As filed with the Securities and Exchange Commission on September 18, 2000
Registration No. 333-44738
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------
WPS Resources Corporation
(Exact name of registrant as specified in its charter)
Wisconsin 4911 39-1775292
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization)(classification code number)Identification No.)
WPS Resources Corporation
700 North Adams Street
Green Bay, Wisconsin 54301
(920) 433-1050
(Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------
Larry L. Weyers
President and Chief Executive Officer
WPS Resources Corporation
700 North Adams Street
Green Bay, Wisconsin 54301
(920) 433-1727
------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------------------------
Copies to:
Michael S. Nolan, Esq. Robert J. Loots, Esq.
Foley & Lardner von Briesen, Purtell & Roper, s.c.
777 East Wisconsin Avenue 411 East Wisconsin Avenue, Suite 700
Milwaukee, WI 53202-5367 Milwaukee, WI 53202
----------------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective and
satisfaction or waiver of all other conditions to the merger (the "Merger") of
Wisconsin Fuel and Light Company ("WFL") with and into Wisconsin Public Service
Corporation or another subsidiary of WPS Resources Corporation ("WPS Resources")
as described in the Agreement and Plan of Merger, dated as of July 13, 2000 (the
"Merger Agreement") attached as Appendix A to the Joint Proxy
Statement/Prospectus forming part of this Registration Statement.
----------------------------------------
If any of the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. |_|
----------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
WISCONSIN FUEL AND LIGHT COMPANY
211 Forest Street, Wausau, Wisconsin 54402-1627
October 6, 2000
Dear Shareholder:
On behalf of the board of directors, it is my pleasure to invite you to a
Special Meeting of Shareholders of Wisconsin Fuel and Light Company ("WF&L")
(the "Special Meeting"), which is being held in connection with the proposed
merger (the "Merger") of WF&L into a subsidiary of WPS Resources Corporation
("WPSR"). This meeting will provide you with the opportunity to participate in
shaping the future direction of your company and the future course of your
investment. The meeting will be held on Monday, November 6, 2000 at the
corporate offices of WF&L, 211 Forest Street, Wausau, Wisconsin 54402-1627, at
2:00 P.M., Central Standard Time.
At this important meeting, you will be asked to approve the Agreement and Plan
of Merger among WPSR, Wisconsin Public Service Corporation ("WPSC"), WF&L
Acquisition Corp. ("WF&L Acquisition") and WF&L (the "Merger Agreement")
pursuant to which WF&L will be merged into WPSC or WF&L Acquisition, and each
issued and outstanding share of Common Stock, $10 par value, of WF&L ("WF&L
Common Stock") will be converted into 1.73 shares of Common Stock, par value
$1.00 per share, of WPSR ("WPSR Common Stock"). This ratio is subject to
adjustment as more fully described in the accompanying Joint Proxy
Statement/Prospectus in the event that the average stock price of a share of
WPSR Common Stock in a ten trading day period shortly before the closing of the
Merger is more than $33.96 or less than $27.79. Based on the initial conversion
ratio, the shares of WPSR Common Stock to be issued to holders of WF&L Common
Stock in the Merger represent approximately 6% of the shares of WPSR Common
Stock anticipated to be outstanding immediately after the effective time of the
Merger.
Pursuant to the Merger Agreement each issued and outstanding share of WF&L
Preferred Stock, $100 par value, will be converted into the right to receive
$103 in cash plus any accrued and unpaid dividends including a pro-rata portion
of the dividend accrued from the last dividend payment date to the date of the
Merger.
As I have indicated to you on a number of occasions, change in the gas utility
industry continues to accelerate, and the gas utility industry will continue to
become increasingly competitive. The Merger will combine WF&L's gas utility,
with a strong, well-managed company, which we have come to know well and
respect, and should enable WF&L to serve its customers more effectively over the
coming years than it could on a stand alone basis.
Your board of directors has carefully considered the terms and conditions
included in the Merger Agreement and the effects of the Merger on the business
and prospects of WF&L, and is in full agreement that entering into the Merger
Agreement was the right decision, and will be beneficial to WF&L and the value
of your investment in WF&L Common Stock. In addition, the board of directors has
received the opinion of its financial advisor, Emory Business Valuation LLC to
the effect that the ratio for conversion of WF&L Common Stock into shares
<PAGE>
of WPSR Common Stock is fair, from a financial point of view, to the holders of
WF&L Common Stock. Accordingly, the board of directors has adopted and approved
the Merger Agreement and the transactions contemplated thereby.
A copy of the Merger Agreement and more detailed information concerning the
Merger and the transactions contemplated thereby, together with financial and
other information concerning the businesses of WPSR and WF&L, are included in
the Joint Proxy Statement/Prospectus that accompanies this letter. I urge you to
review this material carefully.
Your board of directors has unanimously adopted and approved the Merger
Agreement and the Merger and recommends that holders of WF&L Common Stock vote
FOR approval of the Merger Agreement and the Merger at the Special Meeting.
The affirmative vote of the holders of 66 2/3% of the shares of Common Stock
outstanding and entitled to vote is required to approve the Merger. Failure to
vote has the same effect as a vote against the Merger Agreement and the Merger.
I urge you to sign, date and mail the enclosed proxy card at your earliest
convenience, even if you plan to attend the Special Meeting in person. Your vote
is important, no matter how many shares you own. You retain the option to revoke
your proxy at any time, or to vote your shares personally if you attend the
Special Meeting in person.
We do not anticipate that the Merger will be consummated until some time in
2001. Please do not send in your stock certificates at this time.
This is a major step in the history of WF&L, but one that your board of
directors believes is critical to assure the best possible future for all who
share a stake in WF&L.
Thank you for your continued support.
Sincerely,
Mark T. Maranger
President and CEO
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the WPS Resources Corporation Common
Stock to be issued in the Merger or passed upon the accuracy of the accompanying
Joint Proxy Statement/Prospectus. Any representation to the contrary is a
criminal offense. The accompanying Joint Proxy Statement/Prospectus is dated
September __, 2000 and is first being mailed to shareholders on or about
October 6, 2000.
--------------------------------------------------------------------------------
<PAGE>
WISCONSIN PUBLIC SERVICE CORPORATION
700 North Adams Street
P.O. Box 19001
Green Bay, Wisconsin 54307-9001
October 11, 2000
Dear Preferred Shareholder:
The boards of directors of WPS Resources Corporation and Wisconsin
Public Service Corporation have approved a Plan and Agreement of Merger dated as
of July 13, 2000 pursuant to which Wisconsin Fuel and Light Company will merge
into Wisconsin Public Service Corporation or a special purpose subsidiary of WPS
Resources Corporation organized to be the surviving corporation in the Merger if
Wisconsin Public Service Corporation cannot itself be the surviving corporation.
The Merger would not involve the issuance of capital stock by Wisconsin Public
Service Corporation, but Wisconsin Public Service Corporation would acquire all
of the assets of Wisconsin Fuel and Light Company and succeed to its
liabilities.
The Restated Articles of Incorporation of Wisconsin Public Service
Corporation require that the holders of a majority of the outstanding shares of
its preferred stock must vote for any merger or consolidation involving
Wisconsin Public Service Corporation unless the Federal Energy Regulatory
Commission or the Securities and Exchange Commission approves the transaction.
Neither agency has jurisdiction over the proposed merger. Therefore the board of
directors is requesting that you vote to approve the Merger so that Wisconsin
Fuel and Light Company can merge directly with and into Wisconsin Public Service
Corporation. If the preferred shareholders of Wisconsin Public Service
Corporation do not approve the Merger, but all other conditions specified in the
plan and agreement of Merger are satisfied, Wisconsin Fuel and Light Company
will merge into another subsidiary of WPS Resources Corporation. WPS Resources
Corporation intends following that merger to combine the former assets and
operations of Wisconsin Fuel and Light Company with the assets and operations of
Wisconsin Public Service Corporation through a series of transactions which
would not involve a merger and which would not require approval by the preferred
shareholders of Wisconsin Public Service Corporation. The end result will be the
same as the direct merger of Wisconsin Fuel and Light Company into Wisconsin
Public Service Corporation but would probably involve greater transaction costs
and may result in tax liabilities that would not be incurred in the direct
merger.
The board of directors of Wisconsin Public Service Corporation is also
requesting your approval of two amendments to the Wisconsin Public Service
Corporation Restated Articles of Incorporation. The adoption of neither
amendment is necessary in connection with the Wisconsin Fuel and Light Company
merger. The first proposal, however, is intended to eliminate the requirement
for preferred shareholder approval for mergers in which Wisconsin Public Service
Corporation would be the surviving corporation and which would not result in a
<PAGE>
change of control of Wisconsin Public Service Corporation. The board of
directors believes the current provisions serves little purpose and may result
in Wisconsin Public Service Corporation adopting transaction structures that are
more cumbersome and expensive than a direct merger but produce essentially the
same result from the standpoint of the preferred shareholders. The current
provision makes no distinction between types of mergers and applies even to the
merger of a subsidiary into Wisconsin Public Service Corporation but does not
apply to asset or stock acquisitions.
The second amendment is being proposed at this time to avoid the
effort and expense of a separate solicitation at a later date. The Restated
Articles of Incorporation contain a provision requiring the prior approval by
the holders of a majority of the outstanding shares of Wisconsin Public Service
Corporation preferred stock for it to issue unsecured debt securities in a
principal amount in excess of 20% of its combined secured indebtedness, and
capital and surplus. This limitation presents no immediate practical limitation
on Wisconsin Public Service Corporation, but we are considering following the
lead of a growing number of other public utilities in replacing bonded
indebtedness with unsecured indebtedness. This change would allow us to
eliminate restrictions imposed by the provisions of a sixty-year-old bond
indenture which do not contemplate the current realities of our industry and
would allow us greater flexibility in responding to the demands of current and
future corporate and industry restructuring. Your board of directors believes
that it is in the best interest of all of the shareholders of Wisconsin Public
Service Corporation to enable it to choose the right mix of secured and
unsecured indebtedness even to the point of eliminating the use of secured
indebtedness.
I am very enthusiastic about the Wisconsin Fuel and Light merger and I
seriously believe the adoption of the proposed amendments to the Restated
Articles of Incorporation are in the best interest of Wisconsin Public Service
Corporation. I join with all the other members of your board of directors in our
strong recommendation that you vote to approve the Merger and adopt the proposed
amendments to our Restated Articles of Incorporation.
Sincerely,
Larry L. Weyers
Chairman and Chief Executive Officer
-------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has passed upon the accuracy of the accompanying Joint Proxy
Statement/Prospectus. Any representation to the contrary is a criminal offense.
The accompanying Joint Proxy Statement/Prospectus is dated September __, 2000
and is first being mailed to shareholders on or about October 11, 2000.
--------------------------------------------------------------------------------
<PAGE>
WISCONSIN FUEL AND LIGHT COMPANY
211 Forest Street
Wausau, Wisconsin 54402-1627
-----------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-----------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of WISCONSIN
FUEL AND LIGHT COMPANY will be held at the corporate offices of Wisconsin Fuel
and Light Company ("Wisconsin Fuel and Light"), 211 Forest Street, Wausau,
Wisconsin 54402-1627, at 2:00 P.M., Central Standard Time, on November 6, 2000,
for the following purposes:
o To consider and vote upon the Agreement and Plan of Merger, dated as
of July 13, 2000 (the "Merger Agreement"), providing for the merger of
Wisconsin Fuel and Light with and into a subsidiary of WPS Resources
Corporation (the "Merger"). Under the Merger Agreement, each
outstanding share of Wisconsin Fuel and Light Common Stock, $10 par
value, will be converted into the right to receive 1.73 shares of WPS
Resources Common Stock unless the average stock price of WPS Resources
Common Stock determined over a period shortly before the closing of
the Merger is more than $33.96 or less than $27.79. The Merger
Agreement provides that if the average closing price of WPS Resources
Common Stock during this period is more than $33.96, the conversion
ratio will be the same ratio that $58.75 ($33.96 x 1.73) bears to the
average closing price of WPS Resources Common Stock during the period.
The Merger Agreement also provides that if the average closing price
of WPS Resources Common Stock during the period is less than $27.79,
the conversion rate will be the same ratio that $48.08 ($27.79 x 1.73)
bears to the average closing price of WPS Resources Common Stock
during the period. The Merger Agreement also provides that each issued
and outstanding share of Wisconsin Fuel and Light Preferred Stock,
$100 par value, will be converted into the right to receive $103 in
cash plus any accrued and unpaid dividends including a pro-rata
portion of the dividend accrued from the last dividend payment date to
the date of the Merger.
o To consider any other matters that may be properly brought before the
Special Meeting or any adjournment or postponement of the Special
Meeting.
Only shareholders of record at the close of business on October 5,
2000, are entitled to notice of, and to vote at, the Special Meeting or any
adjournment or postponement of the Special Meeting.
The board of directors of Wisconsin Fuel and Light has unanimously adopted
and approved the Merger Agreement and the Merger and determined that they are in
the best interests of Wisconsin Fuel and Light and its shareholders. The Board
recommends that you vote "for" approval of the Merger Agreement and the Merger.
<PAGE>
Shareholders and beneficial owners of shares of Wisconsin Fuel and Light
Common Stock and Preferred Stock will be entitled to assert dissenters' rights
under Sections 180.1301 through 180.1331 of the Wisconsin Business Corporation
Law, a copy of which is attached as Appendix C to the accompanying Joint Proxy
Statement/Prospectus. Shareholders should read the Joint Proxy
Statement/Prospectus and Appendix C for a description of all statutory
provisions relating to dissenters' rights.
The terms of the Merger are summarized in the accompanying Joint Proxy
Statement/Prospectus, which you are urged to read carefully. A copy of the
Merger Agreement is attached as Appendix A.
Your vote is important. Whether or not you expect to attend the Special
Meeting, please complete, sign and date the enclosed proxy card and return it
promptly in the enclosed postage-paid return envelope. You can revoke your proxy
at any time before it is voted by giving written notice to the corporate
secretary of Wisconsin Fuel and Light, by filing another proxy, or by voting in
person at the Special Meeting. Attendance at the Special Meeting, by itself,
does not revoke your proxy.
By Order of the Board of Directors
Hugh H. Bell,
Secretary
October 6, 2000
<PAGE>
WISCONSIN PUBLIC SERVICE CORPORATION
700 North Adams Street
P.O. Box 19001
Green Bay, Wisconsin 54307-9001
Notice of Special Meeting of Preferred Shareholders
Date: November 6, 2000
Time: 10:30 a.m., Central Standard Time
Place: Corporate Offices
WPS Resources Corporation
700 North Adams Street
Green Bay, Wisconsin
Purposes of the Meeting:
o To consider and vote upon the merger of Wisconsin Fuel and Light
Company with and into Wisconsin Public Service Corporation (the
"Merger") pursuant to the Agreement and Plan of Merger, dated as of
July 13, 2000, among WPS Resources Corporation, Wisconsin Public
Service Corporation, WF&L Acquisition Corp. and Wisconsin Fuel and
Light Company (the "Merger Agreement").
o To consider and vote upon a proposed amendment to paragraph 8(b) of
part C of article III of the Restated Articles of Incorporation of
Wisconsin Public Service Corporation, as amended, to permit mergers of
corporations with or into Wisconsin Public Service Corporation which
do not involve a change in control of Wisconsin Public Service
Corporation without the approval of the transaction by the holders of
Preferred Stock of Wisconsin Public Service Corporation.
o To consider and vote upon a proposed amendment to the Restated
Articles of Incorporation of Wisconsin Public Service Corporation, as
amended, to delete in its entirety paragraph (9) of part C of article
III which requires the affirmative vote of the holders of record of a
majority of the total number of outstanding shares of Preferred Stock
for Wisconsin Public Service Corporation to issue unsecured debt
securities in excess of 20% of the aggregate of the total principal
amount of the corporation's secured indebtedness and of the total
capital and surplus of the corporation.
o To consider any other matters that may be properly brought before the
Special Meeting or any adjournment or postponement of the special
meeting.
<PAGE>
Only shareholders of record at the close of business on October 5, 2000,
are entitled to notice of, and to vote, at this special meeting or any
adjournment or postponement of the special meeting.
The board of directors of Wisconsin Public Service Corporation and WPS
Resources Corporation as the holder of all of the outstanding shares of Common
Stock of Wisconsin Public Service Corporation has adopted and approved the
proposed amendments to the Wisconsin Public Service Corporation Restated
Articles of Incorporation.
If both of the proposed amendments to the Restated Articles of
Incorporation of Wisconsin Public Service Corporation are approved at the
Special Meeting by the holders of two-thirds or more of the outstanding shares
of Wisconsin Public Service Corporation Preferred Stock, holders of Preferred
Stock of Wisconsin Public Service Corporation will be entitled to receive a
special cash dividend of $1.00 for each share of Preferred Stock held as of
October 5, 2000, the record date fixed for the Special Meeting.
Shareholders and beneficial owners of shares of Wisconsin Public Service
Corporation Preferred Stock will be entitled to assert dissenters' rights in
connection with their vote to approve the Merger under Sections 180.1301 through
180.1331 of the Wisconsin Business Corporation Law, a copy of which is attached
as Appendix C to the accompanying Joint Proxy Statement/Prospectus. Preferred
shareholders should read the Joint Proxy Statement/Prospectus and Appendix C for
a description of all statutory provisions relating to dissenters' rights.
The terms of the Merger are summarized in the accompanying Joint Proxy
Statement/Prospectus which you are urged to read carefully. A copy of the Merger
Agreement is attached as Appendix A.
Your vote is important. Whether or not you expect to attend the Special
Meeting, please complete, sign and date the enclosed proxy card and return it
promptly in the enclosed postage-paid, return envelope. You can revoke your
proxy at any time before it is voted by giving written notice to the corporate
secretary of Wisconsin Public Service Corporation, by filing another proxy, or
by voting in person at the special meeting. Attendance at the special meeting,
by itself, does not revoke your proxy.
By Order of the Board of Directors
BARTH J. WOLF
Secretary
October 11, 2000
<PAGE>
JOINT PROXY STATEMENT
OF
WISCONSIN FUEL AND LIGHT COMPANY
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 6, 2000
AND OF
WISCONSIN PUBLIC SERVICE CORPORATION
FOR
SPECIAL MEETING OF PREFERRED SHAREHOLDERS
TO BE HELD ON NOVEMBER 6, 2000
--------------------------------------
PROSPECTUS OF
WPS RESOURCES CORPORATION
--------------------------------------
This joint proxy statement/prospectus relates to the proposed merger of
Wisconsin Fuel and Light Company, a Wisconsin corporation, with and into
Wisconsin Public Service Corporation or another subsidiary of WPS Resources
Corporation, a Wisconsin corporation, and is being furnished to the shareholders
of Wisconsin Fuel and Light in connection with the solicitation of proxies by
the Wisconsin Fuel and Light board of directors for use at the special meeting
of Wisconsin Fuel and Light shareholders to be held on November 6, 2000, at 2:00
p.m., central standard time, at the offices of Wisconsin Fuel and Light, 211
Forest Street, Wausau, Wisconsin, and at any adjournment or postponement
thereof. This joint proxy statement/prospectus is first being mailed to
shareholders of Wisconsin Fuel and Light on or about October 6, 2000.
This joint proxy statement/prospectus also relates to the approval by the
preferred shareholders of Wisconsin Public Service Corporation, a Wisconsin
corporation, of the merger of Wisconsin Fuel and Light with and into Wisconsin
Public Service and of two amendments to the Restated Articles of Incorporation
of Wisconsin Public Service, and is being furnished to the preferred
shareholders of Wisconsin Public Service in connection with the solicitation of
proxies by the Wisconsin Public Service board of directors for use at the
special meeting of Wisconsin Public Service preferred shareholders to be held on
November 6, 2000, at 10:30 a.m., central standard time, at the corporate offices
of WPS Resources Corporation, 700 North Adams Street, Green Bay, Wisconsin, and
at any adjournment or postponement thereof. This joint proxy
statement/prospectus is first being mailed to preferred shareholders of
Wisconsin Public Service on or about October 11, 2000.
This joint proxy statement/prospectus constitutes a prospectus of WPS
Resources with respect to 1,763,943 shares of the common stock, $1.00 par value
per share of WPS Resources, an indeterminate amount of additional shares of WPS
Resources Common Stock issuable as a result of an increase in the initial
conversion ratio of 1.73 shares of WPS Resources Common Stock for each share of
Wisconsin Fuel and Light Common Stock in accordance with the terms of the
Agreement and Plan of Merger dated as of July 13, 2000 among WPS Resources,
Wisconsin Fuel and Light, Wisconsin Public Service and WF&L Acquisition Corp.,
and, if applicable, associated rights to purchase shares of WPS Resources
<PAGE>
Common Stock pursuant to that certain Rights Agreement between WPS Resources and
a predecessor of First Bank, N.A., as rights agent thereunder, dated as of
December 12, 1996, to be issued to the holders of Wisconsin Fuel and Light
Common Stock pursuant to the Merger Agreement. Until the Distribution Date, as
defined in the rights agreement, any references in this joint proxy
statement/prospectus to WPS Resources Common Stock shall include the associated
rights. WPS Resources has filed a registration statement on Form S-4 under the
Securities Act of 1933 with the Securities and Exchange Commission covering the
shares of WPS Resources Common Stock to be issued in connection with the Merger.
The Merger involves certain risks. See "RISK FACTORS" beginning on page 26.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the WPS Resources Corporation Common
Stock to be issued in the Merger or passed upon the accuracy of this Joint Proxy
Statement/Prospectus. Any representation to the contrary is a criminal offense.
This Joint Proxy Statement/Prospectus does not cover any resale of the
securities to be received by the holders of Wisconsin Fuel and Light Common
Stock upon completion of the Merger, and no person has authority to make any use
of this Joint Proxy Statement/Prospectus in connection with any such resale.
The date of this Joint Proxy Statement/Prospectus is September __, 2000.
<PAGE>
TABLE OF CONTENTS
Page
WISCONSIN FUEL AND LIGHT COMPANY
QUESTIONS AND ANSWERS ABOUT THE MERGER.........................................1
WISCONSIN PUBLIC SERVICE CORPORATION QUESTIONS AND ANSWERS
ABOUT THE SPECIAL MEETING OF PREFERRED SHAREHOLDERS............................4
SUMMARY........................................................................7
The Parties to the Merger......................................................7
WPS RESOURCES CORPORATION.................................................7
WISCONSIN FUEL AND LIGHT COMPANY..........................................7
Wisconsin Fuel and Light Special Meeting.......................................7
PLACE, TIME AND DATE......................................................7
RECORD DATE...............................................................8
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING...........................8
VOTE REQUIRED.............................................................8
DISSENTERS' RIGHTS........................................................8
Wisconsin Public Service Special Meeting of Preferred Shareholders.............8
PLACE, TIME AND DATE......................................................8
RECORD DATE...............................................................9
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING...........................9
VOTE REQUIRED.............................................................9
The Merger....................................................................10
GENERAL..................................................................10
EFFECTIVE TIME...........................................................10
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES............11
BACKGROUND OF THE MERGER.................................................12
RECOMMENDATION OF THE WISCONSIN FUEL AND LIGHT BOARD;
WISCONSIN FUEL AND LIGHT REASONS FOR THE MERGER.........................12
WPS RESOURCES REASONS FOR THE MERGER.....................................13
OPINION OF WISCONSIN FUEL AND LIGHT'S FINANCIAL ADVISOR..................13
INTERESTS OF CERTAIN PERSONS IN THE MERGER...............................13
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................14
ACCOUNTING TREATMENT.....................................................15
REQUIRED REGULATORY APPROVALS AND OTHER REGULATORY MATTERS...............15
FEDERAL SECURITIES LAW CONSEQUENCES......................................16
CERTAIN OTHER AGREEMENTS.................................................16
TERMINATION; FEES AND EXPENSES...........................................16
i
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS.........................................17
MARKET PRICE AND DIVIDEND INFORMATION.........................................18
SELECTED HISTORICAL CONDENSED FINANCIAL DATA..................................20
WPS RESOURCES............................................................20
WISCONSIN FUEL AND LIGHT.................................................21
COMPARATIVE PER SHARE DATA....................................................22
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.....................24
RISK FACTORS..................................................................26
TRANSACTION RISKS........................................................26
OPERATIONAL RISKS........................................................27
THE SPECIAL MEETINGS..........................................................29
Wisconsin Fuel and Light Special Meeting......................................29
PLACE, TIME AND DATE.....................................................29
RECORD DATE..............................................................29
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING..........................29
VOTE REQUIRED............................................................29
DISSENTERS' RIGHTS.......................................................30
PROXIES..................................................................32
Wisconsin Public Service Special Meeting of Preferred Shareholders............32
PLACE, TIME AND DATE.....................................................32
RECORD DATE..............................................................33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS..........................33
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING..........................33
SPECIAL CASH DIVIDEND....................................................38
RATING AGENCIES..........................................................38
VOTE REQUIRED............................................................38
FEDERAL INCOME TAX CONSEQUENCES OF SPECIAL CASH DIVIDEND.................39
DISSENTERS' RIGHTS.......................................................40
PROXES...................................................................42
THE MERGER....................................................................43
GENERAL..................................................................43
EFFECTIVE TIME; CONDITIONS TO THE MERGER.................................43
CONVERSION OF SHARES.....................................................43
BACKGROUND OF THE MERGER.................................................45
RECOMMENDATIONS OF THE WISCONSIN FUEL AND LIGHT BOARD;
WISCONSIN FUEL AND LIGHT REASONS FOR THE MERGER..........................46
-ii-
<PAGE>
OPINION OF WISCONSIN FUEL AND LIGHT'S FINANCIAL ADVISOR..................46
WPS RESOURCES REASONS FOR THE MERGER.....................................51
INTERESTS OF CERTAIN PERSONS IN THE MERGER...............................52
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................53
ACCOUNTING TREATMENT.....................................................56
REQUIRED REGULATORY APPROVALS AND OTHER REGULATORY MATTERS...............56
FEDERAL SECURITIES LAW CONSEQUENCES......................................60
CERTAIN OTHER AGREEMENTS.................................................61
THE MERGER AGREEMENT..........................................................61
THE MERGER...............................................................61
EFFECTIVE TIME...........................................................61
TERMS OF THE MERGER......................................................62
FRACTIONAL SHARES........................................................63
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES............63
CONDITIONS TO COMPLETION OF THE MERGER...................................64
REPRESENTATIONS AND WARRANTIES...........................................67
CONDUCT OF BUSINESS PENDING THE MERGER...................................69
NO SOLICITATION OF TRANSACTIONS..........................................70
EMPLOYEE BENEFIT PLANS...................................................71
INDEMNIFICATION..........................................................71
CERTAIN OTHER COVENANTS..................................................73
TERMINATION; FEES AND EXPENSES...........................................74
AMENDMENT; WAIVER........................................................77
PERSONNEL MATTERS........................................................77
PARTIES TO THE MERGER.........................................................78
WPS Resources, Wisconsin Public Service and WF&L Acquisition..................78
Wisconsin Fuel and Light Company..............................................78
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION......................................................79
DESCRIPTION OF WPS RESOURCES CAPITAL STOCK....................................85
AUTHORIZED CAPITAL STOCK.................................................85
WPS RESOURCES COMMON STOCK...............................................85
CERTAIN STATUTORY PROVISIONS.............................................87
COMMON STOCK PURCHASE RIGHTS.............................................89
RESTRICTION ON DIVIDENDS PAYABLE BY WISCONSIN PUBLIC SERVICE
AND UPPER PENINSULA POWER TO WPS RESOURCES; LIMITATIONS ON
CAPITAL STRUCTURE......................................................90
-iii-
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF COMMON STOCK OF WPS RESOURCES
AND WISCONSIN FUEL AND LIGHT................................................90
GENERAL..................................................................90
AUTHORIZED CAPITAL STOCK.................................................91
VOTING RIGHTS............................................................91
PREEMPTIVE RIGHTS........................................................91
BOARD OF DIRECTORS.......................................................91
REMOVAL OF DIRECTORS.....................................................92
VACANCIES ON THE BOARD OF DIRECTORS......................................92
LIMITATION OF LIABILITY; INDEMNIFICATION.................................93
AMENDMENTS TO ARTICLES OF INCORPORATION..................................94
AMENDMENTS TO BYLAWS.....................................................94
CERTAIN OTHER SUPERMAJORITY VOTING PROVISIONS............................95
RIGHTS PLAN..............................................................95
INSPECTION OF BOOKS, RECORDS AND STOCKHOLDERS LIST.......................99
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................99
CERTAIN SHAREHOLDERS OF WISCONSIN FUEL AND LIGHT.........................99
CERTAIN SHAREHOLDERS OF WPS RESOURCES...................................100
MANAGEMENT OF WPS RESOURCES AND EXECUTIVE COMPENSATION.......................101
LEGAL MATTERS................................................................101
ACCOUNTANTS REPRESENTATIVES..................................................101
EXPERTS......................................................................101
OTHER MATTERS................................................................102
WHERE YOU CAN FIND MORE INFORMATION..........................................102
INDEX TO WISCONSIN FUEL AND LIGHT COMPANY
FINANCIAL STATEMENTS......................................................F-1
APPENDIX A - AGREEMENT AND PLAN OF MERGER
APPENDIX B - EMORY BUSINESS VALUATION, LLC OPINION
APPENDIX C - DISSENTERS' RIGHTS
APPENDIX D - PARAGRAPHS III.C.(8)(b) AND III.C.(9) OF THE WISCONSIN PUBLIC
SERVICE CORPORATION RESTATED ARTICLES
OF INCORPORATION AND PROPOSED AMENDMENTS
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WISCONSIN FUEL AND LIGHT COMPANY
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. What will I receive in the Merger?
A. Holders of Wisconsin Fuel and Light Common Stock will receive merger
consideration valued at not more than $58.75 nor less than $48.08 per share
of Wisconsin Fuel and Light Common Stock payable in shares of WPS Resources
Common Stock. If the average closing price of WPS Resources Common Stock on
the New York Stock Exchange determined during a ten trading day period
shortly before the closing of the Merger is not more than $33.96 nor less
than $27.79, each share of Wisconsin Fuel and Light Common Stock will
convert at the closing of the Merger into the right to receive 1.73 shares
of WPS Resources Common Stock. If the average closing price of a share of
WPS Resources Common Stock on the New York Stock Exchange during the period
is more than $33.96, the conversion ratio will decrease from 1.73 to an
amount equal to $58.75 (the value of the merger consideration if the
average closing price of WPS Resources Common Stock during the period were
$33.96) divided by the actual average closing price of WPS Resources Common
Stock on the New York Stock Exchange during the period. If the average
closing price of WPS Resources Common Stock on the New York Stock Exchange
during the period is less than $27.79, the conversion ratio will increase
from 1.73 to an amount equal to $48.08 (the value of the merger
consideration if the average closing price of WPS Resources Common Stock
during the period were $27.79) divided by the actual average closing price
of WPS Resources Common Stock on the New York Stock Exchange during the
period.
The holder of Wisconsin Fuel and Light Preferred Stock will receive $103 in
cash per share of Wisconsin Fuel and Light Preferred Stock, plus any
accrued and unpaid dividends including a pro-rata portion of the dividend
accrued from the last dividend payment date to the date of the Merger.
Q. When and where is the Wisconsin Fuel and Light shareholder meeting?
A. November 6, 2000, at 2:00 p.m., central standard time at the Wisconsin
Fuel and Light office, 211 Forest Street, Wausau, Wisconsin
Q. What do I need to do now?
A. Please sign and mail in your proxy card in the enclosed return envelope as
soon as possible so that your shares may be represented at your
shareholders' meeting. In order to ensure that your vote is recorded,
please complete and sign your proxy card as instructed on your proxy card
even if you currently plan to attend your shareholders' meeting in person.
The board of directors of Wisconsin Fuel and Light recommends that you vote
in favor of the Merger Agreement and the Merger. If you do not vote
your shares at the special shareholders' meeting, it will have the same
effect as if you had voted your shares against the Merger.
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Q. What do I do if I later want to change my vote?
A. Just send in a later-dated, signed proxy card to the Wisconsin Fuel and
Light corporate secretary, or attend the special shareholders' meeting in
person and vote. You may also revoke your proxy by sending a notice of
revocation that the Wisconsin Fuel and Light corporate secretary receives
at the address indicated above prior to the special shareholders' meeting.
Q. What are Dissenters' Rights and how do I exercise them?
A. Provisions of the Wisconsin Business Corporation Law permit a shareholder
of a Wisconsin corporation such as Wisconsin Fuel and Light to object to
certain transactions including a merger and demand cash payment of the fair
value of his or her shares determined as of the time immediately before the
effectiveness of the merger and excluding any appreciation or depreciation
in value in anticipation of the merger unless exclusion would be
inequitable.
Any shareholder or beneficial owner of Wisconsin Fuel and Light Common
Stock who desires to assert dissenters' rights must follow the procedure
set forth in subchapter XIII of the Wisconsin Business Corporation Law. A
copy of the relevant statutory provisions are set forth in Appendix C to
the joint proxy statement/prospectus and should be carefully reviewed. The
procedure requires that the shareholder or beneficial owner must do all of
the following:
Deliver to Wisconsin Fuel and Light before the special meeting of
shareholders a written objection to the Agreement and Plan of Merger and a
statement that the shareholder or owner intends to demand payment for his
or her shares if the Merger goes into effect.
Not vote in favor of the Agreement and Plan of Merger at the special
meeting.
Demand payment in writing and surrender the certificates for the shares as
to which he or she has dissented within thirty (30) days of receipt from
Wisconsin Fuel and Light of a notice which the company is required to
deliver to dissenting shareholders within ten (10) days after the special
meeting of shareholders.
Since dissenting shareholders cannot vote in favor of the proposed Merger,
if more than one-third of the holders of Wisconsin Fuel and Light Common
Stock decide to dissent from the Merger, with respect to their shares, the
Merger will not be approved or go into effect and no cash payments will be
made to the dissenting shareholders.
Q: Should I send in my Wisconsin Fuel and Light stock certificates now?
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A: No. If the Wisconsin Fuel and Light shareholders approve the Merger and all
other conditions to the Merger are duly satisfied, we will send the
Wisconsin Fuel and Light shareholders written instructions for turning in
their common stock certificates if they hold the certificate representing
their shares. Do not send in your Wisconsin Fuel and Light stock
certificates now.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: No, unless you provide instruction. You should therefore be sure to provide
your broker with instructions on how to vote your shares.
Q: What should I do if my Wisconsin Fuel and Light shares are held in employee
benefit plans?
A: The trustee of the employee benefit plans will solicit instructions from
each plan participant regarding the voting of the shares held by the plan
and will vote the shares as directed.
Q: Will I continue to receive dividends?
A: We expect no change in the dividend policy of Wisconsin Fuel and Light
while the Merger is pending. WPS Resources expects to continue to pay its
dividends after the Merger. WPS Resources quarterly Common Stock divided is
currently $.515 per share ($2.06 annually), which based on the initial
Merger conversion ratio of 1.73 shares of WPS Resources Common Stock for
each share of Wisconsin Fuel and Light Common Stock, would be equivalent to
a quarterly dividend of $.89 per share ($3.56 annually) of Wisconsin Fuel
and Light Common Stock.
Q: When do you expect the merger to be completed?
A: We are working to complete the Merger as soon as possible, and hope to do
so before the end of the first quarter of 2001. If regulatory approvals
have not been obtained by the June 30, 2001, deadline in the Merger
Agreement, the deadline will be automatically extended to December 31,
2001.
Q: Who do I call if I have questions about the meeting or the merger?
A: Any questions may be directed to Hugh H. Bell, Secretary of Wisconsin Fuel
and Light (608-259-2309).
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WISCONSIN PUBLIC SERVICE CORPORATION
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
OF PREFERRED SHAREHOLDERS
Q. Why am I receiving these materials?
A. The Board of Directors of Wisconsin Public Service is providing the joint
proxy statement/prospectus to you in connection with the Special Meeting of
holders of Wisconsin Public Service Preferred Stock.
Q. When and where is the Wisconsin Public Service Special Meeting of Preferred
Shareholders?
A. November 6, 2000, at 10:30 a.m., central standard time at the corporate
offices of WPS Resources Corporation, 700 North Adams Street, Green Bay,
Wisconsin.
Q. Who is entitled to vote at the Special Meeting?
A. Only holders of record of Wisconsin Public Service Preferred Stock on
October 5, 2000 are entitled to vote at the Special Meeting. As of the
record date, 511,882 shares of Wisconsin Public Service Preferred Stock
were issued and outstanding. Each shareholder is entitled to one vote for
each share of Wisconsin Public Service Preferred Stock held on the record
date.
Q. What may I vote on at the Special Meeting?
A. You may vote to approve the merger of Wisconsin Fuel and Light into
Wisconsin Public Service and to approve two separate amendments to the
Wisconsin Public Service Restated Articles of Incorporation - the first
which would eliminate the requirement for approval by the holders of
Wisconsin Public Service Preferred Stock of any merger in which Wisconsin
Public Service is the surviving corporation and which does not involve a
change in control of Wisconsin Public Service and the second which would
eliminate the requirement of the affirmative vote of holders of Wisconsin
Public Service Preferred Stock to enable Wisconsin Public Service to issue
unsecured debt securities under circumstances where the Wisconsin Public
Service Restated Articles of Incorporation currently requires that vote.
Q. How does the Board of Directors recommend I vote?
A. The Board of Directors recommends that you vote your shares FOR the merger
of Wisconsin Fuel and Light into Wisconsin Public Service and FOR each of
the proposed amendments to the Wisconsin Public Service Restated Articles
of Incorporation.
Q. How can I vote my shares?
A. You may vote either in person at the Special Meeting or by granting a
proxy. If you desire to grant a proxy, then you have three options on how
to vote:
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o By telephone
o By Internet; or
o By mailing the proxy card.
Please refer to the instructions on your proxy card to vote by proxy. The
grant of a proxy will not affect your right to vote your shares if you
attend the Special Meeting and desire to vote in person.
Q. How are votes counted?
A. You may vote FOR, AGAINST or ABSTAIN with respect to the Merger of
Wisconsin Fuel and Light into Wisconsin Public Service and each of the
proposed amendments to the Wisconsin Public Service Restated Articles of
Incorporation. A vote to ABSTAIN will have the same effect as a vote
AGAINST a proposal. If you return your signed proxy card but do not mark
the boxes showing how you wish to vote, your shares will be voted FOR the
Merger and FOR each of the proposed amendments.
Q. How can I change my vote?
A. You have the right to revoke your proxy at any time before the Special
Meeting by:
o Providing notice to the Corporate Secretary of Wisconsin Public
Service and voting in person at the Special Meeting; or
o Appointing a new proxy prior to the time of the vote at the Special
Meeting.
Attendance at the Special Meeting will not cause your previously granted
proxy to be revoked unless you specifically so request.
Q. What are Dissenters' Rights and how do I exercise them?
A. Provisions of the Wisconsin Business Corporation Law permit a preferred
shareholder of Wisconsin Public Service to object to the Merger of
Wisconsin Fuel and Light into Wisconsin Public Service and demand cash
payment of the fair value of his or her shares determined as of the time
immediately before the effectiveness of the Merger and excluding any
appreciation or depreciation in value in anticipation of the Merger unless
exclusion would be inequitable.
Any shareholder or beneficial owner of Wisconsin Public Service Preferred
Stock who desires to assert dissenter's right must follow the procedure set
forth in subchapter XIII of the Wisconsin Business Corporation Law. A copy
of the relevant statutory provisions are set forth in Appendix C to the
joint proxy statement/prospectus and should be carefully reviewed. The
procedure requires that the shareholder or beneficial owner must do all of
the following:
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Deliver to Wisconsin Public Service before the Special
Meeting of preferred shareholders a written objection to the
Merger and a statement that the shareholder or owner intends
to demand payment for his or her shares if the Merger goes
into effect.
Not vote in favor of the Merger at the Special Meeting.
Demand payment in writing and surrender the certificates for
the shares as to which he or she has dissented within thirty
(30) days of receipt from Wisconsin Public Service of a
notice which the company is required to deliver to
dissenting preferred shareholders within ten (10) days after
the Special Meeting.
Since dissenting shareholders cannot vote in favor of the proposed Merger,
if more than one-half of the holders of Wisconsin Public Service Preferred
Stock decide to dissent from the Merger, with respect to their shares, the
Merger will not be approved or go into effect and no cash payments will be
made to the dissenting preferred shareholders.
Q. Who will bear the cost of soliciting votes for the Special Meeting?
A. Wisconsin Public Service will pay the cost of preparing, assembling,
printing, mailing and distributing the accompanying joint proxy
statement/prospectus to the holders of its Preferred Stock. If you choose
to vote over the Internet, then you will be responsible for Internet Access
charges you may incur.
Q. Who do I call if I have questions about the meeting or the Merger?
A. You may direct any questions to Barth J. Wolf, Secretary of Wisconsin
Public Service (920-433-1727).
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SUMMARY
This summary highlights selected information contained in this joint proxy
statement/prospectus. It may not contain all of the information that is
important to you. To understand the Merger fully and for a more complete
description of the terms of the Merger, you should read this entire joint proxy
statement/prospectus carefully, together with the other documents to which we
refer. See "Where You Can Find More Information" on page 92. All references to
WPS Resources Common Stock include any associated rights under the WPS Resources
shareholder rights plan.
The Parties to the Merger
WPS RESOURCES CORPORATION
WPS Resources Corporation ("WPS Resources") is a holding company whose
principal subsidiary is Wisconsin Public Service Corporation ("Wisconsin Public
Service"), a regulated electric and gas utility. At June 30, 2000, Wisconsin
Public Service served 390,700 electric retail customers and 231,493 gas retail
customers in an 11,000 square mile service territory in Northeastern Wisconsin
and Upper Michigan. Additionally, Wisconsin Public Service provides wholesale
full or partial requirements electric service, either directly or indirectly, to
12 municipal utilities, three Rural Electrification Administration financed
electric cooperatives, and a privately-held utility. WPS Resources also owns
Upper Peninsula Power Company, a regulated electric utility which serves
approximately 49,000 customers in two-thirds of Michigan's Upper Peninsula. WPS
Resources also owns two non-utility subsidiaries, WPS Energy Services, Inc. and
WPS Power Development, Inc. For fiscal year 1999, Wisconsin Public Service,
Upper-Peninsula Power, Energy Services and Power Development represented
approximately 65%, 5%, 27% and 3%, respectively, of WPS Resources consolidated
revenues and 78%, 7%, 4% and 11%, respectively, of WPS Resources consolidated
assets. The mailing address and telephone number of the principal executive
offices of WPS Resources are 700 North Adams Street, Green Bay, Wisconsin 54307,
(920) 433-1727. See "PARTIES TO THE MERGER - WPS Resources."
WISCONSIN FUEL AND LIGHT COMPANY
Wisconsin Fuel and Light Company ("Wisconsin Fuel and Light") is a
regulated utility engaged in the distribution of natural gas to a diversified
base of residential, commercial and industrial customers primarily in the
communities of Manitowoc and Wausau, Wisconsin.
Wisconsin Fuel and Light Special Meeting
PLACE, TIME AND DATE
The Wisconsin Fuel and Light Special Meeting will be held on November 6,
2000 at the offices of Wisconsin Fuel and Light, 211 Forest Street, Wausau,
Wisconsin 54402-1627 commencing at 2:00 p.m., central standard time, and at any
such time as may be specified upon any adjournments or postponements of the
Special Meeting. See "THE SPECIAL MEETINGS - Wisconsin Fuel and Light Special
Meeting."
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RECORD DATE
The holders of record of shares of Wisconsin Fuel and Light Common Stock
and Preferred Stock at the close of business on October 5, 2000 are entitled to
notice of, and to vote at, the Wisconsin Fuel and Light Special Meeting. See
"THE WISCONSIN FUEL AND LIGHT SPECIAL MEETING."
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Wisconsin Fuel and Light Special Meeting, holders of shares of
Wisconsin Fuel and Light Common Stock and Preferred Stock will vote separately
upon a proposal to approve the Merger Agreement and the Merger. Holders of
shares of Wisconsin Fuel and Light Common Stock and Preferred Stock will also
consider and vote upon any matters incidental to the conduct of the Wisconsin
Fuel and Light Special Meeting which may properly arise. See "THE SPECIAL
MEETINGS - Wisconsin Fuel and Light Special Meeting."
VOTE REQUIRED
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of Wisconsin Fuel and Light Common Stock and the vote of at least 66 2/3%
of the outstanding shares of Wisconsin Fuel and Light Preferred Stock is
required to approve the Merger. Approval of the Merger by the holders of shares
of Wisconsin Fuel and Light Common Stock and Preferred Stock is a condition to,
and required for, the consummation of the Merger. The holder of all of the
outstanding shares of Wisconsin Fuel and Light Preferred Stock has delivered a
proxy to the President of Wisconsin Fuel and Light authorizing the voting of the
shares of Wisconsin Fuel and Light Preferred Stock for approval of the Merger.
The directors and executive officers of Wisconsin Fuel and Light hold in the
aggregate 5.68% of the issued and outstanding shares of Wisconsin Fuel and Light
common stock entitled to vote at the special meeting. See "THE SPECIAL MEETINGS
- Wisconsin Fuel and Light Special Meeting."
DISSENTERS' RIGHTS
Under the Wisconsin Business Corporation Law, holders of Wisconsin Fuel and
Light Common Stock will be entitled to assert dissenters' rights in connection
with the Merger. See "THE SPECIAL MEETINGS - Wisconsin Fuel and Light Special
Meeting - Dissenters' Rights."
Wisconsin Public Service Special Meeting of Preferred Shareholders
PLACE, TIME AND DATE
The Wisconsin Public Service Special Meeting of Preferred Shareholders will
be held on November 6, 2000 at the corporate offices of WPS Resources
Corporation, 700 North Adams Street, Green Bay, Wisconsin commencing at 10:30
a.m. central standard time, and at any such time as may be specified upon any
adjournments or postponements of the Special
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Meeting. See "THE SPECIAL MEETINGS - Wisconsin Public Service Special Meeting of
Preferred Shareholders."
RECORD DATE
The holders of record of shares of Wisconsin Public Service Preferred Stock
at the close of business on October 5, 2000 are entitled to notice of, and to
vote at, the Wisconsin Public Service Special Meeting of Preferred Shareholders.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The holders of record of shares of Wisconsin Public Service Preferred Stock
of all series voting as a single voting group will vote upon three proposals.
o to approve the Merger of Wisconsin Fuel and Light into Wisconsin
Public Service pursuant to the Merger Agreement.
o to adopt an amendment to paragraph 8(b) of part C of article III of
the Restated Articles of Incorporation of Wisconsin Public Service to
permit without the approval of the transactions by the holders of
Preferred Stock of Wisconsin Public Service the mergers of
corporations with or into Wisconsin Public Service which do not
involve a change of control of Wisconsin Public Service, and
o to adopt an amendment to the Restated Articles of Incorporation of
Wisconsin Public Service by deleting in its entirety paragraph (9) of
part C of article III which requires the affirmative vote of the
holders of a majority of the outstanding shares of Wisconsin Public
Service Preferred Stock to issue unsecured securities in excess of 20%
of the aggregate of the total principal amount of Wisconsin Public
Service secured indebtedness and of its capital and surplus.
Holders of shares of Wisconsin Public Service preferred stock will also
consider and vote upon any matters incidental to the conduct of the Wisconsin
Public Service special meeting of preferred shareholders which may properly
arise. See "THE SPECIAL MEETINGS - Wisconsin Public Service Special Meeting of
Preferred Shareholders."
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding shares of Wisconsin Public Service Preferred Stock of all series
voting as one class is required to approve the Merger of Wisconsin Fuel and
Light directly into Wisconsin Public Service. If the Wisconsin Public Service
Preferred Shareholders do not approve the Merger but all other conditions
contained in the Merger Agreement are satisfied, Wisconsin Fuel and Light will
merge into WF&L Acquisition Corp., a wholly owned subsidiary of WPS Resources.
WF&L Acquisition would then sell its business and assets to Wisconsin Public
Service, or WPS Resources would then contribute the stock of WF&L Acquisition to
Wisconsin Public Service,
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and Wisconsin Public Service would then dissolve and liquidate WF&L Acquisition
into Wisconsin Public Service.
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of Wisconsin Public Service Preferred Stock voting as a single class is
required to approve each of the proposed amendments to the Wisconsin Public
Service Restated Articles of Incorporation. The adoption of neither amendment is
required to enable the Merger of Wisconsin Fuel and Light into Wisconsin Public
Service to proceed.
WPS Resources and the directors, executive officers and affiliates of
Wisconsin Public Service hold in the aggregate 10 of the issued and outstanding
shares of Wisconsin Public Service Preferred Stock entitled to vote at the
Special Meeting.
WPS Resources as the holder of all of the outstanding shares of Common
Stock of Wisconsin Public Service has adopted and approved the two amendments to
the Wisconsin Public Service Restated Articles of Incorporation. See "THE
SPECIAL MEETINGS - Wisconsin Public Service Special Meeting of Preferred
Shareholders."
The Merger
GENERAL
The Merger Agreement contemplates that at its effective time, Wisconsin
Fuel and Light will be merged with and into Wisconsin Public Service, a
corporation all of the outstanding shares of common stock of which are owned by
WPS Resources provided that the preferred shareholders of Wisconsin Public
Service approve the Merger on or before February 1, 2001, if their approval is
then required, or with and into WF&L Acquisition Corp., a wholly-owned
subsidiary of WPS Resources, if the holders of Wisconsin Public Service
Preferred Stock do not approve the Merger on or before February 1, 2001, and
that approval is then required. In either case, the separate corporate existence
of Wisconsin Fuel and Light will cease and Wisconsin Public Service or WF&L
Acquisition, as the case may be, will be the surviving corporation. See "THE
MERGER AGREEMENT - Terms of the Merger."
EFFECTIVE TIME
The Merger will become effective upon the filing of articles of merger with
the Department of Financial Institutions of the State of Wisconsin or such later
time as WPS Resources and Wisconsin Fuel and Light may agree upon and set forth
in the articles of merger. The effective time will be three days after the
satisfaction or waiver of the conditions precedent to the Merger set forth in
the Merger Agreement or such other date as WPS Resources and Wisconsin Fuel and
Light mutually agree upon, provided that if the Merger would otherwise close
during the period beginning December 15, 2000 and ending February 1, 2001, both
inclusive, the closing will be delayed until February 2, 2001 or such other date
as WPS Resources and Wisconsin Fuel and Light mutually agree upon. See "THE
MERGER - Effective Time."
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CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
At the Effective Time, each share of Wisconsin Fuel and Light Common Stock
outstanding immediately prior to the time the Merger becomes effective, other
than dissenting shares and other than shares owned by Wisconsin Fuel and Light
or WPS Resources or any of their respective subsidiaries, will, upon
consummation of the Merger, be converted into the right to receive shares of WPS
Resources Common Stock. The ratio for converting Wisconsin Fuel and Light common
stock into WPS Resources Common Stock will vary depending upon the average
closing price of WPS Resources common stock as reported in the New York Stock
Exchange Composite Transactions in The Wall Street Journal during a
determination period consisting of ten trading days ending with and including
the third trading date next preceding the date on which the Merger becomes
effective, as follows:
Each share of Wisconsin Fuel and Light
Common Stock Converted Into Right to
Receive that Number of Shares of WPS
Resources Common Stock Set Forth Below
Average Closing Price of WPS or that Number of Shares of WPS Resources
Resources Common Stock During Common Stock Equal to One Multiplied
Determination Period by the Fraction Set Forth Below
---------------------------------- ------------------------------------------
$27.79 - $33.96 (both inclusive) 1.73 Shares of WPS Resources Common Stock
$33.97 or more $58.75(1) divided by
Average Closing Price of
WPS Resources Common Stock
During Determination Period
$27.78 or less $48.08(1) divided by
Average Closing Price of
WPS Resources Common Stock
During Determination Period
(1) In the above calculations $58.75 represents the value of 1.73 shares of WPS
Resources common stock at $33.96 per share and $48.08 represents the value
of 1.73 shares of WPS Resources common stock at $27.79 per share.
The Merger Agreement provides that the conversion ratio will not be
increased beyond such number that would result in the delivery of shares of WPS
Resources Common Stock pursuant to the Merger in excess of 19.9% of the
aggregate number of shares of WPS Resources Common Stock outstanding at the time
that the Merger becomes effective. Based on the closing price of WPS Resources
Common Stock on September 13, 2000, the conversion ratio would be 1.73 and the
number of shares of its Common Stock which WPS Resources would issue pursuant to
the Merger would constitute approximately 6.24% of the aggregate of the total of
the number of presently outstanding shares of WPS Resources Common Stock plus
the number of additional shares issuable pursuant to the Merger.
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Based on this conversion ratio and the 1,019,620 outstanding shares of
Wisconsin Fuel and Light Common Stock, WPS Resources would issue up to 1,763,943
shares of WPS Resources Common Stock. See "THE MERGER AGREEMENT - Conversion of
Shares; Procedures for Exchange of Certificates."
WPS Resources will not issue fractional shares of WPS Resources Common
Stock upon the surrender of certificates representing Wisconsin Fuel and Light
Common Stock pursuant to the Merger. Instead, the Merger Agreement provides that
holders of certificates representing shares of Wisconsin Fuel and Light Common
Stock who otherwise would be entitled to fractional shares of WPS Resources
Common Stock will receive cash as set forth in the Merger Agreement. See "THE
MERGER AGREEMENT -- Fractional Shares."
As soon as practicable after the Merger becomes effective, Firstar Bank
N.A., Milwaukee, Wisconsin, a third-party exchange agent selected by WPS
Resources, will mail to each holder of record of a certificate or certificates
which immediately prior to the Merger represented outstanding shares of
Wisconsin Fuel and Light Common Stock that were converted into the right to
receive shares of WPS Resources Common Stock:
o a letter of transmittal specifying that delivery shall be effected,
and risk of loss and title to such certificates will pass, only upon
actual delivery of the certificates to the exchange agent
o instructions for use in effecting the surrender of the certificates in
exchange for certificates representing WPS Resources Common Stock.
Until surrendered, each certificate of Wisconsin Fuel and Light Common
Stock eligible for conversion shall at any time after the Merger represent only
the right to receive upon surrender the certificate representing WPS Resources
Common Stock and cash in lieu of any fractional shares of WPS Resources Common
Stock.
No dividends or other distributions that are declared or made on WPS
Resources Common Stock will be paid to any person entitled to receive
certificates representing WPS Resources Common Stock until that person
surrenders his or her certificates representing Wisconsin Fuel and Light Common
Stock. See "THE MERGER AGREEMENT -Surrender and Payment."
BACKGROUND OF THE MERGER
For a description of the background of the Merger, see "THE MERGER -
Background of the Merger."
RECOMMENDATION OF THE WISCONSIN FUEL AND LIGHT BOARD;
WISCONSIN FUEL AND LIGHT REASONS FOR THE MERGER
The board of directors of Wisconsin Fuel and Light believes that the Merger
is in the best interests of Wisconsin Fuel and Light, and that the terms of the
Merger are fair to, and in the best interests of, the holders of Wisconsin Fuel
and Light common stock and offer the
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holders of Wisconsin Fuel and Light common stock better financial prospects for
the future than would be available to Wisconsin Fuel and Light on a stand-alone
basis.
The Wisconsin Fuel and Light board has unanimously adopted and approved the
Merger Agreement and the Merger, and recommends that holders of Wisconsin Fuel
and Light Common Stock vote to approve the Merger Agreement and the Merger. The
Wisconsin Fuel and Light Board adopted and approved the Merger Agreement based
upon a number of factors, which are described under "THE MERGER - Recommendation
of the Wisconsin Fuel and Light Board; Wisconsin Fuel and Light Reasons for the
Merger."
WPS RESOURCES REASONS FOR THE MERGER
For the reasons WPS Resources has determined to engage in the Merger, see
"THE MERGER - WPS Resources Reasons for the Merger."
OPINION OF WISCONSIN FUEL AND LIGHT'S FINANCIAL ADVISOR
As of July 11, 2000, Emory Business Valuation, LLC, Milwaukee, Wisconsin
delivered to the Wisconsin Fuel and Light board its written opinion to the
effect that, based upon the procedure and subject to the assumptions made,
matters considered and the limitations discussed therein, the consideration for
Wisconsin Fuel and Light Common Stock provided by the Merger Agreement is fair,
from a financial point of view, to the holders of Wisconsin Fuel and Light
Common Stock. A copy of the opinion of Emory Business Valuation, LLC is attached
to this joint proxy statement/prospectus as Appendix B and should be read in its
entirety. See "THE MERGER -- Opinion of Wisconsin Fuel and Light's Financial
Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Five executives, Mark T. Maranger, President and Chief Executive Officer,
Paul C. Baird, Treasurer, Monte K. Gehring, Vice-President, John K. Keune,
Vice-President, and Edward C. Vallis, Vice-President will continue to be covered
by the existing Wisconsin Fuel and Light change in control severance agreements.
In general, each of these agreements provides that if the employer terminates
the employment of such executive "without cause" after a change in control or if
the employee terminates his employment for "cause" after a change in control,
the executive shall be entitled to a payment equal to 2.99 times the executive's
"base amount" as defined under ss. 280G of the Internal Revenue Code
(essentially annualized compensation over the past five calendar years)
multiplied by a fraction, the numerator of which is 36 minus the number of
calendar months elapsing from the effective date of the change in control to the
effective date of termination of employment, and the denominator of which is 36.
However, in no event would the aggregate benefits under a change in control,
severance agreements and severance policies after the change in control exceed
the amount that would trigger excise taxes under the "parachute payment"
provisions of the tax laws.
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In order to induce these executives to join Wisconsin Public Service after
the Merger, Wisconsin Public Service has decided to make the severance payments
to those executives who agree to become Wisconsin Public Service employees
following the Merger.
Wisconsin Fuel and Light has a retainer agreement with its general legal
counsel, Bell, Gierhart & Moore, S.C. in Madison, Wisconsin, extending through
December 31, 2003 and calling for payment of $1,500 per month as a retainer for
legal services. Hugh H. Bell, a principal shareholder of the law firm, is
Secretary and a director of Wisconsin Fuel and Light.
