SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Berkshire Energy Resources
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(Name of Registrant as Specified In Its Articles of Incorporation)
N/A
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
Common shares, without par value, of Berkshire Energy Resources
(2) Aggregate number of securities to which transaction applies:
2,523,479 shares.
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
The filing fee of $19,179 has been calculated in accordance
with Rule 0-11(c)(1) under the Exchange Act and is equal to
1/50 of 1% of $95,892,202 (which is the product of 2,523,479
(the number of common shares of Berkshire Energy Resources to
be exchanged in the merger) and $38.00 (the per share
consideration)).
(4) Proposed maximum aggregate value of transaction:
$95,892,202
(5) Total fee paid:
$19,179
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[BERKSHIRE ENERGY RESOURCES LETTERHEAD]
January 12, 2000
Dear Shareholder:
You are cordially invited to attend the special meeting of
shareholders of Berkshire Energy Resources on Tuesday, February, 29,
2000 at 10:00 a.m. at Berkshire's offices, 115 Cheshire Road, Pittsfield,
Massachusetts 01201-1879.
At the special meeting you will be asked to consider and vote on a
merger agreement among Berkshire, Energy East Corporation and Mountain
Merger LLC, a newly formed subsidiary of Energy East. In the merger,
Berkshire shareholders will receive $38.00 in cash, without interest, for
each Berkshire share owned.
The enclosed series of questions and answers provides information on
the merger and how it would affect you. The enclosed proxy statement
contains a more extensive discussion of the merger and other related
matters.
The board of trustees and management of Berkshire recommend approval
of and urge you to vote for the merger agreement. The affirmative vote of
at least two-thirds of the outstanding Berkshire shares is required to
approve the merger agreement. Your vote is critical to achieving a
successful outcome, regardless of the number of shares that you own.
Whether or not you plan to attend the special meeting, please complete,
sign, date and return your proxy as soon as possible in the envelope
provided.
Sincerely,
Franklin M. Hundley Scott S. Robinson
Chairman of the Board President and Chief
Executive Officer
QUESTIONS AND ANSWERS ABOUT THE MERGER
The proxy statement for the special meeting contains an extensive
discussion of the proposed merger of Berkshire Energy Resources and Energy
East Corporation. We urge you to read the proxy statement and the
appendices thereto in their entirety. The proposed merger is summarized
briefly below. Certain answers reference the page or pages of the proxy
statement where the topic is discussed in more detail.
WHAT WILL HAPPEN IN THE PROPOSED TRANSACTION?
Energy East will acquire Berkshire by merging one of Energy East's
subsidiaries, Mountain Merger LLC, into Berkshire. Please see pages 13 to 14
of the proxy statement.
WHY HAS BERKSHIRE DECIDED TO MERGE?
The Berkshire board of trustees believes that the merger is in the best
interests of its shareholders because it offers a substantial premium over
the historical trading price of Berkshire shares. The Berkshire board of
trustees and management also believe that the merger will benefit the
combined company and its customers, employees and communities in a manner
that Berkshire could not achieve on its own. Please read the more detailed
description of Berkshire's reasons for the merger on pages 18 to 23 of the
proxy statement.
WHAT WILL I RECEIVE IN THE MERGER?
You will receive $38.00 in cash, without interest, for each Berkshire share
you own. You will receive compensation on a pro rata basis for any partial
shares that you own. Please see page 13 of the proxy statement.
WHAT DO I NEED TO DO NOW?
After you carefully read the enclosed documents, including the proxy
statement, please complete, sign, date and mail your proxy card in the
enclosed return envelope as soon as possible. That way, your Berkshire
shares can be represented at the special meeting. Berkshire and Energy
East cannot complete the merger unless at least two-thirds of the
outstanding Berkshire shares approve the merger agreement. Your vote is
very important.
The Berkshire board of trustees recommends voting "for" approval of the
merger agreement.
SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
No. If the merger is approved and completed, Energy East will send you
written instructions for submitting your Berkshire share certificates. You
must follow those instructions and return your share certificates
accordingly. You will receive your cash payment as soon as practicable
after Energy East receives your Berkshire share certificates along with the
other documents requested in those instructions. Please see page 31 of the
proxy statement.
WHO MUST APPROVE THE MERGER AND WHAT SHAREHOLDER VOTE IS REQUIRED?
In addition to approvals by the Berkshire board of trustees, the Energy
East board of directors and Mountain Merger's managers, all of which have
already been obtained, the merger must be approved by the holders of at
least two-thirds of the outstanding Berkshire shares. We must also obtain
certain regulatory approvals for the merger. Please read the more detailed
description of the regulatory approvals on pages 23 to 25 of the proxy
statement.
WILL ENERGY EAST SHAREHOLDERS VOTE ON THE MERGER AGREEMENT?
No. Only Berkshire shareholders will vote on the merger agreement.
WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
We are working to complete all aspects of the merger as quickly as
possible. We expect to complete the merger by the end of the second
quarter of 2000.
WHAT HAPPENS IF I DO NOT INSTRUCT A BROKER HANDLING MY SHARES ON HOW TO
VOTE ON THE MERGER AGREEMENT OR IF I ABSTAIN FROM VOTING?
If a broker holds your Berkshire shares as nominee, he will not be able to
vote them without instructions from you. If you mark your proxy "Abstain"
or do not instruct your broker on how to vote, your shares will have the
effect of a vote against the merger agreement.
CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED AND DATED PROXY CARD?
Yes. If you would like to revoke your proxy in writing, you must deliver,
at any time before the vote has been taken at the special meeting, a
written revocation or a proxy bearing a later date. We will count only the
most recently dated proxy at the special meeting. You should send any
written revocation to: Cheryl M. Clark, Secretary of Berkshire Energy
Resources, 115 Cheshire Road, Pittsfield, Massachusetts 01201-1879.
Alternatively, you may attend the special meeting in person and revoke your
proxy orally by notifying the Secretary before the vote takes place.
WHOM SHOULD I CALL IF I WANT TO REQUEST AN ADDITIONAL COPY OF THIS DOCUMENT
OR THE PROXY STATEMENT?
You may call Cheryl M. Clark, Secretary of Berkshire Energy Resources, at
(413) 445-0311 to request an additional copy of any enclosed document,
including the proxy statement. If your broker holds your shares, you
should call your broker for additional information.
ON WHAT OTHER MATTERS WILL BERKSHIRE SHAREHOLDERS VOTE AT THE SPECIAL
MEETING?
Berkshire shareholders are not expected to vote on any other matters at the
special meeting.
I UNDERSTAND THAT ENERGY EAST IS INVOLVED IN SOME OTHER MERGERS. IS ITS
MERGER WITH BERKSHIRE CONTINGENT ON THOSE OTHER MERGERS BEING COMPLETED?
Consistent with its strategy of selectively growing its energy distribution
business in the northeastern United States, Energy East entered into a
merger agreement in April 1999 with Connecticut Energy Corporation and a
merger agreement in June 1999 with CTG Resources, Inc., both of which are
public utility holding companies located in Connecticut, and a merger
agreement in June 1999 with CMP Group, Inc., a public utility holding
company located in Maine. The merger between Berkshire and Energy East may
be terminated by Energy East, subject to payment to Berkshire of a
$4,000,000 termination fee, if Energy East reasonably believes that the
merger with Berkshire will delay obtaining any regulatory approval
associated with those other mergers or result in any unduly burdensome
condition in any such approval. Please see pages 39 to 41 of the proxy
statement.
WHERE CAN I FIND MORE INFORMATION ABOUT BERKSHIRE?
Various sources described under "Where You Can Find More Information" on
pages 44 to 46 of the proxy statement provide further information. Our
SEC filings are also available at the SEC's web site at http://www.sec.gov.
HOW WILL THE MERGER AFFECT DIVIDENDS ON BERKSHIRE SHARES?
We have no intention to change our dividend policy prior to completion of
the merger. After the merger is completed, you will no longer be
shareholders of Berkshire and will not be shareholders of Energy East and,
therefore, will no longer receive dividends.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
The receipt of the merger consideration will be a taxable transaction for
United States federal income tax purposes. In general, you will recognize
gain or loss equal to the difference between the amount of cash you receive
in the merger and your adjusted tax basis in Berkshire shares. Please see
pages 29 to 30 of the proxy statement.
A majority of Berkshire shares is widely held in small lots. It is
important, therefore, in order to have the necessary number of shares
represented at the special meeting, that all shareholders who cannot be
present in person, however small their holdings, complete, sign, date and
return the enclosed proxy without delay to Boston Equiserve, Proxy
Department, P.O. Box 9391, Boston, MA 02205-9969. A self-addressed,
stamped envelope is enclosed for this purpose.
(Berkshire Energy Resources Logo)
BERKSHIRE ENERGY RESOURCES
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
Notice of Special Meeting of Shareholders
to be held on February, 29, 2000
To the Holders of Common Shares:
The special meeting of shareholders of Berkshire Energy Resources
will be held at Berkshire's offices, 115 Cheshire Road, Pittsfield,
Massachusetts 01201-1879, on Tuesday, February, 29, 2000 at 10:00 a.m., for
the following purposes:
1. To approve the merger agreement among Berkshire, Energy East
Corporation and Mountain Merger LLC, a newly formed subsidiary
of Energy East. In the merger, Berkshire shareholders will
receive $38.00 in cash, without interest, for each Berkshire
share owned.
2. To address any procedural matters that may properly come before
the special meeting or any adjournment thereof.
You will find further information about the merger and related
matters in the accompanying proxy statement.
Only the holders of Berkshire shares as of the close of business on
January 10, 2000 are entitled to notice of and to vote at the special
meeting or any adjournment thereof. Holders of Berkshire shares are not
entitled to dissenters' rights in connection with the merger.
Please complete, sign, date and return the accompanying proxy in the
enclosed addressed envelope, which requires no postage if mailed in the
United States. Your proxy may be revoked at any time before the vote is
taken by delivering to the Secretary a written revocation or a proxy
bearing a later date or by oral revocation in person to the Secretary at
the special meeting.
By Order of the Board of Trustees,
Cheryl M. Clark
Secretary
Pittsfield, Massachusetts
January 12, 2000
BERKSHIRE ENERGY RESOURCES
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
(413) 442-1511
PROXY STATEMENT
This proxy statement, together with the accompanying proxy, is being
furnished to shareholders of Berkshire Energy Resources in connection with
the solicitation of proxies by the Berkshire board of trustees to be voted
at the special meeting of shareholders to be held on Tuesday, February, 29,
2000 at 10:00 a.m. at Berkshire's offices, 115 Cheshire Road, Pittsfield,
Massachusetts 02101-1879 for the following purposes:
1. To approve the merger agreement among Berkshire, Energy East
Corporation and Mountain Merger LLC, a newly formed subsidiary
of Energy East. In the merger, Berkshire shareholders will
receive $38.00 in cash, without interest, for each Berkshire
share owned.
2. To address any procedural matters that may properly come before
the special meeting or any adjournment thereof.
Pursuant to the merger agreement, Mountain Merger will merge with and
into Berkshire with Berkshire being the surviving company. As a result of
the merger, Berkshire will become a subsidiary of Energy East. See "The
Merger--General Description of the Merger."
If the merger is completed, you will have to surrender your Berkshire
share certificates in order to receive the merger consideration for your
shares. See "The Merger Agreement--Conversion of Berkshire Shares."
This proxy statement and the accompanying proxy, solicited on behalf
of the Berkshire board of trustees, were first mailed to shareholders on or
about January 17, 2000.
The accompanying proxy, if properly executed and delivered by a
shareholder entitled to vote, will be voted at the special meeting as
specified in the proxy, but may be revoked at any time before the vote is
taken by delivering to the Secretary of Berkshire a written revocation or a
proxy bearing a later date or by oral revocation in person to the Secretary
at the special meeting. If you sign, date and mail your proxy without
indicating how you want to vote, your proxy will be counted in favor of the
merger agreement. Berkshire will bear the costs of soliciting proxies from
Berkshire shareholders, except that Energy East and Berkshire intend to
share equally the costs associated with the printing and the filing of the
proxy solicitation material. Berkshire has retained Corporate Investor
Communications, Inc. to assist in the solicitation of proxies at a fee of
$4,500, plus additional charges for any telephone solicitation services and
reimbursement of its out-of-pocket expenses. The trustees, directors,
officers and employees of Berkshire and its subsidiaries may devote a part of
their time to the solicitation of proxies but no additional compensation will
be paid to them for the time so employed but they may be reimbursed for out-
of-pocket expenses incurred in connection with the solicitation of proxies.
Berkshire will reimburse brokerage firms, banks, trustees and others for
their reasonable out-of-pocket expenses in forwarding proxy material to the
beneficial owners of Berkshire shares.
On January 10, 2000, there were issued and outstanding 2,523,479
Berkshire shares (and 61,571 shares reserved for issuance pursuant to
Berkshire's Share Owner Dividend Reinvestment and Stock Purchase Plan).
Only holders of record of Berkshire shares at the close of business on that
date shall be entitled to notice of and to vote at the special meeting or
any adjournments thereof, and those entitled to vote will have one vote for
each share held. To the knowledge of management, only one person owns
beneficially more than five percent (5%) of the outstanding voting
securities of Berkshire (See "Share Ownership of Management and Certain
Beneficial Owners").
The date of this proxy statement is January 12, 2000.
TABLE OF CONTENTS
SUMMARY 1
The Companies 1
The Special Meeting 2
Share Ownership of Management 2
The Merger 2
No Dissenters' Rights of Appraisal 3
The Merger Agreement 3
PRICE RANGE OF BERKSHIRE SHARES 6
SELECTED CONSOLIDATED FINANCIAL DATA 7
THE COMPANIES 9
Berkshire Energy Resources 9
Energy East Corporation 9
Mountain Merger LLC 11
THE SPECIAL MEETING 11
Purpose, Time and Place 11
Record Date, Voting Power and Vote Required 11
Share Ownership of Management 12
Voting of Proxies 12
Adjournment of Meeting 12
Revocability of Proxies 12
Solicitation of Proxies 13
NO VOTE REQUIRED FOR ENERGY EAST SHAREHOLDERS 13
THE MERGER 13
General Description of the Merger 13
Background 14
Berkshire's Reasons for the Merger and
Recommendation of the Berkshire Board of Trustees 18
Opinion of Financial Advisor to the Berkshire Board of Trustees 19
Effective Time of the Merger 23
Declaration of Trust and By-Laws 23
Trustees and Officers 23
Accounting Treatment 23
Regulatory Approvals 23
Effects of the Merger 25
Merger Financing 26
Interests of Certain Persons in the Merger 26
Material Federal Income Tax Consequences of the Merger 29
NO DISSENTERS' RIGHTS OF APPRAISAL 30
THE MERGER AGREEMENT 30
General 30
Corporate Governance Matters 31
Conversion of Berkshire Shares 31
Representations and Warranties 32
Covenants 33
No Solicitation of Alternative Proposals 34
Additional Agreements 35
Conditions 37
Termination, Amendment and Waiver 39
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS 41
OTHER MATTERS 43
Voting Procedures 43
Adjournment of Meeting 43
Proposals of Shareholders 44
Other Business 44
Experts 44
Independent Public Accountants 44
Where You Can Find More Information 44
APPENDICES
A. Agreement and Plan of Merger between and among Berkshire
Energy Resources, Energy East Corporation and Mountain
Merger LLC A-1
B. Opinion of Tucker Anthony Cleary Gull B-1
You should rely only upon the information contained in this document
or that we have referred you to. We have not authorized anyone to provide
you with information that is different.
SUMMARY
This summary highlights selected information in this document and may not
contain all of the information that is important to you. To understand the
merger fully, and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Other Matters--Where You Can Find More
Information" on pages 44 to 46 of this document. Each item in this summary
includes a page reference directing you to a more complete description of
that item. ("We" and "our" as used in this document refer to Berkshire.)
The Companies
Berkshire Energy Resources (See Page 9)
Berkshire Energy Resources
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
(413) 442-1511
Berkshire was organized as a Massachusetts business trust and has as
its subsidiaries The Berkshire Gas Company, Berkshire Propane, Inc. and
Berkshire Service Solutions, Inc. (formerly known as Berkshire Energy
Marketing, Inc.). Berkshire Gas is engaged in the distribution, sale and
transportation of natural gas for residential, commercial and industrial
use in western Massachusetts. Berkshire Gas also has an appliance rental
division that sells and leases gas burning equipment. Berkshire Gas is
subject to the regulatory authority of the Massachusetts Department of
Telecommunications and Energy, formerly known as the Massachusetts
Department of Public Utilities. Berkshire Propane provides retail propane
distribution and service in more than 100 communities in western
Massachusetts, eastern New York and southern Vermont. Berkshire Service
Solutions was established to capitalize on new opportunities associated
with the deregulation of the utility industry. Berkshire Service Solutions
offers competitively priced natural gas to meet a wide variety of customer
needs and provides a variety of energy-related services.
Energy East Corporation (See Pages 9 to 11)
Energy East Corporation
P.O. Box 1196
Stamford, Connecticut 06904-1196
(203) 325-0690
Energy East is a holding company that was organized under the laws of
the State of New York in 1997. Energy East, through its subsidiaries, is
an energy delivery, products and services company with operations in New
York, Connecticut, Massachusetts, Maine, New Hampshire, Vermont and New
Jersey, and offices in New York and Connecticut. Energy East is the parent
of New York State Electric & Gas Corporation, a regulated public utility
company. Energy East's nonutility subsidiaries include XENERGY Enterprises,
Inc. and Energy East Enterprises, Inc., which invest in energy ventures and
providers of energy-related and telecommunication services. Energy East
has adopted a strategy of selling its electric generation assets and using
a portion of the proceeds to grow selectively its energy distribution
business in the northeastern United States. Consistent with this strategy,
Energy East sold its coal-fired generation assets to Edison Mission Energy
in March 1999 and to The AES Corporation in May 1999. In addition, Energy
East expects to complete in the second quarter of 2000 the sale of its 18%
interest in the Nine Mile Point nuclear generating unit No. 2. The net cash
received from these sales is being used to repurchase Energy East shares and
will be used to help fund Energy East's business combinations with Berkshire,
Connecticut Energy Corporation, CTG Resources, Inc. and CMP Group, Inc.
Mountain Merger LLC (See Page 11)
Mountain Merger LLC
c/o Energy East Corporation
P.O. Box 1196
Stamford, Connecticut 06904-1196
(203) 325-0690
Mountain Merger is a subsidiary of Energy East, formed as a limited
liability company under the laws of the Commonwealth of Massachusetts
solely for the purpose of completing the merger with Berkshire.
The Special Meeting (See Pages 11 to 13)
The special meeting of Berkshire shareholders will be held at
Berkshire's offices, 115 Cheshire Road, Pittsfield, Massachusetts 01201-
1879 on Tuesday, February, 29, 2000, at 10:00 a.m. local time. At the
special meeting, we will ask you to vote upon a proposal to approve the
merger agreement. Approval of the merger agreement requires the affirmative
vote of at least two-thirds of the outstanding Berkshire shares. Only the
Berkshire shareholders at the close of business on the record date, January
10, 2000, will be entitled to notice of and to vote at the special meeting.
At the close of business on January 10, 2000, there were 2,523,479
Berkshire shares outstanding, with each share entitled to one vote.
Share Ownership of Management (See Pages 41 to 42)
At the close of business on January 7, 2000, trustees and executive
officers of Berkshire and their affiliates beneficially owned less than 2%
of the outstanding Berkshire shares. It is expected that all of these
trustees and executive officers will vote their shares FOR the approval of
the merger agreement.
The Merger
Background of and Reasons for the Merger (See Pages 14 to 19)
You should review the factors that the Berkshire board of trustees
considered when deciding whether to approve the merger.
Recommendation to Shareholders (See Pages 18 to 19)
The Berkshire board of trustees has determined that the merger is in
the best interests of the Berkshire shareholders and recommends that you
vote to approve the merger agreement at the special meeting.
Fairness Opinion (See Pages 19 to 23)
In deciding to approve the merger, the Berkshire board of trustees
considered, among other things, the opinion of Tucker Anthony Cleary Gull,
its financial advisor, as to the fairness, from a financial point of view,
of the consideration that Berkshire shareholders will receive. A copy of
the opinion, as updated to the date hereof, is attached as Appendix B to
this document and is also discussed on pages 19 to 23. We encourage you to
read this opinion.
Accounting Treatment (See Page 23)
The merger will be accounted for as an acquisition of Berkshire by
Energy East under the purchase method of accounting in accordance with
generally accepted accounting principles. The amount of goodwill recorded
will reflect the excess of the purchase price over the estimated net fair
value of the assets and liabilities of Berkshire's utility and nonutility
businesses at the time of closing, plus Energy East's estimated transaction
costs related to the merger. The assets and liabilities of Berkshire's
nonutility subsidiaries will be revalued to fair value, including an
allocation of goodwill to such subsidiaries, if appropriate. The remaining
goodwill will be allocated to Berkshire Gas and will be recorded as an
acquisition adjustment.
Regulatory Approvals (See Pages 23 to 25)
Energy East must obtain Securities and Exchange Commission approval
of the acquisition under the Public Utility Holding Company Act and,
following the completion of the CMP Group merger, must register with the
Securities and Exchange Commission as a holding company. In addition, both
Berkshire and Energy East must file certain notification forms with the
Antitrust Division of the Department of Justice and the Federal Trade
Commission. We may also seek the Massachusetts Department of
Telecommunications and Energy's approval of a rate plan in connection with
the recovery of certain costs associated with the merger.
Interests of Certain Persons in the Merger (See Pages 26 to 29)
In considering the recommendation of the Berkshire board of trustees
to approve the merger, you should be aware that members of the Berkshire
board of trustees and Berkshire senior management will receive benefits as
a result of the merger that will be in addition to or different from the
benefits that Berkshire shareholders receive generally. The members of the
Berkshire board of trustees knew about these additional interests and
considered them when they approved the merger.
Material Federal Income Tax Consequences (See Pages 29 to 30)
The merger will be a taxable transaction to you. For United States
federal income tax purposes, you will generally recognize gain or loss in
the merger in an amount equal to the difference between the cash you
receive and your adjusted tax basis in your Berkshire shares. Because
determining the tax consequences of the merger can be complicated, you
should consult your own tax advisor to understand fully how the merger will
affect you in light of your individual circumstances.
No Dissenters' Rights of Appraisal
You will not be entitled to assert dissenters' rights under
Berkshire's declaration of trust or Massachusetts law.
The Merger Agreement
The merger agreement is the legal document that governs the merger.
The merger agreement is attached as Appendix A to this document, and we
encourage you to read it carefully.
Merger Consideration (See Page 31)
Upon completion of the merger, each of your Berkshire shares will be
converted into the right to receive $38.00 in cash, without interest.
Partial shares that you own will be converted into the right to receive
cash on a pro rata basis.
Certain Covenants (See Pages 34 to 35)
Berkshire has agreed not to solicit or encourage any proposal from
any person to acquire Berkshire or its assets, but it may respond, in
certain circumstances, to unsolicited proposals that it receives.
Conditions to the Merger (See Pages 37 to 39)
Completion of the merger depends upon satisfaction of a number of
conditions. In addition to customary conditions relating to compliance with
the merger agreement, these conditions include the following:
- The holders of at least two-thirds of the outstanding
Berkshire shares must have approved the merger agreement.
- The absence of any temporary restraining order or
injunction by any U.S. federal or state court that
prevents completion of the merger, and the absence of any
U.S. federal or state law or regulation that prohibits
the merger.
- Berkshire and Energy East must have obtained the
requisite regulatory approvals and all applicable waiting
periods must have expired or been terminated.
The merger will be completed, and your Berkshire shares will be
converted into the right to receive $38.00 per share in cash, without
interest, as soon as practicable after Berkshire and Energy East satisfy
all of the conditions in the merger agreement.
Termination (See Pages 39 to 41)
The merger agreement may be terminated, and the merger abandoned, in
the following circumstances:
- if Energy East and Berkshire mutually agree to terminate the
merger agreement;
- by either Energy East or Berkshire, if the merger is not
completed by November 9, 2000 (or May 9, 2001, if the only
barrier to closing is that the requisite regulatory approvals
have not been obtained);
- by either Energy East or Berkshire, if the Berkshire
shareholders have not approved the merger agreement by
November 9, 2000;
- by either Energy East or Berkshire, if there is any law or
regulation that makes the merger illegal, or if any
governmental authority issues a final, nonappealable order
blocking the merger;
- by either Energy East or Berkshire, if the other party
materially breaches the merger agreement and fails to cure the
breach;
- by Energy East, if the Berkshire board of trustees withdraws
its approval of the merger agreement, fails to reaffirm its
approval of the merger agreement upon Energy East's request,
approves a competing acquisition proposal, or resolves to take
any of these actions;
- by Energy East, if it reasonably believes the merger will delay
any regulatory approval of its proposed transactions with
Connecticut Energy, CTG Resources or CMP Group, or cause any
such approval to be unduly burdensome; or
- by Berkshire, prior to its shareholders' approval of the merger
agreement, if Berkshire receives a third-party proposal
concerning another business combination, in response to which
the Berkshire board of trustees determines (based on the advice
of outside counsel) that failure to accept the proposal would
likely result in a breach of their fiduciary duties, and
concludes that the person making the alternative proposal has
demonstrated that it has obtained any necessary financing or
the financing is obtainable and that such proposal would be
financially superior to the merger; provided that before
Berkshire may terminate the merger agreement, it must provide
Energy East with a chance to match the competing proposal, as
discussed on pages 39 to 40.
If either Energy East or Berkshire materially breaches the merger
agreement and the other party terminates the agreement, the breaching party
must pay the other party up to $2 million in expenses and fees incurred by
that party in connection with the merger. If the breach is willful, the
other party may also pursue available legal remedies.
If Energy East terminates the merger agreement because it reasonably
believes the merger will delay any regulatory approval of its proposed
transactions with Connecticut Energy, CTG Resources or CMP Group, or cause
any such approval to be unduly burdensome, then Energy East must pay
Berkshire $4 million, as discussed on pages 40 to 41.
Moreover, if the merger agreement is terminated for any of the
following reasons:
- the Berkshire board of trustees decides to pursue an
alternative acquisition proposal;
- Berkshire shareholders fail to approve the merger
agreement, there is an alternative acquisition proposal
outstanding at the time of the special meeting, and
Berkshire enters into a definitive agreement for or
completes an alternative acquisition within two years of
the termination of the merger agreement; or
- the Berkshire board of trustees withdraws, modifies or
fails to affirm its approval of the merger agreement,
there is an alternative acquisition proposal outstanding
at the time of the termination of the merger agreement
and Berkshire enters into a definitive agreement for or
completes an alternative acquisition within two years of
the termination of the merger agreement;
then Berkshire must pay Energy East $4 million, plus expenses of up to $2
million, as discussed on page 41.
