SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 27, 2000
NISOURCE INC.
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(Exact Name of Registrant as Specified in Its Charter)
Indiana 1-9779 35-1719974
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(State or Other Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
801 E. 86TH AVENUE, MERRILLVILLE, 46410
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (219) 853-5200
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______________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
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On February 27, 2000, NiSource Inc., an Indiana corporation
("NiSource"), and Columbia Energy Group, a Delaware corporation
("Columbia"), entered into an agreement and plan of merger ("Merger
Agreement") under which NiSource will acquire all of the outstanding
shares of Columbia (the "Acquisition"). NiSource will organize a new
company ("Holdco") that will act as a holding company of NiSource and
Columbia after the closing of the Acquisition. Two subsidiaries of
Holdco will be organized, one of which will be merged into NiSource
and the other will be merged into Columbia. Thereafter, each of
NiSource and Columbia will be a wholly owned subsidiary of Holdco.
NiSource shareholders will receive one share of common stock of
Holdco ("Holdco Common Shares") for each of their shares of NiSource
common stock. Columbia shareholders will receive for each of their
shares of common stock of Columbia ("Columbia Common Shares") $70 in
cash (together with interest thereon from February 27, 2001 until the
date of closing, if the Acquisition shall not have closed by February
27, 2001) and $2.60 in face value of a unit ("SAILS{SM}" ) consisting of
a forward equity contract and zero coupon debt security (and having
the terms outlined in Annex A of the Merger Agreement). Alternatively,
the Columbia shareholders can elect to receive, in lieu of cash and
SAILS{SM} of Holdco, for up to 30% of the outstanding Columbia Common
Shares, Holdco Common Shares having an average market price of $74
over a period prior to the consummation of the mergers, but no more
than 4.4848 Holdco Common Shares. The transaction values Columbia
Common Shares at approximately $6 billion. NiSource will assume
approximately $2.5 billion in Columbia long-term debt.
The Merger Agreement has been approved by the boards of directors
of NiSource and Columbia. Consummation of the Acquisition is subject
to certain closing conditions, including approval by the shareholders
of NiSource and Columbia and various regulatory approvals. The
transaction is not subject to financing. Holdco intends to register
as a holding company with the Securities and Exchange Commission under
the Public Utility Holding Company Act of 1935. If the NiSource
shareholders do not approve the Merger Agreement, the transaction will
automatically be restructured so that Columbia shareholders will
receive $70 in cash plus a $3.02 face amount of SAILS{SM} issued by
NiSource for each Columbia Common Share.
The description of the Merger Agreement set forth above does not
purport to be complete and is qualified in its entirety by the
provisions of the Merger Agreement, which is attached as Exhibit 2.1,
and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
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The following exhibit is filed herewith:
2.1 Agreement and Plan of Merger dated as of February 27, 2000
by and between NiSource Inc. and Columbia Energy Group.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
NISOURCE INC.
(Registrant)
Dated: March 3, 2000 By: /s/ Nina M. Rausch
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Name: Nina M. Rausch
Title: Secretary
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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2.1 Agreement and Plan of Merger dated as of February
27, 2000 by and between NiSource Inc. and Columbia
Energy Group.
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Between
COLUMBIA ENERGY GROUP
AND
NISOURCE INC.
Dated as of February 27, 2000
TABLE OF CONTENTS
Page
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ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1 ORGANIZATION OF HOLDCO . . . . . . . . . . . . . . . . 1
1.2 DIRECTORS AND OFFICERS OF HOLDCO . . . . . . . . . . . 2
1.3 ORGANIZATION OF MERGER SUBSIDIARIES . . . . . . . . . . 2
1.4 ACTIONS OF DIRECTORS AND OFFICERS . . . . . . . . . . . 2
1.5 ACTIONS OF PARENT AND THE COMPANY . . . . . . . . . . . 2
ARTICLE II
THE MERGERS; CLOSING; EFFECTIVE TIME
2.1 THE MERGERS . . . . . . . . . . . . . . . . . . . . . . 3
(a) PARENT MERGER . . . . . . . . . . . . . . . . . . 3
(b) COMPANY MERGER . . . . . . . . . . . . . . . . . . 3
2.2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . 4
2.4 ALTERNATIVE STRUCTURE . . . . . . . . . . . . . . . . . 5
ARTICLE III
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF PARENT,
THE COMPANY AND THE MERGER SUBS; EXCHANGE OF CERTIFICATES
3.1 MERGER SUB SHARES . . . . . . . . . . . . . . . . . . . 5
3.2 HOLDCO SHARES . . . . . . . . . . . . . . . . . . . . . 6
3.3 CONVERSION OF PARENT SHARES . . . . . . . . . . . . . . 6
3.4 CONVERSION OF COMPANY SHARES . . . . . . . . . . . . . 7
3.5 STOCK ELECTIONS . . . . . . . . . . . . . . . . . . . . 8
3.6 PRORATION . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 EXCHANGE OF COMPANY CERTIFICATES . . . . . . . . . . . 10
3.8 DIVIDENDS, ETC. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
ADJUSTMENT TO PREVENT DILUTION
4.1 ADJUSTMENTS OF THE EXCHANGE RATIO . . . . . . . . . . . 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . 13
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION . . 13
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(b) CAPITAL STRUCTURE . . . . . . . . . . . . . . . . 14
(c) CORPORATE AUTHORITY; APPROVAL AND FAIRNESS . . . . 15
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS . . . . . . . 16
(e) COMPANY REPORTS; FINANCIAL STATEMENTS . . . . . . 17
(f) ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . 18
(g) LITIGATION . . . . . . . . . . . . . . . . . . . . 18
(h) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 18
(i) COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . 20
(j) TAKEOVER STATUTES . . . . . . . . . . . . . . . . 20
(k) ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . 20
(l) TAXES . . . . . . . . . . . . . . . . . . . . . . 21
(m) LABOR MATTERS . . . . . . . . . . . . . . . . . . 22
(n) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . 22
(o) BROKERS AND FINDERS . . . . . . . . . . . . . . . 23
(p) REGULATION AS A UTILITY . . . . . . . . . . . . . 23
(q) TRADING POSITION RISK MANAGEMENT . . . . . . . . . 23
(r) REGISTRATION STATEMENT AND PROXY STATEMENT . . . . 23
(s) TAX MATTERS . . . . . . . . . . . . . . . . . . . 24
(t) EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . 24
(u) NO OTHER REPRESENTATIONS OR WARRANTIES . . . . . . 24
5.2 REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . 24
(a) [RESERVED] . . . . . . . . . . . . . . . . . . . . 24
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION . . 24
(c) CAPITAL STRUCTURE . . . . . . . . . . . . . . . . 25
(d) CORPORATE AUTHORITY AND APPROVAL . . . . . . . . . 25
(e) GOVERNMENTAL FILINGS; NO VIOLATIONS . . . . . . . 26
(f) PARENT REPORTS; FINANCIAL STATEMENTS . . . . . . . 27
(g) ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . 28
(h) LITIGATION . . . . . . . . . . . . . . . . . . . . 29
(i) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 29
(j) COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . 30
(k) TAKEOVER STATUTES . . . . . . . . . . . . . . . . 31
(l) ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . 31
(m) TAX MATTERS . . . . . . . . . . . . . . . . . . . 31
(n) TAXES . . . . . . . . . . . . . . . . . . . . . . 31
(o) LABOR MATTERS . . . . . . . . . . . . . . . . . . 32
(p) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . 32
(q) BROKERS AND FINDERS . . . . . . . . . . . . . . . 32
(r) AVAILABLE FUNDS . . . . . . . . . . . . . . . . . 33
(s) REGULATION AS A UTILITY . . . . . . . . . . . . . 33
(t) REGISTRATION STATEMENT AND PROXY STATEMENT . . . . 33
(u) NO OTHER REPRESENTATIONS OR WARRANTIES . . . . . . 33
ARTICLE VI
COVENANTS
6.1 INTERIM OPERATIONS OF THE COMPANY . . . . . . . . . . . 34
6.2 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . 37
6.3 SHAREHOLDERS MEETING . . . . . . . . . . . . . . . . . 38
(c) MEETING DATE . . . . . . . . . . . . . . . . . . . 39
6.3A JOINT PROXY STATEMENT AND REGISTRATION STATEMENT . . . 39
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(a) PREPARATION AND FILING . . . . . . . . . . . . . . 39
(b) LETTER OF THE COMPANY'S ACCOUNTANTS . . . . . . . 39
(c) LETTER OF PARENT S ACCOUNTANTS . . . . . . . . . . 40
6.4 FILINGS; OTHER ACTIONS; NOTIFICATION . . . . . . . . . 40
6.5 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . 42
6.6 STOCK EXCHANGE DE-LISTING . . . . . . . . . . . . . . . 42
6.7 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . 42
6.8 BENEFITS . . . . . . . . . . . . . . . . . . . . . . . 42
(a) STOCK OPTIONS . . . . . . . . . . . . . . . . . . 42
(b) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 43
(c) EMPLOYEES . . . . . . . . . . . . . . . . . . . . 44
(d) COMMUNITY INVOLVEMENT . . . . . . . . . . . . . . 44
(e) INTEGRATION COMMITTEE . . . . . . . . . . . . . . 44
(f) PHANTOM SHARES. . . . . . . . . . . . . . . . . . 44
6.9 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 45
6.10 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE . . 45
6.11 TAKEOVER STATUTE . . . . . . . . . . . . . . . . . . . 47
6.12 PARENT VOTE . . . . . . . . . . . . . . . . . . . . . . 47
6.13 1935 ACT . . . . . . . . . . . . . . . . . . . . . . . 47
6.14 NECESSARY ACTION . . . . . . . . . . . . . . . . . . . 47
6.15 CERTAIN MERGERS . . . . . . . . . . . . . . . . . . . . 48
6.16 RULE 145 AFFILIATES . . . . . . . . . . . . . . . . . . 48
6.17 EXECUTIVE CONSENT RIGHTS . . . . . . . . . . . . . . . 48
6.18 LISTING OF UNITS . . . . . . . . . . . . . . . . . . . 48
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS . . . . . . . . . . . . . . . . . . . . . . . . 49
(a) SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . 49
(b) REGISTRATION STATEMENT . . . . . . . . . . . . . . 49
(c) LISTING OF SHARES . . . . . . . . . . . . . . . . 49
(d) HSR . . . . . . . . . . . . . . . . . . . . . . . 49
(e) OTHER REGULATORY CONSENTS . . . . . . . . . . . . 49
(f) LITIGATION . . . . . . . . . . . . . . . . . . . . 50
7.2 CONDITIONS TO OBLIGATIONS OF PARENT . . . . . . . . . . 50
(a) REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 50
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY . . . . 50
(c) CONSENTS UNDER AGREEMENTS . . . . . . . . . . . . 50
(d) MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . 51
7.3 CONDITIONS TO OBLIGATION OF THE COMPANY . . . . . . . . 51
(a) REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 51
(b) PERFORMANCE OF OBLIGATIONS OF PARENT . . . . . . . 51
(c) TAX OPINION . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT . . . . . . . . . . . . . 51
8.2 TERMINATION BY EITHER PARENT OR THE COMPANY . . . . . . 52
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8.3 TERMINATION BY THE COMPANY . . . . . . . . . . . . . . 52
8.4 TERMINATION BY PARENT . . . . . . . . . . . . . . . . . 53
8.5 EFFECT OF TERMINATION AND ABANDONMENT . . . . . . . . . 53
ARTICLE IX
MISCELLANEOUS AND GENERAL . . . . . . . . 55
9.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 MODIFICATION OR AMENDMENT . . . . . . . . . . . . . . . 55
9.3 WAIVER OF CONDITIONS . . . . . . . . . . . . . . . . . 55
9.4 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 55
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL . . . . . 55
9.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 56
9.7 ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS . . . . . . 57
9.8 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . 57
9.9 OBLIGATIONS OF PARENT AND OF THE COMPANY . . . . . . . 57
9.10 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 57
9.11 INTERPRETATION . . . . . . . . . . . . . . . . . . . . 58
9.12 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . 58
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER (hereinafter called this
"Agreement"), dated as of February 27, 2000, between Columbia Energy
Group, a Delaware corporation (the "Company") and NiSource Inc., an
Indiana corporation ("Parent").
WHEREAS, the boards of directors of each of Parent and the
Company have approved and declared it advisable and in the best
interests of their respective companies and stockholders to consummate
the mergers provided for herein, pursuant to which a newly formed
holding company, Parent Holdco, Inc. ("Holdco"), will acquire all of
the common stock of each of Parent and the Company through mergers of
subsidiaries of Holdco with and into each of Parent and the Company
or, if the Parent Requisite Vote (as hereinafter defined) is not
obtained, pursuant to which a wholly owned subsidiary of Parent will
merge with and into the Company;
WHEREAS, for federal income tax purposes, it is intended that (i)
the Parent Merger (as hereinafter defined) qualify as a reorganization
under the provisions of Section 368(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); and/or as an exchange
under the provisions of Section 351 of the Code and (ii) that, if the
Parent Requisite Vote is obtained, the Company Merger (as hereinafter
defined) qualify as an exchange under the provisions of Section 351 of
the Code; and
WHEREAS, the Company and Parent desire to make certain
representations, warranties, covenants and agreements in connection
with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1 ORGANIZATION OF HOLDCO. As promptly as practicable and in
any event no later than five days following the execution of this
Agreement, Parent shall cause Holdco to be organized under the laws of
the State of Indiana. The Articles of Incorporation and By-Laws of
Holdco shall be in such forms as shall be determined by Parent;
provided that, if the Parent Requisite Vote has been received, prior
to the Closing Date (as hereinafter defined), the Articles of
Incorporation of Holdco shall be amended to be substantially in the
form of the Articles of Incorporation of Parent in effect as of the
date hereof. The authorized capital stock of Holdco shall initially
consist of 100 common shares, without par value (the "Holdco Shares"),
all of which shares shall be issued to Parent. Parent shall provide
the Company with copies of the Articles of Incorporation and By-Laws
of Holdco promptly upon the Company's request.
1.2 DIRECTORS AND OFFICERS OF HOLDCO. The directors and
officers of Holdco shall be designated by Parent. Each such officer
and director shall remain in office until his or her successor is
elected.
1.3 ORGANIZATION OF MERGER SUBSIDIARIES. As promptly as
practicable, and in any event no later than five days following the
execution of this Agreement, Holdco shall cause to be organized for
the sole purpose of effectuating the mergers contemplated herein:
(a) Parent Acquisition Corp., a corporation to be organized
under the laws of the State of Indiana ("PAC"). The Articles of
Incorporation and By-Laws of PAC shall be in such forms as shall be
determined by Parent. The authorized capital stock of PAC shall
initially consist of 100 common shares, without par value ("PAC
Shares"), all of which shares shall be issued to Holdco at a price of
$1.00 per share.
(b) Company Acquisition Corp., a corporation to be
organized under the laws of the State of Delaware ("CAC" and, together
with PAC, the "Merger Subs"). The Certificate of Incorporation and
By-Laws of CAC shall be in such forms as shall be determined by
Parent. The authorized capital stock of CAC shall initially consist
of 100 shares of common stock, par value $0.01 per share ("CAC
Shares"), all of which shares shall be issued to Holdco at a price of
$1.00 per share.
Parent shall provide the Company with copies of the Articles
of Incorporation or Certificate of Incorporation, as the case may be,
and By-Laws of PAC and CAC promptly upon the Company's request.
1.4 ACTIONS OF DIRECTORS AND OFFICERS. As promptly as
practicable and in any event no later than five days following the
execution of this Agreement, Parent shall take all requisite action to
designate the directors and officers of Holdco and each of the Merger
Subs and to take such steps as may be necessary or appropriate to
complete the organization of Holdco and the Merger Subs. Parent shall
cause the directors of Holdco and the directors of the Merger Subs to
declare advisable, ratify and approve this Agreement.
1.5 ACTIONS OF PARENT AND THE COMPANY. As promptly as
practicable and in any event no later than five days following the
execution of this Agreement, Parent, as the holder of all the
outstanding Holdco Shares, shall cause Holdco, as the sole stockholder
of each of the Merger Subs, to adopt and declare advisable this
Agreement. Parent shall cause Holdco, and Holdco shall cause Parent
and the Merger Subs, to perform their respective obligations under
this Agreement. As promptly as practicable and in any event no later
than five days after the date hereof the parties shall cause this
2
Agreement to be amended to add Holdco and the Merger Subs as parties
hereto, and each Merger Sub shall become a constituent corporation in
its respective Merger.
