SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
February 1, 1999
Date of Report (Date of Earliest Event Reported)
Eastern Utilities Associates
(Exact Name of Registrant as Specified in Charter)
Massachusetts 1-5366 04-1271872
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
One Liberty Square, Boston, MA 02109
(Address of Principal Executive Offices and Zip Code)
(617) 357-9590
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On February 1, 1999, Eastern Utilities Associates, a Massachusetts
business trust (the "Company"), New England Electric System, a Massachusetts
business trust ("NEES"), and Research Drive LLC ("Research"), a Massachusetts
limited liability company which is directly and indirectly wholly owned by
NEES, entered into an Agreement and Plan of Merger, dated as of February 1,
1999 (the "Merger Agreement"), providing for a merger transaction among the
Company, NEES and Research. The Merger Agreement a nd the press release issued
in connection therewith are filed herewith as Exhibits 10 and 99, respectively,
and are incorporated herein by reference. The description of the Merger
Agreement set forth herein does not purport to be complete and is qualified in
its entirety by the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, Research will merge with and into the
Company (the "Merger"), with the Company being the surviving entity and
becoming a wholly-owned subsidiary of NEES (the "Surviving Entity"). The
Merger, which was unanimously approved by the boards of the Company and NEES,
and the Members of Research, is expected to occur shortly after all of the
conditions to the consummation of the Merger, including the receipt of certain
regulatory approvals, are met or waived. The Comp any anticipates that the
Merger can be consummated in early 2000.
Under the terms of the Merger Agreement, each outstanding common share of
the Company, $5.00 par value per share (the "Company Common Shares"), other
than shares, if any, owned by the Company as treasury shares, or by NEES,
Research or any other wholly-owned subsidiary of NEES, will be converted into
the right to receive $31.00 in cash, as may be adjusted (the "Merger
Consideration"). Such adjustment will occur if the Closing Date does not occur
on or prior to the date that is the six month anniversary of the date on which
the Company shareholders' approval is attained (the "Adjustment Date"), in
which event the per share amount shall be increased by $.003 for each day after
the Adjustment Date up to and including the day which is one day prior to the
earlier of the Closing Date and the Extended Termination Date (as defined
below).
The Merger is subject to certain customary closing conditions, including,
without limitation, the receipt of the required approval of the Company's
shareholders by an affirmative vote of two-thirds of the outstanding Company
Common Shares, and the receipt of all necessary governmental approvals and the
making of all necessary governmental filings, including, to the extent
necessary, the consent or approval of certain state utility regulators, the
approval of the Federal Energy Regulatory Commission, the approval of the
Federal Communications Commission, the approval of the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, as amended,
the approval of the Nuclear Regulatory Commission, the filing of the requisite
notification with the Federal Trade Commission and the Department of Justice
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the expiration of the applicable waiting period thereunder. A meeting of the
Company's shareholders to vote upon the Merger will be convened as soon as
practicable. The Merger is also subject to the receipt of final orders of the
Massachusetts and Rhode Island utility regulatory commissions pertaining to the
recovery of costs asssociated with the Merger that are materially consistent
with existing policy and previous orders of such agencies.
The Merger Agreement contains certain covenants of the parties pending
the consummation of the Merger. Generally, the Company must carry on its
business in the ordinary course consistent with past practice, comply with all
laws and preserve intact its goodwill. The Company is permitted to declare and
pay its regular quarterly dividends. The Merger Agreement contains certain
restrictions on the Company including limitations on, or procedures for
issuance of securities, modification, termination or failure to renew material
contracts, amendments to the Company's Declaration of Trust or similar
governing documents of the Company's Subsidiaries, capital expenditures,
acquisitions, dispositions, incurrence or guarantees of any indebtedness,
modification of employee compensation and benefits, regulatory matters, changes
in accounting policies and discharge of liabilities. (See Article VI of the
Merger Agreement).
The Merger Agreement prevents the Company and its Subsidiaries from
knowingly initiating, soliciting or encouraging, directly or indirectly, any
inquiry or proposal or offer, or engaging in negotiations with, or providing
confidential information to, any third party relating to a business combination
proposal, and requires the Company to terminate immediately any existing
discussions or negotiations and notify NEES of any such inquiries relating to a
business combination proposal, unless prior t o the Company's shareholder
approval: (i) the Company's Board determines, in good faith based upon the
advice of its outside legal counsel with respect to the Board's fiduciary
duties, that taking such action is necessary for the Board to act in a manner
consistent with its fiduciary duties under applicable law; (ii) the Company's
Board reasonably concludes, in good faith after consultation with its financial
advisors, that (A) the party making such proposal has adequate financing
sources and (B ) such proposal is likely to be more favorable to shareholders
of the Company than the Merger (an "Alternative Proposal"); (iii) prior to
furnishing nonpublic information or entering into negotiations, the Company
notifies NEES in writing of such furnishing of information or negotiations
(identifying the party making the proposal and the material terms of such
proposal) and enters into a confidentiality agreement with such third party;
and (iv) the Company keeps NEES promptly informed of the status and all
material information with respect to such discussions or negotiations. The
Company may terminate the Merger Agreement to accept an Alternative Proposal
(in which case, the termination fee provision described below would be
applicable). However, before so terminating, the Company must negotiate with
NEES to adjust the Merger Agreement so as to enable the parties to proceed with
the adjusted Merger Agreement, and the Company's Board must determine that,
based on advice of counsel wit h respect to the Board's fiduciary duties and
notwithstanding a binding commitment to consummate the Merger Agreement and
notwithstanding all concessions that may be offered by NEES in further
negotiations with the Company, the Alternative Proposal i s more favorable to
the Company's shareholders than the Merger. (See Section 7.08 and Article IX
of the Merger Agreement).
The Merger Agreement may be terminated under certain circumstances,
including: (i) by mutual written agreement of the boards of the parties; (ii)
by either party if the Merger has not been effected by December 31, 1999 (the
"Initial Termination Date" ), provided that if the parties are otherwise ready
to close, but certain statutory approvals are not yet obtained, the Initial
Termination Date will be extended four months (the "Extended Termination
Date"); and (iii) by either party if any law, rule or regulation is adopted
which makes the Merger illegal or any final order or injunction permanently
prohibits the Merger. In addition, the Company may terminate the Merger
Agreement: (i) under certain circumstances, in order to accept an Alternative
Proposal (subject to the limitations and procedures described above and to
payment of the termination fee described below); (ii) if there has been a
material breach of certain of NEES' representations and warranties or a failure
by NEES to perform and comply with its covenants under the Merger Agreement and
such breach or failure has not been cured; (iii) if NEES fails to deliver the
merger consideration at a time when all conditions to NEES' obligation to close
have been satisfied or waived . NEES may terminate the Merger Agreement if:
(i) the Board of the Company withdraws or modifies its approval of the merger
or its recommendation to its shareholders or if shareholders' approval shall
not have been obtained at a duly held meeting; ( ii) the Board of the Company
shall approve or recommend or take no position with respect to an Alternative
Proposal; or (iii) there has been a material breach of the Company's
representations and warranties or a failure by the Company to perform and
comply with its covenants under the Merger Agreement and such breach or failure
has not been cured. (See Articles VIII and IX of the Merger Agreement).
The Company will pay NEES a termination fee of $20 million plus up to $5
million for documented out-of-pocket expenses: (i) if the Company terminates
the Merger Agreement because the Company became the target of a third party
Alternative Proposal, and the Company's Board determined in good faith based
upon the advice of outside counsel with respect to the Board's fiduciary
duties, that termination was necessary for the Board to act consistently with
its fiduciary duties under applicable law; or (ii) if, at a time when an
Alternative Proposal is pending the Merger Agreement is terminated because (A)
the Company shareholder approval was not obtained, (B) the Company has
materially breached its representations and warranties or has failed to
materially perform and comply with its covenants under the Merger Agreement, or
(C) the Closing has not occurred by the termination date, provided, that in the
case of (A), (B) or (C), the Company enters into a merger or acquisition
agreement with the party offering such Alternative Proposal within two years of
such termination. (See Article IX of the Merger Agreement).
NEES will pay the Company a termination fee of $10 million plus up to $5
million for documented out-of-pocket expenses if either NEES or the Company
terminates because the Closing Date has not occurred on or before the Initial
Termination Date, or if the Initial Termination Date is extended, the Extended
Termination Date, and on the date of such termination: (i) all conditions to
closing other than the condition requiring that certain statutory and
regulatory consents and approvals be obtained has not been fulfilled, provided,
that such Closing Date has not failed to occur due to a failure on the part of
the terminating party to fulfill any obligation under the Merger Agreement;
(ii) if the date of termination is any date other than the Extended Termination
Date or a date thereafter, all conditions of each party other than the
conditions concerning (A) statutory and regulatory consents and approvals and
(B) the certification of performance of obligations on the part of NEES and LLC
have been fulfilled or are capable of being fulfilled; and (iii) the merger
contemplated by a agreement and Plan of Merger, dated December 11, 1998, by and
among National Grid Group plc, New England Electric System and NGG Holdings LLC
has not been consummated. (See Article s VIII and IX of the Merger Agreement).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(C) Exhibits.
10 Agreement and Plan of Merger, dated as of February 1, 1999, by and
among Eastern Utilities Associates, New England Electric System and
Research Drive LLC.
99 Press Release issued jointly by New England Electric System and Eastern
Utilities Associates on February 1, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 5, 1999
EASTERN UTILITIES ASSOCIATES
By: /s/ Donald G. Pardus
Donald G. Pardus Chairman and
Chief Executive Officer
Exhibit Index
Exhibit Description
10 Agreement and Plan of Merger, dated as of February 1, 1999,
among Eastern Utilities Associates, New England Electric System and
Research Drive LLC.
99 Press Release issued jointly by New England Electric System and Eastern
Utilities Associates on February 1, 1999.
AGREEMENT AND PLAN OF MERGER
dated as of February 1, 1999
by and among
NEW ENGLAND ELECTRIC SYSTEM, RESEARCH DRIVE LLC
and
EASTERN UTILITIES ASSOCIATES
TABLE OF CONTENTS
Page
No.
ARTICLE I THE MERGER 1
1.01 The Merger 1
1.02 Effective Time 1
1.03 Effects of the Merger 2
ARTICLE II CONVERSION OF SHARES 2
2.01 Conversion of Capital Stock 2
2.02 Surrender of Shares 3
2.03 Withholding Rights 4
ARTICLE III THE CLOSING 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EUA 5
4.01 Organization and Qualification 5
4.02 Capital Stock 6
4.03 Authority 7
4.04 Non-Contravention; Approvals and Consents 7
4.05 SEC Reports, Financial Statements and Utility Reports 8
4.06 Absence of Certain Changes or Events 9
4.07 Legal Proceedings 9
4.08 Information Supplied 9
4.09 Compliance 10
4.10 Taxes 10
4.11 Employee Benefit Plans; ERISA 12
4.12 Labor Matters 14
4.13 Environmental Matters 15
4.14 Regulation as a Utility 17
4.15 Insurance 17
4.16 Nuclear Facilities 18
4.17 Vote Required 18
4.18 Opinion of Financial Advisor 18
4.19 Ownership of NEES Common Shares 18
4.20 State Anti-Takeover Statutes 18
4.21 Year 2000 19
4.22 EUA Associates 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NEES 19
5.01 Organization and Qualification 19
5.02 Authority 20
5.03 Capital Stock 20
5.04 Non-Contravention; Approvals and Consents 20
5.05 Information Supplied 21
5.06 Compliance 21
5.07 Financing. 22
5.08 No Vote Required 22
5.09 Ownership of EUA Shares 22
5.10 Merger with The National Grid Group plc 22
ARTICLE VI COVENANTS 22
6.01 Covenants of EUA 22
6.02 Covenants of NEES 28
6.03 Additional Covenants by NEES and EUA. 29
ARTICLE VII ADDITIONAL AGREEMENTS 30
7.01 Access to Information 30
7.02 Proxy Statement 31
7.03 Approval of Shareholders 31
7.04 Regulatory and Other Approvals 31
7.05 Employee Benefit Plans 32
7.06 Labor Agreements and Workforce Matters 34
7.07 Post Merger Operations 34
7.08 No Solicitations 35
7.09 Directors' and Officers' Indemnification and Insurance 36
7.10 Expenses 37
7.11 Brokers or Finders 37
7.12 Anti-Takeover Statutes 38
7.13 Public Announcements 38
7.14 Restructuring of the Merger 38
ARTICLE VIII CONDITIONS 39
8.01 Conditions to Each Party's Obligation to Effect the Merger 39
8.02 Conditions to Obligation of NEES and LLC to Effect the Merger 39
8.03 Conditions to Obligation of EUA to Effect the Merger 40
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 41
9.01 Termination 41
9.02 Effect of Termination 43
9.03 Termination Fees 43
9.04 Amendment 44
9.05 Waiver 44
ARTICLE X GENERAL PROVISIONS 44
10.01 Non-Survival of Representations, Warranties,
Covenants and Agreements 44
10.02 Notices 44
10.03 Entire Agreement; Incorporation of Exhibits 46
10.04 No Third Party Beneficiary 46
10.05 No Assignment; Binding Effect 46
10.06 Headings 47
10.07 Invalid Provisions 47
10.08 Governing Law 47
10.09 Enforcement of Agreement 47
10.10 Certain Definitions 47
10.11 Counterparts 48
10.12 WAIVER OF JURY TRIAL 48
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings ascribed
to them in the corresponding Sections of this Agreement listed below:
"1935 Act" -- Section 4.05(b)
"Adjustment Date" -- Section 2.01(c)
"Affected Employees" -- Section 7.05(a)
"affiliate" -- Section 10.11(a)
"Agreement" -- Preamble
"Alternative Proposal" -- Section 7.08
"beneficially" -- Section 10.10(b)
"business day" -- Section 10.10(c)
"Canceled Shares" -- Section 2.02(b)
"Certificates" -- Section 2.02(b)
"Closing" -- Article III
"Closing Agreement" -- Section 4.10(j)
"Closing Date" -- Article III
"Code" -- Section 2.03
"Confidentiality Agreement" -- Section 7.01
"Constituent Entities" -- Section 1.01
"Contracts" -- Section 4.04(a)
"control," "controlling," "controlled by"
and "under common control with" -- Section 10.10(a)
"DOE" -- Section 4.05(b)
"Effective Time" -- Section 1.02
"Environmental Claim" -- Section 4.13(f)(i)
"Environmental Laws" -- Section 4.13(f)(ii)
"Environmental Permits" -- Section 4.13(b)
"ERISA" -- Section 4.11(a)
"ERISA Affiliate" -- Section 4.11(c)
"EUA" -- Preamble
"EUA Associates" -- Section 4.01(b)
"EUA Employee Agreements" -- Section 7.05(d)(ii)
"EUA Executives" -- Section 7.05(d)(ii)
"EUA Shares" -- Preamble
"EUA Disclosure Letter" -- Section 4.01(a)
"EUA Employee Benefit Plans" -- Section 4.11(a)
"EUA Financial Statements" -- Section 4.05(a)
"EUA Nuclear Facilities" -- Section 4.16
"EUA Material Adverse Effect" -- Section 4.01(a)
"EUA Required Consents" -- Section 4.04(a)
"EUA Required Statutory Approvals" -- Section 4.04(b)
"EUA SEC Reports" -- Section 4.05(a)
"EUA Shareholders' Approval" -- Section 7.03
"EUA Shareholders' Meeting" -- Section 7.03
"EUA Significant Subsidiary" -- Section 7.08
"EUA Shares" -- Preamble
"EUA Trust Agreement" -- Section 1.03
"EUA Voting Debt -- Section 4.02(d)
"Evaluation Material" -- Section 7.01(a)
"Exchange Act" -- Section 4.05(a)
"Exchange Fund" -- Section 2.02(a)
"Extended Termination Date" -- Section 9.01(b)
"FCC" -- Section 4.05(b)
"FERC" -- Section 4.05(b)
"Final Order" -- Section 8.01(d)
"Governmental Authority" -- Section 4.04(a)
"Hazardous Materials" -- Section 4.13(f)(iii)
"HSR Act" -- Section 7.04(a)
"Indemnified Liabilities" -- Section 7.09(a)
"Indemnified Party" -- Section 7.09(a)
"Indemnified Parties" -- Section 7.09(a)
"Information Systems" -- Section 4.21
"Initial Termination Date" -- Section 9.01(b)
"IRS" -- Section 4.10(m)
"knowledge" -- Section 10.11(d)
"laws" -- Section 4.04(a)
"Lien" -- Section 4.02(b)
"LLC" -- Preamble
"Massachusetts Secretary" -- Section 1.02
"Merger" -- Preamble
"Merger Consideration" -- Section 2.01(b)(ii)
"MGL" -- Section 1.01
"National Grid Group" -- Section 5.10
"National Grid Merger Agreement" -- Section 5.10
"NEES" -- Preamble
"NEES Disclosure Letter" -- Section 5.03
"NEES Material Adverse Effect" -- Section 5.01
"NEES-EUA Regulatory Approvals" -- Section 7.04(b)
"NEES-EUA Regulatory Proceedings" -- Section 7.04(c)
"NEES Required Consents" -- Section 5.04(a)
"NEES Required Statutory Approvals" -- Section 5.04(b)
"NEES-NGG Regulatory Approvals" -- Section 7.04(c)
"NEES-NGG Regulatory Proceedings" -- Section 7.04(c)
"NEES-NGG Required Statutory Approvals" -- Section 7.04
"NEES-NGG Transactions" -- Section 7.04
"NEES Shares" -- Section 5.03
"NEES Trust Agreement" -- Section 5.01
"NGG Circular" -- Section 7.02
"NRC" -- Section 4.05(b)
"Options" -- Section 4.02(a)
"orders" -- Section 4.04(a)
"Out-of-Pocket Expenses" -- Section 9.03(a)
"Paying Agent" -- Section 2.02(a)
"PBGC" -- Section 4.11(g)
"person" -- Section 10.11(e)
"Per Share Amount" -- Section 2.01(b)(ii)
"Post Closing Plans" -- Section 7.05(b)
"Proxy Statement" -- Section 4.08(a)
"Release" -- Section 4.13(f)(iv)
"Representatives" -- Section 10.11(f)
"SEC" -- Section 4.05(a)
"Securities Act" -- Section 4.05(a)
"Subsidiary" -- Section 10.11(g)
"Surviving Entity" -- Section 1.01
"Tax Ruling" -- Section 4.10(j)
"Taxes" -- Section 4.10
"Tax Return" -- Section 4.10
"US GAAP" -- Section 4.05(a)
"Yankee Companies" -- Section 4.16
"Y2K Consultant" -- Section 6.01(o)
This AGREEMENT AND PLAN OF MERGER, dated as of February 1, 1999 (this
"Agreement"), is made and entered into by and among NEW ENGLAND ELECTRIC
SYSTEM, a Massachusetts business trust ("NEES"), RESEARCH DRIVE LLC ("LLC"),
a Massachusetts limited liability company which is directly and indirectly
wholly owned by NEES, and EASTERN UTILITIES ASSOCIATES, a Massachusetts
business trust ("EUA").
