<PAGE>
As filed with the Securities and Exchange Commission on March 10, 2000
Registration No. 333-95693
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
EASTERN ENTERPRISES
(Exact name of registrant as specified in its charter)
--------------
Massachusetts 4924 04-1270730
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization) Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
(781) 647-2300
(Address, of principal executive offices, including zip code)
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L. William Law, Jr., Esq.
Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
(781) 647-2300
(Name and address, including zip code, and telephone
number, including area code, of agent for service)
Please send copies of all communications to:
David B. Walek, Esq. David E. Redlick, Esq.
Ropes & Gray Hale and Dorr LLP
One International Place 60 State Street
Boston, Massachusetts 02110 Boston, Massachusetts 02109
(617) 951-7000 (617) 526-6000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
1260 Elm Street
P. O. Box 329
Manchester, New Hampshire 03105
March 28 , 2000
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Dear Holder of EnergyNorth Common Stock:
The board of directors of EnergyNorth, Inc. and the board of trustees of
Eastern Enterprises have agreed on a merger of EnergyNorth and Eastern
Enterprises. We believe that the merger will offer our stockholders an
opportunity to participate in the largest gas company in New England and that
the combined company will offer our customers enhanced and efficient services
and will be a strong competitor in the regional energy market.
The type of consideration to be paid to EnergyNorth stockholders in the
merger will depend on whether a merger agreement between KeySpan Corporation
and Eastern has been terminated prior to the effective time of the Eastern-
EnergyNorth merger.
. Consideration To Be Paid If The KeySpan-Eastern Merger Agreement Has Not
Been Terminated. If the KeySpan-Eastern merger agreement has not been
terminated prior to the effective time of the Eastern-EnergyNorth
merger, then in the Eastern-EnergyNorth merger each share of EnergyNorth
common stock will be converted into the right to receive $61.13 in cash,
subject to increase under certain circumstances. If the merger
consideration takes the form of all cash as described above, we expect
the merger to be fully taxable to EnergyNorth stockholders.
. Consideration To Be Paid If The KeySpan-Eastern Merger Agreement Has
Been Terminated. If the KeySpan-Eastern merger agreement has been
terminated prior to the effective time of the Eastern-EnergyNorth
merger, then in the Eastern-EnergyNorth merger the consideration to be
paid to EnergyNorth stockholders will be as described in this paragraph.
In the merger, each share of EnergyNorth common stock will be converted
into the right to receive shares of common stock of Eastern or $47.00 in
cash. In the merger, you will be permitted to choose between cash and
shares of Eastern common stock, subject to proration among all
EnergyNorth stockholders, which is more fully described in the enclosed
proxy statement/prospectus. A total of 49.9% of the outstanding shares
of EnergyNorth common stock will be converted into the right to receive
cash and the remainder will be converted into the right to receive
shares of Eastern common stock. The number of shares of Eastern common
stock that EnergyNorth stockholders will receive in the merger for each
share of EnergyNorth common stock will have a value of $47.00 based on
Eastern's average stock price during the ten-day trading period ending
on the third trading day before the merger. However, that number of
Eastern shares will be not fewer than 1.0682 per EnergyNorth share and
not more than 1.3056 per EnergyNorth share. Under these circumstances,
we expect the merger to be a tax-free transaction for EnergyNorth
stockholders, except for the receipt of cash payment for shares.
The merger agreement between KeySpan and Eastern is described more fully in
the accompanying proxy statement/prospectus.
It is expected that, unless the KeySpan-Eastern merger agreement is
terminated, the Eastern-EnergyNorth merger and the KeySpan-Eastern merger will
take place simultaneously. In this event, each share of EnergyNorth common
stock will be converted into the right to receive $61.13 in cash.
<PAGE>
The vote on this merger will be taken at the annual meeting of the
EnergyNorth stockholders, at which time the EnergyNorth stockholders will also
be asked to elect directors and approve the appointment of independent public
accountants.
Whether or not you plan to attend the annual meeting, please take the time
to vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote "FOR" the merger and the transactions
contemplated by the merger agreement. If you do not return your card, or if you
do not instruct your broker how to vote any shares held for you in "street
name," the effect will be a vote "AGAINST" the merger.
The place, date and time of the annual meeting is the Center of New
Hampshire Holiday Inn, 700 Elm Street, Manchester, New Hampshire on Thursday,
April 27, 2000, at 10:00 a.m. local time.
The board of directors supports this combination of these two franchises in
the New England gas industry and unanimously recommends that you vote in favor
of the merger.
Robert R. Giordano
President and Chief Executive
Officer
Neither the Securities and Exchange Commission nor any state securities
regulators have approved or disapproved the Eastern common stock to be issued
in the merger, or determined if this proxy statement/prospectus is accurate or
adequate. Anyone who tells you otherwise is committing a crime.
The proxy statement/prospectus is dated March 28, 2000, and is first being
mailed to EnergyNorth stockholders on or about March 28, 2000.
<PAGE>
1260 Elm Street
P.O. Box 329
Manchester, New Hampshire 03105
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 2000
----------------
TO THE STOCKHOLDERS OF ENERGYNORTH, INC.
I am pleased to give you notice of and cordially invite you to attend the
annual meeting of stockholders of EnergyNorth, Inc. which will be held at the
Center of New Hampshire Holiday Inn, 700 Elm Street, Manchester, New Hampshire,
at 10:00 a.m. on Thursday, April 27, 2000.
At our annual meeting, common stockholders will take action on the
following:
1. To consider and vote on a proposal to merge EnergyNorth and a wholly-
owned subsidiary of Eastern Enterprises by approving the Agreement and Plan
of Reorganization dated as of July 14, 1999, as amended by Amendment No. 1
dated as of November 4, 1999, copies of which are attached as Annex A to
the accompanying proxy statement/prospectus.
a. Consideration To Be Paid If The KeySpan-Eastern Merger Agreement
Has Not Been Terminated. The merger agreement provides that if a merger
agreement between KeySpan Corporation and Eastern has not been
terminated prior to the effective time of the merger of Eastern and
EnergyNorth, then each outstanding share of common stock of
EnergyNorth, $1.00 par value, will be converted into the right to
receive $61.13 in cash, subject to increase under certain
circumstances.
b. Consideration To Be Paid If The KeySpan-Eastern Merger Agreement
Has Been Terminated. If the merger agreement between KeySpan and
Eastern has been terminated prior to the effective time of the merger
of Eastern and EnergyNorth, the merger agreement provides that the
outstanding shares of common stock of EnergyNorth, $1.00 par value,
will be converted into the right to receive cash and Eastern common
stock, $1.00 par value. Under this circumstance, the number of shares
of Eastern common stock to be issued in the merger will be determined
based on the average of the daily weighted averages of the trading
prices for Eastern common stock on the New York Stock Exchange over a
ten trading day period ending on the third trading day before the
effective date of the merger.
2. To elect three directors to the Board of Directors.
3. To ratify the appointment of independent public accountants for 2000.
4. To transact such other business as may properly come before the
annual meeting or any adjournment(s) thereof.
Holders of record of EnergyNorth common stock outstanding on March 24, 2000,
the record date fixed by the Board of Directors for this purpose, are entitled
to receive notice of the annual meeting. Only holders of record of shares of
EnergyNorth common stock on the record date are entitled to vote at the annual
meeting. As of the record date, there were 3,322,903 shares of EnergyNorth
common stock outstanding, each of which is entitled to one vote in person or by
proxy at the annual meeting.
<PAGE>
Approval of the merger agreement described in Item 1 on the proxy requires
the affirmative vote of the holders of a majority of the outstanding shares of
Energy North common stock. Thus, abstentions and broker non-votes will have the
effect of a vote "AGAINST" the merger agreement. A majority of the outstanding
shares of EnergyNorth common stock entitled to vote represented in person or by
proxy, constitutes a quorum for consideration of the merger agreement.
If your shares are held through a bank or brokerage firm and you plan to
vote your shares in person at the annual meeting, please request a letter or
some other evidence of ownership from your bank or brokerage firm as well as
proper authorization.
Under the New Hampshire Business Corporation Act, Chapter 293-A, Sections
13.01-13.31, holders of EnergyNorth common stock who object to the approval of
the merger agreement have the right to demand separate payment for or an
appraisal of their shares in connection with the merger agreement. See "The
Merger--Appraisal Rights" beginning on page 45 of the enclosed proxy
statement/prospectus and the New Hampshire dissenters' rights statute attached
as Annex C to the enclosed proxy statement/prospectus for further information
about your appraisal rights.
All holders of EnergyNorth common stock are cordially invited to attend the
annual meeting. However, to ensure your representation at the annual meeting,
you are urged to complete, date and sign the enclosed proxy as promptly as
possible. A pre-addressed envelope is enclosed for that purpose. If no
instructions are indicated on your proxy card, your shares of EnergyNorth
common stock will be voted "FOR" approval of the merger agreement, and for the
election of directors and the ratification of the appointment of independent
public accountants. Execution of a proxy will not in any way affect a
stockholder's right to attend the annual meeting and vote in person. Any
stockholder giving a proxy has a right to revoke it at any time before it is
exercised by written notice to the Secretary of EnergyNorth. In addition,
stockholders attending the annual meeting may revoke their proxies at any time
before they are exercised.
By order of the board of directors
Richard A. Samuels
Richard A. Samuels
Secretary
March 28, 2000
<PAGE>
The accompanying proxy statement/prospectus provides you with detailed
information about the merger, the election of directors and the ratification of
the appointment of independent public accountants. We urge you to read it
carefully. The proxy statement/prospectus also incorporates by reference
important business and financial information about Eastern and EnergyNorth that
is not included in the accompanying documents or delivered with them. You may
obtain information about Eastern and EnergyNorth from documents filed with the
Securities and Exchange Commission or you may obtain them without charge upon
written or oral request from the companies. You may request documents from
Eastern at 9 Riverside Road, Weston, Massachusetts 02943, Attn: Corporate
Relations, or tel: (781) 647-2300 and ask for Corporate Relations. You may
request documents from EnergyNorth at 1260 Elm Street, P.O. Box 329,
Manchester, New Hampshire 03105-0329, Attn: Investor Relations, or tel: (603)
625-4000, extension 4270, and ask for Investor Relations.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
QUESTIONS & ANSWERS ABOUT THE MERGER..................................... 1
SUMMARY.................................................................. 5
COMPARATIVE PER SHARE DATA............................................... 17
COMPARATIVE DIVIDENDS AND MARKET PRICES.................................. 19
RISK FACTORS............................................................. 21
Fixed Merger Consideration Despite Potential Changes in Stock Prices... 21
Tax Treatment.......................................................... 22
Integration of Operations.............................................. 22
Stock Ownership in Eastern............................................. 22
Need for Government Approvals.......................................... 22
FORWARD-LOOKING STATEMENTS............................................... 23
RECENT DEVELOPMENTS...................................................... 24
MEETINGS, VOTING AND PROXIES............................................. 25
The EnergyNorth Annual Meeting......................................... 25
No Vote Required By Eastern Shareholders............................... 26
THE MERGER (Item 1 on Proxy)............................................. 27
General Description of the Merger...................................... 27
Background of the Merger............................................... 27
Common Reasons for the Merger.......................................... 29
EnergyNorth's Reasons for the Merger; Recommendation of the EnergyNorth
Board................................................................. 29
Opinion of EnergyNorth's Financial Advisor............................. 30
Accounting Treatment................................................... 41
Certain Federal Income Tax Consequences................................ 41
Appraisal Rights....................................................... 45
Stock Exchange Listing of Eastern Common Stock......................... 46
Federal Securities Law Consequences.................................... 47
Regulatory Matters..................................................... 47
Potential Conflicts and Interests of Certain Persons in the Merger..... 49
Management and Other Information....................................... 54
MERGER AGREEMENT......................................................... 55
Structure of the Merger................................................ 55
Merger Consideration................................................... 55
Procedure for Filing Elections and Converting EnergyNorth Common Stock
into Merger Consideration............................................. 57
Representations and Warranties......................................... 59
Certain Covenants...................................................... 60
Conditions to the Merger............................................... 64
Amendments; Waivers.................................................... 65
No Solicitation by EnergyNorth......................................... 65
Termination of the Merger Agreement.................................... 67
Termination Fees and Expenses.......................................... 68
COMBINED UNAUDITED PRO FORMA FINANCIAL INFORMATION....................... 72
NOTES TO COMBINED UNAUDITED PRO FORMA FINANCIAL INFORMATION.............. 76
</TABLE>
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EASTERN UNAUDITED ADJUSTED HISTORICAL FINANCIAL INFORMATION.............. 79
NOTES TO EASTERN UNAUDITED ADJUSTED HISTORICAL FINANCIAL INFORMATION..... 82
PRINCIPAL STOCKHOLDERS................................................... 83
Beneficial Owners Of More Than 5% Of Eastern's Outstanding Securities.. 83
Beneficial Owners Of More Than 5% Of EnergyNorth's Outstanding
Securities............................................................ 83
EnergyNorth Management Ownership....................................... 83
DESCRIPTION OF EASTERN CAPITAL STOCK..................................... 85
General................................................................ 85
Authorized and Outstanding Capital Stock............................... 85
Common Stock Purchase Rights........................................... 85
Massachusetts Law; Anti-Takeover Effects............................... 87
Certain Charter and By-Law Provisions.................................. 88
Transfer Agent and Registrar........................................... 89
COMPARATIVE RIGHTS OF HOLDERS OF ENERGYNORTH AND EASTERN COMMON STOCK.... 90
Authorized Capital Stock............................................... 90
Boards of Directors/Trustees........................................... 90
Removal of Directors/Trustees.......................................... 91
Special Meetings of Stockholders; Stockholder Action Without Meeting... 91
Stockholder Proposals and Nominations.................................. 91
Dissenters' Rights..................................................... 92
Charter Amendments..................................................... 92
Dividends and Stock Repurchases........................................ 93
Fair Price Charter Provisions.......................................... 93
Stockholder Rights Plans............................................... 95
Business Combination Statutes.......................................... 96
Control Share Statute.................................................. 96
Proper Factors for Consideration in Evaluating Business Combinations... 96
Form of Consideration for Capital Stock................................ 97
Limitation of Director Liability....................................... 98
Indemnification........................................................ 98
ELECTION OF DIRECTORS (Item 2 on Proxy).................................. 100
BOARD OF DIRECTORS....................................................... 100
NOMINEES FOR ELECTION FOR TERM OF THREE YEARS EXPIRING IN 2003........... 100
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2001.............. 101
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2002.............. 101
Compensation of the Directors.......................................... 101
Section 16(a) Beneficial Ownership Reporting Compliance................ 102
EXECUTIVE COMPENSATION................................................... 103
SUMMARY COMPENSATION TABLE............................................... 103
Stock Options.......................................................... 103
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants...................................................... 104
</TABLE>
ii
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES.......................................................... 104
Noncontributory Retirement Plan....................................... 105
Employment Agreements................................................. 105
Management Continuity Agreements...................................... 106
PERFORMANCE GRAPH....................................................... 107
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.......... 108
Base Salary........................................................... 108
Key Employee Incentive Plan........................................... 108
Stock Option Plan..................................................... 108
Bonus Awards.......................................................... 109
Conclusion............................................................ 109
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 3 on Proxy)...................................................... 110
LEGAL MATTERS........................................................... 110
EXPERTS................................................................. 110
FUTURE ENERGYNORTH STOCKHOLDER PROPOSALS................................ 110
OTHER MATTERS........................................................... 111
WHERE YOU CAN FIND MORE INFORMATION..................................... 111
Annex A Agreement and Plan of Reorganization dated as of July 14, 1999,
including Amendment No. 1 dated as of November 4, 1999.......... A-1
Annex B Opinion of Salomon Smith Barney Inc............................. B-1
Annex C New Hampshire Revised Statutes Annotated, Chapter 293-A,
Sections 13.01-13.31............................................ C-1
</TABLE>
iii
<PAGE>
QUESTIONS & ANSWERS ABOUT THE MERGER
1. How Will These Two Companies Merge?
The merger agreement provides that if the merger agreement between KeySpan
Corporation and Eastern has not been terminated prior to the effective time of
the merger of Eastern and EnergyNorth, then a wholly-owned subsidiary of
Eastern will merge with and into EnergyNorth, and if not, then EnergyNorth will
merge with and into a wholly-owned subsidiary of Eastern. In either case, as a
result, EnergyNorth will become a wholly-owned subsidiary of Eastern.
2. What Will EnergyNorth Stockholders Receive?
The type of consideration to be received by EnergyNorth stockholders in the
merger will depend on whether the merger agreement between KeySpan Corporation
and Eastern has been terminated prior to the effective time of the merger of
Eastern and EnergyNorth.
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, then in the Eastern-
EnergyNorth merger each holder of EnergyNorth common stock will receive $61.13
in cash, subject to increase under certain circumstances.
If the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger, then in the Eastern-
EnergyNorth merger, holders of EnergyNorth common stock will receive cash and
Eastern common stock. Under such circumstances, a total of 49.9% of the
outstanding shares of EnergyNorth common stock will be converted into the right
to receive cash and the remainder will be converted into the right to receive
shares of Eastern common stock. Each share of EnergyNorth's common stock
exchanged for cash will entitle the holder to receive $47.00. Each share which
is not exchanged for cash will entitle the holder to receive that number of
Eastern shares having a value of $47.00 based on the average of the daily
weighted averages of the per share trading prices of the Eastern common stock
on the New York Stock Exchange over the ten trading day period ending on the
third trading day before the effective date of the merger, so long as such
average is not less than $36.00 or higher than $44.00. If this average during
the ten trading day period is less than $36.00, each share of EnergyNorth
common stock would entitle the holder to receive 1.3056 shares of Eastern
common stock. On the other hand, if this average during the ten trading day
period is higher than $44.00, each share of EnergyNorth common stock would
entitle the holder to receive 1.0682 shares of Eastern common stock.
Accordingly, if this average is below $36.00 or above $44.00, the actual value
of the number of Eastern shares received for an EnergyNorth share would be less
than or more than $47.00.
No interest will be paid on any cash received in the merger.
Please read the more detailed description of the consideration to be
received in the merger on pages 55 to 57 .
Eastern will not issue any fractional shares of Eastern common stock in the
merger. Instead, you will receive cash for any fractional share that you would
otherwise receive.
On July 14, 1999 (the last full trading day before the public announcement
of the merger), the closing price of Eastern common stock reported in the New
York Stock Exchange Composite Transactions was $40.00 and on March 7, 2000, the
most recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of Eastern common stock reported in the
New York Stock Exchange Composite Transactions was $57.8125.
3. How Do I Indicate Whether I Would Prefer to Receive Cash or Shares of
Eastern Common Stock?
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, you will only be eligible to
receive cash in exchange for each of your shares of EnergyNorth common stock.
1
<PAGE>
If, and only if, the KeySpan-Eastern merger agreement is terminated, you
will be able to indicate whether you would prefer to receive cash or Eastern
common stock in exchange for each share of EnergyNorth common stock held by
you, or to indicate that you have no preference. Forms would be mailed to you
for this purpose closer to the anticipated effective date of the Eastern-
EnergyNorth merger. As a consequence of your election, you may therefore
receive a combination of cash and Eastern common stock. The cash and Eastern
common stock consideration may be prorated among EnergyNorth common
stockholders based on the preferences indicated in the elections that they
submit, subject to the limitation that a total of 49.9% of the outstanding
shares of EnergyNorth common stock will be exchanged for cash and the remainder
will be exchanged for shares of Eastern common stock. Accordingly, the
consideration actually received by you may differ from the preference indicated
in your stockholder's election.
If election forms are mailed to EnergyNorth common stockholders as described
above, the procedures that you will need to follow once you have received your
election form are described in this proxy statement/prospectus on pages 57 to
59.
4. What are the Federal Income Tax Consequences of the Merger?
The federal income tax consequences of the merger to you will depend on
whether the merger agreement between KeySpan and Eastern is terminated prior to
the effective date of the Eastern-EnergyNorth merger.
If the merger agreement between KeySpan and Eastern is not terminated prior
to the effective date of the Eastern-EnergyNorth merger, the stockholders of
EnergyNorth would receive solely cash consideration in a fully taxable merger.
Each EnergyNorth stockholder would recognize taxable gain or loss equal to the
difference between the value of the cash received and the stockholder's
adjusted tax basis in the EnergyNorth common stock exchanged.
If the merger agreement between KeySpan and Eastern is terminated prior to
the effective date of the Eastern-EnergyNorth merger, the merger will be
structured to qualify as a reorganization under the Internal Revenue Code. In
such circumstances, gain on the exchange of EnergyNorth common stock for
Eastern common stock and/or cash will be recognized by each EnergyNorth
stockholder only to the extent of any cash received. Loss will be recognized on
the exchange only if cash alone is received.
EnergyNorth stockholders should consult their tax advisors for a full
understanding of the tax consequences of the merger.
5. Who Must Approve the Merger?
In addition to the approvals by the EnergyNorth board of directors and the
Eastern board of trustees, each of which has already been obtained, the merger
must be approved by the holders of EnergyNorth common stock. Moreover,
regulatory approvals will need to be obtained from the New Hampshire Public
Utilities Commission and the United States Securities and Exchange Commission,
and certain notifications and forms must be filed with the Antitrust Division
of the United States Department of Justice and the United States Federal Trade
Commission and the applicable waiting period must have expired.
6. Why is EnergyNorth's Board of Directors Recommending Approval of the
Transaction?
The EnergyNorth board of directors believes that the terms of the merger are
fair to, and in the best interests of, EnergyNorth and its stockholders. In
particular, EnergyNorth's board of directors believes that the merger will
allow EnergyNorth to obtain the benefits of Eastern's financial strength and
resources and will provide EnergyNorth's stockholders with an opportunity to
participate in the future growth of the energy industry if the KeySpan-Eastern
merger agreement is terminated and to share in the premium paid for Eastern if
it is not. In initially approving the merger, the EnergyNorth board considered,
among other things, the receipt by EnergyNorth stockholders of a substantial
premium over EnergyNorth's market price at the time the merger
2
<PAGE>
agreement was signed, and the opportunity for stockholders to receive a portion
of the merger consideration on a tax-free basis. In approving the amendment to
the merger agreement that provides for an alternative all-cash payment if the
KeySpan-Eastern merger agreement has not been terminated prior to the effective
time of the Eastern-EnergyNorth merger, the EnergyNorth board considered, among
other things, the substantial additional premium over EnergyNorth's then
current market price that it believed to outweigh the fully-taxable nature of
the transaction to EnergyNorth stockholders. In addition, the EnergyNorth board
of directors believes that the transaction will result in significant benefits
to its customers, including a broader array of services and operational cost
savings. The EnergyNorth board of directors unanimously recommends approval of
the merger.
7. When and Where is the EnergyNorth Annual Meeting?
The EnergyNorth annual meeting will take place on Thursday, April 27, 2000,
at 10:00 a.m. at the Center of New Hampshire Holiday Inn, 700 Elm Street,
Manchester, New Hampshire.
8. What Proposals are EnergyNorth Stockholders Voting on?
EnergyNorth stockholders are being asked to approve the merger. This
approval will continue to apply whether the merger consideration actually
consists of all cash or a combination of cash and Eastern common stock. Because
this is also the EnergyNorth annual meeting, EnergyNorth stockholders are also
being asked to elect directors and approve the appointment of independent
public accountants.
9. What Stockholder Vote is Required to Approve the Merger?
A majority of the outstanding common stock entitled to vote constitutes a
quorum for the EnergyNorth annual meeting. The holders of at least a majority
of the outstanding shares of EnergyNorth common stock must vote in favor of the
merger for it to be approved.
10. When is the Merger Expected to be Completed?
We are working to complete all aspects of the merger as quickly as possible.
We currently expect the merger to be completed by middle to late 2000, although
it is possible that the merger will not be completed until early 2001. It is
expected that, unless the KeySpan-Eastern merger agreement is terminated, the
Eastern-EnergyNorth merger and the KeySpan-Eastern merger will take place
simultaneously.
11. What Happens if I Do Not Instruct a Broker Holding My Shares as to How to
Vote Them or I Abstain From Voting?
If your shares are held by a broker as nominee, your broker will not be able
to vote your shares without instructions from you. If you fail to provide your
broker with instructions or if you mark your proxy "ABSTAIN", it will have the
same effect as a vote "AGAINST".
12. What Do I Need to do Now?
After you have carefully read this proxy statement/prospectus, just
complete, sign and mail your proxy card in the enclosed return envelope as soon
as possible. That way, your shares can be represented at the EnergyNorth
stockholders meeting. If your shares are held by a broker as nominee, you will
receive a proxy card from your broker. Failure to return a proxy card will have
the same effect as a vote "AGAINST" the merger.
13. Can I Change My Vote After I Have Mailed in My Signed Proxy Card?
You may change your vote at any time before the vote takes place at the
EnergyNorth annual meeting. To do so, you can attend the annual meeting and
vote in person. Or, you can complete a new proxy card or send a written notice
stating you would like to revoke your proxy. These should be sent to: EquiServe
at 150 Royall Street, Canton, MA 02021.
3
<PAGE>
14. Should I Send in My EnergyNorth Stock Certificates Now?
No. You should continue to hold your certificates for EnergyNorth common
stock until you receive, after the annual meeting, either a form of election or
a letter of transmittal asking you to send in your certificates, as described
below.
If the KeySpan-Eastern merger agreement is terminated, you will receive a
form of election that you can use to indicate your preference as to the type of
payment you would like to receive in the merger for each of your shares of
EnergyNorth common stock. At that time, you should send in your certificates
along with your completed form of election to BankBoston, the exchange agent
for the merger. After the effective date of the merger, a second set of
materials will be sent to EnergyNorth stockholders that did not make effective
elections, with instructions on how to exchange their shares of EnergyNorth
common stock for cash and Eastern common stock, if any. If you have not already
submitted your certificates with your form of election, you should submit your
certificates at the time you return these materials.
If the KeySpan-Eastern merger agreement has not been terminated, after the
effective date of the merger, a letter of transmittal will be sent to you with
instructions on how to exchange your shares of EnergyNorth common stock for
your cash payment. At that time you should submit your certificates with your
letter of transmittal.
15. Where Will My Shares of Common Stock of Eastern be Traded?
Like EnergyNorth common stock, Eastern common stock is listed and traded on
the New York Stock Exchange. It is also traded on the Pacific Exchange and the
Boston Stock Exchange. Eastern common stock is listed under the symbol "EFU".
If Eastern common stock is issued in the merger, it will also be listed on the
New York Stock Exchange, the Pacific Exchange and the Boston Stock Exchange.
16. Will the EnergyNorth Natural Gas, Inc. Bonds be Exchanged in the Merger?
No. EnergyNorth Natural Gas' bonds will remain outstanding following the
merger.
17. What Will Happen to EnergyNorth's Dividend Reinvestment and Stock Purchase
Plans?
Some EnergyNorth common stockholders also hold shares under EnergyNorth's
Dividend Reinvestment and Stock Purchase Plan. The EnergyNorth Dividend
Reinvestment and Stock Purchase Plan may be suspended prior to completion of
the merger and will be terminated upon the completion of the merger. If the
KeySpan-Eastern merger agreement has not been terminated prior to the effective
time of the Eastern-EnergyNorth merger, EnergyNorth common stockholders who
have shares held by the plan agent under the EnergyNorth Dividend Reinvestment
and Stock Purchase Plan will receive $61.13 in cash in exchange for each share
held under such plan. If the KeySpan-Eastern merger agreement has been
terminated prior to the effective time of the Eastern-EnergyNorth merger, then
EnergyNorth stockholders who have shares held by the plan agent under such plan
will have the option to receive cash or Eastern common stock in exchange for
their shares held under such plan.
To the extent that such EnergyNorth stockholders receive shares of Eastern
common stock, they will also have the option of holding such shares under the
Eastern Dividend Reinvestment and Common Stock Purchase Plan. To the extent
EnergyNorth stockholders receive Eastern shares in the merger, they may choose
to enroll in Eastern's Dividend Reinvestment and Common Stock Purchase Plan.
Further information concerning the Eastern Dividend Reinvestment and Common
Stock Purchase Plan will be distributed to EnergyNorth stockholders who receive
Eastern shares at a future date.
18. Whom Should I Call if I Have Any Additional Questions?
You may call EnergyNorth Investor Relations at (603) 625-4000, extension
4270.
19. Are There Any Risks Associated with the Merger?
The merger does involve some risks. For a discussion of certain risks
factors that should be considered in evaluating the merger, see "Risk Factors"
beginning on page 21.
4
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document, including the annexes, and the other documents that we have
referred you to. See "Where You Can Find More Information" on page 111. We have
included page references in parentheses to direct you to a more complete
description of the topics presented in this summary.
The Companies
Eastern
Eastern is a Massachusetts business trust established and existing under the
Eastern Declaration of Trust. Eastern conducts its business through its
operating subsidiaries.
Eastern's principal subsidiaries are:
. Boston Gas Company, a regulated utility that distributes natural gas in
eastern and central Massachusetts, and also sells natural gas for resale
in Massachusetts. Boston Gas has been wholly-owned by Eastern since 1929
and has been in business for 177 years making it the second oldest gas
company in the United States.
. Colonial Gas Company, a regulated utility that distributes natural gas in
Cape Cod and eastern Massachusetts. Colonial Gas has been in business for
150 years and was purchased by Eastern in August 1999.
. Essex Gas Company, a regulated utility that distributes natural gas in
eastern Massachusetts. Essex Gas has been in business for 146 years and
was purchased by Eastern in September 1998.
. Midland Enterprises Inc., which through its wholly-owned operating
subsidiaries is the second largest operator of tow boats and barges on
the nation's inland river system, principally on the Ohio River and
Mississippi River and their tributaries, the Gulf Intracoastal Waterway
and the Gulf of Mexico. Midland has been operating on the nation's inland
waterways since 1925 and transports dry bulk commodities, a major portion
of which is coal.
. Transgas Inc., an unregulated energy trucking company, which provides
over-the-road transportation of liquefied natural gas, propane and other
commodities. Transgas is the nation's largest over-the-road transporter
of liquefied natural gas.
. ServicEdge Partners, Inc., which offers heating, ventilation and air
conditioning services primarily to residential customers in eastern
Massachusetts.
Together, Boston Gas, Colonial Gas and Essex Gas are engaged in the
purchase, transportation and sale of natural gas to more than 735,000
residential, commercial and industrial customers in Boston and 114 other
communities in eastern and central Massachusetts, including Cape Cod. Eastern
provides overall corporate management and certain staff services to Boston Gas,
Colonial Gas, Essex Gas, Midland, Transgas and ServicEdge.
Eastern's mailing address is 9 Riverside Road, Weston, Massachusetts 02493
and its general telephone number is (781) 647-2300.
5
<PAGE>
EnergyNorth
EnergyNorth is a New Hampshire corporation incorporated in 1982.
EnergyNorth's principal subsidiaries are:
. EnergyNorth Natural Gas, Inc., a regulated utility that purchases, sells
and transports natural gas to approximately 70,000 residential,
commercial and industrial customers in southern and central New
Hampshire;
. EnergyNorth Propane, Inc., which sells propane to more than 15,000
residential, commercial and industrial customers in the New Hampshire
area; and
. ENI Mechanicals, Inc., which owns all of the common stock of Northern
Peabody Inc. and Granite State Plumbing and Heating, Inc., mechanical
contractors that design, construct and service plumbing, heating, air
conditioning and ventilation systems for industrial, commercial and
institutional customers in northern New England.
EnergyNorth's mailing address is P.O. Box 329, Manchester, New Hampshire
03105-0329 and its general telephone number is (603) 625-4000.
Merger Subsidiary
The merger subsidiary is organized as a business corporation under the laws
of New Hampshire, and is a wholly-owned subsidiary of Eastern formed solely for
the purpose of the merger. In the proposed merger, EnergyNorth will be merged
with the merger subsidiary and, as a result, will become a wholly-owned
subsidiary of Eastern.
The KeySpan-Eastern Merger
On November 4, 1999, Eastern entered into an agreement of merger with
KeySpan Corporation, a New York corporation. KeySpan Corporation is a publicly
traded corporation with its shares listed on the New York Stock Exchange under
the symbol "KSE." KeySpan Corporation, using its tradename KeySpan Energy, with
its subsidiaries, is the fourth largest gas distribution company in the United
States, with 1.6 million customers in New York City and on Long Island. It also
provides power, electric transmission and distribution services and a broad
range of related services in the gas and electric power industries. According
to the terms of that agreement, a wholly-owned subsidiary of KeySpan will be
merged into Eastern and, as a result, Eastern will become a wholly-owned
subsidiary of KeySpan.
The consummation of the KeySpan-Eastern merger is subject to several
conditions, all of which must be satisfied or waived by the parties prior to
the effectiveness of that merger. These conditions include receipt of Eastern
shareholder approval, receipt of government and regulatory approvals, receipt
of third-party consents and the absence of events or conditions having material
adverse effects on the transaction. Another condition to the KeySpan-Eastern
merger is that either the Eastern-EnergyNorth merger must have taken place
prior to, or take place simultaneously with, the KeySpan-Eastern merger, or the
Eastern-EnergyNorth merger agreement must have been terminated.
Even though the KeySpan-Eastern agreement of merger would allow the Eastern-
EnergyNorth merger to take place prior to the KeySpan-Eastern merger, the
Eastern-EnergyNorth merger agreement provides that as long as the KeySpan-
Eastern agreement of merger is in effect, the Eastern-EnergyNorth merger cannot
take place any sooner than simultaneously with the KeySpan-Eastern merger.
It is expected that, unless the KeySpan-Eastern merger agreement is
terminated, the Eastern-EnergyNorth merger and the KeySpan-Eastern merger will
take place simultaneously.
6
<PAGE>
The Eastern-EnergyNorth Merger
Summary of the Transaction (See page 27)
Eastern and EnergyNorth executed the merger agreement on July 14, 1999. On
November 4, 1999, concurrently with the execution of Eastern's merger agreement
with KeySpan, Eastern and EnergyNorth amended the merger agreement. The merger
agreement, as amended, is attached at the back of this proxy
statement/prospectus as Annex A. We encourage you to read the merger agreement
as it is the legal document that governs the merger. In the proposed merger,
EnergyNorth and Eastern's merger subsidiary will merge and, as a result,
EnergyNorth will become a wholly-owned subsidiary of Eastern. If the KeySpan-
Eastern merger agreement is not terminated prior to the effective time of the
Eastern-EnergyNorth merger, EnergyNorth will survive the merger. If the
KeySpan-Eastern merger agreement is terminated, Eastern's merger subsidiary
will survive the merger.
The Eastern-EnergyNorth merger will become effective following the approval
of the merger by a majority of the stockholders of EnergyNorth and the
satisfaction or waiver of all other conditions to the merger and concurrently
with the closing of the KeySpan-Eastern merger. These include approval of the
New Hampshire Public Utilities Commission and federal regulatory approvals by
the Securities and Exchange Commission and under the Hart-Scott-Rodino Anti-
Trust Improvements Act of 1976 and the filing of articles of merger with the
Secretary of the State of New Hampshire.
What Holders of EnergyNorth Common Stock Will Receive in the Merger (See page
55)
What type of consideration holders of EnergyNorth common stock will receive
in the merger will depend on whether the merger agreement between KeySpan and
Eastern has been terminated prior to the effective date of the merger of
Eastern and EnergyNorth.
. What Holders of EnergyNorth Common Stock Will Receive If The KeySpan-
Eastern Merger Agreement Has Not Been Terminated. If the KeySpan-Eastern
merger agreement has not been terminated prior to the effective time of
the Eastern-EnergyNorth merger, then in the Eastern-EnergyNorth merger,
holders of EnergyNorth common stock will receive $61.13 for each share of
EnergyNorth common stock for an aggregate amount of cash equal to
approximately $203.1 million, based on the number of shares of
EnergyNorth common stock outstanding as of March 7, 2000.
. What Holders of EnergyNorth Common Stock Will Receive If The KeySpan-
Eastern Merger Agreement Has Been Terminated. If the KeySpan-Eastern
merger agreement has been terminated prior to the effective time of the
Eastern-EnergyNorth merger, then in the Eastern-EnergyNorth merger,
holders of EnergyNorth common stock will receive cash and common stock of
Eastern having an expected aggregate value of approximately $180.7
million, based on the number of shares of EnergyNorth common stock
outstanding as of March 7, 2000 and based on the closing share price of
Eastern common stock on such date, $57.8125. The actual value will depend
on the market price of Eastern common stock and the number of shares of
EnergyNorth common stock outstanding on the date the merger is completed.
Unless otherwise indicated, the remainder of this section summarizes the
cash and stock consideration to be received if the KeySpan-Eastern merger
agreement has been terminated prior to the effective time of the Eastern-
EnergyNorth merger.
Assuming the KeySpan-Eastern merger agreement has been terminated prior to
the effective time of the Eastern-EnergyNorth merger, a total of 49.9% of the
outstanding shares of EnergyNorth common stock will be exchanged for cash and
the remainder will be exchanged for shares of Eastern common stock. The total
amount of cash consideration to be paid to the EnergyNorth stockholders will
equal approximately $78 million (subject to adjustment for tax purposes as
described below) based on the number of shares of EnergyNorth common stock
outstanding on March 7, 2000. Each share of EnergyNorth common stock exchanged
for cash will entitle the holder to receive $47.00.
7
<PAGE>
Each share which is not exchanged for cash will entitle the holder to
receive that number of shares of Eastern common stock having a value of $47.00
based on the average of the daily per share weighted averages of the trading
prices of the Eastern common stock reported in the New York Stock Exchange
Composite Transactions over the ten trading day period ending on the third
trading day before the effective date of the merger, so long as that weighted
average price is not less than $36.00 or higher than $44.00. If this average is
less than $36.00, each share of EnergyNorth common stock not exchanged for cash
will entitle the holder to receive 1.3056 shares of Eastern common stock. On
the other hand, if this average is higher than $44.00, each share of
EnergyNorth common stock, not exchanged for cash, will entitle the holder to
receive 1.0682 shares of Eastern common stock. Accordingly, if this average is
below $36.00 or above $44.00, the actual value of the number of Eastern shares
received for an EnergyNorth share would be less than or more than $47.00. As of
March 7, 2000, the closing market price of an Eastern share was $57.8125.
The following charts depict the effects of variations of the average closing
price of Eastern common stock used to determine the stock portion of the merger
consideration on the number and value of the shares of Eastern common stock to
be received in the merger for each share of EnergyNorth common stock.
[CHART]
In order to permit the merger to qualify as a tax-free reorganization, the
mix of cash and Eastern common stock consideration will be adjusted to the
extent necessary to ensure that at least 45% of the value of the total
consideration paid (including all cash paid in lieu of fractional shares and
other payments required to be considered for tax purposes) consists of Eastern
common stock. To the extent necessary to maintain this percentage, the
percentage of outstanding shares of EnergyNorth common stock which will be
converted into the right to receive cash could be reduced to less than 49.9%.
Eastern will not issue any fractional shares of common stock in the merger.
Instead, holders of EnergyNorth common stock will receive cash for any
fractional share.
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, EnergyNorth stockholders will
only be eligible to receive $61.13 in cash in exchange for each share of
EnergyNorth common stock.
If, and only if, the KeySpan-Eastern merger agreement is terminated,
EnergyNorth stockholders will be able to indicate at a time closer to the
expected effective date of the merger whether they would like to receive cash
or Eastern common stock in exchange for each share of EnergyNorth common stock,
or to indicate that they have no preference. As a consequence of their
elections, the EnergyNorth stockholders may therefore receive a combination of
cash and Eastern common stock. If the elections for a particular form of
consideration
8
<PAGE>
in the aggregate exceed the available amount of that consideration, as is
likely to be the case, these elections will be subject to adjustment on a pro
rata basis. Accordingly, the consideration actually received by an EnergyNorth
stockholder may differ from the preference indicated by that stockholder.
Certain Federal Income Tax Consequences (See page 41)
The federal income tax consequences of the merger depend upon whether the
merger agreement between KeySpan and Eastern is terminated prior to the
effective date of the Eastern-EnergyNorth merger.
If the merger agreement between KeySpan and Eastern is not terminated prior
to the effective date of the Eastern-EnergyNorth merger, the stockholders of
EnergyNorth would receive solely cash consideration in a fully taxable merger.
Each EnergyNorth stockholder would recognize taxable gain or loss equal to the
difference between the value of the cash received and the stockholder's
adjusted tax basis in the EnergyNorth common stock exchanged.
If the merger agreement between KeySpan and Eastern is terminated prior to
the effective date of the Eastern-EnergyNorth merger, the merger will be
structured as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended. In this case, consummation of the
merger will be conditioned on the receipt of tax opinions of counsel to Eastern
and to EnergyNorth, each dated as of the time of the merger, that the merger
qualifies as a reorganization. Accordingly, no gain or loss will be recognized
by the stockholders of EnergyNorth on the exchange of their shares of
EnergyNorth common stock solely for shares of Eastern common stock. An
EnergyNorth stockholder who receives a combination of cash and Eastern common
stock in the merger in exchange for shares of EnergyNorth common stock will not
recognize any loss but will recognize gain, if any, in an amount equal to the
lesser of the amount of cash received and the total gain realized by such
stockholder in the merger. The total gain realized by an EnergyNorth
stockholder in the merger will be the difference between such stockholder's tax
basis in the EnergyNorth common stock surrendered in the merger and the sum of
the cash and the fair market value of Eastern common stock received in
exchange. An EnergyNorth stockholder who receives solely cash in the merger
generally will recognize gain or loss equal to the difference between such
stockholder's tax basis in the EnergyNorth common stock surrendered and the
cash received in the merger.
Because certain tax consequences of the merger will vary depending upon
whether the merger agreement between KeySpan and Eastern is terminated prior to
the effective date of the Eastern-EnergyNorth merger and upon the particular
circumstances of each EnergyNorth stockholder, EnergyNorth stockholders should
consult their own tax advisors as to the federal (and any state, local or
foreign) tax consequences of the merger in light of their particular
circumstances.
The EnergyNorth Annual Meeting
Date and Purpose (See page 25)
The EnergyNorth annual meeting will be held at 10:00 a.m. on Thursday, April
27, 2000 at the Center of New Hampshire Holiday Inn, 700 Elm Street,
Manchester, New Hampshire. At the EnergyNorth annual meeting, holders of
EnergyNorth common stock will be asked to approve the merger.
EnergyNorth Record Date; Voting Rights (See pages 25 to 26)
If you owned shares of EnergyNorth common stock as of the close of business
on March 24, 2000, the EnergyNorth record date, you are entitled to vote on the
approval of the merger.
On the record date, there were 3,322,903 shares of EnergyNorth common stock
outstanding. Holders of EnergyNorth common stock will have one vote at the
EnergyNorth annual meeting for each share of EnergyNorth common stock they own
on the EnergyNorth record date.
9
<PAGE>
Quorum; Required Vote (See page 25)
The presence, in person or by proxy, at the EnergyNorth annual meeting of
the holders of a majority of the shares of EnergyNorth common stock outstanding
and entitled to vote is necessary to constitute a quorum at the EnergyNorth
annual meeting.
. The affirmative vote of the holders of a majority of the outstanding
shares of EnergyNorth common stock is required to approve the merger.
. The affirmative vote of the holders of a majority of the shares of
EnergyNorth common stock represented at the meeting is required for the
election of directors and to approve the appointment of independent
public accountants.
Your failure to vote or your abstention will have the effect of a vote
"AGAINST" approval of the merger. Brokers who hold shares of EnergyNorth common
stock as nominees will not have discretionary authority to vote such shares for
or against the merger unless you provide them with voting instructions, but
they will have discretionary authority to vote for the election of directors
and the ratification of independent public accountants.
Recommendation to EnergyNorth Stockholders (See page 29)
The EnergyNorth board of directors believes that the merger is in the best
interests of EnergyNorth stockholders and unanimously recommends that holders
of EnergyNorth common stock vote "FOR" approval of the merger. The EnergyNorth
board of directors also unanimously recommends that holders of EnergyNorth
common stock vote "FOR" the election of directors and the appointment of
independent public accountants.
Fairness Opinion of EnergyNorth's Financial Advisor (See page 30)
In deciding to approve the merger, the EnergyNorth board of directors
considered an opinion from its financial advisor, Salomon Smith Barney Inc., as
to the fairness, from a financial point of view, of the consideration to be
received in the merger by the EnergyNorth stockholders. This opinion is
attached as Annex B to this proxy statement/prospectus. We encourage you to
read this opinion.
Summary of Other Selected Information
Potential Conflicts and Interests of Officers and Directors in the Merger (See
page 49)
Executive officers and directors of EnergyNorth may have interests in the
transaction that are different from, or in addition to, those of EnergyNorth
stockholders. For example, pursuant to employment agreements and severance
plans, the approval of the merger by the stockholders of EnergyNorth will
constitute a change in control of EnergyNorth, entitling certain executive
officers of EnergyNorth to receive severance benefits under certain
circumstances. In addition, certain executive officers of EnergyNorth may enter
into new employment agreements with Eastern. If the KeySpan-Eastern merger
agreement has been terminated prior to the effective time of the Eastern-
EnergyNorth merger, Edward T. Borer, or another member of the EnergyNorth board
designated by the EnergyNorth board and reasonably acceptable to Eastern, will
be elected to serve on the Eastern board for a term ending with the Eastern
2003 annual meeting. If the KeySpan-Eastern merger agreement has not been
terminated prior to the effective time of the Eastern-EnergyNorth merger, Mr.
Borer will receive a cash payment at the effective time of the Eastern-
EnergyNorth merger as a pre-payment of consulting fees that would otherwise be
payable following the effective time of the Eastern-EnergyNorth merger pursuant
to a consulting agreement between Mr. Borer and Eastern.
The EnergyNorth board of directors was aware of these and other interests
and considered them in approving the merger.
10
<PAGE>
As of January 27, 2000, directors and executive officers of EnergyNorth and
its affiliates as a group owned approximately 3.431% of the issued and
outstanding shares of EnergyNorth common stock including options exercisable
within 60 days of that date.
Regulatory Approvals (See page 47)
The approvals of the New Hampshire Public Utilities Commission under New
Hampshire law, the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935, as well as the expiration or earlier termination
of the applicable waiting period under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, are required in order to complete the merger. As of
the date of this proxy statement/prospectus, none of the required regulatory
approvals has been obtained.
Conditions to the Merger (See page 64)
Completion of the merger depends on the satisfaction of a number of
conditions, including:
. Approval of the holders of EnergyNorth's common stock.
. All required approvals of regulatory and governmental agencies.
. Effectiveness of the registration statement in which this proxy
statement/prospectus is included.
. All required third-party consents and approvals.
Amendment of the Merger Agreement (See page 65)
The Eastern board of trustees and the EnergyNorth board of directors may
amend any of the terms of the merger agreement at any time before or after
stockholder approval. No amendment which would materially and adversely affect
the rights of such stockholders may be made after the EnergyNorth stockholders
have approved the merger without further stockholder approval.
Termination of the Merger Agreement (See page 67)
Eastern and EnergyNorth may mutually terminate the merger agreement without
completing the merger. The merger agreement may also be terminated by either
Eastern or EnergyNorth if the merger is not completed by March 31, 2001 (which
may be extended by either party to September 30, 2001 in certain circumstances)
or in certain other circumstances, including failure of EnergyNorth's
stockholders to approve the merger at the EnergyNorth annual meeting or by
March 1, 2000 (which date the parties to the merger agreement have agreed to
extend to April 1, 2000 and may be extended further by agreement of the
parties).
Termination Fees and Expenses (See page 68)
If the Eastern-EnergyNorth merger agreement is terminated under certain
circumstances, EnergyNorth or Eastern may be required to pay the other's out-
of-pocket expenses in an amount up to $2 million. If the termination involves
an alternative acquisition proposal or a failure of the EnergyNorth board of
directors to recommend approval of the merger to the EnergyNorth stockholders,
EnergyNorth may be required to pay to Eastern a termination fee of $5.5 million
(plus any amount paid on account of out-of-pocket expenses).
Comparative Stockholder Rights (See page 90)
When the merger is completed, holders of EnergyNorth common stock who
receive Eastern common stock in the merger, if any, will be shareholders of
Eastern, and their rights will be governed by the Eastern Declaration of Trust
and by-laws. Certain differences between the rights of holders of the
EnergyNorth common stock and those of holders of Eastern common stock are
summarized on pages 90 to 99.
11
<PAGE>
Accounting Treatment (See page 41)
Eastern will account for the merger as a purchase of a business, which means
that the assets and liabilities of EnergyNorth, including intangible assets,
will be recorded at their fair value and the results of operations of
EnergyNorth will be included in Eastern's results from the date of acquisition.
Statutory Appraisal Rights (See page 45)
Holders of EnergyNorth common stock who do not vote for the merger will be
entitled to appraisal rights. More detailed information regarding these
appraisal rights and the procedure to be followed for exercising them is
provided under "The Merger--Appraisal Rights" on pages 45 to 46.
Comparative Per Share Common Stock Market Price Information (See page 17)
Eastern and EnergyNorth common stock are both listed on the New York Stock
Exchange. On July 14, 1999, the last full trading day prior to the public
announcement of the proposed merger, Eastern common stock closed at $40.00 and
EnergyNorth common stock closed at $29.6875. On March 7, 2000, Eastern common
stock closed at $57.8125 and EnergyNorth common stock closed at $56.25.
Listing of Eastern Common Stock (See page 46)
Eastern will list any shares of its common stock to be issued in the merger
on the New York Stock Exchange, the Pacific Exchange and the Boston Stock
Exchange.
12
<PAGE>
Selected Historical Financial Information of Eastern
The annual financial information set forth below has been derived from the
audited consolidated financial statements of Eastern. The information should be
read in connection with, and is qualified in its entirety by reference to,
Eastern's financial statements and notes thereto incorporated by reference
herein. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Operating revenues...... $ 978,702 $ 935,264 $1,023,740 $1,057,271 $ 994,462 $ 973,386
Operating earnings...... 113,439 100,405 115,317 130,234 121,336 105,022
Earnings from continuing
operations before
extraordinary items.... 55,093 50,828 55,916 64,501 63,561 42,209
Shares of common stock
outstanding, weighted
average diluted........ 24,254 22,680 22,498 22,414 22,171 22,626
Basic earnings per share
from continuing
operations before
extraordinary items.... 2.28 2.26 2.50 2.90 2.88 1.87
Diluted earnings per
share from continuing
operations before
extraordinary items.... 2.27 2.24 2.49 2.88 2.87 1.87
Cash dividends declared
per common share(1).... 1.69 1.65 1.61 1.51 1.42 1.40
Ratio of earnings to
fixed charges(2)....... 3.0 3.0 2.9 3.3 2.8 2.4
Balance Sheet Data:
Total assets............ $2,019,757 $1,518,370 $1,530,365 $1,514,853 $1,463,924 $1,422,830
========== ========== ========== ========== ========== ==========
Long term debt
(excluding
current portion)....... $ 515,232 $ 385,519 $ 371,492 $ 367,683 $ 379,018 $ 387,901
Common stock equity..... 754,630 546,069 484,470 461,013 426,473 403,004
---------- ---------- ---------- ---------- ---------- ----------
Total capitalization.... $1,269,862 $ 931,588 $ 855,962 $ 828,696 $ 805,491 $ 790,905
========== ========== ========== ========== ========== ==========
</TABLE>
- --------
(1) Cash dividends declared per common share represent the historical dividends
of Eastern for all periods presented.
(2) In computing the ratio of earnings to fixed charges, "earnings" are defined
as income before income taxes and fixed charges. "Fixed charges" consist of
interest, including the amount capitalized, interest on the obligation
under the supplemental fuel inventory trust, amortization of debt expense
and the estimated interest portion of rental payments.
See accompanying Notes to Selected Historical Financial Information and
Unaudited Pro Forma Combined Financial Information.
13
<PAGE>
Selected Historical Financial Information of EnergyNorth
The annual financial information set forth below has been derived from the
audited consolidated financial statements of EnergyNorth. The data for the
three-month periods ending December 31, 1999 and 1998 have been derived from
the unaudited consolidated financial statements of EnergyNorth. The information
should be read in connection with, and is qualified in its entirety by
reference to, EnergyNorth's financial statements and notes thereto incorporated
by reference herein. See "Where You Can Find More Information." The interim
data reflects all adjustments that, in the opinion of management of
EnergyNorth, are necessary to present fairly such information for the interim
periods. The results of operations for the three-month periods are not
necessarily indicative of the results expected for a full year or any other
interim period.
<TABLE>
<CAPTION>
Three Months
Fiscal Year Ended September 30, Ended December 31,
----------------------------------------------------- ---------------------------------
1999 1998 1997 1996 1995 1994 1999 1998
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Operating revenues...... $119,172 $109,926 $105,871 $ 88,954 $ 78,806 $ 97,050 $ 37,162 $ 31,471
Operating earnings...... 9,621 8,951 9,547 8,947 7,003 8,739 4,893 4,226
Earnings from continuing
operations............. 4,537 5,378 6,518 6,078 4,104 5,422 2,711 3,219
Shares of common stock
outstanding, weighted
average diluted........ 3,319 3,273 3,243 3,216 3,166 3,120 3,341 3,338
Basic earnings per share
from continuing
operations............. 1.37 1.64 2.01 1.89 1.30 1.74 .82 .97
Diluted earnings per
share from continuing
operations............. 1.36 1.64 2.01 1.89 1.30 1.74 .81 .96
Cash dividends declared
per common share(1).... 1.37 1.31 1.25 1.19 1.12 1.08 .35 .335
Ratio of earnings to
fixed charges(2)....... 1.5 1.7 2.5 2.5 1.4 2.0 3.82 3.66
Balance Sheet Data:
Total assets............ $168,325 $155,150 $139,445 $132,746 $121,337 $121,019 $181,101 $162,145
======== ======== ======== ======== ======== ======== ======== ========
Long term debt
(excluding current
portion)............... $ 45,679 $ 44,390 $ 45,242 $ 29,571 $ 30,103 $ 33,501 $ 45,633 $ 44,156
Common stock equity..... 50,943 50,890 47,722 45,167 42,114 40,778 52,631 53,061
-------- -------- -------- -------- -------- -------- -------- --------
Total capitalization.... $ 96,622 $ 95,280 $ 92,964 $ 74,738 $ 72,217 $ 74,279 $ 98,264 $ 97,217
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
(1) Cash dividends declared per common share represent the historical dividends
of EnergyNorth for all periods presented.
(2) In computing the ratio of earnings to fixed charges, "earnings" are defined
as income before income taxes and fixed charges. "Fixed charges" consist of
interest, including the amount capitalized, interest on the obligation
under the supplemental fuel inventory trust, amortization of debt expense
and the estimated interest portion of rental payments.
See accompanying Notes to Selected Historical Financial Information and
Unaudited Pro Forma Combined Financial Information.
14
<PAGE>
Summary Combined Unaudited Pro Forma Information
The following table summarizes unaudited pro forma information of Eastern,
presented elsewhere in this proxy statement/prospectus, reflecting the
completion of the merger with EnergyNorth assuming the KeySpan-Eastern merger
agreement has been terminated prior to the effective time of the Eastern-
EnergyNorth merger and assuming the merger had been effective for the periods
indicated. Eastern will account for this transaction using the purchase method
of accounting for business combinations.
Eastern's and EnergyNorth's fiscal years end on different dates.
Accordingly, to combine Eastern's and EnergyNorth's financial information:
. Eastern's audited balance sheet as of December 31, 1999, has been
combined, with certain adjustments, with EnergyNorth's unaudited balance
sheet as of December 31, 1999;
. Eastern's unaudited statement of operations for the twelve months ended
December 31, 1999, as adjusted for an acquisition, has been combined,
with certain adjustments, with EnergyNorth's unaudited statement of
operations for the twelve months ended December 31, 1999; and
. Eastern's statement of operations for the year ended December 31, 1998,
as adjusted for an acquisition, has been combined, with certain
adjustments, with EnergyNorth's unaudited statement of operations for the
twelve months ended December 31, 1998.
For a description of the adjustments made in connection with the preparation
of the unaudited pro forma information, see "Combined Unaudited Pro Forma
Financial Information" beginning on page 72. For a description of the
adjustments made to Eastern's historical financial information to adjust for an
acquisition, see "Eastern Unaudited Adjusted Historical Financial Information"
beginning on page 79.
The summary unaudited pro forma information is not necessarily indicative of
the results of operations or financial position that would have been reported
if the merger actually occurred on the dates indicated, nor are they
necessarily indicative of the future operating results or financial position of
the combined company. We have not included pro forma adjustments that reflect
potential effects of (a) the efficiencies that may be obtained by combining the
operations of Eastern and EnergyNorth, (b) the costs of restructuring,
integrating or consolidating the operations of Eastern and EnergyNorth
preliminarily estimated to be $1.2 million (net of tax of $0.8 million) which
will be charged to income as incurred or (c) the impact of recording certain
liabilities for severance and enhanced benefits totaling $10.5 million expected
to be incurred as a result of the merger.
The summary unaudited pro forma information is derived from the unaudited
pro forma financial information and related notes included elsewhere in this
proxy statement/prospectus, which you should read in their entirety.
