AGREEMENT AND PLAN OF MERGER
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BY AND AMONG
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CTG RESOURCES, INC.,
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ENERGY EAST CORPORATION
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AND
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OAK MERGER CO.,
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DATED AS OF JUNE 29, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE ITHE MERGER . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 . . . . . . . . . . . . . . . . . . The Merger 1
Section 1.2 . . . . . . . . . . . . . Effects of the Merger 1
Section 1.3 . . . . . . . . . Effective Time of the Merger 2
Section 1.4 . . . . . . . . . . . . . . . . . . . Directors 2
Section 1.5 . . . . . . . . . . . . . . . . . . . Officers 2
ARTICLE IITREATMENT OF SHARES . . . . . . . . . . . . . . . . . 2
Section 2.1 . . . . . Effect of the Merger on Capital Stock 2
Section 2.2 . . . . . . . . . . . Exchange of Certificates 6
ARTICLE IIITHE CLOSING . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 . . . . . . . . . . . . . . . . . . . . Closing 9
ARTICLE IVREPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . 9
Section 4.1 . . . . . . . . Organization And Qualification 9
Section 4.2 . . . . . . . . . . . . . . . . . Subsidiaries 9
Section 4.3 . . . . . . . . . . . . . . . . Capitalization 10
Section 4.4 . . . . Authority; Non-contravention; Statutory
Approvals; Compliance . . . . . . . . . . . . . . . . 10
Section 4.5 . . . . . . . Reports and Financial Statements 12
Section 4.6 . . . . . Absence of Certain Changes or Events 13
Section 4.7 . . . . . . . . . . . . . . . . . . Litigation 13
Section 4.8 . . Registration Statement and Proxy Statement 13
Section 4.9 . . . . . . . . . . . . . . . . . . Tax Matters 13
Section 4.10 . . . . . . . . . . . . Employee Matters; ERISA 15
Section 4.11 . . . . . . . . . . . Environmental Protection 19
Section 4.12 . . . . . . . . . . . . Regulation as a Utility 21
Section 4.13 . . . . . . . . . . . . . . . . . Vote Required 21
Section 4.14 . . . . . . . . . Opinion of Financial Advisor 21
Section 4.15 . . . . . . . Ownership of Parent Common Stock 21
Section 4.16 . . . . . . . . . . Takeover Laws; Rights Plans 21
ARTICLE VREPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . 22
Section 5.1 . . . . . . . . Organization and Qualification 22
Section 5.2 . . . . . . . . . . . . . . . . . Subsidiaries 22
Section 5.3 . . . . . . . . . . . . . . . . Capitalization 23
Section 5.4 . . . . Authority; Non-contravention; Statutory
Approvals; Compliance . . . . . . . . . . . . . . . 23
Section 5.5 . . . . . . . Reports and Financial Statements 24
Section 5.6 . . . . . Absence of Certain Changes or Events 25
Section 5.7 . . . . . . . . . . . . . . . . . . Litigation 25
Section 5.8 . . Registration Statement and Proxy Statement 25
Section 5.9 . . . . . . . . . . . . Regulation as a Utility 25
Section 5.10 . . . . . Ownership of the Company Common Stock 26
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Section 5.11 . . . . . . . . . . . Environmental Protection 26
Section 5.12 . . . . . . . Operations of Nuclear Power Plant 26
Section 5.13 . . . . . . . . . . . . . . Code Section 368(a) 27
ARTICLE VICONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . 27
Section 6.1 . . . . . . . . . . . Covenants of the Parties 27
Section 6.2 Covenant of the Company; Alternative Proposals 31
Section 6.3 . . . . . . . . . . . . . Employment Agreement 32
Section 6.4 . . . . . . . . Additional Statutory Approvals 32
ARTICLE VIIADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . 32
Section 7.1 . . . . . . . . . . . . . Access to Information 32
Section 7.2 . . Proxy Statement and Registration Statement 33
Section 7.3 . . . . . . . . . . . . . . Regulatory Matters 34
Section 7.4 . . . . . . . . Company Shareholders' Approval 34
Section 7.5 . . . Directors' and Officers' Indemnification 34
Section 7.6 . . . . . . . . . . . . . Disclosure Schedules 36
Section 7.7 . . . . . . . . . . . . . Public Announcements 36
Section 7.8 . . . . . . . . . . . . . . Rule 145 Affiliates 36
Section 7.9 . . . . . . . . . . Certain Employee Agreements 36
Section 7.10 . . . . . . . . . . . . Employee Benefit Plans 37
Section 7.11 . . . . . . . . . Company Stock and Other Plans 38
Section 7.12 . . . . . . . . . . . . . . . . . . . Expenses 39
Section 7.13 . . . . . . . . . . . . . . Further Assurances 39
Section 7.14 . . . . . . . . . . . . . . . Corporate Offices 39
Section 7.15 . . . . . . . . . . . Parent Board of Directors 39
Section 7.16 . . . . . . . . . . . . . Community Involvement 40
Section 7.17 . . . . . . . . . . . . . . . . Advisory Board 40
Section 7.18 . . . . . . . . . . . . . . . . Tax-free Status 40
ARTICLE VIIICONDITIONS . . . . . . . . . . . . . . . . . . . . 40
Section 8.1 . . . . . Conditions to Each Party's Obligation
to Effect the Merger . . . . . . . . . . . . . . . . 40
Section 8.2 . . . . . . Conditions to Obligation of Parent
to Effect the Merger . . . . . . . . . . . . . . . . 41
Section 8.3 . . Conditions to Obligation of the Company to
Effect the Merger . . . . . . . . . . . . . . . . . 42
ARTICLE IXTERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . 43
Section 9.1 . . . . . . . . . . . . . . . . . . Termination 43
Section 9.2 . . . . . . . . . . . . . Effect of Termination 45
Section 9.3 . . . . . . . . . . . Termination Fee; Expenses 45
Section 9.4 . . . . . . . . . . . . . . . . . . . Amendment 46
Section 9.5 . . . . . . . . . . . . . . . . . . . . Waiver 46
ARTICLE XGENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 46
Section 10.1 . . . . Non-survival; Effect of Representations
and Warranties . . . . . . . . . . . . . . . . . . . 46
Section 10.2 . . . . . . . . . . . . . . . . . . . . Brokers 47
Section 10.3 . . . . . . . . . . . . . . . . . . . . Notices 47
Section 10.4 . . . . . . . . . . . . . . . . . Miscellaneous 48
Section 10.5 . . . . . . . . . . . . . . . . Interpretation 48
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Section 10.6 . . . . . . . . . . . . . Counterparts; Effect 48
Section 10.7 . . . . . . . . . . . . . . Parties in Interest 48
Section 10.8 . . . Waiver of Jury Trial and Certain Damages 48
Section 10.9 . . . . . . . . . . . . . . . . . . Enforcement 49
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INDEX OF DEFINED TERMS
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Term Page
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1935 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Affiliate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Alternative Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Business Combination . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Election Number . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Fraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Closing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . 36
Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . 12
Company Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 9
Company Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Required Consents . . . . . . . . . . . . . . . . . . . . . . . . 11
Company Required Statutory Approvals . . . . . . . . . . . . . . . . . . 11
Company Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . 2
Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Company Shareholders' Approval . . . . . . . . . . . . . . . . . . . . . 21
Company Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 34
Company Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . 33
Controlled Group Liability . . . . . . . . . . . . . . . . . . . . . . . 15
Covered Company Employee . . . . . . . . . . . . . . . . . . . . . . . . 37
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Election Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Excess Parent Common Shares . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FERC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Form of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . 11
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 35
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Initial Termination Date . . . . . . . . . . . . . . . . . . . . . . . . 43
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 2
Mixed Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Mixed Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Multiple Employer Plan . . . . . . . . . . . . . . . . . . . . . . . . . 18
No Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Nuclear Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parent Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . 36
Parent Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 22
Parent Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 23
Parent Required Consents . . . . . . . . . . . . . . . . . . . . . . . . 23
Parent Required Statutory Approvals . . . . . . . . . . . . . . . . . . . 24
Parent SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Share Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parent Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PCBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Post-Merger Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Power Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Proxy/Registration Statement . . . . . . . . . . . . . . . . . . . . . . 33
Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . 13
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Restricted Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Schedule 7.11(c) Employees . . . . . . . . . . . . . . . . . . . . . . . 39
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Stock Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stock Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Election Number . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Fraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
VEBA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Withdrawal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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AGREEMENT AND PLAN OF MERGER, dated as of June 29, 1999 (this
"Agreement"), by and among CTG Resources, Inc., a Connecticut corporation
(the "Company"), Energy East Corporation, a New York corporation ("Parent"),
and Oak Merger Co., a Connecticut corporation and a wholly owned subsidiary
of Parent ("Merger Sub").
WHEREAS, the Company and Parent have determined to engage in a business
combination transaction on the terms stated herein;
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have approved and deemed it advisable and in the best interests
of their respective shareholders to consummate the transactions contemplated
herein under which the businesses of the Company and Parent would be
combined by means of the merger of the Company with and into Merger Sub; and
WHEREAS, it is intended that the Merger (as defined below) shall
constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and that this
Agreement shall constitute a plan of reorganization;
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
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THE MERGER
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Section 1.1 THE MERGER. Upon the terms and subject to the
conditions of this Agreement:
At the Effective Time (as defined in Section 1.3), the Company shall be
merged with and into Merger Sub (the "Merger") in accordance with the laws
of the State of Connecticut. Merger Sub shall be the surviving corporation
in the Merger and shall continue its corporate existence under the laws of
the State of Connecticut. The effects and the consequences of the Merger
shall be as set forth in Section 1.2. Throughout this Agreement, the term
"Merger Sub" shall refer to Merger Sub prior to the Merger and the term
"Surviving Corporation" shall refer to Merger Sub in its capacity as the
surviving corporation in the Merger.
Section 1.2 EFFECTS OF THE MERGER. At the Effective Time, (i) the
certificate of incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
certificate of incorporation, except that the name of the Surviving
Corporation shall be "CTG Resources, Inc.," and (ii) the by-laws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the by-
laws of the Surviving Corporation until thereafter amended as provided by
law, the certificate of incorporation of the Surviving Corporation and such
by-laws. Subject to the foregoing, the additional effects of the Merger
shall be as provided in Section 33-820 of the Connecticut Business
Corporation Act (the "CBCA").
Section 1.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date (as
defined in Section 3.1), with respect to the Merger, a certificate of merger
complying with Section 33-819 of the CBCA (the "Certificate of Merger")
shall be delivered to the Secretary of the State of Connecticut for filing.
The Merger shall become effective upon the filing of the Certificate of
Merger, or at such later date and time as may be set forth in the
Certificate of Merger (the "Effective Time").
Section 1.4 DIRECTORS. The directors of Merger Sub immediately
prior to the Effective Time and ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall be the
directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the certificate of
incorporation and by-laws of the Surviving Corporation, or as otherwise
provided by the CBCA.
Section 1.5 OFFICERS. Commencing at the Effective Time, and
continuing until his successor is duly elected or appointed and qualified in
the manner provided in the by-laws of the Surviving Corporation, ▇▇.
▇▇▇▇▇▇▇▇▇ shall be President and Chief Executive Officer of the Surviving
Corporation and shall hold other positions in other subsidiary corporations
of Parent as specified in his Employment Agreement (as defined in Section
6.3 hereof) subject to the terms and conditions therein contained. The
officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation (except that ▇▇. ▇▇▇▇▇▇▇▇▇
shall be the President and Chief Executive Officer of the Surviving
Corporation) and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the
manner provided in the certificate of incorporation and by-laws of the
Surviving Corporation, or as otherwise provided by the CBCA.
ARTICLE II
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TREATMENT OF SHARES
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Section 2.1 EFFECT OF THE MERGER ON CAPITAL STOCK. At the Effective
Time, by virtue of the Merger and without any action on the part of any
holder of any capital stock of the Company or Merger Sub:
(a) SHARES OF MERGER SUB STOCK. Each share of common stock,
without par value, of Merger Sub (the "Merger Sub Common Stock") that is
issued and outstanding immediately prior to the Effective Time shall remain
outstanding unchanged by reason of the Merger as one fully paid and
nonassessable share of common stock, without par value, of the Surviving
Corporation.
(b) CANCELLATION OF CERTAIN COMPANY COMMON STOCK. Each share of
common stock, without par value, of the Company, together with each
associated preferred share purchase right (a "Company Right") under the
Rights Agreement, dated as of December 1, 1998 (the "Company Rights
Agreement"), between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "Company Common Stock"), that is owned by the
Company as treasury stock and all shares of Company Common Stock that are
owned by Parent shall be canceled and shall cease to exist, and no stock of
Parent or other consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to the
provisions of this Section 2.1, each share of Company Common Stock, other
than Dissenting Shares (as defined in Section 2.1(n)) and shares canceled
pursuant to Section 2.1(b), issued and outstanding immediately prior to the
Effective Time shall by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive
(i) $41.00 in cash (the "Cash Consideration") or (ii) a number of validly
issued, fully paid and nonassessable shares of Common Stock, par value $.01
per share, of Parent ("Parent Common Stock") equal to the Exchange Ratio (as
defined below) (the "Stock Consideration") or (iii) the right to receive a
combination of cash and shares of Parent Common Stock determined in
accordance with this Section (the "Mixed Consideration"). The "Exchange
Ratio" shall be equal to the Cash Consideration divided by either (i) the
Parent Share Price (as defined below) if the Parent Share Price is equal to
or less than $30.13 and equal to or more than $23.67, (ii) $30.13 if the
Parent Share Price is greater than $30.13, in which case the Exchange Ratio
shall equal 1.3609, or (iii) $23.67 if the Parent Share Price is less than
$23.67, in which case the Exchange Ratio shall equal 1.7320. The "Parent
Share Price" shall be equal to the average of the closing prices of the
shares of Parent Common Stock on the New York Stock Exchange ("NYSE")
Composite Transactions Reporting System, as reported in The Wall Street
Journal, for the 20 trading days immediately preceding the second trading
day prior to the Effective Time.
(d) CASH ELECTION. Subject to the immediately following
sentence, each record holder of shares of Company Common Stock immediately
prior to the Effective Time shall be entitled to elect to receive cash for
all or any part of such holder's shares of Company Common Stock (a "Cash
Election"). Notwithstanding the foregoing and subject to Section 2.1(l), the
aggregate number of shares of Company Common Stock that may be converted
into the right to receive cash in the Merger (the "Cash Election Number")
plus any Dissenting Shares shall be 55% of the total number of shares of
Company Common Stock issued and outstanding as of the Effective Time. Cash
Elections shall be made on a form designed for that purpose (a "Form of
Election"). A holder of record of shares of Company Common Stock who holds
such shares as nominee, trustee or in another representative capacity (a
"Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the
shares of Company Common Stock held by such Representative for a particular
beneficial owner.
(e) CASH ELECTION SHARES. If the aggregate number of shares of
Company Common Stock covered by Cash Elections (the "Cash Election Shares")
3
exceeds the Cash Election Number, each Cash Election Share shall be
converted into (i) the right to receive an amount in cash, without interest,
equal to the product of (A) the Cash Consideration and (B) a fraction (the
"Cash Fraction"), the numerator of which shall be the Cash Election Number
and the denominator of which shall be the total number of Cash Election
Shares, and (ii) a number of shares of Parent Common Stock equal to the
product of (A) the Exchange Ratio and (B) a fraction equal to one minus the
Cash Fraction.
(f) STOCK ELECTION. Subject to the immediately following
sentence, each record holder of shares of Company Common Stock immediately
prior to the Effective Time shall be entitled to elect to receive shares of
Parent Common Stock for all or any part of such holder's shares of Company
Common Stock (a "Stock Election"). Notwithstanding the foregoing and subject
to Section 2.1(l), the aggregate number of shares of Company Common Stock
that may be converted into the right to receive shares of Parent Common
Stock in the Merger (the "Stock Election Number") shall be 45% of the total
number of shares of Company Common Stock issued and outstanding as of the
close of business on the third trading day prior to the Effective Time.
Stock Elections shall be made on a Form of Election. A Representative may
submit multiple Forms of Election, provided that such Representative
certifies that each such Form of Election covers all the shares of Company
Common Stock held by such Representative for a particular beneficial owner.
(g) STOCK ELECTION SHARES. If the aggregate number of shares of
Company Common Stock covered by Stock Elections (the "Stock Election
Shares") exceeds the Stock Election Number, each Stock Election Share shall
be converted into (i) the right to receive a number of shares of Parent
Common Stock, equal to the product of (A) the Exchange Ratio and (B) a
fraction (the "Stock Fraction"), the numerator of which shall be the Stock
Election Number and the denominator of which shall be the total number of
Stock Election Shares, and (ii) an amount in cash, without interest, equal
to the product of (A) the Cash Consideration and (B) a fraction equal to one
minus the Stock Fraction.