ARTICLE II
THE MERGERS; CLOSING; EFFECTIVE TIME
2.1 THE MERGERS. Upon the terms and subject to the conditions
set forth in this Agreement at the Effective Time (as hereinafter
defined), the following transactions shall be consummated:
(a) PARENT MERGER. In accordance with the Indiana Business
Corporation Law (the "IBCL") and this Agreement, at the Effective
Time, PAC shall be merged with and into Parent, and the separate
corporate existence of PAC shall thereupon cease (the "Parent
Merger"). Parent shall be the surviving corporation in the Parent
Merger and shall continue its corporate existence under the laws of
the State of Indiana, and the separate corporate existence of Parent
with all its rights, privileges, immunities and franchises shall
continue unaffected by the Parent Merger. As a result of the Parent
Merger, Parent shall become a wholly owned subsidiary of Holdco. The
Parent Merger shall have the effects set forth in the IBCL. Pursuant
to the Parent Merger:
(i) The Articles of Incorporation of Parent, as in
effect immediately prior to the Effective Time, shall be the articles
of incorporation of the surviving corporation in the Parent Merger.
(ii) The By-Laws of PAC, as in effect immediately prior
to the Effective Time, shall be the by-laws of the surviving
corporation in the Parent Merger.
(iii) The directors of PAC immediately prior to the
Effective Time, shall, from and after the Effective Time, be the
directors of the surviving corporation in the Parent Merger until
their successors are duly appointed or elected in accordance with
applicable law.
(iv) The officers of Parent immediately prior to the
Effective Time, shall, from and after the Effective Time, be the
officers of the surviving corporation in the Parent Merger until their
successors are duly appointed or elected in accordance with applicable
law.
(v) The shares of PAC and Parent shall be converted as
provided in Article III.
(b) COMPANY MERGER. In accordance with the Delaware
General Corporation Law (the "DGCL") and this Agreement, at the
Effective Time, CAC shall be merged with and into the Company, and the
3
separate corporate existence of CAC shall thereupon cease (the
"Company Merger" and, together with the Parent Merger, the "Mergers").
The Company shall be the surviving corporation in the Company Merger
and shall continue its corporate existence under the laws of the State
of Delaware, and the separate corporate existence of the Company with
all its rights, privileges, immunities and franchises shall continue
unaffected by the Company Merger. As a result of the Company Merger,
the Company shall become a wholly owned subsidiary of Holdco. The
Company Merger shall have the effects set forth in the DGCL. Pursuant
to the Company Merger:
(i) The Certificate of Incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the surviving corporation in the
Company Merger.
(ii) The By-Laws of CAC, as in effect immediately prior
to the Effective Time, shall be the by-laws of the surviving
corporation in the Company Merger.
(iii) The directors of CAC immediately prior to the
Effective Time, shall, from and after the Effective Time, be the
directors of the surviving corporation in the Company Merger.
(iv) The officers of the Company immediately prior to the
Effective Time, shall, from and after the Effective Time, be the
officers of the surviving corporation in the Company Merger.
(v) The shares of CAC and the Company shall be converted
as provided in Article III.
2.2 CLOSING. The closing of the Mergers (the "Closing") shall
take place (i) at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, New York at 10:00 A.M. on the third Business Day
after the last of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those
conditions) shall be satisfied or waived (by the party entitled to the
benefit of such condition) in accordance with this Agreement or (ii)
at such other place and time and/or on such other date as the Company
and Parent may agree in writing (the "Closing Date"). For purposes of
this Agreement, the term "Business Day" means a day on which banks are
not required or authorized by law to close in New York City.
2.3 EFFECTIVE TIME. On the Closing Date, or, if not reasonably
practicable, as soon as practicable following the Closing Date, the
Company and Parent will cause Articles of Merger relating to the
Parent Merger to be executed, acknowledged and filed with the
Secretary of State of the State of Indiana and a Certificate of Merger
relating to the Company Merger to be executed, acknowledged and filed
with the Secretary of State of the State of Delaware. The term
"Effective Time" shall mean the time and date which is the later of
4
(i) the date and time of the filing of the Articles of Merger relating
to the Parent Merger with the Secretary of State of the State of
Indiana and (ii) the date and time of the filing of the Certificate of
Merger relating to the Company Merger with the Secretary of State of
the State of Delaware.
2.4 ALTERNATIVE STRUCTURE. In the event Parent fails to obtain
the Parent Requisite Vote (as defined in Section 5.2(d)) at the Parent
Shareholders Meeting (as defined in Section 6.3(b)), the Company,
Parent and Holdco hereby agree that the Company Merger will be
consummated upon the following terms:
(a) the Parent Merger will not be consummated and Holdco
will not repurchase Holdco Shares and consequently Holdco shall remain
a wholly owned subsidiary of Parent;
(b) the term "Effective Time" as used throughout this
Agreement shall mean the date and time of the filing of the
Certificate of Merger relating to the Company Merger;
(c) Parent shall cause Holdco to, and Holdco shall,
consummate the Company Merger; and
(d) at the Effective Time, each Company Share issued and
outstanding immediately prior to the Effective Time, other than
Excluded Shares (as defined herein), shall, in lieu of being converted
as provided in Section 3.4(a)(i) and (ii), be converted into the right
to receive (x) $70 in cash, without interest, and (y) $3.02 in face
value of Parent SAILS security units consisting of a zero coupon debt
security and a forward equity contract and having the terms set forth
in Annex A hereof (the "Parent Units") and (z) the Additional Amount,
if any (the sum of (x), (y) and (z) being referred to herein as the
"Alternative Structure Merger Consideration").
ARTICLE III
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF PARENT,
THE COMPANY AND THE MERGER SUBS; EXCHANGE OF CERTIFICATES
3.1 MERGER SUB SHARES.
(a) At the Effective Time, each PAC Share issued and
outstanding immediately prior to the Effective Time shall, by virtue
of the Parent Merger and without further action by the holder thereof,
be converted into and shall become one common share, without par
value, of Parent, as the surviving corporation in the Parent Merger.
Each certificate which immediately prior to the Effective Time
represented outstanding PAC Shares shall, on and after the Effective
Time, be deemed for all purposes to represent the number of shares of
the common stock of the surviving corporation into which the PAC
5
Shares represented by such certificate shall have been converted
pursuant to the Parent Merger.
(b) At the Effective Time, each CAC Share issued and
outstanding immediately prior to the Effective Time shall, by virtue
of the Company Merger and without further action by the holder
thereof, be converted into and shall become one share of common stock,
par value $.01 per share, of the Company, as the surviving corporation
in the Company Merger. Each certificate which immediately prior to
the Effective Time represented outstanding CAC Shares shall, on and
after the Effective Time, be deemed for all purposes to represent the
number of shares of the common stock of the surviving corporation into
which the CAC Shares represented by such certificate shall have been
converted pursuant to the Company Merger.
3.2 HOLDCO SHARES. At the Effective Time, Holdco shall
repurchase each Holdco Share issued and outstanding immediately prior
to the Effective Time for an amount of cash representing the fair
market value thereof, as agreed upon by Parent and Holdco.
3.3 CONVERSION OF PARENT SHARES.
(a) At the Effective Time, each common share, without par
value, of Parent (a "Parent Share"), issued and outstanding
immediately prior to the Effective Time (other than Parent Shares held
in the treasury of Parent) shall be converted into one Holdco Share.
Upon such conversion, all such Parent Shares shall be canceled and
cease to exist, and each certificate theretofore representing Parent
Shares shall, without any action on the part of the holder thereof, be
deemed to represent an equivalent number of Holdco Shares. The Holdco
Shares into which Parent Shares are converted pursuant to the Parent
Merger shall be deemed to have been issued at the Effective Time.
(b) At the Effective Time, each Parent Share which is then
held in the treasury of Parent shall, by virtue of the Parent Merger,
cease to be outstanding and shall be canceled and retired without
payment of any consideration therefor.
(c) At the Effective Time, each outstanding option or right
to purchase Parent Shares (a "Parent Option") shall be assumed by
Holdco in such manner that it is converted into an option to purchase
Holdco Shares, with each such Parent Option otherwise to be
exercisable upon the same terms and conditions as then are applicable
to such Parent Option, including the number of shares and exercise
price provided thereby. At the Effective Time, Holdco shall assume
all rights and obligations of Parent under Parent s stock option plans
as in effect at the Effective Time and shall continue such plans in
accordance with their terms.
6
3.4 CONVERSION OF COMPANY SHARES.
(a) At the Effective Time, each share of common stock, par
value $.01 per share, of the Company (a "Company Share") issued and
outstanding immediately prior to the Effective Time (other than (x)
Company Shares the holders of which shall have validly demanded
appraisal of such shares pursuant to Section 262 of the DGCL ("Section
262") and shall not have voted such shares in favor of the Company
Merger ("Dissenting Shares"), (y) Company Shares owned by Parent or
any Subsidiary of Parent and (z) Company Shares held in the treasury
of the Company or owned by any Subsidiary of the Company
(collectively, "Excluded Shares")) shall be converted into either of
the following (the "Merger Consideration"):
(i) the right to receive (x) $70 in cash, without
interest, and (y) $2.60 in face value of Holdco SAILS security units
consisting of a zero coupon debt security and a forward equity
contract and having the terms set forth in Annex A hereto (the "Holdco
Units")(the Holdco Units or the Parent Units, as the case may be,
being referred to herein as the "Units Consideration"), and (z) the
Additional Amount, if any (the sum of (x), (y) and (z) being referred
to herein as the "Cash and Units Consideration"), or
(ii) subject to Section 3.4(b), if the holder thereof
shall have validly made and not revoked a Stock Election (as defined
in Section 3.5(c)) with respect to such Company Share, a number of
fully paid and non-assessable Holdco Shares determined by dividing $74
by the Average Parent Share Price (the "Exchange Ratio"), plus the
Additional Amount, if any, provided that in no event shall the
Exchange Ratio be more than 4.4848 (the "Stock Consideration").
The "Additional Amount" means an amount in cash equal to 7%
interest on $72.29 for the period beginning on the first anniversary
date of this agreement, and ending on the day prior to the closing
date (calculated on a per annum basis of a 365-day year), less all
cash dividends per company share, if any, paid on the company shares
with respect to a record date occurring after the first anniversary
date of this agreement; provided, however, that the additional amount
shall not be a negative number.
"Average Parent Share Price" means the average (rounded to
the nearest 1/10,000) of the closing trading prices of the Parent
Shares on the New York Stock Exchange Composite Tape on each of the
thirty consecutive trading days immediately preceding the second
trading day prior to the Closing Date.
Upon such conversion, all Company Shares (other than
Excluded Shares) shall be canceled and cease to exist, and each holder
of Company Shares shall thereafter cease to have any rights with
respect to such shares, except the right to receive, without interest,
the Merger Consideration or the Alternative Structure Merger
Consideration, as the case may be, and cash for fractional Holdco
7
Shares in accordance with Section 3.7(d) upon the surrender of a
certificate representing such Company Shares (a "Company
Certificate").
(b) Notwithstanding the foregoing, (i) if the aggregate
number of Company Shares for which Stock Elections are validly made
and not revoked exceeds 30% of the Company Shares outstanding as of
the Effective Time (the "Maximum Stock Shares"), the number of Company
Shares to be converted into the Stock Consideration shall be prorated
as described in Section 3.6, and all other Company Shares (other than
Excluded Shares) shall be converted into the Cash and Units
Consideration, and (ii) if the aggregate number of Company Shares for
which valid Stock Elections are made is less than 10% of the Company
Shares outstanding as of the Effective Time, all Company Shares shall
be converted into the Cash and Units Consideration and Section 2.4
(other than subparagraph (d) thereof) shall apply and in lieu of the
Holdco Units, Parent Units shall be delivered as part of the Merger
Consideration.
(c) At the Effective Time, each Company Share which is then
held in the treasury of the Company or owned by Parent, any Subsidiary
of Parent or any Subsidiary of Company shall, by virtue of the Company
Merger, cease to be outstanding and shall be canceled and retired
without payment of any consideration therefor.
(d) Notwithstanding anything in this Section 3.4 to the
contrary, Dissenting Shares shall not be converted into or be
exchangeable for the right to receive the Merger Consideration or the
Alternative Structure Merger Consideration, unless and until the
holder of Dissenting Shares shall have failed to perfect or shall have
effectively withdrawn or lost such holder's right to appraisal and
payment, as the case may be. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, such
holder's shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, at the Effective Time, the right
to receive the Cash and Units Consideration, without any interest
thereon. The Company shall give Parent prompt notice of any
Dissenting Shares (and shall also give Parent prompt notice of any
withdrawals of such demands for appraisal rights), and Parent shall
have the right to direct all negotiations and proceedings with respect
to any such demands. Neither the Company nor the surviving
corporation of the Company Merger shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for appraisal rights.
3.5 STOCK ELECTIONS.
(a) Parent shall authorize one or more transfer agent(s)
reasonably acceptable to the Company to receive Stock Elections and to
act as Exchange Agent hereunder (the "Exchange Agent") with respect to
the Company Merger.
8
(b) Each person who, at the Effective Time, is a record
holder of Company Shares (other than Excluded Shares) shall have the
right to submit a Form of Election (as defined in Section 3.5(c))
specifying the number of Company Shares that such person desires to
have converted into the Stock Consideration.
(c) Parent and the Company shall prepare a form (the "Form
of Election") pursuant to which any holder of Company Shares may elect
to receive the Stock Consideration for any or all of his Company
Shares (a "Stock Election"). The Form of Election shall be mailed to
the holders of Company Shares as of a date on which Parent and the
Company mutually agree, which date is expected to be approximately 45
days prior to the expected Closing Date. Parent and the Company shall
use reasonable efforts to make the Form of Election available to all
persons who become holders of record of Company Shares between the
date on which the Form of Election is mailed to holders of Company
Shares and the Election Deadline (as defined in Section 3.5(d)).
(d) A Stock Election shall have been validly made only if
the Exchange Agent shall have received, by 5:00 p.m. New York, New
York time on the second Business Day prior to the Effective Time (the
"Election Deadline"), a Form of Election properly completed and signed
and accompanied by the Company Certificate or Certificates
representing the shares to which such Form of Election relates (or by
an appropriate guarantee of delivery of such Company Certificates from
a member of any registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States as set forth in such Form of
Election, provided such Company Certificate or Certificates are in
fact delivered by the time set forth in such guarantee of delivery).
Any holder of Company Shares who has made a Stock Election by
submitting a Form of Election to the Exchange Agent may at any time
prior to the Election Deadline change such holder's election by
submitting a revised Form of Election, properly completed and signed,
that is received by the Exchange Agent prior to the Election Deadline.
Any holder of Company Shares may at any time prior to the Election
Deadline revoke such holder's election and withdraw such holder's
Company Certificates deposited with the Exchange Agent by written
notice to the Exchange Agent received by the Election Deadline. As
soon as practicable after the Election Deadline, the Exchange Agent
shall determine the aggregate amounts of Cash and Units Consideration
and Stock Consideration and shall notify Holdco of its determination.
(e) Parent, with the Company s consent, shall have the
right to make rules, not inconsistent with the terms of this
Agreement, governing the validity of the Forms of Election, the manner
and extent to which Stock Elections are to be taken into account in
making the determinations prescribed by Section 3.6, the issuance and
delivery of certificates representing Holdco Shares ("Holdco
Certificates") into which Company Shares are converted in the Company
Merger, and the payment of cash for Company Shares converted into the
9
right to receive the Cash and Units Consideration in the Company
Merger.
3.6 PRORATION. If valid Stock Elections are made for more than
the Maximum Stock Shares, then the number of Company Shares covered by
each Form of Election to be converted into the Stock Consideration
shall be determined by multiplying (i) the number of Company Shares as
to which such Form of Election relates by (ii) a fraction, the
numerator of which is the Maximum Stock Shares and the denominator of
which is the total number of Company Shares for which a valid stock
election has been validly made and not withdrawn as of the Effective
Time, rounded down to the nearest whole number, and the balance of the
Company Shares covered by such Form of Election shall be converted
into the Cash and Units Consideration.
3.7 EXCHANGE OF COMPANY CERTIFICATES.
(a) At or prior to the Effective Time, (i) Parent or Holdco
shall deposit (or cause to be deposited) with the Exchange Agent, for
the benefit of the holders of Company Shares, for exchange in
accordance with this Article III, cash in the amount sufficient to pay
the aggregate cash portion of the Merger Consideration or the
Alternative Structure Merger Consideration, as the case may be, and
(ii) Parent or Holdco shall deposit (or cause to be deposited) with
the Exchange Agent, for the benefit of the holders of Company Shares,
Holdco Certificates and certificates for Holdco Units or Parent Units,
as the case may be, for exchange in accordance with this Article III
(the cash and shares deposited pursuant to clauses (i) and (ii) being
hereinafter referred to as the "Exchange Fund"). The Holdco Shares
and Holdco Units or Parent Units, as the case may be, into which
Company Shares are converted pursuant to the Company Merger shall be
deemed to have been issued at the Effective Time. Any cash (including
the cash portion of the Cash and Unit Consideration) deposited with
the Exchange Agent shall be invested by the Exchange Agent as Parent
reasonably directs, provided that such investments shall be in
obligations of or guaranteed by the United States of America and
backed by the full faith and credit of the United States of America or
in commercial paper obligations rated P-1 and A-1 or better by Moody's
Investors Service, Inc. and Standard & Poor's Corporation,
respectively, and any net profit resulting from, or interest or income
produced by, such investments will be payable to the Company or
Parent, as Parent directs. Parent shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange
of Company Shares for the Merger Consideration or the Alternative
Structure Merger Consideration.
