AGREEMENT AND PLAN OF MERGER
AND SCHEME OF ARRANGEMENT
by and among
NATIONAL GRID GROUP PLC,
NIAGARA MOHAWK HOLDINGS, INC.,
NEW NATIONAL GRID LIMITED,
and
GRID DELAWARE, INC.
Dated as of September 4, 2000
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER AND THE SCHEME .........................................1
Section 1.1 The Merger .........................................1
Section 1.2 Effective Time of the Merger .......................2
Section 1.3 The Scheme .........................................2
Section 1.4 The Scheme Effective Time ..........................2
Section 1.5 Governing Documents ................................2
ARTICLE II TREATMENT OF SHARES ...............................................3
Section 2.1 Effect of the Scheme on Parent Capital Stock .......3
Section 2.2 Effect of the Merger on the Company Capital Stock ..3
Section 2.3 Exchange of Certificates ...........................5
ARTICLE III THE CLOSING .......................................................9
Section 3.1 Closing ............................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY .....................9
Section 4.1 Organization and Qualification .....................9
Section 4.2 Subsidiaries ......................................10
Section 4.3 Capitalization ....................................10
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance ........................................11
Section 4.5 Reports and Financial Statements ..................13
Section 4.6 Absence of Certain Changes or Events ..............14
Section 4.7 Legal Proceedings .................................14
Section 4.8 Information Supplied ..............................15
Section 4.9 Tax Matters .......................................15
Section 4.10 Employee Matters; ERISA ...........................18
Section 4.11 Labor and Employee Relations ......................20
Section 4.12 Environmental Protection ..........................21
Section 4.13 Regulation as a Utility ...........................24
Section 4.14 Vote Required .....................................24
Section 4.15 Opinion of Financial Advisor ......................24
Section 4.16 Brokers ...........................................24
Section 4.17 Insurance .........................................24
Section 4.18 Intellectual Property .............................24
Section 4.19 Nuclear Operations and NRC Actions ................25
Section 4.20 Ownership of Parent or Newco Common Stock .........26
Section 4.21 State Antitakeover Matters ........................26
Section 4.22 Commodity Derivatives and Credit Exposure Matters .26
Section 4.23 The Company Associates ............................26
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ARTICLE V REPRESENTATIONS AND WARRANTIES
OF PARENT, NEWCO AND MERGER SUB ..................................26
Section 5.1 Organization and Qualification ....................26
Section 5.2 Capitalization ....................................27
Section 5.3 Authority; Non-Contravention;
Statutory Approvals;Compliance ....................28
Section 5.4 Reports and Financial Statements ..................29
Section 5.5 Absence of Certain Changes or Events ..............30
Section 5.6 Legal Proceedings .................................30
Section 5.7 Information Supplied ..............................30
Section 5.8 Tax Matters .......................................31
Section 5.9 Environmental Protection ..........................32
Section 5.10 Votes Required ....................................32
Section 5.11 Brokers ...........................................33
Section 5.12 Insurance .........................................33
Section 5.13 Ownership of Company Common Stock .................33
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER ...........................33
Section 6.1 Covenants of the Company ..........................33
Section 6.2 Covenants of Parent ...............................39
Section 6.3 Covenants of Newco ................................40
Section 6.4 Alternative Arrangement Concerning Company
Nuclear Facilities ................................40
ARTICLE VII ADDITIONAL AGREEMENTS ............................................41
Section 7.1 Access to Information .............................41
Section 7.2 Proxy Statement and Registration Statement; Listing;
Parent Disclosure Documents .......................42
Section 7.3 Regulatory Matters ................................43
Section 7.4 Shareholder Approval ..............................43
Section 7.5 Directors' and Officers' Indemnification ..........44
Section 7.6 Public Announcements ..............................46
Section 7.7 Rule 145 Affiliates ...............................46
Section 7.8 Labor Agreements and Workforce Matters ............46
Section 7.9 Employee Benefit Plans; Stock Options .............47
Section 7.10 No Solicitations ..................................48
Section 7.11 Boards of Directors ...............................50
Section 7.12 Charitable Contributions ..........................51
Section 7.13 Anti-Takeover Statutes ............................51
Section 7.14 Conveyance Taxes ..................................51
Section 7.15 Expenses ..........................................51
Section 7.16 Further Assurances ................................52
Section 7.17 Restructuring of Transactions .....................52
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Section 7.18 Integration Team ..................................52
Section 7.19 Newco Ordinary Shares .............................52
Section 7.20 ADR Depositary Agreement ..........................52
ARTICLE VIII CONDITIONS ......................................................53
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger ........................................53
Section 8.2 Conditions to Obligation of Newco and Parent to
Effect the Merger .................................54
Section 8.3 Conditions to Obligation of The Company to Effect
the Merger ........................................55
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER ................................57
Section 9.1 Termination .......................................57
Section 9.2 Effect of Termination .............................58
Section 9.3 Termination Fee; Expenses .........................58
Section 9.4 Amendment .........................................59
Section 9.5 Waiver ............................................60
ARTICLE X GENERAL PROVISIONS ...............................................60
Section 10.1 Non-Survival; Effect of Representations
and Warranties ....................................60
Section 10.2 Notices ...........................................60
Section 10.3 Miscellaneous .....................................63
Section 10.4 Interpretation ....................................63
Section 10.5 Counterparts; Effect ..............................63
Section 10.6 Parties' Interest .................................63
Section 10.7 Governing Law .....................................63
Section 10.8 Submission to Jurisdiction; Waivers ...............63
Section 10.9 Enforcement of Agreement ..........................64
Section 10.10 Waiver of Jury Trial ..............................64
iii
INDEX OF PRINCIPAL TERMS
Term Page
---- ----
1935 Act .....................................................................13
Accounting Method Adjustment .................................................17
Acquisition Agreement ........................................................49
Acquisition Proposal .........................................................49
ADR Depositary ................................................................5
ADR Depositary Agreement ......................................................5
ADS Consideration .............................................................3
ADS Election ..................................................................4
ADS Election Number ...........................................................4
ADS Election Shares ...........................................................5
Affiliate Agreement ..........................................................46
Applicable Period ............................................................49
Atomic Energy Act ............................................................13
Average Price .................................................................4
BCL ...........................................................................1
Cash Amount ...................................................................4
Cash Consideration ............................................................3
Cash Election .................................................................4
Cash Election Number ..........................................................4
Cash Election Shares ..........................................................4
Certificate(s) ................................................................6
Circular .....................................................................15
Closing .......................................................................9
Closing Agreement ............................................................16
Closing Date ..................................................................9
Code ..........................................................................1
Companies Act ................................................................27
Company .......................................................................1
Company Associates ...........................................................10
Company Common Stock ..........................................................3
Company Disclosure Schedule ...................................................9
Company Employee Benefit Plans ...............................................18
Company Financial Statements .................................................13
Company Intellectual Property ................................................25
Company Material Adverse Effect ..............................................10
Company Meeting ..............................................................44
Company Nuclear Facilities ...................................................25
Company Preferred Stock ......................................................10
Company Required Consents ....................................................12
Company Required Statutory Approvals .........................................12
Company SEC Reports ..........................................................13
iv
Term Page
---- ----
Company Shareholders' Approval ...............................................24
Company Subsidiary ...........................................................10
Confidentiality Agreement ....................................................41
Conveyance Taxes .............................................................51
Court .........................................................................1
date hereof ...................................................................1
DGCL ..........................................................................2
DOE ..........................................................................13
Election ......................................................................5
Election Deadline .............................................................6
Election Number ...............................................................4
Environmental Claim ..........................................................23
Environmental Documents ......................................................22
Environmental Laws ...........................................................23
Environmental Permits ........................................................21
ERISA ........................................................................18
Exchange Act .................................................................13
Exchange Fund .................................................................5
Exchange Ratio ................................................................4
Extended Termination Date ....................................................57
FCC ..........................................................................13
FERC .........................................................................13
Final Order ..................................................................54
Foreign Person ...............................................................16
Form of Election ..............................................................6
FSA ..........................................................................15
Governmental Authority .......................................................12
Hazardous Materials ..........................................................23
HSR Act ......................................................................43
Indemnified Liabilities ......................................................44
Indemnified Parties ..........................................................44
Indemnified Party ............................................................44
Initial Termination Date .....................................................57
IRS ..........................................................................17
Knowledge ....................................................................12
Licenses .....................................................................12
Listing Particulars ..........................................................15
Merger ........................................................................1
Merger Consideration ..........................................................3
Merger Effective Time .........................................................2
Merger Sub ....................................................................1
Mixed Election ................................................................5
New York Advisory Board ......................................................50
v
Term Page
---- ----
Newco .........................................................................1
Newco ADRs ....................................................................3
Newco ADSs ....................................................................3
Newco Ordinary Shares .........................................................3
Newco Original Ordinary Shares ...............................................27
Newco Original Preference Shares .............................................27
Newco Special Share ...........................................................3
Non-Convertible Preferred Securities .........................................34
Non-Election Shares ...........................................................5
NRC ..........................................................................13
Nuclear Approvals ............................................................54
Nuclear Sale .................................................................53
Nuclear Sale Agreement .......................................................57
OFGEM ........................................................................30
Option .......................................................................48
Out-of-Pocket Expenses .......................................................59
Parent ........................................................................1
Parent ADRs ...................................................................3
Parent ADSs ...................................................................3
Parent Court Meeting .........................................................33
Parent Disclosure Documents ..................................................15
Parent Disclosure Schedule ...................................................26
Parent Financial Statements ..................................................29
Parent Material Adverse Effect ...............................................28
Parent Merger Meeting ........................................................32
Parent Merger Shareholders' Approval .........................................32
Parent Ordinary Shares ........................................................3
Parent Plans .................................................................27
Parent Required Consents .....................................................28
Parent Required Statutory Approvals ..........................................28
Parent Scheme Meeting ........................................................33
Parent Scheme Shareholders' Approval .........................................33
Parent SEC Reports ...........................................................29
Parent Shareholders' Approval ................................................33
Parent Significant Subsidiary ................................................39
Parent Special Share ..........................................................3
Parent Subsidiary ............................................................27
PBGC .........................................................................20
PCBs .........................................................................23
Per Share Amount ..............................................................3
person ........................................................................8
Post-Closing Plans ...........................................................48
Power Act ....................................................................13
vi
Term Page
---- ----
Proxy Statement ..............................................................15
Registration Statement .......................................................15
Release ......................................................................24
Representatives ..............................................................41
Scheme ........................................................................1
Scheme Document ..............................................................15
Scheme Effective Time .........................................................2
Securities Act ...............................................................13
Shares ........................................................................6
Subsidiary ...................................................................10
Surviving Entity ..............................................................2
Tax Change ...................................................................35
Tax Controversy ..............................................................17
Tax Return ...................................................................16
Tax Rulings ..................................................................16
Tax(es) ......................................................................15
Termination Fee ..............................................................59
Trading Day ...................................................................4
U.K. Listing Authority .......................................................15
U.S. GAAP ....................................................................13
Violation ....................................................................11
Voting Debt ..................................................................10
vii
AGREEMENT AND PLAN OF MERGER AND SCHEME OF ARRANGEMENT, dated as of
September 4, 2000 (referred to herein as the "date hereof"), by and among
National Grid Group plc., a public limited company incorporated under the laws
of England and Wales with registration number 2367004 ("Parent"), Niagara Mohawk
Holdings, Inc., a New York corporation (the "Company"), New National Grid
Limited, a private limited company incorporated under the laws of England and
Wales with registration number 4031152 ("Newco") and Grid Delaware, Inc., a
Delaware corporation and a wholly owned subsidiary of Newco ("Merger Sub").
WHEREAS, the Company, Parent and Newco have determined that it would be
in their respective best interests and in the interests of their respective
shareholders to effect the transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of Parent intends to recommend to its
shareholders a proposal to introduce Newco as a new holding company for the
Parent group pursuant to a scheme of arrangement (the "Scheme") to be sanctioned
by the High Court of Justice, London, England (the "Court"), substantially in
the form of the draft Scheme attached hereto as Exhibit A subject to such
amendments as Parent may reasonably deem necessary or desirable; provided, that
if such amendments would have a material adverse effect on the benefits of the
Merger for the holders of Company Common Stock, or such amendments are not
necessary to consummate the transactions contemplated hereby and have any
adverse effect on the benefits of the Merger to the holders of Company Common
Stock, such amendments may only be effected with the prior written consent of
the Company;
WHEREAS, the respective Boards of Directors of Parent, Newco, Merger
Sub and the Company have approved the merger (the "Merger") of Merger Sub with
and into the Company, whereby the Company will become a wholly owned subsidiary
of Newco, all pursuant to the terms and conditions set forth in this Agreement;
and
WHEREAS, for United States federal income tax purposes, it is intended
that the Scheme together with the Merger shall collectively qualify as a
transaction described in Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER AND THE SCHEME
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Merger Effective Time, Merger Sub will be merged with and into
the
Company in accordance with the Business Corporation Law of the State of New York
(the "BCL") and the General Corporation Law of the State of Delaware (the
"DGCL"). The Company will be the surviving entity in the Merger (the "Surviving
Entity") and shall continue its existence under the laws of the State of New
York. The effects and the consequences shall be as set forth in Section 1.5,
Section 906 of the BCL and Section 259 of the DGCL.
Section 1.2 Effective Time of the Merger. On the Closing Date (as
defined in Section 3.1) a certificate of merger complying with the requirements
of the relevant provisions of the BCL shall be executed and delivered for filing
with the Department of State of the State of New York with respect to the
Merger. The Merger shall become effective upon the later of the filing of a
certificate of merger relating thereto by the Department of State of the State
of New York and the filing of a certificate of merger relating thereto with the
Secretary of State of the State of Delaware or upon such later date as is agreed
upon by the parties and specified in such certificates of merger (the "Merger
Effective Time"); provided that the Merger Effective Time shall occur as soon as
reasonably practical but no later than seven days after the Scheme Effective
Time (as defined below).
Section 1.3 The Scheme. Subject to the terms and conditions of this
Agreement and the Scheme having been sanctioned by the Court and having become
effective in accordance with Section 1.4, on the Scheme Effective Time, all of
the issued and outstanding share capital of Parent shall be cancelled and Parent
shall issue and deliver to Newco such number of the Parent Ordinary Shares as
has been so cancelled in consideration of the allotment by Newco of such number
of Newco shares as shall be of an aggregate nominal amount equal to the
aggregate nominal amount of the Parent Ordinary Shares so cancelled.
Section 1.4 The Scheme Effective Time. This Scheme shall become
effective as soon as an office copy of the Court order sanctioning this Scheme
has been duly delivered to the Registrar of Companies for registration and the
order and relative minutes have been registered by him (such time being referred
to herein as the "Scheme Effective Time"); provided that the Scheme Effective
Time shall occur prior to the Merger Effective Time.
Section 1.5 Governing Documents. The memorandum and articles of
association of Parent as in effect immediately prior to the Scheme Effective
Time shall be the memorandum and articles of association of Parent following the
Scheme Effective Time, until duly amended, except that the memorandum and
articles of association of Parent following the Scheme Effective Time may
reflect a change in the name of Parent and such other changes as are appropriate
for Parent as a wholly owned subsidiary and any changes necessary to reflect any
cancellations or redemption of the Parent Special Share (as defined in Section
2.1) pursuant to the Scheme or otherwise. The certificate of incorporation and
by-laws of the Company as in effect immediately prior to the Merger Effective
Time shall be the certificate of incorporation and by-laws of the Company
following the Merger Effective Time, until duly amended. On or prior to the
Closing Date, Newco shall adopt memorandum and articles of association
substantially similar to the memorandum and articles of incorporation of Parent
immediately prior to the Scheme Effective Time, though they shall not be
required to (but may) provide for a
2
Newco Special Share (as defined in Section 2.1) and Newco's name shall become
"National Grid plc".
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Scheme on Parent Capital Stock. As of the
Scheme Effective Time, in accordance with the terms of the Scheme (a) all
ordinary shares of 11 13/17 ▇▇▇▇▇ each of Parent ("Parent Ordinary Shares")
outstanding on the Scheme Effective Time will be cancelled and the holders
thereof will receive in place of the Parent Ordinary Shares then held by them an
identical number of ordinary shares of Newco ("Newco Ordinary Shares"), (b) all
Parent Ordinary Shares represented by American Depositary Shares of Parent
("Parent ADSs"), each representing five (5) Parent Ordinary Shares and evidenced
by American Depositary Receipts ("Parent ADRs"), outstanding as of the Scheme
Effective Time will be cancelled and the holders thereof will receive in place
of the Parent ADSs then held by them an identical number of American Depositary
Shares of Newco ("Newco ADSs"), each representing five (5) Newco Ordinary Shares
and evidenced by American Depositary Receipts ("Newco ADRs"), (c) Parent will
issue and deliver Parent Ordinary Shares to Newco, and (d) if required by the
Secretary of State for Trade and Industry in the UK as a condition of giving its
consent to the Scheme, the Special Rights Redeemable Preference Share of Parent
with a nominal value of L held by the Secretary of State for Trade and Industry
in the UK (the "Parent Special Share") shall be cancelled and one Special Rights
Redeemable Preference Share of Newco with a nominal value of L shall be issued
by Newco to the Secretary of State for Trade and Industry in the UK (the "Newco
Special Share").
Section 2.2 Effect of the Merger on the Company Capital Stock. As of
the Merger Effective Time, by virtue of the Merger and without any action on the
part of any holder of Company Common Stock (as hereinafter defined):
(a) Conversion of Merger Sub Shares. Each share of common stock, par
value $0.10 per share, of Merger Sub issued and outstanding immediately prior to
the Merger Effective Time will be converted into one share of common stock, par
value $0.01 per share, of the Company (the "Company Common Stock").
(b) Cancellation of Company Treasury Stock and Sub-Owned Stock. Each
Share of Company Common Stock, that is owned by the Company, Parent or Newco or
by any wholly owned Subsidiary of the Company, Parent or Newco, will
automatically be canceled, retired and cease to exist, and no consideration will
be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to the other provisions
of this Section 2.2, each issued and outstanding share of Company Common Stock
(other than shares of Company Common Stock canceled in accordance with Section
2.2(b)) will be converted into the right to receive the Per Share Amount (as
defined below) in the form of
3
(x) cash (in such form, the "Cash Consideration"), (y) a number of Newco ADSs
equal to the Exchange Ratio (in such form, the "ADS Consideration"), or (z) a
combination of Cash Consideration and ADS Consideration determined in accordance
with Section 2.2(h) (the "Merger Consideration"). The "Per Share Amount" shall
be determined as follows: (i) if the Average Price is greater than or equal to
$32.50 and less than or equal to $51.00, the Per Share Amount shall be $19.00,
(ii) if the Average Price is less than $32.50, the Per Share Amount shall be
$19.00 reduced by the product of (x) $12.67 (two-thirds of $19.00) and (y) the
percentage decrease in the Average Price below $32.50, and (iii) if the Average
Price is greater than $51.00, the Per Share Amount shall be $19.00 increased by
the product of (x) $12.67 (two-thirds of $19.00) and (y) the percentage increase
in the Average Price above $51.00. "Average Price" means the average of the
closing prices of Parent Ordinary Shares, as derived from the Daily Official
List of the London Stock Exchange plc (converted to a U.S. dollar value using
the exchange rate for each date for which the closing price is to be determined
as reported in The Financial Times) for 20 Trading Days selected at random
(using procedures mutually agreed upon by Parent and the Company) in the period
of 40 consecutive Trading Days ending on the close of business on the tenth
Trading Day prior to the Election Deadline, multiplied by five. "Trading Day"
means a day on which the London Stock Exchange plc is open for trading. The
"Exchange Ratio" shall be equal to the Per Share Amount as determined above
divided by the Average Price.
