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To expedite review of their $4.7 billion merger, energy companies Reliant Resources Inc. and Orion Power Holdings Inc. agreed not to make acquisitions, build electric generation facilities or enter power purchase agreements. According to the preliminary proxy and prospectus released Tuesday by the Securities and Exchange Commission, the companies said those activities were barred if they “could reasonably be expected to materially delay” the deal. The $26.80 per share, all-cash transaction was announced Sept. 26. The companies also agreed to use their “reasonable best efforts” to take all steps “necessary, proper and advisable” to secure approval of their deal from antitrust regulators and the Federal Energy Regulatory Commission. But then they limited this commitment by agreeing that nothing in the merger contract requires Houston-based Reliant to sell assets or accept restrictions on its business practices as a condition of receiving regulatory clearance if it would have a “material adverse effect” on the companies either individually or collectively. Reliant and Baltimore-based Orion said they expect regulatory approvals in the first quarter, though the companies indicated they had not, as of last Friday, filed their Hart-Scott-Rodino Antitrust Improvements Act notice with the Federal Trade Commission or informed FERC of the deal. Orion must pay Reliant $90 million if it terminates the deal in a favor of a better offer. Reliant and Orion also are liable for a $45 million fee if the deal dies because shareholders for either company reject the offer. The companies also said they could void the merger if further terrorist acts cause the financial markets or the economy to tank. The out provision was included in the definition of material adverse effects, which are used to modify the various commitments both companies made regarding their financial health and business plans. The material adverse effect definition excludes changes in the financial markets and the economy except those caused by a “material worsening of current conditions” because of “acts of terrorism or war occurring after the date of the merger agreement.” Copyright (c)2001 TDD, LLC. All rights reserved.

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