ANNEX I
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN ELECTRIC POWER COMPANY, INC.,
AUGUSTA ACQUISITION CORPORATION
AND
CENTRAL AND SOUTH WEST CORPORATION
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS................................................................................................ 2
SECTION 1.1 Definitions.................................................................................... 2
SECTION 1.2 Rules of Construction.......................................................................... 2
ARTICLE II
TERMS OF MERGER............................................................................................ 2
SECTION 2.1 Statutory Merger............................................................................... 2
SECTION 2.2 Effective Time................................................................................. 2
SECTION 2.3 Effect of the Merger........................................................................... 2
SECTION 2.4 Certificate of Incorporation; Bylaws........................................................... 2
SECTION 2.5 Directors and Officers......................................................................... 3
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES......................................................... 3
SECTION 3.1 Merger Consideration; Conversion and Cancellation of Securities................................ 3
SECTION 3.2 Exchange of Certificates....................................................................... 4
SECTION 3.3 Closing........................................................................................ 6
SECTION 3.4 Stock Transfer Books........................................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................. 6
SECTION 4.1 Organization and Qualification; Subsidiaries................................................... 6
SECTION 4.2 Certificate of Incorporation and Bylaws........................................................ 7
SECTION 4.3 Capitalization................................................................................. 7
SECTION 4.4 Authorization of Agreement..................................................................... 8
SECTION 4.5 Regulation and Approvals....................................................................... 8
SECTION 4.6 No Violation................................................................................... 9
SECTION 4.7 Reports........................................................................................ 9
SECTION 4.8 No Material Adverse Effect; Conduct............................................................ 10
SECTION 4.9 Permits; Compliance............................................................................ 11
SECTION 4.10 Litigation; Compliance with Laws.............................................................. 12
SECTION 4.11 Ownership of AEP Common Stock................................................................. 12
SECTION 4.12 Employee Benefit Plans........................................................................ 12
SECTION 4.13 Taxes......................................................................................... 15
SECTION 4.14 Environmental Matters......................................................................... 16
SECTION 4.15 Insurance..................................................................................... 16
SECTION 4.16 Pooling; Tax Matters.......................................................................... 16
SECTION 4.17 Affiliates.................................................................................... 16
SECTION 4.18 Opinion of Financial Advisor.................................................................. 17
SECTION 4.19 Brokers....................................................................................... 17
SECTION 4.20 Vote Required................................................................................. 17
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE AEP COMPANIES........................................................ 17
SECTION 5.1 Organization and Qualification; Subsidiaries................................................... 17
SECTION 5.2 Certificate of Incorporation and Bylaws........................................................ 18
SECTION 5.3 Capitalization................................................................................. 18
SECTION 5.4 Authorization of Agreement..................................................................... 19
SECTION 5.5 Regulation and Approvals....................................................................... 19
SECTION 5.6 No Violation................................................................................... 20
SECTION 5.7 Reports........................................................................................ 20
SECTION 5.8 No Material Adverse Effect; Conduct............................................................ 21
SECTION 5.9 Permits; Compliance............................................................................ 21
SECTION 5.10 Litigation; Compliance with Laws.............................................................. 22
SECTION 5.11 Ownership of Company Common Stock............................................................. 23
SECTION 5.12 Employee Benefit Plans........................................................................ 23
SECTION 5.13 Taxes......................................................................................... 25
SECTION 5.14 Environmental Matters......................................................................... 26
SECTION 5.15 Insurance..................................................................................... 26
SECTION 5.16 Pooling; Tax Matters.......................................................................... 27
SECTION 5.17 Affiliates.................................................................................... 27
SECTION 5.18 Opinion of Financial Advisor.................................................................. 27
SECTION 5.19 Brokers....................................................................................... 27
SECTION 5.20 Vote Required................................................................................. 27
SECTION 5.21 No Business Activities........................................................................ 27
ARTICLE VI
COVENANTS.................................................................................................. 28
SECTION 6.1 Affirmative Covenants.......................................................................... 28
SECTION 6.2 Negative Covenants............................................................................. 28
SECTION 6.3 Access and Information......................................................................... 36
ARTICLE VII
ADDITIONAL AGREEMENTS...................................................................................... 36
SECTION 7.1 Meeting of AEP Stockholders.................................................................... 36
SECTION 7.2 Meeting of Company Stockholders................................................................ 36
SECTION 7.3 Registration Statement; Joint Proxy Statement/Prospectus....................................... 36
SECTION 7.4 Appropriate Action; Consents; Filings.......................................................... 38
SECTION 7.5 Affiliates; Pooling; Tax Treatment............................................................. 39
SECTION 7.6 Public Announcements........................................................................... 40
SECTION 7.7 NYSE Listing................................................................................... 40
SECTION 7.8 Company Rights Agreement....................................................................... 40
SECTION 7.9 Comfort Letters................................................................................ 40
SECTION 7.10 Stock Options; Employee Benefit Plans......................................................... 40
SECTION 7.11 Indemnification of Directors and Officers..................................................... 43
SECTION 7.12 Newco......................................................................................... 45
SECTION 7.13 Event Notices................................................................................. 45
SECTION 7.14 Board of Directors............................................................................ 45
SECTION 7.15 Headquarters.................................................................................. 45
SECTION 7.16 Rate Matters.................................................................................. 45
SECTION 7.17 Coordination of Dividends..................................................................... 46
SECTION 7.18 Transition Management......................................................................... 46
SECTION 7.19 Acquisition Proposals......................................................................... 46
SECTION 7.20 Workforce Matters............................................................................. 47
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ARTICLE VIII
CLOSING CONDITIONS......................................................................................... 48
SECTION 8.1 Conditions to Obligations of Each Party........................................................ 48
SECTION 8.2 Additional Conditions to Obligations of the AEP Companies...................................... 49
SECTION 8.3 Additional Conditions to Obligations of the Company............................................ 50
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.......................................................................... 51
SECTION 9.1 Termination.................................................................................... 51
SECTION 9.2 Effect of Termination.......................................................................... 54
SECTION 9.3 Amendment...................................................................................... 54
SECTION 9.4 Waiver......................................................................................... 54
SECTION 9.5 Fees, Expenses and Other Payments.............................................................. 54
SECTION 9.6 Certain Damages, Payments and Expenses......................................................... 54
ARTICLE X
GENERAL PROVISIONS......................................................................................... 56
SECTION 10.1 Effectiveness of Representations, Warranties and Agreements................................... 56
SECTION 10.2 Notices....................................................................................... 56
SECTION 10.3 Headings...................................................................................... 57
SECTION 10.4 Severability.................................................................................. 57
SECTION 10.5 Entire Agreement.............................................................................. 57
SECTION 10.6 Assignment.................................................................................... 58
SECTION 10.7 Parties in Interest........................................................................... 58
SECTION 10.8 Failure or Indulgence Not Waiver; Remedies Cumulative......................................... 58
SECTION 10.9 Governing Law................................................................................. 58
SECTION 10.10 Counterparts................................................................................. 58
ANNEXES
Annex A Schedule of Defined Terms
Annex B Affiliate's Agreement (Company Affiliates)
Annex C Affiliate's Agreement (AEP Affiliates)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1997, is by and
among American Electric Power Company, Inc., a New York corporation ("AEP"),
Augusta Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of AEP ("Newco"), and Central and South West Corporation, a Delaware
corporation (the "Company"). AEP and Newco are sometimes collectively referred
to herein as the "AEP Companies."
RECITALS:
The Board of Directors of the Company has determined that the business
combination to be effected by means of the Merger is consistent with and in
furtherance of the long-term business strategy of the Company and is fair to,
and in the best interests of, the Company and its stockholders and has approved
and adopted this Agreement and recommended approval and adoption of this
Agreement by the stockholders of the Company.
The Board of Directors of AEP has determined that the business combination
to be effected by means of the Merger is consistent with and in furtherance of
the long-term business strategy of AEP and is fair to, and in the best interests
of, AEP and its stockholders and has approved this Agreement, the Charter
Amendment and the Share Issuance and recommended approval and adoption of the
Charter Amendment and the Share Issuance by the stockholders of AEP.
The Board of Directors of Newco has determined that the business combination
to be effected by means of the Merger is in the best interests of Newco and its
stockholder and has approved and adopted this Agreement and recommended approval
and adoption of this Agreement by AEP.
To give effect to the transactions contemplated hereby, upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
Law, Newco will merge with and into the Company.
For Federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization under the provisions of Section 368(a) of the Code.
The Merger is intended to be treated as a "pooling of interests" for
accounting purposes.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
SECTION 1.2 RULES OF CONSTRUCTION. Unless the context otherwise requires, as
used in this Agreement: (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" shall mean
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one gender
shall be construed to apply to each gender; (h) the terms "hereof," "herein,"
"hereby," "hereto" and derivative or similar words refer to this entire
Agreement; and (i) the terms "Article" or "SECTION" shall refer to the specified
Article or SECTION of this Agreement.
ARTICLE II
TERMS OF MERGER
SECTION 2.1 STATUTORY MERGER. Subject to the terms and conditions and in
reliance upon the representations, warranties, covenants and agreements
contained herein, Newco shall merge (the "Merger") with and into the Company at
the Effective Time. The terms and conditions of the Merger and the mode of
carrying the same into effect shall be as set forth in this Agreement. As a
result of the Merger, the separate corporate existence of Newco shall cease and
the Company shall continue as the Surviving Corporation.
SECTION 2.2 EFFECTIVE TIME. As soon as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VIII, the
parties hereto shall cause the Merger to be consummated by filing a Certificate
of Merger (the "Certificate of Merger") with the Secretary of State of the State
of Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the Delaware Law.
SECTION 2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Newco and the Company shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Newco and the
Company shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.4 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time, the
certificate of incorporation and the bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation and the bylaws of the Surviving Corporation.
SECTION 2.5 DIRECTORS AND OFFICERS. The directors of Newco immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, each
to hold office in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.1 MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF SECURITIES.
On the date on which the Effective Time occurs, by virtue of the Merger and
without any action on the part of the AEP Companies, the Company or any
securityholder thereof:
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(a) Subject to the other provisions of this Article III, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (exclusive of any shares to be cancelled pursuant to SECTION
3.1(c)) shall be converted into that number of shares of AEP Common Stock
equal to the Common Stock Exchange Ratio. If between the date of this
Agreement and the Effective Time the outstanding shares of Company Common
Stock or AEP Common Stock shall have been changed into a different number of
shares or a different class, by reason of any dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares
or other transaction, the Common Stock Exchange Ratio shall be
correspondingly adjusted to reflect such dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares
or other transaction.
(b) All shares of Company Common Stock shall, upon conversion into
shares of AEP Common Stock at the Effective Time, cease to be outstanding
and shall automatically be cancelled and retired, and each certificate
previously evidencing shares of Company Common Stock outstanding immediately
prior to the Effective Time (exclusive of any shares to be cancelled
pursuant to SECTION 3.1(c)) shall thereafter be deemed, for all purposes
other than the payment of dividends or distributions, to represent that
number of shares of AEP Common Stock into which such shares of Company
Common Stock were converted pursuant to SECTION 3.1(a) and, if applicable,
the right to receive cash pursuant to SECTION 3.2(e). The holders of
certificates previously evidencing Company Common Stock shall cease to have
any rights with respect to such Company Common Stock except as otherwise
provided herein or by law.
(c) Notwithstanding any provision of this Agreement to the contrary,
each share of Company Common Stock held in the treasury of the Company and
each share of Company Common Stock, if any, owned by AEP or any direct or
indirect wholly owned subsidiary of AEP or of the Company immediately prior
to the Effective Time shall be cancelled and extinguished without conversion
thereof.
(d) Each share of common stock, par value $.01 per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $3.50 per share, of the
Surviving Corporation.
SECTION 3.2 EXCHANGE OF CERTIFICATES. (a) EXCHANGE FUND. On or prior to the
day of the Effective Time, AEP shall deposit, or cause to be deposited, with the
Exchange Agent, for the benefit of the holders of Company Common Stock, for
exchange in accordance with this Article III, through the Exchange Agent,
certificates evidencing a number of shares of AEP Common Stock into which the
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time was converted pursuant to SECTION 3.1(a). The
Exchange Agent shall, pursuant to irrevocable instructions from AEP, deliver AEP
Common Stock, together with any cash to be paid in lieu of fractional interests
in shares of AEP Common Stock pursuant to SECTION 3.2(e) and any dividends or
distributions related thereto, in exchange for certificates theretofore
evidencing Company Common Stock surrendered to the Exchange Agent pursuant to
SECTION 3.2(c). Except as contemplated by SECTION 3.2(f), the Exchange Fund
shall not be used for any other purpose.
(b) LETTER OF TRANSMITTAL. Promptly after the Effective Time, AEP will cause
the Exchange Agent to send to each record holder of Company Common Stock
immediately prior to the Effective Time a letter of transmittal and other
appropriate materials for use in surrendering to the Exchange Agent certificates
that prior to the Effective Time evidenced shares of Company Common Stock.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the Exchange
Agent shall distribute to each former holder of Company Common Stock, upon
surrender to the Exchange Agent for cancellation of one or more certificates
that theretofore evidenced shares of Company Common Stock, certificates
evidencing the appropriate number of shares of AEP Common Stock into which such
shares of Company Common Stock were converted pursuant to the Merger, together
with any cash to be paid in lieu of
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fractional interests in shares of AEP Common Stock pursuant to SECTION 3.2(e)
and any dividends or distributions related thereto. If shares of AEP Common
Stock are to be issued to a Person other than the Person in whose name the
surrendered certificate or certificates are registered, it shall be a condition
of issuance of AEP Common Stock that the surrendered certificate or certificates
shall be properly endorsed, with signatures guaranteed, or otherwise in proper
form for transfer and that the Person requesting such payment shall pay any
transfer or other taxes required by reason of the issuance of AEP Common Stock
to a Person other than the registered holder of the surrendered certificate or
certificates or such Person shall establish to the satisfaction of AEP that such
tax has been paid or is not applicable. Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto shall be liable to any former holder of
Company Common Stock for any AEP Common Stock, cash in lieu of fractional
interests or dividends or distributions thereon delivered to a public official
pursuant to any applicable escheat Law.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF COMPANY COMMON
STOCK. No dividends or other distributions declared or made with respect to AEP
Common Stock with a record date after the Effective Time shall be paid to the
holder of any certificate that theretofore evidenced shares of Company Common
Stock until the holder of such certificate shall surrender such certificate.
Subject to the effect of any applicable escheat Laws, following surrender of any
such certificate, there shall be paid (i) to the holder of the certificates
evidencing whole shares of AEP Common Stock issued in exchange therefor, without
interest, (A) promptly, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of AEP Common Stock, and (B) at the appropriate payment date, the amount
of dividends or other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of AEP Common Stock and (ii) to the holder of
any certificate that theretofore evidenced shares of Company Common Stock,
without interest, promptly the amount of any cash payable with respect to a
fractional interest in a share of AEP Common Stock to which such holder is
entitled pursuant to SECTION 3.2(e).
(e) NO FRACTIONAL SHARES. Notwithstanding anything herein to the contrary,
no certificates or scrip evidencing fractional interests in shares of AEP Common
Stock shall be issued in connection with the Merger, and any such fractional
interests to which a holder of record of Company Common Stock at the Effective
Time would otherwise be entitled will not entitle such holder to vote or to any
rights of a stockholder of AEP. In lieu of any such fractional shares, each
holder of record of Company Common Stock at the Effective Time who but for the
provisions of this SECTION 3.2(e) would be entitled to receive a fractional
interest of a share of AEP Common Stock pursuant to the Merger shall be paid
cash, without any interest thereon, as hereinafter provided. AEP shall instruct
the Exchange Agent to determine the number of whole shares and fractional shares
of AEP Common Stock allocable to each holder of record of Company Common Stock
at the Effective Time, to aggregate all such fractional shares into whole
shares, to sell the whole shares obtained thereby in the open market at then
prevailing prices on behalf of holders who otherwise would be entitled to
receive fractional share interests and to distribute to each such holder such
holder's ratable share of the total proceeds of such sale, after making
appropriate deductions of the amount, if any, required for Federal income tax
withholding purposes and after deducting any applicable transfer taxes. All
brokers' fees and commissions and fees of the Exchange Agent incurred in
connection with such sales shall be paid by AEP.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains unclaimed by the former holders of Company Common Stock for twelve
months after the Effective Time shall be delivered to AEP, upon demand, and any
former holders of Company Common Stock who have not theretofore complied with
this Article III shall thereafter look only to AEP for AEP Common Stock, any
cash to be paid in lieu of fractional interests in shares of AEP Common Stock
and any dividends or other distributions to which they are entitled.
(g) WITHHOLDING OF TAX. AEP shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any former
holder of Company Common Stock such
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amounts as AEP (or any affiliate thereof) is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax Law. To the extent that amounts are so withheld by
AEP, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the former holder of Company Common Stock in respect of
which such deduction and withholding was made by AEP.
(h) LOST CERTIFICATES. If any certificate evidencing shares of Company
Common Stock shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by AEP, the posting by such Person of a
bond, in such reasonable amount as AEP may direct, as indemnity against claims
that may be made against it with respect to such certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed certificate a
certificate evidencing that number of shares of AEP Common Stock into which the
shares of Company Common Stock evidenced by such lost, stolen or destroyed
certificate were converted pursuant to SECTION 3.1(a), any cash in lieu of
fractional interests in shares of AEP Common Stock to which the holder thereof
may be entitled pursuant to SECTION 3.2(e) and any dividends or other
distributions to which the holder thereof may be entitled pursuant to SECTION
3.2(d).
SECTION 3.3 CLOSING. The Closing shall take place at such time and place as
the parties shall mutually agree on the second Business Day immediately
following the date on which the last of the conditions set forth in Article VIII
(other than conditions that by their nature are required to be performed on the
Closing Date) is fulfilled or, if permissible, waived, or at such other place,
time and date as the parties hereto may agree. At the conclusion of the Closing
on the Closing Date, the parties hereto shall cause the Certificate of Merger
relating to the Merger to be filed with the Secretary of State of the State of
Delaware.
SECTION 3.4 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Common Stock thereafter on the records of the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the AEP Companies that:
SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company and
each Subsidiary of the Company are legal entities duly organized, validly
existing and in good standing under the Laws of their respective jurisdictions
of incorporation or organization, have all requisite power and authority to own,
lease and operate their respective properties and to carry on their respective
businesses as they are now being conducted and are duly qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted by them or the ownership or leasing of their respective properties
makes such qualification necessary, other than any matters, including the
failure to be so duly qualified and in good standing, that could not reasonably
be expected to have a Material Adverse Effect on the Company. SECTION 4.1 of the
Company's Disclosure Letter sets forth, as of the date of this Agreement, a true
and complete list of all the Company's directly or indirectly owned
Subsidiaries, together with (A) the jurisdiction of incorporation or formation
of each Subsidiary and the percentage of each Subsidiary's outstanding capital
stock or other equity interests owned by the Company or another Subsidiary of
the Company, and (B) an indication of whether each such Subsidiary is a
Significant Subsidiary. Except as set forth in SECTION 4.1 of the Company's
Disclosure Letter, neither the Company nor any of its Subsidiaries owns an
equity interest in any other partnership or joint venture arrangement or other
business entity that is Material to the Company.
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
heretofore marked for identification and furnished to AEP complete and correct
copies of the certificate of incorporation and the
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bylaws or the equivalent organizational documents, in each case as amended or
restated to the date hereof, of the Company and each of its Significant
Subsidiaries. Neither the Company nor any of its Significant Subsidiaries is in
violation of any of the provisions of its certificate of incorporation or bylaws
(or equivalent organizational documents).
SECTION 4.3 CAPITALIZATION. (a) COMPANY COMMON STOCK. The authorized capital
stock of the Company consists of 350,000,000 shares of Company Common Stock of
which as of November 7, 1997: (A) 212,235,320 shares were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, the
Company's certificate of incorporation or bylaws or any agreement to which the
Company is a party or is bound and (B) 10,410,363 shares were reserved for
future issuance in the amounts and for the purposes set forth in SECTION 4.3(a)
of the Company's Disclosure Letter. Except as set forth in SECTION 4.3(a) of the
Company's Disclosure Letter, between November 7, 1997 and the date of this
Agreement, no shares of Company Common Stock have been issued by the Company and
the Company has not granted any options for, or other rights to purchase, shares
of Company Common Stock.
(b) RESERVED SHARES. Except for shares to which reference is made in SECTION
4.3(a), no shares of Company Common Stock are reserved for issuance, and, except
for the Company's Rights Agreement and stock options shares with respect to
which are reserved for issuance as set forth in SECTION 4.3(a) of the Company's
Disclosure Letter, there are no contracts, agreements, commitments or
arrangements obligating the Company to (i) offer, sell, issue or grant any
Equity Securities of the Company, (ii) redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of the Company or (iii)
grant any Lien on any shares of capital stock of the Company.
(c) SUBSIDIARY STOCK. The authorized, issued and outstanding capital stock
of, or other equity interests in, each of the Company's Significant Subsidiaries
are set forth in SECTION 4.3(c) of the Company's Disclosure Letter. Except as
set forth in SECTION 4.3(c) of the Company's Disclosure Letter, (i) all the
issued and outstanding common stock of each of the Company's Significant
Subsidiaries is owned, directly or indirectly, by the Company; (ii) all the
issued and outstanding shares of each class of capital stock of, or other equity
interests in, each of the Significant Subsidiaries of the Company have been duly
authorized and are validly issued, and, with respect to capital stock, are fully
paid and nonassessable, and were not issued in violation of any preemptive or
similar rights of any past or present equity holder of such Significant
Subsidiary; (iii) all such issued and outstanding shares, or other equity
interests, that are indicated as owned by the Company or one of its Subsidiaries
in SECTION 4.3(c) of the Company's Disclosure Letter are owned (A) beneficially
as set forth therein and (B) free and clear of all Liens; (iv) no shares of
capital stock of, or other equity interests in, any Significant Subsidiary of
the Company are reserved for issuance; and (v) there are no contracts,
agreements, commitments or arrangements obligating the Company or any of its
Subsidiaries (A) to offer, sell, issue, grant, pledge, dispose of or encumber
any Equity Securities of any of the Significant Subsidiaries of the Company, (B)
to redeem, purchase or acquire, or offer to purchase or acquire, any outstanding
Equity Securities of any of the Significant Subsidiaries of the Company or (C)
to grant any Lien on any outstanding shares of capital stock of, or other equity
interest in, any of the Significant Subsidiaries of the Company.