(d) Cash Election. Subject to the immediately following sentence, each
record holder of shares of Company Common Stock immediately prior to the Merger
Effective Time shall be entitled to elect to receive Cash Consideration for all
or any part of such Company Common Stock (a "Cash Election"). Notwithstanding
the foregoing, the aggregate amount of Cash Consideration to be paid in the
Merger shall be $1,015,000,000 (the "Cash Amount"). As used in this Agreement,
the "Cash Election Number" shall mean the aggregate number of shares of Company
Common Stock converted into the right to receive Cash Consideration in the
Merger, which shall equal the Cash Amount divided by the Per Share Amount;
provided that Newco reserves the right in its sole discretion to increase the
Cash Election Number to more closely follow the actual elections of the
Company's shareholders (but not to a number which is greater than the number of
shares of Company Common Stock in respect of which a valid Cash Election has
been made).
(e) Cash Election Shares. If the aggregate number of shares of Company
Common Stock covered by the Cash Elections (the "Cash Election Shares") exceeds
the Cash Election Number, (1) the number of Cash Election Shares covered by each
Form of Election (defined below) will be determined by multiplying the number of
Cash Election Shares covered by such Form of Election by a fraction, the
numerator of which is the Cash Election Number and the denominator of which is
the number of Cash Election Shares, and (2) all Cash Election Shares not
exchanged for Cash Consideration will be exchanged for the right to receive ADS
Consideration (and cash in lieu of fractional shares in accordance with Section
2.3(e))
(f) ADS Election. Subject to the immediately following sentence, each
record holder of shares of Company Common Stock immediately prior to the Merger
Effective Time shall be entitled to elect to receive ADS Consideration for all
or any part of such holder's shares
4
of Company Common Stock (an "ADS Election"). Notwithstanding the foregoing, the
aggregate number of shares of Company Common Stock that may be converted into
the right to receive ADS Consideration in the Merger (the "ADS Election Number")
shall be the difference between the total number of shares of Company Common
Stock issued and outstanding immediately prior to the Merger Effective Time and
the Cash Election Number.
(g) ADS Election Shares. If the aggregate number of shares of Company
Common Stock covered by ADS Elections (the "ADS Election Shares") exceeds the
ADS Election Number, (1) the number of ADS Election Shares covered by each Form
of Election (defined below) to be exchanged for Cash Consideration will be
determined by multiplying the number of ADS Election Shares covered by such Form
of Election by a fraction, the numerator of which is the Cash Election Number
less the number of Cash Election Shares and the denominator of which is the
aggregate number of ADS Election Shares, and (2) all ADS Election Shares not
exchanged for Cash Consideration will be exchanged for the right to receive ADS
Consideration (and cash in lieu of fractional shares in accordance with Section
2.3(e)).
(h) Mixed Election. Subject to the immediately following sentence, each
record holder of shares of Company Common Stock immediately prior to the Merger
Effective Time shall be entitled to elect to receive ADS Consideration for part
of such holder's shares of Company Common Stock and Cash Consideration for the
remaining part of such holder's shares of Company Common Stock (the "Mixed
Election" and, collectively with ADS Election and Cash Election, the
"Election"). With respect to each holder of Company Common Stock who makes a
Mixed Election, the shares of Company Common Stock such holder elects to be
converted into the right to receive Cash Consideration shall be treated as Cash
Election Shares for purposes of the provisions contained in Sections 2.2(d) and
(e), and the shares such holder elects to be converted into the right to receive
ADS Consideration shall be treated as ADS Election Shares for purposes of the
provisions contained in Sections 2.2(f) and (g).
(i) Non-Election Shares. Shares of Company Common Stock in respect of
which a timely and properly completed election has not been made (the
"Non-Election Shares") shall be deemed by Newco to be Cash Election Shares or
ADS Election Shares, as Newco shall determine.
Section 2.3 Exchange of Certificates.
(a) Scheme Exchange. The exchange of certificates representing Parent
Ordinary Shares and Parent ADRs in the Scheme shall occur substantially in
accordance with the provisions of Exhibit A hereto.
(b) Appointment of ADR Depositary for Merger Exchange. As of the Merger
Effective Time, Newco and Merger Sub will enter into an agreement ("ADR
Depositary Agreement") with Newco's United States Depositary (the "ADR
Depositary"), which will provide that Newco or Merger Sub will deposit with the
ADR Depositary as of the Merger Effective Time, for the benefit of the holders
of shares of Company Common Stock for exchange in accordance with this Article
II, through the ADR Depositary, cash equal to the sum of the total
5
aggregate Cash Consideration and the number of Newco Ordinary Shares represented
by the Newco ADSs to be issued in the Merger (such cash and such Newco ADSs,
together with any dividends or distributions with respect thereto with a record
date after the Merger Effective Time and any cash payable in lieu of any
fractional Newco ADSs, being hereinafter referred to as the "Exchange Fund")
pursuant to Section 2.2 in exchange for outstanding shares of the Company Common
Stock.
(c) Merger Exchange Procedures.
(i) Not more than 90 days nor fewer than 30 days prior to
the Closing Date, the ADR Depositary will mail a form of election (the
"Form of Election") to holders of record of shares of Company Common Stock
(as of a record date as close as practicable to the date of mailing and
mutually agreed to by the Company, Newco and Parent). In addition, the ADR
Depositary will use its best efforts to make the Form of Election available
to the persons (as defined in Section 2.3(g)) who become shareholders of
the Company during the period between such record date and the Closing
Date. Any election to receive Merger Consideration contemplated by Section
2.2(c) will have been properly made only if the ADR Depositary shall have
received at its designated office or offices, by 5:00 p.m., New York City
time, on the fifth business day immediately preceding the Closing Date (the
"Election Deadline"), a Form of Election properly completed and accompanied
by a Company Share Certificate ("Certificate(s)") for the shares to which
such Form of Election relates, duly endorsed in blank or otherwise
acceptable for transfer on the books of the Company (or an appropriate
guarantee of delivery), as set forth in such Form of Election. An election
may be revoked only by written notice received by the ADR Depositary prior
to 5:00 p.m., New York City time, on the Election Deadline. In addition,
all elections shall automatically be revoked if the ADR Depositary is
notified in writing by Newco, Parent and the Company that the Merger has
been abandoned. If an election is so revoked, the Certificate(s) (or
guarantee of delivery, as appropriate) to which such election relates will
be promptly returned to the person submitting the same to the ADR
Depositary. Newco shall have the discretion, which it may delegate in whole
or in part to the ADR Depositary, to determine whether Forms of Election
have been properly completed, signed and submitted or revoked pursuant to
this Article II, and to disregard immaterial defects in Forms of Election.
The decision of Newco (or the ADR Depositary) in such matters shall be
conclusive and binding.
(ii) As soon as reasonably practicable after the Merger
Effective Time, the ADR Depositary will mail to each holder of record of a
Certificate, whose shares of the Company Common Stock (the "Shares") were
converted into the right to receive Merger Consideration and who failed to
return a properly completed Form of Election, (i) a letter of transmittal
(which will specify that delivery will be effected, and risk of loss and
title to the Certificates will pass, only upon delivery of the Certificates
to the ADR Depositary and will be in such form and have such other
provisions as Newco, Parent and the Company may specify consistent with
this Agreement) and (ii) instructions for use in
6
effecting the surrender of the Certificates in exchange for the Merger
Consideration determined by Newco pursuant to Section 2.2(i).
(iii) At the Merger Effective Time, with respect to properly
made elections in accordance with Section 2.3(c)(i), and upon surrender in
accordance with Section 2.3(c)(ii) of a Certificate for cancellation to the
ADR Depositary or to such other agent or agents as may be appointed by
Newco, Parent and the Company, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by
the ADR Depositary, the holder of such Certificate will be entitled to
receive in exchange therefor the Merger Consideration that such holder has
the right to receive pursuant to the provisions of this Article II, and the
Certificate so surrendered will forthwith be canceled. In the event of a
transfer of ownership of Shares that are not registered in the transfer
records of the Company, payment may be issued to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate is properly endorsed or otherwise in proper form for transfer
and the person requesting such issuance pays any transfer or other taxes
required by reason of such payment to a person other than the registered
holder of such Certificate or establishes to the satisfaction of Newco,
Parent and the Company that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.3, each Certificate
will be deemed at any time after the Merger Effective Time to represent
only the right to receive upon such surrender the Merger Consideration that
the holder thereof has the right to receive in respect of such Certificate
pursuant to the provisions of this Article II. No interest will be paid or
will accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article II.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to the Newco ADSs with a record date after the
Merger Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the Newco ADSs represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to any such holder
pursuant to Section 2.3(e), and all such dividends, other distributions and cash
in lieu of fractional Newco ADSs shall be paid by Newco to the ADR Depositary
and shall be included in the Exchange Fund, in each case until the surrender of
such Certificate in accordance with this Article II. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the Certificate
representing whole Newco ADSs issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of any cash payable in lieu of a
fractional Newco ADS to which such holder is entitled pursuant to Section 2.3(e)
and the amount of dividends or other distributions with a record date after the
Merger Effective Time theretofore paid with respect to such whole Newco ADSs and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Merger Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole Newco ADSs. Newco shall make available to the ADR
Depositary cash for the foregoing purposes.
(e) No Fractional Securities. No Newco Certificates or scrip
representing fractional Newco ADSs shall be issued upon the surrender for
exchange of Certificates, and such
7
fractional shares shall not entitle the owner thereof to vote or to any other
rights of a holder of Newco ADSs or Newco Ordinary Shares. A holder of Shares
converted in the Merger who would otherwise have been entitled to a fractional
Newco ADS shall be entitled to receive a cash payment (without interest) in lieu
of such fractional share in an amount determined by multiplying (i) the
fractional share interest to which such holder would otherwise be entitled by
(ii) the closing price per Parent ADS as reported on the NYSE Composite
Transaction Tape on the Closing Date.
(f) No Further Ownership Rights in Company Common Stock. All Newco ADSs
issued upon the surrender for exchange of Certificates in accordance with the
terms of this Article II (including any cash paid pursuant to this Article II)
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates,
subject, however, to any obligation of Newco or the Surviving Entity to pay any
dividends or make any other distributions with a record date prior to the Merger
Effective Time which may have been authorized or made with respect to shares of
Company Common Stock that remain unpaid at the Merger Effective Time, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Entity of shares of Company Common Stock that were outstanding
immediately prior to the Merger Effective Time. If, after the Merger Effective
Time, Certificates are presented to Newco, the Surviving Entity or the ADR
Depositary for any reason, they shall be cancelled and exchanged as provided in
this Section 2.3, except as otherwise provided by law.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Merger Effective Time shall be delivered by the ADR Depositary to
Newco, and any holders of the Certificates who have not theretofore complied
with this Article II shall thereafter look only to Newco for payment of their
claim for such Newco ADSs or funds to which such holder may be due, subject to
applicable law. None of Newco, Parent, the Company, the Surviving Entity or the
ADR Depositary shall be liable to any person (as defined below) in respect of
any such Newco ADSs or funds from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
As used in this Agreement, the term "person" shall mean any natural person,
corporation, general or limited partnership, limited liability company, joint
venture, trust, association or entity of any kind.
(h) Investment of Exchange Fund. The ADR Depositary will invest any
cash included in the Exchange Fund, as directed by Newco, on a daily basis. Any
interest and other income resulting from such investments will be paid to Newco.
(i) Lost Certificates. If any Certificate is lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Newco or the
Surviving Entity, as the case may be, the posting by such person of a bond in
such reasonable amount as Newco or the Surviving Entity, as the case may be, may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the ADR Depositary will issue in exchange for such lost,
stolen or destroyed
8
Certificate the Merger Consideration and, if applicable, any cash in lieu of
fractional shares, and unpaid dividends and distributions on Newco ADSs,
pursuant to this Agreement.
(j) Certain Adjustments. If, after the date hereof and on or prior to
the Closing Date, the outstanding Parent Ordinary Shares or Parent ADSs shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, issue by capitalization of reserves, split-up, combination,
exchange of shares or rights issue, or any dividend payable in stock or other
securities is declared thereon with a record date within such period, or any
similar event shall occur, the Merger Consideration will be adjusted accordingly
to provide to the holders of the Company Common Stock, the same economic effect
as contemplated by this Agreement prior to such reclassification,
recapitalization, issue by capitalization of reserves, split-up, combination,
exchange, rights issue or dividend or similar event.
(k) Withholding Rights. Each of the Surviving Entity and Newco shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of the Company Common Stock
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law, other than Conveyance Taxes (as defined in Section 7.14). To the extent
that amounts are so withheld by the Surviving Entity or Newco, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of the Company Common Stock in
respect of which such deduction and withholding was made by the Surviving Entity
or Newco, as the case may be.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M., local time, on the business
day that is no later than the first business day that is forty days following
the date on which the last of the conditions set forth in Article VIII hereof
(other than the condition set forth in Section 8.2(h)) is fulfilled or waived
and which is also after, but no more than seven days after, the condition set
forth in Section 8.2(h) hereof is fulfilled or waived, or at such other time,
date and place as the Company, Newco and Parent shall mutually agree (the
"Closing Date").
9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, Newco and Merger Sub as
follows:
Section 4.1 Organization and Qualification. Except as set forth in
Section 4.1 of the schedule delivered by the Company on the date hereof (the
"Company Disclosure Schedule"), the Company and each Company Subsidiary (as
defined below) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority, and has been duly authorized by all
necessary approvals and orders to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify could
not reasonably be expected to have a material adverse effect on the business,
assets, condition (financial or otherwise), current or reasonably anticipated
future results of operations (measured by net income plus the after-tax effect
of the Master Restructuring Agreement amortization as reported in the most
recent Company Financial Statement (as defined in Section 4.5)) of the Company
and the Company Subsidiaries taken as a whole, other than effects resulting from
execution of this Agreement or affecting the electric utility business in the
United States generally or the specific matters set forth in Section 4.1 of the
Company Disclosure Schedule, or on the Company's ability to consummate the
Merger (a "Company Material Adverse Effect"). As used in this Agreement, (a) the
term "Subsidiary" of a person shall mean any corporation or other entity
(including partnerships and other business associations) of which at least a
majority of the voting power represented by the outstanding capital stock or
other voting securities or interests having voting power under ordinary
circumstances to elect directors or similar members of the governing body of
such corporation or entity shall at the time be held or owned, directly or
indirectly, by such person, and (b) the term "Company Subsidiary" shall mean a
Subsidiary of the Company.
Section 4.2 Subsidiaries. (a) Section 4.2(a) of the Company Disclosure
Schedule sets forth a list as of the date hereof of (i) all of the Company
Subsidiaries and (ii) all Company Associates and a list of any existing
agreements requiring the Company or any of Company Subsidiaries to make any
additional material investment in, or material loan or capital contribution to,
or guarantee any material obligation of, such Company Associates. For purposes
of this Agreement, "Company Associates" shall mean any corporation or other
entity (including partnerships and other business associations) that is not a
Company Subsidiary, in which the Company and/or one or more of its Subsidiaries,
directly or indirectly, owns an equity interest (other than investments in the
ordinary course of business in publicly-traded companies which constitute less
than 5% of the outstanding voting securities of such entity).
10
(b) Except as set forth in Section 4.2(b) of the Company Disclosure
Schedule, all of the issued and outstanding shares of capital stock of each
Company Subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned, directly or indirectly, by Company free and
clear of any liens, claims, encumbrances, security interests, charges and
options of any nature whatsoever and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating any such Company Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of its capital
stock or obligating it to grant, extend or enter into any such agreement or
commitment.
Section 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 300,000,000 shares of Company Common
Stock, and 50,000,000 shares of Preferred Stock, par value $0.01 per share (the
"Company Preferred Stock"). At the close of business on September 1, 2000, (i)
approximately 160,239,983 shares of Company Common Stock were issued and
outstanding, (ii) no shares of Company Preferred Stock were issued and
outstanding, and (iii) no bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into securities having the right to vote) on
any matters on which shareholders may vote ("Voting Debt"), were issued or
outstanding. As of the date hereof, all outstanding shares of Company Common
Stock are validly issued, fully paid and nonassessable and are not subject to
preemptive rights. As of the Closing Date, all outstanding shares of Company
Common Stock will be validly issued, fully paid and nonassessable and will not
be subject to preemptive rights. As of the date of this Agreement, except as set
forth in Section 4.3(a) of the Company Disclosure Schedule or pursuant to this
Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which the Company or any material Company
Subsidiary is a party or by which it is bound obligating the Company or any
material Company Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any Voting Debt of the
Company or any material Company Subsidiary or obligating the Company or any
material Company Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. Except as set forth in Section
4.3(b) of the Company Disclosure Schedule, at the Merger Effective Time, there
will be no option, warrant, call, right, commitment or agreement obligating the
Company or any material Company Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of capital stock or any Voting Debt
of the Company or any material Company Subsidiary, or obligating the Company or
any material Company Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. The Company has all requisite power and authority to
enter into this Agreement and, subject to the receipt of Company Shareholders'
Approval (as defined in Section 4.14) and Company Required Statutory Approvals
(as defined in Section 4.4(c)), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, subject to
11
obtaining Company Shareholders' Approval. This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by the other signatories hereto,
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting or relating to the enforcement of
creditors rights generally or general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).
(b) Non-Contravention. Except as set forth in Section 4.4(b) of the
Company Disclosure Schedule, the execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated hereby
shall not, in any respect, violate, conflict with or result in a breach of any
provision of, or constitute a default (with or without notice or lapse of time
or both) under, or result in the termination or modification of, or accelerate
the performance required by, or result in a right of termination, cancellation
or acceleration of any obligation or the loss of a benefit under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company or any of the Company Subsidiaries (any
such violation, conflict, breach, default, right of termination, modification,
cancellation or acceleration, loss or creation, is referred to herein as a
"Violation" with respect to the Company and such term when used in Article V has
a correlative meaning with respect to Parent) pursuant to any provisions of (i)
the charters, by-laws or similar governing documents of the Company or any of
the Company Subsidiaries, (ii) subject to obtaining the Company Required
Statutory Approvals and the receipt of the Company Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority (as defined in Section
4.4(c)) applicable to the Company or any of the Company Subsidiaries or any of
their respective properties or assets or (iii) subject to obtaining the
third-party consents set forth in Section 4.4(b)(iii) of the Company Disclosure
Schedule (the "Company Required Consents"), any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
the Company Subsidiaries is a party or by which they or any of their properties
or assets may be bound or affected, except in the case of clause (ii) or (iii)
above for any such Violation which could not reasonably be expected to have a
Company Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration with,
or notice to or authorization, consent or approval of, any court, federal,
state, local or foreign governmental or regulatory body (including a stock
exchange or other self-regulatory body) or authority (each, a "Governmental
Authority") is necessary for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby except as described in Section 4.4(c) of the Company Disclosure Schedule
(the "Company Required Statutory Approvals"). References in this Agreement to
"obtaining" such Company Required Statutory Approvals shall mean making such
declarations, filings or registrations, giving such notices, obtaining such
authorizations, consents or approvals, and having such waiting periods expire as
are necessary to avoid a violation of law.
