EXHIBIT 2.2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 5, 1998
BY AND AMONG
PHILADELPHIA SUBURBAN CORPORATION,
CONSUMERS ACQUISITION COMPANY
AND
CONSUMERS WATER COMPANY
TABLE OF CONTENTS
ARTICLE 1 The Merger 1
1.1 The Merger 1
1.2 Closing 2
1.3 Effective Time 2
1.4 Articles of Incorporation 2
1.5 By-Laws 2
1.6 Directors 2
1.7 Officers 2
1.8 Conversion of Acquisition Shares 3
1.9 Conversion of Consumers Common Shares and Consumers Preferred Shares 3
1.9.1 Outstanding Consumers Common Shares 3
1.9.2 Treasury Shares 3
1.9.3 Impact of Stock Splits, etc. 3
1.9.4 Options 3
1.9.5 Outstanding Consumers Preferred Shares 4
1.9.6 Dissenting Shares 4
1.10 Exchange of Certificates and Related Matters 4
1.10.1 Paying Agent 4
1.10.2 Letter of Transmittal 5
1.10.3 Exchange Procedures 5
1.10.4 Distributions with Respect to Unexchanged Shares 6
1.10.5 No Further Ownership Rights 6
1.10.6 No Fractional Shares 6
1.10.7 Termination of Paying Agency 7
1.10.8 No Liability 7
ARTICLE 2 Representations and Warranties of Consumers 7
2.1 Organization, Standing and Corporate Authority 7
2.2 Capital Structure 7
2.3 Subsidiaries 8
2.4 Authority; Noncontravention 9
2.5 Consumers SEC Documents and Financial Statements 10
2.6 Absence of Certain Changes or Events 11
2.7 Real and Personal Property 11
2.8 Employee Matters; ERISA 12
2.9 Taxes 16
2.10 Compliance with Applicable Laws 17
2.11 Environmental Protection 17
2.12 Litigation 20
2.13 Labor Relations 20
2.14 Intellectual Property 21
2.15 No Default 21
2.16 Regulation as a Utility 22
2.17 Insurance 22
2.18 Change in Business Relationships 22
2.19 Voting Requirements 22
2.20 Brokers 22
2.21 Year 2000 Problem 23
2.22 Knowledge 23
2.23 Disclosure 23
2.24 Fairness Opinion 23
ARTICLE 3 Representations and Warranties of PSC and Acquisition 23
3.1 Organization, Standing and Corporate Authority 23
3.2 Capital Structure 23
3.3 Authority; Noncontravention 24
3.4 PSC SEC Documents and Financial Statements 25
3.5 Absence of Certain Changes or Events 26
3.6 Compliance with Applicable Laws 26
3.7 Litigation 27
3.8 Brokers 27
3.9 Fairness Opinion 27
3.10 Taxes 27
3.11 Regulation as a Utility 28
3.12 Insurance 28
3.13 Voting Requirements 29
3.14 Disclosure 29
3.15 Knowledge 29
ARTICLE 4 Additional Agreements 29
4.1 Preparation of Form S-4 29
4.1.1 Form S-4; Proxy Statement/Prospectus 29
4.1.2 Consumers Information 29
4.1.3 PSC Information 30
4.1.4 SEC Filings 30
4.2 Shareholders Meetings 31
4.2.1 Consumers' Shareholder Meeting 31
4.2.2 PSC's Shareholder Meeting 31
4.3 Best Efforts 31
4.4 Access to Information; Confidentiality 31
4.5 Public Announcements 32
4.6 Acquisition Proposals 33
4.7 Superior Proposals 33
4.8 Filings; Other Action 34
4.9 Stock Exchange Listing 35
4.10 Affiliates and Certain Shareholders 35
4.11 Employee Matters 35
4.12 Representation on PSC Board 36
4.13 Termination of Consumers' DRIP 36
4.14 Federal Income Tax Treatment 36
4.15 Takeover Statute 36
4.16 Continuance of Existing Indemnification Rights 36
4.17 Consulting Agreements 38
ARTICLE 5 Covenants Relating to Conduct of Business Prior to Merger 38
5.1 Conduct of Business by Consumers 38
5.2 Management of Consumers and its Subsidiaries 39
5.3 Conduct of Business by PSC 40
5.4 Other Actions 40
5.5 Pooling of Interests Accounting Treatment 40
5.6 Termination of Long Term Incentive Plan 40
ARTICLE 6 Conditions Precedent 41
6.1 Conditions to Each Party's Obligation to Effect the Merger 41
6.1.1 Consumers Shareholder Approval 41
6.1.2 PSC Shareholder Approval 41
6.1.3 Governmental and Regulatory Consents 41
6.1.4 ▇▇▇ ▇▇▇ ▇▇
6.1.5 No Injunctions or Restraints 41
6.1.6 NYSE Listing 42
6.1.7 Form S-4 42
6.2 Conditions to Obligations of PSC and Acquisition 42
6.2.1 Representations and Warranties 42
6.2.2 Performance of Obligations of Consumers 42
6.2.3 Opinion of Counsel 42
6.2.4 Satisfactory Completion of Due Diligence 42
6.2.5 Pooling-of-Interests 42
6.2.6 Releases 42
6.3 Conditions to Obligations of Consumers 42
6.3.1 Representations and Warranties 43
6.3.2 Performance of Obligations of PSC and Acquisition 43
6.3.3 Tax Opinion 43
6.3.4 Opinion of Counsel 43
6.3.5 Satisfactory Completion of Due Diligence 43
ARTICLE 7 Termination, Amendment and Waiver 43
7.1 Termination 43
7.2 Effect of Termination 45
7.3 Amendment 45
7.4 Extension; Waiver 46
7.5 Procedure for Termination, Amendment, Extension or Waiver 46
ARTICLE 8 Survival of Provisions 46
8.1 Survival 46
ARTICLE 9 Notices 46
9.1 Notices 46
ARTICLE 10 Miscellaneous 48
10.1 Entire Agreement 48
10.2 Expenses 48
10.3 Counterparts 48
10.4 No Third Party Beneficiary 48
10.5 Governing Law 48
10.6 Assignment; Binding Effect 49
10.7 Headings, Gender, etc. 49
10.8 Invalid Provisions 49
10.9 Material Adverse Effect 49
EXHIBIT A -- Exchange Ratio
EXHIBIT B -- Articles of Incorporation of the Surviving Corporation
EXHIBIT C -- Form of Affiliate's Letter
EXHIBIT D -- Form of Opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
EXHIBIT E -- Form of Opinion of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (the "Agreement")
is made and entered into as of August 5, 1998 by and among PHILADELPHIA
SUBURBAN CORPORATION, a Pennsylvania corporation ("PSC"), CONSUMERS ACQUISITION
COMPANY, a Pennsylvania corporation ("Acquisition"), and CONSUMERS WATER
COMPANY, a Maine corporation ("Consumers"), (each individually hereinafter
referred to as a "Party" and collectively hereinafter referred to as the
"Parties").
PREAMBLE
WHEREAS, the respective Boards of Directors of the Parties have
determined that the Merger (as defined in Section 1.1) is in the best interests
of their respective shareholders and other constituencies and have approved the
Merger, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Parties intend that, for federal income tax purposes, the
Merger will constitute a reorganization within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that
shareholders of Consumers will not be subject to federal income tax on the
receipt of PSC Common Shares (as defined in Section 1.9.1) in exchange for
Consumers Common Shares (as defined in Section 1.9.1) pursuant to the Merger;
and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling-of-interests"; and
WHEREAS, the Parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound, the Parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as is defined in Section 1.3 hereof),
Consumers shall be merged with and into Acquisition (the "Merger"), in
accordance with the provisions of the Pennsylvania Business Corporation Law of
1988, as amended (the "Pennsylvania Code") and the separate
corporate existence of Consumers shall cease and Acquisition shall continue as
the surviving corporation (the "Surviving Corporation") with all the rights,
privileges, immunities and powers, and subject to all the duties and
liabilities, of a corporation organized under the Pennsylvania Code.
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article 6 (excluding those conditions that, by their terms, cannot be satisfied
before the Closing Date as defined in this Section 1.2), the closing of the
Merger (the "Closing") will take place at 9:00 a.m. no later than the seventh
(7th) business day following the Determination Date, as that term is defined in
Exhibit A attached hereto (the "Closing Date"). The Closing will be held at
the offices of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, 2500 One Liberty Place, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless the Parties hereto
agree in writing to another date, time or place.
1.3 Effective Time. The Parties hereto will file with the Secretary
of State of the Commonwealth of Pennsylvania (the "Pennsylvania Secretary of
State") on the date of the Closing (or on such other date as PSC and Consumers
may agree) articles of merger or other appropriate documents, mutually
satisfactory in form and substance to PSC and Consumers and executed in
accordance with the relevant provisions of the Pennsylvania Code, and will make
all other filings or recordings required under the Pennsylvania Code in
connection with the Merger. The Merger shall become effective upon the filing
of the articles of merger with the Pennsylvania Secretary of State, or at such
later time as is specified in the articles of merger (the "Effective Time").
1.4 Articles of Incorporation. The Articles of Incorporation of
Acquisition shall be as set forth in Exhibit B, which is attached hereto and
made a part hereof, and, as so set forth shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended as provided by law.
1.5 By-Laws. The By-Laws of Acquisition, 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 By-Laws, or the Articles of
Incorporation of the Surviving Corporation.
1.6 Directors. The Board of Directors of the Surviving Corporation
from and after the Effective Time shall be comprised of such directors as shall
be appointed by PSC. Such directors shall hold office from the Effective Time
until their respective successors are duly elected or appointed and qualify in
the manner provided in the Articles of Incorporation or By-Laws of the
Surviving Corporation, or as otherwise provided by law.
1.7 Officers. The officers of the Surviving Corporation from and
after the Effective Time shall be comprised of such officers as shall be
appointed by the Surviving Corporation's Board of Directors. Such officers
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualify in the manner provided in the Articles of
Incorporation or By-Laws of the Surviving Corporation, or as otherwise provided
by law.
1.8 Conversion of Acquisition Shares. Each share of common stock of
Acquisition issued and outstanding immediately prior to the Effective Time
shall remain outstanding, unchanged by reason of the Merger, as 1,000 common
shares, without par value, of the Surviving Corporation.
1.9 Conversion of Consumers Common Shares and Consumers Preferred
Shares.
1.9.1 Outstanding Consumers Common Shares. Each share of
common stock, having a par value of $1.00 per share, of Consumers together with
all rights appurtenant thereto (the "Consumers Common Shares") issued and
outstanding immediately prior to the Effective Time (other than shares held as
treasury shares by Consumers) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into that number of
shares of validly issued, fully paid and non-assessable common stock, having a
par value of $.50 per share, of PSC together with all rights appurtenant
thereto (the "PSC Common Shares") as determined in accordance with the exchange
ratio as outlined in Exhibit A, which is attached hereto and made a part hereof
(the "Exchange Ratio").
1.9.2 Treasury Shares. Each Consumers Common Share issued and
outstanding immediately prior to the Effective Time which is then held as a
treasury share by Consumers shall, by virtue of the Merger and without any
action on the part of Consumers, be canceled and retired and cease to exist,
without any conversion thereof.
1.9.3 Impact of Stock Splits, etc. In the event of any change
in PSC Common Shares between June 27, 1998 and the Effective Time by reason
of any stock split, stock dividend, subdivision, reclassification,
recapitalization, combination, exchange or the like, the Exchange Ratio and
the calculation of all share prices provided for in this Agreement shall be
proportionately adjusted.
1.9.4 Options. At the Effective Time, each option to acquire
Consumers Common Shares which is then outstanding, whether or not exercisable,
shall cease to represent a right to acquire Consumers Common Shares and shall
be converted automatically into an option to purchase PSC Common Shares, and
PSC shall assume each such option, in accordance with the terms of the
applicable Consumers stock option plan and stock option agreement by which it
is evidenced, except that from and after the Effective Time, (i) PSC and the
PSC Board of Directors shall be substituted for Consumers and the Consumers
Board of Directors in administering such plan, (ii) each Consumers option
assumed by PSC may be exercised solely for PSC Common Shares, (iii) the number
of PSC Common Shares subject to such Consumers options shall be equal to the
number of shares of Consumers Common Shares subject to such option immediately
prior to the Effective Time multiplied by the Exchange Ratio, provided that any
fractional shares of PSC Common Shares resulting from such multiplication shall
be rounded down to the nearest share, and (iv) the per share exercise price
under each such option shall be adjusted by dividing the per share exercise
price under each such option by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. Notwithstanding clauses (iii)
and (iv) of the preceding sentence, each Consumers option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Code, and the regulations promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option within the meaning of Section
424(h) of the Code. Consumers and PSC agree to take all necessary steps to
effect the foregoing provisions of this Section 1.9.4. Within thirty (30)
calendar days after the Effective Time, PSC shall file a registration statement
on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the PSC Common Shares subject to the
options referred to in this Section 1.9.4 and shall use its reasonable efforts
to maintain the current status of the prospectus or prospectuses contained
therein for so long as such options remain outstanding in the case of a Form S-
8 or, in the case of a Form S-3, until the shares subject to such options may
be sold without a further holding period under Rule 144 under the Securities
Act.
1.9.5 Outstanding Consumers Preferred Shares. Each share of
preferred stock, having a par value of $100 per share, of Consumers together
with all rights appurtenant thereto (the "Consumers Preferred Shares") issued
and outstanding immediately prior to the Effective Time (other than shares held
as treasury shares by Consumers) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into that number of PSC
Common Shares as determined by multiplying the number of Consumers Preferred
Shares by the product of 3.945 times the Exchange Ratio.
1.9.6 Dissenting Shares. Each Consumers Preferred Share, the
holder of which has perfected his right to dissent under the Maine Business
Corporation Act ("MBCA") and has not effectively withdrawn or lost such right
as of the Effective Time (the "Dissenting Shares"), shall not be converted into
or represent a right to receive PSC Common Shares hereunder, and the holder
thereof shall be entitled only to such rights as are granted by the MBCA.
Consumers shall give PSC prompt notice upon receipt by Consumers of any such
written demands for payment of the fair value of such Consumers Preferred
Shares and of withdrawals of such demands and any other instruments provided
pursuant to the MBCA (any shareholder duly making such demand being hereinafter
called a "Dissenting Shareholder"). If any Dissenting Shareholder shall
effectively withdraw or lose (through failure to perfect or otherwise) his
right to such payment at any time, such holder's Consumers Preferred Shares
shall be converted into the right to receive PSC Common Shares in accordance
with the applicable provisions of this Agreement. Any payments made in respect
of Dissenting Shares shall be made by the Surviving Corporation.
1.10 Exchange of Certificates and Related Matters.
1.10.1 Paying Agent. Prior to the Closing Date, PSC shall
appoint the Paying Agent for the purpose of issuing PSC Common Shares in
exchange for certificates representing Consumers Common Shares and Consumers
Preferred Shares. PSC shall deliver certificates representing PSC Common
Shares, to the Paying Agent, for the benefit of the holders of Consumers Common
Shares and Consumers Preferred Shares when and as required for exchanges of
Consumers Common Shares and Consumers Preferred Shares, respectively, pursuant
to Section 1.9.
