<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14A-6(e)(2))
VALLEY RESOURCES, INC.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: Common
Stock, par value $1.00 per share, and accompanying Stock Purchase Rights
2) Aggregate number of securities to which transaction applies: 4,993,028
shares
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): $25 per share of cash
consideration payable in accordance with merger agreement
4) Proposed maximum aggregate value of transaction: $124,825,700
5) Total fee paid: $24,965.14
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing party:
4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
VALLEY RESOURCES, INC.
1595 MENDON ROAD, CUMBERLAND, RHODE ISLAND 02864-0700
MAY 9, 2000
Dear Fellow Stockholder:
It is our pleasure to extend to you a cordial invitation to attend a
Special Meeting of Stockholders of Valley Resources, Inc.
You may have read that your board of directors and the board of directors
of Southern Union Company have agreed on a merger. The enclosed proxy statement
asks for your approval of that merger and provides you with detailed information
about it. Please read this entire document carefully. You may obtain additional
information about Valley Resources and Southern Union from documents filed with
the Securities and Exchange Commission.
YOUR BOARD OF DIRECTORS HAS CONCLUDED THAT THE MERGER IS IN THE BEST
INTEREST OF VALLEY RESOURCES STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE MERGER.
Your vote is important. The merger cannot be completed without the approval
of a majority of the outstanding shares of Valley Resources common stock.
Whether or not you expect to attend the Special Meeting, it is important that
your shares be voted. Registered and many broker-managed stockholders can vote
their shares via the Internet. We provide instructions for using this convenient
service on the proxy card. Of course, you may still vote your shares by marking
your vote on the proxy card, signing and dating it and returning it promptly by
mail in the enclosed envelope. No postage is required if mailed in the United
States. If you sign and return your proxy card without specifying your choices,
we will vote your shares in accordance with the directors' recommendations.
The Special Meeting will be held at the principal office of Valley
Resources, 1595 Mendon Road, Cumberland, Rhode Island 02864-0700, beginning at
10:00 a.m. (Eastern Time), on June 13, 2000. On behalf of your board of
directors, thank you for your continued support and interest in Valley
Resources.
Sincerely,
Alfred P. Degen
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 3
VALLEY RESOURCES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Valley
Resources, Inc. will be held at the principal office of Valley Resources, 1595
Mendon Road, Cumberland, Rhode Island 02864-0700, on June 13, 2000 beginning at
10:00 a.m. (Eastern Time), for the following purposes:
(1) To approve and adopt the Agreement of Merger between Southern
Union Company and Valley Resources, Inc., and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record on the stock transfer books of Valley Resources
at the close of business on April 28, 2000 will be entitled to notice of and to
vote at the special meeting and at any adjournments.
Whether you plan to attend the meeting or not, we urge you to vote via the
Internet or to complete, sign and date the enclosed proxy and return it promptly
by mail in the enclosed envelope. No postage is required if mailed in the United
States.
By order of the Board of Directors,
Sharon Partridge
Secretary
Cumberland, Rhode Island
May 9, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY TERM SHEET.......................................... 1
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 3
WHERE YOU CAN FIND MORE INFORMATION......................... 4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 5
THE COMPANIES............................................... 6
DIVIDENDS AND MARKET PRICES................................. 8
THE SPECIAL MEETING......................................... 9
Purpose, Time and Place................................... 9
Record Date; Voting Power; Vote Required.................. 9
Share Ownership of Management............................. 9
Voting of Proxies......................................... 9
Voting Shares Held in 401(k) Employee Stock Ownership
Plan.................................................... 10
How to Revoke a Proxy..................................... 10
Solicitation of Proxies................................... 10
THE MERGER.................................................. 11
Background of the Merger.................................. 11
Reasons for the Merger; Recommendation of Our Board of
Directors............................................... 13
Opinion of Our Financial Advisor.......................... 14
Potential Conflicts and Interests of Certain Persons in
the Merger.............................................. 18
Significant U.S. Federal Income Tax Consequences of the
Merger.................................................. 19
Regulatory Matters........................................ 20
Accounting Treatment...................................... 20
No Rights of Dissenting Stockholders...................... 20
THE MERGER AGREEMENT........................................ 21
Structure of the Merger................................... 21
Closing; Effective Time................................... 21
Subsidiary Mergers........................................ 21
Merger Consideration...................................... 21
Exchange of Our Common Stock Certificates for Merger
Consideration........................................... 21
Covenants and Other Agreements............................ 22
No Solicitation........................................... 23
Conditions to the Completion of the Merger................ 25
Indemnification and Insurance for Officers and
Directors............................................... 25
Amendments................................................ 25
Termination of the Merger Agreement....................... 26
Termination Fees and Expenses............................. 27
PRINCIPAL STOCKHOLDERS...................................... 28
AUDITORS.................................................... 29
OTHER BUSINESS.............................................. 29
APPENDICES
APPENDIX A Agreement of Merger
APPENDIX B Opinion of PaineWebber Incorporated
</TABLE>
i
<PAGE> 5
VALLEY RESOURCES, INC.
The accompanying proxy will be mailed to our stockholders together with the
Notice of Special Meeting and this proxy statement on or about May 9, 2000. We
are soliciting this proxy in connection with the Special Meeting to be held on
June 13, 2000. ("We" and "our" as used in this document refer to Valley
Resources.)
SUMMARY TERM SHEET
We are asking you to approve and adopt the merger agreement that will
result in us becoming a wholly-owned subsidiary of Southern Union. When we speak
about the "merger" and the "merger agreement" in this proxy statement, we mean
the merger of SUG Acquisition Corporation into us and the agreement that sets
forth the details of the merger. While we have summarized the terms of the
merger below, we have attached the merger agreement at the back of this proxy
statement as Appendix A. We encourage you to read the merger agreement since it
is the legal document that governs the merger.
- MERGER CONSIDERATION: As a result of the merger, each share of our
common stock that you own will be converted into the right to receive
$25.00 in cash. See "The Merger Agreement -- Merger Consideration" for
additional information.
- TAX CONSEQUENCES: As a result of the merger, our stockholders will
generally recognize capital gains for U.S. federal income tax purposes
for the cash received in the merger. The capital gains will be equal to
the amount of cash received in the merger exceeding the tax basis our
stockholders have in our common stock. The merger will not result in
recognition of gain or loss to Southern Union, to us or to our
subsidiaries. See "The Merger -- Significant U.S. Federal Income Tax
Consequences of the Merger" for additional information.
- STRUCTURE OF THE MERGER: At the time the merger becomes effective, SUG
Acquisition Corp., a wholly-owned subsidiary of Southern Union, will
merge into us. As a result, we will become a wholly-owned subsidiary of
Southern Union. See "The Merger Agreement -- Structure of the Merger" for
additional information.
- SUBSIDIARY MERGERS: Immediately after the merger, Valley Gas Company and
Bristol and Warren Gas Company, our wholly-owned subsidiaries, will merge
into us. We call these mergers the "subsidiary mergers." Immediately
after the subsidiary mergers, we will merge into Southern Union. At that
time, our utility operations will become a division of Southern Union and
our non-utility subsidiaries will become subsidiaries of Southern Union.
See "The Merger Agreement -- Subsidiary Mergers" for additional
information.
- CONFLICTS OF INTEREST: Our officers and members of our board have
interests in the merger that may be different from your interests and may
represent conflicts of interest. For example:
- The merger will constitute a "change of control" that will entitle
certain officers to receive severance benefits if Southern Union
terminates the officer without cause or if the officer terminates his
or her own employment as a result of the change of control.
- Alfred P. Degen, our Chairman, President and Chief Executive Officer,
has entered into an employment agreement with Southern Union that will
become effective upon completion of the merger.
- For six years after the merger, Southern Union will indemnify and
provide liability insurance for our current officers and directors for
acts or omissions that may have occurred before the merger.
See "The Merger -- Potential Conflicts and Interests of Certain Persons
in the Merger" for additional information.
- CONDITIONS OF CLOSING: Before the merger can become effective, certain
conditions must be satisfied or waived, including:
- Approval by our stockholders.
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<PAGE> 6
- The public utility regulators of Rhode Island, Massachusetts,
Pennsylvania, Missouri and Florida must approve the merger or related
financing arrangements without imposing any material adverse
conditions.
- Expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
- The Rhode Island Legislature must amend the legislative charters of
Valley Gas and Bristol and Warren Gas to complete the subsidiary
mergers.
- No court or administrative orders to prevent the merger.
- The receipt of certain third-party consents and approvals.
- Certain other conditions that have already been satisfied.
See "The Merger -- Regulatory Matters" and "The Merger
Agreement -- Conditions to the Completion of the Merger" for additional
information.
- TERMINATION OF MERGER AGREEMENT: We and Southern Union may terminate the
merger agreement if we jointly agree to do so. In addition, either we or
Southern Union may terminate the merger agreement if:
- the merger is not completed by February 28, 2001 (this date may be
extended to May 31, 2001 to obtain government approvals); or
- we do not obtain stockholder approval of the merger; or
- certain other circumstances occur as described in "The Merger
Agreement -- Termination of the Merger Agreement."
- TERMINATION FOR FIDUCIARY REASONS: Our board of directors may terminate
the merger agreement if it determines that termination is necessary for
our board to uphold its fiduciary duties to our stockholders. Southern
Union may terminate the merger agreement if our board of directors fails
to recommend approval of the merger agreement to our stockholders. In
either of these events, we may be required to pay Southern Union a
termination fee of $5 million. See "The Merger Agreement -- Termination
of the Merger Agreement" for additional information.
- AMENDMENT OF MERGER AGREEMENT: We and Southern Union may amend any of
the terms of the merger agreement. See "The Merger
Agreement -- Amendments" for additional information.
- BOARD RECOMMENDATION: Our board of directors believes that the merger is
in the best interest of our stockholders and recommends that you vote
"FOR" the approval and adoption of the merger agreement. See "The
Merger -- Reasons for the Merger; Recommendation of Our Board of
Directors" for additional information.
- FAIRNESS OPINION: In deciding to approve the merger, our board of
directors considered an opinion from our financial advisor, PaineWebber
Incorporated. The opinion stated that as of the date of the merger
agreement, the consideration to be received by our stockholders was fair
to our stockholders from a financial point of view. We have attached a
copy of this opinion to the proxy statement as Appendix B. We encourage
you to read this opinion. See "The Merger -- Opinion of Our Financial
Advisor" for additional information.
2
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What do I need to do now?
A: You should carefully read and consider the information contained in this
document. You should complete and sign your proxy and return it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting. You may also vote via the Internet, as we
describe in this proxy statement. If you fail to vote in person or by proxy,
this will have the same effect as a vote against the merger agreement.
Q: What is the required vote to approve and adopt the merger agreement?
A: The merger agreement must be approved and adopted by the holders of a
majority of shares of our common stock entitled to vote at the special
meeting.
Q: Who is entitled to vote?
A: Stockholders as of the close of business on the record date, April 28, 2000,
are entitled to vote at the special meeting.
Q: Can I change my vote after I have mailed in my signed proxy card?
A: You may change your vote at any time before the vote takes place at the
special meeting. To do so, you can attend the special meeting and vote in
person.
You can also deliver a later-dated, signed proxy card or send a written
notice stating you would like to revoke your proxy before the special
meeting. These should be sent to: Valley Resources, Inc., 1595 Mendon Road,
Cumberland, Rhode Island 02864, Attention: Secretary. This notice must reach
the Secretary before the proxy is voted. You may also change your vote prior
to the special meeting via the Internet.
Q: My shares are held in "street name." Will my broker vote my shares on the
merger agreement?
A: A broker will vote your shares on the merger agreement only if you provide
your broker with instructions on how to vote. You should follow the
directions provided by your broker(s) regarding how to instruct brokers to
vote the shares.
Q: Am I entitled to dissenters' rights?
A: No, Rhode Island law does not provide for dissenters' rights for
publicly-traded companies.
Q: Should I send in my certificates now?
A: No. After the merger is completed, Southern Union will send written
instructions to you for exchanging your stock certificates for the cash
consideration. You should not send in your stock certificates with your
proxy.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this document or the enclosed proxy, you should contact our Secretary at
(401) 334-1188, or Morrow & Co., Inc. at 1-800-662-5200.
Q: When is the merger expected to be completed?
A: We are working as quickly as possible and hope to complete the merger by the
end of the third calendar quarter of 2000.
3
<PAGE> 8
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information that we have filed at the SEC's
public reference rooms at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's regional offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
SEC at 1-800-732-0330 for further information on the public reference rooms. Our
SEC filings should also be available to the public from commercial retrieval
services and at the Internet web site maintained by the SEC at
http://www.sec.gov.
In addition, materials and information concerning us can be inspected at
the American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881
where our common stock is listed.
The SEC allows us to "incorporate by reference" information into this proxy
statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this proxy statement, except
for any additional information superseded by information contained directly in
this proxy statement. This proxy statement incorporates by reference the
documents set forth below that we previously filed with the SEC (SEC File No.
1-7924). These documents contain important information about us and our
financial condition.
- Annual Report on Form 10-K/A for the fiscal year ended August 31, 1999,
- Quarterly Reports on Form 10-Q for the fiscal quarters ended November 30,
1999 and February 29, 2000.
We may be required by the SEC to file other documents pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 between the
time this proxy statement is sent and the date the special meeting is held.
These other documents will be deemed to be incorporated by reference in this
proxy statement and to be a part of it from the date they are filed with the
SEC.
Documents incorporated by reference in this proxy statement are available
from Valley Resources without charge. You may obtain documents incorporated by
reference in this proxy statement by requesting them in writing or by telephone
at the following address:
Valley Resources
Attention: Sharon Partridge
Vice President, Chief Financial Officer,
Treasurer and Secretary
1595 Mendon Road
Cumberland, Rhode Island 02864-0700
(401) 334-1188
If you would like to request documents from us, please do so promptly in
order to receive them before the special meeting.
All information contained in this proxy statement with respect to Southern
Union has been provided by Southern Union. We have provided all information
contained in or incorporated by reference in this proxy statement with respect
to us. Neither we nor Southern Union assumes any responsibility for the accuracy
or completeness of the information provided by the other party.
You should rely only on the information contained or incorporated by
reference in this proxy statement to vote on the merger agreement. Neither we
nor Southern Union has authorized anyone to provide you with information that is
different from what is contained in this proxy statement. This proxy statement
is dated May 9, 2000. You should not assume that the information contained in
this proxy statement is accurate as of any date other than that date, and
neither the mailing of this proxy statement to stockholders nor the completion
of the merger shall create any implication to the contrary.
4
<PAGE> 9
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Valley Resources and our subsidiaries and representatives may from time to
time make written or oral statements, including statements contained in filings
with the Securities and Exchange Commission, which constitute forward-looking
statements.
All statements other than statements of historical facts included in this
proxy statement regarding our financial position and strategic initiatives and
addressing industry developments are forward-looking statements. We may use the
words "believe," "anticipate," "expect," "intend" and similar expressions to
identify forward-looking statements. When, in any forward-looking statement, we
express an expectation or belief as to future results, this expectation or
belief is expressed in good faith and believed to have a reasonable basis, but
there can be no assurance that the statement of expectation or belief will
result or be achieved or accomplished.
Forward-looking statements are subject to a number of risks, assumptions
and uncertainties. The following are some of the factors which may cause actual
results to differ materially from those anticipated:
- general economic, financial and business conditions,
- changes in government regulations,
- competition in the energy services sector,
- regional weather conditions,
- the availability and cost of natural gas and oil,
- development and operating costs,
- the success and costs of advertising and promotional efforts,
- the availability and terms of capital,
- unanticipated environmental liabilities,
- the ability to grow through acquisitions and/or significant customer
growth,
- the costs and effects of unanticipated legal proceedings,
- the impacts of unusual items resulting from ongoing evaluations of
business strategies and asset valuations, and
- changes in business strategy.
This list provides only an example of some of the risks, uncertainties and
assumptions that may affect forward-looking statements. If any of these risks or
uncertainties materialize or fail to materialize, as applicable, or if the
underlying assumptions prove incorrect, actual results may differ materially
from those projected in the forward-looking statements.
5
<PAGE> 10
THE COMPANIES
SOUTHERN UNION
Southern Union is a publicly owned international energy company
headquartered in Austin, Texas. It primarily engages in the distribution of
natural gas and is one of the fifteen largest distributors in the nation, as
measured by number of customers. Southern Union serves more than one million
customers through its four natural gas divisions in Texas, Missouri,
Pennsylvania and Florida, its propane distribution subsidiaries, and its equity
ownership in a natural gas distribution company serving Piedras-Negras, Mexico.
Through its subsidiaries, Southern Union also markets natural gas to end users
and operates natural gas pipeline systems.
Southern Union has a goal of selected growth and expansion, primarily in
the utilities industry. To that extent, it intends to consider, when
appropriate, and if financially practicable to pursue, the acquisition of other
utility distribution or transmission businesses. The nature and location of any
such properties, the structure of any such acquisitions and the method of
financing any such expansion or growth will be determined by Southern Union's
management and board of directors. Acquisitions, including the proposed mergers
with Fall River Gas Company, Providence Energy Corporation and Valley Resources,
require substantial additional financing through future debt, and possibly
future equity, offerings. The availability and terms of any such financing
sources will depend upon various factors and conditions, such as Southern
Union's cash flow and earnings, its resulting capital structure, its credit
ratings and conditions in financial capital markets at the time of any such
offering.
The address of the principal offices of Southern Union is 504 Lavaca, Suite
800, Austin, Texas 78701. Their phone number is (512) 477-5852.
Merger with Pennsylvania Enterprises, Inc. Effective November 4, 1999,
Southern Union acquired Pennsylvania Enterprises, Inc. ("PEI") (formerly, NYSE:
PNT) and its subsidiaries for approximately 17 million shares of Southern Union
Common Stock and approximately $36 million in cash, plus the assumption of
approximately $150 million of debt. PEI's natural gas utility businesses are
being operated as PG Energy and Honesdale Gas, a division of Southern Union,
which provides service to approximately 152,000 natural gas customers in
northeastern and central Pennsylvania (including the cities of Wilkes-Barre,
Scranton and Williamsport). Through the acquisition of PEI, Southern Union
acquired and now operates a subsidiary that markets electricity and other
products and services under the name PG Energy Power Plus, principally in
northeastern and central Pennsylvania. Other subsidiaries that Southern Union
acquired in the PEI merger engage in various non-regulated activities, including
the construction, maintenance and rehabilitation of natural gas distribution
pipelines.
Pending Merger with Fall River Gas Company. On October 4, 1999, Southern
Union and Fall River Gas Company (AMEX:FAL) entered into a merger agreement. The
Fall River Gas merger agreement calls for Southern Union to acquire Fall River
Gas in a transaction valued at approximately $75 million, including assumption
of debt. Fall River Gas shareholders will receive $23.50 for each share of Fall
River Gas common stock they own. The Fall River Gas merger agreement provides
that Fall River Gas shareholders can elect to receive Southern Union common
stock, cash or a combination of stock and cash, subject to proration and an
adjustment formula. At least 50% of the approximately 2.2 million outstanding
shares of Fall River Gas common stock must be converted into Southern Union
common stock and up to the remaining 50% of Fall River Gas shares will be
converted into cash. The exchange ratio for the stock portion of the
consideration will be calculated prior to the completion of the merger based on
recent trading prices before then. Headquartered in Fall River, Massachusetts,
Fall River Gas serves approximately 48,000 customers in the city of Fall River
and the towns of Somerset, Swansea and Westport, all located in southeastern
Massachusetts. Southern Union anticipates completing the Fall River Gas merger
in late summer or early fall 2000 after customary closing conditions and
prerequisites are satisfied, including Southern Union and Fall River Gas
shareholder approval and receipt of all regulatory approvals for the Fall River
Gas merger.
Pending Merger with Providence Energy Corporation. On November 14, 1999,
Southern Union entered into a merger agreement to acquire Providence Energy
Corporation (NYSE:PVY) for $42.50 in cash for each of Providence Energy's
approximately 6.1 million shares outstanding, plus the assumption of
approximately $140 million of debt securities. Providence Energy, headquartered
in Providence, Rhode Island, is engaged
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<PAGE> 11
through its subsidiaries principally in natural gas distribution to
approximately 166,000 natural gas customers in Providence and Newport, Rhode
Island, and 23 other cities and towns in Rhode Island and Massachusetts.
Providence Energy's oil business serves over 4,000 residential customers and a
larger commercial base. Providence Energy's utility service territories
encompass approximately 730 square miles with a population of approximately
817,000. Southern Union anticipates completing the Providence Energy merger in
late summer or early fall 2000 once all conditions are satisfied, including
Southern Union and Providence Energy shareholder approval and receipt of all
regulatory approvals.
VALLEY RESOURCES
We are a publicly owned holding company headquartered in Cumberland, Rhode
Island, primarily engaged in the distribution of natural gas. We have both
utility and non-utility subsidiaries. Through our utility subsidiaries, we
provide natural gas to more than 64,000 customers in northeastern and eastern
Rhode Island. Through our non-utility subsidiaries, we:
- merchandise and rent appliances, energy conservation equipment and
residential water filtration equipment and offer appliance service
contracts.
- sell propane at both retail and wholesale.
- distribute wholesale franchised lines of plumbing and heating contractor
supply and other energy related businesses.
- design and install natural gas vehicle conversion systems and refueling
facilities, are an authorized representative of the ONSI fuel cell and
hold patents for a natural gas/diesel co-firing system and a device to
control the flow of fuel on dual-fuel equipment.
The address of our principal offices is 1595 Mendon Road, Cumberland, Rhode
Island 02864. Our phone number is (401) 334-1188.
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<PAGE> 12
DIVIDENDS AND MARKET PRICES
Our common stock is listed and principally traded on the American Stock
Exchange under the symbol "VR." The table below shows the dividends declared and
the high and low sales price of our common stock for the fiscal periods
indicated as reported in The Wall Street Journal.
<TABLE>
<CAPTION>
PRICE RANGE
-------------- CASH
FISCAL 1998 HIGH LOW DIVIDENDS
- ----------- ----- ----- ---------
<S> <C> <C> <C>
First quarter............................................. 11.50 10.25 .1850
Second quarter............................................ 12.38 10.63 .1850
Third quarter............................................. 12.13 11.13 .1875
Fourth quarter............................................ 12.13 11.13 .1875
</TABLE>
<TABLE>
<CAPTION>
CASH
FISCAL 1999 HIGH LOW DIVIDENDS
- ----------- ----- ----- ---------
<S> <C> <C> <C>
First quarter............................................. 13.38 11.00 .1875
Second quarter............................................ 13.00 12.13 .1875
Third quarter............................................. 13.00 10.50 .1875
Fourth quarter............................................ 16.50 11.00 .1875
</TABLE>
<TABLE>
<CAPTION>
CASH
FISCAL 2000 HIGH LOW DIVIDENDS
- ----------- ----- ----- ---------
<S> <C> <C> <C>
First quarter............................................. 22.63 13.00 .1875
Second quarter............................................ 23.13 21.44 .1875
Third quarter (through April 28, 2000).................... 23.50 22.13 .1875
</TABLE>
The following table shows the market value of our common stock as of
September 9, 1999, the day our board of directors authorized our executive
officers to seek indications of interest regarding the sale of our company and
as of November 29, 1999, the last business day preceding the day when we entered
into the merger agreement with Southern Union.
<TABLE>
<CAPTION>
HIGH LOW CLOSING
----- ----- -------
<S> <C> <C> <C>
September 9, 1999........................................... 14.00 13.81 13.88
November 29, 1999........................................... 22.00 19.00 21.00
</TABLE>
You are encouraged to obtain current market quotations for our common
stock.
8
<PAGE> 13
THE SPECIAL MEETING
PURPOSE, TIME AND PLACE
The special meeting will be held at our principal offices, 1595 Mendon
Road, Cumberland, Rhode Island 02864-0700, on June 13, 2000 at 10:00 a.m.
(Eastern time), for the following purposes:
(1) To approve and adopt the merger agreement; and
(2) To transact such other business as may properly come before the
meeting or any adjournment.
RECORD DATE; VOTING POWER; VOTE REQUIRED
Our board of directors has fixed the close of business on April 28, 2000 as
the record date for the determination of holders of our common stock entitled to
notice of and to vote at the special meeting. There were 4,992,002 shares
outstanding and entitled to vote on April 28, 2000. A majority of the shares of
our common stock issued and outstanding and entitled to vote on the record date
must be present in person or by proxy at the special meeting in order for a
quorum to be present for purposes of transacting business at the special
meeting. If a quorum is not present at the special meeting, we expect that the
meeting will be adjourned or postponed to solicit additional proxies. Holders of
record of our common stock on the record date are each entitled to one vote per
share on the approval and adoption of the merger agreement at the special
meeting. The approval and adoption of the merger agreement requires the
affirmative vote of a majority of the shares of our common stock outstanding on
the record date.
