As filed with the Securities and Exchange Commission on February 24, 1998
Registration No. 33-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-4
Registration Statement under The Securities Act of 1933
_______________________________________________________
BERKSHIRE ENERGY RESOURCES
(Exact name of Registrant as specified in its charter)
______________________________________________________
Massachusetts 6719 04-3408946
State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or classification code number) identification no.)
organization)
115 Cheshire Road, Pittsfield, MA 01201-1879, (413) 442-1511
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Cheryl M. Clark
Secretary
115 Cheshire Road, Pittsfield, MA 01201-1879, (413) 442-1511
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
_____________________
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With Copies To:
James M. Avery, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, Massachusetts 02108
(617) 482-1360
______________
Approximate date of commencement of proposed sale of the securities to
the public: At the effective time of the merger of a wholly-owned
subsidiary of the Registrant with and into The Berkshire Gas Company, which
shall occur as soon as practicable after the effective date of this
Registration Statement and the satisfaction or waiver of all conditions to
closing of such merger as described in the enclosed Proxy
Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ] ___
If this form is a post-effective amendment filed pursuant to Rule 462
(d) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ] _________________
________________________
CALCULATION OF REGISTRATION FEE
Title of Each Class of Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Amount to be Registered Offering Price Per Unit Aggregate Offering Price Registration Fee
Common Shares,
without par value 2,385,252 shares $22-11/16(1) $54,115,404.75(1) $15,964.05(1)
- --------------------
<F1> The Registration Fee was calculated in accordance with Rule 457(f)(1),
based on the average of the high and low sales prices for shares of
Common Stock of The Berkshire Gas Company as quoted in the NASDAQ
National Market System on February 18, 1998.
____________________
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
2
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
[THE BERKSHIRE GAS COMPANY LETTERHEAD]
_________ __, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of
Shareholders of The Berkshire Gas Company ("Berkshire Gas") on _________,
_________ __, 1998 at 10:00 a.m. at the Berkshire Gas offices, 115 Cheshire
Road, Pittsfield, Massachusetts 01201-1879.
At the Special Meeting you will be asked to consider and vote on a
proposal to form a holding company for Berkshire Gas. The Board of
Directors and management of Berkshire Gas consider this change to be in the
best interests of Berkshire Gas and its shareholders. The new structure is
designed to enable Berkshire Gas to respond more effectively and efficiently
to competitive changes occurring in the natural gas utility industry and to
new business opportunities that may arise from these changes. The new
structure will allow clear separation of the new holding company's regulated
and unregulated lines of business in a manner consistent with the utility
industry restructuring principles outlined by the Massachusetts Department
of Telecommunications and Energy (formerly the Department of Public
Utilities) and in recent amendments to legislation affecting Massachusetts
gas companies. Nearly all Massachusetts investor-owned electric utilities
are already organized in this manner, as are a number of Massachusetts
investor-owned natural gas utilities.
The attached series of questions and answers provides information on
the proposed holding company, what it is and how it would affect the
individual shareholder. The enclosed Proxy Statement/Prospectus contains a
more extensive discussion of the proposal.
The Board of Directors and management of Berkshire Gas unanimously
recommend approval of the holding company structure and urge you to vote for
the proposed restructuring. A two-thirds majority of all shareholders is
required to approve the proposal, and your vote is critical to achieving a
successful outcome.
Your vote at the Special Meeting is important, regardless of the
number of shares that you own. Whether or not you plan to attend the
Special Meeting, please sign, date and return your proxy as soon as possible
in the envelope provided.
Sincerely,
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___________________________ __________________________
Franklin M. Hundley Scott S. Robinson
Chairman of the Board President and Chief Executive Officer
THE HOLDING COMPANY AND HOW IT WOULD AFFECT YOU
The proxy statement for the Special Meeting contains an extensive discussion
of a proposal to form a holding company structure for The Berkshire Gas
Company ("Berkshire Gas"). This proposal is briefly summarized below. Each
answer references to the page or pages of the Proxy Statement/Prospectus in
which the topic is discussed in more detail. Shareholders are urged to read
the Proxy Statement/Prospectus and the appendices thereto in their entirety.
WHAT IS BEING PROPOSED?
