SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) : November 4, 1999
KEYSPAN CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
New York
(State or Other Jurisdiction of Incorporation)
1-14161 11-3431358
(Commission File Number) (IRS Employer Identification No.)
175 East Old Country Road, Hicksville, New York 11801
One MetroTech Center, Brooklyn, New York 11201
(Address of Principal Executive Offices) (Zip Code)
(516) 755-6650 (Hicksville)
(718) 403-1000 (Brooklyn)
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
As described in the joint press release of KeySpan Corporation (the "Company")
and Eastern Enterprises dated November 4, 1999 (a copy of which is annexed as
Exhibit 99.1), the Company and Eastern Enterprises ("Eastern") have entered into
an Agreement and Plan of Merger, dated as of November 4, 1999 (a copy of which
is annexed as Exhibit 2) pursuant to which Eastern will become a wholly-owned
subsidiary of the Company. The transaction has a value of approximately $2.5
billion, including assumption of debt and preferred stock.
Under the agreement, the Company will acquire all of the common stock of Eastern
for $64.00 per share in an all-cash transaction. The merger is conditioned,
among other things, upon the approval of Eastern Enterprises' shareholders, and
receipt of the required regulatory approvals. The Company anticipates that the
transaction can be completed in 9 to 12 months.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 2. Agreement and Plan of Merger, dated as of November 4,
1999, by and among KeySpan Corporation, Eastern
Enterprises and ACJ Acquisition LLC.
Exhibit 99.1 Joint Press Release of KeySpan Corporation and
Eastern Enterprises dated November 4, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KEYSPAN CORPORATION
Dated: November 5, 1999 By: /s/ Gerald Luterman
--------------------------
Name: Gerald Luterman
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit Page
2 Agreement and Plan of Merger, dated as of November 4, 5
1999, by and among KeySpan Corporation, Eastern
Enterprises and ACJ Acquisition LLC.
99.1 Joint Press Release of KeySpan Corporation and 50
Eastern Enterprises, dated November 4, 1999.
Exhibit 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EASTERN ENTERPRISES
KEYSPAN CORPORATION
AND
ACJ ACQUISITION LLC
dated as of November 4, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of November 4, 1999 (this
"Agreement"), by and among Eastern Enterprises, a Massachusetts voluntary
association (the "Company"), KeySpan Corporation, a New York corporation
("Parent"), and ACJ Acquisition LLC, a Massachusetts limited liability company
which is directly and indirectly wholly owned by 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 Board of Trustees of the Company and the Board of Directors
of 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, with the Company being
the surviving entity, pursuant to the terms and conditions of this Agreement, as
a result of which Parent will own, directly or indirectly, all of the issued and
outstanding common shares of 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
1.01 Section THE MERGER. Upon the terms and subject to the conditions of this
Agreement:
At the Effective Time (as defined in Section 1.03), Merger Sub shall be
merged with and into the Company (the "Merger") in accordance with the
Declaration of Trust (the "Company Declaration of Trust") of the Company, the
Certificate of Organization and Operating Agreement of Merger Sub, and Section 2
of Chapter 182 and Section 59 of Chapter 156C of the Massachusetts General Laws
(the "MGL"). The Company shall be the surviving entity in the Merger and shall
continue its corporate existence under the laws of The Commonwealth of
Massachusetts. The effects and the consequences of the Merger shall be as set
forth in Section 1.02. Throughout this Agreement, the term "Surviving Entity"
shall refer to the Company in its capacity as the surviving entity in the
Merger.
1.02 Section EFFECTS OF THE MERGER. At the Effective Time, the Company
Declaration of Trust, as in effect immediately prior to the Effective Time,
shall be the Declaration of Trust of the Surviving Entity until thereafter
amended as provided by law and such Declaration of Trust. Subject to the
foregoing, the additional effects of the Merger shall be as provided in the
applicable provisions of Chapter 182 of the MGL and Section 62 of the Limited
Liability Company Act of Massachusetts.
<PAGE>
1.03 Section EFFECTIVE TIME OF THE MERGER. On the Closing Date (as defined in
Section 3.01), certificates of merger complying with Section 61 of Chapter 156C
and Section 2 of Chapter 182 of the MGL (the "Certificates of Merger") shall be
delivered to the Secretary of The Commonwealth of Massachusetts for filing. The
Merger shall become effective upon the filing of the Certificates of Merger, or
at such later date and time as may be set forth in the Certificates of Merger
(the "Effective Time").
1.04 Section TRUSTEES. The managers of Merger Sub immediately prior to the
Effective Time shall be the trustees of the Surviving Entity and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Declaration of
Trust of the Surviving Entity, or as otherwise provided by the applicable law.
1.05 Section OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of, and shall hold the same
positions with, the Surviving Entity and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Declaration of Trust of the Surviving
Entity, or as otherwise provided by the applicable law.
ARTICLE II
TREATMENT OF SHARES
2.01 Section 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) Membership Interests of Merger Sub. Each one percent of the issued and
outstanding membership interests in Merger Sub shall be converted into one
transferable certificate of participation or share of the Surviving Entity.
(b) Cancellation of Certain Company Common Stock. Each share of common stock,
par value $1.00 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 Parent, Merger Sub or any other wholly-owned subsidiary of
Parent shall be canceled and retired and shall cease to exist and no cash or
other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to the provisions of this
Section 2.01, each share of Company Common Stock, other than Dissenting Shares
<PAGE>
(as defined in Section 2.01(d)) and shares canceled pursuant to Section 2.01(b),
issued and outstanding immediately prior to the Effective Time (other than
shares held as treasury shares by the Company) shall by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive $64.00 in cash, payable without interest, to the holder of such
share, upon surrender, in the manner provided in Section 2.02 hereof, of the
certificate formerly evidencing such share (as adjusted pursuant to the
following sentence, the "Merger Consideration"). In the event that the Effective
Time shall not have occurred on or prior to the later of (i) the date that is
nine months after the date of this Agreement or (ii) the date that is ninety
days after the date on which the State of New Hampshire statutory approvals
shall have been obtained and become Final Orders (as defined herein) (the
"Adjustment Date"), the Merger Consideration shall be increased for each day
after the Adjustment Date, up to and including the day which is one day prior to
the Closing Date, by an amount equal to $0.006 per share (such amount, the
"Increased Consideration"), provided, that the aggregate amount of the Increased
Consideration shall be reduced by the aggregate amount of any per share increase
in dividends permitted by Section 6.01(b) attributable to any period during
which any Increased Consideration is accruing that is actually paid by the
Company.
(d) Dissenting Shares. The holders of shares of Company Common Stock who dissent
from the Merger within the time and in the manner provided in Sections 86
through 98 of Chapter 156B of the MGL shall have substantially the same rights
as they would have if the Company were at the Effective Date a Massachusetts
business corporation. Each outstanding share of Company Common Stock the holder
of which has perfected his appraisal rights under Chapter 156B of the
Massachusetts General Laws (the "MBCA") and has not effectively withdrawn or
lost such right as of the Effective Time (the "Dissenting Shares") shall not be
converted into or represent a right to receive 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 applicable law, shall be deemed to be converted into, as of the
Effective Time, the right to receive the Merger Consideration. The Company shall
give Parent prompt notice upon receipt by the Company 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.
(e) At the Effective Time, all options to purchase Company Common Stock then
outstanding under the Company's 1982 Stock Option Plan, 1995 Stock Option Plan
and 1996 Trustees' Stock Option Plan (collectively, the "Company Stock Option
Plans") shall be treated by Parent in accordance with Section 7.10 hereof.
<PAGE>
2.02 Section EXCHANGE OF CERTIFICATES.
(a) Deposit with Exchange Agent. As soon as practicable after the Effective
Time, the Surviving Corporation shall deposit with a bank or trust company
mutually agreeable to Parent and the Company (the "Exchange Agent"), pursuant to
an agreement in form and substance reasonably acceptable to Parent and the
Company an amount of cash required for the payment of the Merger Consideration
upon surrender of certificates in accordance with Section 2.01(c).
(b) Exchange and Payment Procedures. As soon as practicable after the Effective
Time, Parent shall cause Parent's transfer agent and registrar, as paying agent
(the "Paying Agent") to mail to each holder of record as of the Effective Time
of a certificate or certificates representing shares of Company Common Stock
(the "Certificates") that have been converted pursuant to Section 2.01: (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 2.01. Upon surrender
of a Certificate to the Paying Agent for cancellation, together with a duly
executed letter of transmittal and such other documents as the Paying Agent may
require, the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration. In the event the Merger Consideration is to
be delivered to any person who is not the person in whose name the Certificate
surrendered in exchange therefor is registered in the transfer records of the
Company, the Merger Consideration may be delivered to a transferee if the
Certificate is presented to the Paying Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence satisfactory to
the Paying Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each Certificate (other than a
certificate representing shares of Company Common Stock to be canceled in
accordance with Section 2.01(b)) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration contemplated by this Section 2.02. No interest will be paid or
will accrue on any cash payable to holders of Certificates pursuant to
provisions of this Article II.
(c) Closing of Transfer Books. The Merger Consideration paid upon the surrender
of Certificates in accordance with the terms of Section 2.01(c) shall be deemed
to have been paid at the Effective Time in full satisfaction of all rights
pertaining to the Company Shares represented thereby. From and after the
Effective Time, the share transfer books of the Company shall be closed and
there shall be no further registration of transfers thereon of the Company
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for the appropriate amount of cash as
provided in Section 2.01 and in this Section 2.02.
<PAGE>
(d) Termination of Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of unsurrendered Certificates and unclaimed at the end of
one year from the Effective Time shall be returned to the Surviving Corporation,
after which time any holder of unsurrendered Certificates shall look as a
general creditor only to Parent for payment of such funds to which such holder
may be due, subject to applicable law.
(e) Escheat. None of Parent, Merger Sub or the Surviving Corporation shall 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.
ARTICLE III
THE CLOSING
3.01 Section CLOSING. The closing of the Merger (the "Closing") shall take place
at the offices of Ropes & Gray, One International Place, Boston, Massachusetts,
at 10:00 a.m., Boston time, on the second business day immediately following the
date on which the last of the conditions set forth in Article VIII hereof is
fulfilled or waived (other than conditions that by their nature are required to
be performed on the Closing Date, but subject to satisfaction of such
conditions), or at such other time and date and place as the Company and Parent
shall mutually agree (the "Closing Date"); provided, however, that the Closing
Date shall be not less than 30 days after the date of mailing of the Notice of
Election as provided in Section 2.01(k).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
4.01 Section ORGANIZATION AND QUALIFICATION. Except as set forth in Section 4.01
of the Company Disclosure Schedule (as defined in Section 7.06(ii)), the Company
and each of its subsidiaries (as defined below) is a Massachusetts voluntary
association, in the case of the Company, and a corporation, in the case of each
of its subsidiaries, in each case duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all requisite
corporate or similar power and authority, and has been duly authorized by all
necessary approvals and orders, to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
<PAGE>
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 would not individually or in the aggregate reasonably be
expected to have a Company Material Adverse Effect (as defined below). The term
"Company Material Adverse Effect" means, for purposes of this Agreement, any
change, event or effect that is materially adverse to the business, properties,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole (other than changes, events or effects that are the effect of
economic factors affecting the economy as a whole or that are the effect of
factors generally affecting the specific industries or markets in which the
Company and its subsidiaries operate or compete); PROVIDED, HOWEVER, that a
Company Material Adverse Effect shall not include any adverse effect primarily
arising out of or resulting primarily from actions contemplated by the parties
in connection with, or that are primarily attributable to the announcement of,
this Agreement and the transactions contemplated hereby. 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.
