AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 5, 1998
BY AND AMONG
PHILADELPHIA SUBURBAN CORPORATION,
CONSUMERS ACQUISITION COMPANY
AND
CONSUMERS WATER COMPANY
TABLE OF CONTENTS
ARTICLE 1 The Merger............................................. 1
1.1 The Merger...................................................... 1
1.2 Closing ....................................................... 2
1.3 Effective Time.................................................. 2
1.4 Articles of Incorporation....................................... 2
1.5 By-Laws ....................................................... 2
1.6 Directors....................................................... 2
1.7 Officers ....................................................... 2
1.8 Conversion of Acquisition Shares................................ 3
1.9 Conversion of Consumers Common Shares and
Consumers Preferred Shares........................... 3
1.9.1 Outstanding Consumers Common Shares.................. 3
1.9.2 Treasury Shares...................................... 3
1.9.3 Impact of Stock Splits, etc.......................... 3
1.9.4 Options.............................................. 3
1.9.5 Outstanding Consumers Preferred Shares............... 4
1.9.6 Dissenting Shares.................................... 4
1.10 Exchange of Certificates and Related Matters.................... 4
1.10.1 Paying Agent......................................... 4
1.10.2 Letter of Transmittal................................ 5
1.10.3 Exchange Procedures.................................. 5
1.10.4 Distributions with Respect to Unexchanged Shares..... 6
1.10.5 No Further Ownership Rights.......................... 6
1.10.6 No Fractional Shares................................. 6
1.10.7 Termination of Paying Agency......................... 7
1.10.8 No Liability......................................... 7
ARTICLE 2 Representations and Warranties of Consumers............ 7
2.1 Organization, Standing and Corporate Authority.................. 7
2.2 Capital Structure............................................... 7
2.3 Subsidiaries.................................................... 8
2.4 Authority; Noncontravention..................................... 9
2.5 Consumers SEC Documents and Financial Statements................ 10
2.6 Absence of Certain Changes or Events............................ 11
2.7 Real and Personal Property...................................... 11
2.8 Employee Matters; ERISA......................................... 12
2.9 Taxes........................................................... 16
2.10 Compliance with Applicable Laws................................. 17
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2.11 Environmental Protection........................................ 17
2.12 Litigation ..................................................... 20
2.13 Labor Relations................................................. 20
2.14 Intellectual Property........................................... 21
2.15 No Default ..................................................... 21
2.16 Regulation as a Utility......................................... 22
2.17 Insurance ..................................................... 22
2.18 Change in Business Relationships................................ 22
2.19 Voting Requirements............................................. 22
2.20 Brokers......................................................... 22
2.21 Year 2000 Problem............................................... 22
2.22 Knowledge....................................................... 23
2.23 Disclosure...................................................... 23
2.24 Fairness Opinion................................................ 23
ARTICLE 3 Representations and Warranties of PSC and Acquisition....... 23
3.1 Organization, Standing and Corporate Authority.................. 23
3.2 Capital Structure............................................... 23
3.3 Authority; Noncontravention..................................... 24
3.4 PSC SEC Documents and Financial Statements...................... 25
3.5 Absence of Certain Changes or Events............................ 26
3.6 Compliance with Applicable Laws................................. 26
3.7 Litigation ..................................................... 27
3.8 Brokers......................................................... 27
3.9 Fairness Opinion................................................ 27
3.10 Taxes........................................................... 27
3.11 Regulation as a Utility......................................... 28
3.12 Insurance....................................................... 28
3.13 Voting Requirements............................................. 29
3.14 Disclosure ..................................................... 29
3.15 Knowledge ..................................................... 29
ARTICLE 4 Additional Agreements....................................... 29
4.1 Preparation of Form S-4......................................... 29
4.1.1 Form S-4; Proxy Statement/Prospectus................. 29
4.1.2 Consumers Information................................ 29
4.1.3 PSC Information...................................... 30
4.1.4 SEC Filings.......................................... 30
4.2 Shareholders Meetings........................................... 31
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4.2.1 Consumers' Shareholder Meeting....................... 31
4.2.2 PSC's Shareholder Meeting............................ 31
4.3 Best Efforts.................................................... 31
4.4 Access to Information; Confidentiality.......................... 31
4.5 Public Announcements............................................ 32
4.6 Acquisition Proposals........................................... 33
4.7 Superior Proposals.............................................. 33
4.8 Filings; Other Action........................................... 34
4.9 Stock Exchange Listing.......................................... 35
4.10 Affiliates and Certain Shareholders............................. 35
4.11 Employee Matters................................................ 35
4.12 Representation on PSC Board..................................... 36
4.13 Termination of Consumers' DRIP.................................. 36
4.14 Federal Income Tax Treatment.................................... 36
4.15 Takeover Statute................................................ 36
4.16 Continuance of Existing Indemnification Rights.................. 36
4.17 Consulting Agreements........................................... 38
ARTICLE 5 Covenants Relating to Conduct of Business Prior to Merger.. 38
5.1 Conduct of Business by Consumers................................ 38
5.2 Management of Consumers and its Subsidiaries.................... 39
5.3 Conduct of Business by PSC...................................... 40
5.4 Other Actions................................................... 40
5.5 Pooling of Interests Accounting Treatment....................... 40
5.6 Termination of Long Term Incentive Plan......................... 40
ARTICLE 6 Conditions Precedent....................................... 41
6.1 Conditions to Each Party's Obligation to Effect the Merger...... 41
6.1.1 Consumers Shareholder Approval....................... 41
6.1.2 PSC Shareholder Approval............................. 41
6.1.3 Governmental and Regulatory Consents................. 41
6.1.4 HSR Act.............................................. 41
6.1.5 No Injunctions or Restraints......................... 41
6.1.6 NYSE Listing......................................... 42
6.1.7 Form S-4............................................. 42
6.2 Conditions to Obligations of PSC and Acquisition................ 42
6.2.1 Representations and Warranties....................... 42
6.2.2 Performance of Obligations of Consumers.............. 42
6.2.3 Opinion of Counsel................................... 42
6.2.4 Satisfactory Completion of Due Diligence............. 42
6.2.5 Pooling-of-Interests................................. 42
6.2.6 Releases............................................. 42
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6.3 Conditions to Obligations of Consumers.......................... 42
6.3.1 Representations and Warranties....................... 43
6.3.2 Performance of Obligations of PSC and Acquisition.... 43
6.3.3 Tax Opinion.......................................... 43
6.3.4 Opinion of Counsel................................... 43
6.3.5 Satisfactory Completion of Due Diligence............. 43
ARTICLE 7 Termination, Amendment and Waiver.................... 43
7.1 Termination..................................................... 43
7.2 Effect of Termination........................................... 45
7.3 Amendment ..................................................... 45
7.4 Extension; Waiver............................................... 46
7.5 Procedure for Termination, Amendment, Extension or Waiver....... 46
ARTICLE 8 Survival of Provisions............................... 46
8.1 Survival........................................................ 46
ARTICLE 9 Notices.............................................. 46
9.1 Notices......................................................... 46
ARTICLE 10 Miscellaneous........................................ 48
10.1 Entire Agreement................................................ 48
10.2 Expenses ..................................................... 48
10.3 Counterparts.................................................... 48
10.4 No Third Party Beneficiary...................................... 48
10.5 Governing Law................................................... 48
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10.6 Assignment; Binding Effect...................................... 49
10.7 Headings, Gender, etc........................................... 49
10.8 Invalid Provisions.............................................. 49
10.9 Material Adverse Effect......................................... 49
EXHIBIT A -- Exchange Ratio
EXHIBIT B -- Articles of Incorporation of the Surviving Corporation
EXHIBIT C -- Form of Affiliate's Letter EXHIBIT D -- Form of Opinion of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
EXHIBIT E -- Form of Opinion of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (the
"Agreement") is made and entered into as of August 5, 1998 by and among
PHILADELPHIA SUBURBAN CORPORATION, a Pennsylvania corporation ("PSC"), CONSUMERS
ACQUISITION COMPANY, a Pennsylvania corporation ("Acquisition"), and CONSUMERS
WATER COMPANY, a Maine corporation ("Consumers"), (each individually hereinafter
referred to as a "Party" and collectively hereinafter referred to as the
"Parties").
PREAMBLE
WHEREAS, the respective Boards of Directors of the Parties have
determined that the Merger (as defined in Section 1.1) is in the best interests
of their respective shareholders and other constituencies and have approved the
Merger, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Parties intend that, for federal income tax purposes, the
Merger will constitute a reorganization within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that
shareholders of Consumers will not be subject to federal income tax on the
receipt of PSC Common Shares (as defined in Section 1.9.1) in exchange for
Consumers Common Shares (as defined in Section 1.9.1) pursuant to the Merger;
and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling-of-interests"; and
WHEREAS, the Parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Parties hereto agree as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as is defined in Section 1.3 hereof), Consumers shall be
merged with and into Acquisition (the "Merger"), in accordance with the
provisions of the Pennsylvania Business Corporation Law of 1988, as amended (the
"Pennsylvania Code") and the separate corporate existence of Consumers shall
cease and Acquisition shall continue as the surviving corporation (the
"Surviving Corporation") with all the rights, privileges, immunities and powers,
and subject to all the duties and liabilities, of a corporation organized under
the Pennsylvania Code.
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1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article 6 (excluding those conditions that, by their terms, cannot be satisfied
before the Closing Date as defined in this Section 1.2), the closing of the
Merger (the "Closing") will take place at 9:00 a.m. no later than the seventh
(7th) business day following the Determination Date, as that term is defined in
Exhibit A attached hereto (the "Closing Date"). The Closing will be held at the
offices of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, 2500 One Liberty Place, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless the Parties hereto agree in
writing to another date, time or place.
1.3 Effective Time. The Parties hereto will file with the Secretary of
State of the Commonwealth of Pennsylvania (the "Pennsylvania Secretary of
State") on the date of the Closing (or on such other date as PSC and Consumers
may agree) articles of merger or other appropriate documents, mutually
satisfactory in form and substance to PSC and Consumers and executed in
accordance with the relevant provisions of the Pennsylvania Code, and will make
all other filings or recordings required under the Pennsylvania Code in
connection with the Merger. The Merger shall become effective upon the filing of
the articles of merger with the Pennsylvania Secretary of State, or at such
later time as is specified in the articles of merger (the "Effective Time").
1.4 Articles of Incorporation. The Articles of Incorporation of
Acquisition shall be as set forth in Exhibit B, which is attached hereto and
made a part hereof, and, as so set forth shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended as provided by law.
1.5 By-Laws. The By-Laws of Acquisition, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the By-Laws, or the Articles of
Incorporation of the Surviving Corporation.
1.6 Directors. The Board of Directors of the Surviving Corporation from
and after the Effective Time shall be comprised of such directors as shall be
appointed by PSC. Such directors shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the Articles of Incorporation or By-Laws of the Surviving
Corporation, or as otherwise provided by law.
1.7 Officers. The officers of the Surviving Corporation from and after
the Effective Time shall be comprised of such officers as shall be appointed by
the Surviving Corporation's Board of Directors. Such officers shall hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Articles of Incorporation or
By-Laws of the Surviving Corporation, or as otherwise provided by law.
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1.8 Conversion of Acquisition Shares. Each share of common stock of
Acquisition issued and outstanding immediately prior to the Effective Time shall
remain outstanding, unchanged by reason of the Merger, as 1,000 common shares,
without par value, of the Surviving Corporation.
1.9 Conversion of Consumers Common Shares and Consumers Preferred
Shares.
1.9.1 Outstanding Consumers Common Shares. Each share of
common stock, having a par value of $1.00 per share, of Consumers together with
all rights appurtenant thereto (the "Consumers Common Shares") issued and
outstanding immediately prior to the Effective Time (other than shares held as
treasury shares by Consumers) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into that number of
shares of validly issued, fully paid and non-assessable common stock, having a
par value of $.50 per share, of PSC together with all rights appurtenant thereto
(the "PSC Common Shares") as determined in accordance with the exchange ratio as
outlined in Exhibit A, which is attached hereto and made a part hereof (the
"Exchange Ratio").
1.9.2 Treasury Shares. Each Consumers Common Share issued and
outstanding immediately prior to the Effective Time which is then held as a
treasury share by Consumers shall, by virtue of the Merger and without any
action on the part of Consumers, be canceled and retired and cease to exist,
without any conversion thereof.
1.9.3 Impact of Stock Splits, etc. In the event of any change
in PSC Common Shares between June 27, 1998 and the Effective Time by reason of
any stock split, stock dividend, subdivision, reclassification,
recapitalization, combination, exchange or the like, the Exchange Ratio and the
calculation of all share prices provided for in this Agreement shall be
proportionately adjusted.
1.9.4 Options. At the Effective Time, each option to acquire
Consumers Common Shares which is then outstanding, whether or not exercisable,
shall cease to represent a right to acquire Consumers Common Shares and shall be
converted automatically into an option to purchase PSC Common Shares, and PSC
shall assume each such option, in accordance with the terms of the applicable
Consumers stock option plan and stock option agreement by which it is evidenced,
except that from and after the Effective Time, (i) PSC and the PSC Board of
Directors shall be substituted for Consumers and the Consumers Board of
Directors in administering such plan, (ii) each Consumers option assumed by PSC
may be exercised solely for PSC Common Shares, (iii) the number of PSC Common
Shares subject to such Consumers options shall be equal to the number of shares
of Consumers Common Shares subject to such option immediately prior to the
Effective Time multiplied by the Exchange Ratio, provided that any fractional
shares of PSC Common Shares resulting from such multiplication shall be rounded
down to the nearest share, and (iv) the per share exercise price under each such
option shall be adjusted by dividing the per share exercise price under each
such option by the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent. Notwithstanding clauses (iii) and (iv) of the
preceding sentence, each Consumers option which is an "incentive stock option"
shall be adjusted as required by Section 424 of the Code, and the regulations
promulgated thereunder, so as not to constitute a modification, extension or
renewal of the option within the meaning of Section 424(h) of the Code.
Consumers and PSC agree to take all necessary steps to effect the foregoing
provisions of this Section 1.9.4. Within thirty (30) calendar days after the
Effective Time, PSC shall file a registration statement on Form S-3 or Form S-8,
as the case may be (or any successor or other appropriate forms), with respect
to the PSC Common Shares subject to the options referred to in this Section
1.9.4 and shall use its reasonable efforts to maintain the current status of the
prospectus or prospectuses contained therein for so long as such options remain
outstanding in the case of a Form S-8 or, in the case of a Form S-3, until the
shares subject to such options may be sold without a further holding period
under Rule 144 under the Securities Act.
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1.9.5 Outstanding Consumers Preferred Shares. Each share of
preferred stock, having a par value of $100 per share, of Consumers together
with all rights appurtenant thereto (the "Consumers Preferred Shares") issued
and outstanding immediately prior to the Effective Time (other than shares held
as treasury shares by Consumers) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into that number of PSC
Common Shares as determined by multiplying the number of Consumers Preferred
Shares by the product of 3.945 times the Exchange Ratio.
1.9.6 Dissenting Shares. Each Consumers Preferred Share, the
holder of which has perfected his right to dissent under the Maine Business
Corporation Act ("MBCA") and has not effectively withdrawn or lost such right as
of the Effective Time (the "Dissenting Shares"), shall not be converted into or
represent a right to receive PSC Common Shares hereunder, and the holder thereof
shall be entitled only to such rights as are granted by the MBCA. Consumers
shall give PSC prompt notice upon receipt by Consumers of any such written
demands for payment of the fair value of such Consumers Preferred Shares and of
withdrawals of such demands and any other instruments provided pursuant to the
MBCA (any shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). If any Dissenting Shareholder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment at any time, such holder's Consumers Preferred Shares shall be converted
into the right to receive PSC Common Shares in accordance with the applicable
provisions of this Agreement. Any payments made in respect of Dissenting Shares
shall be made by the Surviving Corporation.
1.10 Exchange of Certificates and Related Matters.
1.10.1 Paying Agent. Prior to the Closing Date, PSC shall
appoint the Paying Agent for the purpose of issuing PSC Common Shares in
exchange for certificates representing Consumers Common Shares and Consumers
Preferred Shares. PSC shall deliver certificates representing PSC Common Shares,
to the Paying Agent, for the benefit of the holders of Consumers Common Shares
and Consumers Preferred Shares when and as required for exchanges of Consumers
Common Shares and Consumers Preferred Shares, respectively, pursuant to Section
1.9.
4
1.10.2 Letter of Transmittal. Promptly after the Effective
Time (but in no event more than five (5) business days thereafter), PSC shall
require the Paying Agent to mail to each record holder of Certificates, as
defined in Section 1.10.3, that immediately prior to the Effective Time
represented Consumers Common Shares and Consumers Preferred Shares,
respectively, which have been converted pursuant to Section 1.9, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title shall pass, only upon proper delivery of Certificates to the
Paying Agent and shall be in such form and have such provisions as PSC
reasonably may specify), and (ii) instructions for use in surrendering such
Certificates and receiving the Merger Consideration, as defined in Section
1.10.3, to which such holder shall be entitled therefor pursuant to Section 1.9.
1.10.3 Exchange Procedures. Upon surrender to the Paying Agent
of a Certificate representing Consumers Common Shares or Consumers Preferred
Shares, respectively, for cancellation, together with a letter of transmittal
and such other customary documents as may be required by the instructions to the
letter of transmittal (collectively, the "Certificate") and acceptance thereof
by the Paying Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor (i) in connection with the surrender of Consumers Common
Shares, certificates evidencing that number of whole PSC Common Shares into
which Consumers Common Shares previously represented by such certificate are
converted in accordance with Section 1.9.1, and the cash in lieu of fractional
PSC Common Shares to which such holder is entitled pursuant to Section 1.10.6,
(ii) in connection with the surrender of Consumers Preferred Shares,
certificates evidencing that number of whole PSC Common Shares into which
Consumers Preferred Shares previously represented by such certificate are
converted in accordance with Section 1.9.5, and the cash in lieu of fractional
PSC Common Shares to which such holder is entitled pursuant to Section 1.10.6;
and (iii) any dividends or other distributions to which such holder is entitled
pursuant to Section 1.10.4 (the PSC Common Shares, dividends, distributions and
cash described in clauses (i), (ii), and (iii) of this Section 1.10.3 are
referred to collectively as the "Merger Consideration"). The Paying Agent shall
accept such Certificate upon compliance with such reasonable terms and
conditions as the Paying Agent may impose to effect an orderly exchange thereof
in accordance with normal exchange practices. If the Merger Consideration (or
any portion thereof) is to be delivered to any person other than the person in
whose name the Certificate surrendered in exchange therefor is registered on the
record books of Consumers, it shall be a condition to such exchange that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such exchange shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
such consideration to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable. After the Effective
Time, there shall be no further transfer on the records of Consumers or its
transfer agent of any Certificate representing Consumers Common Shares or
Consumers Preferred Shares, respectively, and, if any such Certificate is
presented to Consumers for transfer, it shall be canceled against delivery of
the Merger Consideration as hereinabove provided. Until surrendered as
contemplated by this Section 1.10.3, each Certificate representing Consumers
Common Shares (other than a Certificate representing Consumers Common Shares to
be canceled in accordance with Section 1.9.3) and each Certificate representing
Consumers Preferred Shares, shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the appropriate
Merger Consideration, without any interest thereon.
