EXHIBIT B-1
AGREEMENT AND PLAN OF MERGER
among
Orange and Rockland Utilities, Inc.
Consolidated Edison, Inc.
and
C Acquisition Corp.
Dated as of May 10, 1998
TABLE OF CONTENTS
ARTICLE I THE MERGER
Section 1.1 The Merger. 1
Section 1.2 Effects of the Merger. 1
Section 1.3 Effective Time of the Merger 2
ARTICLE II TREATMENT OF SHARES
Section 2.1 Effect on Capital Stock of the Company and the Merger Subsidiary 2
Section 2.2 Surrender of Shares 3
ARTICLE III THE CLOSING
Section 3.1 Closing 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification 5
Section 4.2 Subsidiaries 6
Section 4.3 Capitalization 6
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance 7
Section 4.5 Reports and Financial Statements 9
Section 4.6 Absence of Certain Changes or Events 10
Section 4.7 Litigation 10
Section 4.8 Proxy Statement 10
Section 4.9 Tax Matters 11
Section 4.10 Employee Matters; ERISA 12
Section 4.11 Labor and Employee Relations 14
Section 4.12 Environmental Protection 15
Section 4.13 Regulation as a Utility 18
Section 4.14 Vote Required 18
Section 4.15 State Anti-Takeover Statutes 18
Section 4.16 Opinion of Financial Advisor 18
Section 4.17 Insurance 18
Section 4.18 Discontinued Business 18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CEI
Section 5.1 Organization and Qualification 19
Section 5.2 Authority; Non-Contravention; Statutory Approvals; Compliance 19
Section 5.3 Litigation 20
Section 5.4 Proxy Statement 21
Section 5.5 Regulation as a Utility 21
Section 5.6 No Vote Required. 21
Section 5.7 Financing. 21
Section 5.8 Ownership of Company Common Stock 21
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Company 22
Section 6.2 Covenants of CEI 28
ARTICLE VII ADDITIONAL AGREEMENTS
Section 7.1 Access to the Company's Information 29
Section 7.2 Proxy Statement 29
Section 7.3 Regulatory Matters 30
Section 7.4 Approval of the Company Shareholders 31
Section 7.5 Directors' and Officers' Indemnification 31
i
Section 7.6 Public Announcements 33
Section 7.7 Standstill Agreements; Confidentiality Agreements 33
Section 7.8 Employee Agreements and Workforce Matters 33
Section 7.9 Employee Benefit Plans 34
Section 7.10 No Solicitations by the Company 35
Section 7.11 Board of Directors; Advisory Board 37
Section 7.12 Post-Merger Operations. 37
Section 7.13 Expenses 38
Section 7.14 Further Assurances 38
Section 7.15 Shareholder Litigation 38
ARTICLE VIII CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger 38
Section 8.2 Conditions to Obligation of CEI to Effect the Merger. 39
Section 8.3 Conditions to Obligation of the Company to Effect the Merger 40
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination 41
Section 9.2 Effect of Termination 42
Section 9.3 Termination Fee; Expenses 42
Section 9.4 Amendment 43
Section 9.5 Waiver 43
Section 9.6 Procedure for Termination, Amendment, Extension or
Waiver 44
ARTICLE X GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties 44
Section 10.2 Brokers 44
Section 10.3 Notices 44
Section 10.4 Miscellaneous 46
Section 10.5 Interpretation 46
Section 10.6 Counterparts; Effect 46
Section 10.7 Parties' Interest; No Third Party Beneficiaries 47
Section 10.8 Waiver of Jury Trial 47
Section 10.9 Enforcement 47
ii
INDEX OF PRINCIPAL TERMS
Term Page
1935 Act 9, 30, 35
Acquisition Agreement 42
Acquisition Proposal 36, 42
Affected Employees 34
Affiliate 24
Cancelled Shares 3
CEI Disclosure Schedule 19
CEI Required Statutory Approvals 20
CEI SEC Reports 21
CEI Subsidiaries 19
Certificates 3
Closing 5
Closing Date 5
Code 12
Company Common Stock 2
Company Financial Statements 9
Company Meeting 31
Company Plans 12
Company Preference Stock 6
Company Preferred Stock 6
Company Required Consents 8
Company Required Statutory Approvals 8
Company SEC Reports 9
Company Shareholders' Approval 18
Company Subsidiary 6
Confidentiality Agreement 29
Control 24
Discontinued Business 18
DLJ 18
Effective Time 2
Environmental Claim 17
Environmental Laws 17
Environmental Permits 15
ERISA 12
ERISA Affiliate 12
Exchange Act 9
FERC 9
Final Divestiture Plan 22
Final Order 39
GAAP 9
iii
Governmental Authority 8
Hazardous Materials 17
HSR Act 30
Indemnified Liabilities 31
Indemnified Parties 31
Indemnified Party 31
Initial Termination Date 41
Injured Party 43
ISRA 30
Liens 6
Material Business 36
Merger 1
Merger Consideration 2
Merger Subsidiary 1
Merger Subsidiary Common Stock 3
NYBCL 1
NYPSC 2
Paying Agent 3
PBGC 13
PCBs 17
person 4
Power Act 9
Proxy Statement 10
Release 17
Representatives 29
SEC 9
Securities Act 9
Settlement Agreement 22
Severance Plan 35
Subsidiary 5
Superior Proposal 36
Surviving Corporation 1
Tax 11
Termination Fee 42
Title IV Harvest Plan 13
Violation 7
Voting Debt 6
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 10,
1998 (referred to herein as the "date hereof"), by and among Orange and Rockland
Utilities, Inc. (the "Company"), a New York corporation, Consolidated Edison,
Inc., a New York corporation ("CEI"), and C Acquisition Corp., a New York
corporation (the " Merger Subsidiary").
WHEREAS, the Company and CEI have determined that it would be in their
respective best interests and in the interests of their respective shareholders
to effect the transactions contemplated by this Agreement; and
WHEREAS, in furtherance thereof, the respective Boards of Directors of
the Company, Merger Subsidiary and CEI have approved this Agreement and the
merger of Merger Subsidiary with and into the Company (the " Merger").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.3),
the separate existence of Merger Subsidiary shall cease and Merger Subsidiary
shall be merged with and into the Company in accordance with the laws of the
State of New York. The Company shall be the surviving corporation in the
Merger, shall continue its corporate existence under the laws of the State of
New York, and, following the Effective Time, the Company shall become a wholly
owned subsidiary of CEI and shall succeed to and assume all the rights and
obligations of Merger Subsidiary in accordance with the New York Business
Corporation Law (the " NYBCL"). The effects and consequences of the Merger
shall be as set forth in Section 1.2. The surviving corporation after the
Merger is sometimes referred to as the " Surviving Corporation."
Section 1.2 Effects of the Merger. At the Effective Time, (a)
the Restated Certificate of Incorporation of the Company in effect immediately
prior to the Effective Time shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended, (b) the by-laws of the Company
in effect immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation after the Effective Time until duly amended, and (c) the
Merger shall have all the effects provided by the NYBCL. As of the Effective
Time, each of the directors of the Company shall resign and the directors of the
Merger Subsidiary at the Effective Time shall, from and after the Effective
Time, be the directors of the Surviving Corporation until their successors have
been duly elected or ap-
pointed and qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation.
Section 1.3 Effective Time of the Merger. Subject to the provisions
of this Agreement, on the Closing Date (as defined in Section 3.1), a
certificate of merger shall be executed and delivered for filing, with the order
of the New York State Public Service Commission (the " NYPSC") approving the
Merger attached thereto, by the Company and Merger Subsidiary to the Department
of State of the State of New York pursuant to the NYBCL. The Merger shall become
effective at the time specified in the certificate of merger so delivered and
filed by the Department of State of the State of New York (the " Effective
Time").
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect on Capital Stock of the Company and the Merger
Subsidiary. As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any capital stock of the Company or Merger
Subsidiary:
(a) Conversion of Capital Stock of the Company. Each issued and
outstanding share of Common Stock, $5 par value per share, of the Company (the "
Company Common Stock"), in each case not owned directly or through a wholly
owned Subsidiary (as defined in Section 4.1) by the Company or CEI, issued and
outstanding immediately prior to the Effective Time shall be cancelled and shall
be converted into the right to receive cash in the amount of $58.50 (the "
Merger Consideration") payable, without interest, to the holder of such share of
Company Common Stock, upon surrender, in the manner provided in Section 2.2
hereof, of the certificate formerly evidencing such share.
(b) Cancellation of Treasury Stock and Certain Company Common Stock.
Any shares of Company Common Stock that are owned by the Company as treasury
stock or by CEI or by any wholly owned Subsidiary of the Company or CEI shall be
cancelled and retired and shall cease to exist and no Merger Consideration or
other consideration shall be delivered in exchange therefor, and each holder of
a certificate formerly representing any such shares shall cease to have any
rights with respect thereto.
(c) Redemption of Company Preferred Stock. Prior to the Effective
Time, the Board of Directors of the Company shall call for redemption all
outstanding shares of Company Preferred Stock (as defined in Section 4.3), at a
redemption price equal to the amount set forth in the Restated Certificate of
Incorporation of the Company, together with all dividends accrued and unpaid to
the date of such redemption. All shares of Company Preferred Stock shall be
redeemed so that no such shares shall be deemed to be outstanding at the
Effective Time.
(d) Redemption of Company Preference Stock. Prior to the Effective
Time, the Board of Directors of the Company shall call for redemption all
outstanding shares of Company Preference Stock (as defined in Section 4.3), at a
redemption price equal to the amount set forth in the Restated Certificate of
Incorporation of the Company, together with all dividends accrued and unpaid to
the date of such redemption. All shares of Company Preference Stock shall be
redeemed so that no such shares shall be deemed to be outstanding at the
Effective Time.
(e) Capital Stock of Merger Subsidiary. Each issued and outstanding
share of Common Stock, $0.01 par value per share, of Merger Subsidiary (" Merger
Subsidiary Common Stock") (of which, as of the date hereof, 1,000 shares are
issued and outstanding, each entitling the holder thereof to vote on the
approval of this Agreement and the transactions contemplated hereby), shall be
converted into one fully paid and nonassessable share of Common Stock, $5 par
value, of the Surviving Corporation.
Section 2.2 Surrender of Shares.
(a) Deposit with Paying Agent. Prior to the Effective Time, the
Company and CEI shall mutually designate a bank or trust company to act as agent
(the " Paying Agent") for the holders of shares of Company Common Stock in
connection with the Merger to receive the funds to which holders of shares of
Company Common Stock shall become entitled pursuant to Section 2.1(a). From
time to time at, immediately prior to or after the Effective Time, CEI shall
make available to the Paying Agent immediately available funds in amounts and at
the times necessary for the payment of the Merger Consideration upon surrender
of Certificates (as defined in Section 2.2(b)) in accordance with Section
2.2(b), it being understood that any and all interest or other income earned on
funds made available to the Paying Agent pursuant to this Section 2.2(a) shall
belong to and shall be paid (at the time provided for in Section 2.2(d)) to CEI.
Any such funds deposited with the Paying Agent by CEI shall be invested by the
Paying Agent as directed by CEI.
(b) Exchange Procedure. As soon as practicable after the Effective
Time, the Paying Agent shall mail to each holder of record of a certificate or
certificates (the " Certificates") which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the " Cancelled Shares")
that were cancelled and became instead the right to receive the Merger
Consideration pursuant to Section 2.1: (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates to the
Paying Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate to the Paying Agent for cancellation (or to such other agent or
agents as may be appointed by agreement of CEI and the Company), together with a
duly executed letter of transmittal and such other documents as the Paying Agent
shall require, the holder of such Certificate shall be entitled to receive the
Merger Consideration in exchange for each share of Company Common Stock formerly
evidenced by such Certificate which such holder has the right to receive
pursuant to the provi-
sions of this Article II. In the event of a transfer of ownership of Cancelled
Shares which is not registered in the transfer records of the Company, the
Merger Consideration may be given to a transferee if the Certificate
representing such Cancelled Shares is presented to the Paying Agent, accompanied
by all documents required to evidence and effect such transfer and by evidence
satisfactory to the Paying Agent that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration as
contemplated by this Section 2.2. No interest shall be paid or will accrue on
the Merger Consideration payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) Closing of Transfer Books; Rights of Holders of Company Common
Stock. From and after the Effective Time, the stock transfer books of the
Company shall be closed and no registration of any transfer of any capital stock
of the Company shall thereafter be made on the records of the Company. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be cancelled and exchanged for the Merger Consideration, as provided
in this Section 2.2. From and after the Effective Time, the holders 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 herein or by applicable law.