SHARE OWNERSHIP OF MANAGEMENT
At the close of business on April 28, 2000, our directors and officers
beneficially owned and were entitled to vote approximately 69,627 shares of our
common stock, which represented approximately 1.4% of the shares outstanding on
that date. Each of those directors and officers has indicated his or her present
intention to vote, or cause to be voted, our common stock owned by him or her
"FOR" the proposal to approve and adopt the merger agreement at the special
meeting. See "Principal Stockholders" for additional information.
VOTING OF PROXIES
If you attend the special meeting, you may vote by ballot. However, since
many stockholders may be unable to attend the special meeting, our board of
directors is soliciting proxies so that each stockholder at the close of
business on the record date has the opportunity to vote on the proposals to be
considered at the special meeting.
Registered stockholders can simplify their voting and save us expense by
voting via the Internet. We provide Internet voting information on the proxy
card. A Control Number, located above your name and address on the right side of
the proxy card, is designed to verify your identity, allow you to vote your
shares and confirm that we have properly recorded your voting instructions.
If you do not choose to vote by Internet, you may still return your proxy
card, properly signed, and we will vote the shares in accordance with your
directions. You can specify your choices by marking the appropriate boxes on
your proxy card. If you sign and return your proxy card without specifying
choices, we will vote the shares as recommended by our board of directors.
Abstentions marked on your proxy card are voted neither FOR nor AGAINST, but we
count these shares in determining a quorum for each of the proposals.
Abstentions have the effect of a vote against the merger agreement. If you do
vote by Internet, it is not necessary to return your proxy card.
If you hold your shares through a bank or broker, follow the voting
instructions on the form you receive. Broker non-votes will be treated as shares
that are present and entitled to vote at the special meeting for purposes of
determining whether a quorum exists and will have the same effect as votes
against approval of the merger agreement. The availability of Internet voting
will depend on the bank's or broker's voting process.
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<PAGE> 14
Your vote is important. We urge you to vote by Internet or by signing and
returning the accompanying proxy card whether or not you plan to attend the
special meeting. If you do attend the special meeting, you may vote by ballot,
thereby canceling any proxy previously given.
If any other matters are properly presented at the special meeting for
consideration, the persons named in the enclosed form of proxy will have
discretion to vote on such matters by best judgment (unless you withhold
authorization to use such discretion). We are not aware of any matters expected
to be presented at the special meeting other than as described in the Notice of
Special Meeting.
VOTING SHARES HELD IN 401(k) EMPLOYEE STOCK OWNERSHIP PLAN
If you are a participant in our 401(k) Employee Stock Ownership Plan, your
proxy card will serve as a voting instruction for the trustee of the plan for
the account registered in your name. If the trustee does not receive proxy
instructions from any participant it will vote in its discretion.
HOW TO REVOKE A PROXY
You may revoke your proxy at any time before it is voted at the special
meeting by executing a later-dated proxy by Internet or mail, by voting in
person by ballot at the special meeting, or by filing a written notice of
revocation to the Secretary at our address listed on page 3 of this proxy
statement. The revocation will be effective when we receive your written notice.
SOLICITATION OF PROXIES
We will bear the costs of this solicitation of proxies. In addition to
solicitation by mail, we may make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send material to their principals, and
we may reimburse them for their delivery expenses. In order to ensure a
sufficient presence of our stockholders to constitute a quorum, our officers,
employees and designated agents may, without additional compensation, request
the return of proxies, in person or by telephone or telegram. We have retained
Morrow & Co., Inc. to assist us in the solicitation of proxies at an anticipated
cost of $7,500, plus reimbursement of out-of-pocket expenses.
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<PAGE> 15
THE MERGER
This section of the proxy statement, as well as the next section entitled
"The Merger Agreement," describe certain aspects of the proposed merger. These
sections highlight key information about the merger and the merger agreement but
they may not include all the information that you would like to know. The merger
agreement is attached as Appendix A to this proxy statement. We urge you to read
the merger agreement in its entirety.
BACKGROUND OF THE MERGER
For the last several years, our board of directors regularly reviewed
strategic options for increasing stockholder value. Among the options considered
during this time were:
- remaining an independent and small-sized company primarily engaged in the
business of gas distribution in northeastern and eastern Rhode Island;
- growing the company through increased emphasis on diversification into
non-regulated businesses;
- looking for a merger partner of similar size; and
- looking for a merger partner of larger size.
We carefully followed recent developments in the gas and electric utility
industries that have substantially increased competition in those industries,
making it difficult for small and medium-sized utilities to compete as
effectively as larger utilities. Over the past several years, we developed and
implemented strategic plans to respond to the evolving competitive environment
as it affected us. Our management concluded that our competitive position and
growth prospects would be significantly enhanced by increasing the scale of our
operations and the size of our customer base, as well as an increased focus on
complementary nonutility activities. As a result, from time to time members of
our senior management had exploratory conversations with executives from other
regional utility companies about the possibility of business combinations or
other strategic transactions. None of these conversations led to any substantive
proposals.
During the spring and early summer of 1999, the pace of consolidation
within the gas industry in general and New England in particular accelerated.
Electric utility companies were showing increased interest in acquiring gas
utilities due to the perceived advantage of being able to offer customers
multiple energy products and services, utilizing both electricity and natural
gas, in a growing competitive environment. During June and July 1999, Mr. Degen
was contacted on various occasions by executives of other utilities regarding
our interest in pursuing a business combination.
On July 29, 1999, a special meeting of the Development Committee of the
board of directors was held. After an update regarding business combination
activities in the industry and a discussion of the significant premiums being
paid by acquirors for medium and small-sized distribution companies, the
Committee discussed the strategic alternatives available to us in light of the
recent consolidations in the New England utility industry. Our attorneys made a
presentation with respect to the legal obligations and fiduciary obligations of
the board regarding the consideration of a business combination or sale of the
company. After an extended question and answer period, a Special Committee of
the board consisting of Messrs. Farnum, Alperin and Guthrie was appointed to
review these strategic alternatives and to engage a financial advisor to assist
them. PaineWebber Incorporated was engaged on August 23, 1999 to provide
financial advisory services.
At a meeting in September 1999, Mr. Thomas Karam of PG Energy indicated
Southern Union's interest in a merger with us.
At a meeting on September 9, 1999, PaineWebber made a presentation to our
board of directors discussing the business combination activities in the market,
potential parties to business combinations with us and the potential
consequences to our stockholders of a sale or merger of our company. In this
presentation, PaineWebber also gave a description of the transaction process and
the typical time frame involved. At this meeting, our board of directors
authorized management and PaineWebber to prepare a confidential information
memorandum describing our business which could be distributed to a limited
number of companies for the purpose of gauging their interest in pursuing a
business combination transaction.
11
<PAGE> 16
In October 1999, members of our senior management and representatives of
PaineWebber had conversations with a company operating a large electric and gas
utility system in the mid-Atlantic region of the United States about a possible
business combination transaction. Although a confidentiality agreement was
signed and information was exchanged, none of these conversations led to any
substantive negotiations.
At a meeting of the board of directors on October 29, 1999, PaineWebber
made a presentation updating the board on the progress made regarding the
preparation of the confidential information memorandum, recent business
combination activities in the market and continued discussion about companies
with a potential interest in a combination with us. Additionally, PaineWebber
discussed various forms of consideration that could be expected and approaches
to valuation of consideration other than cash. After an extended question and
answer period, the board authorized management and PaineWebber to distribute the
confidential information memorandum concerning our company to a representative
number of potentially interested parties for the purpose of gauging their
interest in pursuing a business combination with us.
Beginning on November 1, 1999, PaineWebber and our management commenced
contacting the numerous potential financial and strategic partners, including
those companies with whom we had previously engaged in discussions.
Confidentiality agreements (including stand-still arrangements) were negotiated
with each participant and upon receipt of a signed confidentiality agreement,
copies of the confidential information memorandum were mailed to the
participants. Representatives of PaineWebber also provided a letter to those
entities who received a confidential information memorandum, advising them that
we reserved our rights to terminate or revise the process and requesting that
all preliminary indications of interest be submitted in writing by November 22,
1999 to enable us to select a group of qualified parties to conduct more
detailed due diligence. Since certain confidentiality agreements took longer
than expected to negotiate and the occurrence of the Thanksgiving holiday,
representatives of PaineWebber sent a second letter on November 15, 1999
indicating that the date for submittal of preliminary indications of interest
was extended to December 1, 1999.
During this time period, consolidation of the New England natural gas
distribution market accelerated. On November 4, 1999, Keyspan Energy announced
the acquisition of Eastern Enterprises. On November 10, 1999, Energy East
announced the acquisition of Berkshire Energy Resources. Finally, on November
15, 1999, Southern Union announced the acquisition of our neighboring utility,
Providence Energy. Southern Union had previously announced in October 1999 the
acquisition of Fall River Gas, another neighboring utility.
On November 15, 1999, Mr. Thomas Karam, President and Chief Executive
Officer of PG Energy (a division of Southern Union) and acting as a
representative of Southern Union, contacted representatives of PaineWebber to
discuss a possible business combination with us. On November 18, 1999, Messrs.
Karam, Degen and Peter Kelley, President of Southern Union, met to discuss
trends in the utility industry, strategic issues in the context of a possible
business combination between the two companies and the procedures for the
commencement of due diligence investigations and the exchange of financial
information. Following these discussions Mr. Degen indicated that he would be
willing to discuss with our board of directors a transaction in which we would
become an operating division of Southern Union on terms and conditions that
would generally be comparable to the terms and conditions of the Providence
Energy-Southern Union transaction and that would provide our stockholders with a
premium over book value for their shares comparable to that received by
stockholders of other local gas distribution companies in recent transactions.
Messrs. Karam and Kelley indicated that they would be willing to discuss such a
transaction with Southern Union's board of directors. Following this meeting,
PaineWebber had several discussions with Mr. Karam about the general terms and
conditions on which we would be willing to enter into a business combination
with Southern Union.
Between November 17 and November 30, 1999, members of our senior management
and Southern Union's and their financial and legal advisors held discussions
pertaining to the terms of a proposed business combination and general business
issues, and conducted due diligence investigations. The discussions on the terms
of a transaction related to the amount and composition of the merger
consideration, a proposed corporate structure and management structure and
roles, including the terms of Mr. Degen's employment following the merger.
Working groups composed of employees of both companies and their financial and
legal advisers were formed to examine and address issues relating to regulatory
requirements, strategic opportunities, the impact of the transaction upon the
communities we serve and the identification of possible operational
12
<PAGE> 17
benefits. On November 27, 1999, a draft of the merger agreement was delivered to
the members of our board of directors.
A special meeting of our board of directors was held on November 30, 1999.
Members of senior management and our financial and legal advisors also attended
this meeting. Mr. Degen updated the board on the proposed Southern Union
business combination, including potential strategic benefits and potential risks
of the transaction, and the related employment agreement with Mr. Degen. Mr.
Degen and our legal advisors described the terms of the merger agreement and
related documents and informed the board that Southern Union had offered $25 per
share in cash with no further due diligence contingencies. PaineWebber
representatives presented a general overview of the financial aspects of the
transaction, including a review of the methodology by which they conducted their
fairness review. Legal counsel provided advice regarding the board's legal
responsibilities and fiduciary duties in considering the proposed transaction.
After these presentations and an extended question and answer period,
PaineWebber delivered its fairness opinion to the board to the effect that, as
of that date, the proposed consideration to be received in connection with the
proposed merger was fair from a financial point of view to our stockholders.
After considering and discussing the various presentations at that meeting and
at prior meetings, as well as the recommendation of our senior management, our
board approved, by unanimous vote, the merger with Southern Union and authorized
the execution of the merger agreement. Due to his proposed employment agreement
with Southern Union, Mr. Degen abstained from voting on the merger agreement.
Following the meeting, we and Southern Union executed the merger agreement
on November 30, 1999 and publicly announced the merger on the morning of
December 1, 1999.
REASONS FOR THE MERGER; RECOMMENDATION OF OUR BOARD OF DIRECTORS
At a meeting held on November 30, 1999, after determining that the merger
is fair to and in the best interests of our stockholders, our board of directors
unanimously approved the merger agreement. In approving the merger agreement and
in reaching its recommendation, our board of directors consulted with and relied
upon information and reports prepared or presented by our management and our
legal and financial advisors. The following are the material factors that our
board of directors considered:
1. Our board of directors' review and analysis of our business,
current and future financial condition, current earnings and earnings
prospects, as well as the competitive business environment and changing
regulatory environment facing a relatively small company such as us;
2. Historical market prices of our shares;
3. A review of the possible alternatives to a sale, including:
- the prospects of continuing to operate as a small-sized independent
gas distribution company or attempting to acquire other smaller
distribution companies in the New England region;
- the value to stockholders of such alternatives and the timing and
likelihood of actually achieving additional value from these
alternatives; and
- the possibility that our future performance might lead to a share
price having a lower value than the consideration being offered in the
merger;
4. The per share consideration of $25 to be paid in the merger
represents a premium of approximately 22% over the closing per share price
of our shares on November 30, 1999, the last trading day before the
announcement of the merger, and a premium of approximately 48% over the
closing per share price for our shares on November 12, 1999, the last
trading day before the announcement of the acquisition of Providence Energy
Corporation, which announcement began affecting our share price since we
were then the last remaining publicly-held New England gas utility company;
5. The financial presentation of PaineWebber, including its opinion
dated November 30, 1999 to our board of directors, as to the fairness of
the merger consideration from a financial point of view to our
stockholders, as described below in "Opinion of Our Financial Advisor;"
13
<PAGE> 18
6. The terms of the merger agreement and the right of our board of
directors under certain circumstances to terminate the merger agreement
prior to its approval by our stockholders in the exercise of its fiduciary
duty in connection with receipt by us of a proposal superior to that given
by Southern Union; and
7. The likelihood of consummation of the merger, including an
assessment of the risks associated with obtaining necessary federal and
state regulatory approvals on a timely basis.
In view of the wide variety of factors considered in connection with its
evaluation of the proposed merger, our board of directors did not find it
practical to, and did not, quantify or otherwise attempt to assign relative
weights to the foregoing factors. Our board of directors viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it. While the foregoing discussion of the information and
factors considered by our board of directors is not intended to be
all-inclusive, it does constitute a summary of all material information
considered by our board of directors in determining to recommend approval of the
merger agreement.
OPINION OF OUR FINANCIAL ADVISOR
THE FULL TEXT OF THE PAINEWEBBER OPINION, DATED NOVEMBER 30, 1999, WHICH
SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROXY
STATEMENT. WE URGE YOU TO READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. THE
SUMMARY OF THE PAINEWEBBER OPINION SET FORTH IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE PAINEWEBBER
OPINION. THE PAINEWEBBER OPINION IS NOT A RECOMMENDATION TO ANY STOCKHOLDER AS
TO HOW TO VOTE ON THE MERGER.
We retained PaineWebber as our exclusive financial advisor in connection
with the merger. In connection with such engagement, we requested PaineWebber to
render an opinion as to whether or not the merger consideration is fair, from a
financial point of view, to our stockholders.
In connection with the board of directors' consideration of the merger,
PaineWebber delivered its opinion to the effect that, as of November 30, 1999,
and based on its review and assumptions and subject to the limitations
summarized below, the merger consideration is fair, from a financial point of
view, to our stockholders. The PaineWebber opinion was prepared at the request
and for the information of our board of directors and does not constitute a
recommendation to any of our stockholders as to how to vote on the merger. The
PaineWebber opinion does not address the relative merits of the merger or any
other transactions or business strategies that the board of directors may have
discussed as alternatives to the merger or the decision for the board of
directors to proceed with the merger. We did not place any limitations upon
PaineWebber with respect to the procedures followed or factors considered in
rendering the PaineWebber opinion.
In arriving at its opinion, PaineWebber, among other things:
- Reviewed our Annual Reports, Forms 10-K and related financial information
for the five fiscal years ended August 31, 1999;
- Reviewed certain information, including financial forecasts, relating to
our business, earnings, cash flow, assets and prospects, which we
furnished to PaineWebber;
- Conducted discussions with members of our senior management concerning
our businesses and prospects;
- Reviewed the historical market prices and trading activity for our shares
and compared them with that of certain publicly traded companies which
PaineWebber deemed to be relevant;
- Compared our results of operations with that of certain companies which
PaineWebber deemed to be relevant;
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<PAGE> 19
- Compared the proposed financial terms of the transactions contemplated by
the merger agreement with the financial terms of certain other mergers
and acquisitions which PaineWebber deemed to be relevant;
- Reviewed a draft of the merger agreement dated November 30, 1999; and
- Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as
PaineWebber deemed necessary, including PaineWebber's assessment of
general economic, market and monetary conditions.
In preparing the PaineWebber opinion, PaineWebber relied on the accuracy
and completeness of all information supplied or otherwise made available to
PaineWebber by us, and PaineWebber did not assume any responsibility to
independently verify such information. With respect to the financial forecasts
examined by PaineWebber, PaineWebber assumed that they were reasonably prepared
and reflect the best currently available estimates and good faith judgments of
our management as to our future performance. PaineWebber also relied upon
assurances of our management that we are unaware of any facts that would make
the information or financial forecasts provided to PaineWebber incomplete or
misleading. PaineWebber did not make any independent evaluation or appraisal of
our assets or liabilities (contingent or otherwise) nor was PaineWebber
furnished with any such evaluations or appraisals. PaineWebber also assumed,
with our consent, that (i) the merger will be accounted for under the purchase
method of accounting, and (ii) any material liabilities (contingent or
otherwise, known or unknown) are as set forth in our consolidated financial
statements. The PaineWebber opinion does not constitute a recommendation to any
of our stockholders as to how any such stockholder should vote on the merger.
The PaineWebber opinion does not address the relative merits of the merger and
any other transactions or business strategies discussed by our board of
directors as alternatives to the merger or the decision of our board of
directors to proceed with the merger. PaineWebber's opinion was based on
economic, monetary and market conditions existing on the date of its opinion.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative methods of financial analyses and
the application of those methods to the particular circumstances. Therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Accordingly, PaineWebber believes that its analysis must be
considered as a whole and that considering any portion of its analysis and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the PaineWebber
opinion. In its analyses, PaineWebber made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond our control. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth in these analyses. In addition, analyses relating to the value of
businesses do not purport to be appraisals or to reflect the prices at which
businesses may be sold. Accordingly, these estimates are inherently subject to
substantial uncertainty and neither we nor PaineWebber assume responsibility for
the accuracy of these estimates.
The following paragraphs summarize the significant analyses performed by
PaineWebber in arriving at its opinion.
Historical Stock Performance. PaineWebber reviewed the history of trading
prices for our shares, both separately and in relation to comparable companies.
The comparable companies were selected based on several criteria, including
relative size, profitability, total revenue, growth characteristics, business
position and credit rating. The comparable companies are indicated in the
following paragraph.
Selected Comparable Public Company Analysis. Using publicly available
information, PaineWebber compared our selected historical financial, operating
and stock market performance data to the corresponding data of certain publicly
traded companies that PaineWebber deemed relevant. The comparable companies
consisted of:
<TABLE>
<S> <C>
NUI Corporation South Jersey Industries
Energy South Delta Natural Gas Company
New Jersey Resources SEMCO Energy
</TABLE>
15
<PAGE> 20
With respect to us and our comparable companies, PaineWebber calculated
multiples of total enterprise value (market value, as hereinafter defined, plus
preferred stock and debt less cash and cash equivalents) to latest twelve months
("LTM") earnings before interest, taxes, depreciation and amortization
("EBITDA") and LTM earnings before interest and taxes ("EBIT"). PaineWebber also
calculated multiples of market value (share price multiplied by shares
outstanding including in-the-money options and warrants) to LTM net income, LTM
cash flow from operations ("CFFO") and book value of common equity. The
comparable companies analysis resulted in the following ranges of multiples as
of November 26, 1999:
<TABLE>
<CAPTION>
ANALYSIS MULTIPLE RANGE
- -------- --------------
<S> <C>
LTM EBITDA.................................................. 6.4x to 8.7x
LTM EBIT.................................................... 8.8x to 13.1x
LTM net income.............................................. 12.4x to 18.1x
LTM CFFO.................................................... 6.0x to 9.8x
Book value of common equity................................. 1.3x to 2.2x
</TABLE>
PaineWebber calculated our implied multiples as of November 30, 1999. Our
implied multiples, calculated on the same basis as the comparable companies,
were as follows:
<TABLE>
<CAPTION>
VALLEY RESOURCES
ANALYSIS IMPLIED MULTIPLES
- -------- -----------------
<S> <C>
LTM EBITDA.................................................. 9.9x
LTM EBIT.................................................... 13.6x
LTM net income.............................................. 20.1x
LTM CFFO.................................................... 11.1x
Book value of common equity................................. 2.2x
</TABLE>
Selected Comparable Transactions Analysis. PaineWebber reviewed publicly
available financial information for selected completed and pending mergers and
acquisitions in the natural gas distribution business. The selected mergers and
acquisitions PaineWebber analyzed included (acquiror/target):
<TABLE>
<S> <C>
Southern Union/Providence Energy
Energy East/Berkshire Energy Resources Energy East/Connecticut Energy
Keyspan Energy/Eastern Enterprises ONEOK, Inc./Southwest Gas
DTE Energy Company/MCN Energy Group SCANA/Public Service North Carolina
Southern Union/Fall River Gas Company Carolina Power & Light/North Carolina
Eastern Enterprises/Energy North Inc. Natural Gas
Energy East/CTG Resources Eastern Enterprises/Colonial Gas
Wisconsin Energy/WICOR Inc. CMS Energy/Continental Natural Gas
Northeast Utilities/Yankee Energy Eastern Enterprises/Essex County Gas
Southern Union/Pennsylvania Enterprises NIPSCO Industries/Bay State Gas
</TABLE>
PaineWebber reviewed the consideration paid or market value (for stock
deals, based on acquirer stock price on the day prior to the announcement of the
transaction) in the comparable transactions and calculated multiples of total
enterprise value to the target's LTM (latest twelve months prior to the
announcement of the transaction) EBITDA, LTM EBIT, and total customers.
PaineWebber also calculated multiples of the consideration paid to the target's
LTM net income, LTM CFFO, and book value of common equity. The comparable
transactions analysis resulted in the following ranges:
<TABLE>
<CAPTION>
ANALYSIS MULTIPLE RANGES
- -------- ----------------
<S> <C>
LTM EBITDA.................................................. 8.1x to 13.0x
LTM EBIT.................................................... 11.9x to 22.4x
Total customers............................................. $1,421 to $3,799
LTM net income.............................................. 18.3x to 40.7x
LTM CFFO.................................................... 7.6x to 17.0x
Book value of common equity................................. 1.5x to 3.1x
</TABLE>
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<PAGE> 21
Our multiples implied by the merger, calculated on the same basis as the
comparable transactions, were as follows:
<TABLE>
<CAPTION>
VALLEY RESOURCES
ANALYSIS IMPLIED MULTIPLES
- -------- -----------------
<S> <C>
LTM EBITDA.................................................. 13.0x
LTM EBIT.................................................... 17.9x
Total customers............................................. $2,579
LTM net income.............................................. 29.8x
LTM CFFO.................................................... 16.5x
Book value of common equity................................. 3.5x
</TABLE>
Discounted Cash Flow Analysis. PaineWebber analyzed us based on an
unleveraged discounted cash flow analysis of our projected financial
performance. This projected financial performance was based upon a five-year
forecast provided by our management. The discounted cash flow analysis
determined the discounted present value of the unleveraged after-tax cash flows
generated over the five-year period and then added a terminal value based upon a
range of EBITDA multiples of 9.0x to 11.0x and EBIT multiples of 13.0x to 15.0x.
The unleveraged after-tax cash flows and terminal value were discounted using a
range of discount rates that represented an estimate of our weighted average
cost of capital.
Premiums Paid Analysis. PaineWebber analyzed purchase price per share
premiums paid in 10 publicly disclosed domestic transactions, in nonfinancial
industries, with transaction values between $75 million and $250 million,
announced since January 1, 1997. This analysis indicated the following mean and
median premiums to the target's closing stock price one day, one week and four
weeks prior to the announcement of the transaction:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT MEAN MEDIAN
- ---------------------------- ---- ------
<S> <C> <C>
One day..................................................... 32.4% 25.6%
One week.................................................... 41.1 33.8
Four weeks.................................................. 49.7 43.9
</TABLE>
The premiums paid to our stockholders implied by the merger, based on our
stock price as of November 12, 1999, the trading day prior to the announcement
of the Southern Union merger with Providence Energy, were as follows:
<TABLE>
<CAPTION>
VALLEY RESOURCES
PERIOD PRIOR TO ANNOUNCEMENT IMPLIED PREMIUMS
- ---------------------------- ----------------
<S> <C>
One day..................................................... 48.1%
One week.................................................... 61.3
Four weeks.................................................. 78.6
</TABLE>
We selected PaineWebber to be our financial advisor in connection with the
merger because PaineWebber is a prominent investment banking and financial
advisory firm with experience in the public utility industry and in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of securities,
private placements and valuations for corporate purposes.