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1.10.4 Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to PSC Common Shares with a record
date after the Effective Time shall be paid to the holder of any Certificate,
that immediately prior to the Effective Time represented Consumers Common Shares
or Consumers Preferred Shares, respectively, which has not been converted
pursuant to Section 1.9, and no other part of the Merger Consideration shall be
paid to any such holder, until the surrender for exchange of such Certificate in
accordance with this Article 1. Following surrender for exchange of any such
Certificate, there shall be paid, without interest, to the holder of
certificates evidencing whole PSC Common Shares, issued in exchange therefor,
(i) the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid (a) with respect to the number of whole PSC
Common Shares into which Consumers Common Shares represented by such Certificate
immediately prior to the Effective Time were converted pursuant to Section 1.9,
and (b) with respect to the number of whole PSC Common Shares into which
Consumers Preferred Shares represented by such Certificate immediately prior to
the Effective Time were converted pursuant to Section 1.9, at the time of such
surrender, and (ii) the amount of dividends or other distributions with a record
date after the Effective Time, but prior to such surrender, and with a payment
date subsequent to such surrender, payable with respect to such whole PSC Common
Shares at the appropriate payment date.
1.10.5 No Further Ownership Rights. The Merger Consideration
paid upon the surrender for exchange of Certificates representing Consumers
Common Shares or Consumers Preferred Shares, respectively, in accordance with
the terms of this Article 1 shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to Consumers Common Shares or Consumers
Preferred Shares, respectively, theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation (if any) to pay any
dividends or make any other distributions with a record date (i) prior to the
Effective Time which may have been declared by Consumers on such Consumers
Common Shares or Consumers Preferred Shares, respectively, in accordance with
the terms of this Agreement, or (ii) prior to June 27, 1998 and which remain
unpaid at the Effective Time.
1.10.6 No Fractional Shares. No certificates or scrip
representing fractional PSC Common Shares shall be issued upon the surrender for
exchange of Certificates that immediately prior to the Effective Time
represented Consumers Common Shares which have been converted pursuant to
Section 1.9, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of PSC. Notwithstanding any
other provisions of this Agreement, each holder of Consumers Common Shares who
would otherwise have been entitled to receive a fraction of a PSC Common Share
(after taking into account all certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a PSC Common Share multiplied by the Calculation Price (as
that term is defined in Exhibit A).
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1.10.7 Termination of Paying Agency. Any PSC Common Shares
held by the Paying Agent which remain undistributed to the holders of the
Certificates representing Consumers Common Shares or Consumers Preferred Shares,
respectively, after one hundred twenty (120) calendar days following the
Effective Time shall be delivered to PSC, and any holders of Consumers Common
Shares or Consumers Preferred Shares, respectively, who have not theretofore
complied with this Article 1 shall thereafter look only to PSC and only as
general creditors thereof for payment, without interest, of their claim for any
Merger Consideration and any dividends or distributions with respect to PSC
Common Shares.
1.10.8 No Liability. Neither PSC, the Surviving Corporation
nor the Paying Agent shall be liable to any person in respect of any Merger
Consideration payable with respect to Consumers Common Shares or Consumers
Preferred Shares, respectively, delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar law. If any Certificates
representing Consumers Common Shares or Consumers Preferred Shares,
respectively, shall not have been surrendered prior to seven (7) years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 2.4)), any
such Consumers Common Shares, Consumers Preferred Shares, dividends or
distributions payable in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of PSC free and clear of all
claims or interest of any person previously entitled thereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CONSUMERS
Consumers hereby represents and warrants to PSC and Acquisition as
follows:
2.1 Organization, Standing and Corporate Authority. Consumers is a
corporation duly organized and validly existing under the laws of the State of
Maine and has the requisite corporate power and authority to carry on its
business as now being conducted. The nature of Consumers' business does not
require its qualification as a foreign corporation in any jurisdiction, except
for those jurisdictions in which Consumers has so qualified and except where the
failure to be so qualified would not individually or in the aggregate have a
Material Adverse Effect, as that term is defined in Section 10.9. Consumers has
delivered to PSC complete and correct copies of the Articles of Incorporation
and By-Laws, as amended to the date of this Agreement, for itself and each of
its subsidiaries.
2.2 Capital Structure. The authorized capital stock of Consumers
consists of: (i) 15,000,000 Consumers Common Shares, having a par value of $1.00
per share; (ii) 30,000 shares of preferred stock, having a par value of $100.00
per share, of which 15,925 shares have been designated as "Cumulative Preferred
Stock, Series A" and 14,075 shares are undesignated; and (iii) 120,000 shares of
preferred stock, with no par value, of which no shares have been issued (the
150,000 shares of the preferred stock are hereinafter referred to as "Consumers
Preferred Shares"). At the close of business on June 24, 1998, (i) 9,008,305
Consumers Common Shares were issued and outstanding; (ii) 10,438 Consumers
Preferred Shares have been issued and are outstanding; (iii) no Consumers Common
Shares were held as treasury stock; (iv) no Consumers Common Shares were held by
subsidiaries of Consumers; (v) 925,757 Consumers Common Shares were reserved for
issuance pursuant to Consumers' (1) Dividend Reinvestment Plan ("DRIP"), (2)
401(K) Savings Plan, (3) LTIP, as defined in Section 5.6 and (4) Stock Option
Plan; and (vi) no other shares, including but not limited to Consumers Common
Shares or Consumers Preferred Shares, were issued and outstanding. All
outstanding shares of capital stock of Consumers are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. No
bonds, debentures, notes or other indebtedness of Consumers having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the shareholders of Consumers may vote are issued
or outstanding. Section 2.2 of the Disclosure Schedule, dated as of the date
hereof and executed by Consumers (the "Disclosure Schedule"), sets forth the
name of each participant in Consumers' Incentive Stock Option Plan and LTIP and
the number of Consumers Common Shares awarded to such participant as of the date
hereof. Except as set forth above or in Section 2.2 of the Disclosure Schedule,
Consumers does not have any outstanding option, warrant, subscription or other
right, agreement or commitment which either obligates Consumers to issue, sell
or transfer, repurchase, redeem or otherwise acquire or vote any shares of
capital stock of Consumers, or which restricts the transfer of Consumers Common
Shares.
7
2.3 Subsidiaries.
2.3.1 Section 2.3.1 of the Disclosure Schedule sets forth the
name of each corporation, limited liability company, general or limited
partnership or other entity that is controlled, directly or indirectly, by
Consumers (a "subsidiary") and the jurisdiction of its organization. Each such
subsidiary is a corporation or partnership duly organized and validly existing
under the laws of the jurisdiction of its organization and has the corporate or
partnership power and authority and all necessary government approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority or necessary governmental approvals
would not individually or in the aggregate have a Material Adverse Effect. Each
subsidiary is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not individually or in the
aggregate have a Material Adverse Effect.
2.3.2 Section 2.3.2 of the Disclosure Schedule sets forth, as
to each subsidiary of Consumers, its authorized capital structure and the number
of its issued and outstanding shares of capital stock or other ownership units.
2.3.3 Except as set forth in Section 2.3.3 of the Disclosure
Schedule, Consumers is, directly or indirectly, the record and beneficial owner
of all of the outstanding shares of capital stock or other ownership units of
each of its subsidiaries, and no capital stock or other ownership units of any
subsidiary is or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock or other ownership units of any
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which Consumers or any of its subsidiaries is or may be bound to
issue, redeem, purchase or sell additional shares of capital stock or other
ownership units of any subsidiary or securities convertible into or exchangeable
or exercisable for any such shares or units. All of such shares and other
ownership units are validly issued, fully paid and nonassessable and, except as
set forth in Section 2.3.3 of the Disclosure Schedule, are owned by Consumers,
or by another wholly-owned subsidiary of Consumers, free and clear of all liens,
claims, encumbrances, restraints on alienation, or any other restrictions with
respect to the transferability or assignability thereof (other than restrictions
on transfer imposed by federal or state securities laws).
8
2.4 Authority; Noncontravention. Consumers has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Consumers
and the consummation by Consumers of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Consumers,
subject, in the case of the Merger, to the approval of its shareholders as set
forth in Section 4.2. This Agreement has been duly executed and delivered by
Consumers and, assuming this Agreement has been duly executed and delivered by
PSC and Acquisition, constitutes a valid and binding obligation of Consumers,
enforceable against Consumers in accordance with its terms, except that the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditor's
rights generally and by general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). Except as
disclosed in Section 2.4 of the Disclosure Schedule, the execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions hereof will not, (i)
conflict with any of the provisions of the Articles of Incorporation or Bylaws
of Consumers or the comparable documents of any of its subsidiaries, (ii)
subject to the governmental filings and other matters referred to in the
following sentence, conflict with, result in a breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent of any person under, any
indenture or other agreement, permit, concession, franchise, license or similar
instrument or undertaking to which Consumers or any of its subsidiaries is a
party or by which Consumers or any of its subsidiaries or any of their assets is
bound or affected, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, contravene any law, rule or
regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, subject, in the case of clauses (ii)
and (iii), to those conflicts, breaches, defaults and similar matters, which,
individually or in the aggregate, would not have a Material Adverse Effect nor
materially and adversely affect Consumers' ability to consummate the
transactions contemplated hereby. No consent, approval or authorization of, or
declaration or filing with, or notice to, any governmental agency or regulatory
body, utility regulatory body, court, agency, commission, division, department,
public body or other authority (a "Governmental Entity") which has not been
received or made, is required by or with respect to Consumers in connection with
the execution and delivery of this Agreement by Consumers or the consummation by
it of any of the transactions contemplated hereby, except for (a) the filing of
premerger notification and report forms under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), with respect to the
Merger, (b) the filing with the Securities and Exchange Commission (the "SEC")
of a proxy statement relating to the approval by the shareholders of Consumers
and PSC of the Merger and such reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (c) the
filing of articles of merger with the Pennsylvania Secretary of State and
appropriate documents with the relevant authorities of other states in which
Consumers is qualified to do business, and (d) such other consents, approvals,
authorizations, filings or notices as are set forth in Section 2.4 of the
Disclosure Schedule.
9
2.5 Consumers SEC Documents and Financial Statements.
2.5.1 Except as set forth in Section 2.5.1 of the Disclosure
Schedule, Consumers, and each of its subsidiaries that is or was required to do
so, has timely filed all required reports, schedules, forms, statements and
other documents with the SEC from January 1, 1993 through June 27, 1998 (the
"Consumers SEC Documents"). (All such documents filed by Consumers with the SEC
from June 27, 1998 until the Closing Date shall also be included in the
definition of Consumers SEC Documents.) As of their respective dates, the
Consumers SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Consumers SEC Documents, and none of the Consumers SEC Documents as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. There have been filed as exhibits to, or incorporated by
reference in the Form 10K most recently filed by Consumers with the SEC all
contracts which, as of the date hereof, are material as described in Item
601(b)(10) of Regulation S-K. Consumers has heretofore delivered to PSC in the
form filed with the SEC, all of the Consumers SEC Documents.
2.5.2 The consolidated financial statements of Consumers
included in the Consumers SEC Documents comply in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved ("GAAP") (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
financial position of Consumers and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations, changes in
shareholders' equity and consolidated cash flows for the periods then ended
(subject, in the case of unaudited interim financial statements, to normal
recurring adjustments, none of which is material).
10
2.5.3 Except as disclosed in the Consumers SEC Documents or in
the Disclosure Schedule, neither Consumers nor any of its subsidiaries has any
absolute, accrued, contingent or other liabilities or obligations due or to
become due, and there are no claims or causes of action (including but not
limited to those relating to any Consumers Benefit Plan (as defined in Section
2.8.1) formerly maintained by Consumers or any of its subsidiaries or a
Consumers ERISA Affiliate (as defined in Section 2.8.1) on or after December 31,
1997) that have been or, to the knowledge of Consumers, are reasonably likely to
be asserted against Consumers or any of its subsidiaries, except (i) as and to
the extent reflected or reserved against on the balance sheet included in
Consumers' Annual Report on Form 10-K for the year ended December 31, 1997 (the
"Consumers Base Balance Sheet"), or included in the notes to Consumers Base
Balance Sheet, (ii) for normal and recurring liabilities incurred since December
31, 1997, in the ordinary course of business consistent with past practice, or
(iii) for such other liabilities and obligations that are not in the aggregate
reasonably likely to have a Material Adverse Effect.
2.6 Absence of Certain Changes or Events. Except as disclosed in the
Consumers SEC Documents or in Section 2.6 of the Disclosure Schedule, since the
date of the Consumers Base Balance Sheet, Consumers and its subsidiaries have
conducted their business only in the ordinary course, and, except as otherwise
expressly permitted by this Agreement, there has not been (i) any change which
has had or which could have a Material Adverse Effect, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of Consumers' outstanding capital stock
(other than regular quarterly cash dividends in accordance with usual record and
payment dates and in accordance with Consumers' present dividend policy), (iii)
any split, combination or reclassification of any of its outstanding capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of, or in substitution for shares of its
outstanding capital stock, (iv) any entry by Consumers or any of its
subsidiaries into any employment, severance, change of control, termination or
similar agreement with any officer, director or other employee, or any increase
in the compensation or severance or termination benefits payable to any
director, officer or other employee of Consumers or any of its subsidiaries
(except in the case of employees in the ordinary course of business consistent
with prior practice, or as was required under employment agreements in effect as
of the date of the Consumers Base Balance Sheet), or (v) any change in the
method of accounting or policy used by Consumers or any of its subsidiaries,
except as permitted by GAAP.
2.7 Real and Personal Property.
2.7.1 Consumers and its subsidiaries own, or have a valid and
enforceable right to use or a valid and enforceable leasehold interest in, all
real property (including all buildings, fixtures and other improvements thereto)
used by them in the conduct of their respective businesses as such businesses
are now being conducted. Except as disclosed in the Consumers SEC Documents or
Section 2.7.1 of the Disclosure Schedule, neither Consumers' nor any of its
subsidiaries' ownership of or leasehold interest in any such property is subject
to any mortgage, pledge, lien, option, conditional sale agreement, encumbrance,
security interest, title exception or restriction or claim or charge of any kind
("encumbrances"), except for such encumbrances as are not in the aggregate
reasonably likely to have a Material Adverse Effect. All such property is in
good condition and repair and is suitable in all material respects for the
purposes for which it is now being used in the conduct of the businesses of
Consumers and its subsidiaries, except to the extent that the poor condition or
unsuitability of any such property is not in the aggregate reasonably likely to
have a Material Adverse Effect.
11
2.7.2 Except as otherwise disclosed in the Consumers SEC
Documents or Section 2.7.2 of the Disclosure Schedule, all personal property
that is owned by Consumers or any of its subsidiaries and used by any of them in
the conduct of their respective businesses is owned free and clear of any
encumbrances, except for such encumbrances as are not in the aggregate
reasonably likely to have a Material Adverse Effect. All property that is owned
or used by Consumers is in good working condition, subject to normal wear and
tear, and is suitable in all material respects for the purposes for which it is
now being used in the conduct of the businesses of Consumers and its
subsidiaries, except to the extent that the poor condition or unsuitability of
any such property is not in the aggregate reasonably likely to have a Material
Adverse Effect.
2.8 Employee Matters; ERISA.
2.8.1 Section 2.8.1 of the Disclosure Schedule contains a true
and complete list of: (i) each employee benefit plan, program or arrangement
covering employees, former employees or directors of Consumers (or any of its
subsidiaries, including, but not limited to any "Consumers ERISA Affiliate" (any
entity required to be aggregated with Consumers pursuant to Code Section 414(b),
(c) or (m))), or any of their dependents or beneficiaries, or providing benefits
to such persons in respect of services provided to any such entity, including
but not limited to any "employee benefit plan" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (whether or not terminated, if Consumers, or any of its subsidiaries,
including, but not limited to, any Consumers ERISA Affiliate), could have
statutory or contractual liability with respect thereto on or after the date
hereof); (ii) each management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change in control),
bonus or other plan or contract for personal services with or covering any
current officer, key employee or director or any consulting contract with any
person who prior to entering into such contract was a director or officer of
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate) (whether or not terminated, if Consumers (or any of
its subsidiaries, including, but not limited to, any Consumers ERISA Affiliate)
could have statutory or contractual liability with respect thereto on or after
the date hereof); and (iii) each "employee pension benefit plan" (within the
meaning of ERISA Section 3(2)) subject to Title IV of ERISA or the minimum
funding requirements of Code Section 412 maintained or contributed to by
Consumers or any Consumers ERISA Affiliate at any time during the seven (7) year
period immediately preceding the date hereof (such plans and arrangements
described in paragraphs (i), (ii) and (iii) of this Section 2.8.1 to be referred
to collectively as the "Consumers Benefit Plans"). With respect to each
Consumers Benefit Plan, Section 2.8.1 of the Disclosure Schedule contains a true
and complete list of the source or sources of benefit payments under the plan
(including, where applicable, the identity of any trust, whether or not a
grantor trust, insurance contract, custodial account, agency agreement,
Voluntary Employees Beneficiary Association ("VEBA") as that term is referred to
in Code Section 501(c)(9), or other arrangement that holds the assets of, or
serves as a funding vehicle or source of benefits for, such Consumers Benefit
Plan).
12
2.8.2 Except as disclosed in Section 2.8.2 of the Disclosure
Schedule, all contributions and other payments required to have been made by
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate) pursuant to any Consumers Benefit Plan (or to any
person pursuant to the terms thereof) have been timely made or the amount of
such payment or contribution obligation has been reflected in Consumers'
financial statements reflected in the Consumers SEC Documents.