(d) Termination of Paying Agent. At any time commencing one year
after the Effective Time, CEI shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of shares of Company Common Stock (including, without
limitation, all interest and other income received by the Paying Agent in
respect of all funds made available to it), and thereafter such holders shall be
entitled to look to CEI (subject to abandoned property, escheat and other
similar laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither CEI, the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a share of Company Common
Stock for any Merger Consideration delivered in respect of such share to a
public official pursuant to any abandoned property, escheat or other similar
law. If any Certificates shall not have been surrendered prior to the thirty-
first day of December in the fifth calender year after the Effective Time (or
immediately prior to such earlier date on which any payment pursuant to this
Article II would otherwise escheat to or become the property of any Governmental
Authority (as defined in Section 4.4(c))), the payment in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of CEI, free and clear of all claims or interest of any person (as
defined below) previously entitled thereto. As used in this Agreement, the term
" person" shall mean any natural person, corporation, general or limited
partnership, limited liability company, joint venture, trust, association or
entity of any kind.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the " Closing")
shall take place at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M., local time, on the second
business day immediately following the date on which the last of the conditions
set forth in Article VIII hereof is fulfilled or waived, or at such other time,
date and place as the Company and CEI shall mutually agree (the " Closing
Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered by the Company on
the date hereof (the "Company Disclosure Schedule") and making reference to the
particular subsection of this Agreement to which exception is being taken, the
Company represents and warrants to CEI as follows:
Section 4.1 Organization and Qualification. The Company and each of
the Company Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority, and has
been duly authorized by all necessary approvals and orders to own, lease and
operate its assets and properties to the extent owned, leased and operated and
to carry on its business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its assets and properties
makes such qualification necessary other than in such jurisdictions where the
failure so to qualify, individually or in the aggregate, would not have a
Company Material Adverse Effect. For purposes of this Agreement, "Company
Material Adverse Effect" shall mean any change, effect, event, occurrence or
state of facts (i) that is, or reasonably would be expected to be, materially
adverse to the business, assets, financial condition, results of operations or
prospects of the Company and the Company Subsidiaries taken as a whole or (ii)
that would prevent, or reasonably be expected to prevent, the Company from
performing its obligations under this Agreement or prevent the consummation of
the transactions contemplated hereby. As used in this Agreement, (a) the term "
Subsidiary" of a person shall mean any corporation or other entity (including
partnerships and other business associations) of which at least a majority of
the voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such corporation or
entity (or, if there are no such voting interests, 50% or more of the equity
interests of which) shall at the time be held, di-
rectly or indirectly, by such person, and (b) the term " Company Subsidiary"
shall mean a Subsidiary of the Company.
Section 4.2 Subsidiaries. Section 4.2 of the Company Disclosure
Schedule sets forth a list, as of the date hereof, of (a) all the Company
Subsidiaries and (b) all other entities in which the Company has an aggregate
equity investment in excess of $2 million. All of the issued and outstanding
shares of capital stock of each Company Subsidiary are validly issued, fully
paid, nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by the Company free and clear of any pledges, liens, claims,
encumbrances, security interests, charges and options of any nature whatsoever
(collectively, " Liens") and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of any such capital
stock) 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 Company 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 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 shares of Company Common
Stock, 1,000,000 shares of Cumulative Preferred Stock, issuable in series, par
value $100.00 per share (" Company Preferred Stock"), and 1,500,000 shares of
Cumulative Preference Stock, issuable in series, without par value (" Company
Preference Stock"). At the close of business on April 30, 1998, (i) 13,518,779
shares of Company Common Stock were issued and outstanding, and 16,931 shares of
Company Common Stock were reserved for conversion of Company Preference Stock,
(ii) 428,443 shares of Company Preferred Stock were issued and outstanding,
(iii) 11,518 shares of Company Preference Stock were issued and outstanding,
(iv) no bonds, debentures, notes or other indebtedness having the right to vote
(or convertible into securities having the right to vote) on any matters on
which stockholders may vote (" Voting Debt") were issued or outstanding and (v)
no shares of Company Common Stock were held by the Company in its treasury.
Since April 30, 1998, the Company has not issued any shares of Company Common
Stock or of any other class or series of capital stock or any Voting Debt, other
than shares of Company Common Stock issued upon conversion of Company Preference
Stock. As of the date hereof, all outstanding shares of Company Common Stock,
Company Preferred Stock and Company Preference Stock are validly issued, fully
paid and nonassessable and are not subject to preemptive rights. As of the
Closing Date, all outstanding shares of Company Common Stock will be validly
issued, fully paid and nonassessable and will not be subject to preemptive
rights. As of the date hereof, there are no options, warrants, calls, rights,
commitments or agreements of any character to which the Company or any Company
Subsidiary is a party or by which it is bound obligating the Company or any
Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or any Voting Debt securities of the
Company or any Company Subsidiary or obligating the Company or any
Company Subsidiary to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. At the Effective Time, there will be no
option, warrant, call, right, commitment or agreement obligating the Company or
any Company Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or any Voting Debt of the Company
or any Company Subsidiary, or obligating the Company or any Company Subsidiary
to grant, extend or enter into any such option, warrant, call, right, commitment
or agreement.
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. The Company has all requisite power and authority to
enter into this Agreement and, subject to the receipt of the Company
Shareholders' Approval (as defined in Section 4.14) and the applicable Company
Required Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to obtaining the Company Shareholders' Approval. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery hereof by the other signatories
hereto, constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms.
(b) Non-Contravention. The execution and delivery of this Agreement
by the Company does not, and the consummation of the transactions contemplated
hereby will not, in any respect, violate, conflict with or result in a breach of
any provision of, or constitute a default (with or without notice or lapse of
time or both) under, or result in the termination or modification of, or
accelerate the performance required by, or result in a right of termination,
cancellation or acceleration of any obligation, or the loss of a benefit under,
or result in the creation of any Lien upon any of the properties or assets of
the Company or any of the Company Subsidiaries (any such violation, conflict,
breach, default, right of termination, modification, cancellation or
acceleration, loss or creation is referred to herein as a " Violation" with
respect to the Company and such term when used in Article V has a correlative
meaning with respect to CEI) pursuant to any provisions of (i) the certificate
of incorporation, by-laws or similar governing documents of the Company or any
of the Company Subsidiaries, (ii) subject to obtaining the Company Required
Statutory Approvals and the receipt of the Company Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority applicable to the Company
or any of the Company Subsidiaries or any of their respective properties or
assets (other than (x) municipal consents and franchises and (y) immaterial
consents, approvals, orders, authorizations, actions, registrations,
declarations or filings, including with respect to communications systems,
zoning, name change, occupancy and similar routine regulatory approvals) or
(iii) subject to obtaining the third-party consents set forth in Section 4.4(b)
of the Company Disclosure Schedule (the " Company Required Consents"), any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, standstill agreement, contract, lease or other instrument,
obligation or agreement of any kind to which the Company or any of the Company
Subsidiaries is a party or by which they or any of their properties or assets
may be bound or affected (other than municipal consents or franchises), except
in the case of clause (iii) for any such Violation which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing, registration with,
notice to, authorization, permit, order, consent or approval (other than
immaterial consents, approvals, orders, authorizations, actions, registrations,
declarations or filings, including with respect to communications systems,
zoning, name change, occupancy and similar routine regulatory approvals) of, any
court, federal, state, local or foreign governmental, administrative, or
regulatory body (including a stock exchange or other self-regulatory body) or
authority (each, a " Governmental Authority") is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except those described in Section 4.4(c)
of the Company Disclosure Schedule (the " Company Required Statutory Approvals,"
it being understood that references in this Agreement to "obtaining" such
Company Required Statutory Approvals shall mean making such declarations,
filings or registrations; giving such notices; obtaining such authorizations,
permits, orders, consents or approvals; and having such waiting periods expire
as are necessary to avoid a violation of law).
(d) Compliance. Except as disclosed in the Company SEC Reports (as
defined in Section 4.5) filed prior to the date hereof, neither the Company nor
any of the Company Subsidiaries is in violation of, is, to the knowledge of the
Company, under investigation with respect to any violation of, or has been given
notice or been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
Environmental Law (as defined in Section 4.12(b)(ii))) of any Governmental
Authority, except for possible violations which individually or in the aggregate
would not have a Company Material Adverse Effect. Except as disclosed in the
Company SEC Reports filed prior to the date hereof, the Company and the Company
Subsidiaries have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their businesses as
presently conducted which are material to the operation of the businesses of the
Company and the Company Subsidiaries (other than certain municipal consents and
franchises). The Company and each of the Company Subsidiaries is not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default by the Company or any Company Subsidiary
under (i) their respective certificates of incorporation or by-laws or (ii) any
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is a party or by
which the Company or any Company Subsidiary is bound or to which any of their
respective properties or assets are subject, except in the case of this clause
(ii) for possible violations, breaches or defaults which individually or in the
aggregate would not have a Company Material Adverse Effect. All utility rates
charged
by the Company and its utility Subsidiaries have been and continue to be made
pursuant to lawfully filed tariffs and contracts.
Section 4.5 Reports and Financial Statements. (a) The filings (other
than immaterial filings) required to be made by the Company and the Company
Subsidiaries since January 1, 1993 under the Securities Act of 1933, as amended
(the " Securities Act"); the Securities Exchange Act of 1934, as amended (the "
Exchange Act"); the Public Utility Holding Company Act of 1935, as amended (the
" 1935 Act"); the Federal Power Act (the " Power Act"); and applicable state
public utility laws and regulations have been filed with the Securities and
Exchange Commission (the " SEC"), the Federal Energy Regulatory Commission (the
" FERC"), or the appropriate state public utilities commission, as the case may
be, including all forms, statements, reports, tariffs, contracts, agreements
(oral or written) and all documents, exhibits, amendments and supplements
appertaining thereto, and complied, as of their respective dates, in all
material respects with all applicable requirements of the applicable statutes
and the rules and regulations thereunder. The Company has made available to CEI
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed with the SEC by the Company pursuant to the
requirements of the Securities Act or Exchange Act since January 1, 1993 (the "
Company SEC Reports"). As of their respective dates, the Company SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements (including the notes thereto) of the Company included in the Company
SEC Reports (collectively, the " Company Financial Statements") have been
prepared in accordance with United States generally accepted accounting
principles (" GAAP") as applied to a regulated utility, applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q of the SEC) and fairly present the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal, recurring audit adjustments. True, accurate and complete copies of the
Restated Certificate of Incorporation and by-laws of the Company, as in effect
on the date hereof, are included (or incorporated by reference) in the Company
SEC Reports.
(b) Franchises. The Company and the Company utility Subsidiaries own or
have sufficient rights and consents to use under existing franchises, easements,
leases, and license agreements all properties, rights and assets necessary for
the conduct of their business and operations as currently conducted, except
where the failure to own or have sufficient rights to such properties, rights
and assets would not have, individually or in the aggregate, a Company Material
Adverse Effect. To the knowledge of the Company, no other private corporation
can commence public utility operations in any part of the territories now served
by the Company or its wholly owned utility Subsidiaries, Rockland Electric
Company ("RECO") and Pike County Light & Power Company ("Pike"), respectively,
without
obtaining a certificate of public convenience and necessity from the applicable
state utility commission.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Reports filed prior to the date hereof, since December 31,
1997, the Company and each of the Company Subsidiaries have conducted their
respective businesses only in the ordinary course of business consistent with
past practice and there has not been, and no fact or condition exists which,
individually or in the aggregate, would have a Company Material Adverse Effect.