12
(d) Compliance. Except as set forth in Section 4.4(d), Section 4.7,
Section 4.10, Section 4.11 and Section 4.12 of the Company Disclosure Schedule,
or as disclosed in the Company SEC Reports (as defined in Section 4.5) filed
prior to the date hereof, neither the Company nor any of the Company
Subsidiaries is in violation of, is, to the Knowledge of the Company, under
investigation with respect to any violation of, or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (excluding Environmental Laws, compliance with which is
the subject of Section 4.12) of any Governmental Authority, except for possible
violations which individually or in the aggregate could not reasonably be
expected to have a Company Material Adverse Effect. As used herein, "Knowledge"
means the knowledge of the executive officers of the Company and Niagara Mohawk
Power Corporation. Except as set forth in Section 4.4(d) and Section 4.12 of the
Company Disclosure Schedule, or as expressly disclosed in the Company SEC
Reports, the Company and the Company Subsidiaries have all permits, licenses,
franchises and other governmental authorizations, consents and approvals (the
"Licenses") necessary to conduct their businesses as presently conducted except
such failures which individually or in the aggregate could not reasonably be
expected to have a Company Material Adverse Effect. All such Licenses are in
full force and effect, and there is no proceeding or investigation pending or,
to the Knowledge of the Company, threatened that could reasonably be expected to
lead to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such License which action could reasonably be expected to
have a Company Material Adverse Effect. Except as set forth in Sections 4.4(d),
4.7, 4.10 and 4.11 of the Company Disclosure Schedule, none of the Company or
the Company Subsidiaries is in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with the lapse of time or action by a third party, could result in a
default by the Company or any Company Subsidiary under (i) their respective
charter or by-laws or (ii) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which it is a party or by which the Company or any Company
Subsidiary is bound or to which any of their respective property is subject,
except for possible violations, breaches or defaults which individually or in
the aggregate could not reasonably be expected to have a Company Material
Adverse Effect.
Section 4.5 Reports and Financial Statements. Except as set forth in
Section 4.5 of the Company Disclosure Schedule, all material filings required to
be made by the Company and the Company Subsidiaries since January 1, 1998 under
the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Public Utility
Holding Company Act (the "1935 Act"), the Federal Power Act (the "Power Act"),
the Atomic Energy Act of 1954 (the "Atomic Energy Act"), the Communications Act
of 1934, applicable state public utility laws and regulations or pursuant to the
requirements of any other Governmental Authority have been filed with the SEC,
the Federal Energy Regulatory Commission (the "FERC"), the Nuclear Regulatory
Commission (the "NRC"), the Federal Communications Commission (the "FCC"), the
Department of Energy (the "DOE"), or the appropriate state public utilities
commission or such other appropriate Governmental Authority, as the case may be,
including all forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto, and
complied, as of their respective dates or as of the date of any amendment
thereto, in all
13
material respects with all applicable requirements of the appropriate statutes
and the rules and regulations thereunder. The Company has made available to
Parent a true and complete copy of each report, schedule, registration statement
and definitive proxy statement filed with the SEC by the Company pursuant to the
requirements of the Securities Act or Exchange Act since January 1, 1998 (as
such documents have since the time of their filing been amended, the "Company
SEC Reports"). Except as set forth in Section 4.5 of the Company Disclosure
Schedule, as of their respective dates, the Company SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except as
set forth in Section 4.5 of the Company Disclosure Schedule, the audited
consolidated financial statements and unaudited interim financial statements of
the Company included in the Company SEC Reports (collectively, the "Company
Financial Statements") have been prepared in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP") (except as may be indicated therein
or in the notes thereto and except with respect to unaudited statements as
permitted by Form 10-Q of the SEC) and fairly present the financial position of
the Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal audit adjustments which will not be material in
amount or effect. True, accurate and complete copies of the charter and by-laws
of the Company, as in effect on the date hereof, are included (or incorporated
by reference) in the Company SEC Reports.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Reports filed prior to the date hereof or as set forth in
Section 4.6 of the Company Disclosure Schedule, since December 31, 1999, the
Company and each of the Company Subsidiaries have conducted their respective
businesses only in the ordinary course of business consistent with past practice
(other than with respect to the cessation of operations of non- material Company
Subsidiaries) and there has not been (a) any change that has had or that could
reasonably be expected to have a Company Material Adverse Effect, (b) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock (other than regular quarterly cash dividends in
accordance with the Company's present dividend policy), (c) any split,
combination or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its outstanding capital stock,
(d) any entry by the Company or any of the Company Subsidiaries into any
employment, severance, change-of-control, termination or similar agreement with
any officer, director or other employee, or any increase in the severance or
termination benefits payable to any director, officer or other employee of the
Company or any of the Company Subsidiaries, other than any such agreement or
increase made in the ordinary course of business consistent in process and
amounts with past practice and any such agreement or increase offered pursuant
to a collective bargaining agreement or arrangement described in Section 6.1(m),
(e) any increase in the compensation or benefits not described in subsection (d)
above other than increases made in the ordinary course of business consistent in
process and amounts with past practice and increases made pursuant to a
collective bargaining agreement or arrangement described in Section 6.1(m), or
(f) any change in the method of accounting or policy used by the
14
Company or any of the Company Subsidiaries and disclosed in the financial
statements included in the Company SEC Reports.
Section 4.7 Legal Proceedings. Except as disclosed in the Company SEC
Reports filed prior to the date hereof or as set forth in Section 4.7, Section
4.9, Section 4.11 or Section 4.12 of the Company Disclosure Schedule, (a) there
are no claims, suits, actions, proceedings or hearings before any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator, pending or, to the Knowledge of the Company, threatened, nor are
there, to the Knowledge of the Company, any civil investigations, audits or
reviews by any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator pending or threatened against,
relating to or affecting the Company or any of the Company Subsidiaries which
would have a Company Material Adverse Effect; (b) to the Knowledge of the
Company, there are no criminal investigations by any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
pending or threatened against, relating to or affecting the Company or any of
the Company Subsidiaries, (c) there have not been any significant developments
since December 31, 1999 with respect to such disclosed claims, suits, actions,
proceedings, hearings, investigations, audits or reviews that would have a
Company Material Adverse Effect and (d) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any of the Company Subsidiaries except for such that could not reasonably be
expected to have a Company Material Adverse Effect.
Section 4.8 Information Supplied. (a) 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 F-4 to be filed with the
SEC by Newco in connection with the issuance of Newco ADSs in the Merger (the
"Registration Statement") will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the proxy statement included in the Registration
Statement relating to the Company Meeting (as defined in Section 7.4(b)) to be
held in connection with the Merger (the "Proxy Statement") and any other
documents to be filed by the Company with the SEC (including, without
limitation, under the ▇▇▇▇ ▇▇▇) or any other Governmental Authority in
connection with the Merger will, at the dates mailed to shareholders and at the
times of such meetings, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement shall 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.
(b) The information supplied or to be supplied by the Company for
inclusion in any filing by Newco or Parent with the SEC or the Financial
Services Authority (the "U.K. Listing Authority") in respect of the Merger or
Scheme (including, without limitation, the Class 1 circular to be issued to
shareholders of Parent (the "Circular")), the listing particulars under Part
15
IV of the Financial Services ▇▇▇ ▇▇▇▇ of the United Kingdom (the "FSA") relating
to Newco Ordinary Shares (the "Listing Particulars") and the document, including
an explanatory statement, to be sent to shareholders of Parent in connection
with the Scheme (the "Scheme Document") (collectively with any amendments or
supplements thereto, the "Parent Disclosure Documents") will not, at all
relevant times, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading and will be in accordance with the facts and will not omit
anything likely to affect the import of such information.
(c) Notwithstanding the foregoing provisions of this Section 4.8, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Registration Statement, the Proxy
Statement or the Parent Disclosure Documents based on information supplied by
Parent, Newco or Merger Sub for inclusion or incorporation by reference therein.
Section 4.9 Tax Matters.
"Tax(es)," as used in this Agreement, means any federal, state,
county, local or foreign taxes, charges, fees, levies, or other assessments,
including all net income, gross income, sales and use, ad valorem, transfer,
gains, profits, windfall profits, excise, franchise, real and personal property,
gross receipts, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or other taxes or similar charges imposed by any Governmental
Authority, whether imposed directly on a person or resulting under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise and includes any
interest and penalties (civil or criminal) on or additions to any such taxes or
in respect of a failure to comply with any requirement relating to any Tax
Return and any expenses incurred in connection with the determination,
settlement or litigation of any tax liability. "Tax Return," as used in this
Agreement, means a report, return or other information supplied to a
Governmental Authority with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company or any of the Company Subsidiaries, on the one hand, or
Parent or any of the Parent Subsidiaries (or Newco following the Scheme
Effective Time), on the other hand. "Tax Rulings," as used in this Agreement,
shall mean a written ruling of a taxing authority relating to Taxes. "Closing
Agreement," as used in this Agreement, shall mean a written and legally binding
agreement with a taxing authority relating to Taxes. "Foreign Person" as used in
this Agreement, means any person other than a "United States person" as such
term is defined in Code Section 7701(a)(30).
Except as disclosed in Section 4.9 of the Company Disclosure Schedule:
(a) Timely Filing of Tax Returns. The Company and each of the Company
Subsidiaries have filed all material Tax Returns required to be filed by each of
them under applicable law. All such Tax Returns were in all material respects
(and, as to such Tax Returns
16
not filed as of the date hereof, will be) true, complete and correct and filed
on a timely basis (taking into account applicable extensions).
(b) Payment of Taxes. The Company and each of the Company Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until the
Closing Date will pay within the time and in the manner prescribed by law) all
material Taxes that are currently due and payable, except for those Taxes
contested in good faith.
(c) Tax Liens. There are no material Tax liens upon the assets of the
Company or any of the Company Subsidiaries except liens for Taxes not yet due or
for Taxes which are being contested in good faith.
(d) Extensions of Time for Filing Tax Returns. Except with respect to
Tax Returns related to real property Taxes, neither the Company nor any of the
Company Subsidiaries has requested any extension of time within which to file
any material Tax Return which Tax Return has not since been filed.
(e) Waivers of Statute of Limitations. Except with respect to Tax
Returns related to real property Taxes, neither the Company nor any of the
Company Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
material Taxes or material Tax Returns.
(f) Expiration of Statute of Limitations. The statute of limitations
for the assessment of all material Taxes has expired for all applicable material
Tax Returns of the Company and each of the Company Subsidiaries or those Tax
Returns have been examined by the appropriate taxing authorities for all periods
through 1990, except with respect to Tax Returns that the statute of limitations
has not expired solely by reason of the carryback of a net operating loss from
an open Tax year and Tax Returns related to real property Taxes.
(g) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or material Tax Returns of the Company or any of
the Company Subsidiaries and, to the Knowledge of the Company, no issue has been
raised in writing by any taxing authority in connection with any material Tax or
material Tax Return (a "Tax Controversy"), except with respect to Tax
Controversies involving real property Taxes that could not, individually or in
the aggregate, be reasonably expected to result in a Company Material Adverse
Effect.
(h) Availability of Tax Returns. Except with respect to Real Property
Taxes, the Company and the Company Subsidiaries have made available to Parent
complete and accurate copies, covering all open years, of (i) all material Tax
Returns, and any amendments thereto, filed by the Company or any of the Company
Subsidiaries, (ii) all material audit reports received from any taxing authority
relating to any Tax Return filed by the Company or any of the Company
Subsidiaries, including any proposed, asserted or assessed deficiencies for
Taxes that have not been resolved and paid in full, (iii) any material Tax
Rulings and material Closing
17
Agreements entered into by the Company or any of the Company Subsidiaries with
any taxing authority, and all powers of attorney currently in force granted by
the Company or any of the Company Subsidiaries covering all years ending on or
before the Closing Date, and (iv) any material agreements relating to the
allocation or sharing of Taxes between or among the Company and any of the
Company Subsidiaries.
(i) Code Section 168. To the Knowledge of the Company, no property of
the Company or any of the Company Subsidiaries is property that the Company or
any such Subsidiary or any party to this transaction is or will be required to
treat as being owned by another person pursuant to the provisions of Code
Section 168(f)(8) (as in effect prior to its amendment by the Tax Reform Act of
1986).
(j) Code Section 481 Adjustments. (i) Neither the Company nor any of
the Company Subsidiaries is required to include in income on any Tax Return that
has not been filed and made available to Parent any material adjustment pursuant
to Code Section 481(a) (an "Accounting Method Adjustment") by reason of a
voluntary change in accounting method initiated by the Company or any of the
Company Subsidiaries and (ii) to the Knowledge of the Company, the Internal
Revenue Service (the "IRS") has not proposed any such Accounting Method
Adjustment with respect to any Tax Return that the statute of limitations for
the assessment of all Taxes has not expired.
(k) Indebtedness. No material indebtedness of the Company or any of the
Company Subsidiaries is (i) "corporate acquisition indebtedness" within the
meaning of Code Section 279(b) or (ii) exempt facility bonds described in Code
Section 142 or industrial development bonds described in Section 103 of the
Internal Revenue Code of 1954, as amended, prior to the enactment of the Tax
Reform Act of 1986.
(l) Intercompany Transactions. Neither the Company nor any of the
Company Subsidiaries has engaged in any intercompany transactions within the
meaning of Treasury Regulations Section 1.1502-13 for which any material income
or material gain will remain unrecognized as of the close of the last taxable
year prior to the Closing Date.
(m) Code Section 897(c). To the Knowledge of the Company, no Foreign
Person owns within the meaning of Code Section 897 and the Treasury Regulations
thereunder more than five percent (5%) of the Company Common Stock during the
period described in Code Section 897(c)(1)(A)(ii).
(n) Code Section 355(e). Neither the Company nor any of the Company
Subsidiaries has constituted a "distributing corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
past 24-month period or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(o) Tax Basis. As of December 31, 1999, to the Knowledge of the
Company, the aggregate tax basis of (i) the stock held, directly or indirectly,
by the Company other than the
18
stock of Niagara Mohawk Power Corporation and (ii) the property, plant and
equipment held by Niagara Mohawk Power Corporation is not, taken together,
greater than $4,400,000,000.
(p) Neither the Company nor any of the Company subsidiaries has taken
any action or has any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger and the Scheme taken together from qualifying
as a transaction described in Section 351 of the Code or (ii) cause the Merger
to be subject to Code Section 367(a)(1).
Section 4.10 Employee Matters; ERISA.
(a) Each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), bonus,
deferred compensation, share option or similar option, employment agreement,
severance plan or similar option, plan, agreement or other written agreement
relating to employment, compensation, employment benefits, and any other
compensation or fringe benefits for employees, former employees, officers or
directors of the Company or any Company Subsidiaries effective as of the date
hereof or providing benefits as of the date hereof to current employees, former
employees, officers, trustees, or directors of the Company or pursuant to which
the Company or any of its Subsidiaries has or could reasonably be expected to
have any liability (collectively, the "Company Employee Benefit Plans") is
listed in Section 4.10(a) of the Company Disclosure Schedule (other than any
such agreement with an individual who was never an officer or a director of the
Company or any Company Subsidiary, if such agreement is not material when
considered individually and would not be material if considered in the aggregate
with all other such agreements with individuals who never were officers or
directors of the Company or any Company Subsidiary), is in material compliance
with applicable law except as set forth in Section 4.10(a) of the Company
Disclosure Schedule, and has been administered and operated in all material
respects in accordance with its terms. Each Company Employee Benefit Plan which
is intended to be qualified within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the IRS as to such qualification
and, to the Knowledge of the Company, no event has occurred and no condition
exists which could reasonably be expected to result in the revocation of, or
have any adverse effect on, any such determination.
(b) Complete and correct copies of the following documents have been
made available to Parent as of the date of this Agreement: (i) all Company
Employee Benefit Plans and any related trust agreements, insurance contracts or
other funding arrangements and any amendments to each, (ii) the most current
summary plan descriptions of each Company Employee Benefit Plan subject to ERISA
and any summary of material modifications issued since such summary plan
descriptions, (iii) the three most recent Form 5500s and Schedules thereto for
each Company Employee Benefit Plan subject to such reporting, (iv) the most
recent determination of the Internal Revenue Service with respect to the
qualified status of each Company Employee Benefit Plan that is intended to
qualify under Section 401(a) of the Code, (v) the most recent accountings with
respect to each Company Employee Benefit Plan funded through a trust or through
a funding arrangement and (vi) the most recent actuarial report of the enrolled
actuary of each Company Employee Benefit Plan with respect to which actuarial
valuations are conducted.
19
(c) Except as set forth in Section 4.10(c) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary maintains or is
obligated to provide benefits under any Company Employee Benefit Plan (other
than as an incidental benefit under a Plan qualified under Section 401(a) of the
Code) which provides health or welfare benefits to retirees or other terminated
employees other than benefit continuations as required pursuant to Section 601
of ERISA. Each Company Employee Benefit Plan subject to the requirements of
Section 601 of ERISA has been operated in material compliance therewith. Neither
the Company nor any Company Subsidiaries have contributed to a nonconforming
group health plan (as defined in Code Section 5000(c)). No person or entity
other than the Company or a Company Subsidiary is, or has in the last five years
been, considered to be within a controlled group with the Company or any Company
Subsidiary or under common control with the Company or a Company Subsidiary
within the meaning of Section 414 of the Code or Section 4001 of ERISA.
(d) Except as set forth in Section 4.10(d) of the Company Disclosure
Schedule, each Company Employee Benefit Plan covers only employees who are
employed by the Company or a Company Subsidiary (or former employees or
beneficiaries with respect to service with the Company or a Company Subsidiary).
(e) Except as set forth in Section 4.10(e) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary, within the five-year
period preceding the date of this Agreement, at any time contributed to any
"multiemployer plan," as that term is defined in Section 4001 of ERISA. Neither
the Company nor any Company Subsidiary is subject to "withdrawal liability" as
that term is defined in Part I, Subtitle E, Title IV, of ERISA and if the
Company or any Company Subsidiary were to withdraw from a "multiemployer plan"
at the Merger Effective Time, neither the Company, nor any Company Subsidiary
would have any "withdrawal liability" as that term is defined in Part I,
Subtitle E, Title IV, of ERISA.
(f) No event has occurred, and there exists no condition or set of
circumstances in connection with any Company Employee Benefit Plan, under which
the Company or any Company Subsidiary, directly or indirectly (through any
indemnification agreement or otherwise), is likely to be liable under Section
409 of ERISA, Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the
Code.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation (the "PBGC") under Section
302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise that has not been
satisfied in full and no event or condition exists or has existed which could
reasonably be expected to result in any such material liability. No "reportable
event" within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived or extended has occurred with respect
to any Company Employee Benefit Plan that is a defined benefit plan under
Section 3(35) of ERISA within the 12-month period ending on the date hereof.
20
(h) Except as set forth in Section 4.10(h) of the Company Disclosure
Schedule, no employer securities, employer real property or other employer
property is included in the assets of any Company Employee Benefit Plan.
(i) Full payment has been made of all material amounts which the
Company or any Company Subsidiary was required under the terms of the Company
Employee Benefit Plans to have paid as contributions to such plans on or prior
to the Merger Effective Time (excluding any amounts not yet due) and no Company
Employee Benefit Plan which is subject to Part III of Subtitle B of Title I of
ERISA has incurred any "accumulated funding deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code, whether or not waived.
(j) Except as set forth in Section 4.10(j) of the Company Disclosure
Schedule, no amounts payable under any Company Employee Benefit Plan or other
agreement, contract, or arrangement, as a result of or in connection with the
Merger, is expected to fail to be deductible for federal income tax purposes by
virtue of Section 280G or Section 162(m) of the Code.