1.10.2 Letter of Transmittal. Promptly after the Effective
Time (but in no event more than five (5) business days thereafter), PSC shall
require the Paying Agent to mail to each record holder of Certificates, as
defined in Section 1.10.3, that immediately prior to the Effective Time
represented Consumers Common Shares and Consumers Preferred Shares,
respectively, which have been converted pursuant to Section 1.9, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of Certificates to the
Paying Agent and shall be in such form and have such provisions as PSC
reasonably may specify), and (ii) instructions for use in surrendering such
Certificates and receiving the Merger Consideration, as defined in Section
1.10.3, to which such holder shall be entitled therefor pursuant to Section
1.9.
1.10.3 Exchange Procedures. Upon surrender to the Paying Agent
of a Certificate representing Consumers Common Shares or Consumers Preferred
Shares, respectively, for cancellation, together with a letter of transmittal
and such other customary documents as may be required by the instructions to
the letter of transmittal (collectively, the "Certificate") and acceptance
thereof by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor (i) in connection with the surrender of
Consumers Common Shares, certificates evidencing that number of whole PSC
Common Shares into which Consumers Common Shares previously represented by such
certificate are converted in accordance with Section 1.9.1, and the cash in
lieu of fractional PSC Common Shares to which such holder is entitled pursuant
to Section 1.10.6, (ii) in connection with the surrender of Consumers Preferred
Shares, certificates evidencing that number of whole PSC Common Shares into
which Consumers Preferred Shares previously represented by such certificate are
converted in accordance with Section 1.9.5, and the cash in lieu of fractional
PSC Common Shares to which such holder is entitled pursuant to Section 1.10.6;
and (iii) any dividends or other distributions to which such holder is entitled
pursuant to Section 1.10.4 (the PSC Common Shares, dividends, distributions and
cash described in clauses (i), (ii), and (iii) of this Section 1.10.3 are
referred to collectively as the "Merger Consideration"). The Paying Agent
shall accept such Certificate upon compliance with such reasonable terms and
conditions as the Paying Agent may impose to effect an orderly exchange thereof
in accordance with normal exchange practices. If the Merger Consideration (or
any portion thereof) is to be delivered to any person other than the person in
whose name the Certificate surrendered in exchange therefor is registered on
the record books of Consumers, it shall be a condition to such exchange that
the Certificate so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such exchange shall pay
to the Paying Agent any transfer or other taxes required by reason of the
payment of such consideration to a person other than the registered holder of
the Certificate surrendered, or shall establish to the satisfaction of the
Paying Agent that such tax has been paid or is not applicable. After the
Effective Time, there shall be no further transfer on the records of Consumers
or its transfer agent of any Certificate representing Consumers Common Shares
or Consumers Preferred Shares, respectively, and, if any such Certificate is
presented to Consumers for transfer, it shall be canceled against delivery of
the Merger Consideration as hereinabove provided. Until surrendered as
contemplated by this Section 1.10.3, each Certificate representing Consumers
Common Shares (other than a Certificate representing Consumers Common Shares to
be canceled in accordance with Section 1.9.3) and each Certificate representing
Consumers Preferred Shares, shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the appropriate
Merger Consideration, without any interest thereon.
1.10.4 Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to PSC Common Shares with a
record date after the Effective Time shall be paid to the holder of any
Certificate, that immediately prior to the Effective Time represented Consumers
Common Shares or Consumers Preferred Shares, respectively, which has not been
converted pursuant to Section 1.9, and no other part of the Merger
Consideration shall be paid to any such holder, until the surrender for
exchange of such Certificate in accordance with this Article 1. Following
surrender for exchange of any such Certificate, there shall be paid, without
interest, to the holder of certificates evidencing whole PSC Common Shares,
issued in exchange therefor, (i) the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid (a) with respect
to the number of whole PSC Common Shares into which Consumers Common Shares
represented by such Certificate immediately prior to the Effective Time were
converted pursuant to Section 1.9, and (b) with respect to the number of whole
PSC Common Shares into which Consumers Preferred Shares represented by such
Certificate immediately prior to the Effective Time were converted pursuant to
Section 1.9, at the time of such surrender, and (ii) the amount of dividends or
other distributions with a record date after the Effective Time, but prior to
such surrender, and with a payment date subsequent to such surrender, payable
with respect to such whole PSC Common Shares at the appropriate payment date.
1.10.5 No Further Ownership Rights. The Merger Consideration
paid upon the surrender for exchange of Certificates representing Consumers
Common Shares or Consumers Preferred Shares, respectively, in accordance with
the terms of this Article 1 shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to Consumers Common Shares or
Consumers Preferred Shares, respectively, theretofore represented by such
Certificates, subject, however, to the Surviving Corporation's obligation (if
any) to pay any dividends or make any other distributions with a record date
(i) prior to the Effective Time which may have been declared by Consumers on
such Consumers Common Shares or Consumers Preferred Shares, respectively, in
accordance with the terms of this Agreement, or (ii) prior to June 27, 1998
and which remain unpaid at the Effective Time.
1.10.6 No Fractional Shares. No certificates or scrip
representing fractional PSC Common Shares shall be issued upon the surrender
for exchange of Certificates that immediately prior to the Effective Time
represented Consumers Common Shares which have been converted pursuant to
Section 1.9, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of PSC. Notwithstanding any
other provisions of this Agreement, each holder of Consumers Common Shares who
would otherwise have been entitled to receive a fraction of a PSC Common Share
(after taking into account all certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a PSC Common Share multiplied by the Calculation Price (as
that term is defined in Exhibit A).
1.10.7 Termination of Paying Agency. Any PSC Common Shares
held by the Paying Agent which remain undistributed to the holders of the
Certificates representing Consumers Common Shares or Consumers Preferred
Shares, respectively, after one hundred twenty (120) calendar days following
the Effective Time shall be delivered to PSC, and any holders of Consumers
Common Shares or Consumers Preferred Shares, respectively, who have not
theretofore complied with this Article 1 shall thereafter look only to PSC and
only as general creditors thereof for payment, without interest, of their claim
for any Merger Consideration and any dividends or distributions with respect to
PSC Common Shares.
1.10.8 No Liability. Neither PSC, the Surviving Corporation
nor the Paying Agent shall be liable to any person in respect of any Merger
Consideration payable with respect to Consumers Common Shares or Consumers
Preferred Shares, respectively, delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar law. If any Certificates
representing Consumers Common Shares or Consumers Preferred Shares,
respectively, shall not have been surrendered prior to seven (7) years after
the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as defined in Section 2.4)),
any such Consumers Common Shares, Consumers Preferred Shares, dividends or
distributions payable in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of PSC free and clear of all
claims or interest of any person previously entitled thereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CONSUMERS
Consumers hereby represents and warrants to PSC and Acquisition as
follows:
2.1 Organization, Standing and Corporate Authority. Consumers is a
corporation duly organized and validly existing under the laws of the State of
Maine and has the requisite corporate power and authority to carry on its
business as now being conducted. The nature of Consumers' business does not
require its qualification as a foreign corporation in any jurisdiction, except
for those jurisdictions in which Consumers has so qualified and except where
the failure to be so qualified would not individually or in the aggregate have
a Material Adverse Effect, as that term is defined in Section 10.9. Consumers
has delivered to PSC complete and correct copies of the Articles of
Incorporation and By-Laws, as amended to the date of this Agreement, for itself
and each of its subsidiaries.
2.2 Capital Structure. The authorized capital stock of Consumers
consists of: (i) 15,000,000 Consumers Common Shares, having a par value of
$1.00 per share; (ii) 30,000 shares of preferred stock, having a par value of
$100.00 per share, of which 15,925 shares have been designated as "Cumulative
Preferred Stock, Series A" and 14,075 shares are undesignated; and (iii)
120,000 shares of preferred stock, with no par value, of which no shares have
been issued (the 150,000 shares of the preferred stock are hereinafter referred
to as "Consumers Preferred Shares"). At the close of business on June 24,
1998, (i) 9,008,305 Consumers Common Shares were issued and outstanding; (ii)
10,438 Consumers Preferred Shares have been issued and are outstanding; (iii)
no Consumers Common Shares were held as treasury stock; (iv) no Consumers
Common Shares were held by subsidiaries of Consumers; (v) 925,757 Consumers
Common Shares were reserved for issuance pursuant to Consumers' (1) Dividend
Reinvestment Plan ("DRIP"), (2) 401(K) Savings Plan, (3) LTIP, as defined in
Section 5.6 and (4) Stock Option Plan; and (vi) no other shares, including but
not limited to Consumers Common Shares or Consumers Preferred Shares, were
issued and outstanding. All outstanding shares of capital stock of Consumers
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. No bonds, debentures, notes or other
indebtedness of Consumers having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
the shareholders of Consumers may vote are issued or outstanding. Section 2.2
of the Disclosure Schedule, dated as of the date hereof and executed by
Consumers (the "Disclosure Schedule"), sets forth the name of each participant
in Consumers' Incentive Stock Option Plan and LTIP and the number of Consumers
Common Shares awarded to such participant as of the date hereof. Except as set
forth above or in Section 2.2 of the Disclosure Schedule, Consumers does not
have any outstanding option, warrant, subscription or other right, agreement or
commitment which either obligates Consumers to issue, sell or transfer,
repurchase, redeem or otherwise acquire or vote any shares of capital stock of
Consumers, or which restricts the transfer of Consumers Common Shares.
2.3 Subsidiaries.
2.3.1 Section 2.3.1 of the Disclosure Schedule sets forth the
name of each corporation, limited liability company, general or limited
partnership or other entity that is controlled, directly or indirectly, by
Consumers (a "subsidiary") and the jurisdiction of its organization. Each such
subsidiary is a corporation or partnership duly organized and validly existing
under the laws of the jurisdiction of its organization and has the corporate or
partnership power and authority and all necessary government approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority or necessary governmental
approvals would not individually or in the aggregate have a Material Adverse
Effect. Each subsidiary is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Material Adverse Effect.
2.3.2 Section 2.3.2 of the Disclosure Schedule sets forth, as
to each subsidiary of Consumers, its authorized capital structure and the
number of its issued and outstanding shares of capital stock or other ownership
units.
2.3.3 Except as set forth in Section 2.3.3 of the Disclosure
Schedule, Consumers is, directly or indirectly, the record and beneficial owner
of all of the outstanding shares of capital stock or other ownership units of
each of its subsidiaries, and no capital stock or other ownership units of any
subsidiary is or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable or exercisable for, shares of any capital stock or other ownership
units of any subsidiary, and there are no contracts, commitments,
understandings or arrangements by which Consumers or any of its subsidiaries is
or may be bound to issue, redeem, purchase or sell additional shares of capital
stock or other ownership units of any subsidiary or securities convertible into
or exchangeable or exercisable for any such shares or units. All of such
shares and other ownership units are validly issued, fully paid and
nonassessable and, except as set forth in Section 2.3.3 of the Disclosure
Schedule, are owned by Consumers, or by another wholly-owned subsidiary of
Consumers, free and clear of all liens, claims, encumbrances, restraints on
alienation, or any other restrictions with respect to the transferability or
assignability thereof (other than restrictions on transfer imposed by federal
or state securities laws).
2.4 Authority; Noncontravention. Consumers has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by
Consumers and the consummation by Consumers of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Consumers, subject, in the case of the Merger, to the approval of its
shareholders as set forth in Section 4.2. This Agreement has been duly
executed and delivered by Consumers and, assuming this Agreement has been duly
executed and delivered by PSC and Acquisition, constitutes a valid and binding
obligation of Consumers, enforceable against Consumers in accordance with its
terms, except that the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and by general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). Except as disclosed in Section 2.4 of the Disclosure
Schedule, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not, (i) conflict with any of the provisions of
the Articles of Incorporation or Bylaws of Consumers or the comparable
documents of any of its subsidiaries, (ii) subject to the governmental filings
and other matters referred to in the following sentence, conflict with, result
in a breach of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a material benefit under, or require the consent of
any person under, any indenture or other agreement, permit, concession,
franchise, license or similar instrument or undertaking to which Consumers or
any of its subsidiaries is a party or by which Consumers or any of its
subsidiaries or any of their assets is bound or affected, or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the United
States or any political subdivision thereof or therein, or any order, writ,
judgment, injunction, decree, determination or award currently in effect,
subject, in the case of clauses (ii) and (iii), to those conflicts, breaches,
defaults and similar matters, which, individually or in the aggregate, would
not have a Material Adverse Effect nor materially and adversely affect
Consumers' ability to consummate the transactions contemplated hereby. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any governmental agency or regulatory body, utility regulatory body, court,
agency, commission, division, department, public body or other authority (a
"Governmental Entity") which has not been received or made, is required by or
with respect to Consumers in connection with the execution and delivery of this
Agreement by Consumers or the consummation by it of any of the transactions
contemplated hereby, except for (a) the filing of premerger notification and
report forms under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), with respect to the Merger, (b) the filing with the
Securities and Exchange Commission (the "SEC") of a proxy statement relating to
the approval by the shareholders of Consumers and PSC of the Merger and such
reports under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (c) the filing of articles of
merger with the Pennsylvania Secretary of State and appropriate documents with
the relevant authorities of other states in which Consumers is qualified to do
business, and (d) such other consents, approvals, authorizations, filings or
notices as are set forth in Section 2.4 of the Disclosure Schedule.
2.5 Consumers SEC Documents and Financial Statements.
2.5.1 Except as set forth in Section 2.5.1 of the Disclosure
Schedule, Consumers, and each of its subsidiaries that is or was required to do
so, has timely filed all required reports, schedules, forms, statements and
other documents with the SEC from January 1, 1993 through June 27, 1998 (the
"Consumers SEC Documents"). (All such documents filed by Consumers with the
SEC from June 27, 1998 until the Closing Date shall also be included in the
definition of Consumers SEC Documents.) As of their respective dates, the
Consumers SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Consumers SEC Documents, and none of the Consumers SEC Documents as of
such dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. There have been filed as exhibits to, or
incorporated by reference in the Form 10K most recently filed by Consumers with
the SEC all contracts which, as of the date hereof, are material as described
in Item 601(b)(10) of Regulation S-K. Consumers has heretofore delivered to
PSC in the form filed with the SEC, all of the Consumers SEC Documents.
2.5.2 The consolidated financial statements of Consumers
included in the Consumers SEC Documents comply in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved ("GAAP") (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
financial position of Consumers and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations, changes in
shareholders' equity and consolidated cash flows for the periods then ended
(subject, in the case of unaudited interim financial statements, to normal
recurring adjustments, none of which is material).