PRICE RANGE OF BERKSHIRE SHARES
Berkshire shares are traded on the NASDAQ-National Market System
under the symbol "BERK" and quoted through the NASDAQ System. The table
below sets forth the high and low average of the sales prices for Berkshire
shares, as reported by the National Quotation Bureau, Incorporated, for the
calendar periods indicated. For the period prior to Berkshire's
establishment of a holding company corporate structure as of January 1,
1999, this table reflects prices for Berkshire Gas.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997: First Quarter $17-1/2 $15-1/4
Second Quarter $16 $15
Third Quarter $17-3/8 $15-1/4
Fourth Quarter $23-1/2 $16-1/4
1998: First Quarter $25-5/8 $21-1/2
Second Quarter $24-3/4 $21-5/8
Third Quarter $25 $19-1/2
Fourth Quarter $24-1/4 $20
1999: First Quarter $23-1/8 $18-1/2
Second Quarter $23-3/4 $16-1/4
Third Quarter $26-7/8 $23-1/2
Fourth Quarter $33-1/16 $28-3/4
2000: First Quarter
(through January 7, 2000) $35-1/4 $34-7/8
</TABLE>
These quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not necessarily represent
actual transactions.
On November 9, 1999, the last full trading day before the public
announcement of the execution of the merger agreement, the daily high and
low sales prices of Berkshire shares were $33.25 and $32.625, respectively.
On November 2, 1999, one week before the execution of the merger agreement,
the daily high and low sales prices of Berkshire shares were $25.875 and
$25.625, respectively.
On January 7, 2000, the most recent practicable date for which
quotations were available prior to the printing of this document, the daily
high and low sales prices of Berkshire shares were $35.063 and $34.875,
respectively.
SELECTED CONSOLIDATED FINANCIAL DATA
The following sets forth selected consolidated financial data of
Berkshire and its subsidiaries. For the period prior to Berkshire's
establishment of a holding company corporate structure as of January 1,
1999, this table reflects financial data for Berkshire Gas. This
information does not purport to be complete and should be read in
conjunction with, and is qualified in its entirety by, Berkshire's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the
Securities and Exchange Commission, including the financial statements and
related notes. The selected consolidated financial data as of and for each
of the years ended June 30, 1995, 1996, 1997, 1998 and 1999, respectively,
are derived from the audited consolidated financial statements of Berkshire
and its subsidiaries. The selected consolidated financial data as of and
for the three months ended September 30, 1998 and 1999, respectively, are
derived from unaudited financial statements of Berkshire.
<TABLE>
<CAPTION>
Years Ended June 30,
- ------------------------------------------------------------------------------------------------------
OPERATIONS ($000) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 50,733 $ 54,601 $ 53,584 $50,405 $51,627
Cost of Gas Sold 22,485 27,023 25,873 22,368 26,541
- ------------------------------------------------------------------------------------------------------
Operating Margin 28,248 27,578 27,711 28,037 25,086
- ------------------------------------------------------------------------------------------------------
Net Income 3,233 2,794 3,556 4,213 2,529
Earnings Available for
Common Shareholders 3,218 2,778 3,316 3,521 1,835
COMMON SHARE DATA
- ------------------------------------------------------------------------------------------------------
Earnings Per Share $ 1.34 $ 1.23 $ 1.52 $ 1.65 $ 0.92
Annualized Dividends Per Share 1.18 1.16 1.14 1.12 1.10
Dividends Declared Per Share 1.165 1.145 1.125 1.105 1.10
Book Value Per Share 15.07 14.48 14.18 13.75 13.16
Market Price (Year-End) 22.50 23.25 16.00 15.38 15.00
Average Common Shares
Outstanding (000s) 2,405.2 2,263.6 2,181.5 2,129.2 1,990.5
TOTAL ASSETS ($000)
- ------------------------------------------------------------------------------------------------------
Total Assets $105,485 $101,897 $101,688 $93,660 $87,741
CAPITALIZATION ($000)
- ------------------------------------------------------------------------------------------------------
Common Equity $ 37,896 $ 33,536 $ 31,365 $29,595 $27,688
Preferred Stock 312 321 363 8,406 8,448
Long-Term Debt 40,000 34,000 40,000 31,999 30,983
- ------------------------------------------------------------------------------------------------------
Total Capitalization $ 78,208 $ 67,857 $ 71,728 $70,000 $67,119
- ------------------------------------------------------------------------------------------------------
% OF TOTAL
- ------------------------------------------------------------------------------------------------------
Common Equity 48.5% 49.4% 43.7% 42.3% 41.2%
Preferred Stock 0.4 0.5 0.5 12.0 12.6
Long-Term Debt 51.1 50.1 55.8 45.7 46.2
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended (unaudited)
- -----------------------------------------------------------------
OPERATIONS ($000) 09/30/99 09/30/98
- -----------------------------------------------------------------
<S> <C> <C>
Operating Revenues $ 4,775 $ 4,837
Cost of Gas Sold 1,883 1,821
- -----------------------------------------------------------------
Operating Margin 2,892 3,016
- -----------------------------------------------------------------
Net Income (Loss) (973) (876)
Loss Attributable to Common
Shareholders (977) (880)
COMMON SHARE DATA
- -----------------------------------------------------------------
(Loss) Per Share $ (0.39) $ (0.38)
Annualized Dividends Per Share 1.18 1.16
Dividends Declared Per Share 0.295 0.290
Book Value Per Share 14.41 13.93
Market Price 25.63 22.50
Average Common Shares
Outstanding (000's) 2,519.2 2,337.9
TOTAL ASSETS ($000)
- -----------------------------------------------------------------
Total Assets $110,580 $105,485
CAPITALIZATION ($000)
- -----------------------------------------------------------------
Common Equity $ 36,305 $ 37,896
Preferred Stock 310 312
Long-Term Debt 40,000 40,000
- -----------------------------------------------------------------
Total Capitalization $ 76,615 $ 78,208
- -----------------------------------------------------------------
% OF TOTAL
- -----------------------------------------------------------------
Common Equity 47.4% 48.5%
Preferred Stock 0.4 0.4
Long-Term Debt 52.2 51.1
</TABLE>
THE COMPANIES
Berkshire Energy Resources
Berkshire Energy Resources
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
(413) 442-1511
Berkshire is a Massachusetts business trust organized in 1998.
Berkshire's subsidiaries are: Berkshire Gas, Berkshire Propane and
Berkshire Service Solutions. Berkshire Gas, originally formed in 1853, is
now a subsidiary of Berkshire engaged in the distribution, sale and
transportation of natural gas for residential, commercial and industrial
use in 19 communities in western Massachusetts. The population of the area
served is estimated at 190,000 and is primarily residential in character,
but the territory also includes industrial, agricultural, educational,
cultural and resort facilities. Berkshire Gas currently serves over 34,000
natural gas customers. Berkshire Gas also has an appliance rental division
that sells and leases gas burning equipment. Berkshire Gas is subject to
the regulatory authority of the Massachusetts Department of
Telecommunications and Energy.
Berkshire Propane provides retail propane distribution and service in
more than 100 communities in western Massachusetts, eastern New York and
southern Vermont. Propane is delivered to customers by trucks from storage
facilities at various locations in Massachusetts.
Berkshire Service Solutions was established to capitalize on new
opportunities associated with the deregulation of the utility industry.
Berkshire Service Solutions offers competitively priced natural gas to meet
a wide variety of customer needs. To gain additional supply and price
leverage, Berkshire Service Solutions has entered into a strategic alliance
with Energy East Solutions, LLC, a joint venture of subsidiaries of Energy
East and Connecticut Energy. Energy East Solutions LLC is a regional
energy marketer with significant supply acquisition capabilities.
Berkshire Service Solutions recently completed the acquisitions of two
energy service contractors and is thereby extending its reach into new
markets by providing a variety of energy-related services.
Energy East Corporation
Energy East Corporation
P.O. Box 1196
Stamford, CT 06904-1196
(203) 325-0690
Energy East is a New York corporation that was formed in 1997 and
became the parent of NYSEG on May 1, 1998. Energy East is a holding
company that is currently exempt from the registration requirement of the
Public Utility Holding Company Act. Energy East expects that if the
planned merger with CMP Group is completed it will no longer be eligible
for this exemption, and has agreed that it will register with the
Securities and Exchange Commission as a public utility holding company.
Energy East neither owns nor operates any physical properties. Energy
East, through its subsidiaries, is an energy delivery, products and
services company with operations in New York, Connecticut, Massachusetts,
Maine, New Hampshire, Vermont and New Jersey, and has offices in New York
and Connecticut. Energy East's nonutility subsidiaries include XENERGY
Enterprises, Inc. and Energy East Enterprises, Inc., which invest in energy
ventures and providers of energy and telecommunication services.
NYSEG. NYSEG, Energy East's principal subsidiary, is a public
utility company engaged in purchasing, transmitting and distributing
electricity, and purchasing, transporting and distributing natural gas.
NYSEG also generates electricity from its 18% share of a nuclear station
and its hydroelectric stations. NYSEG has also agreed to sell its share of
the nuclear station; the sale is expected to be completed in the second
quarter of 2000. NYSEG's service territory, 99% of which is located
outside the corporate limits of cities, is in the central, eastern and
western parts of the State of New York. NYSEG's service territory has an
area of approximately 19,900 square miles and a population of 2,400,000.
The larger cities in which NYSEG serves both electricity and natural gas
customers are Binghamton, Elmira, Auburn, Geneva, Ithaca and Lockport.
NYSEG serves approximately 826,000 electric customers and 244,000 natural
gas customers. The service territory reflects a diversified economy,
including high-tech firms, light industry, colleges and universities,
agriculture and recreational facilities. No customer accounts for 5% or
more of either electric or natural gas revenues. From 1996 through 1998,
approximately 84% of NYSEG's operating revenue was derived from electric
service with the balance derived from natural gas service.
XENERGY Enterprises, Inc. XENERGY Enterprises is a nonutility
subsidiary of Energy East and invests in providers of energy and
telecommunications services. One of XENERGY Enterprises' subsidiaries is
XENERGY Inc., an energy services, information systems and consulting company
that specializes in energy management, conservation engineering and
demand-side management. Another one of XENERGY Enterprises' subsidiaries is
Energy East Solutions, Inc., which markets electricity and natural gas to end-
users and provides wholesale commodities to retail electric suppliers in
the northeastern United States directly and through its wholly-owned
subsidiary, NYSEG Solutions, Inc. In October 1998, Energy East Solutions
formed a joint venture with South Jersey Industries to market retail
electricity and energy management services in the mid-Atlantic region of
the United States. In November 1999, Energy East Solutions formed a joint
venture with a subsidiary of Connecticut Energy to sell natural gas, fuel
oil and other services, and to market a full range of energy-related
planning, financial, operational and maintenance services to commercial,
industrial and municipal customers in New England.
Energy East Enterprises, Inc. Energy East Enterprises, another
Energy East nonutility subsidiary, owns natural gas and propane air
distribution companies outside of the State of New York. Energy East
Enterprises owns an interest in CMP Natural Gas, a joint venture with a
subsidiary of CMP Group. CMP Natural Gas was formed to distribute
natural gas to customers in Maine who do not receive natural gas service.
CMP Natural Gas began providing service to customers in May 1999. New
Hampshire Gas Corporation, another subsidiary of Energy East Enterprises, is
an energy services company in New Hampshire specializing in propane air
distribution systems. Southern Vermont Natural Gas Corporation, a third
subsidiary of Energy East Enterprises, is developing a combined natural gas
supply and distribution project that will include an extension of a pipeline
from New York to Vermont by the Iroquois Gas Transmission System, and the
development of natural gas distribution systems in Vermont.
Sale of Generation Assets. Energy East has adopted a strategy of
selling its generation assets and using a portion of the proceeds to grow
selectively its energy distribution business in the northeastern United
States. Consistent with this strategy, Energy East sold its coal-fired
generation assets to Edison Mission Energy in March 1999 and to The AES
Corporation in May 1999. In addition, Energy East expects to complete in
the second quarter of 2000 the sale of its 18% interest in Nine Mile Point
nuclear generating unit No. 2. The net cash received from these sales is
being used to repurchase Energy East shares and will be used to help fund
Energy East's business combinations with Berkshire, Connecticut Energy, CTG
Resources and CMP Group.
Merger Agreements. On April 23, 1999, Energy East signed a definitive
merger agreement with Connecticut Energy. For additional information on this
transaction, see the Connecticut Energy merger agreement, a copy of which
Energy East filed with the SEC as an exhibit to its Form 8-K dated April 23,
1999. On June 14, 1999, Energy East signed a definitive merger agreement with
CMP Group. For additional information on this transaction, see the CMP Group
merger agreement, a copy of which Energy East filed with the SEC as an exhibit
to its Form 8-K dated June 14, 1999. On June 29, 1999, Energy East signed a
definitive merger agreement with CTG Resources. For additional information on
this transaction, see the CTG Resources merger agreement, a copy of which
Energy East filed with the SEC as an exhibit to its Form 8-K dated June 29,
1999.
Mountain Merger LLC
Mountain Merger LCC
c/o Energy East Corporation
P.O. Box 1196
Stamford, CT 06904-1196
(203) 325-0690
Mountain Merger is a Massachusetts limited liability company formed
by Energy East in 1999 solely for the purpose of completing the merger with
Berkshire.
THE SPECIAL MEETING
Purpose, Time and Place
The Berkshire board of trustees is soliciting proxies for use at the
special meeting of Berkshire shareholders. The special meeting will be
held on Tuesday, February, 29, 2000 at 10:00 a.m. at Berkshire's offices,
115 Cheshire Road, Pittsfield, Massachusetts 01201-1879. Except as
otherwise noted, when we refer in this proxy statement to the special
meeting, we are including any adjournments or postponements of the special
meeting.
At the special meeting, Berkshire shareholders as of the record date
will be asked to consider and vote on a proposal to approve the merger
agreement and the transactions contemplated thereby.
Record Date, Voting Power and Vote Required
The Berkshire board of trustees has fixed the close of business (5:00
p.m., local time) on January 10, 2000 as the record date for determining
the Berkshire shareholders entitled to notice of, and to vote at, the
special meeting. Only Berkshire shareholders of record at the close of
business on the record date will be entitled to notice of, and to vote at,
the special meeting.
At the close of business on the record date, 2,523,479 Berkshire
shares were issued and outstanding and entitled to vote at the special
meeting. Berkshire shareholders of record are entitled to one vote per
share on any matter that may properly come before the special meeting.
There were no Berkshire preferred shares issued and outstanding on the
record date. Votes may be cast at the special meeting in person or by
proxy. See "The Special Meeting--Voting of Proxies."
The presence at the special meeting, either in person or by proxy, of
the holders of a majority of the outstanding Berkshire shares entitled to
vote is necessary to constitute a quorum. If a quorum is not present at
the special meeting, management will adjourn or postpone the meeting in
order to solicit additional proxies.
The affirmative vote of the holders of at least two-thirds of the
outstanding Berkshire shares is required to approve the merger agreement
and the transactions contemplated thereby.
Broker non-votes (that is, shares represented by properly signed and
dated proxies held by brokers as nominees as to which instructions have not
been received from the beneficial owners and the broker or nominee does not
have discretionary voting power on that proposal) will be counted as
present for purposes of establishing a quorum, but will not be counted for
the purposes of determining whether the merger agreement has been approved.
Broker non-votes will have the effect of a vote against the merger
agreement.
Share Ownership of Management
At the close of business on January 7, 2000, Berkshire's trustees
and executive officers and their affiliates beneficially owned 37,071
Berkshire shares, which represents less than 2% of the outstanding
Berkshire shares. It is currently expected that all trustees and executive
officers of Berkshire will vote their Berkshire shares for approval of the
merger agreement.
Voting of Proxies
Berkshire shares represented by properly signed and dated proxies
received in time for the special meeting will be voted at the special
meeting in the manner specified by the proxies. If you sign, date and mail
your proxy without indicating how you want to vote, your proxy will be
counted in favor of the merger agreement. We do not expect that any matter
other than the approval of the merger and possibly procedural items
relating to the conduct of the special meeting will be brought before the
special meeting.
If you have Berkshire shares registered in different names, you will
receive a separate proxy card for each registration. All these shares will
be voted in accordance with the instructions on the proxy card. If your
shares are held by a broker as nominee, you will receive a voter
information form from your broker.
The appointment of a proxy on the enclosed proxy card does not
preclude you from voting in person.
Adjournment of Meeting
If the special meeting is adjourned, we do not expect any such
adjournment to be for a period of time long enough to require the setting
of a new record date for the special meeting. If an adjournment occurs, it
will have no effect on the ability of the Berkshire shareholders of record
as of the record date either to exercise their voting rights or to revoke
any previously delivered proxies.
Revocability of Proxies
You may revoke a proxy at any time before its exercise by (1)
notifying in writing Cheryl M. Clark, Secretary of Berkshire Energy
Resources, 115 Cheshire Road, Pittsfield, Massachusetts 01201-1879, (2)
completing a later-dated proxy and returning it to Berkshire's shareholder
services representative, Boston EquiServe, Proxy Department, P.O. Box 9391,
Boston, MA 02205-9969, if you sent your original proxy there, or to your
broker if your shares are held by a broker, or (3) appearing in person at
the special meeting and revoking your proxy orally by notifying the
Secretary before the vote takes place. Additional proxy cards are
available from EquiServe by calling 1-800-426-5523, or your broker,
if your shares are held by a broker.
Attendance at the special meeting will not by itself constitute
revocation of a proxy. A Berkshire shareholder of record attending the
special meeting may revoke his or her proxy and vote in person by informing
the Secretary before the vote is taken at the meeting that he or she
desires to revoke a previously submitted proxy.
Solicitation of Proxies
Berkshire will bear the costs of soliciting proxies from Berkshire
shareholders, except that Energy East and Berkshire intend to share equally
the costs associated with the printing and filing of the proxy solicitation
material. In addition to solicitation by mail, the trustees, directors,
officers and employees of Berkshire and its subsidiaries may solicit
proxies from Berkshire shareholders by telephone or in person. These
trustees, directors, officers and employees will not receive additional
compensation but may be reimbursed for out-of-pocket expenses incurred in
connection with the solicitation of proxies. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of
Berkshire shares held of record by these persons, and Berkshire will
reimburse its custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses.
We have retained Corporate Investor Communications to help solicit
proxies. Corporate Investor Communications will receive a fee that
we expect will not exceed $4,500 as compensation for its basic solicitation
services, plus additional charges for any telephone solicitation services,
and reimbursement of its out-of-pocket expenses. We have agreed to
indemnify Corporate Investor Communications against certain liabilities
arising from its engagement.
You should not send share certificates with your completed proxy
cards.
NO VOTE REQUIRED FOR ENERGY EAST SHAREHOLDERS
Under New York law, Energy East shareholders need not approve the
merger agreement and the transactions contemplated thereby. Thus, no one
is soliciting proxies from Energy East shareholders.
THE MERGER
We are furnishing this proxy statement to you in connection with the
proposed merger between Berkshire and Mountain Merger, a subsidiary of
Energy East, because you are a Berkshire shareholder. If completed, the
merger will be carried out as provided in the merger agreement, a copy of
which is attached as Appendix A to this proxy statement.
General Description of the Merger
The merger agreement provides that Mountain Merger will merge into
Berkshire. Berkshire will be the surviving company and will continue to
conduct its businesses as a direct, wholly-owned subsidiary of Energy East.
In the merger, each outstanding Berkshire share will be converted into the
right to receive $38.00 in cash, without interest.
The total value of the consideration that Berkshire shareholders will
receive in the merger, based on the number of Berkshire shares outstanding
on the date of this proxy statement, is approximately $96 million. See "The
Merger--Merger Financing" for a description of how Energy East expects to
fund the merger consideration.
Background
Berkshire has followed carefully recent developments in the gas and
electric utility industries that have substantially increased competition
in those industries, making it more difficult for small and medium-sized
utility companies to compete as effectively as larger utilities. Over the
past several years, Berkshire has developed and implemented strategic plans
to respond to the evolving competitive environment as it affected
Berkshire. Commencing in 1996, Berkshire's senior management conducted a
preliminary analysis of the potential value of Berkshire Gas, assessed
shareholders' expectations and potential earnings and considered the
appropriate steps to be taken to pursue the best interests of Berkshire and
its shareholders. Berkshire's management ultimately concluded that
Berkshire's competitive position and growth prospects would be enhanced by,
among other things, increasing the scale of its operations and the size of
its customer base. In addition, Berkshire's management determined that
Berkshire should continue to expand its non-regulated operations in
complementary activities. One particularly important aspect of Berkshire's
strategic plan was the decision, approved by the board of directors of
Berkshire Gas on December 3, 1997, to adopt a holding company corporate
structure. After obtaining the requisite shareholder and regulatory
approvals, the holding company structure was adopted effective as of
January 1, 1999. A number of other initiatives were also pursued by
Berkshire to exploit new markets, to respond to evolving regulatory
requirements and to reduce costs. Most notably, on February 6, 1998,
Berkshire entered into a joint venture with Conectiv/CNE (now called Energy
East Solutions L.L.C.) to pursue energy marketing activities in
Massachusetts, Connecticut, Vermont and New York. During the first ten
months of 1999, Berkshire also completed the acquisitions of two leading
energy services contractors within its service territory.
From time to time from July 1998 through September 1999, Mr. Scott S.
Robinson, president and chief executive officer of Berkshire, and, on
certain occasions, Mr. Franklin M. Hundley, the chairman of the board of
Berkshire, had exploratory conversations with executives from other
regional utility companies about the possibility of business combinations
or other strategic transactions, but none of these conversations led to any
substantive proposals.
As part of such initiative, on July 16, 1998, Messrs. Robinson and
Hundley had discussions with the executive officers of a regional natural
gas company regarding potential opportunities to pursue synergies between
the two entities. Although Mr. Robinson and Mr. Hundley continued these
discussions with the executives of the utility and its parent company,
including three additional meetings in May and July, 1999, none of the
discussions led to any satisfactory proposals.
As a result of the commencement of these conversations in the summer
of 1998 and in order to assist Berkshire in responding to the recent
developments in the gas industry, on August 24, 1998, Berkshire retained
Tucker Anthony to assist senior management with an assessment of the
economic value of Berkshire. Representatives from Tucker Anthony made a
presentation to Berkshire Gas' board of directors on October 6, 1998 with
respect to valuation issues.
On October 28, 1998, Mr. Robinson met with the executives of two
other regional gas utilities. In addition, on March 8, 1999, Mr. Robinson
engaged in discussions with an executive from a larger utility holding
company that had pursued merger and acquisition transactions in New
England. At these meetings, Mr. Robinson and these executives discussed
their respective companies' business strategies and the possibility of
certain business combinations. These discussions did not lead to further
substantive negotiations.
On May 6, 1999, Mr. Robinson met with Mr. Joseph R. Crespo, the
chairman, president and chief executive officer of Connecticut Energy,
which is being acquired by Energy East. Mr. Robinson and Mr. Crespo
engaged in discussions regarding the benefits of Connecticut Energy's
combination with Energy East. Based upon such discussions, Mr. Robinson
concluded that it would be appropriate to conduct a follow-up meeting with
Mr. Crespo and Mr. Wesley W. von Schack, the chairman, president and chief
executive officer of Energy East. Mr. Robinson briefly described
conversations with Mr. Crespo during the regularly scheduled meeting of
the Berkshire board of trustees on June 9, 1999.
On July 14, 1999, Mr. Robinson met with Mr. von Schack and Mr.
Crespo. Mr. von Schack described Energy East's objective of becoming a
premier energy company in the northeastern United States. Mr. von Schack
also noted the importance to Energy East of maintaining a strong local
identity and of being an integral force in the economic development of the
communities it serves.
During the remainder of the month of July, 1999, Mr. Robinson engaged
in several discussions with Mr. Crespo and Mr. von Schack regarding the
nature of a potential business combination. These discussions included the
review of trends in the utility industry, strategic issues in terms of the
possible combination of the two companies and the procedures that would be
followed with respect to due diligence investigations and the exchange of
confidential information. During the course of these conversations, Mr.
Robinson indicated that he would be willing to discuss with Berkshire's
board of trustees a transaction in which Berkshire would become a
subsidiary of Energy East on terms and conditions generally comparable to
the terms and conditions of the Connecticut Energy, CTG Resources and CMP
Group merger transactions and that would provide Berkshire shareholders
with a premium to book value for their shares comparable to that received
by shareholders of other regional local gas distribution companies in
recent transactions. On July 28, 1999, Mr. von Schack indicated that he
would be willing to discuss a business combination on such terms with
Energy East's board of directors. In light of the substantial level of
activity associated with Energy East's purchases of Connecticut Energy, CTG
Resources and CMP Group, however, Mr. von Schack requested that further
discussions be held off until after Labor Day 1999 in order that Energy
East could bring such other three transactions closer to completion. Mr.
Robinson stated that Berkshire would be willing to continue its discussions
with Energy East at that time, but that it would also reserve the right to
engage in discussions with other entities should opportunities be
presented.
On August 6, 1999 and August 14, 1999, Mr. Robinson discussed a
potential business combination with an executive from a major New England
utility holding company. In addition, on September 3, 1999 and September
9, 1999, Mr. Robinson held meetings with the executives of an out-of-state
utility holding company that has pursued a consolidation strategy with
other New England gas utilities. The benefits and potential opportunities
of combined operations were similarly discussed and considered.
On September 15, 1999, Mr. Robinson called Mr. Crespo to determine
the status of Energy East's interest in further negotiations with
Berkshire. Mr. Crespo indicated that Energy East remained interested in
such negotiations and that Energy East's attorneys would contact
Berkshire's attorneys in order to make arrangements for protection of
confidential information that might be exchanged in the ongoing
negotiations.
On September 23, 1999, Berkshire and Energy East entered into a
confidentiality agreement pursuant to which they agreed to exchange non-
public information. On September 29, 1999, Energy East's attorneys
provided Berkshire's attorneys with a preliminary outline of certain terms
that Energy East would propose for inclusion in a definitive merger
agreement between the parties. Based upon such preliminary terms, Mr.
Robinson instructed Berkshire's attorneys to proceed with the conduct of
due diligence investigations and the negotiation of a proposed merger
agreement that could be presented to Berkshire's board of trustees.
In early October, 1999 the legal advisors of Berkshire and Energy
East held several discussions pertaining to the terms of a proposed
business combination and general legal issues of the merger structure.
Working groups composed of employees of both companies and their financial
advisors and attorneys were formed to examine and address issues relating
to regulatory requirements, strategic opportunities and advantages to
employees that a transaction would present, the impact upon the communities
served by Berkshire of a transaction, and the identification of possible
operational benefits.
On October 7, 1999, a special meeting of the board of trustees of
Berkshire was held in Sturbridge, Massachusetts. Also in attendance at the
meeting were Berkshire's senior management team and Berkshire's financial
and legal advisors. Mr. Robinson made a presentation describing recent
developments and opportunities in the utility industry. Mr. Robinson also
provided an overview of the specific discussions he had undertaken with
various parties regarding potential business combinations. Mr. Robinson
then described the confidentiality agreement that had been executed with
Energy East and summarized the preliminary discussions relating to a
potential business combination with Energy East. Prior to Mr. Robinson's
summary of the preliminary discussions with Energy East, Mr. Gioia, a
trustee of Berkshire who also serves on the board of Energy East, excused
himself from the meeting. After Mr. Robinson's remarks, Berkshire's
attorneys made a presentation with respect to the legal obligations of the
trustees regarding the consideration of business combination proposals and
the representative of Tucker Anthony made an updated presentation regarding
the valuation of Berkshire. After an extended question and answer period,
Berkshire's board of trustees authorized Mr. Robinson to continue with the
negotiations with Energy East.
On October 18, 19 and 20, 1999, representatives from Energy East
performed a due diligence inquiry at the offices of Berkshire's counsel.