Section 4.11 Labor and Employee Relations. As of the date hereof,
except as disclosed in Section 4.11(a) of the Company Disclosure Schedule or in
the Company SEC Reports, (i) neither the Company nor any of the Company
Subsidiaries is a party to any collective bargaining agreement or other labor
agreement with any union or labor organization and (ii) to the Knowledge of the
Company or any Company Subsidiary, there is no current union representation
question involving employees of the Company or any of the Company Subsidiaries,
nor does the Company or any Company Subsidiary have Knowledge of any activity or
proceeding of any labor organization (or representative thereof) or employee
group to organize any such employees. The Company has delivered or otherwise
made available to Parent true, correct and complete copies of the collective
bargaining agreements listed in Section 4.11 of the Company Disclosure Schedule,
together with all amendments, modifications or supplements thereto. Except as
disclosed in Section 4.11(a) of the Company Disclosure Schedule or in the
Company SEC Reports filed prior to the date hereof, there is no unfair labor
practice, employment discrimination or other material grievance, arbitration,
claim, suit, action, proceeding or employment related complaint against the
Company or any of the Company Subsidiaries pending, or to the Knowledge of the
Company or any Company Subsidiary, threatened against or affecting the Company
or any Company Subsidiary before any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator, (b) there is no strike,
lockout or dispute, slowdown or work stoppage pending or, to the Knowledge of
the Company or any Company Subsidiary, threatened against or involving the
Company or any Company Subsidiary, and (c) there is no proceeding, claim, suit,
action or governmental investigation pending or, to the Knowledge of the
Company, threatened in respect of which any director, officer, employee or agent
of the Company or any Company Subsidiary is or may be entitled to claim
indemnification from the Company or such Company Subsidiary pursuant to their
respective charters or by-laws or as provided in the indemnification agreements
listed in Section 4.11(c) of the Company Disclosure Schedule. Except as set
forth in Section 4.11(a) of the Company Disclosure Schedule, to the Knowledge of
the Company and each Company Subsidiary, the Company and each such Company
Subsidiary are in material compliance with any and all laws in any relevant
jurisdiction, including common law, all applicable federal, state
21
and local laws with respect to employment practices, labor relations, safety and
health regulations and mass layoffs and plant closings.
Section 4.12 Environmental Protection.
(a) Except as set forth in Section 4.12 of the Company Disclosure
Schedule or in the Company SEC Reports filed prior to the date hereof:
(i) Compliance. The Company and each of the Company
Subsidiaries has been and is in compliance with all applicable
Environmental Laws (as defined in Section 4.12(d)(ii)) except where the
failure to so comply would not in the aggregate have a Company Material
Adverse Effect, and neither the Company nor any of the Company Subsidiaries
has received any communication (written or oral) from any person or
Governmental Authority that alleges that the Company or any of the Company
Subsidiaries is not in such compliance with applicable Environmental Laws,
except as would not in the aggregate have a Company Material Adverse
Effect. To the Knowledge of the Company and the Company Subsidiaries,
compliance with all applicable Environmental Laws will not require the
Company or any Company Subsidiary to incur additional costs over the next
five years, beyond those currently recorded or budgeted for the five
Company fiscal years beginning with January 1, 2000, including, but not
limited to, (i) the costs of pollution prevention or control equipment that
are known or anticipated to be required over the next five years; and (ii)
investigatory, removal, remediation or response costs or investigatory,
removal, remediation or response costs known to be required over the next
five years, in each case, both on-site and off-site, except for such
additional costs that reasonably would not be expected to result in the
aggregate in a Company Material Adverse Effect.
(ii) Environmental Permits. The Company and each of the
Company Subsidiaries has obtained or has applied for all environmental,
health and safety permits and governmental authorizations, consents or
licenses (collectively, the "Environmental Permits") necessary for their
operations as presently conducted, and all such Environmental Permits are
in good standing or, where applicable, a renewal application has been
timely filed and is pending before the appropriate Governmental Authority,
except for such Environmental Permits that would not reasonably be expected
in the aggregate to have a Company Material Adverse Effect. The Company and
the Company Subsidiaries are in compliance with all terms and conditions of
the Environmental Permits, except where the failure to so comply could not
in the aggregate reasonably be expected to have a Company Material Adverse
Effect.
(iii) Environmental Claims. There are no written
Environmental Claims (as defined in Section 4.12(d)(i)) or, to the
knowledge of the Company's environmental, health and safety managers, facts
or circumstances which are reasonably likely to result in any Environmental
Claim which would have in the aggregate a Company Material Adverse Effect
pending (A) against the Company or any of the Company Subsidiaries, (B)
against any person or entity whose liability for any such Environmental
Claim, the
22
Company or any of the Company Subsidiaries has retained or assumed either
contractually or by operation of Environmental Law, or (C) against any real
or personal property, facility or operations which the Company or any of
the Company Subsidiaries owns, leases, occupies, uses or manages or has
formerly owned, leased, occupied, used or managed, in whole or in part.
(iv) Releases. To the knowledge of the Company's
environmental, health and safety managers, there are no Releases (as
defined in Section 4.12(d)(iv)) of any Hazardous Material (as defined in
Section 4.12(d)(iii)) that would be reasonably likely to result in any
Environmental Claim against the Company or any of the Company Subsidiaries,
or against any person or entity whose liability for any Environmental
Claim, the Company or any of the Company Subsidiaries has or may have
retained or assumed either contractually or by operation of Environmental
Law, except for any Environmental Claims which could not reasonably be
expected to have in the aggregate a Company Material Adverse Effect.
(v) Predecessors. To the knowledge of the Company's
environmental, health and safety managers, there are no pending or
threatened Environmental Claims or facts or circumstances which are
reasonably likely to result in any Environmental Claim with respect to any
known predecessor of the Company or any of the Company Subsidiaries which
would have in the aggregate a Company Material Adverse Effect.
(b) Except as would not have in the aggregate a Company Material
Adverse Effect, the Company has provided or otherwise made available to Parent:
(i) copies of all material Environmental Permits, as well as material
environmental compliance reports, audits, studies, assessments, complaints,
notices of violations, orders or information requests (collectively,
"Environmental Documents") received by or conducted or prepared by or on behalf
of the Company or any of the Company Subsidiaries relating to the business,
operations, facilities or properties currently or formerly owned, leased,
managed, occupied, used or otherwise controlled by the Company or any of the
Company Subsidiaries; and (ii) based on records in the possession or the control
of the Company or any of the Company Subsidiaries, a complete list of all
material Hazardous Materials used, stored or generated in the course of the
Company's or any of the Company Subsidiaries' business or operations and all
off-site Hazardous Materials treatment, storage or disposal facilities used by
the Company or any of the Company Subsidiaries.
(c) Notwithstanding any other representations and warranty in this
Article IV, the representations and warranties contained in this Section 4.12
constitute the sole representations and warranties of the Company with respect
to any Environmental Law, Environmental Permit, Environmental Claim, Releases or
Hazardous Material.
(d) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions (whether civil or criminal), suits, demands,
demand letters, directives,
23
claims, liens, investigations, proceedings or written notices of
noncompliance or violation by any person or entity (including any
Governmental Authority), alleging potential liability (including, without
limitation, potential responsibility or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(A) the presence, Release or threatened Release into the environment of any
Hazardous Materials at any location, whether or not owned, operated, leased
or managed by the Company or any of the Company Subsidiaries (for purposes
of this Section 4.12) or by Parent or any of the Parent Subsidiaries (for
purposes of Section 5.9),(B) circumstances forming the basis of any
violation or alleged violation of any Environmental Law or (C) any and all
claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means any and all laws in any
relevant jurisdiction, including common law, all applicable federal, state
and local laws, codes, ordinances, directives, orders, rules and
regulations and binding administrative or judicial interpretations thereof
relating to pollution, the environment (including, without limitation,
ambient air, water (including groundwater and drinking water, land surface
or subsurface strata), natural resources as well as protection of human
health and safety from exposure to Hazardous Materials, including without
limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, remedial cleanup or otherwise relating to
the manufacture, generation processing, distribution, use, treatment,
storage, disposal, deposit, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, oil, coal ash, radioactive materials, coal tar or other
forms of MGP waste or by-products, radon gas, asbestos in any form that is
or could become friable, urea formaldehyde, foam insulation, lead-based
paint and any materials, transformers or other equipment that contain
dielectric fluid containing regulated concentrations of polychlorinated
biphenyls ("PCBs"), (B) any chemicals, materials or substances which
exhibit the characteristics of or are now defined as or included in the
definitions of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "contaminants", "toxic pollutants," or words of similar
import under any Environmental Law and (C) any other chemical, material,
substance or waste, exposure to which is now prohibited, limited or
regulated under any applicable Environmental Law or harm from which would
be actionable under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, water (including groundwater) or property and
related improvements.
24
Section 4.13 Regulation as a Utility. (a) The Company is a public
utility holding company exempt under Section 3(a)(1) from all provisions of the
1935 Act except Section 9(a)(2) thereof. Section 4.13 of the Company Disclosure
Schedule lists the subsidiaries of the Company that are "public utility
companies" within the meaning of Section 2(a)(5) of the 1935 Act and lists the
jurisdictions where each such Subsidiary is subject to regulation as a public
utility company or public service company. Except as set forth above and as set
forth in Section 4.13 of the Company Disclosure Schedule, neither the Company
nor any "subsidiary company" or "affiliate" of the Company is subject to
regulation as a public utility or public service company (or similar
designation) by the Federal government of the United States, any state in the
United States or any political subdivision thereof, or any foreign country.
(b) As used in this Section 4.13, the terms "subsidiary company" and
"affiliate" shall have the respective meanings ascribed to them in Section
2(a)(8) and Section 2(a)(11), respectively, of the 1935 Act.
Section 4.14 Vote Required. The approval of the Merger by the holders
of a majority of the votes entitled to be cast by all holders of Company Common
Stock (the "Company Shareholders' Approval") is the only vote of the holders of
any class or series of the capital stock of the Company or any of the Company
Subsidiaries required to approve this Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.15 Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, dated the date
of this Agreement, to the effect that, as of such date, Merger Consideration is
fair from a financial point of view to the holders of Company Common Stock.
Section 4.16 Brokers. Except as relates to the services provided by
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation as financial advisor to the
Company, neither the Company nor any of its officers, directors or employees has
employed any broker, or finder or incurred any liability for a finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
Section 4.17 Insurance. Except as set forth in Section 4.17 of the
Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has received any notice of cancellation or termination with respect
to any material insurance policy of the Company or any of the Company
Subsidiaries.
Section 4.18 Intellectual Property. The Company and the Company
Subsidiaries own or have adequate rights to use all trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights used in the operation of their business
(collectively, the "Company Intellectual Property"), subject to such exceptions
as to such ownership and restrictions on such rights as could not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect. All of the Company Intellectual Property owned by the Company or one of
the Company Subsidiaries is free and clear of any and all Encumbrances, subject
to such exceptions
25
as could not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect, and neither the Company nor any of the Company
Subsidiaries has forfeited or otherwise relinquished any Company Intellectual
Property which forfeiture or relinquishment could reasonably be expected to have
a Company Material Adverse Effect. To the Knowledge of the Company, the use of
the Company Intellectual Property by the Company or the Company Subsidiaries
does not infringe upon, violate or constitute a misappropriation of any right,
title or interest in any intellectual property right (including, without
limitation, any trademark, trade name, patent, service ▇▇▇▇, brand ▇▇▇▇, brand
name, computer program, database, industrial design or copyright) of any other
person, and neither the Company nor any of the Company Subsidiaries has received
written notice of any claim or threatened claim that any of the Company
Intellectual Property is invalid, infringes the asserted rights of any other
person, and, to the Knowledge of the Company, the Company Intellectual Property
owned by the Company has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of such Company Intellectual Property, except for such
infringements, violations, misappropriations, interferences, claims, invalidity,
use, abandonments, cancellations or unenforceability that could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section 4.19 Nuclear Operations and NRC Actions. (a) The Company owns
Nine ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇. ▇ and a 41% tenant-in-common interest
in Nine Mile Point Nuclear Station Unit No. 2 (the "Company Nuclear
Facilities"). Except as disclosed in the Company SEC Reports filed prior to the
date hereof, the operations of the Company Nuclear Facilities are and have at
all times been conducted in compliance with applicable health, safety,
regulatory and other legal requirements, and no Company Nuclear Facility is in
violation of any applicable health, safety, regulatory or other legal
requirements applicable to the Company Nuclear Facilities, except for such
failures to comply as could not in the aggregate be reasonably expected to have
a Company Material Adverse Effect. The Company Nuclear Facilities maintain
emergency plans designed to respond to an unplanned release therefrom of
radioactive materials into the environment and liability insurance to the extent
required by law, and such further insurance (other than liability insurance) as
is consistent with the Company's view of the risks inherent in the operation of
a nuclear power facility and with the general practices of the nuclear power
industry.
(b) Except as disclosed in the Company SEC Reports filed prior to the
date hereof, neither the Company nor any of its Subsidiaries has been given
written notice of or been charged with actual or potential violation of, or, to
the Knowledge of the Company, is the subject of any ongoing proceeding, inquiry,
special inspection, diagnostic evaluation or other NRC action of which the
Company or any of its Subsidiaries has received notice under the Atomic Energy
Act, any applicable regulations thereunder or the terms and conditions of any
license granted to the Company or any of its Subsidiaries regarding the Company
Nuclear Facilities that would have, or is reasonably likely to have, a Company
Material Adverse Effect. No Company Nuclear Facility is, as of the date of this
Agreement, on the List of Nuclear Power Plants Warranting Increased Regulatory
Attention maintained by the NRC.
26
Section 4.20 Ownership of Parent or Newco Common Stock. None of the
Company or any of the Company Subsidiaries beneficially owns any Parent Ordinary
Shares, Parent ADSs, Newco Ordinary Shares or Newco ADSs.
Section 4.21 State Antitakeover Matters. Assuming the accuracy of the
representation contained in Section 5.13, no "fair price," "moratorium,"
"business combination," "control share acquisition," or other form of
anti-takeover statute or regulation under New York law is applicable to the
Merger and other transactions contemplated hereby.
Section 4.22 Commodity Derivatives and Credit Exposure Matters. Except
as set forth in Section 4.22 of the Company Disclosure Schedule, as of September
1, 2000, the Company and the Company Subsidiaries do not in the aggregate have
(qualified on a marked-to-market basis and calculated with respect to physical
and financial positions exposure) (a) natural gas or electricity forward price
exposure exceeding $1 million, (b) pipeline transportation (basis) exposure
exceeding $1 million, or (c) credit exposures (which is unsecured and not backed
by letters of credit or enforceable guarantees from A-rated credit providers) to
any one counterparty that exceeds $1 million.
Section 4.23 The Company Associates. The representations and warranties
set forth (a) in Sections 4.4(b) and (c) are true and correct with regard to the
Company Associates, and (b) in Sections 4.4(d), 4.6, 4.7, 4.10, 4.11 and 4.12
are, to the Knowledge of the Company, true and correct, as of the date hereof,
with regard to the Company Associates.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT, NEWCO AND MERGER SUB
Parent, Newco and Merger Sub represent and warrant to the Company as
follows:
Section 5.1 Organization and Qualification. (a) Except as set forth in
Section 5.1 of the schedule delivered by Parent on the date hereof (the "Parent
Disclosure Schedule"), Parent and each of the Parent Subsidiaries (as defined
below) is a corporation or other entity duly organized, validly existing and in
good standing (with respect to jurisdictions that recognize the concept of good
standing) under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority, and has been duly authorized by all
necessary approvals and orders to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing (with
respect to jurisdictions that recognize the concept of good standing) to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify could
not reasonably be expected to have a Parent Material Adverse Effect (as defined
in Section 5.3(b)). As used in this Agreement, the term "Parent Subsidiary"
shall mean a Subsidiary of Parent.
27
(b) Newco is a corporation duly organized and validly existing under
the laws of England and Wales. Newco holds all of the issued and outstanding
shares of capital stock of Merger Sub, which is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco and Merger Sub have been incorporated solely for the purposes of engaging
in the transactions contemplated by this Agreement and have not conducted any
other business prior to the date hereof and will not conduct any other business
prior to the Closing Date except in connection with any activity related to the
consummation of the Scheme or the Merger.
Section 5.2 Capitalization. (a) As of the date hereof, the authorized
share capital of Parent consists of 2,125,000,000 Parent Ordinary Shares and the
Parent Special Share. At the close of business on September 1, 2000 (i)
1,484,609,903 Parent Ordinary Shares were issued and outstanding, (ii) one
Parent Special Share was outstanding and (iii) except as set forth in Section
5.2 of the Parent Disclosure Schedule, no Voting Debt is issued or outstanding.
All outstanding Parent Ordinary Shares are validly issued and fully paid and are
not subject to preemptive rights, except as provided in Section 89 of the
Companies Act of 1985 of the United Kingdom (the "Companies Act") and except as
set forth in Section 5.2 of the Parent Disclosure Schedule. As of the date of
this Agreement, except as set forth in Section 5.2 of the Parent Disclosure
Schedule or pursuant to this Agreement and the employment, severance, deferred
compensation or similar agreements that are maintained or contributed to as of
the date of this Agreement (the "Parent Plans"), there are no options, warrants,
calls, rights, commitments or agreements of any character to which Parent or any
Parent Subsidiary is a party or by which it is bound obligating Parent or any
Parent Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional capital or other shares or any Voting Debt securities of Parent
or any Parent Subsidiary or obligating Parent or any Parent Subsidiary to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. Except as set forth in Section 5.2 of the Parent Disclosure Schedule,
or other than in connection with the Parent Plans, after the Scheme Effective
Time, there will be no option, warrant, call, right, commitment or agreement
obligating Parent or any Parent Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, any capital or other shares or any Voting Debt
of Parent or any Parent Subsidiary, or obligating Parent or any Parent
Subsidiary to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
(b) The authorized share capital of Newco consists of 100 ordinary
shares ("Newco Original Ordinary Shares"), of which one share is issued and
outstanding. Prior to the Scheme Effective Time, two Newco Original Ordinary
Shares and 49,998 redeemable preference shares ("Newco Original Preference
Shares") shall be issued and outstanding.
(c) Prior to the Merger Effective Time, the authorized capital stock of
Merger Sub will consist of 100 common shares, par value $0.10 per share, all of
which will be issued and outstanding and owned by Newco. All such outstanding
common shares will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
28
Section 5.3 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. Parent, Newco and Merger Sub have all requisite power
and authority to enter into this Agreement and subject to the receipt of the
Parent Required Statutory Approvals (as defined in Section 5.3(c)) and the
Parent Shareholders' Approvals (as defined in Section 5.10), to consummate the
Merger, the Scheme and related transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent, Newco and Merger Sub, subject to obtaining Parent
Shareholders' Approvals. This Agreement has been duly and validly executed and
delivered by Parent, Newco and Merger Sub and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto, constitutes the
valid and binding obligation of Parent, Newco and Merger Sub enforceable against
such parties in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting or relating to the
enforcement of creditors rights generally or general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
(b) Non-Contravention. Except as set forth in Section 5.3(b) of the
Parent Disclosure Schedule, the execution and delivery of this Agreement by
Parent, Newco and Merger Sub does not, and the consummation of the transactions
contemplated hereby shall not, result in a Violation pursuant to any provisions
of (i) the charter, by-laws or similar governing documents of Parent or any of
the Parent Subsidiaries or Newco or Merger Sub, (ii) subject to obtaining Parent
Required Statutory Approvals and the receipt of Parent Shareholders' Approvals,
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority applicable to
Parent or any of the Parent Subsidiaries or Newco or Merger Sub or any of their
respective properties or assets or (iii) subject to obtaining the third-party
consents set forth in Section 5.3(b) of the Parent Disclosure Schedule (the
"Parent Required Consents"), any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which Parent or any of the Parent
Subsidiaries or Newco or Merger Sub is a party or by which they or any of their
respective properties or assets may be bound or affected, except in the case of
clause (ii) or (iii) above for any such Violation which could not reasonably be
expected to have a material adverse effect on the business, assets, condition
(financial or otherwise), current or reasonably anticipated future results of
operations of Parent and the Parent Subsidiaries, taken as a whole, or on
Parent's ability to consummate the Merger (a "Parent Material Adverse Effect").
(c) Statutory Approvals. No declaration, filing or registration with,
or notice to or authorization, consent or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement by
Parent, Newco and Merger Sub or the consummation by Parent, Newco and Merger Sub
of the transactions contemplated hereby except as described in Section 5.3(c) of
the Parent Disclosure Schedule (the "Parent Required Statutory Approvals").