See "THE MERGER - Interests of Certain Persons in the Merger."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under the Internal
Revenue Code of 1986, so that no gain or loss would be recognized by WPS
Resources or by the wholly-owned subsidiary of WPS Resources that is a party to
the Merger, or by Wisconsin Fuel and Light or the shareholders of Wisconsin Fuel
and Light, except for gain or loss attributable to cash received in lieu of
fractional shares of WPS Resources Common Stock or for dissenting shares. At the
closing of the Merger pursuant to the Merger Agreement, von Briesen Purtell &
Roper, s.c., special counsel to Wisconsin Fuel and Light, will have delivered to
Wisconsin Fuel and Light its opinion and Foley & Lardner, counsel to WPS
Resources, will have delivered to WPS Resources its opinion, both opinions dated
as of the date that the Merger becomes effective, that, among other things, the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. See "THE MERGER -- Material Federal Income Tax
Consequences."
Von Briesen, Purtell & Roper, s.c. and Foley & Lardner have filed opinions
as exhibits to the registration statement which includes this joint proxy
statement/prospectus. In the opinion of von Briesen, Purtell & Roper, s.c.,
special counsel to Wisconsin Fuel and Light, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. In the opinion of Foley & Lardner, counsel to WPS Resources, the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. The opinions of von Briesen, Purtell & Roper, s.c. and
Foley & Lardner are based on current law, the information contained in this
proxy statement/prospectus and certain representations as to factual matters
made by Wisconsin Fuel and Light and WPS Resources.
WPS Resource's obligation to effect the Merger is conditioned on, among
other things, the delivery at the closing of the Merger transaction of an
opinion to WPS Resources from Foley & Lardner, and Wisconsin Fuel and Light's
obligation to effect the Merger is conditioned on, among other things, the
delivery at the closing of an opinion from von Briesen Purtell & Roper, s.c.,
each such opinion substantially to the effect that, for federal income tax
purposes, the Merger constitutes a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. WPS Resources and Wisconsin Fuel
and Light may each waive the delivery of such opinions as conditions to closing.
However, in the event that, in the opinion of WPS Resources or Wisconsin Fuel
and Light or their respective counsel, such waiver would constitute a material
event for Wisconsin Fuel and Light common
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<PAGE>
shareholders, including, without limitation, that the Merger does not constitute
a tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, the approval of the Wisconsin Fuel and Light common shareholders
will be resolicited.
ACCOUNTING TREATMENT
The Merger will be treated by WPS Resources as a "purchase" for accounting
and financial reporting purposes pursuant to generally accepted accounting
principles. See "THE MERGER - Accounting Treatment".
REQUIRED REGULATORY APPROVALS AND OTHER REGULATORY MATTERS
The approval of the Public Service Commission of Wisconsin, as well as the
expiration of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") are required in order to
consummate the Merger.
Although the parties believe that they will receive the requisite
regulatory approvals for the Merger, there can be no assurance as to the timing
of such approvals or the ability of the parties to obtain regulatory approval on
satisfactory terms or otherwise. The Merger is not expected to be consummated
until at least the first quarter of 2001.
It is a condition to the consummation of the Merger that all approvals be
obtained pursuant to final orders and on terms and conditions which do not have,
in the aggregate, or insofar as reasonably can be foreseen, would not have, a
material adverse effect on the business, assets, financial condition or results
of operations of WPS Resources or Wisconsin Fuel and Light. There can be no
assurance that any approvals will not contain terms or conditions which cause
such approvals to fail to satisfy such condition to the consummation of the
Merger. See "THE MERGER AGREEMENT - Required Regulatory Approvals and Other
Regulatory Matters" and "THE MERGER AGREEMENT - Conditions to Consummation of
the Merger" with respect to the approvals noted above and other filings and
actions which also constitute conditions to the consummation of the Merger.
Because Wisconsin Fuel and Light will either merge directly into Wisconsin
Public Service or merge into WF&L Acquisition, and WF&L Acquisition will
immediately following the Merger transfer its assets and operations to Wisconsin
Public Service, WPS Resources and Wisconsin Fuel and Light do not believe that
the Merger will involve the creation of a new Wisconsin utility holding company
under section 196.795 of the Wisconsin Statutes, the Wisconsin Holding Company
Act or require the prior approval of the Securities and Exchange Commission
under the Public Utility Holding Company Act of 1935. WPS Resources may seek
confirmation of these conclusions from the Public Service Commission of
Wisconsin and from the Securities and Exchange Commission. If such confirmations
are not received, WPS Resources will make application for such approvals, but
the approval processes may delay the time when the Merger Agreement becomes
effective. The Merger Agreement provides that either Wisconsin Fuel and Light or
WPS Resources may terminate the Merger Agreement if the Merger has not become
effective on or before June 30, 2001, but if there are then pending
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<PAGE>
applications for regulatory approvals, the Merger Agreement automatically
extends this deadline to December 31, 2001.
The Public Service Commission of Wisconsin will continue to have
jurisdiction to review and regulate all costs projected to be incurred by
Wisconsin Public Service for potential recovery in rates in Wisconsin including
the rates charged to the former customers of Wisconsin Fuel and Light, and will
regulate all affiliate dealings between Wisconsin Public Service and all of its
affiliates.
WPS Resources is currently exempt from the registration and other
requirements of the Public Utility Holding Company Act, other than from Section
9(a)(2) thereof. WPS Resources is and will remain a public utility holding
company under the Wisconsin Holding Company Act and as such will remain subject
for certain purposes to the jurisdiction of the Wisconsin Commission. See "THE
MERGER - Required Regulatory Approvals and Other Regulatory Matters - State
Regulatory Matters."
FEDERAL SECURITIES LAW CONSEQUENCES
All WPS Resources Common Stock issued in connection with the Merger will be
freely transferable, except that any WPS Resources Common Stock received by
persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act of 1933) of WPS Resources or Wisconsin Fuel and Light will be
subject to certain limitations on transfer. See "THE MERGER - Federal Securities
Law Consequences."
CERTAIN OTHER AGREEMENTS
The Merger Agreement requires Wisconsin Fuel and Light to identify in
writing to WPS Resources prior to the date of closing of the Merger any persons
who are, or are deemed to be, affiliates of Wisconsin Fuel and Light, and to use
reasonable efforts to have such persons execute and deliver, prior to the
closing date, affiliates' letters in which they will make certain
representations about their intentions to hold shares of WPS Resources Common
Stock to be received in the Merger and agree to certain restrictions on resale
of the shares of WPS Resources Common Stock. The representations and
restrictions on resale are intended to preserve the characterization of the
Merger for federal income tax purposes as a reorganization, and to comply with
restrictions on resale of securities imposed by federal securities laws.
TERMINATION; FEES AND EXPENSES
The parties to the Merger Agreement may terminate the Merger Agreement in
certain circumstances, whether before or after approval and adoption of the
Merger Agreement by the shareholders of Wisconsin Fuel and Light, including:
o by mutual written consent of WPS Resources and Wisconsin Fuel and
Light;
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<PAGE>
o by either party, in certain circumstances, if the Merger is not
consummated by June 30, 2001 (which date shall under certain
circumstances be extended to December 31, 2001);
o by either party if the requisite Wisconsin Fuel and Light shareholder
approval is not obtained;
o by either party if any law or regulation is adopted which prohibits
the Merger or if any court of competent jurisdiction in the United
States issues a final order prohibiting the Merger;
o by a non-breaching party if there occurs a material breach of the
Merger Agreement which is not cured within 20 days;
o by Wisconsin Fuel and Light, upon two days written notice, under
certain circumstances, as a result of the acceptance of a third party
tender offer or business combination proposal.
The Merger Agreement requires the payment of a termination fee of
$1,500,000 be paid in certain circumstances, including if, in certain
circumstances, a business combination proposal with a third party is not
rejected or withdrawn. See "THE MERGER AGREEMENT - Termination; Fees and
Expenses."
The Merger Agreement provides that except under the circumstances in which
a termination fee is payable by one of the parties, all expenses incurred in
connection with the Merger Agreement and the transactions contemplated by the
Merger will be paid by the party incurring such expenses.
COMPARISON OF SHAREHOLDER RIGHTS
WPS Resources and Wisconsin Fuel and Light are both incorporated in
Wisconsin and governed by Wisconsin law, so the rights of Wisconsin Fuel and
Light shareholders who become WPS Resources shareholders will continue to be
governed by Wisconsin law. Certain provisions of the Wisconsin Business
Corporation Law which were not applicable to Wisconsin Fuel and Light are
applicable to WPS Resources. There are some differences in the rights of the
shareholders under the respective articles of incorporation and other documents
relating to WPS Resources and Wisconsin Fuel and Light. WPS Resources is also
subject to the Wisconsin Holding Company Act. For a discussion of the various
differences between the rights of shareholders of Wisconsin Fuel and Light and
the rights of shareholders of WPS Resources, see "COMPARISON OF SHAREHOLDER
RIGHTS."
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<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The WPS Resources Common Stock is listed on the New York Stock Exchange.
The Wisconsin Fuel and Light Common Stock is publicly traded in the
over-the-counter market. The following table sets forth, for the periods
indicated, the high and low sales prices of WPS Resources common stock and
Wisconsin Fuel and Light Common Stock as reported by the New York Stock Exchange
in the case of WPS Resources and by the National Association of Securities
Dealers, Inc., in the case of Wisconsin Fuel and Light and dividends declared on
each.
<TABLE>
<CAPTION>
WPS Resources Price
Per Equivalent
Share of Wisconsin
WPS Resources Wisconsin Fuel and Light Fuel and Light*
-------------------------------- ----------------------------- ----------------------
High Low Dividends High Low Dividends High Low
---- --- --------- ---- --- --------- ---- ---
1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 28 3/4 26 1/8 $.475 20 1/8 20 1/8 $.30 49.74 45.20
Second Quarter 27 7/8 23 3/8 .475 20 1/2 20 1/8 .31 48.22 40.44
Third Quarter 29 1/4 26 3/4 .485 20 1/2 19 1/2 .31 50.60 46.28
Fourth Quarter 34 1/4 28 1/16 .485 20 1/2 20 1/2 .31 59.25 48.55
1998
First Quarter 33 13/16 32 .485 20 1/4 19 1/8 .31 58.50 55.36
Second Quarter 34 29 15/16 .485 20 20 .32 58.82 51.80
Third Quarter 35 3/4 31 5/8 .495 26 26 .32 61.85 54.71
Fourth Quarter 37 1/2 33 .495 23 3/4 23 23/32 .32 64.87 57.09
1999
First Quarter 35 3/4 29 1/4 .495 25 25 .32 61.85 50.60
Second Quarter 32 1/4 28 3/8 .495 25 25 .33 55.79 49.09
Third Quarter 30 11/16 27 13/16 .505 25 1/2 25 .33 53.09 48.12
Fourth Quarter 39 1/16 24 1/4 .505 25 25 .33 67.58 41.95
2000
First Quarter 26 11/16 22 3/4 .505 25 24 .33 46.17 39.36
Second Quarter 32 1/4 25 1/4 .505 54 22 .34 55.79 43.68
Third Quarter 33 1/4 29.81 .515 ** .34 55.36 51.68
(through
September 13, 2000
---------------
* Calculated by multiplying the WPS Resources Common Stock price per share by the exchange ratio of 1.73 shares
of WPS Resources Common Stock for each share of Wisconsin Fuel and Light Common Stock.
** One reported transaction at $41 on August 8, 2000.
</TABLE>
On May 26, 2000, the last full trading day before the public announcement
of the proposed merger, the high, low and closing sales prices per share of WPS
Resources Common Stock on the New York Stock Exchange Composite Tape were $32
1/4, $31 1/2 and $32 1/4, respectively, and the bid, ask and closing prices of
Wisconsin Fuel and Light Common Stock in the over-the-counter market, were $22,
$24 and $24, respectively.
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<PAGE>
On September 13, 2000, the most recent date for which it was practicable to
obtain market price data prior to printing this proxy statement/prospectus, the
high, low and closing sales prices per share of WPS Resources Common Stock on
the New York Stock Exchange Composite Tape were $33.25, $32.56, and $33.06,
respectively. The last trade of Wisconsin Fuel and Light Common Stock reported
in the over-the-counter market was at $41.00 per share. If the Merger had been
consummated on that date, the market value of the number of shares of WPS
Resources Common Stock into which each share of Wisconsin Fuel and Light Common
Stock would have been converted, based on the conversion ratio of 1.73, would
have been $70.93.
The market prices of WPS Resources Common Stock and Wisconsin Fuel and
Light Common Stock are subject to fluctuation. We recommend that Wisconsin Fuel
and Light shareholders obtain current market quotations for WPS Resources Common
Stock and Wisconsin Fuel and Light Common Stock prior to submitting their
proxies or voting on the Merger.
Wisconsin Fuel and Light Common Stock trades infrequently in the
over-the-counter market. Until May 1, 2000, Wisconsin Fuel and Light Common
Stock was quoted on the Nasdaq Over-the-Counter Bulletin Board ("OTCBB"). The
Securities and Exchange Commission recently adopted a rule requiring companies
to become compliant with Securities and Exchange Commission filing requirements
in order to have their share prices quoted on the OTCBB. In view of the pending
Merger, Wisconsin Fuel and Light chose not to comply, and Wisconsin Fuel and
Light Common Stock is no longer quoted on the OTCBB.
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<PAGE>
SELECTED HISTORICAL CONDENSED FINANCIAL DATA
The summary below sets forth selected historical financial data for WPS
Resources and Wisconsin Fuel and Light. The WPS Resources financial data should
be read in conjunction with the consolidated financial statements and notes
thereto contained in the WPS Resources documents incorporated by reference
herein. The Wisconsin Fuel and Light financial data should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
in this proxy statement/prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "INDEX TO WISCONSIN FUEL AND LIGHT FINANCIAL STATEMENTS.
WPS RESOURCES
The selected historical consolidated year-end financial data of WPS
Resources set forth below have been derived from the consolidated financial
statements of WPS Resources for each of the five fiscal years in the period
ended December 31, 1999. The selected historical consolidated six-month-end
financial data of WPS Resources set forth below has been derived from the
consolidated financial statements of WPS Resources for the six-month period
ended June 30, 2000. The consolidated financial statements for each of the five
years in the period ended December 31, 1999 have been audited by Arthur Andersen
LLP, independent public accountants. The consolidated financial statements for
the six-month period ended June 30, 2000 are unaudited. In the opinion of WPS
Resources management, such unaudited data include all adjustments, consisting
only of normal recurring accruals, necessary for fair presentation.
<TABLE>
WPS Resources Summary Financial Data
(Dollars in thousands, except per share amounts)
<CAPTION>
6 Months
Ended June
30, 2000 Years Ended December 31,
------------- ---------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------- --------------
Income Statement Data: (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues................. $773,522 $1,098,540 $1,063,736 $935,837 $916,449 $780,953
Preferred stock dividends of
subsidiary......................... 1,555 3,111 3,132 3,133 3,134 3,136
Net income......................... 40,587 59,565 46,631 55,809 52,885 60,634
Basic and diluted earnings per
average share of common stock
outstanding........................ $1.53 $2.24 $1.76 $2.10 $1.99 $2.28
Cash dividends..................... 1.01 2.00 1.96 1.92 1.88 1.84
Balance Sheet Data:
Total assets....................... $2,095,918 $1,816,548 $1,510,387 $1,435,804 $1,463,316 $1,393,908
Short-term borrowings.............. 55,100 90,258 60,293 40,466 63,192 27,425
Long-term debt..................... 707,344 634,502 393,037 347,015 349,054 350,098
Preferred stock of subsidiaries.... 51,189 51,193 51,200 51,645 51,656 51,703
Common stock equity................ 542,291 536,300 517,190 518,764 510,642 505,178
Book value per share............... $20.55 $20.03 $19.52 $19.56 $19.24 $19.03
Market Data-Common Stock:
Closing market price per share..... $30 l/16 $25 1/8 $35 1/4 $33 13/16 $281/2 $34
</TABLE>
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<PAGE>
WISCONSIN FUEL AND LIGHT
The selected historical year-end financial data of Wisconsin Fuel and Light
set forth below have been derived from the financial statements of Wisconsin
Fuel and Light for each of the five fiscal years in the period ended December
31, 1999. The selected historical six-month financial data of Wisconsin Fuel and
Light set forth below has been derived from the financial statements of
Wisconsin Fuel and Light for the six-month period ended June 30, 2000. The
financial statements for each of the five years in the period ended December 31,
1999 have been audited by Arthur Andersen LLP, independent public accountants.
The financial statements for the six-month period ended June 30, 2000 are
unaudited. In the opinion of Wisconsin Fuel and Light management, such unaudited
data include all adjustments, consisting of only normal recurring accruals,
necessary for fair presentation.
<TABLE>
Wisconsin Fuel and Light Summary Financial Data
(Dollars in thousands, except per share amounts)
<CAPTION>
6 Months
Ended June
30, 2000 Years Ended December 31,
------------- ---------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------- --------------
Income Statement Data: (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues................. $26,444 $43,834 $40,543 $50,887 $53,693 $45,722
Preferred stock dividend........... 60 120 120 120 120 120
Net income......................... 1,404 2,145 1,121 1,841 2,364 1,744
Earnings per average share of
common stock outstanding........... $1.33 $2.04 $1.01 $1.75 $2.29 $1.66
Diluted Earnings per average share
of common stock outstanding........ $1.33 $2.03 $1.01 $1.75 $2.28 $1.66
Cash dividends..................... $.66 $1.30 $1.26 $1.22 $1.18 $1.16
Balance Sheet Data:
Total assets....................... $41,136 $46,248 $44,950 $44,504 $47,420 $43,476
Short-term borrowings.............. 1,825 8,101 5,545 4,701 3,110 1,515
Preferred stock.................... 2,000 2,000 2,000 2,000 2,000 2,000
Common stock equity................ 16,369 15,126 14,400 14,578 14,027 12,906
Book value per share............... $16.05 $15.26 $14.53 $14.78 $14.26 $13.17
Market Data - Common Stock:
Closing market price per share..... $ 54.00 $ 25.00 $23.75 $20.50 $19.75 $ 17.00
</TABLE>
Earnings per share, diluted earnings per share, cash dividends, book value
per share and market price per share has been restated to reflect a 2 for 1
stock split in 1999.
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<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth data per common share of WPS Resources and
Wisconsin Fuel and Light on an historical basis, an unaudited pro forma combined
basis for WPS Resources, and an equivalent unaudited pro forma basis for
Wisconsin Fuel and Light. The unaudited WPS Resources pro forma combined basis
was derived by giving effect to the Merger under the "purchase" method of
accounting for business combinations. The equivalent unaudited pro forma data
for Wisconsin Fuel and Light was calculated by multiplying the unaudited WPS
Resources pro forma combined per common share data by a conversion ratio of 1.73
share of WPS Resources common stock for each share of Wisconsin Fuel and Light
common stock.
This information should be read in conjunction with the historical
financial statements of WPS Resources incorporated by reference in this joint
proxy statement/prospectus and the historical financial statements of Wisconsin
Fuel and Light included in this joint proxy statement/prospectus.
<TABLE>
<CAPTION>
Years Ended
Six Months December 31,
Ended June 30, -------------------------------------
2000 1999 1998 1997
----------------- ---------- --------- ---------
(unaudited)
WPS Resources
Historical per common share data:
<S> <C> <C> <C> <C>
Net income(a)(e).............................................. $1.53 $ 2.24 $ 1.76 $ 2.10
Book value(b)................................................. 20.55 20.03 19.52 19.56
Cash dividends(c)(d).......................................... 1.01 2.00 1.96 1.92
Wisconsin Fuel and Light
Historical per common share data:
Net income(a)(e).............................................. $1.33 $ 2.03 $ 1.01 $ 1.75
Book value(b)................................................. 16.05 15.26 14.53 14.78
Cash dividends(c)(d).......................................... .66 1.30 1.26 1.22
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------- --------------------
WPS Resources(f)
Unaudited pro forma combined per common share data:
<S> <C> <C>
Net income(a)(e).............................................. $1.50 $2.19
Book value(b)................................................. 21.97 21.45
Cash dividends(c)(d).......................................... 1.01 2.00
Wisconsin Fuel and Light(f)
Equivalent, unaudited pro forma per common share data:
Net income(a)(e).............................................. $2.60 $3.79
Book value(b)................................................. 38.00 37.11
Cash dividends(c)(d).......................................... 1.75 3.46
---------------
(a) Per share amounts for net income were computed based on the weighted average shares outstanding during
the period.
(b) Per share amounts for book value were computed based on the number of shares outstanding as of the end of
the period presented.
(c) The payout ratio (ratio of cash dividends to net income) of WPS Resources and Wisconsin Fuel and Light
combined would be 67%, based upon the WPS Resources quarterly dividend of $0.505 for the second
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<PAGE>
quarter of 2000 and unaudited pro forma combined net income for the six months ended June 30, 2000. Such
ratio should not be viewed as indicative of payout ratios for future periods.
(d) Pursuant to Securities and Exchange Commission requirements based on historical dividends paid by WPS
Resources and Wisconsin Fuel and Light combined. If based upon the WPS Resources current quarterly
dividend of $0.515 per share, the equivalent cash dividend of Wisconsin Fuel and Light Common Stock would
be $3.56 per share (annualized).
(e) Net income per share data represents basic and diluted earnings per share, except for 1999 for Wisconsin
Fuel and Light. Basic and diluted net income per share for Wisconsin Fuel and Light for 1999 was $2.04
and $2.03, respectively.
(f) Several assumptions were made in determining the pro forma data. First, the sale price was calculated
using the highest price in the collar for WPS Resources Common Stock of $33.96 and 1,763,943 shares
issued by WPS Resources. This resulted in a purchase price of $59,903,504 and $45,503,400 of purchase
premium at January 1, 1999. The purchase premium was then assumed to be amortized straightline over 40
years. All calculations further assume that Preferred Stock and required preferred dividends of Wisconsin
Fuel and Light have been eliminated after the merger.
</TABLE>
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<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and other material to which we refer
or incorporate by reference contain forward-looking statements made by or on
behalf of WPS Resources or Wisconsin Fuel and Light. These are statements of
opinion, intention or belief about future events or conditions, rather than
historical facts. The forward-looking statements are based upon management's
current expectations and are subject to risks and uncertainties that could cause
the actual results of WPS Resources or Wisconsin Fuel and Light to differ
materially from those contemplated in the statements. You should not place undue
reliance on the forward-looking statements. The terms "anticipate," "believe,"
"estimate," "expect," "objective," "plan," "possible," "potential," "project"
and similar expressions are intended to identify forward-looking statements. In
addition to the assumptions and other factors we mention specifically in
connection with the forward-looking statements, factors that could cause WPS
Resources' or Wisconsin Fuel and Light's actual results to differ materially
from those contemplated in any forward-looking statements include, among others,
the following:
o Unanticipated costs or difficulties related to the integration of the
businesses of Wisconsin Fuel and Light and Wisconsin Public Service,
or unexpected difficulties or delays in realizing anticipated net cost
savings or receiving regulatory authorization to retain the benefit of
those savings for the shareholders of WPS Resources.
o Regulatory delays or conditions imposed by regulatory bodies in
approving the merger, or adverse regulatory treatment of the merger.
o Legislative or regulatory restrictions or caps on non-utility
acquisitions, investments or projects, including the Wisconsin Holding
Company law, which could limit WPS Resources' diversification and
growth opportunities after the Merger.
o Risks associated with non-utility diversification such as:
competition; operating risks; dependence upon certain suppliers and
customers; unanticipated changes in environmental or energy
regulations; and the risk of higher interest costs associated with
potentially reduced securities ratings by independent rating agencies
as a result of these and other factors.
o Factors affecting utility operations such as unusual weather
conditions; catastrophic weather-related damages; availability of
electric generating facilities; unscheduled generation outages,
maintenance and repairs; unanticipated changes in fossil fuel, nuclear
fuel, purchased power, gas supply or water supply costs or
availability due to higher demand, shortages, transportation problems
or other developments; nonperformance by electric energy or natural
gas suppliers under existing power purchase or gas supply contracts;
nuclear or environmental incidents; resolution of spent nuclear fuel
storage and disposal issues; electric transmission or gas pipeline
system constraints; unanticipated organizational structure or key
personnel changes;
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<PAGE>
collective bargaining agreements with union employees or work
stoppages; inflation rates; or demographic and economic factors
affecting utility service territories or operating environment.
o Regulatory factors such as unanticipated changes in rate-setting
policies or procedures; unanticipated changes in regulatory accounting
policies and practices; industry restructuring initiatives;
transmission system operation and/or administration initiatives;
recovery of costs of previous investments made under traditional
regulation; required approvals for new construction; changes in the
United States Nuclear Regulatory Commission's regulations related to
the Kewaunee Nuclear Power Plant of which Wisconsin Public Service is
the principal owner; changes in the United States Environmental
Protection Agency's as well as the Wisconsin Department of Natural
Resources' regulations related to emissions from fossil-fuel-fired
power plants; or the siting approval process for new generation and
transmission facilities.
o The rapidly changing and increasingly competitive electric and gas
utility environment as market-based forces replace strict industry
regulation and other competitors enter the electric and gas markets
resulting in increased wholesale and retail competition.
o Timing, extent of changes and volatility in commodity pricing.
o Consolidation of the industry as a result of the combination and
acquisition of utilities in the Midwest, nationally and globally.
o Restrictions imposed by various financing arrangements and regulatory
requirements on the ability of the utility and other subsidiaries to
transfer funds to their parent companies in the form of cash
dividends, loans or advances.
o Changes in social attitudes regarding the utility and power
industries.
o Customer business conditions including demand for their products and
services and supply of labor and material used in creating their
products and services.
o The cost and other effect of legal and administrative proceedings,
settlements, and investigations, claims and changes in those matters.
o Factors affecting the availability or cost of capital such as changes
in interest rates; market perceptions of the utility industry; WPS
Resources or any of its subsidiaries; or security ratings.
o Federal, state or local legislative factors such as changes in tax
laws or rates; changes in trade, monetary and fiscal policies, laws
and regulations; electric and gas industry restructuring initiatives;
or changes in environmental laws and regulations.
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<PAGE>
o Authoritative generally accepted accounting principle or policy
changes from such standard setting bodies as the Financial Accounting
Standards Board and the Securities and Exchange Commission.
o Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing
assets.
o Other business or investment considerations that may be disclosed from
time to time in filings with the Securities and Exchange Commission or
in other publicly disseminated written documents.
We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
RISK FACTORS
In addition to the other information we have included and incorporated by
reference in this joint proxy statement/prospectus, you should carefully read
and consider the following factors in evaluating the proposals to be voted on at
your company's special shareholders' meeting:
TRANSACTION RISKS
We may not be able to complete the Merger because we may not be able to obtain
required regulatory approvals on satisfactory terms.
Before we can complete the Merger, we must obtain final approvals from the
Public Service Commission of Wisconsin under Wisconsin law and we may require
approval from the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935, as well as complying with premerger notification
requirements under the antitrust laws that apply to business combinations
generally. Obtaining these regulatory approvals could delay the Merger for a
significant period of time after the Wisconsin Fuel and Light shareholders have
approved the Merger Agreement and the Merger at the Special Meeting. If the
approvals are delayed past December 31, 2001, either company can terminate the
Merger Agreement. We cannot assure you that we will obtain these and other
regulatory approvals, or if we obtain them, whether the terms and conditions of
the approvals will be satisfactory. We also cannot give any assurance on whether
intervenors, if any, will appeal final orders approving the Merger to
appropriate courts, which can further delay the Merger.
We are required to take all reasonable actions necessary to obtain any
required consent, authorization, order, approval or exemption of any
governmental entity in connection with the Merger and related transactions.
However, we are not required to complete the Merger if the regulators impose
terms or conditions which, in the aggregate have, or insofar as reasonable can
be foreseen, would have, a material adverse effect on the business, assets,
financial condition or results of operations of WPS Resources or Wisconsin Fuel
and Light as the case may be, or which would be materially inconsistent with
agreements contained in the Merger
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Agreement. See "The Merger Agreement - Conditions to Completion of the Merger"
"The Merger - Required Regulatory Approvals and Other Regulatory Matters".
The Merger may result in decreased earnings per share if Wisconsin Public
Service is unable to timely realize the estimated cost savings that its
management expects to achieve or if the regulatory treatment of the Merger does
not permit WPS Resources to retain sufficient benefit of the savings for its
shareholders.
Wisconsin Public Service management estimates that Wisconsin Public Service
can achieve Merger-related cost savings and avoidances in respect to the
combined gas operations of Wisconsin Public Service and Wisconsin Fuel and Light
of approximately $3.5 million annually beginning in the first full year after
the Merger. Wisconsin Public Service has requested rate treatment which if
granted by the Public Service Commission of Wisconsin would allow Wisconsin
Public Service to offset Merger-related savings against acquisition premium
amortization during the first two years following the Merger and recover $2
million of acquisition premium in rates during each of the following three
years. If Wisconsin Public Service obtains the requested rate treatment, its
management believes the Merger would have minimal impact on earnings per share
for WPS Resources in the first five full years following the Merger. There can
be no assurance that Wisconsin Public Service will achieve the anticipated
Merger related savings or obtain the requested rate treatment.
For further information, see THE MERGER - WPS Resources Reasons for the
Merger "and Regulatory" Approvals on the Other Regulatory Matters.
OPERATIONAL RISKS
We cannot assure you that the operations of the two companies will be
successfully coordinated.
After the Merger we will need to coordinate the operations of Wisconsin
Public Service and Wisconsin Fuel and Light companies. Coordinating the
operations will involve a number of risks, including:
o difficulties in combining operations and systems, including combining
or coordinating gas utility operations;
o difficulties in retaining employees, customers and suppliers;
o potentially adverse short-term effects on operating results;
o potential diversion of management's attention away from ongoing
operations; and
o the possibility that we will not achieve anticipated cost savings, or
that any savings are offset by utility rate reductions and so do not
benefit the shareholders.
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The nonregulated businesses of WPS Resources are riskier than traditional
utility businesses.
We expect the nonregulated businesses of WPS Resources will in the future
contribute a greater proportion of WPS Resources earnings than they currently
contribute to its earnings. Nonregulated businesses generally operate with a
higher level of risk than regulated utility businesses. As a result, the
operating results of these businesses may exhibit more variability than our
regulated utility businesses. This variability may also adversely affect our
securities ratings and so increase our borrowing costs.
An investment in WPS Resources, unlike investment in Wisconsin Fuel and Light,
is subject to risks arising from electric generation.
Holders of Wisconsin Fuel and Light Common Stock should carefully consider
the fact that WPS Resources operates electric generating facilities, including
fossil and nuclear fueled operations. Some of the risks associated with the
operation of electric generating facilities differ from those relating to
Wisconsin Fuel and Light's utility business, including risks relating to
regulatory action, deregulation, removal of generation assets from rate base,
unscheduled outages, fluctuation in the cost of purchased power and changing
environmental requirements.
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THE SPECIAL MEETINGS
Wisconsin Fuel and Light Special Meeting
PLACE, TIME AND DATE
The Special Meeting of Wisconsin Fuel and Light will be held on November 6,
2000 at the office of Wisconsin Fuel and Light, 211 Forest Street, Wausau,
Wisconsin commencing at _:__ p.m., Central Time, and at any time as may be
specified upon any adjournments or postponements thereof. The Wisconsin Fuel and
Light board of directors is furnishing this joint proxy statement/prospectus to
the holders of Wisconsin Fuel and Light Common Stock and the holder of Wisconsin
Fuel and Light Preferred Stock. Holders of Wisconsin Fuel and Light Common Stock
will also receive a form of proxy, which the Wisconsin Fuel and Light board of
directors is soliciting for use at the Wisconsin Fuel and Light Special Meeting
and at any and all adjournments or postponements thereof.
RECORD DATE
The Wisconsin Fuel and Light board has fixed the close of business on
October 5, 2000 as the date for determining holders of Wisconsin Fuel and Light
Common Stock and Preferred Stock who will be entitled to notice of, and to vote
at, the Special Meeting. Only holders of record of Wisconsin Fuel and Light
Common Stock and Preferred Stock at the close of business on the record date
will be entitled to notice of, and to vote at, the special meeting. As of the
record date, there were a total of 1,019,620 shares of Wisconsin Fuel and Light
Common Stock and 20,000 shares of Wisconsin Fuel and Light Preferred Stock
outstanding and entitled to vote at the Special Meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Wisconsin Fuel and Light Special Meeting, holders of shares of
Wisconsin Fuel and Light Common Stock and Preferred Stock will vote upon a
proposal to approve the Merger Agreement and the Merger. Holders of shares of
Wisconsin Fuel and Light Common Stock and Preferred Stock will also consider and
vote upon any matters incidental to the conduct of the Wisconsin Fuel and Light
Special Meeting which may properly arise. The Wisconsin Fuel and Light Board
knows of no business that will be presented for consideration at the Wisconsin
Fuel and Light Special Meeting other than the matters described in this joint
proxy statement/prospectus.
VOTE REQUIRED
Approval of the Merger by the holders of Wisconsin Fuel and Light Common
Stock and Preferred Stock is a condition to, and required for consummation of,
the Merger.
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of Wisconsin Fuel and Light Common Stock and of the holder of all of the
Wisconsin Fuel and Light Preferred Stock is required to approve the Merger. The
Wisconsin Fuel and Light Common Stock and Preferred Stock will vote as separate
classes. For this purpose, holders of
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shares of Wisconsin Fuel and Light Common Stock and Preferred Stock will be
entitled to one vote per share. Votes may be cast in person or by properly
executed proxy. The directors and executive officers Wisconsin Fuel and Light
hold in the aggregate approximately 5.68% of the issued and outstanding shares
of Wisconsin Fuel and Light Common Stock entitled to vote at the Wisconsin Fuel
and Light Special Meeting. The holder of all the outstanding shares of Wisconsin
Fuel and Light Preferred Stock has delivered a proxy to the president of
Wisconsin Fuel and Light authorizing the voting of the shares of Wisconsin Fuel
and Light Preferred Stock for approval of the Merger.
In the tabulation of votes, abstentions and "non-votes" (i.e., shares held
by brokers, fiduciaries or other nominees which are not permitted to vote due to
the absence of instructions from beneficial owners) will have the same effect as
negative votes.
DISSENTERS' RIGHTS
Under Sections 180.1301 through 180.1331 of the Wisconsin Business
Corporation Law, dissenters' rights may be available to holders and beneficial
owners of shares of Wisconsin Fuel and Light Common Stock and Preferred Stock
subject to the procedures described therein. Dissenters' rights permit a
shareholder to object to the Merger and demand payment of the "fair value" of
his or her shares in cash in connection with the completion of the Merger.
Under the Wisconsin Business Corporation Law, dissenters' rights are
available to shareholders of a company in a merger if (i) a Wisconsin
corporation is a party to the merger, (ii) shareholder approval of the merger is
required under the Wisconsin Business Corporation Law or the company's articles
of incorporation and (iii) either the merger is a "business combination" (as
defined in Section 180.1130(3) of the Wisconsin Business Corporation Law) or the
shares are not registered on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. automated quotations system on
the record date for notice to the shareholders of a special meeting to vote on
the merger.
"Fair value" means the value of the shares immediately before the
completion of the Merger to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the Merger unless exclusion
would be inequitable. The "fair value", as so determined, could be more or less
than the value per share to be paid pursuant to the Merger.
Holders of Wisconsin Fuel and Light Common Stock and Preferred Stock have
the right to dissent from the proposed Merger. To receive in cash the fair value
of their shares instead of shares of WPS Resources Common Stock in the case of
holders of Wisconsin Fuel and Light Common Stock or the cash payment provided in
the Merger Agreement in the case of the holder of Wisconsin Fuel and Light
Preferred Stock, the dissenting shareholders are required to follow certain
procedures set forth in the Wisconsin Business Corporation Law. The following is
a brief summary of such procedures, which does not purport to be complete and is
qualified in its entirety by reference to the statutory provisions of the
Wisconsin Business Corporation Law governing dissenters' rights. Holders of
shares of Wisconsin Fuel
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and Light Company should read Appendix C to this joint proxy
statement/prospectus for a description of all statutory provisions related to
dissenters' rights.
Pursuant to Section 180.1321 of the Wisconsin Business Corporation Law, any
owner or beneficial owner of shares of Wisconsin Fuel and Light Common Stock or
Preferred Stock desiring to assert dissenters' rights must do all of the
following:
o deliver to Wisconsin Fuel and Light by mail or by delivery in person
to the principal office of Wisconsin Fuel and Light at 211 Forest
Street, P.O. Box 1627, Wausau, WI 54402-1627, before the vote to
approve the Merger Agreement and Merger is taken at
the special meeting, written objection to the Merger Agreement and the
Merger which includes the dissenting shareholder's intent to demand
payment for his or her shares if the proposed Merger is completed
o not vote in favor of the Merger Agreement.
Dissenting shareholders who fail to satisfy both of the above conditions
will waive their rights under Sections 180.1301 through 1331 of the Wisconsin
Business Corporation Law and will not be entitled to payment of the fair value
of such shares by Wisconsin Fuel and Light under such sections. Within ten (10)
days after the Merger Agreement is approved at the Special Meeting, Wisconsin
Fuel and Light will deliver a written dissenters' notice to each of its
shareholders who has dissented to the Merger Agreement in accordance with
Section 180.1321 of the Wisconsin Business Corporation Law. Upon receipt of such
notice, each dissenting shareholder has 30 days to demand payment in writing and
surrender the certificate or certificates formerly representing the shares with
respect to which he or she has dissented. Dissenting shareholders who do not
demand payment within the designated time period will waive their rights under
Sections 180.1301 through 180.1331 of the Wisconsin Business Corporation Law,
will not be entitled to payment for their shares under such sections and shall
be bound by the terms of the Merger Agreement. Upon receipt of a payment demand
or on the day of the completion of the Merger, whichever is later, the surviving
corporation in the Merger, or its successors or assigns will pay each dissenting
shareholder who has demanded payment the amount that the surviving corporation
estimates to be the fair value of such shares, plus accrued interest. A
dissenting shareholder who does not agree with the estimation of the fair value
of his or her shares or the amount of interest due, must notify the surviving
corporation in the Merger, or its successors or assigns of his or her estimate
within 30 days after the surviving corporation in the Merger or its successors
or assigns made or offered payment for such shares. If the dissenting
shareholder and the surviving corporation in the Merger or its successors or
assigns cannot agree upon the fair value of the shares or amount of interest
due, the surviving corporation in the Merger or its successors or assigns must
file a petition in any court of competent jurisdiction in the county in which
its principal office is located, requesting a finding and determination of the
fair value of such shares and the accrued interest thereon. If the surviving
corporation in the Merger, or its successors or assigns fails to institute such
a proceeding within 60 days after the dissenting shareholder notifies the
surviving corporation in the Merger, or its successors or assigns of his or her
disagreement, the surviving corporation in the Merger, or its successors or
assigns shall
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pay each of its dissenters whose demand remains unsettled, the amount demanded
by such shareholder.
PROXIES
Shares of Wisconsin Fuel and Light Common Stock and Preferred Stock
represented by properly executed proxies received prior to or at the Wisconsin
Fuel and Light Special Meeting will, unless such proxies have been revoked, be
voted in accordance with the instructions indicated in the proxies. If no
instructions are indicated on a properly executed proxy, the shares will be
voted FOR the Merger Agreement and the Merger and will also confer authority on
Wisconsin Fuel and Light management to so adjourn the Wisconsin Fuel and Light
special meeting. Failure to vote (either by returning the proxy or, in the
alternative, by voting in person at the Wisconsin Fuel and Light special
meeting) will have the effect of a vote against the Merger Agreement and the
Merger.
Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted (i) by delivering to the
Secretary of Wisconsin Fuel and Light at 211 Forest Street, Wausau, Wisconsin
54402-1627, on or before the taking of the vote at the Wisconsin Fuel and Light
Special Meeting, a written notice of revocation bearing a later date than the
proxy relating to the same shares or (ii) by attending the Wisconsin Fuel and
Light Special Meeting and voting in person. Attendance at the Wisconsin Fuel and
Light Special Meeting will not in itself constitute the revocation of the proxy.
If any other matters are properly presented at the Wisconsin Fuel and Light
Special Meeting for consideration, the persons named in the proxy or acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment; provided, however, that the persons named in the proxy will not
have the discretion to vote such proxy to adjourn the meeting to solicit
additional votes FOR the Merger Agreement and the Merger if such proxy is marked
as a vote AGAINST the Merger Agreement and the Merger.
The cost of soliciting proxies from holders of Wisconsin Fuel and Light
Common Stock will be borne by Wisconsin Fuel and Light. In addition to
soliciting proxies by mail, officers and employees of Wisconsin Fuel and Light,
without receiving additional compensation therefor, may solicit proxies by
telephone, by telegram or in person. Wisconsin Fuel and Light will also make
arrangements with brokerage firms and other custodians, nominees and fiduciaries
to send proxy materials to their principals.
Wisconsin Public Service Special Meeting of Preferred Shareholders
PLACE, TIME AND DATE
The Special Meeting of the holders of Preferred Stock of Wisconsin Public
Service will be held on November 6, 2000 at the corporate offices of WPS
Resources Corporation, 700 North Adams Street, Green Bay, Wisconsin commencing
at 10:30 a.m., Central Standard time, and at any time as may be specified upon
any adjournment or postponements thereof. This joint proxy statement/prospectus
is being sent to holders of Wisconsin Public Service preferred stock accompanied
by a form of proxy, which is being solicited by the Wisconsin Public
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Service board of directors for use at the special meeting of the holders of
Preferred Stock of Wisconsin Public Service and at any and all adjournments or
postponements thereof.
RECORD DATE
The Wisconsin Public Service board of directors has fixed the close of
business on October 5, 2000 as the date for determining holders of Wisconsin
Public Service Preferred Stock who will be entitled to notice of, and to vote
at, the Special Meeting. Only holders of record of Wisconsin Public Service
Preferred Stock at the close of business on the record date will be entitled to
notice of, and to vote at, the Special Meeting. As of the record date, there
were a total of 511,882 shares of Wisconsin Public Service Preferred Stock
outstanding and entitled to vote at the special meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WPS Resources owns all of the outstanding Common Stock and as of September
11, 2000 owned 149 shares of Preferred Stock of Wisconsin Public Service. The
wife of A. Dean Argonaut, a director of Wisconsin Public Service, owns 10 shares
of Wisconsin Public Service Preferred Stock.
Pursuant to Section 13(d) of the Securities Exchange Act of 1934, a
beneficial owner of a security is any person who directly or indirectly has or
shares voting or investment power over such security.
To the best of Wisconsin Public Service's knowledge, as of August 30, 2000
there is no person who is a beneficial owner of more than 5% of the Preferred
Stock of Wisconsin Public Service other than the shareholders shown in the chart
below:
Shares of Percent of Outstanding
Name Preferred Stock Preferred Stock
---- --------------- ---------------
Argonaut Insurance Co. 57,200 11.17%
250 Middlefield Road
Menlo Park, CA 94025-3507
CGU Asset Management 43,073 8.41%
One Beacon Street
Boston, MA 02108
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Wisconsin Public Service Special Meeting, holders of shares of
Wisconsin Public Service Preferred Stock will vote upon three proposals:
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The first proposal is to approve the Merger of Wisconsin Fuel and Light
with and into Wisconsin Public Service pursuant to the Merger Agreement among
WPS Resources, the owner of all of the outstanding Common Stock of Wisconsin
Public Service, Wisconsin Public Service, WF&L Acquisition Corp., a wholly-owned
subsidiary of WPS Resources, and Wisconsin Fuel and Light.
Paragraph (8)(b) of part C of article III of the Restated Articles of
Incorporation of Wisconsin Public Service, as previously amended prohibits
Wisconsin Public Service from merging or consolidating with or into another
corporation without the affirmative vote of the holders of record of a majority
of the total number of shares of Preferred Stock then outstanding unless the
merger or consolidation is ordered, approved or permitted by the Securities and
Exchange Commission under the Public Utility Holding Company Act of 1935 or by
the Federal Power Commission (now the Federal Energy Regulatory Commission)
under the Federal Power Act. The text of paragraph III C.(8)(b) and the proposed
amendment are set forth in Appendix D to this joint proxy statement/prospectus.
Since Wisconsin Fuel and Light is not an electric utility the Federal
Energy Regulatory Commission has no jurisdiction over the Merger. Since neither
WPS Resources nor Wisconsin Public Service are registered holding companies
under the Public Utility Holding Company Act of 1935 and the Merger of Wisconsin
Fuel and Light into Wisconsin Public Service would not involve the acquisition
of voting securities of a public utility, the approval by the Securities and
Exchange Commission of the Merger is not required under the Public Utility
Holding Company Act of 1935.
The requirement of an affirmative vote of the holders of Preferred Stock of
Wisconsin Public Service does not apply to the purchase or other acquisition by
Wisconsin Public Service of the franchises or assets of another company or
otherwise apply in any manner which does not involve a merger or consolidation.
If the holders of a majority of the outstanding shares of Preferred Stock
of Wisconsin Public Service do not approve the Merger of Wisconsin Fuel and
Light into Wisconsin Public Service but all other conditions to the completion
of the Merger as provided in the Merger Agreement are satisfied, Wisconsin Fuel
and Light will merge into WF&L Acquisition Corp., and immediately or as promptly
as practical following the Merger either WPS Resources will transfer all of the
outstanding common stock of WF&L Acquisition to Wisconsin Public Service, and
Wisconsin Public Service will cause WF&L Acquisition to be dissolved and
liquidated into Wisconsin Public Service with Wisconsin Public Service assuming
the liabilities of WF&L Acquisition, or WF&L Acquisition will sell its business
and assets to Wisconsin Public Service and Wisconsin Public Service will assume
the liabilities of WF&L Acquisition. In either case the end result will be
essentially the same as if Wisconsin Fuel and Light had been merged directly
into Wisconsin Public Service.
The board of directors of Wisconsin Public Service is requesting the
affirmative vote of the holders of Wisconsin Public Service Preferred Stock
required by paragraph III.C.(8)(b) of its restated articles of incorporation,
because the direct merger of Wisconsin Fuel and Light into Wisconsin Public
Service will lower transaction costs of the Merger by eliminating the
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need to document separate transfers of assets and eliminate tax liabilities and
additional legal costs that the alternative forms of transaction may entail.
The second proposal is to amend paragraph III.C.(8)(b) of the Restated
Articles of Incorporation of Wisconsin Public Service, to exclude from its scope
mergers in which Wisconsin Public Service is the surviving corporation and which
do not involve a change in control of Wisconsin Public Service, such as the
proposed Merger of Wisconsin Fuel and Light into Wisconsin Public Service.
Paragraph III.C.(8)(b) as presently written does not distinguish between
mergers in which Wisconsin Public Service is the acquiring corporation and those
in which it is the acquired corporation, mergers in which Wisconsin Public
Service capital stock is being issued or mergers such as the proposed Merger of
Wisconsin Fuel and Light into Wisconsin Public Service in which no capital stock
of Wisconsin Public Service is being issued. The paragraph even applies to a
merger of a wholly-owned subsidiary of Wisconsin Public Service into Wisconsin
Public Service. On the other hand the requirements of paragraph III.C.(8)(b) do
not apply to any other form of acquisition of assets by Wisconsin Public Service
which are not mergers or consolidations.
The management of Wisconsin Public Service believes that the current scope
of paragraph III.C.(8)(b) unnecessarily complicates, and increases the cost of
acquisitions by Wisconsin Public Service, and prompts transactions to be
structured on a less than optimum basis from the perspective of Wisconsin Public
Service and its shareholders. At the same time, the paragraph provides no
meaningful protection to the holders of Wisconsin Public Service Preferred Stock
since most acquisition of business and assets by Wisconsin Public Service can be
structured in a manner that does not involve a merger or consolidation albeit at
increased cost to Wisconsin Public Service.
If the proposed amendment of paragraph III.C.(8)(b) is approved, the
approval by the holders of Wisconsin Public Service Preferred Stock of the
Merger of Wisconsin Fuel and Light into Wisconsin Public Service will not be
necessary and the Merger can proceed whether or not the Merger is approved by
the holders of Wisconsin Public Service Preferred Stock at the Special Meeting.
The third proposal is to amend the Restated Articles of Incorporation of
Wisconsin Public Service to eliminate paragraph (9) of Part C of Article III in
its entirety. The full text of paragraph III.C.(9) and the proposed amendment
are set forth in Appendix D to this joint proxy statement/prospectus.
This paragraph limits the ability of Wisconsin Public Service to issue
unsecured indebtedness by requiring the approval of the holders of a majority of
the shares of Wisconsin Public Service Preferred Stock before Wisconsin Public
Service can issue unsecured debt securities in excess of 20% of the aggregate of
the capital and surplus plus the principal amount of bonds and other secured
indebtedness of Wisconsin Public Service. As of June 30, 2000, the aggregate of
the capital surplus and bonds and other secured indebtedness of Wisconsin Public
Service was $834,695,418 and the aggregate principal amount of its
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outstanding unsecured securities was $142,320 or .01%. Wisconsin Public Service,
however, in the future may refinance its bonds with unsecured indebtedness when
conditions are favorable and thereafter do any further long term financing on an
unsecured basis.
The management of Wisconsin Public Service believes that legislative,
regulatory, technological and market developments will lead to a more
competitive environment in the electric and gas utility industries. As
competition intensifies, Wisconsin Public Services' ability to retain
flexibility and reduce costs will be even more crucial to its success. Because
the electric and gas utility industries are extremely capital intensive, control
and minimization of financing costs are of particular importance to Wisconsin
Public Service. In response to competitive forces and regulatory changes,
Wisconsin Public Service management has from time to time considered, and
expects to continue to consider, various strategies designed to increase the
ability of Wisconsin Public Service to adapt to and anticipate changes in its
utility business. An example of one such strategy is the transfer presently
under consideration of Wisconsin Public Service's transmission assets to a
transmission company being organized by major Wisconsin electric utilities as
contemplated by the Wisconsin "Reliability 2000 Legislation" enacted into law as
part of 1999 Wisconsin Act 9.
Management believes that adoption of the proposed amendment is critical to
maintaining financial flexibility and facilitating capital cost reduction.
Historically, Wisconsin Public Service debt financing generally has been
accomplished through the issuance of long-term mortgage bonds and unsecured
indebtedness. The Wisconsin Public Service mortgage bond indenture contains
certain restrictive covenants with respect to, among other things, the
disposition of assets and its ability to issue additional mortgage bonds.
Although the use of the mortgage bonds may have been an acceptable and
attractive financing vehicle in the non-competitive environment of the past, the
restrictive covenants contained in the Wisconsin Public Service mortgage bond
indenture limit its ability to respond to changing circumstances in a
competitive environment. Unsecured indebtedness generally has fewer restrictions
than mortgage bonds, will provide Wisconsin Public Service more flexibility, and
is, therefore, more desirable as the environment becomes more competitive.
Short-term indebtedness, a lower cost form of debt available to Wisconsin Public
Service, represents one type of unsecured indebtedness.
Inasmuch as the limitation on the issuance of unsecured debt contained in
paragraph III.c.(9) could restrict flexibility in planning and financing
Wisconsin Public Service's business activities, Wisconsin Public Service will
ultimately be at a competitive disadvantage unless this provision is eliminated.
Wisconsin Public Services' current and future competitors (for example, power
marketers, exempt wholesale generators, independent power producers and
cogeneration facilities) generally are not subject to the type of financing
restrictions this provision imposes on Wisconsin Public Service. Recently,
several other utilities with the same or similar charter restrictions have
successfully eliminated such provisions by soliciting their shareholders for the
same or similar amendments. In addition, some potential utility competitors have
no comparable provision restricting the issuance of unsecured debt. Given the
onset of competition in the utility industry, Wisconsin Public Service must
continue to explore new ways of reducing its costs and enhancing its
flexibility. Wisconsin Public Service
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management believes that the adoption of the proposed amendment will be in the
best long-term competitive interests of our shareholders.
If the proposed amendment is adopted, Wisconsin Public Service will have
increased flexibility (i) to choose among different types of debt financing and
(ii) to finance projects using the most cost effective means. Various types of
unsecured debt alternatives may increase in importance as a financing option.
The proposed amendment will enable Wisconsin Public Service to tailor the terms
of unsecured debt to take full advantage of changing conditions in securities
markets.
In addition, although Wisconsin Public Service can currently issue
additional mortgage bonds and preferred stock, there is no guarantee that this
will be true in the future. Other utilities have been unable to issue mortgage
bonds during certain periods because of restrictive covenants in their
mortgages. The inability of Wisconsin Public Service to issue mortgage bonds or
preferred stock in the future, combined with an inability to issue additional
unsecured debt, could limit its financing options to more costly options.
Moreover, continued reliance on the issuance of mortgage bonds could limit the
ability of Wisconsin Public Service in the future to strategically redeploy its
assets.
Replacement of bonds with unsecured indebtedness, however, would both
increase the amount of unsecured debt securities for purposes of the paragraph
III.C.(9) formula and would also reduce the base against which the 20% limit
would be applied and could result in the ongoing and recurring need of Wisconsin
Public Service to secure prior affirmative vote of the holders of its Preferred
Stock. Holders of Wisconsin Public Service Preferred Stock may enjoy a level of
comfort from the effect of paragraph III.C.(9) which limits the ability of the
corporation to borrow on an unsecured basis, requiring it to issue bonded
indebtedness and meet the requirement of its bond indenture to
have applicable bondable property equal to at least 160% of its bonds.
Management, however, believes this type of requirement is unduly restrictive to
its business operations, which are being increasingly measured by revenues and
income parameters rather than by physical assets and creates an inflexibility in
Wisconsin Public Services' ability to meet the demands of current business
conditions.
The proposed amendment will not only allow Wisconsin Public Service to
issue a greater amount of its debt as unsecured indebtedness, it also will allow
Wisconsin Public Service to issue a greater amount of total indebtedness.
Wisconsin Public Service presently has no intention, however, of issuing a
greater amount of total debt than it would have issued absent the adoption of
the proposed amendment. It is management's present intention to retain
flexibility in the mix of outstanding debt and therefore have the option to use
more short-term and other unsecured debt and fewer mortgage bonds, not to
increase the overall debt level of Wisconsin Public Service. Moreover, as a
regulated utility, Wisconsin Public Service's capital structure will continue to
be subject to the approval of the Public Service Commission of Wisconsin which
currently limits its indebtedness to approximately 50% of the total
capitalization of Wisconsin Public Service.
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SPECIAL CASH DIVIDEND
If (but only if) both of the proposed amendments to the Wisconsin Public
Service Restated Articles of Incorporation are approved at the Special Meeting
of holders of Wisconsin Public Service Preferred Stock by the affirmative vote
of the holders of two-thirds or more of the outstanding shares of Wisconsin
Public Service Preferred Stock, Wisconsin Public Service will pay to each holder
of Preferred Stock of record as of October 5, 2000 a special cash dividend in
the amount of $1.00 per share. If both of the proposed amendments are approved
at the Special Meeting, the special cash dividend will be paid promptly after
the proposed amendments shall have become effective. No accrued interest,
however, will be paid on the special cash dividend, regardless of any delay in
making such dividend payment. See "Wisconsin Public Service Special Meeting of
Preferred Shareholders - Federal Income Tax Consequences of Special Cash
Dividend."
RATING AGENCIES
As of the date of this Proxy Statement, each series of Wisconsin Public
Service Preferred Stock was rated aa2 by Moody's Investors Service, Inc. and AA
by Standard & Poor's Rating Services, a division of McGraw-Hill Companies, Inc.
These rating agencies have advised Wisconsin Public Service that the adoption of
the proposed amendments in and of itself, will not result in a reduction in
their current ratings of Wisconsin Public Service Preferred Stock.
Ratings are not recommendations to purchase, hold or sell the Wisconsin
Public Service Preferred Stock inasmuch as the ratings do not comment as to
market price or suitability for a particular investor. The ratings are based on
current information furnished to the rating agencies by Wisconsin Public Service
and obtained from other sources. The ratings may be changed, suspended or
withdrawn as a result of changes in, or the unavailability of, such information.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding shares of Wisconsin Public Service Preferred Stock is required for
the adoption of proposal 1, the approval of the Merger of Wisconsin Fuel and
Light into Wisconsin Public Service. The affirmative vote of the holders of at
least 66 2/3% of the outstanding shares of Wisconsin Public Service Preferred
Stock is required for the adoption of proposals 2 and 3, the proposed amendments
to the restated articles of incorporation of Wisconsin Public Service.
Holders of shares of Wisconsin Public Service Preferred Stock will be
entitled to one vote per share. Votes may be cast in person or by
properly-executed proxy. WPS Resources and the directors, executive officers and
affiliates of Wisconsin Public Service hold in the aggregate less than one
percent of the issued and outstanding shares of Wisconsin Public Service
Preferred Stock entitled to vote at the Wisconsin Public Service Special
Meeting.
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In the tabulation of votes, abstentions and "non-votes" (i.e., shares hold
by brokers, fiduciaries or other nominees which are not permitted to vote due to
the absence of instructions from beneficial owners) will have the same effect as
negative votes.
WPS Resources as the holder of all the outstanding shares of common stock
of Wisconsin Public Service has adopted and approved the two proposed amendments
to the restated articles of incorporation of Wisconsin Public Service.
FEDERAL INCOME TAX CONSEQUENCES OF SPECIAL CASH DIVIDEND
General. In the opinion of Foley & Lardner, our counsel, the following
summary describes the principal United States federal income tax consequences of
the receipt of the special Preferred Stock cash dividend and the adoption of the
proposed amendments. This summary is based on the Internal Revenue Code of 1986,
as amended to the date hereof, administrative pronouncements, judicial decisions
and existing and proposed Treasury Regulations, changes to any of which
subsequent to the date of this joint proxy statement/prospectus may adversely
affect the tax consequences described herein, possibly on a retroactive basis.
This summary is addressed to holders of preferred stock who hold such shares as
capital assets within the meaning of Section 1221 of the Internal Revenue Code.
This summary does not discuss all of the tax consequences that may be relevant
to a holder of Preferred Stock in light of the preferred shareholder's
particular circumstances or to preferred shareholders subject to special rules
(including certain financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or currencies, and preferred shareholders who
are not citizens or residents of the United States). Preferred shareholders
should consult their tax advisors with regard to the application of the United
States federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "United States Holder" means an owner of Preferred
Stock that is for United States federal income tax purposes (i) a citizen or
resident of the United States; (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof; (iii) an estate and certain electing trusts in
existence on August 20, 1996 if the income of such estate or trust is subject to
United States federal income taxation regardless of its source; or (iv) for non-
electing trusts and trusts not in existence until after August 20, 1996, any
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust. A "Non-United States Holder" is a preferred shareholder that is not a
United States Holder.