Executives of Berkshire, including Mr. Robinson, participated in
discussions with the Energy East representatives during these sessions. On
October 27, 1999, representatives from Berkshire performed a due diligence
review of certain non-public documents at the Energy East offices in
Stamford, Connecticut. Berkshire followed up on this review with several
telephone conferences with Energy East executives.
On October 27, 1999, Energy East made its initial proposal with
respect to merger consideration on a dollars-per-share basis. Mr. Robinson
indicated to Energy East that such initial proposal was inadequate,
especially in light of the financial terms of other then recent
transactions. Given concerns with the valuation contained in such initial
proposal, Mr. Robinson further directed Berkshire's attorneys to cease
their efforts on the negotiation of the merger documents.
During the remainder of the day on October 27, 1999 and on October
28, 1999, Mr. Robinson spoke with Berkshire's legal and financial advisors
regarding the status of the Energy East transaction. Mr. Robinson also
advised individual trustees on the status of the negotiations.
On October 29, 1999, Mr. Robinson spoke with Mr. von Schack by
telephone. Messrs. Robinson and von Schack agreed that there were many
positive attributes to a business combination between Berkshire and Energy
East. Mr. Robinson reiterated his concerns regarding the merger
consideration and that Berkshire could not engage in further substantive
discussion unless such consideration was increased. Mr. von Schack
indicated that he would have further discussions with Energy East
executives and that he would instruct such executives to respond to the
Berkshire team on Monday, November 2, 1999.
On Monday morning, November 2, 1999, Energy East executives contacted
Berkshire and increased the proposed per-share consideration with respect
to the merger. Mr. Robinson and representatives of Tucker Anthony engaged
in substantive discussions with Energy East executives regarding the level
of the proposed merger consideration and the need for a further increase in
the consideration proposed by Energy East. Following such discussions, on
Monday afternoon, November 2, 1999, Energy East further increased the
proposed merger consideration to a final offer of $38.00 per share in cash.
Mr. Robinson reviewed this offer with Berkshire's financial and legal
advisors and advised individual trustees of the progress of the
negotiations.
On November 4, 1999, Berkshire held the annual meeting of its board
of trustees. Berkshire's senior management and financial and legal
advisors also attended this meeting. After Mr. Gioia excused himself from
the meeting, Mr. Robinson updated the board on the progress of
negotiations. Mr. Robinson and Berkshire's legal advisors described the
terms of the form of merger agreement and related documents that were being
negotiated and provided copies of the latest version of the transactional
documents to the trustees. The Tucker Anthony representative updated the
trustees with respect to matters of valuation of Berkshire based upon the
most recent information available. During a break in this meeting, Mr.
Robinson again spoke with Mr. von Schack by telephone. Messrs. Robinson
and von Schack agreed on the benefits of reaching an agreement quickly.
Mr. von Schack indicated that he intended to present a proposed agreement
to the Energy East board of directors the following week subject to
consultation with Energy East's investment bankers. Messrs. Robinson and
von Schack agreed to instruct their respective legal advisors to resume
their efforts to finalize the merger documentation as rapidly as
practicable.
On November 5, 1999, Mr. Robinson had additional consultations with
Berkshire's financial advisor, Tucker Anthony, in light of the announcement
on November 4, 1999 of a merger involving two other northeastern United
States utility holding companies. Further analysis was performed by Tucker
Anthony in terms of the fairness of the merger consideration offered by
Energy East based on current market conditions. On a parallel basis,
Berkshire's and Energy East's legal advisors continued their efforts to
finalize merger-related documentation.
On November 8, 1999, Berkshire, working with its financial advisors,
continued its analysis of the financial terms of the Energy East offer.
Messrs. Robinson and von Schack spoke by telephone. Mr. von Schack
indicated that Energy East's financial advisors were preparing a fairness
opinion for the benefit of the Energy East board of directors, that its
legal advisors were continuing to work on a merger agreement and that the
Energy East board of directors would meet on November 9, 1999. Mr.
Robinson made arrangements for a telephonic meeting of the Berkshire board
of trustees for the afternoon of November 9, 1999.
On November 9, 1999, Mr. von Schack notified Mr. Robinson that the
Energy East board of directors had approved the execution of the proposed
form of merger agreement at the final cash consideration proposal of $38.00
per share. Later on November 9, 1999, the Berkshire board of trustees met
in a telephonic meeting. At this meeting, the Berkshire board of trustees
was updated by senior management regarding the proposed business
combination, including potential strategic benefits and potential risks of
the transaction, the status of negotiations on, and substantive terms and
conditions of, the proposed merger agreement and related employment
agreements for four Berkshire executives and the status of Berkshire's due
diligence review of Energy East. Representatives of Tucker Anthony
presented a general overview of the financial aspects of the transaction,
including a presentation on the methodology by which Tucker Anthony had
conducted its fairness review. Legal counsel provided advice regarding the
Berkshire board of trustees' legal responsibilities and fiduciary duties in
considering the proposed transaction and the status of negotiations
regarding the merger agreement. Legal counsel also outlined the latest
negotiated changes to the proposed forms of merger agreement and employment
agreements, which had been previously provided to the trustees. During the
meeting, Berkshire's senior management also discussed its strategic
conclusions with the board of trustees and identified Energy East as the
most likely candidate to enhance value for Berkshire shareholders.
After these presentations and a question and answer period, Tucker
Anthony delivered its fairness opinion to the Berkshire board of trustees
to the effect that, as of that date, the proposed consideration to be
received in connection with the proposed merger was fair from a financial
point of view to the holders of Berkshire shares. After considering and
discussing the various presentations at that meeting and at prior meetings,
as well as the recommendation of Berkshire's senior management, the
Berkshire board of trustees approved, by a unanimous vote, the merger with
Energy East and authorized the execution of the merger agreement. Given
his position as a director of Energy East, Mr. Gioia did not participate in
the telephonic meeting of November 9, 1999 and Mr. Robinson did not
participate in the discussions relating to his employment agreement.
Following the meetings of their respective boards, Berkshire and
Energy East executed the merger agreement on the evening of November 9,
1999 and publicly announced the merger the next morning.
Berkshire's Reasons for the Merger and Recommendation of the
Berkshire Board of Trustees
The Berkshire board of trustees consulted with Berkshire's senior
management, Tucker Anthony, Berkshire's financial advisor, and Rich, May,
Bilodeau & Flaherty, P.C., Berkshire's legal counsel, in approving the
merger and the merger agreement and in determining that the merger is fair
to, and in the best interests of, Berkshire shareholders. The Berkshire
board of trustees considered a number of factors, including without
limitation, the following:
- its review and analysis of Berkshire's business,
financial condition, earnings and prospects, as well as
the competitive and changing regulatory environment
facing Berkshire;
- the potential erosion of shareholder value resulting from
deregulation and regulatory risks faced by Berkshire,
utility industry consolidation and Berkshire's limited
growth prospects;
- historical market prices and trading information with
respect to Berkshire shares;
- a review of the possible alternatives to a sale of
Berkshire in its entirety, including the prospects of
continuing to operate Berkshire, the value to
shareholders of these alternatives, and the timing and
likelihood of actually achieving additional value from
these alternatives, along with the possibility that
Berkshire's future performance might not lead to a share
price in the foreseeable future that would have as high a
present value as the consideration to be paid in the
merger;
- the fact that the Berkshire senior management had
previously contacted a number of other companies over a
period of time in a process designed to determine
interest in acquiring or merging with Berkshire;
- the fact that the $38.00 per share consideration to be
paid in the merger represented a premium for the
Berkshire shares of approximately 48.3% and 50.5%,
respectively, to Berkshire's share price one week and
four weeks prior to the announcement of the merger;
- the financial presentations of Tucker Anthony and its
opinion to the Berkshire board of trustees dated November
9, 1999 as to the fairness of the merger consideration
from a financial point of view to the Berkshire
shareholders as described in "The Merger--Opinion of
Financial Advisor to the Berkshire Board of Trustees;"
- the terms of the merger agreement, including the right of
the Berkshire board of trustees to terminate the merger
agreement prior to its approval by the Berkshire
shareholders in certain circumstances where a superior
proposal is presented to Berkshire; and
- the likelihood of completion of the merger, including an
assessment that Energy East has the financial capability
to acquire Berkshire for the merger consideration, and an
assessment of the risks associated with obtaining
necessary approvals, regulatory and otherwise. See "The
Merger Agreement--Conditions."
The discussion above of the information and factors that the
Berkshire board of trustees considered is not exhaustive. In determining
to recommend the approval of the merger agreement, the Berkshire board of
trustees also considered that the merger was in the best interests of
Berkshire's employees, customers and the communities that Berkshire serves.
In view of the wide variety of factors considered, the Berkshire board of
trustees did not quantify or assign relative weights to the factors above.
Rather, the Berkshire board of trustees based its recommendation on the
totality of the information presented to and considered by it.
The Berkshire board of trustees has determined that the merger is
fair to, and in the best interests of, Berkshire shareholders and has
approved the merger. The Berkshire board of trustees recommends that
Berkshire shareholders vote for approval of the merger agreement.
Opinion of Financial Advisor to the Berkshire Board of Trustees
On November 9, 1999, the Berkshire board of trustees received Tucker
Anthony's oral opinion, which was subsequently followed by a written opinion as
of the same date, that, as of that date and subject to the various
considerations, assumptions, limitations and qualifications described in the
opinion, the merger consideration is fair, from a financial point of view, to
the holders of Berkshire shares.
We urge you to read the actual Tucker Anthony opinion that has been
updated to the date hereof. A copy of the updated Tucker Anthony opinion is
attached as Appendix B to this proxy statement. The November 9, 1999 opinion
is substantially identical to the opinion attached to this proxy statement.
The Tucker Anthony opinion does not constitute a recommendation as to how any
Berkshire shareholder should vote at the special meeting.
In arriving at its opinion, Tucker Anthony, among other things:
* reviewed business and historical financial information related
to Berkshire;
* reviewed financial forecasts and other data provided to Tucker
Anthony by Berkshire, particularly projections for
fiscal years ending 2000-2003;
* reviewed the financial terms of transactions involving
utilities that are, in the opinion of Tucker Anthony, generally
comparable to Berkshire;
* held discussions with members of the senior management of
Berkshire with respect to the business and prospects of
Berkshire;
* reviewed the historical market prices and trading activity for
Berkshire shares and compared this information to similar
information for certain other companies;
* performed a discounted cash flow analysis of projected
financial data for Berkshire;
* compared the consideration and other terms of the merger
agreement to the terms of other transactions which, in the
opinion of Tucker Anthony, are comparable to this transaction;
* conducted other financial studies, analyses and investigations,
and considered other information as Tucker Anthony deemed
necessary or appropriate; and
* reviewed the merger agreement.
Tucker Anthony did not independently verify any of the information
above and relied, with Berkshire's consent, on the information being
materially complete and accurate. Tucker Anthony has not made any
independent evaluation or appraisal of any of the assets or liabilities of
Berkshire or any of its subsidiaries, and no one has furnished Tucker Anthony
with any evaluation or appraisal. Tucker Anthony assumed that the financial
forecasts referred to above were reasonably prepared on bases reflecting the
best currently available estimates and judgments of Berkshire's senior
management as to the future financial performance of Berkshire. Tucker Anthony
also assumed that those estimates would be achieved in all material respects
in the amounts and at the times stated. Berkshire did not limit Tucker Anthony
regarding the procedures to be followed or factors to be considered in
rendering its opinion.
Tucker Anthony's opinion is based on economic, monetary and market
conditions existing on November 9, 1999 and the date of this proxy statement.
No company, transaction or business used in the analysis described below under
"Comparable Company Trading Analysis" and "Comparable Utility Merger and
Acquisition Analysis" is identical to Berkshire or the proposed merger.
Accordingly, an analysis of the results necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors. Mathematical analysis, such as determining
the mean or median, is not in itself a meaningful method of using generally
comparable acquisition or generally comparable company data. In connection with
rendering its opinion, Tucker Anthony considered a variety of valuation
methods. The following discussion summarizes those valuation methods but
does not purport to be a complete description of the analyses that Tucker
Anthony considered.
Discounted Cash Flow Analysis. Tucker Anthony performed a discounted
cash flow valuation based upon projections that the senior management of
Berkshire furnished. Utilizing these projections, Tucker Anthony discounted to
present value, under assumed discount rates ranging from 10.7% to 11.7%,
the free unleveraged cash flows through the year 2003 for Berkshire. Terminal
values were determined utilizing multiples of earnings before interest, taxes,
depreciation and amortization ("EBITDA") of 9.6x to 11.6x. This provided a
value range from $32.08 to $43.94 per Berkshire share on a stand-alone basis.
Comparable Company Trading Analysis. Using publicly available
information, Tucker Anthony compared, based upon the consideration of
$38.00 per share, multiples of certain financial criteria such as sales,
cash flow from operations or EBITDA, operating income or EBIT and book
value of common equity, to multiples based upon market trading values at
the time for certain other companies which, in Tucker Anthony's judgment,
were generally comparable to Berkshire for the purpose of this analysis. The
factors Tucker Anthony considered in selecting companies for comparison
included size, geographic location, financial condition and scope of
business operations. The companies used in the comparison were Connecticut
Energy, Corning Natural Gas Corporation, CTG Resources, Eastern Enterprises,
EnergyNorth, Inc., Fall River Gas Company, Providence Energy Corporation,
Valley Resources, Inc. and Yankee Energy System, Inc. A majority of the
companies used in the comparison have announced mergers in the last six
months, thus prices used to derive valuation multiples are based one day
prior to the respective announcement. Total consideration value (defined
as equity consideration value plus long and short-term debt, plus the current
call value of preferred stock, less excess cash not required for the business)
as a multiple of the indicated statistics for Berkshire's latest 12-month
period, compared to the comparable company mean were as follows:
* Sales-2.8x compared to 1.6x;
* EBITDA-9.4x compared to 9.4x;
* EBIT-14.6x compared to 15.2x; and
* Book Value-2.3x compared to 2.3x.
The above analysis is a valuation method used by Tucker Anthony to
determine if the consideration to be paid to Berkshire is reasonable
in relation to current trading values.
Comparable Utility Merger and Acquisition Analysis. Using publicly
available information, Tucker Anthony compared the stock price premiums
paid over one week's closing price and the price premiums paid over an
unaffected stock price (defined as the closing price four weeks before
announcement of a transaction) for certain utility acquisitions to the
premium per share value to be paid to Berkshire shareholders. Tucker
Anthony also compared various financial measures of the price paid in
comparable transactions (including multiples of sales, EBITDA, EBIT and
Book Value) to both the equity and total consideration values to be paid
for Berkshire. In selecting comparable transactions, Tucker Anthony utilized
its judgment in analyzing acquisitions announced since January 1, 1997 that
were of sufficient size, not generally viewed as a merger-of-equals in which
a low premium or no premium was paid and which were not subsequently
terminated. In total, Tucker Anthony considered eleven acquisitions which
it considered comparable. The comparable transactions were:
* Valley Resources, Inc. and Southern Union Company,
* Providence Energy Corporation and Southern Union Company,
* Eastern Enterprises and KeySpan Corporation,
* Fall River Gas Company and Southern Union Company,
* EnergyNorth, Inc. and Eastern Enterprises,
* CTG Resources and Energy East,
* Yankee Energy System, Inc. and Northeast Utilities,
* Connecticut Energy and Energy East,
* Colonial Gas Company and Eastern Enterprises,
* Essex County Gas Company and Eastern Enterprises, and
* Bay State Gas Company and NIPSCO Industries Inc.
The consideration to be received by Berkshire shareholders of $38.00 per
share represents a premium of 48.3% and 50.5%, respectively, to Berkshire's
share price one week and four weeks prior to the announcement. The premiums
paid over the price one week prior to announcement ranged from 13.9% to 54.9%
with a mean of 37.0% and a median of 33.9%. The premiums paid over the price
four weeks prior to announcement, ranged from 19.0% to 75.4% with a mean of
58.4% and a median of 52.1%. Utilizing latest 12-month multiples for
Berkshire, Tucker Anthony compared the total consideration value to be
received by Berkshire to the figures for comparable transactions. Berkshire's
multiples were:
* for sales-3.0x compared to a high of 2.8x and a low of 1.6x
with a mean and median of 2.1x,
* for EBITDA-10.1x compared to a high of 13.3x and a low of 9.2x
with a mean of 10.6x and a median of 10.8x,
* EBIT-15.9x compared to a high of 19.3x and a low of 12.8x with
a mean of 16.3x and a median of 15.8x,
* for book value-2.6x compared to a high of 3.5x and a low of
2.2x with a mean of 2.6x and a median of 2.7x.
The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and
the application of these methods to particular circumstances. Therefore,
the opinion and analysis are not readily susceptible to summary
description. Accordingly, notwithstanding the separate factors and analyses
summarized above, Tucker Anthony believes that its analysis must be
considered as a whole and that selecting only portions of its analysis and
the factors it considered, without considering all factors and analyses,
could create a misleading view of the evaluation process underlying the
opinions. Tucker Anthony did not assign any particular weight to any
analysis or factor it considered. Rather, Tucker Anthony made qualitative
judgments based on its experience in rendering these opinions and on
economic, monetary and market conditions then present as to the
significance and relevance of each analysis and factor. In its analyses,
Tucker Anthony assumed relatively stable industry performance, regulatory
environments and general business and economic conditions, all of which are
beyond Berkshire's control. Any estimates contained in Tucker Anthony's
analyses do not necessarily indicate actual value, which may be significantly
more or less favorable than those suggested by such estimates. Estimates of
the financial value of companies do not purport to be appraisals or to reflect
necessarily the prices at which companies actually may be sold. In rendering
its opinion, Tucker Anthony makes no recommendations as to how any Berkshire
shareholder should vote on the merger.
Tucker Anthony is a nationally recognized investment banking firm. As
part of its investment banking business, Tucker Anthony is regularly
engaged in evaluating businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids,
secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. The
Berkshire board of trustees selected Tucker Anthony on the basis of
the firm's expertise and reputation. Pursuant to the engagement letter
between Berkshire and Tucker Anthony, Berkshire paid Tucker Anthony $300,000
upon the rendering of Tucker Anthony's fairness opinion. In addition, Tucker
Anthony received a $25,000 payment upon the execution of the engagement
letter. Upon consummation of the merger, Tucker Anthony will receive an
additional payment of approximately $1.2 million. Berkshire has agreed to
indemnify Tucker Anthony against certain liabilities under federal securities
laws, relating to or arising out of its engagement. In the ordinary course of
business, Tucker Anthony trades the equity securities of Berkshire for its own
account and the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
Effective Time of the Merger
The merger will become effective when the parties to the merger
agreement file a certificate of merger with the Secretary of the
Commonwealth of Massachusetts in accordance with the Massachusetts Limited
Liability Company Act and Berkshire's declaration of trust. The merger
will not become effective before the date of the special meeting. If the
merger agreement is approved at the special meeting, the effective time
will occur as promptly as possible after satisfaction or waiver of the
remaining conditions to the merger contained in the merger agreement,
including the receipt of regulatory approvals.
Declaration of Trust and By-Laws
Berkshire's declaration of trust and by-laws, as in effect
immediately prior to the effective time of the merger, will be the
declaration of trust and by-laws of the surviving company until they are
amended.
Trustees and Officers
Trustees. After the merger becomes effective, the board of trustees
of the surviving company will consist of the current managers of Mountain
Merger, who will hold office until their successors are duly elected or
appointed and qualified.
Officers. Once the merger becomes effective, Mr. Robert M. Allessio
will be the president and chief executive officer of the surviving company
(which will be a subsidiary of Energy East) and of Berkshire Gas. The
other initial officers of the surviving company will be the same
individuals who hold the officer positions in Mountain Merger immediately
prior to the time the merger becomes effective. All officers will hold
their positions until their successors are duly elected or appointed and
qualified.
Accounting Treatment
The merger will be accounted for as an acquisition of Berkshire by
Energy East under the purchase method of accounting in accordance with
generally accepted accounting principles. The amount of goodwill recorded
will reflect the excess of the purchase price over the estimated net fair
value of the assets and liabilities of Berkshire's utility and nonutility
businesses at the time of closing, plus Energy East's estimated transaction
costs related to the merger. The assets and liabilities of Berkshire's
nonutility subsidiaries will be revalued to fair value, including an
allocation of goodwill to such subsidiaries, if appropriate. The remaining
goodwill will be allocated to Berkshire Gas and will be recorded as an
acquisition adjustment.
Regulatory Approvals
The parties must comply with regulatory approval requirements before
they can complete the merger. Although there can be no guarantee that the
parties will obtain the requisite consents or approvals on a timely basis,
or at all, we currently believe that the necessary approvals can be
obtained in sufficient time to allow the merger to be completed by the end
of the second quarter of 2000. If any of the regulatory approvals include
conditions or restrictions that would have a material adverse effect on
Energy East or Berkshire, either party would have the right to terminate
the merger.
The Public Utility Holding Company Act. Energy East expects that if
it completes its acquisition of CMP Group it will have to register with the
SEC as a public utility holding company under the Public Utility Holding
Company Act of 1935. The Public Utility Holding Company Act imposes
restrictions on registered holding companies. Among these restrictions are
requirements that the SEC approve certain securities issuances, sales and
acquisitions of utility assets or securities of utility companies, and
acquisitions of an interest in any other business. A registered holding
company is permitted to own one integrated public utility system, as well
as additional utility systems, provided the SEC makes some necessary
findings, as described below. The Public Utility Holding Company Act also
limits the ability of registered holding companies to engage in nonutility
ventures and regulates transactions between various affiliates within
holding company systems, including the provision of services by holding
company affiliates to the system's utilities.
In connection with the Berkshire merger, Energy East must obtain SEC
approval under Section 9(a)(2) of the Public Utility Holding Company Act.
Section 9(a)(2) requires an entity owning, directly or indirectly, 5% or
more of the outstanding voting securities of a public utility company to
obtain the approval of the SEC prior to acquiring a direct or indirect
interest in 5% or more of the voting securities of any additional public
utility company. Energy East currently holds in excess of 5% of the voting
securities of two public utility companies, NYSEG and CMP Natural Gas, and,
in the merger, will be indirectly acquiring Berkshire Gas. Under the
applicable standards of the Public Utility Holding Company Act, the SEC
must determine whether:
- the merger would tend towards detrimental interlocking
relations or a detrimental concentration of control of public
utilities;
- the consideration to be paid in connection with the merger is
reasonable;
- the merger would unduly complicate the capital structure or be
detrimental to the proper functioning of Energy East's holding
company system; or
- the merger would violate applicable state law, or be
detrimental to the carrying out of the integration provisions
of the Public Utility Holding Company Act.
Under the integration provisions of the Public Utility Holding
Company Act, to approve the merger, the SEC must also find that the merger
would serve the public interest because it would tend toward the
development of an integrated public utility system (in this case consisting
of the gas properties of Energy East, CTG Resources, Connecticut Energy,
CMP Group and Berkshire). Section 10(c)(1) of the Public Utility Holding
Company Act prevents the SEC from approving an acquisition that "would be
detrimental to the carrying out of the provisions of Section 11." Section
11(b)(1) of the Public Utility Holding Company Act generally confines the
utility properties of a registered holding company to a "single integrated
public-utility system," either gas or electric. An exception to the
requirement of a "single system" is provided in Section 11(b)(1)(A) through
(C), the so-called "ABC clauses." Under this exception, a registered
holding company may control one or more additional integrated public
utility systems if the SEC affirmatively finds that (A) each of these
additional systems cannot be operated as an independent system without the
loss of substantial economies; (B) all of these additional systems are
located in one state, adjoining states, or a contiguous foreign country;
and (C) the continued combination of these systems under the control of
such holding company is not so large as to impair the advantages of
localized management, efficient operation, or the effectiveness of
regulation.
Although there can be no assurance, Energy East believes that the
electric utility systems of CMP Group and Energy East will constitute an
"integrated" electric utility system and that the SEC will make affirmative
findings under the "ABC clauses" that will permit Energy East to retain the
gas utility properties of Energy East, Berkshire, Connecticut Energy, CTG
Resources and CMP Group as an additional integrated gas utility system.
Although Energy East and Berkshire can give no assurance that the necessary
SEC approvals will be obtained in a timely manner or at all, Energy East
and Berkshire believe that the SEC will approve the merger and make the
requisite findings with respect to the acquisition and retention of the
combined electric and gas systems in sufficient time to allow the merger to
be completed by the end of the second quarter of 2000.
Hart-Scott-Rodino Antitrust Improvements Act. The merger is subject
to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations thereunder, which provide that certain
acquisition transactions may not be completed until specified information
has been furnished to the Antitrust Division of the Department of Justice
and the Federal Trade Commission and until certain waiting periods have
been terminated or have expired. The expiration or earlier termination of
the Hart-Scott Act waiting period would not preclude the Antitrust Division
or the Federal Trade Commission from challenging the merger on antitrust
grounds. Neither Berkshire nor Energy East believes that the merger will
violate federal antitrust laws. If the merger is not completed within 12
months after the expiration or earlier termination of the initial Hart-
Scott Act waiting period, Berkshire and Energy East would be required to
submit new information to the Antitrust Division and the Federal Trade
Commission, and a new waiting period would have to expire or be earlier
terminated before the merger could be completed.
Massachusetts Department of Telecommunications and Energy. If a rate
plan is filed with the Massachusetts Department of Telecommunications and
Energy that is reasonably consistent with the rate plans approved in the
context of other Massachusetts utility mergers or in the context of other
Energy East mergers to the extent not inconsistent with applicable DTE
regulation, it is a condition of the merger that the rate plan be approved
by the DTE. The DTE would hold a public hearing and make an investigation
of any rate plan in order to determine its propriety. Energy East has not
yet determined whether it will require Berkshire Gas to seek DTE approval
of a rate plan associated with the merger and, if such a plan is filed,
there can be no assurances that the DTE will approve any rate plan
submitted.
Obligations to Obtain Regulatory Approvals. Under the merger
agreement, both Energy East and Berkshire have agreed to cooperate and use
their best efforts to promptly prepare and file all necessary applications
and to use all commercially reasonable efforts to obtain all regulatory and
governmental approvals necessary or advisable to complete the merger,
including approvals from the Federal Communications Commission.
Injunctions. Energy East's and Berkshire's obligation to complete
the merger is subject to the condition that there be no law, regulation or
injunction in effect that would prohibit the completion of the merger.
Effects of the Merger
As a result of the merger, Berkshire shares will no longer be
publicly traded and Energy East will become the sole shareholder of
Berkshire. Following the merger, persons who were shareholders of Berkshire
immediately prior to the merger will no longer have an opportunity to
continue their interests in Berkshire as an ongoing company and therefore
will not share in its future earnings and potential growth.
Trading in the Berkshire shares on NASDAQ will cease immediately as
of the time the merger becomes effective. After that time, Berkshire will
delist the Berkshire shares from NASDAQ and deregister the shares under the
Securities Exchange Act of 1934.