(b) As soon as reasonably practicable after the Effective
Time and in any case no later than 5 days thereafter, the Exchange
Agent shall mail to each holder of record of Company Shares
immediately prior to the Effective Time (other than Company Shares
covered by valid Stock Elections and Excluded Shares) (i) a letter of
transmittal (the "Company Letter of Transmittal") (which shall specify
10
that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of such Company
Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent and the Company shall agree prior to
the Effective Time), and (ii) instructions for use in effecting the
surrender of the Company Certificates in exchange for the Cash and
Unit Consideration with respect to the Company Shares formerly
represented thereby. As of the Election Deadline all holders of
Company Shares immediately prior to the Effective Time that have not
submitted to the Exchange Agent or have properly revoked an effective,
properly completed Form of Election shall be deemed not to have made a
valid Stock Election.
(c) Upon surrender of a Company Certificate for
cancellation to the Exchange Agent, together with the Company Letter
of Transmittal, duly executed, and such other documents as Parent or
the Exchange Agent shall reasonably request, the holder of such
Company Certificate shall be entitled to receive in exchange therefor
(i) a certified or bank cashier s check in the amount equal to the
cash, if any, which such holder has the right to receive pursuant to
the provisions of this Article III (including any cash in lieu of
fractional Holdco Shares pursuant to Section 3.7(d)), (ii) a
certificate representing that number of Holdco Units or Parent Units,
if any, and (iii) a Holdco Certificate representing that number of
Holdco Shares, if any, which such holder has the right to receive
pursuant to this Article III (in each case less the amount of any
required withholding taxes), and the Company Certificate so
surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 3.7, each Company Certificate shall be
deemed at any time after the Effective Time to represent only the
right to receive the Merger Consideration or the Alternative Structure
Merger Consideration, as the case may be, with respect to the Company
Shares formerly represented thereby.
(d) No fractional Holdco Shares shall be issued pursuant to
the Company Merger. In lieu of the issuance of any fractional Holdco
Shares, cash adjustments will be paid to holders in respect of any
fractional Holdco Share that would otherwise be issuable, and the
amount of such cash adjustment shall be equal to the product of such
fractional amount and the Average Parent Share Price.
3.8 DIVIDENDS, ETC.
(a) Notwithstanding any other provisions of this Agreement,
no dividends or other distributions declared after the Effective Time
shall be paid on Holdco Shares issuable with respect to any Company
Shares represented by a Company Certificate, until such Company
Certificate is surrendered in exchange for Stock Consideration as
provided herein. Subject to the effect of applicable laws, following
surrender of any such Company Certificate, there shall be paid to the
holder of the Holdco Certificates issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends
11
or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole Holdco Shares and not
paid, less the amount of any withholding taxes which may be required
thereon, 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 Holdco Shares, less the
amount of any withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be no
transfers on the stock transfer books of Parent of the Parent Shares
(in the event the Parent Merger is consummated) or the Company of the
Company Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates
representing any such shares are presented to the surviving
corporations of the Parent Merger or the Company Merger, they shall be
canceled and exchanged for certificates for the consideration, if any,
deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article III. Company
Certificates surrendered by any person constituting an "affiliate" of
the Company for purposes of Rule 145(c) under the Securities Act of
1933, as amended (the "Securities Act"), shall not be exchanged until
Parent has received a written agreement from such person as provided
in Section 6.16.
(c) Any portion of the Exchange Fund (including the
proceeds of any investments thereof, any Holdco Shares and any Holdco
Units or Parent Units) that remains unclaimed by the former
stockholders of the Company six months after the Effective Time shall
be delivered to Holdco. Any former stockholder of the Company who has
not theretofore complied with this Article III shall thereafter look
only to the applicable surviving corporation for payment of the Merger
Consideration or the Alternative Structure Merger Consideration, as
the case may be, and any cash in lieu of fractional shares and unpaid
dividends and distributions on the Holdco Shares deliverable in
respect of each Company Share such stockholder holds as determined
pursuant to this Agreement, in each case without any interest thereon.
(d) None of Parent, the Company, Holdco, the surviving
corporations of the Mergers, the Exchange Agent or any other person
shall be liable to any former holder of Parent Shares or Company
Shares for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(e) In the event that any Company Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Company Certificate to be lost,
stolen or destroyed and, if required by Holdco or Parent, as
applicable, the posting by such person of a bond in such reasonable
amount as Holdco or Parent, as applicable, may direct as indemnity
against any claim that may be made against it with respect to such
Company Certificate, the Exchange Agent will issue in exchange for
12
such lost, stolen or destroyed Company Certificate the applicable
Merger Consideration or Alternative Structure Merger Consideration and
any cash in lieu of fractional shares, and unpaid dividends and
distributions on Holdco Shares as provided in Section 3.7, deliverable
in respect thereof pursuant to this Agreement.
ARTICLE IV
ADJUSTMENT TO PREVENT DILUTION
4.1 ADJUSTMENTS OF THE EXCHANGE RATIO. If, after the date
hereof and prior to the Effective Time, the outstanding shares of
Parent or the Company shall be changed into a different number of
shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or
other securities is declared thereon with a record date within such
period, the Exchange Ratio shall be adjusted accordingly to provide to
the holders of Company Shares the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange or stock dividend or similar event.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth in the disclosure letter delivered to Parent by the Company
on or prior to entering into this Agreement (the "Company Disclosure
Letter") or the Company Reports (as defined in Section 5.1(e), the
Company hereby represents and warrants to Parent that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of
the Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its material properties
and assets and to carry on its business as presently conducted in all
material respects and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be so
qualified as a foreign corporation or be in good standing would not be
reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect. The Company has made available to
Parent complete and correct copies of the Company's and its
Subsidiaries' certificate of incorporation and by-laws (or comparable
governing instruments), as amended to date. The Company's and its
Subsidiaries' certificate of incorporation and by-laws (or comparable
governing instruments) so delivered are in full force and effect.
Section 5.1(a) of the Company Disclosure Letter sets forth a list, as
13
of the date hereof, of all of the Subsidiaries of the Company, the
jurisdictions under which such Subsidiaries were incorporated, the
percent of the equity interest therein owned by the Company and each
Subsidiary of the Company, as applicable and specifies each Subsidiary
that is (i) a "public utility company", a "holding company", a
"subsidiary company", an "affiliate" of any public-utility company, an
"exempt wholesale generator" or a "foreign utility company" within the
meaning of Section 2(a)(5), 2(a)(7), 2(a)(8), 2(a)(11), 32(a)(1) or
33(a)(3) of the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"), respectively, (ii) a "public utility" within the
meaning of Section 201(e) of the Federal Power Act (the "Power Act")
or (iii) a "qualifying facility" within the meaning of the Public
Utility Regulatory Policies Act of 1978, as amended ("PURPA"), or that
owns such a qualifying facility.
As used in this Agreement, the term "Subsidiary" means, with
respect to the Company or Parent, as the case may be, any entity,
whether incorporated or unincorporated, of which at least a majority
of the securities or ownership interests having by their terms
ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions is directly or indirectly
owned or controlled by such party or by one or more of its respective
Subsidiaries or by such party and any one or more of its respective
Subsidiaries but excludes any such entities that are inactive.
As used in this Agreement, the term "Company Material
Adverse Effect" means a material adverse effect on the financial
condition, business, assets, liabilities or results of operations of
the Company and its Subsidiaries taken as a whole; provided, however,
that any such effect resulting from or arising out of (i) any change
in U.S. generally accepted accounting principles ("GAAP") or
interpretations thereof, (ii) economic or business conditions in the
United States generally or (iii) conditions generally affecting the
electric or gas utility industries, shall not be considered when
determining if a Company Material Adverse Effect has occurred. As
used in this Agreement, the term "knowledge" or any similar
formulation of knowledge shall mean the actual knowledge of, with
respect to the Company, those persons set forth in Section 1.1 of the
Company Disclosure Letter and, with respect to Parent, those persons
set forth in Section 1.1 of the Parent Disclosure Letter (as defined
in Section 5.2).
(b) CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 200,000,000 Shares, of which 81,308,000 Shares
were outstanding as of the close of business on December 31, 1999 and
40,000,000 shares of Preferred Stock, par value $0.01 per share (the
"Preferred Shares"), of the Company, of which no shares were
outstanding as of the date hereof. All of the issued and outstanding
Shares have been duly authorized and are validly issued, fully paid
and nonassessable. The Company has no Shares reserved for issuance,
except that, as of February 25, 2000 there were 10,085,000 Shares
reserved in the aggregate for issuance pursuant to the Company's 1985
14
Long Term Incentive Plan, 1996 Amended and Restated Long Term
Incentive Plan and the Columbia Savings Plan (collectively, the "Stock
Plans"). Section 5.1(b) of the Company Disclosure Letter sets forth,
as of February 25, 2000 the aggregate number of outstanding options to
acquire Shares granted by the Company. Each of the outstanding shares
of capital stock or other securities of each of the Company's Subsid-
iaries is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or a direct or indirect wholly
owned Subsidiary of the Company, free and clear of any lien, pledge,
security interest, claim or other encumbrance. Except as set forth
above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements or commitments to
issue or to sell any shares of capital stock or other securities of
the Company or any of its Subsidiaries or any securities or obliga-
tions convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire, any securities of the
Company or any of its Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. The
Company does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to
vote) with the shareholders of the Company on any matter ("Voting
Debt").
(c) CORPORATE AUTHORITY; APPROVAL AND FAIRNESS.
(i) The Company has all requisite corporate power and
authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and
to consummate, subject only to approval of this Agreement by the
holders of a majority of the outstanding Shares (the "Company
Requisite Vote"), the Company Merger. This Agreement has been duly
executed and delivered by the Company, and, assuming due
authorization, execution and delivery of this Agreement by Parent, is
a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception").
(ii) As of the date hereof the Board of Directors of the
Company (A) has approved and declared advisable this Agreement and
adopted the plan of merger relating to the Company set forth herein
and has resolved to recommend that the shareholders of the Company
approve this Agreement and (B) has received the opinion of its
financial advisors, Morgan Stanley Dean Witter & Co., Inc. ("Morgan
Stanley") and Salomon Smith Barney Inc., to the effect that the
consideration to be received by the holders of the Shares in the
Company Merger pursuant to this Agreement is fair from a financial
point of view to such holders.
15
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS.
(i) Other than any reports, filings, registrations,
approvals and/or notices (A) required to be made pursuant to
Section 2.3, (B) under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act of 1933,
as amended (the "Securities Act"), and the Securities Exchange Act of
1934 (the "Exchange Act"), (C) with, to or of the Federal Energy
Regulatory Commission (the "FERC"), (D) with, to or of the Kentucky
Public Service Commission, the Maryland Public Service Commission, the
Public Utilities Commission of Ohio, the Pennsylvania Public Utility
Commission, the Virginia State Corporation Commission and the West
Virginia Public Service Commission; (E) with, to or of the Securities
and Exchange Commission (the "SEC") under the 1935 Act; (F) to comply
with applicable Environmental Laws (as defined in Section 5.1(k)); (G)
with, to or of The Bermuda Registrar of Companies; (H) with, to or of
the Vermont Commissioner of Banking, Insurance, Securities and Health
Care Administration; and (I) to comply with the rules and regulations
of the New York Stock Exchange, Inc. (the "NYSE"), no notices,
reports, registrations or other filings are required to be made by the
Company with, nor are any consents, registrations, approvals, permits
or authorizations required to be obtained by the Company from, any
governmental or regulatory authority, agency, commission, body or
other governmental entity (each a "Governmental Entity"), in
connection with the execution and delivery of this Agreement by the
Company and the consummation by the Company of the Company Merger and
the other transactions contemplated hereby, except for those that the
failure to make or obtain are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this
Agreement by the Company do not, and the consummation by the Company
of the Company Merger and the other transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a
default under, either the Restated Certificate of Incorporation of the
Company or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of,
or a default under, or the acceleration of any obligations, the loss
of any right or benefit, or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Company or any of
its Subsidiaries (with or without notice, lapse of time or both)
pursuant to, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation not otherwise terminable by
the other party thereto on 90 days' or less notice ("Contracts")
binding upon the Company or any of its Subsidiaries or any Law (as
defined in Section 5.1(i)) or governmental or non-governmental permit
or license to which the Company or any of its Subsidiaries is subject
or (C) any change in the rights or obligations of any party under any
of the Contracts, except, in the case of clause (B) or (C) above, for
any breach, violation, default, acceleration, creation or change that
16
would not, individually or in the aggregate, be reasonably likely to
have a Company Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
(e) COMPANY REPORTS; FINANCIAL STATEMENTS. The Company has
made available to Parent each registration statement, report, proxy
statement or information statement filed by it with the SEC
(collectively, including any amendments of any such reports, the
"Company Reports") pursuant to the Securities Act or the Exchange Act
since January 1, 1998 and prior to the date hereof, including (i) the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and (ii) the Company's Quarterly Reports on Form 10-
Q for the quarterly periods ended March 31, 1999, June 30, 1999 and
September 30, 1999, each in the form filed with the SEC (including
exhibits, annexes and any amendments thereto). None of the Company
Reports (in the case of Company Reports filed pursuant to the
Securities Act), as of their effective dates, contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading and none of the Company Reports (in the case of Company
Reports filed pursuant to the Exchange Act) as of the respective dates
first mailed to shareholders contains any statement which, at the time
and in the light of the circumstances under which it was made, was
false or misleading with respect to any material fact, or omits to
state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company and
its Subsidiaries included in such Company Reports comply as to form in
all material respects with the applicable rules and regulations of the
SEC with respect thereto. Each of the consolidated balance sheets
included in or incorporated by reference into the Company Reports
(including the related notes and schedules) presents fairly, in all
material respects, the financial position of the Company and its
Subsidiaries as of its date and each of the consolidated statements of
income and consolidated statements of cash flow included in or
incorporated by reference into the Company Reports (including any
related notes and schedules) fairly presents in all material respects
the results of operations, retained earnings and changes in financial
position, as the case may be, of the Company and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited
statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein.
Since December 31, 1999 (the "Audit Date") and through the date
hereof, neither the Company nor any of its Subsidiaries has incurred
any liabilities or obligations (whether absolute, accrued, fixed,
contingent or otherwise and whether due or to become due) of any
nature, except liabilities or obligations which (i) were reflected on
the audited balance sheet of the Company and its Subsidiaries as of
December 31, 1999 (including the notes thereto), (ii) were incurred in
17
the ordinary course of business, consistent with past practices after
December 31, 1999, (iii) are disclosed in the Company Reports filed
after December 31, 1999, (iv) would not be reasonably likely to,
either individually or in the aggregate, have a Company Material
Adverse Effect, (v) were incurred in connection with the transactions
contemplated by this Agreement or (vi) have been satisfied prior to
the date hereof.
(f) ABSENCE OF CERTAIN CHANGES. Since the Audit Date, the
Company and its Subsidiaries taken as a whole have conducted their
business only in the ordinary and usual course of such business and
there has not been (i) any change in the financial condition,
business, assets, liabilities, or results of operations of the Company
and its Subsidiaries that has had or would be reasonably likely to
have a Company Material Adverse Effect; (ii) any material damage,
destruction or other casualty loss with respect to any material asset
or material property owned, leased or otherwise used by the Company or
any of its Subsidiaries, not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company or any
repurchase, redemption or other acquisition by the Company or any
Subsidiary of any securities of the Company other than (A) regular
quarterly dividends on Shares in the ordinary course (including any
periodic increase thereon consistent with past practice) not to exceed
$.225 per Share and (B) as expressly contemplated by this Agreement;
or (iv) any change by the Company in accounting principles, practices
or methods which is not required by a change in GAAP. Since the Audit
Date and through the date hereof, except as provided for herein or as
disclosed in the Company Reports, there has not been any material
increase in the compensation payable or that could become payable by
the Company or any of its Subsidiaries to officers or key employees or
any material amendment of any of the Compensation and Benefit Plans
(as defined in Section 5.1(h)(i)) other than increases or amendments
in the ordinary course of business consistent with past practice.
(g) LITIGATION. There are no civil, criminal or
administrative actions, suits, claims, hearings, investigations,
reviews or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, except for
those that would not be reasonably likely to have, either individually
or in the aggregate, a Company Material Adverse Effect or prevent or
materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
(h) EMPLOYEE BENEFITS.
