- 3 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONSOLIDATED EDISON, INC.
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
By: __________________
Hyman Schoenblum
Vice President and Controller
DATE: May 13, 1998
AGREEMENT AND PLAN OF MERGER
among
Orange and Rockland Utilities, Inc.
Consolidated Edison, Inc.
and
C Acquisition Corp.
Dated as of May 10, 1998
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger................................................1
Section 1.2 Effects of the Merger.....................................1
Section 1.3 Effective Time of the Merger..............................2
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect on Capital Stock of the Company and the
Merger Subsidiary.......................................2
Section 2.2 Surrender of Shares.......................................3
ARTICLE III
THE CLOSING
Section 3.1 Closing...................................................5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification............................5
Section 4.2 Subsidiaries..............................................6
Section 4.3 Capitalization............................................6
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance..............................................7
Section 4.5 Reports and Financial Statements..........................9
Section 4.6 Absence of Certain Changes or Events.....................10
Section 4.7 Litigation...............................................10
Section 4.8 Proxy Statement..........................................10
Section 4.9 Tax Matters..............................................11
Section 4.10 Employee Matters; ERISA..................................12
Section 4.11 Labor and Employee Relations.............................14
Section 4.12 Environmental Protection.................................15
Section 4.13 Regulation as a Utility..................................18
Section 4.14 Vote Required............................................18
Section 4.15 State Anti-Takeover Statutes.............................18
Section 4.16 Opinion of Financial Advisor.............................18
Section 4.17 Insurance................................................18
Section 4.18 Discontinued Business....................................18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CEI
Section 5.1 Organization and Qualification...........................19
Section 5.2 Authority; Non-Contravention; Statutory Approvals;
Compliance.............................................19
Section 5.3 Litigation...............................................20
Section 5.4 Proxy Statement..........................................21
Section 5.5 Regulation as a Utility..................................21
Section 5.6 No Vote Required.........................................21
Section 5.7 Financing................................................21
Section 5.8 Ownership of Company Common Stock........................21
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Company.................................22
Section 6.2 Covenants of CEI.........................................28
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to the Company's Information......................29
Section 7.2 Proxy Statement..........................................29
Section 7.3 Regulatory Matters.......................................30
Section 7.4 Approval of the Company Shareholders.....................31
Section 7.5 Directors' and Officers' Indemnification.................31
Section 7.6 Public Announcements.....................................33
Section 7.7 Standstill Agreements; Confidentiality Agreements........33
Section 7.8 Employee Agreements and Workforce Matters................33
Section 7.9 Employee Benefit Plans...................................34
Section 7.10 No Solicitations by the Company..........................35
Section 7.11 Board of Directors; Advisory Board.......................37
Section 7.12 Post-Merger Operations...................................37
Section 7.13 Expenses.................................................38
Section 7.14 Further Assurances.......................................38
Section 7.15 Shareholder Litigation........... .......................38
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to
Effect the Merger......................................38
Section 8.2 Conditions to Obligation of CEI to Effect
the Merger.............................................39
Section 8.3 Conditions to Obligation of the Company to
Effect the Merger......................................40
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination..............................................41
Section 9.2 Effect of Termination....................................42
Section 9.3 Termination Fee; Expenses................................42
Section 9.4 Amendment................................................43
Section 9.5 Waiver...................................................43
Section 9.6 Procedure for Termination, Amendment, Extension
or Waiver..............................................44
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and
Warranties.............................................44
Section 10.2 Brokers..................................................44
Section 10.3 Notices..................................................44
Section 10.4 Miscellaneous............................................46
Section 10.5 Interpretation...........................................46
Section 10.6 Counterparts; Effect.....................................46
Section 10.7 Parties' Interest; No Third Party Beneficiaries..........47
Section 10.8 Waiver of Jury Trial.....................................47
Section 10.9 Enforcement..............................................47
INDEX OF PRINCIPAL TERMS
Term Page
1935 Act.............................................................9, 30, 35
Acquisition Agreement.......................................................42
Acquisition Proposal....................................................36, 42
Affected Employees..........................................................34
Affiliate...................................................................24
Cancelled Shares.............................................................3
CEI Disclosure Schedule.....................................................19
CEI Required Statutory Approvals............................................20
CEI SEC Reports.............................................................21
CEI Subsidiaries............................................................19
Certificates.................................................................3
Closing......................................................................5
Closing Date.................................................................5
Code........................................................................12
Company Common Stock.........................................................2
Company Financial Statements.................................................9
Company Meeting.............................................................31
Company Plans...............................................................12
Company Preference Stock.....................................................6
Company Preferred Stock......................................................6
Company Required Consents....................................................8
Company Required Statutory Approvals.........................................8
Company SEC Reports..........................................................9
Company Shareholders' Approval..............................................18
Company Subsidiary...........................................................6
Confidentiality Agreement...................................................29
Control.....................................................................24
Discontinued Business.......................................................18
DLJ.........................................................................18
Effective Time...............................................................2
Environmental Claim.........................................................17
Environmental Laws..........................................................17
Environmental Permits.......................................................15
ERISA.......................................................................12
ERISA Affiliate.............................................................12
Exchange Act.................................................................9
FERC.........................................................................9
Final Divestiture Plan......................................................22
Final Order.................................................................39
GAAP.........................................................................9
Governmental Authority.......................................................8
Hazardous Materials.........................................................17
HSR Act.....................................................................30
Indemnified Liabilities.....................................................31
Indemnified Parties.........................................................31
Indemnified Party...........................................................31
Initial Termination Date....................................................41
Injured Party...............................................................43
ISRA........................................................................30
Liens........................................................................6
Material Business...........................................................36
Merger.......................................................................1
Merger Consideration.........................................................2
Merger Subsidiary............................................................1
Merger Subsidiary Common Stock...............................................3
NYBCL........................................................................1
NYPSC........................................................................2
Paying Agent.................................................................3
PBGC........................................................................13
PCBs........................................................................17
person.......................................................................4
Power Act....................................................................9
Proxy Statement.............................................................10
Release.....................................................................17
Representatives.............................................................29
SEC..........................................................................9
Securities Act...............................................................9
Settlement Agreement........................................................22
Severance Plan..............................................................35
Subsidiary...................................................................5
Superior Proposal...........................................................36
Surviving Corporation........................................................1
Tax.........................................................................11
Termination Fee.............................................................42
Title IV Harvest Plan.......................................................13
Violation....................................................................7
Voting Debt..................................................................6
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May
10, 1998 (referred to herein as the "date hereof"), by and among Orange and
Rockland Utilities, Inc. (the "Company"), a New York corporation,
Consolidated Edison, Inc., a New York corporation ("CEI"), and C
Acquisition Corp., a New York corporation (the "Merger Subsidiary").
WHEREAS, the Company and CEI have determined that it would be
in their respective best interests and in the interests of their respective
shareholders to effect the transactions contemplated by this Agreement; and
WHEREAS, in furtherance thereof, the respective Boards of
Directors of the Company, Merger Subsidiary and CEI have approved this
Agreement and the merger of Merger Subsidiary with and into the Company
(the "Merger").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section
1.3), the separate existence of Merger Subsidiary shall cease and Merger
Subsidiary shall be merged with and into the Company in accordance with the
laws of the State of New York. The Company shall be the surviving
corporation in the Merger, shall continue its corporate existence under the
laws of the State of New York, and, following the Effective Time, the
Company shall become a wholly owned subsidiary of CEI and shall succeed to
and assume all the rights and obligations of Merger Subsidiary in
accordance with the New York Business Corporation Law (the "NYBCL"). The
effects and consequences of the Merger shall be as set forth in Section
1.2. The surviving corporation after the Merger is sometimes referred to as
the "Surviving Corporation."
Section 1.2 Effects of the Merger. At the Effective Time, (a)
the Restated Certificate of Incorporation of the Company in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended, (b)
the by-laws of the Company in effect immediately prior to the Effective
Time shall be the by-laws of the Surviving Corporation after the Effective
Time until duly amended, and (c) the Merger shall have all the effects
provided by the NYBCL. As of the Effective Time, each of the directors of
the Company shall resign and the directors of the Merger Subsidiary at the
Effective Time shall, from and after the Effective Time, be the directors
of the Surviving Corporation until their successors have been duly elected
or appointed and qualified or until their earlier death, resignation or
removal in accordance with the certificate of incorporation and the by-laws
of the Surviving Corporation.
Section 1.3 Effective Time of the Merger. Subject to the
provisions of this Agreement, on the Closing Date (as defined in Section
3.1), a certificate of merger shall be executed and delivered for filing,
with the order of the New York State Public Service Commission (the
"NYPSC") approving the Merger attached thereto, by the Company and Merger
Subsidiary to the Department of State of the State of New York pursuant to
the NYBCL. The Merger shall become effective at the time specified in the
certificate of merger so delivered and filed by the Department of State of
the State of New York (the "Effective Time").
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect on Capital Stock of the Company and the
Merger Subsidiary. As of the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any capital stock of the
Company or Merger Subsidiary:
(a) Conversion of Capital Stock of the Company. Each issued and
outstanding share of Common Stock, $5 par value per share, of the Company
(the "Company Common Stock"), in each case not owned directly or through a
wholly owned Subsidiary (as defined in Section 4.1) by the Company or CEI,
issued and outstanding immediately prior to the Effective Time shall be
cancelled and shall be converted into the right to receive cash in the
amount of $58.50 (the "Merger Consideration") payable, without interest, to
the holder of such share of Company Common Stock, upon surrender, in the
manner provided in Section 2.2 hereof, of the certificate formerly
evidencing such share.
(b) Cancellation of Treasury Stock and Certain Company Common
Stock. Any shares of Company Common Stock that are owned by the Company as
treasury stock or by CEI or by any wholly owned Subsidiary of the Company
or CEI shall be cancelled and retired and shall cease to exist and no
Merger Consideration or other consideration shall be delivered in exchange
therefor, and each holder of a certificate formerly representing any such
shares shall cease to have any rights with respect thereto.
(c) Redemption of Company Preferred Stock. Prior to the
Effective Time, the Board of Directors of the Company shall call for
redemption all outstanding shares of Company Preferred Stock (as defined in
Section 4.3), at a redemption price equal to the amount set forth in the
Restated Certificate of Incorporation of the Company, together with all
dividends accrued and unpaid to the date of such redemption. All shares of
Company Preferred Stock shall be redeemed so that no such shares shall be
deemed to be outstanding at the Effective Time.
(d) Redemption of Company Preference Stock. Prior to the
Effective Time, the Board of Directors of the Company shall call for
redemption all outstanding shares of Company Preference Stock (as defined
in Section 4.3), at a redemption price equal to the amount set forth in the
Restated Certificate of Incorporation of the Company, together with all
dividends accrued and unpaid to the date of such redemption. All shares of
Company Preference Stock shall be redeemed so that no such shares shall be
deemed to be outstanding at the Effective Time.
(e) Capital Stock of Merger Subsidiary. Each issued and
outstanding share of Common Stock, $0.01 par value per share, of Merger
Subsidiary ("Merger Subsidiary Common Stock") (of which, as of the date
hereof, 1,000 shares are issued and outstanding, each entitling the holder
thereof to vote on the approval of this Agreement and the transactions
contemplated hereby), shall be converted into one fully paid and
nonassessable share of Common Stock, $5 par value, of the Surviving
Corporation.
Section 2.2 Surrender of Shares.
(a) Deposit with Paying Agent. Prior to the Effective Time, the
Company and CEI shall mutually designate a bank or trust company to act as
agent (the "Paying Agent") for the holders of shares of Company Common
Stock in connection with the Merger to receive the funds to which holders
of shares of Company Common Stock shall become entitled pursuant to Section
2.1(a). From time to time at, immediately prior to or after the Effective
Time, CEI shall make available to the Paying Agent immediately available
funds in amounts and at the times necessary for the payment of the Merger
Consideration upon surrender of Certificates (as defined in Section 2.2(b))
in accordance with Section 2.2(b), it being understood that any and all
interest or other income earned on funds made available to the Paying Agent
pursuant to this Section 2.2(a) shall belong to and shall be paid (at the
time provided for in Section 2.2(d)) to CEI. Any such funds deposited with
the Paying Agent by CEI shall be invested by the Paying Agent as directed
by CEI.
