Exhibit 2.1
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CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
by and among
DUKE ENERGY CORPORATION,
CINERGY CORP.,
DEER HOLDING CORP.,
DEER ACQUISITION CORP.
and
COUGAR ACQUISITION CORP.
Dated as of May 8, 2005
TABLE OF CONTENTS
ARTICLE I
The Mergers and the Restructuring Transactions
Page
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Section 1.01 The Duke Merger.............................................................2
Section 1.02 The Duke Conversion.........................................................2
Section 1.03 The Restructuring Transactions..............................................2
Section 1.04 The Cinergy Merger..........................................................3
Section 1.05 Closing.....................................................................3
Section 1.06 Effective Time of the Duke and Cinergy Mergers..............................3
Section 1.07 Effects of the Mergers and the Conversion...................................4
Section 1.08 Organizational Documents of Duke, Cinergy and the Company...................4
Section 1.09 Directors and Officers of Duke and Cinergy..................................5
Section 1.10 Directors and Officers of the Company.......................................5
Section 1.11 Post-Merger Operations......................................................6
Section 1.12 Transition Committee........................................................6
ARTICLE II
Effects of the Mergers on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.01 Effect on Capital Stock.....................................................6
Section 2.02 Exchange of Certificates....................................................8
Section 2.03 Dissenting Shares..........................................................13
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties of Cinergy..................................14
Section 3.02 Representations and Warranties of Duke.....................................29
ARTICLE IV
Covenants
Section 4.01 Covenants of Cinergy.......................................................43
Section 4.02 Covenants of Duke..........................................................49
Section 4.03 No Solicitation by Cinergy.................................................54
Section 4.04 No Solicitation by Duke....................................................57
Section 4.05 Other Actions..............................................................60
Section 4.06 Coordination of Dividends..................................................60
Section 4.07 Redemption of Duke Preferred Stock and Duke Preferred Stock A..............60
Section 4.08 Transfer of Certain Assets.................................................60
ARTICLE V
Additional Agreements
Section 5.01 Preparation of the Form S-4 and the Joint Proxy
Statement; Shareholders Meetings...........................................61
Section 5.02 Letters of Cinergy's Accountants...........................................62
Section 5.03 Letters of Duke's Accountants..............................................62
Section 5.04 Access to Information; Effect of Review....................................62
Section 5.05 Regulatory Matters; Reasonable Best Efforts................................63
Section 5.06 Stock Options; Restricted Stock and Equity Awards; Stock Plans.............65
Section 5.07 Employee Matters...........................................................68
Section 5.08 Indemnification, Exculpation and Insurance.................................69
Section 5.09 Fees and Expenses..........................................................71
Section 5.10 Public Announcements.......................................................74
Section 5.11 Affiliates.................................................................75
Section 5.12 NYSE Listing...............................................................75
Section 5.13 Shareholder Litigation.....................................................75
Section 5.14 Tax-Free Reorganization Treatment..........................................75
Section 5.15 Standstill Agreements; Confidentiality Agreements..........................75
ARTICLE VI
Conditions Precedent
Section 6.01 Conditions to Each Party's Obligation to Effect the Mergers................76
Section 6.02 Conditions to Obligations of Cinergy.......................................76
Section 6.03 Conditions to Obligations of Duke..........................................77
Section 6.04 Frustration of Closing Conditions..........................................78
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01 Termination................................................................78
Section 7.02 Effect of Termination......................................................81
Section 7.03 Amendment..................................................................82
Section 7.04 Extension; Waiver..........................................................82
ARTICLE VIII
General Provisions
Section 8.01 Nonsurvival of Representations and Warranties..............................82
Section 8.02 Notices....................................................................82
Section 8.03 Definitions................................................................83
Section 8.04 Interpretation and Other Matters...........................................84
Section 8.05 Counterparts...............................................................85
Section 8.06 Entire Agreement; No Third-Party Beneficiaries.............................85
Section 8.07 Governing Law..............................................................85
Section 8.08 Assignment.................................................................85
Section 8.09 Enforcement................................................................85
Section 8.10 Severability...............................................................86
Section 8.11 Waiver of Jury Trial.......................................................86
Section 8.12 Alternative Structure......................................................86
AGREEMENT AND PLAN OF MERGER, dated as of May 8, 2005 (this
"Agreement"), by and among DUKE ENERGY CORPORATION, a North Carolina
corporation ("Duke"), CINERGY CORP., a Delaware corporation ("Cinergy"), DEER
HOLDING CORP., a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Duke, DEER ACQUISITION CORP., a North Carolina corporation and a
wholly-owned subsidiary of the Company ("Merger Sub A"), and COUGAR
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of the
Company ("Merger Sub B").
WHEREAS the respective Boards of Directors of Duke, Cinergy,
the Company, Merger Sub A and Merger Sub B have approved the consummation of
the business combination provided for in this Agreement, pursuant to which
Merger Sub A and Merger Sub B will merge, respectively, with and into Duke and
Cinergy, respectively, whereby, subject to the terms of Article II, each share
of common stock, no par value per share, of Duke (including, except as the
context otherwise requires, the associated Duke Rights as defined in Section
3.02(b), the "Duke Common Stock") and each share of common stock, par value
$.01 per share, of Cinergy (the "Cinergy Common Stock") will be converted into
the right to receive the Merger Consideration (as defined in Section 2.01)
(such transactions are referred to herein individually as the "Duke Merger"
and the "Cinergy Merger", respectively, and collectively as the "Mergers"), as
a result of which the holders of Duke Common Stock and Cinergy Common Stock
will together own all of the outstanding shares of common stock, no par value
per share, of the Company (the "Company Common Stock") (and the Company will,
in turn, own all of the outstanding shares of common stock, no par value per
share, of the surviving corporation in the Duke Merger (the "Surviving Duke
Common Stock") and all of the outstanding shares of common stock, par value
$.01 per share, of the surviving corporation in the Cinergy Merger (the
"Surviving Cinergy Common Stock"));
WHEREAS the respective Boards of Directors of Duke, the
Company and Merger Sub A have approved the conversion of Duke into a limited
liability company organized under the laws of the State of North Carolina
("Duke Power LLC") as provided for in this Agreement, whereby, subject to the
terms and conditions of this Agreement, the outstanding shares of Surviving
Duke Common Stock shall be converted into membership interests of Duke Power
LLC;
WHEREAS the respective Boards of Directors of Duke and the
Company have approved the distribution by Duke to the Company of Duke Capital
LLC ("Duke Capital"), a Delaware limited liability company and wholly-owned
subsidiary of Duke, and the Restructuring Transactions (as defined below);
WHEREAS the respective Boards of Directors of Duke and
Cinergy have each determined that the Mergers and the other transactions
contemplated hereby are consistent with, and in furtherance of, the best
interests of their respective corporations and shareholders and each of Duke's
and Cinergy's respective business strategies and goals;
WHEREAS Duke and Cinergy desire to make certain
representations, warranties, covenants and agreements in connection with the
Mergers and the transactions contemplated by this Agreement and also to
prescribe various conditions to the Mergers and the Restructuring
Transactions; and
WHEREAS, for United States federal income tax purposes, it
is intended that the Duke Merger and the Duke Conversion (as defined below)
(together, the "Duke Reorganization") shall qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and that the Cinergy Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Code, and this Agreement is intended to be,
and is hereby, adopted as a plan of reorganization within the meaning of
Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I
The Mergers and the Restructuring Transactions
Section 1.01 The Duke Merger. Upon the terms and subject to
the conditions set forth in this Agreement, at the Duke Effective Time (as
defined in Section 1.06), Merger Sub A shall be merged with and into Duke in
accordance with the North Carolina Business Corporation Act (the "NCBCA").
Duke shall be the surviving corporation in the Duke Merger and shall continue
its corporate existence under the laws of the State of North Carolina and
shall succeed to and assume all of the rights and obligations of Duke and
Merger Sub A in accordance with the NCBCA. As a result of the Duke Merger,
Duke shall become a wholly-owned subsidiary of the Company.
Section 1.02 The Duke Conversion. Upon the terms and subject
to the conditions set forth in this Agreement, immediately following the
effectiveness of the Duke Merger, Duke may convert to a limited liability
company (the "Duke Conversion") pursuant to a plan of conversion adopted
pursuant to Section 55-11A-11 of the NCBCA and Section 57C-9A-02 of the North
Carolina Limited Liability Company Act (the "NCLLCA"). Following the Duke
Conversion, Duke Power LLC will be a limited liability company all of whose
membership or other equity interests are held by the Company.
Section 1.03 The Restructuring Transactions.
(a) Immediately following the effectiveness of the
Duke Conversion, Duke Power LLC may, and may cause its subsidiaries to, effect
the transactions set forth on Section 1.03(a) of the Duke Disclosure Letter
(as defined in Section 3.02(a)).
(b) Immediately following the consummation of the
transactions set forth on Section 1.03(a) of the Duke Disclosure Letter, Duke
Power LLC may distribute to the Company the membership interests in Duke
Capital (the "Duke Capital Transfer"). Following the Duke Capital Transfer,
Duke Capital will be a direct wholly-owned subsidiary of the Company.
(c) Immediately following the effectiveness of the
Duke Capital Transfer, the Company may cause Duke Capital to effect the
transactions set forth on Section 1.03(c) of the Duke Disclosure Letter (the
Duke Conversion, the Duke Capital Transfer and the transactions set forth on
Section 1.03(a) and Section 1.03(c) of the Duke Disclosure Letter are referred
to herein as the "Restructuring Transactions"). Duke shall provide prior
notice to Cinergy of any Restructuring Transactions it proposes to effect.
Immediately after the Duke Effective Time, all shares of Company Common Stock
owned by Duke shall be cancelled.
Section 1.04 The Cinergy Merger. Upon the terms and subject
to the conditions set forth in this Agreement, immediately following the
latest of consummation of the Duke Merger or any Restructuring Transactions,
at the Cinergy Effective Time (as defined in Section 1.06), Merger Sub B shall
be merged with and into Cinergy in accordance with the Delaware General
Corporation Law (the "DGCL"). Cinergy shall be the surviving corporation in
the Cinergy Merger and shall continue its corporate existence under the laws
of the State of Delaware and shall succeed to and assume all of the rights and
obligations of Cinergy and Merger Sub B in accordance with the DGCL. As a
result of the Cinergy Merger, Cinergy shall become a wholly-owned subsidiary
of the Company.
Section 1.05 Closing. The closing of the Mergers and the
Restructuring Transactions (the "Closing") will take place at 10:00 a.m.,
local time, on a date to be specified by the parties (the "Closing Date"),
which shall be no later than the second business day after satisfaction or
waiver of the conditions set forth in Article VI, (other than those conditions
that by their terms are to be satisfied at the Closing, but subject to the
satisfaction or waiver of such conditions at such time) unless another time or
date is agreed to by the parties hereto. The Closing shall be held at such
location in The City of New York as is agreed to by the parties hereto.
Section 1.06 Effective Time of the Duke and Cinergy Mergers.
Subject to the provisions of this Agreement, (i) with respect to the Duke
Merger, as soon as practicable after 10:00 a.m., local time, on the Closing
Date the parties thereto shall file articles of merger (the "Duke Articles of
Merger") executed in accordance with, and containing such information as is
required by, Section 55-11-05 of the NCBCA with the Secretary of State of the
State of North Carolina and on or after the Closing Date shall make all other
filings or recordings required under the NCBCA, (ii) with respect to the Duke
Conversion, as soon as practicable on the Closing Date following the Duke
Effective Time, Duke shall file articles of organization of Duke Power LLC
(the "Duke Power Articles of Organization") and articles of conversion (the
"Duke Articles of Conversion") executed in accordance with, and containing
such information as is required by, Section 55-11A-12 of the NCBCA and Section
57C-9A-02 of the NCLLCA with the Secretary of State of the State of North
Carolina and on or after the Closing Date shall make all other filings or
recordings required under the NCBCA and the NCLLCA, and (iii) with respect to
the Cinergy Merger, immediately following the consummation of the
Restructuring Transactions, the parties thereto shall file a certificate of
merger (the "Cinergy Certificate of Merger") executed in accordance with, and
containing such information as is required by, the relevant provisions of
Section 251 of the DGCL with the Secretary of State of the State of Delaware
and on or after the Closing Date shall make all other filings or recordings
required under the DGCL. The Duke Merger shall become effective at such time
as the Duke Articles of Merger are duly filed with the Secretary of State of
the State of North Carolina (the time the Duke Merger becomes effective being
hereinafter referred to as the "Duke Effective Time"), the Duke Conversion
shall become effective at such time as the Duke Articles of Conversion and the
Duke Power Articles of Organization are duly filed with the Secretary of State
of the State of North Carolina (the time the Duke Conversion becomes effective
being hereinafter referred to as the "Conversion Effective Time"), and the
Cinergy Merger shall become effective at such time as the Cinergy Certificate
of Merger is duly filed with the Secretary of State of the State of Delaware
(the time the Cinergy Merger becomes effective being hereinafter referred to
as the "Cinergy Effective Time"). The latest time to occur of the Duke
Effective Time, the Conversion Effective Time and the Cinergy Effective Time
shall hereinafter be referred to as the "Effective Time."
Section 1.07 Effects of the Mergers and the Conversion. The
Duke Merger, the Cinergy Merger and the Duke Conversion shall generally have
the effects set forth in this Agreement and the applicable provisions of the
NCBCA, the DGCL and the NCLLCA respectively.
Section 1.08 Organizational Documents of Duke, Cinergy and
the Company.
(a)
(i) At the Duke Effective Time, (a) the articles
of incorporation of Duke, as in effect immediately prior to the Duke
Effective Time, shall be the articles of incorporation of Duke as the
surviving corporation in the Duke Merger and (b) the by-laws of Duke, as
in effect immediately prior to the Duke Effective Time, shall be the
by-laws of Duke as the surviving corporation in the Duke Merger, in each
case until superceded by the Duke Power Articles of Organization filed as
part of the Duke Conversion; and
(ii) At the Conversion Effective Time, the parties
shall (i) file the Duke Power LLC Articles of Organization in a form
mutually acceptable to the parties hereto and (ii) cause Duke Power LLC
to adopt an operating agreement mutually acceptable to the parties
hereto; and
(iii) At the Cinergy Effective Time, (A) the
certificate of incorporation of Merger Sub B, as in effect immediately
prior to the Cinergy Effective Time, shall be the certificate of
incorporation of Cinergy as the surviving corporation in the Cinergy
Merger until thereafter changed or amended as provided therein or by
applicable law and (B) the by-laws of Merger Sub B, as in effect
immediately prior to the Cinergy Effective Time, shall be the by-laws of
Cinergy as the surviving corporation in the Cinergy Merger, until
thereafter changed or amended as provided therein, in the certificate of
incorporation of Cinergy or by applicable law.
(b) The parties shall take all appropriate action so
that, at the Duke Effective Time, (i) the certificate of incorporation of the
Company shall be in the form attached as Exhibit A hereto and (ii) the by-laws
of the Company shall be in the form attached as Exhibit B hereto. Each of Duke
and Cinergy shall take all actions necessary to cause the Company, Merger Sub
A and Merger Sub B to take any actions necessary in order to consummate the
Mergers, the Restructuring Transactions and the other transactions
contemplated hereby.
Section 1.09 Directors and Officers of Duke and Cinergy.
(a) The directors of Merger Sub A at the Duke
Effective Time shall, from and after the Duke Effective Time, be the directors
of Duke as the surviving corporation in the Duke Merger until their successors
have been duly elected or appointed and qualified.
(b) Subject to Section 1.10, the officers of Duke at
the Duke Effective Time shall, from and after the Duke Effective Time,
continue to be the officers of Duke as the surviving corporation in the Duke
Merger until their successors have been duly elected or appointed and
qualified.
(c) The directors of Duke at the Conversion Effective
Time shall, from and after the Conversion Effective Time, be the managers of
Duke Power LLC until their successors have been duly elected or appointed and
qualified.
(d) Subject to Section 1.10, the officers of Duke at
the Conversion Effective Time shall, from and after the Conversion Effective
Time, continue to be the officers of Duke Power LLC until their successors
have been duly elected or appointed and qualified.
(e) The directors of Merger Sub B at the Cinergy
Effective Time shall, from and after the Cinergy Effective Time, be the
directors of Cinergy as the surviving corporation in the Cinergy Merger until
their successors have been duly elected or appointed and qualified.
(f) Subject to Section 1.10, the officers of Cinergy
at the Cinergy Effective Time shall, from and after the Cinergy Effective
Time, continue to be the officers of Cinergy as the surviving corporation in
the Cinergy Merger until their successors have been duly elected or appointed
and qualified.
Section 1.10 Directors and Officers of the Company. Exhibit
C hereto sets forth (i) as of the Effective Time, subject to the By-Laws of
the Company effective as of the Effective Time, the number of directors
constituting the Board of Directors of the Company and the number of Duke
Directors (as defined in Exhibit B hereto) and the number of Cinergy Directors
(as defined in Exhibit B hereto), (ii) as of the Effective Time, the Chairman
of the Board of Directors of the Company and the President and Chief Executive
Officer of the Company, and (iii) the manner in which certain senior officers
of the Company as of the Effective Time will be selected after the date hereof
and prior to the Effective Time. Certain of the responsibilities of the
Chairman of the Board of Directors of the Company are set forth on Exhibit C
hereto. The material terms of the changes to the existing employment agreement
of the President and Chief Executive Officer of Cinergy to be in effect as of
the Effective Time in his employment agreement with the Company as the
President and Chief Executive Officer of the Company are set forth on Exhibit
D hereto. The parties shall use their commercially reasonable efforts to cause
an amended employment agreement reflecting such terms to be executed by the
Company and the Chief Executive Officer of the Company as promptly as
practicable after the date hereof.
Section 1.11 Post-Merger Operations. Following the Effective
Time, the Company shall conduct its operations in accordance with the
following:
(a) Name. At the Effective Time, the Company's name
shall be changed to "Duke Energy Corporation."
(b) Principal Corporate Offices. The Company shall
maintain its headquarters and principal corporate offices in Charlotte, North
Carolina. Each of Duke Power LLC, The Cincinnati Gas & Electric Company, PSI
Energy, Inc. and The Union Light, Heat and Power Company shall maintain its
utility headquarters in its present location.
(c) Charities. The parties agree that provision of
charitable contributions and community support in their respective service
areas serves a number of their important corporate goals. During the two-year
period immediately following the Cinergy Effective Time, the Company and its
subsidiaries taken as a whole intend to continue to provide charitable
contributions and community support within the service areas of the parties
and each of their respective subsidiaries in each service area at levels
substantially comparable to the levels of charitable contributions and
community support provided, directly or indirectly, by Duke and Cinergy within
their respective service areas during the two-year period immediately prior to
the Effective Time.
Section 1.12 Transition Committee. The parties shall create
a special transition committee (the "Transition Committee") that shall be
co-chaired by the Chief Executive Officer of Duke and the Chief Executive
Officer of Cinergy and shall be composed of such chief executive officers and
two other designees of Duke and one other designee of Cinergy. After the date
hereof and prior to the Effective Time, the Transition Committee shall examine
various alternatives regarding the manner in which to best organize and manage
the business of the Company after the Cinergy Effective Time, subject to
applicable law.
ARTICLE II
Effects of the Mergers on the Capital Stock of the Constituent Corporations;
Exchange of Certificates
Section 2.01 Effect on Capital Stock. (a) At the Duke
Effective Time, by virtue of the Duke Merger and without any action on the
part of the holder of any shares of Duke Common Stock or any capital stock of
Merger Sub A:
(i) Cancellation of Certain Duke Common Stock.
Each share of Duke Common Stock that is owned by Duke, Cinergy or the
Company shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefore.
(ii) Conversion of Duke Common Stock. Subject to
Section 2.02(e), each issued and outstanding share of Duke Common Stock
(other than shares to be canceled in accordance with Section 2.01(a)(i)
and Dissenting Shares (as defined in Section 2.03)) shall be converted
into the right to receive 1 (the "Duke Ratio") fully paid and
nonassessable share of Company Common Stock (such aggregate amount, the
"Duke Merger Consideration"). As of the Duke Effective Time, all such
shares of Duke Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Duke Common Stock
shall cease to have any rights with respect thereto, except the right to
receive the shares of Company Common Stock (and cash in lieu of
fractional shares of Company Common Stock) to be issued or paid in
consideration therefore upon the surrender of such certificate in
accordance with Section 2.02, without interest and the right to receive
dividends and other distributions in accordance with Section 2.02.
(iii) Conversion of Merger Sub A Common Stock. The
aggregate of all shares of the capital stock of Merger Sub A issued and
outstanding immediately prior to the Duke Effective Time (of which, as of
the date of this Agreement, 100 shares of common stock, par value $.01
per share, are issued and outstanding, each entitling the holder thereof
to vote on the approval of this Agreement) shall be converted into 100
shares of Surviving Duke Common Stock.
(b) At the Cinergy Effective Time, by virtue of
the Cinergy Merger and without any action on the part of any holder of
Cinergy Common Stock or any capital stock of Merger Sub B:
(i) Cancellation of Certain Cinergy Common Stock.
Each share of Cinergy Common Stock that is owned by Cinergy, Duke or the
Company shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefore.
(ii) Conversion of Cinergy Common Stock. Subject
to Section 2.02(e), each issued and outstanding share of Cinergy Common
Stock (other than shares to be canceled in accordance with Section
2.01(b)(i)) shall be converted into the right to receive 1.56 (the
"Cinergy Ratio") fully paid and nonassessable shares of Company Common
Stock (such aggregate amount, the "Cinergy Merger Consideration," and,
together with the Duke Merger Consideration, the "Merger Consideration").
As of the Cinergy Effective Time, all such shares of Cinergy Common Stock
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Cinergy Common Stock shall cease to have
any rights with respect thereto, except the right to receive the shares
of Company Common Stock (and cash in lieu of fractional shares of Company
Common Stock) to be issued or paid in consideration therefore upon the
surrender of such certificate in accordance with Section 2.02, without
interest and the right to receive dividends and other distributions in
accordance with Section 2.02.
(iii) Conversion of Merger Sub B Common Stock. The
aggregate of all shares of the capital stock of Merger Sub B issued and
outstanding immediately prior to the Cinergy Effective Time (of which, as
of the date of this Agreement, 100 shares of common stock, without par
value, are issued and outstanding, each entitling the holder thereof to
vote on the approval of this Agreement) shall be converted into the right
to receive 100 shares of Surviving Cinergy Common Stock.
(c) Duke Preferred Stock and Preferred Stock A.
Prior to the Duke Effective Time, each issued and outstanding share of
Preferred Stock, par value $100 per share ("Duke Preferred Stock"), of
Duke and each issued outstanding share of Preferred Stock A, par value
$25 per share ("Duke Preferred Stock A"), of Duke shall be redeemed in
accordance with Section 4.07.
(d) Exchangeable Shares of Duke Energy Canada
Exchangeco, Inc. As of the Duke Effective Time, each issued and
outstanding exchangeable share (the "Exchangeable Shares") of Duke Energy
Canada Exchangeco, Inc. ("Exchangeco"), a corporation incorporated under
the laws of Canada and an indirect subsidiary of Duke, shall become
exchangeable for one share of Company Common Stock and one share of
Company Common Stock shall be issuable upon a redemption or retraction of
each Exchangeable Share, in each case in accordance with the terms of the
provisions relating to the Exchangeable Shares as of immediately prior to
the Duke Effective Time. In addition, following the Effective Time, the
Company shall execute such assignment and assumption agreements and
documentation as are necessary to cause the Company to be bound by the
terms and provisions of the Support Agreement among Duke, Duke Canada
Call Co. and Exchangeco dated March 14, 2002, and the Voting and Exchange
Trust Agreement among Duke, Exchangeco and Computershare Trust Company of
Canada, dated March 14, 2002.
Section 2.02 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the
Company shall enter into an agreement with such bank or trust company as may
be mutually agreed by Duke and Cinergy (the "Exchange Agent"), which agreement
shall provide that the Company shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of shares of Duke Common Stock
and Cinergy Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates representing the shares of Company
Common Stock (such shares of Company Common Stock, together with any dividends
or distributions with respect thereto with a record date after the Cinergy
Effective Time, being hereinafter referred to as the "Exchange Fund")
representing the Merger Consideration.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Duke Common Stock or
Cinergy Common Stock (the "Certificates") whose shares were converted into the
right to receive shares of Company Common Stock pursuant to Section 2.01, (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Duke and Cinergy may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for
certificates representing whole shares of Company Common Stock, cash in lieu
of fractional shares pursuant to Section 2.02(e) and any dividends or other
distributions payable pursuant to Section 2.02(c). Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefore a certificate representing that
number of whole shares of Company Common Stock that such holder has the right
to receive pursuant to the provisions of this Article II, certain dividends or
other distributions in accordance with Section 2.02(c) and cash in lieu of any
fractional share of Company Common Stock in accordance with Section 2.02(e),
and the Certificate so surrendered shall forthwith be canceled. In the event
of a transfer of ownership of Duke Common Stock or Cinergy Common Stock that
is not registered in the transfer records of Duke or Cinergy, as the case may
be, a certificate representing the proper number of shares of Company Common
Stock may be issued to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such issuance shall pay any transfer or other taxes required by reason of the
issuance of shares of Company Common Stock to a person other than the
registered holder of such Certificate or establish to the satisfaction of the
Company that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any
time after the Duke Effective Time or the Cinergy Effective Time, as the case
may be, to represent only the right to receive upon such surrender the Merger
Consideration, which the holder thereof has the right to receive in respect of
such Certificate pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.02(c) and cash
in lieu of any fractional share of Duke Common Stock or Cinergy Common Stock,
as the case may be, in accordance with Section 2.02(e). No interest shall be
paid or will accrue on the Merger Consideration or any cash payable to holders
of Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions with respect to Company Common Stock shall
be declared or paid with a record date on or after the Duke Effective Time and
on or prior to the Effective Time. No dividends or other distributions with
respect to Company Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Company Common Stock issuable hereunder in respect thereof and
no cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e), and all such dividends, other distributions and
cash in lieu of fractional shares of Company Common Stock shall be paid by the
Company to the Exchange Agent and shall be included in the Exchange Fund, in
each case until the surrender of such Certificate in accordance with this
Article II. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall be paid to the holder
of the certificate representing whole shares of Company Common Stock issued in
exchange therefore, without interest, (i) promptly after the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Company Common Stock and the amount of any cash payable in lieu of a
fractional share of Company Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent
to such surrender payable with respect to such whole shares of Company Common
Stock.
(d) No Further Ownership Rights in Duke Common Stock
or Cinergy Common Stock. All shares of Company Common Stock issued upon the
surrender for exchange of Certificates in accordance with the terms of this
Article II (including any cash paid pursuant to this Article II) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Duke Common Stock or Cinergy Common Stock, as the
case may be, theretofore represented by such Certificates, subject, however,
to Duke's and Cinergy's respective obligations to pay any dividends or make
any other distributions with a record date prior to the Duke Effective Time or
the Cinergy Effective Time, as the case may be, that may have been declared or
made by Duke or Cinergy, as the case may be, on such shares of Duke Common
Stock or Cinergy Common Stock that remain unpaid at the Duke Effective Time or
the Cinergy Effective Time, as the case may be, and there shall be no further
registration of transfers on the stock transfer books of Duke or Cinergy of
the shares of Duke Common Stock and Cinergy Common Stock, respectively, that
were outstanding immediately prior to the Duke Effective Time or the Cinergy
Effective Time, as the case may be. If, after the Duke Effective Time or the
Cinergy Effective Time, as the case may be, Certificates are presented to the
Company, Duke, Cinergy or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of
the Company shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or
to any rights of a shareholder of the Company.
(ii) As promptly as practicable following the
Cinergy Effective Time, the Exchange Agent shall determine the excess of
(A) the number of whole shares of Company Common Stock delivered to the
Exchange Agent by the Company pursuant to Section 2.02(a) representing
the Cinergy Merger Consideration over (B) the aggregate number of whole
shares of Company Common Stock to be distributed to former holders of
Cinergy Common Stock pursuant to Section 2.02(b) (such excess being
herein called the "Cinergy Excess Shares"). Following the Cinergy
Effective Time, the Exchange Agent shall, on behalf of former
shareholders of Cinergy, sell the Cinergy Excess Shares at
then-prevailing prices on the New York Stock Exchange, Inc. ("NYSE"), all
in the manner provided in Section 2.02(e)(iii). As promptly as
practicable following the Duke Effective Time, the Exchange Agent shall
determine the excess, if any, of (A) the number of whole shares of
Company Common Stock delivered to the Exchange Agent by the Company
pursuant to Section 2.02(a) representing the Duke Merger Consideration
over (B) the aggregate number of whole shares of Company Common Stock to
be distributed to former holders of Duke Common Stock pursuant to Section
2.02(b) (such excess being herein called the "Duke Excess Shares").
Following the Duke Effective Time, the Exchange Agent shall, on behalf of
former shareholders of Duke, sell the Duke Excess Shares at
then-prevailing prices on the NYSE, all in the manner provided in Section
2.02(e)(iv).
(iii) The sale of the Cinergy Excess Shares by the
Exchange Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent
practicable. The Exchange Agent shall use reasonable efforts to complete
the sale of the Cinergy Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is practicable consistent
with obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have been
distributed to the holders of Certificates formerly representing Cinergy
Common Stock, the Exchange Agent shall hold such proceeds in trust for
holders of Cinergy Common Stock (the "Cinergy Common Shares Trust").
Cinergy shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent incurred in connection with such sale of the Cinergy
Excess Shares. The Exchange Agent shall determine the portion of the
Cinergy Common Shares Trust to which each former holder of Cinergy Common
Stock is entitled, if any, by multiplying the amount of the aggregate net
proceeds composing the Cinergy Common Shares Trust by a fraction, the
numerator of which is the amount of the fractional share interest to
which such former holder of Cinergy Common Stock is entitled (after
taking into account all shares of Cinergy Common Stock held at the
Cinergy Effective Time by such holder) and the denominator of which is
the aggregate amount of fractional share interests to which all former
holders of Cinergy Common Stock are entitled.
(iv) The sale of the Duke Excess Shares by the
Exchange Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent
practicable. The Exchange Agent shall use reasonable efforts to complete
the sale of the Duke Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is practicable consistent
with obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have been
distributed to the holders of Certificates formerly representing Duke
Common Stock, the Exchange Agent shall hold such proceeds in trust for
holders of Duke Common Stock (the "Duke Common Shares Trust"). Duke shall
pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent
incurred in connection with such sale of the Duke Excess Shares. The
Exchange Agent shall determine the portion of the Duke Common Shares
Trust to which each former holder of Duke Common Stock is entitled, if
any, by multiplying the amount of the aggregate net proceeds composing
the Duke Common Shares Trust by a fraction, the numerator of which is the
amount of the fractional share interest to which such former holder of
Duke Common Stock is entitled (after taking into account all shares of
Duke Common Stock held at the Duke Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share
interests to which all former holders of Duke Common Stock are entitled.
(v) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Certificates
formerly representing Duke Common Stock or Cinergy Common Stock, as the
case may be, with respect to any fractional share interests, the Exchange
Agent shall make available such amounts to such holders of Certificates
formerly representing Duke Common Stock or Cinergy Common Stock, as the
case may be, subject to and in accordance with the terms of Section
2.02(c).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the holders of the Certificates
for six months after the Effective Time shall be delivered to the Company,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Article II shall thereafter look only to the Company for
payment of their claim for Merger Consideration, any dividends or
distributions with respect to Company Common Stock and any cash in lieu of
fractional shares of Company Common Stock.
(g) No Liability. None of the Company, Duke, Cinergy
or the Exchange Agent or any of their respective directors, officers,
employees and agents shall be liable to any person in respect of any shares of
Company Common Stock, any dividends or distributions with respect thereto, any
cash in lieu of fractional shares of Company Common Stock or any cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to two years after the Cinergy Effective
Time (or immediately prior to such earlier date on which any Cinergy Merger
Consideration, any dividends or distributions payable to the holder of such
Certificate or any cash payable to the holder of such Certificate formerly
representing Cinergy Common Stock pursuant to this Article II, would otherwise
escheat to or become the property of any Governmental Authority (as defined in
Section 3.01(d)), any such Cinergy Merger Consideration, dividends or
distributions in respect of such Certificate or such cash shall, to the extent
permitted by applicable law, become the property of the Company, free and
clear of all claims or interest of any person previously entitled thereto. If
any Certificate shall not have been surrendered prior to two years after the
Duke Effective Time (or immediately prior to such earlier date on which any
Duke Merger Consideration, any dividends or distributions payable to the
holder of such Certificate or any cash payable to the holder of such
Certificate formerly representing Duke Common Stock pursuant to this Article
II, would otherwise escheat to or become the property of any Governmental
Authority), any such Duke Merger Consideration, dividends or distributions in
respect of such Certificate or such cash shall, to the extent permitted by
applicable law, become the property of the Company, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as directed by the
Company, on a daily basis. Any interest and other income resulting from such
investments shall be paid to the Company.
(i) Withholding Rights. The Company and the Exchange
Agent shall be entitled to deduct and withhold from any consideration payable
pursuant to this Agreement to any Person who was a holder of Duke Common Stock
or Cinergy Common Stock, as the case may be, immediately prior to the Duke
Effective Time or the Cinergy Effective Time, as the case may be, such amounts
as the Company and the Exchange Agent may be required to deduct and withhold
with respect to the making of such payment under the Code or any other
provision of applicable federal, state, local or foreign tax law. To the
extent that amounts are so withheld by the Company or the Exchange Agent and
duly paid over to the applicable taxing authority, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
Person to whom such consideration would otherwise have been paid.
(j) Lost, Stolen or Destroyed Certificates. If any
Certificate 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 the Company, the posting by such
person of a bond in such reasonable amount as the Company may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed Certificate, the Merger Consideration and, if applicable, any
unpaid dividends and distributions on shares of Company Common Stock
deliverable in respect thereof and any cash in lieu of fractional shares, in
each case pursuant to this Agreement.
(k) Adjustments to Prevent Dilution. In the event that
Duke changes the number of shares of Duke Common Stock or securities
convertible or exchangeable into or exercisable for shares of Duke Common
Stock, Cinergy changes the number of shares of Cinergy Common Stock or
securities convertible or exchangeable into or exercisable for shares of
Cinergy Common Stock, issued and outstanding prior to the Effective Time, or
the Company changes the number of shares of Company Common Stock or securities
convertible or exchangeable into or exercisable for shares of Company Common
Stock issued and outstanding after the Duke Effective Time and prior to the
Cinergy Effective Time, in each case as a result of a reclassification, stock
split (including a reverse stock split), stock dividend or distribution,
recapitalization, merger, subdivision, issuer tender or exchange offer, or
other similar transaction, except to the extent any of the foregoing actions
are expressly permitted by this Agreement, the Cinergy Ratio shall be
equitably adjusted.