(i) A copy of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, change in control, retention,
restricted stock, stock option, employment, termination, severance,
compensation, medical, health or other plan, agreement, policy,
practice or arrangement that covers employees or former employees of
18
the Company and its Subsidiaries ("Employees"), or directors or former
directors of the Company (the "Compensation and Benefit Plans") and
any trust agreement or insurance contract forming a part of such
Compensation and Benefit Plans has been made available to Parent prior
to the date hereof. All material Compensation and Benefit Plans are
listed in Section 5.1(h) of the Company Disclosure Letter and any
Compensation and Benefit Plans containing "change of control" or
similar provisions therein are specifically identified in Section
5.1(h) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans, to the extent
subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), are in substantial compliance with the applicable
provisions of ERISA. Each Compensation and Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") and that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service (the "IRS"). As of the date
hereof, there is no material pending or to the knowledge of the
Company threatened litigation relating to the Compensation and Benefit
Plans. Neither the Company nor any of its Subsidiaries has engaged in
a transaction with respect to any Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would
subject the Company or any of its Subsidiaries to a material tax or
penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA.
(iii) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or any of
its Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the single-
employer plan of any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). The Company and its Subsidiaries have not
incurred and do not expect to incur any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate).
No notice of a "reportable event", within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been
waived or extended, other than pursuant to PBGC Reg. Section 4043.66,
has been required to be filed for any Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the
terms of any Compensation and Benefit Plan as of the date hereof have
been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the
Company Reports. Neither any Pension Plan nor any single-employer
plan of an ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA and no ERISA Affiliate has an outstanding
19
funding waiver. Neither the Company nor any of its Subsidiaries has
provided, or is required to provide, security to any Pension Plan or
to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Neither the Company nor its Subsidiaries have any
obligations for, or liabilities with respect to, retiree health and
life benefits under any Compensation and Benefit Plan, except for
benefits required to be provided under Section 4980(B) of the Code.
(i) COMPLIANCE WITH LAWS. As of the date hereof, the busi-
ness of the Company and its Subsidiaries taken as a whole is not being
conducted in violation of any federal, state, local or foreign law,
statute, ordinance, rule, regulation, judgment, order, injunction,
decree, arbitration award, agency requirement, license or permit of
any Governmental Entity (collectively, "Laws"), except for violations
that would not be reasonably likely to have, either individually or in
the aggregate, a Company Material Adverse Effect or prevent or
materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement. As of the
date hereof, no investigation or review by any Governmental Entity
with respect to the Company or any of its Subsidiaries is pending or,
to the knowledge of the Company, threatened, nor has any Governmental
Entity indicated an intention to conduct the same, except for those
the outcome of which would not be reasonably likely to have, either
individually or in the aggregate, a Company Material Adverse Effect or
prevent or materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
The Company and its Subsidiaries each has all permits, licenses,
franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals from Governmental Entities
necessary to conduct its business as presently conducted, except for
those the absence of which would not be reasonably likely to have,
either individually or in the aggregate, a Company Material Adverse
Effect or prevent or materially delay or materially impair the ability
of the Company to consummate the Merger and the other transactions
contemplated by this Agreement.
(j) TAKEOVER STATUTES. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation (each a "Takeover Statute") or any anti-takeover provision
in the Company's Restated Certificate of Incorporation and by-laws is
applicable to the Company Merger or the other transactions
contemplated by this Agreement.
(k) ENVIRONMENTAL MATTERS. To the knowledge of the
Company, except for such matters that would not be reasonably likely
to cause a Company Material Adverse Effect: (i) the operations of the
Company and its Subsidiaries are in compliance with all applicable
Environmental Laws; (ii) the Company and its Subsidiaries possess all
environmental permits, licenses, authorizations and approvals required
under applicable Environmental Laws with respect to the business of
20
the Company and its Subsidiaries as presently conducted and no
deficiencies have been asserted by any Governmental Entities with
respect to such authorizations; (iii) the Company and its Subsidiaries
have not received any written environmental claim, notice or request
for information during the past three years concerning any violation
or alleged violation of any applicable Environmental Law; and (iv)
there are no material writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits or proceedings pending or
threatened in writing relating to compliance by the Company or any of
its Subsidiaries with any environmental permit or liability of the
Company or any of its Subsidiaries under any applicable Environmental
Law.
The representations and warranties in this Section 5.1(k)
constitute the sole representations and warranties of the Company with
respect to any Environmental Law or Hazardous Substance.
As used herein, the term "Environmental Law" means any
applicable law, regulation, code, license, permit, order, judgment,
decree or injunction promulgated by any Governmental Entity (A) for
the protection of the environment (including air, water, soil and
natural resources) or (B) regulating the use, storage, handling,
transportation, release or disposal of Hazardous Substances.
As used herein, the term "Hazardous Substance" means any
substance listed, defined, regulated, designated or classified as
hazardous, toxic or radioactive pursuant to any applicable
Environmental Law including petroleum and any derivative or by-product
thereof.
(l) TAXES. The Company and each of its Subsidiaries
(i) have duly and timely filed (taking into account any extension of
time within which to file) all Tax Returns (as defined below) required
to be filed by any of them as of the date hereof and all such filed
Tax Returns are complete and accurate in all material respects; (ii)
(A) have timely paid all Taxes that are shown as due on such filed Tax
Returns, including amounts required to be paid with respect to Taxes
as a result of any Tax sharing agreement or similar arrangements ("Tax
Sharing Agreement Amounts") or that the Company or any of its
Subsidiaries are obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters
contested in good faith and (B) no penalties or charges are due with
respect to the late filing of any Tax Return required to be filed by
or with respect to any of them on or before the Effective Time; and
(iii) with respect to all Tax Returns filed by or with respect to any
of them have not waived any statute of limitations with respect to
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, except, in each case, for those failures to
file or pay or those waivers that would not have a Company Material
Adverse Effect. As of the date hereof, there are not pending or
proposed or threatened in writing, any deficiency, or any such audits,
examinations, investigations or other proceedings in respect of Taxes
21
or Tax matters. Neither the Company nor any of its Subsidiaries has
been or is a party to any Tax sharing agreement or similar
arrangement.
As used in this Agreement, (i) the term "Tax" (including,
with correlative meaning, the terms "Taxes", and "Taxable") includes
all federal, state, local and foreign income, profits, franchise,
gross receipts, environmental, customs duty, capital stock,
severances, stamp, payroll, sales, employment, unemployment,
disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts and any interest in respect of
such penalties and additions, and (ii) the term "Tax Return" includes
all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns) required to
be supplied to a Tax authority relating to Taxes.
(m) LABOR MATTERS. As of the date hereof, neither the
Company nor any of its Subsidiaries is the subject of any material
proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice nor is there pending or threatened,
nor since January 1, 1998 has there been any labor strike, dispute,
walk-out, work stoppage, slow-down or lockout involving the Company or
any of its Subsidiaries, except for those that, either individually or
in the aggregate, are not reasonably likely to have a Company Material
Adverse Effect or prevent or materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by
this Agreement.
(n) INTELLECTUAL PROPERTY.
(i) The Company or its Subsidiaries own (free and clear
of any and all liens, pledges, security interests, claims or other
encumbrances), or are licensed or otherwise possess sufficient legally
enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, technology, know-how, computer software
programs or applications, databases and tangible or intangible
proprietary information or materials that are currently used in its
and its Subsidiaries' businesses (collectively, "Intellectual Property
Rights"), except for any such failures to own, be licensed or possess
that, individually or in the aggregate, are not reasonably likely to
have a Company Material Adverse Effect.
(ii) Except as disclosed in the Company Reports filed
prior to the date hereof, and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a
Company Material Adverse Effect, (i) to the knowledge of the Company,
the use of the Intellectual Property Rights by the Company or its
Subsidiaries does not conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title,
interest or goodwill, including, without limitation, any intellectual
22
property right, patent, trademark, trade name, service mark, copyright
of any other Person and (ii) there have been no claims made and
neither the Company nor any of its Subsidiaries has received written
notice of any claim or otherwise knows that any Intellectual Property
Right is invalid, or conflicts with the asserted right of any other
Person.
(o) BROKERS AND FINDERS. Except for Morgan Stanley and
Salomon Smith Barney Inc., neither the Company nor any of its
officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the Company Merger or the other transactions
contemplated by this Agreement.
(p) REGULATION AS A UTILITY. Neither the Company nor any
subsidiary company or affiliate of the Company is subject to
regulation as a public utility or public service company (or similar
designation) by any state in the United States, by the United States
or any agency or instrumentality of the United States or by any
foreign country. As used in this Section 5.1(p), the terms
"subsidiary company" and "affiliate" shall have the respective
meanings ascribed to them in the 1935 Act.
(q) TRADING POSITION RISK MANAGEMENT. The Company has
established a risk management committee which, from time to time,
establishes risk parameters to restrict the level of risk that the
Company and its Subsidiaries are authorized to take with respect to
the net position resulting from physical commodity transactions,
exchange traded futures and options and over-the-counter derivative
instruments.
(r) REGISTRATION STATEMENT AND PROXY STATEMENT. None of
the information supplied or to be supplied by or on behalf of the
Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Holdco
in connection with the issuance of shares of Holdco Common Stock and
Holdco Units (or by Parent in connection with the issuance of Parent
Units) in the Mergers (the "Registration Statement") will, at the time
the Registration Statement becomes effective under the Securities Act,
and as the same may be amended, at the effective time of such
amendment, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the joint proxy
in definitive form, relating to the meetings of the stockholders of
the Company and Parent to be held in connection with the Mergers and
the prospectus relating to the Holdco Shares and Holdco Units or the
Parent Units, as the case may be, to be issued in the Mergers (the
"Joint Proxy Statement/Prospectus") will at the date such Joint Proxy
Statement/Prospectus is mailed to such stockholders and, as the same
may be amended or supplemented, at the times of such meetings, contain
any untrue statement of a material fact or omit to state any material
23
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(s) TAX MATTERS. As of the date hereof, neither the
Company nor any of its Affiliates has taken or agreed to take any
action that would prevent the Company Merger contemplated by this
Agreement from qualifying as an exchange under the provisions of
Section 351 of the Code.
(t) EMPLOYMENT AGREEMENTS. Other than those persons listed
on Section 5.1(t) of the Company Disclosure Letter, no officer,
director or employee of the Company or any of its Subsidiaries is a
party to, or a beneficiary of, an employment agreement of the type set
forth in Section 5.1(t) of the Company Disclosure Letter.
(u) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Section 5.1, neither
the Company nor any other Person makes any other express or implied
representation or warranty on behalf of the Company or any of its
Affiliates.
5.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Except as set
forth in the disclosure letter delivered to the Company by Parent on
or prior to entering into this Agreement (the "Parent Disclosure
Letter") or the Parent Reports (as defined in Section 5.2(f)), Parent
represents and warrants to the Company that:
(a) [RESERVED]
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of
Parent and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its respective
jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its material properties
and assets and to carry on its business as presently conducted in all
material respects and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be qualified
as a foreign corporation or be in good standing would not be
reasonably likely to have, either individually or in the aggregate, a
Parent Material Adverse Effect. Parent has made available to the
Company a complete and correct copy of Parent's and its Subsidiaries'
certificates of incorporation and by-laws (or comparable governing
instruments), as amended to date. Parent's and its Subsidiaries'
certificates of incorporation and by-laws (or comparable governing
instruments) so delivered are in full force and effect.
As used in this Agreement, the term "Parent Material Adverse
Effect" means a material adverse effect on the financial condition,
business, assets, liabilities or results of operations of Parent and
its Subsidiaries taken as a whole; provided, however, that any such
24
effect resulting from or arising out of (i) any change in GAAP or
interpretations thereof, (ii) economic or business conditions in the
United States generally or (iii) conditions generally affecting the
electric or gas utility industries, shall not be considered when
determining if a Parent Material Adverse Effect has occurred.
(c) CAPITAL STRUCTURE. The authorized capital stock of
Parent consists of 400,000,000 Parent Shares, of which
124,098,357 shares were issued and outstanding on January 31, 2000 and
20,000,000 preferred shares, without par value, of which no shares
were outstanding as of the date hereof and 4,000,000 shares designated
as Series A Junior Participating Preferred Shares and reserved for
issuance pursuant to Parent's Share Purchase Rights Plan. All of the
issued and outstanding shares of Parent Shares have been duly
authorized and are validly issued, fully paid and nonassessable.
Parent has no Parent Shares reserved for or subject to issuance,
except that, as of December 31, 1999, there were 5,874,956 shares of
Parent Shares reserved in the aggregate for issuance pursuant to
Parent's 1988 Amended and Restated Long-Term Incentive Plan, 1994
Amended and Restated Long-Term Incentive Plan and Nonemployee Director
Stock Incentive Plan (the "Parent Stock Plans"). Each of the
outstanding shares of capital stock or other securities of each of
Parent's Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable and owned by Parent or a direct or indirect wholly
owned Subsidiary of Parent, free and clear of any lien, pledge,
security interest, claim or other encumbrance. Except as set forth
above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements or commitments to
issue or to sell any shares of capital stock or other securities of
Parent or any of its Subsidiaries or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of Parent -
or any of its Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. Parent
does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to
vote) with the shareholders of Parent on any matter ("Parent Voting
Debt").
(d) CORPORATE AUTHORITY AND APPROVAL.
(i) Parent has all requisite corporate power and
authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement,
and, subject only to approval of this Agreement by the holders of a
majority of the outstanding Parent Shares (the "Parent Requisite
Vote"), to consummate the Mergers and the transactions contemplated
hereby. If the Parent Requisite Vote is not obtained, this Agreement
as modified by Section 2.4 hereof will remain effective and no vote of
holders of capital stock of Parent will be necessary to approve this
25
Agreement and the transactions contemplated by Section 2.4 hereof or
for Parent, Holdco or CAC to perform their respective obligations
hereunder. This Agreement has been duly executed and delivered by
Parent and, assuming due authorization, execution and delivery of this
Agreement by the Company, is a valid and legally binding agreement of
Parent, enforceable against Parent in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken
all necessary action to permit Holdco to issue the number of Holdco
Shares and Holdco Units or to permit Parent to issue the number of
Parent Units, as the case may be, required to be issued pursuant to
Articles II and III. The Holdco Shares and Holdco Units or the Parent
Units, as the case may be, when issued, will be validly issued, fully
paid and nonassessable, and no shareholder of Parent will have any
preemptive right of subscription or purchase in respect thereof. The
Holdco Shares and Holdco Units or the Parent Units, as the case may
be, when issued, will be registered under the Securities Act and
Exchange Act and registered or exempt from registration under any
applicable state securities or "blue sky" laws.
(iii) As of the date hereof the Board of Directors of
Parent (A) has approved and declared advisable this Agreement and
adopted the plan of merger relating to Parent set forth herein and has
resolved to recommend that the shareholders of Parent approve this
Agreement and (B) has received the opinion of its financial advisor
Credit Suisse First Boston to the effect that the Merger Consideration
or the Alternate Structure Merger Consideration, as the case may be,
is fair to Parent from a financial point of view.
(e) GOVERNMENTAL FILINGS; NO VIOLATIONS.
(i) Other than any reports, filings, registrations,
approvals and/or notices (A) required to be made pursuant to
Section 2.3, (B) required to be made under the HSR Act, the Securities
Act and the Exchange Act, (C) with, to or of the SEC under the 1935
Act, (D) with, to or of the FERC, (E) required to be made with the
NYSE and (F) with, to or of the Kentucky Public Service Commission,
the Maryland Public Service Commission, the Public Utilities
Commission of Ohio, the Pennsylvania Public Utility Commission, the
Virginia State Corporation Commission, the West Virginia Public
Service Commission and the Maine Public Utilities Commission, no
notices, reports, registrations or other filings are required to be
made by Parent with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Parent from, any
Governmental Entity, in connection with the execution and delivery of
this Agreement by Parent and the consummation by Parent of the Mergers
and the other transactions contemplated hereby, except for those that
the failure to make or obtain would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse
Effect or prevent, materially delay or materially impair the ability
26
of Parent to consummate the transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of this
Agreement by Parent do not, and the consummation by Parent of the
Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default
under, either the certificate of incorporation or by-laws of Parent or
the comparable governing instruments of any of Parent's Subsidiaries,
(B) a breach or violation of, or a default under, or the acceleration
of any obligations, the loss of any right or benefit or the creation
of a lien, pledge, security interest or other encumbrance on the
assets of Parent or any of its Subsidiaries (with or without notice,
lapse of time or both) pursuant to any Contracts binding upon Parent
or any of its Subsidiaries or any Law or governmental or non-
governmental permit or license to which Parent or any of its
Subsidiaries is subject or (C) any change in the rights or obligations
of any party under any of the Contracts, except, in the case of
clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that would not be reasonably likely
to have, either individually or in the aggregate, a Parent Material
Adverse Effect or prevent, materially delay or materially impair the
ability of Parent to consummate the transactions contemplated by this
Agreement.