Special Cash Dividends; Modification of Articles, United States Holders
Wisconsin Public Service will take the position that, for federal income tax
purposes, the special preferred stock cash dividends are ordinary dividend
income to United States Holders and report them as such.
Non-United States Holders Wisconsin Public Service will take the position
that the special preferred stock cash dividends paid to a Non-United States
Holder of Preferred Stock
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are subject to withholding of United States federal income tax at a 30% rate
unless appropriate documentation has been provided to Wisconsin Public Service
that a lower treaty rate applies. However, special cash dividends that are
effectively connected with the conduct of a trade or business by the Non-United
States Holder within the United States are not subject to the withholding tax
(provided such Non-United States Holder provides two originals of Internal
Revenue Service Form 4224 stating that such special cash dividends are so
effectively connected), but instead are subject to United States federal income
tax on a net income basis at applicable graduated individual or corporate rates.
Any such effectively connected special cash dividends received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty). A Non-United States Holder of Preferred Stock
eligible for a reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts withheld by filing
an appropriate claim for refund with the IRS.
All Holders. Preferred shareholders will not recognize any taxable gain or
loss with respect to their Preferred Stock as a result of the modification of
the Restated Articles by the proposed amendments other than with respect to the
receipt of the special cash dividend or if they exercise dissenters' rights.
Backup Withholding. The amount of the special cash dividend paid to a
United States Holder will be reported to such holder and to the Internal Revenue
Service in the same way all cash dividends are reported. Backup withholding at a
rate of 31% will apply to any such payments made to non-exempt United States
Holders for whom backup withholding applies with regard to the payment of
regular cash dividends.
DISSENTERS' RIGHTS
Under Sections 180.1301 through 180.1331 of the Wisconsin Business
Corporation Law, dissenters' rights may be available to holders and beneficial
owners of shares of Wisconsin Public Service Preferred Stock with respect to the
approval of the Merger with Wisconsin Fuel and Light subject to the procedures
described therein. Dissenters' rights permit a shareholder to object to the
Merger and demand payment of the "fair value" of his or her shares in cash in
connection with the completion of the Merger.
Under the Wisconsin Business Corporation Law, dissenters' rights are
available to shareholders of a company in a merger if (i) a Wisconsin
corporation is a party to the merger, (ii) shareholder approval of the merger is
required under the Wisconsin Business Corporation Law or the company's articles
of incorporation and (iii) either the merger is a "business combination" (as
defined in Section 180.1130(3) of the Wisconsin Business Corporation Law) or the
shares are not registered on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. automated quotations system on
the record date for notice to the shareholders of a special meeting to vote on
the merger.
"Fair value" means the value of the shares immediately before the
completion of the Merger to which the dissenter objects, excluding any
appreciation or depreciation in
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anticipation of the Merger unless exclusion would be inequitable. The "fair
value", as so determined, could be more or less than the value per share to be
paid pursuant to the Merger.
Holders of Wisconsin Public Service Preferred Stock have the right to
dissent from the proposed Merger. To receive in cash the fair value of their
shares of Wisconsin Public Service Preferred Stock, the dissenting shareholders
are required to follow certain procedures set forth in the Wisconsin Business
Corporation Law. Holders of Wisconsin Public Service Preferred Stock do not have
dissenter's rights with respect to the two proposed amendments to the Wisconsin
Public Service Restated Articles of Incorporation. The following is a brief
summary of such procedures, which does not purport to be complete and is
qualified in its entirety by reference to the statutory provisions of the
Wisconsin Business Corporation Law governing dissenters' rights. Holders of
shares of Wisconsin Public Service Preferred Stock should read Appendix C to
this joint proxy statement/prospectus for a description of all statutory
provisions related to dissenters' rights.
Pursuant to Section 180.1321 of the Wisconsin Business Corporation Law, any
owner or beneficial owner of shares of Wisconsin Public Service Preferred Stock
desiring to assert dissenters' rights must do all of the following:
o deliver to Wisconsin Public Service by mail or by delivery in person
to the principal office of Wisconsin Public Service at 700 North Adams
Street, P.O. Box 19001, Green Bay, Wisconsin 54307-9001, before the
vote to approve the Merger is taken at the Wisconsin Public Service
Special Meeting of Preferred Shareholders, written objection to the
Merger which includes the dissenting shareholder's intent to demand
payment for his or her shares if the proposed Merger is completed
o not vote in favor of the Merger.
Dissenting shareholders who fail to satisfy both of the above conditions
will waive their rights under Sections 180.1301 through 180.1331 of the
Wisconsin Business Corporation Law and will not be entitled to payment of the
fair value of such shares by Wisconsin Public Service under such sections.
Within ten (10) days after the Merger is approved at the Wisconsin Public
Service Special Meeting of Preferred Shareholders, Wisconsin Public Service will
deliver a written dissenters' notice to each of its shareholders who has
dissented to the Merger Agreement in accordance with Section 180.1321 of the
Wisconsin Business Corporation Law. Upon receipt of such notice, each dissenting
shareholder has 30 days to demand payment in writing and surrender the
certificate or certificates formerly representing the shares with respect to
which he or she has dissented. Dissenting shareholders who do not demand payment
within the designated time period will waive their rights under Sections
180.1301 through 180.1331 of the Wisconsin Business Corporation Law, will not be
entitled to payment for their shares under such sections and shall be bound by
the terms of the Merger Agreement. Upon receipt of a payment demand or on the
day of the completion of the Merger, whichever is later, Wisconsin Public
Service will pay each dissenting shareholder who has demanded payment the amount
that Wisconsin Public Service estimates to be the fair value of such shares,
plus accrued interest. A dissenting shareholder who does not agree with
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the estimation of the fair value of his or her shares or the amount of interest
due, must notify Wisconsin Public Service of his or her estimate within 30 days
after Wisconsin Public Service made or offered payment for such shares. If the
dissenting shareholder and Wisconsin Public Service cannot agree upon the fair
value of the shares or amount of interest due, Wisconsin Public Service must
file a petition in any court of competent jurisdiction in the county in which
its principal office is located, requesting a finding and determination of the
fair value of such shares and the accrued interest thereon. If Wisconsin Public
Service fails to institute such a proceeding within 60 days after the dissenting
shareholder notifies Wisconsin Public Service of his or her disagreement,
Wisconsin Public Service shall pay each of its dissenters whose demand remains
unsettled, the amount demanded by such shareholder.
PROXIES
Shares of Wisconsin Public Service Preferred Stock represented by properly
executed proxies received prior to or at the Wisconsin Public Service Special
Meeting of Preferred Shareholders will, unless such proxies have been revoked,
be voted in accordance with the instructions indicated in the proxies. If no
instructions are indicated on a properly executed proxy, the shares will be
voted FOR the Merger and FOR each of the two proposed amendments to the
Wisconsin Public Service Restated Articles of Incorporation and will also confer
authority on Wisconsin Public Service management to adjourn the Wisconsin Public
Service Special Meeting. Failure to vote (either by returning the proxy or, in
the alternative, by voting in person at the Wisconsin Public Service Special
Meeting) will have the effect of a vote against the Merger and the two proposed
amendments to the Wisconsin Public Service Restated Articles of Incorporation.
Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted (i) by delivering to the
Secretary of Wisconsin Public Service at 700 North Adams Street, P.O. Box 19001,
Green Bay, Wisconsin 54307-9001, on or before the taking of the vote at the
Wisconsin Public Service special meeting, a written notice of revocation bearing
a later date than the proxy relating to the same shares or (ii) by attending the
Wisconsin Public Service special meeting and voting in person. Attendance at the
Wisconsin Public Service Special Meeting will not in itself constitute the
revocation of the proxy.
If any other matters are properly presented at the Wisconsin Public Service
Special Meeting for consideration, the persons named in the proxy or acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment; provided, however, that the persons named in the proxy will not
have the discretion to vote such proxy to adjourn the meeting to solicit
additional votes FOR the Merger if such proxy is marked as a vote AGAINST the
Merger.
The cost of soliciting proxies from holders of Wisconsin Public Service
Preferred Stock will be borne by Wisconsin Public Service. In addition to
soliciting proxies by mail, officers and employees of Wisconsin Public Service,
without receiving additional compensation therefor, may solicit proxies by
telephone, by telegram or in person. Wisconsin Public Service will also make
arrangements with brokerage firms and other custodians, nominees and
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fiduciaries to send proxy materials to their principals. Wisconsin Public
Service has retained Georgeson Shareholder Communications, Inc. to assist in the
solicitation of proxies and the fee paid to such firm is not expected to exceed
$20,000, plus reimbursement for reasonable out-of-pocket costs and expenses.
THE MERGER
GENERAL
The Merger is to be effected pursuant to the Merger Agreement by and among
WPS Resources, Wisconsin Public Service, WF&L Acquisition and Wisconsin Fuel and
Light. The Merger Agreement contemplates that, at its effective time, Wisconsin
Fuel and Light will merge with and into Wisconsin Public Service provided the
holders of a majority of the outstanding shares of Preferred Stock of Wisconsin
Public Service approve the Merger on or before February 1, 2001, or their
approval is not then required under the Wisconsin Public Service Restated
Articles of Incorporation, or if the approval of the Wisconsin Public Service
Preferred Shareholders is then required and the Preferred Shareholders of
Wisconsin Public Service do not approve the Merger on or before February 1,
2001, Wisconsin Fuel and Light will merge with and into WF&L Acquisition. In
either case, the separate corporate existence of Wisconsin Fuel and Light will
cease and Wisconsin Public Service or WF&L Acquisition, as the case may be, will
be the surviving corporation.
EFFECTIVE TIME; CONDITIONS TO THE MERGER
If the Merger Agreement receives the requisite approval of the shareholders
of Wisconsin Fuel and Light, the parties will complete the Merger with either
Wisconsin Public Service (if approved by the required vote of the holders of its
Preferred Stock) or with WF&L Acquisition on the third business day, or at such
other time as WPS Resources and Wisconsin Fuel and Light shall agree upon after
they have received all requisite regulatory approvals, and all other conditions
to the Merger have been met or waived provided however that if the Merger
closing would otherwise occur during the period from December 15, 2000, to
February 1, 2001, both inclusive, the parties will delay the closing until
February 2, 2001 or such other date as they may mutually agree upon. See "THE
MERGER AGREEMENT - Conditions to the Completion of the Merger." The Merger will
become effective at the effective time specified in the articles of merger filed
pursuant to the Wisconsin Business Corporation Law, or, absent such
specification, upon such filing.
CONVERSION OF SHARES
At the effective time of the Merger, pursuant to the Merger Agreement each
issued and outstanding share of Wisconsin Fuel and Light Common Stock (other
than shares owned by Wisconsin Fuel and Light or WPS Resources or any of their
respective subsidiaries, all of which will be canceled and cease to exist, and
other than dissenting shares) shall be converted into the right to receive 1.73
shares of duly authorized, validly issued, fully paid and nonassessable (except
as otherwise provided under the Wisconsin Business Corporation Law) WPS
Resources Common Stock. The ratio for converting Wisconsin Fuel and Light Common
Stock into WPS Resources Common Stock will vary depending upon the average
closing price
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of WPS Resources Common Stock as reported in the New York Stock Exchange
Composite Transactions in The Wall Street Journal during a determination period
consisting of ten trading days ending with and including the third trading date
next proceeding the date on which the Merger becomes effective as follows:
Each share of Wisconsin Fuel and Light
Common Stock Converted Into Right to
Receive that Number of Shares of WPS
Resources Common Stock Set Forth Below
Average Closing Price of WPS or that Number of Shares of WPS Resources
Resources Common Stock During Common Stock Equal to One Multiplied
Determination Period by the Fraction Set Forth Below
---------------------------------- ------------------------------------------
$27.79 - $33.96 (both inclusive) 1.73 Shares of WPS Resources Common Stock
$33.97 or more $58.75(1) divided by
Average Closing Price of
WPS Resources Common Stock
During Determination Period
$27.78 or less $48.08(1) divided by
Average Closing Price of
WPS Resources Common Stock
During Determination Period
(1) In the above calculations $58.75 represents the value of 1.73 shares of WPS
Resources common stock at $33.96 per share and $48.08 represents the value
of 1.73 shares of WPS Resources common stock at $27.79 per share.
For example if the average closing price of WPS Resources common stock
during the ten day determination period is $35.00 each share of Wisconsin Fuel
and Light Common Stock will be converted into 1.68 shares of WPS Resources
Common Stock and if the average closing price of WPS Resources Common Stock
during the determination period is $25.00, each share of Wisconsin Fuel and
Light Common Stock will be converted into 1.92 shares of WPS Resources Common
Stock.
The Merger Agreement provides that the conversion ratio will not be
increased beyond such number that would result in the delivery of shares of WPS
Resources Common Stock pursuant to the Merger in excess of 19.9% of the
aggregate number of shares of WPS Resources Common Stock outstanding at the time
the Merger becomes effective. Based on the closing price of WPS Common Stock on
September 13, 2000, the conversion ratio would be 1.73 and the number of shares
of its Common Stock which WPS Resources would issue pursuant to the Merger would
be 1,763,943 constituting approximately 6.24% of the total of the number of
presently outstanding shares of WPS Resources Common Stock plus the number of
additional shares issuable pursuant to the merger.
Pursuant to the Merger Agreement each issued and outstanding share of
Wisconsin Fuel and Light Preferred Stock, $100 par value, will be converted into
the right to receive
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$103 in cash plus any accrued and unpaid dividends including a pro-rata portion
of the dividend accrued from the last dividend payment date to the date of the
Merger.
See "THE MERGER AGREEMENT - Conversion of Shares; Procedures for Exchange
of Certificates." Also see "COMPARISON OF SHAREHOLDER RIGHTS - WPS Resources
Common Stock."
BACKGROUND OF THE MERGER
In December 1999 Wisconsin Fuel and Light retained the Corporate Finance
Group of Arthur Andersen LLP ("AA Finance Group") to assist the Wisconsin Fuel
and Light board of directors in evaluating strategic alternatives. This included
an assessment of a range of strategic options, addressing the changes occurring
in the utility industry and recent industry transactions, and culminated in a
presentation to the board of directors evaluating strategic options. In February
2000, the Wisconsin Fuel and Light board, after further consideration of the
strategic alternatives, retained AA Finance Group to provide advisory services
in connection with the sale of all or any part of Wisconsin Fuel and Light by
means of a merger, consolidation, reorganization, spin off, joint venture,
exchange offer, tender offer, purchase or sale of stock or assets or other
similar transaction or series of transactions. Wisconsin Fuel and Light then
sent invitations to a significant number of regional and national utilities
inviting them to submit preliminary indications of interest relating to a
possible transaction involving the acquisition of the Common Stock of Wisconsin
Fuel and Light or alternative transaction structures. Seven companies returned
signed confidentiality agreements to Wisconsin Fuel and Light and received
confidential information memoranda, and three companies submitted preliminary
indications of interest and visited the data room. These three companies each
submitted a written proposal for a transaction. Following further discussions
and consideration of the offers, and after discussing the offers with AA Finance
Group, on May 26, 2000 the Wisconsin Fuel and Light board of directors accepted
the proposal from WPS Resources and Wisconsin Fuel and Light entered into a
letter of intent with WPS Resources. On July 7, 2000, the board retained Emory
Business Valuation, LLC for the purpose of providing its opinion as to whether
the proposed Merger is fair to the Wisconsin Fuel and Light common shareholders
from a financial point of view (the "fairness opinion"). As of July 11, 2000,
Emory Business Valuation, LLC delivered its opinion to the board confirming the
fairness of the Merger to the Wisconsin Fuel and Light common shareholders, and
the board approved the Merger Agreement and the Merger now being presented to
the shareholders of Wisconsin Fuel and Light for approval. The Merger Agreement
was signed and delivered by the parties on July 13, 2000.
Under the engagement letter with AA Finance Group, Wisconsin Fuel and Light
paid a $50,000 non-refundable retainer at the time of engagement and an
additional $100,000 upon execution of the Merger Agreement (with the latter fee
to be credited against the "Value-Added Adjustment" due upon completion of the
Merger. The Value-Added Adjustment to be paid upon completion is to be mutually
determined between AA Finance Group and Wisconsin Fuel and Light immediately
prior to completion, with the expected range of $450,000 to $650,000 (but not in
excess of $650,000). In addition, Wisconsin Fuel and Light has agreed
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to pay certain out-of-pocket expenses of AA Finance Group and has agreed to
indemnify AA Finance Group against certain liabilities in connection with the
rendering of its services.
RECOMMENDATIONS OF THE WISCONSIN FUEL AND LIGHT BOARD;
WISCONSIN FUEL AND LIGHT REASONS FOR THE MERGER
The Wisconsin Fuel and Light Board believes that the Merger is in the best
interests of Wisconsin Fuel and Light, and that the terms of the Merger are fair
to, and in the best interests of, the holders of Wisconsin Fuel and Light Common
Stock and offer the holders of Wisconsin Fuel and Light Common Stock better
financial prospects for the future than would be available to Wisconsin Fuel and
Light on a stand-alone basis.
In particular, acceptance of the proposal by WPS Resources under the terms
of the Merger will provide the holders of Wisconsin Fuel and Light Common Stock
with an equity value of not less than $48.08 per share as compared to $24.00 per
share, the last quoted price for Wisconsin Fuel and Light Common Stock
immediately prior to the announcement of the proposed merger. In addition, based
upon the exchange ratio under the proposed Merger and the current annual
dividend of WPS Resources, the dividend per share in the hands of the former
holders of Wisconsin Fuel and Light Common Stock will more than double. Finally,
the board of directors of Wisconsin Fuel and Light, upon a review of information
and analysis provided by AA Finance Group, concluded that it is appropriate to
move towards sale of Wisconsin Fuel and Light at this time. That determination
was primarily based upon the board's conclusion that the natural gas industry
remains in transition, the current market remains favorable for strategic
acquisition opportunities, and that Wisconsin Fuel and Light may find it
difficult in the future to compete against larger and stronger competitors.
In determining to adopt and approve the Merger Agreement, the Wisconsin
Fuel and Light board considered the information and analyses as a whole in light
of its knowledge of Wisconsin Fuel and Light, WPS Resources, and their
respective businesses and the board's own business experience. The Wisconsin
Fuel and Light board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have ascribed differing weights
to different factors. Throughout its deliberations, the Wisconsin Fuel and Light
board received the advice of special counsel.
THE WISCONSIN FUEL AND LIGHT BOARD HAS UNANIMOUSLY ADOPTED AND APPROVED THE
MERGER AGREEMENT AND THE MERGER, BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF WISCONSIN FUEL AND LIGHT AND ITS SHAREHOLDERS
AND RECOMMENDS THAT WISCONSIN FUEL AND LIGHT SHAREHOLDERS VOTE TO APPROVE THE
MERGER AGREEMENT AND THE MERGER.
OPINION OF WISCONSIN FUEL AND LIGHT'S FINANCIAL ADVISOR
Emory Business Valuation, LLC has acted as financial advisor to Wisconsin
Fuel and Light in connection with the Merger and has assisted the Wisconsin Fuel
and Light board in its examination of the fairness, from a financial point of
view, of the consideration for each share of Wisconsin Fuel and Light Common
Stock to be received pursuant to the Merger. As
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described herein, the Emory Business Valuation opinion dated as of July 11, 2000
(together with the related presentations) to the Wisconsin Fuel and Light board
was only one of the many factors taken into consideration by the Wisconsin Fuel
and Light board in determining to approve and adopt the Merger Agreement.
The full text of the Emory Business Valuation written opinion dated July
11, 2000, which sets forth the assumptions made, matters considered and
limitations on review undertaken, is attached as Appendix B to this joint proxy
statement/prospectus and is incorporated herein by
reference. The opinion is directed to the Wisconsin Fuel and Light board and
addresses the fairness of the conversion ratios from a financial point of view
to the holders of Wisconsin Fuel and Light Common Stock. It does not address any
other aspect of the Merger or any related transaction and does not constitute a
recommendation to any holder as to how such holder should vote at the Special
Meeting. The summary of the opinion of Emory Business Valuation LLC set forth in
this joint proxy statement/prospectus is qualified in its entirety by reference
to the full text of such opinion.
Opinion of Emory Business Valuation, LLC
As of July 11, 2000, Emory Business Valuation rendered its opinion to the
board of directors of Wisconsin Fuel and Light to the effect that, as of such
date, and based on certain assumptions and limiting conditions, the proposed
consideration to be received by the holders of Wisconsin Fuel and Light's Common
Stock in the Merger was fair, from a financial point of view, to the holders of
Wisconsin Fuel and Light's Common Stock.
Emory Business Valuation is a business valuation firm that is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, employee stock ownership plans, estate planning,
corporate and other purposes. Emory Business Valuation does not beneficially
own, nor has it ever beneficially owned, any interest in Wisconsin Fuel and
Light or WPS Resources.
The following is a brief summary and general description of the valuation
methodologies used by Emory Business Valuation. The summary set forth below does
not purport to be a complete statement of the analyses and procedures applied,
the judgments made or the conclusion reached by Emory Business Valuation. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Accordingly, Emory
Business Valuation believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors considered by Emory Business
Valuation, without considering all analyses and factors, could create an
incomplete view of the processes underlying Emory Business Valuation's opinions.
Emory Business Valuation's opinion, attached to this document as Appendix
B, sets forth the assumptions made, matters considered and certain limitations
on the scope of review undertaken by Emory Business Valuation. Each holder of
Wisconsin Fuel and Light's Common Stock is urged to read such opinion in its
entirety. The summary of the opinion set
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forth below is qualified in its entirety by reference to the full text of the
opinion attached as Appendix B.
Emory Business Valuation's opinion was intended for the use and benefit of
Wisconsin Fuel and Light's board of directors, was directed only to the fairness
of the proposed Merger consideration from a financial point of view to the
holders of Wisconsin Fuel and Light's Common Stock, did not address the merits
of the underlying decision by Wisconsin Fuel and Light to engage in the Merger,
and does not constitute a recommendation to any shareholder as to how that
shareholder should vote on the proposed Merger or any related matter.
In arriving at its opinion, Emory Business Valuation, among other things:
1. reviewed the Merger Agreement;
2. reviewed Wisconsin Fuel and Light's audited financial statements for the
six years ended December 31, 1999, and unaudited interim financial statements,
which Wisconsin Fuel and Light's management has identified as being the most
current financial statements available;
3. reviewed certain operating and financial information provided it by
management relating to Wisconsin Fuel and Light's business and prospects;
4. considered the impact of Wisconsin statutory restrictions limiting the
ability of non-Wisconsin corporations to hold Wisconsin Fuel and Light's stock
or assets;
5. interviewed certain members of the AA Finance Group, which assisted
Wisconsin Fuel and Light's board of directors in obtaining and analyzing offers
by third parties considering purchasing or merging with Wisconsin Fuel and
Light;
6. reviewed certain materials prepared by the AA Finance Group for
Wisconsin Fuel and Light's board of directors dated December 10, 1999, April 27,
2000, and May 26, 2000, regarding Wisconsin Fuel and Light's strategic
alternatives and the process of obtaining third party offers to acquire or merge
with Wisconsin Fuel and Light;
7. reviewed the Confidential Information Memorandum, dated April 2000,
which was sent to certain third parties that were considering extending offers
to acquire or merge with Wisconsin Fuel and Light;
8. interviewed certain members of Wisconsin Fuel and Light's senior
management to discuss its operations, regulatory environment, historical
financial statements, and future prospects;
9. reviewed certain publicly available filings, financial data, stock
market performance data, and dividend policies regarding Wisconsin Fuel and
Light and WPS Resources;
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10. reviewed publicly available financial data and stock market performance
data of publicly traded companies Emory Business Valuation considered somewhat
similar to Wisconsin Fuel and Light, and publicly available prices and premiums
paid in other transactions Emory Business Valuation considered somewhat similar
to the Merger; and
11. conducted such other studies, analyses, inquiries, and investigations,
as Emory Business Valuation deemed appropriate for purposes of its opinion.
In providing its opinion, Emory Business Valuation relied upon and assumed,
without independent verification, the accuracy and completeness of all financial
information that was available to it from public sources and all the financial
and other information provided to it by Wisconsin Fuel and Light or its
representatives. Emory Business Valuation further relied upon the assurances of
Wisconsin Fuel and Light's management that they were unaware of any facts that
would make the information Wisconsin Fuel and Light or its representatives
provided incomplete or misleading.
With respect to the projected financial results, Emory Business Valuation
assumed they were reasonably prepared on bases reflecting the best currently
available estimates and judgment of Wisconsin Fuel and Light's management. Emory
Business Valuation did not express an opinion or any other form of assurance as
to the reasonableness of the underlying assumptions.
Emory Business Valuation did not solicit any third party indications of
interest for the acquisition of all or any part of Wisconsin Fuel and Light.
Emory Business Valuation did not negotiate the Merger's terms or advise
Wisconsin Fuel and Light's board of directors on alternatives to it.
Emory Business Valuation's opinion is necessarily based on economic,
market, financial and other conditions as they exist and can be evaluated by it
as of the date of its opinion. Emory Business Valuation did not perform or
obtain an independent appraisal of any of Wisconsin Fuel and Light's assets.
Emory Business Valuation did not conduct or provide environmental liability
assessments of any kind, so its opinion does not reflect any actual or
contingent environmental liabilities. Emory Business Valuation further assumed
the Merger would be structured as a tax-free exchange for the holders of
Wisconsin Fuel and Light's Common Stock.
The following summary of valuation methodologies and analyses performed by
Emory Business Valuation relates to its opinion rendered to Wisconsin Fuel and
Light's board of directors as of July 11, 2000.
Assessment of Wisconsin Fuel and Light's Public Stock Price
As part of Emory Business Valuation's analysis, it examined the trading
price and volume of Wisconsin Fuel and Light's Common Stock prior to the
announcement on May 30, 2000, of the proposed Merger. Wisconsin Fuel and Light's
Common Stock traded over-the-counter on the OTC Bulletin Board until it was
delisted and moved to the "pink sheets" on May 1, 2000. According to Nasdaq
Trading and Market Services, there were only six trades
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of Wisconsin Fuel and Light's Common Stock in year 2000 prior to the May 30
Merger announcement, for a total volume of 5,700 shares at prices ranging from
$22 to $25 per share. The last trade in Wisconsin Fuel and Light's Common Stock
prior to the Merger announcement occurred on April 11, 2000, when 400 shares
traded at a price of $24.50 per share.
Wisconsin Fuel and Light's Common Stock does not trade actively. While this
limits the usefulness of the trading information, Emory Business Valuation
believes it does provide some indication as to a reasonable approximation of the
value shareholders placed on Wisconsin Fuel and Light's Common Stock prior to
the Merger announcement.
Acquisition Premium Analysis
Emory Business Valuation calculated the publicly traded market value of WPS
Resources' Common Stock to be received by holders of Wisconsin Fuel and Light's
Common Stock as a result of the Merger at $52.66 per share of Wisconsin Fuel and
Light's Common Stock, based on WPS Resources' Common Stock's closing price on
July 11, 2000, of $30.4375 times the exchange ratio of 1.73. This $52.66 per
share amount represents a premium of 115% relative to the last public trade of
Wisconsin Fuel and Light's Common Stock before the May 30, 2000 Merger
announcement, which occurred at $24.50 per share.
Emory Business Valuation compared this 115% acquisition premium to other
acquisition premiums seen in the public marketplace. According to data published
by Mergerstat Review, the mean and median premiums offered for the 723 company
acquisition transactions reviewed during 1999 were 43.3% and 34.6%,
respectively.
Guideline Public Company Analysis
Emory Business Valuation compared selected financial and operating data and
ratios for Wisconsin Fuel and Light with data available for publicly traded
companies somewhat similar to Wisconsin Fuel and Light. This information was
related to the general market for securities as of July 11, 2000, and resulted
in the estimation of a valuation range based on the multiplication of various
earnings and cash flow measures of Wisconsin Fuel and Light by appropriate
multiples. Earnings and cash flow multiples for the guideline companies were
calculated based on daily trading prices. Emory Business Valuation determined
the multiples through an analysis of publicly traded guideline companies
selected on the basis of operational and economic similarity with Wisconsin Fuel
and Light. As part of this analysis, Emory Business Valuation made quantitative
and qualitative comparisons of Wisconsin Fuel and Light's financial, operational
and economic information with similar information for the guideline companies.
Emory Business Valuation selected the following companies for its guideline
public company analysis:
o Delta Natural Gas Company, Inc.
o RGC Resources, Inc.
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o Energy West Incorporated
o EnergySouth, Inc.
o WPS Resources Corporation
o Madison Gas & Electric Company
Based on its guideline public company analysis, Emory Business Valuation
estimated a value of Wisconsin Fuel and Light's Common Stock in the range of
$25.00 to $27.00 per share on a freely traded basis, based on 1,019,620 common
shares outstanding as of July 11, 2000.
Comparable Transaction Analysis
In its comparable transaction analysis, Emory Business Valuation examined
eleven merger and acquisition transactions of companies in lines of business
reasonably similar to Wisconsin Fuel and Light. Emory Business Valuation
reviewed financial information concerning these transactions, including
multiples of latest twelve months ratios of price-to-sales, price-to-earnings,
and price-to-book value, among other information. Based on its comparable
transaction analysis, Emory Business Valuation estimated a value of Wisconsin
Fuel and Light's Common Stock in the range of $33.00 to $37.00 per share, based
on 1,019,620 common shares outstanding as of July 11, 2000.
Fees and Expenses
Pursuant to a letter agreement accepted July 7, 2000, Wisconsin Fuel and
Light engaged Emory Business Valuation to analyze the fairness, from a financial
point of view, of the proposed consideration to be received by the holders of
Wisconsin Fuel and Light's Common Stock in the Merger. Wisconsin Fuel and Light
has agreed to pay Emory Business Valuation a fee of between $50,000 and $80,000,
plus Emory Business Valuation's out-of-pocket expenses incurred in connection
with rendering its fairness opinion. Wisconsin Fuel and Light has further agreed
to indemnify Emory Business Valuation against certain liabilities and expenses
in connection with the rendering of its services. Emory Business Valuation has
not provided business valuation services to Wisconsin Fuel and Light or WPS
Resources prior to this engagement by Wisconsin Fuel and Light.
WPS RESOURCES REASONS FOR THE MERGER
The WPS Resources Board believes the Merger is in the best interest of WPS
Resources and its shareholders because the consideration to be paid reflects the
value that will result from the efficiencies and other opportunities to be
realized in the merger. WPS Resources management estimates that if the Merger
were consummated, WPS Resources could achieve total cost savings, primarily from
the consolidation of administrative, engineering and accounting functions as
well as other support services, of approximately $3.5 million annually, net of
costs of achieving those savings but excluding transaction costs, beginning in
the first full five years following the consummation of the Merger. Although WPS
Resources
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management believes that the assumptions underlying the estimates of cost
savings are reasonable, the achievement of such cost savings will depend upon
numerous factors beyond the control of WPS Resources. Wisconsin Public Service
has requested the Public Service Commission of Wisconsin to allow Wisconsin
Public Service to retain those savings during the first two years following the
Merger and to recover in rates $2 million of the Merger acquisition premium
during each of the following three years which would allow Wisconsin Public
Service to recover in rates approximately 25% of the Merger acquisition premiums
during the first five years following the Merger. The allocation of the benefits
and cost savings among shareholders and ratepayers will depend on the results of
regulatory proceedings before the Public Service Commission of Wisconsin.
Wisconsin Public Service has requested that synergy savings be offset against
the acquisition premium during the first two years following the Merger and that
it be allowed to recover $2 million of the acquisition premium in each of the
following three years. WPS Resources' subsidiary, Wisconsin Public Service, has
existing electric and gas utility operations in close proximity to the
territories served by Wisconsin Fuel and Light. WPS Resources management
believes that the Merger constitutes an attractive business opportunity for WPS
Resources which, although limited by the size of Wisconsin Fuel and Light
relative to that of WPS Resources, will nevertheless result in economic and
operational synergies between Wisconsin Fuel and Light and Wisconsin Public
Service. WPS Resources management believes the Merger will permit Wisconsin
Public Service to extend the reach of its "core" competencies to operate gas
distribution systems and to spread its overhead over an increased volume of
sales.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Merger by the Wisconsin Fuel and
Light board, the shareholders of Wisconsin Fuel and Light should be aware that
some directors and executive officers of Wisconsin Fuel and Light have interests
in the completion of the Merger that are described below and that may be
considered different from, or in addition to, the interests of holders of
Wisconsin Fuel and Light Common Stock generally. The Wisconsin Fuel and Light
board was aware of these interests and considered them when it approved the
Merger Agreement and the Merger.
Employment Matters
Under the Merger Agreement, WPS Resources and the surviving corporation in
the Merger have the obligation to honor, without modification, all contracts,
agreements, collective bargaining agreement, and commitments of Wisconsin Fuel
and Light to which it or its subsidiary are parties, including employee benefit
plans (subject to any reserved right contained in such plans to amend, modify,
suspend, revoke or terminate any such plan). Some of these agreements include a
"change in control" provision that may be triggered by a termination of
employment following a change in control.
Severance Agreements
Five executives, Mark T. Maranger, President and Chief Executive Officer,
Paul C. Baird, Treasurer, Monte K. Gehring, Vice-President, John K. Keune,
Vice-President, and
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Edward C. Vallis, Vice-President will continue to be covered by the existing
Wisconsin Fuel and Light change in control severance agreements. In general,
each of these agreements provides that if the employer terminates the employment
of such executive "without cause" after a change in control or if the employee
terminates his employment for "cause" after a change in control, the executive
shall be entitled to a payment equal to 2.99 times the executive's "base amount"
as defined under ss. 280G of the Internal Revenue Code (essentially annualized
compensation over the past five calendar years) multiplied by a fraction, the
numerator of which is 36 minus the number of calendar months elapsing from the
effective date of the change in control to the effective date of termination of
employment, and the denominator of which is 36. Termination of employment by the
employer for "cause" is essentially the employee's failure to substantially
perform his duties or engaging in conduct materially harmful to the employer or
conviction of felony or misdemeanor which impairs his ability to substantially
perform his duties or results in personal gain or enrichment at the expense of
the employer. Termination by the employee for "cause" following a change in
control includes assigning duties inconsistent with his duties, responsibilities
and status prior to the change in control, requiring the employee to establish
his principal office at a location outside of an area within a 50 mile radius of
its present location, or failure to continue in effect any employee benefit
plans, policies, practices or arrangements (including a reduction in base
salary) on substantially the same basis as existing prior to the change in
control, unless the employer replaces such plan, policy, practice or arrangement
with one that is of substantially equivalent value to the employee. However, in
no event would the aggregate benefits under a change in control, severance
agreements and severance policies after the change in control exceed the amount
that would trigger excise taxes under the "parachute payment" provisions of the
tax laws.
Since the effective time of the Merger may well be in the first part of the
year 2001, the precise severance amounts cannot be determined at this time.
However, a reasonable estimate can be made for year 2000 taxable income of each
executive, and accordingly, a reasonable estimate of the maximum severance
payments is as follows: Mark T. Maranger, $518,542; Paul C. Baird, $231,256;
Monte K. Gehring, $279,233; John K. Keune, $261,934; and Edward C. Vallis,
$264,244. In order to induce these executives to join Wisconsin Public Service
after the Merger, Wisconsin Public Service has decided to pay these amounts to
executives who agree to become employees of Wisconsin Public Service following
the Merger.
Retainer Agreement
WF&L has a retainer agreement with its general legal counsel, Bell,
Gierhart & Moore, S.C. in Madison, Wisconsin, extending through December 31,
2003 and calling for payment of $1,500 per month as a retainer for legal
services. Hugh H. Bell, a principal shareholder of the law firm, is Secretary
and a director of WF&L.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger to Wisconsin Fuel and Light, WPS Resources and the
holders of Wisconsin Fuel and Light and WPS Resources Common Stock. This
discussion is based on the current provisions
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of the Internal Revenue Code, applicable Treasury Regulations, judicial
decisions, and administrative rulings and practice. Changes in any of the
foregoing could alter the conclusions reached herein, and such changes may have
retroactive effect. The tax treatment of a shareholder may vary depending upon
his or her particular situation, and certain shareholders (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers and
foreign persons or entities) may be subject to special rules not discussed
below.
EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER TAX ADVISER AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN APPLICABLE
TAX LAWS.
Von Briesen, Purtell & Roper, s.c. is of the opinion that: (1) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; (2) WPS Resources, Wisconsin Public Service or WF&L
Acquisition, as the case may be, and Wisconsin Fuel and Light will each be "a
party to a reorganization" within the meaning of Section 368(b) of the Code; (3)
no gain or loss will be recognized by Wisconsin Fuel and Light pursuant to the
Merger; (4) each holder of Wisconsin Fuel and Light Common Stock who exchanges
those shares solely for shares of WPS Resources Common Stock pursuant to the
Merger will not recognize any gain or loss as a result of the Merger; (5) the
aggregate tax basis of the WPS Resources Common Stock received by each Wisconsin
Fuel and Light shareholder will be the same as the aggregate tax basis of the
stock exchanged therefor less cash received for fractional shares; and (6) the
holding period of the WPS Resources Common Stock received by each Wisconsin Fuel
and Light shareholder will include the period for which the Wisconsin Fuel and
Light stock exchanged therefor was held, provided that the stock is held as a
capital asset at the effective time of the Merger.
Von Briesen, Purtell & Roper, s.c. is also of the opinion that the payment
of cash to a Wisconsin Fuel and Light shareholder in lieu of issuing fractional
shares of WPS Resources Common Stock will be treated as if the fractional share
was distributed pursuant to the Merger and then redeemed by Wisconsin Public
Service or WF&L Acquisition. The cash payment will be treated as having been
received as a distribution in full payment in exchange for the fractional share.
The Wisconsin Fuel and Light shareholder will recognize gain or loss equal to
the difference between (i) the cash payment, and (ii) the portion of the
Wisconsin Fuel and Light shareholder's basis in the Wisconsin Fuel and Light
Common Stock which is allocable to the fractional share. This gain or loss will
be capital gain or loss, provided that such stock is held as a capital asset at
the effective time of the Merger.
As indicated in the discussion concerning dissenters' rights, a holder of
Wisconsin Fuel and Light Common Stock who dissents from the proposed Merger and
perfects dissenters rights pursuant to Wisconsin law will receive in cash the
"fair value" of the holder's shares of Wisconsin Fuel and Light Common Stock
instead of shares of WPS Resources Common Stock. In that event the cash payment
will be treated as a sale of the stock by the shareholder and that shareholder
will recognize gain or loss equal to the difference between the cash payment and
that shareholder's basis in the Wisconsin Fuel and Light Common Stock held by
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that shareholder. That gain or loss will be a capital gain or loss provided such
stock is held as a capital asset at the effective time of the Merger. See "THE
SPECIAL MEETINGS - Wisconsin Fuel and Light Special Meeting - Dissenters'
Rights".
In the opinion of Foley & Lardner, counsel to WPS Resources, the Merger
will qualify as a reorganization within the meaning of Section 368(a)(l)(A) of
the Code. No gain or loss will be recognized to WPS Resources, Wisconsin Public
Service or WF&L Acquisition or the shareholders of WPS Resources or Wisconsin
Public Service upon consummation of the Merger and there will be no change to
the tax basis and holding period of the WPS Resources Common Stock of WPS
Resources shareholders.
Foley & Lardner is also of the opinion that the payment of cash to a holder
of Wisconsin Public Service Preferred Stock who asserts and perfects dissenters'
rights under the Wisconsin Business Corporation law will be treated as if such
stock was redeemed by Wisconsin Public Service. The dissenting shareholder will
recognize gain or loss equal to the difference between (i) the cash payment
(excluding any accrued interest paid), and (ii) the dissenting shareholder's
basis in the Wisconsin Public Service Preferred Stock being surrendered. This
gain or loss will be capital gain or loss provided such stock is held as a
capital asset at the effective time of the redemption. Any accrued interest paid
to the dissenting shareholder as part of the cash payment shall be taxable as
ordinary income.
The opinions of von Briesen, Purtell & Roper, s.c. and Foley & Lardner are
based on current law, the information contained in this joint proxy
statement/prospectus and certain representations as to factual matters made by
Wisconsin Fuel and Light, WPS Resources and certain shareholders of Wisconsin
Fuel and Light. These opinions have been filed with the Securities and Exchange
Commission as exhibits to the registration statement which includes this joint
proxy statement/prospectus. Any inaccuracy or change with respect to such
information or representations, or any past or future actions by Wisconsin Fuel
and Light, WPS Resources, or the shareholders contrary to such representations,
could adversely affect the conclusions reached herein.
An opinion of counsel is not binding on the Internal Revenue Service or the
courts, and only represents such counsel's best judgment. The parties have not
and will not request a ruling from the Internal Revenue Service in connection
with the federal income tax consequences of the Merger. If the Internal Revenue
Service successfully challenges the status of the Merger as a tax-free
reorganization, holders of Wisconsin Fuel and Light Common Stock will be treated
as if they sold their Wisconsin Fuel and Light Common Stock in a taxable
transaction. In such event, each holder of Wisconsin Fuel and Light Common Stock
would recognize gain or loss equal to the difference between the holder's tax
basis in the shares of the Wisconsin Fuel and Light Common Stock surrendered in
the Merger and the fair market value, at the effective time of the Merger, of
the WPS Resources Common Stock received in exchange therefor (plus any cash
received for fractional shares of WPS Resources Common Stock).
WPS Resources' obligation to effect the Merger is conditioned on, among
other things, the delivery at the closing of an opinion to WPS Resources from
Foley & Lardner, and
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Wisconsin Fuel and Light's obligation to effect the Merger is conditioned on,
among other things, the delivery at the closing of an opinion from von Briesen,
Purtell & Roper s.c., each such opinion substantially to the effect that, for
federal income tax purposes, the Merger constitutes a tax-free reorganization
within the meaning of Section 368(a) of the Code. WPS Resources and Wisconsin
Fuel and Light may each waive the delivery of such opinions as conditions to
closing. However, in the event that, in the opinion of WPS Resources or
Wisconsin Fuel and Light or their respective counsel, such waiver would
constitute a material event for Wisconsin Fuel and Light Common Shareholders,
including, without limitation, that the Merger does not constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code, the approval of
the Wisconsin Fuel and Light Common Shareholders will be re-solicited.
ACCOUNTING TREATMENT
The Merger will be treated by WPS Resources as a "purchase" for accounting
and financial reporting purposes.
REQUIRED REGULATORY APPROVALS AND OTHER REGULATORY MATTERS
Although the parties believe that they will receive the requisite
regulatory approvals and clearances for the Merger that are summarized below,
there can be no assurance as to the timing of such approvals or clearances or
the ability of the parties to obtain such approvals and clearances on
satisfactory terms or otherwise. It is a condition to consummation of the Merger
that such approvals be obtained pursuant to final orders which shall not impose
terms and conditions which, in the aggregate have, or insofar as reasonably can
be foreseen, would have, a material adverse effect on the business, assets,
financial condition or results of operation of WPS Resources or Wisconsin Fuel
and Light. There can be no assurance that any such approvals will not contain
terms or conditions which cause such approvals to fail to satisfy such condition
to the consummation of the Merger. Even assuming each regulatory approval is
obtained in the optimal time for such action, the Merger is not expected to be
consummated until the first quarter of 2001.
Hart-Scott-Rodino Antitrust Improvements Act of 1976 - Pre-Merger
Notification
The Hart-Scott-Rodino Act, and the rules and regulations thereunder,
provide that certain transactions (including the Merger) may not be consummated
until certain information has been submitted to the Antitrust Division of the
United States Department of Justice and the Federal Trade Commission and
specified Hart-Scott-Rodino Act waiting period requirements have been satisfied.
WPS Resources and Wisconsin Fuel and Light filed notifications under the
Hart-Scott-Rodino Act on August 17, 2000. The waiting period under the
Hart-Scott-Rodino Act relating to these filings will terminate 30 days following
the initial filing, unless additional information is requested. The termination
of the Hart-Scott-Rodino Act waiting period does not preclude the Antitrust
Division or the Federal Trade Commission from challenging the Merger on
antitrust grounds. There can be no assurance that such a challenge, if made,
would not be successful. Neither WPS Resources nor Wisconsin Fuel and Light
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believes that the Merger will violate Federal antitrust laws. If the Merger is
not consummated within 12 months after the termination of the initial
Hart-Scott-Rodino Act waiting period, WPS Resources and Wisconsin Fuel an Light
would be required to submit new information to the Antitrust Division and the
Federal Trade Commission, and a new Hart-Scott-Rodino Act waiting period would
have to expire or be earlier terminated before the Merger could be consummated.
Public Utility Holding Company Act of 1935
WPS Resources is not required to obtain Securities and Exchange Commission
approval under the Public Utility Holding Company Act in connection with the
Merger.
WPS Resources currently claims exemption from the registration and other
requirements of the Public Utility Holding Company Act, other than from Section
9(a)(2) thereof, pursuant to annual filings made with the Securities and
Exchange Commission. The basis of the exemption under Section 3(a)(1) is that
WPS Resources and its public utility subsidiaries from which it receives any
material amount of its income are predominantly intrastate in character and
carry on their businesses substantially in a single state in which they are
organized (Wisconsin).
The completion of the Merger will reinforce the basis for WPS Resources'
exemption from registration under the Public Utility Holding Company Act.
If WPS Resources were required to register under the Public Utility Holding
Company Act, WPS Resources would become subject to numerous restrictions imposed
by the Public Utility Holding Company Act on the operations of a registered
holding company and its subsidiaries and affiliates. Subject to limited
exceptions, Securities and Exchange Commission approval is required under the
Public Utility Holding Company Act for a registered holding company or any of
its subsidiaries to: (i) issue securities, (ii) acquire utility assets from a
third person, (iii) acquire any securities of another public utility, (iv) amend
its articles of incorporation, or (v) acquire stock, extend credit, pay
dividends, lend money or invest in any manner in any other businesses. The
Public Utility Holding Company Act also limits the ability of registered holding
companies to engage in non-utility ventures and regulates holding company system
service companies and the rendering of services by holding company affiliates to
the system's utilities. WPS Resources believes the foregoing restrictions and
limitations imposed by the Public Utility Holding Company Act in its current
form may limit possible operations of WPS Resources. In addition, the Securities
and Exchange Commission historically has interpreted the Public Utility Holding
Company Act to preclude registered holding companies, with limited exceptions,
from owning both electric and gas utility systems, although the Securities and
Exchange Commission has recommended that registered holding companies be allowed
to hold both gas and electric utility operations if the affected states agree.
If Wisconsin Public Service were required to divest its gas utility properties,
such a required divestiture could, under certain circumstances, be at a price
below fair market value or otherwise on terms deemed unsatisfactory by WPS
Resources and could have a materially adverse effect on the operations, earnings
and financial condition of WPS Resources. It is not possible to predict whether
the restrictions resulting from losing exempt status and being
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required to register under the Public Utility Holding Company Act would have a
material adverse effect on the business, assets, financial condition or results
of operation of WPS Resources.
Approval of the Merger and Related State Regulatory Matters
The Wisconsin statutes require Wisconsin Fuel and Light, WPS Resources and
Wisconsin Public Service to secure the consent or approval of the Public Service
Commission of Wisconsin for the merger of Wisconsin Fuel and Light into
Wisconsin Public Service or WF&L Acquisition and any subsequent liquidation and
dissolution of WF&L Acquisition and transfer of assets to Wisconsin Public
Service. On August 7, 2000, WPS Resources, Wisconsin Public Service, WF&L
Acquisition and Wisconsin Fuel and Light filed an application with the Public
Service Commission of Wisconsin for the required consent or approval.
The Public Service Commission of Wisconsin will continue to have
jurisdiction to review and regulate all costs projected to be incurred by
Wisconsin Public Service for potential recovery in rates in Wisconsin, and will
regulate all affiliate dealings between Wisconsin Public Service and all of its
affiliates.
WPS Resources will remain a public utility holding company under the
Wisconsin Holding Company Act and will remain subject for certain purposes to
the jurisdiction of the Public Service Commission of Wisconsin. The following is
a brief summary of certain provisions of the Wisconsin Holding Company Act that
will continue to apply to WPS Resources after the effective time of the Merger.
The Wisconsin Holding Company Act prohibits any person from forming a
public utility holding company or acquiring or holding more than 10% of the
outstanding voting securities of a public utility holding company, without the
approval of the Public Service Commission of Wisconsin and requires that any
holding company of a Wisconsin public utility be a corporation organized under
the laws of the State of Wisconsin. The Public Service Commission of Wisconsin,
if it finds the capital of any public utility affiliate will be impaired by
payment of a dividend, may order the utility affiliate to limit or cease payment
of dividends to the public utility holding company. Various transactions by a
public utility affiliate with others in the public utility holding system are
prohibited, including lending money, guaranteeing obligations, combined
advertising, providing utility service on terms different from those for other
consumers in the same class, and, without the approval of the Public Service
Commission of Wisconsin, certain sales or leases of real property and use of
services of utility employees. The Wisconsin Holding Company Act prohibits (i)
any public utility affiliate from providing any non-utility product or service
in a manner or at a price that unfairly discriminates against any competing
provider; (ii) any non-utility activity from being subsidized materially by the
customers of any public utility in the system; (iii) the operation of the system
in any way which materially impairs the credit, ability to acquire capital on
reasonable terms or ability to provide safe, reasonable, reliable and adequate
utility service, of any public utility affiliate in the system; (iv) any
transfer by a public utility affiliate to any other system company of any
confidential public utility information, including customer lists,
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for any non-utility purpose, unless the Public Service Commission of Wisconsin
has approved the transfer; and (v) any termination of the system's interest in a
public utility affiliate without Wisconsin commission's approval. Other
statutory provisions in addition to the Wisconsin Holding Company Act include
requirements for submission to the Public Service Commission of Wisconsin for
approval of certain contracts or other arrangements for furnishing property or
services between a public utility and an affiliate.
The Wisconsin Holding Company Act also limits non-utility diversification,
in that, stated generally, the net book value of the assets of all non-utility
affiliates may not exceed the sum of 25% of the net book value of the assets of
all electric utility affiliates and a percentage, to be determined by the
Wisconsin Commission (but not less than 25%), of the net book value of the
assets of all other public utility affiliates. In 1999 a law was enacted which
provides a Wisconsin Public utility holding company partial relief from limits
on non-utility assets it may own if the Wisconsin electric utilities in the
holding company system transfer their electric transmission facilities to a
separate transmission company which, in turn, transfers operational control of
the transmission facilities to the Midwest Independent System Operator. The
deadline for such transfer is currently December 31, 2000, and Wisconsin Public
Service is considering the transfer of its electric transmission facilities to a
separate transmission company organized by the major Wisconsin electric
utilities as contemplated by the 1999 law subject to the satisfaction of certain
conditions.
In addition, the Wisconsin Holding Company Act requires the Public Service
Commission of Wisconsin to investigate periodically the impact of the operation
of every holding company system on every public utility affiliate in the system
and to determine whether each non-utility affiliate does, or can reasonably be
expected to do, at least one of the following: (i) substantially retain, attract
or promote business activity or employment or provide capital to businesses
within the service territory of any public utility affiliate or certain others,
(ii) increase or promote energy conservation or develop, produce or sell
renewable energy products or equipment, (iii) conduct a business that is
functionally related to the provision of utility service or to the development
or acquisition of energy resources, and (iv) develop or operate commercial or
industrial parks in the service territory of any public utility affiliate. WPS
Resources believes that its existing non-utility businesses meet the
requirements of the Wisconsin Holding Company Act. In 1998, the Public Service
Commission of Wisconsin conducted its first tri-annual review of the WPS
Resources holding company system and issued an audit report stating that "based
upon a review of the activities of the nonutility subsidiaries of [WPS
Resources] all major subsidiaries appear to comply with at least one" of the
goals specified in the Wisconsin Holding Company Act. The Public Service
Commission of Wisconsin also is authorized to order a holding company to
terminate its interest in a public utility affiliate if the Public Service
Commission of Wisconsin finds that, based upon clear and convincing evidence,
termination of the interest is necessary to protect the interest of utility
investors in a financially healthy utility and the interest of consumers in
reasonably adequate utility service at a just and reasonable price.
Given WPS Resources' experience under the Wisconsin Holding Company Act,
WPS Resources does not expect the restrictions of the Wisconsin Holding Company
Act to have a materially adverse effect upon WPS Resources following the Merger.
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Other
Additional consents from and notifications to governmental agencies may be
required in connection with the Merger. At the present time, neither WPS
Resources nor Wisconsin Fuel and Light anticipates any material difficulties in
obtaining such consents or furnishing such notifications.
FEDERAL SECURITIES LAW CONSEQUENCES
All WPS Resources Common Stock issued in connection with the Merger will be
freely transferable, except that any WPS Resources Common Stock received by
persons who are deemed to be affiliates of WPS Resources or of Wisconsin Fuel
and Light prior to the Merger may be sold by them only in transactions permitted
by the resale provisions of Rule 145 under the Securities Act of 1933 with
respect to affiliates of Wisconsin Fuel and Light or as otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of
Wisconsin Fuel and Light generally include individuals or entities that control,
are controlled by, or are under common control with, Wisconsin Fuel and Light
and may include certain officers and directors of Wisconsin Fuel and Light as
well as its principal shareholders.
Affiliates may not sell their shares of WPS Resources Common Stock acquired
in connection with the Merger, except pursuant to an effective registration
statement under the Securities Act of 1933 covering such shares or in compliance
with Rule 145 (or Rule 144 under the Securities Act in the case of persons who
become affiliates of WPS Resources) or another applicable exemption from the
registration requirements of the Securities Act. In general, under Rule 145, for
one year following the effective time of the Merger an affiliate (together with
certain related persons) would be entitled to sell shares of WPS Resources
Common Stock acquired in connection with the Merger only through unsolicited
"broker transactions" or in transactions directly with a "market maker," as such
terms are defined in Rule 144. Additionally, the number of shares to be sold by
an affiliate (together with certain related persons and certain persons acting
in concert) within any three-month period for purposes of Rule 145 may not
exceed the greater of 1% of the outstanding shares of WPS Resources Common Stock
or the average weekly trading volume of such stock during the four calendar
weeks preceding such sale. Rule 145 would only remain available, however, to
affiliates if WPS Resources remained current with its informational filings with
the Securities and Exchange Commission under the Securities Exchange Act of
1934. One year after the effective time of the Merger, an affiliate would be
able to sell shares of WPS Resources Common Stock received in the Merger without
regard to the manner of sale or volume limitations provided that WPS Resources
is then current with its Exchange Act informational filings and the affiliate is
not then an affiliate of WPS Resources. Two years after the effective time of
the Merger, an affiliate would be able to sell shares of WPS Resources Common
Stock received in the Merger without any restrictions so long as the affiliate
had not been an affiliate of WPS Resources for at least three months prior to
the sale.
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CERTAIN OTHER AGREEMENTS
The Merger Agreement requires Wisconsin Fuel and Light to identify in
writing to WPS Resources prior to the closing date any persons who are, or are
deemed to be, affiliates of Wisconsin Fuel and Light, and to use reasonable
efforts to have such persons execute and deliver, prior to the closing date,
affiliates' letters in which they will make certain representations about their
intentions to hold the shares of WPS Resources Common Stock to be received in
the Merger and agree to certain restrictions on resale of such shares of WPS
Resources Common Stock. The representations and restrictions on resale are
intended to preserve the characterization of the Merger for federal income tax
purposes as a reorganization and to comply with restrictions on resale of
securities imposed by federal securities laws.
THE MERGER AGREEMENT
The following description of the Merger Agreement among WPS Resources,
Wisconsin Public Service, WF&L Acquisition and Wisconsin Fuel and Light does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached hereto as Appendix A and is
incorporated herein by reference. Shareholders of Wisconsin Fuel and Light and
holders of Wisconsin Public Service Preferred Stock are urged to read the Merger
Agreement in its entirety.
THE MERGER
The Merger Agreement provides that, subject to the approval and adoption of
the Merger Agreement by the shareholders of Wisconsin Fuel and Light and the
satisfaction or waiver of the other conditions to the Merger, Wisconsin Fuel and
Light will be merged in accordance with the Wisconsin Business Corporation Law
with and into Wisconsin Public Service provided that the Preferred Shareholders
of Wisconsin Public Service approve the Merger on or before February 1, 2001, if
their approval is then required, or with or into WF&L Acquisition, a
wholly-owned subsidiary of WPS Resources, if the Preferred Shareholders of
Wisconsin Public Service do not approve the Merger on or before February 1,
2001, and that approval is then required. In either case, the separate existence
of Wisconsin Fuel and Light will then cease, and Wisconsin Public Service or
WF&L Acquisition will be the surviving corporation. At the effective time of the
Merger, the conversion of Wisconsin Fuel and Light Common Stock pursuant to the
Merger Agreement will be effected as described below. The Articles of
Incorporation and Bylaws of the surviving corporation will survive the Merger.
The directors and officers of the surviving corporation immediately prior to the
effective time of the Merger will remain directors and officers of the surviving
corporation following the effective time of the Merger.
EFFECTIVE TIME
Following the approval and adoption of the Merger Agreement and subject to
satisfaction or waiver of the terms and conditions to closing, contained in the
Merger Agreement, the Merger will become effective at the time specified in the
articles of merger filed with the Department of Financial Institutions of the
State of Wisconsin or absent such
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specification upon such filing. The filing of the articles of merger will be
made on the third business day after all conditions contemplated by the Merger
Agreement have been satisfied or waived or at such other time, date and place as
WPS Resources and Wisconsin Fuel and Light shall mutually agree upon, provided,
however, that if the third business day immediately following the date on which
the last of the conditions contemplated by the Merger Agreement is satisfied or
waived occurs on or after December 15, 2000 and on or before February 1, 2001,
then the effective time will be February 2, 2001, or such other date as WPS
Resources and Wisconsin Fuel and Light mutually agree upon.