15
<PAGE>
Eastern Summary Combined Unaudited Pro Forma Condensed Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Statements of Operations:
Revenues................................... $1,228,862 $1,233,840
Operating earnings......................... 136,340 144,398
Earnings from continuing operations before
extraordinary items available to common
shareholders.............................. 53,118 56,565
Earnings per common share from continuing
operations before extraordinary items:
Basic.................................... $ 1.87 $ 1.97
Diluted.................................. $ 1.85 $ 1.96
Cash dividends declared per share.......... $ 1.65 $ 1.69
<CAPTION>
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Balance Sheet Data:
Total assets............................... $2,233,504 $2,260,514
========== ==========
Capitalization:
Long-term debt (excluding current
portion)................................ $ 631,227 $ 597,724
Shareholders' equity..................... 809,890 832,874
---------- ----------
Total Capitalization (excluding short-term
debt)..................................... $1,441,117 $1,430,598
========== ==========
</TABLE>
See accompanying Notes to Selected Unaudited Pro Forma Combined Condensed
Financial Data.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain unaudited historical per share data
of Eastern and EnergyNorth and the combined per share data on an unaudited pro
forma basis after giving effect to the Eastern-EnergyNorth merger (and assuming
the KeySpan-Eastern merger agreement has been terminated prior to the effective
time of the Eastern-EnergyNorth merger) using the purchase method of accounting
for business combinations (and including the issuance of approximately
1,778,000 shares of Eastern common stock in the merger in exchange for shares
of EnergyNorth common stock (other than shares of EnergyNorth common stock to
be exchanged for approximately $77,932,000 of cash consideration in the
merger)). This data should be read in conjunction with the selected financial
data and the combined unaudited pro forma financial statements included
elsewhere in this proxy statement/prospectus and the separate historical
financial statements of Eastern and EnergyNorth incorporated by reference
herein. The pro forma combined financial data are not necessarily indicative of
the operating results or financial position that would have been achieved if
the merger had been effective as of the beginning of the periods presented, nor
are they necessarily indicative of the future operating results or financial
position of Eastern or EnergyNorth. Pro forma financial information reflecting
the completion of the merger assuming the KeySpan-Eastern merger agreement has
not been terminated prior to the effective time of the Eastern-EnergyNorth
merger is not presented herein.
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
December 31, 1998 December 31, 1999
------------------ ------------------
<S> <C> <C>
Eastern--Historical
Earnings per common share before
extraordinary items:
Basic................................... $ 2.26 $ 2.28
Diluted................................. 2.24 2.27
Cash dividends declared per share......... 1.65 1.69
Book value per share at period end........ 24.24 27.83
<CAPTION>
Fiscal Year Ended Three Months Ended
September 30, 1998 December 31, 1999
------------------ ------------------
<S> <C> <C>
EnergyNorth--Historical
Earnings per common share before
extraordinary items:
Basic................................... $ 1.64 $ .82
Diluted................................. 1.64 .81
Cash dividends declared per share......... 1.31 .35
Book value per share at period end........ 15.34 15.84
<CAPTION>
Year Ended Fiscal Year Ended
December 31, 1998 December 31, 1999
------------------ ------------------
<S> <C> <C>
Eastern/EnergyNorth--Pro Forma Combined
(1)(4)(5)(6)
Earnings per common share before
extraordinary items:
Basic................................... $ 1.87 $ 1.97
Diluted................................. 1.85 1.96
Cash dividends declared per share......... 1.65 1.69
Book value per share at period end(2)..... 28.40 28.83
<CAPTION>
Year Ended Fiscal Year Ended
December 31, 1998 December 31, 1999
------------------ ------------------
<S> <C> <C>
EnergyNorth--Equivalent Pro Forma
Per share data imputed to existing
stockholders(1)(3)(4)(5)(6)
Earnings per common share before
extraordinary items:
Basic................................... $ 2.00 $ 2.10
Diluted................................. 1.98 2.09
Cash dividends declared per share......... 1.76 1.80
Book value per share at period end........ 30.33 30.79
</TABLE>
17
<PAGE>
- --------
(1) See "Selected Unaudited Pro Forma Combined Condensed Financial Data."
(2) The book value per share information as of December 31, 1998 and December
31, 1999 is calculated based on the Eastern balance sheet as of December
31, 1998 and December 31, 1999 and the EnergyNorth balance sheets as of
December 31, 1998 and December 31, 1999, respectively (assuming Eastern's
merger with EnergyNorth was effective as of December 31, 1998 and December
31, 1999, respectively).
(3) The exchange ratio for the stock portion of the merger consideration, if
there is a stock portion, will be determined by dividing $47.00 by an
amount equal to the average of the daily weighted averages of the trading
prices of Eastern common stock on the New York Stock Exchange for the ten
trading days ending on the third trading day before the date of
consummation of the merger, provided that if such average is less than
$36.00, the amount will be fixed at $36.00 and that if such average is more
than $44.00, the amount will be fixed at $44.00. Equivalent pro forma share
data are calculated by multiplying the respective unaudited pro forma
combined data by an assumed exchange ratio of 1.0682 shares of Eastern
common stock for each share of EnergyNorth common stock. The assumed
exchange ratio is derived using the fixed amount of $44.00 as the average
of the daily weighted average price per share of Eastern common stock on
the New York Stock Exchange for the ten trading day period ended on January
24, 2000 (which is calculated as if the effective date of the merger were
January 27, 2000) because the actual average of the daily weighted average
price per share of Eastern common stock for such ten day trading period was
above $44.00. If Eastern's average of the daily weighted average share
price per share for the ten trading day period ending on the third trading
day prior to the effective date of the merger is at either end of the
collar ($44.00 or $36.00), then the recalculated combined pro forma
earnings per share in the latest fiscal year and interim period would be as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Twelve Months Ended
December 31, 1998 December 31, 1999
----------------- -------------------
<S> <C> <C> <C> <C>
Assumed Eastern Stock Price............ 44.00 36.00 44.00 36.00
Basic earnings per share............... 1.87 1.84 1.97 1.94
Diluted earnings per share............. 1.85 1.83 1.96 1.93
</TABLE>
No pro forma equivalent per share data are provided with respect to
EnergyNorth shares exchanged for cash.
(4) Pro forma combined cash dividends declared per share represents the
historical dividends of Eastern for all periods presented. Eastern's
current cash dividends declared per share is $0.43 per common share per
quarter. After giving effect to the number of shares to be outstanding
after the merger, assuming an exchange ratio of 1.0682 (see Note 3 above),
the pro forma payout ratio of the combined company is approximately 91%.
Additionally, the equivalent cash dividend per share of EnergyNorth common
stock based upon Eastern's current annual dividend policy is $1.80.
(5) Assuming the KeySpan-Eastern merger agreement has been terminated prior to
the effective time of the Eastern-EnergyNorth merger.
(6) Pro forma financial information reflecting the completion of the merger
assuming the KeySpan-Eastern merger agreement has not been terminated prior
to the effective time of the Eastern-EnergyNorth merger is not presented
herein.
18
<PAGE>
COMPARATIVE DIVIDENDS AND MARKET PRICES
Eastern
Eastern common stock is listed and principally traded on the New York Stock
Exchange, the Pacific Exchange and the Boston Stock Exchange under the symbol
"EFU". The table below sets forth the dividends declared and the high and low
sales prices of Eastern common stock for the fiscal periods indicated as
reported in The Wall Street Journal as New York Stock Exchange Composite
Transactions. Note that EnergyNorth stockholders will receive shares of Eastern
common stock in the merger only if the KeySpan-Eastern merger agreement has
been terminated prior to the effective time of the Eastern-EnergyNorth merger.
On March 7, 2000, the closing price of Eastern common stock was $57.8125.
<TABLE>
<CAPTION>
Price Range
Dividends -----------------
Declared High Low
--------- -------- --------
<S> <C> <C> <C>
Year Ended December 31, 1997
First Quarter..................................... $.40 $36.375 $30.500
Second Quarter.................................... .40 35.875 30.500
Third Quarter..................................... .40 38.188 34.750
Fourth Quarter.................................... .41 45.375 36.750
Year Ended December 31, 1998
First Quarter..................................... $.41 $45.625 $40.375
Second Quarter.................................... .41 44.750 37.625
Third Quarter..................................... .41 43.500 38.250
Fourth Quarter.................................... .42 44.250 40.000
Year Ended December 31, 1999
First Quarter..................................... $.42 $44.000 $36.375
Second Quarter.................................... .42 40.5625 33.500
Third Quarter..................................... .42 47.375 38.0625
Fourth Quarter.................................... .43 57.4375 46.000
Year Ended December 31, 2000
First Quarter (through March 7, 2000)............. .43 58.625 56.250
</TABLE>
19
<PAGE>
EnergyNorth
EnergyNorth common stock is listed and principally traded on the New York
Stock Exchange under the symbol "EI". The table below sets forth the dividends
declared and the high and low sales price of EnergyNorth common stock for the
fiscal periods indicated as reported in The Wall Street Journal as New York
Stock Exchange Composite Transactions.
On March 7, 2000, the closing price of EnergyNorth common stock was $56.25.
<TABLE>
<CAPTION>
Price Range
Dividends -----------------
Declared High Low
--------- -------- --------
<S> <C> <C> <C>
Year Ended September 30, 1997
First Quarter..................................... $.305 $22.125 $19.000
Second Quarter.................................... .305 22.250 20.750
Third Quarter..................................... .320 22.625 21.250
Fourth Quarter.................................... .320 23.250 22.000
Year Ended September 30, 1998
First Quarter..................................... $.320 $28.8125 $22.750
Second Quarter.................................... .320 29.0625 27.625
Third Quarter..................................... .335 29.750 26.375
Fourth Quarter.................................... .335 27.625 25.250
Year Ended September 30, 1999
First Quarter..................................... $.335 $29.625 $26.1875
Second Quarter.................................... .335 30.125 27.500
Third Quarter..................................... .350 29.250 26.625
Fourth Quarter.................................... .350 43.750 28.875
Year Ended September 30, 2000
First Quarter..................................... $.350 $55.0625 $41.000
Second Quarter (through March 7, 2000)............ .350 56.250 54.250
</TABLE>
The following table sets forth the market value of EnergyNorth common stock
on a historical and equivalent per share basis and the market value of Eastern
common stock on a historical basis as of July 13, 1999, the last business day
preceding the day that the merger agreement was entered into. The equivalent
per share value assumes that Eastern's average of the daily weighted averages
of the per share trading prices for the ten trading day period ending on the
third trading day before the effective date of the merger is not less than
$36.00 or greater than $44.00.
<TABLE>
<CAPTION>
Eastern EnergyNorth Equivalent
----------------------- ------------------------ Per Share
Date High Low Closing High Low Closing Value
---- ------ -------- ------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
July 13, 1999...... $39.25 $38.3125 $39.25 $29.5625 $29.375 $29.375 $47.00
</TABLE>
EnergyNorth stockholders are encouraged to obtain current market quotations
for Eastern common stock and EnergyNorth common stock.
20
<PAGE>
RISK FACTORS
In addition to the other information included or incorporated by reference
in this proxy statement/prospectus (including the other matters addressed in
"Forward-Looking Statements" on page 23), the risk factors described below
should be considered carefully by the holders of EnergyNorth common stock in
determining whether to vote to approve the merger.
Fixed Merger Consideration Despite Potential Changes in Stock Prices
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, each outstanding share of
EnergyNorth common stock will be converted into the right to receive $61.13 in
cash. The per share amount of $61.13 may be increased if the cash amount to be
paid for each share of Eastern common stock in the KeySpan-Eastern merger is
increased above $64.00, but is otherwise a fixed amount. This amount will not
be adjusted in the event of any increase or decrease in the price of either
Eastern common stock or EnergyNorth common stock.
If the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger, each outstanding share of
EnergyNorth common stock will be converted into the right to receive cash or
Eastern common stock subject to certain limitations. Since a total of 49.9% of
the outstanding shares of EnergyNorth common stock will be converted into the
right to receive cash, the cash portion of the merger consideration is a fixed
amount. This amount will not be adjusted in the event of any increase or
decrease in the price of either Eastern common stock or EnergyNorth common
stock, except to the extent necessary to permit the merger to satisfy one of
the requirements for qualification as a tax-free reorganization.
The exchange ratio used to determine the stock portion of the merger
consideration will be determined based on the average of the daily weighted
averages of the per share trading prices of Eastern common stock on the New
York Stock Exchange for a ten trading day period ending on the third trading
day before the effective date. Unless this average is lower than $36.00 or
higher than $44.00, the value of the stock portion of the merger consideration
will remain fixed at $47.00 per share of EnergyNorth common stock. Accordingly,
within this range the EnergyNorth stockholders will not participate in any
appreciation in value of the Eastern common stock and correspondingly, will not
have the
risk of any decline in value of the Eastern common stock. Should this average
fall below $36.00 per share, the EnergyNorth stockholders who receive Eastern
shares will receive a lower value in exchange for their EnergyNorth shares.
Correspondingly, if this average exceeds $44.00, the EnergyNorth stockholders
who receive Eastern common stock will receive a higher value in exchange for
their EnergyNorth shares. The effect of the change in the average of the daily
weighted averages of the per share trading prices of the Eastern common stock
is depicted graphically on page 8.
The prices of Eastern common stock and EnergyNorth common stock when the
merger takes place may vary from their prices at the date of this proxy
statement/prospectus and at the date of the annual meeting. For example, during
the twelve month period ending on March 7, 2000, (the most recent practicable
date prior to the printing of this proxy statement/prospectus), the closing
price of Eastern common stock varied from a low of $33.875 to a high of $58.00
and ended that period at $57.8125, and the closing price of EnergyNorth common
stock varied from a low of $26.625 to a high of $56.25 and ended that period at
$56.25 (see "Comparative Per Share Data" and "Comparative Dividends and Market
Prices" for further information). Such variations may be the result of changes
in the business, operations and prospects of Eastern, EnergyNorth or the
combined company, market assessments of the likelihood that the merger will be
completed and the timing of completion, regulatory considerations, general
market and economic conditions and other factors. Because the completion of the
merger will occur after the EnergyNorth annual meeting, the prices of Eastern
common stock and EnergyNorth common stock on the date of the annual meeting may
not be indicative of their respective prices at the completion of the merger.
At the time of the EnergyNorth annual meeting, EnergyNorth common stockholders
will not know the exact value of the Eastern common stock that they may receive
when the merger is completed.
21
<PAGE>
In addition, the exchange ratio used to determine the stock portion of the
consideration is a fixed value determined based on the average of the daily
weighted averages of the per share trading prices of Eastern common stock over
the ten trading day period ending the third trading day before the effective
date of the merger. The actual market value of the shares of Eastern common
stock will be based on the market value of the shares when received, which may
be less than the value used to determine the exchange ratio.
Holders of EnergyNorth common stock should obtain current market quotations
for Eastern common stock and EnergyNorth common stock.
Tax Treatment
Whether the merger will be a fully taxable transaction or a partially tax-
free reorganization depends upon whether the merger agreement between KeySpan
and Eastern is terminated prior to the effective date of the Eastern-
EnergyNorth merger. If the merger agreement between KeySpan and Eastern is not
terminated prior to the effective date of the Eastern-EnergyNorth merger,
EnergyNorth stockholders will not be able to defer any taxable gain realized in
the merger.
Integration of Operations
The merger involves the integration of two different companies that have
previously operated independently. No assurance can be given that Eastern will
be able to integrate the operations of EnergyNorth without encountering
difficulties or experiencing the loss of key EnergyNorth employees, customers
or suppliers, or that the benefits expected from such integration will be
realized. Although Eastern has recently successfully completed the acquisitions
of Colonial Gas and Essex Gas and the integration of Essex Gas, additional
issues may arise in connection with the integration of EnergyNorth and Colonial
Gas into Eastern's business.
Stock Ownership in Eastern
Upon completion of the merger, some holders of EnergyNorth common stock may
become holders of Eastern common stock. Eastern's business and strategy are
somewhat different from that of EnergyNorth, and Eastern's results of
operations, as well as the price of Eastern common stock, will be affected by
various factors different from those affecting EnergyNorth's results of
operations and the price of EnergyNorth common stock. In particular, a
significant portion of Eastern's operations relate to its Midland barge
business, a business in which EnergyNorth is not engaged. See "Forward-Looking
Statements" for a summary of many of the key factors that might affect Eastern
and the price at which the Eastern common stock may trade from time to time.
See "Comparative Per Share Data" and "Comparative Dividends and Market Prices."
Need for Government Approvals
The consummation of the merger is conditioned upon receiving approval from
various governmental regulatory authorities. These include:
. receipt of all necessary and requested approvals and reviews of the
merger and the merger agreement by the New Hampshire Public Utilities
Commission.
. approval by the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935.
. expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
In addition, other filings with, notifications to and authorizations and
approvals of various governmental agencies and third-party consents with
respect to the merger must be made or received before the completion of the
merger. Eastern and EnergyNorth are seeking to obtain all required approvals
and consents, some of which will not be obtained prior to the annual meeting.
It is possible that some required approvals and consents will not be obtained
or that they will be obtained only with restrictions on the combined company
that will not be acceptable or would adversely affect the value of the combined
company. See "The Merger--Regulatory Matters."
Similar governmental approvals are necessary for consummation of the
KeySpan-Eastern merger.
22
<PAGE>
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and documents which are incorporated by
reference, include various forward-looking statements about Eastern,
EnergyNorth and the combined company that are subject to risks and
uncertainties. Forward-looking statements include the information concerning
future financial performance, business strategy, projected costs and plans and
objectives of Eastern, EnergyNorth and the combined company set forth under
"Questions and Answers About the Merger", "Summary," "--Background of the
Merger," "--Common Reasons for the Merger", "--Opinion of Eastern's Financial
Advisor," "--EnergyNorth's Reasons for the Merger; Recommendation of the
EnergyNorth Board," "--Opinion of EnergyNorth's Financial Advisor" and those
preceded by, followed by or that otherwise include the words "believes",
"expects", "anticipates", "intends", "estimates" or similar expressions.
Eastern and EnergyNorth participate in an industry characterized by
increasing consolidation, growing deregulation and heightened competition.
Since it is possible that the KeySpan-Eastern merger agreement will be
terminated and the merger consideration will consist of cash and Eastern common
stock, you should understand that the following important factors, among
others, in addition to those discussed elsewhere in this proxy
statement/prospectus and the documents which are incorporated by reference (see
"Where You Can Find More Information"), could affect the future results of
Eastern, EnergyNorth and the combined company and could cause actual results to
differ materially from those expressed in forward-looking statements contained
or incorporated by reference in this proxy statement/prospectus:
. The effect of the merger and Eastern's other possible strategic
initiatives on earnings and cash flow.
. Eastern's ability to successfully integrate its new gas distribution
operations.
. Temperatures deviating significantly from normal in central and eastern
Massachusetts and central and southern New Hampshire.
. Changes in market conditions for barge transportation.
. Adverse weather and operating conditions on the inland waterways.
. The functionality of programs and systems in the year 2000 and the impact
of third parties' Year 2000 issues.
. Changes in economic conditions, including interest rates and the value of
the dollar versus other currencies.
. Regulatory and court decisions, including the outcome of the appeal by
the Massachusetts Attorney General of the rate ruling by the
Massachusetts Department of Telecommunications and Energy in Eastern's
acquisition of Colonial Gas.
. Developments with respect to Eastern's and EnergyNorth's previously
disclosed environmental liabilities.
. Anticipating customer demand and estimating the gas distribution needed
to meet such demand.
. Changes in customer preferences on energy sources.
. Uncertainties regarding the ultimate profitability of ServicEdge
Partners, Inc.
. The fact that financial results in any particular fiscal period are not
necessarily indicative of results for future periods.
. Any significant delay in the expected completion of the merger.
. Cyclical nature of construction business.
. Changes in cost of propane.
Most of these factors are difficult to predict accurately and are generally
beyond the control of Eastern and EnergyNorth.
23
<PAGE>
RECENT DEVELOPMENTS
KeySpan-Eastern Merger
On November 4, 1999, Eastern entered into an agreement of merger with
KeySpan Corporation, a New York corporation. In the proposed merger, a wholly-
owned subsidiary of KeySpan will be merged into Eastern and, as a result,
Eastern will become a wholly-owned subsidiary of KeySpan. In the merger, each
outstanding share of Eastern common stock will be converted into the right to
receive $64.00 in cash.
Several conditions must be satisfied or waived prior to the consummation of
the KeySpan-Eastern merger, including the receipt of Eastern shareholder
approval of the merger and a related amendment to Eastern's Declaration of
Trust, the receipt of approval by the New Hampshire Public Utilities Commission
of the EnergyNorth acquisition and the receipt of other governmental and
regulatory approvals, the receipt of third-party consents, the absence of
events or conditions having material adverse effects on the transaction, and
either the prior or simultaneous consummation of the Eastern-EnergyNorth merger
or the termination of the Eastern-EnergyNorth merger agreement. There can be no
assurance that the KeySpan-Eastern merger will be consummated. Even if the
KeySpan-Eastern merger is consummated, no assurance can be given as to all of
its effects upon the Eastern-EnergyNorth merger.
Election of Trustee
In September 1999, Frederic L. Putnam, Jr. was elected to the Board of
Trustees of Eastern with a term of office expiring at the 2002 annual meeting
of Eastern shareholders. Mr. Putnam is 74 years old and is a graduate of
Harvard College and Harvard Law School. Mr. Putnam served Colonial Gas Company
as Chairman of its Board of Directors from 1981 to August 1999 and Senior
Executive Officer from February 1995 to August 1999. He also served as Chief
Executive Officer of Colonial Gas Company from April 1984 to February 1995.
Eastern acquired Colonial Gas Company on August 31, 1999. In connection with
the closing of the Colonial Gas acquisition, Mr. Putnam received a lump sum
payment of $692,947 pursuant to the change in control provisions of his
employment agreement with Colonial Gas, and also received a lump sum payment of
$92,665 under the Colonial Gas Retention Bonus Plan. Following the completion
of the Colonial Gas acquisition, Eastern elected Mr. Putnam to serve as a
Trustee on the Eastern Board.
Appeal of Colonial Gas Rate Order
On August 16, 1999, the Massachusetts Attorney General filed a petition with
the Supreme Judicial Court of Massachusetts appealing the rate plan ruling by
the Massachusetts Department of Telecommunications and Energy regarding
Eastern's acquisition of Colonial Gas. It is not certain what the final outcome
of this matter will be.
24
<PAGE>
MEETINGS, VOTING AND PROXIES
This proxy statement/prospectus is furnished to the holders of the
outstanding shares of EnergyNorth common stock, in connection with the
solicitation of proxies by the EnergyNorth board of directors from the holders
of EnergyNorth common stock for use at the EnergyNorth annual meeting.
EnergyNorth anticipates that the mailing of proxy materials to its stockholders
entitled to notice of and to vote at the annual meeting will begin on or about
March 28, 2000.
The EnergyNorth Annual Meeting
General. The purpose of the EnergyNorth annual meeting is to consider and
vote upon a proposal to approve the merger, to elect directors and ratify the
appointment of independent public accountants, and to consider and vote upon
such other matters, if any, as may properly be presented for consideration.
Approval of the merger will continue to apply whether the merger consideration
actually consists of all cash or a combination of cash and Eastern common
stock. The EnergyNorth board does not know, as of the date of mailing of this
proxy statement/prospectus, of any other business to be brought before the
EnergyNorth annual meeting. The enclosed proxy card authorizes the voting of
shares represented by the proxy on all other matters that may properly come
before the EnergyNorth annual meeting, and any adjournment or postponement
thereof, and the proxy holders intend to take such action in accordance with
their best judgment.
The EnergyNorth board, by a unanimous vote, has approved the merger and
recommends that EnergyNorth stockholders vote "FOR" approval of the merger.
Date, Place and Time; Record Date. The EnergyNorth annual meeting is
scheduled to be held on Thursday, April 27, 2000 at the Center of New Hampshire
Holiday Inn, 700 Elm Street, Manchester, New Hampshire, at 10:00 a.m. The
EnergyNorth board has fixed the close of business on March 24, 2000 as the
record date for determining the holders of EnergyNorth common stock entitled to
notice of, and to vote at, the EnergyNorth annual meeting. Only holders of
record of shares of EnergyNorth common stock at the close of business on the
record date will be entitled to notice of, and to vote at, the EnergyNorth
annual meeting.
Voting Rights; Required Vote. At the close of business on March 24, 2000,
3,322,903 shares of EnergyNorth common stock were issued and outstanding. Each
share of EnergyNorth common stock outstanding as of the record date is entitled
to one vote upon each matter properly submitted at the EnergyNorth annual
meeting. The affirmative vote of the holders of at least a majority of the
outstanding shares of EnergyNorth common stock is required to approve the
merger at the EnergyNorth annual meeting. The affirmative vote of the holders
of at least a majority of the shares of EnergyNorth common stock represented at
the annual meeting is required to elect the directors and ratify the
appointment of independent public accountants.
The presence in person or by proxy at the EnergyNorth annual meeting of the
holders of at least a majority of the outstanding shares of EnergyNorth common
stock is necessary to constitute a quorum for the transaction of business at
the EnergyNorth annual meeting. Abstentions and broker non-votes (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote
shares as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be considered present for the purpose of
establishing a quorum. In accordance with New York Stock Exchange rules,
brokers and nominees are precluded from exercising their voting discretion with
respect to the approval of the merger but may exercise such discretion with
respect to the election of directors and ratification of the appointment of
independent public accountants. Accordingly, without specific instructions from
the beneficial owner of such shares, brokers and nominees do not have the power
to vote such shares with respect to the approval of the merger.
Therefore, since the affirmative vote in person or by proxy of the holders
of a majority of the outstanding shares of EnergyNorth common stock on the
EnergyNorth Record Date is required to approve the merger, the failure to vote,
abstentions and broker non-votes will have the effect of a vote "AGAINST" the
merger.
25
<PAGE>
As of March 7, 2000, directors and executive officers of EnergyNorth and
their affiliates owned beneficially an aggregate of 114,014 shares of
EnergyNorth common stock, or 3.431% of the shares of EnergyNorth common stock
outstanding on such date.
Voting and Revocation of Proxies. Shares of EnergyNorth common stock
represented by a proxy properly signed and received at or before the
EnergyNorth annual meeting, unless later revoked, will be voted in accordance
with the instructions thereon.
If a proxy is signed and returned without indicating any voting
instructions, shares of EnergyNorth common stock represented by the proxy
will be voted "FOR" approval of the merger, and the election of directors
and ratification of the appointment of independent public accountants.
EnergyNorth proxy holders may in their discretion vote shares voted in favor
of approval of the merger to adjourn the EnergyNorth annual meeting to solicit
additional proxies in favor of such proposal. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before the
proxy is voted by the filing of an instrument revoking it or filing of a
properly executed proxy bearing a later date with the Secretary of EnergyNorth
before or at the EnergyNorth annual meeting, or by voting in person at the
EnergyNorth annual meeting. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: EquiServe at 150 Royall Street, Canton, MA 02021. Attendance at the
EnergyNorth annual meeting will not in and of itself constitute revocation of a
proxy.
The EnergyNorth annual meeting may be adjourned to another date and/or place
for any proper purpose including, without limitation, for the purpose of
soliciting additional proxies.
Solicitation of Proxies. In addition to solicitation by mail, directors,
officers and employees of EnergyNorth may solicit proxies from the stockholders
of EnergyNorth, personally or by telephone, telecopy or telegram or other forms
of communication. Officers, directors and employees of EnergyNorth will not be
specifically compensated for such services. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial owners.
EnergyNorth will bear its own expenses in connection with the solicitation
of proxies for the EnergyNorth annual meeting, except that EnergyNorth and
Eastern will share equally costs of filing and printing this proxy
statement/prospectus other than fees of accountants and attorneys.
No Vote Required By Eastern Shareholders.
Under applicable law, no approval of the Eastern-EnergyNorth merger
agreement or the transactions contemplated thereunder is required by Eastern's
shareholders and no proxies are being solicited from Eastern's shareholders in
connection with the Eastern-EnergyNorth merger. Eastern's shareholders,
however, must approve the KeySpan-Eastern merger agreement and the transactions
contemplated thereunder and a related amendment to the Eastern Declaration of
Trust and Eastern will solicit proxies from its shareholders in connection with
the KeySpan-Eastern merger.
26
<PAGE>
THE MERGER
(Item 1 on Proxy)
This section of the proxy statement/prospectus, as well as the next section
entitled "The Merger Agreement," describes certain aspects of the proposed
merger. These sections highlight key information about the merger and the
merger agreement, but they may not include all the information that a
stockholder would like to know. The merger agreement is attached as Annex A to
this proxy statement/prospectus. We urge stockholders to refer to the merger
agreement in its entirety.
General Description of the Merger
EnergyNorth and Merger Sub will merge in accordance with the laws of the
State of New Hampshire.
. Structure of Merger If KeySpan-Eastern Merger Agreement Has Not Been
Terminated. If the KeySpan-Eastern merger agreement has not been
terminated prior to the effective time of the Eastern-EnergyNorth merger,
EnergyNorth will be the surviving company in the merger and will continue
as a New Hampshire corporation. On the date on which the Eastern-
EnergyNorth merger is consummated, at the time the merger occurs:
. the articles of incorporation of EnergyNorth, as in effect
immediately before the time the merger occurs, will be the articles
of incorporation of the surviving company; and
. the EnergyNorth by-laws, as in effect immediately before the time
the merger occurs, will be the by-laws of the surviving company.
. Structure of Merger If KeySpan-Eastern Merger Agreement Has Been
Terminated. If the KeySpan-Eastern merger agreement has been terminated
prior to the effective time of the Eastern-EnergyNorth merger, Merger Sub
will be the surviving company in the merger and will continue as a New
Hampshire corporation but will change its name to "EnergyNorth, Inc." If
the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger, on the date on which
the merger is consummated, at the time the merger occurs:
. the articles of incorporation of Merger Sub, as in effect
immediately before the time the merger occurs, will be the articles
of incorporation of the surviving company; and
. the Merger Sub by-laws, as in effect immediately before the time the
merger occurs, will be the by-laws of the surviving company.
It is not anticipated that the Eastern board or management of Eastern will
change as a result of the merger, except that if the KeySpan-Eastern merger
agreement has been terminated prior to the effective time of the Eastern-
EnergyNorth merger, a member of the EnergyNorth board will be elected to serve
on the Eastern board.
Background of the Merger
During the past several years, the EnergyNorth board of directors has
regularly considered EnergyNorth's long-term objectives and strategic position,
particularly in light of the energy industry's trend toward deregulation and
consolidation. That planning assumed a strategy of remaining independent but
did not foreclose consideration of other strategic options designed to maximize
stockholder value.
In the past several years, Robert R. Giordano, the President and CEO of
EnergyNorth, had been approached informally by a number of energy companies,
including Eastern, that expressed interest in transactions with EnergyNorth
ranging from joint ventures to complete business combinations. During this same
period, Eastern was pursuing strategic initiatives that would help it to take
advantage of the increasing deregulation and consolidation in the energy
industry. As part of this strategy, Eastern from time to time indicated to
EnergyNorth its interest in discussing a business combination.
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<PAGE>
During March 1998 and throughout 1998, at several industry conferences and
at other events, a number of energy companies, including Eastern, approached
Mr. Giordano with informal expressions of interest concerning a potential
business combination with EnergyNorth. Mr. Giordano apprised the EnergyNorth
board of directors of these contacts.
On February 3, 1999, at the annual meeting of the EnergyNorth board of
directors, the board discussed, among other things, the current state of merger
activity in the New England energy industry. The EnergyNorth board of directors
considered a report by Mr. Giordano relating to recently announced
transactions, including those in the New England gas distribution industry. In
particular, the EnergyNorth board of directors reviewed NiSource Inc.'s
acquisition of Bay State Gas and Eastern's acquisition of Essex Gas and its
announced acquisition of Colonial Gas. At the conclusion of this meeting, it
was the consensus of the EnergyNorth board of directors that EnergyNorth should
retain a prominent investment banking firm with experience in this industry to
advise it and requested that the executive committee of the board of directors
proceed to retain such a firm.
Following the annual meeting, the executive committee of the EnergyNorth
board of directors determined to retain Salomon Smith Barney as EnergyNorth's
investment bankers and to ask representatives of that firm to attend the April
1999 board meeting to present advice concerning EnergyNorth's strategic
alternatives.
During March and April 1999, management of EnergyNorth, including Mr.
Giordano and Michelle Chicoine, Executive Vice President of EnergyNorth,
communicated with representatives of a number of energy companies that had
expressed interest in a strategic combination with EnergyNorth, including
Eastern.
At the EnergyNorth April 1999 board meeting, Salomon Smith Barney presented
its preliminary analysis of EnergyNorth's strategic alternatives. The board
then discussed and considered this analysis. At the conclusion of the meeting,
the board approved the engagement by EnergyNorth of investment banking advisors
to assist EnergyNorth in soliciting and evaluating proposals.
At a May 1999 gas industry meeting, Mr. Giordano had informal discussions
with representatives of several energy companies, including Eastern, that had
indicated a strong interest in EnergyNorth. During mid to late May 1999,
Eastern indicated to Mr. Giordano a preliminary per share price ranging from
$47 to $48, subject to the satisfactory completion of a due diligence review of
EnergyNorth. After considering the merits of the Eastern proposal in light of
the other expressions of interest, the executive committee of the EnergyNorth
board of directors authorized Mr. Giordano to continue more detailed
discussions with Eastern while remaining open to superior proposals.
During early June 1999, Eastern and EnergyNorth exchanged confidentiality
agreements and each began a due diligence process with respect to the other.
On June 10, 1999, the EnergyNorth board of directors met to consider the May
1999 preliminary offer from Eastern and received a briefing from Salomon Smith
Barney relating to recent mergers and acquisition activity in the energy sector
and the specifics of a business combination with Eastern. Salomon Smith Barney
indicated that the preliminary offer from Eastern was attractive given its
premium over the then current market price of EnergyNorth's common stock.
Following this presentation, the EnergyNorth board of directors authorized Mr.
Giordano to continue discussions with Eastern.
During late June through early July 1999, members of senior management of
EnergyNorth, with the assistance of legal counsel and Salomon Smith Barney, in
a series of meetings and discussions, began to negotiate the terms of a
definitive merger agreement with Eastern and its legal and financial advisors.
On July 2, 1999, the executive committee of the EnergyNorth board of directors
met and considered the proposed transaction with Eastern as well as other
alternatives available to EnergyNorth.
On July 14, 1999, the EnergyNorth board of directors met to consider the
merger agreement. At this meeting, EnergyNorth's legal counsel described the
provisions of the merger agreement and the responsibilities
28
<PAGE>
of the board of directors. In addition, Salomon Smith Barney presented its
opinion as to the fairness of the transaction from a financial point of view to
the stockholders of EnergyNorth and the nature of their analysis in arriving at
this opinion. The EnergyNorth board of directors unanimously approved the
merger agreement and voted to recommend its approval to the stockholders of
EnergyNorth.
Following the meeting of the EnergyNorth board of directors, EnergyNorth and
Eastern executed and delivered the final merger agreement and the transaction
was announced on the next business day, Thursday, July 15, 1999, prior to the
opening of the New York Stock Exchange.
On August 16, 1999, Eastern publicly announced that it was evaluating
strategic alternatives including the sale of all or a portion of the company.
In September 1999, Eastern advised EnergyNorth that it was considering,
among its strategic alternatives, a merger transaction with another company. In
late October 1999, representatives of EnergyNorth were advised that an Eastern
merger was under negotiation and Eastern began to negotiate Amendment No. 1
with EnergyNorth. The EnergyNorth board of directors met in a telephone meeting
on November 2, 1999, which was continued and reconvened on November 3, 1999. At
the November 3, 1999 meeting, Salomon Smith Barney delivered its oral opinion,
subsequently confirmed in writing on November 4, 1999, as to the fairness of
the consideration to be received in connection with the merger agreement as
amended by Amendment No. 1 from a financial point of view to the stockholders
of EnergyNorth and the EnergyNorth board of directors unanimously approved the
amendment and voted to recommend its approval to the stockholders of
EnergyNorth.
Common Reasons for the Merger
Even in the event the KeySpan-Eastern merger agreement has been terminated
and the merger consideration will consist of cash and Eastern common stock,
Eastern and EnergyNorth believe that the combined company, its stockholders and
customers can benefit significantly from the strategic advantages which they
expect to result from the merger, which include the following:
. Customers of Boston Gas, Colonial Gas, Essex Gas and EnergyNorth Natural
Gas, Inc. should realize long-term benefits as a result of the economies
of scale of the combined organization that will enable improved customer
service and lower costs.
. The greater financial and operational resources available to the combined
company should strengthen its competitive position in the increasingly
deregulated and competitive energy marketplace.
. Stockholders of both companies will have the opportunity to participate
in the upside potential of the consolidation of gas companies and the
future growth of the energy industry.
EnergyNorth's Reasons for the Merger; Recommendation of the EnergyNorth Board
EnergyNorth's Reasons for the Merger. In addition to the anticipated joint
benefits described above, EnergyNorth believes that the following are
additional reasons a merger in which the merger consideration may consist of
cash and shares of Eastern common stock will be beneficial to EnergyNorth and
its stockholders and acted upon these beliefs in approving the merger and
recommending it to its stockholders:
. EnergyNorth stockholders' receipt of a substantial premium over
EnergyNorth's then current market price;
. the ability to benefit from Eastern's financial strength and resources
and to participate in the future growth of the energy industry;
. the ability to serve customers in a deregulated environment by taking
advantage of the investments in technology made by Eastern; and
. the opportunity to take advantage of synergies between the companies to
lower costs.
29
<PAGE>
In approving the amendment to the merger agreement that provides for an
alternative all-cash payment if the KeySpan-Eastern merger agreement has not
been terminated prior to the effective time of the Eastern-EnergyNorth merger,
EnergyNorth concluded that the following is an additional reason a merger in
which the merger consideration may consist of all cash will be beneficial to
EnergyNorth and its stockholders:
. EnergyNorth stockholders' receipt of a substantial additional premium
over EnergyNorth's then current market price that EnergyNorth believes
outweighs the fully-taxable nature of the transaction to EnergyNorth
stockholders.
The EnergyNorth Board has unanimously approved the merger and the
transactions contemplated thereby and believes that the terms of the merger are
fair to, and in the best interests of, EnergyNorth and its stockholders. The
EnergyNorth board unanimously recommends a vote for the approval and adoption
of the merger.
Opinion of EnergyNorth's Financial Advisor
Salomon Smith Barney was retained to act as financial advisor to EnergyNorth
in connection with the merger. Pursuant to Salomon Smith Barney's engagement
letter dated May 24, 1999, Salomon Smith Barney rendered an opinion to the
EnergyNorth board of directors on July 14, 1999 and rendered an updated opinion
dated November 4, 1999 reflecting the terms of Amendment No. 1, each to the
effect that, based upon and subject to the considerations set forth in the
opinion, Salomon Smith Barney's experience as investment bankers, its work
described below and other factors it deemed relevant, as of the date of the
opinion, the consideration to be received by the holders of EnergyNorth common
stock was fair from a financial point of view to those holders.
The full text of Salomon Smith Barney's November 4, 1999 opinion, which sets
forth the assumptions made, general procedures followed, matters considered and
limits on the review undertaken, is included as Annex B to this document.
Salomon Smith Barney's November 4, 1999 opinion is substantially identical to
its July 14, 1999 opinion except to the extent necessary to reflect the terms
of Amendment No. 1 and to reflect the KeySpan-Eastern merger. The summary of
Salomon Smith Barney's November 4, 1999 opinion set forth below is qualified in
its entirety by reference to the full text of the opinion. Stockholders are
urged to read the Salomon Smith Barney opinion carefully and in its entirety.
In arriving at its opinion, Salomon Smith Barney reviewed the merger
agreement and Amendment No. 1 and held discussions with senior officers,
directors and other representatives and advisors of EnergyNorth and senior
officers and other representatives and advisors of Eastern concerning the
business, operations and prospects of EnergyNorth and Eastern. Salomon Smith
Barney examined publicly available business and financial information relating
to EnergyNorth and Eastern as well as financial forecasts and other information
and data for EnergyNorth and Eastern which were provided to or otherwise
discussed with Salomon Smith Barney by the managements of EnergyNorth and
Eastern, including information relating to strategic implications and
operational benefits anticipated to result from the merger. Salomon Smith
Barney reviewed the financial terms of the merger as set forth in the amended
merger agreement in relation to, among other things:
. current and historical market prices and trading volumes of the common
stock of each of EnergyNorth and Eastern;
. the historical and projected earnings and other operating data of
EnergyNorth and Eastern; and
. the capitalization and financial condition of EnergyNorth and Eastern.
Salomon Smith Barney considered, to the extent publicly available, the
financial terms of other similar recent transactions that Salomon Smith Barney
considered relevant in evaluating the merger and analyzed financial, stock
market and other publicly available information relating to the businesses of
other companies whose operations Salomon Smith Barney considered relevant in
evaluating those of EnergyNorth and Eastern. Salomon Smith Barney also
evaluated the pro forma financial impact of the merger on Eastern. In
connection
30
<PAGE>
with its engagement, Salomon Smith Barney was requested to approach, and it
held discussions with, selected third parties to solicit indications of
interest in the possible acquisition of all or part of EnergyNorth. In
addition, Salomon Smith Barney conducted other analyses and examinations and
considered other information and financial, economic and market criteria as it
deemed appropriate in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney and further relied on the
assurances of management of EnergyNorth that they were not aware of any facts
that would make any of that information inaccurate or misleading. With respect
to financial forecasts and other information and data provided to or otherwise
reviewed by or discussed with it, Salomon Smith Barney was advised by the
managements of EnergyNorth and Eastern that the forecasts and other information
and data had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of EnergyNorth and Eastern
as to the future financial performance of EnergyNorth and Eastern and the
strategic implications and operational benefits anticipated to result from the
merger. Salomon Smith Barney expressed no view with respect to the forecasts
and other information and data or the assumptions on which they were based.
Salomon Smith Barney assumed, with the consent of EnergyNorth's board, that
the merger will be treated as a tax-free reorganization for federal income tax
purposes if it is consummated in accordance with the amended merger agreement
following the termination of the KeySpan-Eastern merger agreement. Salomon
Smith Barney has not made or been provided with an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of EnergyNorth
or Eastern nor did Salomon Smith Barney make any physical inspection of the
properties or assets of EnergyNorth or Eastern. Salomon Smith Barney further
assumed that the merger will be consummated in accordance with the terms of the
amended merger agreement, without waiver of any of the conditions to the merger
contained in the amended merger agreement.
Salomon Smith Barney was not asked to consider, and its opinion does not
address, the relative merits of the merger as compared to any alternative
business strategy that might exist for EnergyNorth or the effect of any other
transaction in which EnergyNorth might engage. Salomon Smith Barney was not
asked to consider for the purposes of its opinion, and its opinion does not
address, the KeySpan-Eastern merger, except to the extent of its direct impact
on the consideration to be received in the Eastern-EnergyNorth merger. Salomon
Smith Barney's opinion relates to the consideration to be received in the
Eastern-EnergyNorth merger, whether or not the KeySpan-Eastern merger is
consummated. Salomon Smith Barney did not express any opinion as to what the
value of the Eastern common stock actually will be if and when issued in the
merger following a termination of the KeySpan-Eastern merger agreement or the
price at which Eastern common stock will trade subsequent to the merger in
those circumstances. Salomon Smith Barney's opinion necessarily was based on
information available to it, and financial, stock market and other conditions
existing and disclosed to Salomon Smith Barney as of the date of the opinion.
Salomon Smith Barney's advisory services and opinion were provided for the
information of EnergyNorth's board of directors in its evaluation of the
proposed merger and did not constitute a recommendation of the merger to
EnergyNorth or a recommendation to any stockholder as to how that stockholder
should vote on any matters relating to the proposed merger or, if applicable
following a termination of the KeySpan-Eastern merger agreement, as to what
election any stockholder should make with respect to the form of consideration
to be received for that stockholder's EnergyNorth common stock.
In connection with rendering its July 14, 1999 opinion, Salomon Smith Barney
made a presentation to the EnergyNorth board of directors on July 14, 1999,
with respect to the material analyses performed by Salomon Smith Barney in
evaluating the fairness of the consideration to be received by holders of
EnergyNorth common stock in the merger. The following is a summary of this
presentation. The summary includes information presented in tabular format. In
order to understand fully the financial analyses used by Salomon Smith Barney,
these tables must be read together with the text of each summary. The tables
alone do not constitute a complete
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<PAGE>
description of the financial analyses. The following quantitative information,
to the extent it is based on market data, is, except as otherwise indicated,
based on market data as it existed at or prior to July 12, 1999 and is not
necessarily indicative of current or future market conditions.
Summary of Financial Terms of Merger. Salomon Smith Barney summarized the
financial terms of the proposed merger for the EnergyNorth board of directors.
For purposes of its analyses, Salomon Smith Barney calculated the estimated
present value of the offer to EnergyNorth stockholders, assuming twelve months
to closing. Using option pricing models, Salomon Smith Barney estimated the
value of the stock component of the consideration to be $22.44, based on a
value of $44.79 for $47.00 in Eastern stock to be received in twelve months,
subject to a collar of 10% around the $40.00 July 14 price of Eastern stock,
for 50.1% of the consideration. Salomon Smith Barney estimated the value of the
cash component of the consideration to be $21.32 to $21.91, based on $47.00 in
cash discounted at 7% and 10%, for 49.9% of the consideration. Salomon Smith
Barney then added $1.33 to $1.35, representing the present value of the four
EnergyNorth dividend payments anticipated prior to a closing twelve months
later, discounted at 7% and 10%. This resulted in an estimate of the overall
present value of the offer ranging from $45.08 to $45.70 per share of
EnergyNorth common stock.
Overview and Valuation of EnergyNorth. Salomon Smith Barney included in its
presentation to the EnergyNorth board an overview of EnergyNorth, including
historical financial and trading price information. Salomon Smith Barney noted
the then current trading price of EnergyNorth common stock, $29.6875, and the
range in which the EnergyNorth common stock had traded during the 52-week
period prior to July 12, 1999, from a low of $25.25 to a high of $30.13.
Salomon Smith Barney noted that the offer price represents a significant
premium to these historical trading prices.
Salomon Smith Barney also performed, and summarized, analyses of the value
of EnergyNorth common stock utilizing three methodologies: a comparable company
analysis, using market data as of June 8, 1999 and as of July 9, 1999; a
comparable transaction analysis; and a discounted cash flow analysis. Salomon
Smith Barney performed these analyses on a consolidated basis, utilizing data
for all of EnergyNorth, and on a sum-of-the-parts basis in which it applied the
methodology separately to data for each component business of EnergyNorth. Each
of these analyses was used to generate a reference range for the value of
EnergyNorth. The following table shows the summary of these valuations and
comparisons. The table should be read together with the more detailed summary
of each of these valuation analyses set forth below.
EnergyNorth Summary Valuation
<TABLE>
<CAPTION>
Reference
Range of
Methodology Implied Value
----------- -------------
<S> <C>
Consolidated:
July 9, 1999 Comparable Companies............................... $29.00-$35.00
June 8, 1999 Comparable Companies............................... $25.00-$31.00
Comparable Transactions......................................... $36.00-$48.00
Discounted Cash Flow............................................ $29.25-$35.25
Sum-of-the-Parts:
July 9, 1999 Comparable Companies............................... $29.75-$37.75
June 8, 1999 Comparable Companies............................... $26.75-$34.75
Comparable Transactions......................................... $37.00-$49.25
Discounted Cash Flow............................................ $33.25-$40.50
</TABLE>
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<PAGE>
Each of these reference ranges was then compared to the following:
<TABLE>
<S> <C>
. Offer Price.................................................. $47.00
. Estimated Present Value of Offer and Collar*................. $45.08-$45.70
. July 14, 1999 Stock Price.................................... $29.6875
. 52-Week Trading Range........................................ $25.25-$30.13
</TABLE>
- --------
* Present value of offer assumes closing occurs June 30, 2000. Cash is
discounted at 7% and 10%. The present value of the offer includes the value
of the stock consideration adjusted for a 10% down, +10% up collar around an
Eastern price of $40.00, assuming 20% annual volatility.
Comparable Company Analysis--Consolidated. Salomon Smith Barney reviewed
publicly available financial, operating and stock market information and
estimates of future financial results published by I/B/E/S International, an
industry service provider of earnings estimates based on an average of earnings
estimates published by various investment banking firms, for EnergyNorth and
the following seven publicly-traded New England gas utility companies:
. Berkshire Energy Resources
. CTG Resources
. Eastern
. Fall River Gas
. Providence Energy
. Valley Resources
. Yankee Energy System
CTG Resources and Yankee Energy System were utilized only for the analysis as
of June 8, 1999 since each was the target of an acquisition announced after
June 8, thus making them inappropriate for inclusion in the analysis as of July
9.
Salomon Smith Barney considered these companies to be reasonably similar to
EnergyNorth insofar as they participate in business segments similar to
EnergyNorth's principal business segment, but noted that none of these
companies has the same management, makeup, size and combination of businesses
as EnergyNorth.
For EnergyNorth and each of the comparable companies, Salomon Smith Barney
calculated and compared, among other things:
. the ratio of the closing stock price on June 8, 1999 and July 9, 1999 to
. net income for the latest twelve months, sometimes referred to as
"LTM", as of March 31, 1999,
. 1999 earnings per share estimates and
. 2000 earnings per share estimates;
. the ratio of equity value to book value; and
. the ratio of firm value to
. latest twelve months earnings before interest, taxes, depreciation
and amortization, sometimes referred to as "EBITDA", and
. latest twelve months earnings before interest and taxes, sometimes
referred to as "EBIT".
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<PAGE>
The following table sets forth the results of these calculations:
Comparable Companies
<TABLE>
<CAPTION>
Range Mean Median EnergyNorth
----------- ----- ------ -----------
<S> <C> <C> <C> <C>
As of June 8, 1999:
Ratio of Closing Price to:
(a) LTM net income...................... 14.6x-25.1x 17.8x 16.5x 16.2x
(b) 1999 earnings per share estimates... 14.1x-21.6x 16.3x 15.3x 13.6x
(c) 2000 earnings per share estimates... 11.5x-16.4x 13.6x 13.1x 13.6x
Ratio of equity value to book value....... 1.29x-2.10x 1.59x 1.54x 1.58x
Ratio of firm value to:
(a) LTM EBITDA.......................... 6.8x- 9.3x 8.1x 8.4x 7.0x
(b) LTM EBIT............................ 10.6x-14.8x 12.7x 13.1x 11.0x
As of July 9, 1999:
Ratio of Closing Price to:
(a) LTM net income...................... 14.0x-26.7x 19.5x 18.7x 17.1x
(b) 1999 earnings per share estimates... 15.8x-22.9x 18.9x 18.5x 14.3x
(c) 2000 earnings per share estimates... 13.0x-20.7x 16.0x 15.1x 14.3x
Ratio of equity value to book value....... 1.57x-2.27x 1.81x 1.72x 1.66x
Ratio of firm value to:
(a) LTM EBITDA.......................... 6.5x-10.0x 8.8x 9.7x 7.3x
(b) LTM EBIT............................ 10.8x-16.4x 14.0x 14.0x 11.4x
</TABLE>
Salomon Smith Barney utilized a narrower selected range around the median of
these ratios for the comparable companies to derive an implied value per share
of EnergyNorth common stock r to $31.00, using market data as of June 8, 1999,
and from $29.00 to $35.00, using market data as of July 9, 1999.
Comparable Transactions Analysis--Consolidated. Salomon Smith Barney
analyzed publicly available financial, operating and stock market information
for thirteen selected completed or pending merger and acquisition transactions
in the gas utility industry since 1997. The precedent transactions reviewed
were:
<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
Energy East........................ CTG Resources, Inc.
Wisconsin Energy................... WICOR
Northeast Utilities................ Yankee Energy System
SIGCORP............................ Indiana Energy
Southern Union..................... Pennsylvania Enterprises
Dominion Resources................. Consolidated Natural Gas
ONEOK.............................. Southwest Gas
Energy East........................ Connecticut Energy
SCANA.............................. Public Service Company of North Carolina
Carolina Power & Light............. North Carolina Natural Gas
Eastern............................ Colonial Gas
Eastern............................ Essex County Gas Company
NIPSCO Industries Inc.............. Bay State Gas Company
</TABLE>
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<PAGE>
Salomon Smith Barney considered the precedent transactions to be reasonably
similar to the merger, but none of these transactions is identical to the
merger.
For each of the precedent transactions, Salomon Smith Barney derived, among
other things:
. the premium of the transaction consideration to:
. closing price of the acquired stock one day prior to announcement of
the transaction,
. closing price of the acquired stock 5 trading days prior to
announcement of the transaction and
. closing price of the acquired stock one month prior to announcement
of the transaction;
. the ratio of the implied transaction value to:
. latest twelve months earnings per share, sometimes referred to as
"EPS",
. estimated earnings per share for the fiscal year following
announcement of the transaction and
. estimated earnings per share for the second fiscal year following
announcement of the transaction;
. the ratio of equity value to book value; and
. the ratio of firm value to
. net plant and
. number of customers.
The following table sets forth the results of these calculations:
Precedent Transactions
<TABLE>
<CAPTION>
Range Mean Median
------------ ----- ------
<S> <C> <C> <C>
Premium of transaction price over:
. Day Prior Price................................... (6.4)%-47.4% 24.5% 23.0%
. 5 Day Prior Price................................. (5.3)%-51.0% 31.2% 29.2%
. One Month Prior Price............................. 0.0%-63.5% 37.4% 35.9%
Ratio of transaction value to:
. LTM EPS........................................... 15.3x-36.8x 23.6x 22.9x
. Forward Fiscal Year EPS........................... 13.5x-27.6x 21.0x 21.3x
. Second Fiscal Year EPS............................ 16.4x-25.0x 19.9x 19.5x
Ratio of equity value to book value................... 1.93x-3.03x 2.53x 2.59x
Ratio of firm value to:
. Net Plant......................................... 1.28x-3.26x 1.84x 1.80x
. No. of Customers.................................. $ 1584-$4710 $3071 $2970
</TABLE>
In its analysis, Salomon Smith Barney utilized a narrower selected range of
the ratios shown above for the precedent transactions to derive an implied
value per share of EnergyNorth common stock ranging from $36.00 to $48.00.
Discounted Cash Flow Analysis--Consolidated. Salomon Smith Barney also
performed a discounted cash flow analysis of EnergyNorth using EnergyNorth
management projections for the years 1999 through 2003. Salomon Smith Barney
calculated the estimated present value of EnergyNorth's unlevered free cash
flows for the years 1999 through 2003 and the estimated present value of the
terminal value per share of EnergyNorth common stock at the end of the year
2003. For purposes of this analysis, Salomon Smith Barney utilized discount
rates ranging from 6.5% to 7.5%, based upon an analysis of the weighted average
cost of capital of EnergyNorth, and terminal values based on multiples ranging
from 6.3x to 6.9x projected year 2003 EBITDA.
35
<PAGE>
From this analysis, Salomon Smith Barney derived a reference range of implied
equity value per share of EnergyNorth common stock of $29.25 to $35.25.
Comparable Company Analysis--Sum-of-the-Parts. Salomon Smith Barney
separately analyzed the natural gas, mechanicals, propane and other businesses
of EnergyNorth, and its 49% interest in VGS, as component parts and reviewed
publicly available financial, operating and stock market information and
estimates of future financial results published by I/B/E/S International and
First Call, another industry service provider of earnings estimates based on an
average of earnings estimates published by various investment banking firms,
for publicly-traded entities in these component sectors.
For purposes of this analysis, Salomon Smith Barney reviewed the data
described above relating to New England gas utility companies in its review of
the natural gas business of EnergyNorth. The three comparable companies Salomon
Smith Barney used in evaluating the mechanicals business of EnergyNorth were
Comfort Systems, Group Maintenance America and Service Experts. The six propane
distributors Salomon Smith Barney used in evaluating the propane business of
EnergyNorth were AmeriGas Partners, L.P., Cornerstone Propane Partners, L.P.,
Ferrelgas Partners, L.P., Heritage Propane Partners, L.P., Star Gas Partners,
L.P. and Suburban Propane Partners, L.P.
From this analysis, Salomon Smith Barney derived an implied value per share
of EnergyNorth common stock attributable to each of the component businesses.
The following table sets forth the results of these analyses:
Implied Per Share Value
<TABLE>
<CAPTION>
Data as of Data as of
June 8 July 9
------------- -------------
Component Business Low High Low High
- ------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Natural Gas......................................... $20.00 $26.00 $23.00 $29.00
Mechanicals......................................... 1.50 2.00 1.50 2.00
Propane............................................. 4.25 5.00 4.25 5.00
49% of VGS.......................................... 0.75 1.50 0.75 1.50
Other............................................... 0.25 0.25 0.25 0.25
</TABLE>
Based on this analysis, Salomon Smith Barney derived an overall implied
value per share of EnergyNorth common stock ranging from $26.75 to $34.75,
using market data for the natural gas business as of June 8, 1999, and from
$29.75 to $37.75, using market data as of July 9, 1999.
Comparable Transactions Analysis--Sum-of-the-Parts. Salomon Smith Barney
also analyzed publicly available financial, operating and stock market
information for selected merger and acquisition transactions in the industry
sectors of each of EnergyNorth's component businesses.
Salomon Smith Barney utilized the gas utility transactions described above
in its review of the natural gas business of EnergyNorth. The pending
acquisition of American Residential Services by The ServiceMaster Company was
reviewed by Salomon Smith Barney in its analysis of the mechanicals business of
EnergyNorth. In its review of the propane business of EnergyNorth, Salomon
Smith Barney reviewed the following five merger and acquisition transactions
since 1995.
<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
Columbia Energy.................................... National Propane Partners
Cornerstone Propane Partners, L.P.................. Propane Continental, Inc.
Northwestern Growth Corp........................... Empire Energy Corp.
Ferrelgas Partners, L.P............................ Skelgas Propane, Inc.
AmeriGas, Inc...................................... Petrolane Inc.
</TABLE>
36
<PAGE>
From this analysis, Salomon Smith Barney derived an implied value per share
of EnergyNorth common stock attributable to each of the component businesses.
The following table sets forth the results of these analyses.
Implied Per Share Value
<TABLE>
<CAPTION>
Component Business Low High
- ------------------ ------ ------
<S> <C> <C>
Natural Gas....................................................... $28.00 $38.00
Mechanicals....................................................... 2.00 2.75
Propane........................................................... 5.50 6.25
49% of VGS........................................................ 1.25 2.00
Other............................................................. 0.25 0.25
</TABLE>
Based on this analysis, Salomon Smith Barney derived an overall implied
value per share of EnergyNorth common stock ranging from $37.00 to $49.25.