Merger Financing
In the merger, Energy East expects to pay approximately $96 million
in cash consideration to Berkshire shareholders. In addition, in its
merger with Connecticut Energy, Energy East expects to pay approximately
$218 million in cash consideration to Connecticut Energy shareholders; in
its merger with CTG Resources, Energy East expects to pay approximately
$195 million in cash consideration to CTG Resources shareholders; and in
its merger with CMP Group, Energy East expects to pay approximately $957
million in cash consideration to CMP Group shareholders. Energy East
expects to issue long-term debt prior to the completion of the CMP Group,
CTG Resources and Berkshire merger transactions. The proceeds from the
debt issuance, along with the proceeds from the sale of its generation
assets and internally generated funds, will be used to help fund the cash
portion of the consideration in the merger transactions and to help fund
Energy East's ongoing share repurchase program.
Interests of Certain Persons in the Merger
In considering the recommendation of the Berkshire board of trustees
to approve the merger, Berkshire shareholders should be aware that members
of the Berkshire board of trustees and Berkshire senior management will
receive benefits as a result of the merger that will be in addition to or
different from the benefits that Berkshire shareholders receive generally.
In addition, Mr. Gioia serves on the board of trustees of Berkshire as well
as the board of directors of Energy East. The members of the Berkshire
board of trustees knew about these additional interests and considered them
when they approved the merger.
Advisory Board. Under the merger agreement, the present trustees of
Berkshire will continue as members of an advisory board of the surviving
company. The members of the advisory board will provide advice to the
board of trustees of the surviving company on various matters. The members
will receive remuneration for their services equivalent to the remuneration
currently provided to non-employee trustees of Berkshire. Additionally, on
the effective date of the merger, in accordance with the terms of the
Retirement Plan for Directors dated September 1, 1993, as amended, each of
the trustees of Berkshire will become fully vested under such plan and
eligible for an annual payment for a ten-year period of an amount equal to
the base annual trustee retainer, currently $10,000.
Indemnification and Insurance. Under the merger agreement, Energy
East and the surviving company have agreed to indemnify, after the
effective time of the merger, each individual who has ever been an officer,
trustee, director or employee of Berkshire or any of its subsidiaries.
This indemnification will cover all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages, liabilities or amounts paid
in settlement (if Energy East gives its written consent to the settlement)
arising out of actions or omissions occurring at or prior to the effective
time of the merger that are at least in part based on:
- the fact that such individual served as a director,
trustee, officer or employee of Berkshire or one of its
subsidiaries, or
- the transactions contemplated by the merger agreement.
These rights to indemnification will continue for at least six years after
the effective time of the merger.
In addition, for six years after the effective time of the merger,
Energy East will either (1) maintain liability insurance policies for the
benefit of those trustees, directors and officers of Berkshire and its
subsidiaries who were covered as of November 9, 1999 or (2) provide tail
coverage for those trustees, directors and officers. In either case, the
terms of the coverage will be at least as favorable as the terms of the
policies in effect as of November 9, 1999. Energy East will not, however,
be required to expend in any year more than 200% of the annual aggregate
premiums that Berkshire was paying for that insurance on November 9, 1999.
Amended Employment Agreement. Mr. Robinson has entered into an
amendment to his employment agreement which will become effective upon
completion of the merger. The merger will be deemed a change of control
and, at the effective time of the merger, Mr. Robinson will retire as
president and chief executive officer and Berkshire Gas will pay Mr.
Robinson three times his total annual cash compensation, determined by
adding (1) his then current annual salary at the time of the merger and (2)
his cash bonus for the most recent year preceding the merger. It is
anticipated that such payment would be subject to certain excise tax and,
therefore, such payment would be "grossed-up" to cover such excise tax and
any additional income taxes on the excise tax restoration amount. This
grossed-up cash payment is currently estimated to be $1,539,036. Berkshire
Gas will continue to offer Mr. Robinson all medical, dental and disability
benefits at the same cost to him as in effect prior to the merger through
December 31, 2001. Additionally, Mr. Robinson will retain his current
benefits under the Berkshire Gas Executive Retiree Health Plan for the
remainder of his retirement. At the effective time of the merger, Mr.
Robinson will be deemed to have reached his normal retirement date, and be
entitled to all benefits payable under the Berkshire Gas Supplemental
Executive Retirement Plan to executives retiring at their normal retirement
date. Mr. Robinson will continue to receive his annual cash compensation
for twelve (12) months after the effective time of the merger in
consideration of (1) Mr. Robinson's agreement to provide consulting
services to Energy East, Berkshire or Berkshire Gas during such period and
(2) Mr. Robinson's agreement not to provide services to any competitor in
the primary lines of business of Energy East or any of its subsidiaries in
the northeastern United States for a period of two years following the
effective time of the merger. If Mr. Robinson's employment terminates for
any reason at any time before completion of the merger, such amendment will
be null and void.
New Employment Agreements. Energy East and Berkshire have entered
into employment agreements with Robert M. Allessio, Michael J. Marrone and
Cheryl M. Clark, officers of Berkshire and Berkshire Gas. The term of each
employment agreement is three years, beginning on the effective date of the
merger, and is automatically extended each month unless Energy East,
Berkshire or the employee gives written notice that the agreement will not
be extended. These agreements will become effective upon completion of the
merger and will terminate the severance agreements currently in place
between Berkshire Gas and each of Mr. Allessio, Mr. Marrone and Ms. Clark.
Under each of Mr. Allessio's, Mr. Marrone's and Ms. Clark's
employment agreements, the employee will participate in all incentive
compensation, fringe benefits and compensation plans on the same basis as
other Energy East and Berkshire executives and key management employees.
They will also be entitled to certain disability benefits. Under each
agreement, Energy East, Berkshire or the employee may terminate the
employee's employment at any time. If Energy East or Berkshire terminates
the employee's employment other than for cause or disability or if the
employee terminates his or her employment for good reason, the employee
will receive:
- payments of base salary at the rate in effect at the time
of termination for the remainder of the term of the
employment agreement;
- incentive compensation for the remainder of the term of
the employment agreement, calculated on the basis of the
value of short-term incentive compensation paid to the
employee in the most recently completed fiscal year and
the value of any long-term incentive compensation awards
determined based on the projected target value of the
awards;
- continuation of all employee welfare benefits for the
remainder of the term of the employment agreement;
- payment of outplacement services up to $10,000; and
- a lump sum payment equal to the value of the fringe
benefits that the employee would have received through
the term of the employment agreement.
If the employee's employment is terminated for any reason, then the
employee is entitled to normal, post-termination compensation and benefits
(other than severance compensation and benefits) as such payments become
due and any unreimbursed expenses. Each of the agreements also provides
for a "gross-up" payment to the employee if any payment, benefit or
distribution to the employee is subject to excise tax under Section 4999 of
the Internal Revenue Code.
We estimate that, if the merger occurred on June 1, 2000 and Mr.
Allessio's employment was immediately terminated by Energy East or
Berkshire other than for cause or disability or if Mr. Allessio terminated
his employment for good reason, he would receive cash severance payments
and gross-up payments pursuant to his new employment agreement of
approximately $1,147,896. We estimate that under similar circumstances Mr.
Marrone would receive approximately $938,506 and Ms. Clark would receive
approximately $430,053.
In addition, the employment agreements contain the following
provisions specific to each employee:
Mr. Allessio. Under the terms of his employment agreement, Mr.
Allessio will become the president and chief executive officer of Berkshire
and Berkshire Gas. Mr. Allessio's base salary will be $193,150 and may be
increased by the Energy East board of directors. Mr. Allessio will
continue participating in the Berkshire Gas Supplemental Executive
Retirement Plan.
Mr. Marrone. Under the terms of his employment agreement, Mr.
Marrone will be the vice president, treasurer and chief financial officer
of Berkshire Gas. Mr. Marrone's base salary will be $140,000 and may be
increased by the Energy East board of directors. Mr. Marrone will continue
participating in the Berkshire Gas Supplemental Executive Retirement Plan.
Ms. Clark. Ms. Clark will be the clerk of Berkshire Gas and her base
salary will be $69,600, which may be increased by the Energy East board of
directors. Ms. Clark will retain her current benefits under the Berkshire
Gas Executive Retiree Health Plan, which provides medical, dental and
vision care to participants during their retirement.
Existing Employment and Severance Agreements. Mr. Robinson's
current employment agreement with Berkshire Gas provides that if,
after a change in control, Mr. Robinson's employment is terminated
without cause or if he resigns within 90 days of such change in control,
then Berkshire Gas will pay him three times his annual cash compensation.
Messrs. Allessio and Marrone and Ms. Clark currently have severance
agreements with Berkshire Gas that provide that if, within twenty-four (24)
months after a change of control such employee is discharged without cause
or resigns for good reason, Berkshire Gas will pay the employee, on a
monthly basis, a severance benefit in an amount equal to one thirtieth
(1/30th) of 250% of his or her then current annual salary plus prior year's
cash bonus, payable monthly for a period of thirty (30) months. Berkshire
shareholder approval of the merger would constitute a change of control as
it is defined in these agreements. All of these agreements provide for a
"gross-up" payment to cover excise tax and any additional income taxes on
the excise tax restoration amount.
The new employment agreements and the amendment to Mr. Robinson's
employment agreement, described above, which replace and terminate the
current severance agreements and amend Mr. Robinson's employment agreement,
do not begin until the effective time of the merger. Thus, Messrs.
Robinson, Allessio and Marrone and Ms. Clark may be entitled to the change
of control benefits provided for in their current agreements if their
employment terminates after Berkshire shareholders approve the merger but
before the effective time of the merger. The rights of Messrs. Allessio
and Marrone and Ms. Clark will be governed by their new employment
agreements if a termination occurs after the effective time of the merger.
We estimate that, if shareholder approval of the merger occurred on
January 1, 2000 and the employment of Messrs. Robinson, Allessio and
Marrone and Ms. Clark immediately terminated as described above, they would
receive cash severance payments and gross-up payments upon termination
pursuant to their current employment agreement and severance agreements
totaling approximately $1,539,036, $769,579, $543,640 and $186,500,
respectively
Material Federal Income Tax Consequences of the Merger
The following discussion is a summary of the material United States
federal income tax consequences of the merger applicable to Berkshire
shareholders. This discussion is based upon the provisions of the Internal
Revenue Code, current and proposed United States Treasury Regulations,
judicial authority, and administrative rulings. Legislative, judicial and
administrative rules and interpretations are subject to change at any time,
possibly on a retroactive basis, and the following statements and
conclusions are therefore subject to change. It is assumed that the
Berkshire shares are held as capital assets by a United States person
(i.e., a citizen or resident of the United States or a domestic
corporation). This discussion does not address all aspects of United
States federal income taxation that may be relevant to a particular
Berkshire shareholder in light of that shareholder's individual
circumstances, and does not apply to Berkshire shareholders:
- who are subject to special treatment under the United
States federal income tax laws (for example, life
insurance companies, tax-exempt organizations, financial
institutions, United States expatriates, foreign
corporations and nonresident alien individuals);
- who hold Berkshire shares as part of a hedging,
"straddle," conversion, constructive sale or other
integrated transaction; or
- who acquired their Berkshire shares through compensation
arrangements.
In addition, the discussion does not address the consequences of any
foreign, state or local tax laws or the consequences of any federal laws
other than those pertaining to the federal income tax.
The receipt of the merger consideration will be a taxable
transaction. In general, a holder of Berkshire shares will recognize gain
or loss equal to the difference between
- the amount of cash received, and
- the holder's adjusted tax basis in Berkshire shares
converted in the merger.
Gain or loss will be calculated separately for each block of shares
converted in the merger (i.e., shares acquired at the same cost in a single
transaction). The gain or loss will be short-term capital gain or loss if,
at the effective time of the merger, the Berkshire shares so converted were
held for one year or less. If the shares were held for more than one year,
the capital gain or loss will be long-term capital gain or loss, subject
(in the case of holders who are individuals) to tax at a maximum United
States federal income tax rate of 20%. Limitations may apply to the
deductibility of any capital losses recognized on the disposition of
Berkshire shares.
Under the United States federal income tax backup withholding rules,
unless an exemption applies, Energy East is required to and will withhold
31% of all payments to which a Berkshire shareholder or other payee is
entitled in the merger or otherwise, unless the payee provides a taxpayer
identification number (a social security number, in the case of an
individual, or an employer identification number, in the case of other
shareholders), and certifies under penalties of perjury that the number is
correct. Each Berkshire shareholder and, if applicable, each other payee,
should complete and sign the substitute Form W-9 that will be part of the
letter of transmittal sent separately to the shareholder and return it to
the paying agent (or other agent) to provide the certification necessary to
avoid backup withholding, unless an applicable exemption exists and is
otherwise proved in a manner satisfactory to the paying agent (or other
applicable agent). The exemptions provide that certain Berkshire
shareholders (including, among others, all corporations) are not subject to
backup withholding. Any amounts withheld will be allowed as a credit
against the holder's United States federal income tax liability for the
year, provided that the required information is furnished to the Internal
Revenue Service.
You should consult your own tax advisors to determine the
United States federal, state and local and foreign tax consequences of the
merger to you in light of your own particular circumstances.
NO DISSENTERS' RIGHTS OF APPRAISAL
Holders of Berkshire shares are not entitled to dissenters' rights
under Berkshire's declaration of trust or Massachusetts law.
THE MERGER AGREEMENT
The following description of the merger agreement is only a summary.
We urge you to read the actual merger agreement, a copy of which is
attached as Appendix A to this proxy statement.
General
The merger agreement provides that Mountain Merger, a subsidiary of
Energy East, will merge with and into Berkshire. Berkshire will survive the
merger as a wholly-owned subsidiary of Energy East. The closing of the
merger will occur on the second business day immediately following the date
upon which all conditions to the merger have been satisfied or waived, or at
such other time as the parties agree. At the closing of the merger, the
parties will deliver a Certificate of Merger to the Secretary of the
Commonwealth of Massachusetts for filing in accordance with the Massachusetts
Limited Liability Company Act and the Berkshire declaration of trust. The
merger will become effective upon the filing of this certificate or at such
later time as may be set forth in the certificate. We currently expect that
the closing of the merger will take place by the end of the second quarter of
2000.
Corporate Governance Matters
Trustees. After the merger becomes effective, the board of trustees
of the surviving company will consist of the current managers of Mountain
Merger who will hold office until their successors are duly elected or
appointed and qualified.
Officers. Once the merger becomes effective, Mr. Allessio, the vice
president of Berkshire, will be the president and chief executive officer
of the surviving company (which will be a subsidiary of Energy East) and of
Berkshire Gas. The other officers of the surviving company will be the
same individuals who hold the officer positions of Mountain Merger
immediately prior to the effective time of the merger. All officers will
hold their positions until their successors are duly elected or appointed
and qualified.
Conversion of Berkshire Shares
Merger Consideration. At the effective time of the merger, all
outstanding Berkshire shares will be converted into the right to receive
the merger consideration of $38.00 in cash, without interest, per share.
Paying Agent. Energy East will deposit with a paying agent cash
payable in exchange for outstanding Berkshire shares.
Exchange and Payment Procedures. As soon as practicable after the
effective time of the merger, the paying agent will mail to each record
holder of a certificate representing Berkshire shares that have been
converted into the right to receive the merger consideration:
- a letter of transmittal for use in submitting share
certificates to the paying agent; and
- instructions explaining what the shareholders must do to
effect the surrender of the Berkshire share certificates
and receive the merger consideration.
After a shareholder submits his share certificates, a letter of
transmittal and other documents that may be required, the shareholder will
have the right to receive cash. The merger consideration may be delivered
to someone who is not listed in Berkshire's transfer records if he presents
a Berkshire share certificate to the paying agent along with all documents
required to evidence that a transfer of the certificate has been made to
him and any applicable transfer taxes have been paid. Until surrender,
each certificate will be deemed at any time after the effective time of the
merger to represent only the right to receive the merger consideration upon
surrender.
You should not forward certificates to the paying agent, Energy East
or Berkshire until you have received a letter of transmittal. You should
not return certificates with the enclosed proxy.
Representations and Warranties
In the merger agreement, Berkshire and Energy East make
representations and warranties about themselves and their businesses,
including the following:
by Berkshire as to:
- its proper organization, good standing and qualification
to do business in various states;
- validity of its subsidiaries' stock and the ownership
rights of Berkshire;
- capital structure;
- authority to enter into and enforceability of the merger
agreement;
- filing of all required reports and financial statements
and the accuracy of information used in their
preparation;
- absence of certain adverse changes or events;
- litigation;
- accuracy of information used in this proxy statement;
- tax matters;
- employee matters and the Employee Retirement Income Security
Act of 1974;
- environmental compliance and liability;
- regulation as a utility;
- shareholder vote required;
- opinion of financial advisor;
- lack of ownership of Energy East shares; and
- non-applicability of takeover laws;
and by Energy East as to:
- its proper organization, good standing and qualification to do
business in various states;
- application of the Public Utility Holding Company Act to Energy
East and its subsidiaries;
- capital structure;
- authority to enter into and enforceability of the merger
agreement;
- accuracy of information used in this proxy statement; and
- availability of funds for payment of the merger consideration.
The representations and warranties made by the parties to the merger
agreement will not survive the merger, but they form the basis of
conditions to the obligations of Energy East and Berkshire.
Covenants
Mutual Covenants. Under the merger agreement, the parties have
agreed that, during the period from the date of the merger agreement until
the effective time of the merger, except as otherwise permitted in the
merger agreement or by written consent of the parties, they will comply
with the following covenants:
- they and their subsidiaries will not amend their declaration of
trust, certificates of incorporation, by-laws or other
organizational documents, or take or fail to take any other
action, in such a way that would reasonably be expected to
prevent, materially impede or interfere with the merger;
- they will confer on a regular and frequent basis with
representatives of the other party to discuss, subject to
applicable law, material operational matters and the general
status of their ongoing operations; promptly notify the other
party of any significant changes in their business, properties,
assets, condition, results of operations or prospects; advise
the other party of any change or event that has had or is
reasonably likely to result in a material adverse effect on
them; and promptly provide the other party with copies of all
filings with governmental authorities in connection with the
merger agreement;
- they and their subsidiaries will use all commercially
reasonable efforts to obtain all necessary consents to complete
the merger, promptly notify the other party of any failure or
prospective failure to obtain these consents, and, if requested
by the other party, will provide copies of all the consents
that have been obtained;
- they and their subsidiaries will not willfully take any action
that is reasonably likely to result in a material breach of the
merger agreement or in any of their representations and
warranties being untrue on and as of the closing date of the
merger; and
- they will take all necessary steps within their control to
exempt the merger from, or, if necessary, challenge the
validity or applicability of, any applicable takeover law.
Covenants of Energy East. Except as provided in the disclosure
schedules to the merger agreement, Energy East has agreed that neither it
nor any of its subsidiaries will enter into a transaction that would
require a governmental filing or consent that would reasonably be expected
to prevent or delay materially the effective time of the merger beyond May
9, 2001.
Covenants of Berkshire. Berkshire has agreed that, until the
effective time of the merger or the termination of the merger agreement
(except as disclosed in the schedules to the merger agreement), Berkshire
and its subsidiaries will:
- carry on their businesses in the ordinary course;
- preserve intact their business organizations and relationships
with customers, suppliers and others having business dealings
with them, keep available the services of their present
officers and employees as a group (subject to prudent
management of workforce needs and ongoing programs currently in
force), maintain properties and assets in good repair, and
maintain supplies and inventories in quantities consistent with
past practice;
- abide by certain customary restrictions on the conduct of their
businesses regarding: (1) dividends, (2) stock splits and
issuances of Berkshire shares, (3) redemptions of Berkshire
shares, (4) substantial equity and asset acquisitions and
dispositions, (5) capital expenditures, (6) indebtedness, (7)
employee benefit plans and other employment arrangements, (8)
tax and accounting matters, (9) discharge of liabilities, (10)
amending, terminating and renewing material contracts and (11)
insurance; and (12) activities that would cause a change in
their status under the Public Utility Holding Company Act;
- use reasonable efforts to maintain in effect all existing
governmental permits pursuant to which they operate; and
- ensure that the merger will not result in the grant of any
rights to any person under any material agreement (other than
the employment and severance agreements disclosed in the
schedules to the merger agreement).
No Solicitation of Alternative Proposals
Berkshire has also agreed to certain restrictions concerning
"Alternative Proposals," which are defined in the merger agreement as
mergers, acquisitions, consolidations or similar transactions between third
parties and Berkshire or its subsidiaries, or any third-party proposals or
offers to acquire in any manner, directly or indirectly, a substantial
equity interest in or a substantial portion of the assets of Berkshire or
any of its subsidiaries.
Specifically, Berkshire has agreed that:
- neither it nor its subsidiaries will encourage, initiate,
solicit or take any other action to facilitate knowingly any
inquiries, proposals or offers that constitute or may
reasonably be expected to lead to an Alternative Proposal from
any person;
- neither it nor its subsidiaries will engage in any discussion
or negotiations concerning, or provide any nonpublic
information or data to make or implement, an Alternative
Proposal;
- it will immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity,
discussions or negotiations with any parties conducted with a
view of formulating an Alternative Proposal; and
- it will notify Energy East of any of these inquiries, offers or
proposals within one business day of their receipt, it will
keep Energy East informed of their status, and it will give
Energy East 48 hours' advance notice of its intent to enter
into any agreement or to commence providing information to any
person making the inquiry, offer or proposal.
Nonetheless, Berkshire may take the following steps:
- at any time before the Berkshire shareholders vote to approve
the merger agreement, Berkshire may engage in discussions or
negotiations with a third party that seeks to initiate such
discussions or negotiations, and may furnish such third party
information concerning Berkshire and its business, properties
and assets, but only if it complies with the following
requirements:
- the Berkshire board of trustees concludes that the third
party has made an Alternative Proposal that is financially
superior to the merger and has demonstrated that any
necessary financing has been obtained or, in the reasonable
judgment of Berkshire's financial advisor, is obtainable,
and the Berkshire board of trustees concludes in good
faith, after consultation with its financial advisor and
based upon the advice of outside counsel and other relevant
matters, that failure to take the above-mentioned steps
would likely result in a breach of its fiduciary duties
under applicable law; and
- before Berkshire provides information to, or enters into
discussions or negotiations with, the third party,
Berkshire (1) promptly notifies Energy East that it intends
to furnish information to, or intends to enter into
discussions with, that third party; (2) provides Energy
East a reasonable opportunity to respond to the Alternative
Proposal; and (3) receives from the third party an executed
confidentiality agreement;
- Berkshire may comply with Rule 14e-2 under the Securities
Exchange Act of 1934 regulating tender or exchange offers;
or
- Berkshire may accept an Alternative Proposal from a third
party, provided that it first terminates the merger
agreement with Energy East.
Additional Agreements
In addition to the covenants above, the parties have also agreed on
the following matters.
Access to Information. Upon reasonable notice and during normal
business hours until the effective time of the merger, each party will
provide the other party reasonable access to all of its properties, books,
contracts, commitments and records. In addition, the parties will provide
to each other (1) access to all reports, schedules and other documents that
they or their subsidiaries filed or received under federal or state
securities laws or filed with or sent to the SEC, the Federal Energy
Regulatory Commission, the Department of Justice, the Federal Trade
Commission, or any other U.S. federal or state regulatory agency or
commission, and (2) access to all information concerning themselves, their
subsidiaries, trustees, directors, officers and shareholders, and other
matters that the other party may reasonably request in connection with any
filings, applications, or approvals required under the merger agreement.
Each party will hold in strict confidence all information furnished to it
in connection with the merger.
Regulatory Matters. Berkshire and Energy East will cooperate with
each other and use their best efforts to prepare and file promptly all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use all commercially
reasonable efforts to obtain required governmental consents by May 9, 2001.
Proxy Statement. Berkshire has agreed to prepare this proxy
statement, file it with the SEC and use all reasonable efforts to have it
cleared by the SEC.
Shareholder Approval. Berkshire will take all steps necessary to
hold the special meeting to obtain the necessary two-thirds vote to approve
the merger. Subject to their fiduciary duties, the Berkshire board of
trustees will recommend to the shareholders the approval of the merger
agreement.
Indemnification of Directors, Trustees and Officers. To the extent
these individuals are not otherwise indemnified, Energy East and the
surviving company have agreed to indemnify, after the effective time of the
Merger, each individual who has ever been an officer, director, trustee or
employee of Berkshire or any of its subsidiaries. This indemnification
will cover all losses, expenses (including reasonable attorneys' fees and
expenses), claims, damages, liabilities or amounts paid in settlement (if
Energy East gives written consent to the settlement) arising out of actions
or omissions occurring at or before the effective time of the merger that
are at least in part (1) based on the fact that such individual served as a
trustee, director, officer or employee of Berkshire or one of its
subsidiaries or (2) based on the transactions contemplated by the merger
agreement. Energy East will advance to the indemnified party, upon
request, reimbursement of documented expenses reasonably incurred.
Independent counsel mutually acceptable to Energy East and the indemnified
individual will make all necessary determinations to decide whether an
indemnified individual's conduct complies with the standards for
indemnification established by Massachusetts law, the governing declaration
of trust or certificate of incorporation or by-laws. These rights to
indemnification will continue for at least six years after the effective
time of the merger.
Insurance. For six years after the effective time of the merger,
Energy East will either (1) maintain liability insurance policies for the
benefit of those trustees, directors and officers of Berkshire and its
subsidiaries who were covered as of November 9, 1999, or (2) provide tail
coverage for those directors and officers. In either case, the terms of
the coverage will be at least as favorable as the terms of the policies in
effect as of November 9, 1999. Energy East will not, however, be required
to expend in any year more than 200% of the annual aggregate premiums that
Berkshire was paying for that insurance on November 9, 1999.
Public Announcements. Subject to their legal obligations to disclose
information, Berkshire and Energy East will cooperate with each other in
the development and distribution of all news releases and other public
information disclosures about the merger agreement and the merger. In
addition, they will not issue any public announcement or statement without
the consent of the other party (which consent cannot be withheld
unreasonably).
Employee Agreements. Except as provided below, Energy East and its
subsidiaries will honor, without modification, all existing contracts,
agreements and commitments of Berkshire that were entered into before
November 9, 1999, and apply to current or former employees, directors or
trustees of Berkshire. Energy East and Berkshire intend to continue their
present strategy of achieving workforce reductions through attrition,
instead of through involuntary layoffs. If any reductions in workforce
become necessary in the future, they will be made on a fair and equitable
basis, giving consideration to previous work history, job experience,
qualifications and business needs without regard to whether employment
before the merger was with Berkshire or its subsidiaries or Energy East or
its subsidiaries. Any employees whose employment is terminated or whose
jobs are eliminated will have a right to participate, on a fair and
equitable basis, in the job opportunity and employment placement programs
offered by Energy East, the surviving company or any of its subsidiaries.
Any workforce reductions carried out after the effective time of the merger
will be done in accordance with all applicable collective bargaining
agreements and all relevant laws and regulations, including the Worker
Adjustment and Retraining Notification Act and any similar U.S. federal,
state or local law.
Employee Benefit Plans. For at least 18 months after the merger
becomes effective, Energy East must provide all employees of Berkshire and
its subsidiaries who are covered by benefit plans and who are not covered
by collective bargaining agreements with benefits that are at least as
favorable as the benefits they receive immediately before the merger.
Further, all employees of Berkshire and its subsidiaries who are covered by
benefit plans and who are not covered by collective bargaining agreements
will receive credit, for all purposes other than benefit accrual, for their
service with Berkshire or any of its subsidiaries.
Expenses. Except for those expenses incurred in connection with the
printing and filing of this proxy statement (which expenses are being
shared equally by Berkshire and Energy East) and except as described under
"The Merger Agreement--Termination, Amendment and Waiver," both parties
will pay their own costs and expenses incurred in connection with the
merger.