(d) ADVERSE CLAIMS. Except for the Company's Rights Agreement and stock
options shares with respect to which are reserved for issuance as set forth in
SECTION 4.3(a) of the Company's Disclosure Letter, there are no voting trusts,
proxies or other agreements, commitments or understandings of any character to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound with respect to the voting of any shares of
capital stock of the Company or any of its Significant Subsidiaries, with
respect to the registration of the offering, sale or delivery of any shares of
capital stock of the Company or any of its Significant Subsidiaries under the
Securities Act or otherwise relating to any shares of capital stock of the
Company or any of its Significant Subsidiaries.
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SECTION 4.4 AUTHORIZATION OF AGREEMENT. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by it at the Closing
and, subject to obtaining the Required Company Vote, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby.
The execution and delivery by the Company of this Agreement and each instrument
required hereby to be executed and delivered by it at the Closing and the
performance of its obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of the Company
(other than, with respect to the Merger, the Required Company Vote). This
Agreement has been duly executed and delivered by the Company and (assuming due
authorization, execution and delivery hereof by the other parties hereto)
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the same may be
limited by legal principles of general applicability governing the application
and availability of equitable remedies.
SECTION 4.5 REGULATION AND APPROVALS. (a) UTILITY REGULATION. The Company is
a public utility holding company registered under, and subject to the provisions
of, the Holding Company Act, and the Company is the parent, owning all the
outstanding common stock, of four Domestic Public Utility Companies: (i) CP&L,
which provides regulated retail electric service in the State of Texas; (ii)
PSO, which provides regulated retail electric service in the State of Oklahoma;
(iii) SWEPCO, which provides regulated retail electric service in the States of
Texas, Louisiana and Arkansas; and (iv) WTU, which provides regulated retail
electric service in the State of Texas. In addition, the Company indirectly owns
all of the outstanding stock of Seeboard, a regulated regional electricity
company in England and Wales. Seeboard is a Foreign Utility Company. Except as
aforesaid and as set forth in SECTION 4.5(a) of the Company's Disclosure Letter,
neither the Company nor any of its Subsidiaries is subject to rate regulation as
a public utility or public service company (or similar designation) by any state
in the United States or any municipality or other political subdivision of any
state, by the United States or any Governmental Authority of the United States
or by any foreign country.
(b) APPROVALS. Except for the applicable requirements set forth in SECTION
4.5(b) of the Company's Disclosure Letter, no declaration, filing or
registration with, no waiting period imposed by and no Permit or Order of, any
Governmental Authority is required under any Law, Regulation or Order applicable
to the Company or any of its Subsidiaries to permit the Company to execute,
deliver or perform this Agreement or any instrument required hereby to be
executed and delivered by it at the Closing, the failure to obtain which could
reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 4.6 NO VIOLATION. Assuming receipt of all Permits and Orders
indicated as required in SECTION 4.5(b) and receipt of the Required Company
Vote, neither the execution and delivery by the Company of this Agreement or any
instrument required hereby to be executed and delivered by it at the Closing nor
the performance by the Company of its obligations hereunder or thereunder will
(a) violate or breach the terms of or cause a default under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination, cancellation or acceleration of any obligation under, or result
in the creation of any lien, security interest, charge or encumbrance upon, any
of the properties or assets of the Company or any of its Subsidiaries under (i)
any Law, Regulation, Permit or Order applicable to the Company or any of its
Subsidiaries, (ii) the certificate of incorporation or bylaws or similar
organizational documents of the Company or any of its Subsidiaries or (iii)
except as set forth in SECTION 4.6 of the Company's Disclosure Letter, any note,
bond, mortgage, indenture, deed of trust, license, franchise, concession, lease,
contract or agreement to which the Company or any of its Subsidiaries is a party
or by which it or any of its properties or assets is bound, or (c) with the
passage of time, the giving of notice or the taking of any action by a third
Person, have any of the effects set forth in clause (a) of this SECTION, except
in any such case for any matters described in clauses (i) and (iii) of this
SECTION that could not reasonably be expected to have a material adverse effect
upon the ability of the Company to perform its obligations under this Agreement
or a Material Adverse Effect on the Company. Prior to the execution of this
Agreement, the Board of Directors of the Company has taken all necessary action
to
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cause this Agreement and the transactions contemplated hereby to be exempt from
the provisions of SECTION 203 of the Delaware Law and to ensure that the
execution, delivery and performance of this Agreement by the parties hereto will
not cause any rights to be distributed or to become exercisable under the
Company's Rights Agreement.
SECTION 4.7 REPORTS. (a) REPORTS. Since January 1, 1993, the Company and its
Subsidiaries have filed or caused to be filed (i) all SEC Reports of the Company
or any of its Subsidiaries required to be filed with the Commission and (ii) all
other Reports of the Company or any of its Subsidiaries required to be filed
with any Governmental Authorities, including the FERC, the Commission (under the
Holding Company Act), the NRC and State Regulatory Commissions, except where the
failure to file any such Reports of the Company or any of its Subsidiaries could
not reasonably be expected to have a Material Adverse Effect on the Company. The
Company has made available to AEP a true and complete copy of each such SEC
Report. The Reports of the Company and its Subsidiaries, including all those
filed after the date of this Agreement and prior to the Effective Time, (i) were
or will be prepared in all material respects in accordance with the requirements
of applicable Law and (ii), in the case of the SEC Reports of the Company and
its Subsidiaries, did not at the time they were filed, or will not at the time
they are filed, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) FINANCIAL STATEMENTS. The Company's Consolidated Financial Statements
and any condensed financial statements of the Company (including any related
notes thereto) contained in any SEC Reports of the Company or any of its
Subsidiaries filed with the Commission after the date of this Agreement (i) have
been or will have been prepared in accordance with the published Regulations of
the Commission and in accordance with GAAP (except (A) to the extent required by
changes in GAAP, (B) with respect to unaudited financial statements as permitted
by Form 10-Q and (C), with respect to SEC Reports of the Company or any of its
Subsidiaries filed prior to the date of this Agreement, as may be indicated in
the notes thereto) and (ii) fairly present the consolidated financial position
of the Company and its Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and cash flows for the periods
indicated (including, in the case of any unaudited interim financial statements,
reasonable estimates of normal and recurring year-end adjustments).
(c) NO OMISSIONS. Except for matters disclosed in SECTION 4.7(c) of the
Company's Disclosure Letter, or matters disclosed in the Company's SEC Reports
filed with the Commission prior to the date hereof, there exist no liabilities
or obligations of the Company and its Subsidiaries, whether accrued, absolute,
contingent or threatened, that would be required to be reflected, reserved for
or disclosed under GAAP in condensed financial statements of the Company as of
and for the period ended on the dates on which this representation and warranty
is made or deemed to be made, other than (i) liabilities or obligations that are
adequately reflected, reserved for or disclosed in the Company's Consolidated
Financial Statements, (ii) liabilities or obligations incurred in the ordinary
course of business of the Company consistent with past practice since September
30, 1997, (iii) liabilities or obligations the incurrence of which would not
have been prohibited by SECTIONs 6.1 or 6.2(a) had such sections been in effect
since September 30, 1997 and (iv) other liabilities and obligations that could
not reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 4.8 NO MATERIAL ADVERSE EFFECT; CONDUCT. (a) MATERIAL ADVERSE
CHANGES. Except as set forth in SECTION 4.8(a) of the Company's Disclosure
Letter, since September 30, 1997, no event (other than any event that is of
general application to the electric utility industry in the United States or the
United Kingdom) has occurred that, individually or together with other similar
events, has had, and, to the Knowledge of the Company, no fact or condition
(other than any fact or condition that is of general application to the electric
utility industry in the United States or the United Kingdom) exists that could
reasonably be expected to have, a Material Adverse Effect on the Company.
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(b) PROSCRIBED CONDUCT. Except as set forth in SECTION 4.8(b) of the
Company's Disclosure Letter, during the period from September 30, 1997 to the
date of this Agreement, neither the Company nor any of its Subsidiaries has
failed to conduct its business in the ordinary course consistent with past
practice, other than any conduct that would not have been prohibited by SECTION
6.1 or SECTION 6.2(a) had such sections been in effect since September 30, 1997.
SECTION 4.9 PERMITS; COMPLIANCE. (a) GENERAL. The Company and its
Subsidiaries have obtained all Orders and Permits that are necessary to carry on
their businesses as currently conducted, except for any such Orders or Permits
that the failure to possess, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. Except
as set forth in SECTION 4.14 of the Company's Disclosure Letter, all such Orders
and Permits are in full force and effect, have not been violated in any respect
that could reasonably be expected to have a Material Adverse Effect on the
Company and no suspension, revocation or cancellation thereof has occurred or,
to the Knowledge of the Company, been threatened and there is no action,
proceeding or investigation pending or, to the Knowledge of the Company,
threatened regarding suspension, revocation or cancellation of any of such
Permits or Orders, except where the suspension, revocation or cancellation of
such Permits or Orders could not reasonably be expected to have a Material
Adverse Effect on the Company.
(b) SOUTH TEXAS NUCLEAR FACILITY. CP&L is a co-owner of the South Texas
Nuclear Facility, owning an undivided 25.2% interest therein. The operations of
the South Texas Nuclear Facility are subject to the control of the STP Nuclear
Operating Company (the "Operating Company"), in which the Company owns a like
equity interest. Except as set forth in SECTION 4.9(b) of the Company's
Disclosure Letter, to the Knowledge of the Company, the operations of the South
Texas Nuclear Facility have at all times been conducted in compliance with
applicable health, safety, regulatory and other legal requirements, except where
the failure to be so in compliance in the aggregate could not reasonably be
expected to have a Material Adverse Effect on the Company. Except as set forth
in SECTION 4.9(b) of the Company's Disclosure Letter, to the Knowledge of the
Company the operations of the South Texas Nuclear Facility are not the subject
of any outstanding notices of violation or requests for information from the NRC
or any other agency with jurisdiction over such facility. To the Knowledge of
the Company, the Operating Company maintains, and is in compliance with, an
emergency plan designed to protect the health and safety of the public in the
event of an unplanned release of radioactive materials from the South Texas
Nuclear Facility, and the NRC has determined that such plan is in compliance
with its requirements. To the Knowledge of the Company, liability insurance to
the full extent required by Law for operating nuclear facilities remains in full
force and effect with respect to the South Texas Nuclear Facility, and the
amount of such insurance has been approved by the NRC. To the Knowledge of the
Company, plans for the decommissioning of the South Texas Nuclear Facility, and
for the storage of spent nuclear fuel, conform with the requirements of
applicable Law, and the owners of such facility, including the Company, have
funded such plans to the extent required by Law.
SECTION 4.10 LITIGATION; COMPLIANCE WITH LAWS. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration) pending
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries, at law or in equity, in any Court or before or by any
Governmental Authority, except actions, suits or proceedings that (a) are fully
and accurately disclosed in the Company's SEC Reports filed with the Commission
prior to the date hereof, (b) are set forth in SECTION 4.10 or SECTION 4.14 of
the Company's Disclosure Letter or (c), individually or, with respect to
multiple actions, suits or proceedings that allege similar theories of recovery
based on similar facts, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company. Except as set forth in SECTION
4.10 of the Company's Disclosure Letter, there are no Material claims pending
or, to the Knowledge of the Company, threatened by any Persons against the
Company or any of its Subsidiaries for indemnification pursuant to any statute,
organizational document, contract or otherwise with respect to any action, suit,
investigation or proceeding pending in any Court or before or by any
Governmental Authority. Except as set forth in SECTION 4.10 or SECTION 4.14 of
the Company's
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Disclosure Letter, the Company and its Subsidiaries are in substantial
compliance with all applicable Laws and Regulations and are not in default with
respect to any Order applicable to the Company or any of its Subsidiaries,
except such events of noncompliance or defaults that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company.
SECTION 4.11 OWNERSHIP OF AEP COMMON STOCK. Neither the Company nor any of
its Affiliates "beneficially own" (as such term is defined for purposes of
SECTION 13(d) of the Exchange Act) any shares of AEP Common Stock (in whole or
in part).
SECTION 4.12 EMPLOYEE BENEFIT PLANS. (a) LISTING. Each Company Benefit Plan
is listed in SECTION 4.12(a) of the Company's Disclosure Letter, including, with
respect to Terminated Company Benefit Plans, the date of termination. True and
correct copies of each of the following have been made available to AEP with
respect to each Current Company Benefit Plan: (i) the three most recent annual
reports (Form 5500) filed with the IRS, (ii) the plan document, (iii) the trust
agreement, if any, (iv) the most recent summary plan description if required by
ERISA, (v) the three most recent actuarial reports or valuations relating to
each Current Company Benefit Plan subject to Title IV of ERISA and (vi) the most
recent determination letter, if any, issued by the IRS with respect to any
Current Company Benefit Plan intended to be qualified under SECTION 401 of the
Code.
(b) MATERIAL ADVERSE CHANGES. With respect to each Company Benefit Plan, no
event has occurred and, to the Knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Company or any of
its Subsidiaries could be subject to any liability under the terms of such
Company Benefit Plan, ERISA, the Code or any other applicable Law, other than
any condition or set of circumstances that could not reasonably be expected to
have a Material Adverse Effect on the Company.
(c) QUALIFIED STATUS OF CURRENT PLANS. Except as set forth in SECTION
4.12(c) of the Company's Disclosure Letter, each Current Company Benefit Plan
intended to be qualified under SECTION 401 of the Code (i) satisfies in form the
requirements of such SECTION, (ii) has received a favorable determination letter
from the IRS regarding such qualified status, (iii) has not, since receipt of
the most recent favorable determination letter, been amended, and, (iv) to the
Knowledge of the Company, has not been operated in a way that would adversely
affect its qualified status.
(d) NO TERMINATIONS OF CURRENT PLANS. There has been no termination or
partial termination of any Current Company Benefit Plan within the meaning of
SECTION 411(d)(3) of the Code.
(e) TERMINATED PLANS. Any Terminated Company Benefit Plan intended to have
been qualified under SECTION 401 of the Code received a favorable determination
letter from the IRS with respect to its termination.
(f) CLAIMS. There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the Knowledge of the Company, threatened
against, or with respect to, any Company Benefit Plan or its assets that could
reasonably be expected to have a Material Adverse Effect on the Company and, to
the Knowledge of the Company, no facts or circumstances exist that could give
rise to any such actions, suits or claims.
(g) PENDING MATTERS. To the Knowledge of the Company, there is no matter
pending (other than routine qualification determination filings) with respect to
any Company Benefit Plan before the IRS, the Department of Labor, the PBGC or
other Governmental Authority.
(h) TIMELY CONTRIBUTIONS. Except as set forth in SECTION 4.12(h) of the
Company's Disclosure Letter, all contributions required to be made to Company
Benefit Plans pursuant to their terms and the provisions of ERISA, the Code or
any other applicable Law have been timely made.
(i) CURRENT PLANS SUBJECT TO TITLE IV OF ERISA. As to each Current Company
Benefit Plan subject to Title IV of ERISA, (i) there has been no event or
condition that presents a significant risk of plan termination, (ii) no
accumulated funding deficiency, whether or not waived, within the meaning of
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SECTION 302 of ERISA or SECTION 412 of the Code has been incurred, (iii) no
reportable event within the meaning of SECTION 4043 of ERISA (for which the
disclosure requirements of Regulation section 4043.1 et seq. promulgated by the
PBGC have not been waived) has occurred within six years prior to the date of
this Agreement, (iv) no notice of intent to terminate such Benefit Plan has been
given under SECTION 4041 of ERISA, (v) no proceeding has been instituted under
SECTION 4042 of ERISA to terminate such Benefit Plan, (vi) no liability to the
PBGC has been incurred (other than with respect to required premium payments)
and (vii) the assets of such Benefit Plan equal or exceed the actuarial present
value of the benefit liabilities, within the meaning of SECTION 4041 of ERISA,
under such Benefit Plan, based upon reasonable actuarial assumptions and the
asset valuation principles established by the PBGC.
(j) EXCESS PARACHUTE PAYMENTS. Except as set forth in SECTION 4.12(j) of the
Company's Disclosure Letter and except for any Retention Agreement not
prohibited by SECTION 6.2(a), in connection with the consummation of the
transactions contemplated by this Agreement, no payments of money or other
property, acceleration of benefits or provision of other rights have been or
will be made under any Current Company Benefit Plan that could reasonably be
expected to be nondeductible under SECTION 280G of the Code, whether or not some
other subsequent action or event would be required to cause such payment,
acceleration or provision to be triggered.
(k) NO REQUIRED INCREASE IN CONTRIBUTIONS. Except as set forth in SECTION
4.12(k) of the Company's Disclosure Letter, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) require the Company or any of its Subsidiaries to make a larger contribution
to, or pay greater benefits or provide other rights under, any Current Company
Benefit Plan than it otherwise would, whether or not some other subsequent
action or event would be required to cause such payment or provision to be
triggered or (ii) create or give rise to any additional vested rights or service
credits under any Current Company Benefit Plan whether or not some other
subsequent action or event would be required to cause such creation or
acceleration to be triggered.
(l) INTENTIONALLY OMITTED.
(m) RETIREE BENEFITS. Except as set forth in SECTION 4.12(m) of the
Company's Disclosure Letter, no Current Company Benefit Plan (other than a
Company Benefit Plan maintained outside the United States that is either fully
insured or fully funded through a retirement plan) provides retiree medical or
retiree life insurance benefits to any Person and neither the Company nor any of
its Subsidiaries is contractually or otherwise obligated (whether or not in
writing) to provide any Person with life insurance or medical benefits upon
retirement or termination of employment, other than as required by the
provisions of SECTIONs 601 through 608 of ERISA and SECTION 4980B of the Code.
(n) MULTIEMPLOYER PLANS. Except as set forth in SECTION 5.1 of AEP's
Disclosure Letter, neither the Company nor any member of its Controlled Group
contributes or has an obligation to contribute, and has not within six years
prior to the date of this Agreement contributed, had an obligation to
contribute, or had any other liability to a multiemployer plan within the
meaning of SECTION 3(37) of ERISA.
(o) COLLECTIVE BARGAINING CONTRACTS. Except as set forth in SECTION 4.12(o)
of the Company's Disclosure Schedule, (i) no collective bargaining agreement is
being negotiated by the Company or any of its Subsidiaries, (ii) there is no
pending or, to the Knowledge of the Company, threatened labor dispute, strike or
work stoppage against the Company or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect on the Company, (iii)
to the Knowledge of the Company, neither the Company or any of its Subsidiaries
nor any representative or employee of the Company or any of its Subsidiaries has
in the United States committed any Material unfair labor practices in connection
with the operation of the business of the Company and its Subsidiaries, and (iv)
there is no pending or, to the Knowledge of the Company, threatened charge or
complaint against the Company or any of its Subsidiaries by the National Labor
Relations Board or any comparable agency of any state of the United States.
(p) FUNDING OF CERTAIN BENEFITS. Except as set forth in SECTION 4.12(p) of
the Company's Disclosure Letter, the Company has not contributed, transferred or
otherwise provided any cash, securities or other property to any grantee, trust,
escrow or other arrangement that has the effect of providing or setting aside
assets for benefits payable pursuant to any termination, severance or other
change in control agreement.
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SECTION 4.13 TAXES. (a) TAX RETURNS AND TAXES. Except for such matters as
could not reasonably be expected to have a Material Adverse Effect on the
Company, (i) all Tax Returns that are required to be filed by or with respect to
the Company or any of its Subsidiaries on or before the Effective Time have been
or will be timely filed, (ii) all Taxes that are due and payable by the Company
or any of its Subsidiaries on or before the Effective Time have been or will be
timely paid in full or adequate reserves have been established for the payment
of such Taxes, (iii) all withholding Tax requirements imposed on or with respect
to the Company or any of its Subsidiaries and that are required to be satisfied
at or before the Effective Time have been or will be satisfied in full in all
respects and (iv) no penalty, interest or other charge is or will become due
with respect to the late filing of any such Tax Return or late payment of any
Tax by the Company or any of its Subsidiaries.
(b) AUDITS. Except as set forth in SECTION 4.13(b) of the Company's
Disclosure Letter, all Material Tax Returns required to be filed by the Company
or any of its Subsidiaries have been audited (and such audit has become final)
by the applicable Governmental Authority or the applicable statute of
limitations has expired for the period covered by such Tax Returns.
(c) EXTENSIONS OF TIME. Except as set forth in SECTION 4.13(c) of the
Company's Disclosure Letter, there is not in force any extension of time with
respect to the due date for the filing of any Material Tax Return required to be
filed by the Company or any of its Subsidiaries or any waiver or agreement for
any extension of time for the assessment or payment of any Tax due with respect
to the period covered by any Tax Return filed, or required to be filed, by the
Company or any of its Subsidiaries.
(d) CLAIMS. No Material issues have been raised by any Taxing authority in
connection with the audit or examination of any Tax Return filed, or required to
be filed, by the Company or any of its Subsidiaries, and there is no claim
against the Company or any of its Subsidiaries for any Taxes, and no assessment,
deficiency or adjustment has been asserted or proposed with respect to any Tax
Return, that, in either case, could reasonably be expected to have a Material
Adverse Effect on the Company.
(e) AFFILIATED GROUP. Except as set forth in SECTION 4.13(e) of the
Company's Disclosure Letter, none of the Company and its Subsidiaries, during
the last ten years, has been a member of an affiliated group filing a
consolidated Federal income Tax Return other than an affiliated group of which
the Company is the common parent.
