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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 5, 1998
COMMONWEALTH ENERGY SYSTEM
(Exact name of registrant as specified in its Declaration of Trust)
1-7316
(Commission File Number)
Massachusetts 04-1662010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 225-4000
(Not Applicable)
(Former name, address and fiscal year, if changed since last report)
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COMMONWEALTH ENERGY SYSTEM
Item 5. Other Events
On December 5, 1998 BEC Energy (BEC), Commonwealth Energy System (CES) and BEC
Newco, Inc. (Newco), a new corporation owned jointly by BEC and CES, entered
into an Agreement and Plan of Merger (the Merger Agreement) providing for a
merger transaction among the companies. The Merger Agreement and the press
release issued in connection therewith are filed herewith as Exhibits 2.2 and
99.1, 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, BEC and CES will be merged into Newco and
holders of BEC and CES common shares will exchange their shares for a
combination of cash and stock in Newco. The Merger Agreement was approved by
the trustees of each of BEC and CES. The mergers are expected to occur
shortly after the satisfaction or waiver of certain conditions, including the
receipt of certain regulatory approvals. The regulatory approval process is
expected to be completed during the second half of 1999.
The mergers will create an energy delivery company serving approximately
1.3 million customers located entirely within Massachusetts, including more
than 1 million electric customers in 81 communities and 240,000 gas customers
in 51 communities.
Under the terms of the Merger Agreement, each outstanding common share of BEC
may be exchanged for one share of Newco common stock or $44.10 in cash, and
each outstanding common share of CES may be exchanged for 1.05 shares of Newco
common stock or $44.10 in cash. $200 million in cash will be allocated to BEC
shareholders and $100 million in cash will be allocated to CES shareholders.
In the event that shareholders of either BEC or CES do not elect to receive
all of the cash allocated to be paid to them, subject to adjustment in certain
cases, such cash will be proportionately allocated among those shareholders
who have elected to receive shares of Newco common stock. The cash portion of
the transaction is expected to be financed primarily through current cash
balances and internally generated funds. At the close of the mergers, BEC
shareholders will own approximately 68% of Newco common stock and CES
shareholders will own approximately 32%.
The transaction is expected to be tax-free to shareholders to the extent they
receive Newco common stock. The mergers are expected to be accounted for
using the purchase method of accounting.
The trustees of BEC have received an opinion of BEC's investment banker,
Goldman, Sachs & Co., to the effect that, as of the date of the Merger
Agreement, the mergers are fair from a financial point of view to the BEC
shareholders. The trustees of CES have received an opinion of CES' investment
banker, SG Barr Devlin, to the effect that, as of the date of the Merger
Agreement, the mergers are fair from a financial point of view to the CES
shareholders.
The mergers are subject to certain customary closing conditions, including the
receipt of the required approvals of BEC and CES shareholders; the receipt of
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COMMONWEALTH ENERGY SYSTEM
all necessary regulatory approvals, including the Massachusetts Department of
Telecommunications and Energy's approval of a rate plan and the approval of
the Federal Energy Regulatory Commission, the Securities and Exchange
Commission and the Nuclear Regulatory Commission; and 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.
Shareholder votes on the mergers are expected to be held as part of each of
BEC's and CES' annual shareholder meetings currently scheduled for the second
quarter of 1999. The Merger Agreement may be terminated under certain
circumstances, including by any party if the mergers are not consummated by
December 5, 1999, subject to an automatic extension of six months if the
requisite regulatory approvals have not yet been obtained by such date.
Upon effectiveness of the mergers, Thomas J. May, BEC's current Chairman,
President and Chief Executive Officer (CEO), will become the Chairman and CEO
of Newco. Russell D. Wright, CES' current president and CEO, will become the
President and Chief Operating Officer of Newco and will serve on Newco's board
of directors. Also, upon effectiveness of the mergers, Newco's board of
directors will consist of BEC's and CES' current trustees. Newco's operating
name has yet to be determined.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
Exhibit 2. Plan of acquisition, reorganization, arrangement,
liquidation, or succession.
Filed herewith as Exhibit 1:
2.2 Agreement and Plan of Merger by and among BEC Energy,
Boston Energy Technology Group, Inc., Commonwealth Energy
System, COM/Energy Resources, Inc. and BEC Newco, Inc.,
dated as of December 5, 1998
Exhibit 99. Additional exhibits
Filed herewith as Exhibit 2:
99.1 Joint press release dated December 7, 1998 issued by BEC
Energy and Commonwealth Energy System
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COMMONWEALTH ENERGY SYSTEM
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.
COMMONWEALTH ENERGY SYSTEM
(Registrant)
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: December 10, 1998
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Exhibit 1
Conformed Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BEC ENERGY,
BOSTON ENERGY TECHNOLOGY GROUP, INC.,
COMMONWEALTH ENERGY SYSTEM,
COM/ENERGY RESOURCES, INC.
AND
BEC NEWCO, INC.
dated as of December 5, 1998
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TABLE OF CONTENTS
Page
ARTICLE I.
THE MERGERS AND THE SUBSIDIARY MERGERS
SECTION 1.1 THE MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 EFFECTS OF THE MERGERS . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II.
TREATMENT OF SHARES
SECTION 2.1 EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF CES. . . . . . 2
SECTION 2.2 EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF BEC. . . . . . 6
SECTION 2.3 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . 9
ARTICLE III.
THE CLOSING
SECTION 3.1 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF CES
SECTION 4.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . .13
SECTION 4.2 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 4.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 4.4 ORGANIZATIONAL DOCUMENTS . . . . . . . . . . . . . . . . . .15
SECTION 4.5 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 4.6 NO CONFLICT; STATUTORY APPROVALS; COMPLIANCE . . . . . . . .15
SECTION 4.7 ALL ASSETS NECESSARY TO CONDUCT BUSINESS . . . . . . . . . .17
SECTION 4.8 REPORTS AND FINANCIAL STATEMENTS . . . . . . . . . . . . . .18
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . .18
SECTION 4.10 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 4.11 NO UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . .19
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Page
SECTION 4.12 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. . . . . .19
SECTION 4.13 RESTRICTIONS ON BUSINESS ACTIVITIES . . . . . . . . . . . .20
SECTION 4.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 4.15 EMPLOYEE MATTERS; ERISA . . . . . . . . . . . . . . . . . .22
SECTION 4.16 ENVIRONMENTAL PROTECTION. . . . . . . . . . . . . . . . . .24
SECTION 4.17 REGULATION AS A UTILITY . . . . . . . . . . . . . . . . . .26
SECTION 4.18 VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 4.19 OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . .26
SECTION 4.20 OWNERSHIP OF BEC COMMON STOCK . . . . . . . . . . . . . . .26
SECTION 4.21 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 4.22 CHANGE IN CONTROL AND SEVERANCE PAYMENTS. . . . . . . . . .27
SECTION 4.23 YEAR 2000 . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 4.24 NON-APPLICABILITY OF CERTAIN MASSACHUSETTS LAWS . . . . . .27
SECTION 4.25 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 4.26 OPERATIONS OF NUCLEAR POWER PLANT . . . . . . . . . . . . .28
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BEC
SECTION 5.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . .28
SECTION 5.2 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 5.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 5.4 ORGANIZATIONAL DOCUMENTS . . . . . . . . . . . . . . . . . .30
SECTION 5.5 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 5.6 NO CONFLICT; STATUTORY APPROVALS; COMPLIANCE . . . . . . . .30
SECTION 5.7 ALL ASSETS NECESSARY TO CONDUCT THE BUSINESS.. . . . . . . .32
SECTION 5.8 REPORTS AND FINANCIAL STATEMENTS . . . . . . . . . . . . . .32
SECTION 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . .33
SECTION 5.10 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 5.11 NO UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . .34
SECTION 5.12 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. . . . . .34
SECTION 5.13 RESTRICTIONS ON BUSINESS ACTIVITIES . . . . . . . . . . . .34
SECTION 5.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 5.15 EMPLOYEE MATTERS; ERISA . . . . . . . . . . . . . . . . . .36
SECTION 5.16 ENVIRONMENTAL PROTECTION. . . . . . . . . . . . . . . . . .38
SECTION 5.17 REGULATION AS A UTILITY . . . . . . . . . . . . . . . . . .39
SECTION 5.18 VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 5.19 OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . .39
SECTION 5.20 OWNERSHIP OF CES COMMON STOCK . . . . . . . . . . . . . . .40
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Page
SECTION 5.21 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 5.22 CHANGE IN CONTROL AND SEVERANCE PAYMENTS. . . . . . . . . .40
SECTION 5.23 YEAR 2000 . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 5.24 NON-APPLICABILITY OF CERTAIN MASSACHUSETTS LAWS . . . . . .41
SECTION 5.25 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 5.26 OPERATIONS OF NUCLEAR POWER PLANT . . . . . . . . . . . . .41
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . .41
SECTION 6.2 COVENANT OF NO SOLICITATION. . . . . . . . . . . . . . . . .48
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1 ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . .49
SECTION 7.2 JOINT PROXY STATEMENT AND REGISTRATION STATEMENT . . . . . .50
SECTION 7.3 REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . .51
SECTION 7.4 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . .52
SECTION 7.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION . . . . . . . . . .52
SECTION 7.6 DISCLOSURE SCHEDULES . . . . . . . . . . . . . . . . . . . .54
SECTION 7.7 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . .54
SECTION 7.8 RULE 145 AFFILIATES. . . . . . . . . . . . . . . . . . . . .54
SECTION 7.9 CERTAIN EMPLOYEE AGREEMENTS. . . . . . . . . . . . . . . . .55
SECTION 7.10 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . .55
SECTION 7.11 STOCK PLANS . . . . . . . . . . . . . . . . . . . . . . . .55
SECTION 7.12 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 7.13 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . .56
SECTION 7.14 CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . .56
SECTION 7.15 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 7.16 EMPLOYMENT CONTRACTS. . . . . . . . . . . . . . . . . . . .56
SECTION 7.17 WORKFORCE MATTERS . . . . . . . . . . . . . . . . . . . . .56
SECTION 7.18 COMPANY'S BOARD OF DIRECTORS. . . . . . . . . . . . . . . .57
SECTION 7.19 CONFIDENTIALITY AGREEMENTS. . . . . . . . . . . . . . . . .57
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Page
ARTICLE VIII.
CONDITIONS TO THE MERGERS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. . . . . . . . . . . . . . . . . . . . . . . . .58
SECTION 8.2 ADDITIONAL CONDITIONS TO OBLIGATION OF BEC TO EFFECT
THE MERGERS. . . . . . . . . . . . . . . . . . . . . . .59
SECTION 8.3 ADDITIONAL CONDITIONS TO OBLIGATION OF CES TO EFFECT
THE MERGERS. . . . . . . . . . . . . . . . . . . . . . .61
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 9.2 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . .65
SECTION 9.3 TERMINATION FEE; EXPENSES. . . . . . . . . . . . . . . . . .65
SECTION 9.4 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . .66
SECTION 9.5 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . .66
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . .66
SECTION 10.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . .67
SECTION 10.3 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .68
SECTION 10.4 INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . .68
SECTION 10.5 COUNTERPARTS; EFFECT. . . . . . . . . . . . . . . . . . . .68
SECTION 10.6 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . .69
SECTION 10.7 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. . . . . . . . . .69
SECTION 10.8 ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .69
SECTION 10.9 MASSACHUSETTS BUSINESS TRUST. . . . . . . . . . . . . . . .69
SECTION 10.10 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . .70
SECTION 10.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . .70
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 5, 1998
(the "Agreement") among BEC Energy, a Massachusetts Voluntary
Association ("BEC"), Boston Energy Technology Group, Inc., a
Massachusetts business corporation ("BETG"), Commonwealth Energy
System, a Massachusetts Voluntary Association ("CES"), COM/Energy
Resources, Inc., a Massachusetts business corporation ("CRI"), and BEC
Newco, Inc., a Massachusetts business corporation of which BEC and CES
each own 50% of the outstanding common stock (the "Company").
WHEREAS, CES and BEC have determined to engage in a strategic
business combination transaction on the terms stated herein;
WHEREAS, the Board of Trustees of CES and the Board of Directors
of CRI, and the Board of Trustees of BEC and the Board of Directors of
BETG, have approved and deemed it advisable and in the best interests
of their respective shareholders to consummate the transactions
contemplated herein under which the business of CES and BEC would be
combined by means of the merger of CES with and into CRI and the
merger of BEC with and into BETG, followed by the merger of CRI with
and into the Company and the merger of BETG with and into the Company
(collectively, the "Mergers");
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I.
THE MERGERS AND THE SUBSIDIARY MERGERS
SECTION 1.1 THE MERGERS. Upon the terms and subject to the
conditions of this Agreement:
(a) Immediately prior to the Effective Time (as defined in
Section 1.3), BEC shall be merged with and into BETG (the "BEC
Subsidiary Merger") and CES shall be merged with and into CRI (the
"CES Subsidiary Merger" and, together with the BEC Subsidiary Merger,
the "Subsidiary Mergers") pursuant to Massachusetts General Laws
("M.G.L.") Chapter 156B, Section 83. BETG and CRI, respectively,
shall be the surviving entities of the BEC Subsidiary Merger and CES
Subsidiary Merger. The effects and consequences of each of the
Subsidiary Mergers are set forth in Section 1.2.
(b) At the Effective Time, CRI shall be merged with and into the
Company (the "CES Merger") pursuant to M.G.L. Chapter 156B, Section
78. The Company shall be the surviving corporation and shall continue
its corporate existence under the laws of the Commonwealth of
Massachusetts. The effects and the consequences of the CES Merger are
set forth in Section 1.2.
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(c) At the Effective Time, BETG shall be merged with and into
the Company (the "BEC Merger"), pursuant to M.G.L. Chapter 156B,
Section 78. The Company shall be the surviving corporation and shall
continue its corporate existence under the laws of the Commonwealth of
Massachusetts. The effects and the consequences of the BEC Merger are
set forth in Section 1.2.
SECTION 1.2 EFFECTS OF THE MERGERS. At the Effective Time, (i)
the articles of organization of the Company, as in effect immediately
prior to the Effective Time, shall be the articles of organization of
the Company (the "Articles of Organization") of the Company as the
surviving corporation in the Mergers, and (ii) the bylaws of the
Company, as in effect immediately prior to the Effective Time, shall
be the bylaws of the Company (the "Bylaws") as the surviving
corporation in the Mergers. Subject to the foregoing, the additional
effects of the Mergers shall be as provided in the applicable
provisions of the Massachusetts Business Corporation Law, M.G.L. c.
156B (the "MBCL"). Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges and franchises of CES and CRI shall vest in the Company,
all debts, liabilities and duties of CES and CRI shall become the
debts, liabilities and duties of the Company, all the property,
rights, privileges and franchises of BEC and BETG shall vest in the
Company, and all debts, liabilities and duties of BEC and BETG shall
become the debts, liabilities and duties of the Company.
SECTION 1.3 EFFECTIVE TIME. On the Closing Date (as defined in
Section 3.1), articles of merger complying with the requirements of
the MBCL shall be executed and filed with the Secretary of the
Commonwealth of Massachusetts with respect to the Mergers and shall,
in addition, be filed in the office of the clerk of the city in which
each of BEC and CES have their respective principal places of business
with respect to the Subsidiary Mergers. Each of the Mergers shall
become effective at the time and date agreed upon by BEC and CES with
respect thereto and specified in the articles of merger therefor;
provided that the Subsidiary Mergers shall each become effective
immediately prior to the effective time of the BEC Merger and the CES
Merger, and provided further that the BEC Merger and CES Merger shall
become effective at the same time, which is hereinafter referred to as
the "Effective Time."
ARTICLE II
TREATMENT OF SHARES
SECTION 2.1 EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF CES.
As of the Effective Time, by virtue of the CES Subsidiary Merger and
the CES Merger and without any action on the part of any holder of CES
Common Stock:
(a) Conversion of CES Common Stock. Subject to the provisions
of Section 2.3(d), in the CES Subsidiary Merger each issued and
outstanding common share of CES, $2.00 par value per share (the "CES
Common Stock"), other than shares canceled pursuant to Section 2.1(b),
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shall be converted into one share of CRI Common Stock, $2.00 par value
per share (the "CRI Common Stock"), and in the CES Merger each share
of CRI Common Stock shall be converted into the right to receive
either (i) $44.10 in cash (the "CES Cash Consideration") or (ii) 1.05
(the "CES Exchange Ratio") fully paid and non-assessable shares of
Company common stock, par value $1.00 per share, (the "Company Common
Stock," such stock consideration being hereinafter referred to as the
"CES Stock Consideration," and, together with the CES Cash
Consideration, the "CES Merger Consideration"), in each case as the
holder thereof shall have elected or be deemed to have elected, in
accordance with Section 2.1(d). The CES Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of
securities convertible into CES Common Stock), reorganization,
recapitalization or other like change with respect to CES Common Stock
occurring after the date hereof and having a record date prior to the
Effective Time.
(b) Cancellation of CES Common Stock; Redemption of CES
Preferred Stock. (i) As of the Effective Time, each share of CES
Common Stock that is owned by CES as treasury stock and all shares of
CES Common Stock that are owned, directly or indirectly, by CES, BEC,
the Company or any of their respective subsidiaries shall be canceled
and shall cease to exist and no stock of the Company or other
consideration shall be delivered in exchange therefor.
(ii) Prior to the effective time of the CES Subsidiary
Merger, the Board of Trustees of CES shall call for redemption all
outstanding shares of preferred shares of CES, $100.00 par value per
share (the "CES Preferred Stock"), at a redemption price equal to the
amount provided for in the declaration of trust of CES, together with
all dividends accrued and unpaid to the date of such redemption. All
shares of CES Preferred Stock shall be redeemed so that no such shares
shall be outstanding at the effective time of the CES Subsidiary
Merger or entitled to vote on the approval of this Agreement, the
Mergers and the other transactions contemplated hereby.
(c) Allocation. The number of shares of CES Common Stock to be
converted into the right to receive the CES Cash Consideration in the
Mergers (the "CES Cash Number") shall be equal to 2,267,573.696. The
number of shares of CES Common Stock to be converted into the right to
receive the CES Stock Consideration in the Mergers (the "CES Stock
Number") shall be equal to (i) the number of shares of CES Common
Stock issued and outstanding immediately prior to the Effective Time
(ignoring for this purpose any CES Common Stock held as treasury
shares and canceled pursuant to Section 2.1(b)) less (ii) the CES Cash
Number. Notwithstanding the foregoing, if the number of shares of CES
Common Stock to be converted into the right to receive the CES Cash
Consideration in the Mergers in the absence of this Section 2.1(c)
(the "Elective CES Cash Number") is greater than 2,267,573.696, and if
the Elective BEC Cash Number (as defined in Section 2.2(c)) is less
than 4,535,147.392, then as illustrated in Exhibit 2.1(c)/2.2(c) the
CES Cash Number shall be increased (but not in an amount that would
violate the conditions set forth in Sections 8.2(e) and 8.3(e)) by the
lesser of (i) the Elective CES Cash Number minus 2,267,573.696 or (ii)
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4,535,147.392 minus the Elective BEC Cash Number. Notwithstanding the
foregoing, if the Elective CES Cash Number is less than 2,267,573.696,
and if the Elective BEC Cash Number is greater than the 4,535,147.392,
then as illustrated in Exhibit 2.1(c)/2.2(c) the CES Cash Number shall
be decreased by the number by which the BEC Cash Number is increased
pursuant to the penultimate sentence of Section 2.2(c).
Notwithstanding anything to the contrary herein, CES shall have the
option, with the prior consent of BEC, to change the CES Cash Number
and the CES Stock Number: (i) to more closely follow the actual
elections of the CES shareholders pursuant to this Section 2.1; and
(ii) to make such modification as is necessary such that the
conditions set forth in Sections 8.2(e) and 8.3(e) can be satisfied.
(d) Election. Subject to allocation in accordance with the
provisions of this Section 2.1, each record holder of shares of CES
Common Stock (other than shares to be canceled in accordance with
Section 2.1(b)) issued and outstanding immediately prior to the
Election Deadline (as defined in Section 2.3(b)(i)) shall be entitled,
in accordance with Section 2.3(b), (i) to elect to receive in respect
of each such share (A) the CES Cash Consideration (a "CES Cash
Election") or (B) the CES Stock Consideration (a "CES Stock Election")
or (ii) to indicate that such record holder has no preference as to
the receipt of the CES Cash Consideration or the CES Stock
Consideration for all such shares held by such holder (a "CES Non-
Election"). Shares of CES Common Stock in respect of which a CES Non-
Election is made or as to which no election is made (collectively,
"CES Non-Election Shares") shall be deemed by CES, with the prior
consent of BEC, to be shares in respect of which CES Cash Elections or
CES Stock Elections have been made, as CES shall determine.
(e) Allocation of CES Cash Election Shares. In the event that
the aggregate number of shares in respect of which CES Cash Elections
have been made or are deemed to have been made in accordance with
Section 2.1(d) (the "CES Cash Election Shares") exceeds the CES Cash
Number, all shares of CES Common Stock in respect of which CES Stock
Elections have been made ("the CES Stock Election Shares") and all CES
Non-Election Shares shall be converted into the right to receive the
CES Stock Consideration (and cash in lieu of fractional interests in
accordance with Section 2.3(d)), and the CES Cash Election Shares
shall be converted into the right to receive the CES Cash
Consideration or the CES Stock Consideration in the following manner:
(i) all record holders of CES Common Stock who (x) own
less than 100 shares of CES Common Stock and (y) elect to receive the
CES Cash Consideration in respect of fewer than 100 shares of CES
Common Stock (all such shares of CES Common Stock being herein
referred to as the "CES De Minimis Cash Election Shares") shall be
entitled to receive the CES Cash Consideration without proration;
(ii) the number of CES Cash Election Shares, other than CES
De Minimus Cash Election Shares, covered by each Form of Election (as
defined in Section 2.3(b)(i)) to be converted into CES Cash
Consideration shall be determined by multiplying the number of CES De
Minimis Cash Election Shares covered by such Form of Election by a
fraction, (A) the numerator of which is the CES Cash Number less the
number of CES De Minimis Cash Election Shares and (B) the denominator
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of which is the aggregate number of CES Cash Election Shares less the
number of CES De Minimis Cash Election Shares, rounded down to the
nearest whole number; provided that if the number of CES De Minimis
Cash Election Shares exceeds the CES Cash Number, the CES De Minimis
Cash Election Shares shall be converted into the CES Cash
Consideration by selecting, by lottery or such other method as
mutually agreed to by CES and BEC, from among the record holders of
CES De Minimis Cash Election Shares a sufficient number of such
holders (collectively, the "CES Cash Designees") such that the number
of CES Cash Election Shares held by the CES Cash Designees shall equal
as closely as practicable the CES Cash Number, and all CES Cash
Election Shares held by the CES Cash Designees shall be converted into
the right to receive the CES Cash Consideration; provided, however,
that no CES Cash Designee shall receive both CES Stock Consideration
and CES Cash Consideration for such holder's CES Common Stock and that
CES may, in accordance with Section 2.1(c), change the CES Cash Number
and the CES Stock Number in order to meet this requirement; and
(iii) all CES Cash Election Shares not converted into
CES Cash Consideration in accordance with Section 2.1(e)(i) or (ii)
shall be converted into the right to receive the CES Stock
Consideration (and cash in lieu of fractional interests in accordance
with Section 2.3(d)).