Further Assurances. Each party and its subsidiaries will execute all
additional documents and instruments and take all other actions that the
other party may reasonably request in order to complete the merger.
Corporate Offices. After the effective time of the merger, the
corporate headquarters of the surviving company will be located in
Pittsfield, Massachusetts.
Community Involvement. After the effective time of the merger,
Energy East or the surviving company will make annual charitable
contributions in an aggregate of $200,000 to charities serving the
communities that the surviving company serves, and otherwise maintain a
substantial level of involvement in community activities in the
Commonwealth of Massachusetts and the States of New York and Vermont that
is at least as high as the level of community development and related
activities currently carried on by Berkshire.
Employment Agreements. Energy East and Berkshire have entered into
employment agreements with Mr. Robert M. Allessio, Mr. Michael J. Marrone
and Ms. Cheryl M. Clark. These agreements will become effective upon
completion of the merger. Berkshire Gas, a subsidiary of Berkshire, has
entered into an amendment of its employment agreement with Mr. Scott S.
Robinson, which will become effective upon completion of the merger.
Advisory Board. The surviving company will set up an advisory board
comprised of the individuals who were trustees of Berkshire immediately
before the effective time of the merger. The advisory board will meet at
least quarterly and will provide advice to the surviving company board of
trustees as requested. The members of the advisory board, who will serve
at the discretion of the surviving company, will receive remuneration for
their services equivalent to that currently provided to non-employee
trustees of Berkshire.
Conditions
Mutual Conditions. The obligations of Berkshire, Energy East and
Mountain Merger to complete the merger are subject to satisfaction of the
following conditions:
- Berkshire shareholders must have approved the merger agreement
and the merger;
- The absence of any temporary restraining order or injunction by
any U.S. federal or state court that prevents completion of the
merger, and the absence of any U.S. federal or state law or
regulation prohibiting the merger; and
- Berkshire and Energy East must have obtained the requisite
regulatory approvals and all applicable waiting periods must
have expired or been terminated.
In addition, no governmental authority may have imposed terms or
conditions that would have a material adverse effect on either Berkshire or
Energy East. The parties have agreed that a requirement under the Public
Utility Holding Company Act that Energy East divest its ownership, or not
consummate the acquisition, of certain companies and subsidiaries,
including NYSEG, Connecticut Energy, CTG Resources or CMP Group, would
constitute a term or condition having a material adverse effect.
Conditions to Obligations of Energy East. The obligations of Energy
East to complete the merger are contingent on the satisfaction by
Berkshire, or waiver by Energy East, of the following conditions:
- Berkshire must have performed in all material respects the
agreements and covenants required by the merger agreement.
- The representations and warranties of Berkshire contained in
the merger agreement must be true and correct on the date of
the merger agreement and on the closing date of the merger
(except for representations and warranties made as of a
specified date, the accuracy of which will be determined as of
the specified date), unless any inaccuracy of the
representations and warranties would not reasonably be expected
to have a material adverse effect on Berkshire.
- Berkshire must have provided Energy East with a certificate,
dated the closing date of the merger, signed by Berkshire's
chief financial officer regarding satisfaction of the two
preceding conditions.
- Berkshire has not suffered a material adverse effect, and there
is no fact or circumstance, unless it was disclosed in the
schedules to the merger agreement or in Berkshire's public
documents prior to November 9, 1999, that is reasonably likely
to have a material adverse effect on Berkshire.
- Berkshire must have obtained the requisite third-party
consents, unless the failure to obtain those consents would not
have a material adverse effect on Berkshire.
Conditions to Obligations of Berkshire. The obligations of Berkshire
to complete the merger are contingent on the satisfaction by Energy East,
or waiver by Berkshire, of the following conditions:
- Energy East must have performed in all material respects the
agreements and covenants required by the merger agreement.
- The representations and warranties of Energy East contained in
the merger agreement must be true and correct on the date of
the merger agreement and on the closing date of the merger
(except for representations and warranties made as of a
specified date, the accuracy of which will be determined as of
the specified date), unless any inaccuracy of the
representations and warranties would not reasonably be expected
to have a material adverse effect on Energy East.
- Energy East must have provided Berkshire with a certificate,
dated the closing date of the merger, signed by Energy East's
executive vice president and general counsel regarding
satisfaction of the two preceding conditions.
- Energy East must have obtained the requisite third-party
consents, unless the failure to obtain those consents would not
have a material adverse effect on Energy East.
Termination, Amendment and Waiver
Termination. The merger agreement may be terminated at any time
before the effective time of the merger, even after the Berkshire
shareholders have already approved it (unless otherwise noted below):
- by mutual written consent of the Berkshire board of trustees
and the Energy East board of directors;
- by either Berkshire or Energy East if they have not completed
the merger by November 9, 2000 (or May 9, 2001, if the only
barrier to completing the merger is the inability to obtain the
requisite governmental approvals), so long as the delay has not
been caused by a failure of the party seeking termination to
fulfill its obligations under the merger agreement;
- by either Berkshire or Energy East if the Berkshire
shareholders have not approved the merger agreement by
November 9, 2000;
- by either Berkshire or Energy East if any state or federal law
prohibits the merger (this determination must be supported by
the written opinion of outside counsel) or if any state or
federal court of competent jurisdiction issues a final and non-
appealable decision that permanently enjoins the merger;
- by Berkshire, before its shareholders approve the merger
agreement, if Berkshire is not in breach of the merger
agreement and, as a result of an Alternative Proposal, the
Berkshire board of trustees determines in good faith that:
- the Alternative Proposal is financially superior to the
merger and the third party making the Alternative Proposal
has obtained or, in the reasonable judgment of Berkshire's
financial advisor, can obtain the necessary financing; and
- after consultation with its financial advisor and based upon
the advice of outside counsel and other relevant matters,
that failure to do so would likely result in a breach of its
fiduciary duties under applicable law;
provided that before Berkshire may terminate the merger agreement:
- Berkshire must give Energy East five days' prior notice of
its intent to accept the alternative acquisition proposal;
and
- Berkshire and its financial and legal advisors must give
Energy East a reasonable opportunity during this five-day
period to make any adjustments in the terms of the merger
agreement that would allow Berkshire to proceed with the
Merger, and must negotiate with Energy East towards
adjusting the merger agreement so as to enable the Merger
to proceed;
- by Berkshire if:
- Energy East has breached any of its representations or
warranties in the merger agreement which would be
reasonably likely to result in a material adverse effect
on Energy East, or Energy East has breached any covenant
in the merger agreement, and Energy East does not cure
any such breach within 20 days of receiving written
notice of such breach from Berkshire; or
- by Energy East if:
- Berkshire has breached any of its representations or
warranties in the merger agreement which would be
reasonably likely to result in a material adverse effect
on Berkshire, or Berkshire has breached any covenant in
the merger agreement, and Berkshire does not cure any
such breach within 20 days of receiving written notice of
such breach from Energy East; or
- the Berkshire board of trustees or any committee thereof
(1) withdraws or modifies in any manner adverse to Energy
East its approval or recommendation of the merger
agreement or the merger, (2) fails to reaffirm its
approval or recommendation upon Energy East's request
within two days of that request, (3) approves or
recommends any acquisition of Berkshire or a material
portion of its assets or any tender offer for the shares
of capital stock of Berkshire by someone other than
Energy East or any of its affiliates, or (4) resolves to
take any of these actions.
- Energy East reasonably believes that (1) the merger will
delay the grant of any regulatory approval of its proposed
transactions with Connecticut Energy, CTG Resources or CMP
Group or (2) any such regulatory approval, if given, will
be unduly burdensome to Energy East.
Effect of Termination. Berkshire and Energy East have agreed that,
if either of them terminates the merger agreement for any reason outlined
above, the merger agreement -- except for the provisions concerning
expenses, termination fees, confidentiality of information subject to the
terms of a confidentiality agreement, waiver of a jury trial and certain
damages and enforcement of the agreement -- will become void and have no
effect, without any liability on the part of any party, their officers,
their trustees or their directors. Nonetheless, if either party materially
breaches any provision of the merger agreement and the other party
consequently terminates the agreement, then the breaching party will have
to pay the other party an amount in cash equal to all documented out-of-
pocket expenses and fees incurred by the other party not in excess of $2
million. However, if the breach is willful, the merger agreement does not
limit the amount of damages that the non-breaching party may seek.
Energy East must pay Berkshire a termination fee of $4 million if
Energy East terminates the merger agreement because it reasonably believes
that (1) the merger will delay the grant of any regulatory approval of its
proposed transactions with Connecticut Energy, CTG Resources or CMP Group
or (2) any such regulatory approval, if given, will be unduly burdensome to
Energy East.
Berkshire must pay Energy East a termination fee of $4 million plus
fees and expenses up to $2 million if the merger agreement is terminated
for any of the following reasons:
- the Berkshire board of trustees decides to pursue an
Alternative Proposal;
- Berkshire shareholders fail to approve the merger by November
9, 2000, but only if there was an Alternative Proposal
outstanding at the time of the special meeting and if, within
two years of such termination, Berkshire enters into a
definitive agreement to complete or actually does complete an
Alternative Proposal; or
- the Berkshire board of trustees withdraws, modifies, or fails
to affirm its approval or recommendation to Berkshire
shareholders, but only if there was an Alternative Proposal
outstanding at the time of the termination and if, within two
years of such termination, Berkshire enters into a definitive
agreement to complete or actually does complete an Alternative
Proposal.
Amendment. The parties' boards of directors or trustees or managers,
as the case may be, may amend the merger agreement at any time before the
effective time of the merger, whether or not the Berkshire shareholders
have already approved the agreement. After Berkshire shareholder approval,
however, no such amendment can (1) alter or change the amount of the merger
consideration or (2) change any of the terms and conditions of the merger
agreement if any of the changes would materially adversely affect the
rights of Berkshire shareholders (except for changes that could otherwise
be adopted by the Berkshire board of trustees without the further approval
of the Berkshire shareholders).
Waiver. At any time before the effective time of the merger, to the
extent permitted by applicable law, the parties may extend the time for the
performance of any of the obligations or other acts required by the merger
agreement, waive any inaccuracies in the representations and warranties
contained in the merger agreement, and waive compliance with any of the
agreements or conditions contained in the merger agreement. Any agreement
on the part of a party to any such extension or waiver shall be valid if
set forth in an instrument in writing signed on behalf of such party.
SHARE OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning the beneficial
ownership of Berkshire shares as of January 7, 2000 by each trustee and
executive officer of Berkshire. The total number of Berkshire shares
beneficially owned as of January 7, 2000 by all trustees and executive
officers as a group is also listed.
As used in this proxy statement, "beneficial ownership" means direct
or indirect, sole or shared power to vote, or to direct the voting of,
and/or investment power to dispose of, or to direct the disposition of
Berkshire shares. Except as indicated in the footnotes below, the listed
beneficial owners held direct and sole voting and investment power with
respect to the stated shares.
As of January 7, 2000 there were 2,523,479 Berkshire shares
outstanding.
<TABLE>
<CAPTION>
Percentage of
Shares of Beneficial Shares
Interest Owned as of Outstanding as of
Name of Beneficial Owner January 7, 2000 January 7, 2000
- ------------------------ -------------------- -----------------
<S> <C> <C>
Robert M. Allessio 665 .03
George R. Baldwin 2,377 .09
John W. Bond (1) 4,074 .16
Paul L. Gioia (2) 4,302 .17
Franklin M. Hundley 2,944 .12
James R. Keys 1,444 .06
Michael J. Marrone 1,911 .08
Scott S. Robinson (3) 8,429 .33
Robert B. Trask (4) 10,925 .43
All trustees and executive
officers of Berkshire,
9 persons as a group (5) 37,071 1.47
- -------------------
<FN>
<F1> Includes 273 shares held by Mr. Bond's spouse, who has sole voting
and investment power over such shares.
<F2> All of Mr. Gioia's shares are held jointly with his spouse, with
shared voting and investment power over such shares.
<F3> Comprised of 7,670 shares held in trust, for which Mr. Robinson and
his spouse are joint trustees, with shared voting and investment
power.
<F4> 8,025 of Mr. Trask's shares are held jointly with his spouse, with
shared voting and investment power over such shares. 2,900 of Mr.
Trask's shares are owned by a private, non-profit foundation of which
Mr. Trask is a trustee.
<F5> Aggregate record or imputed beneficial ownership, with sole or shared
voting and investment power.
</FN>
</TABLE>
The number of Berkshire shares beneficially owned by all of the
trustees and executive officers of Berkshire collectively constituted less
than two percent of the total shares then outstanding.
Based on publicly available information, as of January 7, 2000 the
following shareholder was believed to be a beneficial owner of 5 percent or
more of the outstanding Berkshire shares.
<TABLE>
<CAPTION>
Names and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------- -------------------- ----------------
<S> <C> <C>
Gabelli Funds, LLC(1) 232,000 9.19%
One Corporate Center
Rye, NY 10580-1434
- --------------------
<FN>
<F1> Includes 28,500 Berkshire shares held by Gabelli Funds, LLC, on
behalf of its advisory clients, 4,200 Berkshire shares held by
Gabelli Associates Fund and 199,300 Berkshire shares held by GAMCO
Investors, Inc. on behalf of its advisory clients. Each of these
entities purchased Berkshire shares for investment for one or more
accounts over which it has both investment and voting power, except
that GAMCO does not have the authority to vote 33,000 of the shares
listed above. Mario J. Gabelli may be deemed to directly or
indirectly control these entities. The information regarding the
number of shares beneficially owned described herein is based upon
the Schedule 13 D filed by these entities on December 28, 1999.
</FN>
</TABLE>
OTHER MATTERS
Voting Procedures
Consistent with Berkshire's declaration of trust and by-laws, a
majority of the shares entitled to be cast on a particular matter, present
in person or represented by proxy, constitutes a quorum as to such matter.
Votes cast by proxy or in person at the special meeting will be counted by
persons appointed by Berkshire to act as election inspectors for the
meeting.
The proposal regarding the merger requires the affirmative vote of at
least two-thirds of the outstanding Berkshire shares. The election
inspectors will count the total number of votes cast "for" approval of the
proposal regarding the merger for purposes of determining whether
sufficient affirmative votes have been cast. The election inspectors will
count shares represented by proxies that reflect "broker non-votes" (i.e.,
shares represented at the meeting held by brokers or nominees as to which
(1) instructions have not been received from the beneficial owners or
persons entitled to vote and (2) the broker or nominee does not have the
discretionary voting power on a particular matter) only as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum. For purposes of the proposal regarding the merger,
broker non-votes have the effect of votes cast against the proposal.
Adjournment of Meeting
If sufficient votes in favor of the merger agreement are not received
by the time scheduled for the meeting, the persons named as proxies may
propose one or more adjournments of the meeting to permit further
solicitation of proxies with respect to any such proposal. Any adjournment
will require the affirmative vote of a majority of the votes cast on the
question in person or by proxy at the session of the meeting to be
adjourned. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of such
proposal. They will vote against any such adjournment those proxies
required to be voted against such proposal. Berkshire will pay the costs of
any additional solicitation and of any adjourned session.
Proposals of Shareholders
Shareholders' proposals intended to be presented at Berkshire's 2000
annual meeting, if any, must be received by the Office of the Secretary of
Berkshire Energy Resources, 115 Cheshire Road, Pittsfield, Massachusetts
01201-1879 by June 5, 2000. As to any proposal that a shareholder intends
to present to shareholders without including it in Berkshire's proxy
statement for Berkshire's 2000 annual meeting of shareholders, the proxies
named in management's proxy for that meeting will be entitled to exercise
their discretionary authority on that proposal unless Berkshire receives
notice of the matter to be proposed not later than August 18, 2000. Even
if proper notice is received on or prior to August 18, 2000, the proxies
named in management's proxy for that meeting may nevertheless exercise
their discretionary authority with respect to such matter by advising
shareholders of such proposal and how they intend to exercise their
discretion to vote on such matter, unless the shareholder making the
proposal solicits proxies with respect to the proposal as set forth in Rule
14a-4(c)(2) of the Securities Exchange Act.
Other Business
We have no reason to believe that any other business will be
presented at the special meeting, but if any other business shall be
properly presented, votes pursuant to the proxy will be cast thereon in
accordance with the discretion of the persons named in the accompanying
proxy.
Experts
The consolidated financial statements of Berkshire incorporated in
this proxy statement by reference to Berkshire's Annual Report on Form 10-K
for the year ended June 30, 1999 have been incorporated by reference in
reliance on the report of Deloitte & Touche LLP, independent auditors,
given on authority of that firm as experts in accounting and auditing.
Independent Public Accountants
A representative of Deloitte & Touche expects to be present at the
special meeting and will be available to respond to appropriate questions
from shareholders in attendance. Although this representative has stated
that he does not intend to make any statements at the special meeting, he
will have the opportunity to do so.
Where You Can Find More Information
Berkshire and Energy East file annual, quarterly and current reports,
proxy statements, and other information with the SEC. Anything these
companies file may be read and copied at the following locations at the
SEC:
<TABLE>
<S> <S> <S>
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024, Judiciary Plaza Suite 1300 Citicorp Center
450 Fifth Street, N.W. 7 World Trade Center Suite 1400
Washington, DC 20549 New York, New York 10048 500 West Madison Street
Chicago, Illinois 60661
</TABLE>
Please call the SEC at 1-800-732-0330 for further information on the
public reference rooms. Berkshire's and Energy East's SEC filings should
also be available to the public from commercial document retrieval services
and at the web site that the SEC maintains at http://www.sec.gov.
Berkshire shares are traded on the NASDAQ National Market System under the
symbol "BERK." Berkshire's reports, proxy statements and other information
concerning Berkshire may also be inspected at the NASDAQ web site at
http://www. nasdaq.com. In addition, materials and information concerning
Energy East, which trades under the symbol "NEG," can be inspected at the
New York Stock Exchange, 20 Broad Street, 7th Floor, New York, New York
10005, where Energy East shares are listed.
The SEC allows us to "incorporate by reference" information into this
document, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this
document, except for any information superseded by information contained
directly in, or incorporated by reference in, this document. This document
incorporates by reference the documents set forth below that were
previously filed with the SEC by Berkshire (SEC File No. 000-29812). These
documents contain important information about Berkshire;
- Berkshire's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999.
- Berkshire's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
- Berkshire's Current Report on Form 8-K dated November 10, 1999.
The SEC may require Berkshire to file other documents pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act between
the time this document is sent and the date the special meeting is held.
These other documents will be deemed to be incorporated by reference in
this document and to be a part of it from the date they are filed with the
SEC. This proxy statement is accompanied by certain supplementary materials
that contain our Annual Report on Form 10-K for the year ended June 30,
1999 and our Quarterly Report on Form 10-Q for the quarter ended September
30, 1999.
If you are a Berkshire shareholder, we may have already sent you some
of the documents incorporated by reference. Nevertheless, you may obtain
any of them through us, the SEC, or the SEC's web site as previously
described. Documents incorporated by reference are available from us
without charge, excluding all exhibits unless we have specifically
incorporated by reference an exhibit in this document. You may obtain
documents incorporated by reference in this document by requesting them in
writing or by telephone at the following address:
BERKSHIRE ENERGY RESOURCES
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
Attn: Cheryl M. Clark, Secretary
(413) 445-0311
If you would like to request documents from us, please do so promptly
in order to receive them before the special meeting.
We have provided all information contained in or incorporated by
reference in this document with respect to Berkshire and Berkshire Gas.
Energy East has provided all information contained in this document with
respect to Energy East. Neither Berkshire nor Energy East assumes any
responsibility for the accuracy or completeness of the information provided
by the other party.
The name "Berkshire Energy Resources" refers to the trustees under
Berkshire's declaration of trust as trustees and not personally. No
trustee, shareholder, officer or agent of Berkshire shall be held to any
personal liability in connection with the affairs of Berkshire; only the
trust estate may be liable. A copy of Berkshire's declaration of trust is
on file with the SEC as Appendix B to Berkshire's Registration Statement on
Form S-4 (File No. 333-46799) filed on February 27, 1998.
You should rely only on the information contained or incorporated by
reference in this document to vote on the merger agreement. We have not
authorized anyone to provide you with information that is different from
what is contained in this document. This document is dated January 12,
2000. You should not assume that the information contained in this
document is accurate as of any date other than such date. Neither the
mailing of this document to shareholders nor the completion of the merger
will create any implication to the contrary.
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and among
BERKSHIRE ENERGY RESOURCES,
ENERGY EAST CORPORATION
AND
MOUNTAIN MERGER LLC
November 9, 1999
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
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 1
Section 1.4 Trustees 2
Section 1.5 Officers 2
ARTICLE II-TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Shares and Membership Interests 2
Section 2.2 Exchange of Certificates 3
ARTICLE III-THE CLOSING
Section 3.1 Closing 4
ARTICLE IV-REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification 4
Section 4.2 Subsidiaries 5
Section 4.3 Capitalization 5
Section 4.4 Authority; Non-contravention; Statutory Approvals; Compliance 6
Section 4.5 Reports and Financial Statements 8
Section 4.6 Absence of Certain Changes or Events 8
Section 4.7 Litigation 8
Section 4.8 Proxy Statement 9
Section 4.9 Tax Matters 9
Section 4.10 Employee Matters; ERISA 11
Section 4.11 Environmental Protection 14
Section 4.12 Regulation as a Utility 16
Section 4.13 Vote Required 17
Section 4.14 Opinion of Financial Advisor 17
Section 4.15 Ownership of Parent Common Stock 17
Section 4.16 Takeover Laws 17
ARTICLE V-REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.1 Organization and Qualification 17
Section 5.2 Subsidiaries 18
Section 5.3 Capitalization 18
Section 5.4 Authority; Non-contravention; Statutory Approvals 18
Section 5.5 Proxy Statement 19
Section 5.6 Availability of Funds 19
ARTICLE VI-CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Parties 19
Section 6.2 Covenant of the Company; Alternative Proposals 23
Section 6.3 Employment Agreements 24
Section 6.4 Additional Statutory Approvals 24
ARTICLE VII-ADDITIONAL AGREEMENTS
Section 7.1 Access to Information 25
Section 7.2 Proxy Statement 25
Section 7.3 Regulatory Matters 25
Section 7.4 Company Shareholders' Approval 26
Section 7.5 Indemnification 26
Section 7.6 Disclosure Schedules 27
Section 7.7 Public Announcements 28
Section 7.8 Certain Employee Agreements 28
Section 7.9 Employee Benefit Plans 28
Section 7.10 Expenses 30
Section 7.11 Further Assurances 30
Section 7.12 Corporate Offices 30
Section 7.13 Community Involvement 30
Section 7.14 Advisory Board 30
ARTICLE VIII-CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger 30
Section 8.2 Conditions to Obligation of Parent to Effect the Merger 31
Section 8.3 Conditions to Obligation of the Company to Effect the Merger 32
ARTICLE IX-TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination 33
Section 9.2 Effect of Termination 34
Section 9.3 Termination Fee; Expenses 35
Section 9.4 Amendment 36
Section 9.5 Waiver 36
ARTICLE X-GENERAL PROVISIONS
Section 10.1 Non-survival; Effect of Representations and Warranties 36
Section 10.2 Brokers 36
Section 10.3 Notices 36
Section 10.4 Miscellaneous 37
Section 10.5 Interpretation 38
Section 10.6 Counterparts; Effect 38
Section 10.7 Parties in Interest 38
Section 10.8 Waiver of Jury Trial and Certain Damages 38
Section 10.9 Enforcement 38
Section 10.10 Disclaimer of Liability 39
</TABLE>
List of Defined Terms
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
1935 Act 5
Advisory Board 30
Agreement 1
Alternative Proposal 24
Certificate 2
Certificate of Merger 1
Closing 4
Closing Agreement 10
Closing Date 4
Code 4
Company 1
Company Common Shares 2
Company Disclosure Schedule 27
Company Financial Statements 8
Company Material Adverse Effect 5
Company Preferred Shares 6
Company Required Consents 6
Company Required Statutory Approvals 7
Company SEC Reports 8
Company Shareholders' Approval 17
Company Special Meeting 26
Confidentiality Agreement 25
Controlled Group Liability 11
Covered Company Employee 29
Disclosure Schedules 27
Effective Time 2
Employee Benefit Plan 11
Employment Agreements 24
Environmental Permits 15
Environmental Claim 15
ERISA 11
ERISA Affiliate 11
Exchange Act 8
Exchange Fund 3
Expenses 35
FERC 8
Final Order 31
GAAP 8
Indemnified Liabilities 26
Indemnified Parties 26
Indemnified Party 26
Initial Termination Date 33
IRS 12
joint venture 5
Liens 6
Merger 1
Merger Consideration 2
Merger Sub 1
Merger Sub Membership Interests 2
MGL 1
MLLCA 1
Multiemployer Plan 11
Multiple Employer Plan 13
Parent 1
Parent Disclosure Schedule 27
Parent Material Adverse Effect 17
Parent Preferred Stock 18
Parent Required Consents 18
Parent Required Statutory Approvals 18
Paying Agent 3
PBGC 13
Plan 11
Proxy Statement 9
Qualified Plans 12
Release 16
Representatives 25
Retiree Plan 29
Robinson Employment Agreement 24
SEC 8
Securities Act 8
SERP 29
subsidiary 5
Surviving Company 1
Takeover Laws 17
Tax Return 9
Tax Ruling 10
Taxes 9
Termination Fee 35
VEBA 12
Violation 6
Withdrawal Liability 12
</TABLE>
AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1999 (this
"Agreement"), by and among Berkshire Energy Resources, a Massachusetts
business trust (the "Company"), Energy East Corporation, a New York
corporation ("Parent"), and Mountain Merger LLC, a Massachusetts limited
liability company and a subsidiary of Parent ("Merger Sub").
WHEREAS, the Company and Parent have determined to engage in a
business combination transaction on the terms stated herein;
WHEREAS, the Board of Directors of Parent, the Board of Trustees of
the Company and the Managers of Merger Sub have each approved and deemed
it advisable and in the best interests of their respective shareholders and
members to consummate the transactions contemplated herein under which the
businesses of the Company and Parent would be combined by means of the
merger of Merger Sub with and into the Company; and
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), Merger Sub shall
be merged with and into the Company (the "Merger") in accordance with the
declaration of trust of the Company and the laws of the Commonwealth of
Massachusetts. The Company shall be the surviving entity in the Merger and
shall continue its existence under the laws of the Commonwealth of
Massachusetts. The effects and the consequences of the Merger shall be as
set forth in Section 1.2. Throughout this Agreement, the term "the Company"
shall refer to the Company prior to the Merger and the term "Surviving
Company" shall refer to the Company in its capacity as the surviving entity
in the Merger.
Section 1.2 Effects of the Merger. At the Effective Time, (i) the
declaration of trust of the Company, as in effect immediately prior to the
Effective Time, shall be the declaration of trust of the Surviving Company
until thereafter amended as provided by law and such declaration of trust
and (ii) the by-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Company until
thereafter amended as provided by law, the declaration of trust of the
Surviving Company and such by-laws. Subject to the foregoing, the
additional effects of the Merger shall be as provided in Section 2 of
Chapter 182 of the Massachusetts General Laws ("MGL") and Section 62 of the
Massachusetts Limited Liability Company Act (the "MLLCA").