2.8.3 Except as disclosed in Section 2.8.3 of the Disclosure
Schedule, each Consumers Benefit Plan that is an "employee pension benefit plan"
(within the meaning of ERISA Section 3(2)) is "qualified" within the meaning of
Code Section 401(a), both as to form and operation, and the IRS has determined
that each such Consumers Benefit Plan is qualified as to form (as evidenced by
the issuance of a favorable determination letter), and, to the knowledge of
Consumers, no event or condition exists or has occurred that could result in the
revocation of any such IRS determination. Consumers and each Consumers ERISA
Affiliate are in compliance with, and each Consumers Benefit Plan is and has
been operated in compliance with, all applicable laws, rules and regulations
governing such plan, including without limitation ERISA and the Code. Moreover,
neither Consumers (or any of its subsidiaries, including, but not limited to,
any Consumers ERISA Affiliate) nor any other individual or entity has engaged in
any transaction with respect to any Consumers Benefit Plan as a result of which
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate) could be subject to liability pursuant to ERISA
Section 409 or 502 or subject to an excise tax pursuant to Code Section 4975. In
addition, except as otherwise disclosed in Section 2.8.3 of the Disclosure
Schedule, no Consumers Benefit Plan that is an "employee pension benefit plan"
(within the meaning of ERISA Section 3(2)): (i) is subject to any ongoing audit,
investigation, or other administrative proceeding of the IRS, the Department of
Labor, or any other Governmental Entity; (ii) is the subject of any pending
application for administrative relief under any voluntary compliance program of
any Governmental Entity (including without limitation the IRS's Voluntary
Compliance Resolution Program, Closing Agreement Program, or Walk-in Closing
Agreement Program or the Department of Labor's Delinquent Filer Voluntary
Compliance Program), and no Consumers Benefit Plan has engaged in any act of
"self-correction" under the IRS's Administrative Policy Regarding
Self-Correction; and (iii) all filings required by ERISA and the Code as to each
Consumers Benefit Plan have been timely filed, and all required notices and
disclosures to participants in such Consumers Benefit Plans have been timely
provided.
2.8.4 Except as disclosed in Section 2.8.4 of the Disclosure
Schedule, with respect to Consumers Benefit Plans, individually and in the
aggregate, no termination or partial termination of any Consumers Benefit Plan
or other event has occurred and, to the knowledge of Consumers, there exists no
condition or set of circumstances that could subject Consumers or any Consumers
ERISA Affiliate to any liability arising under the Code, ERISA or any other
applicable law (including without limitation any liability to or under any such
plan or to the Pension Benefit Guaranty Corporation (the "PBGC")), or under any
indemnity agreement to which Consumers (or any of its subsidiaries, including,
but not limited to, any Consumers ERISA Affiliate) is a party, excluding
liability for benefit claims and funding obligations payable in the ordinary
course, and excluding liability for PBGC insurance premiums payable in the
ordinary course.
13
2.8.5 Except as disclosed in Section 2.8.5 of the Disclosure
Schedule, no Consumers Benefit Plan that is a "welfare plan" (within the meaning
of ERISA Section 3(1)) provides benefits for any retired or former employees
(other than as required pursuant to ERISA Section 601).
2.8.6 Consumers has made available to PSC a true and correct
copy of the following items with respect to each Consumers Benefit Plan, as may
be applicable: (i) each collective bargaining agreement to which Consumers or
any Consumers ERISA Affiliate is a party or under which Consumers or any
Consumers ERISA Affiliate has obligations; (ii) the current plan document
(including all amendments adopted since the most recent restatement) and its
most recently prepared summary plan description and all summaries of material
modifications prepared since the most recent summary plan description; (iii) the
IRS Form 5500, including all applicable financial statements and schedules and
opinions of independent accountants, for the three (3) most recent plan years;
(iv) each related trust agreement, insurance contract, service provider or
investment management agreement (including all amendments to each such
document); (v) the most recent IRS determination letter with respect to the
qualified status under Code Section 401(a) of such plan and a copy of any
application for an IRS determination letter filed since the most recent IRS
determination letter was issued; (vi) the most recent actuarial reports or
valuations; (vii) all personnel, payroll, and employment manuals and policies
applicable to Consumers employees; (viii) a written description of any Consumers
Benefit Plan that is not otherwise in writing; (ix) a reasonably representative
sample of notifications to affected employees of their rights under ERISA
Section 601 and Code Section 4980B; and (x) all notices that were given by
Consumers or any Consumers ERISA Affiliate to the IRS, or the United States
Department of Labor, and all notices given to Consumers or any Consumers ERISA
Affiliate by the IRS or the United States Department of Labor, during the last
four (4) calendar years.
2.8.7 Except as disclosed in Section 2.8.7 of the Disclosure
Schedule, the consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in any: (i) payment (whether of severance pay
or otherwise) becoming due from Consumers (or any of its subsidiaries,
including, but not limited to, any Consumers ERISA Affiliate) under any
applicable Consumers Benefit Plans to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement; (ii) benefit under any Consumers Benefit Plan being established or
becoming accelerated, vested or payable, except for a payment or benefit that
would have been payable under the same terms and conditions without regard to
the transactions contemplated by this Agreement; (iii) payment that will be
non-deductible to Consumers or subject to tax under Code Sections 280G or 4999;
or (iv) requirement that Consumers will be required to "gross up" or otherwise
compensate any individual because of the imposition of any excise tax on a
payment to such person.
14
2.8.8 Except as disclosed in Section 2.8.8 of the Disclosure
Schedule, each Consumers Benefit Plan that is subject to either or both of the
minimum funding requirements of ERISA Section 302 or to Title IV of ERISA, has
assets that, as of the date hereof, have a fair market value equal to or
exceeding the present value of the accrued benefit obligations thereunder on a
termination basis, as of the date hereof, based on the actuarial methods, tables
and assumptions theretofore utilized by such plan's actuary in preparing such
plan's most recently prepared actuarial valuation report, except to the extent
that applicable law would require the use of different actuarial assumptions if
such plan was to be terminated as of the date hereof. No Consumers Benefit Plan
subject to the minimum funding requirements of ERISA Section 302 and Code
Section 412 has incurred any "accumulated funding deficiency" (within the
meaning of ERISA Section 302 and Code Section 412).
2.8.9 Except as disclosed in Section 2.8.9 of the Disclosure
Schedule, no Consumers Benefit Plan is or was a "multiemployer plan" (within the
meaning of ERISA Section 4001(a) (3)), a multiple employer plan described in
Code Section 413(c), or a "multiple employer welfare arrangement" (within the
meaning of ERISA Section 3(40)); and neither Consumers nor any of its
subsidiaries (including, but not limited to, any Consumers ERISA Affiliate), has
been obligated to contribute to, or otherwise has or has had any liability with
respect to, any multiemployer plan, multiple employer plan, or multiple employer
welfare arrangement. With respect to any Consumers Benefit Plan that is listed
in Section 2.8.9 of the Disclosure Schedule as a multiemployer plan, neither
Consumers nor any of its subsidiaries (including, but not limited to, any
Consumers ERISA Affiliate) have made or incurred a "complete withdrawal" or a
"partial withdrawal," as such terms are defined in ERISA Sections 4203 and 4205,
therefrom at any time during the five (5) calendar year period immediately
preceding June 27, 1998 and the transactions contemplated by the Agreement will
not, in and of themselves, give rise to such a "complete withdrawal" or "partial
withdrawal."
2.8.10 Except as disclosed in Section 2.8.10 of the Disclosure
Schedule: (i) neither Consumers nor any subsidiary of Consumers (including, but
not limited to, any Consumers ERISA Affiliate) is subject to any legal,
contractual, equitable or other obligation to establish as of any date any
employee benefit plan of any nature, including without limitation any pension,
profit sharing, welfare, post-retirement welfare, stock option, stock or cash
award, nonqualified deferred compensation or executive compensation plan, policy
or practice; and (ii) after review of all Consumers Benefit Plan documents,
Consumers and its subsidiaries, acting alone or together, (including, but not
limited to, any Consumers ERISA Affiliate) may, without the consent of any
employee, beneficiary or dependent, employees' organization or other person,
terminate, modify or amend any Consumers Benefit Plan or any other employee
benefit plan, policy, program or practice (or its participation in any such
Consumers Benefit Plan or other employee benefit plan, policy, program or
practice) at any time sponsored, maintained or contributed to by Consumers (or
any of its subsidiaries, including, but not limited to, any Consumers ERISA
Affiliate), effective as of any date before, on, or after the Effective Time.
2.8.11 Except as disclosed in Section 2.8.11 of the Disclosure
Schedule: (i) no event constituting a "reportable event" (within the meaning of
ERISA Section 4043(b)) for which the thirty (30) calendar day notice requirement
has not been waived by the PBGC has occurred with respect to any Consumers
Benefit Plan, and (ii) no liability, claim, action or litigation has been made,
commenced, or threatened, by or against Consumers (or any of its subsidiaries,
including, but not limited to, any Consumers ERISA Affiliate) with respect to
any Consumers Benefit Plan (other than for benefits or PBGC premiums payable in
the ordinary course).
15
2.8.12 Except as disclosed in Section 2.8.12 of the Disclosure
Schedule, the operation and administration of any Consumers Benefit Plan by
Consumers (or any of its subsidiaries, including, but not limited to, any
Consumers ERISA Affiliate), and, where applicable, to the knowledge of
Consumers, by any independent third-party service provider or other such entity
providing administrative services to, or on behalf of, such Consumers Benefit
Plan, will not result in a Year 2000 Problem with a Material Adverse Effect.
2.9 Taxes. Except as disclosed in Section 2.9 of the Disclosure
Schedule and except for payments required to be made pursuant to Article 4
hereof:
2.9.1 Consumers and each of its subsidiaries has duly filed
all tax returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed, granted and
have not expired. All tax returns filed by Consumers and each of its
subsidiaries are complete and accurate in all material respects. Consumers and
each of its subsidiaries has paid (or Consumers has paid on the subsidiaries'
behalf) all taxes due on such returns, and the most recent financial statements
contained in the Consumers SEC Documents and all Consumers SEC Documents filed
prior to the Closing Date reflect an adequate reserve for all taxes payable by
Consumers and its subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
2.9.2 No deficiencies for any taxes have been proposed,
asserted or assessed against Consumers or any of its subsidiaries that are not
adequately reserved for, and no requests for waivers of the time to assess any
such taxes have been granted or are pending. The federal income tax returns of
Consumers and each of its subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue Service, or the
statute of limitations on assessment or collection of any federal income taxes
due from Consumers or any of its subsidiaries has expired, through such taxable
years as are set forth in Section 2.9.2 of the Disclosure Schedule.
2.9.3 As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, premium, franchise, sales,
excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any interest, penalties and
additions to taxes relating thereto.
2.9.4 Neither Consumers nor any of its subsidiaries has made,
or is obligated to make, in connection with the transactions contemplated by
this Agreement or otherwise, any payments that will not be deductible because of
the application of Section 280G or Section 162(m) of the Code.
16
2.9.5 Neither Consumers nor any of its subsidiaries has made
any election, filed any consent or entered into any agreement with respect to
taxes that is not reflected on the federal income tax returns of Consumers and
its subsidiaries for the three (3) years ended December 31, 1996.
2.10 Compliance With Applicable Laws. Except as disclosed in Section
2.10 of the Disclosure Schedule:
2.10.1 The business of Consumers and each of its subsidiaries
is being conducted in compliance, in all material respects, with all applicable
laws, ordinances, rules and regulations, decrees and orders of any Governmental
Entity, and all material notices, reports, documents and other information
required to be filed thereunder within the last three (3) years were properly
filed and were in compliance in all material respects with such laws.
2.10.2 Except as disclosed in the Consumers SEC Documents,
Consumers and each of its subsidiaries has all material licenses (including,
without limitation, utility licenses), permits, authorizations, franchises and
rights (collectively, "Licenses") which are necessary for it to own or lease, as
the case may be, and operate its properties and assets and to conduct its
business as now conducted. The business of Consumers and each of its
subsidiaries has been and is being conducted in compliance in all material
respects with all such Licenses. All such Licenses are in full force and effect,
and there are no material restrictions or limitations contained within the
Licenses which would prevent Consumers from operating as it does presently, and
there is no proceeding or investigation pending or, to the knowledge of
Consumers, threatened which would reasonably be expected to lead to the
revocation, amendment, failure to renew, limitation, suspension or restriction
of any such License.
2.10.3 Each subsidiary of Consumers that has been or is
required to do so has filed all forms, reports, statements and other documents
required by law to be filed by it with the applicable Governmental Entity, and
such forms, reports, statements and other documents, complied in all material
respects with the statutory and regulatory requirements applicable thereto.
2.11 Environmental Protection.
2.11.1 Except as disclosed in Section 2.11.1 of the Disclosure
Schedule or as disclosed in Consumers SEC Documents, Consumers and its
subsidiaries are and have been in material compliance with all applicable
Environmental Laws (as defined in Section 2.11.7), except where the failure to
be or to have so been in material compliance, in the aggregate, would not have a
present Material Adverse Effect. Except as disclosed in Section 2.11.1 of the
Disclosure Schedule, neither Consumers nor any of its subsidiaries has received
any written notice from any person or Governmental Entity that alleges that
Consumers or any of its subsidiaries is not or has not been in material
compliance with applicable Environmental Laws, except where the failure to be or
to have so been in material compliance, in the aggregate, would not have a
present Material Adverse Effect.
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2.11.2 Except as disclosed in Section 2.11.2 of the Disclosure
Schedule or as disclosed in the Consumers SEC Documents, Consumers and each of
its subsidiaries have obtained or have applied for all material environmental,
health and safety permits and authorizations (collectively, "Environmental
Permits") necessary for the construction of their facilities and the conduct of
their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and Consumers and its subsidiaries are in material compliance
with all terms and conditions of all such Environmental Permits and are not
required to make any material expenditures in connection with any renewal
application pending Governmental Entity approval, except where the failure to
obtain or be in such compliance and the requirement to make such expenditures,
in the aggregate, would not have a Material Adverse Effect.
2.11.3 Except as disclosed in Section 2.11.3 of the Disclosure
Schedule or as disclosed in Consumers SEC Documents, no Environmental Claim (as
defined in Section 2.11.7) is pending or, to the knowledge of Consumers,
threatened (i) against Consumers or any of its subsidiaries, (ii) against any
person or entity whose liability for any Environmental Claim Consumers or any of
its subsidiaries has or may have retained or assumed either contractually or by
operation of law, or (iii) against any real or personal property or operations
that Consumers or any of its subsidiaries owns, leases or manages, in whole or
in part, or (iv) to the knowledge of Consumers, against any real property at
which any Hazardous Materials, as defined in Section 2.11.7, generated or used
by either Consumers or any of its subsidiaries have been stored, treated, or
disposed of, that is reasonably likely in the aggregate to have a Material
Adverse Effect.
2.11.4 Except as disclosed in Section 2.11.4 of the Disclosure
Schedule or as disclosed in the Consumers SEC Documents, to the knowledge of
Consumers, there has been no Release (as defined in Section 2.11.7) or
threatened Release of Hazardous Materials (as defined in Section 2.11.7) that
would be reasonably likely to (i) form the basis of any Environmental Claim
against Consumers or any of its subsidiaries, or against any person or entity
whose liability for any Environmental Claim Consumers or any of its subsidiaries
has or may have retained or assumed either contractually or by operation of law,
or (ii) cause damage to or diminution of real property or operations that
Consumers or any of its subsidiaries owns, leases, or manages, in whole or in
part, except for Releases or threatened Releases of Hazardous Materials the
liability for which would not in the aggregate have a Material Adverse Effect.
2.11.5 Except as disclosed in Section 2.11.5 of the Disclosure
Schedule, or as disclosed in the Consumers SEC Documents, to the knowledge of
Consumers, with respect to any predecessor of Consumers or any of its
subsidiaries, there is no Environmental Claim pending or threatened, or Release
of Hazardous Materials, that would be reasonably likely to form the basis of any
Environmental Claims that are reasonably likely to have, in the aggregate, a
Material Adverse Effect.
2.11.6 To the knowledge of Consumers, Consumers has disclosed
to PSC all material facts that Consumers reasonably believes are likely to
require material expenditures by Consumers or any of its subsidiaries in order
to comply with current applicable Environmental Laws arising from (i) the cost
of pollution control equipment currently required or known to be required in the
future, (ii) current investigatory, removal, remediation or response costs or
investigatory, removal, remediation or response costs known to be required in
the future, in each case, both on-site and off-site, and (iii) any other
environmental matters affecting Consumers or any of its subsidiaries.
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2.11.7 As used in this Agreement:
2.11.7.1 "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices by any person
or entity (including without limitation any Governmental Entity) alleging
liability or potential liability (including without limitation potential
liability for enforcement costs, investigatory costs, cleanup costs, response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on, or
resulting from (i) the presence, or Release or threatened Release, of any
Hazardous Materials at any location, whether or not owned, operated, leased or
managed by Consumers or any of its subsidiaries or joint ventures, (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Laws, or (iii) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence, Release, or threatened Release of
any Hazardous Materials.
2.11.7.2 "Environmental Laws" means all federal,
state and local laws, rules, regulations, ordinances, or consent decrees
relating to pollution or protection of human health or the environment
(including without limitation air inside any structure, ambient air, surface
water, groundwater, land surface or subsurface strata), including without
limitation laws and regulations relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
2.11.7.3. "Hazardous Materials" means (i) any
petroleum or petroleum products or petroleum wastes (including crude oil or any
fraction thereof), nuclear fuel or waste or other radioactive materials, friable
asbestos or friable asbestos-containing material, urea formaldehyde foam
insulation, and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls, (ii) any chemicals, materials or
substances which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"chemical wastes", "residual wastes", "industrial wastes", or words of similar
import, under any Environmental Laws, and (iii) any other chemical, material,
substance or waste, exposure to or use, transport, treatment, storage, or
disposal of which is now prohibited, limited or regulated under any
Environmental Laws in a jurisdiction in which Consumers or any of its
subsidiaries or joint ventures operates.
2.11.7.4 "Release" means any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into any air, soil, surface water, groundwater, indoor structure,
or outdoor structure.
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2.12 Litigation. Except as set forth in the Consumers SEC Documents or
Section 2.12 of the Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Consumers,
threatened against or affecting Consumers or any of its subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect Consumers' ability
to consummate the transactions contemplated hereby. Neither Consumers nor any
its subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Except as set forth in the Consumers SEC Documents or
Section 2.12 of the Disclosure Schedule, none of Consumers' subsidiaries whose
rates or services are subject to regulation by a Governmental Entity (i) has
rates which have been or are being collected subject to refund, pending final
resolution of any proceeding pending before a Governmental Entity or on appeal
to the courts, or (ii) is a party to any proceeding before the Governmental
Entity or on appeal from orders of a Governmental Entity.
2.13 Labor Relations. Except as set forth in Section 2.13 of the
Disclosure Schedule:
2.13.1 Neither Consumers nor any of its subsidiaries is a
party to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no current union
representation issue involving employees of Consumers or any of its
subsidiaries, nor does Consumers or any of its subsidiaries know of any activity
or proceeding of any labor organization (or representative thereof) or employee
group (or representative thereof) to organize any such employees.