(l) Uncertificated Shares. In the case of outstanding
shares of Cinergy Common Stock or Duke Common Stock that are not represented
by Certificates, the parties shall make such adjustments to this Section 2.02
as are necessary or appropriate to implement the same purpose and effect that
this Section 2.02 has with respect to shares of Cinergy Common Stock and Duke
Common Stock that are represented by Certificates.
Section 2.03 Dissenting Shares. Any holder of shares of Duke
Common Stock who shall have exercised rights to dissent with respect to the
Duke Merger in accordance with the NCBCA and who has properly exercised such
holder's rights to demand payment of the "fair value" of the holder's shares
of Duke Common Stock (the "Dissenting Shares") as provided in the NCBCA (the
"Dissenting Shareholder") shall thereafter have only such rights, if any, as
are provided a Dissenting Shareholder in accordance with the NCBCA and shall
have no rights to receive the Merger Consideration pursuant to Section 2.01
(provided, that nothing contained herein shall limit such Dissenting
Shareholder's rights to the payment of all declared and unpaid dividends on
Duke Common Stock); provided, however, that if a Dissenting Shareholder shall
fail to properly demand payment (in accordance with the NCBCA) or shall have
effectively withdrawn or lost such rights to relief as a Dissenting
Shareholder under the NCBCA, then such Dissenting Shareholder's Dissenting
Shares automatically shall cease to be Dissenting Shares and shall be
converted into and represent only the right to receive, upon surrender of the
Certificate representing the Dissenting Shares, the Merger Consideration
pursuant to Section 2.01 and declared and unpaid dividends or other
distributions as provided in Section 2.02(b) and Section 2.02(c). Duke shall
give Cinergy and the Company prompt notice of any demands received by Duke
prior to the Duke Effective Time, any attempted withdrawals of such demands
and any other instruments served pursuant to the NCBCA and received by Duke
relating to Duke's shareholders rights of dissent under the NCBCA, and Duke
and Cinergy shall cooperate with respect to all negotiations and proceedings
with respect to such demands.
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties of Cinergy.
Except as set forth in the letter dated the date of this Agreement and
delivered to Duke by Cinergy concurrently with the execution and delivery of
this Agreement (the "Cinergy Disclosure Letter") or, to the extent the
qualifying nature of such disclosure is readily apparent therefrom, as set
forth in the Cinergy SEC Reports (as defined in Section 3.01(e)) filed on or
after January 1, 2004 and prior to the date hereof, Cinergy represents and
warrants to Duke as follows:
(a) Organization and Qualification.
(i) Each of Cinergy and its subsidiaries is duly
organized, validly existing and in good standing (with respect to
jurisdictions that recognize the concept of good standing) under the laws
of its jurisdiction of organization and has full power and authority to
conduct its business as and to the extent now conducted and to own, use
and lease its assets and properties, except for such failures to be so
organized, existing and in good standing (with respect to jurisdictions
that recognize the concept of good standing) or to have such power and
authority that, individually or in the aggregate, have not had and could
not reasonably be expected to have a material adverse effect (as defined
in Section 8.03) on Cinergy. Each of Cinergy and its subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing
(with respect to jurisdictions that recognize the concept of good
standing) in each jurisdiction in which the ownership, use or leasing of
its assets and properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good
standing (with respect to jurisdictions that recognize the concept of
good standing) that, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect on
Cinergy. Section 3.01(a) of the Cinergy Disclosure Letter sets forth as
of the date of this Agreement the name and jurisdiction of organization
of each subsidiary of Cinergy.
(ii) Section 3.01(a) of the Cinergy Disclosure
Letter sets forth a description as of the date of this Agreement, of all
Cinergy Joint Ventures, including (x) the name of each such entity and
(y) a brief description of the principal line or lines of business
conducted by each such entity. For purposes of this Agreement:
(A) "Joint Venture" of a person or entity
shall mean any person that is not a subsidiary of such first person,
in which such first person or one or more of its subsidiaries owns
directly or indirectly an equity interest, other than equity
interests held for passive investment purposes that are less than 5%
of each class of the outstanding voting securities or equity
interests of such second person;
(B) "Cinergy Joint Venture" shall mean any
Joint Venture of Cinergy or any of its subsidiaries in which the net
book value as of December 31, 2004 of Cinergy's or its subsidiaries'
interest exceeds $35,000,000; and
(C) "Duke Joint Venture" shall mean any Joint
Venture of Duke or any of its subsidiaries in which the invested
capital associated with Duke's or its subsidiaries' interest exceeds
$100,000,000.
(iii) Except for interests in the subsidiaries of
Cinergy, the Cinergy Joint Ventures and interests acquired after the date
of this Agreement without violating any covenant or agreement set forth
herein. Cinergy does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any person, in which
the net book value as of December 31, 2004 of such interest individually
exceeds $35,000,000.
(b) Capital Stock.
(i) The authorized capital stock of Cinergy
consists of:
(A) 600,000,000 shares of Cinergy Common
Stock, of which 198,360,398 shares were issued and outstanding as of
May 6, 2005; and
(B) 10,000,000 shares of preferred stock, par
value $.01 per share, none of which were issued and outstanding as
of the date of this Agreement.
As of March 31, 2005, 138,862 shares of Cinergy Common Stock
were held in the treasury of Cinergy. As of the date of this Agreement,
5,837,978 shares of Cinergy Common Stock were subject to outstanding Cinergy
Employee Stock Options (as defined in Section 5.06(a)) and 6,914,109
additional shares of Cinergy Common Stock were reserved for issuance pursuant
to the Cinergy Corp. 1996 Long-Term Incentive Compensation Plan, Stock Option
Plan, Employee Stock Purchase and Savings Plan, UK Sharesave Scheme,
Retirement Plan for Directors, Directors' Deferred Compensation Plan,
Directors' Equity Compensation Plan and any other compensatory plan, program
or arrangement under which shares of Cinergy Common Stock are reserved for
issuance (collectively, the "Cinergy Employee Stock Option Plans"). All of the
issued and outstanding shares of Cinergy Common Stock are, and all shares
reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments or agreements pursuant to which they are
issuable, duly authorized, validly issued, fully paid and nonassessable.
Except as disclosed in this Section 3.01(b), as of the date of this Agreement
there are no outstanding subscriptions, options, warrants, rights (including
stock appreciation rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion or exchange
under any outstanding security, instrument or agreement (together, "Options"),
obligating Cinergy or any of its subsidiaries to issue or sell any shares of
capital stock of Cinergy or to grant, extend or enter into any Option with
respect thereto.
(ii) Except as permitted by this Agreement, all of
the outstanding shares of capital stock of each subsidiary of Cinergy are
duly authorized, validly issued, fully paid and nonassessable and are
owned, beneficially and of record, by Cinergy or a subsidiary, free and
clear of any liens, claims, mortgages, encumbrances, pledges, security
interests, equities and charges of any kind (each a "Lien"), except for
any of the foregoing that, individually or in the aggregate, have not had
and could not reasonably be expected to have a material adverse effect on
Cinergy. There are no (A) outstanding Options obligating Cinergy or any
of its subsidiaries to issue or sell any shares of capital stock of any
subsidiary of Cinergy or to grant, extend or enter into any such Option
or (B) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than Cinergy or
a subsidiary wholly-owned, directly or indirectly, by Cinergy with
respect to the voting of or the right to participate in dividends or
other earnings on any capital stock of any subsidiary of Cinergy.
(iii) Cinergy is a "registered holding company" as
defined under Section 2(a)(12) of the Public Utility Holding Company Act
of 1935, as amended (the "1935 Act").
(iv) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Cinergy or any of its
subsidiaries having the right to vote (or which are convertible into or
exercisable for securities having the right to vote) (collectively,
"Cinergy Voting Debt") on any matters on which Cinergy shareholders may
vote are issued or outstanding nor are there any outstanding Options
obligating Cinergy or any of its subsidiaries to issue or sell any
Cinergy Voting Debt or to grant, extend or enter into any Option with
respect thereto.
(c) Authority. Cinergy has full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder
and, subject to obtaining Cinergy Shareholder Approval (as defined in Section
3.01(p)), to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Cinergy and the consummation by
Cinergy of the transactions contemplated hereby have been duly and validly
adopted and approved by the Board of Directors of Cinergy, the Board of
Directors of Cinergy has recommended approval of this Agreement by the
shareholders of Cinergy and directed that this Agreement be submitted to the
shareholders of Cinergy for their approval, and no other corporate proceedings
on the part of Cinergy or its shareholders are necessary to authorize the
execution, delivery and performance of this Agreement by Cinergy and the
consummation by Cinergy of the Cinergy Merger and the other transactions
contemplated hereby, other than obtaining Cinergy Shareholder Approval. This
Agreement has been duly and validly executed and delivered by Cinergy and
constitutes a legal, valid and binding obligation of Cinergy enforceable
against Cinergy in accordance with its terms.
(d) No Conflicts; Approvals and Consents.
(i) The execution and delivery of this Agreement
by Cinergy do not, and the performance by Cinergy of its obligations
hereunder and the consummation of the Mergers and the other transactions
contemplated hereby will not, conflict with, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration
of, or result in the creation or imposition of any Lien upon any of the
assets or properties of Cinergy or any of its subsidiaries or any of the
Cinergy Joint Ventures under, any of the terms, conditions or provisions
of (A) the certificates or articles of incorporation or by-laws (or other
comparable organizational documents) of Cinergy or any of its
subsidiaries or any of the Cinergy Joint Ventures, or (B) subject to the
obtaining of Cinergy Shareholder Approval and the taking of the actions
described in paragraph (ii) of this Section 3.01(d) and obtaining the
Duke Required Statutory Approvals (as defined in Section 3.02(d)(ii)),
(x) any statute, law, rule, regulation or ordinance (together, "laws"),
or any judgment, order, writ or decree (together, "orders"), of any
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic, foreign or supranational (each, a
"Governmental Authority") applicable to Cinergy or any of its
subsidiaries or any of the Cinergy Joint Ventures or any of their
respective assets or properties, or (y) any note, bond, mortgage,
security agreement, agreement, indenture, franchise, concession,
contract, lease or other instrument to which Cinergy or any of its
subsidiaries or any of the Cinergy Joint Ventures is a party or by which
Cinergy or any of its subsidiaries or any of the Cinergy Joint Ventures
or any of their respective assets or properties is bound, excluding from
the foregoing clauses (x) and (y) such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Cinergy.
(ii) Except for (A) compliance with, and filings
under, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"); (B)
the filing with and, to the extent required, the declaration of
effectiveness by the Securities and Exchange Commission (the "SEC") of
(1) a proxy statement relating to the approval of this Agreement by
Cinergy's shareholders (such proxy statement, together with the proxy
statement relating to the approval of this Agreement by Duke's
shareholders, in each case as amended or supplemented from time to time,
the "Joint Proxy Statement") pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange
Act"), (2) the registration statement on Form S-4 prepared in connection
with the issuance of Company Common Stock in the Mergers (the "Form S-4")
and (3) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby;
(C) the filing of documents with various state securities authorities
that may be required in connection with the transactions contemplated
hereby; (D) such filings with and approvals of the NYSE to permit the
shares of Company Common Stock that are to be issued pursuant to Article
II to be listed on the NYSE; (E) the registration, consents, approvals
and notices required under the 1935 Act; (F) notice to, and the consent
and approval of, the Federal Energy Regulatory Commission (the "FERC")
under Section 203 of the Federal Power Act, as amended (the "Power Act"),
or an order under the Power Act disclaiming jurisdiction over the
transactions contemplated hereby; (G) the filing of an application to,
and consent and approval of, and issuance of any required licenses and
license amendments by, the Nuclear Regulatory Commission (the "NRC")
under the Atomic Energy Act of 1954, as amended (the "Atomic Energy
Act"); (H) the filing of the Cinergy Certificate of Merger and other
appropriate merger documents required by the DGCL with the Secretary of
State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Cinergy is qualified to do
business; (I) compliance with and such filings as may be required under
applicable Environmental Laws (as defined in Section 3.01(n)); (J) to the
extent required, notice to and the approval of (1) the Public Utilities
Commission of Ohio ("PUCO"), (2) the Indiana Utility Regulatory
Commission ("IURC"), (3) the Kentucky Public Service Commission ("KPSC"),
(4) the North Carolina Utilities Commission ("NCUC"), and (5) the Public
Service Commission of South Carolina ("PSCSC" and, collectively with
PUCO, IURC, KPSC, and NCUC, the "Applicable PSCs"); (K) required
pre-approvals (the "FCC Pre-Approvals") of license transfers with the
Federal Communications Commission (the "FCC"); (L) such other items as
disclosed in Section 3.01(d) of the Cinergy Disclosure Letter; and (M)
compliance with, and filings under, antitrust or competition laws of any
foreign jurisdiction, including the Competition Act (Canada), Investment
Canada Act and other applicable Canadian federal and provincial
regulatory requirements (the items set forth above in clauses (A) through
(H) and (J), collectively, the "Cinergy Required Statutory Approvals"),
no consent, approval, license, order or authorization ("Consents") or
action of, registration, declaration or filing with or notice to any
Governmental Authority is necessary or required to be obtained or made in
connection with the execution and delivery of this Agreement by Cinergy,
the performance by Cinergy of its obligations hereunder or the
consummation of the Mergers and the other transactions contemplated
hereby, other than such items that the failure to make or obtain, as the
case may be, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on Cinergy.
(e) SEC Reports, Financial Statements and Utility
Reports.
(i) Cinergy and its subsidiaries have filed each
form, report, schedule, registration statement, registration exemption,
if applicable, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) required to be filed
by Cinergy or any of its subsidiaries pursuant to the Securities Act of
1933, as amended, and the rules and regulations thereunder (the
"Securities Act") or the Exchange Act with the SEC since January 1, 2002
(as such documents have since the time of their filing been amended or
supplemented, the "Cinergy SEC Reports"). As of their respective dates,
after giving effect to any amendments or supplements thereto, the Cinergy
SEC Reports (A) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, if applicable, as
the case may be, and, to the extent in effect and applicable, the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 ("SOX"), and (B) did not 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 light of the circumstances under which they were made, not misleading.
(ii) Each of the principal executive officer of
Cinergy and the principal financial officer of Cinergy (or each former
principal executive officer of Cinergy and each former principal
financial officer of Cinergy, as applicable) has made all certifications
required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302
and 906 of SOX and the rules and regulations of the SEC promulgated
thereunder with respect to the Cinergy SEC Reports. For purposes of the
preceding sentence, "principal executive officer" and "principal
financial officer" shall have the meanings given to such terms in SOX.
Since the effectiveness of SOX, neither Cinergy nor any of its
subsidiaries has arranged any outstanding "extensions of credit" to
directors or executive officers within the meaning of Section 402 of SOX.
(iii) The audited consolidated financial
statements and unaudited interim consolidated financial statements
(including, in each case, the notes, if any, thereto) included in the
Cinergy SEC Reports (the "Cinergy Financial Statements") complied as to
form in all material respects with the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments that were not or are not
expected to be, individually or in the aggregate, materially adverse to
Cinergy) the consolidated financial position of Cinergy and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and cash flows for the
respective periods then ended.
(iv) All filings (other than immaterial filings)
required to be made by Cinergy or any of its subsidiaries since January
1, 2002, under the 1935 Act, the Power Act, the Communications Act of
1934 and applicable state laws and regulations, have been filed with the
SEC, the FERC, the Department of Energy (the "DOE"), the FCC or any
applicable state public utility commissions (including, to the extent
required, PUCO, IURC and KPSC), as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents,
exhibits, amendments and supplements appertaining thereto, including all
rates, tariffs, franchises, service agreements and related documents and
all such filings complied, as of their respective dates, with all
applicable requirements of the applicable statute and the rules and
regulations thereunder, except for filings the failure of which to make
or the failure of which to make in compliance with all applicable
requirements of the applicable statute and the rules and regulations
thereunder, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Cinergy.
(v) The management of Cinergy has (x) designed
disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Exchange Act), or caused such disclosure controls and procedures to be
designed under their supervision, to ensure that material information
relating to Cinergy, including its consolidated subsidiaries, is made
known to the management of Cinergy by others within those entities, and
(y) has disclosed, based on its most recent evaluation of internal
control over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act), to Cinergy's outside auditors and the audit committee of
the Board of Directors of Cinergy (A) all significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect
Cinergy's ability to record, process, summarize and report financial
information and (B) any fraud, whether or not material, that involves
management or other employees who have a significant role in Cinergy's
internal control over financial reporting. Since December 31, 2004, any
material change in internal control over financial reporting required to
be disclosed in any Cinergy SEC Report has been so disclosed.
(vi) Since December 31, 2004, (x) neither Cinergy
nor any of its subsidiaries nor, to the knowledge of the Executive
Officers (for the purposes of this Section 3.01(e)(vi), as such term is
defined in Section 3b-7 of the Exchange Act) of Cinergy, any director,
officer, employee, auditor, accountant or representative of Cinergy or
any of its subsidiaries has received or otherwise obtained knowledge of
any material complaint, allegation, assertion or claim, whether written
or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of Cinergy or any of its subsidiaries or their
respective internal accounting controls relating to periods after
December 31, 2004, including any material complaint, allegation,
assertion or claim that Cinergy or any of its subsidiaries has engaged in
questionable accounting or auditing practices (except for any of the
foregoing after the date hereof which have no reasonable basis), and (y)
to the knowledge of the Executive Officers of Cinergy, no attorney
representing Cinergy or any of its subsidiaries, whether or not employed
by Cinergy or any of its subsidiaries, has reported evidence of a
material violation of securities laws, breach of fiduciary duty or
similar violation, relating to periods after December 31, 2004, by
Cinergy or any of its officers, directors, employees or agents to the
Board of Directors of Cinergy or any committee thereof or to any director
or Executive Officer of Cinergy.
(f) Absence of Certain Changes or Events. Since
December 31, 2004, through the date hereof, there has not been any change,
event or development that, individually or in the aggregate, has had or could
reasonably be expected to have a material adverse effect on Cinergy.
(g) Absence of Undisclosed Liabilities. Except for
matters reflected or reserved against in the balance sheet (or notes thereto)
as of December 31, 2004, included in the Cinergy Financial Statements, as of
the date of this Agreement, neither Cinergy nor any of its subsidiaries has
any liabilities or obligations (whether absolute, accrued, contingent, fixed
or otherwise, or whether due or to become due) of any nature that would be
required by GAAP to be reflected on a consolidated balance sheet of Cinergy
and its consolidated subsidiaries (including the notes thereto), except
liabilities or obligations (i) that were incurred in the ordinary course of
business consistent with past practice since December 31, 2004, or (ii) that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Cinergy.
(h) Legal Proceedings. Except for environmental
matters, which are the subject of Section 3.01(n), as of the date of this
Agreement, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of Cinergy, threatened against, relating to or
affecting, nor to the knowledge of Cinergy are there any Governmental
Authority investigations or audits pending or threatened against, relating to
or affecting, Cinergy or any of its subsidiaries or any of the Cinergy Joint
Ventures or any of their respective assets and properties that, in each case,
individually or in the aggregate, have had or could reasonably be expected to
have a material adverse effect on Cinergy, and (ii) neither Cinergy nor any of
its subsidiaries is subject to any order of any Governmental Authority that,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on Cinergy.
(i) Information Supplied. None of the information
supplied or to be supplied by Cinergy for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) the Joint
Proxy Statement will, at the date it is first mailed to Cinergy's shareholders
or Duke's shareholders or at the time of the Cinergy Shareholders Meeting (as
defined in Section 5.01) or the Duke Shareholders Meeting (as defined in
Section 5.01), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Joint Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation is made by Cinergy
with respect to statements made or incorporated by reference therein based on
information supplied by or on behalf of Duke for inclusion or incorporation by
reference in the Joint Proxy Statement.
(j) Permits; Compliance with Laws and Orders. Cinergy,
its subsidiaries and the Cinergy Joint Ventures hold all permits, licenses,
certificates, authorizations and approvals of all Governmental Authorities
("Permits") necessary for the lawful conduct of their respective businesses,
except for failures to hold such Permits that, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Cinergy. Cinergy, its subsidiaries and the Cinergy
Joint Ventures are in compliance with the terms of their Permits, except
failures so to comply that, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect on Cinergy.
Cinergy, its subsidiaries and the Cinergy Joint Ventures are not in violation
of or default under any law or order of any Governmental Authority, except for
such violations or defaults that, individually or in the aggregate, have not
had and could not reasonably be expected to have a material adverse effect on
Cinergy. Cinergy is, and has been, in compliance in all material respects with
(i) the provisions of SOX applicable to it on or prior to the date hereof and
has implemented such programs and has taken all reasonable steps necessary to
ensure Cinergy's future compliance (not later than the relevant statutory and
regulatory deadlines therefore) with all provisions of SOX which shall become
applicable to Cinergy after the date hereof and (ii) the applicable listing
standards and corporate governance rules and regulations of the NYSE. This
Section 3.01(j) does not relate to matters with respect to taxes, such matters
being the subject of Section 3.01(k), Environmental Laws, such matters being
the subject of Section 3.01(n) and benefits plans, such matters being the
subject of Section 3.01(l).
(k) Taxes. Except as has not had, and could not
reasonably be expected to have, a material adverse effect on Cinergy:
(i) Each of Cinergy and its subsidiaries has
timely filed, or has caused to be timely filed on its behalf, all Tax
Returns (as defined below) required to be filed by it, and all such Tax
Returns are true, complete and accurate. All Taxes (as defined below)
shown to be due and owing on such Tax Returns have been timely paid.
(ii) The most recent financial statements
contained in the Cinergy SEC Reports filed prior to the date of this
Agreement reflect, in accordance with GAAP, an adequate reserve for all
Taxes payable by Cinergy and its subsidiaries for all taxable periods
through the date of such financial statements.
(iii) There is no audit, examination,
deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Taxes or Tax Return of Cinergy or its
subsidiaries, to the knowledge of Cinergy, neither Cinergy nor any of its
subsidiaries has received written notice of any claim made by a
governmental authority in a jurisdiction where Cinergy or any of its
subsidiaries, as applicable, does not file a Tax Return, that Cinergy or
such subsidiary is or may be subject to income taxation by that
jurisdiction, no deficiency with respect to any Taxes has been proposed,
asserted or assessed against Cinergy or any of its subsidiaries, and no
requests for waivers of the time to assess any Taxes are pending.
(iv) The federal income Tax Returns of Cinergy
and its subsidiaries have been examined by and settled with the Internal
Revenue Service ("IRS") (or the applicable statutes of limitation have
lapsed) for all years through 1990. All material assessments for Taxes
due with respect to such completed and settled examinations or any
concluded litigation have been fully paid.
(v) There are no outstanding written
agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes or deficiencies
against Cinergy or any of its subsidiaries, and no power of attorney
granted by either Cinergy or any of its subsidiaries with respect to any
Taxes is currently in force.
(vi) Neither Cinergy nor any of its
subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes imposed on or with respect to any individual or other
Person (other than (I) such agreements with customers, vendors, lessors
or the like entered into in the ordinary course of business and (II)
agreements with or among Cinergy or any of its subsidiaries), and neither
Cinergy nor any of its subsidiaries (A) has been a member of an
affiliated group (or similar state, local or foreign filing group) filing
a consolidated U.S. federal income Tax Return (other than the group the
common parent of which is Cinergy) or (B) has any liability for the Taxes
of any person (other than Cinergy or any of its subsidiaries) (I) under
Treasury Regulation ss. 1.1502-6 (or any similar provision of state,
local or foreign law), or (II) as a transferee or successor.
(vii) There are no material Liens for Taxes
(other than for current Taxes not yet due and payable) on the assets of
Cinergy and its subsidiaries.
(viii) Neither Cinergy nor any of its
subsidiaries has taken or agreed to take any action or knows of any
fact, agreement, plan or other circumstance that is reasonably
likely to prevent or impede either the Duke Reorganization from
qualifying as a reorganization under Section 368(a) of the Code or
the Cinergy Merger from qualifying as a reorganization under Section
368(a) of the Code.
For purposes of this Agreement:
"Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed
by any governmental authority, including, without limitation, taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
unemployment, social security, workers' compensation, or net worth, and taxes
or other charges in the nature of excise, withholding, ad valorem or value
added.
"Tax Return" means any return, report or similar statement
(including the schedules attached thereto) required to be filed with respect
to Taxes, including, without limitation, any information return, claim for
refund, amended return, or declaration of estimated Taxes.
(l) Employee Benefit Plans; ERISA.
(i) Except for such matters that, individually or
in the aggregate, have not had and could not reasonably be expected to
have a material adverse effect on Cinergy, (A) all Cinergy Employee
Benefit Plans (as defined below) are in compliance with all applicable
requirements of law, including ERISA (as defined below) and the Code, and
(B) there does not now exist, nor do any circumstances exist that could
result in, any Controlled Group Liability that would be a liability of
Cinergy or any of its subsidiaries following the Closing. The only
material employment agreements, severance agreements or severance
policies applicable to Cinergy or any of its subsidiaries are the
agreements and policies disclosed in Section 3.01(l)(i) of the Cinergy
Disclosure Letter.
(ii) As used herein:
(A) "Controlled Group Liability" means any and
all liabilities (i) under Title IV of ERISA, (ii) under Section 302
of ERISA, (iii) under Sections 412 and 4971 of the Code, and (iv) as
a result of a failure to comply with the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of
the Code.
(B) "Cinergy Employee Benefit Plan" means any
Plan entered into, established, maintained, sponsored, contributed
to or required to be contributed to by Cinergy or any of its
subsidiaries for the benefit of the current or former employees or
directors of Cinergy or any of its subsidiaries and existing on the
date of this Agreement or at any time subsequent thereto and, in the
case of a Plan (as defined below) that is subject to Part 3 of Title
I of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA"), Section
412 of the Code or Title IV of ERISA, at any time during the
five-year period preceding the date of this Agreement with respect
to which Cinergy or any of its subsidiaries has or could reasonably
be expected to have any present or future actual or contingent
liabilities;
(C) "Plan" means any employment, bonus,
incentive compensation, deferred compensation, long term incentive,
pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability, workmen's
compensation or other insurance, severance, separation, termination,
change of control or other benefit plan, agreement, practice,
policy, program, scheme or arrangement of any kind, whether written
or oral, including any "employee benefit plan" within the meaning of
Section 3(3) of ERISA; and
(iii) No event has occurred, and there exists no
condition or set of circumstances in connection with any Cinergy Employee
Benefit Plan, that has had or could reasonably be expected to have a
material adverse effect on Cinergy.
(iv) Section 3.01(l)(iv) of the Cinergy Disclosure
Letter identifies each Cinergy Employee Benefit Plan that provides, upon
the occurrence of a change in the ownership or effective control of
Cinergy or its subsidiaries or a change in the ownership of all or a
substantial portion of the assets of Cinergy or its subsidiaries, either
alone or upon the occurrence of any additional or subsequent events and
whether or not applicable to the transactions contemplated by this
Agreement, for (A) an acceleration of the time of payment of or vesting
in, or an increase in the amount of, compensation or benefits due any
current or former employee, director or officer of Cinergy or its
subsidiaries, (B) any forgiveness of indebtedness or obligation to fund
benefits with respect to any such employee, director or officer, or (C)
an entitlement of any such employee, director or officer to severance
pay, unemployment compensation or any other payment or other benefit.
(m) Labor Matters. As of the date hereof, neither
Cinergy nor any of its subsidiaries is a party to, bound by or in the process
of negotiating any collective bargaining agreement or other labor agreement
with any union or labor organization. As of the date of this Agreement, there
are no disputes, grievances or arbitrations pending or, to the knowledge of
Cinergy, threatened between Cinergy or any of its subsidiaries and any trade
union or other representatives of its employees and there is no charge or
complaint pending or threatened in writing against Cinergy or any of its
subsidiaries before the National Labor Relations Board (the "NLRB") or any
similar Governmental Authority, except in each case as, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Cinergy, and, to the knowledge of Cinergy, as of
the date of this Agreement, there are no material organizational efforts
presently being made involving any of the employees of Cinergy or any of its
subsidiaries. From December 31, 2002, to the date of this Agreement, there has
been no work stoppage, strike, slowdown or lockout by or affecting employees
of Cinergy or any of its subsidiaries and, to the knowledge of Cinergy, no
such action has been threatened in writing, except in each case as,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Cinergy. Except as, individually
or in the aggregate, has not had and could not reasonably be expected to have
a material adverse effect on Cinergy: (A) there are no litigations, lawsuits,
claims, charges, complaints, arbitrations, actions, investigations or
proceedings pending or, to the knowledge of Cinergy, threatened between or
involving Cinergy or any of its subsidiaries and any of their respective
current or former employees, independent contractors, applicants for
employment or classes of the foregoing; (B) Cinergy and its subsidiaries are
in compliance with all applicable laws, orders, agreements, contracts and
policies respecting employment and employment practices, including, without
limitation, all legal requirements respecting terms and conditions of
employment, equal opportunity, workplace health and safety, wages and hours,
child labor, immigration, discrimination, disability rights or benefits,
facility closures and layoffs, workers' compensation, labor relations,
employee leaves and unemployment insurance; and (C) since January 1, 2002,
neither Cinergy nor any of its subsidiaries has engaged in any "plant closing"
or "mass layoff", as defined in the Worker Adjustment Retraining and
Notification Act or any comparable state or local law (the "WARN Act"),
without complying with the notice requirements of such laws.
(n) Environmental Matters.
(i) Each of Cinergy, its subsidiaries and the
Cinergy Joint Ventures has been and is in compliance with all applicable
Environmental Laws (as hereinafter defined), except where the failure to
be in such compliance, individually or in the aggregate, has not had and
could not reasonably be expected to have a material adverse effect on
Cinergy.
(ii) Each of Cinergy, its subsidiaries and the
Cinergy Joint Ventures has obtained all environmental Permits
(collectively, the "Environmental Permits") necessary for the
construction of their facilities and the conduct of their operations as
of the date of this Agreement, as applicable, and all such Environmental
Permits are in good standing or, where applicable, a renewal application
has been timely filed and is pending agency approval, and Cinergy, its
subsidiaries and the Cinergy Joint Ventures are in compliance with all
terms and conditions of the Environmental Permits, except where the
failure to obtain such Environmental Permits, of such Permits to be in
good standing or, where applicable, of a renewal application to have been
timely filed and be pending or to be in such compliance, individually or
in the aggregate, has not had and could not reasonably be expected to
have a material adverse effect on Cinergy.
(iii) There is no Environmental Claim (as
hereinafter defined) pending:
(A) against Cinergy or any of its subsidiaries
or any of the Cinergy Joint Ventures;
(B) to the knowledge of Cinergy, against any
person or entity whose liability for such Environmental Claim has
been retained or assumed either contractually or by operation of law
by Cinergy or any of its subsidiaries or any of the Cinergy Joint
Ventures; or
(C) against any real or personal property or
operations that Cinergy or any of its subsidiaries or any of the
Cinergy Joint Ventures owns, leases or manages, in whole or in part,
or, to the knowledge of Cinergy, formerly owned, leased or managed,
in whole or in part,
except in the case of clause (A), (B) or (C) for such Environmental
Claims that, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect
on Cinergy.
(iv) To the knowledge of Cinergy, there have not
been any Releases (as hereinafter defined) of any Hazardous Material (as
hereinafter defined) that would be reasonably likely to form the basis of
any Environmental Claim against Cinergy or any of its subsidiaries or any
of the Cinergy Joint Ventures, in each case, except for such Releases
that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Cinergy.
(v) As used in this Section 3.01(n) and in Section
3.02(n):
(A) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, orders,
demands, demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance, liability or violation
(written or oral) by any person or entity (including any
Governmental Authority) alleging potential liability (including
potential responsibility or liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or
resulting from
(1) the presence or Release into the environment of
any Hazardous Materials at any location;
(2) circumstances forming the basis of any actual
or alleged violation of, or liability under, any Environmental Law
or Environmental Permit; or
(3) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from the presence or Release of, or
exposure to, any Hazardous Materials;
(B) "Environmental Laws" means all domestic or
foreign Federal, state and local laws, principles of common law and
orders relating to pollution, the environment (including ambient
air, surface water, groundwater, land surface or subsurface strata)
or protection of human health as it relates to the environment
including laws relating to the presence or Release of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of, or exposure to, Hazardous Materials;
(C) "Hazardous Materials" means (a) any
petroleum or petroleum products, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam
insulation, and polychlorinated biphenyls; and (b) any chemical,
material, substance or waste that is now prohibited, limited or
regulated under any Environmental Law; and
(D) "Release" means any actual or threatened
release, spill, emission, leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the atmosphere,
soil, surface water, groundwater or property.
(o) No Ownership of Nuclear Power Plants. None of
Cinergy, any of its subsidiaries or any Cinergy Joint Venture owns, directly
or indirectly, any interest in any nuclear generation station or manages or
operates any nuclear generation station.
(p) Vote Required. Assuming the accuracy of the
representation and warranty contained in Section 3.02(r), the affirmative vote
of the holders of record of at least a majority of the outstanding shares of
Cinergy Common Stock, with respect to the approval of this Agreement (the
"Cinergy Shareholder Approval"), is the only vote of the holders of any class
or series of the capital stock of Cinergy or its subsidiaries required to
approve this Agreement, the Cinergy Merger and the other transactions
contemplated hereby.
(q) Opinion of Financial Advisor. Cinergy has received
the opinion of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, dated the
date of this Agreement, to the effect that, as of the date of this Agreement,
the Cinergy Exchange Ratio is fair from a financial point of view to the
holders of Cinergy Common Stock.
(r) Ownership of Duke Capital Stock. Neither Cinergy
nor any of its subsidiaries or other affiliates beneficially owns any shares
of Duke capital stock.
(s) Section 203 of the DGCL Not Applicable; Other
Statutes. Cinergy has taken all necessary actions, if any, so that the
provisions of Section 203 of the DGCL will not, before the termination of this
Agreement, apply to this Agreement, the Cinergy Merger or the other
transactions contemplated hereby. No "fair price", "merger moratorium",
"control share acquisition", or other anti-takeover or similar statute or
regulation applies or purports to apply to this Agreement, the Cinergy Merger
or the other transactions contemplated hereby.
(t) Joint Venture Representations. Each representation
or warranty made by Cinergy in this Section 3.01 relating to a Cinergy Joint
Venture that is neither operated nor managed by Cinergy or a Cinergy
subsidiary shall be deemed made only to the knowledge of Cinergy.
(u) Insurance. Except for failures to maintain
insurance or self-insurance that, individually or in the aggregate, have not
had and could not reasonably be expected to have a material adverse effect on
Cinergy, from January 1, 2004, through the date of this Agreement, each of
Cinergy and its subsidiaries has been continuously insured with financially
responsible insurers or has self-insured, in each case in such amounts and
with respect to such risks and losses as are customary for companies in the
United States conducting the business conducted by Cinergy and its
subsidiaries during such time period. Neither Cinergy nor any of its
subsidiaries has received any notice of cancellation or termination with
respect to any insurance policy of Cinergy or any of its subsidiaries, except
with respect to any cancellation or termination that, individually or in the
aggregate, has not had and could not reasonably be expected to have a material
adverse effect on Cinergy.