(f) Allocation of CES Stock Election Shares. In the event that
the aggregate number of CES Stock Election Shares exceeds the CES
Stock Number, all CES Cash Election Shares and all CES Non-Election
Shares (together, the "CES Cash Shares") shall be converted into the
right to receive the CES Cash Consideration, and all CES Stock
Election Shares shall be converted into the right to receive the CES
Cash Consideration or the CES Stock Consideration in the following
manner:
(i) the number of CES Stock Election Shares covered by
each Form of Election to be converted into CES Cash Consideration
shall be determined by multiplying the number of CES Stock Election
Shares covered by such Form of Election by a fraction, (A) the
numerator of which is the CES Cash Number less the number of CES Cash
Shares and (B) the denominator of which is the aggregate number of CES
Stock Election Shares, rounded down to the nearest whole number; and
(ii) all CES Stock Election Shares not converted into CES
Cash Consideration in accordance with Section 2.1(f)(i) shall be
converted into the right to receive the CES Stock Consideration (and
cash in lieu of fractional interests in accordance with
Section 2.3(d)).
(g) No Allocation. In the event that neither Section 2.1(e) nor
Section 2.1(f) is applicable, all CES Cash Election Shares shall be
converted into the right to receive the CES Cash Consideration, all
CES Stock Election Shares shall be converted into the right to receive
the CES Stock Consideration (and cash in lieu of fractional interests
in accordance with Section 2.3(d)) and CES Non-Election Shares shall
be converted into the right to receive the CES Cash Consideration or
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the CES Stock Consideration (and cash in lieu of fractional interests
in accordance with Section 2.3(d)) as CES, with the prior consent of
BEC, shall determine.
(h) Computations. The Exchange Agent, in consultation with CES,
shall make all computations to give effect to this Section 2.1.
(i) Cancellation of Shares. As of the Effective Time, all
shares of CES Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist and
each holder of a certificate formerly representing any such shares of
CES Common Stock (a "CES Certificate") shall cease to have any rights
with respect thereto, except the right to receive the CES Merger
Consideration and any additional cash in lieu of fractional shares of
CES Common Stock to be issued or paid in consideration therefor upon
surrender of such CES Certificate in accordance with Section 2.3,
without interest.
SECTION 2.2 EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF BEC.
As of the Effective Time, by virtue of the BEC Subsidiary Merger and
the BEC Merger and without any action on the part of any holder of BEC
Common Stock:
(a) Conversion of BEC Common Stock. Subject to the provisions
of Section 2.3(d), in the BEC Subsidiary Merger each issued and
outstanding common share of BEC, $1.00 par value per share (the "BEC
Common Stock"), other than shares canceled pursuant to Section 2.2(b),
shall be converted into one share of BETG Common Stock, $1.00 par
value per share (the "BETG Common Stock"), and in the BEC Merger each
share of BETG Common Stock shall be converted into the right to
receive either (i) $44.10 in cash (the "BEC Cash Consideration") or
(ii) one (the "BEC Exchange Ratio") fully paid and non-assessable
share of Company Common Stock (the " BEC Stock Consideration," and
together with the BEC Cash Consideration, the "BEC Merger
Consideration"), in each case as the holder thereof shall have elected
or be deemed to have elected, in accordance with Section 2.2(d). The
BEC Exchange Ratio shall be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into BEC Common Stock),
reorganization, recapitalization or other like change with respect to
BEC Common Stock occurring after the date hereof and having a record
date prior to the Effective Time.
(b) Cancellation of BEC Common Stock. As of the Effective Time,
each share of BEC Common Stock that is owned by BEC as treasury stock
and all shares of BEC Common Stock that are owned, directly or
indirectly, by BEC, CES, the Company or any of their respective
subsidiaries shall be canceled and shall cease to exist and no stock
of the Company or other consideration shall be delivered in exchange
therefor.
(c) Allocation. The number of shares of BEC Common Stock to be
converted into the right to receive the BEC Cash Consideration in the
Mergers (the "BEC Cash Number") shall be equal to 4,535,147.392. The
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number of shares of BEC Common Stock to be converted into the right to
receive the BEC Stock Consideration in the Mergers (the "BEC Stock
Number") shall be equal to (i) the number of shares of BEC Common
Stock issued and outstanding immediately prior to the Effective Time
(ignoring for this purpose any BEC Common Stock held as treasury
shares and canceled pursuant to Section 2.2(b)) less (ii) the BEC Cash
Number. Notwithstanding the foregoing, if the number of shares of BEC
Common Stock to be converted into the right to receive the BEC Cash
Consideration in the Mergers in the absence of this Section 2.2(c)
(the "Elective BEC Cash Number") is greater than 4,535,147.392, and if
the Elective CES Cash Number is less than 2,267,573.696, then as
illustrated in Exhibit 2.1(c)/2.2(c) the BEC Cash Number shall be
increased (but not in an amount that would violate the conditions set
forth in Sections 8.2(e) and 8.3(e)) by the lesser of (i) the Elective
BEC Cash Number minus 4,535,147.392 or (ii) 2,267,573.696 minus the
Elective CES Cash Number. Notwithstanding the foregoing, if the
Elective BEC Cash Number is less than 4,535,147.392, and if the
Elective CES Cash Number is greater than 2,267,573.696, then as
illustrated in Exhibit 2.1(c)/2.2(c) the BEC Cash Number shall be
decreased by the number by which the CES Cash Number is increased
pursuant to the penultimate sentence of Section 2.1(c).
Notwithstanding anything to the contrary herein, BEC shall have the
option, with the prior consent of CES, to change the BEC Cash Number
and the BEC Stock Number: (i) to more closely follow the actual
elections of the BEC shareholders pursuant to this Section 2.2; and
(ii) to make such modification as is necessary such that the
conditions set forth in Sections 8.2(e) and 8.3(e) can be satisfied.
(d) Election. Subject to allocation in accordance with the
provisions of this Section 2.2, each record holder of shares of BEC
Common Stock (other than shares to be canceled in accordance with
Section 2.2(b)) issued and outstanding immediately prior to the
Election Deadline shall be entitled, in accordance with
Section 2.3(b), (i) to elect to receive in respect of each such share
(A) the BEC Cash Consideration (a "BEC Cash Election") or (B) the BEC
Stock Consideration (a "BEC Stock Election") or (ii) to indicate that
such record holder has no preference as to the receipt of the BEC Cash
Consideration or the BEC Stock Consideration for all such shares held
by such holder (a "BEC Non-Election"). Shares of BEC Common Stock in
respect of which a BEC Non-Election is made or as to which no election
is made (collectively, "BEC Non-Election Shares") shall be deemed by
BEC, with the prior consent of CES, to be shares in respect of which
BEC Cash Elections or BEC Stock Elections have been made, as BEC shall
determine.
(e) Allocation of BEC Cash Election Shares. In the event that
the aggregate number of shares in respect of which BEC Cash Elections
have been made or are deemed to have been made in accordance with
Section 2.2(d) (the "BEC Cash Election Shares") exceeds the BEC Cash
Number, all shares of BEC Common Stock in respect of which BEC Stock
Elections have been made ("the BEC Stock Election Shares") and all BEC
Non-Election Shares shall be converted into the right to receive the
BEC Stock Consideration (and cash in lieu of fractional interests in
accordance with Section 2.3(d)), and the BEC Cash Election Shares
shall be converted into the right to receive the BEC Cash
Consideration or the BEC Stock Consideration in the following manner:
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(i) all record holders of BEC Common Stock who (x) own
less than 100 shares of BEC Common Stock and (y) elect to receive the
BEC Cash Consideration in respect of fewer than 100 shares of BEC
Common Stock (all such shares of BEC Common Stock being herein
referred to as the "BEC De Minimis Cash Election Shares") shall be
entitled to receive the BEC Cash Consideration without proration;
(ii) the number of BEC Cash Election Shares, other than BEC
De Minimus Cash Election Shares, covered by each Form of Election to
be converted into BEC Cash Consideration shall be determined by
multiplying the number of BEC De Minimis Cash Election Shares covered
by such Form of Election by a fraction, (A) the numerator of which is
the BEC Cash Number less the number of BEC De Minimis Cash Election
Shares and (B) the denominator of which is the aggregate number of BEC
Cash Election Shares less the number of BEC De Minimis Cash Election
Shares, rounded down to the nearest whole number; provided that if the
number of BEC De Minimis Cash Election Shares exceeds the BEC Cash
Number, the BEC De Minimis Cash Election Shares shall be converted
into the BEC Cash Consideration by selecting, by lottery or such other
method as mutually agreed to by BEC and CES, from among the record
holders of BEC De Minimis Cash Election Shares a sufficient number of
such holders (collectively, the "BEC Cash Designees") such that the
number of BEC Cash Election Shares held by the BEC Cash Designees
shall equal as closely as practicable the BEC Cash Number, and all BEC
Cash Election Shares held by the BEC Cash Designees shall be converted
into the right to receive the BEC Cash Consideration; provided,
however, that no BEC Cash Designee shall receive both BEC Stock
Consideration and BEC Cash Consideration for such holder's BEC Common
Stock and that BEC may, in accordance with Section 2.2(c), change the
BEC Cash Number and the BEC Stock Number in order to meet this
requirement; and
(iii) all BEC Cash Election Shares not converted into
BEC Cash Consideration in accordance with Section 2.2(e)(i) or (ii)
shall be converted into the right to receive the BEC Stock
Consideration (and cash in lieu of fractional interests in accordance
with Section 2.3(d)).
(f) Allocation of BEC Stock Election Shares. In the event that
the aggregate number of BEC Stock Election Shares exceeds the BEC
Stock Number, all BEC Cash Election Shares and all BEC Non-Election
Shares (together, the "BEC Cash Shares") shall be converted into the
right to receive the BEC Cash Consideration, and all BEC Stock
Election Shares shall be converted into the right to receive the BEC
Cash Consideration or the BEC Stock Consideration in the following
manner:
(i) the number of BEC Stock Election Shares covered by
each Form of Election to be converted into BEC Cash Consideration
shall be determined by multiplying the number of BEC Stock Election
Shares covered by such Form of Election by a fraction, (A) the
numerator of which is the BEC Cash Number less the number of BEC Cash
Shares and (B) the denominator of which is the aggregate number of BEC
Stock Election Shares, rounded down to the nearest whole number; and
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(ii) all BEC Stock Election Shares not converted into BEC
Cash Consideration in accordance with Section 2.2(f)(i) shall be
converted into the right to receive the BEC Stock Consideration (and
cash in lieu of fractional interests in accordance with
Section 2.3(d)).
(g) No Allocation. In the event that neither Section 2.2(e) nor
Section 2.2(f) is applicable, all BEC Cash Election Shares shall be
converted into the right to receive the BEC Cash Consideration, all
BEC Stock Election Shares shall be converted into the right to receive
the BEC Stock Consideration (and cash in lieu of fractional interests
in accordance with Section 2.3(d)) and BEC Non-Election Shares shall
be converted into the right to receive the BEC Cash Consideration or
the BEC Stock Consideration (and cash in lieu of fractional interests
in accordance with Section 2.3(d)) as BEC, with the prior consent of
CES, shall determine.
(h) Computations. The Exchange Agent, in consultation with BEC,
shall make all computations to give effect to this Section 2.2.
(i) Cancellation of Shares. As of the Effective Time, all
shares of BEC Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist and
each holder of a certificate formerly representing any such shares of
BEC Common Stock (a "BEC Certificate") shall cease to have any rights
with respect thereto, except the right to receive the BEC Merger
Consideration and any additional cash in lieu of fractional shares of
BEC Common Stock to be issued or paid in consideration therefor upon
surrender of such BEC Certificate in accordance with Section 2.3,
without interest.
SECTION 2.3 EXCHANGE OF CERTIFICATES.
(a) Deposit with Exchange Agent. As soon as practicable after
the Effective Time, the Company shall deposit with a bank or trust
company as shall be designated by the Company (the "Exchange Agent"),
in trust for the benefit of the holders of CES Common Stock and BEC
Common Stock, cash equal to the sum of the total aggregate CES Cash
Consideration and BEC Cash Consideration and certificates representing
the shares of Company Common Stock (such cash and such shares of
Company Common Stock, together with any dividends or distributions
with respect thereto with a record date after the Effective Time and
any cash payable in lieu of any fractional shares of Company Common
Stock, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Sections 2.1 and 2.2 in exchange for outstanding shares of
CES Common Stock and BEC Common Stock.
(b) Exchange Procedures.
(i) Not more than 90 days nor fewer than 30 days prior to
the Closing Date, the Exchange Agent shall mail a form of election (a
"Form of Election") to holders of record of shares of CES Common Stock
and BEC Common Stock (as of a record date as close as practicable to
the date of mailing and mutually agreed to by CES and BEC). In
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addition, the Exchange Agent shall use its best efforts to make the
Form of Election available to all persons who become shareholders of
CES and BEC during the period between such record date and the Closing
Date. Any election to receive the CES Merger Consideration
contemplated by Section 2.1(d) or the BEC Merger Consideration as
contemplated by Section 2.2(d) (as applicable, the "Merger
Consideration") shall have been properly made only if the Exchange
Agent shall have received at its designated office or offices, by 5:00
p.m., Boston time, on the business day immediately preceding the
Closing Date (the "Election Deadline"), a Form of Election properly
completed and accompanied by a CES Certificate or a BEC Certificate,
as the case may be (together or as applicable, "Certificate(s)") for
the shares to which such Form of Election relates, duly endorsed in
blank or otherwise acceptable for transfer on the books of CES or BEC,
as the case may be (or an appropriate guarantee of delivery), as set
forth in such Form of Election. An election may be revoked only by
written notice received by the Exchange Agent prior to 5:00 p.m.,
Boston time, on the Election Deadline. In addition, all elections
shall automatically be revoked if the Exchange Agent is notified in
writing by CES and BEC that either of the Mergers has been abandoned.
If an election is so revoked, the Certificate(s) (or guarantee of
delivery, as appropriate) to which such election relates shall be
promptly returned to the person who submitted the same to the Exchange
Agent.
(ii) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record a
Certificate, whose shares of CES Common Stock or BEC Common Stock
(collectively, the "Shares") were converted into the right to receive
the Merger Consideration and who failed to return a properly completed
Form of Election, (i) a letter of transmittal (which shall specify
that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other
provisions as CES and BEC may specify consistent with this Agreement)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.
(iii) At the Effective Time, with respect to properly
made elections in accordance with Section 2.3(b)(i), and upon
surrender in accordance with Section 2.3(b)(v) of a Certificate for
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor Merger Consideration
that such holder has the right to receive pursuant to the provisions
of this Article II, and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of shares of
Shares that are not registered in the transfer records of CES or BEC,
payment may be issued to a Person other than the Person in whose name
the Certificate so surrendered is registered if such Certificate is
properly endorsed or otherwise in proper form for transfer and the
Person requesting such issuance pays any transfer or other taxes
required by reason of such payment to a Person other than the
registered holder of such Certificate or established to the
satisfaction of CES and BEC that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.3,
each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration that the holder thereof has the right to receive in
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respect of such Certificate pursuant to the provisions of this Article
II. No interest shall be paid or shall accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective
Time with respect to Company Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Company Common Stock
represented thereby and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.3(d) until the
holder of record of such Certificate shall surrender such Certificate.
Subject to the effect of unclaimed property, escheat and other
applicable laws, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing
whole shares of Company Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Company Common Stock to
which such holder is entitled pursuant to Section 2.3(d) and the
amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole shares
of Company Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of
Company Common Stock.
(d) No Fractional Securities. Notwithstanding any other
provision of this Agreement, no certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional shares
shall not entitle the owner thereof to vote or to any other rights of
a holder of Company Common Stock. A holder of CES Common Stock or BEC
Common Stock, as the case may be, who would otherwise have been
entitled to a fractional share of Company Common Stock shall be
entitled to receive a cash payment in lieu of such fractional share in
an amount equal to the product of such fraction multiplied by the BEC
Cash Consideration, without any interest thereon.
(e) Closing of Transfer Books. From and after the Effective
Time the stock transfer books of CES and BEC shall be closed and no
transfer of any capital stock thereof shall thereafter be made. If,
after the Effective Time, Certificates are presented to the Company,
they shall be canceled and exchanged for certificates representing the
appropriate number of Company Shares as provided in Section 2.1 and in
this Section 2.2.
(f) Termination of Exchange Agent. Any certificates
representing shares of Company Common Stock deposited with the
Exchange Agent pursuant to Section 2.3(a) and not exchanged within six
months after the Effective Time pursuant to this Section 2.3 shall be
returned by the Exchange Agent to the Company, which shall thereafter
act as Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of unsurrendered Certificates in lieu of
fractional shares, and unclaimed at the end of one year from the
Effective Time shall be returned to the Company, after which time any
holder of unsurrendered Certificates shall look as a general creditor
only to the Company for payment of such funds to which such holder may
be due, subject to applicable law.
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(g) Escheat. None of BEC, BETG, CES, CRI or the Company shall
be liable to any person for such shares or funds delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Withholding Rights. The Company or the Exchange Agent shall
be entitled to deduct and withhold from the Merger Consideration
otherwise payable to any holder of CES Common Stock or BEC Common
Stock, as the case may be, such amounts as the Company or the Exchange
Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the
Company or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder
of the Shares in respect of which such deduction and withholding was
made by the Company or the Exchange Agent.
(i) No Further Ownership Rights in CES Common Stock or BEC
Common Stock. The Merger Consideration delivered upon the surrender
for exchange of CES Common Stock or BEC Common Stock, as the case may
be, in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such CES
Common Stock or BEC Common Stock. If, after the Effective Time,
Certificates are presented to the Company for any reason, they shall
be canceled and exchanged as provided in this Article II.
(j) Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the
holder thereof, such Merger Consideration as may be required pursuant
to Article II; provided however, that the Company may, in its
discretion and as a condition precedent thereof, require the owner of
such lost, stolen or destroyed Certificates to deliver a bond in such
sums as it may reasonably direct as indemnity against any claim that
may be made against the Company or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
(k) Taking of Necessary Action: Further Action. Each of BEC,
BETG, CES, CRI and the Company shall take all such reasonable and
lawful action as may be necessary or appropriate in order to
effectuate the Mergers in accordance with this Agreement as promptly
as possible. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Company with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of CES and BEC, the officers and directors of CES, CRI, BEC
and BETG immediately prior to the Effective Time are fully authorized
in the name of their respective corporations or otherwise to take, and
shall take, all such lawful and necessary action.
ARTICLE III.
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THE CLOSING
SECTION 3.1 CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1, the closing of the Mergers (the
"Closing") shall take place at the offices of Ropes & Gray, One
International Place, Boston, Massachusetts at 10.00 a.m., Eastern
time, on the second business day immediately following the date on
which the last of the conditions set forth in Article VIII is
fulfilled or waived (other than conditions that by their nature are
required to be performed on the Closing Date, but subject to
satisfaction of such conditions), or at such other time and date and
place as CES and BEC shall mutually agree (the "Closing Date").
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF
CES
CES represents and warrants to BEC as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Except as set forth
in Section 4.1 of the CES Disclosure Schedule, (i) CES is a duly
organized and lawfully existing voluntary association organized under
M.G.L. c. 182, (ii) CRI is a duly organized and lawfully existing
business corporation organized under M.G.L. c. 156B, (iii) each CES
subsidiary (as defined below) is a corporation, limited liability
company, or trust duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, and (iv) each of CES and each CES subsidiary has all
requisite corporate or other power and authority, and has been duly
authorized by all necessary franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and
orders, to own, lease and operate its assets and properties to the
extent owned, leased and operated and to carry on its business as it
is now being conducted. CES and each CES subsidiary is duly qualified
or licensed as a foreign corporation or other entity to do business,
and is in good standing, in each jurisdiction in which the nature of
its business or the ownership or leasing of its assets and properties
makes such qualification necessary, other than in such jurisdictions
where the failure to be so qualified and in good standing would not,
when taken together with all other such failures, have a material
adverse effect on the business, properties, prospects, condition
(financial or otherwise) or results of operations of CES and its
subsidiaries taken as a whole or prevent the consummation of the
transactions contemplated hereby (any such material adverse effect
being hereafter referred to as a "CES Material Adverse Effect"). As
used in this Agreement, the term "subsidiary" of a person shall mean
any corporation or other entity (including partnerships and other
business associations) of which a majority of the outstanding capital
stock or other voting securities or other interests having voting
power under ordinary circumstances to elect directors or similar
members of the governing body of such corporation or entity shall at
the time be held, directly or indirectly, by such person.
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SECTION 4.2 SUBSIDIARIES. Except as set forth in Section 4.2 of
the CES Disclosure Schedule, CES does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, to CES's knowledge, joint venture (as
defined below), or any other business association or entity, with
respect to which interest CES has invested or is required to invest
$100,000 or more, excluding securities in any publicly traded company
held for investment by CES and comprising less than five percent of
the outstanding stock of such company. Section 4.2 of the CES
Disclosure Schedule sets forth a description as of the date hereof, of
all subsidiaries and joint ventures of CES, including the name of each
such entity, the state or jurisdiction of its incorporation or
organization, CES's interest therein and a brief description of the
principal line or lines of business conducted by each such entity.
Except as set forth in Section 4.2 of the CES Disclosure Schedule, all
of the issued and outstanding shares of capital stock of each CES
subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned, directly or indirectly, by CES free
and clear of any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever and there are
no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of its
capital stock or obligating it to grant, extend or enter into any such
agreement or commitment, except for any of the foregoing that could
not reasonably be expected to have a CES Material Adverse Effect. As
used in this Agreement, the term "joint venture" of a person shall
mean any corporation or other entity (including partnerships and other
business associations) that is not a subsidiary of such person, in
which such person or one or more of its subsidiaries owns an equity
interest, other than equity interests held for passive investment
purposes which are less than 10% of any class of the outstanding
voting securities or equity of any such entity. For the purposes of
this Agreement, it is understood that all references to the knowledge
of CES mean solely the knowledge, after due inquiry, of the corporate
officers of CES listed on Section 4.2(b) of the CES Disclosure
Schedules.
SECTION 4.3 CAPITALIZATION. The authorized shares of CES consist
of 50,000,000 shares of CES Common Stock and 320,000 shares of CES
Preferred Stock. The authorized shares of CRI consist of 100 shares
of CRI Common Stock. As of the close of business on December 4, 1998,
there were issued and outstanding 21,533,820 shares of CES Common
Stock, 122,000 shares of CES Preferred Stock and 100 shares of CRI
Common Stock. As of the close of business on December 4, 1998, no
shares of CES Common Stock were held by CES in its treasury and no
shares of CRI Common Stock were held by CRI in its treasury. No
material change in such capitalization has occurred between December
4, 1998 and the date hereof. All of the issued and outstanding common
and preferred shares of CES are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in
Section 4.3 of the CES Disclosure Schedule, as of the date hereof,
there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
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conversion or exchange under any outstanding security, instruments,
agreements, arrangements or commitments of any character relating to
the issued or unissued common or preferred shares of CES or obligating
CES or any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional common or preferred shares or
other equity or beneficial interests of CES or any of its
subsidiaries, or obligating CES or any of its subsidiaries to
repurchase, redeem or otherwise acquire or cancel any such shares or
other interests or to provide funds to or make any investment (in the
form of a loan, capital contribution, guaranty or otherwise) in any
other entity, or obligating CES to grant, extend or enter into any
such agreement or commitment. None of the outstanding common or
preferred shares of CES was issued in violation of the Securities Act
of 1933, as amended (the "Securities Act"), or the securities or blue
sky laws of any state or jurisdiction, which violation would have a
CES Material Adverse Effect.