4.02 Section SUBSIDIARIES. Section 4.02 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. As of the date hereof, the Company is an exempt
holding company under the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"). Except as set forth in Section 4.02 of the Company Disclosure
Schedule, all of the issued and outstanding shares of capital stock owned by the
Company of each subsidiary of the Company 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, 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. 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 5% of any class of the
outstanding voting securities or equity of any such entity.
4.03 Section CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock. As of the close of
business on November 2, 1999, there were issued and outstanding 27,020,034
shares of Company Common Stock. All of the issued and outstanding shares of the
<PAGE>
capital stock of the Company are validly issued, fully paid, nonassessable and
free of preemptive rights. Except as set forth in Section 4.03 of the Company
Disclosure Schedule and under the Company Rights Agreement (as defined below),
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. Since November 2, 1999,
the Company has not issued any shares of Company Common Stock or any common
stock equivalents. True, accurate and complete copies of the Declaration of
Trust and by-laws, or similar governing documents of the Company as in effect on
the date hereof, have been made available to the Parent.
4.04 Section AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(a) Authority. The Company has all requisite corporate or similar 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 4.04(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company subject to obtaining the Company Shareholders' Approval. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by the other signatories hereto,
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Section 4.04(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
do not, and the consummation of the transactions contemplated hereby will not,
violate, conflict with, or result in a breach of any provision of, or constitute
a default (with or without notice or lapse of time or both) under, or result in
a right of termination, cancellation, or acceleration of any obligation under or
the loss of a material 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 joint ventures (any such
violation, conflict, breach, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation" with respect to the Company (such
term when used in Article V having a correlative meaning with respect to
Parent)) pursuant to any provisions of (i) the Declaration of Trust or the
Company Articles, as the case may be, or the by-laws of the Company or the
articles of organization, by-laws or similar governing documents of 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 4.04(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 4.04(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 individually or in the aggregate reasonably be
expected to have a Company Material Adverse Effect.
<PAGE>
(c) Statutory Approvals. Except as described in Section 4.04(c) of the Company
Disclosure Schedule, no declaration, filing or registration with, or notice to
or authorization, consent or approval of, any court, federal, state, local or
foreign governmental or regulatory body (including a stock exchange or other
self-regulatory body) or authority (each, a "Governmental Authority") is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, the failure
to obtain, make or give which would individually or in the aggregate reasonably
be expected to have 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, if
any, as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.04(d) or Section 4.11 of the
Company Disclosure Schedule, or as disclosed in the Company SEC Reports (as
defined in Section 4.05) filed prior to the date hereof, neither the Company,
nor any of its subsidiaries nor (to the best of its knowledge) any of its joint
ventures is in violation of or to the Company's knowledge under investigation
with respect to or has been given notice of or been charged with any purported
violation of, any law, statute, order, rule, regulation 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 are not
individually or in the aggregate reasonably expected to have a Company Material
Adverse Effect. Except as set forth in Section 4.04(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 not individually or in the aggregate
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 4.04(d) of the Company Disclosure Schedule, the Company and
each of its subsidiaries and joint ventures 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) the Declaration or its articles of organization
(or similar governing documents), as the case may be, or its by-laws or (ii) any
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is a party or by
which it is bound or to which any of its property is subject, except for
breaches, violations or defaults that are not individually or in the aggregate
reasonably expected to have a Company Material Adverse Effect.
<PAGE>
4.05 Section REPORTS AND FINANCIAL STATEMENTS. The filings required to be made
by the Company and its subsidiaries since December 31, 1996 under the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act") and applicable state public utility laws
and regulations have been filed with the Securities and Exchange Commission (the
"SEC"), or the appropriate state public utilities commission, as the case may
be, including all forms, statements, reports, agreements (oral or written),
exhibits, supplements and amendments appertaining thereto, and complied, as of
their respective dates, in all material respects with all applicable
requirements of the appropriate statute and the rules and regulations
thereunder. The Company has made available to Parent a true and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by the Company with the SEC since December 31, 1996 (as such documents
have since the time of their filing been amended, the "Company SEC Reports"). As
of their respective dates, the Company SEC Reports, including without limitation
any financial statements or schedules included therein, 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 and any forms, reports
or other documents filed by the Company with the SEC after the date hereof did
not and will 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.
4.06 Section CONDUCT OF BUSINESS; ABSENCE OF CERTAIN CHANGES OR EVENTS; ABSENCE
OF UNDISCLOSED LIABILITIES.
(a) Except as disclosed in the Company SEC Reports filed prior to the date
hereof or as set forth in Section 4.06 of the Company Disclosure Schedule, since
December 31, 1998, the Company and each of its subsidiaries have conducted their
business only in the ordinary course of business consistent with past practice
and no event has occurred which has had, and no fact or condition exists that
would have or is reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
<PAGE>
(b) Neither the Company nor any of its subsidiaries has any
liabilities or obligations (whether absolute, contingent, accrued or otherwise)
of a nature required by GAAP to be reflected in a consolidated corporate balance
sheet, except liabilities, obligations, or contingencies that are accrued or
reserved against in the consolidated financial statements of the Company or are
reflected in the notes thereto for the year ended December 31, 1998 or that were
incurred after December 31, 1998 in the ordinary course of business and are not
individually or in the aggregate reasonably likely to have a Company Material
Adverse Effect.
4.07 Section LITIGATION. Except as disclosed in the Company SEC Reports filed
prior to the date hereof or as set forth in Section 4.07, Section 4.09 or
Section 4.11 of the Company Disclosure Schedule, (i) there are no claims, suits,
actions or proceedings, pending or to the knowledge of the Company threatened,
nor to the knowledge of the Company are there any investigations or reviews
pending or threatened against, relating to or affecting the Company or any of
its subsidiaries or any Company Employee Benefit Plan (as defined in Section
4.10 herein), (ii) there are no judgments, decrees, injunctions, rules or orders
of any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to the Company or any of its subsidiaries
or any Company Employee Benefit Plan except for any of the foregoing under
clauses (i) and (ii) that would not individually or in the aggregate reasonably
be expected to have a Company Material Adverse Effect.
4.08 Section REGISTRATION STATEMENT AND PROXY STATEMENT. The Proxy Statement
relating to the Company Special Meeting (as defined below), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by the Company with the SEC
(including, without limitation, under the 1935 Act) or any other Governmental
Authority in connection with the Merger and other transactions contemplated
hereby will comply as to form in all material respects with the requirements of
the Exchange Act, the Securities Act and the 1935 Act, as applicable, and will
not, on the date of their respective filings or, in the case of the Proxy
Statement, at the date it is mailed to Shareholders of the Company and at the
time of the Company Special Meeting (as defined in Section 7.04(a)), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (ii) the proxy statement, in definitive form (the "Proxy Statement"),
relating to the Company Special Meeting (as defined below) shall not, at the
dates 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 to make the statements therein,
in light of the circumstances under which they are made, not misleading;
provided that no representation or warranty is made by the Company with respect
to statements made or incorporated by reference in the Proxy Statement based on
information supplied in writing by Parent or Merger Sub for inclusion or
incorporation by reference therein. 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.
<PAGE>
4.09 Section TAX MATTERS.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean all taxes of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts, as well as any and all, fees, levies, duties, tariffs,
imposts, and governmental impositions or charges in the nature of (or similar
to) taxes, payable to any federal, state, local or foreign taxing or
governmental authority; and "Tax Returns" shall mean returns, reports, and
information statements with respect to Taxes required to be filed with the IRS
or any other federal, foreign, state or provincial taxing authority, domestic or
foreign, including, without limitation, consolidated, combined and unitary tax
returns, and including any schedules or attachments thereto and including any
amendments thereto.
(b) Other than as disclosed in the Company Disclosure Schedule and except as
would not have a Company Material Adverse Effect, (i) the Company and its
subsidiaries have timely filed all Tax Returns required to be filed by them
(giving effect to extensions) and all such Tax Returns are true, correct and
complete in all material respects, (ii) the Company and its subsidiaries have
paid and discharged all Taxes due, and (iii) there are no other Taxes that would
be due if asserted by a taxing authority, except with respect to which the
Company is maintaining reserves to the extent currently required. Other than as
disclosed in the Company Disclosure Schedule and except as does not involve or
would not result in liability to the Company or any of its subsidiaries that
individually or in the aggregate constitutes a Company Material Adverse Effect:
(i) there are no Tax liens on any assets of the Company or any subsidiary
thereof; and (ii) neither the Company nor any of its subsidiaries has granted
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax; (iii) no audit or other proceeding with
respect to any Taxes due from the Company or any of its subsidiaries or any Tax
Return of the Company or its subsidiaries is pending, threatened in writing or
being conducted by any taxing authority; (iv) neither the Company nor any of its
subsidiaries (A) has ever been a member of any consolidated, combined, unitary
or aggregate group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (B) has any liability for
the Taxes of any person (other than the Company and its subsidiaries), including
liability arising form the application of Treas. Reg. section 1.1502-6 or any
analogous provision of state, local or foreign law, or as a transferee or
successor, by contract or otherwise; (v) all Taxes required to be withheld,
collected or deposited with respect to the Company and each of its subsidiaries
have been timely withheld, collected or deposited, as the case may be, and, to
the extent required, have been paid to the relevant taxing authority; (vi) no
consent under Section 341(f) of the Code has been filed with respect to the
Company or any of its subsidiaries; (vii) as of the Closing Date, neither the
Company nor any of its subsidiaries shall be a party to, be bound by, or have
any obligation under, any Tax sharing agreement or similar contract or
<PAGE>
arrangement, and (viii) there is no contract or agreement, plan or arrangement
by the Company or any of its subsidiaries covering any person that, individually
or collectively, could give rise to the payment of money or other property or
the acceleration or provision of any rights or benefits, by reason of the
transactions contemplated by this Agreement, of any amount that would not be
deductible by the Company or its subsidiaries (including defined taxes) by
reason of Section 280G or 162(m) of the Code. The accruals and reserves for
Taxes (including deferred taxes) reflected in the balance sheet of the Company
as at September 30, 1999 included in the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 are in all material respects adequate
to cover all Taxes (including deferred taxes) required to be accrued through the
date thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles applied
on a consistent basis with the balance sheet included in the Company Financial
Statements, and the accrual and reserves for Taxes (including deferred taxes)
reflected in the books and records of the Company as at the last day of the
Company's most recently completed fiscal month end are in all material respects
adequate to cover all Taxes (including deferred taxes) required to be accrued
through such date (including interest and penalties, if any, thereon and Taxes
being contested) in accordance with generally accepted accounting principles
applied on a consistent basis with the balance sheet included in the Company
Financial Statements.