WHEREAS, the Board of Directors of NEES, the Board of Trustees of EUA and
the members of LLC have each determined that it is advisable and in the best
interests of their respective shareholders and members to consummate, and have
approved, the business combination transaction provided for herein in which LLC
would merge with and into EUA, with EUA being the surviving entity (the
"Merger"), pursuant to the terms and conditions of this Agreement, as a result
of which NEES will own, directly or indirectly, all of the issued and
outstanding common shares of EUA (the "EUA Shares");
WHEREAS, NEES, LLC and EUA desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.02), LLC shall be
merged with and into EUA in accordance with Section 2 of Chapter 182 and
Section 59 of Chapter 156C of the Massachusetts General Laws ("MGL"). At the
Effective Time, the separate existence of LLC shall cease and EUA shall
continue as the surviving entity in the Merger. EUA, after the Effective Time,
is sometimes referred to herein as the "Surviving Entity" and EUA and LLC are
sometimes referred to herein as the "Constituent Entities". The effect and
consequences of the Merger shall be as set forth in Article II.
1.02 Effective Time. Subject to the provisions of this Agreement, on
the Closing Date (as defined in Article III), a certificate of merger shall be
executed and filed by EUA and LLC with the Secretary of the Commonwealth o f
Massachusetts (the "Massachusetts Secretary"). The Merger shall become
effective at the time of the filing of the certificate of merger relating to
the Merger with the Massachusetts Secretary, or at such later time as is
specified in the certificate of merger (such date and time being referred to
herein as the "Effective Time").
1.03 Effects of the Merger. At the Effective Time, the Agreement and
Declaration of Trust of EUA (the "EUA Trust Agreement") as in effect
immediately prior to the Effective Time shall be the agreement and declaration
of trust of the Surviving Entity, until thereafter amended as provided by law
and such agreement and declaration of trust. Subject to the foregoing, the
additional effects of the Merger shall be as provided in the applicable
provisions of Section 2 of Chapter 182 of the MGL and Section 62 of the Limited
Liability Company Act of Massachusetts.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
(a) Membership Interests of LLC. Each one percent of the issued an
outstanding membership interests in LLC shall be converted into one
transferable certificate of participation or share of the Surviving Entity.
(b) Conversion of EUA Shares.
(i) Cancellation of Treasury Shares and Shares Owned by NEES
and Subsidiaries. All EUA Shares that are owned by EUA as treasury shares and
any EUA Shares owned by NEES or any other wholly owned Subsidiary (as defined
in Section 10.11) of NEES shall be canceled and retired and shall cease to
exist and no cash or other consideration shall be delivered in exchange
therefor.
(ii) Conversion of EUA Shares. Each EUA Share issued and
outstanding immediately prior to the Effective Time (other than shares to be
canceled in accordance with Section 2.01(b)(i)) shall be canceled and converted
in accordance with the provision s of this Section 2.01 into the right to
receive cash in the amount (the "Per Share Amount") of $31.00 as such amount
may hereafter be adjusted in accordance with Section 2.01(c) hereof (the
"Merger Consideration"), payable, without interest, to the holder of such EUA
Share, upon surrender, in the manner provided in Section 2.02 hereof, of the
certificate formerly evidencing such share.
(c) Adjustment in Amount of Merger Consideration. In the event that
the Closing Date shall not have occurred on or prior to the date that is the
six (6) month anniversary of the date on which EUA Shareholders' Approval is
obtained (the "Adjustment Date"), the Per Share Amount shall be increased, for
each day after the Adjustment Date up to and including the day which is one day
prior to the earlier of the Closing Date and the Extended Termination Date, by
an amount equal to $0.003.
2.02 Surrender of Shares. (a) Deposit with Paying Agent. Prior to
the Effective Time, NEES shall designate a bank or trust company reasonably
acceptable to EUA to act as agent (the "Paying Agent") for the benefit of the
holders of EUA Shares in connection with the Merger to receive the funds to
which holders of EUA Shares shall become entitled pursuant to Section
2.01(b)(ii) (the "Exchange Fund"). From time to time at, immediately prior to
or after the Effective Time, NEES or LLC shall make or cause to be made
available to the Paying Agent immediately available funds in amounts and at the
times necessary for the payment of the Merger Consideration upon surrender of
Certificates (as defined in Section 2.02(b) ) in accordance with Section
2.02(b), it being understood that any and all interest or other income earned
on funds made available to the Paying Agent pursuant to this Section 2.02(a)
shall belong to and shall be paid (at the time provided for in Section 2.02(e))
as directed by NEES or LLC. Any such funds deposited with the Paying Agent by
NEES shall be invested by the Paying Agent as directed by NEES or LLC.
(b) Exchange Procedure. As soon as practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding EUA Shares (the "Canceled Shares") that
were canceled and became instead the right to receive the Merger Consideration
pursuant to Section 2.01(b)(ii): (i) a letter of transmittal in such form as
NEES and EUA may reasonably agree (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Paying Agent) and (ii) instructions
for effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate or Certificates to the Paying
Agent for cancellation (or to such other agent or agents as may be appointed by
NEES and are reasonably acceptable to EUA), together with a duly executed
letter of transmittal and such other documents as the Paying Agent shall
require, the holder of such Certificate shall be entitled to receive the Merger
Consideration in exchange for each EUA Share formerly evidenced by such
Certificate which such holder has the right to receive pursuant to Section
2.01(b)(ii). In the event of a transfer of ownership of Canceled Shares which
is not registered in the transfer records of EUA, the Merger Consideration in
respect of such Canceled Shares may be given to the transferee thereof if the
Certificate or Certificates representing such Canceled Shares is presented to
the Paying Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence satisfactory to the Paying Agent that any
applicable stock transfer taxes have been paid. At any time after the
Effective Time, each Certificate shall be deemed to represent only the right to
receive the Merger Consideration subject to and upon the surrender of such
Certificate as contemplated by this Section 2.02. No interest shall be paid or
will accrue on the Merger Consideration payable to holders of Certificates
pursuant to Section 2.01(b)(ii).
(c) No Further Ownership Rights in EUA Shares. The Merger
Consideration paid upon the surrender of Certificates in accordance with the
terms of Section 2.01(b)(ii) shall be deemed to have been paid at the Effective
Time in full satisfaction of all rights pertaining to EUA Shares represented
thereby. From and after the Effective Time, the share transfer books of EUA
shall be closed and there shall be no further registration of transfers thereon
of EUA Shares which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to NEES for any
reason, they shall be canceled and exchanged as provided in this Section 2.02.
(d) Lost, Stolen or Destroyed Certificates. In the event any
owner of any Certificate shall claim that such Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
owner of such Certificate and delivery of that affidavit to the Paying Agent
and, if required by NEES or LLC, the posting by such person of a bond in
customary amount as indemnity against any claim that may be made against NEES,
EUA or the Surviving Entity with respect to such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration payable upon due surrender of, and deliverable pursuant to
this Section 2.02 in respect of, EUA Shares to which such Certificate relates.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the shareholders of EUA for one (1) year
after the Effective Time shall be delivered to the Surviving Entity, upon
demand, and any Shareholders of EUA who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Entity (subject to
abandoned property, escheat and other similar laws) as general creditors for
payment of their claim for the Merger Consideration payable upon due surrender
of the Certificates held by them. None of NEES, LLC or the Surviving Entity
shall be liable to any former holder of EUA Shares for the Merger Consideration
delivered to a public official pursuant to any applicable abandon ed property,
escheat or similar law.
2.03 Withholding Rights. Each of the Surviving Entity and NEES shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of EUA Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"), or any other
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by the Surviving Entity or NEES, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of EUA Shares in respect of which such deduction and withholding
was made by the Surviving Entity or NEES, as the case may be.
ARTICLE III
THE CLOSING
The closing of the Merger and other transactions contemplated hereby (the
"Closing") will take place at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00 a.m., local
time, on the second business day following satisfaction or waiver (where
applicable) of the conditions set forth in Article VIII (other than those
conditions that by their nature are to be fulfilled at the Closing, but subject
to the fulfillment or waiver of such conditions ), unless another date, time or
place is agreed to in writing by the parties hereto (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EUA
EUA represents and warrants to NEES and LLC as follows:
4.01 Organization and Qualification. (a) EUA is a voluntary association
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has full power, authority and legal right to
own its property and assets and to transact the business in which it is
engaged. Each of EUA's Subsidiaries is a corporation duly organized or
incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization or incorporation and has full corporate power and
authority to conduct its business as and to the extent now conducted and to
own, use and lease its assets and properties, except where failure to be so
organized or incorporated, existing and in good standing or to have such power
and authority, individually or in the aggregate, could not reasonably be
expected to have an EUA Material Adverse Effect. As used in this Agreement,
the term "EUA Material Adverse Effect" means a material adverse effect on the
business, assets, results of operations, condition (financial or otherwise) or
prospects of EUA and its Subsidiaries taken as a whole. Each of EUA and its
Subsidiaries is duly qualified, licensed or admitted to do business and is in
good standing in each jurisdiction in which the ownership, use or leasing of
its assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where failure to be so
qualified, licensed or admitted and in good standing, individually or in the
aggregate, could not reasonably be expected to have an EUA Material Adverse
Effect. Section 4.01 of the letter dated the date hereof and delivered to NEES
and LLC by EUA con currently with the execution and delivery of this Agreement
(the "EUA Disclosure Letter") sets forth (i) the name and jurisdiction of
incorporation or organization of each Subsidiary of EUA, (ii) such Subsidiary's
authorized capital stock, (iii) the number of issued and outstanding shares of
capital stock of such Subsidiary and (iv) the number of shares of such
Subsidiary held of record by EUA. EUA has previously delivered to NEES correct
and complete copies of the EUA Trust Agreement and the certificate or articles
of organization or incorporation and bylaws (or other comparable charter
documents) of its Subsidiaries.
(b) Section 4.01 of the EUA Disclosure Letter sets forth a
description as of the date hereof, of all EUA Associates, including (i) the
name of each such entity and EUA's interest therein and (ii) a brief
description of the principal line or lines of business conducted by each such
entity. For purposes of this Agreement "EUA Associates" shall mean any
corporation or other entity (including partnerships and other business
associations) that is not a Subsidiary of EUA in which EUA and/or one or more
of its Subsidiaries, directly or indirectly, owns an equity interest (other
than short-term investments in the ordinary course of business) if such
corporation or other entity (including partnerships and other business
associations) contribute s five percent or more of EUA's consolidated revenues,
assets, income or costs.
4.02 Capital Stock. (a) The authorized equity securities of EUA
consists of 36,000,000 EUA Shares, of which 20,435,997 shares were issued and
outstanding as of the close of business on January 29, 1999. As of the close
of business on January 29, 1999, no EUA Shares were held in the treasury of
EUA. Since such date there has been no change in the sum of the issued and
outstanding EUA Shares. All of the issued and outstanding EUA Shares are duly
authorized, validly issued, fully paid and nonassessable. Except pursuant to
this Agreement and except as described in Section 4.02 of the EUA Disclosure
Letter, on the date hereof there are no outstanding subscriptions, options,
warrants, rights (including share appreciation rights), preemptive rights or
other contracts, commitments, understandings or arrangements, including any
right of conversion or exchange under any outstanding security, instrument or
agreement (together, "Options"), obligating EUA or any of its Subsidiaries to
issue or sell any shares of equity securities of EUA or to grant, extend or
enter into any Option with respect thereto. The EUA Disclosure Letter sets
forth all capital stock authorized, issued and outstanding at subsidiary
levels as of the close of business on January 29, 1999.
(b) Except as disclosed in EUA SEC Reports filed prior to the date of
this Agreement or Section 4.02 of the EUA Disclosure Letter, all of the
outstanding shares of capital stock of each Subsidiary of EUA are duly
authorized, validly issued, full y paid and nonassessable and are owned,
beneficially and of record, by EUA or a Subsidiary, which is wholly owned,
directly or indirectly, by EUA, free and clear of any liens, claims, mortgages,
encumbrances, pledges, security interests, equities and charges of any kind
(each a "Lien"). Except as disclosed in EUA SEC Reports filed prior to the
date of this Agreement or Section 4.02 of the EUA Disclosure Letter, there are
no (i) outstanding Options obligating EUA or any of its Subsidiaries to is sue
or sell any shares of capital stock of any Subsidiary of EUA or to grant,
extend or enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any
person other than EUA or a Subsidiary which is wholly owned, directly or
indirectly, by EUA with respect to the voting of, or the right to participate
in, dividends or other earnings on any capital stock of any Subsidiary of EUA.
(c) Except as disclosed in EUA SEC Reports filed prior to the date
of this Agreement or Section 4.02 of the EUA Disclosure Letter, there are no
outstanding contractual obligations of EUA or any Subsidiary of EUA to
repurchase, redeem or otherwise acquire any EUA Shares or any capital stock of
any Subsidiary of EUA or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary of EUA or
any other person.
(d) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of EUA or any Subsidiary of EUA having the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) (together "EUA Voting Debt") on any matters on which Shareholders may
vote are issued or outstanding nor are there any outstanding Options obligating
EUA or any of its Subsidiaries to issue or sell any EUA Voting Debt or to
grant, extend or enter into any Option with respect thereto.