SECTION 4.4 ORGANIZATIONAL DOCUMENTS. Each of CES and CRI has
heretofore furnished to BEC a complete and correct copy of its
respective charter and by-laws as amended to date. Such charters and
by-laws are in full force and effect. Neither CES nor CRI is in
violation of any of the provisions of its respective charter or by-
laws.
SECTION 4.5 AUTHORITY. CES has the legal capacity, power and
authority (including full corporate (or other) power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder, and, subject to obtaining the CES Shareholders' Approval
(as defined in Section 4.18) and the CES Required Statutory Approvals
(as defined in Section 4.6(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
CES and the consummation by CES of the transactions contemplated
hereby have been duly and validly authorized by all necessary
corporate (or other) action on the part of CES and, subject to
obtaining the applicable CES Shareholders' Approval, no other
corporate (or other) proceedings on the part of CES are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby. The Board of Trustees of CES has determined that
it is advisable and in the best interests of CES's shareholders for
CES to enter into a business combination with BEC upon the terms and
subject to the conditions of this Agreement, and has unanimously
recommended that CES's shareholders approve and adopt this Agreement
and approve the Mergers. This Agreement has been duly and validly
executed and delivered by CES and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto,
constitutes the valid and binding obligation of CES enforceable
against it in accordance with its terms.
SECTION 4.6 NO CONFLICT; STATUTORY APPROVALS; COMPLIANCE.
(a) No Breaches. Except as disclosed in Section 4.6(a) of the
CES Disclosure Schedule, (i) neither CES nor any of its subsidiaries
or, to CES's knowledge, joint ventures has breached, is in default
under, or has received written notice of any breach of or default
under, any (x) loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit,
equipment leases or lease purchase agreements to which CES or any of
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its subsidiaries or, to CES's knowledge, joint ventures is a party or
by which it or any of its subsidiaries or, to CES's knowledge, joint
ventures is bound, (y) contracts, agreements, commitments or other
understandings or arrangements to which CES or any of its subsidiaries
or, to CES's knowledge, joint ventures is a party or by which such
entity or any of its respective properties or assets are bound or
affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of
business and involving, in each case, payments or receipts by CES or
any of its subsidiaries or, to CES's knowledge, joint ventures of less
than $100,000 in any single instance but not more than $300,000 in the
aggregate or (z) agreements which, as of the date hereof, are required
to be filed as "material contracts" with the Securities and Exchange
Commission (the "SEC") pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, and the SEC's rules and regulations
thereunder (the "Exchange Act"), (ii) to CES's knowledge, no other
party to any of the agreements, contracts or other instrument referred
to in subclauses (x), (y) or (z) of clause (i) above or has breached
or is in default of any of its obligations thereunder, and (iii) each
of the agreements, contracts and other instruments referred to in
subclauses (x), (y) or (z) of clause (i) above is in full force and
effect, except in any such case for breaches, defaults or failures to
be in full force and effect that has not had and could not reasonably
be expected to have a CES Material Adverse Effect.
(b) No Conflict. The execution and delivery of this Agreement
by CES does not, and the consummation of the transactions contemplated
hereby will not, violate, conflict with, or result in a breach of any
provision of, or constitute a default (with or without notice or lapse
of time or both) under, or result in the termination or modification
of, or accelerate the performance required by, or result in a right of
termination, cancellation, or acceleration of any obligation or the
loss of a benefit under, or result in the creation of any lien,
security interest, charge or encumbrance (each, a "Lien") upon any of
the properties or assets of CES or any of its subsidiaries or, to
CES's knowledge, joint ventures (any such violation, conflict, breach,
default, right of termination, modification, cancellation or
acceleration, loss or creation, a "Violation" with respect to CES
(such term when used in Article V having a correlative meaning with
respect to BEC) pursuant to any provisions of (i) the declaration of
trust, articles of organization, by-laws or similar governing
documents of CES or any of its subsidiaries or, to CES's knowledge,
joint ventures, (ii) subject to obtaining the CES Required Statutory
Approvals and the receipt of the CES Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority (as
defined in Section 4.6(c)) applicable to CES or any of its
subsidiaries or, to CES's knowledge, joint ventures, or any of their
respective properties or assets or (iii) subject to obtaining the
third-party consents or other approvals set forth in Section 4.6(b) of
the CES Disclosure Schedule (the "CES Required Consents") any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which CES or any of its subsidiaries or, to
CES's knowledge, joint ventures, is a party or by which it or any of
its properties or assets may be bound or affected, excluding from the
foregoing clauses (ii) and (iii) such Violations that would not have a
CES Material Adverse Effect.
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(c) Statutory Approvals. No declaration, filing or registration
with, or notice to or authorization, consent or approval of, any
court, federal, state, local or foreign governmental or regulatory
body (including a stock exchange or other self-regulatory body) or
authority (each, a "Governmental Authority") is necessary for the
execution and delivery of this Agreement by CES or the consummation by
CES of the transactions contemplated hereby, the failure of which to
obtain, make or give would have a CES Material Adverse Effect, except
as described in Section 4.6(c) of the CES Disclosure Schedule (the
"CES Required Statutory Approvals"), it being understood that
references in this Agreement to "obtaining" such CES Required
Statutory Approvals shall mean making such declarations, filings or
registrations, giving such notices, obtaining such authorizations,
consents or approvals and having such waiting periods expire as are
necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.6(d), Section
4.12, Section 4.14, Section 4.15 or Section 4.16 of the CES Disclosure
Schedule, or as disclosed in the CES SEC Reports (as defined in
Section 4.8), neither CES nor any of its subsidiaries nor, to CES's
knowledge, any joint venture of CES, is in violation of, is under
investigation with respect to any violation of, or has been given
notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation)
of any Governmental Authority, except for violations which,
individually or in the aggregate, do not have, and, to CES's
knowledge, are not reasonably likely to have, a CES Material Adverse
Effect. Except as set forth in Section 4.6(d) of the CES Disclosure
Schedule or in Section 4.16 of the CES Disclosure Schedule, CES and
each of its subsidiaries and, to CES's knowledge, joint ventures have
all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their
respective businesses as currently conducted in all respects, except
those of which the failure to obtain would not, in the aggregate, have
a CES Material Adverse Effect. Except as set forth in Section 4.6(d)
of the CES Disclosure Schedule, each of CES and each of its
subsidiaries and, to CES's knowledge, joint ventures 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 under, (i)
its charter or by-laws or (ii) any material contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which it is a party or by
which it is bound or to which any of its property is subject, except
for possible violations, breaches or defaults which individually or in
the aggregate would not have a CES Material Adverse Effect.
SECTION 4.7 ALL ASSETS NECESSARY TO CONDUCT BUSINESS The assets,
properties and rights of CES and its subsidiaries reflected in the
most recent CES Financial Statements (as defined in Section 4.8)
comprise all of the material assets, properties and rights of every
type and description, real, personal, tangible and intangible used by
CES in, and, in the reasonable opinion of the management of CES,
necessary to, the conduct of CES's business as currently conducted.
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SECTION 4.8 REPORTS AND FINANCIAL STATEMENTS. The filings
required to be made by CES and its subsidiaries since January 1, 1995
under the Securities Act, the Exchange Act, the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"), the Federal Power
Act (the "Power Act"), the Atomic Energy Act of 1954, as amended (the
"Atomic Energy Act"), and applicable state public utility laws and
regulations have been filed with the SEC, the Federal Energy
Regulatory Commission (the "FERC"), the Nuclear Regulatory Commission
(the "NRC"), the Department of Energy (the "DOE") or the appropriate
state public utilities commission, as the case may be, including all
forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto
complied, as of their respective dates, in all material respects with
all applicable requirements of the appropriate statute and the rules
and regulations thereunder, and the Exhibit Index to CES's most
recently filed Form 10-K includes each agreement, contract or
instrument (including all amendments thereto) to which CES or any of
its subsidiaries is a party or by which any of them is bound required
to be included thereon (the "CES Material Contracts"). CES has made
available to BEC a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by CES
with the SEC since January 1, 1995 through the date of this Agreement
(as such documents have since the time of their filing been amended,
the "CES SEC Reports"). As of their respective dates, the CES SEC
Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial
statements of CES included in the CES SEC Reports (collectively, the
"CES Financial Statements") complied as to form in all material
respects with the applicable rules of the SEC, have been prepared in
accordance with U.S. generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered
thereby (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form
10-Q of the SEC) and fairly present the consolidated financial
position of CES as of the dates thereof and the consolidated results
of operations and cash flows for the periods then ended.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Section 4.9 of the CES Disclosure Schedule or as set forth or
reflected in the CES SEC Reports, since December 31, 1997, CES and
each of its subsidiaries, and, to CES's knowledge, each of its joint
ventures, have conducted their operations only in the ordinary course
of business consistent with past practice and there has not occurred:
(i) any change, development, event or other circumstance, situation or
state of affairs that has had or may be reasonably expected to have a
CES Material Adverse Effect; (ii) any amendments to or changes in the
charters or by-laws of CES or any of its subsidiaries; (iii) any
material change by CES in its accounting methods, principles or
practices; (iv) any revaluation by CES of any assets having a value
exceeding in the aggregate $1,000,000; or (v) any sale, lease,
transfer, or assignment of assets (tangible or intangible) of CES or
its subsidiaries having a value exceeding $1,000,000 per instance.
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SECTION 4.10 LITIGATION. Except as set forth in Section 4.10 of
the CES Disclosure Schedule or as disclosed in the CES SEC Reports,
(i) there are no claims, suits, actions or proceedings, pending or, to
the knowledge of CES, threatened, nor are there, to the knowledge of
CES, any investigations or reviews pending or threatened against,
relating to or affecting CES or any of its subsidiaries or any
meritorious basis for any such claims, suits, actions, proceedings,
investigations or reviews, and (ii) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator
applicable to CES or any of its subsidiaries, except for any of the
foregoing under clauses (i) and (ii) that individually or in the
aggregate could not reasonably be expected to have a CES Material
Adverse Effect.
SECTION 4.11 NO UNDISCLOSED LIABILITIES. Except as disclosed in
Section 4.11 of the CES Disclosure Schedule, CES has no liabilities
(absolute, accrued, contingent or otherwise), except liabilities (a)
in the aggregate adequately provided for in CES's audited balance
sheet (including any related notes thereto) for the fiscal year ended
December 31, 1997 contained in the Company's Annual Report on Form 10-
K (the "1997 Company Balance Sheet"), (b) incurred since December 31,
1997 in the ordinary course of business consistent with past practice,
(c) incurred in connection with this Agreement, or (d) which could not
reasonably be expected to have a CES Material Adverse Effect.
SECTION 4.12 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT.
(i) None of the information supplied or to be supplied by or on behalf
of CES for inclusion or incorporation by reference in the registration
statement on Form S-4 to be filed with the SEC in connection with the
issuance of shares of Company Common Stock in the Mergers (the
"Registration Statement") will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading and (ii) the joint proxy statement, in definitive form,
relating to the meeting of CES shareholders and the meeting of BEC
shareholders to be held in connection with the Mergers (the "Joint
Proxy Statement") shall not, at the dates mailed to shareholders or at
the times of the meetings of shareholders to be held in connection
with the Mergers, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or omit to
state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for
the shareholder meeting which has become false or misleading. The
Registration Statement and the Joint Proxy Statement, insofar as they
relate to CES or any CES subsidiary, shall comply as to form in all
material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder. If at
any time prior to the Effective Time any event relating to CES or any
of its respective affiliates, officers or directors should be
discovered by CES which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement,
CES shall promptly inform BEC. Notwithstanding the foregoing, CES
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makes no representation or warranty with respect to any information
supplied by BEC which is contained in any of the foregoing documents.
SECTION 4.13 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for
this Agreement or as set forth in Section 4.13 of the CES Disclosure
Schedule, or for any agreement, judgment, injunction, order or decree
of general industry application, to the best of CES's knowledge, there
is no agreement, judgment, injunction, order or decree binding upon
CES which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of CES, any acquisition
of property by CES or the conduct of business by CES as currently
conducted by CES, except for any prohibition or impairment as could
not reasonably be expected to have a CES Material Adverse Effect.
SECTION 4.14 TAX MATTERS. "Tax" or "Taxes," as used in this
Agreement, means any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net income,
gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any Governmental Authority,
and includes any interest and penalties (civil or criminal) on or
additions to any such taxes and any expenses incurred in connection
with the determination, settlement or litigation of any tax liability.
"Tax Return," as used in this Agreement, means a report, return or
other information required to be supplied to a Governmental Authority
with respect to Taxes including, where permitted or required, combined
or consolidated returns for any group of entities that includes CES or
any of its subsidiaries, or BEC or any of its subsidiaries, as the
case may be.
Except as set forth in Section 4.14 of the CES Disclosure
Schedule:
(a) Filing of Timely Tax Returns. CES and each of its
subsidiaries have filed (or there has been filed on their behalf) all
material Tax Returns required to be filed by each of them under
applicable law. All such Tax Returns were and are in all material
respects true, complete and correct and filed on a timely basis.
(b) Payment of Taxes. CES and each of its subsidiaries have,
within the time and in the manner prescribed by law, paid all Taxes
that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken.
(c) Deferred Taxes. CES and its subsidiaries have accounted for
deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of CES or
any of its subsidiaries except liens for Taxes not yet due.
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(e) Withholding Taxes. CES and each of its subsidiaries have
complied in all material respects with the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") relating to the
withholding of Taxes, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither CES 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.
(g) Waivers of Statute of Limitations. Neither CES nor any of
its subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(h) No Deficiency. No deficiency for any Taxes has been
proposed, asserted or assessed against CES or any of its subsidiaries
that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of CES or any of its
subsidiaries.
(j) Powers of Attorney. No power of attorney currently in force
has been granted by CES or any of its subsidiaries concerning any Tax
matter.
(k) Tax Rulings. Neither CES nor any of its subsidiaries has
received a Tax Ruling (as defined below) or entered into a Closing
Agreement (as defined below) with any taxing authority that would have
a continuing adverse effect after the Closing Date. "Tax Ruling," as
used in this Agreement, shall mean a written ruling of a taxing
authority relating to Taxes. "Closing Agreement," as used in this
Agreement, shall mean a written and legally binding agreement with a
taxing authority relating to Taxes.
(l) Availability of Tax Returns. CES has made available to BEC
complete and accurate copies covering all open years of (i) all Tax
Returns, and any amendments thereto, filed by CES or any of its
subsidiaries, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by CES or any of its
subsidiaries and (iii) any Closing Agreements entered into by CES or
any of its subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Neither CES nor any of its
subsidiaries is a party to any agreement relating to allocating or
sharing of Taxes.
(n) Code Section 280G. Neither CES nor any of its subsidiaries
is a party to any agreement, contract or arrangement that could
result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
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(o) Liability for Others. Neither CES nor any of its
subsidiaries has any liability for Taxes of any person other than CES
and its subsidiaries (i) under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local or foreign law) as a
transferee or successor, (ii) by contract or (iii) otherwise.
SECTION 4.15 EMPLOYEE MATTERS; ERISA. Except as set forth in
Section 4.15 of the CES Disclosure Schedule:
(a) Benefit Plans. There is no employee benefit plan, program,
policy, arrangement or agreement sponsored, contributed to or
maintained by CES or any of its subsidiaries covering employees,
former employees, directors, former directors, trustees or former
trustees of CES or any of its subsidiaries or their beneficiaries, or
providing benefits to any person in respect of services provided to
any such entity, including, but not limited to, any employee benefit
plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any severance
or change in control agreement, plan, policy or program between CES or
any of its subsidiaries and any employee thereof (collectively, the
"CES Benefit Plans"). For purposes of this Section 4.15, "subsidiary"
includes any entity which, under Code section 414(b), (c), (m) or (o),
is required to be considered as a single employer with CES. Neither
CES nor any of its subsidiaries is obligated to contribute to any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(b) Contributions. All contributions and other payments
required to be made for any period through the date to which this
representation speaks, by CES or any of its subsidiaries, to any CES
Benefit Plan (or to any person pursuant to the terms thereof) have
been timely made or paid in full, or, to the extent not required to be
made or paid on or before the date to which this representation
speaks, have been properly reflected in the CES Financial Statements.
(c) Qualification; Compliance. Each of the CES Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the Internal Revenue Service (the "IRS")
to be so qualified or an application for such a determination, which
was filed before the expiration of the applicable remedial amendment
period, is pending, and, to the knowledge of CES, no circumstances
exist that could reasonably be expected to result in the revocation of
any such determination. CES and each of its subsidiaries are in
compliance in all material respects with and, each of the CES Benefit
Plans is and has been operated in all material respects in compliance
with the terms of such CES Benefit Plan and all applicable laws, rules
and regulations governing such CES Benefit Plan, including, without
limitation, ERISA and the Code, except where failure to so comply or
operate would not have a CES Material Adverse Effect. Each CES
Benefit Plan intended to provide for the deferral of income, the
reduction of salary or other compensation, or to afford other income
tax benefits, complies in all respects with the terms of such CES
Benefit Plan and the requirements of the applicable provisions of the
Code or other laws, rules and regulations required to provide such
income tax benefits, except where failure to so comply would not have
a CES Material Adverse Effect. There are no pending or, to the
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knowledge of CES, threatened claims under or in respect of any CES
Benefit Plan by or on behalf of any employee, former employee,
director, former director, trustee, former trustee, or beneficiary
thereof, or otherwise involving any CES Benefit Plan (other than
routine claims for benefits).
(d) ERISA Liabilities. No event has occurred and, to the
knowledge of CES, there exists no condition or set of circumstances,
that could subject CES or any of its subsidiaries or, to CES's
knowledge, joint ventures, to any liability (whether to a Governmental
Authority, a multiemployer plan or any other person or entity) arising
under or based upon any provision of Title I, Title II, or Title IV of
ERISA.
(e) Documents Made Available. CES has made or will make
available to BEC a true and correct copy of each collective bargaining
agreement to which CES or any of its subsidiaries is a party or under
which CES or any of its subsidiaries has obligations and, with respect
to each CES Benefit Plan, where applicable, (i) such CES Benefit Plan
document or, if not in writing, a written summary of all material
terms of such CES Benefit Plan, including all amendments thereto, and
the most recent summary plan description and any summary and material
modifications issued subsequent thereto, (ii) the three most recent
annual reports filed with the IRS, (iii) each related trust agreement,
custodial agreement, insurance contract and similar agreements, (iv)
the most recent determination letter from the IRS with respect to the
qualified status of such CES Benefit Plan and any related
correspondence with the IRS, (v) the most recent actuarial report or
valuation, (vi) the most recently prepared audited financial
statements and any interim financial statements prepared therefor, and
(vii) copies of any notices, letters or other correspondence from the
IRS or the U.S. Department of Labor. To CES's knowledge, in the case
of each CES Benefit Plan, no employee handbook or similar employee
communication relating to such CES Benefit Plan nor any written
communication of benefits under such CES Benefit Plan from the
administrator thereof, in either case that has not been delivered or
made available to BEC, describes the terms of such CES Benefit Plan in
a manner that is materially inconsistent with the documents and
summary plan descriptions relating to such CES Benefit Plan that have
been made available pursuant to the foregoing sentence.
(f) No Post-Retirement Benefits. No CES Benefit Plan provides
post-retirement health or welfare benefits to any individual, other
than as required by Section 601 et seq. of ERISA and Section 4980B of
the Code or any other laws, rules or regulations. There is no and
never has been any welfare benefit trust or fund that constitutes or
is associated with a CES Benefit Plan that is intended to be exempt
from federal income tax under Section 501(c)(9) of the Code.
(g) Labor Agreements. As of the date hereof, neither CES nor
any of its subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor
organization. To CES's knowledge, as of the date hereof, there is no
current union representation question involving employees of CES or
any of its subsidiaries, nor does CES know of any activity or
proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees. Except as disclosed in
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the CES SEC Reports or in Section 4.15(g) of the CES Disclosure
Schedule, (i) there is no unfair labor practice, employment
discrimination or other material complaint against CES or any of its
subsidiaries pending or, to CES's knowledge, threatened, (ii) there is
no strike, lockout or material dispute, slowdown or work stoppage
pending, or to CES's knowledge, threatened, against or involving CES
or any of its subsidiaries, (iii) there is no proceeding, claim, suit,
action or governmental investigation pending or, to CES's knowledge,
threatened, in respect of which any director, officer, employee or
agent of CES or any of its subsidiaries is or may be entitled to claim
indemnification from CES or such subsidiary pursuant to their
respective charters or by-laws or as provided in the indemnification
agreements listed in Section 4.15(g) of the CES Disclosure Schedule
and (iv) CES is materially in compliance with all federal, state and
local laws with respect to employment, employment practices, labor
relations and safety and health.
SECTION 4.16 ENVIRONMENTAL PROTECTION. Except as set forth in
Section 4.16 of the CES Disclosure Schedule or as disclosed in the CES
SEC Reports, and except in such respects as in the aggregate would not
have a CES Material Adverse Effect:
(a) Compliance. CES and each of its subsidiaries and, to CES's
knowledge, each of its joint ventures, are in compliance with all
applicable Environmental Laws (as defined in Section 4.16(f)(ii)); and
neither CES nor any of its subsidiaries or, to CES's knowledge, joint
ventures, has received any communication from any person or
Governmental Authority that alleges that CES or any of its
subsidiaries or, to CES's knowledge, joint ventures, is not in
compliance with applicable Environmental Laws.
(b) Environmental Permits. CES and each of its subsidiaries
and, to CES's knowledge, joint ventures, have obtained or have applied
for all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary
for the construction of their facilities or the conduct of their
operations, and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been timely filed and
is pending agency approval, and CES and its subsidiaries and, to CES's
knowledge, each of its joint ventures are in compliance with all terms
and conditions of the Environmental Permits, and CES reasonably
believes that any transfer, renewal or reapplication for any
Environmental Permit required as a result of the Mergers can be
accomplished in the ordinary course of business.
(c) Environmental Claims. There is no Environmental Claim (as
defined in Section 4.16(f)(i)) pending or threatened (i) against CES
or any of its subsidiaries or, to CES's knowledge, joint ventures or
(ii) against any real or personal property or operations CES or any of
its subsidiaries or, to CES's knowledge, joint ventures owns, leases
or operates, in whole or in part.
(d) Releases. There have been no Releases (as defined in
Section 4.16(f)(iv)) of any Hazardous Material (as defined in Section
4.16(f)(iii)) that would be reasonably likely to form the basis of any
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Environmental Claim against CES or any of its subsidiaries or, to
CES's knowledge, joint ventures.
