuant to
Section 409 or Section 502 of ERISA, or
subject to an excise tax pursuant to Section
4975 of the Code, which could in either case
have a Material Adverse Effect on NorAm.
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<PAGE> 37
(E) To the knowledge of NorAm:
(1) no NorAm Benefit Plan is subject to
any ongoing audit, investigation or
other administrative proceeding of the
IRS, the Department of Labor or any
other Governmental Entity or is
scheduled to be subject to such an
audit, investigation or proceeding;
and
(2) no NorAm Benefit Plan is the subject
of any pending application for
administrative relief under any
voluntary compliance program of any
Governmental Entity (including,
without limitation, the IRS' Voluntary
Compliance Resolution Program or
Walk-in Closing Agreement Program, or
the Department of Labor's Delinquent
Filer Voluntary Compliance Program).
(v) Liabilities.
(A) Pension Benefit Plans. With respect to the
NorAm Pension Benefit Plans, individually and
in the aggregate, no termination or partial
termination of any NorAm Pension Benefit Plan
or other event has occurred, and, to the
knowledge of NorAm, there exists no condition
or set of circumstances that could subject
NorAm or any NorAm Affiliate to any liability
arising under the Code, ERISA or any other
applicable law (including, without
limitation, any liability to or under any
such plan or to the PBGC, or under any
indemnity agreement to which NorAm or any
NorAm Affiliate is a party), which liability
could have a Material Adverse Effect on NorAm
(excluding liability for benefit claims and
funding obligations payable in the ordinary
course and liability for PBGC insurance
premiums payable in the ordinary course).
(B) Insurance Policies. With respect to each
NorAm Benefit Plan that is funded wholly or
partially through an insurance policy, there
will be no liability of NorAm or any NorAm
Affiliate, which could have a Material
Adverse Effect on NorAm, in the nature of a
retroactive rate adjustment, loss sharing
arrangement or other actual or contingent
liability under such policy and arising
wholly or partially out of events occurring
prior to the Effective Time.
(vi) Welfare Plans. (A) No NorAm Benefit Plan
that is a "welfare plan" (within the meaning of Section 3(1)
of ERISA) provides benefits for any retired or former
employees (other than as required pursuant to Section 601 of
ERISA) and
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<PAGE> 38
(B) to the knowledge of NorAm, no circumstances exist
that could subject NorAm or any NorAm Affiliate to an excise
tax under Section 4976 of the Code.
(vii) Documents Made Available. NorAm has made
available to HII a true and correct copy of each collective
bargaining agreement to which NorAm or any NorAm Affiliate is
a party or under which NorAm has obligations; and, with
respect to each NorAm Benefit Plan, NorAm has made available
to HII a true and correct copy of each of the following, as
applicable:
(A) the current plan document (including all
amendments adopted since the most recent
restatement) and its most recently prepared
summary plan description and all summaries of
material modifications prepared since the
most recent summary plan description, and all
material employee communications relating to
such plan;
(B) annual reports or Code Section 6039D
information returns (IRS Form 5500 Series),
including financial statements, for the last
three years;
(C) all contracts relating to any plan with
respect to which NorAm or any NorAm Affiliate
may have any liability, including, without
limitation, each related trust agreement,
insurance contract, service provider
contract, subscription or participation
agreement, or investment management agreement
(including all amendments to each such
document);
(D) the most recent IRS determination letter or
other opinion letter with respect to the
qualified status under Code Section 401(a) of
such plan or under Code Section 501(c)(9) of
the related trust; and
(E) actuarial reports or valuations for the last
three years.
(viii) Payments Resulting From Merger. The
consummation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the
occurrence of any additional or further acts or events) result
in any:
(A) payment (whether of severance pay or
otherwise) becoming due from HII, any HII
Affiliate (as defined in Section 3.2(l)(i)),
NorAm or any NorAm Affiliate to any current
or former officer, director, employee or
independent contractor of NorAm or any NorAm
Affiliate or to the trustee under any "rabbi
trust" or other funding arrangement; or
(B) benefit under any NorAm Benefit Plan being
established or increased or becoming
accelerated, vested or payable, except for a
payment or
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<PAGE> 39
benefit that would have been payable under
the same terms and conditions without regard
to the transactions contemplated by this
Agreement.
(ix) Funded Status of Plans. (A) Each NorAm
Pension Benefit Plan has assets that, as of January 1, 1996,
have a fair market value equal to or exceeding the present
value of the accrued benefit obligations thereunder on a
termination basis, as of January 1, 1996, based on the
actuarial methods, tables and assumptions theretofore utilized
by such plan's actuary in preparing such plan's most recently
prepared FAS 87 actuarial valuation report and provided by
NorAm to HII, and NorAm is not aware of any existing facts or
circumstances that would materially change the funded status
of any NorAm Pension Benefit Plan and (B) no NorAm Pension
Benefit Plan has incurred any "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of
the Code).
(x) Multiemployer Plans.
(A) No NorAm Benefit Plan is or was a
"multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA), a multiple
employer plan described in Section 413(c) of
the Code or a "multiple employer welfare
arrangement" (within the meaning of Section
3(40) of ERISA); and none of NorAm or any
NorAm Affiliate has been obligated to
contribute to, or otherwise has or has had
any liability with respect to, any
multiemployer plan, multiple employer plan,
or multiple employer welfare arrangement.
(B) With respect to any NorAm Benefit Plan that
is listed in Section 3.1(l)(x)(A) of the
NorAm Disclosure Schedule as a multiemployer
plan, neither NorAm nor any NorAm Affiliate
has made or incurred a "complete withdrawal"
or a "partial withdrawal," as such terms are
defined in Sections 4203 and 4205 of ERISA,
therefrom at any time during the six calendar
year period immediately preceding the date of
this Agreement and the transactions
contemplated by the Agreement will not, in
and of themselves, give rise to such a
"complete withdrawal" or "partial
withdrawal."
(xi) Modification or Termination of Plans.
Neither NorAm nor any NorAm Affiliate is subject to any legal,
contractual, equitable or other obligation (nor have they any
formal plan or commitment, whether legally binding or not) to
enter into any form of compensation or employment agreement or
to establish any employee benefit plan of any nature,
including (without limitation) any pension, profit sharing,
welfare, post-retirement welfare, stock option, stock or cash
award, non-qualified deferred compensation or executive
compensation plan, policy or
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practice or to modify or change any existing NorAm Benefit
Plan. NorAm or one or more NorAm Affiliates have the right to,
in any manner, and without the consent of any employee,
beneficiary or dependent, employees' organization or other
person, terminate, modify or amend any NorAm Benefit Plan (or
their participation in any such NorAm Benefit Plan) at any time
sponsored, maintained or contributed to by NorAm or any NorAm
Affiliate, effective as of any date before, on or after the
Effective Time except to the extent that any retroactive
amendment would be prohibited by Section 204(g) of ERISA or
would adversely affect a vested accrued benefit or a previously
granted award under any such plan not subject to Section 204(g)
of ERISA.
(xii) Reportable Events; Claims.
(A) No Reportable Event has occurred with respect
to any NorAm Pension Benefit Plan that could
have a Material Adverse Effect on NorAm, and
(B) no liability, claim, action or litigation
exists, has been made, commenced or, to the
knowledge of NorAm, threatened, by or against
NorAm or any NorAm Affiliate with respect to
any NorAm Benefit Plan (other than for
benefits or PBGC premiums payable in the
ordinary course) that could have a Material
Adverse Effect on NorAm.
(m) Labor Matters. Except as set forth in the NorAm SEC
Documents:
(i) neither NorAm nor any of its Subsidiaries is
a party to any collective bargaining agreement or other
current labor agreement with any labor union or organization,
and there is no current union representation question
involving employees of NorAm or any of its Subsidiaries, nor
does NorAm or any of its Subsidiaries know of any activity or
proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to
organize any such employees;
(ii) there is no unfair labor practice charge or
grievance arising out of a collective bargaining agreement or
other grievance procedure against NorAm or any of its
Subsidiaries pending, or, to the knowledge or NorAm or any of
its Subsidiaries, threatened, that has, or could have, a
Material Adverse Effect on NorAm;
(iii) there is no complaint, lawsuit or proceeding
in any forum by or on behalf of any present or former
employee, any applicant for employment or any classes of the
foregoing alleging breach of any express or implied contract
of employment, any law or regulation governing employment or
the termination thereof
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<PAGE> 41
or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against NorAm or
any of its Subsidiaries pending, or, to the knowledge of NorAm
or any of its Subsidiaries, threatened, that has, or could
have, a Material Adverse Effect on NorAm;
(iv) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of NorAm or
any of its Subsidiaries, threatened, against or involving
NorAm or any of its Subsidiaries that has, or could have, a
Material Adverse Effect on NorAm;
(v) NorAm and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health,
except for non-compliance that does not have, and could not
have, a Material Adverse Effect on NorAm; and
(vi) there is no proceeding, claim, suit, action
or governmental investigation pending or, to the knowledge of
NorAm or any of its Subsidiaries, threatened, in respect to
which any current or former director, officer, employee or
agent of NorAm or any of its Subsidiaries is or may be
entitled to claim indemnification from NorAm or any of its
Subsidiaries pursuant to their respective charters or bylaws,
as provided in any indemnification agreement to which NorAm or
any Subsidiary of NorAm is a party or pursuant to applicable
law that has, or could have, a Material Adverse Effect on
NorAm.
(n) Intangible Property. NorAm and its Subsidiaries
possess or have adequate rights to use all material trademarks, trade
names, patents, service marks, brand marks, brand names, computer
programs, databases, industrial designs and copyrights necessary for
the operation of the businesses of each of NorAm and its Subsidiaries
(collectively, the "NorAm Intangible Property"), except where the
failure to possess or have adequate rights to use such properties
would not reasonably be expected to have a Material Adverse Effect on
NorAm. All of the NorAm Intangible Property is owned by NorAm or its
Subsidiaries free and clear of any and all liens, claims or
encumbrances, except those that are not reasonably likely to have a
Material Adverse Effect on NorAm, and neither NorAm nor any such
Subsidiary has forfeited or otherwise relinquished any NorAm
Intangible Property which forfeiture would result in a Material
Adverse Effect. To the knowledge of NorAm, the use of the NorAm
Intangible Property by NorAm or its Subsidiaries does not, in any
material respect, conflict with, infringe upon, violate or interfere
with or constitute an appropriation of any right, title, interest or
goodwill, including, without limitation, any intellectual property
right, trademark, trade name, patent, service mark, brand mark, brand
name, computer program, database, industrial design, copyright or any
pending application therefor of any other person and there have been
no claims made and neither NorAm nor any of its Subsidiaries has
received any notice of any claim or otherwise knows that any of the
NorAm Intangible Property is invalid or conflicts with the asserted
rights of any other person or has not been used or
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<PAGE> 42
enforced or has been failed to be used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of
any of the NorAm Intangible Property, except for any such conflict,
infringement, violation, interference, claim, invalidity, abandonment,
cancellation or unenforceability that would not reasonably be expected
to have a Material Adverse Effect on NorAm.
(o) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Claims" means, with
respect to any person, (x) any and all
administrative, regulatory or judicial
actions, suits, demands, demand letters,
directives, claims, liens, investigations,
proceedings or notices of non-compliance or
violation in writing by or from any person or
entity (including any Governmental Entity), or
(y) any oral information provided by a
Governmental Entity that written action of
the type described in the foregoing clause is
in process, which (in case of either (x) or
(y)) alleges potential liability (including,
without limitation, potential liability for
enforcement, investigatory costs, cleanup
costs, governmental response costs, removal
costs, remedial costs, natural resources
damages, property damages, personal injuries
or penalties) arising out of, based on or
resulting from (1) the presence, or Release
(as hereinafter defined) or threatened Release
into the environment, of any Hazardous
Materials (as hereinafter defined) at any
location, whether or not owned, operated,
leased or managed by NorAm or any of its
Subsidiaries (for purposes of Section 3.1(o))
or by HII or any of its Subsidiaries (for
purposes of Section 3.2(o)), (2) circumstances
forming the basis of any violation, or alleged
violation, of any Environmental Law (as
hereinafter defined) or (3) any and all claims
by any third party seeking damages,
contribution, indemnification, cost recovery,
compensation or injunctive relief resulting
from the presence or Release of any Hazardous
Materials.
(B) "Environmental Laws" means all federal, state
and local laws, rules, regulations and
guidances relating to pollution or the
protection of human health or the environment
(including, without limitation, ambient air,
surface water, groundwater, land surface or
subsurface strata), including, without
limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous
Materials or otherwise relating to the
manufacture, processing, distribution, use,
treatment, storage, disposal, transport or
handling of Hazardous Materials.
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<PAGE> 43
(C) "Hazardous Materials" means (x) any petroleum
or petroleum products, radioactive materials,
asbestos in any form that is or could become
friable, urea formaldehyde foam insulation
and transformers or other equipment that
contain dielectric fluid containing
polychlorinated biphenyls, (y) any chemicals,
materials or substances which are now defined
as or included in the definition of
"hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes,"
"toxic substances" or "toxic pollutants," or
words of similar import, under any
Environmental Law and (z) any other chemical,
material, substance or waste, exposure to
which is now prohibited, limited or regulated
under any Environmental Law in a jurisdiction
in which NorAm or any of its Subsidiaries
operates (for purposes of Section 3.1(o)) or
in which HII or any of its Subsidiaries
operates (for purposes of Section 3.2(o)).
(D) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration
into the atmosphere, soil, subsurface,
surface water, groundwater or property.
(ii) Compliance.
(A) Except as set forth in the NorAm SEC
Documents, NorAm and each of its Subsidiaries
is in compliance with all applicable
Environmental Laws, except where the failure
to be so in compliance would not be
reasonably likely to have a Material Adverse
Effect on NorAm.
(B) Except as set forth in the NorAm SEC
Documents, neither NorAm nor any of its
Subsidiaries has received any written
communication from any person or Governmental
Entity that alleges that NorAm or any of its
Subsidiaries is not in compliance with
applicable Environmental Laws, except where
the failure to be so in compliance would not
be reasonably likely to have a Material
Adverse Effect on NorAm.
(iii) Environmental Permits. Except as set forth
in the NorAm SEC Documents, NorAm and each of its Subsidiaries
has obtained or applied for all environmental, health and
safety permits and authorizations (collectively,
"Environmental Permits") necessary for the construction of
their facilities and the conduct of their operations, and all
such permits are in good standing or, where applicable, a
renewal application has been timely filed, is pending and
agency approval is expected to be obtained, and NorAm and its
Subsidiaries are in compliance with all terms and conditions
of all such Environmental Permits and are not required to make
any expenditure in order to obtain or renew any Environmental
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<PAGE> 44
Permits, except where the failure to obtain or be in
compliance with such Environmental Permits and the requirement
to make such expenditures would not be reasonably likely to
have a Material Adverse Effect on NorAm.
(iv) Environmental Claims. Except as set forth in
the NorAm SEC Documents, there is no Environmental Claim
pending or, to the knowledge of NorAm and its Subsidiaries,
threatened
(A) against NorAm or any of its Subsidiaries,
(B) against any person or entity whose liability
for any Environmental Claim NorAm or any of
its Subsidiaries has retained or assumed,
either contractually or by operation of law,
or
(C) against any real or personal property or
operations that NorAm or any of its
Subsidiaries owns, leases or manages, in
whole or in part,
that, if adversely determined, would be reasonably likely to
have a Material Adverse Effect on NorAm.
(v) Releases. Except as set forth in the NorAm
SEC Documents, and except for Releases of Hazardous Materials
the liability for which would not be reasonably likely to have
a Material Adverse Effect on NorAm, NorAm has no knowledge of
any Release of any Hazardous Materials that has occurred on
any of the properties owned, leased or occupied by NorAm or
any Subsidiary of NorAm or any predecessor of NorAm or any
Subsidiary of NorAm which requires investigation, assessment,
monitoring, remediation or cleanup under Environmental Laws.
(vi) Disclosure. NorAm has disclosed to HII all
material facts that NorAm reasonably believes form the basis
of a Material Adverse Effect on NorAm arising from the cost of
pollution control equipment currently required or known to be
required in the future, current remediation costs or
remediation costs known to be required in the future, or any
other environmental matter affecting NorAm or its Subsidiaries
that would have a Material Adverse Effect on NorAm.
(p) Insurance. NorAm has delivered to HII an insurance
schedule of NorAm's and each of its Subsidiaries' directors' and
officers' liability insurance, primary and excess casualty insurance
policies, providing coverage for bodily injury and property damage to
third parties, including products liability and completed operations
coverage, and worker's compensation, in effect as of the date hereof.