(b) Exchange Procedure. As soon as practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
(the "Cancelled Shares") that were cancelled and became instead the right
to receive the Merger Consideration pursuant to Section 2.1: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual
delivery of the Certificates to the Paying Agent) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate to the Paying Agent
for cancellation (or to such other agent or agents as may be appointed by
agreement of CEI and the Company), together with a duly executed letter of
transmittal and such other documents as the Paying Agent shall require, the
holder of such Certificate shall be entitled to receive the Merger
Consideration in exchange for each share of Company Common Stock formerly
evidenced by such Certificate which such holder has the right to receive
pursuant to the provisions of this Article II. In the event of a transfer
of ownership of Cancelled Shares which is not registered in the transfer
records of the Company, the Merger Consideration may be given to a
transferee if the Certificate representing such Cancelled Shares is
presented to the Paying Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence satisfactory to the
Paying Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration as contemplated by
this Section 2.2. No interest shall be paid or will accrue on the Merger
Consideration payable to holders of Certificates pursuant to the provisions
of this Article II.
(c) Closing of Transfer Books; Rights of Holders of Company
Common Stock. From and after the Effective Time, the stock transfer books
of the Company shall be closed and no registration of any transfer of any
capital stock of the Company shall thereafter be made on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration, as provided in this Section 2.2. From and after the
Effective Time, the holders of shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise
provided herein or by applicable law.
(d) Termination of Paying Agent. At any time commencing one
year after the Effective Time, CEI shall be entitled to require the Paying
Agent to deliver to it any funds which had been made available to the
Paying Agent and not disbursed to holders of shares of Company Common Stock
(including, without limitation, all interest and other income received by
the Paying Agent in respect of all funds made available to it), and
thereafter such holders shall be entitled to look to CEI (subject to
abandoned property, escheat and other similar laws) only as general
creditors thereof with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither CEI, the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a share of Company Common
Stock for any Merger Consideration delivered in respect of such share to a
public official pursuant to any abandoned property, escheat or other
similar law. If any Certificates shall not have been surrendered prior to
the thirty-first day of December in the fifth calender year after the
Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article II would otherwise escheat to or become
the property of any Governmental Authority (as defined in Section 4.4(c))),
the payment in respect of such Certificate shall, to the extent permitted
by applicable law, become the property of CEI, free and clear of all claims
or interest of any person (as defined below) previously entitled thereto.
As used in this Agreement, the term "person" shall mean any natural person,
corporation, general or limited partnership, limited liability company,
joint venture, trust, association or entity of any kind.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom
LLP, 919 Third Avenue, New York, New York 10022 at 10:00 A.M., local time,
on the second business day immediately following the date on which the last
of the conditions set forth in Article VIII hereof is fulfilled or waived,
or at such other time, date and place as the Company and CEI shall mutually
agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered by the Company on
the date hereof (the "Company Disclosure Schedule") and making reference to
the particular subsection of this Agreement to which exception is being
taken, the Company represents and warrants to CEI as follows:
Section 4.1 Organization and Qualification. The Company and
each of the Company Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite power and
authority, and has been duly authorized by all necessary approvals and
orders to own, lease and operate its assets and properties to the extent
owned, leased and operated and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership, leasing
or operation of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify,
individually or in the aggregate, would not have a Company Material Adverse
Effect. For purposes of this Agreement, "Company Material Adverse Effect"
shall mean any change, effect, event, occurrence or state of facts (i) that
is, or reasonably would be expected to be, materially adverse to the
business, assets, financial condition, results of operations or prospects
of the Company and the Company Subsidiaries taken as a whole or (ii) that
would prevent, or reasonably be expected to prevent, the Company from
performing its obligations under this Agreement or prevent the consummation
of the transactions contemplated hereby. As used in this Agreement, (a) the
term "Subsidiary" of a person shall mean any corporation or other entity
(including partnerships and other business associations) of which at least
a majority of the voting power represented by the outstanding capital stock
or other voting securities or interests having voting power under ordinary
circumstances to elect directors or similar members of the governing body
of such corporation or entity (or, if there are no such voting interests,
50% or more of the equity interests of which) shall at the time be held,
directly or indirectly, by such person, and (b) the term "Company
Subsidiary" shall mean a Subsidiary of the Company.
Section 4.2 Subsidiaries. Section 4.2 of the Company Disclosure
Schedule sets forth a list, as of the date hereof, of (a) all the Company
Subsidiaries and (b) all other entities in which the Company has an
aggregate equity investment in excess of $2 million. All of the issued and
outstanding shares of capital stock of each Company Subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are
owned, directly or indirectly, by the Company free and clear of any
pledges, liens, claims, encumbrances, security interests, charges and
options of any nature whatsoever (collectively, "Liens") and free of any
other restriction (including any restriction on the right to vote, sell or
otherwise dispose of any such capital stock) and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating any such
Company Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating it
to grant, extend or enter into any such agreement or commitment.
Section 4.3 Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 50,000,000 shares of
Company Common Stock, 1,000,000 shares of Cumulative Preferred Stock,
issuable in series, par value $100.00 per share ("Company Preferred
Stock"), and 1,500,000 shares of Cumulative Preference Stock, issuable in
series, without par value ("Company Preference Stock"). At the close of
business on April 30, 1998, (i) 13,518,779 shares of Company Common Stock
were issued and outstanding, and 16,931 shares of Company Common Stock were
reserved for conversion of Company Preference Stock, (ii) 428,443 shares of
Company Preferred Stock were issued and outstanding, (iii) 11,518 shares of
Company Preference Stock were issued and outstanding, (iv) no bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on
which stockholders may vote ("Voting Debt") were issued or outstanding and
(v) no shares of Company Common Stock were held by the Company in its
treasury. Since April 30, 1998, the Company has not issued any shares of
Company Common Stock or of any other class or series of capital stock or
any Voting Debt, other than shares of Company Common Stock issued upon
conversion of Company Preference Stock. As of the date hereof, all
outstanding shares of Company Common Stock, Company Preferred Stock and
Company Preference Stock are validly issued, fully paid and nonassessable
and are not subject to preemptive rights. As of the Closing Date, all
outstanding shares of Company Common Stock will be validly issued, fully
paid and nonassessable and will not be subject to preemptive rights. As of
the date hereof, there are no options, warrants, calls, rights, commitments
or agreements of any character to which the Company or any Company
Subsidiary is a party or by which it is bound obligating the Company or any
Company Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any Voting Debt
securities of the Company or any Company Subsidiary or obligating the
Company or any Company Subsidiary to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. At the Effective
Time, there will be no option, warrant, call, right, commitment or
agreement obligating the Company or any Company Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock or any Voting Debt of the Company or any Company Subsidiary,
or obligating the Company or any Company Subsidiary to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. The Company has all requisite power and
authority to enter into this Agreement and, subject to the receipt of the
Company Shareholders' Approval (as defined in Section 4.14) and the
applicable Company Required Statutory Approvals (as defined in Section
4.4(c)), to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to obtaining the
Company Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto, constitutes
the legal, valid and binding obligation of the Company enforceable against
it in accordance with its terms.
(b) Non-Contravention. The execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not, in any respect, violate, conflict with or
result in a breach of any provision of, or constitute a default (with or
without notice or lapse of time or both) under, or result in the
termination or modification of, or accelerate the performance required by,
or result in a right of termination, cancellation or acceleration of any
obligation, or the loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of the
Company Subsidiaries (any such violation, conflict, breach, default, right
of termination, modification, cancellation or acceleration, loss or
creation is referred to herein as a "Violation" with respect to the Company
and such term when used in Article V has a correlative meaning with respect
to CEI) pursuant to any provisions of (i) the certificate of incorporation,
by-laws or similar governing documents of the Company or any of the Company
Subsidiaries, (ii) subject to obtaining the Company Required Statutory
Approvals and the receipt of the Company Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority
applicable to the Company or any of the Company Subsidiaries or any of
their respective properties or assets (other than (x) municipal consents
and franchises and (y) immaterial consents, approvals, orders,
authorizations, actions, registrations, declarations or filings, including
with respect to communications systems, zoning, name change, occupancy and
similar routine regulatory approvals) or (iii) subject to obtaining the
third-party consents set forth in Section 4.4(b) of the Company Disclosure
Schedule (the "Company Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
standstill agreement, contract, lease or other instrument, obligation or
agreement of any kind to which the Company or any of the Company
Subsidiaries is a party or by which they or any of their properties or
assets may be bound or affected (other than municipal consents or
franchises), except in the case of clause (iii) for any such Violation
which, individually or in the aggregate, would not have a Company Material
Adverse Effect.
(c) Statutory Approvals. No declaration, filing, registration
with, notice to, authorization, permit, order, consent or approval (other
than immaterial consents, approvals, orders, authorizations, actions,
registrations, declarations or filings, including with respect to
communications systems, zoning, name change, occupancy and similar routine
regulatory approvals) of, any court, federal, state, local or foreign
governmental, administrative, or regulatory body (including a stock
exchange or other self-regulatory body) or authority (each, a "Governmental
Authority") is necessary for the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions
contemplated hereby, except those described in Section 4.4(c) of the
Company Disclosure Schedule (the "Company Required Statutory Approvals," it
being understood that references in this Agreement to "obtaining" such
Company Required Statutory Approvals shall mean making such declarations,
filings or registrations; giving such notices; obtaining such
authorizations, permits, orders, consents or approvals; and having such
waiting periods expire as are necessary to avoid a violation of law).
(d) Compliance. Except as disclosed in the Company SEC Reports
(as defined in Section 4.5) filed prior to the date hereof, neither the
Company nor any of the Company Subsidiaries is in violation of, is, to the
knowledge of the Company, under investigation with respect to any violation
of, or has been given notice or been charged with any violation of, any
law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable Environmental Law (as defined in Section
4.12(b)(ii))) of any Governmental Authority, except for possible violations
which individually or in the aggregate would not have a Company Material
Adverse Effect. Except as disclosed in the Company SEC Reports filed prior
to the date hereof, the Company and the Company Subsidiaries have all
permits, licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted which are material to the operation of the businesses of the
Company and the Company Subsidiaries (other than certain municipal consents
and franchises). The Company and each of the Company Subsidiaries is not in
breach or violation of or in default in the performance or observance of
any term or provision of, and no event has occurred which, with lapse of
time or action by a third party, could result in a default by the Company
or any Company Subsidiary under (i) their respective certificates of
incorporation or by-laws or (ii) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval
or other instrument to which it is a party or by which the Company or any
Company Subsidiary is bound or to which any of their respective properties
or assets are subject, except in the case of this clause (ii) for possible
violations, breaches or defaults which individually or in the aggregate
would not have a Company Material Adverse Effect. All utility rates charged
by the Company and its utility Subsidiaries have been and continue to be
made pursuant to lawfully filed tariffs and contracts.
Section 4.5 Reports and Financial Statements. (a) The filings
(other than immaterial filings) required to be made by the Company and the
Company Subsidiaries since January 1, 1993 under the Securities Act of
1933, as amended (the "Securities Act"); the Securities Exchange Act of
1934, as amended (the "Exchange Act"); the Public Utility Holding Company
Act of 1935, as amended (the "1935 Act"); the Federal Power Act (the "Power
Act"); and applicable state public utility laws and regulations have been
filed with the Securities and Exchange Commission (the "SEC"), the Federal
Energy Regulatory Commission (the "FERC"), or the appropriate state public
utilities commission, as the case may be, including all forms, statements,
reports, tariffs, contracts, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto, and
complied, as of their respective dates, in all material respects with all
applicable requirements of the applicable statutes and the rules and
regulations thereunder. The Company has made available to CEI a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed with the SEC by the Company pursuant to
the requirements of the Securities Act or Exchange Act since January 1,
1993 (the "Company SEC Reports"). As of their respective dates, the Company
SEC Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements (including the notes thereto) of the
Company included in the Company SEC Reports (collectively, the "Company
Financial Statements") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") as applied to a regulated
utility, applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto and except with respect
to unaudited statements as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to
normal, recurring audit adjustments. True, accurate and complete copies of
the Restated Certificate of Incorporation and by-laws of the Company, as in
effect on the date hereof, are included (or incorporated by reference) in
the Company SEC Reports.
(b) Franchises. The Company and the Company utility
Subsidiaries own or have sufficient rights and consents to use under
existing franchises, easements, leases, and license agreements all
properties, rights and assets necessary for the conduct of their business
and operations as currently conducted, except where the failure to own or
have sufficient rights to such properties, rights and assets would not
have, individually or in the aggregate, a Company Material Adverse Effect.
