EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
SEMPRA ENERGY,
CARDINAL ACQUISITION CORP.
and
K N ENERGY, INC.
Dated as of February 20, 1999
TABLE OF CONTENTS
Page
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ARTICLE I. THE MERGER............................................................................ 1
Section 1.1. The Merger.................................................................... 1
Section 1.2. Effective Time................................................................ 1
Section 1.3. Effects of the Merger......................................................... 2
Section 1.4. Articles of Incorporation; Bylaws............................................. 2
Section 1.5. Directors and Officers........................................................ 2
Section 1.6. Conversion of Securities...................................................... 2
Section 1.7. Treatment of Employee Options and Other Employee Equity Rights................ 4
Section 1.8. Elections By Holders of Company Common Stock.................................. 5
Section 1.9. Fractional Interests.......................................................... 6
Section 1.10. Surrender of Shares of Company Common Stock; Stock Transfer Books............ 6
Section 1.11. Proration.................................................................... 9
Section 1.12. Closing and Closing Date..................................................... 10
Section 1.13. PEPS......................................................................... 10
Section 1.14. Section 16 Affiliates........................................................ 10
Section 1.15. Adjustment of Merger Consideration........................................... 10
Section 1.16. Tax Consequences............................................................. 10
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................ 11
Section 2.1. Organization and Qualification................................................ 11
Section 2.2. Subsidiaries.................................................................. 11
Section 2.3. Capitalization................................................................ 12
Section 2.4. Authority; Non-Contravention; Statutory Approvals; Compliance................. 12
Section 2.5. Reports and Financial Statements.............................................. 14
Section 2.6. Absence of Certain Changes or Events; Absence of Undisclosed Liabilities...... 15
Section 2.7. Litigation; Regulatory Proceedings............................................ 16
Section 2.8. Registration Statement and Joint Proxy Statement.............................. 16
Section 2.9. Tax Matters................................................................... 16
Section 2.10. Employee Matters; ERISA...................................................... 20
Section 2.11. Environmental Protection..................................................... 22
Section 2.12. Regulation................................................................... 23
Section 2.13. Vote Required................................................................ 24
Section 2.14. Opinion of Financial Advisor................................................. 24
Section 2.15. Insurance.................................................................... 24
Section 2.16. Company Rights Agreement..................................................... 25
Section 2.17. Brokers...................................................................... 25
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Section 2.18. No Other Agreements to Sell the Company or Its Assets........................ 25
Section 2.19. Assets....................................................................... 25
Section 2.20. Contracts and Commitments.................................................... 26
Section 2.21. Absence of Breaches or Defaults.............................................. 27
Section 2.22. Labor Matters................................................................ 28
Section 2.23. Affiliate Transactions....................................................... 28
Section 2.24. Chapter 17-12,000 of the KGCC; State Takeover Statutes....................... 29
Section 2.25. Easements.................................................................... 29
Section 2.26. Commodity Price Exposure..................................................... 29
Section 2.27. Year 2000.................................................................... 30
Section 2.28. Intellectual Property and Software........................................... 30
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................................... 31
Section 3.1. Organization and Qualification................................................ 31
Section 3.2. Subsidiaries.................................................................. 31
Section 3.3. Capitalization................................................................ 32
Section 3.4. Authority; Non-Contravention; Statutory Approvals; Compliance................. 32
Section 3.5. Reports and Financial Statements.............................................. 34
Section 3.6. Absence of Certain Changes or Events; Absence of Undisclosed Liabilities...... 34
Section 3.7. Registration Statement and Joint Proxy Statement.............................. 35
Section 3.8. Tax Matters................................................................... 35
Section 3.9. Vote Required................................................................. 39
Section 3.10. Opinion of Financial Advisor................................................. 39
Section 3.11. Brokers...................................................................... 39
Section 3.12. Litigation; Regulatory Proceedings........................................... 39
Section 3.13. Environmental Protection..................................................... 39
Section 3.14. Regulation................................................................... 41
Section 3.15. Absence of Breaches or Defaults.............................................. 41
Section 3.16. Labor Matters................................................................ 41
Section 3.17. Nuclear Operations........................................................... 42
Section 3.18. Employee Matters; ERISA...................................................... 42
Section 3.19. Year 2000.................................................................... 43
ARTICLE IV. CONDUCT OF BUSINESS PENDING THE MERGER............................................. 44
Section 4.1. Conduct of Business of the Company Pending the Merger......................... 44
Section 4.2. Conduct of Business of Parent Pending the Merger.............................. 47
ARTICLE V. ADDITIONAL AGREEMENTS............................................................ 48
Section 5.1. Preparation of Form S-4 and the Joint Proxy Statement; Shareholder Meetings... 48
Section 5.2. Accountants' Letters.......................................................... 50
Section 5.3. Access to Information; Confidentiality........................................ 50
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Section 5.4. No Solicitation of Transactions............................................... 51
Section 5.5. Employee Benefits Matters..................................................... 52
Section 5.6. Directors' and Officers' Indemnification; Insurance........................... 53
Section 5.7. Notification of Certain Matters............................................... 55
Section 5.8. Further Action................................................................ 55
Section 5.9. Public Announcements.......................................................... 55
Section 5.10. Stock Exchange Listing....................................................... 55
Section 5.11. Affiliates................................................................... 56
Section 5.12. Directorships................................................................ 56
Section 5.13. Redemption of Company Class A Preferred Stock................................ 56
Section 5.14. Company Rights Agreement..................................................... 56
Section 5.15. Takeover Statutes............................................................ 56
Section 5.16. Certain Dispositions......................................................... 56
Section 5.17. Thermo Restructuring......................................................... 57
ARTICLE VI. CONDITIONS OF MERGER................................................................. 57
Section 6.1. Conditions to Obligations of Each Party to Effect the Merger.................. 57
Section 6.2. Conditions to Obligation of the Company to Effect the Merger.................. 58
Section 6.3. Conditions to Obligations of Parent and Sub to Effect the Merger.............. 59
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER.................................................. 61
Section 7.1. Termination................................................................... 61
Section 7.2. Effect of Termination......................................................... 62
Section 7.3. Fees and Merger Expenses...................................................... 63
Section 7.4. Amendment..................................................................... 64
Section 7.5. Waiver........................................................................ 64
ARTICLE VIII. GENERAL PROVISIONS................................................................. 65
Section 8.1. Non-Survival of Representations, Warranties and Agreements.................... 65
Section 8.2. Notices....................................................................... 65
Section 8.3. Certain Definitions........................................................... 66
Section 8.4. Other Defined Terms........................................................... 71
Section 8.5. Severability.................................................................. 73
Section 8.6. Entire Agreement; Assignment.................................................. 73
Section 8.7. Parties in Interest........................................................... 74
Section 8.8. Governing Law................................................................. 74
Section 8.9. Headings...................................................................... 74
Section 8.10. Counterparts................................................................. 74
EXHIBIT A - Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 20, 1999 (the
"Agreement"), among Sempra Energy, a California corporation ("Parent"), Cardinal
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Acquisition Corp., a California corporation and wholly-owned subsidiary of
Parent ("Sub"), and K N Energy, Inc., a Kansas corporation (the "Company").
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WHEREAS, the Boards of Directors of Parent, Sub and the Company have
each approved the merger of the Company with and into Sub (the "Merger") in
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accordance with the General Corporation Code of Kansas (the "KGCC") and the
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California General Corporation Law (the "CGCL") upon the terms and subject to
----
the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the KGCC and the CGCL, at the Effective
Time, the Company shall be merged with and into Sub. As a result of the Merger,
the separate corporate existence of the Company shall cease and Sub shall
continue as the surviving corporation of the Merger (the "Surviving
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Corporation"). The name of the Surviving Corporation shall be K N Energy, Inc.
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At Parent's election, the Merger may alternatively be structured so that any
direct wholly-owned subsidiary of Parent may be substituted for Sub as a
constituent corporation in the Merger. In the event of such an election, the
parties agree to execute an appropriate amendment to this Agreement in order to
reflect such election.
Section 1.2. Effective Time. The parties hereto shall cause the Merger to
be consummated by filing a certificate of merger (the "Certificate of Merger")
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on the Closing Date with the Secretary of State of the State of Kansas, in such
form as required by and executed in accordance with the relevant provisions of
the KGCC, and by filing the Certificate of Merger, together with a duly executed
copy of this Agreement, with the Secretary of State of the State of California,
in such form as required by and executed in accordance with the relevant
provisions of the CGCL (the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Kansas and the Secretary of
State of the State of California (or such later time as is specified in the
Certificate of Merger) being the "Effective Time").
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Section 1.3. Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the KGCC and the CGCL. Without limiting
the generality of the
foregoing and subject thereto, at the Effective Time, all the property, rights,
privileges, immunities, powers and franchises of the Company and Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.4. Articles of Incorporation; Bylaws. (a) At the Effective Time
and without any further action on the part of the Company and Sub, the Articles
of Incorporation of Sub as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided therein and under the CGCL.
(b) At the Effective Time and without any further action on the part of the
Company and Sub, the Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until thereafter
amended as provided therein and under the CGCL.
Section 1.5. Directors and Officers. The directors of Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed, as the case may be, and qualified.
Section 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Sub, the Company or the
holders of any of the following securities:
(a) Except as otherwise provided in Section 1.11 and subject to Section
1.6(d), each share of common stock, par value $5.00 per share, of the Company
("Company Common Stock") issued and outstanding immediately prior to the
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Effective Time (other than shares of Company Common Stock to be canceled in
accordance with Section 1.6(b) hereof) shall be converted into, at the election
of the holder thereof, one of the following (as may be adjusted pursuant to
Section 1.11, the "Merger Consideration"):
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(i) for each such share of Company Common Stock with respect to
which an election to receive a combination of Parent Common Stock and cash
has been effectively made and not revoked or lost pursuant to Sections
1.10(b), (c) and (d) (a "Standard Election"), the right to receive (x) an
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amount in cash, without interest, equal to thirty percent (30%) of the
Standard Cash Consideration plus (y) .7805 shares of Parent Common Stock
(collectively, the "Standard Consideration"). The "Standard Cash
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Consideration" means an amount in cash equal to $25.00; or
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(ii) for each such share of Company Common Stock with respect to
which an election to receive solely Parent Common Stock has been
effectively made and not revoked or lost pursuant to Sections 1.10(b), (c)
and (d) (a "Stock Election"), the right to receive 1.115 shares of Parent
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Common Stock (the "Stock Consideration"); or
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(iii) for each such share of Company Common Stock with respect
to which an election to receive solely cash has been effectively made and
not revoked or lost pursuant to Sections 1.10(b), (c) and (d) (a "Cash
----
Election"), the right to receive an amount in cash, without interest, equal
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to the Standard Cash Consideration.
The Merger Consideration shall be payable upon the surrender of the
certificate formerly representing such share of Company Common Stock, subject to
the provisions of Section 1.10(d). As of the Effective Time, all such shares of
Company 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 Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive (i) the Merger
Consideration, (ii) any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 1.9 and (iii) any dividends and
distributions in accordance with Section 1.10(i), in each case without interest.
(b) Each share of Company Common Stock that is (i) held in the treasury of
the Company or (ii) owned by Parent, Sub or any other direct or indirect
Subsidiary of Parent or of the Company, in each case immediately prior to the
Effective Time, shall be canceled and retired without any conversion thereof and
no payment or distribution shall be made with respect thereto.
(c) Each share of common stock, par value $.01 per share, of Sub issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding after the Merger as a share of the Surviving Corporation, which
shall thereafter constitute all of the issued and outstanding shares of common
stock of the Surviving Corporation. No capital stock of Sub will be issued or
used in the Merger.
(d) Notwithstanding any other provision of this Agreement to the contrary,
shares of Company Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has timely objected to and not voted in favor of
the Merger or consented thereto in writing and who has demanded appraisal for
such Company Common Stock in accordance with Section 17-6712 of the KGCC shall
not be converted into a right to receive the Merger Consideration, unless such
holder fails to perfect or withdraws or otherwise loses its right to appraisal
or it is determined that such holder does not have appraisal rights in
accordance with Section 17-6712 of the KGCC. If after the Effective Time such
holder fails to perfect or withdraws or loses its right to appraisal, or if it
is determined that such holder does not have an appraisal right, such shares of
Company Common Stock shall be treated as if they had been exchanged as of the
Effective Time for a right to receive the Merger Consideration in accordance
with this Article I. The Company shall give Parent and Sub prompt notice of any
demands received by the Company for appraisal of shares of Company Common Stock,
and Parent and Sub shall have the right to participate in all negotiations and
proceedings with respect to such demands except as required by applicable law.
The Company shall not, except with the prior written consent of Parent and Sub,
make any payment with respect to, or settle or offer to settle, any such
demands.
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Section 1.7. Treatment of Employee Options and Other Employee Equity Rights.
(a) Subject to Sections 1.7(b), 1.7(c) and 1.7(d) prior to the Effective Time,
the Board of Directors of the Company (or, if appropriate, any Committee
thereof) and the Board of Directors of Parent shall adopt appropriate
resolutions and take all other actions necessary to provide that effective at
the Effective Time, all outstanding stock options, stock appreciation rights,
limited stock appreciation rights, performance units, phantom stock and stock
purchase rights (collectively, the "Company Stock Rights") granted prior to the
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Effective Time whether or not under any employee stock option, performance unit,
stock purchase or similar plan of the Company and its Subsidiaries
(collectively, the "Stock Plans") shall be assumed by Parent and converted
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automatically into similar rights with respect to shares of Parent Common Stock
(collectively, "New Stock Rights") in an amount and, if applicable, at an
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exercise price determined as provided below:
(i) the number of shares of Parent Common Stock to be subject to
the New Stock Right shall be equal to the product of (x) the number of
shares of Company Common Stock subject to the original Company Stock Right
immediately prior to the Effective Time and (y) the number of shares of
Parent Common Stock into which a share of Company Common Stock issued and
outstanding immediately prior to the Effective Time would be converted in
the Merger (assuming the holder thereof made a Stock Election and without
regard to the provisions of Section 1.11), provided that any fractional
shares of Parent Common Stock resulting from such multiplication shall be
rounded to the nearest whole share;
(ii) the exercise price per share of Parent Common Stock under
the New Stock Right shall be equal to the exercise price per share of the
Company Common Stock under the original Company Stock Right immediately
prior to the Effective Time divided by the number of shares of Parent
Common Stock into which a share of Company Common Stock issued and
outstanding immediately prior to the Effective Time would be converted in
the Merger (assuming the holder thereof made a Stock Election and without
regard to the provisions of Section 1.11), provided that such exercise
price shall be rounded to the nearest whole cent; and
(iii) subject to any applicable limitations under the Securities
Act, Parent shall file a registration statement on Form S-8 (or any
successor form) or another appropriate form and shall cause such
registration statement to be effective on or prior to the date of the
Effective Time, with respect to the shares of Parent Common Stock issuable
upon exercise of the New Stock Rights, and shall use all reasonable efforts
to maintain the effectiveness of such registration statement (and maintain
the current status of the prospectus or prospectuses contained therein) for
so long as such New Stock Rights shall remain outstanding.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. Each New Stock Right shall be
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fully vested and exercisable immediately after the Effective Time, except as may
otherwise be agreed between the holder thereof and Parent.
(b) Prior to the Effective Time, the Company will take all actions
necessary (i) to shorten the offering period under the Company Employee Stock
Purchase Plan in which the Effective Time occurs so that such offering period
terminates on the day prior to the Effective Time and (ii) to terminate the
Company Employee Stock Purchase Plan effective as of the Effective Time.
(c) The Company shall take all actions necessary to ensure that, following
the Effective Time, no holder of a Company Stock Right or any participant in any
Stock Plans shall have any right thereunder to acquire capital stock of the
Company, Sub or the Surviving Corporation. The Company will take all actions
necessary to ensure that, as of the Effective Time, none of Parent, Sub, the
Company, the Surviving Corporation or any of their respective Subsidiaries is or
will be bound by any Company Stock Rights, other options, warrants, rights or
agreements which would entitle any person, other than Sub or its affiliates, to
own any capital stock of the Company, Sub, the Surviving Corporation or any of
their respective Subsidiaries or to receive any payment in respect thereof,
except as otherwise provided herein.
(d) Parent agrees that it shall take all action necessary, on or prior
to the Effective Time, to authorize and reserve a number of shares of Parent
Common Stock sufficient for issuance upon exercise of the New Stock Rights as
contemplated by this Section 1.7.
Section 1.8. Elections By Holders of Company Common Stock. Each Person who,
at the Effective Time, is a record holder of shares of Company Common Stock
(other than shares of Company Common Stock to be canceled in accordance with
Section 1.6(b) hereof) shall have the right to submit an Election Form
specifying the number of shares of Company Common Stock that such Person desires
to have converted into the right to receive Parent Common Stock and cash
pursuant to the Standard Election, the number of shares of Company Common Stock
that such Person desires to have converted into the right to receive Parent
Common Stock pursuant to a Stock Election and the number of shares of Company
Common Stock that such Person desires to have converted into the right to
receive cash pursuant to a Cash Election.
Section 1.9. Fractional Interests. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and such fractional interests will not entitle the owner thereof to any
rights of a shareholder of Parent. In lieu of any such fractional interests,
each holder of shares of Company Common Stock exchanged pursuant to Section
1.6(a) who would otherwise have been entitled to receive a fraction of a share
of Parent Common Stock (after taking into account all shares of Company Common
Stock then held by such holder) shall receive cash (without interest) in an
amount equal to the product of such fractional part of a share of Parent Common
Stock multiplied by the average of the closing prices of the Parent Common Stock
on the New York Stock Exchange ("NYSE") as reported on the NYSE Composite
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Transaction Tape for the 10 trading days immediately preceding the Closing Date.
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Section 1.10. Surrender of Shares of Company Common Stock; Stock Transfer
Books. (a) Prior to the Closing Date, Sub shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
shares of Company Common Stock in connection with the Merger (the "Exchange
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Agent") to receive the shares of Parent Common Stock and the amount of cash
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(including any cash payable in lieu of any fractional shares of Parent Common
Stock) to which holders of shares of Company Common Stock shall become entitled
pursuant to Sections 1.6(a) and 1.9. Immediately before the Effective Time,
Parent will, or will cause Sub to, make available to the Exchange Agent
sufficient shares of Parent Common Stock and cash to make all exchanges pursuant
to Section 1.10(d).
(b) Promptly after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, cause to be mailed to each record holder, as of the
Effective Time, of an outstanding certificate or certificates which immediately
prior to the Effective Time represented shares of Company Common Stock (the
"Certificates"), (i) a form of letter of transmittal (which shall specify that
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delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent), (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for cash and/or certificates representing shares of Parent Common Stock therefor
and (iii) an election form (the "Election Form") providing for such holders to
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make the Standard Election, the Stock Election or the Cash Election. As of the
Election Deadline, all holders of shares of Company Common Stock immediately
prior to the Effective Time that shall not have submitted to the Exchange Agent
or shall have properly revoked an effective, properly-completed Election Form
shall be deemed to have made a Standard Election.
(c) Any Standard Election, Stock Election or Cash Election shall have
been validly made only if the Exchange Agent shall have received by 5:00 p.m.,
New York City time, on a date (the "Election Deadline") not less than twenty
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(20) business days after the date the Election Forms are mailed to holders of
Company Common Stock to be mutually agreed upon by Parent and the Company, an
Election Form properly completed and executed (with the signature or signatures
thereof guaranteed to the extent required by the Election Form) by such holder
accompanied by such holder's Certificates, or by an appropriate guarantee of
delivery of such Certificates from a member of any registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States as set forth in such
Election Form. Any holder of Company Common Stock who has made an election by
submitting an Election Form to the Exchange Agent may, at any time prior to the
Election Deadline, change such holder's election by submitting a revised
Election Form, properly completed and signed that is received by the Exchange
Agent prior to the Election Deadline. Any holder of Company Common Stock may at
any time prior to the Election Deadline revoke his election and withdraw his
Certificates deposited with the Exchange Agent by written notice to the Exchange
Agent received by the close of business on the day prior to the Election
Deadline. As soon as practicable after the Election Deadline, the Exchange
Agent shall determine the allocation of the cash portion of the Merger
Consideration and the Parent Common Stock portion of the Merger Consideration
and shall notify Parent and the Company of its determination (the "Allocation
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Determination").
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(d) Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive promptly after the Allocation
Determination in exchange therefor, (i) a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of Section 1.6(a), (ii) a certified or bank
cashier's check in an amount equal to the cash, if any, which such holder has
the right to receive pursuant to the provisions of Section 1.6(a) (including any
cash in lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 1.9), after giving effect to any required tax
withholdings and (iii) any dividends or distributions to which such holder is
entitled pursuant to Section 1.10(i), and the Certificate so surrendered shall
forthwith be canceled. Certificates surrendered for exchange by any Person
constituting an "affiliate" of the Company for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act") shall not be
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exchanged, nor shall any such Person have the right to receive the Merger
Consideration with respect to any shares of Company Common Stock owned by such
Person, until Parent has received a written agreement for such Person as
provided in Section 5.11. If the exchange of certificates representing shares
of Parent Common Stock is to be made to a Person other than the Person in whose
name the surrendered Certificate is registered, it shall be a condition of
exchange that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the Person requesting such
exchange shall have paid any transfer and other taxes required by reason of the
exchange of certificates representing shares of Parent Common Stock to a Person
other than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(e) Parent shall have the right to make reasonable rules, not
inconsistent with the terms of this Agreement, governing the validity of the
Election Forms, the manner and extent to which Standard Elections, Stock
Elections or Cash Elections are to be taken into account in making the
determinations prescribed by Section 1.11, the issuance and delivery of
certificates for Parent Common Stock into which shares of Company Common Stock
are converted in the Merger, and the payment of cash for shares of Company
Common Stock converted into the right to receive cash in the Merger.