NorAm maintains insurance coverage as is customary for the business of
NorAm and each of its Subsidiaries (taking into account the cost and
availability of such insurance), and the transactions contemplated
hereby will not materially adversely affect such coverage.
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<PAGE> 45
(q) Contracts. Neither NorAm nor any of its Subsidiaries
is a party to (i) any agreement under which it provides natural gas
transportation, gathering, distribution or processing services which
provide revenues (excluding gas costs) in excess of $5,000,000 per
year and may be terminated by the other party within 5 years of the
date hereof; (ii) any gas or power purchase contract which requires
NorAm or any of its Subsidiaries to take and/or pay for minimum
contract volumes at prices which exceed, or are expected to exceed,
market prices and, at minimum take and/or pay levels, in the aggregate
would require payment of a premium of $2,000,000 over the market price
in any of the next 5 years; (iii) any gas purchase contract which
requires NorAm or any of its Subsidiaries to take and/or pay for
minimum contract volumes at prices which exceed, or are expected to
exceed, market prices and contain clauses permitting the seller to
commit additional properties or reserves to the contract; (iv) any
agreement relating to prior take or pay payments or to buy-out or
buy-down gas purchase contract obligations which require NorAm or any
of its Subsidiaries to reimburse royalty or severance tax which, in
the aggregate, could require NorAm or any of its Subsidiaries to make
future payments exceeding $2,000,000 per year; (v) any gas sales
contract which provides per year more than 5% of NorAm's or 10% of any
of its Subsidiaries' revenues and which may be terminated by the
purchaser within 5 years of the date hereof; (vi) any gas or power
supply, marketing, transportation or storage contract which provides
revenues in excess of $10,000,000 per month and has a term greater
than one year; or (vii) any fixed-price gas or power supply or
marketing contract (other than (A) gas contracts involving a volume
less than 1,000 Mcf per day or (B) gas purchase contracts with a price
less than $2.00 per Mcf), or any swap, hedging or derivative agreement
or instrument, which has a term greater than one year. The contract
summaries which NorAm has provided to HII prior to the date hereof are
accurate and do not omit to include any material terms necessary to
make the summary thereof not misleading in all material respects. All
gas or power contracts which require NorAm or any of its Subsidiaries
to take and/or pay for minimum contract volumes at prices which
exceed, or are expected to exceed, market prices do not, at minimum
take and/or pay levels, require in the aggregate payment of premiums
of more than $10,000,000 per year over the market price in any of the
next 5 years.
(r) Regulatory Proceedings. Except as set forth in the
NorAm SEC Documents, neither NorAm nor any of its Subsidiaries all or
part of whose rates or services are regulated by a Governmental Entity
has rates which have been or are being collected subject to refund,
pending final resolution of any proceeding pending before a
Governmental Entity or on appeal to the courts or is a party to any
proceeding before the Governmental Entity or on appeal from orders of
the Governmental Entity which could result in orders having a Material
Adverse Effect on NorAm.
(s) Regulation as a Utility.
(i) Neither NorAm nor any of its Subsidiaries is
a "holding company," a "subsidiary company" or an "affiliate"
of any public utility company within the meaning of Section
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding
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<PAGE> 46
Company Act of 1935, as amended (the "1935 Act"),
respectively, and none of the Subsidiaries of NorAm is a
"public utility company" within the meaning of Section 2(a)(5)
of the 1935 Act.
(ii) NorAm is regulated as a public utility in the
States of Texas, Arkansas, Minnesota, Louisiana, Oklahoma and
Mississippi, and in no other state. Neither NorAm nor any
"subsidiary company" or "affiliate" (as each such term is
defined in the 1935 Act) of NorAm is subject to regulation as
a public utility or public service company (or similar
designation) by any other state in the United States or any
foreign country.
(t) Opinion of Financial Advisor. The Board of Directors
of NorAm has received the opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") to the effect that, as of the
date on which the Board of Directors of NorAm approved this Agreement,
the Merger Consideration to be received by the holders of NorAm Common
Stock pursuant to this Agreement is fair from a financial point of
view to such holders.
(u) Vote Required. The affirmative vote of the holders
of a majority of the outstanding shares of NorAm Common Stock is the
only vote of the holders of any class or series of capital stock of
NorAm necessary to approve this Agreement, the NorAm Merger and the
other transactions contemplated hereby.
(v) Beneficial Ownership of HII Common Stock. As of the
date hereof, assuming the accuracy of the representation set forth in
Section 3.2(b), neither NorAm nor its Subsidiaries "beneficially owns"
(as defined in Rule 13d-3 under the Exchange Act) any outstanding
shares of HII Common Stock.
(w) Brokers. Except for the fees and expenses payable to
Merrill Lynch, which fees are reflected in its agreement with NorAm (a
copy of which has been delivered to HII), no broker, investment banker
or other person is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of NorAm.
(x) Article Fifth of NorAm Restated Certificate of
Incorporation and Section 203 of the DGCL Not Applicable. Neither the
provisions of Article Fifth of NorAm's Restated Certificate of
Incorporation nor the provisions of Section 203 of the DGCL will,
prior to the consummation of this Agreement, assuming the accuracy of
the representation contained in Section 3.2(s), apply to this
Agreement, the NorAm Merger or the other transactions contemplated
hereby.
(y) Change in Control Provisions. The Board of Directors
of NorAm has taken all actions necessary to render inapplicable to the
Mergers (and the Alternative Merger and the Second Alternative
Merger) and the other transactions contemplated by this Agreement
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<PAGE> 47
the repurchase rights afforded to holders of NorAm's 10% Debentures due
2019 (the "NorAm 10% Debentures") or to the holders of or trustees
under indentures relating to any other indebtedness of NorAm or any of
its Subsidiaries in the event of a "change in control" as defined in
the indenture governing the NorAm 10% Debentures or similar provisions
contained in such other indentures or in any other debt agreements of
NorAm or any of its Subsidiaries, as the case may be.
3.2 Representations and Warranties of HL&P and HII. HL&P
and HII, jointly and severally, represent and warrant to NorAm as follows,
except as set forth in the disclosure schedule dated as of the date hereof and
signed by an authorized officer of each of HL&P and HII and delivered to NorAm
by HL&P and HII on or prior to the date hereof (the "HII Disclosure Schedule"),
each of which exceptions shall specifically identify the relevant Section
hereof to which it relates:
(a) Organization, Standing and Power. Each of HL&P and
HII is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, has all requisite power
and authority to own, lease and operate its properties and to carry on
its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the business it
is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a
Material Adverse Effect on HII. HL&P and HII have each heretofore
delivered to NorAm complete and correct copies of their respective
Restated Articles of Incorporation and Bylaws.
(b) Capital Structure.
(i) As of the date hereof, the authorized capital
stock of HL&P consists of 1,000 shares of HL&P Class A Common
Stock, 100 shares of HL&P Class B Common Stock and 10,000,000
shares of Cumulative Preferred Stock, no par value, of HL&P
(the "HL&P Preferred Stock"). At the close of business on
July 31, 1996: (A) 1,000 shares of HL&P Class A Common Stock
were issued and outstanding; (B) 100 shares of HL&P Class B
Common Stock were issued and outstanding; (C) 3,804,397 shares
of HL&P Preferred Stock were issued and outstanding; and (D)
no Voting Debt of HL&P was outstanding. All outstanding
shares of HL&P capital stock are, and the shares of HL&P
Common Stock when issued in accordance with this Agreement,
and upon exercise of the HII Stock Options and the NorAm Stock
Options to be assumed by HL&P pursuant to this Agreement, will
be, validly issued, fully paid and nonassessable and not
subject to preemptive rights. HL&P has no Subsidiaries.
Except as set forth above, there are outstanding: (A) no
shares of capital stock, Voting Debt or other voting
securities of HL&P; (B) no securities of HL&P convertible into
or exchangeable for shares of capital stock, Voting Debt or
other voting securities of HL&P; and (C) no options, warrants,
calls, rights (including preemptive rights), commitments or
agreements to which HL&P is a party or by which it is bound in
any case obligating HL&P to issue, deliver, sell, purchase,
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<PAGE> 48
redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital
stock, Voting Debt or other voting securities of HL&P or
obligating HL&P to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. There
are not as of the date hereof and there will not be at the
Effective Time any stockholder agreements, voting trusts or
other agreements or understandings to which HL&P is a party or
by which it is bound relating to the voting of any shares of
the capital stock of HL&P.
(ii) As of the date hereof, the authorized capital
stock of HII consists of 400,000,000 shares of HII Common
Stock and 10,000,000 shares of Cumulative Preferred Stock, no
par value, of HII (the "HII Preferred Stock"). At the close
of business on July 31, 1996, (A) 261,352,547 shares of HII
Common Stock were issued and outstanding and not more than
46,098,546 shares of HII Common Stock were reserved for
issuance pursuant to HII's:
Long-Term Incentive Compensation Plan . . . 630,375
1994 Long-Term Incentive Compensation Plan . 3,999,362
Stock Benefit Plan . . . . . . . . . . . . . 189,804
Stock Plan for Outside Directors . . . . . 94,500
Houston Industries Energy, Inc. Long-Term
Project Incentive Compensation Plan . . . 470,650
Savings Plan . . . . . . . . . . . . . . . . 33,162,041
Investor's Choice Plan . . . . . . . . . . . 7,551,814
(collectively, the "HII Stock Plans"); (B) 1,395,900 shares of
HII Common Stock were held by HII in its treasury or by its
wholly owned Subsidiaries; (C) no shares of HII Preferred
Stock are issued and outstanding and 2,000,000 shares of HII
Series A Preference Stock were reserved for issuance in
connection with the HII Stock Purchase Rights; and (D) no
Voting Debt of HII was outstanding. All outstanding shares of
HII capital stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights. All
outstanding shares of capital stock of the Subsidiaries of HII
are owned by HII or a direct or indirect wholly owned
Subsidiary of HII, free and clear of all liens, charges,
encumbrances, claims and options of any nature. Except as set
forth above and except for changes since July 31, 1996
resulting from the exercise of employee stock options granted
pursuant to, or from issuances or purchases under, the HII
Stock Plans, or as contemplated by this Agreement, there are
outstanding: (A) no shares of capital stock, Voting Debt or
other voting securities of HII; (B) no securities of HII or
any Subsidiary of HII convertible into or exchangeable for
shares of capital stock, Voting Debt or other voting
securities of HII or any Subsidiary of HII; and (C) no
options, warrants, calls, rights (including preemptive
rights), commitments or agreements to which HII or any
Subsidiary of HII is a party or by which it is bound in any
case obligating HII or any Subsidiary of HII to issue,
deliver, sell, purchase, redeem or acquire, or cause to be
issued, delivered, sold, purchased, redeemed or acquired,
additional shares of
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<PAGE> 49
capital stock or any Voting Debt or other voting securities of
HII or of any Subsidiary of HII or obligating HII or any
Subsidiary of HII to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
There are not as of the date hereof and there will not be at
the HII/HL&P Merger Effective Time any stockholder agreements,
voting trusts or other agreements or understandings to which
HII is a party or by which it is bound relating to the voting
of any shares of the capital stock of HII.
(c) Authority; No Violations; Consents and Approvals.
(i) Each of HL&P and HII has all requisite
corporate power and authority to enter into this Agreement
and, subject, with respect to consummation of the Mergers, to
approval of this Agreement and the issuance of the HL&P Common
Stock pursuant to the Mergers (collectively, the "HII Vote
Matter") by the shareholders of HII in accordance with the
TBCA and the NYSE listing requirements, to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby, including, but not limited to, the
issuance of the HL&P Common Stock pursuant to the Mergers,
have been duly authorized by all necessary corporate action on
the part of HL&P and HII, subject, with respect to
consummation of the Mergers, to approval of the HII Vote
Matter by the shareholders of HII in accordance with the TBCA
and NYSE listing requirements. This Agreement has been duly
executed and delivered by HL&P and HII and, subject, with
respect to consummation of the Mergers, to approval of the HII
Vote Matter by the shareholders of HII in accordance with the
TBCA and NYSE listing requirements, and assuming this
Agreement constitutes the valid and binding obligation of
NorAm, constitutes a valid and binding obligation of HL&P and
HII enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(ii) The execution and delivery of this Agreement
does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof
will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of HII or any of its Subsidiaries under, any provision
of (A) the Restated Articles of Incorporation or Bylaws of HII
or any provision of the comparable charter or organizational
documents of any of its Subsidiaries, (B) subject to obtaining
the third-party consents set forth in Section 3.2(c)(ii) of the
HII Disclosure Schedule (the "HII Required Consents"), any loan
or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or
license applicable to HII or any of its
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<PAGE> 50
Subsidiaries or (C) assuming the consents, approvals,
authorizations or permits and filings or notifications referred
to in Section 3.2(c)(iii) are duly and timely obtained or made
and the approval of the HII Vote Matter by the shareholders
of HII has been obtained, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to HII or any of
its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (B) or (C), any such
conflicts, violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on HII,
materially impair the ability of HII or HL&P to perform its
obligations hereunder or thereunder or prevent the consummation
of any of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit
from any Governmental Entity is required by or with respect to
HII or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by HII or HL&P, or
the consummation by HII or HL&P of the transactions
contemplated hereby, as to which the failure to obtain or make
would have a Material Adverse Effect on HII, except for: (A)
the filing of a premerger notification report by HII under the
HSR Act and the expiration or termination of the applicable
waiting period with respect thereto; (B) the filing with the
SEC of the Joint Proxy Statement, the S-4, such reports under
Section 13(a) of the Exchange Act and such other compliance
with the Securities Act and the Exchange Act and the rules and
regulations thereunder as may be required in connection with
this Agreement and the transactions contemplated hereby, and
the obtaining from the SEC of such orders as may be so
required; (C) the filing with the SEC of a Form U-1 requesting
an order from the SEC granting the HII/HL&P Merger Surviving
Corporation an exemption under section 3(a)(2) of the 1935 Act
and/or a Form U-3A-2 under the 1935 Act (unless the
Alternative Merger or the Second Alternative Merger, as the
case may be, is effected in lieu of the Mergers); (D) the
filing of the HII/HL&P Merger Articles of Merger with the
Secretary of State of the State of Texas and the NorAm Merger
Certificate of Merger with the Secretary of State of the State
of Delaware; (E) filings with, and approval of, the NYSE; (F)
such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws or
environmental laws; and (G) such filings and approvals as may
be required by any foreign premerger notification, securities,
corporate or other law, rule or regulation.
(d) SEC Documents. Each of HL&P and HII has made
available to NorAm a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by HL&P
and HII, as the case may be, with the SEC since January 1, 1994 and
prior to the date of this Agreement (the "HL&P SEC Documents" and the
"HII SEC Documents," respectively) which are all the documents (other
than preliminary material) that HL&P or HII have been required to file
with the SEC since such date. As of their respective dates, the HL&P
SEC Documents and the HII SEC Documents complied in all material
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<PAGE> 51
respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such HL&P SEC Documents and HII SEC Documents,
and none of the HL&P SEC Documents or the HII SEC Documents contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of HL&P contained in
the HL&P SEC Documents and the financial statements of HII included in
the HII SEC Documents complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto,
were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by
Rule 10-01 of Regulation S-X of the SEC) and fairly present in
accordance with applicable requirements of GAAP (subject, in the case
of the unaudited statements, to normal, recurring adjustments, none of
which will be material) (x) the financial position of HL&P as of their
respective dates and the results of operations and the cash flows of
HL&P for the periods presented therein or (y) the consolidated
financial position of HII and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the
consolidated cash flows of HII and its consolidated Subsidiaries for
the periods presented therein, respectively.