(e) Predecessors. CES has no knowledge of any Environmental
Claim pending or threatened, or of any Release of Hazardous Materials
that could be reasonably likely to form the basis of any Environmental
Claim, in each case against any person or entity (including, without
limitation, any predecessor of CES or any of its subsidiaries) whose
liability CES or any of its subsidiaries or, to CES's knowledge, joint
ventures has or may have retained or assumed either contractually or
by operation of law or against any real or personal property which CES
or any of its subsidiaries or, to CES's knowledge, joint ventures
formerly owned, leased or operated, in whole or in part.
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or
notices of noncompliance or violation by any person or entity
(including any Governmental Authority) alleging potential liability
(including, without limitation, potential responsibility for or
liability for enforcement costs, investigatory costs, cleanup costs,
governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries, fines or
penalties) arising out of, based on or resulting from (A) the
presence, or Release or threatened Release into the environment, of
any Hazardous Materials at any location, whether or not owned,
operated, leased or managed by CES or BEC or any of their respective
subsidiaries or joint ventures (for purposes of this Section 4.16 and
Section 5.16); 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 applicable federal,
state, local laws, rules and regulations relating to pollution, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or protection
of human health as it relates to the environment including, without
limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls ("PCBs") in regulated
concentrations; and (b) any chemicals, mixtures, materials, substances
or combination of materials or substances that 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,"
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"radioactive materials," "radioactive waste" 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.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
SECTION 4.17 REGULATION AS A UTILITY. CES is an exempt public
utility holding company under Section 3(a)(1) of the 1935 Act. Except
as set forth in Section 4.17 of the CES Disclosure Schedule, each of
Cambridge Electric Light Company, Canal Electric Company, Commonwealth
Electric Company and Commonwealth Gas Company (collectively, the "CES
Utility Subs") is regulated as an electric company or a gas company in
the Commonwealth of Massachusetts and in no other state.
SECTION 4.18 VOTE REQUIRED. Assuming that the CES Preferred
Stock has been redeemed pursuant to Section 2.1(b)(ii), the approval
of the Mergers by two-thirds of the votes entitled to be cast by all
holders of CES Common Stock (the "CES Shareholders' Approval") is the
only vote of the holders of any class or series of the capital stock
of CES or any of its subsidiaries required to approve this Agreement,
the Mergers and the other transactions contemplated hereby.
SECTION 4.19 OPINION OF FINANCIAL ADVISOR. CES has received the
opinion of SG Barr Devlin to the effect that, as of the date hereof,
the Merger Consideration is fair from a financial point of view to the
holders of CES Common Stock.
SECTION 4.20 OWNERSHIP OF BEC COMMON STOCK. Except as set forth
in Section 4.20 of the CES Disclosure Schedule, CES does not
"beneficially own" (as such term is defined for purposes of Section
13(d) of the Exchange Act) any shares of BEC Common Stock or BEC
Preferred Stock (as defined in Section 5.3).
SECTION 4.21 INSURANCE. Except as set forth in Section 4.21 of
the CES Disclosure Schedule, CES and each of its subsidiaries and, to
CES's knowledge, joint ventures are, and have been continuously since
January 1, 1993, insured with financially responsible insurers in such
amounts and against such risks and losses as is customary in all
material respects for companies conducting the businesses as conducted
by CES and its subsidiaries and, to CES's knowledge, joint ventures
during such time period. Except as set forth in Section 4.21 of the
CES Disclosure Schedule, neither CES nor any of its subsidiaries or,
to CES's knowledge, joint ventures has received any notice of
cancellation or termination with respect to any material insurance
policy of CES or any of its subsidiaries or joint ventures. The
insurance policies of CES and each of its subsidiaries and, to CES's
knowledge, joint ventures are valid and enforceable policies in all
material respects.
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SECTION 4.22 CHANGE IN CONTROL AND SEVERANCE PAYMENTS. Except as
set forth in Section 4.22 of the CES Disclosure Schedule, neither CES
nor any of its subsidiaries or, to CES's knowledge, joint ventures has
any plans, programs or agreements to which it is party, or to which it
is subject, pursuant to which payments (or acceleration or vesting of
benefits) may be required upon, or may become payable directly or
indirectly as a result of, a change of control of CES or otherwise
upon termination of employment of any individual with CES or any of
its subsidiaries or, to CES's knowledge, joint ventures.
SECTION 4.23 YEAR 2000. Except as identified in Section 4.23 of
the CES Disclosure Schedule and except for such Year 2000 Defects (as
hereinafter defined) which would not have a CES Material Adverse
Effect, to the knowledge of CES, none of the personal property,
equipment or assets owned or utilized by CES or its subsidiaries,
including but not limited to computer software, databases, hardware,
controls and peripherals, has characteristics or qualities that may
cause it to fail to (i) operate and produce data on and after January
1, 2000 (including taking into effect that such year is a leap year),
or use data based on time periods on and after January 1, 2000
(including taking into effect that such year is a leap year),
accurately and without delay, interruption or error relating to the
fact that the time at which and the date on which such software is
operating is on or after 12:00 a.m. on January 1, 2000 (including
taking into effect that such year is a leap year) and (ii) accept,
calculate, process, maintain, store and output, accurately and without
delay, interruption or error, all times or dates, or both, whether
before, on or after 12:00 a.m. January 1, 2000 (including taking into
effect that such year is a leap year), and any time periods determined
or to be determined based on such times or date or both (each, a "Year
2000 Defect"). Except as identified in Section 4.23 of the CES
Disclosure Schedule and except as would not have a CES Material
Adverse Effect, to the knowledge of CES, none of the property or
assets owned or utilized by CES or its subsidiaries will fail to
perform in any material respect or require any repair, rewrite,
conversion or other adaptation because of, or due in any way to, a
Year 2000 Defect. To the knowledge of CES and except as would not
have a CES Material Adverse Effect, no products sold by CES or its
subsidiaries contain a Year 2000 Defect. To the knowledge of CES and
except as would not have a CES Material Adverse Effect, neither CES
nor any of its subsidiaries has any obligations under warranty
agreements, service agreements or otherwise to rectify a Year 2000
Defect of any customer of CES or any of its subsidiaries, as the case
may be, or to indemnify any customer of CES or any of its subsidiaries
in the event CES or any of its subsidiaries experiences a Year 2000
Defect. CES has no knowledge that a vendor or supplier of CES or any
of its subsidiaries may experience a Year 2000 Defect that could
reasonably be expected to have a CES Material Adverse Effect. Section
4.23 of the CES Disclosure Schedule sets forth the measures CES and
its subsidiaries have taken to identify potential Year 2000 Defects of
CES and its subsidiaries and of customers, suppliers and vendors of
CES and its subsidiaries.
SECTION 4.24 NON-APPLICABILITY OF CERTAIN MASSACHUSETTS LAWS.
Assuming the representations of BEC made in Section 5.20 are correct,
none of the "control share acquisition" provisions of M.G.L. c. 110D,
the "business combination" provisions of M.G.L. c.110F or any other
takeover related provisions of any Massachusetts law (or, to the
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knowledge of CES, any other similar state statute) or the charters of
CES or CRI is applicable to the transactions contemplated by this
Agreement (except as set forth in Section 4.24 of the CES Disclosure
Schedule).
SECTION 4.25 BROKERS. No broker, investment banker, financial
advisor or other person, other than SG Barr Devlin, the fees and
expenses of which will be paid by CES, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of CES. CES has made available
to BEC prior to the execution of this Agreement a copy of the
engagement letter of SG Barr Devlin and, other than as set forth in
such engagement letter, has no understanding or agreement with SG Barr
Devlin regarding any fees or expenses in connection with the
transactions contemplated by this Agreement.
SECTION 4.26 OPERATIONS OF NUCLEAR POWER PLANT. To CES's
knowledge, except as set forth in Section 4.26 of the CES Disclosure
Schedule or as disclosed in the CES SEC Reports, CES has not received
written notice from any Governmental Authority that it is not in
compliance in all material respects with all laws applicable to the
condition or operation of the Crimson nuclear facility, (the "CES
Nuclear Facility") and CES has not violated any laws, except for
violations that, in the aggregate, do not, and insofar as can
reasonably be foreseen, would not, have a CES Material Adverse Effect.
CES has duly filed all reports and returns required to be filed by it
with Governmental Authorities and obtained governmental permits and
licenses and other governmental consents which are required in
connection with the business of owning and/or operating the CES
Nuclear Facility, the failure of which to file and obtain likely would
have a CES Material Adverse Effect. All such permits, licenses and
consents are in full force and effect and no proceedings for the
suspension or cancellation of any of them is pending or threatened.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
BEC
BEC represents and warrants to CES as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. Except as set forth
in Section 5.1 of the BEC Disclosure Schedule, (i) BEC is a duly
organized and lawfully existing voluntary association organized under
M.G.L. c. 182, (ii) BETG is a duly organized and lawfully existing
business corporation organized under M.G.L. c. 156B, (iii) each BEC
subsidiary is a corporation, limited liability company, or trust duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and (iv) each of BEC
and each BEC subsidiary has all requisite corporate or other power and
authority, and has been duly authorized by all necessary franchises,
grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders, to own, lease and operate its
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assets and properties to the extent owned, leased and operated and to
carry on its business as it is now being conducted. BEC and each BEC
subsidiary is duly qualified or licensed as a foreign corporation or
other entity to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, when taken together with all
other such failures, have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results
of operations of BEC and its subsidiaries taken as a whole or prevent
the consummation of the transactions contemplated hereby (any such
material adverse effect being hereafter referred to as a "BEC Material
Adverse Effect").
SECTION 5.2 SUBSIDIARIES. Except as set forth in Section 5.2 of
the BEC Disclosure Schedule, BEC does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, to BEC's knowledge, joint venture, or any
other business association or entity, with respect to which interest
BEC has invested or is required to invest $100,000 or more, excluding
securities in any publicly traded company held for investment by BEC
and comprising less than five percent of the outstanding stock of such
company. Section 5.2 of the BEC Disclosure Schedule sets forth a
description as of the date hereof, of all subsidiaries and joint
ventures of BEC, including the name of each such entity, the state or
jurisdiction of its incorporation or organization, BEC's interest
therein and a brief description of the principal line or lines of
business conducted by each such entity. Except as set forth in
Section 5.2 of the BEC Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each BEC subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and
are owned, directly or indirectly, by BEC free and clear of any liens,
claims, encumbrances, security interests, equities, charges and
options of any nature whatsoever and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights
or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating any
such subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or
commitment, except for any of the foregoing that could not reasonably
be expected to have a BEC Material Adverse Effect. For purposes of
this Agreement, it is understood that all references to the knowledge
of BEC mean solely the knowledge, after due inquiry, of the corporate
officers of BEC listed on Section 5.2(b) of the BEC Disclosure
Schedule.
SECTION 5.3 CAPITALIZATION. The authorized shares of BEC consist
of 100,000,000 shares of BEC Common Stock and 10,000,000 preferred
shares, $1.00 par value per share (the "BEC Preferred Stock"). The
authorized shares of BETG consist of 300,000 shares of BETG Common
Stock. As of the close of business on November 16, 1998, there were
issued and outstanding 47,184,073 shares of BEC Common Stock, no
shares of BEC Preferred Stock and 100 shares of BETG Common Stock. As
of the close of business on November 16, 1998, no shares of BEC Common
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Stock were held by BEC in its treasury and no shares of BETG Common
Stock were held by BETG in its treasury. No material change in such
capitalization has occurred between November 16, 1998 and the date
hereof. All of the issued and outstanding common and preferred shares
of BEC are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 5.3 of the BEC
Disclosure Schedule, as of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights
or warrants, including any right, of conversion or exchange under any
outstanding security, instruments, agreements, arrangements or
commitments of any character relating to the issued or unissued common
or preferred shares of BEC or obligating BEC or any of its
subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional common or preferred shares or other
equity or beneficial interests of BEC or any of its subsidiaries, or
obligating BEC or any of its subsidiaries to repurchase, redeem or
otherwise acquire or cancel any such shares or other interests or to
provide funds to or make any investment (in the form of a loan,
capital contribution, guaranty or otherwise) in any other entity, or
obligating BEC to grant, extend or enter into any such agreement or
commitment. None of the outstanding common or preferred shares of BEC
was issued in violation of the Securities Act or the securities or
blue sky laws of any state or jurisdiction, which violation would have
a BEC Material Adverse Effect.
SECTION 5.4 ORGANIZATIONAL DOCUMENTS. Each of BEC and BETG has
heretofore furnished to CES a complete and correct copy of its
respective charter and by-laws as amended to date. Such charters and
by-laws are in full force and effect. Neither BEC nor BETG is in
violation of any of the provisions of its respective charter or by-
laws.
SECTION 5.5 AUTHORITY. BEC has the legal capacity, power and
authority (including full corporate (or other) power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder, and, subject to obtaining the BEC Shareholders' Approval
(as defined in Section 5.18) and the BEC Required Statutory Approvals
(as defined in Section 5.6(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
BEC and the consummation by BEC of the transactions contemplated
hereby have been duly and validly authorized by all necessary
corporate (or other) action on the part of BEC and, subject to
obtaining the applicable BEC Shareholders' Approval, no other
corporate (or other) proceedings on the part of BEC are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby. The Board of Trustees of BEC has determined that
it is advisable and in the best interests of BEC's shareholders for
BEC to enter into a business combination with CES upon the terms and
subject to the conditions of this Agreement, and has unanimously
recommended that BEC's shareholders approve and adopt this Agreement
and approve the Mergers. This Agreement has been duly and validly
executed and delivered by BEC and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto,
constitutes the valid and binding obligation of BEC enforceable
against it in accordance with its terms.
SECTION 5.6 NO CONFLICT; STATUTORY APPROVALS; COMPLIANCE.
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(a) No Breaches. Except as disclosed in Section 5.6(a) of the
BEC Disclosure Schedule, (i) neither BEC, nor any of its subsidiaries
or, to BEC's knowledge, joint ventures has breached, is in default
under, or has received written notice of any breach of or default
under, any (x) loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit,
equipment leases or lease purchase agreements to which BEC or any of
its subsidiaries or, to BEC's knowledge, joint ventures is a party or
by which it or any of its subsidiaries or, to BEC's knowledge, joint
ventures is bound, (y) contracts, agreements, commitments or other
understandings or arrangements to which BEC or any of its subsidiaries
or, to BEC's knowledge, joint ventures is a party or by which such
entity or any of its respective properties or assets are bound or
affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of
business and involving, in each case, payments or receipts by BEC or
any of its subsidiaries or, to BEC's knowledge, joint ventures of less
than $100,000 in any single instance but not more than $300,000 in the
aggregate or (z) agreements which, as of the date hereof, are required
to be filed as "material contracts" with the SEC pursuant to the
requirements of the Exchange Act, (ii) to BEC's knowledge, no other
party to any of the agreements, contracts or other instrument referred
to in subclauses (x), (y) or (z) of clause (i) above or has breached
or is in default of any of its obligations thereunder, and (iii) each
of the agreements, contracts and other instruments referred to in
subclauses (x), (y) or (z) of clause (i) above is in full force and
effect, except in any such case for breaches, defaults or failures to
be in full force and effect that has not had and could not reasonably
be expected to have a BEC Material Adverse Effect.
(b) No Conflict. The execution and delivery of this Agreement
by BEC does not, and the consummation of the transactions contemplated
hereby will not result in a Violation pursuant to any provisions of
(i) the declaration of trust, articles of organization, by-laws or
similar governing documents of BEC or any of its subsidiaries or, to
BEC's knowledge, joint ventures, (ii) subject to obtaining the BEC
Required Statutory Approvals and the receipt of the BEC Shareholders'
Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any Governmental
Authority applicable to BEC or any of its subsidiaries or, to BEC's
knowledge, joint ventures, or any of their respective properties or
assets or (iii) subject to obtaining the third-party consents or other
approvals set forth in Section 5.6(b) of the BEC Disclosure Schedule
(the "BEC Required Consents") any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease
or other instrument, obligation or agreement of any kind to which BEC
or any of its subsidiaries or, to BEC's knowledge, joint ventures, is
a party or by which it or any of its properties or assets may be bound
or affected, excluding from the foregoing clauses (ii) and (iii) such
Violations that would not have a BEC Material Adverse Effect.
(c) Statutory Approvals. 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 BEC or the consummation by BEC of the transactions
contemplated hereby, the failure of which to obtain, make or give
would have a BEC Material Adverse Effect, except as described in
Section 5.6(c) of the BEC Disclosure Schedule (the "BEC Required
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Statutory Approvals"), it being understood that references in this
Agreement to "obtaining" such BEC Required Statutory Approvals shall
mean making such declarations, filings or registrations, giving such
notices, obtaining such authorizations, consents or approvals and
having such waiting periods expire as are necessary to avoid a
violation of law.
(d) Compliance. Except as set forth in Section 5.6(d), Section
5.12, Section 5.14, Section 5.15 or Section 5.16 of the BEC Disclosure
Schedule, or as disclosed in the BEC SEC Reports (as defined in
Section 5.8), neither BEC nor any of its subsidiaries nor, to BEC's
knowledge, any joint venture of BEC, is in violation of, is under
investigation with respect to any violation of, or has been given
notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation)
of any Governmental Authority, except for violations which,
individually or in the aggregate, do not have, and, to BEC's
knowledge, are not reasonably likely to have, a BEC Material Adverse
Effect. Except as set forth in Section 5.6(d) of the BEC Disclosure
Schedule or in Section 5.16 of the BEC Disclosure Schedule, BEC and
each of its subsidiaries and, to BEC's knowledge, joint ventures have
all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their
respective businesses as currently conducted in all respects, except
those of which the failure to obtain would not, in the aggregate, have
a BEC Material Adverse Effect. Except as set forth in Section 5.6(d)
of the BEC Disclosure Schedule, each of BEC and each of its
subsidiaries and, to BEC's knowledge, joint ventures 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 under, (i)
its charter or by-laws or (ii) any material contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which it is a party or by
which it is bound or to which any of its property is subject, except
for possible violations, breaches or defaults which individually or in
the aggregate would not have a BEC Material Adverse Effect.
SECTION 5.7 ALL ASSETS NECESSARY TO CONDUCT THE BUSINESS. The
assets, properties and rights of BEC and its subsidiaries reflected in
the most recent BEC Financial Statements (as defined in Section 5.8)
comprise all of the material assets, properties and rights of every
type and description, real, personal, tangible and intangible used by
BEC in, and, in the reasonable opinion of the management of BEC,
necessary to, the conduct of BEC's business as currently conducted.
SECTION 5.8 REPORTS AND FINANCIAL STATEMENTS. The filings
required to be made by BEC and its subsidiaries since January l, 1995
under the Securities Act, the Exchange Act, the 1935 Act, the Power
Act, the Atomic Energy Act and applicable state public utility laws
and regulations have been filed with the SEC, the FERC, the NRC, the
DOE or the appropriate state public utilities commission, as the case
may be, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements
appertaining thereto complied, as of their respective dates, in all
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material respects with all applicable requirements of the appropriate
statute and the rules and regulations thereunder, and the Exhibit
Index to BEC's most recently filed Form 10-K includes each agreement,
contract or instrument (including all amendments thereto) to which BEC
or any of its subsidiaries is a party or by which any of them is bound
required to be included thereon (the "BEC Material Contracts"). BEC
has made available to CES a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed
by BEC with the SEC since January l, 1995 through the date of this
Agreement (as such documents have since the time of their filing been
amended, the "BEC SEC Reports"). As of their respective dates, the
BEC SEC Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial
statements of BEC included in the BEC SEC Reports (collectively, the
"BEC Financial Statements") complied as to form in all material
respects with the applicable rules of the SEC, have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as
permitted by Form 10-Q of the SEC) and fairly present the consolidated
financial position of BEC as of the dates thereof and the consolidated
results of operations and cash flows for the periods then ended.
SECTION 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Section 5.9 of the BEC Disclosure Schedule or as set forth or
reflected in the BEC SEC Reports, since December 31, 1997, BEC and
each of its subsidiaries, and, to BEC's knowledge, each of its joint
ventures, have conducted their operations only in the ordinary course
of business consistent with past practice and there has not occurred:
(i) any change, development, event or other circumstance, situation or
state of affairs that has had or may be reasonably expected to have a
BEC Material Adverse Effect; (ii) any amendments to or changes in the
charters or by-laws of BEC or any of its subsidiaries; (iii) any
material change by BEC in its accounting methods, principles or
practices; (iv) any revaluation by BEC of any assets having a value
exceeding in the aggregate $1,000,000; or (v) any sale, lease,
transfer, or assignment of assets (tangible or intangible) of BEC or
its subsidiaries having a value exceeding $1,000,000 per instance.
SECTION 5.10 LITIGATION. Except as set forth in Section 5.11 of
the BEC Disclosure Schedule, (i) there are no claims, suits, actions
or proceedings, pending or, to the knowledge of BEC, threatened, nor
are there, to the knowledge of BEC, any investigations or reviews
pending or threatened against, relating to or affecting BEC or any of
its subsidiaries or any meritorious basis for any such claims, suits,
actions, proceedings, investigations or reviews, and (ii) there are no
judgments, decrees, injunctions, rules or orders of any court,
governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to BEC or any of its
subsidiaries, except for any of the foregoing under clauses (i) and
(ii) that individually or in the aggregate could not reasonably be
expected to have a BEC Material Adverse Effect.
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SECTION 5.11 NO UNDISCLOSED LIABILITIES. Except as disclosed in
Section 5.10 of the BEC Disclosure Schedule or as disclosed in the BEC
SEC Reports, BEC has no liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) in the aggregate adequately
provided for in BEC's audited balance sheet (including any related
notes thereto) for the fiscal year ended December 31, 1997 contained
in the Company's Annual Report on Form 10-K (the "1997 Company Balance
Sheet"), (b) incurred since December 31, 1997 in the ordinary course
of business consistent with past practice, (c) incurred in connection
with this Agreement, or (d) which could not reasonably be expected to
have a BEC Material Adverse Effect.
SECTION 5.12 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT.
(i) None of the information supplied or to be supplied by or on behalf
of BEC for inclusion or incorporation by reference in the Registration
Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading and (ii)
the Joint Proxy Statement shall not, at the dates mailed to
shareholders or at the times of the meetings of shareholders to be
held in connection with the Mergers, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading, or
omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies
for the shareholder meeting which has become false or misleading. The
Registration Statement and the Joint Proxy Statement, insofar as they
relate to BEC or any BEC subsidiary, shall comply as to form in all
material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder. If at
any time prior to the Effective Time any event relating to BEC or any
of its respective affiliates, officers or directors should be
discovered by BEC which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement,
BEC shall promptly inform CES. Notwithstanding the foregoing, BEC
makes no representation or warranty with respect to any information
supplied by CES which is contained in any of the foregoing documents.