To the knowledge of the Company, no other private corporation can commence
public utility operations in any part of the territories now served by the
Company or its wholly owned utility Subsidiaries, Rockland Electric Company
("RECO") and Pike County Light & Power Company ("Pike"), respectively,
without obtaining a certificate of public convenience and necessity from
the applicable state utility commission.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports filed prior to the date hereof, since
December 31, 1997, the Company and each of the Company Subsidiaries have
conducted their respective businesses only in the ordinary course of
business consistent with past practice and there has not been, and no fact
or condition exists which, individually or in the aggregate, would have a
Company Material Adverse Effect. From December 31, 1997 through the date
hereof there has not been (i) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to any capital stock of the Company, other than (A) regular
quarterly dividends of $.645 per share on Company Common Stock and (B)
dividends payable on Company Preferred Stock and Company Preference Stock
in accordance with their terms, (ii) any split, combination or
reclassification of any capital stock of the Company or any of the Company
Subsidiaries or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for any
capital stock of the Company or any of the Company Subsidiaries or (iii)
except insofar as required by a change in GAAP, any change in accounting
methods, principles or practices by the Company or any of the Company
Subsidiaries materially affecting their respective assets, liabilities or
businesses.
Section 4.7 Litigation. There (a) are no claims, suits, actions
or proceedings before any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator, pending or, to the
knowledge of the Company, threatened, nor are there, to the knowledge of
the Company, any investigations or reviews by any court, governmental
department, commission, agency, instrumentality or authority or any
arbitrator pending or threatened against, relating to or affecting the
Company or any of the Company Subsidiaries which, individually or in the
aggregate, would have a Company Material Adverse Effect, (b) have not been
any significant developments since December 31, 1997 with respect to any
disclosed claims, suits, actions, proceedings, investigations or reviews
that, individually or in the aggregate, would have a Company Material
Adverse Effect and (c) are no judgments, decrees, injunctions, rules or
orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to the Company or
any of the Company Subsidiaries except for such that, individually or in
the aggregate, would not have a Company Material Adverse Effect.
Section 4.8 Proxy Statement. None of the information supplied
or to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the proxy statement, in definitive form,
relating to the meeting of holders of Company Common Stock to be held in
connection with the Merger (the "Proxy Statement") will, at the date
mailed to the Company shareholders and at the time of the meeting of the
holders of Company Common Stock to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 4.9 Tax Matters.
Except as to any items that would not, individually or in
the aggregate, have a Company Material Adverse Effect:
(a) The Company and each of the Company Subsidiaries has
(i) filed all Federal, state, local and foreign income and other tax
returns or reports (including declarations of estimated tax) required to be
filed by it, (ii) paid all taxes of any nature whatsoever (together with
any related penalties and interest) (any of the foregoing being referred to
herein as a "Tax"), that are shown on such Tax returns as due and payable
on or before the date hereof, and (iii) paid all Taxes otherwise required
to be paid.
(b) There are no claims or assessments pending against
the Company or any of the Company Subsidiaries for any alleged deficiency
in Tax, and the Company does not know of any threatened Tax claims or
assessments against the Company or any of the Company Subsidiaries.
(c) The Company has established adequate accruals for
Taxes and for any liability for deferred Taxes in the Company Financial
Statements in accordance with
GAAP.
(d) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Company or any Company
Subsidiary.
(e) The Federal income Tax returns of the Company, each
Company Subsidiary and any affiliated, consolidated, combined or unitary
group that includes the Company or any Company Subsidiary either have been
examined and settled with the Internal Revenue Service or closed by virtue
of the expiration of the applicable statute of limitations for all years
through 1994.
(f) None of the Company or any Company Subsidiary shall
be required to include in a taxable period ending after the Effective Time
an amount of taxable income attributable to income that accrued in a prior
taxable period but was not recognized in any prior taxable period as a
result of the installment method of accounting, the completed contract
method of accounting, the long-term contract method of accounting, the cash
method of accounting or Section 481 of the Code or comparable provisions of
state, local or foreign Tax law.
(g) From December 31, 1997 through the date hereof, there
have not been any Tax elections, any settlements or compromises of any
income Tax liability or any changes in Tax attributes.
Section 4.10 Employee Matters; ERISA.
(a) Section 4.10(a) of the Company Disclosure Schedule hereto
contains a true and complete list of each deferred compensation and each
bonus or other incentive compensation, stock purchase, stock option and
other equity compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization, life
insurance and other "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); each profit-sharing, stock bonus or other "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); each
employment, retention, consulting, termination or severance agreement; and
each other employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or contributed to or required
to be contributed to by the Company or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with the Company
would be deemed a "single employer" within the meaning of Section 4001(b)
of ERISA, or to which the Company or an ERISA Affiliate is party, whether
written or oral, for the benefit of any employee or former employee of the
Company or any Company Subsidiary (the "Company Plans").
(b) With respect to each Company Plan, the Company has
heretofore delivered or made available to CEI true and complete copies of
each of the following documents:
(i) a copy of the Company Plan and any amendments thereto;
(ii) a copy of the two most recent annual reports on
Internal Revenue Service Form 5500 and actuarial reports, if required
under ERISA, and the most recent report prepared with respect thereto
in accordance with Statement of Financial Accounting Standards No. 87;
(iii) a copy of the most recent Summary Plan Description
required under ERISA with respect thereto;
(iv) if the Company Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof and all related
agreements; and
(v) the most recent determination letter or pending
determination letter received from the Internal Revenue Service with
respect to each Company Plan intended to qualify under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code").
(c) No liability under Title IV or Section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to
the Company or any ERISA Affiliate of incurring any such liability, other
than liability for premiums due the Pension Benefit Guaranty Corporation
("PBGC") (which premiums have been paid when due). No Company Plan has, to
the knowledge of the Company, engaged in a "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA), no Company
Plan subject to Title IV of ERISA (a "Title IV Company Plan") has been
terminated by the PBGC or has been the subject of a "reportable event" (as
defined in Section 4043 of ERISA and the regulations thereunder) for which
the 30-day notice requirement has not been waived and the Company has not
received any notice of intent by PBGC to terminate any such plan.
(d) With respect to each Title IV Company Plan, the present
value of accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such plan did not exceed,
as of its latest valuation date, the then current value of the assets of
such plan allocable to such accrued benefits.
(e) No Title IV Company Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
as of the last day of the most recent fiscal year of each Title IV Company
Plan ended prior to the Closing Date nor has there been any application for
waiver of the minimum funding standards imposed by Section 412 of the Code.
All contributions required to be made with respect to any Company Plan on
or prior to the Closing Date have been timely made or are reflected on the
balance sheet.
(f) No Title IV Company Plan is a "multiemployer plan", as
defined in Section 3(37) of ERISA, nor is any Title IV Company Plan a plan
described in Section 4063(a) of
ERISA.
(g) Each Company Plan has been operated and administered in all
material respects in accordance with its terms and applicable law,
including but not limited to ERISA and the Code, the rules and regulations
thereunder and all applicable collective bargaining agreements and each
Company Plan intended to be "qualified" under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue
Service to such effect. To the knowledge of the Company, there is no fact,
condition or set of circumstances existing that could adversely affect such
favorable determination. To the Company's knowledge, there are no
investigations pending in respect of any Company Plan by any Governmental
Authority.
(h) Each Company Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code.
(i) No Company Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees (or their beneficiaries) of the Company or
any Company Subsidiary for periods extending beyond their respective dates
of retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan,"
or (iii) benefits the full cost of which is borne by the current or former
employee (or his beneficiary).
(j) No amounts payable under the Company Plans will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(k) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of the Company or any
ERISA Affiliate to severance pay, unemployment compensation or any other
payment, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer. Schedule 4.10(k)
of the Company Disclosure Schedule sets forth estimates prepared by the
Company of the amounts reasonably expected to be paid to participants in
any Company Plan (or by which any of their benefits may be increased or
accelerated) as a result solely of (i) the execution of this Agreement,
(ii) the obtaining of the Company Shareholders' Approval and (iii)
termination or constructive termination of any officer or director's
employment with the Company or any Company Subsidiary. For purposes of the
preceding sentence, the determination of the amounts set forth in Schedule
4.10(k) is based upon each employee's current compensation, outstanding
awards and benefits accrued (as applicable) and on such other factors as
the Company, taking into account applicable law and regulations, deems
reasonable and appropriate.
(l) There are no pending, threatened or anticipated claims by
or on behalf of any Company Plan, by any employee or beneficiary covered
under any such Company Plan, or otherwise involving any such Company Plan
(other than routine claims for
benefits).
Section 4.11 Labor and Employee Relations.
(a) As of the date hereof, except as disclosed in the Company
SEC Reports filed prior to the date hereof, (i) except for the existing
collective bargaining agreement between the Company and Local Union No. 503
of the International Brotherhood of Electrical Workers effective June 1,
1997 through May 31, 2000, neither the Company nor any of the Company
Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or labor organization and (ii) to the
knowledge of the Company, there is no current union representation question
involving employees of the Company or any of the Company Subsidiaries, nor
does the Company know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any
such employees, except to the extent such, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(b) Except as disclosed in the Company SEC Reports filed prior
to the date hereof or except to the extent such, individually or in the
aggregate, would not have a Company Material Adverse Effect, (i) there is
no unfair labor practice, employment discrimination or other charge, claim,
suit, action or proceeding against the Company or any of the Company
Subsidiaries pending, or to the knowledge of the Company, threatened before
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator, (ii) there is no strike, lockout or material
dispute, slowdown or work stoppage pending or, to the knowledge of the
Company, threatened against or involving the Company, and (iii) there is no
proceeding, claim, suit, action or governmental investigation pending or,
to the knowledge of the Company, threatened in respect of which any
director, officer, employee or agent of the Company or any of the Company
Subsidiaries is or may be entitled to claim indemnification from the
Company or such Company Subsidiary pursuant to their respective
certificates of incorporation or by-laws or as provided in the
indemnification agreements listed in Section 4.11(b) of the Company
Disclosure Schedule or any other indemnification agreements.
Section 4.12 Environmental Protection.
(a) Except as set forth in the Company SEC Reports filed prior
to the date hereof:
(i) Compliance. The Company and each of the Company
Subsidiaries is in compliance with all applicable Environmental Laws
except where the failure to so comply, individually or in the
aggregate, would not have a Company Material Adverse Effect, and
neither the Company nor any of the Company Subsidiaries has received
any communication (written or oral) reasonably grounded in fact, from
any person or Governmental Authority that alleges that the Company or
any of the Company Subsidiaries is not in such compliance with
applicable Environmental Laws. To the knowledge of the Company,
compliance with all applicable Environmental Laws will not require
the Company or any Company Subsidiary to incur costs, beyond those
currently budgeted for the three Company fiscal years beginning with
January 1, 1998, that, individually or in the aggregate, would have a
Company Material Adverse Effect, including, but not limited to, the
costs of pollution control equipment that are known or anticipated to
be required in the future.
(ii) Environmental Permits. (A) The Company and each of
the Company Subsidiaries has obtained or has applied for all
environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary
for the construction of their facilities or the conduct of their
operations except where the failure to so obtain, individually or in
the aggregate, would not have a Company Material Adverse Effect, (B)
all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is
pending agency approval except where the failure of such
Environmental Permits to be in good standing or to have filed a
renewal application on a timely basis would not, individually or in
the aggregate, have a Company Material Adverse Effect, (C) the
Company and the Company Subsidiaries are in material compliance with
all terms and conditions of the Environmental Permits, except where
failure to so comply, individually or in the aggregate, would not
have a Company Material Adverse Effect and (D) neither the Company
nor any of the Company Subsidiaries has been advised by any
Governmental Authority of any potential change in the terms and
conditions of the Environmental Permits either prior to or upon their
renewal, except for such potential changes as would not, individually
or in the aggregate, have a Company Material Adverse Effect.
(iii) Environmental Claims. There are no Environmental
Claims (as defined in Section 4.12(b)(i)) which would, individually
or in the aggregate, have a Company Material Adverse Effect pending
or, to the knowledge of the Company, threatened, (A) against the
Company or any of the Company Subsidiaries, (B) to the knowledge of
the Company, against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries
has or may have retained or assumed either contractually or by
operation of law, or (C) against any currently owned, leased or
managed, in whole or in part, real or personal property or operations
of the Company or any of the Company Subsidiaries or, to the
knowledge of the Company, against any formerly owned, leased or
managed, in whole or in part, real or personal property or operations
of the Company or any of the Company Subsidiaries.