4.03 Authority. EUA has full power and authority to enter into this
Agreement, to perform its obligations hereunder and, subject to obtaining EUA
Shareholders' Approval (as defined in Section 7.03(b)) and EUA Required
Statutory Approvals (as defined in Section 4.04(b)), to consummate the Merger
and other transactions contemplated hereby. The execution, delivery and
performance of this Agreement by EUA and the consummation by EUA of the Merger
and other transactions contemplated hereby have been duly authorized by all
necessary action on the part of EUA, subject to obtaining EUA Shareholders'
Approval with respect to the consummation of the Merger and the other
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by EUA and constitutes a legal, valid and binding
obligation of EUA enforceable against EUA in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by EUA do not, and the performance by EUA of its
obligations hereunder and the consummation of the Merger and other transactions
contemplated hereby will not, conflict with, result in a violation or breach
of, constitute (with or without notice or lapse of time or both) a default
under, result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of EUA
or any of its Subsidiaries or any of the terms, conditions or provisions of (i)
the EUA Trust Agreement or the certificates or articles of incorporation or
organization or bylaws (or other comparable charter documents) of EUA's
Subsidiaries, or (ii) subject to the obtaining of EUA Shareholders' Approval,
EUA Required Consents, EUA Required Statutory Approvals and the taking of any
other actions described in this Section 4.04, (x) any statute, law, rule,
regulation or ordinance (together, "laws"), or any judgment, decree, order,
writ, permit or license (together, "orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision (a "Governmental Authority")
applicable to EUA or any of its Subsidiaries or any of their respective assets
or properties, or (y) subject to obtaining the third-party consents set forth
in Section 4.04 of the EUA Disclosure Letter (the "EUA Required Consents"), any
note, bond, mortgage, security agreement, indenture, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind (together, "Contracts") to which EUA or any of its
Subsidiaries is a party or by which EUA or any of its Subsidiaries or any of
their respective assets or properties is bound, excluding from the foregoing
clauses (x) and (y) such conflicts, violations, breaches, defaults, payments or
reimbursements, terminations, cancellations, modifications, accelerations and
creations and impositions of Liens which, individually or in the aggregate,
could not reasonably be expected to have an EUA Material Adverse Effect.
(b) No declaration, filing or registration with, or notice to or
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by EUA or the consummation by
EUA of the Merger and other transactions contemplated hereby except as
described in Section 4.04 of the EUA Disclosure Letter or the failure of which
to obtain could not reasonably be expected to result in an EUA Material Adverse
Effect (the "EUA Required Statutory Approvals," it being understood that
references in this Agreement to "obtaining" such EUA Required Statutory
Approvals shall mean making such declarations, filings or registrations; giving
such notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law).
4.05 SEC Reports, Financial Statements and Utility Reports. (a)
EUA delivered to NEES prior to the execution of this Agreement a true and
complete copy of each form, report, schedule, registration statement,
registration exemption, if applicable, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed
by EUA or any of its Subsidiaries with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") and the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "Exchange
Act") since December 31, 1995 (as such documents have since the time of their
filing been amended or supplemented, the "EUA SEC Reports"), which are all the
documents (other than preliminary materials) that EUA and its Subsidiaries were
required to file with the SEC under the Securities Act and the Exchange Act
since such date. As of their respective dates, EUA SEC Reports (i) complied as
to form in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be , and (ii) did not 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 light
of the circumstances under which they were made, not misleading. Each of the
audited consolidated financial statements and unaudited interim consolidated
financial statements (including, in each case, the notes, if any, thereto)
included in EUA SEC Reports (the "EUA Financial Statements") complied as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with U.S. generally
accepted accounting principles ("US GAAP") applied on a consistent basis during
the periods involve d (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q of the SEC) and fairly present (subject, in the case of the unaudited
interim financial statements, to normal, recurring year-end audit adjustments
(which are not expected to be, individually or in the aggregate, materially
adverse to EUA and its Subsidiaries taken as a whole)) the consolidated
financial position of EUA and its consolidated subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
cash flows for the respective periods then ended. Except as set forth in
Section 4.05 of the EUA Disclosure Letter, each Subsidiary of EUA is treated as
a consolidated subsidiary of EUA in EUA Financial Statements for all periods
covered thereby.
(b) All filings (other than immaterial filings) required to be made
by EUA or any of its Subsidiaries since December 31, 1995, under the Public
Utility Holding Company Act of 1935 (the "1935 Act"), the Federal Power Act,
the Atomic Energy Act of 1954, the Communications Act of 1934, and applicable
state laws and regulations, have been filed with the SEC, the Federal Energy
Regulatory Commission (the "FERC"), the Department of Energy (the "DOE"), the
Nuclear Regulatory Commission (the "NRC"), the Federal Communications
Commission (the "FCC") or any appropriate state public utility commissions
(including, without limitation, to the extent required, the state public
utility regulatory agencies of Massachusetts, Rhode Island, New Hampshire,
Maine, Vermont and Connecticut as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, including but not limited to
all rates, tariff s, franchises, service agreements and related documents and
all such filings complied, as of their respective dates, in all material
respects with all applicable requirements of the appropriate statutes and the
rules and regulations thereunder.
4.06 Absence of Certain Changes or Events. Except as set forth in
Section 4.06 of the EUA Disclosure Letter or as disclosed in EUA SEC Reports
filed prior to the date of this Agreement since December 31, 1997, EUA and each
of EUA's Subsidiaries have conducted its business only in the ordinary course
of business consistent with past practice and there has not been, and no fact
or condition exists which, individually or in the aggregate, has or could
reasonably be expected to have an EUA Material Adverse Effect.
4.07 Legal Proceedings. Except as disclosed in EUA SEC Reports filed
prior to the date of this Agreement or in Section 4.07 of the EUA Disclosure
Letter and except for environmental matters which are governed by Section 4.
13, (i) there are no actions, claims, hearings, suits, arbitrations or
proceedings pending or, to the knowledge of EUA or any of its Subsidiaries,
threatened against, specifically relating to or affecting, and, to the
knowledge of EUA or any of its Subsidiaries, there are no Governmental
Authority investigations or audits pending or threatened against, specifically
relating to or affecting, EUA or any of its Subsidiaries or any of their
respective assets and properties which, individually or in the aggregate, could
reasonably be expected to have an EUA Material Adverse Effect and (ii) neither
EUA nor any of its Subsidiaries is subject to any order of any Governmental
Authority which, individually or in the aggregate, could reasonably be
expected to have an EUA Material Adverse Effect.
4.08 Information Supplied. (a) The proxy statement relating to
EUA Shareholders' Meeting, as amended or supplemented from time to time (as so
amended and supplemented, the "Proxy Statement"), and any other documents to be
filed by EUA with the SEC (including, without limitation, under the 1935 Act)
or any other Governmental Authority in connection with the Merger and other
transactions contemplated hereby will comply as to form in all material
respects with the requirements of the Exchange Act, the Securities Act and the
1935 Act, as applicable, and will not, on the date of their respective filings
or, in the case of the Proxy Statement, at the date it is mailed to
Shareholders of EUA and at the time of EUA Shareholders' Meeting (as defined in
Section 7.03), contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
(b) Notwithstanding the foregoing provisions of this Section 4.08,
no representation or warranty is made by EUA with respect to statements made or
incorporated by reference in the Proxy Statement based on information supplied
by NEES or LLC for inclusion or incorporation by reference therein.
4.09 Compliance. Except as set forth in Section 4.09 of the EUA
Disclosure Letter, or as disclosed in EUA SEC Reports filed prior to the date
hereof, neither EUA nor any of EUA's Subsidiaries is in violation of, is, to
the knowledge of EUA, under investigation with respect to any violation of, or
has been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any Governmental
Authority, except for possible violations which, individually or in the
aggregate, could not reasonably be expected to have an EUA Material Adverse
Effect. Except as set forth in Section 4.09 of the EUA Disclosure Letter or
as disclosed in EUA SEC Reports filed prior to the date hereof, EUA and EUA's
Subsidiaries have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their businesses as
presently conducted except for such failures which could not reasonably be
expected to have an EUA Material Adverse Effect. Neither EUA nor any of EUA's
Subsidiaries is in breach or violation of, or in default in the performance or
observance of any term or provision of, (i) the EUA Trust Agreement, in the
case of EUA, or articles of incorporation or organization or by-laws, in the
case of EUA's Subsidiaries, or (ii) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which it is a party or by which EUA or any Subsidiary of
EUA is bound or to which any of their respective property is subject, except
for possible violations, breaches or defaults which, individually or in the
aggregate, could not reasonably be expected to have an EUA Material Adverse
Effect.
4.10 Taxes. Except as disclosed in Section 4.10 of the EUA Disclosure
Letter:
(a) Filing of Timely Tax Returns. EUA and each of its Subsidiaries
have timely filed all Tax Returns required to be filed by each of them under
applicable law. All Tax Returns were (and, as to Tax Returns not filed as of
the date hereof, will b e) true, complete and correct;
(b) Payment of Taxes. EUA and each of its Subsidiaries have, within
the time and in the manner prescribed by law, paid (and until the Closing Date
will pay within the time and in the manner prescribed by law) all Taxes that
are currently due and payable except for those contested in good faith and for
which adequate reserves have been taken;
(c) Tax Reserves. EUA and its Subsidiaries have established (and
until the Closing Date will maintain) on their books and records adequate
reserves for all Taxes and for any liability for deferred income taxes in
accordance with GAAP;
(d) Extensions of Time for Filing Tax Returns. Neither EUA nor
any of its Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been filed;
(e) Waivers of Statute of Limitations. Neither EUA nor any of its
Subsidiaries has in effect any extension, outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect
to any Taxes or Tax Returns;
(f) Expiration of Statute of Limitations. The Tax Returns of EUA,
each of its Subsidiaries and any affiliated, consolidated, combined or unitary
group that includes EUA or any of its Subsidiaries either have been examined
and settled with the appropriate Tax authority or closed by virtue of the
expiration of the applicable statute of limitations for all years through and
including 1993;
(g) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently pending or
threatened with regard to any Taxes or Tax Returns of EUA or any of its
Subsidiaries (other than those being contested in good faith and for which
adequate reserves have been established) and no issues have been raised in
writing by any Tax authority in connection with any Tax or Tax Return;
(h) Tax Liens. There are no Tax liens upon any asset of EUA or
any of its Subsidiaries except liens for Taxes not yet due.
(i) Powers of Attorney. No power of attorney currently in force
has been granted by EUA or any of its Subsidiaries concerning any Tax matter;
(j) Tax Rulings. Neither EUA nor any of its Subsidiaries has,
during the five year period prior to the date of this Agreement, received a Tax
Ruling (as defined below) or entered into a Closing Agreement (as defined
below) with any taxing authority. "Tax Ruling", as used in this Agreement,
shall mean a written ruling of a taxing authority relating to Taxes. "Closing
Agreement", as used in this Agreement, shall mean a written and legally binding
agreement with a taxing authority relating to Taxes;
(k) Availability of Tax Returns. EUA and its Subsidiaries have
made available to NEES complete and accurate copies, covering all years ending
on or after December 31, 1993, of (i) all Tax Returns, and any amendments
thereto, filed by EUA or any of its Subsidiaries, (ii) all audit reports
received from any taxing authority relating to any Tax Return filed by EUA or
any of its Subsidiaries and (iii) any Closing Agreements entered into by EUA or
any of its Subsidiaries with any taxing authority.
(l) Tax Sharing Agreements. No agreements relating to the
allocation or sharing of Taxes exist between or among EUA and any of its
Subsidiaries and neither EUA nor any of its Subsidiaries (i) has been a member
of an affiliated group filing a consolidated federal income tax return (other
than a group the common parent of which was EUA) or (ii) has any liability for
Taxes of any Person (other than EUA or its Subsidiaries) under United States
Treasury Regulation Section 1.1502-6 (or any provision of state, local), or
foreign law, as a transferee or successor, by contract or otherwise;
(m) Code Section 481 Adjustments. Neither EUA nor any of its
Subsidiaries is required to include in income any adjustment pursuant to Code
Section 481(a) by reason of a voluntary change in accounting method initiated
by EUA or any of its Subsidiaries, and, the Internal Revenue Service ("IRS")
has not proposed any such adjustment or change in accounting method;
(n) Code Sections 6661 and 6662. All transactions that could give
rise to an understatement of federal income tax, and within the meaning of Code
Section 6662 have been adequately disclosed (or, with respect to Tax Returns
filed following the Closing, will be adequately disclosed) on the Tax Returns
of EUA and its Subsidiaries in accordance with Code Section 6662(d)(2)(B);
(o) Intercompany Transactions. Neither EUA nor any of its
Subsidiaries has engaged in any intercompany transactions within the meaning of
Treasury Regulations' 1.1502-13 for which any income or gain will remain
unrecognized as of the close of t he last taxable year prior to the Closing
Date; and
(p) Foreign Tax Returns. Neither EUA nor any of its Subsidiaries
is required to file a foreign tax return.
"Taxes" as used in this Agreement, shall mean any federal, state, county,
local or foreign taxes, charges, fees, levies, or other assessments, including
all net income, gross income, premiums, sales and use, ad valorem, transfer,
gains, profits, wind fall profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, business and occupation,
employment, disability, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes, other taxes or similar charges of any kind
whatsoever imposed by any governmental entity, whether imposed directly on a
Person or resulting under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise and includes any interest and penalties on or additions
to any such taxes or in respect of a failure to comply with any requirement
relating to any Tax Return. "Tax Return" as used in this Agreement, shall mean
a report, return or other information required to be supplied to a governmental
entity with respect to Taxes including, where permitted or required, combined,
unitary or consolidated returns for any group of entities.
4.11 Employee Benefit Plans; ERISA. (a) Each "employee benefit plan"
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), bonus, deferred compensation, share option or
other written agreement relating to employment or fringe benefits for
employees, former employees, officers, trustees or directors of EUA or any of
its Subsidiaries effective as of the date hereof or providing benefits as of
the date hereof to current employees, former employees, officers, trustees or
directors of EUA or pursuant to which EUA or any of its subsidiaries has or
could reasonably be expected to have any liability (collectively, the "EUA
Employee Benefit Plans") is listed in Section 4.11(a) of the EUA Disclosure
Letter, is in material compliance with applicable law, and has been
administered and operated in all material respects in accordance with its
terms. Each EUA Employee Benefit Plan which is intended to be qualified within
the meaning of Section 401(a) of the Code has received a favorable
determination letter from the IRS as to such qualification and, to the
knowledge of EUA, no event has occurred and no condition exists which could
reasonably be expected to result in the revocation of, or have any adverse
effect on, any such determination.
(b) Complete and correct copies of the following documents have
been made available to NEES as of the date of this Agreement: (i) all EUA
Employee Benefit Plans and any related trust agreements or insurance contracts,
(ii) the most current summary descriptions of each EUA Employee Benefit Plan
subject to ERISA, (iii) the three most recent Form 5500s and Schedules thereto
for each EUA Employee Benefit Plan subject to such reporting, (iv) the most
recent determination of the IRS with respect to the qualified status of each
EUA Employee Benefit Plan that is intended to qualify under Section 401(a) of
the Code, (v) the most recent accountings with respect to each EUA Employee
Benefit Plan funded through a trust and (vi) the most recent actuarial report
of the qualified actuary of each EUA Employee Benefit Plan with respect to
which actuarial valuations are conducted.
(c) Except as set forth in Section 4.11(c) of the EUA Disclosure
Letter, neither EUA nor any Subsidiary maintains or is obligated to provide
benefits under any EUA Employee Benefit Plan (other than as an incidental
benefit under a Plan qualified under Section 401(a) of the Code) which provides
health or welfare benefits to retirees or other terminated employees other than
benefit continuations as required pursuant to Section 601 of ERISA. Each EUA
Employee Benefit Plan subject to the requirements of Section 601 of ERISA has
been operated in material compliance therewith. EUA has not contributed to a
nonconforming group health plan (as defined in Code Section 5000(c)) and no
person under common control with EUA within the meaning of Section 414 of the
Code ("ERISA Affiliate") has incurred a tax liability under Code Section
5000(a) that is or could reasonably be expected to be a liability of EUA's.
(d) Except as set forth in Section 4.11(d) of the EUA Disclosure
Letter, each EUA Employee Benefit Plan covers only employees who are employed
by EUA or a Subsidiary (or former employees or beneficiaries with respect to
service with EUA or a Subsidiary).
(e) Except as set forth in Section 4.11(e) of the EUA Disclosure
Letter, neither EUA, any Subsidiary, any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has, within the five-
year period preceding the date of this Agreement, at any time contributed to
any "multiemployer plan," as that term is defined in Section 4001 of ERISA.
(f) No event has occurred, and there exists no condition or set of
circumstances in connection with any EUA Employee Benefit Plan, under which EUA
or any Subsidiary, directly or indirectly (through any indemnification
agreement or otherwise), could be subject to any liability under Section 409 of
ERISA, Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code
except for instances of non-compliance which, individually or in the aggregate,
could not reasonably be expected to have an EUA Material Adverse Effect.
(g) Neither EUA nor any ERISA Affiliate has incurred any liability
to the Pension Benefit Guaranty Corporation (the "PBGC") under Section
302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise that has not been
satisfied in full and no event or condition exists or has existed which could
reasonably be expected to result in any such material liability. As of the
date of this Agreement, no "reportable event" within the meaning of Section
4043 of ERISA has occurred with respect to any EUA Employee Benefit Plan that
is a defined benefit plan under Section 3(35) of ERISA.
(h) Except as set forth in Section 4.11(h) of the EUA Disclosure
Letter, no employer securities, employer real property or other employer
property is included in the assets of any EUA Employee Benefit Plan.