2.5.3 Except as disclosed in the Consumers SEC Documents or in
the Disclosure Schedule, neither Consumers nor any of its subsidiaries has any
absolute, accrued, contingent or other liabilities or obligations due or to
become due, and there are no claims or causes of action (including but not
limited to those relating to any Consumers Benefit Plan (as defined in Section
2.8.1) formerly maintained by Consumers or any of its subsidiaries or a
Consumers ERISA Affiliate (as defined in Section 2.8.1) on or after December
31, 1997) that have been or, to the knowledge of Consumers, are reasonably
likely to be asserted against Consumers or any of its subsidiaries, except (i)
as and to the extent reflected or reserved against on the balance sheet
included in Consumers' Annual Report on Form 10-K for the year ended December
31, 1997 (the "Consumers Base Balance Sheet"), or included in the notes to
Consumers Base Balance Sheet, (ii) for normal and recurring liabilities
incurred since December 31, 1997, in the ordinary course of business consistent
with past practice, or (iii) for such other liabilities and obligations that
are not in the aggregate reasonably likely to have a Material Adverse Effect.
2.6 Absence of Certain Changes or Events. Except as disclosed in the
Consumers SEC Documents or in Section 2.6 of the Disclosure Schedule, since the
date of the Consumers Base Balance Sheet, Consumers and its subsidiaries have
conducted their business only in the ordinary course, and, except as otherwise
expressly permitted by this Agreement, there has not been (i) any change which
has had or which could have a Material Adverse Effect, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of Consumers' outstanding capital
stock (other than regular quarterly cash dividends in accordance with usual
record and payment dates and in accordance with Consumers' present dividend
policy), (iii) any split, combination or reclassification of any of its
outstanding capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of, or in substitution for
shares of its outstanding capital stock, (iv) any entry by Consumers or any of
its subsidiaries into any employment, severance, change of control, termination
or similar agreement with any officer, director or other employee, or any
increase in the compensation or severance or termination benefits payable to
any director, officer or other employee of Consumers or any of its subsidiaries
(except in the case of employees in the ordinary course of business consistent
with prior practice, or as was required under employment agreements in effect
as of the date of the Consumers Base Balance Sheet), or (v) any change in the
method of accounting or policy used by Consumers or any of its subsidiaries,
except as permitted by GAAP.
2.7 Real and Personal Property.
2.7.1 Consumers and its subsidiaries own, or have a valid and
enforceable right to use or a valid and enforceable leasehold interest in, all
real property (including all buildings, fixtures and other improvements
thereto) used by them in the conduct of their respective businesses as such
businesses are now being conducted. Except as disclosed in the Consumers SEC
Documents or Section 2.7.1 of the Disclosure Schedule, neither Consumers' nor
any of its subsidiaries' ownership of or leasehold interest in any such
property is subject to any mortgage, pledge, lien, option, conditional sale
agreement, encumbrance, security interest, title exception or restriction or
claim or charge of any kind ("encumbrances"), except for such encumbrances as
are not in the aggregate reasonably likely to have a Material Adverse Effect.
All such property is in good condition and repair and is suitable in all
material respects for the purposes for which it is now being used in the
conduct of the businesses of Consumers and its subsidiaries, except to the
extent that the poor condition or unsuitability of any such property is not in
the aggregate reasonably likely to have a Material Adverse Effect.
2.7.2 Except as otherwise disclosed in the Consumers SEC
Documents or Section 2.7.2 of the Disclosure Schedule, all personal property
that is owned by Consumers or any of its subsidiaries and used by any of them
in the conduct of their respective businesses is owned free and clear of any
encumbrances, except for such encumbrances as are not in the aggregate
reasonably likely to have a Material Adverse Effect. All property that is
owned or used by Consumers is in good working condition, subject to normal wear
and tear, and is suitable in all material respects for the purposes for which
it is now being used in the conduct of the businesses of Consumers and its
subsidiaries, except to the extent that the poor condition or unsuitability of
any such property is not in the aggregate reasonably likely to have a Material
Adverse Effect.
2.8 Employee Matters; ERISA.
2.8.1 Section 2.8.1 of the Disclosure Schedule contains a true
and complete list of: (i) each employee benefit plan, program or arrangement
covering employees, former employees or directors of Consumers (or any of its
subsidiaries, including, but not limited to any "Consumers ERISA Affiliate"
(any entity required to be aggregated with Consumers pursuant to Code Section
414(b), (c) or (m))), or any of their dependents or beneficiaries, or providing
benefits to such persons in respect of services provided to any such entity,
including but not limited to any "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (whether or not terminated, if Consumers, or any of its subsidiaries,
including, but not limited to, any Consumers ERISA Affiliate), could have
statutory or contractual liability with respect thereto on or after the date
hereof); (ii) each management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change in control),
bonus or other plan or contract for personal services with or covering any
current officer, key employee or director or any consulting contract with any
person who prior to entering into such contract was a director or officer of
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate) (whether or not terminated, if Consumers (or any of
its subsidiaries, including, but not limited to, any Consumers ERISA Affiliate)
could have statutory or contractual liability with respect thereto on or after
the date hereof); and (iii) each "employee pension benefit plan" (within the
meaning of ERISA Section 3(2)) subject to Title IV of ERISA or the minimum
funding requirements of Code Section 412 maintained or contributed to by
Consumers or any Consumers ERISA Affiliate at any time during the seven (7)
year period immediately preceding the date hereof (such plans and arrangements
described in paragraphs (i), (ii) and (iii) of this Section 2.8.1 to be
referred to collectively as the "Consumers Benefit Plans"). With respect to
each Consumers Benefit Plan, Section 2.8.1 of the Disclosure Schedule contains
a true and complete list of the source or sources of benefit payments under the
plan (including, where applicable, the identity of any trust, whether or not a
grantor trust, insurance contract, custodial account, agency agreement,
Voluntary Employees Beneficiary Association ("VEBA") as that term is referred
to in Code Section 501(c)(9), or other arrangement that holds the assets of, or
serves as a funding vehicle or source of benefits for, such Consumers Benefit
Plan).
2.8.2 Except as disclosed in Section 2.8.2 of the Disclosure
Schedule, all contributions and other payments required to have been made by
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate) pursuant to any Consumers Benefit Plan (or to any
person pursuant to the terms thereof) have been timely made or the amount of
such payment or contribution obligation has been reflected in Consumers'
financial statements reflected in the Consumers SEC Documents.
2.8.3 Except as disclosed in Section 2.8.3 of the Disclosure
Schedule, each Consumers Benefit Plan that is an "employee pension benefit
plan" (within the meaning of ERISA Section 3(2)) is "qualified" within the
meaning of Code Section 401(a), both as to form and operation, and the IRS has
determined that each such Consumers Benefit Plan is qualified as to form (as
evidenced by the issuance of a favorable determination letter), and, to the
knowledge of Consumers, no event or condition exists or has occurred that could
result in the revocation of any such IRS determination. Consumers and each
Consumers ERISA Affiliate are in compliance with, and each Consumers Benefit
Plan is and has been operated in compliance with, all applicable laws, rules
and regulations governing such plan, including without limitation ERISA and the
Code. Moreover, neither Consumers (or any of its subsidiaries, including, but
not limited to, any Consumers ERISA Affiliate) nor any other individual or
entity has engaged in any transaction with respect to any Consumers Benefit
Plan as a result of which Consumers (or any of its subsidiaries, including, but
not limited to, any Consumers ERISA Affiliate) could be subject to liability
pursuant to ERISA Section 409 or 502 or subject to an excise tax pursuant to
Code Section 4975. In addition, except as otherwise disclosed in Section 2.8.3
of the Disclosure Schedule, no Consumers Benefit Plan that is an "employee
pension benefit plan" (within the meaning of ERISA Section 3(2)): (i) is
subject to any ongoing audit, investigation, or other administrative proceeding
of the IRS, the Department of Labor, or any other Governmental Entity; (ii) is
the subject of any pending application for administrative relief under any
voluntary compliance program of any Governmental Entity (including without
limitation the IRS's Voluntary Compliance Resolution Program, Closing Agreement
Program, or Walk-in Closing Agreement Program or the Department of Labor's
Delinquent Filer Voluntary Compliance Program), and no Consumers Benefit Plan
has engaged in any act of "self-correction" under the IRS's Administrative
Policy Regarding Self-Correction; and (iii) all filings required by ERISA and
the Code as to each Consumers Benefit Plan have been timely filed, and all
required notices and disclosures to participants in such Consumers Benefit
Plans have been timely provided.
2.8.4 Except as disclosed in Section 2.8.4 of the Disclosure
Schedule, with respect to Consumers Benefit Plans, individually and in the
aggregate, no termination or partial termination of any Consumers Benefit Plan
or other event has occurred and, to the knowledge of Consumers, there exists no
condition or set of circumstances that could subject Consumers or any Consumers
ERISA Affiliate to any liability arising under the Code, ERISA or any other
applicable law (including without limitation any liability to or under any such
plan or to the Pension Benefit Guaranty Corporation (the "PBGC")), or under any
indemnity agreement to which Consumers (or any of its subsidiaries, including,
but not limited to, any Consumers ERISA Affiliate) is a party, excluding
liability for benefit claims and funding obligations payable in the ordinary
course, and excluding liability for PBGC insurance premiums payable in the
ordinary course.
2.8.5 Except as disclosed in Section 2.8.5 of the Disclosure
Schedule, no Consumers Benefit Plan that is a "welfare plan" (within the
meaning of ERISA Section 3(1)) provides benefits for any retired or former
employees (other than as required pursuant to ERISA Section 601).
2.8.6 Consumers has made available to PSC a true and correct
copy of the following items with respect to each Consumers Benefit Plan, as may
be applicable: (i) each collective bargaining agreement to which Consumers or
any Consumers ERISA Affiliate is a party or under which Consumers or any
Consumers ERISA Affiliate has obligations; (ii) the current plan document
(including all amendments adopted since the most recent restatement) and its
most recently prepared summary plan description and all summaries of material
modifications prepared since the most recent summary plan description; (iii)
the IRS Form 5500, including all applicable financial statements and schedules
and opinions of independent accountants, for the three (3) most recent plan
years; (iv) each related trust agreement, insurance contract, service provider
or investment management agreement (including all amendments to each such
document); (v) the most recent IRS determination letter with respect to the
qualified status under Code Section 401(a) of such plan and a copy of any
application for an IRS determination letter filed since the most recent IRS
determination letter was issued; (vi) the most recent actuarial reports or
valuations; (vii) all personnel, payroll, and employment manuals and policies
applicable to Consumers employees; (viii) a written description of any
Consumers Benefit Plan that is not otherwise in writing; (ix) a reasonably
representative sample of notifications to affected employees of their rights
under ERISA Section 601 and Code Section 4980B; and (x) all notices that were
given by Consumers or any Consumers ERISA Affiliate to the IRS, or the United
States Department of Labor, and all notices given to Consumers or any Consumers
ERISA Affiliate by the IRS or the United States Department of Labor, during the
last four (4) calendar years.
2.8.7 Except as disclosed in Section 2.8.7 of the Disclosure
Schedule, the consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in any: (i) payment (whether of severance pay
or otherwise) becoming due from Consumers (or any of its subsidiaries,
including, but not limited to, any Consumers ERISA Affiliate) under any
applicable Consumers Benefit Plans to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement; (ii) benefit under any Consumers Benefit Plan being established or
becoming accelerated, vested or payable, except for a payment or benefit that
would have been payable under the same terms and conditions without regard to
the transactions contemplated by this Agreement; (iii) payment that will be
non-deductible to Consumers or subject to tax under Code Sections 280G or 4999;
or (iv) requirement that Consumers will be required to "gross up" or otherwise
compensate any individual because of the imposition of any excise tax on a
payment to such person.
2.8.8 Except as disclosed in Section 2.8.8 of the Disclosure
Schedule, each Consumers Benefit Plan that is subject to either or both of the
minimum funding requirements of ERISA Section 302 or to Title IV of ERISA, has
assets that, as of the date hereof, have a fair market value equal to or
exceeding the present value of the accrued benefit obligations thereunder on a
termination basis, as of the date hereof, based on the actuarial methods,
tables and assumptions theretofore utilized by such plan's actuary in preparing
such plan's most recently prepared actuarial valuation report, except to the
extent that applicable law would require the use of different actuarial
assumptions if such plan was to be terminated as of the date hereof. No
Consumers Benefit Plan subject to the minimum funding requirements of ERISA
Section 302 and Code Section 412 has incurred any "accumulated funding
deficiency" (within the meaning of ERISA Section 302 and Code Section 412).
2.8.9 Except as disclosed in Section 2.8.9 of the Disclosure
Schedule, no Consumers Benefit Plan is or was a "multiemployer plan" (within
the meaning of ERISA Section 4001(a) (3)), a multiple employer plan described
in Code Section 413(c), or a "multiple employer welfare arrangement" (within
the meaning of ERISA Section 3(40)); and neither Consumers nor any of its
subsidiaries (including, but not limited to, any Consumers ERISA Affiliate),
has been obligated to contribute to, or otherwise has or has had any liability
with respect to, any multiemployer plan, multiple employer plan, or multiple
employer welfare arrangement. With respect to any Consumers Benefit Plan that
is listed in Section 2.8.9 of the Disclosure Schedule as a multiemployer plan,
neither Consumers nor any of its subsidiaries (including, but not limited to,
any Consumers ERISA Affiliate) have made or incurred a "complete withdrawal" or
a "partial withdrawal," as such terms are defined in ERISA Sections 4203 and
4205, therefrom at any time during the five (5) calendar year period
immediately preceding June 27, 1998 and the transactions contemplated by the
Agreement will not, in and of themselves, give rise to such a "complete
withdrawal" or "partial withdrawal."
2.8.10 Except as disclosed in Section 2.8.10 of the Disclosure
Schedule: (i) neither Consumers nor any subsidiary of Consumers (including, but
not limited to, any Consumers ERISA Affiliate) is subject to any legal,
contractual, equitable or other obligation to establish as of any date any
employee benefit plan of any nature, including without limitation any pension,
profit sharing, welfare, post-retirement welfare, stock option, stock or cash
award, nonqualified deferred compensation or executive compensation plan,
policy or practice; and (ii) after review of all Consumers Benefit Plan
documents, Consumers and its subsidiaries, acting alone or together,
(including, but not limited to, any Consumers ERISA Affiliate) may, without the
consent of any employee, beneficiary or dependent, employees' organization or
other person, terminate, modify or amend any Consumers Benefit Plan or any
other employee benefit plan, policy, program or practice (or its participation
in any such Consumers Benefit Plan or other employee benefit plan, policy,
program or practice) at any time sponsored, maintained or contributed to by
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate), effective as of any date before, on, or after the
Effective Time.
2.8.11 Except as disclosed in Section 2.8.11 of the Disclosure
Schedule: (i) no event constituting a "reportable event" (within the meaning
of ERISA Section 4043(b)) for which the thirty (30) calendar day notice
requirement has not been waived by the PBGC has occurred with respect to any
Consumers Benefit Plan, and (ii) no liability, claim, action or litigation has
been made, commenced, or threatened, by or against Consumers (or any of its
subsidiaries, including, but not limited to, any Consumers ERISA Affiliate)
with respect to any Consumers Benefit Plan (other than for benefits or PBGC
premiums payable in the ordinary course).
2.8.12 Except as disclosed in Section 2.8.12 of the Disclosure
Schedule, the operation and administration of any Consumers Benefit Plan by
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate), and, where applicable, to the knowledge of
Consumers, by any independent third-party service provider or other such entity
providing administrative services to, or on behalf of, such Consumers Benefit
Plan, will not result in a Year 2000 Problem with a Material Adverse Effect.