SECTION 4.14 ENVIRONMENTAL MATTERS. Except for matters disclosed in SECTION
4.14 of the Company's Disclosure Letter, or matters disclosed in the Company's
SEC Reports filed with the Commission prior to the date hereof, and except for
matters that, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect on the Company, (a) the properties, operations
and activities of the Company and its Subsidiaries are in compliance with all
applicable Environmental Laws; (b) the Company and its Subsidiaries and the
properties and operations of the Company and its Subsidiaries are not subject to
any existing, pending or, to the Knowledge of the Company, threatened action,
suit, investigation, inquiry or proceeding by or before any Court or
Governmental Authority under any Environmental Law; (c) all Permits, if any,
required to be obtained or filed by the Company or any of its Subsidiaries under
any Environmental Law in connection with the business of the Company and its
Subsidiaries have been obtained or filed and are valid and currently in full
force and effect; (d) to the Knowledge of the Company, there has been no release
of any hazardous substance, pollutant or contaminant into the environment by the
Company or its Subsidiaries or in connection with their properties or
operations; (e) to the Knowledge of the Company, there has been no exposure of
any Person or property to any hazardous substance, pollutant or contaminant in
connection with the properties, operations and activities of the Company and its
Subsidiaries; and (f) the Company and its Subsidiaries have made available to
AEP all internal and external environmental audits and studies and all
correspondence on substantial environmental matters (in each case relevant to
the Company or any of its Subsidiaries) in the possession of the Company or its
Subsidiaries.
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SECTION 4.15 INSURANCE. The Company and its Subsidiaries own and are, and
have been continuously since January 1, 1993, beneficiaries under all such
insurance policies underwritten by reputable insurers that, as to risks insured,
coverages and related limits and deductibles, are customary in the industries in
which the Company and its Subsidiaries operate. Except as disclosed in SECTION
4.15 of the Company's Disclosure Letter, neither the Company nor any of it
Subsidiaries has received any notice of cancellation or termination of any
Material insurance policy as to which it is a named beneficiary. All Material
insurance policies of the Company and its Subsidiaries are valid and enforceable
against the underwriters thereof in accordance with their terms, except as the
same may be limited by legal principles of general applicability governing the
application and availability of equitable remedies.
SECTION 4.16 POOLING; TAX MATTERS. Neither the Company nor, to the Knowledge
of the Company, any of its Affiliates has taken or agreed to take any action
that would prevent the Merger from being treated as a "pooling of interests" in
accordance with generally accepted accounting principles and the Regulations of
the Commission or from constituting a reorganization within the meaning of
section 368(a) of the Code.
SECTION 4.17 AFFILIATES. SECTION 4.17 of the Company's Disclosure Letter
contains a true and complete list of all Persons who, to the Knowledge of the
Company, may be deemed to be "affiliates" of the Company as such term is used in
Rule 145 under the Securities Act, including all directors and executive
officers of the Company.
SECTION 4.18 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated on the date of this Agreement to
the effect that the consideration to be received by the holders of Company
Common Stock in the Merger is fair, from a financial point of view, to such
holders.
SECTION 4.19 BROKERS. Except as set forth in SECTION 4.19 of the Company's
Disclosure Letter, no broker, finder or investment banker (other than ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. Prior to the date
of this Agreement, the Company has made available to AEP complete and correct
copies of all agreements between the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated pursuant to which such firm will be entitled to any payment
relating to the transactions contemplated by this Agreement.
SECTION 4.20 VOTE REQUIRED. The approval by the holders of a majority of the
votes entitled to be cast by holders of the Company Common Stock, with each
share of Company Common Stock being entitled to one vote per share, is the only
vote of the holders of any class or series of capital stock of the Company or
any of its Subsidiaries required to approve the Merger, this Agreement or the
transactions contemplated hereby (the "Required Company Vote").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE AEP COMPANIES
The AEP Companies hereby represent and warrant to the Company that:
SECTION 5.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. AEP and each
Subsidiary of AEP are legal entities duly organized, validly existing and in
good standing under the Laws of their respective jurisdictions of incorporation
or organization, have all requisite power and authority to own, lease and
operate their respective properties and to carry on their respective businesses
as they are now being conducted and are duly qualified and in good standing to
do business in each jurisdiction in which the nature of the business conducted
by them or the ownership or leasing of their respective properties makes such
qualification necessary, other than any matters, including the failure to be so
duly qualified and in good standing, that could not reasonably be expected to
have a Material Adverse Effect on AEP. SECTION 5.1 of AEP's Disclosure Letter
sets forth, as of the date of this Agreement, a true and complete list of all of
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the directly or indirectly owned Subsidiaries of AEP, together with (A) the
jurisdiction of incorporation of each Subsidiary and the percentage of each
Subsidiary's outstanding voting securities owned by AEP or another Subsidiary of
AEP, and (B) an indication of whether each such Subsidiary is a Significant
Subsidiary. Except as set forth in SECTION 5.1 of AEP's Disclosure Letter,
neither AEP nor any of its Subsidiaries owns an equity interest in any other
partnership or joint venture arrangement or other business entity that is
Material to AEP.
SECTION 5.2 CERTIFICATE OF INCORPORATION AND BYLAWS. AEP has heretofore
marked for identification and furnished to the Company complete and correct
copies of the certificate of incorporation and the bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of AEP, Newco and each of AEP's Significant Subsidiaries. Neither AEP,
Newco, nor any of AEP's Significant Subsidiaries is in violation of any of the
provisions of its certificate of incorporation or bylaws (or equivalent
organizational documents).
SECTION 5.3 CAPITALIZATION. (a) AEP COMMON STOCK. The authorized capital
stock of AEP consists of 300,000,000 shares of AEP Common Stock of which as of
the date hereof: (A) 189,989,989 shares were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, AEP's certificate of
incorporation or bylaws or any agreement to which AEP is a party or is bound and
(B) 51,581,493 shares were reserved for future issuance in the amounts and for
the purposes set forth in SECTION 5.3(a) of AEP's Disclosure Letter.
(b) RESERVED SHARES. Except for shares to which reference is made in SECTION
5.3(a), no shares of AEP Common Stock are reserved for issuance, and there are
no contracts, agreements, commitments or arrangements obligating AEP to (i)
offer, sell, issue or grant any Equity Securities of AEP, (ii) to redeem,
purchase or acquire, or offer to purchase or acquire, any outstanding Equity
Securities of AEP or (iii) grant any Lien on any shares of capital stock of AEP.
(c) SUBSIDIARY STOCK. The authorized, issued and outstanding capital stock
of, or other equity interests in, each of AEP's Significant Subsidiaries and
Newco are set forth in SECTION 5.3(c) of AEP's Disclosure Letter. Except as set
forth in SECTION 5.3(c) of AEP's Disclosure Letter, (i) all the issued and
outstanding common stock of each of AEP's Significant Subsidiaries and Newco is
owned, directly or indirectly, by AEP; (ii) all the issued and outstanding
shares of each class of capital stock of, or other equity interests in, each of
the Significant Subsidiaries of AEP and Newco have been duly authorized and are
validly issued, and, with respect to capital stock, are fully paid and
nonassessable, and were not issued in violation of any preemptive or similar
rights of any past or present equity holder of such Significant Subsidiary;
(iii) all such issued and outstanding shares, or other equity interests, that
are indicated as owned by AEP, Newco or one of its Subsidiaries in SECTION
5.3(c) of AEP's Disclosure Letter are owned (A) beneficially as set forth
therein and (B) free and clear of all Liens; (iv) no shares of capital stock of,
or other equity interests in, any Significant Subsidiary of AEP or Newco are
reserved for issuance; and (v) there are no contracts, agreements, commitments
or arrangements obligating AEP or any of its Significant Subsidiaries or Newco
(A) to offer, sell, issue, grant, pledge, dispose of or encumber any Equity
Securities of any of the Significant Subsidiaries of AEP or Newco or (B) to
redeem, purchase or acquire, or offer to purchase or acquire, any outstanding
Equity Securities of any of the Significant Subsidiaries of AEP or Newco or (C)
to grant any Lien on any outstanding shares of capital stock of, or other equity
interest in, any of the Significant Subsidiaries of AEP or Newco.
(d) ADVERSE CLAIMS. There are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which AEP or any of its
Subsidiaries is a party or by which AEP or any of its Subsidiaries is bound with
respect to the voting of any shares of capital stock of AEP, any of its
Significant Subsidiaries or Newco, with respect to the registration of the
offering, sale or delivery of any shares of capital stock of AEP or any of its
Significant Subsidiaries or Newco under the Securities Act or otherwise relating
to any shares of capital stock of AEP, any of its Significant Subsidiaries or
Newco.
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SECTION 5.4 AUTHORIZATION OF AGREEMENT. Each of AEP and Newco has all
requisite corporate power and authority to execute and deliver this Agreement
and each instrument required hereby to be executed and delivered by it at the
Closing and, subject to obtaining the Required AEP Vote, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby. The execution and delivery by each of AEP and Newco of this
Agreement and each instrument required hereby to be executed and delivered by it
at the Closing and the performance of their respective obligations hereunder and
thereunder have been duly and validly authorized by all requisite corporate
action on the part of AEP and Newco (other than the Required AEP Vote). This
Agreement has been duly executed and delivered by AEP and Newco and (assuming
due authorization, execution and delivery hereof by the Company) constitutes a
legal, valid and binding obligation of each of AEP and Newco, enforceable
against each of them in accordance with its terms, except as the same may be
limited by legal principles of general applicability governing the application
and availability of equitable remedies.
SECTION 5.5 REGULATION AND APPROVALS. (a) UTILITY REGULATION. AEP is a
public utility holding company registered under, and subject to the provisions
of, the Holding Company Act, and AEP is the parent, owning all the outstanding
common stock, of seven Domestic Public Utility Companies: (i) APCo, which
provides regulated retail electricity service in the States of Virginia and West
Virginia and which is also regulated in the State of Tennessee; (ii) CSPCo,
which provides regulated retail electricity service in the State of Ohio; (iii)
I&M, which provides regulated retail electricity service in the States of
Indiana and Michigan; (iv) KEPCo, which provides regulated retail electricity
service in the State of Kentucky; (v) KPC, which provides regulated retail
electricity service in the State of Tennessee; (vi) OPCo, which provides
regulated retail electricity service in the State of Ohio and which is also
regulated in the State of West Virginia and (vii) WPC, which provides regulated
retail electricity service in the State of West Virginia. In addition, AEP
indirectly owns 50% of Yorkshire Electricity Group plc, a regulated regional
electricity company in the United Kingdom ("Yorkshire"). Yorkshire is a Foreign
Utility Company. Except for regulation of the aforesaid companies by FERC under
the Federal Power Act, by the Commission under the Holding Company Act and by
said states and as set forth in SECTION 5.5(a) of AEP's Disclosure Letter,
neither AEP nor any of its Subsidiaries is subject to regulation as a public
utility or a public service company (or similar designation) by any state in the
United States or any municipality or other political subdivision of any state,
by the United States or by any Governmental Authority of the United States or by
any foreign country.
(b) APPROVALS. Except for the applicable requirements set forth in SECTION
5.5(b) of AEP's Disclosure Letter, no declaration, filing or registration with,
no waiting period imposed by and no Permit or Order of, any Governmental
Authority is required under any Law, Regulation or Order applicable to AEP or
any of its Subsidiaries to permit AEP or Newco to execute, deliver or perform
this Agreement or any instrument required hereby to be executed and delivered by
either of them at the Closing, the failure to obtain which could reasonably be
expected to have a Material Adverse Effect on AEP.
SECTION 5.6 NO VIOLATION. Assuming receipt of all Permits and Orders
indicated as required in SECTION 5.5(b) and receipt of the Required AEP Vote,
neither the execution and delivery by AEP or Newco of this Agreement or any
instrument required hereby to be executed and delivered by either of them at the
Closing nor the performance by AEP or Newco of their respective obligations
hereunder or thereunder will (a) violate or breach the terms of or cause a
default under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation or acceleration
of any obligation under, or result in the creation of any lien, security
interest, charge or encumbrance upon, any of the properties or assets of AEP or
any of its Subsidiaries under (i) any Law, Regulation, Permit or Order
applicable to AEP or any of its Subsidiaries, (ii) the certificate of
incorporation or bylaws or similar organizational documents of AEP or any of its
Subsidiaries or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, concession, lease, contract or agreement to which AEP or any
of its Subsidiaries is a party or by which it or any of its properties or assets
is bound, or (b) with the passage of time, the giving of notice or the taking of
any action by a third Person, have any of the effects set forth in
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clause (a) of this SECTION, except in any such case for any matters described in
clauses (i) and (iii) of this SECTION that could not reasonably be expected to
have a material adverse effect upon the ability of AEP or Newco to perform their
respective obligations under this Agreement or a Material Adverse Effect on AEP.
Prior to the execution of this Agreement, the Board of Directors of AEP has
taken all necessary action to cause this Agreement and the transactions
contemplated hereby to be exempt from the provisions of SECTION 912 of the New
York Law.
SECTION 5.7 REPORTS. (a) REPORTS. Since January 1, 1993, AEP and its
Subsidiaries have filed or caused to be filed (i) all SEC Reports of AEP or any
of its Subsidiaries required to be filed with the Commission and (ii) all other
Reports of AEP or any of its Subsidiaries required to be filed with any other
Governmental Authorities, including the FERC, the Commission (under the Holding
Company Act), the NRC and State Regulatory Commissions, except where the failure
to file any such Reports of AEP or any of its Subsidiaries could not reasonably
be expected to have a Material Adverse Effect on AEP. AEP has made available to
the Company a true and complete copy of each such SEC Report. The Reports of AEP
and its Subsidiaries, including all those filed after the date of this Agreement
and prior to the Effective Time, (i) were or will be prepared in all material
respects in accordance with the requirements of applicable Law and (ii), in the
case of the SEC Reports of AEP and its Subsidiaries, did not at the time they
were filed, or will not at the time they are filed, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) FINANCIAL STATEMENTS. The AEP Consolidated Financial Statements and any
consolidated financial statements of AEP (including any related notes thereto)
contained in any SEC Reports of AEP or any of its Subsidiaries filed with the
Commission after the date of this Agreement (i) have been or will have been
prepared in accordance with the published Regulations of the Commission and in
accordance with GAAP (except (A) to the extent required by changes in GAAP, (B)
with respect to unaudited financial statements as permitted by Form 10-Q and
(C), with respect to SEC Reports of AEP filed prior to the date of this
Agreement, as may be indicated in the notes thereto) and (ii) fairly present the
consolidated financial position of AEP and its Subsidiaries as of the respective
dates thereof and the consolidated results of their operations and cash flows
for the periods indicated (including, in the case of any unaudited interim
financial statements, reasonable estimates of normal and recurring year-end
adjustments).
(c) NO OMISSIONS. Except for matters disclosed in SECTION 5.7(c) of AEP's
Disclosure Letter, or matters disclosed in AEP's SEC Reports filed with the
Commission prior to the date hereof, there exist no liabilities or obligations
of AEP and its Subsidiaries, whether accrued, absolute, contingent or
threatened, that would be required to be reflected, reserved for or disclosed
under GAAP in consolidated financial statements of AEP as of and for the period
ended on the dates on which this representation and warranty is made or deemed
to be made, other than (i) liabilities or obligations that are adequately
reflected, reserved for or disclosed in AEP's Consolidated Financial Statements,
(ii) liabilities or obligations incurred in the ordinary course of business of
AEP consistent with past practice since September 30, 1997, (iii) liabilities or
obligations the incurrence of which would not have been prohibited by SECTION
6.1 or 6.2(b) had such sections been in effect since September 30, 1997 and (iv)
other liabilities and obligations that could not reasonably be expected to have
a Material Adverse Effect on AEP.
SECTION 5.8 NO MATERIAL ADVERSE EFFECT; CONDUCT. (a) MATERIAL ADVERSE
CHANGES. Except as set forth in SECTION 5.8(a) of AEP's Disclosure Letter, since
September 30, 1997, no event (other than any event that is of general
application to the electric utility industry in the United States or the United
Kingdom) has occurred that, individually or together with other similar events,
has had, and to the Knowledge of AEP, no fact or condition (other than any fact
or condition that is of general application to the electric utility industry in
the United States or the United Kingdom) exists that could reasonably be
expected to have, a Material Adverse Effect on AEP.
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(b) PROSCRIBED CONDUCT. Except as set forth in SECTION 5.8(b) of AEP's
Disclosure Letter, during the period from September 30, 1997 to the date of this
Agreement, neither AEP nor any of its Subsidiaries has failed to conduct its
business in the ordinary course consistent with past practice, other than any
conduct that would not have been prohibited by SECTION 6.1 or SECTION 6.2(b) had
such sections been in effect since September 30, 1997.
SECTION 5.9 PERMITS; COMPLIANCE. (a) GENERAL. To the Knowledge of AEP, AEP
and its Subsidiaries have obtained all Orders and Permits that are necessary to
carry on their businesses as currently conducted, except for any such Orders or
Permits that the failure to possess, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on AEP. All such Orders
and Permits are in full force and effect, have not been violated in any respect
that could reasonably be expected to have a Material Adverse Effect on AEP and
no suspension, revocation or cancellation thereof has occurred or, to the
Knowledge of AEP, been threatened and there is no action, proceeding or
investigation pending or, to the Knowledge of AEP, threatened regarding
suspension, revocation or cancellation of any of such Permits or Orders, except
where the suspension, revocation or cancellation of such Permits or Orders could
not reasonably be expected to have a Material Adverse Effect on AEP.
(b) ▇▇▇▇ NUCLEAR PLANT. A Subsidiary of AEP is the owner of the ▇▇▇▇ Nuclear
Plant. Except as set forth in SECTION 5.9(b) of AEP's Disclosure Letter, to the
Knowledge of AEP, the operations of the ▇▇▇▇ Nuclear Plant have at all times
been conducted in compliance with applicable health, safety, regulatory and
other legal requirements, except where the failure to be so in compliance in the
aggregate could not reasonably be expected to have a Material Adverse Effect on
AEP. Except as set forth in SECTION 5.9(b) of AEP's Disclosure Letter, to the
Knowledge of AEP, the operations of the ▇▇▇▇ Nuclear Plant are not the subject
of any outstanding notices of violation or requests for information from the NRC
or any other agency with jurisdiction over such facility. To the Knowledge of
AEP, AEP maintains, and is in compliance with, an emergency plan designed to
protect the health and safety of the public in the event of an unplanned release
of radioactive materials from the ▇▇▇▇ Nuclear Plant, and the NRC has determined
that such plan is in compliance with its requirements. To the Knowledge of AEP,
liability insurance to the full extent required by law for operating nuclear
facilities remains in full force and effect with respect to the ▇▇▇▇ Nuclear
Plant, and the amount of such insurance has been approved by the NRC. To the
Knowledge of AEP, plans for the decommissioning of the ▇▇▇▇ Nuclear Plant, and
for the storage of spent nuclear fuel, conform with the requirements of
applicable law, and the owner of such facility has funded such plans to the
extent required by Law.
SECTION 5.10 LITIGATION; COMPLIANCE WITH LAWS. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration) pending
or, to the Knowledge of AEP, threatened against AEP or any of its Subsidiaries,
at law or in equity, in any Court or before or by any Governmental Authority,
except actions, suits or proceedings that (a) are fully and accurately disclosed
in AEP's SEC Reports filed with the Commission prior to the date hereof, (b) are
set forth in SECTION 5.10 or SECTION 5.14 of AEP's Disclosure Letter or (c)
individually or, with respect to multiple actions, suits or proceedings that
allege similar theories of recovery based on similar facts, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on AEP.
Except as set forth in SECTION 5.10 of AEP's Disclosure Letter, there are no
Material claims pending or, to the Knowledge of AEP, threatened by any Persons
against AEP or any of its Subsidiaries for indemnification pursuant to any
statute, organizational document, contract or otherwise with respect to any
action, suit, investigation or proceeding pending in any Court or before or by
any Governmental Authority. Except as set forth in SECTION 5.10 of AEP's
Disclosure Letter, AEP and its Subsidiaries are in substantial compliance with
all applicable Laws and Regulations and are not in default with respect to any
Order applicable to AEP or any of its Subsidiaries, except such events of
noncompliance or defaults that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on AEP.
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SECTION 5.11 OWNERSHIP OF COMPANY COMMON STOCK. Neither AEP nor any of its
Affiliates "beneficially own" (as such term is defined for purposes of SECTION
13(d) of the Exchange Act) any shares of Company Common Stock.
SECTION 5.12 EMPLOYEE BENEFIT PLANS. (a) LISTING. Each AEP Benefit Plan is
listed in SECTION 5.12(a) of AEP's Disclosure Letter, including, with respect to
Terminated AEP Benefit Plans, the date of termination. True and correct copies
of each of the following have been made available to the Company with respect to
each Current AEP Benefit Plan: (i) the three most recent annual reports (Form
5500) filed with the IRS, (ii) the plan document, (iii) the trust agreement, if
any, (iv) the most recent summary plan description if required by ERISA, (v) the
three most recent actuarial reports or valuations relating to each Current AEP
Benefit Plan subject to Title IV of ERISA and (vi) the most recent determination
letter, if any, issued by the IRS with respect to any Current AEP Benefit Plan
intended to be qualified under SECTION 401 of the Code.
(b) MATERIAL ADVERSE CHANGES. With respect to each AEP Benefit Plan, no
event has occurred and, to the Knowledge of AEP, there exists no condition or
set of circumstances in connection with which AEP or any of its Subsidiaries
could be subject to any liability under the terms of such AEP Benefit Plan,
ERISA, the Code or any other applicable Law, other than any condition or set of
circumstances that could not reasonably be expected to have a Material Adverse
Effect on AEP.
(c) QUALIFIED STATUS OF CURRENT PLANS. Except as set forth in SECTION
5.12(c) of AEP's Disclosure Letter, each Current AEP Benefit Plan intended to be
qualified under SECTION 401 of the Code (i) satisfies in form the requirements
of such SECTION, (ii) has received a favorable determination letter from the IRS
regarding such qualified status, (iii) has not, since receipt of the most recent
favorable determination letter, been amended, and, (iv) to the Knowledge of AEP,
has not been operated in a way that would adversely affect its qualified status.
(d) NO TERMINATION OF CURRENT PLANS. Except as set forth in SECTION 5.12(d)
of AEP's Disclosure Letter, there has been no termination or partial termination
of any Current AEP Benefit Plan within the meaning of SECTION 411(d)(3) of the
Code.