(i) Full payment has been made of all material amounts which EUA
or any affiliate thereof was required under the terms of EUA Employee Benefit
Plans to have paid as contributions to such plans on or prior to the Effective
Time (excluding any amounts not yet due) and no EUA Employee Benefit Plan which
is subject to Part III of Subtitle B of Title I of ERISA has incurred any
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code, whether or not waived.
(j) Except as set forth in Section 4.11(j) of the EUA Disclosure
Letter, no amounts payable under any EUA Employee Benefit Plan or other
agreement, contract, or arrangement will fail to be deductible for federal
income tax purposes by virtue of Section 280G or Section 162(m) of the Code.
4.12 Labor Matters. As of the date hereof, except as set forth in
Section 4.12 of the EUA Disclosure Letter, neither EUA nor any of its
Subsidiaries is a party to any material collective bargaining agreement or
other labor agreement with any union or labor organization. To the knowledge
of EUA, as of the date hereof, there is no current union representation
question involving employees of EUA or any of its Subsidiaries, nor does EUA
know of any activity or proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees. Except as set forth
in Section 4.12 of the EUA Disclosure Letter, (i) there is no unfair labor
practice, employment discrimination or other employment-related complaint or
proceeding against EUA or any of its Subsidiaries pending or, to the knowledge
of EUA, threatened, which has or could reasonably be expected to have an EUA
Material Adverse Effect, (ii) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of EUA, threatened, against
or involving EUA or any of its Subsidiaries which has or could reasonably be
expected to have, an EUA Material Adverse Effect and (iii) there is no
proceeding, claim, suit, or action pending or, to the knowledge of EUA or any
of its Subsidiaries, threatened, nor, to the knowledge of EUA or any of its
Subsidiaries is there any Governmental Authority investigation pending or
threatened, in respect of which any trustee, director, officer, employee or
agent of EUA or any of its Subsidiaries is or may be entitled to claim
indemnification from EUA or any of its Subsidiaries pursuant to the EUA Trust
Agreement, in the case of EUA, and their respective articles of incorporation
and by-laws, in the case of EUA's Subsidiaries, or as provided in the
indemnification agreements listed in Section 4.12 of the EUA Disclosure Letter.
Except as set forth in Section 4.12 of the EUA Disclosure Letter, EUA and its
Subsidiaries are in compliance with all federal, state and local laws with
respect to employment practices and labor relations, including, without
limitation, any provisions relating to affirmative action, employment
discrimination, wages, hours, collective bargaining, and the payment of social
security and similar taxes, safety and health regulations and mass layoffs and
plant closings except for such instances of noncompliance which, individually
or in the aggregate, could not reasonably be expected to have an EUA Material
Adverse Effect.
4.13 Environmental Matters. Except as disclosed in EUA SEC Reports
filed prior to the date of this Agreement or in Section 4.13 of the EUA
Disclosure Letter:
(a) (i) Each of EUA and its Subsidiaries is in
compliance with all applicable Environmental Laws (as hereinafter defined),
except where the failure to be in compliance, in the aggregate could not
reasonably be expected to result in an EUA Material Adverse Effect; and
(ii) Neither EUA nor any of its Subsidiaries has
received any written communication from any person or Governmental Authority
that alleges that EUA or any of its Subsidiaries is not in such compliance
(including the materiality qualifier set forth in clause (i) above) with
applicable Environmental Laws.
(b) Each of EUA and its Subsidiaries has obtained all
environmental, health and safety permits and governmental authorizations
(collectively, the "Environmental Permits") necessary for the construction of
their facilities and the conduct of their operations, as applicable, and all
such Environmental Permits are in good standing or, where applicable, a renewal
application has been timely filed and agency approval is expected in the
ordinary course of business, and EUA and its Subsidiaries are in compliance
with all terms and conditions of the Environmental Permits, except where the
failure have such Environmental Permits, file a renewal application for such
Environmental Permits, or to be in compliance with such Environmental Permits,
in the aggregate could not reasonably be expected to result in an EUA Material
Adverse Effect.
(c) There is no Environmental Claim (as hereinafter
defined) that could, individually or in the aggregate, reasonably be expected
to have an EUA Material Adverse Effect pending (i) against EUA or any of its
Subsidiaries; (ii) against any person o r entity whose liability for any
Environmental Claim EUA or any of its Subsidiaries has or may have retained or
assumed either contractually or by operation of law; or (iii) against any real
or personal property or operations which EUA or any of its Subsidiaries owns,
leases or manages, in whole or in part.
(d) To the knowledge of EUA there have not been any
material Releases (as hereinafter defined) of any Hazardous Material (as
hereinafter defined) that would be reasonably likely to form the basis of any
material Environmental Claim against EUA or any of its Subsidiaries, or against
any person or entity whose liability for any material Environmental Claim EUA
or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law, except for any Environmental Claim that,
individually or in the aggregate, could not reasonably be expected to have an
EUA Material Adverse Effect.
(e) To the knowledge of EUA with respect to any
predecessor of EUA or any of its Subsidiaries, there is no material
Environmental Claim pending or threatened, and there has been no Release of
Hazardous Materials that could reasonably be expected to form the basis of any
material Environmental Claim except for any Environmental Claim that,
individually or in the aggregate, could not be reasonably be expected to have
an EUA Material Adverse Effect.
(f) As used in this Section 4.13:
(i) "Environmental Claim" means any and all written
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices or
noncompliance, liability or violation by any person or entity (including any
Governmental Authority) alleging potential liability (including, without
limitation, potential responsibility or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs
, remedial costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based on or resulting from
(A) the presence, or Release or threatened Release
into the environment, of any Hazardous Materials at any location, whether or
not owned, operated, leased or managed by EUA or any of its Subsidiaries; or
(B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law; or
(C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials;
(ii) "Environmental Laws" means all federal, state
and local laws, rules and regulations and binding interpretation thereof,
relating to pollution, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
protection of human health as it relates to the environment including, without
limitation, laws and regulations relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials;
(iii) "Hazardous Materials" means (A) any petroleum
or petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls; and (B) any chemicals, materials or substances which are now defined
as or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", or words of similar import,
under any Environmental Law; and (c) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which EUA or any of its Subsidiaries (x)
operates or (y) stores, treats or disposes of Hazardous Materials; and
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
4.14 Regulation as a Utility. (a) EUA is a public utility holding
company registered under Section 5, and subject to the provisions, of the 1935
Act. Section 4.14 of the EUA Disclosure Letter lists the subsidiaries of EUA
that are "public utility companies" within the meaning of Section 2(a)(5) of
the 1935 Act and lists the jurisdictions where each such Subsidiary is subject
to regulation as a public utility company or public service company. Except as
set forth above and as set forth in Section 4.14 of the EUA Disclosure Letter,
neither EUA nor any "subsidiary company" or "affiliate" of EUA is subject to
regulation as a public utility or public service company (or similar
designation) by the federal government of the United States, any state in the
United States or any political subdivision thereof, or any foreign country.
(b) As used in this Section 4.14, the terms "subsidiary
company" and "affiliate" shall have the respective meanings ascribed to them in
Section 2(a)(8) and Section 2(a)(11), respectively, of the 1935 Act.
4.15 Insurance. Except as set forth in Section 4.15 of the EUA
Disclosure Letter, each of EUA and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies in the United States conducting the
business conducted by EUA and its Subsidiaries during such time period. Except
as set forth in Section 4.15 of the EUA Disclosure Letter, neither EUA nor any
of its Subsidiaries has received any notice of cancellation or termination with
respect to any material insurance policy of EUA or any of its Subsidiaries.
The insurance policies of EUA and each of its Subsidiaries are valid and
enforceable policies.
4.16 Nuclear Facilities. Montaup Electric Company, a Subsidiary of EUA,
is a minority common stockholder of each of Connecticut Yankee Atomic Power
Company, Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power
Corporation and Yankee Atomic Electric Company (the "Yankee Companies") and a
minority joint owner in Millstone 3 and Seabrook 1 (collectively, as described
in Section 4.16 of the EUA Disclosure Letter, the "EUA Nuclear Facilities").
With respect to its ownership of Millstone 3 and Seabrook 1, Montaup Electric
Company holds the required operating licenses from the NRC. With respect to
the Yankee Companies, each Yankee Company holds its own operating license from
the NRC. Because it is a minority stockholder or a minority joint owner,
Montaup Electric Company does not have responsibility for the operation of EUA
Nuclear Facilities. Except as set forth in Section 4.16 of the EUA Disclosure
Letter or as disclosed in EUA SEC Reports filed prior to the date hereof, to
the knowledge of EUA, neither EUA nor any of its Subsidiaries is in violation
of any applicable health, safety, regulatory and other legal requirement,
including NRC laws and regulations and Environmental Laws, applicable t o EUA
Nuclear Facilities except for such failure to comply as could not reasonably be
expected to have a material adverse effect with respect to EUA Nuclear
Facilities and the ownership interest of EUA therein. To the knowledge of EUA,
each of EUA Nuclear Facilities maintains emergency plans designed to respond to
an unplanned release therefrom of radioactive materials into the environment
and insurance coverages consistent with industry practice. EUA has funded, or
has caused the funding of, its portion of the decommissioning cost of each of
the EUA Nuclear Facilities and the storage of spent nuclear fuel consistent
with the most recently approved plan for each of the EUA Nuclear Facilities and
FERC authorized rates. Except as set forth in Section 4.16 of the EUA
Disclosure Letter, to the knowledge of EUA, no EUA Nuclear Facility is as of
the date of this Agreement on the List of Nuclear Power Plants Warranting
Increased Regulatory Attention maintained by the NRC.
4.17 Vote Required. The affirmative vote of two-thirds of the
outstanding EUA Shares voting as a single class (with each EUA Share having one
vote per share) with respect to the approval of the Merger and other
transaction s contemplated hereby is the only vote of the holders of any class
or series of equity securities of EUA or its Subsidiaries required to approve
this Agreement and approve the Merger and other transactions contemplated
hereby.
4.18 Opinion of Financial Advisor. EUA has received the opinion of
Salomon Smith Barney Inc., dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair from a financial point
of view to the holders of EUA Shares. A true and complete copy of the written
opinion will be delivered to NEES promptly after receipt thereof by EUA.
4.19 Ownership of NEES Common Shares. Neither EUA nor any of its
Subsidiaries or other affiliates beneficially owns any NEES Common Shares.
4.20 State Anti-Takeover Statutes. EUA has taken all necessary
actions so that the provisions of Chapters 110C, 110D or 110F of the MGL will
not apply to this Agreement, the Merger or other transactions con templated
hereby or thereby.
4.21 Year 2000. The Information Systems operated by EUA and its
Subsidiaries which is used in the conduct of their business is capable of
providing or being adapted to provide uninterrupted millennium functionality to
record, store , process and present calendar dates falling on or after January
1, 2000 in substantially the same manner and with the same functionality as
such Information Systems record, store, process and present such calendar dates
falling on or before December 31, 1999 other than such interruptions in
millennium functionality that could not, individually or in the aggregate,
reasonably be expected to result in a EUA Material Adverse Effect. EUA
reasonably believes as of the date hereof that the remaining cost of
adaptations referred to in the foregoing sentence will not exceed the amounts
reflected in the Form 10-Q filed by EUA for the quarter ended September 30,
1998 (excluding the fees and costs of any Y2K Consultant retained pursuant to
Section 6 .01(o) hereof and of the implementation of any recommendations by
such Y2K Consultant actually made by EUA that are not already part of EUA's
compliance plan as of the date hereof). "Information Systems" means mainframe
and midrange hardware, operating system software and applications programs;
network and desktop (PC) hardware, operating system software and applications
programs; EDI (Electronic Date Interchange) and FTP (File Transfer Protocol)
software; and embedded systems hardware and applications software.
4.22 EUA Associates. The representations and warranties set forth in
Sections 4.04(a), 4.06, 4.07, 4.09, 4.12 and 4.13 are true and correct in all
material respects with regard to EUA Associates.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NEES
NEES represents and warrants to EUA as follows:
5.01 Organization and Qualification. NEES is a voluntary association
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has full power, authority and legal right to
own its property and assets and to transact the business in which it is
engaged. Each of the NEES Subsidiaries is a corporation duly organized or
incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization or incorporation and has full corporate power and
authority to conduct its business as and to the extent now conducted and to
own, use and lease its assets and properties, except where failure to be so
organized or incorporated, existing and in good standing or to have such power
and authority, individually or in the aggregate, could not reasonably be
expected to have a NEES Material Adverse Effect. As used in this Agreement,
the term "NEES Material Adverse Effect" means a material adverse effect on the
business, assets, results of operations, condition (financial or otherwise) or
prospects of NEES and its Subsidiaries taken as a whole. LLC is a limited
liability company validly existing under the laws of the Commonwealth of
Massachusetts. LLC was formed solely for the purpose of engaging in the Merger
and other transactions contemplated hereby, has engaged in no other business
activities (other than in connection with the formation and capitalization of
LLC pursuant to or in accordance with the LLC Agreement (as defined below)) and
has conducted its operations only as contemplated hereby and by the LLC
Agreement. Each of NEES and its Subsidiaries is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except where failure to be so qualified, licensed or admitted and in
good standing, individually or in the aggregate, could not reasonably be
expected to have a NEES Material Adverse Effect. NEES has previously delivered
to EUA correct and complete copies of its Agreement and Declaration of Trust
(the "NEES Trust Agreement") and the articles of association of LLC.
5.02 Authority. Each of NEES and LLC has full power and authority to
enter into this Agreement, and to perform its obligations hereunder, and to
consummate the Merger and other transactions contemplated hereby. The
execution, delivery and performance of this Agreement by each of NEES and LLC
and the consummation by each of NEES and LLC of the Merger and other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of NEES and all necessary action on the part of
LLC. This Agreement has been duly and validly executed and delivered by each
of NEES and LLC and constitutes a legal, valid and binding obligation of each
of NEES and LLC enforceable against each of NEES and LLC i n accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.03 Capital Stock. The authorized equity securities of NEES
consists of 150,000,000 common shares of NEES (the "NEES Shares"), of which
59,170,986 shares were issued and outstanding as of the close of business on
January 29, 1999. As of the close of business on January 29, 1999, 5,798,666
NEES Shares were held in the treasury of NEES. All of the issued and
outstanding NEES Shares are duly authorized, validly issued, fully paid and
nonassessable. Except as may be provided by the New England Electric System
Companies' Incentive Share Plan, the New England Electric System Companies
Incentive Thrift Plan I, the New England Electric System Companies Incentive
Thrift Plan II, the New England Electric Companies Long -Term Performance Share
Award Plan, and the New England Electric System Directors' annual retainer
shares, and except as set forth in Section 5.03 of the letter dated the date
hereof and delivered to EUA by NEES and LLC concurrently with the execution and
delivery of this Agreement (the "NEES Disclosure Letter"), on the date hereof
there are no outstanding Options obligating NEES or any of its Subsidiaries to
issue or sell any shares of equity securities of NEES or to grant, extend or
enter into any Option with respect thereto.
5.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by each of NEES and LLC do not, and the performance
by each of NEES and LLC of its obligations here under and the consummation of
the Merger and other transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon any
of the assets or properties of NEES, or LLC under, any of the terms, conditions
or provisions of (i) the NEES Agreement and Declaration of Trust or the
articles of organization of LLC, (ii) subject to the actions described in
paragraph (b) of this Section, (x) any laws or orders of any Governmental
Authority applicable to NEES or LLC or any of their respective assets or
properties, or (y) subject to obtaining the third-party consents (the "NEES
Required Consents") set forth in Section 5.04 of the NEES Disclosure Letter any
Contracts to which NEES is a party or by which NEES or any of its Subsidiaries
or any of their respective assets or properties is bound, excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not reasonably be expected
to have a NEES Material Adverse Effect.
(b) No declaration, filing or registration with, or notice to
or authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by NEES or LLC or
the consummation by NEES or LLC of the Merger and other transactions
contemplated hereby except as described in Section 5.04 of the NEES Disclosure
Letter or the failure of which to obtain could not reasonably be expected to
result in a NEES Material Adverse Effect (the "NEES Required Statutory
Approvals," it being understood that references in this Agreement to
"obtaining" such NEES Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire
as are necessary to avoid a violation of law).
5.05 Information Supplied. (a) The information supplied by NEES or LLC
and included in the Proxy Statement with the written consent of NEES or LLC, as
the case may be, will not, at the date mailed to EUA's Shareholders or at the
time of EUA Shareholder's Meeting, contain any untrue statements 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.
(b) Notwithstanding the foregoing provisions of this Section
5.05, no representation or warranty is made by NEES with respect to statements
made or incorporated by reference in the Proxy Statement based on information
supplied by EUA for inclusion or incorporation by reference therein or based on
information which is not made in or incorporated by reference in such documents
but which should have been disclosed pursuant to this Section 5.05.