2.9 Taxes. Except as disclosed in Section 2.9 of the Disclosure
Schedule and except for payments required to be made pursuant to Article 4
hereof:
2.9.1 Consumers and each of its subsidiaries has duly filed all
tax returns and reports required to be filed by it or requests for extensions
to file such returns or reports have been timely filed, granted and have not
expired. All tax returns filed by Consumers and each of its subsidiaries are
complete and accurate in all material respects. Consumers and each of its
subsidiaries has paid (or Consumers has paid on the subsidiaries' behalf) all
taxes due on such returns, and the most recent financial statements contained
in the Consumers SEC Documents and all Consumers SEC Documents filed prior to
the Closing Date reflect an adequate reserve for all taxes payable by Consumers
and its subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
2.9.2 No deficiencies for any taxes have been proposed,
asserted or assessed against Consumers or any of its subsidiaries that are not
adequately reserved for, and no requests for waivers of the time to assess any
such taxes have been granted or are pending. The federal income tax returns of
Consumers and each of its subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue Service, or the
statute of limitations on assessment or collection of any federal income taxes
due from Consumers or any of its subsidiaries has expired, through such taxable
years as are set forth in Section 2.9.2 of the Disclosure Schedule.
2.9.3 As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, premium, franchise, sales,
excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any interest, penalties and
additions to taxes relating thereto.
2.9.4 Neither Consumers nor any of its subsidiaries has made,
or is obligated to make, in connection with the transactions contemplated by
this Agreement or otherwise, any payments that will not be deductible because
of the application of Section 280G or Section 162(m) of the Code.
2.9.5 Neither Consumers nor any of its subsidiaries has made
any election, filed any consent or entered into any agreement with respect to
taxes that is not reflected on the federal income tax returns of Consumers and
its subsidiaries for the three (3) years ended December 31, 1996.
2.10 Compliance With Applicable Laws. Except as disclosed in Section
2.10 of the Disclosure Schedule:
2.10.1 The business of Consumers and each of its subsidiaries
is being conducted in compliance, in all material respects, with all applicable
laws, ordinances, rules and regulations, decrees and orders of any Governmental
Entity, and all material notices, reports, documents and other information
required to be filed thereunder within the last three (3) years were properly
filed and were in compliance in all material respects with such laws.
2.10.2 Except as disclosed in the Consumers SEC Documents,
Consumers and each of its subsidiaries has all material licenses (including,
without limitation, utility licenses), permits, authorizations, franchises and
rights (collectively, "Licenses") which are necessary for it to own or lease,
as the case may be, and operate its properties and assets and to conduct its
business as now conducted. The business of Consumers and each of its
subsidiaries has been and is being conducted in compliance in all material
respects with all such Licenses. All such Licenses are in full force and
effect, and there are no material restrictions or limitations contained within
the Licenses which would prevent Consumers from operating as it does presently,
and there is no proceeding or investigation pending or, to the knowledge of
Consumers, threatened which would reasonably be expected to lead to the
revocation, amendment, failure to renew, limitation, suspension or restriction
of any such License.
2.10.3 Each subsidiary of Consumers that has been or is
required to do so has filed all forms, reports, statements and other documents
required by law to be filed by it with the applicable Governmental Entity, and
such forms, reports, statements and other documents, complied in all material
respects with the statutory and regulatory requirements applicable thereto.
2.11 Environmental Protection.
2.11.1 Except as disclosed in Section 2.11.1 of the Disclosure
Schedule or as disclosed in Consumers SEC Documents, Consumers and its
subsidiaries are and have been in material compliance with all applicable
Environmental Laws (as defined in Section 2.11.7), except where the failure to
be or to have so been in material compliance, in the aggregate, would not have
a present Material Adverse Effect. Except as disclosed in Section 2.11.1 of
the Disclosure Schedule, neither Consumers nor any of its subsidiaries has
received any written notice from any person or Governmental Entity that alleges
that Consumers or any of its subsidiaries is not or has not been in material
compliance with applicable Environmental Laws, except where the failure to be
or to have so been in material compliance, in the aggregate, would not have a
present Material Adverse Effect.
2.11.2 Except as disclosed in Section 2.11.2 of the Disclosure
Schedule or as disclosed in the Consumers SEC Documents, Consumers and each of
its subsidiaries have obtained or have applied for all material environmental,
health and safety permits and authorizations (collectively, "Environmental
Permits") necessary for the construction of their facilities and the conduct of
their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and Consumers and its subsidiaries are in material compliance
with all terms and conditions of all such Environmental Permits and are not
required to make any material expenditures in connection with any renewal
application pending Governmental Entity approval, except where the failure to
obtain or be in such compliance and the requirement to make such expenditures,
in the aggregate, would not have a Material Adverse Effect.
2.11.3 Except as disclosed in Section 2.11.3 of the Disclosure
Schedule or as disclosed in Consumers SEC Documents, no Environmental Claim (as
defined in Section 2.11.7) is pending or, to the knowledge of Consumers,
threatened (i) against Consumers or any of its subsidiaries, (ii) against any
person or entity whose liability for any Environmental Claim Consumers or any
of its subsidiaries has or may have retained or assumed either contractually or
by operation of law, or (iii) against any real or personal property or
operations that Consumers or any of its subsidiaries owns, leases or manages,
in whole or in part, or (iv) to the knowledge of Consumers, against any real
property at which any Hazardous Materials, as defined in Section 2.11.7,
generated or used by either Consumers or any of its subsidiaries have been
stored, treated, or disposed of, that is reasonably likely in the aggregate to
have a Material Adverse Effect.
2.11.4 Except as disclosed in Section 2.11.4 of the Disclosure
Schedule or as disclosed in the Consumers SEC Documents, to the knowledge of
Consumers, there has been no Release (as defined in Section 2.11.7) or
threatened Release of Hazardous Materials (as defined in Section 2.11.7) that
would be reasonably likely to (i) form the basis of any Environmental Claim
against Consumers or any of its subsidiaries, or against any person or entity
whose liability for any Environmental Claim Consumers or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law, or (ii) cause damage to or diminution of real property or
operations that Consumers or any of its subsidiaries owns, leases, or manages,
in whole or in part, except for Releases or threatened Releases of Hazardous
Materials the liability for which would not in the aggregate have a Material
Adverse Effect.
2.11.5 Except as disclosed in Section 2.11.5 of the Disclosure
Schedule, or as disclosed in the Consumers SEC Documents, to the knowledge of
Consumers, with respect to any predecessor of Consumers or any of its
subsidiaries, there is no Environmental Claim pending or threatened, or Release
of Hazardous Materials, that would be reasonably likely to form the basis of
any Environmental Claims that are reasonably likely to have, in the aggregate,
a Material Adverse Effect.
2.11.6 To the knowledge of Consumers, Consumers has disclosed
to PSC all material facts that Consumers reasonably believes are likely to
require material expenditures by Consumers or any of its subsidiaries in order
to comply with current applicable Environmental Laws arising from (i) the cost
of pollution control equipment currently required or known to be required in
the future, (ii) current investigatory, removal, remediation or response costs
or investigatory, removal, remediation or response costs known to be required
in the future, in each case, both on-site and off-site, and (iii) any other
environmental matters affecting Consumers or any of its subsidiaries.
2.11.7 As used in this Agreement:
2.11.7.1 "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices by any person
or entity (including without limitation any Governmental Entity) alleging
liability or potential liability (including without limitation potential
liability for enforcement costs, investigatory costs, cleanup costs, response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on, or
resulting from (i) the presence, or Release or threatened Release, of any
Hazardous Materials at any location, whether or not owned, operated, leased or
managed by Consumers or any of its subsidiaries or joint ventures, (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Laws, or (iii) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence, Release, or threatened Release
of any Hazardous Materials.
2.11.7.2 "Environmental Laws" means all federal,
state and local laws, rules, regulations, ordinances, or consent decrees
relating to pollution or protection of human health or the environment
(including without limitation air inside any structure, ambient air, surface
water, groundwater, land surface or subsurface strata), including without
limitation laws and regulations relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
2.11.7.3. "Hazardous Materials" means (i) any
petroleum or petroleum products or petroleum wastes (including crude oil or any
fraction thereof), nuclear fuel or waste or other radioactive materials,
friable asbestos or friable asbestos-containing material, urea formaldehyde
foam insulation, and transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls, (ii) 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,"
"chemical wastes", "residual wastes", "industrial wastes", or words of similar
import, under any Environmental Laws, and (iii) any other chemical, material,
substance or waste, exposure to or use, transport, treatment, storage, or
disposal of which is now prohibited, limited or regulated under any
Environmental Laws in a jurisdiction in which Consumers or any of its
subsidiaries or joint ventures operates.
2.11.7.4 "Release" means any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into any air, soil, surface water, groundwater, indoor structure,
or outdoor structure.
2.12 Litigation. Except as set forth in the Consumers SEC Documents
or Section 2.12 of the Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Consumers,
threatened against or affecting Consumers or any of its subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect Consumers'
ability to consummate the transactions contemplated hereby. Neither Consumers
nor any its subsidiaries is subject to any outstanding order, writ, injunction
or decree which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. Except as set forth in the Consumers SEC
Documents or Section 2.12 of the Disclosure Schedule, none of Consumers'
subsidiaries whose rates or services are subject to regulation by a
Governmental Entity (i) has rates which have been or are being collected
subject to refund, pending final resolution of any proceeding pending before a
Governmental Entity or on appeal to the courts, or (ii) is a party to any
proceeding before the Governmental Entity or on appeal from orders of a
Governmental Entity.
2.13 Labor Relations. Except as set forth in Section 2.13 of the
Disclosure Schedule:
2.13.1 Neither Consumers nor any of its subsidiaries is a
party to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no current union
representation issue involving employees of Consumers or any of its
subsidiaries, nor does Consumers or any of its subsidiaries know of any
activity or proceeding of any labor organization (or representative thereof) or
employee group (or representative thereof) to organize any such employees.
2.13.2 There is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance procedure
against Consumers or any of its subsidiaries pending or, to the knowledge of
Consumers, threatened that could reasonably be expected to have a Material
Adverse Effect.
2.13.3 There is no complaint, lawsuit or proceeding in any
forum by or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortuous conduct
in connection with the employment relationship against Consumers or any of its
subsidiaries pending or, to the knowledge of Consumers, threatened that could
reasonably be expected to have a Material Adverse Effect.
2.13.4 There is no strike, dispute, slowdown, work stoppage or
lockout pending or, to the knowledge of Consumers, threatened against or
involving Consumers or any of its subsidiaries that could reasonably be
expected to have a Material Adverse Effect.
2.13.5 Consumers and each of its subsidiaries is in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health, except for non-compliance that would not, individually or in the
aggregate, have a Material Adverse Effect.
2.13.6 There is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of Consumers,
threatened with respect to which any current or former director, officer,
employee or agent of Consumers or any of its subsidiaries is or may be entitled
to claim indemnification from Consumers or any of its subsidiaries pursuant to
their respective articles or certificates of incorporation or bylaws, as
provided in any indemnification agreement to which Consumers or any of its
subsidiaries is a party, or pursuant to applicable law that could reasonably be
expected to have a Material Adverse Effect.
2.14 Intellectual Property. Consumers and its subsidiaries possess or
have adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights currently used or necessary for the operation
of their business (collectively, the "Consumers Intellectual Property"), except
where the failure to possess or have adequate rights to use such properties
would not have a Material Adverse Effect. Except as set forth in Section 2.14
of the Disclosure Schedule, all of the Consumers Intellectual Property is owned
by Consumers or one of its subsidiaries, free and clear of any and all liens,
claims or encumbrances, except for those liens, claims and encumbrances that
would not, individually or in the aggregate, have a Material Adverse Effect,
and neither Consumers nor any of its subsidiaries has forfeited or otherwise
relinquished any of the Consumers Intellectual Property, which forfeiture would
have a Material Adverse Effect. To the knowledge of Consumers, the use of the
Consumers Intellectual Property by Consumers or its subsidiaries does not, in
any material respect, conflict with, infringe upon, violate or interfere with
or constitute an appropriation of any right, title, interest or goodwill
(including, without limitation, any intellectual property right, trademark,
trade name, patent, service ▇▇▇▇, brand ▇▇▇▇, brand name, computer program,
database, industrial design, copyright or any pending application therefor) of
any other person, and neither Consumers nor any of its subsidiaries has
received notice of any claim or otherwise knows that any of the Consumers
Intellectual Property is invalid, conflicts with the asserted rights of any
other person, has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of Consumers Intellectual Property, except for such
conflicts, infringements, violations, interferences, claims, invalidity,
abandonments, cancellations or unenforceability that would not, individually or
in the aggregate, have a Material Adverse Effect.
2.15 No Default. Neither Consumers nor any of its subsidiaries is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term,
condition or provision of (i) its articles or certificate of incorporation or
bylaws, (ii) any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which it is now a party or by which it or any of
its properties or assets may be bound (except for the requirement under certain
of such instruments to file supplemental indentures as a result of the
transactions contemplated hereby), or (iii) any order, writ, injunction,
decree, statute, rule or regulation applicable to it, except in the case of
(ii) and (iii) for defaults or violations which in the aggregate would not have
a Material Adverse Effect. Consumers and each of its subsidiaries have
fulfilled, and have taken all action reasonably necessary to date to enable
them to fulfill when due, all of their material obligations under all
contracts, commitments and arrangements and, to the knowledge of Consumers, no
breach or default by any other party under such contracts, commitments or
arrangements has occurred or is threatened that will or could impair the
ability of Consumers or any of its subsidiaries to enforce any of its rights
thereunder in any material respect.
2.16 Regulation as a Utility. Certain subsidiaries of Consumers are
regulated as public utilities in the states of Maine, Ohio, Illinois,
Pennsylvania, and New Jersey. Except as disclosed in Section 2.16 of the
Disclosure Schedule, neither Consumers nor any "subsidiary company" or
"affiliate" (as such terms are defined in the Public Utility Holding Company
Act of 1935, as amended (the "1935 Act")) of Consumers is subject to regulation
as a public utility or public service company (or similar designation) by any
other state in the United States, by the United States or any agency or
instrumentality of the United States or by any foreign country. Consumers is
not a holding company under the 1935 Act. Except as disclosed in Section 2.16
of the Disclosure Schedule, no assets of Consumers or any of its subsidiaries
or divisions have been disallowed in any ratemaking procedure before any
Governmental Entity.
2.17 Insurance. Except as disclosed in Section 2.17 of the Disclosure
Schedule, Consumers and each of its subsidiaries is, and has been continuously
since January 1, 1993, insured with financially responsible insurers in such
amounts and against such risks and losses as are disclosed in Section 2.17 of
the Disclosure Schedule. Except as disclosed in Section 2.17 of the Disclosure
Schedule, neither Consumers nor any of its subsidiaries has received any notice
of cancellation or termination with respect to any insurance policy. To the
knowledge of Consumers, there is no basis for any claim under D&O Insurance, as
defined in Section 4.16.3. All insurance policies of Consumers and its
subsidiaries are valid and enforceable policies.