2.13.2 There is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance procedure
against Consumers or any of its subsidiaries pending or, to the knowledge of
Consumers, threatened that could reasonably be expected to have a Material
Adverse Effect.
2.13.3 There is no complaint, lawsuit or proceeding in any
forum by or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortuous conduct in
connection with the employment relationship against Consumers or any of its
subsidiaries pending or, to the knowledge of Consumers, threatened that could
reasonably be expected to have a Material Adverse Effect.
2.13.4 There is no strike, dispute, slowdown, work stoppage or
lockout pending or, to the knowledge of Consumers, threatened against or
involving Consumers or any of its subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
2.13.5 Consumers and each of its subsidiaries is in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health, except for non-compliance that would not, individually or in the
aggregate, have a Material Adverse Effect.
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2.13.6 There is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of Consumers, threatened
with respect to which any current or former director, officer, employee or agent
of Consumers or any of its subsidiaries is or may be entitled to claim
indemnification from Consumers or any of its subsidiaries pursuant to their
respective articles or certificates of incorporation or bylaws, as provided in
any indemnification agreement to which Consumers or any of its subsidiaries is a
party, or pursuant to applicable law that could reasonably be expected to have a
Material Adverse Effect.
2.14 Intellectual Property. Consumers and its subsidiaries possess or
have adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights currently used or necessary for the operation
of their business (collectively, the "Consumers Intellectual Property"), except
where the failure to possess or have adequate rights to use such properties
would not have a Material Adverse Effect. Except as set forth in Section 2.14 of
the Disclosure Schedule, all of the Consumers Intellectual Property is owned by
Consumers or one of its subsidiaries, free and clear of any and all liens,
claims or encumbrances, except for those liens, claims and encumbrances that
would not, individually or in the aggregate, have a Material Adverse Effect, and
neither Consumers nor any of its subsidiaries has forfeited or otherwise
relinquished any of the Consumers Intellectual Property, which forfeiture would
have a Material Adverse Effect. To the knowledge of Consumers, the use of the
Consumers Intellectual Property by Consumers or its subsidiaries does not, in
any material respect, conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill
(including, without limitation, any intellectual property right, trademark,
trade name, patent, service ▇▇▇▇, brand ▇▇▇▇, brand name, computer program,
database, industrial design, copyright or any pending application therefor) of
any other person, and neither Consumers nor any of its subsidiaries has received
notice of any claim or otherwise knows that any of the Consumers Intellectual
Property is invalid, conflicts with the asserted rights of any other person, has
not been used or enforced or has failed to be used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of any of
Consumers Intellectual Property, except for such conflicts, infringements,
violations, interferences, claims, invalidity, abandonments, cancellations or
unenforceability that would not, individually or in the aggregate, have a
Material Adverse Effect.
2.15 No Default. Neither Consumers nor any of its subsidiaries is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of (i) its articles or certificate of incorporation or bylaws, (ii)
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which it is now a party or by which it or any of its properties or
assets may be bound (except for the requirement under certain of such
instruments to file supplemental indentures as a result of the transactions
contemplated hereby), or (iii) any order, writ, injunction, decree, statute,
rule or regulation applicable to it, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate would not have a Material Adverse
Effect. Consumers and each of its subsidiaries have fulfilled, and have taken
all action reasonably necessary to date to enable them to fulfill when due, all
of their material obligations under all contracts, commitments and arrangements
and, to the knowledge of Consumers, no breach or default by any other party
under such contracts, commitments or arrangements has occurred or is threatened
that will or could impair the ability of Consumers or any of its subsidiaries to
enforce any of its rights thereunder in any material respect.
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2.16 Regulation as a Utility. Certain subsidiaries of Consumers are
regulated as public utilities in the states of Maine, Ohio, Illinois,
Pennsylvania, and New Jersey. Except as disclosed in Section 2.16 of the
Disclosure Schedule, neither Consumers nor any "subsidiary company" or
"affiliate" (as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended (the "1935 Act")) of Consumers is subject to regulation as a
public utility or public service company (or similar designation) by any other
state in the United States, by the United States or any agency or
instrumentality of the United States or by any foreign country. Consumers is not
a holding company under the 1935 Act. Except as disclosed in Section 2.16 of the
Disclosure Schedule, no assets of Consumers or any of its subsidiaries or
divisions have been disallowed in any ratemaking procedure before any
Governmental Entity.
2.17 Insurance. Except as disclosed in Section 2.17 of the Disclosure
Schedule, Consumers and each of its subsidiaries is, and has been continuously
since January 1, 1993, insured with financially responsible insurers in such
amounts and against such risks and losses as are disclosed in Section 2.17 of
the Disclosure Schedule. Except as disclosed in Section 2.17 of the Disclosure
Schedule, neither Consumers nor any of its subsidiaries has received any notice
of cancellation or termination with respect to any insurance policy. To the
knowledge of Consumers, there is no basis for any claim under D&O Insurance, as
defined in Section 4.16.3. All insurance policies of Consumers and its
subsidiaries are valid and enforceable policies.
2.18 Change in Business Relationships. Except as disclosed in Section
2.18 of the Disclosure Schedule, neither Consumers nor any of its subsidiaries
has knowledge of any event or circumstance that indicates that, whether on
account of the transactions contemplated by this Agreement or otherwise, any
customer, agent, representative or supplier of Consumers or any of its
subsidiaries intends to discontinue, diminish or change its relationship with
Consumers or any of its subsidiaries in any way that would be reasonably likely
to have a Material Adverse Effect.
2.19 Voting Requirements. The only votes of the holders of any class or
series of Consumers' capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement are: (i) the affirmative vote of the
holders of a majority of the outstanding Consumers Common Shares entitled to
vote at the Consumers Special Meeting, as defined in Section 4.2.1, with respect
to the approval of the Merger; and (ii) the affirmative vote of the holders of a
majority of the outstanding Consumers Preferred Shares, if any, entitled to vote
at the Consumers Special Meeting, with respect to the approval of the Merger.
2.20 Brokers. This Agreement does not give rise to any valid claim by
any person against Consumers or any of its subsidiaries for a finder's fee,
brokerage commission or similar payment; except for ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, which
represented Consumers and whose fees and expenses shall be paid by Consumers.
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2.21 Year 2000 Problem. Except as disclosed in the Consumers SEC
Documents or in Section 2.21 of the Disclosure Schedule, the Year 2000 Problem
will not result in a Material Adverse Effect. For purposes of this Agreement,
the term "Year 2000 Problem" shall mean the risk that computer applications used
by or for the benefit of Consumers or any of its subsidiaries may be unable to
recognize or perform properly certain date sensitive functions involving certain
dates prior to and any date after December 31, 1999.
2.22 Knowledge. For purposes of this Article 2, "to the knowledge of
Consumers" shall mean to the knowledge of the President and Vice Presidents of
Consumers and the Presidents of each of Consumers' subsidiaries, after
reasonable inquiry.
2.23 Disclosure. Matters disclosed in any of the Consumers SEC
Documents, in any section of the Disclosure Schedule, or in any section of this
Article 2 shall be considered disclosed for all purposes under this Article 2.
2.24 Fairness Opinion. Consumers has received an opinion of ▇▇ ▇▇▇▇
▇▇▇▇▇▇, dated June 27, 1998, that as of that date the terms of the Merger are
fair to the current shareholders of Consumers from a financial point of view.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PSC AND ACQUISITION
PSC and Acquisition hereby jointly and severally represent and warrant
to Consumers as follows:
3.1 Organization, Standing and Corporate Authority. Each of PSC and
Acquisition is a corporation duly organized and validly existing under the laws
of the Commonwealth of Pennsylvania and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of PSC and
Acquisition is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary except
where the failure to be so qualified would not individually or in the aggregate
have a Material Adverse Effect (as that term is defined in Section 10.9) on the
ability of PSC or Acquisition to consummate the transactions contemplated
hereby. PSC and Acquisition have delivered to Consumers complete and correct
copies of their Articles of Incorporation and By-Laws, as amended to the date of
this Agreement.
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3.2 Capital Structure.
3.2.1 The authorized capital stock of PSC consists of: (i)
40,000,000 PSC Common Shares having a par value of $.50 per share; and (ii)
1,770,819 shares of preferred stock having a par value of $1.00 per share. At
the close of business on June 24, 1998, there were (i) 27,511,394 PSC Common
Shares issued and outstanding, (ii) 527,577 PSC Common Shares held as treasury
shares, (iii) 1,885,714 PSC Common Shares reserved for issuance under PSC's
long-term incentive plans, (iv) 100,000 shares of Series A Preferred Stock
reserved for issuance under PSC's Shareholder Rights Plan; (v) 32,200 shares of
Series B Preferred Stock issued and outstanding; and (vi) 1,457,200 shares
reserved for issuance under PSC's direct stock purchase and dividend
reinvestment plan. PSC has entered into an agreement, dated June 3, 1998, by and
among PSC, Philadelphia Suburban Water Company ("PSWC"), Berkshire Greens, Inc.
("Berkshire"), and Flying Hills Water Company ("FHWC"), a wholly owned
subsidiary of Berkshire, pursuant to which PSC has agreed to issue 42,000 PSC
Common Shares (as unregistered shares with certain piggyback registration
rights) to Berkshire upon the merger of FHWC into PSWC. Except as set forth
above, at the close of business on June 24, 1998, no other shares of capital
stock or other voting securities of PSC were issued, reserved for issuance, or
outstanding. All such outstanding PSC Common Shares are, and all PSC Common
Shares which may be issued in connection with the Merger will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. All the outstanding shares of capital stock of each
significant subsidiary (within the meaning of Rule 1-02 of Regulation S-X) of
PSC have been validly issued and are fully paid and nonassessable and are owned
by PSC or a wholly-owned subsidiary, and are clear of all liens, claims,
encumbrances, restraints on alienation, or other restrictions with respect to
the transferability or assignability thereof (other than restrictions imposed by
federal or state securities laws). Except as set forth in this Agreement,
neither PSC nor any of its significant subsidiaries has any outstanding option,
warrant, subscription or other agreement or commitment which either obligates
PSC or any of its significant subsidiaries to issue, sell or transfer,
repurchase, redeem, otherwise acquire or vote any shares of the capital stock of
PSC or any of its significant subsidiaries, or which restricts the transfer of
PSC Common Shares.
3.2.2 As of the date hereof, the authorized capital stock of
Acquisition consists of 1,000 common shares, without par value, all of which are
issued and outstanding and owned by PSC. All such outstanding common shares are
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
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3.3 Authority; Noncontravention. Each of PSC and Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. Subject to the approval of their
shareholders as set forth in Section 4.2.2, the execution and delivery of this
Agreement by PSC and Acquisition and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of PSC and Acquisition. This Agreement has been
duly executed and delivered by PSC and Acquisition and, assuming this Agreement
has been duly executed and delivered by Consumers, constitutes a valid and
binding obligation of each of PSC and Acquisition, enforceable against each of
them in accordance with its terms, except that the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditor's rights generally and by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). Except as set forth in Section 3.3 of the
PSC Disclosure Schedule and subject to the governmental filings and other
matters referred to in the following sentence, the execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not (i)
conflict with any of the provisions of the Articles of Incorporation or By-Laws
of PSC or Acquisition, (ii) conflict with, result in a breach of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
a material benefit under, or require the consent of any person under, any
indenture, or other agreement, permit, concession, franchise, license or similar
instrument or undertaking to which PSC or any of its subsidiaries is a party or
by which PSC or any of its subsidiaries or any of their assets is bound or
affected, or (iii) contravene any law, rule or regulation of any state or of the
United States or any political subdivision thereof or therein, or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
subject, in the case of clauses (ii) and (iii), to those conflicts, breaches,
defaults and similar matters, which, individually or in the aggregate, would not
materially and adversely affect PSC's ability to consummate the transactions
contemplated hereby. No consent, approval or authorization of, or declaration or
filing with, or notice to, any Governmental Entity which has not been received
or made is required by or with respect to PSC or Acquisition in connection with
the execution and delivery of this Agreement by PSC and Acquisition or the
consummation by them of any of the transactions contemplated hereby, except for
(a) the filing of premerger notification and report forms under the HSR Act with
respect to the Merger, (b) the filing with the SEC of a registration statement
on Form S-4 by PSC in connection with the issuance of PSC Common Shares in the
merger (the "Form S-4") and such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (c) the filing of articles of merger with the Pennsylvania
Secretary of State and appropriate documents with the relevant authorities of
the other states in which Consumers is qualified to do business, (d) required
filings with the Pennsylvania Public Utility Commission, and (e) such other
consents, approvals, authorizations, filings or notices as are set forth in
Section 3.3 of the PSC Disclosure Schedule.
3.4 PSC SEC Documents and Financial Statements.
3.4.1 PSC has timely filed all required reports, schedules,
forms, statements and other documents with the SEC from January 1, 1993 through
June 27, 1998 (the "PSC SEC Documents"). (All such documents filed by PSC with
the SEC from June 27, 1998 until the Closing Date shall also be included in the
definition of PSC SEC Documents.) As of their respective dates (or, with respect
to any amendment to the PSC SEC Documents, as of the date of the filing of such
amendment), the PSC SEC Documents complied with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such PSC SEC
Documents, and none of the PSC SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.4.2 The consolidated financial statements of PSC included in
the PSC SEC Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except as may be indicated
in the notes thereto or, in the case of unaudited interim financial statements,
as permitted by Rule 10-01 of Regulation S-X) and fairly present, in all
material respects, the consolidated financial position of PSC and its
consolidated subsidiaries, as of the dates thereof and the consolidated results
of their operations, changes in shareholders' equity and consolidated cash flows
for the periods then ended (subject, in the case of unaudited financial
statements, to normal recurring adjustments, none of which is material).
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3.4.3 Except as disclosed in the PSC SEC Documents or in the
PSC Disclosure Schedule, neither PSC nor any of its subsidiaries has any
absolute, accrued, contingent or other liabilities or obligations due or to
become due, and there are no claims or causes of action that have been or, to
the knowledge of PSC, are reasonably likely to be asserted against PSC or any of
its subsidiaries, except (i) as and to the extent reflected or reserved against
on the balance sheet included in PSC's Annual Report on Form 10-K for the year
ended December 31, 1997 (the "PSC Base Balance Sheet"), or included in the notes
to the PSC Base Balance Sheet, (ii) for normal and recurring liabilities
incurred since December 31, 1997, in the ordinary course of business consistent
with past practice, and (iii) for such other liabilities and obligations that
are not in the aggregate reasonably likely to have a Material Adverse Effect.
3.5 Absence of Certain Changes or Events. Except as disclosed in the
PSC SEC Documents or in Section 3.5 of the PSC Disclosure Schedule, since the
date of the PSC Base Balance Sheet, PSC and its subsidiaries have conducted
their business only in the ordinary course, and there has not been (i) any
change which has had or which would have a Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of PSC's outstanding
capital stock (other than regular quarterly cash dividends in accordance with
PSC's present dividend policy), or (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of,
or in substitution for shares of its outstanding capital stock.
3.6 Compliance With Applicable Laws. Except as disclosed in Section 3.6
of the PSC Disclosure Schedule:
3.6.1 The business of PSC and each of its significant
subsidiaries is being conducted in compliance, in all material respects, with
all applicable laws, ordinances, rules, regulations, decrees and orders of any
Governmental Entity, and all material notices, reports, documents and other
information required to be filed thereunder within the last three (3) years were
properly filed and were in compliance in all material respects with such laws.
3.6.2 Except as disclosed in the PSC SEC Documents, PSC and
each of its significant subsidiaries has all material Licenses which are
necessary for it to own or lease, as the case may be, and operate its properties
and assets and to conduct its business as now conducted. The business of PSC and
each of its significant subsidiaries has been and is being conducted in
compliance in all material respects with all such Licenses. All such Licenses
are in full force and effect, and there are no material restrictions or
limitations contained within the Licenses which would prevent PSC from operating
as it does presently, and there is no proceeding or investigation pending or, to
the knowledge of PSC, threatened which would reasonably be expected to lead to
the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such License.
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3.6.3 Each subsidiary of PSC that has been or is required to
do so has filed all forms, reports, statements and other documents required by
law to be filed by it with the Pennsylvania Public Utility Commission, and such
forms, reports, statements and other documents, complied in all material
respects with the statutory and regulatory requirements applicable thereto.
3.7 Litigation. Except as set forth in the PSC SEC Documents, there is
no suit, claim, action, proceeding or investigation pending or, to the knowledge
of PSC, threatened against or affecting PSC or any of its subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect PSC's ability to
consummate the transactions contemplated hereby. Neither PSC nor any its
subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect Except as set forth in the PSC SEC Documents or Section
3.7 of the PSC Disclosure Schedule, none of PSC or PSC's subsidiaries whose
rates or services are subject to regulation by a Governmental Entity (i) has
rates which have been or are being collected subject to refund, pending final
resolution of any proceeding pending before a Governmental Entity or an
appearance before the courts, or (ii) is a party to any proceeding before the
Governmental Entity or on appeal from any order of the Governmental Entity.
3.8 Brokers. This Agreement does not give rise to any valid claim by
any person against PSC or any of its subsidiaries for a finder's fee, brokerage
commission or similar payment, except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, which
represented PSC, and whose fees and expenses shall be paid by PSC.
3.9 Fairness Opinion. PSC has received an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇
Barney, dated June 26, 1998, that as of that date the terms of the Merger are
fair to PSC from a financial point of view.
3.10 Taxes. Except as disclosed in Section 3.10 of the PSC Disclosure
Schedule and except for payments required to be made pursuant to Article 4
hereof:
3.10.1 PSC and each of its subsidiaries has duly filed all tax
returns and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have not
expired. All tax returns filed by PSC and each of its subsidiaries are complete
and accurate in all material respects. PSC and each of its subsidiaries has paid
(or PSC has paid on the subsidiaries' behalf) all taxes due on such returns, and
the most recent financial statements contained in the PSC SEC Documents and all
PSC SEC Documents filed prior to the Closing Date reflect an adequate reserve
for all taxes payable by PSC and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
3.10.2 No deficiencies for any taxes have been proposed,
asserted or assessed against PSC or any of its subsidiaries that are not
adequately reserved for, and no requests for waivers of the time to assess any
such taxes have been granted or are pending. The federal income tax returns of
PSC and each of its subsidiaries consolidated in such returns have been examined
by and settled with the United States Internal Revenue Service, or the statute
of limitations on assessment or collection of any federal income taxes due from
PSC or any of its subsidiaries has expired, through such taxable years as are
set forth in Section 3.10.2 of the PSC Disclosure Schedule.