From December 31, 1997 through the date hereof there has not been (i) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any capital stock of the
Company, other than (A) regular quarterly dividends of $.645 per share on
Company Common Stock and (B) dividends payable on Company Preferred Stock and
Company Preference Stock in accordance with their terms, (ii) any split,
combination or reclassification of any capital stock of the Company or any of
the Company Subsidiaries or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock of the Company or any of the Company Subsidiaries or (iii) except
insofar as required by a change in GAAP, any change in accounting methods,
principles or practices by the Company or any of the Company Subsidiaries
materially affecting their respective assets, liabilities or businesses.
Section 4.7 Litigation. There (a) are no claims, suits, actions or
proceedings before any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator, pending or, to the knowledge of
the Company, threatened, nor are there, to the knowledge of the Company, any
investigations or reviews by any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator pending or threatened
against, relating to or affecting the Company or any of the Company Subsidiaries
which, individually or in the aggregate, would have a Company Material Adverse
Effect, (b) have not been any significant developments since December 31, 1997
with respect to any disclosed claims, suits, actions, proceedings,
investigations or reviews that, individually or in the aggregate, would have a
Company Material Adverse Effect and (c) are no judgments, decrees, injunctions,
rules or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to the Company or any
of the Company Subsidiaries except for such that, individually or in the
aggregate, would not have a Company Material Adverse Effect.
Section 4.8 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 the proxy statement, in definitive form, relating to the meeting of
holders of Company Common Stock to be held in connection with the Merger (the "
Proxy Statement") will, at the date mailed to the Company shareholders and at
the time of the meeting of the holders of Company Common Stock to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
Section 4.9 Tax Matters.
Except as to any items that would not, individually or in the
aggregate, have a Company Material Adverse Effect:
(a) The Company and each of the Company Subsidiaries has (i)
filed all Federal, state, local and foreign income and other tax returns or
reports (including declarations of estimated tax) required to be filed by it,
(ii) paid all taxes of any nature whatsoever (together with any related
penalties and interest) (any of the foregoing being referred to herein as a "
Tax"), that are shown on such Tax returns as due and payable on or before the
date hereof, and (iii) paid all Taxes otherwise required to be paid.
(b) There are no claims or assessments pending against the
Company or any of the Company Subsidiaries for any alleged deficiency in Tax,
and the Company does not know of any threatened Tax claims or assessments
against the Company or any of the Company Subsidiaries.
(c) The Company has established adequate accruals for Taxes and
for any liability for deferred Taxes in the Company Financial Statements in
accordance with GAAP.
(d) There are no Liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of the Company or any Company Subsidiary.
(e) The Federal income Tax returns of the Company, each Company
Subsidiary and any affiliated, consolidated, combined or unitary group that
includes the Company or any Company Subsidiary either have been examined and
settled with the Internal Revenue Service or closed by virtue of the expiration
of the applicable statute of limitations for all years through 1994.
(f) None of the Company or any Company Subsidiary shall be
required to include in a taxable period ending after the Effective Time an
amount of taxable income attributable to income that accrued in a prior taxable
period but was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the long-term contract method of accounting, the cash method of accounting or
Section 481 of the Code or comparable provisions of state, local or foreign Tax
law.
(g) From December 31, 1997 through the date hereof, there have
not been any Tax elections, any settlements or compromises of any income Tax
liability or any changes in Tax attributes.
Section 4.10 Employee Matters; ERISA.
(a) Section 4.10(a) of the Company Disclosure Schedule hereto contains
a true and complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended (" ERISA")); each
profit-sharing, stock bonus or other "pension" plan, fund or program (within the
meaning of Section 3(2) of ERISA); each employment, retention, consulting,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by the Company or by any
trade or business, whether or not incorporated (an " ERISA Affiliate"), that
together with the Company would be deemed a "single employer" within the meaning
of Section 4001(b) of ERISA, or to which the Company or an ERISA Affiliate is
party, whether written or oral, for the benefit of any employee or former
employee of the Company or any Company Subsidiary (the " Company Plans").
(b) With respect to each Company Plan, the Company has heretofore
delivered or made available to CEI true and complete copies of each of the
following documents:
(i) a copy of the Company Plan and any amendments thereto;
(ii) a copy of the two most recent annual reports on Internal
Revenue Service Form 5500 and actuarial reports, if required under ERISA, and
the most recent report prepared with respect thereto in accordance with
Statement of Financial Accounting Standards No. 87;
(iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(iv) if the Company Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof and all related agreements; and
(v) the most recent determination letter or pending determination
letter received from the Internal Revenue Service with respect to each Company
Plan intended to qualify under Section 401 of the Internal Revenue Code of 1986,
as amended (the " Code").
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation (" PBGC") (which premiums
have been paid when due). No Company Plan has, to the knowledge of the Company,
engaged in a "prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA), no Company Plan subject to Title IV of ERISA (a " Title
IV Company Plan") has been terminated by the PBGC or has been the subject of a
"reportable event" (as defined in Section 4043 of ERISA and the regulations
thereunder) for which the 30-day notice requirement has not been waived and the
Company has not received any notice of intent by PBGC to terminate any such
plan.
(d) With respect to each Title IV Company Plan, the present value
of accrued benefits under such plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report prepared by such plan's
actuary with respect to such plan did not exceed, as of its latest valuation
date, the then current value of the assets of such plan allocable to such
accrued benefits.
(e) No Title IV Company Plan or any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each Title IV Company Plan ended prior to the
Closing Date nor has there been any application for waiver of the minimum
funding standards imposed by Section 412 of the Code. All contributions required
to be made with respect to any Company Plan on or prior to the Closing Date have
been timely made or are reflected on the balance sheet.
(f) No Title IV Company Plan is a "multiemployer plan", as defined
in Section 3(37) of ERISA, nor is any Title IV Company Plan a plan described in
Section 4063(a) of ERISA.
(g) Each Company Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code, the rules and regulations thereunder and all
applicable collective bargaining agreements and each Company Plan intended to be
"qualified" under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service to such effect. To the
knowledge of the Company, there is no fact, condition or set of circumstances
existing that could adversely affect such favorable determination. To the
Company's knowledge, there are no investigations pending in respect of any
Company Plan by any Governmental Authority.
(h) Each Company Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code.
(i) No Company Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees (or their beneficiaries) of the Company or any Company Subsidiary for
periods extending beyond their respective dates of retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary).
(j) No amounts payable under the Company Plans will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(k) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment, or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer. Schedule 4.10(k) of the Company
Disclosure Schedule sets forth estimates prepared by the Company of the amounts
reasonably expected to be paid to participants in any Company Plan (or by which
any of their benefits may be increased or accelerated) as a result solely of (i)
the execution of this Agreement, (ii) the obtaining of the Company Shareholders'
Approval and (iii) termination or constructive termination of any officer or
director's employment with the Company or any Company Subsidiary. For purposes
of the preceding sentence, the determination of the amounts set forth in
Schedule 4.10(k) is based upon each employee's current compensation, outstanding
awards and benefits accrued (as applicable) and on such other factors as the
Company, taking into account applicable law and regulations, deems reasonable
and appropriate.
(l) There are no pending, threatened or anticipated claims by or on
behalf of any Company Plan, by any employee or beneficiary covered under any
such Company Plan, or otherwise involving any such Company Plan (other than
routine claims for benefits).
Section 4.11 Labor and Employee Relations.
(a) As of the date hereof, except as disclosed in the Company SEC
Reports filed prior to the date hereof, (i) except for the existing collective
bargaining agreement between the Company and Local Union No. 503 of the
International Brotherhood of Electrical Workers effective June 1, 1997 through
May 31, 2000, neither the Company nor any of the Company Subsidiaries is a party
to any collective bargaining agreement or other labor agreement with any union
or labor organization and (ii) to the knowledge of the Company, there is no
current union representation question involving employees of the Company or any
of the Company Subsidiaries, nor does the Company know of any activity or
proceeding of any labor organization (or representative thereof) or employee
group to organize any such employees, except to the extent such, individually or
in the aggregate, would not have a Company Material Adverse Effect.
(b) Except as disclosed in the Company SEC Reports filed prior to the
date hereof or except to the extent such, individually or in the aggregate,
would not have a Company Material Adverse Effect, (i) there is no unfair labor
practice, employment discrimination or other charge, claim, suit, action or
proceeding against the Company or any of the Company Subsidiaries pending, or to
the knowledge of the Company, threatened before any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator,
(ii) there is no strike, lockout or material dispute, slowdown or work stoppage
pending or, to the knowledge of the Company, threatened against or involving the
Company, and (iii) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of the Company, threatened in respect
of which any director, officer, employee or agent of the Company or any of the
Company Subsidiaries is or may be entitled to claim indemnification from the
Company or such Company Subsidiary pursuant to their respective certificates of
incorporation or by-laws or as provided in the indemnification agreements listed
in Section 4.11(b) of the Company Disclosure Schedule or any other
indemnification agreements.
Section 4.12 Environmental Protection.
(a) Except as set forth in the Company SEC Reports filed prior to the
date hereof:
i.
(i) Compliance. The Company and each of the Company Subsidiaries
is in compliance with all applicable Environmental Laws except where the
failure to so comply, individually or in the aggregate, would not have a
Company Material Adverse Effect, and neither the Company nor any of the
Company Subsidiaries has received any communication (written or oral)
reasonably grounded in fact, from any person or Governmental Authority that
alleges that the Company or any of the Company Subsidiaries is not in such
compliance with applicable Environmental Laws. To the knowledge of the
Company, compliance with all applicable Environmental Laws will not require
the Company or any Company Subsidiary to incur costs, beyond those
currently budgeted for the three Company fiscal years beginning with
January 1, 1998, that, individually or in the aggregate, would have a
Company Material Adverse Effect, including, but not limited to, the costs
of pollution control equipment that are known or anticipated to be required
in the future.
(ii) Environmental Permits. (A) The Company and each of the
Company Subsidiaries has obtained or has applied for all environmental,
health and safety permits and governmental authorizations (collectively,
the " Environmental Permits") necessary for the construction of their
facilities or the conduct of their operations except where the failure to
so obtain, individually or in the aggregate, would not have a Company
Material Adverse Effect, (B) all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed
and is pending agency approval except where the failure of such
Environmental
Permits to be in good standing or to have filed a renewal application on a
timely basis would not, individually or in the aggregate, have a Company
Material Adverse Effect, (C) the Company and the Company Subsidiaries are
in material compliance with all terms and conditions of the Environmental
Permits, except where failure to so comply, individually or in the
aggregate, would not have a Company Material Adverse Effect and (D) neither
the Company nor any of the Company Subsidiaries has been advised by any
Governmental Authority of any potential change in the terms and conditions
of the Environmental Permits either prior to or upon their renewal, except
for such potential changes as would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(iii) Environmental Claims. There are no Environmental Claims
(as defined in Section 4.12(b)(i)) which would, individually or in the
aggregate, have a Company Material Adverse Effect pending or, to the
knowledge of the Company, threatened, (A) against the Company or any of the
Company Subsidiaries, (B) to the knowledge of the Company, against any
person or entity whose liability for any Environmental Claim the Company or
any of the Company Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (C) against any currently owned,
leased or managed, in whole or in part, real or personal property or
operations of the Company or any of the Company Subsidiaries or, to the
knowledge of the Company, against any formerly owned, leased or managed, in
whole or in part, real or personal property or operations of the Company or
any of the Company Subsidiaries.
(iv) Releases. The Company has no knowledge of any Releases (as
defined in Section 4.12(b)(iv)) of any Hazardous Material (as defined in
Section 4.12(b)(iii)) that would be reasonably likely to form the basis of
any Environmental Claim against the Company or any of the Company
Subsidiaries, or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries has or
may have retained or assumed either contractually or by operation of law
except for any Environmental Claim which, individually or in the aggregate,
would not have a Company Material Adverse Effect.