Pursuant to our engagement letter with PaineWebber dated August 23, 1999,
PaineWebber has earned a retention fee of $50,000 and a fee of $400,000 for the
rendering of the PaineWebber opinion. In addition, PaineWebber will receive a
fee of approximately $1,275,000, payable upon the completion of the merger, and
will be reimbursed for certain of its related expenses. PaineWebber will not be
entitled to any additional fees or compensation in the event the merger is not
approved or otherwise completed. We also agreed, under separate agreement, to
indemnify PaineWebber, its affiliates and each of its directors, officers,
agents and employees and each person, if any, controlling PaineWebber or any of
its affiliates against certain liabilities, including liabilities under federal
securities laws.
In the past, PaineWebber and its affiliates have provided various financial
services to us and have received fees for rendering these services. PaineWebber
may provide financial advisory services to, and may act as
17
<PAGE> 22
underwriter or placement agent for, the combined company in the future. In the
ordinary course of PaineWebber's business, PaineWebber may actively trade
securities of Valley Resources and Southern Union for its own account and for
the accounts of its customers and, accordingly, may at any time hold long or
short positions in such securities.
POTENTIAL CONFLICTS AND INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of our board with respect to the merger,
you should be aware that members of our management and board of directors have
the following interests in the merger that may be different from, or in addition
to, your interests generally and represent conflicts of interest. Our board of
directors was aware of these interests and considered them in approving the
merger agreement.
Employment Agreement. In connection with the merger agreement, Southern
Union entered into a three-year employment agreement with Alfred P. Degen, which
will become effective upon the completion of the merger. The employment
agreement provides Mr. Degen's base salary will be set by the president of
Southern Union but will not be less than $200,000, which was his base salary on
November 30, 1999, the day he signed the employment agreement. He also will have
the opportunity to earn an annual incentive bonus which must be equal to at
least 37.5% of his base salary. Mr. Degen will receive a $1,000,000 bonus
payable at the effective time of the merger. If Mr. Degen's employment is
terminated without "cause" or if Mr. Degen terminates his employment for "good
reason" (as such terms are defined in the employment agreement), Mr. Degen will
receive:
- a severance payment equal to three times his base salary plus the amount
of his incentive compensation paid for the most recently completed fiscal
year;
- continued health, life and disability benefits for three years; and
- payment for the actuarial equivalent of the excess of the retirement
pension which would have accrued, determined as if he had accumulated 36
additional months of service credit, over the retirement pension which
had accrued.
If any of the payments made to Mr. Degen would be subject to the excise tax
imposed under the Internal Revenue Code, Southern Union will pay Mr. Degen an
amount equal to such excise tax and any related interest and penalties.
Change in Control Agreements. We have severance agreements containing
change in control provisions with Alfred P. Degen, Charles K. Meunier, Richard
G. Drolet, Jeffrey P. Polucha and Sharon Partridge. These agreements were
entered into before we began to explore the possibility of selling our company.
These agreements provide that, if during the 24 months following a change
of control the officer is terminated without cause or terminates his or her own
employment as a result of adverse actions by us or our successors, the officer
will receive a lump sum severance amount and continuation of certain welfare
plan benefits. The agreements also provide that if the officer terminates his or
her employment for any reason during the 15 months following the later of a
change of control or the expiration of the six month period after any person
publicly announces an intention to take actions which would constitute a change
of control (which was deemed to occur on December 1, 1999 when we announced the
signing of the merger agreement), the officer will receive a lump sum severance
amount and continuation of certain welfare plan benefits. In either case, the
lump sum severance payment is an amount equal to:
- an amount equal to the officer's unpaid base salary plus amounts due
under any compensation plan;
- three times covered compensation (defined as the annual salary at date of
change of control plus the cash portion of Valley Resources Executive
Incentive Compensation Plan) for the year in which the change of control
occurs for Mr. Degen and two times covered compensation for the other
named officers; and
- a lump sum cash payment for the actuarial equivalent of the excess of the
retirement pension which would have accrued after the termination date
for those additional months for which severance is paid to the officer
and the retirement pension which had accrued.
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In addition, if we terminate an executive during the 15 months following a
change of control, or during the six months after any person publicly announces
an intention to take actions which would constitute a change in control, we will
also provide the officer with the same life insurance, disability,
hospitalization and medical plans which were in effect immediately before our
change of control until the earlier of three years after the change in control
for Mr. Degen and two years for the other named officers or when the executive
has obtained new employment and is covered by equivalent benefits.
Mr. Degen has agreed to forego the benefits of his change of control
agreement and entered into an employment agreement with Southern Union.
Deferred Compensation Plan. Our Directors Deferred Compensation Plan
permits outside directors to defer director's fees to a date between the
director's 65th birthday and one month after the director's 70th birthday. Upon
a change of control, this plan provides that each director may elect to receive
a lump sum payment of all deferred compensation plus interest, to receive
benefits as originally elected under the plan, or to receive installments
commencing upon the change of control.
Director Retirement Plan. Our Director Retirement Plan provides retirement
benefits to members of our board who are not our employees or employees of any
subsidiary.
Defense, Indemnification and Insurance for Officers and Directors. For a
period of six years after the effective time, Southern Union has agreed to
indemnify our present and former officers and directors and the present and
former officers and directors of our subsidiaries for any losses resulting from
the acts or omissions occurring before the effective time to the extent provided
under our restated articles of incorporation and bylaws in effect on November
30, 1999. If any claims are asserted within such six-year period, all rights to
indemnification in respect of such claims shall continue until the final
disposition of any and all such claims. For six years after the effective time,
Southern Union will use its reasonable best efforts to provide officers' and
directors' liability insurance for acts or omissions occurring before the
effective time covering each person currently covered by our officers' and
directors' liability insurance policy on terms equal in coverage and amount to
those of such policy in effect on November 30, 1999. In satisfying this
obligation, if the annual premiums of such insurance coverage are more than 200%
higher than the previous year's premiums, Southern Union will be obligated to
obtain a policy with the best coverage available, in the reasonable judgment of
Southern Union's board, for a cost not exceeding such amount. See "The Merger
Agreement -- Indemnification and Insurance for Officers and Directors."
SIGNIFICANT U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Each stockholder who receives cash in the merger will recognize any gain or
loss realized in the transaction. Generally, the gain or loss realized will be
measured by the difference between the purchase price of the shares and the
adjusted basis of the shares in the hands of the holder. Such gain or loss would
be capital gain or loss provided that the shares were held as a capital asset on
the effective date of the merger, and would be long-term capital gain or loss if
such shares were held for more than one year.
We will not recognize any gain or loss as a result of the merger. The
merger will be treated as a purchase of our stock by Southern Union and we will
retain our historic tax basis in our assets and our other tax attributes,
assuming that Southern Union does not make an election under Section 338(g) of
the Internal Revenue Code.
The discussion set forth above of the material federal income tax
consequences of the merger is included for general information only. It does not
address the state, local or foreign tax aspects of the merger. In addition, it
does not discuss the federal income tax considerations that may be relevant to
certain persons, including holders of options or warrants, and may not apply to
certain holders subject to special tax rules, including dealers in securities,
foreign holders and holders who acquired their shares of our stock pursuant to
the exercise of options or otherwise as compensation. The discussion is based
upon currently existing provisions of the Internal Revenue Code, existing
Treasury regulations thereunder and current administrative rulings and court
decisions. All of the foregoing is subject to change and any such change could
affect the continuing validity of this discussion.
Each stockholder should consult his or her own tax advisor with respect to
the specific tax consequences of the merger to him or her, including the
application and effect of state, local and foreign tax laws.
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REGULATORY MATTERS
The following is a summary of the material regulatory requirements
affecting the merger. While there can be no guarantee if and when we will obtain
any of the consents or approvals required for the mergers or what conditions
they may contain, and even though Southern Union has not filed for all its
required approvals from all of the agencies discussed, we currently believe that
the necessary approvals can be obtained.
State Approvals and Related Matters. The utility operations of Southern
Union are subject to the regulatory jurisdiction of the Missouri Public Service
Commission ("MPSC"), the Florida Public Service Commission ("FPSC"), the
Pennsylvania Public Utility Commission ("PPUC"), the Railroad Commission of
Texas ("RRC") and various municipalities in Texas where Southern Union conducts
business. The MPSC and the PPUC must approve the mergers. Southern Union must
also receive approval from the FPSC and the PPUC for certain financing
arrangements for the mergers, namely securities issued and long-term debt
assumed by Southern Union in connection with the mergers. No RRC or municipality
approvals are required.
The utility operations of our subsidiaries are subject to the regulatory
jurisdiction of the Rhode Island Public Utility Commission ("RIPUC"). The Rhode
Island Division of Public Utilities and Carriers ("DPU") must also approve the
mergers.
Assuming the requisite regulatory approvals are obtained, the combined
company and its utility operations will remain subject to the regulatory
jurisdiction of the MPSC, FPSC, PPUC, RIPUC, DPU, RRC and various municipalities
in Texas.
Antitrust Considerations. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules of the Federal Trade Commission (the
"FTC"), the mergers may not be consummated until notifications have been given
and certain information has been furnished to the FTC and the U.S. Department of
Justice Antitrust Division and specified waiting period requirements have been
satisfied. The expiration or earlier termination of the Hart-Scott-Rodino Act's
waiting period does not preclude the Department of Justice or the FTC from
challenging the mergers on antitrust grounds either before or after consummation
of the mergers. Private parties and state attorneys general may also bring legal
action under federal or state antitrust laws under certain circumstances. We and
Southern Union filed notification and report forms under the Hart-Scott-Rodino
Act with the FTC and the Antitrust Division on March 1, 2000. On March 31, 2000,
the Federal Trade Commission requested additional information in connection with
its analysis of the merger under this Act.
General. Southern Union and our utility subsidiaries possess rights and
franchises, and environmental permits and licenses. Some of these may need to be
transferred, renewed or replaced as a result of the mergers. Neither we nor
Southern Union anticipate any difficulties at the present time in making or
obtaining such transfers, renewals or replacements.
Under the merger agreement, we have agreed to use our reasonable best
efforts to obtain all necessary material permits, licenses, franchises and other
governmental authorizations needed to consummate or effect the transactions
contemplated by the merger agreement. Various parties may seek intervention in
the proceedings associated with the regulatory approval process in an attempt to
oppose the merger or to have conditions imposed upon the receipt of the
necessary approvals. Although we and Southern Union believe that we will receive
the requisite regulatory approvals for the mergers or related financings, we
cannot determine when we will receive such approvals. It is a condition to the
consummation of the mergers (subject to waiver) that final non-appealable orders
approving the mergers or related financings be obtained from the various federal
and state commissions described above. See "The Merger Agreement -- Conditions
to the Completion of the Merger."
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting
under generally accepted accounting principles.
NO RIGHTS OF DISSENTING STOCKHOLDERS
Rhode Island law does not provide for dissenters' rights to stockholders of
a publicly-traded company.
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THE MERGER AGREEMENT
The following description of the merger agreement highlights certain
important terms of the merger agreement. We have attached a copy of the merger
agreement as Appendix A to this proxy statement. The summary of the merger
agreement we provide below is qualified in its entirety by reference to that
agreement. We encourage you to read the merger agreement because it is the legal
document that governs the merger.
STRUCTURE OF THE MERGER
Under the merger agreement, SUG Acquisition Corporation, a wholly-owned
subsidiary of Southern Union, will merge into us. After the subsidiary mergers
described below, we will be merged into Southern Union. Southern Union will
continue as the surviving corporation and we will be a division of Southern
Union. Our non-utility subsidiaries will become subsidiaries of Southern Union.
CLOSING; EFFECTIVE TIME
We will close the merger at 10:00 a.m., Eastern time, within five business
days after satisfaction or waiver of the conditions set forth in the merger
agreement, unless we agree on a later date. This date is referred to as the
"closing date." On the closing date, we will file articles of merger and a plan
of merger with the Secretary of State of the State of Rhode Island under Rhode
Island law and a certificate of merger with the Secretary of State of the State
of Delaware under Delaware law. The merger will become effective upon filing of
these documents. This moment is referred to as the "effective time."
SUBSIDIARY MERGERS
Immediately after the effective time, Valley Gas, our wholly-owned
subsidiary, will merge into us. Immediately after the consummation of the Valley
Gas merger, Bristol and Warren Gas will merge into us. Immediately after the
consummation of the Bristol and Warren Gas merger, we will merge into Southern
Union.
MERGER CONSIDERATION
In the merger, each share of our common stock that you own will be
converted into the right to receive $25.00 in cash.
EXCHANGE OF OUR STOCK CERTIFICATES FOR MERGER CONSIDERATION
BankBoston N.A., c/o EquiServe, L.P., will act as exchange and paying agent
in connection with the merger. At the effective time, Southern Union will
deposit in trust with the exchange and paying agent an amount of cash
representing the merger consideration. The exchange and paying agent will invest
the merger consideration in United States government-backed obligations or in
the highest quality commercial paper. As soon as practical after the effective
time, the exchange and paying agent will mail to you a letter of transmittal and
instructions regarding the surrender of your stock certificates for
cancellation. After receiving your certificates together with the letter of
transmittal, duly executed, the exchange and paying agent will send you the cash
you will be entitled to receive.
If the merger consideration is to be paid to a person other than the person
in whose name the surrendered certificate is registered, the surrendered
certificate must be properly endorsed. In addition, the person requesting
payment must have paid any transfer and other taxes required in connection with
payment of the merger consideration to a person other than the registered holder
of the surrendered certificate or must establish to the satisfaction of Southern
Union that taxes do not apply.
If your certificates have been lost, stolen or destroyed, you must provide
the exchange and paying agent with a lost certificate affidavit. In addition,
you must give the exchange and paying agent a bond in an amount as the exchange
and paying agent may ordinarily require and you must indemnify Southern Union
against any claim that may be made against Southern Union because of the
certificate claimed to have been lost, stolen or destroyed.
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Twelve months after the effective time, the exchange and paying agent will
deliver to Southern Union any funds that remain undistributed. From that point
forward, Southern Union will act as exchange and paying agent. If you have not
surrendered your certificates to the exchange and paying agent by then, you will
only be entitled to look to Southern Union as a general creditor for payment of
the merger consideration.
Southern Union will not be liable to you for merger consideration delivered
to a public official pursuant to applicable law. Five years after the effective
time, any portion of the merger consideration that remains unclaimed by our
stockholders will become the property of Southern Union to the extent permitted
by applicable law.
You should not send in your stock certificates until you receive a
transmittal letter.
COVENANTS AND OTHER AGREEMENTS
Interim Operations. We have agreed that, except as provided by the merger
agreement or as consented to by Southern Union, from the date of the merger
agreement until the effective time, we and our subsidiaries will:
- not make or permit any material change in the general nature of our
business;
- maintain our ordinary course of business under prudent business judgment
and consistent with past practice and policy;
- preserve our ongoing business and use reasonable efforts to maintain our
goodwill;
- not enter into any material transaction or contract other than in the
ordinary course of business;
- not hire any new employee unless the employee is a bona fide replacement
for a presently-filled position;
- not file any material applications, petitions, motions, orders, briefs,
settlements or agreements in any material proceeding or related appeal
before a government body without, to the extent reasonably practicable,
consulting Southern Union;
- not make any changes in financial policies or practices, or strategic or
operating policies or practices, except as required by law, rule or
regulation;
- except in the ordinary course of business or under the terms of any of
our existing contracts, employee benefit plans or collective bargaining
agreements, not grant any increase or change in total compensation,
benefits or pay any bonus to any employees;
- not grant or enter into any contract, written or oral, with respect to
continued employment for any employee, officer or director;
- not make any loan or advance to any officer, director, stockholder,
employee, individual or entity other than in the ordinary course of
business;
- not terminate any existing, enter into any new, or renew, extend or
negotiate, any gas purchase, exchange, storage, supply or transportation
contract; and
- not assume any note, debenture or other evidence of indebtedness which by
its terms does not mature within two years.
Employees; Benefits. For our employees (excluding unionized employees) and
those of our subsidiaries, Southern Union has agreed:
- to provide such employees who continue their service with Southern Union
during the 24 months immediately following the closing date with benefits
no less favorable in the aggregate than the benefits that are now
provided under our benefit plans;
- to recognize, for purposes of eligibility, vesting and benefit accrual
under all benefit plans provided to such employees after the effective
time, the tenure of employment, as recognized by us or any of our
subsidiaries as of the closing date;
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- to permit each such employee to carry forward all days of sick leave
accrued before the closing date; and
- to provide retiree medical plan coverage which is collectively equal to
the benefits provided to them by us currently to any former employee (and
his or her eligible dependents) during the 60 months immediately
following the closing date.
Southern Union has also agreed to assume, at the effective time, all
collective bargaining agreements covering any of our employees and our
subsidiaries, and to discharge when due any and all of our liabilities and the
liabilities of our subsidiaries under the collective bargaining agreements after
the effective time.
Certain Other Covenants and Agreements. The merger agreement also contains
additional covenants by us to:
- not declare or pay or permit any of our subsidiaries to declare or pay
any dividends or make other distributions of our capital stock or our
subsidiaries' capital stock, except for regular dividends on our common
stock that do not exceed the current rate of $0.75 per share per year and
dividends by our subsidiaries to us;
- cooperate and cause our subsidiaries to cooperate with Southern Union's
requests with respect to the refinancing, repurchase, redemption or
repayment of our indebtedness or any of our subsidiaries' indebtedness
that may be required or that Southern Union may request before the
mergers;
- except as discussed below (see "--No Solicitation" below), recommend to
our stockholders the approval of the merger agreement;
- except as discussed below (see "-- No Solicitation"), not initiate or
encourage any inquiry or proposal about mergers with other parties, sales
of substantial assets, sales of shares representing a majority or greater
interest in us or any of our subsidiaries or other business combinations
or, except in certain instances, negotiate, discuss, approve or recommend
any such alternative acquisition proposal; and
- use commercially reasonable best efforts at our expense to obtain all
necessary consents, approvals and waivers needed in connection with the
transactions contemplated by the merger agreement.
The merger agreement also contains certain additional covenants of Southern
Union to:
- amend our stock plans to provide for the issuance of Southern Union stock
instead of our common stock; and
- maintain our charitable contributions of at least $60,000 for at least
the next two calendar years.
NO SOLICITATION
The merger agreement provides that we must terminate all existing
discussions or negotiations with third parties, if any, regarding an
"alternative proposal," which we define below. In addition, we may not, nor may
we authorize or permit any of our subsidiaries' officers, directors, agents,
financial advisors, attorneys, accountants or other representatives to, directly
or indirectly:
- solicit, initiate or encourage submission of proposals or offers relating
to, or that could reasonably be expected to lead to, an alternative
proposal; or
- participate in any negotiations or discussions regarding, furnish to any
person any information with respect to, or otherwise cooperate, assist,
participate in, facilitate or encourage any effort or attempt by any
other person to do or seek an alternative proposal.
An "alternative proposal" is:
- a merger, consolidation or other business combination, share exchange,
sale of shares of capital stock, tender offer or exchange offer or
similar transaction involving us or any of our subsidiaries;
- the acquisition in any manner, directly or indirectly, of a material
interest in any capital stock of, or a material equity interest in a
substantial portion of the assets of, us or any of our subsidiaries,
including
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any single or multi-step transaction or series of related transactions
that is structured to permit a third party to acquire beneficial
ownership of a majority or greater equity interest in us or any of our
subsidiaries; or
- the acquisition in any manner, directly or indirectly, of any material
portion of the business or assets (other than immaterial or insubstantial
assets or inventory in the ordinary course of business or assets held for
sale) of us or any of our subsidiaries.
Before receiving the approval of the merger by our stockholders, if our
board receives an unsolicited written proposal from a third party relating to an
alternative proposal that our board determines is financially superior to the
merger and will have adequate sources of funding, we may take the following
steps if we first give Southern Union two days written notice and obtain a
confidentiality agreement from the third party which is substantially the same
as our confidentiality agreement with Southern Union:
- furnish information to, and otherwise engage in substantive discussions
with the third party that submitted the unsolicited alternative proposal
if our board determines, in its good faith judgment after consulting with
its financial advisor and outside counsel, that it is reasonably
necessary to engage in such discussions in order for the board to comply
with its fiduciary duties under applicable law; and
- take and disclose to our stockholders a position regarding an alternative
proposal, or amend or withdraw such position, pursuant to Rules 14d-9 and
14e-2 under the Exchange Act, or make such disclosure to our stockholders
which, in the good faith judgment of our board, is required by applicable
law, based on the advice of our outside counsel.
The merger agreement also prohibits our board from:
- withdrawing or modifying, or proposing publicly to withdraw or modify, in
a manner adverse to Southern Union, its approval or recommendation of the
merger agreement or the merger;
- approving or recommending, or proposing publicly to approve or recommend,
an alternative proposal; or
- causing us to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any business
combination unless the following conditions are satisfied:
- our board determines, in its good faith judgment, after consulting
with our financial advisor and outside counsel, that an unsolicited
proposal regarding an alternative proposal is financially superior to
our stockholders than the merger; and
- our board determines, in its good faith judgment, after consulting
with its financial advisor and outside counsel, that the failure to
either withdraw or modify its approval or recommendation of the merger
agreement or the merger, approve or recommend an alternative proposal,
or cause us to enter into any agreement related to an alternative
proposal would create a reasonable possibility of a breach of the
fiduciary duties of our board under applicable law.
We must promptly notify Southern Union of:
- the receipt of any alternative proposal;
- the material terms and conditions of any such proposal;
- the identity of the person or entity making the proposal and the status
and details of any such request or proposal.
We must use all reasonable efforts to keep Southern Union informed of the
status and details of any such inquiry, offer or proposal and provide Southern
Union two days' advance notice before we give non-public information to any such
person or entity. If any such inquiry, offer or proposal is in writing, we
agreed to promptly deliver to Southern Union a copy of such inquiry, offer or
proposal. If we decide to accept such alternative proposal and enter into a
definitive agreement with respect to such proposal, we must give Southern Union
five business days' notice of our intent to enter into a definitive agreement.
In addition, during this five-day period, we must give Southern Union an
opportunity to adjust the terms of the merger agreement so that
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the parties can proceed with the merger and negotiate in good faith with
Southern Union with respect to any such adjustments. At the same time as we
terminate the merger agreement after accepting an alternative proposal, we must
also pay the required termination fee (see "-- Termination of the Merger
Agreement" and "-- Termination Fees and Expenses -- Termination Fee").
Before we furnish any non-public information to, enter into negotiations
with, or accept an alternative proposal from a third party, we must give written
notice to Southern Union and obtain an executed confidentiality agreement from
the third party containing substantially the same terms and conditions as our
confidentiality agreement with Southern Union.
CONDITIONS TO THE COMPLETION OF THE MERGER
Mutual Closing Conditions. The obligations of Southern Union and us to
complete the merger are subject to the satisfaction or waiver of the following
conditions:
- accuracy as of the closing date of the representations and warranties
made by the other party as specified in the merger agreement;
- performance in all material respects by the other party of its required
obligations at or before the closing date;
- obtaining all required governmental authorizations necessary to complete
the merger without conditions that would be reasonably likely to be
materially adverse to Southern Union's or our businesses, operations,
properties, financial condition, or results of operations;
- no court, administrative agency, governmental body or arbitrator having
issued an order to restrain, enjoin or otherwise prevent the consummation
of the merger agreement or the mergers.
Additional Closing Conditions for Southern Union's Benefit. Southern
Union's obligation to complete the merger is subject to the following additional
conditions:
- approval by our stockholders;
- receipt of third party consents required to consummate the mergers, other
than any consents which, if not obtained, are not, individually or in the
aggregate, reasonably likely to result in a material adverse effect on
the business, operations, properties, financial condition or results of
our operations and our subsidiaries after the closing;
- receipt of all consents and approvals required, under the terms of any
note, bond or indenture to which we or any of our subsidiaries is a
party; and
- the resignation or retirement of each of our directors and the directors
of our subsidiaries effective as of the closing date.
INDEMNIFICATION AND INSURANCE FOR OFFICERS AND DIRECTORS
For six years after the completion of the merger, Southern Union will
indemnify our present and former officers and directors and those of our
subsidiaries for acts or omissions which occurred before the effective time. In
addition, for six years after the effective time, Southern Union will use its
reasonable best efforts to provide officers' and directors' liability insurance
for acts or omissions occurring before the effective time for each person
covered by our officers' and directors' liability insurance policy effective on
the date of the merger agreement on equivalent terms. However, if the annual
premiums of such insurance coverage are greater than 200% of the previous year's
premiums, Southern Union must obtain a policy with the best coverage available
for a cost not exceeding such amount.