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3.10.3 As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, premium, franchise, sales,
excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any interest, penalties and
additions to taxes relating thereto.
3.10.4 Neither PSC nor any of its subsidiaries has made, or is
obligated to make, in connection with the transactions contemplated by this
Agreement or otherwise, any payments that will not be deductible because of the
application of Section 280G or Section 162(m) of the Code.
3.10.5 Neither PSC nor any of its subsidiaries has made any
election, filed any consent or entered into any agreement with respect to taxes
that is not reflected on the federal income tax returns of PSC and its
subsidiaries for the three (3) years ended December 31, 1997 (copies of which
returns have been made available to Consumers for review prior to the date of
this Agreement).
3.11 Regulation as a Utility. Certain subsidiaries of PSC are regulated
as public utilities in the Commonwealth of Pennsylvania. Except as disclosed in
Section 3.11 of the PSC Disclosure Schedule, neither PSC nor any "subsidiary
company" or "affiliate" (as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act")) of PSC is subject to
regulation as a public utility or public service company (or similar
designation) by any other state in the United States, by the United States or
any agency or instrumentality of the United States or by any foreign country.
PSC is not a holding company under the 1935 Act. Except as disclosed in Section
3.11 of the PSC Disclosure Schedule, no assets of PSC or any of its subsidiaries
or divisions have been disallowed in any ratemaking procedure before any
Governmental Entity.
3.12 Insurance. Except as disclosed in Section 3.12 of the PSC
Disclosure Schedule, PSC and each of its subsidiaries is, and has been
continuously since January 1, 1993, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary for
companies engaged in the respective businesses conducted by PSC and its
subsidiaries during such time period. Except as disclosed in Section 3.12 of the
PSC Disclosure Schedule, neither PSC nor any of its subsidiaries has received
any notice of cancellation or termination with respect to any insurance policy.
To the knowledge of PSC, there is no basis for any claim under any PSC directors
and officers liability insurance policy. Except as disclosed in Section 3.12 of
the PSC Disclosure Schedule, to the knowledge of PSC, (i) the reserves on the
books of PSC and its subsidiaries in connection with existing claims under its
liability insurance policies are adequate to cover PSC's deductible or
self-insured retentions under such policies, and (ii) the reserves on the books
of PSC and its subsidiaries in connection with existing claims related to PSC's
discontinued operations are adequate to cover such claims. All insurance
policies of PSC and its subsidiaries are valid and enforceable policies.
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3.13 Voting Requirements. The affirmative vote of the holders of a
majority of each of the outstanding PSC Common Shares entitled to vote at the
PSC Special Meeting, as defined in Section 4.2.2, with respect to the approval
of the Merger are the only votes of the holders of any class or series of PSC's
capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement. This Agreement and the Merger shall have been
approved and adopted by the sole shareholder of Acquisition.
3.14 Disclosure. Matters disclosed in any of the PSC SEC Documents, in
any section of the PSC Disclosure Schedule, or in any section of this Article 3
shall be considered disclosed for all purposes under this Article 3.
3.15 Knowledge. For purposes of this Article 3, "to the knowledge of
PSC" shall mean to the knowledge of the executive officers of PSC and each of
its subsidiaries, after reasonable inquiry.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4.
4.1.1 Form S-4; Proxy Statement/Prospectus. As soon as
practicable following the date of this Agreement, Consumers and PSC shall
prepare and file with the SEC a preliminary proxy statement relating to the
Consumers Special Meeting and PSC Special Meeting, and PSC shall prepare and
file with the SEC the registration statement or Form S-4, in which such
preliminary proxy statement will be included as a preliminary prospectus (such
proxy statement, together with the prospectus relating to the PSC Common Shares,
in each case as amended or supplemented from time to time, is referred to herein
as the "Proxy Statement/Prospectus"). PSC shall use its best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing. Consumers will use its best efforts to cause the Proxy
Statement/Prospectus to be mailed to Consumers' shareholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
PSC shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of the PSC
Common Shares in the Merger. Consumers shall furnish all information concerning
Consumers and the holders of the Consumers Common Shares and Consumers Preferred
Shares, and PSC shall furnish all information concerning PSC and Acquisition, as
may be reasonably requested in connection with any such action.
4.1.2 Consumers Information. Consumers agrees that none of the
information supplied or to be supplied by Consumers specifically for inclusion
or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented and at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statement therein not misleading, and (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to Consumers'
shareholders and PSC's shareholders and at the time of the Consumers Special
Meeting and the PSC Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Consumers agrees that the Proxy
Statement/Prospectus will comply in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except with
respect to statements made or incorporated by reference therein based on
information supplied by PSC specifically for inclusion or incorporation by
reference in the Proxy Statement/Prospectus.
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4.1.3 PSC Information. PSC agrees that none of the information
supplied or to be supplied by PSC specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to PSC's shareholders
and Consumers' shareholders and at the time of the PSC Special Meeting and the
Consumers' Special Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. PSC agrees that the Form S-4 will comply in all
material respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder, and the Proxy Statement/Prospectus will
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder, except with respect to
statements made or incorporated by reference therein based on information
supplied by Consumers specifically for inclusion or incorporation by reference
therein.
4.1.4 SEC Filings. Consumers and PSC shall cooperate with each
other and provide to each other all information necessary in order to prepare
the Form S-4, the Proxy Statement/Prospectus, and the other filings
(collectively, the "SEC Transaction Filings") and shall provide promptly to the
other Party any information that such Party may obtain that could necessitate
amending any such document. Consumers and PSC will each notify the other
promptly of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the SEC Transaction Filings or for additional information and will supply the
other Party with copies of all correspondence between Consumers or any of its
representatives or PSC and any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. If at any time prior to the
Effective Time, any event shall occur that should be set forth in an amendment
of, or a supplement to, any of the SEC Transaction Filings, Consumers and PSC
agree promptly to prepare and file such amendment or supplement and to
distribute such amendment or supplement as required by applicable law,
including, in the case of an amendment or supplement to the Proxy Statement,
mailing such supplement or amendment to Consumers' stockholders. PSC shall not
be required to maintain the effectiveness of the Registration Statement for the
purpose of resale by stockholders of Consumers who may be affiliates of
Consumers or PSC pursuant to Rule 145 under the Securities Act. The information
provided and to be provided by Consumers and PSC for use in SEC Transaction
Filings shall at all times prior to the Effective Time be true and correct in
all material respects and shall not omit to state any material fact required to
be stated therein or necessary in order to make such information not false or
misleading, and Consumers and PSC each agree to promptly correct any such
information provided by it for use in the SEC Transaction Filings that shall
have become false or misleading. The SEC Transaction Filings, when filed with
the SEC or any appropriate government official, shall comply in all material
respects with all applicable requirements of law.
30
4.2 Shareholders Meetings.
4.2.1 Consumers' Shareholders Meeting. Consumers will take all
action necessary in accordance with applicable law and its Articles of
Incorporation and By-Laws to convene a meeting of its shareholders (the
"Consumers Special Meeting") to consider and vote upon the approval of the
Merger. Subject to Section 4.7, Consumers will, through its Board of Directors,
recommend to its shareholders approval of the Merger. Without limiting the
generality of the foregoing, Consumers agrees that, subject to its right to
terminate this Agreement pursuant to Section 4.7, its obligations pursuant to
the first sentence of Section 4.2 shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to Consumers of any
Acquisition Proposal (as defined in Section 4.6), or (ii) the withdrawal or
modification by the Board of Directors of Consumers of its approval or
recommendation of this Agreement or the Merger. Subject to Section 4.7 hereof,
Consumers will use its best efforts to obtain the favorable vote of its
shareholders as soon as practicable after the date hereof.
4.2.2 PSC's Shareholders Meeting. PSC will take all action
necessary in accordance with applicable law and its Articles of Incorporation
and By-Laws to convene a meeting of its shareholders (the "PSC Special Meeting")
to consider and vote upon the approval of the Merger and the increase in the
authorized capital stock of PSC required by the Merger. PSC will, through its
Board of Directors, recommend to its shareholders approval of both actions. In
addition, this Agreement and the Merger shall have been approved and adopted by
the sole shareholder of Acquisition.
4.3 Best Efforts. Upon the terms and subject to the conditions and
other agreements set forth in this Agreement, each of the Parties agrees to use
its best efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
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4.4 Access to Information; Confidentiality. Upon reasonable notice,
Consumers shall, and shall cause its subsidiaries to, afford to PSC and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of PSC, reasonable access during normal business hours during
the period prior to the Effective Time to all of Consumers' executive officers,
properties, books, contracts, commitments, personnel and records. Upon
reasonable notice, PSC shall, and shall cause its subsidiaries to, afford to
Consumers and to the officers, employees, accountants, counsel, financial
advisors and other representatives of Consumers, reasonable access during normal
business hours during the period prior to the Effective Time to all of PSC's
executive officers, properties, books, contracts, commitments, personnel and
records. During such period, Consumers and PSC shall furnish promptly to the
other Party a copy of each Consumers SEC Document or PSC SEC Document, as the
case may be, filed by it (including any separate subsidiary) as well as all
correspondence or written communication with any securities rating agency or any
Governmental Entity which relates to the transactions contemplated hereby or
which is otherwise material to the financial condition or operations of
Consumers and its subsidiaries taken as a whole, or to PSC and its subsidiaries
taken as a whole, as the case may be. During such period, Consumers and PSC
shall each furnish to the other Party such other financial, operating and other
data as may be reasonably required by the other Party in order to perform its
investigation regarding the representations and warranties made by the other
Party pursuant to this Agreement. Without limiting the foregoing, Consumers
shall use its best efforts to furnish to PSC: (a) after the end of each month,
any management financial reports (together with all accompanying documents)
prepared with respect to such month; (b) all notices from any Governmental
Entity with respect to any alleged deficiency or violation which would have a
Material Adverse Effect on the financial condition or operations of any
subsidiary; (c) all material filings with Governmental Entities made by any
subsidiaries, (d) all material correspondence with, and any prepared summaries
of meetings with, representatives of the IRS or other taxing authorities, (e)
all material correspondence or communications with state Governmental Entity
concerning any subsidiaries, (f) all correspondence or communications with any
rating agency, and (g) copies of pleadings in all lawsuits in which the amount
in controversy exceeds $25,000. Notwithstanding the foregoing, if Consumers
fails to provide any document to PSC pursuant to this Section 4.4, and PSC
notifies Consumers of such failure, then Consumers shall provide such document
to PSC as soon as practicable thereafter, which shall cure any breach of this
representation and warranty in connection therewith. Except as required by law,
Consumers and PSC will hold, and will cause its respective directors, officers,
partners, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information obtained from
the other Party in confidence to the extent required by, and in accordance with,
the provisions of the Agreement dated April 17, 1998, between Consumers and PSC
(the "Consumers Confidentiality Agreement") and the Agreement dated June 15,
1998, between PSC and Consumers (the "PSC Confidentiality Agreement").
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4.5 Public Announcements. PSC and Consumers will consult with each
other before issuing, and shall provide each other with a reasonable opportunity
to review and comment upon, any press release or public statement with respect
to this Agreement or the transactions contemplated hereby, except to the extent
disclosure prior to such consultation, review and comment may be required by
applicable law, court process or obligations pursuant to any listing agreement
with any national securities exchange.
4.6 Acquisition Proposals.
4.6.1 Consumers shall not, nor shall it authorize or permit
any officer, director or employee of, or any investment banker, attorney, or
other advisor or representative of, Consumers or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage the submission of any
Acquisition Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that if, at any time prior to receipt
of the approval of the Merger by the holders of the Consumers Common Shares (the
"Consumers Applicable Period"), the Board of Directors of Consumers determines
in good faith, after consultation with outside counsel, that it is necessary to
do so in order to comply with its fiduciary duties to Consumers' shareholders
under applicable law, Consumers may, in response to a Superior Proposal (as
defined in Section 4.7.1) which was not solicited by it or which did not
otherwise result from a breach of this Section 4.6, and subject to providing
prior written notice of its decision to take such action to PSC (the "Consumers
Notice") and compliance with Section 4.6.2 (a) furnish information with respect
to Consumers and its subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement (as determined by Consumers
after consultation with its outside counsel) and (b) participate in discussions
or negotiations regarding such Superior Proposal. For purposes of this
Agreement, "Acquisition Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a business
(a "Material Business") that constitutes 15% or more of the net revenues, net
income or the assets (including equity securities) of Consumers and its
subsidiaries, taken as a whole, or 15% or more of any class of voting securities
of Consumers or any of its subsidiaries owning, operating or controlling a
Material Business, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of any class of voting
securities of Consumers or any such subsidiary, or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Consumers or any such subsidiary, other than the
transactions contemplated by this Agreement.
4.6.2 In addition to the obligations of Consumers set forth in
Section 4.6.1, Consumers shall promptly advise PSC orally and in writing of any
request for information or of any Acquisition Proposal, the material terms and
conditions of such request or Acquisition Proposal and the identity of the
person making such request or Acquisition Proposal. Consumers shall keep PSC
reasonably informed of the status and details (including amendments or proposed
amendments) of any such request or Acquisition Proposal.
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4.7 Superior Proposals.
4.7.1 Except as expressly permitted by this Section 4.7,
neither the Board of Directors of Consumers nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to PSC, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
cause Consumers to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Acquisition Proposal. Notwithstanding the foregoing,
in the event that during the Consumers Applicable Period the Board of Directors
of Consumers determines in good faith that there is a substantial probability
that the adoption of this Agreement by holders of Consumers Common Stock will
not be obtained due to the existence of a Superior Proposal, the Board of
Directors of Consumers may (subject to payment of the termination fee pursuant
to Section 7.2.4) terminate this Agreement, but only at a time that is during
the Consumers Applicable Period and is after the fifth business day following
PSC's receipt of written notice advising PSC that the Board of Directors of
Consumers is prepared to accept a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal; provided, that concurrently with such termination, the
Board of Directors shall cause Consumers to enter into an Acquisition Agreement
with respect to such Superior Proposal. For purposes of this Agreement, a
"Superior Proposal" means any proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of
Consumers Common Stock then outstanding or all or substantially all the assets
of Consumers which the Board of Directors of Consumers determines in its good
faith judgment (based on the written advice of a financial advisor of nationally
recognized reputation) to be, taking into account all legal, financial,
regulatory and other aspects of the proposal and the third party making such
proposal, (a) reasonably capable of being completed, and (b) more favorable to
Consumers' shareholders from a financial point of view and from a strategic
point of view than the Merger and the other transactions contemplated by this
Agreement.
4.7.2 Nothing contained in this Section 4.7 shall prohibit
Consumers from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to Consumers' shareholders if, in the good faith judgment of the
Board of Directors of Consumers, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that, subject to Section 4.7.1, neither
Consumers nor its Board of Directors nor any committee thereof shall withdraw or
modify, or propose publicly to withdraw or modify, its position with respect to
this Agreement or the Merger or approve or recommend, or propose publicly to
approve or recommend, an Acquisition Proposal.
4.8 Filings; Other Action. As promptly as practicable, (i) Consumers
and PSC shall make all filings and submissions under the HSR Act and shall
equally contribute to the required filing fee, and (ii) Consumers and PSC shall
cooperate in all reasonable respects with each other in (a) determining if other
filings are required to be made prior to the Effective Time with, or if other
material consents, approvals, permits, notices or authorizations are required to
be obtained prior to the Effective Time from any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (b) timely making all
such filings and timely seeking all such consents, approvals, permits, notices
or authorizations. In connection with the foregoing, Consumers will provide PSC,
and PSC will provide Consumers, with copies of correspondence, filings or
communications (or memoranda setting forth the substance thereof) between such
party or any of its representatives, on the one hand, and any Governmental
Entity or members of their respective staffs, on the other hand, with respect to
this Agreement and the transactions contemplated hereby. Each of PSC and
Consumers acknowledge that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances, consents, approvals,
waivers or similar third party actions which are material to the consummation of
the transactions contemplated hereby, and each of PSC and Consumers agrees to
take such action as is reasonably necessary to complete such notifications and
obtain such clearances, approvals, waivers or third party actions.
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4.9 Stock Exchange Listing. PSC shall use its best efforts to cause the
PSC Common Shares to be issued in the Merger to be approved for listing on the
NYSE subject to official notice of issuance, prior to the Closing Date.
4.10 Affiliates and Certain Shareholders. Prior to the Closing Date,
Consumers shall deliver to PSC a letter identifying all persons who it believes
to be, at the time the Merger is submitted for approval to the shareholders of
Consumers, "affiliates" of Consumers for purposes of Rule 145 under the
Securities Act. Consumers shall use its best efforts to cause each such person
to deliver to PSC on or prior to the Closing Date a written agreement in
connection with restrictions on affiliates under Rule 145, in substantially the
form attached as Exhibit C, which is attached hereto and made a part hereof. PSC
shall not be required to maintain the effectiveness of the Form S-4 or any other
registration statement under the Securities Act for the purposes of resale of
PSC Common Shares by such affiliates, and the certificates representing PSC
Common Shares received by such affiliates in the Merger shall bear a customary
legend regarding applicable Securities Act restrictions and the provisions of
this Section 4.10. Consumers shall use its best efforts to obtain from each of
the beneficial owners (within the meaning of Rule 13d-3 and Rule 13d-5 of the
Exchange Act) of five percent (5%) or more of Consumers Common Shares such
representation letters addressed to PSC and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ as such
law firm shall require in connection with the delivery of its tax opinion
pursuant to Section 6.3.3.
4.11 Employee Matters.
4.11.1. PSC shall, or shall cause Acquisition to, for at least
one (1) year after the Effective Time, provide or cause to be provided to
employees of Consumers and its subsidiaries, including former employees and
family members of employees, compensation and benefit plans that are no less
favorable than the Consumers Benefit Plans; provided, however, that with respect
to employees who are subject to collective bargaining, all benefits shall be
provided in accordance with the applicable collective bargaining agreement. PSC
shall, and shall cause Acquisition to, honor, pursuant to their terms, all
employee benefit obligations to current and former employees under the Consumers
Benefit Plans.
4.11.2 Following the Effective Time, PSC shall, and shall
cause Acquisition to honor all the obligations of Consumers and its subsidiaries
under the Severance Plan, Executive Severance Plan, Subsidiary Executive
Severance Plans, Supplemental Employee Retirement Plan and Director Deferred
Compensation Plans which have been disclosed to PSC, in accordance with their
terms, as of the date hereof.
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4.11.3 Consumers may, at its discretion, establish a program
of stay-on bonuses for senior management of Consumers and its subsidiaries
pursuant to which Consumers may pay such bonuses up to a total aggregate amount
of $255,000 for all such bonuses to such individuals and in such individual
amounts as determined by the Board of Directors of Consumers.