(v) Predecessors. The Company has no knowledge, with respect
to any predecessor of the Company or any of the Company Subsidiaries, of
any Environmental Claim which, individually or in the aggregate, would have
a Company Material Adverse Effect pending or threatened, or of any Release
of Hazardous Materials that would be reasonably likely to form the basis of
any Environmental Claim which, individually or in the aggregate, would have
a Company Material Adverse Effect.
(b) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person or entity (including any
Governmental Authority), alleging potential liability (including, without
limitation, potential responsibility for or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(A) the presence, Release or threatened Release into the environment of any
Hazardous Materials at any location, whether or not owned, operated, leased
or managed by the Company or any of the Company Subsidiaries; or (B)
circumstances forming the basis of any violation or alleged violation of
any Environmental Law or (C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials or the presence of or exposure to any electromagnetic fields.
(ii) "Environmental Laws" means all federal, state and local
laws, rules, regulations, orders, decrees, judgments or binding agreements
issued, promulgated or entered into by or with any Governmental Authority,
relating to pollution, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or protection of human health as it relates to the environment including,
without limitation, laws and regulations relating to noise levels, Releases
or threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation 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 the Company or any of the Company Subsidiaries
operates.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
Section 4.13 Regulation as a Utility. As of the date hereof, the
Company, pursuant to an order, dated March 27, 1936, of the SEC, has been
exempted, from all of the provisions of the 1935 Act, except Section 9(a)(2)
thereof relating to the acquisition of securities of other public utility
companies. The Company is regulated as a public utility in the State of New
York and in no other state. RECO is regulated as a public utility in the State
of New Jersey and in no other state. Pike is regulated as a public utility in
the State of Pennsylvania and in no other state. Except as set forth in this
Section neither the Company nor any "subsidiary company" or "affiliate" (as each
such term is defined in the ▇▇▇▇ ▇▇▇) of the Company is subject to regulation as
a public utility holding company, public utility or public service company (or
similar designation) by the Federal government of the United States, any other
state in the United States or any foreign country.
Section 4.14 Vote Required. Provided that the NYPSC approves the
Merger prior to the Effective Time, the approval of the Merger by the holders of
two-thirds of all outstanding shares of Company Common Stock (the " Company
Shareholders' Approval") is the only vote of the holders of any class or series
of the capital stock of the Company or any of the Company Subsidiaries required
to approve this Agreement, the Merger and the other transactions contemplated
hereby.
Section 4.15 State Anti-Takeover Statutes. Assuming the accuracy of
the representation of CEI set forth in Section 5.8, neither Section 912 nor
Article 16 of the NYBCL nor any provision of Article Eighth of the Company's
Restated Certificate of Incorporation is applicable to the transactions
contemplated by this Agreement. To the knowledge of the Company, no other state
anti-takeover statute is applicable to the Company's participation in the Merger
or in the other transactions contemplated hereby.
Section 4.16 Opinion of Financial Advisor. The Company has received
the opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation (" DLJ"),
dated the date hereof, to the effect that, as of the date hereof, the Merger
Consideration is fair from a financial point of view to the holders of Company
Common Stock.
Section 4.17 Insurance. The Company and each of the Company
Subsidiaries is, and has been continuously since January 1, 1993, insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary in all material respects for companies conducting the
business as conducted by the Company and the Company Subsidiaries during such
time period. Neither the Company nor any of the Company Subsidiaries has
received any notice of cancellation or termination with respect to any insurance
policy of the Company or any of the Company Subsidiaries. The insurance policies
of the Company and each of the Company Subsidiaries are valid and enforceable
policies.
Section 4.18 Discontinued Business . NORSTAR Management, Inc. and
its Subsidiaries and the business formerly conducted by them have ceased
operations (the " Discontinued Business") and, except for liabilities reflected
in the Company Financial
Statements, neither the Company nor any the Company Subsidiary, other than
NORSTAR Management, Inc. and its Subsidiaries, has any liabilities or
obligations with respect to such business and no creditor of the Discontinued
Business has any recourse against the Company or any Company Subsidiary other
than NORSTAR Management, Inc. and its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CEI
Except as set forth in the schedule delivered by CEI on the date
hereof (the " CEI Disclosure Schedule") and making reference to the particular
subsection of this Agreement to which exception is being taken, CEI represents
and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Each of CEI, Consolidated
Edison Company of New York, Inc., a New York corporation ( "CECONY"), and the
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority, and has been duly authorized by all
necessary approvals and orders to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its assets and properties makes such
qualification necessary other than in such jurisdictions where the failure so to
qualify, individually or in the aggregate, would not have a CEI Material Adverse
Effect. For purposes of this Agreement, "CEI Material Adverse Effect" shall mean
any change, effect, event, occurrence or state of facts (i) that is, or
reasonably would be expected to be, materially adverse to the business, assets,
financial condition, results of operations or prospects of CEI and its
Subsidiaries (the " CEI Subsidiaries") taken as a whole or (ii) that would
prevent, or reasonably be expected to prevent, CEI from performing its
obligations under this Agreement or prevent the consummation of the transactions
contemplated hereby.
Section 5.2 Authority; Non-Contravention; Statutory Approvals;
Compliance
(a) Authority. Each of CEI and the Merger Subsidiary has all
requisite power and authority to enter into this Agreement and, subject to the
receipt of the applicable CEI Required Statutory Approvals (as defined in
Section 5.2(c)), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by each of CEI and
the Merger Subsidiary of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of CEI and the Merger
Subsidiary. This Agreement has been duly and validly executed and delivered by
each of CEI and the Merger Subsidiary and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto, constitutes the
legal, valid and binding obligation of each of CEI and the Merger Subsidiary
enforceable against it in accordance with its terms.
(b) Non-Contravention. The execution and delivery of this
Agreement by CEI and the Merger Subsidiary does not, and the consummation of the
transactions contemplated hereby will not, result in a Violation pursuant to any
provisions of (i) the certificate of incorporation, by-laws or similar governing
documents of CEI or the Merger Subsidiary, (ii) subject to obtaining the CEI
Required Statutory Approvals, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any Governmental
Authority applicable to CEI or the Merger Subsidiary or any of their respective
properties or assets (other than immaterial consents, approvals, orders,
authorizations, actions, registrations, declarations or filings, including with
respect to communications systems, zoning, name change, occupancy and similar
routine regulatory approvals) or (iii) any material note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, standstill
agreement, contract, lease or other instrument, obligation or agreement of any
kind to which CEI or the Merger Subsidiary is a party or by which they or any of
their respective properties or assets may be bound or affected, except in the
case of clause (iii) for any such Violation which, individually or in the
aggregate, would not have a CEI Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration
with, notice to, authorization, permit, order, consent or approval (other than
immaterial consents, approvals, orders, authorizations, actions, registrations,
declarations or filings, including with respect to communications systems,
zoning, name change, occupancy and similar routine regulatory approvals) of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by each of CEI and the Merger Subsidiary or the consummation by each
of CEI and the Merger Subsidiary of the transactions contemplated hereby, except
those described in Section 5.2(c) of the CEI Disclosure Schedule (the " CEI
Required Statutory Approvals," it being understood that references in this
Agreement to "obtaining" such CEI Required Statutory Approvals shall mean making
such declarations, filings or registrations; giving such notices; obtaining such
authorizations, permits, orders, consents
or approvals; and having such waiting periods expire as are necessary to avoid a
violation of law).
(d) Compliance. Except as disclosed in CEI SEC Reports (as defined in
Section 5.3) filed prior to the date hereof, neither CEI nor the Merger
Subsidiary is in violation of, is under investigation with respect to any
violation of, or has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable Environmental Law) of any Governmental
Authority, which would prevent CEI from consummating the transactions
contemplated by this Agreement.
Section 5.3 Litigation. Except as disclosed in each report,
schedule, registration statement and definitive proxy statement filed with the
SEC by CEI or CECONY pursuant to the requirements of the Securities Act or
Exchange Act since January 1, 1993 (as such documents have since the time of
their filing been amended, the "CEI SEC Reports") filed prior to the date
hereof, there are no claims, suits, actions or proceedings by any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator, pending or, to the knowledge of CEI, threatened, nor are there, to
the knowledge of CEI, any investigations or reviews by any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
pending or threatened against relating to or affecting CEI or the Merger
Subsidiary which, in each case, would prevent CEI from consummating the
transactions contemplated by this Agreement.
Section 5.4 Proxy Statement. None of the information supplied or to
be supplied by or on behalf of CEI for inclusion or incorporation by reference
in the Proxy Statement will, at the date mailed to the Company shareholders and
at the time of the meeting of the holders of Company Common Stock to be held in
connection with the Merger, 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.
Section 5.5 Regulation as a Utility. As of the date hereof, neither
CEI nor any "subsidiary company" or "affiliate" (as each such term is defined in
the ▇▇▇▇ ▇▇▇) of CEI is subject to regulation as a public utility holding
company, public utility or public service company (or similar designation) by
the Federal government of the United States, any state in the United States or
any foreign country.
Section 5.6 No Vote Required. No vote of holders of any class or
series of the capital stock of CEI is necessary to approve this Agreement, the
Merger or the other transactions contemplated hereby.
Section 5.7 Financing. CEI has or will have available, prior to the
Effective Time, sufficient cash in immediately available funds to pay the Merger
Consideration pursu-
ant to Article II hereof and to consummate the Merger and the other transactions
contemplated hereby.
Section 5.8 Ownership of Company Common Stock. As of the date
hereof, neither CEI nor any of its Affiliates (excluding for such purposes
officers and directors of CEI and the CEI Subsidiaries) (i) beneficially owns
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of the Company.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Except as set forth in the Company Disclosure Schedule and making
references to the particular subsection of this Agreement to which exception is
being taken:
Section 6.1 Covenants of the Company. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, the
Company agrees as follows, each as to itself and to each of the Company
Subsidiaries, except as expressly contemplated or permitted in this Agreement or
to the extent CEI shall otherwise consent in writing, which decision regarding
consent shall be made as soon as reasonably practical:
(a) Ordinary Course of Business. The Company shall, and shall cause
the Company Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable laws
and regulations and use all commercially reasonable efforts to preserve intact
their respective present business organizations and goodwill, preserve the
goodwill and relationships with customers, suppliers and others having business
dealings with them and, subject to prudent management of work force needs and
ongoing programs currently in force, keep available the services of their
respective present officers and employees, provided, however, (i) that nothing
shall prohibit the Company from divesting its generation assets in accordance
with terms that are equivalent in all material respects to the terms in the
Order Adopting Terms of Settlement with the New York State Public Service
Commission, issued and effective November 26, 1997 (the " Settlement Agreement")
and the Final Divestiture Plan dated February 3, 1998 and the Order Authorizing
the Process For Auctioning of Generation Plant and Rejecting Joint Agreement,
issued and effective April 16, 1998 (collectively, the " Final Divestiture
Plan") and (ii) neither the Company nor any Company Subsidiary shall enter into
any new line of business. Notwithstanding the above and notwithstanding any
other provision in Section 6.1 (other than Section 6.1(l)), the Company and any
of the Company Subsidiaries may make equity infusions into a Company Subsidiary
(other than NORSTAR Management, Inc. and its Subsidiaries) (i) to the extent
required by law or a state regulatory commission or (ii) to the extent
that equity infusions into the Company Subsidiaries do not exceed $10 million in
the aggregate.