(v) Trading. Cinergy has established risk parameters,
limits and guidelines in compliance with the risk management policy approved
by Cinergy's Board of Directors (the "Cinergy Trading Guidelines") to restrict
the level of risk that Cinergy and its subsidiaries are authorized to take
with respect to, among other things, the net position resulting from all
physical commodity transactions, exchange-traded futures and options
transactions, over-the-counter transactions and derivatives thereof and
similar transactions (the "Net Cinergy Position") and monitors compliance by
Cinergy and its subsidiaries with such risk parameters. Cinergy has provided
the Cinergy Trading Guidelines to Duke prior to the date of this Agreement. As
of the date of this Agreement, (i) the Net Cinergy Position is within the risk
parameters that are set forth in the Cinergy Trading Guidelines and (ii) the
exposure of Cinergy and its subsidiaries with respect to the Net Cinergy
Position resulting from all such transactions is not material to Cinergy and
its subsidiaries taken as a whole. From December 31, 2004 to the date of this
Agreement, neither Cinergy nor any of its subsidiaries has, in accordance with
its ▇▇▇▇ to market accounting policies, experienced an aggregate net loss in
its trading and related operations that would be material to Cinergy and its
subsidiaries taken as a whole.
Section 3.02 Representations and Warranties of Duke. Except
as set forth in the letter dated the date of this Agreement and delivered to
Cinergy by Duke concurrently with the execution and delivery of this Agreement
(the "Duke Disclosure Letter") or, to the extent the qualifying nature of such
disclosure is readily apparent therefrom, as set forth in the Duke SEC Reports
(as defined in Section 3.02(e)) filed on or after January 1, 2004 and prior to
the date hereof, Duke represents and warrants to Cinergy as follows:
(a) Organization and Qualification.
(i) Each of Duke and its subsidiaries is duly
organized, validly existing and in good standing (with respect to
jurisdictions that recognize the concept of good standing) under the laws
of its jurisdiction of organization and has full power and authority to
conduct its business as and to the extent now conducted and to own, use
and lease its assets and properties, except for such failures to be so
organized, existing and in good standing (with respect to jurisdictions
that recognize the concept of good standing) or to have such power and
authority that, individually or in the aggregate, have not had and could
not be reasonably expected to have a material adverse effect (as defined
in Section 8.03) on Duke. Each of Duke and its subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing
(with respect to jurisdictions that recognize the concept of good
standing) in each jurisdiction in which the ownership, use or leasing of
its assets and properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good
standing (with respect to jurisdictions that recognize the concept of
good standing) that, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect on
Duke. Section 3.02(a) of the Duke Disclosure Letter sets forth as of the
date of this Agreement the name and jurisdiction of organization of each
subsidiary of Duke. Each of the Company, Merger Sub A and Merger Sub B is
a newly formed corporation and has engaged in no activities except as
contemplated by this Agreement.
(ii) Section 3.02(a) of the Duke Disclosure Letter
sets forth a description as of the date of this Agreement, of all Duke
Joint Ventures, including (x) the name of each such entity and (y) a
brief description of the principal line or lines of business conducted by
each such entity.
(iii) Except for interests in the subsidiaries of
Duke, the Duke Joint Ventures and interests acquired after the date of
this Agreement without violating any covenant or agreement set forth
herein, Duke does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any person, in which
the invested capital associated with such interest individually as of the
date of this Agreement exceeds $100,000,000.
(b) Capital Stock.
(i) The authorized capital stock of Duke consists
of:
(A) 2,000,000,000 shares of Duke Common Stock,
of which 926,431,621 shares were outstanding as of the close of
business on May 6, 2005;
(B) 1,500,000 shares of Preference Stock, par
value $100 per share ("Duke Preference Stock"), none of which were
outstanding as of the date of this Agreement;
(C) 20,000,000 shares of Serial Preferred
Stock, no par value, none of which were outstanding as of the date
of this Agreement;
(D) 12,500,000 shares of Duke Preferred Stock,
of which 1,234,984 shares were outstanding as of the date of this
Agreement, issued in the following series:
(1) 175,000 shares of 4.5% Cumulative Preferred Stock,
Series C;
(2) 300,000 shares of 7.85% Cumulative Preferred Stock,
Series S;
(3) 249,989 shares of 7.0% Cumulative Preferred Stock,
Series W; and
(4) 299,995 shares of 7.04% Cumulative Preferred Stock,
Series Y; and
(E) 10,000,000 shares of Duke Preferred Stock A, of which
1,257,185 shares were outstanding as of the date of this Agreement,
issued as 6.375% Cumulative Preferred Stock A.
As of the date of this Agreement, no shares of Duke Common Stock are held in
the treasury of Duke. As of the date of this Agreement, (x) 1,500,000 shares
of Duke Preference Stock are designated Series A Participating Preference
Stock (the "Duke Series A Preference Stock") and are reserved for issuance in
accordance with the Rights Agreement dated as of December 17, 1998, as
amended, by and between Duke and The Bank of New York, as Rights Agent,
pursuant to which Duke has issued rights (the "Duke Rights") to purchase such
shares of Duke Series A Preference Stock and (y) 26,635,301 shares of Duke
Common Stock were subject to outstanding Duke Employee Stock Options (as
defined in Section 5.06(b)), and 24,294,199 additional shares of Duke Common
Stock were reserved for issuance pursuant to the Duke Power Company Stock
Incentive Plan and the Duke 1998 Long-Term Incentive Plan and any other
compensatory plan, program or arrangement under which shares of Duke Common
Stock are reserved for issuance (collectively, the "Duke Option Plans"). All
of the issued and outstanding shares of Duke Common Stock are, and all shares
reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments or agreements pursuant to which they are
issuable, duly authorized, validly issued, fully paid and nonassessable.
Except as disclosed in this Section 3.02(b), on the date of this Agreement
there are no outstanding Options obligating Duke or any of its subsidiaries to
issue or sell any shares of capital stock of Duke or to grant, extend or enter
into any Option with respect thereto.
(ii) Except as permitted by this Agreement, all of
the outstanding shares of capital stock of each subsidiary of Duke are
duly authorized, validly issued, fully paid and nonassessable and are
owned, beneficially and of record, by Duke or a subsidiary, free and
clear of any Liens, except for any of the foregoing that, individually or
in the aggregate, have not had and could not reasonably be expected to
have a material adverse effect on Duke. All of the outstanding shares of
capital stock of the Company, Merger Sub A and Merger Sub B are duly
authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by Duke (in the case of shares of capital
stock of the Company) or by the Company (in the case of capital stock of
Merger Sub A and Merger Sub B). The shares of the Company owned by Duke,
and the shares of each of Merger Sub A and Merger Sub B owned by the
Company, are owned free and clear of any Lien. There are no (A)
outstanding Options obligating Duke or any of its subsidiaries to issue
or sell any shares of capital stock of any subsidiary of Duke or to
grant, extend or enter into any such Option or (B) voting trusts, proxies
or other commitments, understandings, restrictions or arrangements in
favor of any person other than Duke or a subsidiary wholly-owned,
directly or indirectly, by Duke with respect to the voting of or the
right to participate in dividends or other earnings on any capital stock
of any subsidiary of Duke.
(iii) As of the date of this Agreement, none of
the subsidiaries of Duke or the Duke Joint Ventures is a "public utility
company", a "holding company", a "subsidiary company" or an "affiliate"
of any holding company within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8) or 2(a)(11) of the 1935 Act, respectively. None of Duke, its
subsidiaries and the Duke Joint Ventures is registered under the 1935
Act.
(iv) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Duke or any of its
subsidiaries having the right to vote (or which are convertible into or
exercisable for securities having the right to vote) (collectively, "Duke
Voting Debt") on any matters on which Duke shareholders may vote are
issued or outstanding nor are there any outstanding Options obligating
Duke or any of its subsidiaries to issue or sell any Duke Voting Debt or
to grant, extend or enter into any Option with respect thereto.
(v) Each share of Company Common Stock to be
issued in either the Duke Merger or the Cinergy Merger shall be duly
authorized, validly issued, fully paid and nonassessable and free and
clear of any Liens.
(c) Authority. Duke has full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder
and, subject to obtaining Duke Shareholder Approval (as defined in Section
3.02(p)), to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Duke and the consummation by
Duke of the transactions contemplated hereby have been duly and validly
adopted and approved by the Board of Directors of Duke, the Board of Directors
of Duke has recommended approval of this Agreement by the shareholders of Duke
and directed that this Agreement be submitted to the shareholders of Duke for
their approval, and no other corporate proceedings on the part of Duke or its
shareholders are necessary to authorize the execution, delivery and
performance of this Agreement by Duke and the consummation by Duke of the Duke
Merger, the Duke Conversion, the Restructuring Transactions and the other
transactions contemplated hereby, other than obtaining Duke Shareholders
Approval. This Agreement has been duly and validly executed and delivered by
Duke and constitutes a legal, valid and binding obligation of Duke enforceable
against Duke in accordance with its terms.
(d) No Conflicts; Approvals and Consents.
(i) The execution and delivery of this Agreement
by Duke do not, and the performance by Duke of its obligations hereunder
and the consummation of the Mergers, the Duke Conversion, the
Restructuring Transactions and the other transactions contemplated hereby
will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result
in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in
the creation or imposition of any Lien upon any of the assets or
properties of Duke or any of its subsidiaries or any of the Duke Joint
Ventures under, any of the terms, conditions or provisions of (A) the
certificates or articles of incorporation or by-laws (or other comparable
organizational documents) of Duke or any of its subsidiaries or any of
the Duke Joint Ventures, or (B) subject to the obtaining of Duke
Shareholder Approval and the taking of the actions described in paragraph
(ii) of this Section 3.02(d) and obtaining the Cinergy Required Statutory
Approvals, (x) any laws or orders of any Governmental Authority
applicable to Duke or any of its subsidiaries or any of the Duke Joint
Ventures or any of their respective assets or properties, or (y) any
note, bond, mortgage, security agreement, agreement, indenture, license,
franchise, permit, concession, contract, lease or other instrument to
which Duke or any of its subsidiaries or any of the Duke Joint Ventures
is a party or by which Duke or any of its subsidiaries or any of the Duke
Joint Ventures or any of their respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) such items that,
individually or in the aggregate, have not had and could not reasonably
be expected to have a material adverse effect on Duke.
(ii) Except for (A) compliance with, and filings
under, the HSR Act; (B) the filing with, and to the extent required, the
declaration of effectiveness by, the SEC of (1) the Joint Proxy Statement
with the SEC pursuant to the Exchange Act, (2) the Form S-4 and (3) such
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of
documents with various state securities authorities that may be required
in connection with the transactions contemplated hereby; (D) such filings
with and approvals of the NYSE to permit the shares of Company Common
Stock that are to be issued pursuant to Article II to be listed on the
NYSE; (E) the registration, consents, approvals and notices required
under the 1935 Act; (F) notice to, and the consent and approval of, FERC
under Section 203 of the Power Act, or an order under the Power Act
disclaiming jurisdiction over the transactions contemplated hereby; (G)
the filing of an application to, and consent and approval of, and
issuance of any required licenses and license amendments by, the NRC
under the Atomic Energy Act; (H) the filing of the Duke Articles of
Merger, the Duke Articles of Conversion and other appropriate merger
documents required by the NCBCA and the NCLLCA with the Secretary of
State of the State of North Carolina and appropriate documents with the
relevant authorities of other states in which Duke is qualified to do
business; (I) compliance with and such filings as may be required under
applicable Environmental Laws; (J) to the extent required, notice to and
the approval of, the Applicable PSCs; (K) the FCC Pre-Approvals; (L) such
other items as disclosed in Section 3.02(d) of the Duke Disclosure
Letter; and (M) compliance with, and filings under, antitrust or
competition laws of any foreign jurisdiction, including the Competition
Act (Canada), Investment Canada Act, and other applicable Canadian
federal and provincial regulatory requirements (the items set forth above
in clauses (A) through (H) and (J) collectively, the "Duke Required
Statutory Approvals"), no Consents or action of, registration,
declaration or filing with or notice to any Governmental Authority is
necessary or required to be obtained or made in connection with the
execution and delivery of this Agreement by Duke, the performance by Duke
of its obligations hereunder or the consummation of the Mergers, the Duke
Conversion, the Restructuring Transactions and the other transactions
contemplated hereby, other than such items that the failure to make or
obtain, as the case may be, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on Duke.
(e) SEC Reports, Financial Statements and Utility Reports.
(i) Duke and its subsidiaries have filed each
form, report, schedule, registration statement, registration exemption,
if applicable, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) required to be filed
by Duke or any of its subsidiaries pursuant to the Securities Act or the
Exchange Act with the SEC since January 1, 2002 (as such documents have
since the time of their filing been amended or supplemented, the "Duke
SEC Reports"). As of their respective dates, after giving effect to any
amendments or supplements thereto, the Duke SEC Reports (A) complied as
to form in all material respects with the requirements of the Securities
Act or the Exchange Act, if applicable, as the case may be, and, to the
extent in effect applicable, SOX and (B) did not 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 light of the circumstances under which they were made, not misleading.
(ii) Each of the principal executive officer of
Duke and the principal financial officer of Duke (or each former
principal executive officer of Duke and each former principal financial
officer of Duke, as applicable) has made all certifications required by
Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of
SOX and the rules and regulations of the SEC promulgated thereunder with
respect to the Duke SEC Reports. For purposes of the preceding sentence,
"principal executive officer" and "principal financial officer" shall
have the meanings given to such terms in SOX. Since the effectiveness of
SOX, neither Duke nor any of its subsidiaries has arranged any
outstanding "extensions of credit" to directors or executive officers
within the meaning of Section 402 of SOX.
(iii) The audited consolidated financial
statements and unaudited interim consolidated financial statements
(including, in each case, the notes, if any, thereto) included in the
Duke SEC Reports (the "Duke Financial Statements") complied as to form in
all material respects with the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments that were not or are not
expected to be, individually or in the aggregate, materially adverse to
Duke) the consolidated financial position of Duke and its consolidated
subsidiaries as of the respective dates thereof and the consolidated
results of their operations and cash flows for the respective periods
then ended.
(iv) All filings (other than immaterial filings)
required to be made by Duke or any of its subsidiaries since January 1,
2002, under the 1935 Act, the Power Act, the Atomic Energy Act, the
Natural Gas Act, the Natural Gas Policy Act of 1978, the Communications
Act of 1934 and applicable state laws and regulations, have been filed
with the SEC, the FERC, the DOE, the NRC, the FCC or any applicable state
public utility commissions (including, to the extent required, NCUC and
PSCSC), as the case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, including all rates, tariffs,
franchises, service agreements and related documents and all such filings
complied, as of their respective dates, with all applicable requirements
of the applicable statute and the rules and regulations thereunder,
except for filings the failure of which to make or the failure of which
to make in compliance with all requirements of the applicable statute and
the rules and regulations thereunder, individually or in the aggregate,
have not had and could not reasonably be expected to have a material
adverse effect on Duke.
(v) The management of Duke has (x) designed
disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Exchange Act), or caused such disclosure controls and procedures to be
designed under their supervision to ensure that material information
relating to Duke, including its consolidated subsidiaries, is made known
to the management of Duke by others within those entities, and (y) has
disclosed, based on its most recent evaluation of internal control over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act),
to Duke's outside auditors and the audit committee of the Board of
Directors of Duke (A) all significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect Duke's ability
to record, process, summarize and report financial information and (B)
any fraud, whether or not material, that involves management or other
employees who have a significant role in Duke's internal control over
financial reporting. Since December 31, 2004, any material change in
internal control over financial reporting required to be disclosed in any
Duke SEC Report has been so disclosed.
(vi) Since December 31, 2004, (x) neither Duke nor
any of its subsidiaries nor, to the knowledge of the Executive Officers
(for the purpose of this Section 3.02(e)(vi), as such term is defined in
Section 3b-7 of the Exchange Act) of Duke, any director, officer,
employee, auditor, accountant or representative of Duke or any of its
subsidiaries has received or otherwise obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies
or methods of Duke or any of its subsidiaries or their respective
internal accounting controls relating to periods after December 31, 2004,
including any material complaint, allegation, assertion or claim that
Duke or any of its subsidiaries has engaged in questionable accounting or
auditing practices (except for any of the foregoing after the date hereof
which have no reasonable basis), and (y) to the knowledge of the
Executive Officers of Duke, no attorney representing Duke or any of its
subsidiaries, whether or not employed by Duke or any of its subsidiaries,
has reported evidence of a material violation of securities laws, breach
of fiduciary duty or similar violation, relating to periods after
December 31, 2004, by Duke or any of its officers, directors, employees
or agents to the Board of Directors of Duke or any committee thereof or,
to any director or Executive Officer of Duke.
(f) Absence of Certain Changes or Events. Since December 31,
2004 through the date hereof, there has not been any change, event or
development that, individually or in the aggregate, has had or could
reasonably be expected to have a material adverse effect on Duke.
(g) Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet (or notes thereto) as of
December 31, 2004, included in the Duke Financial Statements, as of the date
of this Agreement, neither Duke nor any of its subsidiaries has any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be
required by GAAP to be reflected on a consolidated balance sheet of Duke and
its consolidated subsidiaries (including the notes thereto), except
liabilities or obligations (i) that were incurred in the ordinary course of
business consistent with past practice since December 31, 2004, or (ii) that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Duke.
(h) Legal Proceedings. Except for environmental matters,
which are the subject of Section 3.02(n), as of the date of this Agreement,
(i) there are no actions, suits, arbitrations or proceedings pending or, to
the knowledge of Duke, threatened against, relating to or affecting, nor to
the knowledge of Duke are there any Governmental Authority investigations or
audits pending or threatened against, relating to or affecting, Duke or any of
its subsidiaries or any of the Duke Joint Ventures or any of their respective
assets and properties that, in each case, individually or in the aggregate,
have had or could reasonably be expected to have a material adverse effect on
Duke, and (ii) neither Duke nor any of its subsidiaries is subject to any
order of any Governmental Authority that, individually or in the aggregate,
has had or could reasonably be expected to have a material adverse effect on
Duke.
(i) Information Supplied. None of the information supplied
or to be supplied by Duke for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the Joint Proxy Statement will, at
the date it is first mailed to Cinergy's shareholders or Duke's shareholders
or at the time of the Cinergy Shareholders Meeting or the Duke Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Joint Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation is made by Duke with
respect to statements made or incorporated by reference therein based on
information supplied by or on behalf of Cinergy for inclusion or incorporation
by reference in the Joint Proxy Statement.
(j) Permits; Compliance with Laws and Orders. Duke, its
subsidiaries and the Duke Joint Ventures hold all Permits necessary for the
lawful conduct of their respective businesses, except for failures to hold
such Permits that, individually or in the aggregate, have not had and could
not reasonably be expected to have a material adverse effect on Duke. Duke,
its subsidiaries and the Duke Joint Ventures are in compliance with the terms
of their Permits, except failures so to comply that, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Duke. Duke, its subsidiaries and the Duke Joint
Ventures are not in violation of or default under any law or order of any
Governmental Authority, except for such violations or defaults that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Duke. Duke is, and has been, in
compliance in all material respects with (i) the provisions of SOX applicable
to it on or prior to the date hereof and has implemented such programs and has
taken all reasonable steps necessary to ensure Duke's future compliance (not
later than the relevant statutory and regulatory deadlines therefore) with all
provisions of SOX which shall become applicable to Duke after the date hereof
and (ii) the applicable listing standards and corporate governance rules and
regulations of the NYSE. This Section 3.02(j) does not relate to matters with
respect to taxes, such matters being the subject of Section 3.02(k),
Environmental Laws, such matters being the subject of Section 3.02(n),
benefits plans, such matters being the subject of Section 3.02(l), and nuclear
power plants, such matters being the subject of Section 3.02(o).
(k) Taxes. Except as has not had, and could not reasonably
be expected to have, a material adverse affect on Duke:
(i) Each of Duke and its subsidiaries has timely
filed, or has caused to be timely filed on its behalf, all Tax Returns
required to be filed by it, and all such Tax Returns are true, complete
and accurate. All Taxes shown to be due and owing on such Tax Returns
have been timely paid.
(ii) The most recent financial statements
contained in the Duke SEC Reports filed prior to the date of this
Agreement reflect, in accordance with GAAP, an adequate reserve for all
Taxes payable by Duke and its subsidiaries for all taxable periods
through the date of such financial statements.
(iii) There is no audit, examination, deficiency,
refund litigation, proposed adjustment or matter in controversy with
respect to any Taxes or Tax Return of Duke or its subsidiaries, to the
knowledge of Duke, neither Duke nor any of its subsidiaries has received
written notice of any claim made by a governmental authority in a
jurisdiction where Duke or any of its subsidiaries, as applicable, does
not file a Tax Return, that Duke or such subsidiary is or may be subject
to income taxation by that jurisdiction, no deficiency with respect to
any Taxes has been proposed, asserted or assessed against Duke or any of
its subsidiaries, and no requests for waivers of the time to assess any
Taxes are pending.
(iv) The federal income Tax Returns of Duke and
its subsidiaries have been examined by and settled with the IRS (or the
applicable statutes of limitation have lapsed) for all years through
1994. All material assessments for Taxes due with respect to such
completed and settled examinations or any concluded litigation have been
fully paid.
(v) There are no outstanding written agreements,
consents or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes or deficiencies against Duke or
any of its subsidiaries, and no power of attorney granted by either Duke
or any of its subsidiaries with respect to any Taxes is currently in
force.
(vi) Neither Duke nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing of Taxes
imposed on or with respect to any individual or other Person (other than
(I) such agreements with customers, vendors, lessors or the like entered
into in the ordinary course of business, and (II) agreements with or
among Duke or any of its subsidiaries), and neither Duke nor any of its
subsidiaries (A) has been a member of an affiliated group (or similar
state, local or foreign filing group) filing a consolidated U.S. federal
income Tax Return (other than the group the common parent of which is
Duke) or (B) has any liability for the Taxes of any person (other than
Duke or any of its subsidiaries) (I) under Treasury Regulation ss.
1.1502-6 (or any similar provision of state, local or foreign law), or
(II) as a transferee or successor.
(vii) There are no material Liens for Taxes (other
than for current Taxes not yet due and payable) on the assets of Duke and
its subsidiaries.
(viii) Neither Duke nor any of its subsidiaries
has taken or agreed to take any action or knows of any fact, agreement,
plan or other circumstance that is reasonably likely to prevent or impede
either the Duke Reorganization from qualifying as a reorganization under
Section 368(a) of the Code or the Cinergy Merger from qualifying as a
reorganization under Section 368(a) of the Code.
(l) Employee Benefit Plans; ERISA.
(i) Except for such matters that, individually or
in the aggregate, have not had and could not reasonably be expected to
have a material adverse effect on Duke, (A) all Duke Employee Benefit
Plans (as defined below) are in compliance with all applicable
requirements of law, including ERISA (as defined below) and the Code, and
(B) there does not now exist, nor do any circumstances exist that could
result in, any Controlled Group Liability that would be a liability of
Duke or any of its subsidiaries. The only material employment agreements,
severance agreements or severance policies applicable to Duke or any of
its subsidiaries are the agreements and policies disclosed in Section
3.02(l)(i) of the Duke Disclosure Letter.
(ii) As used herein:
(A) "Duke Employee Benefit Plan" means any
Plan entered into, established, maintained, sponsored, contributed
to or required to be contributed to by Duke or any of its
subsidiaries for the benefit of the current or former employees or
directors of Duke or any of its subsidiaries and existing on the
date of this Agreement or at any time subsequent thereto and in the
case of a Plan that is subject to Part 3 of Title I of ERISA,
Section 412 of the Code or Title IV of ERISA, at any time during the
five-year period preceding the date of this Agreement with respect
to which Duke or any of its subsidiaries has or could reasonably be
expected to have any present or future actual or contingent
liabilities;
(iii) No event has occurred, and there exists no
condition or set of circumstances in connection with any Duke Employee
Benefit Plan, that has had or could reasonably be expected to have a
material adverse effect on Duke.
(iv) Section 3.02(l)(iv) of the Duke Disclosure
Letter identifies each Duke Employee Benefit Plan that provides, upon the
occurrence of a change in the ownership or effective control of Duke or
its subsidiaries or a change in the ownership of all or a substantial
portion of the assets of Duke or its subsidiaries, either alone or upon
the occurrence of any additional or subsequent events and whether or not
applicable to the transactions contemplated by this Agreement, for (A) an
acceleration of the time of payment of or vesting in, or an increase in
the amount of, compensation or benefits due any current or former
employee, director or officer of Duke or its subsidiaries, (B) any
forgiveness of indebtedness or obligation to fund benefits with respect
to any such employee, director or officer, or (C) an entitlement of any
such employee, director or officer to severance pay, unemployment
compensation or any other payment or other benefit.
(m) Labor Matters. As of the date hereof, neither Duke nor
any of its subsidiaries is a party to, bound by or in the process of
negotiating any collective bargaining agreement or other labor agreement with
any union or labor organization. As of the date of this Agreement, there are
no disputes, grievances or arbitrations pending or, to the knowledge of Duke,
threatened between Duke or any of its subsidiaries and any trade union or
other representatives of its employees and there is no charge or complaint
pending or threatened in writing against Duke or any of its subsidiaries
before the NLRB or any similar Governmental Authority, except in each case as,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Duke, and, to the knowledge of
Duke, as of the date of this Agreement, there are no material organizational
efforts presently being made involving any of the employees of Duke or any of
its subsidiaries. From December 31, 2002, to the date of this Agreement, there
has been no work stoppage, strike, slowdown or lockout by or affecting
employees of Duke or any of its subsidiaries and, to the knowledge of Duke, no
such action has been threatened in writing, except in each case as,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Duke. Except as, individually or
in the aggregate, has not had and could not reasonably be expected to have a
material adverse effect on Duke: (A) there are no litigations, lawsuits,
claims, charges, complaints, arbitrations, actions, investigations or
proceedings pending or, to the knowledge of Duke, threatened between or
involving Duke or any of its subsidiaries and any of their respective current
or former employees, independent contractors, applicants for employment or
classes of the foregoing; (B) Duke and its subsidiaries are in compliance with
all applicable laws, orders, agreements, contracts and policies respecting
employment and employment practices, including, without limitation, all legal
requirements respecting terms and conditions of employment, equal opportunity,
workplace health and safety, wages and hours, child labor, immigration,
discrimination, disability rights or benefits, facility closures and layoffs,
workers' compensation, labor relations, employee leaves and unemployment
insurance; and (C) since January 1, 2002, neither Duke nor any of its
subsidiaries has engaged in any "plant closing" or "mass layoff", as defined
in the WARN Act, without complying with the notice requirements of such laws.
(n) Environmental Matters.
(i) Each of Duke, its subsidiaries and the Duke
Joint Ventures has been and is in compliance with all applicable
Environmental Laws, except where the failure to be in such compliance,
individually or in the aggregate, has not had and could not reasonably be
expected to have a material adverse effect on Duke.
(ii) Each of Duke, its subsidiaries and the Duke
Joint Ventures has obtained all Environmental Permits necessary for the
construction of their facilities and the conduct of their operations as
of the date of this Agreement, as applicable, and all such Environmental
Permits are in good standing or, where applicable, a renewal application
has been timely filed and is pending agency approval, and Duke, its
subsidiaries and the Duke Joint Ventures are in compliance with all terms
and conditions of the Environmental Permits, except where the failure to
obtain such Environmental Permits, of such Permits to be in good standing
or, where applicable, of a renewal application to have been timely filed
and be pending or to be in such compliance, individually or in the
aggregate, has not had and could not reasonably be expected to have a
material adverse effect on Duke.
(iii) There is no Environmental Claim pending
(A) against Duke or any of its subsidiaries or
any of the Duke Joint Ventures;
(B) to the knowledge of Duke, against any
person or entity whose liability for such Environmental Claim has
been retained or assumed either contractually or by operation of law
by Duke or any of its subsidiaries or any of the Duke Joint
Ventures; or
(C) against any real or personal property or
operations that Duke or any of its subsidiaries or any of the Duke
Joint Ventures owns, leases or manages, in whole or in part, or, to
the knowledge of Duke, formerly owned, leased or arranged, in whole
or in part,
except in the case of clause (A), (B) or (C) for such Environmental
Claims that, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect
on Duke.
(iv) To the knowledge of Duke, there have not been
any Releases of any Hazardous Material that would be reasonably likely to
form the basis of any Environmental Claim against Duke or any of its
subsidiaries or any of the Duke Joint Ventures, in each case, except for
such Releases that, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect on
Duke.
(o) Operations of Nuclear Power Plants. The
operations of the nuclear generation stations owned, in whole or part, by
Duke or its subsidiaries (collectively, the "Duke Nuclear Facilities")
are and have been conducted in compliance with all applicable laws and
Permits, except for such failures to comply that, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Duke. Each of the Duke Nuclear Facilities
maintains, and is in material compliance with, emergency plans designed
to respond to an unplanned Release therefrom of radioactive materials and
each such plan conforms with the requirements of applicable law in all
material respects. The plans for the decommissioning of each of the Duke
Nuclear Facilities and for the storage of spent nuclear fuel conform with
the requirements of applicable law in all material respects and, solely
with respect to the portion of the Duke Nuclear Facilities owned,
directly or indirectly, by Duke, are funded consistent with applicable
law. The operations of the Duke Nuclear Facilities are not the subject of
any outstanding notices of violation, any ongoing proceeding, NRC
Diagnostic Team Inspections or requests for information from the NRC or
any other agency with jurisdiction over such facility, except for such
notices or requests for information that, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Duke. No Duke Nuclear Facility is listed by
the NRC in the Unacceptable Performance column of the NRC Action Matrix,
as a part of NRC's Assessment of Licensee Performance. Liability
insurance to the full extent required by law for operating the Duke
Nuclear Facilities remains in full force and effect regarding such
facilities, except for failures to maintain such insurance in full force
and effect that, individually or in the aggregate, have not had and could
not reasonably be expected to have a material adverse effect on Duke.
(p) Vote Required. Assuming the accuracy of the
representation and warranty contained in Section 3.01(r), the affirmative vote
of the holders of record of at least a majority of the outstanding shares of
Duke Common Stock, with respect to the approval of this Agreement (the "Duke
Shareholder Approval"), is the only vote of the holders of any class or series
of the capital stock of Duke or its subsidiaries required to approve this
Agreement, the Duke Merger and the other transactions contemplated hereby.
(q) Opinion of Financial Advisor. Duke has received
the opinion of each of UBS Securities LLC and Lazard Freres & Co. LLC dated
the date of this Agreement, to the effect that, as of the date of this
Agreement, the Duke Exchange Ratio is fair from a financial point of view to
Duke.
(r) Ownership of Cinergy Capital Stock. Neither Duke
nor any of its subsidiaries or other affiliates beneficially owns any shares
of Cinergy capital stock.
(s) Duke Rights Agreement. As of the date of this
Agreement, Duke or the Board of Directors of Duke, as the case may be, has (i)
taken all necessary actions so that the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in a "Distribution Date" (as defined in the Duke Rights Agreement)
and (ii) amended the Duke Rights Agreement to render it inapplicable to this
Agreement, the Duke Merger and other transactions contemplated hereby.
(t) Articles 9 and 9A of the NCBCA Not Applicable.
Duke has taken all necessary actions, if any, so that the provisions of
Articles 9 and 9A of the NCBCA will not, before the termination of this
Agreement, apply to this Agreement, the Duke Merger or the other transactions
contemplated hereby. No "fair price", "merger moratorium", "control share
acquisition", or other anti-takeover or similar statute or regulation applies
or purports to apply to this Agreement, the Duke Merger or the other
transactions contemplated hereby.
(u) Joint Venture Representations. Each representation
or warranty made by Duke in this Section 3.02 relating to a Duke Joint Venture
that is neither operated nor managed by Duke or a Duke subsidiary shall be
deemed made only to the knowledge of Duke.
(v) Insurance. Except for failures to maintain
insurance or self-insurance that, individually or in the aggregate, have not
had and could not reasonably be expected to have a material adverse effect on
Duke, from January 1, 2004, through the date of this Agreement, each of Duke
and its subsidiaries has been continuously insured with financially
responsible insurers or has self-insured, in each case in such amounts and
with respect to such risks and losses as are customary for companies in the
United States conducting the business conducted by Duke and its subsidiaries
during such time period. Neither Duke nor any of its subsidiaries has received
any notice of cancellation or termination with respect to any insurance policy
of Duke or any of its subsidiaries, except with respect to any cancellation or
termination that, individually or in the aggregate, has not had and could not
reasonably be expected to have a material adverse effect on Duke.
(w) Trading. Duke has established risk parameters,
limits and guidelines in compliance with the risk management policy approved
by Duke's Board of Directors (the "Duke Trading Guidelines") to restrict the
level of risk that Duke and its subsidiaries are authorized to take with
respect to, among other things, the net position resulting from all physical
commodity transactions, exchange-traded futures and options transactions,
over-the-counter transactions and derivatives thereof and similar transactions
(the "Net Duke Position") and monitors compliance by Duke and its subsidiaries
with such risk parameters. Duke has provided the Duke Trading Guidelines to
Cinergy prior to the date of this Agreement. As of the date of this Agreement,
(i) the Net Duke Position is within the risk parameters that are set forth in
the Duke Trading Guidelines and (ii) the exposure of Duke and its subsidiaries
with respect to the Net Duke Position resulting from all such transactions is
not material to Duke and its subsidiaries taken as a whole. From December 31,
2004 to the date of this Agreement, neither Duke nor any of its subsidiaries
has, in accordance with its ▇▇▇▇ to market accounting policies, experienced an
aggregate net loss in its trading operations that would be material to Duke
and its subsidiaries taken as a whole.
ARTICLE IV
Covenants
Section 4.01 Covenants of Cinergy. From and after the date
of this Agreement until the Cinergy Effective Time, Cinergy covenants and
agrees as to itself and its subsidiaries that (except as expressly
contemplated or permitted by this Agreement, as set forth in Section 4.01 of
the Cinergy Disclosure Letter, for transactions (other than those set forth in
Section 4.01(d) to the extent relating to the capital stock of Cinergy) solely
involving Cinergy and one or more of its direct or indirect wholly-owned
subsidiaries or between two or more direct or indirect wholly-owned
subsidiaries of Cinergy, or to the extent that Duke shall otherwise previously
consent in writing, such consent not to be unreasonably withheld or delayed):
(a) Ordinary Course. Cinergy and each of its
subsidiaries shall conduct their businesses in all material respects in the
ordinary course of business consistent with past practice. Without limiting
the generality of the foregoing, Cinergy and its subsidiaries shall use
commercially reasonable efforts to preserve intact in all material respects
their present business organizations, to maintain in effect all existing
Permits, subject to prudent management of workforce and business needs, to
keep available the services of their key officers and employees, to maintain
their assets and properties in good working order and condition, ordinary wear
and tear excepted, to preserve their relationships with Governmental
Authorities, customers and suppliers and others having significant business
dealings with them and to comply in all material respects with all laws,
orders and Permits of all Governmental Authorities applicable to them.