(e) TERMINATED PLANS. Any Terminated AEP Benefit Plan intended to have been
qualified under SECTION 401 of the Code received a favorable determination
letter from the IRS with respect to its termination.
(f) CLAIMS. There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the Knowledge of AEP, threatened against, or
with respect to, any AEP Benefit Plan or its assets that could reasonably be
expected to have a Material Adverse Effect on AEP and, to the Knowledge of AEP,
no facts or circumstances exist that could give rise to any such actions, suits
or claims.
(g) PENDING MATTERS. To the Knowledge of AEP, there is no matter pending
(other than routine qualification determination filings) with respect to any AEP
Benefit Plan before the IRS, the Department of Labor, the PBGC or other
Government Authority.
(h) TIMELY CONTRIBUTIONS. All contributions required to be made to AEP
Benefit Plans pursuant to their terms and the provisions of ERISA, the Code or
any applicable Law have been timely made.
(i) CURRENT PLANS SUBJECT TO TITLE IV OF ERISA. As to each Current AEP
Benefit Plan subject to Title IV of ERISA, (i) there has been no event or
condition that presents a significant risk of plan termination, (ii) no
accumulated funding deficiency, whether or not waived, within the meaning of
SECTION 302 of ERISA or SECTION 412 of the Code has been incurred, (iii) no
reportable event within the meaning of SECTION 4043 of ERISA (for which the
disclosure requirements of Regulation section 4043.1 et seq. promulgated by the
PBGC have not been waived) has occurred within six years prior to the date of
this Agreement, (iv) no notice of intent to terminate such Benefit Plan has been
given under SECTION 4041 of ERISA, (v) no proceeding has been instituted under
SECTION 4042 of ERISA to terminate such
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Benefit Plan, (vi) no liability to the PBGC has been incurred (other than with
respect to required premium payments) and (vii) the assets of such Benefit Plan
equal or exceed the actuarial present value of the benefit liabilities, within
the meaning of SECTION 4041 of ERISA, under such Benefit Plan, based upon
reasonable actuarial assumptions and the asset valuation principles established
by the PBGC.
(j) EXCESS PARACHUTE PAYMENTS. Except as set forth in SECTION 5.12(j) of
AEP's Disclosure Letter, in connection with the consummation of the transactions
contemplated by this Agreement, no payments of money or other property,
acceleration of benefit or provision of other rights have been or will be made
under any Current AEP Benefit Plan that could be reasonably be expected to be
nondeductible under SECTION 280G of the Code, whether or not some other
subsequent action or event would be required to cause such payment, acceleration
or provision to be triggered.
(k) NO REQUIRED INCREASE IN CONTRIBUTIONS. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not (i) require AEP or any of its Subsidiaries to make a larger contribution to,
or pay greater benefits or provide other rights under, any Current AEP Benefit
Plan than it otherwise would, whether or not some other subsequent action or
event would be required to cause such payment or provision to be triggered or
(ii) create or give rise to any additional vested rights or service credits
under any Current AEP Benefit Plan, whether or not some other subsequent action
or event would be required to cause such creation or acceleration to be
triggered.
(l) INTENTIONALLY OMITTED.
(m) RETIREE BENEFITS. Except as set forth in SECTION 5.12(m) of AEP's
Disclosure Letter, no Current AEP Benefit Plan (other than an AEP Benefit Plan
maintained outside the United States that is either fully insured or fully
funded through a retirement plan) provides retiree medical or retiree life
insurance benefits to any Person and neither AEP nor any of its Subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide any
Person with life insurance or medical benefits upon retirement or termination of
employment, other than as required by the provisions of SECTIONs 601 through 608
of ERISA and SECTION 4980B of the Code.
(n) MULTIEMPLOYER PLANS. Except as set forth in SECTION 5.12(n) of AEP's
Disclosure Letter, neither AEP nor any member of its Controlled Group
contributes or has an obligation to contribute, and has not within six years
prior to the date of this Agreement contributed, had an obligation to
contribute, or had any other liability to a multiemployer plan within the
meaning of SECTION 3(37) of ERISA. Neither AEP nor any member of its Controlled
Group participate in any multiemployer plan with withdrawal liability on the
date hereof which could reasonably be expected to have a Material Adverse Effect
on AEP.
(o) COLLECTIVE BARGAINING CONTRACTS. Except as set forth in SECTION 5.12(o)
of AEP's Disclosure Schedule, (i) no collective bargaining agreement is being
negotiated by AEP or any of its Subsidiaries, (ii) there is no pending or, to
the Knowledge of AEP, threatened labor dispute, strike or work stoppage against
AEP or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect on AEP, (iii) to the Knowledge of AEP, neither AEP or
any of its Subsidiaries nor any representative or employee of AEP or any of its
Subsidiaries has in the United States committed any Material unfair labor
practices in connection with the operation of the business of AEP and its
Subsidiaries, and (i) there is no pending or, to the Knowledge of AEP,
threatened charge or complaint against AEP or any of its Subsidiaries by the
National Labor Relations Board or any comparable agency of any state of the
United States.
SECTION 5.13 TAXES. (a) TAX RETURNS AND TAXES. Except for such matters as
could not reasonably be expected to have a Material Adverse Effect on AEP, (i)
all Tax Returns that are required to be filed by or with respect to AEP or any
of its Subsidiaries on or before the Effective Time have been or will be timely
filed, (ii) all Taxes that are due and payable by AEP or any of its Subsidiaries
on or before the Effective Time have been or will be timely paid in full or
adequate reserves have been established for the payment of such Taxes, (iii) all
withholding Tax requirements imposed on or with respect to AEP or any of its
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Subsidiaries and that are required to be satisfied at or before the Effective
Time have been or will be satisfied in full in all respects and (iv) no penalty,
interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any Tax by AEP or any of its
Subsidiaries.
(b) AUDITS. Except as set forth in SECTION 5.13(b) of AEP's Disclosure
Letter, all Material Tax Returns required to be filed by AEP or any of its
Subsidiaries have been audited (and such audit has become final) by the
applicable Governmental Authority or the applicable statute of limitations has
expired for the period covered by such Tax Returns.
(c) EXTENSION OF TIME. Except as set forth in SECTION 5.13(c) of AEP's
Disclosure Letter, there is not in force any extension of time with respect to
the due date for the filing of any Material Tax Return required to be filed by
AEP or any of its Subsidiaries or any waiver or agreement for any extension of
time for the assessment or payment of any Tax due with respect to the period
covered by any Tax Return filed, or required to be filed, by AEP or any of its
Subsidiaries.
(d) CLAIMS. No Material issues have been raised by any Taxing authority in
connection with the audit or examination of any Tax Return filed, or required to
be filed, by AEP or any of its Subsidiaries, and there is no claim against AEP
or any of its Subsidiaries for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return, that,
in either case, could reasonably be expected to have a Material Adverse Effect
on AEP.
(e) AFFILIATED GROUP. Except as set forth in SECTION 5.13(e) of AEP's
Disclosure Letter, none of AEP and its Subsidiaries, during the last ten years,
has been a member of an affiliated group filing a consolidated Federal income
Tax Return other than an affiliated group of which AEP is the common parent.
SECTION 5.14 ENVIRONMENTAL MATTERS. Except for matters disclosed in SECTION
5.14 of AEP's Disclosure Letter, or matters disclosed in AEP's SEC Reports filed
with the Commission prior to the date hereof, and except for matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on AEP, (a) the properties, operations and activities of
AEP and its Subsidiaries are in compliance with all applicable Environmental
Laws; (b) AEP and its Subsidiaries and the properties and operations of AEP and
its Subsidiaries are not subject to any existing, pending or, to the Knowledge
of AEP, threatened action, suit, investigation, inquiry or proceeding by or
before any Court or Governmental Authority under any Environmental Law; (c) all
Permits, if any, required to be obtained or filed by AEP or any of its
Subsidiaries under any Environmental Law in connection with the business of AEP
and its Subsidiaries have been obtained or filed and are valid and currently in
full force and effect; (d) to the Knowledge of AEP, there has been no release of
any hazardous substance, pollutant or contaminant into the environment by AEP or
its Subsidiaries or in connection with their properties or operations; (e) to
the Knowledge of AEP, there has been no exposure of any Person or property to
any hazardous substance, pollutant or contaminant in connection with the
properties, operations and activities of AEP and its Subsidiaries; and (f) AEP
and its Subsidiaries have made available to the Company all internal and
external environmental audits and studies and all correspondence on substantial
environmental matters (in each case relevant to AEP or any of its Subsidiaries)
in the possession of AEP or its Subsidiaries.
SECTION 5.15 INSURANCE. AEP and its Subsidiaries own and are, and have been
continuously since January 1, 1993, beneficiaries under all such insurance
policies underwritten by reputable insurers that, as to risks insured, coverages
and related limits and deductibles, are customary in the industries in which AEP
and its Subsidiaries operate. Except as disclosed in SECTION 5.15 of AEP's
Disclosure Letter, neither AEP nor any of it Subsidiaries has received any
notice of cancellation or termination of any Material insurance policy as to
which it is a named beneficiary. All Material insurance policies of AEP and its
Subsidiaries are valid and enforceable against the underwriters thereof in
accordance with their terms,
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except as the same may be limited by legal principles of general applicability
governing the application and availability of equitable remedies.
SECTION 5.16 POOLING; TAX MATTERS. Neither AEP nor, to the Knowledge of AEP,
any of its Affiliates has taken or agreed to take any action that would prevent
the Merger from being treated as a "pooling of interests" in accordance with
generally accepted accounting principles and the Regulations of the Commission
or from constituting a reorganization within the meaning of section 368(a) of
the Code.
SECTION 5.17 AFFILIATES. SECTION 5.17 of AEP's Disclosure Letter contains a
true and complete list of all Persons who, to the Knowledge of AEP, may be
deemed to be "affiliates" of AEP as such term is used under Rule 145 under the
Securities Act, including all directors and executive officers of AEP.
SECTION 5.18 OPINION OF FINANCIAL ADVISOR. AEP has received the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ on the date of this Agreement to the effect that the
consideration to be paid by AEP in the Merger is fair, from a financial point of
view, to AEP.
SECTION 5.19 BROKERS. Except as set forth in SECTION 5.19 of AEP's
Disclosure Letter, no broker, finder or investment banker (other than ▇▇▇▇▇▇▇
▇▇▇▇▇ Barney) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of AEP. Prior to the date of this Agreement,
AEP has made available to the Company complete and correct copies of all
agreements between AEP and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to which such firm will
be entitled to any payment relating to the transactions contemplated by this
Agreement.
SECTION 5.20 VOTE REQUIRED. The affirmative vote of holders of a majority of
the outstanding shares of AEP Common Stock is the only vote of holders of any
class or series of capital stock of AEP necessary to approve the amendment to
the restated certificate of incorporation of AEP in order to increase the number
of authorized shares of AEP Common Stock to be issued in the Merger (the
"Charter Amendment"); and the affirmative vote of holders of shares of AEP
Common Stock representing a majority of the total votes cast at a meeting of the
holders of outstanding shares of AEP Common Stock is the only vote of the
holders of any class or series of AEP capital stock necessary under the rules of
the NYSE to approve the issuance of shares of AEP Common Stock to be issued in
the Merger (the "Share Issuance"). Such votes of the holders of shares of AEP
Common Stock necessary to approve the Charter Amendment and the Share Issuance
are hereinafter collectively referred to as the "Required AEP Vote" and are the
only votes of the holders of any class or series of capital stock of AEP or its
Subsidiaries required to approve the Merger, this Agreement or the transactions
contemplated hereby, except for the vote of AEP as the sole stockholder of
Newco. AEP, in its capacity as sole stockholder of Newco, has approved this
Agreement and the transactions contemplated hereby.
SECTION 5.21 NO BUSINESS ACTIVITIES. Newco was organized solely for the
purpose of the transactions contemplated hereby and has not conducted any
activities other than in connection with the organization of Newco, the
negotiation and execution of this Agreement and the consummation of the
transaction contemplated hereby. Newco has no Subsidiaries.
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ARTICLE VI
COVENANTS
SECTION 6.1 AFFIRMATIVE COVENANTS. Each of the Company and AEP hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by the
other, it will and will cause its Subsidiaries to:
(a) operate its business in the ordinary course consistent with past or
then current industry practices;
(b) use all commercially reasonable efforts to preserve substantially
intact its business organization and goodwill, maintain its rights and
franchises, retain the services of its respective key employees and maintain
its goodwill and relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories in quantities consistent with its customary
business practice;
(d) use all commercially reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained;
(e) use all commercially reasonable efforts to maintain in effect all
existing Orders and Permits pursuant to which such party or its Subsidiaries
operate, and timely to apply for and obtain any additional Orders and
Permits that are or will be required for the current or currently planned
operations of such party or its Subsidiaries; and
(f) consult and confer with one another on a frequent and reasonable
basis in order to ensure compliance with the covenants contained in this
Agreement and otherwise as necessary to consummate and make effective the
transactions contemplated by this Agreement, provided, that, except as
otherwise expressly set forth herein, AEP and the Company shall each retain
discretion and control over its affairs;
except for any matters that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company or AEP,
as the case may be, provided, that, no action by the Company or its Subsidiaries
or AEP or its Subsidiaries, as the case may be, with respect to matters
specifically addressed by any provision of Section 6.2 shall be deemed a breach
of this Section 6.1 unless such action would constitute a breach of one or more
of such provisions of Section 6.2.
SECTION 6.2 NEGATIVE COVENANTS. (a) COMPANY COVENANTS. The Company
covenants and agrees that, except as expressly otherwise contemplated by this
Agreement or Section 6.2(a) of the Company's Disclosure Letter or otherwise
consented to in writing by AEP, which consent shall not be unreasonably
withheld, from the date of this Agreement until the Closing, it will not do, and
will not permit any of its Subsidiaries to do, any of the following:
(i) (A) increase the compensation payable to or to become payable to any
director or executive officer; (B) grant any severance or termination pay;
(C) amend or otherwise modify the terms of any outstanding options, warrants
or rights, the effect of which shall be to make such terms more favorable to
the holders thereof; (D) take any action to accelerate the vesting of any
outstanding Company stock options; (E) amend or take any other actions to
increase the amount or accelerate the payment or vesting of any benefit
under any Benefit Plan (including the acceleration of vesting, waiving of
performance criteria or the adjustment of awards or any other actions
permitted upon a change in control of such party or upon a filing under
Section 13(d) or 14(d) of the Exchange Act with respect to such party), or
(F) contribute, transfer or otherwise provide any cash, securities or other
property to any grantee, trust, escrow or other arrangement that has the
effect of providing or setting aside assets for benefits payable pursuant to
any termination, severance, or other change in control agreement;
I-22
except (i) pursuant to any contract, agreement or other legal obligation of
the Company or any of its Subsidiaries existing at the date of this
Agreement, (ii) increases in salary payable or to become payable upon
promotion to an office having greater operational responsibilities, (iii),
in the case of severance or termination payments, pursuant to the severance
policy of the Company or its Subsidiaries existing at the date of this
Agreement, (iv) in the case of options, warrants, rights or Benefit Plans,
amendments required by ERISA or other applicable law and (v) except with
respect to the management employees of the Company who are parties to Change
of Control Agreements with the Company on the date hereof, any such
increase, grant, amendment, modification or action in the ordinary course of
business consistent with past practice;
(ii) (A) enter into any employment or severance agreement with, any
director, officer or employee, either individually or as part of a class of
similarly situated persons or (B) establish, adopt or enter into any new
Benefit Plan; except employment and severance agreements entered into for
the benefit of any newly employed or promoted officers or employees, in
which case, the terms of such agreements shall be reasonably consistent with
those existing at the date of such employment and except for Company Benefit
Plans relating to health and life insurance benefits established, adopted or
entered into in the ordinary course of business consistent with past
practice;
(iii) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock of the Company or any
Significant Subsidiary, except (A) dividends declared and paid by the
Company with respect to the outstanding Company Common Stock at
approximately the same times and at a rate per share of Company Common Stock
not to exceed the rate per share of Company Common Stock as were declared
and paid during the year ending December 31, 1997 and (B) dividends and
distributions by a wholly owned Subsidiary of the Company to the Company or
another wholly owned Subsidiary of the Company and (C) dividends and
distributions declared and paid with respect to outstanding shares of
preferred stock or similar obligations of the Company's Subsidiaries;
(iv) (A) redeem, purchase or acquire any outstanding Equity Securities
of the Company or any of its Significant Subsidiaries other than
redemptions, repurchases and other acquisitions of Equity Securities in the
ordinary course of business consistent with past practice and that will not
cause a failure of the condition contained in Section 8.1(e) to be
satisfied, including purchases, redemptions and other acquisitions (1) in
connection with the administration of employee benefit, direct stock
purchase and dividend reinvestment plans as in effect on the date hereof in
the ordinary course of the operation of such plans, (2) required by the
respective terms of any Equity Security, (3) in connection with the
refunding of preferred Equity Securities or through the issuance of
additional preferred Equity Securities or indebtedness, as the case may be,
at a lower cost of funds (calculating such cost on an aggregate after-tax
basis) or through the issuance of indebtedness not prohibited by Section
6.2(a)(xi), (4) of Company Common Stock in the open market to fund up to
$10,000,000 in any fiscal year of any acquisitions not prohibited by Section
6.2(a)(vii), (5) in intercompany transactions and (6) by the Company or any
of its wholly-owned Subsidiaries directly from any wholly-owned Subsidiary
of the Company in exchange for capital contributions or loans to such
Subsidiary); or (B) split, combine or reclassify the Company Common Stock or
effect any recapitalization of the Company;
(v) offer, sell, issue or grant, or authorize the offering, sale,
issuance or grant, of any Equity Securities of the Company or any of its
Significant Subsidiaries; except issuances of (A) Company Common Stock (1)
upon the exercise of Company stock options outstanding at the date of this
Agreement in accordance with the terms thereof, (2) upon the expiration of
any restrictions upon issuance of any grant existing at the date of this
Agreement of restricted stock or stock bonus pursuant to the terms of any
Benefit Plans of the Company or any of its Subsidiaries or (3) periodically
pursuant to the terms of any Benefit Plans of the Company or any of its
Subsidiaries; and (B) preferred stock or similar securities of any
Subsidiary for the purpose of financing investments or
I-23
capital expenditures not prohibited under this Agreement or refinancing
existing indebtedness or preferred stock or similar obligations of such
Subsidiary;
(vi) grant any Lien (other than Permitted Encumbrances) with respect to
any shares of capital stock of, or other equity interests in, any
Significant Subsidiary of the Company owned beneficially by the Company or
any other Subsidiary of the Company;
(vii) acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or in any other manner acquiring,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets of any
other Person; except (A) the purchase of assets from suppliers or vendors in
the ordinary course of business and consistent with past or then standard
industry practice, (B) acquisitions of equity interests, assets (excluding
the acquisition of assets permitted in clause (A) above) and businesses
related to the core domestic and U.K. regulated businesses in which the
Company and its Subsidiaries are currently engaged (the "Company Core
Businesses") the fair market value of the total consideration (including the
value of indebtedness (other than non-recourse indebtedness) or other
liability acquired or assumed) for which does not exceed 105% of the amount
budgeted by the Company for such acquisitions as set forth in Section
6.2(a)(vii) of the Company's Disclosure Letter and (C) in connection with a
Company Permitted Transaction;
(viii) except in connection with Company Permitted Transactions or as
required by Law, sell, lease, exchange or otherwise dispose of, or grant any
Lien (other than a Permitted Encumbrance) with respect to, any of the assets
of the Company or any of its Subsidiaries that are Material to the Company,
except dispositions of assets other than generation assets and inventories
in the ordinary course of business and consistent with past practice;
(ix) adopt any amendments to its charter or bylaws or other
organizational documents that could reasonably be expected to have a
material adverse effect on the ability of the Company to perform its
obligations under this Agreement;
(x) (A) change any of its methods of accounting in effect at September
30, 1997, except as may comply with GAAP, (B) make or rescind any election
relating to Taxes that are Material to the Company (other than any election
that must be made periodically and that is made consistent with past
practice) or (C) change any of its methods of reporting income or deductions
for Federal income tax purposes from those employed in the preparation of
the Federal income tax returns for the taxable year ending December 31,
1996, except, in the case of each of clauses (A), (B) and (C), as may be
required by Law and, in the case of clause (C), for matters that could not
reasonably be expected to have a Material Adverse Effect on the Company;
(xi) except in connection with a Company Permitted Transaction or as
required by Law, incur any obligations for borrowed money or purchase money
indebtedness that are Material to the Company, whether or not evidenced by a
note, bond, debenture or similar instrument, except (A) drawings under
credit lines existing at the date of this Agreement or renewals or
replacements thereof, (B) obligations evidenced by debt securities issued by
a Subsidiary of the Company for the purpose of financing investments or
capital expenditures permitted under this Agreement or refinancing existing
indebtedness or preferred stock obligations of such Subsidiary and (C)
indebtedness incurred in the ordinary course of business consistent with
past or then standard industry practice;
(xii) unless required by the terms thereof, release any third Person from
its obligations under any existing standstill agreement or similar agreement
whether included in a confidentiality agreement or otherwise;
(xiii) except in connection with a Company Permitted Transaction or as
required by Law, enter into any Material Contract with any third Person
(other than customers and vendors in the ordinary
I-24
course of business) that provides for an exclusive arrangement with that
third Person or is substantially more restrictive on the Company or any of
its Subsidiaries or substantially less advantageous to the Company or any of
its Subsidiaries than Material Contracts existing on the date hereof;
(xiv) except in connection with a Company Permitted Transaction or as
required by Law, make capital and non-fuel operational and maintenance
expenditures relating to the Company Core Businesses in excess of 105% of
the amount budgeted by the Company for capital and non-fuel operational and
maintenance expenditures as set forth in Section 6.2(a)(vii) of the
Company's Disclosure Letter;
(xv) except pursuant to any contract, agreement or other legal obligation
of the Company or any of its Subsidiaries existing at the date of this
Agreement, make, or commit to make, any investments in, or loans or capital
contributions to, or to undertake any guarantees or other obligations with
respect to, any joint venture (whether organized as a corporation,
partnership or other legal entity) in excess of 105% of the amount budgeted
by the Company for such investments relating to the Company Core Businesses
as set forth in Section 6.2(a)(vii) of the Company's Disclosure Letter or in
connection with a Company Permitted Transaction; or
(xvi) agree in writing or otherwise to do any of the foregoing.