(e) Information Supplied. None of the information
supplied or to be supplied by HL&P or HII for inclusion or
incorporation by reference in the S-4 will, at the time the S-4
becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information
supplied or to be supplied by HL&P or HII and included or incorporated
by reference in the Joint Proxy Statement will, at the date mailed to
the shareholders of HII and the stockholders of NorAm or at the time
of the meetings of such shareholders and stockholders to be held in
connection with the Mergers or at the relevant Effective Time, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the relevant Effective
Time any event with respect to HII or any of its Subsidiaries, or with
respect to other information supplied by HL&P or HII for inclusion in
the Joint Proxy Statement or S-4, shall occur which is required to be
described in an amendment of, or a supplement to, the Joint Proxy
Statement or the S-4, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC. The
Joint Proxy Statement, insofar as it relates to HII or the
Subsidiaries of HII or other information supplied by HL&P or HII for
inclusion therein, will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
(f) Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the financial statements included in,
the HL&P SEC Documents or the HII SEC Documents, or except as
contemplated by this Agreement, since December 31, 1995, there
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<PAGE> 52
has not been: (i) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property)
with respect to (x) any shares of HII's capital stock, except for
regular quarterly cash dividends of $.375 per share on HII Common Stock
(or a pro rata amount for any dividend less than a full quarter) with
usual record and payment dates for such dividends or (y) any shares of
HL&P Preferred Stock, except for regular cash dividends pursuant to the
terms of such series of HL&P Preferred Stock (or a pro rata amount for
any dividend less than a full dividend payment period) with usual
record and payment dates for such dividends or (z) any shares of HL&P
Class A Common Stock and HL&P Class B Common Stock; (ii) any amendment
of any material term of any outstanding equity security of HII or any
Subsidiary of HII; (iii) any repurchase, redemption or other
acquisition by HII or any Subsidiary of HII of any outstanding shares
of capital stock or other equity securities of, or other ownership
interests in, HII or any Subsidiary of HII, except pursuant to HII's
previously publicly-announced HII Common Stock repurchase program (the
"HII Common Stock Repurchase Program") or as contemplated by the HII
Stock Plans; (iv) any material change in any method of accounting or
accounting practice by HII or any Significant Subsidiary of HII; or
(v) any other transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in
the ordinary course of business) that could have a Material Adverse
Effect on HII, except for general economic changes and changes that may
affect the industries of HII or any of its Subsidiaries generally.
(g) No Undisclosed Material Liabilities. As of the date
hereof, there are no liabilities of HII or any of its Subsidiaries of
any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that are reasonably likely to
have a Material Adverse Effect on HII, other than: (i) liabilities
adequately provided for on the balance sheet of HII dated as of March
31, 1996 (including the notes thereto) contained in HII's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996; and (ii)
liabilities under this Agreement.
(h) No Default. Neither HII nor any of its Subsidiaries
is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or
violation) of any term, condition or provision of (i) their respective
charter and bylaws, (ii) any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which HII or any of its
Subsidiaries is now a party or by which HII or any of its Subsidiaries
or any of their respective properties or assets may be bound (except
for the requirement under certain of such instruments to file
supplemental indentures as a result of the transactions contemplated
hereby) or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to HII or any of its Subsidiaries, except in the
case of (ii) and (iii) for defaults or violations which in the
aggregate would not have a Material Adverse Effect on HII.
(i) Compliance with Applicable Laws. HII and its
Subsidiaries hold all permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the
"HII Permits"),
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<PAGE> 53
except where the failure so to hold would not have a Material Adverse
Effect on HII. HII and its Subsidiaries are in compliance with
the terms of the HII Permits, except where the failure so to comply
would not have a Material Adverse Effect on HII. Except as disclosed
in the HL&P SEC Documents or the HII SEC Documents, the businesses of
HII and its Subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity, except for
possible violations which would not have a Material Adverse Effect on
HII. As of the date of this Agreement, no investigation or review by
any Governmental Entity with respect to HII or any of its Subsidiaries
is pending or, to the best knowledge of HII, threatened, other than
those the outcome of which would not have a Material Adverse Effect on
HII.
(j) Litigation. Except as disclosed in the HL&P SEC
Documents or the HII SEC Documents, there is no suit, action or
proceeding pending, or, to the best knowledge of HII, threatened
against or affecting HII or any Subsidiary of HII ("HII Litigation"),
and HII and its Subsidiaries have no knowledge of any facts that are
likely to give rise to any HII Litigation, that (in any case) is
reasonably likely to have a Material Adverse Effect on HII, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against HII or any
Subsidiary of HII ("HII Order") that is reasonably likely to have a
Material Adverse Effect on HII or its or HL&P's ability to consummate
the transactions contemplated by this Agreement.
(k) Taxes. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on HII:
(i) Each of HII, each of its Subsidiaries and any
affiliated, combined or unitary group of which any such
corporation is or was a member has (A) timely filed all
federal income tax and all other material federal and all
material state, local and foreign Returns required to be filed
or sent by or with respect to it in respect of any Taxes, (B)
timely paid all Taxes that are due and payable (except for
audit adjustments not material in the aggregate or to the
extent that liability therefor is reserved for in HII's most
recent audited financial statements) for which HII or any of
its Subsidiaries may be liable, (C) established reserves that
are adequate for the payment of all Taxes not yet due and
payable with respect to the results of operations of HII and
its Subsidiaries through the date hereof and (D) to the
knowledge of HII or any Subsidiary of HII, complied in all
material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes,
and has in all material respects timely withheld from employee
wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over.
(ii) Section 3.2(k)(ii) of the HII Disclosure
Schedule sets forth the last taxable period through which the
federal income tax Returns of HII and any of its Subsidiaries
have been examined by the IRS or otherwise closed. Except to
the extent being contested in good faith, all deficiencies
asserted as a result of such
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<PAGE> 54
examinations and any examination by any applicable state or
local taxing authority have been paid, fully settled or
adequately provided for in HII's most recent audited financial
statements. Except as adequately provided for in the HL&P
SEC Documents or the HII SEC Documents, as the case may be, no
material federal, state or local income or franchise tax audits
or other administrative proceedings or court proceedings are
presently pending with regard to any federal, state or local
income or franchise Taxes for which HII or any of its
Subsidiaries would be liable, and no material deficiency for
any such income or franchise Taxes has been proposed, asserted
or assessed pursuant to such examination against HII or any of
its Subsidiaries by any federal, state or local taxing
authority with respect to any period.
(iii) Neither HII nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on
the Closing Date will execute or enter into) with the IRS or
any taxing authority (A) any agreement or other document
extending or having the effect of extending the period for
assessments or collection of any federal, state or local
income or franchise Taxes for which HII or any of its
Subsidiaries would be liable or (B) a closing agreement
pursuant to Section 7121 of the Code, or any predecessor
provision thereof or any similar provision of state or local
income tax law that relates to the assets or operations of HII
or any of its Subsidiaries.
(iv) Neither HII nor any of its Subsidiaries has
made an election under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by HII or any of its
Subsidiaries.
(v) Except as set forth in the HL&P SEC Documents
or the HII SEC Documents, as the case may be, neither HII nor
any of its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing agreement or similar
agreement or arrangement.
(l) Employee Matters; ERISA.
(i) For purposes of this Agreement, "HII Benefit
Plan" means:
(A) each "employee benefit plan" within the
meaning of Section 3(3) of ERISA that is or
was maintained or contributed to at any time
during the six calendar year period
immediately preceding the date hereof by HII
or any HII Affiliate and each similar plan,
program, policy or arrangement maintained for
non-employee directors or other non-employees
who have provided services to HII or any HII
Affiliate;
(B) each plan, program, policy, payroll practice
or arrangement not listed in (A) above that
provides for bonuses, profit-sharing,
incentive
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compensation, deferred compensation,
equity-based compensation (including stock
options or other stock purchases, restricted
stock, stock appreciation rights, performance
units and dividend equivalents), holiday pay,
vacation pay, sick pay, dependent care
benefits, flexible benefits (including any
cafeteria plan governed by Section 125 of the
Code), paid or unpaid leave (including sick
leave, parental leave, military leave and
bereavement leave), tuition assistance,
relocation or any similar type of benefits,
that has been adopted or implemented by HII or
any HII Affiliate (including any such plan,
program, policy or arrangement that has been
terminated before the date hereof, if HII or
any HII Affiliate could have statutory or
contractual liability with respect to the
arrangement on or after the date hereof);
(C) each employment contract, severance contract,
parachute agreement, option agreement, stock
appreciation right agreement, bonus or other
incentive award agreement, deferred
compensation agreement, supplemental benefit
agreement, split dollar agreement or other
personal service or benefit contract or
arrangement with or covering a current or
former officer, director, employee or
independent contractor of HII or any HII
Affiliate.
(ii) For purposes of this Agreement, "HII Pension
Benefit Plan" means each "employee pension benefit plan"
(within the meanings of Section 3(2) of ERISA) subject to
Title IV of ERISA or the minimum funding requirements of
Section 302 of ERISA that is or was maintained or contributed
to by HII or any HII Affiliate at any time during the six
calendar year period immediately preceding the date hereof,
and "HII Affiliate" means any trade or business, whether or
not incorporated, that is under common control, or treated as
a single employer, with HII under Section 414(b),(c),(m) or
(o) of the Code.
(iii) Contributions. All material contributions
and other material payments required to have been made by HII
or any HII Affiliate under Section 412 of the Code or pursuant
to any HII Benefit Plan (or to any person pursuant to the
terms thereof) have been timely made or will be timely made in
accordance with Section 404(a)(6) of the Code and all such
amounts properly accrued through the date of this Agreement
have been reflected in the financial statements of HII
included in HII's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(iv) Qualification; Compliance.
(A) Each HII Benefit Plan that is intended to be
"qualified" within the meaning of Section
401(a) of the Code (1) to the knowledge of
HII,
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currently meets all qualification
requirements under the Code both in form and
in operation and (2) has received a favorable
determination letter from the IRS on its
qualification or application for such a
determination has been made prior to the
expiration of the applicable remedial
amendment period and HII agrees to make
such plan amendments as the IRS may require in
order to issue a favorable determination
letter.
(B) To the knowledge of HII, HII and each HII
Affiliate are in compliance with, and each
HII Benefit Plan is and has been operated in
compliance with, all applicable laws, rules
and regulations governing such plan,
including, without limitation, ERISA and the
Code, except for violations that could not
have a Material Adverse Effect on HII. All
amendments and actions required to bring each
of the HII Benefit Plans into conformity with
all of the applicable provisions of ERISA and
the Code and other applicable legal
requirements have been made or taken except
to the extent that such amendments or actions
are not required by law to be made or taken
until a date after the Effective Time.
(C) To the knowledge of HII, each HII Benefit
Plan or related trust that is or was intended
to satisfy the requirements of Section 125,
401(k) or 501(c)(9) of the Code has met and
continues to meet all material requirements
under the applicable section of the Code.
(D) To the knowledge of HII, no individual or
entity has engaged in any transaction in
connection with which HII or any HII
Affiliate, or any HII Benefit Plan or any
trust, trustee or administrator thereof,
could be subject to liability pursuant to
Section 409 or Section 502 of ERISA, or
subject to an excise tax pursuant to Section
4975 of the Code, which could in either case
have a Material Adverse Effect on HII.
(E) To the knowledge of HII:
(1) no HII Benefit Plan is subject to
any ongoing audit, investigation or
other administrative proceeding of
the IRS, the Department of Labor or
any other Governmental Entity or is
scheduled to be subject to such an
audit, investigation or proceeding;
and
(2) no HII Benefit Plan is the subject
of any pending application for
administrative relief under any
voluntary compliance program of any
Governmental Entity (including,
without
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<PAGE> 57
limitation, the IRS' Voluntary
Compliance Resolution Program or
Walk-in Closing Agreement Program,
or the Department of Labor's
Delinquent Filer Voluntary Compliance
Program).
(v) Liabilities.
(A) Pension Benefit Plans. With respect to the
HII Pension Benefit Plans, individually and
in the aggregate, no termination or partial
termination of any HII Pension Benefit Plan
or other event has occurred, and, to the
knowledge of HII, there exists no condition
or set of circumstances that could subject
HII or any HII Affiliate to any liability
arising under the Code, ERISA or any other
applicable law (including, without
limitation, any liability to or under any
such plan or to the PBGC, or under any
indemnity agreement to which HII or any HII
Affiliate is a party), which liability could
have a Material Adverse Effect on HII
(excluding liability for benefit claims and
funding obligations payable in the ordinary
course and liability for PBGC insurance
premiums payable in the ordinary course).
(B) Insurance Policies. With respect to each HII
Benefit Plan that is funded wholly or
partially through an insurance policy, there
will be no liability of HII or any HII
Affiliate, which could have a Material
Adverse Effect on HII, in the nature of a
retroactive rate adjustment, loss sharing
arrangement or other actual or contingent
liability under such policy and arising
wholly or partially out of events occurring
prior to the Effective Time.
(vi) Welfare Plans. (A) No HII Benefit Plan that
is a "welfare plan" (within the meaning of Section 3(1) of
ERISA) provides benefits for any retired or former employees
(other than as required pursuant to Section 601 of ERISA) and
(B) to the knowledge of HII, no circumstances exist that could
subject HII or any HII Affiliate to an excise tax under
Section 4976 of the Code.
(vii) Funded Status of Plans. (A) Each HII Pension
Benefit Plan has assets that, as of January 1, 1996, have a
fair market value equal to or exceeding the present value of
the accrued benefit obligations thereunder on a termination
basis, as of January 1, 1996, based on the actuarial methods,
tables and assumptions theretofore utilized by such plan's
actuary in preparing such plan's most recently prepared FAS 87
actuarial valuation report and provided by HII to NorAm, and
HII is not aware of any existing facts or circumstances that
would materially change the funded status of any HII Pension
Benefit Plan and (B) no HII Pension Benefit Plan has incurred
any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code).
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<PAGE> 58
(viii) Multiemployer Plans.
(A) No HII Benefit Plan is or was a
"multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA), a multiple
employer plan described in Section 413(c) of
the Code or a "multiple employer welfare
arrangement" (within the meaning of Section
3(40) of ERISA); and none of HII or any HII
Affiliate has been obligated to contribute
to, or otherwise has or has had any liability
with respect to, any multiemployer plan,
multiple employer plan, or multiple employer
welfare arrangement.
(B) With respect to any HII Benefit Plan that is
listed in Section 3.2(l)(viii)(A) of the HII
Disclosure Schedule as a multiemployer plan,
neither HII nor any HII Affiliate has made or
incurred a "complete withdrawal" or a
"partial withdrawal," as such terms are
defined in Sections 4203 and 4205 of ERISA,
therefrom at any time during the six calendar
year period immediately preceding the date of
this Agreement and the transactions
contemplated by the Agreement will not, in
and of themselves, give rise to such a
"complete withdrawal" or "partial
withdrawal."
(ix) Modification or Termination of Plans.
Neither HII nor any HII Affiliate is subject to any legal,
contractual, equitable or other obligation (nor have they any
formal plan or commitment, whether legally binding or not) to
enter into any form of compensation or employment agreement or
to establish any employee benefit plan of any nature,
including (without limitation) any pension, profit sharing,
welfare, post-retirement welfare, stock option, stock or cash
award, non-qualified deferred compensation or executive
compensation plan, policy or practice or to modify or change
any existing HII Benefit Plan. HII or one or more HII
Affiliates have the right to, in any manner, and without the
consent of any employee, beneficiary or dependent, employees'
organization or other person, terminate, modify or amend any
HII Benefit Plan (or their participation in any such HII
Benefit Plan) at any time sponsored, maintained or contributed
to by HII or any HII Affiliate, effective as of any date
before, on or after the Effective Time except to the extent
that any retroactive amendment would be prohibited by Section
204(g) of ERISA or would adversely affect a vested accrued
benefit or a previously granted award under any such plan not
subject to Section 204(g) of ERISA.
(x) Reportable Events; Claims.
(A) No Reportable Event has occurred with respect
to any HII Pension Benefit Plan that could
have a Material Adverse Effect on HII, and
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<PAGE> 59
(B) no liability, claim, action or litigation
exists, has been made, commenced or, to the
knowledge of HII, threatened, by or against
HII or any HII Affiliate with respect to any
HII Benefit Plan (other than for benefits or
PBGC premiums payable in the ordinary course)
that could have a Material Adverse Effect on
HII.
(m) Labor Matters. Except as set forth in the HII SEC
Documents or the HL&P SEC Documents:
(i) there is no unfair labor practice charge or
grievance arising out of a collective bargaining agreement or
other grievance procedure against HII or any of its
Subsidiaries pending, or, to the knowledge or HII or any of
its Subsidiaries, threatened, that has, or could have, a
Material Adverse Effect on HII;
(ii) there is no complaint, lawsuit or proceeding
in any forum by or on behalf of any present or former
employee, any applicant for employment or any classes of the
foregoing alleging breach of any express or implied contract
of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment
relationship against HII or any of its Subsidiaries pending,
or, to the knowledge of HII or any of its Subsidiaries,
threatened, that has, or could have, a Material Adverse Effect
on HII;
(iii) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of HII or
any of its Subsidiaries, threatened, against or involving HII
or any of its Subsidiaries that has, or could have, a Material
Adverse Effect on HII;
(iv) HII and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health,
except for non-compliance that does not have, and could not
have, a Material Adverse Effect on HII; and
(v) there is no proceeding, claim, suit, action
or governmental investigation pending or, to the knowledge of
HII or any of its Subsidiaries, threatened, in respect to
which any current or former director, officer, employee or
agent of HII or any of its Subsidiaries is or may be entitled
to claim indemnification from HII or any of its Subsidiaries
pursuant to their respective charters or bylaws, as provided
in any indemnification agreement to which HII or any
Subsidiary of HII is a party or pursuant to applicable law
that has, or could have, a Material Adverse Effect on HII.