The Board of Directors of Berkshire Gas proposes to form a holding company,
a structure which is commonly used throughout the utility industry,
including Massachusetts, where nearly every investor-owned electric utility
already has such a structure, as well as several investor-owned natural gas
utilities. Berkshire Gas would become a subsidiary of the new holding
company. Current holders of Berkshire Gas' common stock would own common
shares of the holding company instead of stock in Berkshire Gas itself.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.) New
subsidiary companies could be formed, which would be separate from Berkshire
Gas, but owned by the new holding company. First, retail propane operations
now performed through a division of Berkshire Gas would be transferred to a
new subsidiary. Second, a management services company would be formed to
provide certain administrative services to Berkshire Gas, the new holding
company and other subsidiaries of the holding company for a charge based
upon the cost attributable to providing such services. Finally, in the
event that new business opportunities in the competitive marketplace are
pursued, a new subsidiary company (or companies) could be formed.
The charts below depict Berkshire Gas' current structure and the proposed
holding company structure:
___________________________________________________________________________
| CURRENT STRUCTURE |
|___________________________________________________________________________|
| |
| HOLDERS OF COMMON STOCK |
| AND HOLDERS OF 4.8% CUMULATIVE PREFERRED STOCK |
| : |
| : |
| Berkshire Gas |
|___________________________________________________________________________|
___________________________________________________________________________
| |
| PROPOSED STRUCTURE |
|___________________________________________________________________________|
| HOLDERS OF COMMON SHARES |
| : |
| : |
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|HOLDERS OF 4.8% CUMULATIVE Holding |
|PREFERRED STOCK Company |
| : : |
| : : |
| : ........................................... |
| : : : : : |
| : : : : : |
| Berkshire Gas Berkshire Potential New Management Services |
| Propane Subsidiaries Company |
|___________________________________________________________________________|
WHY IS A HOLDING COMPANY BEING FORMED?
In recent years, many state utility commissions, including the Massachusetts
Department of Telecommunications and Energy ("Massachusetts DTE"; formerly
the Department of Public Utilities), have initiated inquiries into
restructuring the natural gas utility industry with a goal of promoting
competition and extending to all customers the broadest possible choice of
natural gas suppliers. In November, 1997 the Massachusetts legislature
enacted a comprehensive bill to restructure the electric utility industry
(the "Restructuring Act"), many provisions of which will affect gas
utilities.
The Massachusetts DTE's decisions, as well as the Restructuring Act, are
establishing new competitive markets for energy and other related services.
The Massachusetts DTE has specifically recognized the changing nature of the
energy marketplace and the need for utilities to restructure in order to
participate effectively in these new markets while, at the same time,
protecting ratepayers' interests. Berkshire Gas' management believes that
the Massachusetts DTE's rules and decisions and the Restructuring Act
suggest that an effective means for gas utilities to participate in these
competitive markets is through unregulated affiliates within a holding
company corporate structure.
The Massachusetts DTE's decisions regarding the restructuring of the
electricity and natural gas markets, as well as the Restructuring Act,
advance several central components to seek an appropriate balance of the
needs of all participants in the natural gas market. First, the
Massachusetts DTE's decisions and the Restructuring Act have sought to
achieve the "functional separation" and distinct pricing of the services
traditionally provided on a consolidated or "bundled" basis by gas utilities
so as to enhance the development of certain competitive markets. On July
18, 1997, the Massachusetts DTE sent a letter to Berkshire Gas and other
Massachusetts local distribution companies mandating the establishment of a
collaborative forum to establish principles and procedures for such
functional separation and pricing, sometimes referred to as "unbundling," of
all natural gas and local distribution companies' ("LDC's") services with a
goal of creating a more competitive natural gas market. The Massachusetts
DTE stated that a more competitive gas market would: 1) provide the broadest
possible customer choice; 2) provide all customers with an opportunity to
share in the benefits of increased competition; 3) ensure full and fair
competition in the gas supply market; 4) functionally separate supply from
local distribution services; 5) support and further the goals of
environmental regulation; and, 6) rely on incentive regulation where a fully
competitive market cannot exist, or does not exist. Such collaborative
forum is currently underway. In addition, in a letter of August 18, 1997 to
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Massachusetts LDC's, the Massachusetts DTE stated that each Massachusetts
LDC eventually will be required to submit its own unbundling proposal for
the Massachusetts DTE's review and that, as a condition precedent to a
meaningful unbundling proposal, each LDC will be required to provide fully
unbundled rates for each rate class served by each local distribution
company. Specifically, the Department stated that it expects that Berkshire
Gas will submit, for an effective date no later than November 1, 1998, such
fully unbundled rates for each rate class.