AMENDMENTS
We and Southern Union may amend any of the terms of the merger agreement if
the amendment is in writing signed by both of us.
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TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time before the closing:
- by mutual written consent of Southern Union and us;
- by either Southern Union or us:
(1) if our stockholders have not approved the merger by February
28, 2001; or
(2) at any time after 5:00 p.m., Eastern Time on February 28, 2001,
if the closing of the merger has not occurred and the party seeking to
terminate is not in material breach of its representations, warranties,
covenants or agreements contained in the merger agreement. This date
will be extended to May 31, 2001, even though all other conditions to
the closing of the merger have been fulfilled or are capable of being
fulfilled if:
- all required approvals, consents, opinions or rulings of all
government agencies have not been obtained by final order that does
not contain conditions that are likely to have a material adverse
effect on the business, operations, properties, financial condition
or results of operations of the combined company or us, in the case
of a termination by Southern Union;
- the applicable waiting period under the Hart-Scott-Rodino Act
relating to the mergers has not expired or been terminated;
- any required approval or authorization of any federal, state or
local governmental agency has not been obtained or become a final
order;
- if any state or federal law, order, rule or regulation is adopted
that prohibits the mergers; or
- if a court issues a non-appealable order that prohibits the
consummation of the mergers.
- By Southern Union:
(1) if we breach any representation, warranty, covenant or
agreement which cannot be cured and would make our representations and
warranties materially inaccurate;
(2) if our board or any committee of our board:
- withdraws or modifies, or proposes publicly to withdraw or modify,
in a manner adverse to Southern Union, its approval or
recommendation of the merger agreement or the merger;
- approves or recommends, or proposes publicly to approve or
recommend, an alternative proposal;
- causes us to enter into a definitive agreement related to any
alternative proposal;
- resolves to take any of the foregoing actions; or
- if a third party, including a group, acquires securities
representing greater than 50% of the voting power of our
outstanding voting securities.
- By us:
- if Southern Union breaches any representation, warranty, covenant or
agreement, which breach cannot be cured and would make Southern
Union's representations and warranties materially inaccurate, if
- we give Southern Union at least five business days' notice of our
intent to enter into a definitive agreement regarding an
alternative proposal. During this five-day period, we must give
Southern Union an opportunity to adjust the terms of the merger
agreement so that the parties can proceed with the merger and
negotiate in good faith with Southern Union regarding any such
adjustments;
- we have paid the required termination fees; and
- we have entered into a definitive agreement with respect to an
alternative proposal.
If the merger agreement is validly terminated, no provision of the merger
agreement will survive (except for the provisions relating to expenses,
termination fees and miscellaneous provisions of general application) and
neither we nor Southern Union shall have liability unless such party negligently
or willfully breaches any provision of the merger agreement.
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TERMINATION FEES AND EXPENSES
Payment of the Merger Expenses Generally. We and Southern Union will pay
all costs and expenses of our performance of and compliance with the merger
agreement except as follows:
- we will 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 by Southern Union to collect the termination fee
payable to Southern Union under the merger agreement, plus interest on
the amount of any portion of the unpaid termination fee. Southern Union
may calculate this interest using an annual percentage rate of interest
equal to the prime rate published in The Wall Street Journal on the date
(or preceding business day if such date is not a business day) such fee
was required to be paid, compounded on a daily basis using a 360-day
year; and
- we will pay all fees and expenses of our counsel.
Termination Fee. We have agreed to pay Southern Union $5 million in cash
if:
- we provide Southern Union at least five business days' notice of our
intent to terminate the merger agreement and have entered into a
definitive agreement relating to an alternative proposal;
- Southern Union terminates the merger agreement because our board or any
committee of our board has:
- withdrawn or modified, or proposed publicly to withdraw or modify, in
a manner adverse to Southern Union, its approval or recommendation of
the merger agreement;
- approved or recommended, or proposed publicly to approve or recommend,
an alternative proposal;
- caused us to enter into a definitive agreement related to any business
combination; or
- resolved to take any of the foregoing actions; or
- Southern Union terminates the merger agreement because a third party,
including a group, has acquired securities representing greater than 50%
of the voting power of our outstanding voting securities.
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PRINCIPAL STOCKHOLDERS
At the record date the following stockholders beneficially owned more than
5% of our outstanding common stock.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- ---------- --------
<S> <C> <C>
Wilmington Trust Company.................................... 874,913 17.5
1100 North Market Street
Wilmington, DE 19890-0001
</TABLE>
- ---------------
* Wilmington Trust Company holds these shares as trustee of the Valley
Resources, Inc. 401(k) Employee Stock Ownership Plan on behalf of numerous
participants. As a result, it has shared voting and dispositive power.
As of the record date, our directors, executive officers and all executive
officers and directors as a group owned beneficially common stock in the amount
set forth opposite their names. Unless otherwise stated, the holders have sole
voting and investment power.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- ---------- --------
<S> <C> <C>
Melvin G. Alperin........................................... 4,402(2) (1)
C. Hamilton Davison......................................... 392 (1)
Don A. DeAngelis............................................ 7,725 (1)
Alfred P. Degen............................................. 9,935(3)(8) (1)
James M. Dillon............................................. 1,012(4) (1)
Jonathan K. Farnum.......................................... 8,680(5) (1)
John F. Guthrie, Jr......................................... 1,911(6) (1)
Virginia Roberts............................................ 0
Charles K. Meunier.......................................... 13,414(7)(8) (1)
Richard G. Drolet........................................... 10,757(8) (1)
Jeffrey P. Polucha.......................................... 5,012(8) (1)
Sharon Partridge............................................ 6,387(8) (1)
All Directors and Officers as a group (12 persons).......... 69,627(8) 1.4
</TABLE>
- ---------------
(1) Ownership amounts to one percent or less.
(2) Shares are held in living trusts of which Melvin G. Alperin and his wife are
Trustees with voting and investment powers.
(3) Includes 4,616 shares in which Mr. Degen shares voting and investment power
with his wife.
(4) Shares are held in a living trust of which Mr. Dillon is sole trustee with
sole voting and investment power.
(5) Includes 3,531 shares held by Mr. Farnum's wife to which he disclaims
beneficial ownership.
(6) Includes 100 shares held by Mr. Guthrie's children in which he shares voting
and investment power.
(7) Includes 2,404 shares in which Mr. Meunier shares voting and investment
power with his wife.
(8) Includes shares held in the Valley Resources 401(k) Employee Stock Ownership
Plan based upon information as of April 28, 2000 provided by the plan
Trustee.
28
<PAGE> 33
AUDITORS
A representative of Grant Thornton LLP, our independent certified public
accountants, is expected to attend the special meeting and will be available to
respond to appropriate questions. It is not anticipated such representative will
make a prepared statement at the meeting. However, he or she will be free to do
so if he or she chooses.
OTHER BUSINESS
As of the date of this proxy statement, we know of no other matters to be
brought before the special meeting. If any other business properly comes before
the meeting, the shares represented by proxies will be voted in accordance with
the best judgment of the persons named in such proxies.
By Order of the
Board of Directors,
Sharon Partridge, Secretary
Cumberland, Rhode Island
May 9, 2000
29
<PAGE> 34
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VALLEY RESOURCES, INC.,
SOUTHERN UNION COMPANY
AND
SUG ACQUISITION CORPORATION
DATED AS OF NOVEMBER 30, 1999
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER........................................................ 1
Section 1.1 The Merger.................................................. 1
Section 1.2 Effects of the Merger....................................... 1
Section 1.3 Effective Time of the Merger................................ 1
Section 1.4 Directors and Officers...................................... 1
Section 1.5 Other Transactions.......................................... 1
Section 1.6 Certificate of Incorporation; By-laws....................... 2
Section 1.7 Directors and Officers...................................... 2
ARTICLE II TREATMENT OF SHARES.............................................. 2
Section 2.1 Effect of the Merger on Capital Stock....................... 2
Section 2.2 Exchange of Certificates.................................... 2
ARTICLE III THE CLOSING..................................................... 4
Section 3.1 Closing..................................................... 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 4
Section 4.1 Organization And Qualification.............................. 4
Section 4.2 Subsidiaries................................................ 4
Section 4.3 Capitalization.............................................. 5
Section 4.4 Authority; Non-contravention; Statutory Approvals;
Compliance.................................................. 5
Section 4.5 Reports and Financial Statement............................. 7
Section 4.6 Absence of Certain Changes or Events........................ 7
Section 4.7 Litigation.................................................. 8
Section 4.8 Tax Matters................................................. 8
Section 4.9 Employee Matters; ERISA..................................... 9
Section 4.10 Environmental Protection.................................... 12
Section 4.11 Regulation as a Utility..................................... 14
Section 4.12 Vote Required............................................... 14
Section 4.13 Opinion of Financial Advisor................................ 14
Section 4.14 Ownership of Parent Common Stock............................ 14
Section 4.15 Intellectual Property....................................... 14
Section 4.16 Title to Assets............................................. 14
Section 4.17 Indebtedness................................................ 14
Section 4.18 Machinery and Equipment..................................... 14
Section 4.19 Insurance................................................... 15
Section 4.20 Regulatory Proceedings...................................... 15
Section 4.21 The Company Rights Agreement................................ 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT.......................... 15
Section 5.1 Organization and Qualification.............................. 15
Section 5.2 Authority; Statutory Approvals.............................. 15
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER........................... 16
Section 6.1 Covenants of the Company.................................... 16
Section 6.2 Covenant of the Company; Alternative Proposals.............. 20
Section 6.3 Employment Agreement........................................ 21
</TABLE>
i
<PAGE> 36
<TABLE>
<S> <C> <C>
ARTICLE VII ADDITIONAL AGREEMENTS........................................... 21
Section 7.1 Access to Information....................................... 21
Section 7.2 Proxy Statement............................................. 22
Section 7.3 Regulatory Matters.......................................... 23
Section 7.4 Company Shareholders' Approval.............................. 23
Section 7.5 Directors' and Officers' Indemnification.................... 23
Section 7.6 Disclosure Schedules........................................ 24
Section 7.7 Public Announcements........................................ 24
Section 7.8 Certain Employee Agreements................................. 24
Section 7.9 Employee Benefit Plans...................................... 25
Section 7.10 Company Stock Plans......................................... 26
Section 7.11 Expenses.................................................... 26
Section 7.12 Further Assurances.......................................... 26
Section 7.13 Community Involvement....................................... 26
Section 7.14 Financial Statements to be Provided......................... 27
Section 7.15 Officers of Valley Division................................. 27
ARTICLE VIII CONDITIONS..................................................... 27
Section 8.1 Conditions to Each Party's Obligation to Effect the
Mergers..................................................... 27
Section 8.2 Conditions to Obligation of Parent to Effect the Mergers.... 27
Section 8.3 Conditions to Obligation of the Company to Effect the
Mergers..................................................... 29
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................ 29
Section 9.1 Termination................................................. 29
Section 9.2 Effect of Termination....................................... 30
Section 9.3 Termination Fee; Expenses................................... 31
Section 9.4 Amendment................................................... 31
Section 9.5 Waiver...................................................... 31
ARTICLE X GENERAL PROVISIONS................................................ 31
Section 10.1 Non-survival................................................ 31
Section 10.2 Brokers..................................................... 31
Section 10.3 Notices..................................................... 32
Section 10.4 Miscellaneous............................................... 32
Section 10.5 Interpretation.............................................. 33
Section 10.6 Counterparts; Effect........................................ 33
Section 10.7 Parties in Interest......................................... 33
Section 10.8 Waiver of Jury Trial........................................ 33
Section 10.9 Enforcement................................................. 33
Section 10.10 Construction of Agreement................................... 33
</TABLE>
ii
<PAGE> 37
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
1935 Act................................ 4
Affiliate............................... 7
Agreement............................... 1
Alternative Proposal.................... 21
Bristol................................. 2
Bristol Merger.......................... 2
Closing................................. 4
Closing Agreement....................... 9
Closing Date............................ 4
Code.................................... 9
Company................................. 1
Company Certificates.................... 3
Company Common Stock.................... 2
Company Disclosure Schedule............. 24
Company Financial Statements............ 7
Company Material Adverse Effect......... 4
Company Merger.......................... 2
Company Preferred Stock................. 5
Company Required Consents............... 6
Company Required Statutory Approvals.... 6
Company Rights Agreement................ 2
Company SEC Reports..................... 7
Company Shareholders' Approval.......... 14
Company Special Meeting................. 23
Company Stock Plans..................... 26
Confidentiality Agreement............... 22
Contract................................ 5
control................................. 7
controlled by........................... 7
Controlled Group Liability.............. 9
Covered Company Employees............... 25
Disclosure Schedules.................... 24
Effective Time.......................... 1
Employee Benefit Plan................... 10
Employment Agreement.................... 21
Environmental Claim..................... 13
Environmental Laws...................... 13
Environmental Permits................... 12
ERISA................................... 9
ERISA Affiliate......................... 9
Exchange Act............................ 7
Exchange Agent.......................... 2
FERC.................................... 15
Final Order............................. 28
GAAP.................................... 7
Governmental Authority.................. 6
Hazardous Materials..................... 14
Indemnified Parties..................... 24
Initial Termination Date................ 29
IRS..................................... 10
Joint Venture........................... 5
Knowledge............................... 7
Legislative Actions..................... 20
Liens................................... 5
Merger.................................. 1
Merger Consideration.................... 2
Merger Sub.............................. 1
Mergers................................. 2
Multiemployer Plan...................... 10
Multiple Employer Plan.................. 11
Parent.................................. 1
Parent Disclosure Schedule.............. 24
Parent Material Adverse Effect.......... 16
Parent Required Statutory Approvals..... 16
Paying Agent............................ 2
PBGC.................................... 10
PCBs.................................... 14
Plan.................................... 10
Proxy Statement......................... 22
Qualified Plans......................... 10
Related Documents....................... 5
Release................................. 14
RIBCA................................... 1
Rights.................................. 2
SEC..................................... 7
Securities Act.......................... 7
SERP.................................... 25
Subsidiary.............................. 4
Surviving Corporation................... 1
Tax Return.............................. 8
Tax Ruling.............................. 9
Taxes................................... 8
Termination Fee......................... 31
under common control with............... 7
Valley.................................. 1
Valley Merger........................... 1
VEBA.................................... 10
Violation............................... 6
Withdrawal Liability.................... 10
</TABLE>
iii
<PAGE> 38
AGREEMENT AND PLAN OF MERGER, dated as of November 30, 1999 (this
"Agreement"), by and among Valley Resources, Inc., a Rhode Island corporation
(the "Company"), Southern Union Company, a Delaware corporation ("Parent"), and
SUG Acquisition Corporation, a Rhode Island corporation and a wholly-owned
subsidiary of Parent ("Merger Sub").
WHEREAS, the Company and Parent have determined to engage in a business
combination transaction on the terms stated herein; and
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have approved and deemed it advisable and in the best interests of
their respective shareholders to consummate the transactions contemplated herein
under which the businesses of the Company and Parent would be combined by means
of the merger of Merger Sub with and into the Company and the subsequent mergers
of the Company and its regulated subsidiaries into Parent;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company (the "Merger") in accordance with the
laws of the State of Rhode Island. As a result of the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall be the
surviving corporation in the Merger and shall continue its corporate existence
under the laws of the State of Rhode Island. The effects and the consequences of
the Merger shall be as set forth in Section 1.2. Throughout this Agreement, the
term the "Company" shall refer to the Company prior to the Merger and the term
"Surviving Corporation" shall refer to the Company in its capacity as the
surviving corporation in the Merger.
Section 1.2 Effects of the Merger. Pursuant to the Merger, (i) the
Articles of Incorporation of the Surviving Corporation shall be amended and
restated at and as of the Effective Time to be identical to the Articles of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, until thereafter amended as provided by law, except that Article 1 of the
Articles of Incorporation shall be changed so that the name of the Surviving
Corporation shall be "Valley Resources, Inc." and (ii) the By-laws of the
Surviving Corporation shall be amended and restated at and as of the Effective
Time to be identical to the By-laws of Merger Sub, as in effect immediately
prior to the Effective Time, until thereafter amended as provided by law, except
that the By-laws shall be changed so that the name of the Surviving Corporation
shall be "Valley Resources, Inc." Subject to the foregoing, the additional
effects of the Merger shall be as provided in Section 7-1.1-69 of the Rhode
Island Business Corporation Act (the "RIBCA").
Section 1.3 Effective Time of the Merger. On the Closing Date (as defined
in Section 3.1), with respect to the Merger, a duly executed Articles of Merger
complying with Section 7-1.1-65 of the RIBCA shall be filed with the Secretary
of the State of Rhode Island. The Merger shall become effective upon the
issuance of a Certificate of Merger by the Secretary of State of the State of
Rhode Island (the "Effective Time").
Section 1.4 Directors and Officers. The directors and officers of Merger
Sub immediately prior to the Effective Time shall be the directors and officers
of the Surviving Corporation and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Articles of Incorporation and By-laws of the Surviving
Corporation, or as otherwise provided by the RIBCA.
Section 1.5 Other Transactions. Immediately after the Effective Time, the
Surviving Corporation shall adopt an agreement and plan of merger pursuant to
which Valley Gas Company ("Valley"), a wholly-owned Subsidiary (as defined in
Section 4.1) of the Company, shall merge with and into the Surviving Corporation
on the Closing Date, with the Surviving Corporation being the surviving
corporation, by complying with the requirements of the RIBCA (the "Valley
Merger"). Immediately following the
1
<PAGE> 39
consummation of the Valley Merger, the Surviving Corporation shall adopt an
agreement and plan of merger pursuant to which Bristol and Warren Gas Company
("Bristol"), a wholly-owned Subsidiary of the Company, shall merge with and into
the Surviving Corporation on the Closing Date, with the Surviving Corporation
being the surviving corporation, by complying with the requirements of the RIBCA
(the "Bristol Merger"). Immediately following the consummation of the Bristol
Merger, Parent shall adopt an agreement and plan of merger pursuant to which the
Surviving Corporation shall merge with and into Parent on the Closing Date, with
Parent being the surviving corporation by complying with the requirements of the
RIBCA and the Delaware General Corporation Law (the "Company Merger"). The
Merger, the Bristol Merger, the Valley Merger and the Company Merger shall
hereinafter be referred to collectively as the "Mergers."
Section 1.6 Certificate of Incorporation; By-laws. Pursuant to the
Company Merger, the Restated Certificate of Incorporation of Parent, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of Parent until thereafter amended as provided by law and (ii) the
By-laws of Parent, as in effect immediately prior to the Effective Time, shall
be the By-laws of Parent until thereafter amended as provided by law.
Section 1.7 Directors and Officers. The directors and officers of Parent
immediately prior to the Effective Time will be the directors and officers of
Parent after consummation of the Company Merger, each to hold office in
accordance with Restated Certificate of Incorporation and By-laws of Parent.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of any
capital stock of the Company or Merger Sub:
(a) Shares of Merger Sub Stock. Each share of common stock, $1.00 par
value, of Merger Sub that is issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, $1.00 par value, of the Surviving
Corporation.
(b) Cancellation of Certain Company Common Stock. Each share of
common stock, $1.00 par value, of the Company (the "Company Common Stock")
that is owned by the Company as treasury stock and all shares of Company
Common Stock that are owned by Parent shall be canceled and shall cease to
exist, and no stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Subject to the provisions of
this Section 2.1, each share of Company Common Stock (which shall be deemed
to include without limitation each related associated preferred stock
purchase right (collectively, the "Rights") issued pursuant to the Rights
Agreement, dated as of June 18, 1991, between the Company and State Street
Bank and Trust Company, as Rights Agent (the "Company Rights Agreement"),
which will be terminated at the Effective Time (any reference in this
Agreement to Company Common Stock will be deemed to include without
limitation the associated Rights)), other than shares canceled pursuant to
Section 2.1(b), issued and outstanding immediately prior to the Effective
Time shall by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right of each holder thereof to
receive $25.00 in cash (the "Merger Consideration").
Section 2.2 Exchange of Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, Parent shall deposit with a bank or trust company as may be
selected by Parent and be reasonably acceptable to the Company (the "Exchange
Agent"), pursuant to an agreement in form and substance reasonably acceptable to
Parent and the Company, an amount of cash representing the aggregate Merger
Consideration.
(b) Exchange and Payment Procedures. As soon as practicable after the
Effective Time, Parent shall cause Parent's transfer agent and registrar, as
paying agent (the "Paying Agent"), to mail to each holder of record as of the
Effective Time of a certificate or certificates representing the shares of
Company Common
2
<PAGE> 40
Stock ("Company Certificates") that have been converted pursuant to Section
2.1(c): (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Company Certificates shall pass,
only upon actual delivery of the Company Certificates to the Paying Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for effecting the surrender of the Company
Certificates and receiving the Merger Consideration to which such holder shall
be entitled therefor pursuant to Section 2.1. Upon surrender of a Company
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with a duly executed letter of
transmittal and such other documents as the Paying Agent may require, the holder
of such Company Certificate shall be entitled to receive in exchange therefor
the Merger Consideration to which such holder is entitled in accordance with
Section 2.1(c), and the Company Certificate so surrendered shall forthwith be
canceled. If payment of the Merger Consideration is to be made to any person
other than the person in whose name the surrendered Company Certificate is
registered, it shall be a condition of payment that the Company Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other Taxes (as defined in Section 4.8) required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Company Certificate surrendered or shall have established to the
satisfaction of Parent that such Tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Company Certificate
(other than a certificate representing shares of Company Common Stock to be
canceled in accordance with Section 2.1(b)) shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration contemplated by Section 2.1. No interest will be paid
or will accrue on any cash payable to holders of Company Certificates pursuant
to the provisions of this Article II.
(c) Investment of Funds. The Exchange Agent shall invest the funds
representing the aggregate Merger Consideration, as directed by the Parent, in
(i) direct obligations of the United States of America, (ii) obligations for
which the full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest or (iii) commercial paper
rated the highest quality by either Moody's Investors Service, Inc. or Standard
and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.;
provided, however, that, notwithstanding anything to the contrary in this
Agreement, if the Exchange Agent is not able or refuses to so invest such funds,
the Parent may deposit such funds in trust with another bank or trust company
which has a net capital of not less than $100,000,000, as may be selected by
Parent, so long as the Exchange Agent is allowed to draw on such funds to the
extent required to pay the Merger Consideration. Any net earnings with respect
to such funds shall be the property of and paid over to Parent as and when
requested by Parent.
(d) Lost, Stolen or Destroyed Certificates. In the event any Company
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Company Certificate to be
lost, stolen or destroyed, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Company Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this Article II;
provided, however, that the person to whom the Merger Consideration is paid
shall, if required by Parent, as a condition precedent to the payment thereof,
give the Exchange Agent a bond in such sum as it may ordinarily require and
indemnify Parent in a manner satisfactory to it against any claim that may be
made against Parent with respect to the Company Certificate claimed to have been
lost, stolen or destroyed.
(e) Closing of Transfer Books. After the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no transfers on
the stock transfer books of the Surviving Corporation of shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Company Certificates are presented to Parent, they
shall be canceled and exchanged for the appropriate amount of Merger
Consideration as provided in Section 2.1 and in this Section 2.2.
(f) Termination of Exchange Agent. All funds held by the Exchange Agent
for payment to the holders of unsurrendered Company Certificates and unclaimed
at the end of one year from the Effective Time shall be returned to Parent,
after which time any holder of unsurrendered Company Certificates shall look as
a general creditor only to Parent for payment of such funds to which such holder
may be due, subject to applicable law.
3
<PAGE> 41
(g) Escheat. Neither the Surviving Corporation nor Parent shall be liable
to any holder of Company Common Stock for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. Any amounts remaining unclaimed by holders of any such shares of
Company Common Stock five years after the Effective Time (or such earlier date
immediately prior to the time at which such amounts would otherwise escheat to
or become property of any Governmental Authority (as defined in Section 4.4(c))
shall, to the extent permitted by applicable law, become the property of Parent,
free and clear of any claims or interest of any such holders or their
successors, assigns or personal representatives previously entitled thereto.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Hughes Hubbard & Reed LLP, New York, New York, at 10:00
a.m., Eastern time, on a date selected by Parent and reasonably satisfactory to
the Company which is no more than five business days following the date on which
the last of the conditions set forth in Article VIII hereof is fulfilled or, if
permissible, waived (other than conditions that by their nature are required to
be performed on the Closing Date, but subject to satisfaction of such
conditions), or at such other time and date and place as the Company and Parent
shall mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
Section 4.1 Organization And Qualification. The Company and each of its
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power and authority,
and has been duly authorized by all necessary approvals and orders of the Rhode
Island and all other regulatory authorities, in each such case, to own, lease
and operate its assets and properties to the extent owned, leased and operated
and to carry on its business as it is now being conducted and is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its assets and properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified and in good standing will not, when taken together with all
other such failures, have a material adverse effect (i) on the business,
properties, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole or (ii) on the ability of the Company and its
Subsidiaries to consummate the Mergers in accordance with this Agreement and the
Related Documents (as defined in Section 4.4(a)) (any such material adverse
effect being hereafter referred to as a "Company Material Adverse Effect"). As
used in this Agreement, the term "Subsidiary" of a person shall mean any
corporation or other entity (including partnerships and other business
associations) of which a majority of the outstanding capital stock or other
voting securities having the power under ordinary circumstances to elect
directors or similar members of the governing body of such corporation or entity
(or otherwise having the power to direct the business and policies of that other
corporation or other entity) shall at the time be held, directly or indirectly,
by such person.