4.10 Section EMPLOYEE MATTERS; ERISA.
(a) Schedule 4.10 of the Company Disclosure Schedule lists each material plan,
program and arrangement maintained or sponsored by the Company or its
subsidiaries (or to which the Company or its subsidiaries contributes or is
obligated to contribute) or under which the Company or any of its subsidiaries
has any present or future liability that provides retirement benefits, deferred
compensation, stock-based compensation, welfare benefits, incentive
compensation, severance, retention, change of control, employment or fringe
benefits (each, other than multiemployer plans, a "Company Employee Benefit
Plan"), including each such plan that constitutes an "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (each, other than multiemployer plans, an "ERISA Plan").
Each Company Employee Benefit Plan has been established, administered and
operated in all material respects in accordance with its terms and with
applicable law. Each ERISA Plan that is intended to be qualified within the
meaning of Section 401(a) of the Code has received a favorable determination
letter from the IRS as to such qualification and, to the knowledge of the
Company, no event has occurred and no condition exists that could reasonably be
expected to have a materially adverse effect on any such determination.
(b) Complete and correct copies of the following documents have been made
available to Parent as of the date of this Agreement: (i) copies of each Company
Employee Benefit Plan that has been reduced to writing, (ii) the most recent
Form 5500 and attached schedules for each Company Employee Benefit Plan subject
to such reporting, (iii) the most recent determination of the IRS with respect
<PAGE>
to the qualified status of each ERISA Plan that is intended to qualify under
Section 401(a) of the Code, (iv) any trust agreement related to a Company
Employee Benefit Plan; (v) any summary plan description under a Company Employee
Benefit Plan; (vi) the most recent audited financial statements for each Company
Employee Benefit Plan, if applicable; and (vii) the most recent actuarial
valuation reports for each Company Employee Benefit Plan, if applicable.
(c) Except as set forth in Schedule 4.10 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries, nor any other person that would
be treated as a single employer with the Company and its subsidiaries under
Section 4001(b) of ERISA (an "ERISA affiliate"), has, within the five-year
period preceding the date of this Agreement, at any time contributed, or had an
obligation to contribute, to any "multiemployer plan," as that term is defined
in Section 4001 of ERISA.
(d) No event has occurred and there exists no condition or set of circumstances
in connection with any Company Employee Benefit Plan that has subjected or could
reasonably be expected to subject the Company or any subsidiary either directly
or by reason of their affiliation with any member of their "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to
any tax fine, lien or penalty imposed by ERISA or by Chapter 43 of the Code,
except for instances of non-compliance which could not reasonably be expected to
have a Company Material Adverse Effect.
(e) All employer contributions required to have been made with respect to the
Company Employee Benefit Plans, including, for this purpose, multiemployer
plans, have been made in material compliance with the terms of such plans and
applicable law.
(f) Except as would not have a Company Material Adverse Effect, no "reportable
event" (as such term is defined in ERISA section 4043) has occurred.
4.11 Section 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)) except
where the failure to be in such compliance would not individually or in the
aggregate reasonably be expected to have a Company Material Adverse Effect, and
neither the Company nor any of its subsidiaries has received any written
communication from any Governmental Authority that alleges that the Company or
any of its subsidiaries is not in compliance with applicable Environmental Laws
except for matters which could not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
<PAGE>
(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, except where the failure to obtain or to be in such
compliance would not individually or in the aggregate reasonably be expected to
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 (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 individually or in the aggregate reasonably be expected to
have a Company Material Adverse Effect.
(d) Releases. Except for Releases of Hazardous Materials the liability for which
would not reasonably be expected to have a Company Material Adverse Effect,
there have been no Releases (as defined in Section 4.1 1(f)(iv)) of any
Hazardous Material (as defined in Section 4.1 l(f)(iii)) that would be
reasonably likely to form the basis of any Environmental Claim against 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, except for Releases of Hazardous Materials the liability for
which would not individually or in the aggregate reasonably be expected to have
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 their respective subsidiaries or joint
ventures; or (B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any and all claims by
any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
<PAGE>
(ii) "Environmental Laws" means all federal, state, local laws, rules,
ordinances and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of human health as it
relates to the environment including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
(iii)"Hazardous Materials" means (A) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, coal tar residue, any and all
products or by-products of gas manufacture, the presence of PCB's in
reportable concentrations in soil, groundwater, service-water or pipes and
transformers or other equipment that contain dielectric fluid containing
PCB's 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.
4.12 Section REGULATION AS A UTILITY. Except as set forth in Section 4.12 of the
Company Disclosure Schedule, neither the Company nor any "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)(7), 2(a)(5), 2(a)(8) or 2(a)(11), respectively, of the
1935 Act, (ii) a "public utility" under the Federal Power Act, as amended, (iii)
a "natural gas company" under the Natural Gas Act, as amended, or (iv) a public
utility or public service company (or similar designation) by any state in the
United States other than Massachusetts or by any foreign country.
<PAGE>
4.13 Section VOTE REQUIRED. The approval of the Merger by a majority of the
votes entitled to be cast by all holders of Company Common Stock (the "Company
Shareholders' Approval") is the only vote of the holders of any class or series
of the capital stock of the Company or any of its subsidiaries required to
approve this Agreement, the Merger and the other transactions contemplated
hereby.
4.14 Section OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Salomon Smith Barney to the effect that, as of November 3, 1999, the Merger
Consideration is fair from a financial point of view to the holders of Company
Common Stock.
4.15 Section 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 Capital Stock.
4.16 Section TAKEOVER PROVISIONS; RIGHTS PLANS.
(a) The Company has taken (and will take) 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, (i)
the requirements of any "moratorium," "control share," "fair price" or other
anti-takeover laws and regulations (collectively, "Takeover Laws") of The
Commonwealth of Massachusetts, and (ii) the analogous provisions of the
Declaration.
(b) The Company will take all action necessary so that the entering into of this
Agreement and the consummation of the transactions contemplated hereby
(including the Merger) do not and will not result in the ability of any person
to exercise any Rights under the Rights Agreements, dated as of February 22,
1990 and July 22, 1998, between the Company and BankBoston, N.A., as Rights
Agent, as amended (collectively, the "Company Rights Agreement") or enable or
require the Company Rights to separate from the shares of Company Common Stock
to which they are attached or to be triggered or become exercisable.
(c) No "Distribution Date" or "Triggering Event" (as such terms are defined in
the Company Rights Plan) has occurred.
4.17 Section Year 2000. Except as set forth in Section 4.17 of the Company
Disclosure Schedule, (i) the Company has not been informed in writing by any
customer, vendor or service provider with which the Company or any of its
Subsidiaries transacts a material amount of business of an inability on the part
of such third party to be year 2000 compliant and (ii) the computer software
<PAGE>
operated by the Company and its Subsidiaries which is used in the conduct of
their business is capable of providing or being adapted to provide uninterrupted
millennium functionality to record, store, process and present calendar dates
falling on or after January 1, 2000 in substantially the same manner and with
the same functionality as such software records, stores, processes and presents
such calendar dates falling on or before December 31, 1999 other than such
interruptions in millennium functionality that could not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect. The Company reasonably believes as of the date hereof that the remaining
cost of adaptions referred to in the foregoing sentence will not exceed the
amounts reflected in the Form 10-Q filed by the Company for the quarter ended
June 30, 1999.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
5.01 Section ORGANIZATION AND QUALIFICATION. Except as set forth in Section 5.01
of Parent Disclosure Schedule (as defined in Section 7.06(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 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 would not individually or in the aggregate
reasonably be expected to have a material adverse effect on the ability of
Parent to consummate the transactions contemplated by this Agreement or
materially delay consummation of such transactions (any such material adverse
effect being hereafter referred to as a "Parent Material Adverse Effect").
5.02 Section AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(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 5.04(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by the other signatories
hereto, constitutes a valid and binding obligation of Parent enforceable against
it in accordance with its terms.
<PAGE>
(b) Non-Contravention. Except as set forth in Section 5.04(b) of Parent
Disclosure Schedule, the execution and delivery of this Agreement by Parent do
not, and the consummation of the transactions contemplated hereby will not,
result in a Violation pursuant to any provisions of (i) the articles of
incorporation, by-laws or similar governing documents of Parent or any of its
subsidiaries or any of its joint ventures, (ii) subject to obtaining Parent
Required Statutory Approvals (as defined in Section 5.04(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 5.04(b) of 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 individually or in the aggregate
reasonably be expected to have a Parent Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 5.04(c) of 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 Merger
Sub or the consummation by Parent or Merger Sub of the transactions contemplated
hereby, the failure to obtain, make or give which would reasonably be expected
to have, individually or 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, if any, as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 5.04(d) or Section 5.11 of Parent
Disclosure Schedule, or as disclosed in Parent SEC Reports (as defined in
Section 5.05) filed prior to the date hereof, neither Parent nor any of its
subsidiaries nor (to the best of its knowledge) any of its joint ventures is in
violation of, or has been given notice of any purported violation of, any law,
statute, or order, rule, regulation or judgment (including, without limitation,
any applicable Environmental Law) of any Governmental Authority, except for
violations that are not individually or in the aggregate reasonably expected to
have, a Parent Material Adverse Effect. Except as set forth in Section 5.04(d)
of Parent Disclosure Schedule or in Section 5.11 of Parent Disclosure Schedule,
Parent 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
<PAGE>
respects, except those which the failure to obtain would not individually or in
the aggregate reasonably be expected to have a Parent Material Adverse Effect.
Except as set forth in Section 5.04(d) of Parent Disclosure Schedule, Parent 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 organization or by-laws or (ii) any material contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which it is a party or by which it is
bound or to which any of its property is subject; except for breaches,
violations or defaults that are not individually or in the aggregate reasonably
expected to have, a Parent Material Adverse Effect.
5.03 Section MERGER SUB. Merger Sub is a newly formed limited liability company,
and except for activities incident to the Merger and as contemplated by this
Agreement, Merger Sub: (i) has not engaged in any business activities of any
type or kind whatsoever; (ii) has not entered into any agreements or
arrangements with any person or entity; and (iii) is not subject to or bound by
any obligation or undertaking.
