<PAGE>
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
CMP GROUP, INC.
- --------------------------------------------------------------------------------
(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:
Shares of common stock, par value $5.00 per share, of CMP Group, Inc.
(2) Aggregate number of securities to which transaction applies:
32,930,215 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 $194,289 has been calculated in accordance with Rule
0-11(a)(4) and (c)(1) under the Exchange Act and is equal to 1/50 of 1%
of $971,441,343 (which is the product of 32,930,215 (the number of
shares of CMP Group common stock to be exchanged in the merger) and
$29.50 (the per share consideration)).
(4) Proposed maximum aggregate value of transaction:
$971,441,343
(5) Total fee paid:
$194,289
/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.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
CMP GROUP, INC.
PROPOSED MERGER--YOUR VOTE IS IMPORTANT
The boards of directors of CMP Group, Inc. and Energy East Corporation have
agreed to a merger in which a newly formed, wholly owned subsidiary of Energy
East will merge into CMP Group.
In exchange for each share of CMP Group common stock, CMP Group shareholders
will receive $29.50 in cash, without interest, if the merger is completed.
CMP Group and Energy East cannot complete the merger unless CMP Group
shareholders approve the merger agreement. We have scheduled a special meeting
of shareholders to vote on this matter.
Your vote is very important. Whether or not you plan to attend the special
meeting, please take the time to vote by completing the enclosed proxy card and
returning it in the enclosed addressed envelope. If you sign, date and mail your
proxy card without indicating how you want to vote, your proxy will be voted and
counted in favor of the merger agreement.
Only shareholders of record of CMP Group on August 30, 1999 are entitled to
attend and vote at the special meeting. The date, time and place of the special
meeting are as follows:
October 7, 1999
2:00 p.m. local time
The Portland Marriott
200 Sable Oaks Drive
South Portland, Maine
This proxy statement contains answers to frequently asked questions and a
summary description of the merger (beginning on page 1), followed by a more
detailed discussion of the merger and other related matters. Because these
answers and this summary are not detailed, we urge you to read this proxy
statement in its entirety.
/s/ David T. Flanagan
David T. Flanagan
President and Chief Executive Officer
CMP Group has furnished all the information in this proxy statement
concerning CMP Group. Energy East has furnished all the information concerning
Energy East.
This proxy statement is dated August 30, 1999 and was first mailed to
shareholders on or about September 3, 1999.
<PAGE>
CMP GROUP, INC.
83 EDISON DRIVE
AUGUSTA, MAINE 04336
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 7, 1999 AT 2:00 P.M. (LOCAL TIME)
To the Shareholders of CMP Group, Inc.:
The CMP Group board of directors is pleased to provide you with notice of
and cordially invites you to attend in person or by proxy the special meeting of
CMP Group shareholders. The special meeting will be held at The Portland
Marriott, 200 Sable Oaks Drive, South Portland, Maine on October 7, 1999 at 2:00
p.m. local time. The sole purpose of the meeting will be to approve the merger
agreement among CMP Group, Energy East and EE Merger Corp., a newly formed,
wholly owned subsidiary of Energy East. In the merger, CMP Group shareholders
will receive $29.50 in cash, without interest, for each CMP Group share owned.
CMP Group shareholders who do not vote their CMP Group shares in favor of
the merger agreement and who deliver to CMP Group, prior to or at the special
meeting, a written objection to the merger will be entitled to assert
dissenters' rights under Maine law. If the merger agreement is approved and
these dissenting shareholders make a written demand for payment within 15 days
after the merger is approved, these shareholders will receive a cash payment
representing the fair value of the shares they currently hold, and not the
consideration payable in the merger. A copy of the sections of Maine law that
govern this process is attached as Appendix C to the accompanying proxy
statement.
Additional information about the merger may be found in the accompanying
proxy statement.
Only CMP Group shareholders as of the close of business on August 30, 1999
are entitled to notice of and to vote at the special meeting or any
postponements or adjournments thereof.
THE CMP GROUP BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF CMP GROUP SHAREHOLDERS AND RECOMMENDS THAT CMP GROUP
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT AT THE SPECIAL MEETING.
Please sign, date and return the accompanying proxy card in the enclosed
addressed envelope, which requires no postage if mailed in the United States.
You may revoke your proxy at any time before the vote is taken by delivering a
written revocation to the Secretary or a proxy with a later date to CMP Group's
shareholder services representative or by appearing in person and voting at the
special meeting.
By Order of the Board of Directors,
/s/ Anne M. Pare
Anne M. Pare
Secretary and Clerk
Augusta, Maine
August 30, 1999
IT IS IMPORTANT THAT YOU SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD IN
THE ENCLOSED ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING.
PLEASE DO NOT SEND STOCK CERTIFICATES WITH YOUR PROXY CARD.
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, YOUR VOTE IS VERY IMPORTANT.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................................................. 3
SUMMARY.................................................................................................... 4
The Companies.......................................................................................... 4
The Special Meeting.................................................................................... 4
Share Ownership of Management.......................................................................... 5
The Merger............................................................................................. 5
Dissenters' Rights of Appraisal........................................................................ 6
The Merger Agreement................................................................................... 6
Market Prices of CMP Group Shares...................................................................... 8
Selected Consolidated Financial Data................................................................... 9
THE COMPANIES.............................................................................................. 10
CMP Group.............................................................................................. 10
Energy East............................................................................................ 11
EE Merger Corp......................................................................................... 13
THE SPECIAL MEETING........................................................................................ 14
Purpose, Time and Place................................................................................ 14
Record Date, Voting Power and Vote Required............................................................ 14
Share Ownership of Management.......................................................................... 14
Voting of Proxies...................................................................................... 14
Revocability of Proxies................................................................................ 15
Solicitation of Proxies................................................................................ 15
NO VOTE REQUIRED FOR ENERGY EAST SHAREHOLDERS.............................................................. 16
THE MERGER................................................................................................. 17
General Description of the Merger...................................................................... 17
Background............................................................................................. 17
CMP Group Reasons for the Merger and Recommendation of the CMP Group Board of Directors................ 19
Opinion of Financial Advisor to the CMP Group Board.................................................... 20
Effective Time of the Merger........................................................................... 25
Articles of Incorporation and By-laws.................................................................. 25
Directors and Officers................................................................................. 25
Accounting Treatment................................................................................... 25
Regulatory Approvals................................................................................... 25
Effects of the Merger.................................................................................. 28
Merger Financing....................................................................................... 28
Interests of Certain Persons in the Merger............................................................. 28
Material Federal Income Tax Consequences of the Merger................................................. 33
RIGHTS OF DISSENTING SHAREHOLDERS.......................................................................... 35
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE MERGER AGREEMENT....................................................................................... 37
General................................................................................................ 37
Corporate Governance Matters........................................................................... 37
Conversion of CMP Group Shares......................................................................... 37
Representations and Warranties......................................................................... 38
Covenants.............................................................................................. 39
Additional Agreements.................................................................................. 41
Conditions............................................................................................. 43
Termination, Amendment and Waiver...................................................................... 45
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS................................................ 47
EXPERTS.................................................................................................... 48
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 48
DEADLINES FOR SHAREHOLDER PROPOSALS........................................................................ 48
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 49
APPENDIX A -- Agreement and Plan of Merger
APPENDIX B -- Opinion of Warburg Dillon Read LLC
APPENDIX C -- Sections 908 and 909 of the Maine Business Corporation Act
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT WILL HAPPEN IN THE PROPOSED TRANSACTION?
A. Energy East will acquire CMP Group by merging one of Energy East's
subsidiaries, EE Merger Corp., into CMP Group.
Q. WHY HAS CMP GROUP DECIDED TO MERGE?
A. The CMP Group board of directors believes that the transaction is in the best
interests of its shareholders because it offers a significant premium over
the historical trading price of CMP Group's common stock. The CMP Group
board of directors and management also believe that the merger will benefit
the combined company and its customers and employees in a manner that CMP
Group could not achieve on its own.
Please read the more detailed description of CMP Group's reasons for the
merger on pages 19 and 20.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. You will receive $29.50 in cash, without interest, for each CMP Group share
you own.
Q. WHAT DO I NEED TO DO NOW?
A. After you carefully read this document, please complete, sign, date and mail
your proxy card in the enclosed return envelope as soon as possible. That
way, your CMP Group shares can be represented at the special meeting.
CMP Group and Energy East cannot complete the merger unless a majority of the
outstanding CMP Group shares approves the merger agreement. Your vote is
very important.
THE CMP GROUP BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL OF THE
MERGER AGREEMENT.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. If the merger is approved and completed, Energy East will send you
written instructions for submitting your CMP Group stock certificates. You
must follow those instructions and return your stock certificates
accordingly. You will receive your cash payment as soon as practicable after
Energy East receives your CMP Group stock certificates along with the other
documents requested in those instructions.
Q. WHO MUST APPROVE THE MERGER?
A. In addition to approvals by the Energy East, CMP Group and EE Merger Corp.
boards of directors, all of which have already been obtained, the merger
must be approved by the holders of a majority of the outstanding CMP Group
shares. We must also obtain some regulatory approvals for the merger. Please
read the more detailed description of the regulatory approvals on pages 25
to 28.
Q. DO ENERGY EAST SHAREHOLDERS VOTE ON THE MERGER AGREEMENT?
A. No. Only CMP Group shareholders vote on the merger agreement.
Q. WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We are working to complete all aspects of the merger as quickly as possible.
Currently, we expect to complete the merger in the middle of the year 2000.
Q. 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?
A. If a broker holds your CMP Group 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.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED AND DATED PROXY CARD?
A. 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: Anne M. Pare, Secretary and Clerk, CMP Group, Inc., 83
Edison Drive, Augusta, Maine 04336. Your latest proxy should be sent to the
same place that you sent the proxy that you originally submitted.
Alternatively, you may attend the special meeting in person and revoke your
proxy orally by notifying the Secretary before the vote takes place.
Q. WHOM SHOULD I CALL IF I WANT TO REQUEST AN ADDITIONAL COPY OF THIS DOCUMENT?
A. You may call CMP Group's shareholder services representative at Boston
EquiServe at (800) 736-3001 to request an additional copy of this document.
If your broker holds your shares, you should call your broker for additional
information.
Q. ON WHAT OTHER MATTERS WILL CMP GROUP SHAREHOLDERS VOTE AT THE SPECIAL
MEETING?
A. CMP Group shareholders will not vote on any other matters at the special
meeting.
Q. I UNDERSTAND THAT ENERGY EAST IS INVOLVED IN SOME OTHER MERGERS. IS ITS
MERGER WITH CMP GROUP CONTINGENT ON THOSE OTHER MERGERS BEING COMPLETED?
A. No. 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. The merger
between CMP Group and Energy East is not contingent upon the completion of
either of these mergers.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT CMP GROUP?
A. Various sources described under "Where You Can Find More Information" on
pages 49 and 50 of this document provide further information.
1
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This document contains some "forward-looking statements," as defined in the
Private Securities Litigation Reform Act of 1995, that involve risks and
uncertainties. We may make these statements about the financial condition,
results of operations and business of Energy East and CMP Group. These
statements may be made directly in this document referring to Energy East or CMP
Group, or may be "incorporated by reference" from other documents filed with the
Securities and Exchange Commission. This document may also include statements
relating to the period following the completion of the merger. You can find many
of these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates," "intends" or similar expressions in this document or
in the documents incorporated by reference.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors that may cause actual results to differ from those
indicated by such forward-looking statements include, among others, the
following:
- the fact that these forward-looking statements are based on information
of a preliminary nature which may be subject to further and continuing
review and adjustment;
- future economic conditions;
- developments in the legislative, regulatory and competitive
environments in which CMP Group and Central Maine Power Company
operate;
- the risk of a significant delay in the expected completion of, and
unexpected consequences resulting from, the merger;
- the highly competitive nature of the electric, natural gas and energy
marketing industries, including the speed and degree to which
competition enters these industries and the risk that other companies
will further expand into markets in which Energy East or CMP Group
operates;
- the risk that government authorities may impose unfavorable terms as a
condition to the merger;
- other circumstances that could affect anticipated revenues and costs,
such as unscheduled maintenance or repair requirements at nuclear
plants and other facilities; and
- other considerations that may be disclosed from time to time in Energy
East's or CMP Group's publicly disseminated documents or filings.
You should not place undue reliance on these forward-looking statements,
which speak only as of the date of this document, or, in the case of a document
incorporated by reference, the date of that document.
The cautionary statements in this section expressly qualify all subsequent
forward-looking statements attributable to Energy East, CMP Group or any person
acting on their behalf. Neither CMP Group nor Energy East undertakes any
obligation to release publicly any revisions to the forward-looking statements
to reflect events or circumstances occurring after the date of this document.
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<PAGE>
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 "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 49
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 CMP GROUP.)
THE COMPANIES
CMP GROUP (SEE PAGES 10 AND 11)
CMP Group, Inc.
83 Edison Drive
Augusta, Maine 04336
(207) 623-3521
CMP Group is a Maine-based holding company. Its principal subsidiary is
Central Maine Power Company, an electric utility serving customers in southern
and central Maine. CMP Group also holds interests in several nonutility
businesses.
At the 1998 annual meeting, Central Maine Power's shareholders approved the
formation of a holding company over Central Maine Power. On September 1, 1998,
CMP Group became the new holding company for Central Maine Power. On that date,
each outstanding Central Maine Power common share was converted into one CMP
Group common share, and each holder of Central Maine Power common shares who had
not filed a dissent to the transaction became a shareholder of CMP Group.
ENERGY EAST (SEE PAGES 11 TO 13)
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,
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 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 by early next year the sale of its 18% interest in Nine Mile
Point nuclear generating unit No. 2 to AmerGen Energy Company. 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 CMP Group,
Connecticut Energy and CTG Resources.
EE MERGER CORP. (SEE PAGE 13)
EE Merger Corp.
P.O. Box 1196
Stamford, Connecticut 06904-1196
(203) 325-0690
EE Merger Corp. is a wholly owned subsidiary of Energy East, formed under
the laws of the State of Maine solely for the purpose of completing the merger
with CMP Group.
THE SPECIAL MEETING
(SEE PAGES 14 AND 15)
The special meeting of CMP Group shareholders will be held at The Portland
Marriott, 200 Sable Oaks Drive, South Portland, Maine on October 7, 1999, at
2:00 p.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
4
<PAGE>
requires the affirmative vote of a majority of the outstanding CMP Group shares.
Only the CMP Group shareholders at the close of business on the record date,
August 30, 1999, will be entitled to notice of and to vote at the special
meeting.
At the close of business on August 30, 1999, there were 32,442,552 CMP Group
shares outstanding, with each share entitled to one vote.
SHARE OWNERSHIP OF MANAGEMENT
(SEE PAGE 47)
At the close of business on August 20, 1999, directors and executive
officers of CMP Group and their affiliates beneficially owned less than 1% of
the outstanding CMP Group shares. It is expected that all of these directors 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 17 TO 20)
You should review the factors that the CMP Group board of directors
considered when deciding whether to approve the merger.
RECOMMENDATION TO SHAREHOLDERS (SEE PAGE 20)
The CMP Group board of directors has determined that the merger is in the
best interests of the CMP Group shareholders and recommends that CMP Group
shareholders vote to approve the merger agreement at the special meeting.
FAIRNESS OPINION (SEE PAGES 20 TO 24)
In deciding to approve the merger, the CMP Group board of directors
considered, among other things, the opinion of Warburg Dillon Read LLC, its
financial advisor, as to the fairness, from a financial point of view, of the
consideration that CMP Group shareholders will receive. A copy of the opinion,
which has been updated to the date of this prospectus, is attached as Appendix B
to this document and is also discussed on pages 20 to 24. We encourage you to
read this opinion.
ACCOUNTING TREATMENT (SEE PAGE 25)
The merger will be accounted for as an acquisition of CMP Group by Energy
East under the purchase method of accounting in accordance with generally
accepted accounting principles. A portion of the purchase price will be
allocated to nonutility assets and liabilities of CMP Group based on their
estimated fair market values at the date of acquisition. As a regulated utility,
the assets and liabilities of Central Maine Power will not be revalued. The
difference between the purchase price, representing fair value, and the recorded
amounts will be shown as goodwill on the balance sheet.
REGULATORY APPROVALS (SEE PAGES 25 TO 28)
CMP Group must obtain regulatory approval from the Maine Public Utilities
Commission and the Connecticut Department of Public Utility Control. In
addition, both CMP Group and Energy East must file certain notification forms
with the Antitrust Division of the Department of Justice and the Federal Trade
Commission. CMP Group and Energy East must also obtain the consent or approval
of the Federal Energy Regulatory Commission, and CMP Group may be required to
obtain the consent of the Nuclear Regulatory Commission. Finally, Energy East
must obtain Securities and Exchange Commission approval of the acquisition under
the Public Utility Holding Company Act and, following completion of the merger,
must register with the Securities and Exchange Commission as a holding company.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGES 28 TO 33)
In considering the recommendation of the CMP Group board of directors to
approve the merger, CMP Group shareholders should be aware that members of the
CMP Group board of directors and CMP Group management will receive benefits as a
result of the merger that will be in addition to or different from the benefits
that CMP Group shareholders receive
5
<PAGE>
generally. For example, David T. Flanagan, the current president and chief
executive officer of CMP Group, will become the chairman of the board, president
and chief executive officer of the surviving company in the merger (which will
be a subsidiary of Energy East). Mr. Flanagan will also become the president of
Energy East and a member of its board of directors, and two other directors of
CMP Group will become directors of Energy East. In addition, new employment
agreements with Mr. Flanagan, two other members of CMP Group management and one
member of Central Maine Power management will take effect at the effective time
of the merger.
The members of the CMP Group board of directors knew about these additional
interests and considered them when they approved the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGES 33 AND 34)
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 tax
basis in CMP Group 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 (or the exercise of dissenters' rights) will affect you in
light of your individual circumstances.
DISSENTERS' RIGHTS OF APPRAISAL
(SEE PAGES 35 AND 36)
Dissenters' rights of appraisal permit shareholders to receive cash equal to
the fair value of their shares rather than the consideration they would receive
under the merger agreement. Under Maine law, CMP Group shareholders are entitled
to assert dissenters' rights of appraisal in the merger. Therefore, if you
follow the procedures required by Maine law and you dissent from the merger
agreement, but the merger agreement is approved by CMP Group shareholders and
the merger is completed, you will receive a cash payment representing the fair
value of CMP Group shares you hold. The fair value of your shares may not be the
same as the consideration payable under the merger agreement. The relevant
provisions of Maine law governing this process are attached as Appendix C to
this document.
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 PAGES 37 AND 38)
Upon completion of the merger, each of your CMP Group shares will be
converted into the right to receive $29.50 in cash, without interest.
CERTAIN COVENANTS (SEE PAGES 39 TO 41)
CMP Group has agreed not to solicit or encourage any proposal from any
person to acquire CMP Group or its assets, but it may respond, in certain
circumstances, to unsolicited proposals that it receives.
CONDITIONS TO THE MERGER (SEE PAGES 43 AND 44)
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 Securities and Exchange Commission approving the merger under the Public
Utility Holding Company Act;
- - approval of the merger agreement by CMP Group shareholders;
- - expiration or termination of the waiting period applicable to the merger
under U.S. federal antitrust laws and obtaining other regulatory approvals,
including from the Maine Public Utilities Commission and from the Connecticut
Department of Public Utility Control; and
- - absence of any injunction or legal restraint blocking the merger, or of any
proceedings
6
<PAGE>
by a governmental authority to block the merger.
The merger will occur, and your CMP Group shares will be converted into the
right to receive $29.50 per share in cash, without interest, as soon as
practicable after CMP Group and Energy East satisfy all of the conditions in the
merger agreement.
TERMINATION (SEE PAGES 45 AND 46)
The merger agreement may be terminated, and the merger abandoned, only in
the following circumstances:
- - if Energy East and CMP Group mutually agree to terminate the merger
agreement;
- - by either Energy East or CMP Group, 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 CMP Group, if the merger is not completed by June
14, 2000 (or December 14, 2000, if the only barrier to closing is that the
requisite regulatory approvals have not been obtained);
- - by either Energy East or CMP Group, if the other party materially breaches
the merger agreement and fails to cure the breach;
- - by Energy East, if the CMP Group board of directors 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; or
- - by CMP Group, prior to its shareholders' approval of the merger agreement, if
CMP Group receives a third-party proposal concerning another business
combination, in response to which the CMP Group board of directors determines
(based on the advice of outside counsel) that failure to accept the proposal
would likely result in a breach of its members' 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 CMP Group may terminate the merger agreement, it must provide
Energy East with a chance to match the competing proposal, as discussed on
pages 45 and 46.
If either Energy East or CMP Group materially breaches the merger agreement
and the other party terminates the agreement, the breaching party must pay the
other party up to $10 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. Moreover, if the merger agreement is terminated
for any of the following reasons:
- - the CMP Group board of directors decides to pursue an alternative acquisition
proposal;
- - (1) CMP Group shareholders fail to approve the merger agreement, (2) there is
an alternative acquisition proposal outstanding at the time of the special
meeting and (3) CMP Group enters into a definitive agreement for or completes
an alternative acquisition within two years of the termination of the merger
agreement; or
- - (1) the CMP Group board of directors withdraws, modifies or fails to affirm
its approval of the merger agreement, (2) there is an alternative acquisition
proposal outstanding at the time of the termination of the merger agreement
and (3) CMP Group enters into a definitive agreement for or completes an
alternative acquisition within two years of the termination of the merger
agreement;
then CMP Group must pay Energy East $33.5 million in addition to fees and
expenses of up to $10 million, as discussed on page 46.