TERMS OF THE MERGER
At the effective time:
o each share of Wisconsin Fuel and Light Common Stock held in Wisconsin
Fuel and Light treasury or by any subsidiary of Wisconsin Fuel and
Light or held by WPS Resources or any of its subsidiaries immediately
prior to the effective time of the Merger will be cancelled, retired
and cease to exist and no shares of WPS Resources Common Stock will be
delivered with respect to those shares;
o each remaining outstanding share of Wisconsin Fuel and Light Common
Stock other than dissenting shares will be converted into the right to
receive fully paid and nonassessable (except as otherwise provided in
Section 180.0622(2)(b) of the Wisconsin Business Corporation Law (see
"DESCRIPTION OF WPS RESOURCES CAPITAL STOCK - Common Stock")) shares
of WPS Resources Common Stock, except that cash will be paid in lieu
of any fractional share of WPS Resources Common Stock; and
o each share of Wisconsin Fuel and Light Preferred Stock will be
converted into the right to receive $103 in cash plus accrued and
unpaid dividends, including a pro rata portion of the dividends
accrued from the last dividend payment date to the effective time of
the Merger.
For a detailed description of the method of determining the number of
shares of WPS Resources Common Stock which each share of Wisconsin Fuel and
Light Common Stock will be converted into the right to receive, see "THE MERGER
AGREEMENT - Conversion of Shares."
Each share of WPS Resources Common Stock issued to Wisconsin Fuel and Light
shareholders in the Merger will include, if then applicable, a right issued
pursuant to the WPS Resources Rights Agreement. See "COMPARISON OF SHAREHOLDER
RIGHTS - WPS Resources Rights Agreement" and "DESCRIPTION OF WPS RESOURCES
CAPITAL STOCK - Common Stock Purchase Rights."
At the effective time of the Merger, holders of Wisconsin Fuel and Light
Common Stock will cease to have any rights as holders of the shares, but will
have the right to receive shares of WPS Resources Common Stock and cash in lieu
of any fractional shares of WPS
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Resources Common Stock. After the effective time of the Merger, the stock
transfer books of Wisconsin Fuel and Light will be closed and there will be no
further transfers of Wisconsin Fuel and Light Common Stock. See "THE MERGER
-Conversion of Shares; Procedures for Exchange of Certificates" and "COMPARISON
OF SHAREHOLDER RIGHTS."
FRACTIONAL SHARES
Fractional shares of WPS Resources Common Stock will not be issued in
connection with the Merger. In lieu of any such fractional share, each holder of
Wisconsin Fuel and Light Common Stock who would otherwise have been entitled to
a fraction of a share of WPS Resources Common Stock upon surrender of
certificates for exchange will be paid in cash (without interest) in an amount
determined by multiplying the average of the last reported sales price per share
of WPS Resources Common Stock as reported on the New York Stock Exchange
Composite Transactions reporting system for the last ten trading days prior to
and including the third trading day immediately prior to the effective time of
the Merger on which WPS Resources Common Stock was traded on the New York Stock
Exchange by the fractional share interest (rounded to the nearest thousandth) to
which the Wisconsin Fuel Light shareholder would otherwise be entitled.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
As soon as practicable following the effective time of the Merger, WPS
Resources will deposit with the Firstar Bank, N.A. Milwaukee, Wisconsin as
agent, or such other agent as may be appointed by WPS Resources and approved by
Wisconsin Fuel and Light, certificates representing the appropriate number of
shares of WPS Resources Common Stock (and cash to be paid in lieu of fractional
shares of WPS Resources Common Stock) issuable in connection with the Merger. As
soon as reasonably practicable after the effective time of the Merger, the
exchange agent will mail to each holder of record of Wisconsin Fuel and Light
Common Stock a letter of transmittal and instructions for surrendering the
certificates representing shares of Wisconsin Fuel and Light Common Stock, and
each holder of Wisconsin Fuel and Light Common Stock will be entitled to
receive, upon surrender to the exchange agent (or such other agent as may be
appointed by agreement of WPS Resources and Wisconsin Fuel and Light) of one or
more certificates representing the Wisconsin Fuel and Light Common Stock,
certificates representing the number of shares of WPS Resources Common Stock
into which such shares are converted in the Merger and cash in consideration of
fractional shares of WPS Resources Common Stock, as described above. WPS
Resources Common Stock into which Wisconsin Fuel and Light Common Stock will be
converted in the Merger will be deemed to have been issued at the effective time
of the Merger.
No dividends or other distributions that are declared or made on WPS
Resources Common Stock with a record date after the effective time of the Merger
will be paid to persons entitled to receive certificates representing WPS
Resources Common Stock until the persons surrender their certificates
representing the Wisconsin Fuel and Light Common Stock. Upon such surrender,
there shall be paid to the person in whose name the certificates representing
such WPS Resources Common Stock shall be issued any dividends or other
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distributions which shall have become payable with respect to such WPS Resources
Common Stock in respect of a record date after the effective time of the Merger.
In no event shall the person entitled to receive dividends be entitled to
receive interest on dividends. In the event that any certificates representing
shares of WPS Resources Common Stock are to be issued in a name other than that
in which the certificates representing shares of Wisconsin Fuel and Light Common
Stock surrendered in exchange therefor are registered, it shall be a condition
of such exchange that the person requesting such exchange present to the
exchange agent the certificates with all documents required to evidence and
effect the transfer and evidence that any applicable stock transfer taxes have
been paid. Neither WPS Resources nor Wisconsin Fuel and Light shall be liable to
any holder of shares of Wisconsin Fuel and Light Common Stock or WPS Resources
Common Stock, as the case my be, for any shares of WPS Resources Common Stock
(or dividends thereon) or cash in lieu of fractional shares of WPS Resources
Common Stock delivered to a public official pursuant to any applicable abandoned
property escheat or similar law.
Detailed instructions, including a transmittal letter, will be mailed to
shareholders as soon as reasonably practicable following the effective time of
the Merger as to the method of exchanging certificates formerly representing
shares of Wisconsin Fuel and Light Common Stock for certificates representing
shares of WPS Resources Common Stock. See "THE MERGER - Conversion of Shares;
Procedures for Exchange of Certificates." Shareholders should not send
certificates representing their shares to Wisconsin Fuel and Light Company or,
prior to receipt of the transmittal letter, to the exchange agent.
Each outstanding share of Wisconsin Fuel and Light Preferred Stock, $100
par value, will be converted pursuant to the Merger into the right to receive
$103 in cash, plus any accrued and unpaid dividends including a pro-rata portion
of the dividend accrued from the last dividend payment date to the effective
time of the Merger without interest on such amount after the effective time of
the Merger.
CONDITIONS TO COMPLETION OF THE MERGER
The respective obligations of each of WPS Resources and Wisconsin Fuel and
Light to effect the Merger are subject to the satisfaction at or prior to the
closing date of the following conditions:
o the shareholders of Wisconsin Fuel and Light shall have approved the
Merger Agreement by the required vote;
o the holders of a majority of shares of Wisconsin Public Service
Preferred Stock shall have approved the Merger on or before February
1, 2001 in accordance with the requirements of the Restated Articles
of Incorporation of Wisconsin Public Service or such approval shall
not then be required, provided, however, the absence of such approval
if required shall not after February 1, 2001 relieve any of the other
parties to the Merger Agreement from completing the Merger of
Wisconsin Fuel and Light into WF&L Acquisition;
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o no temporary restraining order or preliminary or permanent injunction
or other order by any federal or state court shall be in effect
preventing the completion of the Merger, and the Merger and the other
transactions contemplated by the Merger Agreement shall not have been
prohibited under any applicable federal or state law or regulation;
o any waiting period applicable to the Merger under the Hart Scott
Rodino Antitrust Improvements Act shall have terminated or expired and
any other governmental or regulatory approvals required with respect
to the transactions contemplated by the Merger Agreement including,
but not limited to, the approval of the Public Service Commission of
Wisconsin and any approval by the Securities and Exchange Commission,
under the Public Utility Holding Company Act of 1935, shall have been
obtained and such approvals shall become final and shall not have
imposed terms or conditions which, in the aggregate have, or insofar
as reasonably can be foreseen would have, a material adverse effect on
the business, assets, financial condition or results of operation of
WPS Resources or Wisconsin Fuel and Light or which would be materially
inconsistent with the agreements of WPS Resources and Wisconsin Fuel
and Light contained in the Merger Agreement;
o the registration statement relating to the shares of WPS Resources
Common Stock issuable pursuant to the Merger shall have become
effective under the Securities Act of 1933 and no stop order
suspending such effectiveness shall be in effect; and
o the New York Stock Exchange shall have authorized for listing the
shares of WPS Resources Common Stock issuable to Wisconsin Fuel and
Light shareholders in the Merger upon official notice of issuance.
The obligation of Wisconsin Fuel and Light to effect the Merger is subject
to the satisfaction at or prior to the closing date of the following conditions:
o the accuracy of the representations and warranties of WPS Resources
contained in the Merger Agreement as of the date of the Merger
Agreement and as of the closing date (except as would not be
reasonably likely to result in a material adverse effect);
o the performance in all material respects of all obligations of WPS
Resources required to be performed under the Merger Agreement;
o the receipt by Wisconsin Fuel and Light of a certificate of an officer
of WPS Resources that certain conditions set forth in the Merger
Agreement have been satisfied;
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o the receipt by Wisconsin Fuel and Light of an opinion of its counsel
dated as of the closing date to the effect that the Merger will be
treated as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code;
o the receipt by Wisconsin Fuel and Light of an opinion of legal counsel
to WPS Resources as to certain matters (substantially in the form set
forth in an exhibit to the Merger Agreement);
o the receipt by Wisconsin Fuel & Light of the opinion of Emory Business
Valuation LLC as to the fairness from a financial point of view of the
consideration to be received by the holders of Wisconsin Fuel and
Light common stock in the Merger, which condition has been satisfied;
o the absence of any event that would result in any right or entitlement
of WPS Resources shareholders under the WPS Resources rights agreement
which in Wisconsin Fuel and Light's reasonable judgment would have, or
is reasonably likely to result in, a material adverse effect on WPS
Resources or materially change the number of outstanding equity
securities of WPS Resources, and the WPS Resources stock purchase
rights not having become nonredeemable by any action of the WPS
Resources board of directors; and
o the absence of any material adverse effect on the business, assets,
condition (financial or otherwise) or results of operation of WPS
Resources and its subsidiaries taken as a whole and the absence of any
facts or conditions (other than facts or conditions of general
applicability to electric or gas utility companies in the region in
which WPS Resources conducts its utility operations) which have, or
insofar as reasonably can be foreseen would have, such a materially
adverse effect.
The obligations of WPS Resources to effect the Merger are subject to the
satisfaction at or prior to the Closing Date of the following conditions:
o the accuracy of the representations and warranties of Wisconsin Fuel
and Light contained in the Merger Agreement as of the date of the
Merger Agreement and as of the closing date (except as would not be
reasonably likely to result in a material adverse effect);
o the performance in all material respects of all obligations of
Wisconsin Fuel and Light required to be performed under the Merger
Agreement;
o the receipt by WPS Resources of a certificate of an officer of
Wisconsin Fuel and Light that certain conditions set forth in the
Merger Agreement have been satisfied;
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o the receipt by WPS Resources of an opinion of its counsel dated as of
the closing date to the effect that the Merger will be treated as a
tax-free reorganization under Section 368(a) of the Internal Revenue
Code;
o the receipt by WPS Resources of an opinion of legal counsel to
Wisconsin Fuel and Light as to certain matters (substantially in the
form attached as an exhibit to the Merger Agreement);
o the receipt by WPS Resources of letter agreements relating to trading
in securities of WPS Resources (substantially in the form attached as
an exhibit to the Merger Agreement) duly executed by each affiliate of
Wisconsin Fuel and Light; and
o the absence of any material adverse effect on the business, assets,
condition (financial or otherwise) or results of operation of
Wisconsin Fuel and Light and its subsidiary taken as a whole and the
absence of any facts or conditions (other than facts or conditions of
general applicability to gas distribution utility companies in
Wisconsin including, but not limited to general restructuring orders
or legislation) which have, or insofar as reasonably can be foreseen
would have, such a materially adverse effect.
There can be no assurance that all of the conditions to the Merger will be
satisfied. The parties to the Merger for whose benefit any of the foregoing
conditions are intended can waive any of those conditions (see "Amendment;
Waiver").
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of WPS
Resources and Wisconsin Fuel and Light relating to, among other things, the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions):
o the due organization, power and similar corporate matters with respect
to, each of Wisconsin Fuel and Light, WPS Resources and the
subsidiaries of WPS Resources;
o the capitalization of Wisconsin Fuel and Light, WPS Resources,
Wisconsin Public Service and WF&L Acquisition;
o the authorization, execution, delivery and enforceability of the
Merger Agreement by each party and the completion of the transactions
contemplated by the Merger Agreement;
o reports and other documents filed with the Securities and Exchange
Commission since January 1, 1997, from WPS Resources, and the accuracy
of the information contained therein;
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o the absence of any material untrue statements in this joint proxy
statement/prospectus;
o the absence of any conflict with each of Wisconsin Fuel and Light; WPS
Resources', Wisconsin Public Service's and WF&L Acquisition's
corporate charter and bylaws and compliance with applicable laws;
o governmental or regulatory authorizations, consents or approvals
required to complete the Merger;
o the absence of any material undisclosed liabilities by Wisconsin Fuel
and Light;
o the absence of certain changes or events having a material adverse
effect on the business, results of operations, condition (financial or
otherwise) or prospects of Wisconsin Fuel and Light or WPS Resources;
o the absence of any litigation having a material adverse effect on
Wisconsin Fuel and Light or WPS Resources;
o compliance with laws and regulations, a violation of which could have
a material adverse effect on Wisconsin Fuel and Light or WPS
Resources;
o Wisconsin Fuel and Light's employee benefit plans and compliance in
all material respects with statutes governing their administration;
o the disclosure of any acceleration of benefits under any Wisconsin
Fuel and Light employee benefit plans pursuant to the transactions
contemplated by the Merger Agreement;
o Wisconsin Fuel and Light's labor union contracts;
o material compliance by Wisconsin Fuel and Light with environmental
laws and the absence of environmental claims which would have a
material adverse effect on Wisconsin Fuel and Light;
o compliance by Wisconsin Fuel and Light with tax laws and regulations,
including the absence of tax delinquencies; and
o the absence of any brokerage, finders' or other fees associated with
the Merger payable to any broker, finder, investment banker or advisor
(other than fees payable to AA Finance Group and Emory Business
Valuation).
All representations, warranties and agreements in the Merger Agreement
(with certain exceptions) expire upon completion of the Merger.
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CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Wisconsin Fuel and Light has agreed that,
during the period from the date of the Merger Agreement until the effective time
of the Merger, except as expressly contemplated or permitted by the Merger
Agreement or as otherwise consented to in writing by WPS Resources, it will (and
will cause its subsidiary to), subject to certain exceptions specified therein,
among other things:
o carry on its business in the ordinary course consistent with prior
practice provided that Wisconsin Fuel and Light may dissolve its
subsidiary, WF&L Service, or with the prior approval of WPS Resources
sell the subsidiary or its assets to a third party;
o not declare or pay any dividends on or make other distributions in
respect of any of its capital stock, other than to such party or its
wholly-owned subsidiary and regular quarterly dividends to be paid on
Wisconsin Fuel and Light Common Stock not to exceed in any quarter the
dividends for the last quarter preceding the execution of the Merger
Agreement and regular quarterly dividends to be paid on Wisconsin Fuel
and Light Preferred Stock;
o not effect certain other changes in its capitalization other than
redeeming capital stock in accordance with the terms thereof;
o not issue or encumber any capital stock rights, warrants, options or
convertible or similar securities other than intercompany issuances;
o not amend its articles of incorporation, by-laws or regulations or
similar corporate documents;
o not engage in material acquisitions;
o not make any capital expenditures in excess of $100,000 in the
aggregate over the amounts budgeted by Wisconsin Fuel and Light for
capital expenditures;
o not sell, lease, encumber or otherwise dispose of material assets in
an aggregate amount equaling or exceeding $100,000, other than
dispositions and encumbrances in the ordinary course of business
consistent with past practice;
o not incur indebtedness (or guarantees thereof), other than short-term
indebtedness in the ordinary course of business consistent with prior
practice, long-term indebtedness not aggregating more than $100,000,
arrangements between Wisconsin Fuel and Light and its subsidiary, or
in connection with the refunding of existing indebtedness at a lower
cost of funds;
o not 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
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other contract, agreement, commitment, arrangement, plan or policy,
except for normal increases in the ordinary course of business
consistent with past practice that in the aggregate do not result in a
material increase in benefits or compensation expense to Wisconsin
Fuel and Light or its subsidiary;
o not make any material change in their accounting methods other than as
required by law or in accordance with generally accepted accounting
principles;
o not take any action that would adversely affect the status of the
Merger as a tax-free transaction;
o not enter into agreements with affiliates (other than wholly-owned
subsidiaries) other than on an arms-length basis;
o cooperate with WPS Resources, provide it with reasonable access to
Wisconsin Fuel and Light books and records and notify WPS Resources of
any significant changes;
o refrain from taking specified actions relating to certain tax matters;
o not discharge or satisfy any material claims, liabilities or
obligations, other than discharges in the ordinary course of business
or in accordance with their terms, of liabilities reflected in the
most recent consolidated financial statements of Wisconsin Fuel and
Light;
o except in the ordinary course of business, not change the status of
any of its material contracts or agreements or waive, release or
assign any material rights or claims; and
o maintain adequate insurance and use reasonable efforts to maintain all
existing governmental permits.
The Merger Agreement provides that if the parties are unable to obtain the
necessary statutory approvals which are necessary to effect the business
combination in the form contemplated by the Merger Agreement, and the adoption
of an alternative structure (that otherwise substantially preserves for WPS
Resources and Wisconsin Fuel and Light the economic benefits of the Merger would
result in such conditions being satisfied or waived), then the parties shall use
their respective best efforts to effect a business combination among themselves
by means of a mutually agreed upon structure other than the Merger that so
preserves such benefits.
NO SOLICITATION OF TRANSACTIONS
Wisconsin Fuel and Light has agreed that it will not, and will use its best
efforts to cause its subsidiary not to, permit any of its or their respective
officers, directors, employees, representatives or agents to, directly or
indirectly, initiate, solicit or take any action to facilitate the making of any
offer or proposal which constitutes or is reasonably likely to lead
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to participation in any business combination proposal (as hereinafter defined),
or, in the event of an unsolicited business combination proposal, except to the
extent required by their fiduciary duties under applicable law if so advised in
a written opinion of outside counsel, engage in negotiations or provide any
information or data to any person relating to any business combination proposal.
Wisconsin Fuel and Light will promptly notify WPS Resources in the event it
receives any inquiry, offer or proposal concerning a business combination
proposal including its terms and conditions and the identity of the party making
it; and will take reasonable steps to keep WPS Resources informed of the status
and details of such inquiry, offer or proposal and give WPS Resources advance
notice of any agreement to be entered into with or information to be supplied to
any person relating to any business combination proposal.
"Business combination proposal" means any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
Wisconsin Fuel and Light or any of its material subsidiaries, or any proposal or
offer to acquire in any manner, directly or indirectly, a substantial equity
interest in or a substantial portion of the assets of Wisconsin Fuel and Light
or its subsidiary other than pursuant to the transactions contemplated by the
Merger Agreement.
EMPLOYEE BENEFIT PLANS
Wisconsin Fuel and Light and its subsidiaries maintain a number of employee
benefit plans and compensation arrangements in which eligible employees of
Wisconsin Fuel and Light and its affiliates participate. Following the effective
time of the Merger, the Wisconsin Fuel and Light benefit plans will continue
until WPS Resources otherwise determines.
INDEMNIFICATION
The Merger Agreement provides that, to the extent, if any, not provided by
an existing right of indemnification or other agreement or policy, from and
after the effective time of the Merger, WPS Resources will, to the fullest
extent permitted by applicable law, indemnify, defend and hold harmless each
person who was at, or who had been at any time prior to, the date of the Merger
Agreement, or who becomes prior to the effective time of the Merger, an officer,
director or employee of Wisconsin Fuel and Light or its subsidiary against all
losses, expenses (including reasonable attorney's fees and expenses), claims,
damages or liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or omissions
occurring at or prior to the effective time of the Merger (and whether asserted
or claimed prior to, at or after the effective time) that are, in whole or in
part, based on or arising out of the fact that such person is or was a director,
officer or employee of Wisconsin Fuel and Light or its subsidiary, and all such
indemnified liabilities to the extent they are based on or arise out of or
pertain to the transactions contemplated by the Merger Agreement. In the event
of any such loss, expense, claim, damage or liability (whether or not arising
before the effective time of the Merger):
o WPS Resources will pay the reasonable fees and expenses of counsel
selected by the indemnified parties, which counsel will be reasonably
satisfactory to
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WPS Resources and otherwise advance to such indemnified parties upon
request reimbursement of documented expenses reasonably incurred,
o WPS Resources will cooperate in the defense of any such matter and
o Any determination required to be made with respect to whether an
indemnified party's conduct complies with the standards set forth
under Wisconsin law and the WPS Resources articles of incorporation or
by-laws will be made by independent counsel mutually acceptable to WPS
Resources and the indemnified party; provided, however, that WPS
Resources will not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld).
The Merger Agreement further provides that the indemnified parties as a group
may retain only one law firm with respect to each unrelated matter except to the
extent there is, in the opinion of counsel to an indemnified party, under
applicable standards of professional conduct, a conflict on any significant
issue between positions of such indemnified party and any other indemnified
party or indemnified parties.
In addition, the Merger Agreement requires that for a period of six years
after the effective time of the Merger, WPS Resources will cause to be
maintained in effect policies of directors' and officers' liability insurance
maintained by Wisconsin Fuel and Light for the benefit of those persons who were
covered by such policies as of the date of the Merger Agreement on terms no less
favorable than the terms of such insurance coverage or obtain new policies of
directors' and officers' liability insurance at least as favorable as the
coverage offered by the policies currently maintained by Wisconsin Fuel and
Light, provided that WPS Resources will not be required to expend in any year an
amount in excess of 200% of the annual aggregate premiums currently paid by
Wisconsin Fuel and Light for such insurance and, provided further that if the
annual premiums of such insurance coverage exceed such amount, WPS Resources
shall be obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the WPS Resources board of directors, for a cost not
exceeding such amount. Also, the Merger Agreement provides that to the fullest
extent allowed by law, from and after the effective time, all rights to
indemnification existing in favor of the employees, agents, directors and
officers of Wisconsin Fuel and Light and its subsidiary with respect to their
activities as such prior to the effective time of the Merger, as provided in
their respective articles of incorporation and bylaws in effect on the date of
the Merger Agreement or otherwise in effect on the date of the Merger Agreement
will survive the Merger and will continue in full force and effect for a period
of not less than six years from the effective time of the Merger.
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CERTAIN OTHER COVENANTS
WPS Resources and Wisconsin Fuel and Light have agreed to take certain
other actions with respect to the Merger, including:
o Each will use its best efforts to have the registration statement of
which this joint proxy statement/prospectus forms a part declared
effective as promptly as practicable after its filing with the
Securities and Exchange Commission;
o WPS Resources will take any required action under state securities
laws with respect to the issuance of WPS Resources common stock
pursuant to the Merger;
o Wisconsin Fuel and Light will take all action necessary to hold a
meeting of shareholders as promptly as practicable to approve the
Merger;
o Wisconsin Fuel and Light will give WPS Resources reasonable access to,
and permit reasonable inspection of, properties, books, contracts,
commitments and records of itself and its subsidiary;
o WPS Resources and Wisconsin Fuel and Light will use all commercially
reasonable efforts to obtain all necessary permits, consents,
approvals and authorizations necessary or advisable to complete the
Merger (including but not limited to preparing filings under the
Hart-Scott-Rodino Antitrust Improvements Act, Wisconsin public
utilities laws, and the Public Utility Holding Company Act of 1935);
o WPS Resources and Wisconsin Fuel and Light will cooperate with each
other in the development and distribution of news releases or other
public information disclosures with respect to the Merger Agreement or
any transactions contemplated thereby and will not issue any
announcement or statements with respect to the Merger Agreement
without the other party's consent; and
o WPS Resources and Wisconsin Fuel and Light will give prompt notice to
one another of any significant change in the other's business,
properties, assets, condition (financial or other), results of
operations or prospects and advise the other party of any event which
has, or insofar as reasonably can be foreseen, is reasonably likely to
result in, a material adverse effect on Wisconsin Fuel and Light (in
the case of Wisconsin Fuel and Light) or WPS Resources (in the case of
WPS Resources).
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TERMINATION; FEES AND EXPENSES
One or both of the parties may terminate the Merger Agreement at any time
prior to the closing date, whether before or after approval of the Merger
Agreement by the shareholders of Wisconsin Fuel and Light:
o by mutual consent of WPS Resources and Wisconsin Fuel and Light;
o by WPS Resources or Wisconsin Fuel and Light if any law or regulation
is adopted which prohibits the Merger; or if any court of competent
jurisdiction within the United States issues a final order enjoining
or prohibiting the Merger;
o if the Merger shall not have been completed by June 30, 2001, provided
the terminating party's failure to fulfill its obligations under the
Merger Agreement is not the reason that the Merger has not been
completed; provided that if on June 30, 2001 the required statutory
approvals required in connection with the Merger have not been
obtained, then the termination date shall be extended to December 31,
2001; or
o by WPS Resources or Wisconsin Fuel and Light if the approval by the
Wisconsin Fuel and Light shareholders of the Merger shall not have
been obtained at a duly held meeting of the shareholders.
Wisconsin Fuel and Light may terminate the Merger Agreement at any time
prior to the closing date, whether before or after approval of the Merger
Agreement by the shareholders of Wisconsin Fuel and Light, if
o any representations or warranties of WPS Resources in the Merger
Agreement are breached which, individually or in the aggregate, would
have a material adverse effect on WPS Resources and have not been
remedied within 20 days after receipt by WPS Resources of written
notice from Wisconsin Fuel and Light;
o failure by WPS Resources or Wisconsin Public Service or WF&L
Acquisition to comply with, in all material respects, their other
agreements and covenants in the Merger Agreement, which failure has
not been remedied within 20 days after receipt by WPS Resources of
written notice from Wisconsin Fuel and Light;
o the board of directors of WPS Resources withdraws or modifies it's
approval of the Merger Agreement or the Merger in any manner
materially adverse to Wisconsin Fuel and Light or shall fail to
reaffirm such adoption upon Wisconsin Fuel and Light's request or
resolves to withdraw or modify or fail to reaffirm such approval, or
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o upon two days' prior written notice to WPS Resources, if as a result
of a tender offer by a party other than WPS Resources or any written
offer or proposal with respect to a merger, sale of a material portion
of its assets or other business combination by a party other than WPS
Resources, the Wisconsin Fuel and Light board determines in good faith
(after negotiating with WPS Resources to make adjustments in the terms
and conditions of the Merger Agreement which would enable Wisconsin
Fuel and Light to proceed with the transactions contemplated by the
Merger Agreement and after being so advised by a written opinion of
outside counsel) that its fiduciary obligations under applicable law
required that such tender offer or other written offer or proposal be
accepted.
WPS Resources may terminate the Merger Agreement at any time prior to the
closing date, whether before or after approval of the Merger Agreement by the
shareholders of Wisconsin Fuel and Light, if
o any representations or warranties of Wisconsin Fuel and Light in the
Merger Agreement are breached which, individually or in the aggregate,
would have a material adverse effect on Wisconsin Fuel and Light, and
have not been remedied within 20 days after receipt by Wisconsin Fuel
and Light of written notice from WPS Resources;
o failure by Wisconsin Fuel and Light and/or its subsidiary to comply
with its covenants in the Merger Agreement with respect to dividends
and security issuances pending the Merger or the failure by Wisconsin
Fuel and Light or its subsidiary to comply with, in all material
respects, the other agreements and covenants in the Merger Agreement,
which failure has not been cured within 20 days after receipt by
Wisconsin Fuel and Light of written notice by WPS Resources;
o the Wisconsin Fuel and Light Board withdraws or modifies its adoption
and approval of the Merger in a manner materially adverse to WPS
Resources or shall fail to reaffirm such adoption or recommendation
upon WPS Resources' request; or
o the Wisconsin Fuel and Light Board adopts or recommends any business
combination involving Wisconsin Fuel and Light Company other than the
Merger or any tender offer for the shares of capital stock of
Wisconsin Fuel and Light in each case by or involving a party other
than WPS Resources.
If the Merger Agreement terminates as a result of
o a breach of any representations or warranties on the part of WPS
Resources which individually or in the aggregate have a material
adverse effect on WPS Resources, and such breach or breaches shall not
have been remedied within 20 days after receipt of notice by WPS
Resources;
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o failure by WPS Resources to perform or comply with, in all material
respects, its covenants or agreements under the Merger Agreement and
WPS Resources has not remedied such failure within 20 days after
receipt of notice by it;
o a breach of any representations or warranties on the part of Wisconsin
Fuel and Light which individually or in the aggregate have a material
adverse effect, and such breach or breaches shall not have been
remedied within 20 days after receipt of notice by Wisconsin Fuel and
Light; or
o a failure by Wisconsin Fuel and Light and of its subsidiary to perform
or comply with covenants with respect to dividends and security
issuances pending the Merger or failure of Wisconsin Fuel and Light
and/or its subsidiary to perform or comply with, in all material
respects, any of the other covenants or agreements under the Merger
Agreement and Wisconsin Fuel and Light has not remedied such failure
within 20 days after receipt of notice by it;
then the breaching party is obligated to pay promptly to the non-breaching party
in cash $1,500,000; provided, however, that if the Merger Agreement is
terminated as a result of a willful breach of the Merger Agreement, the
non-breaching party may pursue any other remedies without being limited to the
specified amount.
In addition, if the Merger Agreement terminates due to
o Wisconsin Fuel and Light's acceptance of a tender offer or business
combination offer or proposal;
o failure of Wisconsin Fuel and Light's shareholders to approve the
Merger in accordance with the Wisconsin Business Corporation Law or
o as a result of Wisconsin Fuel and Light's breach of its covenant to
take certain actions to secure shareholder approval as set forth in
the Merger Agreement
and at the time of termination or prior to the special meeting of Wisconsin Fuel
and Light's shareholders to consider and vote upon the Merger, there shall have
been a third-party tender offer for shares of, or a third-party offer or
proposal with respect to a business combination involving Wisconsin Fuel and
Light, which at the time of such termination or of the special meeting of
Wisconsin Fuel and Light's shareholders shall not have been rejected or
withdrawn and within 2 1/2 years of any such termination Wisconsin Fuel and
Light becomes a subsidiary or affiliate of such offeror or accepts a written
offer to complete or completes a business combination with such offeror or its
affiliate, then Wisconsin Fuel and Light Company will pay to WPS Resources a
termination fee of $1,500,000.
In the event one party fails to pay the other party the termination fees
due under the Merger Agreement, the defaulting party will pay the other party's
costs and expenses in
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connection with any action taken to collect payment, together with interest. In
all other cases, WPS Resources and Wisconsin Fuel and Light will each bear their
own expenses.
AMENDMENT; WAIVER
The Merger Agreement provides that the boards of directors of the parties
may amend it at any time before or after approval of the Merger by the
shareholders of Wisconsin Fuel and Light, provided that, after such approval, no
amendment may alter or change the amount or kind of shares, rights or the
treatment of Wisconsin Fuel and Light shareholders under the Merger Agreement or
alter or change the terms and conditions of the Merger Agreement if any of the
alterations or changes would alone or in the aggregate materially adversely
affect the rights of holders of WPS Resources and Wisconsin Fuel and Light
Common Stock. Any amendment of the Merger Agreement must be an instrument in
writing signed on behalf of each of WPS Resources and Wisconsin Fuel and Light.
At any time prior to the effective time of the Merger, the parties to the
Merger Agreement may
o extend the time for the performance of any of the obligations or other
acts of the other parties thereto;
o waive any inaccuracies in the representations and warranties contained
in the Merger Agreement or in any documents delivered pursuant to the
Merger Agreement; or
o waive compliance with any of the agreements or conditions contained in
the Merger Agreement, to the extent permitted by applicable law. Any
agreement on the part of a party to the Merger Agreement to any such
extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of that party.
PERSONNEL MATTERS
Subject to applicable collective bargaining agreements, WPS Resources has
agreed to offer employment opportunities to employees of Wisconsin Fuel and
Light and WF&L Service on terms and conditions consistent with the employment
opportunities offered to employees of WPS Resources or its subsidiaries. WPS
Resources will provide relocation assistance and benefits. WPS Resources has
also agreed, pursuant to the Merger Agreement, that to the extent that any
reductions in work force to be implemented by involuntary termination of
employment are deemed to be required, such reductions will be made on a fair and
equitable basis, in light of the circumstances and objectives to be achieved
giving appropriate consideration to previous work history, job experience and
qualifications, and treating all employees equally, without regard to whether
prior employment was with WPS Resources or any of its subsidiaries. WPS
Resources and Wisconsin Fuel and Light have agreed to consult with each other
with respect to the retention of personnel pending the effective time of the
Merger.
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PARTIES TO THE MERGER
WPS Resources, Wisconsin Public Service and WF&L Acquisition
WPS Resources is a holding company whose principal subsidiary is Wisconsin
Public Service, a regulated electric and gas utility. At June 30, 2000,
Wisconsin Public Service served 390,700 electric retail customers and 231,493
gas retail customers in an 11,000 square mile service territory in northeastern
Wisconsin and Upper Michigan. Additionally, Wisconsin Public Service provides
wholesale (full or partial requirements) electric service, either directly or
indirectly, to 12 municipal utilities, three Rural Electrification
Administration financed electric cooperatives, and a privately-held utility. WPS
Resources also owns Upper Peninsula Power Company an electric utility which
serves approximately 49,000 customers in two-thirds of Michigan's Upper
Peninsula. WPS Resources also owns two non-regulated subsidiaries, WPS Energy
Services, Inc. and WPS Power Development, Inc. WF&L Acquisition is a
wholly-owned subsidiary of WPS Resources organized for the specific purpose of
being the surviving corporation in the Merger if Wisconsin Public Service does
not obtain the required approval of its Preferred Shareholders to be a party to
the Merger.
For 1999 the principal subsidiaries of WPS Resources represented the
following percentages of its consolidated revenues and assets.
Consolidated Consolidated
Revenues Assets
1999 1999
---- ----
Wisconsin Public Service 65% 78%
Upper Peninsula Power 5% 7%
WPS Power Development 3% 11%
WPS Energy Services 27% 4%
Wisconsin Fuel and Light Company
Wisconsin Fuel and Light began with the incorporation of Manitowoc Gas
Company in 1907 selling manufactured gas. Natural gas was introduced in 1949,
and in 1950 Wisconsin Fuel and Light purchased the Wausau Gas Company. The
introduction of natural gas in plentiful supplies for industrial, commercial and
residential customers enabled Wisconsin Fuel and Light to expand rapidly. As of
June 30, 2000, Wisconsin Fuel and Light served approximately 49,700 customers
through more than 1,130 miles of mains in the Manitowoc and Wausau divisions,
with approximately two-thirds of the customer base in the Wausau division and
the headquarters functions located in Wausau. Winter heating loads due to the
northern climate of Wisconsin Fuel and Light's service area and a well
diversified commercial and industrial sales base give the utility an annual
through-put of over 18 million dekatherms. Wisconsin Fuel and Light has
approximately 118 employees and annual revenues of more than $47 million. In
1944, control of Wisconsin Fuel and Light was acquired by a group of
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investors and through the passage of time and periodic sales of stock to
employees, Wisconsin Fuel and Light now has approximately 150 shareholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
Results of Operations-Six Months Ended June 2000 Compared to Six Months
Ended June 1999
Earnings for the six months ended June 2000 were $1.34 million compared to
$1.11 million for the six months ended June 1999. Higher gas margins and lower
losses for Wisconsin Fuel & Light's non-regulated subsidiary offset warmer than
normal weather and higher depreciation charges for an overall increase in
earnings of $230,000. Diluted earnings per share were $1.33 for the six months
ended June 30, 2000 compared to $1.12 for the same period in 1999.
Gas margins increased $232,000 to $9.3 million in 2000. Margins, defined as
revenues less cost of gas sold, are a better indicator of comparative
performance than revenues because revenues are affected by changes in gas cost
which do not impact margin. Although weather was 2.9% warmer than 1999, higher
fixed charges collected from customers offset the effects of weather. The
increased fixed charges for the six months ended June 2000 were a result of an
increase in the overall number of customers and an increase in the amount of
fixed charges collected from large customers which were based on an election by
the customers of the maximum daily quantity of gas they will use during a twelve
month contract period.
Through October 1999, Wisconsin Fuel and Light operated under a purchase
gas adjustment clause (PGA) which allowed it to collect all of its cost for gas
purchased from its customers. Beginning in November 1999, the PGA was replaced
with a gas cost incentive mechanism (GCIM) which provides Wisconsin Fuel and
Light a limited opportunity for income or loss on its purchases of natural gas.
For the six months ended June 2000, Wisconsin Fuel and Light estimates it has
just reached the annual level of savings required on its purchases of natural
gas, to begin sharing future savings with shareholders and customers on a 50-50
basis. However, there has been no revenue recognized as a result of the GCIM
through June 2000.
Operation and maintenance expenses are slightly less than 1999 levels,
largely due to lower pension expense as a result of favorable returns on the
pension plan assets.
Depreciation expense is $131,000 above 1999's level of $1.3 million due to
higher depreciation rates and increased depreciable plant.
Wisconsin Fuel and Light's wholly owned non-regulated subsidiary WFL
Service Company, Inc., had a $79,000 after tax loss for the six months ended
June 2000 compared to a $250,000 after tax loss through June 1999. This decrease
in Service Company losses almost entirely explains the lower variation in Other
Income (Expense) between periods. Wisconsin Fuel and Light has just begun the
process of closing down Service Company. The closing should be completed before
the end of this year.
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Results of Operations - 1999 Compared to 1998
Earnings available to common shareholders in 1999 of $2,024,570 were more
than double the earnings in 1998 of $1,000,776. Diluted earnings per share
likewise rose to $2.03 in 1999 compared to $1.01 in 1998. The combination of
colder weather, reduced operation and maintenance expenses, and new rate design
all contributed to the improvement in profitability.
Beginning in 1999, Wisconsin Fuel and Light instituted a new rate design
which is designed to collect more of the Company's margin on a fixed customer
basis and less on a per therm volumetric basis. The new rates create a more
stable pattern of earnings for Wisconsin Fuel and Light which are less impacted
by the effects of weather than the previous rate design. Under the new rate
design, approximately two-thirds of Wisconsin Fuel and Light's margins are
collected on a fixed basis compared to one-third previously. Customers bills are
somewhat more level throughout the year and are less impacted by the effects of
weather.
Margins, defined as revenues less cost of gas sold, is a better indicator
of comparative performance than revenues because revenues are affected by
changes in gas cost which do not impact margin. Through October 1999, Wisconsin
Fuel and Light operated under a purchase gas adjustment clause (PGA) which
allowed it to collect all of its cost for gas purchased from its customers.
Beginning in November 1999, the PGA was replaced with a gas cost incentive
mechanism (GCIM) which provides Wisconsin Fuel and Light a limited opportunity
for income or loss on its purchases of natural gas. During 1999, there was no
revenue or loss recognized as a result of the GCIM.
The following table sets forth the margins and sales volumes for the years
ended December 31, 1999 , 1998, and 1997 and for the first six months for years
2000 and 1999.
<TABLE>
<CAPTION>
6 Months Ended Year Ended
-------------- ----------
June 2000 June 1999 1999 1998 1997
--------- --------- ---- ---- ----
Thousands of Dollars
--------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 26,444 $ 23,320 $ 43,833 $ 40,543 $ 50,887
Natural Gas Purchased 17,180 14,289 26,635 24,915 33,632
-------- -------- -------- -------- --------
Margin 9,264 9,031 17,198 15,628 17,255
Thousands of Therms
-------------------
Sales Volumes 47,096 49,060 79,782 74,541 88,533
Transportation Volumes 47,750 47,790 93,889 91,789 91,134
-------- -------- -------- -------- --------
Total Sales and Transportation 94,846 96,850 173,671 166,330 179,667
Heating Degree Days 4,297 4,427 7,216 6,511 7,830
% (Warmer) Colder Than 20-year Avg (9.8) (7.1) (9.9) (18.7) (2.2)
</TABLE>
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The increase in sales volumes in 1999 was primarily due to colder weather,
as measured by heating degree days, than in 1998. Weather was still 9.9% warmer
than the 20-year degree day average. Transportation volumes are much less
weather sensitive and the increase in volumes is largely due to more customers
purchasing their gas from another gas marketer rather than Wisconsin Fuel and
Light directly, but transporting those volumes over Wisconsin Fuel and Light's
distribution system. Wisconsin Fuel and Light's gas margins are unaffected by a
customer who switches from a sales customer rate to the corresponding
transportation customer rate.
Operation and maintenance expenses decreased 2.6% in 1999 compared to 1998.
A large portion of the decrease can be attributed to the elimination of $225,000
in amortization expense related to a deferred regulatory asset for uncollected
conservation expenditures which was approved in the new rate design order
effective in 1999.
Depreciation expense in 1999 increased by $121,000 from $2.5 million in
1998 due to increased investment in depreciable plant assets.
Taxes other than income decreased $144,000 in 1999 from $900,000 in 1998,
primarily due to a lower gross receipts tax. Wisconsin utilities pay a gross
receipts tax based on revenues in lieu of property taxes. This gross receipts
tax is based upon the previous year's operating revenues.
Wisconsin Fuel and Light formed a wholly owned non-regulated subsidiary,
WFL Service Company, Inc., in 1996. The Service Company is currently involved in
two main lines of business, the sales and servicing of gas furnaces and
appliances and performance of energy conservation programs for other utilities.
The Service Company has been unsuccessful in building its revenues to levels
which would result in profitability. The Service Company incurred after tax
losses of $313,128 and $243,413 in 1999 and 1998, respectively. The increase in
the Service Company losses along with an increase in charitable donations
resulted in an increase of $113,000 in after tax losses in other income
(expense) in 1999 compared to 1998.
With much higher pretax profits in 1999, the overall effective income tax
rate returned to a more normal level of 35.9% compared to 31.0% in 1998.
Results of Operations - 1998 Compared to 1997
Earnings available to common shareholders in 1998 of $1,000,776 was
$720,239 less than 1997 earnings. Diluted earnings per share likewise dropped
from $3.50 per share in 1997 compared to $2.03 in 1998. The loss can almost
totally be attributed to weather which was 16.5% warmer than in 1997 and 18.7%
warmer than the 20-year normal.
Therm sales volumes were almost 14 million less in 1998 compared to 1997.
This likewise reduced revenues over $10 million between periods, to $41 million
in 1998. Gas margins fell to $15.6 million in 1998 from $17.3 million in 1997.
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Earnings, however, were positively affected by operation expenses dropping
over $500,000 to $7.8 million in 1998. Most of the improvement came from lower
distribution expenses, pension, and post retirement medical benefit costs.
Wisconsin Fuel and Light was able to lower its distribution expenses $243,000 in
1999 through more efficiencies and less mapping conversion costs. Post
retirement benefit accrual was reduced $160,000 due to changes in estimates.
Pension expense decreased $135,000 due to more favorable returns on plan assets
when compared to expected returns.
Maintenance expenses were reduced $350,000 in 1998 from $1.65 million in
1997. Most of the decrease can be attributed to a $226,000 reduction in the
amortization expense of a regulatory asset for Wisconsin Fuel and Light's former
manufactured gas site plant. A portion of the amount deferred in prior years
became fully amortized in 1998.
Depreciation expenses increased $120,000 from $2.4 million in 1997 due to
increased depreciable plant.
Wisconsin Fuel and Light's wholly owned non-regulated subsidiary, WFL
Service Company, Inc., had after taxes losses of $243,413 in 1998 compared to
$52,184 in 1997. The increase in the Service Company losses largely explains the
$208,000 in after tax losses in other income (expense) in 1998 compared to 1997.
Overall total interest charges in 1998 was comparable to the level in 1997.
The reduction in interest expense on bonds was offset by increased interest
expense on short-term notes. Short-term notes were used to finance normal bond
sinking payments.
With much lower pretax profits in 1998, the overall effective income tax
rate dropped to a abnormal level of 31.0% compared to 35.6% in 1997.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). In June 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133." In June
2000, FASB issued Statement No. 138, "Accounting for Derivative Instruments and
Certain Hedging Activities." SFAS 133, as amended by SFAS 137 and SFAS 138,
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS 133 requires changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria is met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement and requires that a company must formally document, designate, and
assess the effectiveness of the transactions that receive hedge accounting.
SFAS 133, as amended, is effective for the fiscal year beginning after June
15, 2000. Wisconsin Fuel and Light has not yet completed its assessments of its
gas commodity contracts
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or determined the impact of adopting this statement on Wisconsin Fuel and
Light's financial statements. However, management believes that few, if any, of
its existing contracts will qualify as a derivative under SFAS 133. Therefore,
management does not believe that the adoption of Statement 133 will have a
material impact on Wisconsin Fuel and Light's financial statements.
During 1999, Wisconsin Fuel and Light adopted Statement of Position No.
98-1, (SOP 98-1) "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP No. 98-1 requires more of the cost of computer
software developed or obtained for internal use to be capitalized as an asset.
The impact of adopting this statement on Wisconsin Fuel and Light's 1999
financial statements was not significant.
Liquidity and Capital Resources
Wisconsin Fuel and Light's net cash generated from operating activities was
$4.6 million in 1999, $5.4 million in 1998, and $4.3 million in 1997. Due to the
seasonal nature of business, accounts receivable including unbilled revenues and
accounts payable are higher during the heating season months of October through
May as compared with summer months of June through September.
Wisconsin Fuel and Light has access to outside capital markets and has been
able to generate sufficient funds internally to meet its investment needs.
Wisconsin Fuel and Light's last external capital financing occurred in 1993 with
its $2 million Preferred Stock issuance.
Wisconsin Fuel and Light has issued 28,450 shares of stock as a result of
the exercise of Common Stock options by its key executives during 2000. There
are no remaining unexercised options. As part of the merger agreement with WPSR,
Wisconsin Fuel and Light is precluded from issuing any more stock options.
Investing Activities
Wisconsin Fuel and Light's major capital requirements are used to upgrade
the efficiency of the existing gas distribution system and expanding the system
to serve additional customers. During 1999, capital expenditures totaled $3.8
million compared to $3.4 million in 1998 and $3.5 million in 1997. Wisconsin
Fuel and Light's planned construction expenditures for plant additions for 2000
are estimated at $4.96 million. The larger than normal increase in the
construction budget in 2000 is a result of Wisconsin Fuel and Light planning to
replace plastic pipe over a 3 year period beginning in 2000.
Financing Activities
Capital expenditures and other cash requirements were financed by
internally generated funds supplemented by short-term borrowings. Wisconsin Fuel
and Light maintains an unsecured line of credit agreement to finance such short
term borrowings which expires August 31, 2001. At December 31, 1999, Wisconsin
Fuel and Light had a $10 million line of credit with $8.1 million in current
borrowings. Wisconsin Fuel and Light has first mortgage bonds in the amounts of
$7.4 million, $8.45 million, and $9.5 million at the end of 1999,
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1998, and 1997, respectively. Fixed maturities and sinking fund requirements
totaled $1.05 million in 1999, $1.08 million in 1998, and $1.07 million in 1997
and will be $1.05 million in 2000. Sinking fund payments have been financed
using short-term debt.
Wisconsin Fuel and Light paid cash dividends to common and preferred
shareholders in the amount of $1.42 million, $1.37 million, and $1.33 million in
1999, 1998, and 1997, respectively. The first mortgage bond indenture contains
restrictions on cash dividends and certain other payments. As of December 31,
1999, none of the retained earnings balance was subject to restriction.
In November 1999, Wisconsin Fuel and Light's Board of Directors declared a
two-for-one stock split. The remainder of Common Stock issued since 1997 has
been as a result of the exercise of stock options by key executives. Previous
year per share financial information has been restated to reflect the
two-for-one stock split.
Regulatory Matters
Wisconsin Fuel and Light is subject to the jurisdiction of the Public
Service Commission of Wisconsin.
The Company is subject to the provisions of Statement of Financial
Accounting Standards (SFAS No. 71) "Accounting for the Effects of Certain Types
of Regulation." Regulatory assets represent probable future revenue associated
with certain incurred costs which will be recovered from customers through the
ratemaking process. The regulatory liabilities represent costs previously
collected that are refundable in future rates.
Through October 1999, Wisconsin Fuel and Light's rate schedules permitted
the recovery of actual purchased gas costs incurred. The difference between
actual gas costs incurred and costs recovered through its rates is deferred as a
current asset or liability. The deferred balance is then collected or returned
to customers through rate adjustments.
Effective November 1, 1999, a new Gas Cost Incentive Mechanism (GCIM) was
approved by the Public Service Commission of Wisconsin. The GCIM provides an
opportunity for Wisconsin Fuel and Light to increase or decrease its revenues if
the actual commodity costs (as defined) differ from a benchmark cost with a 1.5%
- 4% band. Under the GCIM, Wisconsin Fuel and Light's commodity and capacity
release gas costs are compared to monthly benchmarks. At the end of the GCIM
year, any differences in actual gas costs and the monthly benchmark costs
between 1.5% and 4% of the total benchmark costs are shared with customers on a
50-50 basis. Gas costs incurred or cost savings outside this band are 100%
collected from or returned to customers.
Interstate pipelines have been allowed to pass through to local gas
distributors various costs incurred in the transition to FERC Order 636. On the
basis of past Public Service Commission of Wisconsin rulemaking, Wisconsin Fuel
and Light anticipates all such transition costs will be recoverable in future
rates.
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Quantitative and Qualitative Disclosure About Market Risks
Wisconsin Fuel and Light's market risk includes potential loss arising from
adverse changes in the price of its natural gas. Wisconsin Fuel and Light's
commodity and capacity release gas costs are subject to a Gas Cost Incentive
Mechanism (GCIM) where these costs are compared to monthly benchmarks. At the
end of the GCIM year, any differences in actual gas costs and the monthly
benchmark costs between 1.5% and 4% of the total benchmark costs are shared by
Wisconsin Fuel and Light with customers on a 50-50 basis. Gas costs incurred or
cost savings outside this band and all other Wisconsin Fuel and Light pipeline
or storage contract costs are 100% collected from or returned to customers.
Wisconsin Fuel and Light has not historically used derivative financial
instruments.
Environmental Matters
Wisconsin Fuel and Light has been working with an environmental consultant
and the Wisconsin Department of Natural Resources in the cleanup of a
manufactured gas site at its Manitowoc office location. Wisconsin Fuel and Light
has remediated the land portion of the site and is still investigating its
options related to the river portion of the site. Based upon past and current
treatment by the Public Service Commission of Wisconsin, Wisconsin Fuel and
Light expects to recover in rates all remediation costs incurred in connection
with this site.
Wisconsin Fuel and Light has also conducted a preliminary investigation of
the manufactured gas site at the Wausau location and has had correspondence with
the Wisconsin Department of Natural Resources with respect to that
investigation. No allegations of non-compliance have been made. Wisconsin Fuel
and Light expects any future costs incurred for environmental remediation to be
recoverable in future rates.
See Wisconsin Fuel and Light's "Notes to Financial Statements", note 6(c)
for more information regarding environmental matters.
DESCRIPTION OF WPS RESOURCES CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The aggregate number of shares of WPS Resources capital stock which WPS
Resources has authority to issue is One Hundred Million (100,000,000),
consisting of one class only, designated as "common stock," with a par value of
one dollar ($1.00) per share. As of August 31, 2000, 26,485,592 shares of WPS
Resources Common Stock were issued and outstanding.
WPS RESOURCES COMMON STOCK
Dividend and Liquidation Rights
All shares of WPS Resources Common Stock will participate equally with
respect to dividends and rank equally upon liquidation subject to the rights of
holders of any prior
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ranking stock which may be authorized and issued in the future. In the event of
liquidation, dissolution or winding up of WPS Resources, the owners of WPS
Resources Common Stock are entitled to receive pro rata the assets and funds of
WPS Resources remaining after satisfaction of all creditors of WPS Resources and
payment of all amounts which owners of prior ranking stock, if any, then
outstanding may be entitled to receive.
Voting Rights
Except as described below and subject to Section 180.1150 of the Wisconsin
Business Corporation Law (described under "Certain Statutory and Other
Provisions" below), every holder of WPS Resources Common Stock has one vote for
each share.
No shareholder of WPS Resources has cumulative voting rights which means
that the holders of shares entitled to exercise more than 50% of the voting
power of shares entitled to vote, represented in person or by proxy at a meeting
at which a quorum (a majority of the shares entitled to vote) is represented,
have the power to elect all of the directors to be elected. The WPS Resources
articles of incorporation and by-laws divide the WPS Resources board of
directors into three classes of three directors each. The shareholders elect one
class each year for a three-year term.
Article 5 of WPS Resources' articles of incorporation provide that, subject
to the exception discussed below, shareholders may remove a director only for
cause by the affirmative vote of shareholders possessing a majority of the
voting power of the then outstanding shares of voting stock. As defined in
Article 5, "cause" exists only if a court of competent jurisdiction has
convicted the director of a felony and such conviction is no longer subject to
direct appeal or there has been an adjudication that the director is liable for
negligence or misconduct in the performance of his duty to WPS Resources in a
matter which has a materially adverse effect on the business of WPS Resources,
and such adjudication is no longer subject to direct appeal. Article 5 also
provides that the shareholders may remove a director without cause when the
directors recommend the removal by the "requisite vote" of the directors and the
shareholders approve the removal by the affirmative vote of shareholders
possessing a majority of the voting power of the then outstanding shares of
voting stock. Article 5 defines the term "requisite vote" as the affirmative
vote of at least two-thirds of the directors then in office plus one director.
Unless there is "cause" for removal or the directors recommend removal by the
requisite vote of the directors, shareholders may not remove a director from
office even if shareholders possessing a majority of the voting power favor such
action. Additionally, pursuant to Article 5, the remaining members of the board
by a majority vote may fill vacancies on the WPS Resources board, including
those resulting from the removal of a director for the unexpired portion of the
director's term.
Article 5 of WPS Resources' articles of incorporation provides that the
amendment, alteration, change or repeal of those sections of article III of WPS
Resources' by-laws which set forth the general powers, number, qualifications
and classification of directors requires the affirmative vote of shareholders
possessing at least 75% of the voting power of the then outstanding shares of
WPS Resources Common Stock generally possessing voting rights in the election of
directors or the requisite vote of the directors. Article 5 of WPS Resources'
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articles of incorporation requires the affirmative vote of shareholders
possessing at least 75% of the voting power of the then outstanding shares of
WPS Resources Common Stock generally possessing voting rights in the election of
directors for the amendment, alteration or repeal of Article 5.
Preemptive Rights
No holder of WPS Resources common stock has any preemptive or subscription
rights.
Conversion Rights, Redemption Provisions and Sinking Fund Provisions
WPS Resources Common Stock is not convertible, is not redeemable and has no
sinking fund.
Liability to Further Calls or to Assessment
The shares of WPS Resources Common Stock issued pursuant to the Merger will
be fully-paid and non-assessable by WPS Resources, except for certain statutory
personal liability which may be imposed upon shareholders under Section
180.0622(2)(b) of the Wisconsin Business Corporation Law. The substantially
identical predecessor to such statute has been judicially interpreted by a
Wisconsin trial court to mean that shareholders of a Wisconsin corporation are
subject to personal liability, up to an amount equal to the consideration for
which their shares were issued (instead of the aggregate par value in the case
of shares with par value, as the statute states), for all debts owing to
employees of the corporation for services performed for the corporation, but not
exceeding six months service in any one case. The provisions of this section of
the Wisconsin Business Corporation Law are applicable to the shares of capital
stock of WPS Resources and Wisconsin Fuel and Light.
CERTAIN STATUTORY PROVISIONS
Sections 180.1140 to 180.1144 of the Wisconsin Business Corporation Law
(the "Wisconsin Business Combination Statute") regulate a broad range of
"business combinations between a Wisconsin corporation and an "interested
stockholder." The Wisconsin Business Combination Statute defines a "business
combination" to include a merger or a share exchange, sale, lease, exchange,
mortgage, pledge, transfer, or other disposition of assets equal to at least 5%
of the market value of the stock or assets of a corporation or 10% of its
earning power, or issuance of stock or rights to purchase stock with a market
value equal to at least 5% of the outstanding stock, adoption of a plan of
liquidation, and certain other transactions involving an "interested
stockholder." The statute defines an "interested stockholder" as a person who
beneficially owns, directly or indirectly, 10% of the voting power of the
outstanding voting stock of a corporation or who is an affiliate or associate of
the corporation and beneficially owned 10% of the voting power of the then
outstanding voting stock within the last three years. The Wisconsin Business
Combination Statute prohibits a corporation from engaging in a business
combination (other than a business combination of a type specifically excluded
from the coverage of the statue) with an interested stockholder for a period of
three years following the date such person becomes an interested stockholder,
unless the board of directors approved the business combination or the
acquisition of the stock that
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resulted in a person becoming an interested stockholder before such acquisition.
Business combinations after the three-year period following the stock
acquisition date are permitted only if (a) the board of directors approved the
acquisition of the stock prior to the acquisition date, (b) the business
combination is approved by a majority of the outstanding voting stock not
beneficially owned by the interested stockholder, or (c) the consideration which
the shareholders are to receive meets certain requirements of the Wisconsin
Business Combination Statute with respect to form and amount.