2.18 Change in Business Relationships. Except as disclosed in Section
2.18 of the Disclosure Schedule, neither Consumers nor any of its subsidiaries
has knowledge of any event or circumstance that indicates that, whether on
account of the transactions contemplated by this Agreement or otherwise, any
customer, agent, representative or supplier of Consumers or any of its
subsidiaries intends to discontinue, diminish or change its relationship with
Consumers or any of its subsidiaries in any way that would be reasonably likely
to have a Material Adverse Effect.
2.19 Voting Requirements. The only votes of the holders of any class
or series of Consumers' capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement are: (i) the affirmative vote
of the holders of a majority of the outstanding Consumers Common Shares
entitled to vote at the Consumers Special Meeting, as defined in Section 4.2.1,
with respect to the approval of the Merger; and (ii) the affirmative vote of
the holders of a majority of the outstanding Consumers Preferred Shares, if
any, entitled to vote at the Consumers Special Meeting, with respect to the
approval of the Merger.
2.20 Brokers. This Agreement does not give rise to any valid claim by
any person against Consumers or any of its subsidiaries for a finder's fee,
brokerage commission or similar payment; except for ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, which
represented Consumers and whose fees and expenses shall be paid by Consumers.
2.21 Year 2000 Problem. Except as disclosed in the Consumers SEC
Documents or in Section 2.21 of the Disclosure Schedule, the Year 2000 Problem
will not result in a Material Adverse Effect. For purposes of this Agreement,
the term "Year 2000 Problem" shall mean the risk that computer applications
used by or for the benefit of Consumers or any of its subsidiaries may be
unable to recognize or perform properly certain date sensitive functions
involving certain dates prior to and any date after December 31, 1999.
2.22 Knowledge. For purposes of this Article 2, "to the knowledge of
Consumers" shall mean to the knowledge of the President and Vice Presidents of
Consumers and the Presidents of each of Consumers' subsidiaries, after
reasonable inquiry.
2.23 Disclosure. Matters disclosed in any of the Consumers SEC
Documents, in any section of the Disclosure Schedule, or in any section of this
Article 2 shall be considered disclosed for all purposes under this Article 2.
2.24 Fairness Opinion. Consumers has received an opinion of ▇▇ ▇▇▇▇
▇▇▇▇▇▇, dated June 27, 1998, that as of that date the terms of the Merger are
fair to the current shareholders of Consumers from a financial point of view.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PSC AND ACQUISITION
PSC and Acquisition hereby jointly and severally represent and warrant
to Consumers as follows:
3.1 Organization, Standing and Corporate Authority. Each of PSC and
Acquisition is a corporation duly organized and validly existing under the laws
of the Commonwealth of Pennsylvania and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of PSC and
Acquisition is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary except where the failure to be so qualified would not individually or
in the aggregate have a Material Adverse Effect (as that term is defined in
Section 10.9) on the ability of PSC or Acquisition to consummate the
transactions contemplated hereby. PSC and Acquisition have delivered to
Consumers complete and correct copies of their Articles of Incorporation and
By-Laws, as amended to the date of this Agreement.
3.2 Capital Structure.
3.2.1 The authorized capital stock of PSC consists of: (i)
40,000,000 PSC Common Shares having a par value of $.50 per share; and (ii)
1,770,819 shares of preferred stock having a par value of $1.00 per share. At
the close of business on June 24, 1998, there were (i) 27,511,394 PSC Common
Shares issued and outstanding, (ii) 527,577 PSC Common Shares held as treasury
shares, (iii) 1,885,714 PSC Common Shares reserved for issuance under PSC's
long-term incentive plans, (iv) 100,000 shares of Series A Preferred Stock
reserved for issuance under PSC's Shareholder Rights Plan; (v) 32,200 shares of
Series B Preferred Stock issued and outstanding; and (vi) 1,457,200 shares
reserved for issuance under PSC's direct stock purchase and dividend
reinvestment plan. PSC has entered into an agreement, dated June 3, 1998, by
and among PSC, Philadelphia Suburban Water Company ("PSWC"), Berkshire Greens,
Inc. ("Berkshire"), and Flying Hills Water Company ("FHWC"), a wholly owned
subsidiary of Berkshire, pursuant to which PSC has agreed to issue 42,000 PSC
Common Shares (as unregistered shares with certain piggyback registration
rights) to Berkshire upon the merger of FHWC into PSWC. Except as set forth
above, at the close of business on June 24, 1998, no other shares of capital
stock or other voting securities of PSC were issued, reserved for issuance, or
outstanding. All such outstanding PSC Common Shares are, and all PSC Common
Shares which may be issued in connection with the Merger will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights. All the outstanding shares of capital stock of each
significant subsidiary (within the meaning of Rule 1-02 of Regulation S-X) of
PSC have been validly issued and are fully paid and nonassessable and are owned
by PSC or a wholly-owned subsidiary, and are clear of all liens, claims,
encumbrances, restraints on alienation, or other restrictions with respect to
the transferability or assignability thereof (other than restrictions imposed
by federal or state securities laws). Except as set forth in this Agreement,
neither PSC nor any of its significant subsidiaries has any outstanding option,
warrant, subscription or other agreement or commitment which either obligates
PSC or any of its significant subsidiaries to issue, sell or transfer,
repurchase, redeem, otherwise acquire or vote any shares of the capital stock
of PSC or any of its significant subsidiaries, or which restricts the transfer
of PSC Common Shares.
3.2.2 As of the date hereof, the authorized capital stock of
Acquisition consists of 1,000 common shares, without par value, all of which
are issued and outstanding and owned by PSC. All such outstanding common
shares are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
3.3 Authority; Noncontravention. Each of PSC and Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. Subject to the approval of their
shareholders as set forth in Section 4.2.2, the execution and delivery of this
Agreement by PSC and Acquisition and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of PSC and Acquisition. This Agreement has been
duly executed and delivered by PSC and Acquisition and, assuming this Agreement
has been duly executed and delivered by Consumers, constitutes a valid and
binding obligation of each of PSC and Acquisition, enforceable against each of
them in accordance with its terms, except that the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditor's rights generally and by
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). Except as set forth in
Section 3.3 of the PSC Disclosure Schedule and subject to the governmental
filings and other matters referred to in the following sentence, the execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not (i) conflict with any of the provisions of the Articles of
Incorporation or By-Laws of PSC or Acquisition, (ii) conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or require the consent of any
person under, any indenture, or other agreement, permit, concession, franchise,
license or similar instrument or undertaking to which PSC or any of its
subsidiaries is a party or by which PSC or any of its subsidiaries or any of
their assets is bound or affected, or (iii) contravene any law, rule or
regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, subject, in the case of clauses
(ii) and (iii), to those conflicts, breaches, defaults and similar matters,
which, individually or in the aggregate, would not materially and adversely
affect PSC's ability to consummate the transactions contemplated hereby. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any Governmental Entity which has not been received or made is required by
or with respect to PSC or Acquisition in connection with the execution and
delivery of this Agreement by PSC and Acquisition or the consummation by them
of any of the transactions contemplated hereby, except for (a) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger, (b) the filing with the SEC of a registration statement on Form S-4 by
PSC in connection with the issuance of PSC Common Shares in the merger (the
"Form S-4") and such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (c) the filing of articles of merger with the Pennsylvania Secretary
of State and appropriate documents with the relevant authorities of the other
states in which Consumers is qualified to do business, (d) required filings
with the Pennsylvania Public Utility Commission, and (e) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 3.3
of the PSC Disclosure Schedule.
3.4 PSC SEC Documents and Financial Statements.
3.4.1 PSC has timely filed all required reports, schedules,
forms, statements and other documents with the SEC from January 1, 1993 through
June 27, 1998 (the "PSC SEC Documents"). (All such documents filed by PSC with
the SEC from June 27, 1998 until the Closing Date shall also be included in the
definition of PSC SEC Documents.) As of their respective dates (or, with
respect to any amendment to the PSC SEC Documents, as of the date of the filing
of such amendment), the PSC SEC Documents complied with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such PSC SEC
Documents, and none of the PSC SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.4.2 The consolidated financial statements of PSC included in
the PSC SEC Documents comply in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present,
in all material respects, the consolidated financial position of PSC and its
consolidated subsidiaries, as of the dates thereof and the consolidated results
of their operations, changes in shareholders' equity and consolidated cash
flows for the periods then ended (subject, in the case of unaudited financial
statements, to normal recurring adjustments, none of which is material).
3.4.3 Except as disclosed in the PSC SEC Documents or in the
PSC Disclosure Schedule, neither PSC nor any of its subsidiaries has any
absolute, accrued, contingent or other liabilities or obligations due or to
become due, and there are no claims or causes of action that have been or, to
the knowledge of PSC, are reasonably likely to be asserted against PSC or any
of its subsidiaries, except (i) as and to the extent reflected or reserved
against on the balance sheet included in PSC's Annual Report on Form 10-K for
the year ended December 31, 1997 (the "PSC Base Balance Sheet"), or included in
the notes to the PSC Base Balance Sheet, (ii) for normal and recurring
liabilities incurred since December 31, 1997, in the ordinary course of
business consistent with past practice, and (iii) for such other liabilities
and obligations that are not in the aggregate reasonably likely to have a
Material Adverse Effect.
3.5 Absence of Certain Changes or Events. Except as disclosed in the
PSC SEC Documents or in Section 3.5 of the PSC Disclosure Schedule, since the
date of the PSC Base Balance Sheet, PSC and its subsidiaries have conducted
their business only in the ordinary course, and there has not been (i) any
change which has had or which would have a Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of PSC's outstanding
capital stock (other than regular quarterly cash dividends in accordance with
PSC's present dividend policy), or (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of, or in substitution for shares of its outstanding capital stock.
3.6 Compliance With Applicable Laws. Except as disclosed in Section
3.6 of the PSC Disclosure Schedule:
3.6.1 The business of PSC and each of its significant
subsidiaries is being conducted in compliance, in all material respects, with
all applicable laws, ordinances, rules, regulations, decrees and orders of any
Governmental Entity, and all material notices, reports, documents and other
information required to be filed thereunder within the last three (3) years
were properly filed and were in compliance in all material respects with such
laws.
3.6.2 Except as disclosed in the PSC SEC Documents, PSC and
each of its significant subsidiaries has all material Licenses which are
necessary for it to own or lease, as the case may be, and operate its
properties and assets and to conduct its business as now conducted. The
business of PSC and each of its significant subsidiaries has been and is being
conducted in compliance in all material respects with all such Licenses. All
such Licenses are in full force and effect, and there are no material
restrictions or limitations contained within the Licenses which would prevent
PSC from operating as it does presently, and there is no proceeding or
investigation pending or, to the knowledge of PSC, threatened which would
reasonably be expected to lead to the revocation, amendment, failure to renew,
limitation, suspension or restriction of any such License.
3.6.3 Each subsidiary of PSC that has been or is required to do
so has filed all forms, reports, statements and other documents required by law
to be filed by it with the Pennsylvania Public Utility Commission, and such
forms, reports, statements and other documents, complied in all material
respects with the statutory and regulatory requirements applicable thereto.
3.7 Litigation. Except as set forth in the PSC SEC Documents, there
is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of PSC, threatened against or affecting PSC or any of its
subsidiaries which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or to materially and adversely
affect PSC's ability to consummate the transactions contemplated hereby.
Neither PSC nor any its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect Except as set forth in the PSC
SEC Documents or Section 3.7 of the PSC Disclosure Schedule, none of PSC or
PSC's subsidiaries whose rates or services are subject to regulation by a
Governmental Entity (i) has rates which have been or are being collected
subject to refund, pending final resolution of any proceeding pending before a
Governmental Entity or an appearance before the courts, or (ii) is a party to
any proceeding before the Governmental Entity or on appeal from any order of
the Governmental Entity.
3.8 Brokers. This Agreement does not give rise to any valid claim by
any person against PSC or any of its subsidiaries for a finder's fee, brokerage
commission or similar payment, except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, which
represented PSC, and whose fees and expenses shall be paid by PSC.
3.9 Fairness Opinion. PSC has received an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇
Barney, dated June 26, 1998, that as of that date the terms of the Merger are
fair to PSC from a financial point of view.
3.10 Taxes. Except as disclosed in Section 3.10 of the PSC Disclosure
Schedule and except for payments required to be made pursuant to Article 4
hereof:
3.10.1 PSC and each of its subsidiaries has duly filed all tax
returns and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have not
expired. All tax returns filed by PSC and each of its subsidiaries are
complete and accurate in all material respects. PSC and each of its
subsidiaries has paid (or PSC has paid on the subsidiaries' behalf) all taxes
due on such returns, and the most recent financial statements contained in the
PSC SEC Documents and all PSC SEC Documents filed prior to the Closing Date
reflect an adequate reserve for all taxes payable by PSC and its subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements.
3.10.2 No deficiencies for any taxes have been proposed,
asserted or assessed against PSC or any of its subsidiaries that are not
adequately reserved for, and no requests for waivers of the time to assess any
such taxes have been granted or are pending. The federal income tax returns of
PSC and each of its subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue Service, or the
statute of limitations on assessment or collection of any federal income taxes
due from PSC or any of its subsidiaries has expired, through such taxable years
as are set forth in Section 3.10.2 of the PSC Disclosure Schedule.
3.10.3 As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, premium, franchise, sales,
excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any interest, penalties and
additions to taxes relating thereto.
3.10.4 Neither PSC nor any of its subsidiaries has made, or is
obligated to make, in connection with the transactions contemplated by this
Agreement or otherwise, any payments that will not be deductible because of the
application of Section 280G or Section 162(m) of the Code.
3.10.5 Neither PSC nor any of its subsidiaries has made any
election, filed any consent or entered into any agreement with respect to taxes
that is not reflected on the federal income tax returns of PSC and its
subsidiaries for the three (3) years ended December 31, 1997 (copies of which
returns have been made available to Consumers for review prior to the date of
this Agreement).
3.11 Regulation as a Utility. Certain subsidiaries of PSC are
regulated as public utilities in the Commonwealth of Pennsylvania. Except as
disclosed in Section 3.11 of the PSC Disclosure Schedule, neither PSC nor any
"subsidiary company" or "affiliate" (as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended (the "1935 Act")) of PSC is
subject to regulation as a public utility or public service company (or similar
designation) by any other state in the United States, by the United States or
any agency or instrumentality of the United States or by any foreign country.
PSC is not a holding company under the 1935 Act. Except as disclosed in
Section 3.11 of the PSC Disclosure Schedule, no assets of PSC or any of its
subsidiaries or divisions have been disallowed in any ratemaking procedure
before any Governmental Entity.