7
<PAGE>
MARKET PRICES OF CMP GROUP SHARES
CMP Group shares are listed and traded on the New York Stock Exchange under
the symbol "CTP."
The following table provides trading and dividend information for CMP Group
shares for the periods indicated. At the 1998 annual meeting, Central Maine
Power's shareholders approved the formation of a holding company over Central
Maine Power. On September 1, 1998, CMP Group became the new holding company for
Central Maine Power. On that date, each outstanding share of Central Maine Power
common stock was converted into one share of CMP Group common stock. Prior to
September 1, 1998, the common stock of Central Maine Power traded on the New
York Stock Exchange, also under the symbol "CTP." The share prices set forth in
this section are as reported on the New York Stock Exchange Composite
Transaction Tape, based on published financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
---------- ---------- -----------
<S> <C> <C> <C>
1997
First Quarter................. $11 5/8 $10 1/2 $0.225
Second Quarter................ $12 3/4 $10 $0.225
Third Quarter................. $13 9/16 $12 1/16 $0.225
Fourth Quarter................ $15 1/2 $12 7/8 $0.225
1998
First Quarter................. $17 13/16 $15 1/4 $0.225
Second Quarter................ $20 3/8 $17 1/16 $0.225
Third Quarter................. $20 1/2 $16 15/16 $0.225
Fourth Quarter................ $20 $16 3/4 $0.225
1999
First Quarter................. $19 9/16 $16 1/4 $0.225
Second Quarter................ $26 3/4 $17 3/4 $0.225
Third Quarter (through August
25, 1999)................... $27 $26 3/16 $0.225
</TABLE>
On June 14, 1999, the last full trading day before the public announcement
of the execution of the merger agreement, the closing price per share of CMP
Group common stock was $20 1/16.
On August 25, 1999, the most recent practicable date for which quotations
were available prior to the printing of this document, the closing price per
share of CMP Group common stock was $26 13/16.
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following sets forth selected consolidated financial data of CMP Group
and Central Maine Power. This information does not purport to be complete and
should be read in conjunction with, and is qualified in its entirety by, CMP
Group's and Central Maine Power'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 December 31, 1994, 1995, 1996, 1997 and 1998 and for each
of the years in the five-year period ended December 31, 1998 are derived from
the audited consolidated financial statements of Central Maine Power and CMP
Group. The selected consolidated financial data as of and for the six months
ended June 30, 1998 and 1999 are derived from unaudited financial statements of
CMP Group.
<TABLE>
<CAPTION>
CMP GROUP CENTRAL MAINE POWER
------------------------------------------- ------------------------------------------
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
JUNE 30, 1999 JUNE 30, 1998 1998 1997 1996 1995 1994
------------- ------------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS:
Total revenues........................ $501,801 $458,771 $950,327 $956,246 $967,905 $916,016 $904,883
Net income (loss)..................... $37,298 $16,970 $52,910 $5,213 $50,777 $27,802 $(33,776)
Earnings (loss) per common share
--Basic............................. $1.15 $0.52 $1.63 $0.16 $1.57 $0.86 $(1.04)
--Diluted........................... $1.14 $0.52 $1.63 $0.16 $1.57 $0.86 $(1.04)
Dividends declared per common share... $0.45 $0.45 $0.90* $0.90 $0.90 $0.90 $0.90
</TABLE>
<TABLE>
<CAPTION>
CMP GROUP CENTRAL MAINE POWER
----------------------------------------- -----------------------------------------------------
JUNE 30, DECEMBER 31, DECEMBER 31,
1999 JUNE 30, 1998 1998 1997 1996 1995 1994
------------ ------------- ------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................. $2,257,590 $2,243,754 $2,262,884 $2,298,966 $2,010,914 $1,992,919 $2,046,007
Long-term obligations......... $124,205 $313,581 $346,281 $400,923 $587,987 $622,251 $638,841
Redeemable preferred stock.... $18,910 $27,910 $18,910 $39,528 $53,528 $67,528 $80,000
Book value per common share... $16.69 $15.05 $15.99 $15.03 $15.77 $15.10 $15.14
</TABLE>
- ------------------------
* Includes 1998 first and second quarter dividends of $0.225 per share paid by
Central Maine Power.
9
<PAGE>
THE COMPANIES
CMP GROUP
83 Edison Drive
Augusta, Maine 04336
(207) 623-3521
CMP Group is a Maine-based holding company that has been in existence since
September 1, 1998. CMP Group owns all of the common stock of Central Maine Power
and certain nonutility subsidiaries.
CENTRAL MAINE POWER. Central Maine Power, CMP Group's principal subsidiary,
is a public utility that was incorporated in Maine in 1905. Central Maine Power
is primarily engaged in the business of purchasing, transmitting, distributing
and selling electric energy for the benefit of retail customers in southern and
central Maine and wholesale customers, principally other utilities. Central
Maine Power is the largest electric utility in Maine. It serves approximately
533,000 customers in its 11,000 square-mile service area and had $939 million in
consolidated electric operating revenues in 1998.
Central Maine Power's service area contains most of Maine's industrial and
commercial centers, including Portland (Maine's largest city), South Portland,
Westbrook, Lewiston, Auburn, Rumford, Bath, Biddeford, Saco, Sanford, Kittery,
Augusta (Maine's capital), Waterville, Fairfield, Skowhegan and Rockland. This
area encompasses approximately 964,000 people, representing about 78% of the
total population of Maine.
Central Maine Power's industrial and commercial customers include
shipbuilders and major producers of pulp and paper products, chemicals,
plastics, electronic components, processed food and footwear. Large
pulp-and-paper industry customers account for approximately 55% of Central Maine
Power's industrial sales and approximately 21% of total service area sales.
On April 7, 1999, Central Maine Power completed the sale of its fossil,
hydroelectric and biomass generating assets to an affiliate of FPL Group, Inc.
To meet its service obligation to its customers, Central Maine Power is
purchasing energy from the plants included in the sale until March 1, 2000,
which is the date retail access will begin in Maine under a 1997 Maine law
restructuring electric utilities in the State of Maine. Central Maine Power
continues to hold minority interests in two operating nuclear facilities as well
as three nuclear facilities that have been permanently shut down. Central Maine
Power is also a party to contracts with nonutility generators under which
entitlements to energy and capacity are required to be sold prior to March 1,
2000 under the restructuring law.
MAINE ELECTRIC POWER COMPANY, INC. MEPCO owns and operates a 345 kV
transmission interconnection between Wiscasset, Maine and New Brunswick, Canada,
where its transmission line connects with a line of The New Brunswick Power
Corporation under an interconnection agreement. MEPCO transmits power under its
Open Access Transmission Tariff. Central Maine Power owns a 78.3% voting
interest in MEPCO, with the remaining interests owned by two other Maine
electric utilities.
CENTRAL SECURITIES CORPORATION. Central Securities owns and leases office
and service facilities in Central Maine Power's service territory for the
conduct of Central Maine Power's business. Central Maine Power owns all of the
outstanding common stock of Central Securities.
CUMBERLAND SECURITIES CORPORATION. Cumberland Securities also owns and
leases office and service facilities in Central Maine Power's service territory
for the conduct of Central Maine Power's business. Central Maine Power owns all
of the outstanding common stock of Cumberland Securities.
NORVARCO. NORVARCO holds a 50% general partnership interest in Chester SVC
Partnership, which owns a static var compensator facility in Chester, Maine.
This facility provides transmission
10
<PAGE>
system reinforcement that allows the Hydro-Quebec Phase II transmission line in
New Hampshire and the MEPCO line to operate at full capability simultaneously.
NORVARCO is a wholly owned subsidiary of Central Maine Power.
MAINE YANKEE ATOMIC POWER COMPANY. Maine Yankee, in which Central Maine
Power has a 38% voting interest, owns a nuclear electric generating facility
that has been permanently shut down since August 6, 1997, and that is currently
being decommissioned. Central Maine Power also holds a 9.5% voting interest in
Yankee Atomic Electric Company and a 6% voting interest in Connecticut Yankee
Atomic Power Company, whose nuclear plants have been permanently shut down, and
a 4% voting interest in Vermont Yankee Nuclear Power Corporation, which operates
a plant in Vernon, Vermont.
CMP INTERNATIONAL CONSULTANTS (D/B/A CNEX). CNEX, a wholly owned subsidiary
of CMP Group, provides management, planning, consulting and research and
information services to foreign and domestic utilities and government agencies.
MAINECOM SERVICES. MaineCom Services provides telecommunications services,
including point-to-point connections, private networking, consulting, private
voice and data transport, carrier services and long-haul transport. MaineCom
Services is wholly owned by CMP Group.
NORTHEAST OPTIC NETWORK, INC. NorthEast Optic Network develops, constructs,
owns and operates a fiber optic telecommunications system in New England and New
York. MaineCom Services owns 38.5% of its outstanding common stock.
NEW ENGLAND GAS DEVELOPMENT CORPORATION. New England Gas, which is a wholly
owned subsidiary of CMP Group, holds approximately a 27% interest in CMP Natural
Gas, L.L.C.
CMP NATURAL GAS, L.L.C. CMP Natural Gas is a joint venture of New England
Gas and Energy East Enterprises, a wholly owned subsidiary of Energy East. CMP
Natural Gas was formed to construct, own and operate a natural gas distribution
system to serve certain areas of Maine that do not have gas service. CMP Natural
Gas began providing service to customers in May 1999. If the merger is
completed, CMP Natural Gas will become a wholly owned subsidiary of Energy East
Enterprises, and New England Gas will cease to exist.
TELESMART. TeleSmart provides accounts receivable management services for
utility clients. TeleSmart is a wholly owned subsidiary of CMP Group.
THE UNION WATER-POWER COMPANY. Union Water provides utility construction
and support services (On Target division); energy efficiency performance
contracting and energy use and management services (Combined Energies division);
and commercial and residential real estate development services (UnionLand
Services and MaineHomeCrafters divisions). Union Water is a wholly owned
subsidiary of CMP Group.
ENERGY EAST
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 New York State Electric & Gas Corporation ("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 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. It 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,
Massachusetts, Maine, New Hampshire, Vermont and New Jersey, and has offices in
New York
11
<PAGE>
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 agreed to sell its share of the nuclear station; the sale is
expected to be completed by early next year. 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., which provides energy
services and information systems and energy consulting to utilities,
governmental agencies, and end-use energy consumers, primarily commercial and
industrial.
Another one of XENERGY Enterprises' subsidiaries is Energy East Solutions,
Inc., which markets electricity and natural gas to end-use customers and
wholesale markets 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.
ENERGY EAST ENTERPRISES, INC. Energy East Enterprises, another Energy East
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, described above.
New Hampshire Gas Corporation, another subsidiary of Energy East
Enterprises, established a presence in New Hampshire with the purchase of a
franchise and propane air distribution system. Long-term plans call for bringing
natural gas to this area.
Southern Vermont Natural Gas Corporation, a third subsidiary of Energy East
Enterprises, is working with Iroquois Gas Transmission System and Vermont Energy
Park Holdings to develop a combined natural gas supply and electric generation
project that includes an extension of a pipeline from New York to Vermont, two
combined-cycle electric generating plants and natural gas distribution systems.
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 by early next year the sale of its 18%
interest in Nine Mile Point nuclear generating unit No. 2 to AmerGen Energy
Company. 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 CMP Group, Connecticut Energy and CTG Resources.
12
<PAGE>
MERGER AGREEMENT WITH CONNECTICUT ENERGY. On April 23, 1999, Energy East
agreed to a business combination with Connecticut Energy, in which Connecticut
Energy would merge with a newly formed, wholly owned subsidiary of Energy East.
In the transaction, Connecticut Energy shareholders will have the right to
receive, for each of their Connecticut Energy shares, either $42.00 in cash or a
number of Energy East shares valued at $42.00, subject to restrictions on the
maximum and minimum number of Energy East shares to be issued. Connecticut
Energy shareholders can choose to convert some of their Connecticut Energy
shares into cash and others into Energy East shares. The total equity market
value of the transaction is approximately $436 million. Completion of that
transaction is subject to a number of closing conditions, including regulatory
approvals and Connecticut Energy shareholder approval.
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.
MERGER AGREEMENT WITH CTG RESOURCES. On June 29, 1999, Energy East agreed
to a business combination with CTG Resources, in which CTG Resources would merge
with a newly formed, wholly owned subsidiary of Energy East. In the transaction,
CTG Resources shareholders will have the right to receive, for each of their CTG
Resources shares, either $41.00 in cash or a number of Energy East shares valued
at $41.00, subject to restrictions on the maximum and minimum number of Energy
East shares to be issued. CTG Resources shareholders can choose to convert some
of their CTG Resources shares into cash and others into Energy East shares. The
total equity market value of the transaction is approximately $355 million.
Completion of that transaction is subject to a number of closing conditions,
including regulatory approvals and CTG Resources shareholder approval.
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.
EE MERGER CORP.
c/o Energy East Corporation
P.O. Box 1196
Stamford, CT 06904-1196
(203) 325-0690
EE Merger Corp. is a Maine corporation formed by Energy East in June 1999
solely for the purpose of completing the merger with CMP Group.
13
<PAGE>
THE SPECIAL MEETING
PURPOSE, TIME AND PLACE
The CMP Group board of directors is soliciting proxies for use at the
special meeting of CMP Group shareholders. The special meeting will be held on
October 7, 1999 at 2:00 p.m., local time, at The Portland Marriott, 200 Sable
Oaks Drive, South Portland, Maine. 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, CMP Group shareholders as of the record date will be
asked to consider and vote on a proposal to approve the merger agreement.
RECORD DATE, VOTING POWER AND VOTE REQUIRED
The CMP Group board of directors has fixed the close of business (5:00 p.m.,
local time) on August 30, 1999 as the record date for determining the CMP Group
shareholders entitled to notice of, and to vote at, the special meeting. Only
CMP Group 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, 32,442,552 CMP Group shares
were issued and outstanding and entitled to vote at the special meeting. CMP
Group shareholders of record are entitled to one vote per share on any matter
that may properly come before the special meeting. There were no shares of CMP
Group preferred stock issued and outstanding on the record date. Votes may be
cast at the special meeting in person or by proxy. See "--Voting of Proxies."
The presence at the special meeting, either in person or by proxy, of the
holders of a majority of the outstanding CMP Group 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 a majority of the outstanding CMP
Group shares is required to approve the merger agreement.
Abstentions and 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. Abstentions and
broker non-votes will have the effect of a vote against the merger agreement.
SHARE OWNERSHIP OF MANAGEMENT
At the close of business on August 20, 1999, CMP Group's directors and
executive officers and their affiliates beneficially owned 213,550 CMP Group
shares, which represents less than 1% of the outstanding CMP Group shares. It is
currently expected that all directors and executive officers of CMP Group will
vote their CMP Group shares for approval of the merger agreement.
VOTING OF PROXIES
CMP Group 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. You should be aware that, if your proxy is
properly signed and dated but does not contain voting instructions, your proxy
will be voted FOR the approval of the merger agreement. We do not expect that
any matter other than the approval of the merger agreement and possibly
procedural items relating to the conduct of the special meeting will be brought
before the special meeting.
If you have CMP Group 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
14
<PAGE>
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.
REVOCABILITY OF PROXIES
You may revoke a proxy at any time before its exercise by (1) notifying in
writing Anne M. Pare, Corporate Secretary, CMP Group, Inc., 83 Edison Drive,
Augusta, Maine 04336, (2) completing a later-dated proxy and returning it to CMP
Group's shareholder services representative, Boston EquiServe, Proxy Department,
P.O. Box 9381, Boston, MA 02205-9381, if you sent your original proxy there, or
to your broker if your shares are held by a broker, or (3) appearing in person
and revoking your proxy orally by notifying the Secretary before the vote takes
place. Additional proxy cards are available from Boston EquiServe by calling
1-800-736-3001, 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 CMP Group 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.
We do not expect to adjourn the special meeting 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 CMP Group
shareholders of record as of the record date either to exercise their voting
rights or to revoke any previously delivered proxies.
SOLICITATION OF PROXIES
CMP Group will bear the costs of soliciting proxies from CMP Group
shareholders, except that Energy East and CMP Group intend to share equally the
costs associated with the printing and filing of this proxy statement. In
addition to solicitation by mail, the directors, officers and employees of CMP
Group and its subsidiaries may solicit proxies from CMP Group shareholders by
telephone or in person. These 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 CMP Group
shares held of record by these persons, and CMP Group will reimburse its
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses.
We have retained Corporate Investor Communications, Inc. to help solicit
proxies. Corporate Investor Communications will receive a fee that we expect
will not exceed $8,500 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 STOCK CERTIFICATES WITH YOUR COMPLETED PROXY CARDS.
15
<PAGE>
NO VOTE REQUIRED FOR ENERGY EAST SHAREHOLDERS
Under New York law, Energy East shareholders need not approve the merger
agreement. Thus, no one is soliciting proxies from Energy East shareholders.
16
<PAGE>
THE MERGER
We are furnishing this proxy statement to you in connection with the
proposed merger between CMP Group and EE Merger Corp., a wholly owned subsidiary
of Energy East, because you are a CMP Group 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 EE Merger Corp. will merge into CMP
Group. CMP Group 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 CMP Group share (other than those shares that are held by CMP
Group shareholders who have not voted in favor of the merger and have properly
asserted dissenters' rights) will be converted into the right to receive $29.50
in cash, without interest.
The total value of the consideration that CMP Group shareholders will
receive in the merger, based on the number of CMP Group shares outstanding on
the date of this proxy statement is approximately $957 million. See "--Merger
Financing" for a description of how Energy East expects to fund the merger
consideration.
BACKGROUND
During 1997 and 1998, CMP Group's management worked with Energy East's
management to implement a retail natural gas distribution operation in Maine.
The two managements developed business plans and secured regulatory approvals
for this gas business from federal and state agencies. The gas facility, CMP
Natural Gas, proceeded to operational status during May 1999.
During September 1998, in the context of a meeting on this gas business,
Wesley W. von Schack, the chairman, president and chief executive officer of
Energy East, indicated to David T. Flanagan, the president and chief executive
officer of CMP Group, that Energy East might be interested in a strategic
combination with CMP Group.
No further conversations were held on this subject until February 1999 due
to the issues and uncertainties related to:
- litigation over the sale of Central Maine Power's electric generating
assets to an affiliate of FPL Group, Inc.;
- the shutdown of the nuclear power plant owned by Maine Yankee (in which
Central Maine Power has a 38% voting interest); and
- the need to develop and analyze alternative plans to replace revenues
that would be lost as a result of the sale of generating assets and the
shutdown of the Maine Yankee plant, and to evaluate the business
position of CMP Group going forward.
In February 1999, Mr. von Schack expressed continued interest to Mr.
Flanagan regarding a potential business combination. At that time, to help CMP
Group evaluate its strategic position, CMP Group engaged the services of Warburg
Dillon Read LLC to act as CMP Group's exclusive financial advisor and Thelen
Reid & Priest LLP to act as CMP Group's legal counsel. On February 18, 1999, the
CMP Group board of directors held a special meeting with management,
representatives of Warburg Dillon Read and legal counsel to discuss the possible
strategic directions CMP Group might take. Among the issues discussed were:
- the growth prospects of CMP Group in the context of available resources
and competition;
- the strong trend toward consolidation in the utility industry due to
deregulation and other factors;
17
<PAGE>
- the substantial premium that Central Maine Power received in the sale
of its fossil, hydro and biomass generation assets, which premium was
due in part to Central Maine Power's moving quickly into the
generation-sale market once it developed;
- the range of merger and acquisition premiums currently available in the
electric utility industry; and
- timing considerations related to the resolution of Central Maine
Power's litigation with an affiliate of FPL Group, Inc., which was
scheduled for trial in mid-March.
Based on these and other factors, the CMP Group board of directors
instructed CMP Group's management to investigate the possibility of a merger or
sale of the company.
Following the successful resolution of the FPL Group litigation on March 11,
1999, a series of conversations ensued among Messrs. von Schack and Flanagan and
other members of the senior managements of both companies regarding Energy East
and CMP Group's respective strategic business, financial and regulatory
positions and plans. The two companies signed a confidentiality agreement and
commenced reviews of each other's financial and other relevant information.
Thereafter, on April 29, 1999, Energy East submitted a one-page draft proposal
and invited CMP Group to negotiate in the context of that proposal.
In late March 1999, Warburg Dillon Read developed a list of other
prospective merger partners for CMP Group and began confidential inquiries with
respect to those other companies. Two of those companies also signed
confidentiality agreements and received the same information as that provided to
Energy East.
During the next two months, senior management of CMP Group met with all
three potential merger partners to discuss strategic, financial and regulatory
considerations. At its regular meeting on May 20, 1999, the CMP Group board of
directors heard reports on these matters from Warburg Dillon Read and CMP Group
management including the terms of the proposals received from the three
potential merger partners. Due to the incomplete nature of the proposals, the
CMP Group board of directors instructed management and Warburg Dillon Read to
solicit final determinative bids from these three potential merger partners.
Accordingly, Warburg Dillon Read, on behalf of CMP Group, requested that
each potential merger partner submit, by May 24, 1999, a definitive and detailed
bid, including the amount and type of consideration to be received by CMP Group
shareholders as well as any material conditions or obstacles the bidders had
identified to the completion of a merger. Those bids were submitted by May 24,
as requested.