(b) Charter Documents. Cinergy shall not amend or
propose to amend its certificate of incorporation or, other than in a manner
that would not materially restrict the operation of their businesses, its
by-laws or its subsidiaries' certificate of incorporation or by-laws (or other
comparable organizational documents).
(c) Dividends. Cinergy shall not, nor shall it permit
any of its subsidiaries to,
(i) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital stock or share
capital, except:
(A) that Cinergy may continue the declaration
and payment of regular quarterly cash dividends on Cinergy Common
Stock, not to exceed $0.48 per share, with usual record and payment
dates for such dividends in accordance with past dividend practice;
provided, that if the Cinergy Effective Time does not occur between
a record date and payment date of a regular quarterly dividend, a
special dividend may be declared and paid in respect of Cinergy
Common Stock with respect to the quarter in which the Cinergy
Effective Time occurs with a record date in such quarter and on or
prior to the date on which the Cinergy Effective Time occurs, which
dividend does not exceed an amount equal to the product of (i) a
fraction the (x) numerator of which is equal to the number of days
between the last payment date of a regular quarterly dividend and
the record date of such special dividend (excluding such last
payment date but including the record date of such special dividend)
and (y) the denominator of which is equal to the number of days
between the last payment date of a regular quarterly dividend and
the same calendar day in the third month after the month in which
such last payment date occurred (excluding such last payment date
but including such same calendar day), multiplied by (ii) the then
permitted quarterly dividend per share, and
(B) for the declaration and payment of
dividends by a direct or indirect wholly-owned subsidiary solely to
its parent, or by a direct or indirect partially owned subsidiary of
Cinergy (provided that Cinergy or the Cinergy subsidiary receives or
is to receive its proportionate share of such dividend or
distribution), and
(C) for the declaration and payment of regular
cash dividends with respect to preferred stock of Cinergy's
subsidiaries outstanding as of the date of the Agreement or
permitted to be issued under the terms of this Agreement, and
(D) to the extent advisable in the exercise of
the fiduciary duties of the Board of Directors of Cinergy, for the
declaration and payment of a customary share purchase rights plan,
provided, that, (1) Cinergy shall provide Duke prior notice of any
such declaration or payment and (2) in connection with any such
declaration or payment, the Board of Directors of Cinergy and
Cinergy shall cause (x) this Agreement and the transactions
contemplated hereby to not result in a "Distribution Date" (as such
term may be defined in any such share purchase rights plan) or
similar event under such share purchase rights plan and (y) any such
share purchase rights plan to be inapplicable in all respects to
this Agreement, the Duke Merger, the Cinergy Merger and the other
transactions contemplated hereby; and
(ii) split, combine, reclassify or take similar
action with respect to any of its capital stock or share capital or issue
or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or
comprised in its share capital,
(iii) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation
or a dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization, or
(iv) except as disclosed in Section 4.01(c)(iv) of
the Cinergy Disclosure Letter, directly or indirectly redeem, repurchase
or otherwise acquire any shares of its capital stock or any Option with
respect thereto except:
(A) in connection with intercompany purchases
of capital stock or share capital, or
(B) for the purpose of funding the Cinergy
Employee Stock Option Plans or employee stock ownership or dividend
reinvestment and stock purchase plans, or
(C) mandatory repurchases or redemptions of
preferred stock of Cinergy's subsidiaries in accordance with the
terms thereof.
(d) Share Issuances. Cinergy shall not, nor shall
it permit any of its subsidiaries to issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any Option with respect thereto (other than (i) the issuance of Cinergy Common
Stock upon the exercise of Cinergy Employee Stock Options outstanding as of
the date hereof or issued after the date hereof in accordance with the terms
of this Agreement in accordance with their terms, (ii) the issuance of Cinergy
Common Stock in respect of other equity compensation awards granted under the
Cinergy Employee Stock Option Plans outstanding as of the date hereof or
issued after the date hereof in accordance with the terms of this Agreement in
accordance with their terms, (iii) the issuance of Cinergy Employee Stock
Options and the grant of other equity compensation awards pursuant to the
Cinergy Employee Stock Option Plans in accordance with their terms providing,
in aggregate, up to an additional 2,000,000 shares of Cinergy Common Stock in
any 12-month period following the date hereof, provided, however, that any
Cinergy Employee Stock Options and equity awards granted after the date of
this Agreement shall, subject to paragraph 4 of Section 4.01(i) of the Cinergy
Disclosure Letter, be granted on terms pursuant to which such Cinergy Employee
Stock Options and equity awards shall not vest on the Cinergy Shareholder
Approval or otherwise on the occurrence of the transactions contemplated
hereby, provided, further, however, that Cinergy Employee Stock Options and
equity awards granted after the date of this Agreement may vest upon
termination of employment by the Company or any of its subsidiaries without
"cause" or by the participants for "good reason" (each as defined in the
applicable agreement), in each case, within the two-year period following the
Cinergy Effective Time, and shall, at the Cinergy Effective Time, be converted
into options or equity-based awards to acquire or in respect of, as
applicable, Company Common Stock in the manner contemplated by Section 5.06,
and (iv) the pro rata issuance by a subsidiary of its capital stock to its
shareholders, provided, further, subject to Section 4.01(d) of the Cinergy
Disclosure Letter, that any shares of Cinergy Common Stock that Cinergy or its
subsidiaries shall contribute, directly or indirectly, to any employee benefit
plan (including any plan intended to satisfy the requirements of Section
401(a) of the Code) or that Cinergy or its subsidiaries shall make subject to
any dividend reinvestment or similar plan shall be shares purchased in
open-market or privately negotiated transactions, but shall not constitute
newly issued shares of Cinergy Common Stock), or modify or amend any right of
any holder of outstanding shares of its capital stock or any Option with
respect thereto other than to give effect to Section 5.06.
(e) Acquisitions; Capital Expenditures. Except for
(x) acquisitions of, or capital expenditures relating to, the entities, assets
and facilities identified in Section 4.01(e) of the Cinergy Disclosure Letter,
(y) expenditures of amounts set forth in Cinergy's capital expenditure plan
included in Section 4.01(e) of the Cinergy Disclosure Letter, and (z) capital
expenditures (1) required by law or Governmental Authorities or (2) incurred
in connection with the repair or replacement of facilities destroyed or
damaged due to casualty or accident (whether or not covered by insurance),
Cinergy shall not, nor shall it permit any of its subsidiaries to, make any
capital expenditures, or acquire or agree to acquire (whether by merger,
consolidation, purchase or otherwise) any person or assets, if (A) the
expected gross expenditures and commitments pursuant thereto (including the
amount of any indebtedness and amounts received for negative trading positions
assumed) exceeds or may exceed (i) $100,000,000, in the case of any
acquisition or series of related acquisitions of any person, asset or property
located in the United States, or (ii) $50,000,000 in the case of any
acquisition or series of related acquisitions of any person, asset or property
located outside of the United States (each acquisition or series of related
acquisitions described in (i) and (ii), a "Cinergy Threshold Acquisition"),
(B) the expected gross expenditures and commitments pursuant thereto
(including the amount of any indebtedness and amounts received for negative
trading positions assumed) exceeds or may exceed, in the aggregate,
$100,000,000 excluding all Cinergy Threshold Acquisitions identified in
Section 4.01(e) of the Cinergy Disclosure Letter or to which Duke has
previously consented in writing, (C) any such acquisition or capital
expenditure constitutes any line of business that is not conducted by Cinergy,
its subsidiaries or the Cinergy Joint Ventures as of the date of this
Agreement or extends any line of business of Cinergy, its subsidiaries or the
Cinergy Joint Ventures into any geographic region outside of the continental
United States or Canada in which Cinergy, its subsidiaries or the Cinergy
Joint Ventures do not conduct business as of the date of this Agreement, or
(D) any such acquisition or capital expenditure is reasonably likely,
individually or in the aggregate, to materially delay the satisfaction of the
conditions set forth in Sections 6.02(d) or Sections 6.03(d) or prevent the
satisfaction of such conditions.
(f) Dispositions. Except for (x) dispositions set
forth in Section 4.01(f) of the Cinergy Disclosure Letter, (y) dispositions of
obsolete equipment or assets or dispositions of assets being replaced, in each
case in the ordinary course of business consistent with past practice and (z)
dispositions by Cinergy or its subsidiaries of its assets in accordance with
the terms of restructuring and divestiture plans mandated or approved by
applicable local or state regulatory agencies, Cinergy shall not, nor shall it
permit any of its subsidiaries to, sell, lease, grant any security interest in
or otherwise dispose of or encumber any of its assets or properties if (A) the
value of such disposition exceeds or may exceed (i) $100,000,000, in the case
of any disposition or series of related dispositions of any person, asset or
property located in the United States, or (ii) $50,000,000 in the case of any
disposition or series of related dispositions of any person, asset or property
located outside of the United States (each disposition or series of related
dispositions described in (i) and (ii), a "Cinergy Threshold Disposition") or
(B) the aggregate value of all such dispositions, excluding all Cinergy
Threshold Dispositions identified in Section 4.01(f) of the Cinergy Disclosure
Letter or to which Duke has previously consented in writing, exceeds or may
exceed, in the aggregate, $100,000,000. For the purposes of this Section
4.01(f), the value of any disposition or series of related dispositions shall
mean the greater of (i) the book value or (ii) the sales price, in each case
of the person, asset or property which is the subject of such disposition and,
in each case, together with the indebtedness and amounts paid for negative
trading positions transferred by Cinergy or its subsidiaries in connection
with such disposition.
(g) Indebtedness. Except as disclosed in Section
4.01(g) of the Cinergy Disclosure Letter, Cinergy shall not, nor shall it
permit any of its subsidiaries to, (A) incur or guarantee any indebtedness or
enter into any "keep well" or other agreement to maintain any financial
condition of another person or enter into any arrangement having the economic
effect of any of the foregoing (including any capital leases, "synthetic"
leases or conditional sale or other title retention agreements) other than (i)
short-term borrowings incurred in the ordinary course of business, (ii)
letters of credit obtained in the ordinary course of business, (iii)
borrowings made in connection with the refunding of existing indebtedness (x)
at maturity or upon final mandatory redemption (without the need for the
occurrence of any special event) or (y) at a lower cost of funds, (iv)
borrowings to finance capital expenditures or acquisitions permitted pursuant
to Section 4.01(e) or indebtedness assumed pursuant thereto, (v) other
borrowings in an aggregate principal amount not to exceed $150,000,000
outstanding at any time, (vi) guarantees or other credit support issued
pursuant to trading or marketing positions established prior to the date of
this Agreement and (vii) in addition to the guarantees or other credit support
contemplated by subsection (vi) of this Section 4.01(g), additional guarantees
or other credit support issued in connection with trading or marketing
activities in the ordinary course of business or (B) make any loans or
advances to any other person, other than (i) in the ordinary course of
business consistent with past practice, (ii) to any direct or indirect wholly-
owned subsidiary of Cinergy, or, in the case of a subsidiary of Cinergy, to
Cinergy or (iii) as required pursuant to any obligation in effect as of the
date of this Agreement.
(h) Marketing of Energy; Trading. Cinergy shall
not, nor shall it permit any of its subsidiaries to, (i) permit any material
change in policies governing or otherwise relating to the trading or marketing
of energy other than as a result of acquisitions or capital expenditures
permitted pursuant to Section 4.01(e) or to increase the existing aggregate
VaR limit as established by the Risk Policy Committee or (ii) enter into any
physical commodity transactions, exchange-traded futures and options
transactions, over-the-counter transactions and derivatives thereof or similar
transactions other than as permitted by the Cinergy Trading Guidelines.
(i) Employee Benefits. Except as required by law
or the terms of any collective bargaining agreement or any Cinergy Employee
Benefit Plan, or as disclosed in Section 4.01(i) of the Cinergy Disclosure
Letter, Cinergy shall not, nor shall it permit any of its subsidiaries to,
enter into, adopt, amend or terminate any Cinergy Employee Benefit Plan, or
other agreement, arrangement, plan or policy between Cinergy or one of its
subsidiaries and one or more of its directors, officers or employees (other
than any amendment that is immaterial or administrative in nature), or except
for normal increases in the ordinary course of business consistent with past
practice, increase in any manner the compensation or fringe benefits of any
director, executive officer or other employee, or, except for normal payments
in the ordinary course of business consistent with past practice, pay any
benefit not required by any plan or arrangement in effect as of the date of
this Agreement, provided, however, that the foregoing shall not restrict
Cinergy or its subsidiaries from (i) entering into or making available to
newly hired officers and employees or to officers and employees in the context
of promotions based on job performance or workplace requirements in the
ordinary course of business consistent with past practice, plans, agreements,
benefits and compensation arrangements (including incentive grants) that have,
consistent with past practice, been made available to newly hired or promoted
officers and employees, or (ii) entering into or amending collective
bargaining agreements with existing collective bargaining representatives or
newly certified bargaining units regarding mandatory subjects of bargaining
under applicable law, in each case in a manner consistent with past practice
to the extent permitted by law.
(j) Regulatory Status. Except as disclosed in
Section 4.01(j) of the Cinergy Disclosure Letter, Cinergy shall not, nor shall
it permit any of its subsidiaries to, agree or consent to any material
agreements or material modifications of existing agreements or course of
dealings with any Governmental Authority in respect of the operations of their
businesses outside the ordinary course of business, except (i) as required by
law to renew Permits or agreements in the ordinary course of business
consistent with past practice, (ii) as may be necessary or required in
connection with the consummation of any acquisition permitted pursuant to
Section 4.01(e), or (iii) to effect the consummation of the transactions
contemplated hereby.
(k) Accounting. Cinergy shall not, nor shall it
permit any of its subsidiaries to, make any changes in their accounting
methods materially affecting the reported consolidated assets, liabilities or
results of operations of Cinergy, except as required by law or GAAP.
(l) Insurance. Cinergy shall, and shall cause its
subsidiaries to, maintain with financially responsible insurance companies (or
through self-insurance, consistent with past practice) insurance in such
amounts and against such risks and losses as are customary for companies
engaged in their respective businesses.
(m) Taxes. Except as could not reasonably be
expected to have a material adverse effect on Cinergy, Cinergy shall not, nor
shall it permit any of its subsidiaries to, (i) settle any claim, action or
proceeding relating to Taxes or (ii) make any Tax election (this clause (m)
being the sole provision of this Section 4.01 governing Tax matters).
Section 4.02 Covenants of Duke. From and after the date of
this Agreement until the Effective Time, Duke covenants and agrees as to
itself and its subsidiaries (which shall be deemed at all times to include the
Company and its subsidiaries) that (except as expressly contemplated or
permitted by this Agreement, as set forth in Section 4.02 of the Duke
Disclosure Letter, for transactions (other than those set forth in Section
4.01(d) to the extent relating to capital stock of Duke) solely involving Duke
and one or more of its direct or indirect wholly-owned subsidiaries or between
two or more direct or indirect wholly-owned subsidiaries of Duke, or to the
extent that Cinergy shall otherwise previously consent in writing, such
consent not to be unreasonably withheld or delayed):
(a) Ordinary Course. Duke and each of its subsidiaries
shall conduct their businesses in all material respects in the ordinary course
of business consistent with past practice. Without limiting the generality of
the foregoing, Duke and its subsidiaries shall use commercially reasonable
efforts to preserve intact in all material respects their present business
organizations, to maintain in effect all existing Permits, subject to prudent
management of workforce and business needs, to keep available the services of
their key officers and employees, to maintain their assets and properties in
good working order and condition, ordinary wear and tear excepted, to preserve
their relationships with Governmental Authorities, customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with all laws, orders and Permits of all Governmental
Authorities applicable to them.
(b) Charter Documents. Duke shall not amend or propose
to amend its articles of incorporation or, other than in a manner that would
not materially restrict the operation of their businesses, its by-laws or its
subsidiaries' articles of incorporation or by-laws (or other comparable
organizational documents).
(c) Dividends. Duke shall not, nor shall it permit any
of its subsidiaries to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock or share capital,
except:
(A) that Duke may continue the declaration and
payment of regular quarterly cash dividends on Duke Common Stock,
not to exceed $0.275 per share, with usual record and payment dates
for such dividends in accordance with past dividend practice;
provided, that (1) Duke may increase its regular quarterly cash
dividend to an amount not to exceed $0.31 per share between the date
hereof and the Duke Effective Time and (2) if the Duke Effective
Time does not occur between a record date and payment date of a
regular quarterly dividend, a special dividend may be declared and
paid in respect of Duke Common Stock with respect to the quarter in
which the Duke Effective Time occurs with a record date in such
quarter and on or prior to the date on which the Duke Effective Time
occurs, which dividend does not exceed an amount equal to the
product of (i) a fraction the (x) numerator of which is equal to the
number of days between the last payment date of a regular quarterly
dividend and the record date of such special dividend (excluding
such last payment date but including the record date of such special
dividend) and (y) the denominator of which is equal to the number of
days between the last payment date of a regular quarterly dividend
and the same calendar day in the third month after the month in
which such last payment date occurred (excluding such last payment
date but including such same calendar day), multiplied by (ii) the
then permitted quarterly dividend per share, and
(B) for the declaration and payment of
dividends by a direct or indirect wholly-owned subsidiary of Duke
solely to its parent, or by a direct or indirect partially owned
subsidiary of Duke (provided, that Duke or a Duke subsidiary
receives or is to receive its proportionate share of such dividend
or distribution), and
(C) for the declaration and payment of regular
cash dividends with respect to preferred stock of Duke or its
subsidiaries outstanding as of the date of the Agreement or
permitted to be issued under the terms of this Agreement, and
(ii) split, combine, reclassify or take similar
action with respect to any of its capital stock or share capital or issue
or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or
comprised in its share capital, (iii) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation
or a dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization, or (iv) except as disclosed in Section
4.02(c)(iv) of the Duke Disclosure Letter directly or indirectly redeem,
repurchase or otherwise acquire any shares of its capital stock or any
Option with respect thereto except:
(A) in connection with intercompany purchases
of capital stock or share capital, or
(B) for the purpose of funding the Duke Option
Plan or employee stock ownership or dividend reinvestment and stock
purchase plans, or
(C) mandatory repurchases or redemptions of
preferred stock of Duke or its subsidiaries in accordance with the
terms thereof, or
(D) the redemptions by Duke of Duke Preferred
Stock and Duke Preferred Stock A as contemplated by Section 4.07.
(d) Share Issuances. Duke shall not, nor shall it
permit any of its subsidiaries to issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any Option with respect thereto (other than (i) the issuance of Duke Common
Stock upon the exercise of Duke Employee Stock Options outstanding as of the
date of hereof or issued after the date hereof in accordance with the terms of
this Agreement in accordance with their terms, (ii) the issuance of Duke
Common Stock in respect of other equity compensation awards granted under the
Duke Option Plans outstanding as of the date hereof or issued after the date
hereof in accordance with the terms of this Agreement in accordance with their
terms, (iii) the issuance of Duke Employee Stock Options and the grant of
other equity compensation awards pursuant to the Duke Option Plans in
accordance with their terms providing, in aggregate, up to 5,000,000 shares of
Duke Common Stock in any 12-month period following the date of this Agreement,
provided, however, that any Duke Employee Stock Options and equity awards
granted after the date of this Agreement shall be granted on terms pursuant to
which such Duke Employee Stock Options and equity awards shall not vest on the
Duke Shareholder Approval or otherwise on the occurrence of the transactions
contemplated hereby and shall, at the Duke Effective Time, be converted into
options or equity based awards to acquire or in respect of, as applicable,
Company Common Stock in the manner contemplated by Section 5.06, and (iv) the
pro rata issuance by a subsidiary of its capital stock to its shareholders,
provided, further, that any shares of Duke Common Stock that Duke or its
subsidiaries shall contribute, directly or indirectly, to any employee benefit
plan (including any plan intended to satisfy the requirements of Section
401(a) of the Code) or that Duke or its subsidiaries shall make subject to any
dividend reinvestment or similar plan shall be shares purchased in open-market
or privately negotiated transactions, but shall not constitute newly issued
shares of Duke Common Stock), or modify or amend any right of any holder of
outstanding shares of its capital stock or any Option with respect thereto
other than to give effect to Section 5.06.
(e) Acquisitions; Capital Expenditures. Except for (x)
acquisitions of, or capital expenditures relating to, the entities, assets and
facilities identified in Section 4.02(e) of the Duke Disclosure Letter, (y)
expenditures of amounts set forth in Duke's capital expenditure plan included
in Section 4.02(e) of the Duke Disclosure Letter, and (z) capital expenditures
(1) required by law or Governmental Authorities or (2) incurred in connection
with the repair or replacement of facilities destroyed or damaged due to
casualty or accident (whether or not covered by insurance), Duke shall not,
nor shall it permit any of its subsidiaries to, make any capital expenditures,
or acquire or agree to acquire (whether by merger, consolidation, purchase or
otherwise) any person or assets, if (A) the expected gross expenditures and
commitments pursuant thereto (including the amount of any indebtedness and
amounts received for negative trading positions assumed) exceeds or may exceed
(i) $300,000,000, in the case of any acquisition or series of related
acquisitions of any person, asset or property located in the United States, or
(ii) $150,000,000 in the case of any acquisition or series of related
acquisitions of any person, asset or property located outside of the United
States (each acquisition or series of related acquisitions described in (i)
and (ii), a "Duke Threshold Acquisition"), (B) the expected gross expenditures
and commitments pursuant thereto (including the amount of any indebtedness and
amounts received for negative trading positions assumed) exceeds or may
exceed, in the aggregate, $300,000,000 excluding all Duke Threshold
Acquisitions identified in Section 4.02(e) of the Duke Disclosure Letter or to
which Cinergy has previously consented in writing, (C) any such acquisition or
capital expenditure constitutes any line of business that is not conducted by
Duke, its subsidiaries or the Duke Joint Ventures as of the date of this
Agreement or extends any line of business of Duke, its subsidiaries or the
Duke Joint Ventures into any geographic region outside of the continental
United States or Canada in which Duke, its subsidiaries or the Duke Joint
Ventures do not conduct business as of the date of this Agreement, or (D) any
such acquisition or capital expenditure is reasonably likely, individually or
in the aggregate, to materially delay the satisfaction of the conditions set
forth in Sections 6.02(d) or Sections 6.03(d) or prevent the satisfaction of
such conditions.
(f) Dispositions. Except for (x) dispositions set
forth in Section 4.02(f) of the Duke Disclosure Letter, (y) dispositions of
obsolete equipment or assets or dispositions of assets being replaced, in each
case in the ordinary course of business consistent with past practice and (z)
dispositions by Duke or its subsidiaries of its assets in accordance with the
terms of restructuring and divestiture plans mandated or approved by
applicable local or state regulatory agencies, Duke shall not, nor shall it
permit any of its subsidiaries to, sell, lease, grant any security interest in
or otherwise dispose of or encumber any of its assets or properties if (A) the
value of such disposition exceeds or may exceed (i) $300,000,000, in the case
of any disposition or series of related dispositions of any person, asset or
property located in the United States, or (ii) $150,000,000 in the case of any
disposition or series of related dispositions of any person, asset or property
located outside of the United States (each disposition or series of related
dispositions described in (i) and (ii), a "Duke Threshold Disposition") or (B)
the aggregate value of all such dispositions, excluding all Duke Threshold
Dispositions identified in Section 4.02(f) of the Duke Disclosure Letter or to
which Cinergy has previously consented in writing, exceeds or may exceed, in
the aggregate, $300,000,000. For the purposes of this Section 4.02(f), the
value of any disposition or series of related dispositions shall mean the
greater of (i) the book value or (ii) the sales price, in each case of the
person, asset or property which is the subject of such disposition and, in
each case, together with the indebtedness and amounts paid for negative
trading positions transferred by Duke or its subsidiaries in connection with
such disposition.
(g) Indebtedness. Except as disclosed in Section
4.02(g) of the Duke Disclosure Letter, Duke shall not, nor shall it permit any
of its subsidiaries to, (A) incur or guarantee any indebtedness or enter into
any "keep well" or other agreement to maintain any financial condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing (including any capital leases, "synthetic" leases or
conditional sale or other title retention agreements) other than (i)
short-term borrowings incurred in the ordinary course of business, (ii)
letters of credit obtained in the ordinary course of business, (iii)
borrowings made in connection with the refunding of existing indebtedness (x)
at maturity or upon final mandatory redemption (without the need for the
occurrence of any special event) or (y) at a lower cost of funds, (iv)
borrowings to finance capital expenditures or acquisitions permitted pursuant
to Section 4.02(e) or indebtedness assumed pursuant thereto, (v) other
borrowings in an aggregate principal amount not to exceed $500,000,000
outstanding at any time, (vi) guarantees or other credit support issued
pursuant to trading or marketing positions established prior to the date of
this Agreement and (vii) in addition to the guarantees or other credit support
contemplated by subsection (vi) of this Section 4.02(g), additional guarantees
or other credit support issued in connection with trading or marketing
activities in the ordinary course of business at any one time or (B) make any
loans or advances to any other person, other than (i) in the ordinary course
of business consistent with past practice (ii) to any direct or indirect
wholly- owned subsidiary of Duke, or, in the case of a subsidiary of Duke, to
Duke or (iii) as required pursuant to any obligation in effect as of the date
of this Agreement.
(h) Marketing of Energy; Trading. Duke shall not, nor
shall it permit any of its subsidiaries to, (i) permit any material change in
policies governing or otherwise relating to the trading or marketing of energy
other than as a result of acquisitions or capital expenditures permitted
pursuant to Section 4.02(e) or (ii) enter into any physical commodity
transactions, exchange-traded futures and options transactions,
over-the-counter transactions and derivatives thereof or similar transactions
other than as permitted by the Duke Trading Guidelines.
(i) Employee Benefits. Except as required by law or
the terms of any collective bargaining agreement or any Duke Employee Benefit
Plan, or as disclosed in Section 4.02(i) of the Duke Disclosure Letter, Duke
shall not, nor shall it permit any of its subsidiaries to, enter into, adopt,
amend or terminate any Duke Employee Benefit Plan, or other agreement,
arrangement, plan or policy between Duke or one of its subsidiaries and one or
more of its directors, officers or employees (other than any amendment that is
immaterial or administrative in nature), or except for normal increases in the
ordinary course of business consistent with past practice, increase in any
manner the compensation or fringe benefits of any director, executive officer
or other employee, or, except for normal payments in the ordinary course of
business consistent with past practice, pay any benefit not required by any
plan or arrangement in effect as of the date of this Agreement, provided,
however, that the foregoing shall not restrict Duke or its subsidiaries from
(i) entering into or making available to newly hired officers and employees or
to officers and employees in the context of promotions based on job
performance or workplace requirements in the ordinary course of business
consistent with past practice, plans, agreements, benefits and compensation
arrangements (including incentive grants) that have, consistent with past
practice, been made available to newly hired or promoted officers and
employees, or (ii) entering into or amending collective bargaining agreements
with existing collective bargaining representatives or newly certified
bargaining units regarding mandatory subjects of bargaining under applicable
law, in each case in a manner consistent with past practice to the extent
permitted by law.
(j) Regulatory Status. Except as disclosed in Section
4.02(j) of the Duke Disclosure Letter, Duke shall not, nor shall it permit any
of its subsidiaries to, agree or consent to any material agreements or
material modifications of existing agreements or course of dealings with any
Governmental Authority in respect of the operations of their businesses,
except (i) as required by law to renew Permits or agreements in the ordinary
course of business consistent with past practice, (ii) as may be necessary or
required in connection with the consummation of any acquisition permitted
pursuant to Section 4.02(e), or (iii) to effect the consummation of the
transactions contemplated hereby.
(k) Accounting. Duke shall not, nor shall it permit
any of its subsidiaries to, make any changes in their accounting methods
materially affecting the reported consolidated assets, liabilities or results
of operations of Duke, except as required by law or GAAP.
(l) Insurance. Duke shall, and shall cause its
subsidiaries to, maintain with financially responsible insurance companies (or
through self-insurance, consistent with past practice) insurance in such
amounts and against such risks and losses as are customary for companies
engaged in their respective businesses.
(m) Taxes. Except as could not reasonably be expected
to have a material adverse effect on Duke, Duke shall not, nor shall it permit
any of its subsidiaries to, (i) settle any claim, action or proceeding
relating to Taxes or (ii) make any Tax election (this clause (m) being the
sole provision of this Section 4.02 governing Tax matters).
(n) Company Actions. Duke shall not permit the Company
or any of its subsidiaries to take, or to commit to take, any action after the
Duke Effective Time and prior to the Cinergy Effective Time, except for the
actions expressly set forth in this Agreement as actions to be taken by any
such person during such period.
Section 4.03 No Solicitation by Cinergy.
(a) Cinergy shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any of its directors,
officers or employees to, and shall use its reasonable best efforts to cause
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries not to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing information), or knowingly take any other action designed to
facilitate, any inquiries or the making of any proposal that constitutes a
Cinergy Takeover Proposal (as defined below) or (ii) participate in any
negotiations or substantive discussions regarding any Cinergy Takeover
Proposal; provided, however, that if, at any time prior to receipt of the
Cinergy Shareholder Approval (the "Cinergy Applicable Period"), the Board of
Directors of Cinergy determines in good faith, after consultation with its
legal and financial advisors, that a Cinergy Takeover Proposal that was not
solicited by it and that did not otherwise result from a breach (other than in
immaterial respects) of this Section 4.03(a) is, or is reasonably likely to
result in, a Cinergy Superior Proposal (as defined in Section 4.03(b)), and
subject to providing prior written notice of its decision to take such action
to Duke and compliance with Section 4.03(c), Cinergy may (x) furnish
information with respect to Cinergy and its subsidiaries to the person making
such proposal (and its representatives) pursuant to a customary
confidentiality agreement containing terms no less favorable to Cinergy than
those set forth in the Confidentiality Agreement (the "Confidentiality
Agreement") dated November 10, 2004, between Cinergy and Duke (provided, that
such confidentiality agreement shall not in any way restrict Cinergy from
complying with its disclosure obligations under this Agreement, including with
respect to such proposal, but such confidentiality agreement may allow such
party to submit to Cinergy a proposal or offer relating to a transaction) and
(y) participate in discussions or negotiations regarding such proposal.
Cinergy, its subsidiaries and their representatives immediately shall cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties with respect to any Cinergy Takeover Proposal.
For purposes of this Agreement, "Cinergy Takeover Proposal" means any bona
fide inquiry, proposal or offer from any person relating to (i) any direct or
indirect acquisition or purchase of a business (a "Cinergy Material Business")
that constitutes 20% or more of the net revenues, net income or the assets
(including equity securities) of Cinergy and its subsidiaries, taken as a
whole, (ii) any direct or indirect acquisition or purchase of 20% or more of
any class of voting securities of Cinergy or 20% or more of the voting power
of any class of stock of any subsidiary of Cinergy owning, operating or
controlling a Cinergy Material Business, (iii) any tender offer or exchange
offer that if consummated would result in any person beneficially owning 20%
or more of any class of voting securities of Cinergy or 20% or more of the
voting power of any class of stock of any subsidiary of Cinergy owning,
operating or controlling a Cinergy Material Business, or (iv) any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Cinergy or any such subsidiary of
Cinergy owning, operating or controlling a Cinergy Material Business, in each
case other than the transactions contemplated by this Agreement.
(b) Except as contemplated by this Section 4.03,
neither the Board of Directors of Cinergy nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Duke, the approval or recommendation by such Board of Directors or
such committee of this Agreement or the Cinergy Merger, (ii) approve or
recommend, or propose publicly to approve or recommend, any Cinergy Takeover
Proposal, or (iii) cause Cinergy to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement (each, a
"Cinergy Acquisition Agreement") related to any Cinergy Takeover Proposal.
Notwithstanding the foregoing:
(i) in response to a Cinergy Takeover Proposal
that was not solicited by it and that did not otherwise result from a
breach (other than in immaterial respects) of Section 4.03(a), during the
Cinergy Applicable Period, the Board of Directors of Cinergy may, if it
determines in good faith, after consulting with outside counsel, that the
failure to take such action would be reasonably likely to result in a
breach of the Board of Directors' fiduciary obligations under applicable
law, (A) withdraw or modify, or propose publicly to withdraw or modify,
the approval or recommendation by such Board of Directors or any
committee thereof of this Agreement or the Cinergy Merger, (B) approve or
recommend, or propose to approve or recommend, any Cinergy Superior
Proposal, or (C) terminate this Agreement pursuant to Section 7.01(d),
but only after (1) in the case of each of clauses (B) or (C), such Board
of Directors has determined in good faith that such Cinergy Takeover
Proposal constitutes a Cinergy Superior Proposal, and (2) in the case of
clause (C), (I) Cinergy has notified Duke in writing of the determination
that such Cinergy Takeover Proposal constitutes a Cinergy Superior
Proposal and (II) at least five business days following receipt by Duke
of such notice, the Board of Directors of Cinergy has determined that
such Cinergy Superior Proposal remains a Cinergy Superior Proposal; and
(ii) in circumstances other than as provided in
Section 4.03(b)(i), during the Cinergy Applicable Period, the Board of
Directors of Cinergy may, if it determines in good faith, after
consulting with outside counsel, that the failure to take such action
would be reasonably likely to result in a breach of the Board of
Directors' fiduciary obligations under applicable law, withdraw or
modify, or propose publicly to withdraw or modify, the approval or
recommendation by such Board of Directors or any committee thereof of
this Agreement or the Cinergy Merger, but only after (1) Cinergy has
notified Duke in writing that the Board of Directors of Cinergy is
prepared to make the determination set forth in this clause (ii) setting
forth the reasons therefore in sufficient detail, (2) for a period of
five business days following Duke's receipt of the notice set forth in
clause (1) of this sentence, Cinergy negotiates with Duke in good faith
to make such adjustments to the terms and conditions of this Agreement,
the Mergers and the other transactions contemplated hereby as would
enable the Cinergy Board of Directors to proceed with its recommendation
of this Agreement, the Cinergy Merger and the other transactions
contemplated hereby and (3) at the end of such five-business day period
the Board of Directors of Cinergy maintains its determination described
in this clause (ii) (after taking into account Duke's proposed
adjustments to the terms and conditions of this Agreement, the Mergers
and the other transactions contemplated hereby).