(f) Notwithstanding the foregoing provisions of this Section 1.10, the
parties hereto may decide to distribute Election Forms to holders of Company
Common Stock and require that holders making such elections respond prior to the
Effective Time (but not less than twenty (20) business days after the date the
Election Forms are mailed to holders of Company Common Stock), upon such
additional terms and conditions as may be agreed to by the parties.
(g) At any time following one year after the Effective Time, Parent
shall be entitled to require the Exchange Agent to deliver to it or the
Surviving Corporation any shares of Parent Common Stock and cash (including any
cash payable in lieu of any fractional shares of Parent Common Stock and
dividends or other distributions in respect thereof) which had been made
available to the Exchange Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to Parent
(subject to abandoned
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property, escheat or other similar laws) only as general creditors thereof with
respect to the shares of Parent Common Stock and the amount of cash (including
any cash payable in lieu of any fractional shares of Parent Common Stock)
payable upon due surrender of their Certificates. Notwithstanding the foregoing,
neither Parent, the Surviving Corporation nor the Exchange Agent shall be liable
to any holder of a Certificate for shares of Parent Common Stock or cash
(including any cash payable in lieu of any fractional shares of Parent Common
Stock) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common Stock
except as otherwise provided for herein or by applicable law.
(i) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock it is entitled to receive until the holder of such Certificate
shall surrender such Certificate in accordance with the provisions of this
Agreement. Upon such surrender, Parent shall cause to be paid to the Person in
whose name the certificates representing such shares of Parent Common Stock
shall be issued, any dividends or distributions with respect to such shares of
Parent Common Stock which have a record date after the Effective Time and shall
have become payable between the Effective Time and the time of such surrender.
In no event shall the Person entitled to receive such dividends or distributions
be entitled to receive interest thereon.
(j) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either Sub or the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of Sub and
the Company or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in such names and on such behalves or otherwise,
all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry
out the purposes of this Agreement.
Section 1.11. Proration. (a) As is more fully set forth below, the
aggregate amount of cash to be paid in the Merger shall not exceed the product
of (i) thirty percent (30%) of the Standard Cash Consideration multiplied by
(ii) the aggregate number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (such product, the "Maximum
-------
Cash Amount").
-----------
8
(b) In the event that the sum of the aggregate amount of cash
represented by the Cash Elections hereunder received by the Exchange Agent (such
sum, the "Requested Cash Amount") exceeds the Maximum Cash Amount minus the
---------------------
aggregate amount of cash payable on account of all Standard Elections made or
deemed to have been made hereunder (such difference, the "Cash Cap"), each
--------
holder making a Cash Election hereunder shall receive, for each share of Company
Common Stock with respect to which a Cash Election has been made hereunder (x)
cash in an amount equal to the Prorated Cash Amount and (y) a number of shares
of Parent Common Stock equal to the product of the Stock Consideration and a
fraction, the numerator of which is equal to the Standard Cash Consideration
minus the Prorated Cash Amount and the denominator of which is the Standard Cash
Consideration. The term "Prorated Cash Amount" means the greater of (i) thirty
--------------------
percent (30%) of the Standard Cash Consideration and (ii) the product of the
Standard Cash Consideration and a fraction, the numerator of which is the Cash
Cap and the denominator of which is the Requested Cash Amount.
(c) The aggregate number of shares of Parent Common Stock that may be
issued pursuant to Stock Elections hereunder is not subject to any maximum. In
the event that the Requested Cash Amount is less than the Cash Cap, each holder
making a Stock Election hereunder shall receive, at the option of Parent, for
each share of Company Common Stock with respect to which a Stock Election has
been made hereunder, (x) not more than the Stock Consideration and not less than
a number of shares of Parent Common Stock equal to the product of the Stock
Consideration and a fraction, the numerator of which is the Requested Stock
Amount minus the difference between the Cash Cap and the Requested Cash Amount,
and the denominator of which is the Requested Stock Amount (such fraction, the
"Prorated Stock Amount") and (y) cash in an amount equal to the product of (A)
----------------------
the Standard Cash Consideration and (B) one minus the Prorated Stock Amount.
The term "Requested Stock Amount" means the product of (x) the aggregate number
----------------------
of shares of Company Common Stock with respect to which Stock Elections have
been made and (y) the Standard Cash Consideration.
Section 1.12. Closing and Closing Date. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 7.1, the closing (the "Closing")
-------
of the transactions contemplated by this Agreement shall take place (a) at 9:00
a.m. (Pacific time) on the second business day after all of the conditions to
the respective obligations of the parties set forth in Article VI hereof shall
have been satisfied or waived or (b) at such other time and date as Parent and
the Company shall agree (such date and time on and at which the Closing occurs
being referred to herein as the "Closing Date"). The Closing shall take place at
------------
such location as Parent and the Company shall agree.
Section 1.13. PEPS. Parent shall expressly assume, effective as of the
Effective Time, all of the obligations of the Company under the Purchase
Contract Agreement, dated as November 25, 1998 (the "Purchase Contract
-----------------
Agreement"), between the Company and U.S. Bank Trust National Association, as
---------
Purchase Contract Agent, the Purchase Contracts and the Pledge Agreement (as
such terms are defined in the Purchase Contract Agreement) by one or more
supplemental agreements as provided in Section 9.01 of the Purchase Contract
Agreement.
9
Section 1.14. Section 16 Affiliates. Parent, the Surviving Corporation and
the Company shall take all such steps as may be required to provide that, with
respect to each Section 16 Affiliate, (i) the transactions contemplated by this
Agreement and (ii) any other dispositions of Company equity securities
(including derivative securities) or other acquisitions of Parent equity
securities (including derivative securities) in connection with this Agreement,
shall be exempt under Rule 16b-3 promulgated under the Exchange Act, in
accordance with the terms and conditions set forth in that certain No-Action
Letter, dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP.
Section 1.15. Adjustment of Merger Consideration. In the event that,
subsequent to the date hereof but prior to the Effective Time, the outstanding
shares of Parent Common Stock or Company Common Stock shall have been changed
into a different number of shares or a different class as a result of a stock
split, reverse stock split, stock dividend, subdivision, reclassification,
combination, exchange, recapitalization or other similar transaction, the
Standard Consideration, the Standard Cash Consideration and the Stock
Consideration shall be appropriately adjusted.
Section 1.16. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code,
and each of Parent, Sub and the Company hereby adopt this Agreement as a "plan
of reorganization" for purposes of the Code.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub that:
Section 2.1. Organization and Qualification. Except as set forth in Section
2.1 of the disclosure schedule delivered by the Company to Parent and Sub
concurrently with the execution of this Agreement (the "Company Disclosure
------------------
Schedule"), the Company is a corporation duly organized, validly existing and in
--------
good standing under the laws of the State of Kansas, has all requisite corporate
power and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its Assets and to carry on its business as it
is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its Assets makes such qualification necessary other than
in such jurisdictions where the failure to be so qualified and in good standing
will not, when taken together with all other such failures, have a Company
Material Adverse Effect.
Section 2.2. Subsidiaries. Section 2.2 of the Company Disclosure Schedule
sets forth a description as of the date hereof of all Subsidiaries of the
Company and each other corporation, partnership, limited liability company,
business, trust or other Person in which the Company or any of its Subsidiaries
owns, directly or indirectly, an interest in the equity (other than publicly
traded securities which constitute less than 5% of the outstanding securities of
such series or class) including the name of each such Person and the Company's
interest therein, and, as to each Subsidiary identified as a "Material Company
Entity" in Section 2.2 of the Company Disclosure Schedule, a brief description
of the principal line or lines of business conducted by
10
each such entity. Except as set forth in Section 2.2 of the Company Disclosure
Schedule, each of Company's Subsidiaries is duly organized, validly existing and
in good standing under the laws of its state of organization, has all requisite
organizational power and authority, and has been duly authorized by all
necessary approvals and orders, to own, lease and operate its Assets and to
carry on its business as it is now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its Assets make such qualification
necessary other than in such jurisdictions where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a Company Material Adverse Effect. Except as set forth in Section 2.2 of
the Company Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each Subsidiary of the Company are validly issued, fully paid,
nonassessable and free of preemptive rights, are owned directly or indirectly by
the Company free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever
("Encumbrances") and there are no outstanding subscriptions, options, calls,
------------
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
Section 2.3. Capitalization. The authorized capital stock of the Company
consists of (i) 150,000,000 shares of Company Common Stock, (ii) 200,000 shares
of Class A Preferred Stock, without par value (the "Company Class A Preferred
-------------------------
Stock"), of which 70,000 shares have been designated as a series of "Class A $5
-----
Cumulative Preferred Stock," 1,200 shares have been designated as a series of
"Class A $5.65 Cumulative Preferred Stock" and 125,000 shares have been
designated as a series of "Class A $8.50 Cumulative Preferred Stock" and (iii)
2,000,000 shares of Class B Preferred Stock, without par value (the "Company
-------
Class B Preferred Stock"), of which 120,000 shares have been designated as a
-----------------------
series of "Class B $8.30 Series Cumulative Preferred Stock" and 150,000 shares
have been designated as "Class B Junior Participating Series Preferred Stock".
As of the close of business on February 18, 1999, there were issued and
outstanding (i) 69,599,036 shares of Company Common Stock, (ii) 70,000 shares of
Company Class A Preferred Stock (all of which are shares of Class A $5
Cumulative Preferred Stock) and (iii) no shares of Company Class B Preferred
Stock. All of the issued and outstanding shares of the capital stock of the
Company are validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 2.3(a) of the Company Disclosure
Schedule, as of the date hereof, there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
the capital stock of the Company or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such agreement or commitment,
other than (x) the Company's 8.25% Premium Equity Participating Security Units -
PEPS Units ("PEPS Units") (which are exchangeable, in the aggregate, for up to
----------
16,059,000 shares of Company Common Stock) and (y) under the Company Rights
Agreement. Except as set forth in Section 2.3 of the Company
11
Disclosure Schedule and pursuant to the provisions of Section 5.13, the Company
has no commitments or obligations to purchase or redeem any shares of capital
stock of the Company or any of its Subsidiaries. There are no stockholder
agreements, voting trusts, proxies or other agreements or understandings to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound relating to the voting of any shares of the
capital stock of the Company or any of its Subsidiaries by any Person other than
the Company or a Subsidiary of the Company. True, accurate and complete copies
of the Restated Articles of Incorporation and Bylaws of the Company and the
charter and bylaws or other organizational documents and operating agreement for
each Subsidiary of the Company, as in effect on the date hereof, have previously
been made available to Parent.
Section 2.4. Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. The Company has all requisite power and authority to enter
into this Agreement and, subject to obtaining the requisite approval of the
Company's stockholders and the Company Required Statutory Approvals, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to obtaining the applicable Company
Stockholders' Approval. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Parent and Sub, constitutes the valid and binding obligation
of the Company enforceable against it in accordance with its terms (subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law)). Each member of the Board of Directors of the Company and
each of its executive officers has advised the Company and Parent that he or she
currently intends to vote or cause to be voted all shares of Company Common
Stock owned by him or her in favor of approval of this Agreement.
(b) Non-Contravention. Except as set forth in Section 2.4(b) of the
Company Disclosure Schedule, the execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated hereby
will not (with or without notice or lapse of time or both), (i) violate or
conflict with any provision of the Restated Articles of Incorporation or Bylaws
of the Company or similar governing documents of any of the Company's
Subsidiaries, (ii) subject to obtaining the Company Required Statutory Approvals
and the Company Stockholders' Approval, violate or conflict with any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority applicable to the Company or any
of its Subsidiaries or any of their respective Assets or (iii) subject to
obtaining the third-party consents set forth in Section 2.4(b) of the Company
Disclosure Schedule (the "Company Required Consents"), violate, conflict with,
-------------------------
or result in a breach of any provision of, or constitute a default under, or
trigger any obligation to repurchase, redeem or otherwise retire indebtedness
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
any Encumbrance
12
upon any of the Assets (any such violation, conflict, breach, default, trigger,
right of termination, cancellation or acceleration, loss or creation, a
"Violation") of the Company or any of its Subsidiaries pursuant to any
---------
provisions of any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which the Company or any of its Subsidiaries is now
a party or by which it or any of its Assets may be bound or affected, except, in
the case of clauses (ii) and (iii), as would not, in the aggregate, have or be
reasonably likely to have a Company Material Adverse Effect.
(c) Statutory Approvals. Except (i) for applicable requirements, if any,
of the Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and state securities or "blue sky" laws ("Blue Sky Laws"), (ii)
------------ -------------
for the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act") or filings or notifications under the antitrust, competition or
-------
similar laws of any foreign jurisdiction, (iii) for the filing of the
Certificate of Merger pursuant to the KGCC and the CGCL, (iv) required filings
with and the approval of the Federal Energy Regulatory Commission (the "FERC"),
----
(v) applicable filings and approvals with (x) the Wyoming Public Services
Commission and (y) the Colorado Public Utilities Commission, (vi) applicable
filings and approvals set forth in Section 2.4(c) of the Company Disclosure
Schedule, (vii) applicable filings and/or approvals under the Communications Act
and (viii) any notices or filings not required to be given or made until or
after the Effective Time, no declaration, filing or registration with, or notice
to or authorization, consent or approval of, any court, governmental or
regulatory body (including a stock exchange or other self-regulatory body) or
authority, domestic or foreign (each, a "Governmental Authority") is necessary
----------------------
for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except for
such notices, reports, filings, waivers, consents, approvals or authorizations
that, if not made or obtained, would not, in the aggregate, have or reasonably
be expected to have a Company Material Adverse Effect.
(d) Compliance. Except as set forth in Section 2.4(d) of the Company
Disclosure Schedule or as disclosed in the Company SEC Reports, neither the
Company nor any of its Subsidiaries is in violation of or, to the Company's
knowledge, is under investigation with respect to, or has been given notice or
been charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment of any Governmental Authority, except for violations,
investigations and charges relating to Environmental Laws (which are the subject
of Section 2.11) and except for violations, investigations and charges that, in
the aggregate, would not have or reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in Section 2.4(d) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted except
for Environmental Permits (which are the subject of Section 2.11) and permits,
licenses, franchises, authorizations, consents and approvals the failure to
possess, in the aggregate, would not have or reasonably be expected to have a
Company Material Adverse Effect.
13
Section 2.5. Reports and Financial Statements. The filings required to be
made by the Company and its Subsidiaries since January 1, 1996 under the
Securities Act, the Exchange Act, the Federal Power Act (the "Power Act"), the
---------
Natural Gas Act (the "Gas Act"), the Natural Gas Policy Act (the "NGPA"), the
------- ----
Public Utility Holding Company Act of 1935, as amended (the "1935 Act") or any
--------
applicable state laws, rules or regulations have been filed with the Securities
and Exchange Commission (the "SEC"), the applicable public utility regulatory
---
authorities or the FERC, as the case may be, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits, amendments
and supplements appertaining thereto, and the Company has complied in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. The Company has made available to Parent a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Company with the SEC since January 1, 1996
(as such documents have since the time of their filing been amended, the
"Company SEC Reports"). As of their respective dates, the Company SEC Reports
-------------------
(i) complied, or with respect to those not yet filed, will comply, in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and (ii) did not, or with respect to those not yet filed, will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of the Company included in the Company SEC Reports (collectively, the
"Company Financial Statements") have been, or with respect to those not yet
----------------------------
filed, will be prepared in accordance with GAAP (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present, or with respect to
those not yet filed, will fairly present the financial position of the Company
as of the dates thereof and the results of its operations and cash flows for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments. Notwithstanding the
foregoing, no representation or warranty is being made in this Section 2.5 with
respect to information furnished in writing by Parent specifically for inclusion
in any Company SEC Report filed after the date hereof or with respect to any
Parent SEC Report incorporated therein by reference.
Section 2.6. Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities. (a) Except as set forth in the Company SEC Reports or Section 2.6
of the Company Disclosure Schedule, from January 1, 1998 through the date hereof
each of the Company and its Subsidiaries has conducted its business in all
material respects only in the ordinary course of such businesses consistent with
past practice and there has not been any (i) declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of the Company other than (x)
quarterly cash dividends of $1.25 per share in respect of the outstanding shares
of the Company Class A $5 Cumulative Preferred Stock, (y) quarterly cash
dividends of, for the first three fiscal quarters of 1998, $.28, and for fiscal
quarters thereafter, $.20, per share (after giving effect to the 3-for-2 stock
dividend effected by the Company as of December 31, 1998) in respect of the
outstanding shares of the Company Common Stock and (z) as of and after May 31,
1999 semi-annual distributions of up to $1.82221 per outstanding PEP Unit
payable in accordance with the terms thereof; (ii) repurchase, redemption or
other acquisition by the Company or any of its Subsidiaries of any outstanding
14
shares of capital stock or other equity securities of, or other ownership
interests in, the Company or any of its Subsidiaries, except in accordance with
the Stock Plans; (iii) any material change in any method of accounting or
accounting practices by the Company or any of its Subsidiaries other than as
required by GAAP or applicable law; or (iv) material change in the Company's
business operations, condition (financial or otherwise), results of operations,
assets or liabilities.
(b) Except as set forth in the Company SEC Reports filed as of the date
hereof, neither the Company nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) except (i)
liabilities, obligations or contingencies that are accrued or reserved against
in the consolidated financial statements of the Company or reflected in the
notes thereto for the 9-month period ended September 30, 1998, (ii) normal and
recurring liabilities which were incurred after September 30, 1998 in the
ordinary course of business consistent with past practice or (iii) liabilities,
obligations or contingencies that would not, in the aggregate, have a Company
Material Adverse Effect.
Section 2.7. Litigation; Regulatory Proceedings. Except as disclosed in the
Company SEC Reports or as set forth in Section 2.7 of the Company Disclosure
Schedule, (i) there are as of the date hereof no suits, actions, proceedings or,
to the knowledge of the Company, claims pending or, to the knowledge of the
Company, threatened, before a court or other Governmental Authority nor are
there, to the knowledge of the Company, any investigations or reviews pending or
threatened against, relating to or affecting the Company or any of its
Subsidiaries and (ii) there are no judgments, decrees, injunctions or orders of
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to the Company or any of its Subsidiaries
which, in the aggregate, could reasonably be expected to have a Company Material
Adverse Effect.
Section 2.8. Registration Statement and Joint Proxy Statement. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by the Parent in connection with the issuance
of shares of Parent Common Stock in the Merger (the "Registration Statement")
----------------------
will, at the time the Registration Statement is filed with the SEC and at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii) the
joint proxy statement in definitive form relating to the meeting of Company
Stockholders to be held in connection with the Merger and the meeting of Parent
shareholders to be held in connection with the issuance of shares of Parent
Common Stock in the Merger (the "Joint Proxy Statement") will, at the date
---------------------
mailed to stockholders of the Company and shareholders of Parent and at the
times of such meetings, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time the prior to the Effective Time any
event with respect to the Company or any of its Subsidiaries, or with respect to
any information supplied by the Company for inclusion or incorporation by
reference in the Form S-4 on the Joint Proxy Statement, shall occur which is
required to be described in an amendment or supplement to, the Form S-4 or the
Joint Proxy Statement, such event shall be so described, and such
15
amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the holders of Company Common Stock. The Joint Proxy
Statement, to the extent it relates to the Company, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 2.9. Tax Matters. (a) Filing of Timely Tax Returns. Except as set
forth in Section 2.9(a) of the Company Disclosure Schedule, the Company and each
of its Subsidiaries have filed (or there has been filed on their behalf) all Tax
Returns required to be filed by each of them under applicable law. All Tax
Returns were in all material respects (and, as to Tax Returns not filed as of
the date hereof, will be) true, complete and correct and filed on a timely
basis.
(b) Payment of Taxes. The Company and each of its Subsidiaries have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for those contested in good faith and
for which adequate reserves have been taken.
(c) Tax Reserves. Except as set forth in Section 2.9(c) of the Company
Disclosure Schedule, the Company and its Subsidiaries have established (and
until the Closing Date will maintain) on their books and records reserves
adequate to pay all Taxes, all deficiencies in Taxes asserted or proposed
against the Company or its Subsidiaries and reserves for deferred income taxes
in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of the Company
or any of its Subsidiaries except liens for Taxes not yet due and payable.
(e) Withholding Taxes. The Company and each of its Subsidiaries have
complied (and until the Closing Date will comply) in all respects with the
provisions of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, and 6041 and 6049 of the Code, as
well as similar provisions under any other laws, and have, within the time and
in the manner prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Except as set forth in
Section 2.9(f) of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as set forth in Section 2.9(g)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as set forth in Section
2.9(h) of the Company Disclosure Schedule, the statute of limitations for the
assessment of all federal income and applicable state income or franchise Taxes
has expired for all related Tax Returns of
16
the Company and each of its Subsidiaries or those Tax Returns have been examined
by the appropriate taxing authorities for all periods through the date hereof,
and no deficiency for any such Taxes has been proposed, asserted or assessed
against the Company or any of its Subsidiaries that has not been resolved and
paid in full.
(i) Audit, Administrative and Court Proceedings. Except as set forth in
Section 2.9(i) of the Company Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries,
and neither the Company nor any of its Subsidiaries has any knowledge of any
threatened action, audit or administrative or court proceeding with respect to
any such Taxes or Tax Returns.