At a special meeting of the CMP Group board of directors held on May 25,
1999 and attended by representatives of Warburg Dillon Read and Thelen Reid &
Priest, the three bids were discussed in detail and evaluated by the CMP Group
board of directors. The CMP Group board of directors primarily considered the
amount of consideration proposed, along with the likelihood that the respective
bidders could in fact complete the transaction and that the necessary state and
federal regulatory approvals could be obtained. All the bids were cash bids.
The Energy East bid was equal to the higher of the other two bids in terms
of the amount of the consideration offered. The CMP Group board of directors
determined to pursue negotiations with Energy East on an exclusive basis, after
determining that Energy East's proposed transaction offered a greater likelihood
of completion than the proposed transaction of the other high bidder. Central to
the CMP Group board of directors' decision was the fact that Energy East had a
history of working with the Maine Public Utilities Commission in connection with
the gas project described above and that Energy East appeared more likely than
the other high bidder to obtain the necessary federal regulatory approvals.
On May 27, 1999, CMP Group executed an agreement to negotiate exclusively
with Energy East for a two-week period, and suspended its discussions with the
other two bidders.
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After executing the exclusivity agreement, representatives of CMP Group
management, Warburg Dillon Read and Thelen Reid & Priest negotiated the terms of
the merger agreement with Energy East and its legal counsel and financial
advisor.
On June 14, 1999, the CMP Group board of directors held a special meeting to
review the terms of the proposed merger agreement and related transactions.
Representatives of Warburg Dillon Read made a detailed presentation on the
proposed merger and rendered that firm's oral opinion to the CMP Group board of
directors, subsequently confirmed in writing, that as of June 14, 1999, based on
the matters described in its opinion, the merger consideration was fair from a
financial point of view to the CMP Group shareholders. After a presentation by
Thelen Reid & Priest regarding the terms and conditions of the merger agreement
and full discussion and analysis by the CMP Group board of directors, the board
of directors:
- determined that it was in the best interests of CMP Group and its
shareholders for CMP Group to enter into the merger agreement with
Energy East;
- determined that the terms of the merger were fair to, and in the best
interests of, CMP Group shareholders; and
- authorized, approved and adopted the proposed merger agreement and the
transactions it described.
Mr. Flanagan abstained from voting because of his personal interests in some
elements of the proposed transaction, as described on pages 28 to 33. Later that
evening, CMP Group, Energy East and EE Merger Corp. executed and delivered the
merger agreement and certain related agreements and, early on June 15, publicly
announced the proposed merger.
CMP GROUP REASONS FOR THE MERGER AND RECOMMENDATION OF THE CMP GROUP BOARD OF
DIRECTORS
The CMP Group board of directors consulted with CMP Group's management,
Warburg Dillon Read and Thelen Reid & Priest in determining to approve the
merger agreement and in reaching the board of directors' determination that the
merger is fair to, and in the best interests of, CMP Group shareholders. The CMP
Group board of directors considered a number of factors, including without
limitation, the following:
- its review and analysis of CMP Group's business, financial condition,
earnings and prospects, as well as the competitive and changing
regulatory environment facing CMP Group;
- the potential erosion of shareholder value resulting from deregulation
and regulatory risks faced by CMP Group, utility industry consolidation
and CMP Group's limited growth prospects;
- historical market prices and trading information with respect to CMP
Group shares;
- a review of the possible alternatives to a sale of CMP Group in its
entirety, including the prospects of continuing to operate CMP Group,
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 CMP Group's future
performance might not lead to a stock price in the foreseeable future
that would have as high a present value as the merger consideration;
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- the fact that the CMP Group board of directors had previously
contacted, through Warburg Dillon Read, a number of potential bidders
over a period of time in a process designed to elicit third-party
proposals to acquire or merge with CMP Group and to optimize
shareholder value;
- the fact that the $29.50 per share consideration to be paid in the
merger represented a premium for the CMP Group shares of approximately
47% over the closing price of $20 1/16 per share on June 14, 1999,
which was the last trading day prior to the public announcement of the
execution of the merger agreement;
- the financial presentations of Warburg Dillon Read and its opinion to
the CMP Group board of directors dated June 14, 1999 as to the fairness
of the merger consideration from a financial point of view to the CMP
Group shareholders as described in "--Opinion of Financial Advisor to
the CMP Group Board";
- the fact that all three bidders submitted cash bids;
- the terms of the merger agreement, including the right of the CMP Group
board of directors to terminate the merger agreement prior to its
approval by the CMP Group shareholders in certain circumstances where a
superior proposal is presented to CMP Group; and
- the likelihood of completion of the merger, including an assessment
that Energy East has the financial capability to acquire CMP Group 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 CMP Group board
of directors considered is not exhaustive. In determining to recommend the
approval of the merger agreement, the CMP Group board of directors also
considered that the merger was in the best interests of CMP Group's employees,
customers and the communities that CMP Group serves. In view of the wide variety
of factors considered, the CMP Group board of directors did not quantify or
assign relative weights to the factors above. Rather, the CMP Group board of
directors based its recommendation on the totality of the information presented
to and considered by it.
THE CMP GROUP BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, CMP GROUP SHAREHOLDERS AND HAS APPROVED THE
MERGER. THE CMP GROUP BOARD OF DIRECTORS RECOMMENDS THAT CMP GROUP SHAREHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO THE CMP GROUP BOARD
On June 14, 1999, the CMP Group board of directors received Warburg Dillon
Read'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 CMP Group
shareholders.
We urge you to read the actual Warburg Dillon Read opinion, which has been
updated to the date of this proxy statement. A copy of the updated Warburg
Dillon Read opinion is attached as Appendix B to this proxy statement. The June
14, 1999 opinion is substantially identical to the opinion attached to this
proxy statement. The Warburg Dillon Read opinion does not constitute a
recommendation as to how any CMP Group shareholder should vote at the special
meeting.
In arriving at its opinion, Warburg Dillon Read, among other things:
- reviewed business and historical financial information related to CMP
Group;
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- reviewed financial forecasts and other data provided to Warburg Dillon
Read by CMP Group, particularly projections for calendar year 2000
which reflect CMP Group's operations following, and giving effect to,
the sale by Central Maine Power of its generation assets;
- reviewed the financial terms of transactions involving electric
utilities that are, in the opinion of Warburg Dillon Read, generally
comparable to CMP Group;
- held discussions with members of the senior management of CMP Group
with respect to the business and prospects of CMP Group;
- reviewed the historical market prices and trading activity for CMP
Group and Central Maine Power stock and compared this information to
similar information for certain other companies;
- performed a discounted cash flow analysis of projected financial data
for CMP Group;
- compared the consideration and other terms of the merger agreement to
the terms of other transactions which, in the opinion of Warburg Dillon
Read, are comparable to this transaction;
- held discussions with companies other than CMP Group;
- conducted other financial studies, analyses and investigations, and
considered other information as Warburg Dillon Read deemed necessary or
appropriate; and
- reviewed the merger agreement.
Warburg Dillon Read did not independently verify any of the information
above and relied, with CMP Group's consent, on the information being materially
complete and accurate. Warburg Dillon Read has not made any independent
evaluation or appraisal of any of the assets or liabilities of CMP Group or any
of its subsidiaries, and no one has furnished Warburg Dillon Read with any
evaluation or appraisal. Warburg Dillon Read assumed that the financial
forecasts referred to above were reasonably prepared on bases reflecting the
best currently available estimates and judgments of CMP Group management as to
the future financial performance of CMP Group. Warburg Dillon Read also assumed
that those estimates would be achieved in all material respects in the amounts
and at the times stated. CMP Group did not limit Warburg Dillon Read regarding
the procedures to be followed or factors to be considered in rendering its
opinion.
Warburg Dillon Read's opinion is based on economic, monetary and market
conditions existing on June 14, 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 Acquisition
Analysis" is identical to CMP Group 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 average 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, Warburg Dillon Read 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 Warburg Dillon Read considered.
DISCOUNTED CASH FLOW ANALYSIS. Warburg Dillon Read performed a discounted
cash flow valuation based upon projections that the management of CMP Group
furnished. Utilizing these projections, Warburg Dillon Read discounted to
present value, under assumed discount rates ranging from 7.5% to 8.5%, the free
unleveraged cash flows through the year 2003 for the regulated electric business
of CMP
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Group. Terminal values were determined utilizing multiples of earnings before
interest, taxes, depreciation and amortization ("EBITDA") of 7.0x to 8.0x and
multiples of earnings before interest and taxes ("EBIT") of 9.5x to 10.5x. CMP
Group also owns non-regulated businesses held at the subsidiary level, which
were valued at book value, and an equity interest in NorthEast Optic Network, a
publicly traded stock, which was valued at its then-current market price. In
addition, as a result of the sale of its generation assets, CMP Group held cash
and short-term investments in excess of amounts necessary in its businesses.
Combining the present value of the regulated business with the values of its
other businesses and excess cash provided a value range from $16.82 to $25.29
per share of CMP Group common stock on a stand-alone basis.
COMPARABLE COMPANY TRADING ANALYSIS. Using publicly available information,
Warburg Dillon Read compared, based upon the consideration of $29.50 per share,
multiples of certain financial criteria such as net income and net income per
share as projected by Institutional Brokers Estimate System, cash flow from
operations (defined as cash provided by operating activities before changes in
working capital), book value of common equity, operating income or EBIT, and
cash flow from operations or EBITDA, to multiples based upon market trading
values at the time for certain other companies which, in Warburg Dillon Read's
judgment, were generally comparable to CMP Group for the purpose of this
analysis. The factors Warburg Dillon Read considered in selecting companies for
comparison included size, geographic location, financial condition and scope of
business operations. The companies used in the comparison were Energy East, GPU,
Inc., Consolidated Edison Inc., Unicom Corporation, BEC Energy Company, United
Illuminating Company and Central Hudson Gas & Electric Corporation.
Equity consideration value (defined as the market price per common share to
be paid in the transaction multiplied by the number of outstanding common
shares) as a multiple of the indicated statistics for CMP Group's latest
12-month figures and projected year 2000 figures, respectively, compared to the
comparable company average range, were as follows:
- net income--16.3x and 19.9x compared to 12.5x to 16.5x, and
- book value--1.6x and 1.7x compared to 1.5x to 2.0x.
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 CMP Group's latest 12-month and projected year 2000 figures, respectively,
compared to the comparable company average range were as follows:
- cash flow from operations--7.1x and 9.1x compared to 7.0x to 10.0x,
- EBIT--10.2x and 18.7x compared to 9.0x to 11.0x, and
- EBITDA--7.4x and 11.8x compared to 6.0x to 7.5x.
The above analysis is a valuation method used by Warburg Dillon Read to
determine if the consideration to be paid to CMP Group is reasonable in relation
to current trading values.
COMPARABLE UTILITY ACQUISITION ANALYSIS. Using publicly available
information, Warburg Dillon Read compared the stock price premiums paid over the
previous day's closing price and the price premiums paid over an unaffected
stock price (defined as the closing price one month before announcement of a
transaction) for certain utility acquisitions to the premium per share value to
be paid to CMP Group shareholders. Warburg Dillon Read also compared various
financial measures of the price paid in comparable transactions (including
multiples of net income, book value, cash flow from operations, EBIT and EBITDA)
to both the equity and total consideration values to be paid for CMP Group.
In selecting comparable transactions, Warburg Dillon Read utilized its
judgment in analyzing acquisitions announced since January 1, 1995 that were of
sufficient size, not generally viewed as a
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merger-of-equals in which a low premium or no premium was paid and which were
not subsequently terminated. In total, Warburg Dillon Read considered 19
acquisitions which it considered comparable. The comparable transactions were:
- New England Electric System and Eastern Utilities Associates,
- The National Grid Group PLC and New England Electric System,
- BEC Energy Company and Commonwealth Energy Company,
- Consolidated Edison Inc. and Orange & Rockland Utilities Inc.,
- CalEnergy Company and MidAmerican Energy Company,
- an investor group and TNP Enterprises,
- Utilicorp United Inc. and Empire District Electric Company,
- Utilicorp United Inc. and St. Joseph Power & Light Company,
- ScottishPower PLC and Pacificorp,
- The AES Corporation and CILCORP Inc.,
- American Electric Power Company and Central & Southwest Corporation,
- LG&E Energy Corporation and KU Energy Corporation,
- Allegheny Energy, Inc. and DQE, Inc.,
- Brooklyn Union Gas Company and Long Island Lighting Co.,
- Ohio Edison Corp. and Centerior Energy,
- Enron Corporation and Portland General Electric Company,
- Western Resources Inc. and Kansas City Power & Light Company,
- Puget Sound Power & Light Company and Washington Energy Company, and
- Union Electric Company and CIPSCO Incorporated.
The consideration to be received by CMP Group shareholders of $29.50 per
share represents a premium of 47.0% and 48.0%, respectively, to CMP Group's
price one day and one month prior to the announcement. The premiums paid over
the previous day's closing price in comparable transactions ranged from 4.9% to
42.9% with an average of 26.4% and a mean of 25.0%. The premiums paid over the
price one month prior to announcement, ranged from 14.4% to 40.8% with an
average of 27.9% and a mean of 28.4%.
Utilizing latest 12-month and projected year-2000 multiples for CMP Group,
Warburg Dillon Read compared both the equity consideration value and total
consideration value to be received by CMP Group to the figures for comparable
transactions. For equity consideration value, CMP Group's multiples were:
- for net income--16.3x and 19.9x compared to a high of 26.8x and a low
of 9.9x with an average and median of 17.6x, and
- for book value--1.6x and 1.7x compared to a high of 2.5x and a low of
0.8x with an average and a median of 1.9x.
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Latest 12-month and projected year-2000 multiples for CMP Group,
respectively, were also utilized to compare total consideration value to
multiples for comparable transactions. CMP Group's multiples were:
- for cash flow from operations--7.1x and 9.1x compared to a high of
14.3x and a low of 2.7x with an average of 7.7x and a median of 7.6x;
- for EBIT--10.2x and 18.7x compared to a high of 16.9x and a low of 8.8x
with an average of 12.6x and a median of 12.4x; and
- for EBITDA--7.4x and 11.8x compared to a high of 10.7x and a low of
6.4x with an average of 8.3x and a median of 8.1x.
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, Warburg
Dillon Read 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. Warburg Dillon Read did not assign
any particular weight to any analysis or factor it considered. Rather, Warburg
Dillon Read 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,
Warburg Dillon Read assumed relatively stable industry performance, regulatory
environments and general business and economic conditions, all of which are
beyond CMP Group's control. Any estimates contained in Warburg Dillon Read'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, Warburg Dillon Read makes no recommendations as to how any CMP Group
shareholder should vote on the merger.
Warburg Dillon Read is an internationally recognized investment banking
firm. As part of its investment banking business, Warburg Dillon Read 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 CMP Group board of
directors selected Warburg Dillon Read on the basis of the firm's expertise and
reputation.
Pursuant to the engagement letter between CMP Group and Warburg Dillon Read,
CMP Group paid Warburg Dillon Read $1 million upon the rendering of Warburg
Dillon Read's fairness opinion. In addition, Warburg Dillon Read received a
$100,000 payment upon the execution of the engagement letter and has been and
will continue to receive a $50,000 quarterly retainer. Upon the approval of the
merger agreement by the shareholders of CMP Group, Warburg Dillon Read will
receive an additional payment of $1 million. At the completion of the merger,
Warburg Dillon Read will receive a fee equal to 0.6% of the aggregate
consideration paid in the merger, which fee is expected to equal approximately
$5.74 million, less the amount of all fees previously paid. CMP Group has agreed
to indemnify Warburg Dillon Read against certain liabilities under federal
securities laws, relating to or arising out of its engagement.
The predecessor of Warburg Dillon Read has, in the past, performed various
investment banking services for CMP Group for which Warburg Dillon Read has been
compensated. In the ordinary course of business, Warburg Dillon Read trades the
debt and equity securities of CMP Group 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.
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EFFECTIVE TIME OF THE MERGER
The merger will become effective when the parties to the merger agreement
file articles of merger with the Secretary of State of Maine in accordance with
the Maine Business Corporation Act. 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.
ARTICLES OF INCORPORATION AND BY-LAWS
The articles of incorporation of EE Merger Corp., as in effect immediately
prior to the effective time of the merger will become the articles of
incorporation of the surviving company until they are amended, except that the
name of the surviving company will be "CMP Group, Inc." The by-laws of EE Merger
Corp. in effect immediately prior to the effective time will be the by-laws of
the surviving company until they are amended.
DIRECTORS AND OFFICERS
DIRECTORS. After the merger becomes effective, the board of directors of
the surviving company will consist of the current directors of EE Merger Corp.,
Mr. Flanagan and Arthur W. Adelberg, currently the executive vice president of
CMP Group. These directors will hold office until their successors are duly
elected or appointed and qualified. In addition, the Energy East board of
directors will increase the number of Energy East directors by three and will
elect Mr. Flanagan and two additional directors of CMP Group, mutually agreed
upon by Energy East and CMP Group, to Energy East's board of directors.
OFFICERS. Once the merger becomes effective, Mr. Flanagan will be the
chairman of the board, president and chief executive officer of the surviving
company (which will be a subsidiary of Energy East) as well as the president of
Energy East. At that time, Mr. Adelberg will be the chief financial officer and
a senior vice president of Energy East. The other initial officers of the
surviving company will be the same individuals who hold the officer positions in
EE Merger Corp. 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 CMP Group by Energy
East under the purchase method of accounting in accordance with generally
accepted accounting principles. A portion of the purchase price will be
allocated to nonutility assets and liabilities of CMP Group based on their
estimated fair market value at the date of acquisition. As a regulated utility,
the assets and liabilities of Central Maine Power will not be revalued. The
difference between the purchase price, representing fair value, and the recorded
amounts will be shown as goodwill on the balance sheet.
REGULATORY APPROVALS
The parties must comply with state and federal 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 in the middle
of the year 2000. If any of the regulatory approvals include conditions or
restrictions that would have a material adverse effect on Energy East or CMP
Group, Energy East would have the right to terminate the merger.
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MAINE PUBLIC UTILITIES COMMISSION. Under Maine law, the Maine Public
Utilities Commission has jurisdiction over the indirect transfer of control of
Central Maine Power and of CMP Group's other utility subsidiaries resulting from
the merger, under a standard that requires a finding that the merger is
consistent with the interests of customers and shareholders. CMP Group expects
to be able to satisfy this standard. Under Maine law, once an application for
approval is filed, the Maine Public Utilities Commission must act definitively
within 180 days of the date of filing. Under this schedule, CMP Group expects
the Maine Public Utilities Commission's order, which may include conditions that
are not subject to prediction but that could have an impact on CMP Group's
business, to be issued by the end of 1999.
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
non-utility 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 CMP Group 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 Central
Maine Power and CMP Group's other public utility subsidiaries.
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 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 electric properties of the
Energy East and CMP Group systems). 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
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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, CMP Group and Energy East believe that
the electric utility systems of CMP Group and Energy East will constitute an
"integrated" electric utility system. In addition, Energy East and CMP Group
believe 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, CMP
Group, Connecticut Energy and CTG Resources as an additional integrated gas
utility system. Although Energy East and CMP Group can give no assurance that
the necessary SEC approvals will be obtained in a timely manner or at all Energy
East and CMP Group 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
in the middle of the year 2000.
FEDERAL ENERGY REGULATORY COMMISSION. Under Section 203 of the Federal
Power Act, the Federal Energy Regulatory Commission has jurisdiction when a
public utility sells or otherwise disposes of facilities that are subject to its
jurisdiction. A disposition is deemed made when there is a change of control of
the public utility that owns the facilities. Central Maine Power's transmission
facilities are subject to the FERC's jurisdiction. For this reason, the prior
approval of the FERC is required in order to complete the merger.
In reviewing a merger, the FERC generally evaluates the effect of a proposed
merger on competition and on rates and whether the proposed merger will impair
the effectiveness of regulation.
CMP Group and Energy East plan to file a joint application with the FERC,
requesting that the FERC approve the merger. While there can be no assurance on
this issue, we expect the approval in sufficient time to allow the merger to be
completed in the middle of the year 2000.
NUCLEAR REGULATORY COMMISSION. The consent of the Nuclear Regulatory
Commission under the Atomic Energy Act of 1954 may be required for the indirect
transfer of control of Central Maine Power's 2.5% interest in the Millstone Unit
No. 3 nuclear facility. Central Maine Power is a co-licensee with respect to its
2.5% Millstone 3 interest, but has no operating authority under the license.
Because there will be no change in the operation of Millstone 3 or in Central
Maine Power's funding of its obligations with respect to Millstone 3, CMP Group
and Energy East expect that the NRC's consent will be obtained, if necessary.
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 CMP Group 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, CMP Group 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.
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CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL. As a result of Central
Maine Power's ownership of a 2.5% interest in the Millstone Unit No. 3 nuclear
facility located in Waterford, Connecticut, Central Maine Power is a public
service company under Connecticut law. For this reason, the Connecticut
Department of Public Utility Control has jurisdiction over the merger. Central
Maine Power and CMP Group intend to file an application with the Connecticut
Department of Public Utility Control for approval of the merger. The Connecticut
Department of Public Utility Control will consider whether the merger will have
an adverse impact on electric service or ratepayers in Connecticut.
Although Energy East and CMP Group can give no assurance that the necessary
Connecticut Department of Public Utility Control approval will be obtained in a
timely manner, Energy East and CMP Group believe that this approval will be
obtained in sufficient time to allow the merger to be completed in the middle of
the year 2000. Because CMP Group serves no customers in Connecticut, the
involvement of the Connecticut Department of Public Utility Control is expected
to be relatively minimal.
OBLIGATIONS TO OBTAIN REGULATORY APPROVALS. Under the merger agreement,
both Energy East and CMP Group have agreed to use all commercially reasonable
efforts to obtain all regulatory and governmental approvals necessary or
advisable to complete the merger.