(b) AEP COVENANTS. AEP covenants and agrees that, except as expressly
contemplated by this Agreement or Section 6.2(b) of AEP's Disclosure Letter or
otherwise consented to in writing by the Company, which consent shall not be
unreasonably withheld, from the date of this Agreement until the Effective Time,
it will not do, and will not permit any of its Subsidiaries to do, any of the
following:
(i) (A) increase the compensation payable to or to become payable to any
director or executive officer; (B) grant any severance or termination pay;
(C) amend or otherwise modify the terms of any outstanding options, warrants
or rights, the effect of which shall be to make such terms more favorable to
the holders thereof; (D) amend or take any other actions to increase the
amount or accelerate the payment or vesting of any benefit under any Benefit
Plan (including the acceleration of vesting, waiving of performance criteria
or the adjustment of awards or any other actions permitted upon a change in
control of such party or upon a filing under Section 13(d) or 14(d) of the
Exchange Act with respect to such party); except (i) pursuant to any
contract, agreement or other legal obligation of AEP or any of its
Subsidiaries existing at the date of this Agreement, (ii) increases in
salary payable or to become payable upon promotion to an office having
greater operational responsibilities, (iii), in the case of severance or
termination payments, pursuant to the severance policy of AEP or its
Subsidiaries existing at the date of this Agreement, (iv) in the case of
options, warrants, rights or Benefit Plans, amendments required by ERISA or
other applicable law and (v) any (including incentive) increase, grant,
amendment, modification or action in the ordinary course of business
consistent with past practice;
(ii) (A) enter into any employment or severance agreement with, any
director, officer or employee, either individually or as part of a class of
similarly situated persons or (B) establish, adopt or enter into any new
Benefit Plan; except (1) employment and severance agreements entered into
for the benefit of any newly employed or promoted officers or employees, in
which case, the terms of such agreements shall be reasonably consistent with
those existing at the date of such employment, (2) that AEP may modify or
enter into severance arrangements with management employees, which
arrangements provide a level of severance benefits to such management
employees generally comparable to the level of severance benefits which are,
on the date of this Agreement, provided to similarly situated employees of
the Company and (3) for AEP Benefit Plans relating to health and life
insurance benefits established, adopted or entered into in the ordinary
course of business consistent with past practice;
I-25
(iii) declare or pay any dividend on, or to make any other distribution
in respect of, outstanding shares of capital stock of AEP or any Significant
Subsidiary (other than Yorkshire), except (A) dividends declared and paid by
AEP with respect to the outstanding AEP Common Stock at approximately the
same times and rates and at a rate per share of AEP Common Stock not less
than the rate per share of AEP Common Stock as were declared and paid during
the year ended December 31, 1997 and (B) dividends and distributions by a
wholly owned Subsidiary of AEP to AEP or another wholly owned Subsidiary of
AEP and (C) dividends and distributions declared and paid with respect to
outstanding shares of preferred stock or similar obligations of AEP's
Subsidiaries.
(iv) (A) redeem, purchase or acquire, or offer to purchase or acquire,
any outstanding Equity Securities of AEP or any of its Significant
Subsidiaries other than redemptions, repurchases and other acquisitions of
Equity Securities in the ordinary course of business consistent with past
practice which will not cause a failure of the condition contained in
Section 8.1(e) to be satisfied, including purchases, redemptions and other
acquisitions (1) in connection with the administration of employee benefit;
direct stock purchase and dividend reinvestment plans as in effect on the
date hereof in the ordinary course of the operation of such plans, (2)
required by the respective terms of any Equity Security, (3) in connection
with the refunding of preferred Equity Securities or through the issuance of
additional preferred Equity Securities or indebtedness, as the case may be,
at a lower cost of funds (calculating such cost on an aggregate after-tax
basis) or through the issuance of indebtedness not prohibited by Section
6.2(b)(xi), (4) of AEP Common Stock in the open-market to fund up to
$10,000,000 in any fiscal year of any acquisitions not prohibited by Section
6.2(b)(vii), (5) in intercompany transactions and (6) by AEP or any of its
wholly-owned Subsidiaries directly from any wholly-owned Subsidiary of AEP
in exchange for capital contributions or loans to such Subsidiary; or (B)
split, combine or reclassify AEP Common Stock or effect any recapitalization
of AEP;
(v) offer, sell, issue or grant, or authorize the offering, sale,
issuance or grant, of any Equity Securities of AEP or any of its Significant
Subsidiaries; except issuances of (A) AEP Common Stock (1) upon the
expiration of any restrictions upon issuance of any grant existing at the
date of this Agreement of restricted stock or stock bonus pursuant to the
terms of any Benefit Plans of AEP or any of its Subsidiaries or (2)
periodically pursuant to the terms of any Benefit Plans of AEP or any of its
Subsidiaries; (B) preferred stock or similar securities of any Subsidiary
for the purpose of financing investments or capital expenditures not
prohibited under this Agreement or refinancing existing indebtedness or
preferred stock or similar obligations of such Subsidiary and (C) issuances
of a number of shares of AEP Common Stock not in excess of 10% of the number
of shares represented to be outstanding in Section 5.3 hereof;
(vi) grant any Lien (other than Permitted Encumbrances) with respect to
any shares of capital stock of, or other equity interests in, any
Significant Subsidiary of AEP owned beneficially by AEP or any other
Subsidiary of AEP;
(vii) acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or in any other manner acquiring,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets of any
other Person; except (A) the purchase of assets from suppliers or vendors in
the ordinary course of business and consistent with past or then standard
industry practice and (B) acquisitions of equity interests, assets
(excluding the acquisition of assets permitted in clause (A) above) and
businesses related to the energy sector the fair market value of the total
consideration (including the value of indebtedness (other than non-recourse
indebtedness) or other liability acquired or assumed) for which does not
exceed $2.5 billion in the aggregate (which amount shall be reduced by the
amount permitted and expended for (x) capital expenditures (other than
relating to the core domestic and United Kingdom regulated utility business
in which AEP and its Subsidiaries are currently engaged (the "AEP Core
Businesses")) pursuant to Section 6.2(b)(xiv) and (y) joint ventures
pursuant to Section 6.2(b)(xv);
I-26
(viii) sell, lease, exchange or otherwise dispose of, or grant any Lien
(other than a Permitted Encumbrance) with respect to, any of the assets of
AEP or any of its Subsidiaries that are Material to AEP, except (A)
dispositions of assets other than generation assets and inventories in the
ordinary course of business and consistent with past practice, (B)
divestitures of non-AEP Core Businesses and (C) except as required by Law;
(ix) adopt any amendments to its charter or bylaws or other
organizational documents that could reasonably be expected to have a
material adverse effect on the ability of AEP to perform its obligations
under this Agreement;
(x) (A) change any of its methods of accounting in effect at September
30, 1997, except as may be required to comply with GAAP, (B) make or rescind
any election relating to Taxes that are Material to AEP (other than any
election that must be made periodically and that is made consistent with
past practice) or (C) change any of its methods of reporting income or
deductions for Federal income tax purposes from those employed in the
preparation of the Federal income tax returns for the taxable year ending
December 31, 1996, except, in the case of each of clauses (A), (B) and (C),
as may be required by Law and, in the case of clause (C), for matters that
could not reasonably be expected to have a Material Adverse Effect on AEP;
(xi) except as required by Law, incur any obligations for borrowed money
or purchase money indebtedness that are Material to AEP, whether or not
evidenced by a note, bond, debenture or similar instrument, except (A)
drawings under credit lines existing at the date of this Agreement or
renewals or replacements thereof, (B) obligations evidenced by debt
securities issued by a Subsidiary of AEP for the purpose of financing
investments or capital expenditures permitted under this Agreement or
refinancing existing indebtedness or preferred stock obligations of such
Subsidiary, (C) purchase money indebtedness as to which Liens may be granted
as permitted by Section 6.2(b)(vi), (D) indebtedness incurred in the
ordinary course of business consistent with past practice and (E)
indebtedness not in excess of $2.0 billion in the aggregate (in addition to
the aggregate amount budgeted for indebtedness by AEP as set forth in
Section 6.2(b)(xi) of AEP's Disclosure Letter);
(xii) unless required by the terms thereof, release any third Person from
its obligations under any existing standstill agreement or similar agreement
whether included in a confidentiality agreement or otherwise;
(xiii) except as otherwise required by Law, enter into any Material
Contract with any third Person (other than customers and vendors in the
ordinary course of business) that provides for an exclusive arrangement with
that third Person or is substantially more restrictive on AEP or any of its
Subsidiaries or substantially less advantageous to AEP or any of its
Subsidiaries than Material Contracts existing on the date hereof;
(xiv) other than with respect to the AEP Core Businesses or except as
required by Law, make capital expenditures in excess of $2.5 billion less
the amounts permitted and expended in connection with acquisitions and joint
ventures pursuant to Section 6.2(b)(vii) and Section 6.2(b)(xv);
(xv) except pursuant to any contract, agreement or other legal obligation
of AEP or its Subsidiaries existing at the date of this Agreement, make or
commit to make, any investments in, or loans or capital contributions to, or
to undertake any guarantees or other obligations with respect to, any joint
venture in excess of $2.5 billion (which amount shall be reduced by any
amounts permitted and expended for capital expenditures (other than with
respect to the AEP Core Businesses)) and acquisitions as set forth in
Section 6.2(b)(xiv) and 6.2(b)(vii); or
(xvi) agree in writing or otherwise to do any of the foregoing.
I-27
SECTION 6.3 ACCESS AND INFORMATION. AEP and the Company shall each, and
shall each cause its Subsidiaries to, (i) afford to the other party and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, the "Representatives" of such party)
reasonable access at reasonable times upon reasonable prior notice to the
officers, employees, agents, properties, offices and other facilities of such
party and its Subsidiaries and to their books and records and (ii) furnish
promptly to the other party and its Representatives such information concerning
the business, properties, contracts, records and personnel of the furnishing
party and its Subsidiaries (including financial, operating and other data and
information) as may be reasonably requested, from time to time, by or on behalf
of the other party. All documents furnished pursuant to this Section 6.3 shall
be subject to the Confidentiality Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 MEETING OF AEP STOCKHOLDERS. AEP shall, promptly after the
date of this Agreement, take all actions necessary in accordance with Law, the
rules of the NYSE and its certificate of incorporation and bylaws to convene a
special meeting of AEP's stockholders for the purpose of obtaining the Required
AEP Vote (together with any adjournments thereof, the "AEP Stockholders'
Meeting"), and AEP shall consult with the Company in connection therewith.
Subject to Section 7.19, AEP shall take all commercially reasonable action to
solicit from stockholders of AEP proxies in favor of the Share Issuance and the
Charter Amendment and to secure the Required AEP Vote and the Board of Directors
of AEP shall recommend approval of the Share Issuance and the Charter Amendment
by the stockholders of AEP.
SECTION 7.2 MEETING OF COMPANY STOCKHOLDERS. The Company shall, promptly
after the date of this Agreement, take all actions necessary in accordance with
Law, the rules of the NYSE and its certificate of incorporation and bylaws to
convene a special meeting of the Company's stockholders to consider approval and
adoption of this Agreement and the Merger (together with any adjournments
thereof, the "Company Stockholders' Meeting"), and the Company shall consult
with AEP in connection therewith. Subject to Section 7.19, the Company shall
take all commercially reasonable action to solicit from stockholders of the
Company proxies in favor of the approval and adoption of this Agreement and the
Merger and to secure the Required Company Vote and the Board of Directors of the
Company shall recommend approval of the transactions contemplated by this
Agreement by the stockholders of the Company.
SECTION 7.3 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS. (a)
JOINT PROXY STATEMENT/PROSPECTUS. As promptly as practicable after the execution
of this Agreement, the parties shall prepare and file with the Commission the
registration statement on form S-4 to be filed with the Commission in connection
with the issuance of shares of AEP common stock in the Merger (the "Registration
Statement") and the joint proxy statement relating to the meetings of AEP's and
the Company's stockholders to be held in connection with the Merger (together
with any amendments thereof or supplements thereto effected prior to the
effective date of the Registration Statement, the "Joint Proxy
Statement/Prospectus"). The Joint Proxy Statement/Prospectus shall comply as to
form in all material respects with the applicable provisions of the Securities
Act and the Exchange Act and the Regulations thereunder. Each of the AEP
Companies and the Company shall furnish all information concerning it and the
holders of its capital stock as the other may reasonably request in connection
with the preparation and filing of the Joint Proxy Statement/Prospectus. Each of
the AEP Companies and the Company will use all commercially reasonable efforts
to have or cause the Registration Statement to become effective as promptly as
practicable, and shall take any action required to be taken under any applicable
Federal or state securities Laws in connection with the issuance of shares of
AEP Common Stock in the Merger (other than qualifying to do business in any
jurisdiction in which they are currently not so qualified). As promptly as
practicable after the Registration Statement shall have become effective, (x)
AEP shall mail the Joint Proxy Statement/Prospectus to its stockholders entitled
to notice of and to vote at the AEP
I-28
Stockholders' Meeting and (y) the Company shall mail the Joint Proxy
Statement/Prospectus to its stockholders entitled to notice of and to vote at
the Company Stockholders' Meeting.
(b) COMPANY INFORMATION. The information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement shall not,
at the time the Registration Statement is declared effective, 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 not
misleading. The information supplied by the Company for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus shall not, at
the date of the mailing of the Joint Proxy Statement/Prospectus (or any
supplement thereto) and at the time of the AEP Stockholders' Meeting or of the
Company Stockholders' Meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If at any
time prior to the Effective Time any event or circumstance relating to the
Company or any of its Subsidiaries, or its or their respective officers or
directors, should be discovered by the Company that should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, the Company shall promptly inform AEP. All documents that
the Company is responsible for filing with the Commission in connection with the
transactions contemplated herein shall comply as to form in all material
respects with the applicable requirements of the Securities Act and the
Regulations thereunder and the Exchange Act and the Regulations thereunder.
(c) THE AEP COMPANIES INFORMATION. The information supplied by the AEP
Companies for inclusion or incorporation by reference in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, 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 not misleading. The information supplied by AEP for inclusion
or incorporation by reference in the Joint Proxy Statement/Prospectus shall not,
at the date of the mailing of the Joint Proxy Statement/Prospectus (or any
supplement thereto), at the time of the AEP Stockholders' Meeting or the Company
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event or circumstance relating to AEP or any of its
Subsidiaries, or to their respective officers or directors, should be discovered
by AEP that should be set forth in an amendment to the Registration Statement or
a supplement to the Joint Proxy Statement/Prospectus, AEP shall promptly inform
the Company. All documents that the AEP Companies are responsible for filing
with the Commission in connection with the transactions contemplated hereby
shall comply as to form in all material respects with the applicable
requirements of the Securities Act and the Regulations thereunder and the
Exchange Act and the Regulations thereunder.
SECTION 7.4 APPROPRIATE ACTION; CONSENTS; FILINGS. (a) APPLICATIONS. Each
of the Company and AEP shall consult with one another, coordinate with respect
to, and use all commercially reasonable efforts (i) subject to Section 7.19, to
take, or to cause to be taken, all appropriate action, and to do, or to cause to
be done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement, (ii) to obtain from any Governmental Authorities any Permits or
Orders required to be obtained by AEP or the Company or any of their
Subsidiaries in connection with the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, (iii) to make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act and the Exchange
Act, and any other applicable Federal or state securities Laws, (B) the Holding
Company Act, (C) the Federal Power Act, (D) the Atomic Energy Act, (E) the
applicable State Regulatory Acts, (F) the HSR Act and (G) any other applicable
Law; provided that AEP and the Company shall cooperate with each other in
connection with
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the making of all such filings, including providing copies of all such documents
to the nonfiling party and its advisors prior to filings and, if requested,
shall accept all reasonable additions, deletions or changes suggested in
connection therewith, and provided further that, except as otherwise expressly
provided herein, each party shall retain discretion and control over its
affairs. The Company and AEP shall furnish all information required for any
application or other filing to be made pursuant to any applicable Law or any
applicable Regulations of any Governmental Authority in connection with the
transactions contemplated by this Agreement.
(b) REGULATORY PLANS. The Company and AEP have jointly retained ▇▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ to assist the parties in developing
and implementing a collaborative regulatory plan in connection with the
transactions contemplated hereby.
(c) COOPERATION. AEP and the Company agree to cooperate and use all
commercially reasonable efforts to resist or resolve any action including
legislative, administrative or judicial action and to have vacated or overturned
any Order of any Court or Governmental Authority that is in effect and that
prevents or prohibits the consummation of the Merger or any other transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that in no event shall either
party take, or be required to take, any action that could reasonably be expected
to have a Material Adverse Effect on AEP, the Company or the Combined Companies.
Both parties shall consult on a reasonable and frequent basis regarding matters
relating to the operations of AEP and the Company prior to Closing, provided,
that, except as otherwise expressly set forth herein, AEP and the Company shall
each retain discretion over their own affairs.
(d) THIRD PARTY CONSENTS. (i) Each of the Company and AEP shall give (or
shall cause their respective Subsidiaries to give) any notices to third Persons,
and use, and cause their respective Subsidiaries to use, all commercially
reasonable efforts to obtain any consents from third Persons (A) necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, (B) otherwise required under any contracts, licenses, leases or other
agreements in connection with the consummation of the transactions contemplated
hereby or (C) required to prevent a Material Adverse Effect on the Company or
AEP from occurring prior to the Effective Time or a Material Adverse Effect on
the Combined Companies from occurring after the Effective Time (the "Third Party
Consents").
(ii) If any party shall fail to obtain any consent from a third Person
described in subsection (d)(i) above, such party shall use all commercially
reasonable efforts, and shall take any such actions reasonably requested by the
other parties, to limit the adverse effect upon the Company and AEP, their
respective Subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
SECTION 7.5 AFFILIATES; POOLING; TAX TREATMENT. (a) AFFILIATES. Each of
the Company and AEP shall use all commercially reasonable efforts to cause
Persons (other than Subsidiaries) who are, or who become "affiliates," as such
term is used in Rule 145 under the Securities Act, of the Company or AEP, as the
case may be, after the date of this Agreement but prior to the date of the
Company Stockholders' Meeting or the AEP Stockholders' Meeting, as the case may
be, to execute and deliver a letter agreement substantially in the form of Annex
B or Annex C hereto, as the case may be, not later than 10 days prior to the
date of such meeting.
(b) EFFECTIVE REGISTRATION STATEMENT. AEP shall not be required to
maintain the effectiveness of the Registration Statement for the purpose of
resale by stockholders of the Company who may be Affiliates of the Company
pursuant to Rule 145 under the Securities Act.
(c) POOLING. Each party hereto shall use all commercially reasonable
efforts to cause the Merger to be treated for financial accounting purposes as a
Pooling Transaction, and shall not take, and shall use all commercially
reasonable efforts to prevent any Affiliate of such party from taking, any
actions which could prevent the Merger from being treated for financial
accounting purposes as a Pooling Transaction.
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(d) TAX REORGANIZATION. Each party hereto shall use all commercially
reasonable efforts to cause the Merger to qualify, and shall not take, and shall
use all commercially reasonable efforts to prevent any Affiliate of such party
from taking, any actions which could prevent the Merger from qualifying as a
reorganization under the provisions of Section 368(a) of the Code.
SECTION 7.6 PUBLIC ANNOUNCEMENTS. AEP and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement prior to such consultation.
SECTION 7.7 NYSE LISTING. AEP shall use all commercially reasonable
efforts to cause the shares of AEP Common Stock to be issued in the Merger to be
approved for listing (subject to official notice of issuance) on the NYSE prior
to the Effective Time.
SECTION 7.8 COMPANY RIGHTS AGREEMENT. The Company shall take all action
(including, if necessary, amending such Rights Agreement) so that the execution,
delivery and performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby do not and will not result in the
grant of any rights to any Person under the Company Rights Agreement or enable
or require any outstanding rights to be exercised, distributed or triggered.
SECTION 7.9 COMFORT LETTERS. (a) AEP LETTER. AEP shall use all
commercially reasonable efforts to cause Deloitte & Touche L.L.P. to deliver a
letter dated as of the date of mailing of the Joint Proxy Statement/Prospectus,
and addressed to AEP and the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for agreed upon
procedures letters delivered by independent public accounts in connection with
registration statements and proxy statements similar to the Joint Proxy
Statement/Prospectus.
(b) COMPANY LETTER. The Company shall use all commercially reasonable
efforts to cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to deliver a letter dated as of the date of
mailing of the Joint Proxy Statement/Prospectus, and addressed to the Company
and AEP, in form and substance reasonably satisfactory to AEP and customary in
scope and substance for agreed upon procedures letters delivered by independent
public accountants in connection with registration statements and proxy
statements similar to the Joint Proxy Statement/Prospectus.
SECTION 7.10 STOCK OPTIONS; EMPLOYEE BENEFIT PLANS. (a) STOCK-BASED
COMPENSATION.
(i) STOCK OPTIONS. AEP agrees to assume, effective as of the Effective
Time, each option to purchase shares of Company Common Stock granted under
the Company's 1992 Long-term Incentive Plan or Directors' Compensation Plan
(an "Outstanding Option") (whether or not vested) which remains as of such
time unexercised in whole or in part and to substitute AEP Common Stock as
purchasable under such assumed option ("Assumed Option"), with such
assumption and substitution to be effected as follows:
(A) The Assumed Option shall not give the optionee additional
benefits which he did not have under the Outstanding Option before such
assumption;
(B) The number of shares of AEP Common Stock purchasable under any
Assumed Option shall be equal to the number of whole shares of AEP Common
Stock that the holder of the Outstanding Option being assumed would have
received upon consummation of the Merger had such Outstanding Option been
exercised in full prior to the Merger;
(C) The per share option price of the Assumed Option shall be equal
to the per share option price of the Outstanding Option divided by the
Common Stock Exchange Ratio; and
(D) The Assumed Option shall provide the optionee with the same
benefit rights which he had under the Outstanding Option before such
assumption.