5.04 Section PROXY STATEMENT. The information supplied or to be supplied by or
on behalf of Parent for inclusion or incorporation by reference in the Proxy
Statement will not, at the dates 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 to make the statements therein, in light of the circumstances under
which they are made, not misleading provided that no representation or warranty
is made by Parent with respect to the statements made or incorporated by
reference in the Proxy Statement based on information supplied by the Company
for inclusion or incorporation by reference therein. The Proxy Statement,
insofar as it relates to Parent or any Parent subsidiary, 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.
5.05 Section REGULATION AS A UTILITY. Except as set forth in Section 5.09 of
Parent Disclosure Schedule, neither Parent nor any "subsidiary company" or
"affiliate" (as such terms are defined in the 1935 Act) of Parent 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)(7), 2(a)(5), 2(a)(8) or 2(a)(11), respectively, of the 1935 Act,
(ii) a "public utility" under the Federal 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
New York or by any foreign country.
5.06 Section FINANCING. Parent has or will have available prior to the Effective
Time sufficient cash in immediately available funds to pay or to cause Merger
Sub to pay all Merger Consideration required to be paid pursuant to Article II
hereof and to consummate the Merger and the other transactions contemplated
hereby.
<PAGE>
5.07 Section OWNERSHIP OF COMPANY SHARES. Neither Parent nor any of its
subsidiaries or other affiliates beneficially owns any Company Shares.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.01 Section COVENANTS OF THE PARTIES. After the date hereof and prior to the
Effective Time or earlier termination of this Agreement, the Company agrees as
follows, as to itself and to each of its subsidiaries, except as expressly
contemplated or permitted in this Agreement or as set forth in Section 6.01 of
the Company Disclosure Schedule, or to the extent the Parent shall otherwise
consent in writing:
(a) Ordinary Course of Business. The Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the 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 direct or indirect
subsidiary to the Company or Parent, as the case may be or (B) regular quarterly
dividends on Company Common Stock that do not exceed the current regular
dividends on Company Common Stock; provided that, the Company may from time to
time after the first anniversary date of this Agreement increase the rate of
such dividends in an amount not more than $0.04 per year on an annual basis and
(C) if the Effective Time does not occur between a record date and payment date
of a regular quarterly dividend, a special dividend on the Company Common Stock
with respect to the quarter in which the Effective Time occurs with a record
date on or prior to the date on which the Effective Time occurs, which does not
exceed an amount equal to the product of (x) the number of days between the last
payment date of a regularly quarterly dividend on the Company Common Stock and
the record date of such special dividend, multiplied by (y) $.0047; (ii) split,
combine, subdivide or reclassify or take similar action with respect to 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) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization;
or (iv) directly or indirectly 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, or (B) intercompany acquisitions of
capital stock.
<PAGE>
(c) Issuance of Securities. The Company shall not, nor shall it permit any of
its subsidiaries to, issue, agree to issue, deliver, sell, pledge, dispose of or
otherwise encumber 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 (i) pursuant to outstanding stock options granted under Employee
Benefit Plans, (ii) pursuant to the Company's employee stock purchase plan and
dividend reinvestment plan as in effect on the date hereof, (iii) in the case of
subsidiaries, for issuances of capital stock to the Company or another
subsidiary, or (iv) as may be required by the Company Rights Agreement.
(d) Charter Documents; Other Actions. The Company shall not nor shall it permit
any of its subsidiaries to, amend or propose to amend its or its subsidiaries'
Declaration of Trust, articles of organization, by-laws or regulations, or
similar governing documents, or to take or fail to take any other action, which
in any such case would reasonably be expected to prevent or materially impede or
interfere with the Merger (except to the extent permitted by Section 6.02 and
Article IX).
(e) Acquisitions. 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
(i) in the ordinary course of business, and (ii) acquisitions having an
aggregate acquisition consideration payable by the Company of not more than
$5,000,000.
(f) Capital Expenditures. Except (i) as may be required by law or (ii) as
reasonably deemed necessary by the Company following a catastrophic event, the
Company shall not, nor shall it permit any of its subsidiaries to, make capital
expenditures in excess of 110% of the aggregate annual amount budgeted by the
Company or its subsidiaries for capital expenditures as set forth in Section
6.01 of the Company Disclosure Schedule.
(g) No Dispositions. The Company shall not, nor shall it permit any of its
subsidiaries to, sell, lease, 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. The Company shall not, nor shall it permit any of its
subsidiaries to, incur, or guarantee any indebtedness for borrowed money
<PAGE>
(including any such debt 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 other than (i) short-term and other
indebtedness and "keep well" or similar assurances for the benefit of customers,
in each case in the ordinary course of business consistent with past practice;
(ii) arrangements between the Company and its subsidiaries or among its
subsidiaries; or (iii) in connection with the refunding of existing indebtedness
at a lower cost of funds (calculating such cost on an aggregate after-tax
basis).
(i) Compensation, Benefits. 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 any Company
Employee Benefit Plan or any arrangement that would be a Company Employee
Benefit Plan if it was in effect as of the date hereof to increase the amount or
accelerate the payment or vesting of any benefit or amount payable thereunder,
or otherwise increase the regular compensation, incentive compensation
opportunities, or benefits of any trustee, director, officer or other employee
of such party or any of its subsidiaries, except in accordance with existing
performance-based compensation arrangements (including, without limitation,
annual bonus opportunities under the Executive Incentive Compensation Plan) in
the ordinary course of business consistent with past practice and except for
normal increases in the ordinary course of business consistent with past
practice, or (ii) enter into or amend any employment, severance or similar
contract, agreement or arrangement with any trustee, director or officer or
other employee other than in the ordinary course of business consistent with
current industry practice.
(j) Accounting. 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.
(k) Cooperation, Notification. The Company shall, and shall cause its
subsidiaries to, (i) confer on a regular and frequent basis with one or more
representatives of Parent to discuss, subject to applicable law, material
operational and business matters; (ii) promptly notify Parent of any significant
changes in its business, properties, assets, condition (financial or other) or
results of operations; (iii) advise Parent of any change or event which has had
or could reasonably be expected to result in a Company Material Adverse Effect;
<PAGE>
and (iv) promptly provide Parent with copies of all filings made by the Company
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; provided that the Company
shall not be required to make any disclosure to the extent such disclosure would
constitute a violation of the Confidentiality Agreement (as defined below) or
any applicable law or regulation. Parent shall advise the Company of any change
or event which has or could reasonably be expected to result in a Parent
Material Adverse Effect
(l) Rate Matters. The Company shall, and shall cause its subsidiaries, to
discuss with Parent any changes in its or its subsidiaries' regulated rates or
charges, standards of service or accounting from those in effect on the date
hereof and consult with Parent prior to making any filing (or any amendment
thereto), or effecting any agreement, commitment, arrangement, or consent with
governmental regulators, whether written or oral, formal or informal, with
respect thereto, and the Company and its subsidiaries shall not make any filing
to change its rates or charges on file with the public utility commission of any
state or FERC that would have, individually or in the aggregate, a material
adverse effect on the benefits associated with the Merger or a Company Material
Adverse Effect.
(m) Contracts; Agreements. Neither the Company, nor any of its subsidiaries,
except in the ordinary course of business consistent with past practice, shall
modify, amend, terminate, renew or fail to use reasonable business efforts to
renew any material contract or agreement to which the Company or any subsidiary
of the Company is a party or waive, release, or assign any material rights or
claims. Neither the Company, nor any of its subsidiaries, shall agree in writing
to take any action not permitted by this Article VI.
(n) Insurance. The Company shall, and shall cause its subsidiaries to, maintain
with financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for companies engaged in the gas
utility and barge transportation industries.
(o) 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 any applicable Takeover Law.
(p) Confidentiality Agreements. During the period from the date of this
Agreement through the Effective Time, neither the Company nor any of its
subsidiaries shall terminate, amend, modify, or waive any provision of any
confidentiality or standstill agreement to which it is a party. During such
period, the Company shall take all steps necessary to enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreement.
(q) Rights Agreement. Except as specifically contemplated by this Agreement, the
Company shall not amend, modify or waive any provision of the Rights Agreement,
and shall not take any action to redeem the Company Rights or render the Company
Rights inapplicable to any transaction other than the transactions to be
effected pursuant to this Agreement.
(r) EnergyNorth. The Company shall not terminate or amend the EnergyNorth
Agreement or waive any of its rights thereunder.
<PAGE>
(s) Conduct of Business of Merger Sub. Prior to the Effective Time, except as
may be required by applicable law and subject to the other provisions of this
Agreement, Parent shall cause Merger Sub to (i) perform its obligations under
this Agreement in accordance with its terms, and (ii) not engage directly or
indirectly in any business or activities of any type or kind and not enter into
any agreements or arrangements with any person, or be subject to or bound by any
obligation or undertaking, which is inconsistent with this Agreement.
(t) Parent shall not, and shall not permit its subsidiaries to, acquire or agree
to acquire a substantial portion of the assets of or equity in any business or
any corporation, partnership, association or other business organization or
division thereof if the entering into of a definitive agreement relating to, or
the consummation of, such acquisition, could reasonably be expected to (i)
impose any material delay in the obtaining of, or materially increase the risk
of not obtaining, any authorizations, consents, orders, declarations or
approvals of any Governmental Authority necessary to consummate the Merger or
the expiration or termination of any applicable waiting period or (ii)
materially adversely affect the ability of Parent to obtain financing necessary
to consummate the Merger.