INJUNCTIONS. Energy East's and CMP Group'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, CMP Group shares will no longer be publicly
traded, and Energy East will become the sole shareholder of CMP Group. Following
the merger, persons who were shareholders of CMP Group immediately prior to the
merger will no longer have an opportunity to continue their interests in CMP
Group as an ongoing corporation and therefore will not share in its future
earnings and potential growth.
Trading in the CMP Group shares on the New York Stock Exchange will cease
immediately as of the time the merger becomes effective. After that time, CMP
Group will delist the CMP Group shares from the New York Stock Exchange and
deregister the shares under the Securities Exchange Act of 1934.
MERGER FINANCING
In the merger, Energy East expects to pay approximately $957 million in cash
consideration to CMP Group shareholders. In addition, in its merger with
Connecticut Energy, Energy East expects to pay approximately $218 million in
cash consideration to Connecticut Energy shareholders; and in its merger with
CTG Resources, Energy East expects to pay approximately $195 million in cash
consideration to CTG Resources shareholders. Energy East anticipates funding the
cash consideration in these mergers with a combination of the proceeds from the
issuance of long-term debt, the proceeds from the sale of its generation assets
and internally generated funds.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the CMP Group board of directors to
approve the merger, CMP Group shareholders should be aware that members of the
CMP Group board of directors and CMP Group and Central Maine Power management
will receive benefits from the merger that will be in addition to or different
from the benefits that CMP Group shareholders receive generally. The
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members of the CMP Group board of directors knew about these additional
interests and considered them when they approved the merger.
ADVISORY BOARD. Under the merger agreement, the present directors of
Central Maine Power, all except one of whom are also the present directors of
CMP Group, will continue as members of an advisory board of Central Maine Power.
The members of the advisory board will provide advice to the board of directors
of Central Maine Power on various matters. The members will receive remuneration
for their services equivalent to the base remuneration currently provided to
non-officer directors of CMP Group.
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, director or employee of
CMP Group 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 gave 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, officer or
employee of CMP Group 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 maintain directors and officers liability insurance policies for the
benefit of those directors and officers of CMP Group and its subsidiaries who
were covered as of June 14, 1999. The terms of the coverage will be at least as
favorable as the terms of the policies in effect as of June 14, 1999. Energy
East will not, however, be required to expend in any year more than 200% of the
annual aggregate premiums that CMP Group was paying for that insurance on June
14, 1999.
NEW EMPLOYMENT AGREEMENTS. Energy East and CMP Group have entered into
employment agreements with Messrs. Flanagan and Adelberg and F. Michael McClain,
Jr. In addition, Energy East and Central Maine Power have entered into an
employment agreement with Sara J. Burns. These agreements will become effective
upon completion of the merger. These new employment agreements will replace and
terminate Mr. Flanagan's, Mr. Adelberg's and Mr. McClain's existing agreements
with CMP Group and Ms. Burns's existing agreement with Central Maine Power.
MR. FLANAGAN. The term of Mr. Flanagan's new employment agreement is three
years, beginning on the effective date of the merger, and is automatically
extended each month unless either Energy East or Mr. Flanagan gives written
notice that the agreement will not be extended. Under the terms of his
employment agreement, Mr. Flanagan will become the president of Energy East and
the chairman, president and chief executive officer of CMP Group. Mr. Flanagan's
base salary will be $550,000 and may be increased by the Energy East board of
directors. Mr. Flanagan will also participate in all incentive compensation,
fringe benefit and employee benefit plans on the same basis as other executives
and key management employees. Mr. Flanagan will be entitled to receive a life
insurance benefit that is not less than two and one-half times his annual
compensation, and he will also be entitled to certain other death and disability
benefits. Energy East will also pay the premiums, not more than $7,800 annually,
on a term life insurance policy with a face amount of $700,000. The agreement
also provides for a "gross-up" payment to Mr. Flanagan if any payment, benefit
or distribution to Mr. Flanagan is subject to excise tax under Section 4999 of
the Internal Revenue Code of 1986.
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Energy East, CMP Group or Mr. Flanagan may terminate Mr. Flanagan's
employment at any time. If Energy East or CMP Group terminates Mr. Flanagan's
employment other than for cause or disability or if Mr. Flanagan terminates his
employment for good reason, he will receive:
- payments of his base salary at the rate in effect at the time of
termination for the remainder of the term of his employment agreement;
- incentive compensation for the remainder of the term of his employment
agreement, calculated on the basis of the value of short-term
incentive compensation paid to him 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;
- outplacement services costing up to $10,000; and
- a lump sum payment equal to the value of the fringe benefits that he
would have received through the term of the employment agreement and
any unreimbursed expenses.
In addition, if Mr. Flanagan voluntarily terminates his employment on or
after June 1, 2001, or if Energy East terminates his employment without cause,
then Mr. Flanagan is entitled to a fully vested guaranteed minimum annual
retirement benefit, taking into account any other retirement benefits provided
to Mr. Flanagan by either Energy East or CMP Group, of 45% of his base salary.
This amount is payable as a joint and survivor annuity and is reduced by the
proceeds, if any, of the above-referenced $700,000 term life insurance policy.
MR. ADELBERG. The term of Mr. Adelberg's new employment agreement is three
years, beginning on the effective date of the merger, and is automatically
extended each month unless either Energy East or Mr. Adelberg gives written
notice that the agreement will not be extended. Under the terms of his
employment agreement, Mr. Adelberg will become the chief financial officer and a
senior vice president of Energy East, and he will be appointed to the board of
directors of CMP Group. Mr. Adelberg's base salary will be $425,000 and may be
increased by the Energy East board of directors. Mr. Adelberg will participate
in all incentive compensation, fringe benefit and employee benefit plans on the
same basis as other executives and key management employees. He will also be
entitled to relocation benefits if Energy East requires him to spend more than
half of his working time in the vicinity of Portland, Maine. Mr. Adelberg will
be entitled to receive a life insurance benefit that is not less than two times
his annual compensation, and he will also be entitled to certain other death and
disability benefits.
In addition, if Mr. Adelberg is employed by Energy East or CMP Group on June
30, 2000, he will have a fully vested right to a guaranteed minimum annual
retirement benefit of 2.6 percent times his number of years of service with
Energy East and CMP Group times his adjusted highest average earnings for the
previous three years. That benefit will be paid in the form of a joint and
survivor annuity. The agreement also provides for a "gross-up" payment to Mr.
Adelberg if any payment, benefit or distribution to Mr. Adelberg is subject to
excise tax under Section 4999 of the Internal Revenue Code.
Energy East, CMP Group or Mr. Adelberg may terminate Mr. Adelberg's
employment at any time. If Energy East or CMP Group terminates Mr. Adelberg's
employment other than for cause or disability or if Mr. Adelberg terminates his
employment for good reason, he will receive:
- payments of his base salary at the rate in effect at the time of
termination for the remainder of the term of his employment agreement;
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- incentive compensation for the remainder of the term of his employment
agreement, calculated on the basis of the value of short-term
incentive compensation paid to him 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;
- outplacement services costing up to $10,000; and
- a lump sum payment equal to the value of the fringe benefits that he
would have received through the term of the employment agreement and
any unreimbursed expenses.
MS. BURNS AND MR. MCCLAIN. The term of Ms. Burns's new employment agreement
is three years, beginning on the effective date of the merger, and is
automatically extended each month unless either Energy East, Central Maine Power
or Ms. Burns gives written notice that the agreement will not be extended. The
term of Mr. McClain's new employment agreement is three years, beginning on the
effective date of the merger, and is automatically extended each month unless
either Energy East, CMP Group or Mr. McClain gives written notice that the
agreement will not be extended.
Ms. Burns will become the president of Central Maine Power and her base
salary will be $300,000, which may be increased by the Energy East board of
directors. Mr. McClain will become the president of one or more of the
nonutility subsidiaries of Energy East, XENERGY Enterprises, Inc. and/or CMP
Group. Mr. McClain's base salary will be $200,000 and may be increased by the
Energy East board of directors.
Ms. Burns and Mr. McClain will both participate in all incentive
compensation, fringe benefit and employee benefit plans on the same basis as
other executives and key management employees. Each agreement also provides for
a "gross-up" payment to the executive if any payment, benefit or distribution to
that person is subject to excise tax under Section 4999 of the Internal Revenue
Code.
Energy East, Central Maine Power or Ms. Burns may terminate her employment
at any time. Energy East, CMP Group or Mr. McClain may terminate his employment
at any time. If one of those companies terminates the employment of either
executive other than for cause or disability or if the executive terminates his
or her employment for good reason, the executive 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 his or her
employment agreement, calculated on the basis of the value of
short-term incentive compensation paid to him or her 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;
- outplacement services costing up to $10,000; and
- a lump sum payment equal to the value of the fringe benefits that the
executive would have received through the term of the employment
agreement and any unreimbursed expenses.
We estimate that, if the merger occurred on January 1, 2000 and Mr.
Flanagan's employment was immediately terminated by Energy East or CMP Group
other than for cause or disability or if Mr. Flanagan terminated his employment
for good reason, he would receive cash severance payments
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and gross-up payments pursuant to his new employment agreement of approximately
$5,324,924. We estimate that under similar circumstances Mr. Adelberg would
receive approximately $2,528,012, Ms. Burns would receive approximately
$1,973,185 and Mr. McClain would receive approximately $1,417,973.
EXISTING EMPLOYMENT AGREEMENTS. Messrs. Flanagan, Adelberg, and McClain
currently have employment agreements that provide severance benefits if, within
36 months after a change of control, CMP Group terminates their employment other
than for cause or disability or they terminate their employment for good reason.
CMP Group shareholder approval of the merger would constitute a change of
control as it is defined in these agreements. The new employment agreements,
described above, which replace and terminate the current agreements, do not
begin until the effective time of the merger. Thus, Messrs. Flanagan, Adelberg,
and McClain may be entitled to the change of control benefits provided for in
their current agreements if their employment terminates after CMP Group
shareholders approve the merger but before the effective time of the merger. The
rights of these executives will be governed by their new employment agreements
if a termination occurs after the effective time of the merger. In addition,
David E. Marsh, Gerald C. Poulin and Anne M. Pare currently have employment
agreements that also contain provisions relating to a change of control of CMP
Group. These agreements also provide that approval of the merger by CMP Group
shareholders would constitute a change of control. Each of these agreements
provides the benefits described below, if the executive's employment is
terminated by CMP Group other than for cause or disability, or by the executive
for good reason, within 36 months following CMP Group shareholder approval of
the merger, in the case of Messrs. Marsh and Poulin, or within 12 months of the
completion of the merger in the case of Ms. Pare.
MR. FLANAGAN'S BENEFITS. Mr. Flanagan's special retirement benefit under his
current employment agreement would be funded through a rabbi trust over a
five-year period following shareholder approval of the merger. Additionally, Mr.
Flanagan would receive the following change of control benefits under this
agreement if, during the 36-month period following shareholder approval of the
merger, CMP Group terminates his employment other than for cause or disability,
or if he terminates his employment for good reason:
Change of Control Severance:
- a lump sum cash payment of 1.99 times his base salary and 2.99 times
his bonus, based on the average bonus for the three years preceding
the change of control;
- continued welfare benefits for the three-year period following the
termination of employment;
- outplacement services costing up to $10,000; and
- age and service credit for retirement and welfare benefits during the
36 months following his termination of employment, if this credit is
permitted under applicable law.
If Mr. Flanagan's employment terminates after a change of control, he will
be paid an amount equal to his annual base salary as of the termination date in
12 equal monthly installments as reasonable compensation for his agreement not
to compete, subject to forfeiture if he competes during this period.
Severance if there is No Change of Control:
- his base salary for one year in 12 equal monthly installments
following the termination of his employment by CMP Group without cause
or by Mr. Flanagan for good reason.
MESSRS. ADELBERG'S, MCCLAIN'S, MARSH'S AND POULIN'S BENEFITS. These
executives' change of control benefits are similar to those provided to Mr.
Flanagan, except that special
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retirement benefits for Messrs. Adelberg, Marsh and Poulin are not funded
through a rabbi trust. In addition, in exchange for not competing with CMP Group
if their employment is terminated after a change of control, they will be paid
amounts equal to their respective base salaries under the same terms as those
under which Mr. Flanagan would receive payments for not competing. In the
absence of a change of control, each of these executives' severance benefits
would consist of monthly installments of the executive's base salary for one
year following the termination of employment. However, the last six installments
would be reduced by income from other employment.
MS. PARE'S BENEFITS. Ms. Pare's severance benefits in the event of the
termination of her employment after a change of control are as follows: a lump
sum cash payment equal to one times base salary, payment of the COBRA health
benefit continuation premiums for 18 months following the date of termination,
and outplacement services costing up to $10,000. In addition, in exchange for
not competing with CMP Group if her employment is terminated after a change of
control, she will be paid an amount equal to her base salary under the same
terms as those under which Mr. Flanagan would receive payments for not
competing. Under her employment agreement, Ms. Pare is also entitled to a
retention bonus of one-half of her base salary if she is employed through the
earlier of May 31, 2000 or the date on which the transmission and distribution
business is sold. In the absence of a change of control, she would be entitled
to a lump sum payment equal to her annual base salary.
We estimate that, if shareholder approval of the merger occurred on July 1,
1999 and the employment of Messrs. Flanagan, Adelberg, McClain, Marsh and Poulin
and Ms. Pare immediately terminated as described above, they would receive cash
severance payments upon termination pursuant to their agreements of
approximately $1,486,972, $761,797, $593,244, $761,797, $608,617, and $121,399,
respectively. If such payments constituted "excess parachute payments" under the
Internal Revenue Code, the severance benefits would be reduced to avoid the
imposition of the excise tax, but only if the amount of the reduction is less
than the excise tax that the executive would otherwise be required to pay.
TREATMENT OF STOCK OPTIONS. The CMP Group board of directors has granted
options to purchase CMP Group shares to executive officers and managers of CMP
Group and Central Maine Power. In the merger agreement, CMP Group agreed that
its board of directors will take all actions necessary, including obtaining the
consents of the option holders, to provide for the cancellation at the effective
time of the merger of all outstanding stock options. Promptly following the
effective time of the merger, CMP Group will pay each option holder who consents
to the cancellation of his or her options an amount in cash equal to the product
of (1) the total number of CMP Group shares underlying the holder's options, and
(2) the excess of $29.50 over the exercise price per share of the CMP Group
shares underlying the options. As a result of this provision, the following
members of management will receive at the effective time of the merger the
following cash payments: David T. Flanagan -- $1,803,437; Arthur W. Adelberg --
$415,734; David E. Marsh -- $415,734; F. Michael McClain -- $335,897; Gerald C.
Poulin -- $337,059; Anne M. Pare -- $186,705; all others -- $2,211,727.
ENERGY EAST BOARD OF DIRECTORS. At the time the merger becomes effective,
the Energy East board of directors will increase the number of Energy East
directors by three and will elect Mr. Flanagan and two additional directors of
CMP Group mutually agreed upon by Energy East and CMP Group.
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 CMP Group 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 CMP Group shares
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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 CMP Group shareholder in light of that shareholder's
individual circumstances, and does not apply to CMP Group 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 CMP Group shares as part of a hedging, "straddle,"
conversion, constructive sale or other integrated transaction,
- who acquired their CMP Group shares through the exercise of employee
stock options or other compensation arrangements, or
- who exercise dissenters' rights.
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 CMP Group shares will recognize gain or loss equal to the
difference between
- the amount of cash received, and
- the holder's adjusted tax basis in CMP Group 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 CMP Group 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 CMP Group 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 CMP Group 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 CMP Group 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 exchange 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
exchange agent (or other applicable agent). The exemptions provide that certain
CMP Group 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.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE UNITED
STATES FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO
THEM IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
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RIGHTS OF DISSENTING SHAREHOLDERS
If you hold CMP Group shares and do not wish to accept the merger
consideration, then Sections 908 and 909 of the Maine Business Corporation Act
provide you with an alternative. Under these sections, you have a right to
dissent from the merger and can choose to be paid the fair value of your CMP
Group shares once the merger is completed, provided you follow the procedures
outlined in the statute. The complete text of these sections is included in
Appendix C to this proxy statement.
If you wish to exercise your dissenter's rights of appraisal or to preserve
the right to do so, you should carefully review Appendix C and seek the advice
of counsel. If you do not comply with the deadlines and procedures specified in
the Maine Business Corporation Act, you may lose your dissenters' rights of
appraisal. To exercise these rights, you must satisfy each of the following
conditions:
- You must file with CMP Group, at or prior to the special meeting, a
written objection to the merger.
- You must not vote in favor of the merger agreement.
- You must file a written demand for payment of the fair value of your
shares within 15 days after the date of the shareholder approval of the
merger agreement.
- You should file your written objection and your demand for payment by
mailing them by certified or registered mail to Anne M. Pare, Corporate
Secretary and Clerk, CMP Group Inc., 83 Edison Drive, Augusta, Maine
04336, or delivering them in person to CMP Group's principal place of
business at the same address, to the attention of Anne M. Pare,
Corporate Secretary and Clerk. The objection and demand for payment
must specify your name and current address.
You may object with respect to fewer than all of your shares.
You must deliver the written objection to the merger even if you submit a
proxy or vote against the merger agreement. MERELY VOTING AGAINST, ABSTAINING
FROM VOTING OR FAILING TO VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT WILL
NOT CONSTITUTE A WRITTEN OBJECTION TO THE MERGER UNDER THE MAINE BUSINESS
CORPORATION ACT. If you fail to meet these conditions, and the merger is
effected, your CMP Group shares will be converted into the merger consideration,
which is $29.50 in cash, without interest.
Once filed, the demand for payment may not be withdrawn without the consent
of CMP Group. If you make a demand for payment, you may not thereafter vote or
exercise any other CMP Group shareholders rights.
Your right to be paid the fair value of your shares will terminate in the
event that (1) the merger agreement is not approved or is abandoned, (2) your
demand is withdrawn upon consent of CMP Group, (3) no judicial action for the
determination of fair value is filed within the time prescribed by Maine law, as
described below, (4) you fail to comply with the statutory procedure or (5) a
court of competent jurisdiction determines that you are not entitled to demand
payment.
At the time you file your demand for payment, or within 20 days thereafter,
you must submit the certificates representing the shares for which you are
demanding payment for notation of the fact of your demand. You must mail or
deliver these certificates to Anne M. Pare, Corporate Secretary and Clerk, CMP
Group, Inc., 83 Edison Drive, Augusta, Maine 04336. CMP Group will return share
certificates to you promptly after notation has been made. If you fail to submit
certificates for notation within this time limit, you will lose all rights as a
dissenting shareholder (unless a court of competent jurisdiction for good and
sufficient cause shown directs otherwise).
Within the later of 25 days after the merger agreement is approved by the
shareholders or 10 days after the effective time of the merger, CMP Group must
give written notice to each dissenting
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shareholder who has complied with the procedures above that the merger has been
effected, and must make a written offer at a specified price to purchase the
shares as to which each shareholder is dissenting. The offer will be made at the
same price per share to all dissenting shareholders.
If you and CMP Group agree on the price within 20 days after the last date
for delivery of this offer, CMP Group must, within 90 days after the effective
time of the merger, make payment of the agreed amount upon your surrender of
your shares. At the time you are paid, you will cease to have any interest in
your shares. If you and CMP Group fail to agree on the fair value of your shares
during that 20-day period, CMP Group may, within a 60-day period thereafter,
bring an action in the Maine Superior Court in Kennebec County, Maine to
determine the fair value of the shares. Alternatively, you may, up to 60 days
after the effective time of the merger, demand in writing that CMP Group bring
such an action, in which case CMP Group must do so within 30 days after receipt
of the demand. If CMP Group fails to institute an action within this 30-day
period, you may bring a suit in the name of CMP Group. All actions to determine
fair value, whether brought by CMP Group or a shareholder, must be filed within
six months from the effective time of the merger.
All dissenting shareholders, wherever residing, who have not agreed with CMP
Group on a price for their shares will be joined as parties in any action to
determine fair value and must be served with a copy of the complaint filed in
the court action. The value determined by the court will be binding on all
eligible dissenting shareholders. Upon request of CMP Group, the court will
consider and pass upon whether specified dissenting shareholders have
satisfactorily complied with all of the requirements of Maine law. If the court
finds that the dissenting shareholders have not so complied, they will not be
entitled to be paid the fair value as determined, but will be bound by the terms
of the merger agreement. The burden of proof is on the shareholder to prove his
eligibility.
The judgment fixing the fair value of the shares will include interest, at a
rate the court finds to be fair and equitable, from the date of the shareholder
vote to the date of payment, unless the court determines that your refusal to
accept CMP Group's offer of payment for the shares was arbitrary, vexatious or
not in good faith. The judgment will be payable only upon surrender to CMP Group
of the certificates representing your dissenting shares. Upon CMP Group's
payment of the judgment, you will cease to have any interest in the shares.
Costs and expenses of the proceeding, as determined by the court, will be
assessed against CMP Group unless the court finds that your refusal to accept
CMP Group's offer of payment for your shares was arbitrary, vexatious or not in
good faith. Costs and expenses will not include the fees and expenses of counsel
or of expert witnesses but will include reasonable compensation and expenses to
any appraisers appointed by the court. If the "fair value" of the shares, as
determined by the court, "materially exceeds" the amount that CMP Group offered
to pay for the shares, or if no offer was made, the court may award you all or
part of your attorneys' fees or expenses and reasonable compensation and
expenses to any expert you employed.