(iv) Releases. The Company has no knowledge of any
Releases (as defined in Section 4.12(b)(iv)) of any Hazardous
Material (as defined in Section 4.12(b)(iii)) that would be
reasonably likely to form the basis of any Environmental Claim
against the Company or any of the Company Subsidiaries, or against
any person or entity whose liability for any Environmental Claim the
Company or any of the Company Subsidiaries has or may have retained
or assumed either contractually or by operation of law except for any
Environmental Claim which, individually or in the aggregate, would
not have a Company Material Adverse Effect.
(v) Predecessors. The Company has no knowledge, with
respect to any predecessor of the Company or any of the Company
Subsidiaries, of any Environmental Claim which, individually or in
the aggregate, would have a Company Material Adverse Effect pending
or threatened, or of any Release of Hazardous Materials that would be
reasonably likely to form the basis of any Environmental Claim which,
individually or in the aggregate, would have a Company Material
Adverse Effect.
(b) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands,
demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation (written or
oral) by any person or entity (including any Governmental Authority),
alleging potential liability (including, without limitation,
potential responsibility for or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, Release or threatened Release into
the environment of any Hazardous Materials at any location, whether
or not owned, operated, leased or managed by the Company or any of
the Company Subsidiaries; or (B) circumstances forming the basis of
any violation or alleged violation of any Environmental Law or (C)
any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials or
the presence of or exposure to any electromagnetic fields.
(ii) "Environmental Laws" means all federal, state and
local laws, rules, regulations, orders, decrees, judgments or binding
agreements issued, promulgated or entered into by or with any
Governmental Authority, relating to pollution, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of
human health as it relates to the environment including, without
limitation, laws and regulations relating to noise levels, Releases
or threatened Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls ("PCBs"); (B) any chemicals,
materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar
import under any Environmental Law and (C) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in
which the Company or any of the Company Subsidiaries operates.
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or
property.
Section 4.13 Regulation as a Utility. As of the date hereof, the
Company, pursuant to an order, dated March 27, 1936, of the SEC, has been
exempted, from all of the provisions of the 1935 Act, except Section
9(a)(2) thereof relating to the acquisition of securities of other public
utility companies. The Company is regulated as a public utility in the
State of New York and in no other state. RECO is regulated as a public
utility in the State of New Jersey and in no other state. Pike is regulated
as a public utility in the State of Pennsylvania and in no other state.
Except as set forth in this Section neither the Company nor any "subsidiary
company" or "affiliate" (as each such term is defined in the 1935 Act) of
the Company is subject to regulation as a public utility holding company,
public utility or public service company (or similar designation) by the
Federal government of the United States, any other state in the United
States or any foreign country.
Section 4.14 Vote Required. Provided that the NYPSC approves the
Merger prior to the Effective Time, the approval of the Merger by the
holders of two-thirds of all outstanding shares of Company Common Stock
(the "Company Shareholders' Approval") is the only vote of the holders of
any class or series of the capital stock of the Company or any of the
Company Subsidiaries required to approve this Agreement, the Merger and the
other transactions contemplated hereby.
Section 4.15 State Anti-Takeover Statutes. Assuming the
accuracy of the representation of CEI set forth in Section 5.8, neither
Section 912 nor Article 16 of the NYBCL nor any provision of Article Eighth
of the Company's Restated Certificate of Incorporation is applicable to the
transactions contemplated by this Agreement. To the knowledge of the
Company, no other state anti-takeover statute is applicable to the
Company's participation in the Merger or in the other transactions
contemplated hereby.
Section 4.16 Opinion of Financial Advisor. The Company has
received the opinion of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), dated the date hereof, to the effect that, as of the date hereof,
the Merger Consideration is fair from a financial point of view to the
holders of Company Common Stock.
Section 4.17 Insurance. The Company and each of the Company
Subsidiaries is, and has been continuously since January 1, 1993, insured
with financially responsible insurers in such amounts and against such
risks and losses as are customary in all material respects for companies
conducting the business as conducted by the Company and the Company
Subsidiaries during such time period. Neither the Company nor any of the
Company Subsidiaries has received any notice of cancellation or termination
with respect to any insurance policy of the Company or any of the Company
Subsidiaries. The insurance policies of the Company and each of the Company
Subsidiaries are valid and enforceable policies.
Section 4.18 Discontinued Business. NORSTAR Management, Inc.
and its Subsidiaries and the business formerly conducted by them have
ceased operations (the "Discontinued Business") and, except for liabilities
reflected in the Company Financial Statements, neither the Company nor any
the Company Subsidiary, other than NORSTAR Management, Inc. and its
Subsidiaries, has any liabilities or obligations with respect to such
business and no creditor of the Discontinued Business has any recourse
against the Company or any Company Subsidiary other than NORSTAR
Management, Inc. and its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CEI
Except as set forth in the schedule delivered by CEI on the
date hereof (the "CEI Disclosure Schedule") and making reference to the
particular subsection of this Agreement to which exception is being taken,
CEI represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Each of CEI,
Consolidated Edison Company of New York, Inc., a New York corporation (
"CECONY"), and the Merger Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority, and
has been duly authorized by all necessary approvals and orders to own,
lease and operate its assets and properties to the extent owned, leased and
operated and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of
its assets and properties makes such qualification necessary other than in
such jurisdictions where the failure so to qualify, individually or in the
aggregate, would not have a CEI Material Adverse Effect. For purposes of
this Agreement, "CEI Material Adverse Effect" shall mean any change,
effect, event, occurrence or state of facts (i) that is, or reasonably
would be expected to be, materially adverse to the business, assets,
financial condition, results of operations or prospects of CEI and its
Subsidiaries (the "CEI Subsidiaries") taken as a whole or (ii) that would
prevent, or reasonably be expected to prevent, CEI from performing its
obligations under this Agreement or prevent the consummation of the
transactions contemplated hereby.
Section 5.2 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. Each of CEI and the Merger Subsidiary has all
requisite power and authority to enter into this Agreement and, subject to
the receipt of the applicable CEI Required Statutory Approvals (as defined
in Section 5.2(c)), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by each of
CEI and the Merger Subsidiary of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of CEI
and the Merger Subsidiary. This Agreement has been duly and validly
executed and delivered by each of CEI and the Merger Subsidiary and,
assuming the due authorization, execution and delivery hereof by the other
signatories hereto, constitutes the legal, valid and binding obligation of
each of CEI and the Merger Subsidiary enforceable against it in accordance
with its terms.
(b) Non-Contravention. The execution and delivery of this
Agreement by CEI and the Merger Subsidiary does not, and the consummation
of the transactions contemplated hereby will not, result in a Violation
pursuant to any provisions of (i) the certificate of incorporation, by-laws
or similar governing documents of CEI or the Merger Subsidiary, (ii)
subject to obtaining the CEI Required Statutory Approvals, any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority applicable to CEI or
the Merger Subsidiary or any of their respective properties or assets
(other than immaterial consents, approvals, orders, authorizations,
actions, registrations, declarations or filings, including with respect to
communications systems, zoning, name change, occupancy and similar routine
regulatory approvals) or (iii) any material note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
standstill agreement, contract, lease or other instrument, obligation or
agreement of any kind to which CEI or the Merger Subsidiary is a party or
by which they or any of their respective properties or assets may be bound
or affected, except in the case of clause (iii) for any such Violation
which, individually or in the aggregate, would not have a CEI Material
Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration
with, notice to, authorization, permit, order, consent or approval (other
than immaterial consents, approvals, orders, authorizations, actions,
registrations, declarations or filings, including with respect to
communications systems, zoning, name change, occupancy and similar routine
regulatory approvals) of, any Governmental Authority is necessary for the
execution and delivery of this Agreement by each of CEI and the Merger
Subsidiary or the consummation by each of CEI and the Merger Subsidiary of
the transactions contemplated hereby, except those described in Section
5.2(c) of the CEI Disclosure Schedule (the "CEI Required Statutory
Approvals," it being understood that references in this Agreement to
"obtaining" such CEI Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, permits, orders, consents or approvals; and having such
waiting periods expire as are necessary to avoid a violation of law).
(d) Compliance. Except as disclosed in CEI SEC Reports (as
defined in Section 5.3) filed prior to the date hereof, neither CEI nor the
Merger Subsidiary is in violation of, is under investigation with respect
to any violation of, or has been given notice or been charged with any
violation of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable Environmental Law)
of any Governmental Authority, which would prevent CEI from consummating
the transactions contemplated by this Agreement.
Section 5.3 Litigation. Except as disclosed in each report,
schedule, registration statement and definitive proxy statement filed with
the SEC by CEI or CECONY pursuant to the requirements of the Securities Act
or Exchange Act since January 1, 1993 (as such documents have since the
time of their filing been amended, the "CEI SEC Reports") filed prior to
the date hereof, there are no claims, suits, actions or proceedings by any
court, governmental department, commission, agency, instrumentality or
authority or any arbitrator, pending or, to the knowledge of CEI,
threatened, nor are there, to the knowledge of CEI, any investigations or
reviews by any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator pending or threatened
against relating to or affecting CEI or the Merger Subsidiary which, in
each case, would prevent CEI from consummating the transactions
contemplated by this Agreement.
Section 5.4 Proxy Statement. None of the information supplied
or to be supplied by or on behalf of CEI for inclusion or incorporation by
reference in the Proxy Statement will, at the date mailed to the Company
shareholders and at the time of the meeting of the holders of Company
Common Stock to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Section 5.5 Regulation as a Utility. As of the date hereof,
neither CEI nor any "subsidiary company" or "affiliate" (as each such term
is defined in the 1935 Act) of CEI is subject to regulation as a public
utility holding company, public utility or public service company (or
similar designation) by the Federal government of the United States, any
state in the United States or any foreign country.
Section 5.6 No Vote Required. No vote of holders of any class
or series of the capital stock of CEI is necessary to approve this
Agreement, the Merger or the other transactions contemplated hereby.
Section 5.7 Financing. CEI has or will have available, prior to
the Effective Time, sufficient cash in immediately available funds to pay
the Merger Consideration pursuant to Article II hereof and to consummate
the Merger and the other transactions contemplated hereby.
Section 5.8 Ownership of Company Common Stock. As of the date
hereof, neither CEI nor any of its Affiliates (excluding for such purposes
officers and directors of CEI and the CEI Subsidiaries) (i) beneficially
owns (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each
case, shares of capital stock of the Company.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Except as set forth in the Company Disclosure Schedule and
making references to the particular subsection of this Agreement to which
exception is being
taken:
Section 6.1 Covenants of the Company. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, the
Company agrees as follows, each as to itself and to each of the Company
Subsidiaries, except as expressly contemplated or permitted in this
Agreement or to the extent CEI shall otherwise consent in writing, which
decision regarding consent shall be made as soon as reasonably practical:
(a) Ordinary Course of Business. The Company shall, and shall
cause the Company Subsidiaries to, carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable laws and regulations and use all commercially reasonable efforts
to preserve intact their respective present business organizations and
goodwill, preserve the goodwill and relationships with customers, suppliers
and others having business dealings with them and, subject to prudent
management of work force needs and ongoing programs currently in force,
keep available the services of their respective present officers and
employees, provided, however, (i) that nothing shall prohibit the Company
from divesting its generation assets in accordance with terms that are
equivalent in all material respects to the terms in the Order Adopting
Terms of Settlement with the New York State Public Service Commission,
issued and effective November 26, 1997 (the "Settlement Agreement") and the
Final Divestiture Plan dated February 3, 1998 and the Order Authorizing the
Process For Auctioning of Generation Plant and Rejecting Joint Agreement,
issued and effective April 16, 1998 (collectively, the "Final Divestiture
Plan") and (ii) neither the Company nor any Company Subsidiary shall enter
into any new line of business. Notwithstanding the above and
notwithstanding any other provision in Section 6.1 (other than Section
6.1(l)), the Company and any of the Company Subsidiaries may make equity
infusions into a Company Subsidiary (other than NORSTAR Management, Inc.
and its Subsidiaries) (i) to the extent required by law or a state
regulatory commission or (ii) to the extent that equity infusions into the
Company Subsidiaries do not exceed $10 million in the aggregate.