Section 1.3 Effective Time of the Merger. On the Closing Date (as
defined in Section 3.1), with respect to the Merger, a certificate of
merger complying with Article 56 of the Company's declaration of trust and
Section 61 of the MLLCA (the "Certificate of Merger") shall be delivered to
the Secretary of the Commonwealth of Massachusetts, and to such other
offices as may be required by law, for filing. The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary
of the Commonwealth of Massachusetts, or at such later date and time as may
be set forth in the Certificate of Merger (the "Effective Time").
Section 1.4 Trustees. The Managers of Merger Sub immediately
prior to the Effective Time shall be the trustees of the Surviving Company
and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner
provided in the declaration of trust and by-laws of the Surviving Company.
Section 1.5 Officers. Except for the Vice President of the
Company, who shall become the President and Chief Executive Officer of the
Surviving Company, the officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Company and
shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided in the
declaration of trust and by-laws of the Surviving Company.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Shares and Membership
Interests. At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any share of the Company or membership
interest of Merger Sub:
(a) Membership Interests of Merger Sub. All of the membership
interests of Merger Sub (the "Merger Sub Membership Interests") that are
issued and outstanding immediately prior to the Effective Time shall be
converted into an aggregate of one thousand (1,000) fully paid and
nonassessable common shares, without par value, of the Surviving Company.
(b) Cancellation of Certain Company Common Shares. Each
common share, without par value, of the Company (the "Company Common
Shares"), that is owned by the Company as treasury shares and all Company
Common Shares that are owned by Parent shall be canceled and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Shares. Subject to the
provisions of this Section 2.1, each Company Common Share, other than
shares canceled pursuant to Section 2.1(b), issued and outstanding
immediately prior to the Effective Time shall by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive $38.00 in cash (the "Merger Consideration"). At the
Effective Time, all such Company Common Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate ("Certificate") representing any
such Company Common Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration.
Section 2.2 Exchange of Certificates.
(a) Deposit With Paying Agent. As soon as practicable after
the Effective Time, Parent shall deposit or cause to be deposited with a
bank or trust company mutually agreeable to Parent and the Company (the
"Paying Agent"), pursuant to an agreement in form and substance reasonably
acceptable to Parent and the Company, cash representing the aggregate
Merger Consideration to which Company shareholders who have properly
completed, signed and submitted letters of transmittal shall be entitled
pursuant to Section 2.1(c); and from time to time cash representing the
aggregate Merger Consideration to which Company shareholders who later
submit letters of transmittal shall be entitled pursuant to Section 2.1(c)
(such amounts being hereinafter referred to as the "Exchange Fund"). The
Paying Agent shall invest the Exchange Fund as Parent directs. Any net
profit resulting from, or interest or income produced by, such investments
shall be payable to Parent. The Exchange Fund shall not be used for any
other purpose except as provided in this Agreement.
(b) Exchange And Payment Procedures. As soon as practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to
each holder of record as of the Effective Time of a Certificate or
Certificates that have been converted 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
effecting the surrender of the Certificates and receiving the Merger
Consideration to which such holder shall be entitled therefor pursuant to
Section 2.1. Upon surrender of a Certificate to the Paying Agent for
cancellation, together with a duly executed letter of transmittal and such
other documents as the Paying Agent may require, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration. In the event the Merger Consideration is to be delivered to
any person who is not the person in whose name the Certificate surrendered
in exchange therefor is registered in the transfer records of the Company,
the Merger Consideration may be delivered to a transferee if the
Certificate 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 transfer taxes have been paid.
Until surrendered as contemplated by this Section 2.2, each Certificate
(other than a certificate representing Company Common Shares to be canceled
in accordance with Section 2.1(b)) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the Merger Consideration contemplated by this Section 2.2. No interest will
be paid or will accrue on any cash payable to holders of Certificates
pursuant to the provisions of this Article II.
(c) Closing of Transfer Books. From and after the Effective
Time, the share transfer books of the Company shall be closed and no
registration of any transfer of any shares of the Company shall thereafter
be made in the records of the Company. If, after the Effective Time,
Certificates are presented to the Surviving Company, they shall be canceled
and exchanged for the Merger Consideration.
(d) Termination of Exchange Fund. All funds held by the
Paying Agent for payment to the holders of unsurrendered Certificates and
unclaimed at the end of one year from the Effective Time shall be returned
to Parent, after which time any holder of unsurrendered Certificates shall
look as a general creditor only to the Surviving Company for payment of
such funds to which such holder may be due, subject to applicable law.
(e) Escheat. The Company shall not be liable to any person
for such funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Rights. Each of the Surviving Company, the
Company and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Shares such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code
of 1986 as amended (the "Code") and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign Tax law. To the
extent that amounts are so withheld by the Surviving Company, the Company
or Parent, as the case may be, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of Company
Common Shares in respect of which such deduction and withholding was made
by the Surviving Company, the Company or Parent, as the case may be.
Without limitation of the foregoing, unless an exemption applies, the
Paying Agent will be required to withhold and remit to the IRS 31% of any
cash payments to which a holder of Company Common Shares or other payee is
entitled pursuant to the Merger, unless (i) the shareholder or other payee
provides his or her U.S. Federal taxpayer identification number (social
security number or employer identification number) and certifies that such
number is correct by completing and signing the IRS Form W-9 that will be
included as part of the transmittal letter sent to shareholders by the
Paying Agent or (ii) another applicable exemption exists and is proved in a
manner satisfactory to the Paying Agent.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Huber Lawrence & Abell, at 10:00 a.m.,
Eastern 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 (other than conditions that by their nature are
required to be performed on the Closing Date, but subject to satisfaction
of such conditions), or at such other time and date and place as the
Company and Parent shall mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
Section 4.1 Organization and Qualification. Except as set forth
in Section 4.1 of the Company Disclosure Schedule (as defined in Section
7.6), the Company and each of its subsidiaries (as defined below) is a
business trust or corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has all requisite trust or corporate 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 or leasing of its assets
and properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified and in good standing
will not, when taken together with all other such failures, have a material
adverse effect on the business, properties, financial condition or results
of operations of the Company and its subsidiaries taken as a whole or on
the consummation of this Agreement (any such material adverse effect being
hereafter referred to as a "Company Material Adverse Effect"). As used in
this Agreement, the term "subsidiary" of a person shall mean any
corporation or other entity (including business trusts, partnerships and
other business associations) of which a majority of the outstanding capital
stock or other voting securities having voting power under ordinary
circumstances to elect directors or similar members of the governing body
of such corporation or entity shall at the time be held, directly or
indirectly, by such person.
Section 4.2 Subsidiaries. Section 4.2 of the Company Disclosure
Schedule sets forth a description as of the date hereof, of all material
and certain other subsidiaries and joint ventures of the Company, including
the name of each such entity, the state or jurisdiction of its
incorporation or organization, the Company's interest therein and a brief
description of the principal line or lines of business conducted by each
such entity. Except as set forth in Section 4.2 of the Company Disclosure
Schedule, none of the Company's subsidiaries is a "public utility company,"
a "holding company," a "subsidiary company" or an "affiliate" of any public
utility company within the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or
2(a)(11) of the Public Utility Holding Company Act of 1935, as amended (the
"1935 Act"). Except as set forth in Section 4.2 of the Company Disclosure
Schedule, all of the issued and outstanding shares of capital stock owned
by the Company 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 liens, claims,
encumbrances, security interests, equities, charges and options of any
nature whatsoever, and there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including
any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend or enter into
any such agreement or commitment, except for any of the foregoing that
could not reasonably be expected to have a Company Material Adverse Effect.
As used in this Agreement, the term "joint venture" of a person shall mean
any corporation or other entity (including business trusts, partnerships
and other business associations) that is not a subsidiary of such person,
in which such person or one or more of its subsidiaries owns an equity
interest, other than equity interests held for passive investment purposes
which are less than 10% of any class of the outstanding voting securities
or equity of any such entity.
Section 4.3 Capitalization. The authorized capital of the Company
consists of 10,000,000 Company Common Shares and 1,000,000 preferred
shares, par value $100.00, of the Company ("Company Preferred Shares"). As
of the close of business on November 8, 1999, there were issued and
outstanding 2,523,479 Company Common Shares and no Company Preferred
Shares. All of the issued and outstanding shares of the Company are validly
issued, fully paid, nonassessable and free of preemptive rights. Except as
set forth in Section 4.3 of the Company Disclosure Schedule, as of the date
hereof, there are no outstanding subscriptions, options, stock appreciation
rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including
any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating the Company or any of the
subsidiaries of the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the Company, or obligating
the Company to grant, extend or enter into any such agreement or
commitment.
Section 4.4 Authority; Non-contravention; Statutory Approvals;
Compliance.
(a) Authority. The Company has all requisite trust power and
authority to enter into this Agreement and, subject to obtaining the
Company Shareholders' Approval (as defined in Section 4.13) and the 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 trust action
on the part of the Company subject to obtaining the applicable Company
Shareholders' Approval. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution
and delivery by the other signatories hereto, constitutes the valid and
binding obligation of the Company enforceable against it in accordance with
its terms.
(b) Non-contravention. Except as set forth in Section 4.4(b)
of the Company Disclosure Schedule, the execution and delivery of this
Agreement by the Company do not, and the consummation of the transactions
contemplated hereby will not, 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, security interest,
charge or encumbrance ("Liens") upon any of the properties or assets of the
Company or any of its subsidiaries or any of its joint ventures (any such
violation, conflict, breach, default, right of termination, modification,
cancellation or acceleration, loss or creation, a "Violation" with respect
to the Company (such term when used in Article V having a correlative
meaning with respect to Parent)) pursuant to any provisions of (i) the
articles of organization, by-laws or similar governing documents of the
Company, any of its subsidiaries or any of its joint ventures, (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 (as defined in Section 4.4(c)) applicable to the
Company, any of its subsidiaries or any of its joint ventures, or any of
their respective properties or assets or (iii) subject to obtaining the
third-party consents or other approvals 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, contract, lease or other instrument, obligation or agreement of
any kind to which the Company, any of its subsidiaries or any of its joint
ventures is a party or by which it or any of its properties or assets may
be bound or affected, excluding from the foregoing clauses (i), (ii) and
(iii) such Violations as would not have, in the aggregate, a Company
Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section
4.4(c) of the Company Disclosure Schedule, no declaration, filing or
registration with, or notice to or authorization, consent or approval of,
any court, federal, state, local or foreign governmental 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, the failure to obtain,
make or give which would have, in the aggregate, a Company Material Adverse
Effect (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, consents
or approvals and having such waiting periods expire as are necessary to
avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.4(d) or
Section 4.11 of the Company Disclosure Schedule, or 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 its subsidiaries nor any of its
joint ventures 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,
as defined in Section 4.11(f)(ii)) of any Governmental Authority except for
violations that, in the aggregate, do not have and are not reasonably
likely to have a Company Material Adverse Effect. Except as set forth in
Section 4.4(d) of the Company Disclosure Schedule or in Section 4.11 of the
Company Disclosure Schedule, the Company and its subsidiaries and joint
ventures have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their
respective businesses as currently conducted in all respects, except those
which the failure to obtain would, in the aggregate, not have a Company
Material Adverse Effect. Except as set forth in Section 4.4(d) of the
Company Disclosure Schedule, the Company and each of its subsidiaries are
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
under, (i) its declaration of trust, articles of organization or by-laws or
(ii) any material contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which it is a party or by which it is bound or to which any of its property
is subject, except for breaches, violations or defaults that, in the
aggregate, do not have and are not reasonably likely to have, a Company
Material Adverse Effect.
(e) Except as set forth in Section 4.4(e) of the Company
Disclosure Schedule, there is no "non-competition" or other similar
contract, commitment, agreement or understanding that restricts the ability
of the Company or any of its affiliates to conduct business in any
geographic area or that would reasonably be likely to restrict the
Surviving Company or any of its affiliates to conduct business in any
geographic area.
Section 4.5 Reports and Financial Statements. The filings
required to be made by the Company and its subsidiaries since January 1,
1996 under the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
1935 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, 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 appropriate statute and the rules and regulations thereunder. The
Company has made available to Parent a true and complete copy of each
report, schedule, registration statement and definitive proxy statement
filed by the Company or its predecessor with the SEC since January 1, 1996
(as such documents have since the time of their filing been amended, the
"Company SEC Reports"). As of their respective dates, the Company SEC
Reports 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 of the Company included in the
Company SEC Reports (collectively, the "Company Financial Statements") have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP") (except as may be indicated therein
or in the notes thereto and except with respect to unaudited statements as
permitted by Form 10-Q of the SEC) and fairly present the consolidated
financial position of the Company as of the dates thereof and the
consolidated results of operations and cash flows for the periods then
ended. True, accurate and complete copies of the declaration of trust and
by-laws of the Company, as in effect on the date hereof, have been made
available to Parent.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports filed prior to the date hereof or as
set forth in Section 4.6 of the Company Disclosure Schedule, from December
31, 1998 the Company and each of its subsidiaries have conducted their
business only in the ordinary course of business consistent with past
practice, and there has not been, and no fact or condition exists which
would have or, insofar as reasonably can be foreseen, could have, a Company
Material Adverse Effect.
Section 4.7 Litigation. Except as disclosed in the Company SEC
Reports filed prior to the date hereof or as set forth in Section 4.7,
Section 4.9 or Section 4.11 of the Company Disclosure Schedule, (a) there
are no claims, suits, actions or proceedings, pending or threatened, nor
are there any investigations or reviews pending or threatened against,
relating to or affecting the Company or any of its subsidiaries, and (b)
there 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 its subsidiaries,
except for any of the foregoing under clauses (a) and (b) that individually
or in the aggregate would not reasonably be expected to have a Company
Material Adverse Effect.
Section 4.8 Proxy Statement. The proxy statement, in definitive
form (the "Proxy Statement"), relating to the Company Special Meeting (as
defined below) shall not, at the date mailed to shareholders and at the
time of the Company Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy
Statement, insofar as it relates to the Company or any of its subsidiaries,
shall comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 4.9 Tax Matters. "Taxes," as used in this Agreement,
means any federal, state, county, local or foreign taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, sales and use, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipts, capital stock,
production, business and occupation, disability, employment, payroll,
license, estimated, stamp, custom duties, severance or withholding taxes or
charges imposed by any governmental entity, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes. "Tax
Return," as used in this Agreement, means a report, return or other written
information required to be supplied to a governmental entity with respect
to Taxes.
Except as disclosed in Section 4.9 of the Company Disclosure
Schedule:
(a) Filing of Timely Tax Returns. The Company and each of
its subsidiaries have duly filed (or there has been filed on its behalf)
within the time prescribed by law all material Tax Returns (including
withholding Tax Returns) required to be filed by each of them under
applicable law. All such Tax Returns were and are in all material respects
true, complete and correct.
(b) Payment of Taxes. The Company and each of its
subsidiaries have, within the time and in the manner prescribed by law,
paid all material Taxes (including withholding Taxes) that are currently
due and payable except for those contested in good faith and for which
adequate reserves have been taken.
(c) Tax Reserves. All material Taxes payable by the Company
and its subsidiaries for all taxable periods and portions thereof through
the date of the most recent financial statements contained in the Company
Financial Statements filed prior to the date of this Agreement are properly
reflected in such financial statements in accordance with GAAP, and the
unpaid Taxes of the Company and its subsidiaries do not exceed the amount
shown therefor on such financial statements adjusted for the passage of
time through the Effective Time in accordance with past custom and practice
of the Company and its subsidiaries in filing their Tax Returns.
(d) Extensions of Time for Filing Tax Returns. Neither the
Company nor any of its subsidiaries have requested any extension of time
within which to file any material Tax Return, which Tax Return has not
since been filed.
(e) Waivers of Statute of Limitations. Neither the Company
nor any of its subsidiaries has executed any outstanding waivers or
comparable consents regarding the application of the statute of limitations
with respect to any material Taxes or material Tax Returns.
(f) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all material Taxes has expired for all
applicable material Tax Returns of the Company and each of its
subsidiaries, or those material Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date hereof, and
no deficiency for any material Taxes has been proposed, asserted or
assessed against the Company or any of its subsidiaries that has not been
resolved and paid in full.
(g) Audit, Administrative and Court Proceedings. No material
claims, audits, disputes, controversies, examinations, investigations or
other proceedings are presently pending with regard to any Taxes or Tax
Returns of the Company or any of its subsidiaries.
(h) Tax Rulings. Neither the Company nor any of its
subsidiaries has received a Tax Ruling (as defined below) or entered into a
Closing Agreement (as defined below) with any taxing authority that would
have a continuing adverse effect after the Closing Date. "Tax Ruling," as
used in this Agreement, shall mean a written ruling of a taxing authority
relating to Taxes. "Closing Agreement," as used in this Agreement, shall
mean a written and legally binding agreement with a taxing authority
relating to Taxes.
(i) Availability of Tax Returns. The Company has provided or
made available to Parent complete and accurate copies of (i) all Tax
Returns, and any amendments thereto, filed by the Company or any of its
subsidiaries since 1994, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by the Company or any of its
subsidiaries and (iii) any Closing Agreements entered into by the Company
or any of its subsidiaries with any taxing authority.
(j) Tax Sharing Agreements. Neither the Company nor any of
its subsidiaries is a party to any agreement, understanding or arrangement
relating to allocating or sharing of Taxes.
(k) Liability for Others. Neither the Company nor any of its
subsidiaries has any liability for any material Taxes of any person other
than the Company and its subsidiaries (i) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), (ii) as
a transferee or successor, (iii) by contract or (iv) otherwise.
(l) Code Section 897. To the best knowledge of the Company
after due inquiry, no foreign person owns or has owned beneficially more
than five percent of the total fair market value of the Company Common
Shares during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(m) Code Section 355(e). Neither the Company nor any of its
subsidiaries has constituted a "distributing corporation" or a "controlled
corporation" in a distribution of shares qualifying for tax-free treatment
under Section 355 of the Code (i) in the past 24 month period or (ii) in a
distribution which could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code)
in conjunction with the Merger.
Section 4.10 Employee Matters; ERISA. Except as set forth in the
appropriate subsection of Section 4.10 of the Company Disclosure Schedule:
(a) For purposes of this Section 4.10, the following terms
have the definitions set forth below:
(i) "Controlled Group Liability" means any and all
liabilities (a) under Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (b) as a result of a
failure to comply with the minimum funding requirements of Section
302 of ERISA or Section 412 of the Code, (c) under Section 4971 of
the Code, and (d) as a result of a failure to comply with the
continuation coverage requirements of Section 601 et seq. of ERISA
and Section 4980B of the Code, other than such liabilities that arise
solely out of, or relate solely to, the Employee Benefit Plans.
(ii) "ERISA Affiliate" means, with respect to any
entity, trade or business, any other entity, trade or business that
is a member of a group described in Section 414(b), (c), (m) or (o)
of the Code or Section 4001(b)(1) of ERISA that includes the first
entity, trade or business, or that is a member of the same
"controlled group" as the first entity, trade or business pursuant to
Section 4001(a)(14) of ERISA.
(iii) An "Employee Benefit Plan" means any material
employee benefit plan, program, policy, practice, or other
arrangement providing benefits to any current or former employee,
officer, trustee or director of the Company or any of its
subsidiaries or any beneficiary or dependent thereof that is
sponsored or maintained by the Company or any of its subsidiaries or
to which the Company or any of its subsidiaries contributes or is
obligated to contribute, whether or not written, including without
limitation any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (whether or not such plan is subject
to ERISA) and any material bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change
of control or fringe benefit plan, program or agreement.
(iv) A "Plan" means any Employee Benefit Plan other than
a Multiemployer Plan.
(v) A "Multiemployer Plan" means any "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA.
(vi) "Withdrawal Liability" means liability to a
Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan, as those terms are defined in Part I of
Subtitle E of Title IV of ERISA.
(b) Section 4.10(b) of the Company Disclosure Schedule
includes a complete list of all material Employee Benefit Plans and, with
respect to executive welfare benefit plans and nonqualified pension,
savings and deferred compensation plans, states the number of employees
participating in or covered by such plans.
(c) With respect to each Plan, the Company has delivered to
Parent a true, correct and complete copy of: (i) each writing constituting
a part of such Plan, including without limitation all material plan
documents, trust agreements, and insurance contracts and other funding
vehicles; (ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedules, if any; (iii) the current summary plan description
and any material modifications thereto, if required to be furnished under
ERISA; (iv) the most recent annual financial report, if any; (v) the most
recent actuarial report, if any; and (vi) the most recent determination
letter from the Internal Revenue Service (the "IRS"), if any. Except as
specifically provided in the foregoing documents delivered to Parent, there
are no amendments to any Plan that have been adopted or approved nor has
the Company or any of its subsidiaries undertaken to make any such
amendments or to adopt or approve any new Plan.
(d) Section 4.10(b) of the Company Disclosure Schedule
identifies each Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code ("Qualified Plans"). The IRS has
issued a favorable determination letter with respect to each Qualified Plan
and the related trust that has not been revoked, and except as would not
have a Company Material Adverse Effect, there are no existing circumstances
nor any events that have occurred that could adversely affect the qualified
status of any Qualified Plan or the related trust. Section 4.10(b) of the
Company Disclosure Schedule identifies each Plan or related trust which is
intended to meet the requirements of Code Section 501(c)(9) (a "VEBA"), and
except as would not have a Company Material Adverse Effect, each such VEBA
meets such requirements and provides no disqualified benefits (as such term
is defined in Code Section 4976(b)).
(e) All material contributions required to be made to any
Plan by applicable law or regulation or by any Plan document or other
contractual undertaking, and all material premiums due or payable with
respect to insurance policies funding any Plan, for any period through the
date hereof have been timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof, have been fully
reflected on the Company Financial Statements. Each Plan that is an
employee welfare benefit plan under Section 3(1) of ERISA (i) is funded
through an insurance company contract or a contract with a health
maintenance organization, (ii) is, or is funded through, a VEBA identified
as such in Section 4.10(b) of the Company Disclosure Schedule, or (iii) is
unfunded.
(f) Except as would not have a Company Material Adverse
Effect, with respect to each Employee Benefit Plan, the Company and its
subsidiaries have complied, and are now in compliance, with all provisions
of ERISA, the Code and all laws and regulations applicable to such Employee
Benefit Plans and each Plan has been administered in all material respects
in accordance with its terms. There is not now, nor do any circumstances
exist that could reasonably be expected to give rise to, any requirement
for the posting of security with respect to a Plan or the imposition of any
lien on the assets of the Company or any of its subsidiaries under ERISA or
the Code.
(g) With respect to each Plan that is subject to Title IV of
ERISA, the minimum funding requirements of Section 302 of ERISA or Section
412 of the Code, or Section 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the
Code or Section 302 of ERISA, whether or not waived, in respect of any plan
year ended prior to the date hereof and for which the time for making
contributions in order to avoid incurring an accumulated funding deficiency
for such year has expired; (ii) the fair market value of the assets of each
such Plan that is a defined benefit plan equals or exceeds the actuarial
present value of the accumulated benefit obligation (as of the date of the
most recent actuarial report prepared for such Plan) under such Plan
(whether or not vested), based upon the actuarial assumptions set forth in
the most recent actuarial report for such Plan; (iii) no reportable event
within the meaning of Section 4043(c) of ERISA for which the 30-day notice
requirement has not been waived has occurred since December 31, 1993 in
respect of any such Plan which is a defined benefit Plan; (iv) all material
premiums to the Pension Benefit Guaranty Corporation ("PBGC") have been
timely paid in full; (v) no material liability (other than for premiums to
the PBGC and for the payment of benefits and contributions in the ordinary
course) under Title IV of ERISA has been or could reasonably be expected to
be incurred by the Company or any of its subsidiaries; and (vi) to the
knowledge of the Company, the PBGC has not instituted proceedings to
terminate any such Plan and no condition exists that presents a material
risk that such proceedings will be instituted or which would constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan.
(h) No Employee Benefit Plan is a Multiemployer Plan or a
plan that has two or more contributing sponsors at least two of which are
not under common control, within the meaning of Section 4063 of ERISA (a
"Multiple Employer Plan"). None of the Company and its subsidiaries nor any
of their respective ERISA Affiliates has, at any time during the last six
years, contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan. None of the Company and its subsidiaries
nor any ERISA Affiliates has incurred any Withdrawal Liability that has not
been satisfied in full.
(i) There does not now exist, nor do any circumstances exist
that could reasonably be expected to result in, any Controlled Group
Liability that would have a Company Material Adverse Effect following the
Closing. Without limiting the generality of the foregoing, neither the
Company nor any of its subsidiaries, nor any of their respective ERISA
Affiliates, has engaged in any transaction described in Section 4069 or
Section 4204 or 4212 of ERISA since December 31, 1993.
(j) Except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA or applicable state
law, the Company and its subsidiaries have no material liability for life,
health, medical or other welfare benefits to former employees or
beneficiaries or dependents of former employees.
(k) Neither the execution and delivery of this Agreement nor
the consummation of any of the transactions contemplated hereby will
(either alone or in conjunction with any other event) result in, cause the
accelerated funding, vesting or delivery of, or increase the amount or
value of, any material payment or benefit to any employee, officer, trustee
or director of the Company or any of its subsidiaries. Section 4.10(k) of
the Company Disclosure Schedule sets forth the estimated amount that will
be required to be contributed to each trust listed thereon as a result of
the consummation of the transactions contemplated hereby.
(l) No labor organization or group of employees of the
Company or any of its subsidiaries has made a pending demand for
recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of the Company, threatened to be
brought or filed, with the National Labor Relations Board or any other
labor relations tribunal or authority. There are no organizing activities,
strikes, work stoppages, slowdowns, lockouts, material arbitrations or
material grievances, or other material labor disputes pending or, to the
knowledge of the Company, threatened against or involving the Company or
any of its subsidiaries. Each of the Company and its subsidiaries is in
compliance in all material respects with all applicable laws and collective
bargaining agreements respecting employment and employment practices, terms
and conditions of employment, wages and hours and occupational safety and
health.
(m) There are no pending or, to the knowledge of the Company,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits or arbitrations which have been asserted or instituted, and there
is no set of circumstances which may reasonably give rise to a claim or
lawsuit, against the Plans, any fiduciaries thereof with respect to their
duties to the Plans or the assets of any of the trusts under any of the
Plans which could reasonably be expected to result in a Company Material
Adverse Effect.
(n) The Company, its subsidiaries and each member of their
respective business enterprise has complied with the Worker Adjustment and
Retraining Notification Act.
(o) None of the Company and its subsidiaries nor any other
person, including any fiduciary, has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of
ERISA), which could subject any of the Employee Benefit Plans or their
related trusts, the Company, any of its subsidiaries or any person that the
Company or any of its subsidiaries has an obligation to indemnify, to any
tax or penalty imposed under Section 4975 of the Code or Section 502 of
ERISA.
Section 4.11 Environmental Protection. Except as set forth in
Section 4.11 of the Company Disclosure Schedule or in the Company SEC
Reports filed prior to the date hereof:
(a) Compliance. Except where the failure to be in such
compliance would not in the aggregate have a Company Material Adverse
Effect, (i) the Company and each of its subsidiaries are in compliance with
all applicable Environmental Laws (as defined in Section 4.11(f)(ii)) and
(ii) neither the Company nor any of its subsidiaries has received any
communication from any Governmental Authority or any written communication
from any other person that alleges that the Company or any of its
subsidiaries is not in compliance with applicable Environmental Laws.