If you have exercised your right to dissent, any purchaser of your
dissenting shares will not acquire any rights in CMP Group other than the rights
that you had as a dissenting shareholder. Any new certificate issued evidencing
the transferred shares will bear a notation reflecting your demand for payment.
A shareholder who is a minor or otherwise legally incapacitated will be
bound by the procedural limitations of Section 909 of the Maine Business
Corporation Act. He may personally, or through a guardian or any person acting
for him as a legally authorized representative, take all actions necessary to
assert his right to dissent. Actions taken in respect of shares held of record
by a nominee for the benefit of another may be made only by the nominee and not
by the beneficial owner.
The foregoing discussion is qualified in its entirety by reference to
Sections 908 and 909 of the Maine Business Corporation Act, copies of which are
attached hereto as Appendix C.
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THE MERGER AGREEMENT
THE FOLLOWING DESCRIPTION IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER
AGREEMENT. IT IS QUALIFIED, IN ITS ENTIRETY, BY THE ACTUAL MERGER AGREEMENT, A
COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT. WE URGE YOU TO
READ THE ACTUAL MERGER AGREEMENT.
GENERAL
The merger agreement provides that EE Merger Corp., a wholly owned
subsidiary of Energy East, will merge with and into CMP Group. CMP Group 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 articles of merger to the Secretary of State of
the State of Maine for filing. The merger will become effective upon the filing
of these articles. We currently expect that the closing of the merger will take
place in the middle of the year 2000.
CORPORATE GOVERNANCE MATTERS
DIRECTORS. After the merger becomes effective, the board of directors of
the surviving company will consist of the current directors of EE Merger Corp.
and Messrs. Flanagan and Adelberg. These directors will hold office until their
successors are duly elected or appointed and qualified. In addition, the Energy
East board of directors will increase the number of Energy East directors by
three and will elect Mr. Flanagan and two additional directors of CMP Group
mutually agreed upon by CMP Group and Energy East.
OFFICERS. Once the merger becomes effective, Mr. Flanagan will be the
chairman of the board, president and chief executive officer of the surviving
company (which will be a subsidiary of Energy East) as well as the president of
Energy East. At that time, Mr. Adelberg will be the chief financial officer and
a senior vice president of Energy East. The other officers of the surviving
company will be the same individuals who hold the officer positions in EE Merger
Corp. 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.
CONVERSION OF CMP GROUP SHARES
MERGER CONSIDERATION. At the effective time of the merger, each outstanding
CMP Group share (other than those shares that are held by CMP Group shareholders
who have not voted in favor of the merger and have properly asserted dissenters'
rights or those shares that are owned by CMP Group, Energy East, or any of their
subsidiaries) will be converted into the right to receive $29.50 in cash,
without interest.
PAYING AGENT. Energy East will deposit with a paying agent cash payable in
exchange for outstanding CMP Group shares.
DISSENTERS' SHARES. CMP Group shareholders who pursue their rights to
dissent under Maine law will lose their right to receive the merger
consideration, which is $29.50 in cash per share, without interest. These
shareholders will have only those rights that are granted by applicable Maine
law. If, however, after the effective time of the merger, a holder withdraws or
loses his right to dissent (in either case pursuant to Maine law), his CMP Group
shares will be converted into the right to receive the merger consideration. CMP
Group will promptly notify Energy East if it receives any written demands for
payment of the fair value of outstanding CMP Group shares or withdrawals of such
demands. The surviving company will make any payments in respect of dissenting
shares.
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EXCHANGE AND PAYMENT PROCEDURES. Promptly after the effective time of the
merger, the paying agent will mail to each record holder of a certificate
representing CMP Group shares that have been converted into the right to receive
the merger consideration:
- a letter of transmittal for use in submitting stock certificates to the
paying agent; and
- instructions explaining what the shareholders must do to effect the
surrender of the CMP Group stock certificates and receive the merger
consideration.
After a shareholder submits his stock certificates, a letter of transmittal and
other documents that may be required, the shareholder will have the right to
receive the merger consideration. The merger consideration may be delivered to
someone who is not listed in CMP Group's transfer records if he presents a CMP
Group 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 stock transfer taxes have been paid. Until surrender, each
certificate (other than those that are held by CMP Group shareholders who have
not voted in favor of the merger and have properly asserted dissenters' rights)
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.
Shareholders should not forward certificates to the paying agent, Energy
East or CMP Group until they have received a letter of transmittal. Shareholders
should not return certificates with the enclosed proxy.
TREATMENT OF STOCK OPTIONS. CMP Group agreed that its board of directors
will take all actions necessary, including obtaining the consents of the option
holders, to provide for the cancellation at the effective time of the merger of
all outstanding stock options. Promptly following the effective time of the
merger, CMP Group will pay each option holder who consents to the cancellation
of his options an amount in cash equal to the product of (1) the total number of
CMP Group shares underlying the holder's options, and (2) the excess of $29.50
over the exercise price per share of the CMP Group shares underlying the
options.
WITHHOLDING RIGHTS. Each of the surviving company, CMP Group and Energy
East is entitled to deduct and withhold from the merger consideration those
amounts it is required to deduct and withhold under the Internal Revenue Code or
any provision of state, local or foreign tax law.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, CMP Group and Energy East make representations and
warranties about themselves and their businesses, including the following:
by CMP Group as to:
- its proper organization, good standing and qualification to do
business in various states;
- its capital structure;
- the filing with regulatory agencies of all required reports, including
financial statements and their compliance with legal requirements;
- litigation;
- tax matters;
- environmental compliance and liability;
- the shareholder vote required;
- the ownership of Energy East shares by CMP Group;
- the required statutory approvals;
- Year 2000 readiness;
- the validity of its subsidiaries' stock and the ownership rights of
CMP Group;
- its authority to enter into and the enforceability of the merger
agreement;
- the absence of certain adverse changes or events;
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- accuracy of information included in this proxy statement;
- employee matters and matters relating to the Employee Retirement
Income Security Act of 1974;
- regulation as a utility;
- the opinion of CMP Group's financial advisor;
- the nonapplicability of takeover laws; and
- compliance with laws;
and by Energy East as to:
- its proper organization, good standing and qualification to do
business in various states;
- its capital structure;
- required statutory approvals;
- its ability to complete the merger without any vote by its
shareholders;
- compliance with laws;
- application of the Public Utility Holding Company Act to Energy East
and its subsidiaries;
- its authority to enter into and the enforceability of the merger
agreement;
- the accuracy of information contained in the proxy statement; and
- the availability of funds to complete the merger.
The representations and warranties made by the parties to the merger
agreement will not survive the merger, but they do form the basis of conditions
to the obligations of Energy East and CMP Group.
COVENANTS
MUTUAL COVENANTS. Under the merger agreement, each party has 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, it will comply with the following covenants:
- it 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 its ongoing operations;
promptly notify the other party of any significant changes in its
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; and
promptly provide the other party with copies of all filings with
governmental authorities in connection with the merger agreement;
- it and its subsidiaries will use 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; and
- it and its subsidiaries will not willfully take any action that is
reasonably likely to result in a material breach of the merger
agreement or any of its representations and warranties being untrue on
and as of the closing date of the merger.
COVENANTS OF CMP GROUP. CMP Group 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), CMP Group and its subsidiaries will:
- carry on their businesses in the ordinary course;
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- 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 and requirements with
respect to: (1) dividends, (2) stock splits and issuances of shares,
(3) redemptions or repurchases of 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;
- take any action in connection with CMP Group's rights in its investment
in NorthEast Optic Network, as requested by Energy East;
- not engage in any activities that would cause a change in their status
under the Public Utility Holding Company Act;
- not amend or propose to amend their articles of incorporation, by-laws,
regulations or similar organizational documents (except CMP Group's
wholly owned subsidiaries may do so if it would not reasonably be
expected to prevent or materially impede the merger or interfere with
Energy East's ability to exercise control over these subsidiaries);
- use reasonable efforts to maintain in effect all material existing
governmental permits pursuant to which they operate; and
- take all necessary steps within their control to exempt the merger
from, or if necessary, challenge the validity or applicability of, any
takeover law.
NO SOLICITATION OF ALTERNATIVE PROPOSALS. CMP Group also agreed to certain
restrictions concerning "Alternative Proposals," which are defined in the merger
agreement as proposals or offers relating to mergers, acquisitions,
consolidations or similar transactions between third parties and CMP Group or
its subsidiaries, or any acquisition of a substantial equity interest in or a
substantial portion of the assets of CMP Group or any of its subsidiaries.
Specifically, CMP Group 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 then 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 24 hours 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, CMP Group may take the following steps:
- at any time before the CMP Group shareholders vote to approve the
merger agreement, CMP Group may engage in discussions or negotiations
with a third party who seeks to initiate such discussions or
negotiations, and may furnish such third party information
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concerning CMP Group and its business, properties and assets, but only
if the following requirements are met:
- the CMP Group board of directors 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 is obtainable in the reasonable judgment of the CMP
Group board of directors), and the CMP Group board of directors
concludes in good faith, based upon the advice of outside counsel
and other relevant matters, that failure to engage in such
discussions and provide such information would likely result in a
breach of its fiduciary duties under applicable law, and
- before CMP Group provides information to, or enters into
discussions or negotiations with, the third party, CMP Group (1)
gives Energy East not less than two business days' notice 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;
- CMP Group may comply with Rule 14e-2 under the Securities Exchange
Act of 1934 regulating tender or exchange offers; or
- CMP Group 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 Antitrust Division of 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, 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 is required to hold in strict confidence all information furnished to
it in connection with the merger.
PROXY STATEMENT. CMP Group agreed to prepare this proxy statement, file it
with the SEC and use all reasonable efforts to have it cleared by the SEC.
REGULATORY MATTERS. CMP Group 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 and approvals.
SHAREHOLDER APPROVAL. CMP Group agreed to take all steps necessary to hold
the special meeting to obtain the necessary majority vote to approve the merger.
Subject to their fiduciary duties, the CMP Group board of directors will
recommend to the shareholders the approval of the merger agreement.
INDEMNIFICATION OF DIRECTORS 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 or employee of CMP Group or
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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 gave 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 (1) based on
the fact that such individual served as a director, officer or employee of CMP
Group 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. Energy East
and the surviving company will cooperate in the defense of all these matters.
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 Maine law and the governing articles of incorporation and
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 maintain directors' and officers' liability insurance policies (or, if
available, an extended reporting period under current policies) for the benefit
of those directors and officers of CMP Group and its subsidiaries who were
covered by CMP Group's insurance as of June 14, 1999. The terms of the coverage
will be at least as favorable as the terms of CMP Group's policies in effect as
of June 14, 1999. Energy East will not, however, be required to expend in any
year more than 200% of the annual aggregate premiums that CMP Group was paying
for that insurance on June 14, 1999.
PUBLIC ANNOUNCEMENTS. Subject to their legal obligations to disclose
information, CMP Group 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 concerning the merger without the
consent of the other party, which consent cannot be withheld unreasonably.
EMPLOYEE AGREEMENTS. Except as provided below, Energy East and its
subsidiaries, including the surviving corporation, will honor, without
modification, all existing contracts, agreements and commitments of CMP Group
that were entered into before June 14, 1999, and apply to current or former
employees or directors of CMP Group.
EMPLOYEE BENEFIT PLANS. Everyone who works for CMP Group or any of its
subsidiaries immediately before the effective time of the merger, remains
employed after the effective time of the merger and is not covered by a
collective bargaining agreement will be provided with credit, for all purposes
other than benefit accrual, for years of service with CMP Group and its
subsidiaries before the effective time of the merger, unless providing credit
would result in a duplication of benefits. In addition:
- each of these employees will be immediately eligible to participate,
without any waiting period, in all employee benefit plans sponsored by
Energy East and its subsidiaries for the benefit of such employees to
the extent coverage under these new plans replaces coverage under a
comparable plan in which these employees participated immediately
before the effective time of the merger;
- for purposes of each new plan providing medical, dental, pharmaceutical
or vision benefits to any of these employees or their dependents,
Energy East will waive all pre-existing condition exclusions and
actively-at-work requirements of the new plan; and
- these employees and their dependents will get credit for the eligible
expenses they incurred under the old plans, for purposes of satisfying
all applicable deductible, coinsurance and maximum out-of-pocket
requirements, as if these expenses had been paid under the new plans.
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EXPENSES. Except for those expenses incurred in connection with the
printing and filing of this proxy statement (which expenses are being shared
equally by CMP Group and Energy East) and except as described under
"--Termination, Amendment and Waiver--Termination," 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. The parties also
agreed that if the only barrier to completing the merger is the inability to
obtain governmental consents and these consents can be obtained by adopting an
alternative structure for the combination of Energy East and CMP Group, then the
parties will use their best efforts to effect the combination by means of an
alternative structure. The parties need not, however, use best efforts to effect
the combination if the alternative structure would not preserve the economic
benefits of the merger or would require additional governmental consents or
filings (other than amendments or supplements to filings already made).
CORPORATE OFFICES. After the effective time of the merger, the corporate
headquarters of Central Maine Power will continue to be located in Augusta,
Maine. At that time, Energy East will open and maintain an office in Portland,
Maine to accommodate the responsibilities of Messrs. Flanagan and Adelberg.
COMMUNITY INVOLVEMENT. After the effective time of the merger, Energy East
or the surviving company will make annual charitable contributions of at least
$100,000 to the communities that Central Maine Power serves, and otherwise
maintain a substantial level of involvement in community activities in the State
of Maine that is similar to or greater than the level of community development
and related activities currently carried on by CMP Group.
EMPLOYMENT CONTRACTS. Energy East has entered into employment contracts
with Messrs. Flanagan, Adelberg and McClain and Ms. Burns. These agreements will
become effective upon completion of the merger.
ADVISORY BOARD. Central Maine Power will set up an advisory board comprised
of the individuals who were directors of Central Maine Power immediately before
the effective time of the merger. The advisory board will meet at least
quarterly and will provide advice to the Central Maine Power board of directors
as requested. The members of the advisory board, who will serve at the
discretion of Central Maine Power, will receive remuneration for their services
equivalent to the base remuneration provided to non-officer directors of CMP
Group.
TRANSITION STEERING TEAM. Energy East and CMP Group agreed that, as soon as
reasonably practicable, they would create a special transition steering team.
That team has been created and regularly holds meetings. This team was formed to
develop non-binding recommendations for Energy East concerning the future
structure and operations of CMP Group, regulatory plans, corporate
organizational and management plans, workforce combination proposals, and any
other matters requested by Energy East. The chief executive officers of Energy
East and CMP Group appointed the members of the transition steering team from
the senior management teams of both companies.
CONDITIONS
MUTUAL CONDITIONS. The obligations of CMP Group, Energy East and EE Merger
Corp. to complete the merger are subject to satisfaction of the following
conditions:
- CMP Group shareholders have approved the merger agreement.
- No U.S. federal or state court has issued a temporary restraining order
or injunction that prevents consummation of the merger, and there is no
U.S. federal or state law or regulation prohibiting the merger.
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- CMP Group and Energy East have obtained the requisite governmental
approvals by the effective time of the merger and all applicable
waiting periods must have expired.
CONDITIONS TO OBLIGATIONS OF ENERGY EAST. The obligations of Energy East to
complete the merger are contingent on the satisfaction of, or waiver by Energy
East of, the following conditions:
- CMP Group has performed in all material respects the agreements and
covenants contained in the merger agreement.
- The representations and warranties of CMP Group 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 would not,
in the aggregate, reasonably be expected to have a material adverse
effect on CMP Group and its subsidiaries taken as a whole.
- CMP Group has provided Energy East with a certificate, dated the
closing date of the merger, signed by CMP Group's treasurer, corporate
counsel and secretary regarding satisfaction of the two preceding
conditions.
- CMP Group and its subsidiaries taken as a whole have not suffered a
material adverse effect, and there is no fact or circumstance, unless
it was disclosed in the schedules to the merger agreement, that is
reasonably likely to have a material adverse effect on CMP Group and
its subsidiaries taken as a whole.
- CMP Group has obtained the requisite third-party consents, unless the
failure to obtain those consents would not have a material adverse
effect on CMP Group and its subsidiaries taken as a whole.
- The requisite governmental approvals must not impose terms or
conditions that, in the aggregate, will have or (insofar as reasonably
can be foreseen) could have, a material adverse effect on either CMP
Group and its subsidiaries taken as a whole or Energy East's ability to
complete the transactions contemplated by the merger agreement. A
requirement that Energy East divest its ownership of NYSEG would
constitute a term or condition that could have a material adverse
effect.
CONDITIONS TO OBLIGATIONS OF CMP GROUP. The obligations of CMP Group to
complete the merger agreement and the merger are contingent on the satisfaction
of, or waiver by CMP Group of, the following conditions:
- Energy East has performed in all material respects the agreements and
covenants contained in 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 would not, in the aggregate, reasonably be expected to
have a material adverse effect on Energy East's ability to complete the
transactions contemplated by the merger agreement.
- Energy East has provided CMP Group 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 has obtained the requisite third-party consents, unless the
failure to obtain those consents would not have a material adverse
effect on Energy East's ability to complete the transactions
contemplated by the merger agreement.
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TERMINATION, AMENDMENT AND WAIVER
TERMINATION. The merger agreement may be terminated at any time before the
effective time of the merger, even after the CMP Group shareholders have already
approved it unless otherwise noted below:
- by mutual written consent of the boards of directors of CMP Group and
Energy East;
- by either CMP Group or Energy East if they have not completed the
merger by June 14, 2000 (or December 14, 2000, if the only barrier to
the closing of 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 CMP Group 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 nonappealable decision that
permanently enjoins the merger;
- by CMP Group, before its shareholders approve the merger agreement, if
CMP Group is not in breach of the merger agreement and, as a result of
an Alternative Proposal, the CMP Group board of directors determines in
good faith that
- the Alternative Proposal is financially superior to the merger
and the third party making the Alternative Proposal has
obtained the necessary financing (or demonstrated that the
financing is obtainable in the reasonable judgment of the CMP
Group board of directors), 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 CMP Group may terminate the merger agreement,
- CMP Group must give Energy East five days' prior notice of its
intent to accept the Alternative Proposal, and
- during this five-day period CMP Group and its financial and
legal advisors must negotiate with Energy East towards
adjusting the merger agreement so as to enable the merger to
proceed.
- by CMP Group if:
- Energy East has breached any of its representations, warranties
or covenants in the merger agreement, the breach would be
reasonably likely to result in a material adverse effect on
Energy East's ability to complete the transactions contemplated
by the merger agreement, and Energy East does not cure the
breach within 20 days of notice from CMP Group; or
- by Energy East if:
- CMP Group has breached any of its representations, warranties
or covenants in the merger agreement, the breach would be
reasonably likely to result in a material adverse effect on CMP
Group and its subsidiaries taken as a whole, and CMP Group does
not cure the breach within 20 days of notice from Energy East;
or
- the CMP Group board of directors 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
within two days of Energy East's request, (3) approves or
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recommends any acquisition of CMP Group or a material portion
of its assets or any tender offer for the shares of capital
stock of CMP Group by someone other than Energy East or any of
its affiliates, or (4) resolves to take any of these actions.
EFFECT OF TERMINATION. CMP Group 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 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 $10 million if the breach was not willful. In the event of a willful
breach, the non-breaching party will also have all available legal remedies in
addition to the right to recover its documented out-of-pocket expenses, which
will not be limited to $10 million.
CMP Group must pay Energy East a termination fee of $33.5 million, in
addition to fees and expenses up to $10 million, if the merger agreement is
terminated for any of the following reasons:
- the CMP Group board of directors decides to pursue an Alternative
Proposal;
- CMP Group shareholders fail to approve the merger by June 14, 2000, but
only if there was an Alternative Proposal outstanding at the time of
the special meeting and CMP Group enters into a definitive agreement to
complete or actually does complete an Alternative Proposal within two
years of the termination; or
- the CMP Group board of directors withdraws, modifies, or fails to
affirm its approval or recommendation of the merger agreement, but only
if there was an Alternative Proposal outstanding at the time of the
termination and, within two years of such termination, CMP Group enters
into a definitive agreement to complete or actually does complete an
Alternative Proposal.
AMENDMENT. The parties' boards of directors may amend the merger agreement
at any time before the effective time of the merger, whether or not the CMP
Group shareholders have already approved the agreement. After CMP Group
shareholder approval is obtained, however, no such amendment can (1) alter the
amount or nature 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 CMP Group shareholders (except for changes that
could otherwise be adopted by the CMP Group board of directors without the
further approval of the CMP Group 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 made in connection with
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 will be valid if set forth in an
instrument in writing signed on behalf of such party.