(h) MIXED ELECTION. Subject to the immediately following
sentence, each record holder of shares of Company Common Stock immediately
prior to the Effective Time shall be entitled to elect to receive shares of
Parent Common Stock for part of such holder's shares of Company Common Stock
and cash for the remaining part of such holder's shares of Company Common
Stock (the "Mixed Election" and, collectively with Stock Election and Cash
Election, the "Election"). Notwithstanding the foregoing and subject to
Section 2.1(l), the aggregate number of shares of Company Common Stock that
may be converted into the right to receive the Cash Consideration plus
Dissenting Shares shall be 55%, and the number of shares of Company Common
Stock converted into the right to receive the Stock Election Number shall be
45%, in each case, of the total number of shares of Company Common Stock
issued and outstanding as of the Effective Time. Mixed Elections shall be
made on a Form of Election. A Representative may submit multiple Forms of
Election, provided that such Representative certifies that each such Form of
Election covers all the shares of Company Common Stock held by such
Representative for a particular beneficial owner. With respect to each
4
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 2.1(d), (e) and (l), and
the shares such holder elects to be converted into the right to receive
shares of Parent Common Stock shall be treated as Stock Election Shares for
purposes of the provisions contained in Sections 2.1(f), (g) and (l).
(i) FORM OF ELECTION. To be effective, a Form of Election must
be properly completed, signed and submitted to Parent's transfer agent and
registrar, as paying agent (the "Paying Agent"), and accompanied by the
certificates representing the shares of Company Common Stock ("Company
Certificates") as to which the election is being made (or by an appropriate
guarantee of delivery of such Company Certificate signed by a firm that is a
member of any registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of the Securities Transfer Agent's Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program). Parent shall have the discretion, which it may delegate
in whole or in part to the Paying Agent, to determine whether Forms of
Election have been properly completed, signed and submitted or revoked and
to disregard immaterial defects in Forms of Election. The decision of Parent
(or the Paying Agent) in such matters shall be conclusive and binding.
Neither Parent nor the Paying Agent shall be under any obligation to notify
any person of any defect in a Form of Election submitted to the Paying
Agent. The Paying Agent shall also make all computations contemplated by
this Section 2.1, and all such computations shall be conclusive and binding
on the holders of shares of Company Common Stock.
(j) DEEMED NON-ELECTION. For the purposes hereof, a holder of
shares of Company Common Stock who does not submit a Form of Election that
is received by the Paying Agent prior to the Election Deadline (as defined
in Section 2.1(k)) (the "No Election Shares") shall be deemed not to have
made a Cash Election, Stock Election or Mixed Election. If Parent or the
Paying Agent shall determine that any purported Election was not properly
made, the shares subject to such improperly made Election shall be treated
as No Election Shares. No Election Shares may be treated by the Company as
Cash Election Shares or Stock Election Shares.
(k) ELECTION DEADLINE. Parent and the Company shall each use its
best efforts to cause copies of the Form of Election to be mailed to the
record holders of the Company Shares not less than thirty days prior to the
Effective Time and to make the Form of Election available to all persons who
become record holders of Company Shares subsequent to the date of such
mailing and no later than the close of business on the seventh business day
prior to the Effective Time. A Form of Election must be received by the
Paying Agent by 5:00 p.m., New York City time, on the second day after the
Effective Time (the "Election Deadline") in order to be effective. All
elections may be revoked until the Election Deadline in writing by the
record holders submitting Forms of Election.
5
(l) ADJUSTMENT PER TAX OPINION. Notwithstanding anything in this
Article II to the contrary (other than the last sentence of Section 2.1(m)),
the number of shares of Company Common Stock to be converted into the right
to receive the Stock Consideration in the Merger shall be not less than that
number which would cause the ratio of (i) the closing price per share of
Parent Common Stock on the Closing Date times the aggregate number of shares
of Parent Common Stock to be paid as Stock Consideration pursuant to Section
2.1(c), to (ii) the sum of (A) the amount set forth in the preceding clause
(i) plus (B) the aggregate Cash Consideration to be issued pursuant to
Section 2.1(c) plus (C) the number of Dissenting Shares times the per share
Cash Consideration plus (D) any other amounts paid by Parent or the Company
(or any affiliate thereof) to, or on behalf of, any Company shareholder in
connection with the sale, redemption or other disposition of any Company
stock in connection with the Merger for purposes of Treasury Regulation
Sections 1.368-1(e) and 1.368-1T(e) plus (E) any extraordinary dividend
distributed by the Company prior to and in connection with the Merger for
purposes of Treasury Regulation Sections 1.368-1(e) and 1.368-1T(e), to be
45%. To the extent the application of this Section 2.1(l) results in the
number of shares of Company Common Stock to be converted into the right to
receive the Stock Consideration in the Merger being increased, the number of
such shares to be converted into the right to receive the Cash Consideration
will be reduced.
(m) ANTI-DILUTION PROVISIONS. In the event Parent (i) changes
(or establishes a record date for changing) the number of shares of Parent
Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, stock combination, recapitalization,
reclassification, reorganization or similar transaction with respect to the
outstanding Parent Common Stock or (ii) pays or makes an extraordinary
dividend or distribution in respect of Parent Common Stock (other than a
distribution referred to in clause (i) of this sentence) and, in either
case, the record date therefor shall be prior to the Effective Time, the
Merger Consideration (as defined in Section 2.2(b)) shall be proportionately
adjusted. Regular quarterly cash dividends and increases thereon shall not
be considered extraordinary for purposes of the preceding sentence. If,
between the date hereof and the Effective Time, Parent shall merge or
consolidate with or into any other corporation (a "Business Combination")
and the terms thereof shall provide that Parent Common Stock shall be
converted into or exchanged for the shares of any other corporation or
entity, then provision shall be made so that shareholders of the Company who
would be entitled to receive shares of Parent Common Stock pursuant to this
Agreement shall be entitled to receive, in lieu of each share of Parent
Common Stock issuable to such shareholders as provided herein, the same kind
and amount of securities or assets as shall be distributable upon such
Business Combination with respect to one share of Parent Common Stock and
the parties hereto shall agree on an appropriate restructuring of the
transactions contemplated herein.
(n) DISSENTING SHARES. Each outstanding share of Company Common
Stock the holder of which has perfected his right to dissent under
applicable law and has not effectively withdrawn or lost such right as of
the Effective Time (the "Dissenting Shares") shall not be converted into or
6
represent a right to receive the Merger Consideration, and the holder
thereof shall be entitled only to such rights as are granted by applicable
law; provided, however, that any Dissenting Share held by a person at the
Effective Time who shall, after the Effective Time, withdraw the demand for
payment for shares or lose the right to payment for shares, in either case
pursuant to the CBCA, shall be deemed to be converted into, as of the
Effective Time, the right to receive cash pursuant to Section 2.1(c) in the
same manner as if such shares were Cash Election Shares. The Company shall
give Parent prompt notice upon receipt by the Company of any such written
demands for payment of the fair value of such shares of Company Common Stock
and of withdrawals of such notice and any other instruments provided
pursuant to applicable law. Any payments made in respect of Dissenting
Shares shall be made by the Surviving Corporation.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after
the Effective Time, the Surviving Corporation shall deposit with a bank or
trust company mutually agreeable to Parent and the Company (the "Exchange
Agent"), pursuant to an agreement in form and substance reasonably
acceptable to Parent and the Company, an amount of cash and certificates
representing shares of Parent Common Stock required to effect the conversion
of Company Common Stock into Parent Common Stock and cash in accordance with
Section 2.1(c).
(b) EXCHANGE AND PAYMENT PROCEDURES. As soon as practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to
each holder of record as of the Effective Time of a Certificate or
Certificates that have been converted pursuant to Section 2.1: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual
delivery of the Certificates to the Paying Agent) and (ii) instructions for
effecting the surrender of the Certificates and receiving the Merger
Consideration (as defined below) to which such holder shall be entitled
therefor pursuant to Section 2.1. Upon surrender of a Certificate to the
Paying Agent for cancellation, together with a duly executed letter of
transmittal and such other documents as the Paying Agent may require, the
holder of such Certificate shall be entitled to receive in exchange therefor
(i) a certificate representing that number of shares of Parent Common Stock
(the "Parent Shares") into which the shares of Company Common Stock
previously represented by such Certificate are converted in accordance with
Section 2.1(c), (ii) the cash to which such holder is entitled in accordance
with Section 2.1(c), and (iii) the cash in lieu of fractional Parent Shares
to which such holder has the right to receive pursuant to Section 2.2(d)
(the shares of Parent Common Stock and cash described in clauses (i), (ii)
and (iii) above being referred to collectively as the "Merger
Consideration"). In the event the Merger Consideration is to be delivered to
any person who is not the person in whose name the Certificate surrendered
in exchange therefor is registered in the transfer records of Company, the
Merger Consideration may be delivered to a transferee if the Certificate is
presented to the Paying Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence satisfactory to the Paying
7
Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate (other
than a certificate representing shares of Company Common Stock to be
canceled in accordance with Section 2.1(b)) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration contemplated by this Section 2.2. No
interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time
with respect to Parent Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the Parent Shares represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section
2.2(d) until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of unclaimed property, escheat and other
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole Parent
Shares issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share
of Parent Common Stock to which such holder is entitled pursuant to Section
2.2(d) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Parent
Shares and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Parent Shares.
(d) NO FRACTIONAL SECURITIES. In lieu of any such fractional
securities, each holder of Company Common Stock who would otherwise have
been entitled to a fraction of a share of Parent Common Stock upon surrender
of Certificates for exchange pursuant to this Article II will be paid an
amount in cash (without interest) equal to such holder's proportionate
interest in the net proceeds from the sale or sales in the open market by
the Exchange Agent, on behalf of all such holders, of the aggregate
fractional shares of Parent Common Stock issued pursuant to this Article II.
As soon as practicable following the Effective Time, the Exchange Agent
shall determine the excess of (i) the number of full shares of Parent Common
Stock delivered to the Exchange Agent by Parent over (ii) the aggregate
number of full shares of Parent Common Stock to be distributed to holders of
Company Common Stock (such excess being herein called the "Excess Parent
Common Shares"). The Exchange Agent, as agent for the former holders of
Company Common Stock, shall sell the Excess Parent Common Shares at the
prevailing prices on the NYSE. The sales of the Excess Parent Common Shares
by the Exchange Agent shall be executed on the NYSE through one or more
member firms of the NYSE and shall be executed in round lots to the extent
practicable. Parent shall pay all commissions, transfer taxes and other out-
of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Parent
Common Shares. Until the net proceeds of such sale have been distributed to
the former holders of Company Common Stock, the Exchange Agent will hold
8
such proceeds in trust for such former holders. As soon as practicable after
the determination of the amount of cash to be paid to former holders of
Company Common Stock in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such amounts to such
former holders.
(e) CLOSING OF TRANSFER BOOKS. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for certificates representing the appropriate number
of Parent Shares and the appropriate amount of cash as provided in Section
2.1 and in this Section 2.2.
(f) TERMINATION OF EXCHANGE AGENT. Any certificates representing
Parent Shares deposited with the Exchange Agent pursuant to Section 2.2(a)
and not exchanged within six months after the Effective Time pursuant to
this Section 2.2 shall be returned by the Exchange Agent to Parent, which
shall thereafter act as Exchange Agent. All funds held by the Exchange Agent
for payment to the holders of unsurrendered Certificates and unclaimed at
the end of one year from the Effective Time shall be returned to the
Surviving Corporation, after which time any holder of unsurrendered
Certificates shall look as a general creditor only to Parent for payment of
such funds to which such holder may be due, subject to applicable law.
(g) ESCHEAT. The Company shall not be liable to any person for
such shares or funds delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
-----------
THE CLOSING
-----------
Section 3.1 CLOSING. The closing of the Merger (the "Closing")
shall take place at the offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, at 10:00
a.m., Eastern time, on the second business day immediately following the
date on which the last of the conditions set forth in Article VIII hereof is
fulfilled or waived (other than conditions that by their nature are required
to be performed on the Closing Date, but subject to satisfaction of such
conditions), or at such other time and date and place as the Company and
Parent shall mutually agree (the "Closing Date").
9
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Except as set forth in
Section 4.1 of the Company Disclosure Schedule (as defined in Section 7.6),
the Company and each of its subsidiaries (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 corporate
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 to be so qualified and in
good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries taken
as a whole or on the consummation of this Agreement (any such material
adverse effect being hereafter referred to as a "Company Material Adverse
Effect"). As used in this Agreement, the term "subsidiary" of a person shall
mean any corporation or other entity (including partnerships and other
business associations) of which a majority of the outstanding capital stock
or other voting securities 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, directly or indirectly, by
such person.
Section 4.2 SUBSIDIARIES. Section 4.2 of the Company Disclosure
Schedule sets forth a description as of the date hereof, of all material and
certain other subsidiaries and joint ventures of the Company, including the
name of each such entity, the state or jurisdiction of its incorporation or
organization, the Company's interest therein and a brief description of the
principal line or lines of business conducted by each such entity. Except as
set forth in Section 4.2 of the Company Disclosure Schedule, none of the
Company's subsidiaries is a "public utility company," a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company within
the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public
Utility Holding Company Act of 1935, as amended (the "1935 Act"). Except as
set forth in Section 4.2 of the Company Disclosure Schedule, all of the
issued and outstanding shares of capital stock owned by the Company of each
Company subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned, directly or indirectly, by the Company
free and clear of any liens, claims, encumbrances, security interests,
equities, 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
10
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating any such
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, except for any of the
foregoing that could not reasonably be expected to have a Company Material
Adverse Effect. As used in this Agreement, the term "joint venture" of a
person shall mean any corporation or other entity (including partnerships
and other business associations) that is not a subsidiary of such person, in
which such person or one or more of its subsidiaries owns an equity
interest, other than equity interests held for passive investment purposes
which are less than 10% of any class of the outstanding voting securities or
equity of any such entity.
Section 4.3 CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock and 2,000,000
shares of preferred stock, without par value, of the Company ("Company
Preferred Stock"). As of the close of business on June 29, 1999, there were
issued and outstanding 8,648,029 shares of Company Common Stock and no
shares of Company Preferred Stock. As of the close of business on June 29,
1999, 64,600 shares of Company Common Stock were reserved for issuance upon
exercise of outstanding Company stock options. All of the issued and
outstanding shares of the capital stock of the Company are validly issued,
fully paid, nonassessable and free of preemptive rights. Except as set forth
in Section 4.3 of the Company Disclosure Schedule, as of the date hereof,
and except for the Company Rights Agreement, there are no outstanding
subscriptions, options, stock appreciation rights, 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 the Company or any of the subsidiaries of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of the capital stock of the Company, or obligating the Company to grant,
extend or enter into any such agreement or commitment.
Section 4.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
COMPLIANCE.
(a) AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to obtaining the Company
Shareholders' Approval (as defined in Section 4.13) and the 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 obtaining the applicable
Company Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the other signatories hereto, constitutes the
valid and binding obligations of the Company enforceable against it in
accordance with their terms.
11
(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 do not, and the consummation of the transactions
contemplated hereby will not, 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 ("Liens") upon any of the properties or assets of the
Company or any of its subsidiaries or any of its joint ventures (any such
violation, conflict, breach, default, right of termination, modification,
cancellation or acceleration, loss or creation, a "Violation" with respect
to the Company (such term when used in Article V having a correlative
meaning with respect to Parent)) pursuant to any provisions of (i) the
articles of organization, by-laws or similar governing documents of the
Company, any of its subsidiaries or any of its joint ventures, (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, any of its subsidiaries or any of its joint ventures, or any of
their respective properties or assets or (iii) subject to obtaining the
third-party consents or other approvals set forth in Section 4.4(b) 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, any of its subsidiaries or any of its joint
ventures is a party or by which it or any of its properties or assets may be
bound or affected, excluding from the foregoing clauses (i), (ii) and (iii)
such Violations as would not have, in the aggregate, a Company Material
Adverse Effect.
(c) STATUTORY APPROVALS. Except as described in Section 4.4(c)
of the Company Disclosure Schedule, 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, the failure to obtain, make or give which
would have, in the aggregate, a Company Material Adverse Effect (the
"Company Required Statutory Approvals"), it being understood that references
in this Agreement to "obtaining" such Company Required Statutory Approvals
shall mean making such declarations, filings or registrations, giving such
notices, obtaining such authorizations, consents or approvals and having
such waiting periods expire as are necessary to avoid a violation of law.
(d) COMPLIANCE. Except as set forth in Section 4.4(d) or Section
4.11 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 its subsidiaries nor any of its joint ventures is in
12
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 (including, without
limitation, any applicable Environmental Law, as defined in Section
4.11(f)(ii)) of any Governmental Authority except for violations that, in
the aggregate, do not have and are not reasonably likely to have a Material
Adverse Effect. Except as set forth in Section 4.4(d) of the Company
Disclosure Schedule or in Section 4.11 of the Company Disclosure Schedule,
the Company and its subsidiaries and joint ventures have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals necessary to conduct their respective businesses as currently
conducted in all respects, except those which the failure to obtain would,
in the aggregate, not have a Company Material Adverse Effect. Except as set
forth in Section 4.4(d) of the Company Disclosure Schedule, the Company and
each of its subsidiaries are 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 lapse of time or action by a third party, could result
in a default under, (i) its articles of organization or by-laws or (ii) any
material contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to which
it is a party or by which it is bound or to which any of its property is
subject, except for breaches, violations or defaults that, in the aggregate,
do not have and are not reasonably likely to have, a Company Material
Adverse Effect.