References in this Agreement to "obtaining" such Parent Required Statutory
Approvals shall mean making such declarations, filings or registrations, giving
such notices,
29
obtaining such authorizations, consents or approvals, and having such waiting
periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 5.3(d), Section 5.6 and
Section 5.9 of the Parent Disclosure Schedule, or as disclosed in the Parent SEC
Reports (as defined in Section 5.4) filed prior to the date hereof, neither
Parent nor any of the Parent Subsidiaries is in violation of, is under
investigation with respect to any violation of, or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (excluding any applicable Environmental Laws, compliance
with which is the subject of Section 5.9) of any Governmental Authority, except
for possible violations which individually or in the aggregate could not
reasonably be expected to have a Parent Material Adverse Effect. Except as set
forth in Section 5.3(d) of the Parent Disclosure Schedule, or as expressly
disclosed in the Parent SEC Reports or Parent Disclosure Documents, Parent and
the Parent Subsidiaries have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted which are material to the operation of the
businesses of Parent and the Parent Subsidiaries. Except as set forth in Section
5.3(d) of the Parent Disclosure Schedule, each of Parent and the Parent
Subsidiaries is not in breach or violation of or in default in the performance
or observance of any term or provision of, and no event has occurred which, with
the lapse of time or action by a third party, could result in a default by
Parent or any Parent Subsidiary under (i) their respective charters or by-laws
or (ii) any contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to which
they are a party or by which Parent or any Parent Subsidiary is bound or to
which any of their property is subject, except for possible violations, breaches
or defaults which individually or in the aggregate could not reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.4 Reports and Financial Statements. (a) All material filings
required to be made by Parent and the Parent Subsidiaries since January 1, 1995
under the Securities Act, the Exchange Act, the 1935 Act, the Power Act, and
applicable state public utility laws and regulations have been filed with the
SEC, the FERC, the NRC, the FCC, the DOE or the appropriate state public
utilities commission, as the case may be, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits, amendments
and supplements appertaining thereto, and complied, as of their respective
dates, in all material respects with all applicable requirements of the
appropriate statutes and the rules and regulations thereunder. Parent has made
available to the Company a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed with the SEC by
Parent pursuant to the requirements of the Securities Act or Exchange Act since
October 7, 1999 (as such documents have since the time of their filing been
amended, the "Parent SEC Reports"). As of their respective dates, the Parent SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of Parent included in the Parent SEC Reports
(collectively, the "Parent Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles
30
in the United Kingdom applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements) and fairly present (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments (which are not expected to be, individually or in the aggregate,
materially adverse to Parent and Parent Subsidiaries taken as a whole)) the
consolidated financial position of Parent and its consolidated subsidiaries as
at the dates thereof and the consolidated results of operations and cash flows
for the periods then ended. True, accurate and complete copies of the memorandum
and articles of association of Parent, as in effect on the date hereof, are
included (or incorporated by reference) in the Parent SEC Reports.
(b) All material filings required to be made by Parent or any Parent
Subsidiaries since March 31, 1996 in the United Kingdom under the Electricity
▇▇▇ ▇▇▇▇, have been filed with the Office of Gas and Electricity Markets
("OFGEM") or any other appropriate Governmental Authority, as the case may be,
including all material forms, statements, reports, agreements and all material
documents, exhibits, amendments and supplements appertaining thereto, including
but not limited to all material rates, tariffs, franchises, service agreements
and related documents, complied, as of their respective dates, in all material
respects with all applicable requirements of the statute and the rules and
regulations thereunder.
Section 5.5 Absence of Certain Changes or Events. Except as disclosed
in the Parent SEC Reports filed prior to the date hereof or as set forth in
Section 5.5 of the Parent Disclosure Schedule, since March 31, 2000, Parent and
each of the Parent Subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice and there has not
been, and no fact or condition exists which has had or could reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.6 Legal Proceedings. Except as disclosed in the Parent SEC
Reports filed prior to the date hereof or as set forth in Section 5.6, Section
5.8 or Section 5.9 of the Parent Disclosure Schedule, (a) there are no claims,
suits, actions or proceedings by any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator, pending or, to the
knowledge of Parent, threatened, nor are there, to the knowledge of Parent, any
investigations or reviews by any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator pending or threatened
against, relating to or affecting Parent or any of the Parent Subsidiaries,
which would have a Parent Material Adverse Effect, (b) there have not been any
significant developments since March 31, 2000 with respect to such disclosed
claims, suits, actions, proceedings, hearings, investigations, audits or reviews
that would have a Parent Material Adverse Effect and (c) there are no judgments,
decrees, injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator applicable to
Parent or any of the Parent Subsidiaries, except for such that could not
reasonably be expected to have a Parent Material Adverse Effect.
Section 5.7 Information Supplied. (a) The Parent Disclosure Documents
(as defined in Section 4.8(b)) will, at all relevant times, include (i) all
information relating to Parent, and information which is within the knowledge of
each of the directors of Parent (or which it
31
would be reasonable for them to obtain by making inquiries) or (ii) all
information relating to Newco and information which is within the knowledge of
each of the directors of Newco (or which it would be reasonable for them to
obtain by making inquiries), which, in each case, is required to enable the
Parent Disclosure Documents and the parties hereto to comply in all material
respects with all United Kingdom statutory and other legal and regulatory
provisions (including, without limitation, the Companies Act, the FSA, and the
rules and regulations made thereunder, and the rules and requirements of the
U.K. Listing Authority) and all such information contained in the Circular and
Scheme Document will be in accordance with the facts and will not omit anything
likely to affect the import of such information.
(b) None of the information supplied or to be supplied by or on behalf
of Parent, Newco or Merger Sub for inclusion or incorporation by reference in
(i) the Registration Statement (as defined in Section 4.8(a)) will, at the time
the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the Proxy
Statement (as defined in Section 4.8(a)) will, at the dates mailed to the
Company shareholders and at the times of the Company Meeting (as defined in
Section 7.4(b)), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement and the Proxy Statement
included therein shall 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.
(c) Notwithstanding the foregoing provisions of this Section 5.7, no
representation or warranty is made by Parent, Newco or Merger Sub with respect
to statements made or incorporated by reference in the Registration Statement,
the Proxy Statement or the Parent Disclosure Documents based on information
supplied by the Company for inclusion or incorporation by reference therein or
based on information which is not made in or incorporated by reference in such
documents but which should have been disclosed pursuant to this Section 5.7.
Section 5.8 Tax Matters.
(a) Newco, Merger Sub, Parent and the Parent Subsidiaries have filed
all material Tax Returns required to be filed by it, or requests for extensions
to file such Tax Returns have been timely filed or granted and have not expired
and all Tax Returns are complete and accurate in all material respects. Newco,
Merger Sub, Parent and the Parent Subsidiaries have paid (or Parent, if
applicable, has paid on their behalf) all Taxes shown as due on such Tax
Returns. The most recent financial statements contained in the Parent SEC
Reports reflect an adequate reserve for all Taxes payable by Parent and the
Parent Subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements, and no deficiencies for any Taxes have
been proposed, asserted or assessed against Newco, Merger Sub, Parent or any of
the Parent Subsidiaries that are not adequately reserved for, except for
inadequately reserved Taxes and inadequately reserved deficiencies that would
not, individually
32
or in the aggregate, have a Parent Material Adverse Effect. No requests for
waivers of the time to assess any taxes against Newco, Merger Sub, Parent or any
of the Parent Subsidiaries have been granted or are pending, except for requests
with respect to such Taxes that, to the extent not adequately reserved, the
assessment of which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
(b) Neither Newco, Parent nor any of the Parent Subsidiaries has taken
any action or has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger and the Scheme taken together from qualifying
as a transaction described in Section 351 of the Code or (ii) cause the Merger
to be subject to Code Section 367(a)(1).
(c) On the Closing Date, Newco will directly own the whole of the
issued share capital of Merger Sub.
Section 5.9 Environmental Protection.
Except as would not, in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect, and except as set forth in Section 5.9(a) of the
Parent Disclosure Schedule or in the Parent SEC Reports,
(a) Compliance. To Parent's knowledge, Parent and the Parent
Subsidiaries are in substantial compliance with all applicable Environmental
Laws and the terms and conditions of all applicable Environmental Permits, and
neither Parent nor any of the Parent Subsidiaries has received any written
notice from Governmental Authority that alleges that Parent or any of the Parent
Subsidiaries is not in such compliance with applicable Environmental Laws or the
terms and conditions of all such Environmental Permits;
(b) Environmental Claims/Releases. There are no Environmental Claims,
to Parent's knowledge, pending or threatened: (i) against Parent or any of the
Parent Subsidiaries; (ii) against any person or entity whose liability for any
Environmental Claim Parent or any of the Parent Subsidiaries has retained or
assumed either contractually or by operation of Environmental Law; (iii) against
any properties or operations that Parent or any of the Parent Subsidiaries owns;
or (iv) as the result of a Release of Hazardous Materials in contravention of
applicable Environmental Laws, at any properties or operations that Parent or
any of the Parent Subsidiaries owns.
(c) Parent Representations. Notwithstanding any other representations
and warranties in this Article V, the representations and warranties contained
in this Section 5.9 constitute the sole representations and warranties of the
Parent with respect to any Environmental Law, Environmental Permit,
Environmental Claim, Releases or Hazardous Material.
Section 5.10 Votes Required. (a) The only votes of the holders of any
class of shares of Parent that are required to approve (i) the Merger and other
transactions contemplated thereby are the affirmative vote of a majority of such
ordinary shareholders of Parent as (being entitled to do so) are present in
person and vote (or, in the case of a vote taken on a poll, the
33
affirmative vote by shareholders representing a majority of the Parent Ordinary
Shares in respect of which votes were validly exercised) (the "Parent Merger
Shareholders' Approval") at a general meeting of Parent Shareholders in relation
to the Merger and other transactions contemplated hereby (the "Parent Merger
Meeting") and (ii) the Scheme and other transactions contemplated thereby are,
(x) at the meeting of Parent shareholders convened by an order of the Court (the
"Parent Court Meeting"), the affirmative vote of a majority in number
representing 75 percent of the value of Parent Ordinary Shares present and
voting (either in person or by proxy) and (y) with respect to approval of the
Scheme resolutions at an extraordinary general meeting of Parent shareholders
(the "Parent Scheme Meeting"), the affirmative vote of 75 percent of ordinary
shareholders of Parent as (being entitled to do so) are present in person and
vote (or, on the case of a vote taken on a poll, the affirmative vote by
shareholders representing 75 percent of the Parent Ordinary Shares in respect of
which votes were validly exercised) (together, the "Parent Scheme Shareholders'
Approval" and with the Parent Merger Shareholders' Approval, the "Parent
Shareholders' Approvals").
(b) Newco and Merger Sub have received all necessary approvals, if any,
from their respective shareholders required to consummate the transactions
contemplated hereby.
Section 5.11 Brokers. Except as relates to the services provided by
Rothschild, Inc. as financial advisor to Parent, all negotiations relative to
the Scheme and the Merger and the transactions contemplated hereby have been
carried out by Parent and Newco directly with the Company, without the
intervention of any person on behalf of Parent or Newco in such manner as to
give rise to any valid claim by any person against the Company, Parent, Newco or
any of their respective Subsidiaries for a finder's fee, brokerage commission or
similar payment.
Section 5.12 Insurance. Except as set forth in Section 5.12(b) of
Parent Disclosure Schedule, neither Parent nor any of the Parent Subsidiaries
has received any notice of cancellation or termination with respect to any
material insurance policy of Parent or any of the Parent Subsidiaries.
Section 5.13 Ownership of Company Common Stock. None of Parent or Newco
nor any of their Subsidiaries beneficially own any shares of Company Common
Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Company. After the date hereof and prior
to the Merger Effective Time or earlier termination of this Agreement, the
Company agrees as follows, each as to itself and to each of the Company
Subsidiaries, except as expressly contemplated or permitted in this Agreement or
as set forth in Section 6.1 of the Company Disclosure Schedule or to the extent
Parent shall otherwise consent in advance in writing, which decision regarding
consent shall be made as soon as reasonably practical:
34
(a) Ordinary Course of Business. The Company shall, and shall cause the
Company Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to preserve intact their
respective present business organizations and goodwill, preserve the goodwill
and relationships with customers, suppliers and others having business dealings
with it and, subject to prudent management of work force needs and ongoing
programs currently in force, keep available the services of their respective
present officers and employees. The Company shall not, and shall not permit the
Company Subsidiaries to, enter into a new line of business involving any
investment of assets or resources or any exposure to liability or loss to the
Company and the Company Subsidiaries taken as a whole; provided, however, that
notwithstanding the above and notwithstanding any other provision in Section
6.1, the Company and any of the Company Subsidiaries may make equity infusions
into a Company Subsidiary to the extent required by law or a state regulatory
commission.
(b) Dividends. The Company shall not, and shall not permit any of the
Company Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of their respective capital stock except (A) to
the Company or the Company Subsidiaries, (B) Company Subsidiaries may continue
the declaration and payment of regularly scheduled dividends on, and
distributions required by the terms of, preferred stock or similar securities
not convertible into common equity securities ("Non-Convertible Preferred
Securities") (ii) split, combine or reclassify any of their respective capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of their respective
capital stock or (iii) redeem, repurchase or otherwise acquire any shares of
their respective capital stock, other than (x) for the purpose of funding
employee stock ownership plans and dividend reinvestment programs in accordance
with past practice and (y) redemptions, purchases or acquisitions required by
the terms of any Non-Convertible Preferred Securities of Company Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall it permit
any of its Subsidiaries to issue or sell, or authorize or propose the issuance
or sale of, any shares of its capital stock or any option with respect thereto
(other than (i) the issuance of options or awards pursuant to the Company Share
Plans in accordance with their present terms and only in connection with the
hiring of new employees, and the issuance of shares of Company capital stock
upon exercise of such options or awards or (ii) the issuance by a wholly owned
Subsidiary of its capital stock to its direct or indirect parent corporation, or
modify or amend any right of any holder of outstanding shares of capital stock
or options with respect thereto).
(d) Charter Documents. The Company shall not amend or propose to amend
its charter or by-laws except as contemplated herein.
(e) No Acquisitions. The Company shall not, nor shall it permit any of
the Company Subsidiaries to, acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner) any business or any corporation, partnership,
association or other business organization or division
35
thereof or otherwise acquire or agree to acquire any assets other than in the
ordinary course of its business consistent with past practice.
(f) No Dispositions. Except for dispositions in the ordinary course of
business consistent with past practice, the Company shall not, and it shall not
permit any of the Company Subsidiaries to, sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of, or agree to sell,
lease, encumber or otherwise dispose of, any of its assets.
(g) Limitation on Investment in Joint Ventures. Except as required by
applicable law or any agreement to which the Company or any of the Company
Subsidiaries is a party on the date hereof, the Company will not make, and will
not permit any Subsidiary to make, any additional investments in, or loans or
capital contributions to, or to undertake any guaranties or other obligations
with respect to any joint venture or partnership.
(h) Tax-Exempt Status. The Company shall not, and the Company shall not
permit any of the Company Subsidiaries to, take any action that (or fail to take
any action if such failure) could reasonably be expected to jeopardize the
qualification of the Company's outstanding revenue bonds which qualify on the
date hereof under Section 142(a) of the Code as "exempt facility bonds" or as
tax-exempt pollution control bonds under Section 103(b)(4) of the Internal
Revenue Code of 1954, as amended, prior to the Tax Reform Act of 1986.
(i) Tax Matters. Neither the Company nor any of its Subsidiaries shall
(i) make or rescind any material express or deemed election relating to Taxes or
grant any power of attorney with respect to any Tax matters, (ii) make a request
for a Tax Ruling or enter into a Closing Agreement, (iii) settle or compromise
any material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or (iv) change in any
material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December 31, 1998, (in
each case, a "Tax Change"); except for Tax Changes (A) required by applicable
law, (B) with respect to any Tax period that involve Tax issues where the amount
of income, gain, loss, deduction, credit, gross receipts, property value or any
similar item does not exceed $75,000,000 with respect to such Tax period (or
more than $75,000,000 in any subsequent Tax period); provided that, the Company
has informed and consulted with Parent and Newco prior to making such Tax Change
or (C) that are made with the written consent of Parent, which consent will not
be unreasonably withheld. Notwithstanding the requirements of this Section
6.1(i), any Tax Change relating to the Nuclear Sale shall not be subject to this
Section 6.1(i). The Company agrees to consult with and inform Parent and Newco
of any events that are reasonably likely to result in a Tax Change relating to
the Nuclear Sale and shall not make any such Tax Change without such
consultation.
(j) Capital Expenditures. Except (i) as required by law, or (ii) as
reasonably deemed necessary by the Company after consulting with Parent
following a catastrophic event, such as a major storm, the Company shall not,
and the Company shall not permit any of the Company Subsidiaries to, make
capital expenditures during any fiscal year, except for capital
36
expenditures incurred by Niagara Mohawk Power Corp. not in excess of 110% of the
amount budgeted for such fiscal year by the Company for capital expenditures as
set forth in Section 6.1 of the Company Disclosure Schedule.
(k) Indebtedness. The Company shall not, nor shall it permit any of its
Subsidiaries to incur or guarantee any indebtedness (including any debt borrowed
or guaranteed or otherwise assumed, including, without limitation, the issuance
of debt securities or warrants or rights to acquire debt) or enter into any
"keep well" or other agreement to maintain any financial condition of another
Person or enter into any arrangement having the economic effect of any of the
foregoing other than (i) short-term indebtedness in the ordinary course of
business consistent with past practice (such as the issuance of commercial paper
or the use of existing credit facilities) in amounts not exceeding the amounts
set forth in Section 6.1 of the Company Disclosure Schedule, except as
reasonably deemed necessary by the Company after consulting with Parent
following a catastrophic event, (ii) long-term indebtedness in connection with
the refinancing of existing indebtedness either at its stated maturity or at a
lower cost of funds (calculating such cost on an aggregate after-tax basis) or
(iii) guarantees or "keep well" agreements in favor of wholly owned Subsidiaries
of the Company in connection with the conduct of the business of such wholly
owned Subsidiaries of the Company.
(l) Compensation, Benefits. Except as set forth in Section 6.1 of the
Company Disclosure Schedule or as may be required by applicable law or as
contemplated by this Agreement, the Company shall not, and the Company shall not
permit any Company Subsidiary to, enter into or amend or increase the amount or
accelerate the payment or vesting or termination of any benefit or amount
payable under any employee benefit or compensation plan or other contract,
agreement, commitment, arrangement, plan, trust, fund or policy maintained by,
contributed to or entered into by the Company or any Company Subsidiary or
increase, or enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the term of employment, compensation or benefits of
any former, present or future director, officer or employee of the Company or
any Company Subsidiary, except for increases and accelerations that are made in
the ordinary course of business consistent in process and amounts with the past
practice or that are otherwise required pursuant to the current terms of the
Company Employee Benefit Plans, which in the aggregate for any group of
employees, officers or directors, do not result in a material increase in
benefits or compensation expense as of the effective date of this Agreement and
which would not result in (i) any material change in the amount of compensation
which will fail to be deductible for federal income tax purposes by virtue of
Section 280G or Section 162(m) of the Code or (ii) an acceleration or material
increase in "parachute payments" set forth in Section 4.10(a) of the Company
Disclosure Schedule as of the effective date of this Agreement.
Notwithstanding the foregoing, the Company shall not and the Company
shall not permit any Company Subsidiary to adopt, establish, enter into or
implement any new employee plan, benefit or compensation program or policy, or
any new employment, severance or retention agreement, or other new contract,
agreement or arrangement which would provide for any form of benefits or other
compensation, or pay any compensation or benefits to any former, present, or
37
future director, officer or employee of the Company or any Company Subsidiary
which was not in effect as of the effective date of this Agreement; provided,
however, that this sentence shall not apply to any such compensation or benefits
(A) provided pursuant to a collective bargaining agreement or arrangement
described in Section 6.1(m) or a discharge of liability permitted in Section
6.1(t), (B) provided pursuant to any compensation or benefit plan, program or
arrangement that is mutually agreed to, in writing, by the parties or (C) that
are otherwise required pursuant to the current terms of the Company Employee
Benefit Plans; provided further, that nothing in this Section 6.1(l) shall
prevent the Company from entering into severance agreements intended solely to
implement the terms of severance policies or programs in effect on the date
hereof or from entering into retention or other arrangements as described in
Section 6.1 of the Company Disclosure Schedule.