Discounted Cash Flow Analysis--Sum-of-the-Parts. Salomon Smith Barney also
performed a sum-of-the-parts discounted cash flow analysis of EnergyNorth using
EnergyNorth management projections for each of the component businesses for the
years 1999 through 2003. Salomon Smith Barney calculated the estimated present
value of the unlevered free cash flows of each business for the years 1999
through 2003 and the estimated present value of the terminal value per share of
EnergyNorth common stock attributable to each business at the end of the year
2003. For purposes of this analysis, Salomon Smith Barney utilized discount
rates ranging from 6.5% to 7.5% and terminal values based on multiples ranging
from 6.4x to 7.0x projected year 2003 EBITDA for the natural gas business;
discount rates ranging from 7.5% to 8.5% and terminal values based on multiples
ranging from 9.0x to 10.0x projected year 2003 EBITDA for the mechanicals
business; and discount rates ranging from 6.5% to 7.5% and terminal values
based on multiples ranging from 9.5x to 11.0x projected year 2003 EBITDA for
the propane business and VGS. The following table sets forth the results of
these analyses:
Implied Per Share Value
<TABLE>
<CAPTION>
Component Business Low High
- ------------------ ------ ------
<S> <C> <C>
Natural Gas....................................................... $23.50 $28.50
Mechanicals....................................................... 2.50 2.75
Propane........................................................... 5.25 6.75
49% of VGS........................................................ 1.75 2.25
Other............................................................. 0.25 0.25
</TABLE>
Based on this analysis, Salomon Smith Barney derived a reference range of
implied equity value per share of EnergyNorth common stock ranging from $33.25
to $40.50.
Overview and Valuation of Eastern. Salomon Smith Barney included in its
presentation to the EnergyNorth board an overview of Eastern, including
historical financial information, historical trading price information and a
summary of the views of Wall Street analysts on Eastern. Salomon Smith Barney
noted that Eastern common stock had traded during the prior 52 weeks in a range
from a low of $33.25 to a high of $44.25.
Salomon Smith Barney also performed, and summarized, analyses of the value
of Eastern common stock utilizing two methodologies: a comparable company
analysis, using market data as of June 8, 1999 and as of July 9, 1999; and a
discounted cash flow analysis. Salomon Smith Barney performed these analyses on
a consolidated basis, utilizing data for all of Eastern, and on a sum-of-the-
parts basis in which it applied the methodology separately to data for each
component business of Eastern. Each of these analyses was used to generate a
reference range for the value of Eastern common stock. The following table
shows the summary of these valuations. The table should be read together with
the more detailed summary of each of these valuation analyses set forth below.
37
<PAGE>
Eastern Enterprises Summary Valuation
<TABLE>
<CAPTION>
Reference
Range of
Methodology Implied Value
----------- -------------
<S> <C>
Consolidated:
July 9, 1999 Comparable Companies............................... $37.00-$45.00
June 8, 1999 Comparable Companies............................... $32.00-$40.00
Discounted Cash Flow............................................ $41.50-$49.50
Sum-of-the-Parts:
July 9, 1999 Comparable Companies............................... $40.50-$47.75
June 8, 1999 Comparable Companies............................... $36.50-$43.75
Discounted Cash Flow............................................ $46.75-$55.25
Each of these reference ranges was then compared to the following:
. July 14, 1999 Stock Price.................................... $40.00
. 52-Week Trading Range........................................ $33.25-$44.25
</TABLE>
Comparable Company Analysis--Consolidated. Salomon Smith Barney reviewed the
publicly available financial, operating and stock market information and
estimates of future financial results described above for the New England gas
utility companies as the comparable companies in its evaluation of Eastern.
Salomon Smith Barney considered these companies to be reasonably similar to
Eastern insofar as they participate in business segments similar to Eastern's
principal business segment, but noted that none of these companies has the same
management, makeup, size and combination of businesses as Eastern.
Utilizing the same narrower selected range around the median of the ratios
for the comparable companies, Salomon Smith Barney derived an implied value per
share of Eastern common stock ranging from $32.00 to $40.00, using market data
as of June 8, 1999, and from $37.00 to $45.00, using market data as of July 9,
1999.
Discounted Cash Flow Analysis--Consolidated. Salomon Smith Barney also
performed a discounted cash flow analysis of Eastern using Eastern management
projections for the years 1999 through 2003. Salomon Smith Barney calculated
the estimated present value of Eastern's unlevered free cash flows for the
years 1999 through 2003 and the estimated present value of the terminal value
per share of Eastern common stock at the end of the year 2003. For purposes of
this analysis, Salomon Smith Barney utilized discount rates ranging from 6.5%
to 7.5%, based upon an analysis of the weighted average cost of capital of
Eastern, and terminal values based on multiples ranging from 5.9x to 6.5x
projected year 2003 EBITDA. From this analysis, Salomon Smith Barney derived a
reference range of implied value per share of Eastern common stock of $41.50 to
$49.50.
Comparable Company Analysis--Sum-of-the-Parts. Salomon Smith Barney
separately analyzed the natural gas, marine transportation and mechanicals
businesses of Eastern, and its headquarters, as component parts and reviewed
publicly available financial, operating and stock market information and
estimates of future financial results published by I/B/E/S International and
First Call for publicly-traded entities in these component sectors.
For purposes of this analysis, Salomon Smith Barney reviewed the data
described above relating to New England gas utility companies and to the three
comparable mechanicals companies in its review of the natural gas business and
the mechanicals business, respectively, of Eastern. The eight barge, other
shipping or other transportation companies Salomon Smith Barney used in
evaluating the marine transportation business of Eastern were Kirby, Alexander
& Baldwin, Hvide Marine Incorporated, Maritrans Inc., Omi Corp., Burlington
Northern Santa Fe, CSX Corp. and Union Pacific Corp.
38
<PAGE>
From this analysis, Salomon Smith Barney derived an implied value per share
of Eastern common stock attributable to each of the component businesses. The
following table sets forth the results of these analyses:
Implied Per Share Value
<TABLE>
<CAPTION>
Data as of Data as of
June 8 July 9
------------- -------------
Component Business Low High Low High
- ------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Natural Gas......................................... $27.00 $32.00 $31.00 $36.00
Marine Transportation............................... 5.00 7.00 5.00 7.00
Mechanicals......................................... 0.00 0.25 0.00 0.25
Headquarters........................................ 4.50 4.50 4.50 4.50
</TABLE>
Based on this analysis, Salomon Smith Barney derived an overall implied
value per share of Eastern common stock ranging from $36.50 to $43.75, using
market data for the natural gas business as of June 8, 1999, and from $40.50 to
$47.75, using market data as of July 9, 1999.
Discounted Cash Flow Analysis--Sum-of-the-Parts. Salomon Smith Barney also
performed a sum-of-the-parts discounted cash flow analysis of Eastern using
Eastern management projections for each of the component businesses for the
years 1999 through 2003. Salomon Smith Barney calculated the estimated present
value of the unlevered free cash flows of each business for the years 1999
through 2003 and the estimated present value of the terminal value per share of
Eastern common stock attributable to each business at the end of the year 2003.
For purposes of this analysis, Salomon Smith Barney utilized discount rates
ranging from 6.5% to 7.5% and terminal values based on multiples ranging from
6.5x to 7.1x projected year 2003 EBITDA for the natural gas business; discount
rates ranging from 8.5% to 9.5% and terminal values based on multiples ranging
from 7.0x to 8.0x projected year 2003 EBITDA for the marine transportation
business; and discount rates ranging from 7.5% to 8.5% and terminal values
based on multiples ranging from 9.0x to 10.0x projected year 2003 EBITDA for
the mechanicals business. The following table sets forth the results of these
analyses:
Implied Per Share Value
<TABLE>
<CAPTION>
Component Business Low High
- ------------------ ------ ------
<S> <C> <C>
Natural Gas....................................................... $29.50 $35.50
Marine Transportation............................................. 11.50 13.75
Mechanicals....................................................... 1.25 1.50
Headquarters...................................................... 4.50 4.50
</TABLE>
Based on this analysis, Salomon Smith Barney derived a reference range of
implied equity value per share of Eastern common stock ranging from $46.75 to
$55.25.
Historical Trading Analyses. Salomon Smith Barney reviewed the relationship
between the daily closing prices of EnergyNorth common stock and Eastern common
stock during the following periods, each ending on July 14, 1999:
. Last two years
. Last six months
. Last one month
39
<PAGE>
Salomon Smith Barney calculated the implied historical exchange ratio
determined by dividing the closing price per share of EnergyNorth common stock
by the closing price per share of Eastern common stock for each trading day in
these periods. The following table shows the results of those calculations.
Historical Exchange Ratio
<TABLE>
<CAPTION>
High Low Average
----- ----- -------
<S> <C> <C> <C>
Period:
Last Two Years............................................ 0.827 0.567 0.674
Last Six Months........................................... 0.827 0.690 0.749
Last One Month............................................ 0.801 0.723 0.751
</TABLE>
Salomon Smith Barney noted that the exchange ratio implied by the latest
closing prices of EnergyNorth and Eastern was 0.742. Salomon Smith Barney noted
that the proposed merger exchange ratio significantly exceeds the historical
trading ratios currently and during each of these periods.
The preceding discussion is a summary of the material financial analyses
furnished by Salomon Smith Barney to the EnergyNorth board of directors but it
does not purport to be a complete description of the analyses performed by
Salomon Smith Barney or of its presentations to the EnergyNorth board of
directors. In connection with its November 4, 1999 opinion, Salomon Smith
Barney performed procedures to confirm its analyses described above based upon
updated information. Salomon Smith Barney also reviewed the assumptions on
which those analyses were based and the factors considered in connection with
those analyses. Salomon Smith Barney's review confirmed its opinion in light of
the updated information.
The preparation of financial analyses and fairness opinions is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. Salomon Smith Barney made no attempt
to assign specific weights to particular analyses or factors considered, but
rather made qualitative judgments as to the significance and relevance of all
the analyses and factors considered and determined to give its fairness opinion
as described above.
Accordingly, Salomon Smith Barney believes that its analyses, and the
summary set forth above, must be considered as a whole, and that selecting
portions of the analyses and of the factors considered by Salomon Smith Barney,
without considering all of the analyses and factors, could create a misleading
or incomplete view of the processes underlying the analyses conducted by
Salomon Smith Barney and its opinion. With regard to the comparable public
company analyses summarized above, Salomon Smith Barney selected comparable
public companies on the basis of various factors, including the size of the
public company and similarity of the line of business; however, no public
company utilized as a comparison in these analyses, and no transaction utilized
as a comparison in the comparable transaction analyses summarized above, is
identical to EnergyNorth or Eastern, any business segment of EnergyNorth or
Eastern or the merger. As a result, these analyses are not purely mathematical,
but also take into account differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the transaction or public trading value of the comparable companies and
transactions to which EnergyNorth and Eastern, the business segments of
EnergyNorth and Eastern and the merger are being compared.
In its analyses, Salomon Smith Barney made numerous assumptions with respect
to EnergyNorth, Eastern, industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of EnergyNorth and Eastern. Any estimates contained in Salomon Smith
Barney's analyses are not necessarily indicative of actual values or predictive
of future results or values, which may be significantly more or less favorable
than those suggested by these analyses. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the prices at which
companies may actually be sold. Because these estimates are inherently subject
to uncertainty, none of EnergyNorth, Eastern, the EnergyNorth board of
directors, Salomon Smith Barney or any other person assumes responsibility if
future results or actual values differ materially from the estimates.
40
<PAGE>
Salomon Smith Barney's analyses were prepared solely as part of Salomon
Smith Barney's analysis of the fairness of the consideration to be received by
holders of EnergyNorth common stock in the merger and were provided to the
EnergyNorth board of directors in that connection. The opinion of Salomon Smith
Barney was one of the factors taken into consideration by the EnergyNorth board
of directors in making its determination to approve the merger agreement and
the merger.
Salomon Smith Barney is an internationally recognized investment banking
firm engaged, among other things, in the valuation of businesses and their
securities in connection with mergers and acquisitions, restructurings,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. EnergyNorth selected
Salomon Smith Barney to act as its financial advisor on the basis of Salomon
Smith Barney's extensive experience in similar utility transactions. Salomon
Smith Barney and its predecessors and affiliates had previously rendered
investment banking services to Eastern unrelated to the merger, for which
Salomon Smith Barney has received customary compensation and Salomon Smith
Barney is currently providing investment banking services to Eastern in
connection with the KeySpan-Eastern merger for which Salomon Smith Barney will
receive a fee. In the ordinary course of its business, Salomon Smith Barney and
its affiliates may actively trade or hold the securities of both EnergyNorth
and Eastern for its own account and for the account of customers and,
accordingly, may at any time hold a long or short position in these securities.
Salomon Smith Barney and its affiliates, including Citigroup Inc. and its
affiliates, may have other business relationships with EnergyNorth, Eastern and
KeySpan and their respective affiliates.
Pursuant to Salomon Smith Barney's engagement letter, EnergyNorth has agreed
to pay Salomon Smith Barney a fee for its services equal to $1.9 million plus
2.0% of the consideration received by stockholders of EnergyNorth in excess of
$40.00 per share, but less than or equal to $42.50 per share, plus 2.5% of the
consideration received by stockholders of EnergyNorth in excess of $42.50 per
share, but less than or equal to $45.00 per share, plus 3.0% of the
consideration received by stockholders of EnergyNorth in excess of $45.00 per
share, one quarter of which has been paid or is payable, an additional one
fifth of which will become payable upon approval of the merger by stockholders
of EnergyNorth, and the payment of the remainder is contingent upon
consummation of the merger. EnergyNorth has also agreed to reimburse Salomon
Smith Barney for its reasonable travel and other out-of-pocket expenses
incurred in connection with its engagement, including the reasonable fees and
disbursements of its counsel, and to indemnify Salomon Smith Barney against
specific liabilities and expenses relating to or arising out of its engagement,
including liabilities under the federal securities laws.
As noted under the caption "The Merger--EnergyNorth's Reasons for the
Merger; Recommendation of the EnergyNorth Board" the fairness opinion of
Salomon Smith Barney was only one of several factors considered by the
EnergyNorth board of directors in determining to approve the merger agreement
and the merger.
Accounting Treatment
The merger will be accounted for by Eastern using the purchase method of
accounting for a business combination. Under this method of accounting, the
assets and liabilities of EnergyNorth, including intangible assets, will be
recorded at their fair market values. The results of operations and cash flows
of EnergyNorth will be included in Eastern's financials prospectively as of the
consummation of the merger.
Certain Federal Income Tax Consequences
The following is a summary of the material United States federal income tax
consequences of the merger. This summary is limited to United States Persons
(as defined below) who hold their EnergyNorth common stock as "capital assets"
within the meaning of the Internal Revenue Code (the "Code"), and whose
"functional currency" is the U. S. dollar. This discussion does not address the
U.S. federal income tax consequences to certain persons subject to special
treatment under federal income tax laws, including, but not
41
<PAGE>
limited to, tax-exempt organizations, dealers in securities or currencies,
regulated investment companies, real estate investment trusts, real estate
mortgage investment conduits, financial asset securitization investment trusts,
financial institutions, persons subject to alternative minimum tax, insurance
companies, persons holding their stock as a part of a hedging, conversion,
short sale, or integrated transaction or a straddle, or stockholders who
acquired their EnergyNorth common stock pursuant to the exercise of an employee
stock option or otherwise as compensation. In addition, this summary does not
discuss the tax consequences of the merger under state, local, or foreign law.
"United States Person" means:
. a citizen or resident of the United States,
. a corporation or partnership created or organized in or under the laws of
the United States or any state thereof, or
. an estate or trust that is subject to United States federal income
taxation without regard to the source of its income.
This summary is based upon the provisions of law and the regulations,
administrative rulings, and judicial decisions thereunder now in effect, all of
which are subject to change (possibly with retroactive effect) or different
interpretations. Any such changes could affect the accuracy of the statements
and conclusions set forth herein. This summary does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to a decision whether to approve the merger. This summary is provided for
general information purposes only, and does not constitute, and should not be
considered as, legal or tax advice.
EnergyNorth stockholders should consult their own tax advisors concerning
the United States federal income tax consequences of the merger in light of
their particular situations, as well as concerning any consequences arising
under the laws of any other tax jurisdiction, including any state, local,
or foreign jurisdiction, and any estate or gift tax considerations.
Ropes & Gray, counsel to Eastern, and Hale and Dorr LLP, counsel to
EnergyNorth, have each delivered an opinion that the description of the federal
income tax consequences of the merger contained in this section fairly and
accurately summarizes the material federal income tax consequences of the
merger. These opinions, which are exhibits to the registration statement in
which this proxy statement/prospectus is included, are based on certain
assumptions and subject to certain limitations and qualifications described in
such opinions.
An opinion of counsel only represents counsel's best judgment, and has no
binding effect or official status of any kind, and no assurance can be given
that contrary positions may not be taken by the IRS or a court considering the
issues. Neither Eastern nor EnergyNorth has requested or will request a ruling
from the IRS with regard to any of the federal income tax consequences of the
merger.
Tax Consequences of the Merger. The federal income tax consequences of the
merger depend upon whether the merger agreement between KeySpan and Eastern is
terminated prior to the effective date of the Eastern-EnergyNorth merger.
Taxable Merger. If the merger agreement between KeySpan and Eastern is not
terminated prior to the effective date of the Eastern-EnergyNorth merger, the
stockholders of EnergyNorth will receive solely cash consideration in the
merger. Each EnergyNorth stockholder will recognize taxable gain or loss equal
to the difference between the value of the cash received and the stockholder's
adjusted tax basis in the EnergyNorth common stock exchanged. Such gain or loss
generally will be a capital gain or loss, assuming the EnergyNorth common stock
is held as a capital asset at the effective time of the merger. In the case of
individuals, trusts and estates, such capital gain will be subject to a maximum
federal income tax rate of 20% for shares of EnergyNorth common stock held for
more than one year prior to the date of disposition.
42
<PAGE>
Partially Tax-Free Reorganization. If the merger agreement between KeySpan
and Eastern is terminated prior to the effective date of the Eastern-
EnergyNorth merger, the merger will be structured as a reorganization within
the meaning of Section 368(a) of the Code. In this case, consummation of the
merger will be conditioned on the receipt of tax options of Ropes & Gray and
Hale and Dorr LLP, each dated as of the time of the merger, that the merger
qualifies as a reorganization. Such opinions will be based in part on
representations made by EnergyNorth, Eastern and Merger Sub as of the effective
date of the merger and on certain assumptions and will be subject to certain
limitations and qualifications.
To qualify as a reorganization under Section 368(a) of the Code, the merger
must satisfy, in addition to other requirements, a "continuity of interest"
test, which requires that the holders of EnergyNorth common stock, as a group,
retain a substantial proprietary interest in the EnergyNorth business that
Eastern will conduct following the merger. IRS ruling guidelines provide that
this requirement will be satisfied if the holders of EnergyNorth common stock,
as a group, receive an amount of Eastern common stock in the merger having a
value equal to at least 50% of the value of the formerly outstanding
EnergyNorth common stock. However, these guidelines only describe the
circumstances in which the IRS will issue a favorable ruling in advance of the
consummation of a subject transaction, and are not a statement of the
substantive law regarding the qualification of a merger as a reorganization
under Section 368(a) of the Code. The case law is more liberal than the IRS
ruling guidelines in this area and, in one early case, the Supreme Court held
that the continuity requirement was satisfied where the stockholders of the
acquired company received stock of the acquiring company having a value of less
than 45% of the value of the formerly outstanding stock of the acquired
company.
In general, the merger should satisfy the IRS's advance ruling guidelines in
this area unless:
. the market price of a share of Eastern common stock, valued at the
average of the daily weighted averages of the per share trading prices of
Eastern common stock on the New York Stock Exchange for the ten trading
day period ending on the third trading day prior to that date, is $36 or
less, or
. the market price of Eastern common stock on the date on which the merger
is consummated is less than $44 and is also less than such ten day
average price.
If the IRS guideline percentage is not satisfied, however, the merger
agreement provides that the number of shares of Eastern common stock issued in
the merger will be increased to equal at least 45% of the value of the formerly
outstanding EnergyNorth common stock and the amount of cash paid will be
correlatively reduced. The "continuity of interest" requirement should be
satisfied at this 45% level.
Treatment of stockholders who exchange EnergyNorth common stock solely for
Eastern common stock. Except as discussed below with respect to the receipt of
cash in lieu of fractional shares, a United States Holder of EnergyNorth common
stock who receives solely Eastern common stock in exchange for EnergyNorth
common stock in the merger will not recognize gain or loss upon such exchange.
The aggregate tax basis of the Eastern common stock received by such holder
(including any fractional shares deemed received, as described below) will be
equal to the aggregate tax basis of the EnergyNorth common stock surrendered,
and the holding period of the Eastern common stock will include the holding
period of the EnergyNorth common stock surrendered.
Treatment of stockholders who exchange EnergyNorth common stock for a
combination of Eastern common stock and cash. Except as discussed below with
respect to the receipt of cash in lieu of fractional shares, a United States
Holder of EnergyNorth common stock who receives a combination of Eastern common
stock and cash (other than cash in lieu of fractional shares) in exchange for
EnergyNorth common stock in the merger will recognize gain, but not loss, on
the exchange. The gain, if any, that the holder will recognize will equal the
sum of the cash and the fair market value of the Eastern common stock received
in the exchange, minus the tax basis of the EnergyNorth common stock
surrendered, but such gain will not exceed the amount of cash received in the
merger (excluding cash received in lieu of fractional shares). Any gain in
excess of the cash received in the merger will not be recognized for tax
purposes.
43
<PAGE>
The aggregate tax basis of the Eastern common stock received (including any
fractional shares deemed received, as described below) will be equal to the
aggregate tax basis of the EnergyNorth common stock surrendered in the
exchange, decreased by the amount of cash received and increased by the amount
of gain recognized. The holding period of the Eastern common stock received
will include the holding period of the EnergyNorth common stock surrendered in
exchange therefor. Any gain recognized by a holder with respect to the exchange
will generally be capital gain if the EnergyNorth common stock is held as a
capital asset at the effective time of the merger and will be long-term capital
gain if the holding period of the EnergyNorth common stock surrendered in the
merger is more than one year. In certain circumstances, however, an EnergyNorth
stockholder who actually or constructively owns Eastern stock may be required
to treat gain recognized as ordinary dividend income (rather than capital
gain). If a holder's percentage of ownership of Eastern common stock is small
and the holder exercises no control over the affairs of Eastern, dividend
treatment is unlikely to result. Because the attribution rules are complex,
each EnergyNorth stockholder who believes these rules may apply should contact
his or her own tax advisor.
Treatment of stockholders who exchange EnergyNorth common stock solely for
cash. A United States Holder of EnergyNorth common stock who receives solely
cash in exchange for such holder's EnergyNorth common stock in the merger will,
except as set forth below, recognize gain or loss equal to the difference
between the tax basis of the EnergyNorth common stock surrendered and the
amount of cash received therefor. Generally, such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the holding period
of the EnergyNorth common stock surrendered in the merger is more than one year
as of the date on which the merger is consummated. If such a holder owns
Eastern common stock actually or constructively immediately after the merger,
however, it is possible that such holder could be treated as receiving a
dividend taxable as ordinary income. Because the attribution rules are complex,
each EnergyNorth stockholder who believes these rules may apply should contact
his or her own tax advisor.
Receipt of cash in lieu of fractional shares. A United States Holder of
EnergyNorth common stock who receives cash in lieu of fractional shares of
Eastern common stock will be treated as having received such fractional shares
pursuant to the merger and then as having exchanged such fractional shares for
cash in a redemption by Eastern. The holder will recognize gain or loss on this
deemed redemption in an amount equal to the difference between the portion of
the tax basis of the holder's EnergyNorth common stock surrendered in the
merger that is allocated to such fractional shares and the cash received in
lieu thereof. Such gain or loss generally will be capital gain or loss if the
EnergyNorth common stock is held as a capital asset at the effective time of
the merger, and will be long-term capital gain or loss if the holding period of
the EnergyNorth common stock surrendered in the merger is more than one year.
Backup Withholding. Unless a holder of EnergyNorth common stock complies
with certain reporting and/or certification procedures or is an exempt
recipient under applicable provisions of the Code and Treasury regulations,
cash payments in exchange for such holder's EnergyNorth common stock in the
merger may be subject to "backup withholding" at a rate of 31% for federal
income tax purposes. Any amounts withheld under the backup withholding rules
may be allowed as a refund or a credit against the holder's federal income tax
liability, provided the required information is furnished to the IRS.
The above summary is not intended to constitute a complete analysis of all
of the U. S. federal income tax consequences of the merger. This discussion is
included for general information purposes only and may not apply to a
particular stockholder in light of such stockholder's particular circumstances.
Stockholders should consult their own tax advisors as to the particular tax
consequences to them of the merger, including the application of state, local,
and foreign tax laws.
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<PAGE>
Appraisal Rights
New Hampshire law allows stockholders of EnergyNorth common stock who object
to the merger to dissent from participating in the merger and obtain fair value
(as defined below) for their EnergyNorth shares. Fair value for stockholders
asserting their dissenters' right is determined in accordance with New
Hampshire law and not necessarily with reference to the amount offered by
Eastern. This section summarizes the terms of the relevant provisions of New
Hampshire law regarding dissenters' rights. Because this summary does not
address all of the details a stockholder may be interested in knowing, all
stockholders are encouraged to consult those sections in their entirety. As
required by the New Hampshire Revised Statutes Annotated, Chapter 293-A,
Section 13.20, a copy of the dissenters' rights statute New Hampshire Revised
Statutes Annotated, Chapter 293-A, Sections 13.01-13.31 is included as Annex C
to this proxy statement/prospectus.
Stockholders who wish to exercise dissenters' rights must deliver to
EnergyNorth written notice of their intent to demand payment for their shares
if the merger is effectuated. This notice must be delivered prior to the votes
approving the merger. Stockholders who wish to exercise dissenters' rights must
not vote their shares in favor of approving the merger.
If the merger is approved by EnergyNorth stockholders, EnergyNorth must
deliver no later than 10 days after the consummation of the merger a written
notice to all stockholders who have satisfied the requirements set forth in the
preceding paragraph. This dissenters' notice must, among other things, inform
dissenting stockholders where they should send their demand for payment and
where and when their stock certificates should be deposited. The dissenters'
notice must also set a date by which EnergyNorth must receive the demand for
payment. This date must not be less than 30 days and not more than 60 days
after the date the dissenters' notice is delivered. EnergyNorth must also
provide a form for demanding payment which includes the date of the first
announcement to news media or to stockholders of the terms of the merger
agreement.
A stockholder receiving a dissenters' notice must certify whether the
stockholder acquired ownership of the shares prior to the specified date, and
deposit his or her share certificates in accordance with the dissenters'
notice. The stockholder otherwise retains all other rights of a stockholder
until the time these rights are canceled when the merger is consummated. A
stockholder who fails to demand payment or deposit his or her shares in
accordance with the dissenters' notice will lose his or her rights to payment
for his or her shares pursuant to the New Hampshire dissenters' rights statute.
Except as described below, the notice of intent to demand payment and the
written demand for payment must be made by or for the stockholder of record of
the shares for which dissenters' rights are being asserted. Accordingly, such
notice and demand should be executed by or for such stockholder of record,
fully and correctly as such stockholder's name appears on the certificate(s)
formerly representing the shares. If shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the notice
of intent to demand payment and the demand for payment should be made in such
capacity. If shares are owned of record by more than one person, as in a joint
tenancy or tenancy in common, the notice of intent to demand payment and the
demand for payment should be executed by or for all joint owners.
An authorized agent, including one of two or more joint owners, may execute
the notice of intent to demand payment and the demand for payment for a
stockholder of record. However, the agent must identify the record owner or
owners and must expressly disclose that, in executing the notice and the
demand, the agent is acting as agent for the record owner(s). A beneficial
stockholder may assert dissenters' rights as to shares held on his or her
behalf only if :
. he or she submits to EnergyNorth the record owner's written consent to
the dissent not later than the time the beneficial stockholder asserts
dissenters' rights, and
. he or she does so with respect to all shares of which he or she is the
beneficial stockholder or over which he or she has power to direct the
vote.
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<PAGE>
Following the consummation of the merger, or upon receipt of a demand for
payment, EnergyNorth will pay each dissenting stockholder who has complied with
the statutory notice provisions the fair value of the stockholder's shares,
plus interest. "Fair value" means the value of the shares immediately before
the consummation of the merger, excluding any appreciation or depreciation in
anticipation of the merger, unless such exclusion would be inequitable. The
payment will be accompanied by, among other things, an EnergyNorth balance
sheet, income statement, changes in stockholder equity and any interim
financial information as well as an explanation of how the interest was
calculated.
If EnergyNorth's written dissenters' notice is delivered prior to the merger
and if the proposed merger with Eastern is not consummated within 60 days after
the date set for demanding payment and depositing share certificates,
EnergyNorth must return the deposited certificates. If after returning
deposited certificates EnergyNorth takes the proposed action, it must send a
new dissenters' notice and repeat the payment demand procedure.
Under New Hampshire Revised Statutes Annotated, Chapter 293-A, Section
13.28, a dissenting stockholder may notify EnergyNorth in writing of his or her
own estimate of the fair value of his or her shares and amount of interest due,
and demand payment in the amount of such estimate, less any payment already
received from EnergyNorth, or reject EnergyNorth's offer and demand payment of
the fair value of his or her shares and interest due, if:
. The dissenting stockholder believes that the amount paid or offered is
less than the fair value of his or her shares or that the interest due
was incorrectly calculated;
. EnergyNorth fails to make payment for the shares within 60 days after the
date set for demanding payment; or
. EnergyNorth, having failed to consummate the merger, does not return the
deposited certificates within 60 days after the date set for demanding
payment.
A dissenting stockholder waives the right to demand payment under New
Hampshire law unless the stockholder notifies EnergyNorth in writing of his or
her demand within 30 days after EnergyNorth made or offered payment for the
stockholder's shares.
If a demand for payment under New Hampshire Revised Statutes Annotated,
Chapter 293-A, Section 13.28 remains unsettled, EnergyNorth will commence a
court proceeding within 60 days after receiving the payment demand and petition
the New Hampshire Superior Court for Hillsborough County to determine the fair
value of the shares and accrued interest. If EnergyNorth does not commence such
a proceeding within 60 days, it will pay each dissenter whose demand remains
unsettled the amount demanded. The court will determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court will assess the costs against EnergyNorth,
except that the court may assess costs against all or some of the dissenters
who are parties, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for the services should not be assessed against EnergyNorth,
the court may award to these counsel reasonable fees to be paid out of the
amounts awarded to dissenters who were benefited.
Stock Exchange Listing of Eastern Common Stock
If the KeySpan-Eastern merger agreement has been terminated and the merger
consideration will consist of cash and Eastern common stock, applications will
be made for the listing on the New York Stock Exchange, the Pacific Exchange
and the Boston Stock Exchange of the shares of Eastern common stock to be
issued in the merger. So long as Eastern continues to meet the requirements of
the New York Stock Exchange, the Pacific Exchange and the Boston Stock
Exchange, Eastern common stock will continue to be listed on the New York Stock
Exchange, the Pacific Exchange and the Boston Stock Exchange through the time
the merger occurs.
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<PAGE>
Federal Securities Law Consequences
If the KeySpan-Eastern merger agreement has been terminated and the merger
consideration consists of cash and shares of Eastern common stock, any shares
of Eastern common stock received by EnergyNorth stockholders in the merger will
be freely transferable, except that shares of Eastern common stock received by
individuals and entities who are deemed to be "affiliates" defined under the
Securities Act of 1933, as amended of EnergyNorth before the merger may be
resold by them only in transactions permitted by the resale provisions of Rule
145 under the Securities Act (or Rule 144 under the Securities Act, in the case
of individuals and entities who become affiliates of Eastern) or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of EnergyNorth or Eastern generally include individuals or entities that
control, are controlled by, or are under common control with, such party and
may include certain officers and directors of such party as well as principal
stockholders of such party.
This proxy statement/prospectus does not cover resales of Eastern common
stock received by any person who may be deemed to be an affiliate of
EnergyNorth.
Regulatory Matters
The following is a summary of the material regulatory requirements affecting
the merger. Although Eastern and EnergyNorth have not yet filed for all of the
required approvals from the agencies discussed, it is anticipated that all
regulatory approvals will be received by middle to late 2000, although it is
possible they will not be received until early 2001.
State Approvals and Related Matters. EnergyNorth, EnergyNorth Natural Gas,
Inc., Eastern and KeySpan made a joint filing on December 3, 1999 with the New
Hampshire Public Utilities Commission pursuant to applicable New Hampshire law
regarding the proposed transaction between EnergyNorth and Eastern and the
proposed transaction between KeySpan and Eastern. Under the applicable
statutes, the New Hampshire Public Utilities Commission must determine that the
EnergyNorth acquisition will not have an adverse effect on rates, terms,
service, or operation of EnergyNorth Natural Gas, Inc. and is lawful, proper
and in the public interest. The New Hampshire Public Utilities Commission has,
in prior cases, approved mergers where there is no net harm to the public as a
result of the merger. In addition, New Hampshire law establishes a time-frame
within which the New Hampshire Public Utilities Commission must take action
regarding the proposed EnergyNorth acquisition. In accordance with that time
frame, the New Hampshire Public Utilities Commission must issue a final order
within approximately 180 days. The New Hampshire Public Utilities Commission
has set May 1 as the expected date for the issuance of its order in this
matter.
Public Utility Holding Company Act of 1935. As a result of the Eastern-
EnergyNorth merger, Eastern, which already owns all of the outstanding common
stock of Boston Gas, Colonial Gas and Essex Gas, will acquire all EnergyNorth
common stock. Under the Public Utility Holding Company Act of 1935, as amended,
Eastern must obtain the approval of the SEC before acquiring the EnergyNorth
common stock. Eastern is currently and will continue to be a "holding company"
as defined in the Public Utility Holding Company Act, but is exempt from
registration and from regulation generally under the Public Utility Holding
Company Act because Eastern and its material utility subsidiaries are
"predominantly intrastate in character". In other words, each material
subsidiary is organized under Massachusetts law and carries on its utility
activities predominantly in Massachusetts. Eastern expects to continue to be
exempt on the same basis after consummation of the merger, based on applicable
precedent. Eastern has filed with the SEC an application for approval of the
acquisition under the Public Utility Holding Company Act and for confirmation
that Eastern's "intrastate" exemption will continue in effect. Consummation of
the Eastern-EnergyNorth merger is conditioned upon the SEC's approving
Eastern's application and Eastern remaining exempt from registration under the
Public Utility Holding Company Act.
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<PAGE>
In connection with the KeySpan-Eastern merger, in accordance with the Public
Utility Holding Company Act of 1935, as amended, KeySpan must obtain the
approval of the SEC before acquiring Eastern common stock, because as a result
of the KeySpan-Eastern merger KeySpan will hold all of Eastern's common stock.
KeySpan is currently and will continue to be a "holding company" as defined in
the Public Utility Holding Company Act, but is currently exempt from
registration and from most regulation under the Public Utility Holding Company
Act because among other requirements for such exemption, KeySpan and its
material utility subsidiaries are "predominantly intrastate in character". As a
result of the acquisition of Eastern's Common Stock, KeySpan will likely no
longer qualify for an exemption from registration, and KeySpan intends to
register as a holding company under the Public Utility Holding Company Act of
1935.
Antitrust Considerations. Under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, and the rules, and regulations adopted under the
Hart-Scott-Rodino Anti-Trust Improvements Act, the merger may not be
consummated until the requisite notifications and report forms have been filed
with the Antitrust Division of the United States Department of Justice and the
Federal Trade Commission and the specified Hart-Scott-Rodino Anti-Trust
Improvements Act waiting period requirements have been satisfied. The Hart-
Scott-Rodino Anti-Trust Improvements Act waiting period is thirty days from the
date both parties have filed their notification and report form unless
terminated earlier or extended by the Federal Trade Commission or the
Department of Justice issuing a request for additional information or
documentary materials. Thereafter, the waiting period may be extended only by
court order or with the parties' consent. The expiration or earlier termination
of the Hart-Scott-Rodino Anti-Trust Improvements Act waiting period does not
preclude the Department of Justice or the Federal Trade Commission from
challenging the merger on antitrust grounds either before or after consummation
of the merger. Private parties and state attorneys general may also bring legal
action under federal or state antitrust laws under certain circumstances.
If the merger is not consummated within twelve months after the expiration
or earlier termination of the Hart-Scott-Rodino Anti-Trust Improvements Act
waiting period, Eastern and EnergyNorth would be required to submit new filings
to the Department of Justice and the Federal Trade Commission, and a new Hart-
Scott-Rodino Anti-Trust Improvements Act waiting period would have to expire or
be earlier terminated before the merger could be consummated. Eastern and
EnergyNorth intend to file their pre-merger notification and report forms
pursuant to the Hart-Scott-Rodino Anti-Trust Improvements Act at such time as
they believe there is a high degree of certainty that the merger will be
consummated within twelve months after the expiration or earlier termination of
the waiting period under the Hart-Scott-Rodino Anti-Trust Improvements Act. The
Federal Trade Commission and the Department of Justice frequently scrutinize
the legality under the antitrust laws of transactions such as the proposed
transaction. Neither Eastern nor EnergyNorth believes that the merger will
violate federal antitrust laws. Nevertheless, there can be no assurance that a
challenge to the proposed transaction will not be made on antitrust grounds or,
if such a challenge is made, what the result would be.
In connection with the KeySpan-Eastern merger, KeySpan and Eastern must also
file the requisite notifications and report forms under the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, and the related rules and regulations, and
satisfy the specified waiting period requirements. KeySpan and Eastern intend
to file their pre-merger notification and report forms pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act at such time as they believe there is a
high degree of certainty that the KeySpan-Eastern merger will be consummated
within twelve months after the expiration or earlier termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act. The KeySpan-
Eastern merger may not be consummated until the requisite notifications and
report forms have been filed and the specified Hart-Scott-Rodino Anti-Trust
Improvements Act waiting period requirements have been satisfied.
General. Under the merger agreement, Eastern and EnergyNorth have agreed to
use their best efforts to obtain all necessary material permits, licenses,
franchises and other governmental authorizations needed to consummate the
transactions contemplated by the merger agreement. Various parties may seek
intervention in the proceedings associated with the regulatory approval process
in an attempt to oppose the merger or to have conditions imposed upon the
receipt of the necessary approvals. Although EnergyNorth and Eastern believe
that
48
<PAGE>
they will receive the requisite regulatory approvals for the merger, the timing
of their receipt cannot be determined. It is a condition to the consummation of
the merger that final non-appealable orders approving the merger be obtained
from the various federal and state commissions described above.
Potential Conflicts and Interests of Certain Persons in the Merger
You should be aware of the interests that executive officers and directors
of EnergyNorth have in the merger. These interests are different from and in
addition to your and their interests as stockholders. These include, among
other things:
. eliminating forfeiture and transferability restrictions on restricted
stock grants;
. accelerated vesting of certain retirement benefits;
. accelerated vesting of stock options;
. employment and consulting agreements and severance agreements; and
. indemnification and directors' and officers' liability insurance.
Ownership of Restricted Stock. Certain employees of EnergyNorth have been
awarded shares of restricted EnergyNorth common stock under EnergyNorth's Key
Employee Performance and Equity Incentive Plan. In addition, in 1998
EnergyNorth awarded Mr. Robert Giordano 1,350 shares of restricted stock
outside of this plan. Shares awarded under the plan have been held in escrow,
and certain forfeiture provisions, whereby a participant would have to return
award shares to EnergyNorth, and restrictions on transfer, which prevented a
participant from selling or assigning award shares, applied. However, on July
2, 1999, the executive committee of the EnergyNorth board of directors voted to
waive the forfeiture and nontransferability provisions of all restricted stock
awards, which vote was reported to and approved by the compensation committee
of the EnergyNorth board of directors on the date of the signing of the merger
agreement. In addition, shares were awarded pursuant to the Plan on November
18, 1999 and the forfeiture and nontransferability provisions on those shares
were immediately waived.
49
<PAGE>
The following table sets forth the ownership of stock by EnergyNorth
executive officers as of July 14, 1999 and shares awarded on November 18, 1999
affected by the above-mentioned waiver by the compensation committee of the
EnergyNorth board:
<TABLE>
<CAPTION>
Total No.
of Shares
from which
restrictions
Name Date of Award No. of Shares were removed
---- ------------- ------------- ------------
<S> <C> <C> <C>
Robert R. Giordano..................... 11/96 1,019
11/97 884
07/98 1,350
11/98 694
11/99 654 4,601
Michelle L. Chicoine................... 11/96 371
11/97 387
11/98 296
11/99 370 1,424
Frank L. Childs........................ 11/96 380
11/97 371
11/98 296
11/99 229 1,276
Kenneth M. Margossian.................. 11/98 294
11/99 229 523
David A. Skrzysowski................... 11/96 303
11/97 261
11/98 202
11/99 143 909
</TABLE>
Acceleration of Vesting Under EnergyNorth's Supplemental Executive
Retirement Plan. Certain executive officers participate in EnergyNorth's
Supplemental Executive Retirement Plan. Participants in the plan become vested
after 10 years of service with EnergyNorth. However, the plan provides that
upon a "change in control," as defined in the documents which govern the plan,
participant vesting will be accelerated from 10 years to five years of service.
There are two executive officers, Michelle L. Chicoine and Frank L. Childs, who
are participating in EnergyNorth's Supplemental Executive Retirement Plan who
currently have at least five years of service, but less than 10 years of
service. There is no present value of future benefits related to the potential
accelerated vesting for Ms. Chicoine or Mr. Childs.
Acceleration of Exercisability of EnergyNorth Stock Options. Certain
executive officers participate in EnergyNorth's 1998 Stock Option Plan. Under
the Plan any unexercisable options will become immediately and fully
exercisable for a period of six months following approval of the merger
agreement by EnergyNorth's stockholders.
The following table sets forth the outstanding options held by EnergyNorth
executive officers which are currently not exercisable:
<TABLE>
<CAPTION>
Name Date of Grant No. of Shares Exercise Price
---- ------------- ------------- --------------
<S> <C> <C> <C>
Robert R. Giordano................... 11/19/98 11,429 $28.00
Michelle L. Chicoine................. 11/19/98 7,500 $28.00
Frank L. Childs...................... 11/19/98 3,750 $28.00
</TABLE>
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<PAGE>
Severance Agreements. The following executive officers are parties with
EnergyNorth to management continuity agreements:
. Robert R. Giordano
. Michelle L. Chicoine
. Frank L. Childs
. David A. Skrzysowski
These management continuity agreements provide that if, during a period
between 24 and 36 months following the change in control of EnergyNorth, such
officer is terminated without cause or terminates his or her own employment as
a result of certain adverse actions by EnergyNorth, as more fully set forth in
such management continuity agreements, such officer receives:
. a severance amount which may consist of several components;
. any other benefits or amounts payable, such as deferred compensation,
sick pay or bonuses; and
. in the case of Mr. Giordano and Ms. Chicoine, continuation of certain
welfare plan benefits at no cost.
Additionally, each of the above executive officers may, at his or her
option, in the thirty day period following the first anniversary of the change
of control of EnergyNorth, terminate his or her employment for any reason and
still receive severance benefits under the management continuity agreements.
Robert R. Giordano and Michelle L. Chicoine
The severance amount of Mr. Giordano, president and chief executive officer,
consists of four components, and the severance amount of Ms. Chicoine,
executive vice president, consists of three components. In addition, Mr.
Giordano and Ms. Chicoine receive a 36-month extension of welfare benefits at
no additional cost under their agreements and are eligible for payments equal
to the present value of those benefits if EnergyNorth cannot provide them on an
individual basis. Mr. Giordano also receives a 36-month extension of certain
fringe benefits. The payments to which Mr. Giordano and Ms. Chicoine are
entitled are equal to the following:
(1) The greater of three times his or her salary in effect either
immediately prior to the change of control or on the date of termination,
including deferrals, plus
. the greater of either three times the prior three-year average
annual incentive compensation award under the applicable plan, or
three times the target level of incentive compensation for the year
when termination occurs, plus
. any interest on delayed payments at a rate of 150% of the prime
rate posted by BankBoston or its successor entity;
(2) a proration of his or her target level of incentive compensation for
the termination year, plus any interest on delayed payments at a rate of
150% of the prime rate posted by BankBoston or its successor entity; and
(3) an amount equivalent to any excise tax or comparable tax to which
any payments or distributions to him or her may be subject, plus an amount
equal to income taxes and excise or comparable taxes resulting from the
payment of such third amount.
Mr. Giordano is also entitled to a payment equal to the difference between:
(a) the aggregate benefit payable under the EnergyNorth, Inc. Retirement
Plan for Salaried Employees and the EnergyNorth, Inc. Supplemental
Executive Retirement Plan, if benefits under these plans were calculated as
if Mr. Giordano continued to be employed for the 36 months following
termination; and
(b) the benefits actually due to him under these plans at the time of
termination.
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<PAGE>
In addition, Mr. Giordano, except to the extent prohibited under the
EnergyNorth, Inc. Retirement Plan for Salaried Employees and the EnergyNorth,
Inc. Supplemental Executive Retirement Plan, may, within 90 days of
termination, retire under such plans and under EnergyNorth policies entitling
retired employees to post-retirement health and life insurance benefits.
Frank L. Childs
Mr. Childs, EnergyNorth's senior vice president and chief financial officer,
would receive a severance payment equal to
. 2.95 times the sum of salary plus the prior three-year average annual
incentive compensation award under the applicable plan, plus any interest
on delayed payments at a rate of 150% of the prime rate posted by
BankBoston or its successor entity. This salary amount includes deferrals
such as deferred compensation benefits.
David A. Skrzysowski
The severance payment of Mr. Skrzysowski, vice president and controller of
EnergyNorth, equals the greater of
. an amount equal to 2.0 times salary (for this purpose, "salary" includes
the prior three-year average annual incentive compensation award under
the applicable plan); or
. 275% of the average aggregate compensation paid by EnergyNorth or its
subsidiaries to him which was includible by him in his gross income for
federal tax purposes for the five tax years ending immediately prior to
the change of control.
The following table sets forth the names, positions and estimated cash value
of benefits that may be received under the management continuity agreements for
each of the executive officers who are entitled to such benefits, based on
compensation levels as of December 31, 1999 and assuming that the Eastern-
EnergyNorth merger occurs on July 1, 2000. The benefits payable to the
individuals set forth below in the event of termination have been reduced as
appropriate, except with regard to Mr. Giordano and Ms. Chicoine, to the
amounts that may be paid without causing the payments to constitute excess
parachute payments within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended. In the event that payments to either Mr. Giordano or
Ms. Chicoine constitute excess parachute payments, their management continuity
agreements provide that they will be paid an amount necessary to pay all excise
or comparable taxes associated with this payment, plus any additional income or
excise taxes resulting from payment of that amount, which amounts equal
$742,700 for Mr. Giordano and $408,600 for Ms. Chicoine.
<TABLE>
<CAPTION>
Name Position Estimated Amount
---- -------- ----------------
<S> <C> <C>
Robert R. Giordano....... President and Chief Executive Officer $2,254,500
Michelle L. Chicoine..... Executive Vice President $ 865,500
Frank L. Childs.......... Senior Vice President and CFO $ 449,500
David A. Skrzysowski..... Vice President and Controller $ 309,600
</TABLE>
Consulting Agreements. Mr. Giordano's employment with EnergyNorth will
terminate on the first day of the first month after the closing of the merger,
as a result of which Mr. Giordano will receive severance payments under his
management continuity agreement. EnergyNorth and Eastern have entered into a
three-year consulting agreement with Mr. Giordano which will become effective
upon termination of his employment, pursuant to which he will advise
EnergyNorth and Eastern on various matters regarding their business operations,
including business development, participation in legal and regulatory
proceedings and community involvement.
52
<PAGE>
The consulting agreement provides for Mr. Giordano to:
. provide up to 75 and 25 business days of consulting, respectively, during
each of the first year and the second year of the agreement, for which he
will receive payment of approximately $8,333 per month;
. receive $2,000 for any business day worked in excess of 100 days in the
aggregate during the first two years of the agreement, as well as for any
day worked during the third year, during which he is obligated to be
available to consult up to 25 additional days; and
. barring any violation of certain non-competition and confidentiality
covenants, receive an additional $29,000 per year during the term of the
agreement.
Eastern has entered into a consulting agreement with Edward T. Borer,
Chairman of the EnergyNorth board of directors, which provides that if the
KeySpan-Eastern merger agreement has not been terminated or expired prior to
the effective date of the Eastern-EnergyNorth merger, Mr. Borer will receive
$100,000 as a pre-payment of consulting fees payable upon the closing of the
Eastern-EnergyNorth merger. Mr. Borer has agreed to provide consulting services
to Eastern for a period of six months following the closing of the Eastern-
EnergyNorth merger, at mutually agreed upon times and places, for up to one day
per month.
Defense, Indemnification and Insurance for EnergyNorth Directors and
Officers. Eastern and EnergyNorth have agreed to use their best efforts to
defend all current and former directors and officers of EnergyNorth and its
subsidiaries against any claims, proceedings or investigations arising before
or after the time the merger occurs as a result of
. the person being or having been a director or officer of EnergyNorth or
its subsidiaries or their respective predecessors; or
. the merger and related transactions.
Eastern has further agreed after the closing of the merger to indemnify each
indemnified person, to the fullest extent allowed under applicable law and the
charter and bylaws of the relevant entity, against any losses, claims, damages,
liabilities, costs, expenses, judgments, fines and amounts paid in settlement
of or in connection with any such threatened or actual claim, action, suit,
investigation or proceeding.
EnergyNorth's obligation to defend the indemnified persons continues for six
years after the effective time of the merger, not including time necessary to
reach a final disposition on any claim brought within this period.
Eastern has also agreed to cause the surviving EnergyNorth entity to
. honor EnergyNorth's indemnification obligations under EnergyNorth's
Articles of Incorporation and Bylaws as in effect before the effective
time of the merger; and
. maintain for a period of six years after the effective time of the merger
a directors' and officers' liability insurance policy covering the
persons covered by EnergyNorth's current policy and providing comparable
coverage to EnergyNorth's current policy.
Amendments to Benefit Plan Documents. The executive committee of
EnergyNorth's board of directors voted to amend the Grantor Trust Agreement for
the EnergyNorth, Inc. Supplemental Executive Retirement Plan to provide for the
holding of funds for the purpose of paying benefits under all of EnergyNorth's
deferred compensation plans. The Grantor Trust Agreement previously provided
for the holding of funds solely for the purpose of paying benefits under
EnergyNorth's Supplemental Executive Retirement Plan. EnergyNorth plans to
borrow funds to make a contribution to the Grantor Trust Agreement in an amount
sufficient to provide the Grantor Trust Agreement with assets to pay the
benefits accrued by officers under the deferred compensation plans.
Election of EnergyNorth Representative to the Eastern Board. The merger
agreement provides that, if the KeySpan-Eastern merger agreement has been
terminated prior to the effective time of the Eastern-EnergyNorth
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merger, then following the effective time of the Eastern-EnergyNorth merger,
Eastern will elect Edward T. Borer or another director of EnergyNorth
designated by the board of directors of EnergyNorth who is reasonably
satisfactory to Eastern, to serve on the Eastern board for an initial term
ending at the 2003 Eastern annual meeting of stockholders.
Advisory Board. EnergyNorth Natural Gas, Inc. will maintain an advisory
board consisting of a minimum of five persons following the time that the
merger occurs for a period of at least 3 years to provide it with consultation
with respect to regulatory and legislative matters and community affairs in its
New Hampshire service territory. This advisory board will be chaired by Robert
R. Giordano, Chairman and Chief Executive Officer of EnergyNorth, and
membership will be offered to all current members of EnergyNorth's board of
directors who are New Hampshire residents and who are not employees of the
surviving company. Meetings of the advisory committee will be held no less than
quarterly. Members of this advisory board will receive a meeting fee of $1,500,
and will be reimbursed for reasonable out of pocket expenses. Pursuant to a
letter agreement dated November 3, 1999 between Eastern and EnergyNorth,
Eastern has agreed that following the merger of Eastern and EnergyNorth it will
make every reasonable effort to enable members of the advisory board to defer
their meeting fees on terms similar to those upon which EnergyNorth directors
are currently entitled to defer director retainers and fees.
Management and Other Information
If the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger, then after the Eastern-
EnergyNorth merger, Eastern will continue to be managed by the same board of
trustees and officers of Eastern as before the merger except that Eastern will
elect Edward T. Borer, or another person designated by the EnergyNorth board,
to serve on the Eastern board. If the KeySpan-Eastern merger agreement has not
been terminated prior to the effective time of the Eastern-EnergyNorth merger,
then upon the effectiveness of the KeySpan-Eastern merger, Eastern will be
managed by a new board of trustees but initially by the same officers as before
the KeySpan-Eastern merger. Certain information relating to the management,
executive compensation, voting securities, certain relationships and related
transactions and other related matters pertaining to Eastern and EnergyNorth is
set forth in or incorporated by reference in their respective Annual Reports on
Form 10-K for the year ended December 31, 1998 and September 30, 1998
respectively. These Annual Reports are incorporated by reference into this
proxy statement/prospectus. See "Where You Can Find More Information."
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MERGER AGREEMENT
The description of the merger agreement set forth below highlights the
material terms of the merger agreement. A copy of the merger agreement is
attached to this proxy statement/prospectus as Annex A. This description may
not include all the information that interests you. We urge you to read the
merger agreement carefully and in its entirety.
Structure of the Merger
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, then Merger Sub will merge
with and into EnergyNorth and EnergyNorth shall continue as the surviving
company. If the KeySpan-Eastern merger agreement has been terminated prior to
the effective time of the Eastern-EnergyNorth merger, EnergyNorth will merge
with and into Merger Sub. After the merger, Merger Sub will continue as the
surviving company under the name "EnergyNorth, Inc."
Merger Consideration
The type of consideration to be received by EnergyNorth stockholders in the
merger will depend on whether the KeySpan-Eastern merger agreement has been
terminated prior to the effective time of the Eastern-EnergyNorth merger.
. Consideration To Be Paid If The KeySpan-Eastern Merger Agreement Has Not
Been Terminated. If the KeySpan-Eastern merger agreement has not been
terminated prior to the effective time of the Eastern-EnergyNorth merger,
then as a result of the Eastern-EnergyNorth merger, each outstanding
share of EnergyNorth common stock shall be automatically converted into
the right to receive $61.13 in cash, without interest. The $61.13 amount
is subject to increase if for any reason the consideration to be paid for
each share of Eastern common stock in the KeySpan-Eastern merger is
increased above $64.00. Under such circumstances, the $61.13 amount to be
paid for each share of EnergyNorth common stock would be increased by an
amount equal to the per share amount of the increase over $64.00 to be
paid in the KeySpan-Eastern merger multiplied by 0.589.
. Consideration To Be Paid If The KeySpan-Eastern Merger Agreement Has Been
Terminated. If the KeySpan-Eastern merger agreement has been terminated
prior to the effective time of the Eastern-EnergyNorth merger, then as a
result of the merger, each outstanding share of EnergyNorth common stock
shall be automatically converted into the right to receive one of the
following:
. $47.00 in cash, without interest; or
. a number of shares of Eastern common stock determined by dividing
$47.00 by an amount equal to the average of the daily weighted
averages of the trading prices of Eastern common stock on the New
York Stock Exchange for the ten trading days ending on the third
trading day before the date of consummation of the merger, provided
that if such average is less than $36.00, the amount will be fixed at
$36.00 and that if such average is more than $44.00, the amount will
be fixed at $44.00.
If the KeySpan-Eastern merger agreement has been terminated, each holder of
EnergyNorth common stock will be able to elect the number of shares of
EnergyNorth common stock, if any, that it wishes to exchange for cash, the
number it wishes to exchange for Eastern common stock, or to indicate no
preference, by completing and returning a form to be provided for this purpose
closer to the date on which the merger is anticipated to be consummated as
described below. If the KeySpan-Eastern merger agreement has not been
terminated prior to the effective time of the Eastern-EnergyNorth merger, then
holders of EnergyNorth common stock will only be entitled to receive the cash
payment of $61.13 per share and it will not be necessary for EnergyNorth
stockholders to make elections.
If the KeySpan-Eastern merger agreement has been terminated, the holders of
EnergyNorth common stock may indicate the preferred form of payment for their
shares. This election will be subject to the following
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limitations. The total number of shares of EnergyNorth common stock that may be
converted into the right to receive cash will be 49.9% of the total number of
outstanding shares of EnergyNorth common stock and the remaining shares of
EnergyNorth common stock will be converted into Eastern common stock. The total
amounts of cash and Eastern common stock payable in the merger will, therefore,
be fixed at amounts which may differ from the total amounts indicated in the
elections. In that case, the amount of cash and Eastern common stock payable
will be determined as follows:
. If, based on the elections received, the holders of more than 49.9% of
the outstanding shares of EnergyNorth common stock indicate a preference
for cash consideration then:
. all shares for which elections have been submitted which indicate a
preference for Eastern common stock will be converted into Eastern
common stock;
. all shares for which elections have been submitted which indicate no
preference as to the form of consideration, or for which no election
has been received, will be converted into Eastern common stock; and
. all shares for which elections have been submitted which indicate a
preference for cash consideration will be converted into:
. cash based on the proportion that the maximum number of shares
of EnergyNorth common stock which may be converted into cash
bears to the total number of shares of EnergyNorth common
stock for which a preference for cash is so indicated, and
. shares of Eastern common stock based on the applicable
exchange ratio to the extent that the maximum amount of cash
consideration is exceeded.
. If, based on the elections received, the holders of more than 50.1% of
the outstanding shares of EnergyNorth common stock indicate a preference
for stock consideration then:
. all shares for which elections have been submitted which indicate a
preference for cash consideration will be converted into cash
consideration;
. all shares for which elections have been submitted which indicate no
preference as to the form of consideration, or for which no election
has been received, will be converted into cash consideration; and
. all shares for which elections have been submitted which indicate a
preference for Eastern common stock will be converted into:
. shares of Eastern common stock based on the proportion that
the maximum number of shares of EnergyNorth common stock which
may be converted into Eastern common stock bears to the total
number of shares of EnergyNorth common stock for which a
preference for Eastern common stock is indicated; and
. cash equal to $47.00 per share to the extent that the maximum
number shares of EnergyNorth common stock which may be
converted into Eastern common stock is exceeded.