(e) Except as set forth in Section 4.4(e) of the Company
Disclosure Schedule, there is no "non-competition" or other similar
contract, commitment, agreement or understanding that restricts the ability
of the Company or any of its affiliates to conduct business in any
geographic area or that would reasonably be likely to restrict the Surviving
Corporation or any of its affiliates to conduct business in any geographic
area.
Section 4.5 REPORTS AND FINANCIAL STATEMTENTS. The filings required
to be made by the Company and its subsidiaries since January 1, 1996 under
the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the 1935
Act and applicable state public utility laws and regulations have been filed
with the Securities and Exchange Commission (the "SEC"), the Federal Energy
Regulatory Commission (the "FERC") 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 statute 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 by the
Company with the SEC since January 1, 1996 (as such documents have since the
time of their filing been amended, the "Company SEC Reports"). 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
13
circumstances under which they were made, not misleading. 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
generally accepted accounting principles applied on a consistent basis
("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 consolidated financial position of the Company
as of the dates thereof and the consolidated results of operations and cash
flows for the periods then ended. True, accurate and complete copies of the
articles of organization and by-laws of the Company, as in effect on the
date hereof, have been made available to Parent.
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, from December
31, 1998 the Company and each of its 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
would have or, insofar as reasonably can be foreseen, could have, a Company
Material Adverse Effect.
Section 4.7 LITIGATION. 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 or Section 4.11 of the Company Disclosure Schedule, (a) there
are no claims, suits, actions or proceedings, pending or threatened, nor are
there any investigations or reviews pending or threatened against, relating
to or affecting the Company or any of its subsidiaries, and (b) 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 its subsidiaries, except for
any of the foregoing under clauses (a) and (b) that individually or in the
aggregate would not reasonably be expected to have a Company Material
Adverse Effect.
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in (a) the registration statement on
Form S-4 to be filed with the SEC in connection with the issuance of shares
of Parent Common Stock in the Merger (the "Registration Statement") will, at
the time the Registration Statement 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 (b) the proxy statement, in definitive
form (the "Proxy Statement"), relating to the Company Special Meeting (as
defined below) shall not, at the dates mailed to shareholders and at the
time of the Company Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement, insofar as they relate to
the Company or any of its subsidiaries, shall comply as to form in all
14
material respects with the applicable provisions of the Securities Act and
the Exchange Act and the rules and regulations thereunder.
Section 4.9 TAX MATTERS. "Taxes," as used in this Agreement, means
any federal, state, county, local or foreign taxes, charges, fees, levies or
other assessments, including, without limitation, all net income, gross
income, sales and use, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipts, capital stock,
production, business and occupation, disability, employment, payroll,
license, estimated, stamp, custom duties, severance or withholding taxes or
charges imposed by any governmental entity, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes. "Tax
Return," as used in this Agreement, means a report, return or other written
information required to be supplied to a governmental entity with respect to
Taxes.
Except as disclosed in Section 4.9 of the Company Disclosure Schedule:
(a) FILING OF TIMELY TAX RETURNS. The Company and each of its
subsidiaries have duly filed (or there has been filed on its behalf) within
the time prescribed by law all material Tax Returns (including withholding
Tax Returns) required to be filed by each of them under applicable law. All
such Tax Returns were and are in all material respects true, complete and
correct.
(b) PAYMENT OF TAXES. The Company and each of its subsidiaries
have, within the time and in the manner prescribed by law, paid all material
Taxes (including withholding Taxes) that are currently due and payable
except for those contested in good faith and for which adequate reserves
have been taken.
(c) TAX RESERVES. All material Taxes payable by the Company and
its subsidiaries for all taxable periods and portions thereof through the
date of the most recent financial statements contained in the Company
Financial Statements filed prior to the date of this Agreement are properly
reflected in such financial statements in accordance with GAAP, and the
unpaid Taxes of the Company and its subsidiaries do not exceed the amount
shown therefor on such financial statements adjusted for the passage of time
through the Effective Time in accordance with past custom and practice of
the Company and its subsidiaries in filing their Tax Returns.
(d) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither the
Company nor any of its subsidiaries have 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. Neither the Company nor
any of its subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any material Taxes or material Tax Returns.
(f) EXPIRATION OF STATUTE OF LIMITATIONS. The statute of
15
limitations for the assessment of all material Taxes has expired for all
applicable material Tax Returns of the Company and each of its subsidiaries,
or those material Tax Returns have been examined by the appropriate taxing
authorities for all periods through the date hereof, and no deficiency for
any material Taxes has been proposed, asserted or assessed against the
Company or any of its subsidiaries that has not been resolved and paid in
full.
(g) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No material
claims, audits, disputes, controversies, examinations, investigations or
other proceedings are presently pending with regard to any Taxes or Tax
Returns of the Company or any of its subsidiaries.
(h) TAX RULINGS. Neither the Company nor any of its subsidiaries
has received a Tax Ruling (as defined below) or entered into a Closing
Agreement (as defined below) with any taxing authority that would have a
continuing adverse effect after the Closing Date. "Tax Ruling," as used in
this Agreement, shall mean a written ruling of a taxing authority relating
to Taxes. "Closing Agreement," as used in this Agreement, shall mean a
written and legally binding agreement with a taxing authority relating to
Taxes.
(i) AVAILABILITY OF TAX RETURNS. The Company has provided or
made available to Parent complete and accurate copies of (i) all Tax
Returns, and any amendments thereto, filed by the Company or any of its
subsidiaries since 1994, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by the Company or any of its
subsidiaries and (iii) any Closing Agreements entered into by the Company or
any of its subsidiaries with any taxing authority.
(j) TAX SHARING AGREEMENTS. Neither the Company nor any of its
subsidiaries is a party to any agreement, understanding or arrangement
relating to allocating or sharing of Taxes.
(k) LIABILITY FOR OTHERS. Neither the Company nor any of its
subsidiaries has any liability for any material Taxes of any person other
than the Company and its subsidiaries (i) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), (ii) as
a transferee or successor, (iii) by contract or (iv) otherwise.
(l) CODE SECTION 897. To the best knowledge of the Company after
due inquiry, no foreign person owns or has owned beneficially more than five
percent of the total fair market value of Company Common Stock during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(m) CODE SECTION 368(a). The Company has no knowledge of any
fact, nor has the Company taken any action that would, or would be
reasonably likely to, adversely affect the qualification of the Merger as a
reorganization described in Section 368(a) of the Code.
(n) CODE SECTION 355(e). Neither the Company nor any of its
subsidiaries has constituted a "distributing corporation" or a "controlled
16
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.
Section 4.10 EMPLOYEE MATTERS; ERISA. Except as set forth in the
appropriate subsection of Section 4.10 of the Company Disclosure Schedule:
(a) For purposes of this Section 4.10, the following terms have
the definitions set forth below:
(i) "Controlled Group Liability" means any and all
liabilities (a) under Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (b) as a result of a
failure to comply with the minimum funding requirements of Section 302
of ERISA or Section 412 of the Code, (c) under Section 4971 of the
Code, and (d) as a result of a failure to comply with the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B
of the Code, other than such liabilities that arise solely out of, or
relate solely to, the Employee Benefit Plans.
(ii) "ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is a member
of a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
(iii) An "Employee Benefit Plan" means any material
employee benefit plan, program, policy, practice, or other arrangement
providing benefits to any current or former employee, officer or
director of the Company or any of its subsidiaries or any beneficiary
or dependent thereof that is sponsored or maintained by the Company or
any of its subsidiaries or to which the Company or any of its
subsidiaries contributes or is obligated to contribute, whether or not
written, including without limitation any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, any employee pension
benefit plan within the meaning of Section 3(2) of ERISA (whether or
not such plan is subject to ERISA) and any material bonus, incentive,
deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan,
program or agreement.
(iv) A "Plan" means any Employee Benefit Plan other than a
Multiemployer Plan.
(v) A "Multiemployer Plan" means any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA.
(vi) "Withdrawal Liability" means liability to a
17
Multiemployer Plan as a result of a complete or partial withdrawal from
such Multiemployer Plan, as those terms are defined in Part I of
Subtitle E of Title IV of ERISA.
(b) Section 4.10(b) of the Company Disclosure Schedule includes a
complete list of all material Employee Benefit Plans and, with respect to
executive welfare benefit plans and nonqualified pension, savings and
deferred compensation plans, states the number of employees participating in
or covered by such plans.
(c) With respect to each Plan, the Company has delivered to
Parent a true, correct and complete copy of: (i) each writing constituting a
part of such Plan, including without limitation all material plan documents,
trust agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and accompanying
schedules, if any; (iii) the current summary plan description and any
material modifications thereto, if required to be furnished under ERISA;
(iv) the most recent annual financial report, if any; (v) the most recent
actuarial report, if any; and (vi) the most recent determination letter from
the Internal Revenue Service (the "IRS"), if any. Except as specifically
provided in the foregoing documents delivered to Parent, there are no
amendments to any Plan that have been adopted or approved nor has the
Company or any of its subsidiaries undertaken to make any such amendments or
to adopt or approve any new Plan.
(d) Section 4.10(b) of the Company Disclosure Schedule identifies
each Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("Qualified Plans"). The IRS has issued a
favorable determination letter with respect to each Qualified Plan and the
related trust that has not been revoked, and except as would not have a
Company Material Adverse Effect, there are no existing circumstances nor any
events that have occurred that could adversely affect the qualified status
of any Qualified Plan or the related trust. Section 4.10(b) of the Company
Disclosure Schedule identifies each Plan or related trust which is intended
to meet the requirements of Code Section 501(c)(9) (a "VEBA"), and except as
would not have a Company Material Adverse Effect, each such VEBA meets such
requirements and provides no disqualified benefits (as such term is defined
in Code Section 4976(b)).
(e) All material contributions required to be made to any Plan by
applicable law or regulation or by any Plan document or other contractual
undertaking, and all material premiums due or payable with respect to
insurance policies funding any Plan, for any period through the date hereof
have been timely made or paid in full or, to the extent not required to be
made or paid on or before the date hereof, have been fully reflected on the
Company Financial Statements. Each Plan that is an employee welfare benefit
plan under Section 3(1) of ERISA (i) is funded through an insurance company
contract or a contract with a health maintenance organization, (ii) is, or
is funded through, a VEBA identified as such in Section 4.10(b) of the
Company Disclosure Schedule, or (iii) is unfunded.
(f) Except as would not have a Company Material Adverse Effect,
18
with respect to each Employee Benefit Plan, the Company and its subsidiaries
have complied, and are now in compliance, with all provisions of ERISA, the
Code and all laws and regulations applicable to such Employee Benefit Plans
and each Plan has been administered in all material respects in accordance
with its terms. There is not now, nor do any circumstances exist that could
reasonably be expected to give rise to, any requirement for the posting of
security with respect to a Plan or the imposition of any lien on the assets
of the Company or any of its subsidiaries under ERISA or the Code. To the
knowledge of the Company, no non-exempt prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code) has occurred with
respect to any Plan.
(g) With respect to each Plan that is subject to Title IV of
ERISA, the minimum funding requirements of Section 302 of ERISA or Section
412 of the Code, or Section 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code
or Section 302 of ERISA, whether or not waived, in respect of any plan year
ended prior to the date hereof and for which the time for making
contributions in order to avoid occurring an accumulated funding deficiency
for such year has expired; (ii) the fair market value of the assets of each
such Plan that is a defined benefit plan equals or exceeds the actuarial
present value of the accumulated benefit obligation (as of the date of the
most recent actuarial report prepared for such Plan) under such Plan
(whether or not vested), based upon the actuarial assumptions set forth in
the most recent actuarial report for such Plan; (iii) no reportable event
within the meaning of Section 4043(c) of ERISA for which the 30-day notice
requirement has not been waived has occurred since December 31, 1993 in
respect of any such Plan which is a defined benefit Plan; (iv) all material
premiums to the Pension Benefit Guaranty Corporation ("PBGC") have been
timely paid in full; (v) no material liability (other than for premiums to
the PBGC and for the payment of benefits and contributions in the ordinary
course) under Title IV of ERISA has been or could reasonably be expected to
be incurred by the Company or any of its subsidiaries; and (vi) to the
knowledge of the Company, the PBGC has not instituted proceedings to
terminate any such Plan and no condition exists that presents a material
risk that such proceedings will be instituted or which would constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan.
(h) No Employee Benefit Plan is a Multiemployer Plan or a plan
that has two or more contributing sponsors at least two of which are not
under common control, within the meaning of Section 4063 of ERISA (a
"Multiple Employer Plan"). None of the Company and its subsidiaries nor any
of their respective ERISA Affiliates has, at any time during the last six
years, contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan. None of the Company and its subsidiaries nor
any ERISA Affiliates has incurred any Withdrawal Liability that has not been
satisfied in full.
(i) There does not now exist, nor do any circumstances exist that
could reasonably be expected to result in, any Controlled Group Liability
that would have a Company Material Adverse Effect following the Closing.
19
Without limiting the generality of the foregoing, neither the Company nor
any of its subsidiaries, nor any of their respective ERISA Affiliates, has
engaged in any transaction described in Section 4069 or Section 4204 or 4212
of ERISA since December 31, 1993.
(j) Except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA or applicable state
law, the Company and its subsidiaries have no material liability for life,
health, medical or other welfare benefits to former employees or
beneficiaries or dependents of former employees.
(k) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will (either
alone or in conjunction with any other event) result in, cause the
accelerated funding, vesting or delivery of, or increase the amount or value
of, any material payment or benefit to any employee, officer or director of
the Company or any of its subsidiaries. Section 4.10(k) of the Company
Disclosure Schedule sets forth the estimated amount that will be required to
be contributed to each trust listed thereon as a result of the consummation
of the transactions contemplated hereby.
(l) No labor organization or group of employees of the Company or
any of its subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification proceedings
or petitions seeking a representation proceeding presently pending or, to
the knowledge of the Company, threatened to be brought or filed, with the
National Labor Relations Board or any other labor relations tribunal or
authority. There are no organizing activities, strikes, work stoppages,
slowdowns, lockouts, material arbitrations or material grievances, or other
material labor disputes pending or, to the knowledge of the Company,
threatened against or involving the Company or any of its subsidiaries. Each
of the Company and its subsidiaries is in compliance in all material
respects with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health.
(m) There are no pending or, to the knowledge of the Company,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits or arbitrations which have been asserted or instituted, and there
is no set of circumstances which may reasonably give rise to a claim or
lawsuit, against the Plans, any fiduciaries thereof with respect to their
duties to the Plans or the assets of any of the trusts under any of the
Plans which could reasonably be expected to result in a Company Material
Adverse Effect.
(n) The Company, its subsidiaries and each member of their
respective business enterprise has complied with the Worker Adjustment and
Retraining Notification Act.
Section 4.11 ENVIRONMENTAL PROTECTION. Except as set forth in
Section 4.11 of the Company Disclosure Schedule or in the Company SEC
Reports filed prior to the date hereof:
20
(a) COMPLIANCE. Except where the failure to be in such
compliance would not in the aggregate have a Company Material Adverse
Effect, (i) the Company and each of its subsidiaries are in compliance with
all applicable Environmental Laws (as defined in Section 4.11(f)(ii)) and
(ii) neither the Company nor any of its subsidiaries has received any
communication from any Governmental Authority or any written communication
from any other person that alleges that the Company or any of its
subsidiaries is not in compliance with applicable Environmental Laws,.
(b) ENVIRONMENTAL PERMITS. The Company and each of its
subsidiaries has obtained or has applied for all environmental, health and
safety permits and governmental authorizations (collectively, the
"Environmental Permits") necessary for the construction of its facilities or
the conduct of its operations, and all such Environmental Permits are in
good standing or, where applicable, a renewal application has been timely
filed and is pending agency approval, and the Company and its subsidiaries
are in compliance with all terms and conditions of the Environmental
Permits, and the Company reasonably believes that any transfer, renewal or
reapplication for any Environmental Permit required as a result of the
Merger can be accomplished in the ordinary course of business, except where
the failure to obtain or to be in such compliance would not, in the
aggregate, have a Company Material Adverse Effect.
(c) ENVIRONMENTAL CLAIMS. There are no Environmental Claims (as
defined in Section 4.11(f)(i)) pending (i) against the Company or any of its
subsidiaries or joint ventures, or (ii) against any real or personal
property or operations that the Company or any of its subsidiaries owns,
leases or manages, in whole or in part that, if adversely determined, would
have, in the aggregate, a Company Material Adverse Effect.