5.06 Compliance. Except as set forth in Section 5.06 of the NEES
Disclosure Letter, or as disclosed in the NEES Reports filed prior to the date
hereof, NEES is not in violation of, is, to the knowledge of NEES, under
investigation with respect to any violation of, or has been given notice or
been charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for possible violations which, individually or in the aggregate, could
not reasonably be expected to have a NEES Material Adverse Effect. Except as
set forth in Section 5.06 of the NEES Disclosure Letter or as disclosed in the
NEES Reports filed prior to the date hereof, NEES and its Subsidiaries have all
material permits, licenses and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted which
are material to the operation of the businesses of NEES. NEES is not in breach
or violation of, or in default in the performance or observance of, any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default by NEES under (i) the NEES Agreement
and Declaration of Trust or by-laws or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument t o which it is a party or by which NEES is bound
or to which any of their respective property is subject, except for possible
violations, breaches or defaults which, individually or in the aggregate, could
not reasonably be expected to have a NEES Material Adverse Effect.
5.07 Financing. NEES has or will have available, prior to the Effective
Time, sufficient cash in immediately available funds to pay or to cause LLC to
pay the Merger Consideration pursuant to Article II hereof and to consummate
the Merger and other transactions contemplated hereby.
5.08 No Vote Required. No vote of the NEES Shares or of any class or
series of equity securities of NEES or its Subsidiaries is necessary for the
approval of the Merger and other transactions contemplated hereby.
5.09 Ownership of EUA Shares. Neither NEES nor any of its
Subsidiaries or other affiliates beneficially owns any EUA Shares.
5.10 Merger with The National Grid Group plc. NEES has entered into an
Agreement and Plan of Merger dated as of December 11, 1998 by and among The
National Grid Group plc ("National Grid Group"), NGG Holdings LLC (formerly
known as Iosta LLC) and NEES (the "National Grid Merger Agreement"). Pursuant
to Section 6.01 of the National Grid Merger Agreement, NEES has provided a copy
of this Agreement to National Grid Group, and National Grid Group
has given NEES its written consent to enter into this Agreement and consummate
the Merger on the terms set forth in this Agreement. Prior to the execution
of this Agreement, NEES has provided EUA with a copy of such written consent.
ARTICLE VI
COVENANTS
6.01 Covenants of EUA. At all times from and after the date hereof
until the Effective Time, EUA covenants and agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as set forth in Section 6.01 of the EUA Disclosure Letter, or to
the extent that NEES shall otherwise previously consent in writing):
(a) Ordinary Course. EUA and each of its Subsidiaries shall
conduct their businesses only in, and EUA and each of its Subsidiaries shall
not take any action except in, the ordinary course consistent with good utility
practice. Without limiting the generality of the foregoing, EUA and its
Subsidiaries shall use all commercially reasonable efforts to preserve intact
in all material respects their present business organizations and reputation,
to maintain in effect all existing permits, to keep available the services of
their key officers and employees, to maintain their assets and properties in
good working order and condition, ordinary wear and tear excepted, to maintain
insurance on their tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve their
relationships with customers and suppliers and others having significant
business dealings with them and to comply in all material respects with all
laws and orders of all Governmental Authorities applicable to them.
(b) Charter Documents. EUA shall not, nor shall it permit any
of its Subsidiaries to, amend or propose to amend the EUA Trust Agreement, in
the case of EUA, and its certificate or articles of incorporation or
organization or bylaws (or other comparable charter documents), in the case of
EUA's Subsidiaries.
(c) Dividends. EUA shall not, nor shall it permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividends on, or make other
distributions in respect of, any of its capital stock or share capital, except:
(A) that EUA may continue the declaration and payment of
regular quarterly dividends on EUA Shares with usual record and payment dates
not, in any fiscal year, in excess of the dividend for the comparable period in
the prior fiscal year;
(B) that the Subsidiaries of EUA set forth in Section
6.01(c) of the EUA Disclosure Letter may continue the declaration and payment
of dividends on preferred stock in accordance with the terms of such stock,
with the record and payment dates and in the amounts set forth in Section
6.01(c) of the EUA Disclosure Letter;
(C) if the Effective Time does not occur between a record
date and payment date of a regular quarterly dividend, for a special dividend
on EUA Shares with respect to the quarter in which the Effective Time occurs
with a record date on or prior to the date on which the Effective Time occurs,
which does not exceed an amount equal to the product of (x) the number of days
between the last payment date of a regular quarterly dividend and the record
date of such special dividend, multiplied by (y) $.0045; and
(D) for dividends and distributions (including
liquidating distributions) by a direct or indirect Subsidiary of EUA to its
parent.
(ii) split, combine, subdivide, reclassify or take similar action with respect
to any of its capital stock or share capital or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or comprised in its share capital,
(iii) adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or (iv) directly or
indirectly redeem, repurchase or otherwise acquire any shares of its capital
stock or any Option with respect thereto except:
(A) in connection with intercompany purchases of capital
stock or share capital,
(B) for the purpose of funding EUA's dividend
reinvestment and share purchase plan in accordance with past practice, or
(C) subject to EUA's obligations under the Securities Act
and the Exchange Act, pursuant to EUA's previously announced share repurchase
program provided that the number of EUA Shares repurchased does not exceed
3,000,000 and the price paid per share does not exceed 95% of the Per Share
Amount.
(d) Share Issuances. EUA shall not, nor shall it permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any Option
with respect thereto (other than the issuance by a wholly owned Subsidiary of
its capital stock to its direct or indirect parent corporation, or modify or
amend any right of any holder of outstanding shares of capital stock or Options
with respect thereto).
(e) Acquisitions. EUA shall not, nor shall it permit any
of its Subsidiaries to acquire or agree to acquire (by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial portion
of the assets of, or by any other manner) any business or any corporation,
partnership, association or other business organization or division thereof.
(f) Dispositions. EUA shall not, nor shall it permit
any of its Subsidiaries to sell, lease, securitize, grant any security interest
in or otherwise dispose of or encumber any of its assets or properties, other
than dispositions in the ordinary course of its business consistent with past
practice and having an aggregate value of less than $1,000,000 for each
disposition and $5,000,000 in the aggregate.
(g) Indebtedness. EUA shall not, nor shall it permit
any of its Subsidiaries to incur or guarantee any indebtedness (including any
debt borrowed or guaranteed or otherwise assumed, including, without
limitation, the issuance of debt securities or warrants or rights to acquire
debt) or enter into any "keep well" or other agreement to maintain any
financial condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing other than (i) short-term in debtedness
in the ordinary course of business consistent with past practice (such as the
issuance of commercial paper or the use of existing credit facilities) in
amounts not exceeding the amounts set forth in Section 6.01(g) of the EUA
Disclosure Letter, (ii) long-term indebtedness in connection with the
refinancing of existing indebtedness either at its stated maturity or at a
lower cost of funds (calculating such cost on an aggregate after-tax basis) or
(iii) guarantees or "keep well" agreements in favor of wholly owned
Subsidiaries of EUA in connection with the conduct of the business of such
wholly owned Subsidiaries of EUA not aggregating more than $1,000,000.
(h) Capital Expenditures. Except (i) as required by law
or (ii) as reasonably deemed necessary by EUA after consulting with NEES
following a catastrophic event, such as a major storm, EUA shall not, nor shall
it permit any of its Subsidiaries to make any capital expenditures or
commitments during any fiscal year that is in excess of 110% of (i) the
aggregate amount set forth in Section 6.01(h) of the EUA Disclosure Letter with
respect to EUA and its Subsidiaries that are public utility companies within
the meaning of Section 2(a)(5) of the 1935 Act or (ii) the amount set forth in
Section 6.01(h) of the EUA Disclosure Letter with respect to each of EUA's
other Subsidiaries.
(i) Employee Benefits. EUA shall not, nor shall it
permit any of its Subsidiaries to enter into, adopt, amend (except as may be
required by applicable law) or terminate any EUA Employee Benefit Plan, or
other agreement, arrangement, plan or policy between EUA or one of its
Subsidiaries and one or more of its trustees, directors, officers, employees or
former employees, or, except for normal increases in the ordinary course of
business, (a) increase in any manner the compensation or fringe benefits of any
trustee, director or executive officer, (b) increase in any manner the
compensation or fringe benefits of any employee, (c) pay any benefit not
required by any plan or arrangement in effect as of the date hereof or, (d)
cause any trustee, director, officer, employee or former employee of EUA to
accrue or receive additional benefits, accelerate vesting or accelerate the
payment of any benefits under any EUA Employee Benefit Plan, or other
agreement, arrangement, plan or policy. EU A, prior to the Closing Date, shall
take all necessary action and make all necessary amendments to its stock-based
plans so that all such plans will be in a form that allows the plans to
function after the Effective Time and after any merger of EUA a nd its
Subsidiaries into NEES or its Subsidiaries. EUA, prior to the Closing Date,
shall take all necessary actions, in a manner satisfactory to NEES, so that on
or after the Closing Date, neither EUA, the Surviving Entity nor their
affiliates' stock or securities will be required to be held in, or distributed
pursuant to, any EUA Employee Benefit Plan.
(j) Labor Matters. Notwithstanding any other provision
of this Agreement to the contrary, EUA or its Subsidiaries may negotiate
successor collective bargaining agreements to those referenced in Section 4.12
hereof, and may negotiate other collective bargaining agreements or
arrangements as required by law or for the purpose of implementing the
agreements referenced in Section 4.12 hereof. EUA will keep NEES informed as
to the status of, and will consult with NEES as to the strategy for, all
negotiations with collective bargaining representatives. EUA and its
Subsidiaries shall act prudently and reasonably and consistent with their
obligation under applicable law in such negotiations.
(k) Discharge of Liabilities. EUA shall not, nor shall
it permit its Subsidiaries to, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice (which includes
the payment of final and unappealable judgments) or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of such
party included in EUA SEC Reports, or incurred in the ordinary course of
business consistent with past practice.
(l) Contracts. EUA shall not, nor shall it permit its
Subsidiaries, except in the ordinary course of business consistent with past
practice or as set forth in Section 6.01(l) of the EUA Disclosure Letter, (i)
to modify, amend, terminate or fail to use commercially reasonable efforts to
renew any material Contract to which EUA or any of its Subsidiaries is a party
or waive, release or assign any material rights or claims or (ii) to enter into
any new material Contracts except as expressly permitted by Sections 6.01 (f),
(g) or (i) and 7.06 hereof.
(m) Equity Investments. EUA shall not, nor shall it
permit its Subsidiaries or affiliates to, make equity contributions to non-
affiliates or to its non-utility Subsidiaries.
(n) Loans. EUA shall not, nor shall it permit its
Subsidiaries or affiliates to, loan money to non-affiliates or to its non-
utility Subsidiaries.
(o) Year 2000. EUA, within 15 days of the date of this
Agreement, shall engage a qualified third party ("Y2K Consultant") to conduct a
detailed assessment of the adequacy and state of completion of its Year 2000
Program, including but not limited to assessment and testing of its customer,
accounting, and operational systems. The Y2K Consultant and scope of work of
the Y2K Consultant shall be acceptable to NEES. Such assessment and testing
shall be completed as soon thereafter as practicable. EUA shall have such
assessment updated by the Y2K Consultant at the end of each fiscal quarter of
1999. EUA shall allow designated NEES personnel and representatives access to
the Y2K Consultant's personnel, reports and recommendations and access to EUA's
personnel, documents, and information related to the Y2K issue. EUA and the
third party shall meet with such designated NEES personnel and representatives
on a periodic basis (but not less frequently than monthly) to update NEES on
EUA's Year 2000 Program. If this Agreement is terminated pursuant to Section
9.01 hereof, NEES shall reimburse EUA for the costs and expenses of the Y2K
Consultant.
(p) Insurance. EUA shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance companies (or
through self-insurance, consistent with past practice) insurance in such
amounts and against such risks and losses as are customary for companies
engaged in their respective businesses.
(q) 1935 Act. EUA shall not, nor shall it permit any of
its Subsidiaries to, engage in any activities which would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act.
(r) Regulatory Matters. Subject to applicable law and
except for non-material filings in the ordinary course of business consistent
with past practice, EUA shall consult with NEES prior to implementing any
changes in its or any of its Subsidiaries' rates or charges, standards of
service or accounting or executing any agreement with respect thereto that is
otherwise permitted under this Agreement and shall, and shall cause its
Subsidiaries to, deliver to NEES a copy of each such filing or agreement at
least four (4) business days prior to the filing or execution thereof so that
NEES may comment thereon. EUA shall, and shall cause its Subsidiaries to, make
all such filings (i) only in the ordinary course of business consistent with
past practice or (ii) as required by a Governmental Authority or regulatory
agency with appropriate jurisdiction.
(s) Accounting. EUA shall not, nor shall it permit any
of its Subsidiaries to make any changes in their accounting methods, policies
or procedures, except as required by law, rule, regulation or applicable
generally accepted accounting principles;
(t) Tax Status. Neither EUA nor any of its Subsidiaries
shall (i) make or rescind any material express or deemed election relating to
Taxes, (ii) make a request for a Tax Ruling or enter into a Closing Agreement,
(iii) settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit, or controversy relating to Taxes
or (iv) change in any material respect any of its methods of reporting income,
deductions or accounting for federal income tax purposes from those employed in
the preparation of its federal income Tax Return for the taxable year ending
December 31, 1997, except as may be required by applicable law.
(u) No Breach. EUA shall not, nor shall it permit any
of its Subsidiaries to willfully take or fail to take any action that would or
is reasonably likely to result in (i) a material breach of any provision of
this Agreement or (ii) its representations and warranties set forth in this
Agreement being untrue in any material respect on and as of the Closing Date.
(v) Advice of Changes. EUA shall confer with NEES on a
regular and frequent basis with respect to EUA's business and operations and
other matters relevant to the Merger to the extent permitted by law, and shall
promptly advise NEES, orally and i n writing, of any material change or event,
including, without limitation, any complaint, investigation or hearing by any
Governmental Authority (or communication indicating the same may be
contemplated) or the institution or threat of material litigation; provided
that EUA shall not be required to make any disclosure to the extent such
disclosure would constitute a violation of any applicable law or regulation.
(w) Notice and Cure. EUA will notify NEES in writing of, and
will use all commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance, as soon as practical after it becomes known
to EUA, that causes or will or may be likely to cause any covenant or agreement
of EUA under this Agreement to be breached or that renders or will render
untrue in any material respect any representation or warranty of EUA contained
in this Agreement. EUA also will notify NEES in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any material
violation or breach, as soon as practical after it becomes known to EUA, of any
representation, warranty, covenant or agreement made by EUA. No notice given
pursuant to this paragraph shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein.
(x) Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, EUA will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the Merger and other
transactions contemplated by this Agreement, and EUA will not, nor will it
permit any of its Subsidiaries to, take or fail to take any action that could
be reasonably expected to result in the nonfulfillment of any such condition.
(y) Third Party Standstill Agreements. Except as
provided in Section 7.08 hereto, during the period from the date of this
Agreement through the Effective Time, neither EUA nor any of its Subsidiaries
shall terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it is a party. During such period, EUA shall
take all steps necessary to enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreement.
6.02 Covenants of NEES. At all times from and after the date hereof
until the Effective Time, NEES covenants and agrees that (except as expressly
contemplated or permitted by this Agreement or to the extent that EUA shall
otherwise previously consent in writing):
(a) No Breach. NEES shall not, nor shall it permit any of its
Subsidiaries to, except as otherwise expressly provided for in this Agreement,
willfully take or fail to take any action that would or is reasonably likely to
result in (i) a material breach of any of its covenants or agreements
contained in this Agreement or (ii) any of its representations and warranties
set forth in Sections 5.01, 5.02, 5.03, 5.04, 5.05, 5.06, 5.07, 5.08 and 5.09
of this Agreement being untrue in any material respect on and as of the Closing
Date.
(b) Advice of Changes. NEES shall confer with EUA on a regular
and frequent basis with respect to any matter having, or which, insofar as can
be reasonably foreseen, could reasonably be expected to have, a NEES Material
Adverse Effect or materially impair the ability of NEES to consummate the
Merger and other transactions contemplated hereby; provided that NEES shall not
be required to make any disclosure to the extent such disclosure would
constitute a violation of any applicable law or regulation.
(c) Notice and Cure. NEES will notify EUA in writing of, and will
use all commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practical after it becomes known to
NEES, that causes or will or may be likely to cause any covenant or agreement
of NEES under this Agreement to be breached or that renders or will render
untrue in any material respect any representation or warranty of NEES contained
in this Agreement. NEES also will notify EUA in writing of, and will use all
commercially reasonable efforts to cure before the Closing, any material
violation or breach, as soon as practical after it becomes known to such party,
of any representation, warranty, covenant or agreement made by NEES. No notice
given pursuant to this paragraph shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein.