6.02 Section COVENANT OF THE COMPANY; ALTERNATIVE PROPOSALS. From and after the
date hereof, the Company agrees (a) that it and its subsidiaries will not, and
it will not authorize or permit it and its subsidiaries' officers, trustees,
directors, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it or any of its
subsidiaries or any of the foregoing) to, directly or indirectly, encourage,
initiate or solicit (including by way of furnishing information) or take any
action to facilitate 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 an Alternative Proposal or accept any Alternate Proposal; (b) that it
will immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussions or negotiations with any
parties conducted heretofore with a view of formulating an Alternative Proposal;
and (c) that it will immediately notify Parent orally and in writing of the
receipt of any such inquiry, offer or proposals and the identity of the person
making it within 24 hours of the receipt thereof; shall keep Parent informed as
to the status and details of any such inquiry, offer or proposal; provided
however, that notwithstanding any other provision hereof, the Company may at any
time prior to the time the Company shareholders shall have voted with respect to
the Merger (i) engage in discussions or negotiations with a third party who,
without 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 a bona fide written Alternative Proposal that, in the good faith judgment
<PAGE>
of a majority of the Company's Board of Trustees, is likely to be more favorable
to the Company's shareholders than the Merger and as to which the Board of
Trustees has reasonably concluded that the third party will have adequate
sources of financing to consummate the Alternative Proposal, and (y) a majority
of the Company's Board of Trustees shall conclude in good faith, based upon the
advice of outside counsel and such other matters as the Company Board of
Trustees deems relevant, that such actions are necessary for the Company Board
of Trustees to comply with its fiduciary duties to shareholders under applicable
law, and (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Company (x)
provides prompt 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, and of the identity of the person or group making the
Alternative Proposal and the material terms thereof and (y) receives from such
person an executed confidentiality agreement in reasonably customary form on
terms not in the aggregate more favorable to such third party than the terms
contained in the Confidentiality Agreement, (ii) comply with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer
provided, further, that the Board of Trustees shall not recommend that the
shareholders of the Company tender their shares of Common Stock in connection
with any such tender or exchange offer unless a majority of the Board of
Trustees shall have determined in good faith based on the advice of outside
counsel that such action is necessary for the Company Board of Trustees to
comply with its fiduciary duties to shareholders under applicable law and/or
(iii) accept an Alternative Proposal from a third party, provided the Company
terminates this Agreement pursuant to Section 9.01(e) or (iv) in response to an
unsolicited bona fide written Alternative Proposal from a third party which is
likely to be more favorable to the Company's shareholders than the Merger and as
to which the Company's Board of Trustees has reasonably concluded that the third
party will have adequate sources of financing to consummate the Alternative
Proposal recommend such Alternative Proposal, or withdraw or modify in any
adverse manner its approval or recommendation of this Agreement if a majority of
the Board of Trustees shall have determined in good faith based on the advice of
outside counsel that such action is necessary for the Company Board of Trustees
to comply with its fiduciary duties to shareholders under applicable law.
"Alternative Proposal" shall mean a proposal or offer for a merger, acquisition,
consolidation, reorganization, share exchange, tender offer, exchange offer or
similar transaction involving the Company or any of the Company's significant
subsidiaries (as defined in Rule 1-02(w) of Regulation S-X under the Exchange
Act) or any proposal or offer to acquire in any manner, directly or indirectly
(x) ten percent or more of the outstanding Company Common Stock, (y) or 50% or
more of the outstanding capital stock of any significant subsidiary of the
Company, or (z) all or a substantial portion of the assets of the Company or of
any significant subsidiary. Nothing herein shall prohibit a disposition
permitted by Section 6.01 (g) hereof
6.03 Section CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, each of the Company and Parent shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
<PAGE>
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Section ACCESS TO INFORMATION. Upon reasonable notice and during normal
business hours, the Company shall, and shall cause its subsidiaries to, afford
to the officers, directors, employees, agents and accountants of the Parent
(collectively, "Representatives") reasonable access, throughout the period prior
to the Effective Time, to all of its properties, books, contracts, commitments
and records to the extent that such party or any of its subsidiaries is not
under a legal obligation not to provide access or to the extent that such access
would not constitute a waiver of the attorney-client privilege and does not
unreasonably interfere with the business and operations of the Company. During
such period, the Company shall, and shall cause its subsidiaries to, furnish
promptly to the Parent (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 Parent in
connection with any filings, applications or approvals required or contemplated
by this Agreement. The Parent shall, and shall cause its subsidiaries and
Representatives to, hold in strict confidence all Evaluation Material (as
defined in the Confidentiality Agreement) concerning the Company furnished to it
in connection with the transactions contemplated by this Agreement in accordance
with the Confidentiality Agreement between the Company (or its agent) and
Parent, as it may be amended from time to time (the "Confidentiality
Agreement").
7.02 Section PROXY STATEMENT.
(a) Preparation and Filing. The Company will prepare and file with the SEC as
soon as reasonably practicable after the date hereof the Proxy Statement. The
Company shall use reasonable best efforts to have the Proxy Statement cleared by
the SEC as promptly as practicable after such filing. Each of the parties hereto
shall furnish all information concerning itself which is required or customary
for inclusion in the Proxy Statement. The Company shall promptly notify Parent
of the receipt of any comments of the SEC for any amendment or supplement
thereto or for additional information, and shall promptly provide to Parent
copies of all correspondence between the Company or any of its Representatives
and the SEC with respect to the Proxy Statement. The Company shall consult with
Parent regarding the Proxy Statement and have due regard to any comments Parent
may make in relation to the Proxy Statement. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement and all responses to
requests for additional information by and replies to comments of the SEC before
their filing with, or being sent to, the SEC. The information provided by any
party hereto for use in the Proxy Statement shall be true and correct in all
material respects without omission of any material fact which is required to
make such information, in the circumstances under which it is provided, not
false or misleading. 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.
<PAGE>
(b) Each party shall promptly notify the other party of the receipt of any
comments of any of the SEC, the FERC, the Department of Justice, the Federal
Trade Commission or any other federal or state regulatory agency or commission
(the "Regulatory Filings") or requests for additional information and shall
promptly provide to the other party copies of all correspondence between such
party or any of its representatives and such regulatory agency or commission
with respect to the Regulatory Filings. Each party shall consult with the other
party regarding the Regulatory Filings and have due regard to any comments the
other party may make in relation to the Regulatory Filings. Each party shall
give the other party and its counsel the opportunity to review all responses to
requests for additional information by and replies to comments of any regulatory
agency or communication before their filing with, or being sent to, such
regulatory agency or commission.
7.03 Section REGULATORY MATTERS. Each party hereto shall cooperate and use its
best efforts to promptly prepare and file all necessary documentation, to effect
all necessary applications, notices, petitions, filings and other documents, and
to use all commercially reasonable efforts to obtain no later than the Initial
Termination Date, as such date may be extended pursuant to Section 9.01(b), all
necessary permits, consents, approvals and authorizations of all Governmental
Authorities and all other persons necessary or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Company Required Statutory Approvals and Parent Required Statutory Approvals.
7.04 Section SHAREHOLDER APPROVAL.
(a) The Company Shareholders. The Company shall, as soon as reasonably
practicable after the date hereof, (i) take all steps necessary to duly call,
give notice of, convene and hold a meeting of its shareholders (the "Company
Special Meeting") for the purpose of securing the Company Shareholders'
Approval, (ii) distribute to its shareholders the Proxy Statement in accordance
with applicable federal and state law and with its Declaration, (iii) subject to
Section 6.02, 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.
7.05 Section TRUSTEES' AND OFFICERS' INDEMNIFICATION.
(a) Indemnification. From and after the Effective Time, Parent and the Surviving
Corporation shall, to the fullest extent permitted by applicable law, indemnify,
<PAGE>
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,
trustee, 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, in either
case to the extent permitted by applicable law and (ii) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth in the applicable charter document or
by-laws or under applicable law 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 or delayed). The Indemnified
Parties as a group may retain only one law firm (other than local counsel) with
respect to each related matter except to the extent there is, in the opinion of
counsel to an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more Indemnified Parties, in which case each Indemnified Party with a
conflicting position on a significant issue shall be entitled to separate
counsel.
(b) Insurance. For a period of six years after the Effective Time, Parent shall
(i) cause to be maintained in effect policies of directors' and officers'
liability insurance for the benefit of those persons who are currently covered
by such policies of the Company on terms no less favorable than the terms of
such current insurance coverage; provided that the Parent may substitute
therefor policies of at least the same coverage containing terms that are no
less advantageous with respect to matters occurring at or prior to the Effective
Time to the extent such liability insurance can be maintained annually at a cost
to the Parent not greater than 200 percent of the current annual premiums of the
policies currently maintained by the Company for their directors' and officers'
liability insurance; provided further that if such insurance cannot be so
maintained or obtained at such cost, the Parent shall maintain or obtain a
policy providing the best coverage available, as determined by the Board of
Directors of the Parent, for a premium not exceeding 200 percent of the
aggregate annual premiums currently paid by the Company for their directors' and
officers' liability insurance and other indemnity agreements, or (ii) provide
tail coverage for such persons which provides coverage for a period of six years
for acts prior to the Effective Time on terms no less favorable than the terms
of such current insurance coverage.
<PAGE>
(c) Successors. In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in either such case, proper provisions shall be made so that
the successors and assigns of Parent shall assume the obligations set forth in
this Section 7.05.
(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, trustees, 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 charter document and
by-laws in effect on the date hereof, or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.05 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.
7.06 Section REASONABLE BEST EFFORTS. Subject to the terms and conditions
provided herein, each of the parties hereto agrees to cooperate and use its
reasonable best efforts to take, or cause to be taken, all necessary or
appropriate action, and to do, or cause to be done, all things necessary, under
applicable laws, and regulations or otherwise to consummate and make effective
the Merger and all other transactions contemplated by this Agreement including,
without limitation, the execution of any additional instruments necessary to
consummate the transactions contemplated hereby and seeking to lift, rescind or
reverse any legal restraint imposed on the consummation of the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take all
such necessary action.
7.07 Section DISCLOSURE SCHEDULES. On the date hereof, (i) Parent has delivered
to the Company a schedule (the "Parent Disclosure Schedule"), signed by a duly
authorized officer stating that the Parent Disclosure Schedule is being
delivered pursuant to this clause 7.07(i), and (ii) the Company has delivered to
Parent a schedule (the "Company Disclosure Schedule"), signed by a duly
authorized officer stating that the Company Disclosure Schedule is being
delivered pursuant to this clause 7.07(ii). The Company Disclosure Schedule and
Parent Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules constitute an integral part of
this Agreement and modify the respective representations, warranties, covenants
or agreements of the parties hereto contained herein to the extent that such
representations, warranties, covenants or agreements expressly refer to the
Disclosure Schedules. Anything to the contrary contained herein or in the
Disclosure Schedules notwithstanding, any and all statements, representations,
warranties or disclosures set forth in the Disclosure Schedules shall be deemed
to have been made on and as of the date hereof.
<PAGE>
7.08 Section PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law or the rules of any applicable securities exchange or
Governmental Authority, 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 prior consent of the other party
(which consent shall not be unreasonably withheld).
7.09 Section EMPLOYEE BENEFIT PLANS.
(a) For a period of not less than twelve months immediately following the
Closing Date, Parent and the Surviving Corporation shall provide or cause to be
provided to those non-union individuals who continue to be employees of the
Surviving Corporation, Parent or their respective subsidiaries (the "Nonunion
Continuing Company Employees") and their family members, dependents and other
beneficiaries coverages and benefits not less favorable and on terms that are
not less favorable, in each case in the aggregate, than those provided or made
available to such Nonunion Continuing Company Employees immediately prior to the
Closing Date under the Company Employee Benefit Plans.
(b) Parent and the Surviving Corporation shall give or cause to be given to each
Nonunion Continuing Company Employee full credit for purposes of eligibility,
vesting, benefit accrual (including without limitation benefit accrual under any
defined benefit pension plans) and determination of the level of benefits, as
applied to the employee benefit plans or arrangements maintained by Parent, the
Surviving Corporation, or their respective subsidiaries in which such Nonunion
Continuing Company Employee participates, for such Nonunion Continuing Company
Employees' service with the Company or any subsidiary of the Company (or any
prior employer) to the same extent recognized by the analogous Company Employee
Benefit Plan immediately prior to the Closing Date and to the extent service
with Parent or the Surviving Corporation is so recognized for other employees of
Parent or the Surviving Corporation who participate in such plan.