. If, based on the elections received, the holders of EnergyNorth common
stock do not indicate a preference for consideration in the form of cash
or Eastern common stock which would exceed the maximum amount of either
form of consideration payable in the merger, then:
. all shares for which elections have been submitted which indicate a
preference for cash consideration will be converted into cash
consideration;
. all shares for which elections have been submitted which indicate a
preference for Eastern common stock will be converted into Eastern
common stock; and
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. all shares for which elections have been submitted which indicate no
preference, or for which no election has been received, will be
converted into cash and Eastern common stock proportionately so that
a total of 49.9% of the number of outstanding shares of EnergyNorth
common stock will be converted into cash and the remainder converted
into Eastern common stock.
If the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger, then in order to permit the
merger to qualify as a reorganization within the meaning of Section 368(a) of
the Code, the merger agreement also provides that, if necessary, the mix of
cash and Eastern common stock will be adjusted to ensure that at least 45% of
the value of the total consideration paid (including all cash paid in exchange
for fractional shares and other payments required to be considered for tax
purposes) consists of Eastern common stock.
Shares of EnergyNorth common stock held by EnergyNorth as treasury stock or
by a wholly-owned direct or indirect subsidiary of EnergyNorth will be canceled
and not converted into merger consideration.
No fractional shares of Eastern common stock will be issued in the merger.
Instead of fractional shares, holders will receive cash in an amount equal to
the value of their fractional shares based on the average closing price of
Eastern common stock on the New York Stock Exchange for the ten trading days
ending on and including the date on which the merger is consummated. After that
date, the outstanding shares of EnergyNorth common stock will not represent any
ownership interest in EnergyNorth but will only represent the right to receive
a portion of the merger consideration.
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, then each share of common
stock of Merger Sub outstanding immediately prior to the effectiveness of the
Eastern-EnergyNorth merger will be converted into one share of common stock of
the surviving company. If the KeySpan-Eastern merger agreement has been
terminated prior to the effective time of the Eastern-EnergyNorth merger, then
each share of common stock of Merger Sub outstanding immediately prior to the
effectiveness of the Eastern-EnergyNorth merger will continue to be outstanding
following the merger.
Procedure for Filing Elections and Converting EnergyNorth Common Stock into
Merger Consideration
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, EnergyNorth stockholders will
only be entitled to receive cash in exchange for each share of EnergyNorth
common stock and it will not be necessary for EnergyNorth stockholders to make
elections as to the form of consideration they will receive. Under such
circumstances, promptly after the effective time of the Eastern-EnergyNorth
merger, a letter of transmittal will be sent to EnergyNorth stockholders with
instructions on how to exchange their shares of EnergyNorth common stock for
the cash payment to which they are entitled. EnergyNorth stockholders will be
asked to submit their certificates with their letter of transmittal.
If the KeySpan-Eastern merger agreement has been terminated, then at least
thirty days before the date on which the Eastern-EnergyNorth merger is
anticipated to be consummated, a form of election will be mailed to each record
holder of EnergyNorth common stock as of the date of the EnergyNorth annual
meeting. A form of election will also be mailed to each person who becomes a
holder of record of EnergyNorth common stock between the record date and the
date seven calendar days before the date on which the merger is anticipated to
be consummated. A form of election will also be made available to all persons
who become holders of EnergyNorth common stock after that time. To be
effective, a form of election must:
. be properly completed and signed by the holder of record;
. be accompanied by the certificates for the shares of EnergyNorth common
stock for which the election is being made or by an appropriate guaranty
of delivery by
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. a member of a registered national securities exchange or the
National Association of Securities Dealers or
. a bank, trust company or other financial institution that is a
member in good standing of the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guaranty
Program or the Stock Exchange Medallion Program; and
. be delivered to BankBoston, N.A. (the "Exchange Agent") by no later than
the close of business on the last business day before the date on which
the merger is consummated.
If shares of EnergyNorth common stock are held on behalf of a holder by a
nominee, trustee or other representative, such representative may submit an
election on the holder's behalf so long as it covers all of the shares held by
the representative on such holder's behalf.
Holders may revoke their elections by filing a written revocation with the
Exchange Agent before the deadline for submitting elections.
If a form of election is not received by the Exchange Agent before the
deadline, or if a form of election is determined by the Exchange Agent or
Eastern to be not properly made, the holder submitting such form of election
will be treated as if such holder indicated no preference as to the form of
consideration to be received.
If the KeySpan-Eastern merger agreement has been terminated, then promptly
after the effective time of the Eastern-EnergyNorth merger the Exchange Agent
will mail the following materials to each person who held shares of EnergyNorth
common stock as of the time the merger occurred:
. a letter of transmittal to be used by the holder to surrender his, her or
its shares to the Exchange Agent to be exchanged for the merger
consideration (if the holder has not already done so in connection with
submitting a form of election); and
. instructions explaining what the holder has to do to effect the exchange
of shares of EnergyNorth common stock for the merger consideration.
If the holder has not already submitted all of his, her or its certificates
for shares of EnergyNorth common stock to the Exchange Agent in connection with
submitting a form of election, such holder should complete and sign the letter
of transmittal and return it to the Exchange Agent in accordance with the
instructions provided by the Exchange Agent, together with any certificates for
EnergyNorth common stock held by such holder.
If certificates for any shares of EnergyNorth common stock have been lost,
stolen or destroyed, the holder must submit an affidavit to that effect to the
Exchange Agent. The Exchange Agent may prescribe the form of affidavit required
and Eastern may require the holder to deliver a bond in an amount reasonably
required to indemnify Eastern and the Exchange Agent against claims with
respect to the lost certificates.
If a record holder of EnergyNorth common stock at the time the merger occurs
wishes the merger consideration to be paid to some other person, then, before
the merger consideration can be issued to the designated recipient, the
Exchange Agent must be provided with the following documentation:
. a properly endorsed certificate for the shares of EnergyNorth common
stock being exchanged;
. properly completed and signed originals of any other documents required
by the Exchange Agent to show that the transfer occurred; and
. evidence that any transfer taxes resulting from the issuance of a
certificate(s) for Eastern common stock to a person(s) other than the
record holder of EnergyNorth common stock have been or will be paid.
To the extent that the merger consideration is payable in Eastern common
stock, holders of EnergyNorth common stock exchanged in the merger will be
entitled to receive dividends and other distributions with
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respect to Eastern common stock that they receive in the merger that are
declared or made with a record date after the time the merger occurs. No such
dividends or other distributions will be paid to any former holder of
EnergyNorth common stock, however, until such holder surrenders his, her or its
shares of EnergyNorth common stock to the Exchange Agent.
After six months following the time the merger occurs, the Exchange Agent
will return to Eastern any merger consideration which has not been exchanged
for EnergyNorth common stock. After the return of the merger consideration to
Eastern, Eastern will act as the Exchange Agent and any former holders of
EnergyNorth common stock who have not exchanged their shares for merger
consideration shall surrender their certificates to Eastern. Once Eastern has
assumed the role of Exchange Agent, former holders of EnergyNorth common stock,
to the extent permitted under applicable law, shall look to Eastern as a
general creditor only for payment of the merger consideration.
Holders of EnergyNorth Common Stock Should Not Send in Their Stock
Certificates Until They Receive a Form of Election or Transmittal Letter.
Representations and Warranties
EnergyNorth and Eastern. EnergyNorth and Eastern have each made customary
representations and warranties to the other in the merger agreement. These
representations and warranties relate to such matters as:
. their organization, the organization of their subsidiaries and similar
corporate matters
. their capital structure
. authorization, execution, delivery and performance of the merger
agreement and the absence of any conflicts, violations or defaults under
their respective organizational documents and other agreements and
documents or conflicts with or violations of any laws as a result of
executing the merger agreement
. governmental consents and filings
. reports and financial statements filed with the SEC and the accuracy of
the information contained in such reports and financial statements
. absence of any change, event or effect that is materially adverse to the
business, assets (including intangible assets), prospects, financial
condition or results of operations of such party and its respective
subsidiaries taken as a whole and certain other events since March 31,
1999
. their regulation as utilities
. compliance with applicable laws and agreements and maintenance of
licenses and permits
. absence of certain litigation
. the accuracy of information provided for inclusion in the registration
statement on Form S-4 and proxy statement/prospectus to be filed in
connection with the merger
. compliance with environmental laws and environmental matters.
EnergyNorth. In addition to the representations and warranties described
above, EnergyNorth has made representations and warranties to Eastern as to the
following matters:
. that EnergyNorth has taken all actions so that the restrictions of any
anti-takeover laws in the State of New Hampshire and any similar
provisions in its charter and by-laws will not apply to the merger or the
merger agreement
. that the rights agreement dated as of June 18, 1990 between EnergyNorth
and State Street Bank and Trust Company has been amended so that it will
not apply to the execution of the merger agreement
. the filing of tax returns and the payment of taxes
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. title to its properties
. ownership, use and non-infringement of intellectual property rights
. brokers' and finders' fees incurred in connection with the merger
. employee benefit plans maintained by EnergyNorth
. compliance with governmental regulations concerning employees and
relations with employees
. disclosure of material agreements and commitments
. delivery of a fairness opinion by Salomon Smith Barney
. maintenance of insurance coverage
. the compliance status of the computer systems of EnergyNorth and its
third party service providers with respect to the "Year 2000" date
recognition problem; and
. disclosure of and compliance with natural gas and propane price risk
management policies.
Eastern. In addition to the representations and warranties described above,
Eastern has represented and warranted to EnergyNorth in the merger agreement as
to the following matters:
. it does not beneficially own any shares of EnergyNorth common stock
. the organization and capitalization of Merger Sub, and
. the business activities of Merger Sub.
Certain Covenants
Interim Operations of EnergyNorth. From the date of the execution of the
merger agreement until the time the merger occurs, EnergyNorth has agreed to
carry on its business and the businesses of its subsidiaries in the usual,
regular and ordinary course consistent with past practice. EnergyNorth has also
agreed to use commercially reasonable efforts consistent with past practice to
preserve intact the business organization of EnergyNorth and its subsidiaries,
keep available the services of their officers and employees, maintain their
properties and assets, in the aggregate, in good condition, normal wear and
tear excepted, and to preserve their relationships with third parties. These
obligations are subject to certain exceptions provided in the merger agreement
and any other exceptions that are agreed to in writing by Eastern. In
particular, during the period before the time the merger occurs, EnergyNorth
will not do or permit its subsidiaries to do or agree to do any of the
following:
. make any filings with governmental authorities regarding rates, charges,
standards of service, accounting matters or services except in the
ordinary course of business or as required by law
. declare or pay any dividends or make any distribution with respect to its
capital stock (except for regular quarterly cash dividends on EnergyNorth
common stock in a manner and amount consistent with past practice and
dividends payable by subsidiaries to EnergyNorth) or split, combine or
reclassify, repurchase or acquire any shares of its capital stock, other
than in connection with the adoption of a replacement stockholder rights
plan or in connection with any redemption under its current rights plan
. repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock
. issue, deliver, sell, authorize or propose the issuance, delivery or sale
of any capital stock or securities convertible into capital stock or any
rights to acquire any such securities, or authorize the issuance of any
other securities in lieu of such securities, except for issuances in the
normal course consistent with past practices under the EnergyNorth stock
plans
. make, permit or propose any amendments to its articles of incorporation
or by-laws except in connection with the adoption of a new stockholder
rights plan
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. acquire or agree to acquire (by business combination with or a purchase
of any equity interest in or a material portion of the assets of or by
any other manner) any business organization or acquire any material
amount of operating assets, or enter into any partnership or joint
development agreements or strategic alliances, or sell, lease, encumber
or otherwise dispose of any properties or assets of EnergyNorth which
alone or taken together are material to its business
. incur or guaranty any indebtedness for borrowing money, issue or sell any
debt securities or any rights to acquire debt securities or warrants, or
guarantee the indebtedness of others
. adopt or amend any employee benefit, stock purchase or option plan, enter
into any amendment contract with or pay any special bonus, remuneration,
or grant any severance or termination pay to any director, officer or
employee (except under previously disclosed arrangements or agreements),
adopt any new severance plan, or, except in accordance with past
practices or as required by law, increase the salaries or wage rates of
its officers or employees
. pay, discharge or satisfy any claim, liability or obligation in amounts
greater than $150,000 or make any individual or series of related capital
expenditures or commitments exceeding $150,000 except in the ordinary
course of business or pursuant to existing contracts disclosed in the
merger agreement, and
. take any action that will cause the merger agreement to become subject to
any anti-takeover law.
Interim Operations of Eastern. From the date of the execution of the merger
agreement until the time the merger occurs, Eastern has agreed to carry on its
business and the business of its material subsidiaries in the usual, regular
and ordinary course and consistent with past practice. Eastern has also agreed
to use commercially reasonable efforts consistent with past practices to
preserve intact the business organization of Eastern and its subsidiaries, keep
available the services of their officers and employees, maintain their
properties and assets, in the aggregate, in good condition, normal wear and
tear excepted, and to preserve their relationships with third parties. These
obligations are subject to certain exceptions provided in the merger agreement
and any other exceptions that are agreed to in writing by EnergyNorth.
EnergyNorth Stockholders Meeting; Recommendations of the EnergyNorth
Board. EnergyNorth has agreed, in accordance with applicable New Hampshire law
and its articles of incorporation and by-laws, to cause an EnergyNorth
stockholders meeting to be held as promptly as practicable after the signing of
the merger agreement, but not later than sixty days after the declaration of
the effectiveness of the registration statement in which this proxy
statement/prospectus is included, for the purpose of considering the approval
of the merger agreement. EnergyNorth has agreed, subject to the fiduciary
duties of its board of directors, to use its best efforts to solicit from
EnergyNorth stockholders proxies in favor of the approval of the merger
agreement and to take all other actions necessary or advisable to secure the
vote or consent of the EnergyNorth stockholders required to obtain such
approval.
Defense, Indemnification and Insurance for EnergyNorth Directors and
Officers. Eastern and EnergyNorth have agreed to use their best efforts to
defend the directors and officers of EnergyNorth against any claims,
proceedings or investigations arising before or after the time the merger
occurs as a result of the following:
. such indemnified party's position with EnergyNorth or its subsidiaries,
or
. the merger and related transactions.
Eastern has further agreed after the time the merger occurs to indemnify
each indemnified party, to the fullest extent allowed under applicable law and
the charter and by-laws of the relevant entity, against any losses, liabilities
or expenses (including attorneys' fees for not more than one separate counsel)
paid in connection with any such claim, investigation or proceeding.
EnergyNorth's obligation to defend the indemnified parties continues for six
years after the time the merger occurs. Eastern has also agreed to cause the
surviving company to:
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. honor EnergyNorth's indemnification obligations under EnergyNorth's
articles of incorporation and by-laws as in effect before the time the
merger occurs, and
. maintain for a period of six years after the time the merger occurs a
directors' and officers' liability insurance policy covering the persons
covered by EnergyNorth's current policy and providing comparable coverage
to EnergyNorth's current policy.
See "The Merger--Potential Conflicts and Interests of Certain Persons in
the Merger" on page 49.
Certain Other Covenants. The merger agreement contains certain mutual
covenants of the parties, including covenants relating to: public
announcements; notifications of certain matters; access to information;
qualification of the merger as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code (if the KeySpan-Eastern merger agreement
has been terminated prior to the effective time of the Eastern-EnergyNorth
merger); best efforts and further assurances; obtainment of third party
consents; compliance with legal requirements and cooperation in connection
with certain governmental and regulatory filings and in obtaining consents and
approvals, including antitrust matters; and confidential treatment of non-
public information.
The merger agreement also contains covenants by EnergyNorth to:
. declare and pay a dividend on EnergyNorth common stock for the period
beginning on the most recent record date for the payment of a regular
quarterly dividend on EnergyNorth common stock and ending on the
effective date of the Eastern-EnergyNorth merger, such dividend per share
to be equal to a fraction, the numerator of which equals $0.35 multiplied
by the number of days in such dividend period and the denominator of
which is 90, if the KeySpan-Eastern merger agreement has not been
terminated prior to the effective time of the Eastern-EnergyNorth merger,
and if the effective date of the Eastern-EnergyNorth merger does not fall
on a record date for a regular quarterly dividend on EnergyNorth common
stock,
. coordinate with Eastern regarding the payment of dividends on the
EnergyNorth common stock and Eastern common stock, if the KeySpan-Eastern
merger agreement has been terminated prior to the effective time of the
Eastern-EnergyNorth merger, and
. redeem all outstanding rights under its current rights agreement not
later than immediately prior to the time the merger occurs.
The merger agreement also contains certain covenants of Eastern including
covenants requiring Eastern to:
. use its best efforts to list any Eastern common stock to be issued in
connection with the merger on the New York Stock Exchange, the Pacific
Exchange and the Boston Stock Exchange before the time the merger occurs
. cause Edward T. Borer or another candidate recommended by the EnergyNorth
board to be elected as a member of the Eastern board until the 2003
annual meeting of Eastern as of the effective time of the merger, if the
KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger,
. locate the headquarters of the surviving company initially in Manchester,
New Hampshire
. continue to make or cause the surviving company to continue to make
charitable contributions and maintain community involvement as carried on
by EnergyNorth and its subsidiaries in New Hampshire in recent years, and
. establish an advisory board to EnergyNorth Natural Gas, Inc. to be
chaired by Robert Giordano, for at least three years after the merger
occurs. See "The Merger--Potential Conflicts and Interests of Certain
Persons in the Merger" on page 49.
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Certain Employee Benefits Matters. Eastern has agreed to honor all
EnergyNorth collective bargaining agreements and other contracts pertaining to
employees or directors of EnergyNorth that are disclosed in the merger
agreement. This agreement will not prevent Eastern from exercising any of its
rights under these contracts to amend, modify, suspend, revoke or terminate
these contracts.
For all employees of EnergyNorth who continue as employees of Eastern after
the merger and whose employment is not governed by a collective bargaining
agreement, Eastern has agreed as follows:
. to provide such employees for a period of one year after the time the
merger occurs, with benefits substantially comparable in the aggregate to
the benefits provided under EnergyNorth's welfare and tax qualified
pension benefit plans, other than individual agreements disclosed in the
merger agreement,
. not to impose any pre-existing condition limitation on such employees'
participation in Eastern's benefit plans other than to the extent such
limitation is applied under the comparable EnergyNorth plan, and
. to recognize such employees' service at EnergyNorth for purposes of
meeting eligibility and vesting requirements under Eastern's benefit
plans.
EnergyNorth may establish a retention pool of up to a maximum of $650,000 in
order to retain the services of certain officers and employees through and
following the date of consummation of the merger. Eastern must approve the list
of individuals proposed to be covered and their respective retention payments.
The merger agreement provides that, if the KeySpan-Eastern merger agreement
has not been terminated prior to the effective time of the Eastern-EnergyNorth
merger, and if the KeySpan-Eastern merger has been closed prior to or
simultaneously with the effective time of the Eastern-EnergyNorth merger, then
at the effective time of the Eastern-EnergyNorth merger, each outstanding
option to purchase shares of EnergyNorth common stock under EnergyNorth's stock
option plans will be assumed by KeySpan. Such options will continue to be
subject to the terms and conditions in the applicable option plan and option
certificate immediately prior to the time the merger occurs, except that:
. each such assumed option will be exercisable for that number of whole
shares of KeySpan common stock determined by multiplying the number of
shares of EnergyNorth common stock subject to the EnergyNorth option by a
fraction, the numerator of which is the product of 1.175 and $64.00 and
the denominator of which is the average closing price per share of
KeySpan common stock on the New York Stock Exchange, as reported in The
Wall Street Journal, for the 10 trading days immediately before the
effectiveness of the Eastern-EnergyNorth merger, and then rounding such
number down to the nearest whole number of shares of KeySpan common
stock, provided that the $64.00 amount used in this calculation will be
increased by the amount of any increase in the cash consideration to be
paid for each share of Eastern common stock in the KeySpan-Eastern merger
above $64.00; and
. the per share exercise price for the shares of KeySpan common stock
issuable upon exercise of such assumed options will be determined by
dividing the quotient of the exercise price set forth in the EnergyNorth
option and 1.175 by the quotient of $64.00 and the average closing price
per share of KeySpan common stock on the New York Stock Exchange, as
reported in The Wall Street Journal, for the 10 trading days immediately
before the effectiveness of the Eastern-EnergyNorth merger, provided that
the $64.00 amount used in this calculation will be increased by the
amount of any increase in the cash consideration to be paid for each
share of Eastern common stock in the KeySpan-Eastern merger above $64.00.
If the KeySpan-Eastern merger agreement has not been terminated prior to the
effective time of the Eastern-EnergyNorth merger, and if the KeySpan-Eastern
merger has not been closed prior to or simultaneously with the effective time
of the Eastern-EnergyNorth merger, then at the effective time of the Eastern-
EnergyNorth merger, each outstanding option to purchase shares of EnergyNorth
common stock under EnergyNorth's stock option plans will be assumed by Eastern.
Such options will continue to be subject to the terms and conditions in the
applicable option plan and option certificate immediately prior to the time the
merger occurs, except that:
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. each such assumed option will be exercisable for that number of whole
shares of Eastern common stock determined by multiplying the number of
shares of EnergyNorth common stock subject to the EnergyNorth option by
1.175, and then rounding such number down to the nearest whole number of
shares of Eastern common stock; and
. the per share exercise price for the shares of Eastern common stock
issuable upon exercise of such assumed options will be determined by
dividing the exercise price set forth in the EnergyNorth option by 1.175.
The merger agreement further provides that if the KeySpan-Eastern merger
agreement has been terminated prior to the effective time of the Eastern-
EnergyNorth merger, then at the effective time of the Eastern-EnergyNorth
merger, each outstanding option to purchase shares of EnergyNorth common stock
under EnergyNorth's stock option plans will be assumed by Eastern. Such options
will continue to be subject to the terms and conditions in the applicable
option plan and option certificate immediately prior to the time the merger
occurs, except that:
. each such assumed option will be exercisable for the number of whole
shares of Eastern common stock the holder would have received in the
merger if the option had been exercised in full immediately prior to the
time the merger occurs (whether or not fully exercisable), rounded down
to the nearest whole number of shares of Eastern common stock; and
. the per share exercise price for the shares of Eastern common stock
issuable upon exercise of such assumed options will be equal to the
aggregate exercise price per share under the original option divided by
the number of shares of Eastern common stock deemed purchasable pursuant
to the merger agreement, rounded up to the nearest whole cent.
Regardless of whether the EnergyNorth options are assumed by KeySpan or
Eastern, it is intended that such options shall qualify after the time the
merger has occurred as incentive stock options as defined in Section 422 of the
Code to the extent they so qualified immediately prior to the time the merger
occurs. Each of KeySpan and Eastern has agreed to file a registration statement
on Form S-8 within 10 business days after the time the merger has occurred
covering such options assumed by it.
Conditions to the Merger
Conditions to Each Party's Obligations to Effect the Merger. The obligation
of Eastern, EnergyNorth and Merger Sub to consummate the merger are subject to
the satisfaction of the following conditions:
. the approval of the merger by the holders of EnergyNorth common stock
. the merger, the merger agreement and related transactions having received
all required or requested approvals or reviews from the New Hampshire
Public Utilities Commission on terms and conditions which, with respect
to rates and recovery of costs associated with the merger, are not less
favorable than those contained in the New Hampshire Public Utilities
Commission's order dated July 20, 1998, entitled In Re: Northern
Utilities, Inc., and do not otherwise have or constitute a material
adverse effect on the surviving company, EnergyNorth Natural Gas, Inc. or
on Eastern's other gas distribution subsidiaries, and such approval shall
be final, nonappealable and not under appeal
. the merger having been approved by the SEC under the Public Utility
Holding Company Act of 1935 on terms that do not and cannot reasonably be
expected to have an Eastern Material Adverse Effect (as defined below)
and are not materially burdensome to Eastern (including a requirement for
Eastern to register under the Public Utility Holding Company Act of 1935
or divest any of its or the surviving company's operations)
. the registration statement of which this proxy statement/prospectus is a
part having become effective under the Securities Act and not being
subject to any stop order or related proceedings by the SEC
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. no applicable law or regulation, judgment, injunction, order or decree of
a court of competent jurisdiction prohibiting or enjoining the
consummation of, or having a material adverse affect on, the merger
. if the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger, EnergyNorth and Eastern
having each received substantially identical opinions from their legal
counsel that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code
. the applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 relating to the merger having expired or been
terminated, and
. all other third party consents and approvals required to be obtained by
EnergyNorth having been obtained.
"Material adverse effect" for the purposes of the merger agreement means any
change, event or effect that is materially adverse to the business, assets
(including intangible assets), prospects, financial condition or results of
operations of Eastern or EnergyNorth and their respective subsidiaries, taken
as a whole. This would not include changes that are the effect of economic
factors affecting the economy as a whole other than interest rate changes, or
changes that are the effect of factors generally affecting the specific markets
in which Eastern or EnergyNorth and their respective subsidiaries compete. This
would also not include any adverse effect primarily attributable to the merger
or the announcement of the merger or the transactions contemplated by the
merger agreement (other than effects arising out of or resulting from actions
by any state or federal regulatory authority with respect to the merger
agreement and the transactions contemplated by the merger agreement).
Conditions to the Obligations of Eastern and Merger Sub. The obligations of
Eastern and Merger Sub to effect the merger are further subject to the
satisfaction of the following conditions:
. the representations and warranties of EnergyNorth contained in the merger
agreement being true in all material respects at and as of the time the
merger occurs as if made at and as of such time, and
. the performance in all material respects by EnergyNorth of its
obligations under the merger agreement at or prior to the time the merger
occurs.
Conditions to the Obligations of EnergyNorth. The obligation of EnergyNorth
to effect the merger is further subject to the satisfaction of the following
conditions:
. the representations and warranties of Eastern and Merger Sub contained in
the merger agreement being true in all material respects at and as of the
time the merger occurs as if made at and as of such time
. the performance in all material respects by Eastern and Merger Sub of
their respective obligations under the merger agreement at or prior to
the time the merger occurs, and
. any shares of Eastern common stock to be issued in the merger having been
authorized for listing on the New York Stock Exchange, the Pacific
Exchange and the Boston Stock Exchange.
Amendments; Waivers
Any provisions of the merger agreement may be amended or waived before the
time the merger occurs only if the amendment or waiver is in writing and
signed, in the case of an amendment, by Eastern, Merger Sub and EnergyNorth
and, in the case of a waiver, by the party against whom the waiver is to be
effective.
No Solicitation by EnergyNorth
EnergyNorth has agreed in the merger agreement that, from the date of
execution of the merger agreement until the merger occurs or any earlier
termination of the merger agreement, EnergyNorth and its subsidiaries will not,
and EnergyNorth and its subsidiaries will instruct their respective officers,
directors, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly:
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. solicit or encourage any Acquisition Proposal (as defined below) from,
. participate in negotiations or discussions with,
. disclose any nonpublic information relating to EnergyNorth or any
subsidiary of EnergyNorth to,
. afford access to the properties, books or records of EnergyNorth or any
subsidiary of EnergyNorth to, or
. otherwise assist or facilitate or enter into any agreement or
understanding with,
any person, entity or group other than Eastern and its affiliates in connection
with an Acquisition Proposal, or to take any other action that constitutes or
may reasonably be expected to lead to an Acquisition Proposal.
"Acquisition Proposal" means any offer or proposal for:
. a merger, consolidation or other business combination involving
EnergyNorth or any subsidiary of EnergyNorth or a substantial portion of
the assets of EnergyNorth or any subsidiary of EnergyNorth, other than
the transactions contemplated by the merger agreement
. a sale of 20% or more of the outstanding capital stock of EnergyNorth, or
. the acquisition by any person of beneficial ownership of or the right to
beneficially own or the formation of a group that beneficially owns or
has the right to acquire 20% or more of the outstanding capital stock of
EnergyNorth,
or the public announcement of any proposal, plan or intention to do any
transaction described above.
EnergyNorth also agreed to immediately cease all negotiations or discussions
with any parties conducted prior to the date of the merger agreement with
respect to the above and to use reasonable efforts to obtain the return of any
confidential information. EnergyNorth has agreed to notify Eastern:
. promptly of any inquiry or proposal made or any request made for access
or information relating to any Acquisition Proposal or potential
Acquisition Proposal, and
. within one (1) business day of the receipt of an Acquisition Proposal,
the identity of the person making the Acquisition Proposal and the terms
of such Acquisition Proposal or any modification to such terms or any
proposed agreement relating to such Acquisition Proposal.
EnergyNorth has also agreed not to make or authorize any public statement,
recommendation or solicitation in support of any Acquisition Proposal made by
any party other than Eastern.
Notwithstanding the foregoing, EnergyNorth may, to the extent that the
EnergyNorth board determines in good faith, after consultation with outside
legal counsel and its financial advisor, that its fiduciary duties under
applicable law require it to do so:
. participate in negotiations with, or
. disclose information relating to EnergyNorth and any of its subsidiaries
to,
any person who has made an Acquisition Proposal to EnergyNorth which the
EnergyNorth board has determined would result in a transaction more favorable
to the stockholders of EnergyNorth than the merger and has been made by a
person, entity or group that is financially capable of consummation of the
Acquisition Proposal.
If EnergyNorth receives an Acquisition Proposal and the EnergyNorth board
determines in good faith, after consultation with outside legal counsel and its
financial advisor, that its fiduciary duties under applicable law require it to
do so, EnergyNorth may, subject to the terms of the merger agreement:
. approve such Acquisition Proposal
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. recommend approval of such Acquisition Proposal to EnergyNorth's
stockholders, or
. withdraw, modify or refrain from recommending approval of the merger
agreement.
Before withdrawing, modifying or refraining from recommending the merger
agreement, the EnergyNorth board has agreed to give Eastern at least three
business days' prior notice to allow Eastern to make a counterproposal and has
agreed to consider any counterproposal made by Eastern and shall itself and
shall cause its financial and legal advisors to negotiate on its behalf with
Eastern with respect to the terms and conditions of such counterproposal.
EnergyNorth may not provide any non-public information to a third party unless
such information is provided subject to a non-disclosure agreement with terms
comparable to the confidentiality agreement dated June 9, 1999 with Eastern and
such information has previously been provided to Eastern.
Termination of the Merger Agreement
The merger agreement may be terminated at any time before the time the
merger occurs, whether before or after approval of the merger by EnergyNorth's
stockholders or the New Hampshire Public Utilities Commission:
. by mutual written consent of Eastern and EnergyNorth.
. by either EnergyNorth or Eastern:
. if the merger has not been consummated by March 31, 2001 (which date
may be extended by either EnergyNorth or Eastern to September 30,
2001 if certain regulatory conditions have not been satisfied);
provided, however, that neither Eastern nor EnergyNorth may
terminate if its breach is the reason that the merger has not been
consummated; and provided further that if the deadlines for the
consummation of the KeySpan-Eastern merger are extended, then the
March 31, 2001 and September 30, 2001 deadlines described in this
paragraph may either be extended to be the same as those in the
KeySpan-Eastern agreement of merger, or the Eastern-EnergyNorth
merger agreement may be terminated by EnergyNorth.
. if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission has issued an order, decree or
ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the
merger, which order, decree or ruling is final, nonappealable and
not under appeal;
. if the EnergyNorth stockholders do not approve the merger agreement
by March 1, 2000 (which date the parties to the merger agreement
have agreed to extend to April 1, 2000 and may be extended further
by agreement of the parties) or if the required vote is not obtained
at the EnergyNorth annual meeting or any adjournment thereof;
provided, however, that EnergyNorth or Eastern, as appropriate, will
not have the right to terminate the merger agreement for this reason
if the failure to obtain the approval of EnergyNorth's stockholders
was caused by EnergyNorth's or Eastern's respective breach of the
merger agreement;
. if EnergyNorth has accepted or approved an Acquisition Proposal (as
defined above under "--No Solicitation by EnergyNorth") or if the
EnergyNorth board recommends an Acquisition Proposal to
EnergyNorth's stockholders.
. By Eastern:
. if the EnergyNorth board has:
. failed to convene the EnergyNorth annual meeting;
. failed to recommend any required approval of the merger
agreement and the merger in this proxy statement/prospectus or
has withheld, withdrawn or modified in a manner adverse to
Eastern its recommendation in favor of any required approval
of the merger (or resolved to do so); or
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. approved or recommended an Acquisition Proposal;
. upon a breach of any representation, warranty, covenant or agreement
on the part of EnergyNorth set forth in the merger agreement, if:
. as a result of such breach the conditions set forth in the
representations and warranties or the agreements and covenants
would not be satisfied as of the time of such breach; and
. such breach has not been cured by EnergyNorth within ten
business days following receipt by EnergyNorth of written
notice of such breach from Eastern; or
. if any event or condition that constitutes a material adverse effect
with respect to EnergyNorth has occurred since the date of the
merger agreement, which condition or event shall not have been
ameliorated such that it is no longer a material adverse effect with
respect to EnergyNorth within ten business days following receipt by
EnergyNorth of notice from Eastern.
. By EnergyNorth:
. upon a breach of any representation, warranty, covenant or agreement
on the part of Eastern set forth in the merger agreement, if:
. as a result of such breach, the representations and warranties
or covenants and agreements would not be satisfied as of the
time of such breach; and
. such breach shall not have been cured by Eastern within ten
business days following receipt by Eastern of written notice
of such breach from EnergyNorth; or
. if any event or condition that constitutes a material adverse
effect with respect to Eastern has occurred since the date of the
merger agreement, which condition or event shall not have been
ameliorated such that it is no longer a material adverse effect
with respect to Eastern within ten business days following receipt
by Eastern of notice from EnergyNorth.
If the merger agreement is validly terminated, no provision of the merger
agreement shall survive (except for the provisions relating to expenses,
termination fees and miscellaneous provisions of general application). The
confidentiality agreements entered into between Eastern and EnergyNorth as of
June 9, 1999 and June 11, 1999 will continue in effect notwithstanding
termination of the merger agreement.
Termination Fees and Expenses
Payment of Expenses of the Merger Generally. Except as described below and
for fees and expenses (other than attorneys' and accountants' fees and
expenses) incurred in connection with the printing and filing of this proxy
statement/prospectus and the registration statement (which will be shared
equally by EnergyNorth and Eastern), all fees and expenses incurred in
connection with the merger will be paid by the party incurring such expenses.
Payment of Eastern Expenses by EnergyNorth. EnergyNorth has agreed to pay up
to $2 million of Eastern's out-of-pocket expenses and fees incurred in
connection with the merger or the transactions contemplated by the merger
agreement if:
. EnergyNorth has committed a breach of a representation, warranty,
covenant or agreement under the merger agreement and as a result the
merger agreement is terminated by Eastern under the circumstances
described in "--Termination of the Merger Agreement."
. EnergyNorth has accepted or approved an Acquisition Proposal or its board
of directors recommends an Acquisition Proposal to the EnergyNorth
stockholders and as a result the merger agreement is terminated under the
circumstances described in "--Termination of the Merger Agreement".
. The EnergyNorth board
. has failed to convene the EnergyNorth annual meeting or to recommend
approval of the merger,
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. withholds, withdraws or modifies such recommendation in a manner
adverse to Eastern, or
. recommends or approves an Acquisition Proposal
and as a result the merger agreement is terminated by Eastern under
the circumstances described in "--Termination of the Merger
Agreement".
. The stockholders of EnergyNorth fail to approve the merger and as a
result the merger agreement is terminated under the circumstances
described in "--Termination of the Merger Agreement" and,
. at the time of such failure to approve the merger, an Alternative
Transaction (as defined below) has been announced, commenced or
occurred and EnergyNorth has either:
. executed an agreement to engage in the Alternative Transaction
or
. the EnergyNorth board has not recommended against such
Alternative Transaction affirmatively, or has made and
withdrawn such a recommendation against the Alternative
Transaction, or has modified such negative recommendation in a
manner adverse to Eastern; or
. at the time of such failure to approve the merger, an Alternative
Transaction has been announced, commenced or occurred with a third
party and within twelve months of the failure of the EnergyNorth
stockholders to approve the merger, EnergyNorth has either:
. engaged in, or entered into an agreement to engage in, an
Alternative Transaction with the third party initially involved
at the time of the announcement or commencement, or an
affiliate of such third party, or with another third party who
announces or commences an Alternative Transaction or with whom
an Alternative Transaction occurs while another Alternative
Transaction is pending (a "competing party"), or
. the EnergyNorth board has recommended an Alternative
Transaction with the third party initially involved in such
Alternative Transaction, or an affiliate of such party, or with
a competing party.
. EnergyNorth has committed a willful breach of the merger agreement and as
a result the merger agreement is terminated by Eastern under the
circumstances described in "--Termination of the Merger Agreement" and,
either before such termination or within twelve months thereafter,
EnergyNorth has entered into an agreement to engage in or has engaged in
an Alternative Transaction.
"Alternative Transaction", when used to describe a transaction involving
EnergyNorth, means either:
. a transaction pursuant to which any person (or group of persons) other
than Eastern or its affiliates, acquires 33% or more of the outstanding
shares of EnergyNorth common stock, pursuant to a tender offer or
exchange offer or otherwise,
. a merger, consolidation or combination involving EnergyNorth, in which
the holders of EnergyNorth common stock do not own at least a majority of
the equity of the surviving entity,
. any other transaction pursuant to which any third party other than
Eastern or its affiliates acquires control of assets of EnergyNorth,
having a fair market value (as determined in good faith by the
EnergyNorth board of directors) equal to more than 33% of the fair market
value of all the assets of EnergyNorth immediately prior to such
transaction, or
. any public announcement by EnergyNorth of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the
foregoing.
Payment of EnergyNorth Expenses by Eastern. Eastern has agreed to pay up to
$2 million of EnergyNorth's out-of-pocket expenses and fees incurred in
connection with the merger or the transactions contemplated by the merger
agreement if:
. Eastern has committed a breach of a representation, warranty, covenant or
agreement under the merger agreement and as a result the merger agreement
is terminated by EnergyNorth under the circumstances described in "--
Termination of the Merger Agreement."
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EnergyNorth Termination Fee. EnergyNorth has agreed to pay Eastern an amount
equal to $5.5 million (plus the amount of any out-of-pocket expenses of Eastern
required to be paid by EnergyNorth under the merger agreement) if:
. EnergyNorth accepts or approves an Acquisition Proposal or the
EnergyNorth board recommends approval of an Acquisition Proposal to the
EnergyNorth stockholders and as a result the merger agreement is
terminated under the circumstances described in "--Termination of the
Merger Agreement."
. The EnergyNorth board
. has failed to convene the EnergyNorth annual meeting or to
recommend approval of the merger,
. withholds, withdraws or modifies such recommendation in a manner
adverse to Eastern, or
. recommends or approves an Acquisition Proposal
and as a result the merger agreement is terminated by Eastern under
the circumstances described in "--Termination of the Merger
Agreement".
. The stockholders of EnergyNorth fail to approve the merger and as a
result the merger agreement is terminated under the circumstances
described in "--Termination of the Merger Agreement" and,
. at the time of such failure to approve the merger, an Alternative
Transaction has been announced, commenced or occurred and
EnergyNorth has either:
. executed an agreement to engage in the Alternative Transaction
or
. the EnergyNorth board has not recommended against such
Alternative Transaction affirmatively, or has made and
withdrawn such a recommendation against the Alternative
Transaction, or has modified such negative recommendation in a
manner adverse to Eastern; or
. at the time of such failure to approve the merger, an Alternative
Transaction has been announced, commenced or occurred with a third
party and within twelve months of the failure of the EnergyNorth
stockholders to approve the merger, EnergyNorth has either:
. engaged in, or entered into an agreement to engage in, an
Alternative Transaction with the third party initially
involved at the time of the announcement or commencement, or
an affiliate of such third party, or with a competing party,
or
. the EnergyNorth board has recommended an Alternative
Transaction with the third party initially involved in such
Alternative Transaction, or an affiliate of such party, or
with a competing party.
. EnergyNorth has committed a willful breach of the merger agreement and as
a result the merger agreement is terminated by Eastern under the
circumstances described in "--Termination of the Merger Agreement" and,
either before such termination or within twelve months thereafter,
EnergyNorth has entered into an agreement to engage in or has engaged in
an Alternative Transaction.
Payment of Termination Fees and Expenses of the Other Party; No Limitation
on Recovering for Willful Breach. Amounts payable by EnergyNorth to Eastern as
a termination fee or amounts payable by EnergyNorth or Eastern to the other
party for out-of-pocket expenses of the other party will be paid by wire
transfer within three business days after the event giving rise to such
payment. EnergyNorth and Eastern, however, will not be required to pay any
expenses or termination fees to the other party if, immediately prior to the
termination of the merger agreement, the other party was in material breach of
any of its material obligations under the merger agreement. If a party does not
promptly pay any fee due under the merger agreement, that party will also be
liable for the costs and expenses of the other party incurred in recovering
such fee, as well as interest on any late payment amount. In addition, if the
merger agreement is terminated by
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a party as a result of a willful breach by the other party (except under
circumstances of willful breach of the merger agreement of EnergyNorth as
described in "--Termination of Fees and Expenses--EnergyNorth Termination Fee"
in which case Eastern may exercise and enforce its rights and remedies as
described in this paragraph until and unless EnergyNorth engages in an
Alternative Transaction, in which event the provisions described in "--
Termination of Fees and Expenses--EnergyNorth Termination Fee" will apply), the
terminating party may pursue any remedies available to it at law or in equity
and shall, in addition to its out-of-pocket expenses (which shall be paid as
specified above and shall not be limited to $2,000,000), be entitled to retain
such additional amounts as the terminating party may be entitled to receive at
law or in equity; provided, however, no party shall be responsible for any
special, consequential or incidental damages. Eastern shall not be entitled to
payment for both willful breach of EnergyNorth as described in this paragraph
and a termination fee for willful breach of the merger agreement by EnergyNorth
as described in "--Termination of Fees and Expenses--EnergyNorth Termination
Fee".
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COMBINED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following combined condensed unaudited financial information of Eastern
and EnergyNorth reflects the completion of the merger assuming the KeySpan-
Eastern merger agreement has been terminated prior to the effective time of the
Eastern-EnergyNorth merger, and accordingly that the merger consideration
consists of cash and shares of Eastern common stock, and assuming the merger
had been effective for the periods indicated, which we refer to as "pro forma"
information. Eastern will account for this transaction using the purchase
method of accounting for business combinations. Pro forma financial information
reflecting the completion of the merger assuming the KeySpan-Eastern merger
agreement has not been terminated prior to the effective time of the Eastern-
EnergyNorth merger is not presented herein.
Eastern's and EnergyNorth's fiscal years end on different dates.
Accordingly, to combine Eastern's and EnergyNorth's financial information:
. Eastern's audited balance sheet as of December 31, 1999 has been
combined, with certain adjustments, with EnergyNorth's unaudited balance
sheet as of December 31, 1999;
. Eastern's unaudited statement of operations for the twelve months ended
December 31, 1999, as adjusted for an acquisition, has been combined,
with certain adjustments, with EnergyNorth's unaudited statement of
operations for the twelve months ended December 31, 1999; and
. Eastern's unaudited statement of operations for the year ended December
31, 1998, as adjusted for an acquisition, has been combined, with certain
adjustments, with EnergyNorth's unaudited statement of operations for the
twelve months ended December 31, 1998.
The combined unaudited pro forma balance sheet as of December 31, 1999
includes the effect of this merger as if the merger had occurred on December
31, 1999.
The combined unaudited statements of operations for the twelve months and
year ended December 31, 1999 and December 31, 1998 include the effect of this
merger as if this merger had occurred on January 1, 1998.
The combined unaudited pro forma financial information is not necessarily
indicative of our results of operations or financial position that would have
been reported if the merger actually occurred on the dates indicated, nor are
they necessarily indicative of the future operating results or financial
position of the combined company. We have not included pro forma adjustments
that reflect potential effects of (a) the efficiencies that may be obtained by
combining the operations of Eastern and EnergyNorth or (b) the costs of
restructuring, integrating or consolidating the operations of Eastern and
EnergyNorth preliminarily estimated to be $1.2 million (net of tax of $0.8
million) which will be charged to income as incurred or (c) the impact of
recording certain liabilities for severance, enhanced benefits and a contract
cancellation all totaling $10.5 million expected to be incurred as a result of
the merger. The combined unaudited pro forma financial information should be
read in conjunction with the respective consolidated historical financial
statements of both Eastern and EnergyNorth which are incorporated herein by
reference.
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EASTERN COMBINED UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Eastern EnergyNorth Pro Forma Pro Forma
Historical (As Reclassified)(2) Adjustments Balances(1)
---------- -------------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term
investments............ $ 44,332 $ 372 $ 44,704 (5) $ --
Receivables, less
reserves of $18,669.... 135,409 20,578 -- 155,987
Inventories............. 74,555 10,641 -- 85,196
Deferred gas costs...... 64,503 5,237 -- 69,740
Other current assets.... 5,008 2,850 -- 7,858
---------- -------- -------- ----------
Total current assets... 323,807 39,678 44,704 318,781
PROPERTY AND EQUIPMENT,
AT COST................. 2,197,156 178,430 -- 2,375,586
Less--accumulated
depreciation........... 906,953 57,347 -- 964,300
---------- -------- -------- ----------
Net property and
equipment.............. 1,290,203 121,083 -- 1,411,286
OTHER ASSETS
Excess of cost over fair
value of acquired
assets, less
amortization........... 247,137 -- 107,176 (3) 354,313
Deferred post-retirement
health care costs...... 72,760 -- 72,760
Investments............. 14,671 1,119 -- 15,790
Deferred charges and
other costs, less
amortization........... 71,179 16,405 -- 87,584
---------- -------- -------- ----------
Total other assets..... 405,747 17,524 107,176 530,447
---------- -------- -------- ----------
TOTAL ASSETS.......... $2,019,757 $178,285 $ 62,472 $2,260,514
========== ======== ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current debt............ $ 123,251 $ 23,628 $ 146,879
Accounts payable........ 75,770 13,536 -- 89,306
Accrued expenses........ 37,516 4,118 -- 41,634
Other current
liabilities............ 50,234 3,011 -- 53,245
---------- -------- -------- ----------
Total current
liabilities........... 286,771 44,293 -- 331,064
GAS INVENTORY FINANCING.. 54,020 10,139 -- 64,159
LONG-TERM DEBT........... 515,232 45,633 36,859 (5) 597,724
RESERVES AND OTHER
LIABILITIES
Deferred income taxes... 179,426 24,160 -- 203,586
Post-retirement health
care................... 100,016 -- 100,016
Preferred stock of
subsidiary............. 26,454 -- 26,454
Other reserves.......... 103,208 1,429 -- 104,637
---------- -------- -------- ----------
Total reserves and
other liabilities..... 409,104 25,589 -- 434,693
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock,
authorized;
Eastern--50 million,
EnergyNorth--10 million
issued and outstanding;
Adjusted Historical
Eastern--27.1 million;
28.9 million pro forma.. 27,131 1,778 (4) 28,909
EnergyNorth--3.3
million................ -- 3,323 (3,323)(4) --
Capital in excess of
par.................... 244,449 32,643 43,823 (4) 320,915
Retained earnings....... 483,710 16,665 (16,665)(4) 483,710
Accumulated other
comprehensive.......... (77) -- -- (77)
Treasury stock.......... (583) -- -- (583)
---------- -------- -------- ----------
Total stockholders'
equity................ 754,630 52,631 25,613 832,874
---------- -------- -------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY............... $2,019,757 $178,285 $ 62,472 $2,260,514
========== ======== ======== ==========
</TABLE>
See accompanying notes to Combined Unaudited Pro Forma Financial Information.
73
<PAGE>
EASTERN COMBINED UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Eastern
Adjusted EnergyNorth Pro Forma Pro Forma
Historical (As Reclassified)(2) Adjustments Results(1)
---------- -------------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues................ $1,108,977 $124,863 $ -- $1,233,840
Operating costs and
expenses:
Operating costs....... 744,007 83,879 827,886
Selling, general and
administrative
expenses............. 137,089 20,980 (1,869)(3) 156,200
Depreciation and
amortization......... 94,832 7,845 2,679 (3) 105,356
---------- -------- ------- ----------
Operating earnings...... 133,049 12,159 (810) 144,398
Other income (expense):
Interest income....... 2,017 76 (2,459)(6) (366)
Interest expense...... (45,876) (4,915) (3,041)(6) (53,832)
Other, net............ 9,170 449 -- 9,619
---------- -------- ------- ----------
Earnings from continuing
operations before
income taxes........... 98,360 7,769 (6,310) 99,819
Provision for income
taxes.................. 41,439 3,740 (1,925)(8) 43,254
---------- -------- ------- ----------
Net earnings from
continuing operations.. $ 56,921 $ 4,029 $(4,385) $ 56,565
========== ======== ======= ==========
Basic earnings per share
from continuing
operations(4).......... $ 2.11 $ 1.21 $ 1.97
========== ======== ==========
Diluted earnings per
share from continuing
operations(4).......... $ 2.10 $ 1.21 $ 1.96
========== ======== ==========
Weighted average number
of common
shares outstanding:
Basic................. 26,920 3,320 28,698
========== ======== ==========
Diluted............... 27,063 3,339 28,841
========== ======== ==========
</TABLE>
See accompanying notes to Combined Unaudited Pro Forma Financial Information.
74
<PAGE>
EASTERN COMBINED UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Eastern
Adjusted EnergyNorth Pro Forma Pro Forma
Historical (As Reclassified)(2) Adjustments Results(1)
---------- -------------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues................ $1,118,357 $110,505 $ -- $1,228,862
Operating costs and
expenses:
Operating costs....... 752,497 74,645 827,142
Selling, general and
administrative
expenses............. 143,660 18,102 161,762
Depreciation and
amortization......... 94,118 6,821 2,679 (3) 103,618
---------- -------- ------- ----------
Operating earnings...... 128,082 10,937 (2,679) 136,340
Other income (expense):
Interest income
(expense)............ 1,024 19 (2,459)(6) (1,416)
Interest expense...... (44,445) (4,956) (3,041)(6) (52,442)
Other, net............ 6,438 1,016 7,454
---------- -------- ------- ----------
Earnings from continuing
operations before
income taxes........... 91,099 7,016 (8,179) 89,936
Provision for income
taxes.................. 36,182 2,561 (1,925)(8) 36,818
---------- -------- ------- ----------
Net earnings from
continuing operations
before extraordinary
items.................. $ 54,917 $ 4,455 $(6,254) $ 53,118
========== ======== ======= ==========
Basic earnings per share
from continuing
operations before
extraordinary
items(4)............... $ 2.06 $ 1.35 $ 1.87
========== ======== ==========
Diluted earnings per
share from continuing
operations before
extraordinary
items(4)............... $ 2.04 $ 1.35 $ 1.85
========== ======== ==========
Weighted average number
of common
shares outstanding:
Basic................. 26,693 3,291 28,470
========== ======== ==========
Diluted............... 26,899 3,291 28,676
========== ======== ==========
</TABLE>
See accompanying notes to Combined Unaudited Pro Forma Financial Information.
75
<PAGE>
NOTES TO COMBINED UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) The Merger
The merger will be accounted for under the purchase method of accounting for
business combinations. The combined unaudited pro forma financial information
does not give effect to (a) the efficiencies that may be obtained by combining
the operations of Eastern and EnergyNorth or (b) the costs of restructuring,
integrating or consolidating the operations of Eastern and EnergyNorth
preliminarily estimated to be $1.2 million (net of tax of $0.8 million) which
will be charged to income as incurred or (c) the impact of recording certain
liabilities for severance, enhanced benefits and a contract cancellation all
totaling $10.5 million expected to be incurred as a result of the merger.
Eastern is currently in the process of developing its plan to integrate the
operations of EnergyNorth. There were no intercompany transactions between
Eastern and EnergyNorth during the periods presented that require elimination.
(2) Reclassifications
These columns represent historical results of operations and financial
position of the respective companies. Certain reclassifications have been made
to the historical balance sheet and statements of operations of EnergyNorth to
conform with Eastern's historical financial statement presentation.
(3) Purchase Price Allocation
The fair value of the consideration exchanged to acquire EnergyNorth common
stock will be determined at the closing date and will be allocated to the
assets and liabilities of EnergyNorth based on their estimated fair value. A
preliminary allocation of the purchase price has been presented in the
unaudited pro forma combined financial information in which the fair value of
the identifiable net assets of EnergyNorth is assumed to equal the net book
value of such assets. The excess of consideration over the fair value of the
identifiable net assets for EnergyNorth has been preliminarily allocated to
goodwill as follows (in thousands, except price per share):
<TABLE>
<S> <C>
Shares of EnergyNorth common stock outstanding on December 31,
1999............................................................. 3,323
Consideration per EnergyNorth share (a)........................... $ 47.00
--------
Consideration exchanged for EnergyNorth common stock.............. $156,176
Plus: estimated transaction costs (b)............................. 3,631
--------
Total estimated purchase price.................................... 159,807
Less: estimated fair value of EnergyNorth's identifiable net
assets (net book value) on December 31, 1999..................... 52,631
--------
Total estimated goodwill due to merger............................ $107,176
========
</TABLE>
- --------
(a) The estimated consideration and purchase price allocation used for pro
forma purposes is based on a value of $47.00 per share of EnergyNorth
common stock.
(b) Transaction costs primarily consist of investment banking fees and other
professional fees. Transaction costs related to the EnergyNorth
acquisition are estimated to be $5.5 million but are presented herein net
of $1.9 million of costs previously expensed by EnergyNorth in the
accompanying historical statements of operations.
(c) A pro forma adjustment has been made for the twelve months ended December
31, 1999 and the twelve months ended December 31, 1998 to reflect
incremental amortization expense on the goodwill created by the merger.
Goodwill is amortized over a 40-year life.
76
<PAGE>
(4) Stock Consideration
(a) EnergyNorth--Assuming the KeySpan-Eastern merger agreement has been
terminated prior to the effective time of the Eastern-EnergyNorth merger, the
merger consideration consists of both cash and Eastern common stock. Under the
agreement, 50.1% of the common stock of EnergyNorth will be converted into
Eastern common stock and 49.9% of the common stock of EnergyNorth will be
converted into cash. Shares of EnergyNorth common stock which are not exchanged
for cash consideration will be converted into a number of shares of Eastern
common stock based on the exchange ratio. The exchange ratio for the stock
portion of the consideration will be determined in the manner described in Note
7 below. Based on the average of the daily weighted average price per share of
Eastern common stock on the New York Stock Exchange for the ten trading day
period (which is the period used to calculate the exchange ratio under the
merger agreement, as discussed in Note 7 below) ended on January 24, 2000 which
was above $44.00, Eastern would issue approximately 1.778 million shares in the
transaction (based on the number of shares of EnergyNorth common stock
outstanding on December 31, 1999). The unaudited pro forma net earnings per
share reflect the weighted average number of Eastern common shares that would
have been outstanding if the merger occurred at the beginning of the periods
presented upon the conversion of each outstanding share of EnergyNorth common
stock not exchanged for cash into 1.0682 shares of Eastern common stock, as
provided in the merger agreement.
(b) Pro forma adjustments have been made as of December 31, 1999 to reflect
the issuance of approximately 1.778 million shares of Eastern common stock
($1.00 par value per share) to be exchanged together with cash of $78 million
for all of the outstanding shares of EnergyNorth common stock (based on the
number of shares of EnergyNorth common stock outstanding on December 31, 1999)
and to eliminate the stockholders' equity accounts of EnergyNorth.
(5) Cash Consideration
(a) Pro forma adjustments have been made to reflect the funding of the cash
portion of the purchase price of EnergyNorth common stock plus an additional
$4.3 million for estimated transaction costs for the merger. The cash
consideration will be comprised of borrowings, available on-hand cash and
short-term investments.
<TABLE>
<S> <C>
Shares of EnergyNorth common stock outstanding on December 31,
1999........................................................... 3,323
Fixed percentage to be exchanged for cash....................... 49.9%
--------
Shares of EnergyNorth common stock to be exchanged for cash..... 1,658
Consideration per EnergyNorth share............................. $ 47.00
--------
Cash consideration.............................................. $ 77,932
Merger costs.................................................... 3,631
--------
Total expected cash outlay...................................... 81,563
less cash on-hand............................................... (44,704)
--------
Expected borrowings............................................. $ 36,859
========
</TABLE>
(6) Interest Income/Expense
(a) A pro forma adjustment has been made to reflect reduced interest income
resulting from the use of cash more fully described in 5(a) above as if such
funding had occurred on January 1, 1998, assuming a weighted average annual
interest rate of 5.5%.
(b) A pro forma adjustment has been made to reflect increased interest
expense resulting from the incremental borrowings more fully described in 5(b)
above as if such borrowings had occurred on January 1, 1998, assuming an
incremental borrowing rate of 8.25%.
77
<PAGE>
(7) Exchange Ratio
EnergyNorth--As provided for in the merger agreement, assuming the KeySpan-
Eastern merger agreement has been terminated prior to the effective time of the
Eastern-EnergyNorth merger, EnergyNorth stockholders will be permitted to elect
either Eastern common stock or cash, subject to a limitation of 50.1% of the
common stock of EnergyNorth converted into Eastern common stock and 49.9% of
the common stock of EnergyNorth converted into cash. Under the merger
agreement's collar mechanism, if Eastern's average of the daily weighted
average price per share for the ten trading day period ending on the third
trading day prior to the date on which the merger is consummated is either
higher than $44.00 or lower than $36.00, the portion of the purchase price
payable in Eastern shares would be determined based upon a fixed exchange ratio
calculated at such prices. Based upon the average of the daily weighted average
price per share of Eastern common stock on the New York Stock Exchange for the
ten trading day period ended on January 24, 2000 (which is calculated as if the
date on which the merger is consummated was January 27, 2000) which was above
$44.00, the assumed exchange ratio would be derived using the fixed amount of
$44.00. The fixed exchange ratio would be 1.0682 shares of Eastern common stock
for each share of EnergyNorth common stock (other than shares of EnergyNorth
common stock to be exchanged for an aggregate $78 million cash consideration in
the merger) and Eastern would issue approximately 1.778 million shares in this
transaction based on the number of shares of EnergyNorth common stock
outstanding as of December 31, 1999.