In addition, the Wisconsin Business Corporation Law provides that certain
mergers, share exchanges or sales, leases, exchanges or other dispositions of
assets in a transaction involving a "significant shareholder" are subject to a
supermajority vote of shareholders, in addition to any approval otherwise
required. The statute defines a "significant shareholder" as a person who
beneficially owns, directly or indirectly, 10% or more of the voting stock of a
corporation or an affiliate of the corporation which beneficially owned,
directly or indirectly, 10% or more of the voting stock of a corporation within
the last two years. The statute requires approval of certain transactions with a
significant shareholder to be by 80% of the voting power of the corporation's
stock and at least two-thirds of the voting power of the corporation's stock not
beneficially held by the significant shareholder who is a party to the relevant
transaction or any of its affiliates or associates, in each case voting together
as a single group, unless the following fair price standards have been met: (a)
the aggregate value of the per share consideration is equal to the higher of
o the highest price paid for any common shares of the corporation by the
significant shareholder in the transaction in which it became a
significant shareholder or within two years before the date of the
transaction,
o the market value of the corporation's shares on the date of
commencement of any tender offer by the significant shareholder, the
date on which the person became a significant shareholder or the date
of the first public announcement of the proposed transaction,
whichever is higher, or
o the highest liquidation or dissolution distribution to which holders
of the shares would be entitled,
and (b) the significant shareholder offers either cash, or the form of
consideration used by the significant shareholder to acquire the largest number
of shares.
Section 180.1150 of the Wisconsin Business Corporation Law limits the
voting power of shares, including shares issuable upon conversion of securities
or exercise of options or warrants of an "issuing public corporation" held by
any person or persons acting as a group in excess of 20% of the voting power in
the election of directors to 10% of the full voting power of those shares. This
restriction does not apply to shares acquired directly from the issuing public
corporation in certain specified transactions, or in a transaction in which the
corporation's shareholders have approved restoration of the full voting power of
the otherwise restricted shares.
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Finally, Section 180.1134 (the "Wisconsin Defensive Action Restrictions")
of the Wisconsin Business Corporation Law requires, in addition to the vote
otherwise required by law or the articles of incorporation of an issuing public
corporation, the approval of the holders of a majority of the shares entitled to
vote before such corporation can take certain action while a takeover offer is
being made or after a takeover offer has been publicly announced and before it
is concluded. The Wisconsin Defensive Action Restrictions require shareholder
approval for the corporation to (a) acquire more than 5% of the outstanding
voting shares at a price above the market price from any individual or
organization that owns more than 3% of the outstanding voting shares and has
held such shares for less than two years, unless a similar offer is made to
acquire all voting shares or (b) sell or option assets of the corporation which
amount to at least 10% of the market value of the corporation, unless the
corporation has at least three independent directors or a majority of the
independent directors vote not to have this provision apply to the corporation.
The restrictions described in clause (a) above may have the effect of deterring
a shareholder from acquiring shares of WPS Resources with the goal of seeking to
have WPS Resources repurchase such shares at a premium over the market price.
The above sections of the Wisconsin Business Corporation Law and certain
provisions of the WPS Resources articles of incorporation and by-laws, could
have the effect, among others, of discouraging takeover proposals for WPS
Resources or impeding a business combination between WPS Resources and a major
shareholder of WPS Resources.
Section 196.795 of the Wisconsin Statutes (the "Wisconsin Public Utility
Holding Company Act") states that no person may hold or acquire directly or
indirectly more than 10% of the outstanding voting securities of a public
utility holding company with the unconditional power to vote such securities
unless the Public Service Commission of Wisconsin determines, after
investigation and an opportunity for hearing, that such holding or acquisition
is in the best interests of utility customers, investors and the public. The
Wisconsin Public Utility Holding Company Act also requires that any direct or
indirect holding company of a Wisconsin public utility be a corporation
organized under the laws of Wisconsin.
COMMON STOCK PURCHASE RIGHTS
On December 12, 1996, the board of directors of WPS Resources approved the
issuance to shareholders as of December 16, 1996, of a dividend of one right for
each outstanding share of WPS Resources Common Stock. The rights are not
presently exercisable, but ten days after a person or group acquires 15% or more
of WPS Resources Common Stock or ten business days (subject to extension) after
a person or group announces a tender offer to acquire at least 15% of the WPS
Resources Common Stock, the rights will become exercisable. The rights will
entitle each holder of Common Stock of WPS Resources to purchase one share of
authorized but unissued Common Stock of WPS Resources for each right. The
exercise price of each right is currently $85. Upon the acquisition by any
person or group of 15% or more of the Common Stock of WPS Resources, each right,
other than rights held by an acquiring party, will entitle the holder to
purchase, at the exercise price, Common Stock of WPS Resources having a market
value of two times the exercise price. The rights agreement excludes from its
effects the inadvertent acquisition of 15% or more of WPS
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Resources Common Stock, provided there is prompt divestment to less than 15%.
The rights may be redeemed or may under certain circumstances, be exchanged for
shares of Common Stock of WPS Resources, all as provided and subject to the
limitations set forth in the agreement setting forth the terms of the rights;
otherwise, such rights expire on December 11, 2006. None of the shareholders or
percentages of outstanding shares reported in this joint proxy
statement/prospectus reflect the rights or shares of Common Stock which may be
purchased upon the exercise of the rights. See also "COMPARISON OF RIGHTS OF
SHAREHOLDERS OF WPS RESOURCES AND WISCONSIN FUEL AND LIGHT -- WPS RIGHTS PLAN."
RESTRICTION ON DIVIDENDS PAYABLE BY WISCONSIN PUBLIC SERVICE
AND UPPER PENINSULA POWER TO WPS RESOURCES; LIMITATIONS ON
CAPITAL STRUCTURE
Wisconsin Public Service is restricted by an order of the Public Service
Commission of Wisconsin to paying normal dividends on Common Stock of no more
than 109% of the previous year's Common Stock dividend. Wisconsin Public Service
must maintain a capital structure (i.e., the percentages by which each of Common
Stock, Preferred Stock and debt constitute the total capital invested in a
utility) which has a common equity range of 50% to 55%. Each of these
limitations may be modified by a future order of the Public Service Commission
of Wisconsin. Upper Peninsula Power is limited by the trust indenture securing
its first mortgages with respect to dividends and stock purchases to an
aggregate amount of $5,455,000 as of December 31, 1999.
COMPARISON OF RIGHTS OF HOLDERS OF COMMON STOCK OF
WPS RESOURCES AND WISCONSIN FUEL AND LIGHT
GENERAL
Upon consummation of the Merger, the shareholders of Wisconsin Fuel and
Light will become shareholders of WPS Resources, and their rights will be
governed by the WPS Resources articles of incorporation and the WPS Resources
bylaws which differ in certain material respects from the Wisconsin Fuel and
Light articles of incorporation and Wisconsin Fuel and Light bylaws. As
shareholders of WPS Resources, the rights of former Wisconsin Fuel and Light
shareholders will be governed by those provisions of the Wisconsin Business
Corporation Law described under "DESCRIPTION OF WPS RESOURCES CAPITAL STOCK -
CERTAIN STATUTORY PROVISIONS" which are not presently applicable to Wisconsin
Fuel and Light. In addition, Section 196.795 of the Wisconsin Statutes is
applicable to WPS Resources and its subsidiaries but is not applicable to
Wisconsin Fuel and Light. Described below are certain significant differences
between the current rights of Wisconsin Fuel and Light shareholders and the
rights of WPS Resources shareholders following consummation of the Merger.
The following discussion is not complete and is qualified in its entirety
by reference to the WPS Resources articles of incorporation and bylaws, each of
which is available for inspection at the principal executive offices of WPS
Resources, and the Wisconsin Fuel and
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Light articles of incorporation and bylaws, each of which is available for
inspection at the principal executive offices of Wisconsin Fuel and Light, and
the Wisconsin Business Corporation Law.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Wisconsin Fuel and Light currently consists
of 2,000,000 shares of Wisconsin Fuel and Light Common Stock, $10 par value (of
which 1,019,620 shares are issued and outstanding) and 50,000 shares of
preferred stock, $100 par value (of which 20,000 shares are issued and
outstanding). The authorized capital stock of WPS Resources currently consists
of 100,000,000 shares of WPS Resources Common Stock of which 26,485,592 shares
were issued and outstanding as of August 31, 2000
VOTING RIGHTS
Both the WPS Resources articles of incorporation and the Wisconsin Fuel and
Light articles of incorporation grant the holders of common stock the exclusive
right to vote for the election of directors and for all other purposes, except
as may be otherwise provided in the articles of incorporation or by applicable
law. Under the Wisconsin Business Corporation Law, shareholders are entitled to
cumulate their voting power only if a corporation's articles of incorporation
expressly grant the right. Neither the WPS Resources articles of incorporation
nor the Wisconsin Fuel and Light articles of incorporation grant cumulative
voting rights to shareholders.
PREEMPTIVE RIGHTS
Holders of Wisconsin Fuel and Light presently have preemptive rights to
purchase additional shares of its common stock to preserve their relative
ownership interest in Wisconsin Fuel and Light. Holders of WPS Resources common
stock do not have preemptive rights.
BOARD OF DIRECTORS
The Wisconsin Fuel and Light by-laws provide that the number of directors
of Wisconsin Fuel and Light shall be seven, exclusive of directors emeritus.
The WPS Resources by-laws provide that the number of directors of WPS
Resources shall be nine (9).
The WPS Resources by-laws provide that the board of directors will be
divided into three classes, and each class will generally serve for a term of
three (3) years. The term of one class of directors expires annually, so it is
only possible to elect one class of the board of directors in any one year.
Wisconsin Fuel and Light's board of directors is not classified.
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REMOVAL OF DIRECTORS
The Wisconsin Corporation Business Law provides for the removal of
directors by the shareholders with or without cause, unless the articles of
incorporation provide that directors may be removed only for cause. The
Wisconsin Fuel and Light articles of incorporation do not address the removal of
directors. The Wisconsin Fuel and Light bylaws provide that a director may be
removed by the vote of a majority of the shares entitled to vote for the
election of the director. The WPS Resources articles of incorporation generally
provide that shareholders may remove any director from office only for cause and
only by the affirmative vote of the holders of at least a majority of the voting
power of the then outstanding shares of all classes of stock of the corporation
generally possessing voting rights in the election for directors, considered for
this purpose as one class; provided, however, that if the board of directors by
a resolution adopted by the requisite vote recommends removal of a director, the
shareholders may remove the director by the foregoing vote without cause. Under
the Wisconsin Business Corporation Law, shareholders may remove a director only
at a special meeting called expressly for that purpose.
VACANCIES ON THE BOARD OF DIRECTORS
The Wisconsin Business Corporation Law provides that unless the articles of
incorporation provide otherwise, the shareholders, the board of directors, or if
the directors remaining in office constitute fewer than a quorum of the board,
the directors, by the affirmative vote of a majority of all directors remaining
in office, may fill a vacancy on the board of directors. A vacancy that will
occur at a specific later date, because of a resignation effective at a later
date may be filled before the vacancy occurs, but the new directors may not take
office until the vacancy occurs.
The Wisconsin Business Corporation Law further provides that if the vacant
office was held by a director elected by a voting group of shareholders, only
the holders of shares of that voting group may vote to fill the vacancy if it is
filled by the shareholders, and only the remaining directors elected by that
voting group may vote to fill the vacancy if it is filled by the directors.
The Wisconsin Fuel and Light Company articles of incorporation do not
address the filling of vacancies on the board of directors. The Wisconsin Fuel
and Light bylaws provide that vacancies in the board of directors shall be
filled by the remaining directors. Any director so elected shall serve until his
successor is elected by the shareholders at the next annual meeting of the
shareholders or at any special meeting called for that purpose. The Wisconsin
Fuel and Light bylaws provide that vacancies in the board of directors may be
filled by the remaining directors. Any director so elected shall serve until his
successor is elected by the shareholders at the next annual election of
directors. The WPS Resources articles of incorporation provide that the board of
directors may fill any vacancy occurring in the board of directors, including a
vacancy caused by an increase in the number of directors, by the affirmative
vote of a majority of directors then in office, though less than a quorum of the
board of directors, or by a sole remaining director. Any director so elected to
fill a vacancy
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shall hold office until the next election of the class to which such director is
elected and until a successor shall have been elected and qualified.
LIMITATION OF LIABILITY; INDEMNIFICATION
The WPS Resources Bylaws provide that WPS Resources shall indemnify and
hold harmless any person who is or was a party or threatened to be made a party
to any action by reason of his status as a director or officer of WPS Resources
or an affiliate (an "executive") and/or by reason of acts performed in the
course of the executive's duties to WPS Resources and/or an affiliate against
liabilities and reasonable expenses incurred by or on behalf of such executive
in connection with any action to the extent such executive has been successful
on the merits or otherwise in connection with such action. WPS Resources will
not indemnify an executive if the action was initiated or brought voluntarily by
the executive, subject to certain exceptions enumerated in the WPS Resources
Bylaws. WPS Resources is required to pay any expenses incurred by a director or
officer in defending such an action, in advance of the final disposition of such
action, following the satisfaction of certain conditions.
The Wisconsin Fuel and Light bylaws obligate the corporation to indemnify a
director or officer for all reasonable expenses incurred in a proceeding, to the
extent he or she has been successful on the merits or otherwise in the defense
of a proceeding, if the director or officer was a party to the proceeding
because he or she is a director or officer of the corporation, or serves as a
director or officer of another entity at the corporation's request.
In addition, the Wisconsin Fuel and Light bylaws provide that the
corporation shall indemnify an officer or director against liability incurred in
a proceeding in which the officer or director was a party, or threatened to be
made a party, because he or she is a director or officer of the corporation, or
serves as a director or officer of another entity at the corporation's request,
unless the officer or director incurs liability because of his or her breach of
or failure to perform a duty owed to the corporation, and the breach or failure
to perform constitutes: a willful failure to deal fairly with the corporation or
its stockholders on a matter in which the director officer has a material
conflict of interest, a violation of criminal law (unless the officer or
director had reasonable cause to believe his or her conduct was lawful or no
reasonable basis to believe his or her conduct was unlawful), a transaction from
which the director or officer derived an improper personal profit, or willful
misconduct.
The Wisconsin Fuel and Light bylaws also obligate the corporation to pay or
reimburse the reasonable expenses of a director or officer who is a party to a
proceeding, subject to the director's or officer's written undertaking to repay
the corporation if it is determined that the corporation is not required to
indemnify the director or officer against liability incurred in the proceeding.
The rights to indemnification and payment of expenses under the Wisconsin
Fuel and Light bylaws apply to directors emeritus, and continue to apply after a
person ceases to be an officer or director of the corporation.
The Wisconsin Fuel and Light bylaws further provide that the corporation
may indemnify and allow expenses of employees and agents who are not officers or
directors, to
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the extent of indemnification and allowance of expenses provided to officers and
directors under the bylaws.
AMENDMENTS TO ARTICLES OF INCORPORATION
The Wisconsin Business Corporation Law generally requires the approval of a
majority of the votes entitled to be cast on the amendment by each voting group
with respect to which the amendment would create dissenters' rights and a
majority of votes of every other voting group entitled to vote on the amendment,
unless the articles of incorporation, bylaws adopted under authority granted in
the articles of incorporation or the Wisconsin Business Corporation Law require
a greater proportion. Because Wisconsin Fuel and Light Common Stock was
authorized prior to January 1, 1991, the Wisconsin Business Corporation Law
provides that approval of amendments to the corporation's articles of
incorporation requires the affirmative vote of the majority of the shares
entitled to vote on the proposal.
The WPS Resources articles of incorporation provide that certain provisions
with respect to the powers, removal and the filling of vacancies on the board of
directors may only be amended, altered, changed or repealed by the affirmative
vote of shareholders possessing at least three-fourths of the voting power of
the then outstanding shares of all classes of stock of the corporation generally
possessing voting rights in elections for directors, considered for this purpose
as one class.
AMENDMENTS TO BYLAWS
The Wisconsin Fuel and Light articles of incorporation state that the
bylaws may be amended by a majority vote of the shareholders or by the board of
directors, but that the board of directors may not amend any bylaws adopted by
the shareholders without the authorization of the shareholders. Any bylaws
adopted by the board of directors shall be subject to amendment or repeal by a
majority vote of the shareholders, as well as by the board of directors.
The WPS Resources bylaws provide that the WPS Resources board of directors
shall have authority to adopt, amend, or repeal the bylaws upon affirmative vote
of a majority of the total number of directors at a meeting of the board, the
notice of which shall have included notice of the proposed amendment; but the
board of directors shall have no power to amend any bylaw or to reinstate any
bylaw repealed by the shareholders unless the shareholders confer such authority
upon the board of directors. The WPS Resources bylaws further provide that by
the affirmative vote of a majority of shareholders entitled to vote thereon, the
shareholders have power to adopt, amend, or repeal any of the WPS Resources
bylaws, at any regular or special meeting of the shareholders, provided,
however, that the holders of at least 5% of the voting stock or the board of
directors include in the notice of such regular or special meetings a statement
of the nature of any amendment that is proposed for the consideration of the
shareholders.
The WPS Resources articles of incorporation further limit the authority of
the board of directors to amend certain bylaws covering the power, number, term
and qualification of the members of the Board. Specifically, the WPS Resources
articles of incorporation provide that
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any amendment alteration, change or repeal of these bylaws must have the
affirmative vote of shareholders possessing at least three-fourths of the voting
power of the then outstanding shares of all classes generally possessing voting
rights in elections for directors, considered for this purpose as one class;
provided, however, that the board of directors, by a resolution adopted by the
affirmative vote of at least two-thirds of the directors then in office plus one
director, may amend, alter, change or repeal such bylaws without the vote of
shareholders.
CERTAIN OTHER SUPERMAJORITY VOTING PROVISIONS
In addition to the supermajority voting provisions previously described,
the WPS Resources articles of incorporation also contain certain other
supermajority voting provisions requiring the affirmative vote of not less than
three-fourths of the voting power of the then outstanding shares of all classes
possessing voting rights in election for directors to effect any change,
amendment, alteration or repeal of the provisions of article 5 of the WPS
Resources articles of incorporation or article III, sections 1, 2, 3 and 4 of
the WPS Resources bylaws relating to the general powers, number and
classification of directors; provided that the board of directors may make such
change, amendment, alteration or repeal of article III, sections 1, 2, 3 and 4
with the affirmative vote of at least two-thirds of the directors then in office
plus one director, without the vote of shareholders.
Except as discussed above, the Wisconsin Fuel and Light bylaws do not
contain similar supermajority voting provisions. However, because Wisconsin Fuel
and Light's common stock was authorized prior to January 1, 1991, the Wisconsin
Business Corporation Law provides that approval of a plan of merger or share
exchange, a plan to sell all or substantially all of the corporation's property
other than in the ordinary course of business, or a plan of dissolution of the
corporation or the revocation of a plan of dissolution, requires the affirmative
vote of two-thirds (2/3) of the shares entitled to vote on the proposal.
RIGHTS PLAN
On December 12, 1996, WPS Resources declared a dividend of one common share
purchase right (a "Right") for each outstanding share of common stock, $1.00 par
value (the "Common Shares"), of WPS Resources which dividend was paid on
December 16, 1996 to the shareholders of record on that date. Each Right
entitles the registered holder to purchase from WPS Resources one Common Share
of WPS Resources at a price of $85 per Common Share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between WPS Resources and Firstar
Trust Company (succeeded by Firstar Bank, N.A.), as Rights Agent (the "Rights
Agent").
Until the earlier to occur of 10 days following a public announcement that
a person or group of affiliated or associated persons (other than WPS Resources,
a subsidiary of WPS Resources or of an employee benefit plan of WPS Resources or
a subsidiary) (an "Acquiring Person") has acquired beneficial ownership of 15%
or more of the outstanding Common Shares (the "Shares Acquisition Date") or 10
business days (or such later date as may be determined by action of WPS
Resources' board of directors prior to such time as any person
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becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the completion of which
would result in the beneficial ownership by a person or group (other than WPS
Resources, a subsidiary of WPS Resources or an employee benefit plan of WPS
Resources or of a subsidiary) of 15% or more of such outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of December 16, 1996, by such Common Share certificate. Any
person or group of affiliates or associated persons who, at the close of
business on December 12, 1996, was the beneficial owner of at least 3,584,545
Common Shares (which number of shares constituted 15% of the number of Common
Shares outstanding on such date) will not be deemed an "Acquiring Person" unless
such person or group of affiliated or associated persons acquires beneficial
ownership of additional Common Shares at any time that such person or group of
affiliated or associated persons is or thereby becomes the beneficial owner of
15% or more of the Common Shares then outstanding.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after December 16, 1996, upon transfer or new issuance of
Common Shares, will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares,
outstanding as of December 16, 1996, even without such notation, will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on December 11, 2006 (the "Final Expiration Date"), unless the Rights are
earlier redeemed or exchanged by WPS Resources, in each case as described below.
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution
o in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Shares,
o upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price, or
securities convertible into preferred shares with a conversion price,
less than the then current market price of the Common Shares or
o upon the distribution to holders of the Common Shares of evidences of
indebtedness or assets (excluding regular quarterly cash dividends or
dividends
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payable in Common Shares) or of subscription rights or warrants (other
than those referred to above).
In the event that any person becomes an Acquiring Person (a "Flip-In
Event"), each holder of a Right (other than the Acquiring Person) will
thereafter have the right to receive upon exercise that number of Common Shares
(or, in certain circumstances cash, property or other securities of WPS
Resources or a reduction in the Purchase Price) having a market value of two
times the then current Purchase Price. Notwithstanding any of the foregoing,
following the occurrence of a Flip-In Event all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, or subsequently
become beneficially owned by an Acquiring Person, related persons and
transferees will be null and void. For example, if at the time of such
transaction the Common Shares were trading at $34 per share and the exercise
price of the Rights at such time were $85 per Right, each Right would thereafter
be exercisable at $85 for five Common Shares (i.e., the number of shares that
could be purchased in the open market for $170, or two times the exercise price
of the Rights).
In the event that, at any time following the Shares Acquisition Date, (i)
WPS Resources is acquired in a merger or other business combination transaction
or (ii) 50% or more of its consolidated assets or earning power are sold (the
events described in clauses (i) and (ii) are herein referred to as "Flip-Over
Events"), proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the then current Purchase Price. For example, if at the time of such
transaction the acquiring company's common stock were trading at $40 per share
and the exercise price of the Rights at such time were $85 per Right, each Right
would thereafter be exercisable at $85 for 4.25 shares (i.e., the number of
shares that could be purchased for $170 in the open market, or two times the
exercise price of the Rights) of the acquiring company's common stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional Common Shares will be issued. In lieu thereof,
an adjustment in cash will be made based on the market price of the Common
Shares on the last trading day prior to the date of exercise.
The Purchase Price is payable by certified check, cashier's check, bank
draft or money order or, if so provided by WPS Resources, the Purchase Price
following the occurrence of a Flip-In Event and until the first occurrence of a
Flip-Over Event may be paid in Common Shares having an equivalent value.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by any Acquiring Person of 50% or more of the outstanding Common
Shares, the board of directors of WPS Resources may exchange the Rights (other
than Rights owned by any Acquiring Person which have become void), in whole or
in part, at an exchange ratio of one Common Share, (or of a share of a class or
series of preferred stock of WPS Resources having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
-97-
<PAGE>
At any time prior to a person becoming an Acquiring Person, the board of
directors of WPS Resources may redeem the Rights in whole, but not in part, at a
price of $.001 per Right (the "Redemption Price"). The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the board of directors in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
Other than provisions relating to the Redemption Price or Final Expiration
Date, the terms of the Rights may be amended by the board of directors of WPS
Resources without the consent of the holders of the Rights, including an
amendment to lower the threshold for exercisability of the Rights from 15% to
not less than 10%, with appropriate exceptions for any person then beneficially
owning a percentage of the number of Common Shares then outstanding equal to or
in excess of the new threshold, except that from and after the Distribution Date
no such amendment may adversely affect the interests of the holders of the
Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of WPS Resources, including, without limitation, the
right to vote or to receive dividends. While distribution of the Rights will not
constitute a taxable event to the shareholders or WPS Resources, the
shareholders may, depending on the circumstances, recognize taxable income in
the event that the Rights become exercisable for Common Shares (or other
consideration) of WPS Resources or for common stock of the acquiring company, as
set forth above.
As of December 12, 1996, there were 23,896,962 Common Shares issued and
outstanding. Each outstanding Common Share on December 16, 1996 received one
Right. As long as the Rights are attached to the Common Shares, WPS Resources
will issue one Right for each Common Share which becomes outstanding between
December 16, 1996 and the Distribution Date so that all such shares will have
attached Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire WPS Resources
without conditioning the offer on redemption of the Rights or on a substantial
number of Rights being acquired. The Rights should not interfere with any merger
or other business combination approved by the board of directors of WPS
Resources prior to the time that the Rights may not be redeemed (as described
above) since the board of directors may, at its option, at any time until the
Shares Acquisition Date redeem all but not less than all the then outstanding
Rights at $.001 per Right. The Rights are designed to provide additional
protection against abusive takeover tactics such as offers for all shares at
less than full value or at an inappropriate time (in terms of maximizing
long-term shareholder value), partial tender offers and selective open-market
purchases. The Rights are intended to provide the WPS Resources board of
directors with the ability to protect shareholders and WPS Resources if efforts
are made to gain control of WPS Resources in a manner that is not in the best
interests of WPS Resources and its shareholders.
The Rights Agreement is attached as Exhibit 4.1 to WPS Resources' Form 8-A
filed December 13, 1996 (File No. 1-11337), which form is incorporated by
reference in the
-98-
<PAGE>
Registration Statement of which this proxy statement/prospectus forms a part.
The foregoing description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement and the form of
Rights Certificate attached to the Rights Agreement.
Wisconsin Fuel and Light does not have a shareholders rights plan.
INSPECTION OF BOOKS, RECORDS AND STOCKHOLDERS LIST
The WPS Resources bylaws provide that the shareholders' list must be
available for inspection by any shareholder beginning two business days after
notice of the meeting is given for which the list was prepared and continuing to
be available up to and through such meeting at the corporation's principal
office or at a place identified in the notice of such meeting located in the
city where the meeting will be held.
The Wisconsin Fuel and Light bylaws provide that a shareholder list must be
available for inspection at least ten days before an annual meeting and five
days before any special meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN SHAREHOLDERS OF WISCONSIN FUEL AND LIGHT
The following table sets forth the names of shareholders owning of record
or beneficially more than five percent (5%) of the outstanding Common Stock of
Wisconsin Fuel and Light as of June 15, 2000.
Number of Common Stock Percent of
Shares Beneficially Owned(1) Class(2)
----------------------------- ----------------
Harry K. Wrench and
Ruth Frazer Wrench Trusts (3) 401,944 39.42%
1997 LBW Limited Partnership (4) 63,088 6.19% (4)
(1) 178,450 shares of Wisconsin Fuel and Light's stock is registered in
street name. A notice to non-objecting beneficial owners (NOBO) as of
July 26, 2000, indicated none of these shareholders owned over 5% of
Wisconsin Fuel and Light's Common Stock.
(2) In computing the percent ownership, a total of 1,019,620 shares
outstanding was used.
(3) Mr. Protz, a director of Wisconsin Fuel and Light, is trustee of this
trust and has full voting rights.
(4) Louis B. Wrench is the general partner of this partnership and
additionally owns 20,400 shares in her own name.
The following table sets forth certain information regarding the beneficial
ownership of Wisconsin Fuel and Light Common Stock as of June 15, 2000: (a)
Wisconsin Fuel and Light Directors; (b) Wisconsin Fuel and Light's Chief
Executive Officer and certain other Executive Officers; and (c) the Executive
Officers and Directors of Wisconsin Fuel and Light as a group.
-99-
<PAGE>
Except as otherwise described in the notes below, the following beneficial
owners have sole voting power and sole investment power with respect to all
common stock set forth opposite their names:
Number of Common
Stock Shares Percent of
Directors Beneficially Owned (a) Class(b)
--------- ---------------------- --------
Hugh H. Bell (1) 3,400 *
Donald L. Grade 600 *
Thomas A. Mack 600 *
William D. Maki 350 *
William F. Protz, Jr. (2) 656 *
Susan W. Teteak 1,920 *
Mark T. Maranger (3) 16,032 1.57%
Number of Common
Stock Shares Percent of
Officers Beneficially Owned (a) Class(b)
-------- ---------------------- --------
Paul C. Baird, Treasurer 8,900 *
Monte K. Gehring, Vice President 8,500 *
John K. Keune, Vice President 8,500 *
Edward C. Vallis, Vice President 8,500 *
Executive Officers and Directors
as a Group - (11 persons) 57,958 5.68%
(1) Secretary of the Company
(2) Additionally Mr. Protz' spouse owns 12,532 shares in her name and as
indicated above, votes 401,944 shares as trustee.
(3) President and CEO of the Company.
(4) In computing the percent ownership, a total of 1,019,620 shares outstanding
was used.
(a) Each of the beneficial owners identified above has sole voting and
investment power as to all of the shares shown in this column as
beneficially owned.
(b) Asterisk indicates less than one percent.
CERTAIN SHAREHOLDERS OF WPS RESOURCES
The information required herein is hereby incorporated by reference to WPS
Resources' annual report on Form 10-K for the fiscal year ended December 31,
1999 and the portions of the WPS Resources proxy statement filed in connection
with the WPS Resources
-100-
<PAGE>
annual meeting of shareholders held on May 11, 2000 that have been incorporated
by reference into the WPS Resources 1999 Form 10-K.
MANAGEMENT OF WPS RESOURCES AND EXECUTIVE COMPENSATION
The Merger Agreement provides that the WPS Resources board of directors
will take such action as is necessary to increase the size of the WPS Resources
board of directors by one director as of the effective time of the Merger, and
that the Wisconsin Fuel and Light board of directors will designate a person,
acceptable to the WPS Resources board, to fill such position.
The information required herein respecting WPS Resources is hereby
incorporated by reference to WPS Resources' annual report on Form 10-K for the
fiscal year ended December 31, 1999 and the portions of the WPS Resources proxy
statement filed in connection with WPS Resources annual meeting of shareholders
held on May 11, 2000 that have been incorporated by reference into the WPS
Resources 1999 Form 10-K.
LEGAL MATTERS
Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 will
pass upon certain legal matters with respect to the validity of the securities
offered hereby and the Merger for WPS Resources. von Briesen, Purtell & Roper
s.c., 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 will pass upon
certain legal matters in connection with the Merger for Wisconsin Fuel and
Light.
ACCOUNTANTS REPRESENTATIVES
Wisconsin Fuel and Light expects that representatives of Arthur Andersen
LLP, Wisconsin Fuel and Light's accountants, will be present at the Wisconsin
Fuel and Light special meeting to respond to appropriate questions of
shareholders and to make a statement if they desire.
EXPERTS
The consolidated financial statements of WPS Resources and Wisconsin Public
Service incorporated by reference in this joint proxy statement/prospectus from
the Annual Report on Form 10-K of WPS Resources and of Wisconsin Public Service
for the year ended December 31, 1999, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
The financial statements of Wisconsin Fuel and Light included in this joint
proxy statement/prospectus for the year ended December 31, 1999 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report which are included herein, and have been so included in reliance
upon the authority of said firm as experts in auditing and accounting in giving
said report.
-101-
<PAGE>
OTHER MATTERS
It is not expected that any matters other than those described in this
joint proxy statement/prospectus will be brought before the special meeting. If
any other matters are presented, however, it is the intention of the persons
named in the Wisconsin Fuel and Light proxy to vote the proxy in accordance with
the discretion of the persons named in such proxy.
WHERE YOU CAN FIND MORE INFORMATION
WPS Resources files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. These filings
are available to the public over the Internet at the Security and Exchange
Commission's web site at http://www.sec.gov and through WPS Resources' own web
site at http://www.wpsr.com. You may also read and copy any document we file at
the Security and Exchange Commission's public reference rooms in Washington,
D.C., New York, and Chicago, as well as the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York, 10005, where WPS Resources Common
Stock is listed under the symbol "WPS". You can call the Security and Exchange
Commission at 1-800-732-0330 for further information about the public reference
rooms.
The Securities and Exchange Commission allows WPS Resources to "incorporate
by reference" the information WPS Resources and Wisconsin Public Service file
with them, which means WPS Resources is assumed to have disclosed important
information to you when it refers you to documents that are on file with the
Security and Exchange Commission. The information WPS Resources has incorporated
by reference is an important part of this joint proxy statement/prospectus, and
information that WPS Resources and Wisconsin Public Service file later with the
Security and Exchange Commission will automatically update and supersede this
information. WPS Resources incorporates by reference the documents listed below
and any future documents which WPS Resources or Wisconsin Public Service file
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until the date of our respective
shareholders' meetings.
o Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
o Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000.
o Current Reports on Form 8-K filed March 8, 2000, May 30, 2000 and
September 5, 2000.
o The description of WPS Resources' common stock contained in its
Registration Statement on Form 8-B filed on June 1, 1994. The
description is also included in this joint proxy statement/prospectus
under "DESCRIPTION OF WPS RESOURCES CAPITAL STOCK"
-102-
<PAGE>
o The description of common stock purchase rights contained in
Registration Statement in Form 8-A filed on December 13, 1996. The
description is also included in this joint proxy statement/prospectus
under "COMPARISON OF RIGHTS OF SHAREHOLDERS OF WPS RESOURCES
CORPORATION AND WISCONSIN FUEL AND LIGHT CORPORATION - Rights Plan."
You may request a copy of these documents at no cost by writing to us at
the following address:
WPS Resources Corporation
Attn: Secretary
700 North Adams Street
P.O. Box 19001
Green Bay, Wisconsin 54307-9001
(920) 433-1727
You should rely only on the information provided in or incorporated by
reference (and not later changed) in this joint proxy statement/prospectus.
Neither WPS Resources nor Wisconsin Fuel and Light has authorized anyone else to
provide you with additional or different information. WPS Resources is not
making an offer of any securities in any state where the offer is not permitted.
You should not assume that the information in this joint proxy
statement/prospectus is accurate as of any date other than the date on the front
of this document.
-103-
<PAGE>
INDEX TO WISCONSIN FUEL AND LIGHT COMPANY FINANCIAL STATEMENTS
Page
Audited Annual Financial Statements
Report of Independent Public Accountants F-2
Statements of Income for the Three Years Ended
December 31, 1999 F-3
Balance Sheets as of December 31, 1999 and 1998 F-4
Statements of Cash Flows for the Three Years Ended
December 31, 1999 F-5
Statements of Capitalization as of December 31,
1999 and 1998 F-6
Statements of Stockholders' Equity for the Three
Years Ended December 31, 1999 F-7
Notes to Financial Statements F-8
Unaudited Interim Financial Statements
Statements of Income for Six Months Ended June 30,
2000 and 1999 F-18
Balance Sheet as of June 30, 2000 F-19
Statements of Cash Flows for Six Months Ended
June 30, 2000 F-20
Statement of Capitalization as of June 30, 2000 F-21
Statements of Stockholders Equity for Six Months
Ended June 30, 2000 and 1999 F-22
Condensed Notes to Financial Statements June 30, 2000 F-23
F-1
<PAGE>
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Wisconsin Fuel and Light Company:
We have audited the accompanying balance sheets of Wisconsin Fuel and Light
Company (a Wisconsin Corporation) as of December 31, 1999 and 1998, and the
related statements of income, common stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wisconsin Fuel And Light
Company as of December 31, 1999 and 1998, and the results of its operations and
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States..
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 9, 2000 (except with respect to Note 10,
as to which the date is August 4, 2000).
F-2
<PAGE>
<TABLE>
WISCONSIN FUEL & LIGHT COMPANY
Statements of Income
<CAPTION>
For the Years Ended December 31
1999 1998 1997
----------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 43,833,511 $ 40,543,410 $ 50,887,462
----------------------------------------------------------
OPERATING EXPENSES:
Cost of gas sold 26,635,474 24,915,143 33,632,251
Operation 7,399,802 7,780,739 8,289,334
Maintenance 1,446,958 1,301,755 1,652,982
Depreciation 2,613,890 2,511,067 2,389,730
Taxes other than income 776,073 919,700 944,727
Income taxes 1,442,743 679,205 1,035,387
----------------------------------------------------------
Total Operating Expenses 40,314,940 38,107,609 47,944,411
----------------------------------------------------------
Net Operating Income 3,518,571 2,435,801 2,943,051
OTHER INCOME (EXPENSE)
Other income, net (590,289) (406,338) (41,869)
Income taxes 245,366 175,081 18,711
----------------------------------------------------------
Total Other Income (344,923) (231,257) (23,158)
----------------------------------------------------------
Income Before Interest Charges 3,173,648 2,204,544 2,919,893
----------------------------------------------------------
INTEREST CHARGES:
Interest on bonds 724,489 835,899 936,335
Interest on short term notes 271,494 165,666 93,170
Other 33,095 82,203 49,373
----------------------------------------------------------
Total interest charges 1,029,078 1,083,768 1,078,878
----------------------------------------------------------
NET INCOME 2,144,570 1,120,776 1,841,015
Preferred Stock Dividend Requirement 120,000 120,000 120,000
----------------------------------------------------------
EARNINGS ON COMMON STOCK $ 2,024,570 $ 1,000,776 $ 1,721,015
==========================================================
PER SHARE OF COMMON STOCK
Basic earnings $2.04 $1.01 $1.75
Diluted Earnings $2.03 $1.01 $1.75
Cash Dividend Paid $1.30 $1.26 $1.22
Average Common Shares Outstanding 991,170 986,932 984,036
Average Diluted Shares Outstanding 996,287 989,795 986,060
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
F-3
<PAGE>
<TABLE>
WISCONSIN FUEL & LIGHT COMPANY
Balance Sheets
<CAPTION>
As of December 31
ASSETS 1999 1998
---------------------------------------
<S> <C> <C>
UTILITY PLANT:
Original Cost $ 62,864,772 $59,876,833
Less - Accumulated Depreciation 33,003,768 31,193,442
---------------------------------------
Net Utility Plant 29,861,004 28,683,391
---------------------------------------
INVESTMENTS AND OTHER 110,344 176,975
---------------------------------------
CURRENT ASSETS:
Cash and cash equivalents 392,857 32,943
Accounts receivable, less reserves of $107,239
and $108,476, respectively 3,397,997 2,362,199
Unbilled utility revenues 3,165,205 3,798,349
Materials and supplies, at average cost 361,178 378,093
Gas in storage, at average cost 5,218,945 5,256,223
Prepayments and others 646,787 733,456
---------------------------------------
Total Current Assets 13,182,969 12,561,263
---------------------------------------
DEFERRED CHARGES:
Environmental costs 3,045,002 3,471,606
Other 48,835 56,817
---------------------------------------
Total Deferred Charges 3,093,837 3,528,423
---------------------------------------
---------------------------------------
TOTAL $ 46,248,154 $44,950,052
=======================================
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stockholders $ 15,126,244 $14,400,104
Preferred stockholders 2,000,000 2,000,000
First mortgage bonds 7,400,000 8,450,000
---------------------------------------
Total Capitalization 24,526,244 24,850,104
---------------------------------------
CURRENT LIABILITIES:
Notes payable 8,101,459 5,544,809
Current maturities of bonds 1,050,000 1,050,000
Accounts payable 3,754,164 3,419,366
Refunds due customers 1,678,446 2,391,593
Accrued taxes 351,063 543,288
Dividends payable 357,086 347,175
Obligations under capital lease 59,595 132,197
Other accrued liabilities 1,165,230 1,163,894
---------------------------------------
Total Current Liabilities 17,900,886 15,676,015
---------------------------------------
OTHER LIABILITIES AND DEFERRED CREDITS:
Accrued environmental costs 2,439,976 2,522,015
Accumulated deferred income taxes 338,044 582,682
Investment tax credits 163,301 190,221
Customer advances 249,790 192,293
Regulatory liability 1,936,882 1,773,381
Other deferred credits 76,874 247,034
---------------------------------------
Total Other Liabilities and Deferred Credits 3,821,024 4,423,933
---------------------------------------
TOTAL $ 46,248,154 $44,950,052
=======================================
The accompanying Notes to Financial Statements are an integral part of these balance sheets.
</TABLE>
F-4
<PAGE>
<TABLE>
WISCONSIN FUEL & LIGHT COMPANY
Statements of Cash Flows
<CAPTION>
For the Years Ended December 31
1999 1998 1997
------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income $ 2,144,570 $ 1,120,776 $ 1,841,015
Adjustments to reconcile net income to net cash from
operating activities -
Depreciation 2,818,690 2,713,744 2,603,466
Investment tax credit restored (26,920) (29,753) (34,758)
Deferred income taxes (381,287) (467,053) (448,159)
Amortization of deferred environmental costs 386,100 386,100 612,504
Conservation escrow 300,150 668,289 251,436
Other 369,939 255,203 162,271
Changes in Assets and Liabilities -
Accounts receivable including unbilled revenues, net (402,654) 1,006,711 2,850,589
Gas in storage 37,278 (238,302) (685,034)
Other assets 163,943 241,532 (82,349)
Incurred environmental costs (82,039) (79,146) (139,889)
Accounts payable 334,798 (837,901) (1,754,610)
Refunds due customers (713,147) 773,762 (796,276)
Accrued taxes (192,225) 268,060 (260,912)
Other liabilities (191,011) (393,162) 196,119
------------------------------------------------------------
Net Cash From (Used For) Operating Activities 4,566,185 5,388,860 4,315,413
------------------------------------------------------------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITES:
Construction expenditures, net (4,051,988) (3,480,878) (3,753,732)
Temporary investments
- - 20,926
Advances and contributions for construction 57,497 (43,562) (3,636)
Non-utility investments (300,000) (300,000) (100,000)
------------------------------------------------------------
Net Cash From (Used For) Investing Activities (4,294,491) (3,824,440) (3,836,442)
------------------------------------------------------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITES:
Retirement of bonds (1,050,000) (1,080,000) (1,070,000)
Issuance of common stock
- 76,037 40,775
Common stock dividends (1,298,430) (1,254,471) (1,211,006)
Preferred stock dividends (120,000) (120,000) (120,000)
Change in notes payable 2,556,650 843,796 1,591,013
------------------------------------------------------------
Net Cash From (Used For) Financing Activities 88,220 (1,534,638) (769,218)
------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 359,914 29,782 (290,247)
Cash at Beginning of Year 32,943 3,161 293,408
------------------------------------------------------------
Cash at End of Year $ 392,857 $ 32,943 $ 3,161
============================================================
SUPPLEMENTAL DISCLOSURE:
Cash Paid During Year For -
Interest $ 1,076,406 $ 1,005,925 $ 1,042,779
Income taxes $ 1,875,000 $ 900,000 $ 1,758,501
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
F-5
<PAGE>
<TABLE>
WISCONSIN FUEL & LIGHT COMPANY
Statements of Capitalization
<CAPTION>
For the Years Ended December 31
1999 1998
------------------------------------------------
<S> <C> <C>
Long-Term Debt
9.9% First mortgage-series B due 2005 $ 2,500,000 $ 3,000,000
7.02% First mortgage-series C due 2008 4,900,000 5,450,000
------------------------------------------------
Total Long-Term Debt 7,400,000 8,450,000
------------------------------------------------
Redeemable Preferred Stock
------------------------------------------------
$100 par, 20,000 shares issued 2,000,000 2,000,000
------------------------------------------------
Common Stock Equity
Common Stock, $10 par value, authorized 2,000,000 shares;
outstanding 991,170 and 495,585 shares, respectively 9,911,700 4,955,850
Other paid in capital - 169,550
Retained earnings 5,214,544 9,274,704
------------------------------------------------
Total Common Stock Equity 15,126,244 14,400,104
------------------------------------------------
------------------------------------------------
Total Capitalization $ 24,526,244 $24,850,104
================================================
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
F-6
<PAGE>
<TABLE>
WISCONSIN FUEL & LIGHT COMPANY
Statements of Stockholders' Equity
<CAPTION>
For the Years Ended December 31
1999 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK:
$10 par value; authorized 2,000,000 shares, issued and
outstanding 991,170 and 495,585 shares respectively
Balance, Beginning of Year $ 4,955,850 $ 4,931,100 $ 4,917,100
Two-for-one stock split 4,955,850
- -
Par value of common stock issued - 24,750 14,000
-------------------------------------------------------------
Balance, End of Year 9,911,700 4,955,850 4,931,100
ADDITIONAL PAID IN CAPITAL:
Balance, Beginning of Year 169,550 118,263 91,488
Two-for-one stock split (169,550) - -
Proceeds from common stock issued - 51,287 26,775
-------------------------------------------------------------
Balance, End of Year - 169,550 118,263
RETAINED EARNINGS:
Balance, Beginning of Year 9,274,704 9,528,399 9,018,390
Add - Net income 2,144,570 1,120,776 1,841,015
Deduct - Two-for-one stock split (4,786,300) - -
- Cash dividend on common stock (1,298,430) (1,254,471) (1,211,006)
- Preferred stock dividends accrued (120,000) (120,000) (120,000)
-------------------------------------------------------------
Balance, End of Year 5,214,544 9,274,704 9,528,399
-------------------------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY $ 15,126,244 $14,400,104 $14,577,762
=============================================================
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
F-7
<PAGE>
WISCONSIN FUEL AND LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES -
(a) Nature of operations -
Wisconsin Fuel & Light Company (the "Company") is a public utility engaged
in the distribution of natural gas to a diversified base of residential,
commercial, and industrial customers primarily in the communities of Manitowoc
and Wausau, Wisconsin. It is subject to the regulation of the Public Service
Commission of Wisconsin (PSCW).
The Company has a wholly owned non-utility subsidiary, WFL Service Company,
Inc., which is mainly involved in the sale and servicing of gas appliances and
performing energy conservation programs. The Company has invested $800,000 in
the subsidiary to date. WFL Service Company, Inc. incurred net losses of
$313,128, $243,413, and $52,184 during 1999, 1998, and 1997, respectively, which
is included on the Statements of Income under the heading Other Income
(Expense).
During 1999, WFL Service Company sold its Lakeshore Fireplace store which
sold and installed natural gas and wood burning fireplaces. The Company incurred
a loss of approximately $100,000 in exiting the business.
(b) Use of estimates -
The preparation of the Company's financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Regulatory accounting -
The Company is subject to the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of Certain
Types of Regulation." Regulatory assets represent probable future revenue
associated with certain incurred costs which will be recovered from customers
through the rate making process. Regulatory liabilities represent costs
previously collected that are refundable in future customer rates. The
regulatory liability at December 31, 1999 and 1998 consists of future refunds
related to income taxes and conservation activities.
(d) Cash and cash equivalents -
The Company considers short-term investments with an original maturity of
three months or less to be cash equivalents.
F-8
<PAGE>
(e) Inventories -
All gas in storage is priced using the weighted cost method of accounting.
Costs considered in this calculation are largely composed of pipeline
transportation contract costs, commodity costs, storage fees, and capacity
costs.
(f) Gas revenues and purchased gas costs -
The Company accrues estimated revenues related to gas service rendered but
not yet billed at month end. It is required to provide service and grant credit
to customers within its defined service territory and is precluded by statute
from discontinuing service to residential customers during a certain portion of
the heating season. The Company continually reviews customer credit worthiness
and obtains or refunds customer deposits as permitted.
Through October 1999, the Company's rate schedules permitted the recovery
of actual purchased gas costs incurred. The difference between actual gas costs
incurred and costs recovered through rates is deferred as a current asset or
liability. The deferred balance is then collected or returned to customers
through future rate adjustments.
Effective November 1999, a new Gas Cost Incentive Mechanism (GCIM) was
approved by the PSCW. The GCIM provides an opportunity for the Company to
increase or decrease its revenues if the actual commodity gas costs (as defined)
differ from a benchmark cost within a 1.5% - 4% band.
Under the GCIM, the Company's commodity and capacity gas costs are compared
to monthly benchmarks. At the end of the GCIM year, any differences in actual
gas costs and the monthly benchmark costs between 1.5% and 4% of the total
benchmark gas cost are shared with customers on a 50-50 basis. Gas costs
incurred or cost savings outside this band are 100% collected from or returned
to customers.
The Company has reflected no incentive income or expense in its results of
operations during the first two months of the GCIM in 1999.
(g) Income taxes -
The Company follows the liability method of accounting for income taxes
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes" for rate making and financial reporting.
F-9
<PAGE>
As of December 31, 1999 and 1998, the Company had deferred income tax
assets and liabilities established for the following temporary differences:
1999 1998
---- ----
Deferred Tax Assets:
Regulatory liability $ 553,039 $ 689,688
Advances for construction 97,807 75,338
Conservation expense 540,188 422,895
Vacation pay accrual 143,889 139,122
Gas inventory 494,722 468,967
Other 99,755 107,808
---------- ----------
Total Deferred Tax Assets 1,929,400 1,903,818
---------- ----------
Deferred Tax Liabilities:
Property related items 2,045,999 2,136,984
Environmental costs 221,445 349,516
Total Deferred Tax
Liabilities 2,267,444 2,486,500
---------- ----------
Net Deferred Tax
Liability $ 338,044 $ 582,682
========== ==========
The effective tax rate is computed by dividing total income tax expense
(including investment tax credit restored) by the sum of such expense and net
income. The following table reconciles the statutory federal tax rate to the
effective income tax rate:
1999 1998 1997
------ ------ ------
Statutory federal tax rate 34.0% 34.0% 34.0%
State income tax, net 5.8 5.2 4.7
Investment tax credit restored (.8) (1.8) (1.2)
Contributions in aid of
construction (1.2) (2.5) (1.4)
Excess deferred income taxes-
property (.8) (1.8) (1.0)
Other, net (1.1) (2.1) .5
------ ------ ------
Effective income tax rate 35.9% 31.0% 35.6%
====== ====== ======
F-10
<PAGE>
The following table reflects the components of income tax expense:
1999 1998 1997
----------- ----------- -----------
Current:
Federal $ 1,295,403 $ 792,486 $ 1,193,980
State 316,604 197,167 309,575
----------- ----------- -----------
1,612,007 989,653 1,503,555
----------- ----------- -----------
Deferred (387,710) (455,776) (452,121)
Investment tax credit restored (26,920) (29,753) (34,758)
----------- ----------- -----------
$ 1,197,377 $ 504,124 $ 1,016,676
=========== =========== ===========
Income tax expense is included in the Statements of Income as follows:
1999 1998 1997
----------- ----------- -----------
Income taxes $ 1,442,743 $ 679,205 $ 1,035,387
Other income (expense),net (245,366) (175,081) (18,711)
----------- ----------- -----------
$ 1,197,377 $ 504,124 $ 1,016,676
=========== =========== ===========
(h) Utility plant -
Utility plant is stated at the original cost of construction.
Replacements of minor items of property are charged to maintenance expense.
The cost of property retired, plus removal costs, less salvage, is charged to
accumulated depreciation; as a result, no profit or loss is recognized in
connection with ordinary retirements of depreciable property.
Substantially all of the Company's utility plant is subject to a first
mortgage lien.
(i) Depreciation -
The composite straight-line depreciation rate certified by the PSCW was
approximately 4.8%, 4.8%, and 4.9% for 1999, 1998, and 1997, respectively. The
reasonableness of the depreciation rates is regularly reviewed by the Company.
(j) Pension plans -
The Company has two defined benefit pension plans (union and non-union)
covering substantially all employees. Benefits are based upon years of service
and compensation. Company contributions and funding are consistent with the
funding requirements of federal law and regulations. Pension plan costs have
been calculated and recovered in customer rates in accordance with SFAS No. 87
"Employers' Accounting for Pensions."
The following table provides a reconciliation of benefit obligations, plan
assets, and funded status of the Company's defined benefit pension plans. The
Company's obligation for its post-retirement medical benefit is fully accrued
but is not material for disclosure purposes.
F-11
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation at 1/1 $ 16,062,691 $ 14,731,877 $ 13,005,462
Service costs 528,081 506,568 461,417
Interest cost 998,823 947,923 925,334
Actuarial(gain)loss (2,058,765) 597,598 945,713
Benefits paid from plan assets (708,001) (721,275) (606,049)
------------ ------------ ------------
Benefit obligation at 12/31 $ 14,822,829 $ 16,062,691 $ 14,731,877
============ ============ ============
Change in plan assets
Fair value of plan
assets at 1/1 $ 18,100,151 $ 16,417,304 $ 14,338,843
Actual return on plan assets 1,836,806 2,404,122 2,684,510
Employers contribution -- -- --
Benefits paid from plan assets (708,001) (721,275) (606,049)
------------ ------------ ------------
Fair value of plan assets
at 12/31 $ 19,228,956 $ 18,100,151 $ 16,417,304
============ ============ ============
Funded status of plans $ 4,406,127 $ 2,037,460 $ 1,685,427
Unrecognized transition (asset) (303,536) (324,046) (344,556)
Unrecognized prior service cost 199,399 217,526 235,653
Unrecognized net actuarial
(gain) (4,274,429) (2,026,095) (1,706,277)
------------ ------------ ------------
Net amount recognized $ 27,561 $ (95,155) $ (129,753)
============ ============ ============
Amounts recognized in the
financial statements
(Accrued) pension liability
at 1/1 $ (95,155) $ (129,753) $ (15,444)
Net periodic pension (income)
cost (122,716) (34,598) 114,309
Employer contributions -- -- --___
------------ ------------ ------------
Prepaid (accrued) pension asset
(liability) at 12/31 $ 27,561 $ (95,155) $ (129,753)
------------ ------------ ------------
Assumptions as of December 31
Discount rate 7.50% 6.50% 6.75%
Expected return on plan assets 9.00% 9.00% 9.00%
Rate of compensation increase 4.80% 4.80% 4.80%
Net Periodic Pension Cost(Income)
Service costs $ 528,081 $ 506,568 $ 461,417
Interest costs on projected
benefit obligations 998,823 947,923 925,334
Expected (gain) on assets (1,603,914) (1,453,970) (1,268,695)
F-12
<PAGE>
Amortization of transition
(asset) (20,510) (20,510) (20,510)
Amortization of prior service
costs 18,127 18,127 18,127
Amortization of actuarial(gain) (43,323) (32,736) (1,364)
------------ ------------ ------------
Net benefit(income) expense $ (122,716) $ (34,598) $ 114,309
============ ============ ============
</TABLE>
(2) LONG TERM DEBT
First Mortgage Bonds as of December 31, consisted of the following:
1999 1998
---- ----
9.90% Series B Due 2005 $ 3,000,000 $ 3,500,000
7.02% Series C Due 2008 5,450,000 6,000,000
---------- ---------
8,450,000 9,500,000
Less: Current maturities 1,050,000 1,050,000
---------- ----------
Total First Mortgage Bonds $ 7,400,000 $ 8,450,000
========== ==========
Fixed maturities and sinking fund requirements on bonds total $1,050,000,
$1,050,000, $1,050,000, $1,050,000, and $1,150,000 for each of the years 2000
through 2004, respectively. Under indenture provisions, Series B first mortgage
bonds are not currently eligible for redemption as of December 31, 1999. All
outstanding bond series have a make-whole provision for early redemption.
The first mortgage bond indenture, as supplemented and amended, contains
restrictions on cash dividends and certain other payments. As of December 31,
1999, $5,327,368 of retained earnings were not subject to such restrictions.
(3) NOTES PAYABLE AND LINE OF CREDIT
The Company maintains an unsecured $10,000,000 line of credit which expires
August 31, 2000. Certain cash balances represent compensating balances for the
credit line and bank services; however, there are no legal restrictions as to
the withdrawal of these funds. The following information relates to short-term
borrowing and lines of credit for the years indicated:
1999 1998
---------- ----------
As of year-end:
Weighted average interest rate 8.6% 7.0%
Notes payable $8,101,459 $5,544,809
Unused line $1,898,541 $2,455,191
For the year ended:
Maximum notes payable $8,787,010 $6,031,919
F-13
<PAGE>
Average notes payable $3,473,389 $2,164,665
Average interest rate on
notes 7.8% 7.7%
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
The Company's carrying amount for its cash, energy conservation loans, and
notes payable approximates fair value due to the short maturity of those
investments and obligations.
The fair value of the Company's first mortgage bonds and preferred stock
are estimated based on the quoted market price for the same or similar issues or
on the current rates offered to the Company or debt of the same remaining
maturity.
The estimated fair values of the Company's financial instruments as of
December 31 are as follows:
1999 1998
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $ 392,857 $ 392,857 $ 30,658 $ 30,658
Energy conservation loans -- -- 3,503 3,503
Notes payable 8,101,459 8,101,459 5,544,809 5,544,809
First mortgage bonds 8,450,000 8,529,400 9,500,000 9,968,630
Preferred stock 2,000,000 1,650,000 2,000,000 1,842,500
(5) STOCK OPTION PLAN
The Company has a stock option plan for its key executives. All options are
granted at approximate market value at the date of grant and expire in ten years
from date of grant. SFAS No. 123, "Accounting for Stock Based Compensation
Plans," establishes standards of financial accounting and reporting for
stock-based compensation plans. As allowed under SFAS No. 123, the Company
elected to continue to apply APBO No. 25, "Accounting for Stock Issued to
Employees," in accounting for stock based compensation plans. Accordingly, no
compensation cost has been recognized for its stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under the plan, the Company's basic
and diluted earnings per share would have been reduced by approximately $.01 in
1999, 1998, and 1997.
F-14
<PAGE>
A summary of the Company's stock options at December 31, 1999, 1998, and
1997 and changes for the years then ended are as follows:
1999 1998 1997
---- ---- ----
Wtd Ave Wtd Ave Wtd Ave
Shares Price Shares Price Shares Price
Outstanding at Jan 1 23,450 $19.29 23,400 $18.27 21,200 $17.37
Granted 5,000 $25.50 5,000 $20.19 5,000 $20.00
Exercised --- --- (4,950) $15.36 (2,800) $14.56
------ ------ ------
Outstanding at Dec 31 28,450 $20.38 23,450 $19.29 23,400 $18.27
Exercisable at Dec 31 28,450 $20.38 23,450 $19.29 23,400 $18.27
Available for Future
Grants 50,000 55,000 60,000
(6) SEGMENTS OF BUSINESS
The Company has two reportable segments: a Regulated Gas Utility
responsible for natural gas distribution and related services, and a segment
titled Other which captures the non-regulated activities of the Company,
primarily those of WFL Service Company which is involved in the sale and
servicing of gas appliances and performing energy conservation programs. The
Company's reportable segments are managed separately because each business unit
requires different technology and marketing strategies.
The accounting policies of the segments are the same as those described in
Note 1 of the Notes to Financial Statements. The Company evaluates the
performance of its operating segments based on income from continuing
operations. Although intersegment sales and transfers are not significant, the
Company accounts for them as if the sales or transfers were to third parties,
that is, at current market prices.