For purposes of this Agreement, "Cinergy Superior Proposal"
means any written Cinergy Takeover Proposal that the Board of Directors of
Cinergy determines in good faith (after consultation with a financial advisor
of nationally recognized reputation) to be more favorable (taking into account
(i) all financial and strategic considerations, including relevant legal,
financial, regulatory and other aspects of such Cinergy Takeover Proposal and
the Mergers and the other transactions contemplated by this Agreement deemed
relevant by the Board of Directors, (ii) the identity of the third party
making such Cinergy Takeover Proposal, and (iii) the conditions and prospects
for completion of such Cinergy Takeover Proposal) to Cinergy's shareholders
than the Cinergy Merger, the Duke Merger and the other transactions
contemplated by this Agreement (taking into account all of the terms of any
proposal by Duke to amend or modify the terms of the Cinergy Merger and the
other transactions contemplated by this Agreement), except that (x) the
reference to "20%" in clauses (i), (ii) and (iii) of the definition of
"Cinergy Takeover Proposal" in Section 4.03(a) shall be deemed to be a
reference to "50%", (y) a "Cinergy Takeover Proposal" shall only be deemed to
refer to a transaction involving Cinergy, and not any of its subsidiaries or
Cinergy Material Businesses alone, and (z) the references to "or any
subsidiary of Cinergy owning, operating or controlling a Cinergy Material
Business" in clauses (ii), (iii) and (iv) shall be deemed to be deleted.
(c) In addition to the obligations of Cinergy set
forth in paragraphs (a) and (b) of this Section 4.03, Cinergy shall as
promptly as practicable advise Duke, orally and in writing, of any request for
information or of any Cinergy Takeover Proposal (and in any case within 24
hours of such request or the receipt of such Cinergy Takeover Proposal), the
principal terms and conditions of such request or Cinergy Takeover Proposal
and the identity of the person making such request or Cinergy Takeover
Proposal. Cinergy shall keep Duke informed of the status and details
(including amendments or proposed amendments) of any such request or Cinergy
Takeover Proposal. Contemporaneously with any termination by Cinergy of this
Agreement pursuant to Section 7.01(b)(i), Cinergy shall provide Duke with a
written verification that it has complied with its obligations pursuant to
this Section 4.03(c) (other than noncompliance which is immaterial).
(d) Nothing contained in this Section 4.03 shall
prohibit Cinergy from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to Cinergy's shareholders if, in the good faith judgment
of the Board of Directors of Cinergy, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law or (ii) taking actions permitted by Section 4.01(f).
Section 4.04 No Solicitation by Duke.
(a) Duke shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any of its directors,
officers or employees to, and shall use its reasonable best efforts to cause
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries not to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing information), or knowingly take any other action designed to
facilitate, any inquiries or the making of any proposal that constitutes a
Duke Takeover Proposal (as defined below) or (ii) participate in any
negotiations or substantive discussions regarding any Duke Takeover Proposal;
provided, however, that if, at any time prior to receipt of the Duke
Shareholder Approval (the "Duke Applicable Period"), the Board of Directors of
Duke determines in good faith, after consultation with its legal and financial
advisors, that a Duke Takeover Proposal that was not solicited by it and that
did not otherwise result from a breach (other than in immaterial respects) of
this Section 4.04(a) is, or is reasonably likely to result in, a Duke Superior
Proposal (as defined in Section 4.04(b)), and subject to providing prior
written notice of its decision to take such action to Cinergy and compliance
with Section 4.04(c), Duke may (x) furnish information with respect to Duke
and its subsidiaries to the person making such proposal (and its
representatives) pursuant to a customary confidentiality agreement containing
terms no less favorable to Duke than those set forth in the Confidentiality
Agreement (provided, that such confidentiality agreement shall not in any way
restrict Duke from complying with its disclosure obligations under this
Agreement, including with respect to such proposal, but such confidentiality
agreement may allow such party to submit to Duke a proposal or offer relating
to a transaction) and (y) participate in discussions or negotiations regarding
such proposal. Duke, its subsidiaries and their representatives immediately
shall cease and cause to be terminated any existing activities, discussions or
negotiations with any parties with respect to any Duke Takeover Proposal. For
purposes of this Agreement, "Duke Takeover Proposal" means any bona fide
inquiry, proposal or offer from any person relating to (i) any direct or
indirect acquisition or purchase of a business (a "Duke Material Business")
that constitutes 20% or more of the net revenues, net income or the assets
(including equity securities) of Duke and its subsidiaries, taken as a whole,
(ii) any direct or indirect acquisition or purchase of 20% or more of any
class of voting securities of Duke or 20% or more of the voting power of any
class of stock of any subsidiary of Duke owning, operating or controlling a
Duke Material Business, (iii) any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of voting securities of Duke or 20% or more of the voting power of any
class of stock of any subsidiary of Duke owning, operating or controlling a
Duke Material Business, or (iv) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Duke or any such subsidiary of Duke owning, operating or controlling
a Duke Material Business, in each case other than the transactions
contemplated by this Agreement.
(b) Except as contemplated by this Section 4.04,
neither the Board of Directors of Duke nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Cinergy, the approval or recommendation by such Board of Directors
or such committee of this Agreement or the Duke Merger, (ii) approve or
recommend, or propose publicly to approve or recommend, any Duke Takeover
Proposal, or (iii) cause Duke to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "Duke
Acquisition Agreement") related to any Duke Takeover Proposal. Notwithstanding
the foregoing:
(i) in response to a Duke Takeover Proposal that
was not solicited by it and that did not otherwise result from a breach
(other than in immaterial respects) of Section 4.04(a), during the Duke
Applicable Period, the Board of Directors of Duke may, if it determines
in good faith, after consulting with outside counsel, that the failure to
take such action would be reasonably likely to result in a breach of the
Board of Directors' fiduciary obligations under applicable law, (A)
withdraw or modify, or propose publicly to withdraw or modify, the
approval or recommendation by such Board of Directors or any committee
thereof of this Agreement or the Duke Merger, (B) approve or recommend,
or propose to approve or recommend, any Duke Superior Proposal, or (C)
terminate this Agreement pursuant to Section 7.01(f), but only after (1)
in the case of each of clauses (B) or (C), such Board of Directors has
determined in good faith that such Duke Takeover Proposal constitutes a
Duke Superior Proposal, and (2) in the case of clause (C), (I) Duke has
notified Cinergy in writing of the determination that such Duke Takeover
Proposal constitutes a Duke Superior Proposal and (II) at least five
business days following receipt by Cinergy of such notice, the Board of
Directors of Duke has determined that such Duke Superior Proposal remains
a Duke Superior Proposal; and
(ii) in circumstances other than as provided in
Section 4.04(b)(i), during the Duke Applicable Period, the Board of
Directors of Duke may, if it determines in good faith, after consulting
with outside counsel, that the failure to take such action would be
reasonably likely to result in a breach of the Board of Directors'
fiduciary obligations under applicable law, withdraw or modify, or
propose publicly to withdraw or modify, the approval or recommendation by
such Board of Directors or any committee thereof of this Agreement or the
Duke Merger, but only after (1) Duke has notified Cinergy in writing that
the Board of Directors of Duke is prepared to make the determination set
forth in this clause (ii) setting forth the reasons therefor in
sufficient detail, (2) for a period of five business days following
Cinergy's receipt of the notice set forth in clause (1) of this sentence,
Duke negotiates with Cinergy in good faith to make such adjustments to
the terms and conditions of this Agreement, the Mergers and the other
transactions contemplated hereby as would enable the Duke Board of
Directors to proceed with its recommendation of this Agreement, the Duke
Merger and the other transactions contemplated hereby and (3) at the end
of such five-business day period the Board of Directors of Duke maintains
its determination described in this clause (ii) (after taking into
account Cinergy's proposed adjustments to the terms and conditions of
this Agreement, the Mergers and the other transactions contemplated
hereby).
For purposes of this Agreement, a "Duke Superior Proposal"
means any written Duke Takeover Proposal that the Board of Directors of Duke
determines in good faith (after consultation with a financial advisor of
nationally recognized reputation) to be more favorable (taking into account
(i) all financial and strategic considerations, including relevant legal,
financial, regulatory and other aspects of such Duke Takeover Proposal and the
Mergers and the other transactions contemplated by this Agreement deemed
relevant by the Board of Directors, (ii) the identity of the third party
making such Duke Takeover Proposal, and (iii) the conditions and prospects for
completion of such Duke Takeover Proposal) to Duke's shareholders than the
Duke Merger and the other transactions contemplated by this Agreement (taking
into account all of the terms of any proposal by Cinergy to amend or modify
the terms of the Duke Merger, the Cinergy Merger and the other transactions
contemplated by this Agreement), except that (x) the reference to "20%" in
clauses (i), (ii) and (iii) of the definition of "Duke Takeover Proposal" in
Section 4.04(a) shall be deemed to be a reference to "50%", (y) a "Duke
Takeover Proposal" shall only be deemed to refer to a transaction involving
Duke, and not any of its subsidiaries or Duke Material Businesses alone, and
(z) the references to "or any subsidiary of Duke owning, operating or
controlling a Duke Material Business" in clauses (ii), (iii) and (iv) shall be
deemed to be deleted.
(c) In addition to the obligations of Duke set forth
in paragraphs (a) and (b) of this Section 4.04, Duke shall as promptly as
practicable advise Cinergy, orally and in writing, of any request for
information or of any Duke Takeover Proposal (and in any case within 24 hours
of such request or the receipt of such Duke Takeover Proposal), the principal
terms and conditions of such request or Duke Takeover Proposal and the
identity of the person making such request or Duke Takeover Proposal. Duke
shall keep Cinergy informed of the status and details (including amendments or
proposed amendments) of any such request or Duke Takeover Proposal.
Contemporaneously with any termination by Duke of this Agreement pursuant to
Section 7.01(b)(i), Duke shall provide Cinergy with a written verification
that it has complied with its obligations pursuant to this Section 4.03(c)
(other than noncompliance which is immaterial).
(d) Nothing contained in this Section 4.04 shall
prohibit Duke from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to Duke's shareholders if, in the good faith judgment of
the Board of Directors of Duke, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law or (ii) taking actions permitted by Section 4.02(f).
Section 4.05 Other Actions. Each of Cinergy and Duke shall
use its reasonable best efforts not to, and shall use its reasonable best
efforts not to permit any of their respective subsidiaries to, take any action
that would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
is qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that is not so qualified becoming untrue in any
material respect, or (iii) any condition to the Mergers set forth in Article
VI not being satisfied.
Section 4.06 Coordination of Dividends. From the date of
this Agreement until the Effective Time, Duke and Cinergy shall coordinate
with each other regarding the declaration and payment of dividends in respect
of the shares of Cinergy Common Stock and Duke Common Stock and the record
dates and payment dates relating thereto, including, if applicable, through
the payment of the special dividend contemplated by Sections 4.01(c)(i)(A) and
4.02(c)(i)(A), it being the intention of Cinergy and Duke that no holder of
Cinergy Common Stock, Duke Common Stock or Company Common Stock shall receive
two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to its shares of Cinergy Common Stock or Duke Common
Stock, as the case may be, and/or any shares of Company Common Stock any such
holder receives in exchange therefor pursuant to the Mergers.
Section 4.07 Redemption of Duke Preferred Stock and Duke
Preferred Stock A. Prior to the Duke Effective Time, Duke shall call for
redemption all outstanding shares of Duke Preferred Stock and Duke Preferred
Stock A at a redemption price equal to the amounts then required to be paid
upon redemption of the applicable series of Duke Preferred Stock or Duke
Preferred Stock A, as the case may be, pursuant to the term of each such
series, together with all dividends accrued and unpaid to the date of such
redemption. Duke shall use its reasonable best efforts to redeem all shares of
Duke Preferred Stock and Duke Preferred Stock A so that no such shares shall
be deemed to be outstanding as of the Duke Effective Time.
Section 4.08 Transfer of Certain Assets. Each of Duke,
Cinergy and the Company shall, and shall cause each of their subsidiaries to,
use their reasonable best efforts prior to the Closing to obtain all consents
and approvals necessary to distribute at the Closing, or as soon as reasonably
possible thereafter, the generation stations set forth on Section 4.08 of the
Duke Disclosure Letter, (together the "Transferred Assets") to the Company and
subsequently to contribute the Transferred Assets to The Cincinnati Gas &
Electric and shall effect such distribution and contribution as promptly as
practicable following the Cinergy Effective Time, subject to the receipt of
all such necessary consents and approvals.
ARTICLE V
Additional Agreements
Section 5.01 Preparation of the Form S-4 and the Joint Proxy
Statement; Shareholders Meetings.
(a) As soon as practicable following the date of this
Agreement, Cinergy and Duke shall prepare and file with the SEC the Joint Proxy
Statement and Cinergy, Duke and the Company shall prepare and file with the SEC
the Form S-4, in which the Joint Proxy Statement will be included. Each of
Cinergy, Duke and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing. Cinergy will use its reasonable best efforts to cause the
Joint Proxy Statement to be mailed to Cinergy's shareholders, and Duke will use
its reasonable best efforts to cause the Joint Proxy Statement to be mailed to
Duke's shareholders, in each case as promptly as practicable after the Form S-4
is declared effective under the Securities Act. Each party hereto shall also
take any action required to be taken under any applicable state or provincial
securities laws in connection with the issuance of Company Common Stock in the
Mergers and each party shall furnish all information concerning itself and its
shareholders as may be reasonably requested in connection with any such action.
Each party will advise the others, promptly after it receives notice thereof,
of the time when the Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Company Common Stock issuable in connection with the
Mergers for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Joint Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. If prior
to the Effective Time any event occurs with respect to Cinergy, Duke or any
subsidiary of Cinergy or Duke, respectively, or any change occurs with respect
to information supplied by or on behalf of Cinergy or Duke, respectively, for
inclusion in the Joint Proxy Statement or the Form S-4 that, in each case, is
required to be described in an amendment of, or a supplement to, the Joint
Proxy Statement or the Form S-4, Cinergy or Duke, as applicable, shall promptly
notify the other and the Company of such event, and Cinergy or Duke, as
applicable, shall cooperate with the Company in the prompt filing with the SEC
of any necessary amendment or supplement to the Joint Proxy Statement and the
Form S-4 and, as required by law, in disseminating the information contained in
such amendment or supplement to Cinergy's shareholders and to Duke's
shareholders.
(b) Cinergy shall, as soon as reasonably practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of its shareholders (the "Cinergy Shareholders Meeting") for the
purpose of obtaining the Cinergy Shareholder Approval. Without limiting the
generality of the foregoing, Cinergy agrees that its obligations pursuant to
the first sentence of this Section 5.01(b) shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to Cinergy of
any Cinergy Takeover Proposal, (ii) the withdrawal or modification by the Board
of Directors of Cinergy of its approval or recommendation of this Agreement,
the Cinergy Merger or the other transactions contemplated hereby, or (iii) the
approval or recommendation of any Cinergy Superior Proposal. Notwithstanding
any of the events set forth in clauses (i), (ii) and (iii) of the immediately
preceding sentence, in the event Cinergy fulfills its obligations pursuant to
this Section 5.01(b) and the Cinergy Shareholder Approval is not obtained at
the Cinergy Shareholders Meeting, Duke shall not thereafter have the right to
terminate this Agreement pursuant to Sections 7.01(h)(i) as a result of the
Board of Directors of Cinergy (or any committee thereof) having, pursuant to
Section 4.03(b)(ii), withdrawn or modified, or proposed publicly to withdraw or
modify, the approval or recommendation by such Board of Directors of this
Agreement or the Cinergy Merger, provided Duke shall retain all other rights to
terminate this Agreement set forth in Section 7.01.
(c) Duke shall, as soon as reasonably practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of its shareholders (the "Duke Shareholders Meeting") for the
purpose of obtaining the Duke Shareholder Approval. Without limiting the
generality of the foregoing, Duke agrees that its obligations pursuant to the
first sentence of this Section 5.01(c) shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to Duke of
any Duke Takeover Proposal, (ii) the withdrawal or modification by the Board of
Directors of Duke of its approval or recommendation of this Agreement, the Duke
Merger or the other transactions contemplated hereby, or (iii) the approval or
recommendation of any Duke Superior Proposal. Notwithstanding any of the events
set forth in clauses (i), (ii) and (iii) of the immediately preceding sentence,
in the event Duke fulfills its obligations pursuant to this Section 5.01(c) and
the Duke Shareholder Approval is not obtained at the Duke Shareholders Meeting,
Cinergy shall not thereafter have the right to terminate this Agreement
pursuant to Sections 7.01(g)(i) as a result of the Board of Directors of Duke
(or any committee thereof) having, pursuant to Section 4.04(b)(ii), withdrawn
or modified, or proposed publicly to withdraw or modify, the approval or
recommendation by such Board of Directors of this Agreement or the Duke Merger,
provided Cinergy shall retain all other rights to terminate this Agreement set
forth in Section 7.01.
(d) Cinergy and Duke will use their reasonable best
efforts to hold the Duke Shareholders Meeting and the Cinergy Shareholders
Meeting on the same date and as soon as practicable after the date of this
Agreement.
Section 5.02 Letters of Cinergy's Accountants. Cinergy shall
use its reasonable best efforts to cause to be delivered to Duke two letters
from Cinergy's independent accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one dated
a date within two business days before the Closing Date, each addressed to
Duke, in form and substance reasonably satisfactory to Duke and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
Section 5.03 Letters of Duke's Accountants. Duke shall use
its reasonable best efforts to cause to be delivered to Cinergy two letters
from Duke's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated a
date within two business days before the Closing Date, each addressed to
Cinergy, in form and substance reasonably satisfactory to Cinergy and customary
in scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
Section 5.04 Access to Information; Effect of Review.
(a) Access. Subject to the Confidentiality Agreement,
to the extent permitted by applicable law, each of Cinergy and Duke shall, and
shall cause each of its respective subsidiaries to, and, so long as consistent
with its confidentiality obligations under its applicable agreements, shall use
its respective reasonable best efforts to cause the Cinergy Joint Ventures and
Duke Joint Ventures, respectively, to, afford to the other party and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of such other party reasonable access during normal business
hours during the period prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, to the extent permitted by applicable law, each of Cinergy and
Duke shall, and shall cause each of its respective subsidiaries to, and, so
long as consistent with its confidentiality obligations under its applicable
agreements, shall use its respective reasonable best efforts to cause the
Cinergy Joint Ventures and Duke Joint Ventures, respectively, to, (i) confer on
a regular and frequent basis with one or more representatives of the other
party to discuss material operational and regulatory matters and the general
status of its ongoing operations, (ii) advise the other party of any change or
event that has had or could reasonably be expected to have a material adverse
effect on such party, and (iii) furnish promptly all other information
concerning its business, properties and personnel, in each case as such other
party may reasonably request; provided, however, that no actions shall be taken
pursuant to this Section 5.04(a) that would result in a waiver of the
attorney/client privilege. Notwithstanding the foregoing, if a party requests
access to proprietary information of the other party, the disclosure of which
would have a material adverse effect on the other party if the Closing were not
to occur (giving effect to the requesting party's obligations under the
Confidentiality Agreement), such information shall only be disclosed to the
extent reasonably agreed upon by the chief financial officers (or their
designees) of Cinergy and Duke. All information exchanged pursuant to this
Section 5.04(a) shall be subject to the Confidentiality Agreement.
(b) Effect of Review. No review pursuant to this
Section 5.04 shall have any effect for the purpose of determining the accuracy
of any representation or warranty given by any of the parties hereto to any of
the other parties hereto.
Section 5.05 Regulatory Matters; Reasonable Best Efforts.
(a) Regulatory Approvals. Each party hereto shall
cooperate and promptly prepare and file all necessary documentation, to effect
all necessary applications, notices, petitions and filings, and shall use
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things in order to obtain all approvals and authorizations
of all Governmental Authorities, necessary or advisable to consummate and make
effective, in the most expeditious manner reasonably practicable, the Mergers
and the other transactions contemplated by this Agreement, including the
Cinergy Required Statutory Approvals and the Duke Required Statutory Approvals;
provided, however, that Cinergy shall have primary responsibility for the
preparation and filing of any related applications, filings or other materials
with the PUCO, the IURC and the KPSC and, provided, further, that Duke shall
have primary responsibility for the preparation and filing of any related
applications, filings or other materials with the NCUC and the PSCSC. Cinergy
shall have the right to review and approve in advance all characterizations of
the information relating to Cinergy, on the one hand, and Duke shall have the
right to review and approve in advance all characterizations of the information
relating to Duke, on the other hand, in either case, that appear in any
application, notice, petition or filing made in connection with the Mergers or
the other transactions contemplated by this Agreement. Cinergy and Duke agree
that they will consult and cooperate with each other with respect to the
obtaining of all such necessary approvals and authorizations of Governmental
Authorities. On or about the date which is the twelve-month anniversary of the
date of this Agreement, the parties shall mutually determine in good faith
whether the failure to extend the dates set forth in Section 7.01(b)(i) would
be reasonably likely to result in the failure to receive required consents and
approvals from Governmental Authorities in light of the facts and circumstances
in existence on or about such twelve-month anniversary, and if the parties
determine that such an extension is appropriate, they shall negotiate the terms
and length of such extension in good faith.
(b) Further Actions. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things reasonably necessary or advisable to consummate and make
effective, in the most expeditious manner reasonably practicable, the Mergers
and the other transactions contemplated by this Agreement, including (i) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Authority vacated or reversed, and (ii) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement. Notwithstanding the foregoing, as used in this Section 5.05,
"reasonable best efforts" shall not include nor require any party, except as
set forth in Section 5.05(b) of the Duke Disclosure Letter, to (A) sell, or
agree to sell, hold or agree to hold separate, or otherwise dispose or agree to
dispose of any asset, in each case if such sale, separation or disposition or
agreement with respect thereto (i) would, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Company,
Cinergy or Duke (provided that for the purposes of determining whether a
potential adverse effect would constitute a material adverse effect for the
purposes of this clause (i), each of the Company, Cinergy and Duke and their
respective subsidiaries, taken as a whole, shall each be deemed to be a
consolidated group of entities of the size and scale of Cinergy and its
subsidiaries, taken as a whole), (ii) would involve any capital stock of Duke
Energy Gas Transmission Corporation or any capital stock of its subsidiaries or
any of their respective assets, other than a de minimis amount of such assets
or (iii) is of the Transferred Assets or with respect to the Transferred Assets
and as a result of such sale, separation, disposition or agreement with respect
thereto, thereafter the remaining Transferred Assets held by Duke or its
subsidiaries would include less than 1,500 megawatts, or (B) conduct or agree
to conduct its business in any particular manner if such conduct or agreement
with respect thereto would, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company, Cinergy, or Duke
(provided that for the purposes of determining whether a potential adverse
effect would constitute a material adverse effect for the purposes of this
clause (ii), each of the Company, Cinergy and Duke and their respective
subsidiaries, taken as a whole, shall be deemed to be a consolidated group of
entities of the size and scale of Cinergy and its subsidiaries, taken as a
whole.
(c) State Anti-Takeover Statutes. Without limiting the
generality of Section 5.05(b), Cinergy and Duke shall (i) take all action
necessary to ensure that no state anti-takeover statute or similar statute or
regulation is or becomes applicable to the Mergers, this Agreement or any of
the other transactions contemplated by this Agreement and (ii) if any state
anti-takeover statute or similar statute or regulation becomes applicable to
the Mergers, this Agreement or any other transaction contemplated by this
Agreement, take all action necessary to ensure that the Mergers and the other
transactions contemplated by this Agreement may be consummated as promptly as
reasonably practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Mergers
and the other transactions contemplated by this Agreement.
Section 5.06 Stock Options; Restricted Stock and Equity
Awards; Stock Plans.
(a) (i) At the Effective Time, all outstanding stock
options (the "Cinergy Employee Stock Options") granted under the Cinergy
Employee Stock Option Plans, whether vested or unvested, shall be
converted into an option to acquire, on the same terms and conditions as
were applicable under such Cinergy Employee Stock Option, including
vesting (taking into account any acceleration of vesting that may occur as
a result of the transactions contemplated hereby), a number of shares of
Company Common Stock equal to the number of shares of Cinergy Common Stock
subject to such Cinergy Employee Stock Option immediately before the
Cinergy Effective Time multiplied by the Cinergy Ratio (rounded to the
nearest whole share) at a price per share of Company Common Stock equal to
the price per share under such Cinergy Stock Option divided by the Cinergy
Ratio (rounded to the nearest cent) (each, as so adjusted, a "Cinergy
Adjusted Option");
(ii) Prior to the Effective Time, Cinergy shall
make such other changes to the Cinergy Employee Stock Option Plans as
Cinergy and Duke may agree are appropriate to give effect to the Cinergy
Merger;
(iii) At the Effective Time, each restricted share
of Cinergy Common Stock ("Cinergy Restricted Stock") shall be converted
into a number of restricted shares of Company Common Stock equal to the
number of restricted shares of Cinergy Common Stock multiplied by the
Cinergy Ratio, on the same terms and conditions as were applicable to such
share of Cinergy Common Stock, including vesting (taking into account any
acceleration of vesting that may occur as a result of the transactions
contemplated hereby) ("Cinergy Adjusted Restricted Stock"); and
(iv) except as disclosed in Section 5.06(a) of the
Cinergy Disclosure Letter, all outstanding Cinergy equity or equity-based
awards other than Cinergy Employee Stock Options and Cinergy Restricted
Stock (together, "Cinergy Awards"), whether vested or unvested, as of
immediately prior to the Cinergy Effective Time shall be converted into an
equity or equity-based award in respect of a number of shares of Company
Common Stock equal to the number of Cinergy Common Stock represented by
such award multiplied by the Cinergy Ratio, on the same terms and
conditions as were applicable to such Cinergy equity or equity-based
award, including vesting (taking into account any acceleration of vesting
that may occur as a result of the transactions contemplated hereby)
("Cinergy Adjusted Awards").
(v) Prior to the Cinergy Effective Time, the Board
of Directors of Cinergy (or, if appropriate, any committee administering
the Cinergy Employee Stock Option Plans) shall adopt such resolutions or
take such other actions as may be required to effect the foregoing and to
ensure that the conversion pursuant to Section 2.01(b) of the Cinergy
Common Stock held by any director or officer of Cinergy and the conversion
pursuant to this Section 5.06(a) into Cinergy Adjusted Options of Cinergy
Employee Stock Options, Cinergy Adjusted Restricted Stock of Cinergy
Restricted Stock and Cinergy Adjusted Awards of Cinergy Awards held by any
director or officer of Cinergy will be eligible for exemption under Rule
16b-3(e) under the Exchange Act. Notwithstanding anything in Section
5.06(a) to the contrary, to the extent that the adjustments set forth in
Section 5.06(a) would otherwise result in the adjustment being treated as
a new grant of stock options or deferred compensation under Section 409A
of the Code, the number of shares subject to any Cinergy Adjusted Option,
Cinergy Adjusted Restricted Stock or Cinergy Adjusted Awards converted
pursuant to Section 5.06(a) and the exercise price per share of any
Cinergy Adjusted Option converted pursuant to Section 5.06(a) shall be
determined in a manner that will not result in such conversions being
treated as a new grant of stock options or deferred compensation under
Section 409A of the Code and most closely reflects the economics of the
adjustment pursuant to Section 5.06(a).
(b) (i) At the Duke Effective Time, all outstanding
stock options (the "Duke Employee Stock Options") granted under the Duke
Option Plans, whether vested or unvested, shall be converted into an
option to acquire, on the same terms and conditions as were applicable
under such Duke Employee Stock Option after taking into account the
transactions contemplated hereby, the same number of shares of Company
Common Stock at the same price per share of Company Common Stock (each, as
so adjusted, a "Duke Adjusted Option", and, together with the Cinergy
Adjusted Options, the "Adjusted Options");
(ii) Prior to the Duke Effective Time, Duke shall
make such other changes to the Duke Option Plans as Cinergy and Duke may
agree are appropriate to give effect to the Duke Merger;
(iii) At the Duke Effective Time, each restricted
share of Duke Common Stock (the "Duke Restricted Stock") shall be
converted into a restricted share of Company Common Stock, on the same
terms and conditions as were applicable to such share of Duke Common Stock
after taking into account the transactions contemplated hereby (the "Duke
Adjusted Restricted Stock"); and
(iv) except as disclosed in Section 5.06(b) of the
Duke Disclosure Letter, all outstanding Duke equity or equity-based awards
other than Duke Employee Stock Options and Duke Restricted Stock
(together, "Duke Awards"), whether vested or unvested, as of immediately
prior to the Duke Effective Time shall be converted into an equity or
equity-based award in respect of the same number of shares of Company
Common Stock, on the same terms and conditions as were applicable to such
Duke equity or equity-based award after taking into account the
transactions contemplated hereby ("Duke Adjusted Awards").
(v) Prior to the Duke Effective Time, the Board of
Directors of Duke (or, if appropriate, any committee administering the
Duke Option Plans) shall adopt such resolutions or take such other actions
as may be required to effect the foregoing and to ensure that the
conversion pursuant to Section 2.01(a) of the Duke Common Stock held by
any director or officer of Cinergy and the conversion pursuant to this
Section 5.06(b) into Duke Adjusted Options of Duke Employee Stock Options,
Duke Adjusted Restricted Stock of Duke Restricted Stock and Duke Adjusted
Awards of Duke Awards held by any director or officer of Duke will be
eligible for exemption under Rule 16b-3(e) under the Exchange Act.
Notwithstanding anything in Section 5.06(b) to the contrary, to the extent
that the adjustments set forth in Section 5.06(b) would otherwise result
in the adjustment being treated as a new grant of stock options or
deferred compensation under Section 409A of the Code, the number of shares
subject to any Duke Adjusted Option, Duke Adjusted Restricted Stock or
Duke Adjusted Awards converted pursuant to Section 5.06(b) and the
exercise price per share of any Duke Adjusted Option converted pursuant to
Section 5.06(b) shall be determined in a manner that will not result in
such conversions being treated as a new grant of stock options or deferred
compensation under Section 409A of the Code and most closely reflects the
economics of the adjustment pursuant to Section 5.06(b).
(c) Prior to the Duke Effective Time, the Board of
Directors of the Company shall adopt such resolutions or take such other
actions as may be required to ensure to the maximum extent permitted by law
that the conversion pursuant to Section 2.01(b) of the Duke Common Stock held
by any director or officer of Duke, the conversions pursuant to Section
5.06(b), the conversion pursuant to Section 2.01(a) of the Cinergy Common Stock
held by any director or officer of Cinergy and the conversion pursuant to
Section 5.06(a) will be eligible for exemption under Rule 16b-3(e) under the
Exchange Act. Prior to the Cinergy Effective Time or the Duke Effective Time,
as the case may be, Duke and Cinergy, as applicable, shall each deliver to the
holders of Cinergy Employee Stock Options and Duke Employee Stock Options
(collectively, the "Stock Options") appropriate notices setting forth such
holders' rights pursuant to the respective Cinergy Employee Stock Option Plans
or Duke Option Plans, as the case may be (collectively, the "Stock Plans"), and
the agreements evidencing the grants of such Stock Options, and that such Stock
Options and agreements shall be assumed by the Company and shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 5.06 after giving effect to the Mergers).
(d) Except as otherwise contemplated by this Agreement
and except to the extent required under the respective terms of the Stock
Options, all restrictions or limitations on transfer and vesting with respect
to Stock Options awarded under the Stock Plans, or any other plan, program or
arrangement of Cinergy, Duke or any of their subsidiaries, to the extent that
such restrictions or limitations shall not have already lapsed, shall remain in
full force and effect with respect to such Stock Options after giving effect to
the Mergers and the assumption by the Company as set forth above.
(e) At the Cinergy Effective Time, by virtue of the
Mergers, the Stock Plans shall be assumed by the Company, with the result that
all obligations of Cinergy and Duke under the Stock Plans, including with
respect to awards outstanding at the Effective Time under each Stock Plan,
shall be obligations of the Company following the Effective Time. Prior to the
Cinergy Effective Time, the Company shall take all necessary actions for the
assumption of the Stock Plans, including the reservation, issuance and listing
of Company Common Stock in a number at least equal to the number of shares of
Company Common Stock that will be subject to Adjusted Options. As promptly as
practicable following the Cinergy Effective Time, the Company shall prepare and
file with the SEC a registration statement on Form S-8 (or another appropriate
form) registering a number of shares of Company Common Stock determined in
accordance with the preceding sentence. Such registration statement shall be
kept effective (and the current status of the prospectus or prospectuses
required thereby shall be maintained) at least for so long as Adjusted Options
remain outstanding.
Section 5.07 Employee Matters.
(a) Following the Cinergy Effective Time, the Company
will (subject to this Section 5.07 and Section 5.08), or, as applicable, will
cause its subsidiaries to, honor all obligations under any contracts,
agreements, collective bargaining agreements, plans (as such may be amended in
accordance with this Agreement) and commitments of Cinergy and Duke and their
respective subsidiaries that exist on the date of this Agreement (or as
established or amended in accordance with or permitted by this Agreement) that
apply to any current or former employee, or current or former director, of
Cinergy or Duke or any of their subsidiaries; provided, however, that this
undertaking is not intended to prevent the Company or its subsidiaries from
enforcing such contracts, agreements, collective bargaining agreements, plans
(as such may be amended in accordance with this Agreement) and commitments in
accordance with their terms, including any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective
bargaining agreement or commitment. The Company acknowledges on behalf of
itself and its subsidiaries that the Mergers and the transactions contemplated
by this Agreement shall constitute a "Change of Control" or a "Change in
Control," as applicable under the Cinergy Employee Stock Options and Cinergy
Employee Benefit Plans. Until the first anniversary of the Effective Time, the
Company shall provide, or shall cause to be provided, to each individual who is
an employee of Cinergy or its subsidiaries (exclusive of any individual who is
employed subject to a collective bargaining agreement) immediately prior to the
Cinergy Effective Time ("Cinergy Employees") compensation and benefits from
time to time that are no less favorable, in the aggregate, than the
compensation and benefits provided to Cinergy Employees immediately prior to
the Effective time.
(b) At the Cinergy Effective Time, it shall be the
intent of the Company, that (subject to obligations under applicable law and
applicable collective bargaining agreements) (i) any reductions in the employee
work force of the Company and its subsidiaries shall be made in light of the
circumstances and the objectives to be achieved, giving consideration to
previous work history, job experience and qualifications and such other factors
as the Company and its subsidiaries consider appropriate, without regard to
whether employment prior to the Effective Time was with Cinergy and its
subsidiaries or Duke and its subsidiaries, and any employees whose employment
is terminated or jobs are eliminated by the Company or any of its subsidiaries
during such period shall be entitled to participate on a fair and equitable
basis (as determined by the Company and its subsidiaries) in the job
opportunity and employment placement programs offered by the Company or any of
its subsidiaries for which they are eligible and (ii) employees shall be
entitled to participate in all job training, career development and educational
programs of the Company and its subsidiaries for which they are eligible, and
shall be entitled to be considered for any job opportunities with the Company
and its subsidiaries, in each case without regard to whether employment prior
to the Cinergy Effective Time was with Cinergy and its subsidiaries or Duke and
its subsidiaries. Until the later to occur of (w) the first anniversary of the
Cinergy Effective Time and (x) December 31, 2007 (the "Severance Maintenance
Period"), Cinergy Employees shall be eligible to receive severance benefits
(exclusive of severance benefits provided pursuant to individual agreements or
pursuant to arrangements covering only select highly compensated or management
employees) in amounts and on terms and conditions no less favorable than the
more favorable of (y) those provided to Cinergy Employees pursuant to policies
in effect immediately prior to the Cinergy Effective Time, or (z) those
provided to similarly situated employees of Duke or its subsidiaries
immediately prior to the Effective Time pursuant to policies (other than the
▇▇▇▇ Asset Partners, L.P. 2003-2005 Severance Benefits Plan) as in effect from
time to time during the Severance Maintenance Period.