(b) Dividends. The Company shall not, and shall not permit any of the
Company Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of their respective capital stock other than to
the Company or the Company Subsidiaries and other than regular quarterly
dividends on Company Common Stock with usual record and payment dates not,
during any period of any fiscal year, in excess of the dividends for the
comparable period of the prior fiscal year, (ii) split, combine or reclassify
any of their respective capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of their respective capital stock or (iii) redeem, repurchase or
otherwise acquire any shares of their respective capital stock, other than (A)
redemptions, purchases or acquisitions required by the respective terms of any
series of Company Preferred Stock or Company Preference Stock, or (B) for the
purpose of funding employee stock ownership plans and dividend reinvestment
programs in accordance with past practice. Notwithstanding the foregoing, the
Company may redeem Company Preferred Stock pursuant to the provisions of Section
2.1(c) and the Company may redeem Company Preference Stock pursuant to the
provisions of Section 2.1(d). The last record date of the Company on or prior
to the Effective Time which relates to a regular quarterly dividend on Company
Common Stock shall be prior to the Effective Time.
(c) Issuance of Securities. The Company shall not, and shall not permit
any of the Company Subsidiaries to, issue, agree to issue, deliver, sell, award,
pledge, dispose of or otherwise encumber or authorize or propose the issuance,
delivery, sale, award, pledge, disposal or other encumbrance of, any shares of
their capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or convertible or exchangeable securities, other than any issuances of capital
stock of any Company Subsidiary to the Company or any wholly-owned Company
Subsidiary (other than, in each case, NORSTAR Management, Inc. and its
Subsidiaries).
(d) Charter Documents. The Company shall not amend or propose to amend
its Restated Certificate of Incorporation or by-laws or other comparable
organizational documents of any Company Subsidiary.
(e) No Acquisitions. The Company shall not, nor shall the Company
permit any of the Company Subsidiaries to: (i) acquire, or publicly propose to
acquire, or agree to acquire, by merger or consolidation with, or by purchase or
otherwise, an equity interest in or a substantial portion of the assets of, any
business or any corporation, partnership, association or other business
organization or division thereof, or (ii) otherwise acquire or agree to acquire
a material amount of assets, except in the case of this clause (ii) only, in the
ordinary course of business consistent with past practice or (iii) alter
(through merger, liquidation, reorganization, restructuring or in any other
fashion) the corporate structures or ownership of the Company or any of the
Company Subsidiaries.
(f) No Dispositions. Except (i) for the Company divesting its generation
assets in accordance with the terms and conditions set forth in the Settlement
Agreement and the Final Divestiture Plan, (ii) for Clove Development
Corporation, a wholly owned subsidiary of the Company, divesting at fair market
value, its real estate, primarily located in ▇▇▇▇▇▇▇▇ County, New York, (iii)
for O&R Energy Development, Inc., a wholly owned subsidiary of the Company,
divesting at fair market value its real estate, primarily located in Orange
County, New York, and (iv) for the Company or the Company Subsidiaries making
dispositions at fair market value of less than $10 million in sales price and
indebtedness assumed by the acquiring party and its Affiliates, singularly or in
the aggregate during any fiscal year, the Company shall not, nor shall the
Company permit any of the Company Subsidiaries to, sell or dispose of any of
their respective assets other than dispositions in the ordinary course of its
business consistent with past practice. As used in this Agreement, the term "
Affiliate," except where otherwise defined herein, shall mean, as to any person,
any other person which directly or indirectly controls, or is under common
control with, or is controlled by, such person. As used in this definition, "
control" (including, with its correlative meanings, "controlled by" and "under
common control with") shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise). The Company (i) shall consult with CEI with respect to
significant decisions relating to the divestiture of the generation assets and
transactions in connection therewith prior to taking any action with respect to
any such decision or entering into any such transaction and (ii) shall take into
account the views of CEI with respect to such action or transaction. The
Company shall use its best efforts to enter into a definitive agreement to
divest its generation assets in accordance with the Settlement Agreement and the
Final Divestiture Plan on or prior to May 1, 1999 and use its best efforts to
consummate the divestiture of its generation assets as soon as practicable after
entering into such agreement. The Company shall conduct such divestiture on
terms that are equivalent in all material respects to the terms set forth in the
Final Divestiture Plan, including divesting all liabilities, arising out of,
related to or otherwise associated with such generation assets, including all
environmental liabilities (other than environmental liabilities relating to off-
site storage or disposal of Hazardous Materials associated with the generating
assets) and all liabilities with respect to fuel purchase contracts relating to
such generation assets. Unless ordered pursuant to law or regulation, the
Company shall not materially modify or amend, or propose to enter into any
agreement to modify or amend the Settlement Agreement or the Final Divestiture
Plan or conduct any negotiations with the NYPSC or any other Governmental
Authority in connection with any such proposed modification or amendment. If so
ordered, the Company shall consult with CEI prior to taking or agreeing to take
any such action. The Company and the Company Subsidiaries shall not pay out,
distribute, invest (except that the Company and the Company Subsidiaries may
invest in the ordinary course of business in a manner that would not otherwise
be prohibited by any of the provisions of this Section 6.1) or otherwise make
use of the proceeds resulting from the divestiture of its generation assets
except as expressly permitted by the provisions of this Section 6.1.
(g) Cooperation, Notification. The Company shall (i) confer on a regular
and frequent basis with one or more representatives of CEI to discuss, subject
to applicable law, material operational matters and the general status of its
ongoing operations, (ii) promptly notify CEI of any significant changes in its
business, properties, assets, condition (financial or other), results of
operations or prospects, (iii) promptly notify CEI of property sales by the
Company Subsidiaries in excess of $10 million and shall discuss with CEI use of
proceeds from such sales to the extent that such proceeds exceed $10 million,
(iv) promptly advise CEI of (A) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect, (B) the
failure by it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement and (C) any change or event which, individually or in
the aggregate, has had or would have a Company Material Adverse Effect
(provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement) and (v) promptly provide CEI with copies of all filings made by the
Company or any of the Company Subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
(h) Third-Party Consents. The Company shall, and shall cause the
Company Subsidiaries to, use all reasonable best efforts to obtain all Company
Required Consents. The Company shall promptly notify CEI of any failure or
prospective failure to obtain any such consents and, if requested by CEI, shall
provide copies of all Company Required Consents obtained by the Company to CEI.
(i) No Breach, Etc. The Company shall not, and the Company shall not
permit any of the Company Subsidiaries to, voluntarily take any action that
would or is reasonably likely to result in a material breach of any provision of
this Agreement or in any of its representations and warranties set forth in this
Agreement being untrue on and as of the Closing Date.
(j) Tax-Exempt Status. The Company shall not, and the Company shall
not permit any of the Company Subsidiaries to, take any action that would likely
jeopardize the qualification of the Company's outstanding revenue bonds which
qualify on the date hereof under Section 142(a) of the Code as "exempt facility
bonds" or as tax-exempt pollution control bonds under Section 103(b) (4) of the
Internal Revenue Code of 1954, as amended, prior to the Tax Reform Act of 1986.
(k) Tax Matters. The Company shall not (i) make or rescind any
material express or deemed election relating to Taxes without the prior written
consent of CEI, which consent shall not be unreasonably withheld, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes without the prior written consent of CEI or (iii) change in any material
respect any of its methods of reporting income or deductions for federal income
tax purposes from those employed in the preparation of its federal income tax
return for the taxable year ending December 31, 1996, except as may be required
by applicable law.
(l) Capital Expenditures. Except (i) as required by law, or (ii) as
reasonably deemed necessary by the Company after consulting with CEI following a
catastrophic event, such as a major storm, the Company shall not, and the
Company shall not permit any of the Company Subsidiaries to, make capital
expenditures during any fiscal year in excess of 110% of the amount budgeted for
such fiscal year by the Company for capital expenditures.
(m) Indebtedness. The Company shall not, and the Company shall not
permit any of the Company Subsidiaries to, incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise assumed including,
without limitation, the issuance of debt securities or warrants or rights to
acquire debt) or enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or entity or enter into any
arrangement having the economic effect of any of the foregoing other than (i)
short-term indebtedness in the ordinary course of business consistent with past
practice (such as the issuance of commercial paper, the use of credit facilities
existing as of the date hereof or hedging activities undertaken in order to
hedge a balance sheet asset or liability and not for speculative purposes), (ii)
guarantees or "keep well" or other agreements in favor of wholly-owned
Subsidiaries (other than NORSTAR Management, Inc. and its Subsidiaries) in the
ordinary course of business consistent with past practice and not aggregating
more than $5 million, (iii) other indebtedness or "keep well" or other
agreements not aggregating more than $5 million, (iv) arrangements between the
Company and the wholly-owned Company Subsidiaries (other than NORSTAR
Management, Inc. and its Subsidiaries) or among the wholly-owned Company
Subsidiaries (other than NORSTAR Management, Inc. and its Subsidiaries), (v) in
connection with the refunding of existing long-term indebtedness at maturity or
at a lower cost of funds, (vi) in connection with the redemption of Company
Preferred Stock as set forth in Section 2.1(c), (vii) in connection with the
redemption of Company Preference Stock as set forth in Section 2.1(d), (viii) as
may be necessary in connection with capital expenditures permitted by Section
6.1(l).
(n) Compensation, Benefits. Except as may be required by applicable
law, the Company shall not, and the Company shall not permit any of the Company
Subsidiaries to, (i) enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under, any
Company Plan or any other employee benefit plan or other contract, agreement,
commitment, arrangement, plan, trust, fund or policy maintained by, contributed
to or entered into by the Company or any of the Company Subsidiaries (other than
any adoption or amendment to, or change of, any Company Plan that, individually
or in the aggregate, does not result in any material expense to the Company and
the Company Subsidiaries taken as a whole); (ii) increase, or enter into any
contract, agreement, commitment or arrangement to increase in any manner, the
com-
pensation or fringe benefits, or otherwise to extend, expand or enhance the
engagement, employment or any related rights, of any director, officer or other
employee of the Company or any of the Company Subsidiaries, except for normal
promotion and compensation (including incentive compensation) increases and
hiring and discretionary award grants in the ordinary course of business that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company or any of the Company Subsidiaries; (iii)
enter into or amend any employment, severance, retention, consulting or special
pay arrangement with respect to the termination of employment or other similar
contract, agreement or arrangement with any director or officer or other
employee other than, with respect only to employees who are not officers or
directors, in the ordinary course of business consistent with past practice or
(iv) enter into any collective bargaining agreement or other labor union
contract or written agreement or amend in any material manner any such agreement
or contract to which the Company or any of the Company Subsidiaries is a party,
except as required by law, in which case the Company shall consult with CEI
prior to taking any required action.
(o) 1935 Act. The Company shall not, and the Company shall not permit
any of the Company Subsidiaries to engage in any activities which would cause a
change in its status, or that of the Company Subsidiaries, under the 1935 Act.
(p) Accounting. The Company shall not, and the Company shall not permit
any of the Company Subsidiaries to, make any changes in their accounting
methods, except as required by law, rule, regulation or GAAP.
(q) Affiliate Transactions. Subject to the other restrictions set forth
in this Section 6.1, the Company shall not permit any of the Company
Subsidiaries to, enter into any material agreement or arrangement with any of
their respective Affiliates (except wholly owned Subsidiaries other than NORSTAR
Management, Inc. and its Subsidiaries), on terms materially less favorable to
such party than could be reasonably expected to have been obtained with an
unaffiliated third-party on an arm's length basis.
(r) Rate Matters. Subject to applicable law, the Company shall, and
shall cause the Company Subsidiaries to, (i) discuss with CEI any changes in its
or the Company Subsidiaries' rates or the services it provides or charges (other
than pass-through fuel and gas rates or charges), standards of service or
accounting from those in effect on the date hereof, and obtain CEI's approval
prior to proposing, agreeing to or making any material changes with respect
thereto and (ii) subject to the preceding clause (i), consult with CEI prior to
making any filing (or any amendment thereto), or effecting any agreement,
commitment, arrangement or consent with governmental regulators, whether written
or oral, formal or informal, with respect thereto. The Company will consult with
CEI before making any filing to change its rates or the services it provides on
file with the FERC that would have a material adverse effect on the benefits
associated with the business combination provided for herein.