3.12 Insurance. Except as disclosed in Section 3.12 of the PSC
Disclosure Schedule, PSC and each of its subsidiaries is, and has been
continuously since January 1, 1993, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary for
companies engaged in the respective businesses conducted by PSC and its
subsidiaries during such time period. Except as disclosed in Section 3.12 of
the PSC Disclosure Schedule, neither PSC nor any of its subsidiaries has
received any notice of cancellation or termination with respect to any
insurance policy. To the knowledge of PSC, there is no basis for any claim
under any PSC directors and officers liability insurance policy. Except as
disclosed in Section 3.12 of the PSC Disclosure Schedule, to the knowledge of
PSC, (i) the reserves on the books of PSC and its subsidiaries in connection
with existing claims under its liability insurance policies are adequate to
cover PSC's deductible or self-insured retentions under such policies, and (ii)
the reserves on the books of PSC and its subsidiaries in connection with
existing claims related to PSC's discontinued operations are adequate to cover
such claims. All insurance policies of PSC and its subsidiaries are valid and
enforceable policies.
3.13 Voting Requirements. The affirmative vote of the holders of a
majority of each of the outstanding PSC Common Shares entitled to vote at the
PSC Special Meeting, as defined in Section 4.2.2, with respect to the approval
of the Merger are the only votes of the holders of any class or series of PSC's
capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement. This Agreement and the Merger shall have been
approved and adopted by the sole shareholder of Acquisition.
3.14 Disclosure. Matters disclosed in any of the PSC SEC Documents,
in any section of the PSC Disclosure Schedule, or in any section of this
Article 3 shall be considered disclosed for all purposes under this Article 3.
3.15 Knowledge. For purposes of this Article 3, "to the knowledge of
PSC" shall mean to the knowledge of the executive officers of PSC and each of
its subsidiaries, after reasonable inquiry.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4.
4.1.1 Form S-4; Proxy Statement/Prospectus. As soon as
practicable following the date of this Agreement, Consumers and PSC shall
prepare and file with the SEC a preliminary proxy statement relating to the
Consumers Special Meeting and PSC Special Meeting, and PSC shall prepare and
file with the SEC the registration statement or Form S-4, in which such
preliminary proxy statement will be included as a preliminary prospectus (such
proxy statement, together with the prospectus relating to the PSC Common
Shares, in each case as amended or supplemented from time to time, is referred
to herein as the "Proxy Statement/Prospectus"). PSC shall use its best efforts
to have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Consumers will use its best efforts to cause
the Proxy Statement/Prospectus to be mailed to Consumers' shareholders as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. PSC shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of the PSC Common Shares in the Merger. Consumers shall furnish all
information concerning Consumers and the holders of the Consumers Common Shares
and Consumers Preferred Shares, and PSC shall furnish all information
concerning PSC and Acquisition, as may be reasonably requested in connection
with any such action.
4.1.2 Consumers Information. Consumers agrees that none of the
information supplied or to be supplied by Consumers specifically for inclusion
or incorporation by reference in (i) the Form S-4 will, at the time the Form S-
4 is filed with the SEC, at any time it is amended or supplemented and at the
time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statement therein not misleading, and
(ii) the Proxy Statement/Prospectus will, at the date it is first mailed to
Consumers' shareholders and PSC's shareholders and at the time of the Consumers
Special Meeting and the PSC 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. Consumers agrees that
the Proxy Statement/Prospectus will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except with respect to statements made or incorporated by reference therein
based on information supplied by PSC specifically for inclusion or
incorporation by reference in the Proxy Statement/Prospectus.
4.1.3 PSC Information. PSC agrees that none of the information
supplied or to be supplied by PSC specifically for inclusion or incorporation
by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with
the SEC, at any time it is amended or supplemented and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to PSC's shareholders
and Consumers' shareholders and at the time of the PSC Special Meeting and the
Consumers' 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. PSC agrees that the Form S-4 will comply in all
material respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder, and the Proxy Statement/Prospectus will
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder, except with respect to
statements made or incorporated by reference therein based on information
supplied by Consumers specifically for inclusion or incorporation by reference
therein.
4.1.4 SEC Filings. Consumers and PSC shall cooperate with each
other and provide to each other all information necessary in order to prepare
the Form S-4, the Proxy Statement/Prospectus, and the other filings
(collectively, the "SEC Transaction Filings") and shall provide promptly to the
other Party any information that such Party may obtain that could necessitate
amending any such document. Consumers and PSC will each notify the other
promptly of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the SEC Transaction Filings or for additional information and will supply
the other Party with copies of all correspondence between Consumers or any of
its representatives or PSC and any of its representatives, as the case may be,
on the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. If at any time prior to the
Effective Time, any event shall occur that should be set forth in an amendment
of, or a supplement to, any of the SEC Transaction Filings, Consumers and PSC
agree promptly to prepare and file such amendment or supplement and to
distribute such amendment or supplement as required by applicable law,
including, in the case of an amendment or supplement to the Proxy Statement,
mailing such supplement or amendment to Consumers' stockholders. PSC shall not
be required to maintain the effectiveness of the Registration Statement for the
purpose of resale by stockholders of Consumers who may be affiliates of
Consumers or PSC pursuant to Rule 145 under the Securities Act. The
information provided and to be provided by Consumers and PSC for use in SEC
Transaction Filings shall at all times prior to the Effective Time be true and
correct in all material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such information
not false or misleading, and Consumers and PSC each agree to promptly correct
any such information provided by it for use in the SEC Transaction Filings that
shall have become false or misleading. The SEC Transaction Filings, when filed
with the SEC or any appropriate government official, shall comply in all
material respects with all applicable requirements of law.
4.2 Shareholders Meetings.
4.2.1 Consumers' Shareholders Meeting. Consumers will take all
action necessary in accordance with applicable law and its Articles of
Incorporation and By-Laws to convene a meeting of its shareholders (the
"Consumers Special Meeting") to consider and vote upon the approval of the
Merger. Subject to Section 4.7, Consumers will, through its Board of
Directors, recommend to its shareholders approval of the Merger. Without
limiting the generality of the foregoing, Consumers agrees that, subject to its
right to terminate this Agreement pursuant to Section 4.7, its obligations
pursuant to the first sentence of Section 4.2 shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to Consumers
of any Acquisition Proposal (as defined in Section 4.6), or (ii) the withdrawal
or modification by the Board of Directors of Consumers of its approval or
recommendation of this Agreement or the Merger. Subject to Section 4.7 hereof,
Consumers will use its best efforts to obtain the favorable vote of its
shareholders as soon as practicable after the date hereof.
4.2.2 PSC's Shareholders Meeting. PSC will take all action
necessary in accordance with applicable law and its Articles of Incorporation
and By-Laws to convene a meeting of its shareholders (the "PSC Special
Meeting") to consider and vote upon the approval of the Merger and the increase
in the authorized capital stock of PSC required by the Merger. PSC will,
through its Board of Directors, recommend to its shareholders approval of both
actions. In addition, this Agreement and the Merger shall have been approved
and adopted by the sole shareholder of Acquisition.
4.3 Best Efforts. Upon the terms and subject to the conditions and
other agreements set forth in this Agreement, each of the Parties agrees to use
its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other Parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
4.4 Access to Information; Confidentiality. Upon reasonable notice,
Consumers shall, and shall cause its subsidiaries to, afford to PSC and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of PSC, reasonable access during normal business hours during
the period prior to the Effective Time to all of Consumers' executive officers,
properties, books, contracts, commitments, personnel and records. Upon
reasonable notice, PSC shall, and shall cause its subsidiaries to, afford to
Consumers and to the officers, employees, accountants, counsel, financial
advisors and other representatives of Consumers, reasonable access during
normal business hours during the period prior to the Effective Time to all of
PSC's executive officers, properties, books, contracts, commitments, personnel
and records. During such period, Consumers and PSC shall furnish promptly to
the other Party a copy of each Consumers SEC Document or PSC SEC Document, as
the case may be, filed by it (including any separate subsidiary) as well as all
correspondence or written communication with any securities rating agency or
any Governmental Entity which relates to the transactions contemplated hereby
or which is otherwise material to the financial condition or operations of
Consumers and its subsidiaries taken as a whole, or to PSC and its subsidiaries
taken as a whole, as the case may be. During such period, Consumers and PSC
shall each furnish to the other Party such other financial, operating and other
data as may be reasonably required by the other Party in order to perform its
investigation regarding the representations and warranties made by the other
Party pursuant to this Agreement. Without limiting the foregoing, Consumers
shall use its best efforts to furnish to PSC: (a) after the end of each month,
any management financial reports (together with all accompanying documents)
prepared with respect to such month; (b) all notices from any Governmental
Entity with respect to any alleged deficiency or violation which would have a
Material Adverse Effect on the financial condition or operations of any
subsidiary; (c) all material filings with Governmental Entities made by any
subsidiaries, (d) all material correspondence with, and any prepared summaries
of meetings with, representatives of the IRS or other taxing authorities, (e)
all material correspondence or communications with state Governmental Entity
concerning any subsidiaries, (f) all correspondence or communications with any
rating agency, and (g) copies of pleadings in all lawsuits in which the amount
in controversy exceeds $25,000. Notwithstanding the foregoing, if Consumers
fails to provide any document to PSC pursuant to this Section 4.4, and PSC
notifies Consumers of such failure, then Consumers shall provide such document
to PSC as soon as practicable thereafter, which shall cure any breach of this
representation and warranty in connection therewith. Except as required by
law, Consumers and PSC will hold, and will cause its respective directors,
officers, partners, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information
obtained from the other Party in confidence to the extent required by, and in
accordance with, the provisions of the Agreement dated April 17, 1998, between
Consumers and PSC (the "Consumers Confidentiality Agreement") and the Agreement
dated June 15, 1998, between PSC and Consumers (the "PSC Confidentiality
Agreement").
4.5 Public Announcements. PSC and Consumers will consult with each
other before issuing, and shall provide each other with a reasonable
opportunity to review and comment upon, any press release or public statement
with respect to this Agreement or the transactions contemplated hereby, except
to the extent disclosure prior to such consultation, review and comment may be
required by applicable law, court process or obligations pursuant to any
listing agreement with any national securities exchange.
4.6 Acquisition Proposals.
4.6.1 Consumers shall not, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney, or other
advisor or representative of, Consumers or any of its subsidiaries to, directly
or indirectly, (i) solicit, initiate or encourage the submission of any
Acquisition Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that if, at any time prior to receipt
of the approval of the Merger by the holders of the Consumers Common Shares
(the "Consumers Applicable Period"), the Board of Directors of Consumers
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to Consumers'
shareholders under applicable law, Consumers may, in response to a Superior
Proposal (as defined in Section 4.7.1) which was not solicited by it or which
did not otherwise result from a breach of this Section 4.6, and subject to
providing prior written notice of its decision to take such action to PSC (the
"Consumers Notice") and compliance with Section 4.6.2 (a) furnish information
with respect to Consumers and its subsidiaries to any person making a Superior
Proposal pursuant to a customary confidentiality agreement (as determined by
Consumers after consultation with its outside counsel) and (b) participate in
discussions or negotiations regarding such Superior Proposal. For purposes of
this Agreement, "Acquisition Proposal" means any inquiry, proposal or offer
from any person relating to any direct or indirect acquisition or purchase of a
business (a "Material Business") that constitutes 15% or more of the net
revenues, net income or the assets (including equity securities) of Consumers
and its subsidiaries, taken as a whole, or 15% or more of any class of voting
securities of Consumers or any of its subsidiaries owning, operating or
controlling a Material Business, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of voting securities of Consumers or any such subsidiary, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Consumers or any such subsidiary, other than
the transactions contemplated by this Agreement.
4.6.2 In addition to the obligations of Consumers set forth in
Section 4.6.1, Consumers shall promptly advise PSC orally and in writing of any
request for information or of any Acquisition Proposal, the material terms and
conditions of such request or Acquisition Proposal and the identity of the
person making such request or Acquisition Proposal. Consumers shall keep PSC
reasonably informed of the status and details (including amendments or proposed
amendments) of any such request or Acquisition Proposal.
4.7 Superior Proposals.
4.7.1 Except as expressly permitted by this Section 4.7,
neither the Board of Directors of Consumers nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to PSC, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
cause Consumers to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that during the Consumers Applicable Period the Board
of Directors of Consumers determines in good faith that there is a substantial
probability that the adoption of this Agreement by holders of Consumers Common
Stock will not be obtained due to the existence of a Superior Proposal, the
Board of Directors of Consumers may (subject to payment of the termination fee
pursuant to Section 7.2.4) terminate this Agreement, but only at a time that is
during the Consumers Applicable Period and is after the fifth business day
following PSC's receipt of written notice advising PSC that the Board of
Directors of Consumers is prepared to accept a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal; provided, that concurrently with such
termination, the Board of Directors shall cause Consumers to enter into an
Acquisition Agreement with respect to such Superior Proposal. For purposes of
this Agreement, a "Superior Proposal" means any proposal made by a third party
to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting
of cash and/or securities, more than 50% of the combined voting power of the
shares of Consumers Common Stock then outstanding or all or substantially all
the assets of Consumers which the Board of Directors of Consumers determines in
its good faith judgment (based on the written advice of a financial advisor of
nationally recognized reputation) to be, taking into account all legal,
financial, regulatory and other aspects of the proposal and the third party
making such proposal, (a) reasonably capable of being completed, and (b) more
favorable to Consumers' shareholders from a financial point of view and from a
strategic point of view than the Merger and the other transactions contemplated
by this Agreement.
4.7.2 Nothing contained in this Section 4.7 shall prohibit
Consumers from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to Consumers' shareholders if, in the good faith judgment of the
Board of Directors of Consumers, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that, subject to Section 4.7.1, neither
Consumers nor its Board of Directors nor any committee thereof shall withdraw
or modify, or propose publicly to withdraw or modify, its position with respect
to this Agreement or the Merger or approve or recommend, or propose publicly to
approve or recommend, an Acquisition Proposal.
4.8 Filings; Other Action. As promptly as practicable, (i) Consumers
and PSC shall make all filings and submissions under the HSR Act and shall
equally contribute to the required filing fee, and (ii) Consumers and PSC shall
cooperate in all reasonable respects with each other in (a) determining if
other filings are required to be made prior to the Effective Time with, or if
other material consents, approvals, permits, notices or authorizations are
required to be obtained prior to the Effective Time from any Governmental
Entity in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (b) timely making all
such filings and timely seeking all such consents, approvals, permits, notices
or authorizations. In connection with the foregoing, Consumers will provide
PSC, and PSC will provide Consumers, with copies of correspondence, filings or
communications (or memoranda setting forth the substance thereof) between such
party or any of its representatives, on the one hand, and any Governmental
Entity or members of their respective staffs, on the other hand, with respect
to this Agreement and the transactions contemplated hereby. Each of PSC and
Consumers acknowledge that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances, consents,
approvals, waivers or similar third party actions which are material to the
consummation of the transactions contemplated hereby, and each of PSC and
Consumers agrees to take such action as is reasonably necessary to complete
such notifications and obtain such clearances, approvals, waivers or third
party actions.
4.9 Stock Exchange Listing. PSC shall use its best efforts to cause
the PSC Common Shares to be issued in the Merger to be approved for listing on
the NYSE subject to official notice of issuance, prior to the Closing Date.