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Notwithstanding the foregoing, in the case of any Outstanding Option to
which section 421 of the Code applies by reason of the qualification under
section 422 of the Code, the exercise price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise
of such option shall comply with section 424(a) of the Code. As soon as
practicable after the Effective Time, AEP shall deliver to the holders of
the Outstanding Options appropriate agreements evidencing its assumption of
such options.
(ii) OTHER STOCK-BASED COMPENSATION. Effective as of the Effective Time,
AEP agrees to assume the Company's 1992 Long-Term Incentive Plan and
Director's Compensation Plan with respect to any stock-based compensation
(other than the Outstanding Options) payable in the form of Company Common
Stock as a result of the Merger ("Other Compensation"), and to substitute
shares of AEP Common Stock with respect to such assumed Other Compensation.
The number of shares of AEP Common Stock issuable with respect to such Other
Compensation shall be equal to the number of whole shares of AEP Common
Stock that the holder of Other Compensation being assumed would have
received upon consummation of the Merger had such Other Compensation been
paid in full prior to the Merger.
On or prior to the Effective Time, the Company shall take or cause to be taken
all such actions, reasonably satisfactory to AEP, as may be necessary or
desirable in order to authorize the transactions contemplated by subsections (i)
and (ii) above. Further, AEP shall take all corporate actions necessary to
reserve for issuance a sufficient number of shares of AEP Common Stock for
delivery upon exercise of the Company Outstanding Options or issuance of the
Company Other Compensation assumed by AEP pursuant to subsections (i) and (ii)
above. Prior to the Effective Time, AEP shall file one or more registration
statements on Form S-8 (or any successor or other appropriate forms) with
respect to the shares of AEP Common Stock issuable in respect to the Assumed
Options or Other Compensation and AEP Common Stock issuable in respect of the
Assumed Options or Other Compensation and AEP shall use its commercially
reasonable efforts to cause such registration statement to become effective
promptly after the Effective Time and to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained herein) for so long as any Assumed Options remain
outstanding and to comply with applicable state securities and blue sky laws. So
long as any holder of an Assumed Options shall be subject to the reporting
requirements under Section 16(a) of the Exchange Act, AEP shall have the
Company's 1992 Long-Term Incentive Plan and Directors' Compensation Plan to be
administered in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act.
(b) SEPARATE COMPANY PLANS. From and after the Effective Time through July
1, 2002, AEP will continue or cause to be continued, without adverse change to
any employee or former employee of the Company or any of its Subsidiaries, the
Company Benefit Plans listed in Section 7.10(b) of the Company's Disclosure
Letter, except that (i) any Company Common Stock investment fund offered under a
Company Benefit Plan will be replaced by an AEP Common Stock investment fund or
a traditional investment fund as determined by AEP (ii) premiums charged to
participants may be increased under medical, dental, life, accidental death and
dismemberment, and disability insurance plans (except that premiums charged to
participants who retired from the Company or any of its Subsidiaries prior to
1993 (or survivors of such participants) may not be increased), and (iii)
changes required by law, including changes required to maintain the qualified
status of any Company Benefit Plan intended to be qualified under Section 401(a)
of the Code, may be made. After July 1, 2002, AEP will provide the employees of
the Company and its Subsidiaries with benefits that in the aggregate are at
least as favorable as the benefits provided to similarly situated employees of
AEP and its Subsidiaries. If, after July 1, 2002, an AEP Benefit Plan is made
available to employees of the Company or any of its Subsidiaries, all periods of
service with the Company and its Subsidiaries will be credited to such employees
for all purposes of the AEP Benefit Plan, including the accrual of benefits and
eligibility to receive benefits for which a specified period of service is
required under the AEP Benefit Plan. No earlier than July 1, 2002, the Company's
Cash Balance Retirement Plan shall be merged into a defined benefit pension plan
maintained by AEP or one of its
I-32
Subsidiaries. The retirement benefit for employees of the Company or its
Subsidiaries who become participants in such merged plan will be determined
under the AEP pension plan formula for all years of service (including years of
service with the Company and its Subsidiaries) but such retirement benefit will
not be less than the benefit accrued under the Company's Cash Balance Retirement
Plan determined immediately prior to such plan merger plus the benefit
determined under the AEP pension plan formula for years of service beginning on
the date of such plan merger. If employees of the Company or any of its
Subsidiaries become participants in a health plan maintained by AEP or any of
its Subsidiaries, all preexisting condition limitations under the AEP health
plan for such employees will be waived. In addition, if such AEP health plan
participation becomes effective as of any date other than the first day of a
calendar year, such employees will receive credit under the AEP health plan for
any co-payments and deductibles incurred by such employees in the same calendar
year under the Company's Medical Plan.
(c) RETIREE AND DISABILITY BENEFITS. From and after July 1, 2002, AEP will
provide access to retiree medical and life insurance coverage for any employee
or director of the Company or any of its Subsidiaries who retires or becomes
disabled prior to July 1, 2002 and who was eligible for such coverage under
plans of the Company and its Subsidiaries in effect on the date of such
individual's retirement. Further, for any such employees or directors who
retired or became disabled prior to 1993, such coverage shall be continued
without adverse change to such retired or disables employees or directors. In
addition, with respect to any such employee who becomes disabled before July 1,
2002, so long as such employee continues to satisfy the eligibility requirements
for disability benefits under the Company's Disability Income Plan in effect on
such date AEP will offer such disabled employee medical coverage without charge
to such disabled employee.
(d) CERTAIN NONQUALIFIED ARRANGEMENTS. From and after the Effective Time
through July 1, 2002, AEP will maintain the Company's Supplemental Executive
Retirement Plan and Executive Deferred Compensation Plan without adverse change
to any employee participating in the Plan until all benefits have been paid in
accordance with the terms of the Plan; provided, however, that no deferrals
shall be permitted under such plan after the Effective Time. If the Company's
Supplemental Executive Retirement Plan or Executive Deferred Savings Plan is
terminated or otherwise discontinued after July 1, 2002, AEP will make available
to the class of employees of the Company and its Subsidiaries who were eligible
to participate in the Company's Supplemental Executive Retirement Plan or
Executive Deferred Savings Plan any nonqualified deferred compensation plan or
plans it maintains to supplement benefits in the AEP Benefit Plans that are
qualified plans. In addition, employees of the Company and its Subsidiaries will
be given credit for service with the Company and its Subsidiaries for all
purposes of such supplemental plans, and the supplemental plans will assume the
obligation of the Supplemental Executive Retirement Plan or the Executive
Deferred Savings Plan, as applicable, to pay the benefits that have accrued
under the Supplemental Executive Retirement Plan or the Executive Deferred
Savings Plan at the time of such termination or discontinuance.
(e) MEMORIAL GIFTS PROGRAM. The Company will take all action necessary to
terminate the Memorial Gifts Program as of the Effective Time; provided,
however, that all then-existing commitments under such Program will not be
adversely affected by such termination and will be honored in accordance with
their terms.
(f) AGREEMENT BY AEP. AEP agrees to honor without modification or contest,
and agrees to cause the Surviving Corporation to honor without modification or
contest, and to make required payments when due under all Change of Control
Agreements and all Retention Agreements, including any modifications to such
Change of Control Agreements or Retention Agreements permitted by Section
6.2(a).
(g) The provisions of Sections 7.10(d) and (f) are intended to be for the
benefit of, and shall be enforceable by, each Person entitled to benefits or
payments thereunder and the heirs and representatives of such Person.
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SECTION 7.11 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) Until six
years from the Effective Time, the certificate of incorporation and bylaws of
the Company as the corporation surviving the Merger (in this Section 7.11 called
the "Surviving Corporation") as in effect immediately after the Effective Time
shall not be amended to reduce or limit the rights of indemnity afforded to the
present and former directors and officers of the Company thereunder or as to the
ability of the Company to indemnify such persons or to hinder, delay or make
more difficult the exercise of such rights of indemnity or the ability to
indemnify. The Surviving Corporation will at all times exercise the powers
granted to it by its certificate of incorporation, its bylaws and applicable law
to indemnify to the fullest extent possible the present and former directors,
officers, employees and agents of the Company against claims made against them
arising from their service in such capacities prior to the Effective Time.
(b) If any claim or claims shall, subsequent to the Effective Time and
within six years thereafter, be made against any present or former director,
officer, employee or agent of the Company based on or arising out of the
services of such Person prior to the Effective Time in the capacity of such
Person as a director, officer, employee or agent of the Company, the provisions
of subsection (a) of this Section respecting the certificate of incorporation
and bylaws of the Surviving Corporation shall continue in effect until the final
disposition of all such claims.
(c) AEP hereby agrees after the Effective Time to guarantee the payment of
the Surviving Corporation's indemnification obligations described in Section
7.11(a) up to an amount determined as of the Effective Time equal to (i) the
fair market value of any assets of the Surviving Corporation or any of its
Subsidiaries distributed to AEP or any of its Subsidiaries (other than the
Surviving Corporation and its Subsidiaries), minus (ii) any liabilities of the
Surviving Corporation or any of its Subsidiaries assumed by AEP or any of its
Subsidiaries (other than the Surviving Corporation and its Subsidiaries), minus
(iii) the fair market value of any assets of AEP or any of its Subsidiaries
(other than the Surviving Corporation and its Subsidiaries) contributed to the
Surviving Corporation or any of its Subsidiaries and (iv) plus any liabilities
of AEP or any of its Subsidiaries (other than the Surviving Corporation and its
Subsidiaries) assumed by the Surviving Corporation or any of its Subsidiaries.
(d) Notwithstanding subsection (a), (b) or (c) of this Section 7.11, AEP and
the Surviving Corporation shall be released from the obligations imposed by such
subsection if AEP shall assume the obligations of the Surviving Corporation
thereunder by operation of Law or otherwise. Notwithstanding anything to the
contrary in this Section 7.11, neither AEP nor the Surviving Corporation shall
be liable for any settlement effected without its written consent, which shall
not be unreasonably withheld.
(e) AEP shall cause to be maintained in effect until six years from the
Effective Time the current policies of directors' and officers' liability
insurance maintained by the Company (or substitute policies providing at least
the same coverage and limits and containing terms and conditions that are not
materially less advantageous) with respect to claims arising from facts or
events which occurred before the Effective Time; PROVIDED, HOWEVER, that in no
event shall AEP or the Surviving Corporation be required to expend more than 200
percent of the greater of (i) current annual premiums and (ii) annual premiums
for the year in which the Closing occurs paid by the Company for such insurance;
PROVIDED, FURTHER, that, if AEP or the Surviving Corporation is unable to obtain
insurance for any period for 200 percent of the greater of such annual premiums,
then the obligation of AEP and the Surviving Corporation pursuant hereto shall
be to obtain the best coverage reasonably available under the circumstances
subject to the foregoing limitations on premiums.
(f) The provisions of this Section 7.11 are intended to be for the benefit
of, and shall be enforceable by, each Person entitled to indemnification
hereunder and the heirs and representatives of such Person.
(g) AEP shall not permit the Surviving Corporation to merge or consolidate
with any other Person unless the Surviving Corporation shall ensure that the
surviving or resulting entity assumes the obligations imposed by subsections
(a), (b), (c) and (e) of this Section.
I-34
SECTION 7.12 NEWCO. Prior to the Effective Time, Newco shall not conduct
any business or make any investments other than as specifically contemplated by
this Agreement and will not have any assets (other than the minimum amount of
cash required to be paid to Newco for the valid issuance of its stock to AEP).
SECTION 7.13 EVENT NOTICES. From and after the date of this Agreement
until the Effective Time, each party hereto shall promptly notify the other
party hereto of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any condition to the
obligations of such party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied and (ii) the failure of such
party to comply with any covenant or agreement to be complied with by it
pursuant to this Agreement which would be likely to result in any condition to
the obligations of such party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied. No delivery of any notice
pursuant to this Section 7.13 shall cure any breach of any representation or
warranty or any failure to comply with any covenant or agreement of such party
contained in this Agreement or otherwise limit or affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.14 BOARD OF DIRECTORS. At the Effective Time, the Board of
Directors of AEP shall be expanded to fifteen members and reconstituted to
include all then current board members of AEP, the Chairman of the Company on
the date hereof, and four additional outside directors of the Company to be
nominated by AEP.
SECTION 7.15 HEADQUARTERS. At and after the Effective Time, the principal
corporate office of the Combined Companies shall be located in Columbus, Ohio;
and the Combined Companies shall maintain a significant presence in the states
currently served by the Company.
SECTION 7.16 RATE MATTERS. Each of the Company and AEP shall, and shall
cause its Significant Subsidiaries to, discuss with the other any changes in its
or its Significant Subsidiaries' rates or charges (other than automatic cost
pass-through rate adjustment clauses), standards of service or accounting from
those in effect on the date hereof and consult with the other prior to making
any filing (or any amendment thereto), or effecting any agreement, commitment,
arrangement or consent with governmental regulators, whether written or oral,
formal or informal, with respect thereto (provided that except as otherwise
expressly provided herein each party shall retain discretion and control over
its affairs), and except as set forth in Section 7.16 of the Company's
Disclosure Letter, no party will make any filing to change its rates or charges,
standards of service or accounting that could reasonably be expected to have a
Material Adverse Effect on the Combined Companies.
SECTION 7.17 COORDINATION OF DIVIDENDS. Each of the Company and AEP shall
coordinate with the other regarding the declaration and payment of any dividends
in respect of the Company Common Stock and AEP Common Stock and the record dates
and the payment dates relating thereto, it being the intention of the Company
and AEP that holders of the Company Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to their shares of Company Common Stock and/or any shares of AEP Common
Stock that any such holder receives in exchange therefor pursuant to the Merger.
SECTION 7.18 TRANSITION MANAGEMENT. As soon as practicable after the date
hereof, the parties shall create a special transition management task force (the
"Task Force"). The Task Force shall examine various alternatives regarding the
manner in which to best organize and manage the business of the Combined
Companies after the Effective Time, subject to applicable Law.
SECTION 7.19 ACQUISITION PROPOSALS. Each of AEP and the Company agrees
that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to,
I-35
directly or indirectly, initiate, solicit, encourage or otherwise facilitate
(including by way of furnishing information) any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase or sale of all or any
significant portion of the assets or 10% or more of the equity securities of, it
or any of its Subsidiaries that, in any such case, could reasonably be expected
to interfere with the completion of the Merger or the other transactions
contemplated by this Agreement (any such proposal or offer being hereinafter
referred to as an "ACQUISITION PROPOSAL"). Each of AEP and the Company further
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, have
any discussion with or provide any confidential information or data to any
Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding the foregoing, the Board of Directors of AEP or the
Company shall be permitted to (A) to the extent applicable, comply with Rule
14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal, (B) in response to an unsolicited bona fide written Acquisition
Proposal by any Person, recommend such an unsolicited bona fide written
Acquisition Proposal to its stockholders, or withdraw or modify in any adverse
manner its approval or recommendation of this Agreement or (C) engage in any
discussions or negotiations with, or provide any information to, any Person in
response to an unsolicited bona fide written Acquisition Proposal by any such
Person, if and only to the extent that, in any such case as is referred to in
clause (B) or (C), (i) the Required AEP Vote or the Required Company Vote, as
the case may be, shall not have been obtained, (ii) the Board of Directors of
AEP or the Company, as the case may be, concludes in good faith that such
Acquisition Proposal (x) in the case of clause (B) above would, if consummated,
constitute a Superior Proposal or (y) in the case of clause (C) above could
reasonably be expected to constitute a Superior Proposal, (iii) the Board of
Directors of AEP or the Company, as the case may be, determines in good faith
upon the basis of written advice of outside legal counsel that such action is
necessary for such Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law, (iv) prior to providing any information
or data to any Person in connection with an Acquisition Proposal by any such
Person, the AEP Board of Directors or the Company Board of Directors, as the
case may be, receives from such Person an executed confidentiality agreement
containing customary terms and provisions and (v) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, the Board of Directors of AEP or the Board of Directors of the
Company, as the case may be, notifies the other party immediately of such
inquiries, proposals or offers received by, any such information requested from,
or any such discussions or negotiations sought to be initiated or continued
with, any of its representatives indicating, in connection with such notice, the
name of such Person and the material terms and conditions of any proposals or
offers. AEP and the Company agree that they will keep the other party informed,
on a current basis, of the status and terms of any such proposals or offers and
the status of any such discussions or negotiations. Each of AEP and the Company
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Each of AEP and the Company agrees
that it will take the necessary steps to promptly inform the individuals or
entities referred to in the first sentence of this Section 7.19 of the
obligations undertaken in this Section 7.19. Nothing in this Section 7.19 shall
(x) permit either AEP or the Company to terminate this Agreement (except as
specifically provided in Article IX hereof) or (y) affect any other obligation
of AEP or the Company under this Agreement.
SECTION 7.20 WORKFORCE MATTERS. Subject to applicable collective
bargaining agreements, for a period of 2 years following the Effective Time, any
reductions in workforce in respect of employees of the Combined Company and
their Subsidiaries shall be made on a fair and equitable basis, in light of the
circumstances and the objectives to be achieved, giving consideration to
previous work history, job
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experience, and qualifications, without regard to whether employment prior to
the Effective Time was with the Company or its Subsidiaries or AEP or its
Subsidiaries, and any employees whose employment is terminated or jobs are
eliminated by AEP or any of its Subsidiaries during such period shall be
entitled to participate on a fair and equitable basis in the job opportunity and
employment placement programs offered by the Combined Companies or any of their
prospective Subsidiaries. Any workforce reductions carried out following the
Effective Time by the Combined Companies and their Subsidiaries shall be done in
accordance with all applicable collective bargaining agreements, and all laws
and regulations governing the employment relationship and termination thereof
including, without limitation, the Worker Adjustment and Retraining Notification
Act and regulations promulgated thereunder, and any comparable state or local
law. As provided generally in Section 10.7, nothing in this Section is intended
to confer upon any Person (other than the parties hereto), including any current
or future employee of AEP or the Company or any subsidiary of either of them,
any right, benefit or remedy of any nature whatsoever.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which may be waived by
a party with respect to its obligations, in whole or in part, to the extent
permitted by applicable Law:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the Commission under the
Securities Act; and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and not
withdrawn and no proceedings brought by the Commission for that purpose
shall be pending.
(b) STOCKHOLDER APPROVAL. (i) The Company shall have obtained the
Required Company Vote in connection with the adoption of this Agreement by
the stockholders of the Company and (ii) AEP shall have obtained the
Required AEP Vote in connection with the approval of the Share Issuance and
the Charter Amendment by the stockholders of AEP.
(c) NO PROHIBITING LAW, REGULATION OR ORDER. No Court or Governmental
Authority shall have enacted, issued, promulgated, enforced or entered any
Law, Regulation or Order (whether temporary, preliminary or permanent) that
is in effect and that has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(d) REQUIRED ORDERS. All Orders necessary for the consummation of the
Merger and the other transactions contemplated hereby shall have been
obtained at or prior to the Effective Time and such Orders shall have become
Final Orders and no Final Orders shall impose terms or conditions or
qualifications that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Combined Companies.
(e) POOLING OF INTERESTS. Each of AEP and the Company shall have
received a letter of its independent public accountants, dated the Closing
Date, in form and substance reasonably satisfactory, in each case, to AEP
and the Company, stating that the transactions effected pursuant to this
Agreement will qualify as a pooling of interests transaction under GAAP and
applicable Commission Regulations.
(f) NYSE LISTING. The shares of AEP Common Stock to be issued pursuant
to the Merger shall have been listed, subject to official notice of
issuance, on the NYSE.
(g) DIVESTITURE EVENT. There shall not have occurred and remain in
effect a Divestiture Event with respect to either AEP or the Company.
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SECTION 8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE AEP COMPANIES. The
obligations of the AEP Companies to effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which may be waived by
the AEP Companies, in whole or in part, to the extent permitted by applicable
Law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement that is qualified as
to materiality shall be true and correct in all respects and each of those
that is not so qualified as to materiality shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing as
though made again at and as of the Closing (except for representations and
warranties that expressly speak only as of a specific date or time other
than the date hereof or the Closing Date which need only be true and correct
as of such date), provided, that no representation or warranty of the
Company shall be deemed to be untrue or incorrect as a result of the
occurrence of a Divestiture Event or any change or effect arising out of or
resulting from any foreign, federal or state legislative or regulatory
action with respect to (i) the regulation or deregulation of the electric
utility industry in such jurisdiction, or (ii) health or the environment,
including the conservation or protection of the environment. The AEP
Companies shall have received a certificate of the Chief Executive Officer
and the Chief Financial Officer of the Company, dated the Closing Date, to
such effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied with, in all material respects, all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing. The AEP Companies shall have received a certificate of
the Chief Executive Officer and the Chief Financial Officer of the Company,
dated the Closing Date, to such effect.
(c) TAX OPINION. AEP shall have received the opinion dated the Closing
Date of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ to the effect that (i) the Merger will
constitute a reorganization under section 368(a) of the Code, (ii) the
Company, AEP and Newco will each be a party to that reorganization, and
(iii) no gain or loss will be recognized by the Company, AEP or Newco by
reason of the Merger. In rendering their opinion, such counsel may require
and rely upon representations, including those contained in certificates of
officers of the Company, Newco and AEP.
(d) INVESTMENT BANKER'S OPINION. AEP shall have received, on or prior to
the date of mailing of the Joint Proxy Statement/Prospectus to the holders
of AEP Common Stock, a written opinion from ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, dated the
date of such mailing, confirming the opinion to which reference is made in
Section 5.18.
(e) COMPANY REQUIRED CONSENTS. The Company Required Consents shall have
been obtained.