(c) Subject to its obligations under applicable law and
applicable collective bargaining agreements, the Company and its subsidiaries
shall give credit under each of their respective employee benefit plans,
programs and arrangements to employees for all service prior to the Cinergy
Effective Time with Cinergy or Duke or their respective subsidiaries, as
applicable, or any predecessor employer (to the extent that such credit was
given by Cinergy or Duke or any of their respective subsidiaries, as
applicable) for all purposes for which such service was taken into account or
recognized by Cinergy or Duke or their respective subsidiaries, as applicable,
but not to the extent crediting such service would result in duplication of
benefits (including for benefit accrual purposes under defined benefit pension
plans).
Section 5.08 Indemnification, Exculpation and Insurance.
(a) Each of the Company, Cinergy, Duke, Merger Sub A
and Merger Sub B agrees that, to the fullest extent permitted under applicable
law, all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Cinergy Effective Time now existing in
favor of the current or former directors, officers, employees or fiduciaries
under benefit plans currently indemnified of Cinergy and its subsidiaries or
Duke and its subsidiaries, as the case may be, as provided in their respective
certificate or articles of incorporation, by-laws (or comparable organizational
documents) or other agreements providing indemnification shall survive the
Mergers and shall continue in full force and effect in accordance with their
terms. In addition, from and after the Cinergy Effective Time, directors,
officers, employees and fiduciaries under benefit plans currently indemnified
of Cinergy or Duke or their respective subsidiaries who become directors,
officers, employees or fiduciaries under benefit plans of the Company will be
entitled to the indemnity rights and protections afforded to directors,
officers, employees and fiduciaries under benefit plans of the Company.
(b) For six years after the Effective Time, the Company
shall maintain in effect the directors' and officers' liability (and fiduciary)
insurance policies currently maintained by Cinergy and Duke covering acts or
omissions occurring on or prior to the Effective Time with respect to those
persons who are currently covered by Cinergy's and Duke's respective directors'
and officers' liability (and fiduciary) insurance policies on terms with
respect to such coverage and in amounts no less favorable than those set forth
in the relevant policy in effect on the date of this Agreement. If such no less
favorable insurance coverage cannot be maintained, the Company shall maintain
the most advantageous policies of directors' and officers' insurance otherwise
obtainable. In addition, each of Duke and Cinergy may purchase a six-year
"tail" prepaid policy prior to the Effective Time on terms and conditions no
less advantageous to the Cinergy Indemnified Parties and Duke Indemnified
Parties, or any other person entitled to the benefit of Sections 5.08(a) and
(b), as applicable, than the existing directors' and officers' liability (and
fiduciary) insurance maintained by Duke or Cinergy, as the case may be,
covering without limitation the transactions contemplated hereby. If such
"tail" prepaid policy has been obtained by Duke or Cinergy, as the case may be,
prior to the Effective Time, the Company shall, and shall cause Duke or
Cinergy, as the case may be, after the Effective Time, to maintain such policy
in full force and effect, for its full term, and to continue to honor their
respective obligations thereunder.
(c) From and after the Cinergy Effective Time, each of
the Company and the corporation surviving the Cinergy Merger (the "Cinergy
Surviving Corporation") agrees that it will jointly and severally indemnify and
hold harmless each present director and officer of Cinergy or any of its
subsidiaries (in each case, for acts or failures to act in such capacity),
determined as of the date hereof, and any person who becomes such a director or
officer between the date hereof and the Cinergy Effective Time (collectively,
the "Cinergy Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at or prior to the Cinergy Effective Time, whether asserted or claimed prior
to, at or after the Cinergy Effective Time (including any matters arising in
connection with the transactions contemplated by this Agreement), to the
fullest extent permitted by applicable law (and the Company or the Cinergy
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law, provided that if required by applicable
law the person to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such person is not entitled
to indemnification); and provided, further, that any determination as to
whether a Cinergy Indemnified Person is entitled to indemnification or
advancement of expenses hereunder pursuant to applicable law shall be made by
independent counsel jointly selected by the Cinergy Surviving Corporation and
such Cinergy Indemnified Person.
(d) From and after the Duke Effective Time, each of the
Company and Duke Power LLC, as the successor to the corporation surviving the
Duke Merger, agrees that it will jointly and severally indemnify and hold
harmless each present director and officer of Duke or any of its subsidiaries
(in each case, for acts or failures to act in such capacity), determined as of
the date hereof, and any person who becomes such director or officer between
the date hereof and the Duke Effective Time (collectively, the "Duke
Indemnified Parties"), against any Costs incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at or prior to the Duke Effective Time, whether asserted or claimed prior to,
at or after the Duke Effective Time (including any matters arising in
connection with the transactions contemplated by this Agreement), to the
fullest extent permitted by applicable law (and the Company or Duke Power LLC
shall also advance expenses as incurred to the fullest extent permitted under
applicable law, provided that if required by applicable law the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification); and
provided, further, that any determination as to whether a Duke Indemnified
Person is entitled to indemnification or advancement of expenses hereunder
pursuant to applicable law shall be made by independent counsel jointly
selected by the Duke Power LLC and such Duke Indemnified Person.
(e) The obligations of the Company, the Cinergy
Surviving Corporation and Duke Power LLC under this Section 5.08 shall not be
terminated or modified by such parties in a manner so as to adversely affect
any Cinergy Indemnified Party, Duke Indemnified Party, or any other person
entitled to the benefit of Sections 5.08(a) and (b), as the case may be, to
whom this Section 5.08 applies without the consent of the affected Cinergy
Indemnified Party, Duke Indemnified Party, or such other person, as the case
may be. If the Company, the Cinergy Surviving Corporation or Duke Power LLC or
any of its respective successors or assigns (i) shall consolidate with or merge
into any other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then, and in each such case, proper
provisions shall be made so that the successors and assigns of the Company, the
Cinergy Surviving Corporation or Duke Power LLC, as the case may be, shall
assume all of the obligations set forth in this Section 5.08.
(f) The provisions of Section 5.08 are (i) intended to
be for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
Section 5.09 Fees and Expenses.
(a) Except as provided in this Section 5.09, all fees
and expenses incurred in connection with the Mergers, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Mergers are consummated,
except that each of Cinergy and Duke shall bear and pay one-half of the costs
and expenses incurred in connection with (1) the filing, printing and mailing
of the Form S-4 and the Joint Proxy Statement (including SEC filing fees) and
(2) the filings of the premerger notification and report forms under the HSR
Act (including filing fees). The Company shall file any return with respect to,
and shall pay, any state or local taxes (including any penalties or interest
with respect thereto), if any, that are attributable to (i) the transfer of the
beneficial ownership of Duke's real property and (ii) the transfer of Duke
Common Stock pursuant to this Agreement as a result of the Mergers. Cinergy
shall file any return with respect to, and shall pay, any state or local taxes
(including penalties or interest with respect thereto), if any, that are
attributable to (i) the transfer of the beneficial ownership of Cinergy's real
property and (ii) the transfer of Cinergy Common Stock pursuant to this
Agreement as a result of the Mergers. Cinergy, Duke and the Company shall
cooperate with respect to the filing of such returns, including supplying any
information that is reasonably necessary to complete such returns.
(b) In the event that (i) following the Cinergy
Shareholder Approval, a Cinergy Takeover Proposal shall have been made known to
Cinergy or any person shall have publicly announced an intention (whether or
not conditional) to make a Cinergy Takeover Proposal and thereafter this
Agreement is terminated by Cinergy pursuant to Section 7.01(b)(i), (ii) prior
to or during the Cinergy Shareholders Meeting (or any subsequent meeting of
Cinergy shareholders at which it is proposed that the Cinergy Merger be
approved), a Cinergy Takeover Proposal shall have been publicly disclosed or
any person shall have publicly announced an intention (whether or not
conditional) to make a Cinergy Takeover Proposal, and thereafter this Agreement
is terminated by either Cinergy or Duke pursuant to Section 7.01(b)(iii), (iii)
this Agreement is terminated by Cinergy pursuant to Section 7.01(d), or (iv)
this Agreement is terminated by Duke pursuant to Section 7.01(h)(i) or (iii),
then Cinergy shall immediately pay Duke a fee equal to $300,000,000 (the
"Cinergy Termination Fee") minus any amounts as may have been previously paid
by Cinergy pursuant to Section 5.09(d), payable by wire transfer of same day
funds; provided, however, that no Cinergy Termination Fee shall be payable to
Duke (x) pursuant to clause (i) of this paragraph (b) unless and until within
six months of such termination Cinergy or any of its subsidiaries enters into
any Cinergy Acquisition Agreement or consummates any Cinergy Takeover Proposal,
in either case with the person (or an affiliate of such person) that made the
Cinergy Takeover Proposal referred to in clause (i) of this paragraph (b) or
(y) pursuant to clause (ii) of this paragraph (b) unless and until within 18
months of such termination Cinergy or any of its subsidiaries enters into any
Cinergy Acquisition Agreement or consummates any Cinergy Takeover Proposal, in
either case with the person (or an affiliate of such person) that made the
Cinergy Takeover Proposal referred to in clause (ii) of this paragraph (b) (for
the purposes of the foregoing proviso the terms "Cinergy Acquisition Agreement"
and "Cinergy Takeover Proposal" shall have the meanings assigned to such terms
in Section 4.03 except that the references to "20%" in the definition of
"Cinergy Takeover Proposal" in Section 4.03(a) shall be deemed to be references
to "35%"), in which event the Termination Fee shall be immediately payable upon
the first to occur of such events, and provided, further, if this Agreement is
terminated by Duke pursuant to Section 7.01(h)(i) as a result of the Board of
Directors of Cinergy (or any committee thereof) having withdrawn or modified,
or proposed publicly to withdraw or modify, the approval or recommendation by
such Board of Directors of this Agreement or the Cinergy Merger primarily due
to adverse conditions, events or actions of or relating to Duke, the Cinergy
Termination Fee shall not be payable to Duke.
(c) In the event that (i) following the Duke
Shareholder Approval, a Duke Takeover Proposal shall have been made known to
Duke or any person shall have publicly announced an intention (whether or not
conditional) to make a Duke Takeover Proposal and thereafter this Agreement is
terminated by Duke pursuant to Section 7.01(b)(i), (ii) prior to or during the
Duke Shareholders Meeting (or any subsequent meeting of Duke shareholders at
which it is proposed that the Duke Merger be approved), a Duke Takeover
Proposal shall have been publicly disclosed or any person shall have publicly
announced an intention (whether or not conditional) to make a Duke Takeover
Proposal, and thereafter this Agreement is terminated by either Cinergy or Duke
pursuant to Section 7.01(b)(ii), (iii) this Agreement is terminated by Duke
pursuant to Section 7.01(f), or (iv) this Agreement is terminated by Cinergy
pursuant to Section 7.01(g)(i) or (iii), then Duke shall immediately pay
Cinergy a fee equal to $500,000,000 (the "Duke Termination Fee") minus any
amounts as may have been previously paid by Duke pursuant to Section 5.09(e),
payable by wire transfer of same day funds; provided, however, that no Duke
Termination Fee shall be payable to Cinergy (x) pursuant to clause (i) of this
paragraph (c) unless and until within six months of such termination Duke or
any of its subsidiaries enters into any Duke Acquisition Agreement or
consummates any Duke Takeover Proposal, in either case with the person (or an
affiliate of such person) that made the Duke Takeover Proposal referred to in
clause (i) of this paragraph (c) or (y) pursuant to clause (ii) of this
paragraph (c) unless and until within 18 months of such termination Duke or any
of its subsidiaries enters into any Duke Acquisition Agreement or consummates
any Duke Takeover Proposal, in either case with the person (or an affiliate of
such person) that made the Duke Takeover Proposal referred to in clause (ii) of
this paragraph (c) (for the purposes of the foregoing proviso the terms "Duke
Acquisition Agreement" and "Duke Takeover Proposal" shall have the meanings
assigned to such terms in Section 4.04 except that the references to "20%" in
the definition of "Duke Takeover Proposal" in Section 4.04(a) shall be deemed
to be references to "35%"), in which event the Termination Fee shall be
immediately payable upon the first to occur of such events, and provided,
further, if this Agreement is terminated by Cinergy pursuant to Section
7.01(g)(i) as a result of the Board of Directors of Duke (or any committee
thereof) having withdrawn or modified, or proposed publicly to withdraw or
modify, the approval or recommendation by such Board of Directors of this
Agreement or the Duke Merger primarily due to adverse conditions, events or
actions of or relating to Cinergy, the Duke Termination Fee shall not be
payable to Cinergy.
(d) If this Agreement is terminated by Cinergy pursuant
to Section 7.01(b)(i) (and following the Cinergy Shareholder Approval a Cinergy
Takeover Proposal shall have been made known to Cinergy or any person shall
have publicly announced an intention (whether or not conditional) to make a
Cinergy Takeover Proposal and in each case there shall not have been a bona
fide withdrawal thereof) or by Cinergy or Duke pursuant to Section 7.01(b)(iii)
(after the public disclosure of a Cinergy Takeover Proposal or the announcement
by any person of the intention (whether or not conditional) to make a Cinergy
Takeover Proposal and in each case there shall not have been a bona fide
withdrawal thereof), Cinergy shall reimburse Duke promptly upon demand, but in
no event later than three business days after the date of such demand, by wire
transfer of same day funds, for all fees and expenses, incurred or paid by or
on behalf of, Duke in connection with the Mergers, the Duke Conversion, the
Restructuring Transactions or the transactions contemplated by this Agreement,
including all fees and expenses of counsel, investment banking firms,
accountants, experts and consultants to Duke; provided, however, that Cinergy
shall not be obligated to make payments pursuant to this Section 5.09(d) in
excess of $35,000,000 in the aggregate.
(e) If this Agreement is terminated by Duke pursuant to
Section 7.01(b)(i) (and following the Duke Shareholder Approval a Duke Takeover
Proposal shall have been made known to Duke or any person shall have publicly
announced an intention (whether or not conditional) to make a bona fide Duke
Takeover Proposal and in each case there shall not have been a bona fide
withdrawal thereof) or by Cinergy or Duke pursuant to Section 7.01(b)(ii)
(after the public disclosure of a bona fide Duke Takeover Proposal or the
announcement by any person of the intention (whether or not conditional) to
make a bona fide Duke Takeover Proposal and in each case there shall not have
been a bona fide withdrawal thereof), Duke shall reimburse Cinergy promptly
upon demand, but in no event later than three business days after the date of
such demand, by wire transfer of same day funds, for all fees and expenses
incurred, or paid by or on behalf of, Cinergy in connection with the Mergers or
the transactions contemplated by this Agreement, including all fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants to Cinergy; provided, however, that Duke shall not be obligated to
make payments pursuant to this Section 5.09(e) in excess of $35,000,000 in the
aggregate.
(f) Cinergy acknowledges that the agreements contained
in Sections 5.09(b) and 5.09(d) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Duke would
not enter into this Agreement; accordingly, if Cinergy fails promptly to pay
the amount due pursuant to Section 5.09(b) or 5.09(d), and, in order to obtain
such payment, Duke commences a suit that results in a judgment against Cinergy
for the fees set forth in Section 5.09(b) or 5.09(d), Cinergy shall pay to Duke
its costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Citibank N.A. in effect on the date such payment was required to be
made.
(g) Duke acknowledges that the agreements contained in
Sections 5.09(c) and 5.09(e) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Cinergy
would not enter into this Agreement; accordingly, if Duke fails promptly to pay
the amount due pursuant to Section 5.09(c) or 5.09(e), and, in order to obtain
such payment, Cinergy commences a suit that results in a judgment against Duke
for the fees set forth in Section 5.09(c) or 5.09(e), Duke shall pay to Cinergy
its costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Citibank N.A. in effect on the date such payment was required to be
made.
Section 5.10 Public Announcements. Cinergy and Duke will
consult with each other before issuing, and provide each other the reasonable
opportunity to review, comment upon and concur with, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Mergers, and shall not issue any such press release or
make any such public statement prior to such consultation, except as any party,
after consultation with counsel, determines is required by applicable law or
applicable rule or regulation of the NYSE.
Section 5.11 Affiliates. As soon as practicable after the
date of this Agreement, Cinergy shall deliver to Duke, and Duke shall deliver
to Cinergy, a letter identifying all persons who are, at the time this
Agreement is submitted for adoption by the respective shareholders of Duke and
Cinergy, "affiliates" of Cinergy or Duke, as the case may be, for purposes of
Rule 145 under the Securities Act. Cinergy and Duke shall use their respective
reasonable best efforts to cause each such person to deliver to the Company as
of the Closing Date, a written agreement in mutually acceptable customary form.
Section 5.12 NYSE Listing. The Company shall use its
reasonable best efforts to cause the shares of Company Common Stock issuable to
Cinergy's shareholders and Duke's shareholders as contemplated by this
Agreement to be approved for listing on the NYSE, subject to official notice of
issuance, as promptly as practicable after the date of this Agreement, and in
any event prior to the Closing Date.
Section 5.13 Shareholder Litigation. Each of Cinergy and Duke
shall give the other the reasonable opportunity to consult concerning the
defense of any shareholder litigation against Cinergy or Duke, as applicable,
or any of their respective directors relating to the transactions contemplated
by this Agreement.
Section 5.14 Tax-Free Reorganization Treatment. The parties
to this Agreement intend that the Duke Reorganization will qualify as a
reorganization under Section 368(a) of the Code and that the Cinergy Merger
will qualify as a reorganization under Section 368(a) of the Code, and each
shall not, and shall not permit any of their respective subsidiaries to, take
any action, or fail to take any action, that would reasonably be expected to
jeopardize the qualification of the Duke Reorganization or the Cinergy Merger
as reorganizations under Section 368(a) of the Code.
Section 5.15 Standstill Agreements; Confidentiality
Agreements. During the period from the date of this Agreement through the
Effective Time, neither Cinergy nor Duke shall terminate, amend, modify or
waive any provision of any confidentiality or standstill agreement to which it
or any of its respective subsidiaries is a party unless required by applicable
law or, in the case of a standstill agreement, during the Cinergy Applicable
Period in the case of Cinergy or during the Duke Applicable Period in the case
of Duke, unless the Board of Directors of the applicable party determines in
good faith that failure to do so could reasonably be expected to result in a
breach of its fiduciary obligations under applicable law. During such period,
Cinergy or Duke, as the case may be, shall enforce, to the fullest extent
permitted under applicable law or, in the case of a standstill agreement,
during the Cinergy Applicable Period in the case of Cinergy or during the Duke
Applicable Period in the case of Duke, unless the Board of Directors of the
applicable party determines in good faith that failure to do so could
reasonably be expected to result in a breach of its fiduciary obligations under
applicable law, the provisions of any such agreement, including by seeking
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof.
ARTICLE VI
Conditions Precedent
Section 6.01 Conditions to Each Party's Obligation to Effect
the Mergers. The respective obligation of each party to effect the Mergers is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approvals. Each of the Duke Shareholder
Approval and the Cinergy Shareholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No (i) temporary
restraining order or preliminary or permanent injunction or other order by any
Federal or state court of competent jurisdiction preventing consummation of
either of the Mergers or (ii) applicable Federal or state law prohibiting
consummation of either of the Mergers (collectively, "Restraints") shall be in
effect.
(c) Form S-4. The Form S-4 shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(d) NYSE Listing. The shares of Company Common Stock
issuable to Cinergy's shareholders and Duke's shareholders as contemplated by
this Agreement shall have been approved for listing on the NYSE, subject to
official notice of issuance.
Section 6.02 Conditions to Obligations of Cinergy. The
obligation of Cinergy to effect the Cinergy Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Duke set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) does not have,
and could not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on Duke.
(b) Performance of Obligations of Duke. Duke shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Cinergy shall have received a written
opinion from Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, counsel to Cinergy, dated as of
the Closing Date, to the effect that the Cinergy Merger will qualify as a
reorganization under Section 368(a) of the Code. Such counsel shall be entitled
to rely upon representation letters from each of the Company, Duke, Duke Power
LLC, Cinergy, Merger Sub A, Merger Sub B and others, in each case, in form and
substance reasonably satisfactory to such counsel. Each such representation
letter shall be dated as of the date of such opinion. The opinion condition
referred to in this Section 6.2(c) shall not be waivable after receipt of the
Cinergy Shareholder Approval, unless further approval of the shareholders of
Cinergy is obtained with appropriate disclosure.
(d) Statutory Approvals. The Cinergy Required Statutory
Approvals and the Duke Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting periods
(and any extensions thereof) under the HSR Act applicable to the Mergers and
the transactions contemplated by this Agreement) at or prior to the Effective
Time, such approvals shall have become Final Orders (as defined below) and such
Final Orders shall not impose terms or conditions that, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on
(i) the Company and its prospective subsidiaries taken as a whole, (ii) Cinergy
and its subsidiaries taken as a whole, or (iii) Duke and its subsidiaries taken
as a whole, provided that for the purposes of determining whether such terms
and conditions could have a material adverse effect for the purposes of this
Section 6.02(d), each of the Company, Cinergy and Duke and their respective
subsidiaries, taken as a whole, shall each be deemed to be a consolidated group
of entities of the size and scale of Cinergy and its subsidiaries, taken as a
whole. A "Final Order" means action by the relevant Governmental Authority that
has not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired (a "Final Order Waiting
Period"), and as to which all conditions to the consummation of such
transactions prescribed by law, regulation or order have been satisfied.
(e) No Material Adverse Effect. Except as disclosed in
the Duke SEC Reports filed on or after January 1, 2004 and prior to the date
hereof or in any specific section of the Duke Disclosure Letter corresponding
to Section 3.02, since December 31, 2004, there shall not have been any change,
event, occurrence or development that, individually or in the aggregate, has
had or could reasonably be expected to have a material adverse effect on Duke.
(f) Closing Certificates. Cinergy shall have received a
certificate signed by an executive officer of Duke, dated the Effective Time,
to the effect that, to such officer's knowledge, the conditions set forth in
Sections 6.02(a), 6.02(b) and 6.02(e) have been satisfied.
Section 6.03 Conditions to Obligations of Duke. The
obligation of Duke to effect the Duke Merger, the Duke Conversion and the
Restructuring Transactions is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of Cinergy set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) does not have,
and could not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on Cinergy.
(b) Performance of Obligations of Cinergy. Cinergy
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Duke shall have received a written
opinion from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to Duke, dated
as of the Closing Date, to the effect that the Duke Reorganization will qualify
as a reorganization under Section 368(a) of the Code and that the Cinergy
Merger will qualify as a reorganization under Section 368(a) of the Code. Such
counsel shall be entitled to rely upon representation letters from each of the
Company, Duke, Duke Power LLC, Cinergy, Merger Sub A and Merger Sub B and
others, in each case, in form and substance reasonably satisfactory to such
counsel. Each such representation letter shall be dated as of the date of such
opinion. The opinion condition referred to in this Section 6.3(c) shall not be
waivable after receipt of the Duke Shareholder Approval, unless further
approval of the shareholders of Duke is obtained with appropriate disclosure.
(d) Statutory Approvals. The Cinergy Required Statutory
Approvals and the Duke Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting periods
(and any extensions thereof) under the HSR Act applicable to the Mergers and
the transactions contemplated by this Agreement) at or prior to the Effective
Time, such approvals shall have become Final Orders and such Final Orders shall
not impose terms or conditions that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on (i) the Company and
its prospective subsidiaries taken as a whole, (ii) Cinergy and its
subsidiaries taken as a whole, or (iii) Duke and its subsidiaries taken as a
whole, provided that for the purposes of determining whether such terms and
conditions could have a material adverse effect for the purposes of this
Section 6.03(d), each of the Company, Cinergy and Duke and their respective
subsidiaries, taken as a whole, shall each be deemed to be a consolidated group
of entities of the size and scale of Cinergy and its subsidiaries, taken as a
whole.
(e) No Material Adverse Effect. Except as disclosed in
the Cinergy SEC Reports filed on or after January 1, 2004 and prior to the date
hereof or in any specific section of the Cinergy Disclosure Letter
corresponding to Section 3.01, since December 31, 2004, there shall not have
been any change, event, occurrence or development that, individually or in the
aggregate, has had or could reasonably be expected to have a material adverse
effect on Cinergy.
(f) Closing Certificates. Duke shall have received a
certificate signed by an executive officer of Cinergy, dated the Effective
Time, to the effect that, to such officer's knowledge, the conditions set forth
in Sections 6.03(a), 6.03(b) and 6.03(e) have been satisfied.
Section 6.04 Frustration of Closing Conditions. Neither
Cinergy nor Duke may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable best efforts to consummate the
Mergers and the other transactions contemplated by this Agreement, to the
extent required by and subject to Section 5.05.
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or (other than pursuant to
clauses (d), (f), (g) or (h) below) after the Duke Shareholder Approval or the
Cinergy Shareholder Approval:
(a) by mutual written consent of Cinergy and Duke;
(b) by either Cinergy or Duke:
(i) if the Mergers shall not have been consummated
by the 12-month anniversary of the date of this Agreement (the "Initial
Termination Date"); provided, however, that the right to terminate this
Agreement pursuant to this Section 7.01(b)(i) shall not be available to
any party whose failure to perform any of its obligations under this
Agreement results in the failure of the Mergers to be consummated by such
time; and provided, further, that, (A) if on the Initial Termination Date
the conditions to the Closing set forth in Sections 6.01(b), 6.02(d)
and/or 6.03(d) shall not have been fulfilled but all other conditions to
the Closing shall have been fulfilled or shall be capable of being
fulfilled, then either party may (on one or more occasions) extend the
Initial Termination Date up to the 15-month anniversary of the date of
this Agreement and (B) if the Initial Termination Date (as it may be
extended pursuant to clause (A) of this Section 7.01(b)(i)(A)) shall occur
during any Final Order Waiting Period, the Initial Termination Date shall
be extended until the third business day after the expiration of such
Final Order Waiting Period;
(ii) if the Duke Shareholder Approval shall not
have been obtained at a Duke Shareholders Meeting duly convened therefor
or at any adjournment or postponement thereof;
(iii) if the Cinergy Shareholder Approval shall not
have been obtained at a Cinergy Shareholders Meeting duly convened
therefor or at any adjournment or postponement thereof;
(iv) if any Restraint having any of the effects set
forth in Section 6.01(b) shall be in effect and shall have become final
and nonappealable; provided that the party seeking to terminate this
Agreement pursuant to this Section 7.01(b)(iv) shall have used its
reasonable best efforts to prevent the entry of and to remove such
Restraint; or
(v) if any condition to the obligation of such
party to consummate the Cinergy Merger or the Duke Merger, as applicable,
set forth in Section 6.02 (in the case of Cinergy) or in Section 6.03 (in
the case of Duke) becomes incapable of satisfaction prior to the Initial
Termination Date (or, if the Initial Termination Date is extended in
accordance with the second proviso to Section 7.01(b)(i), such date as
extended); provided, however, in the case of Section 6.02(d) and 6.03(d),
the Initial Termination Date shall refer to such date as it may be
extended pursuant to the second proviso to Section 7.01(b)(i); and
provided further, that the failure of any such condition to be capable of
satisfaction is not the result of a material breach of this Agreement by
the party seeking to terminate this Agreement.
(c) by Cinergy, if Duke shall have breached or failed
to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set forth
in Section 6.02(a) or (b), and (B) is incapable of being cured by Duke or is
not cured by Duke within 105 days following receipt of written notice from
Cinergy of such breach or failure to perform;
(d) by Cinergy in accordance with Section 4.03(b);
provided, that, in order for the termination of this Agreement pursuant to this
paragraph (d) to be deemed effective, Cinergy shall have complied with Section
4.03 and with applicable requirements, including the payment of the Cinergy
Termination Fee, of Section 5.09;
(e) by Duke, if Cinergy shall have breached or failed
to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set forth
in Section 6.03(a) or (b), and (B) is incapable of being cured by Cinergy or is
not cured by Cinergy within 105 days following receipt of written notice from
Duke of such breach or failure to perform;
(f) by Duke in accordance with Section 4.04(b);
provided, that, in order for the termination of this Agreement pursuant to this
paragraph (f) to be deemed effective, Duke shall have complied with Section
4.04 and with applicable requirements, including the payment of the Duke
Termination Fee, of Section 5.09;
(g) by Cinergy, if the Board of Directors of Duke (or
any committee thereof) (i) shall have withdrawn or modified, or proposed
publicly to withdraw or modify, the approval or recommendation by such Board of
Directors of this Agreement or the Duke Merger, (ii) shall fail to reaffirm
such approval or recommendation within 15 business days of receipt of Cinergy's
written request at any time when a Duke Takeover Proposal shall have been made
and not rejected by the Board of Directors of Duke, provided, that, such
15-business day period shall be extended for ten business days following any
material modification to such Duke Takeover Proposal occurring after the
receipt of Cinergy's written request and provided, further, that such
15-business day period shall recommence each time a Duke Takeover Proposal has
been made following the receipt of Cinergy's written request by a person that
had not made a Duke Takeover Proposal prior to the receipt of Cinergy's written
request, or (iii) shall have approved or recommended, or proposed to approve or
recommend, a Duke Takeover Proposal; or
(h) by Duke, if the Board of Directors of Cinergy (or
any committee thereof) (i) shall have withdrawn or modified, or proposed
publicly to withdraw or modify, the approval or recommendation by such Board of
Directors of this Agreement or the Cinergy Merger, (ii) shall fail to reaffirm
such approval or recommendation within 15 business days of receipt of Duke's
written request at any time when a Cinergy Takeover Proposal shall have been
made and not rejected by the Board of Directors of Cinergy, provided, that,
such 15-business day period shall be extended for ten business days following
any material modification to such Cinergy Takeover Proposal occurring after the
receipt of Duke's written request and provided, further, that such 15-business
day period shall recommence each time a Cinergy Takeover Proposal has been made
following the receipt of Duke's written request by a person that had not made a
Cinergy Takeover Proposal prior to the receipt of Duke's written request, or
(iii) shall have approved or recommended, or proposed to approve or recommend,
a Cinergy Takeover Proposal.
Section 7.02 Effect of Termination.
(a) In the event of termination of this Agreement by
either Duke or Cinergy as provided in Section 7.01, this Agreement shall
forthwith become null and void and have no effect, without any liability or
obligation on the part of Cinergy or Duke, other than the provisions of Section
5.09, this Section 7.02 and Article VIII, which provisions shall survive such
termination, and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, in which case
such termination shall not relieve any party of any liability or damages
resulting from its willful and material breach of this Agreement (including any
such case in which a Cinergy Termination Fee or a Duke Termination Fee, as the
case may be, is, or any expenses of Cinergy or Duke in connection with the
transactions contemplated by this Agreement are, payable pursuant to Section
5.09 to Cinergy or Duke, as the case may be (the "Injured Party"), to the
extent any such liability or damage suffered by the Injured Party exceeds the
amount of the Cinergy Termination Fee, in the circumstance in which Duke is the
Injured Party, or the Duke Termination Fee, in the circumstance in which
Cinergy is the Injured Party and any expenses payable pursuant to Section 5.09
to the Injured Party, it being the intent that any Cinergy Termination Fee,
Duke Termination Fee and any expenses paid to the Injured Party shall serve as
a credit against and off-set any liability or damage suffered by the Injured
Party to the extent of such payment).
(b) In the event Duke terminates this Agreement
pursuant to Section 7.01(h)(i) as a result of the Board of Directors of Cinergy
having withdrawn or modified, or proposed to publicly withdraw or modify, the
approval or recommendation by such Board of Directors of this Agreement or the
Cinergy Merger that was made primarily due to adverse conditions, events or
actions of or relating to Duke, in any judicial, court or tribunal proceeding
in which the payment of the Cinergy Termination Fee is at issue, whether
brought or initiated by Duke or Cinergy, Cinergy shall have the burden of
proving that the Board of Directors of Cinergy withdrew or modified, or
proposed publicly to withdraw or modify, the approval or recommendation by such
Board of Directors of this Agreement or the Cinergy Merger primarily due to
adverse conditions, events or actions of or relating to Duke.
(c) In the event Cinergy terminates this Agreement
pursuant to Section 7.01(g)(i) as a result of the Board of Directors of Duke
having withdrawn or modified, or proposed to publicly withdraw or modify, the
approval or recommendation by such Board of Directors of this Agreement or the
Duke Merger that was made primarily due to adverse conditions, events or
actions of or relating to Cinergy, in any judicial, court or tribunal
proceeding in which the payment of the Duke Termination Fee is at issue,
whether brought or initiated by Cinergy or Duke, Duke shall have the burden of
proving that the Board of Directors of Duke withdrew or modified, or proposed
publicly to withdraw or modify, the approval or recommendation by such Board of
Directors of this Agreement or the Duke Merger primarily due to adverse
conditions, events or actions of or relating to Cinergy.
Section 7.03 Amendment. This Agreement may be amended by the
parties at any time before or after the Cinergy Shareholder Approval or the
Duke Shareholder Approval; provided, however, that after any such approval,
there shall not be made any amendment that by law requires further approval by
the shareholders of Cinergy or Duke without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
Section 7.04 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.03, waive compliance by the other parties
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
General Provisions
Section 8.01 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the
parties that by its terms contemplates performance after the Effective Time and
such provisions shall survive the Effective Time.
Section 8.02 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given (as of the time of delivery or, in the case of a telecopied
communication, of confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Cinergy, to:
Cinergy Corp.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President and Chief
Legal Officer
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(b) if to Duke, to:
Duke Energy Corporation
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.:
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Section 8.03 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise;
(b) "capital stock" or "shares of capital stock" means
(a) with respect to a corporation, as determined under the laws of the
jurisdiction of organization of such entity, capital stock or such shares of
capital stock; (b) with respect to a partnership, limited liability company, or
similar entity, as determined under the laws of the jurisdiction of
organization of such entity, units, interests, or other partnership or limited
liability company interests; or (c) any other equity ownership or
participation;
(c) "material adverse change" or "material adverse
effect" means, when used in connection with Cinergy, Duke or the Company, as
the case may be, any change, effect, event, occurrence or state of facts (i)
that is materially adverse to the business, assets, properties, financial
condition or results of operations of such person and its subsidiaries taken as
a whole but excluding any of the foregoing resulting from (A) changes in
international or national political or regulatory conditions generally (in each
case, to the extent not disproportionately affecting the applicable person as
compared to similarly situated persons), (B) changes or conditions generally
affecting the U.S. economy or financial markets or generally affecting any of
the segments of the industry in which the applicable person or any of its
subsidiaries operates (in each case, to the extent not disproportionately
affecting the applicable person as compared to similarly situated persons) or
(C) the announcement or consummation of this Agreement or (ii) that prevents or
materially delays such person from performing its material obligations under
this Agreement or consummation of the transactions contemplated hereby;
(d) "person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(e) "subsidiary" means, with respect to any person, any
other person, whether incorporated or unincorporated, of which more than 50% of
either the equity interests in, or the voting control of, such other person is,
directly or indirectly through subsidiaries or otherwise, beneficially owned by
such first person. Each of Ohio Sub and Indiana Sub shall be considered
wholly-owned subsidiaries of Cinergy.