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<PAGE> 60
(n) Intangible Property. HII and its Subsidiaries
possess or have adequate rights to use all material trademarks, trade
names, patents, service marks, brand marks, brand names, computer
programs, databases, industrial designs and copyrights necessary for
the operation of the businesses of each of HII and its Subsidiaries
(collectively, the "HII Intangible Property"), except where the
failure to possess or have adequate rights to use such properties
would not reasonably be expected to have a Material Adverse Effect on
HII. All of the HII Intangible Property is owned by HII or its
Subsidiaries free and clear of any and all liens, claims or
encumbrances, except those that are not reasonably likely to have a
Material Adverse Effect on HII and neither HII nor any such Subsidiary
has forfeited or otherwise relinquished any HII Intangible Property
which forfeiture would result in a Material Adverse Effect on HII. To
the knowledge of HL&P and HII, the use of the HII Intangible Property
by HII or its Subsidiaries does not, in any material respect, conflict
with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill, including,
without limitation, any intellectual property right, trademark, trade
name, patent, service mark, brand mark, brand name, computer program,
database, industrial design, copyright or any pending application
therefor of any other person and there have been no claims made and
neither HII nor any of its Subsidiaries has received any notice of any
claim or otherwise knows that any of the HII Intangible Property is
invalid or conflicts with the asserted rights of any other person or
has not been used or enforced or has been failed to be used or
enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the HII Intangible
Property, except for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or
unenforceability that would not reasonably be expected to have a
Material Adverse Effect on HII.
(o) Environmental Matters.
(i) Compliance.
(A) Except as set forth in the HII SEC Documents
or the HL&P SEC Documents, HII and each of
its Subsidiaries is in compliance with all
applicable Environmental Laws, except where
the failure to be so in compliance would not
be reasonably likely to have a Material
Adverse Effect on HII.
(B) Except as set forth in the HII SEC Documents
or the HL&P SEC Documents, neither HII nor
any of its Subsidiaries has received any
written communication from any person or
Governmental Entity that alleges that HII or
any of its Subsidiaries is not in compliance
with applicable Environmental Laws, except
where the failure to be so in compliance
would not be reasonably likely to have a
Material Adverse Effect on HII.
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(ii) Environmental Permits. Except as set forth
in the HII SEC Documents or the HL&P SEC Documents, HII and
each of its Subsidiaries has obtained or applied for all
Environmental Permits necessary for the construction of their
facilities and the conduct of their operations, and all such
permits are in good standing or, where applicable, a renewal
application has been timely filed, is pending and agency
approval is expected to be obtained, and HII and its
Subsidiaries are in compliance with all terms and conditions
of all such Environmental Permits and are not required to make
any expenditure in order to obtain or renew any Environmental
Permits, except where the failure to obtain or be in
compliance with such Environmental Permits and the requirement
to make such expenditures would not be reasonably likely to
have a Material Adverse Effect on HII.
(iii) Environmental Claims. Except as set forth in
the HII SEC Documents or the HL&P SEC Documents, there is no
Environmental Claim pending or, to the knowledge of HII and
its Subsidiaries, threatened
(A) against HII or any of its Subsidiaries,
(B) against any person or entity whose liability
for any Environmental Claim HII or any of its
Subsidiaries has retained or assumed, either
contractually or by operation of law, or
(C) against any real or personal property or
operations that HII or any of its
Subsidiaries owns, leases or manages, in
whole or in part,
that, if adversely determined, would be reasonably likely to
have a Material Adverse Effect on HII.
(iv) Releases. Except as set forth in the HII SEC
Documents or the HL&P SEC Documents, and except for Releases
of Hazardous Materials the liability for which would not be
reasonably likely to have a Material Adverse Effect on HII,
HII has no knowledge of any Release of any Hazardous Materials
that has occurred on any of the properties owned, leased or
occupied by HII or any Subsidiary of HII or any predecessor of
HII or any Subsidiary of HII which requires investigation,
assessment, monitoring, remediation or cleanup under
Environmental Laws.
(p) Regulation as a Utility.
(i) HII is a "public utility holding company" as
defined in the 1935 Act exempt from all provisions of the 1935
Act, except Section 9(a)(2), by order of the SEC pursuant to
Section 3(a)(1) of the 1935 Act. HL&P is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935
Act. No other Subsidiary of HII is a "public utility company"
within the meaning of Section 2(a)(5) of the 1935 Act.
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(ii) HL&P is regulated as a public utility in the
State of Texas and in no other state. Neither HII nor any
"subsidiary company" or "affiliate" (as each such term is
defined in the 1935 Act) of HII (other than HL&P) is subject
to regulation as a public utility or public service company
(or similar designation) by any other state in the United
States or any foreign country.
(q) Opinion of Financial Advisor. The Board of Directors
of HII has received the opinion of CS First Boston Corporation ("CS
First Boston") to the effect that, as of the date on which the Board
of Directors of HII approved this Agreement, the Merger Consideration
is fair from a financial point of view to HII.
(r) Vote Required.
(i) The affirmative vote of the holders of
two-thirds of the outstanding shares of each of the HL&P Class
A Common Stock and the HL&P Class B Common Stock, voting
separately as a class, is the only vote of the holders of any
class or series of capital stock of HL&P necessary to approve
this Agreement and the transactions contemplated hereby. The
affirmative vote of HII, the sole holder of HL&P Class A
Common Stock, has been obtained prior to or on the date
hereof. HII shall cause its wholly owned subsidiary Houston
Industries (Delaware) Incorporated, the sole holder of HL&P
Class B Common Stock, to approve this Agreement and the
transactions contemplated hereby as soon as practicable after
the date hereof.
(ii) The affirmative vote of the holders of
two-thirds of the outstanding shares of HII Common Stock is
the only vote of the holders of any class or series of capital
stock of HII necessary to approve this Agreement, the issuance
of shares of HL&P Common Stock pursuant to the Mergers and the
other transactions contemplated hereby.
(s) Beneficial Ownership of NorAm Common Stock. As of
the date hereof, assuming the accuracy of the representation set forth
in Section 3.1(b), neither HII nor any of its Subsidiaries
"beneficially owns" (as defined in Rule 13d-3 under the Exchange Act)
any of the outstanding NorAm Common Stock.
(t) Brokers. Except for the fees and expenses payable to
CS First Boston, which fees are reflected in its agreement with HII (a
copy of which has been delivered to NorAm), no broker, investment
banker or other person is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of HII or HL&P.
(u) Financing. HII has and will continue to have
sufficient cash resources available to it to pay the aggregate Cash
Consideration.
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(v) Insurance. HII maintains insurance coverage as is
customary for the business of HII and each of its Subsidiaries (taking
into account the cost and availability of such insurance), and the
transactions contemplated hereby will not materially adversely affect
such coverage.
(w) Regulatory Proceedings. Except as set forth in the
HII SEC Documents or the HL&P SEC Documents, neither HII nor any of
its Subsidiaries all or part of whose rates or services are regulated
by a Governmental Entity has rates which have been or are being
collected subject to refund, pending final resolution of any
proceeding pending before a Governmental Entity or on appeal to the
courts or is a party to any proceeding before the Governmental Entity
or on appeal from orders of the Governmental Entity which could result
in orders having a Material Adverse Effect on HII.
(x) Representations with Respect to Merger Sub.
(i) Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of
Delaware. Merger Sub was formed solely for the purpose of
being an acquisition vehicle, has engaged in no other business
activities, has incurred no obligations or liabilities, has no
other assets and has no Subsidiaries.
(ii) As of the date hereof, the authorized capital
stock of Merger Sub consists of 1,000 shares of common stock,
par value $0.01 per share, of Merger Sub, all of which are
validly issued, fully paid and nonassessable and are owned by
HII.
(iii) Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation by Merger Sub
of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
Merger Sub. This Agreement has been duly executed and
delivered by Merger Sub and, assuming this Agreement
constitutes the valid and binding obligation of NorAm,
constitutes a valid and binding obligation of Merger Sub
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGERS
4.1 Conduct of Business by NorAm Pending the Mergers.
During the period from the date of this Agreement and continuing until the
Effective Time, NorAm agrees as to itself and its Subsidiaries that (except as
expressly contemplated or permitted by this Agreement, as provided in Section
4.1 of the NorAm Disclosure Schedule (each of which exceptions shall
specifically
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identify the relevant subsection hereof to which it relates) or to the extent
that HII shall otherwise consent in writing):
(a) Ordinary Course. Each of NorAm and its Subsidiaries
shall carry on its businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and
shall use all commercially reasonable efforts to preserve intact its
present business organizations, keep available the services of its
current officers and employees, subject to Section 5.10, and endeavor
to preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material respect at the
Effective Time.
(b) Dividends; Changes in Stock. NorAm shall not, and it
shall not permit any of its Subsidiaries to: (i) declare or pay any
dividends on or make other distributions in respect of any of its
capital stock or partnership interests, except for the declaration and
payment of (x) regular quarterly cash dividends not in excess of $.07
per share of NorAm Common Stock with usual record and payment dates
for such dividend, (y) regular quarterly cash distributions not in
excess of $.7813 per share of 6 1/4% Convertible Trust Originated
Preferred Securities of NorAm Financing I with usual record and
payment dates for such distribution and (z) dividends from a
Subsidiary of NorAm to NorAm or another Subsidiary of NorAm and except
for cash dividends or distributions paid on or with respect to the
capital stock or partnership interests of a Subsidiary of NorAm; (ii)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of capital stock of
NorAm; or (iii) repurchase, redeem or otherwise acquire, or permit any
of its Subsidiaries to purchase, redeem or otherwise acquire, any
shares of its capital stock, except as required by the terms of its
securities outstanding on the date hereof or as contemplated by
any existing NorAm Benefit Plan.
(c) Issuance of Securities. Except for the issuance of
NorAm Common Stock and any rights and options to acquire such shares
pursuant to NorAm Stock Plans (which shares, rights or options awarded
for periods subsequent to 1996, if any, under NorAm's 1994 Incentive
Equity Plan shall be made strictly in accordance with the provisions
of Section 5.10(d)), NorAm's Direct Stock Purchase and Dividend
Reinvestment Plan, NorAm's Annual Incentive Plan and the Restricted
Stock Agreement between Milton Honea and NorAm dated January 31, 1996,
NorAm shall not, and it shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose to issue, deliver or
sell, any shares of its capital stock of any class, any Voting Debt or
other voting securities of NorAm or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, Voting
Debt or other voting securities or convertible securities, other than:
(i) the issuance of NorAm Common Stock upon the exercise of stock
options granted under the NorAm Stock Plans that are outstanding on
the date hereof, or in satisfaction of stock grants or stock-based
awards made prior to the date hereof pursuant to the NorAm Stock Plans
or upon conversion of the NorAm Convertible Debentures or NorAm
Convertible Junior Debentures; and (ii) issuances by a wholly owned
Subsidiary of its capital stock to its parent.
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(d) Governing Documents. NorAm shall not amend or
propose to amend its Restated Certificate of Incorporation or Bylaws.
(e) No Acquisitions. Other than acquisitions as to which
the aggregate purchase price is not in excess of $25,000,000, NorAm
shall not, and it shall not permit any of its Subsidiaries to, acquire
or agree to acquire by merging or consolidating with, or by purchasing
a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof.
(f) No Dispositions. Other than dispositions in the
ordinary course of business consistent with past practice that are not
material, individually or in the aggregate, to NorAm and its
Subsidiaries taken as a whole, or dispositions as to which the
aggregate market value is not in excess of $10,000,000, NorAm shall
not, and it shall not permit any of its Subsidiaries to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease (whether
such lease is an operating or capital lease), encumber or otherwise
dispose of, any of its assets.
(g) No Dissolution, Etc. NorAm shall not authorize,
recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of NorAm or any of its
Significant Subsidiaries.
(h) Certain Employee Matters. Except as may be required
by applicable law or any agreement to which NorAm or any NorAm
Affiliate is a party on the date hereof or as expressly contemplated
by this Agreement, including Section 4.1(c), NorAm shall not, nor
shall it permit any NorAm Affiliate to:
(i) amend, or increase the amount of (or
accelerate the payment or vesting of) any benefit or amount
payable under, any employee benefit plan or any other
contract, agreement, commitment, arrangement, plan or policy
providing for compensation or benefits to any current or
former director, officer, employee or independent contractor
who would be deemed to be an employee under applicable
guidelines published by the IRS, and maintained by, contributed
to or entered into by, NorAm or any NorAm Affiliate, including,
without limitation, the existing NorAm Benefit Plans and
the NorAm Pension Benefit Plans;
(ii) increase (or enter into any contract,
agreement, commitment or arrangement to increase in any
manner) the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any
related rights, of any current or former director, officer,
employee or independent contractor who would be deemed to be
an employee under applicable guidelines published by the IRS,
of NorAm or any NorAm Affiliate, except for normal increases
in the ordinary course of business consistent with past
practice that, in the aggregate, do not
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result in a material increase in benefits or compensation
expense to NorAm or any NorAm Affiliate;
(iii) adopt, establish or implement any plan,
policy or other arrangement providing for any form of benefits
or other compensation to any current or former director,
officer, employee or independent contractor who would be
deemed to be an employee under applicable guidelines published
by the IRS, of NorAm or any NorAm Affiliate;
(iv) enter into or amend any employment agreement,
severance agreement, or other contract, agreement or
arrangement with any current or former director, officer,
employee or independent contractor who would be deemed to be
an employee under applicable guidelines published by the IRS,
of NorAm or any NorAm Affiliate; or
(v) pay or agree to pay any pension, retirement
allowance or other benefit not required or contemplated by any
of the existing NorAm Benefit Plans as in effect on the date
of this Agreement to any current or former director, officer,
employee or independent contractor who would be deemed to be
an employee under applicable guidelines published by the IRS,
of NorAm or any NorAm Affiliate.
(i) Indebtedness; Leases; Capital Expenditures. NorAm
shall not, nor shall NorAm permit any of its Subsidiaries to, (i)
incur any indebtedness for borrowed money (except under NorAm's
existing credit facilities, including NorAm's receivable sales
facility, and renewals thereof, and refinancings of existing debt that
permit prepayment of such debt without penalty (other than LIBOR
breakage costs)) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any debt
securities of such party or any of its Subsidiaries or guarantee any
debt securities of others, (ii) except in the ordinary course of
business, enter into any lease (whether such lease is an operating or
capital lease) or create any mortgages, liens, security interests or
other encumbrances on the property of NorAm or any of its Subsidiaries
in connection with any indebtedness thereof or (iii) make or commit to
make capital expenditures not provided for in the capital budget, as
amended and approved by NorAm prior to the date hereof and disclosed
to HII on Section 4.1(i) of the NorAm Disclosure Schedule.
(j) Accounting. NorAm shall not, nor shall it permit any
of its Subsidiaries to, make any changes in their accounting methods
which would be required to be disclosed under the rules and
regulations of the SEC, except as required by law, rule, regulation or
GAAP.
(k) Affiliate Transactions. NorAm shall not, nor shall
it permit any of its Subsidiaries to, enter into any agreement or
arrangement with any of their respective affiliates (as such term is
defined in Rule 405 under the Securities Act, an "Affiliate"), other
than with wholly owned Subsidiaries of NorAm, on terms materially less
favorable to
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NorAm or such Subsidiary, as the case may be, than could be reasonably
expected to have been obtained with an unaffiliated third party on an
arm's-length basis.
(l) Rate Matters. Subject to applicable law and except
for non-material filings in the ordinary course of business consistent
with past practices, 10 business days prior to making any filing
regarding any changes in its or its Subsidiaries' rates or charges
(other than pass-through fuel and gas rates or charges under existing
tariffs or rate schedules), standards of service, accounting, or the
services it provides (or any amendment thereto) with any Governmental
Entity, NorAm shall, and shall cause its Subsidiaries to, deliver a
copy of such filing or amendment to HII. NorAm shall, and shall cause
its Subsidiaries to, make all such filings only in the ordinary course
of business consistent with past practices.