Section 4.2 Subsidiaries. Section 4.2(i) of the Company Disclosure
Schedule (as defined in Section 7.6) sets forth a description of all
Subsidiaries and Joint Ventures (as defined below) of the Company and its
Subsidiaries, including the name of each such entity, the state or jurisdiction
of its incorporation or organization, the Company's or its Subsidiary'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(ii) of the
Company Disclosure Schedule, none of the Company's Subsidiaries is a "public
utility company," a "holding company," a "subsidiary company" or an "affiliate"
of any "public utility company" or of any "holding company" within the meaning
of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"). Except as set forth in Section
4.2(i) of the Company Disclosure Schedule, all of the issued and outstanding
shares of capital stock owned, directly or indirectly, by the
4
<PAGE> 42
Company of each Subsidiary or Joint Venture of the Company are validly issued,
fully paid, nonassessable and free of preemptive rights, and are owned, directly
or indirectly, by the Company free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever
(collectively, "Liens"), 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 the Company or any Subsidiary of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
its capital stock or obligating it to grant, extend or enter into any such
agreement or commitment. As used in this Agreement, the term "Joint Venture" of
a person shall mean any corporation or other entity (including partnerships and
other business associations) that is not a Subsidiary of such person, in which
such person or one or more of its Subsidiaries owns an equity interest, other
than equity interests held for passive investment purposes which are less than
2% of any class of the outstanding voting securities or equity of any such
entity.
Section 4.3 Capitalization. The authorized capital stock of the Company
consists of (i) 20,000,000 shares of Company Common Stock and (ii) 500,000
shares of preferred stock, $100 par value (the "Company Preferred Stock"). As of
the close of business on November 29, 1999, there were issued and outstanding
4,991,264 shares of Company Common Stock. No shares of Company Preferred Stock
are issued or outstanding. There are no shares of Company Common Stock or
Company Preferred Stock reserved for issuance upon exercise of outstanding
Company stock options or stock appreciation rights. All of the issued and
outstanding shares of the capital stock of the Company are validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in
Section 4.3 of the Company Disclosure Schedule, there are no outstanding
subscriptions, options, stock appreciation rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating the
Company or any Subsidiary of the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of the capital stock of the
Company or any Subsidiary of the Company, or obligating the Company or any of
its Subsidiaries to grant, extend or enter into any such agreement or
commitment.
Section 4.4 Authority; Non-contravention; Statutory Approvals; Compliance.
(a) Authority. The Company and each applicable Subsidiary of the Company
has all requisite corporate power and authority to enter into this Agreement and
the Related Documents and, subject to obtaining the Company Shareholders'
Approval (as defined in Section 4.12), the Company Required Statutory Approvals
(as defined in Section 4.4(c)) and the Legislative Actions (as defined in
Section 6.1(y)), to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Related Documents and the
consummation by the Company and its Subsidiaries of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company and its Subsidiaries, subject to
obtaining the Company Shareholders' Approval. This Agreement has been, and as of
the Closing the Related Documents to be executed by the Company and its
applicable Subsidiaries will be, duly and validly executed and delivered by the
Company or its applicable Subsidiary, as the case may be, and, assuming the due
authorization, execution and delivery by the other signatories hereto and
thereto, constitutes or will constitute, as the case may be, the valid and
binding obligations of the Company or its applicable Subsidiary, as the case may
be, enforceable against it in accordance with its terms, except to the extent
that enforceability may be limited by applicable bankruptcy, insolvency or other
laws affecting the enforcement of creditors' rights generally and subject to the
general principles of equity (regardless of whether enforcement is sought in a
court of law or equity). As used in this Agreement, the term (i) "Related
Documents" shall mean any Contract provided for in this Agreement to be entered
into by one or more of the parties hereto or their respective Subsidiaries in
connection with the Mergers, and (ii) "Contract" shall mean any agreement,
contract, document, instrument, obligation, promise, commitment or undertaking
(whether written or oral) to which any person is a party or by which any person
or its assets may be bound.
(b) Non-Contravention. The execution and delivery of this Agreement and
the Related Documents by the Company and its Subsidiaries do not, and the
consummation of the transactions contemplated hereby and thereby will not,
violate, conflict with, or result in a breach of any provision of, or constitute
a default (with notice or lapse of time) under, or result in the termination or
modification of, or accelerate the performance
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<PAGE> 43
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 upon any of the properties or assets of the Company or any of its
Subsidiaries or any of its Joint Ventures (any such violation, conflict, breach,
default, right of termination, modification, cancellation or acceleration, loss
or creation, a "Violation" with respect to the Company, its Subsidiaries and
Joint Ventures) pursuant to any provisions of (i) the articles of incorporation,
by-laws or similar governing documents of the Company, subject to Section
4.4(b)(i) of the Company Disclosure Schedule, any of its Subsidiaries or any of
its Joint Ventures, (ii) subject to obtaining the Company Required Statutory
Approvals and the receipt of the Company Shareholders' Approval, any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority applicable to the Company, any
of its Subsidiaries or any of its Joint Ventures, or any of their respective
properties or assets or (iii) subject to obtaining the third-party consents or
other approvals set forth in Section 4.4(b)(iii) of the Company Disclosure
Schedule (the "Company Required Consents"), any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease,
commitment, security agreement, loan agreement, or other instrument, obligation,
agreement or other Contract of any kind to which the Company, any of its
Subsidiaries or any of its Joint Ventures is a party or by which any of such
persons or any of their properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such Violations as would not have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 4.4(c) of the
Company Disclosure Schedule (the "Company Required 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 and the Related Documents by the Company and its
Subsidiaries or Joint Ventures or the consummation by the Company and its
Subsidiaries or Joint Ventures of the transactions contemplated hereby and
thereby, the failure to obtain, make or give which are, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect, it being
understood that references in this Agreement to "obtaining" such Company
Required Statutory Approvals shall mean making such declarations, filings or
registrations, giving such notices, obtaining such authorizations, consents or
approvals and having such waiting periods expire as are necessary to avoid a
violation of law.
(d) Compliance; Contracts. Except as set forth in Section 4.10 of the
Company Disclosure Schedule, or as disclosed in the Company SEC Reports (as
defined in Section 4.5) delivered to Parent prior to the date of this Agreement,
neither the Company nor any of its Subsidiaries nor any of its Joint Ventures is
in violation of, is under investigation with respect to any violation of, or has
been given notice of, or been charged with any violation of, or failure to
comply with, any law, statute, order, rule, regulation, tariff, franchise
agreement, principle of common law, ordinance or judgment (including, without
limitation, any applicable Environmental Law, as defined in Section 4.10(i)(ii))
of any Governmental Authority except for violations that, individually and in
the aggregate, do not have a Company Material Adverse Effect. The Company and
its Subsidiaries and Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to conduct
their respective businesses and to own, operate and vote all of their respective
assets as currently conducted in all respects, except those which the failure to
obtain would not, individually or in the aggregate, have a Company Material
Adverse Effect. Neither the Company nor any of its Subsidiaries nor any of its
Joint Ventures nor to the Knowledge (as defined below) of any of the foregoing,
any other party thereto, is in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
or is occurring which, with lapse of time or action by a third party, could
result in a default by any party thereto under, (i) its articles of
incorporation or by-laws or similar governing document or (ii) any commitment,
deed of trust, franchise, permit, concession, security agreement, obligation,
agreement, indenture, mortgage, loan agreement, note, lease, bond, or other
Contract, license, approval or other instrument to which it is a party or by
which it is bound or to which any of its property is subject, except for
breaches, violations or defaults that, individually and in the aggregate, do not
have a Company Material Adverse Effect. Set forth in Section 4.4(d) of the
Company Disclosure Schedule is a list as the date hereof of all Contracts to
which any of the Company or any of its Subsidiaries is a party involving a total
commitment by or to any party thereto of more than $125,000 on an annual basis
or more than $500,000 on its remaining term which cannot be terminated on no
more than sixty (60) days' notice without penalty or additional cost to
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<PAGE> 44
the Company or its applicable Subsidiary as the terminating party. Except as
disclosed in the Company SEC Reports delivered to Parent prior to the date of
this Agreement, and with such exceptions as are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect, each
Contract to which the Company or any of its Subsidiaries is a party is in full
force and effect and constitutes the valid and binding obligation of the parties
thereto, enforceable against such party in accordance with its terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
insolvency or other laws affecting the enforcement of creditors' rights
generally and subject to the general principles of equity (regardless of whether
enforcement is sought in a court of law or equity). For purposes of this
Agreement, (i) an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter and (ii) a person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director or officer of such person or any Subsidiary of it has
actual knowledge after reasonable inquiry of such fact or other matter.
(e) Except as set forth in Section 4.4(e) of the Company Disclosure
Schedule, there is no "non-competition" or other similar Contract that restricts
the ability of the Company or any of its Affiliates to conduct business in any
geographic area or that would reasonably be likely to restrict Parent or any of
its Affiliates to conduct business in any geographic area. As used in this
Agreement, the term "Affiliate" shall mean, with respect to any person, any
other person that directly, or through one or more intermediaries, controls or
is controlled by or is under common control with such first person. As used in
this definition, "control" (including with correlative meanings, "controlled by"
and "under common control with") shall mean possession, directly or indirectly,
or power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
Section 4.5 Reports and Financial Statements. The filings required to be
made by the Company and its Subsidiaries and Joint Ventures since January 1,
1996 under the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the 1935 Act
and applicable state public utility laws and regulations have been filed with
the Securities and Exchange Commission (the "SEC") or the appropriate state
public utilities commission, as the case may be, including all forms,
statements, financial statements, reports, agreements (oral or written) and all
documents, exhibits, schedules, amendments and supplements appertaining thereto,
were duly made and complied (or, with respect to such documents to be filed
after the date of this Agreement, will be duly made and will comply), as of
their respective dates, in all material respects with all applicable
requirements of the appropriate statute and the rules and regulations
thereunder. The Company has made available to Parent a true and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by the Company with the SEC since January 1, 1997 (as such documents,
including those filed after the date of this Agreement, have since the time of
their filing been amended, the "Company SEC Reports"). As of their respective
dates, the Company SEC Reports did (or will) not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of the Company included in
the Company SEC Reports (collectively, the "Company Financial Statements") have
been (or will be) prepared in accordance with U.S. generally accepted accounting
principles applied on a consistent basis ("GAAP") (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present (or will fairly
present) the consolidated financial position of the Company and its Subsidiaries
as of the dates thereof and the consolidated results of operations and cash
flows for the periods then ended. True, accurate and complete copies of the
articles of incorporation and by-laws of the Company, each of its Subsidiaries
and each of its Joint Ventures have been made available to Parent. The Company
SEC Reports delivered to Parent prior to the date of this Agreement accurately
disclose all material regulation of the Company and each of its Subsidiaries and
Joint Ventures that relates to the utility business of any of the Company and
each of its Subsidiaries and Joint Ventures.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports delivered to Parent prior to the date of this Agreement,
from August 31, 1999, the Company and each of its Subsidiaries have conducted
their businesses only in the ordinary course of business consistent with past
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<PAGE> 45
practice, and there has not been, and no fact or condition exists which,
individually or in the aggregate, would have or, insofar as reasonably can be
foreseen, could have, a Company Material Adverse Effect.
Section 4.7 Litigation. Except as disclosed in the Company SEC Reports
delivered to Parent prior to the date of this Agreement or as set forth in
Section 4.8(g) or Section 4.10 of the Company Disclosure Schedule, (a) there are
no claims, suits, actions or proceedings pending or, to the Knowledge of the
Company and its Subsidiaries, threatened, nor are there any investigations,
requests for information, or reviews pending or, to the Knowledge of the Company
and its Subsidiaries, threatened against, relating to or affecting the Company
or any of its Subsidiaries, and (b) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any of its Subsidiaries, except for any of the foregoing under clauses (a)
and (b) that, individually and in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. There is no claim, suit,
action or proceeding pending that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, the Mergers
or any of the transactions contemplated hereby.
Section 4.8 Tax Matters. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipts, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties (civil or criminal) on or
additions to any such taxes. "Tax Return," as used in this Agreement, means a
report, return or other written information required to be supplied to a
governmental entity with respect to Taxes.
(a) Filing of Timely Tax Returns. Except as set forth in Section
4.8(a) of the Company Disclosure Schedule, the Company and each of its
Subsidiaries have duly filed (or there has been filed on its behalf) within
the time prescribed by law all material Tax Returns (including withholding
Tax Returns) required to be filed by each of them under applicable law. Any
such Tax Returns were and are in all material respects true, complete and
correct.
(b) Payment of Taxes. Except as set forth in Section 4.8(a) of the
Company Disclosure Schedule, the Company and each of its Subsidiaries have,
within the time and in the manner prescribed by law, paid all Taxes
(including withholding Taxes) required to have been paid except for those
contested in good faith and for which adequate reserves have been taken.
(c) Tax Reserves. All material Taxes payable by the Company and its
Subsidiaries for all taxable periods and portions thereof through the date
of the most recent financial statements contained in the Company Financial
Statements delivered to Parent prior to the date of this Agreement are
properly reflected in such financial statements in accordance with GAAP,
and the unpaid Taxes of the Company and its Subsidiaries do not exceed the
amount shown therefor on such financial statements, adjusted for the Taxes
incurred in the ordinary course of business through the Effective Time.
(d) Extensions of Time for Filing Tax Returns. Except as set forth in
Section 4.8(d) of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries have requested any extension of time within which
to file any material Tax Return, which Tax Return has not since been filed.
(e) Waivers of Statute of Limitations. Neither the Company nor any of
its Subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(f) Expiration of Statute of Limitations. The statute of limitations
for the assessment of all material Taxes has expired for all applicable
material Tax Returns of the Company and each of its Subsidiaries, or those
material Tax Returns have been examined by the appropriate taxing
authorities for all periods through the date hereof, and no deficiency for
any material Taxes has been proposed, asserted or assessed against the
Company or any of its Subsidiaries that has not been resolved and paid in
full.
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(g) Audit, Administrative and Court Proceedings. Except as set forth
in Section 4.8(g) of the Company Disclosure Schedule, no material claims,
audits, disputes, controversies, examinations, investigations or other
proceedings are presently pending, or, to the Knowledge of the Company and
its Subsidiaries, threatened, with regard to any Taxes or Tax Returns of
the Company or any of its Subsidiaries.
(h) Tax Rulings. Neither the Company nor any of its Subsidiaries has
received a Tax Ruling (as defined below) or entered into a Closing
Agreement (as defined below) with any taxing authority that would have a
continuing effect after the Closing Date. "Tax Ruling," as used in this
Agreement, shall mean a written ruling of a taxing authority relating to
Taxes. "Closing Agreement," as used in this Agreement, shall mean a written
and legally binding agreement with a taxing authority relating to Taxes.
(i) Availability of Tax Returns. The Company has provided or made
available to Parent complete and accurate copies of (i) all Tax Returns,
and any amendments thereto, filed by the Company or any of its Subsidiaries
(or any predecessors thereto) for all open years, (ii) all audit reports
received from any taxing authority relating to any Tax Return filed by the
Company or any of its Subsidiaries and (iii) any Closing Agreements entered
into by the Company or any of its Subsidiaries with any taxing authority.
(j) Tax Sharing Agreements. Except as set forth in Section 4.8(j) of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any agreement, understanding or arrangement
relating to allocating or sharing of Taxes.
(k) Liability for Others. Neither the Company nor any of its
Subsidiaries has any liability for any material Taxes of any person other
than the Company and its Subsidiaries (i) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), (ii) as
a transferee or successor, (iii) by contract or (iv) otherwise.
(1) Code Section 897. To the Knowledge of the Company and its
Subsidiaries after due inquiry, no foreign person owns or has owned
beneficially more than five percent of the total fair market value of
Company Common Stock during the applicable period specified in Section
897(c)(1)(A)(ii) of the Internal Revenue Code of 1986, as amended (the
"Code").
(m) Code Section 280G. Neither the Company nor any of its
Subsidiaries is a party to any agreement that could result in a
non-deductible expense under Section 280G of the Code.
(n) Code Section 481. Neither the Company nor any of its Subsidiaries
has agreed to or is required to make any adjustment pursuant to Section 481
of the Code.
(o) Code Section 341(f). Neither the Company nor any of its
Subsidiaries has made an election under Section 341(f) of the Code.
(p) Code Section 355. Neither the Company nor any of its Subsidiaries
has made a distribution or has been the subject of a distribution intended
to qualify under Section 355 of the Code.
Section 4.9 Employee Matters; ERISA.
(a) For purposes of this Section 4.9, the following terms have the
definitions set forth below:
(i) "Controlled Group Liability" means any and all liabilities (a)
under Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (b) as a result of a failure to comply with the minimum
funding requirements of Section 302 of ERISA or Section 412 of the Code,
(c) under Section 4971 of the Code, and (d) as a result of a failure to
comply with the continuation coverage requirements of Section 601 et seq.
of ERISA and Section 4980B of the Code, other than such liabilities that
arise solely out of, or relate solely to, the Employee Benefit Plans.
(ii) "ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or
that is a member of the same "controlled group" as the first entity, trade
or business pursuant to Section 4001(a)(14) of ERISA.
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(iii) An "Employee Benefit Plan" means any employee benefit plan,
program, policy, practice, agreement or other arrangement providing
benefits to any current or former employee, officer or director of the
Company or any of its Subsidiaries or any beneficiary or dependent thereof
that is sponsored or maintained by the Company or any of its Subsidiaries
or to which the Company or any of its Subsidiaries contributes or is
obligated to contribute, whether or not written, including without
limitation any employee welfare benefit plan within the meaning of Section
3(l) of ERISA, any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and
any bonus, incentive, deferred compensation, vacation, sick leave,
disability, stock purchase, stock option, stock award, phantom stock, stock
appreciation right, severance, employment, change of control or fringe
benefit plan, program or agreement.
(iv) A "Plan" means any Employee Benefit Plan other than a
Multiemployer Plan.
(v) A "Multiemployer Plan" means any "multiemployer plan" within the
meaning of Section 4001(a)(3) or 3(37) of ERISA.
(vi) "Withdrawal Liability" means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan,
as those terms are defined in Part I of Subtitle E of Title IV of ERISA or
under the terms of the Multiemployer Plan.
(b) Section 4.9(b) of the Company Disclosure Schedule includes a complete
list of all Employee Benefit Plans and, with respect to executive welfare
benefit plans and nonqualified pension, savings and deferred compensation plans,
states the number of employees participating in or covered by such plans. Such
list identifies all Plans which are funded with or provide benefits in the form
of Company Common Stock or other securities of the Company or its Subsidiaries.
(c) With respect to each Plan, the Company has delivered to Parent a true,
correct and complete copy of: (i) each writing constituting a part of such Plan,
including without limitation all plan documents, trust agreements, and insurance
contracts and other funding vehicles, and a description of each unwritten plan;
(ii) the three most recent Annual Reports (Form 5500 Series) and accompanying
schedules, if any; (iii) the current summary plan description and any material
modifications thereto, if required to be furnished under ERISA; (iv) the most
recent annual financial report, if any; (v) the three most recent actuarial
reports, if any; (vi) the most recent determination letter from the Internal
Revenue Service (the "IRS"), if any; (vii) the three most recent Pension Benefit
Guaranty Corporation ("PBGC") Forms 1; and (viii) loan documents in connection
with loans by the Plan. Prior to the date of this Agreement, the Company has
delivered to Parent a true, correct and complete copy of each current employee
handbook relating to employees of the Company or any of its Subsidiaries. Except
as specifically provided in the foregoing documents delivered to Parent, there
are no amendments to any Plan that have been adopted or approved nor has the
Company or any of its Subsidiaries undertaken to make any such amendments or to
adopt or approve any new Plan.
(d) Section 4.9(b) of the Company Disclosure Schedule identifies each Plan
that is intended to be a "qualified plan" within the meaning of Section 401(a)
of the Code ("Qualified Plans"). The IRS has issued a favorable determination
letter with respect to each Qualified Plan and the related trust that has not
been revoked, and, to the Knowledge of the Company and its Subsidiaries, nothing
has occurred since the date of such determination letter which cannot be
remedied by timely amendment and which would adversely affect the qualified
status of such plan. Section 4.9(b) of the Company Disclosure Schedule
identifies each Plan or related trust which is intended to meet the requirements
of Code Section 501(c)(9) (a "VEBA"), and except as disclosed in Section 4.9(d)
of the Company Disclosure Schedule, each such VEBA meets such requirements, has
received a favorable determination letter from the IRS, and provides no
disqualified benefits (as such term is defined in Code Section 4976(b)).
(e) All contributions required to be made to any Plan by applicable law or
regulation or by any Plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Plan,
have been timely made or paid in full. Each Plan that is an employee welfare
benefit plan under Section 3(l) of ERISA (i) is funded through an insurance
company contract or a contract with a health maintenance organization, (ii) is,
or is funded through, a VEBA identified as such in Section 4.9(b) of the Company
Disclosure Schedule, or (iii) is unfunded.
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(f) With respect to each Employee Benefit Plan, the Company and its
Subsidiaries have substantially complied, and are now in substantial compliance,
with all provisions of ERISA, the Code and all laws and regulations applicable
to such Employee Benefit Plans and each Plan has been administered in all
material respects in accordance with its terms and the terms of any applicable
collective bargaining agreement. There is not now, nor do any circumstances now
exist that could reasonably be expected to give rise to, any requirement for the
posting of security with respect to a Plan or the imposition of any Lien on the
assets of the Company or any of its Subsidiaries under ERISA or the Code. To the
Knowledge of the Company and its Subsidiaries, no non-exempt prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) or
breach of fiduciary duty has occurred with respect to any Plan, and no event has
occurred which would subject the Company or Parent to any material liability for
any excise tax, tax on unrelated business taxable income, penalty, or fine under
ERISA or the Code.
(g) With respect to each Plan that is subject to Title IV of ERISA, the
minimum funding requirements of Section 302 of ERISA or Section 412 of the Code,
or Section 4971 of the Code: (i) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived; (ii) as of August 31, 1999, the fair market value
of the assets of each such Plan that is a defined benefit plan equals or exceeds
the "projected benefit obligation" (within the meaning of Financial Accounting
Standard No. 87) under such Plan, based upon the actuarial assumptions set forth
in the most recent actuarial report for such Plan; (iii) no reportable event
within the meaning of Section 4043(c) of ERISA for which the 30-day notice
requirement has not been waived has occurred since December 31, 1994 in respect
of any such Plan which is a defined benefit Plan; (iv) all premiums to the PBGC
have been timely paid in full; (v) no liability (other than for premiums to the
PBGC not yet due and for the payment of benefits and contributions in the
ordinary course) under Title IV of ERISA has been incurred by the Company or any
of its Subsidiaries; (vi) to the Knowledge of the Company and its Subsidiaries,
the PBGC has not instituted proceedings to terminate any such Plan and no
condition exists that presents a material risk that such proceedings will be
instituted or which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such Plan;
and (vii) neither the Company nor any of its Subsidiaries has taken any action
to terminate such Plan.
(h) No Employee Benefit Plan is a Multiemployer Plan or a plan that has two
or more contributing sponsors at least two of which are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple Employer
Plan"). None of the Company and its Subsidiaries nor any of their respective
ERISA Affiliates has, at any time during the last six years, contributed to or
been obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan. None of the Company and its Subsidiaries nor any of their respective ERISA
Affiliates has incurred any Withdrawal Liability or other liability that has not
been satisfied in full.
(i) There does not now exist, nor do any circumstances exist that could
reasonably be expected to result in, any Controlled Group Liability to the
Company, any of its Subsidiaries, or Parent with respect to any employee benefit
plan of any ERISA Affiliate of the Company or any its Subsidiaries. Without
limiting the generality of the foregoing, neither the Company nor any of its
Subsidiaries, nor any of their respective ERISA Affiliates, has engaged in any
transaction described in Section 4069 or Section 4204 or 4212(c) of ERISA since
December 31, 1993.