Consistent with utility industry financial reporting practices to reflect
nonregulated operations below net operating income, and due to the relative
insignificance of the results of operations of WFL Service Company, the results
of this segment have been reflected in Other income (expense) on the statements
of income, and the net investment has been reflected in Investments and Other on
the balance sheets. Therefore, the reconciling eliminations column primarily
results from the reporting presentation for segment reporting purposes and what
was reported in Wisconsin Fuel and Light Company's financial statements.
F-15
<PAGE>
Summarized financial information concerning the Company's reportable
segments is shown in the following table:
<TABLE>
<CAPTION>
Regulated Reconciling Total
1999 Gas Utility Other Eliminations WF&L
----------- ------- ------------ -----
<S> <C> <C> <C> <C>
Income Statement
Operating revenues $43,833,511 $1,318,943 $(1,318,943) $43,833,511
Depreciation 2,613,890 53,021 (53,021) 2,613,890
Other income (exp) (590,289) -- -- (590,289)
Interest expense 1,029,078 21,338 (21,338) 1,029,078
Income taxes 1,688,109 (224,053) 224,053 1,688,109
Net income (loss) 2,144,570 (313,128) 313,128 2,144,570
Balance Sheet
Total assets $46,248,154 $340,171 $(340,171) $46,248,154
Cash expenditures for long-lived 3,836,357 3,193 (3,193) 3,836,357
assets
Regulated Reconciling Total
1998 Gas Utility Other Eliminations WF&L
----------- ------- ------------ ----
Income Statement
Operating revenues $40,543,410 $1,649,913 $(1,649,913) $40,543,410
Depreciation 2,511,067 33,255 (33,255) 2,511,067
Other income (exp) (406,338) -- (406,338)
Interest expense 1,083,768 2,981 (2,981) 1,083,768
Income taxes 854,286 (181,002) 181,002 854,286
Net income (loss) 1,120,776 (243,413) 243,413 1,120,776
Balance Sheet
Total assets $44,950,052 $643,798 $(643,798) $44,950,052
Cash expenditures for 3,372,280 293,943 (293,943) 3,372,280
long-lived assets
F-16
<PAGE>
<CAPTION>
Regulated Reconciling Total
1997 Gas Utility Other Elimination WF&L
----------- ------- ----------- ----
<S> <C> <C> <C> <C>
Income Statement
Operating revenues $50,887,462 $555,701 $(555,701) $50,807,462
Depreciation 2,389,730 5,346 (5,346) 2,389,730
Other income (exp) (41,869) -- -- (41,869)
Interest expense 1,078,878 -- -- 1,078,878
Income taxes 1,054,098 (37,332) 37,332 1,054,098
Net income (loss) 1,841,015 (52,185) 52,185 1,841,015
Balance Sheet
Total assets $45,504,380 $231,889 $(231,889) $45,504,380
Cash expenditures for 3,538,072 33,172 (33,172) 3,530,072
long-lived assets
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
(a) Construction -
The Company's 2000 planned expenditures for utility plant construction are
estimated at $4.96 million, and certain commitments have been made in connection
with this budget.
(b) Gas supply-
The Company has agreements for pipeline transportation and storage capacity
and gas supply contracts. The majority of the pipeline transportation and
storage capacity contracts range from 4-8 years and gas supply contracts up to 4
years in length. The total required payments under such agreements totals
approximately $61 million. For 2000, these agreements include reservation fees
of approximately $6.3 million for pipeline capacity and approximately $3.0
million for natural gas supply.
Federal Energy Regulatory Commission (FERC) Order No. 636 allows pipelines
to collect a portion of their transition costs in restructuring their sales and
transportation services as a result of this order. The Company estimates annual
payments of approximately $42,000 in transition costs which have been included
in the total pipeline transportation costs previously shown. On the basis of
past PSCW rulemaking, the Company anticipates all such transition costs will be
recoverable in future rates.
F-17
<PAGE>
(c) Environmental matters -
During 1991, the Company hired an environmental consultant to perform
testing on an old manufactured gas site that was previously used by the Company
in the early 1900's. The results of the testing indicated that the soil in the
area of the manufactured gas site was contaminated and that river and ground
water surrounding the site were also affected. The Company has substantially
remediated the land portion of the site and continues to monitor and treat
groundwater at the site. The Company management has been working with its
consultant and the Wisconsin Department of Natural Resources (DNR) on what
remediation actions should be taken regarding the river portion of the site.
Through December 31, 1999, the Company spent $4.5 million on environmental
remediation costs, of which $41,511 and $79,146 was spent in 1999 and 1998,
respectively, in land remediation costs. An additional $31,000 is estimated to
be spent in 2000 for groundwater monitoring and treatment.
As of December 31, 1999, the Company has accrued $2.44 million as its best
estimate of future remediation costs. The majority of the estimated future
remediation costs is for cleanup of the river soils using a treatment technique
which would require final approval from the DNR. A change in treatment
techniques could significantly change future estimates.
In the Company's last rate order, the Company was allowed to continue to
defer incurred costs. The Company amortized $386,100 of these deferred costs
during 1999 and 1998, and $612,504 in 1997. During 2000, the Company expects to
amortize $302,074 of deferred costs.
As future expenditures are approved for deferral, each amount is expected
to be amortized over a 5-year period based upon current regulatory policy. The
PSCW did not allow the Company to earn a return on remediation costs spent, net
of amortization and income taxes. This unrecovered deferred amount totaled
$605,000 as of December 31, 1999. Based on past and current treatment by the
PSCW, management expects to recover in rates all remediation costs incurred in
connection with this site. The Company expects to receive some insurance
proceeds that will reduce the amounts to be recovered in future rates. The
amount and timing of any additional insurance proceeds cannot be reasonably
estimated at this time.
(8) COMMON AND PREFERRED STOCK
On November 23, 1999, the Company's Board of Directors declared a
two-for-one common stock split. On December 1, 1999, 495,585 new shares of
common stock were issued to stockholders of record as of November 15, 1999. The
par value of the additional shares ($10 par), was transferred to common stock
from additional paid in capital and retained earnings.
In connection with the stock dividend, the Company increased its authorized
shares of common stock to 2,000,000 shares. Previous year financial information
has been restated to reflect this stock split.
F-18
<PAGE>
Preferred Stock at December 31, 1999 and 1998 consists of 20,000 shares of
$100 par value stock with a 6% annual dividend. The shares are non-voting,
cumulative and may not be redeemed prior to 2004. Scheduled redemptions of
$333,333 begin in 2004.
(9) NEW ACCOUNTING STANDARDS
Effective December 31, 1997,the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share"
(SFAS 128). SFAS 128 requires a dual presentation of earnings per share-basic
and diluted. Basic earnings per share has been computed by dividing net earnings
by the weighted average number of common shares outstanding. Diluted earnings
per share has been computed by dividing net earnings by the weighted average
number of common shares outstanding, including the dilutive effects of stock
options.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of SFAS No. 133." SFAS 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS 133 requires changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria is
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement and
requires that a company must formally document, designate, and assess the
effectiveness of the transactions that receive hedge accounting.
SFAS 133, as amended, is effective for the fiscal year beginning after June
15, 2000. The Company has not quantified the effects of adopting SFAS 133 on its
financial statements.
During 1999, the Company adopted Statement of Position No. 98-1, (SOP 98-1)
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP No. 98-1 requires more of the cost of computer software
developed or obtained for internal use to be capitalized as an asset. The impact
of adopting this statement on the Company's 1999 financial statements was not
significant.
(10) AGREEMENT TO MERGE WITH WPS RESOURCES CORPORATION
On July 13, 2000, the Company signed a merger agreement with WPS Resources
Corporation. Under the agreement, Wisconsin Fuel & Light shareholders will
receive 1.73 shares of WPS Resources common stock for each share of Wisconsin
Fuel & Light common stock. The exchange ratio will be adjusted if, at the time
of closing the transaction, the market price of WPS Resources common stock
exceeds $33.96 per share or is less than $27.79 per share. The merger is subject
to (i) approval by the Wisconsin Fuel & Light shareholders; (ii) approval by the
Public Service Commission of Wisconsin; (iii) the Form S-4 Registration
Statement being declared effective by the Securities and Exchange Commission;
(iv) the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust
F-19
<PAGE>
Improvements Act of 1976; (v) receipt of an opinion of counsel that the exchange
of stock qualifies as a tax-free transaction; and (vi) the satisfaction of
various other conditions.
F-20
<PAGE>
<TABLE>
WISCONSIN FUEL AND LIGHT COMPANY
Statements of Income
<CAPTION>
Six Months Ended
June 30
2000 1999
(unaudited) (unaudited)
----------------------------------------------
<S> <C> <C>
OPERATING REVENUES $ 26,443,814 $23,319,728
----------------------------------------------
OPERATING EXPENSES:
Cost of gas sold 17,179,864 14,288,537
Operation 3,781,319 3,800,969
Maintenance 688,250 704,829
Depreciation 1,460,400 1,328,598
Taxes other than income 426,356 407,209
Income taxes 963,380 906,212
----------------------------------------------
Total Operating Expenses 24,499,569 21,436,354
----------------------------------------------
Net Operating Income 1,944,245 1,883,374
OTHER INCOME (EXPENSE)
Other income (expense), net (144,166) (415,429)
Income taxes 56,532 158,602
----------------------------------------------
Total Other Income (87,634) (256,827)
----------------------------------------------
Income Before Interest Charges 1,856,611 1,626,547
----------------------------------------------
INTEREST CHARGES:
Interest on bonds 327,744 370,867
Interest on short term notes 114,723 62,657
Other 10,362 21,160
----------------------------------------------
Total interest charges 452,829 454,684
----------------------------------------------
NET INCOME 1,403,782 1,171,863
Preferred Stock Dividend Requirement 60,000 60,000
----------------------------------------------
EARNINGS ON COMMON STOCK $ 1,343,782 $1,111,863
==============================================
PER SHARE OF COMMON STOCK
Basic Earnings $1.33 $1.12
Diluted Earnings $1.33 $1.12
Cash Dividend Paid $0.66 $0.64
Average Common Shares Outstanding 1,008,035 991,170
Average Diluted Shares Outstanding 1,008,657 996,032
</TABLE>
F-21
<PAGE>
WISCONSIN FUEL AND LIGHT COMPANY
Balance Sheets
June 30, 2000
(unaudited)
-------------------
ASSETS
UTILITY PLANT:
Original Cost $ 64,273,918
Less - Accumulated Depreciation 34,442,162
-------------------
Net Utility Plant 29,831,756
-------------------
INVESTMENTS AND OTHER 30,861
-------------------
CURRENT ASSETS:
Cash and cash equivalents 562,911
Accounts receivable, less reserves of
$129,915 and $180,340, respectively 2,656,500
Unbilled utility revenues 622,005
Materials and supplies, at average cost 704,678
Gas in storage, at average cost 3,322,096
Prepayments and others 507,635
-------------------
Total Current Assets 8,375,825
-------------------
DEFERRED CHARGES:
Environmental costs 2,851,952
Other 46,056
-------------------
Total Deferred Charges 2,898,008
-------------------
TOTAL $ 41,136,450
===================
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stockholders $ 16,368,846
Preferred stockholders 2,000,000
First mortgage bonds 6,850,000
-------------------
Total Capitalization 25,218,846
-------------------
CURRENT LIABILITIES:
Notes payable 1,825,222
Current maturities of bonds 1,050,000
Accounts payable 3,243,875
Refunds due customers 2,955,517
Accrued taxes 218,990
Dividends payable 376,671
Obligations under capital lease 34,937
Other accrued liabilities 839,974
-------------------
Total Current Liabilities 10,545,186
-------------------
OTHER LIABILITIES AND DEFERRED CREDITS:
Accrued environmental costs 2,417,477
Accumulated deferred income taxes 354,871
Investment tax credits 163,301
Customer advances 279,130
Regulatory liability 2,080,255
Other deferred credits 77,384
-------------------
Total Other Liabilities and
Deferred Credits 5,372,418
-------------------
TOTAL $ 41,136,450
===================
The accompanying Notes to Financial Statements are an integral part of
these balance sheets.
F-22
<PAGE>
<TABLE>
WISCONSIN FUEL AND LIGHT COMPANY
Statements of Cash Flows
<CAPTION>
Six Months Ended
June 30
2000 1999
(unaudited) (unaudited)
-------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,403,782 $ 1,171,863
Adjustments to reconcile net income to net
cash from operating activities -
Depreciation 1,594,236 1,434,228
Investment tax credit restored - -
Deferred income taxes 16,827 -
Amortization of deferred environmental costs 193,050 193,050
Other 106,321 288,354
Changes in Assets and Liabilities -
Accounts receivable including unbilled
revenues, net 3,284,697 3,794,881
Gas in storage 1,896,849 2,471,380
Other assets (204,348) 103,007
Incurred environmental costs (22,499) (28,165)
Accounts payable (510,289) (917,053)
Refunds due customers 1,277,071 (413,371)
Accrued taxes (132,073) (327,296)
Other liabilities (186,449) (1,760)
-------------------------------------------
Net Cash From (Used For) Operating Activities 8,717,175 7,769,118
-------------------------------------------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Construction expenditures, net (1,589,047) (1,844,673)
Temporary investments - -
Advances and contributions for construction 29,340 24,662
Non-utility investments - (250,000)
-------------------------------------------
Net Cash From (Used For) Investing Activities (1,559,707) (2,070,011)
-------------------------------------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Retirement of bonds (550,000) (550,000)
Issuance of common stock 579,888 -
Common stock dividends (681,065) (644,260)
Preferred stock dividends (60,000) (60,000)
Change in notes payable (6,276,237) (4,233,738)
-------------------------------------------
Net Cash From (Used For) Financing Activities (6,987,414) (5,487,998)
-------------------------------------------
NET INCREASE (DECREASE) IN CASH 170,054 211,109
Cash at Beginning of Period 392,857 32,943
-------------------------------------------
Cash at End of Period $ 562,911 $ 244,052
===========================================
SUPPLEMENTAL DISCLOSURE:
Cash Paid During Year For -
Interest $ 518,707 $ 473,322
Income taxes $ 900,000 $ 1,215,000
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
F-23
<PAGE>
WISCONSIN FUEL & LIGHT COMPANY
Statements of Capitalization
June 30
2000
(unaudited)
---------------------
Long-Term Debt
9.9% First mortgage-series B due 2005 $ 2,500,000
7.02% First mortgage-series C due 2008 4,350,000
---------------------
Total Long-Term Debt 6,850,000
---------------------
Redeemable Preferred Stock
---------------------
$100 par, 20,000 shares issued 2,000,000
---------------------
Common Stock Equity
Common Stock, $10 par value, authorized
2,000,000 shares; outstanding 1,019,620 and
495,585 shares, respectively 10,196,200
Other paid in capital 295,388
Retained earnings 5,877,258
---------------------
Total Common Stock Equity 16,368,846
---------------------
---------------------
Total Capitalization $ 25,218,846
=====================
The accompanying Notes to Financial Statements are an integral part
of these statements.
F-24
<PAGE>
<TABLE>
WISCONSIN FUEL AND LIGHT COMPANY
Statements of Stockholders' Equity
<CAPTION>
Six Months Ended
June 30
2000 1999
(unaudited) (unaudited)
------------------------------------------
<S> <C> <C>
COMMON STOCK:
$10 par value; authorized 2,000,000 shares, issued
and outstanding 1,019,620 and 495,585 shares
respectively
Balance, Beginning of Period $ 9,911,700 $ 4,955,850
Par Value of common stock issued 284,500 -
------------------------------------------
Balance, End of Period 10,196,200 4,955,850
ADDITIONAL PAID IN CAPITAL:
Balance, Beginning of Period - 169,550
Excess of proceeds over par value of
common stock issued 295,388 -
------------------------------------------
Balance, End of Period 295,388 169,550
RETAINED EARNINGS:
Balance, Beginning of Period 5,214,544 9,274,704
Add - Net income 1,403,782 1,171,863
Deduct - Common stock dividends declared (681,068) (644,258)
- Preferred stock dividends accrued (60,000) (60,000)
------------------------------------------
Balance, End of Period 5,877,258 9,742,309
------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY $ 16,368,846 $ 14,867,709
==========================================
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
F-25
<PAGE>
WISCONSIN FUEL AND LIGHT COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(1) FINANCIAL INFORMATION
We have prepared the consolidated financial statements of Wisconsin Fuel &
Light Company under the rules and regulations of the Securities and Exchange
Commission. These financial statements have not been audited. Management
believes that these financial statements include all normal recurring
adjustments which are necessary for a fair presentation of the financial results
for each period shown. We have condensed or omitted certain information and
footnote disclosures normally included in financial statements prepared under
generally accepted accounting principles. Management believes that the
disclosures made are adequate to make the information presented not misleading.
These financial statements should be read along with the annual financial
statements and notes included within this filing.
(2) MERGER WITH WPS RESOURCES CORPORATION
On July 13, 2000, the Company signed a merger agreement with WPS Resources
Corporation. The merger is subject to (i) approval by the Wisconsin Fuel & Light
shareholders; (ii) approval by the Public Service Commission of Wisconsin; (iii)
the Form S-4 Registration Statement being declared effective by the Securities
and Exchange Commission; (iv) the expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (v)
receipt of an opinion of counsel that the exchange of stock qualifies as a
tax-free transaction; and (vi) the satisfaction of various other conditions.
F-26
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
By and Among
WPS RESOURCES CORPORATION,
WISCONSIN PUBLIC SERVICE CORPORATION,
WF&L ACQUISITION CORP.
and
WISCONSIN FUEL AND LIGHT COMPANY
Dated as of July 13, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER .........................................................1
Section 1.1 The Merger...............................................1
Section 1.2 Effects of the Merger....................................2
Section 1.3 Effective Time of the Merger.............................2
ARTICLE II TREATMENT OF SHARES................................................3
Section 2.1 Effect of the Merger on Capital Stock....................3
Section 2.2 Issuance of New Certificates.............................4
Section 2.3 Dissenting Shares........................................7
ARTICLE III THE CLOSING ......................................................7
Section 3.1 The Closing..............................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WPSR.............................8
Section 4.1 Organization and Qualification...........................8
Section 4.2 Capitalization...........................................9
Section 4.3 Authority; Non-contravention; Statutory Approvals;
Compliance...... ......................................9
Section 4.4 Reports and Financial Statements........................11
Section 4.5 Absence of Certain Changes or Events....................11
Section 4.6 Litigation..............................................11
Section 4.7 Registration Statement and Proxy Statement..............12
Section 4.8 Vote Not Required.......................................13
Section 4.9 Ownership of WF&L Common Stock..........................13
Section 4.10 WPSR Rights Agreement...................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF WF&L.............................13
Section 5.1 Organization and Qualification..........................13
Section 5.2 Subsidiaries............................................14
Section 5.3 Capitalization..........................................14
Section 5.4 Authority; Non-contravention; Statutory Approvals;
Compliance..... ......................................14
Section 5.5 Reports and Financial Statements........................16
Section 5.6 Absence of Certain Changes or Events....................17
Section 5.7 Litigation..............................................17
Section 5.8 Registration Statement and Proxy Statement..............18
Section 5.9 Tax Matters.............................................18
Section 5.10 Employee Matters; ERISA.................................20
Section 5.11 Environmental Protection................................24
Section 5.12 Regulation as a Utility.................................26
Section 5.13 Vote Required...........................................26
Section 5.14 Opinion of Financial Advisor............................26
Section 5.15 Insurance...............................................27
Section 5.16 Ownership of WPSR Common Stock..........................27
Section 5.17 Title to Assets.........................................27
Section 5.18 No Violation of Law; Buildings and Equipment............27
-i-
<PAGE>
Section 5.19 Existing Contracts......................................27
Section 5.20 Performance of Contracts................................28
Section 5.21 Contingent and Undisclosed Liabilities..................28
Section 5.22 Sole Representations and Warranties.....................29
ARTICLE VI CONDUCT OF BUSINESS BY WF&L PENDING THE MERGER....................29
Section 6.1 Covenants of the Parties................................29
Section 6.2 Ordinary Course of Business.............................29
Section 6.3 Dividends...............................................30
Section 6.4 Issuance of Securities..................................31
Section 6.5 Charter Documents.......................................31
Section 6.6 No Acquisitions.........................................31
Section 6.7 Capital Expenditures....................................31
Section 6.8 No Dispositions.........................................31
Section 6.9 Indebtedness............................................32
Section 6.10 Compensation, Benefits..................................32
Section 6.11 Certain Agreements......................................33
Section 6.12 Accounting..............................................33
Section 6.13 Affiliate Transactions..................................33
Section 6.14 Tax Matters.............................................33
Section 6.15 Discharge of Liabilities................................33
Section 6.16 Contracts...............................................34
Section 6.17 Insurance...............................................34
Section 6.18 Permits.................................................34
Section 6.19 Access to Information...................................34
ARTICLE VII ADDITIONAL AGREEMENTS............................................35
Section 7.1 Proxy Statement and Registration Statement..............35
Section 7.2 Regulatory Matters......................................35
Section 7.3 Shareholder Approval....................................36
Section 7.4 Director and Officer Indemnification....................36
Section 7.5 Disclosure Schedules....................................38
Section 7.6 Public Announcements....................................39
Section 7.7 Rule 145 Affiliates.....................................39
Section 7.8 Employee Agreements.....................................39
Section 7.9 Employee Benefit Plans..................................40
Section 7.10 No Solicitations........................................40
Section 7.11 WPSR Board of Directors.................................41
Section 7.12 Workforce Matters.......................................41
Section 7.13 Expenses................................................41
Section 7.14 Further Assurances......................................41
Section 7.15 Charter and By-law Amendments...........................42
Section 7.16 Tax-free Status.........................................42
Section 7.17 Cooperation, Notification...............................42
Section 7.18 Third-party Consents....................................42
-ii-
<PAGE>
ARTICLE VIII CONDITIONS .....................................................43
Section 8.1 Conditions to each Party's Obligation to Effect
the Merger........ ...................................43
Section 8.2 Further Conditions to Obligation of WF&L to Effect
the Merger..... ......................................44
Section 8.3 Further Conditions to Obligation of WPSR and WPSC or
Acquisition Corp. to Effect the Merger..................45
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................46
Section 9.1 Termination.............................................46
Section 9.2 Effect of Termination...................................48
Section 9.3 Termination Fee.........................................49
Section 9.4 Amendment...............................................50
Section 9.5 Waiver..................................................50
ARTICLE X GENERAL PROVISIONS.................................................51
Section 10.1 Non-survival; Effect of Representations and Warranties..51
Section 10.2 Brokers.................................................51
Section 10.3 Notices.................................................51
Section 10.4 Miscellaneous...........................................52
Section 10.5 Interpretation..........................................53
Section 10.6 Counterparts; Effect....................................53
Section 10.7 Binding Effect; Benefits................................53
Section 10.8 Enforcement.............................................53
EXHIBITS:
1.3.1 Plan of Merger (WF&L into WPSC)
1.3.2 Plan of Merger (WF&L into Acquisition Corp.)
7.7 Affiliate Agreement
8.2(g) Form of Legal Opinion (Foley & Lardner)
8.3(h) Form of Legal Opinion (von Briesen, Purtell & Roper, S.C.)
-iii-
<PAGE>
1935 Act.....................................................................25
Acquisition Corp..............................................................1
Affiliate....................................................................32
Affiliate Agreement..........................................................37
Affiliated Employees.........................................................38
Agreement.....................................................................1
Business Combination.........................................................45
Business Combination Proposal................................................39
Certificates..................................................................4
Closing.......................................................................7
Closing Agreement............................................................19
Closing Date..................................................................7
Code..........................................................................1
Confidentiality Agreement....................................................33
control......................................................................32
Converted Common Shares.......................................................4
Disclosure Schedules.........................................................37
Dissenting Shares.............................................................7
Effective Time................................................................2
Environmental Claim..........................................................24
Environmental Laws...........................................................25
Environmental Permits........................................................23
ERISA........................................................................19
Exchange Act.................................................................11
Exchange Agent................................................................4
Final Order..................................................................42
GAAP.........................................................................11
Governmental Authority.......................................................10
Hazardous Materials..........................................................25
HSR Act......................................................................34
Indemnified Liabilities......................................................35
Indemnified Parties..........................................................35
Indemnified Party............................................................35
Initial Termination Date.....................................................44
IRS..........................................................................21
Joint Venture.................................................................8
Merger........................................................................1
Merger Consideration..........................................................7
Merger Ratio..................................................................3
NYSE..........................................................................3
PBGC.........................................................................20
Plan of Merger................................................................2
Proxy Statement..............................................................12
Proxy/Registration Statement.................................................33
Registration Statement.......................................................12
-i-
<PAGE>
Release......................................................................25
Representatives..............................................................33
SEC..........................................................................10
Securities Act...............................................................12
Subchapter XIII...............................................................7
Subsidiary....................................................................8
Surviving Corporation.........................................................2
Tax Return...................................................................19
Tax Ruling...................................................................19
Taxes........................................................................19
Violation....................................................................10
WBCL..........................................................................2
WF&L..........................................................................1
WF&L Benefit Plans...........................................................20
WF&L Common Stock.............................................................3
WF&L Disclosure Schedule.....................................................13
WF&L Financial Statements....................................................16
WF&L Material Adverse Effect.................................................13
WF&L Preferred Stock..........................................................4
WF&L Required Consents.......................................................15
WF&L Required Statutory Approvals............................................15
WF&L Shareholders' Approval..................................................26
WF&L Special Meeting.........................................................35
WFL Service..................................................................13
WFL Service Common Stock.....................................................14
WPSC..........................................................................1
WPSC Preferred Stock..........................................................1
WPSR..........................................................................1
WPSR Average Stock Price......................................................3
WPSR Common Stock.............................................................3
WPSR Disclosure Schedule......................................................8
WPSR Financial Statements....................................................11
WPSR Material Adverse Effect..................................................8
WPSR Required Consents.......................................................10
WPSR Required Statutory Approvals............................................10
WPSR Rights...................................................................3
WPSR Rights Agreement.........................................................3
WPSR SEC Reports.............................................................10
WPSR Subsidiary...............................................................8
-ii-
<PAGE>
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 13, 2000 (this
"Agreement"), by and among WPS Resources Corporation, a corporation incorporated
under the laws of the State of Wisconsin ("WPSR"), WISCONSIN PUBLIC SERVICE
CORPORATION, a wholly-owned subsidiary of WPSR and a corporation incorporated
under the laws of the State of Wisconsin ("WPSC"). WF&L ACQUISITION CORP., a
wholly-owned subsidiary of WPSR and a corporation incorporated under the laws of
the State of Wisconsin ("Acquisition Corp."), and WISCONSIN FUEL AND LIGHT
COMPANY, a corporation incorporated under the laws of the State of Wisconsin
("WF&L"),
W I T N E S S E T H:
WHEREAS, WPSR and WF&L have determined that it would be in their
respective best interests and in the interests of their respective shareholders
to effect the transactions contemplated by this Agreement;
WHEREAS, in furtherance thereof, the respective Boards of Directors
of WPSR, WPSC, Acquisition Corp. and WF&L and WPSR as the sole shareholder of
WPSC and Acquisition Corp. have approved this Agreement and the Merger (as
defined in Section 1.1 below) on the terms and conditions set forth in this
Agreement;
WHEREAS, for Federal income tax purposes, it is intended that the
transaction contemplated herein will be a reorganization described in Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, and that the parties hereto and their respective
shareholders will recognize no gain or loss for Federal income tax purposes as a
result of the consummation of the Merger;
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:
(a) at the Effective Time WF&L shall be merged with and into WPSC
provided that such merger shall have been approved by the affirmative vote of
the holders of a majority of the outstanding shares of preferred stock of WPSC
("WPSC Preferred Stock") on or before February 1, 2001 or such approval shall
not then be required under the WPSC Articles of Incorporation or if such
approval shall then be required under the WPSC Articles of Incorporation and
shall not have been obtained on or before February 1, 2001, WF&L shall be merged
with and into Acquisition Corp. (either of such mergers being hereinafter
referred to as the "Merger") in either case in accordance with the laws of the
State of Wisconsin;
<PAGE>
(b) WPSC or Acquisition Corp., as the case may be, shall be the
surviving corporation of the Merger (the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Wisconsin; and
(c) the effects and the consequences of the Merger shall be as set
forth in Section 1.2.
Section 1.2 Effects of the Merger. At the Effective Time,
(a) the Articles of Incorporation of the Surviving Corporation, as
in effect immediately prior to the Effective Time shall at and after the
Effective Time be the Articles of Incorporation of the Surviving Corporation
until thereafter amended, and
(b) the By-laws of the Surviving Corporation, as in effect
immediately prior to the Effective Time, shall at and after the Effective Time
be the By-laws of the Surviving Corporation until thereafter amended, and
(c) subject to applicable law, the directors of the Surviving
Corporation immediately prior to the Effective Time shall be the directors of
the Surviving Corporation at and after the Effective Time and shall hold office
until their respective successors are duly elected and qualified or their
earlier death, resignation or removal, and
(d) the officers of Surviving Corporation immediately prior to the
Effective time shall be the officers of the Surviving Corporation at and after
the Effective Time and shall hold office until their respective successors are
duly elected and qualified or their earlier death, resignation or removal.
Subject to the foregoing, the additional effects of the Merger shall be as
provided in the applicable provisions of the Wisconsin Business Corporation Law
(the "WBCL").
Section 1.3 Effective Time of the Merger. On or prior to the Closing
Date (as hereinafter defined), articles of merger together with a Plan of Merger
in substantially the form attached hereto as Exhibit 1.3, in the case of the
merger of WF&L with and into WPSC or in substantial the form attached hereto as
Exhibit 1.3.2 in the case of the merger of WF&L with and into Acquisition Corp.,
which Plans of Merger are incorporated by reference herein and deemed a part
hereof (each, the "Plan of Merger"), complying with the requirements of the WBCL
and the appropriate Plan of Merger, shall be executed by the Surviving
Corporation and WF&L and on the Closing Date shall be filed by the Surviving
Corporation and WF&L with the Department of Financial Institutions of the State
of Wisconsin pursuant to the WBCL. The Merger shall become effective at the time
(the "Effective Time") specified in the appropriate articles of merger filed
with respect to the Merger, or absent such specification upon such filing.
-2-
<PAGE>
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 Surviving Corporation or WF&L:
(a) Cancellation of Certain Common Stock. Each share of Common
Stock, $10 par value, of WF&L (the "WF&L Common Stock") that is owned by WF&L or
WPSR or any of their respective Subsidiaries (as hereinafter defined) shall be
canceled and shall cease to exist.
(b) Conversion of Certain Common Stock.
(i) Each issued and outstanding share of WF&L Common Stock (but
excluding shares canceled pursuant to Section 2.1(a) and Dissenting Shares
(as hereinafter defined)) shall be converted into the right to receive one
and seventy-three-one hundredths (1.73) of a share (the "Merger Ratio") of
duly authorized, validly issued, fully paid and nonassessable (except as
otherwise provided in Section 180.0622(2)(b) of the WBCL) Common Stock,
par value $1.00 per share, of WPSR ("WPSR Common Stock"), including if
applicable, associated rights (the "WPSR Rights") to purchase shares of
WPSR Common Stock pursuant to the terms of that certain Rights Agreement
between WPSR and Firstar Trust Company, as Rights Agent thereunder, dated
as of December 12, 1996 (the "WPSR Rights Agreement") provided that the
average of the closing sale prices of a share of WPSR Common Stock as
reported in the New York Stock Exchange ("NYSE") Composite Transactions as
reported in The Wall Street Journal, during the ten trading days ending
with and including the third trading day immediately preceding the
Effective Time of the Merger on which WPSR Common stock was traded on the
NYSE (hereinafter referred to as the "WPSR Average Stock Price") shall not
be more than $33.96 and not less than $27.79. In the event that the WPSR
Average Stock Price shall be more than $33.96, the Merger Ratio shall be
redetermined by dividing $58.75 by the WPSR Average Stock Price. In the
event that the WPSR Average Stock Price shall be less than $27.79, the
Merger Ratio shall be redetermined by dividing $48.08 by the WPSR Average
Stock Price. In either event, the Merger Ratio as so redetermined shall be
the basis on which shares of WF&L Common Stock are converted into the
right to receive shares of WPSR Common Stock pursuant to the Merger.
Notwithstanding the foregoing, the Merger Ratio will not be increased
beyond such number as would result in the delivery of shares of WPSR
Common Stock pursuant to the Merger in excess of 19.9% of the aggregate
number of shares of WPSR Common Stock outstanding as of the Effective
Time. Until the Distribution Date (as defined in the WPSR Rights
Agreement) all references in this Agreement to WPSR Common Stock shall be
deemed to include the associated WPSR Rights.
-3-
<PAGE>
(ii) Upon such conversions and except as otherwise provided in
Section 2.2, all such shares of WF&L Common Stock shall be canceled and
cease to exist, and each holder of a certificate formerly representing any
such shares of WF&L Common Stock shall cease to have rights with respect
thereto, except the right to receive the shares of WPSR Common Stock to be
issued in consideration therefor upon the surrender of such certificate in
accordance with Section 2.3 and any cash in lieu of fractional shares of
WPSR Common Stock.
(c) Conversion of Preferred Stock. Each issued and outstanding share
of WF&L Preferred Stock, $100 par value ("WF&L Preferred Stock"), shall be
converted into the right to receive $103 in cash plus any accrued and unpaid
dividends including a pro-rata portion of the dividend accrued from the last
dividend payment date to the Closing Date. Upon such conversion, all such shares
of WF&L Preferred Stock shall be canceled and cease to exist, and each holder of
a certificate previously representing any such shares of WF&L Preferred Stock
shall cease to have rights with respect thereto, except the right to receive the
cash payment in consideration therefor upon the surrender of such Certificate to
the Exchange Agent or other agent referred to in Section 2.2(a). Upon such
surrender of a certificate for WF&L Preferred Stock, together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
shall require, the Exchange Agent shall pay to holder of such WF&L Preferred
Stock Certificate the cash consideration for the shares of WF&L Preferred Stock
evidenced by such certificate. WPSR and the holder of the shares of WF&L
Preferred Stock may agree upon an alternative method for surrender of
certificates for shares of the WF&L Preferred Stock.
Section 2.2 Issuance of New Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, WPSR shall deposit with Firstar Bank, N.A., Milwaukee,
Wisconsin, or other appropriate entity mutually agreeable to WPSR and WF&L (the
"Exchange Agent"), certificates representing shares of WPSR Common Stock
required to effect the issuance referred to in Section 2.1, together with cash
payable in respect of fractional shares pursuant to Section 2.2(d) and the cash
payable with respect to the WF&L Preferred Stock, provided that WPSR and the
holder of the Shares of WF&L Preferred Stock may agree upon an alternative
method for the payment for the WF&L Preferred Stock.
(b) Issuance Procedures.
(i) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate or certificates
(the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of WF&L Common Stock (the "Converted Common
Shares"), that were converted into the right to receive shares of WPSR
Common Stock pursuant to Section 2.1 and the Plan of Merger, (A) a form of
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Exchange Agent), and (B)
instructions for
-4-
<PAGE>
use in effecting the surrender of the Certificates in exchange for
certificates representing WPSR Common Stock.
(ii) Upon surrender of a Certificate to the Exchange Agent for
cancellation (or to such other agent or agents as may be appointed by
agreement of WPSR and WF&L), together with a duly executed letter of
transmittal and such other documents as the Exchange Agent shall require,
the holder of such Certificate shall be entitled to receive a certificate
representing that number of whole shares of WPSR Common Stock which such
holder has the right to receive pursuant to the provisions of this Article
II and the Plan of Merger. In the event of a transfer of ownership of
Converted Common Shares which is not registered in the transfer records of
WF&L, a certificate representing the proper number of shares of WPSR
Common Stock may be issued to a transferee if the Certificate representing
such Converted Common Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and by evidence satisfactory to the Exchange Agent that any applicable
stock transfer taxes have been paid. If any Certificate shall have been
lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit of
that fact from the holder claiming such Certificate to be lost, mislaid,
stolen or destroyed, (ii) such bond, security or indemnity as WPSR or the
Exchange Agent may reasonably require, and (iii) any other documentation
necessary to evidence and effect the bona fide exchange thereof, the
Exchange Agent shall issue to such holder a certificate representing the
number of shares of WPSR Common Stock into which the shares represented by
such lost, stolen, mislaid or destroyed Certificate shall have been
converted.
(iii) Until surrendered as contemplated by this Section 2.2,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing WPSR Common Stock and cash in lieu of any fractional shares
of WPSR Common Stock contemplated by this Section 2.2.
(c) Distributions with Respect to Unsurrendered Shares.
(i) No dividends or other distributions declared or made after
the Effective Time with respect to shares of WPSR Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of WPSR Common Stock
to be delivered upon surrender thereof and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section
2.2(d) until the holder of record of such Certificate (or a transferee as
described in Section 2.2(b)) shall surrender such Certificate.
(ii) Subject to the effect of unclaimed property, escheat and
other applicable laws, following surrender of any such Certificate, there
shall be paid to the record holder (or a transferee as described in
Section 2.2(b)) thereof the certificates representing whole shares of WPSR
common Stock issued in consideration therefor, without interest,
-5-
<PAGE>
(A) at the time of such surrender, the amount of cash in
lieu of a fractional share of WPSR Common Stock to which such holder
(or transferee) is entitled pursuant to Section 2.2(d) and the
amount of dividends or other distributions with a record date after
the Effective Time which theretofore became payable but which were
not paid by reason of Section 2.2(c)(i) with respect to such whole
shares of WPSR Common Stock, and
(B) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of WPSR Common Stock.
(d) No Fractional Securities.
(i) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of WPSR Common Stock
shall be issued upon the surrender for exchange of Certificates and such
fractional shares shall not entitle the owner thereof to vote as, or to
any other rights of, a holder of WPSR Common Stock.
(ii) A holder of WF&L Common Stock who would otherwise have been
entitled to receive a fractional share of WPSR Common Stock shall be
entitled to receive a cash payment in lieu of such fractional share in an
amount equal to the product (rounded to the nearest cent) of such fraction
(rounded to the nearest thousandth) multiplied by the average of the last
reported sales prices, per share of WPSR Common Stock as reported in the
NYSE Composite Transactions as reported in The Wall Street Journal for the
ten trading days ending with and including the third trading day
immediately preceding the Effective Time on which WPSR Common Stock was
traded on the NYSE, without any interest thereon.
(e) Closing of WF&L Common Stock Transfer Books. From and after the
Effective Time, the stock transfer books of WF&L with respect to shares of WF&L
Common Stock issued and outstanding prior to the Effective Time shall be closed
and no transfer of any such shares shall thereafter be made. If, after the
Effective Time, Certificates are presented to WPSR, they shall be canceled and
exchanged for certificates representing the appropriate number of shares of WPSR
Common Stock as provided in this Section 2.2.
(f) Termination of Duties of Exchange Agent. Any certificates
representing WPSR Common Stock deposited with the Exchange Agent pursuant to
Section 2.2(a) and not exchanged within one year after the Effective Time
pursuant to this Section 2.2 shall be returned by the Exchange Agent to WPSR,
which shall thereafter act as Exchange Agent. All funds held by the Exchange
Agent for payment to the holders of unsurrendered Certificates or to the holder
of shares of WF&L Preferred Stock and unclaimed at the end of one year from the
Effective Time shall be returned to WPSR, after which time any holder of
unsurrendered Certificates shall look as a general unsecured creditor only to
WPSR for payment of such funds to which such holder may be due, subject to
applicable law. WPSR shall not be liable to
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any person for such shares or funds delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
Section 2.3 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, if
Sections 180.1301 through 180.1331 of the WBCL ("Subchapter XIII") shall be
applicable to the Merger, shares of WF&L Common Stock that are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who have not voted such shares in favor of the Merger, who shall
have delivered, prior to any vote on the merger, a written objection to the
Merger in the manner provided in Subchapter XIII and who as of the Effective
Time, shall not have effectively withdrawn or lost such right to dissenters'
rights ("Dissenting Shares") shall not be converted into or represent a right to
receive WPSR Common Stock and WPSR Rights pursuant to Section 2.1, and cash in
lieu of a fractional share pursuant to Section 2.2(d) (collectively the "Merger
Consideration"), but the holders of Dissenting Shares shall be entitled only to
such rights as are granted by Subchapter XIII. Each holder of Dissenting Shares
who becomes entitled to payment for such shares pursuant to Subchapter XIII
shall receive payment therefor from the surviving corporation in the Merger in
accordance with Subchapter XIII; provided, however, that if any such holder of
Dissenting Shares shall have effectively withdrawn such holder's demand for
appraisal of such shares or lost such holder's right to appraisal and payment of
such shares under Subchapter XIII, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such shares and each such share shall
thereupon be deemed, as of the Effective Time, to have been cancelled,
extinguished and converted into and represent the right to receive payment of
the Merger Consideration as provided in Section 2.1.
(b) WF&L shall give WPSR (i) prompt notice of any written demand for
fair value, any withdrawal of a demand for fair value and any other instrument
served pursuant to Subchapter XIII received by WF&L and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for fair value
under such Subchapter XIII. WF&L shall not, except with the prior written
consent of WPSR, voluntarily make any payment with respect to any demand for
fair value or offer to settle or settle any such demand.
ARTICLE III
THE CLOSING
Section 3.1 The Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin, at 10:00 a.m. (Milwaukee, Wisconsin local time) on the
third business day immediately following the date on which the last of the
conditions set forth in Article VIII hereof is fulfilled or waived, or at such
other time and date and place as WPSR and WF&L shall mutually agree (the
"Closing Date"), provided, however, that if the third business day immediately
following the date on which the last of the conditions set forth in Article VIII
hereof is fulfilled or waived is on or after December 15, 2000 and before
February 2, 2001,
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then the Closing shall take place on February 2, 2001, or on such other date as
WPSR and WF&L shall mutually agree upon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WPSR
WPSR represents and warrants to WF&L as follows:
Section 4.1 Organization and Qualification.
(a) Except as set forth in Section 4.1 of the Disclosure Schedule to
this Agreement prepared and delivered by WPSR (the "WPSR Disclosure Schedule"),
each of WPSR and the WPSR Subsidiaries (as hereinafter defined) is a corporation
duly organized and validly existing under the laws of its respective
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary approvals and
orders to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted
and is duly qualified and in good standing (to the extent applicable) to do
business in each respective jurisdiction in which the nature of its business or
the ownership or leasing of its assets and properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so qualified
and in good standing would not, when taken together with all other such
failures, have a WPSR Material Adverse Effect.
(b) As used in this Agreement,
(i) "Subsidiary" of a person shall mean any corporation or other
entity (including partnerships and other business associations) of which
at least a majority of the outstanding capital stock or other voting
securities having voting power under ordinary circumstances to elect
directors or similar members of the governing body of such corporation or
entity shall at the time be held, directly or indirectly, by such person
or entity.
(ii) "Joint Venture" of a person or entity shall mean any
corporation or other entity (including partnerships and other business
associations) that is not a Subsidiary of such person or entity, in which
such person or one or more of its Subsidiaries owns directly or indirectly
an equity interest, other than equity interests held for passive
investment purposes which are less than 5% of each class of the
outstanding voting securities or equity interests of any such entity.
(iii) "WPSR Subsidiary" shall mean any Subsidiary of WPSR.
(iv) "WPSR Material Adverse Effect" shall mean a material
adverse effect on the business, operations, properties, assets, condition
(financial or otherwise), or the results of operations of WPSR and the
WPSR Subsidiaries taken as a whole or on the consummation of the
transactions contemplated hereby.
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Section 4.2 Capitalization.
(a) The authorized capital stock of WPSR consists of 100,000,000
shares of WPSR Common Stock of which 26,468,372 shares were issued and
outstanding as of May 31, 2000;
(b) The authorized capital stock of WPSC consists of 32,000,000
shares of common stock $4.00 par value of which 23,896,962 shares are issued and
outstanding as of May 31, 2000 and 1,000,000 shares of WPSC Preferred Stock,
$100 par value, of which 511,887 shares are issued and outstanding as of May 31,
2000;
(c) The authorized capital stock of Acquisition Corp. consists of
9,000 shares of common stock, $1.00 par value of which 1,000 shares are issued
and outstanding as of June 21, 2000;
(d) All of the issued and outstanding shares of WPSR Common Stock
and shares of common stock of WPSC and Acquisition Corp. and of WPSC Preferred
Stock are, and any shares of WPSR Common Stock issued pursuant to the Merger
will be, duly authorized, validly issued, fully paid, nonassessable (except as
otherwise provided in Section 180.0622(2)(b) of the WBCL) and free of preemptive
rights.
Section 4.3 Authority; Non-contravention; Statutory Approvals;
Compliance.
(a) Authority. WPSR, WPSC and Acquisition Corp. have all requisite
corporate power and authority to enter into this Agreement, and, subject to the
applicable WPSR Required Statutory Approvals (as hereinafter defined), to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by WPSR, WPSC and Acquisition Corp. and the consummation by WPSR
and WPSC or Acquisition Corp. as the case may be, of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of WPSR, WPSC and Acquisition Corp. This Agreement has been duly and
validly executed and delivered by WPSR, WPSC and Acquisition Corp. and, assuming
the due authorization, execution and delivery hereof by WF&L, constitutes the
valid and binding obligations of WPSR, WPSC and Acquisition Corp. enforceable
against them in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceeding therefor may
be brought.
(b) Non-contravention. Except as set forth in Section 4.3(b) of the
WPSR Disclosure Schedule, the execution and delivery of this Agreement by WPSR,
WPSC and Acquisition Corp. do not, and the consummation of the transactions
contemplated hereby will not violate, conflict with, or result in a breach of
any provision of, or constitute a default (with or without notice or lapse of
time or both) under, or result in the termination or modification of, or
accelerate the performance required by, or result in a right of termination,
cancellation, or acceleration of any obligation or the loss of a benefit under,
or result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of WPSR or
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any of the WPSR Subsidiaries or (any such violation, conflict, breach, default,
termination, modification, cancellation, acceleration, loss or creation, a
"Violation" with respect to WPSR, such term when used in Article V having a
correlative meaning with respect to WF&L) pursuant to any provisions of:
(i) the Articles of Incorporation, By-laws or similar governing
documents of WPSR or any of the WPSR Subsidiaries;
(ii) subject to obtaining the WPSR Required Statutory Approvals,
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority (as
hereinafter defined) applicable to WPSR or any of the WPSR Subsidiaries or
any of their respective properties or assets; or
(iii) subject to obtaining the third-party consents set forth in
Section 4.3(b) of the WPSR Disclosure Schedule (the "WPSR Required
Consents") any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which WPSR or any of the WPSR
Subsidiaries is a party or by which it or any of its properties or assets
may be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such Violations which, in
the aggregate do not, and insofar as reasonably can be foreseen, would not, have
a WPSR Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration
with, or notice to or authorization, consent or approval of, any court, Federal,
state, local or foreign governmental or regulatory body (including a stock
exchange or other self-regulatory body) or authority (each, a "Governmental
Authority") is necessary for the execution and delivery of this Agreement by
WPSR, WPSC or Acquisition Corp. or the consummation by WPSR and WPSC or
Acquisition Corp., as the case may be, of the transactions contemplated hereby,
the failure to obtain, make or give which would have, in the aggregate, a WPSR
Material Adverse Effect, except as described in Section 4.3(c) of the WPSR
Disclosure Schedule (the "WPSR Required Statutory Approvals," it being
understood that references in this Agreement to "obtaining" such WPSR 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).
Section 4.4 Reports and Financial Statements.
(a) WPSR has made available to WF&L a true and complete copy of each
form, report, schedule, registration statement and definitive proxy statement
filed by each of WPSR and WPSC with the Securities and Exchange Commission (the
"SEC") since January 1, 1997 (as such documents have since the time of their
filing been amended or supplemented, the "WPSR SEC Reports"). As of their
respective dates, the WPSR SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be
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stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements and unaudited
interim financial statements of WPSR and WPSC, as the case may be, included in
the WPSR SEC Reports (collectively, the "WPSR Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q under the Securities Exchange Act of 1934, as amended, (the "Exchange
Act")) and fairly present in all material respects the financial position of
WPSR or WPSC, as the case may be, as of the dates thereof and the results of its
operations and cash flows for the periods then ended, subject, in the case of
the unaudited interim financial statements, to normal, recurring audit
adjustments.
(c) True, accurate and complete copies of the Restated Articles of
Incorporation and By-laws of WPSR and the WPSR Rights Agreement, as in effect on
the date hereof, have been delivered or made available to WF&L.
Section 4.5 Absence of Certain Changes or Events. Except as
disclosed in the WPSR and WPSC SEC Reports filed prior to the date hereof or as
set forth in Section 4.5 of the WPSR Disclosure Schedule, since December 31,
1999, WPSR and each of the WPSR Subsidiaries have conducted their businesses
only in the ordinary course of their respective businesses consistent with past
practice and there has not been, and no facts or conditions exist (other than
facts or conditions of general applicability to electric and gas utility
companies in the region in which WPSR operates) which, in the aggregate have, or
insofar as reasonably can be foreseen, would have, a WPSR Material Adverse
Effect.
Section 4.6 Litigation. Except as disclosed in the WPSR SEC Reports
filed prior to the date hereof or as set forth in Section 4.6 of the WPSR
Disclosure Schedule,
(a) there are no claims, suits, actions or proceedings pending or,
to the knowledge of WPSR, threatened, nor are there, to the knowledge of WPSR,
any investigations or reviews pending or threatened against, relating to or
affecting WPSR or any of the WPSR Subsidiaries;
(b) there have not been any developments since December 31, 1999
with respect to such disclosed claims, suits, actions, proceedings,
investigations or reviews; and
(c) there are no judgments, decrees, injunctions, rules or orders of
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to WPSR or any of the WPSR Subsidiaries,
which, when taken together with any other nondisclosures of matters described in
clauses (a), (b) and (c), have, or insofar as reasonably can be foreseen, would
have, a WPSR Material Adverse Effect.
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Section 4.7 Registration Statement and Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of WPSR for inclusion or incorporation by reference in:
(i) the registration statement on Form S-4 to be filed with the
SEC by WPSR in connection with the issuance of shares of WPSR Common Stock
in the Merger (the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act of 1933, as amended (the "Securities
Act"), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and
(ii) the joint proxy statement, in definitive form, relating to
the meetings of WF&L shareholders and holders of shares of WPSC Preferred
Stock to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to such shareholders and, as the same may be
amended or supplemented, at the time of the meetings of WF&L shareholders
and of holders of shares of WPSC Preferred Stock to be held in connection
with the Merger, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
(b) The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the applicable
rules and regulations thereunder.
Section 4.8 Vote Not Required. The approval by the holders of WPSR
Common Stock is not required for any of the transactions contemplated by this
Agreement.
Section 4.9 Ownership of WF&L Common Stock. Except as set forth in
Section 4.9 of the WPSR Disclosure Schedule, WPSR does not "beneficially own"
(as such term is defined for purposes of Section 13(d) of the Exchange Act) any
shares of WF&L Common Stock.
Section 4.10 WPSR Rights Agreement. Assuming the accuracy of the
representations contained in Section 5.16, the consummation of the transactions
contemplated by this Agreement will not result in the triggering of any right or
entitlement of WPSR shareholders under the WPSR Rights Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WF&L
WF&L represents and warrants to WPSR and Acquisition Corp. as
follows:
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Section 5.1 Organization and Qualification.
(a) Except as set forth in Section 5.1 of the Disclosure Schedule to
this Agreement prepared and delivered by WF&L (the "WF&L Disclosure Schedule"),
each of WF&L and its wholly-owned subsidiary WFL Service Company, Inc., a
corporation organized under the laws of the State of Wisconsin ("WFL Service")
is a corporation duly organized, validly existing under the laws of the State of
Wisconsin, has all requisite corporate power and authority, and has been duly
authorized by all necessary approvals and orders to own, lease and operate its
assets and properties to the extent owned, leased and operated and to carry on
its business as it is now being conducted and is duly qualified and in good
standing (to the extent applicable) to do business in each respective
jurisdiction in which the nature of its business or the ownership or leasing of
its assets and properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not, when taken together with all other such failures, have a "WF&L Material
Adverse Effect." The foregoing is not a representation as to the adequacy of any
rate order to which WF&L is subject.
(b) As used in this Agreement, "WF&L Material Adverse Effect" shall
mean a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), or the results of operations of WF&L and WFL
Service taken as a whole or on the consummation of the transactions contemplated
hereby.
Section 5.2 Subsidiaries.
(a) WF&L has no Subsidiary other than WFL Service and neither WF&L
nor WFL Service has an equity interest in any Joint Venture.
(b) Except as set forth in Section 5.2 of the WF&L Disclosure
Schedule, all of the issued and outstanding shares of capital stock of WFL
Service are duly authorized, validly issued, fully paid, nonassessable and free
of preemptive rights, and are owned, directly by WF&L free and clear of any
liens, claims, encumbrances, security interests, equities, charges and options
of any nature whatsoever, and there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating WFL Service to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of its capital stock, or granting
to any person other than WF&L any right to participate in its dividends or
earnings or obligating it to grant, extend or enter into any such agreement or
commitment.
Section 5.3 Capitalization.
(a) The authorized capital stock of WF&L consists of 2,000,000
shares of WF&L Common Stock, $10 par value, of which 1,019,620 shares are issued
and outstanding as of the date hereof and 50,000 shares of preferred stock, $100
par value of which 20,000 shares are issued and outstanding.
(b) The authorized capital stock of WFL Service consists of
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(i) 10,000 shares of common stock, no par value, of which 8,000
shares are issued and outstanding as of the date hereof ("WFL Service
Common Stock"), and
(c) All of the issued and outstanding shares of WF&L Common Stock
and WFL Service Common Stock are duly authorized, validly issued, fully paid and
nonassessable except as otherwise provided in Section 180.0602(2)(b) of the
WBCL.
(d) Except as otherwise set forth in Section 5.3 of the WF&L
Disclosure Schedule, as of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating WF&L or WFL Service to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of WF&L, or obligating WF&L to grant, extend or enter into any
such agreement or commitment.
Section 5.4 Authority; Non-contravention; Statutory Approvals;
Compliance.
(a) Authority. WF&L has all requisite corporate power and authority
to enter into this Agreement and, subject to the applicable WF&L Shareholders'
Approval (as hereinafter defined) and the applicable WF&L Required Statutory
Approvals (as hereinafter defined), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation by
WF&L of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of WF&L, subject to obtaining the
applicable WF&L Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by WF&L and, assuming the due authorization, execution
and delivery hereof and thereof by WPSR and Acquisition Corp., constitutes the
valid and binding obligation of WF&L enforceable against it in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except that the availability of equitable remedies,
including specific performance, may be subject to the discretion of any court
before which any proceeding therefor may be brought.
(b) Non-contravention. Except as set forth in Section 5.4(b) of the
WF&L Disclosure Schedule, the execution and delivery of this Agreement by WF&L
do not, and the consummation of the transactions contemplated hereby will not,
result in a Violation pursuant to any provisions of:
(i) subject to obtaining the consent of the holder of the shares
of WF&L Preferred Stock, the Articles of Incorporation, By-laws or similar
governing documents of WF&L or WFL Service;
(ii) subject to obtaining the WF&L Required Statutory Approvals,
and the receipt of the WF&L Shareholders' Approval, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any
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Governmental Authority applicable to WF&L or WFL Service or any of
their respective properties or assets, or
(iii) subject to obtaining the third-party consents set forth in
Section 5.4(b) of the WF&L Disclosure Schedule (the "WF&L Required
Consents"), any material note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which WF&L or WFL
Service is a party or by which it or any of its properties or assets may
be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such violations which, in
the aggregate do not, and insofar as reasonably can be foreseen, would not, have
a WF&L Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration
with, or notice to or authorization, consent or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement or the
consummation by WF&L of the transactions contemplated hereby, except as
described in this Agreement or Section 5.4(c) of the WF&L Disclosure Schedule
(the "WF&L Required Statutory Approvals", the failure to obtain, make or give
which would have, in the aggregate, a WF&L Material Adverse Effect, it being
understood that references in this Agreement to "obtaining" such WF&L 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.
(i) (A) Except as set forth in Section 5.4(d), Section 5.10 or
Section 5.11 of the WF&L Disclosure Schedule, to the knowledge of WF&L
neither WF&L nor WFL Service is in violation of, is under investigation
with respect to any violation of, or has been given notice or been charged
with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for violations which, in the aggregate do not, and insofar as
reasonably can be foreseen, would not, have a WF&L Material Adverse
Effect.
(B) For purposes of this Agreement "knowledge" shall mean,
with respect to any party hereto, the actual knowledge after due inquiry
of principal executive officers of such party.
(ii) Except as set forth in Section 5.4(d) or in Section 5.11
of the WF&L Disclosure Schedule, to the knowledge of WF&L, WF&L and WFL
Service have all permits, licenses, franchises and other government
authorizations, consents and approvals (collectively "Permits") necessary
to conduct their businesses as presently conducted, except those the
failure of which to obtain, in the aggregate do not, and insofar as
reasonably can be foreseen, would not, have a WF&L Material Adverse
Effect.
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(iii) Except as set forth in Section 5.4(d) of the WF&L
Disclosure Schedule, each of WF&L and WFL Service is not in breach,
violation, or default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under,
(A) its Articles of Incorporation or By-laws, or
(B) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which it is a party or by which it is bound or
to which any of its property is subject, except for breaches,
violations or defaults which, in the aggregate do not, and insofar
as reasonably can be foreseen, would not, have a WF&L Material
Adverse Effect.
Section 5.5 Reports and Financial Statements.
(a) The filings required to be made by WF&L and WFL Service since
January 1, 1997 under Wisconsin laws and regulations relating to public
utilities have been filed with the Public Service Commission of Wisconsin
including all forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto, and
complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate statute and the rules and regulations
thereunder.
(b) WF&L has delivered to WPSR a true and complete copy of its
audited consolidated balance sheets as of December 31, 1997, December 31, 1998,
and December 31, 1999 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999 (including the related notes and schedules thereto) and
of its unaudited consolidated financial statements for the three months ended
March 31, 1999 and March 31, 2000 (collectively the "WF&L Financial
Statements").
(c) The WF&L Financial Statements have been prepared in accordance
with GAAP (except as may be indicated therein or in the notes thereto and except
for the absence of notes to unaudited statements) and fairly present in all
material respects the financial position of WF&L, as of the dates thereof and
the results of its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring audit adjustments.