(m) Labor Matters. Notwithstanding any other provision of this
Agreement to the contrary, the Company or the Company Subsidiaries may negotiate
successor collective bargaining agreements to those referenced in Section
4.11(a) of the Company Disclosure Schedule. The Company shall keep Parent
informed as to the status of, and shall consult with Parent as to the strategy
for, all material negotiations with collective bargaining representatives. The
Company and Company Subsidiaries shall act reasonably, consistent with their
obligations under applicable law in such negotiations.
(n) 1935 Act. The Company shall not, and the Company shall not permit
any of the Company Subsidiaries to, except as required or contemplated by this
Agreement, engage in any activities which would cause a change in its status, or
that of the Company Subsidiaries, under the ▇▇▇▇ ▇▇▇.
(o) Accounting. The Company shall not, and the Company shall not permit
any of the Company Subsidiaries to, make any changes in their accounting
methods, except as required by law, rule, regulation or U.S. GAAP or except as
mutually agreed to by the parties.
(p) Affiliate Transactions. The Company shall not permit any of the
Company Subsidiaries to, enter into any material agreement or arrangement with
any of their respective Affiliates (other than wholly owned Subsidiaries), on
terms less favorable to such party than could be reasonably expected to have
been obtained with an unaffiliated third-party on an arm's length basis.
(q) Rate Matters. Subject to applicable law and except for non-material
filings in the ordinary course of business consistent with past practice, the
Company shall consult with Parent prior to initiating any proposed changes in
its or any of the Company Subsidiaries' rates or charges (other than automatic
cost pass-through rate adjustment clauses), standards of service or accounting
or executing any agreement with respect thereto that is otherwise permitted
under this Agreement. The Company shall, and shall cause the Company
Subsidiaries to, deliver to Parent a copy of each filing or agreement related to
rates, changes, standards of service, accounting or regulatory policy which
could lead to a material change in any of those areas at least four days prior
to the filing or execution thereof so that Parent may comment thereon. The
Company shall, and shall cause its Subsidiaries to, make all such filings only
in the ordinary
38
course of business (i) consistent with past practice or (ii) as required by a
Governmental Authority or regulatory agency with appropriate jurisdiction or
under existing settlement agreements to which the Company is a party.
(r) Contracts. The Company shall not, and the Company shall not permit
any of the Company Subsidiaries to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail to use
commercially reasonable efforts to renew any contract or agreement to which the
Company or the Company Subsidiary is a party, which is material to the Company
and the Company Subsidiaries taken as a whole, to waive, release or assign any
material rights or claims therein, or agree to any provisions thereof which
would impede the ability of the Company to consummate the Merger, or in respect
of which the Merger would constitute a default, or would result in the Merger
triggering a right of termination by any unaffiliated parties.
(s) Insurance. The Company shall, and shall cause the Company
Subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are consistent
with the insurance maintained by the Company in the ordinary course of business
in accordance with past practice.
(t) Discharge of Liabilities. The Company shall not, and the Company
shall not permit any of the Company Subsidiaries to, pay, settle, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise and whether criminal, civil or
administrative in nature) material to the Company and the Company Subsidiaries
taken as a whole, other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice (which includes the
payment of final and unappealable judgments) or in accordance with their terms,
of liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the Company
included in the Company's reports filed with the SEC, or incurred in the
ordinary course of business consistent with past practice.
(u) Third Party Standstill Agreements. During the period from the date
of this Agreement through the Merger Effective Time, neither the Company nor any
of the Company Subsidiaries shall terminate, amend, modify or waive any
provision of any standstill agreement or any standstill provisions of other
agreements to which it is a party. During such period, the Company shall take
all appropriate steps to enforce the provisions of any such agreement.
(v) Cooperation, Notification. The Company shall (i) confer on a
regular and frequent basis with one or more representatives of Parent to
discuss, subject to applicable law, material business and operational matters
and the general status of its ongoing operations, (ii) promptly notify Parent of
any material changes in its business, properties, assets, condition (financial
or other), results of operations or prospects, (iii) promptly advise Parent of
any change or event which has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in a Company Material Adverse Effect and (iv)
promptly provide Parent with copies of all filings made by the Company or any of
the Company Subsidiaries with any state or federal court,
39
administrative agency, commission or other Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
(w) Third-Party Consents. The Company shall, and shall cause the
Company Subsidiaries to, use all commercially reasonable efforts to obtain all
the Company Required Consents. The Company shall promptly notify Parent of any
failure or prospective failure to obtain any such consents and, if requested by
Parent, shall provide copies of all the Company Required Consents obtained by
the Company to Parent.
(x) Tax-Free Status. The Company shall not, nor shall it permit any of
its Subsidiaries to, take any actions that would or would be reasonably likely
to, (i) adversely affect the status of the Merger and the Scheme taken together
as a transaction described in Section 351 of the Code or (ii) cause the Merger
to be subject to Code Section 367(a)(1), and the Company shall use all
reasonable efforts to achieve such result.
(y) No Breach, Etc. The Company shall not, and the Company shall not
permit any of the Company Subsidiaries to, willfully take any action that would
or is reasonably likely to result in a material breach of any provision of this
Agreement or in any of its representations and warranties set forth in this
Agreement being untrue in a material respect on and as of the Closing Date.
Section 6.2 Covenants of Parent. After the date hereof and prior to the
Merger Effective Time or earlier termination of this Agreement, Parent agrees as
follows, as to itself and to each of the Parent Significant Subsidiaries, except
as expressly contemplated or permitted in this Agreement, or as set forth in
Section 6.2 of the Parent Disclosure Schedule or to the extent the Company shall
otherwise consent in writing, which decision regarding consent shall be made as
soon as reasonably practical (as used herein, the term "Parent Significant
Subsidiary" shall mean any Parent Subsidiary that constitutes a "significant
subsidiary" within the meaning of Rule 1-02(w)(3) of Regulation S-X of the U.S.
Securities and Exchange Commission):
(a) Ordinary Course of Business. Parent shall cause the Parent
Significant Subsidiaries to carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to preserve intact their
respective present business organizations and goodwill, preserve the goodwill
and relationships with customers, suppliers and others having business dealings
with them. Parent shall not, and shall not permit the Parent Significant
Subsidiaries to enter into a new line of business involving any material
investment of assets or resources or any material expense, liability or loss to
the Parent and the Parent Significant Subsidiaries taken as a whole; it being
agreed that the limitations contained in this Section 6.2(a) do not limit the
Parent or any of the Parent Significant Subsidiaries from entering into any line
of business in which Parent or any of the Parent Significant Subsidiaries or any
of its other affiliates is engaged on the date of this Agreement.
(b) Certain Mergers. Parent shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a
40
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets if the entering into of a definitive agreement relating to or the
consummation of such acquisition, merger or consolidation could reasonably be
expected to materially delay the consummation of the Merger.
(c) Tax-Free Status. Parent shall not, nor shall it permit any of its
Subsidiaries to, take any actions that would, or would be reasonably likely to,
(i) adversely affect the status of the Merger and the Scheme taken together as a
transaction described in Section 351 of the Code or (ii) cause the Merger to be
subject to Code Section 367(a)(1), and Parent shall use all reasonable efforts
to achieve such result.
(d) Other Actions. Parent shall not, and shall not permit any of the
Parent Subsidiaries to, take or fail to take any other action, including,
without limitation, amending or proposing to amend their respective charters,
by-laws or regulations, or similar organic documents (except as contemplated
herein), engage in any activities which would cause a change in its status, or
that of the Parent Subsidiaries, under the 1935 Act, or to make any changes in
their accounting methods (except as required by law, rule, regulation or
applicable generally accepted accounting principles), which would reasonably be
expected to prevent or materially impede, interfere with or delay the Merger or
the Scheme.
(e) Cooperation, Notification. Parent shall confer on a regular and
frequent basis with the Company to discuss, subject to applicable law, (i) any
material changes in its business, results of operations or prospects, and (ii)
any change or event which has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in a Parent Material Adverse Effect or materially
impair the ability of Parent to consummate the Merger or the Scheme, and will
promptly provide the Company with copies of all filings made by Parent or any of
the Parent Subsidiaries with any state or federal court, administrative agency,
commission or other Governmental Authority in connection with this Agreement and
the transactions contemplated hereby.
(f) Third-Party Consents. Parent shall, and shall cause the Parent
Subsidiaries to, use all commercially reasonable efforts to obtain all Parent
Required Consents. Parent shall promptly notify the Company of any failure or
prospective failure to obtain any such consents and, if requested by the
Company, shall provide copies of all Parent Required Consents obtained by Parent
to the Company.
(g) No Breach, Etc. Parent shall not, and Parent shall not permit any
of the Parent Subsidiaries to, willfully take any action that would or is
reasonably likely to result in a material breach of any provision of this
Agreement or in any of its representations and warranties set forth in this
Agreement being untrue on and as of the Closing Date.
Section 6.3 Covenants of Newco. (a) Prior to the Merger Effective Time
except as may be required by applicable law and subject to the other provisions
of this Agreement, Newco shall not engage, directly or indirectly, in any
business or activity of the type
41
or kind, and not enter into any agreement or arrangement with any person, or be
subject to or bound by any obligation or undertaking, which is inconsistent with
this Agreement or the Scheme.
(b) Conduct of Business of Merger Sub. Prior to the Merger Effective
Time, except as may be required by applicable law and subject to the other
provisions of this Agreement, Newco shall cause Merger Sub to (i) perform its
obligations under this Agreement in accordance with its terms and (ii) not
engage, directly or indirectly, in any business or activity of the type or kind,
and not enter into any agreement or arrangement with any person, or be subject
to or bound by any obligation or undertaking, which is inconsistent with this
Agreement.
Section 6.4 Alternative Arrangement Concerning Company Nuclear
Facilities. If, following the date hereof, the Company and Parent determine that
the Company Nuclear Facilities are likely to be sold but not on a timely basis
in order to satisfy the condition contained in Section 8.1(e)(i), the Company
and Parent agree to consider in good faith alternatives to a Nuclear Sale prior
to the Closing, including but not limited to alternative governance, operational
and ownership arrangements under which Parent would be willing and able to close
the transactions contemplated by this Agreement without the Nuclear Sale having
occurred, consistent with the requirements of the Atomic Energy Act and
applicable NRC rules and regulations.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice, (a) the
Company shall, and shall cause its Subsidiaries to, afford the officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives (collectively, "Representatives") of Parent
reasonable access, during normal business hours throughout the period prior to
the Merger Effective Time, to all of its properties, facilities, operations,
books, contracts, commitments and records (including, but not limited to, Tax
Returns and any information relating to any audits or other examinations of such
Tax Returns) and personnel (including the Company's environmental, health and
safety personnel) and (b) Parent shall, and shall cause the Parent Significant
Subsidiaries to, afford to the Representatives of the Company, reasonable access
to senior executives of Parent for the purpose of discussing Parent's business
(with reasonable access to the documents related thereto) during the period
prior to the Merger Effective Time. Each party shall, and shall cause its
Subsidiaries to, in addition to the advance approval requirements set forth in
Section 7.3(b), furnish promptly to the other (a) access to each report,
schedule and other document filed or received by it or any of its Subsidiaries
pursuant to the requirements of federal or state securities laws or filed with
or sent to the SEC, the FERC, the NRC, the DOE, the Department of Justice, the
Federal Trade Commission or any other federal or state regulatory agency or
commission that relates to the transactions contemplated hereby or, subject to
the terms of any then existing confidentiality requirements, that is otherwise
material to the financial condition or operations of the Company and its
Subsidiaries taken as a whole, or
42
to Parent and its Subsidiaries taken as a whole, as the case may be and (b)
access to all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably requested
by the other party in connection with any filings, applications or approvals
required or contemplated by this Agreement or for any other reason related to
the transactions contemplated by this Agreement. Each party shall, and shall
cause its Subsidiaries and Representatives to, hold in strict confidence all
documents and information concerning the other furnished to it in connection
with the transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated December 13, 1999, between the Company and
Parent (the "Confidentiality Agreement").
Section 7.2 Proxy Statement and Registration Statement; Listing; Parent
Disclosure Documents.
(a) Preparation and Filing of Proxy Statement and the Registration
Statement; Listing. As soon as practicable after the date of this Agreement, the
Company shall, in cooperation with Parent and Newco, prepare and file the Proxy
Statement and Newco shall, in cooperation with the Company and Parent, prepare
and file the Registration Statement, in which the Proxy Statement will be
included as the prospectus. Parent, Newco and the Company shall cooperate in the
preparation of the Proxy Statement and the Registration Statement and any
amendments thereto and shall promptly notify each other of the receipt of any
comments from the SEC or any requests for any amendment or supplement thereto or
for additional information. The parties hereto shall each use reasonable efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after such filing. Each party hereto
shall also take such action as may be reasonably required to cause the Newco
ADRs issuable in connection with the Merger to be registered or to obtain an
exemption from registration under applicable state "blue sky" or securities
laws; provided, however, that Newco shall not be required to register or qualify
as a foreign corporation or to take other action which would subject it to
service of process in any jurisdiction where Newco will not be, following the
Merger, so subject. The parties shall cause the shares of Newco ADRs issuable in
the Merger to be approved for listing on the NYSE upon official notice of
issuance. Each of the parties hereto shall furnish all information concerning
itself which is required or customary for inclusion in the Proxy Statement and
the Registration Statement. The information provided by any party hereto for use
in the Proxy Statement and the Registration Statement shall be true and correct
in all material respects without omission of any material fact which is required
to make such information not false or misleading. No representation, covenant or
agreement is made by any party hereto with respect to information supplied by
any other party for inclusion in the Proxy Statement or the Registration
Statement.
(b) Letter of the Company's Accountants. The Company shall use its best
efforts to cause to be delivered to Parent and Newco a letter of
PricewaterhouseCoopers, dated a date within two business days before the date of
the Registration Statement, and addressed to Parent and Newco, in form and
substance reasonably satisfactory to Parent and Newco and customary in scope and
substance for "cold comfort" letters delivered by independent public accountants
in connection with registration statements on Form F-4.
43
(c) Letter of Parent's Accountants. Parent shall use best efforts to
cause to be delivered to the Company a letter of PricewaterhouseCoopers, dated a
date within two business days before the date of the Registration Statement, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements on Form F-4.
(d) Parent Disclosure Documents. Subject to applicable law, Parent and
Newco shall, as soon as reasonably practicable after the date of this Agreement
and in accordance with the listing rules of the U.K. Listing Authority, prepare
and submit to the U.K. Listing Authority for approval the Circular, and shall
use its reasonable endeavors to have the Circular approved by the U.K. Listing
Authority as soon as reasonably practicable after the date of this Agreement.
Newco, Parent and the Company shall cooperate with each other in the preparation
of the Parent Disclosure Documents and any amendments or supplements thereto as
well as the preparation of any responses to the U.K. Listing Authority in
connection therewith. Each of the parties hereto shall furnish all information
concerning itself which is required or customary for inclusion in the Parent
Disclosure Documents. Each of Newco, Parent and the Company agrees to use its
reasonable best efforts to respond promptly to any requests of the U.K. Listing
Authority.
(e) Mailing to Shareholders. Each of the Company and Parent shall,
consistent with the requirements of the securities laws of the United States and
the United Kingdom, use their reasonable best efforts to cause the Proxy
Statement and the Circular to be mailed or dispatched to their respective
shareholders entitled to vote on the Merger and other transactions contemplated
hereby.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or cause to be filed with
the Federal Trade Commission and the Department of Justice any notifications
required to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Each party
hereto will use all commercially reasonable efforts to make such filings in a
timely manner and to respond on a timely basis to any requests for additional
information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and
use its best efforts to prepare and file promptly all necessary documentation,
to effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals, clearance and authorizations of all
Governmental Authorities necessary or advisable to obtain the Company Required
Statutory Approvals and the Parent Required Statutory Approvals. The parties
agree that they will consult with each other with respect to obtaining the
Company Required Statutory Approvals and Parent Required Statutory Approvals;
provided, however, that it is agreed that Parent shall have primary
responsibility for the preparation and filing of any related applications,
44
filings or other material with Governmental Authorities other than the Nuclear
Approvals (as defined in Section 8.1(e)(ii)), with respect to which the Company
shall have primary responsibility. Each of Parent and the Company shall have the
right to review and approve in advance drafts and final applications, notices,
petitions, filings and other documents submitted to or filed with applicable
Governmental Authorities, which approval shall not be unreasonably withheld or
delayed. The Company shall not agree to the imposition of any condition in the
Company Required Statutory Approvals without the prior consent of Parent.
Section 7.4 Shareholder Approval.
(a) Approval of Parent Shareholders. Parent shall, through its Board of
Directors, (i) duly call, give notice of, convene and hold the Parent Merger
Meeting, for the purpose of securing the Parent Merger Shareholders' Approval as
soon as reasonably practicable after the date hereof and (ii) duly call, give
notice of, convene and hold the Parent Scheme Meeting and apply to the Court to
convene the Parent Court Meeting required to complete the Parent Scheme
Shareholders' Approval at such time as Parent determines is appropriate to
insure that the Parent Scheme Shareholders' Approval may be obtained not later
than forty days following satisfaction or waiver of the conditions set forth in
Article VIII hereof (other than the condition set forth in Section 8.2(h)).
Subject to its fiduciary obligations with respect to a transaction involving a
change in control of Parent and the requirements of applicable law, Parent shall
include in the Circular the recommendation of the Board of Directors of Parent
that the shareholders of Parent approve the Merger and the other transactions
contemplated hereby and shall include in the Scheme Document the recommendation
of the Board of Directors of Parent that the shareholders of Parent approve the
Scheme, and shall use its reasonable endeavors to obtain such approvals in
accordance with its usual practices.
(b) Approval of the Company Shareholders. The Company shall, through
its Board of Directors, duly call, give notice of, convene and hold a meeting of
its shareholders (the "Company Meeting"), for the purpose of securing the
Company Shareholders' Approval as soon as reasonably practicable after the date
hereof. Subject to fiduciary obligations and the requirements of applicable law,
the Company shall include in the Proxy Statement the recommendation of the Board
of Directors of the Company that the shareholders of the Company approve the
Merger and the other transactions contemplated hereby, and shall use its
reasonable best efforts to obtain such approval.