(s) Contracts. The Company shall not, and the Company shall not permit
any of the Company Subsidiaries to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail to use
reasonable business efforts to renew any contract or agreement to which the
Company or the Company Subsidiary is a party, which is material to the Company
and the Company Subsidiaries taken as a whole, or waive, release or assign any
material rights or claims therein.
(t) Insurance. The Company shall, and shall cause the Company
Subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are customary for
companies engaged in the electric and gas utility industry and employing methods
of generating electric power and fuel sources similar to those methods employed
and fuels used by the Company or the Company Subsidiaries.
(u) Permits. The Company shall, and shall cause the Company Subsidiaries
to, use reasonable efforts to maintain in effect all existing governmental
permits which are material to the operations of the Company or the Company
Subsidiaries.
(v) Discharge of Liabilities. The Company shall not, and the Company
shall not permit any of the Company Subsidiaries to, pay, discharge, settle,
compromise or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise) material to the Company and the
Company Subsidiaries taken as a whole, other than the payment, discharge,
settlement, compromise or satisfaction, in the ordinary course of business
consistent with past practice (which includes the payment of final and
unappealable judgments) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of the Company SEC
Reports filed prior to the date hereof, or incurred in the ordinary course of
business consistent with past practice.
Section 6.2 Covenants of CEI . After the date hereof and prior to the
Effective Time or earlier termination of this Agreement, CEI agrees as follows,
as to itself and to each of CEI Subsidiaries, except to the extent the Company
shall otherwise consent in writing, which decision regarding consent shall be
made as soon as reasonably practical:
(a) Cooperation, Notification. CEI shall (i) promptly advise the Company
of (A) any representation or warranty made by it contained in this Agreement
that is qualified as to materiality becoming untrue or inaccurate in any respect
or any such representation or warranty that is not so qualified becoming untrue
or inaccurate in any material respect and (B) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement
(provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement) and (ii) promptly provide the Company with copies of all filings made
by CEI or any of CEI Subsidiaries with
any state or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby.
(b) No Breach, Etc. CEI shall not and CEI shall not permit any of
the CEI Subsidiaries to, voluntarily take any action that would or is reasonably
likely to result in a material breach of any provision of this Agreement or in
any of its representations and warranties set forth in this Agreement being
untrue on and as of the Closing Date.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to the Company's Information. Upon reasonable
notice, the Company shall, and shall cause the Company Subsidiaries to, afford
to the officers, directors, employees, accountants, counsel, investment bankers,
financial advisors and other representatives (collectively, " Representatives")
of CEI reasonable access, during normal business hours throughout the period
prior to the Effective Time, to all of its properties, books, contracts,
commitments and records (including, but not limited to, tax returns) and, during
such period, the Company shall, and shall cause the Company Subsidiaries to,
furnish promptly to CEI and its Representatives (i) access to each report,
schedule and other document filed or received by the Company or any of the
Company Subsidiaries pursuant to the requirements of federal or state securities
laws or filed with or sent to the SEC, the FERC, the Department of Justice, the
Federal Trade Commission, the New York Department of Environmental Conservation
or any other federal or state regulatory agency or commission and (ii) access to
all information concerning the Company, the Company Subsidiaries, and their
respective directors, officers and shareholders and such other matters as may be
reasonably requested by CEI or its Representatives in connection with any
filings, applications or approvals required or contemplated by this Agreement or
for any other reason related to the transactions contemplated by this Agreement.
Subject to obtaining customary indemnities, the parties shall promptly furnish
to each other such information as may be reasonably requested, including audited
financial statements and other financial information, and take such other action
as may be reasonably necessary and otherwise fully cooperate with each other in
the preparation of any registration statement under the Securities Act and other
documents necessary in connection with the issuance of securities (subject to
Section 6.1(c) and 6.1(m) in the case of issuances by the Company or any Company
Subsidiary). Each party shall, and shall cause its Subsidiaries and
Representatives to, hold in strict confidence all documents and information
concerning the other furnished to it in connection with the transactions
contemplated by this Agreement in accordance with the Confidentiality Agreement,
dated December 17, 1997, between the Company and CEI (the " Confidentiality
Agreement"). No review pursuant to this Section 7.1 shall have an effect for
the purpose of determining the accuracy of any representation or warranty given
by any of the parties hereto to any of the other parties hereto.
Section 7.2 Proxy Statement. The parties will prepare and file with
the SEC as soon as practicable after the date hereof the Proxy Statement. Each
of the parties hereto shall furnish all information concerning itself which is
required or customary for inclusion in the Proxy Statement. The information
provided by any party hereto for use in the Proxy Statement shall be true and
correct in all material respects without omission of any material fact which is
required to make such information not false or misleading. No representation,
covenant or agreement is made by any party hereto with respect to information
supplied by any other party for inclusion in the Proxy Statement. No filing of,
or amendment or supplement to, the Proxy Statement will be made by the Company
without providing CEI with the opportunity to review and comment thereon. If at
any time prior to the Effective Time any information relating to the Company or
CEI, or any of their respective Affiliates, officers or directors, should be
discovered by the Company or CEI which should be set forth in an amendment or
supplement to the Proxy Statement, so that the Proxy Statement would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of the Company.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall, as soon as practicable
after the date hereof, file or cause to be filed with the Federal Trade
Commission and the Department of Justice any notifications required to be filed
by their respective "ultimate parent" companies under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the " HSR Act"), and the rules
and regulations promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use their reasonable best efforts to
respond on a timely basis to any requests for additional information made by
either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate
and use its reasonable best efforts to promptly prepare and file all necessary
documentation and to effect all necessary applications, notices, petitions,
filings and other documents and use its reasonable best efforts to obtain all
necessary permits, consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to obtain the Company Required Statutory
Approvals and CEI Required Statutory Approvals; provided, however, that the
Company shall not be required to take any action in connection with the
obtaining of such permits, consents, approvals and authorizations that would
have, or, insofar as reasonably can be foreseen, is likely to have, a Company
Material Adverse Effect and CEI shall not be required to take any action in
connection with the obtaining of such permits, consents, approvals and
authorizations that would have, or, insofar as reasonably can be
foreseen, is likely to have a CEI Material Adverse Effect or a Company Material
Adverse Effect.
(c) For each facility that is potentially an "industrial
establishment" (as that term is defined by the New Jersey Industrial Site
Recovery Act (" ISRA")) and is owned or operated by the Company or a Company
Subsidiary that is subject to ISRA as a result of this Agreement, the Company or
the Company Subsidiary that owns or operates such facility shall, prior to the
Closing Date, obtain a written determination from the New Jersey Department of
Environmental Protection that such facility is not an industrial establishment,
or that such facility is otherwise exempted or excluded from coverage under ISRA
(collectively a " non-applicability determination") and with respect to any
facility for which a non-applicability determination cannot be obtained, either
(i) obtain an approved Negative Declaration or No Further Action Letter (as such
terms are defined by ISRA); (ii) obtain an approved Remedial Action Workplan (as
such term is defined by ISRA); or (iii), if a Negative Declaration, No Further
Action Letter, or approved Remedial Action Workplan cannot be obtained prior to
the Closing Date, obtain and execute a Remediation Agreement permitting the
consummation of the transactions contemplated by this Agreement. The Company
shall provide to CEI all relevant correspondence, data and submissions to or
from the New Jersey Department of Environmental Protection.
Section 7.4 Approval of the Company Shareholders. The Company shall,
as soon as practicable after the date hereof (i) take all steps necessary to
duly call, give notice of, convene and hold a meeting of its shareholders (the "
Company Meeting") for the purpose of securing the Company Shareholders'
Approval, (ii) distribute to its shareholders the Proxy Statement in accordance
with applicable federal and state law and with its Restated Certificate of
Incorporation and by-laws, (iii) subject to Section 7.10, recommend to its
shareholders the approval of the Merger, this Agreement and the transactions
contemplated hereby and (iv) cooperate and consult with CEI with respect to each
of the foregoing matters. Without limiting the generality of the foregoing but
subject to its rights to terminate this Agreement pursuant to Section 9.1(g),
the Company agrees that its obligations pursuant to the first sentence of this
Section 7.4 shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any Acquisition Proposal.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof, or who becomes prior
to the Effective Time, (x) an officer or director or (y) an employee covered as
of the date hereof (to the extent of the coverage extended as of the date
hereof) of any of the Company or any Company Subsidiary (each an " Indemnified
Party" and collectively, the " Indemnified Parties") against (i) all losses,
expenses (including reasonable attorney's fees and expenses), claims, damages or
liabilities or, subject to the first proviso of the next succeeding sentence,
amounts paid in settlement, arising out of actions or omissions occurring at or
prior to the Effective Time (and whether asserted or claimed prior to, at or
after the Effective Time) that are, in whole or in part, based on or arising out
of the fact that such person is or was a director, officer or employee of the
Company or any Company Subsidiary (the " Indemnified Liabilities"), and (ii) all
Indemnified Liabilities to the extent they are based on or arise out of or
pertain to the transactions contemplated by this Agreement, in each case, to the
extent permitted by Section 722(a) of the NYBCL. In the event of any such loss,
expense, claim, damage or liability (whether or not arising before the Effective
Time), (i) the Surviving Corporation shall pay the reasonable fees and expenses
of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Surviving Corporation, promptly after statements
therefor are received and otherwise advance to such Indemnified Party upon
request, reimbursement of documented expenses reasonably incurred, in either
case to the extent not prohibited by the NYBCL upon receipt of an undertaking by
or on behalf of such director or officer to repay such amounts as and to the
extent required by the NYBCL, (ii) the Surviving Corporation will cooperate in
the defense of any such matter and (iii) any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the NYBCL and the certificate of incorporation or by-
laws of the Surviving Corporation shall be made by independent counsel mutually
acceptable to the Surviving Corporation and the Indemnified Party; provided,
however, that the Surviving Corporation shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld) and provided further that no indemnification shall be made if such
indemnification is prohibited by the proviso to the first sentence of Section
721 of the NYBCL. The Indemnified Parties as a group may retain only one law
firm with respect to each related matter except to the extent that such law firm
would have, in the opinion of such law firm, under applicable standards of
professional conduct then prevailing under the laws of the State of New York, a
conflict of interest in representing any particular Indemnified Party.
(b) Insurance. For a period of six years after the Effective Time,
the Surviving Corporation shall cause to be maintained in effect policies of
directors and officers' liability insurance equivalent to those maintained by
the Company prior to the Effective Time
for the benefit of those persons who are currently covered by such policies on
terms no less favorable than the terms of such current insurance coverage.
(c) Successors. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation, as applicable, shall assume the obligations set forth in
this Section 7.5.
(d) Survival of Indemnification. To the fullest extent permitted by
law, from and after the Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of the
Company and the Company Subsidiaries with respect to their activities as such
prior to the Effective Time, as provided in their respective certificates of
incorporation and by-laws in effect on the date hereof, or otherwise in effect
on the date hereof, shall survive the Merger and shall continue in full force
and effect for a period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 7.6 Public Announcements. Subject to each party's disclosure
obligations imposed by law, the Company and CEI will cooperate with each other
in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without the consent of the other party
(which consent shall not be unreasonably withheld).
Section 7.7 Standstill Agreements; Confidentiality Agreements. Except
for the Company's ability to enter into, amend, modify, waive any provision of,
enforce and terminate, if necessary, the confidentiality agreements relating to
the sale of the generation assets, (i) during the period from the date of this
Agreement through the Effective Time, the Company shall not, and shall not
permit any Company Subsidiary, to terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any
Company Subsidiary is a party and (ii) during such period, the Company shall
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreement, including by obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions thereof
in any court of the United States of America or of any state having
jurisdiction.
Section 7.8 Employee Agreements and Workforce Matters.