(j) Powers of Attorney. Except as set forth in Section 2.9(j) of the Company
Disclosure Schedule, no power of attorney currently in force has been granted by
the Company or any of its Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as set forth in Section 2.9(k) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received a Tax Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing adverse effect after the Closing Date.
"Tax Ruling", as used in this Agreement, shall mean a written ruling of a taxing
-----------
authority relating to Taxes. "Closing Agreement", as used in this Agreement,
-----------------
shall mean a written and legally binding agreement with a taxing authority
relating to Taxes.
(l) Availability of Tax Returns. With respect to the tax years ending
on December 31, 1995, December 31, 1996 and December 31, 1997, the Company and
its Subsidiaries have made available to Parent complete and accurate copies of
(i) all federal income and state income or franchise Tax Returns, and any
amendments thereto, filed by the Company or any of its Subsidiaries for all
taxable years commencing January 1, 1995, (ii) all audit reports received from
any taxing authority relating to any such Tax Return filed by the Company or any
of its Subsidiaries and (iii) any Closing Agreements entered into by the Company
or any of its Subsidiaries with any taxing authority with respect to the periods
included in such Tax Returns.
(m) Tax Sharing Agreements. Except as set forth in Section 2.9(m) of the
Company Disclosure Schedule, no agreements relating to allocating or sharing of
Taxes exist between or among the Company and any of its Subsidiaries.
(n) Code Section 341(f). Neither the Company nor any of its Subsidiaries has
filed (or will file prior to the Closing) a consent pursuant to Section 341(f)
of the Code or has agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.
(o) Code Section 168. No property of the Company or any of its Subsidiaries
is property that the Company or any such Subsidiary or any party to this
transaction is or will be required to treat as being owned by another person
pursuant to the provisions of Section
17
168(f)(8) of the Code (as in effect prior to its amendment by the Tax Reform Act
of 1986) or is "tax-exempt use property" within the meaning of Section 168 of
the Code.
(p) Code Section 481 Adjustments. Except as set forth in Section 2.9(p) of
the Company Disclosure Schedule and except for adjustments that in the aggregate
could not reasonably be expected to have a Company Material Adverse Effect,
neither the Company nor any of its Subsidiaries is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Company or any of its Subsidiaries,
and to the best of the knowledge of the Company, the Internal Revenue Service
(the "IRS") has not proposed any such adjustment or change in accounting method.
(q) Code Sections 6661 and 6662. All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of the
Code for Tax Returns the due date for which was on or before December 31, 1998
and within the meaning of Section 6662 of the Code for Tax Returns the due date
for which was after December 31, 1998) that could reasonably be expected to
result in a Company Material Adverse Effect have been adequately disclosed (or,
with respect to Tax Returns filed following the Closing, will be adequately
disclosed) on the Tax Returns of the Company and its Subsidiaries in accordance
with Section 6661(b)(2)(B) of the Code for Tax Returns the due date for which
was on or before December 31, 1998, and in accordance with Section 6662(d)(2)(B)
of the Code for Tax Returns the due date for which was after December 31, 1998.
(r) NOLs. As of the date hereof, the Company and its Subsidiaries had
net operating loss carryovers available to offset future income as set forth in
Section 2.9(r) of the Company Disclosure Schedule. Section 2.9(r) of the
Company Disclosure Schedule sets forth the amount of and year of expiration of
each company's net operating loss carryovers.
(s) Credit Carryover. As of the date hereof, the Company and its Subsidiaries
had tax credit carryovers available to offset future tax liability as set forth
in Section 2.9(s) of the Company Disclosure Schedule. Section 2.9(s) of the
Company Disclosure Schedule sets forth the amount and year of expiration of each
company's tax credit carryovers.
(t) Code Section 338 Elections. Except as set forth in Section 2.9(t) of the
Company Disclosure Schedule, no election under Section 338 of the Code (or any
predecessor provision) has been made by or with respect to the Company or any of
its Subsidiaries or any of their respective assets or properties.
(u) Acquisition Indebtedness. Except as set forth in Section 2.9(u) of the
Company Disclosure Schedule, no indebtedness of the Company or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
(v) Intercompany Transactions. Except as set forth in Section 2.9(v)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has engaged in any intercompany transactions within the meaning of
Section 1.1502-13 of the Treasury Regulations for which any income remains
unrecognized as of the close of the last taxable year prior to the Closing Date.
18
(w) Code Section 280G. Except as set forth in Section 2.9(w) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any agreement, contract, or arrangement that could result, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
(x) Affiliated Group. Except as set forth in Section 2.9(x) of the Company
Disclosure Schedule, none of the Company and its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (B) has any
liability for Taxes of any other Person (other than any of the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
(y) Tax Treatment of Merger. The Company has not taken or agreed to take any
action, or knows of any circumstances, that (without regard to any action taken
or agreed to be taken by Parent or Sub or any of their respective affiliates)
would prevent the Merger from qualifying as a reorganization within the meaning
of Sections 368(a)(1)(A) or 368(a)(2)(D) of the Code.
Section 2.10. Employee Matters; ERISA. (a) Benefit Plans. Section 2.10(a)
of the Company Disclosure Schedule contains a true and complete list of each
material employee benefit plan, program or arrangement currently sponsored,
maintained or contributed to by the Company or any of its Subsidiaries for the
benefit of employees, former employees or directors and their beneficiaries or
for which the Company or any of its Subsidiaries may have any liability,
including, but not limited to, any employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any employment, consulting, non-compete, severance or change in
-----
control agreement (collectively, the "Company Benefit Plans"). For the purposes
---------------------
of this Section 2.10 only, the term "Company" shall be deemed to include
predecessors thereof.
(b) Termination of Company Benefit Plans; Withdrawal. All of the Company
Benefit Plans (other than any multiemployer plan, as defined in Section 3(37) of
ERISA) can be terminated by the Company without incurring any material
liability. Subject to any collective bargaining obligations, except as set forth
in Section 2.10(a) of the Company Disclosure Schedule, the Company and its
Subsidiaries can withdraw from participation in any Company Benefit Plan that is
a multiemployer plan, without incurring any material liability.
(c) Contributions. Except as set forth in Section 2.10(c) of the Company
Disclosure Schedule, all material contributions and other payments required to
be made as of date hereof by the Company or any of its Subsidiaries to any
Company Benefit Plan (or to any person pursuant to the terms thereof) have been
made or the amount of such payment or contribution obligation has been properly
reflected in the Company Financial Statements in accordance with GAAP.
19
(d) Qualification; Compliance. Except as set forth in Section 2.10(d)
of the Company Disclosure Schedule, each of the Company Benefit Plans (other
than any multiemployer plan as defined in Section 3(37) of ERISA) intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and, to the best knowledge of the Company, no
circumstances exist that are reasonably expected by the Company to result in the
revocation of any such determination. The Company is in compliance in all
material respects with, and each Company Benefit Plan (other than any
multiemployer plan as defined in Section 3(37) of ERISA) is and has been
operated in all material respects in compliance with, all applicable laws, rules
and regulations governing such plan, including, without limitation, ERISA and
the Code. Each Company Benefit Plan (other than any multiemployer plan as
defined in Section 3(37) of ERISA) intended to provide for the deferral of
income, the reduction of salary or other compensation, or to afford other income
tax benefits, complies with the material requirements of the applicable
provisions of the Code or other laws, rules and regulations required to provide
such income tax benefits.
(e) Liabilities. With respect to the Company Benefit Plans individually and
in the aggregate, no event has occurred, and, to the best knowledge of the
Company, there exists no condition or set of circumstances that is reasonably
likely to subject the Company or any of its Subsidiaries to any liability
arising under the Code, ERISA or any other applicable law (including, without
limitation, any liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity agreement to which the Company
----
is a party, which liability could reasonably be expected to have a Company
Material Adverse Effect.
(f) Welfare Plans. Except as set forth in Section 2.10(e) of the Company
Disclosure Schedule, none of the Company Benefit Plans that are "welfare plans",
within the meaning of Section 3(1) of ERISA, provides for any retiree benefits
other than coverage mandated by applicable law or benefits the full cost of
which is borne by the retiree.
(g) Documents Made Available. The Company has made available to Parent a true
and correct copy of each collective bargaining agreement to which the Company or
any of its Subsidiaries is a party or under which the Company or any of its
Subsidiaries has obligations and, with respect to each Company Benefit Plan, (i)
such plan and summary plan description, as applicable, (ii) the most recent
annual report filed with the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management agreement (including all
amendments to each such document), (iv) the most recent determination of the IRS
with respect to the qualified status of such plan and (v) the most recent
actuarial report or valuation.
(h) Payments Resulting from Mergers. Except as set forth in Section 2.10(g)
of the Company Disclosure Schedule or specifically provided for herein, neither
the Company nor any of its Subsidiaries is a party to any plan, agreement or
arrangement pursuant to the terms of which the consummation or announcement of
any transaction contemplated by this Agreement will (either alone or in
connection with the occurrence of any additional or further acts or events)
result in any (A) payment (whether of severance pay or otherwise) becoming due
from the Company or any of its Subsidiaries to any officer, employee, former
employee or director thereof
20
or to a trustee under any "rabbi trust" or similar arrangement, or (B) benefit
under any Company Benefit Plan being established or becoming accelerated, or
immediately vested or payable.
Section 2.11. Environmental Protection. (a) Compliance. Except as
set forth in the Company SEC Reports or in Section 2.11(a) of the Company
Disclosure Schedule, (i) each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable Environmental Laws and
(ii) to the knowledge of the General Counsel and the Director of Environmental
Health and Safety of the Company, neither the Company nor any of its
Subsidiaries has received any unresolved written communication since January 1,
1996 from any Person or Governmental Authority that alleges that the Company or
any of its Subsidiaries is not in such compliance with applicable Environmental
Laws.
(b) Environmental Permits. Except as set forth in the Company SEC
Reports or as set forth in Section 2.11(b) of the Company Disclosure Schedule,
each of the Company and its Subsidiaries has obtained or has applied for all
material environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary for the
---------------------
construction of their facilities or the conduct of their operations, and all
such permits are in good standing or, where applicable, a renewal application
has been timely filed and is pending agency approval, and the Company and its
Subsidiaries are in material compliance with all terms and conditions of the
Environmental Permits.
(c) Environmental Claims. Except as set forth in the Company SEC
Reports or as set forth in Section 2.11(c) of the Company Disclosure Schedule or
except as would not be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, (i) as of date hereof, there is no
Environmental Claim pending (x) against the Company or any of its Subsidiaries,
(y) to the Company's knowledge, against any Person whose liability for any
Environmental Claim the Company or any of its Subsidiaries has retained or
assumed contractually or (z) against any real or personal property or operations
which the Company or any of its Subsidiaries owns, leases or manages, in whole
or in part, and (ii) there are no past or present actions, activities,
circumstances, conditions, events or incidents which could reasonably be
expected to form the basis of any such Environmental Claim.
(d) Releases. Except as set forth in the Company SEC Reports or as
set forth in Section 2.11(c) or Section 2.11(d) of the Company Disclosure
Schedule, as of date hereof there have been no Releases of any Hazardous
Material that would be reasonably likely to form the basis of any Environmental
Claim against the Company or any of its Subsidiaries, or to the Company's
knowledge against any Person whose liability for any Environmental Claim the
Company or any of its Subsidiaries has retained or assumed contractually, except
for those that would not be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
(e) Predecessors. Except as set forth in the Company SEC Reports or
as set forth in Section 2.11(e) of the Company Disclosure Schedule and, to the
Company's knowledge, with respect to any predecessor of the Company or any
Subsidiary of the Company, there is no Environmental Claim pending or
threatened, nor any Release of Hazardous Materials that would
21
be reasonably likely to form the basis of any Environmental Claim, except for
those that would not be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(f) Disclosure. The Company has made available to Parent all material
documents which the Company reasonably believes provide the basis for (i) the
cost of Company pollution control equipment currently required or known to be
required in the future; (ii) current Company remediation costs or Company
remediation costs known or suspected to be required in the future; or (iii) any
other environmental matter affecting the Company, except for those that would
not be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
(g) Cost Estimates. No environmental matter set forth in the Company
SEC Reports or the Company Disclosure Schedule could reasonably be expected to
substantially differ from the cost or recovery estimates provided in the Company
SEC Reports.
(h) Reports. Each of the Company and its Subsidiaries has made
available to Parent true, complete and correct summaries or copies of all
environmental audits, assessments or investigations, including test results and
drafts, which (i) have been conducted by or on behalf of the Company or any of
its Subsidiaries since January 1, 1996 and (ii) are available to, or in the
possession of, the Company or any of its Subsidiaries on any currently or
formerly owned, leased or operated property.
(i) Release. Except as set forth in Section 2.11(i) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
released any party from any material claim under any Environmental Law or waived
any rights against any other party under any Environmental Law, except for those
that would not be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(j) Prior Indemnification Agreements. Except as set forth in Section
2.11(j) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has entered into any material agreement that may require the
Company or any of its Subsidiaries to pay to, reimburse, guarantee, pledge,
defend, indemnify or hold harmless any Person for or against any Environmental
Claim, except for those that would not be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section 2.12. Regulation.
(a) The Company is regulated as a local distribution company or public
utility by the States of Colorado, Wyoming and Nebraska and as a pipeline or
gatherer by the States of Oklahoma, Montana, New Mexico, Colorado, Wyoming,
Texas, Kansas and Utah and by no other state and is a "public utility company"
and a "gas utility company" under the 1935 Act. Except as set forth in Section
2.12 of the Company Disclosure Schedule, neither the Company (except as
aforesaid) nor any of its Subsidiaries is subject to regulation as a local
distribution company, pipeline, gatherer, storage provider or public utility or
public service company (or similar designation) by any other state in the United
States or any foreign country, is a "holding company," "gas utility company,"
"electric utility company," "public utility company" or an
22
"affiliate" of any "public utility company" (other than the Company) or "holding
company" as defined under the 1935 Act or the holder of an authorization or
certificate issued under Section 3 or Section 7 of the Gas Act.
(b) The Company holds no assets in its own name subject to the
jurisdiction of the United States under Section 7(c) of the Gas Act. Section
2.12(b) of the Company Disclosure Schedule sets forth all of the Company's
direct and indirect interests in electrical generation assets. Each of the
foregoing electric generation assets sells all of its electric generating output
pursuant to contracts under, and is defined as, a qualifying facility pursuant
to the Public Utilities Regulatory Policy Act of 1978 ("PURPA"). The Company
-----
has no direct or indirect control or ownership of electric transmission
facilities.
Section 2.13. Vote Required. Giving effect to the redemption of the
Company Class A Preferred Stock pursuant to the provisions of Section 5.13, the
approval of the Merger by the affirmative vote of a majority of the votes
entitled to be cast by all holders of Company Common Stock are the only votes of
the holders of any class or series of the capital stock of the Company required
to approve this Agreement, the Merger and the other transactions contemplated
hereby (the "Company Stockholders' Approval"). The Board of Directors of the
------------------------------
Company has (i) unanimously approved this Agreement, (ii) determined that the
Merger is fair to, and in the best interests of, the holders of Company Common
Stock and (iii) subject to Section 5.1(b), resolved to recommend this Agreement
and the Merger to such holders for approval and adoption and directed that this
Agreement be submitted to such holders. The Company hereby agrees to the
inclusion in the Form S-4 and the Joint Proxy Statement of the recommendations
of the Board of Directors described in this Section 2.13.
Section 2.14. Opinion of Financial Advisor. The Company has received
the opinion of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (the "Company
-------
Financial Advisor") dated February 19, 1999, to the effect that, as of such
-----------------
date, the Merger Consideration is fair to the holders of Company Common Stock
from a financial point of view. The Company has been authorized by the Company
Financial Advisor to permit (or reference thereto) the inclusion of such
fairness opinion in the Form S-4 and the Joint Proxy Statement.
Section 2.15. Insurance. Except as set forth in Section 2.15 of the
Company Disclosure Schedule, each of the Company and its Subsidiaries is, and
has been continuously since January 1, 1996, insured with financially
responsible insurers or under other financially responsible arrangements in such
amounts and against such risks and losses as are customary for companies
conducting the business as conducted by the Company and its Subsidiaries during
such time period. Neither the Company nor its Subsidiaries has received any
notice of cancellation or termination with respect to any material insurance
policy of the Company or its Subsidiaries. The insurance policies of the Company
and each of its Subsidiaries are valid and enforceable policies in all material
respects.
Section 2.16. Company Rights Agreement. The Company has delivered to
Parent a true and complete copy of the Company Rights Agreement as in effect on
the date hereof. Prior to the Effective Time, the Company will have taken all
necessary action to amend
23
the Company Rights Agreement so that neither the execution of this Agreement nor
the consummation of the Merger and the other transactions contemplated hereby
will (a) cause the Company Rights to become exercisable, (b) cause Parent, Sub
or the Surviving Corporation to become an Acquiring Person (as such term is
defined in the Company Rights Agreement) or (c) give rise to a Distribution Date
or a Shares Acquisition Date. The Company shall cause the Company Rights
Agreement to be amended so that the rights issued thereunder shall expire
immediately prior to the Effective Time.
Section 2.17. Brokers. No broker, finder or investment banker (other
than the Company Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Parent a complete and correct copy of all agreements between the Company and the
Company Financial Advisor pursuant to which such firm would be entitled to any
payment relating to the Merger.
Section 2.18. No Other Agreements to Sell the Company or Its Assets.
Except pursuant to this Agreement and as set forth in Section 2.18 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
any legal obligation, absolute or contingent, to any other Person to sell any
material portion of the Assets of the Company or any of its Subsidiaries, to
sell any material portion of the capital stock or other ownership interests of
the Company or any of its Subsidiaries (other than (x) pursuant to the exercise
of Company Stock Rights granted under the Stock Plans, (y) the Thermo Agreements
or (z) upon exchange of the PEPS Units), or to effect any merger, consolidation
or other reorganization of the Company or any of its Subsidiaries or to enter
into any agreement with respect thereto. Since January 30, 1999, the Company has
executed no confidentiality agreement with any Person in connection with its
consideration of acquiring all or a substantial part of the Assets or capital
stock of the Company or any of its Subsidiaries.
Section 2.19. Assets. Except as set forth in Section 2.19(a) of the
Company Disclosure Schedule or except as would not, in the aggregate, have or be
reasonably likely to have a Company Material Adverse Effect, the Company and its
Subsidiaries have good and marketable or, with respect to Assets located in the
State of Texas, defensible title to or a valid leasehold estate in or a valid
right to use all of the material Assets (other than easements and rights of way
which are the subject of Section 2.25) reflected on the Company's balance sheet
at September 30, 1998 (except for Assets subsequently sold in the ordinary
course of business consistent with past practice). All of such Assets are free
and clear of all Encumbrances (other than Permitted Encumbrances) and have been
maintained in reasonable operating condition and repair, subject to ordinary
wear and tear.
Section 2.20. Contracts and Commitments. As of the date hereof,
Section 2.20 of the Company Disclosure Schedule contains a complete and accurate
list of all contracts (written or oral), plans, undertakings, commitments or
agreements (including, without limitation, intercompany Contracts) ("Contracts")
---------
of the following categories to which the Company or any of its Subsidiaries is a
party or by which any of them is bound as of the date of this Agreement:
24
(a) employment contracts, including, without limitation, contracts to
employ executive officers and other contracts with officers, directors or
stockholders of the Company, and all severance, change in control or similar
arrangements with any officers, employees or agents of the Company that will
result in any obligation (absolute or contingent) of the Company or any of its
Subsidiaries to make any payment to any officers, employees or agents of the
Company following the consummation of the transactions contemplated hereby or
termination or change of terms and conditions of employment;
(b) collective bargaining agreements;
(c) (i) all gas sales and purchase Contracts that are not cancellable
or otherwise terminable on or prior to December 31, 1999 and that have volumes
greater than 5,000 MMBtu/day and all firm transportation and storage Contracts
related to the commodity marketing or Texas intrastate gas marketing operations
of the Company, (ii) gathering Contracts in excess of $2.0 million annually,
(iii) gas purchases for plant shrink and fuel in excess of $6.0 million
annually, (iv) liquid hydrocarbon purchases for purposes of resale in excess of
$4.0 million annually, (v) gas sales at plant outlets in excess of $6.0 million
annually, (vi) liquid hydrocarbon sales in excess of $6.0 million annually,
(vii) processing agreements in excess of $2.0 million annually, (viii) Natural
Gas Pipeline transportation contracts in excess of $2.4 million annually, (ix)
Natural Gas Pipeline storage and balancing contracts in excess of $2.4 million
annually, (x) the 10 largest KN Interstate transportation and/or storage
Contracts (measured by combined annual revenue), (xi) all Mid-Con Texas Pipeline
Contracts with Houston Lighting & Power, (xii) all Mid-Con Texas Pipeline
Contracts with Entex, (xiii) the ten largest Mid-Con Texas Pipeline end use
sales contracts (measured by annual revenue), (xiv) all West Texas System
Contracts with Energas, (xv) all West Texas System Contracts with Southwest
Public Service, (xvi) all West Texas System Contracts with Texas Utilities,
(xvii) the ten largest remaining West Texas System end use sales Contracts
(measured by annual revenue), (xviii) all Rocky Mountain Natural and Northern
Gas Company Contracts with the Company's retail gas divisions, (xix) the ten
largest regulated utility franchise agreements (measured by annual revenue),
(xx) "qualifying facilities" (as defined under PURPA) Contracts for plant outlet
power sales, and (xxi) all en*able and Orcom Contracts for services which are
not cancelable or otherwise terminable on or prior to December 31, 1999;
(d) Contracts for the purchase of inventory which are not cancelable
(without material penalty, cost or other liability) within one year and, other
than Contracts described elsewhere in this Section 2.20, other Contracts made in
the ordinary course of business involving annual expenditures or liabilities in
excess of $1,000,000 which are not cancelable (without material penalty, cost or
other liability) within 90 days;
(e) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money, whether as
borrower, lender or guarantor, in excess of $1,000,000;
25
(f) Contracts containing covenants limiting the freedom of the Company
or any of its Subsidiaries to engage in any line of business or compete with any
Person or operate at any location, including, without limitation, any
preferential rights granted to third parties;
(g) any Contract pending for the acquisition or disposition, directly
or indirectly (by merger or otherwise) of material Assets (other than inventory)
or capital stock of any Person (including, without limitation, the Company or
any of its Subsidiaries); and
(h) Other than Contracts described elsewhere in this Section 2.20 or
Contracts which may be omitted pursuant to the specific size limitations set
forth in other provisions of this Section 2.20, Contracts between the Company
and any of its wholly-owned Subsidiaries, on one hand, and any Subsidiary of the
Company which is not wholly-owned, directly or indirectly, by the Company, on
the other hand.