(m) Contracts. NorAm shall not, nor shall it permit any
of its Subsidiaries to, except in the ordinary course of business
consistent with past practice and NorAm policy, modify, amend,
terminate, renew or fail to use reasonable business efforts to renew
any material contract or agreement to which it or any of its
Subsidiaries is a party or waive, release or assign any material
rights or claims. NorAm shall not, nor shall it permit any of its
Subsidiaries to, enter into any contract involving total consideration
of $10,000,000 or more, or in the case of NorAm Energy Services, Inc.,
any gas or power marketing contract involving total consideration of
$50,000,000 or more, with a term longer than one year which is not
terminable by NorAm or any such Subsidiary of NorAm without penalty
upon no more than 30 days' prior notice.
(n) Insurance. NorAm shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses
as are customary for companies engaged in their respective businesses.
(o) Permits. NorAm shall, and shall cause its
Subsidiaries to, use reasonable efforts to maintain in effect all
existing NorAm Permits which are material to their respective
operations.
(p) Tax Matters. NorAm shall not (i) make or rescind any
material express or deemed election relating to Taxes unless it is
reasonably expected that such action will not adversely affect NorAm,
including elections for any and all joint ventures, partnerships,
limited liability companies, working interests or other investments
where NorAm has the capacity to make such binding election, (ii)
settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to Taxes, except where such settlement or compromise will not
adversely affect NorAm or (iii) change in any material respect any of
its methods of reporting income or deductions for federal income tax
purposes from those expected to be employed in the preparation of its
federal income tax Return for the taxable year ending December 31,
1995, except as may be required by applicable law or except for such
changes that are reasonably expected not to adversely affect NorAm.
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(q) Discharge of Liabilities. NorAm shall not, nor shall
it permit any of its Subsidiaries to, pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice (which includes the payment of final and
unappealable judgments) or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto)
of NorAm included in NorAm's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, or incurred in the ordinary course of
business consistent with past practice.
(r) Other Actions. NorAm shall not, and shall not permit
any of its Subsidiaries to, take or fail to take any other action
which would reasonably be expected to prevent or materially impede,
interfere with or delay the Mergers.
(s) Agreements. NorAm shall not, nor shall it permit any
of its Subsidiaries to, agree in writing or otherwise to take any
action inconsistent with the foregoing.
4.2 Certain Restrictions in Respect of HII and HL&P.
During the period from the date of this Agreement and continuing until the
Effective Time, HII and HL&P agree as to themselves and their Subsidiaries that
(except as expressly contemplated or permitted by this Agreement, as provided
in Section 4.2 of the HII Disclosure Schedule (each of which exceptions shall
specifically identify the relevant subsection hereof to which it relates) or to
the extent that NorAm shall otherwise consent in writing):
(a) Dividends; Changes in Stock. Each of HII and HL&P
shall not (i) engage in any material repurchase at a premium,
recapitalization, restructuring or reorganization with respect to its
capital stock (other than (x) pursuant to the HII Common Stock
Repurchase Program or (y) in connection with the HII/HL&P Merger),
including, without limitation, by way of any extraordinary dividends
on or other extraordinary distributions in respect of any of its
capital stock, (ii) engage in any repurchase of HII Common Stock
(other than pursuant to the HII Stock Plans) during the period
beginning 45 days prior to the Effective Time and ending at the
Effective Time or (iii) amend any material term or provision of the
HL&P Common Stock.
(b) Governing Documents. HL&P shall not amend or propose
to amend its Restated Articles of Incorporation with respect to the
rights of the holders of HL&P Common Stock except as contemplated
herein.
(c) Insurance. HII shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses
as are customary for companies engaged in their respective businesses.
(d) Permits. HL&P and HII shall use reasonable efforts
to maintain in effect all existing HII Permits which are material to
their respective operations.
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(e) Certain Acquisitions. Other than acquisitions as to
which the purchase price is not in excess of $200,000,000, HII shall
not, and it shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof the principal business of which is not related to the sale,
transmission, distribution, marketing or generation of electric power
or gas or other regulated or unregulated utility operations. HII will
consult with appropriate NorAm personnel prior to any acquisition with
a purchase price in excess of $200,000,000 and NorAm shall keep any
such information strictly confidential.
(f) Other Actions. Each of HII and HL&P shall not, and
shall not permit any of their Subsidiaries to, take or fail to take
any other action which would reasonably be expected to prevent or
materially impede, interfere with or delay the Mergers.
(g) Agreements. Each of HII and HL&P shall not agree in
writing or otherwise to take any action inconsistent with the
foregoing.
4.3 No Solicitation.
(a) From and after the date hereof, NorAm will not, and
will not authorize or permit any of its officers, directors,
employees, agents and other representatives or those of any of its
Subsidiaries (collectively, "NorAm Representatives") to, directly or
indirectly, solicit, initiate or encourage (including by way of
providing information) any prospective buyer or the making of any
proposal that constitutes, or may reasonably be expected to lead to,
an Acquisition Proposal (as hereinafter defined) from any person or
engage in any discussions or negotiations with respect thereto or
otherwise cooperate with or assist or participate in, or facilitate,
any such proposal; provided, however, that, notwithstanding any other
provision of this Agreement, (i) NorAm's Board of Directors may take
and disclose to NorAm's stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act and (ii) prior to approval
of this Agreement by NorAm's stockholders and following receipt from a
third party (without any solicitation, initiation, encouragement,
discussion or negotiation, directly or indirectly, by or with NorAm or
any NorAm Representatives) of a bona fide Acquisition Proposal that is
financially superior to the NorAm Merger and reasonably capable of
being financed (as determined in each case in good faith by NorAm's
Board of Directors after consultation with NorAm's financial
advisors), (x) NorAm may engage in discussions or negotiations with
such third party and may furnish such third party information
concerning NorAm and its business, properties and assets if such third
party executes a confidentiality and standstill agreement in
reasonably customary form and (y) the Board of Directors of NorAm may
withdraw, modify or not make its recommendation referred to in Section
5.5 or terminate this Agreement in accordance with Section 7.1(g), but
in each case referred to in the foregoing clauses (i) and (ii) only to
the extent that the Board of Directors of NorAm shall conclude in good
faith based on the written advice of NorAm's outside counsel that such
action is necessary in order
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for the Board of Directors of NorAm to act in a manner that is
consistent with its fiduciary obligations under applicable law,
notwithstanding (1) a binding commitment to consummate an agreement of
the nature of this Agreement entered into in the proper exercise of
their applicable fiduciary duties and (2) any concessions which may be
offered by HII in negotiations entered into pursuant to Section
7.1(g)(ii) or otherwise.
(b) NorAm shall immediately cease and cause to be
terminated any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted
heretofore by NorAm or any NorAm Representatives with respect to any
Acquisition Proposal existing on the date hereof.
(c) Prior to taking any action referred to in Section
4.3(a), if NorAm intends to participate in any such discussions or
negotiations or provide any such information to any such third party,
NorAm shall give reasonable prior notice to HII of each such action.
NorAm will promptly notify HII of any such requests for such
information or the receipt of any Acquisition Proposal, including the
identity of the person or group engaging in such discussions or
negotiations, requesting such information or making such Acquisition
Proposal, and the material terms and conditions of any Acquisition
Proposal.
(d) Nothing in this Section 4.3 shall permit NorAm to
enter into any agreement with respect to an Acquisition Proposal
during the term of this Agreement (it being agreed that during the
term of this Agreement NorAm shall not enter into any agreement with
any person that provides for, or in any way facilitates, an
Acquisition Proposal other than a confidentiality agreement in the
form referred to above).
(e) As used in this Agreement, "Acquisition Proposal"
means any proposal or offer, other than a proposal or offer by HII or
any of its Affiliates, for, or that could be reasonably expected
to lead to, a tender or exchange offer, a merger, consolidation or
other business combination involving NorAm or any Significant
Subsidiary of NorAm or any proposal to acquire in any manner a
substantial equity interest in, or any substantial portion of the
assets of, NorAm or any of its Significant Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement. As
promptly as practicable after the date hereof, HII, HL&P and NorAm shall
prepare and file with the SEC the Joint Proxy Statement and HL&P shall prepare
and file with the SEC the S-4, in which the Joint Proxy Statement will be
included as a prospectus. Each of HII, HL&P and NorAm shall use its best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing. Each of HII, HL&P and NorAm shall use its
best efforts to cause the Joint Proxy Statement to be mailed to the
shareholders of HII and the stockholders of NorAm at the earliest practicable
date. HL&P shall use its best efforts to obtain all necessary state securities
laws or "blue sky"
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permits, approvals and registrations in connection with the
issuance of HL&P Common Stock in the Mergers and upon the exercise of the HII
Stock Options and the NorAm Stock Options assumed by HL&P and NorAm shall
furnish all information concerning NorAm and the holders of NorAm Common Stock
as may be reasonably requested in connection with obtaining such permits,
approvals and registrations.
5.2 Letter of NorAm's Accountants. NorAm shall use its
best efforts to cause to be delivered to HII a letter of Coopers & Lybrand,
L.L.P., NorAm's independent public accountants, dated a date within two
business days before the date on which the S-4 shall become effective and
addressed to HII and NorAm, in form and substance reasonably satisfactory to
HII and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
S-4.
5.3 Letter of HII's Accountants. HII shall use its best
efforts to cause to be delivered to NorAm a letter of Deloitte & Touche LLP,
HII's independent public accountants, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to NorAm
and HII, in form and substance reasonably satisfactory to NorAm and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice,
NorAm, HII and HL&P shall each (and shall cause each of their respective
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the others, access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, each of NorAm, HII
and HL&P shall (and shall cause each of their respective Subsidiaries to)
furnish promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to SEC requirements and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Each of NorAm, HII and HL&P agrees that it will not, and will cause its
respective representatives not to, use any information obtained pursuant to
this Section 5.4 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. The Confidentiality Agreements
dated July 15, 1996 between HII and NorAm (the "Confidentiality Agreements")
shall apply with respect to information furnished thereunder or hereunder and
any other activities contemplated thereby.
5.5 NorAm Stockholders' Meeting. NorAm shall (i) call a
meeting of its stockholders (the "NorAm Stockholders' Meeting") to be held as
promptly as practicable after the date hereof for the purpose of voting upon
this Agreement and the NorAm Merger (or in lieu thereof and only in the
circumstances set forth in Section 8.1 or Section 8.5, the Alternative Merger
or the Second Alternative Merger, respectively), (ii) through its Board of
Directors, recommend to its stockholders approval of such matters and not
rescind such recommendation, (iii) use its best efforts to obtain approval and
adoption of this Agreement and the NorAm Merger by its stockholders and (iv)
use all reasonable efforts to hold such meeting as soon as practicable after
the date upon which the S-4 becomes effective; provided, however, that nothing
herein obligates NorAm to take any
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action that would cause its Board of Directors to act inconsistently with their
fiduciary duties as determined by the Board of Directors of NorAm in good faith
based on the written advice of NorAm's outside counsel. The NorAm
Stockholders' Meeting shall be held on such date as soon as practicable after
the date upon which the S-4 becomes effective as NorAm and HII shall mutually
determine.
5.6 HII Shareholders' Meeting. HII (i) shall call the
HII Shareholders' Meeting to be held as promptly as practicable after the date
hereof for the purpose of voting upon this Agreement, the HII/HL&P Merger and
the issuance of the Stock Consideration in the NorAm Merger (or in lieu of the
Mergers and only in the circumstances set forth in Section 8.1 or 8.5, the
Alternative Merger or the Second Alternative Merger, respectively), (ii)
through its Board of Directors, recommend to its shareholders approval of such
matters and not rescind such recommendation, (iii) use its best efforts to
obtain approval and adoption of this Agreement, the HII/HL&P Merger and the
issuance of the Stock Consideration in the NorAm Merger by its shareholders and
(iv) use all reasonable efforts to hold such meeting as soon as practicable
after the date upon which the S-4 becomes effective; provided, however, that
nothing herein obligates HII to take any action that would cause its Board of
Directors to act inconsistently with their fiduciary duties as determined by
the Board of Directors of HII in good faith based on the written advice of
HII's outside counsel. The meeting of HII's shareholders for the purpose of
voting upon this Agreement, the HII/HL&P Merger and the issuance of the Stock
Consideration in the NorAm Merger (the "HII Shareholders' Meeting") shall be
held on such date as soon as practicable after the date upon which the S-4
becomes effective as NorAm and HII shall mutually determine.
5.7 Regulatory and Other Approvals.
(a) HSR Act. Each party hereto shall file or cause to be
filed with the Federal Trade Commission and the Department of Justice
any notifications required to be filed by their respective "ultimate
parent" companies under the HSR Act and the rules and regulations
promulgated thereunder with respect to the transactions contemplated
hereby. Such parties will use all commercially reasonable efforts to
make such filings promptly and to respond on a timely basis to any
requests for additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its best efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications,
notices, petitions, filings and other documents, and to use all
commercially reasonable efforts to obtain (and will cooperate with
each other in obtaining) any consent, acquiescence, authorization,
order or approval of, or any exemption or nonopposition by, any
Governmental Entity required to be obtained or made by NorAm, HII,
HL&P or any of their Subsidiaries in connection with the Mergers or
the taking of any action contemplated thereby or by this Agreement.
(c) Other Approvals. Each party hereto will, and will
cause its Subsidiaries to, take all commercially reasonable actions
necessary to obtain (and will cooperate with each
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other in obtaining) all NorAm Required Consents and all HII
Required Consents, as the case may be.
5.8 Agreements of Others. Prior to the Effective Time,
NorAm shall cause to be prepared and delivered to HL&P a list identifying all
persons who, at the time of the NorAm Stockholders' Meeting, may be deemed to
be "affiliates" of NorAm as that term is used in paragraphs (c) and (d) of Rule
145 under the Securities Act (the "Rule 145 Affiliates"). NorAm shall use its
best efforts to cause each person who is identified as a Rule 145 Affiliate in
such list to deliver to HL&P, at or prior to the Effective Time, a written
agreement, in the form to be approved by the parties hereto, that such Rule 145
Affiliate will not sell, pledge, transfer or otherwise dispose of any shares of
HL&P Common Stock issued to such Rule 145 Affiliate pursuant to the NorAm
Merger, except pursuant to an effective registration statement or in compliance
with Rule 145 or an exemption from the registration requirements of the
Securities Act.
5.9 Authorization for Shares and Stock Exchange Listing.
Prior to the Effective Time, HL&P shall have taken all action necessary to
permit it to issue the number of shares of HL&P Common Stock required to be
issued pursuant to Sections 2.1 and 2.2. HL&P shall use all reasonable efforts
to cause the shares of HL&P Common Stock to be issued in the Mergers and the
shares of HL&P Common Stock to be reserved for issuance upon exercise of the
HII Stock Options and the NorAm Stock Options assumed by HL&P pursuant to
Section 5.11 and issuances under the HII Stock Plans and the NorAm Stock Plans
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
5.10 Employee Matters.
(a) HL&P and NorAm agree that all employees of NorAm
immediately prior to the Effective Time shall be employed by the NorAm
Merger Surviving Corporation immediately after the Effective Time, it
being understood that neither the NorAm Merger Surviving Corporation
nor HL&P shall have any obligation to continue employing such
employees for any length of time thereafter.
(b) From and after the Effective Time, to the extent of
the accrued benefits described in this Section 5.10(b), HL&P will
honor in accordance with their respective terms the employee benefit
plans, programs, policies, arrangements and agreements listed on
Section 5.10(b) to the NorAm Disclosure Schedule (the "Section 5.10(b)
Plans") and will not take, or permit to be taken, any action that
would reduce, eliminate or otherwise adversely affect the compensation
or benefits accrued at the Effective Time (or, solely with respect to
those three severance plans listed as Items 6, 7 and 8 on Section
5.10(b) to the NorAm Disclosure Schedule, if greater, at termination
of employment after the Effective Time) for any employee or former
employee of NorAm or any NorAm Affiliate under any Section 5.10(b)
Plan. Nothing contained in this Section 5.10(b) shall preclude HL&P
from amending any Section 5.10(b) Plan to cease the accrual of
benefits thereunder after the Effective Time (or, solely with respect
to those three severance plans listed as Items 6, 7 and 8 on Section
5.10(b) to the NorAm Disclosure Schedule, if greater, at termination
of employment after the Effective Time). For purposes of any Section
5.10(b) Plan that contains a provision relating
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to a change in control of NorAm, HL&P acknowledges that the
consummation of the NorAm Merger constitutes such a change in
control.