(c) Meeting Date for Merger Approvals. The Parent Merger Meeting for
the purpose of securing the Parent Merger Shareholders' Approval, and the
Company Meeting for the purpose of securing the Company Shareholders' Approval
shall be held on such dates as the Company and Parent shall mutually determine.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an existing
right of indemnification or other agreement or policy, Newco shall, to the
fullest extent permitted by applicable law, indemnify, defend and hold harmless
(i) from and after the Merger Effective
45
Time, each person who is now, or has been at any time prior to the date hereof,
or who becomes prior to the Merger Effective Time, an officer, director or
employee of the Company or any of the Company Subsidiaries and (ii) from and
after the Scheme Effective Time, each person who is now, or who has been at
anytime prior to the date hereof, or who becomes prior to the Scheme Effective
Time, an officer director or employee of Parent (each an "Indemnified Party" and
collectively, the "Indemnified Parties") against (i) all losses, expenses
(including reasonable attorneys' fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Merger Effective Time or the Scheme Effective Time, as the case may be (and
whether asserted or claimed prior to, at or after the Merger Effective Time or
Scheme Effective Time, as the case may be) that are, in whole or in part, based
on or arising out of the fact that such person is or was a director, officer or
employee of such party (the "Indemnified Liabilities"), and (ii) all Indemnified
Liabilities to the extent they are based on or arise out of or pertain to the
transactions contemplated by this Agreement. In the event of any such loss,
expense, claim, damage or liability (whether or not arising before the Merger
Effective Time or the Scheme Effective Time, as the case may be), (i) Newco
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to Newco,
promptly after statements therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses reasonably
incurred, (ii) Newco 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 relevant law and the
memorandum of association or by-laws of Newco shall be made by independent
counsel mutually acceptable to Newco and the Indemnified Party; provided,
however, that Newco shall not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld). The
Indemnified Parties as a group may retain only one law firm with respect to each
related matter except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of such Indemnified Party
and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Merger Effective
Time and the Scheme Effective Time, Newco at Newco's election (i) shall cause to
be maintained in effect an extended reporting period for current policies of
directors' and officers' liability insurance for the benefit of such persons who
are currently covered by such policies of the Company or Parent on terms no less
favorable than the terms of such insurance coverage or (ii) provide tail
coverage for such persons which provides coverage for a period of six years for
acts prior to the Merger Effective Time or the Scheme Effective Time, as the
case may be, on terms no less favorable than the terms of such current insurance
coverage.
(c) Successors. In the event Newco or any of its successors or assigns
(i) consolidates with or merges into any other person or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person or entity, then, and in each such case, proper
provision shall be made so that the successors and assigns of Newco shall assume
the obligations set forth in this Section 7.5 and in Sections 7.8 and 7.9.
46
(d) Survival of Indemnification. To the fullest extent permitted by
law, (i) from and after the Merger Effective Time, all rights to indemnification
as of the date hereof in favor of the employees, agents, directors and officers
of the Company and the Company Subsidiaries with respect to their activities as
such prior to the Merger Effective Time, as provided in the charter and by-laws
or similar governing documents in effect on the date thereof, or otherwise in
effect on the date hereof and disclosed to Newco in writing prior to the date
hereof, shall survive the Merger and shall continue in full force and effect for
a period of not less than six years from the Merger Effective Time and (ii) from
and after the Scheme Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of Parent
and the Parent Subsidiaries with respect to their activities prior to the Scheme
Effective Time, as provided in the memorandum or articles of association,
charter, by-laws or similar governing documents on the date thereof, or
otherwise in effect on the date hereof and disclosed to Newco in writing prior
to the date hereof, shall survive the Scheme and shall continue in full force
and effect for a period of not less than six years from the Scheme Effective
Time.
(e) Benefit. The provisions of this Section 7.5 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification that such person may have
by contract or otherwise.
Section 7.6 Public Announcements. Except as otherwise required by law
or the rules of any applicable securities exchange or national market system or
any other Governmental Authority, so long as this Agreement is in effect, Newco,
Parent and the Company will not, and will not permit any of their respective
Subsidiaries or Representatives to, issue or cause the publication of any press
release or make any other public announcement with respect to the Merger and
other transactions contemplated by this Agreement without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed.
Newco, Parent and the Company will cooperate with each other in the development
and distribution of all press releases and other public announcements with
respect to the Merger and other transactions contemplated hereby, and will
furnish the other with drafts of any such releases and announcements as far in
advance as practicable.
Section 7.7 Rule 145 Affiliates. Within 30 days after the date of this
Agreement, the Company shall identify in a letter to Newco all persons who are,
and to such person's best knowledge who will be at the Closing Date,
"affiliates" of the Company, as the case may be, as such term is used in Rule
145 under the Securities Act. The Company shall use commercially reasonable
efforts to cause its affiliates (including any person who may be deemed to have
become such an affiliate after the date of the letter referred to in the prior
sentence) to deliver to Newco on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit 7.7 (each, an "Affiliate
Agreement").
47
Section 7.8 Labor Agreements and Workforce Matters.
(a) Labor Agreements. Newco shall honor or cause the appropriate
subsidiary to honor all collective bargaining agreements in effect as of the
Merger Effective Time until their expiration, and shall assume all of the rights
and obligations provided under such collective bargaining agreements.
(b) Workforce Matters. Subject to applicable law and obligations under
applicable collective bargaining agreements, for a period of two years following
the Merger Effective Time, reductions in workforce, if any, in respect of U.S.
employees of Newco and its Subsidiaries shall be made on a fair and equitable
basis as determined by Newco, and any employee whose employment is terminated or
job is eliminated during such period shall be entitled to participate on a fair
and equitable basis as determined by Newco in the job opportunity and employment
placement programs offered by Newco or any of its Subsidiaries for U.S.
employees for which they are eligible. Workforce reductions, if any, carried out
following the Merger Effective Time by the Surviving Entity shall be done in
accordance with all applicable collective bargaining agreements, and all laws
and regulations governing the employment relationship and termination thereof
including, without limitation, the Worker Adjustment and Retraining Notification
Act and regulations promulgated thereunder, and any comparable state or local
law.
Section 7.9 Employee Benefit Plans; Stock Options.
(a) For a period of two years immediately following the Closing Date,
the compensation, benefits and coverage provided to current employees and
retirees of the Company or any Company Subsidiary, other than those covered by a
collective bargaining agreement, who continue employment with Newco or one of
its Subsidiaries (the "Affected Employees") pursuant to compensation and
employee benefit plans or arrangements maintained by Newco or one of its
Subsidiaries shall be, in the aggregate, not less favorable (as determined by
Newco and the Surviving Entity using reasonable assumptions and benefit
valuation methods) than those provided, in the aggregate, to such Affected
Employees by the Company and any Company Subsidiary immediately prior to the
Closing Date. Newco shall, and shall cause the Surviving Entity and its other
Subsidiaries to, honor in accordance with their terms and applicable law (i) all
compensation, benefit, and funding obligations as in effect as of the date
hereof or as may later be in effect in accordance with the terms of this
Agreement to current and former officers of the Company or any Company
Subsidiary, and to their beneficiaries, that are described in any applicable
employment agreement or other Company Employee Benefit Plan (including, but not
limited to, the Company's Supplemental Executive Retirement Plan) of the Company
or any Company Subsidiary and that are accrued, owed or mutually agreed to on or
before the Merger Effective Time as set forth in Section 4.10(a) of the Company
Disclosure Schedule and (ii) all other obligations to Affected Employees and
current and former directors of the Company and any Company Subsidiary, and to
their beneficiaries, under employment, severance, consulting and retention
agreements or arrangements and all Company Employee Benefit Plans that are
accrued, owed or mutually agreed to on or before the Merger Effective Time, as
set forth in Section 4.10(a) of the Company Disclosure Schedule. In addition to
the foregoing, Newco shall
48
and shall cause the Surviving Entity or its other Subsidiaries to pay any
Affected Employees whose employment is terminated by Newco, the Surviving Entity
or other Subsidiary within 24 months of the Closing Date, a severance benefit
package equivalent to the severance-related benefits in effect under the
following Company plans and programs as of the effective date hereof (subject to
the modification described in the following (i)): (i) the Niagara Mohawk
Involuntary Severance Plan (Section 1.9 of the Niagara Mohawk Involuntary
Severance Plan shall be amended prior to the Merger Effective Date to provide
that a job offer by Newco or one of its Subsidiaries shall not prevent an
involuntarily terminated Affected Employee from receiving severance benefits
under such Plan if such job offer is for employment that is more than fifty
miles one-way from the Affected Employee's work location at the time of such
involuntary termination); (ii) the Niagara Mohawk Medical and Prescription Drug
Plan For Eligible Participants In the Involuntary Severance Plan; and (iii) the
"Career Center" and "Reimbursement For Job Training Educational Expenses"
benefits described in the Company's "Transition Benefits" summary that describes
transition benefits for eligible management employees whose jobs are abolished
as a direct result of the Company's restructuring efforts.
(b) The compensation, benefits and coverage provided to employees who
are covered by a collective bargaining agreement described in Section 7.8(a)
shall be provided subject to the terms of such collective bargaining agreement.
(c) Newco shall, or shall cause its Subsidiaries to, give the Affected
Employees full credit for purposes of eligibility, vesting, benefit accrual
(including, without limitation, benefit accrual under any defined benefit
pension plans) and determination of the level of benefits under any employee
benefit or fringe benefit plans or arrangements maintained by Newco or one of
its Subsidiaries for such Affected Employees' service with the Company or any
Company Subsidiary (or any prior employer) to the same extent recognized by the
Company or any Company Subsidiary immediately prior to the Closing Date, except
where such credit would provide duplication of benefits. With respect to any
employee benefit plan or arrangement established by Newco or one of its
Subsidiaries after the Closing Date (the "Post-Closing Plans") that is not
intended to replace any Company benefit for Affected Employees in existence
immediately prior to the Merger Effective Time, service shall be credited in
accordance with the terms of such Post-Closing Plans consistent with the
crediting of service for employees of Parent and Parent Subsidiaries who
participate in such plan or arrangement.
(d) Newco shall, or shall cause its Subsidiaries to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plan of Newco or its Subsidiaries in which
such Affected Employees may be eligible to participate after the Closing Date,
other than limitations or waiting periods that are already in effect with
respect to such Affected Employees and that have not been satisfied as of the
Closing Date under any welfare benefit plan maintained for the Affected
Employees immediately prior to the Closing Date, and (ii) provide each Affected
Employee with credit for any co-payments and deductibles paid prior to the
Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare benefit plans that such Affected Employees are
eligible to participate in after the Closing Date.
49
(e) Except as may be limited by any applicable law or collective
bargaining agreement, Newco and its Subsidiaries shall neither be required to or
prevented from merging the Company's benefit plans, agreements, or arrangements
into Newco or its Subsidiaries benefit plans, agreements, or arrangements or
from replacing the Company's benefit plans, agreements or arrangements with
Newco or its Subsidiaries benefit plans, agreements or arrangements.
(f) At the Merger Effective Time each stock option outstanding pursuant
to the Company's 1992 Stock Option Plan (the "Option"), whether or not then
exercisable, shall be canceled and shall only entitle the holder thereof to
receive an amount in cash from the Company equal to the result of multiplying
(i) the number of shares of Company Common Stock previously subject to such
Option by (ii) the excess of the Cash Consideration over the per Share exercise
price of such Option. The Company shall use its reasonable efforts to take all
action necessary to effectuate the foregoing provision.
Section 7.10 No Solicitations. (a) From and after the date hereof, the
Company (i) shall not, nor shall it permit any of its Subsidiaries to, nor shall
it authorize or permit any of its Representatives to, directly or indirectly,
(A) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any offer or proposal (including, without limitation, any offer or proposal to
its shareholders) which constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined herein) from any third party or (B) engage in
any discussions or negotiations or furnish any confidential information or data
to any person or group relating to any Acquisition Proposal and (ii) shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties with respect to any Acquisition
Proposal; provided, however, that if, at any time prior to the date on which the
Company Shareholders' Approval has been obtained (the "Applicable Period"), the
Board of Directors of the Company (A) determines in good faith, based upon the
written opinion of outside counsel that such Board's fiduciary duties under
applicable law with respect to the Acquisition Proposal require it to do so in
order to act in a manner consistent with its fiduciary duties to the Company
shareholders under applicable law and (B) concludes in good faith based on the
written advice of its financial advisors that the person or group making such
Acquisition Proposal has adequate sources of financing to consummate such
Acquisition Proposal and that such Acquisition Proposal, if consummated as
proposed, is materially more favorable to the Company shareholders from a
financial point of view than the Merger, the Company may, in response to an
Acquisition Proposal which was not solicited by it or which did not otherwise
result from a breach of this Section 7.10(a), and subject to providing prior
written notice of its decision to take such action to Parent in compliance with
Section 7.10(b), (x) furnish to such third party information with respect to
itself and its business, properties and assets pursuant to a customary
confidentiality agreement on terms not in the aggregate materially more
favorable to such third party than the terms contained in the Confidentiality
Agreement and (y) engage in discussions or negotiations regarding such
Acquisition Proposal. As used herein, "Acquisition Proposal" shall mean any
proposal or offer (other than by another party hereto) for a tender or exchange
offer, merger, consolidation or other business combination involving the Company
or any of its material Subsidiaries or any proposal to acquire in any manner,
directly or indirectly, 10% or
50
more of the shares of capital stock in or a substantial portion of the assets of
the Company or any of its material Subsidiaries.
(b) Except as expressly permitted by this Section 7.10, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, in any manner adverse to Parent, the approval or recommendation by
such Board of Directors or such committee of the Merger or this Agreement, (ii)
fail to reaffirm such approval or recommendation upon Parent's request, (iii)
approve or recommend any Acquisition Proposal or (iv) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, an "Acquisition Agreement") relating to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that during
the Applicable Period the Board of Directors of the Company (i) determines in
good faith based upon the written opinion of outside counsel that such Board's
fiduciary duties under applicable law with respect to the Acquisition Proposal
require, to do so in order to act in a manner consistent with its fiduciary
duties to the Company shareholders and (ii) concludes in good faith based on the
written advice of its financial advisors that the person or group making such
Acquisition Proposal has adequate sources of financing to consummate such
Acquisition Proposal and that such Acquisition Proposal, if consummated as
proposed, is materially more favorable to the Company shareholders from a
financial point of view than the Merger, such Board of Directors may terminate
this Agreement pursuant to Section 9.1(e) (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Acquisition
Agreement with respect to any Acquisition Proposal), but only at a time that is
(x) during the Applicable Period and is after the fifth business day following
receipt by Parent of written notice advising Parent that the Board of Directors
of the Company is prepared to accept an Acquisition Proposal, specifying the
material terms and conditions of such Acquisition Proposal and identifying the
person making such Acquisition Proposal, (y) after the Company and its
respective financial and legal advisors have given Parent a reasonable
opportunity during such five-day period following receipt by Parent of such
written notice to make such adjustments in the terms and conditions of this
Agreement as would enable the Company to proceed with the Merger or other
transactions contemplated hereby on such adjusted terms, and (z) after the
Company and such advisors have negotiated in good faith with Parent with respect
to any such adjustments; provided that the Company's ability to terminate this
Agreement pursuant to Section 9.1(e) is conditioned upon the concurrent payment
by the Company to Parent of any amounts owed by it pursuant to Section 9.3(c).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 7.10, the Company shall immediately
advise Parent orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal. The Company shall keep Parent informed of the status and
details (including amendments or proposed amendments) of any such request or
Acquisition Proposal.
(d) Nothing contained in this Section 7.10 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2 promulgated under the Exchange Act or from making any disclosure to its
shareholders if, in the good faith
51
judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law.
Section 7.11 Boards of Directors.
(a) Newco Board. Newco shall take such action as may be necessary to
appoint (i) all members serving on the Parent Board of Directors immediately
prior to the Effective Time, (ii) the current Chief Executive Officer of the
Company and (iii) one additional person presently serving as an outside director
of the Board of Directors of the Company on the date hereof, as determined by
Parent, to serve on the Newco Board of Directors following the Effective Time.
(b) Advisory Board. Promptly following the Merger Effective Time, Newco
shall cause the Surviving Entity to establish an advisory board (the "New York
Advisory Board") which shall be maintained for at least two years and which
shall be comprised of up to 12 persons who were, immediately prior to the Merger
Effective Time, serving as non-executive members of the Company's Board of
Directors, who are not appointed to serve on Newco Board of Directors and who
are willing to serve in such capacity on the New York Advisory Board. The
function of the New York Advisory Board shall be to advise the Surviving
Entity's Board of Directors with respect to general business as well as
opportunities and activities in the State of New York and to maintain and
develop customer relationships in the State of New York. The New York Advisory
Board shall meet no less frequently than three times a year. The members of the
New York Advisory Board shall each be named to serve as members thereof for a
period of two years; provided, however, that Newco shall have no obligation to
cause the Surviving Entity to elect or appoint, and may cause the Surviving
Entity to remove, any member of the New York Advisory Board if Newco reasonably
determines that such member has a conflict of interest that compromises such
member's ability to serve effectively as a member of the New York Advisory Board
or any cause exists that otherwise would allow for removal of such person as a
director of the Surviving Entity if such person were a member of the Surviving
Entity's Board of Directors.
(c) National Grid USA Board. For a period of two years commencing at
the Effective Time, the current Chief Executive Officer of the Company shall
serve as Chairman of the Board of Directors of National Grid USA and two other
current executive officers of the Company as determined by Parent will serve on
the Board of Directors of National Grid USA.
Section 7.12 Charitable Contributions. The parties agree that provision
of charitable contribution and community support within the region served by the
Company serves a number of important goals. After the Merger Effective Time,
Newco intends to cause the Surviving Entity to provide charitable contributions
and community support within the region served by the Company at annual levels
substantially comparable to the annual level of charitable contributions and
community support provided, directly or indirectly, by the Company and its
public utility subsidiary within the region served by the Company during 1999.
52
Section 7.13 Anti-Takeover Statutes. If any "fair price," "moratorium,"
"business combination," "control share acquisition" or other form of
anti-takeover statute or regulation shall become applicable to the Merger or any
other transaction contemplated hereby, each of Parent and the Company and the
members of their respective boards of directors shall grant such approvals and
take such actions consistent with their fiduciary duties and in accordance with
applicable law as are reasonably necessary so that the Merger and such other
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the Merger and other transactions
contemplated hereby.
Section 7.14 Conveyance Taxes. The Company, Parent and Newco shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
Taxes, any transfer, recording, registration and other fees, and any similar
Taxes ("Conveyance Taxes") which become payable in connection with the
transactions contemplated by this Agreement that are required or permitted to be
paid on or before the Merger Effective Time. Newco shall pay, without deduction
or withholding from any amount payable to the holders of any shares of the
Company Common Stock, any such Conveyance Taxes which become payable in
connection with the transactions contemplated by this Agreement, on behalf of
the shareholders of the Company.
Section 7.15 Expenses. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Proxy/Registration Statement,
the filing fee relating to the Proxy/Registration Statement and for expert
witnesses retained for the purpose of advising and supporting approvals where
both Company and Parent have filed for approval from the same regulator, shall
be shared equally by the Company and Parent.
Section 7.16 Further Assurances. Each party shall, and shall cause its
Subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Merger in accordance with the terms hereof. Parent and Newco
shall, and shall cause their respective Subsidiaries to, execute such further
documents and instruments and take such further actions as may reasonably be
requested by any other party in order to consummate the Scheme in accordance
with the terms hereof, provided that Parent and Newco may amend the terms of the
Scheme as they deem reasonably necessary or desirable, provided further that if
any such amendment would have a material adverse effect on the benefits of the
Merger to the shareholders of the Company, such amendment will require the
consent of the Company.
Section 7.17 Restructuring of Transactions. It may be preferable to
effectuate a business combination between Parent and the Company by means of an
alternative structure to the Merger and the Scheme. Accordingly, if, prior to
satisfaction of the conditions contained in Article VIII hereto, Parent proposes
the adoption of an alternative structure that otherwise substantially preserves
for Parent, the Company and the holders of the Company Common Stock
53
the economic and Tax benefits of the transactions contemplated thereby then the
parties shall use their respective best efforts to effect a business combination
among themselves by means of a mutually agreed upon structure other than the
Merger that so preserves such benefits, including without limitation, a
structure that does not require consummation of the Scheme. In particular, in
the event that Parent determines that approval of the Scheme is uncertain and it
waives the condition set forth in Section 8.2(h), Parent and the Company agree
to adopt an alternative business combination transaction that does not require
consummation of the Scheme. In the event that the parties adopt a restructured
transaction, the Agreement shall be revised to reflect such transaction as
determined necessary by the parties hereto and prior to closing any such
restructured transaction, all material third party and Governmental Authority
declarations, filings, registrations, notices, authorizations, consents or
approvals necessary for the effectuation of such alternative business
combination shall have been obtained and all other conditions to the parties'
obligations to consummate the Merger and other transactions contemplated hereby,
as applied to such alternative business combination, shall have been satisfied
or waived.