(d) True, accurate and complete copies of the Articles of
Incorporation and By-laws of WF&L, as in effect on the date hereof, have been
delivered to WPSR.
Section 5.6 Absence of Certain Changes or Events. Except as set
forth in Section 5.6 of the WF&L Disclosure Schedule, since December 31, 1999,
WF&L and WFL Service have conducted their businesses only in the ordinary course
of their respective businesses consistent with past practice and there has not
been, and no facts or conditions exist (other than facts or conditions of
general applicability to gas distribution utility companies in
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Wisconsin, including, but not limited to general utility industry restructuring
orders or legislation) which, in the aggregate have or, insofar as reasonably
can be foreseen, would have, a WF&L Material Adverse Effect.
Section 5.7 Litigation. Except as set forth in Section 5.7, Section
5.9 or Section 5.11 of the WF&L Disclosure Schedule,
(a) there are no claims, suits, actions or proceedings pending or,
to the knowledge of WF&L, threatened, nor are there, to the knowledge of WF&L,
any investigations or reviews pending or threatened against, relating to or
affecting WF&L or WFL Service;
(b) there have not been any developments since December 31, 1999
with respect to such disclosed claims, suits, actions, proceedings,
investigations or reviews; and
(c) there are no judgments, decrees, injunctions, rules or orders of
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to WF&L or WFL Service,
which, when taken together with any other nondisclosures of matters described in
clauses (a), (b) and (c), have, or insofar as reasonably can be foreseen, would
have, a WF&L Material Adverse Effect.
Section 5.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of WF&L for inclusion or
incorporation by reference in:
(i) the Registration Statement will, at the time the Registration
Statement is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, not misleading, and
(ii) the Proxy Statement will, at the date mailed to shareholders
and, as the same may be amended or supplemented, at the time of the
meeting of shareholders to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 5.9 Tax Matters. Except as set forth in Section 5.9 of the
WF&L Disclosure Schedule:
(a) Filing of Timely Tax Returns. Each of WF&L and WFL Service have
filed (or there has been filed on its behalf) all Tax Returns required to be
filed by each of them under applicable law. All such Tax Returns were and are in
all material respects true, complete and correct and filed on a timely basis.
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(b) Payment of Taxes. Each of WF&L and WFL Service have, within the
time and in the manner prescribed by law, paid all Taxes that are currently due
and payable except for those contested in good faith and for which adequate
reserves have been established on their books and records.
(c) Tax Reserves. Each of WF&L and WFL Service have established on
their books and records reserves adequate to pay all Taxes and reserves for
deferred income taxes in accordance with GAAP and requirements of the Public
Service Commission of Wisconsin.
(d) Tax Liens. There are no Tax liens upon the assets of WF&L or WFL
Service except liens for Taxes not yet due.
(e) Withholding Taxes. Each of WF&L and WFL Service have complied in
all material respects with the provisions of the Code relating to the
withholding of Taxes, as well as similar provisions under any other laws, and
have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required.
(f) Extensions of Time for Filing Tax Returns. Neither WF&L nor WFL
Service has requested any extension of time within which to file any Tax Return,
which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Neither WF&L nor WFL Service
has executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
(h) No Assessments. No deficiency for any Taxes has been proposed,
asserted or assessed against WF&L or WFL Service that has not been resolved and
paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of WF&L or WFL Service.
(j) Powers of Attorney. No power of attorney currently in force has
been granted by WF&L or WFL Service concerning any Tax matter.
(k) Tax Rulings. Neither WF&L nor WFL Service has received a Tax
Ruling or entered into a Closing Agreement with any taxing authority that would
have a continuing adverse effect after the Closing Date.
(l) Availability of Tax Returns. For the three years ended December
31, 1999, WF&L has made available to WPSR complete and accurate copies of (i)
all Tax Returns, and any amendments thereto, filed by WF&L or WFL
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Service, (ii) all audit reports received from any taxing authority relating to
any Tax Return filed by WF&L or WFL Service, and (iii) any Closing Agreements
entered into by WF&L or WFL Service with any taxing authority.
(m) Tax Sharing Agreements. Except for agreements among members of
the WF&L consolidated group, neither WF&L nor WFL Service is a party to any
agreement relating to allocating or sharing of Taxes.
(n) Code Section 280G. Except as set forth in Section 5.9(n) of the
WF&L Disclosure Schedule, neither WF&L nor WFL Service is a party to any
agreement, contract, or arrangement that could result, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
(o) Liability for Others. Neither WF&L nor WFL Service has any
liability for Taxes of any person other than WF&L and WFL Service (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor, (ii) by contract, or (iii)
otherwise.
(p) Certain Definitions. As used in this Agreement:
(i) "Taxes " means any Federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including all net
income, gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and
includes any interest and penalties (civil or criminal) on or additions to
any such taxes;
(ii) "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, combined or consolidated returns
for a group of entities;
(iii) "Tax Ruling" means a written ruling of a taxing authority
relating to Taxes; and
(iv) "Closing Agreement" means a written and legally binding
agreement with a taxing authority relating to Taxes.
Section 5.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 5.10(a) of the WF&L Disclosure Schedule
contains a true and complete list of each employee benefit plan, fund program,
contract, policy or arrangement covering employees, former employees or
directors of WF&L and WFL Service or their beneficiaries, or providing benefits
to such persons in respect of services provided to any such entity, including,
but not limited to, employee benefit plans within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
any severance or change in control agreement (collectively, the
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"WF&L Benefit Plans"). For the purposes of this Section 5.10 only, the term
"WF&L" shall be deemed to include the predecessors of such company.
(b) Contributions. Except as set forth in Section 5.10(b) of the
WF&L Disclosure Schedule, all material contributions and other payments required
to be made by WF&L or WFL Service to any WF&L Benefit Plan (or to any person
pursuant to the terms thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the WF&L Financial Statements.
(c) Multiemployer Pension Plans. Neither WF&L nor WFL Service nor
any member of a controlled group (as defined in Section 401(a)(14) of ERISA,
disregarding the reference to single employer plans) that includes WF&L or WFL
Service contributes to or is obligated to contribute to, or has during the past
ten (10) years contributed to or been obligated to contribute to, a
multiemployer pension plan (as defined in Section 4011(a)(3) of ERISA).
(d) Title IV of ERISA. With respect to each WF&L Benefit Plan and
any other plan, fund or program maintained or contributed to during the past ten
(10) years by WF&L or WFL Service or any member of a controlled group (as
defined in Section 401(a)(14) of ERISA) that includes WF&L or WFL Service and
that is subject to Title IV of ERISA:
(i) no such plan has been terminated so as to subject, directly
or indirectly, WF&L or WFL Service to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of ERISA on the
assets of WF&L or WFL Service;
(ii) no proceeding has been initiated or threatened by any
person (including the Pension Benefit Guaranty Corporation ("PBGC")) to
terminate any such plan;
(iii) to the knowledge of WF&L, no condition or event exists or
is expected to occur that could subject, directly or indirectly, WF&L or
WFL Service to any liability, contingent or otherwise, or the imposition
of any lien under Title IV of ERISA on the assets of WF&L or WFL Service,
whether to the PBGC or to any other person or otherwise;
(iv) if any such plan were to be terminated, no assets of WF&L or
WFL Service would be subject, directly or indirectly, to any liability,
contingent or otherwise, or the imposition of any lien under Title IV of
ERISA other than for the payment of benefits in the ordinary course of
business;
(v) no "reportable event" (as defined in Section 4043 of ERISA
other than a reportable event with respect to which the 30-day notice to
the PBGC has been waived) has occurred with respect to any such plan; and
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(vi) no such plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred an "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code), whether
or not such deficiency has been waived.
(e) Qualification; Compliance. Except as set forth in Section
5.10(e) of the WF&L Disclosure Schedule, each of the WF&L Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified as to
form, and, to the knowledge of WF&L, no circumstances exist that are reasonably
expected by WF&L to result in the revocation of any such determination. To the
knowledge of WF&L, WF&L is in compliance in all respects with, and each of the
WF&L Benefit Plans is and has been operated in accordance with the term of such
plan and in all respects in compliance with, all applicable laws, rules and
regulations governing each such plan, including, without limitation, ERISA and
the Code, except for any violations that, in the aggregate do not, and insofar
as reasonably can be foreseen, would not, give rise to a WF&L Material Adverse
Effect. To the knowledge of WF&L, each WF&L Benefit Plan (and where applicable,
its related trust) intended to provide for the deferral of income, the reduction
of salary or other compensation, or to afford other income tax benefits,
complies in all material respects with the requirements of the applicable
provisions of the Code or other laws, rules and regulations required to provide
such income tax benefits.
(f) Liabilities. With respect to the WF&L Benefit Plans,
individually and in the aggregate, no event has occurred, and, to the knowledge
of WF&L, there does not now exist any condition or set of circumstances that
could subject WF&L or any of the WF&L Subsidiaries to any liability arising
under the Code, ERISA or any other applicable law (including, without
limitation, any liability of any kind whatsoever, whether direct or indirect,
contingent, inchoate or otherwise, to any such plan or the PBGC), or under any
indemnity agreement to which WF&L is subject, which liability, excluding
liability for PBGC premiums, benefit claims and funding obligations payable in
the ordinary course, has, or insofar as reasonably can be foreseen, would have,
a WF&L Material Adverse Effect.
(g) Welfare Plans. Except as set forth in Section 5.10(g) of the
WF&L Disclosure Schedule, (i) none of the WF&L Benefit Plans that are "welfare
plans" within the meaning of Section 3(1) of ERISA, provides for any benefits
(and neither WF&L nor WFL Service has any obligation to provide benefits)
payable to or on behalf of any employee or director after termination of
employment or service, as the case may be, other than elective continuation
coverage required to be provided under Section 4980B of the Code or Part 6 of
Title I of ERISA or coverage which expires at the end of the calendar month
following such event, and (ii) with respect to each WF&L Benefit Plan (or other
plan, contract or arrangement under which WF&L or WFL Service has an obligation
to provide benefits) identified in Section 5.10(g) of the WF&L Disclosure
Schedule as providing welfare benefits payable to or on behalf of any employee
or director after termination of employment or service, WF&L or WFL Service may
at any time amend, modify or terminate such benefits.
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(h) Documents made Available. WF&L has made available to WPSR a true
and correct copy of each collective bargaining agreement to which WF&L or WFL
Service is a party or under which WF&L or WFL Service has obligations and, with
respect to each WF&L Benefit Plan, where applicable,
(i) such current plan and summary plan description,
(ii) the most recent annual report filed with the IRS,
(iii) each current related trust agreement, insurance contract,
service provider or investment management agreement (including all
amendments to each such document),
(iv) the most recent determination of the IRS with respect to
the qualified status of such WF&L Benefit Plan, and
(v) the most recent actuarial report or valuation.
(i) Payments Resulting from Merger. Except as set forth in Section
5.10(i) of the WF&L Disclosure Schedule:
(i) The consummation or announcement of any transaction
contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or further acts or events) result in any
(A) payment (whether of severance pay or otherwise) becoming
due from WF&L or WFL Service to any officer, employee, former
employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement that would not have been paid without
regard to such consummation or announcement or
(B) benefit under any WF&L Benefit Plan being established
or becoming accelerated, vested or payable; and
(ii) neither WF&L nor WFL Service is a party to
(A) any management, employment, deferred compensation,
severance (including any payment, right or benefit resulting from a
change in control), bonus or other contract for personal services
with any officer, director or employee,
(B) any consulting contract with any person who prior to
entering into such contract was a director or officer of WF&L, or
(C) any material plan, agreement, arrangement or
understanding similar to any of the foregoing.
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(j) Labor Agreements. Except as set forth in Section 5.10(j) of the
WF&L Disclosure Schedule, as of the date hereof, neither WF&L nor WFL Service is
a party to any collective bargaining agreement or other labor agreement with any
union or labor organization. To the knowledge of WF&L, as of the date hereof,
there is no current union representation question involving employees of WF&L or
WFL Service, nor does WF&L know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any such
employees. Except as disclosed in Section 5.10(j) of the WF&L Disclosure
Schedule,
(i) there is no material unfair labor practice, employment
discrimination or other complaint against WF&L or WFL Service pending, or
to the knowledge of WF&L, threatened,
(ii) there is no strike, lockout or material dispute, slowdown
or work stoppage pending, or to the knowledge of WF&L, threatened, against
or involving WF&L or WFL Service, and
(iii) there is no material proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of WF&L,
threatened, in respect of which any director, officer, employee or agent
of WF&L or WFL Service is or may be entitled to claim indemnification from
WF&L or WFL Service pursuant to their respective Articles of Incorporation
or By-laws.
Section 5.11 Environmental Protection. Except as set forth in
Section 5.11 of the WF&L Disclosure Schedule:
(a) Compliance.
(i) To the knowledge of WF&L, each of WF&L and WFL Service is
in compliance with all applicable Environmental Laws, except where the
failure to be in compliance, in the aggregate does not, and insofar as
reasonably can be foreseen, would not, have a WF&L Material Adverse
Effect; and
(ii) neither WF&L nor WFL Service has received any
communication (written or oral) from any person or Governmental Authority
that alleges that WF&L or WFL Service is not in such compliance with
applicable Environmental Laws.
(b) Environmental Permits. To the knowledge of WF&L each of WF&L and
WFL Service has obtained all environmental, health and safety permits and
governmental authorizations (collectively "Environmental Permits") necessary for
the construction of their facilities and the conduct of their operations, as
applicable, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and WF&L and WFL Service are in compliance with all terms and
conditions of the Environmental Permits, except where the failure to be in such
compliance, in the aggregate does not, and insofar as reasonably can be
foreseen, would not, have a WF&L Material Adverse Effect.
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(c) Environmental Claims. There is no material Environmental Claim
pending
(i) against WF&L or WFL Service,
(ii) against any person or entity whose liability for any
Environmental Claim WF&L or WFL Service has or may have retained or
assumed either contractually or by operation of law, or
(iii) against any real or personal property or operations which
WF&L or WFL Service owns, leases or manages, in whole or in part.
(d) Releases. To the knowledge of WF&L, there have not been any
material Releases of any Hazardous Material that would be reasonably likely to
form the basis of any material Environmental Claim against WF&L or WFL Service,
or against any person or entity whose liability for any material Environmental
Claim WF&L or WFL Service has or may have retained or assumed either
contractually or by operation of law.
(e) Predecessors. To the knowledge of WF&L, with respect to any
predecessor of WF&L or WFL Service, there is no material Environmental Claim
pending or threatened, and there has been no Release of Hazardous Materials that
would be reasonably likely to form the basis of any material Environmental
Claim.
(f) Disclosure. WF&L has disclosed to WPSR all material facts which
WF&L reasonably believes form the basis of a material Environmental Claim
arising from
(i) the cost of WF&L pollution control equipment currently
required or known to be required in the future;
(ii) current WF&L remediation costs or WF&L remediation costs
known to be required in the future; or
(iii) any other environmental matter affecting WF&L or WFL
Service.
(g) Certain Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance, liability or violation (written or oral) by any person or
entity (including any Governmental Authority) alleging potential liability
(including, without limitation, potential responsibility or liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from
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(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 WF&L or any of the WF&L
Subsidiaries or WF&L Joint Ventures (as hereinafter defined); or
(B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials;
(ii) "Environmental Laws" means all Federal, state and local
laws, rules and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of human health as it
relates to the environment including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials;
(iii) "Hazardous Materials" means (a) any petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing polychlorinated
biphenyls; and (b) any chemicals, materials or substances which are now
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or
words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which WF&L or WFL Service operates; and
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
Section 5.12 Regulation as a Utility. WF&L is regulated as a public
utility in the State of Wisconsin and in no other state. Except as set forth in
Section 5.12 of the WF&L Disclosure Schedule, neither WF&L nor any "subsidiary
company" or "affiliate" (as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act") of WF&L is subject to
regulation as a public utility or public service company (or similar
designation) by any other state in the United States or any foreign country.
WF&L is not a holding company as defined in Section 2(a)(7) of the 1935 Act.
Section 5.13 Vote Required. Assuming the accuracy of WPSR's
representations in Section 4.10 of this Agreement and subject to Sections
180.1130-180.1133
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of the WBCL, the approval by the holders of at least two-thirds (2/3rds) of the
votes entitled to be cast by all holders of WF&L Common Stock and the approval
of the holder of all of the outstanding shares of Preferred Stock of WF&L (the
"WF&L Shareholders' Approval") to approve the WF&L Merger, are the only votes of
the holders of any class or series of capital stock of WF&L required for any of
the transactions required by this Agreement.
Section 5.14 Opinion of Financial Advisor. WF&L has retained Emory
Business Valuation LLC, Milwaukee, Wisconsin, to provide its written opinion to
the holders of shares of WF&L Common Stock as to the fairness from a financial
point of view of the consideration to be received by such holders in the Merger.
A copy of the engagement letter retaining Emory Business Valuation LLC has been
made available to WPSC.
Section 5.15 Insurance. Except as set forth in Section 5.15 of the
WF&L Disclosure Schedule, each of WF&L and WFL Service is, and has been
continuously since January 1, 1990, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business conducted by WF&L
and WFL Service during such time period. Except as set forth in Section 5.15 of
the WF&L Disclosure Schedule, neither WF&L nor WFL Service has received any
notice of cancellation or termination with respect to any material insurance
policy of WF&L or WFL Service. The insurance policies of WF&L and WFL Service
are valid and enforceable policies in all material respects.
Section 5.16 Ownership of WPSR Common Stock. Except as set forth in
Section 5.16 of the WF&L Disclosure Schedule, WF&L does not "beneficially own"
(as such term is defined for purposes of Section 13(d) of the Exchange Act) any
shares of WPSR Common Stock.
Section 5.17 Title to Assets. Except as set forth in Section 5.17 of
the WF&L Disclosure Schedule, WF&L or WFL Service owns good and valid title to
the assets and properties which WF&L or WFL Service owns or purports to own,
free and clear of any and all liens and encumbrances.
Section 5.18 No Violation of Law; Buildings and Equipment.
(a) Except as set forth in Section 5.18 of the WF&L Disclosure
Schedule, to the knowledge of WF&L, neither WF&L nor WFL Service nor any of the
assets of WF&L or WFL Service violates or conflicts with any law, governance,
regulation, judgment or order or any zoning, building line restrictions,
planning, use or other similar restriction.
(b) Except as set forth in Section 5.18 of the WF&L Disclosure
Schedule, to the knowledge of WF&L, (i) the buildings and equipment owned by
WF&L or WFL Service are in good operating condition and repair, reasonable wear
and tear excepted; (ii) such assets and their use conform in all respects to
applicable laws, ordinances and governmental regulations and (iii) no written
notice of any violation of any building, zoning or other law or governmental
regulation relating to such assets or their use has been received by WF&L or WFL
Service.
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Section 5.19 Existing Contracts. Set forth in Section 5.19 of the
WF&L Disclosure Schedule is a list of all contracts to which WF&L or WFL Service
is a party which constitute:
(a) a lease of, or agreement to purchase or sell, any capital assets
in excess of $100,000;
(b) any union labor contracts;
(c) any management, consulting, employment, personal service, agency
or other contracts providing for employment or rendition of services and which:
(i) are in writing; or (ii) create other than an at will employment
relationship; or (iii) provide for any commission, bonus, profit sharing,
incentive, retirement, consulting or additional compensation;
(d) any agreements or notes evidencing any indebtedness;
(e) an agreement for the storage, transportation, treatment or
disposal of any hazardous waste or hazardous byproduct;
(f) a power of attorney (whether revocable or irrevocable) given to
any Person by WF&L or WFL Service that is in force;
(g) an agreement by WF&L or WFL Service not to compete in any
business or in any geographical area;
(h) an agreement restricting the right of WF&L or WFL Service to use
or disclose any information in its possession;
(i) a partnership, joint venture or similar arrangement;
(j) a license;
(k) an agreement or arrangement with any Affiliate; or
(l) any other agreement which: (i) involves an amount in excess of
$100,000.00; or (ii) is not in the ordinary course of business of WF&L or WFL
Service.
Section 5.20 Performance of Contracts. WF&L and WFL Service have
complied in all material respects with each contract which is to be performed by
it at or before the date hereof. Each of the contracts identified in Section
5.19 of the WF&L Disclosure Schedule is in full force and effect and constitutes
the legal and binding obligation of WF&L or WFL Service and to the knowledge of
WF&L, constitutes the legal and binding obligation of the other parties thereto.
Section 5.21 Contingent and Undisclosed Liabilities. Except pursuant
to the deposit and collection of checks in the ordinary course of business,
neither WF&L nor WFL Service has guaranteed or become a surety or is otherwise
contingently liable for the obligation
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of any other Person. Neither WF&L nor WFL Service has any liabilities of any
nature except for those which: (a) are disclosed in the WF&L Financial
Statements, WF&L Disclosure Schedule or in this Agreement; or (b) arose in the
ordinary course of business since December 31, 1999 and are not required to be
disclosed pursuant to this Agreement or the WF&L Disclosure Schedule.
Section 5.22 Sole Representations and Warranties. WF&L shall not be
deemed to have made to WPSR or Acquisition Corp. any representation or warranty
other than as expressly made in this Article V. In particular, without limiting
the generality of this Section, WF&L does not make any representation or
warranty with respect to (a) any projections, estimates or budgets previously
delivered or made available to WPSR or Acquisition Corp. concerning future
revenues, expenses, expenditures or results of operations, or (b) any other
information or documents made available to WPSR or Acquisition Corp. or their
respective representatives except as expressly covered in Article V or the WF&L
Disclosure Statement.
ARTICLE VI
CONDUCT OF BUSINESS BY WF&L PENDING THE MERGER
Section 6.1 Covenants of the Parties. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, WF&L
agrees as set forth in this Article VI, as to itself and as to WFL Service,
except as expressly contemplated or permitted in this Agreement, or to the
extent WPSR shall otherwise consent in writing.
Section 6.2 Ordinary Course of Business. WF&L shall, and shall cause
WFL Service 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 preserve intact their present business
organizations and goodwill, preserve the goodwill and relationships with
customers, suppliers and others having business dealings with them and, subject
to prudent management of workforce needs and ongoing programs currently in
force, keep available the services of their present officers and employees.
Except as set forth in Section 6.2 of the WF&L Disclosure Schedule, WF&L shall
not, nor shall WF&L permit WFL Service to, enter into a new line of business, or
make any change in the line of business it engages in as of the date hereof
involving any material investment of assets or resources or any material
exposure to liability or loss to WF&L and WFL Service taken as a whole or take
any action that would make it materially less likely that WPSR can obtain the
WPSR Required Statutory Approvals or that WF&L can obtain the WF&L Required
Statutory Approvals. Notwithstanding the foregoing provisions of this Section
6.2, or any other provision of this Agreement, WF&L may prior to the Effective
Time liquidate and dissolve WFL Service, assume its liabilities and cause its
assets to be distributed to WF&L, merge WFL Service into WF&L, or, on terms
previously approved in writing by WPSR, sell WFL Service or cause WFL Service to
sell its business and assets to such party or parties as WPSR may approve.
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Section 6.3 Dividends. WF&L shall not, nor shall WF&L permit WFL
Service to,
(a) (i) declare or pay any dividends (including dividends payable in
capital stock) on or make other distributions in respect of any of their capital
stock other than
(A) to WF&L or WFL Service,
(B) regular quarterly cash dividends on WF&L Common Stock,
with usual record and payment dates during any fiscal year
(provided, however, if it appears that the Closing Date will fall
after the last day of any February, May, August or November (the
normal record dates for payment of dividends on WPSC Common Stock)
and on or before the 15th day of the immediately succeeding month
(the usual record dates for payment of dividends on WF&L Common
Stock), then WF&L may accelerate the record date for the dividend
payment on WF&L Common Stock from the 15th day of the April, June,
September or November in which the Closing Date is to occur to the
date in such month immediately preceding the proposed Closing Date
but further provided that WF&L shall not change the record date for
payment of dividends on WF&L Common Stock from the usual record date
if such change could result in holders of WF&L Common Stock being
record holders in the same calendar quarter for payment of dividends
on both WF&L Common Stock and WPSR Common Stock), which quarterly
dividends shall not exceed the dividend per share paid in the last
quarter preceding the execution of this Agreement,
(C) regular quarterly cash dividends on WF&L preferred stock
at the dividend rate specified in the WF&L Articles of Incorporation
as in effect on the date of this Agreement, and
(ii) split, combine or reclassify any of their capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of their capital
stock; or
(iii) redeem, repurchase or otherwise acquire any shares of
their capital stock, other than
(A) redemptions or repurchases in accordance with the
terms of such capital stock,
(B) in connection with intercompany purchases of capital
stock,
(C) for the purpose of funding dividend reinvestment and
employee stock purchase plans in accordance with past practice, or
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(D) as set forth on Section 6.3(a)(iii) of the WF&L
Disclosure Schedule.
Section 6.4 Issuance of Securities.
(a) WF&L shall not, nor shall WF&L permit WFL Service to, issue,
agree to issue, deliver, sell, award, pledge, dispose of or otherwise encumber
or authorize or propose the issuance, delivery, sale, award, pledge, disposal or
other encumbrance of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable securities,
other than issuances by WFL Service to WF&L.
(b) WF&L shall promptly furnish to WPSR such information as may be
reasonably requested including financial information and take such action as may
be reasonably necessary and otherwise fully cooperate with in the preparation of
any registration statement under the Securities Act and other documents
necessary in connection with issuance of securities as contemplated by this
Section 6.4, subject to obtaining customary indemnities.
Section 6.5 Charter Documents. Except as set forth in Section 6.5 of
the WF&L Disclosure Schedule and except as contemplated herein, WF&L shall not
amend or propose to amend its articles of incorporation, by-laws or regulations,
or similar organic documents.
Section 6.6 No Acquisitions. Except as set forth in Section 6.6 of
the WF&L Disclosure Schedule, WF&L shall not, nor shall WF&L permit WFL Service
to, acquire, or publicly propose to acquire, or agree to acquire, by merger or
consolidation with, or by purchase or otherwise, a substantial equity interest
in or a substantial portion of the assets of, any business or any corporation,
partnership, association or other business organization or division thereof, nor
shall WF&L of WFL Service acquire or agree to acquire a material amount of
assets other than in the ordinary course of business consistent with past
practice. Neither WF&L nor WFL Service shall organize or acquire the shares of
any Subsidiary or acquire equity interests in any Joint Venture.
Section 6.7 Capital Expenditures. Except as set forth in Section 6.7
of the WF&L Disclosure Schedule, or as required by law, WF&L shall not, nor
shall WF&L permit WFL Service to, make capital expenditures in excess of
$100,000 over the amount budgeted by WF&L for capital expenditures as set forth
in Section 6.7 of the WF&L Disclosure Schedule.
Section 6.8 No Dispositions. Except as set forth in Section 6.8 of
the WF&L Disclosure Schedule, other than dispositions by WF&L and its
Subsidiaries of assets having a fair market value (singularly or in the
aggregate) of less than $100,000 WF&L shall not, nor shall WF&L permit WFL
Service to, sell, lease, license, encumber or otherwise dispose of, any of its
assets, other than encumbrances or dispositions of assets held for resale in the
ordinary course of its business or other dispositions in the ordinary course of
business consistent with past practice.
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Section 6.9 Indebtedness. Except as contemplated by this Agreement,
WF&L shall not, nor shall WF&L permit WFL Service to, incur or guarantee any
indebtedness (including any debt borrowed or guaranteed or otherwise assumed
including, without limitation, the issuance of debt securities or warrants or
rights to acquire debt) or enter into any "keep well" or other agreement to
maintain any financial condition of another person or enter into any arrangement
having the economic effect of any of the foregoing other than (i) short-term
indebtedness in the ordinary course of business consistent with past practice
(such as the issuance of commercial paper or the use of existing credit
facilities); (ii) long-term indebtedness not aggregating more than $100,000;
(iii) arrangements between WF&L and WFL Service; (iv) as set forth in Section
6.9 of the WF&L Disclosure Schedule; or (v) in connection with the refunding of
existing indebtedness at a lower cost of funds.
Section 6.10 Compensation, Benefits. Except as set forth in Section
6.10 of the WF&L Disclosure Schedule, or as may be required by applicable law or
as contemplated by this Agreement, WF&L shall not, and WF&L shall use its best
efforts to prevent WFL Services from taking any action to,
(a) enter into, adopt or amend or increase the amount or accelerate
the payment or vesting of any benefit or amount payable under, any employee
benefit plan or other contract, agreement, commitment, arrangement, plan or
policy maintained by, contributed to or entered into by WF&L or WFL Service, or
increase, or enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of such party or any of its
Subsidiaries, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, would not result in a
material increase in benefits or compensation expense to WF&L or WFL Service, or
(b) 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, except as set forth in Section 6.10 of the WF&L Disclosure Schedule or
otherwise in the ordinary course of business consistent with past practice that
would not result in a material increase in benefits or compensation expense to
WF&L or WFL Service.
(c) Notwithstanding the foregoing, WF&L shall be permitted to enter
into negotiations with respect to, and to execute and deliver, new collective
bargaining agreements in the ordinary course of business after consultation with
WPSR.
Section 6.11 Certain Agreements. WF&L will not enter into any gas
purchase, storage or pipeline or other transportation agreement for a term of
more than six months or any derivative transaction in connection with gas
purchases unless previously approved in writing by WPSR.
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Section 6.12 Accounting. Except as set forth in Section 6.12 of the
WF&L Disclosure Schedule, WF&L shall not, nor shall WF&L permit WFL Service to,
make any changes in its accounting methods, except as required by law, rule,
regulation or GAAP.
Section 6.13 Affiliate Transactions.
(a) Except as set forth in Section 6.13 of the WF&L Disclosure
Schedule, WF&L shall not, nor shall WF&L permit WFL Service to, enter into any
material agreement or arrangement with any of their respective Affiliates on
terms materially less favorable to WF&L than could reasonably be expected to
have been obtained with an unaffiliated third party on an arm's-length basis.
(b) As used in this Agreement (except as specifically otherwise
defined):
(i) "Affiliate" means, as to any person, any other person which
directly or indirectly controls, or is under common control with, or is
controlled by, such person; and
(ii) "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession,
directly or indirectly, of 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 6.14 Tax Matters. Except as set forth in Section 6.14 of the
WF&L Disclosure Schedule, WF&L shall not make or rescind any material express or
deemed election relating to Taxes, settle or compromise any material claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or change any of its methods of Reporting income
or deductions for Federal income Tax purposes from those historically employed.
Section 6.15 Discharge of Liabilities. WF&L shall not, nor shall
WF&L permit WFL Service 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 of the WF&L Financial Statements (or the notes thereto) or incurred
in the ordinary course of business consistent with past practice.
Section 6.16 Contracts. WF&L shall not, nor shall WF&L permit WFL
Service to, 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 or agreement to which WF&L or WFL Service
is a party or waive, release or assign any material rights or claims.
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Section 6.17 Insurance. WF&L shall, and shall cause WFL Service to,
maintain with financially responsible insurance companies insurance coverage in
such amounts and against such risks and losses as are customary for companies
engaged in the gas distribution utility industry or engaged in business
conducted by WFL Service.
Section 6.18 Permits. WF&L shall, and shall cause WFL Service to,
use reasonable efforts to maintain in effect all existing Permits pursuant to
which WF&L or WFL Service operates.
Section 6.19 Access to Information.
(a) Upon reasonable notice, WF&L shall, and shall cause WFL Service
to, afford to the officers, directors, employees, accountants, counsel,
investment bankers, financial advisors and other representatives of WPSR
(collectively, "Representatives") reasonable access, during normal business
hours throughout the period prior to the Effective Time, to all of its
properties, books, contracts, commitments and records (including, but not
limited to, Tax Returns) and, during such period, WF&L shall, and shall cause
WFL Service to, furnish promptly to the WPSR
(i) access to each report, schedule and other document filed or
received by it or WFL Service 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, the Public Service Commission of
Wisconsin, or any other Federal or state regulatory agency or commission,
and
(ii) access to all information concerning itself and WFL Service
and their directors, officers and shareholders and such other matters as
may be reasonably requested by WPSR in connection with any filings,
applications or approvals required or contemplated by this Agreement or
for any other reason related to the transactions contemplated by this
Agreement.
(b) WPSR shall, and shall cause its Representatives to, continue to
hold in confidence all documents and information furnished to it in connection
with the transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated April 4, 2000 between WPSR and WF&L, as it may
be amended from time to time (the "Confidentiality Agreement").
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Proxy Statement and Registration Statement. The parties
will prepare and file with the SEC as soon as reasonably practicable after the
date hereof the Registration Statement and the Proxy Statement (together, the
"Proxy/Registration Statement"). The parties hereto shall each use reasonable
efforts to cause the Proxy/Registration Statement to be declared effective under
the Securities Act as promptly as practicable after such filing. Each party
hereto shall also take such action as may reasonably
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be required to cause the shares of WPSR Common Stock issuable in connection with
the Merger to be registered (or to obtain an exemption from registration) under
applicable state "blue sky" or securities laws; provided, however, that no party
shall be required to register or qualify as a foreign corporation or to take
other action which would subject it to service of process in any jurisdiction
where it will not be, following the Merger, so subject. Each of the parties
hereto shall furnish all information concerning itself which is required or
customary for inclusion in the Proxy/Registration Statement. The parties shall
use reasonable efforts to cause the shares of WPSR Common Stock issuable in the
Merger to be approved for listing on the NYSE subject only to official notice of
issuance. The information provided by any party hereto for use in the
Proxy/Registration Statement shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading. No representation, covenant or agreement is made by any
party hereto with respect to information supplied by any other party for
inclusion in the Proxy/Registration Statement.
Section 7.2 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or cause to be filed
with the Federal Trade Commission and the Department of Justice any
notifications required to be filed by itself or its respective "ultimate parent"
company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Such parties will use all
commercially reasonable efforts to make such filings as promptly as reasonably
practicable after the date hereof, and to respond promptly to any requests for
additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and
use its best efforts to prepare and file promptly all necessary documentation,
to effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to consummate the Merger, including, without
limitation, the WPSR Required Statutory Approvals and the WF&L Required
Statutory Approvals. Each party shall have the right to review and approve in
advance all of the information concerning such party which appears in any filing
made in connection with the transactions contemplated by this Agreement and the
Merger. WPSR shall allow WF&L and its counsel a meaningful opportunity to
consult with WPSR with respect to, and to participate with WPSR in, the efforts
to obtain all necessary approvals from Governmental Authorities in connection
with the transactions contemplated by this Agreement and the Merger, it being
understood that all positions taken in the filings with such Governmental
Authorities shall be consistent with one another and consistent with this
Agreement.
Section 7.3 Shareholder Approval.
(a) Approval of WF&L Shareholders. Subject to the provisions of
Section 7.3(b), WF&L shall, as soon as reasonably practicable after the date
hereof
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(i) take all steps necessary to duly call, give notice of,
convene and hold a special meeting of its shareholders (the "WF&L Special
Meeting") for the purpose of securing the WF&L Shareholders' Approval,
(ii) distribute to its shareholders the Proxy
Statement/Prospectus 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 the Merger, this Agreement
and the transactions contemplated hereby, and
(iv) cooperate and consult with WPSR, including obtaining the
prior approval of WPSR for proxy references discussing WPSR and/or its
advisors with respect to each of the foregoing matters.
(b) Meeting Date. The WF&L Special Meeting shall be held on such
date as WF&L shall determine after consultation with WPSR.
Section 7.4 Director and Officer Indemnification.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, WPSR shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date hereof, or who becomes prior to the Effective Time,
an officer, director or employee of WF&L or of WFL Service (each an "Indemnified
Party" and collectively, the "Indemnified Parties") against
(i) all losses, expenses (including reasonable attorney's fees
and expenses), claims, damages or liabilities or, subject to the proviso
of the next succeeding sentence, amounts paid in settlement, arising out
of actions or omissions occurring at or prior to the Effective Time (and
whether asserted or claimed prior to, at or after the Effective Time) that
are, in whole or in part, based on or arising out of the fact that such
person is or was a director, officer or employee of WF&L or WFL Service
(the "Indemnified Liabilities"), and
(ii) all Indemnified Liabilities to the extent that they are
based on or arise out of or pertain to the transactions contemplated by
this Agreement.
In the event of any such loss, expense, claim, damage or liability (whether or
not arising before the Effective Time),
(A) WPSR shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to WPSR, promptly after statements therefor
are received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred,
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(B) WPSR will cooperate in the defense of any such
matter, and
(C) any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards
set forth under Sections 180.0850 through 180.0859 of the WBCL and
the Restated Articles of Incorporation or By-laws of WPSR (as the
same shall be amended from time to time) shall be made by
independent counsel mutually acceptable to WPSR and the Indemnified
Party; provided, however, that WPSR shall not be liable for any
settlement effected without its written consent (which consent shall
not be unreasonably withheld).
The Indemnified Parties as a group may retain only one law firm with
respect to each related matter except to the extent that there is, in the sole
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time,
WPSR shall (i) cause to be maintained in effect policies of directors' and
officers' liability insurance maintained by WF&L for the benefit of those
persons who are currently covered by such policies on terms no less favorable
than the terms of such current insurance coverage or (ii) obtain new policies of
such insurance with respect to such obligations at least as favorable as the
most favorable coverage offered by policies currently maintained by WF&L;
provided, however, that WPSR shall not be required to expend in any year an
amount in excess of 200% of the annual aggregate premiums currently paid by WF&L
for such insurance; and provided, further, that if the annual premiums of such
insurance coverage exceed such amount, WPSR shall be obligated to obtain a
policy with the best coverage available, in the reasonable judgment of the Board
of Directors of WPSR, for a cost not exceeding such amount.
(c) Successors. In the event WPSR or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its properties and assets
to any person, then and in either such case, proper provisions shall be made so
that the successors and assigns of WPSR shall assume the obligations set forth
in this Section 7.4.
(d) Survival of Indemnification. To the fullest extent permitted by
law, from and after the Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of WF&L
and WFL Service with respect to their activities as such prior to the Effective
Time, as provided in their respective articles of incorporation and by-laws in
effect on the date thereof, 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.
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(e) Benefit. The provisions of this Section 7.4 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 7.5 Disclosure Schedules. On the date hereof,
(a) WF&L has delivered to WPSR a WF&L Disclosure Schedule,
accompanied by a certificate signed by the chief financial officer of WF&L
stating the WF&L Disclosure Schedule is being delivered pursuant to this Section
7.5(a).
(b) WPSR has delivered to WF&L a WPSR Disclosure Schedule,
accompanied by a certificate signed by the chief financial officer of WPSR
stating the WPSR Disclosure Schedule is being delivered pursuant to this Section
7.5(b).
(c) The WPSR Disclosure Schedule and the WF&L Disclosure Schedule
are collectively referred to herein as the "Disclosure Schedules."
(d) 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 7.6 Public Announcements. Subject to each party's disclosure
obligations imposed by law, WPSR and WF&L 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 or thereto without the consent of the other party (which
consent shall not be unreasonably withheld).
Section 7.7 Rule 145 Affiliates. Within 30 days before the Closing
Date, WF&L shall identify in a letter to WPSR all persons who are, and to such
person's knowledge who will be at the Closing Date, "affiliates" of WF&L, as
such term is used in Rule 145 under the Securities Act. WF&L shall use all
reasonable efforts to cause its affiliates (including any person who may be
deemed to have become an affiliate after the date of the letter referred to in
the prior sentence) to deliver to WPSR on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit 7.7 (an "Affiliate
Agreement"). If any affiliate refuses to provide such a written agreement, WPSR
shall, in lieu of receipt of such written agreement, be entitled to place
restrictive legends on the certificates evidencing that WPSR Common Stock to be
received by such affiliate pursuant to the terms of this Agreement, and to issue
appropriate stock transfer instructions to the transfer agent for WPSR Common
Stock, to the effect that the shares of WPSR Common Stock received or to be
received by such affiliate pursuant to the terms of this Agreement may only be
sold, transferred or otherwise conveyed pursuant to an effective registration
statement under the Securities Act, in compliance with Rule 145, as amended from
time to time, or in a transaction
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which, in the opinion of legal counsel satisfactory to WPSR, is exempt from the
registration requirements of the Securities Act. The foregoing restrictions on
the transferability of WPSR Common Stock shall apply to all purported sales,
transfers and other conveyances of the shares of WPSR Common Stock received or
to be received by such affiliate pursuant to this Agreement whether or not such
affiliate has exchanged the certificates previously evidencing such affiliates'
shares of WF&L Common Stock for certificates evidencing shares of WPSR Common
Stock into which such shares were converted. The Proxy/Registration Statement
shall disclose the foregoing in a reasonably prominent manner.
Section 7.8 Employee Agreements. Subject to Section 7.9, WPSR and
its Subsidiaries shall honor, without modification, all contracts, agreements,
collective bargaining agreements and commitments of WF&L and WFL Service prior
to the date hereof which apply to any current or former employee or current or
former director of WF&L and WFL Service; provided, however, that this
undertaking is not intended to prevent WPSR from enforcing such contracts,
agreements, collective bargaining agreements and commitments in accordance with
their terms, including, without limitation, any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment.
Section 7.9 Employee Benefit Plans. Subject to Section 6.10, each of
the WF&L Benefit Plans in effect at the date hereof shall be maintained in
effect with respect to the employees or former employees of WF&L and WFL Service
who are covered by any such Benefit Plan immediately prior to the Closing Date
(the "Affiliated Employees") until WPSR otherwise determines after the Effective
Time; provided, however, that nothing herein contained shall limit any reserved
right contained in any such WF&L Benefit Plan, to amend, modify, suspend, revoke
or terminate any such plan. Without limitation of the foregoing, each
participant of any such WF&L Benefit Plan shall receive credit for purposes of
eligibility to participate and vesting, under a benefit plan of WPSR or any of
its Subsidiaries or Affiliates for service credited for the corresponding
purpose under such benefit plan; provided, however, that such crediting of
service shall not operate to duplicate any benefit to any such participant or
the funding for any such benefit.
Section 7.10 No Solicitations.
(a) WF&L shall not, and shall use its best efforts to cause WFL
Service not to, permit any of its Representatives, directly or indirectly
initiate, solicit or encourage, or take any action to facilitate the making of
any offer or proposal which constitutes or is reasonably likely to lead to, any
Business Combination Proposal (as hereinafter defined), or, in the event of an
unsolicited Business Combination Proposal, except to the extent required by
their fiduciary duties under applicable law if so advised in a written opinion
of outside counsel, engage in negotiations or provide any information or data to
any person relating to any Business Combination Proposal.
(b) WF&L shall notify WPSR orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the terms and
conditions of any such proposal and the identity of the person making it),
within 24 hours of the receipt thereof, shall
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take reasonable steps to keep WPSR informed of the status and details of any
such inquiry, offer or proposal, and shall give WPSR five days' advance notice
of any agreement to be entered into with or any information to be supplied to
any person making such inquiry, offer or proposal. WF&L shall immediately cease
and cause to be terminated all existing discussions and negotiations, if any,
with any parties conducted heretofore with respect to any Business Combination
Proposal, unless such discussions or negotiations are not solicited by WF&L and
the Representatives of WF&L are required to engage in such discussions or
negotiations by the fiduciary duties of such Representatives under applicable
law if so advised by a written opinion of outside counsel.
(c) As used in this Section 7.10, "Business Combination Proposal"
shall mean any tender or exchange offer, proposal for a merger, consolidation or
other business combination involving WF&L or WFL Service, or any proposal or
offer (in each case, whether or not in writing and whether or not delivered to
the shareholders of WF&L generally) to acquire in any manner, directly or
indirectly, a substantial equity interest in or a substantial portion of the
assets of WF&L or WFL Service, other than pursuant to the transactions
contemplated by this Agreement.
Section 7.11 WPSR Board of Directors.. WPSR's Board of Directors
will take such action as may be necessary to cause the number of directors
comprising the full Board of Directors of WPSR at the Effective Time to be
increased by one member, the class thereof the then current term of which
extends for the longest time beyond the Effective Time to be increased by one
member and to fill the vacancy thereby created by electing to the WPSR Board of
Directors a person previously designated by the WF&L Board of Directors and
acceptable to the WPSR Board of Directors. The directors shall continue to be
divided into three classes of approximately equal size. All of the directors of
WPSR in office immediately preceding the Effective Time shall continue to be
directors of WPSR thereafter until their respective successors have been duly
elected and qualified.
Section 7.12 Workforce Matters. Subject to applicable collective
bargaining agreements, WPSR will offer employment opportunities to employees of
WF&L and WFL Service on terms and conditions consistent with the employment
opportunities offered to employees of WPSR or its subsidiaries. WPSR will
provide relocation assistance and benefits. To the extent that any reductions in
workforce to be implemented by involuntary terminations of employment are deemed
to be required, such reductions shall be made on a fair and equitable basis, in
light of the circumstances and the objective to be achieved giving appropriate
consideration to previous work history, job experience, and qualifications, and
treating all employees equally, without regard to whether prior employment was
with WPSR or any of its Subsidiaries. WPSR and WF&L will consult with each other
with respect to the retention of personnel pending the Effective Time.
Section 7.13 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 provided
that following the Effective Time all such costs and expenses not previously
paid shall be paid by the surviving corporation in the Merger or its successors
or assigns.
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Section 7.14 Further Assurances. Each party will, and will cause its
Subsidiaries to and will use its best efforts to cause its Joint Ventures to,
execute such further documents and instruments and take such further actions as
may reasonably be requested by the terms hereof. The parties expressly
acknowledge and agree that, although it is their current intention to effect a
business combination between themselves in the form contemplated by this
Agreement, it may be preferable to effectuate such a business combination by
means of an alternative structure in light of the conditions set forth in
Section 8.1(e), Section 8.2(e), Section 8.2(f), Section 8.3(e) and Section
8.3(f). Accordingly, if the only conditions to the parties' obligations to
consummate the Merger which are not satisfied or waived are receipt of any one
or more of the WPSR Required Consents, WPSR Required Statutory Approvals, WF&L
Required Consents, WF&L Required Statutory Approvals or the opinions referred to
in Sections 8.2(e) and 8.3(e), and the adoption of an alternative structure
(that otherwise substantially preserves for WPSR and WF&L the economic and other
material benefits of the Merger) would result in such conditions being satisfied
or waived, then the parties shall use their respective best efforts to effect a
business combination among themselves by means of a mutually agreed upon
structure other than the Merger that so preserves such benefits; provided that,
prior to closing any such restructured transaction, all material third party and
Governmental Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary to effect such alternative
business combination shall have been obtained and all other conditions to the
parties' obligations to consummate the Merger, as applied to such alternative
business combination, shall have been satisfied or waived.
Section 7.15 Charter and By-law Amendments. Prior to the Closing,
WPSR shall cause its By-laws to be amended as contemplated in Section 7.11.
Section 7.16 Tax-free Status. Neither party shall, nor shall either
party permit any of its Subsidiaries or, within the exercise of its best
efforts, its Joint Ventures to, take any actions which would, or would be
reasonably likely to, adversely affect the status of the Merger as a
reorganization under Section 368(a) of the Code, and each party hereto shall use
all reasonable efforts to achieve such result.
Section 7.17 Cooperation, Notification. Each party shall, and shall
cause its Subsidiaries and shall use its best efforts to cause, its Joint
Ventures to
(a) cause its appropriate representatives to confer on a regular and
frequent basis with one or more representatives of the other party to discuss,
subject to applicable law, material operational matters and the general status
of its ongoing operations;
(b) promptly notify the other party of any significant changes in
its business, properties, assets, condition (financial or other), results of
operations or prospects;
(c) advise the other party of any change or event which has, had or,
insofar as reasonably can be foreseen, is reasonably likely to result in, in the
case of WPSR, a WPSR Material Adverse Effect or in the case of WF&L, a WF&L
Material Adverse Effect; and
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(d) promptly provide the other party with copies of all filings made
by such party or any of its Subsidiaries with any state or Federal court,
administrative agency, commission or other Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
Section 7.18 Third-party Consents.
(a) WPSR shall, and shall cause Acquisition Corp. to, use all
commercially reasonable efforts to obtain all WPSR Required Consents. WPSR shall
promptly notify WF&L of any failure or prospective failure to obtain any such
consents and, if requested by WF&L, shall provide copies of all WPSR Required
Consents obtained by WPSR to WF&L.
(b) WF&L shall, and shall cause WFL Service to, use all commercially
reasonable efforts to obtain all WF&L Required Consents. WF&L shall promptly
notify WPSR of any failure or prospective failure to obtain any such consents
and, if requested by WPSR, shall provide copies of all WF&L Required Consents
obtained by WF&L to WPSR.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions, except, to the extent permitted by applicable law, that such
conditions may be waived in writing pursuant to Section 9.5 by the joint action
of the parties hereto:
(a) Shareholder Approval. The WF&L Shareholders' Approval shall have
been obtained, and the holders of a majority of the shares of WPSC Preferred
Stock shall have approved the merger of WF&L into WPSC on or before February 1,
2001 in accordance with the requirements of the Articles of Incorporation of
WPSC or such approval shall not then be required, provided, however, the absence
of such approval if required shall not after February 1, 2001 relieve WPSR,
Acquisition Corp. or WF&L from consummating the Merger with Acquisition Corp. as
the Surviving Corporation.
(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 Merger shall have been issued and be continuing in effect,
and the Merger and the other transactions contemplated hereby shall not have
been prohibited under any applicable Federal or state law or regulation.
(c) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act, and no
stop order suspending such effectiveness shall have been issued and remain in
effect.
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(d) Listing of Shares. The shares of WPSR Common Stock issuable in
the Merger pursuant to Article II shall have been approved for listing on the
NYSE Stock Exchange subject only to official notice of issuance.
(e) Statutory Approvals.
(i) The WPSR Required Statutory Approvals and the WF&L Required
Statutory Approvals, including the expiration or termination of any
applicable waiting periods under the HSR Act and the continued
effectiveness of clearance of the Merger under the HSR Act shall have been
obtained at or prior to the Effective Time, such approvals shall have
become Final Orders (as hereinafter defined) and such Final Orders shall
not impose terms or conditions which, in the aggregate have, or insofar as
reasonably can be foreseen, would have, a material adverse effect on the
business, assets, financial condition or results of operations of WPSR or
WF&L, as the case may be, or which would be materially inconsistent with
the agreements of the parties contained herein.
(ii) As used in this Agreement, "Final Order" means action by the
relevant regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which any
waiting period prescribed by law before the transactions contemplated
hereby may be consummated has expired, and as to which all conditions to
the consummation of such transactions prescribed by law, regulation or
order have been satisfied.
Section 8.2 Further Conditions to Obligation of WF&L to Effect the
Merger. The obligation of WF&L to effect the Merger shall be further subject to
the satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by WF&L in writing pursuant to Section 9.5:
(a) Performance of Obligations of WPSR. WPSR (and/or its appropriate
Subsidiaries) will have performed in all material respects their agreements and
covenants contained in or contemplated by this Agreement.
(b) Representations and Warranties. The representations and
warranties of WPSR 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 each
of cases (i) and (ii) for such failures of representations or warranties to be
true and correct (without regard to any materiality qualifications contained
therein) which, individually or in the aggregate do not, and insofar as
reasonably can be foreseen, would not, result in a WPSR Material Adverse Effect.
(c) Closing Certificates. WF&L shall have received a certificate
signed by the chief executive officer or the chief financial officer of WPSR,
dated the Closing Date, to
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the effect that, to such officer's knowledge, the conditions set forth in
Section 8.2(a) and Section 8.2(b) with respect to WPSR have been satisfied.
(d) Material Adverse Effect. No WPSR Material Adverse Effect shall
have occurred, and there shall exist no facts or conditions (other than facts or
conditions of general applicability to electric or gas utility companies in the
region in which WPSR conducts its utility operations) which have, or insofar as
reasonably can be foreseen, would have a WPSR Material Adverse Effect.
(e) Tax Opinions. WF&L shall have received an opinion of von
Briesen, Purtell & Roper, S.C. dated as of the Closing Date, to the effect that
the Merger will be treated as a tax-free reorganization under Section 368(a) of
the Code.
(f) Required Consents. The WPSR Required Consents, the failure of
which to obtain would have a WPSR Material Adverse Effect shall have been
obtained.
(g) Legal Opinion. WF&L shall have received an opinion of Foley &
Lardner substantially in the form of Exhibit 8.2(g).
(h) Trigger of WPSR Rights. No event has occurred that would result
in the triggering of any right or entitlement of WPSR shareholders under the
WPSR Rights Agreement, including a "flip in" or "flip over" or similar event
commonly described in such rights plans has occurred, which, in the reasonable
judgment of WF&L, would have or be reasonably likely to result in a WPSR
Material Adverse Effect or materially change the number of outstanding equity
securities of WPSR, and the WPSR Rights shall not have become nonredeemable by
any action of the WPSR Board of Directors.
(i) Opinion of Financial Advisor. WF&L shall have received the
opinion of Emory Business Valuation LLC referred to in Section 5.14.
Section 8.3 Further Conditions to Obligation of WPSR and WPSC or
Acquisition Corp. to Effect the Merger. The obligation of WPSR and WPSC or
Acquisition Corp. to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by WPSR in writing pursuant to Section 9.5:
(a) Performance of Obligations of WF&L. WF&L will have performed its
agreements and covenants contained in Sections 6.3 and 6.4 and will have
performed in all material respects its other agreements and covenants contained
in or contemplated by this Agreement required to be performed by it at or prior
to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of WF&L 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 and except for
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representations and warranties respecting WFL Service which are no longer true
because of action taken by WF&L or WFL Service pursuant to the last sentence of
Section 6.2) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without regard to any
materiality qualifications contained therein) which, individually or in the
aggregate do not, and insofar as reasonably can be foreseen, would not, result
in a WF&L Material Adverse Effect.
(c) Closing Certificates. WPSR shall have received a certificate
signed by the chief executive officer or chief financial officer of WF&L, dated
the Closing Date, to the effect that, to such officer's knowledge, the
conditions set forth in Section 8.3(a) and Section 8.3(b) with respect to WF&L
have been satisfied.
(d) Material Adverse Effect. No WF&L Material Adverse Effect shall
have occurred, and there shall exist no facts or conditions (other than facts or
conditions of general applicability to gas distribution utility companies in the
State of Wisconsin including, but not limited to general restructuring orders or
legislation) which have, or insofar as reasonably can be foreseen, would have a
WF&L Material Adverse Effect.
(e) Tax Opinions. WPSR shall have received an opinion of Foley &
Lardner dated as of the Closing Date, to the effect that the Merger will be
treated as a tax-free reorganization under Section 368(a) of the Code.
(f) Required Consents. The WF&L Required Consents, the failure of
which to obtain would have a WF&L Material Adverse Effect, shall have been
obtained.
(g) Affiliate Agreements. WPSR shall have received Affiliate
Agreements, duly executed by each Affiliate of WF&L, substantially in the form
of Exhibit 7.7, as provided in Section 7.7, or shall be satisfied by the
alternative stock legend process described at Section 7.7 hereof.
(h) Legal Opinion. WPSR shall have received an opinion of von
Briesen, Purtell & Roper, S.C. substantially in the form of Exhibit 8.3(h)
hereto.
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 WF&L contemplated by this Agreement:
(a) by mutual written consent of WPSR, Acquisition Corp. and WF&L;
(b) by any party hereto, by written notice to the other parties, if
the Effective Time shall not have occurred on or before June 30, 2001 (the
"Initial Termination Date"); provided, however, that the right to terminate the
Agreement under this Section 9.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement
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has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the Initial Termination Date; and provided, further, that if
on the Initial Termination Date the conditions to the Closing set forth in
Sections 8.1(e), 8.2(f) and/or 8.3(f) 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 December 31,
2001;
(c) by any party hereto, by written notice to the other parties, if
the WF&L Shareholders' Approval shall not have been obtained at a duly held WF&L
meeting thereof, including any adjournments thereof;
(d) by any party hereto, if any state or Federal law, order, rule or
regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger or
by either 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 Merger, and such order,
judgment or decree shall have become final and nonappealable;
(e) by WF&L, upon two days' prior notice to WPSR, if, as a result of
a tender offer by a party other than WPSR or any WPSR Affiliate or any written
offer or proposal with respect to a merger, sale of a material portion of its
assets or other business combination (each, a "Business Combination") by a party
other than WPSR or any WPSR Affiliates, the Board of Directors of WF&L
determines in good faith that its fiduciary obligations under applicable law
require that such tender offer or other written offer or proposal be accepted;
provided, however, that
(i) the Board of Directors of WF&L shall have been advised in a
written opinion of outside counsel that after giving due consideration to
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 after giving due consideration to all concessions which may be
offered by WPSR in negotiations entered into pursuant to clause (ii)
below, such fiduciary duties would require the directors to reconsider
such commitment as a result of such tender offer or other written offer or
proposal; and
(ii) prior to any such termination, WF&L shall, and shall cause
its respective financial and legal advisors to, negotiate with WPSR to
make such adjustments in the terms and conditions of this Agreement as
would enable WF&L to proceed with the transactions contemplated herein on
such adjusted terms;
(f) by WF&L, by written notice to WPSR and Acquisition Corp., if
(i) there exists any breach or breaches of the representations
and warranties of WPSR and Acquisition Corp. made herein as of the date
hereof which breaches, individually or in the aggregate have or, insofar
as reasonably can be foreseen, would have, a WPSR Material Adverse Effect,
and such breaches shall not have been remedied within 20 days after
receipt by WPSR of notice in writing from WF&L specifying the nature of
such breaches and requesting that they be remedied;
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(ii) WPSR or Acquisition Corp. 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 WPSR of notice in writing from
WF&L specifying the nature of such failure and requesting that it be
remedied; or
(iii) the Board of Directors of WPSR or any committee thereof:
(A) shall withdraw or modify in any manner materially
adverse to WF&L its approval of this Agreement, or the Merger, or
(B) shall fail to reaffirm such approval upon WF&L's
request, or
(C) shall resolve to take any of the actions specified in
clause (A) or (B);
(g) by WPSR, by written notice to WF&L, if
(i) there exists any breach or breaches of the representations
and warranties of WF&L made herein as of the date hereof which breaches,
individually or in the aggregate have or, insofar as reasonably can be
foreseen, would have, a WF&L Material Adverse Effect, and such breaches
shall not have been remedied within 20 days after receipt by WF&L of
notice in writing from WPSR specifying the nature of such breaches and
requesting that they be remedied;
(ii) WF&L shall not have performed and complied with its
agreements and covenants contained in Sections 6.3 and 6.4 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 WF&L of
notice in writing from WPSR specifying the nature of such failure and
requesting that it be remedied; or
(iii) the Board of Directors of WF&L or any committee thereof:
(A) shall withdraw or modify in any manner materially
adverse to WPSR its approval or recommendation of this Agreement,
or the Merger,
(B) shall fail to reaffirm such approval or
recommendation upon WPSR's request,
(C) shall approve or recommend any Business Combination
involving WF&L other than the Merger or any tender offer for the
shares of capital stock of WF&L, in each case by or involving a
party other than WPSR or any of its Affiliates or
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(D) shall resolve to take any of the actions specified in
clause (A), (B) or (C).