Any increase in the exchange ratio will cause a corresponding decrease in
the pro forma combined per share amounts and any decrease in the exchange ratio
will cause a corresponding increase in the pro forma per share amounts. For
example, if Eastern's stock price was at $44.00, or $36.00, the recalculated
combined pro forma earnings per share in the latest fiscal year and interim
period would be as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C> <C> <C>
Eastern stock price...................... $ 44.00 $ 36.00 $ 44.00 $ 36.00
======== ======== ======== ========
Earnings per share:
Basic.................................. $ 1.85 $ 1.82 $ 0.94 $ 0.92
Diluted................................ $ 1.83 $ 1.81 $ 0.93 $ 0.92
</TABLE>
(8) Income Taxes
A pro forma adjustment has been made for the twelve months ended December
31, 1999 and the twelve months ended December 31, 1998 to reflect the tax
effect of the pro forma adjustments using Eastern's incremental tax rate of
35%. Goodwill created by the merger is nondeductible for tax purposes because
the transaction is expected to be tax-free.
78
<PAGE>
EASTERN UNAUDITED ADJUSTED HISTORICAL
FINANCIAL INFORMATION
Eastern completed its acquisition of Colonial Gas on August 31, 1999 and is
accounting for this transaction under the purchase method of accounting for
business combinations.
The Eastern unaudited adjusted historical statements of operations for the
years ended December 31, 1999 and 1998 include the effect of this acquisition,
as if the acquisition had occurred on January 1, 1998.
The Eastern unaudited adjusted historical financial information is not
necessarily indicative of the results of operations which would have been
reported if the acquisition had occurred on the indicated dates nor is it
necessarily indicative of the future operating results of the combined company.
Furthermore, the adjusted historical financial information does not give effect
to the efficiencies that may be obtained by combining the operations of Eastern
and Colonial Gas and the costs incurred for restructuring, integrating and
consolidating the operations of Eastern and Colonial Gas preliminarily
estimated at $5.0 million (net of tax of $3.4 million) which will be charged to
income as incurred. In the opinion of management, all adjustments necessary to
present fairly such adjusted historical statement of operations have been made.
The Eastern unaudited historical financial information should be read in
conjunction with the historical consolidated financial statements of Eastern
which are incorporated by reference into this proxy statement/prospectus and
the historical consolidated financial statements of Colonial Gas.
79
<PAGE>
EASTERN UNAUDITED ADJUSTED HISTORICAL STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Eastern
Eastern Colonial Pro Forma Adjusted
As Reported(2) (As Reclassified)(2) Adjustments Historical
-------------- -------------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues................ $921,460 $187,517 $ -- $1,108,977
Operating costs and
expenses:
Operating costs....... 631,660 120,371 744,007
Selling, general and
administrative
expenses............. 113,654 23,435 (8,024)(4) 137,089
Depreciation and
amortization......... 74,608 17,644 2,580 (3) 94,832
-------- -------- ------- ----------
Operating earnings...... 101,538 26,067 5,444 133,049
Other income (expense):
Interest income....... 7,962 -- (5,945)(5) 2,017
Interest expense...... (35,528) (10,348) -- (45,876)
Other, net............ 8,587 583 -- 9,170
-------- -------- ------- ----------
Earnings from continuing
operations before
income taxes........... 85,559 16,302 (501) 98,360
Provision for income
taxes.................. 32,352 7,766 1,321 (6) 41,439
-------- -------- ------- ----------
Net earnings from
continuing operations
before extraordinary
items.................. $ 50,207 $ 8,536 $(1,822) $ 56,921
======== ======== ======= ==========
Basic earnings per share
from continuing
operations(4):......... $ 2.21 $ 2.11
======== ==========
Diluted earnings per
share from continuing
operations(4):......... $ 2.20 $ 2.10
======== ==========
Weighted average number
of common
shares outstanding:
Basic................. 22,701 26,920
======== ==========
Diluted............... 22,844 27,063
======== ==========
</TABLE>
See accompanying notes to Eastern Unaudited Adjusted Historical Financial
Information.
80
<PAGE>
EASTERN UNAUDITED ADJUSTED HISTORICAL STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Eastern
Eastern Colonial Pro Forma Adjusted
(As Reported)(2) (As Reclassified)(2) Adjustments Historical
---------------- -------------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues................ $935,264 $183,093 $ -- $1,118,357
Operating costs and
expenses:
Operating costs....... 640,792 111,705 752,497
Selling, general and
administrative
expenses............. 118,546 28,795 (3,681)(4) 143,660
Depreciation and
amortization......... 75,521 14,727 3,870 (3) 94,118
-------- -------- ------- ----------
Operating earnings...... 100,405 27,866 (189) 128,082
Other income (expense):
Interest income....... 7,582 2,360 (8,918)(5) 1,024
Interest expense...... (33,584) (10,861) (44,445)
Other, net............ 5,591 847 6,438
-------- -------- ------- ----------
Earnings from continuing
operations before
income taxes........... 79,994 20,212 (9,107) 91,099
Provision for income
taxes.................. 29,166 7,910 (894)(6) 36,182
-------- -------- ------- ----------
Net earnings from
continuing operations
before extraordinary
items.................. $ 50,828 $ 12,302 $(8,213) $ 54,917
======== ======== ======= ==========
Basic earnings per share
from continuing
operations before
extraordinary
items(4):.............. $ 2.26 $ 1.40 $ 2.06
======== ======== ==========
Diluted earnings per
share from continuing
operations before
extraordinary
items(4):.............. $ 2.24 $ 1.40 $ 2.04
======== ======== ==========
Weighted average number
of common
shares outstanding:
Basic................. 22,474 8,781 26,693
======== ======== ==========
Diluted............... 22,680 8,781 26,899
======== ======== ==========
</TABLE>
See accompanying notes to Eastern Unaudited Adjusted Historical Financial
Information.
81
<PAGE>
NOTES TO EASTERN UNAUDITED ADJUSTED HISTORICAL FINANCIAL INFORMATION
(1) The Acquisition
The acquisition was accounted for under the purchase method of accounting
for business combinations. The adjusted historical financial information does
not give effect to (a) the efficiencies that may be obtained by combining the
operations of Eastern and Colonial Gas, (b) the costs incurred for
restructuring, integrating and consolidating the operations of Eastern and
Colonial Gas preliminarily estimated at $8.4 million ($5.0 million net of tax)
which will be charged to income as incurred.
On September 30, 1998, Eastern completed a merger with Essex Gas which was
accounted for as a pooling-of-interests. Accordingly, the accompanying
unaudited pro forma combined financial data include in Eastern the accounts of
Essex Gas for all periods presented.
(2) Reclassifications
These columns represent historical results of operations and financial
position of the respective companies. Certain reclassifications have been made
to the historical balance sheet and statements of operations of Colonial Gas to
conform with Eastern's historical financial statement presentation.
(3) Depreciation and Amortization
(a) A pro forma adjustment has been made for the twelve months ended
December 31, 1999 and the twelve months ended December 31, 1998 to reflect
incremental amortization expense on the goodwill created by the acquisition.
Goodwill is principally amortized over a 40-year life.
(b) A pro forma adjustment has been made to reverse previously expensed
depreciation for the twelve months ended December 31, 1999 and the twelve
months ended December 31, 1998. These depreciation charges relate to assets not
given value in purchase accounting on the date of acquisition.
(4) Selling, General and Administrative Expenses
(a) A pro forma adjustment has been made to reverse previously expensed
transaction costs for the twelve months ended December 31, 1999 and the twelve
months ended December 31, 1998. These costs are non-recurring and relate
directly to the acquisition.
(b) A pro forma adjustment has been made for the twelve months ended
December 31, 1999 and the twelve months ended December 31, 1998 to reflect
recurring recoveries and expenses previously recorded through regulatory assets
which were not given value as a direct result of the acquisition.
(5) Interest Income
A pro forma adjustment has been made to reflect reduced interest income
resulting from the use of cash more fully described in 5(a) above as if such
funding had occurred on January 1, 1998, assuming a weighted average annual
interest rate of 5.5%.
(6) Income Taxes
A pro forma adjustment has been made for the twelve months ended December
31, 1999 and the twelve months ended December 31, 1998 to reflect the tax
effect of the pro forma adjustments using Eastern's incremental tax rate of
35%. Goodwill created by the acquisition is nondeductible for tax purposes
because the transaction is tax-free.
82
<PAGE>
PRINCIPAL STOCKHOLDERS
Beneficial Owners Of More Than 5% Of Eastern's Outstanding Securities
The following table shows, as of December 31, 1999, any person who is known
by Eastern to be the beneficial owner of more than 5% of its common stock.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name and Address of Beneficial of
Beneficial Owner Ownership(s) Class
------------------- ------------ -------
<S> <C> <C>
GAMCO Investors, Inc., 1,653,466 6.12%
Gabelli Funds, LLC and
others (b)
One Corporate Center
Rye, New York 10580
</TABLE>
- --------
(a) According to Schedule 13D/A filed with the SEC on December 23, 1999.
(b) Nine entities and two individuals were included in the 13D/A filing with
the SEC. In addition, to the entities listed above, Gabelli Associates
Fund, Gabelli Associates Limited, Gabelli Fund, LDC, Gabelli Securities,
Inc., Gabelli & Company, Inc., Gabelli Group Capital Partners, Inc.,
Gabelli Asset Management Inc., Marc J. Gabelli and Mario J. Gabelli were
included. No single entity or individuals is the beneficial owner of more
than five percent of the voting securities of Eastern. In the aggregate,
these entities and individuals exceed the five percent threshold.
Beneficial Owners Of More Than 5% Of EnergyNorth's Outstanding Securities
EnergyNorth knows of no person that owns more than 5% of its common stock.
EnergyNorth Management Ownership
The following table sets forth:
. the number of shares of EnergyNorth common stock beneficially owned by
each of EnergyNorth's directors and executive officers and by all of
EnergyNorth's directors and executive officers as a group, as of March 7,
2000, and
. the percentage which such shares bear to the total number of outstanding
shares as of that date.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Owned(6) Common Stock
--------------------- -------------
<S> <C> <C>
Roger C. Avery(1)......................... 34,837 1.0481
Edward T. Borer(2)........................ 15,639 *
Michelle L. Chicoine...................... 5,778 *
Frank L. Childs........................... 2,821 *
Richard B. Couser......................... 763 *
Joan P. Cudhea(3)......................... 14,202 *
Sylvio L. Dupuis.......................... 1,402 *
Robert R. Giordano(4)..................... 21,842 *
Constance B. Girard-diCarlo............... 703 *
Andrew E. Lietz........................... 1,452 *
N. George Mattaini(5)..................... 11,912 *
David A. Skrzysowski...................... 1,863 *
John E. Tulley II......................... 800 *
All directors and executive officers as a
group (15 in number at March 7, 2000).... 114,014 3.431
</TABLE>
83
<PAGE>
- --------
* Less than 1.0%.
(1) Includes 12,879 shares held by Mr. Avery solely in a fiduciary capacity and
in which he disclaims beneficial ownership.
(2) Includes 963 shares held by Mr. Borer's spouse, in which he disclaims
beneficial ownership.
(3) Includes 1,690 shares held by Ms. Cudhea's daughter-in-law, in which she
disclaims beneficial ownership and over which she shares investment power
only.
(4) Includes 430 shares held by Mr. Giordano's spouse, in which he disclaims
beneficial ownership.
(5) Includes 7,404 shares held by Mr. Mattaini's spouse in which he disclaims
beneficial ownership.
(6) Beneficial ownership includes shares that the following persons have a
right to acquire upon exercise of options: Mr. Giordano, 3,571; Ms.
Chicoine, 2,500; Mr. Childs, 1,250; and each director who is not also an
employee, 250.
84
<PAGE>
DESCRIPTION OF EASTERN CAPITAL STOCK
General
This section summarizes the terms of Eastern's capital stock. Because this
summary does not address all of the details a shareholder may be interested in
knowing, all shareholders are encouraged to read Eastern's Declaration of Trust
and Bylaws in their entirety. Note that EnergyNorth stockholders will receive
Eastern common stock in the merger only if the KeySpan-Eastern merger agreement
has been terminated prior to the effective time of the Eastern-EnergyNorth
merger. See "Where You Can Find More Information."
Authorized and Outstanding Capital Stock
Eastern is authorized to issue up to 50,000,000 shares of Eastern common
stock. On March 7, 2000, there were 27,137,772 shares of Eastern common stock
issued and outstanding.
Shares of Eastern common stock are entitled to one vote per share in person
or by proxy on any question, except the election of trustees. Trustees are
elected by cumulative voting. This means that each holder of Eastern common
stock will be entitled to as many votes as will equal the number of such
holder's shares multiplied by the number of trustees to be elected. A holder
may cast all of its votes for a single candidate or distribute them among any
two or more candidates, at its election.
Eastern shareholders are entitled to receive dividends only when and if
declared by the Eastern board out of the earned surplus of Eastern.
If Eastern is terminated, the trustees will sell and convert into money or
securities the whole or any part of the trust estate, and will apportion the
proceeds, and any property that is part of the trust estate that is not sold,
among all the shareholders in accordance with their respective rights.
Eastern shareholders have no preemptive, redemption or conversion rights.
All issued and outstanding shares of Eastern common stock are, and the shares
that Eastern will issue in connection with the merger will be (when authorized,
approved, issued and delivered subject to the terms of the merger agreement),
fully-paid and non-assessable.
Common Stock Purchase Rights
Eastern has adopted a rights plan that is designed to protect shareholders
from coercive or unfair tactics. To implement the plan, on July 22, 1998, the
Eastern Board declared a dividend of one common stock purchase right for each
outstanding share of Eastern common stock. The dividend was payable on February
18, 2000 to the shareholders of record on that date. This section summarizes
the terms of the rights agreement. Because this summary does not address all of
the details a shareholder may be interested in knowing, all shareholders are
encouraged to consult the rights agreement in its entirety. A copy of the
agreement may be obtained from Eastern. See "Where You Can Find More
Information."
Under the plan, each outstanding share of Eastern common stock, whether
issued before or after adoption of the plan, carries with it a right which
permits its holder to purchase one share of Eastern common stock at a price of
$160, subject to adjustment as described below. Unless otherwise determined by
a majority of the Eastern Board then in office, the Eastern rights will
separate from the underlying Eastern common stock and are exercisable only on
the earliest to occur of:
. the 10th business day following the later of the date of a public
announcement that a person, together with affiliates or associates of
such person has acquired, or obtained the rights to acquire, beneficial
ownership of 10% or more of the outstanding shares of Eastern common
stock or the date on which an executive officer of Eastern had actual
knowledge of such beneficial ownership; or
85
<PAGE>
. the 10th business day following the commencement of a tender offer or
exchange offer that would result in any person or its affiliates and
associates owning 10% or more of the outstanding shares of Eastern common
stock.
If one of these events occurs, Eastern will mail separate certificates
evidencing the rights to holders of record for the Eastern common stock. Until
one of these events occurs, the rights will transfer with the underlying shares
of Eastern common stock whenever shares are sold or otherwise transferred. Any
shares of Eastern common stock issued after adoption of the plan will contain a
notation that the shares incorporate and are subject to the terms of the rights
plan. In any event, the Eastern Board may delay the distribution of the
certificates.
The Eastern rights will expire on July 22, 2008, or upon their earlier
redemption.
Each Eastern right may also allow the holder to purchase shares of Eastern
common stock, or shares of stock of any entity that has engaged in certain
specified transactions with Eastern, at a discount upon the occurrence of
certain events:
. If Eastern is acquired in a merger or other business combination
transaction or 25% or more of its consolidated assets or earning power
are sold, each holder of an Eastern right other than an acquiring person
or disqualified transferee will have the right to receive the number of
shares of common stock of the acquiring company that have a market value
of two times the exercise price of the Eastern right.
. If any person or group of affiliated or associated persons other than
Eastern or its affiliates has acquired or obtained the right to acquire
the beneficial ownership of 10% or more of the outstanding Eastern common
stock, each holder of an Eastern right other than an acquiring person or
any disqualified transferee will have the right to receive the number of
shares of Eastern common stock which have a market value of two times the
exercise price of the Eastern right.
The Eastern board may, at its option, at any time after any person has
acquired or obtained the right to acquire beneficial ownership of 10% or more
of the outstanding Eastern common stock, exchange all or part of the then
outstanding and exercisable Eastern rights for shares of Eastern common stock
at an exchange ratio of one share of Eastern common stock per Eastern right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of declaration of the Eastern rights. The
Eastern board may not effect an exchange at any time after any person, together
with all affiliates of such person, becomes the beneficial owner of 50% or more
of the outstanding Eastern common stock.
Purchase Price of Eastern Rights. The purchase price payable, and the number
of whole or fractional shares of the Eastern common stock or other securities
or property issuable, upon exercise of the Eastern rights are subject to
adjustment from time to time to prevent dilution if any of the following
occurs:
. a stock dividend on, or a subdivision, combination or reclassification,
of Eastern common stock,
. the grant to holders of Eastern common stock of certain rights or
warrants to subscribe for shares of Eastern common stock or convertible
securities at less than the current market price of Eastern common stock,
or
. the distribution to holders of Eastern common stock of evidences of
indebtedness or assets excluding cash dividends paid out of the earnings
or retained earnings of Eastern or of subscription rights or warrants
other than those referred to above.
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1% in
such price.
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Redemption of the Rights. At any time prior to the earlier of:
. the 10th business day following the later of the date of a public
announcement that a person, together with affiliates or associates of
such person has acquired, or obtained the rights to acquire, beneficial
ownership of 10% or more of the outstanding shares of Eastern common
stock or the date on which an executive officer of Eastern had actual
knowledge of such beneficial ownership; or
. the 10th business day following the commencement of a tender offer or
exchange offer that would result in any person or its affiliates and
associates owning 10% or more of the outstanding shares of Eastern common
stock; or
. the close of business on July 22, 2008
Eastern, by a majority vote of the trustees then in office, may redeem the
Eastern rights at a price of $.01 per Eastern right. Immediately upon the
action of the Eastern board electing to redeem the Eastern rights, the right to
exercise the Eastern rights will terminate and the only right of the holders of
Eastern rights will be to receive the redemption price of $.01 per Eastern
right. A holder of a right will have no rights as a shareholder of Eastern
until a right is exercised, including, without limitation, the right to vote or
to receive dividends.
Amendment of Rights Agreement. Before the rights are distributed, the
Eastern board may amend the rights agreement without the approval of the
holders of the Eastern rights. After distribution of the rights, the rights
agreement may be amended without the approval of the holders of the Eastern
rights in order to cure any ambiguity, correct any defective or inconsistent
provisions, make changes that do not adversely affect the interests of the
holders of the Eastern rights, or change any time period for redemption or any
other time period under the agreement.
Massachusetts Law; Anti-Takeover Effects
Anti-Takeover Statute. Eastern is subject to Chapter 110F of the
Massachusetts General Laws, an anti-takeover law. Under Chapter 110F, a
Massachusetts corporation, or business trust that controls a gas utility
organized under Chapter 164 of the Massachusetts General Laws, with more than
200 shareholders may not engage in a "business combination" with an "interested
shareholder" for a period of three years after the date of the transaction in
which the person becomes an interested shareholder, unless:
. the interested shareholder obtains the approval of the board of directors
(or board of trustees in the case of Eastern) prior to becoming an
interested shareholder
. the interested shareholder acquires 90% of the outstanding voting stock
of the corporation excluding shares held by certain affiliates of the
corporation at the time it becomes an interested shareholder or
. the business combination is approved by both the board of directors and
the holders of two-thirds of the outstanding voting stock of the issuer
excluding shares held by the interested shareholder.
An "interested shareholder" is a person who, together with affiliates and
associates, owns (or, in certain cases, at any time within the prior three
years did own) 5% or more of the outstanding voting stock of the issuer. A
"business combination" includes a merger, certain stock or asset sales, and
certain other specified transactions resulting in a financial benefit to the
interested shareholder.
Control Share Acquisition Statute. The Eastern by-laws include a provision
excluding Eastern from the applicability of Chapter 110D of the Massachusetts
General Laws, which regulates the acquisition of so-called "control shares." A
control share acquisition is the acquisition of shares that, when added to
shares already owned, would (but for Chapter 110D) entitle the acquiring person
to vote at least 20% of an entity's stock. Shares acquired in such a
transaction would, under Chapter 110D, have no voting rights unless a majority
of non-interested shareholders voted to grant such voting rights. In general,
the person acquiring such shares, officers of Eastern and those trustees of
Eastern who are also employees, are not permitted to vote on whether such
voting rights shall be granted. The Eastern board may amend the Eastern by-laws
at any time to subject Eastern to Chapter 110D prospectively.
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Certain Charter and By-Law Provisions
Exculpation and Indemnification of Certain Persons. Eastern's Declaration of
Trust generally exempts the trustees, officers and agents of Eastern from
liability for acts or failures to act to the extent permitted by the
Massachusetts Business Corporation Law if Eastern were a Massachusetts business
corporation. In addition, Eastern must indemnify each of its trustees and
officers against all liabilities and expenses, including reasonable fees of
counsel, they may incur because of any suit or other proceeding threatened or
resulting from their service to Eastern.
Eastern will not indemnify any trustee or officer if there has been an
adjudication that they acted in bad faith or did not act in good faith and in
the reasonable belief that their actions were in the best interests of Eastern
or in the best interests of the participants or beneficiaries of Eastern's
employee benefit plans, as the case may be.
Under Eastern's Declaration of Trust, as to any matter disposed of by a
compromise payment by such trustee or officer pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
will be provided unless such compromise shall be approved as in the best
interests of Eastern, after notice that it involves such indemnification:
. if no change of control has occurred,
. by a disinterested majority of the trustees then in office or
. by a majority of the disinterested trustees then in office or
. by the shareholders of Eastern,
provided that Eastern shall have received a written opinion of
independent legal counsel to the effect that such trustee or officer
appears to have acted in good faith in the reasonable belief that such
trustee's or officer's action was in the best interests of Eastern; or
. if a change of control shall have occurred, by an opinion in writing of
independent legal counsel to the effect that such trustee or officer
appears to have acted in good faith in the reasonable belief that his
action was in the best interests of Eastern.
A trustee will not be liable to Eastern or any Eastern shareholder for
monetary damages for breach of his or her fiduciary duties, except where under
applicable law he or she has been adjudicated:
. to have breached his or her duty of loyalty to Eastern or its
shareholders,
. to have acted not, or omitted to act, in good faith,
. to have knowingly violated the law,
. to have intentionally engaged in misconduct, or
. to have derived any improper personal benefit from a transaction.
Trustees, officers and agents of Eastern will also not be held liable for
any act or failure to act in good faith, which is required, authorized or
approved by any order issued pursuant to the Public Utility Holding Company Act
of 1935 or any other federal or state statute regulating Eastern or any of its
subsidiaries by reason of its being a public utility holding company or their
being public utilities. Under Eastern's Declaration of Trust, shareholders,
trustees, officers and agents of Eastern have no liability for the payment or
satisfaction of all obligations and liabilities incurred in carrying on the
business of Eastern, and the trust estate of Eastern only is liable.
shareholders are indemnified out of the trust estate if held personally liable
in any event, except for payments due upon shares of Eastern.
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Special Meetings of Shareholders. The trustees or the President of Eastern
at any time may, and the President or Secretary of Eastern shall upon written
request of a majority of the trustees or of the holders of one-tenth of the
outstanding shares of Eastern and carrying the right to vote upon any question
to be presented to a meeting of shareholders, call a special meeting of
shareholders. A special meeting will be held at the principal place of business
of Eastern or such other place (within the Commonwealth of Massachusetts) as
the trustees shall designate. Every such request shall state the purpose of the
meeting and shall be delivered at the principal office of Eastern addressed to
the President or Secretary. If the President or Secretary refuses or fails for
fourteen days after the request has been delivered to call or cause to be
called the meeting to be held within 60 days after the delivery of the request,
the person or persons signing the request or any three of them may call the
meeting and will be given access to the principal share register of Eastern.
The shareholders of Eastern may not take any action without a meeting.
Transfer Agent and Registrar
The transfer agent and registrar for the Eastern common stock is BankBoston,
N.A.
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COMPARATIVE RIGHTS OF HOLDERS OF ENERGYNORTH
AND EASTERN COMMON STOCK
Rights of stockholders of EnergyNorth are currently governed by the New
Hampshire Business Corporation Act and New Hampshire law generally,
EnergyNorth's articles of incorporation and the EnergyNorth by-laws. Rights of
shareholders of Eastern are currently governed by the Massachusetts Business
Corporation Law, Eastern's Declaration of Trust, and the Eastern by-laws. Upon
consummation of the merger, some EnergyNorth stockholders may become
shareholders of Eastern and their rights as shareholders of Eastern would be
governed by Eastern's Declaration of Trust, the Eastern by-laws and the
Massachusetts Business Corporation Law. There are a number of differences
between the rights of EnergyNorth stockholders and the rights of Eastern
shareholders. The following is a brief summary of certain differences between
the rights of Eastern shareholders and the rights of EnergyNorth stockholders,
and is qualified in its entirety by reference to the relevant provisions of
relevant New Hampshire law, Eastern's Declaration of Trust and the Eastern by-
laws, EnergyNorth's articles of incorporation and the EnergyNorth by-laws. Note
that EnergyNorth stockholders will receive Eastern common stock in the merger
only if the KeySpan-Eastern merger agreement has been terminated prior to the
effective time of the Eastern-EnergyNorth merger.
Authorized Capital Stock
EnergyNorth. EnergyNorth is authorized to issue 10,000,000 shares of common
stock, par value $1.00 per share. On March 7, 2000, there were 3,322,903 shares
of EnergyNorth common stock issued and outstanding.
Eastern. Eastern is authorized to issue up to 50,000,000 shares of Eastern
common stock. On March 7, 2000, there were 27,137,772 shares of Eastern common
stock issued and outstanding.
Boards of Directors/Trustees
EnergyNorth. The EnergyNorth by-laws provide that the number of directors
shall be ten, effective as of the 2000 annual meeting of the EnergyNorth
stockholders. Directors hold office for three-year terms and until the election
and qualification of their successors or until their earlier resignation, death
or removal from office. The EnergyNorth board of directors is divided into
three classes having staggered terms of three years each. Current directors'
staggered terms expire as follows:
. four expire at the 2002 annual meeting of EnergyNorth stockholders;
. three have terms expiring at the 2001 annual meeting of EnergyNorth
stockholders; and
. four have terms expiring at the 2000 annual meeting of EnergyNorth
stockholders.
Each outstanding share of EnergyNorth common stock eligible to vote is
entitled to one vote in person or by proxy for the election of directors.
Eastern. The Eastern board is divided into three classes having staggered
terms of three years each. Eastern's Declaration of Trust provides that the
number of trustees shall be fixed from time to time by the trustees but shall
not be less than three or more than twenty. The total number of trustees is
currently fixed at ten. Four of the trustees now in office have terms expiring
at the 2002 annual meeting of Eastern shareholders, three have terms expiring
at the 2001 annual meeting of Eastern shareholders and three have terms
expiring at the 2000 annual meeting of Eastern shareholders.
Shares of Eastern common stock which are entitled to vote upon a given
question are entitled to one vote per share in person or by proxy on such
question. Eastern's Declaration of Trust provides, however, the election of
trustees by the holders of Eastern common stock shall be by cumulative voting,
namely, each holder of Eastern common stock will be entitled to as many votes
as will equal the number of such holder's shares
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multiplied by the number of trustees to be elected, and such holder may cast
all of such votes for a single candidate or distribute them among any two or
more candidates as such holder shall elect.
Removal of Directors/Trustees
EnergyNorth. Under the EnergyNorth articles of incorporation, the removal of
a director or the removal of the entire EnergyNorth board, with or without
cause, requires the affirmative vote of 75% of the then issued and outstanding
EnergyNorth common stock.
Eastern. Under Eastern's Declaration of Trust, a trustee may be removed
without cause only by the affirmative vote of the holders of 80% of the
combined voting power of the then-outstanding shares of beneficial interest
entitled to vote generally in the election of trustees, voting together as a
single class.
Special Meetings of Stockholders; Stockholder Action Without Meeting
EnergyNorth. Under the EnergyNorth by-laws, special meetings of the
stockholders:
. may be called by the president or by the EnergyNorth Board; and
. shall be called by the president at the request of the holders of not
less than 10% of all the issued and outstanding shares of the EnergyNorth
common stock entitled to vote at the meeting.
Under the EnergyNorth by-laws and New Hampshire corporate law, stockholders
of EnergyNorth may take action without a meeting if:
. all stockholders entitled to vote on the matter consent to the action in
writing; and
. the written consents are delivered to EnergyNorth for inclusion in the
minutes or filing with the corporate records.
Eastern. The trustees or the President at any time may, and the President or
Secretary shall upon written request of a majority of the trustees then in
office or of the holders of one-tenth of all the shares of Eastern at the time
outstanding and carrying the right to vote upon any question to be presented at
a meeting of shareholders, call a special meeting of the shareholders having
the right to vote upon any such question, and in case the President or
Secretary shall refuse or fail for fourteen days after the request shall have
been so delivered to call or cause to be called such meeting to be held within
sixty days after the delivery of the request, such meeting may be called by the
person or persons signing such request or by any three of them.
The shareholders of Eastern may not take any action without a meeting.
Stockholder Proposals and Nominations
EnergyNorth. Stockholder proposals intended to be presented at any annual
meeting of stockholders must be received at EnergyNorth's principal executive
offices no later than 120 days prior to the date of the proxy statement
released to the stockholders for the immediately preceding annual meeting.
The board of directors does not have a nominating committee. The board of
directors elects members of board committees and officers.
Eastern. The Nominating Committee of the Eastern board is responsible for
nominating trustees, members of committees of the Eastern board and officers,
among other things. The Nominating Committee will consider nominees for the
Eastern board recommended by shareholders of Eastern. Written recommendations
together with supporting information should be directed to Eastern not later
than forty-five days prior to the anniversary of the date of the immediately
preceding annual meeting. This notice should set forth the following:
. the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated;
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. a representation that the shareholder is a holder of record of Eastern
entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the
notice;
. a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder;
. such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC; and
. the consent of each nominee to serve as a trustee if so elected.
The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
Shareholder proposals intended to be presented at any annual meeting of
shareholders must be received at Eastern's principal executive offices no later
than 120 days prior to the date of the proxy statement released to shareholders
for the immediately preceding annual meeting.
Dissenters' Rights
EnergyNorth. New Hampshire corporate law provides EnergyNorth stockholders
dissenters' rights in the event of the consummation of a plan of merger. These
rights are described in greater detail under the heading "The Merger--Appraisal
Rights."
Eastern. Eastern's Declaration of Trust provides that in the event of a
merger or consolidation of Eastern with another entity, the governing agreement
for such transaction must provide that the shareholders of Eastern are entitled
to the rights of dissent available under Massachusetts law as if Eastern were a
Massachusetts business corporation.
Charter Amendments
EnergyNorth. Amendments to EnergyNorth's articles of incorporation require
the affirmative vote of at least a majority of the outstanding EnergyNorth
common stock except:
. no amendment or repeal of the article pertaining to the liabilities of
directors and officers may be approved which would retroactively impair
any rights or protections of the directors and officers created by the
article; and
. any amendment to the article pertaining to a business combinations must
be approved by a majority of the outstanding EnergyNorth common stock,
exclusive of the shares which are beneficially owned by a controlling
person, and any amendment to or repeal of the portion of the article
pertaining to the election and removal of directors must be approved by
the affirmative vote of 75% of the issued and outstanding EnergyNorth
common stock.
Under New Hampshire law, certain minor amendments may be effected by the
EnergyNorth board without stockholder consent.
Eastern. Eastern's Declaration of Trust may be amended by vote of at least a
majority of the outstanding Eastern common stock; provided that:
. no change shall be made to the article pertaining to the liabilities of
the trustees, officers and agents of Eastern which would impair the
relief from personal liability provided therein,
. any provision requiring a higher percentage than a majority shall be
amended only by such higher percentage and
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. the Eastern Declaration of Trust may be amended for the purpose of
changing the name of Eastern, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained in Eastern's Declaration of Trust by the
trustees without authorization by shareholder vote.
Dividends and Stock Repurchases
EnergyNorth. Under the EnergyNorth by-laws, the board of directors may, from
time to time, declare and EnergyNorth may pay dividends on its outstanding
shares in cash, securities or property as allowed under New Hampshire law. New
Hampshire law allows EnergyNorth to acquire its own shares and the shares so
acquired would constitute authorized but unissued shares.
Eastern. The trustees, in their discretion, may from time to time declare
dividends payable at any date fixed by them out of the earned surplus of
Eastern, determined in accordance with sound accounting practice, in cash,
securities or property, and may declare dividends in securities of Eastern and
for that purpose may authorize the issuance of certificates and scrip and may
capitalize all or any part of the earned or capital surplus and may determine
the number of dollars per share so capitalized and may determine that shares
held in the treasury of Eastern shall be entitled to all or part of any such
dividend declared in securities of Eastern but in no event shall such treasury
shares be entitled to any cash payment made in connection with such dividend,
whether or not made in lieu of fractional securities; but no shareholder shall
have any right to any dividends whether in cash, securities or property of
Eastern except when and as notice shall have been given that the same have been
declared as aforesaid, and no shareholder, trustee, officer of agent of Eastern
shall be liable personally therefor, and every shareholder entitled thereto
shall look only to Eastern's trust estate for the payment of any such dividend.
Pursuant to Eastern's Declaration of Trust, shares of Eastern purchased,
redeemed or otherwise acquired by Eastern may, in the discretion of the
trustees, be canceled and the number of shares issued thereby be reduced, or
such shares may, in the discretion of the trustees, be held in the treasury and
may be sold or otherwise disposed of by the trustees at such time or times, to
such party or parties and for such consideration and on such terms as the
trustees may determine, but such shares while so held in the treasury shall not
be entitled to any voting rights nor to dividends (except for dividends payable
in securities of Eastern, at the discretion of the trustees) or right of
subscription or purchase and shall not be deemed outstanding in computing
proportions or percentages of shares or shareholders under Eastern's
Declaration of Trust. Shares canceled pursuant to Eastern's Declaration of
Trust shall have the status of authorized but unissued shares.
Fair Price Charter Provisions
EnergyNorth. EnergyNorth's articles of incorporation require a higher
affirmative vote for the approval of certain business transactions with a
person or entity that holds 10% or more of the outstanding EnergyNorth common
stock. This higher vote is required for the approval of any transaction
involving an entity which owns 10% or more of the outstanding EnergyNorth
common stock, if the transaction will result in:
. an involuntary sale;
. redemption;
. cancellation; or
. other termination of ownership
of any shares of EnergyNorth common stock owned by stockholders who do not vote
in favor of, or consent in writing to, the transaction.
In any such case, approval of the transaction requires the affirmative vote
of a majority of the issued and outstanding EnergyNorth common stock, exclusive
of the shares of the involved party that owns 10% or more
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of the outstanding stock. This provision does not apply to any such transaction
if the cash or fair value of the consideration to be received by the affected
stockholders is at least equal to a minimum price per share as defined in the
EnergyNorth articles of incorporation and a proxy statement that meets the
requirements of the Securities Exchange Act is provided to stockholders in
order to secure their approval of the proposed transaction.
Eastern. Eastern's Declaration of Trust contains certain "anti-Greenmail"
provisions in the case of certain stock repurchases from interested security
holders. Any direct or indirect purchase or other acquisition by Eastern or any
majority owned subsidiary of any shares of capital stock of Eastern from any
"interested security holder" (generally defined as any holder (with certain
exceptions) of 5% or more of the outstanding shares of voting stock of Eastern
or an affiliate of Eastern who at any time within the two-year period
immediately prior to the date in question was the beneficial owner of 5% or
more of all outstanding shares of voting stock of Eastern) who has been the
beneficial owner of such shares for less than two years prior to the date of
such purchase or other acquisition or any agreement in respect thereof, for
aggregate consideration greater than the then "fair market value" (as defined
in Eastern's Declaration of Trust) of such shares shall, except as expressly
provided, require the affirmative vote of the holders of voting stock
representing shares equal to the sum of:
. a majority of the then-outstanding voting stock, excluding voting stock
of which such interested security holder is the beneficial owner, plus
. the number of shares of voting stock of which such interested security
holder is the beneficial owner, voting together as a single class.
The foregoing provisions do not apply to any purchase or other acquisition
of securities made as part of a tender or exchange offer to purchase securities
of the same class made on the same terms to all holders of such securities, or
made as part of an open market purchase program approved by a majority of the
disinterested trustees of Eastern provided that such purchase is effected on
the open market and is not the result of a privately negotiated transaction.
Eastern's Declaration of Trust further provides for a higher affirmative
vote in connection with certain business transactions with interested security
holders or their affiliates or associates, including:
. any merger or consolidation of Eastern or any majority owned subsidiary
with any interested security holder or any other company which is or
after such merger or consolidation would be an affiliate or associate of
an interested security holder;
. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition involving any assets or securities of Eastern having an
aggregate fair market value in excess of 5% of the total consolidated
book assets of Eastern and its majority owned subsidiaries;
. the adoption of any plan or proposal for the termination, liquidation or
dissolution of Eastern proposed by or on behalf of an interested security
holder or any affiliate or associate;
. any reclassification of securities (including any reverse stock split),
or recapitalization of Eastern or any merger or consolidation of Eastern
with any of its majority owned subsidiaries or any other transaction that
has the effect, directly or indirectly, of increasing the proportionate
share of any class or series of capital stock of Eastern, or any
securities convertible into capital stock of Eastern or into equity
securities of any majority owned subsidiary, that is beneficially owned
by an interested security holder or any affiliate or associate;
. any tender offer or exchange offer made by Eastern for shares of capital
stock of Eastern that may have the effect of increasing an interested
security holder's percentage beneficial ownership so that following the
completion of the tender offer or exchange offer such interested security
holder's percentage beneficial ownership of the outstanding capital stock
of Eastern may exceed 110% of its percentage beneficial ownership
immediately prior to the commencement of such tender offer or exchange
offer; or
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. any agreement, contract or other arrangement providing for any one or
more of the actions specified above.
In any such case, the affirmative vote is required of the holders of voting
stock representing shares equal to the sum of (a) a majority of the then
outstanding voting stock, excluding voting stock of which such interested
security holder is the beneficial owner, plus (b) the number of shares of
voting stock of which such interested security holder is the beneficial owner,
voting together as a single class. The foregoing provisions are not applicable
to any direct or indirect purchase or other acquisition of Eastern capital
stock by Eastern or any majority owned subsidiary from any interested security
holder, or to any particular transaction referred to above if approved by a
majority of the disinterested trustees.
Stockholder Rights Plans
EnergyNorth. On June 6, 1990, the EnergyNorth board declared a dividend
distribution of one right for each outstanding share of EnergyNorth common
stock. The distribution was payable on June 18, 1990 to the stockholders of
record on that date.
On June 6, 1990, the EnergyNorth board of directors declared a dividend of
one right for each outstanding share of EnergyNorth common stock. These rights
will not be exercisable until a person or group of affiliated or associated
persons:
. acquires 10% or more of EnergyNorth's common stock, or
. announces an intention to make a tender offer for 20% or more of
EnergyNorth's common stock.
Unless these rights are redeemed by EnergyNorth or expire before one of
these events occurs, after either of these events occurs, each right entitles
its holder to acquire from EnergyNorth one share of EnergyNorth common stock
for an exercise price of $48.
In the event that:
. EnergyNorth is acquired in a merger or other business combination or 50%
or more of its assets or earning power is transferred;
. any person or entity acquires 15% or more of the outstanding EnergyNorth
common stock; or
. any person or entity that owns 15% or more of EnergyNorth common stock
engages in a self-dealing transaction;
then each right entitles the holder to purchase at the exercise price the
number of shares of common stock of EnergyNorth or the acquiring company equal
to two times the value of the exercise price. Any rights held by a person that
owns 10% or more of EnergyNorth's common stock or that has announced its
intention to make a tender offer for 20% or more of EnergyNorth's common stock
will be terminated following the occurrence of any such events.
Before the expiration of the rights and except in certain instances,
EnergyNorth may redeem all of the rights by paying $.01 per right. The rights
do not entitle the holder to vote or receive dividends. The rights expire on
June 18, 2000 unless extended or redeemed.
Eastern. Pursuant to the Eastern rights agreement, one Eastern right was
payable as a dividend on February 18, 2000 for each outstanding share of
Eastern common stock to shareholders of record on that date. Each Eastern right
entitles the holder to purchase one share of Eastern common stock for $160,
subject to adjustment, upon the occurrence of certain events. Each Eastern
right may also allow the holder to purchase shares of Eastern common stock, or
shares of stock of any entity that has engaged in certain specified
transactions with Eastern, at a discount upon the occurrence of certain events.
The rights will expire on July 22, 2008, or upon their earlier redemption. See
"Description of Eastern Capital Stock--Common Stock Purchase Rights."
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Business Combination Statutes
EnergyNorth. There is no statute in New Hampshire governing business
combinations with stockholders who may have an interest in the combination or
transaction, nor is there a statute in New Hampshire that protects collective
bargaining agreements following a business combination.
Eastern. Chapter 110F of the Massachusetts Business Corporation Law
prohibits any business combination with an "interested shareholder" (defined
generally as a person owning 5% of more of a corporation's outstanding voting
stock) for three years after that person becomes an interested shareholder
unless:
. the board gives prior approval to the 5% purchase of the proposed
business combination;
. upon consummation of the transaction that resulted in the person becoming
an interested shareholder, the interested shareholder owns at least 90%
of the voting stock of the corporation, excluding certain shares; or
. subsequent to the acquiror's becoming an interested shareholder, the
board of directors and two-thirds of the noninterested shares approve the
business combination.
Eastern has not opted out of Chapter 110F and the provisions of Chapter 110F
apply to an acquisition of Eastern.
Section 20E of Chapter 149 of the Massachusetts Business Corporation Law
prohibits the termination or impairment of collective bargaining agreements
following a business combination until the negotiated termination date of the
agreement or until the parties to the agreement negotiate a new termination
date.
Control Share Statute
EnergyNorth. EnergyNorth is normally subject to the filing requirements of
the New Hampshire Security Takeover Disclosure Act. However, the current
transaction is entitled to an exclusion from the filing requirements of this
statute, because EnergyNorth and Eastern are public utility holding companies
under the Public Utility Holding Company Act of 1935, as amended, and the
transaction is subject to approval by the Securities and Exchange Commission.
Eastern. Chapter 110D of the Massachusetts Business Corporation Law provides
that, once a potential acquiror notifies a company of its intention to purchase
30% or more of a corporation, a shareholders meeting must be held within 50
days, at the acquiror's expense, to vote on whether the control shares may
exercise voting rights. Without approval of a majority of the outstanding
shares not owned by the acquiror, or by officers or directors of the target,
the control shares do not receive voting rights. The Eastern by-laws provide
that the provisions of Chapter 110D shall not apply to control share
acquisitions of beneficial shares of Eastern.
Proper Factors for Consideration in Evaluating Business Combinations
EnergyNorth. Under the New Hampshire Business Corporation Act, in performing
his or her duties, an EnergyNorth director or officer is entitled to rely upon:
. information;
. opinions;
. reports; or
. statements, including financial statements and other financial data;
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if prepared or presented by:
. one or more officers or employees of the corporation whom the director or
officer reasonably believes to be reliable and competent in the matters
presented;
. legal counsel, public accountants or other persons as to matters which
the director or officer reasonably believes are within the person's
professional or expert competence; or
. in the case of a director, a committee of the EnergyNorth Board of which
he or she is not a member, if the director reasonably believes the
committee merits confidence.
However, the director or officer shall not be acting in good faith if he or she
has knowledge concerning the matter in question that makes such reliance
unwarranted.
Directors and officers who perform their duties:
. in good faith;
. with the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and
. in a manner that he or she reasonably believes to be in the best
interests of the corporation
shall not be liable for any action taken as a director or officer, or any
failure to take any action.
Eastern. Eastern's Declaration of Trust provides that in discharging his or
her duties, when acting in good faith, any trustee or officer of Eastern shall
be fully entitled to rely upon information, opinion, reports or records,
including financial statements, books of account, and other financial records,
in each case, presented or prepared by, or under the supervision of:
. one or more officers or employees of Eastern (or of another organization
in which he or she serves as contemplated by Article 19 of Eastern's
Declaration of Trust, including all directors, officers and trustees of
wholly owned subsidiaries of Eastern) whom the trustee or officer
reasonably believes to be reliable and competent in the matters presented
. counsel, public accountants or other persons as to matters which the
trustee or officer reasonably believes to be within such person's
professional or expert competence, or
. in the case of a trustee, a duly constituted committee of trustees (or
similar governing body of such other organization) upon which he or she
does not serve, as to matters within its delegated authority, which
committee the trustee reasonably believes to merit confidence
but he or she shall not be considered to be acting in good faith if he or she
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. The fact that a trustee or officer so relied shall be a
complete defense to any claim asserted against him or her, except as expressly
provided by statute, by reason of his or her being or having been a trustee or
officer of Eastern (or such other organization).
Form of Consideration for Capital Stock
EnergyNorth. Pursuant to the New Hampshire corporate law, the EnergyNorth
board may authorize the issuance of shares for consideration consisting of any
tangible or intangible property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for services to be performed,
or other securities of the corporation.
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<PAGE>
Eastern. Eastern's Declaration of Trust provides that authorized shares of
the trust may be issued either for money, services, stock, property or other
value, or by way of a stock dividend or in exchange for other shares or
securities of Eastern and par for par in exchange for stock of another company
irrespective of the dividend rate or the then-market value of such stock.
Shares may not be issued at less than par in the case of shares with a par
value.
Limitation of Director Liability
EnergyNorth. New Hampshire law provides that a director will not be liable
for any action taken as a director, or for any failure to take any action,
provided that he or she performs the duties of his or her office in compliance
with the standard of conduct set forth under New Hampshire corporate law.
EnergyNorth's articles of incorporation further provide that to the fullest
extent permitted by law, no director shall be personally liable to the
corporation or its stockholders for any breach of fiduciary duty as a director.
No amendment or repeal of this provision of EnergyNorth's articles of
incorporation will have any effect on any right or protection of any director
with respect to acts or omissions that occurred prior to the amendment or
repeal.
Eastern. Eastern's Declaration of Trust provides that no trustee shall be
liable except for acts or failures to act which at the time would impose
liability on him or her if Eastern were a Massachusetts business corporation
and he or she were a director thereof.
Eastern's Declaration of Trust further provides that the trustees of Eastern
will not personally be liable to Eastern or its shareholders for monetary
damages for certain breaches of fiduciary duty as trustees, unless they
violated their duty of loyalty to Eastern or its shareholders, acted not, or
omitted to act, in good faith, knowingly or intentionally violated the law,
intentionally misconducted themselves, or derived an improper benefit from
their actions as trustees. Trustees, officers and agents of Eastern will also
not be held liable for any act or failure to act in good faith, that is
required, authorized or approved by an order issued pursuant to PUHCA or any
other federal or state statute regulating Eastern or any of its subsidiaries by
reason of its being a public utility holding company or their being public
utilities. Eastern's Declaration of Trust also provides that shareholders,
trustees, officers and agents of Eastern will have no liability for the payment
or satisfaction of obligations and liabilities incurred in carrying on the
business of Eastern and that the trust estate of Eastern only shall be liable.
Indemnification
EnergyNorth. The EnergyNorth by-laws provide that it will indemnify officers
and directors, and such other employees or agents of the corporation as the
EnergyNorth board may authorize, to the fullest extent now or in the future
permitted by the New Hampshire Business Corporation Act.
Under the relevant provisions of the New Hampshire Business Corporation Act,
EnergyNorth may indemnify any individual who is made a party to a proceeding
because he or she was a director, if the individual has met the standard of
conduct set forth under New Hampshire law. Generally, this standard of conduct
requires a director to have acted in good faith and to have reasonably believed
that his or her conduct was in the best interests of EnergyNorth or, if the
action related to an employee benefit plan, in the best interests of the
participants in or beneficiaries of the plan. However, EnergyNorth may not
indemnify a director in connection with any proceeding which finds the director
to be liable to the corporation or in connection with any other proceeding in
which the director is adjudged to have received improper personal benefit. The
New Hampshire Business Corporation Act also authorizes EnergyNorth to indemnify
officers, employees or agents of EnergyNorth who are not directors, to the same
extent and on the same terms as offered to directors.
The EnergyNorth by-laws further provide that its provisions for the
indemnification of directors and officers are not exclusive of any other rights
that individuals seeking indemnification may be entitled to
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exercise under any other by-law, agreement, vote of stockholders or
disinterested directors, or as mandated by any court of competent jurisdiction.
The indemnification provided under the EnergyNorth by-laws will continue with
respect to any individual who ceases to be a director, officer, employee or
agent and will inure to the benefit of that individual's heirs, executors and
administrators. In addition, the EnergyNorth by-laws state that if EnergyNorth
is merged into or consolidated with another corporation and is not the
surviving corporation in the transaction, then the surviving corporation will
be required to assume the indemnification obligation set forth in the by-laws
with respect to actions or suits arising out of events or facts which occurred
prior to the date of the merger or consolidation. Under the EnergyNorth by-
laws, EnergyNorth may pay in advance the expenses, including attorneys' fees,
incurred by any officer or director, or any other employee or agent authorized
by the board, in defending against any threatened or pending action under
certain circumstances. Finally, the EnergyNorth by-laws authorize the
corporation to purchase and maintain insurance on behalf of any officer,
director, employee or agent of the corporation or any individual serving at the
request of the corporation in a similar capacity with another corporation,
partnership, joint venture or other enterprise, whether or not EnergyNorth
would have the power or obligation to indemnify the individual against such
liability under the EnergyNorth by-laws.
Eastern. Eastern's Declaration of Trust provides that Eastern indemnify each
of its trustees and officers against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, including, but not limited to, derivative suits (to
the extent permitted by law), in which he or she may be involved or with which
he or she may be threatened, while in office or thereafter, except with respect
to any matters as to which he or she shall have been adjudicated to have acted
in bad faith or not to have acted in good faith in the reasonable belief that
his or her action was in the best interests of Eastern or, to the extent that
such matter relates to service with respect to an employee benefit plan, in the
best interests of the participants or beneficiaries of such plan; provided,
however, that as to any matter disposed of by a compromise payment by such
trustee or officer pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless such compromise shall be approved as in the best interests of
Eastern, after notice that it involves such indemnification:
. if no change of control has occurred, (a) by a disinterested majority of
the trustees then in office or (b) by a majority of the disinterested
trustees then in office or by the shareholders of Eastern, provided that
Eastern shall have received a written opinion of independent legal
counsel to the effect that such trustee or officer appears to have acted
in good faith in the reasonable belief that his or her action was in the
best interests of Eastern; or
. if a change of control shall have occurred, by an opinion in writing of
independent legal counsel to the effect that such trustee or officer
appears to have acted in good faith in the reasonable belief that his or
her action was in the best interests of Eastern. No trustee or officer
may satisfy any rights of indemnity or reimbursement granted pursuant to
Eastern's Declaration of Trust or to which he or she may be otherwise
entitled except out of the trust estate of Eastern.
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ELECTION OF DIRECTORS
(Item 2 on Proxy)
BOARD OF DIRECTORS
The Board of Directors of EnergyNorth met six times during the most recent
fiscal year. Each director attended 75% or more of the aggregate of the total
number of Board meetings and total number of meetings of Committees on which
the director served.
The Compensation Committee of the Board consists of Sylvio L. Dupuis,
Chairman, Roger C. Avery, Andrew E. Lietz and John E. Tulley II. This Committee
reviews the compensation of the officers and directors of EnergyNorth and makes
recommendations to the Board of Directors with respect to those matters. The
Compensation Committee held five meetings during the fiscal year.
The following information concerning the name, age at December 31, 1999, and
business experience of the three persons to be nominated for election as
directors and the seven directors whose terms do not expire in 2000 has been
furnished to EnergyNorth by the nominees and directors. The election of each
nominee will require the affirmative votes of the holders of a majority of the
shares of Common Stock present at the meeting and entitled to vote. Where
proxies are marked "withhold authority," such shares are included in
determining the number of shares present and voting. "Broker non-votes" on
proxies returned by brokers holding shares for beneficial owners who have not
provided instructions as to voting for directors will be counted as a vote for
each nominee.
Each person nominated, if elected, will hold office until the annual meeting
to be held in the year in which his or her term expires and until his or her
successor is duly elected.
NOMINEES FOR ELECTION FOR TERM OF THREE YEARS
EXPIRING IN 2003
<TABLE>
<CAPTION>
Name and position Director Principal occupation or employment
with the Registrant Age since during last five years
- ------------------- --- -------- ----------------------------------
<S> <C> <C> <C>
Roger C. Avery 60 1984 President and Chief Executive Officer, Illinois
Gas Company; Adjunct Associate Professor, Brown
University
Robert R. Giordano 61 1988 Chairman and Chief Executive Officer of
President and Chief EnergyNorth Natural Gas, Inc.; formerly (until
Executive Officer 1998) President and Chief Executive Officer of
EnergyNorth Natural Gas, Inc.; Chairman of
EnergyNorth Propane, Inc.; Chairman, President
and Chief Executive Officer of ENI Mechanicals,
Inc.
John E. Tulley II 45 1997 President and Chief Executive Officer, Tulley
Buick Pontiac Company, Inc.
</TABLE>
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<PAGE>
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
Name and position Director Principal occupation or employment
with the Registrant Age since during last five years
- ------------------- --- -------- ----------------------------------
<S> <C> <C> <C>
Joan P. Cudhea.......... 67 1984 Certified Financial Planner(R) Practitioner and
Registered Investment Advisor
Sylvio L. Dupuis........ 65 1982 Optometrist; President, Notre Dame College;
formerly (until 1999) Executive Director of
McLane, Graf, Raulerson & Middleton,
Professional Association law firm; formerly
(until 1996) Commissioner of Insurance--State
of New Hampshire
Andrew E. Lietz......... 61 1998 President, Chief Executive Officer and Director
(until 1995, Vice President and Chief Operating
Officer) of Hadco Corporation, a manufacturer
of printed circuit boards
</TABLE>
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2002
<TABLE>
<CAPTION>
Name and position Director Principal occupation or employment
with the Registrant Age since during last five years
- ------------------- --- -------- ----------------------------------
<S> <C> <C> <C>
Edward T. Borer (1)..... 61 1982 Chairman (and, until 1996, Chief Executive
Chairman of the Board Officer; and, until 1995, President) of
Philadelphia Corporation for Investment
Services, a registered securities broker/dealer
and investment advisor
Michelle L. Chicoine.... 43 1999 President and Chief Operating Officer of
Executive Vice EnergyNorth Natural Gas, Inc.; formerly (1998)
President Senior Vice President, Treasurer and Chief
Financial Officer, (1997-1998) Vice President,
Treasurer and Chief Financial Officer and
(1993-1997) Vice President and Treasurer of
EnergyNorth Natural Gas, Inc.
Richard B. Couser....... 58 1985 Attorney with Orr & Reno, Professional
Association
Constance B. Girard- 52 1994 Retired; formerly (until 1999) President,
diCarlo................ Healthcare Support Services, a division of
ARAMARK Corporation, which manages support
service departments in the healthcare industry
</TABLE>
- --------
(1) Mr. Borer is a director of Philadelphia Corporation for Investment
Services, First Financial Bank and Chester Valley Bancorp Inc., a NASDAQ
traded company. Chester Valley Bancorp Inc. is a 100% owner of Philadelphia
Corporation for Investment Services and First Financial Bank.
Compensation of the Directors
The Chairman of the Board of Directors receives an annual retainer of
$40,000 and the Vice Chairman receives an annual retainer of $20,000. All other
directors receive annual retainers of $10,500. Committee chairmen receive
additional annual retainers of $2,500. Incentive compensation in the amount of
100 shares of EnergyNorth's $1.00 par value Common Stock is awarded to each
director annually, provided that EnergyNorth has achieved certain fiscal year
earnings and shareholder return objectives. The Chairman and directors receive
fees of $750 for each board meeting attended and $650 for each committee
meeting attended. The Vice Chairman and committee chairmen receive fees of $750
for each board and committee meeting attended. Multiple meetings of the board
of directors held on the day of the annual meeting of the board of directors
are
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considered one meeting. Directors who are employees receive no annual
retainers, director incentive compensation, or meeting fees.
Directors may elect to have portions of their retainers and fees credited
each year to a deferred compensation account pursuant to a plan that provides
for accrual of interest and distribution of the deferral accounts in lump sum
amounts or in equal installments over ten years, at the option of each
director, beginning on a date designated by the director.
In fiscal 1999, each non-employee director was granted an option to purchase
1,000 shares of EnergyNorth's Common Stock in accordance with the 1998 Stock
Option Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that each
director and certain officers of EnergyNorth file reports of initial beneficial
ownership and changes in beneficial ownership of EnergyNorth's common stock
with the Securities and Exchange Commission. To EnergyNorth's knowledge, during
1999, all directors and officers filed all such required notices except that
Mr. Margossian, a former Senior Vice President, filed a Form 5 with respect to
the acquisition of 200 shares four days late.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by
EnergyNorth for services rendered in all capacities during the fiscal years
ended September 30, 1999, 1998 and 1997 to the Chief Executive Officer and the
four other executive officers of EnergyNorth whose salary and cash incentive
and bonus award for the 1999 fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual compensation compensation
---------------------------- ------------
Restricted
Name and Principal Stock All Other
Position Year Salary(1) Bonus Other Awards(2) Compensation(3)
- ------------------ ---- --------- -------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Giordano..... 1999 $266,738 $109,543(4) $2,864 -- $18,254
President and CEO 1998 229,902 56,832 2,656 $55,136(5) 16,170
1997 210,797 61,217 2,234 20,403 12,132
Michelle L. Chicoine... 1999 $175,000 $ 62,023(4) $ -- -- $ 7,687
Executive Vice
President 1998 126,667 34,342(5) 1,593 $8,078 7,303
1997 111,595 26,832 1,350 8,932 6,013
Frank L. Childs........ 1999 $140,000 $ 38,417(4) $ -- -- $8,569
Senior Vice President 1998 115,883 44,342(5) -- $8,078 7,260
and CFO 1997 107,417 25,695 -- 8,563 3,571
Kenneth M.