4.12 Representation on PSC Board. The Board of Directors of PSC shall
use its best efforts to increase the authorized number of directors as of the
Effective Time so as to permit the appointment of four (4) directors of
Consumers, as mutually determined by PSC and Consumers, to serve as directors of
PSC, one to serve until the year 1999 PSC annual meeting, one to serve until the
year 2000 PSC annual meeting, and two to serve until the year 2001 PSC annual
meeting or until their respective earlier deaths, resignations or removals in
accordance with PSC's Articles of Incorporation and By-Laws. PSC shall include
the one individual who will serve until the year 1999 PSC annual meeting on the
list of nominees for directors presented by the Board of Directors of PSC and
for which said Board shall solicit proxies at the first annual meeting at which
his appointed term expires. PSC shall consider including the one individual who
will serve until the year 2000 PSC Annual Meeting and the two individuals who
will serve until the year 2001 PSC Annual Meeting on the list of nominees for
directors presented by the Board of Directors of PSC and for which said Board
shall solicit proxies at the first annual meeting at which their appointed terms
expire.
4.13 Termination of Consumers' DRIP. Consumers shall have terminated
its DRIP on or immediately before the Closing Date.
4.14 Federal Income Tax Treatment. Consumers and PSC shall use their
reasonable best efforts to ensure that the Merger constitutes a reorganization
within the meaning of Section 368(a)(1) of the Code and that shareholders of
Consumers will not be subject to federal income tax on the receipt of PSC Common
Shares in exchange for Consumers Common Shares pursuant to the Merger.
4.15 Takeover Statute. If any state takeover statute shall become
applicable to the transactions contemplated hereby, Consumers and PSC and the
members of their respective Boards of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
4.16 Continuance of Existing Indemnification Rights
4.16.1 For six (6) years after the Effective Time, PSC shall
indemnify, defend and hold harmless any person who is now or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, a
director or officer of Consumers (an "Indemnified Person") against all losses,
claims, damages, liabilities, costs and expenses (including attorneys' fees and
expenses), judgments, fines, losses and amounts paid in settlement in connection
with any actual or threatened action, suit, claim, proceeding or investigation
(each, a "Claim") to the extent that any such Claim is based on, or arises out
of: (i) the fact that such Indemnified Person is or was a director or officer of
Consumers or one of Consumers' subsidiaries is or was serving at the request of
Consumers as a director, officer, employee, or agent of another corporation,
partnership, joint venture trust or other enterprise or one of Consumers'
subsidiaries; or (ii) the Agreement or any of the transactions contemplated
hereby, in each case, to the extent that any such Claim pertains to any matter
or fact arising, existing or occurring prior to or at the Effective Time,
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time, to the full extent permitted under the MBCA, Consumers'
Articles of Incorporation or By-Laws or any indemnification agreement in effect
at the date hereof, including provisions relating to advancement of expenses
incurred in the defense of any such Claim. Without limiting the generality of
the preceding sentence, in the event any Indemnified Person becomes involved in
any Claim, after the Effective Time, PSC shall periodically advance to such
Indemnified Person its reasonable legal and other expenses (including the cost
of any investigation and preparation incurred in connection therewith), subject
to the providing by such Indemnified Person of an undertaking to reimburse all
amounts so advanced in the event of a final non-appealable determination by a
court of competent jurisdiction that such Indemnified Person is not entitled
thereto.
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4.16.2 PSC and Consumers agree that all rights to
indemnification, and all limitations with respect thereto, existing in favor of
any Indemnified Person, as provided in Consumers' Articles of Incorporation, or
By-Laws and any indemnification agreement in effect at the date hereof, shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of six (6) years from the Effective Time, to the
extent such rights and limitations are consistent with the MBCA; provided,
however, that in the event any Claim is asserted or made within such six (6)
year period, all such rights, liabilities and limitations in respect of any such
Claim shall continue until disposition thereof; provided further, that any
determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the MBCA,
Consumers' Articles of Incorporation, or By-Laws or any such agreement, as the
case may be, shall be made by independent legal counsel selected by such
Indemnified Person and reasonably acceptable to PSC and provided further, that
nothing in this Section 4.16 shall impair any rights or obligations of any
current or former director or officer of Consumers.
4.16.3 PSC shall, in its sole discretion, either maintain
Consumers' existing directors' and officers' liability insurance policy ("D&O
Insurance") or substitute for D&O Insurance such policies of substantially
similar coverage and amounts containing terms no less advantageous to such
former directors or officers; provided further, that if the existing D&O
Insurance expires or is canceled within six (6) years from the Effective Time,
PSC shall use its best efforts to obtain substantially similar D&O Insurance;
and provided further, that PSC shall not be required to pay an annual premium
for D&O Insurance in excess of 200% of the last annual premium paid prior to the
date hereof, but in such case shall purchase as much coverage as possible for
such amount. If PSC provides a substitute insurance policy for the D&O
Insurance, Consumers shall use its best efforts to cause each director and
officer of Consumers to complete any application required by the insurance
company providing such insurance.
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4.16.4 The provisions of this Section 4.16 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Person, his or
her heirs and personal representatives.
4.17 Consulting Agreements Consumers may, at its discretion, enter
into consulting agreements with such employees following their termination of
employment as authorized by the Board of Directors of Consumers to provide
advice and assistance in connection with the Merger and matters that may arise
after the completion of the Merger, provided that the aggregate amount paid or
payable under such consulting agreements shall not exceed $300,000.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 Conduct of Business by Consumers. Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Disclosure Schedule, during the
period from June 27, 1998 to the Effective Time, Consumers has and shall, and
shall cause its subsidiaries to, act and carry on their respective businesses in
the ordinary course of business and, to the extent consistent therewith, use
best efforts to preserve intact their current business organizations, keep in
full force and effect their Licenses, keep available the services of their
current key officers, employees, agents and field representatives, and preserve
the goodwill of regulators or those engaged in material business relationships
with them. Without limiting the generality of the foregoing, during the period
from June 27, 1998 to the Effective Time, Consumers has not and shall not, and
shall not permit any of its subsidiaries to, without the prior written consent
of PSC:
5.1.1 adopt or propose any change to its Articles of
Incorporation or By-Laws;
5.1.2 (i) declare, set aside or pay any dividends on, or make
any other distributions with respect to, any of Consumers' outstanding capital
stock (other than dividends required to be paid on the Consumers Preferred
Shares in accordance with the respective terms thereof, regular quarterly
dividends on Consumers Common Shares with usual record and payment dates during
any fiscal year, not in excess of $0.005 per quarter per share greater than the
per share dividends for the corresponding quarter in the prior fiscal year),
(ii) split, combine or reclassify any of its outstanding capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of, or
in substitution for shares of its outstanding capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock or other securities of
Consumers, except for Consumers DRIP;
5.1.3 issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or to issue shares or units
under the LTIP, specifically excluding (i) the exercise of options outstanding
on June 27, 1998 or (ii) the issuance of shares or units under Consumers' DRIP;
38
5.1.4 acquire any business or any corporation, partnership,
joint venture, association or other business organization or division for a
purchase price in any instance greater than $500,000;
5.1.5 take any action that, if taken prior to the date of this
Agreement, would have been required to be disclosed in Section 2.6 of the
Disclosure Schedule or that would otherwise cause any of the representations and
warranties contained in Article 2 not to be true and correct in all material
respects;
5.1.6 sell, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets that are material
to Consumers and its subsidiaries taken as a whole, except in the ordinary
course of business;
5.1.7 (i) except for borrowings in the ordinary course of
business under existing credit facilities, incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, other than
indebtedness owing to or guaranties of indebtedness owing to Consumers or any
direct or indirect subsidiary of Consumers or (ii) make any loans or advances
other than routine advances in the ordinary course of business to employees;
5.1.8 make any tax election or settle or compromise any income
tax liability;
5.1.9 except in the ordinary course of business, modify, amend
or terminate, or waive, release or assign any material rights or claims under
any material agreement, license or similar instrument to which Consumers or any
of its subsidiaries is a party;
5.1.10 authorize any of, or commit or agree to take any of,
the foregoing actions; or
5.1.11 make or incur any obligations for capital expenditures
for or on behalf of Consumers or its subsidiaries in excess of $25,000,000 for
calendar year 1998, $26,000,000 for calendar year 1999, or $23,000,000 for
calendar year 2000; or
5.1.12 increase the salary or compensation or benefits of any
director, officer or employee other than in accordance with past practice, or in
accordance with a program of stay-on bonuses for employees at Consumers'
headquarters in Portland, Maine; or
5.1.13. increase the number of Directors on Consumers' Board
to more than eight (8).
5.2 Management of Consumers and its Subsidiaries. Consumers shall, from
the date of this Agreement through the Effective Time, cause its management and
that of its subsidiaries to consult on a regular basis and in good faith with
the executive officers and representatives of PSC concerning the management of
Consumers and its subsidiaries. Notwithstanding the foregoing, the business and
affairs of Consumers shall continue to be managed by Consumers' directors and
officers until the Effective Time.
39
5.3 Conduct of Business by PSC. Except as contemplated by this
Agreement or as set forth in Section 5.3 of the Disclosure Schedule, during the
period from June 27, 1998 to the Effective Time, PSC has and shall, and shall
cause its subsidiaries to, act and carry on their respective businesses in the
ordinary course of business and, to the extent consistent therewith, use best
efforts to preserve intact their current business organizations, keep available
the services of their current key officers and employees and preserve the
goodwill of those engaged in material business relationships with them. Without
limiting the generality of the foregoing, during the period from June 27, 1998
to the Effective Time, PSC has not and shall not and shall not permit any of its
significant subsidiaries to, without the prior written consent of Consumers:
5.3.1 adopt or propose any change to its Articles of
Incorporation or By-Laws, except as otherwise contemplated by this Agreement;
5.3.2 issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, in each case if any such
action could reasonably be expected to (i) delay materially the date of mailing
of the Proxy Statement/Prospectus, or (ii) if it were to occur after such date
of mailing, require an amendment of the Proxy Statement/Prospectus;
5.3.3 acquire any business or any corporation, partnership,
joint venture, association or other business organization or division thereof,
in each case if any such action could reasonably be expected to (i) delay
materially the date of mailing of the Proxy Statement/Prospectus, or (ii) if it
were to occur after such date of mailing, require an amendment of the Proxy
Statement/Prospectus; or
5.3.4 authorize any of, or commit or agree to take any of, the
foregoing actions.
5.4 Other Actions. Consumers and PSC shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement becoming untrue in any
material respect, or (ii) any of the conditions of the Merger set forth in
Article 6 not being satisfied.
5.5 Pooling of Interests Accounting Treatment. Consumers and PSC shall
use their best efforts to preserve the "pooling of interests" accounting
treatment for the Merger.
5.6 Termination of Long Term Incentive Plan. Consumers' Board of
Directors shall terminate the Consumers Senior Management Long Term Incentive
Plan ("LTIP") as of the date hereof.
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ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each Party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
6.1.1 Consumers Shareholder Approval. This Agreement and the
Merger shall require: (i) the affirmative vote of the holders of a majority of
the outstanding Consumers Common Shares entitled to vote at the Consumers
Special Meeting; and (ii) the affirmative vote of the holders of a majority of
the outstanding Consumers Preferred Shares entitled to vote at the Consumers
Special Meeting (collectively "Consumers Shareholder Approval").
6.1.2 PSC Shareholder Approval. This Agreement, the Merger,
and the increase in the authorized capital stock of PSC required to consummate
the transactions contemplated by this Agreement shall have been approved and
adopted by an affirmative vote of the holders of the requisite number of shares
present, in person or by proxy, and entitled to vote on the Merger at the PSC
Special Meeting. This Agreement and the Merger shall have been approved and
adopted by the sole shareholder of Acquisition.
6.1.3 Governmental and Regulatory Consents. Consumers and PSC
shall have made all such filings, and obtained such permits, authorizations,
consents, or approvals required by any Governmental Entity to consummate the
transactions contemplated hereby; (collectively, the "Governmental Consents")
and such Governmental Consents have become Final Orders (as hereinafter
defined); provided, however, that such Governmental Consents shall impose no
conditions that, in the reasonable opinion of Consumers and PSC, would be
expected to have a Material Adverse Effect after giving effect to the
consummation of the Merger. For purposes of this Agreement, a "Final Order"
shall mean action by the relevant Governmental Entity that has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect to
which all periods for appeal or reconsideration thereof, and any waiting period
prescribed by law before the consummation of the transactions contemplated by
this Agreement has expired, and as to which all conditions to the consummation
of such transactions prescribed by law, regulation or order have been satisfied.
6.1.4 HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have otherwise expired.
6.1.5 No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the Party
invoking this condition shall use its best efforts to have any such order or
injunction vacated.
41
6.1.6 NYSE Listing. The PSC Common Shares issuable to
Consumers' shareholders pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
6.1.7 Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
6.2 Conditions to Obligations of PSC and Acquisition. The obligations
of PSC and Acquisition to effect the Merger are further subject to the following
conditions:
6.2.1 Representations and Warranties. The representations and
warranties of Consumers contained in this Agreement shall be true and correct in
all material respects on the date hereof and (except to the extent specifically
given as of an earlier date) on and as of the Closing Date as though made on the
Closing Date, and Consumers shall have delivered to PSC a certificate dated as
of the Closing Date signed by an executive officer to the effect set forth in
this Section 6.2.1.
6.2.2 Performance of Obligations of Consumers. Consumers shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Consumers shall
have delivered to PSC a certificate dated as of the Closing Date signed by an
executive officer to the effect set forth in this Section 6.2.2.
6.2.3 Opinion of Counsel. PSC shall have received an opinion
dated the Closing Date of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Consumers, in
substantially the form attached as Exhibit D, which is attached hereto and made
a part hereof.
6.2.4 Satisfactory Completion of Due Diligence. PSC shall have
received the continuing access to the records and information concerning
Consumers and the assistance of its employees, agents and representatives
reasonably needed in order to complete PSC's due diligence review of Consumers
and shall have completed such review on or before September 1, 1998, without
identifying any facts or circumstances not previously disclosed in the Consumers
SEC Documents or Disclosure Schedule that would have a Material Adverse Effect
on Consumers in excess of $2,000,000 in the aggregate.
6.2.5 Pooling-of-Interests. The Merger shall, as of the date
of the Closing, meet the requirements for pooling-of-interests accounting
treatment under generally accepted accounted principles and under the accounting
rules of the SEC.
6.2.6 Releases Consumers shall have obtained legally effective
releases from all participants in the LTIP of any and all claims for payments or
benefits from the LTIP or arising from the termination of the LTIP.
6.3 Conditions to Obligations of Consumers. The obligation of Consumers
to effect the Merger is further subject to the following conditions:
42
6.3.1 Representations and Warranties. The representations and
warranties of PSC and Acquisition contained in this Agreement shall be true and
correct in all material respects on the date hereof and (except to the extent
specifically given as of an earlier date) on and as of the Closing Date as
though made on the Closing Date, and PSC and Acquisition shall have delivered to
Consumers a certificate dated as of the Closing Date, signed by an executive
officer of each of them and to the effect set forth in this Section 6.3.1.
6.3.2 Performance of Obligations of PSC and Acquisition. Each
of PSC and Acquisition shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and PSC and Acquisition shall have delivered to Consumers a
certificate dated as of the Closing Date, signed by an executive officer of each
of them and to the effect set forth in this section 6.3.2
6.3.3 Tax Opinion. Consumers shall have received an opinion
dated the Closing Date of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Consumers, to
the effect that for federal income tax purposes the Merger will constitute a
reorganization within the meaning of Section 368(a)(1) of the Code and that
shareholders of Consumers will not be subject to federal income tax on the
receipt of PSC Common Shares in exchange for Consumers Common Shares pursuant to
the Merger. In rendering such opinion, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ shall be
entitled to receive and may rely on representations contained in certificates of
PSC and Consumers and representation letters of certain shareholders of
Consumers.
6.3.4 Opinion of Counsel. Consumers shall have received an
opinion dated the Closing Date of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to PSC,
in substantially the form attached as Exhibit E, which is attached hereto and
made a part hereof.
6.3.5 Satisfactory Completion of Due Diligence. Consumers
shall have received the continuing access to the records and information
concerning PSC and the assistance of its employees, agents and representatives
reasonably needed in order to complete Consumers' due diligence review of PSC
and shall have completed such review on or before September 1, 1998, without
identifying any facts or circumstances not previously disclosed in the PSC SEC
Documents or PSC Disclosure Schedule that would have a Material Adverse Effect
on PSC in excess of $2,000,000 in the aggregate.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and abandoned
at any time prior to the Effective Time:
7.1.1 by mutual written consent of PSC and Consumers;
7.1.2 by either PSC or Consumers:
43
(i) if, upon a vote at a duly held Consumers
Special Meeting, this Agreement and the Merger shall fail to receive
the requisite vote for approval and adoption by the shareholders of
Consumers;
(ii) if, upon a vote at a duly held PSC Special
Meeting, any required increase in the authorized common stock of PSC
and this Agreement and the Merger shall fail to receive the requisite
vote for approval and adoption by the shareholders of PSC;
(iii) if the Merger shall not have been consummated
on or before July 1, 1999 (the "Termination Date"), unless the failure
to consummate the Merger is the result of a willful and material breach
of this Agreement by the Party seeking to terminate this Agreement;
provided that the Termination Date shall automatically be extended for
up to six (6) months if, on July 1, 1999: (a) any of the conditions set
forth in Section 6.1.3 has not been satisfied or waived, (b) all of the
other conditions to the consummation of the Merger set forth in Article
6 have been satisfied or waived or can readily be satisfied, and (c)
any Governmental Consent that has not yet been obtained is being
pursued diligently and in good faith;
(iv) if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable; or
(v) if the Board of Directors of Consumers shall
have exercised its rights set forth in Section 4.7 of this Agreement;
or
7.1.3 by Consumers upon a material breach of any
representation or warranty of PSC or if PSC fails to comply in any material
respect with any of its covenants or agreements, or if any representation or
warranty of PSC shall be or become untrue in any material respect, in either
case such that the conditions set forth in Sections 6.3.1 and 6.3.2 would be
incapable of being satisfied by the Closing Date, provided that a willful breach
shall be deemed to cause such conditions to be incapable of being satisfied by
such date; or
7.1.4 by PSC upon a material breach of any representation or
warranty of Consumers or if Consumers fails to comply in any material respect
with any of its covenants or agreements, or if any representation or warranty of
Consumers shall be or become untrue in any material respect, in either case such
that the conditions set forth in Sections 6.2.1 and 6.2.2 would be incapable of
being satisfied by the Closing Date, provided that a willful breach shall be
deemed to cause such conditions to be incapable of being satisfied by such date;
or
7.1.5 by Consumers, if: (i) the product of the Calculation
Price (as that term is defined in Exhibit A) and 1.459 is less than $28.000;
(ii) the Adjustment Election Period (as that term is defined in Exhibit A) has
expired and PSC has not made an Adjustment Election (as that term is defined in
Exhibit A); and (iii) the Board of Directors of Consumers determines at any time
during the three (3) business day period commencing on the expiration of the
Adjustment Election Period (the "Consumers Evaluation Period"), that it elects
to exercise its termination right pursuant to this Section 7.1.5. Consumers
shall give prompt written notice of its intention to terminate (the "Termination
Notice"), which termination shall be effective at the close of business on the
final day of the Consumers Evaluation Period (which termination may be withdrawn
at any time prior to the effectiveness of the termination).