(d) RELEASES. Except for Releases of Hazardous Materials the
liability for which would not have, in the aggregate, a Company Material
Adverse Effect, there have been no Releases (as defined in Section
4.11(f)(iv)) of any Hazardous Material (as defined in Section 4.11(f)(iii))
that would be reasonably likely to (i) form the basis of any Environmental
Claim against the Company or any of its subsidiaries, or (ii) to the
knowledge of the Company, cause, damage or diminution of value to any of the
operations or real properties owned, leased or managed, in whole or in part,
by Company or any of its subsidiaries.
(e) PREDECESSORS. The Company has no knowledge of any
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any
Environmental Claim, in each case against any person or entity (including,
without limitation, any predecessor of the Company or any of its
subsidiaries) whose liability the Company or any of its subsidiaries has or
may have retained or assumed either contractually or by operation of law or
against any real or personal property which the Company or any of its
subsidiaries formerly owned, leased or managed, in whole or in part, except
for Releases of Hazardous Materials the liability for which would not have,
in the aggregate, a Company Material Adverse Effect.
21
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including any
Governmental Authority) alleging potential liability (including,
without limitation, potential responsibility for or liability for
enforcement costs, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural-resources
damages, property damages, personal injuries, fines or penalties)
arising out of, based on or resulting from (A) the presence, or Release
or threatened Release into the environment, of any Hazardous Materials
at any location, whether or not owned, operated, leased or managed by
the Company, Parent or any of their respective subsidiaries or joint
ventures; or (B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence
or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local
laws, rules, ordinances and regulations relating to pollution, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation,
laws and regulations relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation, coal tar
residue, and transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls ("PCBs") in regulated
concentrations; and (B) any chemicals, materials or substances which
are now defined as or included in the definition of "hazardous
substances", "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "hazardous constituents" or words of similar
import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in
which the Parent, the Company or any of their subsidiaries or joint
ventures operates or has stored, treated or disposed of Hazardous
Materials.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
22
Section 4.12 REGULATION AS A UTILITY. Except as set forth in Section
4.12 of the Company Disclosure Schedule, neither the Company nor any
"associate company," "subsidiary company" or "affiliate" (as such terms are
defined in the ▇▇▇▇ ▇▇▇) of the Company is subject to regulation as (a) a
"holding company," a "public-utility company," a "subsidiary company" or an
"affiliate" of a "holding company," within the meaning of Sections 2(a)(7),
2(a)(5), 2(a)(8) and 2(a)(11), respectively, of the 1935 Act, (b) a "public
utility" under the Power Act, (c) a "natural-gas company" under the Natural
Gas Act or (d) a public utility or public service company (or similar
designation) by any state in the United States other than Connecticut or by
any foreign country.
Section 4.13 VOTE REQUIREDD The approval of the Merger by two-thirds
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 its
subsidiaries required to approve this Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.14 OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of PaineWebber Incorporated, to the effect that, as of June 29,
1999, the Merger Consideration is fair from a financial point of view to the
holders of Company Common Stock.
Section 4.15 OWNERSHIP OF PARENT COMMON STOCK. Except as set forth
in Section 4.15 of the Company Disclosure Schedule, the Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of
the Exchange Act) any shares of Parent Common Stock or Parent Preferred
Stock.
Section 4.16 TAKEOVER LAWS; RIGHTS PLANS. (a) The Company has taken
all action required to be taken by it in order to exempt this Agreement and
the transactions contemplated hereby from, and this Agreement and the
transactions contemplated hereby are exempt from, the requirements of any
"moratorium," "control share," "fair price" or other anti-takeover laws and
regulations (collectively, "Takeover Laws") of the State of Connecticut,
including Sections 33-841 and 33-844 of the CBCA.
(b) The Company has (i) duly entered into an appropriate
amendment to the Company Rights Agreement which amendment has been provided
to Parent and (ii) taken all other action necessary or appropriate so that
the entering into of this Agreement and the consummation of the transactions
contemplated hereby (including the Merger) do not and will not result in the
ability of any person to exercise any Company Rights under the Company
Rights Agreement or enable or require the Company Rights to separate from
the shares of Company Common Stock to which they are attached or to be
triggered or become exercisable, and the Company Rights Agreement will
expire immediately prior to the Effective Time, and the Company Rights
Agreement, as so amended, has not been further amended or modified except in
accordance herewith. Copies of such amendments to the Company Rights
Agreement have been previously provided to Parent.
23
(c) No "Distribution Date" or "Triggering Event" (as such terms
are defined in the Company Rights Agreement) has occurred.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent represents and warrants to the Company as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Except as set forth in
Section 5.1 of the Parent Disclosure Schedule (as defined in Section 7.6),
Parent and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate 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 to be so qualified and in good
standing will not, when taken together with all other such failures, have a
material adverse effect on the business, properties, financial condition or
results of operations of Parent and its subsidiaries taken as a whole or on
the consummation of this Agreement (any such material adverse effect being
hereafter referred to as a "Parent Material Adverse Effect").
Section 5.2 SUBSIDIARIES. Section 5.2 of the Parent Disclosure
Schedule sets forth a description as of the date hereof of all material
subsidiaries and joint ventures of Parent, including the name of each such
entity, the state or jurisdiction of its incorporation or organization,
Parent's interest therein, and a brief description of the principal line or
lines of business conducted by each such entity. As of the date hereof,
Parent is an exempt holding company under the 1935 Act, and, except as set
forth in Section 5.2 of the Parent Disclosure Schedule, none of the
subsidiaries of Parent is a "public utility company" within the meaning of
Section 2(a)(5) of the 1935 Act. Except as set forth in Section 5.2 of the
Parent Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each Parent subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned directly or
indirectly by Parent free and clear of any liens, claims, encumbrances,
security interests, equities, 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 Parent 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
24
commitment; except for any of the foregoing that could not reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.3 CAPITALIZATION. (a) Except as set forth in Section 5.3
of the Parent Disclosure Schedule the authorized capital stock of Parent
consists of 300,000,000 shares of Parent Common Stock and 10,000,000 shares
of preferred stock, par value $.01 per share, of Parent ("Parent Preferred
Stock"). As of the close of business on June 29, 1999, there were issued and
outstanding 115,902,728 shares of Parent Common Stock and no shares of
Parent Preferred Stock. All of the issued and outstanding shares of the
capital stock of Parent are, and will be, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section
5.3 of the Parent Disclosure Schedule, as of the date hereof, 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 Parent or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of Parent, or
obligating Parent to grant, extend or enter into any such agreement or
commitment.
(b) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, without par value ("Merger Sub Common Stock"). As of
the close of business on June 29, 1999, there were issued and outstanding
1,000 shares of Merger Sub Common Stock, all of which were owned by Parent.
Section 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
COMPLIANCE.
(a) AUTHORITY. Parent has all requisite corporate power and
authority to enter into this Agreement and, subject to the applicable Parent
Required Statutory Approvals (as defined in Section 5.4(c)), to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement, and the consummation by Parent of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Parent. This Agreement has been duly and validly executed and
delivered by Parent and, assuming the due authorization, execution and
delivery by the other signatories hereto, constitutes a valid and binding
obligation of Parent enforceable against it in accordance with its terms.
(b) NON-CONTRAVENTION. Except as set forth in Section 5.4(b) of
the Parent Disclosure Schedule, the execution and delivery of this Agreement
by Parent do not, and the consummation of the transactions contemplated
hereby will not, result in a Violation pursuant to any provisions of (i) the
articles of incorporation, by-laws or similar governing documents of Parent
or any of its subsidiaries or any of its joint ventures, (ii) subject to
obtaining the Parent Required Statutory Approvals (as defined in Section
5.4(c)) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental Authority
applicable to Parent or any of its subsidiaries or any of its joint ventures
or any of their respective properties or assets or (iii) subject to
25
obtaining the third-party consents or other approvals set forth in Section
5.4(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 its subsidiaries or any of
its joint ventures is a party or by which it or any of its properties or
assets may be bound or affected, excluding from the foregoing clauses (i),
(ii) and (iii) such Violations as would not have, in the aggregate, a Parent
Material Adverse Effect.
(c) STATUTORY APPROVALS. Except as described in Section 5.4(c)
of the Parent Disclosure Schedule, no declaration, filing or registration
with, or notice to or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, the failure to obtain, make or give which would have,
in the aggregate, a Parent Material Adverse Effect (the "Parent Required
Statutory Approvals"), it being understood that references in this Agreement
to "obtaining" such Parent Required Statutory Approvals shall mean making
such declarations, filings or registrations; giving such notices; obtaining
such authorizations, consents or approvals; and having such waiting periods
expire as are necessary to avoid a violation of law.
(d) COMPLIANCE. Except as set forth in Section 5.4(d) or Section
5.11 of the Parent Disclosure Schedule, or as disclosed in the Parent SEC
Reports (as defined in Section 5.5) filed prior to the date hereof, neither
Parent nor any of its subsidiaries nor any of its joint ventures 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, or order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable Environmental Law) of any Governmental
Authority, except for violations that, in the aggregate, do not have and are
not reasonably likely to have, a Parent Material Adverse Effect. Except as
set forth in Section 5.4(d) of the Parent Disclosure Schedule or in Section
5.11 of the Parent Disclosure Schedule, Parent and its subsidiaries and
joint ventures have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their respective
businesses as currently conducted in all respects, except those which the
failure to obtain would, in the aggregate, not have a Parent Material
Adverse Effect. Except as set forth in Section 5.4(d) of the Parent
Disclosure Schedule, Parent and each of its subsidiaries are 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 lapse of time or
action by a third party, could result in a default under, (i) its articles
of organization or by-laws or (ii) any material contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which it is a party or by which it is bound
or to which any of its property is subject; except for breaches, violations
or defaults that, in the aggregate, do not have and are not reasonably
likely to have, a Parent Material Adverse Effect.
Section 5.5 REPORTS AND FINANCIAL STATEMENTS. The filings required
26
to be made by Parent and its subsidiaries since January 1, 1996 under the
Securities Act, the Exchange Act, the 1935 Act, the Federal Power Act, as
amended (the "Power Act"), and applicable state public utility laws and
regulations have been filed with the SEC, the FERC or the appropriate state
public utilities commission, as the case may be, including all forms,
statements, reports, agreements 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 statute 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 by
Parent or its predecessor with the SEC since January 1, 1996 (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") have been prepared in
accordance with 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 consolidated financial position of
Parent as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended. True, accurate and
complete copies of the articles of incorporation and by-laws of Parent as in
effect on the date hereof, have been made available to the Company.
Section 5.6 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 5.6 of the Parent Disclosure Schedule, since December 31,
1998, Parent and each of its subsidiaries have as of the date hereof
conducted their businesses 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 5.7 LITIGATION. Except as disclosed in the Parent SEC
Reports filed prior to the date hereof or as set forth in Section 5.7 of the
Parent Disclosure Schedule (a) there are no claims, suits, actions or
proceedings, pending or threatened, nor are there any investigations or
reviews pending or threatened against, relating to or affecting Parent or
any of its subsidiaries, which would have a Parent Material Adverse Effect
and (b) 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 its subsidiaries,
except for such that would not reasonably be expected to have a Parent
Material Adverse Effect.
Section 5.8 REGISTRATION STATEMENT AND PROXY STATEMENT. (a) None of
the information supplied or to be supplied by or on behalf of Parent for
inclusion or incorporation by reference in the Registration Statement will,
27
at the time the Registration Statement 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 (b) the Proxy Statement shall not,
at the dates mailed to the Company shareholders and at the time of the
Company Special Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Registration Statement and the
Proxy Statement, insofar as they relate to Parent or any Parent subsidiary,
shall comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 5.9 REGULATION AS A UTILITY. Except as set forth in Section
5.9 of the Parent Disclosure Schedule, neither Parent nor any "subsidiary
company" or "affiliate" (as such terms are defined in the ▇▇▇▇ ▇▇▇) of
Parent is subject to regulation as (a) a "holding company," a "public-
utility company," a "subsidiary company" or an "affiliate" of a "holding
company," within the meaning of sections 2(a)(7), 2(a)(5), 2(a)(8) or
2(a)(11), respectively, of the 1935 Act, (b) a "public utility" under the
Power Act, (c) a "natural-gas company" under the Natural Gas Act, or (d) a
public utility or public service company (or similar designation) by any
state in the United States other than New York or by any foreign country.
Section 5.10 OWNERSHIP OF THE COMPANY COMMON STOCK. Except as set
forth in Section 5.10 of the Parent Disclosure Schedule, Parent does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of
the Exchange Act) any shares of Company Common Stock.
Section 5.11 ENVIRONMENTAL PROTECTION. (a) Except as would not, in
the aggregate, reasonably be expected to result in a Parent Material Adverse
Effect, and except for matters disclosed in Section 5.11(a) of the Parent
Disclosure Schedule or in the Parent SEC Reports, (i) Parent and its
subsidiaries are in compliance with all applicable Environmental Laws and
the terms and conditions of all applicable Environmental Permits, and
neither Parent nor any of its subsidiaries has received any written notice
from any person or Governmental Authority that alleges that Parent or any of
its subsidiaries is not in material compliance with applicable Environmental
Laws or the terms and conditions of all such Environmental Permits,
(ii) there are no Environmental Claims pending or threatened (A) against
Parent or any of its subsidiaries, (B) against any person or entity whose
liability for any Environmental Claim Parent or any of its subsidiaries has
or may have retained or assumed either contractually or by operation of law
or (C) against any real or personal property or operations that Parent or
any of its subsidiaries owns, leases or manages, in whole or in part, and
(iii) there has been no Release of Hazardous Materials that would be
reasonably likely to (A) form the basis of any Environmental Claim against
Parent or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim Parent or any of its subsidiaries has
or may have retained or assumed either contractually or by operation of law
or (B) cause damage or diminution of value to any of the operations or real
28
properties owned, leased or managed, in whole or in part, by Parent or any
of its subsidiaries.
(b) To the best knowledge of Parent, except as disclosed in the
Parent SEC Reports, there are no facts or circumstances that are likely to
require expenditures by Parent or any of its subsidiaries in order to comply
with currently applicable Environmental Laws, except for expenditures that
are not reasonably expected to have a Parent Material Adverse Effect.
Section 5.12 OPERATIONS OF NUCLEAR POWER PLANT. To the knowledge of
the Parent, the operation of the nuclear generation plant (the "Nuclear
Facility") currently partially owned by the Parent is being conducted in
substantial compliance with current laws and regulations governing nuclear
plant operations, except for such failures to comply as would not,
individually or in the aggregate, have a Parent Material Adverse Effect. To
the best of the Parent's knowledge and except as would not reasonably be
expected to have a Parent Material Adverse Effect, (a) the Nuclear Facility
maintains and is in substantial compliance with emergency evacuation plans
as required by the laws and regulations governing nuclear plant operations
and (b) as of the date of this Agreement, the storage of spent nuclear fuel
and the plans for the decommissioning of the Nuclear Facility substantially
conforms with the requirements of applicable law.
Section 5.13 CODE SECTION 368(a). Parent has no knowledge of any
fact, nor has Parent taken any action that would, or would be reasonably
likely to, adversely affect the qualification of the Merger as a
reorganization described in Section 368(a) of the Code.
ARTICLE VI
----------
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
Section 6.1 COVENANTS OF THE PARTIES. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, Parent
and the Company each agree as follows, each as to itself and to each of its
subsidiaries, except as expressly contemplated or permitted in this
Agreement, or to the extent the other parties hereto shall otherwise consent
in writing:
(a) ORDINARY COURSE OF BUSINESS. The Company shall, and shall
cause its 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
(i) preserve intact their present business organizations and goodwill,
preserve the goodwill and relationships with customers, suppliers and others
having business dealings with them, (ii) subject to prudent management of
workforce needs and ongoing programs currently in force, keep available the
services of their present officers and employees as a group, and
(iii) maintain and keep material properties and assets in as good repair and
29
condition as at present, subject to ordinary wear and tear, and maintain
supplies and inventories in quantities consistent with past practice.
(b) DIVIDENDS. The Company shall not, nor shall it permit any of
its subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any capital stock other than (A) dividends by a
wholly owned subsidiary to the Company or another wholly owned subsidiary,
(B) dividends by a less than wholly owned subsidiary consistent with past
practice, (C) regular dividends on Company Common Stock with usual record
and payment dates that do not exceed the current regular dividends on
Company Common Stock; (ii) split, combine or reclassify any capital stock or
the capital stock of any subsidiary or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of capital stock or the capital stock of any
subsidiary; or (iii) redeem, repurchase or otherwise acquire any shares of
capital stock or the capital stock of any subsidiary other than
(A) redemptions, repurchases and other acquisitions of shares of capital
stock in connection with the administration of employee benefit and dividend
reinvestment plans as in effect on the date hereof in the ordinary course of
the operation of such plans consistent with past practice, or
(B) intercompany acquisitions of capital stock. Prior to the Closing Date,
each of the parties agrees to coordinate dividend policies so as not to
adversely affect either party's shareholders because of the timing of
record, declaration or payment dates.