(d) Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, NEES will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to its obligations contained in this
Agreement and to consummate and make effective the Merger and other
transactions contemplated by this Agreement, and NEES will not, nor will it
permit any of its Subsidiaries to, take or fail to take any action that could
be reasonably expected to result in the nonfulfillment of any such condition.
(e) Conduct of Business of LLC. Prior to the Effective Time,
except as may be required by applicable law and subject to the other provisions
of this Agreement, NEES shall cause LLC to (i) perform its obligations under
this Agreement in accordance with its terms, and (ii) not engage directly or
indirectly in any business or activities of any type or kind and not enter into
any agreements or arrangements with any person, or be subject to or bound by
any obligation or undertaking, which is inconsistent with this Agreement.
(f) Certain Mergers. NEES shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity in, 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 assets if the entering into of a definitive agreement
relating to or the consummation of such acquisition, merger or consolidation
could reasonably be expected to (i) impose any material delay in the obtaining
of, or significantly increase the risk of not obtaining, any authorizations,
consents, orders, declarations or approvals of any Governmental Authority
necessary to consummate the Merger or the expiration or termination of any
applicable waiting period, (ii) significantly increase the risk of any
Governmental Authority entering an order prohibiting the consummation of the
Merger, (iii) significantly increase the risk of not being able to remove any
such order on appeal or otherwise or (iv) materially delay the consummation of
the Merger.
6.03 Additional Covenants by NEES and EUA.
(a) Control of Other Party's Business. Nothing contained in this
Agreement shall give NEES, directly or indirectly, the right to control or
direct EUA's operations prior to the Effective Time. Nothing contained in this
Agreement shall give EUA, directly or indirectly, the right to control or
direct NEES' operations prior to the Effective Time. Prior to the Effective
Time, each of EUA and NEES shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
(b) Transition Steering Team. As soon as reasonably practicable
after the date hereof, NEES and EUA shall create a special transition steering
team, with representation from EUA and NEES, that will develop recommendations
concerning the future structure and operations of EUA after the Effective Time,
subject to applicable law. The members of the transition steering team shall
be appointed by the Chief Executive Officers of NEES and EUA. The functions of
the transition steering team shall include (i) to direct the exchange of
information and documents between the parties and their Subsidiaries as
contemplated by Section 7.01 and (ii) the development of regulatory plans and
proposals, corporate organizational and management plans, workforce combination
proposals, and such other matters as they deem appropriate.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Access to Information. EUA shall, and shall cause each of its
Subsidiaries to, and shall use commercially reasonable efforts to cause EUA
Associates to, throughout the period from the date hereof to the Effective Time
to the extent permitted by law, (i) provide NEES and its Representatives with
full access, upon reasonable prior notice and during normal business hours, to
all facilities, operations, officers (including EUA's environmental, health and
safety personnel), employees, agents and accountants of EUA and its
Subsidiaries and Associates and their respective assets, properties, books and
records, to the extent EUA or any Subsidiary of EUA or EUA Associate is not
under a legal obligation not to provide access or to the extent that such
access would not constitute a waiver of the attorney client privilege and does
not unreasonably interfere with the business and operations of EUA and its
Subsidiaries and Associates and (ii) furnish promptly to such persons (x) a
copy of each report, statement, schedule and other document filed or received
by EUA or any of its Subsidiaries pursuant to the requirements of federal or
state securities laws and each material report, statement, schedule an d other
document filed with any other Governmental Authority, and (y) all other
information and data (including, without limitation, copies of Contracts, EUA
Employee Benefit Plans, and other books and records) concerning the business
and operations of EUA and its Subsidiaries as NEES or any of its
Representatives reasonably may request. No review pursuant to this Section
7.01 or otherwise shall affect any representation or warranty contained in this
Agreement or any condition to the obligation s of the parties hereto. Any such
information or material obtained pursuant to this Section 7.01 that constitutes
"Evaluation Material" (as such term is defined in the letter agreement dated as
of December 18, 1998 between EUA and NEES (the "Confidentiality Agreement"))
shall be governed by the terms of the Confidentiality Agreement. NEES may
provide information or materials that it obtains relating to EUA or any EUA
Subsidiary pursuant to this Section 7.01 to National Grid Group; the treatment
by National Grid Group of such information or material shall be governed by the
terms of the letter agreement dated as of December 21, 1998 between EUA and
National Grid Group.
7.02 Proxy Statement. As soon as reasonably practicable after the date
of this Agreement, EUA shall prepare and file the Proxy Statement with the SEC.
NEES and EUA shall cooperate with each other in the preparation of the Proxy
Statement and any amendment or supplement thereto, and EUA shall promptly
notify NEES of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information, and shall promptly provide to NEES
copies of all correspondence between EUA or any of its Representatives and the
SEC with respect to the Proxy Statement (except reports from financial advisors
other than with the consent of such financial advisors). Each of the parties
hereto shall furnish all information concerning itself which is required or
customary for inclusion in the Proxy Statement. EUA shall consult with NEES
regarding the Proxy Statement and have due regard to any comments NEES may make
in relation to the Proxy Statement. EUA shall give NEES and its counsel the
opportunity to review the Proxy Statement and all responses to requests for
additional information by and replies to comments of the SEC before t heir
being filed with, or sent to, the SEC. Each of EUA and NEES agrees to use its
reasonable best efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and requests by the SEC. After
obtaining the consent of EUA, which consent shall not be unreasonably withheld,
NEES may provide information supplied to NEES by EUA to National Grid Group for
inclusion of such information in the Super Class 1 circular ("NGG Circular") to
be issued to shareholders of National Grid Group in connection with approval by
such shareholders of the National Grid Merger Agreement. NEES shall use its
best efforts to provide EUA with a draft of any portion of the NGG Circular
with information relating to EUA prior to the issuance of the NGG Circular.
7.03 Approval of Shareholders. EUA shall, through its Board of Trustees,
duly call, give notice of, convene and hold a meeting of its shareholders (the
"EUA Shareholders' Meeting") for the purpose of voting on the approval of the
Merger and other transactions contemplated hereby (the "EUA Shareholders'
Approval") as soon as reasonably practicable after the date hereof; provided,
however, subject to the fiduciary duties of its Board of Trustees and the
requirements of applicable law, EUA shall include in the Proxy Statement the
recommendation of the Board of Trustees of EUA that the Shareholders of EUA
approve the Merger and the other transactions contemplated hereby, and shall
use its reasonable best efforts to obtain such approval.
7.04 Regulatory and Other Approvals. (a) HSR Filings. Each party
hereto shall file or cause to be filed with the Federal Trade Commission and
the Department of Justice any notifications required to be filed by its
respective "ultimate parent" company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations promulgated thereunder with respect to the Merger and other
transactions contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings in a timely manner and to respond on a
timely basis to any requests for additional information made by either of such
agencies.
(b) Other Regulatory Approvals. Each party shall cooperate and
use its best efforts to promptly prepare and file all necessary applications,
notices, petitions, filings and other documents with, and to use all
commercially reasonable efforts to obtain all necessary permits, consents,
approvals and authorizations of, all Governmental Authorities necessary or
advisable to obtain the EUA Required Statutory Approvals, the NEES Required
Statutory Approvals and the approvals of the state utility commissions referred
to in Section 8.01(d) (collectively, the "NEES-EUA Regulatory Approvals"). The
parties agree that they will consult with each other with respect to obtaining
the NEES-EUA Regulatory Approvals; provided, however, that NEES shall have
primary responsibility for the preparation and filing of any related
applications, filings or other material with the SEC, the FERC, the NRC and
state utility commissions. EUA shall have the right to review and approve in
advance drafts of and final applications, filings and other material (including
material with respect to proposed settlements) submitted to or filed with the
SEC, the FERC, the NRC and state utility commissions or parties to such
proceedings before such Governmental Authority, which approval shall not be
unreasonably withheld or delayed.
(c) NEES-NGG Regulatory Proceedings. EUA and NEES acknowledge
that, at the same time EUA and NEES will be seeking to obtain the NEES-EUA
Regulatory Approvals, National Grid Group and NEES will be seeking to obtain
the regulatory approvals (the "NEES-NGG Regulatory Approvals") required to
consummate the transactions contemplated by the National Grid Merger Agreement.
NEES and EUA agree to seek to prosecute the proceedings relating to the NEES-
EUA Regulatory Approvals (the "NEES-EUA Regulatory Proceedings") separately
from the prosecution by National Grid Group and NEES of the proceedings
relating to the NEES-NGG Regulatory Approvals (the "NEES-NGG Regulatory
Proceedings"), but recognize that one or more of the NEES-EUA Regulatory
Proceedings may be consolidated with one or more of the NEES-NGG Regulatory
Proceedings by the relevant Governmental Authority. Upon the request of EUA,
NEES will keep EUA reasonably apprised of the status of the NEES-NGG Regulatory
Proceedings.
7.05 Employee Benefit Plans.
(a) For a period of twelve (12) months immediately following
the Closing Date, the compensation, benefits and coverage provided to those
non-union individuals who continue to be employees of the Surviving Entity (the
"Affected Employees") pursuant to employee benefit plans or arrangements
maintained by NEES or the Surviving Entity shall be, in the aggregate, not less
favorable (as determined by NEES and the Surviving Entity using reasonable
assumptions and benefit valuation methods) than those provided, in the
aggregate, to such Affected Employees immediately prior to the Closing Date.
In addition to the foregoing, NEES shall, or shall cause the Surviving Entity
to, pay any Affected Employee whose employment is terminated by NEES or the
Surviving Entity within twelve (12) months of the Closing Date a severance
benefit package equivalent to the severance benefit package that would be
provided under the NEES Standard Severance Plan as in effect on the date
hereof.
(b) NEES shall, or shall cause the Surviving Entity to, give
the Affected Employees full credit for purposes of eligibility, vesting,
benefit accrual (including, without limitation, benefit accrual under any
defined benefit pension plans) and determination of the level of benefits under
any employee benefit plans or arrangements maintained by NEES or the Surviving
Entity in effect as of the Closing Date for such Affected Employees' service
with EUA or any Subsidiary of EUA (or any prior employer) to the same extent
recognized by EUA or such Subsidiary immediately prior to the Closing Date.
With respect to any employee benefit plan or arrangement established by NEES,
EUA or the Surviving Entity after the Closing Date (the "Post Closing Plans"),
service shall be credited in accordance with the terms of such Post Closing
Plans.
(c) NEES shall, or shall cause the Surviving Entity to, (i)
waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Affected Employees under any welfare benefit plan established to replace
any EUA welfare benefit plans in which such Affected Employees may be eligible
to participate after the Closing Date, other than limitations or waiting
periods that are already in effect with respect to such Affected Employees and
that have not been satisfied as of the Closing Date under any welfare plan
maintained for the Affected Employees immediately prior to the Closing Date,
and (ii) provide each Affected Employee with credit for any co-payments a nd
deductibles paid prior to the Closing Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
Affected Employees are eligible to participate in after the Closing Date.
(d)(i) NEES shall, or shall cause the Surviving Entity and its
Subsidiaries to, honor, and shall guarantee the obligations of the Surviving
Entity and its Subsidiaries under, all EUA Employee Benefit Plans as in effect
on the date hereof; provided, however, that this Section 7.05(d)(i) is not
intended to prevent NEES or the Surviving Entity from exercising their rights
with respect to all EUA Employee Benefit Plans solely in accordance with their
terms, including but not limited to the right to alter, terminate or otherwise
amend such EUA Employee Benefit Plans.
(ii) NEES shall, or shall cause the Surviving Entity and its
Subsidiaries to, honor, and shall guarantee the obligations of the Surviving
Entity and its Subsidiaries under, (A) all employment severance, consulting and
retention agreements or arrangements as in effect on the date hereof, as set
forth in Section 7.05(d)(ii) of the EUA Disclosure Letter, or as modified in
accordance with Section 6.01(i) of the EUA Disclosure Letter (such agreements
or arrangements, the "EUA Employee Agreements" an d the individuals who are
parties to such EUA Employee Agreements, the "EUA Executives") and (B) all EUA
Employee Benefit Plans in which such EUA Executives participate; provided,
however, that this Section 7.05(d)(i) is not intended to prevent NEES or the
Surviving Entity from exercising their rights with respect to the EUA Employee
Agreements and the EUA Employee Benefit Plans in which such EUA Executives
participate, in each case solely in accordance with their terms, including but
not limited to the right to alter, terminate or otherwise amend such EUA
Employee Agreements and EUA Employee Benefit Plans.
(e) Notwithstanding the foregoing, NEES and the Surviving Entity
and its subsidiaries shall neither be required to or prevented from merging
EUA's benefit plans, agreements, or arrangements into NEES or the Surviving
Entity and its subsidiaries benefit plans, agreements, or arrangements or from
replacing EUA's benefit plans, agreements or arrangements with NEES or the
Surviving Entity and its subsidiaries benefit plans, agreements or
arrangements.
7.06 Labor Agreements and Workforce Matters.
(a) Labor Agreements. NEES shall honor, or shall cause the
appropriate subsidiaries of the Surviving Entity to honor, all collective
bargaining agreements of EUA or its subsidiaries in effect as of the Effective
Time until their expiration; provided, however, that this undertaking is not
intended to prevent NEES or the Surviving Entity and its subsidiaries from
exercising their rights with respect to such collective bargaining agreements
and in accordance with their terms, including any rig ht to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective
bargaining agreement or commitment or portion thereof.
(b) Workforce Matters. Subject to applicable law and
obligations under applicable collective bargaining agreements, for a period of
2 years following the Effective Time, any reductions in workforce in respect of
employees of the Surviving Entity and its Subsidiaries shall be made on a fair
and equitable basis as determined by the Surviving Entity, with due
consideration to prior experience and skills, and any employee whose employment
is terminated or job is eliminated during such period shall be entitled to
participate on a fair and equitable basis as determined by NEES or the
Surviving Entity in the job opportunity and employment placement programs
offered by NEES or the Surviving Entity or any of their Subsidiaries for which
they are eligible. Any workforce reductions carried out following the
Effective Time by the Surviving Entity and its 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 the regulations promulgated thereunder, and any
comparable state or local law.
7.07 Post Merger Operations.
(a) NEES Advisory Board. If the Merger is consummated, then,
promptly following the closing of the merger contemplated by the National Grid
Merger Agreement, NEES shall take such action as is necessary to cause all of
the members of the Board of Directors of EUA to be appointed to serve on the
advisory board to be formed pursuant to Section 7.07(e) of the National Grid
Merger Agreement.
(b) Charities. The parties agree that provision of charitable
contribution and community support within the New England region serves a
number of important goals. After the Effective Time, NEES intends to cause the
Surviving Entity to provide charitable contributions and community support
within the New England region at annual levels substantially comparable to the
annual level of charitable contributions and community support provided,
directly or indirectly, by EUA and its public utility subsidiaries within the
New England region during 1998.
7.08 No Solicitations. Prior to the Effective Time, EUA agrees: (a)
that neither it nor any of its Subsidiaries shall, and it shall use its best
efforts to cause its Representatives (as defined in Section 10.10) not to,
knowingly initiate, solicit or encourage, directly or indirectly, any inquiries
or any proposal or offer (including, without limitation, any proposal or offer
to its Shareholders) with respect to a merger, consolidation or other business
combination including EUA or any of its significant Subsidiaries (as defined in
Rule 1-02(W) of Regulation S-X promulgated under the Exchange Act) other than
EUA Cogenex Corporation (an "EUA Significant Subsidiary"), or any acquisition
or similar transaction (including, without limitation, a tender or exchange
offer) involving the purchase of (i) all or any significant portion of the
assets of EUA and its Subsidiaries taken as a whole, (ii) ten percent or more
of the outstanding EUA Shares or (iii) 50% or mo re of the outstanding shares
of the capital stock of any EUA Significant Subsidiary (any such proposal or
offer being hereinafter referred to as an "Alternative Proposal"), or engage in
any negotiations concerning, or provide any confidential information or data
to, or have any other discussions with, any person or group relating to an
Alternative Proposal, or otherwise knowingly facilitate any effort or attempt
to make or implement an Alternative Proposal other than from NEES and its
affiliates ; (b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties with respect
to any Alternative Proposal; and (c) that it will notify NEES immediately if
any such inquiries, proposals or offers are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it or any of such persons; provided, however,
that, prior to receipt of the EUA Shareholders' Approval, nothing contained in
this Section 7.08 shall prohibit the Board of Trustees of EUA from (i)
furnishing information to (but only pursuant to a confidentiality agreement in
customary form and having terms and conditions no less favorable to EUA than
the Confidentiality Agreement (as defined in Section 7.01)) or entering into
discussions or negotiations with any person or group that makes an unsolicited
Alternative Proposal, if, and only to the extent that, (A) the Board of
Trustees of EUA, based upon advice of outside counsel with respect to fiduciary
duties, determines in good faith that such action is necessary for the Board of
Trustees to act in a manner consistent with its fiduciary duties to
Shareholders under applicable law, (B) the Board of Trustees of EUA has
reasonably concluded in good faith (after consultation with its financial
advisors) that the person or group making such Alternative Proposal will have
adequate sources of financing to consummate such Alternative Proposal and that
such Alternative Proposal is likely to be more favorable to EUA's shareholders
than the Merger, (C) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or group, EUA provides written
notice to NEES to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person or group, which notice shall
identify such person or group and the material terms of the Alternative
Proposal inreasonable detail, and (D) EUA keeps NEES promptly informed of the
status and all material information with respect to any such discussions or
negotiations; and (ii) to the extent required, complying with Rule 14e-2
promulgated under the Exchange Act wit h regard to an Alternative Proposal.