SECTION 5.13 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for
this Agreement, or as set forth in Section 5.13 of the BEC Disclosure
Schedule, or for any agreement, judgment, injunction, order or decree
of general industry application, to the best of BEC's knowledge, there
is no agreement, judgment, injunction, order or decree binding upon
BEC which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of BEC, any acquisition
of property by BEC or the conduct of business by BEC as currently
conducted by BEC, except for any prohibition or impairment as could
not reasonably be expected to have a BEC Material Adverse Effect.
SECTION 5.14 TAX MATTERS. Except as set forth in Section 5.14 of
the BEC Disclosure Schedule:
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(a) Filing of Timely Tax Returns. BEC and each of its
subsidiaries have filed (or there has been filed on their behalf) all
material Tax Returns required to be filed by each of them under
applicable law. All such Tax Returns were and are in all material
respects true, complete and correct and filed on a timely basis.
(b) Payment of Taxes. BEC and each of its subsidiaries have,
within the time and in the manner prescribed by law, paid all Taxes
that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken.
(c) Deferred Taxes. BEC and its subsidiaries have accounted for
deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of BEC or
any of its subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. BEC and each of its subsidiaries have
complied in all material respects with the provisions of the Code
relating to the withholding of Taxes, as well as similar provisions
under any other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the
proper Governmental Authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither BEC 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.
(g) Waivers of Statute of Limitations. Neither BEC nor any of
its subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(h) No Deficiency. No deficiency for any Taxes has been
proposed, asserted or assessed against BEC or any of its subsidiaries
that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of BEC or any of its
subsidiaries.
(j) Powers of Attorney. No power of attorney currently in force
has been granted by BEC or any of its subsidiaries concerning any Tax
matter.
(k) Tax Rulings. Neither BEC nor any of its subsidiaries has
received a Tax Ruling or entered into a Closing Agreement with any
taxing authority that would have a continuing adverse effect after the
Closing Date.
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(l) Availability of Tax Returns. BEC has made available to CES
complete and accurate copies comprising all open years of (i) all Tax
Returns, and any amendments thereto, filed by BEC or any of its
subsidiaries, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by BEC or any of its
subsidiaries and (iii) any Closing Agreements entered into by BEC or
any of its subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Neither BEC nor any of its
subsidiaries is a party to any agreement relating to allocating or
sharing of Taxes.
(n) Code Section 280G. Neither BEC nor any of its subsidiaries
is a party to any agreement, contract or arrangement that could
result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(o) Liability for Others. Neither BEC nor any of its
subsidiaries has any liability for Taxes of any person other than BEC
and its subsidiaries (i) under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local or foreign law) as a
transferee or successor, (ii) by contract or (iii) otherwise.
SECTION 5.15 EMPLOYEE MATTERS; ERISA. Except as set forth in
Section 5.15 of the BEC Disclosure Schedule:
(a) Benefit Plans. There is no employee benefit plan, program,
policy, arrangement or agreement sponsored, contributed to or
maintained by BEC or any of its subsidiaries covering employees,
former employees, directors, former directors, trustees or former
trustees of BEC or any of its subsidiaries or their beneficiaries, or
providing benefits to any person in respect of services provided to
any such entity, including, but not limited to, any employee benefit
plans within the meaning of Section 3(3) of ERISA, and any severance
or change in control agreement, plan, policy or program between BEC or
any of its subsidiaries and any employee thereof (collectively, the
"BEC Benefit Plans"). For purposes of this Section 5.15, "subsidiary"
includes any entity which, under Code section 414(b), (c), (m) or (o),
is required to be considered as a single employer with BEC. Neither
BEC nor any of its subsidiaries is obligated to contribute to any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(b) Contributions. All contributions and other payments
required to be made for any period through the date to which this
representation speaks, by BEC or any of its subsidiaries, to any BEC
Benefit Plan (or to any person pursuant to the terms thereof) have
been timely made or paid in full, or, to the extent not required to be
made or paid on or before the date to which this representation
speaks, have been properly reflected in the BEC Financial Statements.
(c) Qualification; Compliance. Each of the BEC Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the IRS to be so qualified or an
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application for such a determination, which was filed before the
expiration of the applicable remedial amendment period, is pending,
and, to the knowledge of BEC, no circumstances exist that could
reasonably be expected to result in the revocation of any such
determination. BEC and each of its subsidiaries are in compliance in
all material respects with and, each of the BEC Benefit Plans is and
has been operated in all material respects in compliance with the
terms of such BEC Benefit Plan and all applicable laws, rules and
regulations governing such BEC Benefit Plan, including, without
limitation, ERISA and the Code, except where failure to so comply or
operate would not have a BEC Material Adverse Effect. Each BEC
Benefit Plan intended to provide for the deferral of income, the
reduction of salary or other compensation, or to afford other income
tax benefits, complies in all respects with the terms of such BEC
Benefit Plan and the requirements of the applicable provisions of the
Code or other laws, rules and regulations required to provide such
income tax benefits, except where failure to so comply would not have
a BEC Material Adverse Effect. There are no pending or, to the
knowledge of BEC, threatened claims under or in respect of any BEC
Benefit Plan by or on behalf of any employee, former employee,
director, former director, trustee, former trustee or beneficiary
thereof, or otherwise involving any BEC Benefit Plan (other than
routine claims for benefits).
(d) ERISA Liabilities. No event has occurred and, to the
knowledge of BEC, there exists no condition or set of circumstances,
that could subject BEC or any of its subsidiaries or, to BEC's
knowledge, joint ventures to any liability (whether to a Governmental
Authority, a multiemployer plan or any other person or entity) arising
under or based upon any provision of Title I, Title II, or Title IV of
ERISA.
(e) Documents Made Available. BEC has made or will make
available to CES a true and correct copy of each collective bargaining
agreement to which BEC or any of its subsidiaries is a party or under
which BEC or any of its subsidiaries has obligations and, with respect
to each BEC Benefit Plan, where applicable, (i) such BEC Benefit Plan
document or, if not in writing, a written summary of all material
terms of such BEC Benefit Plan, including all amendments thereto, and
the most recent summary plan description and any summary and material
modifications issued subsequent thereto, (ii) the three most recent
annual reports filed with the IRS, (iii) each related trust agreement,
custodial agreement, insurance contract, and similar agreements, (iv)
the most recent determination letter from the IRS with respect to the
qualified status of such BEC Benefit Plan and any related
correspondence with the IRS, (v) the most recent actuarial report or
valuation, (vi) the most recently prepared audited financial
statements and any interim financial statements prepared therefor, and
(vii) copies of any notices, letters or other correspondence from the
IRS or the U.S. Department of Labor. To BEC's knowledge, in the case
of each BEC Benefit Plan, no employee handbook or similar employee
communication relating to such BEC Benefit Plan nor any written
communication of benefits under such BEC Benefit Plan from the
administrator thereof, in either case that has not been delivered or
made available to CES, describes the terms of such BEC Benefit Plan in
a manner that is materially inconsistent with the documents and
summary plan descriptions relating to such BEC Benefit Plan that have
been made available pursuant to the foregoing sentence.
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(f) No Post-Retirement Benefits. No BEC Benefit Plan provides
post-retirement health or welfare benefits to any individual, other
than as required by Section 601 et seq. of ERISA and Section 4980B of
the Code or any other laws, rules or regulations. There is no and
never has been any welfare benefit trust or fund that constitutes or
is associated with a BEC Benefit Plan that is intended to be exempt
from federal income tax under Section 501(c)(9) of the Code.
(g) Labor Agreements. As of the date hereof, neither BEC nor
any of its subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor
organization. To BEC's knowledge, as of the date hereof, there is no
current union representation question involving employees of BEC or
any of its subsidiaries, nor does BEC know of any activity or
proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees. Except as disclosed in
the BEC SEC Reports or in Section 5.15(g) of the BEC Disclosure
Schedule, (i) there is no unfair labor practice, employment
discrimination or other material complaint against BEC or any of its
subsidiaries pending or, to BEC's knowledge, threatened, (ii) there is
no strike, lockout or material dispute, slowdown or work stoppage
pending, or to BEC's knowledge, threatened, against or involving BEC
or any of its subsidiaries, (iii) there is no proceeding, claim, suit,
action or governmental investigation pending or, to BEC's knowledge,
threatened, in respect of which any director, officer, employee or
agent of BEC or any of its subsidiaries is or may be entitled to claim
indemnification from BEC or such subsidiary pursuant to their
respective charters or by-laws or as provided in the indemnification
agreements listed in Section 5.15(g) of the BEC Disclosure Schedule
and (iv) BEC is materially in compliance with all federal, state and
local laws with respect to employment, employment practices, labor
relations and safety and health.
SECTION 5.16 ENVIRONMENTAL PROTECTION. Except as set forth in
Section 5.16 of the BEC Disclosure Schedule or as disclosed in the BEC
SEC Reports, and except in such respects as in the aggregate would not
have a BEC Material Adverse Effect:
(a) Compliance. BEC and each of its subsidiaries and, to BEC's
knowledge, each of its joint ventures, are in compliance with all
applicable Environmental Laws; and neither BEC nor any of its
subsidiaries or, to BEC's knowledge, joint ventures, has received any
communication from any person or Governmental Authority that alleges
that BEC or any of its subsidiaries or, to BEC's knowledge, joint
ventures is not in compliance with applicable Environmental Laws.
(b) Environmental Permits. BEC and each of its subsidiaries
and, to BEC's knowledge, joint ventures have obtained or have applied
for all Environmental Permits necessary for the construction of their
facilities or the conduct of their operations, and all such
Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency
approval, and BEC and its subsidiaries and, to BEC's knowledge, each
of its joint ventures are in compliance with all terms and conditions
of the Environmental Permits, and BEC reasonably believes that any
transfer, renewal or reapplication for any Environmental Permit
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required as a result of the Mergers can be accomplished in the
ordinary course of business.
(c) Environmental Claims. There is no Environmental Claim
pending or threatened (i) against BEC or any of its subsidiaries or,
to BEC's knowledge, joint ventures, or (ii) against any real or
personal property or operations BEC or any of its subsidiaries or, to
BEC's knowledge, joint ventures owns, leases or operates, in whole or
in part.
(d) Releases. There have been no Releases of any Hazardous
Material that would be reasonably likely to form the basis of any
Environmental Claim against BEC or any of its subsidiaries or, to
BEC's knowledge, joint ventures.
(e) Predecessors. BEC has no knowledge of any Environmental
Claim pending or threatened, or of any Release of Hazardous Materials
that could be reasonably likely to form the basis of any Environmental
Claim, in each case against any person or entity (including, without
limitation, any predecessor of BEC or any of its subsidiaries) whose
liability BEC or any of its subsidiaries or, to BEC's knowledge, joint
ventures has or may have retained or assumed either contractually or
by operation of law or against any real or personal property which BEC
or any of its subsidiaries or, to BEC's knowledge, joint ventures
formerly owned, leased or operated, in whole or in part.
SECTION 5.17 REGULATION AS A UTILITY. BEC is an exempt public
utility holding company under Section 3(a)(1) of the 1935 Act. Each
of BEC and each of Boston Edison Company and Harbor Electric Energy
Company is regulated as a public utility in the Commonwealth of
Massachusetts and in no other state.
SECTION 5.18 VOTE REQUIRED. The approval of the Mergers by two-
thirds of the votes entitled to be cast by all holders of BEC Common
Stock (the "BEC Shareholders' Approval") is the only vote of the
holders of any class or series of the capital stock of BEC or any of
its subsidiaries required to approve this Agreement, the Mergers and
the other transactions contemplated hereby.
SECTION 5.19 OPINION OF FINANCIAL ADVISOR. BEC has received the
opinion of Goldman, Sachs & Co. to the effect that, as of the date
hereof, the Merger Consideration is fair from a financial point of
view to the holders of BEC Common Stock.
SECTION 5.20 OWNERSHIP OF CES COMMON STOCK. Except as set forth
in Section 5.20 of the BEC Disclosure Schedule, BEC does not
"beneficially own" (as such term is defined for purposes of Section
13(d) of the Exchange Act) any shares of CES Common Stock or CES
Preferred Stock.
SECTION 5.21 INSURANCE. Except as set forth in Section 5.21 of
the BEC Disclosure Schedule, BEC and each of its subsidiaries and, to
BEC's knowledge, joint ventures are, and have been continuously since
January 1, 1993, insured with financially responsible insurers in such
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amounts and against such risks and losses as is customary in all
material respects for companies conducting the businesses as conducted
by BEC and its subsidiaries and, to BEC's knowledge, joint ventures
during such time period. Except as set forth in Section 5.21 of the
BEC Disclosure Schedule, neither BEC nor any of its subsidiaries or,
to BEC's knowledge, joint ventures has received any notice of
cancellation or termination with respect to any material insurance
policy of BEC or any of its subsidiaries or joint ventures. The
insurance policies of BEC and each of its subsidiaries and, to BEC's
knowledge, joint ventures are valid and enforceable policies in all
material respects.
SECTION 5.22 CHANGE IN CONTROL AND SEVERANCE PAYMENTS. Except as
set forth in Section 5.22 of the BEC Disclosure Schedule, neither BEC
nor any of its subsidiaries or, to BEC's knowledge, joint ventures has
any plans, programs or agreements to which it is party, or to which it
is subject, pursuant to which payments (or acceleration or vesting of
benefits) may be required upon, or may become payable directly or
indirectly as a result of, a change of control of BEC or otherwise
upon termination of employment of any individual with BEC or any of
its subsidiaries or, to BEC's knowledge, joint ventures.
SECTION 5.23 YEAR 2000. Except as identified in Section 5.23 of
the BEC Disclosure Schedule and except for such Year 2000 Defects
which would not have a BEC Material Adverse Effect, to the knowledge
of BEC, none of the personal property, equipment or assets owned or
utilized by BEC or its subsidiaries, including but not limited to
computer software, databases, hardware, controls and peripherals, has
characteristics or qualities that may constitute a Year 2000 Defect.
Except as identified in Section 5.23 of the BEC Disclosure Schedule
and except as would not have a BEC Material Adverse Effect, to the
knowledge of BEC, none of the property or assets owned or utilized by
BEC or its subsidiaries will fail to perform in any material respect
or require any repair, rewrite, conversion or other adaptation because
of, or due in any way to, a Year 2000 Defect. To the knowledge of BEC
and except as would not have a BEC Material Adverse Effect, no
products sold by BEC or its subsidiaries contain a Year 2000 Defect.
To the knowledge of BEC and except as would not have a BEC Material
Adverse Effect, neither BEC nor any of its subsidiaries has any
obligations under warranty agreements, service agreements or otherwise
to rectify a Year 2000 Defect of any customer of BEC or any of its
subsidiaries, as the case may be, or to indemnify any customer of BEC
or any of its subsidiaries in the event BEC or any of its subsidiaries
experiences a Year 2000 Defect. BEC has no knowledge that a vendor or
supplier of BEC or any of its subsidiaries may experience a Year 2000
Defect that could reasonably be expected to have a BEC Material
Adverse Effect. Section 5.23 of the BEC Disclosure Schedule sets
forth the measures BEC and its subsidiaries have taken to identify
potential Year 2000 Defects of BEC and its subsidiaries and of
customers, suppliers and vendors of BEC and its subsidiaries.
SECTION 5.24 NON-APPLICABILITY OF CERTAIN MASSACHUSETTS LAWS.
Assuming the representations of CES made in Section 4.20 are correct,
none of the "control share acquisition" provisions of M.G.L. c. 110D,
the "business combination" provisions of M.G.L. c. 110F or any other
takeover related provisions of any Massachusetts law (or, to the
knowledge of BEC, any other similar state statute) or the charters of
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BEC or BETG is applicable to the transactions contemplated by this
Agreement (except as set forth in Section 5.24 of the BEC Disclosure
Schedule).
SECTION 5.25 BROKERS. No broker, investment banker, financial
advisor or other person, other than Goldman, Sachs & Co., the fees and
expenses of which will be paid by BEC, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of BEC. BEC has made available
to CES prior to the execution of this Agreement a copy of the
engagement letter of Goldman, Sachs & Co., and, other than as set
forth in such engagement letter, has no understanding or agreement
with Goldman, Sachs & Co. regarding any fees or expenses in connection
with the transactions contemplated by this Agreement.
SECTION 5.26 OPERATIONS OF NUCLEAR POWER PLANT. To BEC's
knowledge, except as set forth in Section 5.26 of the BEC Disclosure
Schedule or as disclosed in the BEC SEC Reports, BEC has not received
written notice from any Governmental Authority that it is not in
compliance in all material respects with all laws applicable to the
condition or operation of the Pilgrim nuclear facility, (the "BEC
Nuclear Facility") and BEC has not violated any laws, except for
violations that, in the aggregate, do not, and insofar as can
reasonably be foreseen, would not, have a BEC Material Adverse Effect.
BEC has duly filed all reports and returns required to be filed by it
with Governmental Authorities and obtained governmental permits and
licenses and other governmental consents which are required in
connection with the business of owning and/or operating the BEC
Nuclear Facility, the failure of which to file and obtain likely would
have a BEC Material Adverse Effect. All such permits, licenses and
consents are in full force and effect and no proceedings for the
suspension or cancellation of any of them is pending or threatened.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 COVENANTS OF THE PARTIES. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement,
BEC and CES each agrees as follows, each as to itself and as to each
of its respective subsidiaries, except as expressly contemplated or
permitted in this Agreement, or to the extent that the other parties
hereto shall otherwise consent in writing:
(a) Ordinary Course of Business. Each party hereto shall, and
shall cause its subsidiaries to, carry on their respective operations
in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and in compliance with applicable laws
and regulations to the extent that failure to be in compliance would
constitute a BEC Material Adverse Effect or a CES Material Adverse
Effect, as the case may be, and use all commercially reasonable
efforts to (i) preserve intact their present business organizations
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and goodwill, preserve the goodwill and relationships with customers,
suppliers and others having business dealings with them, (ii) subject
to prudent management of workforce needs and ongoing or planned
programs relating to down-sizing, re-engineering and similar matters
currently in force, keep available the services of their present
employees as a group, (iii) maintain and keep material properties and
assets in as good repair and condition as at present, subject to
ordinary wear and tear, and (iv) maintain supplies and inventories in
quantities consistent with past practice. Except as set forth in
Section 6.1(a) of the CES Disclosure Schedule or the BEC Disclosure
Schedule, respectively, or except as otherwise expressly provided in
this Article VI, no party shall, nor shall any party permit any of its
subsidiaries to, enter into a new line of business, or make any change
in a line of business it engaged in as of the date hereof involving
any material investment of assets or resources or any material
exposure to liability or loss, in the case of CES, to CES and its
subsidiaries taken as a whole, and in the case of BEC, to BEC and its
subsidiaries taken as a whole, or take any action that would make it
materially less likely that BEC can obtain the BEC Required Statutory
Approvals or that CES can obtain the CES Required Statutory Approvals.
(b) Dividends.
(i) Except as set forth in Section 6.1(b) of the CES
Disclosure Schedule or the BEC Disclosure Schedule, respectively, no
party shall nor shall any party permit any of its subsidiaries to
declare, set aside, make or pay any dividends on or other
distributions (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock other than (A)
dividends by a wholly-owned subsidiary to CES or BEC, as the case may
be, or another wholly-owned subsidiary, (B) regular dividends on CES
Common Stock, with usual record and payment dates in any fiscal
quarter, which quarterly dividends shall be consistent with past
practices (including increases consistent with past practice), (C)
regular dividends on BEC Common Stock, with usual record and payment
dates in any fiscal year, which quarterly dividends shall be
consistent with past practices (including increases consistent with
past practice), (D) dividends required to be paid on any BEC Preferred
Stock in accordance with the terms thereof, or dividends required to
be paid on any CES Preferred Stock in accordance with the terms
thereof. CES shall not, nor shall it permit any of its subsidiaries
to (i) split, combine or reclassify any capital stock or the capital
stock of any subsidiary or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of, or in substitution
for, shares of capital stock or the capital stock of any subsidiary,
or (ii) amend the terms or change the period of exercisability of,
redeem, repurchase or otherwise acquire any of its capital stock or
the capital stock of any subsidiary, or any option, warrant or right,
directly or indirectly, to acquire shares of capital stock or the
capital stock of any subsidiary, other than (A) redemptions,
repurchases and other acquisitions of shares of capital stock in
connection with the administration of employee benefit and dividend
reinvestment plans as in effect on the date hereof in the ordinary
course of the operation of such plans consistent with past practice,
(B) in connection with refunding of securities with preferred stock,
debt or tax preference preferred securities at a lower cost of funds
or in connection with intercompany purchases of capital stock, (C)
mandatory redemptions (including optional sinking fund payments) of
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preferred stock, and (D) open market purchases of BEC Common Stock or
CES Common Stock pursuant to any previously announced stock repurchase
programs.
(ii) Each of BEC and CES shall coordinate with the other
regarding the declaration and payment of dividends in respect of BEC
Common Stock and CES Common Stock and the record dates and payment
dates relating thereto, it being the intention of the parties hereto
that no holder of BEC Common Stock or CES Common Stock shall receive
two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to its BEC Common Stock or CES Common
Stock, as the case may be, and/or any shares of Company Common Stock
any such holder receives in exchange therefor pursuant to the Mergers.
(c) Issuance of Securities. Neither party shall, nor shall it
permit any of its subsidiaries to, issue, agree to issue, deliver,
sell, award, pledge, dispose of or otherwise encumber or authorize or
propose the issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of its capital stock of any class or any
securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares or convertible or
exchangeable securities, or any other ownership interest (including,
without limitation, any phantom interest), other than
(i) in the case of BEC and its subsidiaries, (a) in
connection with refunding of BEC Preferred Stock, with preferred stock
or tax preference preferred securities at a lower cost of funds or (b)
of up to 1,500,000 shares of BEC Common Stock, including shares to be
issued pursuant to all plans, programs or arrangements existing on the
date hereof providing for the issuance of BEC Common Stock; and
(ii) in the case of CES and its subsidiaries (a) in
connection with refunding of CES Preferred Stock with preferred shares
or tax preference preferred shares at a lower cost of funds or (b) of
up to 1,000,000 shares of CES Common Stock, including shares to be
issued pursuant to all plans, programs or arrangements existing on the
date hereof providing for the issuance of CES Common Stock.
(iii) The parties shall promptly furnish to each other
such information as may be reasonably requested (including financial
information) and take such action as may be reasonably necessary and
otherwise fully cooperate with each other in the preparation of any
registration statement under the Securities Act and other documents
necessary in connection with the issuance of securities as
contemplated by this Section 6.1(c), subject to obtaining customary
indemnities.
(d) Charter Documents. No party shall, and no party shall
permit any of its subsidiaries to, amend or propose to amend its
respective declaration of trust, articles of organization, by-laws or
regulations, or similar organic documents, as the case may be, except
as contemplated herein.
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(e) Acquisitions. Except as (i) disclosed in Section 6.1(e) of
the CES Disclosure Schedule or the BEC Disclosure Schedule, (ii) for
acquisitions by BEC and its affiliates of less than $5 million in the
aggregate that are not set forth in Section 6.1(e) of the BEC
Disclosure Schedule, and (iii) for acquisitions by CES and its
affiliates of less than $5 million in the aggregate that are not set
forth in Section 6.1(e) of the CES Disclosure Schedule, neither party
shall, nor shall it permit any of its subsidiaries to, acquire,
publicly propose to acquire, or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or alter (through merger,
liquidation, reorganization, restructuring or in any other fashion)
the corporate structures or ownership of such party or such party's
subsidiaries, or otherwise acquire or agree to acquire any material
amount of assets other than in the ordinary course of business
consistent with past practice.