(c) ISSUANCE OF SECURITIES. Except as set forth in Section
6.1(c) of the Company Disclosure Schedule, the Company shall not, nor shall
it permit any of its subsidiaries to, issue, agree to issue, deliver, sell,
award, pledge, dispose of or otherwise encumber or authorize or propose the
issuance, delivery, sale, award, pledge, disposal or other encumbrance of,
any shares of their capital stock of any class or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire, any
such shares or convertible or exchangeable securities, other than pursuant
to currently outstanding stock options granted under Employee Benefit Plans
and as provided in the Company Rights Agreement.
(d) CHARTER DOCUMENTS; OTHER ACTIONS. Neither party shall, nor
shall any party permit any of its subsidiaries to, amend or propose to amend
its respective articles of organization, by-laws or regulations, or similar
organic documents or to take or fail to take any other action, which in any
such case would reasonably be expected to prevent or materially impede or
interfere with the Merger.
(e) ACQUISITIONS. Except as disclosed in Section 6.1(e) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its subsidiaries to, acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or business organization or
division thereof, or otherwise acquire or agree to acquire any material
amount of assets other than in the ordinary course of business.
30
(f) CAPITAL EXPENDITURES. Except as set forth in Section 6.1(f)
of the Company Disclosure Schedule, the Company shall not, nor shall it
permit any of its subsidiaries to, make capital expenditures in an aggregate
amount in excess of 110% of the amount budgeted by the Company or its
subsidiaries for capital expenditures as set forth in Section 6.1(f) of the
Company Disclosure Schedule.
(g) NO DISPOSITIONS. Except as set forth in Section 6.1(g) of
the Company Disclosure Schedule, the Company shall not, nor shall it permit
any of its subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, any of its respective assets, other than encumbrances or
dispositions in the ordinary course of business consistent with past
practice.
(h) INDEBTEDNESS. Except as set forth in Section 6.1(h) of the
Company Disclosure Schedule, 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 statement 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; (ii) arrangements between the Company and its
subsidiaries or among its subsidiaries; or (iii) in connection with the
refunding of existing indebtedness at a lower cost of funds.
(i) COMPENSATION, BENEFITS. Except as set forth in Section
6.1(i) of the Company Disclosure Schedule, as may be required by applicable
law or under existing Employee Benefit Plans or collective bargaining
agreements, as may be required to facilitate or obtain a determination
letter from the IRS that a plan is a Qualified Plan, or as expressly
contemplated by this Agreement, the Company shall not, nor shall it permit
any of its subsidiaries to, (i) enter into, adopt or amend or increase the
amount or accelerate the payment or vesting of any benefit or amount payable
under any Employee Benefit Plan, or otherwise increase the compensation or
benefits of any director, officer or other employee of such party or any of
its subsidiaries, except for normal increases in compensation and benefits,
or grants of new incentive compensation awards, or actions in the ordinary
course of business, that are consistent with the Company's past practice of
adjusting compensation and benefits to reflect the average compensation and
benefits as determined by general industry or market surveys; provided that
prior to implementing any such increases on the basis of such surveys the
Company shall advise Parent of its intention so to increase compensation or
benefits and of the basis therefor and shall otherwise consult with Parent
concerning such proposed increases, or (ii) enter into or amend any
employment, severance or special pay arrangement with respect to the
termination of employment or other similar contract, agreement or
arrangement with any director or officer or other employee other than with
respect to employees who are not officers of the Company in the ordinary
course of business consistent with current industry practice. This
subsection (i) is not intended to (A) restrict the Company or its
31
subsidiaries from granting promotions to officers or employees based upon
job performance or workplace requirements in the ordinary course of business
consistent with past practice, (B) restrict the Company's ability to make
available to employees the plans, benefits and arrangements that have
customarily and consistent with past practices been available to officers
and employees in the context of such merit-based promotion or (C) restrict
the Company from dealing with matters of employee retention in specific
areas of expertise through the use of specialized employment and benefit
plans designed for that specific purpose; PROVIDED, HOWEVER, that the result
of the use of such specialized employment or benefit plans shall not, in the
aggregate, result in payments in excess of $600,000.
(j) 1935 ACT. Except as set forth in Section 6.1(j) of the
Company Disclosure Schedule, and except as required or contemplated by this
Agreement, the Company shall not, nor shall it permit any of its
subsidiaries to, engage in any activities which would cause a change in its
status, or that of its subsidiaries, under the 1935 Act.
(k) ACCOUNTING. Except as set forth in Section 6.1(k) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its subsidiaries to, make any changes in their accounting methods, except
as required by law, rule, regulation or GAAP.
(l) TAX-FREE STATUS. No party shall, nor shall any party permit
any of its subsidiaries to, take any actions which would, or would be
reasonably likely to, adversely affect the status of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, and each
party hereto shall use all reasonable efforts to achieve such result.
(m) COOPERATION, NOTIFICATION. Each party shall, and shall cause
its subsidiaries to, (i) confer on a regular and frequent basis with one or
more representatives of the other party to discuss, subject to applicable
law, material operational matters and the general status of its ongoing
operations; (ii) promptly notify the other party of any significant changes
in its business, properties, assets, condition (financial or other), results
of operations or prospects; (iii) advise the other party of any change or
event which has had or, insofar as reasonably can be foreseen, is reasonably
likely to result in, in the case of the Company, a Company Material Adverse
Effect or, in the case of Parent, a Parent Material Adverse Effect; and
(iv) promptly provide the other party with copies of all filings made by
such party or any of its subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in
connection with this Agreement and the transactions contemplated hereby.
(n) THIRD-PARTY CONSENTS. The Company shall, and shall cause its
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. Parent shall, and shall cause its subsidiaries to,
use all commercially reasonable efforts to obtain all Parent Required
Consents. Parent shall promptly notify the Company of any failure or
32
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.
(o) NO BREACH, ETC. No party shall, nor shall any party permit
any of its 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.
(p) DISCHARGE OF LIABILITIES. The Company shall not pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice (which includes the payment of final
and unappealable judgments) or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the
Company included in the Company's reports filed with the SEC, or incurred in
the ordinary course of business consistent with past practice.
(q) CONTRACTS. Except as set forth in Section 6.1(q) of the
Company Disclosure Schedule, the Company shall not, except in the ordinary
course of business consistent with past practice, modify, amend, terminate,
renew or fail to use reasonable business efforts to renew any material
contract or agreement to which the Company or any of its subsidiaries is a
party or waive, release or assign any material rights or claims.
(r) INSURANCE. The Company shall, and shall cause its
subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are customary
for companies engaged in the electric and gas utility industry.
(s) PERMITS. The Company shall, and shall cause its subsidiaries
to, use reasonable efforts to maintain in effect all existing governmental
permits pursuant to which the Company or any of its subsidiaries operate.
(t) TAKEOVER LAWS. Neither party shall take any action that
would cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law, and each of them shall take all
necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable
Takeover Law, as now or hereafter in effect, including Sections 33-841
through 33-844 of the CBCA.
(u) NO RIGHTS TRIGGERED. The Company shall ensure that the
entering into of this Agreement and the consummation of the transactions
contemplated hereby and any other action or combination of actions, or any
other transactions contemplated hereby, do not and will not result, directly
or indirectly, in the grant of any rights to any person under any material
agreement (other than the employment agreements disclosed in Section 6.1(u)
33
of the Company Disclosure Schedule) to which it or any of its subsidiaries
is a party (including the Company Rights Agreement) or in the exercise of
any rights under the Company Rights Agreement or otherwise. In addition, the
Company shall not amend or waive any rights under the Company Rights
Agreement or otherwise in a manner that would materially and adversely
affect either party's ability to consummate the Merger or the economic
benefits of the Merger to either party.
(v) TAXES. Except as disclosed on Section 6.1(v) of the Company
Disclosure Schedule, the Company shall not, and shall cause its subsidiaries
not to, (A) make or rescind any express or deemed material election relating
to Taxes, (B) settle or compromise any material claim, audit, dispute,
controversy, examination, investigation or other proceeding relating to
Taxes, (C) materially change any of its methods of reporting income or
deductions for federal income Tax purposes, except as may be required by
applicable law, or (D) file any material Tax Return other than in a manner
consistent with past custom and practice.
Section 6.2 COVENANT OF THE COMPANY; ALTERNATIVE PROPOSALS. From
and after the date hereof, the Company agrees (a) that it will not, its
subsidiaries will not, and it will not authorize or permit any of its or its
subsidiaries' officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or
accountant retained by it or any of its subsidiaries or any of the
foregoing) to, directly or indirectly, encourage, initiate or solicit
(including by way of furnishing information) or take any other action to
facilitate knowingly any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders)
which constitutes or may reasonably be expected to lead to an Alternative
Proposal (as defined below) from any person or engage in any discussion or
negotiations concerning, or provide any non-public information or data to
make or implement, an Alternative Proposal; (b) that it will immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussions or negotiations with any parties
conducted heretofore with a view of formulating an Alternative Proposal; and
(c) that it will notify Parent orally and in writing of any such inquiry,
offer or proposals (including, without limitation, the terms and conditions
of any such proposal and the identity of the person making it), within one
business day of the receipt thereof, and that it shall keep Parent informed
of the status and details of any such inquiry, offer or proposal and shall
give Parent 48 hours' prior notice of any agreement to be entered into or of
the fact that it proposes to commence providing information to any person
making such inquiry, offer or proposal; provided however, that
notwithstanding any other provision hereof, the Company may (i) at any time
prior to the time at which the Company Shareholders' Approval shall have
been obtained engage in discussions or negotiations with a third party who
(without any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with Company or its
representatives after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party information concerning the
Company and its business, properties and assets if, and only to the extent
that, (A) (x) the third party has first made an Alternative Proposal that is
34
financially superior to the Merger and has demonstrated that any necessary
financing has been obtained, or in the reasonable judgment of the Company's
financial advisor is obtainable, and (y) the Board of Directors of the
Company shall conclude in good faith, after consultation with its financial
advisor and based upon the advice of outside counsel and such other matters
as the Board of Directors of the Company deems relevant, that failure to do
so would likely result in a breach of its fiduciary duties under applicable
law, and (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Company
(x) provides prompt written notice to Parent to the effect that it intends
to furnish information to, or intends to enter into discussions or
negotiations with, such person or entity, (y) provides the Parent a
reasonable opportunity to respond to the Alternative Proposal and
(z) receives from such person an executed confidentiality agreement in
reasonably customary form except that such confidentiality agreement shall
not prohibit such person from making an unsolicited Alternative Proposal,
and (ii) comply with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer and/or (iii) accept an Alternative
Proposal from a third party, provided the Company terminates this Agreement
pursuant to Section 9.1(e). "Alternative Proposal" shall mean any merger,
acquisition, consolidation, reorganization, share exchange, tender offer,
exchange offer or similar transaction involving the Company or any of the
Company's subsidiaries, or any proposal or offer to acquire in any manner,
directly or indirectly, a substantial equity interest in or a substantial
portion of the assets of the Company or any of the Company's subsidiaries.
Nothing herein shall prohibit a disposition permitted by Section 6.1(g)
hereof.
Section 6.3 EMPLOYMENT AGREEMENT. Parent, the Company and ▇▇.
▇▇▇▇▇▇▇▇▇ have entered into an employment agreement in the form attached
hereto as Exhibit A (the "Employment Agreement"), which will become
effective upon consummation of the Merger.
Section 6.4 ADDITIONAL STATUTORY APPROVALS. Parent agrees not to,
and it will not permit any subsidiary to, and will use reasonable best
efforts to cause any prospective subsidiary not to, be a party to any
transaction that would make it necessary for Parent or the Company to make
any declaration, filing or registration with, or notice to or authorization,
consent or approval of, any Governmental Authority in connection with the
consummation by Parent, Merger Sub or the Company of the transactions
contemplated by this Agreement, other than those set forth in Section 5.4(c)
of the Parent Disclosure Schedule or Section 4.4(c) of the Company
Disclosure Schedule, in either case, that would reasonably be expected to
prevent or materially impede, interfere with, or delay consummation of the
Merger or the transactions contemplated by this Agreement beyond the 18-
month anniversary of the date hereof.
35
ARTICLE VII
-----------
ADDITIONAL AGREEMENTS
---------------------
Section 7.1 ACCESS TO INFORMATION. Upon reasonable notice and during
normal business hours, each party shall, and shall cause its subsidiaries
to, afford to the officers, directors, employees, accountants, counsel,
investment bankers, financial advisors and other representatives of the
other (collectively, "Representatives") reasonable access, throughout the
period prior to the Effective Time, to all of its properties, books,
contracts, commitments and records (including, but not limited to, Tax
Returns) and, during such period, each party shall, and shall cause its
subsidiaries to, 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 Department of Justice,
the Federal Trade Commission or any other federal or state regulatory agency
or commission, 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. Each party shall, and shall cause its subsidiaries and
Representatives to, hold in strict confidence all Proprietary Information
(as defined in the Confidentiality Agreement) concerning the other parties
furnished to it in connection with the transactions contemplated by this
Agreement in accordance with the Confidentiality Agreement, dated as of
June 18, 1999, between the Company and Parent, as it may be amended from
time to time (the "Confidentiality Agreement").
36
Section 7.2 PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) PREPARATION AND FILING. The parties will prepare and file
with the SEC as soon as reasonably practicable after the date hereof the
Registration Statement and the Proxy Statement (together, the
"Proxy/Registration Statement"). 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 shares of Parent Common Stock 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 no party shall 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 it will not be, following the Merger, so
subject. Each of the parties hereto shall furnish all information concerning
itself which is required or customary for inclusion in the
Proxy/Registration Statement. The parties shall use reasonable efforts to
cause the shares of Parent Common Stock issuable in the Merger to be
approved for listing on the NYSE upon official notice of issuance. The
information provided by any party hereto for use in the Proxy/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 or
on behalf of any party hereto with respect to information supplied by any
other party for inclusion in the Proxy Statement/Registration Statement.
(b) LETTER OF THE COMPANY'S ACCOUNTANT. Following receipt by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the Company's independent auditor, of an appropriate
request from the Company pursuant to SAS No. 72, the Company shall use its
best efforts to cause to be delivered to Parent a letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP dated a date within two business days before the date of the
Proxy/Registration Statement, and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in
connection with registration statements similar to the Proxy/Registration
Statement.
(c) LETTER OF PARENT'S ACCOUNTANT. Following receipt by
PricewaterhouseCoopers LLP, Parent's independent auditor, of an appropriate
request from Parent pursuant to SAS No. 72, Parent shall use its best
efforts to cause to be delivered to the Company a letter of
PricewaterhouseCoopers LLP, dated a date within two business days before the
date of the Proxy/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 similar to the
Proxy/Registration Statement.
Section 7.3 REGULATORY MATTERS. Each party hereto shall cooperate
and use its best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
37
filings and other documents, and to use all commercially reasonable efforts
to obtain no later than the Initial Termination Date, as such date may be
extended pursuant to Section 9.1(b), all necessary permits, consents,
approvals and authorizations of all Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement,
including, without limitation, the Company Required Statutory Approvals and
the Parent Required Statutory Approvals.
Section 7.4 COMPANY SHAREHOLDERS' APPROVAL.
(a) COMPANY SPECIAL MEETING. Subject to the provisions of
Section 7.4(b), the Company shall, as soon as reasonably practicable after
the date hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "Company Special
Meeting") for the purpose of securing the Company Shareholders' Approval,
(ii) distribute to its shareholders the Proxy Statement in accordance with
applicable federal and state law and with its certificate of incorporation
and by-laws, (iii) subject to the fiduciary duties of its Board of
Directors, recommend to its shareholders the approval of this Agreement and
the transactions contemplated hereby and (iv) cooperate and consult with
Parent with respect to each of the foregoing matters.
(b) MEETING DATE. The Company Special Meeting for the purpose of
securing the Company Shareholders' Approval shall be held on such date as
the Company and Parent shall mutually determine.
38
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, from and
after the Effective Time, Parent and the Surviving Corporation shall, to the
fullest extent permitted by applicable law, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, an officer, director or
employee of the Company or any of its subsidiaries (each an "Indemnified
Party" and collectively, the "Indemnified Parties") against (i) all losses,
expenses (including reasonable attorney's fees and expenses), claims,
damages or liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or omissions
occurring at or prior to the Effective Time (and whether asserted or claimed
prior to, at or after the Effective Time) that are, in whole or in part,
based on or arising out of the fact that such person is or was a director,
officer or employee of the Company or a subsidiary of the Company (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 Effective
Time), (i) Parent shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to Parent, promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, (ii) any determination required to
be made with respect to whether an Indemnified Party's conduct complies with
the standards set forth in Section 33-756, 33-757 and 33-765 of the CBCA,
and the certificate of incorporation or by-laws shall be made by independent
counsel mutually acceptable to Parent and the Indemnified Party; provided,
however, that Parent 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 Effective
Time, Parent shall (i) cause to be maintained in effect policies of
directors' and officers' liability insurance for the benefit of those
persons who are currently covered by such policies of the Company on terms
no less favorable than the terms of such current insurance coverage or
(ii) provide tail coverage for such persons which provides coverage for a
period of six years for acts prior to the Effective Time on terms no less
favorable than the terms of such current insurance coverage; provided,
however, that Parent shall not be required to expend in any year an amount
in excess of 200% of the annual aggregate premiums currently paid by the
Company, for such insurance; and provided, further, that if the annual
premiums of such insurance coverage exceed such amount, Parent shall be
obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of Parent, for a cost not
39
exceeding such amount.