(f) PARENT REPORTS; FINANCIAL STATEMENTS. Parent has made
available to the Company each registration statement, report, proxy
statement or information statement filed by it with the SEC
(collectively, including any amendments of any such reports, the
"Parent Reports") pursuant to the Securities Act or the Exchange Act
since January 1, 1998 and prior to the date hereof, including
(i) Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and (ii) Parent's Quarterly Reports on Form 10-Q for
the quarterly periods ended March 31, 1999, June 30, 1999 and
September 30, 1999, each in the form filed with the SEC (including
exhibits, annexes and any amendments thereto). None of the Parent
Reports (in the case of Parent Reports filed pursuant to the
Securities Act), as of their effective dates, contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading and none of the Parent Reports (in the case of Parent
Reports filed pursuant to the Exchange Act) as of the respective dates
first mailed to shareholders contains any statement which, at the time
and in the light of the circumstances under which it was made, was
false or misleading with respect to any material fact, or omits to
state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Parent and its
Subsidiaries included in such Parent Reports comply as to form in all
material respects with the applicable rules and regulations of the SEC
with respect thereto. Each of the consolidated balance sheets
27
included in or incorporated by reference into the Parent Reports
(including the related notes and schedules) fairly presents, in all
material respects, the financial position of Parent and its
Subsidiaries as of its date and each of the consolidated statements of
income and consolidated statements of cash flow included in or
incorporated by reference into the Parent Reports (including any
related notes and schedules) fairly presents, in all material
respects, the results of operations, retained earnings and changes in
financial position, as the case may be, of Parent and its Subsidiaries
for the periods set forth therein, in each case in accordance with
GAAP consistently applied during the periods involved, except as may
be noted therein. Since September 30, 1999 (the "Parent Audit Date")
and through the date hereof, neither Parent nor any of its
Subsidiaries has incurred any liabilities or obligations (whether
absolute, accrued, fixed, contingent or otherwise and whether due or
to become due) of any nature, except liabilities or obligations which
(i) were reflected on the audited balance sheet of Parent and its
Subsidiaries as of September 30, 1999 (including the notes thereto),
(ii) were incurred in the ordinary course of business, consistent with
past practices after September 30, 1999, (iii) are disclosed in the
Parent Reports filed after September 30, 1999, (iv) would not be
reasonably likely to, either individually or in the aggregate, have a
Parent Material Adverse Effect, (v) were incurred in connection with
the transactions contemplated by this Agreement or (vi) have been
satisfied prior to the date hereof.
(g) ABSENCE OF CERTAIN CHANGES. Since the Parent Audit
Date, Parent and its Subsidiaries taken as a whole have conducted
their business only in the ordinary and usual course of such business
and there has not been (i) any change in the financial condition,
business, assets, liabilities or results of operations of Parent and
its Subsidiaries that has had or would be reasonably likely to have a
Parent Material Adverse Effect; (ii) any material damage, destruction
or other casualty loss with respect to any material asset or material
property owned, leased or otherwise used by Parent or any of its
Subsidiaries, not covered by insurance; (iii) any declaration, setting
aside or payment of any dividend or other distribution in respect of
the capital stock of Parent or any repurchase, redemption or other
acquisition by Parent or any Subsidiary of any securities of Parent
other than (A) quarterly dividends in the ordinary course not to
exceed $.30 per share of Parent Shares and (B) as expressly
contemplated by this Agreement; or (iv) any change by Parent in
accounting principles, practices or methods which is not required or
permitted by GAAP. Since the Parent Audit Date and through the date
hereof, except as provided for herein or as disclosed in the Parent
Reports, there has not been any material increase in the compensation
payable or that could become payable by Parent or any of its
Subsidiaries to officers or key employees or any material amendment of
any of the Parent Compensation and Benefit Plans (as defined in
Section 5.2(i)) other than increases or amendments in the ordinary
course of business consistent with past practice.
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(h) LITIGATION. There are no civil, criminal or
administrative actions, suits, claims, hearings, investigations,
reviews or proceedings pending or threatened against Parent or any of
its Subsidiaries, except for those that would not be reasonably likely
to have, either individually or in the aggregate, a Parent Material
Adverse Effect or prevent or materially delay or materially impair the
ability of Parent to consummate the transactions contemplated by this
Agreement.
(i) EMPLOYEE BENEFITS.
(i) A copy of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, change in control, retention,
restricted stock, stock option, employment, termination, severance,
compensation, medical, health or other plan, agreement, policy,
practice or arrangement that covers employees or former employees of
the Parent and its Subsidiaries ("Parent Employees"), or directors or
former directors of the Parent (the "Parent Compensation and Benefit
Plans") and any trust agreement or insurance contract forming a part
of such Parent Compensation and Benefit Plans has been made available
to the Company prior to the date hereof. All material Parent
Compensation and Benefit Plans are listed in Section 5.2(i) of the
Parent Disclosure Letter and any Parent Compensation and Benefit Plans
containing "change of control" or similar provisions therein are
specifically identified in Section 5.2(i) of the Parent Disclosure
Letter.
(ii) All Parent Compensation and Benefit Plans, to the
extent subject to ERISA are in substantial compliance with the
applicable provisions of ERISA. Each Parent Compensation and Benefit
Plan that is a Pension Plan and that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination
letter from the IRS. As of the date hereof, there is no material
pending or, to the knowledge of Parent or Merger Sub, threatened
litigation relating to the Parent Compensation and Benefit Plans.
Neither Parent nor any of its Subsidiaries has engaged in a
transaction with respect to any Parent Employee Plan that, assuming
the taxable period of such transaction expired as of the date hereof,
would subject Parent or any of its Subsidiaries to a material tax or
penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA.
(iii) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by Parent or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered an ERISA
Affiliate. Parent and its Subsidiaries have not incurred and do not
expect to incur any withdrawal liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA (regardless
29
of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived or
extended, other than pursuant to PBGC Reg. Section 4043.66, has been
required to be filed for any Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the
terms of any Parent Compensation and Benefit Plan as of the date
hereof have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the
Parent Reports. Neither any Pension Plan nor any single-employer plan
of an ERISA Affiliate has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA and no ERISA Affiliate has an outstanding funding
waiver. Neither Parent nor any of its Subsidiaries has provided, or
is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Neither Parent nor any of its Subsidiaries have any
obligations for, or liabilities with respect to, retiree health and
life benefits under any Parent Compensation and Benefit Plan, except
for benefits required to be provided under Section 4980(B) of the
Code.
(j) COMPLIANCE WITH LAWS. As of the date hereof, the
business of Parent and its Subsidiaries taken as a whole is not being
conducted in violation of any Laws, except for violations that would
not be reasonably likely to have, either individually or in the
aggregate, a Parent Material Adverse Effect or prevent or materially
delay or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement. As of the date hereof, no
investigation or review by any Governmental Entity with respect to
Parent or any of its Subsidiaries is pending or to the knowledge of
Parent threatened, nor has any Governmental Entity indicated an
intention to conduct the same, except for those the outcome of which
would not be reasonably likely to have, either individually or in the
aggregate, a Parent Material Adverse Effect or prevent or materially
delay or materially impair the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement. Parent
and its Subsidiaries each has all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations,
consents and approvals from Governmental Entities necessary to conduct
its business as presently conducted, except for those the absence of
which would not be reasonably likely to have, either individually or
in the aggregate, a Parent Material Adverse Effect or prevent or
materially delay or materially impair the ability of Parent to
consummate the Merger and the other transactions contemplated by this
Agreement.
30
(k) TAKEOVER STATUTES. As of the date hereof, no Takeover
Statute or any applicable anti-takeover provision in the certificate
of incorporation of Parent or by-laws of Parent is applicable to the
Mergers or any of the other transactions contemplated by this
Agreement.
(l) ENVIRONMENTAL MATTERS. To the knowledge of Parent,
except for such matters that would not be reasonably likely to cause a
Parent Material Adverse Effect: (i) operations of Parent and its
Subsidiaries are in compliance with all applicable Environmental Laws;
(ii) Parent and its Subsidiaries possess all environmental permits,
licenses, authorizations and approvals required under applicable
Environmental Laws with respect to the business of Parent and its
Subsidiaries as presently conducted and no deficiencies have been
asserted by any Governmental Entities with respect to such
authorizations; (iii) Parent and its Subsidiaries have not received
any written environmental claim, notice or request for information
during the past three years concerning any violation or alleged
violation of any applicable Environmental Law; and (iv) there are no
material writs, injunctions, decrees, orders or judgments outstanding,
or any actions, suits or proceedings pending or threatened in writing
relating to compliance by Parent or any of its Subsidiaries with any
environmental permit or liability of Parent or any of its Subsidiaries
under any applicable Environmental Law.
The representations and warranties in this Section 5.2(l)
constitute the sole representations and warranties of Parent with
respect to any Environmental Law or Hazardous Substance.
(m) TAX MATTERS. As of the date hereof, neither Parent nor
any of its Affiliates has taken or agreed to take any action that
would prevent the Parent Merger from qualifying as a "reorganization"
within the meaning of Section 368(a) of the Code.
(n) TAXES. Parent and each of its Subsidiaries (i) have
duly and timely filed (taking into account any extension of time
within which to file) all Tax Returns required to be filed by any of
them as of the date hereof and all such filed Tax Returns are complete
and accurate in all material respects; (ii) (A) have timely paid all
Taxes that are shown as due on such filed Tax Returns, including all
Tax Sharing Agreement Amounts, and all amounts that Parent or any of
its Subsidiaries are obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters
contested in good faith and (B) no penalties or charges are due with
respect to the late filing of any Tax Return required to be filed by
or with respect to any of them on or before the Effective Time; and
(iii) with respect to all Tax Returns filed by or with respect to any
of them have not waived any statute of limitations with respect to
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, except, in each case, for those failures to
file or pay or those waivers that would not have a Parent Material
Adverse Effect. As of the date hereof, there are not pending or
31
proposed or threatened in writing, any deficiency, or any such audits,
examinations, investigations or other proceedings in respect of Taxes
or Tax matters. Neither Parent nor any of its Subsidiaries has been
or is a party to any Tax sharing agreement or similar arrangement.
(o) LABOR MATTERS. As of the date hereof, neither Parent
nor any of its Subsidiaries is the subject of any material proceeding
asserting that Parent or any of its Subsidiaries has committed an
unfair labor practice nor is there pending or threatened, nor since
January 1, 1998 has there been any labor strike, dispute, walk-out,
work stoppage, slow-down or lockout involving Parent or any of its
Subsidiaries, except for those that, either individually or in the
aggregate, are not likely to have a Parent Material Adverse Effect or
prevent or materially delay or materially impair the ability of Parent
to consummate the transactions contemplated by this Agreement.
(p) INTELLECTUAL PROPERTY.
(i) Parent or its Subsidiaries own (free and clear of
any and all liens, pledges, security interests, claims or other
encumbrances), or are licensed or otherwise possess sufficient legally
enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, technology, know-how, computer software
programs or applications, databases and tangible or intangible
proprietary information or materials that are currently used in its
and its Subsidiaries' businesses (collectively, "Parent Intellectual
Property Rights"), except for any such failures to own, be licensed or
possess that, individually or in the aggregate, are not reasonably
likely to have a Parent Material Adverse Effect.
(ii) Except as disclosed in the Parent Reports filed
prior to the date hereof, and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a
Parent Material Adverse Effect, (i) to the knowledge of Parent, the
use of the Parent Intellectual Property Rights by Parent or its
Subsidiaries does not 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, patent, trademark, trade name, service mark of any
other Person and (ii) there have been no claims made and neither
Parent nor any of its Subsidiaries has received written notice of any
claim or otherwise knows that any Parent Intellectual Property Right
is invalid, or conflicts with the asserted right of any other Person.
(q) BROKERS AND FINDERS. Except for Credit Suisse First
Boston and Wasserstein Perella & Co., Inc., neither Parent nor any of
its officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the Mergers or the other transactions
contemplated by this Agreement.
32
(r) AVAILABLE FUNDS. Parent has received a commitment
letter from Credit Suisse First Boston and Barclays Bank PLC
representing committed funds sufficient to pay the cash portion of the
Cash and Unit Consideration and to satisfy all of its obligations
hereunder and in connection with the Company Merger and the other
transactions contemplated by this Agreement (a copy of which has been
provided to the Company) and on the Closing Date will have available
all funds necessary to pay the cash portion of the Cash and Unit
Consideration and to satisfy all of obligations hereunder and in
connection with the Company Merger and the other transactions
contemplated by this Agreement. The obligations of Parent hereunder
are not subject to any conditions regarding the ability of Parent to
obtain financing for the consummation of the transactions contemplated
herein.
(s) REGULATION AS A UTILITY. Neither Parent nor any
subsidiary company or affiliate of Parent is subject to regulation as
a public utility or public service company (or similar designation) by
any state in the United States, by the United States or any agency or
instrumentality of the United States or by any foreign country. As
used in this Section 5.2(s), the terms "subsidiary company" and
"affiliate" shall have the respective meanings ascribed to them in the
1935 Act.
(t) REGISTRATION STATEMENT AND PROXY STATEMENT. None of
the information supplied or to be supplied by or on behalf of Holdco,
PAC, CAC, or Parent for inclusion or incorporation by reference in (i)
the Registration Statement will, at the time the Registration
Statement becomes effective under the Securities Act, and as the same
may be amended, at the effective time of such amendment, contain any
untrue statement or a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and (ii) the Joint Proxy Statement/Prospectus
will, at the date such Joint Proxy Statement/Prospectus is mailed to
the stockholders of the Company and Parent and, as the same may be
amended or supplemented, at the times of the meetings of such
stockholders to be held in connection with the Mergers, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Registration Statement and the Joint Proxy Statement/Prospectus will
comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and regulations
thereunder.
(u) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Section 5.2, neither
Parent nor any other Person makes any other express or implied
representation or warranty on behalf of Parent or any of its
Affiliates.
33
ARTICLE VI
COVENANTS
6.1 INTERIM OPERATIONS OF THE COMPANY. Except as otherwise set
forth in Section 6.1 of the Company Disclosure Letter, including but
not limited to the list of capital expenditures of the Company for the
years 2000 and 2001 set forth therein, the Company covenants and
agrees as to itself and its Subsidiaries that, from the date hereof
and prior to the Effective Time (unless Parent shall otherwise approve
in writing, which approval shall not be unreasonably withheld or
delayed, and except as otherwise expressly contemplated by this
Agreement or required by Law):
(i) the business of the Company and its Subsidiaries
shall be conducted only in the ordinary and usual course and, to the
extent consistent therewith, it and its Subsidiaries shall use their
respective reasonable best efforts to (a) subject to prudent
management of workforce needs and ongoing programs currently in force,
preserve its business organization intact and maintain its existing
relations and goodwill with customers, suppliers, distributors,
creditors, lessors, employees and business associates, (b) maintain
and keep material properties and assets in good repair and condition,
subject to ordinary wear and tear and (c) maintain in effect all
existing governmental permits pursuant to which the Company or any of
its Subsidiaries operates;
(ii) the Company shall not (w) amend its certificate of
incorporation or by-laws or the comparable governing instruments of
any of its Subsidiaries except, in the case of its Subsidiaries, for
such amendments that would not prevent or materially delay the
consummation of the transactions contemplated by this Agreement;
(x) split, combine or reclassify its outstanding shares of capital
stock; (y) declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock (other than (A)
dividends from its direct or indirect wholly owned Subsidiaries to it
or a wholly owned Subsidiary and (B) regular quarterly dividends on
Shares with usual record and payment dates not to exceed $.225 per
Share); or (z) repurchase, redeem or otherwise acquire any shares of
its capital stock or any securities convertible into or exchangeable
or exercisable for any shares of its capital stock or permit any of
its Subsidiaries to purchase or otherwise acquire, any shares of its
capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock (other than for the
purpose of funding or providing benefits under the existing terms of
the Compensation and Benefit Plans and any other existing terms of the
employee benefit plans, stock option and other incentive compensation
plans, directors plans and stock purchase and dividend reinvestment
plans);
(iii) neither the Company nor any of its Subsidiaries
shall issue, sell, pledge, dispose of or encumber any shares of, or
34
securities convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to
acquire, any shares of its capital stock of any class or any Voting
Debt or any other property or assets (other than (A) Shares issuable
pursuant to options (whether or not vested) outstanding on the date
hereof under the Stock Plans and (B) issuances of additional options
or rights to acquire not more than 1,000,000 Company Shares in any
calendar year (it being understood that approximately 845,000 options
have already been issued by the Company in the year 2000 and that
those persons identified on Section 6.1(iii) of the Company Disclosure
Letter have already been issued approximately 115,000 options in 2000)
nor more than 2,000,000 Company Shares in the aggregate granted
pursuant to the terms of the Stock Plans as in effect on the date
hereof in the ordinary and usual course of the operation of such Stock
Plans consistent with past practice and performance guidelines;
provided that option issuances for each of the calendar years 2001 and
2002 for the persons identified on Section 6.1(iii) of the Company
Disclosure Letter shall not exceed the option issuances to such
persons in the year 2000 and shall not be included for purposes of the
1,000,000 and 2,000,000 option grant limitations set forth above, and
issuances of Shares pursuant to options granted after the date hereof
pursuant to such Stock Plans;
(iv) neither the Company nor any of its Subsidiaries
shall, other than in the ordinary and usual course of business, and
other than transactions not in excess of $125,000,000 in the aggregate
in any calendar year, transfer, lease, license, guarantee, sell, mort-
gage, pledge, dispose of or encumber any property or assets (including
capital stock of any of its Subsidiaries) or incur or modify any
indebtedness for borrowed money or guarantee any such indebtedness;
(v) neither the Company nor any of its Subsidiaries
shall, by any means, make any acquisition of, or investment in, assets
or stock (whether by way of merger, consolidation, tender offer, share
exchange or other activity) in any transaction or any series of
transactions (whether or not related), except for acquisitions not
involving a merger, consolidation, tender offer or share exchange for
an aggregate purchase price or prices, including the assumption of any
debt, not in excess of $125,000,000 in any calendar year;
(vi) neither the Company nor any of its Subsidiaries
shall, other than in the ordinary and usual course of business, (i)
modify, amend, or terminate any material contract, (ii) waive,
release, relinquish or assign any material contract (or any of the
material rights of the Company or any of its Subsidiaries thereunder),
right or claim, or (iii) cancel or forgive any material indebtedness
owed to the Company or any of its Subsidiaries;
(vii) neither the Company nor any of its Subsidiaries will
(i) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, recapitalization or other similar
reorganization of the Company or any Subsidiary of the Company,
35
(ii) accelerate or delay collection of notes or accounts receivable in
advance of or beyond their regular due dates, other than in the usual
and ordinary course of business, or (iii) change any accounting
principle, practice or method in a manner that is inconsistent with
past practice, except to the extent required by U.S. GAAP as advised
by the Company's regular independent accountants;
(viii) neither the Company nor any of its Subsidiaries
shall terminate, establish, adopt, enter into, make any new grants or
awards under, amend or otherwise modify, any Compensation and Benefit
Plans (other than issuances of additional Shares or options or rights
to acquire Shares granted pursuant to the terms of the Stock Plans as
in effect on the date hereof in the ordinary and usual course of the
operation of such Stock Plans, subject to the limitations set forth in
clause (iii) of this Section 6.1) or enter into any material
consulting agreements or arrangements, or increase the salary, wage,
bonus or other compensation of any employees except for (A) grants or
awards or increases to employees who are not persons set forth in
Section 6.1(iii) of the Company Disclosure Letter under existing
Compensation and Benefit Plans as in effect as of the date hereof
occurring in the ordinary and usual course of business consistent with
past practice (which shall include normal periodic performance reviews
and related compensation and benefit increases), (B) annual
reestablishment of Compensation and Benefit Plans and the provision of
individual compensation or benefit plans and agreements for newly
hired or appointed officers and employees of the Company and its
Subsidiaries who are not executive officers or (C) actions necessary
to satisfy existing contractual obligations under Compensation and
Benefit Plans or agreements existing as of the date hereof;
(ix) other than in the ordinary and usual course of
business, neither the Company nor any of its Subsidiaries shall settle
or compromise any material claims or litigation or regulatory
proceeding;
(x) neither the Company nor any of its Subsidiaries
shall make any material Tax election or, except as required by
applicable Law, permit any insurance policy naming it as a beneficiary
or loss-payable payee to be canceled or terminated except in the
ordinary and usual course of business or as may be required by
applicable Law;
(xi) except for (x) capital expenditures set forth in
Section 6.1(xi) of the Company Disclosure Letter and (y) acquisitions
permitted under clause (v) above, neither the Company nor any of its
Subsidiaries shall make, or (to the extent the Company has not
previously committed to making such expenditures) commit to make, any
capital expenditures; and
(xii) neither the Company nor any of its Subsidiaries will
authorize or enter into an agreement to do anything prohibited by the
foregoing.