(f) Capital Expenditures. Except as required by law or as
reasonably necessary after consultation with the other party following
a catastrophic event, such as a major storm (a "Catastrophic Event")
or as set forth in Section 6.1(f) of the CES Disclosure Schedule or
the BEC Disclosure Schedule, neither CES or BEC, as the case may be,
shall, nor shall either permit any of its subsidiaries to make any
capital expenditure (or series of related capital expenditures) in
excess of $80 million in the aggregate per year, in the case of CES,
and $160 million in the aggregate per year, in the case of BEC.
(g) No Dispositions. Other than dispositions by a party and its
subsidiaries of assets (whether directly through a sale of assets or
through the sale of all of the stock of a subsidiary) having a fair
market value (individually or in the aggregate) of less than $5
million, or except as set forth in Section 6.1(g) of the CES
Disclosure Schedule or BEC Disclosure Schedule, neither party shall,
nor shall it permit any of its subsidiaries to, sell, lease, license,
encumber or otherwise dispose of, any of its assets, other than sales,
leases, licenses, encumbrances or dispositions in the ordinary course
of its business consistent with past practice.
(h) Indebtedness. Except as necessary to pay the Cash
Consideration or in the event of securitization financings pursuant to
M.G.L. Chapter 164, Section 1H, neither party shall, nor shall it
permit any of its subsidiaries to, incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise assumed
including, without limitation, the issuance of debt securities or
warrants or rights to acquire debt) or enter into any "keep well" or
other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic
effect of any of the foregoing other than (i) short-term indebtedness
or guarantees or "keep well" or other agreements in the ordinary
course of business consistent with past practice (such as the issuance
of commercial paper, the use of credit facilities existing on the date
hereof or hedging activities undertaken in order to hedge a balance
sheet asset or liability and not for speculative purposes); (ii) long-
term indebtedness or "keep well" or other agreements not aggregating
more than, together with any preferred stock or tax preference
preferred securities issued by BEC or CES, as the case may be, in
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accordance with Section 6.1(c)(iv), $200 million in the case of BEC
and its subsidiaries or $115 million in the case of CES and its
subsidiaries; or (iii) in connection with the refunding with preferred
stock, tax preference preferred securities or debt at a lower cost of
funds permitted in Section 6.1(b).
(i) Compensation, Benefits. Except in the ordinary course of
business consistent with past practice, or as set forth in Section
6.1(i) of the CES Disclosure Schedule or the BEC Disclosure Schedule,
or as may be required by applicable law, or as may be required to
facilitate or obtain a determination from the IRS that a plan is
"qualified" within the meaning of Section 401(a) of the Code, or
pursuant to an existing agreement (including as contemplated by this
Agreement), neither party shall, nor shall it permit any of its
subsidiaries to, (i) enter into, adopt or amend or increase the amount
or accelerate the payment or vesting of any benefit or amount payable
under, any employee benefit plan or other contract, agreement,
commitment, arrangement, plan or policy covering employees, former
employees, directors or former directors or their beneficiaries or
providing benefits to such persons that is maintained by, contributed
to or entered into by such party or any of its subsidiaries, or
increase, or enter into any contract, agreement, commitment or
arrangement to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement,
employment or any related rights of, or take any other action or grant
any benefit (including, without limitation, any stock options or stock
option plan) not required under the terms of any existing employee
benefit plan, or other contract, agreement, commitment, arrangement,
plan or policy to or with any trustee, director, officer or other
employee of such party or any of its subsidiaries, except for normal
increases or grants or actions in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in
a material increase in benefits or compensation expense to such party
or any of its subsidiaries, (ii) enter into or amend any employment,
severance or special pay arrangement with respect to the termination
of employment or other similar contract, agreement or arrangement with
any trustee, director or officer or other employee other than in the
ordinary course of business consistent with current industry practice,
provided that such arrangements or contracts (or amendments thereto)
would not, in the aggregate, result in a material increase in benefits
or compensation expense to such party or any of its subsidiaries) or
(iii) enter into any employment contract or collective bargaining
agreement, written or oral, or modify or change the terms of any
existing such contract or agreement.
(j) 1935 Act. Except as set forth in Section 6.1(j) of the CES
Disclosure Schedule or the BEC Disclosure Schedule, and except as
required or contemplated by this Agreement, no party shall, nor shall
any party 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 or that would impair the ability of either party,
or any subsidiary of either party to claim an exemption as of right
under Section 3(a)(l) of the 1935 Act following the Mergers.
(k) Accounting. Except as set forth in Section 6.1(k) of the
CES Disclosure Schedule or the BEC Disclosure Schedule, neither party
shall, nor shall either party permit any of its subsidiaries to, make
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any changes in its accounting methods, except as required by law,
rule, regulation or GAAP.
(l) Tax-Free Status. No party shall, nor shall any party permit
any of its subsidiaries to, or within the exercise of its reasonable
best efforts its joint ventures to, take any actions which would, or
would be reasonably likely to, adversely affect the status of the
Mergers as a tax-free transaction (except as to any cash received)
under Section 368(a) of the Code, and each party hereto shall use all
reasonable efforts to achieve such result.
(m) Cooperation, Notification. Each party shall, and shall
cause its subsidiaries to, and shall use its reasonable best efforts
to cause its joint ventures to
(i) cause its appropriate representatives to confer on a
regular and frequent basis with one or more representatives of the
other party to discuss, subject to applicable law, material
operational matters and the general status of its ongoing operations;
(ii) promptly notify the other party of any significant
changes in its business, properties, assets, condition (financial or
other), results of operations or prospects;
(iii) promptly advise the other party of any change or
event which has had or, insofar as reasonably can be foreseen, is
reasonably likely to result, in the case of CES, in a CES Material
Adverse Effect or, in the case of BEC, a BEC Material Adverse Effect
(provided that no such notification shall affect the representations,
warranties, covenants or agreements of the parties hereto (or remedies
with respect thereto) or the conditions to the obligations of the
parties hereto under this Agreement);
(iv) promptly provide the other party with copies of all
filings made by such party or any of its subsidiaries with any state
or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the
transactions contemplated hereby; and
(v) promptly advise the other party of (y) any
representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or accurate in any
respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect or (z)
the failure by it to comply in any material respect with or satisfy in
any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
(n) Third-Party Consents. Each party shall, and shall cause its
subsidiaries to, use all commercially reasonable efforts to obtain all
the CES Required Consents or the BEC Required Consents, as the case
may be. Each party shall promptly notify the other of any failure or
prospective failure to obtain any such consents and, if requested by
the other party shall provide copies of all the Required Consents
obtained by such party to the other party.
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(o) No Breach, Etc. No party shall, nor shall any party permit
any of its subsidiaries to, willfully take any action that would or is
reasonably likely to result in a material breach of any provision of
this Agreement or in any of its representations and warranties set
forth in this Agreement being untrue on and as of the Closing Date.
(p) Discharge of Liabilities. Neither party shall, nor shall
either party permit its subsidiaries to, pay, discharge, settle,
compromise or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge, settlement, compromise 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 such party's SEC Reports, or incurred in the ordinary
course of business consistent with past practice.
(q) Contracts. Neither party shall, nor shall either party
permit its subsidiaries or, within the exercise of its reasonable best
efforts, its joint ventures, except in the ordinary course of business
consistent with past practice, accelerate, modify, amend, terminate,
renew or fail to use reasonable business efforts to renew any material
contract or agreement to which such party or any subsidiary of such
party is a party or waive, release or assign any material rights or
claims.
(r) Insurance. Each party shall, and shall cause its
subsidiaries to, and, with the exercise of its reasonable best
efforts, its joint ventures to, maintain with financially responsible
insurance companies insurance coverage (including directors and
officers liability insurance) in such amounts and against such risks
and losses as are customary for companies engaged in (i) the electric
and gas utility industries and employing methods of generating
electric power and distributing fuel similar to those methods used and
fuels used by such party or its subsidiaries or (ii) in the case of a
party or its subsidiaries engaged in industries other than the
electric and gas utility industries, in such other industries as such
party or its subsidiaries are engaged in from time to time.
(s) Permits. Each party shall, and shall cause its subsidiaries
to, use reasonable efforts to maintain in effect all existing
governmental permits pursuant to which such party or its subsidiaries
operate.
(t) No Liens. Except as set forth in Section 6.1(t) of the CES
Disclosure Schedule or the BEC Disclosure Schedule or under any
indebtedness permitted hereunder constituting purchase money security
interests, neither party shall permit, nor shall either party permit
any of its subsidiaries to permit, the creation or imposition of any
Lien upon its or any of its subsidiaries' assets, tangible or
intangible.
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(u) No Loans. Neither party shall, except in the ordinary
course of business, make any loan to any third party or to any of its
or its subsidiaries' directors, officers and employees.
(v) Tax Elections. Neither BEC nor CES shall make any material
tax election inconsistent with past practice or settle or compromise
any material federal, state, local or foreign tax liability or agree
to an extension of a statute of limitations with respect thereto.
(w) Transition Steering Team. As soon as reasonably practicable
after the date hereof, BEC and CES shall create a special transition
steering team, with representation from CES and BEC, that will develop
recommendations concerning the future structure and operations of the
Company after the Effective Time, subject to applicable law.
SECTION 6.2 COVENANT OF NO SOLICITATION.
(a) From and after the date hereof, neither CES nor BEC shall,
and shall cause its subsidiaries not to, and shall not authorize or
permit any Representative (as defined in Section 7.1) to, directly or
indirectly, (i) solicit, initiate or encourage the initiation of any
inquiries or proposals regarding any merger, sale of substantial
assets, sale of shares of capital stock (including without limitation
by way of a tender offer) or similar transactions involving such party
other than the Mergers (any of the foregoing inquiries or proposals
being referred to herein as an "Acquisition Proposal"), (ii) engage in
negotiations or discussions concerning, or provide any nonpublic
information to any person relating to, any Acquisition Proposal or
(iii) agree to, approve or recommend any Acquisition Proposal.
Nothing contained in this Section 6.2(a) shall prevent the Board of
Trustees of CES or the Board of Trustees of BEC, at any time prior to
the time the CES Shareholders' Approval, in the case of CES, or the
BEC Shareholders' Approval, in the case of BEC, has been obtained,
from (x) considering, negotiating, approving and recommending to the
shareholders of CES or BEC, as the case may be, a bona fide
Acquisition Proposal that it reasonably believes in good faith, after
consultation with its financial advisors, may be more favorable to the
shareholders of such party than the Mergers, or (y) furnishing such
third party information concerning itself and its business, properties
and assets; provided that (A) such board shall have determined in good
faith based upon the advice of outside counsel that failure to do so
likely would constitute a breach of their fiduciary duties and (B)
prior to furnishing nonpublic information with such third party, BEC
or CES, as the case may be, shall have received from such third party
an executed confidentiality agreement in customary form on terms not
more favorable to such third party than the terms of the
confidentiality agreement dated June 3, 1998 between CES and BEC, as
it may be amended from time to time (the "Confidentiality Agreement").
(b) Either party shall promptly notify the other party of (i)
the receipt of any Acquisition Proposal, (ii) any request for
nonpublic information relating to such party in connection with an
Acquisition Proposal or for access to the properties, books or records
of such party by any person or entity that informs the Board of
Trustees of such party that it is considering making, or has made, an
Acquisition Proposal and (iii) the status and details (including
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amendments) of any such request or proposal. Such notice shall be
made orally and in writing within 24 hours of the receipt of such
Acquisition Proposal (or amendment thereof) or request for
information, and shall indicate whether such party is providing or
intends to provide the person making such Acquisition Proposal with
access to information concerning such party.
(c) Each party hereto shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons
(other than the other parties hereto) conducted heretofore with
respect to any of the foregoing. Each party agrees not to release any
third party from the confidentiality provisions of any confidentiality
agreement to which such party is a party.
(d) Each party hereto shall ensure that its Representatives are
aware of the restrictions described in this Section 6.2.
(e) Nothing contained herein shall prohibit a party from
complying with Rules 14d-9 and 14e-2 promulgated under the Exchange
Act, including without limitation by taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act, or from making any other disclosure to its
shareholders if, in the good faith judgment of its Board of Trustees,
after consultation with outside counsel, failure to do so may
reasonably be expected to be inconsistent with its obligations under
applicable law.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1 ACCESS TO INFORMATION.
(a) Upon reasonable notice and during normal business hours,
each party hereto shall, and shall cause its subsidiaries to, and
shall use its reasonable best efforts to cause its joint ventures to,
afford to the officers, directors, trustees, employees, accountants,
counsel, investment bankers, financial advisors and other
representatives of the other parties (collectively, "Representatives")
reasonable access, during normal business hours throughout the period
prior to the Effective Time, to all of its properties, books,
contracts, commitments and records (including, but not limited to, Tax
Returns) and, during such period, each party shall, and shall cause
its subsidiaries to, and shall use its reasonable best efforts to
cause its joint ventures to, furnish promptly to the other party
(i) access to each report, schedule and other document
filed or received by it or any of its subsidiaries and, within the
exercise of its reasonable best efforts, its joint ventures pursuant
to the requirements of federal or state securities laws or filed with
or sent to the SEC, the FERC, the NRC, the DOE, the Department of
Justice, the Federal Trade Commission, the Massachusetts Department of
Telecommunications and Energy, and any other federal or state
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regulatory agency or commission (including without limitation those
with jurisdiction over Environmental Laws and Hazardous Materials),
and
(ii) access to all information concerning themselves, their
subsidiaries, operations, facilities, real and leased properties,
directors, trustees, officers and shareholders and such other matters
as may be reasonably requested by the other party or its
Representatives in connection with any filings, applications or
approvals required or contemplated by this Agreement or for any other
reason related to the transactions contemplated by this Agreement.
(b) No review pursuant to this Section 7.1 shall have an effect
for the purpose of determining the accuracy of any representation or
warranty given by any party to the other.
(c) Each party shall, and shall cause its subsidiaries and
Representatives to, hold in strict confidence all documents and
information concerning the other furnished to it in connection with
the transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement.
SECTION 7.2 JOINT PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) Preparation and Filing. The parties shall prepare and file
with the SEC as soon as reasonably practicable after the date hereof
the Registration Statement and the Joint Proxy Statement (together,
the "Joint Proxy/Registration Statement"). The parties hereto shall
each use reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as practicable
after such filing. Each party hereto shall also take such action as
may be reasonably required to cause the shares of Company Common Stock
issuable in connection with the Mergers to be registered (or to obtain
an exemption from registration) under applicable state "blue sky" or
securities laws; provided, however, that no party shall be required to
register or qualify as a foreign corporation or to take other action
which would subject it to service of process in any jurisdiction where
it otherwise will not be, following the Mergers, so subject. Each of
the parties hereto shall furnish all information concerning itself
which is required or customary for inclusion in the Joint
Proxy/Registration Statement. The parties shall use reasonable
efforts to cause the shares of Company Common Stock issuable in the
Mergers to be approved for listing on the New York Stock Exchange upon
official notice of issuance. The information provided by any party
hereto for use in the Joint Proxy/Registration Statement shall be true
and correct in all material respects without omission of any material
fact which is required to make such information not false or
misleading. No representation, covenant or agreement is made by or on
behalf of any party hereto with respect to information supplied by any
other party for inclusion in the Joint Proxy/Registration Statement.
No filing of, or amendment or supplement to, the Joint
Proxy/Registration Statement shall be made without providing each
party the opportunity to review and comment thereon. If at any time
prior to the Effective Time any information relating to a party, or
any of its affiliates, officers, trustees or directors, should be
discovered by any party which should be set forth in an amendment or
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supplement to the Joint Proxy/Registration Statement, so that the
Joint Proxy/Registration Statement would not include any misstatement
of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, the party hereto that discovers such
information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information shall
be promptly filed with the SEC and, to the extent required by law,
disseminated to the shareholders of the parties hereto.
(b) Letter of CES's Accountants. CES shall use its best efforts
to cause to be delivered to BEC a letter of Arthur Andersen, LLP,
CES's independent auditors, dated a date within two business days
before the date of the Joint Proxy/Registration Statement, and
addressed to BEC, in form and substance reasonably satisfactory to
BEC, and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with
registration statements on Form S-4.
(c) Letter of BEC's Accountants. BEC shall use its best efforts
to cause to be delivered to CES a letter of PricewaterhouseCoopers,
LLP, BEC's independent auditors, dated a date within two business days
before the date of the Joint Proxy/Registration Statement, and
addressed to CES, in form and substance reasonably satisfactory to
CES, and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with
registration statements on Form S-4.
SECTION 7.3 REGULATORY MATTERS.
(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 itself or 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
transactions contemplated hereby. The parties hereto shall use
reasonable best efforts to make such filings promptly, and to respond
promptly to any requests for additional information made by either of
such agencies.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its best efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications,
notices, petitions, filings and other documents, and to use all
commercially reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental Authorities
necessary or advisable to consummate (or in connection with the
consummation of) and make effective, in the most expeditious manner
practicable, the Mergers and other transactions contemplated by this
Agreement, including, without limitation, the CES Required Statutory
Approvals and the BEC Required Statutory Approvals. Each party shall
have the right to review and approve in advance all of the information
concerning such party which appears in any filing made in connection
with the transactions contemplated by this Agreement and the Mergers.
Each party shall allow the other party and its counsel a meaningful
opportunity to consult with respect to, and to participate in, the
efforts to obtain all necessary approvals from Governmental
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Authorities in connection with the transactions contemplated by this
Agreement and the Mergers (including but not limited to the FERC, the
SEC and the Massachusetts Department of Telecommunications and
Energy), it being understood that all positions taken in the filings
with such Governmental Authorities shall be consistent with one
another and consistent with this Agreement.
SECTION 7.4 SHAREHOLDER APPROVAL.
(a) CES Shareholders. Subject to the provisions of Section
7.4(c), CES shall, as soon as reasonably practicable after the date
hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "CES Special
Meeting") for the purpose of securing the CES Shareholders' Approval,
(ii) distribute to its shareholders the Joint Proxy/Registration
Statement in accordance with applicable federal and state law and with
its charter and by-laws, (iii) subject to the fiduciary duties of its
Board of Trustees, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv) cooperate
and consult with BEC with respect to each of the foregoing matters.
(b) BEC Shareholders. Subject to the provisions of Section
7.4(c), BEC shall, as soon as reasonably practicable after the date
hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "BEC Special
Meeting") for the purpose of securing the BEC Shareholders' Approval,
(ii) distribute to its shareholders the Joint Proxy/Registration
Statement in accordance with applicable federal and state law and with
its charter and by-laws, (iii) subject to the fiduciary duties of its
Board of Trustees, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv) cooperate
and consult with CES with respect to each of the foregoing matters.
(c) Meeting Date. The CES Special Meeting for the purpose of
securing the CES Shareholders' Approval and the BEC Special Meeting
for the purpose of securing the BEC Shareholders' Approval shall be
held on such date as CES and BEC shall mutually determine, and as soon
as practicable after the date of this Agreement.
SECTION 7.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from
and after the Effective Time, the Company shall, to the fullest extent
permitted by applicable law and its charter and by-laws, as in effect
on the date hereof, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, trustee, director or
employee of any of the parties hereto or any subsidiary of any party
hereto (each an "Indemnified Party" and collectively, the "Indemnified
Parties") against (i) all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages or liabilities or,
subject to the proviso of the next succeeding sentence, amounts paid
in settlement, arising out of actions or omissions occurring at or
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prior to the Effective Time (and whether asserted or claimed prior to,
at or after the Effective Time) that are, in whole or in part, based
on or arising out of the fact that such person is or was a director,
trustee, officer or employee of such party or a subsidiary of such
party (the "Indemnified Liabilities"), and (ii) all Indemnified
Liabilities to the extent they are based on or arise out of or pertain
to the transactions contemplated by this Agreement. In the event of
any such loss, expense, claim, damage or liability (whether or not
arising before the Effective Time), (i) the Company shall pay the
reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to the
Company, promptly after statements therefor are received and otherwise
advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, (ii) the Company 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 Massachusetts law, and the declaration of trust or by-laws (or
similar governing documents) of the Company (as the same may be
amended from time to time) shall be made by independent counsel
mutually acceptable to the Company and the Indemnified Party;
provided, however, that the Company shall not be liable for any
settlement effected without its written consent (which consent shall
not be unreasonably withheld). The Indemnified Parties as a group may
retain only one law firm with respect to each related matter except to
the extent there is, in the opinion of counsel to an Indemnified
Party, under applicable standards of professional conduct, a conflict
on any significant issue between positions of such Indemnified Party
and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective
Time, the Company shall cause to be maintained in effect current
policies of directors' and officers' liability insurance for the
benefit of those persons who are currently covered by such policies of
CES and BEC on terms no less favorable than the terms of such current
insurance coverage or obtain new policies of such insurance with
respect to such obligations at least as favorable as the most
favorable coverage offered by policies currently maintained by CES and
BEC; provided, however, that the Company shall not be required to
expend in any year an amount in excess of 200% of the annual aggregate
premiums currently paid by CES and BEC for such insurance; and
provided, further, that if the annual premiums of such policies exceed
such amount, the Company shall be obligated to obtain the best
coverage reasonably available, in the reasonable judgment of the Board
of Directors of the Company, for a cost not exceeding such amount.
(c) Successors. In the event the Company or any of its
successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and
in either such case, proper provisions shall be made so that the
successors and assigns of the Company shall assume the obligations set
forth in this Section 7.5.
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(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 CES and BEC and their
respective subsidiaries with respect to their activities as such prior
to the Effective Time, as provided in their respective charters and
by-laws or other organizational documents in effect on the date
hereof, or otherwise in effect on the date hereof, shall survive the
Mergers and shall continue in full force and effect for a period of
not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified
Party, his or her heirs and his or her representatives.
SECTION 7.6 DISCLOSURE SCHEDULES. On the date hereof, (i) BEC
has delivered to CES a schedule (the "BEC Disclosure Schedule"),
accompanied by a certificate signed by the chief financial officer of
BEC stating that the BEC Disclosure Schedule is being delivered
pursuant to this Section 7.6(i) and (ii) CES has delivered to BEC a
schedule (the "CES Disclosure Schedule"), accompanied by a certificate
signed by the chief financial officer of CES stating that the CES
Disclosure Schedule is being delivered pursuant to this Section
7.6(ii). The CES Disclosure Schedule and the BEC Disclosure Schedule
are collectively referred to herein as the "Disclosure Schedules."
The Disclosure Schedules constitute an integral part of this Agreement
and modify the respective representations, warranties, covenants or
agreements of the parties hereto contained herein to the extent that
such representations, warranties, covenants or agreements expressly
refer to the Disclosure Schedules. Anything to the contrary contained
herein or in the Disclosure Schedules notwithstanding, any and all
statements, representations, warranties or disclosures set forth in
the Disclosure Schedules shall be deemed to have been made on and as
of the date hereof.