(b) Dividends. The Company shall not, and shall not permit any
of the Company Subsidiaries to: (i) declare or pay any dividends on or make
other distributions in respect of any of their respective capital stock
other than to the Company or the Company Subsidiaries and other than
regular quarterly dividends on Company Common Stock with usual record and
payment dates not, during any period of any fiscal year, in excess of the
dividends for the comparable period of the prior fiscal year, (ii) split,
combine or reclassify any of their respective capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of, or in substitution for, shares of their respective capital stock
or (iii) redeem, repurchase or otherwise acquire any shares of their
respective capital stock, other than (A) redemptions, purchases or
acquisitions required by the respective terms of any series of Company
Preferred Stock or Company Preference Stock, or (B) for the purpose of
funding employee stock ownership plans and dividend reinvestment programs
in accordance with past practice. Notwithstanding the foregoing, the
Company may redeem Company Preferred Stock pursuant to the provisions of
Section 2.1(c) and the Company may redeem Company Preference Stock pursuant
to the provisions of Section 2.1(d). The last record date of the Company on
or prior to the Effective Time which relates to a regular quarterly
dividend on Company Common Stock shall be prior to the Effective Time.
(c) Issuance of Securities. The Company shall not, and shall
not permit any of the Company Subsidiaries to, issue, agree to issue,
deliver, sell, award, pledge, dispose of or otherwise encumber or authorize
or propose the issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable
securities, other than any issuances of capital stock of any Company
Subsidiary to the Company or any wholly-owned Company Subsidiary (other
than, in each case, NORSTAR Management, Inc. and its Subsidiaries).
(d) Charter Documents. The Company shall not amend or propose
to amend its Restated Certificate of Incorporation or by-laws or other
comparable organizational documents of any Company Subsidiary.
(e) No Acquisitions. The Company shall not, nor shall the
Company permit any of the Company Subsidiaries to: (i) acquire, or publicly
propose to acquire, or agree to acquire, by merger or consolidation with,
or by purchase or otherwise, an equity interest in or a substantial portion
of the assets of, any business or any corporation, partnership, association
or other business organization or division thereof, or (ii) otherwise
acquire or agree to acquire a material amount of assets, except in the case
of this clause (ii) only, in the ordinary course of business consistent
with past practice or (iii) alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the corporate
structures or ownership of the Company or any of the Company Subsidiaries.
(f) No Dispositions. Except (i) for the Company divesting its
generation assets in accordance with the terms and conditions set forth in
the Settlement Agreement and the Final Divestiture Plan, (ii) for Clove
Development Corporation, a wholly owned subsidiary of the Company,
divesting at fair market value, its real estate, primarily located in
Sullivan County, New York, (iii) for O&R Energy Development, Inc., a wholly
owned subsidiary of the Company, divesting at fair market value its real
estate, primarily located in Orange County, New York, and (iv) for the
Company or the Company Subsidiaries making dispositions at fair market
value of less than $10 million in sales price and indebtedness assumed by
the acquiring party and its Affiliates, singularly or in the aggregate
during any fiscal year, the Company shall not, nor shall the Company permit
any of the Company Subsidiaries to, sell or dispose of any of their
respective assets other than dispositions in the ordinary course of its
business consistent with past practice. As used in this Agreement, the term
"Affiliate," except where otherwise defined herein, shall mean, as to any
person, any other person which directly or indirectly controls, or is under
common control with, or is controlled by, such person. As used in this
definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise). The
Company (i) shall consult with CEI with respect to significant decisions
relating to the divestiture of the generation assets and transactions in
connection therewith prior to taking any action with respect to any such
decision or entering into any such transaction and (ii) shall take into
account the views of CEI with respect to such action or transaction. The
Company shall use its best efforts to enter into a definitive agreement to
divest its generation assets in accordance with the Settlement Agreement
and the Final Divestiture Plan on or prior to May 1, 1999 and use its best
efforts to consummate the divestiture of its generation assets as soon as
practicable after entering into such agreement. The Company shall conduct
such divestiture on terms that are equivalent in all material respects to
the terms set forth in the Final Divestiture Plan, including divesting all
liabilities, arising out of, related to or otherwise associated with such
generation assets, including all environmental liabilities (other than
environmental liabilities relating to off-site storage or disposal of
Hazardous Materials associated with the generating assets) and all
liabilities with respect to fuel purchase contracts relating to such
generation assets. Unless ordered pursuant to law or regulation, the
Company shall not materially modify or amend, or propose to enter into any
agreement to modify or amend the Settlement Agreement or the Final
Divestiture Plan or conduct any negotiations with the NYPSC or any other
Governmental Authority in connection with any such proposed modification or
amendment. If so ordered, the Company shall consult with CEI prior to
taking or agreeing to take any such action. The Company and the Company
Subsidiaries shall not pay out, distribute, invest (except that the Company
and the Company Subsidiaries may invest in the ordinary course of business
in a manner that would not otherwise be prohibited by any of the provisions
of this Section 6.1) or otherwise make use of the proceeds resulting from
the divestiture of its generation assets except as expressly permitted by
the provisions of this Section 6.1.
(g) Cooperation, Notification. The Company shall (i) confer on
a regular and frequent basis with one or more representatives of CEI to
discuss, subject to applicable law, material operational matters and the
general status of its ongoing operations, (ii) promptly notify CEI of any
significant changes in its business, properties, assets, condition
(financial or other), results of operations or prospects, (iii) promptly
notify CEI of property sales by the Company Subsidiaries in excess of $10
million and shall discuss with CEI use of proceeds from such sales to the
extent that such proceeds exceed $10 million, (iv) promptly advise CEI of
(A) any representation or warranty made by it contained in this Agreement
that is qualified as to materiality becoming untrue or inaccurate in any
respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (B) the failure by
it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement and (C) any change or event which,
individually or in the aggregate, has had or would have a Company Material
Adverse Effect (provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements of the parties (or
remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement) and (v) promptly provide CEI with copies of
all filings made by the Company or any of the Company Subsidiaries with any
state or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
(h) Third-Party Consents. The Company shall, and shall cause
the Company Subsidiaries to, use all reasonable best efforts to obtain all
Company Required Consents. The Company shall promptly notify CEI of any
failure or prospective failure to obtain any such consents and, if
requested by CEI, shall provide copies of all Company Required Consents
obtained by the Company to CEI.
(i) No Breach, Etc. The Company shall not, and the Company
shall not permit any of the Company Subsidiaries to, voluntarily take any
action that would or is reasonably likely to result in a material breach of
any provision of this Agreement or in any of its representations and
warranties set forth in this Agreement being untrue on and as of the
Closing Date.
(j) Tax-Exempt Status. The Company shall not, and the Company
shall not permit any of the Company Subsidiaries to, take any action that
would likely jeopardize the qualification of the Company's outstanding
revenue bonds which qualify on the date hereof under Section 142(a) of the
Code as "exempt facility bonds" or as tax-exempt pollution control bonds
under Section 103(b) (4) of the Internal Revenue Code of 1954, as amended,
prior to the Tax Reform Act of 1986.
(k) Tax Matters. The Company shall not (i) make or rescind any
material express or deemed election relating to Taxes without the prior
written consent of CEI, which consent shall not be unreasonably withheld,
(ii) settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes without the prior written consent of CEI or (iii) change in any
material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December 31, 1996,
except as may be required by applicable law.
(l) Capital Expenditures. Except (i) as required by law, or
(ii) as reasonably deemed necessary by the Company after consulting with
CEI following a catastrophic event, such as a major storm, the Company
shall not, and the Company shall not permit any of the Company Subsidiaries
to, make capital expenditures during any fiscal year in excess of 110% of
the amount budgeted for such fiscal year by the Company for capital
expenditures.
(m) Indebtedness. The Company shall not, and the Company shall
not permit any of the Company Subsidiaries to, incur or guarantee any
indebtedness (including any debt borrowed or guaranteed or otherwise
assumed including, without limitation, the issuance of debt securities or
warrants or rights to acquire debt) or enter into any "keep well" or other
agreement to maintain any financial statement condition of another person
or entity or enter into any arrangement having the economic effect of any
of the foregoing other than (i) short-term indebtedness in the ordinary
course of business consistent with past practice (such as the issuance of
commercial paper, the use of credit facilities existing as of the date
hereof or hedging activities undertaken in order to hedge a balance sheet
asset or liability and not for speculative purposes), (ii) guarantees or
"keep well" or other agreements in favor of wholly-owned Subsidiaries
(other than NORSTAR Management, Inc. and its Subsidiaries) in the ordinary
course of business consistent with past practice and not aggregating more
than $5 million, (iii) other indebtedness or "keep well" or other
agreements not aggregating more than $5 million, (iv) arrangements between
the Company and the wholly-owned Company Subsidiaries (other than NORSTAR
Management, Inc. and its Subsidiaries) or among the wholly-owned Company
Subsidiaries (other than NORSTAR Management, Inc. and its Subsidiaries),
(v) in connection with the refunding of existing long-term indebtedness at
maturity or at a lower cost of funds, (vi) in connection with the
redemption of Company Preferred Stock as set forth in Section 2.1(c), (vii)
in connection with the redemption of Company Preference Stock as set forth
in Section 2.1(d), (viii) as may be necessary in connection with capital
expenditures permitted by Section 6.1(l).
(n) Compensation, Benefits. Except as may be required by
applicable law, the Company shall not, and the Company shall not permit any
of the Company Subsidiaries to, (i) enter into, adopt or amend or increase
the amount or accelerate the payment or vesting of any benefit or amount
payable under, any Company Plan or any other employee benefit plan or other
contract, agreement, commitment, arrangement, plan, trust, fund or policy
maintained by, contributed to or entered into by the Company or any of the
Company Subsidiaries (other than any adoption or amendment to, or change
of, any Company Plan that, individually or in the aggregate, does not
result in any material expense to the Company and the Company Subsidiaries
taken as a whole); (ii) increase, or enter into any contract, agreement,
commitment or arrangement to increase in any manner, the compensation or
fringe benefits, or otherwise to extend, expand or enhance the engagement,
employment or any related rights, of any director, officer or other
employee of the Company or any of the Company Subsidiaries, except for
normal promotion and compensation (including incentive compensation)
increases and hiring and discretionary award grants in the ordinary course
of business that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company or any of the Company
Subsidiaries; (iii) enter into or amend any employment, severance,
retention, consulting or special pay arrangement with respect to the
termination of employment or other similar contract, agreement or
arrangement with any director or officer or other employee other than, with
respect only to employees who are not officers or directors, in the
ordinary course of business consistent with past practice or (iv) enter
into any collective bargaining agreement or other labor union contract or
written agreement or amend in any material manner any such agreement or
contract to which the Company or any of the Company Subsidiaries is a
party, except as required by law, in which case the Company shall consult
with CEI prior to taking any required action.
(o) 1935 Act. The Company shall not, and the Company shall not
permit any of the Company Subsidiaries to engage in any activities which
would cause a change in its status, or that of the Company Subsidiaries,
under the 1935 Act.
(p) Accounting. The Company shall not, and the Company shall
not permit any of the Company Subsidiaries to, make any changes in their
accounting methods, except as required by law, rule, regulation or GAAP.
(q) Affiliate Transactions. Subject to the other restrictions
set forth in this Section 6.1, the Company shall not permit any of the
Company Subsidiaries to, enter into any material agreement or arrangement
with any of their respective Affiliates (except wholly owned Subsidiaries
other than NORSTAR Management, Inc. and its Subsidiaries), on terms
materially less favorable to such party than could be reasonably expected
to have been obtained with an unaffiliated third-party on an arm's length
basis.
(r) Rate Matters. Subject to applicable law, the Company shall,
and shall cause the Company Subsidiaries to, (i) discuss with CEI any
changes in its or the Company Subsidiaries' rates or the services it
provides or charges (other than pass-through fuel and gas rates or
charges), standards of service or accounting from those in effect on the
date hereof, and obtain CEI's approval prior to proposing, agreeing to or
making any material changes with respect thereto and (ii) subject to the
preceding clause (i), consult with CEI prior to making any filing (or any
amendment thereto), or effecting any agreement, commitment, arrangement or
consent with governmental regulators, whether written or oral, formal or
informal, with respect thereto. The Company will consult with CEI before
making any filing to change its rates or the services it provides on file
with the FERC that would have a material adverse effect on the benefits
associated with the business combination provided for herein.
(s) Contracts. The Company shall not, and the Company shall not
permit any of the Company Subsidiaries to, except in the ordinary course of
business consistent with past practice, modify, amend, terminate, renew or
fail to use reasonable business efforts to renew any contract or agreement
to which the Company or the Company Subsidiary is a party, which is
material to the Company and the Company Subsidiaries taken as a whole, or
waive, release or assign any material rights or claims therein.