36
6.2 ACQUISITION PROPOSALS. The Company agrees that neither it
nor any of its Subsidiaries nor any of its or its Subsidiaries'
officers and directors shall, and that it shall direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
other representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly
or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to
(i) a merger, recapitalization, reorganization, share exchange,
consolidation or similar transaction involving it or its Subsidiaries,
(ii) any sale, lease, exchange, mortgage, pledge or transfer of 25% or
more of the equity securities of the Company or a business that
constitutes 25% or more of the net revenues, net income or the assets
of the Company and its Subsidiaries, taken as a whole, in a single
transaction or series of related transactions or (iii) any tender
offer or exchange offer for 15% or more of the outstanding Shares (any
such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). The Company further agrees that neither it
nor any of its Subsidiaries nor any of its or its Subsidiaries'
officers and directors shall, and that it shall direct and use its
reasonable best efforts to cause its and its Subsidiaries' employees,
agents and representatives not to, directly or indirectly, engage in
any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal; provided, however, that
prior to the adoption of this Agreement by the Company's Shareholders,
nothing contained in this Agreement shall prevent either the Company
or any of its representatives or the Board of Directors of the Company
from (A) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal or otherwise complying with the
Exchange Act; provided that the Company or its Board of Directors
shall not be permitted to recommend any such Acquisition Proposal
unless it would be permitted to do so in accordance with clause (D)
below; (B) providing information in response to a request therefor by
a Person who has made a bona fide unsolicited written Acquisition
Proposal; (C) engaging in any negotiations or discussions with any
Person who has made a bona fide unsolicited written Acquisition
Proposal; or (D) recommending such an Acquisition Proposal to the
shareholders of the Company or adopting an agreement relating to an
Acquisition Proposal, if, and only to the extent that (x) in each such
case referred to in clause (B), (C) or (D) above, the Board of
Directors of the Company determines in good faith, after consultation
with and based upon the advice of outside legal counsel that failure
to take such action would result in a breach of the directors'
fiduciary duties under applicable law and after consultation with its
independent financial advisors of national reputation, that such
Acquisition Proposal is reasonably likely to lead to a transaction on
terms more favorable from a financial point of view to the Company's
shareholders than the transactions contemplated by this Agreement (any
such more favorable Acquisition Proposal being referred to as a
"Superior Proposal") and (y) in the case of clause (D) above the Board
37
of Directors of the Company determines in good faith that such
Acquisition Proposal is reasonably capable of being consummated,
taking into account legal, financial, regulatory and other aspects of
the proposal and the Person making the proposal, and prior to taking
any such action set forth in clauses (B), (C) or (D) above (other than
with respect to actions related to entering into a confidentiality
agreement), the Company provides reasonable notice to Parent to the
effect that it is taking such action and receives from the Person
making the Acquisition Proposal an executed confidentiality agreement
in reasonably customary form and, in any event, containing terms no
more onerous to the Company than those contained in the
Confidentiality Agreement (as defined in Section 9.7). Promptly after
receiving any Acquisition Proposal or any written inquiry that would
be reasonably likely to lead to an Acquisition Proposal and prior to
providing any information to or entering into any discussions or
negotiations with any Person in connection with an Acquisition
Proposal by such Person, the Company shall notify Parent of such
Acquisition Proposal (including, without limitation, the material
terms and conditions thereof and the identity of the person making
it), and shall provide Parent with a copy of any written Acquisition
Proposal or amendment or supplements thereto and shall thereafter
inform Parent on a prompt basis of any material changes to the terms
and conditions of such Acquisition Proposal. The Company agrees that
it will immediately cease and cause to be terminated any existing
discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal; it being understood that any
Acquisition Proposal made prior to the date hereof may, if made at any
time after the date hereof, be deemed a Superior Proposal, if it would
otherwise fulfill the requirements for being deemed a Superior
Proposal hereunder. The Company agrees that it will take the
necessary steps to promptly inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken
in this Section 6.2.
6.3 SHAREHOLDERS MEETINGS.
(a) Subject to fiduciary obligations under applicable law,
the Company will take, in accordance with applicable law and its
Restated Certificate of Incorporation and by-laws, all action
necessary to call, give notice of, convene and hold a meeting of
holders of Shares, including any adjournment thereof (the "Company
Shareholders Meeting") as promptly as practicable after the execution
of this Agreement by Parent to consider and vote upon the approval of
this Agreement and such other matters as may be appropriate. The
Board of Directors of the Company shall recommend such approval and
shall take all lawful action reasonably necessary to solicit such
approval; provided, however, that the recommendation of the Board of
Directors of the Company may be withdrawn or adversely modified if
required under applicable law relating to fiduciary duties.
Without limiting the generality of the foregoing but subject
to the Company s rights pursuant to Sections 6.2 and 8.3, the Company
38
agrees that its obligations pursuant to the first sentence of this
Section 6.3(a) shall not be affected by the commencement, public
proposal, public disclosure or communication to the Company of any
Acquisition Proposal.
(b) Subject to fiduciary obligations under applicable law,
Parent will take, in accordance with applicable law and its Restated
Articles of Incorporation and by-laws, all action necessary to call,
give notice of, convene and hold a meeting of its holders of Parent
Shares, including any adjournment thereof (the "Parent Shareholders
Meeting") as promptly as practicable after the execution of this
Agreement to consider and vote upon the approval of this Agreement and
such other matters as may be appropriate. The Board of Directors of
Parent shall recommend such approval and shall take all lawful action
reasonably necessary to solicit such approval, provided, however, that
the recommendation of the Board of Directors of the Company may be
withdrawn or adversely modified if required under applicable law
relating to fiduciary duties.
(c) MEETING DATE. The Parent Shareholders Meeting shall be
held on the day prior to the Company Shareholders Meeting unless
otherwise agreed by the Company and Parent.
6.3A JOINT PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) PREPARATION AND FILING. As promptly as reasonably
practicable after the date hereof, Parent, Holdco and the Company,
shall prepare and file with the SEC the Registration Statement and the
Joint Proxy Statement/ Prospectus (together the "Joint
Proxy/Registration Statement"). Holdco or Parent, as the case may be,
shall take such actions as may be reasonably required to cause the
Registration Statement to be declared effective under the Securities
Act as promptly as practicable after such filing. Each of the parties
shall furnish all information concerning itself that is required or
customary for inclusion in the Joint Proxy/Registration Statement. No
representation, covenant or agreement contained in this Agreement is
made by any party hereto with respect to information supplied by any
other party hereto for inclusion in the Joint Proxy/Registration
Statement. The parties shall take such actions as may be reasonably
required to cause the Joint Proxy/Registration Statement to comply as
to form in all material respects with the Securities Act, the Exchange
Act and the 1935 Act and the rules and regulations thereunder. Holdco
or Parent, as the case may be, shall take such action as may be
reasonably required to cause the Holdco Shares and Holdco Units or
Parent Units to be issued in the Mergers to be approved for listing on
the NYSE and any other stock exchanges agreed to by the parties, each
upon official notice of issuance.
(b) LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall
use its reasonable best efforts to cause to be delivered to the
Company, Parent and Holdco letters of Arthur Andersen LLP, one dated a
date within two (2) business days before the effective date of the
39
Joint Proxy/Registration Statement and one dated the Closing Date, and
addressed to the Company and Parent, in form and substance reasonably
satisfactory to the Company and Parent and customary in scope and
substance for "cold comfort" letters delivered by independent public
accountants in connection with registration statements and proxy
statements similar to the Joint Proxy/Registration Statement.
(c) LETTER OF PARENT S ACCOUNTANTS. Parent shall use its
reasonable best efforts to cause to be delivered to Parent, Holdco and
the Company letters of Arthur Andersen LLP, one dated a date within
two (2) business days before the effective date of the Joint
Proxy/Registration Statement and one dated the Closing Date, and
addressed to Parent and the Company, in form and substance
satisfactory to Parent and the Company and customary in scope and
substance for "cold comfort" letters delivered by independent public
accountants in connection with registration statements and proxy
statements similar to the Joint Proxy/Registration Statement.
6.4 FILINGS; OTHER ACTIONS; NOTIFICATION.
(a) The Company and Parent shall cooperate with each other
and use (and shall cause their respective Subsidiaries to use) their
respective reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and applicable Laws to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including
preparing and filing as soon as practicable all documentation to
effect all necessary notices, reports and other filings and to obtain
as soon as practicable all consents (including, but not limited to,
the parties cooperating and using their reasonable best efforts to
obtain the consents listed in Section 5.1(d) of the Company Disclosure
Letter), registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Merger or any of the
other transactions contemplated by this Agreement. Subject to appli-
cable Laws relating to the exchange of information and the
preservation of any applicable attorney-client privilege, work-product
doctrine, self-audit privilege or other similar privilege, Parent and
the Company shall have the right to review and comment on in advance,
and to the extent practicable each will consult the other on, all the
information relating to Parent or the Company, as the case may be, and
any of their respective Subsidiaries, that appear in any filing made
with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement. In exercising the
foregoing right, each of the Company and Parent shall act reasonably
and as promptly as practicable.
(b) Subject to applicable Laws and the preservation of any
applicable attorney-client privilege, the Company and Parent each
shall, upon request by the other, furnish the other with all
40
information concerning itself, its Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably necessary
or advisable in connection with any statement, filing, notice or
application made by or on behalf of Parent, the Company or any of
their respective Subsidiaries to any third party and/or any
Governmental Entity in connection with the Merger and the transactions
contemplated by this Agreement.
(c) Subject to any confidentiality obligations and the
preservation of any attorney-client privilege, the Company and Parent
each shall keep the other apprised of the status of matters relating
to completion of the transactions contemplated hereby, including
promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be,
or any of its Subsidiaries, from any third party and/or any
Governmental Entity with respect to the Merger and the other
transactions contemplated by this Agreement.
(d) Without limiting the generality of the undertakings
pursuant to this Section 6.4, each of the Company and Parent agrees to
take or cause to be taken the following actions: (i) provide promptly
to any and all federal, state, local or foreign courts or Governmental
Entity with jurisdiction over enforcement of any applicable antitrust
laws ("Government Antitrust Entity") information and documents
requested by any Government Antitrust Entity or necessary, proper or
advisable to permit consummation of the Company Merger and the
transactions contemplated by this Agreement and (ii) contest and
resist any action seeking to have imposed any order, decree, judgment,
injunction, ruling or other order (whether temporary, preliminary or
permanent) (an "Order") that would materially delay, restrain, enjoin
or otherwise prohibit consummation of the Company Merger and, in the
event that any such temporary or preliminary Order is entered in any
proceeding that would make consummation of the Company Merger in
accordance with the terms of this Agreement unlawful or that would
prevent or materially delay consummation of the Company Merger or the
other transactions contemplated by this Agreement, Parent agrees to
use its best efforts to take promptly any and all steps (including the
appeal thereof, the posting of a bond or the taking of the steps
contemplated by clause (e) of this paragraph) necessary to vacate,
modify or suspend such Order so as to permit such consummation.
(e) Without limiting the generality of the covenants
contained in this Section 6.4, Parent agrees to, if necessary to
prevent any Governmental Authority from issuing any order, injunction,
decree, judgment or ruling or the taking of any other action
restraining, enjoining or otherwise prohibiting the Company Merger,
offer to accept an order to divest (or enter into a consent decree or
other agreement giving effect thereto) such of Parent's or the
Company's assets as are required to forestall such order, injunction,
decree, judgment, ruling or action and to hold separate such assets
pending such divestiture.
41
6.5 ACCESS. Upon reasonable notice, and except as may otherwise
be required by applicable Law, the Company shall (and shall cause its
Subsidiaries to) afford Parent's officers, employees, counsel,
accountants and other authorized representatives ("Representatives")
reasonable access, during normal business hours throughout the period
prior to the Effective Time, to its executive officers, to its
properties, books, contracts and records and, during such period, the
Company shall (and shall cause its Subsidiaries to) furnish promptly
to Parent all information concerning its business, properties and
personnel as may reasonably be requested; provided that no
investigation pursuant to this Section shall affect or be deemed to
modify any representation or warranty made by the Company, and;
provided, further, that the foregoing shall not require the Company to
permit any inspection, or to disclose any information, that in the
reasonable judgment of the Company, would result in the disclosure of
any trade secrets of third parties, the loss of any applicable
attorney-client privilege or violate any of its obligations with
respect to confidentiality if the Company shall have used reasonable
efforts to obtain the consent of such third party to such inspection
or disclosure. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or
such Person as may be designated by such executive officer. All such
information shall be governed by the terms of the Confidentiality
Agreement. From the date hereof until the Effective Time, Parent
shall (i) comply with the reasonable requests of the Company to make
its officers and employees available to respond to the reasonable
inquiries of the Company in connection with the operations of Parent
and its Subsidiaries and (ii) furnish to the Company such information
concerning its financial condition as may be reasonably requested.
6.6 STOCK EXCHANGE DE-LISTING. Holdco or Parent, as the case
may be, shall use its best efforts to cause the Company Shares to be
removed from quotation on the NYSE and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
6.7 PUBLICITY. The initial press release shall be a joint press
release and thereafter the Company and Parent each shall consult with
the other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any
filings with any third party and/or any Governmental Entity with
respect thereto, except as may be required by Law or by obligations
pursuant to any listing agreement with or rules of any national
securities exchange or national market system.