SECTION 8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which may be waived by
the Company, in whole or in part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the AEP Companies contained in this Agreement that is
qualified as to materiality shall be true and correct in all respects and
each of those that is not so qualified as to materiality shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing as though made again at and as of the Closing (except for
representations and warranties that expressly speak only as of a specific
date or time other than the date hereof or the Closing Date which need only
be true and correct as of such date), provided, that no representation or
warranty of AEP shall be deemed to be untrue or incorrect as a result of the
occurrence of a Divestiture Event or any change or effect arising out of or
resulting from any foreign, federal or sate legislative or regulatory action
with respect to (i) the regulation or deregulation of the electric utility
industry in such jurisdiction, or (ii) health or the
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environment, including the conservation or protection of the environment.
The Company shall have received a certificate of the Chief Executive Officer
and the Chief Financial Officer of AEP, dated the Closing Date to such
effect.
(b) AGREEMENTS AND COVENANTS. The AEP Companies shall have performed or
complied with, in all material respects, all agreements and covenants
required by this Agreement to be performed or complied with by them at or
prior to the Closing. The Company shall have received a certificate of the
Chief Executive Officer and the Chief Financial Officer of AEP, dated the
Closing Date, to such effect.
(c) TAX OPINION. The Company shall have received the opinion dated the
Closing Date of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ to the effect that (i) the Merger will
constitute a reorganization under section 368(a) of the Code, (ii) AEP, the
Company and Newco will each be a party to that reorganization and (iii) no
gain or loss will be recognized by the stockholders of the Company upon the
receipt of shares of AEP Common Stock in exchange for shares of Company
Common Stock pursuant to the Merger except with respect to any cash received
in lieu of fractional interests in shares of AEP Common Stock or cash
received pursuant to statutory dissenters rights. In rendering their
opinion, such counsel may require and rely upon representations, including
those contained in certificates of officers of the Company, Newco and AEP.
(d) INVESTMENT BANKER'S OPINION. The Company shall have received, on or
prior to the date of mailing of the Joint Proxy Statement/Prospectus to the
holders of Company Common Stock, a written opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, dated the date of such mailing, confirming the opinion to
which reference is made in Section 4.18.
(e) AEP REQUIRED CONSENTS. The AEP Required Consents shall have been
obtained.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the AEP Required
Vote or before or after receipt of the Company Required Vote:
(a) MUTUAL CONSENT. By mutual written consent of AEP and the Company;
(b) TERMINATING COMPANY BREACH. By AEP, upon two Business Days' prior
written notice to the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section
8.2(a) or Section 8.2(b) would not be satisfied (a "Terminating Company
Breach"); PROVIDED THAT, if such Terminating Company Breach is curable by
the Company through the exercise of commercially reasonable efforts, for so
long as the Company continues to exercise such commercially reasonable
efforts AEP may not terminate this Agreement under this Section 9.1(b);
(c) TERMINATING AEP BREACH. By the Company, upon two Business Days'
prior written notice to AEP, upon breach of any representation, warranty,
covenant or agreement on the part of the AEP Companies (or either of them)
set forth in this Agreement, or if any representation or warranty of the AEP
Companies (or either of them) shall have become untrue, in either case such
that the conditions set forth in Section 8.3(a) or Section 8.3(b) would not
be satisfied (a "Terminating AEP Breach"); PROVIDED THAT, if such
Terminating AEP Breach is curable by the AEP Companies through the exercise
of their commercially reasonable efforts, for so long as the AEP Companies
continue to exercise such commercially reasonable efforts the Company may
not terminate this Agreement under this Section 9.1(c);
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(d) DIVESTITURE EVENT. By either AEP or the Company, upon two Business
Days' prior written notice to the other, if there shall be any Divestiture
Event; provided that, if such Divestiture Event is capable of being vacated,
lifted or reversed on or before the Termination Date (as extended pursuant
to Section 9.1(f) hereof) through the exercise of commercially reasonable
efforts and for so long as the party whose assets are subject to the
Divestiture Event continues to exercise such commercially reasonable
efforts, such party seeking to terminate may not terminate this Agreement
under this Section 9.1(d).
(e) LAW, REGULATION OR ORDER. By either AEP or the Company, upon two
Business Days' prior written notice to the other, if there shall be any Law
or Regulation issued or adopted or any Order which is final and
nonappealable preventing the consummation of the Merger, unless the party
relying on such Law, Regulation or Order as a basis for termination under
this Section 9.1(e) has not complied with its obligations under Section 7.4;
(f) TERMINATION DATE. By either AEP or the Company, by written notice to
the other, if the Merger shall not have been consummated before December 31,
1999 ("Termination Date"); PROVIDED, HOWEVER, that this Agreement may be
extended by written notice of either AEP or the Company to a date not later
than June 30, 2000, if the Merger shall not have been consummated as a
result of the Company or the AEP Companies having failed by December 31,
1999 to satisfy the conditions set forth in Section 8.1(c) or Section 8.1(d)
but all other conditions to the Closing shall be fulfilled; provided
further, that, the right to terminate the Agreement under this Section
9.1(f) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date.
(g) STOCKHOLDER VOTE. By either AEP or the Company, upon two Business
Days' prior written notice to the other, if the transactions contemplated by
this Agreement shall fail to receive the Required AEP Vote at the AEP
Stockholders' Meeting or if this Agreement shall fail to receive the
Required Company Vote at the Company Stockholders' Meeting;
(h) AEP FIDUCIARY OUT. By AEP, at any time prior to receipt of the
Required AEP Vote, upon two Business Days' prior written notice to the
Company, if, the Board of Directors of AEP shall approve a Superior
Proposal; provided, however, that (i) AEP shall have complied with Section
7.19, (ii) the Board of Directors of AEP shall have concluded in good faith,
after giving effect to all concessions which may be offered by the Company
pursuant to clause (iv) below, on the basis of the advice of its financial
advisors and outside counsel, that such proposal is a Superior Proposal,
(iii) the Board of Directors of AEP shall have concluded in good faith,
after receipt of written advice of outside counsel, that notwithstanding all
concessions which may be offered by the Company in negotiations entered into
pursuant to clause (iv) below, such action is necessary for the AEP Board of
Directors to act in a manner consistent with its fiduciary duties under
applicable law; and (iv) prior to any such termination, AEP shall, and shall
cause its respective financial and legal advisors to, negotiate with the
Company to make such adjustments in the terms and conditions of this
Agreement as would enable AEP to proceed with the transactions contemplated
herein on such adjusted terms;
(i) COMPANY FIDUCIARY OUT. By the Company, at any time prior to receipt
of the Required Company Vote, upon two Business Days' prior written notice
to AEP, if, the Board of Directors of the Company shall approve a Superior
Proposal; provided, however, that (i) the Company shall have complied with
Section 7.19, (ii) the Board of Directors of the Company shall have
concluded in good faith, after giving effect to all concessions which may be
offered by AEP pursuant to clause (iv) below, on the basis of the advice of
its financial advisors and outside counsel, that such proposal is a Superior
Proposal, (iii) the Board of Directors of the Company shall have concluded
in good faith, after receipt of the written advice of outside counsel, that
notwithstanding all concessions which may be offered by AEP in negotiations
entered into pursuant to clause (iv) below, such action is necessary for the
Company Board of Directors to act in a manner consistent with its fiduciary
duties under applicable
I-40
law; and (iv) prior to any such termination, the Company shall, and shall
cause its respective financial and legal advisors to, negotiate with AEP to
make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein on
such adjusted terms;
(j) AEP CHANGE OF RECOMMENDATION. By the Company, upon two Business
Days' prior written notice to AEP, if the Board of Directors of AEP or any
committee thereof (A) shall withdraw or modify in any manner adverse to the
Company its approval or recommendation of the Charter Amendment, the Share
Issuance, this Agreement or the Merger, (B) shall fail to reaffirm such
approval or recommendation upon the Company's request, (C) shall approve or
recommend any Superior Proposal or (D) shall resolve to take any of the
actions specified in clause (A), (B) or (C);
(k) COMPANY CHANGE OF RECOMMENDATION. By AEP, upon two Business Days'
prior written notice to the Company, if the Board of Directors of the
Company or any committee thereof (A) shall withdraw or modify in any manner
adverse to AEP its approval or recommendation of this Agreement or the
Merger, (B) shall fail to reaffirm such approval or recommendation upon
AEP's request, (C) shall approve or recommend any Superior Proposal or (D)
shall resolve to take any of the actions specified in clause (A), (B) or
(C); or
(l) THIRD PARTY ACQUISITION. By either AEP or the Company, by written
notice to the other party, if (A) a third party acquires securities
representing greater than 50% of the voting power of the outstanding voting
securities of such other party or (B) individuals who as of the date hereof
constitute the board of directors of such other party (together with any new
directors whose election by such board of directors or whose nomination for
election by the stockholders of such party was approved by a vote of a
majority of the directors of such party then still in office who are either
directors as of the date hereof or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority of
the board of directors of such party then in office.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 9.2 EFFECT OF TERMINATION. Except as provided in Section 9.6 and
Section 10.1 of this Agreement, in the event of the termination of this
Agreement pursuant to Section 9.1, this Agreement shall forthwith become void,
there shall be no liability on the part of the AEP Companies or the Company or
any of their respective officers or directors to the other and all rights and
obligations of any party hereto shall cease, except that nothing herein shall
relieve any party from liability for any breach of this Agreement.
SECTION 9.3 AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; PROVIDED, HOWEVER, that, after receipt of
either the AEP Required Vote or the Company Required Vote, no amendment may be
made which would reduce the amount or change the type of consideration into
which each share of Company Common Stock shall be converted upon consummation of
the Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 9.4 WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or, to the extent legally permissible, conditions
contained herein. Any such extension or waiver shall be valid only
I-41
if set forth in an instrument in writing signed by the party or parties to be
bound thereby. For purposes of this Section 9.4, the AEP Companies shall be
deemed to be one party.
SECTION 9.5 FEES, EXPENSES AND OTHER PAYMENTS. Subject to Section 9.6, all
Expenses incurred by the parties hereto shall be borne solely and entirely by
the party which has incurred such Expenses; PROVIDED, HOWEVER, that the share of
all Expenses related to printing, filing and mailing the Registration Statement
and the Joint Proxy Statement/Prospectus and all Commission and other regulatory
filing fees incurred in connection with the Registration Statement and the Joint
Proxy Statement/Prospectus allocable to the Company and to the AEP Companies as
a group shall be 50% each; AND PROVIDED FURTHER that AEP may, at its option and
subject to Section 7.5(d), pay any Expenses of the Company.
SECTION 9.6 CERTAIN DAMAGES, PAYMENTS AND EXPENSES. (a) DAMAGES PAYABLE
UPON TERMINATION FOR BREACH OR WITHDRAWAL OF APPROVAL. If this Agreement is
terminated pursuant to Section 9.1(h) or (i) (fiduciary out), Section 9.1(b) or
(c) (breach), Section 9.1(j) or (k) (change of recommendation) or Section 9.1
(l) (acquisition of voting power or change of board), then the breaching party
or party whose board has exercised its fiduciary out or changed its
recommendation or whose voting stock has been acquired or whose board has
changed, as the case may be, shall promptly (but not later than five Business
Days after receipt of notice that the amount is due from the other party) pay to
the other party, as liquidated damages and expense reimbursement, an amount in
cash equal to $20 million (the "Termination Fee").
(b) OTHER TERMINATION PAYMENTS. If (i) this Agreement is terminated
pursuant to (A) Section 9.1(f) (expiration date), (B) Section 9.1(h) or (i)
(fiduciary out), (C) Section 9.1(g) (failure to obtain shareholder
approval), (D) Section 9.1(j) or (k) (change of recommendation) or (E)
pursuant to Section 9.1(b) or (c) (breach); and (ii) at the time of such
termination (or in the case of clause (i)(C) above, prior to the meeting of
such party's shareholders) there shall have been an Acquisition Proposal
involving the Company or AEP (as the case may be, the "Target Party") or any
of its Affiliates which, at the time of such termination (or such meeting,
as the case may be), shall not have been (x) rejected by the Target Party
and its Board of Directors and (y) withdrawn by the third party; and (iii)
within eighteen months of any such termination described in clause (i)
above, the Target Party or any of its Affiliates becomes a Subsidiary of
such offeror or a Subsidiary of an Affiliate of such offeror or accepts a
written offer or enters into a written agreement to consummate or
consummates an Acquisition Proposal with such offeror or an Affiliate
thereof, then such Target Party (jointly and severally with its Affiliates),
upon the signing of a definitive agreement relating to such Acquisition
Proposal, or, if no such agreement is signed, then at the closing (and as a
condition to the closing) of such Target Party becoming such a subsidiary or
of such Acquisition Proposal, shall pay the Company or AEP, as the case may
be, a termination fee equal to $225 million (the "Topping Fee") plus
Expenses of such party not in excess of $20 million ("Out-of-Pocket
Expenses"). If this Agreement is terminated by the Company or AEP pursuant
to Section 9.1(l) (third party acquisition of voting power or change of
board), then the Company or AEP, as the case may be, shall pay immediately
the terminating party the Topping Fee plus Out-of-Pocket Expenses.
(c) EXPENSES. The Parties agree that the agreements contained in this
Section 9.6 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If one party
fails to promptly pay to the other any fee due hereunder, the defaulting
party shall pay the costs and expenses (including legal fees and expenses)
in connection with any action, including the filing of any lawsuit or other
legal action, taken to collect payment, together with interest on the amount
of any unpaid fee at the publicly announced prime rate of Citibank, N.A.
from the date such fee was required to be paid.
(d) LIMITATION OF FEES. Notwithstanding anything herein to the contrary,
the aggregate amount payable to AEP and its Affiliates pursuant to Section
9.6(a) and Section 9.6(b) shall not exceed $245 million and the aggregate
amount payable to the Company and its Affiliates pursuant to Section 9.6(a)
and Section 9.6(b) shall not exceed $245 million.
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(e) EXCLUSIVE REMEDY. Subject to the following sentence, the payments
required by Sections 9.6(a) and Section 9.6(b) shall constitute liquidated
damages in full and complete satisfaction of, and shall be the sole and
exclusive remedy for any loss, liability, damage or claim arising out of or
in connection with the transactions contemplated by this Agreement,
including any termination of this Agreement pursuant to Section 9.1.
Notwithstanding the foregoing sentence, in the event of payment of the
Termination Fee pursuant to Section 9.6(a), if (i) this Agreement is
terminated by a party as a result of a willful breach of representation,
warranty, covenant or agreement by the other party, and (ii) the Topping Fee
is not paid, the nonbreaching party may pursue any remedies available to it
at law or in equity and shall, in addition to the Termination Fee, be
entitled to recover such additional amounts as such nonbreaching party may
be entitled to receive at law or in equity.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. (a) EFFECT OF INVESTIGATION. Except as set forth in Section 10.1(b)
of this Agreement, the representations, warranties, covenants and agreements of
each party hereto shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any other party hereto, any Person
controlling any such party or any of their officers, directors, representatives
or agents whether prior to or after the execution of this Agreement.
(b) TERMINATION. The representations and warranties in this Agreement
shall terminate at the Effective Time and the representations, warranties,
covenants and agreements shall terminate upon the termination of this
Agreement pursuant to Article IX, except that the covenants and agreements
set forth in the last sentence of Section 6.3, Sections 9.2, 9.5 and 9.6 and
Article X hereof shall survive termination of this Agreement.
SECTION 10.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses ( or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) AEP. If to any of the AEP Companies, to:
American Electric Power Service Corporation
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Executive Vice President
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) COMPANY. If to the Company, to:
Central and South West Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.3 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 10.5 ENTIRE AGREEMENT. This Agreement (together with the Annexes,
the Company's Disclosure Letter and AEP's Disclosure Letter) constitutes the
entire agreement of the parties, and supersedes all prior agreements and
undertakings, both written and oral, among the parties, with respect to the
subject matter hereof, other than the Confidentiality Agreement which shall
remain in full force and effect with respect to the subject matter thereof.
SECTION 10.6 ASSIGNMENT. This Agreement shall not be assigned by operation
of Law or otherwise.
SECTION 10.7 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for the
beneficiaries of the indemnities and covenants contained in Sections 7.11,
7.10(d) and 7.10(f) herein, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION 10.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive to,
and not exclusive of, any rights or remedies otherwise available.
SECTION 10.9 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
law; PROVIDED, HOWEVER, that any matter involving the internal corporate affairs
of any party hereto shall be governed by the provisions of the state of its
incorporation.
SECTION 10.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
I-44
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
By /s/ E. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
-----------------------------------------
E. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AUGUSTA ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
PRESIDENT
CENTRAL AND SOUTH WEST CORPORATION
By: /s/ ▇.▇. ▇▇▇▇▇▇
-----------------------------------------
▇.▇. ▇▇▇▇▇▇
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
I-45
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings set
forth below unless the context shall otherwise require:
"Acquisition Proposal" shall have the meaning ascribed to such term in
Section 7.19.
"Affiliate" shall, with respect to any Person, mean any other Person that
controls, is controlled by or is under common control with the former.
"Agreement" shall mean the Agreement and Plan of Merger made and entered
into as of December 21, 1997 among AEP, Newco and the Company, including any
amendments thereto and each Annex (including this Annex A) and including AEP's
Disclosure Letter and the Company's Disclosure Letter.
"APCo" shall mean Appalachian Power Company, a Virginia corporation.
"Atomic Energy Act" shall mean shall mean the Atomic Energy Act of 1954, as
amended, and the Regulations promulgated thereunder.
"AEP" shall mean American Electric Power Company, Inc., a New York
corporation, and its successors from time to time.
"AEP Benefit Plans" shall mean Benefit Plans with respect to AEP and its
Subsidiaries.
"AEP Common Stock" shall mean the voting common stock, par value $6.50 per
share, of AEP.
"AEP Companies" shall have the meaning ascribed to such term in the first
paragraph of the Agreement.
"AEP Required Consents" shall mean any Third Party Consents relating to AEP
the failure of which to obtain could reasonably be expected to have a Material
Adverse Effect on the Combined Companies.
"AEP Stockholders' Meeting" shall have the meaning ascribed to such term in
Section 7.1.
"AEP's Audited Consolidated Financial Statements" shall mean the condensed
balance sheets of AEP and its Subsidiaries as of December 31, 1996, 1995 and
1994 and the related condensed statements of operations and cash flows for each
of the three fiscal years in the three-year period ended December 31, 1996,
together with the notes thereto, all as audited by Deloitte & Touche L.L.P.,
independent accountants, under their report with respect thereto dated February
25, 1997 and included in AEP's Annual Report on Form 10-K for the year ended
December 31, 1996 filed with the Commission.
"AEP's Consolidated Financial Statements" shall mean AEP's Audited
Consolidated Financial Statements and AEP's Unaudited Consolidated Financial
Statements.
"AEP's Disclosure Letter" shall mean a letter of even date herewith
delivered by AEP to the Company concurrently with the execution of the
Agreement, which, among other things, shall identify exceptions to AEP's
representations, warranties and covenants contained in this Agreement by
specific section and subsection references.
"AEP's Unaudited Consolidated Financial Statements" shall mean the unaudited
condensed balance sheet of AEP and its Subsidiaries as of September 30, 1997 and
the related condensed statements of operations and cash flows for the
three-month periods and nine-month periods ended September 30, 1996 and
September 30, 1997, together with the notes thereto, included in AEP's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997 filed with the
Commission.
"Benefit Plans" shall mean, with respect to a specified Person, any employee
pension benefit plan (whether or not insured), as defined in Section 3(2) of
ERISA, any employee welfare benefit plan (whether
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or not insured) as defined in Section 3(1) of ERISA, any plans that would be
employee pension benefit plans or employee welfare benefit plans if they were
subject to ERISA, such as foreign plans and plans for directors, any stock
bonus, stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock, severance, employment, change-in-control, deferred compensation
and any bonus or incentive compensation plan, agreement, program or policy
(whether qualified or nonqualified, written oral), sponsored, maintained or
contributed to by the specified Person or any of its Subsidiaries for the
benefit of any of the present or former directors, officers, employees, agents,
consultants or other similar representatives providing services to or for the
specified Person or any of its Subsidiaries in connection with such services or
any such plans which have been so sponsored, maintained, or contributed to
within six years prior to the date of the Agreement; PROVIDED, HOWEVER, that
such term shall not include (a) routine employment policies and procedures
developed and applied in the ordinary course of business and consistent with
past practice, including wage, vacation, holiday and sick or other leave
policies, (b) workers compensation insurance and (c) directors and officers
liability insurance.
"Business Day" means any day other than a day on which banks in the State of
Texas or the State of New York are authorized or obligated to be closed.
"Certificate of Merger" shall have the meaning ascribed to such term in
Section 2.2.
"Charter Amendment" shall have the meaning ascribed to such term in Section
5.20.
"Change of Control Agreements" shall mean the change in control or severance
agreements identified as such in Section 4.12(j) of the Company's Disclosure
Letter.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 3.3, of all Persons interested in the transactions contemplated by the
Agreement at which all documents deemed necessary by the parties to the
Agreement to evidence the fulfillment or waiver of all conditions precedent to
the consummation of the transactions contemplated by the Agreement are executed
and delivered.
"Closing Date" shall mean the date of the Closing as determined pursuant to
Section 3.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Combined Companies" shall mean, before the Merger, the AEP Companies
(together with all of their Subsidiaries) and the Company (together with all of
its Subsidiaries) considered as a single business enterprise as if the Merger
had been consummated immediately prior to the time of consideration, and after
the Merger shall mean AEP (together with its Subsidiaries).
"Commission" shall mean the Securities and Exchange Commission, a
Governmental Authority of the United States Government, and its successors from
time to time.
"Common Stock Exchange Ratio" shall mean 0.60, as adjusted pursuant to the
second sentence of Section 3.1(a) of the Agreement.
"Company" shall mean Central and South West Corporation, a Delaware
corporation, and its successors from time to time.
"Company Benefit Plans" shall mean Benefit Plans with respect to the Company
and its Subsidiaries.
"Company Common Stock" shall mean the common stock, par value $3.50 per
share, of the Company.
"Company Permitted Transactions" shall mean (i) those transactions described
in Section 6.1 of the Company's Disclosure Letter and (ii) individual
transactions not otherwise permitted by Section 6.2(a) the total investment
(including debt and equity and other liability acquired or assumed) with respect
to which does not exceed $50 million per annum or $150 million per annum when
aggregated with all other such transactions, provided that no transactions
entered into in reliance on this clause (ii) shall involve a total
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investment (including debt and equity and other liability acquired or assumed)
in excess of $75 million per annum in any one country.