(c) Parent and the Surviving Corporation shall (i) waive or cause to be waived
all limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Nonunion Continuing Company Employees and their family members and dependents
under the welfare benefit plans maintained or continued by Parent, the Surviving
Corporation or their respective subsidiaries, except to the extent such
limitations or waiting periods were already in effect with respect to such
Nonunion Continuing Company Employees and had not been satisfied as of the
Closing Date under the corresponding Company Employee Benefit Plan that is a
welfare plan maintained for the Nonunion Continuing Company Employees
immediately prior to the Closing Date, and (ii) provide or cause to be provided
to each Nonunion Continuing Company Employee credit for any co-payments and
deductibles paid during the year of but paid prior to the Closing Date in
satisfying any applicable deductible or out-of-pocket requirements under the
Company Employee Benefit Plans that are welfare plans in which such Nonunion
Continuing Company Employees are eligible to participate after the Closing Date.
<PAGE>
(d) Subject to Sections 7.09 and 7.10, Parent and the Surviving Corporation
agree to honor and to cause their respective subsidiaries to honor, from and
after the Effective Time, in accordance with their terms, (i) all Company
Employee Benefit Plans, (ii) all collective bargaining agreements and (iii) all
other contracts, plans, arrangements or commitments with or for the benefit of
officers, trustees, directors or employees. Any workforce reductions affecting
employees of the Company carried out within the twenty-four- month period
following the Effective Time by Parent or the Surviving Corporation or their
respective subsidiaries shall be done in accordance with the provisions of this
Agreement, all applicable collective bargaining and other agreements, and all
laws and regulations governing the employment relationship and termination
thereof including, without limitation, the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder, and any applicable
state or local law.
(e) The Company and Parent agree to coordinate their executive incentive plans
in order to assure that the officers and employees of the Company and its
subsidiaries entitled to participate in the Company's incentive pay or other
bonus plans receive on an equitable basis the benefits provided under such plan
for the portion of the year in which the Merger occurs during which they were
officers or employees of the Company or its subsidiaries.
7.10 Section COMPANY STOCK OPTIONS AND EMPLOYEE BENEFITS. As soon as practicable
following the date of this Agreement, the Board of Trustees of the Company (or
if appropriate, any committee administering the Company Stock Option Plans)
shall adopt such resolutions or take such other actions as may be required to
effect or facilitate the effectuation of the following:
(a) In the case of each option outstanding immediately prior to the Effective
Time (including without limitation, for the avoidance of doubt, options held by
previously terminated employees that became exercisable in connection with the
Merger) to purchase shares of the Company Common Stock under the Company Stock
Option Plans (each a "Company Stock Option"), adjust the terms of such Company
<PAGE>
Stock Option to provide that, at the Effective Time, it shall (except to the
extent that Parent and the holder of such Company Stock Option otherwise agree
in writing prior to the Effective Time): (i) if such Company Stock Option is or
becomes exercisable on or before the Merger or as a consequence of the
transactions contemplated by this Agreement and the holder of such Company Stock
Option shall have elected by written notice to Parent prior to the date 10
business days prior to the Effective Time to receive the payment contemplated by
this clause (i), be canceled in exchange for a payment from the Surviving
Corporation (subject to any applicable withholding taxes) equal to the product
of (1) the total number of shares of Company Common Stock subject to such
Company Stock Option and (2) the excess of the Merger Consideration over the
exercise price per share of Company Common Stock subject to such Company Stock
Option, payable in cash as soon as reasonably practicable following the
Effective Time; or (ii) with respect to any Company Stock Option not canceled
pursuant to clause (i) above, be assumed by Parent and, thereby be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option immediately prior to the Effective
Time, Parent Common Stock, except that (1) each such Company Stock Option will
be exercisable for that number of whole shares of Parent Common Stock which
equals (x) the number of shares of Company Common Stock subject to such Company
Stock Option immediately prior to the Effective Time multiplied by (y) the
Option Exchange Ratio (as defined below), rounded down to the nearest whole
number of shares of Parent Common Stock, and (2) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Stock Option will be equal to (x) the exercise price per share of
Company Common Stock under such Company Stock Option divided by (y) the Option
Exchange Ratio, rounded up to the nearest whole cent. The parties hereto shall
cooperate in giving the holders of Company Stock Options adequate notice and
opportunity to exercise their rights under this Section 7.10(a). With respect to
the Company Stock Options not canceled pursuant to clause (i) above, Parent
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Parent Common Stock for delivery upon exercise of options
assumed by Parent pursuant to this Section. As soon as practicable after the
Effective Time, Parent shall deliver to each holder of a Company Stock Option
assumed by Parent pursuant to this Section 7.10 an appropriate notice setting
forth such holder's rights pursuant thereto. For purposes of this provision, the
term "Option Exchange Ratio" shall mean the ratio obtained by dividing (i) the
average of the closing prices of the shares of Company Common Stock on the NYSE
Composite Transactions Reporting System, as reported in The Wall Street Journal,
for the twenty (20) trading days immediately preceding the second trading day
prior to the Effective Time by (ii) the average of the closing prices of the
shares of Parent Common Stock on the NYSE Composite Transactions Reporting
System, as reported in the Wall Street Journal for the twenty (20) trading days
immediately preceding the second trading day prior to the Effective Time.
(b) It is intended that the Company Stock Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent the Company Stock Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 7.10 shall be applied consistent with such intent,
including any adjustment of the conversion formula set forth in the preceding
paragraph (a) as is necessary in good faith to comply with Section 422 and
424(a) of the Code.
<PAGE>
(c) Except as otherwise agreed to in writing by the parties hereto, the Company
shall ensure that, to the extent consistent with applicable law (including,
without limitation, the Code), following the Effective Time, no holder of a
Company Stock Option nor any participant in any Company Stock Option Plan or any
other plan, program or arrangement providing for the issuance or grant of any
interest in respect of the capital stock of the Company or any subsidiary shall
have any right thereunder to acquire equity securities of the Company or the
Surviving Corporation.
(d) Parent agrees to file a registration statement on Form S-8 for the shares of
Parent Common Stock issuable with respect to assumed Company Stock Options as
soon as reasonably practicable after the Effective Time and shall use its
reasonable efforts to maintain the effectiveness of such registration statement
thereafter for so long as any of such options or other rights remain
outstanding.
7.11 Section EXPENSES. 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/ Registration Statement, as well as the filing fee relating
thereto, shall be shared equally by the Company and Parent.
7.12 Section FURTHER ASSURANCES. (a) Each of Parent and Company shall, and shall
cause its subsidiaries to, execute such further documents and instruments and
take such further actions as may reasonably be requested by the other in order
to consummate the Merger and the other transactions contemplated by this
Agreement, and to use its reasonable best efforts to take or cause to be taken
all actions, and to do or cause to be done all things necessary under applicable
laws, and regulations to consummate and make effective the Merger and the other
transactions contemplated hereby (subject to the vote of the Company
shareholders described in Sections 4.13), including fully cooperating with the
other in obtaining the Parent Required Statutory Approvals, the Company Required
Statutory Approvals and all other approvals and authorizations of any
Governmental Authorities necessary to consummate the transactions contemplated
hereby.
(b) Parent and Company, respectively, shall be responsible for the
taking of any action necessary to obtain the Parent Required Statutory Approvals
and to obtain the Company Required Statutory Approvals. Parent and Company agree
to cooperate in obtaining the necessary approvals from the SEC under the 1935
Act, the Securities Act and the Exchange Act from the applicable state
authorities under state "blue sky", securities or utility regulatory laws.
Parent and Company shall each provide the other with copies of any filings made
with any Governmental Authorities in connection with the foregoing.
(c) It may be preferable to effectuate a business combination between
Parent and Company by means of an alternative structure in light of the
conditions set forth in Sections 8.01(d), 8.02(e) and 8.03(d). Accordingly, if
<PAGE>
the only conditions to the parties' obligations to consummate the Merger that
are not satisfied or waived are receipt of any one or more of the Company
Required Consents, Company Required Statutory Approvals, Parent Required
Consents and Parent Required Statutory Approvals, and the adoption of an
alternative structure (that otherwise substantially preserves for Company and
Parent the economic benefits of the Merger and does not result in materially
more burdensome regulatory requirements) would result in such conditions being
satisfied or waived, then the parties shall cooperate 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.
7.13 Section CORPORATE OFFICES. At and subsequent to the Effective Time, the
corporate headquarters of the Surviving Corporation shall be located in the
greater Boston, Massachusetts area.
7.14 Section INVOLVEMENT IN COMMUNITY. After the Effective Time, Parent will, or
will cause the Surviving Corporation to make at least $1,000,000 per year in
charitable contributions to the communities served by the Surviving Corporation
and otherwise maintain a substantial level of involvement in community
activities in such communities that is similar to, or greater than, the level of
community development and related activities carried on by the Company and is
consistent with the activities and programs currently supported by the Company.
7.15 Section 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 Parent and the Company, that will
develop recommendations concerning the future structure and operations of the
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 (i) to direct the exchange of information and documents between the
parties and their subsidiaries as contemplated by Section 7.01 and (ii) the
development of regulatory plans and proposals, corporate organizational and
management plans, workforce combination proposals, and such other matters as
they deem appropriate.
7.16 Section REPRESENTATION ON PARENT BOARD. The Parent shall take such action
as may be necessary to cause the number of directors comprising the Parent's
Board of Directors at the Effective Time to be sufficient to permit J. Atwood
Ives to serve thereon and shall elect Mr. Ives to serve as such director.
<PAGE>
ARTICLE VIII
CONDITIONS
8.01 Section 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 or waiver on or prior to the Closing Date of each of the
following conditions:
(a) Shareholder Approval. The Company Shareholders' Approval shall have been
obtained.
(b) HSR Act. Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1978, as amended, shall have expired or been terminated.
(c) 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.
(d) Statutory Approvals. The Company Required Statutory Approvals and Parent
Required Statutory Approvals shall have been obtained at or prior to the
Effective Time, such approvals shall have become Final Orders (as defined below)
and such Final Orders shall not impose terms or conditions that, in the case of
the State of New Hampshire approval, constitute a Company Material Adverse
Effect and in the case of the 1935 Act approval, are materially adverse to the
business, properties, financial condition or results of operations of Parent and
its subsidiaries taken as a whole (a "Parent MAE"). 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.