True copies of the written Contracts identified in Section 2.20 of the
Company Disclosure Schedule (except as to the Contracts identified in Section
2.20(c), true copies of only those Contracts which are material as to one or
more of the categories listed in Section 2.20(c)), or with respect to the
Natural Gas Pipeline Transportation and Storage Contracts, true summaries of all
material terms, have been delivered or made available to Parent. Promptly after
the date of this Agreement, the Company shall use its reasonable best efforts to
obtain all required consents to deliver or make available the Natural Gas
Pipeline Transportation and Storage Contracts to Parent and, upon obtaining such
consents, shall deliver or make available to Parent all of the Natural Gas
Pipeline Transportation and Storage Contracts.
Section 2.21. Absence of Breaches or Defaults. Except as set forth
in Section 2.21 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries is and, to the knowledge of the Company, no other party is
in default under, or in breach or violation of (and no event has occurred which,
with notice or the lapse of time or both, would constitute a default under, or a
breach or violation of), any term, condition or provision of (i) their
respective charters, bylaws or other governing documents or (ii) any Contract
identified on Section 2.20 of the Company Disclosure Schedule except, in the
case of clause (ii) for defaults, breaches, violations or events which,
individually or in the aggregate, would not have a Company Material Adverse
Effect; provided that any defaults, breaches, violations or events with respect
to those Contracts referred to in Section 2.20(e) shall be scheduled without
regard to any Company Material Adverse Effect. Other than contracts which have
terminated or expired in accordance with their terms, each of the Contracts
identified on Section 2.20 of the Company Disclosure Schedule is valid, binding
and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect. No event has occurred which either entitles, or would, on notice or
lapse of time or both, entitle the holder of any indebtedness for borrowed money
affecting the Company or any of its Subsidiaries to accelerate, or which does
accelerate, the maturity of any indebtedness affecting the Company or any of its
Subsidiaries, except as set forth in Section 2.21 of the Company Disclosure
Schedule.
26
Section 2.22. Labor Matters. (a) Section 2.22(a) of the Company
Disclosure Schedule contains a complete list of all organizations representing
the employees of the Company or any of its Subsidiaries. As of the date hereof,
there is no strike or work stoppage, pending or, to the knowledge of the
Company, threatened, which involves any employees of the Company or any of its
Subsidiaries.
(b) Section 2.22(b) of the Company Disclosure Schedule contains as of
the date hereof (i) a list of all material unfair employment or labor practice
charges which are presently pending which, to the knowledge of the Company, have
been filed with any governmental authority by or on behalf of any employee
against the Company or any of its Subsidiaries and (ii) a list of all material
employment-related litigation, including, without limitation, arbitrations or
administrative proceedings which are presently pending, filed by or on behalf of
any former, current or prospective employee against the Company or any of its
Subsidiaries.
(c) Except as described in Sections 2.22(a) and (b) of the Company
Disclosure Schedule, there are not presently pending or, to the knowledge of the
Company, threatened, against the Company or any of its Subsidiaries any claims
by any governmental authority, labor organization, or any former, current or
prospective employee alleging that the Company or any such employer has violated
any applicable laws respecting employment practices, except where such claims
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
Section 2.23. Affiliate Transactions. Except as set forth in the
Company SEC Reports and Schedule 2.23 of the Company Disclosure Schedule, from
December 31, 1997 through the date of this Agreement there have been no
transactions, agreements, arrangements or understandings (and no such
arrangements are pending) between the Company or any of its Subsidiaries, on the
one hand, and affiliates of the Company or other Persons, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
Section 2.24. Chapter 17-12,100 of the KGCC; State Takeover Statutes.
Prior to the date hereof, the Board of Directors of the Company has approved
this Agreement and the Merger and the other transactions contemplated hereby,
and such approval is sufficient to render inapplicable to the Merger and any of
such other transactions the provisions of Sections 17-12,100 through 17-12,104
of the KGCC and Sections 17-1286 through 17-1298 of the KGCC. To the Company's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement or any of the
transactions contemplated hereby and no provision of the Restated Articles of
Incorporation or Bylaws of the Company or the charter or bylaws of any of its
Subsidiaries would, directly or indirectly, restrict or impair the ability of
Parent to vote, or otherwise to exercise the rights of a stockholder with
respect to, shares of capital stock of the Company and its Subsidiaries that may
be acquired or controlled by Parent as contemplated by this Agreement.
27
Section 2.25. Easements. The businesses of the Company and each of
its Subsidiaries are being operated in a manner which does not violate (in any
manner which would, or which would be reasonably likely to, have a Company
Material Adverse Effect) the terms of any easements, rights of way, permits,
servitudes, licenses, leasehold estates and similar rights relating to real
property (collectively, "Easements") used by the Company and each of its
---------
Subsidiaries in such businesses. All Easements are valid and enforceable, except
as the enforceability thereof may be affected by bankruptcy, insolvency or other
laws of general applicability affecting the rights of creditors generally or
principles of equity, and grant the rights purported to be granted thereby and
all rights necessary thereunder for the current operation of such business,
except where the failure of any such Easement to be valid and enforceable or to
grant the rights purported to be granted thereby or necessary thereunder would
have a Company Material Adverse Effect. There are no special gaps in the
Easements which would impair the conduct of such businesses in a manner which
would, or which would be reasonably likely to, have a Company Material Adverse
Effect, and no part of the pipelines, equipment and other tangible personal
property used in connection with the Company's pipeline operations is located on
property which is not owned in fee by the Company or a Subsidiary or subject to
an Easement in favor of the Company or a Subsidiary, where the failure of such
pipelines, equipment or assets to be so located would have a Company Material
Adverse Effect. As of the date of this Agreement, there are no pending or, to
the knowledge of the Company, threatened actions against any Easements which are
reasonably likely to have a Company Material Adverse Effect.
Section 2.26. Commodity Price Exposure. The Risk Management
Committee of the Company has established risk parameters, limits and guidelines
in compliance with the risk management policy approved by the Company's Board of
Directors which parameters, limits and guidelines have been previously provided
to Parent (the "Company Trading Guidelines") to restrict the level of risk that
--------------------------
the Company and its Subsidiaries are authorized to take with respect to the net
position resulting from all physical commodity transactions, exchange traded
futures and options and over-the-counter derivative instruments (the "Net
---
Company Position") and monitors the compliance by the Company and its
----------------
Subsidiaries with such risk parameters. As of the date hereof, (i) the Net
Company Position is within the risk parameters which are set forth in the
Company Trading Guidelines and (ii) the exposure of the Company and its
Subsidiaries with respect to their net position resulting from all physical
commodity transactions, exchange traded futures and options and over-the-counter
derivative instruments is not material to the Company and its Subsidiaries taken
as a whole. Except as previously disclosed in writing to Parent, as of the date
hereof, neither the Company nor any of its Subsidiaries is a party to any
agreement for (x) the purchase, sale, transportation, storage of petroleum,
petroleum products, natural gas, natural gas liquids, electricity, or other
energy products which would result in a loss or have a negative value in excess
of $5.0 million when marked to market in accordance with generally recognized
▇▇▇▇ to market accounting policies that have been discussed and agreed to by the
parties or (y) for the processing of natural gas and natural gas liquids which
would result in a loss in excess of $2.0 million when valued at market prices as
of the date hereof.
Section 2.27. Year 2000. All Software and hardware systems currently
utilized by the Company and its Subsidiaries and material to the operation of
their respective businesses are capable of providing or are being adapted or
replaced to provide on or before December 31,
28
1999 accurate results using data having date ranges spanning the twentieth and
twenty-first centuries, except where the failure to provide such accurate
results is not reasonably expected to have a Company Material Adverse Effect.
Section 2.28. Intellectual Property and Software. Subject to
obtaining required consents under all license agreements pursuant to which the
Company or its Subsidiaries have obtained the right to use the Intellectual
Property owned by third parties, the Surviving Corporation, after giving effect
to the Merger, will own or have the valid, legal right to use all Intellectual
Property and Software used in connection with its business as conducted by the
Company on the date hereof. The Company and its Subsidiaries have used
commercially reasonable measures to protect the confidentiality of the material
trade secrets used in connection with its business. To the Company's knowledge,
no material Intellectual Property or Software used in connection with its
businesses has been improperly used, improperly divulged or misappropriated by
the Company or any other Person. As of the date hereof, neither the Company nor
any of its Subsidiaries has made in the past three years any claim in writing
which remains unresolved of a violation, infringement, misuse or
misappropriation by others of rights of the Company and its Subsidiaries to or
in connection with any material Intellectual Property used in connection with
its business. There is no pending or, to the knowledge of the Company,
threatened claim by any third person of a violation, infringement, misuse or
misappropriation by any of the Company or any of its Subsidiaries of any
Intellectual Property or Software owned by any third person, or of the
invalidity of any patent used in connection with its business, that would,
individually or in the aggregate, have a Company Material Adverse Effect.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and warrant to
the Company that:
Section 3.1. Organization and Qualification. Except as set forth in
Section 3.1 of the disclosure schedule delivered by Parent to the Company
concurrently with the execution of this Agreement (the "Parent Disclosure
-----------------
Schedule"), Parent is a corporation duly organized, validly existing and in good
--------
standing under the laws of the State of California has all requisite corporate
power and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its Assets and to carry on its business as it
is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its Assets makes such qualification necessary other than
in such jurisdictions where the failure to be so qualified and in good standing
will not, when taken together with all other such failures, have a Parent
Material Adverse Effect.
Section 3.2. Subsidiaries. Section 3.2 of the Parent Disclosure
Schedule sets forth a description as of the date hereof of all Subsidiaries of
Parent and each other corporation, partnership, limited liability company,
business, trust or other Person in which Parent or any of
29
its Subsidiaries owns, directly or indirectly, an interest in the equity (other
than publicly traded securities which constitute less than 5% of the outstanding
securities of such series or class) including the name of each such Person and
Parent's interest therein, and, as to each Subsidiary identified as a "Material
Parent Entity" in Section 3.2 of the Parent Disclosure Schedule, a brief
description of the principal line or lines of business conducted by each such
entity. Except as set forth in Section 3.2 of the Parent Disclosure Schedule,
each of Parent's Subsidiaries is duly organized, validly existing and in good
standing under the laws of its state of organization, has all requisite
organizational power and authority, and has been duly authorized by all
necessary approvals and orders, to own, lease or operate its Assets and to carry
on its business as it is now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its Assets make such qualification necessary
other than in such jurisdictions where the failure to be so qualified and in
good standing will not, when taken together with all such other failures, have a
Parent Material Adverse Effect. Except as set forth in Section 3.2 of the Parent
Disclosure Schedule, all of the issued and outstanding shares of capital stock
of each Subsidiary of Parent are validly issued, fully paid, nonassessable and
free of preemptive rights, are owned directly or indirectly by Parent free and
clear of any Encumbrances and there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
Section 3.3. Capitalization. (a) The authorized capital stock of
Parent consists of (i) 750,000,000 shares of Parent Common Stock and (ii)
250,000,000 shares of preferred stock, without par value (the "Parent Preferred
----------------
Stock"). As of the close of business on February 17, 1999, there were issued and
-----
outstanding (i) 240,139,973 shares of Parent Common Stock and (ii) no shares of
Parent Preferred Stock. All of the issued and outstanding shares of the capital
stock of Parent are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 3.3(a) of the Parent
Disclosure Schedule, as of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating Parent or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Parent or obligating Parent or any of its
Subsidiaries to grant, extend or enter into any such agreement or commitment,
other than the Parent Rights Plan. True, accurate and complete copies of the
Articles of Incorporation and Bylaws of Parent and Sub, as in effect on the date
hereof, have previously been made available to the Company.
(b) The authorized capital stock of Sub consists of 100 shares of
common stock, no par value, 100 shares of which are duly authorized, validly
issued and outstanding, fully paid and nonassessable and owned by Parent free
and clear of all liens, claims and encumbrances.
30
(c) None of Parent or any of its Subsidiaries, or to Parent's
knowledge, any of their respective affiliates, beneficially owns as of the date
hereof in the aggregate more than 3% of the outstanding shares of Company Common
Stock, and, except to the extent permitted by the Confidentiality Agreement,
neither Parent nor its Subsidiaries will acquire any shares of Company Common
Stock prior to the Company Stockholders Meeting.
Section 3.4. Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. Each of Parent and Sub has all requisite power and
authority to enter into this Agreement and, subject to obtaining the requisite
approval of Parent's shareholders and the applicable Parent Required Statutory
Approvals, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub, subject to obtaining the
requisite approval of Parent's shareholders. This Agreement has been duly and
validly executed and delivered by Parent and Sub and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes the
valid and binding obligation of Parent and Sub enforceable against them in
accordance with its terms (subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law)).
(b) Non-Contravention. Except as set forth in Section 3.4(b) of the
Parent Disclosure Schedule, the execution and delivery of this Agreement by
Parent and Sub does not, and the consummation of the transactions contemplated
hereby will not (with or without notice or lapse of time or both), (i) violate
or conflict with any provision of the Articles of Incorporation, Bylaws or
similar governing documents of Parent or any of its Subsidiaries, (ii) subject
to obtaining the required Parent Statutory Approvals and the approval of
Parent's shareholders, violate or conflict with any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any Governmental Authority applicable to Parent or any of its Subsidiaries or
any of their respective Assets, or (iii) subject to obtaining the third-party
consents set forth in Section 3.4(b) of the Parent Disclosure Schedule (the
"Parent Required Consents"), violate, conflict with, or result in a breach of
-------------------------
any provision of, or constitute a default under, or trigger any obligation to
repurchase, redeem or otherwise retire indebtedness under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination, cancellation, or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any Encumbrance upon any of
the Assets of Parent or any of its Subsidiaries pursuant to any provisions of
any note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Parent or any of its Subsidiaries is now a party or by which it or
any of its Assets may be bound or affected, except in the case of clauses (ii)
and (iii) as would not, in the aggregate, have or be reasonably likely to have
or be reasonably likely to have a Parent Material Adverse Effect.
31
(c) Statutory Approvals. Except (i) for applicable requirements, if
any, of the Securities Act, the Exchange Act and Blue Sky Laws, (ii) for the
pre-merger notification requirements of the HSR Act or filings or notifications
under the antitrust, competition or similar laws of any foreign jurisdiction,
(iii) for the filing of the Certificate of Merger pursuant to the KGCC and the
CGCL, (iv) required filings with and the approval of the FERC, (v) applicable
filings and approvals with the Colorado Public Utilities Commission and the
Wyoming Public Service Commission, (vi) applicable filings and approvals set
forth in Section 3.4(c) of the Parent Disclosure Schedule, (vii) applicable
filings and/or approvals under the Communications Act, (viii) applicable filings
and approvals under the 1935 Act; and (ix) any notices or filings not required
to be given or made until or after the Effective Time, no declaration, filing or
registration with, or notice to or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, except for such notices, reports, filings, waivers,
consents, approvals or authorizations that, if not made or obtained, would not,
in the aggregate, have or reasonably be expected to have a Parent Material
Adverse Effect.
(d) Compliance. Except with respect to the matters set forth in
Section 3.4(d) of the Parent Disclosure Schedule or as disclosed in the Parent
SEC Reports, neither the Parent nor any of its Subsidiaries is in violation of
or, to Parent's knowledge, is under investigation with respect to, or has been
given notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance or judgment of any Governmental Authority, except
for violations, investigations and charges relating to Environmental Laws (which
are the subject of Section 3.13) and except for violations, investigations and
charges that, in the aggregate would not have or reasonably be expected to have
a Parent Material Adverse Effect. Except as set forth in Section 3.4(d) of the
Parent Disclosure Schedule, Parent and each of its Subsidiaries have all
permits, licenses, franchises and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted,
except for Environmental Permits (which are the subject of Section 3.13) and
permits, licenses, franchises, authorizations, consents and approvals the
failure to possess would not have or reasonably be expected to have a Parent
Material Adverse Effect.
Section 3.5. Reports and Financial Statements. The filings required
to be made by Parent and its Subsidiaries since January 1, 1996 under the
Securities Act, the Exchange Act, the California Public Utilities Act, the Power
Act, the Gas Act, the NGPA or the 1935 Act have been filed with the SEC, the
California Public Utilities Commission ("CPUC") or the FERC, as the case may
----
be, including all forms, statements, reports, agreements (oral or written) and
all documents, exhibits, amendments and supplements appertaining thereto, and
Parent has complied in all material respects with all applicable requirements of
the appropriate act and the rules and regulations thereunder. Parent has made
available to the Company a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by Parent (or its
predecessors) with the SEC since January 1, 1996 (as such documents have since
the time of their filing been amended, the "Parent SEC Reports"). As of their
------------------
respective dates, the Parent SEC Reports (i) complied, or with respect to those
not yet filed, will comply in all material respects with the applicable
requirements of the Securities Act and the Exchange Act
32
and (ii) did not, or with respect to those not yet filed, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of Parent included in the Parent SEC Reports (collectively, the
"Parent Financial Statements") have been, or with respect to those not yet
---------------------------
filed, will be prepared in accordance with GAAP (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present, or with respect to
those not yet filed, will present the financial position of Parent as of the
dates thereof and the results of its operations and cash flows for the periods
then ended, subject, in the case of the unaudited interim financial statements,
to normal, recurring audit adjustments. Notwithstanding the foregoing, no
representation or warranty is being made in this Section 3.5 with respect to
information furnished in writing by the Company specifically for inclusion in
any Parent SEC Report filed after the date hereof or with respect to any Company
SEC Report incorporated therein by reference.
Section 3.6. Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities. (a) Except as set forth in the Parent SEC Reports or Section
3.6 of the Parent Disclosure Schedule, from January 1, 1998 through the date
hereof each of Parent and its Subsidiaries has conducted its business in all
material respects only in the ordinary course of such businesses consistent with
past practice and there has not been any material change in Parent's business
operations, condition (financial or otherwise), results of operations, assets or
liabilities.
(b) Except as set forth in the Parent SEC Reports filed as of the date
hereof, neither Parent nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) except (i)
liabilities, obligations or contingencies that are accrued or reserved against
in the consolidated financial statements of Parent or reflected in the notes
thereto for the 9-month period ended September 30, 1998, or in the financial
statements of Pacific Enterprises or Enova Corporation or in the respective
notes thereto for the year ended December 31, 1997 or (ii) normal and recurring
liabilities which were incurred after September 30, 1998 in the ordinary course
of business consistent with past practice or (iii) liabilities, obligations or
contingencies that would not, in the aggregate, have a Parent Material Adverse
Effect.
Section 3.7. Registration Statement and Joint Proxy Statement. None of the
information supplied or to be supplied by or on behalf of Parent or Sub for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Joint
Proxy Statement will, at the date mailed to the shareholders of Parent and
stockholders of the Company and at the times of such meetings, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to the Parent or any of
its Subsidiaries, or with
33
respect to information supplied by Parent or Sub for inclusion or incorporation
by reference in the Form S-4 or the Joint Proxy Statement, shall occur which is
required to be described in an amendment of, or a supplement to, the Form S-4 or
the Joint Proxy Statement, such event shall be so described, and such amendment
shall be promptly filed with the SEC and, as required by law, disseminated to
the holders of Parent Common Stock. The Registration Statement and the Joint
Proxy Statement, in each case to the extent it relates to Parent or Sub, will
comply as to form in all material respects with the provisions of the Securities
Act and the Exchange Act, respectively, and the rules and regulations
thereunder.
Section 3.8. Tax Matters. (a) Filing of Timely Tax Returns. Except as set
forth in Section 3.8(a) of the Parent Disclosure Schedule, Parent and each of
its Subsidiaries have filed (or there has been filed on their behalf) all Tax
Returns required to be filed by each of them under applicable law. All Tax
Returns were in all material respects (and, as to Tax Returns not filed as of
the date hereof, will be) true, complete and correct and filed on a timely
basis.
(b) Payment of Taxes. Parent and each of its Subsidiaries have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for those contested in good faith and
for which adequate reserves have been taken.