Margossian(6)......... 1999 $132,123 $ 38,417(4) $ -- -- $7,372
Senior Vice President 1998 115,853 29,085(5) -- $8,023 1,499
David A. Skrzysowski... 1999 $90,946 $ 24,014(4) $1,494 -- $6,063
Vice President and 1998 87,227 16,538 1,681 $5,513 5,245
Controller 1997 82,424 18,133 1,531 6,024 4,693
</TABLE>
- --------
(1) Includes amounts earned and deferred without election by the officer and
amounts deferred pursuant to Deferred Compensation Agreements and
EnergyNorth's 401(k) plan.
(2) There are no shares of restricted stock holdings of the above-named
officers as of September 30, 1999.
(3) All other compensation paid in 1999 includes: Employer contributions to
EnergyNorth's 401(k) plan for Mr. Giordano ($5,063), Ms. Chicoine ($5,287),
Mr. Childs ($6,213), Mr. Margossian ($5,187), and Mr. Skrzysowski ($4,438);
value of term life insurance premiums paid for Mr. Giordano ($2,400), Ms.
Chicoine ($2,400), Mr. Childs ($2,356), Mr. Margossian ($2,185), and Mr.
Skrzysowski ($1,625); portion of interest earned in a deferred compensation
account by Mr. Giordano in excess of 120% of federal long-term rate
($10,791).
(4) Includes cash and stock incentive awards.
(5) Includes an award of 1,350 shares of restricted stock that are subject to
forfeiture and nontransferability until July 16, 2000 for Mr. Giordano
($36,197) and cash bonus award for Ms. Chicoine ($10,000), Mr. Childs
($20,000) and Mr. Margossian ($5,000) for 1998 acquisition activities.
(6) Mr. Margossian joined EnergyNorth on September 29, 1997 and resigned on
November 19, 1999.
Stock Options
In November 1998, EnergyNorth adopted the EnergyNorth, Inc. 1998 Stock
Option Plan (Plan) to provide for grants of options to officers, directors and
key employees to purchase common stock of EnergyNorth. The maximum exercise
period for any option is ten years.
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Options granted under the Plan have been entirely incentive stock options
with the exception of options granted to directors. The option price per share
for options granted under the Plan was determined at 100% of the fair market
value of the average closing price for the common stock, as reported on the New
York Stock Exchange, during the ten trading days immediately preceding the date
of grant. All options that have been granted under the Plan become exercisable
over a four-year period beginning in 1999, except for options granted to Mr.
Giordano, which become exercisable over five years. All options will become
fully exercisable for a six-month period in connection with the Eastern-
EnergyNorth merger.
The following table sets forth certain information regarding stock options
granted under the Plan during the fiscal year ended September 30, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
Number of % of total
securities options Exercise
underlying granted to price
options employees in per share Expiration Grant date
Name granted(#) fiscal year ($/sh) date value
- ---- ---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert R. Giordano...... 15,000 34.1 $28.00 11/19/2008 $75,532
Michelle L. Chicoine.... 10,000 22.7 28.00 11/19/2008 50,355
Frank L. Childs......... 5,000 11.4 28.00 11/19/2008 25,177
Kenneth M. Margossian... 5,000 11.4 28.00 11/19/2008 25,177
All directors as a
group.................. 9,000 20.4 28.00 11/19/2008 45,319
</TABLE>
The following table provides information with respect to options to purchase
shares of EnergyNorth's common stock exercised in fiscal 1999 and the value of
unexercised options granted during the fiscal year under the Plan to the named
executive officers in the Summary Compensation Table and all directors as a
group and held by them as of September 30, 1999. EnergyNorth has no
compensation plan under which SARs are granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of securities Value of unexercised in-
Underlying unexercised the-money options at
Shares options at fiscal year fiscal
Acquired end year end(1)
on Value ------------------------- -------------------------
Name exercise(#) realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Giordano...... -- -- 3,571 11,429 $ 48,208 $154,292
Michelle L. Chicoine.... -- -- 2,500 7,500 33,750 101,250
Frank L. Childs......... -- -- 1,250 3,750 16,875 50,625
Kenneth M. Margossian... -- -- 1,250 3,750 16,875 50,625
All directors as a
group.................. -- -- 2,250 6,750 30,375 91,125
</TABLE>
- --------
(1) Represents the difference between the exercise price of the options and the
closing price of $41.50 for EnergyNorth's common stock as quoted by the New
York Stock Exchange on September 30, 1999 times the number of options held.
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<PAGE>
Noncontributory Retirement Plan
The following Pension Plan table sets forth estimated combined annual
benefits payable under EnergyNorth's Retirement Plan and Supplemental Executive
Retirement Plan (SERP) at age 65 to persons in specified compensation and years
of service classifications. The combined annual benefits shown in the table do
not reflect offsets for benefits of Social Security and for retirement benefits
received from other employers.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Average annual earnings
during highest five 15 years of 25 years of 35 years of
years service service service
----------------------- ----------- ----------- -----------
<S> <C> <C> <C>
$125,000 $ 93,750 $ 93,750 $ 93,750
150,000 112,500 112,500 112,500
175,000 131,250 131,250 131,250
200,000 150,000 150,000 150,000
250,000 187,500 187,500 187,500
300,000 225,000 225,000 225,000
350,000 262,500 262,500 262,500
400,000 300,000 300,000 300,000
</TABLE>
All full-time salaried employees, including officers and certain part-time
employees, are eligible to participate in EnergyNorth's Retirement Plan,
provided an employee has reached the age of 21 and has completed one year of
service. The SERP is a noncontributory plan intended to supplement benefits of
the Retirement Plan for certain named executive officers, effective January 1,
1985. Under both plans normal retirement is at age 65 with a provision for
early retirement. Benefits under the Retirement Plan vest after five years of
service and under the SERP vest after ten years of service. Earnings under the
plans for the executive officers named in the Summary Compensation Table
consist of regular annual compensation, excluding bonuses or severance pay, and
are the same, except for bonuses and "Other", as the Annual Compensation and
Long-Term Compensation shown in the Summary Compensation Table. Mr. Giordano
has 34 credited years of service under the plans, Ms. Chicoine 9 years, Mr.
Childs 4 years, Mr. Margossian 2 years and Mr. Skrzysowski 22 years.
Funding of the Retirement Plan is based on actuarial computations and
results in a pool of assets held in trust that is unallocated with respect to
any particular individual. Benefits payable under the Retirement Plan are
calculated on the basis of straight life annuity amounts, accrued over a 25-
year period and are not subject to any deduction for Social Security Benefits
or other offset.
Benefits under the SERP are unfunded, accrue over a 15-year period and once
they are fully vested do not vary with years of service, except that SERP
participants who are included in the plan after September 30, 1995 will have
benefits reduced if they retire prior to the normal retirement date under the
Retirement Plan. For an individual retiring at age 65, benefits are calculated
on the basis of 75% of the average of the five highest consecutive years'
earnings, less any amounts receivable for benefits of Social Security, the
Retirement Plan, and other qualified plans of EnergyNorth and other employers.
Employment Agreements
EnergyNorth has employment agreements with Mr. Giordano and Ms. Chicoine
under which EnergyNorth has agreed to employ Mr. Giordano through March 31,
2003 and Ms. Chicoine for a two-year period, which may be extended annually for
an additional year. If EnergyNorth terminates the employment of either of these
individuals other than for breach of the agreement or misconduct, it is
required to continue salary payments including average or target incentive
compensation, deferred compensation and amounts the employee has elected to
defer, through the term of the agreement. Such termination payments will not be
made following any
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<PAGE>
termination of employment that gives rise to payments under the management
continuity agreements described below.
Management Continuity Agreements
For a discussion of the management continuity agreements between EnergyNorth
and certain of its executive officers, see "Severance Agreements" under the
section "Potential Conflicts and Interests of Certain Persons in the Merger" on
pages 51 to 52.
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of EnergyNorth's common stock
to the S&P 500 Index and a natural gas industry peer group, consisting of 48
companies published by Media General Financial Services, Inc., for the last
five years. The graph assumes an investment of $100 at September 30, 1994 with
all dividends reinvested.
[GRAPH]
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The compensation program for executive officers of EnergyNorth is
administered by the Compensation Committee of the Board of Directors. The
Committee's philosophy is to link executive compensation to improvements in
corporate performance and enhanced profitability and shareholder value. The
compensation program objectives are to (1) provide a competitive, market-based
total compensation package that enables EnergyNorth to attract and retain key
executives; (2) integrate all compensation programs with EnergyNorth's annual
and long-term business objectives and focus executive efforts on the
fulfillment of those objectives; and (3) provide variable compensation
opportunities that are directly linked with the performance of EnergyNorth and
that align executive remuneration with the interests of shareholders and
utility subsidiary ratepayers.
Base Salary
The base salary component of executive compensation reflects the first
objective stated above of attracting and retaining qualified executives. The
salary range for each executive officer ("officer") position, including the
Chief Executive Officer ("CEO"), and the actual base salary of each officer is
reviewed annually. The salary ranges are based upon independent regional and
industry salary surveys, including peer groups, for comparable positions. These
surveys are reviewed and analyzed by EnergyNorth's Human Resources Department
with the assistance of outside consultants from time to time. Specific salary
levels are established through an evaluation of each officer's performance
relating to duties and individual achievements. For fiscal year 1999, the
salary range and specific officer salary recommendations were reviewed and
approved by the Compensation Committee.
In establishing the CEO's 1999 base salary, the Compensation Committee
reviewed the competitive market data and also reviewed performance relating to
EnergyNorth's earnings level and return on equity, cost containment efforts,
involvement in community and industry leadership activities and development of
relations with customers. The Committee's evaluation of the CEO's success in
meeting these goals resulted in the determination of his base salary. The
Compensation Committee recommended a base salary, which was approved by the
Board of Directors.
Key Employee Incentive Plan
Each officer participates in EnergyNorth's Key Employee Performance and
Equity Incentive Plan. The Plan is intended to compensate key employees based
upon performance standards and objectives and to reward performance with share
ownership in EnergyNorth. EnergyNorth seeks to align the interests of key
employees with the interests of shareholders and utility customers. In 1999 the
annual performance criteria which determined eligibility for awards under the
plan were (1) earnings levels compared to forecast, (2) total shareholder
return over a rolling three-year period compared to a peer group of comparable
natural gas distribution companies, (3) operations and maintenance expenses per
customer benchmarks compared to inflation, and (4) evaluation of individual
performance. Success in meeting these goals determines the amount of annual
incentive compensation an officer will receive. Targeted awards for the CEO
under the program ranged up to 45% of the midpoint of the market interval, up
to 32.5% for the executive vice president and up to 30% for other participating
officers. Three-quarters of the Incentive Plan award is paid in cash and one-
quarter is paid in the form of awards of Company Common Stock that are subject
to forfeiture and restrictions on transferability for a period of three years.
All forfeiture and restrictions on transferability with respect to shares
granted under the Plan have been waived by the Board of Directors.
Stock Option Plan
Officers will be eligible to receive grants of stock options under
EnergyNorth's 1998 Stock Option Plan. Grants under the plan are intended to
provide officers with long-term incentives which appreciate in value with
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the continued favorable performance of EnergyNorth. The Plan is described in
detail in the section of this proxy statement entitled "Adoption of the 1998
Stock Option Plan."
Bonus Awards
From time-to-time, EnergyNorth may determine that special recognition is
appropriate for one or more officers for an extraordinary level of performance.
Any bonus awards granted for this reason are intended to be non-recurring in
nature. During 1999, no such bonus awards were granted.
Conclusion
The Compensation Committee believes that the total compensation program for
executives of EnergyNorth is competitive with the compensation programs
provided by similarly sized utilities. The Compensation Committee believes that
any amounts paid under the annual incentive plan are appropriately related to
corporate and individual performance, yielding awards that are directly linked
to annual financial and operational results of EnergyNorth.
Compensation Committee
of the Board of Directors
Sylvio L. Dupuis, Chairman
Roger C. Avery
Andrew E. Lietz
John E. Tulley II
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RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 3 on Proxy)
Subject to stockholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed Arthur Andersen LLP to
serve as independent public accountants for EnergyNorth for the year 2000.
Arthur Andersen LLP were EnergyNorth's principal accountants in 1999.
Ratification of the appointment of independent public accountants will require
the affirmative votes of the holders of a majority of the shares of Common
Stock present at the meeting and entitled to vote. Where proxies are marked
"withhold authority," such shares are included in determining the number of
shares present and voting. "Broker non-votes" on proxies returned by brokers
holding shares for beneficial owners who have not provided instructions as to
voting for directors will be counted as a vote for each nominee. The Board of
Directors recommends that the stockholders vote for such ratification.
Representatives of Arthur Andersen LLP are expected to be present at the
meeting and will have an opportunity to make a statement and be available to
respond to appropriate questions.
LEGAL MATTERS
Certain legal matters relating to Eastern in connection with the merger,
including, among other things, certain legal matters with respect to the
validity of the securities to be issued, will be passed upon for Eastern by
Ropes & Gray, Boston, Massachusetts.
Certain legal matters relating to EnergyNorth in connection with the merger
will be passed upon for EnergyNorth by Hale and Dorr LLP, Boston, Massachusetts
and McLane, Graf, Raulerson & Middleton, Professional Association, Manchester,
New Hampshire.
EXPERTS
The EnergyNorth consolidated financial statements as of September 30, 1999
and 1998, and for each of the three years in the period ended September 30,
1999, incorporated by reference in this proxy statement/prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
Representatives of Arthur Andersen LLP are expected to be present at the
EnergyNorth annual meeting with the opportunity to make a statement, if they
desire to do so, and to be available to respond to appropriate questions.
The Eastern consolidated financial statements and schedule as of December
31, 1999 and 1998, and for each of the three years in the period ended December
31, 1999, incorporated by reference in this proxy statement/prospectus and
elsewhere in this proxy statement/prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
FUTURE ENERGYNORTH STOCKHOLDER PROPOSALS
Assuming the timing of the consummation of the merger contemplated in the
merger agreement requires EnergyNorth to hold an annual meeting in 2001,
stockholders may submit proposals to be considered for stockholder action at
the 2001 annual meeting if they do so in accordance with appropriate
regulations of the Securities and Exchange Commission. The deadline for
submitting a stockholder proposal for inclusion in the
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EnergyNorth proxy materials for the 2001 annual meeting will be November 27,
2000. With respect to any proposal that a stockholder does not seek to have
included in the EnergyNorth proxy materials, the proxyholders named in
management's proxy will be entitled to exercise their discretionary authority
on that proposal if EnergyNorth does not receive proper notice of the matter
proposed before February 12, 2001. If proper notice is timely received, the
proxyholders named in management's proxy may nevertheless exercise
discretionary authority to the extent permitted by appropriate regulations of
the Securities and Exchange Commission. In any event, EnergyNorth may have no
obligation to include such proposals submitted after November 27, 2000 on the
agenda of the 2001 annual meeting.
OTHER MATTERS
EnergyNorth does not presently intend to bring before the EnergyNorth annual
meeting, any matters other than those specified and EnergyNorth has no
knowledge of any other matters which may be brought up by other persons.
However, if any other matters not now known properly come before the
EnergyNorth annual meeting or any adjournments thereof, the persons named in
the enclosed forms of EnergyNorth proxy, including any substitutes, will vote
such proxies in accordance with their judgment on such matters.
WHERE YOU CAN FIND MORE INFORMATION
Eastern and EnergyNorth file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661- 2511. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Eastern's and EnergyNorth's SEC filings should also be available to the public
from commercial document retrieval services and at the Internet web site
maintained by the SEC at http:// www.sec.gov.
In addition, material and information concerning Eastern and EnergyNorth can
be inspected at the New York Stock Exchange, Inc., 20 Broad Street, 7th Floor,
New York, New York 10005, on which exchange the Eastern common stock and the
EnergyNorth common stock are listed, and material and information concerning
Eastern can also be inspected at the Pacific Exchange, Inc., 301 Pine Street,
San Francisco, California 94104, and the Boston Stock Exchange, on which
exchanges the Eastern common stock is also listed.
The SEC allows Eastern and EnergyNorth to "incorporate by reference"
information into this proxy statement/prospectus, which means that Eastern and
EnergyNorth can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this proxy statement/prospectus, except for
any information superseded by information contained directly in this proxy
statement/prospectus. This proxy statement/prospectus incorporates by reference
the documents set forth below that were previously filed with the SEC by
Eastern (File No. 1-2297) or EnergyNorth (File No. 001-11441). These documents
contain important information about Eastern and EnergyNorth and their financial
condition.
Regarding Eastern:
. Eastern's Annual Report on Form 10-K for the fiscal year ended December
31, 1999.
. The description of Eastern common stock contained in its Form 8, filed on
May 23, 1991, amending its Registration Statement on Form 8-A dated
November 6, 1950.
. The description of the Eastern rights contained in Eastern's Registration
Statement on Form 8-A filed on March 1, 1990, as amended.
. The description of Eastern's new rights contained in Eastern's
Registration Statement on Form 8-A filed on July 29, 1998.
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Regarding EnergyNorth:
. EnergyNorth's Annual Report on Form 10-K for the year ended September 30,
1999.
. EnergyNorth's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1999.
. EnergyNorth's Current Report on Form 8-K dated July 20, 1999.
. EnergyNorth's Current Report on Form 8-K dated November 10, 1999.
Eastern and EnergyNorth may be required by the SEC to file other documents
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, between the time this proxy statement/prospectus is sent and
the date the EnergyNorth annual meeting is held. These documents will be deemed
to be incorporated by reference in this proxy statement/prospectus and to be a
part of it from the date they are filed with the SEC.
If you are a stockholder, Eastern and EnergyNorth may have sent you some of
the documents incorporated by reference, but you can obtain any of them through
Eastern and EnergyNorth, the SEC or the SEC's Internet web site as described
above. Documents incorporated by reference are available from Eastern and
EnergyNorth without charge, excluding all exhibits except for exhibits which
have been specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. Stockholders may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Eastern Enterprises EnergyNorth, Inc.
9 Riverside Road 1260 Elm Street
Weston, Massachusetts 02493 P. O. Box 329
(781) 647-2300 Manchester, New Hampshire 03105
(603) 625-4000
</TABLE>
If you would like to request documents from Eastern or EnergyNorth, please
do so promptly in order to receive them before the EnergyNorth annual meeting.
All information contained in or incorporated by reference into this proxy
statement/prospectus with respect to Eastern has been provided by Eastern. All
information contained in or incorporated by reference into this proxy
statement/prospectus with respect to EnergyNorth has been provided by
EnergyNorth. Neither Eastern nor EnergyNorth assumes any responsibility for the
accuracy or completeness of the information provided by the other party.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the merger. Neither
Eastern nor EnergyNorth has authorized anyone to provide you with
information that is different from what is contained in this proxy
statement/prospectus.
This proxy statement/prospectus is dated March 28, 2000. You should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date, and neither the mailing of
this proxy statement/prospectus to stockholders nor the issuance of
Eastern's common stock in the merger shall create any implication to the
contrary.
----------------
The name "Eastern Enterprises" refers to the trustees under Eastern's
Declaration of Trust 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. A copy of Eastern's Declaration of Trust
is on file with the SEC as Exhibit 3.1 to Eastern's Quarterly Report on Form
10-Q for the quarter ended June 30, 1989.
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Annex A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of July
14, 1999 is by and among Eastern Enterprises (the "Parent"), EE Acquisition
Company, Inc., a New Hampshire corporation ("Merger Sub"), and EnergyNorth,
Inc. (the "Company"), a New Hampshire corporation.
Recitals
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the laws of the State of New Hampshire, the Parent and the
Company will enter into a business combination transaction pursuant to which
the Company will merge with and into Merger Sub, a wholly-owned subsidiary of
Parent.
B. The Board of Trustees of the Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of the
Parent and fair to, and in the best interests of, the Parent and its
stockholders, and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
C. The Board of Directors of the Company (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of the
Company and fair to, and in the best interests of, the Company and its
stockholders, and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement, subject to approval of the Merger
by the stockholders of the Company.
D. The Parent and the Company and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
I. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of New Hampshire law, the Company shall be merged with
and into Merger Sub, the separate corporate existence of the Company shall
cease and Merger Sub shall continue as the surviving corporation. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing the
Articles of merger (the "Articles of Merger") with the Secretary of the State
of New Hampshire in accordance with the relevant provisions of New Hampshire
law (the time of such filing, or such later time as may be agreed in writing by
the parties and specified in the Articles of Merger, being the "Effective
Time," and the date on which the Effective Time occurs being the "Effective
Date") as soon as practicable on the Closing Date (as herein defined). Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and the Articles of Merger. The closing of the
Merger (the "Closing") shall take place at the offices of Ropes & Gray, at a
time and date to be specified by the parties, which shall be no later than the
35th day after the satisfaction or waiver of the conditions set forth in
Article 6 (other than delivery of items to be delivered at Closing), or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date"). At the Closing, (a) the Company shall
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deliver to the Parent the various Articles and instruments required under
Article 6, (b) the Parent and Merger Sub shall deliver to the Company the
various Articles and instruments required under Article 6, and (c) the Company
and Merger Sub shall execute and file with the Secretary of the State of New
Hampshire the Articles of Merger.
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of New
Hampshire law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the estate, property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and obligations of the Company and
Merger Sub shall become the debts, liabilities and obligations of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation; provided, however, that at the
Effective Time the Articles of Incorporation of the Surviving Corporation shall
be amended so that the name of the Surviving Corporation shall be "EnergyNorth,
Inc." Subject to the foregoing, the additional effects of the Merger shall be
as provided in NH RSA 293-A: 11.06 (the "NHBCA").
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The directors of Merger Sub immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
to serve until their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, to serve until
their successors are duly elected or appointed or qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, the Company or the holders of
any of the following securities:
(a) Conversion of Company Common Stock. Each share of Common Stock,
$1.00 par value, of the Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than any shares
of Company Common Stock to be canceled pursuant to Section 1.6(c)) will be
canceled and extinguished and automatically converted (subject to Section
1.6(f) and (h)) into the right to receive the following (the "Merger
Consideration") at the Effective Time:
(i) (A) $47.00 in cash, without interest (the "Per Share Cash
Amount"), (B) a number of shares of Common Stock, $1.00 par value, of
the Parent (the "Parent Common Stock") equal to the Per Share Cash
Amount divided by the Market Value (as defined below) of Parent Common
Stock (the "Exchange Ratio"), or (C) a combination of cash and shares
of Parent Common Stock determined in accordance with this Section 1.6.
For purposes of this Agreement, "Market Value" of Parent Common Stock
means the average of the Daily Per Share Prices (as hereinafter
defined) of Parent Common Stock for the ten consecutive trading days
ending on the third trading day prior to the Effective Date. The "Daily
Per Share Price" for any trading day means the weighted average of the
per share selling prices of the Parent Common Stock on the New York
Stock Exchange (the "NYSE"), as reported in the NYSE Composite
Transactions, for that day. Notwithstanding the foregoing, if the
Market Value of Parent Common Stock is less than $36.00 per share,
Market Value for purposes of this Section 1.6(a)(i) shall mean $36.00
and if the Market Value of Parent Common Stock is greater than $44.00
per share, Market Value for purposes of this Section 1.6(a)(i) shall
mean $44.00.
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(ii) The number of shares of Company Common Stock to be converted
into the right to receive cash in the Merger will, subject to Section
1.6(a)(vii), be 49.9% of outstanding shares (the "Cash Election
Number"). The remaining shares of Company Common Stock outstanding
immediately prior to the Effective Time (the "Stock Election Number")
will be converted into the right to receive Parent Common Stock in the
Merger.
(iii) Subject to the allocation and election procedures set forth in
this Section 1.6, each record holder of shares of Company Common Stock
immediately prior to the Effective Time will be entitled in respect of
each such share (i) to elect to receive cash for such share (a "Cash
Election"), (ii) to elect to receive Parent Common Stock for such share
(a "Stock Election"), or (iii) to indicate that such record holder has
no preference as to the receipt of cash or Parent Common Stock for such
share (a "Non-Election"). All such elections will be made on a form
designed for that purpose (a "Form of Election").
(iv) If the aggregate number of shares covered by Cash Elections
(the "Cash Election Shares") exceeds the Cash Election Number, all
shares of Company Common Stock covered by Stock Elections (the "Stock
Election Shares") and all shares of Company Common Stock covered by
Non-Elections (the "Non-Election Shares") will be converted into the
right to receive Parent Common Stock, and the Cash Election Shares will
be converted into the right to receive Parent Common Stock and cash in
the following manner:
Each Cash Election Share will be converted into the right to
receive (A) an amount in cash, without interest, equal to the
product of (x) the Per Share Cash Amount and (y) a fraction (the
"Cash Fraction"), the numerator of which will be the Cash Election
Number and the denominator of which will be the total number of Cash
Election Shares, and (B) a number of shares of Parent Common Stock
equal to the product of (x) the Exchange Ratio and (y) a fraction
equal to one minus the Cash Fraction.
(v) If the aggregate number of Stock Election Shares exceeds the
Stock Election Number, all Cash Election Shares and all Non-Election
Shares will be converted into the right to receive cash, and all Stock
Election Shares will be converted into the right to receive Parent
Common Stock and cash in the following manner:
Each Stock Election Share will be converted into the right to
receive (A) a number of shares of Parent Common Stock equal to the
product of (x) the Exchange Ratio and (y) a fraction (the "Stock
Fraction"), the numerator of which will be the Stock Election Number
and the denominator of which will be the total number of Stock
Election Shares, and (B) an amount in cash, without interest, equal
to the product of (x) the Per Share Cash Amount and (y) a fraction
equal to one minus the Stock Fraction.
(vi) In the event that neither subparagraph (iv) nor subparagraph
(v) above is applicable, all Cash Election Shares will be converted
into the right to receive cash, all Stock Election Shares will be
converted into the right to receive Parent Common Stock, and all Non-
Election Shares will be converted into the right to receive Parent
Common Stock and the right to receive cash on a proportionate basis so
that the Stock Election Number and the Cash Election Number equal their
respective percentages of the number of shares of Company Common Stock
outstanding as closely as possible.
(vii) In the event that the Parent Common Stock (excluding
fractional shares to be paid in cash pursuant to Section 1.6(f)) to be
issued in the Merger in exchange for shares of Company Common Stock,
valued at the lesser of (i) the Market Value and (ii) the average of
the high and low trading prices as reported on the NYSE for the
Effective Date, minus the aggregate discount, if any, due to trading
restrictions on the Parent Common Stock to be issued in the Merger (the
"Parent Common Stock Value") is less than 45% of the total
consideration to be paid in exchange for the shares of Company Common
Stock (including without limitation the amount of cash to be paid in
lieu of
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fractional shares pursuant to Section 1.6(f), plus the number of
Dissenting Shares (as defined below) multiplied by the Per Share Cash
Consideration and any other payments required to be considered in
determining whether the continuity of interest requirement applicable
to reorganizations under Section 368 of the Code has been satisfied)
(the "Total Consideration"), then the Cash Election Number shall be
reduced, and the Stock Election Number shall be correspondingly
increased, to the extent necessary so that the Parent Common Stock
Value is 45% of the Total Consideration.
(b) Cash Election Procedure.
(i) The Parent and the Company will each use its reasonable best
efforts to cause a Form of Election to be mailed not less than thirty
(30) days prior to the anticipated Effective Time to all holders of
record of shares of Company Common Stock as of the record date for the
Company Stockholders' Meeting (as hereinafter defined) and to all
persons who become holders of Company Common Stock during the period
between the record date for the Company Stockholders' Meeting and 5:00
p.m., New York time, on the date seven calendar days prior to the
anticipated Effective Time and to make the Form of Election available
to all persons who become holders of Company Common Stock subsequent to
such time. Elections will be made by holders of Company Common Stock by
mailing to the Exchange Agent a Form of Election. Holders of record of
shares of Company Common Stock who hold such shares as nominees,
trustees or in other representative capacities (a "Representative") may
submit multiple Forms of Election, provided that such Representative
certifies that each such Form of Election covers all the shares of
Company Common Stock held by each Representative for a particular
beneficial owner. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent and accompanied
by the certificates representing the shares of Company Common Stock as
to which the election is being made (or by an appropriate guarantee of
delivery of such certificates as set forth in such Form of Election
from a member of any registered national securities exchange or of the
National Association of Securities Dealers, Inc. ("NASD") or a bank,
trust company, credit union, savings association, broker, dealer or
other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program, the NYSE Medallion Signature
Guaranty Program or the Stock Exchange Medallion Program). The Parent
will have the discretion, which it may delegate in whole or in part to
the Exchange Agent, to determine whether Forms of Election have been
properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. The decision of the Parent (or
the Exchange Agent) in such matters will be conclusive and binding.
Neither the Parent nor the Exchange Agent will be under any obligation
to notify any person of any defect in a Form of Election submitted to
the Exchange Agent. The Exchange Agent will also make computations
contemplated by this Section 1.6 and all such computations will be
conclusive and binding on the holders of Company Common Stock.
(ii) For the purposes hereof, a holder of Company Common Stock who
does not submit a Form of Election which is received by the Exchange
Agent prior to the Election Deadline (as defined herein) will be deemed
to have made a Non-Election. If the Parent or the Exchange Agent
determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election will be
deemed to be of no force and effect and the stockholder making such
purported election will for purposes hereof be deemed to have made a
Non-Election.
(iii) A Form of Election must be received by the Exchange Agent by
the close of business on the last business day prior to the Effective
Time (the "Election Deadline") in order to be effective. All elections
may be revoked until the Election Deadline in writing by holders
submitting the Forms of Election.
(c) Cancellation of Certain Shares. Each share of Company Common Stock
held in the treasury of the Company or owned by Merger Sub, the Parent or
any direct or indirect wholly owned subsidiary of the Company or of the
Parent immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
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(d) Capital Stock of Merger Sub. Each share of Common Stock, no par
value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall continue to be outstanding following, and shall be
unaffected by, the Merger.
(e) Adjustment of Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Parent Common Stock), reorganization, recapitalization or other like
change with respect to Parent Common Stock, occurring after the date hereof
and having a record date prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock to be received by such holder)
shall receive from the Parent an amount of cash (rounded to the nearest
whole cent), without interest thereon, equal to the product of (i) such
fraction, multiplied by (ii) the Average Closing Price. The "Average
Closing Price" shall mean the average of the per share closing prices of
Parent Common Stock as reported on the NYSE for the ten trading days ending
on and including the Effective Date.
(g) At the Effective Time, all options to purchase Company Common Stock
then outstanding under the EnergyNorth, Inc. 1998 Stock Option Plan shall
be assumed by Parent in accordance with Section 5.20 hereof.
(h) Dissenting Shares. Each outstanding share of Company Common Stock
the holder of which has perfected his right to dissent under applicable law
and has not effectively withdrawn or lost such right as of the Effective
Time (the "Dissenting Shares") shall not be converted into or represent a
right to receive the Merger Consideration, and the holder thereof shall be
entitled only to such rights as are granted by applicable law; provided,
however, that any Dissenting Share held by a person at the Effective Time
who shall, after the Effective Time, withdraw the demand for payment for
shares or lose the right to payment for shares, in either case pursuant to
the NHBCA, shall be deemed to be converted into, as of the Effective Time,
the right to receive cash pursuant to Section 1.6(a) in the same manner as
if such shares were Cash Election Shares. 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.
1.7 Surrender of Certificates.
(a) Exchange Agent. The Parent shall select a bank or trust company
reasonably acceptable to the Company, which may be the Parent's existing
transfer agent, to act as the exchange agent (the "Exchange Agent") in the
Merger.
(b) The Parent to Provide Merger Consideration. Promptly after the Effective
Time, the Parent shall make available to the Exchange Agent for exchange in
accordance with this Article 1, certificates for the shares of Parent Common
Stock issuable, and cash payable, pursuant to Section 1.6(a) in exchange for
outstanding shares of Company Common Stock and cash in an amount sufficient for
payment in lieu of fractional shares pursuant to Section 1.6(f) and any
dividends or distributions to which holders of shares of Company Common Stock
may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time, the Parent shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "Certificates") that immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive the Merger
Consideration, together with any cash payable pursuant to Section 1.6(f) and
Section 1.7(d), (i) a letter of transmittal (which shall specify that delivery
shall
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be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as the Parent may reasonably specify,
provided that risk of loss and title shall already have passed with respect to
Certificates previously surrendered in connection with Section 1.6(b)(i)) and
(ii) instructions for effecting the exchange of the Certificates for the Merger
Consideration, together with any cash payable pursuant to Section 1.6(f) and
Section 1.7(d). Upon surrender of a Certificates for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by the
Parent, together with such letter of transmittal duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificates shall be entitled to receive in exchange therefor the Merger
Consideration, together with any cash payable pursuant to Section 1.6(f) and
Section 1.7(d), and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificates will be deemed
from and after the Effective Time, for all corporate purposes, subject to
Section 1.7(d) as to the payment of dividends, to evidence only the ownership
of the number of full shares of Parent Common Stock and the aggregate Per Share
Cash Amount into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the date of this Agreement with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificates with respect to the shares of
Parent Common Stock represented thereby until the holder of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, there shall be delivered to the
record holder thereof Certificates representing whole shares of Parent Common
Stock and the aggregate Per Share Cash Amount issuable and payable in exchange
therefor, without interest, along with payments of the amount of dividends or
other distributions with a record date after the Effective Time then payable
with respect to such whole shares of Parent Common Stock and cash in lieu of
any fractional shares in accordance with Section 1.6(f).
(e) Transfers of Ownership. If any Certificates for shares of Parent Common
Stock is to be issued in a name other than that in which the Certificates
surrendered in exchange therefor is registered or if any of the other Merger
Consideration is to be payable to a person other than the person to whom such
Certificates is registered, it will be a condition of the issuance and payment
thereof that the Certificates so surrendered will be properly endorsed,
accompanied by any documents required to evidence and effect such transfer and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to the Parent or any agent designated by it any
applicable transfer taxes required by reason of the issuance of a Certificates
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or shall provide evidence that any
applicable transfer taxes have been paid.
(f) No Liability. Notwithstanding anything to the contrary in this Section
1.7, neither the Exchange Agent, the Parent, the Surviving Corporation nor any
other party hereto shall be liable to a holder of shares of Parent Common Stock
or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) Termination of Exchange Agent. Any Merger Consideration made available
to the Exchange Agent pursuant to Section 1.7(b) and not exchanged within six
months after the Effective Time pursuant to this Section 1.7 shall be returned
by the Exchange Agent to Parent, which shall thereafter act as Exchange Agent,
and thereafter any holder of unsurrendered Certificates shall look as a general
creditor only to Parent for payment of any funds to which such holder may be
due, subject to applicable law.
1.8 No Further Ownership Rights in Company Common Stock. The Merger
Consideration, together with any cash payable pursuant to Sections 1.6(f) and
1.7(d) issued and paid in exchange for shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued and paid
in
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full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 1.
1.9 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall deliver in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, the Merger Consideration;
provided, however, that the Parent may, in its discretion and as a condition
precedent to such delivery, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against the Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368 of the
Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent, subject to the exceptions
set forth in the disclosure schedule supplied by the Company to the Parent (the
"Company Disclosure Schedule"), as follows:
2.1 Organization of the Company. The Company and each of its Subsidiaries
and joint ventures (as defined below) is a corporation or other legal entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has the requisite corporate
or similar power to own, lease and operate its property and to carry on its
business as now being conducted, and is duly qualified to do business and in
good standing as a foreign corporation or other legal entity in each
jurisdiction in which the failure to be so qualified, when taken with all other
such failures, would have a Company Material Adverse Effect (as defined below).
Included in the Company Disclosure Schedule is a true and complete list of all
of the Company's Subsidiaries and joint ventures, together with the
jurisdiction of incorporation or organization of each Subsidiary and joint
venture and the Company's equity interest therein. The Company has delivered or
made available to the Parent a true and correct copy of the Articles of
Incorporation and Bylaws of the Company and similar governing instruments of
each of its Subsidiaries and joint ventures, each as amended to date. The
minute books of the Company and its Subsidiaries and joint ventures made
available to the Parent are the only minute books of the Company and its
Subsidiaries and joint ventures in the Company's possession, and such minutes
contain a reasonably accurate record of all actions taken in all meetings of
directors (or committees thereof) and stockholders or actions by written
consent since January 1, 1994. The term "Company Material Adverse Effect"
means, for purposes of this Agreement, any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
prospects, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole (other than changes that are the effect of
economic factors (other than interest rate changes) affecting the economy as a
whole or changes that are the effect of factors generally affecting the
specific markets in which the Company and its Subsidiaries compete); provided,
however, that a Company Material Adverse Effect shall not include any adverse
effect primarily attributable to the Merger or the announcement thereof or the
transactions contemplated by this Agreement
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(other than effects arising out of or resulting from actions by any state or
federal regulatory authority with respect to this Agreement and the
transactions contemplated hereby). "Subsidiary" means, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership interests
of which held by such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least 50% of
the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization are directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. The term
"joint venture" of a party shall mean any corporation or other entity
(including partnerships and other business associations) that is not a
Subsidiary of such party, in which such party or one or more of its
Subsidiaries owns an equity interest (other than money market accounts and
other short term investments), other than equity interests held for passive
investment purposes which are less than 10% of any class of the outstanding
voting securities or equity of any such entity. Except as set forth in the
Company Disclosure Schedule, none of the Company's Subsidiaries is a "public
utility company," a "holding company," a "subsidiary company" or an "affiliate"
of any public utility company within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935, as
amended ("PUHCA").
2.2 The Company Capital Structure.
(a) The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, $1.00 par value, of which, as of June 30, 1999, there
were 3,319,718 shares issued and outstanding and no shares in treasury. No
shares of Company's capital stock have been issued since that date except
shares of Company Common Stock issued in the normal course and consistent with
past practice pursuant to the (i) 1998 Stock Option Plan, (ii) Employee
Performance and Equity Incentive Plan, (iii) Director Incentive Compensation
Plan, and (iv) Dividend Reinvestment and Stock Purchase Plan (the "Company
Stock Plans"). All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and non-assessable and are not subject
to preemptive rights created by statute, the Articles of Incorporation or
Bylaws of the Company or any agreement or document to which the Company is a
party or by which it is bound. As of June 30, 1999, an aggregate of 520,000
shares of Company Common Stock were reserved for issuance pursuant to the
Company Stock Plans. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable.
(b) The Company Disclosure Schedule includes a true and complete list of all
outstanding rights, subscriptions, warrants, calls, preemptive rights, options
or other agreements of any kind to purchase or otherwise receive from the
Company any shares of the capital stock or any other security of the Company,
and all outstanding securities of any kind convertible into or exchangeable for
such securities. True and complete copies of all instruments (or other forms of
such instruments) referred to in this Section 2.2(b) have been previously
furnished to the Parent. There are no stockholder agreements, voting trusts,
proxies or other agreements, instruments or understandings with respect to the
outstanding shares of capital stock of the Company to which the Company is a
party.
(c) Except for securities the Company owns directly or indirectly through
one or more Subsidiaries, there are no equity securities of any class of any
Subsidiary of the Company, or any security exchangeable or convertible into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding.
2.3 Authority.
(a) Subject to approval by its stockholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of this
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Agreement and the Merger by the Company's stockholders and any necessary or
requested review or approval of this Agreement and the Merger by the State of
New Hampshire Public Utilities Commission ("NHPUC") and the filing and
recording of the Articles of Merger pursuant to the laws of the State of New
Hampshire. This Agreement has been duly executed and delivered by the Company.
Assuming the due authorization, execution and delivery by the Parent and Merger
Sub, upon execution by the Company this Agreement constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the Articles of
Incorporation or Bylaws of the Company or the equivalent organizational
documents of any of its Subsidiaries or joint venture, (ii) subject to
obtaining the approval by the Company's stockholders of this Agreement as
contemplated in Section 5.2 and of the NHPUC in accordance with New Hampshire
law and compliance with the other requirements set forth in Section 2.3(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its Subsidiaries or joint venture or
by which its or any of their respective properties is bound, or (iii) subject
to obtaining any third party consents referred to in the final sentence of this
Section 2.3(a), result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the rights of the Company or any Subsidiary or joint venture or alter
the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its Subsidiaries or joint venture pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
its or any of their respective properties are bound or affected, except, with
respect to clauses (ii) and (iii), for any such conflicts, violations, defaults
or other occurrences that would not have a Company Material Adverse Effect. The
Company Disclosure Schedule lists all consents, waivers and approvals under any
of the Company's or any of its Subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, except for those the absence of which would
not have a Company Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Articles of Merger with the Secretary of State of New Hampshire, (ii)
the filing of the Proxy Statement (as defined in Section 2.18) with the United
States Securities and Exchange Commission (the "SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the
filing of a Current Report on Form 8-K with the SEC, (iv) the filing with the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") of such forms as may be
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") and the termination or expiration of all applicable waiting periods
thereunder, (v) approval of the Merger and the related transactions
contemplated hereunder by NHPUC in accordance with New Hampshire law and any
required filing thereof with the Secretary of State of New Hampshire, (vi) the
approval of the Merger by the SEC pursuant to PUHCA, (vii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the laws
of any foreign country and (viii) such other consents, authorizations, filings,
approvals and registrations that, if not obtained or made, would not have a
Company Material Adverse Effect or a material adverse effect on the ability of
the parties to consummate the Merger.
2.4 Takeover Laws; Rights Plans.
(a) The Company has taken all action required to be taken by it in order to
exempt this Agreement and the transactions contemplated hereby from, and this
Agreement and the transactions contemplated hereby are
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exempt from, the requirements of any "moratorium," "control share," "fair
price" or other anti-takeover laws and regulations (collectively, "Takeover
Laws") of the State of New Hampshire, including NH RSA 421-A and under any
similar provisions included in the Company's charter and by-laws.
(b) The Company has (1) duly entered into an appropriate amendment to the
Company's Rights Agreement dated as of June 18, 1990 (the "Rights Agreement")
between the Company and State Street Bank and Trust Company, which amendment
has been provided to Parent, and (2) taken all other action necessary or
appropriate so that the entering into of this Agreement does not and will not
result in the ability of any person to exercise any Rights under the Rights
Agreement or enable or require the Rights issued thereunder to separate from
the shares of Company Common Stock to which they are attached or to be
triggered or become exercisable or redeemable.
(c) No "Distribution Date" or "Triggering Event" (as such terms are defined
in the Rights Agreement) has occurred.
2.5 SEC Filings; Company Financial Statements.
(a) Each of the Company and EnergyNorth Natural Gas, Inc. has filed all
forms, reports and documents required to be filed by it with the SEC since
January 1, 1996. All such required forms, reports and documents (including
those that the Company or EnergyNorth Natural Gas, Inc. may file after the date
hereof until the Closing) are referred to herein as the "Company SEC Reports."
As of their respective dates, the Company SEC Reports (i) were or will be
prepared in compliance in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports, and (ii) did not or will not at the
time they were or are filed (or if amended or superseded by a filing prior to
the Closing, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances in which they were made, not misleading. None of the Company's
Subsidiaries, other than EnergyNorth Natural Gas, Inc., is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports (the "Company
Financials"), including any Company SEC Reports filed after the date hereof
until the Closing, (i) complied or will comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was or will be prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented or will fairly
present, in all material respects, the consolidated financial position of the
Company and its Subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods
indicated, consistent with the books and records of the Company, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Company contained in the Company's
SEC Report as of March 31, 1999 is hereinafter referred to as the "Company
Balance Sheet." Except as disclosed in the Company Disclosure Schedule and
except for obligations under this Agreement, neither the Company nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the consolidated financial statements prepared in accordance with GAAP that
are, individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its Subsidiaries taken as
a whole, except liabilities (i) provided for in the Company Balance Sheet and
the related notes or (ii) incurred since the date of the Company Balance Sheet
in the ordinary course of business consistent with past practices or (iii)
incurred in connection with the transactions contemplated hereby.
2.6 Absence of Certain Changes or Events. Since March 31, 1999, there has
not occurred any Company Material Adverse Effect and there has not been,
occurred or arisen any:
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(a) transaction by the Company or its Subsidiaries except in the
ordinary course of business as conducted on the date of the Company Balance
Sheet and consistent with past practices;
(b) except as permitted by this Agreement, amendments or changes to the
Articles of Incorporation or Bylaws of the Company;
(c) individual capital expenditure or commitment, or series of related
capital expenditure or commitments, by the Company or its Subsidiaries
outside the ordinary course of business exceeding $150,000;
(d) destruction of, damage to or loss of any assets material to the
business of the Company and its Subsidiaries taken as a whole (whether or
not covered by insurance);
(e) any cancellation or termination or written notice of cancellation or
termination by any customer that is material to the Company and its
Subsidiaries, taken as a whole, of its relationship or a portion of its
relationship with the Company or any of its Subsidiaries that is material
to the Company and its Subsidiaries, taken as a whole, or any decrease, not
in the ordinary course of business, in the usage or purchase of the
products or services of the Company or any of its Subsidiaries by any such
customer that is material to the Company and its Subsidiaries, taken as a
whole, or any by-pass transaction involving any such customer of the
Company, other than any of the foregoing that is primarily the result of
weather factors;
(f) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action that is reasonably likely to have a Company Material
Adverse Effect;
(g) material change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(h) material revaluation by the Company or its Subsidiaries of any of
its significant assets;
(i) except as permitted by this Agreement, declaration, setting aside or
payment of a dividend or other distribution with respect to the capital
stock of the Company (other than regular quarterly dividends in accordance
with past practice), or any direct or indirect redemption, purchase or
other acquisition by the Company of any of its capital stock;
(j) except as permitted by this Agreement, increase in the salary or
other compensation payable or to become payable to any of its officers or
directors or, other than in the ordinary course of business and consistent
with past practices, any of its employees or advisors, or the declaration,
payment or contractually binding commitment or obligation of any kind for
the payment of a bonus or other additional salary or compensation to any
such person except for increases, payments or commitments in the ordinary
course of business and consistent with past practices;
(k) sale, lease, license or other disposition of any assets or
properties material to the Company and its Subsidiaries, taken as a whole,
except in the ordinary course of business;
(l) except as would not reasonably be expected to result in a Company
Material Adverse Effect, amendment or termination of any material contract,
agreement or license to which the Company or any of its Subsidiaries is a
party or by which it is bound except for amendments in the ordinary course
of business or scheduled expiration pursuant to the terms of the contract,
agreement or license and not as a result of any breach;
(m) except in the ordinary course of business and consistent with past
practices or as permitted by this Agreement, loan by the Company or any of
its Subsidiaries to any person or entity, incurring by the Company or any
Subsidiary of any indebtedness (except for indebtedness incurred in the
ordinary course under existing credit lines or arrangements set forth in
the Company Disclosure Schedule), guaranteeing by the Company or any
Subsidiary of any indebtedness, issuance or sale of any debt securities of
the Company or any Subsidiary or guaranteeing of any debt securities of
others;
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(n) waiver or release of any right or claim material to the Company and
its Subsidiaries, taken as a whole, including any write-off or other
compromise of any account receivable of the Company or any Subsidiary,
other than in the ordinary course of business and consistent with past
practices;
(o) adoption, material amendment or modification, or termination of any
Plan (as defined in Section 2.14) by the Company or any of its
Subsidiaries;
(p) regulatory decision by the NHPUC that would have a material adverse
impact on the Surviving Corporation; or
(q) contractually binding commitment, understanding or agreement by the
Company or any of its Subsidiaries thereof to do any of the things
described in the preceding clauses (a) through (o) (other than this
Agreement).
2.7 Tax Matters.
(a) The Company and its Subsidiaries have filed all material tax reports and
returns required to be filed by them and have paid or will timely pay all
material taxes and other charges shown as due on such reports and returns.
Neither the Company nor any of its Subsidiaries is delinquent in the payment of
any material tax assessment or other governmental charge (including without
limitation applicable withholding taxes). Any provision for taxes reflected in
the Company Balance Sheet has been properly reflected in accordance with GAAP.
There are no tax liens on any assets of the Company or its Subsidiaries except
for current taxes not yet due and other non-material tax amounts.
(b) There has not been any audit of any tax return filed by the Company or
any of its Subsidiaries for any period beginning on or after January 1, 1994
and no audit of any tax return filed by the Company or any of its Subsidiaries
is in progress and neither the Company nor any Subsidiary has been notified by
any tax authority that any such audit is contemplated or pending. Neither the
Company nor any Subsidiary has received any claim in writing from any tax
authority concerning any tax liability for any period for which tax returns
have been filed. No extension of time with respect to any date on which a tax
return was or is to be filed by the Company or any of its Subsidiaries is in
force, and no waiver or agreement by the Company or any of its Subsidiaries is
in force for the extension of time for the assessment or payment of any tax.
For purposes of this Agreement, the term "tax" includes all federal, state,
local and foreign taxes or assessments, including income, sales, gross
receipts, excise, use, value added, royalty, franchise, payroll, withholding,
property and import taxes and any interest or penalties applicable thereto.
(c) Neither the Company nor any of its Subsidiaries has any liability for
any taxes of any person other than the Company and its Subsidiaries (i) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by contract or (iv)
otherwise. Neither the Company nor any of its Subsidiaries has engaged in any
intercompany transactions within the meaning of Treasury Regulations Section
1.1502-13, or its predecessors, for which any income or gain will remain
unrecognized as of the close of the last taxable year prior to the Closing
Date.
(d) Neither the Company nor any of its Subsidiaries has agreed to, or is
required to, make any adjustments under Section 481(a) of the Code by reason of
a change in accounting method or otherwise.
(e) Each agreement, contract or arrangement to which the Company or any of
its Subsidiaries is a party that could result, on account of the transactions
contemplated hereunder, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code is
set forth in Section 2.7 of the Company Disclosure Schedule.
(f) No indebtedness of the Company or any of its Subsidiaries is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code. To
the best knowledge of the Company, no foreign person owns or has owned
beneficially more than five percent of the total fair market value of Company
Common Stock during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
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(g) Neither the Company nor any of its Subsidiaries has constituted a
"distributing corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code in the past 24 month period or in a
distribution which could otherwise constitute part of a "plan" or a series of
"related transactions" (within the meaning of Code Section 355(e)).
(h) Section 2.7 of the Company Disclosure Schedule lists all examination
reports and statements of deficiencies asserted, assessed against or agreed to
by or on behalf of the Company or any Subsidiary received or agreed to with
respect to any tax period beginning on or after January 1, 1994. No claim has
ever been made by any tax authority that the Company or any Subsidiary is or
may be subject to taxation in a jurisdiction where it does not file tax
returns.
2.8 Regulation as a Utility.
(a) The Company is a "holding company" exempt from registration under
Section 3(a)(1) of PUHCA.
(b) The Company is not subject to regulation as a natural gas distribution
utility by the State of New Hampshire. The Company's subsidiary, EnergyNorth
Natural Gas, Inc., is subject to regulation as a natural gas distribution
utility by the NHPUC.
(c) Neither the Company nor any of its Subsidiaries is currently subject to
regulation by the Federal Energy Regulation Commission under the Federal Power
Act or as a "natural gas company" under the Natural Gas Act or is subject to
regulation as a public utility or public service company (or similar
designation) by any state in the United States other than New Hampshire or in
any foreign country.
2.9 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company and its Subsidiaries have good and valid title to, or have
a valid and enforceable right to use or a valid and enforceable leasehold
interest in, all real property (including all buildings, fixtures and other
improvements thereto) owned by them and material to the conduct of the
business of the Company and its Subsidiaries, taken as a whole, as such
business is now being conducted, except for easements granted in the ordinary
course of business. Neither the Company's nor any of its Subsidiaries'
ownership of or leasehold interest in any such property is subject to any
mortgage, pledge, lien, option, conditional sale agreement, encumbrance,
security interest, title exception or restriction or claim or charge of any
kind ("Encumbrances"), except for such Encumbrances as are set forth in the
Company Disclosure Schedule or the Company Financials or are not in the
aggregate reasonably likely to have a Company Material Adverse Effect. Such
property is, in the aggregate, in condition and repair, normal wear and tear
excepted, adequate in all material respects for the continued conduct of the
business of the Company and its Subsidiaries, taken as whole, in the manner in
which it is currently conducted, except to the extent that the condition of
any property is not in the aggregate reasonably likely to have a Company
Material Adverse Effect.
(b) The Company and its Subsidiaries have good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
their tangible personal properties and assets, used or held for use in their
business, and such properties and assets, as well as all other properties and
assets of the Company and its Subsidiaries, whether tangible or intangible,
are free and clear of any Encumbrances, except for such Encumbrances as are
set forth in the Company Disclosure Schedule or the Company Financials or are
not in the aggregate reasonably likely to have a Company Material Adverse
Effect. Such property is, in the aggregate, in condition and repair, normal
wear and tear excepted, adequate in all material respects for the continued
conduct of the business of the Company and its Subsidiaries, taken as a whole,
in the manner in which it is currently conducted, except to the extent that
the condition of any property is not in the aggregate reasonably likely to
have a Company Material Adverse Effect.
2.10 Intellectual Property. The Company and its Subsidiaries own, or are
licensed or otherwise possess legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any
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applications therefor, schematics, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information or
material that are required for the conduct of business of the Company or its
Subsidiaries as currently conducted, the absence of which would have a Company
Material Adverse Effect (collectively, the "Company Intellectual Property
Rights"). All of the Company Intellectual Property Rights are owned or licensed
by the Company or one of its Subsidiaries, free and clear of any and all
Encumbrances, except for those Encumbrances under or set forth in applicable
license agreements or that would not, individually or in the aggregate, have a
Company Material Adverse Effect, and, to the knowledge of the Company, neither
the Company nor any of its Subsidiaries has forfeited or otherwise relinquished
any Company Intellectual Property Rights which forfeiture would have a Company
Material Adverse Effect. To the knowledge of the Company, the use of the
Company Intellectual Property Rights by the Company and its Subsidiaries does
not, in any material respect, conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest or
goodwill (including, without limitation, any intellectual property right,
trademark, trade name, patent, service mark, brand mark, brand name, computer
program, database, industrial design, copyright or any pending application
therefor) of any other person, and neither the Company nor any of its
Subsidiaries has received notice of any claim or otherwise knows that any of
the Company Intellectual Property Rights is invalid, conflicts with the
asserted rights of any other person, has not been used or enforced or has
failed to be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Company Intellectual Property
Rights, except for such conflicts, infringements, violations, interferences,
claims, invalidity, abandonments, cancellations or unenforceability that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
2.11 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its Subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its Subsidiaries or by which its or
any of their respective properties is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
its or any of their respective properties is bound or affected, except for any
conflicts, defaults or violations that are not reasonably likely to have a
Company Material Adverse Effect.
(b) The Company and its Subsidiaries hold all consents, permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to the operation of the business of the Company and its
Subsidiaries taken as a whole (collectively, the "Company Permits"). The
Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure to so comply is not reasonably likely to have
a Company Material Adverse Effect.
2.12 Litigation. There is no action, suit or proceeding of any nature
pending or to the Company's knowledge threatened against the Company or any of
its Subsidiaries, or any of their respective properties, officers or directors,
in their respective capacities as such (i) in which injunctive or other
equitable relief or damages in excess of $150,000 are or are reasonably likely
to be sought against the Company or any Subsidiary or that otherwise are
reasonably likely to result in a Company Material Adverse Effect or (ii) that
in any manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement. To the Company's knowledge, there
is no investigation pending or threatened against the Company or any of its
Subsidiaries, their respective properties or any of their respective officers
or directors by or before any Governmental Entity that is reasonably likely to
have a Company Material Adverse Effect.