SECTION 7.7 PUBLIC ANNOUNCEMENTS. Subject to each party's
disclosure obligations imposed by law or the requirements of any
applicable national securities exchange, CES and BEC shall cooperate
with each other in the development and distribution of all news
releases and other public information disclosures with respect to this
Agreement or any of the transactions contemplated hereby and shall not
issue any public announcement or statement with respect hereto or
thereto without the consent of the other party (which consent shall
not be unreasonably withheld).
SECTION 7.8 RULE 145 AFFILIATES. Within 30 days before the
Closing Date CES shall identify in a letter to BEC, and BEC shall
identify in a letter to CES, all persons who were, at the time of the
CES Special Meeting or the BEC Special Meeting, as the case may be,
"affiliates" of CES and BEC, respectively, as such term is used in
Rule 145 under the Securities Act. Each of CES and BEC shall use all
reasonable efforts to cause such affiliates to deliver to CES and BEC
on or prior to the Closing Date a written agreement substantially in
the form attached as Exhibit 7.8 (each, an "Affiliate Agreement").
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SECTION 7.9 CERTAIN EMPLOYEE AGREEMENTS. Subject to Section 7.10
and Section 7.11 the Company and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining
agreements and commitments of the parties hereto prior to the date
hereof which apply to any current or former employee or current or
former director or trustee of the parties hereto and are disclosed in
Section 4.15 of the Disclosure Schedules; provided, however, that this
undertaking is not intended to prevent the Company from enforcing such
contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including, without
limitation, any reserved right to amend, modify, suspend, revoke or
terminate any such contract, agreement, collective bargaining
agreement or commitment.
SECTION 7.10 EMPLOYEE BENEFIT PLANS.
(a) Maintenance of CES and BEC Benefit Plans. Subject to
Section 7.11 and Section 6.1(i), each of the CES Benefit Plans and BEC
Benefit Plans in effect at the date hereof (or as amended in
accordance with or as permitted by this Agreement) shall be maintained
in effect with respect to the employees or former employees of CES and
any of its subsidiaries or BEC and any of its subsidiaries,
respectively, who are covered by any such benefit plan immediately
prior to the Closing Date (the "Affiliated Employees") until the
Company otherwise determines on or after the Effective Time; provided,
however, that nothing herein contained shall limit any reserved right
contained in any such CES Benefit Plan or BEC Benefit Plan to amend,
modify, suspend, revoke or terminate any such plan. Without
limitation of the foregoing, each participant in any CES Benefit Plan
or BEC Benefit Plan shall receive credit for purposes of eligibility
to participate, vesting and eligibility to receive benefits (but not
for purposes of benefit accrual under any benefit plan of the Company
or any of its subsidiaries or affiliates) for service credited for the
corresponding purpose under such benefit plan; provided, however, that
such crediting of service shall not operate to duplicate any benefit
to any such participant or the funding for any such benefit. No
provision in this Section 7.10 shall be deemed to constitute an
employment contract between the Company and any individual, or a
waiver of the Company's right to discharge any employee at any time,
with or without cause.
SECTION 7.11 STOCK PLANS. With respect to each CES Benefit Plan
and each BEC Benefit Plan listed in Section 7.11 of the CES Disclosure
Schedule or Section 7.11 of the BEC Disclosure Schedule that provides
for benefits in the form of CES Common Stock or BEC Common Stock
(together, the "Stock Plans"), CES and BEC shall take all trust action
necessary or appropriate to (i) provide for the issuance or purchase
in the open market of Company Common Stock rather than CES Common
Stock or BEC Common Stock, as the case may be, pursuant thereto, and
otherwise to amend such Stock Plans to reflect this Agreement and the
Mergers, (ii) obtain their respective shareholder approvals with
respect to such Stock Plans to the extent such approval is required
for purposes of the Code or other applicable law, or to enable such
Stock Plans to comply with Rule 16b-3 promulgated under the Exchange
Act, (iii) reserve for issuance under such Stock Plans or otherwise
provide a sufficient number of shares of Company Common Stock for
delivery upon payment of benefits, grant of awards or exercise of
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options under such Stock Plans and (iv) as soon as practicable after
the Effective Time, file registration statements on Form S-8 or
amendments on such forms to the Form S-4 Registration Statement, as
the case may be (or any successor or other appropriate forms), with
respect to the shares of Company Common Stock subject to such Stock
Plans to the extent such registration statement is required under
applicable law. The Company shall use its best efforts to maintain
the effectiveness of such registration statements (and maintain the
current status of the prospectuses contained therein) for so long as
such benefits and grants remain payable and such options remain
outstanding. With respect to those individuals who subsequent to the
Mergers will be subject to the reporting requirements under Section
16(a) of the Exchange Act, the Company shall administer the Stock
Plans, where applicable, in a manner that complies with Rule 16b-3
promulgated under the Exchange Act.
SECTION 7.12 EXPENSES. Subject to Section 9.3, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party hereto
incurring such expenses, whether or not the Mergers are consummated,
except that those expenses incurred in connection with the filing,
printing and mailing of the Joint Proxy/Registration Statement and the
filings of the premerger notification and report forms under the HSR
Act (including filing fees) shall be shared equally by CES and BEC.
SECTION 7.13 FURTHER ASSURANCES. Each party shall, and shall
cause its subsidiaries to, and shall use its reasonable best efforts
to cause its joint ventures to, execute such further documents and
instruments and take such further actions as may reasonably be
required by the terms hereof, including the defending of any lawsuits
or other proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated by
this Agreement (including seeking a stay or temporary restraining
order entered by any court or other Governmental Authority vacated or
reversed).
SECTION 7.14 CORPORATE OFFICES. At the Effective Time, the
corporate headquarters of the Company shall be located in Boston,
Massachusetts.
SECTION 7.15 OFFICERS. At the Effective Time, the Chairman,
President and Chief Executive Officer of BEC shall be the Chairman and
Chief Executive Officer of the Company and the Chief Executive Officer
and President of CES shall be the President and Chief Operating
Officer of the Company. The provisions of this Section 7.15 are
subject to the specific terms of the employment contracts referred to
in Section 7.16 and the duties and responsibilities attributable to
the positions referred to in this Section 7.15 shall be as set forth
in such contracts. The other officers of the Company at the Effective
Time shall be such officers as may be designated by the Board of
Directors of the Company.
SECTION 7.16 EMPLOYMENT CONTRACTS. At the Effective Time, the
Company shall enter into employment contracts with BEC's Chief
Executive Officer and CES's Chief Executive Officer in the forms set
forth in Exhibit 7.16.1 and Exhibit 7.16.2, respectively.
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SECTION 7.17 WORKFORCE MATTERS. Subject to compliance with
applicable law and obligations under applicable collective bargaining
agreements, for a period of three years following the Effective Time,
any reductions in workforce in respect of employees of CES or BEC or
any of their respective subsidiaries shall be made on the basis of the
objectives to be achieved, giving consideration to previous work
history, job experience, qualifications, and business needs without
regard to whether employment prior to the Effective Time was with CES
or its subsidiaries or BEC or its subsidiaries, and any employees
whose employment is terminated or jobs are eliminated by the Company
or any of its subsidiaries during such period shall be entitled to
participate on a fair and equitable basis in the job opportunity and
employment placement programs offered by the Company or any of its
subsidiaries. Any workforce reductions carried out following the
Effective Time by the Company 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 regulations promulgated
thereunder, and any comparable state or local law.
SECTION 7.18 COMPANY'S BOARD OF DIRECTORS. Each of BEC's and
CES's Boards of Trustees shall take such action as may be necessary to
cause the number of directors comprising the full Board of Directors
of the Company at the Effective Time to consist of 20 members, with 11
members to be selected by BEC and nine members to be selected by CES.
The initial designation of such directors among the three classes of
the Board of Directors of the Company shall be agreed between BEC and
CES, the designees of each party to be divided as proportionally as is
feasible among such classes; provided, however, that if, prior to the
Effective Time, any of such designee shall decline or be unable to
serve, the party hereto that designated such person shall designate
another person to serve in such person's stead. At the Effective
Time, the Board of Directors of the Company shall have such number of
standing committees, with such names and functions as shall be agreed
upon by BEC and CES prior to the Effective Time. CES shall have the
right to designate two members of the Executive Committee, one of whom
shall be the Chairman of the Board of CES on the Effective Date who
shall be the Chairman of the Executive Committee.
SECTION 7.19 CONFIDENTIALITY AGREEMENTS. During the period from
the date of this Agreement through the Effective Time, neither party
shall, and shall not permit its subsidiaries to, and shall use its
reasonable best efforts to not permit its joint ventures to,
terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it or any subsidiary or joint venture
is a party and, during such period, shall (or, in the case of its
joint ventures, shall use reasonable efforts to) enforce or cause to
be enforced to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions
to prevent any breaches of such agreements and to specifically enforce
the terms and provisions thereof in any court of the United States of
America or of any state having jurisdiction.
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ARTICLE VIII
CONDITIONS TO THE MERGERS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligations of each party to effect the
Mergers shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, except, to the extent
permitted by applicable law, that such conditions may be waived in
writing pursuant to Section 9.5 by the joint action of the parties
hereto:
(a) Shareholder Approvals. The CES Shareholders' Approval and
the BEC Shareholders' Approval shall have been obtained with respect
to this Agreement and the Mergers.
(b) No Injunctions or Restraints: Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Mergers shall be in
effect, nor shall any proceeding brought by any administrative agency
or commission or other Governmental Authority or instrumentality,
domestic or foreign, of competent jurisdiction seeking any of the
foregoing be pending, and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Mergers, which makes the consummation of the
Mergers illegal.
(c) Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the
Securities Act, no stop order suspending such effectiveness shall have
been issued and remain in effect, and no proceedings for that purpose
and no similar proceeding in respect of the Joint Proxy Statement
shall have been initiated or threatened by the SEC.
(d) Listing of Shares. The shares of Company Common Stock
issuable in the Mergers pursuant to Article II shall have been
approved for listing, upon official notice of issuance, on the New
York Stock Exchange.
(e) Statutory Approvals. The CES Required Statutory Approvals
and the BEC Required Statutory Approvals shall have been obtained at
or prior to the Effective Time, such approvals shall have become Final
Orders (as hereinafter defined) and such Final Orders shall not impose
terms or conditions which, in the aggregate, would have, or insofar as
reasonably can be foreseen, could have, a material adverse effect on
the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company and its
subsidiaries taken as a whole or which would be materially
inconsistent with the agreements of the parties contained herein; it
being understood that for purposes of this section, "BEC Required
Statutory Approval" shall include without limitation an approval by
the Massachusetts Department of Telecommunication and Energy of a rate
plan to be filed by the parties (the "Rate Plan") that includes a rate
freeze as described in the Rate Plan and assurances to the reasonable
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satisfaction of BEC that the Company and its subsidiaries after the
Mergers will be entitled to recover in rates the amortization and
recovery of the acquisition premium (the excess of the CES Merger
Consideration over the net book value of CES' assets) over a period
not to exceed 40 years and transaction costs over a period not to
exceed 10 years incurred by BEC in connection with the Mergers. As
used in this Agreement, "Final Order" means action by the relevant
regulatory authority which has not been reversed, stayed, enjoined,
set aside, annulled or suspended with respect to which any waiting
period prescribed by law before the transactions contemplated hereby
may be consummated has expired, and as to which all conditions to be
satisfied before the consummation of such transactions prescribed by
law, regulation or order have been satisfied.
(f) Government Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation
or other inquiry that might result in such an action or proceeding) by
any governmental authority, administrative agency or court (in any
such case of competent jurisdiction), nor shall there be in effect any
judgment, decree or order of any Governmental Authority,
administrative agency or court (in any such case, of competent
jurisdiction), in either case, seeking to prohibit consummation of the
Mergers and the Mergers and the other transactions contemplated hereby
shall not have been prohibited under any applicable federal or state
law or regulation.
(g) Hart-Scott-Rodino Act. All applicable waiting periods under
the HSR Act shall have expired or been terminated.
SECTION 8.2 ADDITIONAL CONDITIONS TO OBLIGATION OF BEC TO EFFECT
THE MERGERS. The obligation of BEC to effect the Mergers shall be
further subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, except as may be waived by BEC in writing
pursuant to Section 9.5:
(a) Performance of Obligations of CES. CES (and/or its
appropriate subsidiaries) shall have performed in all material
respects its agreements and covenants contained in or contemplated by
this Agreement to be performed by it at or prior to the Effective
Time, and CES shall have provided to BEC a certificate to such effect
signed by the Chief Financial Officer of CES.
(b) Representations and Warranties. The representations and
warranties of CES set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for (a)
representations and warranties that expressly speak only as of a
specific date or time other than the date hereof or the Closing Date
which need only be true and correct as of such date or time and (b)
representations and warranties that are no longer true and correct as
a consequence of action taken by the parties in accordance with this
Agreement) except in each of cases (i) and (ii) for such failures of
representations or warranties (other than the representations and
warranties contained in Section 4.9 of this Agreement) to be true and
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correct (without regard to any materiality qualifications contained
therein) which, individually or in the aggregate, would not have or
would not be reasonably likely to result in a CES Material Adverse
Effect, and CES shall have provided to BEC a certificate to such
effect signed by the Chief Financial Officer of CES.
(c) CES Required Consents. All CES Required Consents shall have
been obtained by CES, except where the failure to receive such CES
Required Consents could not reasonably be expected to (i) have a CES
Material Adverse Effect or a BEC Material Adverse Effect, or (ii)
delay or prevent the consummation of the Mergers.
(d) Affiliate Agreements. CES shall have received Affiliate
Agreements, duly executed by each "affiliate" of CES, substantially in
the form of Exhibit 7.8, as provided in Section 7.8.
(e) Opinion of Counsel. BEC shall have received a written
opinion from Ropes & Gray, which is in form and substance reasonably
satisfactory to BEC and which applies the standards used by the
Internal Revenue Service to issue an advance private letter ruling
(assuming for this purpose that under these standards the factual
representations required for such advance ruling must be true on the
date of this Agreement and at the Effective Time), to the effect that
each of the BEC Subsidiary Merger and the BEC Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code.
(f) Blue Sky Laws. The Company shall have received all permits
and other authorizations necessary under applicable blue sky laws to
issue shares of Company Common Stock pursuant to the Mergers.
(g) Divestiture of Generating Assets. Either (i) Canal Electric
Company, Commonwealth Electric Company and Cambridge Electric Light
Company shall have consummated the sale of their non-nuclear
generation assets pursuant to Purchase and Sale Agreements dated May
15, 1998 (the "Generation Asset Sale Agreements") between each of them
(collectively, the "Divesting Utilities") and Southern Energy, L.L.C.
or another unaffiliated buyer pursuant to a purchase and sale
agreement under which the indemnification obligations are not
materially more onerous to the Divesting Utilities than those in the
Generation Asset Sale Agreements, or (ii) (A) the Board of Directors
of each of the Company and each of the Divesting Utilities shall have
voted, and such votes shall be in full force and effect as of the
Effective Time, that in the event the Generation Asset Sale Agreements
are terminated for any reason, the assets covered by the Generation
Asset Sale Agreements will be sold to an unaffiliated party at the
earliest practicable date, unless prior thereto the Divesting
Utilities shall have consummated the sale of their respective non-
nuclear generation assets to unaffiliated buyers pursuant to purchase
and sale agreements under which the indemnification obligations are
not materially more onerous to the Divesting Utilities than those in
the Generation Asset Sale Agreements, and (B) the by laws of the
Company and of the Divesting Utilities shall have been amended (the
"CES By-law Amendments") to provide that (1) neither the Company's
vote nor the Divesting Utilities' votes may be amended, rescinded or
withdrawn and (2) the CES By-law Amendments may not be amended,
without in either case the approval, as the Board of Directors of the
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Company or as the Board of Directors of the sole shareholder of the
Divesting Utilities, as the case may be, of two-thirds of the members
of the Board of Directors of the Company.
SECTION 8.3 ADDITIONAL CONDITIONS TO OBLIGATION OF CES TO EFFECT
THE MERGERS. The obligation of CES to effect the Mergers shall be
further subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, except as may be waived by CES in writing
pursuant to Section 9.5:
(a) Performance of Obligations of BEC. BEC (and/or its
appropriate subsidiaries) shall have performed in all material
respects its agreements and covenants contained in or contemplated by
this Agreement to be performed by it at or prior to the Effective
Time, and BEC shall have provided to CES a certificate to such effect
signed by the Chief Financial Officer of BEC.
(b) Representations and Warranties. The representations and
warranties of BEC set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for (a)
representations and warranties that expressly speak only as of a
specific date or time other than the date hereof or the Closing Date
which need only be true and correct as of such date or time and (b)
representations and warranties that are no longer true and correct as
a consequence of action taken by the parties in accordance with this
Agreement) except in each of cases (i) and (ii) for such failures of
representations or warranties (other than the representations and
warranties contained in Section 5.9 of this Agreement) to be true and
correct (without regard to any materiality qualifications contained
therein) which, individually or in the aggregate, would not have or
would not be reasonably likely to result in a BEC Material Adverse
Effect, and BEC shall have provided to CES a certificate to such
effect signed by the Chief Financial Officer of BEC.
(c) BEC Required Consents. All BEC Required Consents shall have
been obtained by BEC, except where the failure to receive such BEC
Required Consents could not reasonably be expected to (i) have a BEC
Material Adverse Effect or a CES Material Adverse Effect, or (ii)
delay or prevent the consummation of the Mergers.
(d) Affiliate Agreements. CES shall have received Affiliate
Agreements, duly executed by each "affiliate" of BEC substantially in
the form of Exhibit 7.8, as provided in Section 7.8.
(e) Tax Opinion. CES shall have received a written opinion from
LeBoeuf, Lamb, Greene & MacRae, L.L.P., which is in form and substance
reasonably satisfactory to BEC and which applies the standards used by
the Internal Revenue Service to issue an advance private letter ruling
(assuming for this purpose that under these standards the factual
representations required for such advance ruling must be true on the
date of this Agreement and at the Effective Time), to the effect that
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each of the CES Subsidiary Merger and the CES Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code.
(f) Blue Sky Laws. The Company shall have received all permits
and other authorizations necessary under applicable blue sky laws to
issue shares of Company Common Stock pursuant to the Mergers.
(g) BEC Nuclear Facility. Either (i) Boston Edison Company
shall have consummated the sale of the BEC Nuclear Facility pursuant
to the Purchase and Sale Agreement dated November 18, 1998 (the
"Nuclear Sale Agreement") between Boston Edison Company and Entergy
Nuclear Generating Company or another unaffiliated buyer pursuant to a
purchase and sale agreement under which the indemnification and
decommissioning obligations are not materially more onerous to Boston
Edison Company than those in the Nuclear Sale Agreement, or (ii) (A)
the Board of Directors of each of the Company and Boston Edison
Company shall have voted, and such votes shall be in full force and
effect as of the Effective Time, that in the event the Nuclear Sale
Agreement is terminated for any reason Boston Edison Company will
permanently cease operations of the BEC Nuclear Facility not later
than the end of the then current fuel cycle unless prior thereto
Boston Edison Company shall have consummated the sale of the BEC
Nuclear Facility to an unaffiliated buyer pursuant to a purchase and
sale agreement under which the indemnification and decommissioning
obligations are not materially more onerous to Boston Edison Company
than those in the Nuclear Sale Agreement, and (B) the by laws of the
Company and of Boston Edison Company shall have been amended (the "BEC
By-law Amendments") to provide that (1) neither the Company's vote nor
Boston Edison Company's vote may be amended, rescinded or withdrawn
and (2) the BEC By-law Amendments may not be amended, without in
either case the approval, as the Board of Directors of the Company or
as the Board of Directors of the sole shareholder of Boston Edison
Company, as the case may be, of two-thirds of the members of the Board
of Directors of the Company.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date, whether before or after approval by
the shareholders of the respective parties hereto contemplated by this
Agreement:
(a) by mutual written consent of the Boards of Trustees of CES
and BEC;
(b) by CES or BEC, by written notice to the other, if the
Effective Time shall not have occurred on or before one year from the
date of this Agreement (the "Initial Termination Date"); provided,
however, that the right to terminate the Agreement under this Section
9.1(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date;
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and provided, further, that if on the Initial Termination Date the
conditions to the Closing set forth in Section 8.1(e) shall not have
been fulfilled but all other conditions to the Closing shall be
fulfilled or shall be capable of being fulfilled, and the approvals
required by Section 8.1(e) which have not yet been obtained are being
pursued with diligence, then the Initial Termination Date shall be
extended for six months beyond the Initial Termination Date;
(c) by CES or BEC, by written notice to the other, if the CES
Shareholders' Approval shall not have been obtained at a duly held CES
Special Meeting, including any adjournments thereof; or the BEC
Shareholders' Approval shall not have been obtained at a duly held BEC
Special Meeting, including any adjournments thereof;
(d) by CES or BEC, if any state or federal law, order, rule or
regulation is adopted or issued that has the effect, as supported by
the written opinion of outside counsel for such party, of prohibiting
either or both of the Mergers, 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 Mergers (provided that the right to
terminate this Agreement under this Section 9.1(d) shall not be
available to any party that has not defended such lawsuit or other
proceeding (including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Authority
vacated or reversed).