For purposes of this Agreement, in the event that any Final Order includes terms
or conditions that (i) require that Parent register as a "holding company" under
the 1935 Act or (ii) require (whether on an absolute or contingent basis) that,
at any time, all or any portion of Midland Enterprises Inc. or any of its
subsidiaries, assets, operations or business be transferred, sold, spun off or
distributed (whether in whole or in part) to shareholders, otherwise disposed
of, liquidated or wound down, such terms and conditions shall be deemed not to
constitute a Parent MAE or Company Material Adverse Effect.
<PAGE>
8.02 Section CONDITIONS TO OBLIGATION OF PARENT TO EFFECT THE MERGER. The
obligation of Parent to effect the Merger shall be further subject to the
satisfaction (or waiver by Parent), on or prior to the Closing Date, of each of
the following conditions:
(a) Performance of Obligations of the Company. The Company shall have performed
in all material respects each of its agreements and covenants required by this
Agreement to be so performed by the Company at or prior to the Closing.
(b) Representations and Warranties. The representations and warranties of the
Company set forth in this Agreement (other than the representations contained in
Sections 4.03, 4.04(a), 4.13 and 4.16) shall be true and correct on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date
or time, which need only be true and correct as of such date or time) except for
such failures of representations or warranties to be true and correct which
would not reasonably be expected to result in a Company Material Adverse Effect
and the representations contained in Sections 4.03, 4.04(a), 4.13 and 4.16 shall
be true and correct in all material respects
(c) Closing Certificates. Parent shall have received a certificate signed by the
Chief Executive Officer or Chief Financial Officer of the Company, dated the
Closing Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.02(a) and Section 8.02(b) have been satisfied.
(d) No Company Material Adverse Effect. There shall exist no fact or
circumstance other than facts and circumstances described in Section 8.02(d) of
the Company Disclosure Schedule or the Company SEC Reports filed prior to the
date hereof that constitutes a Company Material Adverse Effect.
(e) Company Required Consents. The Company Required Consents the failure of
which to obtain would reasonably be expected to have a Company Material Adverse
Effect shall have been obtained.
(f) EnergyNorth Transaction. The Company's acquisition of EnergyNorth shall have
been, or shall simultaneously be, consummated or the Company shall have
terminated the EnergyNorth Agreement.
8.03 Section 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 (or waiver by the Company), on or prior to the Closing Date, of
each of the following conditions:
<PAGE>
(a) Performance of Obligations of Parent. Parent shall have performed in all
material respects each of its agreements and covenants required by this
Agreement to be so performed by Parent at or prior to the Closing.
(b) Representations and Warranties. The representations and warranties of Parent
set forth in this Agreement shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date (except for representations and warranties
that expressly speak only as of a specific date or time, which need only be true
and correct as of such date or time) except for such failures of representations
or warranties to be true and correct which would not reasonably be expected to
result in a Parent Material Adverse Effect.
(c) Closing Certificates. The Company shall have received a certificate signed
by the chief Executive Officer or Chief Financial Officer of Parent, dated the
Closing Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 8.03(a) and Section 8.03(b) have been satisfied.
(d) Parent Required Consents. Parent Required Consents the failure of which to
obtain would reasonably be expected to have a Parent Material Adverse Effect
shall have been obtained.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01 Section TERMINATION. This Agreement may be terminated, and the Merger and
other transactions contemplated hereby may be abandoned, at any time prior to
the Effective Time, whether before or after approval by the shareholders of the
respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Board of Trustees of the Company and the
Board of Directors of Parent;
(b) by Parent or the Company, by written notice to the other parties, if the
Effective Time shall not have occurred on or before March 31, 2001 (the "Initial
Termination Date"); provided, however, that the right to terminate the Agreement
under this Section 9.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
directly or indirectly 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 8.01(d) 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 September 30, 2001;
<PAGE>
(c) (i) by Parent, by written notice to the other parties, if the Company
Shareholders' Approval shall not have been obtained on or before June 30, 2000
at a duly held Company Special Meeting, including any adjournments thereof;
(d) by Parent or the Company, if any state or federal law, order, rule or
regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the
Incorporation Merger or the Merger, or 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 Incorporation
Merger or the Merger, and such order, judgment or decree shall have become final
and nonappealable; (provided that the right to terminate this Agreement under
this Section 9.01(d) shall not be available to any party that has not defended
such lawsuit or other legal proceeding (including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Authority
vacated or reversed);
(e) by the Company, upon five days prior notice to Parent if as a result of a
bona fide written Alternative Proposal by a party other than Parent or any of
its affiliates, a majority of the Board of Trustees of the Company determines in
good faith that (x) such proposal is more favorable to the shareholders of the
Company than the Merger and as to which the Company's Board of Trustees has
reasonably determined that the third party has adequate sources of financing to
consummate the Alternative Proposal and (y) on the basis of advice of outside
counsel that the termination of this Agreement is necessary to comply with its
fiduciary duties under applicable law; provided, however, that (i) the Board of
Trustees of the Company shall have been advised by outside counsel that,
notwithstanding a binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their applicable fiduciary
duties, and notwithstanding all concessions that may be offered by Parent in
negotiations entered into pursuant to clause (ii) below, such fiduciary duties
would also require the directors to reconsider such commitment as a result of
such Alternative Proposal and (ii) prior to any such termination, the Company
shall, and shall cause its financial and legal advisors to, negotiate with
Parent during such five-day notice period to make such adjustments in the terms
and conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated herein and provided further that the Company's ability
to terminate this Agreement pursuant to this Section 9.01(e) is conditioned upon
the concurrent payment by the Company to Parent of any amounts owed to it
pursuant to Sections 9.03(a) and 9.03(b).
(f) by the Company, by written notice to Parent, if (i) there exist breaches of
the representations and warranties of Parent made herein as of the date hereof
which breaches, would or would reasonably be expected 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) there shall have been a material breach of any agreement or covenant of
Parent hereunder, and such breach 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; or
<PAGE>
(g) by Parent, by written notice to the Company, if
(i) there exist breaches of the representations and warranties of the Company
(other than the representations contained in Sections 4.03, 4.04(a), 4.13
and 4.16) made herein as of the date hereof which breaches, would or would
reasonably be expected to result in a Company Material Adverse Effect or
there exist material breaches of the representations of the Company
contained in Sections 4.03, 4.04(a), 4.13 and 4.16, and such breaches shall
not have been remedied within 20 days after receipt by the Company of
notice in writing from Parent, specifying the nature of such breaches and
requesting that they be remedied;
(ii) there shall have been a material breach of any agreement or covenant of
the Company hereunder, and such failure to perform or comply shall not
have been remedied within 20 days after receipt by the Company of notice
in writing from Parent, specifying the nature of such failure and
requesting that it be remedied; or
(iii) the Board of Trustees of the Company or any committee thereof (A) shall
withdraw or modify in any manner adverse to Parent its approval or
recommendation of this Agreement or the transactions contemplated
herein, (B) shall fail to reaffirm such approval or recommendation upon
Parent's request, (C) shall approve or recommend or take no position
with respect to an Alternative Proposal or (D) shall resolve to take any
of the actions specified in clause (A), (B) or (C).
9.02 Section EFFECT OF TERMINATION. In the event of a valid termination of this
Agreement by either the Company or Parent pursuant to Section 9.01, this
Agreement shall forthwith become null and void and there shall be no liability
on the part of either the Company or Parent or their respective officers,
trustees or directors hereunder, except that Section 7.11, Section 9.03, the
agreement contained in the last sentence of Section 7.01, Section 10.08 and
Section 10.09 shall survive the termination.
9.03 Section TERMINATION FEE; EXPENSES.
(a) In the event that this Agreement is terminated by the Company pursuant to
Section 9.01(e) or by the Parent pursuant to any of Section 9.01(c), Section
9.01(g)(i), Section 9.01(g)(ii) or Section 9.01(g)(iii), then the Company shall
promptly (but no later than five business days after notice that the amount is
due from the Company) pay to the Parent, as liquidated damages, an amount in
cash equal to the out-of-pocket expenses and fees incurred by the Parent arising
out of, in connection with or related to the Merger and the other transactions
contemplated by this Agreement not in excess of $10 million ("Out-of-Pocket
Expenses"); provided that if this Agreement is terminated by a party as a result
of a willful breach of a representation, warranty, covenant or agreement by the
Company, the Parent may pursue any remedies available to it at law or in equity
and shall, in addition to the amount of Out-of-Pocket Expenses set forth above,
be entitled to recover such additional amounts as the Parent may be entitled to
receive at law or in equity.
<PAGE>
(b) In the event that (i) this Agreement is terminated by the Company pursuant
to Section 9.01 (e) or by the Parent pursuant to Section 9.01(g)(iii) or (ii)
any person or group shall have made an Alternative Proposal and this Agreement
is terminated by (A) Parent pursuant to Section 9.01 (c) or Section 9.01 (g)(i)
or 9.01(g)(ii) or (B) by the Company pursuant to Section 9.01 (b) and, in the
case of this clause (ii) only, a definitive agreement with respect to such
Alternative Proposal is executed within one year after such termination, or the
Company or any of its affiliates becomes a subsidiary of such offeror or a
subsidiary of an affiliate of such offeror or accepts a written offer or
consummates an Alternative Proposal with such offeror or an affiliate thereof,
then the Company, upon the signing of a definitive agreement relating to such
Alternative Proposal, or if no such agreement is signed, then at the closing
(and as a condition to the closing) of the Company becoming such a subsidiary or
of such Alternative Proposal, shall pay to Parent, by wire transfer of same day
funds, a termination fee of $65 million, plus Out-of-Pocket Expenses.
(c) Nature of Fees. The parties agree that the agreements contained in this
Section 9.03 are an integral part of the Merger and the other transactions
contemplated hereby and constitute liquidated damages and not a penalty. The
parties further agree that if any party is or becomes obligated to pay a
termination fee pursuant to Section 9.03(a), the right to receive such
termination fee shall be the sole remedy of the other party with respect to the
facts and circumstances giving rise to such payment obligation. If this
Agreement is terminated by a party as a result of a willful breach of a
representation, warranty, covenant or agreement by the other party, the
non-breaching party, may pursue any remedies available to it at law or in equity
and shall be entitled to recover any additional amounts thereunder.
Notwithstanding anything to the contrary contained in this Section 9.03, if one
party fails to promptly pay to the other any fee or expense due under this
Section 9.03, in addition to any amounts paid or payable pursuant to Section
9.03(a), the defaulting party shall pay the costs and expenses (including legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee at the publicly announced prime rate of Fleet
Bank from the date such fee was required to be paid.
9.04 Section AMENDMENT. This Agreement may be amended by the Boards of Trustees
or Directors, as the case may be, of the parties hereto, at any time before or
after approval hereof by the shareholders of the Company and prior to the
Effective Time, but after such approval only to the extent permitted by
applicable law. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
<PAGE>
9.05 Section WAIVER. At any time prior to the Effective Time, the Parent or the
Company may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
No waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.