(t) Insurance. The Company shall, and shall cause the Company
Subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are
customary for companies engaged in the electric and gas utility industry
and employing methods of generating electric power and fuel sources similar
to those methods employed and fuels used by the Company or the Company
Subsidiaries.
(u) Permits. The Company shall, and shall cause the Company
Subsidiaries to, use reasonable efforts to maintain in effect all existing
governmental permits which are material to the operations of the Company or
the Company Subsidiaries.
(v) Discharge of Liabilities. The Company shall not, and the
Company shall not permit any of the Company Subsidiaries to, pay,
discharge, settle, compromise or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) material to the Company and the Company Subsidiaries taken as a
whole, other than the payment, discharge, settlement, compromise or
satisfaction, in the ordinary course of business consistent with past
practice (which includes the payment of final and unappealable judgments)
or in accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company SEC Reports filed prior to
the date hereof, or incurred in the ordinary course of business consistent
with past practice.
Section 6.2 Covenants of CEI. After the date hereof and prior
to the Effective Time or earlier termination of this Agreement, CEI agrees
as follows, as to itself and to each of CEI Subsidiaries, except to the
extent the Company shall otherwise consent in writing, which decision
regarding consent shall be made as soon as reasonably practical:
(a) Cooperation, Notification. CEI shall (i) promptly advise
the Company of (A) any representation or warranty made by it contained in
this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is
not so qualified becoming untrue or inaccurate in any material respect and
(B) the failure by it to comply in any material respect with or satisfy in
any material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement (provided, however, that no
such notification shall affect the representations, warranties, covenants
or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement) and (ii)
promptly provide the Company with copies of all filings made by CEI or any
of CEI Subsidiaries with any state or federal court, administrative agency,
commission or other Governmental Authority in connection with this
Agreement and the transactions contemplated hereby.
(b) No Breach, Etc. CEI shall not and CEI shall not permit any
of the CEI Subsidiaries to, voluntarily take any action that would or is
reasonably likely to result in a material breach of any provision of this
Agreement or in any of its representations and warranties set forth in this
Agreement being untrue on and as of the Closing Date.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to the Company's Information. Upon
reasonable notice, the Company shall, and shall cause the Company
Subsidiaries to, afford to the officers, directors, employees, accountants,
counsel, investment bankers, financial advisors and other representatives
(collectively, "Representatives") of CEI reasonable access, during normal
business hours throughout the period prior to the Effective Time, to all of
its properties, books, contracts, commitments and records (including, but
not limited to, tax returns) and, during such period, the Company shall,
and shall cause the Company Subsidiaries to, furnish promptly to CEI and
its Representatives (i) access to each report, schedule and other document
filed or received by the Company or any of the Company Subsidiaries
pursuant to the requirements of federal or state securities laws or filed
with or sent to the SEC, the FERC, the Department of Justice, the Federal
Trade Commission, the New York Department of Environmental Conservation or
any other federal or state regulatory agency or commission and (ii) access
to all information concerning the Company, the Company Subsidiaries, and
their respective directors, officers and shareholders and such other
matters as may be reasonably requested by CEI or its Representatives in
connection with any filings, applications or approvals required or
contemplated by this Agreement or for any other reason related to the
transactions contemplated by this Agreement. Subject to obtaining customary
indemnities, the parties shall promptly furnish to each other such
information as may be reasonably requested, including audited financial
statements and other financial information, and take such other action as
may be reasonably necessary and otherwise fully cooperate with each other
in the preparation of any registration statement under the Securities Act
and other documents necessary in connection with the issuance of securities
(subject to Section 6.1(c) and 6.1(m) in the case of issuances by the
Company or any Company Subsidiary). Each party shall, and shall cause its
Subsidiaries and Representatives to, hold in strict confidence all
documents and information concerning the other furnished to it in
connection with the transactions contemplated by this Agreement in
accordance with the Confidentiality Agreement, dated December 17, 1997,
between the Company and CEI (the "Confidentiality Agreement"). No review
pursuant to this Section 7.1 shall have an effect for the purpose of
determining the accuracy of any representation or warranty given by any of
the parties hereto to any of the other parties hereto.
Section 7.2 Proxy Statement. The parties will prepare and file
with the SEC as soon as practicable after the date hereof the Proxy
Statement. Each of the parties hereto shall furnish all information
concerning itself which is required or customary for inclusion in the Proxy
Statement. The information provided by any party hereto for use in the
Proxy Statement shall be true and correct in all material respects without
omission of any material fact which is required to make such information
not false or misleading. No representation, covenant or agreement is made
by any party hereto with respect to information supplied by any other party
for inclusion in the Proxy Statement. No filing of, or amendment or
supplement to, the Proxy Statement will be made by the Company without
providing CEI with the opportunity to review and comment thereon. If at any
time prior to the Effective Time any information relating to the Company or
CEI, or any of their respective Affiliates, officers or directors, should
be discovered by the Company or CEI which should be set forth in an
amendment or supplement to the Proxy Statement, so that the Proxy Statement
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall, as soon as
practicable after the date hereof, file or cause to be filed with the
Federal Trade Commission and the Department of Justice any notifications
required to be filed by their respective "ultimate parent" companies under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations promulgated thereunder with
respect to the transactions contemplated hereby. Such parties will use
their reasonable best efforts to respond on a timely basis to any requests
for additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its reasonable best efforts to promptly prepare and file
all necessary documentation and to effect all necessary applications,
notices, petitions, filings and other documents and use its reasonable best
efforts to obtain all necessary permits, consents, approvals and
authorizations of all Governmental Authorities necessary or advisable to
obtain the Company Required Statutory Approvals and CEI Required Statutory
Approvals; provided, however, that the Company shall not be required to
take any action in connection with the obtaining of such permits, consents,
approvals and authorizations that would have, or, insofar as reasonably can
be foreseen, is likely to have, a Company Material Adverse Effect and CEI
shall not be required to take any action in connection with the obtaining
of such permits, consents, approvals and authorizations that would have,
or, insofar as reasonably can be foreseen, is likely to have a CEI Material
Adverse Effect or a Company Material Adverse Effect.
(c) For each facility that is potentially an "industrial
establishment" (as that term is defined by the New Jersey Industrial Site
Recovery Act ("ISRA")) and is owned or operated by the Company or a Company
Subsidiary that is subject to ISRA as a result of this Agreement, the
Company or the Company Subsidiary that owns or operates such facility
shall, prior to the Closing Date, obtain a written determination from the
New Jersey Department of Environmental Protection that such facility is not
an industrial establishment, or that such facility is otherwise exempted or
excluded from coverage under ISRA (collectively a "non- applicability
determination") and with respect to any facility for which a
non-applicability determination cannot be obtained, either (i) obtain an
approved Negative Declaration or No Further Action Letter (as such terms
are defined by ISRA); (ii) obtain an approved Remedial Action Workplan (as
such term is defined by ISRA); or (iii), if a Negative Declaration, No
Further Action Letter, or approved Remedial Action Workplan cannot be
obtained prior to the Closing Date, obtain and execute a Remediation
Agreement permitting the consummation of the transactions contemplated by
this Agreement. The Company shall provide to CEI all relevant
correspondence, data and submissions to or from the New Jersey Department
of Environmental Protection.
Section 7.4 Approval of the Company Shareholders. The Company
shall, as soon as practicable after the date hereof (i) take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Meeting") for the purpose of securing the
Company Shareholders' Approval, (ii) distribute to its shareholders the
Proxy Statement in accordance with applicable federal and state law and
with its Restated Certificate of Incorporation and by-laws, (iii) subject
to Section 7.10, recommend to its shareholders the approval of the Merger,
this Agreement and the transactions contemplated hereby and (iv) cooperate
and consult with CEI with respect to each of the foregoing matters. Without
limiting the generality of the foregoing but subject to its rights to
terminate this Agreement pursuant to Section 9.1(g), the Company agrees
that its obligations pursuant to the first sentence of this Section 7.4
shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any Acquisition Proposal.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and
after the Effective Time, the Surviving Corporation shall, to the fullest
extent permitted by applicable law, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof,
or who becomes prior to the Effective Time, (x) an officer or director or
(y) an employee covered as of the date hereof (to the extent of the
coverage extended as of the date hereof) of any of the Company or any
Company Subsidiary (each an "Indemnified Party" and collectively, the
"Indemnified Parties") against (i) all losses, expenses (including
reasonable attorney's fees and expenses), claims, damages or liabilities
or, subject to the first proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or
prior to the Effective Time (and whether asserted or claimed prior to, at
or after the Effective Time) that are, in whole or in part, based on or
arising out of the fact that such person is or was a director, officer or
employee of the Company or any Company Subsidiary (the "Indemnified
Liabilities"), and (ii) all Indemnified Liabilities to the extent they are
based on or arise out of or pertain to the transactions contemplated by
this Agreement, in each case, to the extent permitted by Section 722(a) of
the NYBCL. In the event of any such loss, expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Surviving Corporation, promptly after statements
therefor are received and otherwise advance to such Indemnified Party upon
request, reimbursement of documented expenses reasonably incurred, in
either case to the extent not prohibited by the NYBCL upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amounts as and to the extent required by the NYBCL, (ii) the Surviving
Corporation will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under the NYBCL and
the certificate of incorporation or by-laws of the Surviving Corporation
shall be made by independent counsel mutually acceptable to the Surviving
Corporation and the Indemnified Party; provided, however, that the
Surviving Corporation shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably
withheld) and provided further that no indemnification shall be made if
such indemnification is prohibited by the proviso to the first sentence of
Section 721 of the NYBCL. The Indemnified Parties as a group may retain
only one law firm with respect to each related matter except to the extent
that such law firm would have, in the opinion of such law firm, under
applicable standards of professional conduct then prevailing under the laws
of the State of New York, a conflict of interest in representing any
particular Indemnified Party.
(b) Insurance. For a period of six years after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect
policies of directors and officers' liability insurance equivalent to those
maintained by the Company prior to the Effective Time for the benefit of
those persons who are currently covered by such policies on terms no less
favorable than the terms of such current insurance coverage.
(c) Successors. In the event the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person or entity,
then and in either such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation, as applicable, shall
assume the obligations set forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent
permitted by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees, agents,
directors and officers of the Company and the Company Subsidiaries with
respect to their activities as such prior to the Effective Time, as
provided in their respective certificates of incorporation and by-laws in
effect on the date hereof, or otherwise in effect on the date hereof, shall
survive the Merger and shall continue in full force and effect for a period
of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Party,
his or her heirs and his or her representatives.
Section 7.6 Public Announcements. Subject to each party's
disclosure obligations imposed by law, the Company and CEI will cooperate
with each other in the development and distribution of all news releases
and other public information disclosures with respect to this Agreement or
any of the transactions contemplated hereby and shall not issue any public
announcement or statement with respect hereto or thereto without the
consent of the other party (which consent shall not be unreasonably
withheld).
Section 7.7 Standstill Agreements; Confidentiality Agreements.
Except for the Company's ability to enter into, amend, modify, waive any
provision of, enforce and terminate, if necessary, the confidentiality
agreements relating to the sale of the generation assets, (i) during the
period from the date of this Agreement through the Effective Time, the
Company shall not, and shall not permit any Company Subsidiary, to
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any Company Subsidiary is a party and
(ii) during such period, the Company shall enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement,
including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in
any court of the United States of America or of any state having
jurisdiction.
Section 7.8 Employee Agreements and Workforce Matters.
(a) Certain Employee Agreements. CEI shall cause the Surviving
Corporation and its Subsidiaries to honor all collective bargaining
agreements in effect as of the date hereof, and, subject to Section 7.9,
CEI shall cause the Surviving Corporation and its Subsidiaries to honor all
contracts, agreements and commitments (including all Company Plans) of the
Company as in effect on the date hereof that apply to any current or former
employee or current or former director of the Company; provided, however,
that this undertaking is not intended to prevent CEI or the Surviving
Corporation and its Subsidiaries from exercising their rights with respect
to such contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including, without limitation,
any right to amend, modify, suspend, revoke or terminate any such contract,
agreement, collective bargaining agreement or commitment or portion
thereof.