(j) Except as set forth in Section 4.9(j) of the Company Disclosure
Schedule and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA or applicable state law, the
Company and its Subsidiaries have no material liability for life, health,
medical or other welfare benefits to former employees or beneficiaries or
dependents of former employees.
(k) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will (either alone
or in conjunction with any other event) cause any amount to be payable, cause
the accelerated funding, vesting, exercisability, payment or delivery of, or
increase the amount or value of, any payment or benefit to any current or former
employee, officer or director of the Company or any of its Subsidiaries.
(l) Section 4.9(l)(i) of the Company Disclosure Schedule sets forth a list
as of no more than thirty (30) days prior to the date of this Agreement, of all
the present officers and employees of the Company and its
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<PAGE> 49
Subsidiaries, indicating each employee's base salary or wage rate and
identifying those who are union employees and those who are part-time employees.
Except as set forth in Section 4.9(l)(ii) of the Company Disclosure Schedule, as
of the date of this Agreement, no labor union or other collective bargaining
unit has been certified or recognized by the Company or any of its Subsidiaries.
The Company has provided to Parent a true, complete and correct copy of each
collective bargaining agreement covering employees of the Company and its
Subsidiaries. No labor organization or group of employees of the Company or any
of its Subsidiaries has made a pending demand for recognition or certification,
and there are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or, to the Knowledge of
the Company or any of its Subsidiaries, threatened to be brought or filed with
the National Labor Relations Board or any other labor relations tribunal or
authority. There are no organizing activities, strikes, work stoppages,
slowdowns, lockouts, arbitrations or material grievances, or other material
labor disputes pending or, to the Knowledge of the Company or any of its
Subsidiaries, threatened against or involving the Company or any of its
Subsidiaries. Each of the Company and its Subsidiaries is in compliance in all
material respects with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health.
(m) There are no pending or, to the Knowledge of the Company and its
Subsidiaries, threatened claims (other than claims for benefits in the ordinary
course), lawsuits or arbitrations, and, to the Knowledge of the Company and its
Subsidiaries, there is no set of circumstances which may reasonably give rise to
a claim or lawsuit, against the Plans, any fiduciaries thereof with respect to
their duties to the Plans, or the assets of any of the trusts under any of the
Plans which could reasonably be expected to result in a material liability. No
Plan is the subject of any pending, or, to the Knowledge of the Company and its
Subsidiaries, threatened, governmental audit or investigation.
(n) Except as set forth in Section 4.9(n) of the Company Disclosure
Schedule, the Company and its Subsidiaries, as applicable, have reserved the
right to unilaterally amend and terminate each Plan which is an "employee
welfare benefit plan," as such term is defined in Section 3(1) of ERISA, which
provides health or life insurance benefits after termination of employment.
(o) Except as set forth in Section 4.9(o) of the Company Disclosure
Schedule, as of the date of this Agreement, none of the Company and its
Subsidiaries is a party to any employment agreement with any employee pertaining
to any of the Company and its Subsidiaries.
Section 4.10 Environmental Protection. Except as set forth in Section
4.10 of the Company Disclosure Schedule or as disclosed in the Company SEC
Reports delivered to Parent prior to the date of this Agreement:
(a) Compliance. Except where the failure to be in such compliance
would not, individually or in the aggregate, have a Company Material
Adverse Effect, (i) the Company and each of its Subsidiaries are in
compliance with all applicable Environmental Laws (as defined in Section
4.10(i)(ii)) and (ii) neither the Company nor any of its Subsidiaries has
received any communication from any Governmental Authority or any written
communication from any other person that alleges that the Company or any of
its Subsidiaries is not in compliance with applicable Environmental Laws.
(b) Environmental Permits. The Company and each of its Subsidiaries
has obtained or has applied for all environmental, health and safety
permits and governmental authorizations (collectively, the "Environmental
Permits") necessary for the construction of its facilities or the conduct
of its operations, and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been timely filed and is
pending agency approval, and the Company and its Subsidiaries are in
compliance with all terms and conditions of the Environmental Permits, and
the Company reasonably believes that any transfer, renewal or reapplication
for any Environmental Permit required as a result of the Mergers can be
accomplished in the ordinary course of business, except where the failure
to obtain or to be in such compliance would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(c) Environmental Claims. There are no Environmental Claims (as defined
in Section 4.10(i)(i)) pending or, to the Knowledge of the Company and its
Subsidiaries, threatened
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(i) against the Company or any of its Subsidiaries or Joint Ventures, or
(ii) against any real or personal property or operations that the Company
or any of its Subsidiaries owns, leases or manages, in whole or in part,
that, if adversely determined, would have, individually or in the
aggregate, a Company Material Adverse Effect.
(d) Releases. Except for Releases of Hazardous Materials the
aggregate liability for which would not have a Company Material Adverse
Effect, there have been no Releases (as defined in Section 4.10(i)(iv)) of
any Hazardous Material (as defined in Section 4.10(i)(iii)) that would be
reasonably likely to (i) form the basis of any Environmental Claim against
the Company or any of its Subsidiaries or Joint Ventures, or (ii) to the
Knowledge of the Company and its Subsidiaries, cause damage or diminution
of value to any of the operations or real properties owned, leased or
managed, in whole or in part, by the Company or any of its Subsidiaries or
Joint Ventures.
(e) Predecessors. The Company and its Subsidiaries have no Knowledge
of any Environmental Claim pending or threatened, or of any Release of
Hazardous Materials that would be reasonably likely to form the basis of
any Environmental Claim, in each case against any person or entity
(including, without limitation, any predecessor of the Company or any of
its Subsidiaries) whose liability the Company or any of its Subsidiaries or
Joint Ventures retained, succeeded to, acquired, or assumed, either
contractually or by operation of law, or against any real or personal
property which the Company or any of its Subsidiaries or Joint Ventures
formerly owned, leased or managed, in whole or in part, except for Releases
of Hazardous Materials the liability for which would not have, individually
or in the aggregate, a Company Material Adverse Effect.
(f) Listed Sites. There have been no Hazardous Materials generated by
the Company or any of its Subsidiaries or Joint Ventures (or predecessors
of any of them) that have been disposed of or come to rest at any site that
has been included in any published federal, state, or local priority list
of hazardous or toxic waste sites.
(g) Environmental Reports. A copy of all environmental
investigations, studies, audits, tests, reviews or analyses relating to the
Company or any of its Subsidiaries or Joint Ventures conducted by any of
them or any consultant engaged by any of them within the last three years
have been provided to Parent prior to the date of this Agreement.
(h) Liens. The real property owned, operated or leased by the Company
and its Subsidiaries is not subject to any Lien, securing the costs of
environmental remediation, arising under Environmental Laws.
(i) 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, requests for information,
proceedings or notices of noncompliance or violation by any person or
entity (including any Governmental Authority) alleging potential
liability (including, without limitation, potential responsibility for
or liability for enforcement costs, investigatory costs, cleanup costs,
governmental response costs, removal costs, remedial costs,
natural-resources damages, property damages, personal injuries, fines or
penalties) arising out of, based on or resulting from (A) the presence,
or Release or threatened Release into the environment, of any Hazardous
Materials at any location, whether or not owned, operated, leased or
managed by the Company, Parent or any of their respective Subsidiaries
or Joint Ventures; or (B) circumstances forming the basis of any
violation, alleged violation of, or failure to comply with any
Environmental Law; or (C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local laws,
rules, ordinances and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), protection of human health as it
relates to the environment, or occupational health and safety,
including, without limitation, laws and regulations relating to Releases
or threatened Releases of Hazardous Materials, damage to the
environment, resource extraction or other activities that could have
impact on the Environment, or the
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manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, coal tar residue, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs") in regulated concentrations; and (B)
any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"hazardous constituents" or words of similar import, under any
Environmental Law; and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under
any Environmental Law in a jurisdiction in which the Parent, the Company
or any of their Subsidiaries or Joint Ventures operates or has stored,
treated or disposed of Hazardous Materials.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
Section 4.11 Regulation as a Utility. Except as set forth in Section 4.11
of the Company Disclosure Schedule, neither the Company nor any "associate
company," "subsidiary company" or "affiliate" (as such terms are defined in the
1935 Act) of the Company is subject to regulation as (a) a "holding company," a
"public-utility company," a "subsidiary company" or an "affiliate" of a "holding
company," within the meaning of Sections 2(a)(7), 2(a)(5), 2(a)(8) and 2(a)(11),
respectively, of the 1935 Act, (b) a "public utility" under the Power Act, (c) a
"natural-gas company" under the Natural Gas Act or (d) a public utility or
public service company (or similar designation) by any state in the United
States other than Rhode Island or by any foreign country.
Section 4.12 Vote Required. The approval of the Merger by a majority of
the shares entitled to be voted by the holders of Company Common Stock (the
"Company Shareholders' Approval") is the only vote of the holders of any class
or series of the capital stock of the Company or any of its Subsidiaries
required to approve this Agreement, the Mergers and the other transactions
contemplated hereby.
Section 4.13 Opinion of Financial Advisor. The Company has received the
opinion of PaineWebber Incorporated, dated as of the date of this Agreement, to
the effect that the Merger Consideration is fair from a financial point of view
to the holders of Company Common Stock, and a copy of such opinion will be
provided to Parent promptly after the execution of this Agreement.
Section 4.14 Ownership of Parent Common Stock. The Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of common stock of Parent.
Section 4.15 Intellectual Property. Neither the Company nor any of its
Subsidiaries has any Knowledge of (i) any infringement or claimed infringement
by the Company or any of its Subsidiaries of any patent or patent license
rights, trademarks or copyrights of others or (ii) any infringement of the
patent or patent license rights, trademarks or copyrights owned by or under
license to the Company or any of its Subsidiaries, except for any such
infringements of the type described in clause (i) or (ii) that are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
Section 4.16 Title to Assets. Except as disclosed in the Company SEC
Reports delivered to Parent prior to the date of this Agreement, none of the
assets of the Company or any of its Subsidiaries are subject to any Lien.
Section 4.17 Indebtedness. All outstanding principal amounts of
indebtedness for borrowed money of the Company and its Subsidiaries as of
November 23, 1999 are set forth in Section 4.17 of the Company Disclosure
Schedule.
Section 4.18 Machinery and Equipment. Except for normal wear and tear,
and with such other exceptions as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse
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Effect, the machinery and equipment of the Company and its Subsidiaries are in
good operating condition and in a state of reasonable maintenance and repair.
Section 4.19 Insurance. Section 4.19 of the Company Disclosure Schedule
sets forth a list of all policies of insurance held by the Company and its
Subsidiaries as of the date of this Agreement. Since September 30, 1997, the
assets and the business of the Company and its Subsidiaries have been
continuously insured with what the Company reasonably believes are reputable
insurers against all risks and in such amounts normally insured against by
companies of the same type and in the same line of business as the Company and
its Subsidiaries. No notice of cancellation, non-renewal or material increase in
premiums has been received by any of the Company and its Subsidiaries with
respect to such policies, and none of the Company and its Subsidiaries has
Knowledge of any fact or circumstance that could reasonably be expected to form
the basis for any cancellation, non-renewal or material increase in premiums,
except for such cancellations, non-renewals and increases which are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. None of the Company and its Subsidiaries is in default with
respect to any provision contained in any such policy or binder nor has there
been any failure to give notice or to present any claim relating to the business
or the assets of the Company and its Subsidiaries under any such policy or
binder in a timely fashion or in the manner or detail required by the policy or
binder, except for such defaults or failures which are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse Effect.
There are no outstanding unpaid premiums (except premiums not yet due and
payable), and no notice of cancellation or renewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company and its Subsidiaries, except for such non-payments of premiums,
cancellations, renewals or disallowances which are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect.
Section 4.20 Regulatory Proceedings. Except as disclosed in the Company
SEC Reports delivered to Parent prior to the date of this Agreement, other than
purchase gas adjustment provisions, none of the Company or its Subsidiaries all
or part of whose rates or services are regulated by a Governmental Authority (a)
has rates that have been or are being collected subject to refund, pending final
resolution of any rate proceeding pending before a Governmental Authority or on
appeal to the courts, or (b) is a party to any rate proceedings before a
Governmental Authority that are, individually or in the aggregate, reasonably
likely to result in any orders having a Company Material Adverse Effect.
Section 4.21 The Company Rights Agreement. Prior to the date of this
Agreement, the Company has delivered to Parent a true and complete copy of the
Company Rights Agreement. The consummation of the transactions contemplated by
this Agreement will not result in the triggering of any right or entitlement of
the holders of the Company Common Stock or other Company securities under the
Company Rights Agreement. Neither the Company nor any of its Subsidiaries is a
party to any agreement similar to the Company Rights Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all requisite corporate power and
authority, and Parent has been duly authorized by all necessary approvals and
orders of the Florida, Missouri, Pennsylvania and Texas regulatory authorities
and the Federal Energy Regulatory Commission (the "FERC"), 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.
Section 5.2 Authority; Statutory Approvals.
(a) Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and, subject to the applicable
Parent Required Statutory Approvals (as defined in Section 5.2(b)), to
consummate the transactions contemplated hereby. The execution and delivery of
this
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Agreement, and the consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the other signatories hereto,
constitutes a valid and binding obligation of Parent and Merger Sub enforceable
against them in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and subject to the
general principles of equity (regardless of whether enforcement is sought in a
court of law or equity).
(b) Statutory Approval. Except as described in Section 5.2(b) of the
Parent Disclosure Schedule (as defined in Section 7.6) (the "Parent Required
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 Parent or Merger
Sub or the consummation by Parent or Merger Sub of the transactions contemplated
hereby, the failure to obtain, make or give which would have, individually or in
the aggregate, a material adverse effect on the ability of Parent and Merger Sub
to consummate the Mergers in accordance with this Agreement (any such material
adverse effect being hereafter referred to as a "Parent Material Adverse
Effect"), it being understood that references in this Agreement to "obtaining"
such Parent Required Statutory Approvals shall mean making such declarations,
filings or registrations; giving such notices; obtaining such authorizations,
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of law.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Company. From the date hereof until the
Effective Time or earlier termination of this Agreement, the Company agrees as
follows, as to itself and to each of its Subsidiaries, except as expressly
consented to in writing by Parent:
(a) Ordinary Course of Business. The Company shall, and shall cause
its Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to (i) not make or
permit any material change in the general nature of its business, (ii)
preserve intact their present business organizations and goodwill, preserve
the goodwill and relationships with customers, suppliers and others having
business dealings with them, (iii) subject to prudent management of
workforce needs and ongoing programs currently in force, keep available the
services of their present officers and employees as a group, (iv) maintain
and keep material properties and assets in as good repair and condition as
at present, subject to ordinary wear and tear, and maintain supplies and
inventories in quantities consistent with past practice, and (v) preserve
all franchises, tariffs, certificates of public convenience and necessity,
licenses, authorizations and other governmental rights and permits.
(b) Dividends. The Company shall not, nor shall it permit any of its
Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any capital stock other than (A) dividends by a
wholly-owned Subsidiary of the Company to the Company or another
wholly-owned Subsidiary of the Company, and (B) regular dividends on
Company Common Stock with usual record and payment dates that do not exceed
the current rate of $0.75 per share of Company Common Stock per year, (ii)
split, combine or reclassify any of its capital stock or the capital stock
of any of its Subsidiaries or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock or the capital stock of any of its
Subsidiaries, or (iii) redeem, repurchase or otherwise acquire any shares
of its capital stock or the capital stock of any of its Subsidiaries, other
than 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.
(c) Issuance of Securities. Except as set forth in Section 6.1(c) of
the Company Disclosure Schedule, the Company shall not, nor shall it permit
any of its Subsidiaries to, issue, agree to issue,
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deliver, sell, award, pledge, dispose of or otherwise encumber or authorize
or propose the issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable
securities.
(d) Compliance With Law. The Company shall, and shall cause its
Subsidiaries to, comply in all material respects with all applicable legal
requirements and permits, including without limitation those relating to
the filing of reports and the payment of Taxes due to be paid prior to the
Closing, other than those contested in good faith with adequate reserves
set forth in the Company Financial Statements delivered to Parent prior to
the date of this Agreement.
(e) Charter Documents; Other Actions. The Company shall not, nor
shall it permit any of its Subsidiaries to, (i) amend or propose to amend
its respective articles of incorporation, by-laws or regulations, or
similar organizational documents or (ii) take or fail to take any other
action, which in any such case would reasonably be expected to prevent or
materially impede or interfere with the Mergers.
(f) Acquisitions. Except as disclosed in Section 6.1(f) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any
of its Subsidiaries to, acquire or agree to acquire, by merging or
consolidating with, or by purchasing an equity interest in or a portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or business organization or division thereof, or
otherwise acquire or agree to acquire any material amount of assets.
(g) Contracts. The Company and its Subsidiaries shall not enter into
any transaction or any Contract involving a total commitment by or to any
party thereto of more than $125,000 on a yearly basis or more than $500,000
on its remaining term which cannot be terminated on no more than 60 days'
notice without penalty or cost to the Company or any of its Subsidiaries as
a terminating party. Without limiting the prior sentence, the Company shall
not, except in the ordinary course of business consistent with past
practice, modify, amend, terminate, renew or fail to use reasonable
business efforts to renew any material Contract to which the Company or any
of its Subsidiaries is a party or waive, release or assign any material
rights or claims with respect thereto.
(h) Capital Expenditures. The Company shall not, nor shall it permit
any of its Subsidiaries to, make capital expenditures in an aggregate
amount in excess of the amount budgeted by the Company or its Subsidiaries
for capital expenditures as set forth in Section 6.1(h) of the Company
Disclosure Schedule.
(i) No Dispositions. The Company shall not, nor shall it permit any
of its Subsidiaries to, sell, lease, license, encumber or otherwise dispose
of, any of its respective assets, other than encumbrances or dispositions
in the ordinary course of business consistent with past practice.
(j) Indebtedness. The Company shall not, nor shall it permit any of
its Subsidiaries to, incur or guarantee any indebtedness (including any
debt borrowed or guaranteed or otherwise assumed including, without
limitation, the issuance of debt securities or warrants or rights to
acquire debt) or enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing other than
(i) short-term indebtedness in the ordinary course of business consistent
with past practice which is subject to redemption or prepayment at any time
at the option of the Company or its applicable Subsidiary on no more than
30 days' notice without any penalty or premium or (ii) arrangements between
the Company and its wholly-owned Subsidiaries or among its wholly-owned
Subsidiaries.
(k) Compensation, Benefits; Employees. Except as may be required by
applicable law or under existing Employee Benefit Plans or collective
bargaining agreements, as may be required to facilitate or obtain a
determination letter from the IRS that a plan is a Qualified Plan, or as
expressly contemplated by this Agreement, the Company shall not, nor shall
it permit any of its Subsidiaries to, (i) enter into, adopt or amend or
increase the amount or accelerate the payment or vesting of any benefit or
amount payable under any Employee Benefit Plan, or otherwise increase the
compensation or benefits of any director, officer or other employee of the
Company or any of its Subsidiaries, except for normal increases in
compensation and benefits (including incentive compensation) or actions in
the ordinary course of
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business, that are consistent with the Company's past practice of adjusting
compensation and benefits to reflect the average compensation and benefits
as determined by general industry or market surveys; provided that prior to
implementing any such increases on the basis of such surveys the Company
shall advise Parent of its intention so to increase compensation or
benefits and of the basis therefor and shall otherwise consult with Parent
concerning such proposed increases, or (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 director or officer or other employee. This subsection
(k) is not intended to (A) restrict the Company or its Subsidiaries from
granting promotions to officers or employees based upon job performance or
workplace requirements in the ordinary course of business consistent with
past practice or (B) restrict the Company's ability to make available to
employees the plans, benefits and arrangements that have customarily and
consistent with past practices been available to officers and employees in
the context of such merit-based promotion. The Company and its Subsidiaries
shall not hire any new employee unless such employee is a bona fide
replacement for a presently-filled position with the Company or a
Subsidiary as of the date hereof.
(l) 1935 Act. The Company shall not, nor shall it permit any of its
Subsidiaries to, engage in any activities which would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act.
(m) Accounting. The Company shall not, nor shall it permit any of its
Subsidiaries to, make any changes in their accounting methods, principles
and practices, except as required by law, rule, regulation or GAAP.
(n) Cooperation, Notification. The Company shall, and shall cause its
Subsidiaries to, (i) confer on a regular and frequent basis with one or
more representatives of Parent to discuss, subject to applicable law,
material operational matters and the general status of its ongoing
operations, (ii) promptly notify Parent of any significant changes in its
business, properties, assets, condition (financial or other), results of
operations or prospects, (iii) advise Parent of any change or event which
has had or, insofar as reasonably can be foreseen, is reasonably likely to
result in a Company Material Adverse Effect, and (iv) without limiting the
Company's and its Subsidiaries' obligations under Section 6.1(u)(i),
promptly provide Parent with copies of all filings made by the Company or
any of its Subsidiaries with any state or federal court, administrative
agency, commission or other Governmental Authority in connection with this
Agreement and the transactions contemplated hereby.
(o) Third-Party Consents. The Company shall, and shall cause its
Subsidiaries to, use all commercially reasonable efforts to obtain all the
Company Required Consents and other consents required to consummate the
transactions contemplated hereby. The Company shall promptly notify Parent
of any failure or prospective failure to obtain any such consents and, if
requested by Parent, shall provide copies of all the Company Required
Consents obtained by the Company to Parent.
(p) Discharge of Liabilities. The Company shall not, nor shall it
permit any of its Subsidiaries to, pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice (which includes the payment of final and unappealable judgments)
or in accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Company
SEC Reports delivered to Parent prior to the date of this Agreement, or
incurred in the ordinary course of business consistent with past practice.
(q) Insurance. The Company shall, and shall cause its Subsidiaries
to, maintain with financially responsible insurance companies insurance in
such amounts and against such risks and losses as are customary for
companies engaged in the electric and gas utility industry.
(r) Permits. The Company shall, and shall cause its Subsidiaries to,
use reasonable efforts to maintain in effect all existing governmental
permits pursuant to which the Company or any of its Subsidiaries operate.
(s) No Rights Triggered. The Company shall ensure that the entering
into of this Agreement and the Related Documents and the consummation of
the transactions contemplated hereby and thereby and
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any other action or combination of actions, or any other transactions
contemplated hereby and thereby, do not and will not result, directly or
indirectly, in the grant of any rights to any person under any Contract
(other than the employment agreements disclosed in Section 6.1(s) of the
Company Disclosure Schedule) to which it or any of its Subsidiaries is a
party or otherwise. In addition, the Company shall not amend or waive any
rights in a manner that would adversely affect any party's ability to
consummate the Mergers or the economic benefits of the Mergers to Parent.
(t) Taxes. The Company shall not, and shall cause its Subsidiaries
not to, (i) make or rescind any express or deemed material election
relating to Taxes, (ii) settle or compromise any material claim, audit,
dispute, controversy, examination, investigation or other proceeding
relating to Taxes, (iii) materially change any of its methods of reporting
income or deductions for federal income Tax purposes, except as may be
required by applicable law, or (iv) file any material Tax Return other than
in a manner consistent with past custom and practice.
(u) The Company and its Subsidiaries shall:
(i) Not file any material application, petition, motion, order,
brief, settlement or agreement in any material proceeding before any
Governmental Authority which involves the Company or any of its
Subsidiaries, and appeals related thereto without, to the extent
reasonably practicable, consulting Parent; provided, however, that if
such proceeding is reasonably likely to have a Company Material Adverse
Effect, the Company shall not make any such filing without the consent
of Parent, which consent shall not be unreasonably withheld or delayed;
(ii) Not engage in or modify, except in the ordinary course of
business, any material intercompany transactions involving any other
Subsidiary of the Company;
(iii) Not make any changes in financial policies or practices, or
strategic or operating policies or practices;
(iv) Not make any loan or advance to any officer, director,
shareholder, employee or any other person other than advances for
business purposes to employees in the ordinary course of business;
(v) Not purchase, sell, lease, dispose of or otherwise transfer or
make any Contract for the purchase, sale, lease, disposition or transfer
of, or subject to Lien, any of the assets of the Company or its
Subsidiaries other than in the ordinary course of business; and
(vi) Not terminate any existing gas purchase, exchange or
transportation contract necessary to supply firm gas at all city gate
delivery points or enter into any new contract for the supply,
transportation, storage or exchange of gas with respect to the Company's
or its Subsidiaries' regulated gas distribution operations or renew or
extend or negotiate any existing contract providing for the same where
such contract is not terminable within sixty (60) days without penalty
without obtaining Parent's prior written consent; provided, however,
that if the Company provides Parent with a copy of any such proposed new
Contract, Parent shall be deemed to have consented to the entering into
of such Contract if Parent does not notify the Company of its
disapproval of such Contract by the end of the second business day after
receipt by Parent of such copy of such proposed new Contract.