(c) Tax Reserves. Except as set forth in Section 3.8(c) of the Parent
Disclosure Schedule, Parent and its Subsidiaries have established (and until the
Closing Date will maintain) on their books and records reserves adequate to pay
all Taxes, all deficiencies in Taxes asserted or proposed against Parent or its
Subsidiaries and reserves for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of Parent or
any of its Subsidiaries except liens for Taxes not yet due and payable.
(e) Withholding Taxes. Parent and each of its Subsidiaries have
complied (and until the Closing Date will comply) in all respects with the
provisions of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, and 6041 and 6049 of the Code, as
well as similar provisions under any other laws, and have, within the time and
in the manner prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Except as set forth in
Section 3.8(f) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as set forth in Section
3.8(g) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
34
(h) Expiration of Statute of Limitations. Except as set forth in
Section 3.8(h) of the Parent Disclosure Schedule, the statute of limitations for
the assessment of all federal income and applicable state income or franchise
Taxes has expired for all related Tax Returns of Parent and each of its
Subsidiaries or those Tax Returns have been examined by the appropriate taxing
authorities for all periods through the date hereof, and no deficiency for any
such Taxes has been proposed, asserted or assessed against Parent or any of its
Subsidiaries that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as set forth
in Section 3.8(i) of the Parent Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Parent or any of its Subsidiaries, and
neither Parent nor any of its Subsidiaries has any knowledge of any threatened
action, audit or administrative or court proceeding with respect to any such
Taxes or Tax Returns.
(j) Powers of Attorney. Except as set forth in Section 3.8(j) of the
Parent Disclosure Schedule, no power of attorney currently in force has been
granted by Parent or any of its Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as set forth in Section 3.8(k) of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries has received a
Tax Ruling or entered into a Closing Agreement with any taxing authority that
would have a continuing adverse effect after the Closing Date.
(l) Availability of Tax Returns. With respect to the tax years ending
on December 31, 1995, December 31, 1996, and December 31, 1997, Parent and its
Subsidiaries have made available to the Company complete and accurate copies of
(i) all federal income and state income or franchise Tax Returns, and any
amendments thereto, filed by Parent or any of its Subsidiaries, (ii) all audit
reports received from any taxing authority relating to any such Tax Return filed
by Parent or any of its Subsidiaries and (iii) any Closing Agreements entered
into by Parent or any of its Subsidiaries with any taxing authority with respect
to the periods included in such Tax Returns.
(m) Tax Sharing Agreements. Except as set forth in Section 3.8(m) of
the Parent Disclosure Schedule, no agreements relating to allocating or sharing
of Taxes exist between or among Parent and any of its Subsidiaries.
(n) Code Section 341(f). Neither Parent nor any of its Subsidiaries
has filed (or will file prior to the Closing) a consent pursuant to Section
341(f) of the Code or has agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by Parent or any of its Subsidiaries.
(o) Code Section 168. Except as set forth in Section 3.8(o) of the
Parent Disclosure Schedule, no property of Parent or any of its Subsidiaries is
property that Parent or any such Subsidiary or any party to this transaction is
or will be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior
35
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Section 168 of the Code.
(p) Code Section 481 Adjustments. Except as set forth in Section
3.8(p) of the Parent Disclosure Schedule and except for adjustments that in the
aggregate could not reasonably be expected to have a Parent Material Adverse
Effect, neither Parent nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by Parent or any of its
Subsidiaries, and to the best of the knowledge of Parent, the IRS has not
proposed any such adjustment or change in accounting method.
(q) Code Sections 6661 and 6662. All transactions that could give
rise to an understatement of federal income tax (within the meaning of Section
6661 of the Code for Tax Returns the due date for which was on or before
December 31, 1998 and within the meaning of Section 6662 of the Code for Tax
Returns the due date for which was after December 31, 1998) that could
reasonably be expected to result in a Parent Material Adverse Effect have been
adequately disclosed (or, with respect to Tax Returns filed following the
Closing, will be adequately disclosed) on the Tax Returns of Parent and its
Subsidiaries in accordance with Section 6661(b)(2)(B) of the Code for Tax
Returns the due date for which was on or before December 31, 1998, and in
accordance with Section 6662(d)(2)(B) of the Code for Tax Returns the due date
for which was after December 31, 1998.
(r) NOLs. As of the date hereof, Parent and its Subsidiaries have no
net operating loss carryovers available to offset future income.
(s) Credit Carryover. As of the date hereof, Parent and its
Subsidiaries have no tax credit carryovers available to offset future tax
liability.
(t) Code Section 338 Elections. Except as set forth in Section 3.8(t)
of the Parent Disclosure Schedule, no election under Section 338 of the Code (or
any predecessor provision) has been made by or with respect to Parent or any of
its Subsidiaries or any of their respective assets or properties.
(u) Acquisition Indebtedness. Except as set forth in Section 3.8(u)
of the Parent Disclosure Schedule, no indebtedness of Parent or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
(v) Intercompany Transactions. Except as set forth in Section 3.8(v)
of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries
has engaged in any intercompany transactions within the meaning of Section
1.1502-13 of the Treasury Regulations for which any income remains unrecognized
as of the close of the last taxable year prior to the Closing Date.
(w) Code Section 280G. Except as set forth in Section 3.8(w) of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to any agreement, contract, or arrangement that could result, on account
of the transactions contemplated hereunder,
36
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(x) Affiliated Group. Except as set forth in Section 3.8(x) of the
Parent Disclosure Schedule, none of Parent and its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Parent) or (B) has any
liability for Taxes of any other Person (other than any of Parent and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
(y) Tax Treatment of Merger. Neither Parent nor Sub has taken or
agreed to take any action, or knows of any circumstances, that (without regard
to any action taken or agreed to be taken by the Company or any of its
affiliates) would prevent the Merger from qualifying as a reorganization within
the meaning of Sections 368(a)(1)(A) or 368(a)(2)(D) of the Code.
Section 3.9. Vote Required. The approval of the Merger by the affirmative
vote of a majority of the votes entitled to be cast by all holders of Parent
Common Stock is the only votes of the holders of any class or series of the
capital stock of Parent required to approve this Agreement, the Merger and the
other transactions contemplated hereby.
Section 3.10. Opinion of Financial Advisor. Parent has received the opinion of
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. (the "Parent Financial Advisor"), dated February 19, 1999,
------------------------
to the effect that, as of such date, the Merger Consideration is fair from a
financial point of view to the holders of Parent Common Stock. Parent has been
authorized by the Parent Financial Advisor to permit the inclusion of such
fairness opinion (or reference thereto) in the Form S-4 and the Joint Proxy
Statement.
Section 3.11. Brokers. No broker, finder or investment banker (other than the
Parent Financial Advisor) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of Parent or Sub.
Section 3.12. Litigation; Regulatory Proceedings. Except as disclosed in the
Parent SEC Reports or as set forth in Section 3.12 of the Parent Disclosure
Schedule, (i) there are as of the date hereof no suits, actions, proceedings or,
to the knowledge of Parent, claims pending or, to the knowledge of Parent,
threatened, before a court or other Governmental Authority nor are there, to the
knowledge of Parent, any investigations or reviews pending or threatened
against, relating to or affecting Parent or any of its Subsidiaries and (ii)
there are no judgments, decrees, injunctions or orders of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator applicable to Parent or any of its Subsidiaries which, in the
aggregate, could reasonably be expected to have a Parent Material Adverse
Effect.
Section 3.13. Environmental Protection. (a) Compliance. Except as set forth
in the Parent SEC Reports or in Section 3.13(a) of the Parent Disclosure
Schedule, (i) each of Parent and its Subsidiaries is in compliance in all
material respects with all applicable Environmental Laws and (ii) to the
knowledge of the General Counsel and the Director of
37
Environmental and Safety of Parent, neither Parent nor any of its Subsidiaries
has received any unresolved written communication since January 1, 1996 from any
Person or Governmental Authority that alleges that Parent or any of its
Subsidiaries is not in such compliance with applicable Environmental Laws.
(b) Environmental Permits. Except as set forth in Parent SEC Reports
or as set forth in Section 3.13(b) of the Parent Disclosure Schedule, each of
Parent and its Subsidiaries has obtained or has applied for all Environmental
Permits necessary for the construction of their facilities or the conduct of
their operations, and all such permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and Parent and its Subsidiaries are in material compliance with all
terms and conditions of the Environmental Permits.
(c) Environmental Claims. Except as set forth in the Parent SEC
Reports or as set forth in Section 3.13(c) of the Parent Disclosure Schedule or
as would not be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (i) as of the date hereof, there is no Environmental
Claim pending (x) against Parent or any of its Subsidiaries, (y) to Parent's
knowledge, against any Person whose liability for any Environmental Claim Parent
or any of its Subsidiaries has retained or assumed contractually or (z) against
any real or personal property or operations which Parent or any of its
Subsidiaries owns, leases or manages, in whole or in part, and (ii) there are no
past or present actions, activities, circumstances, conditions, events or
incidents which could reasonably be expected to form the basis of any such
Environmental Claim.
(d) Releases. Except as set forth in the Parent SEC Reports or as set
forth in Section 3.13(c) or Section 3.13(d) of the Parent Disclosure Schedule,
as of the date hereof, there have been no Releases of any Hazardous Material
that would be reasonably likely to form the basis of any Environmental Claim
against Parent or any of its Subsidiaries, or, to the Company's knowledge,
against any Person whose liability for any Environmental Claim Parent or any of
its Subsidiaries has retained or assumed contractually, except for those that
would not be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(e) Predecessors. Except as set forth in the Parent SEC Reports or as
set forth in Section 3.13(e) of the Parent Disclosure Schedule and, to Parent's
knowledge, with respect to any predecessor of Parent or any Subsidiary of
Parent, there is no Environmental Claim pending or threatened, nor any Release
of Hazardous Materials that would be reasonably likely to form the basis of any
Environmental Claim, except for those that would not be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(f) Disclosure. Parent has made available to the Company all material
documents which Parent reasonably believes provide the basis for (i) the cost of
Parent pollution control equipment currently required or known to be required in
the future; (ii) current Parent remediation costs or Parent remediation costs
known or suspected to be required in the future; or (iii) any other
environmental matter affecting Parent, except for those that would not be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
38
(g) Cost Estimates. No environmental matter set forth in the Parent
SEC Reports or the Parent Disclosure Schedule could reasonably be expected to
substantially differ from the cost or recovery estimates provided in the Parent
SEC Reports.
(h) Reports. Each of Parent and its Subsidiaries has made available
to the Company true, complete and correct summaries or copies of all
environmental audits, assessments or investigations, including test results and
drafts, which (i) have been conducted by or on behalf of Parent or any of its
Subsidiaries since January 1, 1996 and (ii) are available to, or in the
possession of, Parent or any of its Subsidiaries on any currently or formerly
owned, leased or operated property.
(i) Release. Except as set forth in Section 3.13(i) of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries has released any
party from any material claim under any Environmental Law or waived any rights
against any other party under any Environmental Law, except for those that would
not be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect.
(j) Prior Indemnification Agreements. Except as set forth in Section
3.13(j) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries has entered into any material agreement that may require Parent or
any of its Subsidiaries to pay to, reimburse, guarantee, pledge, defend,
indemnify or hold harmless any Person for or against any Environmental Claim,
except for those that would not be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 3.14. Regulation. Parent is a "holding company" (within the meaning
of the ▇▇▇▇ ▇▇▇) exempt by order from all of the provisions of the 1935 Act
other than Section 9(a)(2) thereof. Section 3.14 of the Company Disclosure
Schedule lists each "affiliate" and each "subsidiary company" of Parent which
may be deemed to be a "public utility company" or a "holding company" within the
meaning of the 1935 Act.
Section 3.15. Absence of Breaches or Default. Except as set forth in Section
3.15 the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries
is and, to the knowledge of Parent, no other party is in default under, or in
breach or violation of (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default under, or a breach or
violation of), any term, condition or provision of their respective charters,
bylaws or other governing documents. No event has occurred which either
entitles, or would, on notice or lapse of time or both, entitle the holder of
any indebtedness for borrowed money affecting Parent or any of its Subsidiaries
to accelerate, or which does accelerate, the maturity of any indebtedness
affecting Parent or any of its Subsidiaries, except as set forth in Section 3.15
of the Parent Disclosure Schedule.
Section 3.16. Labor Matters. As of the date hereof, there is no (i) strike or
work stoppage, pending or, to the knowledge of Parent, threatened, which
involves any employees of Parent or any of its Subsidiaries, (ii) unfair
employment or labor practice charge currently pending with any governmental
authority by or on behalf of any employee against Parent or any of its
Subsidiaries, (iii) claim by any governmental authority, labor organization, or
any former,
39
current or prospective employee alleging that Parent or any such employer has
violated any applicable laws respecting employment practices, or (iv)
employment-related litigation pending, filed by or on behalf of any former,
current or prospective employee against Parent or any of its Subsidiaries,
except as would not in the aggregate have or reasonably be expected to have a
Parent Material Adverse Effect.
Section 3.17. Nuclear Operations. Except as set forth in Section 3.17 of the
Parent Disclosure Schedule, to the knowledge of Parent, the operations of the
San ▇▇▇▇▇▇ Nuclear Generating Stations ("SONGS") are and have at all times been
-----
conducted material compliance with applicable health, safety, regulatory and
other legal requirements. To the knowledge of Parent, SONGS maintains emergency
plans designed to respond to an unplanned release therefrom of radioactive
materials into the environment and liability insurance to the extent required by
law, which is consistent with Parent's view of the risks inherent in the
operation of a nuclear power facility. To the knowledge of Parent, plans for the
decommissioning of each of the SONGS facilities and for the short-term storage
of spent nuclear fuel conform with the requirements of applicable regulatory or
other legal requirements, and such plans have at all times been funded to the
extent required by law, which is consistent with Parent's reasonable budget
projections for such plans.
Section 3.18. Employee Matters; ERISA. (a) Benefit Plans. Section 3.18(a) of
the Parent Disclosure Schedule contains a true and complete list of each
material employee benefit plan, program or arrangement currently sponsored,
maintained or contributed to by Parent or any of its Subsidiaries for the
benefit of employees, former employees or directors and their beneficiaries or
for which Parent or any of its Subsidiaries may have any liability, including,
but not limited to, any employee benefit plans within the meaning of Section
3(3) of ERISA (collectively, the "Parent Benefit Plans"). For the purposes of
--------------------
this Section 3.18 only, the term "Parent" shall be deemed to include
predecessors thereof.
(b) Termination of Company Benefit Plans; Withdrawal. All of the
Parent Benefit Plans (other than any multiemployer plan, as defined in Section
3(37) of ERISA) can be terminated by Parent without incurring any material
liability. Subject to any collective bargaining obligations, except as set
forth in Section 3.18(a) of the Parent Disclosure Schedule, Parent and its
Subsidiaries can withdraw from participation in any Parent Benefit Plan that is
a multiemployer plan, without incurring any material liability.
(c) Contributions. Except as set forth in Section 3.18(c) of the
Parent Disclosure Schedule, all material contributions and other payments
required to be made as of the date hereof by Parent or any of its Subsidiaries
to any Parent Benefit Plan (or to any person pursuant to the terms thereof) have
been made or the amount of such payment or contribution obligation has been
properly reflected in the Parent Financial Statements in accordance with GAAP.
(d) Qualification; Compliance. Except as set forth in Section 3.18(d)
of the Parent Disclosure Schedule, each of the Parent Benefit Plans (other than
any multiemployer plan as defined in Section 3(37) of ERISA) intended to be
"qualified" within the meaning of Section
40
401(a) of the Code has been determined by the IRS to be so qualified, and, to
the best knowledge of Parent, no circumstances exist that are reasonably
expected by Parent to result in the revocation of any such determination. Parent
is in compliance in all material respects with, and each Parent Benefit Plan
(other than any multiemployer plan as defined in Section 3(37) of ERISA) is and
has been operated in all material respects in compliance with, all applicable
laws, rules and regulations governing such plan, including, without limitation,
ERISA and the Code. Each Parent Benefit Plan (other than any multiemployer plan
as defined in Section 3(37) of ERISA) intended to provide for the deferral of
income, the reduction of salary or other compensation, or to afford other income
tax benefits, complies with the material requirements of the applicable
provisions of the Code or other laws, rules and regulations required to provide
such income tax benefits.
(e) Liabilities. With respect to Parent Benefit Plans individually
and in the aggregate, no event has occurred, and, to the best knowledge of
Parent, there exists no condition or set of circumstances that is reasonably
likely to subject Parent or any of its Subsidiaries to any liability arising
under the Code, ERISA or any other applicable law (including, without
limitation, any liability to any such plan or the PBGC), or under any indemnity
agreement to which Parent is a party, which liability could reasonably be
expected to have a Parent Material Adverse Effect.
(f) Welfare Plans. Except as set forth in Section 3.18(e) of the
Parent Disclosure Schedule, none of the Parent Benefit Plans that are "welfare
plans", within the meaning of Section 3(1) of ERISA, provides for any retiree
benefits other than coverage mandated by applicable law or benefits the full
cost of which is borne by the retiree.
(g) Documents Made Available. Parent has made available to the
Company a true and correct copy of each collective bargaining agreement to which
Parent or any of its Subsidiaries is a party or under which Parent or any of its
Subsidiaries has obligations and, with respect to each Parent Benefit Plan, (i)
such plan and summary plan description, as applicable, (ii) the most recent
annual report filed with the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management agreement (including all
amendments to each such document), (iv) the most recent determination of the IRS
with respect to the qualified status of such plan and (v) the most recent
actuarial report or valuation.
Section 3.19. Year 2000. All Software and hardware systems currently utilized
by Parent and its Subsidiaries and material to the operation of their respective
businesses are capable of providing or are being adapted or replaced to provide
on or before December 31, 1999 accurate results using data having date ranges
spanning the twentieth and twenty-first centuries, except where the failure to
provide such accurate results is not reasonably expected to have a Parent
Material Adverse Effect.
ARTICLE IV.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1. Conduct of Business of the Company Pending the Merger. Except as
set forth in Section 4.1 of the Company Disclosure Schedule, the Company
covenants and
41
agrees that, during the period from the date hereof to the Effective Time
(except as otherwise contemplated by the terms of this Agreement), unless Parent
shall otherwise agree in writing in advance, the businesses of the Company and
its Subsidiaries shall be conducted only in the usual and ordinary course of
business in substantially the same manner as heretofore conducted and in
compliance with applicable laws; and the Company and its Subsidiaries shall each
use all commercially reasonable efforts consistent with the foregoing to
preserve substantially intact the business organization of the Company and its
Subsidiaries, to keep available the services of the present officers and
employees of the Company and its Subsidiaries (subject to prudent management of
workforce needs and ongoing programs currently in force), to preserve the
present relationships of the Company and its Subsidiaries with customers,
suppliers, distributors and other Persons with which the Company or any of its
Subsidiaries has significant business relations, to maintain and keep its
material Assets in good repair and condition (subject to ordinary wear and
tear), to maintain supplies and inventories in quantities consistent with past
practice and, with respect to any hedging and energy trading transactions, to
comply with prudent policies, practices and procedures with respect to risk
management and trading limitations, including the Company Trading Guidelines.