Section 7.18 Integration Team. As soon as practicable after the date
hereof, Parent and Company shall, subject to limitations imposed by applicable
law, create an integration steering team with representatives appointed by the
CEOs of Parent and the Company, and chaired by Parent. The integration steering
team shall be responsible for facilitating the integration of the two companies
as subsidiaries of Newco.
Section 7.19 Newco Ordinary Shares. Newco agrees that the Newco
Ordinary Shares delivered by it on the Closing Date shall be validly issued and
fully paid.
Section 7.20 ADR Depositary Agreement. Newco, Merger Sub and the ADR
Depositary shall enter into the ADR Depositary Agreement in a form satisfactory
to Newco, Parent and the Company.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, except, to the extent permitted by
applicable law, that such conditions may be waived by the parties in writing
pursuant to Section 9.5:
(a) Shareholders' Approvals. The Parent Shareholders' Merger Approval
and the Company Shareholders' Approval shall have been obtained.
(b) No Injunction. No court of competent jurisdiction or other
competent Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any law or order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of
54
making illegal or otherwise restricting, preventing or prohibiting consummation
of the Scheme, the Merger or other transactions contemplated hereby.
(c) Proxy/Registration Statement. The Proxy/Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act, and no stop order suspending such effectiveness shall have been issued and
remain in effect.
(d) Listing of Shares. The U.K. Listing Authority shall have agreed to
admit to the Official List of the U.K. Listing Authority (subject to allotment)
(i) the Newco Ordinary Shares represented by the Newco ADSs issuable in the
Merger pursuant to Article II, and (ii) the Newco Ordinary Shares issued
pursuant to the Scheme and such agreement shall not have been withdrawn, and the
Newco ADSs issuable in the Merger pursuant to Article II shall have been
approved for listing on the NYSE upon official notice of issuance.
(e) Statutory Approvals. (i) Either (x) the sale by the Company of its
Nuclear Facilities (the "Nuclear Sale") shall have closed, the Company shall
have received the purchase price therefor, and conforming license amendments
shall have been issued by NRC to reflect the change in ownership or (y) Parent
and the Company shall have agreed to an alternative to the Nuclear Sale in
accordance with the provisions of Section 6.4 hereof with respect to which all
required approvals, authorizations and consents from Governmental Authorities,
including, without limitation, any necessary order of the NRC consenting to the
transfer of the operating licenses for the Company's Nuclear Facilities and any
necessary conforming license amendments, have been received.
(ii) Each of (x) the Company Required Statutory Approvals,
including, with respect to the approval of the New York Public Service
Commission, confirmation that PowerChoice will remain in effect in accordance
with its terms in all material respects following consummation of the Merger,
(y) the Parent Required Statutory Approvals, and (z) any declaration, filing,
registration with, or notice to or authorization, consent or approval of any
Governmental Authority required in connection with (A) the Nuclear Sale, as well
as a determination by the New York Public Service Commission of the level of
recovery of stranded costs resulting from the Nuclear Sale or (B) any
alternative arrangement to the Nuclear Sale agreed to in accordance with the
provisions of Section 6.4 hereof (collectively, the "Nuclear Approvals"), shall
have been obtained at or prior to the Merger Effective Time, such approvals
shall have become Final Orders (as defined below), and such Final Orders shall
not, individually or in the aggregate, impose terms or conditions which (x) with
respect to the Company Required Statutory Approvals and the Nuclear Approvals,
could reasonably be expected to have a Company Material Adverse Effect taking
into account the allowed recovery of any stranded costs from the Nuclear Sale,
(y) with respect to the Parent Required Statutory Approvals, could reasonably be
expected to have a Parent Material Adverse Effect or (z) with respect to the
Company Required Statutory Approvals, the Parent Required Statutory Approvals
and the Nuclear Approvals, could reasonably be expected to materially impair the
ability of the parties to complete the Merger and the transactions contemplated
hereby. A "Final Order" means action by the relevant regulatory authority which
has not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the
55
transactions contemplated hereby may be consummated has expired, and as to which
all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
(f) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
otherwise expired.
Section 8.2 Conditions to Obligation of Newco and Parent to Effect the
Merger. The obligation of Parent and Newco to effect the transactions
contemplated by this Agreement shall be further subject to the satisfaction, on
or prior to the Closing Date, of the following conditions, except as may be
waived by Parent and Newco in writing pursuant to Section 9.5:
(a) Performance of Obligations of the Company. The Company (and/or the
appropriate Company Subsidiaries, as applicable) shall have performed in all
material respects its agreements and covenants contained in or contemplated by
this Agreement which are required to be performed by it at or prior to the
Merger Effective Time.
(b) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct (i) on and
as of the date hereof and (ii) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific date or time which need only be true and correct as of
such date or time), except where the failure of representations or warranties to
be true and correct could not, individually or in the aggregate, be reasonably
expected to result in a Company Material Adverse Effect. For purposes of this
Section 8.2(b), qualifications in any representation or warranty as to
"materiality" or a "Company Material Adverse Effect" shall be disregarded.
(c) Closing Certificates. Parent and Newco shall have received a
certificate signed by the chief financial officer of the Company, dated the
Closing Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) Tax Opinion. Parent and Newco shall have received an opinion from
PricewaterhouseCoopers, counsel to Parent and Newco, in form and substance
reasonably satisfactory to Parent and Newco, dated as of the Closing Date,
substantially to the effect that the Merger, together with the Scheme will be
treated for United States federal income tax purposes as a transaction described
in Section 351 of the Code, and no gain or loss will be recognized by Parent or
Newco as a result thereof. In rendering such opinion, PricewaterhouseCoopers may
require and rely upon representations reasonably satisfactory to
PricewaterhouseCoopers contained in certificates of officers of the Company,
Parent, Newco and Merger Sub.
(e) Company and Parent Required Consents. All material Company Required
Consents and Parent Required Consents shall have been obtained and OFGEM shall
not have
56
imposed any modifications to any conditions of the license held by National Grid
Company plc under the Electricity ▇▇▇ ▇▇▇▇ that would reasonably be expected to
have a Parent Material Adverse Effect.
(f) Affiliate Agreements. Newco shall have received Affiliate
Agreements, duly executed by each "Affiliate" of the Company, substantially in
the form of Exhibit 7.7, as provided in Section 7.7.
(g) Permits. To the extent that the continued lawful operations of the
business of the Company or any Company Subsidiary after the Merger requires that
any license, permit (including, without limitation, Environmental Permits) or
other governmental approval be transferred to Parent or any Parent Subsidiary or
issued to Parent or any Parent Subsidiary, such licenses, permits or other
authorizations shall have been transferred or reissued to Parent or such Parent
Subsidiary at or before the Closing Date, except where the failure to transfer
or reissue such licenses, permits or other authorizations would not have a
Company Material Adverse Effect immediately after the Merger Effective Time.
(h) Court Sanction. The Court shall have sanctioned the Scheme on terms
contemplated by this Agreement, and the Parent Shareholders' Scheme Approvals
shall have been obtained.
Section 8.3 Conditions to Obligation of The Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by the Company in writing pursuant to
Section 9.5:
(a) Performance of Obligations of Parent and Newco. Parent (and/or the
appropriate Parent Subsidiaries, as applicable) and Newco shall have performed
in all material respects its agreements and covenants contained in or
contemplated by this Agreement which are required to be performed by it at or
prior to the Merger Effective Time.
(b) Representations and Warranties. The representations and warranties
of Parent, Newco and Merger Sub set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date (except for representations and warranties that
expressly speak only as of a specific date or time which need only be true and
correct as of such date or time), except where the failure of representations or
warranties to be true and correct could not, individually or in the aggregate,
be reasonably expected to result in a Parent Material Adverse Effect. For
purposes of this Section 8.3(b), qualifications in any representation or
warranty as to "materiality" or a "Parent Material Adverse Effect" shall be
disregarded.
(c) Closing Certificates. The Company shall have received a certificate
signed by the chief financial officer of Parent and Newco, dated the Closing
Date, to the effect
57
that, to the best of such officer's knowledge, the conditions set forth in
Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) Tax Opinion. The Company shall have received an opinion from ▇▇▇▇▇
▇▇▇▇ LLP, special tax counsel to the Company, in form and substance reasonably
satisfactory to the Company, dated as of the Closing Date, substantially to the
effect that the Merger, together with the Scheme will be treated for United
States federal income tax purposes as a transaction described in Section 351 of
the Code and no gain or loss will be recognized by the Company pursuant to the
Merger and no gain or loss will be recognized by shareholders of the Company who
receive solely Newco ADSs pursuant to the Merger. In rendering such opinion,
▇▇▇▇▇ ▇▇▇▇ LLP may require and rely upon representations reasonably satisfactory
to ▇▇▇▇▇ ▇▇▇▇ LLP contained in certificates of officers of the Company, Parent,
Newco and Merger Sub.
(e) Parent Required Consents. All material Parent Required Consents,
the failure of which to obtain would have a Parent Material Adverse Effect,
shall have been obtained.
(f) Legal Opinion. The Company shall have received an opinion from CMS
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, counsel to Parent, in form and substance reasonably
satisfactory to the Company, dated as of the Closing Date, substantially to the
effect that the Newco Ordinary Shares represented by the ADSs issued as the ADS
consideration are validly issued and fully paid.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the shareholders
of the respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of Newco, the
Company and Parent;
(b) by either Parent or the Company:
(i) if any state or federal law, order, rule or regulation
is adopted or issued, which has the effect, as supported by the written
opinion of outside counsel for such party, of prohibiting the Merger, or by
Parent or the Company, if any court of competent jurisdiction in the United
States or any state shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Merger, and
such order, judgment or decree shall have become final and nonappealable;
(ii) by written notice to the other parties, if the Merger
Effective Time shall not have occurred on or before December 31, 2001 (the
"Initial Termination Date");
58
provided, however, that the right to terminate the Agreement under this
Section 9.1(b)(ii) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger Effective Time to occur on or before
such date; provided, further, that (A) if on the Initial Termination Date
any of the conditions to the Closing set forth in Section 8.1(e) shall not
have been fulfilled but (x) to the extent that the condition set forth in
Sections 8.1(e)(i) and 8.1(e)(ii) (with respect to the Nuclear Approvals
only) shall not have been fulfilled, the Company shall have entered into a
binding definitive agreement for the Nuclear Sale (the "Nuclear Sale
Agreement") or satisfactory alternative arrangements shall have been
reached pursuant to Section 6.4 and (y) all other conditions to the Closing
shall be fulfilled or shall be capable of being fulfilled, then the Initial
Termination Date shall be extended to March 31, 2002 (the "Extended
Termination Date"), and (B) if as of the Extended Termination Date, the
conditions to Closing set forth in Section 8.1(e)(ii) (with respect to the
Nuclear Approvals only) shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled and the Nuclear Sale Agreement remains in effect, then the
Initial Termination Date shall be extended to August 31, 2002;
(iii) by written notice to the other parties, if Parent
Merger Shareholders' Approval shall not have been obtained at a duly held
Parent Merger Meeting, as the case may be, including any adjournments
thereof, or the Company Shareholders' Approval shall not have been obtained
at a duly held Company Meeting, including any adjournments thereof;
(c) by Parent, by written notice to the Company, if (i) there shall
have been any breach of any representation or warranty, or any breach of any
covenant or agreement of the Company hereunder, which breaches individually or
in the aggregate would result in a Company Material Adverse Effect, and such
breach shall not have been remedied within 20 business days after receipt by the
Company of notice in writing from Parent, specifying the nature of such breach
and requesting that it be remedied, or Parent shall not have received adequate
assurance of a cure of such breach within such 20 business-day period or (ii)
the Board of Directors of the Company shall withdraw or modify in any manner
adverse to Parent its approval of this Agreement and the transactions
contemplated hereby or its recommendation to its shareholders regarding approval
of this Agreement, the Merger and other transactions contemplated hereby;
(d) by the Company, by written notice to Parent, if (i) there shall
have been any breach of any representation or warranty, or any breach of any
covenant or agreement of Parent or Newco hereunder, which breaches individually
or in the aggregate would result in a Parent Material Adverse Effect, and such
breach shall not have been remedied within 20 business days after receipt by
Parent and Newco of notice in writing from the Company, specifying the nature of
such breach and requesting that it be remedied, or the Company shall not have
received adequate assurance of a cure of such breach within such 20 business-day
period, (ii) the Board of Directors of Parent shall withdraw or modify in any
manner adverse to the Company its approval of this Agreement and the
transactions contemplated hereby or its recommendation to its shareholders
regarding approval of this Agreement, the Scheme (if it remains a condition
under
59
Section 8.2(h) hereof) and the Merger and other transactions contemplated hereby
or (iii) Newco shall fail to deliver or cause to be delivered the Merger
Consideration to the ADR Depositary required pursuant to Section 2.3 at a time
when all other conditions to Newco's obligations to close have been satisfied or
waived in writing by Newco; or
(e) by the Company in accordance with Section 7.10(b); provided, that,
in order for the termination of this Agreement pursuant to this paragraph (e) to
be deemed effective, the Company shall have complied with all provisions of
Section 7.10, including the notice provisions therein, and with applicable
requirements, including the payment of the Termination Fee, of Section 9.3(c).
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent pursuant to Section 9.1, there shall
be no liability on the part of either the Company or Parent or Newco or their
respective officers or directors hereunder, except that the agreement contained
in the last sentence of Section 7.1, Section 7.14, Section 9.3, Section 10.2 and
Section 10.9 shall survive any such termination.
Section 9.3 Termination Fee; Expenses.
(a) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 9.1(d)(ii) as a result of an action by the Board of
Directors of the Parent prior to obtaining the Parent Merger Shareholders'
Approval or (ii) by Parent pursuant to Section 9.1(c)(ii) as a result of an
action by the Board of Directors of the Company prior to obtaining the Company
Shareholders' Approval, then (A) in the event of termination pursuant to Section
9.1(c)(ii), the Company shall pay to Parent and (B) in the event of termination
pursuant to Section 9.1(d)(ii), Parent shall pay to the Company, (promptly but
in each case no later than five (5) business days after the date of termination
of this Agreement) by wire transfer of same day funds, a termination fee of
$150,000,000, plus, in each case, all of the terminating party's documented
out-of-pocket expenses and fees incurred by the party (including, without
limitation, fees and expenses payable to all legal, accounting, financial, and
other professionals arising out of, in connection with or related to the
transactions contemplated by this Agreement) not in excess of $10,000,000 (the
"Out-of-Pocket Expenses").
(b) In the event that (i) this Agreement is terminated by the Company
pursuant to Section 9.1(e), or (ii) there shall have been an Acquisition
Proposal involving the Company or any of its Affiliates that has not been
withdrawn and thereafter this Agreement is terminated by Parent or the Company
in the circumstances described in Section 9.1(b)(ii) or (b)(iii) or in
accordance with Section 9.1(c)(i) and, in the case of this clause (ii) only, a
definitive agreement with respect to such Acquisition Proposal is executed
within two years of such termination, then the Company shall pay Parent a
termination fee (the "Termination Fee") equal to $150,000,000 in cash plus the
Out-of-Pocket Expenses of Parent; provided however, that, if such termination
has occurred pursuant to Section 9.1(b)(ii) solely as a result of the failure to
meet conditions set forth in Sections 8.1(e)(i) and (ii) with respect to the
Nuclear Sale and Nuclear Approvals only, then the Company shall pay the
Termination Fee plus the Out-of-Pocket Expenses of Parent if a definitive
agreement with respect to such Acquisition Proposal is
60
executed within one year of such termination; provided further that there is no
arrangement or understanding between the Company and the party making the
Acquisition Proposal at the time of such termination.
(c) The parties agree that the agreements contained in this Section 9.3
are an integral part of the transactions contemplated hereby and constitute
liquidated damages and not a penalty. The parties further agree that if any
party is or becomes obligated to pay a termination fee pursuant to Sections
9.3(a) and (b), the right to receive such termination fee shall be the sole
remedy of the other party with respect to the facts and circumstances giving
rise to such payment obligation. If this Agreement is terminated by a party as a
result of a willful breach of a representation, warranty, covenant or agreement
by the other party, the non-breaching party may pursue any remedies available to
it at law or in equity and shall be entitled to recover any amounts thereunder.
Notwithstanding anything to the contrary contained in this Section 9.3, if one
party fails to promptly pay to the other any fee or expense due under this
Section 9.3, in addition to any amounts paid or payable pursuant to such
Section, the defaulting party shall pay the costs and expenses (including legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee at the publicly announced prime rate of
Citibank, N.A. from the date such fee was required to be paid.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after obtaining the
Company Shareholders' Approval, the Parent Shareholders' Approvals and prior to
the Merger Effective Time, but after such approvals, only to the extent
permitted by applicable law. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Merger Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein, to the extent permitted by applicable
law. Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed by a duly
authorized officer of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties. No
representations or warranties in this Agreement shall survive the Merger
Effective Time, except as otherwise provided in this Agreement.
Section 10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) when delivered personally, (b)
when sent by reputable
61
overnight courier service or (c) when telecopied (which is confirmed by copy
sent within one business day by a reputable overnight courier service) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) If to the Company, to
Niagara Mohawk Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice-President and Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 202-293-6330
and
(ii) if to Parent, to
National Grid Group plc
National Grid House
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇
Group Finance Director
Telephone: ▇▇▇-▇▇-▇▇-▇-▇▇▇-▇▇▇▇
Facsimile: 011-44-20-7-312-5655
and
National Grid USA
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
62
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
CMS ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Mitre House
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇-▇▇-▇-▇▇▇-▇▇▇▇
Facsimile: 011-44-20-7-367-2000
(iii)If to Newco, to
New National Grid Limited
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇
Director
Telephone: ▇▇▇-▇▇-▇▇-▇-▇▇▇-▇▇▇▇
Facsimile: 011-44-20-7-312-5655
and
National Grid USA.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
CMS ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Mitre House
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇-▇▇-▇-▇▇▇-▇▇▇▇
Facsimile: 011-44-20-7-367-2000
(iv) If to Merger Sub, to
Grid Delaware, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Section 10.3 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement and (b) shall not be assigned by
operation of law or otherwise.
Section 10.4 Interpretation. When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." Reference to
any "person" shall include reference to any predecessor or successor of such
person. Reference to any United States legal term for any action, remedy, method
of judicial proceeding, legal document, legal status, court, official or legal
concept or thing shall in respect of any
64
jurisdiction other than the United States be deemed to include what most nearly
approximates in that jurisdiction to the United States legal term.
Section 10.5 Counterparts; Effect. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
Section 10.6 Parties' Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for the rights
of Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED IN AND TO BE FULLY PERFORMED IN SUCH STATE, WITHOUT GIVING
EFFECT TO ITS CONFLICTS OF LAW RULES OR PRINCIPLES.
Section 10.8 Submission to Jurisdiction; Waivers. Each of Parent and
the Company irrevocably agree that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by another party hereto or its successors or assigns may be
brought and determined in the Supreme Court of the State of New York in New York
County or in the United States District Court for the Southern District of New
York, and each of Newco, Parent and the Company hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Any service of process to be made in such action or proceeding
may be made by delivery of process in accordance with the notice provisions
contained in Section 10.2. Each of Newco, Parent and the Company hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) the defense of sovereign immunity, (b) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to serve process in accordance with this Section 10.8,
(c) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (d) to the fullest extent
permitted by applicable law that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
Section 10.9 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this
65
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 10.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
66
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its respective officer thereunto duly authorized as of the date first
written above.
NATIONAL GRID GROUP PLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Its: Group Director, North America
-----------------------------------------
NIAGARA MOHAWK HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Its: Chairman and Chief Executive Officer
-----------------------------------------
NEW NATIONAL GRID LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Its: Director
-----------------------------------------
GRID DELAWARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Its: President
-----------------------------------------