(b) Environmental Permits. The Company and each of its
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 its facilities
or the conduct of its operations, and all such Environmental Permits are in
good standing or, where applicable, a renewal application has been timely
filed and is pending agency approval, and the Company and its subsidiaries
are in compliance with all terms and conditions of the Environmental
Permits, and the Company reasonably believes that any transfer, renewal or
reapplication for any Environmental Permit required as a result of the
Merger can be accomplished in the ordinary course of business, except where
the failure to obtain or to be in such compliance would not, in the
aggregate, have a Company Material Adverse Effect.
(c) Environmental Claims. There are no Environmental Claims
(as defined in Section 4.11(f)(i)) pending (i) against the Company or any
of its subsidiaries or joint ventures, or (ii) against any real or personal
property or operations that the Company or any of its subsidiaries owns,
leases or manages, in whole or in part that, if adversely determined, would
have, in the aggregate, a Company Material Adverse Effect.
(d) Releases. Except for Releases of Hazardous Materials the
liability for which would not have, in the aggregate, a Company Material
Adverse Effect, there have been no Releases (as defined in Section
4.11(f)(iv)) of any Hazardous Material (as defined in Section 4.11(f)(iii))
that would be reasonably likely to (i) form the basis of any Environmental
Claim against the Company or any of its subsidiaries, or (ii) to the
knowledge of the Company, cause, damage or diminution of value to any of
the operations or real properties owned, leased or managed, in whole or in
part, by Company or any of its subsidiaries.
(e) Predecessors. The Company has no knowledge of any
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any
Environmental Claim, in each case against any person or entity (including,
without limitation, any predecessor of the Company or any of its
subsidiaries) whose liability the Company or any of its subsidiaries has or
may have retained or assumed either contractually or by operation of law or
against any real or personal property which the Company or any of its
subsidiaries formerly owned, leased or managed, in whole or in part, except
for Releases of Hazardous Materials the liability for which would not have,
in the aggregate, a Company Material Adverse Effect.
(f) 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 by any person or
entity (including any Governmental Authority) alleging potential
liability (including, without limitation, potential responsibility
for or liability for enforcement costs, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs,
natural-resources damages, property damages, personal injuries, fines
or penalties) arising out of, based on or resulting from (A) the
presence, or Release or threatened Release into the environment, of
any Hazardous Materials at any location, whether or not owned,
operated, leased or managed by the Company, Parent or any of their
respective subsidiaries or joint ventures; 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.
(ii) "Environmental Laws" means all federal, state,
local laws, rules, ordinances and regulations 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 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, coal
tar residue, and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls ("PCBs") in
regulated concentrations; and (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," "hazardous constituents" 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 Parent, the Company or any of their
subsidiaries or joint ventures operates or has stored, treated or
disposed of Hazardous Materials.
(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 4.12 Regulation as a Utility. Except as set forth in
Section 4.12 of the Company Disclosure Schedule, neither the Company nor
any "associate company," "subsidiary company" or "affiliate" (as such terms
are defined in the 1935 Act) of the Company is subject to regulation as (a)
a "holding company," a "public-utility company," a "subsidiary company" or
an "affiliate" of a "holding company," within the meaning of Sections
2(a)(7), 2(a)(5), 2(a)(8) and 2(a)(11), respectively, of the 1935 Act, (b)
a "public utility" under the Federal Power Act, (c) a "natural-gas company"
under the Natural Gas Act or (d) a public utility or public service company
(or similar designation) by any state in the United States other than
Massachusetts or by any foreign country.
Section 4.13 Vote Required. The approval of the Merger by two-
thirds of the votes entitled to be cast by all holders of issued and
outstanding Company Common Shares (the "Company Shareholders' Approval") is
the only vote of the holders of any class or series of the shares of the
Company or any of its subsidiaries required to approve this Agreement, the
Merger and the other transactions contemplated hereby.
Section 4.14 Opinion of Financial Advisor. The Company has
received the opinion of Tucker Anthony Cleary Gull to the effect that, as
of November 9, 1999, the Merger Consideration is fair from a financial
point of view to the holders of Company Common Shares.
Section 4.15 Ownership of Parent Common Stock. Except as set forth
in Section 4.15 of the Company Disclosure Schedule, the Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d)
of the Exchange Act) any shares of Parent Common Stock.
Section 4.16 Takeover Laws. The Company has taken all action
required to be taken by it in order to exempt this Agreement and the
transactions contemplated hereby from, and this Agreement and the
transactions contemplated hereby are exempt from, the requirements of any
"moratorium," "control share," "fair price" or other anti-takeover laws and
regulations (collectively, "Takeover Laws") of the Commonwealth of
Massachusetts, including Chapters 110C, 110D and 110F of the Massachusetts
General Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Except as set forth in
Section 5.1 of the Parent Disclosure Schedule (as defined in Section 7.6),
Parent and each of its subsidiaries is a corporation or other entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate
power and authority, and has been duly authorized by all necessary
approvals and orders, to own, lease and operate its assets and 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 or leasing of its assets and properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so
qualified and in good standing will not, when taken together with all other
such failures, have a material adverse effect on the business, properties,
financial condition or results of operations of Parent and its subsidiaries
taken as a whole or on the consummation of this Agreement (any such
material adverse effect being hereafter referred to as a "Parent Material
Adverse Effect").
Section 5.2 Subsidiaries. Except as set forth in Section 5.2 of
the Parent Disclosure Schedule, Parent is an exempt holding company under
the 1935 Act and none of the subsidiaries of Parent is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935 Act.
Section 5.3 Capitalization. The authorized capital stock of
Parent consists of 300,000,000 shares of Parent Common Stock and 10,000,000
shares of preferred stock, par value $.01 per share, of Parent ("Parent
Preferred Stock"). As of the close of business on November 8, 1999, there
were issued and outstanding 112,042,928 shares of Parent Common Stock and
no shares of Parent Preferred Stock.
Section 5.4 Authority; Non-contravention; Statutory Approvals.
(a) Authority. Parent has all requisite corporate power and
authority to enter into this Agreement and, subject to the applicable
Parent Required Statutory Approvals (as defined in Section 5.4(c)), to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement, and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Parent. This Agreement has been duly and validly
executed and delivered by Parent and, assuming the due authorization,
execution and delivery by the other signatories hereto, constitutes a valid
and binding obligation of Parent enforceable against it in accordance with
its terms.
(b) Non-contravention. Except as set forth in Section 5.4(b)
of the Parent Disclosure Schedule, the execution and delivery of this
Agreement by Parent do not, and the consummation of the transactions
contemplated hereby will not, result in a Violation pursuant to any
provisions of (i) the articles of incorporation, by-laws or similar
governing documents of Parent or any of its subsidiaries or any of its
joint ventures, (ii) subject to obtaining the Parent Required Statutory
Approvals (as defined in Section 5.4(c)) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any Governmental Authority applicable to Parent or any of its subsidiaries
or any of its joint ventures or any of their respective properties or
assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 5.4(b) of the Parent Disclosure Schedule
(the "Parent Required Consents"), any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of
its subsidiaries or any of its joint ventures is a party or by which it or
any of its properties or assets may be bound or affected, excluding from
the foregoing clauses (i), (ii) and (iii) such Violations as would not
have, in the aggregate, a Parent Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section
5.4(c) of the Parent Disclosure Schedule, no declaration, filing or
registration with, or notice to or authorization, consent or approval of,
any Governmental Authority is necessary for the execution and delivery of
this Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, the failure to obtain, make or give which would have,
in the aggregate, a Parent Material Adverse Effect (the "Parent Required
Statutory Approvals"), it being understood that references in this
Agreement to "obtaining" such Parent Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such
notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law.
Section 5.5 Proxy Statement. None of the information supplied or
to be supplied by or on behalf of Parent for inclusion or incorporation by
reference in the Proxy Statement will, at the date the Proxy Statement is
mailed to the Company shareholders and at the time of the Company Special
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading.
Section 5.6 Availability of Funds. Parent has sufficient funds
available to it or has received binding written commitments subject only to
customary terms and conditions from third parties to enable Parent timely
to perform all of its obligations under this Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Parties. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement,
Parent and the Company each agree as follows, each as to itself and to each
of its subsidiaries, except as expressly contemplated or permitted in this
Agreement, or to the extent the other parties hereto shall otherwise
consent in writing:
(a) Ordinary Course of Business. The Company shall, and
shall cause its subsidiaries to, carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and use all commercially reasonable efforts to (i)
preserve intact their present business organizations and goodwill, preserve
the goodwill and relationships with customers, suppliers and others having
business dealings with them, (ii) subject to prudent management of
workforce needs and ongoing programs currently in force, keep available the
services of their present officers and employees as a group, and
(iii) maintain and keep material properties and assets in as good repair
and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past
practice.
(b) Dividends. The Company shall not, nor shall it permit
any of its subsidiaries to: (i) declare or pay any dividends on or make
other distributions in respect of any shares other than (A) dividends by a
wholly owned subsidiary to the Company or another wholly owned subsidiary,
(B) dividends by a less than wholly owned subsidiary consistent with past
practice or (C) regular dividends on Company Common Shares with usual
record and payment dates that do not exceed the current regular dividends
on Company Common Shares, except for periodic increases made in the
ordinary course of business consistent with the Company's recent policy of
annual dividend increases as set forth in Schedule 6.1(b) of the Company
Disclosure Schedule; (ii) split, combine or reclassify any shares or the
capital stock of any subsidiary or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of the Company or the capital stock of any
subsidiary; or (iii) redeem, repurchase or otherwise acquire any shares or
the capital stock of any subsidiary other than (A) redemptions, repurchases
and other acquisitions of shares in connection with the administration of
employee benefit and dividend reinvestment plans as in effect on the date
hereof in the ordinary course of the operation of such plans consistent
with past practice, or (B) intercompany acquisitions of shares or capital
stock.
(c) Issuance of Securities. Except as set forth in Section
6.1(c) of the Company Disclosure Schedule, the Company shall not, nor shall
it permit any of its 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 of their shares or 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.
(d) Charter Documents; Other Actions. Neither party shall,
nor shall any party permit any of its subsidiaries to, amend or propose to
amend its respective declaration of trust, articles of organization, by-
laws or regulations, or similar organic documents or to take or fail to
take any other action, which in any such case would reasonably be expected
to prevent or materially impede or interfere with the Merger.
(e) Acquisitions. Except as disclosed in Section 6.1(e) of
the Company Disclosure Schedule, the Company shall not, nor shall it permit
any of its subsidiaries to, acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or business organization or
division thereof, or otherwise acquire or agree to acquire any material
amount of assets other than in the ordinary course of business.
(f) Capital Expenditures. Except as set forth in Section
6.1(f) of the Company Disclosure Schedule, the Company shall not, nor shall
it permit any of its subsidiaries to, make capital expenditures in an
aggregate amount in excess of 110% of the amount budgeted by the Company or
its subsidiaries for capital expenditures as set forth in Section 6.1(f) of
the Company Disclosure Schedule.
(g) No Dispositions. Except as set forth in Section 6.1(g)
of the Company Disclosure Schedule, the Company shall not, nor shall it
permit any of its subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, any of its respective assets, other than encumbrances
or dispositions in the ordinary course of business consistent with past
practice.
(h) Indebtedness. Except as set forth in Section 6.1(h) of
the Company Disclosure Schedule, the Company shall not, nor shall it permit
any of its 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 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; (ii) arrangements between the Company and its
subsidiaries or among its subsidiaries; or (iii) in connection with the
refunding of existing indebtedness at a lower cost of funds.
(i) Compensation, Benefits. Except as set forth in Section
6.1(i) of the Company Disclosure Schedule, as may be required by applicable
law or under existing Employee Benefit Plans or collective bargaining
agreements, as may be required to facilitate or obtain a determination
letter from the IRS that a plan is a Qualified Plan, or as expressly
contemplated by this Agreement, the Company shall not, nor shall it permit
any of its 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 Employee Benefit Plan, or otherwise increase the
compensation or benefits of any trustee, director, officer or other
employee of such party or any of its subsidiaries, except for normal
increases in compensation and benefits, or grants of new incentive
compensation awards, or actions in the ordinary course of business, that
are consistent with the Company's past practice of adjusting compensation
and benefits to reflect the average compensation and benefits as determined
by general industry or market surveys; provided that prior to implementing
any such increases on the basis of such surveys the Company shall advise
Parent of its intention so to increase compensation or benefits and of the
basis therefor and shall otherwise consult with Parent concerning such
proposed increases, or (ii) enter into or amend any employment, severance
or special pay arrangement with respect to the termination of employment or
other similar contract, agreement or arrangement with any trustee, director
or officer or other employee other than with respect to employees who are
not officers of the Company in the ordinary course of business consistent
with current industry practice. This subsection (i) is not intended to
(A) restrict the Company or its subsidiaries from granting promotions to
officers or employees based upon job performance or workplace requirements
in the ordinary course of business consistent with past practice, (B)
restrict the Company's ability to make available to employees the plans,
benefits and arrangements that have customarily and consistent with past
practices been available to officers and employees in the context of such
merit-based promotion or (C) restrict the Company from dealing with matters
of employee retention in specific areas of expertise through the use of
specialized employment and benefit plans designed for that specific
purpose; provided, however, that the result of the use of such specialized
employment or benefit plans shall not, in the aggregate, result in payments
in excess of $130,000.
(j) 1935 Act. Except as set forth in Section 6.1(j) of the
Company Disclosure Schedule, and except as required or contemplated by this
Agreement, the Company shall not, nor shall it permit any of its
subsidiaries to, engage in any activities which would cause a change in its
status, or that of its subsidiaries, under the 1935 Act.
(k) Accounting. Except as set forth in Section 6.1(k) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its subsidiaries to, make any changes in their accounting methods,
except as required by law, rule, regulation or GAAP.
(l) Cooperation, Notification. Each party shall, and shall
cause its subsidiaries to, (i) confer on a regular and frequent basis with
one or more representatives of the other party to discuss, subject to
applicable law, material operational matters and the general status of its
ongoing operations; (ii) promptly notify the other party of any significant
changes in its business, properties, assets, condition (financial or
other), results of operations or prospects; (iii) advise the other party of
any change or event which has had or, insofar as reasonably can be
foreseen, is reasonably likely to result in, in the case of the Company, a
Company Material Adverse Effect or, in the case of Parent, a Parent
Material Adverse Effect; and (iv) promptly provide the other party with
copies of all filings made by such party or any of its subsidiaries with
any state or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
(m) Third-party Consents. The Company shall, and shall cause
its subsidiaries to, use all commercially reasonable efforts to obtain all
the Company Required Consents. The Company shall promptly notify Parent of
any failure or prospective failure to obtain any such consents and, if
requested by Parent shall provide copies of all the Company Required
Consents obtained by the Company to Parent. Parent shall, and shall cause
its subsidiaries to, use all commercially reasonable efforts to obtain all
Parent Required Consents. Parent shall promptly notify the Company of any
failure or prospective failure to obtain any such consents and, if
requested by the Company, shall provide copies of all Parent Required
Consents obtained by Parent to the Company.
(n) No Breach, Etc. No party shall, nor shall any party
permit any of its subsidiaries to, willfully 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.
(o) Discharge of Liabilities. The Company shall not pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge 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 included in the Company's reports filed with the SEC, or incurred
in the ordinary course of business consistent with past practice.
(p) Contracts. Except as set forth in Section 6.1(p) of the
Company Disclosure Schedule, the Company shall not, 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 material
contract or agreement to which the Company or any of its subsidiaries is a
party or waive, release or assign any material rights or claims.
(q) Insurance. The Company shall, and shall cause its
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 gas utility industry.
(r) Permits. The Company shall, and shall cause its
subsidiaries to, use reasonable efforts to maintain in effect all existing
governmental permits pursuant to which the Company or any of its
subsidiaries operate.
(s) Takeover Laws. Neither party shall take any action that
would cause the transactions contemplated by this Agreement to be subject
to requirements imposed by any Takeover Law, and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable
Takeover Law, as now or hereafter in effect, including Chapters 110C, 110D
and 110F of the Massachusetts General Laws.
(t) No Rights Triggered. The Company shall ensure that the
entering into of this Agreement and the consummation of the transactions
contemplated hereby and any other action or combination of actions, or any
other transactions contemplated hereby, do not and will not result,
directly or indirectly, in the grant of any rights to any person under any
material agreement (other than the employment agreements disclosed in
Section 6.1(t) of the Company Disclosure Schedule) to which it or any of
its subsidiaries is a party.
(u) Taxes. Except as disclosed on Section 6.1(u) of the
Company Disclosure Schedule, the Company shall not, and shall cause its
subsidiaries not to, (A) make or rescind any express or deemed material
election relating to Taxes, (B) settle or compromise any material claim,
audit, dispute, controversy, examination, investigation or other proceeding
relating to Taxes, (C) materially change any of its methods of reporting
income or deductions for federal income Tax purposes, except as may be
required by applicable law, or (D) file any material Tax Return other than
in a manner consistent with past custom and practice.
Section 6.2 Covenant of the Company; Alternative Proposals. From
and after the date hereof, the Company agrees (a) that it will not, its
subsidiaries will not, and it will not authorize or permit any of its or
its subsidiaries' officers, trustees, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its subsidiaries or any of
the foregoing) to, directly or indirectly, encourage, initiate or solicit
(including by way of furnishing information) or take any other action to
facilitate knowingly any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders)
which constitutes or may reasonably be expected to lead to an Alternative
Proposal (as defined below) from any person or engage in any discussion or
negotiations concerning, or provide any non-public information or data to
make or implement, an Alternative Proposal; (b) that it will immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussions or negotiations with any parties
conducted heretofore with a view of formulating an Alternative Proposal;
and (c) that it will notify Parent orally and in writing of any such
inquiry, offer or proposals (including, without limitation, the terms and
conditions of any such proposal and the identity of the person making it),
within one business day of the receipt thereof, and that it shall keep
Parent informed of the status and details of any such inquiry, offer or
proposal and shall give Parent 48 hours' prior notice of any agreement to
be entered into or of the fact that it proposes to commence providing
information to any person making such inquiry, offer or proposal; provided
however, that notwithstanding any other provision hereof, the Company may
(i) at any time prior to the time at which the Company Shareholders'
Approval shall have been obtained engage in discussions or negotiations
with a third party who (without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or
with Company or its representatives after the date hereof) seeks to
initiate such discussions or negotiations and may furnish such third party
information concerning the Company and its business, properties and assets
if, and only to the extent that, (A) (x) the third party has first made an
Alternative Proposal that is financially superior to the Merger and has
demonstrated that any necessary financing has been obtained, or in the
reasonable judgment of the Company's financial advisor is obtainable, and
(y) the Board of Trustees of the Company shall conclude in good faith,
after consultation with its financial advisor and based upon the advice of
outside counsel and such other matters as the Board of Trustees of the
Company deems relevant, that failure to do so would likely result in a
breach of its fiduciary duties under applicable law, and (B) prior to
furnishing such information to, or entering into discussions or
negotiations with, such person or entity, the Company (x) provides prompt
written notice to Parent to the effect that it intends to furnish
information to, or intends to enter into discussions or negotiations with,
such person or entity, (y) provides the Parent a reasonable opportunity to
respond to the Alternative Proposal and (z) receives from such person an
executed confidentiality agreement in reasonably customary form except that
such confidentiality agreement shall not prohibit such person from making
an unsolicited Alternative Proposal, and (ii) comply with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange
offer and/or (iii) accept an Alternative Proposal from a third party,
provided the Company terminates this Agreement pursuant to Section 9.1(e).
"Alternative Proposal" shall mean any merger, acquisition, consolidation,
reorganization, share exchange, tender offer, exchange offer or similar
transaction involving the Company or any of the Company's subsidiaries, or
any proposal or offer to acquire in any manner, directly or indirectly, a
substantial equity interest in or a substantial portion of the assets of
the Company or any of the Company's subsidiaries. Nothing herein shall
prohibit a disposition permitted by Section 6.1(g) hereof.
Section 6.3 Employment Agreements. Parent and the Company have
entered into employment agreements with Mr. Robert M. Allessio, Mr.
Michael J. Marrone and Ms. Cheryl M. Clark (the "Employment Agreements"),
which will become effective upon consummation of the Merger. The Berkshire
Gas Company, a subsidiary of the Company, has entered into an amendment of
its employment agreement with Mr. Scott S. Robinson (the "Robinson
Employment Agreement")
Section 6.4 Additional Statutory Approvals. Parent agrees not to,
and it will not permit any subsidiary to, and will use reasonable best
efforts to cause any prospective subsidiary not to, be a party to any
transaction that would make it necessary for Parent or the Company to make
any declaration, filing or registration with, or notice to or
authorization, consent or approval of, any Governmental Authority in
connection with the consummation by Parent, Merger Sub or the Company of
the transactions contemplated by this Agreement, other than those set forth
in Section 5.4(c) of the Parent Disclosure Schedule or Section 4.4(c) of
the Company Disclosure Schedule, in either case, that would reasonably be
expected to prevent or materially impede, interfere with, or delay
consummation of the Merger or the transactions contemplated by this
Agreement beyond the 18-month anniversary of the date hereof.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice and
during normal business hours, each party shall, and shall cause its
subsidiaries to, afford to the officers, directors, trustees, employees,
accountants, counsel, investment bankers, financial advisors and other
representatives of the other (collectively, "Representatives") reasonable
access, 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, each party shall, and
shall cause its subsidiaries to, furnish promptly to the other (a) access
to each report, schedule and other document filed or received by it or any
of its subsidiaries pursuant to the requirements of federal or state
securities laws or filed with or sent to the SEC, the FERC, the Department
of Justice, the Federal Trade Commission or any other federal or state
regulatory agency or commission, and (b) access to all information
concerning themselves, their subsidiaries, directors, trustees, officers
and shareholders and such other matters as may be reasonably requested by
the other party in connection with any filings, applications or approvals
required or contemplated by this Agreement. Each party shall, and shall
cause its subsidiaries and Representatives to, hold in strict confidence
all Evaluation Material (as defined in the Confidentiality Agreement)
concerning the other parties furnished to it in connection with the
transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated as of September 23, 1999, between the
Company and Parent, as it may be amended from time to time (the
"Confidentiality Agreement").
Section 7.2 Proxy Statement. As soon as reasonably practicable
after the date hereof, the Company shall prepare the Proxy Statement, file
it with the SEC under the Exchange Act and use all reasonable efforts to
have the Proxy Statement cleared by the SEC. Each of the parties hereto
shall furnish all information concerning itself which is required or
customary for inclusion in the Proxy Statement. No representation,
covenant or agreement is made by or on behalf of any party hereto with
respect to information supplied by any other party for inclusion in the
Proxy Statement.
Section 7.3 Regulatory Matters. Each party hereto shall cooperate
and use its best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to use all commercially reasonable efforts
to obtain no later than the Initial Termination Date, as such date may be
extended pursuant to Section 9.1(b), all necessary permits, consents,
approvals and authorizations of all Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement,
including, without limitation, the Company Required Statutory Approvals and
the Parent Required Statutory Approvals.
Section 7.4 Company Shareholders' Approval.
(a) Company Special Meeting. Subject to the provisions of
Section 7.4(b), the Company shall, as soon as reasonably 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 Special
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 declaration of trust and by-
laws, (iii) subject to the fiduciary duties of its Board of Trustees,
recommend to its shareholders the approval of this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult with Parent
with respect to each of the foregoing matters.
(b) Meeting Date. The Company Special Meeting for the
purpose of securing the Company Shareholders' Approval shall be held on
such date as the Company and Parent shall mutually determine.
Section 7.5 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, Parent and the Surviving Company 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, an officer, director,
trustee or employee of the Company or any of its subsidiaries (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 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, trustee, officer or employee of the Company or
a subsidiary of the Company (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 the event of
any such loss, expense, claim, damage or liability (whether or not arising
before the Effective Time), (i) Parent shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to Parent, promptly after statements
therefor are received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred, (ii) any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth in Section 8 of the
MLLCA or the declaration of trust or certificate of incorporation or by-
laws shall be made by independent counsel mutually acceptable to Parent and
the Indemnified Party; provided, however, that Parent shall not be liable
for any settlement effected without its written consent (which consent
shall not be unreasonably withheld). The Indemnified Parties as a group may
retain only one law firm with respect to each related matter except to the
extent there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, a conflict on any significant
issue between positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective
Time, Parent shall (i) cause to be maintained in effect policies of
directors' and officers' liability insurance for the benefit of those
persons who are currently covered by such policies of the Company on terms
no less favorable than the terms of such current insurance coverage or (ii)
provide tail coverage for such persons which provides coverage for a period
of six years for acts prior to the Effective Time on terms no less
favorable than the terms of such current insurance coverage; provided,
however, that Parent shall not be required to expend in any year an amount
in excess of 200% of the annual aggregate premiums currently paid by the
Company, for such insurance; and provided, further, that if the annual
premiums of such insurance coverage exceed such amount, Parent shall be
obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of Parent, for a cost not
exceeding such amount.
(c) Successors. In the event Parent or any of its successors
or assigns (i) consolidates with or merges into any other person 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, then, and in either such case, proper
provisions shall be made so that the successors and assigns of Parent 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, trustees and officers of the Company, and its subsidiaries with
respect to their activities as such prior to the Effective Time, as
provided in their respective declaration of trust or articles of
organization 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 Disclosure Schedules. On the date hereof, (a) Parent
has delivered to the Company a schedule (the "Parent Disclosure Schedule"),
accompanied by a certificate signed by the Executive Vice President and
General Counsel of Parent stating the Parent Disclosure Schedule is being
delivered pursuant to this Section 7.6(a), and (b) the Company has
delivered to Parent a schedule (the "Company Disclosure Schedule"),
accompanied by a certificate signed by the President and Chief Executive
Officer of the Company stating the Company Disclosure Schedule is being
delivered pursuant to this Section 7.6(b). The Company Disclosure Schedule
and the Parent Disclosure Schedule are collectively referred to herein as
the "Disclosure Schedules." The Disclosure Schedules constitute an integral
part of this Agreement and modify the respective representations,
warranties, covenants or agreements of the parties hereto contained herein
to the extent that such representations, warranties, covenants or
agreements expressly refer to the Disclosure Schedules. Anything to the
contrary contained herein or in the Disclosure Schedules notwithstanding,
any and all statements, representations, warranties or disclosures set
forth in the Disclosure Schedules shall be deemed to have been made on and
as of the date hereof.
Section 7.7 Public Announcements. Subject to each party's
disclosure obligations imposed by law, the Company and Parent 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 without the
consent of the other party (which consent shall not be unreasonably
withheld).