The Company and its Subsidiaries will manage their commodity price risk exposure
with respect to their respective gathering, processing, transportation and
storage contracts in accordance with prudent risk management guidelines to be
developed and mutually agreed to by the Company and Parent as promptly as
practicable after the date hereof. From time to time prior to the Effective
Time, the Company will allow Parent and its representatives reasonable access to
the energy trading operations, as well as gathering, processing, transportation
and storage contracting operations, of the Company and its Subsidiaries and
their respective books and records, and develop appropriate procedures to permit
Parent and its representatives to monitor the Company's and its Subsidiaries'
compliance with the Company Trading Guidelines and the other risk management
guidelines agreed to by the parties. The Company will not amend or rescind the
Company Trading Guidelines or the other risk management guidelines agreed to by
the parties. By way of amplification and not limitation, neither the Company nor
any of its Subsidiaries shall, except as set forth in Section 4.1 of the Company
Disclosure Schedule and as otherwise contemplated by the terms of this
Agreement, between the date of this Agreement and the Effective Time, directly
or indirectly do, or propose or commit to do, any of the following without the
prior written consent of Parent:
(a) except as required by law, make or commit to make any capital
expenditures (other than reimbursable expenditures which are collected from
third parties within 120 days of incurrence) in excess of 110% of those
contained in the Company's 1999 budget provided to and approved by Parent prior
to the date hereof, and for the fiscal year 2000 make any such expenditures in
excess of those contained in the Company's 2000 budget which shall have been
provided to and reasonably approved by Parent prior to incurring any such
expenditures, other than (i) expenditures for routine maintenance and repair or
(ii) unplanned capital expenditures due to emergency conditions, unanticipated
catastrophic events or extreme weather;
(b) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person (other than the Company or a wholly-owned
Subsidiary of the Company) or enter into any "keep well" or other agreement to
maintain the financial condition of
42
another Person (other than the Company or a wholly-owned Subsidiary of the
Company) or make any loans, or advances of borrowed money or capital
contributions to, or equity investments in, any other Person (other than the
Company or a wholly-owned Subsidiary of the Company) or issue or sell any debt
securities, other than (i) refinancings or refundings of (x) indebtedness
existing as of the date hereof or (y) the Company Class A Preferred Stock, (ii)
in connection with financings of ordinary course trade payables and (iii)
additional borrowings under existing lines of credit or via commercial paper
issuances in the ordinary course of business consistent with past practice in an
amount not to exceed $150.0 million at any time outstanding;
(c) (i) amend its Restated Articles of Incorporation or Bylaws or the
charter or bylaws of any of its Subsidiaries; (ii) split, combine or reclassify
the outstanding shares of its capital stock or declare, set aside or pay any
dividend payable in cash (other than (x) regular quarterly cash dividends of the
Company in an amount not to exceed $0.20 per share of Company Common Stock paid
at such times and in such amounts as are consistent with past practices and in
compliance with applicable law, (y) dividends paid pursuant to the terms as of
the date hereof of the Company's Class A $5 Cumulative Preferred Stock and (z)
contract fees in connection with the PEPS Units, provided that the Company shall
not declare, set aside or pay any dividend on the Company Common Stock with
respect to any fiscal quarter of the Company corresponding to any fiscal quarter
of Parent for which the shareholders of Parent are reasonably likely to receive
a regular quarterly dividend from Parent after the Effective Time pursuant to
Parent's past practices), stock or property or make any other distribution with
respect to such shares of capital stock or other ownership interests; (iii)
except for "cashless" exercises of Company Stock Rights pursuant to the Stock
Plans and as set forth in Section 5.13, redeem, purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock or other ownership
interests; or (iv) sell or pledge any stock of any of its Subsidiaries;
(d) (i) Other than (w) pursuant to Company Stock Rights granted in
the ordinary course of business consistent with past practice under the Company
Stock Plans, (x) the Thermo Agreements, (y) early settlement of the PEPS Units
or (z) pursuant to the DRIP Plan, issue or sell or agree to issue or sell any
additional shares of, or grant, confer or award any options, warrants or rights
of any kind to acquire any shares of, its capital stock of any class; (ii) enter
into any agreement, contract or commitment out of the ordinary course of its
business, to dispose of or acquire, or relating to the disposition or
acquisition of, a segment of its business; (iii) except in the ordinary course
of business consistent with past practice, sell, pledge, dispose of or encumber
any material amount of Assets (including without limitation, any indebtedness
owed to them or any claims held by them); or (iv) acquire (by merger,
consolidation, acquisition of stock or Assets or otherwise) any corporation,
partnership or other business organization or division thereof or acquire any
material amount of Assets (other than in the ordinary course of business
consistent with past practice or other than pursuant to Section 4.1(a)) or make
any material investment, either by purchase of stock or other securities, or
contribution to capital, in any case, in any other Person;
(e) except as required by law, grant any severance or termination pay
(other than pursuant to policies or agreements in effect on the date hereof as
disclosed in the Company SEC Reports or set forth in Section 4.1(e) of the
Company Disclosure Schedule) or increase the
43
benefits payable under its severance or termination pay policies or agreements
in effect on the date hereof or enter into any employment (other than "at will")
or severance agreement with any officer, director or employee;
(f) except as required by law, adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or employee or
increase in any manner the compensation or fringe benefits of any director,
officer or, except in the ordinary course of business consistent with past
practice, employee, or grant, confer, award or pay any forms of cash incentive,
bonuses or other benefit not required by any existing plan, arrangement or
agreement, except for retention bonuses paid to Company employees with the
reasonable approval of Parent, in an aggregate amount not to exceed $3.0
million;
(g) enter into or amend (i) any Contract for the sale, purchase,
transportation and/or storage of gas related to the commodity marketing or Texas
intrastate gas marketing operations of the Company which is not consistent with
the Company Trading Guidelines, (ii) any Contract for gathering in excess of
$2.0 million annually, (iii) any Contract for purchase or sale of gas for plant
shrink and fuel in excess of $2.0 million annually, (iv) any Contract for
purchase or sale of liquid hydrocarbons in excess of $6.0 million annually, (v)
any Contract for sale of gas at plant outlets in excess of $6.0 million
annually, (vi) any Contract for processing in excess of $2.0 million annually,
(vii) any Contract for transportation services in excess of $2.4 million
annually, (viii) any Contract for storage and/or balancing services in excess of
$2.4 million annually, in each case which is not cancelable or otherwise
terminable on or prior to December 31, 1999, (ix) any franchise agreement, (x)
any qualifying facilities Contracts for plant outlet power sales or (xi) any
En*able or Orcom agreements or similar agreements for services which are not
cancelable or otherwise terminable on or prior to December 31, 1999;
(h) enter into or modify any collective bargaining agreement, other
than in replacement of collective bargaining agreements expiring prior to the
Effective Time;
(i) make any material change in its tax or accounting policies or any
material reclassification of assets or liabilities except as required by law,
rule or regulation or GAAP;
(j) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except the payment, discharge or satisfaction of (i) liabilities or
obligations in the ordinary course of business consistent with past practice or
in accordance with the terms thereof as in effect on the date hereof or (ii)
claims settled or compromised to the extent permitted by Section 4.1(k), or
waive, release, grant or transfer any rights of material value or modify or
change in any material respect any existing Contract, in each case other than in
the ordinary course of business consistent with past practice;
(k) settle or compromise any litigation, other than litigation not in
excess of amounts reserved for in the most recent consolidated financial
statements of the Company included in the Company SEC Documents or, if not so
reserved for, in an aggregate amount not in
44
excess of $500,000, provided in either case such settlement documents do not
involve any material non-monetary obligations on the part of the Company and its
Subsidiaries;
(l) take any action (without regard to any action taken or agreed to
be taken by Parent or any of its affiliates) with knowledge that such action
would prevent the Merger from qualifying as a reorganization within the meaning
of Sections 368(a)(1)(A) or 368(a)(2)(D) of the Code;
(m) consummate any acquisition pursuant to any Contract disclosed
pursuant to Section 2.20(g) other than in accordance with the terms so disclosed
(including without waiver of any condition to the Company's obligations to
consummate such acquisition), excluding insignificant deviations from such
terms;
(n) enter into any fixed price, basis or option positions related to
petroleum, petroleum products, natural gas, natural gas liquids, electricity or
energy in any form, either financial or physical that are not consistent with
the Company Trading Guidelines;
(o) engage in any activities which would cause a change in its status,
or that of its Subsidiaries, under the 1935 Act, or that would impair the
ability of Parent to claim an exemption as of right under Section 3(a)(1) of the
1935 Act; and
(p) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.1(a) through 4.1(o) or any
action which would or is reasonably likely to result in (i) a material breach of
any provision of this Agreement, (ii) any of the representations and warranties
of the Company set forth in this Agreement becoming untrue in any material
respect or (iii) any of the conditions set forth in Article VI not being
satisfied.
Section 4.2. Conduct of Business of Parent Pending the Merger.
Parent covenants and agrees that, during the period from the date hereof to the
Effective Time (except as otherwise contemplated by the terms of this
Agreement), unless the Company shall otherwise agree in writing in advance, the
businesses of Parent and its Subsidiaries shall be conducted, in all material
respects, only in, and Parent and its Subsidiaries shall not take any action
except in, the ordinary course of business and in substantially the same manner
as heretofore conducted and in compliance with applicable laws; provided,
however, that in no event shall either Parent or any of its Subsidiaries be
restricted from making, nor shall they be required to notify the Company or
obtain the Company's consent prior to making, any acquisitions or dispositions
of any businesses or Assets; and Parent and its Subsidiaries shall each use all
commercially reasonable efforts consistent with the foregoing to preserve
substantially intact the business organization of Parent and its Subsidiaries,
to keep available the services of the present officers and employees of Parent
and its Subsidiaries (subject to prudent management of workforce needs and
ongoing programs currently in force) and to preserve the present relationships
of Parent and its Subsidiaries with customers, suppliers, distributors and other
persons with which Parent or any of its Subsidiaries has significant business
relations. By way of amplification and not limitation, neither Parent nor any of
its Subsidiaries shall, except as set forth in Section 4.2 of the Parent
Disclosure Schedule and as otherwise contemplated by the terms of this
Agreement, between the
45
date of this Agreement and the Effective Time, directly or indirectly do, or
propose or commit to do, any of the following without the prior written consent
of the Company:
(a) take any action (without regard to any action taken or agreed to
be taken by the Company or any of its affiliates) with knowledge that such
action would prevent the Merger from qualifying as a reorganization within the
meaning of Sections 368(a)(1)(A) or 368(a)(2)(D) of the Code;
(b) engage in any activities which would cause a change in Parent's
status, or that of its Subsidiaries, under the 1935 Act, or that would impair
the ability of Parent to claim an exemption as of right under Section 3(a)(1) of
the 1935 Act; and
(c) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.2(a) or 4.2(b) or any
action which would or is reasonably likely to result in (i) a material breach of
any provision of this Agreement, (ii) any of the representations and warranties
of Parent set forth in this Agreement becoming untrue in any material respect,
or (iii) any of the conditions set forth in Article VI not being satisfied.
ARTICLE V.
ADDITIONAL AGREEMENTS
Section 5.1. Preparation of Form S-4 and the Joint Proxy Statement;
Shareholder Meetings. (a) Promptly following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Joint Proxy
Statement, and Parent shall prepare and file with the SEC the Form S-4, in which
the Joint Proxy Statement will be included as a prospectus. Each of the Company
and Parent 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.
Each of the Company and Parent will use its reasonable best efforts to cause the
Joint Proxy Statement to be mailed to its respective shareholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Parent shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities law in connection with the issuance of Parent Common
Stock in the Merger, and the Company shall furnish all information concerning
the Company and the holders of the Company Common Stock and rights to acquire
Company Common Stock pursuant to the Stock Plans as may be reasonably required
in connection with any such action. Each of Parent and the Company shall furnish
all information concerning itself to the other as may be reasonably requested in
connection with any such action and the preparation, filing and distribution of
the Form S-4 and the preparation, filing and distribution of the Joint Proxy
Statement, which information shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading. The Company, Parent and Sub each agree to correct any
information provided by it for use in the Form S-4 or the Joint Proxy Statement
which shall have become false or misleading. No amendment or supplement to the
Form S-4 or the Joint Proxy Statement will be made without the approval of both
Parent and the Company. Each party will advise the other, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective or
46
any supplement or amendment has been filed, the issuance of any stop order,
the suspension, if applicable, of the qualification of the Parent Common Stock
for sale in any jurisdiction, or any request by the SEC for amendment of the
Form S-4 or the Joint Proxy Statement or comments thereon and responses thereto
or requests by the SEC for additional information.
(b) The Company, acting through its Board of Directors, shall, in
accordance with its Restated Articles of Incorporation and Bylaws and subject to
the other provisions of this Section 5.1(b), promptly and duly call, give notice
of, convene and hold as soon as reasonably practicable following the date upon
which the Form S-4 becomes effective a meeting (the "Company Stockholders
--------------------
Meeting") of the holders of Company Common Stock for the purpose of voting to
-------
approve and adopt this Agreement and the transactions contemplated hereby, and
(i) recommend approval and adoption of this Agreement and the Merger by the
stockholders of the Company and include in the Joint Proxy Statement such
recommendation and (ii) take all reasonable and lawful action to solicit and
obtain such approval. The Board of Directors of the Company shall not withdraw,
amend or modify in a manner adverse to Parent its recommendation referred to in
clause (i) of the preceding sentence (or announce publicly its intention to do
so), except that such Board of Directors shall be permitted to withdraw, amend
or modify its recommendation (or publicly announce its intention to do so) if:
(i) the Company has complied with Section 5.4; (ii) a Superior Transaction shall
have been proposed by any Person other than Parent and such proposal is pending
at the time of such withdrawal, amendment or modification; and (iii) the Company
shall have notified Parent of such Superior Transaction proposal at least five
days in advance of such withdrawal, amendment or modification in accordance with
Section 5.4. The Company agrees that, subject to its right to terminate this
Agreement pursuant to Section 7.1(i), (a) the Company's obligations pursuant to
the first sentence of this Section 5.1(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of any Transaction proposal and (b) the Board of Directors of the Company, upon
10 days' written notice from Parent, shall reaffirm (i) its approval of this
Agreement, the Merger and the other transactions contemplated hereby and (ii)
its recommendation to the stockholders of the Company that they approve and
adopt this Agreement and the Merger. "Superior Transaction" means any bona fide
--------------------
written proposal that is fully financed, if applicable, with respect to a
Transaction, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination or similar transaction, involving more than
70% of the outstanding shares of Company Common Stock or all or substantially
all of the Assets of the Company and its Subsidiaries, taken as a whole, which
the Board of Directors of the Company determines, in its good faith judgment
(based on the advice of a financial advisor of nationally recognized
reputation), (x) contains terms which are more favorable and provide greater
value to the Company's stockholders than this Agreement and the Merger taken as
a whole and (y) is reasonably capable of being completed on substantially the
terms proposed. Parent, acting through its Board of Directors, shall, in
accordance with its Articles of Incorporation and Bylaws, promptly and duly
call, give notice of, convene and hold as soon as practicable following the date
upon which the Form S-4 becomes effective a meeting of the holders of Parent
Common Stock for the purpose of voting to approve the Merger, and (i) recommend
approval of the Merger by the shareholders of Parent and include in the Joint
Proxy Statement such recommendation and (ii) take all reasonable and lawful
action to solicit and obtain such approval. The Board of Directors of Parent
shall not withdraw, amend or modify in
47
a manner adverse to the Company, its recommendation referred to in clause (i) of
the preceding sentence.
(c) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
Section 5.2. Accountants' Letters. (a) The Company shall cause to be
delivered to Parent a "comfort" letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the Company's
independent public accountants, dated a date within two business days before the
date on which the Form S-4 shall become effective and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4. In connection with the
Company's efforts to obtain such letter, if requested by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
Parent shall provide a representation letter to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, complying
with the Statement on Auditing Standards No. 72 ("SAS 72"), if then required.
------
(b) Parent shall cause to be delivered to the Company a "comfort"
letter of Deloitte & Touche LLP, Parent's independent public accountants, dated
a date within two business days before the date on which the Form S-4 shall
become effective and addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4. In connection with the Parent's efforts to
obtain such letter, if requested by Deloitte & Touche LLP, the Company shall
provide a representation letter to Deloitte & Touche LLP, complying with SAS 72,
if then required.
Section 5.3. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, each of the Company
and Parent shall, and shall cause its Subsidiaries, officers, directors,
employees, auditors and other agents to, afford the officers, employees,
auditors and other agents of Parent or the Company, respectively, who shall
agree to be bound by the provisions of this Section 5.3 as though a party
hereto, reasonable access to its officers, employees, agents, properties,
offices, plants and other facilities and to all books and records, and shall
furnish Parent or the Company, respectively, with all financial, operating and
other data and information as Parent or the Company, respectively, through its
officers, employees or agents may from time to time reasonably request.
(b) Parent and the Company shall confer on a regular basis with each
other, report on operational matters and promptly advise each other orally and
in writing of any change or event having, or which, insofar as can reasonably be
foreseen, could have, a Parent Material Adverse Effect or a Company Material
Adverse Effect. The Company shall promptly provide Parent (or its counsel) with
a copy of each material report, schedule and other document filed or received by
it or any of its Subsidiaries pursuant to the requirements of the FERC or any
state public utilities commission and a copy of each report, schedule and other
document filed or received by it or any of its Subsidiaries pursuant to the
requirements of federal or state securities
48
laws or filed with the SEC, the Department of Justice, the Federal Trade
Commission or any other federal, state or local regulatory agency or commission.
(c) Each of the Company and Parent will hold and will cause its
directors, officers, employees, agents, advisors (including, without limitation,
counsel and auditors) and controlling persons to hold any such information which
is nonpublic in confidence on the same terms and conditions as set forth in the
letter dated January 30, 1999, as amended from time to time, between the Company
and Parent (the "Confidentiality Agreement") and as supplemented by the
-------------------------
Acknowledgment and Agreement between the parties with respect to trading
information dated February 12, 1999.
(d) No investigation pursuant to this Section 5.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
Section 5.4. No Solicitation of Transactions. The Company shall, and shall
cause its Subsidiaries and its and their respective officers, directors,
management employees, representatives and agents to, immediately cease all
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any direct or indirect acquisition of or exchange for
(i) all or any material portion of the Assets of the Company and its
Subsidiaries taken as a whole, (ii) more than 15% of the outstanding equity
interests in the Company, (iii) any material equity interest in any of the
material Subsidiaries of the Company, or (iv) any merger, consolidation or other
business combination transaction with or involving the Company or any of its
material Subsidiaries (each, a "Transaction"). Neither the Company or any of its
-----------
Subsidiaries, nor any of its or their respective officers, directors, management
employees, representatives and agents shall, directly or indirectly, encourage,
solicit, participate in, facilitate or initiate discussions or negotiations
with, or provide any information to, any Person or group (other than Parent and
Sub or any designees of Parent or Sub) concerning any Transaction; provided that
the Company (and its Subsidiaries and its and their respective officers,
directors, employees, representatives or agents) may, prior to the Company
Stockholders Meeting, participate in negotiations or discussions with, and
provide information to, any Person concerning a written proposal with respect to
a Transaction made by such Person to the Board of Directors of the Company after
the date of this Agreement if (A) such proposal or proposed Transaction was not
solicited, initiated, facilitated or encouraged in violation of this Agreement,
(B) the Board of Directors of the Company, in its good faith judgment, believes
that such Transaction is reasonably likely to result in a Superior Transaction,
(C) the Board of Directors of the Company, in its good faith judgment (based on
advice of outside legal counsel), determines that the failure to take such
action is reasonably likely to violate its fiduciary duties to the Company's
stockholders under applicable law, (D) prior to participating in any such
discussions or negotiations with, or providing such information to, such Person,
the Board of Directors of the Company receives from such Person an executed
confidentiality and standstill agreement with terms no more favorable to such
Person that those contained in the Confidentiality Agreement and (E) the Company
complies with the other provisions of this Section 5.4. The Company shall not
enter into (except as set forth in the immediately preceding sentence) or amend
any confidentiality or standstill agreement (other than the Confidentiality
Agreement) with any
49
Person in connection with a possible Transaction involving the Company. In the
event that the Board of Directors of the Company determines to accept any such
Superior Transaction (an "Other Transaction"), the Company shall provide Parent
-----------------
with at least five days' prior written notice thereof, during which time Parent
may make a counterproposal (a "Counterproposal"), and the Company will negotiate
---------------
with Parent in good faith with respect to such adjustments in the terms and
conditions of such Counterproposal so that such Other Transaction would not
constitute a Superior Transaction and thereby enable the Company to proceed with
the transactions contemplated by the Counterproposal. Nothing contained in this
Agreement shall prohibit the Board of Directors of the Company from complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer. The Company shall notify Parent immediately if it receives any
unsolicited proposal concerning a Transaction, the identity of the person making
any such proposal and all the terms and conditions thereof and shall keep Parent
promptly advised of all developments relating thereto.
Section 5.5. Employee Benefits Matters. The Company shall, or Parent
shall cause the Company and the Surviving Corporation to, promptly pay or
provide when due all compensation and benefits earned through or prior to the
Effective Time as provided pursuant to the terms of any Employee Plans in
existence as of the date hereof and as otherwise set forth in Section 5.5 of the
Company Disclosure Schedule for all employees (and former employees) and
directors (and former directors) of the Company. Parent and the Company agree
that the Company and the Surviving Corporation shall pay promptly or provide
when due all compensation and benefits required to be paid pursuant to the terms
of any agreement with any employee, former employee, director or former director
in effect and disclosed to Parent as of the Effective Time. The Company shall
take all action necessary to terminate its 401(k) Plan (the "Company 401(k)
--------------
Plan") in compliance with applicable law, no later than
----
immediately prior to the Effective Time. On or as soon as administratively
practicable following the Effective Time employees who were participants in the
Company 401(k) Plan shall be eligible to participate in a 401(k) Plan sponsored
by Parent or one of its Subsidiaries ("Parent 401(k) Plan"). At the election of
------------------
participants, Parent 401(k) Plan shall accept rollovers from the Company 401(k)
Plan. Nothing herein shall require the continued employment of any person. From
the Effective Time until December 31, 2000, Parent shall cause the Surviving
Corporation (i) to continue to maintain the Company's employee compensation
levels, benefit plans, programs, policies and arrangements in effect as of the
Effective Time or (ii) to provide alternative employee compensation levels,
benefit plans, programs, policies and arrangements to the employees retained by
the Surviving Corporation (other than employees who are subject to a collective
bargaining agreement) that provide compensation and benefits, in the aggregate
for all such employees, that have a value which in the aggregate is at least
substantially equivalent to the value of the compensation and benefits in effect
at the Effective Time. Years of service with the Company and its Subsidiaries
prior to the Effective Time shall be treated as service with the Surviving
Corporation or Parent for eligibility and vesting purposes and for purposes of
vacation and severance pay accruals, except to the extent such treatment will
result in duplication of benefits.
Section 5.6. Directors' and Officers' Indemnification; Insurance
(a) From and after the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, indemnify and
50
hold harmless to the fullest extent permitted under applicable law, each person
who is a current or former officer or director of the Company or any of its
Subsidiaries or otherwise entitled to indemnification under Article Ninth of the
Company's Restated Articles of Incorporation (each, an "Indemnified Party")
-----------------
against all losses, claims, damages, liabilities, cost or expenses (including
reasonable attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to (i) acts or omissions, or alleged
acts or omissions, by them in their capacities as such, which acts or omissions
occurred prior to the Effective Time or (ii) this Agreement and the transactions
contemplated hereby. In case any such action, proceeding or claim is brought
against an Indemnified Party, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the Indemnified Party a
conflict of interest between it and the indemnifying party may exist in respect
of such action, proceeding or claim, to assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Party, and after notice from the
indemnifying party to the Indemnified Party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. In the event that the indemnifying party fails to assume the
defense of any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the Indemnified Party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
Indemnified Party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. Anything in this Section 5.6 to the
contrary notwithstanding, the indemnifying party shall not, without the
Indemnified Party's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as a
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party, a release from all liability in respect of such claim.