"Company Required Consents" shall mean any Third Party Consents relating to
the Company the failure of which to obtain could reasonably be expected to have
a Material Adverse Effect on the Combined Companies.
"Company Stockholders' Meeting" shall have the meaning ascribed to such term
in Section 7.2.
"Company's Audited Consolidated Financial Statements" shall mean the
condensed balance sheets of the Company and its Subsidiaries as of December 31,
1996, 1995 and 1994 and the related condensed and combined statements of
operations and cash flows for each of the three fiscal years in the three-year
period ended December 31, 1996, together with the notes thereto, all as audited
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent accountants, under their report with respect
thereto dated February 28, 1997 and included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 filed with the Commission.
"Company's Consolidated Financial Statements" shall mean the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
"Company's Disclosure Letter" shall mean a letter of even date herewith
delivered by the Company to the AEP Companies concurrently with the execution of
the Agreement, which, among other things, shall identify exceptions to the
Company's representations, warranties and covenants contained in this Agreement
by specific section and subsection references.
"Company's Rights Agreement" shall mean that certain Rights Agreement
entered into or to be entered into between the Company and a rights agent,
substantially in the form previously filed with the Commission except for any
amendments or modifications thereto contemplated in the Agreement.
"Company's Unaudited Consolidated Financial Statements" shall mean the
unaudited condensed balance sheet of the Company and its Subsidiaries as of
September 30, 1997 and the related condensed statements of operations and cash
flows for the three-month periods and nine-month periods ended September 30,
1996 and September 30, 1997, together with the notes thereto, included in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
filed with the Commission.
"Confidentiality Agreement" shall mean that certain confidentiality
agreement between AEP and the Company dated October 17, 1997, as amended.
"Control" (including the terms "controlled," "controlled by" and "under
common control with") shall mean the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
"Controlled Group" shall mean any organization which is a member of a
controlled group of organizations within the meaning of Code sections 414(b),
(c), (m) or (o).
"▇▇▇▇ Nuclear Plant" shall mean the ▇▇▇▇▇▇ ▇. ▇▇▇▇ nuclear plant located in
Bridgman, Michigan.
"Court" shall mean any court or arbitration tribunal of the United States,
any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"CP&L" shall mean Central Power and Light Company, a Texas corporation and a
Subsidiary of the Company.
"CSPCo" shall mean Columbus Southern Power Company, an Ohio corporation.
A-3
"Current AEP Benefit Plans" shall mean Benefit Plans that are sponsored,
maintained, or contributed to by AEP or any of its Subsidiaries as of the date
of the Agreement.
"Current Company Benefit Plans" shall mean Benefit Plans that are sponsored,
maintained, or contributed to by the Company or any of its Subsidiaries as of
the date of the Agreement.
"Delaware Law" shall mean the General Corporation Law of the State of
Delaware.
"Divestiture Event" shall mean any Law, Regulation or Order adopted or
issued by a Governmental Authority that requires the divestiture of a
substantial portion of the generating assets of the Company and its
Subsidiaries, taken as a whole, or AEP and its Subsidiaries, taken as a whole.
"Domestic Public Utility Company" shall mean a company that provides
electric energy directly to retail customers under rates, terms and conditions
determined by a State Regulatory Commission; provided that no company shall be a
Domestic Public Utility Company solely by reason of engaging in power marketing
or brokering or the wholesale sale of electric energy.
"Effective Time" shall mean the date and time of the completion of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 2.2.
"Environmental Law or Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Authority
pertaining to health or the environment currently in effect and applicable to a
specified Person and its Subsidiaries, including the Clean Air Act, as amended,
the Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, the Oil Pollution Act of 1990, as amended
("OPA"), any state or local Laws implementing the foregoing Federal Laws, and
all other environmental conservation or protection Laws. For purposes of the
Agreement, the terms "hazardous substance" and "release" have the meanings
specified in CERCLA; PROVIDED, HOWEVER, that to the extent the Laws of the state
or locality in which the property is located establish a meaning for "hazardous
substance" or "release" that is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply, and the term "hazardous substance" shall
include all dehydration and treating wastes, waste (or spilled) oil, and waste
(or spilled) petroleum products, and (to the extent in excess of background
levels) radioactive material, even if such are specifically exempt from
classification as hazardous substances pursuant to CERCLA or RCRA or the
analogous statutes of any jurisdiction applicable to the specified Person or its
Subsidiaries or any of their respective properties or assets.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.
"Equity Securities" shall mean, with respect to a specified Person, any
shares of capital stock of, or other equity interests in, or any securities that
are convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity interests in,
such Person.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and the
Regulations promulgated thereunder.
"Exchange Agent" shall mean a bank or trust company having a net worth in
excess of $100 million designated and appointed to act in the capacities
required thereof under Section 3.2.
A-4
"Exchange Fund" shall mean the fund of AEP Common Stock and cash in lieu of
fractional interests and dividends and distributions, if any, with respect to
such shares of AEP Common Stock established at the Exchange Agent pursuant to
Section 3.2.
"Expenses" shall mean all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of the Agreement, the preparation,
printing, filing and mailing of the Registration Statement, Joint Proxy
Statement/Prospectus, the solicitation of stockholder approvals and all other
matters related to the consummation of the transactions contemplated hereby.
"Federal Power Act" shall mean the Federal Power Act, as amended, and the
Regulations promulgated thereunder.
"FERC" shall mean the Federal Energy Regulatory Commission, a Governmental
Authority of the United States Government, and its successors from time to time.
"Final Order" shall mean an Order that has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which any waiting
period prescribed by Law before the transactions contemplated hereby may be
consummated has expired (but without the requirement for expiration of any
applicable rehearing or appeal period), and as to which all conditions to the
consummation of such transactions prescribed by Law, Regulation or Order have
been satisfied.
"Foreign Utility Company" shall mean a foreign utility company as defined in
section 33(a)(3) of the Holding Company Act.
"GAAP" shall mean accounting principles generally accepted in the United
States consistently applied by a specified Person.
"Governmental Authority" shall mean any governmental or regulatory agency or
authority (other than a Court but including a stock exchange or other
self-regulatory body) of or within the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Holding Company Act" shall mean the Public Utility Holding Company Act of
1935, as amended, and the Regulations promulgated thereunder.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the Regulations promulgated thereunder.
"I&M" shall mean Indiana Michigan Power Company, an Indiana corporation.
"IRS" shall mean the Internal Revenue Service, a Governmental Authority of
the United States Government, and its successors from time to time.
"Joint Proxy Statement/Prospectus" shall have the meaning ascribed to such
term in Section 7.3(a).
"KEPCo" shall mean Kentucky Power Company, a Kentucky corporation.
"Knowledge" shall mean, with respect to either the Company or AEP, the
actual knowledge of any executive officer of such party after reasonable
inquiry.
"KPC" shall mean Kingsport Power Company, a Virginia corporation.
"Law" shall mean all laws, statutes, ordinances, rules and regulations of
the United States, any foreign country, or any domestic or foreign state, and
any political subdivision or agency thereof, including all decisions of Courts
having the effect of law in each such jurisdiction.
A-5
"Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any agreement to give any of the foregoing),
any conditional sale or other title retention agreement, any lease in the nature
thereof or the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
"Material" shall mean material to the business, condition (financial or
otherwise) or results of operations or prospects of a specified Person and its
subsidiaries, if any, taken as a whole; PROVIDED, HOWEVER, that, as used in this
definition the word "material" shall have the meaning accorded thereto in
Section 11 of the Securities Act.
"Material Contract" shall mean each contract, lease, indenture, agreement,
arrangement or understanding to which a specified Person or any of its
Subsidiaries is a party or to which any of the assets or operations of such
specified Person or any of its Subsidiaries is subject that is of a type that
would be required to be included as an exhibit to a registration statement on
Form S-1 pursuant to Paragraph (2), (4) or (10) of Item 601(b) of Regulation S-K
under the Securities Act if such a registration statement were to be filed by
such Person under the Securities Act on the date of determination.
"Material Adverse Effect" shall mean any change or effect that is material
and adverse to the business, condition (financial or otherwise) or results of
operations or prospects of a specified Person and its subsidiaries, if any,
taken as a whole; PROVIDED, HOWEVER, that, as used in this definition the word
"material" shall have the meaning accorded thereto in Section 11 of the
Securities Act.
"Merger" shall have the meaning ascribed to such term in Section 2.1 of the
Agreement.
"Newco" shall mean Augusta Acquisition Corporation, a Delaware corporation
and a wholly-owned Subsidiary of AEP formed for the sole purpose of affecting
the Merger.
"New York Law" shall mean the New York Business Corporation Law.
"NRC" shall mean the Nuclear Regulatory Commission, a Governmental Authority
of the United States Government, and its successors from time to time.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OPCo" shall mean Ohio Power Company, an Ohio corporation.
"Operating Company" shall have the meaning ascribed to such term in Section
4.9(b).
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, Federal, foreign, state or local. Any reference in the
Agreement to the "receipt" or "obtaining" of any Order shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of Law.
"Out-of-Pocket Expenses" shall have the meaning ascribed to such term in
Section 9.6(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall mean any and all permits, licenses, authorizations, orders,
consents, certificates, registrations or other approvals granted by any
Governmental Authority. Any reference in the Agreement to the "receipt" or
"obtaining" of any Permit shall mean making such declarations, filings or
registrations; giving such notices; obtaining such consents or approvals; and
having such waiting periods expire as are necessary to avoid a violation of Law.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental charges not
delinquent or which are currently being contested in good faith by
appropriate proceedings; PROVIDED that, in the latter case, the specified
Person or one of its Subsidiaries shall have set aside on its books adequate
reserves with respect thereto;
A-6
(2) mechanics' and materialmen's liens not filed of record and similar
charges not delinquent or which are filed of record but are being contested
in good faith by appropriate proceedings; PROVIDED that, in the latter case,
the specified Person or one of its Subsidiaries shall have set aside on its
books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect to which the
specified Person or one of its Subsidiaries shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect to
which such Person or such Subsidiary shall have secured a stay of execution
pending such appeal or such proceeding for review; PROVIDED that such Person
or such Subsidiary shall have set aside on its books adequate reserves with
respect thereto;
(4) easements, leases, reservations or other rights of others in, or
minor defects and irregularities in title to, property or assets of a
specified Person or any of its Subsidiaries; PROVIDED that such easements,
leases, reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which they
are held; and
(5) any lien or privilege vested in any lessor, licensor or permittor
for rent or other obligations of a specified Person or any of its
Subsidiaries thereunder so long as the payment of such rent or the
performance of such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but shall not include a Governmental Authority.
"Pooling Transaction" shall mean a business combination that qualifies for
financial accounting purposes, as a pooling of interests pursuant to Accounting
Principles Board Opinion 16 and the interpretations thereof and the Staff
Accounting Bulletins of the Commission and the interpretations thereof.
"PSO" shall mean Public Service Company of Oklahoma, an Oklahoma
corporation.
"Registration Statement" shall have the meaning ascribed to such term in
Section 7.3(a).
"Regulation" shall mean any rule or regulation of any Governmental Authority
having the effect of Law.
"Representatives" shall have the meaning ascribed to such term in Section
6.3.
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the Commission).
"Required AEP Vote" shall have the meaning ascribed to such term in Section
5.20.
"Required Company Vote" shall have the meaning ascribed to such term in
Section 4.20.
"Retention Agreements" shall mean the retention agreements described in
Section 6.2(a) of the Company's Disclosure Letter.
"SEC Reports" shall mean (1) all Annual Reports on Form 10-K, (2) all
Quarterly Reports on Form 10-Q, (3) all proxy statements relating to meetings of
stockholders (whether annual or special), (4) all Current Reports on Form 8-K
and (5) all other reports, schedules, registration statements or other documents
required to be filed during a specified period by a Person with the Commission
pursuant to the Securities Act or the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
Regulations promulgated thereunder.
"Seeboard" shall mean SEEBOARD plc, a company incorporated in England and a
Subsidiary of the Company.
A-7
"Share Issuance" shall have the meaning ascribed to such term in Section
5.20.
"Significant Subsidiary" shall mean any subsidiary of the Company or AEP, as
the case may be, that would constitute a Significant Subsidiary of such party
within the meaning of Rule 1-02 of Regulation S-X of the Commission.
"South Texas Nuclear Facility" shall mean the South Texas nuclear project
located in Bay City, Texas.
"State Regulatory Commissions" shall mean: the Public Utility Commission of
the State of Texas; the Public Service Commission of the State of Arkansas; the
Corporation Commission of the State of Oklahoma; the Public Service Commission
of the State of Louisiana; the Indiana Utility Regulatory Commission; the
Kentucky Public Service Commission; the Michigan Public Service Commission; the
Ohio Public Utility Commission; the Tennessee Regulatory Commission; the
Virginia State Corporation Commission; and the West Virginia Public Service
Commission.
"State Regulatory Acts" shall mean the utility Laws regulating Domestic
Public Utility Companies in the States of Arkansas, Oklahoma, Texas, Louisiana,
Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia; in
each case, as amended, and the Regulations promulgated thereunder.
A "Subsidiary" of a specified Person shall be any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified Person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, over 50% of the stock or other equity or
partnership interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity.
"Superior Proposal" a BONA FIDE written Acquisition Proposal which the Board
of Directors of AEP or the Board of Directors of the Company, as the case may
be, concludes in good faith (after consultation with its financial advisors and
legal counsel), taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal, (i) would, if
consummated, result in a transaction that is more favorable to such party's
stockholders, from a strategic and financial point of view, than the
transactions contemplated by this Agreement and (ii) is reasonably capable of
being completed (PROVIDED that for purposes of this definition the term
Acquisition Proposal shall have the meaning assigned to such term in Section
7.19 except that the reference to "10%" in the definition of "Acquisition
Proposal" shall be deemed to be a reference to "50%" and "Acquisition Proposal"
shall only be deemed to refer to a transaction involving AEP or the Company, as
the case may be, or with respect to assets (including the shares of any
Subsidiary of AEP or the Company) of AEP or the Company, as the case may be, and
its Subsidiaries, taken as a whole, and not any of its Subsidiaries alone).
"Surviving Corporation" shall mean the Company as the corporation surviving
the Merger.
"SWEPCO" shall mean Southwestern Electric Power Company, a Delaware
corporation and a Subsidiary of the Company.
"Target Party" shall have the meaning ascribed to such term in Section
9.6(b).
"Task Force" shall have the meaning ascribed to such term in Section 7.18.
"Tax Returns" shall mean all returns, reports or other documents (including
information returns) required to be filed by or under any Law with any
Governmental Authority with respect to Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies or
other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
A-8
"Terminated AEP Benefit Plans" shall mean Benefit Plans that were sponsored,
maintained, or contributed to by AEP or any of its Subsidiaries within six years
prior to the date of this Agreement but which have been terminated prior to the
date of the Agreement.
"Terminated Company Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by the Company or any of its
Subsidiaries within six years prior to the date of this Agreement but which have
been terminated prior to the date of the Agreement.
"Terminating AEP Breach" shall have the meaning ascribed to such term in
subsection 9.1(c) of the Agreement.
"Terminating Company Breach" shall have the meaning ascribed to such term in
subsection 9.1(b) of the Agreement.
"Termination Date" shall have the meaning ascribed to such term in Section
9.1(f).
"Termination Fee" shall have the meaning ascribed to such term in Section
9.6(a).
"Third Party Consents" shall have the meaning ascribed to such term in
Section 7.4(d)(i).
"Topping Fee" shall have the meaning ascribed to such term in Section
9.6(b).
"WPC" shall mean Wheeling Power Company, a West Virginia corporation.
"WTU" shall mean West Texas Utilities Company, a Texas corporation and a
Subsidiary of the Company.
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[▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Corporation Affiliates]
AFFILIATE'S AGREEMENT
American Electric Power Company, Inc.
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Central and South West Corporation
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▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of Central and South West
Corporation, a Delaware corporation (the "Company"), as that term is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act").
Pursuant to the terms and subject to the conditions of that certain
Agreement and Plan of Merger by and among American Electric Power Company, Inc.,
a New York corporation ("AEP"), Augusta Acquisition Corporation, a newly formed
Delaware corporation and a wholly owned Subsidiary of AEP ("Newco"), and the
Company dated as of December 21, 1997 (the "Merger Agreement"), providing for,
among other things, the merger of Newco with and into the Company (the
"Merger"), the undersigned will be entitled to receive shares of common stock,
par value $6.50 per share ("AEP Common Stock"), of AEP in exchange for shares of
common stock, par value $3.50 per share ("Company Common Stock"), of the Company
owned by me at the effective time of the Merger (the "Effective Time") as
determined pursuant to the Merger Agreement.
The undersigned understands that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the application of pooling of
interests accounting to the transaction.
In consideration of the agreements contained herein, AEP's and the Company's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned has not made and will not make any sale, transfer or other
disposition of (i) Company Common Stock or AEP Common Stock within the 30 day
period prior to the date of the consummation of the Merger or (ii) AEP Common
Stock received by the undersigned pursuant to the Merger or otherwise owned by
the undersigned until after such time as financial statements of AEP that
include at least 30 days of combined operations of the Company and AEP after the
Merger shall have been publicly reported, unless the undersigned shall have
delivered to AEP, prior to any such sale, transfer or other disposition, a
written opinion from Deloitte & Touche L.L.P., independent public accountants
for AEP, or a written no-action letter from the accounting staff of the SEC, in
either case in form and substance reasonably satisfactory to AEP, to the effect
that such sale, transfer or other disposition will not cause the Merger not to
be treated as a "pooling of interests" for financial accounting purposes in
accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC and (iii) AEP Common Stock received
by the undersigned pursuant to the Merger in violation of the Securities Act or
the Rules and Regulations. The undersigned has been advised that the offering,
sale and delivery of the shares of AEP Common Stock pursuant to the Merger will
have been registered with
B-1
the SEC under the Securities Act on a Registration Statement on Form S-4. The
undersigned has also been advised, however, that since the undersigned may be
deemed to be an affiliate of the Company at the time the Merger is submitted for
a vote of the stockholders of the Company, AEP Common Stock received by the
undersigned pursuant to the Merger can be sold by the undersigned only (i)
pursuant to an effective registration statement under the Securities Act of 1933
(the "Securities Act"), (ii) in conformity with the volume and other limitations
of Rule 145 promulgated by the SEC under the Securities Act, or (iii) in
reliance upon an exemption from registration that is available under the
Securities Act.
The undersigned also understands that instructions will be given to the
transfer agent for AEP Common Stock with respect to AEP Common Stock to be
received by the undersigned pursuant to the Merger and that there will be placed
on the certificates representing such shares of AEP Common Stock, or any
substitutions therefor, a legend stating in substance as follows:
"These shares were issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. These shares may only be
transferred in accordance with the terms of such Rule and an Affiliate's
Agreement between the original holder of such shares and AEP, a copy of
which agreement is on file at the principal offices of AEP."
It is understood and agreed that the legend set forth above shall be removed
upon surrender of certificates bearing such legend by delivery of substitute
certificates without such legend if the undersigned shall have delivered to AEP
an opinion of counsel, in form and substance reasonably satisfactory to AEP, to
the effect that (i) the sale or disposition of the shares represented by the
surrendered certificates may be effected without registration of the offering,
sale and delivery of such shares under the Securities Act and (ii) the shares to
be so transferred may be publicly offered, sold and delivered by the transferee
thereof without compliance with the registration provisions of the Securities
Act.
By its execution hereof, AEP agrees that it will, as long as the undersigned
owns any AEP Common Stock to be received by the undersigned pursuant to the
Merger, take all reasonable efforts to make timely filings with the SEC of all
reports required to be filed by it pursuant to the Securities Exchange Act of
1934, as amended, and will promptly furnish upon written request of the
undersigned a written statement confirming that such reports have been so timely
filed.
B-2
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:
-----------------------------------------
Name:
Title:
Date:
Address:
ACCEPTED this day
of , 1998
AMERICAN ELECTRIC POWER COMPANY, INC.
By:
-----------------------------------------
Name:
Title:
CENTRAL AND SOUTH WEST CORPORATION
By:
-----------------------------------------
Name:
Title:
B-3
ANNEX C
[AEP Affiliates]
AFFILIATE'S AGREEMENT
American Electric Power Company, Inc.
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▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Central and South West Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of American Electric Power
Company, Inc., a New York corporation ("AEP"), as that term is defined in the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act").
The undertakings contained in this Affiliate's Agreement are being given by
the undersigned in connection with that certain Agreement and Plan of Merger by
and among AEP, Augusta Acquisition Corporation, a newly formed Delaware
corporation and a wholly owned Subsidiary of AEP ("Newco"), and Cypress, a
Delaware corporation (the "Company") dated as of December 21, 1997 (the "Merger
Agreement"), providing for, among other things, the merger of Newco with and
into the Company (the "Merger").
The undersigned understands that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the application of pooling of
interests accounting to the transaction.
In consideration of the agreements contained herein, AEP's and the Company's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned has not made and will not make any sale, transfer or other
disposition of (i) AEP Common Stock or Company Common Stock within the thirty
day period prior to the date of the consummation of the Merger or (ii) AEP
Common Stock owned by the undersigned until such time as financial statements
that include at least 30 days of combined operations of the Company and AEP
after the Merger shall have been publicly reported, unless the undersigned shall
have delivered to AEP prior to any such sale, transfer or other disposition, a
written opinion from Deloitte & Touche L.L.P., independent public accountants
for AEP, or a written no-action letter from the accounting staff of the SEC, in
either case in form and substance reasonably satisfactory to AEP, to the effect
that such sale, transfer or other disposition will not cause the Merger not to
be treated as a "pooling of interests" for financial accounting purposes in
accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC.
C-1
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:
-----------------------------------------
Name:
Title:
Date:
Address:
ACCEPTED this day
of , 1998
CENTRAL AND SOUTH WEST CORPORATION
By:
-----------------------------------------
Name:
Title:
AMERICAN ELECTRIC POWER COMPANY, INC.
By:
-----------------------------------------
Name:
Title:
C-2