4.10 Affiliates and Certain Shareholders. Prior to the Closing Date,
Consumers shall deliver to PSC a letter identifying all persons who it believes
to be, at the time the Merger is submitted for approval to the shareholders of
Consumers, "affiliates" of Consumers for purposes of Rule 145 under the
Securities Act. Consumers shall use its best efforts to cause each such person
to deliver to PSC on or prior to the Closing Date a written agreement in
connection with restrictions on affiliates under Rule 145, in substantially the
form attached as Exhibit C, which is attached hereto and made a part hereof.
PSC shall not be required to maintain the effectiveness of the Form S-4 or any
other registration statement under the Securities Act for the purposes of
resale of PSC Common Shares by such affiliates, and the certificates
representing PSC Common Shares received by such affiliates in the Merger shall
bear a customary legend regarding applicable Securities Act restrictions and
the provisions of this Section 4.10. Consumers shall use its best efforts to
obtain from each of the beneficial owners (within the meaning of Rule 13d-3 and
Rule 13d-5 of the Exchange Act) of five percent (5%) or more of Consumers
Common Shares such representation letters addressed to PSC and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ as such law firm shall require in connection with the delivery of
its tax opinion pursuant to Section 6.3.3.
4.11 Employee Matters.
4.11.1. PSC shall, or shall cause Acquisition to, for at least
one (1) year after the Effective Time, provide or cause to be provided to
employees of Consumers and its subsidiaries, including former employees and
family members of employees, compensation and benefit plans that are no less
favorable than the Consumers Benefit Plans; provided, however, that with
respect to employees who are subject to collective bargaining, all benefits
shall be provided in accordance with the applicable collective bargaining
agreement. PSC shall, and shall cause Acquisition to, honor, pursuant to their
terms, all employee benefit obligations to current and former employees under
the Consumers Benefit Plans.
4.11.2 Following the Effective Time, PSC shall, and shall cause
Acquisition to honor all the obligations of Consumers and its subsidiaries
under the Severance Plan, Executive Severance Plan, Subsidiary Executive
Severance Plans, Supplemental Employee Retirement Plan and Director Deferred
Compensation Plans which have been disclosed to PSC, in accordance with their
terms, as of the date hereof.
4.11.3 Consumers may, at its discretion, establish a program of
stay-on bonuses for senior management of Consumers and its subsidiaries
pursuant to which Consumers may pay such bonuses up to a total aggregate amount
of $255,000 for all such bonuses to such individuals and in such individual
amounts as determined by the Board of Directors of Consumers.
4.12 Representation on PSC Board. The Board of Directors of PSC shall
use its best efforts to increase the authorized number of directors as of the
Effective Time so as to permit the appointment of four (4) directors of
Consumers, as mutually determined by PSC and Consumers, to serve as directors
of PSC, one to serve until the year 1999 PSC annual meeting, one to serve until
the year 2000 PSC annual meeting, and two to serve until the year 2001 PSC
annual meeting or until their respective earlier deaths, resignations or
removals in accordance with PSC's Articles of Incorporation and By-Laws. PSC
shall include the one individual who will serve until the year 1999 PSC annual
meeting on the list of nominees for directors presented by the Board of
Directors of PSC and for which said Board shall solicit proxies at the first
annual meeting at which his appointed term expires. PSC shall consider
including the one individual who will serve until the year 2000 PSC Annual
Meeting and the two individuals who will serve until the year 2001 PSC Annual
Meeting on the list of nominees for directors presented by the Board of
Directors of PSC and for which said Board shall solicit proxies at the first
annual meeting at which their appointed terms expire.
4.13 Termination of Consumers' DRIP. Consumers shall have terminated
its DRIP on or immediately before the Closing Date.
4.14 Federal Income Tax Treatment. Consumers and PSC shall use their
reasonable best efforts to ensure that the Merger constitutes a reorganization
within the meaning of Section 368(a)(1) of the Code and that shareholders of
Consumers will not be subject to federal income tax on the receipt of PSC
Common Shares in exchange for Consumers Common Shares pursuant to the Merger.
4.15 Takeover Statute. If any state takeover statute shall become
applicable to the transactions contemplated hereby, Consumers and PSC and the
members of their respective Boards of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
4.16 Continuance of Existing Indemnification Rights
4.16.1 For six (6) years after the Effective Time, PSC shall
indemnify, defend and hold harmless any person who is now or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, a
director or officer of Consumers (an "Indemnified Person") against all losses,
claims, damages, liabilities, costs and expenses (including attorneys' fees and
expenses), judgments, fines, losses and amounts paid in settlement in
connection with any actual or threatened action, suit, claim, proceeding or
investigation (each, a "Claim") to the extent that any such Claim is based on,
or arises out of: (i) the fact that such Indemnified Person is or was a
director or officer of Consumers or one of Consumers' subsidiaries is or was
serving at the request of Consumers as a director, officer, employee, or agent
of another corporation, partnership, joint venture trust or other enterprise or
one of Consumers' subsidiaries; or (ii) the Agreement or any of the
transactions contemplated hereby, in each case, to the extent that any such
Claim pertains to any matter or fact arising, existing or occurring prior to or
at the Effective Time, regardless of whether such Claim is asserted or claimed
prior to, at or after the Effective Time, to the full extent permitted under
the MBCA, Consumers' Articles of Incorporation or By-Laws or any
indemnification agreement in effect at the date hereof, including provisions
relating to advancement of expenses incurred in the defense of any such Claim.
Without limiting the generality of the preceding sentence, in the event any
Indemnified Person becomes involved in any Claim, after the Effective Time, PSC
shall periodically advance to such Indemnified Person its reasonable legal and
other expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the providing by such Indemnified
Person of an undertaking to reimburse all amounts so advanced in the event of a
final non-appealable determination by a court of competent jurisdiction that
such Indemnified Person is not entitled thereto.
4.16.2 PSC and Consumers agree that all rights to
indemnification, and all limitations with respect thereto, existing in favor of
any Indemnified Person, as provided in Consumers' Articles of Incorporation, or
By-Laws and any indemnification agreement in effect at the date hereof, shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of six (6) years from the Effective Time, to
the extent such rights and limitations are consistent with the MBCA; provided,
however, that in the event any Claim is asserted or made within such six (6)
year period, all such rights, liabilities and limitations in respect of any
such Claim shall continue until disposition thereof; provided further, that any
determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the MBCA,
Consumers' Articles of Incorporation, or By-Laws or any such agreement, as the
case may be, shall be made by independent legal counsel selected by such
Indemnified Person and reasonably acceptable to PSC and provided further, that
nothing in this Section 4.16 shall impair any rights or obligations of any
current or former director or officer of Consumers.
4.16.3 PSC shall, in its sole discretion, either maintain
Consumers' existing directors' and officers' liability insurance policy ("D&O
Insurance") or substitute for D&O Insurance such policies of substantially
similar coverage and amounts containing terms no less advantageous to such
former directors or officers; provided further, that if the existing D&O
Insurance expires or is canceled within six (6) years from the Effective Time,
PSC shall use its best efforts to obtain substantially similar D&O Insurance;
and provided further, that PSC shall not be required to pay an annual premium
for D&O Insurance in excess of 200% of the last annual premium paid prior to
the date hereof, but in such case shall purchase as much coverage as possible
for such amount. If PSC provides a substitute insurance policy for the D&O
Insurance, Consumers shall use its best efforts to cause each director and
officer of Consumers to complete any application required by the insurance
company providing such insurance.
4.16.4 The provisions of this Section 4.16 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Person, his
or her heirs and personal representatives.
4.17 Consulting Agreements Consumers may, at its discretion, enter
into consulting agreements with such employees following their termination of
employment as authorized by the Board of Directors of Consumers to provide
advice and assistance in connection with the Merger and matters that may arise
after the completion of the Merger, provided that the aggregate amount paid or
payable under such consulting agreements shall not exceed $300,000.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 Conduct of Business by Consumers. Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Disclosure Schedule, during
the period from June 27, 1998 to the Effective Time, Consumers has and shall,
and shall cause its subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent consistent
therewith, use best efforts to preserve intact their current business
organizations, keep in full force and effect their Licenses, keep available
the services of their current key officers, employees, agents and field
representatives, and preserve the goodwill of regulators or those engaged in
material business relationships with them. Without limiting the generality
of the foregoing, during the period from June 27, 1998 to the Effective Time,
Consumers has not and shall not, and shall not permit any of its subsidiaries
to, without the prior written consent of PSC:
5.1.1 adopt or propose any change to its Articles of
Incorporation or By-Laws;
5.1.2 (i) declare, set aside or pay any dividends on, or make
any other distributions with respect to, any of Consumers' outstanding capital
stock (other than dividends required to be paid on the Consumers Preferred
Shares in accordance with the respective terms thereof, regular quarterly
dividends on Consumers Common Shares with usual record and payment dates during
any fiscal year, not in excess of $0.005 per quarter per share greater than the
per share dividends for the corresponding quarter in the prior fiscal year),
(ii) split, combine or reclassify any of its outstanding capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of, or
in substitution for shares of its outstanding capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock or other securities of
Consumers, except for Consumers DRIP;
5.1.3 issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or to issue shares or units
under the LTIP, specifically excluding (i) the exercise of options outstanding
on June 27, 1998 or (ii) the issuance of shares or units under Consumers' DRIP;
5.1.4 acquire any business or any corporation, partnership,
joint venture, association or other business organization or division for a
purchase price in any instance greater than $500,000;
5.1.5 take any action that, if taken prior to the date of this
Agreement, would have been required to be disclosed in Section 2.6 of the
Disclosure Schedule or that would otherwise cause any of the representations
and warranties contained in Article 2 not to be true and correct in all
material respects;
5.1.6 sell, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets that are material
to Consumers and its subsidiaries taken as a whole, except in the ordinary
course of business;
5.1.7 (i) except for borrowings in the ordinary course of
business under existing credit facilities, incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, other than
indebtedness owing to or guaranties of indebtedness owing to Consumers or any
direct or indirect subsidiary of Consumers or (ii) make any loans or advances
other than routine advances in the ordinary course of business to employees;
5.1.8 make any tax election or settle or compromise any income
tax liability;
5.1.9 except in the ordinary course of business, modify, amend
or terminate, or waive, release or assign any material rights or claims under
any material agreement, license or similar instrument to which Consumers or any
of its subsidiaries is a party;
5.1.10 authorize any of, or commit or agree to take any of, the
foregoing actions; or
5.1.11 make or incur any obligations for capital expenditures
for or on behalf of Consumers or its subsidiaries in excess of $25,000,000 for
calendar year 1998, $26,000,000 for calendar year 1999, or $23,000,000 for
calendar year 2000; or
5.1.12 increase the salary or compensation or benefits of any
director, officer or employee other than in accordance with past practice, or
in accordance with a program of stay-on bonuses for employees at Consumers'
headquarters in Portland, Maine; or
5.1.13. increase the number of Directors on Consumers' Board to
more than eight (8).
5.2 Management of Consumers and its Subsidiaries. Consumers shall,
from the date of this Agreement through the Effective Time, cause its
management and that of its subsidiaries to consult on a regular basis and in
good faith with the executive officers and representatives of PSC concerning
the management of Consumers and its subsidiaries. Notwithstanding the
foregoing, the business and affairs of Consumers shall continue to be managed
by Consumers' directors and officers until the Effective Time.
5.3 Conduct of Business by PSC. Except as contemplated by this
Agreement or as set forth in Section 5.3 of the Disclosure Schedule, during
the period from June 27, 1998 to the Effective Time, PSC has and shall, and
shall cause its subsidiaries to, act and carry on their respective businesses
in the ordinary course of business and, to the extent consistent therewith,
use best efforts to preserve intact their current business organizations, keep
available the services of their current key officers and employees and preserve
the goodwill of those engaged in material business relationships with them.
Without limiting the generality of the foregoing, during the period from
June 27, 1998 to the Effective Time, PSC has not and shall not and shall not
permit any of its significant subsidiaries to, without the prior written
consent of Consumers:
5.3.1 adopt or propose any change to its Articles of
Incorporation or By-Laws, except as otherwise contemplated by this Agreement;
5.3.2 issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, in each case if any such
action could reasonably be expected to (i) delay materially the date of mailing
of the Proxy Statement/Prospectus, or (ii) if it were to occur after such date
of mailing, require an amendment of the Proxy Statement/Prospectus;
5.3.3 acquire any business or any corporation, partnership,
joint venture, association or other business organization or division thereof,
in each case if any such action could reasonably be expected to (i) delay
materially the date of mailing of the Proxy Statement/Prospectus, or (ii) if it
were to occur after such date of mailing, require an amendment of the Proxy
Statement/Prospectus; or
5.3.4 authorize any of, or commit or agree to take any of, the
foregoing actions.
5.4 Other Actions. Consumers and PSC shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement becoming untrue in any
material respect, or (ii) any of the conditions of the Merger set forth in
Article 6 not being satisfied.
5.5 Pooling of Interests Accounting Treatment. Consumers and PSC
shall use their best efforts to preserve the "pooling of interests" accounting
treatment for the Merger.
5.6 Termination of Long Term Incentive Plan. Consumers' Board of
Directors shall terminate the Consumers Senior Management Long Term Incentive
Plan ("LTIP") as of the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each Party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
6.1.1 Consumers Shareholder Approval. This Agreement and the
Merger shall require: (i) the affirmative vote of the holders of a majority of
the outstanding Consumers Common Shares entitled to vote at the Consumers
Special Meeting; and (ii) the affirmative vote of the holders of a majority of
the outstanding Consumers Preferred Shares entitled to vote at the Consumers
Special Meeting (collectively "Consumers Shareholder Approval").
6.1.2 PSC Shareholder Approval. This Agreement, the Merger,
and the increase in the authorized capital stock of PSC required to consummate
the transactions contemplated by this Agreement shall have been approved and
adopted by an affirmative vote of the holders of the requisite number of shares
present, in person or by proxy, and entitled to vote on the Merger at the PSC
Special Meeting. This Agreement and the Merger shall have been approved and
adopted by the sole shareholder of Acquisition.
6.1.3 Governmental and Regulatory Consents. Consumers and PSC
shall have made all such filings, and obtained such permits, authorizations,
consents, or approvals required by any Governmental Entity to consummate the
transactions contemplated hereby; (collectively, the "Governmental Consents")
and such Governmental Consents have become Final Orders (as hereinafter
defined); provided, however, that such Governmental Consents shall impose no
conditions that, in the reasonable opinion of Consumers and PSC, would be
expected to have a Material Adverse Effect after giving effect to the
consummation of the Merger. For purposes of this Agreement, a "Final Order"
shall mean action by the relevant Governmental Entity that has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect to
which all periods for appeal or reconsideration thereof, and any waiting period
prescribed by law before the consummation of the transactions contemplated by
this Agreement has expired, and as to which all conditions to the consummation
of such transactions prescribed by law, regulation or order have been
satisfied.
6.1.4 HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have otherwise expired.
6.1.5 No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that the
Party invoking this condition shall use its best efforts to have any such order
or injunction vacated.