ARTICLE X
GENERAL PROVISIONS
10.01 Section NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and agreements in this Agreement shall not survive
the Merger, except as otherwise provided in this Agreement and except for the
agreements contained in this Section 10.01, in Articles I and II and in Sections
7.05, 7.09, 7.10, 7.11, 7.13, 7.14, 7.15, 7.16, 10.07, 10.08, 10.09 and 10.10.
10.02 Section BROKERS. The Company represents and warrants that, except for
Salomon Smith Barney, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company. Parent represents and warrants that, except for
J.P. Morgan Securities, Inc., 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.
10.03 Section 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) telecopied (which is 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:
J. Atwood Ives
Chairman and Chief Executive Officer
Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
Telephone: (781) 647-2300
Telecopy: (781) 674-2350
<PAGE>
with a copy to:
L W. Law, Jr.
Senior Vice President and General Counsel
Eastern Enterprises
9 Riverside Drive
Weston, Massachusetts 02493
Telephone: (781) 647-2313
Telecopy: (781) 674-2398
(b) If to Parent, to:
Frederick Lowther, Esq.
KeySpan Corporation
One Metrotech Center
Brooklyn, New York 11201-3851
Telephone: (718) 403-3313
Telecopy: (718) 522-2647
with a copy to:
James M. Cotter, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2000
Telecopy: (212) 455-2502
10.04 Section 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 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 Commonwealth of Massachusetts applicable to
contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of law, rules or principles.
<PAGE>
10.05 Section INTERPRETATION; KNOWLEDGE. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a Section or
Exhibit of this Agreement, respectively, unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." References in this Agreement to the "knowledge of the Company" or
any similar expression shall refer to and mean the actual knowledge of an
executive officer of the Company.
10.06 Section 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.
10.07 Section PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for Article II and
for rights of Indemnified Parties as set forth in Section 7.05, 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.
10.08 Section WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
10.09 Section 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 Commonwealth of Massachusetts or in Massachusetts 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 Commonwealth of
Massachusetts or any Massachusetts 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 Commonwealth of Massachusetts.
<PAGE>
10.10 Section Reference is hereby made to the declaration of trust establishing
Eastern Enterprises (formerly Eastern Gas and Fuel Associates) dated July 18,
1929, as amended, a copy of which is on file in the office of the Secretary of
the Commonwealth of Massachusetts. The name "Eastern Enterprises" refers to the
trustees under said declaration as trustees and not personally; and no trustee
shareholder, officer or agent of Eastern Enterprises shall be held to any
personal liability in connection with the affairs of said Eastern Enterprises,
but the trust estate only is liable.
<PAGE>
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.
EASTERN ENTERPRISES,
By: J. Atwood Ives
------------------
Name: J. Atwood Ives
Title: Chairman and Chief
Executive Officer
KEYSPAN CORPORATION
By:/s/ Robert B. Catell
-----------------------
Name: Robert B. Catell
Title: Chairman and Chief
Executive Officer
ACJ ACQUISITION LLC
By:/s/ Steven L. Zelkowitz
--------------------------
Name: Steven L. Zelkowitz
Title:
Exhibit 99.1
KEYSPAN ENERGY TO ACQUIRE EASTERN ENTERPRISES IN
STRATEGIC COMBINATION FOR APPROXIMATELY $2.5 BILLION
__Creates Largest Gas Distribution Company in the Northeast
Brooklyn, NY and Weston, MA __November 4, 1999 __ KeySpan Corporation [NYSE:
KSE] ("KeySpan Energy") and Eastern Enterprises [NYSE: EFU] today announced that
the companies have signed a definitive merger agreement under which KeySpan
Energy will acquire all of the common stock of Eastern Enterprises for $64.00
per share in cash. This represents a premium of 24% over the Eastern Enterprises
closing price of $51.56 on Wednesday, November 3, 1999, and a 45% premium over
the average of the last 90_day trading period. The transaction has a total value
of approximately $2.5 billion ($1.7 billion in equity and $0.8 billion in
assumed debt and preferred stock). The transaction will be accounted for as a
purchase and will be immediately accretive to KeySpan Energy's cash earnings per
share and will turn accretive to the company's earnings per share in the second
year after closing.
Robert B. Catell, chairman and chief executive officer of KeySpan Energy,
commented, "Together KeySpan Energy and Eastern share a common vision as to the
great potential of the markets we serve. Our combined companies will serve 2.4
million customers and will be strong competitors in the emerging energy markets.
This merger is consistent with our vision for growth, and with the addition of
Eastern's unregulated businesses, accelerates our plans to become a full service
energy company. We look forward to working with Eastern's well_regarded
management team to continue to provide safe and reliable energy services to
customers throughout the Northeast and to build future value for all of KeySpan
Energy's shareholders.
"This combination provides an excellent opportunity to increase growth while
introducing geographic and regulatory diversity," Mr. Catell continued. "Eastern
Enterprises is by far the largest natural gas distribution utility in New
England, however, there is still significant upside potential due to the
relatively low penetration of customers using gas for heat in the region. This
opportunity is similar to what KeySpan Energy is experiencing on Long Island.
The combined company will employ its considerable marketing expertise and
acclaimed customer service to enhance this growth. The development of new
pipeline capacity and new supply options to New England over the past two years
will certainly help us to grow our customer base.
"In addition, the combined company will have a broad platform for future growth
for the full array of services KeySpan Energy and Eastern Enterprises have been
developing in their non_regulated subsidiaries," Mr. Catell added.
"We have great respect for the Eastern Enterprises employees and look forward to
having them join the KeySpan Energy family. We each have a proud history of over
100 years of positive community involvement and look forward to continuing that
tradition," Mr. Catell concluded.
J. Atwood Ives, Eastern chairman and chief executive officer, commented,
"Eastern's Board of Trustees and management have concluded an extensive twelve
week review and analysis of the company's strategic alternatives. The choice of
KeySpan Energy as our partner for the future will bring immediate and long_term
benefits to our customers, shareholders, employees and the communities we serve.
The increased size and scope of the combined organization will enable us to
provide enhanced, cost_effective customer service and to capitalize on the
above_average growth opportunities for natural gas in the Northeast and provide
additional resources to our unregulated businesses."
Mr. Ives concluded, "We have known and respected Bob Catell and his management
team for many years. We share their vision that together we can build the
premier full service energy company in the Northeast." The combined company will
have assets of $8.8 billion, $4.3 billion in revenues, and EBITDA of
approximately $950 million.
KeySpan Energy expects pre_tax annual cost savings will be approximately $30
million. These cost savings result primarily from the elimination of duplicate
corporate and administrative programs, greater efficiencies in operations and
business processes, and increased purchasing efficiencies. KeySpan Energy
expects to achieve reductions due to the merger through a variety of programs
which would include hiring freezes, attrition and separation programs. All union
contracts will be honored.
KeySpan Energy expects to raise $1.7 billion of initial financing for the
transaction in short term markets which will ultimately be replaced with long
term financing. Going forward, KeySpan Energy will actively manage its balance
sheet to maintain strong investment grade ratings at each of its rated entities.
KeySpan Energy anticipates continuing its current annual dividend of $1.78.
Eastern Enterprises will continue to pay its dividend at the annual rate of
$1.72.
Mr. Catell will remain chairman and CEO of the combined company. Upon completion
of the transaction, Mr. Ives will retire from active management at the company
and will join the KeySpan Energy board of directors. KeySpan Energy's
headquarters will remain in New York.
Boston will serve as the New England headquarters for the combined company.
The merger is conditioned, among other things, upon the approval of Eastern
Enterprises shareholders, the Securities and Exchange Commission and the New
Hampshire Public Utility Commission. The company anticipates that the
transaction can be completed in
9 to 12 months.
J.P. Morgan & Co. acted as financial advisor and Simpson Thacher & Bartlett
acted as legal counsel to KeySpan Energy. Salomon Smith Barney acted as
financial advisor and Ropes & Gray acted as legal counsel to Eastern
Enterprises.
In connection with the merger, Eastern Enterprises has amended its merger
agreement with EnergyNorth, Inc. to provide for an all cash acquisition of
EnergyNorth shares at a price per share of $61.13. The restructured EnergyNorth
merger is expected to close contemporaneously with the KeySpan Energy/Eastern
Enterprises transaction.
Eastern Enterprises owns and operates Boston Gas Company, Colonial Gas Company,
Essex Gas Company, Midland Enterprises Inc. Transgas Inc. and ServicEdge
Partners, Inc. Upon completion of the pending merger with EnergyNorth, Inc.,
Eastern will serve over 800,000 natural gas customers in Massachusetts and New
Hampshire. Midland, headquartered in Cincinnati, Ohio, is the leading carrier of
coal and a major carrier of other dry bulk cargoes on the nation's inland
waterways. Transgas is the nation's largest over_the_road transporter of
liquefied natural gas. ServicEdge is the largest unregulated provider of
residential HVAC equipment installation and service to customers in
Massachusetts. More information can be found at the company's Web site:
www.efu.com.
KeySpan Energy is a holding company operating two utilities that distribute
natural gas under the Brooklyn Union name to 1.6 million customers in New York
City and on Long Island, making it the fourth largest gas_distribution company
in the United States. Other KeySpan Energy companies market a portfolio of
gas_marketing and energy_related services in the Northeast, operate
electric_generation plants in New York City and on Long Island, and provide
operating and customer services to 1.1 million electric customers of the Long
Island Power Authority. KeySpan Energy's unregulated energy activities focus on
three principal lines of business: gas exploration and development, primarily
through The Houston Exploration Company (NYSE: THX); domestic pipelines and
storage; and international activities, including gas_processing in Canada, and
gas pipelines and local_distribution in Northern Ireland. More information can
be found at the company's Web site:
www.keyspanenergy.com.
Certain statements contained herein are forward_looking statements, which
reflect numerous assumptions and involve a number of risks and uncertainties.
Actual results may differ materially from those discussed in such statements.
Among the factors that could cause actual results to differ materially are:
available sources and cost of fuel; State and Federal regulatory initiatives
that increase competition, threaten cost and investment recovery, and impact
rate structures; the ability of the Company to successfully reduce its cost
structure; the ability of the Company to successfully integrate acquired
operations; the degree to which the Company develops non_regulated business
ventures; the effect of inflationary trends and increases in interest rates; the
ability of the Company and its significant vendors to modify their computer
software, hardware and databases to accommodate the year 2000; and risks
detailed from time to time in reports and other documents filed by the Company
with the Securities and Exchange Commission.
Contacts for KeySpan Energy: Contacts for Eastern Enterprises:
Name: Robert J. Mahony Name: Jane W. McCahon
Phone: 718.403.2503 Phone: (781) 647_2316
Name: Michael J. Taunton
Phone: 718.403.3265