(b) For six years from the Effective Time, Parent shall maintain in
effect the current directors' and officers' liability insurance covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy to the extent that it provides coverage for events
occurring on or prior to the Effective Time (a copy of which has been heretofore
delivered to Parent), so long as the annual premium therefor would not be in
excess of 200% of the last annual premium paid prior to the date of this
Agreement (the "Company's Current Premium"). If such premiums for such
-------------------------
insurance would at any time exceed 200% of the Company's Current Premium, then
Parent shall cause to be maintained policies of insurance which in Parent's good
faith determination, provide the maximum coverage available at an annual premium
equal to 200% of the Company's Current Premium.
(c) Parent hereby covenants not to take or permit to be taken, any
action that would limit, restrict or otherwise prevent the Surviving Corporation
from performing, or render it
51
unable to perform, each of its obligations under this Section 5.6. Neither
Parent nor the Surviving Corporation nor any of their respective successors or
assigns shall (i) consolidate with or merge into any other person so as not to
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfer all or substantially all of its properties and assets to
any person unless, in either such case, proper provisions shall be made so that
the successors and assigns of the Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 5.6.
(d) To the fullest extent not prohibited by law, from and after the
Effective Time, all rights to indemnification as of the date hereof in favor of
the employees, agents, directors or officers of the Company and its Subsidiaries
with respect to their activities as such prior to the Effective Time, as
provided in their respective charters or bylaws or other organizational
documents, in effect on the date thereof or otherwise in effect on the date
hereof, shall survive the Merger and shall continue in full force and effect for
a period of not less than six years from the Effective Time.
(e) The Surviving Corporation shall honor and fulfill in all respects
the obligations of the Company pursuant to indemnification agreements with
officers and directors of the Company existing at the Effective Time.
(f) The provision of this Section 5.6 are intended for the benefit of,
and shall be enforceable by, each person entitled to indemnification under this
Section 5.6, his or her heirs and his or her personal representatives.
Section 5.7. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.7 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 5.8. Further Action. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in the preparation and filing of the Form S-4, the Joint Proxy
Statement, and required filings under the HSR Act and any amendments to any
thereof, (ii) using all commercially reasonable efforts to make all required
regulatory filings and applications and to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and its Subsidiaries as
are necessary for the consummation of the transactions contemplated by this
Agreement and to fulfill the conditions to the Merger, including, without
limitation, the Company Required Statutory Approvals and the Parent
52
Required Statutory Approvals, (iii) cooperating in all respects with each
other in connection with any investigation or other inquiry, including any
proceeding initiated by a private party, in connection with the transactions
pursuant hereto, (iv) keeping the other party informed in all material respects
of any material communication received by such party from, or given by such
party to, the FTC, the Antitrust Division of the Department of Justice ("DOJ"),
---
the SEC, the FERC or any other Governmental Authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby, and
(v) permitting the other party to review any material communication given by it
to, and consult with each other in advance of any meeting or conference with,
the FTC, the DOJ or any such other governmental authority or, in connection with
any such proceeding by a private party, with any other Person.
Section 5.9. Public Announcements. The initial press release relating
to this Agreement shall be a joint press release and thereafter Parent and the
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the Merger and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with its
securities exchange.
Section 5.10. Stock Exchange Listing. Parent shall use its reasonable
best efforts to have approved for listing on the NYSE prior to the Effective
Time, subject to official notice of issuance, the Parent Common Stock to be
issued pursuant to the Merger (including shares of Parent Common Stock issuable
pursuant to Section 1.7).
Section 5.11. Affiliates. At least 10 business days prior to the
Closing Date, the Company shall deliver to Parent a letter identifying all
persons who are, at the time this Agreement is submitted for approval to the
shareholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. The Company shall use its reasonable best efforts
to cause each such person to deliver to Parent on or prior to the Closing Date a
written agreement substantially in the form attached as Exhibit A hereto.
Section 5.12. Directorships. Promptly following the Effective Time of
the Merger, Parent's Board of Directors, following collaborative discussions
between the Company and the Corporate Governance Committee of Parent's Board of
Directors, will elect three Company designees as directors of Parent who shall
be reasonably acceptable to the Corporate Governance Committee of Parent's Board
of Directors.
Section 5.13. Redemption of Company Class A Preferred Stock. Prior to
the record date in connection with the Company Stockholder Meeting, the Company
shall (i) issue a notice of redemption with respect to all issued and
outstanding shares of Company Class A Preferred Stock and (ii) deposit the
redemption price with a bank or trust company pursuant to Article Sixth, Section
4(A)(4)(d) of the Company's Restated Articles of Incorporation.
Section 5.14. Company Rights Agreement. The Company will take all
actions necessary to ensure that the Company Rights Agreement is amended in
accordance with Section 2.16 prior to the Effective Time.
53
Section 5.15. Takeover Statutes. If any "interested stockholder,"
"fair price," "moratorium," "control share acquisition" or other form of
antitakeover statute or regulation shall become applicable to the transactions
contemplated hereby, the Company and the members of its Board of Directors shall
grant such approvals and take such other actions as may be necessary to make
Parent and its Subsidiaries exempt under or otherwise not subject to such
statutes.
Section 5.16. Certain Dispositions. Prior to the Effective Time and at
the request of Parent, the Company shall use all commercially reasonable efforts
to dispose of its direct and indirect interests in any "qualifying facilities"
(as defined under PURPA), if and to the extent the ownership of such facilities
by the Surviving Corporation would cause such facilities to cease to be
"qualifying facilities." The Company shall cooperate with Parent in connection
with any disposition pursuant to this Section 5.16, the terms of which shall be
subject to the prior approval (not to be unreasonably withheld) of Parent.
Section 5.17. Thermo Restructuring. As promptly as practicable
following the date hereof, the Company will use all commercially reasonable
efforts to restructure the Thermo Agreements as provided in the term sheet
previously agreed to by the parties.
ARTICLE VI.
CONDITIONS OF MERGER
Section 6.1. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions, except, to the extent permitted by applicable law, that such
conditions may be waived in writing by the joint action of the parties hereto:
(a) This Agreement shall have been approved by the requisite vote of
the holders of the outstanding shares of Company Common Stock. The Merger shall
have been approved by the requisite vote of the holders of the outstanding
shares of Parent Common Stock.
(b) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any court or governmental
authority of competent jurisdiction prohibiting, restraining, or enjoining the
consummation of the Merger; provided, however, that each of the parties shall
have used all reasonable efforts to cause any such statute, rule, regulation,
executive order, decree, ruling, injunction or order to be lifted or vacated or
to appeal such ruling, injunction or order as promptly as possible.
(c) All applicable waiting periods under the HSR Act shall have
terminated or expired.
(d) The Form S-4 and any required post-effective amendment thereto
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order, and all necessary
approvals and permits under material "blue
54
sky" and other state securities laws applicable to the registration of the
Parent Common Stock to be exchanged for Company Common Stock shall have been
obtained.
(e) The shares of Parent Common Stock issuable to the holders of
Company Common Stock pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(f) All consents, authorizations, orders, permits and approvals of (or
registrations, declarations or filings with) any Governmental Authority in
connection with the execution, delivery and performance of this Agreement shall
have been obtained or made and shall have become Final Orders, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except when the failure to have obtained or
made any such consent, authorization, order, permit, approval, registration,
declaration or filing would not have a Parent Material Adverse Effect or,
following the Effective Time, a Surviving Corporation Material Adverse Effect.
A "Final Order" means action by the relevant regulatory authority which has not
-----------
been reversed, stayed, enjoined, set aside, annulled or suspended, with respect
to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions, prescribed by law,
regulation or order have been satisfied.
Section 6.2. Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of the following additional
conditions unless waived by the Company:
(a) The representations and warranties of Parent and Sub set forth in
this Agreement shall be true and correct in all respects as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; provided, however, that for purposes of determining the
satisfaction of this condition, no effect shall be given to any exception in
such representations and warranties relating to materiality or a Parent Material
Adverse Effect, and provided, further, however, that for purposes of this
condition, such representations and warranties shall be deemed to be true and
correct in all respects unless the failure or failures of such representations
and warranties to be so true and correct, individually or in the aggregate,
results or would reasonably be expected to result in a Parent Material Adverse
Effect. Parent and Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date. The Company shall have received a certificate signed on
behalf of Parent and Sub by the Chief Executive Officer and Chief Financial
Officer of Parent to the foregoing effect.
(b) The Company shall have received an opinion of Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP in form and substance reasonably satisfactory to the
Company, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion that
are consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes, the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code. In rendering such opinion,
Skadden, Arps,
55
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, may receive and rely upon representations contained
in certificates of the Company and Parent typical for transactions such as the
Merger.
(c) There shall not be pending any suit, action or proceeding by any
Governmental Authority, nor shall there by any judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or
issued by any Government Authority which could reasonably be expected, if
adversely determined, to result in criminal or uninsured and unindemnified or
unindemnifiable personal liability on the part of one or more directors of the
Company, (i) challenging or seeking to restrain or prohibit the consummation of
the Merger or (ii) seeking to prohibit or limit the ownership or operation by
the Company, Parent or any of their respective material Subsidiaries of any
material portion of their respective business or Assets or to dispose of or hold
separate any material portion of the business or Assets of the Company, Parent
or any of their respective material Subsidiaries, as a result of the Merger or
any of the other transactions contemplated by this Agreement.
(d) The Parent Required Statutory Approvals shall have been obtained
at or prior to the Effective Time pursuant to Final Orders; no such Final Order
shall have imposed terms or conditions that would have a Parent Material Adverse
Effect; and the Parent Required Consents shall have been obtained at or prior to
the Effective Time.
(e) From the date hereof through the Effective Time, no Parent
Material Adverse Effect shall have occurred and there shall exist no fact or
circumstance which could reasonably be expected to have a Parent Material
Adverse Effect.
Section 6.3. Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of the following
additional conditions unless waived by Parent and Sub:
(a) The representations and warranties of the Company set forth in
this Agreement shall be true and correct in all respects as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; provided, however, that for purposes of determining the
satisfaction of this condition, no effect shall be given to any exception in
such representations and warranties relating to materiality or a Company
Material Adverse Effect, and provided, further, however, that, for purposes of
this condition, such representation and warranties shall be deemed to be true
and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or in the
aggregate, results or would reasonably be expected to result in a Company
Material Adverse Effect. The Company 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. Parent shall have received a certificate signed
on behalf of the Company by the Chief Executive Officer and Chief Financial
Officer of the Company to the foregoing effect.
(b) Parent shall have received an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, in form
and substance reasonably satisfactory to Parent, dated the Effective Time,
substantially to the effect
56
that, on the basis of facts, representations and assumptions set forth in such
opinion that are consistent with the state of facts existing as of the Effective
Time, for federal income tax purposes the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code. In rendering
such opinion, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ may receive and rely upon representations
contained in certificates of Parent and the Company typical for transactions
such as the Merger.
(c) There shall not be pending any suit, action or proceeding by any
Governmental Authority, nor shall there be any judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or
issued by any Governmental Authority, (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or seeking to obtain from Parent or any
of its Subsidiaries any damages that are material in relation to Parent and its
Subsidiaries taken as a whole, (ii) seeking to prohibit or limit the ownership
or operation by the Company, Parent or any of their respective material
Subsidiaries of any material portion of their respective business or Assets, to
dispose of or hold separate any material portion of the business or Assets of
the Company, Parent or any of their respective material Subsidiaries, as a
result of the Merger or any of the other transactions contemplated by this
Agreement, (iii) seeking to prohibit Parent or any of its Subsidiaries from
effectively controlling in any material respect the business or operations of
the Company or its Subsidiaries or (iv) which otherwise is reasonably likely to
have a Company Material Adverse Effect or a Parent Material Adverse Effect.
(d) After the Effective Time, no Person shall have any right under any
Stock Plan (or any Company Stock Right granted thereunder) or other plan,
program or arrangement to acquire any equity securities of the Company or any of
its Subsidiaries.
(e) The Company Required Consents shall have been obtained at or prior
to the Effective Time. The Company Required Statutory Approvals shall have been
obtained at or prior to the Effective Time pursuant to Final Orders and no such
Final Order shall have imposed terms or conditions that would have a Company
Material Adverse Effect or a Parent Material Adverse Effect or which would
unreasonably interfere with or impair Parent's or the Surviving Corporation's
business. The Parent Required Statutory Approvals shall have been obtained at
or prior to the Effective Time pursuant to Final Orders, and no such Final Order
shall have imposed terms or conditions that would have a Parent Material Adverse
Effect or a Company Material Adverse Effect or which would unreasonably
interfere with or impair Parent's or the Surviving Corporation's business.
(f) The rights issued pursuant to the Company Rights Agreement shall
not have become non-redeemable, exercisable, distributed or triggered pursuant
to the terms of such agreement. The Company shall have amended the Company
Rights Agreement in accordance with Section 2.16 hereof.
(g) From the date hereof through the Effective Time, no Company
Material Adverse Effect shall have occurred and there shall exist no fact or
circumstance which could reasonably be expected to have a Company Material
Adverse Effect.
57
(h) The SEC shall have issued an order to the effect that, upon giving
effect to the Merger, Parent shall continue to be exempt from all of the
provisions of the 1935 Act (other than 9(a)(2) thereof) under Section 3(a)(1)
thereof.
(i) If Parent shall have requested that the Company make any
disposition or transfer of facilities or interests pursuant to Section 5.16, any
such disposition or transfer shall have been completed.
(j) The Company shall have consummated the restructuring of the Thermo
Agreements in accordance with Section 5.17 hereof and upon terms and conditions
which have been previously approved by Parent, which approval shall not be
unreasonably withheld or delayed.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Closing Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
(a) By mutual written consent of the Boards of Directors of
Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have been
consummated on or before February 28, 2000 (other than due to the failure of the
party seeking to terminate this Agreement to perform its obligations under this
Agreement required to be performed at or prior to the Effective Time); provided,
however, that at any time or from time to time prior to such termination, Parent
by written notice to the Company may extend such date to another date not later
than August 31, 2000 if:
(i) any of the conditions set forth in Section 6.1(b), 6.1(f),
6.2(d), 6.3(e), 6.3(h), 6.3(i) or 6.3(j) have not been satisfied or waived,
but are being diligently pursued; and
(ii) all conditions to the consummation of the transactions
contemplated hereby other than the conditions set forth in clause (i) above
are then capable of being satisfied.
(c) By Parent or the Company, if any required approval of the
stockholders of the Company for this Agreement or the Merger shall not have been
obtained at a duly held meeting of stockholders or at any adjournment thereof;
provided, however, that the right to terminate this Agreement under this Section
-------- -------
7.1(c) shall not be available to any party whose failure to fulfill any
obligations under this Agreement has been the cause of, or resulted in, the
failure of such approval to have been obtained;
58
(d) By the Company or Parent, if the required approval of the
shareholders of Parent of the Merger shall not have been obtained at a duly held
meeting of shareholders or at any adjournment thereof; provided, however, that
-------- -------
the right to terminate this Agreement under this Section 7.1(d) shall not be
available to any party whose failure to fulfill any obligations under this
Agreement has been the cause of, or resulted in, the failure of such approval to
have been obtained;
(e) By Parent or the Company if any court or other Governmental
Authority of competent jurisdiction shall have issued a final order, decree or
ruling or taken any other final action, permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable or if any state or federal law, order,
rule or regulation is adopted or issued, which has the effect, as supported by
the written opinion of legal counsel, of prohibiting the Merger;
(f) By the Company if prior to the Closing Date (i) there shall have
been a breach of any representation or warranty on the part of Parent contained
in this Agreement which could reasonably be expected to have a Parent Material
Adverse Effect or (ii) there shall have been a breach of any covenant or
agreement on the part of Parent contained in this Agreement which could
reasonably be expected to have a Parent Material Adverse Effect, which breach
shall not have been cured prior to 30 days following notice thereof; or
(g) By Parent if prior to the Closing Date (i) there shall have been a
breach of any representation or warranty on the part of the Company contained in
this Agreement which could reasonably be expected to have a Company Material
Adverse Effect or a Parent Material Adverse Effect or (ii) there shall have been
a breach of any covenant or agreement on the part of the Company contained in
this Agreement which could reasonably be expected to have a Company Material
Adverse Effect or a Parent Material Adverse Effect, which breach shall not have
been cured prior to 30 days following notice thereof; or
(h) By Parent, if the Board of Directors of the Company shall have (i)
failed to approve or recommend or withdrawn, modified or amended in any respect
adverse to Parent or Sub its approval or recommendation of this Agreement, the
Merger or any of the other transactions contemplated herein, (ii) recommended an
Alternative Transaction from any Person other than Parent or resolved to do so,
(iii) engaged in a solicitation of a Transaction prohibited by Section 5.4, (iv)
failed, upon 10 days written notice from Parent, to reaffirm (x) its approval of
this Agreement, the Merger and the other transactions contemplated hereby and
(y) its recommendation to the stockholders of the Company that they approve and
adopt this Agreement and the Merger or (v) resolved to take any of the actions
specified above; or
(i) By the Company (but only prior to approval by the stockholders of
the Company of this Agreement and the Merger) to accept a Superior Transaction
proposed to the Company in accordance with the provisions of Section 5.4,
provided that such termination under this Section 7.1(i) shall not be effective
until the Company has made payment of the Fee and the Expenses required by
Section 7.3.
59
Section 7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
except as set forth in Section 8.1 and there shall be no liability on the part
of any party hereto or their respective officers or directors except as set
forth in Section 7.3.
Section 7.3. Fees and Merger Expenses.
(a) Parent Merger Expenses. If (i) this Agreement is terminated
pursuant to Section 7.1(h) or (i); (ii) Parent or the Company terminates this
Agreement pursuant to Section 7.1(c) and on or prior to the date of the Company
Stockholders Meeting an Alternative Transaction has been publicly announced; or
(iii) Parent terminates this Agreement pursuant to Section 7.1(g); then the
Company shall pay to Parent and Sub, within one business day after request by
Parent or Sub (accompanied by reasonably detailed documentation to the extent
reasonably requested by the Company) from time to time, all of Parent's and
Sub's Merger Expenses up to a maximum payment of $7.0 million, if termination
occurs prior to the approval of the Merger by the shareholders of Parent, and up
to an aggregate maximum of $12.0 million, if termination occurs on or after the
date of approval of the Merger by the shareholders of Parent.
(b) Company Merger Expenses. If the Company terminates this
Agreement pursuant to Section 7.1(f), then the Parent shall pay to the Company
within one business day after request by the Company (accompanied by reasonably
detailed documentation to the extent reasonably requested by the Parent) from
time to time, all of the Company's Merger Expenses up to a maximum payment of
$7.0 million, if termination occurs prior to the approval of this Agreement by
the stockholders of the Company, and up to an aggregate maximum of $12.0
million, if termination occurs on or after the date of approval of this
Agreement by the stockholders of the Company of this Agreement.
(c) Termination Fees Payable by Company. If (i) this Agreement is
terminated pursuant to Section 7.1(h) or (i); (ii) Parent or the Company
terminates this Agreement pursuant to Section 7.1(c) and on or prior to the date
of the Company Stockholders Meeting an Alternative Transaction has been publicly
announced; or (iii) this Agreement is terminated pursuant to Section 7.1(g) as a
result of a willful breach by the Company; then the Company shall also pay (in
addition to any Merger Expenses payable pursuant to Section 7.3(a)) to Parent,
(A) simultaneously with any termination by the Company
contemplated by Section 7.3(c)(i) or 7.3(c)(iii) a fee of $85.0 million or
(B) following any termination by Parent contemplated by Section
7.3(c)(ii), a fee in cash within one business day following such
termination of $35.0 million; and if within 18 months of such termination
the Company or any Subsidiary accepts a written offer to consummate an
Alternative Transaction or an Alternative Transaction is consummated, upon
the earlier of such acceptance or consummation, an additional fee in cash
of $50.0 million.
60
Under no circumstances shall the Company be required to pay more than one fee
pursuant to this Section 7.3(c), taking into effect the two payments required by
Section 7.3(c)(B).
"Alternative Transaction" means any of the following events: (i) the
-----------------------
acquisition of the Company by merger, tender offer or otherwise by any Person
other than Parent, Sub or any affiliate thereof (a "Third Party"); (ii) the
-----------
acquisition by a Third Party of 30% or more of the Assets of the Company and its
Subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 30% or
more of the outstanding shares of Company Common Stock; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by the Company or any of its
Subsidiaries of 30% or more of the outstanding shares of Company Common Stock.
(d) Termination Fees Payable by Parent. If this Agreement is
terminated pursuant to Section 7.1(f) as a result of a willful breach by Parent,
then Parent shall also pay (in addition to any Merger Expenses payable pursuant
to Section 7.3(b)) to the Company within one business day following such
termination by the Company a fee of $85.0 million.
(e) The Company and Parent agree that the agreements contained in
Sections 7.3(a), 7.3(b), 7.3(c) and 7.3(d) above are an integral part of the
transactions contemplated by this Agreement, that without such agreements
neither party would have entered into this Agreement, and that such amounts
constitute liquidated damages and not a penalty. If either party fails to
timely pay the other party the amounts due under Sections 7.3(a), 7.3(b), 7.3(c)
and 7(d), as the case may be, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) incurred by the party due to be
paid in connection with any action, including the filing of any lawsuit, taken
to collect payment of such amounts, together with interest on the amount of any
such unpaid amounts at the publicly announced prime rate of The Chase Manhattan
Bank from the date such amounts were required to be paid.