(e) by CES, upon five days' prior notice to BEC, if, as a result
of an Acquisition Proposal for CES, the Board of Trustees of CES
determines in good faith based on the opinion of outside counsel that
failure to accept such Acquisition Proposal may reasonably be expected
to constitute a breach of their fiduciary duties; provided, however,
that (i) the Board of Trustees of CES shall have been advised by
outside counsel that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into
in the proper exercise of their applicable fiduciary duties, such
fiduciary duties require the Board of Trustees to reconsider such
commitment as a result of such Acquisition Proposal; (ii) the person
making such Acquisition Proposal shall have acknowledged and agreed in
writing to pay the termination and other fees set forth in Section 9.3
if such Acquisition Proposal is consummated or any other Acquisition
Proposal is consummated with such person or any of its affiliates and
(iii) prior to such termination, CES shall, and shall cause its
respective financial and legal advisors to, negotiate in good faith
with BEC to attempt to make such adjustments in the terms and
conditions of this Agreement as would enable CES to proceed with the
transactions contemplated herein; provided, further, that CES and BEC
acknowledge and affirm that notwithstanding anything in this Section
9.1(e) to the contrary, the parties hereto intend this Agreement to be
an exclusive agreement and, accordingly, nothing in this Agreement is
intended to constitute a solicitation of an Acquisition Proposal, it
being acknowledged and agreed that any Acquisition Proposal would
interfere with the strategic advantages and benefits that the parties
hereto expect to derive from the Mergers; or
(f) by BEC, upon five days' prior notice to CES, if, as a result
of an Acquisition Proposal for BEC, the Board of Trustees of BEC
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determines in good faith based on the opinion of outside counsel that
failure to accept such Acquisition Proposal may reasonably be expected
to constitute a breach of their fiduciary duties; provided, however,
that (i) the Board of Trustees of BEC shall have been advised by
outside counsel that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into
in the proper exercise of their applicable fiduciary duties, such
fiduciary duties require the Board of Trustees to reconsider such
commitment as a result of such Acquisition Proposal; (ii) the person
making such Acquisition Proposal shall have acknowledged and agreed in
writing to pay the termination and other fees set forth in Section 9.3
if such Acquisition Proposal is consummated or any other Acquisition
Proposal is consummated with such person or any of its affiliates and
(iii) prior to such termination, BEC shall, and shall cause its
respective financial and legal advisors to, negotiate in good faith
with CES to attempt to make such adjustments in the terms and
conditions of this Agreement as would enable BEC to proceed with the
transactions contemplated herein; provided, further, that BEC and CES
acknowledge and affirm that notwithstanding anything in this Section
9.1(f) to the contrary, the parties hereto intend this Agreement to be
an exclusive agreement and, accordingly, nothing in this Agreement is
intended to constitute a solicitation of an Acquisition Proposal, it
being acknowledged and agreed that any Acquisition Proposal would
interfere with the strategic advantages and benefits that the parties
hereto expect to derive from the Mergers; or
(g) by CES, by written notice to BEC, if (i) there shall have
been any material breach of any representation or warranty, or any
material breach of any covenant or agreement, of BEC hereunder, and
such breach shall not have been remedied within twenty days after
receipt by BEC of notice in writing from CES, specifying the nature of
such breach and requesting that it be remedied; or (ii) the Board of
Trustees of BEC (A) shall withdraw or modify in any manner adverse to
CES its approval of this Agreement and the transactions contemplated
hereby or its recommendation to its shareholders regarding the
approval of this Agreement, (B) shall fail to reaffirm such approval
or recommendation upon the request of CES, (C) shall approve or
recommend and Acquisition Proposal or (D) shall resolve to take any of
the actions specified in clause (A), (B)or (C); provided, however,
that CES and BEC acknowledge and affirm that notwithstanding anything
in clause (g)(ii) above to the contrary, the parties hereto intend
this Agreement to be an exclusive agreement and, accordingly, nothing
in this Agreement is intended to constitute a solicitation of an
Acquisition Proposal, it being acknowledged and agreed that any such
offer or proposal would interfere with the strategic advantages that
the parties hereto expect to derive from the Mergers; or
(h) by BEC, by written notice to CES, if (i) there shall have
been any material breach of any representation or warranty, or any
material breach of any covenant or agreement, of CES hereunder, and
such breach shall not have been remedied within twenty days after
receipt by CES of notice in writing from BEC, specifying the nature of
such breach and requesting that it be remedied; or (ii) the Board of
Trustees of CES (A) shall withdraw or modify in any manner adverse to
BEC its approval of this Agreement and the transactions contemplated
hereby or its recommendation to its shareholders regarding the
approval of this Agreement, (B)shall fail to reaffirm such approval or
recommendation upon the request of BEC, (C) shall approve or recommend
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and Acquisition Proposal or (D) shall resolve to take any of the
actions specified in clause (A), (B) or (C); provided, however, that
BEC and CES acknowledge and affirm that notwithstanding anything in
clause (h)(ii) above to the contrary, the parties hereto intend this
Agreement to be an exclusive agreement and, accordingly, nothing in
this Agreement is intended to constitute a solicitation of an
Acquisition Proposal, it being acknowledged and agreed that any such
offer or proposal would interfere with the strategic advantages that
the parties hereto expect to derive from the Mergers.
SECTION 9.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either CES or BEC pursuant to Section 9.1 there
shall be no liability on the part of either CES or BEC or their
respective affiliates, officers or directors hereunder, except that
(i) Section 7.1(c), Section 7.12, Section 9.3, Section 10.7 and
Section 10.8 shall survive the termination, and (ii) nothing herein
shall relieve any party from liability for any breach hereof.
SECTION 9.3 TERMINATION FEE; EXPENSES.
(a) If this Agreement (i) is terminated at such time that this
Agreement is terminable pursuant to Section 9.1 (g)(i) or Section 9.1
(h)(i) or (ii) is terminated pursuant to Section 9.1(e) or Section
9.1(f), then (A) in the event of such a termination pursuant to
Section 9.1(e) or Section l(h)(i), CES shall pay to BEC and (B) in the
event of such a termination pursuant to Section 9.1(f) or Section 9.1
(g)(i), BEC shall pay to CES, promptly (but not later than five
business days after such notice is received pursuant to
Section 9.1(g)(i) or Section 9.1(h)(i) or is given pursuant to Section
9.1(e) or Section 9.1(f)) cash in an amount equal to all documented
out-of-pocket expenses and fees incurred by the other party
(including, without limitation, fees and expenses payable to all
legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Mergers
or the transactions contemplated by this Agreement) not in excess of
$5 million; provided, however, that if this Agreement is terminated by
a party as a result of a willful breach of a representation, warranty,
covenant or agreement by the other party, the non-breaching party may
pursue any remedies available to it at law or in equity and shall, in
addition to the amount of out-of-pocket expenses set forth above, be
entitled to recover such additional amounts as such non-breaching
party may be entitled to receive at law or in equity.
(b) Additional Termination Fees. If (i) this Agreement (w) is
terminated by any party pursuant to Section 9.1(e) or Section 9.1(f),
(x) is terminated following a failure of the shareholders of CES or
BEC to grant the necessary approvals described in Section 4.18 or
Section 5.18, (y) is terminated as a result of such party's material
breach of Section 7.4 or (z) is terminated pursuant to Section
9.1(g)(i) or Section 9.1(h)(i) as a result of such party's breach, and
(ii) at the time of such termination (or, in the case of clause (i)(x)
above, prior to the meeting of such party's shareholders) there shall
have been an Acquisition Proposal involving such party or its
affiliates which at the time of such termination or of the meeting of
such party's shareholders (x) shall not have been rejected by such
party and its Board of Trustees and (y) shall not have been withdrawn
by the third party and (iii) within two years of any such termination
described in clause (i) above, the party hereto or the affiliate
thereof that is the target of such Acquisition Proposal (a "Target
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Party") becomes a subsidiary or part of such offeror or a subsidiary
or part of an affiliate of such offeror, or merges with or into the
offeror or a subsidiary or affiliate of the offeror or enters into a
definitive agreement to consummate an Acquisition Proposal with such
offeror or affiliate thereof, then (A) in the event CES or one of its
affiliates is the Target Party, CES shall pay to BEC and (B) in the
event BEC or one of its affiliates is the Target Party, BEC shall pay
to CES, at the closing of the transaction (and as a condition to the
closing) in which such Target Party becomes such a subsidiary or part
of such other Person or the closing of such Acquisition Proposal
occurs, an additional termination fee equal to $35 million in cash.
(c) Liquidated Damages: Prompt Payment. The parties agree that
the agreements contained in this Section 9.3 are an integral part of
the transactions contemplated by the Agreement and constitute
liquidated damages and not a penalty. If a party fails to promptly
pay to the other any fee due hereunder, the defaulting party shall pay
the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee at the publicly announced prime rate
of Bank Boston, N.A. from the date such fee was required to be paid.
SECTION 9.4 AMENDMENT. This Agreement may be amended by the
respective Boards of the parties hereto, at any time before or after
approval hereof by the shareholders of CES and BEC and prior to the
Effective Time, but after such approvals, no such amendment shall be
made which by law requires further approval by such shareholders
without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 9.5 WAIVER. At any time prior to the Effective Time, the
parties hereto may with respect to any other party hereto (a) extend
the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein, to the extent permitted by
applicable law. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND
WARRANTIES.
(a) All representations, warranties and agreements in this
Agreement shall not survive the Mergers, except as otherwise provided
in this Agreement and except for the agreements contained in this
Section 10.1 and in Article II, Section 7.5 (Directors' and Officers'
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Indemnification), Section 7.9 (Certain Employee Agreements), Section
7.10 (Employee Benefit Plans), Section 7.11 (Stock Plans), Section
7.12 (Expenses), Section 7.15 (Officers), Section 7.18 (Company's
Board of Directors), Section 10.6 (Parties in Interest) and Section
10.7 (Waiver of Jury Trial and Certain Damages). The representations,
warranties and agreements of each party hereto shall remain operative
and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any
such party or any of their officers or directors, whether prior to or
after the execution of this Agreement.
(b) No party may assert a claim for breach of any representation
or warranty contained in this Agreement (whether by direct claim or
counterclaim) except as provided in Section 9.3(a).
SECTION 10.2 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if (i)
delivered personally, (ii) sent by reputable overnight courier
service, (iii) telecopied (which is confirmed), or (iv) five days
after being mailed by registered or certified mail (return receipt
requested) to BEC or CES at the following addresses (or at such other
address for such party as shall be specified by like notice):
(a) If to CES, to:
Commonwealth Energy System
One Main Street
P.O. Box 9150
Cambridge, Massachusetts 92142-9150
Attention: Russell D. Wright, Chief Executive Officer
Telephone: (617) 225-4600
Telecopy: (617) 225-4831
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
260 Franklin Street
Boston, MA 02110
Attention: Paul K. Connolly, Jr., Esq.
Telephone: (617) 439-9500
Telecopy: (617) 439-0341
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(b) If to BEC, to:
BEC Energy
800 Boylston Street
Boston, Massachusetts 02199
Attention: Thomas J. May, Chief Executive Officer
Telephone: (617) 424-2000
Telecopy: (617) 424-3204
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110-2624
Attention: David A. Fine, Esq.
Telephone: (617) 951-7000
Telecopy: (617) 951-7050
SECTION 10.3 MISCELLANEOUS. This Agreement (including the
documents aid instruments referred to herein) (i) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties hereto, or
any of them, with respect to the subject matter hereof other than the
Confidentiality Agreement; (ii) shall not be assigned by operation of
law or otherwise; and (iii) shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts executed in and to be fully performed in such
Commonwealth without giving effect to its conflicts of law rules or
principles.
SECTION 10.4 INTERPRETATION. When a reference is made in this
Agreement to Articles, Sections or Exhibits, such reference shall be
to an Article, Section or Exhibit of this Agreement, respectively,
unless otherwise indicated. The terms "hereof" and "hereto" shall
refer to this Agreement as a whole unless otherwise expressly
indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the
words "include," "includes or including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation."
SECTION 10.5 COUNTERPARTS; EFFECT. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to
be an original, but all of which taken together shall constitute one
and the same agreement.
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SECTION 10.6 PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto,
and, except for rights of Indemnified Parties as set forth in Section
7.5, nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement, including, without
limitation, by way of subrogation.
SECTION 10.7 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. Each
party to this Agreement waives, to the fullest extent permitted by
applicable law, (i) any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or relating
to this Agreement and (ii) without limitation to Section 9.3, any
right it may have to receive damages from any other party based on any
theory of liability for any special, indirect, consequential
(including lost profits) or punitive damages.
SECTION 10.8 ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the
Commonwealth of Massachusetts or in Massachusetts state court, this
being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal
court located in the Commonwealth of Massachusetts or any
Massachusetts state court m the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny such personal jurisdiction
by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court
other than a federal or state court sitting in the Commonwealth of
Massachusetts.
SECTION 10.9 MASSACHUSETTS BUSINESS TRUST.
(a) The name "BEC Energy" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an
Amended and Restated Declaration of Trust dated March 25, 1997, as
amended from time to time, which is hereby referred to, and a copy of
which, as amended, has been filed with the Secretary of the
Commonwealth of The Commonwealth of Massachusetts. Any obligation,
agreement, or liability made, entered into, or incurred by or on
behalf of BEC binds only its trust estate, and no shareholder,
director, trustee, officer or agent thereof assumes or shall be held
to any liability therefor.
(b) The name "Commonwealth Energy System" means the trustee
or trustees for the time being (as trustees but not individually)
under a Declaration of Trust dated December 31, 1926, as amended,
which is hereby referred to, and a copy of which 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 CES binds only the trust estate, and no shareholder,
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director, trustee, officer or agent assumes, or shall be held to, any
liability by reason thereof.
SECTION 10.10 SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by
any rule of law, or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties hereto as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby
are fulfilled to the fullest extent possible.
SECTION 10.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of any party hereto in
the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude any other or further
exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized as
of the date first written above.
BEC ENERGY
By:
/s/ Thomas J. May
Name: Thomas J. May
Title: Chairman, President and
Chief Executive Officer
BOSTON ENERGY TECHNOLOGY GROUP, INC.
By:
/s/ Thomas J. May
Name: Thomas J. May
Title: Chairman, President and
Chief Executive Officer
COMMONWEALTH ENERGY SYSTEM
By:
/s/ Russell D. Wright
Name: Russell D. Wright
Title: President and Chief
Executive Officer
COM/ENERGY RESOURCES, INC.
By:
/s/ Russell D. Wright
Name: Russell D. Wright
Title: Chairman and Chief
Executive Officer
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BEC NEWCO, INC.
By:
/s/ Thomas J. May
Name: Thomas J. May
Title: Chairman, President and
Chief Executive Officer
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EXHIBIT 2.1(c)/2.2(c)
Assume that the Elective CES Cash Number is 2,500,000 and that
the Elective BEC Cash Number is 4,500,000. This would occur if the
CES shareholder elected to receive $110,250,000 ($44.10 x 2,500,000)
of cash in the Merger, and the BEC shareholders elected to receive
$198,450,000 of cash in the Merger ($44.10 x 4,500,000).
Under the penultimate sentences of Section 2.1(c), the CES Cash
Number would be increased by the lesser of:
(i) 2,500,000 - 2,267,573.696, which is 232,426.304; or
(ii) 4,535,147.392 - 4,500,000, which is 35,147.392.
Because 35,147.392 is less than 232,426.304, the CES Cash Number
would be increased by 35,147.392. This means that instead of
receiving $100,000,000 of cash in the Merger, the CES shareholders
would receive $101,550,000 ($44.10 x (2,267,573.696 + 35,147.392)).
Under the last sentence of Section 2.2(c) the BEC Cash Number
would be decreased by 35,147.392. This means that instead of
receiving $200,000,000 of cash in the Merger, the BEC shareholders
would receive $198,450,000 ($44.10 x (4,535,147.392 - 35,147.392)).
EXAMPLE TWO
Assume that the Elective CES Cash Number is 2,000,000 and that
the Elective BEC Cash Number is 5,000,000. This would occur if the
CES shareholder elected to receive $88,200,000 ($44.10 x 2,000,000) of
cash in the Merger, and the BEC shareholders elected to receive
$220,500,000 of cash in the Merger ($44.10 x 5,000,000).
Under the penultimate sentence of Section 2.2(c) the BEC Cash
Number would be increased by the lesser of:
(i) 5,000,000 - 4,535,147.392, which is 464,852.608; or
(ii) 2,267,573.696 - 2,000,000), which is 267,573.696.
Because 267,573.696 is less than 464,852.608, the BEC Cash Number
would be increased by 267,573.696. This means that instead of
receiving $200,000,000 of cash in the Merger, the BEC shareholders
would receive $211,800,000 ($44.10 x (4,535,147.392+ 267,573.696)),
and as explained below, under the last sentence of Section 2.1(c), the
CES shareholders would receive $88,200,000.
Under the last sentences of Section 2.1(c), the CES Cash Number
would be decreased by 44.10 x 267,573.696, which is 11,800,000. This
means that instead of receiving $100,000,000 of cash in the Merger,
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the CES shareholders would receive $88,200,000 ($44.10 x
(2,267,573.696 - 267,573.696).
<PAGE 1>
Exhibit 2
Contacts for BEC Energy: Contacts for Commonwealth Energy System:
Media: Media:
Name: Michael Monahan Name: Peter Dimond
Phone: (617)424-2460 Phone: (617)225-4003
Investors: Investors:
Name: Philip J. Lembo Name: John F. Gavin
Phone: (617)424-3562 Phone: (617)225-4428
BEC ENERGY AND COMMONWEALTH ENERGY SYSTEM
AGREE TO $4.4 BILLION COMBINATION
Merger Creates Premier Energy Delivery System in New England
Boston, MA and Cambridge, MA (December 7, 1998) - BEC Energy [NYSE: BSE] and
Commonwealth Energy System ("COM/Energy") [NYSE: CES] today announced that
their boards of trustees have approved a definitive agreement providing for a
merger in which the total consideration would be a combination of cash and
stock in a newly-formed holding company. The combined company will have a
total market capitalization of approximately $4.4 billion ($2.6 billion in
equity; $1.7 billion in net debt; $0.1 billion in preferred stock). The $2.6
billion equity value is the largest of any New England utility. The
combination is anticipated to be accretive to earnings per share in the first
full year following closing.
The combined company will serve about 1.3 million customers, including
approximately 1,040,000 electric customers in 81 communities and 240,000 gas
customers in 51 communities.
Thomas J. May, chairman, president and chief executive officer of BEC Energy,
said, "BEC Energy and COM/Energy share a common vision -- to be the premier
energy delivery company in our region. At BEC Energy, we are focusing our
efforts on the transmission and distribution of energy. We believe that
expanding our customer base is the key to success in the delivery business.
Our goal is to grow to two million customers, enabling us to further enhance
customer service.
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"The new company allows us to broaden our customer base, and to capture the
savings opportunities that the combined operations can produce," Mr. May
added. "We will continue to make customer service the top priority. Our
expanded platform will allow the combined company to invest more effectively
in technology and infrastructure which will lead to higher levels of customer
service."
Russell D. Wright, president and chief executive officer of COM/Energy, said,
"We are delighted with today's announcement. BEC Energy and COM/Energy have
worked together for many years and our merger maintains and, indeed,
strengthens the commitments we both have to corporate citizenship and our
customers. Our service territories will continue to be served by skilled and
dedicated people who know and understand local needs. In addition, the
combination will enhance the local and regional economies through more stable
rates.
"The new company will be financially strong and strategically focused on the
delivery of superior service to its customers, including competitive energy
suppliers. Employees will become part of a larger, more vibrant energy
delivery company. We are confident that this strategic combination will be
beneficial for our customers, our employees and our shareholders," concluded
Mr. Wright.
Under the terms of the agreement, a new holding company will be created and
both BEC Energy and COM/Energy will exchange their shares for a combination of
stock in the holding company and cash. The cash portion of the transaction is
expected to be financed primarily through current cash balances and internally
generated funds. BEC Energy stockholders may elect to receive 1 share of the
holding company's common stock or $44.10 in cash for each BEC Energy share
they own. The cash price represents a 5% premium to BEC Energy's closing
stock price on December 4, 1998. COM/Energy stockholders may elect to receive
1.05 shares of the holding company's common stock or $44.10 in cash for each
COM/Energy share they own, representing a 17% premium to COM/Energy's closing
price on December 4, 1998.
Under the merger agreement, $200 million in cash will be allotted to BEC
Energy stockholders and $100 million in cash will be allotted to COM/Energy
stockholders. In the event that stockholders of BEC Energy or COM/Energy do
not elect to receive all of the shares of the combined company's common stock
allotted, the shares will be proportionately allocated to those stockholders
who have elected to receive cash. In the event that stockholders of
BEC Energy and COM/Energy, collectively, do not elect to receive all of the
cash allotted, cash will be allocated to those stockholders who have elected
to receive shares of the combined company's common stock.
The transaction is expected to be tax-free to stockholders to the extent they
receive common stock of the combined company. The combination is expected to
be accounted for using the purchase method of accounting.
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Based on 47.2 million shares of BEC Energy and 21.5 million shares of
COM/Energy currently outstanding, BEC Energy stockholders will receive
approximately 42.6 million shares in the new company and $200 million in cash
and COM/Energy stockholders will receive approximately 20.2 million shares and
$100 million in cash. At the close of the transaction, BEC Energy
stockholders will own approximately 68% of the combined company and COM/Energy
stockholders will own approximately 32%.
It is anticipated that the initial annual dividend for the new company's
common stock would be equal to BEC Energy's annual dividend, currently $1.88
per share. For COM/Energy stockholders, this represents a 22 percent increase
in annual dividend on an as-converted basis.
The new company anticipates net savings related to the merger of approximately
$500 million over a ten-year period from the elimination of duplication in
corporate and administrative programs, greater efficiencies in operations and
business processes, increased purchasing efficiencies and the combination of
the two workforces. Employee reductions due to the merger are expected to be
about 300 positions out of a total workforce of approximately 3,900. The new
company expects to achieve reductions through a variety of programs which
would include hiring freezes, attrition and voluntary separation. All union
contracts will remain in effect.
The new company will be an exempt public utility holding company which will be
the parent of Boston Edison Company and Commonwealth Electric Company,
Cambridge Electric Light Company, Canal Electric Company, Commonwealth Gas
Company, and the unregulated affiliates of BEC Energy and COM/Energy. The
corporate headquarters of the holding company will be in Boston and the
company will have a significant presence throughout Eastern Massachusetts.
Initially the board of directors of the new holding company will consist of
the trustees of each company at the time of the merger.
Upon completion of the merger, Thomas J. May, currently chairman, president
and chief executive officer of BEC Energy, will become chairman and chief
executive officer of the new company. Russell D. Wright, president and chief
executive officer of COM/Energy, will become president and chief operating
officer of the new company and will serve on the new company's board of
directors.
A service quality plan and a rate plan will be filed with the Massachusetts
Department of Telecommunications and Energy (DTE) within 30 days. The service
quality plan will include service performance standards and service quality
guarantees. The rate plan will provide for price stability for all customers.
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The merger is conditioned, among other things, upon the approvals of each
company's shareholders and various regulatory agencies, including the DTE's
approval of the rate plan and the approvals of the Federal Energy Regulatory
Commission (FERC), the Nuclear Regulatory Commission (NRC), and the Securities
and Exchange Commission (SEC). Given that all operations are within
Massachusetts, the companies anticipate that regulatory approvals can be
obtained by mid-1999.
Goldman, Sachs & Co. acted as financial advisor and provided a fairness
opinion to BEC Energy. SG Barr Devlin acted as financial advisor and provided
a fairness opinion to Commonwealth Energy System.
BEC Energy intends to continue its previously announced stock repurchase
program of 4 million shares.
Commonwealth Energy System is a $1 billion holding company based in Cambridge,
Massachusetts. Its regulated subsidiaries include Commonwealth Electric
Company, Cambridge Electric Light Company, Canal Electric Company and
Commonwealth Gas Company, together serving 600,000 customers in Eastern
Massachusetts.
BEC Energy, through its wholly owned subsidiary Boston Edison Company,
provides electricity to about 670,000 customers in the city of Boston and 39
other cities and towns in Eastern Massachusetts.
This press release includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements reflect numerous assumptions, and involve a number of risks and
uncertainties. Among the factors that could cause actual results to differ
materially are: the ability of the combined company to successfully reduce its
cost structure and realize the economies expected to be generated by the
merger, including benefits from consolidation of the companies' workforces,
the effects of the continued regulatory orders and legislative changes in
connection with utility industry restructuring; the effects of the changes in
economic conditions, weather conditions, growth in the service territories of
the two companies, interest costs and the other risks detailed from time to
time in BEC Energy's and Commonwealth Energy System's SEC reports. See the
Annual Reports of each of BEC Energy and Commonwealth Energy System for the
years ended December 31, 1997.
Note to Editors: Today's news release, along with other news about BEC Energy
and Commonwealth Energy System, is available on the Internet at
http://www.bostonedison.com and http://www.comenergy.com.