Section 8.04 Interpretation and Other Matters.
(a) When a reference is made in this Agreement to an
Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
The definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
(b) Each of the Cinergy and Duke has or may have set
forth information in its respective disclosure letter in a section thereof that
corresponds to the section of this Agreement to which it relates. A matter set
forth in one section of a disclosure letter need not be set forth in any other
section of the disclosure letter so long as its relevance to the latter section
of the disclosure letter or section of the Agreement is readily apparent on the
face of the information disclosed in the disclosure letter to the person to
which such disclosure is being made. The fact that any item of information is
disclosed in a disclosure letter to this Agreement shall not be construed to
mean that such information is required to be disclosed by this Agreement. Such
information and the dollar thresholds set forth herein shall not be used as a
basis for interpreting the terms "material," "material adverse effect" or other
similar terms in this Agreement.
(c) Duke agrees to cause each of the Company, Merger
Sub A and Merger Sub B to comply with its respective obligations under this
Agreement.
Section 8.05 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each party and delivered to the other parties.
Section 8.06 Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to herein) and
the Confidentiality Agreement (i) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and (ii)
except for the provisions of Section 5.08 (which shall be enforceable by the
Indemnified Parties), are not intended to confer upon any person other than the
parties any rights or remedies.
Section 8.07 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws, except that matters related to the Cinergy Merger and the
fiduciary obligations of the Cinergy Board of Directors shall be governed by
the laws of the State of Delaware and that matters related to the Duke Merger
and the fiduciary obligations of the Duke Board of Directors shall be governed
by the laws of the State of North Carolina.
Section 8.08 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other party. Any attempted or
purported assignment in violation of the preceding sentence shall be null and
void and of no effect whatsoever. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
Section 8.09 Enforcement. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the Federal court located in the
Borough of Manhattan in The City of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal
jurisdiction of the Federal court located in the Borough of Manhattan in The
City of New York in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the Borough of
Manhattan in The City of New York.
Section 8.10 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. 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 to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
Section 8.11 Waiver of Jury Trial. Each party to this
Agreement waives, to the fullest extent permitted by applicable law, any right
it may have to a trial by jury in respect of any action, suit or proceeding
arising out of or relating to this Agreement.
Section 8.12 Alternative Structure
The parties agree that in the event that it becomes
reasonably likely that it will not be possible to obtain any of the Cinergy
Required Statutory Approvals or Duke Required Statutory Approvals in a manner
that will result in the satisfaction of the conditions set forth in Section
6.02(d) and Section 6.03(d) prior to the Initial Termination Date (assuming the
Initial Termination Date is extended in accordance with the second proviso to
Section 7.01(b)(i)) or reasonably likely that it will not be possible for any
other condition to the obligations of any of the parties to consummate the
transactions contemplated hereby to be satisfied by the Initial Termination
Date, the parties shall use reasonable best efforts to modify the structure of
the Mergers, the Restructuring Transactions and the other transactions
contemplated hereby in order to permit the Mergers to be consummated without
altering the Duke Ratio, the Cinergy Ratio or the anticipated United States
federal income tax consequences to Duke, Cinergy or their shareholders as
promptly as practicable in accordance with their respective terms. The parties
agree that completion of any Restructuring Transactions will not be a condition
to consummation of the Mergers and that Duke will not effect any Restructuring
Transactions that would prevent satisfaction of the conditions set forth in
Article VI.
IN WITNESS WHEREOF, Duke, Cinergy, the Company, Merger Sub A
and Merger Sub B have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first written above.
DUKE ENERGY CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
CINERGY CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
DEER HOLDING CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇
Title: Director
DEER ACQUISITION CORP.
By: /s/ B. ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: B. ▇▇▇▇▇ ▇▇▇▇▇
Title: Director
COUGAR ACQUISITION CORP.
By: /s/ B. ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: B. ▇▇▇▇▇ ▇▇▇▇▇
Title: Director
SIGNATURE PAGE TO THE MERGER AGREEMENT
Exhibit A
To The Merger Agreement
FORM OF CERTIFICATE OF INCORPORATION OF THE
COMPANY AS OF THE EFFECTIVE TIME
RESTATED CERTIFICATE OF INCORPORATION
OF
DUKE ENERGY CORPORATION
DUKE ENERGY CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY AS FOLLOWS:
1. The name of the corporation is Duke Energy Corporation and the name
under which the corporation was originally incorporated was Deer Holding Corp.
The original Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on May 3, 2005.
2. This Restated Certificate of Incorporation, having been duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware (the "DGCL") and by the unanimous written consent of
the stockholders of the Corporation in accordance with Section 228 of the DGCL,
restates and integrates and further amends the provisions of the Certificate of
Incorporation as amended or supplemented heretofore. As so restated and
integrated and further amended, the Restated Certificate of Incorporation
(hereinafter, this "Certificate of Incorporation") reads as follows:
ARTICLE FIRST
Name
The name of the corporation is Duke Energy Corporation.
ARTICLE SECOND
Registered Office
The address of the registered office of the Corporation in the State
of Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of New Castle.
The name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
ARTICLE THIRD
Purpose
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the DGCL.
ARTICLE FOURTH
Capital Stock
(a) The aggregate number of shares of stock that the Corporation shall
have authority to issue is [__________] shares, consisting of [___________]
shares of Common Stock, no par value per share (the "Common Stock"), and
[_________] shares of Preferred Stock, no par value per share (the "Preferred
Stock").
(b) The Board of Directors of the Corporation shall have the full
authority permitted by law, at any time and from time to time, to divide the
authorized and unissued shares of Preferred Stock into one or more classes or
series and, with respect to each such class or series, to determine by
resolution or resolutions the number of shares constituting such class or
series and the designation of such class or series, the voting powers, if any,
of the shares of such class or series, and the preferences and relative,
participating, optional or other special rights, if any, and any
qualifications, limitations or restrictions thereof, of the shares of any such
class or series of Preferred Stock to the full extent now or hereafter
permitted by the law of the State of Delaware. The powers, preferences and
relative, participating, optional and other special rights of each class or
series of Preferred Stock and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other classes or series
at any time outstanding.
(c) Subject to applicable law and the rights, if any, of the holders
of any class or series of Preferred Stock or any class or series of stock
having a preference over or the right to participate with the Common Stock with
respect to the payment of dividends, dividends may be declared and paid on the
Common Stock at such times and in such amounts as the Board of Directors of the
Corporation in its discretion shall determine. Nothing in this ARTICLE FOURTH
shall limit the power of the Board of Directors to create a class or series of
Preferred Stock with dividends the rate of which is calculated by reference to,
and the payment of which is concurrent with, dividends on shares of Common
Stock.
(d) In the event of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, subject to the rights of the
holders of any class or series of the Preferred Stock, the net assets of the
Corporation available for distribution to stockholders of the Corporation shall
be distributed pro rata to the holders of the Common Stock in accordance with
their respective rights and interests. If the assets of the Corporation are not
sufficient to pay the amounts, if any, owing to holders of shares of Preferred
Stock in full, holders of all shares of Preferred Stock will participate in the
distribution of assets ratably in proportion to the full amounts to which they
are entitled or in such order or priority, if any, as will have been fixed in
the resolution or resolutions providing for the issue of the class or series of
Preferred Stock. Neither the merger or consolidation of the Corporation into or
with any other corporation, nor a sale, transfer or lease of all or part of its
assets, will be deemed a liquidation, dissolution or winding up of the
Corporation within the meaning of this paragraph, except to the extent
specifically provided in any certificate of designation for any class or series
of Preferred Stock. Nothing in this ARTICLE FOURTH shall limit the power of the
Board of Directors to create a class or series of Preferred Stock for which the
amount to be distributed upon any liquidation, dissolution or winding up of the
Corporation is calculated by reference to, and the payment of which is
concurrent with, the amount to be distributed to the holders of shares of
Common Stock.
(e) Except as otherwise required by law, as otherwise provided herein
or as otherwise determined by the Board of Directors as to the shares of any
class or series of Preferred Stock, the holders of Preferred Stock shall have
no voting rights and shall not be entitled to any notice of meetings of
stockholders.
(f) Except as otherwise required by law and subject to the rights of
the holders of any class or series of Preferred Stock, with respect to all
matters upon which stockholders are entitled to vote or to which stockholders
are entitled to give consent, the holders of any outstanding shares of Common
Stock shall vote together as a class, and every holder of Common Stock shall be
entitled to cast thereon one vote in person or by proxy for each share of
Common Stock standing in such holder's name on the books of the Corporation;
provided, however, that, except as otherwise required by law, or unless
provided in any certificate of designation for any class or series of Preferred
Stock, holders of Common Stock, as such, shall not be entitled to vote on any
amendment to this Certificate of Incorporation (including any certificate of
designations relating to any class or series of Preferred Stock) that relates
solely to the terms of one or more outstanding classes or series of Preferred
Stock if the holders of such affected class or series are entitled, either
separately or together with the holders of one or more other such classes or
series, to vote thereon pursuant to this Certificate of Incorporation
(including any certificate of designations relating to any class or series of
Preferred Stock) or pursuant to applicable law. Subject to the rights of the
holders of any class or series of Preferred Stock, stockholders of the
Corporation shall not have any preemptive rights to subscribe for additional
issues of stock of the Corporation and no stockholder will be permitted to
cumulate votes at any election of directors.
ARTICLE FIFTH
Board of Directors
(a) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(b) Except as otherwise fixed by or pursuant to provisions of ARTICLE
FOURTH relating to the rights of the holders of any series of Preferred Stock,
the number of directors of the Corporation shall be as from time to time fixed
by, or in the manner provided in, the By-Laws of the Corporation. Election of
directors need not be by written ballot unless the By-Laws so provide. A
director may be removed from office with or without cause; provided, however,
that, subject to applicable law, any director elected by the holders of any
series of Preferred Stock may be removed without cause only by the holders of a
majority of the shares of such series of Preferred Stock.
(c) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the DGCL, this
Certificate of Incorporation, and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Laws had not been adopted.
ARTICLE SIXTH
Action by Stockholders; Books of the Corporation
(a) Meetings of stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
(b) Any action required or permitted to be taken at any Annual or
Special Meeting of stockholders of the Corporation may be taken without a
meeting, without prior notice and without a vote only if consent in writing
setting forth the action so taken is signed by all the holders of the
Corporation's issued and outstanding capital stock entitled to vote thereon.
ARTICLE SEVENTH
Amendment of Certificate of Incorporation
The Corporation reserves the right to supplement, amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of the State of Delaware and
this Certificate of Incorporation, and all rights conferred upon stockholders,
directors and officers herein are granted subject to this reservation.
ARTICLE EIGHTH
Amendment of By-laws
In furtherance and not in limitation of the powers conferred
upon it by law, the Board of Directors of the Corporation is expressly
authorized to adopt, repeal, alter or amend the By-laws of the Corporation.
ARTICLE NINTH
Limitation of Liability
Except to the extent elimination or limitation of liability
is not permitted by applicable law, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty in such capacity. Any repeal or modification
of this ARTICLE NINTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
ARTICLE TENTH
Liability of Stockholders
The holders of the capital stock of the Corporation shall not
be personally liable for the payment of the Corporation's debts, and the
private property of the holders of the capital stock of the Corporation shall
not be subject to the payment of debts of the Corporation to any extent
whatsoever.
IN WITNESS WHEREOF, THE UNDERSIGNED, being the [INSERT
TITLE], has executed this Restated Certificate of Incorporation as of the
[_____] day of [______], 200[ ], and DOES HEREBY CERTIFY under the penalties of
perjury that the facts stated in this Restated Certificate of Incorporation are
true.
By: ________________________
Name:
Title:
Exhibit B
To The Merger Agreement
FORM OF BY-LAWS OF THE COMPANY
AS OF THE EFFECTIVE TIME
AMENDED AND RESTATED
BY-LAWS
of
DUKE ENERGY CORPORATION
Effective as of o, o
TABLE OF CONTENTS
ARTICLE I Offices ..........................................................................1
Section 1.01. Principal Office..........................................................1
Section 1.02. Registered Office and Agent...............................................1
Section 1.03. Other Offices.............................................................1
ARTICLE II Stockholders ..........................................................................1
Section 2.01. Place of Stockholders' Meetings...........................................1
Section 2.02. Day and Time of Annual Meetings of Stockholders...........................2
Section 2.03. Purposes of Annual Meetings...............................................2
Section 2.04. Special Meetings of Stockholders..........................................3
Section 2.05. Notice of Meetings of Stockholders........................................3
Section 2.06. Quorum of Stockholders....................................................4
Section 2.07. Presiding Officer and Secretary of Meeting; Conduct of Meetings...........4
Section 2.08. Voting by Stockholders....................................................5
Section 2.09. Proxies...................................................................6
Section 2.10. Inspector.................................................................6
Section 2.11. List of Stockholders......................................................7
Section 2.12. Fixing of Record Date for Determination of Stockholders of Record.........7
ARTICLE III Directors ............................................................................8
Section 3.01. Number and Qualifications.................................................8
Section 3.02. Board Representation......................................................8
Section 3.03. Election and Term of Directors........................................... 9
Section 3.04. Newly Created Directorships; Vacancies...................................10
Section 3.05. Resignation..............................................................10
Section 3.06. Meetings of the Board....................................................11
Section 3.07. Quorum and Action........................................................11
Section 3.08. Presiding Officer and Secretary of Meeting...............................11
Section 3.09. Action by Consent without Meeting........................................11
Section 3.10. Compensation of Directors................................................11
Section 3.11. Committees of the Board and Powers.......................................11
Section 3.12. Meetings of Committees...................................................12
Section 3.13. Quorum of Committee; Manner of Action....................................12
ARTICLE IV Officers .............................................................................12
Section 4.01. Elected Officers.........................................................12
Section 4.02. Election and Term of Office..............................................13
Section 4.03. Chairman of the Board....................................................13
Section 4.04. Chief Executive Officer..................................................13
Section 4.05. President................................................................13
Section 4.06. Vice Presidents..........................................................13
Section 4.07. Secretary................................................................13
Section 4.08. Treasurer................................................................14
Section 4.09. Controller...............................................................14
Section 4.10. Assistant Secretaries, Assistant Treasurers and Assistant Controllers....14
Section 4.11. Removal..................................................................15
Section 4.12. Vacancies................................................................15
ARTICLE V Indemnification........................................................................15
Section 5.01. Power to Indemnify in Actions, Suits or Proceedings other
than Those by or in the Right of the Corporation.........................15
Section 5.02. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation.............................................15
Section 5.03. Authorization of Indemnification.........................................16
Section 5.04. Good Faith Defined.......................................................16
Section 5.05. Indemnification by a Court...............................................16
Section 5.06. Expenses Payable in Advance..............................................17
Section 5.07. Nonexclusivity of Indemnification and Advancement of Expenses............17
Section 5.08. Insurance................................................................17
Section 5.09. Certain Definitions......................................................17
Section 5.10. Survival of Indemnification and Advancement of Expenses..................18
Section 5.11. Limitation on Indemnification............................................18
Section 5.12. Indemnification of Employees and Agents..................................18
ARTICLE VI Capital Stock.........................................................................18
Section 6.01. Stock Certificates.......................................................18
Section 6.02. Record Ownership.........................................................19
Section 6.03. Transfer of Record Ownership.............................................19
Section 6.04. Transfer Agent; Registrar; Rules Respecting Certificates.................19
Section 6.05. Lost, Stolen or Destroyed Certificates...................................19
ARTICLE VII Contracts, Checks and Drafts, Deposits and Proxies...................................20
Section 7.01. Contracts................................................................20
Section 7.02. Checks and Drafts........................................................20
Section 7.03. Deposits.................................................................20
Section 7.04. Proxies..................................................................20
ARTICLE VIII General Provisions..................................................................20
Section 8.01. Dividends................................................................20
Section 8.02. Fiscal Year..............................................................20
Section 8.03. Seal.....................................................................21
Section 8.04. Waivers of Notice........................................................21
ARTICLE IX Amendment of By-Laws..................................................................21
Section 9.01. Amendment................................................................21
Section 9.02. Entire Board of Directors................................................21
ARTICLE X Emergency Provisions...................................................................21
Section 10.01. General..................................................................21
Section 10.02. Unavailable Directors....................................................22
Section 10.03. Authorized Number of Directors...........................................22
Section 10.04. Quorum...................................................................22
Section 10.05. Creation of Emergency Committee..........................................22
Section 10.06. Constitution of Emergency Committee......................................22
Section 10.07. Powers of Emergency Committee............................................22
Section 10.08. Directors Becoming Available.............................................23
Section 10.09. Election of Board of Directors...........................................23
Section 10.10. Termination of Emergency Committee.......................................23
Section 10.11. Nonexclusive Powers......................................................23
AMENDED AND RESTATED BY-LAWS
of
DUKE ENERGY CORPORATION
(A CORPORATION ORGANIZED UNDER THE LAWS OF THE
STATE OF DELAWARE, THE "CORPORATION")
(EFFECTIVE AS OF o, o)
ARTICLE I
Offices
Section 1.01. Principal Office. The principal office of the
Corporation shall be located in Charlotte, North Carolina.
Section 1.02. Registered Office and Agent. The address of the
registered office of the Corporation in the State of Delaware shall be ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The name of the registered agent is
The Corporation Trust Company. Such registered agent has a business office
identical with such registered office.
Section 1.03. Other Offices. The Corporation may have such other
offices either within or without the State of Delaware as the Board of
Directors (the "Board" and each member thereof, a "Director") may designate or
as the business of the Corporation may from time to time require.
ARTICLE II
Stockholders
Section 2.01. Place of Stockholders' Meetings. All meetings of the
stockholders of the Corporation shall be held at such place or places, within
or outside the State of Delaware, as may be fixed by the Board from time to
time or as shall be in the respective notices thereof. The Board may, in its
sole discretion, determine that a meeting of the stockholders shall not be held
at any place, but may instead be held solely by means of remote communication
in the manner authorized by the General Corporation Law of the State of
Delaware (the "DGCL").
Section 2.02. Day and Time of Annual Meetings of Stockholders. An
annual meeting of stockholders shall be held at such date and hour as shall be
determined by the Board and designated in the notice thereof. Any previously
scheduled annual meeting of stockholders may be postponed by action of the
Board taken prior to the time previously scheduled for such annual meeting of
stockholders.
Section 2.03. Purposes of Annual Meetings.
(a) Subject to the rights of the holders of any series of
Preferred Stock of the Corporation, at each annual meeting, the stockholders
shall elect the Directors. At any such annual meeting any other business
properly brought before the meeting may be transacted.
(b) To be properly brought before an annual meeting, business
must be (i) specified in the notice of the meeting (or any supplement thereto)
given by or at the direction of the Board, (ii) otherwise properly brought
before the meeting by or at the direction of the Board or (iii) otherwise
properly brought before the meeting by a stockholder who is a holder of record
at the time of the giving of notice provided for in this Section 2.03(b), who
is entitled to vote at the meeting and who complies with the procedures set
forth in this Section 2.03(b). For business to be properly brought before an
annual meeting by a stockholder, such business must be a proper matter for
stockholder action under applicable law and the stockholder must have given
written notice thereof, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Corporation at the principal executive
offices of the Corporation, not less than 90 days nor more than 120 days prior
to the anniversary date of the immediately preceding annual meeting provided,
that the first such anniversary date occurring after the effective date of
these By-Laws shall be deemed to be o, o and provided, further, that in the
event that the date of the annual meeting is more than 30 days before or more
than 60 days after such anniversary date, notice by the stockholder to be
timely must be so received not later than the tenth day following the day on
which notice of the date of the annual meeting was mailed or public
announcement of the date of such meeting is first made by the Corporation,
whichever occurs first. In no event shall the public announcement of an
adjournment of an annual meeting of shareholders commence a new time period for
the giving of a shareholder's notice as described above. Any such notice shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, and, in the event that such business includes a proposal to amend
either the Restated Certificate of Incorporation of the Corporation (the
"Certificate") or these By-Laws, the text of the proposed amendment; (ii) the
name and address, as they appear on the Corporation's books, of the stockholder
proposing such business; (iii) the class and number of shares of the
Corporation that are beneficially owned by the stockholder; (iv) any material
interest of the stockholder in such business, and (v) if the stockholder
intends to solicit proxies in support of such stockholder's proposal, a
representation to that effect. The foregoing notice requirements shall be
deemed satisfied by a stockholder if the stockholder has notified the
Corporation of his or her intention to present a proposal at an annual meeting
and such stockholder's proposal has been included in a proxy statement that has
been prepared by management of the Corporation to solicit proxies for such
annual meeting; provided, however, that if such stockholder does not appear or
send a qualified representative to present such proposal at such annual
meeting, the Corporation need not present such proposal for a vote at such
meeting, notwithstanding that proxies in respect of such vote may have been
received by the Corporation. No business shall be conducted at an annual
meeting of stockholders except in accordance with this Section 2.03(b), and the
presiding officer of any annual meeting of stockholders may refuse to permit
any business to be brought before an annual meeting without compliance with the
foregoing procedures or if the stockholder solicits proxies in support of such
stockholder's proposal without such stockholder having made the representation
required by clause (v) of the second preceding sentence.
Section 2.04. Special Meetings of Stockholders.
(a) Except as otherwise expressly required by the Certificate
or applicable law and subject to the rights of the holders of any series of
Preferred Stock of the Corporation, special meetings of the stockholders or of
any class or series entitled to vote may be called for any purpose or purposes
by the Chairman of the Board or by the Board of Directors pursuant to a
resolution stating the purpose or purposes thereof, to be held at such place
(within or without the State of Delaware), date and hour as shall be determined
by the Chairman or the Board, as applicable, and designated in the notice
thereof. At any such special meeting any business properly brought before the
meeting may be transacted.
(b) To be properly brought before a special meeting, business
must be (i) specified in the notice of the meeting (or any supplement thereto)
given by or at the direction of the Board or (ii) otherwise properly brought
before the meeting by or at the direction of the Board. No business shall be
conducted at a special meeting of stockholders except in accordance with this
Section 2.04(b) or as required by applicable law.
Section 2.05. Notice of Meetings of Stockholders. Whenever
stockholders are required or permitted to take any action at a meeting, unless
notice is waived in writing by all stockholders entitled to vote at the
meeting, a written notice of the meeting shall be given which shall state the
place, if any, date and hour of the meeting, the means of remote communication,
if any, by which stockholders and proxy holders may be deemed to be present in
person and vote at such meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called.
In lieu of and/or in addition to the foregoing, notice of any meeting
of the stockholders of the Corporation may be given via electronic
transmission, to the fullest extent permitted by Section 232 of the DGCL. To be
valid, such electronic transmission notice must be in a form of electronic
transmission to which the stockholder has consented. Any stockholder can revoke
consent to receive notice by a form of electronic transmission by written
notice to the Corporation. Such consent shall be deemed revoked after two
consecutive electronic transmissions by the Corporation are returned as
undeliverable; provided, however, the inadvertent failure to treat any such
undeliverable notices as a revocation shall not invalidate any meeting or other
action. "Electronic transmission" shall mean any form of communication, not
directly involving the physical transmission of paper, that creates a record
and that may be retained, retrieved, and reviewed by a recipient thereof, and
that may be directly reproduced in paper form by such a recipient through an
automated process.
Unless otherwise provided by law, and except as to any stockholder
duly waiving notice, the written notice of any meeting shall be given
personally, by mail, or by a form of electronic transmission consented to by
the stockholder to whom notice is given, not less than 10 days nor more than 60
days before the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, notice shall be deemed given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his or her
address as it appears on the records of the Corporation. If by a form of
electronic transmission, notice shall be deemed given when transmitted to the
stockholder in accordance with the provisions set forth herein; provided,
however, that if the electronic transmission notice is posted on an electronic
network (e.g., a website or chatroom), notice shall be deemed given upon the
later of (A) such posting and (B) the giving of separate notice of the posting
to the stockholder.
Except as otherwise expressly required by applicable law, notice of
any adjourned meeting of stockholders need not be given if the time, place, if
any, thereof, and the means of remote communications, if any, by which
stockholders and proxy holders may be deemed to be present in person and vote
at such adjourned meeting are announced at the meeting at which the adjournment
is taken.
Section 2.06. Quorum of Stockholders.
(a) Unless otherwise expressly required by the Certificate or
applicable law, at any meeting of the stockholders, the presence in person or
by proxy of stockholders entitled to cast a majority of the votes entitled to
be cast thereat shall constitute a quorum for the entire meeting,
notwithstanding the withdrawal of stockholders entitled to cast a sufficient
number of votes in person or by proxy to reduce the number of votes represented
at the meeting below a quorum. Shares of the Corporation's stock belonging to
the Corporation or to another corporation, if a majority of the shares entitled
to vote in an election of the directors of such other corporation is held by
the Corporation, shall neither be counted for the purpose of determining the
presence of a quorum nor be entitled to vote at any meeting of the
stockholders; provided, however, that the foregoing shall not limit the right
of the Corporation to vote stock, including its own stock, held by it in a
fiduciary capacity.
(b) At any meeting of the stockholders at which a quorum
shall be present, a majority of those present in person or by proxy may adjourn
the meeting from time to time. Whether or not a quorum is present, the officer
presiding thereat shall have power to adjourn the meeting from time to time.
Except as otherwise expressly required by applicable law, notice of any
adjourned meeting other than announcement at the meeting at which an
adjournment is taken shall not be required to be given.
(c) At any adjourned meeting, any business may be transacted
that might have been transacted at the meeting originally called, but only
those stockholders entitled to vote at the meeting as originally noticed shall
be entitled to vote at any adjournment or adjournments thereof unless a new
record date is fixed by the Board.
Section 2.07. Presiding Officer and Secretary of Meeting; Conduct of
Meetings.
(a) The Chairman of the Board or, in his or her absence,
another officer of the Corporation designated by the Chairman of the Board,
shall preside at meetings of the stockholders. The Secretary or an Assistant
Secretary of the Corporation shall act as secretary of the meeting, or if
neither is present, then the presiding officer may appoint a person to act as
secretary of the meeting.
(b) The Board may to the extent not prohibited by law adopt
such rules and regulations for the conduct of the meeting of the stockholders
as it shall deem appropriate. Except to the extent inconsistent with such rules
and regulations as adopted by the Board, the presiding officer of any meeting
of the stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
presiding officer, are appropriate for the proper conduct of the meeting. Such
rules, regulations or procedures, whether adopted by the Board or prescribed by
the presiding officer of the meeting, may to the extent not prohibited by law
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other
persons as the presiding officer of the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless, and to the extent, determined by the Board or the
presiding officer of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
Section 2.08. Voting by Stockholders.
(a) Except as otherwise expressly required by the Certificate
or applicable law, at every meeting of the stockholders each stockholder of
record shall be entitled to the number of votes specified in the Certificate
(or, with respect to any class or series of Preferred Stock, in the applicable
certificate of designations providing for the creation of such class or
series), in person or by proxy, for each share of stock standing in his or her
name on the books of the Corporation on the date fixed pursuant to the
provisions of Section 2.11 of these By-Laws as the record date for the
determination of the stockholders who shall be entitled to receive notice of
and to vote at such meeting.
(b) When a quorum is present at any meeting of the
stockholders, all questions shall be decided by the vote of a majority of the
total number of votes of the Corporation's capital stock represented and
entitled to vote at such meeting, unless the question is one upon which by
express provision of law, the rules or regulations of any stock exchange or
governmental or regulatory body applicable to the Corporation, the Certificate
or these By-Laws, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Such votes
may be cast in person or by proxy as provided in Section 209.
(c) Except as otherwise expressly required by applicable law,
the vote at any meeting of stockholders on any question need not be by ballot,
unless so directed by the presiding officer of the meeting.
Section 2.09. Proxies. Each stockholder entitled to vote at a
meeting of the stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for such stockholder as proxy, but no such proxy shall be voted upon after
three years from its date, unless such proxy provides for a longer period.
Without limiting the manner in which a stockholder may authorize another person
or persons to act for such stockholder as proxy, the following shall constitute
a valid means by which a stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing
another person or persons to act for such stockholder as proxy. Execution
may be accomplished by the stockholder or such stockholder's authorized
officer, director, employee or agent signing such writing or causing such
person's signature to be affixed to such writing by any reasonable means,
including, but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or
persons to act for such stockholder as proxy by transmitting or
authorizing the transmission of a telegram, cablegram or other means of
electronic transmission to the person who will be the holder of the proxy
or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the
proxy to receive such transmission, provided that any such telegram,
cablegram or other means of electronic transmission must either set forth
or be submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by
the stockholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there are
no inspectors, such other persons making that determination shall specify
the information on which they relied.
Any copy, facsimile telecommunication or other reliable reproduction
of the writing or transmission authorizing another person or persons to act as
proxy for a stockholder may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing
or transmission could be used; provided, however, that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Section 2.10. Inspector. In advance of any meeting of the
stockholders, the Board or the Chairman of the Board shall appoint one or more
inspectors to act at the meeting and make a written report thereof. One or more
other persons may be designated as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a
meeting of the stockholders, the presiding officer of the meeting shall appoint
one or more inspectors to act at the meeting. Unless otherwise required by
applicable law, inspectors may be officers, employees or agents of the
Corporation. Each inspector, before entering upon the discharge of the duties
of inspector, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of such
inspector's ability. The inspector shall have the duties prescribed by law and
shall take charge of the polls and, when the vote is completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by applicable law.
Section 2.11. List of Stockholders.
(a) At least ten days before every meeting of stockholders,
the officer who has charge of the stock ledger of the Corporation shall cause
to be prepared and made a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder.
(b) For such ten-day period through the conclusion of the
meeting, such list shall be open to examination by any stockholder for any
purpose germane to the meeting as required by applicable law (i) on a
reasonably accessible electronic network provided that the information required
to gain access to such list is provided with the notice of the meeting or (ii)
during ordinary business hours, at the principal place of business of the
Corporation. In the event that the Corporation determines to make the list
available on an electronic network, the Corporation may take reasonable steps
to ensure that such information is available only to stockholders of the
Corporation. If the meeting is to be held at a place, then the list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. If the meeting
is to be held solely by means of remote communication, then the list shall also
be open to the examination of any stockholder during the whole time of the
meeting on a reasonably accessible electronic network, and the information
required to access such list shall be provided with the notice of the meeting.
(c) The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list required by
this Section 2.11 or the books of the Corporation, or to vote in person or by
proxy at any meeting of stockholders.
Section 2.12. Fixing of Record Date for Determination of
Stockholders of Record.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than 60 nor less
than ten days before the date of such meeting.
If no record date is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which the meeting is held.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board may fix a new record date for
the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board,
and prior action by the Board is required by law, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto.
ARTICLE III
Directors
Section 3.01. Number and Qualifications. The number of Directors
constituting the Board shall be not less than nine nor more than 18, as may be
fixed from time to time by the Board in accordance with Section 3.07. A
director must be a shareholder of the Corporation. On the effective date of
these By-Laws, the number of Directors constituting the Board shall be 15 (the
"Initial Board"). Notwithstanding any provision in these By-Laws or the
Certificate to the contrary, prior to the first annual meeting of stockholders
at which Directors are elected following the effective date of these By-Laws,
the size of the Initial Board shall not be increased or decreased without the
affirmative vote of at least 80% of the entire Board.
Section 3.02. Board Representation. On the effective date of these
By-Laws, the Initial Board shall consist of ten Duke Directors and five Cinergy
Directors (as such terms are defined below). The term "Duke Director" means any
person serving as a director of Duke Energy Corporation prior to the Duke
Effective Time and who becomes a Director of the Corporation on the effective
date of these By-Laws and the term "Cinergy Director" means any person serving
as a director of Cinergy Corp. prior to the Cinergy Effective Time and who
becomes a Director of the Corporation on the effective date of these By-Laws.
The terms "Cinergy Effective Time" and "Duke Effective Time" have the meanings
ascribed to such terms in that certain Agreement and Plan of Merger, dated as
of May 8, 2005, by and among the Corporation, Duke Energy Corporation, Cinergy,
Deer Acquisition Corp. and Cougar Acquisition Corp. Other than the constitution
of the Initial Board pursuant to Sections 3.01 and 3.02, the By-Laws shall
apply without regard to whether a Director is a Cinergy Director or a Duke
Director.
Section 3.03. Election and Term of Directors. Subject to the rights of
the holders of any class or series of Preferred Stock of the Corporation,
nominations of persons for election as Directors may be made by the Board or by
any stockholder who is a stockholder of record at the time of giving of the
notice of nomination provided for in this Section 3.03 and who is entitled to
vote for the election of Directors. Any stockholder of record entitled to vote
for the election of Directors at a meeting may nominate a person or persons for
election as Directors only if written notice of such stockholder's intent to
make such nomination is given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary at the principal executive offices of
the Corporation, not later than (i) with respect to an election to be held at
an annual meeting of stockholders, not less than 90 nor more than 120 days
prior to the anniversary date of the immediately preceding annual meeting
provided, that the first such anniversary date occurring after the effective
date of these By-Laws shall be deemed to be o, o and provided, further, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the stockholder to be
timely must be so received not later than the tenth day following the day on
which notice of the date of the annual meeting was mailed or public
announcement of the date of such meeting is first made by the Corporation,
whichever occurs first and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of Directors, not earlier than
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
tenth day following the day on which public announcement of the date of the
special meeting and of the nominees to be elected at such meeting is first
made. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board; (e) the consent of each nominee to serve as a
Director if so elected; and (f) if the stockholder intends to solicit proxies
in support of such stockholder's nominee(s), a representation to that effect.
The presiding officer of any meeting of stockholders to elect Directors and the
Board may refuse to acknowledge any attempted nomination of any person not made
in compliance with the foregoing procedure or if the stockholder solicits
proxies in support of such stockholder's nominee(s) without such stockholder
having made the representation required by clause (f) of the preceding
sentence. Only such persons who are nominated in accordance with the procedures
set forth in this Section 3.03 shall be eligible to serve as Directors of the
Corporation.
At each meeting of the stockholders for the election of Directors at
which a quorum is present, the persons receiving the greatest number of votes,
up to the number of Directors to be elected, shall be the Directors. Each
Director so elected shall hold office until the next annual meeting of
stockholders and until such Director's successor is duly elected and qualified
or until such Director's earlier death, resignation or removal.