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7.2 Effect of Termination.
7.2.1 In the event of termination of this Agreement by either
Consumers or PSC as provided in Section 7.1, this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the part
of PSC or Consumers, other than Section 7.2, Section 10.2, and the last sentence
of Section 4.4.
7.2.2 In the event of termination of this Agreement by PSC
pursuant to Section 7.1.4, Consumers shall pay PSC $1,250,000 in cash, as
liquidated damages, within sixty (60) calendar days of such termination,
provided that PSC shall not be in material breach of its obligations under this
Agreement. Such damages, if payable, shall be paid only once.
7.2.3 In the event of termination of this Agreement by
Consumers pursuant to Section 7.1.3, PSC shall pay Consumers $1,250,000 in cash,
as liquidated damages, within sixty (60) calendar days of such termination,
provided that Consumers shall not be in material breach of its obligations under
this Agreement. Such damages, if payable, shall be paid only once.
7.2.4 In the event of termination of this Agreement by either
PSC or Consumers pursuant to Section 7.1.2(v), or in the event of termination of
this Agreement by PSC or Consumers pursuant to Section 7.1.2(i) if at the time
of the Consumers Special Meeting there was an Acquisition Proposal as defined in
Section 4.6 and within twelve (12) months after the Consumers Special Meeting a
transaction is agreed to with the person or entity that made such Acquisition
Proposal, and such transaction is subsequently consummated, Consumers shall pay
PSC $9,000,000 in cash, as a termination fee and not as a penalty, within sixty
(60) calendar days of such termination or consummation, whichever is later,
provided that PSC shall not be in material breach of its obligations under this
Agreement.
7.2.5 In the event of termination of this Agreement pursuant
to Section 7.1.5, there shall be no termination fee due or payable to either
Consumers or PSC.
7.2.6 The payments provided in Sections 7.2.2, 7.2.3 and 7.2.4
shall be the Parties' sole and exclusive remedies hereunder for the termination
of this Agreement under the circumstances in which such payments are paid
(regardless of any breach of this Agreement), and upon such delivery of such
payment to PSC or Consumers, as the case may be, no person shall have any
further claim or rights against Consumers, PSC or Acquisition under this
Agreement.
7.3 Amendment. Subject to the applicable provisions of the Pennsylvania
Code, at any time prior to the Effective Time, the Parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective Parties; provided, however, that after
approval of the Merger by the shareholders of Consumers, no amendment shall be
made which reduces the Merger Consideration payable in the Merger or adversely
affects the rights of Consumers' shareholders hereunder without the approval of
such shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the Parties.
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7.4 Extension; Waiver. At any time prior to the Effective Time, the
Parties may (i) extend the time for the performance of any of the obligations or
other acts of the other Parties, (ii) waive any inaccuracies in the
representations and warranties of the other Parties contained in this Agreement
or in any document delivered pursuant to this Agreement, or (iii) subject to
Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a Party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure of any Party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of PSC or Consumers,
action by its Board of Directors.
ARTICLE 8
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively required
to be made by Consumers and PSC and Acquisition in this Agreement, or in any
certificate, respectively, delivered by Consumers or PSC and Acquisition
pursuant to Section 6.2 or Section 6.3 hereof, will terminate upon the Closing
and be of no further force or effect.
ARTICLE 9
NOTICES
9.1 Notices. Any notice or communication given pursuant to this
Agreement must be in writing and will be deemed to have been duly given if
mailed (by registered or certified mail, postage prepaid, return receipt
requested), transmitted by facsimile, or delivered by courier, as follows:
If to Consumers, to:
Consumers Water Company
Three ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
46
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to PSC, to:
Philadelphia Suburban Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
Chairman, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Acquisition, to:
Consumers Acquisition Company
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
Chairman and President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
2500 One Liberty Place
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 9.1 will, whether sent
by mail, facsimile or courier, be deemed given upon the first business day after
actual delivery to the Party to whom such notice or other communication is sent
(as evidenced by the return receipt or shipping invoice signed by a
representative of such Party or by facsimile confirmation). Any Party from time
to time may change its address for the purpose of notices to that Party by
giving a similar notice specifying a new address, but no such notice will be
deemed to have been given until it is actually received by the Party sought to
be charged with the contents thereof. For purposes of this Section 9.1,
"business day" shall mean a day other than Saturday, Sunday or any day on which
the principal commercial banks located in Philadelphia, Pennsylvania are
authorized or obligated to close under the laws of the Commonwealth of
Pennsylvania.
47
ARTICLE 10
MISCELLANEOUS
10.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes, except as set forth in Section 4.4 with respect to the
Confidentiality Agreement, all prior communications, agreements, understandings,
representations and warranties, whether oral or written, between the parties
hereto. There are no oral or written agreements, understandings, representations
or warranties between the parties hereto with respect to the subject hereof
other than those set forth in this Agreement.
10.2 Expenses. Consumers, PSC, and Acquisition each will pay its own
costs and expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the transactions contemplated hereby,
except that (i) the filing fee in respect of the notification and report under
the HSR Act, and (ii) the expenses incurred in connection with the printing,
mailing and distribution of the Proxy Statement/Prospectus and the preparation
and filing of the Form S-4 shall be borne equally by Consumers and PSC.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
10.4 No Third Party Beneficiary. Except as expressly provided herein,
this Agreement is not intended and may not be construed to create any rights in
any parties other than Consumers, PSC and Acquisition and their respective
successors or assigns, and it is not the intention of the parties to confer
third party beneficiary rights upon any other person.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania (without regard
to the principles of conflicts of law).
48
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, such consent not to be
unreasonably withheld, and any such assignment that is not consented to shall be
null and void. Notwithstanding the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and assigns including but not limited to any entity
that is a successor, by merger or otherwise, of PSC.
10.7 Headings, Gender, etc. The headings used in this Agreement have
been inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (i) words of any gender are deemed to include the
other gender; (ii) words using the singular or plural number also include the
plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (v) all references to "dollars" or "$" refer to
currency of the United States of America; (vi) the term "person" shall include
any natural person, corporation, limited liability company, general partnership,
limited partnership, trust or other entity, enterprise, authority or business
organization; and (vii) the term "or" is disjunctive but not necessarily
exclusive.
10.8 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of Consumers or PSC and Acquisition under this Agreement
will not be materially and adversely affected thereby, (i) such provision will
be fully severable; (ii) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof; and (iii) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.
10.9 Material Adverse Effect. As used in this Agreement, the term
"Material Adverse Effect" means a material adverse effect on the business,
results of operations, financial condition, or prospects of either Consumers or
PSC and their subsidiaries, as the case may be, taken as a whole, provided,
however, that Material Adverse Effect shall not be deemed to include (a)
reasonable expenses incurred in connection with the transactions contemplated
hereby, and (b) actions or omissions by either Consumers or PSC, or any of their
subsidiaries, as the case may be, taken with the prior written consent of the
other Party in connection with the transactions contemplated hereby.
49
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Consumers, PSC and Acquisition effective as
of the date first written above.
PHILADELPHIA SUBURBAN CORPORATION
By: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
CONSUMERS ACQUISITION COMPANY
By: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Chairman and President
CONSUMERS WATER COMPANY
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
50
================================================================================
EXHIBIT A
Exchange Ratio
================================================================================
The "Exchange Ratio" shall be 1.459. If the Exchange Ratio is
adjusted pursuant to this Exhibit A, then any references in this Agreement to
the Exchange Ratio shall thereafter refer to the Exchange Ratio as adjusted.
Notwithstanding any other provisions in this Agreement, if the
product of 1.459 and the Calculation Price (as defined below) exceeds $32.000,
then the Exchange Ratio shall equal the quotient determined by dividing $32.000
by the Calculation Price (rounded to the nearest one-thousandth of a dollar).
If the product of 1.459 and the Calculation Price is less than
$28.000, then, during the three (3) business day period commencing on the
Determination Date (the "Adjustment Election Period"), PSC shall have the
option, but not the obligation, of adjusting the Exchange Ratio (an "Adjustment
Election") to equal the quotient determined by dividing $28.000 by the
Calculation Price (rounded to the nearest one-thousandth of a dollar) by
delivering written notice (the "Adjustment Election Notice") to Consumers within
the Adjustment Election Period of its intention to so adjust the Exchange Ratio.
The Calculation Price is the volume weighted average (rounded
to the nearest one-thousandth of a dollar) of the trading prices of PSC Common
Stock on the New York Stock Exchange ("NYSE"), as reported by Bloomberg
Financial Markets (or such other source as the parties shall agree in writing),
for each of the ten (10) consecutive trading days ending five (5) days before
the Determination Date. The "Determination Date" is the date on which all the
conditions to Closing (other than those conditions that by their terms cannot be
satisfied until the Closing Date) set forth in Article 6 have been satisfied or
waived.
================================================================================
EXHIBIT B
Articles of Incorporation of the Surviving Corporation
================================================================================
ARTICLES OF INCORPORATION-FOR PROFIT
OF
Caribbean Acquisition Company
A TYPE OF CORPORATION INDICATED BELOW
Indicate type of domestic corporation:
x Business-stock (15 Pa.C.S.ss.1306) Management (15 Pa.C.S.ss.2702)
--- ---
Business-nonstock (15 Pa.C.S.ss.2102) Professional (15 Pa.C.S.ss.2903)
--- ---
Business-statutory close (15 Pa.C.S.ss.2303) Insurance (15 Pa.C.S.ss.3101)
--- ---
Cooperative (15 Pa.C. S. ss. 7102)
---
DSCB:15-1306/2102/2303/2702/2903/3101/7102A (Rev 91)
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned, desiring to incorporate a corporation for profit hereby, state(s)
that:
1. The name of the corporation is: Caribbean Acquisition Company
2. The (a) address of this corporation's initial registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is:
(a)762 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o N/A
------------------------------------------------------------------------------------------------
____ Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
4. The aggregate number of shares authorized is: 1000 shares of common stock.
5. The name and address, including number and street, if any, of each
incorporator is:
Name Address
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1650 Market Street, 2500 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
DSCB: 15-1306/2102/2303/2702/2903/3101/7102A (Rev 91)-2
6. The specified effective date, if any, is:
June 26 1998
-----------------------------------------------------------
month day year hour, if any
7. Any additional provisions of the articles are attached. See Exhibit A.
IN TESTIMONY WHEREOF, the incorporator has signed these Articles of
Incorporation this 26th day of June, 1998.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
(Signature)
Exhibit A
7. Personal Liability of Directors.
(a) Elimination of Liability. To the fullest extent that the
laws of the Commonwealth of Pennsylvania, as now in effect or as hereafter
amended, permit elimination or limitation of the liability of directors, no
director of the Corporation shall be personally liable for monetary damages as
such for any action taken, or any failure to take any action, as a director.
(b) Nature and Extent of Rights. The provisions of this
Article shall be deemed to be a contract with each director of the Corporation
who serves as such at any time while this Article is in effect and each such
director shall be deemed to be so serving in reliance on the provisions of this
Article. Any amendment or repeal of this Article or adoption of any By-law or
provision of the Articles of the Corporation which has the effect of increasing
director liability shall operate prospectively only and shall not have any
effect with respect to any action taken, or any failure to act, by a director
prior thereto.
8. Indemnification of, and Advancement of Expenses to, Directors,
Officers and Others.
(a) Right to Indemnification. Except as prohibited by law,
every director and officer of the Corporation shall be entitled as of right to
be indemnified by the Corporation against expenses and any liabilities paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the Corporation or otherwise, in
which he or she may be involved in any manner, as a party, witness or otherwise,
or is threatened to be made so involved, by reason of such person being or
having been a director or officer of the Corporation or of a subsidiary of the
Corporation or by reason of the fact that such person is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary or other
representative of another corporation or of a partnership, joint venture, trust,
employee benefit plan or other entity (such claim, action, suit or proceeding
hereinafter being referred to as an "Action"), provided that no such right of
indemnification shall exist with respect to an Action initiated by an indemnitee
(as hereinafter defined) against the Corporation (an "Indemnitee Action") except
as provided in the last sentence of this Section (a). Persons who are not
directors or officers of the Corporation may be similarly indemnified in respect
of service to the Corporation or to another such entity at the request of the
Corporation to the extent that the Board of Directors at any time denominates
any of such persons as entitled to the benefits of this Article. As used in this
Article, "indemnitee" shall mean each director and officer of the Corporation
and each other person denominated by the Board of Directors as entitled to the
benefits of this Article, "expenses" shall mean all expenses actually and
reasonably incurred, including fees and expenses of counsel selected by an
indemnitee, and "liabilities" shall include amounts of judgments, excise taxes,
fines, penalties and amounts paid in settlement. An indemnitee shall be entitled
to be indemnified pursuant to this Section (a) for expenses incurred in
connection with any Indemnitee Action only if (i) the Indemnitee Action is
instituted under Section (c) of this Article and the indemnitee is successful in
whole or in part in such Action, (ii) the indemnitee is successful in whole or
in part in another Indemnitee Action for which expenses are claimed, (iii) the
indemnification for expenses is included in a settlement of, or is awarded by a
court in, such other Indemnitee Action or (iv) such Indemnitee Action was
authorized by the Board of Directors.
(b) Right to Advancement of Expenses. Every indemnitee shall
be entitled as of right to have his or her expenses in defending any Action, or
in initiating and pursuing any Indemnitee Action for indemnity or advancement of
expenses under Section (c) of this Article, paid in advance by the Corporation
prior to final disposition of such Action or Indemnitee Action, provided that
the Corporation receives a written undertaking by or on behalf of the indemnitee
to repay the amount advanced if it should ultimately be determined that the
indemnitee is not entitled to be indemnified for such expenses.
(c) Right of Indemnitee to Initiate Action. If a written claim
under Section (a) or Section (b) of this Article is not paid in full by the
Corporation within thirty (30) days after such claim has been received by the
Corporation, the indemnitee may at any time thereafter initiate an Indemnitee
Action to recover the unpaid amount of the claim and, if successful in whole or
in part, the indemnitee shall also be entitled to be paid the expense of
prosecuting such Indemnitee Action. The only defense to an Indemnitee Action to
recover on a claim for indemnification under Section (a) of this Article shall
be that the indemnitee's conduct was such that under Pennsylvania law, the
Corporation is prohibited from indemnifying the indemnitee for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel and its shareholders) to have made a determination
prior to the commencement of such Indemnitee Action that indemnification of the
indemnitee is proper under the circumstances, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel or its
shareholders) that the indemnitee's conduct was such that indemnification is
prohibited by Pennsylvania law, shall be a defense to such Indemnitee Action or
create a presumption that the indemnitee's conduct was such that indemnification
is prohibited by Pennsylvania law. The only defense to an Indemnitee Action to
recover on a claim for advancement of expenses under Section (b) of this Article
shall be the indemnitee's failure to provide the undertaking required by Section
(b) of this Article.
(d) Insurance and Funding. The Corporation may purchase and
maintain insurance to protect itself and any person eligible to be indemnified
hereunder against any liability or expense asserted or incurred by such person
in connection with any Action, whether or not the Corporation would have the
power to indemnify such person against such liability or expense by law or under
the provisions of this Article. The Corporation may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means
(whether or not similar to the foregoing) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
(e) Non-Exclusivity; Nature and Extent of Rights. The rights
to indemnification and advancement and/or payment of expenses provided for in
this Article (i) shall not be deemed exclusive of any other rights, whether now
existing or hereafter created, to which any indemnitee may be entitled under any
agreement, any provision of these Articles of Incorporation or the By-Laws, any
vote of shareholders or directors or otherwise, (ii) shall be deemed to create
contractual rights in favor of each indemnitee who serves the Corporation at any
time while this Article is in effect (and each such indemnitee shall be deemed
to be so serving in reliance on the provisions of this Article), and (iii) shall
continue as to each indemnitee who has ceased to have the status pursuant to
which he or she was entitled or was denominated as entitled to indemnification
under this Article and shall inure to the benefit of the heirs and legal
representatives of each indemnitee. Any amendment, modification or repeal of
this Article or adoption of any provision of the Articles of Incorporation or
By-laws of the Corporation which has the effect of limiting in any way the
rights to indemnification or advancement of expenses provided for in this
Article shall operate prospectively only and shall not affect any action taken,
or failure to act, by an indemnitee prior to such amendment, modification or
repeal or the adoption of such provision.
(f) Partial Indemnity. If an indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses or liabilities paid or incurred by the indemnitee in the
preparation, investigation, defense, appeal or settlement of any Action or
Indemnitee Action but not, however, for the total amount thereof, the
Corporation shall indemnify the indemnitee for the portion of such expenses or
liabilities to which the indemnitee is entitled.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. section 1915 (relating to articles of
amendment), the undersigned business corporation, desiring to amend its Articles, hereby states:
1. The name of the corporation is: Caribbean Acquisition Company
------------------------------------------
2. The (a) address of this corporation's current registered office in the Commonwealth or (b)
name of its commercial registered office provider and the county of venue is (the
Department is hereby authorized to correct the following information to conform to the
records of the Department):
(a) ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
---------------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered provider, the county in (b) shall
be deemed the county in which the corporation is located for venue and official publication
purposes.
3. The statute by or under which it was incorporated is: 15 Pa.C.S. Section 1306
------------------------------------
4. The date of its incorporation is: June 26, 1998
-----------------------------------------------------------
5. (Check, and if appropriate complete, one of the following):
|X| The amendment shall be effective upon filing these Articles of Amendment in the
Department of State.
|_| The amendment shall be effective on: at
-------------------- ---------------------
Date Hour
6. (Check one of the following):
|_| The amendment was adopted by the shareholders (or members) pursuant to 15 Pa.C.S. section 1914(a) and (b).
|X| The amendment was adopted by the board of directors pursuant to 15 Pa.C.S. section 1914(c).
7. (Check, and if appropriate complete, one of the following):
|X| The amendment adopted by the corporation, set forth in full, is as follows:
Article 1 is to be amended as follows:
"The name of this corporation is: Consumers Acquisition Company"
|_| The amendment adopted by the corporation is set forth in full in Exhibit A attached hereto and made a
part hereof.