(c) SUCCESSORS. In the event Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in either such case, proper provisions shall
be made so that the successors and assigns of Parent shall assume the
obligations set forth in this Section 7.5.
(d) SURVIVAL OF INDEMNIFICATION. To the fullest extent permitted
by law, from and after the Effective Time, all rights to indemnification as
of the date hereof in favor of the employees, agents, directors and officers
of the Company, and its subsidiaries with respect to their activities as
such prior to the Effective Time, as provided in its respective articles of
organization and by-laws in effect on the date hereof, or otherwise in
effect on the date hereof, shall survive the Merger and shall continue in
full force and effect for a period of not less than six years from the
Effective Time.
(e) BENEFIT. The provisions of this Section 7.5 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.
Section 7.6 DISCLOSURE SCHEDULES. On the date hereof, (a) Parent
has delivered to the Company a schedule (the "Parent Disclosure Schedule"),
accompanied by a certificate signed by the Executive Vice President and
General Counsel of Parent stating the Parent Disclosure Schedule is being
delivered pursuant to this Section 7.6(a), and (b) the Company has delivered
to Parent a schedule (the "Company Disclosure Schedule"), accompanied by a
certificate signed by the Vice President, General Counsel and Secretary of
the Company stating the Company Disclosure Schedule is being delivered
pursuant to this Section 7.6(b). The Company Disclosure Schedule and the
Parent Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules constitute an integral part
of this Agreement and modify the respective representations, warranties,
covenants or agreements of the parties hereto contained herein to the extent
that such representations, warranties, covenants or agreements expressly
refer to the Disclosure Schedules. Anything to the contrary contained herein
or in the Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the Disclosure
Schedules shall be deemed to have been made on and as of the date hereof.
Section 7.7 PUBLIC ANNOUNCEMENTS. Subject to each party's
disclosure obligations imposed by law, the Company and Parent will cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or any
of the transactions contemplated hereby and shall not issue any public
announcement or statement with respect hereto without the consent of the
other party (which consent shall not be unreasonably withheld).
Section 7.8 RULE 145 AFFILIATES. Within 30 days after the date of
40
this Agreement, the Company shall identify in a letter to Parent all persons
who are, and to such person's best knowledge who will be at the Closing
Date, "affiliates" of the Company, as such term is used in Rule 145 under
the Securities Act. The Company shall use all reasonable efforts to cause
its affiliates (including any person who may be deemed to have become an
affiliate after the date of the letter referred to in the prior sentence) to
deliver to Parent on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit 7.8 (each, an "Affiliate
Agreement").
Section 7.9 CERTAIN EMPLOYEE AGREEMENTS. Subject to Section 7.10,
Parent and the Surviving Corporation and its subsidiaries shall honor,
without modification, all contracts, agreements, collective bargaining
agreements and commitments of the parties which apply to any current or
former employee or current or former director of the parties hereto;
provided, however, that the foregoing shall not prevent Parent or the
Surviving Corporation from enforcing such contracts, agreements, collective
bargaining agreements and commitments in accordance with their terms,
including, without limitation, any reserved right to amend, modify, suspend,
revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment. It is the present intention of Parent and the
Company that following the Effective Time, there will be no involuntary
reductions in force at the Surviving Corporation or its subsidiaries, but
that Parent, the Surviving Corporation and their respective subsidiaries
will continue Parent's and the Company's present strategy of achieving
workforce reductions through attrition; however, if any reductions in
workforce in respect of employees of Parent and its subsidiaries, including
the Surviving Corporation and its subsidiaries, become necessary, they shall
be made on a fair and equitable basis, in light of the circumstances and the
objectives to be achieved, giving consideration to previous work history,
job experience, qualifications, and business needs without regard to whether
employment prior to the Effective Time was with the Company or its
subsidiaries or Parent or its subsidiaries, and any employees whose
employment is terminated or jobs are eliminated by Parent, the Surviving
Corporation or any of their respective subsidiaries shall be entitled to
participate on a fair and equitable basis in the job opportunity and
employment placement programs offered by Parent, the Surviving Corporation
or any of their respective subsidiaries. Any workforce reductions carried
out following the Effective Time by Parent or the Surviving Corporation and
their respective subsidiaries shall be done in accordance with all
applicable collective bargaining agreements, and all laws and regulations
governing the employment relationship and termination thereof including,
without limitation, the Worker Adjustment and Retraining Notification Act
and regulations promulgated thereunder, and any comparable state or local
law.
Section 7.10 EMPLOYEE BENEFIT PLANS.
(a) Except as may be required by applicable law and except as
provided in Section 7.11(b) with respect to the Stock Option Plan and
Restricted Stock Plan, each Plan in effect on the date hereof (or as amended
or established in accordance with or as permitted by this Agreement) shall
41
be maintained in effect with respect to the employees, former employees,
directors or former directors of the Company and any of its subsidiaries who
are covered by such plans, programs, agreements or arrangements immediately
prior to the Effective Time until Parent determines otherwise on or after
the Effective Time, and Parent shall assume or cause the Surviving
Corporation to assume as of the Effective Time each Plan maintained by the
Company immediately prior to the Effective Time and perform such plan,
program, agreement or arrangement in the same manner and to the same extent
that the Company would be required to perform thereunder; PROVIDED, HOWEVER,
that nothing herein contained shall limit any reserved right contained in
any such Plan to amend, modify, suspend, revoke or terminate any such plan,
program, agreement or arrangement; PROVIDED, FURTHER, that Parent or its
subsidiaries shall provide to each employee of the Company and any of its
subsidiaries who was covered by Plans immediately prior to the Effective
Time and who is not covered by a collective bargaining agreement (a "Covered
Company Employee") for a period of no less than 18 months following the
Effective Time, employer-provided benefits under Qualified Plans,
supplemental retirement benefit and deferred compensation plans which are
not Qualified Plans and welfare plans that are no less favorable in the
aggregate than those provided to the employee immediately prior to the
Effective Time. Without limiting the foregoing, each Covered Company
Employee who is a participant in any Plan shall receive credit for purposes
of eligibility to participate, vesting and eligibility to receive benefits
(but specifically excluding for benefit accrual purposes) under any
replacement benefit plan of Parent or any of its subsidiaries or affiliates
in which such employee becomes a participant for service credited for the
corresponding purpose under any such Plan; PROVIDED, HOWEVER, that such
crediting of service shall not operate to cause any such plan or agreement
to fail to comply with the applicable provisions of the Code and ERISA. No
provision contained in this Section 7.10 shall be deemed to constitute an
employment contract between Parent or any of its subsidiaries and any
individual, or a waiver of Parent's or any of its subsidiaries' right to
discharge any employee at any time, with or without cause. Notwithstanding
the foregoing, but subject to Section 7.10(b), Parent acknowledges that each
Covered Company Employee who is a participant in the Connecticut Natural Gas
Corporation Officers' Retirement Plan (the "SERP") as of the date hereof
shall continue to accrue benefits after the Effective Time under terms at
least as favorable as the terms of the SERP in effect on the date of this
Agreement, taking into account service and compensation earned while
employed by Parent and its subsidiaries after the Effective Time.
(b) The Company shall take all necessary actions so that,
effective no later than immediately before the Effective Time, (i) each of
the SERP, the Connecticut Natural Gas Corporation Officers Deferred
Compensation Plan, the Connecticut Natural Gas Corporation Executive Life
Insurance Plan and all other executive benefit plans and programs of the
Company and its subsidiaries shall be amended to the extent necessary so
that any provisions therein that prohibit or limit the amendment or
termination thereof following a change of control do not apply to
individuals who are not participants therein as of the date of this
Agreement and (ii) subject to applicable law and the provisions of any
applicable collective bargaining agreement, each Qualified Plan shall be
42
amended to the extent necessary so that any provisions therein that call for
the waiver or elimination of vesting requirements upon or following a change
in control shall apply only to individuals who are participants therein
immediately before the Effective Time.
Section 7.11 COMPANY STOCK AND OTHER PLANS.
(a) With respect to each Plan that provides for benefits in the
form of Company Common Stock ("Company Stock Plans"), the Company and Parent
shall take all corporate action necessary or appropriate to (i) provide for
the issuance or purchase in the open market of Parent Common Stock rather
than Company Common Stock, pursuant thereto, and otherwise to amend such
Company Stock Plans to reflect this Agreement and the Merger, (ii) obtain
shareholder or board of director approval with respect to such Company Stock
Plans to the extent such approval is required for purposes of the Code or
other applicable law, or to enable such Company Stock Plans to comply with
Rule 16b-3 promulgated under the Exchange Act, (iii) reserve for issuance
under such Company Stock Plans or otherwise provide a sufficient number of
shares of Parent Common Stock for delivery upon payment of benefits, grant
of awards or exercise of options under such Company Stock Plans and (iv) as
soon as practicable after the Effective Time, file registration statements
on Form S-8 or amendments on such forms to the Form S-4 Registration
Statement, as the case may be (or any successor or other appropriate forms),
with respect to the shares of Parent Common Stock subject to such Company
Stock Plans to the extent such registration statement is required under
applicable law, and Parent shall use its best efforts to maintain the
effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as such benefits
and grants remain payable and such options remain outstanding. With respect
to those individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, the Company
shall administer the Company Stock Plans, where applicable, in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act.
(b) The Company and its subsidiaries and the Parent and its
subsidiaries, including the Surviving Corporation and its subsidiaries,
shall take all actions necessary to provide that upon the Effective Time (i)
each outstanding option to purchase Company Common Stock granted under the
Company's 1999 Stock Option Plan (the "Stock Option Plan"), whether or not
then vested and exercisable, shall be canceled in exchange for a cash
payment equal to (A) the excess of $41.00 over the exercise price thereof
times (B) the number of shares of Company Common Stock subject thereto, less
applicable tax withholding, and (ii) each outstanding restricted share of
Company Common Stock granted under the Connecticut Natural Gas Corporation
Executive Restricted Stock Plan (the "Restricted Stock Plan") shall become
fully vested as provided in and subject to the terms of the award agreements
relating thereto and simultaneously converted for Cash Consideration or
Stock Consideration payable to the holder thereof as provided in Section 2.1
hereof. The Company and its subsidiaries shall take all actions needed to
terminate the Stock Option Plan and Restricted Stock Plan as of the
Effective Time, subject, however, to the payments required under the
preceding sentence.
43
(c) Each employee of the Company who is a participant in the
Company's Annual Incentive Plan and who is not a party to a Change of
Control Employment Agreement with the Company is listed on Schedule 7.11(c)
hereto (such employees, the "Schedule 7.11(c) Employees"). Following the
Effective Time, each Schedule 7.11(c) Employee shall be entitled to
participate in an annual incentive plan of Parent or any of its subsidiaries
for the portion of the fiscal year of Parent or the applicable subsidiary in
which the Effective Time occurs that follows the Effective Time (the "Post-
Merger Period"), under which (i) the Schedule 7.11(c) Employee's award
opportunity for the Post-Merger Period shall equal the percentage of the
Schedule 7.11(c) Employee's base salary set forth opposite the Schedule
7.11(c) Employee's name on Schedule 7.11(c), and (ii) the amount of such
award opportunity that is earned shall be pro-rated based upon the number of
days occurring in such fiscal year that occur during the Post-Merger Period.
Section 7.12 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, as well as the filing fee relating thereto,
shall be shared equally by the Company and Parent.
Section 7.13 FURTHER ASSURANCES. Each party will, and will 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.
Section 7.14 CORPORATE OFFICES. At and subsequent to the Effective
Time, the corporate headquarters of the Surviving Corporation shall be
located in Hartford, Connecticut. At and subsequent to the Effective Time,
the corporate headquarters of XENERGY Enterprises, Inc. shall be located in
Connecticut.
Section 7.15 PARENT BOARD OF DIRECTORS. At the Effective Time, the
Board of Directors of Parent shall increase by one the number of directors
on the Board of Directors of Parent and shall thereupon elect as a director
a non-employee director of the Company designated by the Company and
reasonably acceptable to Parent.
Section 7.16 COMMUNITY INVOLVEMENT. After the Effective Time, Parent
will, or will cause the Surviving Corporation to make at least $500,000 per
year in charitable contributions to the communities served by the Surviving
Corporation and otherwise maintain a substantial level of involvement in
community activities in the State of Connecticut that is similar to, or
greater than, the level of community development and related activities
carried on by the Company.
Section 7.17 ADVISORY BOARD. At the Effective Time, there shall be
established an advisory board to the Surviving Corporation ("Advisory
Board"), which shall be comprised of the persons who were directors of the
Company immediately prior to the Effective Time. The Advisory Board shall
meet no less frequently than quarterly and shall provide advice to the board
of directors of the Surviving Corporation with respect to such issues as the
44
board of directors of the Surviving Corporation may from time to time
request, including but not limited to community relations, customer service,
economic development, employee development and relations and such other
matters of community interest as may be appropriate. The members of the
Advisory Board, who shall serve at the discretion of the Surviving
Corporation, shall receive remuneration for their services equivalent to the
remuneration currently provided to non-employee directors of the Company.
Section 7.18 TAX-FREE STATUS. No party shall, nor shall any party
permit any of its subsidiaries to, take any actions which would, or would be
reasonably likely to, adversely affect the status of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, and each
party hereto shall use all reasonable efforts to achieve such result.
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 Merger 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 in writing pursuant to Section 9.5 by the
joint action of the parties hereto:
(a) SHAREHOLDER APPROVAL. The Company Shareholders' Approval
shall have been obtained.
(b) NO INJUNCTION. No temporary restraining order or preliminary
or permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and be
continuing in effect, and the Merger and the other transactions contemplated
hereby shall not have been prohibited under any applicable federal or state
law or regulation.
(c) REGISTRATION STATEMENT. The Registration Statement shall
have become effective in accordance with the provisions of the Securities
Act, and no stop order suspending such effectiveness shall have been issued
and remain in effect.
(d) LISTING OF SHARES. The shares of Parent Common Stock
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. The Company Required Statutory
Approvals and the Parent Required Statutory Approvals shall have been
obtained at or prior to the Effective Time, such approvals shall have become
Final Orders (as defined below) and such Final Orders shall not impose terms
or conditions which, in the aggregate, would have, or insofar as reasonably
45
can be foreseen, could have, a Company Material Adverse Effect or a Parent
Material Adverse Effect; provided, however, that a requirement that Parent
become a registered holding company pursuant to Section 5 of the 1935 Act as
a result of the Merger shall not constitute a term or condition which could
have a "material adverse effect" within the meaning of this Section 8.1(e)
of the Agreement. In addition, the inclusion of a condition or requirement
of the Securities and Exchange Commission's approval of the Merger under the
1935 Act that Parent divest its ownership of New York State Electric & Gas
Corporation, a New York corporation and wholly owned subsidiary of Parent,
shall constitute a term or condition which could have a "material adverse
effect" within the meaning of this Section 8.1(e) of the Agreement. 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 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.
Section 8.2 CONDITIONS TO OBLIGATION OF PARENT TO EFFECT THE MERGER.
The obligation of Parent 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 Parent in writing pursuant to Section
9.5:
(a) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company (and
its appropriate subsidiaries) shall have performed in all material respects
its agreements and covenants contained in Sections 6.1 and 6.2 and shall
have performed in all material respects its other agreements and covenants
contained in or contemplated by this Agreement to be performed by it at or
prior to the 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 other
than the date hereof or the Closing Date, which need only be true and
correct as of such date or time) except in each of cases (i) and (ii) for
such failures of representations or warranties to be true and correct
(without regard to any materiality qualifications contained therein) which,
individually and in the aggregate, would not be reasonably likely to result
in a Company Material Adverse Effect.
(c) CLOSING CERTIFICATES. Parent 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) NO COMPANY MATERIAL ADVERSE EFFECT. No Company Material
Adverse Effect shall have occurred, and there shall exist no fact or
46
circumstance other than facts and circumstances described in Section 8.2(d)
of the Company Disclosure Schedule or the Company SEC Reports filed prior to
the date hereof which is reasonably likely to have a Company Material
Adverse Effect.
(e) COMPANY REQUIRED CONSENTS. The Company Required Consents the
failure of which to obtain would have a Company Material Adverse Effect
shall have been obtained.
(f) AFFILIATE AGREEMENTS. Parent shall have received Affiliate
Agreements, duly executed by each "affiliate" of the Company, substantially
in the form of Exhibit 7.8, as provided in Section 7.8.
(g) TAX OPINION. Parent shall have received an opinion of
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇ to the effect that the Merger will be treated
as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇ may receive and rely
upon representations contained in certificates of Parent, the Company and
others, in each case in form and substance reasonably acceptable to such
counsel.