(c) For one year after the Effective Time, HL&P will
continue or cause to be continued without adverse change to any
employee or former employee of NorAm and the NorAm Affiliates all
NorAm Benefit Plans other than the Section 5.10(b) Plans and the types
of plans described in Section 5.10(d) and (e) below, except that any
NorAm Common Stock investment fund offered under a NorAm Benefit Plan
will be replaced by either a HL&P Common Stock fund or a traditional
investment fund, as determined by HL&P. From and after the expiration
of the one-year period following the Effective Time, HL&P will provide
the employees of NorAm and each NorAm Affiliate with benefits that in
the aggregate are not less favorable than those then provided to
similarly situated employees of HL&P. In the event a HL&P employee
benefit plan is made available to employees of NorAm and the NorAm
Affiliates, all periods of service with NorAm and the NorAm Affiliates
will be credited to such employees for all purposes other than accrual
of benefits, including the eligibility to participate and receive
benefits for which a specified period of service is required under
such HL&P employee benefit plan. The foregoing provisions of this
Section 5.10(c) will not apply to any employee benefits provided to
employees of NorAm and the NorAm Affiliates who are covered by a
collective bargaining agreement to the extent such provisions are
inconsistent with the terms of any applicable collective bargaining
agreement.
(d) If the Effective Time does not occur on or before
December 31, 1996, awards made by NorAm under the NorAm 1994 Incentive
Equity Plan (the "NorAm Incentive Plan") with respect to the
performance cycle beginning January 1, 1997 (the "Cycle X Awards")
will be made by utilizing the same salary grade levels and the same
award levels assigned to each salary grade that were utilized in
making awards under the NorAm Incentive Plan for the performance cycle
beginning January 1, 1996.
Each Cycle X Award shall be conditioned upon (1) if
the recipient is covered by an individual severance agreement, the
recipient's waiver of the acceleration of incentive benefits provided
for in Section 3 of such severance agreement solely with respect to
any outstanding Cycle X Awards, (2) the recipient's agreement that,
notwithstanding any provision of any outstanding award agreement to
the contrary, (a) if the recipient becomes employed by HL&P or an
affiliate of HL&P at the Effective Time, each outstanding Cycle X
Award shall automatically expire without the payment of any
consideration to the recipient other than the grant of substitute
awards by HL&P as described below and (b) if the recipient does not
become employed by HL&P or an affiliate of HL&P at the Effective
Time, (i) a fraction of the options subject to each outstanding Cycle
X Award under the NorAm Incentive Plan shall become immediately
exercisable by the recipient (and the option shall expire with respect
to the remaining shares) and (ii) a fraction of all nonforfeited
shares of restricted stock and opportunity shares subject to such
award shall be immediately delivered to the recipient (and the
remaining restricted shares and opportunity shares shall be
forfeited), the number of such option shares, restricted shares and
opportunity shares to
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be based on the opportunity (maximum) level of performance and the
fraction to be determined by multiplying the option shares, restricted
shares and opportunity shares by a fraction, the numerator of which is
the number of calendar days from and including the effective date of
the applicable performance cycle through the date of the Effective
Time and the denominator of which is the total number of days in the
applicable performance cycle and (3) the recipient's agreement that
the foregoing arrangement does not constitute a reduction in the
aggregate of the recipient's base pay and target variable pay (for
individuals not covered by individual severance agreements) or a
reduction in the aggregate of the recipient's base pay and incentive
pay (for individuals covered by individual severance agreements) or
the termination or denial of the recipient's rights to any employee
benefits or a reduction in the scope or value thereof.
As of the Effective Time, HL&P shall cause one or more
substitute long-term incentive awards to be granted under the HII 1994
Long Term Incentive Compensation Plan to each individual whose
award(s) under the NorAm Incentive Plan expired upon the individual's
employment with HL&P as of the Effective Time in accordance with the
preceding paragraph. One substitute award shall be granted for each
award so expired on terms and conditions to be determined in good
faith by the Personnel Committee of HL&P to be substantially equal to
the terms and conditions of the expired award. With respect to each
performance cycle commencing after the Effective Time, executive and
management employees of NorAm and the NorAm Affiliates will be
eligible to participate in all long-term and short-term incentive
compensation, variable pay and similar plans maintained by HL&P for
other executive and management employees of HL&P and the affiliates of
HL&P on substantially the same basis as similarly situated executives
and management employees of HL&P and the affiliates of HL&P. In
addition, all other employees of NorAm and the NorAm Affiliates
(including employees covered by a collective bargaining agreement to
the extent permitted by such agreement) will be eligible to
participate in variable pay plans and programs of HL&P on
substantially the same basis as similarly situated employees of HL&P
and the affiliates of HL&P. The Personnel or Benefits Committee of
HL&P, as applicable, shall have the sole and absolute authority to
determine the NorAm employees eligible to receive, and the amount of,
benefits provided under this Section 5.10(d), whose good faith
determination shall be conclusive and binding on all parties hereto,
including any employee who was employed by NorAm prior to the
Effective Time.
(e) For the calendar year ending December 31, 1996, NorAm
will pay to each employee of NorAm and the NorAm Affiliates who is a
participant in a NorAm annual incentive compensation plan or a
variable pay program the amount of annual incentive compensation or
variable pay awarded to such employee for 1996 based on the level of
performance goals actually attained by NorAm. The amount of such
incentive compensation or variable pay will be determined in
accordance with normal practice, will not be prorated if the Effective
Time is prior to December 31, 1996, and will be paid on or before
March 15, 1997. If the Effective Time occurs in 1997, annual
incentive compensation and variable pay awarded to employees of NorAm
and the NorAm Affiliates for calendar 1997 will be paid to such
employees as soon as practicable after the Effective Time based on the
level of
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performance goals NorAm actually attained at the Effective Time (if
such performance level can reasonably be determined) or (if such
performance level cannot reasonably be determined) based on the level
of performance goals that would have been attained by NorAm at
the target level of performance and will be prorated by multiplying
the amount of incentive compensation so determined by a fraction, the
numerator of which is the number of calendar days from and including
January 1, 1997, through the date of the Effective Time and the
denominator of which is 365.
(f) For a period of at least two years after the
Effective Time, HL&P will maintain and continue initiatives similar to
those reflected in NorAm's Operation Breakthrough and will consider
extending or integrating such initiatives into HL&P and the affiliates
of HL&P in order to more fully integrate the businesses, operations
and employees of HL&P and NorAm.
(g) NorAm has previously established "rabbi trusts" (the
"NorAm Rabbi Trusts") to fund certain nonqualified benefit plans,
programs and compensation agreements for employees and directors.
Pursuant to resolutions adopted by the NorAm Board of Directors at the
time the NorAm Rabbi Trusts were established, the execution of this
Agreement by NorAm will cause the NorAm Rabbi Trusts to be funded.
NorAm will take such action as is necessary to rescind such funding
resolutions. In exchange, HL&P agrees to maintain the NorAm Rabbi
Trusts for an indefinite period of time and, notwithstanding any
provision of the NorAm Rabbi Trusts that would otherwise permit
earlier termination, to terminate the NorAm Rabbi Trusts only with the
unanimous consent of those persons who, immediately prior to any
proposed termination, would benefit from the NorAm Rabbi Trusts if the
NorAm Rabbi Trusts were fully funded. In addition, HL&P agrees to
deliver to the trustee of the NorAm Rabbi Trusts, on or before the
occurrence of a change in control of HL&P (a change in control to have
the same meaning as under the NorAm Rabbi Trusts as if the term
"Company" referred to HL&P), an amount that is not less than 120%
multiplied by the aggregate "Fully Funded" amounts for all
"subaccounts" as most recently determined by the "Actuary" (as such
terms are defined in the NorAm Rabbi Trusts), unless those persons who
would benefit from the funding of the NorAm Rabbi Trusts unanimously
waive such funding.
5.11 Stock Options. (a) At the Effective Time, each
outstanding NorAm Stock Option, whether vested or unvested, of a holder who has
properly elected (in accordance with Section 2.2(e)(i)) to have HL&P assume his
or her NorAm Stock Options, shall be assumed by HL&P. Each such option shall
be deemed to constitute an option to acquire, on the same terms and conditions
(giving effect to any accelerated vesting caused by the NorAm Merger) as were
applicable under such NorAm Stock Option, a number of shares of HL&P Common
Stock equal to the number of shares of NorAm Common Stock purchasable pursuant
to such NorAm Stock Option multiplied by the Stock Consideration, at a price
per share equal to the per-share exercise price for the shares of NorAm Common
Stock purchasable pursuant to such NorAm Stock Option divided by the Stock
Consideration; provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification under any of
Sections 422-424 of the Code, the
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option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code; and provided further, that the number
of shares of HL&P Common Stock that may be purchased upon exercise of such
NorAm Stock Option shall not include any fractional share and, upon exercise of
such NorAm Stock Option, a cash payment shall be made for any fractional share
based upon the closing price of a share of HL&P Common Stock on the NYSE on the
last Trading Day of the calendar month immediately preceding the date of
exercise.
(b) HL&P shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of HL&P Common Stock for delivery upon
exercise of the NorAm Stock Options assumed in accordance with this Section
5.11. As soon as practicable after the Effective Time, HL&P shall file with the
SEC a registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of HL&P Common Stock subject to the
NorAm Stock Options assumed in accordance with this Section 5.11 and shall use
all commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as the
NorAm Stock Options remain outstanding.
5.12 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, the NorAm Merger Surviving Corporation
shall indemnify, defend and hold harmless each person who is now, or has been
at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of NorAm or any of its Subsidiaries or an employee
of NorAm or any of its Subsidiaries who acts as a fiduciary under any NorAm
Benefit Plan or NorAm Pension Benefit Plan (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director,
officer, or such employee of NorAm or any of its Subsidiaries whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the
full extent permitted under applicable law (and the NorAm Merger Surviving
Corporation will pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent permitted by
law). Without limiting the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time), (i) the NorAm Merger
Surviving Corporation shall have the right to assume the defense thereof (which
it shall, in cooperation with the Indemnified Parties, vigorously defend) and
the NorAm Merger Surviving Corporation shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if the NorAm Merger Surviving Corporation elects
not to assume such defense or there is a conflict of interest between the NorAm
Merger Surviving Corporation, on the one hand, and the Indemnified Parties, on
the
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other hand, including situations in which there are one or more legal defenses
available to the Indemnified Party that are different from or additional to
those available to the NorAm Merger Surviving Corporation, the Indemnified
Parties may retain counsel satisfactory to them, and the NorAm Merger Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the NorAm Merger Surviving Corporation shall not, in connection
with any one such action or proceeding or separate but substantially similar
actions or proceedings arising out of the same general allegations, be liable
for the fees and expenses of more than one separate firm of attorneys at any
time for all Indemnified Parties except to the extent that local counsel, in
addition to such parties' regular counsel, is required in order to effectively
defend against such action or proceeding, (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) the NorAm Merger
Surviving Corporation shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld),
and provided, further, that the NorAm Merger Surviving Corporation shall not
have any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final, that the indemnification of such Indemnified Party in the
manner contemplated hereby is prohibited by applicable law. NorAm, HII, HL&P
and Merger Sub agree that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the Indemnified Parties (including in NorAm's Restated
Certificate of Incorporation or Bylaws or in the indemnification agreements
previously provided to HII) with respect to matters occurring through the
Effective Time, shall survive the Mergers and shall continue in full force and
effect for a period of six years from the Effective Time; provided, however,
that all rights to indemnification in respect of any Indemnified Liabilities
asserted or made within such period shall continue until the disposition of
such Indemnified Liabilities.
(b) For a period of six years after the Effective Time, the NorAm
Merger Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by NorAm
and its Subsidiaries (provided that the NorAm Merger Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions that are no less advantageous in any material
respect to the Indemnified Parties) with respect to matters arising before the
Effective Time, provided that the NorAm Merger Surviving Corporation shall not
be required to pay an annual premium for such insurance in excess of 150% of
the last annual premium paid by NorAm prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount. NorAm
represents that the last annual premium paid by NorAm for such insurance prior
to the date hereof is the amount set forth in Section 5.12(b) to the NorAm
Disclosure Schedule.
5.13 Compliance with WARN Act. HII shall, or shall cause
HL&P or Merger Sub to, comply with all laws governing the shutdown of
operations of facilities, including any action that could be construed as a
"plant closing" or "mass layoff" as those terms are defined in the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101.2109
("WARN") or any "employment loss" as defined in WARN which an employee of NorAm
or any of its Subsidiaries may suffer or may be deemed to suffer in connection
with the NorAm Merger.
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5.14 Agreement to Defend. In the event any claim, action,
suit, investigation or other proceeding by any governmental body or other
person or other legal or administrative proceeding is commenced that questions
the validity or legality of the transactions contemplated hereby or seeks
damages in connection therewith, the parties hereto agree to cooperate and use
their reasonable efforts to defend against and respond thereto.
5.15 Public Announcements. HII, HL&P and Merger Sub, on
the one hand, and NorAm, on the other hand, will consult with each other before
issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange or
transaction reporting system.
5.16 Other Actions. Except as contemplated by this
Agreement, neither HII, HL&P nor NorAm shall, and none of them shall permit any
of their respective Subsidiaries to, take or agree or commit to take any action
that is reasonably likely to result in any of its respective representations or
warranties hereunder being untrue in any material respect or in any of the
conditions to the Mergers set forth in Article VI not being satisfied.
5.17 Advice of Changes; SEC Filings. HII, HL&P and NorAm
shall confer on a regular basis with each other, report on operational matters
and promptly advise each other orally and in writing of any change or event
having, or which, insofar as can reasonably be foreseen, could have, a Material
Adverse Effect on HII or NorAm, as the case may be. NorAm, HII and HL&P shall
promptly provide each other (or their respective counsel) copies of all filings
made by such party with the SEC or any other Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
5.18 Reorganization. It is the intention of the parties
hereto that the Mergers will qualify as a reorganization described in Section
368(a) of the Code (and any comparable provisions of applicable state law).
Neither HL&P, HII nor NorAm (nor any of their respective Subsidiaries) will
take or omit to take any action (whether before, on or after the Closing Date)
that would cause the Mergers not to be so treated. The parties will
characterize the Mergers as such a reorganization for purposes of all Returns
and other filings.
5.19 HII/HL&P Merger Surviving Corporation Board of
Directors. The Board of Directors of the HII/HL&P Merger Surviving Corporation
will take such action as may be necessary (including the amendment of the
HII/HL&P Merger Surviving Corporation's bylaws) to cause the election of four
persons, each of whom shall be mutually agreed upon by NorAm and HII and shall
have been a director of NorAm immediately prior to the date hereof, to be
directors of the HII/HL&P Merger Surviving Corporation immediately after the
Effective Time. One of such directors shall be elected as a Class II director,
one shall be elected as a Class III director, and two shall be elected as Class
I directors. Subject to the fiduciary duties of its Board of Directors,
HII/HL&P Merger Surviving Corporation shall nominate and solicit proxies for
the re-election of
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such Class II director for an additional three-year period upon expiration of
his initial term, provided such director continues to be qualified and willing
to serve.
5.20 Execution of Supplemental Indentures. At the
Effective Time, the NorAm Merger Surviving Corporation, and additionally in the
case of the NorAm Convertible Debentures and the NorAm Convertible Junior
Debentures, the HII/HL&P Merger Surviving Corporation, shall execute and
deliver, supplemental indentures, in form satisfactory to HII, assuming the
obligations of NorAm under the indentures governing NorAm's long-term
indebtedness.
5.21 Disclosure Schedules. The NorAm Disclosure Schedule
and the HII Disclosure Schedule (collectively, the "Disclosure Schedules") are
an integral part of this Agreement and shall modify or otherwise affect the
respective representations, warranties, covenants or agreements of the parties
hereto contained in this Agreement. All of the representations and warranties
of the parties hereto contained herein shall apply as if any of the Mergers,
the Alternative Merger or the Second Alternative Merger are to be consummated.
5.22 Fairness Opinions Not Withdrawn. It shall be a
condition to the obligation of NorAm to mail the Joint Proxy Statement to its
stockholders and to hold the NorAm Stockholders' Meeting that the opinion of
Merrill Lynch, referred to in Section 3.1(t), shall not have been withdrawn,
and it shall be a condition to the obligation of HII to mail the Joint Proxy
Statement to its shareholders and to hold the HII Shareholders' Meeting that
the opinion of CS First Boston, referred to in Section 3.2(q), shall not have
been withdrawn.
ARTICLE IV
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Mergers shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) NorAm Stockholder Approval. This Agreement and the
NorAm Merger shall have been approved and adopted by the affirmative
vote of the holders of a majority of the outstanding shares of NorAm
Common Stock entitled to vote thereon.
(b) HII Shareholder Approval. This Agreement, the
HII/HL&P Merger and the issuance of the Stock Consideration in the
NorAm Merger shall have been approved and adopted by the affirmative
vote of the holders of two-thirds of the outstanding shares of HII
Common Stock entitled to vote thereon.