8. (Check if the amendment restates the Articles):
|_| The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this 6th
day of August, 1998.
CARIBBEAN ACQUISITION COMPANY
-----------------------------------
(Name of Corporation)
BY: ▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
(Signature)
TITLE: Secretary
-----------------------------------
================================================================================
EXHIBIT C
Form of Affiliate's Letter
================================================================================
Philadelphia Suburban Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Dear Mr. _________
Reference is made to the Agreement and Plan of Merger (the
"Agreement") dated as of June 27, 1998, by and among Philadelphia Suburban
Corporation ("PSC"), Consumers Acquisition Company ("Acquisition"), and
Consumers Water Company ("Consumers").
I understand that it is a condition precedent to the
obligations of PSC and Acquisition to effect the Merger (as defined in the
Agreement) that, among other things, the persons identified as "affiliates" of
Consumers pursuant to Section 4.10 of the Agreement shall have executed and
delivered to PSC an agreement as contemplated by such Section 4.10. I also
understand that I have been identified by Consumers as an affiliate of Consumers
for such purpose.
Therefore, in order to induce PSC and Acquisition to effect
the Merger, I hereby agree with PSC that I will not sell, pledge, transfer or
otherwise dispose of the shares of PSC common stock to be received by me in the
Merger, except (i) after financial results covering at least thirty (30)
calendar days of post-Merger combined operations have been published within the
meaning of Section 201.01 of the Codification of Financial Reporting Policies of
the Securities and Exchange Commission, and (ii) in compliance with applicable
provisions of the Securities Act of 1933 and Rules and Regulations thereunder.
This letter agreement is intended to take effect as a sealed
instrument and I intend to be legally bound hereby.
Very truly yours,
------------------
================================================================================
EXHIBIT D
Form of Opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
================================================================================
[Letterhead of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇]
________ __, 1998
Philadelphia Suburban Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Consumers Water Company.
Ladies and Gentlemen:
We have acted as counsel to Consumers Water Company, a Maine
corporation (the "Company"), in connection with the Agreement and Plan of Merger
dated as of June 27, 1998 by and among Philadelphia Suburban Corporation, a
Pennsylvania corporation ("PSC"), Consumers Acquisition Company, a Pennsylvania
corporation ("Acquisition") and the Company (the "Agreement"). We are delivering
this opinion to you pursuant Section 6.2.3 of the Agreement. Capitalized terms
used herein without definition shall have the same meanings ascribed to them in
the Asset Purchase Agreement.
As counsel to the Company we have examined, among other things,
executed originals of the Agreement, and have examined and relied upon the
originals, or copies certified or otherwise identified to our satisfaction, of
such records, documents, agreements and other instruments of the Company and
other certificates of public officials and officers of the Company other
investigations as we deemed necessary in connection with the opinions set forth
herein.
We have assumed that all signatures, other than those of the Company,
are genuine, that all documents submitted to us as originals are authentic, that
all documents submitted to us as copies conform to the originals, and that the
facts stated in all such documents are true and correct. In rendering this
opinion, we have not made any independent investigation as to the accuracy or
completeness of any facts or representations, warranty, data or other
information, whether written or oral, that may have been made by or on behalf of
the parties to the Agreement and we have relied upon such representations and
warranties.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maine, and is duly qualified to
do business as a foreign corporation and is in good standing in each state where
the failure to so qualify would have a Material Adverse Effect on the Company or
its business as defined in Section 10.9 of the Agreement.
2. The authorized capital stock of the Company consists 15,000,000
Company Common Shares having a par value of $1.00 per share, of which [ ]
Company Common Shares are issued and outstanding, [ ] shares are held as
treasury shares, no shares are held by subsidiaries of the Company and [_______]
are reserved for issuance under the Company's Incentive Stock Plan, 401(k)
Savings Plan, Long-Term Incentive Plan, and Dividend Reinvestment Plan; 30,000
shares of preferred stock, par value $1.00 per share, of which 15,925 shares
have been designated as "Cumulative Preferred Stock, Series A" and 14,075 are
undesignated, of which [___________] shares are issued and outstanding; and
[______________] shares of preferred stock, no par value, of which
[____________] shares are issued and outstanding. Except as otherwise stated in
the Agreement, there are no outstanding options, warrants, subscriptions or
other right, agreement or commitment which either obligates the Company to
issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any
shares of capital stock, or which restricts the transfer of shares of the
Company's Capital Stock.
3. All issued and outstanding Company Common Shares and Company
Preferred Shares are duly authorized, validly issued, fully paid and
nonassessable.
4. The Company has the requisite corporate power and authority to
execute and deliver the Agreement. All corporate action of the Company necessary
to duly authorize the execution of the Agreement and the Merger contemplated
thereby has been taken, and the Agreement represents the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
5. The execution and delivery of the Agreement and the performance by
the Company of its obligations thereunder (i) does not conflict with or violate
any applicable federal statute, law or written regulation to which it is
subject, (ii) does not violate or result in a default by it (immediately or with
the passage of time) under any agreement, contract or instrument known to us to
which it is a party or by which it is bound, (iii) does not conflict with or
violate any order, writ, judgment or decree known to us to which the Company is
a party or is subject, and (iv) does not conflict with or result in a violation
of the articles of incorporation or By-Laws of the Company.
6. To our knowledge, there is no suit, action or proceeding pending or
threatened against or affecting the Company before or by any court,
administrative agency or governmental authority, which seeks to enjoin the
consummation or challenge the validity or enforceability of any of the
transactions contemplated by the Agreement.
7. No approval, authorization, consent or other action by, or filing
with, any governmental authority of the United States of America is required in
connection with the execution, delivery and performance by the Company of the
Agreement, other than those actions or filings which have previously been
obtained, taken or made.
The foregoing opinions are subject to the following exceptions,
limitations, assumptions and qualifications:
A. Such opinions are subject to applicable bankruptcy, reorganization,
insolvency, fraudulent conveyance, fraudulent transfer, moratorium and other
similar laws of general application relating to or affecting creditors' rights,
and to general principles of equity, judicial discretion and general
requirements of good faith, fair dealing and commercial reasonableness (whether
a matter is considered in a proceeding at law or in equity).
B. Certain laws and decisions applicable in the State of Maine and the
United States may limit, render unenforceable or otherwise affect the
enforceability of, certain rights, remedies, waivers and other provisions
contained in the Agreement, but such laws and decisions do not, in our judgment,
make the available remedies, when considered in their entirety, inadequate for
the practical realization of the benefits to PSC provided by the Agreement.
C. We express no opinion with respect to the effect on the matters set
forth herein of any amendment, modification, extension, substitution,
replacement or renewal of or to the Agreement.
D. Without limiting the generality of paragraph B of the exceptions
portion of this letter, we express no opinion as to the enforceability of (1)
any provisions in the Agreement purporting to waive or limit PSC's or
Acquisition's liability for negligent acts or omissions, (2) any provision in
the Agreement providing for a right of indemnification or right of contribution
(to the extent that they provide for indemnification for the negligence or
willful misconduct of, or a violation of law or public policy by, the Person
being indemnified), or (3) any provisions in the Agreement with respect to
payment of costs and expenses of enforcement, including, without limitation,
attorneys' fees, to the extent that the same are determined to be contrary to
public policy.
E. Without limiting the generality of paragraph B of the exceptions
portion of this letter, we express no opinion as to the validity or
enforceability of any provision in the Agreement (1) that purports to prevent
oral modification or waivers or purports to preclude the modification of the
Agreement through conduct, custom or the course of performance, action or
dealing or (2) the breach of which a court concludes is not material or does not
adversely affect PSC.
F. We express no opinion on the enforceability of any provisions in the
Agreement relating to conflict of laws, consent to jurisdiction, choice of forum
or choice of law.
G. We express no opinion as to (i) federal or state securities or "blue
sky" laws or regulations, (ii) federal or state antitrust or unfair competition
laws or regulations; (iii) federal or state racketeering laws or regulations;
(iv) federal or state environmental laws or regulations; (v) federal or state
pension or employee benefit laws or regulations; (vi) federal patent, copyright
or trademark, state trademark, or other federal or state intellectual property
laws or regulations; (vii) federal or state health and safety laws or
regulations; (viii) federal or state labor laws or regulations; (ix) federal or
state laws, regulations or policies relating to national or local emergencies;
(x) federal or state statutes which provide for criminal prosecution; or (xi)
statutes, ordinances, administrative decisions, rules or regulations of
counties, towns, municipalities or special political subdivisions (whether
created or enabled through legislative actions at the federal, state or regional
level) or judicial decisions to the extent that they deal with any of the
foregoing.
The opinions herein are expressed as of the date hereof only, and not
as of some future date. We undertake no responsibility to advise you of any
change in law or new laws, regulations or judicial decisions in the future. As
used herein, the phrase "to our knowledge" or a phrase of similar import means
the conscious awareness of information by those lawyers in our firm who are
actively involved in the representation of the Company concerning the
transactions described in the Agreement.
This opinion is limited to the present law of the State of Maine and
the present federal law of the United States of America. To the extent that the
matters which are the subject of this opinion may be affected by the laws of
jurisdictions other than (i) the laws of the State of Maine, or (ii) the federal
laws of the United States of America, our opinion is necessarily made upon the
assumption, which we have made with your permission, that the relevant law of
such other jurisdictions is identical to that of the State of Maine in all
applicable respects. We express no opinion regarding what laws will actually
govern the Agreement. This opinion is limited to the matters set forth herein,
no opinion may be inferred or implied beyond the matters expressly stated
herein, and our statements contained in the paragraphs numbered 1 through 7,
inclusive, of the opinion portion of this letter must be read in conjunction
with the assumptions, limitations, exceptions and qualifications set forth in
this letter.
The opinions rendered herein are for the sole benefit of, and may only
be relied upon by, PSC, and the opinions herein expressed are not to be used,
circulated, or otherwise referred to in connection with any transaction other
than those contemplated by the Agreement.
Very truly yours,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
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EXHIBIT E
Form of Opinion of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
================================================================================
Subject to review by
RSSM Opinion Committee
[Letterhead of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇, LLP]
, 1998
-------- ------------------------------------------
Consumers Water Company
Three ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Philadelphia Suburban Corporation;
Consumers Acquisition Company.
Ladies and Gentlemen:
We have acted as counsel to Philadelphia Suburban Corporation, a
Pennsylvania corporation ("PSC") and Consumers Acquisition Company, a
Pennsylvania corporation ("Acquisition"), in connection with the Agreement and
Plan of Merger dated as of June 27, 1998 by and among PSC, Acquisition and
Consumers Water Company, a Maine corporation. (the "Company") (the "Agreement").
We are delivering this opinion to you pursuant Section 6.3.4 of the Agreement.
Capitalized terms used herein without definition shall have the same meanings
ascribed to them in the Agreement.
As counsel to PSC and Acquisition we have examined, among other things,
executed originals of the Agreement and the Form S-4, and have examined and
relied upon the originals, or copies certified or otherwise identified to our
satisfaction, of such records, documents, agreements and other instruments of
PSC and Acquisition and other certificates of public officials and officers of
PSC and Acquisition other investigations as we deemed necessary in connection
with the opinions set forth herein.
We have assumed that all signatures, other than those of PSC and
Acquisition, are genuine, that all documents submitted to us as originals are
authentic, that all documents submitted to us as copies conform to the
originals, and that the facts stated in all such documents are true and correct.
In rendering this opinion, we have not made any independent investigation as to
the accuracy or completeness of any facts or representations, warranty, data or
other information, whether written or oral, that may have been made by or on
behalf of the parties to the Agreement and we have relied upon such
representations and warranties.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. Each of PSC and Acquisition is a corporation duly incorporated,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and is duly qualified to do business as a foreign corporation and
is in good standing in each state where the failure to so qualify would have a
Material Adverse Effect on it or its business as defined in Section 10.9 of the
Agreement.
2. The authorized capital stock of PSC consists of 40,000,000 PSC
Common Shares having a par value of $.50 per share, of which shares are issued
and outstanding, [________] are held as treasury shares and [_______] are
reserved for issuance under PSC's Share Purchase Rights Plan; and shares of
Series A Preferred Stock, par value $1.00 per share, of which [no] shares are
issued and outstanding and [__________] shares are reserved for issuance under
PSC's Share Purchase Rights Plan.
3. All issued and outstanding PSC Common Shares are, and all PSC Common
Shares issued in connection with the Merger will be, duly authorized, validly
issued, fully paid and nonassessable.
4. The authorized capital stock of Acquisition consists of 1,000 shares
of common stock, without par value, all of which are issued and outstanding and
the record owner of which is PSC. All such outstanding common shares are duly
authorized, validly issued, fully paid and nonassessable.
5. Each of PSC and Acquisition has the requisite corporate power and
authority to execute and deliver the Agreement. All corporate action of each of
PSC and Acquisition necessary to duly authorize the execution of the Agreement
and the Merger contemplated thereby has been taken, and the Agreement represents
the valid and binding obligation of each of PSC and Acquisition, enforceable
against each of them in accordance with its terms.
6. The Form S-4 is effective under the Securities Act of 1933 (the
"Act"), and, to our knowledge, no proceedings for a stop order are pending or
threatened under the Act.
7. The execution and delivery of the Agreement and the performance by
each of PSC and Acquisition of its obligations thereunder (i) does not conflict
with or violate any applicable federal statute, law or written regulation to
which it is subject, (ii) does not violate or result in a default by it
(immediately or with the passage of time) under any agreement, contract or
instrument known to us to which it is a party or by which it is bound, (iii)
does not conflict with or violate any order, writ, judgment or decree known to
us to which either PSC or Acquisition is a party or is subject, and (iv) does
not conflict with or result in a violation of the articles of incorporation or
By-Laws of either PSC or Acquisition.
8. To our knowledge, there is no suit, action or proceeding pending or
threatened against or affecting PSC or Acquisition before or by any court,
administrative agency or governmental authority, which seeks to enjoin the
consummation or challenge the validity or enforceability of any of the
transactions contemplated by the Agreement.
9. No approval, authorization, consent or other action by, or filing
with, any governmental authority of the United States of America is required in
connection with the execution, delivery and performance by PSC and Acquisition
of the Agreement, other than those actions or filings which have previously been
obtained, taken or made.
The foregoing opinions are subject to the following exceptions,
limitations, assumptions and qualifications:
A. Such opinions are subject to applicable bankruptcy, reorganization,
insolvency, fraudulent conveyance, fraudulent transfer, moratorium and other
similar laws of general application relating to or affecting creditors' rights,
and to general principles of equity, judicial discretion and general
requirements of good faith, fair dealing and commercial reasonableness (whether
a matter is considered in a proceeding at law or in equity).
B. Certain laws and decisions applicable in the Commonwealth of
Pennsylvania and the United States may limit, render unenforceable or otherwise
affect the enforceability of, certain rights, remedies, waivers and other
provisions contained in the Agreement, but such laws and decisions do not, in
our judgment, make the available remedies, when considered in their entirety,
inadequate for the practical realization of the benefits to the Company provided
by the Agreement.
C. We express no opinion with respect to the effect on the matters set
forth herein of any amendment, modification, extension, substitution,
replacement or renewal of or to the Agreement.
D. Without limiting the generality of paragraph B of the exceptions
portion of this letter, we express no opinion as to the enforceability of (1)
any provisions in the Agreement purporting to waive or limit the Company's
liability for negligent acts or omissions, (2) any provision in the Agreement
providing for a right of indemnification or right of contribution (to the extent
that they provide for indemnification for the negligence or willful misconduct
of, or a violation of law or public policy by, the Person being indemnified), or
(3) any provisions in the Agreement with respect to payment of costs and
expenses of enforcement, including, without limitation, attorneys' fees, to the
extent that the same are determined to be contrary to public policy.
E. Without limiting the generality of paragraph B of the exceptions
portion of this letter, we express no opinion as to the validity or
enforceability of any provision in the Agreement (1) that purports to prevent
oral modification or waivers or purports to preclude the modification of the
Agreement through conduct, custom or the course of performance, action or
dealing or (2) the breach of which a court concludes is not material or does not
adversely affect the Company.
F. We express no opinion on the enforceability of any provisions in the
Agreement relating to conflict of laws, consent to jurisdiction, choice of forum
or choice of law.
G. We express no opinion as to (i) except as specifically set forth in
paragraph 6 above, federal or state securities or "blue sky" laws or
regulations, (ii) federal or state antitrust or unfair competition laws or
regulations; (iii) federal or state racketeering laws or regulations; (iv)
federal or state environmental laws or regulations; (v) federal or state pension
or employee benefit laws or regulations; (vi) federal patent, copyright or
trademark, state trademark, or other federal or state intellectual property laws
or regulations; (vii) federal or state health and safety laws or regulations;
(viii) federal or state labor laws or regulations; (ix) federal or state laws,
regulations or policies relating to national or local emergencies; (x) federal
or state statutes which provide for criminal prosecution; or (xi) statutes,
ordinances, administrative decisions, rules or regulations of counties, towns,
municipalities or special political subdivisions (whether created or enabled
through legislative actions at the federal, state or regional level) or judicial
decisions to the extent that they deal with any of the foregoing.
The opinions herein are expressed as of the date hereof only, and not
as of some future date. We undertake no responsibility to advise you of any
change in law or new laws, regulations or judicial decisions in the future. As
used herein, the phrase "to our knowledge" or a phrase of similar import means
the conscious awareness of information by those lawyers in our firm who are
actively involved in the representation of PSC and Acquisition concerning the
transactions described in the Agreement.
This opinion is limited to the present law of the Commonwealth of
Pennsylvania and the present federal law of the United States of America. To the
extent that the matters which are the subject of this opinion may be affected by
the laws of jurisdictions other than (i) the laws of the Commonwealth of
Pennsylvania, or (ii) the federal laws of the United States of America, our
opinion is necessarily made upon the assumption, which we have made with your
permission, that the relevant law of such other jurisdictions is identical to
that of the Commonwealth of Pennsylvania in all applicable respects. We express
no opinion regarding what laws will actually govern the Agreement. This opinion
is limited to the matters set forth herein, no opinion may be inferred or
implied beyond the matters expressly stated herein, and our statements contained
in the paragraphs numbered 1 through 9, inclusive, of the opinion portion of
this letter must be read in conjunction with the assumptions, limitations,
exceptions and qualifications set forth in this letter.
The opinions rendered herein are for the sole benefit of, and may only
be relied upon by, the Company, and the opinions herein expressed are not to be
used, circulated, or otherwise referred to in connection with any transaction
other than those contemplated by the Agreement.
Very truly yours,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
PJT/CER/CEE