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. Parent (and its
appropriate subsidiaries) shall have performed in all material respects its
agreements and covenants contained in Section 6.1 and shall have performed
in all material respects its other agreements and covenants contained in or
contemplated by this Agreement to be performed by it at or prior to the
Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent 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 other than the date
hereof or the Closing Date, which need only be true and correct as of such
date or time) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without regard to any
materiality qualifications contained therein) which, individually and in the
aggregate, would not be reasonably likely to result in a Parent Material
Adverse Effect.
(c) CLOSING CERTIFICATES. The Company shall have received a
certificate signed by the Executive Vice President and General Counsel of
Parent, dated the Closing Date, to the effect 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.
47
(d) NO PARENT MATERIAL ADVERSE EFFECT. No Parent Material
Adverse Effect shall have occurred, and there shall exist no fact or
circumstance other than facts and circumstances described in the Parent SEC
Reports filed prior to the date hereof which is reasonably likely to have a
Parent Material Adverse Effect.
(e) PARENT REQUIRED CONSENTS. The Parent Required Consents the
failure of which to obtain would have a Parent Material Adverse Effect shall
have been obtained.
(f) TAX OPINION. The Company shall have received an opinion from
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ to the effect that the Merger will be treated as
a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇, may receive and rely
upon representations contained in certificates of Parent, the Company and
others, in each case in form and substance reasonably acceptable to such
counsel.
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 the
Company and Parent;
(b) by any party hereto, by written notice to the other parties,
if the Effective Time shall not have occurred on or before the date that is
12 months from the date hereof (the "Initial Termination Date"); provided,
however, that if on the Initial Termination Date the conditions to the
Closing set forth in Section 8.1(e) shall not have been fulfilled but all
other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Initial Termination Date shall be extended to the
18-month anniversary of the date hereof; and provided, further, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement or whose breach of any agreement or covenant has been the cause
of, or resulted directly or indirectly in, the failure of the Effective Time
to occur on or before the Initial Termination Date or as it may be so
extended.
(c) by any party hereto, by written notice to the other parties,
if the Company Shareholders' Approval shall not have been obtained at a duly
held Company Special Meeting, including any adjournments thereof by the
Initial Termination Date;
48
(d) by any party hereto, 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 any party hereto 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;
(e) by the Company prior to the time at which the Company
Shareholders' Approval shall have been obtained, upon five days' prior
notice to Parent, if the Company is not in breach of this Agreement and, as
a result of an Alternative Proposal, the Board of Directors of the Company
determines in good faith, that (i) the Alternative Proposal is financially
superior to the Merger and the third party making the Alternative Proposal
has demonstrated that any necessary financing has been obtained, or in the
reasonable judgment of the Company's financial advisor such financing is
obtainable, and (ii) after consultation with its financial advisor and based
upon the advice of outside counsel and such other matters as the Board of
Directors of the Company deems relevant, after considering applicable
provisions of state law and after giving effect to all concessions which may
be offered by the other party pursuant to the proviso below, that failure to
do so would likely result in a breach of its fiduciary duties under
applicable law; provided, however, that prior to any such termination, the
Company shall, and shall cause its respective financial and legal advisors
to, negotiate with Parent to make such adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated herein;
(f) by the Company, by written notice to Parent, if (i) there
exist breaches of the representations and warranties of Parent made herein
as of the date hereof which breaches, individually or in the aggregate,
would or would be reasonably likely to result in a Parent Material Adverse
Effect, and such breaches shall not have been remedied within 20 days after
receipt by Parent of notice in writing from the Company, specifying the
nature of such breaches and requesting that they be remedied, or (ii) Parent
(or its appropriate subsidiaries) shall have failed to perform and comply
with, in all material respects, its agreements and covenants hereunder, and
such failure to perform or comply shall not have been remedied within 20
days after receipt by Parent of notice in writing from the Company,
specifying the nature of such failure and requesting that it be remedied; or
(g) by Parent, by written notice to the Company, if (i) there
exist material breaches of the representations and warranties of the Company
made herein as of the date hereof which breaches, individually or in the
aggregate, would or would be reasonably likely to result in a Company
Material Adverse Effect, and such breaches shall not have been remedied
within 20 days after receipt by the Company of notice in writing from
Parent, specifying the nature of such breaches and requesting that they be
remedied, (ii) the Company (or its appropriate subsidiaries) shall not have
performed and complied with its agreements and covenants contained in
Sections 6.1(b) and 6.1(c) or shall have failed to perform and comply with,
in all material respects, its other agreements and covenants hereunder, and
49
such failure to perform or comply shall not have been remedied within 20
days after receipt by the Company of notice in writing from Parent,
specifying the nature of such failure and requesting that it be remedied; or
(iii) the Board of Directors of the Company or any committee thereof
(A) shall withdraw or modify in any manner adverse to Parent its approval or
recommendation of this Agreement or the transactions contemplated herein,
(B) shall fail to reaffirm such approval or recommendation upon Parent's
request within two days of such request, (C) shall approve or recommend any
acquisition of the Company or a material portion of its assets or any tender
offer for the shares of capital stock of the Company, in each case by a
party other than Parent or any of its affiliates or (D) shall resolve to
take any of the actions specified in clause (A), (B) or (C).
Section 9.2 EFFECT OF TERMINATION. Subject to Section 10.1(b), 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 their respective officers or directors hereunder,
except that Section 7.12, Section 9.3, the agreement contained in the last
sentence of Section 7.1, Section 10.8 and Section 10.9 shall survive the
termination.
Section 9.3 TERMINATION FEE; EXPENSES.
(a) TERMINATION FEE UPON BREACH OR WITHDRAWAL OF APPROVAL. If
this Agreement is terminated at such time that this Agreement is terminable
pursuant to one (but not both) of (x) Section 9.1(f)(i) or (ii) or
(y) Section 9.1(g)(i) or (ii), then: (i) the breaching party shall promptly
(but not later than five business days after receipt of notice from the non-
breaching party) pay to the non-breaching party in cash an amount equal to
all documented out-of-pocket expenses and fees incurred by the non-breaching
party (including, without limitation, fees and expenses payable to all
legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Merger or the
transactions contemplated by this Agreement) not in excess of $4 million
("Expenses"); provided, however, that, if this Agreement is terminated by a
party as a result of a willful breach by the other party, the non-breaching
party may pursue any remedies available to it at law or in equity and shall,
in addition to its out-of-pocket expenses (which shall be paid as specified
above and shall not be limited to $4 million), be entitled to retain such
additional amounts as such non-breaching party may be entitled to receive at
law or in equity.
(b) The Company shall pay Parent a fee of $14 million
("Termination Fee") plus Expenses, upon the termination of this Agreement by
Parent or the Company pursuant to Section 9.1(c) or the Company pursuant to
Section 9.1(e) or by Parent pursuant to Section 9.1(g)(iii); provided,
however, that in the event of termination under either Section 9.1(c) or
Section 9.1(g)(iii), no payment of the Termination Fee or Expenses shall be
required unless and until within two years of such termination the Company
enters into a definitive agreement to consummate or consummates an
Alternative Proposal, and, in the case of a termination pursuant to Section
9.1(c), there shall have been made and not withdrawn at the time of the
50
Company Special Meeting an Alternative Proposal and, in the case of a
termination pursuant to Section 9.1(g)(iii), there shall have been made and
not withdrawn at the time of such termination an Alternative Proposal.
(c) LIQUIDATED DAMAGES; PROMPT PAYMENT. The parties agree that
the agreements contained in this Section 9.3 are an integral part of the
transactions contemplated by the Agreement and constitute liquidated damages
and not a penalty. If one party fails to pay promptly to the other any fee
or expenses due hereunder, 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 Chase Manhattan Bank, 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 approval
hereof by the shareholders of the Company and prior to the Effective Time,
but after such approvals, no such amendment shall (a) alter or change the
amount or kind of shares, rights or any of the proceedings of the treatment
of shares under Article II, or (b) alter or change any of the terms and
conditions of this Agreement if any of the alterations or changes, alone or
in the aggregate, would materially adversely affect the rights of holders of
Company capital stock, except for alterations or changes that could
otherwise be adopted by the Board of Directors of the Company, without the
further approval of such shareholders. 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 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 on behalf of such party.
ARTICLE X
---------
GENERAL PROVISIONS
------------------
Section 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND WARRANTIES.
(a) All representations, warranties and agreements in this Agreement shall
not survive the Merger, except as otherwise provided in this Agreement and
except for the agreements contained in this Section 10.1, in Articles I and
II and in Sections 7.5, 7.11, 10.7, 10.8 and 10.9.
51
(b) No party may assert a claim for breach of any representation
or warranty contained in this Agreement (whether by direct claim or
counterclaim) except in connection with the cancellation of this Agreement
pursuant to Section 9.1(f)(i) or Section 9.1(g)(i) (or pursuant to any other
subsection of Section 9.1, if the terminating party would have been entitled
to terminate this Agreement pursuant to Section 9.1(f)(i) or Section
9.1(g)(i)).
Section 10.2 BROKERS. The Company represents and warrants that,
except for PaineWebber Incorporated whose fees have been disclosed to Parent
prior to the date hereof, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. Parent represents and
warrants that, except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated whose fees have
been disclosed to the Company prior to the date hereof, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.
Section 10.3 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if (a) delivered personally,
(b) sent by reputable overnight courier service, (c) telecopied (which is
confirmed) or (d) five days after being mailed by registered or certified
mail (return receipt requested) 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:
CTG Resources, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel and Secretary
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to Parent or Merger Sub, to:
Energy East Corporation
One Canterbury Green
52
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Executive Vice President and General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.4 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 Employment Agreement and the Confidentiality
Agreement; (b) shall not be assigned by operation of law or otherwise; and
(c) 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 and except to the extent the provisions of this
Agreement (including the documents or instruments referred to herein) are
expressly governed by or derive their authority from the CBCA.
Section 10.5 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."
Section 10.6 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 10.7 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, except for
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 10.8 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. Each party to
53
this Agreement waives, to the fullest extent permitted by applicable law,
(a) any right it may have to a trial by jury in respect of any action, suit
or proceeding arising out of this Agreement and (b) without limiting the
effect of Section 9.3, any right it may have, other than in the case of a
willful breach, to receive damages from any other party based on any theory
of liability for any special, indirect, consequential (including lost
profits) or punitive damages.
Section 10.9 ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court
of the United States located in the State of New York or in New York state
court, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in
the State of New York or any New York state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny such personal
jurisdiction by motion or other request for leave from any such court and
(c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other
than a federal or state court sitting in the State of New York.
[Signature Page Follows]
54
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
CTG RESOURCES, INC.
By: S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
ENERGY EAST CORPORATION
By: S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
General Counsel
OAK MERGER CO.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Secretary, Treasurer and
Vice President
55
EXHIBIT A
---------
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of June 29,
1999 (the "Agreement"), by and among Energy East Corporation, a New York
corporation ("Parent"), CTG Resources, Inc., a Connecticut corporation or
its successor (the "Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Executive"),
amends and restates as of the Effective Time (as defined below) that certain
Amended and Restated Employment Agreement dated April 27, 1999, by and
between the Company and the Executive (the "Prior Agreement").
The Executive is currently serving as the President and Chief Executive
Officer of the Company, and the Company, Parent and Oak Merger Co. have
entered into a Merger Agreement (as defined below) which contemplates the
merger of the Company with and into Oak Merger Co. to be effective as of the
Effective Time.
The Board of Directors of Parent (the "Board") and the Board of
Directors of the Company (the "Company Board") desire to provide for the
employment of the Executive as a member of the management of the Company,
XENERGY Enterprises, Inc. ("XENERGY") and certain of their subsidiaries and
affiliates, from and after the Effective Time, and the Executive is willing
to commit himself to serve the Company, XENERGY and their subsidiaries and
affiliates, on the terms and conditions herein provided.
In order to effect the foregoing, Parent, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set
forth below. Accordingly, in consideration of the premises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement, unless otherwise defined herein, are provided in the last Section
hereof.
2. EMPLOYMENT. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to serve Parent, the Company, XENERGY and
their subsidiaries and affiliates, on the terms and conditions set forth
herein, during the term of this Agreement (the "Term".)
3. TERM OF AGREEMENT. The Term will commence on the Effective Time
of the Merger as those terms are defined in the Agreement and Plan of Merger
dated as of June 29, 1999, by and among the Company, Parent and Oak Merger
Co., a Connecticut corporation and wholly owned subsidiary of Parent (the
"Merger Agreement"), and end on the third anniversary of the day on which
the Effective Time occurs, unless further extended as hereinafter provided.
Commencing on the first anniversary of the Effective Time and each
succeeding anniversary thereafter, the Term of this Agreement shall
- 1 -
automatically be extended for one (1) additional year unless Parent, the
Company, or the Executive shall have given 90 days' prior written notice not
to extend this Agreement.
4. POSITION AND DUTIES. During the Term, the Executive shall serve
as President and Chief Executive Officer of the Company and a member of the
Company Board, and President and Chief Operating Officer of XENERGY and a
member of the Board of Directors of XENERGY, and shall also serve in any
such executive officer position of the Company or its subsidiaries and
affiliates if so appointed by the Board. Commencing no later than the one-
year anniversary of the Effective Time, the Executive shall also serve as
the Chief Executive Officer of XENERGY, and at that time he shall cease
serving as its Chief Operating Officer unless otherwise notified in writing
by the Board. During the Term, the Executive shall also be a member of the
Board of Directors of Connecticut Energy Corporation. The Executive shall
devote substantially all his working time and efforts to the business and
affairs of Parent, the Company and their subsidiaries and affiliates;
PROVIDED, HOWEVER, that the Executive may also serve on the boards of
directors or trustees of other non-affiliated companies and organizations,
as long as such service does not substantially interfere with the
performance of his duties hereunder or violate his obligations under Section
10 hereof.
5. COMPENSATION AND RELATED MATTERS
.
5.1. BASE SALARY. The Company shall pay, or cause to be paid, to
the Executive an annual base salary ("Base Salary") during the period of the
Executive's employment hereunder, which shall be at an initial rate of not
less than $425,000 per year. The Base Salary shall be paid in substantially
equal bi-weekly installments, in arrears. During the period of the
Executive's employment hereunder, the Board shall make an annual review of
the Executive's compensation for possible increase, as the Board deems
appropriate in its business judgment (and, as so increased, shall thereafter
constitute "Base Salary" hereunder). The Base Salary in effect from time to
time shall not be decreased during the Term.
Compensation of the Executive by Base Salary payments shall not be
deemed exclusive and shall not prevent the Executive from participating in
any other compensation or benefit plan of Parent, XENERGY or the Company.
The Base Salary payments (including any increased Base Salary payments)
shall not in any way limit or reduce any other obligation of Parent or the
Company hereunder, and no other compensation, benefit or payment hereunder
shall in any way limit or reduce the obligation of the Company to pay the
Executive s Base Salary.
5.2. BENEFIT PLANS. The Executive shall be entitled to
participate in or receive benefits under any "employee benefit plan" (as
defined in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended from time to time ("ERISA")) or employee benefit
arrangement made available by Parent, XENERGY or the Company during the
period of the Executive's employment hereunder to their executives and key
management employees, subject to and on a basis consistent with the terms,
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conditions and overall administration of such plans and arrangements. The
Executive's participation in such employee benefit plans and arrangements
shall be on an appropriate level, but no less favorable than the level of
other peer executives of Parent, XENERGY and the Company, as determined by
the Board.
5.3. INCENTIVE COMPENSATION. The Executive shall be entitled to
participate in or receive benefits under any short or long-term incentive
compensation plan made available by Parent during the period of the
Executive's employment hereunder to their executives and key management
employees at a level appropriate for the Executive's position as determined
by the Board, but no less favorable than the level of other peer executives
of Parent, XENERGY and the Company, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements; PROVIDED, HOWEVER, that the Executive shall not be eligible to
receive benefits from any long-term incentive compensation plan, policy or
arrangement of Parent to the extent the Executive is receiving a similar
benefit pursuant to an incentive compensation plan, policy or arrangement of
the Company or any of its subsidiaries.
5.4. FRINGE BENEFITS. The Executive shall be entitled to receive
any fringe benefits which are made available by Parent, XENERGY or the
Company during the period of the Executive s employment hereunder to their
executives and key management employees; provided, however, if not otherwise
included, Executive shall receive: (a) an automobile provided at the
expense of the Parent or a subsidiary thereof, (b) payment for luncheon club
dues at a level not less than that which the Executive was entitled to
receive immediately prior to the Effective Time, and (c) financial and tax
planning services and computer allowance of $3,500 per year.
5.5. EXPENSES. Upon presentation of reasonably adequate
documentation to Parent, the Executive shall receive prompt reimbursement
from Parent or a subsidiary thereof for all reasonable and customary
business expenses incurred by the Executive in accordance with Parent's
policy in performing services hereunder.
5.6. VACATION. The Executive shall be entitled to five (5) weeks
of vacation during each year of this Agreement, or such greater period as
the Board shall approve, without reduction in salary or other benefits.