Section 9.2 Effect of Termination. Subject to Section 10.1(b), in
the event of termination of this Agreement by WPSR or WF&L pursuant to Section
9.1 there shall be no liability on the part of either WPSR or WF&L or their
respective officers or directors hereunder, except that Section 6.19(b), Section
7.14, Section 9.3, Section 10.2 and Section 10.8 shall survive the termination.
Section 9.3 Termination Fee.
(a) Termination Fee Upon Breach. If this Agreement is terminated at
such time that this Agreement is terminable pursuant to one (but not both) of
(x) Section 9.1(f)(i) or (ii) or (y) Section 9.1(g)(i) or (ii), then the
breaching party shall promptly (but no later than five business days after
receipt of notice from the non-breaching party) pay to the non-breaching party
in cash One Million Five Hundred Thousand Dollars ($1,500,000); provided,
however, that, if this Agreement is terminated by a party as a result of a
willful breach of this Agreement by the other party, the non-breaching party may
pursue any other remedies available to it at law or in equity, and its recovery
shall not be limited to the applicable amount previously specified and the
non-breaching party shall be entitled to such additional amounts as it may be
entitled to receive at law or in equity, provided, however, that such
termination damages shall be reduced by any amount paid pursuant to the
liquidated damage amounts defined herein.
(b) Termination Fee Upon Certain Transactions Involving WF&L. If
(i) this Agreement
(A) is terminated by WF&L pursuant to Section 9.1(e),
(B) is terminated following a failure of the shareholders
of WF&L to grant the necessary approvals described in Section
5.13 or
(C) is terminated as a result of WF&L's material breach
of Section 7.3, and
(ii) at the time of such termination or prior to the meeting of
WF&L's shareholders there shall have been a third-party tender offer for
shares of, or a third-party offer or proposal with respect to a Business
Combination involving, WF&L or any of its Affiliates which, at the time of
such termination or of the meeting of WF&L's shareholders, shall not have
been (A) rejected by WF&L and its board of directors or (B) withdrawn by
the third party, and
(iii) within two and one-half (2-1/2) years of any such
termination described in clause (i) above, WF&L becomes a Subsidiary of
such offeror or a Subsidiary of an Affiliate of such offeror or accepts a
written offer to consummate or consummates a Business Combination with
such offeror or an Affiliate thereof,
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then WF&L (jointly and severally with its Affiliates), at the closing (and as a
condition to the closing) of WF&L becoming such a Subsidiary or of such Business
Combination, will pay to WPSR in cash an aggregate termination fee of One
Million Five Hundred Thousand Dollars ($1,500,000).
(c) Expenses. The parties agree that the agreements contained in
this Section 9.3 are an integral part of the transactions contemplated by the
Agreement and the termination fees constitute liquidated damages (subject to the
proviso to Section 9.3(a)) and are not penalties. If one party fails to promptly
pay to the other party any fee due hereunder, the defaulting party shall pay the
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of Firstar Bank N.A., Milwaukee, Wisconsin from
the date such fee was required to be paid.
Section 9.4 Amendment.
(a) 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 WF&L and prior to the Effective Time, but after such approval, no such
amendment shall
(i) alter or change the amount or kind of shares, rights or any
of the proceedings of the treatment of shares under Article II, or
(ii) 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 WPSR and WF&L
Common Stock.
(b) 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.
(a) At any time prior to the Effective Time, the parties hereto may
(i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto and
(iii) waive compliance with any of the agreements or conditions
contained herein, to the extent permitted by applicable law.
(b) 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.
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-survival; Effect of Representations and Warranties.
(a) All representations, warranties and agreements in this Agreement
shall not survive the Merger, except as otherwise provided in this Agreement and
except for the agreements contained in this Section 10.1 and in Article II,
Section 7.4 (Director and Officer Indemnification), Section 7.8 (Employee
Agreements), Section 7.9 (Employee Benefit Plans), Section 7.11 (WPSR Board of
Directors), Section 7.13 (Expenses), Section 10.2 (Brokers) and Section 10.7
(Parties in Interest).
(b) No party may assert a claim for breach of any representation or
warranty contained in this Agreement (whether by direct claim or counterclaim)
except in connection with the termination of this Agreement pursuant to Section
9.1(f)(i) or Section 9.1(g)(i) (or pursuant to any other subsection of Section
9.1 if the terminating party would have been entitled to terminate this
Agreement pursuant to Section 9.1(f)(i) or Section 9.1(g)(i)).
Section 10.2 Brokers.
(a) WPSR 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 Merger, or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of WPSR.
(b) WF&L represents and warrants that, except for Arthur Andersen
LLP, whose fees have been disclosed to WPSR 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 Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of WF&L.
Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if (i) delivered personally, (ii)
sent by reputable overnight courier service, (iii) telecopied (which is
confirmed), or (iv) five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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(a) If to WPSR or WPS Resources
Acquisition Corp., to: 700 North Adams Street
P.O. Box 19001
Green Bay, WI 54307-9001
Attention: Larry L. Weyers
Chairman, President and
Chief Executive Officer
Telephone: (414) 433-1334
Telecopy: (414) 433-1693
with a copy to: Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Attention: Allen W. Williams, Jr., Esq.
Telephone: (414) 297-5829
Telecopy: (414) 297-4900
(b) If to WF&L, to: Wisconsin Fuel and Light Company
211 Forest Street
P.O. Box 1627
Wausau, WI 54402-1627
Attention: Mark T. Maranger
President and CEO
Telephone: (715) 847-6238
Telecopy: (715) 847-6208
With a copy to: von Briesen, Purtell & Roper, S.C.
411 East Wisconsin Avenue, Suite 700
Milwaukee, WI 53202
Attention: Robert J. Loots, Esq.
Telephone: (414) 287-1362
Telecopy: (414) 276-6281
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;
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(b) shall not be assigned by operation of law or otherwise; and
(c) shall be governed by and construed in accordance with the laws
of the State of Wisconsin applicable to contracts executed in and to be fully
performed in such State, without giving effect to its conflicts of law rules or
principles.
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 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns; except as provided in Section 7.5(e) nothing in this
Agreement, express or implied, shall confer upon any person, other than the
parties hereto and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
Section 10.8 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
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IN WITNESS WHEREOF, WPSR, WPSC, Acquisition Corp. and WF&L have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
WPS RESOURCES CORPORATION
Attest:
By: /s/ Barth J. Wolf By: /s/ Patrick D. Schrickel
--------------------------------- -----------------------------------
Barth J. Wolf Name: Patrick D. Schrickel
Secretary and Manager - Title: Executive Vice President
Legal Services
WISCONSIN PUBLIC SERVICE
CORPORATION
Attest:
By: /s/ Barth J. Wolf By: /s/ Patrick D. Schrickel
--------------------------------- -----------------------------------
Barth J. Wolf Name: Patrick D.Schrickel
Secretary and Manager - Title: President and Chief
Legal Services Operating Officer
WF&L ACQUISITION CORP.
Attest:
By: /s/ Barth J. Wolf By: /s/ Patrick D. Schrickel
--------------------------------- -----------------------------------
Barth J. Wolf Name: Patrick D. Schrickel
Secretary and Manager - Title: Vice President
` Legal Services
WISCONSIN FUEL AND LIGHT
COMPANY
Attest:
By: /s/ Barth J. Wolf By: /s/ Mark T. Maranger
--------------------------------- -----------------------------------
Barth J. Wolf Name: Mark T. Maranger
Secretary and Manager - Title: President and Chief
Legal Services Executive Officer
WPS Resources Corporation
<PAGE>
Exhibit 1.3.1 to Merger Agreement
PLAN OF MERGER
THIS PLAN OF MERGER, dated as of ______________ (the "Plan of Merger"),
is entered into by and between Wisconsin Fuel and Light Company, a Wisconsin
corporation ("WF&L"), and Wisconsin Public Service Corporation, a Wisconsin
corporation ("WPSC"). This Plan of Merger is being entered into pursuant to an
Agreement and Plan of Merger, dated as of July 13, 2000, (the "Merger
Agreement"), among WPS Resources Corporation ("WPSR"), WPSC, WF&L Acquisition
Corp. ("Acquisition") and WF&L. The Merger Agreement, provides for the merger of
WF&L with and into WPSC provided that such merger shall have been approved by
the holders of a majority of the outstanding shares of preferred stock of WPSC
on or before February 1, 2001 or if such approval is then no longer required
under the WPSC Articles of Incorporation (the "WPSC Preferred Shareholder
Approval") and for the merger of WF&L into Acquisition if the WPSC Preferred
Shareholder Approval shall be then required under the WPSC Articles of
Incorporation and shall not have been obtained (the "Merger"); and
WHEREAS, the WPSC Preferred Shareholder Approval has been obtained or is
no longer required under the WPSC Articles of Incorporation.
NOW, THEREFORE, in consideration of the premises and the agreements
herein contained, the parties hereto, intending to be legally bound hereby,
agree to as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of the Merger
Agreement and this Plan of Merger, WF&L shall be merged with and into WPSC (the
"Merger") in accordance with and with the effect as provided in the Wisconsin
Business Corporation Law (the "WBCL"). WPSC shall be the surviving corporation
in the Merger (sometimes hereafter referred to as the "Surviving Corporation")
and shall continue its corporate existence under the laws of the State of
Wisconsin. The separate corporate existence of WF&L shall cease.
1.02. Effective Time of the Merger. Subject to the provisions of the
Merger Agreement and this Plan of Merger, articles of merger (the "Articles of
Merger") shall be duly prepared by or on behalf of WF&L and WPSC and executed as
required by the WBCL and thereafter delivered to the Department of Financial
Institutions of the State of Wisconsin for filing, as provided in the WBCL, on
the Closing Date (as defined in the Merger Agreement). The Merger shall become
effective at the time specified in the Articles of Merger filed with the
Department of Financial Institutions of the State of Wisconsin (the "Effective
Time"), or absent such specification upon such filing.
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<PAGE>
1.03. Articles of Incorporation and By-laws of the Surviving Corporation.
At the Effective Time, (a) the Articles of Incorporation of Acquisition in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation; and (b) the By-laws of Acquisition
in effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation.
1.04. Directors and Officers of the Surviving Corporation. The directors
and officers of Acquisition at the Effective Time shall, from and after the
Effective Time, continue as the directors and officers, respectively, of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal.
1.05. Outstanding Shares. The designation and number of outstanding
shares of WF&L is as set forth in Section 5.3 of the Merger Agreement. The
designation and number of outstanding shares of WPSC is _____ shares of common
stock, $4.00 par value and _____ shares of preferred stock, $100 par value.
Shares of WPSC may be issued or retired as may be approved by its Boards of
Directors.
ARTICLE II
CONVERSION OF SHARES
2.01. Cancellation and Conversion of WF&L Common Stock. At the Effective
Time, in accordance with the terms and conditions set forth in the Merger
Agreement, and by virtue of the Merger and without any action on the part of any
holder of shares of Common Stock, $10.00 par value, of WF&L ("WF&L Common
Stock"):
(a) Cancellation of Certain WF&L Common Stock. Each share of WF&L
Common Stock that is owned by WF&L or WPSR or any of their respective
subsidiaries shall be canceled and cease to exist, and no consideration
shall be delivered in exchange therefor.
(b) Conversion of Certain WF&L Common Stock. Each share of WF&L
Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares canceled pursuant to Section 2.01(a) and other
than Dissenting Shares (as defined in Section 2.01(d) shall be converted
into the right to receive [insert Merger Ratio as determined in
accordance with the Merger Agreement] _____ shares of Common Stock, $1.00
par value, of WPSR ("WPSR Common Stock"), together with any associated
rights to purchase shares of WPSR Common Stock (the "Rights") pursuant to
the terms of that certain Rights Agreement between WPSR and Firstar Trust
Company (subsequently succeeded by Firstar Bank N.A., Milwaukee,
Wisconsin), as Rights Agent thereunder, dated as of December 12, 1996.
Until the Distribution Date (as defined in the Rights Agreement), all
references in this Plan of Merger to the WPSR Common Stock shall be
deemed to include the Associated Rights.
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<PAGE>
(c) No Fractional Shares. Notwithstanding any other provision of
this Plan of Merger to the contrary, no certificates or scrip
representing fractional shares of WPSR Common Stock shall be issued in
the Merger, and such fractional shares shall not entitle the owner
thereof to vote as, or to any rights of, a holder of, WPSR Common Stock.
In lieu of any such fractional shares, a holder of WPSR Common Stock who
would otherwise have been entitled to a fractional share of WPSR Common
Stock shall receive a cash payment in an amount equal to the product
(rounded to the nearest cent) of such fraction (rounded to the nearest
thousandth) multiplied by the average of the last reported sales price,
per share of WPSR Common Stock as reported in the New York Stock Exchange
("NYSE") Composite Tape transactions as reported in The Wall Street
Journal for the last ten trading days immediately preceding the last
trading day immediately preceding the Effective Time on which WPSR Common
Stock was traded on the NYSE, without any interest thereon.
(d) Dissenters' Rights. Notwithstanding anything in this Agreement
to the contrary, if Sections 180.1301 through 180.1331 of the WBCL
("Subchapter XIII") shall be applicable to the Merger, shares of WF&L
Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who have not voted such
shares in favor of the Merger, who shall have delivered, prior to any
vote on the merger, a written objection to the Merger in the manner
provided in Subchapter XIII and who as of the Effective Time, shall not
have effectively withdrawn or lost such right to dissenters' rights
("Dissenting Shares") shall not be converted into or represent a right to
receive WPSR Common Stock and WPSR Rights pursuant to Section 2.1(b), and
cash in lieu of a fractional share pursuant to Section 2.01(c)
(collectively the "Merger Consideration"), but the holders of Dissenting
Shares shall be entitled only to such rights as are granted by Subchapter
XIII. Each holder of Dissenting Shares who becomes entitled to payment
for such shares pursuant to Subchapter XIII shall receive payment
therefor from the Surviving Corporation in accordance with Subchapter
XIII; provided, however, that if any such holder of Dissenting Shares
shall have effectively withdrawn such holder's demand for appraisal of
such shares or lost such holder's right to appraisal and payment of such
shares under Subchapter XIII, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such shares and each such share
shall thereupon be deemed, as of the Effective Time, to have been
cancelled, extinguished and converted into and represent the right to
receive payment of the Merger Consideration.
(e) Cancellation and Conversion of WF&L Preferred Stock. Each
share of WF&L Preferred Stock issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive $103 in
cash plus any accrued and unpaid dividends including a pro-rata portion
of the dividend accrued from the last dividend payment date to the
Closing Date.
2.02. WPSC Common Stock. The shares of WPSC common stock or preferred
stock issued and outstanding immediately prior to the Effective Time shall not
be
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<PAGE>
affected in any manner by virtue of the Merger and after the Effective Time
shall constitute the outstanding shares of common stock and preferred stock of
the Surviving Corporation.
ARTICLE III
TERMINATION
3.01. Termination. This Plan of Merger shall terminate forthwith in the
event that the Merger Agreement shall be terminated as therein provided. In the
event of the termination of this Plan of Merger as provided above, this Plan of
Merger shall forthwith become void and there shall be no liability on the part
of any of the parties hereto, except as otherwise provided in the Merger
Agreement.
ARTICLE IV
GENERAL PROVISIONS
4.01. Counterparts. This Plan of Merger may be executed in counterparts,
each of which shall constitute one and the same instrument.
4.02. Headings. The headings in this Plan of Merger are inserted for
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of the date first above written.
WISCONSIN FUEL AND LIGHT COMPANY
("WF&L")
By:_______________________________________
Attest:___________________________________
WISCONSIN PUBLIC SERVICE CORPORATION
("WPSC")
By:_______________________________________
Attest:___________________________________
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<PAGE>
Exhibit 1.3.2 to Merger Agreement
PLAN OF MERGER
THIS PLAN OF MERGER, dated as of ______________ (the "Plan of Merger"),
is entered into by and between Wisconsin Fuel and Light Company, a Wisconsin
corporation ("WF&L"), and WF&L Acquisition Corp., a Wisconsin corporation
("Acquisition"). This Plan of Merger is being entered into pursuant to an
Agreement and Plan of Merger, dated as of _____________, (the "Merger
Agreement"), among WPS Resources Corporation ("WPSR"), WF&L and Acquisition. The
Merger Agreement, provides under certain circumstances which are now prevailing
for the merger of WF&L with and into Acquisition (the "Merger").
NOW, THEREFORE, in consideration of the premises and the agreements
herein contained, the parties hereto, intending to be legally bound hereby,
agree to as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of the Merger
Agreement and this Plan of Merger, WF&L shall be merged with and into
Acquisition in accordance with and with the effect as provided in the Wisconsin
Business Corporation Law (the "WBCL"). Acquisition shall be the surviving
corporation in the Merger (sometimes hereafter referred to as the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Wisconsin. The separate corporate existence of WF&L shall cease.
1.02. Effective Time of the Merger. Subject to the provisions of the
Merger Agreement and this Plan of Merger, articles of merger (the "Articles of
Merger") shall be duly prepared by or on behalf of WF&L and Acquisition and
executed as required by the WBCL and thereafter delivered to the Department of
Financial Institutions of the State of Wisconsin for filing, as provided in the
WBCL, on the Closing Date (as defined in the Merger Agreement). The Merger shall
become effective at the time specified in the Articles of Merger filed with the
Department of Financial Institutions of the State of Wisconsin (the "Effective
Time"), or absent such specification upon such filing.
1.03. Articles of Incorporation and By-laws of the Surviving Corporation.
At the Effective Time, (a) the Articles of Incorporation of Acquisition in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, except that (i) Article I thereof
shall be amended in its entirety to provide as follows: "The name of the
Corporation is Wisconsin Fuel and Light Company Inc."; and (b) the By-laws of
Acquisition in effect immediately prior to the Effective Time shall be the
By-laws of the Surviving Corporation.
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<PAGE>
1.04. Directors and Officers of the Surviving Corporation. The directors
and officers of Acquisition at the Effective Time shall, from and after the
Effective Time, continue as the directors and officers, respectively, of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal.
1.05. Outstanding Shares. The designation and number of outstanding
shares of WF&L is as set forth in Section 5.3 of the Merger Agreement. The
designation and number of outstanding shares of Acquisition is 1,000 shares of
common stock, $1.00 par value. Shares of Acquisition may be issued or retired as
may be approved by its Boards of Directors.
ARTICLE II
CONVERSION OF SHARES
2.01. Cancellation and Conversion of WF&L Common Stock. At the Effective
Time, in accordance with the terms and conditions set forth in the Merger
Agreement, and by virtue of the Merger and without any action on the part of any
holder of shares of Common Stock, $10.00 par value, of WF&L ("WF&L Common
Stock"):
(a) Cancellation of Certain WF&L Common Stock. Each share of WF&L
Common Stock that is owned by WF&L or WPSR or any of their respective
subsidiaries shall be canceled and cease to exist, and no consideration
shall be delivered in exchange therefor.
(b) Conversion of Certain WF&L Common Stock. Each share of WF&L
Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares canceled pursuant to Section 2.01(a) and other
than Dissenting Shares (as defined in Section 2.01(d) shall be converted
into the right to receive [insert Merger Ratio as determined in
accordance with the Merger Agreement] _____ shares of Common Stock, $1.00
par value, of WPSR ("WPSR Common Stock"), together with any associated
rights to purchase shares of WPSR Common Stock (the "Rights") pursuant to
the terms of that certain Rights Agreement between WPSR and Firstar Trust
Company (subsequently succeeded by Firstar Bank N.A., Milwaukee,
Wisconsin), as Rights Agent thereunder, dated as of December 12, 1996.
Until the Distribution Date (as defined in the Rights Agreement), all
references in this Plan of Merger to the WPSR Common Stock shall be
deemed to include the Associated Rights.
(c) No Fractional Shares. Notwithstanding any other provision of
this Plan of Merger to the contrary, no certificates or scrip
representing fractional shares of WPSR Common Stock shall be issued in
the Merger, and such fractional shares shall not entitle the owner
thereof to vote as, or to any rights of, a holder of, WPSR Common Stock.
In lieu of any such fractional shares, a holder of WPSR Common Stock who
would otherwise have been entitled to a fractional share of WPSR Common
Stock shall receive a cash payment in an amount equal to the product
(rounded to the nearest cent) of such fraction (rounded to the nearest
thousandth) multiplied by the average of the last reported sales price,
per share of WPSR Common
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<PAGE>
Stock as reported in the New York Stock Exchange ("NYSE") Composite Tape
transactions as reported in The Wall Street Journal for the last ten
trading days immediately preceding the last trading day immediately
preceding the Effective Time on which WPSR Common Stock was traded on the
NYSE, without any interest thereon.
(d) Dissenters' Rights. Notwithstanding anything in this Agreement
to the contrary, if Sections 180.1301 through 180.1331 of the WBCL
("Subchapter XIII") shall be applicable to the Merger, shares of WF&L
Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who have not voted such
shares in favor of the Merger, who shall have delivered, prior to any
vote on the merger, a written objection to the Merger in the manner
provided in Subchapter XIII and who as of the Effective Time, shall not
have effectively withdrawn or lost such right to dissenters' rights
("Dissenting Shares") shall not be converted into or represent a right to
receive WPSR Common Stock and WPSR Rights pursuant to Section 2.1(b), and
cash in lieu of a fractional share pursuant to Section 2.01(c)
(collectively the "Merger Consideration"), but the holders of Dissenting
Shares shall be entitled only to such rights as are granted by Subchapter
XIII. Each holder of Dissenting Shares who becomes entitled to payment
for such shares pursuant to Subchapter XIII shall receive payment
therefor from the Surviving Corporation in accordance with Subchapter
XIII; provided, however, that if any such holder of Dissenting Shares
shall have effectively withdrawn such holder's demand for appraisal of
such shares or lost such holder's right to appraisal and payment of such
shares under Subchapter XIII, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such shares and each such share
shall thereupon be deemed, as of the Effective Time, to have been
cancelled, extinguished and converted into and represent the right to
receive payment of the Merger Consideration.
(e) Cancellation and Conversion of WF&L Preferred Stock. Each
share of WF&L Preferred Stock issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive $103 in
cash plus any accrued and unpaid dividends including a prorata portion of
the dividend accrued from the last dividend payment date to the Closing
Date.
2.02. Acquisition Common Stock. The shares of Acquisition Common Stock
issued and outstanding immediately prior to the Effective Time shall not be
affected in any manner by virtue of the Merger and after the Effective Time
shall constitute the outstanding shares of Common Stock of the Surviving
Corporation.
ARTICLE III
TERMINATION
3.01. Termination. This Plan of Merger shall terminate forthwith in the
event that the Merger Agreement shall be terminated as therein provided. In the
event of the termination of this Plan of Merger as provided above, this Plan of
Merger shall forthwith
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<PAGE>
become void and there shall be no liability on the part of any of the parties
hereto, except as otherwise provided in the Merger Agreement.
ARTICLE IV
GENERAL PROVISIONS
4.01. Counterparts. This Plan of Merger may be executed in counterparts,
each of which shall constitute one and the same instrument.
4.02. Headings. The headings in this Plan of Merger are inserted for
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of the date first above written.
WISCONSIN FUEL AND LIGHT COMPANY
("WF&L")
By:_______________________________________
Attest:___________________________________
WF&L ACQUISITION CORP.
("Acquisition")
By:_______________________________________
Attest:___________________________________
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<PAGE>
Appendix B
July 11, 2000
PERSONAL AND CONFIDENTIAL
Board of Directors
Wisconsin Fuel & Light Company
211 Forest Street
P.O. Box 1627
Wausau, WI 54402-1627
Dear Directors:
We understand that Wisconsin Fuel & Light Company (the "Company") is
considering entering into the Agreement and Plan of Merger (the "Merger
Agreement") to be dated July 13, 2000, among the Company, WPS Resources
Corporation ("WPS"), Wisconsin Public Service Corporation, and WF&L Acquisition
Corp. Under the Merger Agreement, the Company would merge with and into a wholly
owned subsidiary of WPS, and the holders (the "Shareholders") of the Company's
common stock ("Company Stock") would receive consideration of a certain number
of shares of WPS' common stock for each share of Company Stock, according to the
Merger Ratio (defined in the Merger Agreement). We will refer to such
transaction as the "Transaction." We further understand the Transaction will be
structured as a tax-free exchange for the Shareholders.
You have asked Emory Business Valuation, LLC to provide its opinion as to
whether the consideration to be received by the Shareholders in connection with
the Transaction is fair to them from a financial point of view (this "Opinion").
In the course of our analyses for rendering this Opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed the Company's audited financial statements for the six
years ended December 31, 1999, and unaudited interim financial
statements through June 30, 2000, which the Company's management
has identified as being the most current financial statements
available;
3. reviewed certain operating and financial information provided us
by management relating to the Company's business and prospects;
<PAGE>
Board of Directors
Wisconsin Fuel & Light Company
July 13, 2000
Page 2
4. interviewed certain members Arthur Andersen LLP's Global Corporate
Finance Group (the "AA Finance Group"), which assisted the Board
in obtaining and analyzing offers by third parties considering
purchasing or merging with the Company ("Third Party Offers");
5. reviewed certain materials prepared by the AA Finance Group for
the Company's Board of Directors (the "Board") dated December 10,
1999, April 27, 2000, and May 26, 2000, regarding the Company's
strategic alternatives and the process of obtaining Third Party
Offers;
6. reviewed the Confidential Information Memorandum prepared by the
AA Finance Group, dated April 2000, which was sent to certain
third parties that were considering extending Third Party Offers;
7. interviewed certain members of the Company's senior management to
discuss its operations, regulatory environment, historical
financial statements, and future prospects;
8. reviewed certain publicly available filings, financial data and
stock market performance data regarding the Company and WPS;
9. reviewed publicly available financial data and stock market
performance data of publicly traded companies we considered
somewhat similar to the Company, and publicly available prices and
premiums paid in other transactions we considered somewhat similar
to the Transaction; and
10. conducted such other studies, analyses, inquiries, and
investigations, as we deemed appropriate for purposes of this
Opinion.
In providing this Opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all financial information that
was available to us from public sources and all the financial and other
information provided to us by the Company or its representatives. We have
further relied upon the assurances of the Company's management that they are
unaware of any facts that would make the information the Company or its
representatives provided to us incomplete or misleading.
We have not solicited Third Party Offers, nor have we negotiated the
Transaction's terms nor advised you with respect to alternatives to it.
This Opinion is provided for the information and assistance of the Board in its
consideration of the Transaction. This Opinion does not constitute a
recommendation to the Shareholders as to how they should vote with respect to
the Transaction.
We have not reviewed any proxy statement, registration statement or similar
documents that have been or may be prepared for use in connection with the
Transaction.
<PAGE>
Board of Directors
Wisconsin Fuel & Light Company
July 13, 2000
Page 3
With respect to the projected financial results, we have assumed they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgment of the Company's management. We do not express an opinion or any
other form of assurance as to the reasonableness of the underlying assumptions.
We have not performed or obtained an independent appraisal of any of the
Company's assets.
We have not conducted or provided environmental liability assessments of any
kind, so this Opinion does not reflect any actual or contingent environmental
liabilities.
This Opinion is necessarily based on economic, market, financial, and other
conditions as they exist and can be evaluated by us as of the date of this
letter.
Based on the foregoing, it is our opinion that the consideration to be received
by the Shareholders in connection with the Transaction is fair to them from a
financial point of view.
Very truly yours,
/s/ Emory Business Valuation, LLC
EMORY BUSINESS VALUATION, LLC
<PAGE>
APPENDIX C
DISSENTERS' RIGHTS
Subchapter XIII
Sections 180.1301 through 180.1331
of the Wisconsin Business Corporation Law
180.1301 DEFINITIONS. IN ss. 180.1301 TO 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner
of shares held by a nominee as the shareholder.
(lm) "Business combination" has the meaning given in s. 180.1130(3).
(2) "Corporation" means the issuer corporation or, if the corporate
action giving rise to dissenters' rights under s. 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under s. 180.1302 and who exercises
that right when and in the manner required by ss. 180.1320 to 180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in s.
180.1130(9)(a) 1 to 4.
(5) "Interest" means interest from the effectuation date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all of the circumstances.
(6) "Issuer corporation means a domestic corporation that is the
issuer of the shares held by a dissenter before the corporate action.
History: 1989 a. 303; 1991 a. 16.
180.1302 RIGHT TO DISSENT.
(1) Except as provided in sub. (4) and s. 180.1008(3), a shareholder
or beneficial shareholder may dissent from, and obtain payment of the fair value
of his or her shares in the event of, any of the following corporate actions:
<PAGE>
(a) Consummation of a plan of merger to which the issuer
corporation is a party if any of the following applies:
1. Shareholder approval is required for the merger
by s. 180.1103 or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is
merged with its parent under s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the
shareholder holding shares on behalf of the beneficial shareholder is
entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the issuer corporation other
than in the usual and regular course of business, including a sale in
dissolution, but not including any of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the
date of sale.
(d) Except as provided in sub. (2), any other corporate
action taken pursuant to a shareholder vote to the extent that the
articles of incorporation, bylaws or a resolution of the board of
directors provides that the voting or nonvoting shareholder or
beneficial shareholder may dissent and obtain payment for his or her
shares.
(2) Except as provided in sub. (4) and s. 180.1008(3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent from
an amendment of the articles of incorporation and obtain payment of the fair
value of his or her shares if the amendment materially and adversely affects
rights in respect of a dissenter's shares because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of
shares to acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on
any matter or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights.
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(e) Reduces the number of shares owned by the shareholder or
beneficial shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1)(a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of the
statutory close corporation may dissent from a corporate action and obtain
payment of the fair value of his or her shares, to the extent permitted under
sub. (1)(d) or (2) or s. 180.1803, 180.1813(1)(d) or (2)(b), 180.1815(3) or
180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the National
Association of Securities Dealers, Inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
ss. 180.1301 to 180.1331 may not challenge the corporate action creating his or
her entitlement under the action is unlawful or fraudulent with respect to the
shareholder, beneficial shareholder or issuer corporation.
History: 1989 a. 303; 1991 a. 16.
180.1303 DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS.
(1) A shareholder may assert dissenters' rights as to fewer than all
of the shares registered in his or her name only if the shareholder dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a shareholder who under this
subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name are determined as if the shares as to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if the beneficial shareholder does all of
the following:
(a) Submits to the corporation the shareholder's written
consent to the dissent not later than the time that the beneficial
shareholder asserts dissenters' rights.
(b) Submits the consent under par. (a) with respect to all
shares of which he or she is the beneficial shareholder.
History: 1989 a. 303.
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180.1320 NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders and beneficial shareholders are or may be entitled
to assert dissenters' right under ss. 180.1301 to 180.1331 and shall be
accompanied by a copy of those sections.
(2) If corporate action creating dissenters' rights under s. 180.1302
is authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to assert
dissenters' rights that the action was authorized and send them the dissenters'
notice described in s. 180.1322.
History: 1989 a. 303.
180.1321 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to vote at a shareholders' meeting, a shareholder or
beneficial shareholder who wishes to assert dissenters' rights shall do all of
the following:
(a) Deliver to the issuer corporation before the vote is
taken written notice that complies with s. 180.0 141 of the
shareholder's or beneficial shareholder's intent to demand payment for
his or her shares if the proposed action is effectuated.
(b) Not vote his or her shares in favor of the proposed
action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub.
(1) is not entitled to payment for his or her shares under ss. 180.1301 to
180.1331.
History: 1989 a. 303.
180.1322 DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders and beneficial shareholders who
satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after
the corporate action is authorized at a shareholders' meeting or without a vote
of shareholders, whichever is applicable. The dissenters' notice shall comply
with s. 180.0 141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or
beneficial shareholder must send the payment demand and where and when
certificates for certified shares must be deposited.
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(b) For holders of uncertificated shares, an explanation of
the extent to which transfer of the shares will be restricted after
the payment demand is received.
(c) A form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms
of the proposed corporate action and that requires the shareholder or
beneficial shareholder asserting dissenters' rights to certify whether
he or she acquired beneficial ownership of the shares before that
date.
(d) A date by which the corporation must receive the payment
demand, which may not be fewer than 30 days nor more than 60 days
after the date on which the dissenters' notice is delivered.
(e) A copy of ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1323 DUTY TO DEMAND PAYMENT.
(1) A shareholder or beneficial shareholder who is sent a dissenters'
notice described in s. 180.1322, or a beneficial shareholder whose shares are
held by a nominee who is sent a dissenters' notice described in s. 180.1322,
must demand payment in writing and certify whether he or she acquired beneficial
ownership of the shares before the date specified in the dissenters' notice
under s. 180.1322(2)(c). A shareholder or beneficial shareholder with
certificated shares must also deposit his or her certificates in accordance with
the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares
who demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice is not entitled to payment for his or her
shares under ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1324 RESTRICTIONS ON UNCERTIFICATED SHARES.
(1) The issuer corporation may restrict the transfer of uncertificated
shares from the date that the demand for payment for those shares is received
until the corporate action is effectuated or the restrictions released under s.
180.1326.
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(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
History: 1989 a. 303.
180.1325 PAYMENT.
(1) Except as provided in s. 180.1327, as soon as the corporate action
is effectuated or upon receipt of a payment demand, whichever is later, the
corporation shall pay each shareholder or beneficial shareholder who has
complied with s. 180.1323 the amount that the corporation estimates to be the
fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements,
audited and including footnote disclosure if available, but including
not less than a balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders'
equity for that year and the latest available interim financial
statements, if any.
(b) A statement of the corporation's estimate of the fair
value of the shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment
under s. 180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1326 FAILURE TO TAKE ACTION.
(1) If an issuer corporation does not effectuate the corporate action
within 60 days after the date set under s. 180.1322 for demanding payment, the
issuer corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and repeat
the payment demand procedure.
History: 1989 a. 303.
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180.1327 AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by s.
180.1325 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date specified in the dissenters' notice under s.
180.1322(2)(c) as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment
under sub. (1) after effectuating the corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of his or her
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand under s. 180.1328 if the
dissenter is dissatisfied with the offer.
History: 1989 a. 303.
180.1328 PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may, in the manner provided in sub. (2), notify the
corporation of the dissenter's estimate of the fair value of his or her shares
and amount of interest due, and demand payment of his or her estimate, less any
payment received under s. 180.1325, or reject the offer under s. 180.1327 and
demand payment of the fair value of his or her shares and interest due, if any
of the following applies:
(a) The dissenter believes that the amount paid under s.
180.1325 or offered under s. 180.1327 is less than the fair value of
his or her shares or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under s. 180.1325
within 60 days after the date set under s. 180.1322 for demanding
payment.
(c) The issuer corporation, having failed to effectuate the
corporate action, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares
within 60 days after the date set under s. 180.1322 for demanding
payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand under
sub. (1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with s. 180.0141.
History: 1989 a. 303.
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180.1330 COURT ACTION.
(1) If a demand for payment under s. 180.1328 remains unsettled, the
corporation shall bring a special proceeding within 60 days after receiving the
payment demand under s. 180.1328 and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not bring the
special proceeding within the 60-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit
court for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled parties to the special
proceeding. Each party to the special proceeding shall be served with a copy of
the petition as provided in s. 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled
to judgment for any of the following:
(a) The amount, if any, by which the court finds the fair
value of his or her shares, plus interest, exceeds the amount paid by
the corporation.
(b) The fair value, plus accrued interest, of his or her
shares acquired on or after the date specified in the dissenter's
notice under s. 180.1322(2)(c), for which the corporation elected to
withhold payment under s. 180.1327.
History: 1989 a. 303.
180.1331 COURT COSTS AND COUNSEL FEES.
(1) (a) Notwithstanding ss. 814.01 to 814.04, the court in a special
proceeding brought under s. 180.1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court and shall assess the costs against the corporation,
except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may
assess costs against all or some of the dissenters, in amounts that
the court finds to be
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equitable, to the extent what the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment
under s. 180.1328.
(2) The parties shall bear their own expenses of the proceeding,
except that, notwithstanding ss. 814.01 to 814.04, the court may also assess the
fees and expenses of counsel and experts for the respective parties, in amounts
that the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if
the court finds that the corporation did not substantially comply with
ss. 180.1320 to 180.1328.
(b) Against the corporation or against a dissenter, in favor
of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not
in good faith with respect to the rights provided by this chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
History: 1989 a. 303.
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APPENDIX D
WISCONSIN PUBLIC SERVICE CORPORATION
RESTATED ARTICLES OF INCORPORATION
PARAGRAPH III.C.(8)(b)
(8) Special Voting Rights on Certain Additional Issues and Merger or
Consolidation
So long as any shares of the Preferred Stock of any series are outstanding
the corporation shall not without the affirmative vote of the holders of record
of a majority of the total number of shares of Preferred Stock of all series
then outstanding:
* * *
(b) Merge or consolidate with or into any corporation unless such merger or
consolidation or the issuance or assumption of all securities to be issued or
assumed in connection therewith shall have been ordered, approved or permitted
by the Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935, or by the Federal Power Commission under the Federal Power
Act, or by any successor commission or regulatory authority of the United States
of America having jurisdiction in the premises; provided that the provisions of
this subdivision (b) shall not apply to a purchase or other acquisition by the
corporation of the franchises or assets of another company or otherwise apply in
any manner which does not involve a merger or consolidation.
PARAGRAPH III.C.(9)
(9) Special Voting Rights on Incurring Certain Unsecured Indebtedness
So long as any shares of the Preferred Stock of any series are outstanding
the corporation shall not without the affirmative vote of the holders of record
of a majority of the total number of shares of Preferred Stock present in person
or by proxy at a meeting duly called for the purpose:
Issue or assume any unsecured notes, debentures or other securities
representing unsecured indebtedness for any purpose other than (1) the refunding
of outstanding unsecured securities theretofore issued or assumed by the
corporation or (2) the redemption or other retirement of outstanding shares of
one or more series of the Preferred Stock, if, immediately after such issue or
assumption the total principal amount of all unsecured notes, debentures or
other unsecured securities representing unsecured indebtedness issued or assumed
by the corporation and then outstanding (including unsecured securities then to
be issued or assumed but excluding unsecured securities theretofore so consented
to by the holders of Preferred Stock) will exceed twenty per cent (20%) of the
total principal amount of all bonds or other securities representing secured
indebtedness issued or assumed by the corporation and then to be outstanding and
the capital and surplus of the corporation as then to be stated on the books of
account of the corporation.
<PAGE>
For the purpose of the foregoing subparagraph the presence in person or by
proxy of the holders of record of a majority of all outstanding Preferred Stock
shall be necessary to constitute a quorum; provided that if such quorum shall
not have been obtained at such meeting or any adjournment thereof within thirty
(30) days of the date of such meeting as originally called the presence in
person or by proxy of the holders of record of one-third of all outstanding
Preferred Stock shall constitute a quorum; provided further that in the absence
of quorum such meeting or any adjournment thereof may be adjourned from time to
time by an officer of the corporation who shall have called the meeting without
notice other than announcement at the meeting.
PROPOSED AMENDMENTS
RESOLVED, that subdivision (b) of Paragraph (8) of Part C of Article
III of the Restated Articles of Incorporation of Wisconsin Public Service
Corporation hereby be amended by adding thereto the following clause at the end
of such paragraph:
"and further provided that the provisions of this subdivision (b)
shall not apply to any merger in which the corporation shall be the
surviving corporation and which does not result in a change in control
of the corporation, i.e., the power to direct or cause the direction
of the management and policies of the corporation through the
ownership of voting stock, by contract or otherwise."
RESOLVED, that Part C. of Article III of the Restated Articles of
Incorporation of Wisconsin Public Service Corporation hereby be amended by
deleting paragraph (9) thereof in its entirety.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Wisconsin Business Corporation Law and the By-Laws of WPS
Resources Corporation permit indemnification of WPS Resources Corporation's
directors and officers in a variety of circumstances, which may include
liabilities under the Securities Act of 1933. In addition, WPS Resources
Corporation has purchased insurance permitted by the law of Wisconsin on behalf
of directors, officers, employees or agents which may cover liabilities under
the Securities Act.
The Merger Agreement among WPS Resources Corporation, two subsidiaries
thereof and Wisconsin Fuel and Light Company provides that, to the extent not
prohibited by law, all rights of indemnification in favor of current or former
directors or officers of Wisconsin Fuel and Light Company as provided in the
Articles of Incorporation or By-laws of Wisconsin Fuel and Light Company for
acts or omissions occurring prior to the effective time of the Merger, will
continue in full force and effect for a period of not less than six years from
the effective time of the Merger. The Merger Agreement also provides that, to
the extent permitted by law and not provided by an existing right of
indemnification or other agreement or policy, WPS Resources Corporation shall
indemnify, defend and hold harmless all current or former directors or officers
of Wisconsin Fuel and Light Company for acts or omissions occurring prior to the
effective time that are, in whole or in part, based on or arise out of the fact
that such person is or was a director, officer or employee of Wisconsin Fuel and
Light Company or of any Wisconsin Fuel and Light Company subsidiary or that are
based on or arise out of or pertain to the transactions contemplated by the
Merger Agreement, and that for a period of six years from the effective time of
the Merger, WPS Resources Corporation will cause to be maintained, Wisconsin
Fuel and Light Company's directors' and officers' insurance and indemnification
policy to the extent that it provides coverage for events occurring prior to the
effective time of the Merger for directors and officers of Wisconsin Fuel and
Light Company who were covered under such policy as in effect on July 13, 2000,
or obtain new policies of such insurance at least as favorable as the most
favorable coverage offered by policies currently maintained by Wisconsin Fuel
and Light Company and WPS Resources Corporation, so long as the annual premium
would not be in excess of 200% of the aggregate premiums paid by Wisconsin Fuel
and Light Company for such insurance as of July 13, 2000, and provided that if
the annual premiums of such insurance coverage exceed such amount, WPS Resources
Corporation shall be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the board of directors of WPS Resources
Corporation, for a cost not exceeding such amount.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger, dated as of July 13, 2000, by and among
WPS Resources Corporation, WF&L Acquisition Corp. and Wisconsin Fuel
and Light Company (included as Appendix A to the Joint Proxy
Statement/Prospectus forming part of this Registration Statement).
3(a)-1 Restated Articles of Incorporation of WPS Resources Corporation.
(Incorporated by reference to Appendix B to Amendment No. 1 to WPS'S
Registration Statement on Form S-4, filed February 28, 1994 [Reg. No.
33-52199])
3(a)-2 Articles of Incorporation of Wisconsin Public Service Corporation as
effective May 26, 1972 and amended through May 31, 1988 (Incorporated
by reference to Exhibit 3A to Form 10K for the year ended December 31,
1999 [File No. 1-3016]); Articles of Amendment to Articles of
Incorporation dated June 1, 1993 (Incorporated by reference to Exhibit
3 to Form 8-K filed June 10, 1993 [File No. 1-3016]).
3(b)-1 By-Laws of WPS Resources Corporation as in effect February 10, 2000.
(Incorporated by reference to Exhibit 3B-1 to Form 10-K for the year
ended December 31, 1999 [File No. 1-11337]).
3(b)-2 By-Laws of Wisconsin Public Service as in effect February 10, 2000
(Incorporated by reference to Exhibit 3B-2 to Form 10-K for the year
ended December 31, 1999 [File No. 1-3016].
4 Copy of Rights Agreement, dated December 12, 1996 between WPS and
Firstar Trust Company (Incorporated by reference to Exhibit 4.1 to
Form 8-A filed December 13, 1996 [File No. 1-11337]).
5* Opinion of Foley & Lardner, counsel for WPS, regarding validity of
Securities being registered.
8(a)* Opinion of Foley & Lardner, regarding certain federal income tax
matters.
8(b)* Opinion of von Briesen, Purtell & Roper, s.c., regarding certain
federal income tax matters.
8(c) Opinion of Foley & Lardner regarding federal income tax consequences
of special cash dividend.
l0(a) Copy of Joint Power Supply Agreement among Wisconsin Public Service
Corporation, Wisconsin Power and Light Company, and Madison Gas and
Electric Company, dated February 2, 1967 (Incorporated by reference to
Exhibit 4.09 [File No. 2-27308]).
10(b) Copy of Joint Power Supply Agreement (Exclusive of Exhibits) among
Wisconsin Public Service Corporation, Wisconsin Power and Light
Company, and Madison Gas and Electric Company dated July 26, 1973
(Incorporated by reference to Exhibit 5.04A in File No. 2-48781).
* Previously filed.
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EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
10(c) Settlement and Ownership Transfer Agreement dated September 28, 1998
between Wisconsin Public Service Corporation and Madison Gas and
Electric Company (Incorporated by reference to Exhibit 99-2 to Form
8-K filed March 2, 1999 [File No. 1-03016]).
10(d)(1) Copy of Basic Generating Agreement, Unit 4, Edgewater Generating
Station, dated June 5, 1967, between Wisconsin Power and Light Company
and Wisconsin Public Service Corporation (Incorporated by reference to
Exhibit 4.10 in File No. 2-27308).
10(d)(2) Copy of Agreement for Construction and Operation of Edgewater 5
Generating Unit, dated February 24, 1983, between Wisconsin Power and
Light Company, Wisconsin Electric Power Company, and Wisconsin Public
Service Corporation (Incorporated by reference to Exhibit 10C-l to
Form 10-K of Wisconsin Public Service Corporation for the year ended
December 31, 1983 [File No. 1-3016]).
10(d)(3) Amendment No. 1 to Agreement for Construction and Operation of
Edgewater 5 Generating Unit, dated December 1, 1988 (Incorporated by
reference to Exhibit 10C-2 to Form 10-K of Wisconsin Public Service
Corporation for the year ended December 31, 1988 [File No. 1-3016]).
10(e) Copy of revised Agreement for Construction and Operation of Columbia
Generating Plant among Wisconsin Public Service Corporation, Wisconsin
Power and Light Company, and Madison Gas and Electric Company, dated
July 26, 1973 (Incorporated by reference to Exhibit 5.07 in File No.
2-48781).
10(f) Copy of Guaranty and Agreements and Note Agreements for Wisconsin
Public Service Corporation Employee Stock Ownership Plan and Trust
(ESOP) dated November 1, 1990 (Incorporated by reference to Exhibits
10.1 and 10.2 to Form 8-K of Wisconsin Public Service Corporation
filed November 2, 1990 [File No. 1-3016]).
10(g) Copy of Power Purchase Agreement Between DePere Energy LLC and
Wisconsin Public Service Corporation dated November 8, 1995 and
amended by a Letter Agreement dated February 19, 1997. (Incorporated
by a reference to Exhibit 10f-1 to the Form 10-K for the year ended
December 31, 1997 [File No. 1-3016]).
10(h)(1) Copy of amended and restated WPS Resources Corporation Deferred
Compensation Plan for executives and non-employee directors, effective
March 1, 1999. (Incorporated by reference to Exhibit 10H-1 to Form
10-K for the year ended December 31, 1999 [File No. 1-1137]).
10(h)(2) Copy of Form of Executive Employment and Severance Agreement entered
into between WPS Resources Corporation and each of Ralph G. Baeten,
Daniel P. Bittner, Diane L. Ford, Richard E. James, Thomas P. Meinz,
Phillip M. Mikulsky, Wayne J. Peterson, Patrick D. Schrickel, Charlie
A. Schrock, Clark R. Steinhardt, Bernard J. Treml and Larry L. Weyers.
(Incorporated by reference to Exhibit 10.6 to Form 10-Q for the
quarter ended June 30, 1997 [File No. 1-1137]).
10(h)(3) Copy of WPS Resources Corporation Short-Term Variable Pay Plan
effective January 1, 1998. (Incorporated by reference to Exhibit 10G-3
in the Form 10-K for the year ended December 31, 1997 [File No.
1-11337]).
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EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
10(h)(4) Copy of WPS Resources 1999 Stock Option Plan effective May 6, 1999
(Incorporated by reference to Exhibit 10-2 in the Form 10-Q for the
quarter ended June 30, 1999, filed August 11, 1999. [File No.
1-11337]).
10(h)(5) WPS Resources Corporation 1999 Non-Employee Directors Stock Option
Plan (Incorporated by reference to Exhibit 4.2 in Form S-8 December
21, 1999. [File No. 333-93193]).
21 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit
21 of WPS Resources Corporation--Wisconsin Public Service Corporation
Form 10-K filed March 7, 1997 [File No. 1-11337]).
23* (a) Consent of Arthur Andersen LLP regarding WPS Resources Corporation
and Wisconsin Public Service Corporation
23(b)* Consent of Arthur Anderson LLP regarding Wisconsin Fuel and Light
Company
23(c)* Consent of Emory Business Valuation, LLC.
24 Powers of Attorney (included in signature pages of original
registration statement).
99.1 Form of Proxy to be used in connection with the Special Meeting of
Shareholders of Wisconsin Fuel and Light Company.
99.2 Form of Proxy to be used in connection with the Special Meeting of
Preferred Shareholders of Wisconsin Public Service Corporation.
* Previously filed.
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<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section l0(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
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<PAGE>
underwriters, in addition to the information called for by the other Items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
l0(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to this
Registration Statement and will not be used until such amendment is effective,
and that, for the purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(7) To respond to requests for information that is incorporated by
reference into the Proxy Statement/Prospectus pursuant to Item 4, 10(b), 11 or
13 of this Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of responding to
the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this Registration Statement when it
became effective.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF GREEN BAY,
STATE OF WISCONSIN, ON SEPTEMBER 18, 2000.
WPS RESOURCES CORPORATION
By:/s/ Larry L. Weyers
------------------------------------
Larry L. Weyers
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.*
NAME CAPACITY
---- --------
/s/ Larry L. Weyers
------------------------------ Chairman, President and Chief Executive Officer
Larry L. Weyers (Principal Executive Officer and Director)
/s/ Daniel P. Bittner
------------------------------ Vice President and Chief Financial Officer
Daniel P. Bittner (Principal Financial Officer)
/s/ Diane L. Ford
------------------------------ Controller
Diane L. Ford Principal Accounting Officer)
NAME CAPACITY
---- --------
A. Dean Arganbright Director
Michael S. Ariens Director
Richard A. Bemis Director
Clarence R. Fisher Director
Robert S. Gallagher Director
John C. Meng Director
Kathryn M. Hasselblad-Pascale Director
James L. Kemerling Director
By /s/ Barth J. Wolf
-----------------------------------------
Barth J. Wolf
Attorney-in-Fact
A Power of Attorney from each of the above persons was included on the signature
page of the original registration statement
____________________
* Each of the above signatures is affixed as of September 18, 2000
II-7
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger, dated as of July 13, 2000, by and among
WPS Resources Corporation, WF&L Acquisition Corp. and Wisconsin Fuel
and Light Company (included as Appendix A to the Joint Proxy
Statement/Prospectus forming part of this Registration Statement).
3(a)-1 Restated Articles of Incorporation of WPS Resources Corporation.
(Incorporated by reference to Appendix B to Amendment No. 1 to WPS'S
Registration Statement on Form S-4, filed February 28, 1994 [Reg. No.
33-52199])
3(a)-2 Articles of Incorporation of Wisconsin Public Service Corporation as
effective May 26, 1972 and amended through May 31, 1988 (Incorporated
by reference to Exhibit 3A to Form 10K for the year ended December 31,
1999 [File No. 1-3016]); Articles of Amendment to Articles of
Incorporation dated June 1, 1993 (Incorporated by reference to Exhibit
3 to Form 8-K filed June 10, 1993 [File No. 1-3016]).
3(b)-1 By-Laws of WPS Resources Corporation as in effect February 10, 2000.
(Incorporated by reference to Exhibit 3B-1 to Form 10-K for the year
ended December 31, 1999 [File No. 1-11337]).
3(b)-2 By-Laws of Wisconsin Public Service as in effect February 10, 2000
(Incorporated by reference to Exhibit 3B-2 to Form 10-K for the year
ended December 31, 1999 [File No. 1-3016].
4 Copy of Rights Agreement, dated December 12, 1996 between WPS and
Firstar Trust Company (Incorporated by reference to Exhibit 4.1 to
Form 8-A filed December 13, 1996 [File No. 1-11337]).
5* Opinion of Foley & Lardner, counsel for WPS, regarding validity of
Securities being registered.
8(a)* Opinion of Foley & Lardner, regarding certain federal income tax
matters.
8(b)* Opinion of von Briesen, Purtell & Roper, S.C., regarding certain
federal income tax matters.
8(c) Opinion of Foley & Lardner regarding federal income tax consequences
of special cash dividend.
l0(a) Copy of Joint Power Supply Agreement among Wisconsin Public Service
Corporation, Wisconsin Power and Light Company, and Madison Gas and
Electric Company, dated February 2, 1967 (Incorporated by reference to
Exhibit 4.09 [File No. 2-27308]).
10(b) Copy of Joint Power Supply Agreement (Exclusive of Exhibits) among
Wisconsin Public Service Corporation, Wisconsin Power and Light
Company, and Madison Gas and Electric Company dated July 26, 1973
(Incorporated by reference to Exhibit 5.04A in File No. 2-48781).
* Previously filed.
<PAGE>
EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
10(c) Settlement and Ownership Transfer Agreement dated September 28, 1998
between Wisconsin Public Service Corporation and Madison Gas and
Electric Company (Incorporated by reference to Exhibit 99-2 to Form
8-K filed March 2, 1999 [File No. 1-03016]).
10(d)(1) Copy of Basic Generating Agreement, Unit 4, Edgewater Generating
Station, dated June 5, 1967, between Wisconsin Power and Light Company
and Wisconsin Public Service Corporation (Incorporated by reference to
Exhibit 4.10 in File No. 2-27308).
10(d)(2) Copy of Agreement for Construction and Operation of Edgewater 5
Generating Unit, dated February 24, 1983, between Wisconsin Power and
Light Company, Wisconsin Electric Power Company, and Wisconsin Public
Service Corporation (Incorporated by reference to Exhibit 10C-l to
Form 10-K of Wisconsin Public Service Corporation for the year ended
December 31, 1983 [File No. 1-3016]).
10(d)(3) Amendment No. 1 to Agreement for Construction and Operation of
Edgewater 5 Generating Unit, dated December 1, 1988 (Incorporated by
reference to Exhibit 10C-2 to Form 10-K of Wisconsin Public Service
Corporation for the year ended December 31, 1988 [File No. 1-3016]).
10(e) Copy of revised Agreement for Construction and Operation of Columbia
Generating Plant among Wisconsin Public Service Corporation, Wisconsin
Power and Light Company, and Madison Gas and Electric Company, dated
July 26, 1973 (Incorporated by reference to Exhibit 5.07 in File No.
2-48781).
10(f) Copy of Guaranty and Agreements and Note Agreements for Wisconsin
Public Service Corporation Employee Stock Ownership Plan and Trust
(ESOP) dated November 1, 1990 (Incorporated by reference to Exhibits
10.1 and 10.2 to Form 8-K of Wisconsin Public Service Corporation
filed November 2, 1990 [File No. 1-3016]).
10(g) Copy of Power Purchase Agreement Between DePere Energy LLC and
Wisconsin Public Service Corporation dated November 8, 1995 and
amended by a Letter Agreement dated February 19, 1997. (Incorporated
by a reference to Exhibit 10f-1 to the Form 10-K for the year ended
December 31, 1997 [File No. 1-3016]).
10(h)(1) Copy of amended and restated WPS Resources Corporation Deferred
Compensation Plan for executives and non-employee directors, effective
March 1, 1999. (Incorporated by reference to Exhibit 10H-1 to Form
10-K for the year ended December 31, 1999 [File No. 1-1137]).
10(h)(2) Copy of Form of Executive Employment and Severance Agreement entered
into between WPS Resources Corporation and each of Ralph G. Baeten,
Daniel P. Bittner, Diane L. Ford, Richard E. James, Thomas P. Meinz,
Phillip M. Mikulsky, Wayne J. Peterson, Patrick D. Schrickel, Charlie
A. Schrock, Clark R. Steinhardt, Bernard J. Treml and Larry L. Weyers.
(Incorporated by reference to Exhibit 10.6 to Form 10-Q for the
quarter ended June 30, 1997 [File No. 1-1137]).
10(h)(3) Copy of WPS Resources Corporation Short-Term Variable Pay Plan
effective January 1, 1998. (Incorporated by reference to Exhibit 10G-3
in the Form 10-K for the year ended December 31, 1997 [File No.
1-11337]).
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<PAGE>
EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
10(h)(4) Copy of WPS Resources 1999 Stock Option Plan effective May 6, 1999
(Incorporated by reference to Exhibit 10-2 in the Form 10-Q for the
quarter ended June 30, 1999, filed August 11, 1999. [File No.
1-11337]).
10(h)(5) WPS Resources Corporation 1999 Non-Employee Directors Stock Option
Plan (Incorporated by reference to Exhibit 4.2 in Form S-8 December
21, 1999. [File No. 333-93193]).
21 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit
21 of WPS Resources Corporation--Wisconsin Public Service Corporation
Form 10-K filed March 7, 1997 [File No. 1-11337]).
23(a)* Consent of Arthur Andersen LLP regarding WPS Resources Corporation and
Wisconsin Public Service Corporation
23(b)* Consent of Arthur Andersen LLP regarding Wisconsin Fuel and Light
Company
23(c)* Consent of Emory Business Valuation, LLC.
24 Powers of Attorney (included in signature pages of original
registration statement).
99.1* Form of Proxy to be used in connection with the Special Meeting of
Shareholders of Wisconsin Fuel and Light Company.
99.2* Form of Proxy to be used in connection with Special Meeting of
Preferred Shareholders of Wisconsin Public Service Corporation
* Previously filed.
-3-