(c) NYSE Listing. The shares of HL&P Common Stock
issuable to HII shareholders and NorAm stockholders pursuant to this
Agreement and such other shares of
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HL&P Common Stock required to be reserved for issuance in connection
with the Mergers shall have been authorized for listing on the NYSE
upon official notice of issuance.
(d) Other Approvals. The waiting period applicable to
the consummation of the Mergers under the HSR Act shall have expired
or been terminated and all filings required to be made prior to the
relevant Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the relevant Effective
Time from, any Governmental Entity in connection with the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby by NorAm, HII, HL&P and Merger Sub
shall have been made or obtained (as the case may be), except for such
consents, approvals, permits and authorizations the failure of which
to be obtained would not, in the aggregate, be reasonably likely in
the judgment of HII to result in a Material Adverse Effect on HL&P
(assuming the Mergers have taken place) or to materially adversely
affect the consummation of the Mergers, and no such consent, approval,
permit or authorization shall impose terms or conditions that would
have, or would be reasonably likely to have, in the judgment of HII, a
Material Adverse Effect on NorAm or HL&P (assuming the Mergers have
taken place). Unless otherwise agreed to by HII, no such consent,
approval, permit or authorization shall then be subject to appeal.
(e) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction, no order of any
Governmental Entity having jurisdiction over HL&P, HII or NorAm, and
no other legal restraint or prohibition shall be in effect (an
"Injunction") preventing or making illegal the consummation of the
Mergers; provided, however, that prior to any party invoking this
condition, such party shall have complied fully with its obligations
under Section 5.7.
6.2 Conditions of Obligations of HII, HL&P and Merger
Sub. The obligations of HII, HL&P and Merger Sub to effect the Mergers are
subject to the satisfaction of the following conditions, any or all of which
may be waived in whole or in part by HII, HL&P and Merger Sub.
(a) Representations and Warranties. Each of the
representations and warranties of NorAm set forth in this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except where the failure to
be so true and correct (without giving effect to the individual
materiality qualifications and thresholds otherwise contained in
Section 3.1 hereof) could not reasonably be expected to have a
Material Adverse Effect on NorAm or as otherwise contemplated by this
Agreement, and HII shall have received a certificate signed on behalf
of NorAm by the Chief Executive Officer and the Chief Financial
Officer of NorAm to such effect.
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(b) Performance of Obligations of NorAm. NorAm shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing
Date, and HII shall have received a certificate signed on behalf of
NorAm by the Chief Executive Officer and the Chief Financial Officer
of NorAm to such effect.
(c) Letters from Rule 145 Affiliates. HL&P shall have
received from each person named in the letter referred to in Section
5.8 an executed copy of an agreement as provided in Section 5.8.
(d) Number of NorAm Dissenting Shares. At the Effective
Time, the aggregate number of NorAm Dissenting Shares shall not exceed
10% of the total number of issued and outstanding shares of NorAm
Common Stock.
(e) Tax Opinion. HII shall have received an opinion, in
form and substance satisfactory to HII, dated the Closing Date, a copy
of which will be furnished to NorAm, of Baker & Botts, L.L.P., counsel
to HII, to the effect that, if the Mergers (or in lieu thereof, the
Alternative Merger or the Second Alternative Merger) are consummated
in accordance with the terms of this Agreement, each of the HII/HL&P
Merger and the NorAm Merger (or in lieu thereof, the Alternative
Merger or the Second Alternative Merger) will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, such counsel may
receive and rely upon appropriate representations of fact contained in
certificates of HII, HL&P, Merger Sub, NorAm and certain stockholders
of HII and of NorAm, which representations are in form and substance
reasonably satisfactory to such counsel.
(f) No Material Limitations or Restraints. No Injunction
shall be in effect (i) imposing any material limitation upon the
ability of HII or any of its Subsidiaries effectively to control the
business or operations of NorAm or any of its Subsidiaries or (ii)
prohibiting or imposing any material limitation upon HII's or any of
its Subsidiaries' ownership or operation of all or any material
portion of the business or assets or properties of HII or NorAm or any
of their respective Subsidiaries or compelling HII or NorAm or any of
their respective Subsidiaries to divest or hold separate all or any
material portion of the business or assets or properties of HII or
NorAm or any of their respective Subsidiaries or imposing any other
material limitation on any of them in the conduct of their businesses
and no such action by any Governmental Entity seeking such an
Injunction or an Injunction preventing or making illegal the
consummation of the Mergers shall be pending; provided, however, that
prior to invoking this condition, HII, HL&P and Merger Sub shall have
complied fully with their obligations under Section 5.7.
(g) NorAm Required Consents. The NorAm Required Consents
shall have been obtained, except for such NorAm Required Consents the
failure of which to be obtained would not have a Material Adverse
Effect on NorAm.
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6.3 Conditions of Obligations of NorAm. The obligation
of NorAm to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by NorAm:
(a) Representations and Warranties. Each of the
representations and warranties of HII, HL&P and Merger Sub set forth
in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except
where the failure to be so true and correct (without giving effect to
the individual materiality qualifications and thresholds otherwise
contained in Section 3.2 hereof) could not reasonably be expected to
have a Material Adverse Effect on HII or as otherwise contemplated by
this Agreement, and NorAm shall have received a certificate signed on
behalf of HII by the Chief Executive Officer and the Chief Financial
Officer of HII to such effect.
(b) Performance of Obligations of HII, HL&P and Merger
Sub. HII, HL&P and Merger Sub shall have performed in all material
respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and NorAm shall have
received a certificate signed on behalf of HII by the Chief Executive
Officer and the Chief Financial Officer of HII to such effect.
(c) Tax Opinion. NorAm shall have received an opinion,
in form and substance satisfactory to NorAm, dated the Closing Date, a
copy of which will be furnished to HII, of Jones, Day, Reavis & Pogue,
counsel to NorAm, to the effect that, if the Mergers (or in lieu
thereof, the Alternative Merger or the Second Alternative Merger) are
consummated in accordance with the terms of this Agreement, the NorAm
Merger (or in lieu thereof, the Alternative Merger or the Second
Alternative Merger) should be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, such counsel may receive and rely upon
appropriate representations of fact contained in certificates of HII,
HL&P, Merger Sub, NorAm and certain stockholders and members of
management of NorAm, which representations are in form and substance
reasonably satisfactory to such counsel.
(d) HII Required Consents. The HII Required Consents
shall have been obtained, except for such HII Required Consents the
failure of which to be obtained would not have a Material Adverse
Effect on HII.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and
the Mergers may be abandoned at any time prior to the Effective Time, whether
before or after approval of the matters
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presented in connection with the Mergers by the shareholders of HII and the
stockholders of NorAm:
(a) by mutual written consent of NorAm, HII and HL&P, or
by mutual action of their respective Boards of Directors;
(b) by either NorAm or HII if (i) any Governmental Entity
shall have issued any Injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of
the Mergers and such Injunction or other action shall have become
final and nonappealable; or (ii) any required approval of the
shareholders or stockholders of the other party shall not have been
obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of shareholders or stockholders, as
the case may be, or at any adjournment thereof;
(c) by either NorAm or HII if the Mergers shall not have
been consummated by the first anniversary of the date hereof (the
"Initial Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose breach of any representation or warranty
or failure to fulfill any covenant or agreement under this Agreement
has been the cause of or resulted in the failure of the Mergers to
occur on or before such date; and provided, further, that if on the
Initial Termination Date the conditions to the Closing set forth in
Section 6.1(d) shall not have been fulfilled but all other conditions
to the Closing shall have been fulfilled or shall be capable of being
fulfilled, then the Initial Termination Date shall be extended to
December 31, 1997;
(d) by HII if (i) for any reason NorAm fails to call and
hold a stockholders meeting for the purpose of voting upon this
Agreement and the NorAm Merger by February 15, 1997 (provided that the
right to terminate this Agreement under this Section 7.1(d) shall not
be available to HII if (x) the S-4 shall not have been declared
effective by the SEC at least 45 days prior to the date of termination
or (y) NorAm would be entitled to terminate this Agreement under
Section 7.1(e)); (ii) NorAm shall have failed to comply in any
material respect with any of the covenants or agreements contained in
this Agreement to be complied with or performed by NorAm at or prior
to such date of termination (provided such breach has not been cured
within 30 days following receipt by NorAm of notice of such breach and
is existing at the time of termination of this Agreement); (iii) any
representation or warranty of NorAm contained in this Agreement shall
not be true in all material respects when made or on or at the time of
termination as if made on such date of termination (except to the
extent it relates to a particular date) provided such breach has not
been cured within 30 days following receipt by NorAm of notice of such
breach and is existing at the time of termination of this Agreement,
except where the failure to be so true and correct (without giving
effect to the individual materiality qualifications and thresholds
otherwise contained in Section 3.1 hereof) could not reasonably be
expected to have a Material Adverse Effect on NorAm; (iv) after the
date hereof there has been any Material Adverse Change with respect to
NorAm, except for general economic changes or changes
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that may affect the industries of NorAm or any of its Subsidiaries
generally; or (v) any Governmental Entity shall have issued any
Injunction or taken any other action permanently imposing, prohibiting
or compelling any of the limitations, prohibitions or compulsions set
forth in Section 6.2(f) and such Injunction or other action shall have
become final and nonappealable;
(e) by NorAm if (i) other than pursuant to Article VIII,
the Board of Directors of HII shall have withdrawn or modified, in any
manner which is adverse to NorAm, its recommendation or approval of
the HII/HL&P Merger or this Agreement and the transactions
contemplated hereby or shall have resolved to do so; (ii) other than
pursuant to Article VIII, for any reason HII fails to call and hold a
shareholders meeting for the purpose of voting upon this Agreement and
the HII/HL&P Merger by February 15, 1997 (provided that the right to
terminate this Agreement under this Section 7.1(e) shall not be
available to NorAm if (x) the S-4 shall not have been declared
effective by the SEC at least 45 days prior to the date of termination
or (y) HII would be entitled to terminate this Agreement under Section
7.1(d) or (f)); (iii) HII, HL&P or Merger Sub shall have failed to
comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by it at
or prior to such date of termination (provided such breach has not
been cured within 30 days following receipt by HII of notice of such
breach and is existing at the time of termination of this Agreement);
(iv) any representation or warranty of HII or HL&P contained in this
Agreement shall not be true in all material respects when made or on
or at the time of termination as if made on such date of termination
(except to the extent it relates to a particular date) provided such
breach has not been cured within 30 days following receipt by HII of
notice of such breach and is existing at the time of termination of
this Agreement, except where the failure to be so true and correct
(without giving effect to the individual materiality qualifications
and thresholds otherwise contained in Section 3.2 hereof) could not
reasonably be expected to have a Material Adverse Effect on HII; or
(v) after the date hereof there has been any Material Adverse Change
with respect to HII, except for general economic changes or changes
that may affect the industries of HII or any of its Subsidiaries
generally;
(f) by HII, if (i) the Board of Directors of NorAm shall
have withdrawn or modified, in any manner which is adverse to HII,
HL&P or Merger Sub, its recommendation or approval of the NorAm Merger
or this Agreement and the transactions contemplated hereby or shall
have resolved to do so, or (ii) the Board of Directors of NorAm shall
have recommended to the stockholders of NorAm any Acquisition Proposal
or any transaction described in the definition of Acquisition
Proposal, or shall have resolved to do so; or
(g) by NorAm, prior to approval of this Agreement by
NorAm's stockholders, if NorAm shall exercise the right specified in
clause (ii) of Section 4.3(a); provided that NorAm may not effect such
termination pursuant to this Section 7.1(g) unless and until (i) NorAm
gives HII at least one week's prior notice of its intention to effect
such termination pursuant to this Section 7.1(g); (ii) during such
week, NorAm shall, and shall cause its respective financial and legal
advisors to, negotiate with HII to make such adjustments in
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the terms and conditions of this Agreement as would enable NorAm to
proceed with the transactions contemplated herein; and (iii) NorAm
pays the amounts required by Section 7.2 concurrently with such
termination.
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any
party hereto as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on
the part of HII, HL&P, Merger Sub or NorAm except (i) with respect to
this Section 7.2, the second and third sentences of Section 5.4, and
Section 9.1, and (ii) to the extent that such termination results from
the willful breach (except as provided in Section 9.8) by a party
hereto of any of its representations or warranties or of any of its
covenants or agreements contained in this Agreement.
(b) If (i) HII or NorAm terminates this Agreement
pursuant to Section 7.1(f)(ii) or 7.1(g) or (ii) HII terminates this
Agreement pursuant to Section 7.1(b)(ii) or 7.1(f)(i) and at the time
of such termination or prior to the NorAm Stockholders' Meeting there
shall have been an Acquisition Proposal, NorAm shall, on the day of
such termination, pay HII a fee of $75 million in cash by wire
transfer of immediately available funds to an account designated by
HII.
(c) If HII terminates this Agreement pursuant to Section
7.1(d)(i) or 7.1(d)(ii), in either case as a result of a willful
breach of this Agreement by NorAm, and Section 7.2(b)(ii) shall not
apply, NorAm shall, on the day of such termination, pay HII a fee of
$35 million in cash by wire transfer of immediately available funds to
an account designated by HII.
(d) If HII terminates this Agreement pursuant to Section
7.1(b)(ii) or 7.1(f)(i) and Section 7.2(b)(ii) shall not apply, NorAm
shall, on the day of such termination, pay HII a fee of $10 million in
cash by wire transfer of immediately available funds to an account
designated by HII.
(e) If NorAm terminates this Agreement pursuant to
Section 7.1(e)(ii) or (iii), in either case as result of a willful
breach of this Agreement by HL&P, HII or Merger Sub, HII shall, on the
day of such termination, pay NorAm a fee of $35 million in cash by
wire transfer of immediately available funds to an account designated
by NorAm.
(f) If NorAm terminates this Agreement pursuant to
Section 7.1(b)(ii) or 7.1(e)(i), HII shall, on the day of such
termination, pay NorAm a fee of $10 million in cash by wire transfer
of immediately available funds to an account designated by NorAm.
(g) If within 12 months of any termination described in
Section 7.2(c) or (d) above, NorAm agrees to or consummates an
Acquisition Proposal, then upon the signing of a definitive agreement
relating to such an Acquisition Proposal, or, if no such agreement is
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signed, then at the closing of such Acquisition Proposal, NorAm shall
pay HII a fee equal to $75 million in cash minus any amounts as may
have been previously paid by NorAm pursuant to this Section 7.2 by
wire transfer of immediately available funds to an account designated
by HII.
7.3 Expenses. The parties agree that the agreements
contained in Section 7.2 are an integral part of the transactions contemplated
by this Agreement and constitute liquidated damages and not a penalty.
Notwithstanding anything to the contrary contained in Section 7.2, if one party
fails to promptly pay to the other any fee due under Section 7.2, in addition
to any amounts paid or payable pursuant to such section, the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date
such fee was required to be paid.
7.4 Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Mergers by the shareholders of HII and/or the stockholders
of NorAm, but, after any such approval, no amendment shall be made which by law
requires further approval by such shareholders or stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed: (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE VIII
ALTERNATIVE MERGER
8.1 Alternative Merger.
(a) If HL&P, after consultation with its legal counsel,
determines that upon consummation of the transactions contemplated
herein the HII/HL&P Merger Surviving Corporation would not be an
exempt "public utility holding company" under Section 3(a)(2) of the
1935 Act, or any rules or regulations promulgated by the SEC under the
1935 Act, then notwithstanding the other provisions of this Agreement,
NorAm and HII shall be merged with and into HL&P, with HL&P being the
surviving corporation (the "Alternative
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Merger"), and the other provisions of Sections 8.1 through 8.4 shall
be applicable to NorAm, HII, HL&P and the Alternative Merger.
Such determination may be made before or after (i) NorAm's
stockholders approve this Agreement and the NorAm Merger (or in lieu
thereof and only in the circumstances set forth in this Section 8.1 or
Section 8.5, the Alternative Merger or the Second Alternative Merger,
respectively) or (ii) HII's shareholders approve this Agreement, the
HII/HL&P Merger and the issuance of the Stock Consideration in the
NorAm Merger (or in lieu of the Mergers and only in the circumstances
set forth in this Section 8.1 or Section 8.5, the Alternative Merger
or the Second Alternative Merger, respectively).