5.7. COMPLETION BONUSES. Parent shall pay, or cause to be paid,
to the Executive in cash a bonus of $400,000 within five (5) days of the
Effective Time. Parent shall pay, or cause to be paid, to the Executive the
following completion bonuses (the "Completion Bonuses") upon completion of
the specified periods of his employment: (i) $400,000 if Executive is
employed with Parent or any subsidiary or affiliate thereof on the one (1)
year anniversary of the Effective Time; and (ii) $400,000 if Executive is
employed with Parent or any subsidiary or affiliate thereof on the two (2)
year anniversary of the Effective Time. Each Completion Bonus shall be paid
within five (5) days after the respective anniversary of the Effective Time.
5.8. SPECIAL RETIREMENT BENEFIT. If the Executive retires on or
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after his 60th birthday ("Retirement"), or if the Executive's employment
hereunder is terminated within three years after the Effective Time by the
Company without Cause (other than Disability) or by the Executive for Good
Reason ("Wrongful Termination"), or for any reason (including, without
limitation, the Executive's death) thereafter during the Term, the Executive
(or in the event of his death at any time during the Term, his surviving
spouse) shall be entitled to a supplemental retirement benefit (the "Special
Retirement Benefit") as set forth herein, which shall be in addition to his
pension benefits under all qualified and nonqualified defined benefit
retirement plans of the Company and Parent and their affiliates and all of
his prior employers (the "Basic Plans"). The Special Retirement Benefit
shall be payable in the form of a monthly single life annuity, or, if the
Executive is married at the commencement of the Special Retirement Benefit
or at the time of his death during the Term, in the form of an actuarially
equivalent joint and 66 2/3% survivor benefit with the surviving spouse to
whom he was married at the time of the commencement of the Special
Retirement Benefit or date of death, if earlier (the amount of which
actuarially equivalent benefit shall be determined based on assumptions no
less favorable to the Executive than the applicable assumptions in the
Connecticut National Gas Corporation Officers' Retirement Plan immediately
prior to the Effective Time). The Special Retirement Benefit shall be
payable beginning as of (i) in the case of the Executive's Retirement, the
date of the Executive s Retirement, (ii) in the case of the Executive's
Wrongful Termination, the third anniversary of the Date of Termination,
(iii) in the case of the Executive's death during the Term, the date of his
death, and (iv) in all other cases, the later of the date of the Executive's
termination of employment or the Executive's 60th birthday. The amount of
the Special Retirement Benefit shall be such that for each month, the
aggregate of the monthly payments payable to the Executive pursuant to the
Special Retirement Benefit and the Basic Plans equals 75% of the highest
annual rate of the Executive's Base Salary in effect at any time during the
Term, divided by twelve; provided, that in determining the amounts payable
pursuant to the Basic Plans, it shall be assumed that the benefits
thereunder are payable in the same form as the Special Retirement Benefit,
beginning on the earliest date permitted by the terms of the applicable
Basic Plan. If the Executive (or in the case of the Executive's death
during the Term, his surviving spouse) becomes entitled to receive the
Special Retirement Benefit, he or his surviving spouse, as applicable, shall
supply Parent and the Company with such information as they may reasonably
request relating to his benefits from retirement plans of prior employers in
order to determine the amount of the Special Retirement Benefit.
6. COMPENSATION RELATED TO DISABILITY. During the Term of this
Agreement, during any period that the Executive fails to perform the
Executive's full-time duties hereunder as a result of incapacity due to
physical or mental illness, Parent shall pay, or cause to be paid, to the
Executive his Base Salary at the rate in effect at the commencement of any
such period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by Parent, XENERGY or the Company during such period,
until the Executive s employment is terminated by Parent for Disability;
PROVIDED, HOWEVER, that such payments shall be reduced by the sum of the
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amounts, if any, payable to the Executive at or prior to the time of any
such payment under disability benefit plans of Parent or the Company or
under the Social Security disability insurance program, which amounts were
not previously applied to reduce any such payment.
7. TERMINATION COMPENSATION AND BENEFITS.
7.1. If the Executive's employment shall be terminated for any
reason during the Term of this Agreement, the Company shall pay the
Executive's Base Salary (to the Executive or in accordance with Section 11.2
if the Executive's employment is terminated by his death) through the Date
of Termination at the rate in effect immediately prior to the time the
Notice of Termination is given, together with all compensation and benefits
(other than severance compensation and benefits) payable to the Executive
through the Date of Termination or thereafter under the terms of any
compensation or benefit plan, program or arrangement maintained by Parent,
XENERGY or the Company during such period, and any unreimbursed expenses
payable pursuant to Section 5.5 of the Agreement that were incurred before
the Date of Termination.
7.2. In the event the Executive's employment is terminated prior
to the expiration of the Term of the Agreement by the Executive for Good
Reason or by Parent or the Company for reasons other than Cause (other than
the death or Disability of the Executive), the Executive shall receive, in
addition to amounts payable under Section 7.1 and 7.3, (i) a lump sum cash
payment to be made within five (5) days of the Date of Termination equal to
three times the sum of the Base Salary and incentive compensation (as
described below), (ii) continuation of the benefits provided for in Section
5.2 of this Agreement for the remainder of the Term, and (iii) the Special
Retirement Benefit (to the extent provided for in Section 5.8 hereof). For
purposes of determining equivalent value of incentive compensation, the
value of short-term incentive compensation shall be the higher of (i) the
amount of short-term compensation payable to the Executive with respect to
the fiscal year ended immediately prior to the Date of Termination and (ii)
the average of the amounts of short-term compensation payable to the
Executive with respect to each of the three most recently completed fiscal
years ended immediately prior to the Date of Termination, and the value of
long-term incentive compensation shall be the value of long-term incentive
compensation awards outstanding on the Date of Termination for performance
periods ending after the Date of Termination, such value being determined
based upon the projected target value of the applicable long-term incentive
compensation award as determined by the Company in connection with the grant
thereof.
7.3. If the Executive's employment shall be terminated for any
reason during the Term of this Agreement, the Company shall pay (i) the
Executive's normal post-termination compensation and benefits (other than
severance compensation and benefits) to the Executive as such payments
become due, and (ii) the Special Retirement Benefit as and to the extent
provided for in Section 5.8. Such normal post-termination compensation and
benefits (other than severance compensation and benefits) shall be
determined under, and paid in accordance with, Parent's or the Company's
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retirement, insurance and other compensation or benefit plans, programs and
arrangements (other than this Agreement), as applicable.
7.4. (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment,
benefit, or distribution by Parent, the Company or their affiliates to or
for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of
the Code, or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment ("Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes and Excise Tax imposed upon the Gross-
Up Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7.4(c) hereof, all
determinations required to be made under this Section 7.4, including whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be used in arriving at such determinations, shall be made
by Parent s principal outside accounting firm (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Board and the
Executive within fifteen (15) business days of the Date of Termination
and/or such earlier date(s) as may be requested by Parent or the Executive
(each such date and the Date of Termination shall be referred to as a
"Determination Date" for purposes of this Section 7.4(b) and Section 7.5
hereof). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 7.4(b), shall be paid by the Company to the
Executive within five (5) days of the receipt of the Accounting Firm s
determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a written
opinion that failure to report the Excise Tax on the Executive's applicable
federal income tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm under this
Section 7.4(b) shall be binding upon Parent, the Company and the Executive.
As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") consistent with
the calculations required to be made hereunder. In the event that Parent
exhausts its remedies pursuant to Section 7.4(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify Parent in writing of any
claim by the Internal Revenue Service that, if successful, would require the
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payment by the Company of an Underpayment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise Parent of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
thirty (30) day period following the date on which he gives such notice to
Parent (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If Parent notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give Parent any information reasonably
requested by Parent relating to such claim;
(ii) take such action in connection with contesting
such claim as Parent shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by Parent;
(iii) cooperate with Parent in good faith in order
to effectively contest such claim; and
(iv) permit Parent to participate in any proceeding
relating to such claim;
PROVIDED, HOWEVER, that Parent shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 7.4(c), Parent shall control all
proceedings taken in connection with such contest and, at its sole option,
may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to pay the tax
claimed and ▇▇▇ for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as Parent shall determine; PROVIDED, HOWEVER, that
if Parent directs the Executive to pay such claim and ▇▇▇ for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and PROVIDED,
FURTHER that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, Parent s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
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and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7.4(c) hereof, the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to Parent's and the Company's complying with the
requirements of Section 7.4(c) hereof) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Section 7.4(c) hereof, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and Parent does not notify the Executive in
writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination, then such advance
shall be forgiven and shall not be required to be repaid.
7.5. The payments provided for in Section 7.4 hereof (other than
Section 7.4(c) and (d)) shall be made not later than the fifth (5th) day
following each Determination Date; PROVIDED, HOWEVER, that if the amounts of
such payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined by
the Executive, of the minimum amount of such payments to which the Executive
is clearly entitled and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after each Determination Date. In the event that the
amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
7.6. The Company also shall pay to the Executive all reasonable
legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Severance Payments
(including all such fees and expenses, if any, incurred in disputing any
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder); PROVIDED, HOWEVER,
the Company shall not be required to pay to the Executive legal fees and
expenses to the extent such legal fees and expenses were incurred in
connection with a contest controlled by Parent pursuant to Section 7.4(c)
hereof in connection with which Parent complied with its obligations under
said Section 7.4(d). Such payments shall be made within five (5) business
days after delivery of the Executive's written request for payment
accompanied with such evidence of fees and expenses incurred as Parent
reasonably may require.
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8. TERMINATION PROCEDURES
.
8.1. NOTICE OF TERMINATION. During the Term of this Agreement,
any purported termination of the Executive s employment (other than by
reason of death) shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 12
hereof. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and, in the case of a termination by the Company
for Cause or by the Executive for Good Reason, shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive s employment under the provision so indicated.
Further, a Notice of Termination for Cause is required to include a copy of
a resolution duly adopted by the affirmative vote of not less than three-
quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive
was guilty of conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.
8.2. DATE OF TERMINATION. "Date of Termination", with respect to
any purported termination of the Executive's employment during the Term of
this Agreement, shall mean (i) if the Executive s employment is terminated
by his death, the date of his death, (ii) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full time
performance of the Executive's duties during such thirty (30) day period),
and (iii) if the Executive s employment is terminated for any other reason,
the date specified in the Notice of Termination (which, in the case of a
termination by Parent, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by
the Executive, shall not be less than fifteen (15) days nor more than sixty
(60) days, respectively, from the date such Notice of Termination is given).
9. NO MITIGATION. Parent and the Company agree that, if the
Executive's employment hereunder is terminated during the Term, the
Executive is not required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by Parent or the Company
hereunder. Further, the amount of any payment or benefit provided for
hereunder (other than pursuant to Section 7.4(d) hereof) shall not be
reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to Parent or the Company, or
otherwise.
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10. CONFIDENTIALITY AND NONCOMPETITION.
10.1. The Executive will not, during or after the Term,
without the prior written consent of the Parent or as may otherwise be
required by law or legal process, disclose to any entity or person any
information which is treated as confidential by Parent or the Company or any
of their subsidiaries or affiliates (each, an "EE Entity"), and not
generally known or available in the marketplace, and to which the Executive
gains access by reason of his position as an employee or director of any EE
Entity.
10.2. Except as permitted by Parent or the Company upon its
prior written consent, the Executive shall not, during the Executive's
employment with the EE Entities and for the period ending one year after the
Executive's employment with the EE Entities terminates for any reason enter,
directly or indirectly, into the employ of or render or engage in, directly
or indirectly, any services to any person, firm or corporation within the
"Restricted Territory," which is a major competitor of any EE Entity with
respect to products which any EE Entity is then producing or services which
any EE Entity is then providing (a "Competitor"). However, it shall not be
a violation of the immediately preceding sentence for the Executive to be
employed by, or render services to, a Competitor, if the Executive renders
those services only in lines of business of the Competitor which are not
directly competitive with a primary line of business of any EE Entity or are
outside of the Restricted Territory. For purposes of this Section 10.2, the
"Restricted Territory" shall be the states and/or commonwealths of
Connecticut, Vermont, Massachusetts, New Hampshire, Maine and Rhode Island.
11. SUCCESSORS; BINDING AGREEMENT.
11.1. In addition to any obligations imposed by law upon any
successor to Parent or the Company, Parent and the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
Parent or the Company, as the case may be, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that Parent
and the Company would be required to perform it if no such succession had
taken place. Failure of Parent or the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation
from Parent or the Company in the same amount and on the same terms as the
Executive would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason, except that, for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
11.2. This Agreement shall inure to the benefit of and be
enforceable by the Executive s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
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such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives
or administrators of the Executive s estate.
11.3. Except as provided herein, at the Effective Time, the
Prior Agreement shall be terminated and no longer in effect; and the
Executive expressly waives his rights to any payments under the Prior
Agreement. Notwithstanding any other provision of this Agreement, this
Agreement shall be null and void and of no further force or effect if the
Merger Agreement is terminated without consummation of the Merger or if the
Executive's employment with the Company and/or its subsidiaries terminates
for any reason before the Effective Time.
12. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addressees set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon actual
receipt:
(a) To the Company:
Energy East Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) To the Company:
CTG Resources, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel and Secretary
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: 312-782-8585
(c) To the Executive:
At the Executive's residence address as maintained
by the Company in the regular course of its business
for payroll purposes.
13. MISCELLANEOUS.
13.1. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officers as may be specifically
designated by the Board. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by any party which are not expressly set forth in this
Agreement. This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer,
employee or representative of any party hereto; and any prior agreement of
the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled, except as otherwise provided in this
Agreement. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York,
without giving effect to choice of law principles.
- 12 -
All references to sections of the Code shall be deemed also to refer to
any successor provisions to such sections. There shall be withheld from any
payments provided for hereunder any amounts required to be withheld under
federal, state or local law and any additional withholding amounts to which
the Executive has agreed. The obligations under this Agreement of Parent,
the Company or the Executive which by their nature and terms require
satisfaction after the end of the Term shall survive such event and shall
remain binding upon such party.
13.2. Notwithstanding any provision of this Agreement to the
contrary, Parent and the Company shall be jointly and severally liable to
the Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees or legatees for
all payment obligations under this Agreement.
14. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
16. SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Executive
for benefits under this Agreement shall be directed to and initially
determined by the Board and shall be in writing. Any denial by the Board of
a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial
and the specific provisions of this Agreement relied upon. The Board shall
afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to appeal to
the Board a decision of the Board within sixty (60) days after notification
by the Board that the Executive s claim has been denied. To the extent
permitted by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in New York, New York in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator s award in any court having
jurisdiction.
17. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meaning indicated below:
(a) "Base Salary" shall have the meaning stated in Section
5.1 hereof.
(b) "Cause" for termination by Parent or the Company of the
Executive's employment, for purposes of this Agreement, shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for
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Good Reason by the Executive pursuant to Section 8.1) after a written demand
for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive s duties,
or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to Parent or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive s act, or
failure to act, was in the best interest of Parent or the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(d) "Company" shall mean CTG Resources, Inc. or any
successor to its business and/or assets.
(e) "Date of Termination" shall have the meaning stated in
Section 8.2 hereof.
(f) "Disability" shall be deemed the reason for the
termination by Parent or the Company of the Executive s employment, if, as a
result of the Executive s incapacity due to physical or mental illness, the
Executive shall have been absent from the full time performance of the
Executive's duties hereunder for the maximum number of months applicable to
the Executive under the Company's Disability Policy for Salaried Employees
(or any successor policy) (but in no event for less than six (6) consecutive
months), Parent shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full time performance of
the Executive s duties.
(g) "Parent" shall mean Energy East Corporation and any
successor to its business and/or assets.
(h) "Excise Tax" shall have the meaning stated in Section
7.4(a) hereof.
(i) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(j) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent), of any one of the following acts by Parent or the
Company, or failures by Parent or the Company to act, unless, in the case of
any act or failure to act described in paragraphs (i) or (ii) below, such
act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's status as an executive
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officer of the Company and XENERGY or a substantial
alteration in the nature or status of the Executive's
responsibilities consistent with the titles set forth in
Section 4;
(ii) any material breach of any provision of this
Agreement by Parent or the Company;
(iii) the relocation of the Company s principal
executive offices to a location which is not within the
25-mile radius of Hartford, Connecticut or Parent or the
Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices
except for required travel on the business of Parent or
the Company or its affiliates; or
(iv) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 8.1;
for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical
or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(k) "Gross-Up Payment" shall have the meaning stated in
Section 7.4(a) hereof.
(l) "Notice of Termination" shall have the meaning stated in
Section 8.1 hereof.
(m) "Severance Payments" shall mean those payments described
in Section 7.2 hereof.
(n) "Term" shall have the meaning stated in Section 3
hereof.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
ENERGY EAST CORPORATION
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and General
Counsel
CTG RESOURCES, INC.
----------------------------
By:
Title:
EXECUTIVE
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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