(f) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby and thereby, except that each of Parent and the Company
shall bear and pay one-half of the costs and expenses incurred in connection
with (i) the filing, printing and mailing of the Form S-4 and the Joint Proxy
Statement; (ii) the filing of any applications to the FERC, the SEC or any state
public utilities commission; and (iii) any filings under the HSR Act.
Section 7.4. Amendment. This Agreement may be amended prior to the Effective
Time by the parties hereto by action taken by or on behalf of their respective
Boards of Directors at any time before or after any required approval of matters
presented in connection with the Merger by the shareholders of Parent or the
stockholders of the Company; provided, however, that after any such approval,
there shall be made no amendment that by law requires further approval by such
shareholders or stockholders, as the case may be, without the further approval
of such shareholders or stockholders, as the case may be. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.
Section 7.5. Waiver. At any time prior to the Closing Date, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties
61
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby. 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 8.1. Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
7.1, as the case may be, except that the agreements set forth in Article I,
Section 5.5, Section 5.6 and Article VIII shall survive the Effective Time and
those set forth in Section 5.3(c) and Section 7.3 and the Confidentiality
Agreement in accordance with its terms shall survive termination of this
Agreement.
Section 8.2. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Parent or Sub:
Sempra Energy
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. Light, Esq.
Executive Vice President and General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
62
if to the Company:
K N Energy, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Phase II - ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.3. Certain Definitions. For purposes of this Agreement, the term:
"Action" shall mean any action, order, writ, injunction, judgment or
------
decree outstanding or claim, suit, litigation, proceeding, arbitration or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any other Person.
"affiliate" shall mean, with respect to any Person, any other Person
---------
that directly, or through one or more intermediaries, controls or is controlled
by or is under common control with such Person.
"Assets" shall mean, with respect to any Person, all properties, land,
------
buildings, improvements, leasehold improvements, Fixtures and Equipment and
other assets, real or personal, tangible or intangible, owned, leased or
licensed by such Person or any of its Subsidiaries.
"Company Employee Stock Purchase Plan" shall mean the 1990
------------------------------------
Employee Stock Purchase Plan of KN Energy, Inc.
"Company Material Adverse Effect" shall mean a material adverse change
-------------------------------
in or effect on the business, operations, Assets, financial condition or results
of operations of the Company and its Subsidiaries taken as a whole or any change
which materially impairs or materially delays the ability of the Company to
consummate the transactions contemplated by this Agreement, provided that a
Company Material Adverse Effect shall exclude any change or effect due to (i)
United States or global economic conditions or financial markets in general,
(ii) subject to the accuracy of the Company's representations and warranties in
Section 2.26 and the Company's and its Subsidiaries' ongoing compliance with
their respective obligations under Section 4.1 hereof, changes in the
international, national, regional or local wholesale or retail
63
markets for natural gas, liquid hydrocarbons or electricity and (iii) rules,
regulations or decisions of the FERC affecting the interstate natural gas
transmission industry as a whole or the wholesale sale and transmission of
electric power as a whole.
"Company Required Statutory Approvals" shall mean those statutory
------------------------------------
approvals set forth on Section 8.3 of the Company Disclosure Schedule.
"Company Rights Agreement" shall mean the Rights Agreement, dated as
------------------------
of August 21, 1995, between the Company and First Chicago Trust Company of New
York, as successor Rights Agent, as amended by Amendment No. 1 to Rights
Agreement, dated as of September 8, 1998.
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
------------
easement, security interest, deed of trust, mortgage, right-of-way, covenant,
condition, restriction, encumbrance or other rights of third parties.
"Environmental Claim" means any and all written administrative,
-------------------
regulatory or judicial actions, suits, demands, demand letters, requests for
information, notifications, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation by any person or entity
(including any Governmental Authority) alleging potential liability (including,
without limitation, potential liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (A) the presence, or Release or
threatened Release into the environment, of any Hazardous Materials at any
location, whether or not now or formerly owned, operated, leased or managed by
the Company or any of its Subsidiaries or joint ventures; (B) circumstances
forming the basis of any violation or alleged violation of, or responsibility or
alleged responsibility under, any Environmental Law; or (C) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
"Environmental Laws" means all federal, state, and local laws, rules,
------------------
regulations statutes, common law, ordinances, policies or directive relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, coastal zones, wetlands, endangered and
threatened species, groundwater, land surface or subsurface strata), including,
without limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
"Fixtures and Equipment" shall mean, with respect to any Person, all
----------------------
of the furniture, fixtures, furnishings, machinery and equipment owned, leased
or licensed by such Person and located in, at or upon the facilities of such
Person.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America, as in effect from time to time, consistently applied.
64
"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 transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls ("PCBs"); (B) any
----
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", or words of similar import, under any Environmental Law; and
(C) any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a jurisdiction
in which Company or any of its Subsidiaries or joint ventures operates.
"Intellectual Property" shall mean all intellectual property rights,
---------------------
including domestic and foreign patents, patent applications, invention
disclosures to be filed or awaiting filing determinations, trademark and service
▇▇▇▇ applications, registered trademarks, registered service marks, registered
copyrights, trademarks, servicemarks, tradenames, trade secrets and other
proprietary rights, inventions, know-how, formulae, processes, procedures,
research records, records of inventions, test information, market surveys and
marketing know-how and unregistered copyrights, together with associated
goodwill.
"Leases" shall mean, with respect to any Person, all leases (including
------
subleases, licenses, any occupancy agreement and any other agreement) of real or
personal property (other than Intellectual Property license agreements) in each
case to which such Person or any of its Subsidiaries is a party, whether as
lessor, lessee, guarantor or otherwise, or by which any of them or their
respective properties or assets are bound, or which otherwise relate to the
operation of their respective businesses.
"Merger Expenses" shall include all out-of-pocket expenses and fees
---------------
(including without limitation fees and expenses payable to all banks, investment
banking firms and other financial institutions and their respective agents and
counsel for arranging or providing financial advice with respect to the Merger
and all reasonable fees and expenses of counsel, accountants, experts and
consultants) actually incurred by Parent and Sub or the Company, as applicable,
or on their behalf in connection with the consummation of all transactions
contemplated by this Agreement, including the Merger.
"Natural Gas Pipeline Transportation and Storage Contracts" shall mean
---------------------------------------------------------
those Contracts identified as such in Section 2.20 of the Company Disclosure
Schedule.
"Parent Common Stock" shall mean the common stock, no par value,
-------------------
of Parent.
"Parent Material Adverse Effect" shall mean a material adverse change
------------------------------
in or effect on the business, operations, Assets, financial condition or results
of operations of Parent and its Subsidiaries taken as a whole or any change
which materially impairs or materially delays the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement, provided that a
Parent Material Adverse Effect shall exclude any change or effect due to (i)
United States or global economic conditions or financial markets in general,
(ii) changes in the international, national, regional or local wholesale or
retail markets for natural gas, liquid
65
hydrocarbons or electricity and (iii) rules, regulations, or decisions of the
CPUC, California Independent System Operator or the FERC affecting the
California investor-owned electric or gas utilities as a group or the wholesale
sale and transmission of electric power as a whole.
"Parent Required Statutory Approvals" shall mean the statutory
-----------------------------------
approvals set forth on Section 8.3 of the Parent Disclosure Schedule.
"Parent Rights Plan" shall mean that certain Rights Agreement, dated
------------------
as of May 26, 1998, between Sempra Energy and First Chicago Trust Company of New
York, as Rights Agent.
"Permitted Encumbrances" shall mean any Encumbrances resulting from
----------------------
(i) all statutory or other liens for Taxes or assessments which are not yet due
or delinquent or the validity of which are being contested in good faith by
appropriate proceedings for which adequate reserves are being maintained in
accordance with GAAP; (ii) all cashiers', landlords', workers' and repairers'
liens, and similar liens imposed by law, incurred in the ordinary course of
business; (iii) all laws and governmental rules, regulations, ordinances and
restrictions; (iv) all leases, subleases, licenses, concessions or service
contracts to which any Person or any of its Subsidiaries is a party; (v)
Encumbrances identified on title policies or preliminary title reports or other
documents or writing delivered or made available for inspection to any Person
prior to the date hereof or included in the Public Records; and (vi) all other
liens and mortgages (but solely to the extent such liens or mortgages secure
indebtedness described or referred to in the Company Disclosure Schedule),
covenants, imperfections in title, charges, easements, restrictions and other
Encumbrances which, in the case of any such Encumbrances pursuant to clause (i)
through (vi), do not materially detract from or materially interfere with the
present use of the Asset subject thereto or affected thereby.
"Person" shall mean any individual, corporation, partnership, limited
------
liability company, joint venture, governmental agency or instrumentality, or any
other entity.
"Release" means any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
indoor or outdoor environment (including, without limitation, the atmosphere,
surface or subsurface strata, surface water, groundwater) or into or out of any
property, including the movement of Hazardous Materials through or in the air,
soil, surface water, groundwater or property, except for those that would not
reasonably be expected to have a Parent Material Adverse Effect or a Company
Material Adverse Effect, as applicable.
"Section 16 Affiliate" shall mean each individual who (x) immediately
--------------------
prior to the Effective Time is a director or officer of the Company or (y) at
the Effective Time will become a director or officer of Parent, the Surviving
Corporation or the Company.
"Software" shall mean all proprietary software programs, and the
--------
related source code, system documentation, statements of principles of
operation, and, if available to the Company, schematics for all software
programs, as well as any pertinent commentary or
66
explanation that may be necessary to render such materials understandable and
usable by a trained computer programmer.
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership, joint venture or other organization, whether incorporated or
unincorporated, of which such Person directly or indirectly owns or controls at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions.
"Surviving Corporation Material Adverse Effect" shall mean a material
---------------------------------------------
adverse change in or effect on the business, operations, Assets, financial
condition or results of operations of the Surviving Corporation and its
Subsidiaries taken as a whole, provided that a Surviving Corporation Material
Adverse Effect shall exclude any change or effect due to (i) United States or
global economic conditions or financial markets in general, (ii) changes in the
international, national, regional or local wholesale or retail markets for
natural gas, liquid hydrocarbons or electricity and (iii) rules, regulations or
decisions of the FERC affecting the interstate natural gas transmission industry
as a whole or the wholesale sale and transmission of electric power as a whole.
"Tax" or "Taxes" shall mean any U.S. federal, state, county, local or
--- -----
foreign taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, sales and use, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes or charges imposed by any governmental entity, and includes any interest
and penalties (civil or criminal) on or additions to any such taxes and any
expenses incurred in connection with the determination, settlement or litigation
of any Tax liability.
"Tax Return" shall mean any report, return or other information
----------
required to be supplied to any governmental entity with respect to Taxes
including, where permitted or required, combined or consolidated returns.
"Thermo Agreements" shall mean (i) the Contribution Agreement, dated
-----------------
as of February 18, 1998, by and among Thermo LLC, a Colorado limited liability
company, Thermo Ft. ▇▇▇▇▇▇, ▇.▇., a Colorado limited partnership, Thermo
Investments Limited Partnership, a Colorado limited partnership, Crystal River
Energy Company, a California corporation, ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual and KN
Cogeneration, Inc., a Colorado corporation; (ii) the Purchase Agreement, dated
as of February 18, 1998, by and among ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual, Thermo
Greeley I, Inc., a Colorado corporation and KN Thermo Acquisition, Inc., a
Colorado corporation; (iii) the Master Joint Venture Agreement, dated as of
February 18, 1998, by and among ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, an individual, ▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual, Thermo LLC, a Colorado
limited liability company, and KN Cogeneration, a Colorado corporation; and (iv)
the Transaction Modification Agreement, dated as of August 27, 1998, by and
among Thermo LLC, a Colorado limited liability company, Thermo Ft. ▇▇▇▇▇▇, ▇.▇.,
a Colorado limited partnership,
67
Thermo Investments Limited Partnership, a Colorado limited partnership, Crystal
River Energy Company, a California corporation, ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual,
▇▇▇▇▇ ▇▇▇▇▇▇ III, as trustee under that certain Restated Declaration and
Agreement of Trust dated August 10, 1997, originally dated January 1, 1997,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual, Thermo Greeley I, Inc., a Colorado corporation,
KN Cogeneration, Inc., a Colorado corporation, and KN Thermo Acquisition, Inc.,
a Colorado corporation; and (v) any other Contracts arising from or related to
the relationship between the Company and its affiliates, on the one hand, and
Thermo, LLC and its affiliates (including, the parties set forth in clauses (i)
through (iv) above), on the other hand; including in each case any and all
exhibits, attachments or amendments to the above referenced agreements.
Section 8.4. Other Defined Terms. The following terms shall have the
respective meanings given to such terms in the Sections set forth below:
Term Section
---- -------
1935 Act.......................... 2.5
Agreement......................... Recitals
Allocation Determination.......... 1.10(c)
Alternative Transaction........... 7.3(c)
Blue Sky Laws..................... 2.4(c)
Cash Cap.......................... 1.11(b)
Cash Election..................... 1.6(a)
Certificate of Merger............. 1.2
Certificates...................... 1.10(b)
CGCL.............................. Recitals
Closing........................... 1.12
Closing Agreement................. 2.9(k)
Closing Date...................... 1.12
Code.............................. Recitals
Company........................... Recitals
Company Benefit Plans............. 2.10(a)
Company Class A Preferred Stock... 2.3
Company Class B Preferred Stock... 2.3
Company Common Stock.............. 1.6(a)
Company's Current Premium......... 5.6(b)
Company Disclosure Schedule....... 2.1
Company Financial Advisor......... 2.14
Company Financial Statements...... 2.5
Company Required Consents......... 2.4(b)
Company SEC Reports............... 2.5
Company Stock Rights.............. 1.7
Company Stockholders' Approval.... 2.13
Company Stockholders Meeting...... 5.1(b)
Company Trading Guidelines........ 2.26
68
Term Section
---- -------
Confidentiality Agreement......... 5.3(c)
Contracts......................... 2.20
CPUC.............................. 3.5
Counterproposal................... 5.4
DOJ............................... 5.8
Easements......................... 2.25
Effective Time.................... 1.2
Election Deadline................. 1.10(c)
Election Form..................... 1.10(b)
Encumbrances...................... 6.2
Environmental Permits............. 2.11(b)
ERISA............................. 2.10(a)
Exchange Act...................... 2.4(c)
Exchange Agent.................... 1.10(a)
FERC.............................. 2.4(c)
Final Order....................... 6.1(f)
Gas Act........................... 2.5
Governmental Authority............ 2.4(c)
HSR Act........................... 2.4(c)
IRS............................... 2.9(p)
Indemnified Party................. 5.6(a)
Joint Proxy Statement............. 2.8
KGCC.............................. Recitals
Maximum Cash Amount............... 1.11(a)
Merger Consideration.............. 1.6(a)
Net Company Position.............. 2.26
New Stock Rights.................. 1.7(a)
NGPA.............................. 2.5
NYSE.............................. 1.9
Other Transaction................. 5.4
Parent............................ Recitals
Parent Disclosure Schedule........ 3.1
Parent Financial Advisor.......... 3.10
Parent Financial Statements....... 3.5
Parent Preferred Stock............ 3.3
Parent Required Consents.......... 3.4(b)
Parent SEC Reports................ 3.5
PBGC.............................. 2.10(e)
PEPS Units........................ 2.3
Power Act......................... 2.5
Prorated Cash Amount.............. 1.11(b)
Prorated Stock Amount............. 1.11(c)
Purchase Contract Agreement....... 1.13
69
Term Section
---- -------
PURPA............................. 2.12(b)
Registration Statement............ 2.8
Requested Cash Amount............. 1.11(b)
Requested Stock Amount............ 1.11(c)
SAS 72............................ 5.2
SEC............................... 2.5
Securities Act.................... 1.10(d)
SONGS............................. 3.17
Standard Cash Consideration....... 1.6(a)
Standard Consideration............ 1.6(a)
Standard Election................. 1.6(a)
Stock Consideration............... 1.6(a)
Stock Election.................... 1.6(a)
Stock Plans....................... 1.7
Sub............................... Recitals
Superior Transaction.............. 5.1(b)
Surviving Corporation............. 1.1
Tax Ruling........................ 2.9(k)
Third Party....................... 7.3(c)
Transaction....................... 5.4
Violation......................... 2.4(b)
Section 8.5. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 8.6. Entire Agreement; Assignment. This Agreement, together with
the Confidentiality Agreement and the other agreements referred to herein or
contemplated hereby, constitute the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. Subject to the provisions of Section 1.1,
this Agreement shall not be assigned, by operation of law or otherwise, without
the prior written consent of the other parties hereto, in their sole discretion.
Any attempted assignment which does not comply with the provisions of this
Section 8.6 shall be null and void ab initio.
70
Section 8.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except as provided in
the following sentence, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement. The
parties hereto expressly intend the provisions of Sections 1.7 and 5.6 to confer
a benefit upon and be enforceable by, as third party beneficiaries of this
Agreement, the third persons referred to in, or intended to be benefited by,
such provisions.
Section 8.8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California
without regard to its rules of conflict of laws, except that the provisions of
Article I with respect to the Merger also shall be governed by, and construed in
accordance with, the laws of the State of Kansas.
Section 8.9. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 8.10. Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
71
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SEMPRA ENERGY
By: /s/ ▇▇▇▇ ▇. Light
---------------------------
Name: ▇▇▇▇ ▇. Light
Title: Executive Vice President
CARDINAL ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. Light
---------------------------
Name: ▇▇▇▇ ▇. Light
Title: Executive Vice President
K N ENERGY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
Attested:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
State of Colorado )
)
County of Jefferson )
Be it remembered, that on this 20th day of February 1999, before me, the
undersigned, a Notary Public in and for the County and State aforesaid,
personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ who declared that they
are the Chairman and Chief Executive Officer and the Secretary, respectively, of
K N Energy, Inc., a corporation organized under the laws of the State of Kansas,
personally known to me to be the same persons who executed the foregoing, and
acknowledged the execution and attestation of the same as their respective act
and deed and as the act and deed of the corporation.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Notary Public
My Commission Expires:
5/6/01
----------------------
EXHIBIT A
FORM OF AFFILIATE LETTER
[Date]
Sempra Energy
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of K N Energy, Inc., Inc., a Kansas corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
--------
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
---------------------
of the Securities and Exchange Commission (the "Commission") under the
----------
Securities Act of 1933, as amended, (the "Act"). Pursuant to the terms of the
---
Agreement and Plan of Merger, dated as of February 20, 1999 (the "Merger
------
Agreement"), among Sempra Energy, a California corporation ("Parent"), Cardinal
--------- ------
Acquisition Corp., a California corporation and wholly-owned subsidiary of
Parent ("Sub"), and the Company, the Company will be merged with and into Sub
---
(the "Merger").
------
As a result of the Merger, I may receive cash, shares of Parent Common
Stock (as defined in the Merger Agreement), or a combination of both (the
"Merger Consideration") in exchange for shares of Common Stock, par value $5.00
---------------------
per share, of the Company ("Company Common Stock") owned by me.
--------------------
1. Compliance with the Act. I represent, warrant and covenant to
-----------------------
Parent that in the event I receive any Merger Consideration as a result of the
Merger:
A. I shall not make any sale, transfer or other disposition of
the Merger Consideration in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Merger Agreement
and discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Merger Consideration to the extent I felt necessary, with my counsel or
counsel for the Company.
C. I have been advised that the issuance of Parent Common Stock
to me pursuant to the Merger will be registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger is submitted for a vote of the
stockholders of Company, I may be deemed to have been an affiliate of
Company and the distribution by me of the Parent Common Stock has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Parent Common Stock issued to me in the Merger unless (i) such
A-1
EXHIBIT A
sale, transfer or other disposition has been registered under the Act, (ii)
such sale, transfer or disposition is made in conformity with Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Parent, or pursuant to a "no action"
letter obtained by the undersigned from the staff of the Commission, such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
2. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of Parent Common Stock by me or on my behalf
under the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available.
3. I also understand that stop transfer instructions will be given
to Parent's transfer agent with respect to the Parent Common Stock issued to me
and that there will be placed on the certificates for the Parent Common Stock
issued to me or any substitutions therefor a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
4. I also understand that unless the transfer by me of my Parent
Common Stock has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Parent reserves the right to put the following
legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraph E
and F above will be removed by delivery of substituted certificates without
such legend if such legend is not required for purposes of the Act or this
letter agreement. It is understood and agreed that such legends and the
stop orders referred to above will be removed if (i) one
A-2
EXHIBIT A
year shall have elapsed from the date the undersigned acquired Parent
Common Stock received in the Merger and the provisions of Rule 145(d)(2)
are then available to the undersigned, (ii) two years shall have elapsed
from the date the undersigned acquired the Parent Common Stock received in
the Merger and the provisions of Rule 145(d)(3) are then available to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to Parent, or a
"no action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
5. Certain Tax Matters. The undersigned does not intend to take a
-------------------
position on any federal or state income tax return that is inconsistent with the
treatment of the Merger as a tax-free reorganization for federal or state income
tax purposes.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
Name:
----------------------------
Accepted this _____ day of
___________ , 1999 by
SEMPRA ENERGY
By:
--------------------
Name:
------------------
Title:
-----------------
A-3