(a) Certain Employee Agreements. CEI shall cause the Surviving
Corporation and its Subsidiaries to honor all collective bargaining agreements
in effect as of the date hereof, and, subject to Section 7.9, CEI shall cause
the Surviving Corporation and its Subsidiaries to honor all contracts,
agreements and commitments (including all Company Plans) of the Company as in
effect on the date hereof that apply to any current or former employee or
current or former director of the Company; provided, however, that this
undertaking is not intended to prevent CEI or the Surviving Corporation and its
Subsidiaries from exercising their rights with respect to such contracts,
agreements, collective bargaining agreements and commitments in accordance with
their terms, including, without limitation, any right to amend, modify, suspend,
revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment or portion thereof.
(b) Workforce Matters. Subject to applicable law and obligations under
applicable collective bargaining agreements, for a period of 3 years following
the Effective Time, any reductions in workforce in respect of employees of the
Surviving Corporation and its Subsidiaries shall be made on a fair and equitable
basis as determined by the Surviving Corporation, without regard to whether
employment was with the Company or the Company Subsidiaries or CEI or CEI
Subsidiaries and with due consideration to prior experience and skills, and any
employee whose employment is terminated or job is eliminated during such period
shall be entitled to participate on a fair and equitable basis as determined by
CEI or the Surviving Corporation in the job opportunity and employment placement
programs offered by CEI or the Surviving Corporation or any of their
Subsidiaries for which they are eligible. Any workforce reductions carried out
following the Effective Time by the Surviving Corporation and its Subsidiaries
shall be done in accordance with all applicable collective bargaining agreements
and all laws and regulations governing the employment relationship and
termination thereof including, without limitation, the Worker Adjustment and
Retraining Notification Act and regulations promulgated thereunder, and any
comparable state or local law.
Section 7.9 Employee Benefit Plans.
(a) Service Credit. All service under any Company Plan that was
recognized, accrued or credited under such Company Plan immediately preceding
the Effective Time shall continue to be recognized, accrued or credited for all
relevant purposes under such Company Plan as of and at all times following the
Effective Time. Subject to obligations under applicable law and applicable
collective bargaining agreements, all employees of the Company and its
Subsidiaries who were employees immediately prior to the Effective Time (the "
Affected Employees") shall be given credit for all service with the Company or
its Subsidiaries (and service credited by the Company or such Subsidiary), to
the same extent as such service was credited for such purpose by the Company or
such Subsidiary, under (a) all employee benefit plans, programs and policies,
and fringe benefits of CEI or
the Surviving Corporation (if any) in which they first become participants on or
after the Effective Time, for purposes of eligibility and vesting but not for
benefit accrual purposes or eligibility for early retirement purposes under
defined benefit pension plans and not to the extent crediting such service would
result in duplication of benefits and (b) severance plans for purposes of
calculating the amount of each Affected Employee's severance benefits. To the
extent permissible under the terms thereof and required by applicable law, CEI
and the Surviving Corporation shall (i) waive all limitations as to preexisting
conditions exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Affected Employees under any welfare
benefit plans that such employees may be eligible to participate in after the
Closing Date, other than limitations or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of the
Closing Date under any welfare benefit plan maintained for the Affected
Employees immediately prior to the Closing Date, and (ii) provide each Affected
Employee with credit for any co-payments and deductibles paid prior to the
Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing Date. Nothing in this Section shall be deemed
to require the employment of any Affected Employee to be continued for any
particular period of time after the Closing Date.
(b) Continuation of Benefits. Subject to applicable law and obligations
under applicable collective bargaining agreements, CEI shall cause the Surviving
Corporation to maintain for a period of at least one year after the Closing
Date, without interruption, such employee compensation, welfare and benefit
plans, programs, policies and fringe benefits as will, in the aggregate, provide
benefits to the Affected Employees that are no less favorable than those
provided pursuant to such employee compensation, welfare and benefit plans,
programs, policies and fringe benefits of the Company and its Subsidiaries, as
in effect on the Closing Date; provided, however, that CEI shall cause the
Surviving Corporation to, for one year following the Closing Date, continue the
Company Severance Pay Plan (the " Severance Plan") in full force and effect to
the same extent that such Severance Plan is in effect on the Closing Date.
(c) Effect of the Merger. The consummation of the Merger shall not be
treated as a termination of employment of any Affected Employee for purposes of
any Company Plan.
(d) Continuation of Agreements. CEI shall cause the Surviving Corporation
to, as of the Closing Date, honor and be solely responsible for the employment,
severance, consulting and retention agreements set forth in Section 7.9 of the
Company Disclosure Schedule.
Section 7.10 No Solicitations by the Company.
(a) From and after the date hereof, (i) the Company will not, and will not
authorize or permit any of its Representatives to, directly or indirectly,
solicit, initiate or en-
courage (including by way of furnishing information) or take any other action to
facilitate knowingly any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an Acquisition Proposal (as
defined herein) from any person, or engage in any discussion or negotiations
relating thereto and (ii) neither the Board of Directors of the Company nor any
committee thereof shall (A) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to CEI, the approval or recommendation by such
Board of Directors or such committee of the Merger or this Agreement, (B)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (C) cause the Company or any Company Subsidiary to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an " Acquisition Agreement") related to any
Acquisition Proposal; provided, however, that the Company may, at any time prior
to receipt of the Company Shareholders' Approval (the " Company Applicable
Period"), (i) in response to an Acquisition Proposal which was not solicited by
it or its Representatives and which did not otherwise result from a breach of
this Section 7.10, if the Board of Directors of the Company (x) reasonably
believes in good faith, after consultation with its financial advisors, that an
Acquisition Proposal may be a Superior Proposal (as defined herein) and (y)
determines in good faith, after consultation with its financial advisors and
outside counsel, that failing to take such action could reasonably be expected
to be a breach of its fiduciary duties to the Company's shareholders under
applicable law, and subject to providing prior written notice of its decision to
take such action to CEI (the "Company Notice") and compliance with Section
7.10(c), for a period of twenty business days following delivery of the Company
Notice, (1) furnish information with respect to the Company and its Subsidiaries
to any person making a Superior Proposal pursuant to a customary confidentiality
agreement (as determined by the Company after consultation with outside counsel)
and (2) participate in discussions or negotiations regarding such Superior
Proposal (provided, in each case, that the Company shall be permitted to deliver
only one Company Notice with respect to each person making an Acquisition
Proposal), (ii) comply with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer (provided that, except in connection with a
termination of this Agreement pursuant to clause (iii) of this proviso, neither
the Company nor its Board of Directors nor any committee thereof shall withdraw
or modify, or propose publicly to withdraw or modify, its position with respect
to this Agreement or the Merger or approve or recommend, or propose publicly to
approve or recommend, an Acquisition Proposal), and/or (iii) in the event that
during the Company Applicable Period the Board of Directors of the Company
reasonably believes in good faith, after consultation with financial advisors
and outside counsel, (x) that it has received an Acquisition Proposal that
constitutes a Superior Proposal and (y) that failure to terminate this Agreement
and accept such Superior Proposal could reasonably be expected to be a breach of
its fiduciary duties to the Company's shareholders under applicable law, by
action of the Board of Directors of the Company (subject to this sentence and
Section 9.1(g)), terminate this Agreement (and, following the exercise of such
termination right, withdraw or modify in any adverse manner its approval or
recommendation of this Agreement or the Merger, and approve or recommend any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any such Company
Subsidiary, other than the transactions contemplated by this Agreement),
but only at a time that is during the Company Applicable Period and is after the
third business day following CEI's receipt of written notice advising CEI that
the Board of Directors of the Company is prepared to accept a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal. The Company shall
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any persons conducted
heretofore by the party or its Representatives with respect to the foregoing.
(b) As used herein, (i) "Acquisition Proposal" shall mean any inquiry,
proposal or offer from any person relating to any direct or indirect acquisition
or purchase of a business (a " Material Business") that constitutes 15% or more
of the net revenues, net income or the assets (including equity securities) of
the Company and the Company Subsidiaries, taken as a whole, or 15% or more of
any class of voting securities of the Company or any Company Subsidiary owning,
operating or controlling a Material Business, any tender offer or exchange offer
that if consummated would result in any person beneficially owning 15% or more
of any class of voting securities of the Company or any such Company Subsidiary,
or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
such Company Subsidiary, other than the transactions contemplated by this
Agreement; provided, however, that no transaction permitted pursuant to Section
6.1(f) shall be deemed an Acquisition Proposal for any purpose and (ii) a "
Superior Proposal" shall mean any proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of Company
Common Stock then outstanding or all or substantially all the assets of the
Company which the Board of Directors of the Company determines in its good faith
judgment (based on the written advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's shareholders
(taking into account any changes to the financial terms of this Agreement
proposed by CEI in response to such proposal and all financial and strategic
considerations, including relevant legal, financial, regulatory and other
aspects of the proposal and the third party making such proposal and the
conditions and the prospects for completion of such proposal, the strategic
direction and benefits sought by the Company and any changes to this Agreement
proposed by CEI in response to such proposal) than the Merger and the other
transactions contemplated by this Agreement.
(c) The Company shall promptly advise CEI orally and in writing of the
receipt of any Superior Proposal and of the receipt of any inquiry with respect
to or which the Company reasonably believes could lead to any Superior Proposal.
The Company shall promptly advise CEI orally and in writing of the identity of
the person making any such Superior Proposal or inquiry and of the material
terms of any such Superior Proposal and of any material changes thereto.
Section 7.11 Board of Directors; Advisory Board. The Board of Directors
of CEI will take such action as may be necessary (including increasing the size
of the Board of Directors of CEI) to appoint to the Board of Directors of CEI
after the Effective Time, effective at the Effective Time, one person selected
by the Nominating Committee of CEI, who (i) is a member of the Board of
Directors of the Company as of the date hereof, (ii) is willing to serve on the
Board of Directors of CEI and (iii) would be eligible under CEI's by-laws and
applicable resolutions of CEI's Board of Directors to be so nominated for
election to the Board of Directors of CEI at the next annual meeting of CEI
following the Effective Time. At the Effective Time, CEI shall cause the
Surviving Corporation to establish an advisory board that will consist of
approximately equal numbers of individuals designated by the Company and
designated by CEI, which advisory board will provide advice and input regarding
the implementation of the Merger and the ongoing operations of the Surviving
Corporation.
Section 7.12 Post-Merger Operations.
(a) Corporate Offices. The Surviving Corporation shall maintain a
subsidiary office at a Rockland County, New York location, as the headquarters
of the Company subsidiary for three years following the Merger.
(b) Charities. The parties agree that provision of charitable
contributions and community support in the service areas of the Company and the
Company Subsidiaries serves a number of important goals. After the Effective
Time, CEI shall cause the Surviving Corporation to provide, directly or
indirectly, charitable contributions and community support within the service
areas of the Company and each of the Company utility Subsidiaries at levels
substantially comparable to and no less than the levels of charitable
contributions and community support provided by the Company and the Company
utility Subsidiaries within their service areas within the two-year period
immediately prior to the Effective Time.
Section 7.13 Expenses. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that each of
CEI and the Company shall bear and pay one-half of the costs and expenses
incurred for the filings of the premerger notification and report forms under
the HSR Act (including filing fees) and for expert witnesses retained for the
purpose of advising and supporting joint regulatory filings.
Section 7.14 Further Assurances. Each party will, and will cause its
Subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Merger in accordance with the terms hereof, including the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Authority vacated or reversed.
Section 7.15 Shareholder Litigation. Each of the Company and CEI
shall give the other the reasonable opportunity to participate in the defense of
any shareholder litigation against the Company or CEI, as applicable, or any of
their respective directors relating to the transactions contemplated by this
Agreement.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions, except, to the extent permitted by applicable law, that such
conditions may be waived in writing pursuant to Sections 9.5 and 9.6 by the
joint action of the parties hereto:
(a) Shareholder Approvals. The Company Shareholders' Approval shall
have been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court preventing
consummation of the Merger shall have been issued and be continuing in effect,
and the Merger and the other transactions contemplated hereby shall not have
been prohibited under any applicable federal or state law or regulation.