Section 3.04. Newly Created Directorships; Vacancies. Subject to the
rights of holders of any class or series of Preferred Stock and unless
otherwise required by the Certificate, newly created directorships resulting
from any increase in the number of Directors and any vacancies on the Board
resulting from death, resignation, disqualification, removal or other cause
shall be filled only by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board, and any
Director so chosen shall hold office until the next annual meeting of
stockholders at which Directors are elected and until their successors are duly
elected and qualified, or until their earlier death, resignation or removal. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
Section 3.05. Resignation. Any Director may resign at any time upon
notice given in writing or by electronic transmission to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time be not specified, upon receipt thereof, and the acceptance of such
resignation, unless required by the terms thereof, shall not be necessary to
make such resignation effective.
Section 3.06. Meetings of the Board.
(a) The Board may hold its meetings, both regular and
special, either within or outside the State of Delaware, at such places as from
time to time may be determined by the Board or as may be designated in the
respective notices or waivers of notice thereof.
(b) Regular meetings of the Board shall be held at such times
and at such places as from time to time shall be determined by the Board.
(c) The first meeting of each newly elected Board shall be
held as soon as practicable after the annual meeting of the stockholders and
shall be for the election of officers and the transaction of such other
business as may come before such meeting.
(d) Special meetings of the Board shall be held whenever
called by direction of the Chairman of the Board or at the request of Directors
constituting a majority of the number of Directors then in office.
(e) Members of the Board or any Committee of the Board may
participate in a meeting of the Board or such Committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and by any
other means of remote communication permitted by applicable law, and such
participation shall constitute presence in person at such meeting.
(f) A regular meeting of the Board of Directors shall be held
without other notice than this By-Law as soon as practicable after the annual
meeting of shareholders. The Board of Directors may, by resolution, provide the
time and place for the holding of additional regular meetings without other
notice than such resolution. Notice of any special meeting of directors shall
be given to each director at such director's business or residence in writing
by hand delivery, first-class or overnight mail or courier service, facsimile
transmission or orally by telephone. If mailed by first-class mail, such notice
shall be deemed adequately delivered when deposited in the United States mails
so addressed, with postage thereon prepaid, at least 5 calendar days before
such meeting. If by overnight mail or courier service, such notice shall be
deemed adequately delivered when the notice is delivered to the overnight mail
or courier service company at least 24 hours before such meeting. If by
facsimile transmission, such notice shall be deemed adequately delivered when
the notice is transmitted at least 12 hours before such meeting. If by
telephone or by hand delivery, the notice shall be given at least 12 hours
prior to the time set for the meeting. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice of such meeting. Any and all business
may be transacted at any meeting of the Board. No notice of any adjourned
meeting need be given. No notice to or waiver by any Director shall be required
with respect to any meeting at which the Director is present except when such
Director attends the meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened.
Section 3.07. Quorum and Action. Except as otherwise expressly
required by the Certificate, these By-Laws or applicable law, at any meeting of
the Board, the presence of at least a majority of the number of Directors fixed
pursuant to these By-Laws shall constitute a quorum for the transaction of
business; but if there shall be less than a quorum at any meeting of the Board,
a majority of those present may adjourn the meeting from time to time. Unless
otherwise provided by applicable law, the Certificate or these By-Laws, the
vote of a majority of the Directors present at any meeting at which a quorum is
present shall be necessary for the approval and adoption of any resolution or
the approval of any act of the Board.
Section 3.08. Presiding Officer and Secretary of Meeting. The Chairman
of the Board or, in the absence of the Chairman of the Board, the Lead
Director, or in the absence of the Chairman of the Board and the Lead Director,
the Chief Executive Officer, or in the absence of the Chairman of the Board,
the Lead Director and the Chief Executive Officer, a member of the Board
selected by the members present, shall preside at meetings of the Board. The
Secretary shall act as secretary of the meeting, but in the Secretary's absence
the presiding officer may appoint a secretary of the meeting.
Section 3.09. Action by Consent without Meeting. Any action required
or permitted to be taken at any meeting of the Board or of any Committee
thereof may be taken without a meeting if all of the Directors or members of
such Committee, as the case may be, consent thereto in writing or by electronic
transmission, and the writing or writings or electronic transmissions are filed
with the minutes of proceedings of the Board or such Committee.
Section 3.10. Compensation of Directors. Directors, as such, may
receive, pursuant to resolution of the Board, fixed fees and other compensation
for their services as Directors, including, without limitation, their services
as members of a Committee of the Board.
Section 3.11. Committees of the Board and Powers. The Board may
designate one or more Committees of the Board, which shall consist of two or
more Directors. Any such Committee may to the extent permitted by applicable
law exercise such powers and shall have such responsibilities as shall be
specified in the designating resolution. A Committee of the Board may not (i)
approve or adopt, or recommend to the stockholders, any action or matter (other
than the election or removal of directors) expressly required by law to be
submitted to stockholders for approval or (ii) adopt, amend or repeal any bylaw
of the corporation. The Board shall have power at any time to fill vacancies
in, to change the membership of, or to dissolve any such Committee. Nothing
herein shall be deemed to prevent the Board from appointing one or more
Committees consisting in whole or in part of persons who are not Directors;
provided, however, that no such Committee shall have or may exercise any
authority of the Board.
Section 3.12. Meetings of Committees. Regular meetings of any
Committee may be held without notice at such time and at such place, within or
outside the State of Delaware, as from time to time shall be determined by such
Committee. The Chairman of the Board, the Board or the Committee by vote at a
meeting, or by two members of any Committee in writing without a meeting, may
call a special meeting of any such Committee by giving notice to each member of
the Committee in the manner provided for in Section 3.06(f) hereof. Unless
otherwise provided in the Certificate, these By-Laws or by applicable law,
neither business to be transacted at, nor the purpose of, any regular or
special meeting of any such Committee need be specified in the notice or any
waiver of notice.
Section 3.13. Quorum of Committee; Manner of Action. At all meetings
of any Committee a majority of the total number of its members shall constitute
a quorum for the transaction of business. Except in cases in which it is by
applicable law, by the Certificate, by these By-Laws, or by resolution of the
Board otherwise provided, a majority of such quorum shall decide any questions
that may come before the meeting. In the absence of a quorum, the members of
the Committee present by majority vote may adjourn the meeting from time to
time, without notice other than by verbal announcement at the meeting, until a
quorum shall attend. A Committee may also act by the written consent of all
members thereof although not convened in a meeting provided that such written
consent is filed with the minute books of the Committee.
ARTICLE IV
Officers
Section 4.01. Elected Officers. The elected officers of the
Corporation shall be a Chairman of the Board, a Chief Executive Officer, a
President, a Secretary, a Treasurer, a Controller and such other officers
(including, without limitation, Executive Vice Presidents and Senior Vice
Presidents and Vice Presidents) as the Board may deem proper. The Chairman of
the Board shall be chosen from among the Directors. Any two or more offices may
be held simultaneously by the same person, except as otherwise expressly
required by applicable law. The Board may if the positions of Chairman of the
Board and Chief Executive Officer are held by the same individual elect a Lead
Director from among the independent (as such term is defined by applicable SEC
rule or regulation) members of the Board, who will serve as a liaison between
the Board and the Chairman of the Board and Chief Executive Officer. Elected
officers shall have such powers and duties as generally pertain to their
respective offices, subject to the specific provisions of this Article IV. Such
officers shall also have such powers and duties as from time to time may be
conferred by the Board or by any Committee thereof. The Board or the Chief
Executive Officer may from time to time appoint such other officers (including
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers),
as may be necessary or desirable for the conduct of the business of the
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as shall be provided in these By-Laws or, to
the extent consistent with these By-Laws, as may be prescribed by the Board or
the Chief Executive Officer. The Executive Officers of the Corporation shall
consist of such officers as the Board may designate as Executive Officers from
time to time, who may or may not be "executive officers" as defined under rules
of the Securities and Exchange Commission.
Section 4.02. Election and Term of Office. Executive Officers of the
Corporation shall be elected by the Board at the regular meeting of the Board
held after the annual meeting of stockholders and at such other times as the
Board may deem necessary. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as practicable.
Officers who are not Executive Officers may be elected from time to time by the
Board or appointed by the Chief Executive Officer. Each officer shall hold
office until such person's successor shall have been duty elected and shall
have qualified or until such person's death or until he or she shall resign or
shall be removed pursuant to Section 4.11.
Section 4.03. Chairman of the Board. The Chairman of the Board shall
perform all duties incidental to such person's office which may be required by
law and all such other duties as are properly required of the Chairman of the
Board by the Board. The Chairman of the Board shall preside at all meetings of
shareholders and of the Board and shall make reports to the Board and the
shareholders, and shall see that all orders and resolutions of the Board and of
any Committee thereof are carried into effect. The Chairman of the Board shall
have such other duties and Executive Officers reporting directly to him as set
forth in a resolution of the Board.
Section 4.04. Chief Executive Officer. The Chief Executive Officer
shall be responsible for the general management of the affairs of the
Corporation and shall perform all duties incidental to such person's office
which may be required by law and all such other duties as are properly required
of the Chief Executive Officer by the Board. The Chief Executive Officer shall
report to the Board of Directors. The Chief Executive Officer shall, in the
absence or inability to act of the Chairman of the Board and the Lead Director
(if elected), perform all duties of the Chairman of the Board and preside at
all meetings of shareholders and of the Board.
Section 4.05. President. The President shall act in a general
executive capacity and shall assist the Chief Executive Officer and the
Chairman of the Board, if so designated by the Board, in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs.
Section 4.06. Vice Presidents. The Executive Vice Presidents, the
Senior Vice Presidents and the Vice Presidents shall have such powers and
duties as may be prescribed for them, respectively, by the Board of Directors
or the Chief Executive Officer. Each of such officers shall report to the Chief
Executive Officer or such other officer as the Chief Executive Officer shall
direct or to the Chairman of the Board, if so designated by the Board.
Section 4.07. Secretary. The Secretary shall attend all meetings of
the shareholders and of the Board, shall keep a true and faithful record
thereof in proper books and shall have the custody and care of the corporate
seal, records, minute books and stock books of the Corporation and of such
other books and papers as in the practical business operations of the
Corporation shall naturally belong in the office or custody of the Secretary or
as shall be placed in the Secretary's custody by order of the Board. The
Secretary shall cause to be kept a suitable record of the addresses of
shareholders and shall, except as may be otherwise required by statute or these
By-Laws, sign and issue all notices required for meetings of shareholders or of
the Board. The Secretary shall sign all papers to which the Secretary's
signature may be necessary or appropriate, shall affix and attest the seal of
the Corporation to all instruments requiring the seal, shall have the authority
to certify the By-Laws, resolutions of the shareholders and the Board and other
documents of the Corporation as true and correct copies thereof and shall have
such other powers and duties as are commonly incidental to the office of
Secretary and as may be prescribed by the Board or the Chief Executive Officer.
Section 4.08. Treasurer. The Treasurer shall have charge of and
supervision over and be responsible for the funds, securities, receipts and
disbursements of the Corporation; cause the moneys and other valuable effects
of the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositories as shall be selected in accordance with resolutions adopted by the
Board; cause the funds of the Corporation to be disbursed by checks or drafts
upon the authorized depositories of the Corporation, and cause to be taken and
preserved proper vouchers for all moneys disbursed; render to the proper
officers and to the Board and any duly constituted committee of the Board
responsible for financial matters, whenever requested, a statement of the
financial condition of the Corporation and of all his or her transactions as
Treasurer; cause to be kept at the principal executive offices of the
Corporation correct books of account of all its business and transactions; and,
in general, perform all duties incident to the office of Treasurer and such
other duties as are given to him or her by the By-Laws or as may be assigned to
him or her by the Chief Executive Officer or the Board.
Section 4.09. Controller. The Controller shall be the chief accounting
officer of the Corporation; shall keep full and accurate accounts of all
assets, liabilities, commitments, revenues, costs and expenses, and other
financial transactions of the Corporation in books belonging to the
Corporation, and conform them to sound accounting principles with adequate
internal control; shall cause regular audits of these books and records to be
made; shall see that all expenditures are made in accordance with procedures
duly established, from time to time, by the Corporation; shall render financial
statements upon the request of the Board; and, in general, shall perform all
the duties ordinarily connected with the office of Controller and such other
duties as may be assigned to him or her by the Chief Executive Officer or the
Board.
Section 4.10. Assistant Secretaries, Assistant Treasurers and
Assistant Controllers. Assistant Secretaries, Assistant Treasurers and
Assistant Controllers, when elected or appointed, shall respectively assist the
Secretary, the Treasurer and the Controller in the performance of the
respective duties assigned to such principal officers, and in assisting such
principal officer, each of such assistant officers shall for such purpose have
the powers of such principal officer; and, in case of the absence, disability,
death, resignation or removal from office of any principal officer, such
principal officer's duties shall, except as otherwise ordered by the Board,
temporarily devolve upon such assistant officer as shall be designated by the
Chief Executive Officer.
Section 4.11. Removal. Any officer or agent may be removed by the
affirmative vote of a majority of the directors then in office whenever, in
their judgment, the best interests of the Corporation would be served thereby.
In addition, any officer or agent appointed by the Chief Executive Officer may
be removed by the Chief Executive Officer whenever, in his or her judgment, the
best interests of the Corporation would be served thereby. Any removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4.12. Vacancies. A newly created elected office and a vacancy
in any elected office because of death, resignation or removal may be filled by
the Board for the unexpired portion of the term at any meeting of the Board.
Any vacancy in an office appointed by the Chief Executive Officer because of
death, resignation or removal may be filled by the Chief Executive Officer.
ARTICLE V
Indemnification
Section 5.01. Power to Indemnify in Actions, Suits or Proceedings
other than Those by or in the Right of the Corporation. Subject to Section
5.03, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that such person is or was a Director or officer of the Corporation, or is
or was a Director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was
unlawful.
Section 5.02. Power to Indemnify in Actions, Suits or Proceedings by
or in the Right of the Corporation. Subject to Section 5.03, the Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact
that such person is or was a Director or officer of the Corporation, or is or
was a Director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 5.03. Authorization of Indemnification. Any indemnification
under this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the present or former Director or officer is proper in the
circumstances because such person has met the applicable standard of conduct
set forth in Section 5.01 or Section 5.02, as the case may be. Such
determination shall be made, with respect to a person who is a Director or
officer at the time of such determination, (i) by a majority vote of the
Directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such Directors designated by a
majority vote of such Directors, even though less than a quorum, or (iii) if
there are no such Directors, or if such Directors so direct, by independent
legal counsel in a written opinion, or (iv) by the stockholders. Such
determination shall be made, with respect to former Directors and officers, by
any person or persons having the authority to act on the matter on behalf of
the Corporation. To the extent, however, that a present or former Director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith, without the necessity of authorization in the
specific case.
Section 5.04. Good Faith Defined. For purposes of any determination
under Section 5.03, a person shall be deemed to have acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation
or another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The provisions of this Section 5.04 shall
not be deemed to be exclusive or to limit in any way the circumstances in which
a person may be deemed to have met the applicable standard of conduct set forth
in Section 5.01 or Section 5.02, as the case may be.
Section 5.05. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 5.03, and notwithstanding the
absence of any determination thereunder, any Director or officer may apply to
the Court of Chancery of the State of Delaware or any other court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Section 5.01 or Section 5.02. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the Director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 5.01 or Section 5.02, as the case may be. Neither a contrary
determination in the specific case under Section 5.03 nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the Director or officer seeking indemnification has not met
any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 5.05 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the Director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.
Section 5.06. Expenses Payable in Advance. Expenses (including
attorneys' fees) incurred by a Director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
Director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the Corporation as
authorized in this Article V. Such expenses (including attorneys' fees)
incurred by former Directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the Corporation deems
appropriate.
Section 5.07. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate, these By-Laws, agreement, vote of stockholders
or disinterested Directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Section 5.01 and Section 5.02 shall be made to the fullest
extent permitted by law. The provisions of this Article V shall not be deemed
to preclude the indemnification of any person who is not specified in Section
5.01 or Section 5.02 but whom the Corporation has the power or obligation to
indemnify under the provisions of the DGCL, or otherwise.
Section 5.08. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director or officer of the
Corporation, or is or was a Director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether
or not the Corporation would have the power or the obligation to indemnify such
person against such liability under the provisions of this Article V.
Section 5.09. Certain Definitions. For purposes of this Article V,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article V with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued. The term
"another enterprise" as used in this Article V shall mean any other corporation
or any partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. For purposes of this
Article V, references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article V.
Section 5.10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article V shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a Director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 5.11. Limitation on Indemnification. Notwithstanding anything
contained in this Article V to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 5.05), the
Corporation shall not be obligated to indemnify any Director or officer (or his
or her heirs, executors or personal or legal representatives) or advance
expenses in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board.
Section 5.12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board, provide rights to
indemnification and to the advancement of expenses to employees and agents of
the Corporation and employees or agents of the Corporation that are or were
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, similar to those conferred in this Article V to Directors and
officers of the Corporation.
ARTICLE VI
Capital Stock
Section 6.01. Stock Certificates. The shares of the Corporation shall
be represented by certificates, provided that the Board may provide by
resolution or resolutions that some or all of any or all classes or series of
stock shall be uncertificated shares. If shares are represented by
certificates, each certificate shall be signed by, or in the name of, the
Corporation by the Chairman of the Board, the Chief Executive Officer, the
President or any Vice President, and by the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary. In addition, such
certificates may be signed by a transfer agent of a registrar (other than the
Corporation itself) and may be sealed with the seal of the Corporation or a
facsimile thereof. Any or all of the signatures on such certificates may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, such certificate may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
its issuance.
Each certificate representing shares shall state upon the face
thereof: the name of the Corporation; that the Corporation is organized under
the laws of Delaware; the name of the person or persons to whom issued; the
number and class of shares and the designation of the series, if any, which
such certificate represents; and the par value of each share represented by
such certificate or a statement that the shares are without par value.
Section 6.02. Record Ownership. A record of the name of the person,
firm or corporation and address of such holder of each certificate, the number
of shares represented thereby and the date of issue thereof shall be made on
the Corporation's books. The Corporation shall be entitled to treat the holder
of record of any share of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
any share on the part of any person, whether or not it shall have express or
other notice thereof, except as otherwise expressly required by applicable law.
Section 6.03. Transfer of Record Ownership. Transfers of stock shall
be made on the books of the Corporation only by direction of the person named
in the certificate or such person's attorney, lawfully constituted in writing,
and only upon the surrender of the certificate therefor and a written
assignment of the shares evidenced thereby. Whenever any transfer of stock
shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer if, when the certificates are presented
to the Corporation for transfer, both the transferor and transferee request the
Corporation to do so.
Section 6.04. Transfer Agent; Registrar; Rules Respecting
Certificates. The Corporation shall maintain one or more transfer offices or
agencies (which may include the Corporation) where stock of the Corporation
shall be transferable. The Corporation shall also maintain one or more registry
offices (which may include the Corporation) where such stock shall be
registered. The Board may make such rules and regulations as it may deem
expedient concerning the issue, transfer and registration of stock certificates
in accordance with applicable law.
Section 6.05. Lost, Stolen or Destroyed Certificates. No certificate
for shares of stock in the Corporation shall be issued in place of any
certificate alleged to have been lost, destroyed or stolen, except on
production of such evidence of such loss, destruction or theft and on delivery
to the Corporation of a bond of indemnity in such amount, upon such terms and
secured by such surety, as the Board or any financial officer may in its or
such person's discretion require. A new certificate may be issued without
requiring any bond if the Board or such financial officer so determines.
ARTICLE VII
Contracts, Checks and Drafts, Deposits and Proxies
Section 7.01. Contracts. The Board may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation and such
authority may be general or confined to specific instances.
Section 7.02. Checks and Drafts. All checks, drafts or other orders
for the payment of money, issued in the name of the Corporation, shall be
signed by such officer or officers, agent or agents of the Corporation and in
such manner as shall from time to time be determined by the Board.
Section 7.03. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such depositories as may be selected by or under the authority of the Board.
Section 7.04. Proxies. Unless otherwise provided by the Board, the
Chairman of the Board, the Chief Executive Officer, the President or any
Executive Vice President, Senior Vice President or Vice President may from time
to time appoint an attorney or attorneys or agent or agents of the Corporation,
in the name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation, any of whose stock or other securities may be held by
the Corporation, at meetings of the holders of the stock or other securities of
such other corporation, or to consent in writing, in the name of the
Corporation as such holder, to any action by such other corporation, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal or
otherwise, all such written proxies or other instruments as he or she may deem
necessary or proper in the premises.
ARTICLE VIII
General Provisions
Section 8.01. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and the provisions of the
Certificate, if any, may be declared by the Board at any regular or special
meeting of the Board (or any action by written consent in lieu thereof in
accordance with Section 3.09 hereof), and may be paid in cash, in property, or
in shares of the Corporation's capital stock. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet contingencies, or for
purchasing any of the shares of capital stock, warrants, rights, options,
bonds, debentures, notes, scrip or other securities or evidences of
indebtedness of the Corporation, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or for any proper purpose, and
the Board may modify or abolish any such reserve.
Section 8.02. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January in each year and shall end on the
thirty-first day of December of such year.
Section 8.03. Seal. The corporate seal of the Corporation shall be
circular in form and shall bear, in addition to any other emblem or device
approved by the Board, the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The corporate seal
may be used by causing it or a facsimile thereof to be impressed or reproduced
or otherwise.
Section 8.04. Waivers of Notice. Whenever any notice is required by
applicable law, the Certificate or these By-Laws, to be given to any Director,
member of a Committee or stockholder, a waiver thereof in writing, signed by
the person or persons entitled to notice, or a waiver by electronic
transmission by the person or persons entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance
of a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any annual or special meeting of stockholders or any regular or special
meeting of the Board or members of a Committee of the Board need be specified
in any written waiver of notice unless so required by law, the Certificate or
these By-Laws.
ARTICLE IX
Amendment of By-Laws
Section 9.01. Amendment. Except as otherwise expressly provided in the
Certificate, these By-Laws, or any of them, may from time to time be
supplemented, amended or repealed, or new By-Laws may be adopted, by the Board
at any regular or special meeting of the Board, if such supplement, amendment,
repeal or adoption is approved by a majority of the entire Board.
Section 9.02. Entire Board of Directors. As used in this Article IX
and in these By-Laws generally, the terms "entire Board" or "entire Board of
Directors" mean the total number of Directors which the Corporation would have
if there were no vacancies.
ARTICLE X
Emergency Provisions
Section 10.01. General. The provisions of this Article X shall be
operative only during a national emergency declared by the President of the
United States or the person performing the President's functions, or in the
event of a nuclear, atomic or other attack on the United States or on a
locality in which the Corporation conducts its principal business or
customarily holds meetings of its Board or its stockholders, or during the
existence of any other catastrophic event or similar emergency, as a result of
which a quorum of the Board cannot readily be assembled for action. Said
provisions in such event shall override all other By-Laws of the Corporation in
conflict with any provisions of this Article X and shall remain operative
during such emergency, but thereafter shall be inoperative; provided, that, all
actions taken in good faith pursuant to such provisions shall thereafter remain
in full force and effect unless and until revoked by action taken pursuant to
the provisions of the By-Laws other than those contained in this Article X.
Section 10.02. Unavailable Directors. All Directors who are not
available to perform their duties as Directors by reason of physical or mental
incapacity or for any other reason or who arc unwilling to perform their duties
or whose whereabouts are unknown shall automatically cease to be Directors,
with like effect as if such persons had resigned as Directors, so long as such
unavailability continues.
Section 10.03. Authorized Number of Directors. The authorized number
of Directors shall be the number of Directors remaining after eliminating those
who have ceased to be Directors pursuant to Section 10.02, or the minimum
number required by applicable law, whichever number is greater.
Section 10.04. Quorum. The number of Directors necessary to constitute
a quorum shall be one-third of the authorized number of Directors as specified
in Section 10.03, or such other minimum number as, pursuant to the law or
lawful decree then in force, it is possible for the by-laws of a corporation to
specify.
Section 10.05. Creation of Emergency Committee. In the event the
number of Directors remaining after eliminating those who have ceased to be
directors pursuant to Section 10.02 is less than the minimum number of
authorized directors required by law, then until the appointment of additional
Directors to make up such required minimum, all the powers and authorities
which the Board could by law delegate, including all powers and authorities
which the Board could delegate to a Committee, shall be automatically vested in
an emergency committee, and the emergency committee shall thereafter manage the
affairs of the Corporation pursuant to such powers and authorities and shall
have all other powers and authorities as may by law or lawful decree be
conferred on any person or body of persons during a period of emergency.
Section 10.06. Constitution of Emergency Committee. The emergency
committee shall consist of all the Directors remaining after eliminating those
who have ceased to be directors pursuant to Section 10.02, provided that such
remaining Directors are not less than three in number. In the event such
remaining Directors are less than three in number, the emergency committee
shall consist of three persons, who shall be the remaining Director or
Directors and either one or two officers or employees of the Corporation, as
the remaining Director or Directors may in writing designate. If there is no
remaining Director, the emergency committee shall consist of the three most
senior officers of the Corporation who are available to serve, and if and to
the extent that officers are not available, the most senior employees of the
Corporation. Seniority shall be determined in accordance with any designation
of seniority in the minutes of the proceedings of the Board, and in the absence
of such designation, shall be determined by rate of remuneration.
Section 10.07. Powers of Emergency Committee. The emergency committee,
once appointed, shall govern its own procedures and shall have power to
increase the number of members thereof beyond the original number, and in the
event of a vacancy or vacancies therein, arising at any time, the remaining
member or members of the emergency committee shall have the power to fill such
vacancy or vacancies. In the event at any time after its appointment all
members of the emergency committee shall die or resign or become unavailable to
act for any reason whatsoever, a new emergency committee shall be appointed in
accordance with the foregoing provisions of this Article X.
Section 10.08. Directors Becoming Available. Any person who has ceased
to be a Director pursuant to the provisions of Section 10.02 and who thereafter
becomes available to serve as a Director shall automatically become a member of
the emergency committee.
Section 10.09. Election of Board of Directors. The emergency committee
shall, as soon after its appointment as is practicable, take all requisite
action to secure the election of Directors, and upon such election all the
powers and authorities of the emergency committee shall cease.
Section 10.10. Termination of Emergency Committee. In the event, after
the appointment of an emergency committee, a sufficient number of persons who
ceased to be Directors pursuant to Section 10.02 become available to serve as
Directors, so that if they had not ceased to be Directors as aforesaid, there
would be sufficient Directors to constitute the minimum number of Directors
required by law, then all such persons shall automatically be deemed to be
reappointed as Directors and the powers and authorities of the emergency
committee shall terminate.
Section 10.11. Nonexclusive Powers. The emergency powers provided in
this Article X shall be in addition to any powers provided by applicable law.
Exhibit C
To The Merger Agreement
Board of Directors of the Company
As of the Effective Time, in accordance with the By-Laws of the Company to be
effective as of the Effective Time set forth on Exhibit B to the Merger
Agreement (the "Company By-Laws"), the number of Directors constituting the
Board of Directors shall be 15, comprised of ten Duke Directors (as defined in
the Company By-Laws) and five Cinergy Directors (as defined in the Company
By-Laws).
Chairman of the Board of Directors and President and Chief Executive Officer
of the Company
Chairman of the Board of Directors: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. In addition to the duties
of the Chairman of the Board of Directors attendant to such position set forth
in the Company By-Laws, ▇▇. ▇▇▇▇▇▇▇▇ shall have management responsibilities for
analyzing potential strategic alternatives regarding the separation of the
Company's gas and electric businesses, and, if approved by the Board of
Directors of the Company, the implementation thereof, and in such capacity the
President or other chief officer of the gas business shall report directly to
the Chairman of the Board of Directors of the Company (as well as to the
President and Chief Executive Officer). Any employment or other agreement or
arrangement between ▇▇. ▇▇▇▇▇▇▇▇ and the Company consistent with the terms of
this Exhibit C and the Company By-Laws shall contain such other terms and
conditions as are agreed to by ▇▇. ▇▇▇▇▇▇▇▇ and the Company.
President and Chief Executive Officer: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Selection of Senior Officers of the Company
From the date of the Agreement to immediately prior to the Closing, as
necessary, ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ will consult with one another and
cooperate to select officers of the Company as of the Effective Time. With
respect to the 25 most senior officers (the "Senior Management Team"), in the
event ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ are unable to agree on the appointment of a
particular person to any office included in the Senior Management Team, ▇▇.
▇▇▇▇▇▇' appointment to such office shall control. Upon the completion of the
selection process set forth in this Exhibit C, ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇
shall submit their selection of the Senior Management Team to the 15
individuals who will comprise the Board of Directors of the Company as of the
Effective Time (the "Pro Forma Board") as and when the Pro Forma Board has been
identified. Notwithstanding the foregoing selection process, the Senior
Management Team, as an entirety, will be subject to the review and approval by
the Pro Forma Board. In the event the Pro Forma Board does not approve any
Senior Management Team submitted by ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇, the Pro Forma
Board may suggest changes to the Senior Management Team and ▇▇. ▇▇▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇ will consult with one another and cooperate to submit a revised
Senior Management Team for the review and approval of the Pro Forma Board in
accordance with the foregoing procedures on one or more occasions until a
Senior Management Team is approved by the Pro Forma Board. The selection
process set forth in this Exhibit C shall terminate as of the Effective Time.
Exhibit D
To The Merger Agreement
EMPLOYMENT AGREEMENT
TERM SHEET
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1. Basic premise - No changes to be made to ▇▇. ▇▇▇▇▇▇' existing agreement
unless:
(a) required to reflect changes mandated by the transactions (the
"Merger") contemplated by the Agreement and Plan of Merger by and
among Duke Energy Corporation, Cinergy Corp., Deer Holding Corp.,
Deer Acquisition Corp. and Cougar Acquisition Corp. (the "Merger
Agreement")
(b) as specifically reflected in this term sheet
2. Changes mandated by the corporate transaction
(a) References to Cinergy Corp. ("Cinergy") shall automatically refer to
Deer Holding Corp. ("Holdco") as of the Closing Date
(b) Required move to Charlotte
(i) principal executive offices in Charlotte to be specified as the
principal place of performance post-closing (ss.2(b)(1))
(ii) will not constitute a "Good Reason" trigger (ss.ss.2(b) and
4(d)(iii)) (1)
--------
(1) Note that section references are to ▇▇. ▇▇▇▇▇▇' existing agreement
(c) ▇▇. ▇▇▇▇▇▇ to be named as President and CEO of Holdco effective upon
the closing of the corporate transaction
(i) Duties and Powers - modify the current positions, duties and
responsibilities of ▇▇. ▇▇▇▇▇▇ (ss.2(a)) to reflect post-closing
status as Holdco President and CEO, subject to Exhibit C to the
Merger Agreement
(d) Compensation
(i) Unless otherwise agreed by the parties, ▇▇. ▇▇▇▇▇▇' compensation
arrangements will remain in place post-closing
(ii) The parties will negotiate in good faith to restructure the
current compensation arrangements to provide that ▇▇. ▇▇▇▇▇▇
will be paid substantially in the form of equity compensation by
which Duke Energy Corporation CEO is presently compensated; it
being understood that ▇▇. ▇▇▇▇▇▇' restructured compensation will
be no less favorable in economic value than his existing
compensation arrangements. The valuation determination will be
made by an independent nationally recognized human resources
consulting firm mutually selected by Holdco and ▇▇. ▇▇▇▇▇▇, or,
in the absence of agreement on the firm to be selected, such
consulting firm as shall be selected by an arbitrator appointed
in accordance with the rules of the American Arbitration
Association then in effect
(iii) SERP benefit - The present value of the SERP benefit
(ss.3(b)(ii)) will be quantified immediately prior to the
closing of the Merger and will be deferred, with market-based
earnings credited thereon, in compliance with ss.409A of the
Internal Revenue Code. If it is determined at any time prior to
or following the closing that the SERP benefit should fail to
comply with ss.409A for any reason, ▇▇. ▇▇▇▇▇▇ and Cinergy or
Holdco (as applicable) in good faith shall negotiate to
restructure the SERP benefit so as to make it compliant,
provided that, in no event will such restructuring adversely
affect such pre-tax present value of the SERP benefit
(e) Arbitration clause (ss.8) should be modified to provide for any
proceeding to take place in Charlotte, NC
(f) Governing law (ss.12(a)) - change from Ohio to North Carolina
(g) Notice provision - update to reflect Charlotte address of Holdco
3. Other changes/Comments
(a) Three-year term of employment commencing upon closing of the Merger,
with back-end consecutive one-year "evergreen" renewals if neither
party gives notice prior to a specified date (e.g., six months) prior
to the end of the three-year employment term (or extended one-year
term, as applicable)
(b) Severance - Unless otherwise agreed by the parties, if ▇▇. ▇▇▇▇▇▇ is
involuntarily terminated without Cause or quits for Good Reason on or
prior to the second anniversary of the closing of the Merger or
within two years following a change in control of Holdco, then he
will receive an amount no less than the economic value to which he
would otherwise be entitled under his existing employment agreement
had he terminated employment under such circumstances immediately
following the closing of the transaction; provided, however, that if
his termination of employment occurs at any time following the second
anniversary of the closing of the Merger (other than within two years
following a change in control of Holdco), then he will receive an
amount no less than the economic value to which he would otherwise be
entitled under his existing employment agreement had he terminated
employment immediately prior to the occurrence of a change in control
of Cinergy (and, in either case, such economic value shall be
determined without regard to the form of his then restructured
compensation arrangements)
(c) Relocation benefits - ▇▇. ▇▇▇▇▇▇ will be reimbursed for all direct
and indirect relocation costs
(d) Stock sale limitations - remove limitation on the sale, during
employment, of Cinergy shares acquired upon exercise of stock options
(ss.4(g)), such removal to be effective as of the closing of the
transaction (but ▇▇. ▇▇▇▇▇▇ shall remain subject to Duke Energy
Corporation/Holdco stock ownership guidelines which have been
represented to ▇▇. ▇▇▇▇▇▇ as being a 100,000 share minimum)
As soon as reasonably practicable following the execution of this term sheet
but in any event prior to the closing of the corporate transaction, Cinergy,
Duke Energy Corporation and Holdco will each take such action (or cause their
respective affiliates to take such action) as may be necessary and appropriate
to effectuate the foregoing in a new or amended employment agreement to be
entered into or assumed by Holdco for ▇▇. ▇▇▇▇▇▇, which agreement shall take
effect as of the effective date of the closing of the mergers contemplated by
the Merger Agreement; provided, however, that ss.2(d)(iii) hereof shall take
effect immediately upon the execution of this term sheet. Until such time as a
new or amended employment agreement becomes effective, this term sheet shall
govern the respective parties' rights and obligations and shall constitute an
amendment of ▇▇. ▇▇▇▇▇▇' employment agreement when deemed effective as provided
hereinabove.
IN WITNESS WHEREOF, the parties signing hereinbelow have executed this term
sheet this 8th day of May, 2005, intending to be legally bound thereby.
CINERGY CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
_______________________
▇▇▇▇ ▇. ▇▇▇▇▇
DUKE ENERGY CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
DEER HOLDING CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
_______________________
▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