(b) Workforce Matters. Subject to applicable law and
obligations under applicable collective bargaining agreements, for a period
of 3 years following the Effective Time, any reductions in workforce in
respect of employees of the Surviving Corporation and its Subsidiaries
shall be made on a fair and equitable basis as determined by the Surviving
Corporation, without regard to whether employment was with the Company or
the Company Subsidiaries or CEI or CEI Subsidiaries and with due
consideration to prior experience and skills, and any employee whose
employment is terminated or job is eliminated during such period shall be
entitled to participate on a fair and equitable basis as determined by CEI
or the Surviving Corporation in the job opportunity and employment
placement programs offered by CEI or the Surviving Corporation or any of
their Subsidiaries for which they are eligible. Any workforce reductions
carried out following the Effective Time by the Surviving Corporation and
its Subsidiaries shall be done in accordance with all applicable collective
bargaining agreements and all laws and regulations governing the employment
relationship and termination thereof including, without limitation, the
Worker Adjustment and Retraining Notification Act and regulations
promulgated thereunder, and any comparable state or local law.
Section 7.9 Employee Benefit Plans.
(a) Service Credit. All service under any Company Plan that was
recognized, accrued or credited under such Company Plan immediately
preceding the Effective Time shall continue to be recognized, accrued or
credited for all relevant purposes under such Company Plan as of and at all
times following the Effective Time. Subject to obligations under applicable
law and applicable collective bargaining agreements, all employees of the
Company and its Subsidiaries who were employees immediately prior to the
Effective Time (the "Affected Employees") shall be given credit for all
service with the Company or its Subsidiaries (and service credited by the
Company or such Subsidiary), to the same extent as such service was
credited for such purpose by the Company or such Subsidiary, under (a) all
employee benefit plans, programs and policies, and fringe benefits of CEI
or the Surviving Corporation (if any) in which they first become
participants on or after the Effective Time, for purposes of eligibility
and vesting but not for benefit accrual purposes or eligibility for early
retirement purposes under defined benefit pension plans and not to the
extent crediting such service would result in duplication of benefits and
(b) severance plans for purposes of calculating the amount of each Affected
Employee's severance benefits. To the extent permissible under the terms
thereof and required by applicable law, CEI and the Surviving Corporation
shall (i) waive all limitations as to preexisting conditions exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Affected Employees under any welfare benefit plans that
such employees may be eligible to participate in after the Closing Date,
other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the
Closing Date under any welfare benefit plan maintained for the Affected
Employees immediately prior to the Closing Date, and (ii) provide each
Affected Employee with credit for any co-payments and deductibles paid
prior to the Closing Date in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Closing Date. Nothing in this Section
shall be deemed to require the employment of any Affected Employee to be
continued for any particular period of time after the Closing Date.
(b) Continuation of Benefits. Subject to applicable law and
obligations under applicable collective bargaining agreements, CEI shall
cause the Surviving Corporation to maintain for a period of at least one
year after the Closing Date, without interruption, such employee
compensation, welfare and benefit plans, programs, policies and fringe
benefits as will, in the aggregate, provide benefits to the Affected
Employees that are no less favorable than those provided pursuant to such
employee compensation, welfare and benefit plans, programs, policies and
fringe benefits of the Company and its Subsidiaries, as in effect on the
Closing Date; provided, however, that CEI shall cause the Surviving
Corporation to, for one year following the Closing Date, continue the
Company Severance Pay Plan (the "Severance Plan") in full force and effect
to the same extent that such Severance Plan is in effect on the Closing
Date.
(c) Effect of the Merger. The consummation of the Merger shall
not be treated as a termination of employment of any Affected Employee for
purposes of any Company Plan.
(d) Continuation of Agreements. CEI shall cause the Surviving
Corporation to, as of the Closing Date, honor and be solely responsible for
the employment, severance, consulting and retention agreements set forth in
Section 7.9 of the Company Disclosure Schedule.
Section 7.10 No Solicitations by the Company.
(a) From and after the date hereof, (i) the Company will not,
and will not authorize or permit any of its Representatives to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly any inquiries
or the making of any proposal which constitutes or may reasonably be
expected to lead to an Acquisition Proposal (as defined herein) from any
person, or engage in any discussion or negotiations relating thereto and
(ii) neither the Board of Directors of the Company nor any committee
thereof shall (A) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to CEI, the approval or recommendation by such
Board of Directors or such committee of the Merger or this Agreement, (B)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (C) cause the Company or any Company Subsidiary to
enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement")
related to any Acquisition Proposal; provided, however, that the Company
may, at any time prior to receipt of the Company Shareholders' Approval
(the "Company Applicable Period"), (i) in response to an Acquisition
Proposal which was not solicited by it or its Representatives and which did
not otherwise result from a breach of this Section 7.10, if the Board of
Directors of the Company (x) reasonably believes in good faith, after
consultation with its financial advisors, that an Acquisition Proposal may
be a Superior Proposal (as defined herein) and (y) determines in good
faith, after consultation with its financial advisors and outside counsel,
that failing to take such action could reasonably be expected to be a
breach of its fiduciary duties to the Company's shareholders under
applicable law, and subject to providing prior written notice of its
decision to take such action to CEI (the "Company Notice") and compliance
with Section 7.10(c), for a period of twenty business days following
delivery of the Company Notice, (1) furnish information with respect to the
Company and its Subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement (as determined by the
Company after consultation with outside counsel) and (2) participate in
discussions or negotiations regarding such Superior Proposal (provided, in
each case, that the Company shall be permitted to deliver only one Company
Notice with respect to each person making an Acquisition Proposal), (ii)
comply with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer (provided that, except in connection with a
termination of this Agreement pursuant to clause (iii) of this proviso,
neither the Company nor its Board of Directors nor any committee thereof
shall withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, an Acquisition
Proposal), and/or (iii) in the event that during the Company Applicable
Period the Board of Directors of the Company reasonably believes in good
faith, after consultation with financial advisors and outside counsel, (x)
that it has received an Acquisition Proposal that constitutes a Superior
Proposal and (y) that failure to terminate this Agreement and accept such
Superior Proposal could reasonably be expected to be a breach of its
fiduciary duties to the Company's shareholders under applicable law, by
action of the Board of Directors of the Company (subject to this sentence
and Section 9.1(g)), terminate this Agreement (and, following the exercise
of such termination right, withdraw or modify in any adverse manner its
approval or recommendation of this Agreement or the Merger, and approve or
recommend any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any such Company Subsidiary, other than the transactions
contemplated by this Agreement), but only at a time that is during the
Company Applicable Period and is after the third business day following
CEI's receipt of written notice advising CEI that the Board of Directors of
the Company is prepared to accept a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. The Company shall immediately cease
and terminate any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any persons conducted heretofore
by the party or its Representatives with respect to the foregoing.
(b) As used herein, (i) "Acquisition Proposal" shall mean any
inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business (a "Material Business") that
constitutes 15% or more of the net revenues, net income or the assets
(including equity securities) of the Company and the Company Subsidiaries,
taken as a whole, or 15% or more of any class of voting securities of the
Company or any Company Subsidiary owning, operating or controlling a
Material Business, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 15% or more of any class of
voting securities of the Company or any such Company Subsidiary, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any such
Company Subsidiary, other than the transactions contemplated by this
Agreement; provided, however, that no transaction permitted pursuant to
Section 6.1(f) shall be deemed an Acquisition Proposal for any purpose and
(ii) a "Superior Proposal" shall mean any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company which the
Board of Directors of the Company determines in its good faith judgment
(based on the written advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's shareholders
(taking into account any changes to the financial terms of this Agreement
proposed by CEI in response to such proposal and all financial and
strategic considerations, including relevant legal, financial, regulatory
and other aspects of the proposal and the third party making such proposal
and the conditions and the prospects for completion of such proposal, the
strategic direction and benefits sought by the Company and any changes to
this Agreement proposed by CEI in response to such proposal) than the
Merger and the other transactions contemplated by this Agreement.
(c) The Company shall promptly advise CEI orally and in writing
of the receipt of any Superior Proposal and of the receipt of any inquiry
with respect to or which the Company reasonably believes could lead to any
Superior Proposal. The Company shall promptly advise CEI orally and in
writing of the identity of the person making any such Superior Proposal or
inquiry and of the material terms of any such Superior Proposal and of any
material changes thereto.
Section 7.11 Board of Directors; Advisory Board. The Board of
Directors of CEI will take such action as may be necessary (including
increasing the size of the Board of Directors of CEI) to appoint to the
Board of Directors of CEI after the Effective Time, effective at the
Effective Time, one person selected by the Nominating Committee of CEI, who
(i) is a member of the Board of Directors of the Company as of the date
hereof, (ii) is willing to serve on the Board of Directors of CEI and (iii)
would be eligible under CEI's by-laws and applicable resolutions of CEI's
Board of Directors to be so nominated for election to the Board of
Directors of CEI at the next annual meeting of CEI following the Effective
Time. At the Effective Time, CEI shall cause the Surviving Corporation to
establish an advisory board that will consist of approximately equal
numbers of individuals designated by the Company and designated by CEI,
which advisory board will provide advice and input regarding the
implementation of the Merger and the ongoing operations of the Surviving
Corporation.
Section 7.12 Post-Merger Operations.
(a) Corporate Offices. The Surviving Corporation shall maintain
a subsidiary office at a Rockland County, New York location, as the
headquarters of the Company subsidiary for three years following the
Merger.
(b) Charities. The parties agree that provision of charitable
contributions and community support in the service areas of the Company and
the Company Subsidiaries serves a number of important goals. After the
Effective Time, CEI shall cause the Surviving Corporation to provide,
directly or indirectly, charitable contributions and community support
within the service areas of the Company and each of the Company utility
Subsidiaries at levels substantially comparable to and no less than the
levels of charitable contributions and community support provided by the
Company and the Company utility Subsidiaries within their service areas
within the two-year period immediately prior to the Effective Time.
Section 7.13 Expenses. Subject to Section 9.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
except that each of CEI and the Company shall bear and pay one-half of the
costs and expenses incurred for the filings of the premerger notification
and report forms under the HSR Act (including filing fees) and for expert
witnesses retained for the purpose of advising and supporting joint
regulatory filings.
Section 7.14 Further Assurances. Each party will, and will cause
its Subsidiaries to, execute such further documents and instruments and
take such further actions as may reasonably be requested by any other party
in order to consummate the Merger in accordance with the terms hereof,
including the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation
of the transactions contemplated by this Agreement, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Authority vacated or reversed.
Section 7.15 Shareholder Litigation. Each of the Company and
CEI shall give the other the reasonable opportunity to participate in the
defense of any shareholder litigation against the Company or CEI, as
applicable, or any of their respective directors relating to the
transactions contemplated by this Agreement. .
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of the
following conditions, except, to the extent permitted by applicable law,
that such conditions may be waived in writing pursuant to Sections 9.5 and
9.6 by the joint action of the parties hereto:
(a) Shareholder Approvals. The Company Shareholders' Approval
shall have been obtained.
(b) No Injunction. No temporary restraining order or
preliminary or permanent injunction or other order by any federal or state
court preventing consummation of the Merger shall have been issued and be
continuing in effect, and the Merger and the other transactions
contemplated hereby shall not have been prohibited under any applicable
federal or state law or regulation.
(c) Statutory Approvals. The Company Required Statutory
Approvals and CEI Required Statutory Approvals shall have been obtained at
or prior to the Effective Time and such approvals shall have become Final
Orders (as defined below). A "Final Order" means action by the relevant
regulatory authority which has not been reversed, stayed, enjoined, set
aside, annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired, and as to which all conditions to the consummation
of such transactions prescribed by law, regulation or order have been
satisfied.
Section 8.2 Conditions to Obligation of CEI to Effect the
Merger. The obligation of CEI to effect the Merger shall be further subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by CEI in writing pursuant to Sections
9.5 and 9.6:
(a) Performance of Obligations of the Company. The Company
(and/or its appropriate Subsidiaries) will have performed in all material
respects its agreements and covenants contained in or contemplated by this
Agreement which are required to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of the Closing Date (except for representations and
warranties that expressly speak only as of a specific date or time which
need only be true and correct as of such date or time) except in each of
cases (i) and (ii) for such failures of representations or warranties to be
true and correct (without giving effect to any materiality qualification or
standard contained in any such representations and warranties) which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(c) Closing Certificates. CEI shall have received a certificate
signed by the chief financial officer of the Company, dated the Closing
Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.2(a) and Section 8.2(b) have been
satisfied.
(d) Company Material Adverse Effect. No Company Material
Adverse Effect shall have occurred and there shall exist no fact or
circumstance which would have a
Company Material Adverse Effect.
(e) Company Required Consents. The Company Required Consents
the failure of which to obtain would have a Company Material Adverse Effect
shall have been
obtained.