Section 7.8 Certain Employee Agreements. Subject to Section 7.9,
Parent and the Surviving Company and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements
and commitments of the parties which apply to any current or former
employee or current or former director or trustee of the parties hereto;
provided, however, that the foregoing shall not prevent Parent or the
Surviving Company from enforcing such contracts, agreements, collective
bargaining agreements and commitments in accordance with their terms,
including, without limitation, any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective
bargaining agreement or commitment. It is the present intention of Parent
and the Company that following the Effective Time, there will be no
involuntary reductions in force at the Surviving Company or its
subsidiaries, but that Parent, the Surviving Company and their respective
subsidiaries will continue Parent's and the Company's present strategy of
achieving workforce reductions through attrition; however, if any
reductions in workforce in respect of employees of Parent and its
subsidiaries, including the Surviving Company and its subsidiaries, become
necessary, they shall be made on a fair and equitable basis, in light of
the circumstances and the objectives to be achieved, giving consideration
to previous work history, job experience, qualifications, and business
needs without regard to whether employment prior to the Effective Time was
with the Company or its subsidiaries or Parent or its subsidiaries, and any
employees whose employment is terminated or jobs are eliminated by Parent,
the Surviving Company or any of their respective subsidiaries shall be
entitled to participate on a fair and equitable basis in the job
opportunity and employment placement programs offered by Parent, the
Surviving Company or any of their respective subsidiaries. Any workforce
reductions carried out following the Effective Time by Parent or the
Surviving Company and their respective 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) Except as may be required by applicable law, each Plan in
effect on the date hereof (or as amended or established in accordance with
or as permitted by this Agreement) shall be maintained in effect with
respect to the employees, former employees, trustees, former trustees,
directors or former directors of the Company and any of its subsidiaries
who are covered by such plans, programs, agreements or arrangements
immediately prior to the Effective Time until Parent determines otherwise
on or after the Effective Time, and Parent shall assume or cause the
Surviving Company to assume as of the Effective Time each Plan maintained
by the Company immediately prior to the Effective Time and perform such
plan, program, agreement or arrangement in the same manner and to the same
extent that the Company would be required to perform thereunder; provided,
however, that nothing herein contained shall limit any reserved right
contained in any such Plan to amend, modify, suspend, revoke or terminate
any such plan, program, agreement or arrangement; provided, further, that
Parent or its subsidiaries shall provide to each employee of the Company
and any of its subsidiaries who was covered by Plans immediately prior to
the Effective Time and who is not covered by a collective bargaining
agreement (a "Covered Company Employee"), for a period of no less than 18
months following the Effective Time, employer-provided benefits under
Qualified Plans, supplemental retirement benefit and deferred compensation
plans which are not Qualified Plans and welfare plans that are no less
favorable in the aggregate than those provided to the employee immediately
prior to the Effective Time. Without limiting the foregoing, each Covered
Company Employee who is a participant in any Plan shall receive credit for
purposes of eligibility to participate, vesting and eligibility to receive
benefits (but specifically excluding for benefit accrual purposes) under
any replacement benefit plan of Parent or any of its subsidiaries or
affiliates in which such employee becomes a participant for service
credited for the corresponding purpose under any such Plan; provided,
however, that such crediting of service shall not operate to cause any such
plan or agreement to fail to comply with the applicable provisions of the
Code and ERISA. No provision contained in this Section 7.9 shall be deemed
to constitute an employment contract between Parent or any of its
subsidiaries and any individual, or a waiver of Parent's or any of its
subsidiaries' right to discharge any employee at any time, with or without
cause.
(b) The Company shall take all necessary actions so that,
effective no later than immediately before the Effective Time, (i) each of
the Corporate Incentive Compensation Plan, The Berkshire Gas Company
Supplemental Executive Retirement Plan (the "SERP"), the Trust under the
SERP, The Berkshire Gas Company Executive Retiree Health Plan (the "Retiree
Plan") and all other executive benefit plans and programs of the Company
and its subsidiaries shall be amended to the extent necessary so that any
provisions therein that prohibit or limit the amendment or termination
thereof following a change of control do not apply to individuals who are
not participants therein as of the date of this Agreement and (ii) subject
to applicable law and the provisions of any applicable collective
bargaining agreement, each Qualified Plan shall be amended to the extent
necessary so that any provisions therein that call for the waiver or
elimination of vesting requirements upon or following a change in control
shall apply only to individuals who are participants therein immediately
before the Effective Time. Notwithstanding anything to the contrary
herein, the Company shall take all necessary action so that, at the
Effective Time, the Retiree Plan shall be amended to the extent necessary
so that Messrs. Allessio and Marrone shall not participate in the Retiree
Plan.
Section 7.10 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 those expenses incurred in connection with printing the Proxy
Statement, as well as the filing fee relating thereto, shall be shared
equally by the Company and Parent.
Section 7.11 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.
Section 7.12 Corporate Offices. At and subsequent to the Effective
Time, the headquarters of the Surviving Company shall be located in
Pittsfield, Massachusetts.
Section 7.13 Community Involvement. After the Effective Time,
Parent will, or will cause the Surviving Company to make an aggregate of
$200,000 per year in charitable contributions to the communities served by
the Surviving Company and otherwise maintain a substantial level of
involvement in community activities in the Commonwealth of Massachusetts
(as well as the States of Vermont and New York) that is similar to, or
greater than, the level of community development and related activities
carried on by the Company.
Section 7.14 Advisory Board. At the Effective Time, there shall be
established an advisory board to the Surviving Company ("Advisory Board"),
which shall be comprised of the persons who were trustees of the Company
immediately prior to the Effective Time. The Advisory Board shall meet no
less frequently than quarterly and shall provide advice to the Board of
Trustees of the Surviving Company with respect to such issues as the Board
of Trustees of the Surviving Company may from time to time request,
including but not limited to community relations, customer service,
economic development, employee development and relations and such other
matters of community interest as may be appropriate. The members of the
Advisory Board, who shall serve at the discretion of the Surviving Company,
shall receive remuneration for their services equivalent to the
remuneration currently provided to non-employee trustees of the Company.
Parent acknowledges that, pursuant to the Retirement Plan for Directors of
The Berkshire Gas Company dated September 1, 1993, as amended, each trustee
of the Company shall be credited with a minimum of 10 years of service
under Section 4 of said Retirement Plan and shall be deemed fully vested
pursuant to Section 4 of said Retirement Plan as of the Effective Time.
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 Section 9.5 by
the joint action of the parties hereto:
(a) Shareholder Approval. 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 the Parent Required Statutory Approvals shall have been
obtained at or prior to the Effective Time, such approvals shall have
become Final Orders (as defined below) and such Final Orders shall not
impose terms or conditions which, in the aggregate, would have, or insofar
as reasonably can be foreseen, could have, a Company Material Adverse
Effect or a Parent Material Adverse Effect; provided, however, that a
requirement that Parent become a registered holding company pursuant to
Section 5 of the 1935 Act as a result of the Merger shall not constitute a
term or condition which could have a "material adverse effect" within the
meaning of this Section 8.1(c). In addition, the inclusion of a condition
or requirement of the SEC's approval of the Merger under the 1935 Act that
Parent divest its ownership of, or not consummate the acquisition of, any
of the entities listed on Section 8.1(c) of the Parent Disclosure Schedule,
shall constitute a term or condition which could have a "material adverse
effect" within the meaning of this Section 8.1(c). 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 Parent to Effect the
Merger. The obligation of Parent 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 Parent in writing pursuant
to Section 9.5:
(a) Performance of Obligations of the Company. The Company
(and its appropriate subsidiaries) shall have performed in all material
respects its agreements and covenants contained in Sections 6.1 and 6.2 and
shall have performed in all material respects its other agreements and
covenants contained in or contemplated by this Agreement 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 other
than the date hereof or the Closing Date, 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 regard to any materiality qualifications contained therein) which,
individually and in the aggregate, would not be reasonably likely to result
in a Company Material Adverse Effect.
(c) Closing Certificates. Parent 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) No Company Material Adverse Effect. No Company Material
Adverse Effect shall have occurred, and there shall exist no fact or
circumstance (other than facts and circumstances described in Section
8.2(d) of the Company Disclosure Schedule or the Company SEC Reports filed
prior to the date hereof) which is reasonably likely to 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.
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 Section 9.5.
(a) Performance of Obligations of Parent. Parent (and its
appropriate subsidiaries) shall have performed in all material respects its
agreements and covenants contained in Section 6.1 and shall have performed
in all material respects its other agreements and covenants contained in or
contemplated by this Agreement to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of Parent 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 other
than the date hereof or the Closing Date, 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 regard to any materiality qualifications contained therein) which,
individually and in the aggregate, would not be reasonably likely to result
in a Parent Material Adverse Effect.
(c) Closing Certificates. The Company shall have received a
certificate signed by the Executive Vice President and General Counsel of
Parent, 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.
(d) Parent Required Consents. The Parent Required Consents
the failure of which to obtain would have a Parent Material Adverse Effect
shall have been obtained.
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 approval by the
shareholders of the respective parties hereto contemplated by this
Agreement:
(a) by mutual written consent of the Board of Directors of
Parent and the Board of Trustees of the Company;
(b) by any party hereto, by written notice to the other
parties, if the Effective Time shall not have occurred on or before the
date that is 12 months from the date hereof (the "Initial Termination
Date"); provided, however, that if on the Initial Termination Date the
conditions to the Closing set forth in Section 8.1(c) 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 the 18-month anniversary of the date hereof; and
provided, further, that the right to terminate this Agreement under this
Section 9.1(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement or whose breach of any agreement or
covenant has been the cause of, or resulted directly or indirectly in, the
failure of the Effective Time to occur on or before the Initial Termination
Date or as it may be so extended.
(c) by any party hereto, by written notice to the other
parties, if the Company Shareholders' Approval shall not have been obtained
at a duly held Company Special Meeting, including any adjournments thereof
by the Initial Termination Date;
(d) by any party hereto, 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;
(e) by the Company prior to the time at which the Company
Shareholders' Approval shall have been obtained, upon five days' prior
notice to Parent, if the Company is not in breach of this Agreement and, as
a result of an Alternative Proposal, the Board of Trustees of the Company
determines in good faith, that (i) the Alternative Proposal is financially
superior to the Merger and the third party making the Alternative Proposal
has demonstrated that any necessary financing has been obtained, or in the
reasonable judgment of the Company's financial advisor such financing is
obtainable, and (ii) after consultation with its financial advisor and
based upon the advice of outside counsel and such other matters as the
Board of Trustees of the Company deems relevant, after considering
applicable provisions of state law and after giving effect to all
concessions which may be offered by the other party pursuant to the proviso
below, that failure to do so would likely result in a breach of its
fiduciary duties under applicable law; provided, however, that prior to any
such termination, the Company shall, and shall cause its respective
financial and legal advisors to, negotiate with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated herein;
(f) by the Company, by written notice to Parent, if (i) there
exist breaches of the representations and warranties of Parent made herein
as of the date hereof which breaches, individually or in the aggregate,
would or would be reasonably likely to result in a Parent Material Adverse
Effect, and such breaches shall not have been remedied within 20 days after
receipt by Parent of notice in writing from the Company, specifying the
nature of such breaches and requesting that they be remedied, or (ii)
Parent (or its appropriate subsidiaries) shall have failed to perform and
comply with, in all material respects, its agreements and covenants
hereunder, and such failure to perform or comply shall not have been
remedied within 20 days after receipt by Parent of notice in writing from
the Company, specifying the nature of such failure and requesting that it
be remedied;
(g) by Parent, by written notice to the Company, if (i) there
exist material breaches of the representations and warranties of the
Company made herein as of the date hereof which breaches, individually or
in the aggregate, would or would be reasonably likely to result in a
Company Material Adverse Effect, and such breaches shall not have been
remedied within 20 days after receipt by the Company of notice in writing
from Parent, specifying the nature of such breaches and requesting that
they be remedied, (ii) the Company (or its appropriate subsidiaries) shall
not have performed and complied with its agreements and covenants contained
in Sections 6.1(b) and 6.1(c) or shall have failed to perform and comply
with, in all material respects, its other agreements and covenants
hereunder, and such failure to perform or comply shall not have been
remedied within 20 days after receipt by the Company of notice in writing
from Parent, specifying the nature of such failure and requesting that it
be remedied; or (iii) the Board of Trustees of the Company or any committee
thereof (A) shall withdraw or modify in any manner adverse to Parent its
approval or recommendation of this Agreement or the transactions
contemplated herein, (B) shall fail to reaffirm such approval or
recommendation upon Parent's request within two days of such request, (C)
shall approve or recommend any acquisition of the Company or a material
portion of its assets or any tender offer for the shares of the Company, in
each case by a party other than Parent or any of its affiliates or (D)
shall resolve to take any of the actions specified in clause (A), (B) or
(C); or
(h) by Parent, by written notice to the Company, if Parent
reasonably believes that (i) the transactions contemplated by this
Agreement will delay the grant of any regulatory approval of any of the
transactions listed in Section 9.1(h) of the Parent Disclosure Schedule or
(ii) any such regulatory approval, if granted, will be unduly burdensome to
Parent.
Section 9.2 Effect of Termination. Subject to Section 10.1(b), in
the event of termination of this Agreement by either the Company or Parent
pursuant to Section 9.1, there shall be no liability on the part of either
the Company or Parent or their respective officers, directors or trustees
hereunder, except that Section 7.10, Section 9.3, the agreement contained
in the last sentence of Section 7.1, Section 10.8 and Section 10.9 shall
survive the termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee upon Breach or Withdrawal of Approval.
If this Agreement is terminated at such time that this Agreement is
terminable pursuant to one (but not both) of (x) Section 9.1(f)(i) or (ii)
or (y) Section 9.1(g)(i) or (ii), then: the breaching party shall promptly
(but not later than five business days after receipt of notice from the
non-breaching party) pay to the non-breaching party in cash an amount equal
to all documented out-of-pocket expenses and fees incurred by the non-
breaching party (including, without limitation, fees and expenses payable
to all legal, accounting, financial, public relations and other
professional advisors arising out of, in connection with or related to the
Merger or the transactions contemplated by this Agreement) not in excess of
$2 million ("Expenses"); provided, however, that, if this Agreement is
terminated by a party as a result of a willful breach by the other party,
the non-breaching party may pursue any remedies available to it at law or
in equity and shall, in addition to its out-of-pocket expenses (which shall
be paid as specified above and shall not be limited to $2 million), be
entitled to retain such additional amounts as such non-breaching party may
be entitled to receive at law or in equity.
(b) If this Agreement is terminated by Parent pursuant to
Section 9.1(h), then Parent shall promptly (but not later than five
business days after receipt of notice from the Company) pay to the Company
in cash an amount equal to $4 million.
(c) The Company shall pay Parent a fee of $4 million
("Termination Fee") plus Expenses, upon the termination of this Agreement
by Parent or the Company pursuant to Section 9.1(c) or the Company pursuant
to Section 9.1(e) or by Parent pursuant to Section 9.1(g)(iii); provided,
however, that in the event of termination under either Section 9.1(c) or
Section 9.1(g)(iii), no payment of the Termination Fee or Expenses shall be
required unless and until within two years of such termination the Company
enters into a definitive agreement to consummate or consummates an
Alternative Proposal, and, in the case of a termination pursuant to Section
9.1(c), there shall have been made and not withdrawn at the time of the
Company Special Meeting an Alternative Proposal and, in the case of a
termination pursuant to Section 9.1(g)(iii), there shall have been made and
not withdrawn at the time of such termination an Alternative Proposal.
(d) Liquidated Damages; Prompt Payment. The parties agree
that the agreements contained in this Section 9.3 are an integral part of
the transactions contemplated by the Agreement and constitute liquidated
damages and not a penalty. If one party fails to pay promptly to the other
any fee or expenses due hereunder, 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 fee at
the publicly announced prime rate of Chase Manhattan Bank, N.A., from the
date such fee was required to be paid.
Section 9.4 Amendment. This Agreement may be amended by the
Boards of Directors or Trustees or Managers as the case may be, of the
parties hereto, at any time before or after approval hereof by the
shareholders of the Company and prior to the Effective Time, but after such
approvals, no such amendment shall (a) alter or change the amount or kind
of shares, rights or any of the proceedings of the treatment of shares
under Article II, or (b) alter or change any of the terms and conditions of
this Agreement if any of the alterations or changes, alone or in the
aggregate, would materially adversely affect the rights of holders of
Company shares, except for alterations or changes that could otherwise be
adopted by the Board of Trustees of the Company, without the further
approval of such shareholders. 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) 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 if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-survival; Effect of Representations and
Warranties. (a) All representations, warranties and agreements in this
Agreement shall not survive the Merger, except as otherwise provided in
this Agreement and except for the agreements contained in this Section
10.1, in Articles I and II and in Sections 7.5, 10.7, 10.8, 10.9 and 10.10.
(b) No party may assert a claim for breach of any
representation or warranty contained in this Agreement (whether by direct
claim or counterclaim) except in connection with the cancellation of this
Agreement pursuant to Section 9.1(f)(i) or Section 9.1(g)(i) (or pursuant
to any other subsection of Section 9.1, if the terminating party would have
been entitled to terminate this Agreement pursuant to Section 9.1(f)(i) or
Section 9.1(g)(i)).
Section 10.2 Brokers. The Company represents and warrants that,
except for Tucker Anthony Cleary Gull, whose fees have been disclosed to
Parent 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.
Parent represents and warrants that, except for Chase Securities, Inc.,
whose fees have been disclosed to the Company 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 Parent.
Section 10.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if (a) delivered
personally, (b) sent by reputable overnight courier service, (c) telecopied
(which is confirmed) or (d) five days after being mailed by registered or
certified mail (return receipt requested) 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:
Berkshire Energy Resources
115 Cheshire Road
Pittsfield, Massachusetts 01201
Attention: Scott S. Robinson
President and Chief Executive Officer
Telephone: (413) 442-1511
Telecopy: (413) 443-0546
with a copy to:
Rich, May, Bilodeau & Flaherty, P.C.
176 Federal Street
Boston, Massachusetts 02110
Attention: Joseph F. Sullivan, Esq.
Telephone: (617) 482-1360
Telecopy: (617) 556-3889
(ii) If to Parent or Merger Sub, to:
Energy East Corporation
One Canterbury Green
P.O. Box 1196
Stamford, Connecticut 06901
Attention: Mr. Kenneth M. Jasinski
Executive Vice President and General Counsel
Telephone: (203) 325-0690
Telecopy: (203) 325-1901
with a copy to:
Huber Lawrence & Abell
605 Third Avenue
New York, New York 10158
Attention: Leonard Blum, Esq.
Telephone: (212) 682-6200
Telecopy: (212) 661-5759
Section 10.4 Miscellaneous. This Agreement (including the
documents and instruments referred to herein) (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 other than the Employment Agreements, the
Robinson Employment Agreement and the Confidentiality Agreement; (b) shall
not be assigned other than by operation of law without the prior written
consent of the other parties hereto; 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 and except to
the extent the provisions of this Agreement (including the documents or
instruments referred to herein) are expressly governed by or derive their
authority from the MLLCA or the MGL.
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."
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.
Section 10.7 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and their
respective successors and permitted assigns, 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 and Certain Damages. Each party
to this Agreement waives, to the fullest extent permitted by applicable
law, (a) any right it may have to a trial by jury in respect of any action,
suit or proceeding arising out of this Agreement and (b) without limiting
the effect of Section 9.3, any right it may have, other than in the case of
a willful breach, to receive damages from any other party based on any
theory of liability for any special, indirect, consequential (including
lost profits) or punitive damages.
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 State of New
York or in New York state court, 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 State of New York or any New York state
court 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 or state court sitting in the
State of New York.
Section 10.10. Disclaimer of Liability. As provided by Article 3 of
the Company's declaration of trust, no trustee of the Company shall be held
to any liability whatever for the payment of any sum of money, or for
damage or otherwise under this Agreement, and this Agreement shall not be
enforceable against the trustees, shareholders (other than Parent),
officers, agents or other representatives of the Company or any of them in
their, his or her individual capacities or capacity. This Agreement shall
be enforceable only against the Company, Merger Sub and Parent. Every
person, firm, association, trust and corporation shall look only to the
trust estate of the Company for the payment or satisfaction of any
liability or damages of the Company arising out of or in connection with
this Agreement.
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
BERKSHIRE ENERGY RESOURCES
By: /s/ Scott S. Robinson
-------------------------
Name: Scott S. Robinson
Title: President and Chief
Executive Officer
ENERGY EAST CORPORATION
By: /s/ Kenneth M. Jasinski
-------------------------
Name: Kenneth M. Jasinski
Title: Executive Vice President and
General Counsel
MOUNTAIN MERGER LLC
By: /s/Kenneth M. Jasinski
-------------------------
Name: Kenneth M. Jasinski
Title: Secretary, Treasurer and
Vice President
APPENDIX B
LETTERHEAD OF TUCKER ANTHONY CLEARY GULL
January 12, 2000
Board of Trustees
Berkshire Energy Resources
115 Cheshire Road
Pittsfield, MA 01201
Gentlemen:
We understand that Berkshire Energy Resources, a Massachusetts
business trust ("Berkshire" or the "Company"), is contemplating a merger
(the "Berkshire Merger") with Mountain Merger LLC, a Massachusetts limited
liability company ("Merger Sub") and a wholly owned subsidiary of Energy
East Corporation, a New York corporation ("Energy East") pursuant to an
Agreement and Plan of Merger dated as of November 9, 1999 (the "Merger
Agreement"), which provides, among other things, for the merger of Merger
Sub with and into Berkshire (the "Merger"). Pursuant to the Merger
Agreement, and subject to the terms and conditions thereof, Berkshire will
become a wholly owned subsidiary of Energy East and each outstanding share
of common stock, no par value of the Company ("Berkshire Common Shares")
will be converted into the right to receive $38.00 net, in cash (the
"Consideration").
You have requested our opinion (the "Opinion") as investment bankers
as to whether the Consideration as provided for in the Merger Agreement to
be received by the holders of the Berkshire Common Shares, is fair, from a
financial point of view, to the holders of Berkshire Common Shares.
Tucker Anthony Cleary Gull ("Tucker Anthony"), as part of its
investment banking business, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements and valuations for corporate
and other purposes. In the ordinary course of our business, we may trade the
securities of either of the Company or Energy East for our own account or
for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities. Tucker Anthony has acted as the
Company's financial advisor in connection with, and has participated in the
negotiations leading to, the proposed Merger. Tucker Anthony will receive
fees for rendering this opinion and for acting as financial advisor, a
substantial portion of such advisory fees are contingent upon the closing of
the proposed Merger. Tucker Anthony has not provided investment banking
services to Energy East.
In arriving at the Opinion, we have, among other things, reviewed and
analyzed the following:
(i) the most recent available draft form of the Merger Agreement;
(ii) certain publicly available information concerning the Company,
including the annual reports on form 10-K of the Company for the
three fiscal years ending June 30, 1999;
(iii) certain other internal information, primarily financial in
nature, including projections and assumptions related thereto,
concerning the business, assets and operations of the Company,
furnished to us by the Company for purposes of our analysis;
(iv) certain publicly available information concerning the trading
of, and the trading market for the Berkshire Common Shares;
(v) certain publicly available information concerning Energy East,
including the annual reports on form 10-K of Energy East for the
three years ending December 31, 1998 and the quarterly reports
on form 10-Q for the quarterly periods ending March 31, 1999,
June 30, 1999 and September 30, 1999;
(vi) certain publicly available information with respect to certain
other companies that we believe to be comparable to the Company
and the trading markets for certain of such other companies'
securities; and
(vii) certain publicly available information concerning the nature and
terms of certain other merger and acquisition transactions that
we consider relevant to the proposed Merger and our analysis.
We have considered such other information, financial studies,
analyses, investigations and financial, economic and market conditions and
criteria that we deemed relevant. We also met with the management of the
Company to discuss the foregoing, as well as other matters we believe
relevant to the Company and Energy East.
In our review and analysis and in arriving at the Opinion, we have
assumed and relied upon the accuracy and completeness of all the financial
and other information provided to us by the Company or that is publicly
available, and have not attempted to verify any of such information. We
have assumed (i) the financial projections of the Company have been
reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the Company's management as to future financial
performance, and (ii) that such projections will be realized in the amounts
and time periods currently estimated by management. We did not make or
obtain any independent evaluation or appraisals of any assets or liabilities
of the Company. The Opinion is necessarily based upon prevailing market
conditions and other circumstances and conditions as they exist and can be
evaluated as of the date hereof.
The opinion does not constitute a recommendation of the proposed
Merger to the Company or a recommendation to any holder of Berkshire Common
Shares as to how such holder should vote with respect to the proposed
Merger. Our opinion is, in any event, limited to the fairness, from a
financial point of view, of the Consideration as provided for in the Merger
Agreement. We disclaim any undertakings or obligations to advise any person
of any change in any fact or matter affecting the Opinion which may come or
be brought to our attention after the date of the Opinion.
This opinion is being furnished for the use and benefit of the
Company's Board of Trustees in evaluating the fairness, from a financial
point of view, of the consideration to be received by the holders of
Berkshire Common Shares and may not be quoted or referred to in whole or in
part, nor used for any other purpose without the prior written consent of
Tucker Anthony, provided however, that this letter may be reproduced in
full, with appropriate references made thereto, in the proxy statement filed
in connection with the proposed Merger. The Opinion rendered herein is
given as of the date hereof, and is limited in scope and subject matter as
set forth herein. No other opinions should be inferred beyond the opinion
expressly stated herein.
Based upon and subject to the foregoing, we are of the opinion as
investment bankers that, as of the date hereof, the Consideration to be
received by the holders of Berkshire Common Shares is fair, from a financial
point of view, to the holders of Berkshire Common Shares.
Very truly yours,
/s/ Tucker Anthony Cleary Gull
THIS IS YOUR PROXY,
YOUR VOTE IS IMPORTANT.
The Special Meeting of Shareholders will be held:
DATE: February 29, 2000
LOCATION: OFFICES OF BERKSHIRE ENERGY RESOURCES
TIME: 10:00 A.M.
/X/ Please mark
votes as in
this example
The Board of Trustees recommends a vote FOR approval of the merger
agreement.
FOR AGAINST ABSTAIN
Proposal to Approve the / / / / / /
Agreement and Plan of
Merger among Berkshire
Energy Resources, Energy
East Corporation and Mountain
Merger LLC.
MARK HERE / /
TO DISCONTINUE
MULTIPLE
MAILINGS
MARK HERE / /
IF YOU PLAN
TO ATTEND
THE MEETING
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE ON THE
REVERSE SIDE
OF THIS CARD.
Please date and sign name exactly as it appears hereon.
When signing as attorney, agent, guardian, executor, administrator, trustee
or the like, please give your full title as such.
Signature ____________________________
Date _________________________________
BERKSHIRE ENERGY RESOURCES
Proxy for Special Meeting on February, 29, 1999
This Proxy is Solicited on Behalf of the Board of Trustees
The undersigned hereby appoints Franklin M. Hundley, Scott S. Robinson
and John W. Bond and each of them proxies, with power of substitution, to act
and vote in the name of the undersigned, with all the powers that the
undersigned would possess if personally present, on all matters which may
come before the Special Meeting of Shareholders of Berkshire Energy Resources
to be held on February 29, 2000 and any adjournment thereof.
The proxies are hereby authorized and instructed upon the matters
specified in the Notice of Special Meeting as set forth on the reverse side
hereof. IF NO CHOICE IS INDICATED AS TO A PROPOSAL, THE PROXIES SHALL VOTE
FOR SUCH PROPOSAL. THE PROXIES MAY VOTE IN THEIR DISCRETION ON ANY OTHER
MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting dated January 12, 2000 and the related Proxy Statement.
To ensure that your shares are voted on your behalf, please return your proxy
promptly in the enclosed envelope.
Has your address changed?
- -----------------------------
- -----------------------------
- -----------------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