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SHARE OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning the beneficial
ownership of CMP Group shares as of August 20, 1999 by each director and
executive officer of CMP Group. The total number of CMP Group shares
beneficially owned as of August 20, 1999 by all directors and executive officers
as a group is also listed. Shares listed as beneficially owned include shares as
to which the directors and executive officers have or share the power to vote or
the power to dispose.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
SHARES OWNED SUBJECT
BENEFICIALLY TO OPTIONS TOTAL
OWNED (AS OF EXERCISABLE AS SHARES
AUGUST 20, OF BENEFICIALLY
DIRECTORS AND EXECUTIVE OFFICERS 1999) AUGUST 20, 1999 OWNED
- ------------------------------------------------ ------------- --------------- -----------
<S> <C> <C> <C>
Charles H. Abbott............................... 7,274 -- 7,274
Lawrence A. Bennigson........................... 300 -- 300
Charleen M. Chase............................... 1,409 -- 1,409
Duane D. Fitzgerald............................. 500 -- 500
David T. Flanagan............................... 15,354 78,983 94,337
Robert H. Gardiner.............................. 1,000 -- 1,000
David M. Jagger................................. 1,000 -- 1,000
Peter J. Moynihan............................... 1,367 -- 1,367
William J. Ryan................................. 1,000 -- 1,000
Lee M. Schepps.................................. 1,500 -- 1,500
Kathryn M. Weare................................ 1,271 -- 1,271
Lyndel J. Wishcamper............................ 3,391 -- 3,391
Arthur W. Adelberg.............................. 6,749 17,988 24,737
David E. Marsh.................................. 8,047 17,988 26,035
Gerald C. Poulin................................ 8,520 14,762 23,282
F. Michael McClain.............................. 1,218 14,711 15,929
Anne M. Pare.................................... 1,041 8,177 9,218
All directors and executive officers as a
group......................................... 60,941 152,609 213,550
</TABLE>
The number of CMP Group shares beneficially owned by all of the directors
and executive officers of CMP Group collectively constituted less than one
percent of the total shares then outstanding. Mr. Abbott's spouse held sole
voting and investment power over 800 shares of the total number of shares listed
for Mr. Abbott. All shares listed for Ms. Chase were held jointly. Of the shares
listed for Mr. Poulin, 201 shares were held jointly. The total number of shares
held jointly for all directors and executive officers as a group was 1,610
shares.
Based on publicly available information, as of June 30, 1999 there was no
shareholder believed to be the beneficial owner of 5 percent or more of the
outstanding CMP Group shares.
47
<PAGE>
EXPERTS
The consolidated financial statements of CMP Group and Central Maine Power
incorporated in this proxy statement by reference to CMP Group's and Central
Maine Power's Annual Report on Form 10-K for the year ended December 31, 1998
have been incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors given on authority of that firm
as experts in accounting and auditing.
INDEPENDENT PUBLIC ACCOUNTANTS
A representative of PricewaterhouseCoopers LLP 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.
DEADLINES FOR SHAREHOLDER PROPOSALS
For a shareholder proposal to be considered for inclusion in the proxy
statement and form of proxy for the 2000 annual meeting of shareholders of CMP
Group, it must be received by Anne M. Pare, Secretary, CMP Group, Inc., 83
Edison Drive, Augusta, Maine 04336 on or before December 22, 1999.
As for proposals that a shareholder does not seek to include in the proxy
statement for the 2000 annual meeting of shareholders, CMP Group can use
discretionary voting authority to vote on these matters if CMP Group does not
have notice of them (1) at least 45 days before the first anniversary of the
date on which CMP Group first mailed its proxy materials for the prior year's
annual meeting of shareholders or (2) before the date specified by the advance
notice provision in CMP Group's articles of incorporation.
Under the articles of incorporation, a shareholder who wishes to nominate a
candidate for election to the board of directors of CMP Group at the 2000 annual
meeting of shareholders of CMP Group or bring any matter before that meeting
(other than matters included in CMP Group's proxy materials) must submit the
nomination or the matter to the Secretary of CMP Group no earlier than February
21, 2000 and no later than March 21, 2000. The notice must also meet other
requirements set forth in the articles of incorporation.
48
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
CMP Group 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> <C> <C>
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. CMP Group's and Energy East's SEC filings should also be
available to the public from commercial document retrieval services and at the
Internet world wide web site that the SEC maintains at HTTP://WWW.SEC.GOV. In
addition, materials and information concerning CMP Group and Energy East can be
inspected at the New York Stock Exchange, 20 Broad Street, 7th Floor, New York,
New York 10005, where CMP Group shares and Energy East shares are listed.
The SEC allows CMP Group to "incorporate by reference" information into this
document, which means that CMP Group 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 CMP Group (SEC File No. 001-14786). These documents contain important
information about CMP Group.
- CMP Group's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, as amended by Form 10-K/A filed on June 30, 1999.
- CMP Group's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999.
- CMP Group's Current Reports on Form 8-K dated April 7, 1999 and June 14,
1999.
The SEC may require CMP Group to file other documents pursuant to Section
13(a), 13(c), 14 or 15(d) of the 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.
If you are a CMP Group 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 Internet world wide 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:
CMP GROUP, INC.
83 Edison Drive
Augusta, Maine 04336
(207) 623-3521
Attn: Corporate Secretary
If you would like to request documents from CMP Group, please do so promptly
in order to receive them before the special meeting.
49
<PAGE>
CMP Group has provided all information contained in or incorporated by
reference in this document with respect to CMP Group and Central Maine Power.
Energy East has provided all information contained in this document with respect
to Energy East. Neither CMP Group nor Energy East assumes any responsibility for
the accuracy or completeness of the information provided by the other party.
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 AUGUST 30, 1999. 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 STOCKHOLDERS
NOR THE COMPLETION OF THE MERGER WILL CREATE ANY IMPLICATION TO THE CONTRARY.
50
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CMP GROUP, INC.,
ENERGY EAST CORPORATION
AND
EE MERGER CORP.
dated as of June 14, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
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 Directors................................................ 2
Section 1.5 Officers................................................. 2
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock.................... 2
Section 2.2 Exchange of Certificates................................. 3
Section 2.3 Treatment of Stock Options; Withholding Rights........... 4
ARTICLE III
THE CLOSING
Section 3.1 Closing.................................................. 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification........................... 5
Section 4.2 Subsidiaries............................................. 6
Section 4.3 Capitalization........................................... 6
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance............................................... 7
Section 4.5 Reports and Financial Statements......................... 8
Section 4.6 Absence of Certain Changes or Events..................... 9
Section 4.7 Litigation............................................... 9
Section 4.8 Proxy Statement.......................................... 9
Section 4.9 Tax Matters.............................................. 10
Section 4.10 Employee Matters; ERISA.................................. 11
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<PAGE>
Section 4.11 Environmental Protection................................. 15
Section 4.12 Regulation as a Utility.................................. 17
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; Rights Plans.............................. 17
Section 4.17 Year 2000................................................ 18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.1 Organization and Qualification........................... 18
Section 5.2 Subsidiaries............................................. 18
Section 5.3 Capitalization........................................... 18
Section 5.4 Authority; Non-Contravention; Statutory Approvals........ 19
Section 5.5 Proxy Statement.......................................... 20
Section 5.6 Availability of Funds.................................... 20
Section 5.7 Vote Required............................................ 20
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business by the Company Pending the Merger.... 20
Section 6.2 Alternative Proposals.................................... 24
Section 6.3 Cooperation, Notification ............................... 25
Section 6.4 Third Party Consents .................................... 25
Section 6.5 No Breach, Etc. ......................................... 25
Section 6.6 Access to Information.................................... 26
Section 6.7 Proxy Statement.......................................... 26
Section 6.8 Regulatory Matters....................................... 26
Section 6.9 Shareholder Approval..................................... 27
Section 6.10 Directors'and Officers'Indemnification................... 27
Section 6.11 Disclosure Schedules..................................... 28
Section 6.12 Public Announcements..................................... 29
Section 6.13 Certain Employee Agreements.............................. 29
Section 6.14 Employee Benefit Plans................................... 29
Section 6.15 Expenses................................................. 30
Section 6.16 Further Assurances....................................... 30
Section 6.17 Corporate Offices........................................ 30
Section 6.18 Parent Directors......................................... 30
Section 6.19 Employment Contracts..................................... 31
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<PAGE>
Section 6.20 Advisory Board........................................... 31
Section 6.21 Community Involvement.................................... 31
Section 6.22 Transition Steering Team................................. 31
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger................................................... 31
Section 7.2 Conditions to Obligation of Parent to Effect the Merger.. 32
Section 7.3 Conditions to Obligation of the Company to Effect the
Merger................................................... 33
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.............................................. 34
Section 8.2 Effect of Termination.................................... 35
Section 8.3 Termination Fee; Expenses................................ 35
Section 8.4 Amendment................................................ 36
Section 8.5 Waiver................................................... 36
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival; Effect of Representations and Warranties... 37
Section 9.2 Brokers.................................................. 37
Section 9.3 Notices.................................................. 37
Section 9.4 Miscellaneous............................................ 38
Section 9.5 Interpretation........................................... 38
Section 9.6 Counterparts; Effect..................................... 39
Section 9.7 Parties in Interest...................................... 39
Section 9.8 Waiver of Jury Trial and Certain Damages................. 39
Section 9.9 Enforcement.............................................. 39
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of June 14, 1999 (this
"AGREEMENT"), by and among CMP Group, Inc., a Maine corporation (the "COMPANY"),
Energy East Corporation, a New York corporation ("PARENT"), and EE Merger Corp.,
a Maine corporation and a wholly owned subsidiary of Parent ("MERGER SUB").
WHEREAS, the Company and Parent have determined to engage in a
business combination transaction on the terms stated herein; and
WHEREAS, the Boards of Directors of the Company and Parent have
approved and deemed it advisable and in the best interests of their respective
shareholders 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;
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
laws of the State of Maine. The Company shall be the surviving corporation in
the Merger and shall continue its corporate existence under the laws of the
State of Maine. The effects and the consequences of the Merger shall be as set
forth in SECTION 1.2. Throughout this Agreement, the term "MERGER SUB" shall
refer to Merger Sub prior to the Merger and the term "SURVIVING CORPORATION"
shall refer to the Company in its capacity as the surviving corporation in the
Merger.
SECTION 1.2 EFFECTS OF THE MERGER. At the Effective Time, (i) the
articles of incorporation of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such articles of
incorporation, except that the name of the Surviving Corporation shall be "CMP
Group, Inc." and (ii) the by-laws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by law, the articles of incorporation or by-laws
of the Surviving Corporation. Subject to the foregoing, the additional effects
of the Merger shall be as provided in Section 905 of the Maine Business
Corporation Act, as amended (the "MBCA").
SECTION 1.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date (as
defined in SECTION 3.1), with respect to the Merger, articles of merger
complying with Section 903 of the MBCA (the "ARTICLES OF MERGER") shall be
delivered to the Secretary of the State of Maine for filing. The Merger shall
become effective upon the filing of the Articles of Merger (the "EFFECTIVE
TIME").
<PAGE>
SECTION 1.4 DIRECTORS. The directors of Merger Sub immediately prior
to the Effective Time and Messrs. David T. Flanagan and Arthur W. Adelberg shall
be the directors of the Surviving Corporation 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 articles of incorporation and
by-laws of the Surviving Corporation, or as otherwise provided by the MBCA.
SECTION 1.5 OFFICERS. Except for the Chief Executive Officer of the
Company, who shall become the Chairman of the Board, President and Chief
Executive Officer of the Surviving Corporation, the officers of Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation 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 articles of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the MBCA.
ARTICLE II
TREATMENT OF SHARES
SECTION 2.1 EFFECT OF THE MERGER ON CAPITAL STOCK. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company or Merger Sub:
(a) SHARES OF MERGER SUB STOCK. Each share of common stock, par
value $.01 per share, of Merger Sub (the "MERGER SUB COMMON STOCK") that is
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN COMPANY COMMON STOCK. Each share of
common stock, par value $5.00 per share, of the Company (the "COMPANY COMMON
STOCK"), that is owned by the Company as treasury stock and all shares of
Company Common Stock that are owned by any subsidiary of the Company, Parent,
Merger Sub or any other subsidiary of Parent shall be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common
Stock, other than Dissenting Shares (as defined in SECTION 2.1(D)) and shares
cancelled 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 an amount
in cash, without interest, equal to $29.50 (the "MERGER CONSIDERATION"). At the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration.
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<PAGE>
(d) DISSENTING SHARES. Each outstanding share of Company Common
Stock the holder of which has perfected his right to dissent under applicable
law and has not effectively withdrawn or lost such right as of the Effective
Time (the "DISSENTING SHARES") shall not be converted into or represent a right
to receive the Merger Consideration, and the holder thereof shall be entitled
only to such rights as are granted by applicable law; PROVIDED, HOWEVER, that
any Dissenting Share held by a person at the Effective Time who shall, after the
Effective Time, withdraw the demand for payment for shares or lose the right to
payment for shares, in either case pursuant to the MBCA, shall be deemed to be
converted into, as of the Effective Time, the right to receive the Merger
Consideration. The Company or the Surviving Corporation shall give Parent prompt
notice upon receipt by the Company or the Surviving Corporation, respectively,
of any such written demands for payment of the fair value of such shares of
Company Common Stock and of withdrawals of such notice and any other instruments
provided pursuant to applicable law. Any payments made in respect of Dissenting
Shares shall be made by the Surviving Corporation.
SECTION 2.2 EXCHANGE OF CERTIFICATES. (a) DEPOSIT WITH PAYING AGENT.
Prior to the Effective Time, Parent and the Company shall appoint a mutually
acceptable bank or trust to act as paying agent (the "PAYING AGENT") for the
payment of the Merger Consideration upon surrender of certificates representing
shares of Company Common Stock. Parent will enter into a customary paying agent
agreement acceptable to both Parent and the Company with the Paying Agent. As
soon as practicable after the Effective Time, Parent shall deposit or cause to
be deposited with the Paying Agent in trust for the benefit of the Company's
stockholders cash representing the aggregate Merger Consideration to which
Company stockholders 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
stockholders 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 representing shares of
Company Common Stock (a "Certificate") that has 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(C). 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
-3-
<PAGE>
required to evidence and effect such transfer and by evidence satisfactory to
the Paying Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this SECTION 2.2, each Certificate (other than a
certificate representing (i) shares of Company Common Stock to be cancelled in
accordance with SECTION 2.1(B) or (ii) Dissenting Shares) shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration. No interest will be paid or will accrue on
any cash payable to holders of Certificates pursuant to provisions of this
ARTICLE II. In the event any Certificate has been lost, stolen or destroyed, the
Paying Agent shall issue in exchange for such lost, stolen or destroyed
Certificate upon the making of an affidavit of that fact by the holder thereof
the Merger Consideration payable with respect thereto pursuant to SECTION
2.1(C), PROVIDED, HOWEVER, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Paying
Agent with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(c) CLOSING OF TRANSFER BOOKS. From and after the Effective Time,
the stock transfer books of the Company shall be closed and no registration of
any transfer of any capital stock of the Company shall thereafter be made in the
records of the Company. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be cancelled and exchanged for the
Merger Consideration.
(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 six months 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 Corporation 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
shares or funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 2.3 TREATMENT OF STOCK OPTIONS; WITHHOLDING RIGHTS. (a)
TREATMENT OF STOCK OPTIONS. Prior to the Effective Time, the Board of Directors
of the Company (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary (including
obtaining the consent of holders) to provide for the cancellation, effective at
the Effective Time, of all the outstanding stock options (the "OPTIONS")
outstanding immediately prior to the Effective Time heretofore granted under any
stock option or similar plan of the Company or under any agreement, without any
payment therefor except as otherwise provided in this Section 2.3. As of the
Effective Time, all Options (whether vested or unvested) which are listed in
Section 2.3 of the Company Disclosure Schedule (as defined in Section 6.11(ii))
shall be cancelled (and to the extent formerly so exercisable shall no longer be
exercisable) and shall entitle each holder thereof, in cancellation and
settlement therefor, to a payment, if any, in cash by the Company (less any
applicable withholding taxes), promptly following the Effective Time, equal to
the product of (i) the total number of shares of the Company Common Stock
subject to
-4-
<PAGE>
such Option (whether vested or unvested) and (ii) the excess, if any, of $29.50
over the exercise price per share of the Company Common Stock subject to such
Option.
(b) WITHHOLDING RIGHTS. Each of the Surviving Corporation, the
Company and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of the Company Common Stock 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 Corporation, 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 the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation, the Company or Parent, as the case may be.
ARTICLE III
THE CLOSING
SECTION 3.1 CLOSING. The closing of the Merger (the "CLOSING") shall
take place at the offices of Wachtell, Lipton, Rosen & Katz, at 10:00 a.m., New
York City time, on the second business day immediately following the date on
which the last of the conditions set forth in ARTICLE VII 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, the Company and each of its
subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite 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 currently 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, condition (financial or otherwise) 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
-5-
<PAGE>
a "COMPANY MATERIAL ADVERSE EFFECT"). As used in this Agreement, the term
"SUBSIDIARY" of a person shall mean any corporation or other entity (including
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 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, 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 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 stock of the
Company consists of 80,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $100.00 per share, of the Company ("COMPANY
PREFERRED STOCK"). As of the close of business on June 14, 1999, there were
issued and outstanding 32,442,552 shares of Company Common Stock and no shares
of Company Preferred Stock. All of the issued and outstanding shares of the
capital stock 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, 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 capital stock of the Company, or obligating the
Company to grant, extend or enter into any such agreement or commitment.
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SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
COMPLIANCE. (a) AUTHORITY. The Company has all requisite corporate 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 corporate 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, except as may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceedings may be
brought.
(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 does 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 (i) of
the articles of incorporation, 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 (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
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(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 articles of incorporation
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 Violations that, in the aggregate, do not have,
and to the knowledge of the Company are not reasonably likely to have, a Company
Material Adverse Effect.
(e) NON-COMPETITION. 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 Corporation 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, 1995 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Public Utility
Holding Company Act of 1935, as amended (the "1935 ACT"), the Federal Power Act,
as amended (the "POWER ACT") and applicable state public utility laws and
regulations have been filed with the Securities and Exchange Commission (the
"SEC"), the Federal Energy Regulatory Commission (the "FERC") or the appropriate
state public utilities commission, as the
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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 delivered or made available to Parent a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since January 1,
1995 (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 articles of
incorporation 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 set
forth in Section 4.6 of the Company Disclosure Schedule or disclosed in the
Company SEC Reports filed prior to the date hereof, 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 could have, in the aggregate, a Company Material Adverse
Effect.
SECTION 4.7 LITIGATION. Except as set forth in Section 4.7 or
Section 4.11 of the Company Disclosure Schedule or disclosed in the Company SEC
Reports filed prior to the date hereof, (i) there are no claims, suits, actions
or proceedings, pending or to the knowledge of the Company threatened, nor are
there any investigations or reviews pending or threatened against, relating to
or affecting the Company or any of its subsidiaries, and (ii) there are no
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality, authority or any arbitrator
applicable to the Company or any of its subsidiaries, except for any of the
foregoing under clauses (i) and (ii) that in the aggregate could not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 4.8 PROXY STATEMENT. None of the information supplied or to
be supplied by or on behalf of the Company for inclusion or incorporation by
reference in the proxy statement, in definitive form (the "PROXY STATEMENT"),
relating to the Company Special Meeting (as defined below) shall, 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.
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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 and any expenses incurred in connection with the
determination, settlement or litigation of any tax liability. "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 set forth in the appropriate subsection of 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) all
material 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 and filed on a timely basis.
(b) PAYMENT OF TAXES. The Company and each of its subsidiaries have,
within the time and in the manner prescribed by law, paid all 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 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 as of the Effective Time are not reasonably
expected to 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 has requested any extension of time within which to
file any 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
Taxes or Tax Returns.
(f) EXPIRATION OF STATUTE OF LIMITATIONS. The statute of limitations
for the assessment of all Taxes has expired for all applicable Tax Returns of
the Company and each of its subsidiaries, or those Tax Returns have been
examined by the appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any Taxes has been proposed, asserted or assessed
against the Company or any of its subsidiaries that has not been resolved and
paid in full.
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(g) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No 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. For any taxable years since and including 1990,
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 for the tax
years after December 31, 1992, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by the Company or any of its
subsidiaries for any taxable year since and including 1990 and (iii) any Closing
Agreements entered into by the Company or any of its subsidiaries with any
taxing authority, relating to any Tax Return filed by the Company or any of its
subsidiaries for any taxable year since and including 1990.
(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 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, for purposes of Section 897 of the
Code, more than five percent of the total fair market value of Company Common
Stock during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, and, at all times during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, Company Common Stock has been regularly traded in
an established securities market within the meaning of Treasury Regulation
Section 1.897-1(m).
(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 stock qualifying for tax-free treatment under
Section 355 of the Code (x) in the past 24-month period or (y) 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:
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(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) under 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 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.
(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 schedule, 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
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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 except as required under applicable law.
(d) Section 4.10(d) 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 to the knowledge of the Company there are no
existing circumstances nor any events that have occurred that could reasonably
be expected to adversely affect the qualified status of any Qualified Plan or
the related trust. No Plan is intended to meet the requirements of Code Section
501(c)(9).
(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 Employee Benefit Plan that is an employee welfare benefit plan
under Section 3(1) of ERISA (i) is funded through an insurance company contract
and is not a "welfare benefit fund" within the meaning of Section 419 of the
Code, or (ii) is unfunded.
(f) With respect to each Employee Benefit Plan, the Company and its
subsidiaries have complied (or, as disclosed to Parent prior to the date of this
Agreement, have corrected any noncompliance under applicable IRS self correction
programs), and are now in compliance in all material respects, with all
provisions of ERISA, the Code and all laws and regulations applicable to such
Employee Benefit Plans and each Employee Benefit 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. To the knowledge of the Company, no non-exempt prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) has
occurred with respect to any Plan.
(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; (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 all accrued benefits 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; (iv) all material premiums to the Pension
Benefit Guaranty Corporation ("PBGC") have been timely paid in full; (v) no
material
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liability (other than for premiums to the PBGC and for the payment of benefits
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) 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 be a material liability of the Surviving Corporation 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.
(j) Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA, 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. The Company and each of its subsidiaries has reserved the right to
amend, terminate or modify at any time all plans or arrangements providing for
retiree health or life insurance coverage.