2.13 Brokers' and Finders' Fees. Except for fees payable to Salomon Smith
Barney Inc. and disclosed to the Parent, the Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.14 Employee Benefit Plans. The Company Disclosure Schedule sets forth a
complete list of all pension, profit sharing, retirement, deferred
compensation, employment, welfare, insurance, disability, incentive
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bonus, stock option, restricted stock, stock incentive, phantom stock, vacation
pay, severance pay, fringe benefits and similar plans, programs, agreements or
arrangements, benefiting more than one individual, including without limitation
all employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), maintained by the
Company or its Subsidiaries or to which Company or any of its Subsidiaries are
parties or are required to contribute or under which the Company or any of its
Subsidiaries is or may be required to provide benefits other than any
multiemployer plan as defined in Section 4001(a)(3) of ERISA or any other plans
or arrangements sponsored and maintained by a union (and not by the Company or
its Subsidiaries) (the "Plans"). The Company has delivered or made available to
the Parent current, accurate and complete copies of (i) each Plan that has been
reduced to writing, together with all amendments; (ii) a summary of the
material terms of each Plan that has not been reduced to writing, as amended;
(iii) the summary plan description for each Plan subject to ERISA and, in the
case of each other Plan, any similar employee summary (including employee
handbook description) of the Plan; (iv) for each Plan intended to be qualified
and each Plan-related funding arrangement intended to be exempt under Section
401(a), Section 501(a) or Section 501(c)(9) of the Code, the most recent
determination letter or exemption determination issued by the Internal Revenue
Service ("IRS"); (v) for each Plan with respect to which a Form 5500 series
annual report is required to be filed, the most recently filed such annual
report and the annual report for the two preceding years, together with all
schedules and exhibits; (vi) all insurance contracts, administrative services
contracts, trust agreements, investment management agreements or similar
agreements maintained in connection with the Plans or any of them; and (vii)
copies of any correspondence with the IRS, the Department of Labor ("DOL") or
other U.S. government agency or department relating to an audit or an asserted
or assessed penalty with respect to a Plan or relating to requested relief from
any liability or penalty (including, but not limited to, any correspondence
relating to the IRS's EPRSC, VCR or CAP programs, or the DOL's amnesty programs
for late filers and non-filers). No employee benefit handbook or similar
employee communication relating to any Plan nor any communication of benefits
under such Plan from an administrator thereof describes the terms of such Plan
in a manner that is materially inconsistent with the documents and summary plan
descriptions relating to such Plan that have been delivered pursuant to the
foregoing sentence. The Company Disclosure Schedule identifies each
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA and any
arrangement sponsored and maintained by a union (and not by the Company or its
subsidiaries) which the Company or any Subsidiary maintains or is obligated to
maintain or to which the Company or any Subsidiary contributes or is obligated
to contribute. No deficiency in funding levels or other circumstance exists and
no event has occurred that has resulted or that could result in a liability to
Company or any Subsidiary under Subtitle E of Title IV of ERISA, except for
such liabilities which, individually and in the aggregate, would not result in
a Company Material Adverse Effect, and the consummation of the transactions
contemplated by this Agreement will not result in any withdrawal liability
under such Subtitle. Except for PBGC premiums paid in the ordinary course,
neither the Company nor any Subsidiary has incurred any liability under Title
IV of ERISA which has not been satisfied in full nor, except for such
liabilities which, individually and in the aggregate, would not result in a
Company Material Adverse Effect has any event occurred that could result in any
such liability. Each Plan maintained by the Company or a Subsidiary and each
related fund which is intended to be qualified or exempt under Section 401(a),
Section 501(a) or 501(c)(9) of the Code is so qualified or exempt except where
the failure to be so qualified or exempt would not result in a Company Material
Adverse Effect. Without limiting the generality of the immediately preceding
sentence, each Plan, if any, containing an account described in Section 401(h)
of the Code has been maintained in accordance with Section 401(h) of the Code
and the limitations described therein and in applicable regulations. Each Plan
has been administered in all material respects in accordance with the terms of
such Plan and the provisions of all applicable statutes, orders or governmental
rules or regulations, and nothing has been done or omitted to be done with
respect to any Plan or related fund that has resulted or could result in any
material liability on the part of the Company or a Subsidiary under Title I of
ERISA or Chapter 43 of the Code. All reports required to be filed with respect
to each Plan, including without limitation Form 5500 series annual reports,
have been timely filed. No "reportable event" as defined in Section 4043 of
ERISA, other than any such event for which the notice period has been waived,
has occurred with respect to any Plan subject to Title IV of ERISA. Except to
the extent specified in the Company Disclosure Schedule, each Plan that is
subject to Title IV of ERISA is fully funded on a termination basis. All
contributions required to be
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made to any Plan by applicable law or regulation or by any Plan document or
other contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Plan, have been timely made or paid in full or,
to the extent not required to be made or paid on or before the date hereof,
have been fully reflected on the Company Financials. All claims for welfare
benefits incurred by employees and their eligible dependents on or before the
Closing are or prior to the Closing will be fully insured under fully paid up
third-party insurance policies or, if self-funded, have been adequately
reserved for on the Company Financials. Except for benefit claims in the
ordinary course, there are no pending or, to the best knowledge of the Company,
threatened claims with respect to any Plan. Except for continuation of health
coverage to the extent required under Section 4980B of the Code or Part 6 of
Subtitle B of Title I of ERISA or applicable state law or as otherwise set
forth in the Company Disclosure Schedule, no Plan that is a "welfare plan" as
defined in Section 3(1) of ERISA provides for any benefits following retirement
or other termination of employment. Except as set forth in the Company
Disclosure Schedule, each Plan can be amended, terminated or modified
prospectively on and after the Effective Time without advance notice to or
consent by any employee, former employee or beneficiary, except as required by
law. Except as set forth in the Company Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of any of the
transactions contemplated hereby will (either alone or in conjunction with any
other event) result in, cause the accelerated funding, vesting or delivery of,
or increase the amount or value of, any payment or benefit to any employee,
officer or director of the Company or any of its Subsidiaries.
2.15 Employment Matters.
(a) The Company and each of its Subsidiaries (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations that are material to the Company and its Subsidiaries,
taken as a whole, respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any Governmental Entity, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(b) No material work stoppage or labor strike against the Company or any of
its Subsidiaries is pending or, to the knowledge of the Company, threatened.
Neither the Company nor any of its Subsidiaries is involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
employee, including without limitation charges of unfair labor practices or
discrimination complaints, that have a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act that is
reasonably likely to, in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is presently a party to or
bound by any collective bargaining agreement or union contract with respect to
employees other than as set forth in the Company Disclosure Schedule and no
collective bargaining agreement is being negotiated by the Company or any of
its Subsidiaries. To the knowledge of the Company, no union organizing campaign
or activity with respect to non-union employees of the Company or any of its
Subsidiaries is ongoing, pending or threatened.
2.16 Environmental Matters.
(a) Except as would not have a Company Material Adverse Effect, no amount of
any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, hazardous or
otherwise to pose an unreasonable danger to human health or the environment,
including without limitation all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, (a "Hazardous
Material"), is present as a result of the actions of the
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Company or any of its Subsidiaries in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that the
Company or any of its Subsidiaries has at any time owned, operated, occupied or
leased, and to the knowledge of the Company, no Hazardous Materials are present
in, on or under such property, including the improvements, ground water and
surface water thereof, as a result of the conduct of other parties. To the
knowledge of the Company, the Company Disclosure Schedule lists all locations
that the Company or any of its Subsidiaries formerly owned or leased where
Hazardous Materials are present in a volume or concentration that would
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as would not have a Company Material Adverse Effect, (i) neither
the Company nor any of its Subsidiaries has generated, transported, stored,
used, manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of, or in a manner which could give rise to
liabilities under, any law in effect prior to or as of the date hereof, nor
(ii) has the Company or any of its Subsidiaries disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) The Company and its Subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "Company
Environmental Permits") necessary for the conduct of the Company's and its
Subsidiaries' Hazardous Material Activities and other businesses of the Company
and its Subsidiaries, taken as a whole, as such activities and businesses are
currently being conducted, except where the failure to so hold would not have a
Company Material Adverse Effect.
(d) No action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim is pending, or to the Company's knowledge, threatened
concerning any Company Environmental Permit, Hazardous Material in, on or under
any property owned or leased at any time by the Company or any of its
Subsidiaries or any Hazardous Materials Activity of the Company or any of its
Subsidiaries, in which injunctive or other equitable relief or damages in
excess of $150,000 is or is reasonably likely to be sought against the Company
or any Subsidiary or that otherwise would have a Company Material Adverse
Effect.
2.17 Agreements, Contracts and Commitments. Except as identified in the
Company Disclosure Schedule or listed in the Exhibit Index to the Company's
Form 10-K for the year ended September 30, 1998 (the "Company 10-K"), neither
the Company nor any of its Subsidiaries is a party to or is bound by:
(a) any agreement, contract or contractually binding commitment
containing any covenant materially limiting the freedom of the Company or
any of its Subsidiaries to engage in any line of business or compete with
any person;
(b) any agreement, contract or contractually binding commitment relating
to capital expenditures and involving future obligations in excess of
$150,000 and not cancelable without penalty;
(c) any agreement, contract or contractually binding commitment
currently in force relating (i) to the disposition or acquisition of assets
material to the Company and its Subsidiaries, taken as a whole, not in the
ordinary course of business or (ii) any ownership interest in any
corporation, partnership, joint venture or other business enterprise (other
than the Company's wholly-owned subsidiaries and money market accounts and
other short term investments);
(d) any mortgages, indentures, loans or credit agreements or security
agreements relating to assets material to the Company and its Subsidiaries,
taken as a whole, or other agreements or instruments relating to the
borrowing of money or extension of credit involving more than $150,000;
(e) any other agreement, contract, binding commitment or lease which
requires annual payments by the Company or any of its Subsidiaries of
$150,000 or more in the aggregate and is not cancelable without penalty
within thirty (30) days.
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(f) any consulting arrangements and contracts for professional, advisory
and other services involving payments of more than $150,000 in any year,
including contracts under which the Company or any of its Subsidiaries
performs services for others;
(g) any material contracts relating to the source or supply of gas,
propane and other raw materials essential to the conduct of the business of
the Company and its Subsidiaries, taken as a whole, and any financial
derivatives master agreements, confirmations, or futures account opening
agreements and/or brokerage statements evidencing financial hedging or
other trading activities with respect to the foregoing;
(h) any contracts, agreements or contractually binding commitments
relating to the employment, engagement, compensation or termination of
directors, officers, employees or agents of the Company or any of its
Subsidiaries not included under Plans (as defined in Section 2.14);
(i) any collective bargaining agreements;
(j) any agreement, contract or instrument (including amendments thereto)
to which the Company or any of its Subsidiaries is a party or by which any
of them is bound that is required to be included in the Company 10-K; and
(k) any other contracts made other than in the usual or ordinary course
of business of the Company or any of its Subsidiaries to which the Company
or any of its Subsidiaries is a party or under which the Company or any of
its Subsidiaries is obligated and material to the Company and its
Subsidiaries, taken as a whole.
Neither the Company nor any of its Subsidiaries, nor to the Company's knowledge
any other party to a Company Contract (as defined below), has breached,
violated or defaulted under, or received notice that it has breached violated
or defaulted under, any of the terms or conditions of any of the agreements,
contracts or commitments to which the Company or any Subsidiary is a party or
by which it is bound of the type described in clauses (a) through (k) above
(any such agreement, contract or commitment, a "Company Contract") in such a
manner as would permit any other party to cancel or terminate any such Company
Contract, or would permit any other party to seek damages, in either case,
which would have a Company Material Adverse Effect.
2.18 Statements; Proxy Statement/Prospectus. The information to be supplied
by the Company for inclusion in the Registration Statement on Form S-4 to be
filed to register under the Securities Act Parent Common Stock issuable
pursuant to Section 1.6 (the "Registration Statement") shall not at the time
the Registration Statement is filed with the SEC or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by the Company for inclusion in the proxy statement/prospectus to be
sent to the stockholders of the Company in connection with the meeting of the
Company's stockholders to consider the approval of this Agreement (the "Company
Stockholders' Meeting") (such proxy statement/prospectus as amended or
supplemented, including any joint proxy statement, is referred to herein as the
"Proxy Statement") shall not, on the dates the Proxy Statement is first mailed
to the Company's stockholders and at the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier written communication with respect to the
solicitation of proxies for the Company Stockholders' Meeting which has become
false or misleading. The Proxy Statement utilized by the Company will comply as
to form in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder. If at any time prior to the Effective
Time, any event relating to the Company or any of its affiliates, officers or
directors should be discovered by the Company which is required to be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement, or which is required to be disclosed to the Company's stockholders
so that the information made available to them in connection with electing the
form of Merger Consideration is not false or misleading in any material
respect, the Company shall promptly inform the Parent. Notwithstanding the
foregoing,
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the Company makes no representation or warranty with respect to any information
supplied by the Parent or Merger Sub that is contained in any of the foregoing
documents.
2.19 Fairness Opinion. The Company has received an opinion from Salomon
Smith Barney Inc. dated as of the date hereof, to the effect that as of the
date hereof, the consideration to be received by the Company's stockholders in
the Merger is fair from a financial point of view and will deliver to the
Parent a copy of such written opinion.
2.20 Insurance. The Company and each of its Subsidiaries are, and have been
continuously since January 1, 1994, insured for a minimum amount of $25,000,000
(subject to deductibles stated in such policies) against such risks and losses
as are customary in all material respects for companies conducting the business
as conducted by the Company and its Subsidiaries during such time period.
Neither the Company nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any insurance policy material to
the Company and its Subsidiaries, taken as a whole. The insurance policies
material to the Company and its Subsidiaries are, taken as a whole, to the
Company's knowledge, valid and enforceable policies in all material respects.
2.21 Year 2000. The Company Disclosure Schedule identifies each "Year 2000"
audit, report or investigation that has been performed by or on behalf of the
Company with respect to its business and operations. Except as set forth in
such audits, reports and investigations, (i) the Company has not been informed
by any customer, vendor or service provider with which the Company or any of
its Subsidiaries transacts business of an inability on the part of such third
party to be Year 2000 Compliant and (ii) to the knowledge of the Company, there
is and will be no failure of the Company's computer hardware or software
systems to be Year 2000 Compliant, which inability or failure is reasonably
likely to have a Company Material Adverse Effect. For purposes of this
Agreement, "Year 2000 Compliant" means, with respect to each system referred to
in the prior sentence that is intended to perform date-related functions, that
such system, when used properly in accordance with its documentation, is
capable of correctly receiving, processing and providing date data before, on,
between and after December 31, 1999 and January 1, 2000; provided that all
applications, hardware and other systems used in conjunction with such system
correctly exchange data with or provided data to such system.
2.22 Commodity Derivatives and Credit Exposure Matters. The Company has
provided the Parent copies of the Company's and its Subsidiaries' natural gas
and propane price risk management policies listed in Schedule 2.22 of the
Company Disclosure Schedules. At all times since March 31, 1999, the Company
and its Subsidiaries taken as a whole have been in material compliance with
such policies, and no failure to comply with such policies by the Company and
its Subsidiaries taken as a whole has resulted in a Company Material Adverse
Effect.
III. REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Company, subject to the exceptions
set forth in the disclosure schedule supplied by the Parent to the Company (the
"Parent Disclosure Schedule"), as follows:
3.1 Organization of the Parent. The Parent and each of its Subsidiaries is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the requisite corporate or similar power to own, lease and
operate its property and to carry on its business as now being conducted and as
proposed to be conducted, and is duly qualified to do business and in good
standing as a foreign corporation or other legal entity in each jurisdiction in
which the failure to be so qualified would have a Parent Material Adverse
Effect (as defined below). The Parent has delivered or made available a true
and correct copy of the Declaration of Trust and Bylaws of the Parent, each as
amended to date, to the Company. The term "Parent Material Adverse Effect"
means, for purposes of this Agreement, any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
prospects, financial condition or results of operations of the Parent and its
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Subsidiaries taken as a whole (other than changes that are the effect of
economic factors (other than interest rate changes) affecting the economy as a
whole or changes that are the effect of factors generally affecting the
specific markets in which the Parent and its Subsidiaries compete); provided,
however, that a Parent Material Adverse Effect shall not include any adverse
effect primarily attributable to the Merger or the announcement thereof or the
transactions contemplated by this Agreement (other than effects arising out of
or resulting from actions by any state or federal regulatory authority with
respect to this Agreement and the transactions contemplated hereby).
3.2 The Parent Capital Structure. The authorized capital stock of the Parent
consists of 50,000,000 shares of Common Stock, $1.00 par value, of which there
were 22,638,996 shares issued and outstanding as of June 30, 1999. As of the
date hereof, except for an aggregate of 1,142.410 shares of Parent Common Stock
reserved for issuance under various stock option and other stock plans of the
Parent, there is no outstanding right, subscription, warrant, call, preemptive
right, option or other agreement of any kind to purchase or otherwise to
receive from the Parent any shares of the capital stock or any other security
of the Parent and there is no outstanding security of any kind convertible into
or exchangeable for such capital stock. Since March 31, 1999, no shares of
Parent Common Stock have been issued except pursuant to the stock option and
other stock plans of the Parent. All outstanding shares of Parent Common Stock
are duly authorized, validly issued, and fully paid and non-assessable and are
not subject to preemptive rights created by statute, the Declaration of Trust
or Bylaws of the Parent or any agreement or document to which the Parent is a
party or by which it is bound. All of the shares of Parent Common Stock to be
issued in the Merger will be, when issued in accordance with this Agreement,
duly authorized, validly issued, fully paid and nonassessable.
3.3 Merger Sub.
(a) Merger Sub is duly organized, validly existing and in good standing as a
New Hampshire corporation, with the requisite corporate power to own, lease and
operate the property and carry on the business as now being conducted by the
Company.
(b) All of the capital stock of Merger Sub has been duly authorized, and is
validly issued, fully paid and nonassessable and owned of record and
beneficially by the Parent.
(c) Merger Sub has been formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has not engaged in any other
business activities.
3.4 Authority.
(a) The Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Parent and Merger Sub,
respectively. This Agreement has been duly executed and delivered by the Parent
and Merger Sub, respectively, and, assuming the due authorization, execution
and delivery of this Agreement by the Company, this Agreement constitutes and
will constitute the valid and binding obligation of the Parent and Merger Sub,
respectively, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this Agreement by the
Parent and Merger Sub do not, and the performance of this Agreement by the
Parent and Merger Sub will not, (i) conflict with or violate the charter or
bylaws of the Parent or Merger Sub, (ii) subject to obtaining the approval of
the NHPUC in accordance with New Hampshire law and compliance with the other
requirements set forth in Section 3.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Parent or
any of its Subsidiaries or by which its or any of their respective properties
is bound or affected, or (iii) subject to obtaining the third party consents
referred to in the final sentence of this Section 3.4(a), result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair the Parent's rights or alter the
rights or obligation of any third party under, or give to others any rights of
termination, amendment,
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acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Parent or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Parent or any of its Subsidiaries is a party or by which the
Parent or any of its Subsidiaries or its or any of their respective properties
are bound or affected, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, defaults or other occurrences that would not have a
Parent Material Adverse Effect. The Parent Disclosure Schedule lists all
consents, waivers and approvals under any of the Parent's or any of its
Subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby,
except for those the absence of which would not have a Parent Material Adverse
Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to the Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing and effectiveness of the Registration
Statement with the SEC in accordance with the Securities Act, (ii) the filing
of the Articles of Merger with the Secretary of State of New Hampshire, (iii)
the filing of a Current Report on Form 8-K with the SEC, (iv) the filing with
the Antitrust Division and the FTC of such forms as may be required by the HSR
Act and the termination or expiration of all applicable waiting periods
thereunder, (v) the listing of Parent Common Stock issuable pursuant to Section
1.6 on the NYSE, the Pacific Exchange and the Boston Stock Exchange, (vi) the
approval of the Merger, the related transactions contemplated hereunder by the
NHPUC and any required filing thereof with the Secretary of State of New
Hampshire; (vii) the approval of the Merger by the SEC pursuant to PUHCA;
(viii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country; and (ix) such other
consents, authorizations, filings, approvals and registrations that, if not
obtained or made, would not have a Parent Material Adverse Effect or a material
adverse effect on the ability of the Parent to consummate the Merger.
3.5 SEC Filings; the Parent Financial Statements.
(a) Each of the Parent and each of its Subsidiaries has filed all forms,
reports and documents required to be filed by it with the SEC since January 1,
1996. All such required forms, reports and documents (including those that the
Parent or its Subsidiaries may file after the date hereof until the Closing)
are referred to herein as the "Parent SEC Reports." As of their respective
dates, the Parent SEC Reports (i) were or will be prepared in compliance in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports, and (ii) did not and will not at the
time they were or are filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports (the "Parent
Financials"), including any Parent SEC Reports filed after the date hereof
until the Closing, (i) complied or will comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was or will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented or will fairly present, in all material respects, the
consolidated financial position of the Parent and its Subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount. The
balance sheet of the Parent contained in the Parent SEC Reports as of March 31,
1999 is hereinafter referred to as the "Parent Balance Sheet." Except as
disclosed in the Parent
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Disclosure Schedule and except for obligations under this Agreement, neither
the Parent nor any of its Subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance
sheet or in the related notes to the consolidated financial statements prepared
in accordance with GAAP that are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Parent and
its Subsidiaries taken as a whole, except liabilities (i) provided for in the
Parent Balance Sheet or the related notes, (ii) incurred since the date of the
Parent Balance Sheet in the ordinary course of business consistent with past
practices, or (iii) incurred in connection with the transactions contemplated
hereby.
3.6 Absence of Certain Changes and Events. Since March 31, 1999, there has
not occurred, and no fact or condition exists which would have or, insofar as
reasonably can be foreseen, could have any Parent Material Adverse Effect and
there has not been, occurred or arisen any:
(a) material damage, destruction, or loss to the business or properties
of the Parent and its Subsidiaries taken as a whole (whether or not covered
by insurance);
(b) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Parent's capital stock (other than regular
quarterly dividends in accordance with past practice); or
(c) change in the capital stock or in the number of shares or classes of
the Parent's authorized capital stock as described in Section 3.2.
3.7 Litigation. There is no action, suit, proceeding or investigation
pending or to the Parent's knowledge, threatened against the Parent or any of
its Subsidiaries that would have a Parent Material Adverse Effect or that in
any manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
3.8 Registration Statement; Proxy Statement/Prospectus. The information
supplied by the Parent for inclusion in the Registration Statement (as defined
in Section 2.18) shall not at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The information supplied by the Parent for inclusion in the Proxy
Statement to be sent to the stockholders of the Company in connection with the
Company Stockholders' Meeting, and the information made available to the
Company's stockholders in connection with their election as to the form of
Merger Consideration, shall not, on the date the Proxy Statement is first
mailed to the Company's stockholders and at the time of the Company
Stockholders' Meeting, as the case may be, and at the time such information is
made available to the Company's stockholders in connection with such election,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier written communication with respect to the solicitation
of proxies for the Company Stockholders' Meeting which has become false or
misleading. The Registration Statement and the Proxy Statement used by the
Parent will comply as to form in all material respects with applicable
provisions of the Securities Act and the Exchange Act, respectively, and the
rules and regulations thereunder. If at any time prior to the Effective Time,
any event relating to the Parent or any of its affiliates, officers or
directors should be discovered by the Parent that should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement
or as part of the information made available to the Company's stockholders so
that the information made available to them in connection with electing the
form of Merger Consideration is not false or misleading in any material
respect, the Parent shall promptly inform the Company. Notwithstanding the
foregoing, the Parent makes no representation or warranty with respect to any
information supplied by the Company that is contained in any of the foregoing
documents.
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3.9. Compliance; Permits; Restrictions.
(a) Neither the Parent nor any of its Subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Parent or any of its Subsidiaries or by which its or
any of their respective properties is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Parent or any of its Subsidiaries or
its or any of their respective properties is bound or affected, except for any
conflicts, defaults or violations that would not have a Parent Material Adverse
Effect.
(b) The Parent and its Subsidiaries hold all consents, permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to the operation of the business of the Parent and its
Subsidiaries taken as a whole (collectively, the "Parent Permits"). The Parent
and its Subsidiaries are in compliance with the terms of the Parent Permits,
except where the failure to so comply would not have a Parent Material Adverse
Effect.
3.10. Regulation as a Utility. As of the date of this Agreement, the Parent
is a holding company exempt from registration under Section 3(a)(1) of the
PUHCA.
3.11. Ownership of the Company Common Stock. As of the date of this
Agreement, the Parent does not "beneficially own" (as such term is defined for
purposes of Section 13(d) of the Exchange Act) any shares of Company Common
Stock.
3.12. Environmental Matters.
(a) Except as would not have a Parent Material Adverse Effect, no amount of
any Hazardous Material is present as a result of the actions of the Parent or
any of its Subsidiaries in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Parent or
any of its Subsidiaries has at any time owned, operated, occupied or leased,
and the Company is not aware that any Hazardous Materials are present in, on or
under such property as a result of the conduct of other parties. To the
knowledge of the Parent, the Parent Disclosure Schedule lists all locations
that the Parent or any Subsidiary formerly owned or leased where Hazardous
Materials are present in a volume or concentration that would reasonably be
expected to have a Parent Material Adverse Effect.
(b) Except as would not have a Parent Material Adverse Effect, (i) neither
the Parent nor any of its Subsidiaries has generated, transported, stored,
used, manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of, or in a manner which could give rise to
liabilities under, any law in effect prior to or as of the date hereof, nor
(ii) has the Parent or any of its Subsidiaries engaged in Hazardous Materials
Activities in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) The Parent and its Subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents ("Parent Environmental
Permits") necessary for the conduct of the Parent's and its Subsidiaries'
Hazardous Material Activities and other businesses of the Parent and its
Subsidiaries, taken as a whole, as such activities and businesses are currently
being conducted, except where the failure to so hold would not have a Parent
Material Adverse Effect.
(d) No actions, proceedings, revocation proceeding, amendment procedure,
writ, injunction or claim is pending, or to the Parent's knowledge, threatened
concerning any Parent Environmental Permit, Hazardous Material in, and or under
any property owned or leased at any time by the Parent or any of its
Subsidiaries or any Hazardous Materials Activity of the Parent or any of its
Subsidiaries, in which injunction or other equitable relief or damages in
excess of $1,000,000 is or is reasonably likely to be sought against the Parent
or any Subsidiary or that otherwise would have a Parent Material Adverse
Effect.
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IV. CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1. Conduct of Business by the Company and the Parent. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, the Company (which for the
purposes of this Article 4 shall include the Company and each of its
Subsidiaries) and the Parent (which for the purposes of this Article 4 shall
include the Parent and each of its Subsidiaries) agree, except (i) in the case
of the Company as provided in Article 4 of the Company Disclosure Schedule,
(ii) in the case of the Parent (x) as provided in Article 4 of the Parent
Disclosure Schedule or (y) as would not have a material adverse effect on the
ability of the Parent to consummate the Merger or materially delay the
Effective Date, (iii) as otherwise contemplated by this Agreement, or (iv) to
the extent that the other party shall otherwise consent in writing, to carry on
its business in the usual, regular and ordinary course, in substantially the
same manner as heretofore conducted and use its commercially reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees, maintain its properties and assets, in the aggregate, in good
condition and repair, normal wear and tear excepted, and preserve its
relationships with customers, suppliers, distributors, and others with which it
has business dealings.
4.2. Certain Actions by the Company. In addition, except as is set forth in
Article 4 of the Company Disclosure Schedules notwithstanding Section 4.1
above, without the prior written consent of the Parent, which consent will not
be unreasonably withheld or delayed, the Company shall not do any of the
following, nor shall the Company permit its Subsidiaries to do any of the
following:
(a) Enter into any partnership arrangements, joint development
agreements or strategic alliances;
(b) Grant any severance or termination pay to any officer or employee
except payments pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing to the
Parent, or adopt any new severance plan;
(c) Make any filings with any government authority regarding its rates
or charges, standards of service, accounting matters or services it
provides, except in the ordinary course of business consistent with past
practices or as required by law;
(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock, other than the declaration and payment
of regular quarterly cash dividends on the Company Common Stock with record
and payment dates consistent with past practice and at rates not in excess,
in any fiscal year, of the dividends for the prior fiscal year increased at
a rate consistent with past practice, and dividends payable by a Subsidiary
to the Company, other than a dividend or distribution in connection with
the adoption of a replacement shareholders rights plan or in connection
with any redemption under the Rights Plan;
(e) Repurchase or otherwise acquire, directly or indirectly, any shares
of capital stock;
(f) Issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of Company capital stock or any securities convertible
into shares of Company capital stock, or subscriptions, rights, warrants or
options to acquire any shares of Company capital stock or any securities
convertible into shares of Company capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than pursuant to the Company Plans
consistent with past practice;
(g) Cause, permit or propose any amendments to its Articles of
Incorporation or Bylaws, except as contemplated by this Agreement and in
connection with adopting a new shareholder rights plan;
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest (other than money market accounts and other
short-term investments) in or a material portion of
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the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any material amount of
operating assets;
(i) Sell, lease, encumber or otherwise dispose of any properties or
assets that are material, individually or in the aggregate, to the business
of the Company, except for easements granted in the ordinary course of
business;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness (or enter any other guarantee, keep-well, capital maintenance
or other similar agreement) or issue or sell any debt securities or
warrants or rights to acquire debt securities of the Company or guarantee
any debt securities of others;
(k) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director, officer or employee other than
pursuant to existing agreements, plans and arrangements identified in the
Company Disclosure Schedule, or increase the salaries or wage rates, other
than in the ordinary course of business and consistent in timing and amount
with past practice or as required by law, of its officers or employees;
(l) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than payment, discharge or satisfaction in the ordinary course of business
or in an amount, in any individual case, of less than $150,000, other than
any payments made under any of the contracts, agreements or binding
commitments listed in the Company Disclosure Schedule, in accordance with
their respective terms;
(m) Make any individual capital expenditure or commitment, or series of
related capital expenditures or commitments, outside the ordinary course of
business, exceeding $150,000;
(n) Take any action that would cause the transactions contemplated by
this Agreement to be subject to requirements imposed by any Takeover Law or
fail to take all necessary steps within its control to exempt (or ensure
the exemption of) the transactions contemplated by this Agreement from any
applicable Takeover Law, including NH RSA 421-A; or
(o) Agree in writing or otherwise to take any of the actions described
in this Section.
V. ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings. As
promptly as practicable after the execution of this Agreement, the Company will
prepare and file with the SEC the Proxy Statement, and the Parent will prepare
and file with the SEC the Registration Statement in which the Proxy Statement
will be included as a prospectus. Each of the Company and the Parent will
respond to any comments of the SEC and will use its best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. The Company will cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable time. As promptly as
practicable after the date of this Agreement, the Company and the Parent will
prepare and file any other filings required under the Exchange Act, the
Securities Act or any other Federal, foreign or state securities laws relating
to the Merger and the transactions contemplated by this Agreement (the "Other
Filings"). Each party will notify the other party promptly upon the receipt of
any comments from the SEC or its staff and of any request by the SEC or its
staff or any other government officials for amendments or supplements to the
Registration Statement, the Proxy Statement or any Other Filing or for
additional information and will supply the other party with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. From and after the date of this Agreement until the
Effective Time, the Parent and the Company shall file with the SEC when due all
reports required to be filed pursuant to Section 13 or 15(d) of the Exchange
Act, and the Parent shall make available to the Company's stockholders such
information as
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may be required in connection with their election as to the form of Merger
Consideration. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Proxy Statement, the Registration Statement or
any Other Filing or to be made available to the Company's stockholders in
connection with such election, the Company or the Parent, as the case may be,
will promptly inform the other party of such occurrence and cooperate in filing
with the SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company, such amendment, supplement or information. The
Proxy Statement will also include the recommendations of the Board of Directors
of the Company in favor of approval of this Agreement (except that the Board of
the Company may withdraw, modify or refrain from making such recommendation to
the extent that the Board determines in good faith, after consulting with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so).
5.2 Meetings of Stockholders.
The Company will take all action necessary in accordance with applicable New
Hampshire law and its Articles of Incorporation and Bylaws to convene the
Company Stockholders' Meeting to be held as promptly as practicable, and in any
event within 60 days after the declaration of effectiveness of the Registration
Statement, and in any event will use all commercially reasonable efforts to
convene the Company Stockholders' Meeting prior to December 31, 1999, for the
purpose of considering the approval of this Agreement. Unless otherwise
required by the fiduciary duties of the Company's Board of Directors, the
Company will use its best efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement, and will take all other action
necessary or advisable to secure the vote or consent of its stockholders
required to obtain such approval.
5.3 Access to Information; Confidentiality.
(a) Each party will afford the other party and its accountants, counsel and
other representatives reasonable access during normal business hours to the
properties, books, records and personnel of the other party during the period
prior to the Effective Time to obtain all information concerning the business,
including properties, results of operations and personnel of such party, as the
other party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.3 will affect or be deemed to modify
or waive any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.
(b) The parties acknowledge that the Company and the Parent have previously
executed Confidentiality Agreements dated June 9 and June 11, 1999 (the
"Confidentiality Agreements"), which Confidentiality Agreements will continue
in full force and effect in accordance with its terms, except as is necessary
to comply with the terms of this Agreement.
5.4 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement, the Company and its
Subsidiaries will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or encourage or facilitate submission of,
any proposals or offers (or anything that is reasonably likely to lead to a
proposal or offer) by any person, entity or group (other than the Parent and
its affiliates, agents and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its Subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its Subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than the Parent and its affiliates,
agents and representatives), in connection with any Acquisition Proposal, or
that constitute or may reasonably be expected to lead to an Acquisition
Proposal, with respect to the Company. For the purposes of this Agreement, an
"Acquisition Proposal" means (x) any proposal or offer relating to (i) any
merger, consolidation, sale of substantial assets of the Company or similar
transactions involving the Company or any Subsidiary (other than sales of
assets or inventory in the ordinary course of business or permitted under the
terms of this Agreement),
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(ii) sale of 20% or more of the outstanding shares of capital stock of the
Company (including without limitation by way of a tender offer or an exchange
offer), or (iii) the acquisition by any person of beneficial ownership or a
right to acquire beneficial ownership of, or the formation of any "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) that beneficially owns, or has the right to acquire beneficial
ownership of, 20% or more of the then outstanding shares of capital stock of
the Company (except for acquisitions for passive investment purposes only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto); or (y) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and will use reasonable efforts to obtain the return of
any confidential information furnished to any such parties. The Company will
(i) notify the Parent promptly if any inquiry or proposal is made or any
information or access is requested in connection with an Acquisition Proposal
or potential Acquisition Proposal and (ii) notify the Parent within one
business day of the receipt thereof of the identity of the person making the
Acquisition Proposal and the applicable terms and conditions of such
Acquisition Proposal and of any modification thereof or any proposed agreement.
In addition, subject to the other provisions of this Section 5.4, from and
after the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement, the Company and its Subsidiaries will not, and
will instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than the
Parent); provided, however, that nothing herein shall prohibit the Company's
Board of Directors from taking and disclosing to the Company's stockholders a
position with respect to a tender offer pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act or any other disclosure required by law.
(b) Notwithstanding the provisions of paragraph (a) above but subject to
compliance with the notification requirements thereof, the Company may, to the
extent the Board of Directors of the Company determines, in good faith, after
consultation with its outside legal counsel and financial advisors, that the
Board's fiduciary duties under applicable law require it to do so, participate
in discussions or negotiations with, and, subject to the requirements of
paragraph (c) below, furnish information to any person, entity or group after
such person, entity or group has delivered to the Company in writing an
Acquisition Proposal that the Board of Directors of the Company determines in
good faith, (i) would result in a transaction more favorable to the
stockholders of the Company than the Merger and (ii) has been made by a person,
entity or group that is financially capable of consummating the Acquisition
Proposal. In addition, notwithstanding the provisions of paragraph (a) above,
in connection with a possible Acquisition Proposal, the Company shall refer any
third party to this Section 5.4 or make a copy of this Section 5.4 available to
a third party. In the event the Company receives an Acquisition Proposal,
nothing contained in this Agreement (but subject to the terms hereof) will
prevent the Board of Directors of the Company from approving such Acquisition
Proposal, or recommending such Acquisition Proposal to the Company's
stockholders, if the Board determines in good faith, after consultation with
its outside legal counsel and financial advisors, that such action is required
by its fiduciary duties under applicable law; in such case, the Board of
Directors of the Company may withdraw, modify or refrain from making its
recommendation concerning the approval of this Agreement, provided that the
Company provides Parent with at least three business days' prior notice
thereof, during which time the Parent may make, and in such event the Company
shall consider, a counterproposal to such Acquisition Proposal, and shall
itself and shall cause its financial and legal advisors to negotiate on its
behalf with the Parent with respect to the terms and conditions of such
counterproposal. Nothing in this Section 5.4 shall (x) permit the Company to
terminate this Agreement (except as specifically provided in Section 7.1
hereof), (y) permit the Company to enter into any agreement with respect to an
Acquisition Proposal during the term of this Agreement (it being agreed that
during the term of this Agreement, the Company shall not enter into any
agreement with any person that provides for, or in any way facilitates, an
Acquisition Proposal (other than a confidentiality agreement of the type
referred to below)) or (z) affect any other obligation of the Company under
this Agreement.
(c) Notwithstanding anything to the contrary in this Section 5.4, the
Company will not provide any non-public information to a third party unless (i)
the Company provides such non-public information pursuant to a
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nondisclosure agreement with terms comparable to the terms in the
Confidentiality Agreement dated June 9, 1999 protecting confidential
information of the Company and (ii) such non-public information has previously
been delivered or made available to the Parent.
5.5 Public Disclosure. The Parent will consult with the Company, and the
Company will consult the Parent, and each will get the approval of the other
(which will not be unreasonably withheld or delayed), before issuing any press
release or otherwise making any public statement with respect to the Merger or
this Agreement and will not issue any such press release or make any such
public statement prior to such consultation and approval, except as may be
required by law or any listing agreement with or rule of a national securities
exchange.
5.6 Legal Requirements.
(a) Each of the Parent, Merger Sub and the Company will take all reasonable
actions necessary or desirable to comply promptly with all legal requirements
that may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity) and will promptly cooperate with and furnish information
to any party hereto necessary in connection with any such requirements imposed
upon any of them or their respective Subsidiaries in connection with the
consummation of the transactions contemplated by this Agreement. The Parent
will use its commercially reasonable efforts to take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of Parent Common Stock pursuant hereto.
The Company will use its commercially reasonable efforts to assist the Parent
as may be necessary to comply with the securities and blue sky laws of all
jurisdictions that are applicable in connection with the issuance of Parent
Common Stock pursuant hereto.
(b) As soon as practicable after execution of this Agreement or as otherwise
mutually agreed by the parties, each of the Parent and the Company shall file
with the Antitrust Division and the FTC a premerger notification form and any
supplemental information (other than privileged information) which may be
requested in connection therewith pursuant to the HSR Act, which filings and
supplemental information will comply in all material respects with the
requirements of the HSR Act. Each of the Parent and the Company shall cooperate
fully with the other in connection with the preparation of such filings and
shall use its best efforts to respond to any requests for supplemental
information from the Antitrust Division or the FTC and to obtain early
termination of any waiting period applicable to the Merger under the HSR Act
without any materially burdensome conditions or any divestiture. Filing fees
required to be paid in connection with the premerger notification pursuant to
the HSR Act shall be borne and paid by the Parent.
(c) As soon as practicable after execution of this Agreement, to the extent
applicable, the Parent shall file with the SEC an application for approval
under Section 9(a)(2) of PUHCA and such other applications and information
(other than privileged information) which may be requested by the SEC in
connection therewith pursuant to PUHCA and the rules of the SEC thereunder,
which filings and information will comply in all material respects with the
requirements of PUHCA and such rules. The Parent will diligently prosecute such
applications and, subject to the understanding set forth in clause (ii) of
Section 6.1(d) below, take such actions as may reasonably be necessary to
obtain the requisite SEC approval under PUHCA.
5.7 Third Party Consents. As soon as practicable following the date hereof,
each of the Company and the Parent will use its commercially reasonable efforts
to obtain all material consents, waivers and approvals under any of its or its
Subsidiaries' agreements, contracts, licenses, leases or franchises required to
be obtained in connection with the consummation of the transactions
contemplated hereby, it being understood that neither Company nor Parent shall
be required to make materially burdensome payments in connection with
fulfillment of its obligations under this Section 5.7.
5.8 Notification of Certain Matters. The Parent will give prompt notice to
the Company, and the Company will give prompt notice to the Parent, of the
occurrence, or failure to occur, of any event, which
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occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time, or (b) any material failure of the Parent and Merger Sub
or the Company, as the case may be, or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement. Notwithstanding
the above, the delivery of any notice pursuant to this section will not limit
or otherwise affect the remedies available hereunder to the party receiving
such notice or the conditions to such party's obligation to consummate the
Merger.
5.9 Best Efforts and Further Assurances. Subject to the respective rights
and obligations of the Parent and the Company under this Agreement, each of the
parties to this Agreement will and the Parent will cause Merger Sub to, use its
best efforts to effectuate the Merger and the other transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, will, and the Parent will cause Merger Sub to, execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby. Notwithstanding the foregoing, nothing in
this Agreement shall require the Parent to agree to any materially burdensome
condition or any divestiture in order to obtain any clearance for the Merger
under the HSR Act or in connection with any other regulatory order or approval.
5.10 Certain Employee Agreements. Parent and the Surviving Corporation and
its Subsidiaries shall honor in accordance with their terms all contracts,
agreements, collective bargaining agreements and commitments of the Company and
its Subsidiaries prior to the date hereof which apply to any current or former
employee or current or former director of the Company and which are disclosed
in the Company Disclosure Schedule; provided, however, that the foregoing shall
not prevent Parent or the Surviving Corporation from administering and
enforcing such contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including without limitation, any
reserved right to amend, modify, suspend, revoke or terminate any such
contract, agreement, collective bargaining agreement or commitment. It is the
present intention of Parent and the Company that following the Effective Time,
if any reductions in workforce in respect of employees of the Company or any of
its Subsidiaries become necessary they shall be made on a fair and equitable
basis, in light of the circumstances and the objectives to be achieved, giving
consideration to previous work history, job experience, and qualifications,
without regard to whether employment prior to the Effective Time was with the
Company or its Subsidiaries or Parent or its Subsidiaries, and that any
employees whose employment is terminated or jobs are eliminated by Parent, the
Surviving Corporation or any of their respective Subsidiaries during such
period shall be entitled to participate on a fair and equitable basis in the
job opportunity and employment placement programs offered by Parent, the
Surviving Corporation or any of their respective subsidiaries, subject in each
case to the provisions of any labor agreements that may be applicable. Any
workforce reductions carried out following the Effective Time by Parent or the
Surviving Corporation and their respective subsidiaries shall be done in
accordance with all applicable collective bargaining agreements, and all laws
and regulations governing the employment relationship and termination thereof
including, without limitation, the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder, to the extent
applicable, and any comparable applicable state or local law.
5.11 Corporate Offices. The corporate headquarters of the Surviving
Corporation shall initially be located in Manchester, New Hampshire.
5.12 Community Involvement. Subsequent to the Effective Time, Parent will,
or will cause the Surviving Corporation to, continue to make charitable
contributions to the communities served by the Company and its Subsidiaries and
otherwise maintain a level of involvement in community activities in the State
of New Hampshire at a level as generous as established practice carried on in
recent years by the Company and its Subsidiaries.
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5.13 Advisory Board. Following the Effective Time, EnergyNorth Natural Gas,
Inc. shall maintain an advisory board (the "Advisory Board") consisting of not
less than five members and to be chaired by Mr. Giordano, for a period of at
least three years following the Closing Date. Membership on the Advisory Board
shall be offered to Mr. Giordano and all current members of the Company's Board
of Directors who are residents of the State of New Hampshire and who are not
employees of the Surviving Corporation and all such persons who join the
Advisory Board shall be referred to as "Company Designees". Any vacancy on the
Advisory Board which arises after the Effective Time (including any shortfall
in Advisory Board membership arising from the failure of at least five eligible
members of the Company's Board of Directors to elect to join the Advisory
Board) shall be filled by Parent with the advice of the then remaining Company
Designees (and such replacement person shall be deemed a "Company Designee" for
all purposes hereunder). Meetings of the Advisory Board shall be called by
EnergyNorth Natural Gas, Inc. and shall be held no less frequently than
quarterly, and EnergyNorth Natural Gas, Inc. shall consult with the Advisory
Board with respect to regulatory and legislative matters and community affairs
of EnergyNorth Natural Gas, Inc. in EnergyNorth Natural Gas, Inc.'s current
service area (including consultations with the Advisory Board in which the
Advisory Board may review and make recommendations consistent with Section 5.12
with respect to the civic, charitable and business and customer development
activities of EnergyNorth Natural Gas, Inc. in such area). Company Designees
shall receive a fee of $1,500 per meeting attended for serving on the Advisory
Board, and shall be reimbursed for reasonable out-of-pocket expenses incurred
in connection with their service on the Advisory Board. The members of the
Advisory Board shall be committed to the advancement of the affairs of the
Surviving Corporation, EnergyNorth Natural Gas, Inc., and the Parent in the
State of New Hampshire. The Surviving Corporation shall provide to Company
Designees indemnification rights to the same extent as provided to Surviving
Corporation's directors pursuant to the Surviving Corporation's Articles of
Incorporation and bylaws.
5.14 Representation on Parent Board. The Parent shall take such action as
may be necessary to cause the number of Trustees comprising of the Parent's
Board of Trustees at the Effective Time to be sufficient to permit one director
of the Company to serve thereon and shall elect Edward T. Borer or another
director of the Company designated by the Board of Directors of the Company who
is reasonably satisfactory to the Parent. The Parent shall, as of the Effective
Time, appoint such director to serve on the Parent's Board of Trustees for an
initial term ending at the 2003 Annual Meeting of Shareholders of the Parent.
5.15 Employee Benefit Matters.
(a) For a period of 12 months after the Closing Date, and subject to
applicable law, the Parent shall provide to continuing employees who were
employees of the Company and its Subsidiaries immediately prior to the
Effective Time (for purposes of this Section 5.15, "affected employees")
benefits under welfare plans (as that term is defined in Section 3(1) of ERISA)
and tax-qualified pension plans (as that term is defined in Section 3(2) of
ERISA) that are substantially comparable in the aggregate to the welfare and
tax-qualified pension benefits provided under the Company's Plans (as defined
in Section 2.14), other than individual agreements, disclosed in the Company
Disclosure Schedule as in effect on the Closing Date. Such employee benefits
shall be made available to such employees without regard to preexisting
condition limitations other than any such condition or limitation (including
without limitation preexisting condition exclusions, waiting periods, actively-
at-work requirements and other similar exclusions and conditions) as to which
the relevant corresponding Plan of the Company or its Subsidiaries provided
only a conditional waiver and as to which the employee (or his or her spouse or
dependents) had not, as of the Closing Date, satisfied the relevant conditions
for such waiver. For purposes of each employee benefits plan of the Parent or
its Subsidiaries (a "Parent plan") that determines an individual's eligibility
to become a participant in the Parent plan (an "eligibility requirement") or
the extent of a participant's nonforfeitable right to benefits otherwise
accrued under the Parent plan (a "vesting requirement") by reference to service
for the Parent and its Subsidiaries, the Parent plan's eligibility and vesting
requirements shall be applied to the extent permitted by law by taking into
account for each affected employee such services of such employee for the
Company or its subsidiaries prior to the Effective Time as would have been
taken into account for purposes of the Parent's plan's eligibility and vesting
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requirements had such services been performed for the Parent and its
Subsidiaries. The provisions of this Section 5.15 shall not apply to affected
employees whose terms and conditions of employment are governed by a collective
bargaining agreement.
(b) The Company may establish a retention pool of up to a maximum of
$650,000 in order to retain the services of certain officers and employees
through and following the Effective Date. A listing of the individuals proposed
to be covered and their respective retention amounts shall be provided by the
Company to the Parent for its approval within 90 days following the date of
this Agreement, such approval not to be unreasonably withheld. The amounts
shall be payable to the individuals, as approved by the Parent pursuant to the
immediately preceding sentence, 90 days following the Closing if such
individuals have remained employed with the Surviving Corporation or its
Subsidiaries through such date, except as set forth in Schedule 5.15(b) of the
Parent Disclosure Schedules.
5.16 Indemnification; D&O Insurance.
(a) In the event of any threatened or actual claim, action, suit, proceeding
or investigation, whether civil, criminal or administrative, including without
limitation any such claim, action, suit, proceeding or investigation in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer of
the Company or any of its Subsidiaries (the "Indemnified Parties") is, or is
threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director or officer of the Company, any of its Subsidiaries or any of their
respective predecessors or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after
the Effective Time, the parties hereto agree to cooperate and use their best
efforts to defend against and respond thereto. It is understood and agreed that
after the Effective Time, to the extent, if any, not provided by an existing
right of indemnification or other agreement or policy, the Parent shall
indemnify and hold harmless, as and to the fullest extent permitted by law and
the charter and by-laws of the relevant entity, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final disposition of
any claim, suit, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking required by
applicable law), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding or
investigation. In the event of any such threatened or actual claim, action,
suit, proceeding or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with the Parent; provided, however,
that (i) the Parent shall have the right to assume the defense thereof and upon
such assumption the Parent shall not be liable to any Indemnified Party in
connection with the defense thereof, except that if the Parent elects not to
assume such defense or counsel for the Indemnified Parties reasonably advises
the Indemnified Parties that there are issues which raise conflicts of interest
between the Parent and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with the
Parent, and the Parent shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties, (ii) the Parent shall be obligated
pursuant to this paragraph to pay for only one counsel in any jurisdiction for
all Indemnified Parties, (iii) the Parent shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld) and (iv) the Parent shall have no obligation
hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim indemnification under this Section 5.16 upon
learning of any such claim, action, suit, proceeding or investigation shall
notify the Parent thereof, provided that the failure to so notify shall not
affect the obligations of the Parent under this Section 5.16 except to the
extent such failure to notify materially prejudices the Parent. The Company's
obligations under this Section 5.16(a) shall continue in full force and effect
for a period of six (6) years from the Effective Time, provided, however, that
all rights to indemnification in respect of any claim asserted or made within
such period shall continue until the final disposition of such claim.
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(b) From and after the Effective Time, the Surviving Corporation will
fulfill and honor in all respects the indemnification obligations of the
Company pursuant to the provisions of the Articles of Incorporation and the
Bylaws of the Company as in effect immediately prior to the Effective Time.
(c) For a period of six (6) years after the Effective Time, the Parent shall
cause the Surviving Corporation to maintain (to the extent available in the
market) in effect a directors' and officers' liability insurance policy
covering those persons who are currently covered by the Company's directors'
and officers' liability insurance policy (a copy of which has been heretofore
delivered to the Parent) with coverage in amount and scope at least as
favorable as the Company's existing coverage (which coverage may be an
endorsement extending the period in which claims may be made under such
existing policy); provided that in no event shall the Parent or the Surviving
Corporation be required to expend per year under this Section 5.16(c) more than
an aggregate of 150% of the current annual premium expended by the Company to
provide such coverage; and, further provided that if the premium for such
coverage exceeds such amount, the Parent or the Surviving Corporation shall
purchase a policy with the greatest coverage available for such 150% of the
current annual premium.
(d) In the event the 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 or conveys all or substantially all of its assets to any
person, then, and in each such case, to the extent necessary, proper provision
shall be made so that the successors and assigns of the Parent assume the
obligations set forth in this Section 5.16.
(e) The provisions of this Section 5.16 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives, and nothing herein shall affect any indemnification rights
that any Indemnified Party and his or her heirs and representatives may have
under the Bylaws of the Company or any of its Subsidiaries, any contract or
applicable law.
5.17 Tax-Free Reorganization. The Parent and the Company will each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368 of the Code, and neither party will take any action that
would cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code. Each of the parties shall report the
Merger for income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code (and any comparable state or local tax statute). The
Parent and the Company will each make available to the other party and their
respective legal counsel copies of all tax returns as may be requested by the
other party. Each of the Parent and the Company will make and will use its best
efforts to obtain from its affiliates such reasonable representations as may be
requested by legal counsel for the purpose of rendering the opinions
contemplated by Section 6.1(f).
5.18 Listing. The Parent shall use its best efforts to cause the shares of
Parent Common Stock to be issued in the Merger to be approved for listing on
the NYSE, the Pacific Exchange and the Boston Stock Exchange prior to the
Effective Time.
5.19 Dividend Record Date. The Company agrees to coordinate with the Parent
in establishing the record date for the payment of any dividends on the Company
Common Stock in order to assure that the holders of record of Company Common
Stock (i) are entitled to receive a dividend on either Company Common Stock or
Parent Common Stock received in the Merger in the quarter in which the Closing
occurs, and (ii) are not entitled to receive a dividend on both Company Common
Stock and Parent Common Stock received in the Merger in the quarter in which
the Closing occurs.
5.20 Stock Options and Employee Benefits.
(a) At the Effective Time, each outstanding option to purchase shares of the
Company Common Stock (each a "Company Stock Option") under the Company Stock
Option Plans, whether or not exercisable, will be assumed by Parent. Each
Company Stock Option so assumed by Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions set forth in the
applicable Company Stock Option Plan
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and option certificate immediately prior to the Effective Time (including,
without limitation, any existing repurchase rights or vesting provisions other
than any provision providing for accelerated vesting in connection with the
Merger, which provisions shall not apply with respect to the Merger), except
that (i) each Company Stock Option will be exercisable for that number of whole
shares of Parent Common Stock as the holder would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, without taking into account whether or
not such option is in fact then exercisable and all shares of Company Common
Stock issuable upon the exercise of such option were converted into Parent
Common Stock pursuant to Section 1.6, rounded down to the nearest whole number
of shares of Parent Common Stock and (ii) 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 the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Company Stock Option was
exercisable immediately prior to the Effective Time by the number of shares of
Parent Common Stock deemed purchasable, in accordance with the terms of this
Section, pursuant to such Company Common Stock Option, rounded up to the
nearest whole cent. 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 an appropriate notice setting forth such holder's rights
pursuant thereto.
(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 5.20 shall be applied consistent with such intent.
(c) 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 within 10 business days 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.
5.21 Rights Plan Redemption. Not later than immediately prior to the
Effective Time, the Company shall redeem all outstanding rights under the
Rights Agreement so that the Rights Agreement will not apply to the
consummation of the transactions contemplated hereby.
VI. CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or waiver at or prior to the Effective
Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved by the
requisite vote under the Company's charter and bylaws, applicable laws of
the State of New Hampshire and the rules and regulations of the NYSE, as
and to the extent required.
(b) NHPUC Approval. The Merger, the Merger Agreement and the related
transactions contemplated hereunder shall have received all required or
requested approvals or reviews from the NHPUC pursuant to applicable New
Hampshire law on terms and conditions which (i) with respect to rates and
recovery of costs, including without limitation transaction, premium and
integration costs, associated with the Merger, are not less favorable to
the Surviving Corporation or EnergyNorth Natural Gas, Inc. or Parent than
those contained in the order of the NHPUC, dated July 20, 1998, In Re
Northern Utilities, Inc. (DF-040, Order No. 22,983), and (ii) do not
otherwise have or constitute a material adverse effect on the business,
assets (including intangible assets), prospects, financial condition or
results of operations of the Surviving Corporation or EnergyNorth Natural
Gas, Inc. or the other gas distribution Subsidiaries of the Parent, and
such approval shall be final, nonappealable and not under appeal.
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(c) Registration Statement Effective. The SEC shall have declared the
Registration Statement effective, and no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding
in respect of the Proxy Statement, shall have been initiated or threatened
in writing by the SEC.
(d) PUHCA Approval. The requisite approval of the SEC under PUHCA shall
have been obtained on terms and conditions that (i) do not have and cannot
reasonably be expected to have a Parent Material Adverse Effect and (ii)
are not otherwise materially burdensome to the Parent, it being understood
that any requirement that the Parent register as a non-exempt "holding
company" under PUHCA or divest any of its or the Surviving Corporation's
operations shall be deemed to be materially burdensome for purposes of this
provision unless such requirement arises as a result of any other
transaction or transactions engaged in by Parent or its Subsidiaries after
the date of this Agreement and not solely as a result of the transactions
contemplated by this Agreement.
(e) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal, otherwise prohibiting consummation of the Merger or having a
material adverse effect on the Merger.
(f) Tax Opinions. The Parent and the Company shall each have received
substantially identical written opinions from their counsel, Ropes & Gray
and Hale and Dorr LLP, respectively, in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code; provided
that if the respective counsel to the Parent or the Company does not render
such opinion, this condition shall nonetheless be deemed satisfied with
respect to such party if counsel to the other party renders such opinion to
such party.
(g) HSR and Similar Compliance. Any applicable waiting period relating
to the consummation of Merger under the HSR Act shall have expired or been
terminated by the reviewing agency.
(h) Required Approvals. All consents and approvals referred to in
Section 6.1(h) of the Company Disclosure Schedule (or in the applicable
Disclosure Schedule with respect thereto) shall have been obtained.
6.2 Additional Conditions to Obligations of the Company. The obligations of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
of the Parent and Merger Sub contained in this Agreement shall be true and
correct on and as of the Effective Time (without regard to any updates to
the Parent Disclosure Schedule, unless otherwise agreed by the Company),
except for changes contemplated by this Agreement and except for those
representations and warranties that address matters only as of a particular
date (which shall remain true and correct as of such particular date), with
the same force and effect as if made on and as of the Effective Time,
except, in all such cases, where the failure to be so true and correct
(without regard to any materiality or knowledge qualifications contained
therein) would not have a Parent Material Adverse Effect, and the Company
shall have received a certificate to such effect signed on behalf of the
Parent by the Chief Executive Officer, Chief Operating Officer or Chief
Financial Officer of the Parent.
(b) Agreements and Covenants. The Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and the Company shall have received
a certificate to such effect signed on behalf of the Parent by the Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer of
the Parent.
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(c) Listing. The shares of Parent Common Stock issuable to stockholders
of the Company pursuant to this Agreement shall have been authorized for
listing on the NYSE, the Pacific Exchange and the Boston Stock Exchange.
6.3 Additional Conditions to the Obligations of the Parent and Merger
Sub. The obligations of the Parent and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Parent:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct on and
as of the Effective Time (without regard to any updates to the Company
Disclosure Schedule, unless otherwise agreed by the Parent), except for
changes contemplated by this Agreement and except for those representations
and warranties that address matters only as of a particular date (which
shall remain true and correct as of such particular date), with the same
force and effect as if made on and as of the Effective Time, except, in all
such cases, where the failure to be so true and correct (without regard to
any materiality or knowledge qualifications contained therein) would not
have a Company Material Adverse Effect, and the Parent and Merger Sub shall
have received a certificate to such effect signed on behalf of the Company
by the Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and the Parent shall have received a
certificate to such effect signed on behalf of the Company by the Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer of
the Company.