6.8 BENEFITS.
(a) STOCK OPTIONS. At the Effective Time, each stock
option outstanding under the Stock Plans (each, a "Company Option"),
whether or not then exercisable, shall be cancelled and only entitle
the holder thereof to receive with respect to such Company Option an
amount in cash equal to (i) for each share with respect to such
42
Company Option, the excess, if any, of (A) the value of the Merger
Consideration or the Alternative Structure Merger Consideration, as
the case may be, over (B) the per Share exercise price under such
Company Option and (ii) the balance in such holder's Dividend Credit
Account pursuant to the stock option agreement with respect to such
Company Option. For purposes of this Section 6.8(a), the value of the
Merger Consideration or the Alternative Structure Merger
Consideration, as the case may be, shall be $72.29 plus an amount in
cash equal to 7% interest on $72.29 for the period beginning on the
first anniversary date of this Agreement and ending on the day prior
to the Closing Date (calculated on a per annum basis of a 365-day
year). Parent, or Merger Sub, as applicable, shall be entitled to
deduct or withhold from amounts otherwise payable to a holder of a
Company Option any amounts required to be withheld under applicable
tax laws. The Company shall use its reasonable efforts to obtain, but
only if and to the extent required, the consent of each holder of
outstanding Company Options to the foregoing treatment of such Company
Options and to take any other action reasonably necessary to
effectuate the foregoing provisions.
(b) EMPLOYEE BENEFITS. Parent agrees that, during the
period commencing at the Effective Time and ending on the third
anniversary thereof, the employees of the Company and its Subsidiaries
will continue to be provided with benefits under employee benefit
plans that are no less favorable than the greater of (i) those
currently provided by the Company and its Subsidiaries to such
employees and (ii) those provided by Parent and its Subsidiaries from
time to time during such three-year period. Following the Effective
Time, Parent shall cause service by employees of the Company and its
Subsidiaries (and any predecessor entities) to be taken into account
for all purposes (including, without limitation, eligibility to
participate, eligibility to commence benefits, vesting, benefit
accrual and severance) under the Compensation and Benefit Plans or any
other benefit plans of Parent or its Subsidiaries in which such
employees participate; provided, however, that with respect to any
defined benefit pension plan, such crediting of service shall not
result in the duplication of benefits in respect of any period.
From and after the Effective Time, Parent shall (i) cause to
be waived any pre-existing condition limitations under benefit plans,
policies or practices of Parent or its Subsidiaries in which employees
of the Company or its Subsidiaries participate (other than those pre-
existing condition limitations in effect at the Effective Time under
any plans, policies or practices of the Company or its Subsidiaries)
and (ii) cause to be credited any deductibles and out-of-pocket
expenses incurred by such employees and their beneficiaries and
dependents during the portion of the calendar year prior to
participation in the benefit plans provided by Parent and its
Subsidiaries.
43
Parent and Holdco shall, and Parent and Holdco shall cause
the Company to, honor all employee benefit obligations to current and
former employees under the Compensation and Benefit Plans.
Parent agrees that the transactions contemplated by this
Agreement meet the definition of, and shall constitute, a "change in
control" under each Compensation and Benefit Plan listed on Schedule
6.8(b) of the Company Disclosure Letter.
(c) EMPLOYEES. Any workforce reductions carried out
following the Effective Time by Parent, Holdco or the Company and
their respective Subsidiaries shall be done in accordance with all
applicable collective bargaining agreements, and all Laws and
regulations governing the employment relationship and termination
thereof including, without limitation, the Worker Adjustment and
Retraining Notification Act and regulations promulgated thereunder,
and any comparable state or local law.
(d) COMMUNITY INVOLVEMENT. Parent acknowledges that after
the Effective Time, it intends to provide charitable contributions and
community support within the service areas of the Company and its
Subsidiaries at levels consistent with past practice.
(e) INTEGRATION COMMITTEE. Parent recognizes that the
Company has a talented group of officers and employees that will be
important to the future growth of Holdco or Parent, as the case may
be, after the Effective Time. In recognition of the foregoing, within
seven business days of the date hereof, Parent and the Company will
establish an Integration Committee composed in its entirety of two
senior executive officers of the Company and two senior executive
officers of Parent, as selected by the Company and Parent,
respectively (the "Integration Committee"). The Integration Committee
shall meet not less than once per month and shall have direct access
to the Chief Executive Officer of each of Parent and the Company and
will be responsible for proposing alternatives and recommendations
regarding the matters and issues arising in connection with the
integration of the Company and Parent and their respective businesses,
assets and organizations (including without limitation, issues arising
in connection with matters contemplated by this Article VI).
(f) PHANTOM SHARES. At the Effective Time, each Phantom
Share under the Company's Phantom Stock Plan for Outside Directors
shall be canceled and only entitle the holder thereof to receive with
respect to such Phantom Share an amount in cash equal to the value of
the Merger Consideration or the Alternative Structure Merger
Consideration, as the case may be. For purposes of this Section
6.8(f), the value of the Merger Consideration or the Alternative
Structure Merger Consideration, as the case may be, shall be $72.29
plus an amount in cash equal to 7% interest on $72.29 for the period
beginning on the first anniversary date of this Agreement and ending
on the date prior to the Closing Date (calculated on a per annum basis
of a 365-day year). Parent, or Holdco, as applicable, shall be
44
entitled to deduct or withhold from amounts otherwise payable to a
holder of a Phantom Share any amounts required to be withheld under
applicable tax laws. The Company shall use its reasonable efforts to
obtain, but only if and to the extent required, the consent of each
holder of a Phantom Share to the foregoing treatment of such Phantom
Shares and to take any other action reasonably necessary to effectuate
the foregoing provisions.
6.9 EXPENSES. Parent shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the trans-
actions contemplated in Article II. Except as otherwise provided in
this Section 6.9 and Section 8.5(b), whether or not the Mergers are
consummated, all costs and expenses incurred in connection with this
Agreement and the Mergers and the other transactions contemplated by
this Agreement shall be paid by the party incurring such expense,
except that each of the Company and Parent shall bear and pay one-half
of the costs and expenses incurred in connection with the preparation,
printing and mailing of the Joint Proxy/Registration Statement.
6.10 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, Holdco and Parent
shall indemnify and hold harmless, to the fullest extent permitted
under applicable law (and Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law,
provided the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that
such Person is not entitled to indemnification), each present and
former director and officer of the Company and its Subsidiaries
(collectively, the "Indemnified Parties") against any costs or
expenses (including reasonable attorneys' fees and expenses),
judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time,
including the transactions contemplated by this Agreement; provided,
however, that Parent shall not be required to indemnify any
Indemnified Party pursuant hereto if it shall be determined that the
Indemnified Party acted in bad faith and not in a manner such Party
believed to be in or not opposed to the best interests of the Company.
In addition, Holdco and Parent shall indemnify each present and former
director, officer and employee of the Company and its Subsidiaries for
any Costs arising out of or pertaining to matters existing or
occurring at or prior to the Effective Time to the extent that the
Company would have been obligated to indemnify such persons pursuant
to its Restated Certificate of Incorporation as in effect as of the
date hereof. In the event any claim or claims are asserted or made
within six years after the Effective Time, all rights to indemnifica-
tion in respect of any such claim or claims shall continue until final
disposition of any and all such claims.
45
(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 6.10, upon receiving written
notification of any such claim, action, suit, proceeding or investiga-
tion, shall promptly notify the Company thereof, but the failure to so
notify shall not relieve the Company of any liability it may have to
such Indemnified Party if such failure does not materially and
irreversibly prejudice Parent. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) subject to receipt of the undertaking
to repay advances referred to in paragraph (a) of this Section 6.10,
Parent shall pay the reasonable fees and expenses of counsel selected
by the Indemnified Party, which counsel shall be reasonably
satisfactory to Parent, promptly after statements therefor are
received, and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, (ii) Parent
will cooperate in the defense of any such matter, and (iii) any
determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth
under applicable Law shall be made by independent counsel mutually
acceptable to Parent and the Indemnified Party; provided, however,
that (A) Parent shall be obligated pursuant to this paragraph (b) to
pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, except to the extent there is, in the opinion of counsel
to an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of
such Indemnified Party and any other Indemnified Party or Indemnified
Parties, in which case each Indemnified Party with a conflicting
position on a significant issue shall be entitled to retain separate
counsel mutually satisfactory to Parent and such Indemnified Party,
(B) the Indemnified Parties shall cooperate in the defense of any such
matter and (C) Parent shall not be liable for any settlement effected
without its prior written consent (which consent may not be
unreasonably withheld or delayed).
(c) Parent or Holdco shall cause the Company to maintain
the Company's existing officers' and directors' liability insurance
("D&O Insurance") for a period of six years after the Effective Time
so long as the annual premium therefor is not in excess of 200% of the
last annual premium paid prior to the date hereof (the "Current
Premium"); provided, however, (i) that policies with at least the same
coverage, containing terms and conditions which are at least as
protective of the insureds thereunder, may be substituted therefor;
(ii) if the existing D&O Insurance is terminated or cancelled during
such six-year period, the Surviving Corporation shall use its best
efforts to obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium and, to the extent permitted by
law, shall agree to indemnify the directors and officers for any Costs
not covered by such D&O Insurance; and (iii) if the annual premiums
for the existing D&O Insurance exceed 200% of the Current Premium, the
Surviving Corporation shall obtain as much D&O Insurance as can be
46
obtained for the remainder of such period for a premium not in excess
(on an annualized basis) of 200% of the Current Premium.
(d) If Parent, Holdco or the Company or any of its
successors or assigns (i) shall consolidate with or merge into any
other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then, and in
each such case, proper provisions shall be made so that the successors
and assigns of Parent, Holdco or the Company shall assume all of the
obligations set forth in this Section 6.10.
(e) The provisions of this Section are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their representatives.
6.11 TAKEOVER STATUTE. If any Takeover Statute is or may become
applicable to the Mergers or the other transactions contemplated by
this Agreement, each of Parent, Holdco and the Company and their
respective Boards of Directors shall grant such approvals and take
such actions as are necessary so that such transactions may be consum-
mated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize
the effects of such statute or regulation on such transactions.
6.12 PARENT VOTE. Parent shall vote (or consent with respect to)
or cause to be voted (or a consent to be given with respect to) any
Shares and any shares of common stock of a Merger Sub beneficially
owned by it or any of its Affiliates or with respect to which it or
any of its Affiliates has the power (by agreement, proxy or otherwise)
to cause to be voted (or to provide a consent), in favor of the
approval of this Agreement at the Company Shareholders Meeting or any
other meeting of shareholders of the Company or either Merger Sub,
respectively, at which this Agreement shall be submitted for approval
and at all adjournments or postponements thereof (or, if applicable,
by any action of shareholders of either the Company or either Merger
Sub by consent in lieu of a meeting).
6.13 1935 ACT. None of the parties hereto shall, nor shall any
such party permit any of its Subsidiaries to, except as required or
contemplated by this Agreement, engage in any activities that would
cause a change in its status, or that of its Subsidiaries, under the
1935 Act if such change would prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
6.14 NECESSARY ACTION. Neither the Company nor Parent, nor any
of their respective Subsidiaries, shall take or fail to take any
action that is reasonably likely to result in any failure of the
conditions to the Mergers set forth in Article VII, or is reasonably
likely to make any representation or warranty of the Company or Parent
contained herein inaccurate in any material respect at, or as of any
47
time prior to, the Effective Time, or that is reasonably likely to,
individually or in the aggregate, have a Company Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be.
6.15 CERTAIN MERGERS. Each of the Company and Parent agrees that
it shall not, and shall not permit any of its Subsidiaries to
(i) acquire or agree to acquire any assets or (ii) acquire or agree to
acquire, whether by merger, consolidation, by purchasing a substantial
portion of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, if the entering into of a
definitive agreement relating thereto or the consummation of such
acquisition, merger or consolidation could reasonably be expected to
(A) impose any material delay in the expiration of any applicable
waiting period or impose any material delay in the obtaining of, or
significantly increase the risk of not obtaining, any authorizations,
consents, orders, declarations or approvals of any Governmental Entity
necessary to consummate the Merger, (B) significantly increase the
risk of any Governmental Entity entering an Order (as defined in
Section 7.1(e)) prohibiting the consummation of the Merger, (C)
significantly increase the risk of not being able to remove any such
Order on appeal or otherwise or (D) materially delay or materially
impede the consummation of the Merger.
6.16 RULE 145 AFFILIATES. Prior to the Closing Date, the Company
shall identify in a letter to Parent all persons who are, at the
Closing Date, "affiliates" of the Company, as such term is used in
Rule 145 under the Securities Act. The Company shall use its
reasonable best efforts to cause its affiliates to deliver to Parent
on or prior to the Closing Date written agreements substantially in
the form attached as Annex B.
6.17 EXECUTIVE CONSENT RIGHTS. In the event an officer covered
by an employment agreement set forth in Section 5.1(t) of the Company
Disclosure Letter terminates his employment with the Company prior to
the Effective Time, the person replacing such officer shall not be
hired by the Company without the prior written consent of Parent
(which consent shall not be unreasonably withheld or delayed).
6.18 LISTING OF UNITS. Parent agrees to file, within 60 days
after the date hereof, a listing application with NYSE covering the
listing of the Units and to use its best efforts to pursue the listing
of such Units so that the listing is effective prior to the Effective
Time. In the event such Units are not accepted for listing despite
such best efforts, Parent shall use its best efforts to list such
Units on another national securities exchange or the Nasdaq Stock
Market so that such listings are effective prior to the Effective
Time.
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ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS.
The respective obligation of each party to effect the Mergers is
subject to the satisfaction or waiver at or prior to the Effective
Time of each of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been
duly approved by holders of Company Shares constituting the Company
Requisite Vote in accordance with applicable Law and the Restated
Certificate of Incorporation and by-laws of the Company.
(b) REGISTRATION STATEMENT. The Registration Statement
shall have become effective in accordance with the provisions of the
Securities Act, and no stop order suspending such effectiveness shall
have been issued and remain in effect.
(c) LISTING OF SHARES. In the event that the Parent
Requisite Vote is obtained, the Holdco Shares issuable in the Mergers
pursuant to Article II shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(d) HSR. The waiting period applicable to the consummation
of the Mergers under the HSR Act shall have expired or been earlier
terminated.
(e) OTHER REGULATORY CONSENTS. Other than the filing
provided for in Section 1.3, the parties shall have made or filed
those notices, reports or other filings required to be made or filed
with, and obtained those registrations, approvals, permits or
authorizations required to be obtained from or filed with any
Governmental Entity prior to the consummation of the Mergers and in
each case set forth in Sections 5.1(d) and 5.2(e) ("Governmental
Consents") and such Governmental Consents shall have become Final
Orders, except for those that the failure to make or to obtain, either
individually or in the aggregate are not reasonably likely to have a
material adverse effect on the combined entity resulting from the
transactions contemplated hereby.
The Final Orders shall not impose terms or conditions that
(a) have or would reasonably be expected to have a material adverse
effect on the combined entity resulting from the transactions
contemplated hereby, or (b) materially impair the ability of the
parties to complete the Mergers or the transactions contemplated
hereby. A "Final Order" means action by the relevant regulatory
authority that has not been reversed, stayed, enjoined, set aside,
annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired, and as to which all conditions to the
49
consummation of such transactions prescribed by law, regulation or
order have been satisfied.
(f) LITIGATION. No court or Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, en-
forced or entered any statute, law, ordinance, rule, regulation,
judgment, decree, injunction or other order that is in effect and
permanently enjoins or otherwise prohibits consummation of the Merger
(collectively, an "Order"), nor shall any proceeding brought by a
Governmental Entity seeking an Order be pending, provided, however,
that the provisions of this Section 7.1(f) shall not be available to
any party whose failure to fulfill its obligations hereunder shall
have been the cause of, or shall have resulted in, such Order.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of
Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company set forth in this Agreement which are
not modified by the words "Material Adverse Effect" shall be true and
correct in all material respects as of the Closing Date as though made
on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date,
which representations and warranties shall be true and correct in all
material respects as of such date in the same manner as specified
above), and the representations and warranties of the Company set
forth in this Agreement which are modified by the words "Material
Adverse Effect" shall be true and correct as of the Closing Date as
though made on and as of the Closing Date (except to the extent any
such representation or warranty expressly speaks as of an earlier
date, which representations and warranties shall be true and correct
as of such date in the same manner as specified above), and Parent
shall have received a certificate signed on behalf of the Company by
an executive officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all material obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and Parent shall have received a certificate signed on
behalf of the Company by an executive officer of the Company to such
effect.
(c) CONSENTS UNDER AGREEMENTS. The Company shall have
obtained the consent or approval of each Person whose consent or
approval shall be required under any material Contract to which the
Company or any of its Subsidiaries is a party except for such consents
or approvals the failure of which to obtain would not be reasonably
likely to result in a material adverse effect on Parent and the
Company (together with all Subsidiaries of Parent and the Company)
taken as a whole.
50
(d) MATERIAL ADVERSE EFFECT. There shall not have occurred
any Company Material Adverse Effect or change or condition which would
reasonably be expected to have a Company Material Adverse Effect.