(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 or director of the Company
or any of its subsidiaries. Without limiting the generality of the foregoing, no
amount paid or payable by the Company or any of its subsidiaries in connection
with the transactions contemplated hereby (either solely as a result thereof or
as a result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(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
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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 any material liability of the Company or any
of its subsidiaries to the PBGC, the Department of Treasury, the Department of
Labor, any Multiemployer Plan, any Plan or any participant in a Plan.
(n) The Company, its subsidiaries and each member of their
respective business enterprise has complied with the Worker Adjustment and
Retraining Notification Act.
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. The Company and each of its subsidiaries are in
compliance with all applicable Environmental Laws (as defined in SECTION
4.11(F)(II)); and 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, except where the
failure to be in such compliance would not in the aggregate have a Company
Material Adverse Effect.
(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 be in compliance with all such
Environmental Permits would not, in the aggregate, have a Company Material
Adverse Effect.
(c) ENVIRONMENTAL CLAIMS. There is no Environmental Claim (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 a Company Material
Adverse Effect.
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(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 (A) form the basis of any Environmental Claim against the Company or
any of its subsidiaries, or (B) 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 the 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 or any of its 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.
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(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 Company or any of its 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 (i) a "holding company," a
"public-utility company," a "subsidiary company" or an "affiliate" of a "holding
company," within the meaning of Sections 2(a)(5), 2(a)(7), 2(a)(8) and 2(a)(11),
respectively, of the 1935 Act, (ii) a "public utility" under the Power Act,
(iii) a "natural-gas company" under the Natural Gas Act, or (iv) a public
utility or public service company (or similar designation) by any state in the
United States other than Maine or by any foreign country.
SECTION 4.13 VOTE REQUIRED. The approval of the Merger by the
affirmative vote of the holders of at least a majority of the outstanding shares
of Company Common Stock (the "COMPANY SHAREHOLDERS' APPROVAL") is the only vote
of the holders of any class or series of the capital stock of 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 Warburg Dillon Read LLC, to the effect that, as of June 14, 1999,
the Merger Consideration is fair from a financial point of view to the holders
of Company Common Stock.
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; RIGHTS PLANS. 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
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regulations (collectively, "TAKEOVER LAWS") of the State of Maine, including
Sections 910 and 611-A of the MBCA. The Company is not a party to a
shareholders' rights plan or other similar anti-takeover agreement or
arrangement.
SECTION 4.17 YEAR 2000. Except as set forth in Section 4.17 of the
Company Disclosure Schedule, the systems operated or used by the Company or any
of its subsidiaries are capable of providing or are being adapted to provide
uninterrupted millennium functionality on or after January 1, 2000 to share,
record, process and present data in substantially the same manner and with the
same functionality as such systems share, records, process and present such data
on or before December 31, 1999, except, in the aggregate, as could not have, or
reasonably be expected to have, a Company Material Adverse Effect. The costs of
the adaptations referred to in the prior sentence, in the aggregate, will not
have a Company Material Adverse Effect.
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 6.11(I)),
Parent and each of its subsidiaries is a corporation 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 currently 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 Parent's ability
to consummate the transactions contemplated by this Agreement (any such material
adverse effect being hereafter referred to as a "PARENT MATERIAL ADVERSE
EFFECT").
SECTION 5.2 SUBSIDIARIES. As of the Closing Date, Parent will be a
"holding company" within the meaning of Section 2(a)(7) of the 1935 Act. Except
as set forth in Section 5.2 of the Parent Disclosure Schedule, as of the date
hereof 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. (a) 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 $0.01 per share, of Parent ("PARENT
PREFERRED STOCK"). As of the close of business on June 10, 1999, there were
issued and outstanding 116,173,728 shares of Parent Common Stock and no shares
of Parent Preferred Stock.
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(b) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, par value $.01 per share ("MERGER SUB COMMON STOCK"). As
of the close of business on June 10, 1999, there were issued and outstanding
1,000 shares of Merger Sub Common Stock, all of which were owned by Parent.
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 the valid and binding obligation of Parent enforceable
against it in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceeding maybe
brought.
(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 does not, and the consummation of the transactions contemplated hereby
will not, result in a Violation pursuant to any provisions (i) of the
certificate 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 (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.
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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 shall, at the date 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 provide sufficient funds to
pay the Merger Consideration on the Closing Date and to enable Parent timely to
perform all of its obligations under this Agreement.
SECTION 5.7 VOTE REQUIRED. Parent, as the sole stockholder of Merger
Sub, has approved the Merger, and such approval is the only vote of the holders
of any class or series of the capital stock of Parent or any of its subsidiaries
required to approve this Agreement, the Merger and the other transactions
contemplated hereby.
ARTICLE VI
COVENANTS
SECTION 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
After the date hereof and prior to the Effective Time or earlier termination of
this Agreement, the Company agrees as follows, each as to itself and to each of
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. Except as set forth in Section
6.1(a) of the Company Disclosure Schedule, 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 and 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 capital stock 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, including,
without limitation, mandatory dividends on the currently outstanding preferred
stock of Central Maine Power Company ("CMP Sub"), or (C) regular dividends on
Company Common Stock with usual record and payment dates that do not exceed the
current regular dividends on
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Company Common Stock; (ii) split, combine or reclassify any capital stock 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 capital stock or the capital stock of any subsidiary; or (iii) redeem,
repurchase or otherwise acquire any shares of capital stock or the capital stock
of any subsidiary other than (A) redemptions, repurchases and other acquisitions
of shares of capital stock 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,
(B) intercompany acquisitions of capital stock or (C) to comply with the
mandatory redemption provisions of the Flexible Money Market Preferred Stock,
Series A, 7.999% of CMP Sub.
(c) ISSUANCE OF SECURITIES. 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 shares of
their capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or convertible or exchangeable securities, other than pursuant to currently
outstanding options granted under Employee Benefit Plans.
(d) CHARTER DOCUMENTS. The Company shall not, nor shall it permit
any of its non-wholly owned subsidiaries to, amend or propose to amend their
respective articles of incorporation, by-laws or regulations, or similar organic
documents. The Company shall not permit any of its wholly owned subsidiaries to
amend or propose to amend its respective articles of incorporation, by-laws or
regulations or similar organic documents in a manner which would reasonably be
expected to prevent or materially impede or interfere with the Merger or
interfere in any way with Parent's ability to exercise control over such
subsidiaries.
(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, or except with respect to amounts which may be
required in connection with a major storm or other catastrophic event in order
for the Company to fulfill its public service obligations, the Company shall
not, nor shall it permit any of its subsidiaries to, make capital expenditures
in excess of 110% per year of the amount budgeted by the Company or its
subsidiaries for capital expenditures for the 1999 and 2000 fiscal years
respectively, which budgeted amounts have been provided to Parent.
(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,
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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; (iii) in connection with
the refunding at a lower cost of funds of existing indebtedness or (iv) in
connection with the refunding at a commercially reasonable rate of existing
indebtedness that has matured.
(i) COMPENSATION, BENEFITS. Except as set forth in Section 6.1(i) of
the Company Disclosure Schedule, except as may be required by applicable law, 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 other contract, agreement, commitment,
arrangement, plan or policy covering employees, former employees, directors or
former directors or their beneficiaries or providing benefits to such persons
that is maintained by, contributed to or entered into by the Company or any of
its subsidiaries, (ii) increase, or enter into any contract, agreement,
commitment or arrangement to increase in any manner, or waive any conditions to
the vesting of payment of, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights of,
or take any other action or grant any benefit (including, without limitation,
any incentive compensation or stock options or stock option plan) not required
under the terms of any existing employee benefit plan, or other contract,
agreement, commitment, arrangement, plan or policy to or with any director,
officer or other employee of the Company or any of its subsidiaries, except for
normal increases in compensation with respect to employees who are not officers
of the Company in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company or any of its subsidiaries, or (iii) 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 director or officer or other employee except with respect
to employees who are not officers of the Company in the ordinary course of
business consistent with current industry practice.
(j) STATUS UNDER 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.
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(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) DISCHARGE OF LIABILITIES. Except as set forth in Schedule 6.1(l)
of the Company Disclosure Schedule, 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; PROVIDED, HOWEVER, that notwithstanding this Section 6.1(l), the
Company shall not be prohibited from amending any contracts with non-utility
generators if (i) the sole effect of such amendment is to reduce the net present
value of the payments under any such contract, applying the Company's internal
cost of capital, (ii) the term of any such contract is not extended and (iii)
the Company's obligation to make accelerated payments under any such contract is
financed pursuant to a contract with a third party which has a term equal to the
remaining term under any such contract.
(m) CONTRACTS. The Company shall not, except in the ordinary course
of business consistent with past practice, modify, amend, terminate, renew any
material contract or agreement, other than employment contracts which shall be
governed by Section 6.1(i), to which the Company or any of its subsidiaries is a
party or waive, release or assign any material rights or claims; PROVIDED,
HOWEVER, that notwithstanding this Section 6.1(m), the Company shall not be
prohibited from amending any contracts with non-utility generators if (i) the
sole effect of such amendment is to reduce the net present value of the payments
under any such contract, applying the Company's internal cost of capital, (ii)
the term of any such contract is not extended and (iii) the Company's obligation
to make accelerated payments under any such contract is financed pursuant to a
contract with a third party which has a term equal to the remaining term under
any such contract. The Company shall use its reasonable business efforts to
renew any material contract or agreement that expires after the date hereof,
subject to the written consent of Parent.
(n) INVESTMENT IN NORTHEAST OPTIC NETWORK, INC. The Company shall,
and shall cause its subsidiaries to, take any action requested by Parent in
connection with any of the Company's or its subsidiaries' preemptive rights,
rights of first refusal, rights in connection with the issuance of shares,
rights in connection with certain material transactions or other similar rights
owned or held in connection with any investment in NorthEast Optic Network, Inc.
(o) 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 electric and gas utility industry.
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(p) PERMITS. The Company shall, and shall cause its subsidiaries to,
use reasonable efforts to maintain in effect all material existing governmental
permits pursuant to which the Company or any of its subsidiaries operate.
(q) TAKEOVER LAWS. The Company shall not take any action that would
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law, and 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 Sections 910 and 611-A of the MBCA.
(r) TAXES. Except as may be required by applicable law or as
provided in Section 6.1(r) of the Company Disclosure Schedule, the Company shall
not, and shall cause its subsidiaries not to, make or rescind any express or
deemed election relating to a material amount of Taxes, settle or compromise any
claim, audit, dispute, controversy, examination, investigation or other
proceeding relating to a material amount of Taxes, change any of its methods of
reporting a material amount of income or deductions for federal income Tax
purposes, or file any Tax Return other than in a manner consistent with past
custom and practice.
SECTION 6.2 ALTERNATIVE PROPOSALS. From and after the date hereof,
the Company agrees that it (i) will not, its subsidiaries will not, and it will
not authorize or permit any of its or its subsidiaries' officers, 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; (ii) 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 (iii) 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 24 hours 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 the Company shareholders shall have voted
to approve this Agreement engage in discussions or negotiations with a third
party who (without any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with the 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 terms of the Merger and has
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demonstrated that any necessary financing has been obtained or is, in the
reasonable judgment of the Board of Directors of the Company, obtainable and (y)
the Board of Directors of the Company shall conclude in good faith, based upon
the advice of outside counsel and such other matters as the Board of Directors
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 not less than two business days'
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 8.1(g). "ALTERNATIVE PROPOSAL"
shall mean any proposal or offer relating to 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 acquisition in any manner of, 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 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 a Company 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.
SECTION 6.4 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 to Parent copies of all the Company Required Consents
obtained by the Company. 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.
SECTION 6.5 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
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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.
SECTION 6.6 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, 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 (i) 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 (ii) access to all information
concerning themselves, their subsidiaries, directors, 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 Proprietary Information (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 March 5, 1999,
between the Company and Parent, as it may be amended from time to time (the
"CONFIDENTIALITY AGREEMENT").
SECTION 6.7 PROXY STATEMENT. PREPARATION AND FILING. 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 6.8 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
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.
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SECTION 6.9 SHAREHOLDER APPROVAL.
(a) THE COMPANY SHAREHOLDERS. Subject to the provisions of SECTION
6.9(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 articles of incorporation and by-laws, (iii) subject to the
fiduciary duties of its Board of Directors, 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 6.10 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) INDEMNIFICATION. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, Parent and the Surviving Corporation shall, to the fullest
extent permitted by applicable law and the articles or certificate of
incorporation or by-laws of the relevant entity, 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 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, 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) Parent and the Surviving
Corporation will cooperate in the defense of all such matters and (iii)any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under Maine law, and the relevant
articles 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
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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 cause to be maintained in effect policies of directors' and
officers' liability insurance, or, if available, an extended reporting period
under current 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; 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 or extended reporting period coverage exceed
such amount, Parent shall be obligated to obtain a policy with the best coverage
or extended reporting period 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 6.10.
(d) SURVIVAL OF INDEMNIFICATION. To the fullest extent permitted by
law, from and after the Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of the
Company, and its subsidiaries with respect to their activities as such prior to
the Effective Time, as provided in its respective articles of incorporation and
by-laws in effect on the date hereof, or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) BENEFIT. The provisions of this SECTION 6.10 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 6.11 DISCLOSURE SCHEDULES. On the date hereof, (i) 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 6.11(I) and (ii) the Company has delivered to Parent a
schedule (the "COMPANY DISCLOSURE SCHEDULE"), accompanied by a certificate
signed by the Treasurer, Corporate Counsel and Secretary of the Company stating
the Company Disclosure Schedule is being delivered pursuant to this SECTION
6.11(II). 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
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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 6.12 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 6.13 CERTAIN EMPLOYEE AGREEMENTS. Subject to SECTION 6.14,
Parent and the Surviving Corporation and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements and
commitments of the parties prior to the date hereof which apply to any current
or former employee or current or former director of the parties hereto;
PROVIDED, HOWEVER, that the foregoing shall not prevent Parent or the Surviving
Corporation 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.
SECTION 6.14 EMPLOYEE BENEFIT PLANS. Each individual employed by the
Company or any of its subsidiaries immediately before the Effective Time who (i)
remains employed by Parent, the Surviving Corporation or any of their respective
subsidiaries and (ii) is not covered by a collective bargaining agreement (each
such individual, a "CONTINUING COMPANY EMPLOYEE"), shall be provided with
credit, for all purposes other than benefit accrual under the employee benefit
plans of Parent and its Affiliates providing benefits after the Effective Time
to Continuing Company Employees, for his or her years of service with the
Company and its subsidiaries before the Effective Time, to the same extent as
such Continuing Company Employee was entitled, before the Effective Time, to
credit for such service under any similar Plans, except to the extent such
credit would result in a duplication of benefits. In addition, and without
limiting the generality of the foregoing, (i) each Company Employee shall be
immediately eligible to participate, without any waiting time, in any and all
employee benefit plans sponsored by Parent and its subsidiaries for the benefit
of Company Employees (such plans, collectively, the "NEW PLANS") to the extent
coverage under such New Plan replaces coverage under a comparable Plan in which
such Surviving Company Employee participated immediately before the Effective
Time (such plans, collectively, the "OLD PLANS"); and (ii) for purposes of each
New Plan providing medical, dental, pharmaceutical and/or vision benefits to any
Surviving Company Employee, Parent shall cause all pre-existing condition
exclusions and actively-at-work requirements of such New Plan to be waived for
such employee and his or her covered dependents, and Parent shall cause any
eligible expenses incurred by such employee and his or her covered dependents
during the portion of the plan year of the Old Plan ending on the date such
employee's participation in the corresponding New Plan begins to be taken into
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account under such New Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to such employee
and his or her covered dependents for the applicable plan year as if such
amounts had been paid in accordance with such New Plan.
SECTION 6.15 EXPENSES. Subject to SECTION 8.3, 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 6.16 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
satisfy the conditions set forth in Article VII and otherwise consummate the
Merger in accordance with the terms hereof. The parties expressly acknowledge
and agree that, although it is their current intention to effect a business
combination among themselves in the form contemplated by this Agreement, it may
be preferable to effectuate such a business combination by means of an
alternative structure in light of the conditions set forth in Section 7.1(c) or
7.2(f). Accordingly, if the only conditions to the parties' obligations to
consummate the Merger which are not satisfied or waived are receipt of any one
or more of the Company Required Statutory Approvals or Parent Required Statutory
Approvals and the adoption of an alternative structure (that otherwise
substantially preserves for Parent and the Company the economic benefits of the
Merger and does not require any additional filing with or authorization, consent
or approval from any Governmental Authority other than supplements or
amendments, to filings already made, to reflect such alternative structure)
would result in such conditions being satisfied or waived, then the parties
shall use their respective best efforts to effect a business combination among
themselves by means of a mutually agreed upon structure other than the Merger
that so preserves such benefits; PROVIDED that, prior to closing any such
restructured transaction, all material third party and Governmental Authority
declarations, filings, registrations, notices, authorizations, consents or
approvals necessary for the effectuation of such alternative business
combination shall have been obtained and all other conditions to the parties'
obligations to consummate the Merger, as applied to such alternative business
combination, shall have been satisfied or waived.
SECTION 6.17 CORPORATE OFFICES. At and subsequent to the Effective
Time, the corporate headquarters of CMP Sub shall be located in Augusta, Maine.
At and subsequent to the Effective Time, Parent shall open and maintain an
office in Portland, Maine appropriate to the responsibilities of Messrs.
Flanagan and Adelberg.
SECTION 6.18 PARENT DIRECTORS. In accordance with the by-laws of
Parent, at the Effective Time, the Board of Directors of Parent shall increase
by three the number of directors on the Board of Directors of Parent and shall
thereupon elect as directors of Parent, Mr. Flanagan and two additional
directors of the Company to be mutually agreed upon by Parent and the Company.
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SECTION 6.19 EMPLOYMENT CONTRACTS. Parent has entered into
employment contracts with Mr. Flanagan, Mr. Adelberg, Ms. Sara J. Burns, and Mr.
F. Michael McClain in the forms attached hereto as Exhibits A, B, C and D,
respectively (the "EMPLOYMENT AGREEMENTS"), which will become effective upon
consummation of the Merger.
SECTION 6.20 ADVISORY BOARD. At the Effective Time, there shall be
established an advisory board to CMP Sub ("ADVISORY BOARD"), which shall be
comprised of the persons who were directors of CMP Sub prior to the Effective
Time. The Advisory Board shall meet no less frequently than quarterly and shall
provide advice to the board of directors of CMP Sub with respect to such issues
as the board of directors of CMP Sub 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 CMP Sub, shall receive remuneration for their services equivalent
to the base remuneration currently provided to directors of the Company.
SECTION 6.21 COMMUNITY INVOLVEMENT. Subsequent to the Effective
Time, Parent will, or will cause the Surviving Corporation to make at least
$100,000 in the aggregate per year in charitable contributions to the
communities served by CMP Sub and otherwise maintain a substantial level of
involvement in community activities in the state of Maine that is similar to, or
greater than, the level of community development and related activities carried
on by the Company.
SECTION 6.22 TRANSITION STEERING TEAM. As soon as reasonably
practicable after the date hereof, Parent and the Company shall create a special
transition steering team, with representation from the senior management teams
of Parent and the Company, that will develop non-binding recommendations for
Parent concerning the future structure and operations of Company after the
Effective Time, subject to applicable law. The members of the transition
steering team shall be appointed by the Chief Executive Officers of Parent and
the Company. The functions of the transition steering team shall include the
development of recommendations regarding regulatory plans and proposals,
corporate organizational and management plans, workforce combination proposals,
and such other matters as directed by Parent.
ARTICLE VII
CONDITIONS
SECTION 7.1 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 8.5 by the joint action
of the parties hereto:
(a) SHAREHOLDER APPROVAL. The Company Shareholders' Approval shall
have been obtained.
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(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, and such approvals shall have become Final Orders. 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 7.2 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 the Closing Date, of the following conditions, except as may be
waived by Parent in writing pursuant to SECTION 8.5:
(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 ARTICLE VI 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, 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 Treasurer, Corporate Counsel and Secretary 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 7.2(A) and SECTION 7.2(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 which
is reasonably likely to have a Company Material Adverse Effect in each case,
other than as described in Section 4.6 of the Company Disclosure Schedule.
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(e) COMPANY REQUIRED CONSENTS. The Company Required Consents the
failure of which to obtain would have a Company Material Adverse Effect shall
have been obtained.
(f) STATUTORY APPROVALS. The 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. Parent acknowledges that it may be required to become a
registered holding company pursuant to Section 5 of the 1935 Act, and that the
requirement to become so registered shall not constitute a term or condition
that could have a Company Material Adverse Effect or Parent Material Adverse
Effect; provided however, that 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 New York State Electric & Gas Corporation, a New York corporation
and a wholly owned subsidiary of Parent, shall constitute a term or condition
which could have a "material adverse effect" within the meaning of this Section
7.2(f).
SECTION 7.3 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 8.5.
(a) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent (and its
appropriate subsidiaries) shall have performed in all material respects its
agreements and covenants contained in ARTICLE VI 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, 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 7.3(A) and SECTION
7.3(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.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date, whether before or after the Company
Shareholders' Approval:
(a) by mutual written consent of the Boards of Directors of the
Company and Parent;
(b) by any party hereto, by written notice to the other parties, if
the Effective Time shall not have occurred on or before the day which is twelve
months from the date of this Agreement (the "INITIAL TERMINATION DATE");
PROVIDED, HOWEVER, that the right to terminate the Agreement under this SECTION
8.1(B) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date; and PROVIDED,
FURTHER, that if on the Initial Termination Date the conditions to the Closing
set forth in Section 7.1(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 eighteen
month anniversary of the date hereof;
(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;
(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, 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, in the aggregate, 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;
(f) 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, in the aggregate, 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
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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 Section 6.1(b) and (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 Directors 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 capital stock 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
(g) by the Company prior to the approval of this Agreement by the
shareholders of the Company, 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 Directors 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 is, in the reasonable judgment of the Board of
Directors of the Company, obtainable and (ii) based upon the advice of outside
counsel and such other matters as the Company Board of Directors deems relevant,
including, as appropriate, 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 attempt to make such adjustments in
the terms and conditions of this Agreement as would enable the Company to
proceed with the transactions contemplated herein.