Nothing in this Section 7.08 shall (x) permit EUA to terminate this Agreement
(except as specifically provided in Article IX), (y) permit EUA to enter into
any agreement with respect to an Alternative Proposal for so long as this
Agreement remains in effect (it being agreed that for so long as this Agreement
remains in effect, EUA shall not enter into any agreement with any person or
group that provides for, or in any way knowingly facilitates, an Alternative
Proposal (other than a confidentiality agreement under the circumstances
described above)), or (z) affect any other obligation of EUA under this
Agreement.
7.09 Directors' and Officers' Indemnification and Insurance.
(a) Indemnification. To the extent, if any, not provided by
an existing right of indemnification or other agreement or policy, from and
after the Effective Time, NEES shall, or shall cause the Surviving Entity to,
to the fullest extent permitted by applicable law, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, (x) an officer, trustee or
director or (y) an employee covered as of the date hereof (to the extent of the
coverage extended as of the date hereof) of EUA or any Subsidiary of EUA (each
an "Indemnified Party," and collectively, the "Indemnified Parties") against
(i) all losses, expenses (including reasonable attorney's fees and expenses),
claims, damages or liabilities or, subject to the first proviso of the next
succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time (and whether asserted or
claim ed prior to, at or after the Effective Time) that are, in whole or in
part, based on or arising out of the fact that such person is or was a
director, trustee, officer or employee of EUA or any Subsidiary of EUA (the
"Indemnified Liabilities"), and (ii) all Indemnified Liabilities to the extent
they are based on or arise out of or pertain to the transactions contemplated
by this Agreement, in each case, to the extent permitted by the EUA Trust
Agreement or the indemnification agreements set fort h in Section 7.09 of the
EUA Disclosure Letter. In the event of any such loss, expense, claim, damage
or liability (whether or not arising before the Effective Time), (i) NEES
shall, or shall cause the Surviving Entity to, pay the reasonable fees an d
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to NEES or the Surviving Entity, as appropriate,
promptly after statements therefor are received and otherwise advance to such
Indemnified Party upon request, reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by the EUA Trust
Agreement or the indemnification agreements set forth in Section 7.09 of the
EUA Disclosure Letter upon receipt of a n undertaking by or on behalf of such
director, trustee or officer to repay such amounts as and to the extent
required by the EUA Trust Agreement or the indemnification agreements set forth
in Section 7.09 of the EUA Disclosure Letter, (ii) the Surviving Entity shall
cooperate in the defense of any such matter and (iii) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under the EUA Trust Agreement or the
indemnification agreements set forth in Section 7.09 of the EUA Disclosure
Letter and the certificate of incorporation or by-laws or similar governing
documents of the Surviving Entity shall be made by independent counsel mutually
acceptable to the Surviving Entity and the Indemnified Party; provided,
however, that the Surviving Entity shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld) and provided further that no indemnification shall be made if such
indemnification is prohibited by the EUA Trust Agreement or the indemnification
agreements set forth in Section 7.09 of the EUA Disclosure Letter.
(b) Insurance. For a period of six years after the Effective
Time, NEES and the Surviving Entity at NEES's election, (i) shall cause to be
maintained in effect an extended reporting period for current policies of
directors' and officers' liability insurance for the benefit of such persons
who are currently covered by such policies of EUA on terms no less favorable
than the terms of such current insurance coverage or (ii) shall provide tail
coverage for such persons which provides such persons with coverage for a
period of six years for acts prior to the Effective Time on terms no less
favorable than the terms of such current insurance coverage.
(c) Successors. In the event the Surviving Entity or any of
its successors or assigns (i) consolidates with or merges into any other person
or entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Entity, as applicable, shall assume the obligations set forth in this
Section 7.09.
(d) Survival of Indemnification. To the fullest extent
permitted by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees, agents,
directors, trustees and officers of EUA and EUA's Subsidiaries with respect to
their activities as such prior to the Effective Time, as provided in the EUA
Trust Agreement or the respective certificates of incorporation and by-laws or
similar governing documents in effect on the date hereof, or otherwise in
effect on the date hereof, shall survive the Merger and shall continue in full
force and effect for a period of not less than six years from the Effective
Time.
(e) Benefit. The provisions of this Section 7.09 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.
(f) Amendment of the EUA Trust Agreement. NEES shall not, and
shall ensure that the Surviving Entity shall not, amend the EUA Trust Agreement
to in any way limit the indemnification provided to the Indemnified Parties
under this Section 7.09.
7.10 Expenses Except as set forth in Section 9.03, whether or not the
Merger is consummated, all costs and expenses incurred in connection with the
Merger and other transactions contemplated hereby shall be paid by the party
incurring such cost or expense, except that the filing fees in connection with
the filings required under the HSR Act and the 1935 Act shall be paid by NEES.
7.11 Brokers or Finders EUA represents, as to itself and its affiliates,
that no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any broker's, finder's or investment banker's
fee or any other commission or similar fee in connection with the Merger and
other transactions contemplated by this Agreement except Salomon Smith Barney
Inc., whose fees and expenses will be paid by EUA in accordance with EUA's
agreement with such firm, and EUA shall indemnify and hold NEES harmless from
and against any and all claims, liabilities or obligations with respect to any
other such fee or commission or expenses related thereto asserted by any person
on the basis of any act or statement alleged to have been made by EUA or its
affiliates.
7.12 Anti-Takeover Statutes If any "fair price", "moratorium", "business
combination", "control share acquisition" or other form of anti-takeover
statute or regulation shall become applicable to the Merger or other
transactions contemplated hereby, EUA and the members of the Board of Trustees
of EUA shall grant such approvals and take such actions consistent with their
fiduciary duties and in accordance with applicable law as are reasonably
necessary so that the Merger and other transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or
regulation on the Merger and other transact ions contemplated hereby.
7.13 Public Announcements Except as otherwise required by law or the
rules of any applicable securities exchange or national market system or any
other Regulatory Authority, so long as this Agreement is in effect, NEES and
EUA will not, and will not permit any of their respective Subsidiaries or
Representatives to, issue or cause the publication of any press release or make
any other public announcement with respect to the Merger and other transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld. NEES and EUA will cooperate with
each other in the development and distribution of all press releases and other
public announcements with respect to the Merger and other transactions
contemplated hereby, and will furnish the other with drafts of any such
releases and announcements as far in advance as practicable.
7.14 Restructuring of the Merger. It may be preferable to effectuate a
business combination between NEES and EUA by means of an alternative structure
to the Merger. Accordingly, if, prior to satisfaction o f the conditions
contained in Article VIII hereto, NEES proposes the adoption of an alternative
structure that otherwise substantially preserves for NEES and EUA the economic
benefits of the Merger and will not materially delay the consummation there of,
then the parties shall use their respective best efforts to effect a business
combination among themselves by means of a mutually agreed upon structure other
than the Merger that so preserves such benefits; provided, however, that prior
to closing any such restructured transaction, all material third party and
Governmental Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary for the effectuation of such
alternative business combination shall have been obtained and all other
conditions to the parties' obligations to consummate the Merger and other
transactions contemplated hereby, as applied to such alternative business
combination, shall have been satisfied or waived.
ARTICLE VIII
CONDITIONS
8.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger and other transactions
contemplated hereby is subject to the satisfaction or waiver, at or prior to
the Closing, of each of the following conditions:
(a) Shareholder Approval. EUA Shareholders' Approval shall
have been obtained.
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under HSR shall have expired or
been terminated.
(c) Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law or order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
illegal or otherwise restricting, preventing or prohibiting consummation of the
Merger or other transactions contemplated hereby.
(d) Governmental and Regulatory and Other Consents and
Approvals. The NEES Required Statutory Approvals and EUA Required Statutory
Approvals shall have been obtained prior to the Effective Time, and shall have
become Final Orders (as hereinafter defined). The Final Orders shall not,
individually or in the aggregate, impose terms and conditions that (i) could
reasonably be expected to have an EUA Material Adverse Effect; (ii) could
reasonably be expected to have a NEES Material Adverse Effect; or (iii)
materially impair the ability of the parties to complete the Merger. The
parties shall have received Final Orders from the Massachusetts Department of
Telecommunications and Energy and the Rhode Island Public Utilities Commission
pertaining to the recovery of costs (including, without limitation, transaction
premium and integration costs) associated with the Merger that are materially
consistent with existing policy and previous orders of such agencies. "Final
Order" for all purposes of this Agreement means action by the relevant
regulatory authority which has not been reversed, stayed, enjoined, set aside,
annulled or suspended with respect to which any waiting period prescribed by
law before the Merger and other transaction s contemplated hereby may be
consummated has expired, and as to which all conditions to be satisfied before
the consummation of such transactions prescribed by law, regulation or order
have been satisfied.
8.02 Conditions to Obligation of NEES and LLC to Effect the Merger. The
obligation of NEES and LLC to effect the Merger and other transactions
contemplated hereby is further subject to the satisfaction or waiver at or
prior to the Closing, of each of the following additional conditions (all or
any of which may be waived in whole or in part by NEES and LLC in the sole
discretion):
(a) Representations and Warranties. The representations and
warranties made by EUA in this Agreement, in each case made as if none of such
representations or warranties contained any qualification or limitation as to
"materiality" or "EUA Material Adverse Effect", shall be true and correct as so
made as of the Closing Date as though so made on and as of the Closing Date,
except to the extent expressly given as of a specified date, except where the
failure of such representations and warranties to be true and correct as so
made does not have and could not reasonably be expected to have, individually
or in the aggregate, an EUA Material Adverse Effect, and EUA shall have
delivered to NEES a certificate, dated the Closing Date and execute d in the
name and on behalf of EUA by its Chairman of the Board, President or any
Executive or Senior Vice President, to such effect.
(b) Performance of Obligations. EUA shall have performed and
complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by
EUA at or prior to the Closing, and EUA shall have delivered to NEES a
certificate, dated the Closing Date and executed in the name and on behalf of
EUA by its Chairman of the Board, President or any Executive or Senior Vice
President, to such effect.
(c) Material Adverse Effect. No EUA Material Adverse Effect
shall have occurred and there shall exist no facts or circumstances which in
the aggregate could reasonably be expected to have an EUA Material Adverse
Effect.
(d) EUA Required Consents. All EUA Required Consents shall
have been obtained by EUA, except where the failure to receive such EUA
Required Consents could not reasonably be expected to (i) have an EUA Material
Adverse Effect, or (ii) delay or prevent the consummation of the Merger and
other transactions contemplated hereby.
8.03 Conditions to Obligation of EUA to Effect the Merger. The obligation
of EUA to effect the Merger and other transactions contemplated hereby is
further subject to the satisfaction or waiver, at or prior to the Closing, of
each of the following additional conditions (all or any of which may be waived
in whole or in part by EUA in its sole discretion):
(a) Representations and Warranties. The representations and
warranties made by NEES and LLC in Sections 5.01, 5.02, 5.03, 5.04, 5.05, 5.07,
5.08 and 5.09 of this Agreement, in each case made as if none of such
representations or warranties contained any qualification or limitation as to
"materiality" or "NEES Material Adverse Effect," shall be true and correct as
so made as of the Closing Date, except to the extent expressly given as of a
specified date and except where the failure of such representations and
warranties to be so true and correct as so made does not have and could not
reasonably be expected to have, individually or in the aggregate, a NEES
Material Adverse Effect or a material adverse effect on LLC, and NEES and LLC
shall each have delivered to EUA a certificate, dated the Closing Date and
executed in the name and on behalf of NEES by any director of NEES and in the
name and on behalf of LLC by a member of its management committee its Chairman
of the Board, President or any Executive or Senior Vice President to such
effect.
(b) NEES Required Consents. All NEES Required Consents shall
have been obtained by NEES, except where the failure to receive such NEES
Required Consents could not reasonably be expected to (i) have a NEES Material
Adverse Effect or (ii) delay or prevent the consummation of the Merger and
other transactions contemplated hereby.
(c) Performance of Obligations. NEES and LLC shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this Agreement to be so performed or complied with
by NEES or LLC at or prior to t he Closing, and NEES and LLC shall each have
delivered to EUA a certificate, dated the Closing Date and executed in the name
and on behalf of NEES by its Chairman of the Board, President or any Executive
or Senior Vice President, or on behalf of LLC by a member of its management
committee to such effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01 Termination. This Agreement may be terminated, and the Merger and
other transactions contemplated hereby may be abandoned, at any time prior to
the Effective Time, whether prior to or after EUA Shareholders' Approval
(except as otherwise provided in Section 9.01(c) below):
(a) By mutual written agreement of the Board of Directors of
NEES and Board of Trustees of EUA, respectively;
(b) By EUA or NEES, by written notice to the other, if the
Closing Date shall not have occurred on or before December 31, 1999 (the
"Initial Termination Date"); provided, however, that the right to terminate the
Agreement under this Section 9.01( b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before such
date; and provided, further, that if on the Initial Termination Date the
conditions to the Closing set forth in Section 8.01(d) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or shall
be capable of being fulfilled, then the Initial Termination Date shall be
extended for four (4) months beyond the Initial Termination Date (the "Extended
Termination Date");
(c) By NEES, by written notice to EUA, if EUA Shareholders'
Approval shall not have been obtained at a duly held meeting of such
Shareholders, including any adjournments thereof;
(d) By EUA or NEES, if any applicable state or federal law or
applicable law of a foreign jurisdiction or any order, rule or regulation is
adopted or issued that has the effect, as supported by the written opinion of
outside counsel for such part y, of prohibiting the Merger or other
transactions contemplated hereby, or if any court of competent jurisdiction or
any Governmental Authority shall have issued a nonappealable final order,
judgment or ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger or other
transactions contemplated hereby (provided that the right to terminate this
Agreement under this Section 9.01(d) shall not be available to any party that
has not defended such lawsuit or other legal proceeding (including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Authority vacated or reversed)).
(e) By EUA upon ten (10) days' prior notice to NEES if the
Board of Trustees of EUA determines in good faith, that termination of this
Agreement is necessary for the Board of Trustees of EUA to act in a manner
consistent with its fiduciary duties to Shareholders under applicable law by
reason of an unsolicited Alternative Proposal meeting the requirements of
clauses (A) and (B) of Section 7.08 having been made; provided that
(A) The Board of Trustees of EUA shall determine based
on advice of outside counsel with respect to the Board of Trustees'
fiduciary duties that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement enter ed
into in the proper exercise of its applicable fiduciary duties, and
notwithstanding all concessions which may be offered by NEES in
negotiation entered into pursuant to clause (B) below, it is
necessary pursuant to such fiduciary duties that the trustees
reconsider such commitment as a result of such Alternative
Proposal, and
(B) prior to any such termination, EUA shall, and shall
cause its respective financial and legal advisors to, negotiate
with NEES to make such adjustments in the terms and conditions of
this Agreement as would enable EUA to proceed with the Merge r or
other transactions contemplated hereby on such adjusted terms;
and provided further that EUA's ability to terminate this Agreement pursuant to
this Section 9.01(e) is conditioned upon the concurrent payment by EUA to NEES
of any amounts owed by it pursuant to Section 9.03(a);
(f) By EUA, by written notice to NEES, if (i) there shall have
been any material breach of any representation or warranty, or any material
breach of any covenant or agreement, of NEES hereunder (other than a breach
described in clause (ii)), and such breach shall not have been remedied within
twenty (20) days after receipt by NEES of notice in writing from EUA,
specifying the nature of such breach and requesting that it be remedied; or
(ii) NEES shall fail to deliver or cause to be delivered the amount of cash to
the Paying Agent required pursuant to Section 2.02(a) at a time when all
conditions to NEES's obligation to close have been satisfied or otherwise
waived in writing by NEES.