(c) Statutory Approvals. The Company Required Statutory Approvals
and CEI Required Statutory Approvals shall have been obtained at or prior to the
Effective Time and such approvals shall have become Final Orders (as defined
below). A " Final Order" means action by the relevant regulatory authority which
has not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
Section 8.2 Conditions to Obligation of CEI to Effect the Merger.
The obligation of CEI to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by CEI in writing pursuant to Sections 9.5 and 9.6:
(a) Performance of Obligations of the Company. The Company (and/or
its appropriate Subsidiaries) will have performed in all material respects its
agreements and covenants contained in or contemplated by this Agreement which
are required to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
(i) on and as of the date hereof and (ii) on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date (except for representations and warranties that expressly
speak only as of a specific date or time which need only be true and correct as
of such date or time) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without giving effect to
any materiality qualification or standard contained in any such representations
and warranties) which, individually or in the aggregate, would not have a
Company Material Adverse Effect.
(c) Closing Certificates. CEI shall have received a certificate
signed by the chief financial officer of the Company, dated the Closing Date, to
the effect that, to the best of such officer's knowledge, the conditions set
forth in Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) Company Material Adverse Effect. No Company Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance which
would have a Company Material Adverse Effect.
(e) Company Required Consents. The Company Required Consents the
failure of which to obtain would have a Company Material Adverse Effect shall
have been obtained.
(f) Statutory Approvals. The Company Required Statutory Approvals and
CEI Required Statutory Approvals shall have been obtained and shall have become
Final Orders and such Final Orders shall not impose terms or conditions, which,
individually or in the aggregate, would have (i) a Company Material Adverse
Effect or (ii) a CEI Material Adverse Effect.
(g) Redemption of Company Preference Stock. The Company shall have
redeemed all outstanding shares of Company Preference Stock in accordance with
the provisions of Section 2.1(d).
Section 8.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by the Company in writing pursuant to
Sections 9.5 and 9.6:
(a) Performance of Obligations of CEI. CEI (and/or its appropriate
Subsidiaries) will have performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement which are required to
be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of CEI set forth in this Agreement shall be true and correct (i) on
and as of the date hereof and (ii) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific date or time which need only be true and correct as of
such date or time) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without giving effect to
any materiality qualification or standard contained in any such representations
and warranties) which, individually or in the aggregate, would not have a CEI
Material Adverse Effect.
(c) Closing Certificates. The Company shall have received a
certificate signed by the chief financial officer of CEI, dated the Closing
Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.3(a) and Section 8.3(b) have been satisfied.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any
time prior to the Closing Date, whether before or after the Company
Shareholders' Approval contemplated by this Agreement:
(a) by mutual written consent of the Company and CEI;
(b) by CEI or the Company, if any state or federal law, order, rule
or regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger, or
by any party hereto if any court of competent jurisdiction in the United States
or any state shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
(c) by CEI or the Company, by written notice to the other party, if
the Effective Time shall not have occurred on or before November 30, 1999 (the "
Initial Termination Date"); provided, however, that the right to terminate the
Agreement under this Section 9.1(c) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before this date;
and provided, further, that if on the Initial Termination Date the conditions to
the Closing set forth in Sections 8.1(c) and/or 8.2(f) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Initial Termination Date shall be extended
to May 31, 2000;
(d) by CEI or the Company, by written notice to the other, if the
Company Shareholders' Approval shall not have been obtained at a duly held
Company Meeting, including any adjournments thereof;
(e) by CEI, by written notice to the Company, if there shall have
been any breach of any representation or warranty, or any breach of any covenant
or agreement of the Company hereunder, which breaches individually or in the
aggregate would have a Company Material Adverse Effect, and such breach shall
not have been remedied within 20 business days after receipt by the Company of
notice in writing from CEI, specifying the nature of such breach and requesting
that it be remedied or CEI shall not have received adequate assurance of a cure
of such breach within such 20 business-day period;
(f) by the Company, by written notice to CEI, if there shall have
been any breach of any representation or warranty, or any breach of any covenant
or agreement of CEI hereunder, which breaches individually or in the aggregate
would have a CEI Material Adverse Effect, and such breach shall not have been
remedied within 20 business days after receipt by CEI of notice in writing from
the Company, specifying the nature of such breach and requesting that it be
remedied or the Company shall not have received adequate assurance of a cure of
such breach within such 20 business-day period;
(g) by the Company, in accordance with clause (iii) of the proviso to
the first sentence of Section 7.10(a); provided that, in order for the
termination of this Agreement pursuant to this paragraph (g) to be deemed
effective, the Company shall have complied with all provisions of Section 7.10,
including the notice provisions therein, and with the applicable requirements,
including the payment of the Termination Fee (as defined in Section 9.3(a)), of
Section 9.3;
Section 9.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or CEI pursuant to Section 9.1 there shall
be no liability on the part of either the Company or CEI or their respective
officers or directors hereunder, except that Section 7.13, Section 9.2 and
Section 9.3, the agreement contained in the next to last sentence of Section
7.1, Section 10.2 and Section 10.8 shall survive the termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee Payable by the Company. If this Agreement (i) is
terminated by the Company pursuant to Section 9.1(g) or (ii) is terminated by
the Company or CEI pursuant to Section 9.1(d) as a result of the Company
Shareholders' Approval not being obtained and at or prior to the Company Meeting
(or any subsequent meeting of the Company's shareholders at which it is proposed
that the Merger be approved) there shall have been an Acquisition Proposal
(whether or not conditional and whether or not such offer shall have been
rejected or shall have been withdrawn prior to the time of such termination or
of the meeting) and, solely in the case of any termination described in this
clause (ii) of this paragraph (a), within two and one-half years of such
termination the Company or any Com-
pany Subsidiary enters into any Acquisition Agreement or consummates any
Acquisition Proposal (provided, that for the purposes of this Section 9.3(a)(ii)
the terms " Acquisition Agreement" and " Acquisition Proposal" shall have the
meanings assigned to such terms in Section 7.10 except that the references to
"15%" in the definition of "Acquisition Proposal" in Section 7.10 shall be
deemed to be references to "35%"), then, in each case, the Company shall
immediately pay to CEI by wire transfer of same day funds a termination fee
equal to $25 million in cash (the " Termination Fee").
(b) Payment of Expenses. If this Agreement is terminated pursuant to
Section 9.1(d) or 9.1(e), then the Company shall promptly (but not later than
ten business days after receiving notice of termination) pay to CEI in cash by
wire transfer of same day funds an amount equal to all documented out-of-pocket
expenses and fees incurred by CEI (including, without limitation, fees and
expenses payable to all legal, accounting, financial, and other professionals
arising out of, in connection with or related to the transactions contemplated
by this agreement) not in excess of $5 million. If this Agreement is terminated
pursuant to Section 9.1(f), then CEI shall promptly (but not later than ten
business days after receiving notice of termination), pay to the Company in cash
by wire transfer of same day funds an amount equal to all documented out-of-
pocket expenses and fees incurred by the Company (including, without limitation,
fees and expenses payable to all legal, accounting, financial, and other
professionals arising out of, in connection with or related to the transactions
contemplated by this agreement) not in excess of $5 million. The Company and
CEI each agree that notwithstanding any provisions in this Agreement to the
contrary, including Section 9.2, each of the Company and CEI retain their
remedies at law or in equity with respect to breaches of this Agreement and that
no termination which results from the breach by a party of any of its
representations, warranties, covenants or agreements set forth in this Agreement
shall relieve such party of any liability or damages, including any such case in
which a Termination Fee is, or any expenses of CEI or the Company in connection
with the transactions contemplated by this Agreement are, payable pursuant to
this Section 9.3 to CEI or the Company, as the case may be (the " Injured
Party"), to the extent any such liability or damage suffered by the Injured
Party exceeds the amount of any Termination Fee and/or any expenses payable
pursuant to this Section 9.3 to the Injured Party.
(c) Expenses. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
anything to the contrary contained in this Section 9.3, if one party fails to
promptly pay to the other any fees or expenses due under Sections 9.3(a) or (b),
in addition to any amounts paid or payable pursuant to such sections, the
defaulting party shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fees or expenses at the publicly announced prime rate of
The Chase Manhattan Bank from the date such fees or expenses were required to be
paid.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after the Company
Shareholders' Approval and prior to the Effective Time, but after the Company
Shareholders' Approval, no such amendment which under applicable law would
require the further approval of the Company's shareholders shall be made without
obtaining such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) subject to the first sentence of Section 9.4, waive
compliance with any of the agreements or conditions contained herein, to the
extent permitted by applicable law. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
Section 9.6 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.4 or an extension or waiver pursuant to Section
9.5 shall, in order to be effective, require, in the case of the Company or CEI,
action by its Board of Directors, or a duly authorized committee of its Board of
Directors to the extent permitted by law.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and
Warranties. No representations or warranties in this Agreement shall survive
the Effective Time.
Section 10.2 Brokers. The Company represents and warrants that,
except for DLJ, whose fees have been disclosed to CEI prior to the date hereof,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has made available to CEI prior to the execution of
this Agreement a copy of the engagement letter of DLJ and, other than as set
forth in such engagement letter, has no understanding or agreement with DLJ
regarding any fees or expenses in connection with the Merger or the transactions
contemplated by this Agreement. CEI represents and warrants that, except for
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, no broker, finder or investment banker is entitled to any
brokerage, finder's or other
fee or commission in connection with the Merger or the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of CEI.
Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) when delivered personally, (b)
when sent by reputable overnight courier service, or (c) when telecopied (which
is confirmed by copy sent within one business day by a reputable overnight
courier service) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to the Company, to
Orange and Rockland Utilities, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: D. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
and
(ii) if to CEI, to
Consolidated Edison, Inc.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
Cravath, Swaine & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.4 Miscellaneous. This Agreement (including the documents
and instruments referred to herein) and the Confidentiality Agreement (other
than paragraph 11 thereof relating to the parties' standstill obligations) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof (including paragraph 11 of the
Confidentiality Agreement relating to the parties' standstill obligations) other
than the agreement between the Company and CECONY with respect to the
divestiture of their respective interests in the Bowline Point Generating
Station, (b) shall not be assigned by operation of law or otherwise and (c)
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts executed in and to be fully performed in such
State, without giving effect to its conflicts of law rules or principles. The
Company hereby waives the restrictions applicable to CEI pursuant to paragraph
11 of the Confidentiality Agreement relating to the parties' standstill
obligations provided, however that such waiver shall lapse and the provisions of
paragraph 11 of the Confidentiality Agreement will be binding on CEI if (i) this
Agreement is terminated by CEI and (ii) the Termination Fee is required to be
paid pursuant to Section 9.3(a) to CEI (subject, in such case, to payment of the
Termination Fee). If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect. Upon such determination that any term or other provisions
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
Section 10.5 Interpretation. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a Section or
Exhibit of this Agreement, respectively, unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
Section 10.6 Counterparts; Effect. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement and each of which
shall only become effective when one or more counterparts have been signed by
each party and delivered to the other parties.
Section 10.7 Parties' Interest; No Third Party Beneficiaries. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and, except for rights of Indemnified Parties as set forth in Section
7.5, nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 10.8 Waiver of Jury Trial. Each party to this Agreement
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any action, suit or proceeding arising out of
or relating to this Agreement.
Section 10.9 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the Borough of Manhattan in the City of New York or, if such court
does not have jurisdiction, in any New York state court located in the Borough
of Manhattan in the City of New York, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
federal court located in the Borough of Manhattan in the City of New York or, if
such court does not have jurisdiction, any New York state court located in the
Borough of Manhattan in the City of New York in the event any dispute arises out
of this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court located
in the Borough of Manhattan in the City of New York or, if such court does not
have jurisdiction, any New York state court located in the Borough of Manhattan
in the City of New York.
IN WITNESS WHEREOF, each of the Company, CEI and the Merger Subsidiary
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
Orange and Rockland Utilities, Inc.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇ Peoples
Title: Vice Chairman and Chief Executive Officer
Consolidated Edison, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
C Acquisition Corp.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