7.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Mergers is also subject to the satisfaction
or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent set forth in this Agreement which are not
modified by the words "Material Adverse Effect" shall be true and
correct in all material respects as of the Closing Date as though made
on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date,
which representations and warranties shall be true and correct in all
material respects as of such date in the same manner as specified
above) and the representations and warranties of Parent set forth in
this Agreement which are modified by the words "Material Adverse
Effect" shall be true and correct as of the Closing Date as though
made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date,
which representations and warranties shall be true and correct as of
such date in the same manner as specified above), and the Company
shall have received a certificate signed on behalf of Parent by
executive officers of Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall
have performed and caused Holdco, CAC and PAC to have performed, in
all material respects all material obligations required to be
performed by each such entity under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate signed
on behalf of Parent by an executive officer of Parent to such effect.
(c) TAX OPINION. In the event of the Company Merger, the
Company shall have received the opinion of Sullivan & Cromwell,
counsel to the Company, dated the Closing Date, to the effect that,
based on the facts and assumptions stated therein, the Company Merger
will qualify as an exchange pursuant to Section 351 of the Code.
In rendering its opinion, Sullivan & Cromwell may rely on
the representations made in certificates addressed to such counsel by
both Parent and the Company.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval by shareholders
51
of the Company referred to in Section 7.1(a), by mutual written
consent of the Company and Parent by action of their respective Boards
of Directors.
8.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated and the Mergers may be abandoned at any time prior
to the Effective Time by action of the Board of Directors of either
Parent or the Company if (a) the Mergers shall not have been
consummated by June 30, 2001, whether such date is before or after the
date of receipt of the Company Requisite Vote (the "Termination
Date"), provided that the Termination Date shall be automatically
extended to March 31, 2002 if, on June 30, 2001: (x) any of the
Governmental Consents described in Section 7.1(e) have not been
obtained or waived, (y) each of the other conditions to the
consummation of the Mergers set forth in Article VII has been
satisfied or waived or remains capable of satisfaction, and (z) any
Governmental Consent that has not yet been obtained is being pursued
diligently and in good faith, (b) the approval of the Company's
shareholders required by Section 7.1(a) shall not have been obtained
at a meeting duly convened therefor or at any adjournment or
postponement thereof or (c) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Mergers shall
become final and non-appealable after the parties have used their
respective best efforts to have such Order removed, repealed or
overturned (whether before or after the approval by the shareholders
of the Company) pursuant to Section 6.4, provided that the right to
terminate this Agreement pursuant to clause (a) above shall not be
available to any party whose failure to fulfill any obligation under
this Agreement or under any existing law, order, rule or regulation
has caused or resulted in the failure of the Mergers to be
consummated.
8.3 TERMINATION BY THE COMPANY. This Agreement may be
terminated and the Mergers may be abandoned by action of the Board of
Directors of the Company after three days' prior written notice to
Parent at any time prior to (a) the approval of this Agreement by
shareholders of the Company referred to in Section 7.1(a), if the
Board of Directors of the Company shall approve a Superior Proposal;
provided, however, that (i) the Company is not then in breach of
Section 6.2, (ii) the Board of Directors of the Company shall have
concluded in good faith, after giving effect to any concessions which
are offered by Parent during such three-day period, on the basis of
the advice of its independent financial advisor of national
reputation, that such proposal is a Superior Proposal and (iii) the
termination pursuant to this Section 8.3(a) shall not be effective
unless the Company shall at or prior to the time of such termination
make the payment required by Section 8.5; or (b) the Effective Time,
whether before or after the approval by shareholders of the Company
referred to in Section 7.1(a) if (x) there has been a breach by Parent
of any representation or warranty modified by the words "Material
Adverse Effect" or a breach of any other representation or warranty
that, individually or in the aggregate, has had a Parent Material
52
Adverse Effect, or there has been a material breach by Parent of any
material covenant or agreement contained in this Agreement that is not
curable or, if curable, is not cured within 20 days after written
notice of such breach is given by the Company to the party committing
such breach or (y) if all Governmental Consents have not been obtained
and become Final Orders meeting the requirements of Section 7.1(e) by
March 31, 2002.
8.4 TERMINATION BY PARENT. This Agreement may be terminated and
the Mergers may be abandoned at any time prior to the Effective Time
by action of the Board of Directors of Parent if (a) the Board of
Directors of the Company withdraws or adversely modifies its adoption
of this Agreement or its recommendation that the shareholders of the
Company approve this Agreement, (b) the Board of Directors of the
Company shall approve or recommend a Superior Proposal, (c) the Board
of Directors of the Company shall resolve or publicly propose to take
any of the actions specified in clauses (a) or (b) above, or (d) there
has been a breach by the Company of any representation or warranty
modified by the words "Material Adverse Effect" or a breach of any
other representation or warranty that, individually or in the
aggregate, has had a Company Material Adverse Effect, or there has
been a material breach by the Company of any material covenant or
agreement contained in this Agreement that is not curable or, if
curable, is not cured within 20 days after written notice of such
breach is given by Parent to the party committing such breach.
8.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, this
Agreement (other than as set forth in Section 9.1) shall become void
and of no effect with no liability on the part of any party hereto (or
of any of its directors, officers, employees, agents, legal and
financial advisors or other representatives); provided, however, that
no such termination shall relieve any party hereto of any liability or
damages resulting from any breach of this Agreement prior to
termination.
(b) In the event that this Agreement is terminated by the
Company pursuant to Section 8.3(a) or by Parent pursuant to
Section 8.4(a), (b) or (c), then the Company shall promptly, but in no
event later than two days after the date of such termination (except
in the case of a termination pursuant to Section 8.3(a), in which case
the payment referred to below shall be made at or prior to the time of
such termination), pay Parent a termination fee (as liquidated
damages) of $200,000,000 (the "Termination Fee") by wire transfer of
same day funds to an account previously designated in writing by
Parent to the Company. In the event that (i) an Acquisition Proposal
shall have been made to the Company after the date hereof or any
Person (other than Parent or any of its Affiliates) shall have
publicly announced after the date hereof an intention (whether or not
conditional) to make an Acquisition Proposal with respect to the
53
Company and thereafter this Agreement is terminated by either Parent
or the Company pursuant to Section 8.2(b) and (ii) (x) the Person
making the Acquisition Proposal which was outstanding at the time of
the Shareholders Meeting (the "Acquiring Party") acquires, by
purchase, merger, consolidation, sale, assignment, lease, transfer or
otherwise, in one transaction or any related series of transactions
within twelve months after a termination of this Agreement, a majority
of the voting power of the outstanding securities of the Company or
all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole or (y) there is consummated a merger,
consolidation or similar business combination between the Company or
one of its Subsidiaries and the Acquiring Party or one of its
Subsidiaries within twelve months after the relevant termination of
this Agreement, or (z) within twelve months after termination of this
Agreement, the Company or one of its Subsidiaries enters into a
binding agreement with the Acquiring Party for such an acquisition,
merger, consolidation or similar business combination then the Company
shall promptly, but in no event later than two days after the earlier
of consummation of the transaction or transactions with the Acquiring
Party or one of its Subsidiaries or the execution of a binding
agreement between the Company and the Acquiring Party, pay Parent the
Termination Fee in same day funds to an account previously designated
by Parent to the Company in writing.
In the event that this Agreement is terminated by the
Company pursuant to Section 8.3(b)(y) or by Parent or the Company
pursuant to 8.2(a) as a result of the failure to meet the condition
set forth in Section 7.1(e) or 8.2(c) hereof, then Parent shall, or
shall cause Holdco to, promptly, but in no event later than two days
after the date of such termination, pay to the Company a termination
fee (as liquidated damages) of $50,000,000 (the "Regulatory
Termination Fee").
The Company and Parent acknowledge that the agreements
contained in this Section 8.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements neither Parent nor the Company would have entered into this
Agreement; accordingly, if the Company or Parent fails to promptly pay
any amounts due pursuant to this Section 8.5(b), and in order to
obtain such payment Parent or the Company as the case may be commences
a suit which results in a judgment against the Company for payment of
all or a portion of the Termination Fee, or against Parent for payment
of all or a portion of the Regulatory Termination Fee, the Company
shall pay to Parent or Parent shall pay the Company, as the case may
be, its costs and expenses (including its reasonable attorneys' fees)
incurred in connection with such suit, together with interest from the
date of termination of this Agreement on the amounts owed at the prime
rate of The Chase Manhattan Bank in effect from time to time during
such period. The Company's payment of the Termination Fee shall be
the sole and exclusive remedy of Parent against the Company and any of
its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives in the event this Agreement
54
is terminated and the Termination Fee is payable whether or not there
has been a breach of this Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 SURVIVAL. This Article IX and the agreements of the
Company, Parent and Holdco, as the case may be contained in Article
IV, Sections 6.6 (Stock Exchange De-listing), 6.8 (Benefits), 6.9
(Expenses), 6.10 (Indemnification; Directors' and Officers' Insurance)
and 6.18 (Listing of Units) shall survive the consummation of the
Merger. This Article IX, the agreements of the Company, Parent and
Holdco, as the case may be, contained in Section 6.9 (Expenses),
Section 8.5 (Effect of Termination and Abandonment) and the Confiden-
tiality Agreement shall survive the termination of this Agreement.
All other representations, warranties, covenants and agreements in
this Agreement shall not survive the consummation of the Mergers or
the termination of this Agreement.
9.2 MODIFICATION OR AMENDMENT. Subject to the provisions of
applicable Law, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement
executed and delivered by duly authorized officers of the respective
parties.
9.3 WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to consummate the Mergers are for the sole
benefit of such party and may be waived by such party in whole or in
part to the extent permitted by applicable law.
9.4 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the
same agreement.
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS TO BE WHOLLY
PERFORMED IN SUCH STATE. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of New York and the Federal
courts of the United States of America located in the State of New
York in each case in the borough of Manhattan solely in respect of the
interpretation and enforcement of the provisions of this Agreement and
of the documents referred to in this Agreement, and in respect of the
transactions contemplated hereby, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it
is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue
55
thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties
hereto irrevocably agree that all claims with respect to such action
or proceeding shall be heard and determined in such a State of New
York or Federal court. The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the
manner provided in Section 9.6 or in such other manner as may be
permitted by law shall be valid and sufficient service thereof. Each
party hereto hereby acknowledges and agrees to waive any right it may
have to a trial by jury in respect of any action, suit or proceeding
arising out of or relating to this Agreement.
9.6 NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing
and delivered personally or sent by registered or certified mail,
postage prepaid, or by facsimile:
if to Parent
NiSource Inc.
801 East 86th Avenue,
Merrillville, Indiana 46410.
Attention: Stephen P. Adik
fax: (219) 647-6060
(with a copy to
Peter V. Fazio, Jr.,
Schiff Hardin & Waite,
6600 Sears Tower
233 South Wacker Drive
Chicago, IL 60606-6473
fax: (312) 258-5600).
if to the Company
Columbia Energy Group,
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
Attention: Michael W. O'Donnell
fax: (703) 561-7326
(with a copy to
Neil T. Anderson
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
fax: (212) 558-3588).
or to such other persons or addresses as may be designated in writing
by the party to receive such notice as provided above.
56
9.7 ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS. This Agreement
(including any exhibits hereto), the Company Disclosure Letter, the
Parent Disclosure Letter and the Confidentiality Agreement, dated
November 18, 1999 between Parent and the Company (the "Confidentiality
Agreement") constitute the entire agreement, and supersede all other
prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject
matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER
PARENT NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES,
AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE
BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE
OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8 NO THIRD PARTY BENEFICIARIES. Other than with respect to
the matters set forth in Section 6.10 (Indemnification; Directors' and
Officers' Insurance), this Agreement is not intended to confer upon
any Person other than the parties hereto any rights or remedies
hereunder.
9.9 OBLIGATIONS OF PARENT AND OF THE COMPANY. Whenever this
Agreement requires Holdco or a Subsidiary of Parent to take any
action, such requirement shall be deemed to include an undertaking on
the part of Parent to cause Holdco or such Subsidiary, as the case may
be, to take such action. Whenever this Agreement requires Parent to
take any action, such requirement shall be deemed to include an
undertaking to cause Holdco to take such action. Whenever this
Agreement requires a Subsidiary of the Company to take any action,
such requirement shall be deemed to include an undertaking on the part
of the Company to cause such Subsidiary to take such action and, after
the Effective Time, on the part of the Company to cause such
Subsidiary to take such action.
9.10 SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other
jurisdiction.
57
9.11 INTERPRETATION. The table of contents and headings herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of
the provisions hereof. Where a reference in this Agreement is made to
a Section or Exhibit, such reference shall be to a Section of or
Exhibit to this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation."
9.12 ASSIGNMENT. This Agreement shall not be assignable by
operation of law or otherwise; provided, however, that Parent may
designate, by written notice to the Company, another wholly owned
direct or indirect subsidiary to be a constituent corporation in lieu
of either Merger Sub, so long as such designation would not reasonably
be expected to (i) impose any material delay in the obtaining of, or
significantly increase the risk of not obtaining any authorizations,
consents, orders, declarations or approvals of any Governmental Entity
necessary to consummate the Mergers or the expiration or termination
of any applicable waiting period, (ii) significantly increase the risk
of any Governmental Entity entering an order prohibiting the
consummation of the Mergers, (iii) significantly increase the risk of
not being able to remove any such order on appeal or otherwise or (iv)
materially delay the consummation of the Mergers. If the requirements
of the previous sentence are met and Parent wishes to designate
another wholly owned direct or indirect subsidiary to be a constituent
corporation in lieu of either Merger Sub, then, all references herein
to that Merger Sub shall be deemed references to such other
subsidiary, except that all representations and warranties made herein
with respect to that Merger Sub as of the date of this Agreement shall
be deemed representations and warranties made with respect to such
other subsidiary as of the date of such designation.
58
IN WITNESS WHEREOF, this Agreement has been duly executed,
acknowledged and delivered by the duly authorized officers of the
parties hereto as of the date first written above.
COLUMBIA ENERGY GROUP
By: /s/ Oliver G. Richard III
----------------------------
Name: Oliver G. Richard III
Title: Chairman, President
and Chief Executive
Officer
NISOURCE INC.
By: /s/ Gary L. Neale
----------------------------
Name: Gary L. Neale
Title: Chairman, President
and Chief Executive
Officer
59
ANNEX A
SUMMARY OF TERMS FOR HOLDCO/PARENT SAILS{SM}
Each SAILS is a unit consisting of a share purchase contract plus a
senior debt security. The share purchase contract and the senior debt
security will have the following terms and other terms customary for
securities of this type.
* Share purchase contract
* Obligates holder to buy $2.60 or $3.02, as applicable, of
Holdco/Parent common shares on settlement date
* Settlement date: 4 years after closing
* "Contract adjustment payments" pending settlement: none
* Stock issuable upon settlement (per $2.60 or $3.02, as
applicable, purchase contract):
- If average closing price of Holdco/Parent common shares
for the 30-day period before settlement date (the
"measurement period") is $16.50 or less, then the
holder will receive .1576 of a Holdco/Parent common
share;
- If average closing price of Holdco/Parent common shares
for the measurement period is more than $16.50 but less
than $23.10, then the holder will receive a number
shares of Holdco/Parent common stock equal to $2.60 or
$3.02, as applicable, divided by the average closing
price of Holdco/Parent common shares (carried to four
decimal places);
- If the average closing price of Holdco/Parent common
shares for the measurement period is more than $23.10,
then the holder will receive .1126 of a Holdco/Parent
common share; and
- Customary anti-dilution provisions, including upon a
change in control of Holdco/Parent after the Effective
Time
* Acceleration of settlement date upon change of control of
Holdco/Parent after Effective Time
- No early settlement option
- Voting rights: none, except with respect to
modification of terms of share purchase contract or
senior debt securities
1 1
- Obligation is secured by pledge of companion senior
debt security (provided holder may substitute basket of
treasuries)
- Purchase price will be paid on settlement date using
solely proceeds from remarketing of pledged debt
security (or proceeds of basket of treasuries), without
holder having to provide additional funds. However, at
holder's election, holder may deliver $2.60 or $3.02,
as applicable, cash to pay purchase price on settlement
date, in which case pledged debt security will be
released to holder in lieu of being remarketed
* NYSE listing
* Senior debt security
* Maturity: 6 years after closing
* Not interest bearing prior to settlement date; after
settlement date, bears interest at market rate (determined
in remarketing procedure as rate necessary to trade at par)
plus 50 basis points
* Not redeemable prior to maturity
* No sinking fund
* Unsecured
* No voting rights, except customary rights with respect to
modification of indenture
* Remarketed on settlement date to determine market interest
rate for a par security
* Covenants
- Customary affirmative covenants to pay principal and
interest, maintain office for payment and transfer, pay
taxes, maintain corporate existence, etc.
- Customary limitation on liens
- Customary limitation on mergers, consolidations, sales
of assets and similar transactions
- No limitation on incurrence of additional indebtedness
- No limitation on restricted payments
2 2
* Events of default
- Failure to pay interest for 30 days after due (relevant
only after remarketing)
- Nonpayment of principal when due
- Nonpayment of more than $5 million of indebtedness for
borrowed money beyond grace period
- Bankruptcy
3 3