(b) At the Alternative Merger Effective Time (as
hereinafter defined), each of NorAm and HII shall be merged with and
into HL&P in accordance with the TBCA and the DGCL. As soon as
practicable at or after the Closing, articles of merger, prepared and
executed in accordance with the relevant provisions of the TBCA, with
respect to the Alternative Merger (the "Alternative Merger Articles of
Merger"), shall be filed with the Secretary of State of the State of
Texas and a certificate of merger, prepared and executed in accordance
with the relevant provisions of the DGCL, with respect to the
Alternative Merger (the "Alternative Merger Certificate of Merger"),
shall be filed with the Secretary of State of the State of Delaware.
The Alternative Merger Articles of Merger and the Alternative Merger
Certificate of Merger shall state that the Alternative Merger shall
become effective immediately upon the later of (i) the filing of the
Alternative Merger Articles of Merger with the Secretary of State of
the State of Texas and (ii) the filing of the Alternative Merger
Certificate of Merger with the Secretary of State of the State of
Delaware, or, if agreed to by HL&P, HII and NorAm, at such time
thereafter as is provided in the Alternative Merger Articles of Merger
and the Alternative Merger Certificate of Merger. The Alternative
Merger shall become effective at the later of (i) the time of the
issuance of the certificate of merger with respect to the Alternative
Merger by the Secretary of State of the State of Texas and (ii) the
time that the Alternative Merger Certificate of Merger shall be duly
filed with the Secretary of State of the State of Delaware or, if a
later effective time was provided in the Alternative Merger Articles
of Merger and the Alternative Merger Certificate of Merger, such later
time (the "Alternative Merger Effective Time").
8.2 Effects of the Alternative Merger.
(a) At the Alternative Merger Effective Time: (i) each of
NorAm and HII shall be merged with and into HL&P, the separate
existence of NorAm and HII shall cease and HL&P shall continue as the
surviving corporation (NorAm, HII and HL&P are sometimes referred to
herein as the "Alternative Merger Constituent Corporations" and HL&P
is sometimes referred to herein as the "Alternative Merger Surviving
Corporation"); (ii) Article I and Article VI of the Restated Articles
of Incorporation of HL&P shall be amended as set forth in Exhibit A
hereto and, as so amended, such Restated Articles of Incorporation
shall be the Articles of Incorporation of the Alternative Merger
Surviving Corporation; and (iii) the Bylaws of HII as in effect
immediately prior to the Alternative Merger Effective Time shall be
the Bylaws of the Alternative Merger Surviving Corporation.
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(b) The directors and officers of HII at the Alternative
Merger Effective Time shall, from and after the Alternative Merger
Effective Time, be the initial directors and officers of the
Alternative Merger Surviving Corporation and shall serve until their
successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the
Alternative Merger Surviving Corporation's Articles of Incorporation
and Bylaws.
(c) The Alternative Merger shall have the effects set
forth in this Section 8.2 and the applicable provisions of the TBCA
and the DGCL.
8.3 Effect of the Alternative Merger on the Capital Stock
of the Alternative Merger Constituent Corporations; Exchange of Certificates.
All of the provisions of this Agreement shall apply to the Alternative Merger,
except that (i) references to the HII/HL&P Merger Effective Time, the NorAm
Merger Effective Time and the Effective Time shall be deemed to be references
to the Alternative Merger Effective Time, (ii) references to the HII/HL&P
Merger Surviving Corporation and the NorAm Merger Surviving Corporation shall
be deemed to be references to the Alternative Merger Surviving Corporation and
(iii) references to the HII/HL&P Merger and the NorAm Merger shall be deemed to
be references to the Alternative Merger.
8.4 Amendment to This Agreement. If, pursuant to Section
8.1(a), it is decided that the Alternative Merger should be consummated, the
parties hereto shall forthwith execute an appropriate amendment to this
Agreement, which amendment (i) shall reflect any and all changes required to be
made to this Agreement so that the representations, warranties, covenants and
agreements of the parties contained herein relating to (x) the HII/HL&P Merger
or the NorAm Merger or (y) the conduct of the HII/HL&P Merger Surviving
Corporation or the NorAm Merger Surviving Corporation after the relevant
Effective Time, shall apply to the Alternative Merger and the Alternative
Merger Surviving Corporation, respectively, and (ii) shall not require further
approval of the stockholders of NorAm or of the shareholders of HII.
8.5 The Second Alternative Merger.
(a) The parties hereto acknowledge that in the absence of
applicable regulatory constraints under the 1935 Act, it would be
preferable for NorAm to merge with and into Merger Sub, with Merger
Sub being the surviving corporation, and for the HII/HL&P Merger not
to be effected. Accordingly, if, at the time at which all of the
conditions to the parties' respective obligations to consummate the
Mergers have been satisfied or waived, no such constraints under the
1935 Act shall require the Mergers to occur, then notwithstanding the
other provisions of this Agreement, the parties hereto shall effect
the Second Alternative Merger in lieu of the Mergers (and in lieu of
the Alternative Merger), and other provisions of Sections 8.5 through
8.8 shall be applicable to NorAm, HII, HL&P and the Second Alternative
Merger.
(b) At the Second Alternative Merger Effective Time (as
hereinafter defined), NorAm shall be merged with and into Merger Sub
in accordance with the DGCL. As soon
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as practicable at or after the Closing, a certificate of merger,
prepared and executed in accordance with the relevant provisions of
the DGCL, with respect to the Second Alternative Merger (the "Second
Alternative Merger Certificate of Merger"), shall be filed with the
Secretary of State of the State of Delaware. The Second Alternative
Merger Certificate of Merger shall state that the Second Alternative
Merger shall become effective immediately upon the filing of the
Second Alternative Merger Certificate of Merger with the Secretary of
State of the State of Delaware, or, if agreed to by HII and NorAm, at
such time thereafter as is provided in the Second Alternative Merger
Certificate of Merger. The Second Alternative Merger shall become
effective at the time that the Second Alternative Merger Certificate
of Merger shall be duly filed with the Secretary of State of the State
of Delaware or, if a later effective time was provided in the Second
Alternative Merger Certificate of Merger, such later time (the "Second
Alternative Merger Effective Time").
8.6 Effects of the Second Alternative Merger.
(a) At the Second Alternative Merger Effective Time: (i)
NorAm shall be merged with and into Merger Sub, the separate existence
of NorAm shall cease and Merger Sub shall continue as the surviving
corporation (NorAm and Merger Sub are sometimes referred to herein as
the "Second Alternative Merger Constituent Corporations" and Merger
Sub is sometimes referred to herein as the "Second Alternative Merger
Surviving Corporation"); (ii) the Certificate of Incorporation of
Merger Sub shall be amended to change the name of Merger Sub to "NorAm
Energy Corp.," and, as so amended, such Certificate of Incorporation
shall be the Certificate of Incorporation of the Second Alternative
Merger Surviving Corporation; and (iii) the Bylaws of Merger Sub as in
effect immediately prior to the Second Alternative Merger Effective
Time shall be the Bylaws of the Second Alternative Merger Surviving
Corporation.
(b) The directors of Merger Sub at the Second Alternative
Merger Effective Time shall, from and after the Second Alternative
Merger Effective Time, be the initial directors of the Second
Alternative Merger Surviving Corporation and the officers of NorAm at
the Second Alternative Merger Effective Time shall, from and after the
Second Alternative Merger Effective Time, be the initial officers of
the Second Alternative Merger Surviving Corporation, and such
directors and officers shall serve until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Second Alternative
Merger Surviving Corporation's Certificate of Incorporation and
Bylaws.
(c) The Second Alternative Merger shall have the effects
set forth in this Section 8.6 and the applicable provisions of the
DGCL.
8.7 Effect of the Second Alternative Merger on the
Capital Stock of the Second Alternative Merger Constituent Corporations;
Exchange of Certificates. All of the provisions of this Agreement shall apply
to the Second Alternative Merger, except that (i) references to the HII/HL&P
Merger Effective Time, the NorAm Merger Effective Time and the Effective Time
shall
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be deemed to be references to the Second Alternative Merger Effective Time,
(ii) references to the HII/HL&P Merger Surviving Corporation and the NorAm
Merger Surviving Corporation shall be deemed to be references to the Second
Alternative Merger Surviving Corporation, (iii) references to the HII/HL&P
Merger and the NorAm Merger shall be deemed to be references to the Second
Alternative Merger and (iv) references to HL&P Common Stock shall be deemed to
be references to HII Common Stock.
8.8 Amendment to This Agreement. If, pursuant to Section
8.5(a), it is decided that the Second Alternative Merger should be consummated,
the parties hereto shall forthwith execute an appropriate amendment to this
Agreement, which amendment (i) shall reflect any and all changes required to be
made to this Agreement so that the representations, warranties, covenants and
agreements of the parties contained herein relating to (x) the HII/HL&P Merger
or the NorAm Merger or (y) the conduct of the HII/HL&P Merger Surviving
Corporation or the NorAm Merger Surviving Corporation after the relevant
Effective Time, shall apply to the Second Alternative Merger and the Second
Alternative Merger Surviving Corporation, respectively, and (ii) shall not
require further approval of the stockholders of NorAm or of the shareholders of
HII.
ARTICLE IX
GENERAL PROVISIONS
9.1 Payment of Expenses. Each party hereto shall pay its
own expenses incident to preparing for entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, whether
or not the Mergers shall be consummated, except that the filing fees with
respect to the Joint Proxy Statement and the S-4 shall be shared equally by
HL&P and NorAm.
9.2 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time and any liability for breach or violation thereof
shall terminate absolutely and be of no further force and effect at and as of
the Effective Time, except for the agreements contained in Article II, Sections
5.10 through 5.14 and 7.2 and Articles VIII and IX, the agreements delivered
pursuant to Section 5.8 and the representations, covenants and agreements
contained in Section 5.18. The Confidentiality Agreements shall survive the
execution and delivery of this Agreement, and the provisions of the
Confidentiality Agreements shall apply to all information and material
delivered hereunder.
9.3 Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied or, if mailed, five business days after
the date of mailing to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder:
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(a) if to HII, HL&P or Merger Sub, to:
Houston Industries Incorporated
Houston Industries Plaza
1111 Louisiana Street
Houston, Texas 77002-5231
Attention: Chief Executive Officer
with copies to:
Hugh Rice Kelly
Senior Vice President and General Counsel
Houston Industries Incorporated
Houston Industries Plaza
1111 Louisiana Street
Houston, Texas 77002-5231
Stephen A. Massad
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
and (b) if to NorAm, to:
NorAm Energy Corp.
1600 Smith Street
11th Floor
Houston, Texas 77002
Attention: Chief Executive Officer
with copies to:
Hubert Gentry, Jr.
Senior Vice President and General Counsel
NorAm Energy Corp.
1600 Smith Street
11th Floor
Houston, Texas 77002
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Gerry D. Osterland
Jones, Day, Reavis & Pogue
555 West Fifth Street
Suite 4600
Los Angeles, California 90013-1025
9.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents, glossary of defined terms
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Unless the context otherwise requires, "or" is disjunctive but
not necessarily exclusive, and words in the singular include the plural and in
the plural include the singular.
9.5 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
9.6 Entire Agreement; No Third Party Beneficiaries. This
Agreement (together with the Confidentiality Agreements and any other documents
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereto and (b) except as
provided in Sections 5.9 through 5.12, is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Notwithstanding the foregoing or any provision in this Agreement to the
contrary, each individual who is an employee or former employee of NorAm or any
NorAm Affiliate at the Effective Time shall be a third party beneficiary with
respect to the provisions of Sections 5.9 through 5.11 relating to such
employee's compensation or benefits with full authority to enforce such
provision as if such employee or former employee were a party to this
Agreement.
9.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas, without giving
effect to the principles of conflicts of law thereof, except to the extent the
DGCL is required to govern the NorAm Merger, the Alternative Merger or the
Second Alternative Merger, as the case may be.
9.8 No Remedy in Certain Circumstances. Each party
agrees that, should any court or other competent authority hold any provision
of this Agreement or part hereof to be null, void or unenforceable, or order
any party to take any action inconsistent herewith or not to take an action
consistent herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations contained or set
forth herein shall not in any way be affected or impaired thereby, unless the
foregoing inconsistent action or the failure to take an action constitutes a
material breach of this Agreement or makes this Agreement impossible to
perform, in
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which case this Agreement shall terminate pursuant to Article VII hereof.
Except as otherwise contemplated by this Agreement, to the extent that a party
hereto took an action inconsistent herewith or failed to take action consistent
herewith or required hereby pursuant to an order or judgment of a court or
other competent authority, such party shall not incur any liability or
obligation unless such party breached its obligations under Section 5.7 or did
not in good faith seek to resist or object to the imposition or entering of
such order or judgment.
9.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Merger Sub may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to any newly formed, direct wholly owned Subsidiary of HII, which Subsidiary
would then be substituted for Merger Sub for purposes of this Agreement.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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IN WITNESS WHEREOF, each party has caused this Agreement to be
signed by its respective officers thereunto duly authorized, all as of the date
first written above.
HOUSTON INDUSTRIES INCORPORATED
By: /s/ DON D. JORDAN
-------------------------------------
Don D. Jordan
Chairman and Chief Executive Officer
HOUSTON LIGHTING & POWER COMPANY
By: /s/ DON D. JORDAN
-------------------------------------
Don D. Jordan
Chairman and Chief Executive Officer
HI MERGER, INC.
By: /s/ DON D. JORDAN
-------------------------------------
Don D. Jordan
Chairman and Chief Executive Officer
NORAM ENERGY CORP.
By: /s/ T. MILTON HONEA
-------------------------------------
T. Milton Honea
Chairman of the Board, President and
Chief Executive Officer
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Exhibit A
Amendments to Restated Articles of Incorporation
of
Houston Lighting & Power Company
The following amendments to the Restated Articles of
Incorporation of HL&P will be made, subject to shareholder approval, at the
HII/HL&P Merger Effective Time or the Alternative Merger Effective Time, as the
case may be, in order to (i) change the name of the HII/HL&P Merger Surviving
Corporation or the Alternative Merger Surviving Corporation, as the case may
be, (ii) change the authorized capital stock of the HII/HL&P Merger Surviving
Corporation or the Alternative Merger Surviving Corporation, as the case may
be, and (iii) change the terms of the common stock of the HII/HL&P Merger
Surviving Corporation or the Alternative Merger Surviving Corporation, as the
case may be.
FIRST: The first amendment alters or changes Article I of the
Restated Articles of Incorporation and the full text of such altered article is
as follows:
"The name of this corporation is 'Houston Industries
Incorporated.'"
SECOND: The second amendment alters or changes the first
paragraph of Article VI of the Restated Articles of Incorporation and the full
text of such altered paragraph is as follows:
"The number of shares of the total authorized capital stock of
the Company is 410,000,000(1) shares, of which 10,000,000 shares are classified
as Preferred Stock, without par value, and the balance of 400,000,000(1) shares
are classified as Common Stock, without par value."
THIRD: The third amendment alters or changes "Division C--The
Common Stock" of Article VI of the Restated Articles of Incorporation and the
full text of such altered division is as follows:
"1. Dividends. Dividends may be paid on the Common Stock
out of any assets of the Company available for such dividends after full
cumulative dividends on all outstanding shares of capital stock of all series
ranking senior to the Common Stock in respect of dividends and liquidation
rights (referred to in this Division C as "stock ranking senior to the Common
Stock") have been paid, or declared and a sum sufficient for the payment
thereof set apart, for all past quarterly dividend periods, and after or
concurrently with making payment of or provision for dividends on the stock
ranking senior to the Common Stock for the then current quarterly dividend
period.
__________________
(1) or such other number as may be permitted by Section 4.2(a)(iii) and Section
4.2(b).
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2. Distribution of Assets. In the event of any
liquidation, dissolution or winding up of the Company, or any reduction or
decrease of its capital stock resulting in a distribution of assets to the
holders of its Common Stock, after there shall have been paid to or set aside
for the holders of the stock ranking senior to the Common Stock the full
preferential amounts to which they are respectively entitled, the holders of
the Common Stock shall be entitled to receive, pro rata, all of the remaining
assets of the Company available for distribution to its stockholders. The
Board of Directors, by vote of a majority of the members thereof, may
distribute in kind to the holders of the Common Stock such remaining assets of
the Company, or may sell, transfer or otherwise dispose of all or any of the
remaining property and assets of the Company to any other corporation or other
purchaser and receive payment therefor wholly or partly in cash or property,
and/or in stock of any such corporation, and/or in obligations of such
corporation or other purchaser, and may sell all or any part of the
consideration received therefor and distribute the same or the proceeds thereof
to the holders of the Common Stock.
3. Voting Rights. Subject to the voting rights
expressly conferred under prescribed conditions upon the stock ranking senior
to the Common Stock, the holders of the Common Stock shall exclusively possess
full voting power for the election of directors and for all other purposes."
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