(g) By NEES, by written notice to EUA, if (i) there shall have
been any material breach of any representation or warranty, or any material
breach of any covenant or agreement, of EUA hereunder, and such breach shall
not have been remedied within twenty (20) days after receipt by EUA of notice
in writing from NEES, specifying the nature of such breach and requesting that
it be remedied; or (ii) the Board of Trustees of EUA (A) shall withdraw or
modify in any manner adverse to NEES its approval of the Merger and other
transactions contemplated hereby or its recommendation to its shareholders
regarding the approval of this Agreement, the Merger and other transactions
contemplated hereby, (B) shall approve or recommend or take no position with
respect to an Alternative Proposal or (C) shall resolve to take any of the
actions specified in clause (A) or (B).
9.02 Effect of Termination. If this Agreement is validly terminated by
either EUA or NEES pursuant to Section 9.01, this Agreement shall forthwith
become null and void and there shall be no liability or obligation on the part
of either EUA or NEES (or any of their respective Representatives or
affiliates), except that the provisions of this Section 9.02, Sections 7.10,
7.11 and 7.13, Section 9.03 and Sections 10.09 and 10.10 shall continue to
apply following any such termination.
9.03 Termination Fees. (a) In the event that (i) this Agreement is
terminated by EUA pursuant to Section 9.01(e) or (ii) any person or group shall
have made an Alternative Proposal that has not been withdrawn and this
Agreement is terminated by (A) NEES pursuant to Section 9.01(c) or Section
9.01(g) or (B) by EUA pursuant to Section 9.01(b) and, in the case of this
clause (ii) only, a definitive agreement with respect to such Alternative
Proposal is executed within two years after such termination, then EUA shall
pay to NEES, by wire transfer of same day funds, either on the date
contemplated in Section 9.01(e) if applicable, or otherwise, within five (5)
business days after such termination, a termination fee of $20 million, plus an
amount equal to all documented out-of-pocket expenses and fees incurred by NEES
arising out of, or in connection with or related to, the Merger and other
transactions contemplated hereby, not in excess of $5 million in the
aggregate.
(b) In the event that this Agreement is terminated by either NEES
or EUA pursuant to Section 9.01(b) and at the time of such termination (i) the
conditions to the Closing set forth in Section 8.01(d) shall not have been
fulfilled, (ii) if the date o f termination is any date other than a date which
is on or after the Extended Termination Date, all conditions contained in
Article VIII other than Sections 8.01(d) or 8.03(c) shall have been fulfilled
or are capable of being fulfilled as of such date, and (iii) the merger
contemplated by the National Grid Merger Agreement has not yet been
consummated, then NEES shall pay to EUA, by wire transfer of same day funds,
within five (5) business days after such termination, a termination fee of $10
million, plus an amount equal to all documented out-of-pocket expenses and fees
incurred by EUA arising out of, or in connection with or related to, the Merger
and other transactions contemplated hereby, not in excess of $5 million in the
aggregate.
(c) Nature of Fees. The parties agree that the agreements
contained in this Section 9.03 are an integral part of the Merger and the other
transactions contemplated hereby and constitute liquidated damages and not a
penalty. The parties further agree that if any party is or becomes obligated
to pay a termination fee pursuant to Sections 9.03(a) or (b), the right to
receive such termination fee shall be the sole remedy of the other party with
respect to the facts and circumstances giving rise to such payment obligation.
If this Agreement is terminated by a party as a result of a willful breach of a
representation, warranty, covenant or agreement by the other party, including a
termination pursuant to Section 9.01(f)(ii), the non-breaching party may pursue
any remedies available to it at law or in equity and shall be entitled to
recover any additional amounts thereunder. Notwithstanding anything to the
contrary contained in this Section 9.03, if one party fails to promptly pay t
o the other any fee or expense due under this Section 9.03, in addition to any
amounts paid or payable pursuant to such Section, 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 Citibank, N.A. from the date such
fee was required to be paid.
9.04 Amendment. This Agreement may be amended, supplemented or modified
by action taken by or on behalf of the Board of Directors of NEES or the Board
of Trustees of EUA at any time prior to the Effective Time, whether prior to or
after EUA Shareholders' Approval shall have been obtained, but after such
adoption and approval only to the extent permitted by applicable law. No such
amendment, supplement or modification shall be effective unless set forth in a
written instrument duly executed and delivered by or on behalf of each party
hereto.
9.05 Waiver. At any time prior to the Effective Time, NEES or EUA, by
action taken by or on behalf of its Board of Directors or Board of Trustees,
respectively, may to the extent permitted by applicable law (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 of the other parties hereto contained herein or in any document
delivered pursuant hereto or (iii) waive compliance with any of the covenants,
agreements or conditions of the other parties hereto contained herein. No such
extension or waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party ex tending the time of performance
or waiving any such inaccuracy or non-compliance. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion.
ARTICLE X
GENERAL PROVISIONS
10.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article I and Article II, in
Sections 7.05, 7.06, 7.08, 7.09 and 7.10, this Article X which shall survive
the Effective Time.
10.02 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses or
facsimile numbers:
If to NEES or LLC, to:
New England Electric System
25 Research Drive
Westborough, MA 01582
Attn: Richard P. Sergel
President and Chief Executive Officer
Telephone: (508) 389-2764
Facsimile: (508) 366-5498
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
If to EUA, to:
Eastern Utilities Associates
One Liberty Square
Boston, MA 02109
Attn: Donald G. Pardus
Chairman and Chief Executive Officer
Telephone: (617) 357-9590
Facsimile: (617) 357-7320
with a copy to:
Winthrop, Stimson, Putnam & Roberts
1 Battery Park Plaza
New York, NY 10004
Attn: David P. Falck
Telephone: (212) 858-1000
Facsimile: (212) 858-1500
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given when sent, provided that the
facsimile is promptly confirmed by telephone confirmation thereof, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given one business day after delivery (in each case
regardless of whether such notice, request or other communication is received
by any other person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
10.3 Entire Agreement; Incorporation of Exhibits. (a) This Agreement
supersedes all prior discussions and agreements, both written and oral, among
the parties hereto with respect to the subject matter hereof, other than the
Confidentiality Agreement, which shall survive the execution and delivery of
this Agreement in accordance with its terms, and contains, together with the
Confidentiality Agreement, the sole and entire agreement among the parties
hereto with respect to the subject matter hereof.
(b) The EUA Disclosure Letter, the NEES Disclosure Letter and
any Exhibit attached to this Agreement and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
10.04 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Article
II and Sections 7.04, 7.05(d)(ii) and 7.09 (which is intended to be for the
benefit of the persons entitled to therein, and may be enforced by any of such
persons), it is not the intention of the parties to confer third-party
beneficiary right s upon any other person.
10.05 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned, in whole or in part,
by operation of law or otherwise, by any party hereto without the prior written
consent of the other parties hereto and any attempt to do so will be void,
except that LLC may assign any or all of its rights, interests and obligations
hereunder to another direct or indirect wholly owned Subsidiary of NEES,
provided that any such Subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein and provided further that
such assignment (i) does not require a greater vote for EUA's Shareholder
Approval, (ii) does not require a subsequent vote following EUA's Shareholders
Meeting, or (iii) is not reasonably likely to materially delay or prevent EUA,
LLC and NEES, as appropriate, from obtaining EUA Required Statutory Approvals,
EUA Required Consents, EUA Shareholders ' Approval, the NEES Required
Shareholders' Approvals, or the NEES Required Consents. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
10.06 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define, modify or limit the
provisions hereof.
10.07 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law or
order, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (iii) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
10.08 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
10.09 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specified terms or was
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
competent jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
10.10 Certain Definitions. As used in this Agreement:
(a) except as provided in Section 4.14, the term "affiliate,"
as applied to any person, shall mean any other person directly or indirectly
controlling, controlled by, or under common control with, that person; for
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
applied to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
person, whether through the ownership of voting securities, by contract or
otherwise;
(b) a person will be deemed to "beneficially" own securities if
such person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the right to
acquire (whether such right is exercisable immediately or only after the
passage of time);
(c) the term "business day" means a day other than Saturday,
Sunday or any day on which banks located in the Massachusetts are authorized or
obligated to close;
(d) the term "knowledge" or any similar formulation of
"knowledge" shall mean, with respect to any party hereto, the actual knowledge
after due inquiry of the executive officers of NEES and its Subsidiaries or EUA
and its Subsidiaries, respectively, set forth in Section 10.11(d) of the NEES
Disclosure Letter or Section 10.11(d) of the EUA Disclosure Letter; provided
that as used in Section 4.13 the term "knowledge" shall also include the
knowledge of the environmental, health and safety personnel of EUA;
(e) the term "person" shall include individuals, corporations,
partnerships, trusts, limited liability companies, other entities and groups
(which term shall include a "group" as such term is defined in Section 13(d)(3)
of the Exchange Act);
(f) the "Representatives" of any entity shall have the same
meaning as set forth in the Confidentiality Agreement;
(g) the term "Subsidiary" means any corporation or other
entity, whether incorporated or unincorporated, in which such party directly or
indirectly owns at least a majority of the voting power represented by the
outstanding capital stock or other voting securities or interests having voting
power under ordinary circumstances to elect a majority of the directors or
similar members of the governing body, or otherwise to direct the management
and policies, or such corporation or entity.
10.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument and will become effective
when one or more counterparts have been signed by each party and delivered to
the other parties.
10.12 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
NEW ENGLAND ELECTRIC SYSTEM
By:/s/Richard P. Sergel
Name: Richard P. Sergel
Title: President and CEO
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an Agreement and
Declaration of Trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which, as amended, has been filed with the Secretary
of the Commonwealth of Massachusetts. Any agreement, obligation, or liability
made, entered into, or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer, or
agent thereof assumes or shall be held to any liability therefor.
EASTERN UTILITIES ASSOCIATES
By:/s/ Donald G. Pardus
Name: Donald G. Pardus
Title: Chairman
The name "Eastern Utilities Associates" is the designation of the Trustees of
EUA for the time being in their collective capacity but not personally, under a
Declaration of Trust dated April 2, 1928, as amended, a copy of which amended
Declaration of Trust has been filed in the office of the Secretary of The
Commonwealth of Massachusetts and elsewhere as required by law; and all persons
dealing with EUA must look solely to the trust property for the enforcement of
any claim against EUA, as neither the Trustees nor the officers or shareholders
of EUA assume any personal liability for obligations entered into on behalf of
EUA.
RESEARCH DRIVE LLC
By: /s/John G. Cochrane
Name: John G. Cochrane
Title: Manager
Exhibit 99a
FOR RELEASE: Feb. 1, 1999, 6:00 am
CONTACTS:
NEES EUA
Investors: Investors:
Bob Seega, 508-389-2178 Clifford J. Hebert, 617-357-9590
Media: Media:
Cathy Fair, 508-389-3102 Fred Mason, 508-559-2000 x3662
NEES AND EUA TO MERGE IN $634-MILLION TRANSACTION
Industry Restructuring-Driven Consolidation Continues
WESTBOROUGH, Mass., Feb. 1, 1999 In the latest consolidation driven by
the restructuring of the region's electricity industry, New England Electric
System (NYSE:NES) and Eastern Utilities Associates (NYSE:EUA) announced today
that they have signed a merger agreement under which NEES will acquire all
outstanding shares of EUA for $31 per share in cash, subject to upward
adjustment.
The merger agreement values the equity of EUA at approximately $634
million and represents a 23% premium above the price of EUA shares on Dec. 4,
1998 (the last trading day before other regional merger announcements affected
EUA's share price), and a 5% premium above the closing price on Jan. 29, 1999.
NEES is New England's second largest electric utility, serving 1.3 million
customers through its regulated electric companies in Massachusetts, Rhode
Island and New Hampshire. The company announced on Dec. 14, 1998, that it will
merge with National Grid Group plc, the world's largest privately owned
transmission company, which is based in Coventry, England. Upon completion of
that merger, NEES will become a wholly owned subsidiary of National Grid.
The NEES/EUA merger is not contingent upon the NEES/National Grid merger
closing, but has the full support of National Grid, according to Rick Sergel,
president and chief executive officer of NEES.
EUA is a Boston-based public utility holding company whose subsidiaries
include electric transmission and distribution utilities in southeastern
Massachusetts and northern and south coastal Rhode Island. These utilities
provide electric service to approximately 300,000 customers.
Upon completion of the merger, EUA's operations will be merged into
NEES's. The combined company will serve 1.6 million electricity customers in
228 New England communities. The new company will serve more electricity
customers in both Massachusetts and Rhode Island than any other company.
NEES and EUA have consistently been the two lowest-cost, major electric
companies in the region. It is expected that the geographical fit of the two
companies will result in even greater efficiencies. The companies expect to
file a rate plan with state regulators in the near future, which will maintain
NEES's low rates, and bring EUA's rates to NEES levels in the future.
"This merger of New England's two most cost-conscious electric companies
is a natural fit in philosophy, geography and corporate structure," Sergel
said. "Furthermore, it is the first step in fulfilling the promise of the
NEES/National Grid merger."
"EUA and NEES share a long history of providing customers with high-
quality service at low rates. The synergies between the two companies will
create an even stronger company for our customers," EUA Chairman and Chief
Executive Officer Donald G. Pardus said. "Equally important, NEES and EUA
customers will continue to receive the same great service from the same
people."
Sergel will be president and chief executive officer of the combined
company upon completion of the merger. Both Pardus and EUA President and Chief
Operating Officer John R. Stevens have opted to retire upon the merger's
completion. EUA board members will be offered positions on the NEES Advisory
Board, and Pardus and Sergel will appoint a transition team representing both
companies. EUA Executive Vice President Robert G. Powderly will become
president of New England Power Service Company, NEES's subsidiary that provides
administrative and support services to the other subsidiaries.
"These are the logical steps to take to ensure a smooth transition as EUA
and NEES mesh into a larger, even more efficient, finely tuned operation,"
Pardus said.
The combined company will have approximately 250 fewer positions. "Our
goal is to attain this through voluntary early retirement and attrition,"
Sergel said. NEES will honor EUA's labor contracts.
The merger is subject to regulatory approvals by the Securities and
Exchange Commission, Federal Energy Regulatory Commission, Nuclear Regulatory
Commission, and the state utility commissions in Massachusetts and Rhode
Island. NEES expects to submit all principal regulatory filings, related both
to EUA and National Grid, this month. The merger also requires approval by EUA
shareholders. The merger is expected to be completed by early 2000.
EUA shareholders will receive a cash payment of $31 for each share held
when the merger is completed. The cash payment will be subject to an increase
of $0.003 per share per day if the merger is not completed on or before the
date following six months after approval of the merger by EUA shareholders.
NEES will finance the acquisition in part with cash received from the sale
of its generating business in September 1998.
EUA shareholders will continue to receive dividends at the current level
as declared by the Board of Trustees, until closing of the merger.
Merrill Lynch & Co., Inc. served as financial advisor and delivered a
fairness opinion to NEES, as did Salomon Smith Barney Inc. for EUA.
NEES is a public utility holding company headquartered in Westborough,
Mass. Massachusetts Electric Company serves 970,000 customers in 146
communities, and Nantucket Electric Company serves 10,000 customers on the
island of Nantucket. Narragansett Electric Company serves 330,000 customers in
27 Rhode Island communities, and Granite State Electric Company serves 36,000
customers in 21 New Hampshire communities.
Unregulated NEES subsidiaries include AllEnergy, an energy marketing
company, and NEESCom, a telecommunications company. NEES subsidiaries employ
3,200 people.
EUA is a Boston-based public utility holding company headquartered in
Boston, Massachusetts, whose shares are traded on the New York and Pacific
Stock Exchanges. Subsidiaries include Eastern Edison Co., which serves 184,000
customers in 22 communities; Blackstone Valley Electric Co., which serves
85,000 customers in 7 communities; and Newport Electric Corp., which serves
33,000 customers in 4 communities. Unregulated subsidiaries include EUA
Cogenex Corp. Together, the companies are known as the EUA System. Information
about EUA is available on the World Wide Web at http://www.eua.com.
This news release may contain statements that are "forward looking
statements" under the federal securities law. Actual results could differ
materially from those discussed, and there can be no assurance that estimates
of future results can be achieved. For a list of factors that could influence
results, please refer to the earnings section of NEES's Form 10-Q for the
period ended Sept. 30, 1998. The NEES/EUA merger is also subject to
contingencies as discussed herein. The NEES/National Grid merger is subject to
the contingencies listed in NEES's Form 8-K dated Dec. 11, 1998.