6.1.6 NYSE Listing. The PSC Common Shares issuable to
Consumers' shareholders pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
6.1.7 Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
6.2 Conditions to Obligations of PSC and Acquisition. The obligations
of PSC and Acquisition to effect the Merger are further subject to the
following conditions:
6.2.1 Representations and Warranties. The representations and
warranties of Consumers contained in this Agreement shall be true and correct
in all material respects on the date hereof and (except to the extent
specifically given as of an earlier date) on and as of the Closing Date as
though made on the Closing Date, and Consumers shall have delivered to PSC a
certificate dated as of the Closing Date signed by an executive officer to the
effect set forth in this Section 6.2.1.
6.2.2 Performance of Obligations of Consumers. Consumers
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Consumers shall have delivered to PSC a certificate dated as of the Closing
Date signed by an executive officer to the effect set forth in this Section
6.2.2.
6.2.3 Opinion of Counsel. PSC shall have received an opinion
dated the Closing Date of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Consumers, in
substantially the form attached as Exhibit D, which is attached hereto and made
a part hereof.
6.2.4 Satisfactory Completion of Due Diligence. PSC shall have
received the continuing access to the records and information concerning
Consumers and the assistance of its employees, agents and representatives
reasonably needed in order to complete PSC's due diligence review of Consumers
and shall have completed such review on or before September 1, 1998, without
identifying any facts or circumstances not previously disclosed in the
Consumers SEC Documents or Disclosure Schedule that would have a Material
Adverse Effect on Consumers in excess of $2,000,000 in the aggregate.
6.2.5 Pooling-of-Interests. The Merger shall, as of the date
of the Closing, meet the requirements for pooling-of-interests accounting
treatment under generally accepted accounted principles and under the
accounting rules of the SEC.
6.2.6 Releases Consumers shall have obtained legally effective
releases from all participants in the LTIP of any and all claims for payments
or benefits from the LTIP or arising from the termination of the LTIP.
6.3 Conditions to Obligations of Consumers. The obligation of
Consumers to effect the Merger is further subject to the following conditions:
6.3.1 Representations and Warranties. The representations and
warranties of PSC and Acquisition contained in this Agreement shall be true and
correct in all material respects on the date hereof and (except to the extent
specifically given as of an earlier date) on and as of the Closing Date as
though made on the Closing Date, and PSC and Acquisition shall have delivered
to Consumers a certificate dated as of the Closing Date, signed by an executive
officer of each of them and to the effect set forth in this Section 6.3.1.
6.3.2 Performance of Obligations of PSC and Acquisition. Each
of PSC and Acquisition shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and PSC and Acquisition shall have delivered to Consumers a
certificate dated as of the Closing Date, signed by an executive officer of
each of them and to the effect set forth in this section 6.3.2
6.3.3 Tax Opinion. Consumers shall have received an opinion
dated the Closing Date of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Consumers, to
the effect that for federal income tax purposes the Merger will constitute a
reorganization within the meaning of Section 368(a)(1) of the Code and that
shareholders of Consumers will not be subject to federal income tax on the
receipt of PSC Common Shares in exchange for Consumers Common Shares pursuant
to the Merger. In rendering such opinion, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ shall be
entitled to receive and may rely on representations contained in certificates
of PSC and Consumers and representation letters of certain shareholders of
Consumers.
6.3.4 Opinion of Counsel. Consumers shall have received an
opinion dated the Closing Date of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to PSC,
in substantially the form attached as Exhibit E, which is attached hereto and
made a part hereof.
6.3.5 Satisfactory Completion of Due Diligence. Consumers
shall have received the continuing access to the records and information
concerning PSC and the assistance of its employees, agents and representatives
reasonably needed in order to complete Consumers' due diligence review of PSC
and shall have completed such review on or before September 1, 1998, without
identifying any facts or circumstances not previously disclosed in the PSC SEC
Documents or PSC Disclosure Schedule that would have a Material Adverse Effect
on PSC in excess of $2,000,000 in the aggregate.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and abandoned at
any time prior to the Effective Time:
7.1.1 by mutual written consent of PSC and Consumers;
7.1.2 by either PSC or Consumers:
(i) if, upon a vote at a duly held Consumers Special
Meeting, this Agreement and the Merger shall fail to receive the
requisite vote for approval and adoption by the shareholders of
Consumers;
(ii) if, upon a vote at a duly held PSC Special
Meeting, any required increase in the authorized common stock of PSC and
this Agreement and the Merger shall fail to receive the requisite vote
for approval and adoption by the shareholders of PSC;
(iii) if the Merger shall not have been consummated on
or before July 1, 1999 (the "Termination Date"), unless the failure to
consummate the Merger is the result of a willful and material breach of
this Agreement by the Party seeking to terminate this Agreement; provided
that the Termination Date shall automatically be extended for up to six
(6) months if, on July 1, 1999: (a) any of the conditions set forth in
Section 6.1.3 has not been satisfied or waived, (b) all of the other
conditions to the consummation of the Merger set forth in Article 6 have
been satisfied or waived or can readily be satisfied, and (c) any
Governmental Consent that has not yet been obtained is being pursued
diligently and in good faith;
(iv) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable; or
(v) if the Board of Directors of Consumers shall have
exercised its rights set forth in Section 4.7 of this Agreement; or
7.1.3 by Consumers upon a material breach of any representation
or warranty of PSC or if PSC fails to comply in any material respect with any
of its covenants or agreements, or if any representation or warranty of PSC
shall be or become untrue in any material respect, in either case such that the
conditions set forth in Sections 6.3.1 and 6.3.2 would be incapable of being
satisfied by the Closing Date, provided that a willful breach shall be deemed
to cause such conditions to be incapable of being satisfied by such date; or
7.1.4 by PSC upon a material breach of any representation or
warranty of Consumers or if Consumers fails to comply in any material respect
with any of its covenants or agreements, or if any representation or warranty
of Consumers shall be or become untrue in any material respect, in either case
such that the conditions set forth in Sections 6.2.1 and 6.2.2 would be
incapable of being satisfied by the Closing Date, provided that a willful
breach shall be deemed to cause such conditions to be incapable of being
satisfied by such date; or
7.1.5 by Consumers, if: (i) the product of the Calculation
Price (as that term is defined in Exhibit A) and 1.459 is less than $28.000;
(ii) the Adjustment Election Period (as that term is defined in Exhibit A) has
expired and PSC has not made an Adjustment Election (as that term is defined in
Exhibit A); and (iii) the Board of Directors of Consumers determines at any
time during the three (3) business day period commencing on the expiration of
the Adjustment Election Period (the "Consumers Evaluation Period"), that it
elects to exercise its termination right pursuant to this Section 7.1.5.
Consumers shall give prompt written notice of its intention to terminate (the
"Termination Notice"), which termination shall be effective at the close of
business on the final day of the Consumers Evaluation Period (which termination
may be withdrawn at any time prior to the effectiveness of the termination).
7.2 Effect of Termination.
7.2.1 In the event of termination of this Agreement by either
Consumers or PSC as provided in Section 7.1, this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the part
of PSC or Consumers, other than Section 7.2, Section 10.2, and the last
sentence of Section 4.4.
7.2.2 In the event of termination of this Agreement by PSC
pursuant to Section 7.1.4, Consumers shall pay PSC $1,250,000 in cash, as
liquidated damages, within sixty (60) calendar days of such termination,
provided that PSC shall not be in material breach of its obligations under this
Agreement. Such damages, if payable, shall be paid only once.
7.2.3 In the event of termination of this Agreement by
Consumers pursuant to Section 7.1.3, PSC shall pay Consumers $1,250,000 in
cash, as liquidated damages, within sixty (60) calendar days of such
termination, provided that Consumers shall not be in material breach of its
obligations under this Agreement. Such damages, if payable, shall be paid only
once.
7.2.4 In the event of termination of this Agreement by either
PSC or Consumers pursuant to Section 7.1.2(v), or in the event of termination
of this Agreement by PSC or Consumers pursuant to Section 7.1.2(i) if at the
time of the Consumers Special Meeting there was an Acquisition Proposal as
defined in Section 4.6 and within twelve (12) months after the Consumers
Special Meeting a transaction is agreed to with the person or entity that made
such Acquisition Proposal, and such transaction is subsequently consummated,
Consumers shall pay PSC $9,000,000 in cash, as a termination fee and not as a
penalty, within sixty (60) calendar days of such termination or consummation,
whichever is later, provided that PSC shall not be in material breach of its
obligations under this Agreement.
7.2.5 In the event of termination of this Agreement pursuant to
Section 7.1.5, there shall be no termination fee due or payable to either
Consumers or PSC.
7.2.6 The payments provided in Sections 7.2.2, 7.2.3 and 7.2.4
shall be the Parties' sole and exclusive remedies hereunder for the termination
of this Agreement under the circumstances in which such payments are paid
(regardless of any breach of this Agreement), and upon such delivery of such
payment to PSC or Consumers, as the case may be, no person shall have any
further claim or rights against Consumers, PSC or Acquisition under this
Agreement.
7.3 Amendment. Subject to the applicable provisions of the
Pennsylvania Code, at any time prior to the Effective Time, the Parties hereto
may modify or amend this Agreement, by written agreement executed and delivered
by duly authorized officers of the respective Parties; provided, however, that
after approval of the Merger by the shareholders of Consumers, no amendment
shall be made which reduces the Merger Consideration payable in the Merger or
adversely affects the rights of Consumers' shareholders hereunder without the
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
Parties may (i) extend the time for the performance of any of the obligations
or other acts of the other Parties, (ii) waive any inaccuracies in the
representations and warranties of the other Parties contained in this Agreement
or in any document delivered pursuant to this Agreement, or (iii) subject to
Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a
Party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure of any Party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of PSC or Consumers,
action by its Board of Directors.
ARTICLE 8
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively
required to be made by Consumers and PSC and Acquisition in this Agreement, or
in any certificate, respectively, delivered by Consumers or PSC and Acquisition
pursuant to Section 6.2 or Section 6.3 hereof, will terminate upon the Closing
and be of no further force or effect.
ARTICLE 9
NOTICES
9.1 Notices. Any notice or communication given pursuant to this
Agreement must be in writing and will be deemed to have been duly given if
mailed (by registered or certified mail, postage prepaid, return receipt
requested), transmitted by facsimile, or delivered by courier, as follows:
If to Consumers, to:
Consumers Water Company
Three ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to PSC, to:
Philadelphia Suburban Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, Chairman, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Acquisition, to:
Consumers Acquisition Company
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, Chairman and President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
2500 One Liberty Place
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 9.1 will, whether
sent by mail, facsimile or courier, be deemed given upon the first business
day after actual delivery to the Party to whom such notice or other
communication is sent (as evidenced by the return receipt or shipping
invoice signed by a representative of such Party or by facsimile
confirmation). Any Party from time to time may change its address for the
purpose of notices to that Party by giving a similar notice specifying a new
address, but no such notice will be deemed to have been given until it is
actually received by the Party sought to be charged with the contents
thereof. For purposes of this Section 9.1, "business day" shall mean a day
other than Saturday, Sunday or any day on which the principal commercial
banks located in Philadelphia, Pennsylvania are authorized or obligated to
close under the laws of the Commonwealth of Pennsylvania.
ARTICLE 10
MISCELLANEOUS
10.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes, except as set forth in Section 4.4 with respect to the
Confidentiality Agreement, all prior communications, agreements,
understandings, representations and warranties, whether oral or written,
between the parties hereto. There are no oral or written agreements,
understandings, representations or warranties between the parties hereto with
respect to the subject hereof other than those set forth in this Agreement.
10.2 Expenses. Consumers, PSC, and Acquisition each will pay its own
costs and expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the transactions contemplated hereby,
except that (i) the filing fee in respect of the notification and report under
the HSR Act, and (ii) the expenses incurred in connection with the printing,
mailing and distribution of the Proxy Statement/Prospectus and the preparation
and filing of the Form S-4 shall be borne equally by Consumers and PSC.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
10.4 No Third Party Beneficiary. Except as expressly provided herein,
this Agreement is not intended and may not be construed to create any rights in
any parties other than Consumers, PSC and Acquisition and their respective
successors or assigns, and it is not the intention of the parties to confer
third party beneficiary rights upon any other person.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania (without regard
to the principles of conflicts of law).
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, such consent not to be
unreasonably withheld, and any such assignment that is not consented to shall
be null and void. Notwithstanding the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and assigns including but not limited to any entity
that is a successor, by merger or otherwise, of PSC.
10.7 Headings, Gender, etc. The headings used in this Agreement have
been inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (i) words of any gender are deemed to include the
other gender; (ii) words using the singular or plural number also include the
plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (v) all references to "dollars" or "$" refer to
currency of the United States of America; (vi) the term "person" shall include
any natural person, corporation, limited liability company, general
partnership, limited partnership, trust or other entity, enterprise, authority
or business organization; and (vii) the term "or" is disjunctive but not
necessarily exclusive.
10.8 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of Consumers or PSC and Acquisition under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable; (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; and (iii) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
10.9 Material Adverse Effect. As used in this Agreement, the term
"Material Adverse Effect" means a material adverse effect on the business,
results of operations, financial condition, or prospects of either Consumers or
PSC and their subsidiaries, as the case may be, taken as a whole, provided,
however, that Material Adverse Effect shall not be deemed to include (a)
reasonable expenses incurred in connection with the transactions contemplated
hereby, and (b) actions or omissions by either Consumers or PSC, or any of
their subsidiaries, as the case may be, taken with the prior written consent of
the other Party in connection with the transactions contemplated hereby.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Consumers, PSC and Acquisition effective as
of the date first written above.
PHILADELPHIA SUBURBAN CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Chairman, President and Chief Executive Officer
CONSUMERS ACQUISITION COMPANY
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Chairman and President
CONSUMERS WATER COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
===============================================================================
EXHIBIT A
Exchange Ratio
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The "Exchange Ratio" shall be 1.459. If the Exchange Ratio is adjusted
pursuant to this Exhibit A, then any references in this Agreement to the
Exchange Ratio shall thereafter refer to the Exchange Ratio as adjusted.
Notwithstanding any other provisions in this Agreement, if the product of
1.459 and the Calculation Price (as defined below) exceeds $32.000, then the
Exchange Ratio shall equal the quotient determined by dividing $32.000 by the
Calculation Price (rounded to the nearest one-thousandth of a dollar).
If the product of 1.459 and the Calculation Price is less than $28.000,
then, during the three (3) business day period commencing on the Determination
Date (the "Adjustment Election Period"), PSC shall have the option, but not the
obligation, of adjusting the Exchange Ratio (an "Adjustment Election") to equal
the quotient determined by dividing $28.000 by the Calculation Price (rounded
to the nearest one-thousandth of a dollar) by delivering written notice (the
"Adjustment Election Notice") to Consumers within the Adjustment Election
Period of its intention to so adjust the Exchange Ratio.
The Calculation Price is the volume weighted average (rounded to the
nearest one-thousandth of a dollar) of the trading prices of PSC Common Stock
on the New York Stock Exchange ("NYSE"), as reported by Bloomberg Financial
Markets (or such other source as the parties shall agree in writing), for each
of the ten (10) consecutive trading days ending five (5) days before the
Determination Date. The "Determination Date" is the date on which all the
conditions to Closing (other than those conditions that by their terms cannot
be satisfied until the Closing Date) set forth in Article 6 have been satisfied
or waived.