(v) Customer Notifications. At any time and from time to time as
reasonably requested by Parent prior to the Closing Date, each of the
Company and its Subsidiaries will permit Parent at Parent's expense to
insert preprinted single-page customer education materials into billing
documentation to be delivered to customers affected by this Agreement;
provided, however, that the Company has reviewed in advance and consented
to the content of such materials, which consent shall not be unreasonably
withheld or delayed. Other means of notifying customers may be employed by
either the Company or Parent, at the expense of the initiating party, but
in no event shall any notification be initiated without the prior consent
of the other party (which consent shall not be unreasonably withheld or
delayed).
(w) Company Bondholders' Consent. The Company shall use its
reasonable best efforts to obtain consents from all holders of each series
of First Mortgage Bonds issued under the Indenture of First Mortgage dated
as of December 15, 1992 between Valley, the Company, as Guarantor, and
State Street
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Bank and Trust Company, as Trustee, and from all holders of each series of
debentures issued under the Indenture between the Company and Mellon Bank,
N.A., dated as of September 1, 1997, each as amended or supplemented from
time to time, to such amendments to such Indentures as requested by Parent.
(x) Financing Activities. The Company shall, and shall cause its
Subsidiaries to, cooperate, to the fullest extent commercially reasonable
and practicable, with Parent's requests with respect to refinancing by the
Company and its Subsidiaries of the current maturities of any of their
indebtedness, and any repurchase, redemption or prepayment by the Company
or any of its Subsidiaries of any of their indebtedness that may be
required prior to or because of the Mergers or that Parent may request that
the Company or any of its Subsidiaries effect prior to the Mergers, so as
to permit Parent to have the maximum opportunity to refinance, on or
promptly after the Closing Date without any penalty except as may be due
pursuant to the terms of the Company's or its Subsidiaries' indebtedness as
in effect on the date of this Agreement, any of the Company's or its
Subsidiaries' indebtedness outstanding on the Closing Date; provided,
however, that neither the Company nor any of its Subsidiaries shall be
required to consummate prior to the Effective Time any such refinancing,
repurchase, redemption or repayment requested by Parent.
(y) Legislative Action. The Company shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to cause the Rhode
Island Legislature to: (i) unconditionally amend the legislative charter of
Valley to expressly and unconditionally approve and authorize the Valley
Merger, (ii) unconditionally amend the legislative charter of Bristol to
expressly and unconditionally approve and authorize the Bristol Merger,
(iii) expressly and unconditionally approve and authorize the Company
Merger, and (iv) expressly and unconditionally permit Parent to qualify to
do business in Rhode Island in accordance with the RIBCA, notwithstanding
contrary provisions of sec.7-1.1-3 and sec.7-1.1-99 (collectively, the
"Legislative Actions"). All Legislative Actions shall be in form and
substance reasonably acceptable to Parent. The Company shall, and shall
cause its Subsidiaries to, cooperate with Parent to effect the Legislative
Actions as soon as practicable after the date of this Agreement.
Section 6.2 Covenant of the Company; Alternative Proposals. (a) From and
after the date hereof, the Company agrees (i) that it will not, its Subsidiaries
will not, and it will not authorize or permit any of its or its Subsidiaries'
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, financial advisor, attorney or accountant
retained by it or any of its Subsidiaries or any of the foregoing) to, directly
or indirectly, encourage, initiate or solicit (including by way of furnishing
information) or take any other action designed or which could be reasonably
expected to facilitate any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders) which
constitutes or may reasonably be expected to lead to an Alternative Proposal (as
defined below) from any person or engage in any discussion or negotiations
concerning, or provide any non-public information or data to make or implement
or otherwise in any way cooperate or facilitate the making of an Alternative
Proposal; (ii) that it will immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussions or
negotiations with any parties conducted heretofore with a view of formulating an
Alternative Proposal; and (iii) that it will notify Parent orally and in writing
of any such inquiry, offer or proposals, within one business day of the receipt
thereof, and that it shall keep Parent informed of the status of any such
inquiry, offer or proposal; provided, however, that notwithstanding any other
provision hereof, the Company may (1) at any time prior to the time at which the
Company Shareholders' Approval shall have been obtained, engage in discussions
or negotiations with a third party who (without solicitation in violation of the
terms of this Agreement) seeks to initiate such discussions or negotiations and
may furnish such third party information concerning the Company and its
business, properties and assets if, and only to the extent that, (A) (x) the
third party has first made an Alternative Proposal that, in the good faith
judgment of the Company's Board of Directors (after consulting with its
financial and legal advisors) is financially superior to the Company's
shareholders than the Merger and has demonstrated that it will have adequate
sources of financing to consummate such Alternative Proposal, and (y) the Board
of Directors of the Company shall conclude in good faith, based upon the advice
of outside counsel and such other matters as the Board of Directors of the
Company deems relevant, that such actions are necessary for the Company's Board
of Directors to act in a manner consistent with its fiduciary duties to
shareholders under applicable law, and
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(B) prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, the Company (x) provides at least two
business days' prior written notice to Parent to the effect that it intends to
furnish information to, or intends to enter into discussions or negotiations
with, such person or entity, and of the identity of the person or group making
the Alternative Proposal and the material terms thereof, including a copy of any
offer or proposal submitted in writing, and (y) receives from such person an
executed confidentiality agreement containing the same terms and conditions as
the Confidentiality Agreement (as defined in Section 7.1) except that such
confidentiality agreement shall not prohibit such person from making an
unsolicited Alternative Proposal, and (2) comply with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer. "Alternative
Proposal" shall mean any merger, acquisition, consolidation, reorganization,
business combination, share exchange, tender offer, exchange offer or similar
transaction involving the Company or any of the Company's Subsidiaries, or any
proposal or offer to acquire in any manner, directly or indirectly, a material
equity interest in or a material portion of the assets of the Company or any of
the Company's Subsidiaries, including any single or multi-step transaction or
series of related transactions.
(b) Neither the Board of Directors of the Company nor any committee thereof
may, (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Board of
Directors of the Company or such committee of the Merger or this Agreement, (ii)
approve or recommend or propose publicly to approve or recommend an Alternative
Proposal or (iii) cause the Company or any of its Subsidiaries to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Alternative Proposal. Notwithstanding the foregoing,
prior to the time at which the Company Shareholders' Approval has been obtained,
in response to an Alternative Proposal (without solicitation in violation of the
terms of this Agreement) from a third party, if the Board of Directors of the
Company determines, in its good faith judgment, after consultation with and the
receipt of the advice of its financial advisor and outside counsel, that such
proposal is financially superior to the Company's shareholders than the Merger
and that failure to do any of the actions set forth in clauses (i), (ii) or
(iii) above of this Section 6.2(b) would create a reasonable possibility of a
breach of the fiduciary duties of the Company's Board of Directors under
applicable law, the Board of Directors of the Company may (i) withdraw or modify
its approval or recommendation of the Merger or this Agreement, approve or
recommend an Alternative Proposal or cause the Company to enter into an
Alternative Proposal and (ii) negotiate with a third party with respect to such
Alternative Proposal, and subject to the Company having paid to Parent the fees
described in Section 9.3 hereof and having entered into a definitive agreement
with respect to such Alternative Proposal, terminate this Agreement; provided,
however, that prior to entering into a definitive agreement with respect to an
Alternative Proposal, the Company shall give Parent at least five (5) days'
notice thereof, and shall cause its representatives to negotiate with Parent to
make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein on such
adjusted terms; provided, further, that if the Company and Parent are unable to
reach an agreement on such adjustments within five (5) days after such notice
from the Company, the Company may enter into such definitive agreement, subject
to the provisions of Article IX.
Section 6.3 Employment Agreement. Parent and Mr. Alfred P. Degen have
entered into an employment agreement in the form attached hereto as Exhibit A
(the "Employment Agreement"), which will become effective upon consummation of
the Merger.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information.
(a) Upon reasonable notice and during normal business hours, the Company
shall, and shall cause its Subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment bankers, financial advisors and
other representatives of Parent reasonable access, throughout the period prior
to the Effective Time, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
and during such period, the Company shall, and shall cause its Subsidiaries to,
furnish promptly to Parent access to each report, schedule and other document
filed or received by it or any of
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its Subsidiaries pursuant to the requirements of federal or state securities
laws or filed with or sent to the SEC, the Department of Justice, the Federal
Trade Commission or any other federal or state regulatory agency or commission.
Each party shall, and shall cause its Subsidiaries to, afford to the officers,
directors, employees, accountants, counsel, investment bankers and other
representatives of the other reasonable access to all information concerning
themselves, their subsidiaries, directors, officers and shareholders and such
other matters as may be reasonably requested by the other party in connection
with any filings, applications or approvals required or contemplated by this
Agreement. Each party shall, and shall cause its Subsidiaries and
representatives to, hold in strict confidence all Information (as defined in the
Confidentiality Agreement) concerning the other parties furnished to it in
connection with the transactions contemplated by this Agreement in accordance
with Confidentiality Agreement dated November 1, 1999 between the Company and
Parent, as it may be amended from time to time (the "Confidentiality
Agreement").
(b) As promptly as practicable after Parent's request, the Company will
furnish such financial and operating data and other information pertaining to
the Company or its Subsidiaries and their businesses and assets as Parent may
reasonably request; provided, however, that nothing herein will obligate the
Company or any of its Subsidiaries to take actions that would unreasonably
disrupt its ordinary course of business or violate the terms of any legal
requirement or Contract to which the Company or its Subsidiary is a party or to
which any of its assets is subject in providing such information, or to incur
any costs with respect to Parent's external auditors (or the Company's or its
Subsidiaries' external auditors in the event a report by such auditors is
requested by Parent) providing accounting services with respect to issuing an
auditor's report required by or for Parent.
Section 7.2 Proxy Statement.
(a) (i) As soon as practicable after the date hereof, the Company shall
take such reasonable steps as are necessary for the prompt preparation and
filing with the SEC of a proxy statement relating to the Company Special Meeting
(as defined in Section 7.4(a)) (together with any amendments thereto or
supplements thereto, the "Proxy Statement"). Each of Parent and the Company
shall furnish all information concerning it, its officers and directors, and the
holders of its capital stock as the other may reasonably request in connection
with the preparation and filing of the Proxy Statement. The Company will use all
commercially reasonable efforts to cause the Proxy Statement to be cleared by
the SEC as promptly as practicable after filing and as promptly as practicable
after such clearance, the Company shall mail the Proxy Statement to its
shareholders entitled to notice of and to vote at the Company Special Meeting.
As promptly as practical after consultation between Parent and the Company, the
Company shall respond to any comments made by the SEC with respect to the Proxy
Statement.
(ii) The Company agrees that information supplied by the Company for
inclusion or incorporation by reference in the Proxy Statement shall not, at the
date of the mailing of the Proxy Statement (or any supplement thereto) and at
the time of the Company Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time prior
to the Company Special Meeting any event or circumstance relating to the Company
or any of its Subsidiaries, or its or their respective officers or directors,
should be discovered by the Company that should be set forth in a supplement to
the Proxy Statement, the Company shall promptly inform Parent. All documents
that the Company is responsible for filing with the SEC in connection with the
transactions contemplated hereby shall comply as to form in all material
respects with the applicable requirements of the Securities Act and the
regulations thereunder and the Exchange Act and the regulations thereunder.
(iii) Parent agrees that information supplied by Parent for inclusion or
incorporation by reference in the Proxy Statement shall not, at the date of the
mailing of the Proxy Statement (or any supplement thereto) or at the time of the
Company Special Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. If at any time prior to the Company Special
Meeting any event or circumstance relating to Parent or any of its Subsidiaries,
or to their respective officers or directors, should be discovered by Parent
that should be set forth in a supplement to the Proxy Statement, Parent shall
promptly inform the Company.
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(iv) No representation, warranty, covenant or agreement is made by or on
behalf of the Company with respect to information supplied by any other person
other than its Subsidiaries for inclusion in the Proxy Statement. No
representation, warranty, covenant or agreement is made by or on behalf of
Parent with respect to information supplied by any other person for inclusion in
the Proxy Statement. No filing of, or amendment or supplement to, the Proxy
Statement shall be made by the Company without providing Parent with the
opportunity to review and comment thereon; provided, however, that no such
filing, amendment or supplement (i) that relates to Parent or any of its
Subsidiaries or (ii) that is reasonably likely to have a material adverse effect
on Parent or any of its Subsidiaries, shall be made without Parent's prior
written approval. If at any time prior to the Company Special Meeting any
information relating to any party hereto or any of their respective officers,
directors, shareholders or Subsidiaries, should be discovered by any party
hereto which should be set forth in an amendment or supplement to the Proxy
Statement so that the Proxy Statement would not include any untrue statement 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 which discovers such information shall promptly notify
the other party hereto and an appropriate amendment or supplement describing
such information shall be promptly prepared, filed with the SEC and, to the
extent required by law, disseminated to the shareholders of the Company.
(b) Letter of the Company's Accountant. Following receipt by Grant
Thornton LLP, the Company's independent auditor, of an appropriate request from
the Company pursuant to SAS No. 72, the Company shall use its best efforts to
cause to be delivered to Parent a letter of Grant Thornton LLP dated a date
within two business days before the date of the Proxy Statement, and addressed
to Parent, in form and substance reasonably satisfactory to Parent and customary
in scope and substance for the "cold comfort" letters delivered by independent
public accountants in connection with proxy statements similar to the Proxy
Statement.
Section 7.3 Regulatory Matters. Each party hereto shall cooperate and use
its commercially reasonable efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to use all commercially reasonable efforts to obtain no
later than the Initial Termination Date (as defined in Section 9.1(b)), as such
date may be extended pursuant to Section 9.1(b), all necessary permits,
consents, approvals and authorizations of all Governmental Authorities necessary
or advisable to consummate the transactions contemplated by this Agreement,
including, without limitation, the Company Required Statutory Approvals, the
Parent Required Statutory Approvals and the Legislative Actions. Notwithstanding
anything to the contrary contained in this Agreement, including this Section
7.3, neither Parent, nor any of Parent's Affiliates shall be required to divest
themselves of any of their respective assets or properties or agree to limit the
ownership or operation by Parent or any of Parent's Affiliates of any assets
including any of the assets of the Company and its Subsidiaries and Joint
Ventures.
Section 7.4 Company Shareholders' Approval.
(a) Company Special Meeting. Subject to the provisions of Section 7.4(b),
the Company shall, as soon as reasonably practicable after the date hereof (i)
take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders (the "Company Special Meeting") for the purpose of
securing the Company Shareholders' Approval, (ii) distribute to its shareholders
the Proxy Statement in accordance with applicable federal and state law and with
its articles of incorporation and by-laws, (iii) subject to the fiduciary duties
of its Board of Directors, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby, (iv) solicit from its
shareholders proxies in favor of the Merger and take all other action reasonably
necessary, or, in the reasonable opinion of Parent, advisable to secure the
Company Shareholders' Approval, and (v) cooperate and consult with Parent with
respect to each of the foregoing matters.
(b) Meeting Date. The Company Special Meeting for the purpose of securing
the Company Shareholders' Approval shall be held on such date as the Company and
Parent shall mutually determine.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification and Insurance. For a period of six years after the
Effective Time, Parent will indemnify and hold harmless the present and former
officers and directors of the Company and its Subsidiaries
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(the "Indemnified Parties") in respect of acts or omissions occurring prior to
the Effective Time to the extent provided under the Company's articles of
incorporation and by-laws in effect on the date hereof; provided, however, that
if any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of such claims shall continue until the
final disposition of any and all such claims. For six years after the Effective
Time, Parent will use its reasonable best efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy on terms with
respect to coverage and amount no less favorable than those of such policy in
effect on the date hereof; provided, however, that in satisfying its obligation
under this Section, if the annual premiums of such insurance coverage exceed
200% of the previous year's premiums, Parent will be obligated to obtain a
policy with the best coverage available, in the reasonable judgment of the Board
of Directors of Parent, for a cost not exceeding such amount.
(b) Successors. In the event Parent or any of its successors or assigns
(i) consolidates with or merges into any other person and is not 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 must be made so that the
successors and assigns of Parent will assume the obligations set forth in this
Section 7.5.
(c) Survival of Indemnification. To the fullest extent permitted by law,
from and after the Effective Time, all rights to indemnification as of the date
hereof in favor of the employees, agents, directors and officers of the Company
and its Subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in its respective articles of incorporation and
by-laws in effect on the date hereof, or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time (or in the event any
relevant claim is asserted or made within such six-year period, until final
disposition of such claim).
(d) 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, (a) Parent has
delivered to the Company a schedule (the "Parent Disclosure Schedule"),
accompanied by a certificate signed by an authorized officer of Parent stating
the Parent Disclosure Schedule is being delivered pursuant to this Section
7.6(a), and (b) the Company has delivered to Parent a schedule (the "Company
Disclosure Schedule"), accompanied by a certificate signed by an authorized
officer of the Company stating the Company Disclosure Schedule is being
delivered pursuant to this Section 7.6(b). The Company Disclosure Schedule and
the Parent Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules constitute an integral part of
this Agreement and modify the respective representations, warranties, covenants
or agreements of the parties 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 applicable regulations of any securities
exchange upon which such party's securities are listed, the Company and Parent
will cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
or any of the transactions contemplated hereby and shall not issue any public
announcement or statement with respect hereto without the consent of the other
party (which consent shall not be unreasonably withheld).
Section 7.8 Certain Employee Agreements. Subject to Section 7.9, Parent
shall assume all contracts, agreements and collective bargaining agreements of
the Company and its Subsidiaries which apply to any current or former employee
or current or former director of the Company or any of its Subsidiaries;
provided, however, that the foregoing shall not prevent Parent from enforcing
such contracts, agreements and collective bargaining agreements in accordance
with their terms, including, without limitation, any reserved right to amend,
modify, suspend, revoke or terminate any such contract, agreement or collective
bargaining agree-
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ment. It is the present intention of Parent and the Company that following the
Effective Time there will be no involuntary reductions in force at the Company
or its Subsidiaries, but that Parent will achieve workforce reductions through
attrition; however, Parent reserves the right to respond as it deems appropriate
based on business conditions and regulatory environments. If reductions in
workforce in respect of employees of the Company and its Subsidiaries become
necessary, they shall be made on a fair and equitable basis, in light of the
circumstances and the objectives to be achieved, giving consideration to
previous work history, job experience, qualifications, and business needs, and
any employees whose employment is terminated or jobs are eliminated by Parent
shall be entitled to participate on a fair and equitable basis in the job
posting programs offered by Parent. Any workforce reductions carried out
following the Effective Time by Parent shall be done in accordance with all
applicable collective bargaining agreements, and all applicable 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 7.9 Employee Benefit Plans.
(a) Except as may be required by applicable law, each Plan in effect on the
date hereof (or as amended or established in accordance with or as permitted by
this Agreement) shall be maintained in effect with respect to the employees,
former employees, directors or former directors of the Company and any of its
Subsidiaries who are covered by such plans, programs, agreements or arrangements
immediately prior to the Effective Time until Parent determines otherwise on or
after the Effective Time, and Parent shall assume as of the Effective Time each
Plan maintained by the Company immediately prior to the Effective Time and
perform such plan, program, agreement or arrangement in the same manner and to
the same extent that the Company would be required to perform thereunder;
provided, however, that nothing herein contained shall limit any reserved right
contained in any such Plan to amend, modify, suspend, revoke or terminate any
such plan, program, agreement or arrangement; provided, further, that, except as
may be required by applicable law, Parent or its Subsidiaries shall provide to
the employees of the Company and its Subsidiaries who are employed immediately
prior to the Effective Time and who are not covered by a collective bargaining
agreement ("Covered Company Employees") for a period of no less than 24 months
following the Effective Time, base salary levels, bonus opportunity levels and
employer-provided benefits under Qualified Plans, supplemental retirement
benefit plans which are not Qualified Plans and welfare plans that are
comparable in the aggregate to those provided immediately prior to the Effective
Time. Without limiting the foregoing, each Covered Company Employee who is a
participant in any Plan shall receive credit for purposes of eligibility to
participate, vesting and eligibility to receive benefits (but specifically
excluding for benefit accrual purposes) under any replacement benefit plan of
Parent or any of its Subsidiaries or Affiliates in which such employee becomes a
participant for service credited for the corresponding purpose under any such
Plan, unless such crediting of service would operate to cause any such plan or
agreement to fail to comply with the applicable provisions of the Code and ERISA
or other applicable law. Notwithstanding the foregoing, but subject to Section
7.9(b), Parent acknowledges that each Covered Company Employee who is a
participant in the Valley Gas Company Supplemental Retirement Plan (the "SERP")
as of the date hereof shall continue to accrue benefits for 24 months after the
Effective Time under terms at least as favorable as the terms of the SERP in
effect on the date of this Agreement, taking into account service and
compensation earned while employed by Parent and its Subsidiaries after the
Effective Time. After the 24 months immediately following the Effective Time,
Parent agrees to maintain during the next 24-month period, for Covered Company
Employees who continue their service with Parent, base salary levels, bonus
opportunity and employer-provided benefits under Qualified Plans, supplemental
retirement benefit plans which are not Qualified Plans and welfare plans that
are appropriate for the market given Parent's financial circumstances, the
industry in which it operates, and regulatory considerations. No provision
contained in this Section 7.9 shall be deemed to constitute an employment
contract between Parent or any of its Subsidiaries and any individual, or a
waiver of Parent's or any of its Subsidiaries' right to discharge any employee
at any time, with or without cause.
(b) The Company shall take all necessary actions so that, effective no
later than immediately before the date the Company Shareholders' Approval is
obtained, (i) each of the SERP, the Morris Merchants, Inc. Executive Deferred
Compensation Plan and all other executive benefit plans and programs of the
Company and its Subsidiaries shall be amended to the extent necessary so that
any provisions therein that prohibit or
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limit the amendment or termination thereof following a change of control do not
apply to individuals who are not participants therein as of the date of this
Agreement and (ii) subject to applicable law and the provisions of any
applicable collective bargaining agreement, each Qualified Plan shall be amended
to the extent necessary so that any provisions therein that call for the waiver
or elimination of vesting requirements upon or following a change in control
shall apply only to individuals who are participants therein immediately before
the Effective Time. Section 7.9(b) of the Company Disclosure Schedule sets forth
a list of all Plans which contain provisions that either (x) prohibit or limit
the amendment or termination thereof following a change of control, or (y) call
for the waiver or elimination of vesting requirements upon a change of control.
(c) Parent will permit each of the Covered Company Employees to carry
forward all days of sick leave accrued prior to the Effective Time.
(d) For a 5-year period from the Effective Time, Parent agrees to provide
retiree medical plan coverage which is substantially comparable to the coverage
under the Company retiree medical plan as of the date hereof, subject to
Parent's right to adjust copayment and cost sharing provisions (which may be
continued in the same proportions to the Company-provided portions of cost) to
any former Covered Company Employee (and his or her eligible dependents) who is
currently receiving such benefits thereunder, or any active Covered Company
Employee (and his or her eligible dependents) who would be eligible for such
benefits if he or she retired on the Effective Time (or who, within 5 years of
the Effective Time, retires and is eligible to receive benefits thereunder).
Section 7.10 Company Stock Plans. With respect to each Plan that provides
for benefits in the form of Company Common Stock ("Company Stock Plans"), the
Company and Parent shall take all corporate action necessary or appropriate to
(i) provide for the issuance or purchase in the open market of common stock of
Parent rather than Company Common Stock, pursuant thereto, and otherwise to
amend such Company Stock Plans to reflect this Agreement and the Merger, (ii)
obtain shareholder or board of director approval with respect to such Company
Stock Plans to the extent such approval is required for purposes of the Code or
other applicable law, or to enable such Company Stock Plans to comply with Rule
16b-3 promulgated under the Exchange Act, (iii) reserve for issuance under such
Company Stock Plans or otherwise provide a sufficient number of shares of Parent
Common Stock for delivery upon payment of benefits, grant of awards or exercise
of options under such Company Stock Plans and (iv) as soon as practicable after
the Effective Time, file registration statements on Form S-8 (or any successor
or other appropriate forms), with respect to the shares of Parent Common Stock
subject to such Company Stock Plans to the extent such registration statement is
required under applicable law, and Parent 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 Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, the Company shall
administer the Company Stock Plans, where applicable, in a manner that complies
with Rule 16b-3 promulgated under the Exchange Act. This Section 7.10 shall not
limit any reserved right contained in any Plan to amend, modify, suspend, revoke
or terminate any such plan, program, agreement or arrangement.
Section 7.11 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 incurring such expenses.
Section 7.12 Further Assurances. Each party will, and will cause its
Subsidiaries to, execute such further documents and instruments and, subject to
the last sentence of Section 7.3 take such further actions as may reasonably be
requested by any other party in order to consummate the Mergers in accordance
with the terms hereof.