VII. TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of the Company or the NHPUC:
(a) by mutual written consent duly authorized by the Board of Trustees
of the Parent and the Board of Directors of the Company;
(b) by either the Company or the Parent if the Merger shall not have
been consummated by July 14, 2000 (which date may be extended at the
written request of either the Parent or the Company to January 14, 2001 to
the extent necessary to satisfy the condition set forth in Section 6.1(b),
(d) or (g) and so long as all other conditions have been or shall be
capable of being fulfilled); provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date if
such action or failure to act constitutes a breach of this Agreement;
(c) by either the Company or the Parent if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (an "Order"), in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order is
final, nonappealable and not under appeal;
(d) by either the Company or the Parent if the required approval of the
stockholders of the Company contemplated by this Agreement shall not have
been obtained on or before March 1, 2000 or by reason of the failure to
obtain the required vote upon a vote taken at a duly held meeting of the
Company's stockholders duly convened therefor or at any adjournment thereof
(a "Company Stockholder Approval Failure Event"); provided, however, that
the right to terminate this Agreement under this Section 7.1(d) shall not
be available to the Company where the failure to obtain Company stockholder
approval shall have been caused by the action or failure to act of the
Company in breach of this Agreement and shall not be available to Parent
where such failure is caused by a breach of this Agreement by Parent;
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(e) by either the Company or the Parent, if the Company shall have
accepted or approved an Acquisition Proposal or if the Company's Board of
Directors recommends an Acquisition Proposal to the stockholders of the
Company as permitted by Section 5.4(b);
(f) by the Parent, if the Board of Directors of the Company shall have
(i) failed to convene the Company Stockholders' Meeting, as required by
Section 5.2, (ii) failed to recommend approval of this Agreement in the
Proxy Statement or withheld, withdrawn or modified in a manner adverse to
the Parent such recommendation or resolved to do so, or (iii) approved or
recommended an Acquisition Proposal;
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of the Parent set forth in this
Agreement, if (i) as a result of such breach the conditions set forth in
Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time of
such breach and (ii) such breach shall not have been cured by the Parent
within ten (10) business days following receipt by the Parent of written
notice of such breach from the Company;
(h) by the Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, if (i) as a result of such breach the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time of
such breach and (ii) such breach shall not have been cured by the Company
within ten (10) business days following receipt by the Company of written
notice of such breach from the Parent;
(i) by the Parent, if there shall have occurred any event or condition
that constitutes a Company Material Adverse Effect since the date of this
Agreement which condition or event shall not have been ameliorated such
that it is no longer a Company Material Adverse Effect within ten (10)
business days following receipt by the Company of notice from the Parent;
or
(j) by the Company, if there shall have occurred any event or condition
that constitutes a Parent Material Adverse Effect since the date of this
Agreement, which condition or event shall not have been ameliorated such
that it is no longer a Parent Material Adverse Effect within ten (10)
business days following receipt by the Parent of notice from the Company.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8 (General
Provisions), each of which shall survive the termination of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreements, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated; provided, however, that the Parent and the Company shall share
equally all fees and expenses, other than attorneys' and accountants' fees and
expenses, incurred in relation to the printing and filing of the Proxy
Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) The Company shall pay to the Parent an amount equal to all out-of-pocket
expenses and fees incurred by the Parent, including without limitation fees and
expenses payable to all legal, accounting, financial and other professional
advisors, relating to the Merger or the transactions contemplated by this
Agreement not exceeding $2,000,000 in the aggregate upon the termination of
this Agreement by the Parent pursuant to 7.1(h) or upon any termination of this
Agreement as to which subparagraph (i), (ii) or (iii) of Section 7.3(c) is
applicable.
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(c) The Company shall pay the Parent a termination fee of $5,500,000 (plus
all amounts payable pursuant to Section 7.3(b)), upon the earliest to occur of
the following events:
(i) the termination of this Agreement pursuant to Section 7.1(e) or (f);
(ii) the termination of this Agreement pursuant to Section 7.1(d) if, at
the time of the Seller Stockholder Approval Failure Event:
(A) there shall have been announced, commenced or occurred an
Alternative Transaction (as defined in Section 7.3(g)) and the Company
shall have either (x) executed an agreement to engage in the same or
(y) the Company's Board of Directors shall not have recommended against
such Alternative Transaction affirmatively or, if the Company's Board
of Directors has recommended against such Alternative Transaction, the
Company's Board of Directors shall have withdrawn such recommendation
against such Alternative Transaction or modified such recommendation in
a manner adverse to the Parent; or
(B) there shall have been announced, commenced or occurred an
Alternative Transaction with a Third Party (as defined in Section
7.3(g)) and (x) the Company shall have engaged in, or entered into an
agreement to engage in, an Alternative Transaction with such Third
Party or any affiliate thereof or with a Competing Party (as defined in
Section 7.3(g)) within 12 months of the date of the Company Stockholder
Approval Failure Event or (y) the Company's Board of Directors shall
have recommended an Alternative Transaction with such Third Party or
any affiliate thereof or with a Competing Party within 12 months after
the date of the Company Stockholder Approval Failure Event; or
(iii) the termination of this Agreement by the Parent pursuant to
Section 7.1(h) after a willful breach by the Company of this Agreement, if
before such termination or within twelve months thereafter the Company
shall have entered into an agreement to engage in or shall have engaged in
an Alternative Transaction.
(d) The Parent shall pay to the Company an amount equal to all out-of-pocket
expenses and fees incurred by the Company, including without limitation fees
and expenses payable to all legal, accounting, financial and other professional
advisors, relating to the Merger or the transactions contemplated by this
Agreement not exceeding $2,000,000 in the aggregate upon the termination of
this Agreement by the Company pursuant to Section 7.1(g).
(e) The amounts payable pursuant to Section 7.3(b), (c) or (d) shall be paid
by wire transfer within three business days after the event giving rise to such
payment; provided that in no event shall the Company or the Parent be required
to pay any expenses or termination fees to the other party if, immediately
prior to the termination of this Agreement, the other party was in material
breach of any of its material obligations under this Agreement. If one party
fails to promptly pay to the other any fee due hereunder, the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of BankBoston, N.A. from the
date such fee was required to be paid.
(f) As used in this Agreement, (A) "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other than
the Parent or its Affiliates (a "Third Party"), acquires 33% or more of the
outstanding shares of Company Common Stock, pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger, consolidation or combination
involving the Company in which the holders of Company Common Stock do not own
at least a majority of the equity of the surviving entity, or (iii) any other
transaction pursuant to which any Third Party acquires control of assets
(including for this purpose the outstanding equity securities of Subsidiaries
of the Company, and the entity surviving any merger or business combination
including any of them) of the Company having a fair market value (as determined
by the Board of Directors of the Company in good faith) equal to more than 33%
of the fair market value of all the assets of the
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Company immediately prior to such transaction, or (iv) any public announcement
by the Company of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing, and (B) "Competing Party"
shall mean any person other than the Parent or its affiliates who announces or
commences an Alternative Transaction, or with whom an Alternative Transaction
occurs, while an Alternative Transaction with a Third Party is pending.
(g) If this Agreement is terminated by a party as a result of a willful
breach by the other party (other than under the circumstances described in
Section 7.3(c)(iii) above, provided that under such circumstances Parent may
exercise and enforce its rights and remedies under this paragraph (g) until and
unless the Company engages in an Alternative Transaction, in which event the
provisions of Section 7.3(c)(iii) shall thereupon apply), the terminating party
may pursue any remedies available to it at law or in equity and shall, in
addition to its out-of-pocket expenses (which shall be paid as specified above
and shall not be limited to $2,000,000), be entitled to retain such additional
amounts as the terminating party may be entitled to receive at law or in
equity; provided, however, no party shall be responsible for any special,
consequential or incidental damages hereunder, it being understood and agreed
that no party shall be entitled to payment under both this Section 7.3(g) and
Section 7.3(c)(iii).
VIII. GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations and
warranties of the Company, the Parent and Merger Sub contained in this
Agreement shall terminate at the Effective Time, and only the covenants that by
their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at
the following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):
(a) if to the Parent or Merger Sub, to:
Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
Attention:J. Atwood Ives
Chairman and Chief Executive Officer
Telephone:(781) 647-2302
Facsimile:(781) 647-2350
with a copy to:
Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
Attention:L. William Law, Jr., Esq.
Senior Vice President and General Counsel
Telephone:(781) 647-2313
Facsimile:(781) 647-2398
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(b) if to the Company, to:
EnergyNorth, Inc.
1260 Elm Street
Manchester, New Hampshire 03101
Attention:Robert R. Giordano
President and Chief Executive Officer
Telephone:(603) 668-3779
Facsimile:(603) 621-2982
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention:David E. Redlick, Esq.
Telephone:(617) 526-6484
Facsimile:(617) 526-5000
8.3 Interpretation; Knowledge. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." 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. When reference is made herein to "business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the Subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity. References to the "knowledge of the Company," or any similar
expression shall mean the actual knowledge of any executive officer of the
Company.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, including the Company Disclosure Schedule and the Parent Disclosure
Schedule (i) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreements
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (ii) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth herein.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
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8.8 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
8.9 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
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 hereof
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in equity.
8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
8.11 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the of the other parties.
8.12 Parties in Interest. Except for rights of Indemnified Parties as set
forth in Sections 5.13, 5.14 and 5.16, 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.
8.13 Waiver of Jury Trial. EACH OF THE PARENT, MERGER SUB AND COMPANY HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARENT, THE MERGER SUB OR THE
COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
8.14 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 inthe 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.
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IN WITNESS WHEREOF, Eastern Enterprises, EE Acquisition Company, Inc. and
EnergyNorth, Inc. have caused this Agreement to be signed as a sealed
instrument by their duly authorized respective officers, all as of the date
first written above.
EASTERN ENTERPRISES
/s/ J. Atwood Ives
By: _________________________________
Chairman and Chief Executive
Officer
EE ACQUISITION COMPANY, INC.
/s/ Walter J. Flaherty
By: _________________________________
President
ENERGYNORTH, INC.
/s/ Robert R. Giordano
By: _________________________________
President and Chief Executive
Officer
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AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION
This is AMENDMENT NO. 1 dated as of November 4, 1999 (the "Amendment") to
the AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of July 14,
1999 by and among Eastern Enterprises (the "Parent"), EE Acquisition Company,
Inc., a New Hampshire corporation ("Merger Sub"), and EnergyNorth, Inc., a New
Hampshire corporation (the "Company").
1. The parties entered into the Agreement to provide for a business
combination pursuant to which the Company would merge with and into Merger Sub.
On the date of this Amendment, Parent entered into an Agreement and Plan of
Merger (the "Parent Merger Agreement") with KeySpan Corporation, a New York
corporation (the "Parent Acquiror"), providing for a business combination (the
"Parent Merger") pursuant to which ACJ Acquisition LLC, a wholly-owned
subsidiary of Parent Acquiror and a Massachusetts limited liability company,
would merge with and into Parent, with the Parent as the survivor of the Parent
Merger. The purpose of this Amendment is to set forth certain agreements by and
among Parent, Merger Sub and the Company to amend the Agreement as a
consequence of the execution and delivery of the Parent Merger Agreement by
Parent. Accordingly, Parent, Merger Sub and the Company agree as set forth
below in this Amendment. Capitalized terms used in this Amendment that are not
defined herein shall have the respective meanings ascribed to them in the
Agreement. Capitalized terms used in this Amendment that are not defined in the
Agreement shall be deemed included in the Agreement with the respective
meanings ascribed to them in this Amendment.
2. Recital A of the Agreement is hereby amended to read in its entirety as
follows:
"A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the laws of the State of New Hampshire, the Parent and
the Company will enter into a business combination transaction (the
"Merger") pursuant to which Merger Sub will merge with and into the Company
with the Company as the surviving corporation of the Merger or, if the
Parent Merger Agreement is terminated or has expired prior to the Effective
Time of the Merger, the Company will merge with and into Merger Sub with
Merger Sub as the surviving corporation of the Merger."
3. Recital E of the Agreement is hereby amended to read in its entirety as
follows:
"E. If the Parent Merger Agreement is terminated prior to the Effective
Time, the parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code")."
4. Article I of the Agreement is hereby amended by inserting the following
new Section 1.12:
"1.12 Alternative Merger Structure.
(a) If the Parent Merger Agreement has not been terminated prior to the
Effective Time, then the Merger shall be effected as provided in this
Section 1.12 (the "Alternative Merger")."
(b) The following provisions shall apply to the Alternative Merger:
(i) Section 1.1 of this Agreement shall be deemed to read in its
entirety as follows:
"1.1 The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of New Hampshire law, the
Merger Sub shall be merged with and into the Company, the separate
corporate existence of the Merger Sub shall cease and the Company
shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
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(ii) Sections 1.4(a) and (b) of this Agreement shall be deemed to
read in their entirety as follows:
"(a) At the Effective Time, the Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such
Articles of Incorporation. Subject to the foregoing, the
additional effects of the Merger shall be as provided in NH RSA
293-A: 11.06 (the "NHBCA")."
"(b) The Bylaws of the Company, as in effect immediately prior
to the Effective Time, shall be, at the Effective Time, the
Bylaws of the Surviving Corporation until thereafter amended."
(iii) Section 1.6(a) of this Agreement shall be deemed to read in
its entirety as follows:
"(a) Conversion of Company Common Stock. Each share of Common
Stock, $1.00 par value, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to
be canceled pursuant to Section 1.6(c)) will be canceled and
extinguished and automatically converted into the right to
receive $61.13 in cash, without interest (the "Merger
Consideration") at the Effective Time."
(iv) Section 1.6(b) of this Agreement shall be deemed to be deleted.
(v) Section 1.6(d) of this Agreement shall be deemed to read in its
entirety as follows:
"(d) Capital Stock of Merger Sub. Each share of Common Stock, no
par value, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and non assessable
share of Common Stock, $1.00 par value, of the Surviving
Corporation."
(vi) Section 1.6(f) of this Agreement shall be deemed to be deleted.
(vii) Section 1.6(g) of this Agreement shall be amended to add the
following sentence at the end thereof:
"If the Parent Merger shall have closed prior to or
simultaneously with the Effective Time, all options to purchase
Company Common Stock then outstanding under the EnergyNorth,
Inc. 1998 Stock Option Plan shall be assumed by Parent Acquiror
pursuant to Section 5.20(b)."
(viii) Section 1.10 of this Agreement shall be deemed to be deleted.
(ix) The provisions of Sections 5.14, 5.17 and 5.18 of this
Agreement shall not be applicable to the Alternative Merger.
(x) Section 5.19 of this Agreement shall be deemed to read in its
entirety as follows:
"If the Effective Time occurs on a date other than the record
date for a regular quarterly dividend on the Company Common
Stock, the Company shall, unless prohibited by law, declare and
establish a record date, set aside funds for payment of a
dividend and pay or cause to be paid a dividend for the period
commencing on the most recent record date for the payment of a
regular quarterly dividend by the Company on the Company Common
Stock and ending on the Effective Date (the "Partial Period").
The amount of the dividend (the "Partial Dividend") per share of
Company Common Stock for the Partial Period shall equal a
fraction (x) the numerator of which equals (a) $.35, multiplied
by (b) the number of days comprising the Partial Period and (y)
the denominator of which is 90."
(xi) Section 5.20 of this Agreement shall be deemed to read in its
entirety as follows:
"5.20 Stock Options and Employee Benefits.
(a) If the Parent Merger shall not have been closed prior to
or simultaneously with the Effective Time, then at the Effective
Time each outstanding option to purchase shares of the
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Company Common Stock (each a "Company Stock Option") under the
Company Stock Option Plans, whether or not exercisable, will be
assumed by Parent. Each Company Stock Option so assumed by
Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the
applicable Company Stock Option Plan and option agreement
immediately prior to the Effective Time, except that each
Company Stock Option will be exercisable for that number of
whole shares of Parent Common Stock determined by multiplying
the number of shares of Company Common Stock subject to such
Company Stock Option by 1.175, at a purchase price per share of
Parent Common Stock determined by dividing the option exercise
price per share of Company Common Stock provided in such Company
Stock Option by 1.175. The number of shares of Parent Common
Stock that may be purchased on the exercise of such Company
Stock Option shall not include any fractional shares but shall
be rounded down to the next lower whole share of Parent Common
Stock. 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 5.20(a). As soon as practicable
after the Effective Time, Parent shall deliver to each holder of
a Company Stock Option an appropriate notice setting forth such
holder's rights pursuant hereto. Any Company Stock Options
assumed by the Parent pursuant to this Section 5.20(a) shall be
treated in the same manner as other "Company Stock Options" (as
defined in the Parent Merger Agreement) under Section 7.10 of
the Parent Merger Agreement.
(b) If the Parent Merger shall have been closed prior to or
simultaneously with the Effective Time, then at the Effective
Time, each outstanding Company Stock Option under the Company
Stock Option Plans, whether or not exercisable, will be assumed
by Parent Acquiror. Each Company Stock Option so assumed by
Parent Acquiror under this Agreement will continue to have and
be subject to, the same terms and conditions set forth in the
applicable Company Stock Option Plan and option agreement
immediately prior to the Effective Time, except that each
Company Stock Option will be exercisable for that number of
whole shares of Parent Acquiror common stock determined by
multiplying the number of shares of Company Common Stock subject
to such Company Stock Option by a fraction the numerator of
which is the product of (x) 1.175 times (y) $64.00 and the
denominator of which is the average closing price per share of
Parent Acquiror's common stock on the NYSE, as report in The
Wall Street Journal, for the 10 NYSE trading days immediately
preceding the Effective Time, at a purchase price per share of
common stock of Parent Acquiror determined by dividing the
quotient of (I) such option exercise price per share of Company
Common Stock provided in such Company Stock Option and (II)
1.175 by the quotient of (x) $64.00 and (y) the average closing
price per share of Parent Acquiror's common stock on NYSE, as
reported in The Wall Street Journal, for the 10 NYSE trading
days immediately preceding the Effective Time. The number of
shares of Parent Acquiror common stock that may be purchased on
the exercise of such Company Stock Option shall not include any
fractional shares but shall be rounded down to the next lower
whole share of Parent Acquiror common stock. Parent Acquiror
shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Acquiror common
stock for delivery upon exercise of options assumed by Parent
Acquiror pursuant to this Section 5.20(b). As soon as
practicable after the Effective Time, Parent Acquiror shall
deliver to each holder of a Company Stock Option an appropriate
notice setting forth such holder's rights pursuant hereto.
(c) It is intended that the Company Stock Options assumed by
Parent under Section 5.20(a) or the Parent Acquiror under
Section 5.20(b) 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. The
provisions of this Section 5.20 shall be applied consistent with
such intent.
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(d)(i) 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, and (ii) Parent Acquiror
agrees to file a registration statement on Form S-8 for the
shares of Parent Acquiror common stock issuable with respect to
assumed Company Stock Options, in each case within 10 business
days after the Effective Time, and to 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."
(xii) The conditions set forth in Section 6.1(f) and 6.2(c) of this
Agreement shall not be applicable to the Alternative Merger.
(xiii) All references in this Agreement to the Surviving Corporation
shall be deemed references to the Company as the Surviving Corporation
in the Alternative Merger.
(xiv) All references in this Agreement to the Merger shall be deemed
references to the Alternative Merger as provided in this Section 1.12.
(xv) All other provisions of this Agreement shall be deemed amended
as appropriate to reflect that the Alternative Merger is being effected
as the Merger so that, among other things, neither the Company nor the
Parent shall be deemed to have breached its representations, warranties
or covenants set forth in this Agreement solely by reason of effecting
the Alternative Merger".
5. Section 8.11 of the Agreement is hereby amended to read in its entirety
as follows:
"8.11 Assignment. Except as hereinafter set forth, no party may assign
either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other parties. Upon
the closing of the Parent Merger, the Parent Acquiror agrees to cause
Parent to consummate the Alternative Merger in accordance with the
terms and conditions of this Agreement and in such event the Parent
Acquiror will be a third party beneficiary of this Agreement."
6. Parent shall not agree to any amendment or modification of Section 7.10
of the Parent Merger Agreement which adversely affects holders of Company Stock
Options (including the rights that they would have as holders of options to
purchase Parent Common Stock upon the effectuation of Section 5.20(a) of the
Agreement at the Effective Time) without the Company's prior written consent.
If the per share merger consideration set forth in the Parent Merger Agreement
(the "Parent Merger Consideration") or any amendment or modification thereof is
increased for any reason above $64.00 (including any increase in the "Merger
Consideration" in the Parent Merger Agreement pursuant to the last sentence of
Section 2.01(c) of the Parent Merger Agreement and disregarding for this
purpose the reduction set forth in the proviso at the end of such sentence),
(i) the amounts set forth in Paragraph 4 of this Amendment with reference to
Section 1.12(b)(iii) of the Agreement (which amends Section 1.6(a) of the
Agreement) will be increased by an amount equal to (x) the per share amount of
the increase in the Parent Merger Consideration times (y) 0.589 and (ii) the
amounts set forth in Paragraph 4 of this Amendment with reference to the $64.00
amounts in Section 1.12(b)(xi) of the Agreement (which adds new Section 5.20(b)
of the Agreement) will be increased by the full amount of the per share
increase in the Parent Merger Consideration.
7. Section 5.20(a) of the Agreement shall be amended to delete the
parenthetical contained in the second sentence thereof.
8. All per share amounts in this Amendment and the exchange ratios set forth
herein of 1.175 and .589 shall be subject to appropriate adjustment in the case
of stock splits, stock dividends or other similar events affecting the common
stock of the Company, Parent or the Parent Acquiror, as applicable.
9. Section 7.1(b) of this Agreement shall be amended to provide for the
substitution of the dates March 31, 2001 and September 30, 2001 for July 14,
2000 and January 14, 2001, respectively. If the dates set forth in Section
9.01(b) of the Parent Merger Agreement are extended, Parent shall promptly
notify the Company and
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the Company shall have the option of either (x) extending the dates set forth
in Section 7.1(b) of the Agreement to be coterminous with the analogous dates
in Section 9.01(b) of the Parent Merger Agreement (as so extended) or (y)
terminating the Agreement pursuant to Section 7.1(b) of the Agreement.
10. If the Parent Merger Agreement has not been terminated prior to the
Effective Time, Section 1.2 of this Agreement shall be amended (x) to provide
for the substitution of the words "the second business day" for the words "the
thirty-fifth day" in the third sentence thereof, and (y) to add "but in no
event sooner than simultaneously with the Closing provided for in the Parent
Merger Agreement" immediately after the second parenthetical thereof.
11. The parties acknowledge that the reference to "Company Plans" contained
in Section 4.2(f) of the Agreement means "Company Stock Plans".
12. Parent and Parent Acquiror represent that they have presented the
Company with a true copy of the Parent Merger Agreement in connection with the
execution of this Amendment.
IN WITNESS WHEREOF, Eastern Enterprises, EE Acquisition Company, Inc. and
EnergyNorth, Inc. have caused this Amendment to be signed as a sealed
instrument by their duly authorized respective officers, all as of the date
first written above.
EASTERN ENTERPRISES
/s/ J. Atwood Ives
By: _________________________________
Chairman and Chief Executive
Officer
EE ACQUISITION COMPANY, INC.
/s/ Walter J. Flaherty
By: _________________________________
President
ENERGYNORTH, INC.
/s/ Robert R. Giordano
By: _________________________________
President and Chief Executive
Officer
The undersigned agrees to its obligations set forth in Sections 5.20 and
8.11 of the Agreement.
KEYSPAN CORPORATION
/s/ Robert B. Catell
By: _________________________________
Chairman and Chief Executive
Officer
A-46
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Annex B
[Letterhead of Salomon Smith Barney Inc.]
November 4, 1999
The Board of Directors
EnergyNorth, Inc.
1260 Elm Street
Manchester, NH 03105-0329
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock, $1.00 par value (the "Company Common
Stock"), of EnergyNorth, Inc. (the "Company"), of the consideration to be
received by such holders in connection with the proposed merger (the "Merger")
contemplated by the Agreement and Plan of Reorganization (the "Agreement")
dated as of July 14, 1999 by and among Eastern Enterprises ("Parent"), EE
Acquisition Company, Inc. ("Merger Sub") and the Company, as amended by
Amendment No. 1 to Agreement and Plan of Reorganization ("Amendment No. 1"),
dated as of November 4, 1999. Amendment No. 1 was executed in connection with
Parent's execution of an Agreement and Plan of Merger (the "Parent Merger
Agreement") with KeySpan Corporation ("KeySpan") contemplating the merger of a
subsidiary of KeySpan with and into Parent (the "Parent Merger"). The
Agreement, as amended by Amendment No. 1, is referred to herein as the "Amended
Agreement."
As more specifically set forth in the Amended Agreement, and subject to the
terms and conditions thereof, if the Parent Merger Agreement has not been
terminated, in the Merger, Merger Sub will merge with and into the Company and
each outstanding share of Company Common Stock (other than shares held in the
treasury of the Company or owned by Merger Sub, Parent or any direct or
indirect wholly owned subsidiary of the Company or of Parent and other than
Dissenting Shares (as defined in the Amended Agreement) (collectively,
"Excluded Shares")) will be converted into the right to receive $61.13 in cash,
without interest, subject to adjustment.
If the Parent Merger Agreement has been terminated, subject to the terms and
conditions of the Amended Agreement, the Merger will proceed as provided in the
Amended Agreement, and the Company will merge with and into Merger Sub and each
outstanding share of Company Common Stock (other than Excluded Shares) will be
converted (at the election of the holder of such share) into the right to
receive (i) $47.00 in cash, without interest (the "Original Per Share Cash
Amount"), (ii) a number of shares of common stock, $1.00 par value (the "Parent
Common Stock"), of Parent equal to the Original Per Share Cash Amount divided
by the Market Value (as defined in the Amended Agreement) of Parent Common
Stock, or (iii) a combination of cash and shares of Parent Common Stock.
Notwithstanding the foregoing, if the Market Value of Parent Common Stock is
less than $36.00 per share, Market Value shall mean $36.00 and if the Market
Value of Parent Common Stock is greater than $44.00 per share, Market Value
shall mean $44.00. The Amended Agreement provides that 49.9% of the outstanding
shares of Company Common Stock (subject to adjustment pursuant to the Amended
Agreement) will be converted into the right to receive cash in the Merger. The
remaining Company Common Stock will be converted into the right to receive
Parent Common Stock in the Merger. Holders of Company Common Stock will receive
cash in lieu of fractional shares of Parent Common Stock. The actual
consideration received by each individual holder of Company Common Stock will
depend upon such holder's election and the application of pro rationing
provisions contained in the Amended Agreement.
In arriving at our opinion, we reviewed the Agreement and Amendment No. 1,
and held discussions with certain senior officers, directors and other
representatives and advisors of the Company and certain senior officers and
other representatives and advisors of Parent concerning the businesses,
operations and prospects of
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the Company and Parent. We examined certain publicly available business and
financial information relating to the Company and Parent as well as certain
financial forecasts and other information and data for the Company and Parent
which were provided to or otherwise discussed with us by the managements of the
Company and Parent, including information relating to certain strategic
implications and operational benefits anticipated to result from the Merger. We
reviewed the financial terms of the Merger as set forth in the Amended
Agreement in relation to, among other things: current and historical market
prices and trading volumes of Company Common Stock and Parent Common Stock; the
historical and projected earnings and other operating data of the Company and
Parent; and the capitalization and financial condition of the Company and
Parent. We considered, to the extent publicly available, the financial terms of
certain other similar transactions recently effected that we considered
relevant in evaluating the Merger and analyzed certain financial, stock market
and other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of the
Company and Parent. We also evaluated the pro forma financial impact of the
Merger on Parent. In connection with our engagement, we were requested to
approach, and we held discussions with, selected third parties to solicit
indications of interest in the possible acquisition of all or a part of the
Company. In addition to the foregoing, we conducted such other analyses and
examinations and considered such other information and financial, economic and
market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us and have further relied upon the assurances of
management of the Company that they are not aware of any facts that would make
any of such information inaccurate or misleading. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by
or discussed with us, we have been advised by the managements of the Company
and Parent that such forecasts and other information and data were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of the Company and Parent as to the future
financial performance of the Company and Parent and the strategic implications
and operational benefits anticipated to result from the Merger. We express no
view with respect to such forecasts and other information and data or the
assumptions on which they were based. We have assumed, with your consent, that
the Merger will be treated as a tax-free reorganization for federal income tax
purposes if it is consummated in accordance with the Amended Agreement
following the termination of the Parent Merger Agreement. We have not made or
been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or Parent nor have we made
any physical inspection of the properties or assets of the Company or Parent.
We have further assumed that the Merger will be consummated in accordance with
the terms of the Amended Agreement, without waiver of any conditions precedent
to the Merger contained in the Amended Agreement.
We were not requested to consider, and our opinion does not address, the
relative merits of the Merger as compared to any alternative business
strategies that might exist for the Company or the effect of any other
transaction in which the Company might engage. We have not been asked to
consider for the purposes of this opinion, and this opinion does not address,
the Parent Merger, except to the extent of its direct impact on the
consideration to be received in the Merger, and our opinion, as expressed
herein, relates to the consideration to be received in the Merger, whether or
not the parent Merger is consummated. We are not expressing any opinion as to
what the value of the Parent Common Stock actually will be if and when issued
in the Merger following a termination of the Parent Merger Agreement or the
price at which the Parent Common Stock will trade subsequent to the Merger in
those circumstances. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us as of the date hereof.
Salomon Smith Barney Inc. is acting as financial advisor to the Company in
connection with the proposed Merger and will receive a fee for our services, a
portion of which was payable upon the execution of the Agreement, a second
portion of which is payable upon approval of the Merger by the holders of
Company Common Stock and the remainder of which is contingent upon consummation
of the Merger. We have in the past provided investment banking services to
Parent unrelated to the Merger, for which we have received
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compensation, and we are currently providing investment banking services to
Parent in connection with the Parent Merger for which we will receive a fee. In
the ordinary course of our business, we and our affiliates may actively trade
or hold the securities of the Company and Parent for our own account or for the
account of our customers and, accordingly, may at any time hold a long or short
position in such securities. Salomon Smith Barney Inc. and its affiliates
(including Citigroup Inc. and its affiliates) may maintain relationships with
the Company, Parent and KeySpan and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of the Company in its evaluation of the
proposed Merger and our opinion is not intended to be and does not constitute a
recommendation of the Merger to the Company or a recommendation to any
stockholder as to how such stockholder should vote on any matters relating to
the proposed Merger or, if applicable following a termination of the Parent
Merger Agreement, as to what election such stockholder should make with respect
to the form of consideration to be received for such stockholder's Company
Common Stock.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the consideration to be
received by the holders of Company Common Stock in the Merger is fair, from a
financial point of view, to such holders.
Very truly yours,
SALOMON SMITH BARNEY INC.
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Annex C
NEW HAMPSHIRE REVISED STATUTES ANNOTATED, CHAPTER
293-A NEW HAMPSHIRE BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
(S) 293-A:13.01. Definitions
In this subdivision:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation or
other entity by merger, share exchange, or conversion of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RSA 293-A:13.02 and who exercises that right when
and in the manner required by RSA 293-A:13.20 through 293-A:13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action, unless exclusion would be
inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
(S) 293-A:13.02. Right to Dissent
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(i) If shareholder approval is required for the merger by RSA 293-
A:11.03 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its
parent under RSA 293-A:11.04.
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale.
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares.
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(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights.
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under RSA 293-A:6.04.
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(6) Consummation of a plan of conversion to which the corporation is a
party converting to another entity.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this subdivision shall not challenge the corporate action creating his
entitlement, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
(S) 293-A:13.03. Dissent by Nominees and Beneficial Owners
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
(S) 293-A:13.20. Notice of Dissenters' Rights
(a) If proposed corporate action creating dissenters' rights under RSA 293-
A:13.02 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this subdivision and be accompanied by a copy of this subdivision.
(b) If corporate action creating dissenters' rights under RSA 293-A:13.02 is
taken without a vote of shareholders or by consent pursuant to RSA 293-A:7.04,
the corporation shall notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in RSA 293-A:13.22.
(S) 293-A:13.21. Notice of Intent to Demand Payment
(a) If proposed corporate action creating dissenters' rights under RSA 293-
A:13.02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Shall not vote his shares in favor of the proposed action.
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(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this subdivision.
(S) 293-A:13.22. Dissenters' Notice
(a) If proposed corporate action creating dissenters' rights under RSA 293-
A:13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RSA 293-A:13.21.
(b) The dissenters' notice shall be sent no later than 10 days after
corporate action was taken, and shall:
(1) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited.
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date.
(4) Set a date by which the corporation shall receive the payment
demand, which date shall not be fewer than 30 nor more than 60 days after
the date the notice is delivered.
(5) Be accompanied by a copy of this subdivision.
(S) 293-A:13.23. Duty to Demand Payment
(a) A shareholder sent a dissenters' notice described in RSA 293-A:13.22
shall demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth, in the dissenters' notice
pursuant to RSA 293-A:13.22(b)(3), and deposit his certificates in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this subdivision.
(S) 293-A:13.24. Share Restrictions
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under RSA 293-A:13.26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate
action.
(S) 293-A:13.25. Payment
(a) Except as provided in RSA 293-A:13.27, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with RSA 293-A:13.23 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
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(b) The payment shall be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under RSA
293-A:13.28; and
(5) A copy of this subdivision.
(S) 293-A:13.26. Failure to Take Action
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under RSA 293-A:13.22 and repeat the payment demand
procedure.
(S) 293-A:13.27. After-Acquired Shares
(a) A corporation may elect to withhold payment required by RSA 293-A:13.25
from a dissenter, unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under RSA 293-
A:13.28.
(S) 293-A:13.28. Procedure if Shareholder Dissatisfied With Payment or Offer
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate, less any payment under RSA 293-A:13.25, or reject the
corporation's offer under RSA 293-A:13.27 and demand payment of the fair value
of his shares and interest due, if:
(1) The dissenter believes that the amount paid under RSA 293-A:13.25 or
offered under RSA 293-A:13.27 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under RSA 293-A:13.25 within
60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection (a)
within 30 days after the corporation made or offered payment for his shares.
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(S) 293-A:13.30. Court Action
(a) If a demand for payment under RSA 293-A:13.28 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
or other entity without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or converted into or whose shares were
acquired by the foreign corporation or other entity was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decisions on the
question of their value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or,
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under RSA 293-
A:13.27.
(S) 293-A:13.31. Court Costs and Counsel Fees
(a) The court in an appraisal proceeding commenced under RSA 293-A:13.30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under RSA 293-A:13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of RSA 293-A:13.20 through RSA 293-A:13.28.
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this subdivision.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Trustees and Officers.
The Declaration of Trust of the Registrant (the "Registrant's Charter")
provides that the Trustees, officers and agents of the Registrant generally
shall not be liable except for acts or failures to act which at the time would
impose liability on such party if the Registrant were a Massachusetts business
corporation and such person was a director, officer or agent thereof. The
Registrant's Charter provides that it shall indemnify each of its Trustees and
officers against all liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees, reasonably incurred by such person in connection with the
defense or disposition of any action, suit or other proceeding, whether civil
or criminal, including but not limited to derivative suits (to the extent
permitted by law), in which such person may be involved or with which such
person may be threatened, while in office or thereafter, except with respect
to any matters as to which such person shall have been adjudicated to have
acted in bad faith or not to have acted in good faith in the reasonable belief
that such person's action was in the best interests of the Registrant or, to
the extent that such matter relates to service with respect to an employee
benefit plan, in the best interests of the participants or beneficiaries of
such plan. The Registrant's Charter provides, however, that as to any matter
disposed of by a compromise payment by such Trustee or officer pursuant to a
consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless such compromise shall be approved
as in the best interests of the Registrant, after notice that it involves such
indemnification: (a) if no change of control has occurred, (i) by a
disinterested majority of the Trustees then in office or (ii) by a majority of
the disinterested Trustees then in office or by the stockholders of the
Registrant, provided that the Registrant shall have received a written opinion
of independent legal counsel to the effect that such Trustee or officer
appears to have acted in good faith in the reasonable belief that such
person's action was in the best interests of the Registrant; or (b) if a
change of control shall have occurred, by an opinion in writing of independent
legal counsel to the effect that such Trustee or officer appears to have acted
in good faith in the reasonable belief that such person's action was in the
best interests of the Registrant. The rights accruing to any Trustee or
officer under the foregoing provisions do not exclude any other right to which
such Trustee or officer may be lawfully entitled; provided, however, that no
Trustee or officer may satisfy any rights of indemnity or reimbursement
granted pursuant to the Registrant's Charter or to which he may be otherwise
entitled except out of the trust estate of the Registrant.
The Registrant's Charter further provides that notwithstanding any provision
of law or any other provision of the Registrant's Charter, a Trustee shall not
be liable to the Registrant or any shareholder of the Registrant for monetary
damages for breach of such Trustee's fiduciary duties as a Trustee, except
with respect to any matter as to which such liability is imposed by applicable
law and such Trustee shall have been adjudicated (a) to have breached such
Trustee's duty of loyalty to the Registrant or its stockholders, (b) to have
acted (or omitted to act) not in good faith, (c) to have knowingly violated
the law, (d) to have intentionally engaged in misconduct, or (e) to have
derived any improper personal benefit from a transaction. Trustees, officers
and agents of the Registrant will also not be held liable for any act or
failure to act in good faith, that is required, authorized or approved by an
order issued pursuant to the Public Utility Holding Company Act of 1935 or any
other federal or state statute regulating the Registrant or any of its
subsidiaries by reason of its being a public utility holding company or their
being public utilities. In the event that the foregoing provisions of the
preceding sentence are found by a court not to constitute a valid defense on
the grounds of not being applicable to the particular class of plaintiffs,
each such Trustee, officer, and agent (and his or her legal representatives)
shall be reimbursed for, or indemnified against, all expenses and liabilities
incurred by him or her or imposed on him or her in connection with any such
action, suit or proceeding; provided, however, that as to any matter disposed
of by a compromise payment by such Trustee or officer, pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any
other expenses shall be provided unless such compromise shall be approved as
in the best interest of the Registrant as provided in the Registrant's
Charter. Such expenses and liabilities shall include, but shall not be limited
to, judgments, court costs, and attorneys' fees.
The Registrant's Charter provides that in discharging his or her duties,
when acting in good faith, any Trustee or officer shall be fully entitled to
rely upon information, opinion, reports or records, including financial
II-1
<PAGE>
statements, books of account and other financial records, in each case
presented or prepared by, or under the supervision of, (a) one or more
officers or employees of the Registrant (or of another organization in which
such party serves as contemplated by Article 19 of the Registrant's Charter,
including all directors, officers and trustees of wholly-owned subsidiaries of
the Registrant) whom the Trustee or officer reasonably believes to be reliable
and competent in the matters presented, (b) counsel, public accountants or
other persons as to matters which the Trustee or officer reasonably believes
to be within such person's professional or expert competence, or (c) in the
case of a Trustee, a duly constituted committee of Trustees (or similar
governing body of such other organization) upon which such Trustee does not
serve, as to matters within its delegated authority, which committee the
Trustee reasonably believes to merit confidence, but such Trustee shall not be
considered to be acting in good faith if such Trustee has knowledge concerning
the matter in question that would cause such reliance to be unwarranted. The
fact that a Trustee or officer so relied shall be a complete defense to any
claim asserted against such party, except as expressly provided by statute, by
reason of such party being or having been a Trustee or officer of the
Registrant (or such other organization).
The Registrant maintains an insurance policy that insures its Trustees and
officers against certain liabilities.
The Agreement and Plan of Merger between KeySpan Corporation and the
Registrant provides that from and after the closing of the KeySpan-Eastern
merger, KeySpan and Eastern (as the surviving corporation of the merger) are
required, to the fullest extent permitted by applicable law, to indemnify,
defend and hold harmless each person who was at the time of signing of the
KeySpan-Eastern merger agreement, or had been at any time prior to the date of
signing of the KeySpan-Eastern merger agreement, or who becomes prior to the
closing of the KeySpan-Eastern merger, an officer, Trustee, director or
employee of Eastern or any of its subsidiaries against (1) all losses,
expenses (including reasonable attorney's fees and expenses), claims, damages
or liabilities or, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the closing of the merger (and whether
asserted or claimed prior to, at or after the closing) that are, in whole or
in part, based on or arising out of the fact that such person is or was a
Trustee, director, officer or employee of Eastern or a subsidiary of Eastern
and (2) all such indemnified liabilities to the extent they are based on or
arise out of or pertain to the transactions contemplated by the KeySpan-
Eastern merger agreement. KeySpan has also agreed to pay the reasonable fees
and expenses of counsel to any indemnified parties in connection with any such
indemnification. The KeySpan-Eastern merger agreement also requires KeySpan,
for a period of six years after the closing of the KeySpan-Eastern merger, to
keep in effect policies of Trustees' and officers' liability insurance for the
benefit of those persons who were at the time of signing of the KeySpan-
Eastern merger agreement covered by such policies of Eastern on terms no less
favorable than the terms of such prior insurance coverage. KeySpan may
substitute policies of at least the same coverage containing terms that are no
less advantageous with respect to matters occurring at or prior to the closing
of the KeySpan-Eastern merger to the extent such liability insurance can be
maintained annually at a cost to KeySpan not greater than 200 percent of the
annual premiums of the policies maintained by Eastern for their Trustees' and
officers' liability insurance at the time of signing of the KeySpan-Eastern
merger agreement. Alternatively, KeySpan may provide tail coverage for such
persons which provides coverage for a period of six years for acts prior to
the closing of the KeySpan-Eastern merger on terms no less favorable than the
terms of such current insurance coverage. If such insurance cannot be
maintained or obtained at such cost, KeySpan shall maintain or obtain a policy
providing the best coverage available, for a premium not exceeding 200 percent
of the aggregate annual premiums paid by Eastern for their Trustees' and
officers' liability insurance and other indemnity agreements at the time of
signing of the KeySpan-Eastern merger agreement. If KeySpan or any of its
successors or assigns (1) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (2) transfers all or substantially all of its
properties and assets to any person, then, and in either such case, proper
provisions must be made so that the successors and assigns of KeySpan shall
assume the indemnity obligations described above. After the closing of the
KeySpan-Eastern merger, all rights to indemnification in favor of the
employees, agents, Trustees, directors and officers of Eastern and its
subsidiaries with respect to their activities as such prior to the closing of
the merger, as provided in Eastern's respective charter document, by-laws or
otherwise in effect on the date of the KeySpan-Eastern merger agreement will
survive the closing of the KeySpan-Eastern merger and will continue in full
force and effect for a period of not less than six years from such closing.
The above-described indemnity provisions 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.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Number Title of Exhibit
------ ----------------
<C> <S>
2.1. Agreement and Plan of Reorganization dated as of July 14, 1999, by and
among Eastern Enterprises, Merger Sub and EnergyNorth, Inc., including
Amendment No. 1 dated as of November 4, 1999 (attached as Annex A to
the Proxy Statement/Prospectus contained in this Registration
Statement).
4.1. Declaration of Trust of Eastern Enterprises, as amended, filed as
Exhibit 3.1 to the Eastern Enterprise Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989, Commission File No 1-2297,
incorporated by reference herein.
4.2. By-laws of Eastern Enterprises, as amended, filed as Exhibit 3.1 to
the Eastern Enterprise Annual Report on Form 10-K for the year ended
December 31, 1998, Commission File No. 1-2297, incorporated by
reference herein.
4.3. Specimen copy of common stock certificate for Eastern Enterprises,
filed as Exhibit A-1 to the Eastern Enterprise Form U-1 dated March
31, 1998, Commission File No. 070-09195, incorporated by reference
herein.
4.4. Common Stock Rights Agreement between Eastern Enterprises and the Bank
of New York dated as of February 22, 1990, filed as Exhibit 1 to the
Eastern Enterprise Form 8-K dated March 1, 1990, Commission File No.1-
2297, incorporated by reference herein.
4.4.1. Agreement between Eastern and the First National Bank of Boston dated
January 30, 1995, filed as Exhibit 4.1.1. to the Eastern Enterprise
Annual Report on Form 10-K for the year ended December 31, 1994,
Commission File No. 1-2297, incorporated by reference herein.
4.4.2. Amendment No. 2 to Common Stock Rights Agreement dated as of July 22,
1998, between Eastern Enterprises and BankBoston, N.A., filed as
Exhibit 99.1 to the Eastern Enterprises Form 8-K dated July 28, 1998,
Commission File No. 1-2297, incorporated by reference herein.
4.4.3. Rights Agreement dated as of July 22, 1998, between Eastern
Enterprises and BankBoston, N.A., filed as Exhibit 99.2 to the Eastern
Enterprises Form 8-K dated July 28, 1998, Commission File No. 1-2297,
incorporated by reference herein.
*5.1. Opinion of Ropes & Gray as to the legality of the shares being issued.
*8.1. Opinion of Ropes & Gray as to certain tax matters.
*8.2. Opinion of Hale and Dorr LLP as to certain tax matters.
12.1. Statement re: computation of ratio of earnings to fixed charges.
23.1. Consent of Salomon Smith Barney Inc.
23.2. Consent of Ropes & Gray (included in Exhibits 5.1. and 8.1.).
23.3. Consent of Hale and Dorr LLP (included in Exhibit 8.2.).
23.4. Consent of Arthur Andersen LLP with respect to the Registrant.
23.5. Consent of Arthur Andersen LLP with respect to EnergyNorth, Inc.
24.1. Power of Attorney (included on signature page to Registration
Statement previously filed).
99.1. Form of proxy card to be used in soliciting EnergyNorth shareholders.
</TABLE>
(b) Financial Statement Schedules.
Schedule II. Valuation and Qualifying Accounts and Reserves.
(c) Fairness Opinion.
Included in Part I as Annex B to the Proxy Statement/Prospectus contained
in this Registration Statement.
- --------
* Previously filed.
II-3
<PAGE>
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions set forth in Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10 (a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(g) The undersigned Registrant hereby undertakes:
1. To file during any period in which offers and sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if
II-4
<PAGE>
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act of 1933, if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Pre-Effective
Amendment No. 1 to Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Weston,
State of Massachusetts, on the 10th day of March, 2000.
EASTERN ENTERPRISES
By: /s/ Walter J. Flaherty
-----------------------------------
Name:Walter J. Flaherty
Title: Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, March 10, 2000
______________________________________ Chief Executive Officer
J. Atwood Ives and Trustee
* President and Chief March 10, 2000
______________________________________ Operating Officer
Fred C. Raskin
/s/ Walter J. Flaherty Executive Vice President March 10, 2000
______________________________________ and Chief Financial
Walter J. Flaherty Officer
* Vice President and March 10, 2000
______________________________________ Controller (Chief
James J. Harper Accounting Officer)
Trustee March 10, 2000
______________________________________
James R. Barker
* Trustee March 10, 2000
______________________________________
Richard R. Clayton
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Trustee March 10, 2000
______________________________________
John D. Curtin, Jr.
* Trustee March 10, 2000
______________________________________
Samuel Frankenheim
* Trustee March 10, 2000
______________________________________
Leonard R. Jaskol
* Trustee March 10, 2000
______________________________________
Wendell J. Knox
* Trustee March 10, 2000
______________________________________
F. L. Putnam, Jr.
* Trustee March 10, 2000
______________________________________
Rina K. Spence
Trustee March 10, 2000
______________________________________
</TABLE> David B. Stone
*The undersigned, by signing his name hereto, does hereby sign and execute this
Pre-Effective Amendment No. 1 to Registration Statement on Form S-4 on behalf
of the above named officers and Trustees of Eastern Enterprises pursuant to the
Power of Attorney executed by each such officer and/or Trustee and previously
filed with the SEC.
By: /s/ Walter J. Flaherty March 10,
--------------------------------- 2000
Walter J. Flaherty
Attorney-in-Fact
II-7
<PAGE>
SCHEDULE II
EASTERN ENTERPRISES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions Deductions
------------------- --------------
Balance Charged to Charged Charges for Balance
December 31, Costs and to other which Reserves December 31,
1998 Expenses Accounts were Created 1999
------------ ---------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Reserves deducted from
assets:
Reserves for doubtful
accounts............. $ 17,070 $12,005 $ 3,176 $(13,391) $ 18,860
======== ======= ======= ======== ========
Reserves for loss on
inventory............ $ -- $ 234 $ -- $ -- $ 234
======== ======= ======= ======== ========
Reserves for loss on
investments.......... $ 19 $ -- $ -- $ -- $ 19
======== ======= ======= ======== ========
Reserves included in
liabilities:
Reserve for
postretirement health
care................. $ 97,197 $ 5,781 $ 4,857 $ (8,211) $ 99,624
Reserves for employee
benefits............. 29,716 16,722 7,345 (13,290) 40,493
Reserves for
environmental
expenses............. 25,115 249 850 (4,340) 21,874
Reserves for insurance
claims............... 12,269 5,497 3,268 (8,863) 12,171
Other................. 11,157 286 -- (1,190) 10,253
-------- ------- ------- -------- --------
Total liability
reserves........... $175,454 $28,535 $16,320 $(35,894) $184,415
======== ======= ======= ======== ========
</TABLE>
S-1
<PAGE>
SCHEDULE II
EASTERN ENTERPRISES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
------------------ ----------
CHARGES
CHARGED FOR WHICH
BALANCE TO COSTS CHARGED RESERVES BALANCE
DECEMBER 31, AND TO OTHER WERE DECEMBER 31,
DESCRIPTION 1997 EXPENSES ACCOUNTS CREATED 1998
- ----------- ------------ -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Reserves deducted from
assets--
Reserves for doubtful
accounts............. $ 17,220 $ 5,062 $ 120 $ (5,332) $ 17,070
======== ======== ====== ======== ========
Reserves for loss on
investments.......... $ 19 $ -- $ -- $ -- $ 19
======== ======== ====== ======== ========
Reserves included in
liabilities--
Reserve for
postretirement health
care................. $ 98,382 $ 5,540 $ -- $ (6,725) $ 97,197
Reserve for coal
miner's retiree
health care.......... 76,500 (74,500) -- (2,000) --
Reserves for employee
benefits............. 25,236 14,092 1,486 (11,098) 29,716
Reserves for
environmental
expenses............. 25,920 71 82 (958) 25,115
Reserves for insurance
claims............... 13,171 5,029 1,968 (7,899) 12,269
Other................. 16,319 377 921 (6,460) 11,157
-------- -------- ------ -------- --------
Total liability
reserves........... $255,528 $(49,391) $4,457 $(35,140) $175,454
======== ======== ====== ======== ========
</TABLE>
S-2
<PAGE>
SCHEDULE II
EASTERN ENTERPRISES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions Deductions
------------------- --------------
Balance Charged to Charged Charges for Balance
December 31, Costs and to Other Which Reserves December 31,
1996 Expenses Accounts Were Created 1997
------------ ---------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Reserves deducted from
assets:
Reserves for doubtful
accounts............. $ 17,301 $ 5,818 $167 $ (6,066) $ 17,220
======== ======= ==== ======== ========
Reserves for loss on
investments.......... $ 19 $ 0 $ 0 $ 0 $ 19
======== ======= ==== ======== ========
Reserves included in
liabilities:
Reserves for post-
retirement health
care................. $100,446 $ 4,578 $ 0 $ (6,642) $ 98,382
Reserve for coal
miners retiree health
care................. 77,308 0 0 (808) 76,500
Reserves for employee
benefits............. 24,624 9,690 907 (9,985) 25,236
Reserves for
environmental
expenses............. 26,809 0 122 (1,011) 25,920
Reserves for insurance
claims............... 12,838 7,348 (530) (6,485) 13,171
Other................. 17,680 6,304 41 (7,706) 16,319
-------- ------- ---- -------- --------
Total liability
reserves........... $259,705 $27,920 $540 $(32,637) $255,528
======== ======= ==== ======== ========
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Title of Exhibit
------ ----------------
<C> <S>
2.1. Agreement and Plan of Reorganization dated as of July 14, 1999, by and
among Eastern Enterprises, Merger Sub and EnergyNorth, Inc., including
Amendment No. 1 dated as of November 4, 1999 (attached as Annex A to
the Proxy Statement/Prospectus contained in this Registration
Statement).
4.1. Declaration of Trust of Eastern Enterprises, as amended, filed as
Exhibit 3.1 to the Eastern Enterprise Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989, Commission File No. 1-2297,
incorporated by reference herein.
4.2. By-laws of Eastern Enterprises, as amended, filed as Exhibit 3.1 to
the Eastern Enterprise Annual Report on Form 10-K for the year ended
December 31, 1998, Commission File No. 1-2297, incorporated by
reference herein.
4.3. Specimen copy of common stock certificate of Eastern Enterprises filed
as Exhibit A-1 to the Eastern Enterprise Form U-1 dated March 31,
1998, Commission File No. 070-09195, incorporated by reference herein.
4.4. Common Stock Rights Agreement between Eastern Enterprises and the Bank
of New York dated as of February 22, 1990, filed as Exhibit 1 to the
Eastern Enterprise Form 8-K dated March 1, 1990, Commission File No.
1-2297, incorporated by reference herein.
4.4.1. Agreement between Eastern and the First National Bank of Boston dated
January 30, 1995, filed as Exhibit 4.1.1. to the Eastern Enterprise
Annual Report on Form 10-K for the year ended December 31, 1994,
Commission File No. 1-2297, incorporated by reference herein.
4.4.2. Amendment No. 2 to Common Stock Rights Agreement dated as of July 22,
1998, between Eastern Enterprises and BankBoston, N.A., filed as
Exhibit 99.1 to the Eastern Enterprises Form 8-K dated July 28, 1998,
Commission File No. 1-2297, incorporated by reference herein.
4.4.3. Rights Agreement dated as of July 22, 1998, between Eastern
Enterprises and BankBoston, N.A., filed as Exhibit 99.2 to the Eastern
Enterprises Form 8-K dated July 28, 1998, Commission File No. 1-2297,
incorporated by reference herein.
*5.1. Opinion of Ropes & Gray as to the legality of the shares being issued.
*8.1. Opinion of Ropes & Gray as to certain tax matters.
*8.2. Opinion of Hale and Dorr LLP as to certain tax matters.
12.1. Statement re: computation of ratio of earnings to fixed charges.
23.1. Consent of Salomon Smith Barney Inc.
23.2. Consent of Ropes & Gray (included in Exhibits 5.1. and 8.1.).
23.3. Consent of Hale and Dorr LLP (included in Exhibit 8.2.).
23.4. Consent of Arthur Andersen LLP with respect to the Registrant.
23.5. Consent of Arthur Andersen LLP with respect to EnergyNorth, Inc.
24.1. Power of Attorney (included on signature page to Registration
Statement previously filed).
99.1. Form of proxy card to be used in soliciting EnergyNorth shareholders.
</TABLE>
- --------
*Previously filed.
<PAGE>
EXHIBIT 12.1
EASTERN ENTERPRISES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Pretax earnings $ 91,247 $ 79,994 $ 82,870 $ 102,249 $ 89,805 $ 68,520
Less: Capitalized Interest (923) (490) (636) (570) (591) (932)
Plus: Fixed Changes 46,082 $ 39,749 $ 44,028 $ 44,488 $ 48,878 $ 48,382
--------------------------------------------------------------------------------
Adjusted earnings $136,406 $ 119,253 $ 126,262 $ 146,167 $ 138,092 $ 115,970
Fixed Charges:
Interest reported $ 39,136 $ 33,584 $ 37,411 $ 37,290 $ 41,273 $ 41,001
Interest capitalized 923 490 636 570 591 932
Fuel clause interest 2,547 1,302 2,452 2,120 2,480 2,061
Preferred stock dividend 0 0 0 0 0 0
Interest element of lease rental
payments (1/3) 3,476 4,373 3,529 4,508 4,534 4,388
---------------------------------------------------------------------------------
$ 46,082 $ 39,749 $ 44,028 $ 44,488 $ 48,878 $ 48,382
Fixed Charge Coverage 3.0 3.0 2.9 3.3 2.8 2.4
</TABLE>
<PAGE>
EXHIBIT 23.1
[SALOMON SMITH BARNEY LETTERHEAD]
CONSENT OF SALOMON SMITH BARNEY INC.
-------------------------------------
We hereby consent to the use of our name and to the description of our
opinion letter, dated November 4, 1999, under the captions "Summary," "The
Merger--Background of the Merger" and "The Merger--Opinion of EnergyNorth's
Financial Advisor" in, and to the inclusion of such opinion letter as Annex B
to, the Proxy Statement/Prospectus of EnergyNorth, Inc., which Proxy
Statement/Prospectus is part of the Registration Statement on Form S-4 of
Eastern Enterprises. By giving such consent we do not thereby admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "expert" as used in, or that we come within the category of
persons whose consent is required under, the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
SALOMON SMITH BARNEY INC.
New York, New York
March 10, 2000
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports, incorporated by reference in this Form S-4 into
Eastern Enterprises' previously filed Post-Effective Amendment No. 1 to Form S-
16 Registration Statement No. 2-71614 on Form S-3 and Form S-8 Registration
Statements No. 2-77146, No. 33-19990, No. 33-40862, No. 33-56424, No. 33-58873
and No. 333-88967.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
March 9, 2000
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated November 5, 1999 included in EnergyNorth, Inc.'s
Form 10-K, into the Eastern Enterprises Form S-4 filed March 10, 2000.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
March 9, 2000
<PAGE>
[FORM OF ENERGYNORTH, INC. PROXY CARD]
[ENERGYNORTH, INC. LOGO]
PROXY PROXY
Proxy for the Annual Meeting of Stockholders
To be Held on April [ ], 2000
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Robert R.
Giordano and Michelle L. Chicoine, and each of them, with full power of
substitution, as proxies to represent and vote as designated herein, all shares
of stock of EnergyNorth, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Center of New Hampshire Holiday
Inn, 700 Elm Street, Manchester, New Hampshire, on April [ ], 2000 at 10:00
a.m., local time, and at any adjournment or adjournments thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy
will be voted "FOR" proposals 1, 2 and 3. Attendance of the undersigned at the
meeting or at any adjournment thereof will not be deemed to revoke this proxy
unless the undersigned shall revoke this proxy in writing before it is
exercised.
1. To approve the merger of the Company with a wholly-owned subsidiary of
Eastern Enterprises by approving the Agreement and Plan of Reorganization
dated as of July 14, 1999, as amended by Amendment No. 1 dated as of
November 4, 1999, attached to the accompanying proxy statement/prospectus as
Annex A.
[_] [_] [_]
FOR AGAINST ABSTAIN
2. To elect the following nominees as directors:
Nominees: Roger C. Avery, Robert R. Giordano, John E. Tulley II
[_] [_]
FOR WITHHELD
[_]
For all nominees except as noted above
3. To ratify the appointment of independent public accountants for 2000
[_] [_] [_]
FOR AGAINST ABSTAIN
The proxy holders are authorized to transact such other business as may
properly come before the meeting or any adjournment or adjournments of the
meeting.
<PAGE>
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give the full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature: __________________________ Date: _________________________
Signature: __________________________ Date: _________________________
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE.
2