SECTION 8.2 EFFECT OF TERMINATION. Subject to SECTION 9.1(B), in the
event of termination of this Agreement by either the Company or Parent pursuant
to SECTION 8.1, there shall be no liability on the part of either the Company or
Parent or their respective officers or directors hereunder, except that the
agreement contained in the last sentence of SECTION 6.6; SECTION 6.15; SECTION
8.3; SECTION 9.8; and SECTION 9.9 shall survive the termination.
SECTION 8.3 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 8.1(E)(I) or (II) or (y) SECTION 8.1(F)(I)
or (II), then (i) 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
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out of, in connection with or related to the Merger or the transactions
contemplated by this Agreement) not in excess of $10 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 $10 million, be entitled to retain such additional amounts as such
non-breaching party may be entitled to receive at law or in equity.
(b) The Company shall pay Parent a fee of $33.5 million
("Termination Fee") and Expenses, upon the termination of this Agreement by
Parent or the Company pursuant to SECTION 8.1(C) or by Parent pursuant to
SECTION 8.1(F)(III) or by the Company pursuant to SECTION 8.1(G); PROVIDED,
HOWEVER, that in the event of termination under either Section 8.1(c) or Section
8.1(f)(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 8.1(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 8.1(f)(iii),
there shall have been made and not withdrawn at the time of such termination an
Alternative Proposal.
(c) LIQUIDATED DAMAGES; PROMPT PAYMENT. The parties agree that the
agreements contained in this SECTION 8.3 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 reasonable 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 The Chase Manhattan Bank from the date such fee was
required to be paid.
SECTION 8.4 AMENDMENT. This Agreement may be amended by the Boards
of Directors 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 (i) alter or change the amount or nature
of the Merger Consideration under ARTICLE II or (ii) 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 Common Stock, except for alterations or changes that could
otherwise be adopted by the Board of Directors 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 8.5 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
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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 IX
GENERAL PROVISIONS
SECTION 9.1 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 9.1 and in ARTICLE II, SECTION
6.10, SECTION 9.7, SECTION 9.8 and SECTION 9.9.
(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
8.1(E)(I) or SECTION 8.1(F)(I) (or pursuant to any other subsection of SECTION
8.1, if the terminating party would have been entitled to terminate this
Agreement pursuant to SECTION 8.1(E)(I) or SECTION 8.1(F)(I)).
SECTION 9.2 BROKERS. The Company represents and warrants that,
except for Warburg Dillon Read LLC 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
Goldman, Sachs & Co. 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 9.3 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if (i) delivered personally, (ii)
sent by reputable overnight courier service, (iii) delivered by facsimile
transmission (with receipt confirmed) or (iv) 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):
(a) If to the Company, to:
CMP Group, Inc.
83 Edison Drive
Augusta, Maine 04336
Attention: Anne M. Pare, Esq.
Treasurer, Corporate Counsel and Secretary
Telephone: (207) 623-3521
Telecopy: (207) 621-4714
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with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: J. Michael Parish, Esq.
Telephone: (212) 603-2000
Telecopy: (212) 603-2001
(b) If to Parent, 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:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
SECTION 9.4 MISCELLANEOUS. This Agreement (including the documents
and instruments referred to herein) (i) 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 and the Confidentiality Agreement; (ii)
shall not be assigned by operation of law or otherwise; and (iii) 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 MBCA.
SECTION 9.5 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
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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." Whenever the word "person" is used in this
Agreement, it shall mean any individual, partnership, limited liability company,
joint venture, corporation, trust, association, unincorporated organization, or
governmental entity or any department or agency thereof.
SECTION 9.6 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 9.7 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, except for
rights of Indemnified Parties as set forth in Section 6.10, 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 9.8 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. Each party to
this Agreement waives, to the fullest extent permitted by applicable law, (i)
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of this Agreement and (ii) without limiting the effect of
SECTION 8.3, 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 9.9 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.
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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.
CMP GROUP, INC.
By: /s/ David T. Flanagan
----------------------------------------------
Name: David T. Flanagan
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
EE MERGER CORP.
By: /s/ Kenneth M. Jasinski
----------------------------------------------
Name: Kenneth M. Jasinski
Title: Secretary, Treasurer and Vice President
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APPENDIX B
[Letterhead of Warburg Dillon Read]
August 30, 1999
The Board of Directors
CMP Group Inc.
83 Edison Drive
Augusta, Maine 04336
Dear Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of CMP Group Inc. (the "Company") Common Stock of the
Consideration (both as defined hereafter) to be received pursuant to the
Agreement and Plan of Merger, dated June 14, 1999 (the "Agreement") by and among
the Company, Energy East Corporation ("Parent"), and EE Merger Corp., a
wholly-owned subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub
shall be merged with and into the Company (the "Merger"). In the Merger, each
issued and outstanding share of Company common stock, par value $5.00 per share
(the "Common Stock") will be converted into the right to receive $29.50 in case,
without interest (the "Consideration").
In arriving at our opinion, we have, among other things: (i) reviewed certain
business and historical financial information related to the Company, (ii)
reviewed certain financial forecasts and other data provided to us by the
Company, particularly projections for calendar year 2000 which reflect the
Company's operations following, and giving effect to, the sale by Central Maine
Power Company of its generation assets, (iii) held discussions with members of
the senior management of the Company with respect to the business and prospects
of the Company, (iv) reviewed publicly available financial and stock market data
of utilities which are, in our opinion, generally comparable to the Company, (v)
reviewed the financial terms of certain transactions involving electric
utilities which are, in our opinion, generally comparable to the Company, (vi)
prepared a discounted cash flow analysis of the Company, (vii) reviewed the
Agreement, and (viii) conducted such other financial studies, analyses and
investigations, and considered such other information, as we deemed necessary or
appropriate. In addition, at your direction, we held discussions with certain
parties other than Parent to assess their possible interest in a transaction
involving the Company.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have, with your consent, relied on its being complete and accurate in all
material respects. In addition, we have not made any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company or any of its subsidiaries, nor have we been furnished with any such
evaluation or appraisal. With respect to the financial forecasts referred to
above, we have, with your consent, assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management as to the future financial performance of the Company
and that those estimates will be materially achieved in the amounts and at the
times stated therein.
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Page 2 of 2
August 30, 1999
Further, our opinion is based on economic, monetary and market conditions
existing on the date hereof. We express no opinion as to such financial
forecasts or the assumptions upon which they were based. Finally, we have also
assumed that the Merger will be consummated in accordance with the Agreement.
Warburg Dillon Read has acted as financial advisor to the Board of Directors of
the Company in connection with the Merger, for which we will receive a fee, a
significant portion of which is contingent upon consummation of the Merger. In
the ordinary course of business, we have traded the debt and equity securities
of the Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
In rendering this opinion, we are not making any recommendation to the
stockholders of the Company on how to vote with respect to the Merger or whether
to accept the Consideration.
Based upon and subject to the foregoing, we are of the opinion, as of the date
hereof, that the Consideration to be received by the holders of Common Stock in
the Merger is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ James H. Brandi /s/ Gregory K. Sawyer
- ------------------------------------- -----------------------------------
James H. Brandi Gregory K. Sawyer
Managing Director Managing Director
<PAGE>
APPENDIX C
MAINE REVISED STATUTES
TITLE 13-A. MAINE BUSINESS CORPORATION ACT
CHAPTER 9. MERGERS AND CONSOLIDATIONS
SECTION 908. RIGHT OF SHAREHOLDERS TO DISSENT
1. Except as provided in subsections 3 and 4, any shareholders of a domestic
corporation, by complying with section 909, shall have the right to dissent from
any of the following corporate actions:
A. Any plan of merger or consolidation in which the corporation is
participating; or
B. Any sale or other disposition, excluding a mortgage or other security
interest, of all or substantially all of the property and assets of the
corporation not made in the usual and regular course of its business,
including a sale in liquidation, but not including a sale pursuant to an
order of a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their respective
interests within one year after the date of sale; or
C. Any other action as to which a right to dissent is expressly given by
this Act.
2. A shareholder may dissent as to less than all of the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
3. There shall be no right of dissent in the case of shareholders of the
surviving corporation in a merger.
A. If such corporation is, on the date of filing of the articles of
merger, the owner of all the outstanding shares of the other corporations,
domestic or foreign, which are parties to the merger, or
B. If a vote of the shareholders of such surviving corporation was not
necessary to authorize such merger.
4. There shall be no right of dissent in the case of holders of any class or
series of shares in any of the participating corporations in a merger or
consolidation, which shares were, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the plan of merger or consolidation was to be voted on,
either:
A. Registered or traded on a national securities exchange; or
B. Registered with the Securities and Exchange Commission pursuant to
section 12(g) of the Act of Congress known as the Securities Exchange Act of
1934, as the same has been or may hereafter be amended, being Title 15 of
the United States Code Annotated, section 78 I(g);
unless the articles of incorporation of that corporation provide that there
shall be a right of dissent.
5. The exceptions from the right of dissent provided for in subsection 3,
paragraph B and in subsection 4 shall not be applicable to the holders of a
class or series of shares of a participating corporation if, under the plan of
merger or consolidation, such holders are required to accept for their shares
anything, except:
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A. Shares of the surviving or new corporation resulting from the merger
or consolidation, or such shares plus cash in lieu of fractional shares; or
B. Shares, or shares plus cash in lieu of fractional shares, of any
other corporation, which shares were, at the record date fixed to determine
the shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the plan of merger or consolidation was acted upon,
either:
(1) Registered or traded on a national securities exchange; or
(2) Held of record by not less than 2,000 shareholders; or
C. A combination of shares, or shares plus cash in lieu of fractional
shares, as set forth in paragraphs A and B.
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MAINE REVISED STATUTES
TITLE 13-A. MAINE BUSINESS CORPORATION ACT
CHAPTER 9. MERGERS AND CONSOLIDATIONS
SECTION 909. RIGHT OF DISSENTING SHAREHOLDERS TO PAYMENT FOR SHARES
1. A shareholder having a right under any provision of this Act to dissent
to proposed corporate action shall, by complying with the procedure in this
section, be paid the fair value of his shares, if the corporate action to which
he dissented is effected. The fair value of shares shall be determined as of the
day prior to the date on which the vote of the shareholders, or of the directors
in case a vote of the shareholders was not necessary, was taken approving the
proposed corporate action, excluding any appreciation or depreciation of shares
in anticipation of such corporate action.
2. The shareholder, whether or not entitled to vote, shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to the proposed
corporate action. No such objection shall be required from any shareholder to
whom the corporation failed to send notice of such meeting in accordance with
this Act.
3. If the proposed corporate action is approved by the required vote and the
dissenting shareholder did not vote in favor thereof, the dissenting shareholder
shall file a written demand for payment of the fair value of his shares. Such
demand
A. Shall be filed with the corporation or, in the case of a merger or
consolidation, with the surviving or new corporation; and
B. Shall be filed by personally delivering it, or by mailing it via
certified or registered mail, to such corporation at its registered office
within this State or to its principal place of business or to the address
given to the Secretary of State pursuant to section 906, subsection 4,
paragraph B; it shall be so delivered or mailed within 15 days after the
date on which the vote of shareholders was taken, or the date on which
notice of a plan of merger of a subsidiary into a parent corporation without
vote of shareholders was mailed to shareholders of the subsidiary; and
C. Shall specify the shareholder's current address; and
D. May not be withdrawn without the corporation's consent.
4. Any shareholder failing either to object as required by subsection 2 or
to make demand in the time and manner provided in subsection 3 shall be bound by
the terms of the proposed corporate action. Any shareholder making such
objection and demand shall thereafter be entitled only to payment as in this
section provided and shall not be entitled to vote or to exercise any other
rights of a shareholder.
5. The right of a shareholder otherwise entitled to be paid for the fair
value of his shares shall cease, and his status as a shareholder shall be
restored, without prejudice to any corporate proceedings which may have been
taken during the interim.
A. If his demand shall be withdrawn upon consent, or
B. If the proposed corporate action shall be abandoned or rescinded, or
the shareholders shall revoke the authority to effect such action, or
C. If, in the case of a merger, on the date of the filing of the
articles of merger the surviving corporation is the owner of all the
outstanding shares of the other corporations, domestic and foreign, that are
parties to the merger, or
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D. If no action for the determination of fair value by a court shall
have been filed within the time provided in this section, or
E. If a court of competent jurisdiction shall determine that such
shareholder is not entitled to the relief provided by this section.
6. At the time of filing his demand for payment for his shares, or within 20
days thereafter, each shareholder demanding payment shall submit the certificate
or certificates representing his shares to the corporation or its transfer agent
for notation thereon that such demand has been made; such certificates shall
promptly be returned after entry thereon of such notation. A shareholder's
failure to do so shall, at the option of the corporation, terminate his rights
under this section, unless a court of competent jurisdiction, for good and
sufficient cause shown, shall otherwise direct. If shares represented by a
certificate on which notation has been so made shall be transferred, each new
certificate issued therefor shall bear a similar notation, together with the
name of the original dissenting holder of such shares, and a transferee of such
shares shall acquire by such transfer no rights in the corporation other than
those which the original dissenting shareholder had after making demand for
payment of the fair value thereof.
7. Within the time prescribed by this subsection, the corporation, or, in
the case of a merger or consolidation, the surviving or new corporation,
domestic or foreign, shall give written notice to each dissenting shareholder
who has made objection and demand as herein provided that the corporation action
dissented to has been effected, and shall make a written offer to each such
dissenting shareholder to pay for such shares at a specified price deemed by
such corporation to be the fair value thereof. Such offer shall be made at the
same price per share to all dissenting shareholders of the same class. The
notice and offer shall be accompanied by a balance sheet of the corporation the
shares of which the dissenting shareholder holds, as of the latest available
date and not more than 12 months prior to the making of such offer, and a profit
and loss statement of such corporation for the 12 months' period ended on the
date of such balance sheet. The offer shall be made within the later of 10 days
after the expiration of the period provided in subsection 3, paragraph B, for
making demand, or 10 days after the corporate action is effected; corporate
action shall be deemed effected on a sale of assets when the sale is
consummated, and in a merger or consolidation when the articles of merger or
consolidation are filed or upon which later effective date as is specified in
the articles of merger or consolidation as permitted by this Act.
8. If within 20 days after the date by which the corporation is required, by
the terms of subsection 7, to make a written offer to each dissenting
shareholder to pay for his shares, the fair value of such shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made within 90 days after the date on which such corporate action was
effected, upon surrender of the certificate or certificates representing such
shares. Upon payment of the agreed value the dissenting shareholder shall cease
to have any interest in such shares.
9. If within the additional 20-day period prescribed by subsection 8, one or
more dissenting shareholders and the corporation have failed to agree as to the
fair value of the shares:
A. Then the corporation may, or shall, if it receives a demand as
provided in subparagraph (1), bring an action in the Superior Court in the
county in this State where the registered office of the corporation is
located praying that the fair value of such shares be found and determined.
If, in the case of a merger or consolidation, the surviving or new
corporation is a foreign corporation without a registered office in this
State, such action shall be brought in the county where the registered
office of the participating domestic corporation was last located. Such
action:
(1) Shall be brought by the corporation, if it receives a written
demand for suit from any dissenting shareholder, which demand is made
within 60 days after the date on which the
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corporate action was effected; and if it receives such demand for suit,
the corporation shall bring the action within 30 days after receipt of
the written demand; or,
(2) In the absence of a demand for suit, may at the corporation's
election be brought by the corporation at any time from the expiration of
the additional 20-day period prescribed by subsection 8 until the
expiration of 60 days after the date on which the corporate action was
effected;
B. If the corporation fails to institute the action within the period
specified in paragraph A, any dissenting shareholder may thereafter bring
such an action in the name of the corporation;
C. No such action may be brought, either by the corporation or by a
dissenting shareholder, more than 6 months after the date on which the
corporate action was effected;
D. In any such action, whether initiated by the corporation or by a
dissenting shareholder, all dissenting shareholders, wherever residing,
except those who have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to the proceeding as an action
against their shares quasi in rem. A copy of the complaint shall be served
on each dissenting shareholder who is a resident of this State as in other
civil actions, and shall be served by registered or certified mail, or by
personal service without the State, on each dissenting shareholder who is a
nonresident. The jurisdiction of the court shall be plenary and exclusive;
E. The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, has
satisfied the requirements of this section and is entitled to receive
payment for his shares; as to any dissenting shareholder with respect to
whom the corporation makes such a request, the burden is on the shareholder
to prove that he is entitled to receive payment. The court shall then
proceed to fix the fair value of the shares. The court may, if it so elects,
appoint one or more persons as appraisers to receive evidence and recommend
a decision on the question of fair value. The appraisers shall have such
power and authority as shall be specified in the order of their appointment
or an amendment thereof;
F. All shareholders who are parties to the proceeding shall be entitled
to judgment against the corporation for the amount of the fair value of
their shares, except for any shareholder whom the court shall have
determined not to be entitled to receive payment for his shares. The
judgment shall be payable only upon and concurrently with the surrender to
the corporation of the certificate or certificates representing such shares.
Upon payment of the judgment, the dissenting shareholder shall cease to have
any interest in such shares;
G. The judgment shall include an allowance for interest at such rate as
the court may find to be fair and equitable in all the circumstances, from
the date on which the vote was taken on the proposed corporate action to the
date of payment. If the court finds that the refusal of any shareholder to
accept the corporate offer of payment for his shares was arbitrary,
vexatious or not in good faith, it may in its discretion refuse to allow
interest to him;
H. The costs and expenses of any such proceedings shall be determined by
the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court may
deem equitable against any or all of the dissenting shareholders who are
parties to the proceeding to whom the corporation shall have made an offer
to pay for the shares, if the court shall find that the action of such
shareholders in failing to accept such offer was arbitrary or vexatious or
not in good faith. Such expenses shall include reasonable compensation for
and reasonable expenses of the appraisers, but shall exclude the fees and
expenses of counsel for any party and shall exclude the fees and expenses of
experts employed by any party, unless the court otherwise orders for good
cause. If the fair value of the shares as determined materially exceeds the
amount which the corporation offered to pay therefor, or if no offer was
made, the court in its discretion may award to any shareholder who is a
party to the
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proceeding such sum as the court may determine to be reasonable compensation
to any expert or experts employed by the shareholder in the proceeding, and
may, in its discretion, award to any shareholder all or part of his
attorney's fees and expenses; and
I. At all times during the pendency of any such proceeding, the court
may make any and all orders which may be necessary to protect the
corporation or the dissenting shareholders, or which are otherwise just and
equitable. Such orders may include, without limitation, orders:
(1) Requiring the corporation to pay into court, or post security
for, the amount of the judgment or its estimated amount, either before
final judgment or pending appeal;
(2) Requiring the deposit with the court of certificates representing
shares held by the dissenting shareholders;
(3) Imposing a lien on the property of the corporation to secure the
payment of the judgment, which lien may be given priority over liens and
incumbrances contracted after the vote authorizing the corporate action
from which the shareholders dissent;
(4) Staying the action pending the determination of any similar
action pending in another court having jurisdiction.
10. Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this section
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
11. The objection required by subsection 2 and the demand required by
subsection 3 may, in the case of a shareholder who is a minor or otherwise
legally incapacitated, be made either by such shareholder, notwithstanding his
legal incapacity, or by his guardian, or by any person acting for him as next
friend. Such shareholder shall be bound by the time limitations set forth in
this section, notwithstanding his legal incapacity.
12. Appeals shall lie from judgments in actions brought under this section
as in other civil actions in which equitable relief is sought.
13. No action by a shareholder in the right of the corporation shall abate
or be barred by the fact that the shareholder has filed a demand for payment of
the fair value of his shares pursuant to this section.
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DETACH HERE
PROXY
CMP GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(COMMON SHAREHOLDERS)
The undersigned shareholder hereby appoints Arthur W. Adelberg and David E.
Marsh, and either of them, proxies, with power of substitution, to vote all
shares that the undersigned is entitled to vote at the special meeting of the
CMP Group, Inc. shareholders to be held on October 7, 1999, at 2:00 p.m.
local time, at The Portland Marriott, 200 Sable Oaks Drive, South Portland,
Maine, and at any adjournments, on the proposal described in the accompanying
proxy statement as marked on the reverse side, and in their discretion on any
other matters that may properly come before the meeting or any adjournment.
If this proxy is properly signed, your shares will be voted as you directed
by marking the box on the reverse side. IF NO DIRECTION IS GIVEN, YOUR SHARES
WILL BE VOTED FOR PROPOSAL 1 ON THE REVERSE SIDE.
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<S> <C> <C>
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SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
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</TABLE>
<PAGE>
CMP GROUP, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
[graphic]
DETACH HERE
/X/ Please mark vote as in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1
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1. Proposal to approve the Agreement and Plan of Merger among CMP Group,
Inc., Energy East Corporation and EE Merger Corp.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please date, sign exactly as name(s) appear at left, and return promptly in
enclosed envelope. If signing for a corporation or partnership, sign in that
name and indicate your title. If signing as attorney, executor, guardian,
trustee or custodian, please add your title.
Signature: Date: Signature: Date:
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