(f) Statutory Approvals. The Company Required Statutory
Approvals and CEI Required Statutory Approvals shall have been obtained and
shall have become Final Orders and such Final Orders shall not impose terms
or conditions, which, individually or in the aggregate, would have (i) a
Company Material Adverse Effect or (ii) a CEI Material Adverse Effect.
(g) Redemption of Company Preference Stock. The Company shall
have redeemed all outstanding shares of Company Preference Stock in
accordance with the
provisions of Section 2.1(d).
Section 8.3 Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be
further subject to the satisfaction, on or prior to the Closing Date, of
the following conditions, except as may be waived by the Company in writing
pursuant to Sections 9.5 and 9.6:
(a) Performance of Obligations of CEI. CEI (and/or its
appropriate Subsidiaries) will have performed in all material respects its
agreements and covenants contained in or contemplated by this Agreement
which are required to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of CEI set forth in this Agreement shall be true and correct (i)
on and as of the date hereof and (ii) on and as of the Closing Date with
the same effect as though such representations and warranties had been made
on and as of the Closing Date (except for representations and warranties
that expressly speak only as of a specific date or time which need only be
true and correct as of such date or time) except in each of cases (i) and
(ii) for such failures of representations or warranties to be true and
correct (without giving effect to any materiality qualification or standard
contained in any such representations and warranties) which, individually
or in the aggregate, would not have a CEI Material Adverse Effect.
(c) Closing Certificates. The Company shall have received a
certificate signed by the chief financial officer of CEI, dated the Closing
Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.3(a) and Section 8.3(b) have been
satisfied.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at
any time prior to the Closing Date, whether before or after the Company
Shareholders' Approval contemplated by this Agreement:
(a) by mutual written consent of the Company and CEI;
(b) by CEI or the Company, if any state or federal law, order,
rule or regulation is adopted or issued, which has the effect, as supported
by the written opinion of outside counsel for such party, of prohibiting
the Merger, or by any party hereto if any court of competent jurisdiction
in the United States or any state shall have issued an order, judgment or
decree permanently restraining, enjoining or otherwise prohibiting the
Merger, and such order, judgment or decree shall have become final and
nonappealable;
(c) by CEI or the Company, by written notice to the other
party, if the Effective Time shall not have occurred on or before November
30, 1999 (the "Initial Termination Date"); provided, however, that the
right to terminate the Agreement under this Section 9.1(c) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before this date; and provided, further, that
if on the Initial Termination Date the conditions to the Closing set forth
in Sections 8.1(c) and/or 8.2(f) shall not have been fulfilled but all
other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Initial Termination Date shall be extended to May
31, 2000;
(d) by CEI or the Company, by written notice to the other, if
the Company Shareholders' Approval shall not have been obtained at a duly
held Company Meeting, including any adjournments thereof;
(e) by CEI, by written notice to the Company, if there shall
have been any breach of any representation or warranty, or any breach of
any covenant or agreement of the Company hereunder, which breaches
individually or in the aggregate would have a Company Material Adverse
Effect, and such breach shall not have been remedied within 20 business
days after receipt by the Company of notice in writing from CEI, specifying
the nature of such breach and requesting that it be remedied or CEI shall
not have received adequate assurance of a cure of such breach within such
20 business-day period;
(f) by the Company, by written notice to CEI, if there shall
have been any breach of any representation or warranty, or any breach of
any covenant or agreement of CEI hereunder, which breaches individually or
in the aggregate would have a CEI Material Adverse Effect, and such breach
shall not have been remedied within 20 business days after receipt by CEI
of notice in writing from the Company, specifying the nature of such breach
and requesting that it be remedied or the Company shall not have received
adequate assurance of a cure of such breach within such 20 business-day
period;
(g) by the Company, in accordance with clause (iii) of the
proviso to the first sentence of Section 7.10(a); provided that, in order
for the termination of this Agreement pursuant to this paragraph (g) to be
deemed effective, the Company shall have complied with all provisions of
Section 7.10, including the notice provisions therein, and with the
applicable requirements, including the payment of the Termination Fee (as
defined in Section 9.3(a)), of Section 9.3;
Section 9.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or CEI pursuant to Section 9.1
there shall be no liability on the part of either the Company or CEI or
their respective officers or directors hereunder, except that Section 7.13,
Section 9.2 and Section 9.3, the agreement contained in the next to last
sentence of Section 7.1, Section 10.2 and Section 10.8 shall survive the
termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee Payable by the Company. If this Agreement
(i) is terminated by the Company pursuant to Section 9.1(g) or (ii) is
terminated by the Company or CEI pursuant to Section 9.1(d) as a result of
the Company Shareholders' Approval not being obtained and at or prior to
the Company Meeting (or any subsequent meeting of the Company's
shareholders at which it is proposed that the Merger be approved) there
shall have been an Acquisition Proposal (whether or not conditional and
whether or not such offer shall have been rejected or shall have been
withdrawn prior to the time of such termination or of the meeting) and,
solely in the case of any termination described in this clause (ii) of this
paragraph (a), within two and one-half years of such termination the
Company or any Company Subsidiary enters into any Acquisition Agreement or
consummates any Acquisition Proposal (provided, that for the purposes of
this Section 9.3(a)(ii) the terms "Acquisition Agreement" and "Acquisition
Proposal" shall have the meanings assigned to such terms in Section 7.10
except that the references to "15%" in the definition of "Acquisition
Proposal" in Section 7.10 shall be deemed to be references to "35%"), then,
in each case, the Company shall immediately pay to CEI by wire transfer of
same day funds a termination fee equal to $25 million in cash (the
"Termination Fee").
(b) Payment of Expenses. If this Agreement is terminated
pursuant to Section 9.1(d) or 9.1(e), then the Company shall promptly (but
not later than ten business days after receiving notice of termination) pay
to CEI in cash by wire transfer of same day funds an amount equal to all
documented out-of-pocket expenses and fees incurred by CEI (including,
without limitation, fees and expenses payable to all legal, accounting,
financial, and other professionals arising out of, in connection with or
related to the transactions contemplated by this agreement) not in excess
of $5 million. If this Agreement is terminated pursuant to Section 9.1(f),
then CEI shall promptly (but not later than ten business days after
receiving notice of termination), pay to the Company in cash by wire
transfer of same day funds an amount equal to all documented out-of-pocket
expenses and fees incurred by the Company (including, without limitation,
fees and expenses payable to all legal, accounting, financial, and other
professionals arising out of, in connection with or related to the
transactions contemplated by this agreement) not in excess of $5 million.
The Company and CEI each agree that notwithstanding any provisions in this
Agreement to the contrary, including Section 9.2, each of the Company and
CEI retain their remedies at law or in equity with respect to breaches of
this Agreement and that no termination which results from the breach by a
party of any of its representations, warranties, covenants or agreements
set forth in this Agreement shall relieve such party of any liability or
damages, including any such case in which a Termination Fee is, or any
expenses of CEI or the Company in connection with the transactions
contemplated by this Agreement are, payable pursuant to this Section 9.3 to
CEI or the Company, as the case may be (the "Injured Party"), to the extent
any such liability or damage suffered by the Injured Party exceeds the
amount of any Termination Fee and/or any expenses payable pursuant to this
Section 9.3 to the Injured Party.
(c) Expenses. The parties agree that the agreements contained
in this Section 9.3 are an integral part of the transactions contemplated
by this Agreement and constitute liquidated damages and not a penalty.
Notwithstanding anything to the contrary contained in this Section 9.3, if
one party fails to promptly pay to the other any fees or expenses due under
Sections 9.3(a) or (b), in addition to any amounts paid or payable pursuant
to such sections, the defaulting party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fees or
expenses at the publicly announced prime rate of The Chase Manhattan Bank
from the date such fees or expenses were required to be paid.
Section 9.4 Amendment. This Agreement may be amended by the
Boards of Directors of the parties hereto, at any time before or after the
Company Shareholders' Approval and prior to the Effective Time, but after
the Company Shareholders' Approval, no such amendment which under
applicable law would require the further approval of the Company's
shareholders shall be made without obtaining such approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time,
the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) subject to the first
sentence of Section 9.4, waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
Section 9.6 Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 9.1, an
amendment of this Agreement pursuant to Section 9.4 or an extension or
waiver pursuant to Section 9.5 shall, in order to be effective, require, in
the case of the Company or CEI, action by its Board of Directors, or a duly
authorized committee of its Board of Directors to the extent permitted by
law.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and
Warranties. No representations or warranties in this Agreement shall
survive the Effective Time.
Section 10.2 Brokers. The Company represents and warrants that,
except for DLJ, whose fees have been disclosed to CEI prior to the date
hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has made
available to CEI prior to the execution of this Agreement a copy of the
engagement letter of DLJ and, other than as set forth in such engagement
letter, has no understanding or agreement with DLJ regarding any fees or
expenses in connection with the Merger or the transactions contemplated by
this Agreement. CEI represents and warrants that, except for Salomon Smith
Barney, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CEI.
Section 10.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (a) when delivered
personally, (b) when sent by reputable overnight courier service, or (c)
when telecopied (which is confirmed by copy sent within one business day by
a reputable overnight courier service) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(i) If to the Company, to
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attn: D. Louis Peoples
Telecopy: (914) 577-6910
Telephone: (914) 352-6000
with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Sheldon Adler, Esq.
Telecopy: (212) 735-2000
Telephone: (212) 735-3000
and
(ii) if to CEI, to
Consolidated Edison, Inc.
4 Irving Place
New York, New York 10003
Attn: Mr. Kevin Burke
John D. McMahon, Esq.
Telecopy: (212) 677-0601
Telephone: (212) 460-1110
with a copy to
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attn: George W. Bilicic, Jr., Esq.
Telecopy: (212) 474-3700
Telephone: (212) 474-1000
Section 10.4 Miscellaneous. This Agreement (including the
documents and instruments referred to herein) and the Confidentiality
Agreement (other than paragraph 11 thereof relating to the parties'
standstill obligations) (a) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof
(including paragraph 11 of the Confidentiality Agreement relating to the
parties' standstill obligations) other than the agreement between the
Company and CECONY with respect to the divestiture of their respective
interests in the Bowline Point Generating Station, (b) shall not be
assigned by operation of law or otherwise and (c) shall be governed by and
construed in accordance with the laws of the State of New York applicable
to contracts executed in and to be fully performed in such State, without
giving effect to its conflicts of law rules or principles. The Company
hereby waives the restrictions applicable to CEI pursuant to paragraph 11
of the Confidentiality Agreement relating to the parties' standstill
obligations provided, however that such waiver shall lapse and the
provisions of paragraph 11 of the Confidentiality Agreement will be binding
on CEI if (i) this Agreement is terminated by CEI and (ii) the Termination
Fee is required to be paid pursuant to Section 9.3(a) to CEI (subject, in
such case, to payment of the Termination Fee). If any term or other
provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and
effect. Upon such determination that any term or other provisions is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 10.5 Interpretation. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a Section or
Exhibit of this Agreement, respectively, unless otherwise indicated. The
table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
Section 10.6 Counterparts; Effect. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same agreement
and each of which shall only become effective when one or more counterparts
have been signed by each party and delivered to the other parties.
Section 10.7 Parties' Interest; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and, except for rights of Indemnified Parties as set
forth in Section 7.5, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any
nature whatsoever under or by reason of this Agreement.
Section 10.8 Waiver of Jury Trial. Each party to this Agreement
waives, to the fullest extent permitted by applicable law, any right it may
have to a trial by jury in respect of any action, suit or proceeding
arising out of or relating to this Agreement.
Section 10.9 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the Borough of
Manhattan in the City of New York or, if such court does not have
jurisdiction, in any New York state court located in the Borough of
Manhattan in the City of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of
the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the Borough of Manhattan in
the City of New York or, if such court does not have jurisdiction, any New
York state court located in the Borough of Manhattan in the City of New
York in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court located in the Borough of
Manhattan in the City of New York or, if such court does not have
jurisdiction, any New York state court located in the Borough of Manhattan
in the City of New York.
IN WITNESS WHEREOF, each of the Company, CEI and the Merger
Subsidiary have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first written above.
Orange and Rockland Utilities, Inc.
By: /s/ D.L. Peoples
---------------------------------
Name: Denton Louis Peoples
Title: Vice Chairman and Chief
Executive Officer
Consolidated Edison, Inc.
By: /s/ Joan S. Freilich
---------------------------------
Name: Joan S. Freilich
Title: Executive Vice President and
Chief Financial Officer
C Acquisition Corp.
By: /s/ Kevin Burke
----------------------------------
Name: Kevin Burke
Title: President