Section 7.13 Community Involvement. For two years after the Effective
Time, Parent will make at least $60,000 per year in charitable contributions to
the communities served by the Company prior to the Merger and otherwise maintain
a substantial level of involvement in community activities in the State of Rhode
Island that is similar to, or greater than, the level of community development
and related activities carried on by the Company.
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Section 7.14 Financial Statements to be Provided. Upon Parent's request,
the Company shall (i) provide to Parent audited and unaudited financial
statements required to be included in (a) the proxy statements and the
registration statement contemplated by the Agreement of Merger, dated as of
October 4, 1999, by and between Parent and Fall River Gas Company and (b) the
proxy statement contemplated by the Agreement and Plan of Merger, dated as of
November 15, 1999, by and between Parent, GUS Acquisition Corporation and
Providence Energy Corporation, and (ii) cause its independent accountants to
deliver to Parent, Fall River Gas Company and Providence Energy Corporation the
required consents in connection therewith.
Section 7.15 Officers of Valley Division. From the Effective Time until
the earlier of their resignation, removal by Parent, or reassignment by Parent
in the event of a restructuring of the Valley Division, the following
individuals shall serve the Valley Division of the New England Business Unit of
Parent in the following capacities:
Alfred P. Degen as President and Chief Executive Officer
Charles K. Meunier as Vice President, Operations
Richard G. Drolet as Vice President, Information Systems and Corporate
Planning
Sharon Partridge as Vice President, Chief Financial Officer and
Treasurer
Jeffrey P. Polucha as Vice President, Marketing and Development
James P. Carney as Assistant Vice President, Human Resources
William D. Mullin as Assistant Vice President, Operations
Alan H. Roy as Assistant Vice President, Gas Supply
Robert A. Young as Assistant Vice President and Chief Engineer
Parent expressly reserves the right to restructure the operations of the Valley
Division or the New England Business Unit at any time and from time to time in
any manner that it deems appropriate in its sole discretion.
ARTICLE VIII
CONDITIONS
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 at or prior to the Closing 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 Approval. The Company Shareholders' Approval shall
have been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court
preventing consummation of the Mergers shall have been issued and be
continuing in effect, and the Mergers and the other transactions
contemplated hereby shall not have been prohibited under any applicable
federal or state law or regulation.
Section 8.2 Conditions to Obligation of Parent to Effect the Mergers. The
obligation of Parent to effect the Mergers shall be further subject to the
satisfaction, at or prior to the Closing, of the following conditions, except as
may be waived by Parent in writing pursuant to Section 9.5:
(a) Performance of Obligations of the Company. The Company (and its
appropriate Subsidiaries) shall have performed in all material respects its
agreements and covenants contained in or contemplated by this Agreement to
be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of the Closing Date (except for representations and
warranties that expressly speak only as of a specific date or time other
than the date hereof or the Closing Date, which need only be true and
correct as of such date or time) except in the case of clauses (i) and (ii)
for such failures of representations or warranties to be true and correct
(without regard to any materiality qualifications contained in any of
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such representations or warranties) which, individually and in the
aggregate, would not be reasonably likely to result in a Company Material
Adverse Effect.
(c) Closing Certificates. Parent shall have received a certificate
signed by an authorized officer of the Company, dated the Closing Date, to
the effect that the conditions set forth in Section 8.2(a) and Section
8.2(b) of this Agreement have been satisfied.
(d) Statutory Approvals. The Company Required Statutory Approvals,
the Parent Required Statutory Approvals and all other approvals, consents,
opinions or rulings of Governmental Authorities required in order to
consummate the transactions contemplated hereby, shall have been obtained,
such approvals shall have become Final Orders (as defined below) and such
Final Orders shall not impose terms or conditions which, individually or in
the aggregate, would be reasonably likely to have a Company Material
Adverse Effect or a material adverse effect on the business, operations,
properties, financial condition or results of operation of Parent, or which
would otherwise, in the reasonable determination of Parent, be unduly
burdensome to Parent in a manner that would be, individually or in the
aggregate, reasonably likely to have, a Company Material Adverse Effect or
a material adverse effect on the business, operations, properties,
financial condition or results of operation of Parent. A "Final Order"
means an action by a Governmental Authority as to which: (a) no request for
stay of the action is pending, no such stay is in effect and if any time
period is permitted by statute or regulation for filing any request for
such stay, such time period has passed; (b) no petition for rehearing,
reconsideration or application for review of the action is pending and the
time for filing any such petition or application has passed; (c) such
Governmental Authority does not have the action under reconsideration on
its own motion and the time in which such reconsideration is permitted has
passed; and (d) no appeal to a court, or a request for stay by a court of
the Governmental Authority's action is pending or in effect and the
deadline for filing any such appeal or request has passed. The applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, with respect to the transactions contemplated hereby,
shall have expired or been terminated.
(e) No Company Material Adverse Effect. No Company Material Adverse
Effect shall have occurred, and there shall exist no fact or circumstance
other than facts and circumstances disclosed in the Company SEC Reports
delivered to Parent prior to the date of this Agreement which is reasonably
likely to have a Company Material Adverse Effect.
(f) Company Required Consents. Each of the Company Required Consents
shall have been obtained to the reasonable satisfaction of Parent, other
than any such consents which, if not obtained, are not, individually or in
the aggregate, reasonably likely to result in a Company Material Adverse
Effect after the Closing. In addition, all consents and approvals required
under the terms of any note, bond or indenture listed in Section 4.4(b) of
the Company Disclosure Schedule to which the Company or any of its
Subsidiaries is a party, shall have been obtained.
(g) Resignations. Each director of the Company, and each director of
the Subsidiaries of the Company, shall resign or retire as a director of
the applicable entity effective as of the Effective Time in accordance with
such entity's organizational documents and applicable provisions of the
RIBCA or other applicable state law, as the case may be; provided, however,
that such resignations (but not retirements) shall not cause the
termination of any such person's employment as an employee of the Company
or its Subsidiaries.
(h) Tax Good Standing. Letters of Tax Good Standing shall have been
obtained for the Company and its Subsidiaries from the Rhode Island
Department of Taxation.
(i) Company Bondholders' Consent. All holders of each series of First
Mortgage Bonds issued and outstanding under the Indenture of First
Mortgage, dated as of December 15, 1992, between Valley, the Company, as
Guarantor, and State Street Bank and Trust Company, as Trustee, and all
holders of each series of debentures issued and outstanding under the
Indenture between the Company and Mellon Bank, N.A., dated as of September
1, 1997, each as amended or supplemented from time to time, shall have
consented to such amendments to such Indentures as requested by Parent.
(j) Legislative Actions. The Legislative Actions shall have been
completed.
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Section 8.3 Conditions to Obligation of the Company to Effect the
Mergers. The obligation of the Company 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 the Company in writing pursuant to
Section 9.5:
(a) Performance of Obligations of Parent. Parent 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.
(b) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and correct
(i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of the Closing Date (except for representations and
warranties that expressly speak only as of a specific date or time other
than the date hereof or the Closing Date, which need only be true and
correct as of such date or time) except in the case of clauses (i) and (ii)
for such failures of representations or warranties to be true and correct
(without regard to any materiality qualifications contained in any of such
representations and warranties) which, in the aggregate, would not be
reasonably likely to result in a Parent Material Adverse Effect.
(c) Statutory Approvals. The Company Required Statutory Approvals and
the Parent Required Statutory Approvals shall have been obtained. The
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, with respect to the transactions
contemplated hereby, shall have expired or been terminated.
(d) Closing Certificates. The Company shall have received a
certificate signed by an authorized officer of Parent, dated the Closing
Date, to the effect that the conditions set forth in Section 8.3(a) and
Section 8.3(b) of this Agreement have been satisfied.
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 Company contemplated by this Agreement:
(a) by mutual written consent of the Company and Parent;
(b) by any party hereto, by written notice to the other parties, if
the Effective Time shall not have occurred on or before the date that is 15
months from the date hereof (the "Initial Termination Date"); provided,
however, that if on the Initial Termination Date the conditions to the
Closing set forth in Section 8.2(d), 8.3(c) or 8.2(j) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or
shall be capable of being fulfilled, then the Initial Termination Date
shall be extended to the 18-month anniversary of the date hereof; and
provided, further, that the right to terminate this Agreement under this
Section 9.1(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement or whose breach of any agreement or
covenant has been the cause of, or resulted directly or indirectly in, the
failure of the Effective Time to occur on or before the Initial Termination
Date or as it may be so extended;
(c) by any party hereto, by written notice to the other parties, if
the Company Shareholders' Approval shall not have been obtained at a duly
held Company Special Meeting, including any adjournments thereof, by the
Initial Termination Date;
(d) by any party hereto, by written notice to the other parties if any
state or federal law, order, rule or regulation is adopted or issued, which
has the effect of prohibiting the Mergers, or by any party hereto if any
court of competent jurisdiction in the United States or any State shall
have issued an order, judgment or decree permanently restraining, enjoining
or otherwise prohibiting the Mergers, and such order, judgment or decree
shall have become final and nonappealable;
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(e) by the Company prior to the time at which the Company
Shareholders' Approval shall have been obtained, upon five days' prior
written notice to Parent, if the Board of Directors of the Company
determines in good faith that termination of this Agreement is necessary
for the Board of Directors of the Company to act in a manner consistent
with its fiduciary duties to shareholders under applicable law by reason of
an Alternative Proposal meeting the requirements of Section 6.2 having been
made; provided that
(A) the Board of Directors of the Company shall determine based on
advice of outside counsel with respect to the Board of Directors'
fiduciary duties that notwithstanding a binding commitment to consummate
an agreement of the nature of this Agreement entered into in the proper
exercise of its applicable fiduciary duties, and notwithstanding all
concessions which may be offered by Parent in negotiation entered into
pursuant to Section 6.2(b), it is necessary pursuant to such fiduciary
duties that the directors reconsider such commitment as a result of such
Alternative Proposal;
(B) the other provisions of Section 6.2(b) have been complied with
by the Company; and
(C) the Company's ability to terminate this Agreement pursuant to
Section 9.1(e) is conditioned upon the payment by the Company to Parent
of the amounts owed by it pursuant to Section 9.3;
(f) by the Company, by written notice to Parent, if (i) there exist
breaches of the representations and warranties of Parent made herein as of
the date hereof which breaches, individually or in the aggregate, would or
would be reasonably likely to result in a Parent Material Adverse Effect,
and such breaches shall not have been remedied within 20 days after receipt
by Parent of notice in writing from the Company, specifying the nature of
such breaches and requesting that they be remedied, or (ii) Parent shall
have failed to perform and comply with, in all material respects, its
agreements and covenants hereunder, and such failure to perform or comply
shall not have been remedied within 20 days after receipt by Parent of
notice in writing from the Company, specifying the nature of such failure
and requesting that it be remedied;
(g) by Parent, by written notice to the Company, if (i) there exist
breaches of the representations and warranties of the Company made herein
as of the date hereof which breaches, individually or in the aggregate,
would or would be reasonably likely to result in a Company Material Adverse
Effect, and such breaches shall not have been remedied within 20 days after
receipt by the Company of notice in writing from Parent, specifying the
nature of such breaches and requesting that they be remedied, (ii) the
Company (or its appropriate Subsidiaries) shall not have performed and
complied with its agreements and covenants contained in Sections 6.1(b) and
6.1(c) or shall have failed to perform and comply with, in all material
respects, its other agreements and covenants hereunder, and such failure to
perform or comply shall not have been remedied within 20 days after receipt
by the Company of notice in writing from Parent, specifying the nature of
such failure and requesting that it be remedied, or (iii) the Board of
Directors of the Company or any committee thereof (A) shall withdraw or
modify or proposes to withdraw or modify in any manner adverse to Parent
its approval or recommendation of this Agreement or the transactions
contemplated hereby, (B) shall fail to reaffirm such approval or
recommendation upon Parent's request within two days of such request, (C)
shall approve or recommend any acquisition of the Company or any of its
Subsidiaries or a material portion of their respective assets or any tender
offer for the shares of capital stock of the Company or any of its
Subsidiaries or any other Alternative Proposal, in each case by a party
other than Parent or any of its Affiliates, (D) causes the Company or any
of its Subsidiaries to enter into a definitive agreement related to the
Alternative Proposal or (E) shall resolve to take any of the actions
specified in clause (A), (B), (C) or (D); or
(h) by Parent, by written notice to Company, if a third party,
including a group (as defined under the Exchange Act), acquires securities
representing greater than 50% of the voting power of the outstanding voting
securities of Company.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent pursuant to Section 9.1, there shall
be no liability on the part of any party or its Affiliates, shareholders,
officers or directors, agents or other representatives hereunder; provided,
however, that (i) any
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fee payable under Section 9.3 is paid to Parent and (ii) no such termination
shall relieve any party of liability for any claims, damages or losses suffered
by the other party as a result of the negligent or willful failure of a party to
perform any obligations required to be performed by it hereunder on or prior to
the date of termination and (iii) the agreement contained in the last sentence
of Section 7.1(a) and Sections 7.11, 9.3, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8,
10.9 and 10.10 shall survive any termination of this Agreement.
Section 9.3 Termination Fee; Expenses.
(a) The Company shall pay Parent a fee of $5.0 million in cash
("Termination Fee") upon the termination of this Agreement by the Company
pursuant to Section 9.1(e) or by Parent pursuant to Section 9.1(g)(iii) or
9.1(h).
(b) 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 the Company fails to pay promptly to Parent the fee due under
Section 9.3, in addition to any amounts paid or payable pursuant to Section 9.3,
the Company 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 prime rate published in The Wall Street Journal on the
date (or preceding business day if such date is not a business day) such fee was
required to be paid, compounded on a daily basis using a 360-day year.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the shareholders of the Company and prior to the Effective Time, but after such
approvals, no such amendment shall (a) alter or change the amount of the Merger
Consideration, or (b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the rights of holders of Company capital stock,
except for alterations or changes that could otherwise be adopted by the Board
of Directors of the Company, without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
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.
Except as otherwise expressly provided in this Agreement, neither the failure
nor any delay on the part of any party to exercise any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any such right, power or privilege preclude any other or
further exercise thereof, or the exercise of any other right, power or privilege
available to each party at law or in equity.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-survival. All representations, warranties and agreements
in this Agreement shall not survive the Merger, except as otherwise provided in
this Agreement and except for the agreements contained in this Section 10.1, in
Articles I and II and in Sections 7.5, 7.11, 9.3, 10.3, 10.4, 10.5, 10.6, 10.7,
10.8, 10.9 and 10.10.
Section 10.2 Brokers. The Company represents and warrants that, except
for PaineWebber Incorporated whose fees have been disclosed to Parent prior to
the date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Mergers or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or any of its Subsidiaries. Parent represents and
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Mergers or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent.
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Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if (a) delivered personally, (b)
sent by reputable overnight courier service on the business day after mailing,
(c) telecopied (which is confirmed) (if confirmed during business hours) at the
time of such confirmation or (if confirmed outside of business hours) the next
business day or (d) mailed by registered or certified mail (return receipt
requested) five days after being so mailed, in each case to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) If to the Company, to:
Valley Resources, Inc.
1595 Mendon Road
P.O. Box 7900
Cumberland, Rhode Island 06144
Attention: Sharon Partridge
Vice President, Chief Financial Officer, Secretary and
Treasurer
Telephone: (401) 334-1188
Telecopy: (401) 334-9135
with a copy to:
Edwards and Angell, LLP
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attention: Christine M. Marx, Esq.
Telephone: (973) 921-5219
Telecopy: (973) 376-3380
(ii) If to Parent or Merger Sub, to:
Southern Union Company
504 Lavaca Street, Suite 800
Austin, Texas 78701
Attention: Peter H. Kelley
President and Chief Operating Officer
Telephone: (512) 370-8307
Telecopy: (512) 477-3879
with a copy to:
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Attention: Kenneth A. Lefkowitz, Esq.
Telephone: (212) 837-6557
Telecopy: (212) 422-4726
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; and (b) shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. Any assignment in violation of the terms of this Agreement shall
be null and void ab initio. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York (without regard to its
principles of conflicts of law other than Sections 5-1401 and 5-1402 of the New
York General Obligations Law), including all matters of construction, validity
and performance, except to the extent that the terms and consummation of the
Mergers are subject to the Delaware General Corporation Law or the RIBCA, in
which case such laws shall govern.
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Section 10.5 Interpretation. When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for 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 10.6 Counterparts; Effect. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their respective
successors and permitted assigns, 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.
Section 10.8 Waiver of Jury Trial. Each party to this Agreement waives,
to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any action, suit or proceeding arising out of this
Agreement.
Section 10.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Rhode Island or in the Southern District of New York in
the county of New York and the borough of Manhattan, or in Rhode Island state
court or in New York state court in the county of New York and the borough of
Manhattan, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
State of Rhode Island or in the Southern District of New York in the county of
New York and the borough of Manhattan, or any Rhode Island state court or in any
New York state court in the county of New York and the borough of Manhattan in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal or state court sitting in the State of Rhode Island or in the county of
New York and the borough of Manhattan.
Section 10.10 Construction of Agreement. The terms and provisions of this
Agreement represent the results of negotiations between the parties and their
representatives, each of which has been represented by counsel of its own
choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement shall be interpreted and construed in accordance with their usual and
customary meanings, and each of the parties hereto hereby waives the application
in connection with the interpretation and construction of this Agreement of any
rule of law to the effect that ambiguous or conflicting terms or provisions
contained in this Agreement shall be interpreted or construed against the party
whose attorney prepared the executed draft or any earlier draft of this
Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
VALLEY RESOURCES, INC.
By: /s/ ALFRED P. DEGEN
------------------------------------
Name: Alfred P. Degen
Title: President and Chief
Executive Officer
SOUTHERN UNION COMPANY
By: /s/ PETER H. KELLEY
------------------------------------
Name: Peter H. Kelley
Title: President and Chief
Operating Officer
SUG ACQUISITION CORPORATION
By: /s/ PETER H. KELLEY
------------------------------------
Name: Peter H. Kelley
Title: President
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APPENDIX B
INVESTMENT BANKING DIVISION
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
212 713-2000
[PaineWebber LOGO]
November 30, 1999
Confidential
Board of Directors
Valley Resources, Inc.
1595 Mendon Road
Cumberland, RI 02864
Ladies and Gentlemen:
Valley Resources, Inc. (the "Company"), Southern Union Company (the
"Acquiring Company") and SUG Acquisition Corporation, a wholly-owned subsidiary
of the Acquiring Company (the "Purchaser"), propose to enter into an agreement
(the "Agreement") pursuant to which the Company will be merged with and into the
Purchaser in a transaction (the "Merger") in which each share of the Company's
common stock (the "Shares") will be converted into the right to receive $25.00
in cash.
You have asked us whether or not, in our opinion, the proposed cash
consideration to be received by the shareholders of the Company pursuant to the
Merger is fair to the shareholders of the Company from a financial point of
view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended August 31, 1999;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company, furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning its businesses and prospects;
(4) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded companies
which we deemed to be relevant;
(5) Compared the results of operations of the Company with that of certain
companies which we deemed to be relevant;
(6) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(7) Reviewed a draft of the Agreement dated November 30, 1999; and
(8) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company,
and we have not assumed any responsibility to independently verify such
information. With respect to the financial forecasts examined by us, we have
assumed that they were reasonably prepared and reflect the best currently
available estimates and good faith judgments of the management of the Company as
to the future performance of the Company. We have also relied upon assurances of
the management of the Company that they are unaware of any facts that would make
the information or financial forecasts provided to us incomplete or misleading.
We have not made any independent
<PAGE> 73
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company nor have we been furnished with any such evaluations or
appraisals. We have also assumed with your consent, that (i) the Merger will be
accounted for under the purchase method of accounting, and (ii) any material
liabilities (contingent or otherwise, known or unknown) of the Company are as
set forth in the consolidated financial statements of the Company. This opinion
does not constitute a recommendation to any shareholder of the Company as to how
any such shareholder should vote on the Merger. This opinion does not address
the relative merits of the Merger and any other transactions or business
strategies discussed by the Board of Directors of the Company as alternatives to
the Merger or the decision of the Board of Directors of the Company to proceed
with the Merger. Our opinion is based on economic, monetary and market
conditions existing on the date hereof.
In the ordinary course of business, PaineWebber Incorporated may trade in
the securities of the Company and the Acquiring Company for our own account and
for the accounts of our customers and, accordingly, may at any time hold long or
short positions in such securities.
PaineWebber Incorporated is currently acting as financial advisor to the
Company in connection with the Merger and will be receiving a fee in connection
with the rendering of this opinion and upon consummation of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed cash consideration to be received by the shareholders of the
Company pursuant to the Merger, taken as a whole, is fair to such shareholders
from a financial point of view.
This opinion has been prepared for the information of the Board of
Directors of the Company in connection with the Merger and shall not be
reproduced, summarized, described or referred to, provided to any person or
otherwise made public or used for any other purpose without the prior written
consent of PaineWebber Incorporated, provided, however, that this letter may be
reproduced in full in the Proxy Statement related to the Merger.
Very truly yours,
PAINEWEBBER INCORPORATED
2
<PAGE> 74
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JUNE 13,2000
To the Stockholders of
VALLEY RESOURCES,INC.
Notice is hereby given that the Special Meeting of the Stockholders of
Valley Resources,Inc. (the "Corporation") will be held at the principal office
of the Corporation, 1595 Mendon Road, Cumberland, Rhode Island 02864-0700, on
Tuesday, June 13, 2000,at 10:00 a.m., for the following purposes:
1. To approve and adopt the Agreement of Merger between Southern Union
Company and Valley Resources, Inc.
2. To consider and act upon such other matters as may properly come
before the meeting and any and all adjournments thereof.
Only Common Stockholders of record on the stock transfer books of the
Corporation at the close of business on April 28, 2000 will be entitled to
notice of and to vote at the meeting and at any and all adjournments thereof.
Whether you plan to attend the meeting or not,we urge you to vote via the
Internet or to complete, sign and date the enclosed proxy and return it promptly
in the enclosed envelope. No postage is required if mailed in the United States.
By Order of the Board of Directors,
S. Partridge, Secretary
Mailed: May 9, 2000
STOCKHOLDERS ARE REQUESTED TO EXECUTE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED, WHETHER OR NOT THEY EXPECT TO ATTEND THE
SPECIAL MEETING. A STOCKHOLDER NEVERTHELESS MAY VOTE IN PERSON IF HE DOES
ATTEND.
- --------------------------------------------------------------------------------
VALLEY RESOURCES, INC. PROXY/VOTING INSTRUCTION CARD
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VALLEY
RESOURCES, INC. FOR THE SPECIAL MEETING ON JUNE 13, 2000
The stockholder appoints A.P. Degen, S. Partridge and P.A .Morrison, and
each of them, with full power of substitution in each, the proxies of the
stockholder, to represent the stockholder and vote all shares of Valley
Resources, Inc. Common Stock which the stockholder may be entitled to vote at
the Special Meeting of Stockholders to be held on June 13, 2000, and at any
adjournment or postponement thereof, as indicated on the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the stockholder. If no direction is given, this proxy will be voted
FOR proposal 1.
VALLEY RESOURCES, INC.
P.O. BOX 11419
NEW YORK, N.Y. 10203-0419
(Continued, and to be signed and dated on reverse side.)
<PAGE> 75
INTERNET MAIL
http://proxy.shareholder.com/vr
Use the Internet to vote your proxy. Mark, sign and date your proxy card
Have your proxy card in hand when and return it in the postage-paid
you access the website. You will be envelope we have provided.
prompted to enter your control
number, located in the box below,to
create an electronic ballot.
--------------------------------------
Your Internet vote authorizes the named If you have submitted your proxy by
proxies to vote your shares in the same the Internet there is no need for
manner as if you marked, signed and you to mail back your proxy.
returned the proxy card. --------------------------------------
---------------------------
CONTROL NUMBER FOR
INTERNET VOTING
---------------------------
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY THE INTERNET
- --------------------------------------------------------------------------------
[ ]
1. To approve and adopt the Agreement of Merger between Southern Union Company
and Valley Resources, Inc.
FOR [X] AGAINST [X] ABSTAIN [X]
2. To consider and act upon other matters as they may properly come before the
meeting and any and all adjournments thereof.
In their discretion the Proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment or postponement
thereof.
Change of Address or [X]
Comments Mark Here
The signature on this Proxy should
correspond exactly with stockholder's
name as printed to the left. In the
case of joint tenancies, co-executors,
or co-trustees, both should sign.
Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian
should give their full title.
Dated:___________________________,2000
______________________________________
Signature
______________________________________
Signature
(PLEASE SIGN, DATE AND RETURN THIS VOTES MUST BE INDICATED [X]
PROXY IN THE ENCLOSED POSTAGE PREPAID (X) IN BLACK OR BLUE INK.
ENVELOPE.)
- --------------------------------------------------------------------------------
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