The second component of the above-described utility industry restructuring
initiatives involves the continuing regulation of other traditional utility
activities, such as the distribution function, by the Massachusetts DTE so
as to ensure the continuing provision of safe and reliable service to
customers at reasonable rates. After the proposed corporate restructuring,
Berkshire Gas will continue to provide many traditional utility services and
will be subject to the continuing regulation of the Massachusetts DTE.
The third component of Massachusetts DTE and legislative restructuring
initiatives relates to the development of competitive markets for energy and
other related services, with utilities participating in such markets through
affiliates subject to appropriate standards of conduct. Berkshire Gas'
opportunities for long-term growth will, in part, be dependent upon its
ability to compete in new competitive markets. The Massachusetts DTE's
rules and the Restructuring Act both include provisions relating to the
specific limitations upon which regulated utilities may participate in the
new competitive energy markets so as to avoid unfair competitive advantages
or the cross-subsidization of such activities by utility ratepayers. The
Massachusetts DTE's rules include specific requirements relating to the
functional and legal separation of the activities of regulated utilities and
their competitive affiliates.
Given this emerging regulatory structure, the Massachusetts DTE has
recognized a utility company's need for flexibility and speed in order to
respond in a timely manner to the opportunities and challenges in the
changing energy marketplace. Many competitive opportunities could be
frustrated or lost if pursued by a utility or through a subsidiary of a
utility due to the requirements of the regulatory process, including, for
example, the need to obtain Massachusetts DTE approval for a gas company to
invest in a subsidiary. The Massachusetts DTE has also recognized that
alternative organizational structures may afford a utility the flexibility
to accomplish its objectives while also furthering the Massachusetts DTE's
goals of unbundling and fostering competition, maintaining appropriate
separation between regulated and non-regulated activities and also
streamlining regulatory review. The Massachusetts DTE has acknowledged that
the holding company structure is one means by which a utility may achieve
these objectives.
Assuming that natural gas industry restructuring in Massachusetts continues
to proceed consistent with the above described requirements, at a minimum,
Berkshire Gas has identified the need to adopt a corporate structure that:
1) can facilitate such unbundling; 2) permits the necessary separation of
regulated and competitive operations; and 3) will afford the appropriate
flexibility to pursue opportunities in new competitive markets. Berkshire
Gas' management believes that the increasingly competitive natural gas
industry, together with new energy-related technologies, may create
significant new opportunities for energy service providers like Berkshire
Gas in non-utility business ventures. Berkshire Gas' management believes
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that the pursuit of these new opportunities can be well accommodated in a
holding company structure and is a key element of Berkshire Gas' strategy
for long-term growth to benefit its shareholders and customers.
The holding company structure is a well-established form of organization for
companies conducting multiple lines of business, particularly entities
engaging in both regulated and unregulated activities. The holding company
structure would provide increased financial, managerial and organizational
flexibility in order to better position Berkshire Gas to operate in this
changing natural gas utility industry. Moreover, the new structure will
facilitate clear separation of the new holding company's regulated and
unregulated lines of business in a manner consistent with the principles
outlined by the Massachusetts DTE and mandated in applicable legislation and
regulation regarding competitive affiliates of Massachusetts gas companies.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.)
IN WHAT TYPES OF BUSINESSES WOULD THE HOLDING COMPANY INVEST?
The primary focus of the holding company initially would be maintaining the
strength of Berkshire Gas' core business of serving the natural gas utility
and propane needs of its customers. While authorized to engage in any form
of business, the new holding company would initially endeavor to develop
businesses that are generally related to the provision of energy and energy-
related services. For example, on February 6, 1998 Berkshire Gas formed a
limited strategic marketing alliance with Conectiv/CNE, LLC, a joint venture
of a subsidiary of Connecticut Energy Corporation, a public utility holding
company, and a subsidiary of Delmarva Power & Light Company, a Delaware
public utility, to market electricity, natural gas and energy-related
services to customers in Massachusetts, Connecticut, Vermont and New York
states. The holding company system would provide the flexibility for the
legal and functional separation of such strategic marketing alliance (and
other non-utility businesses) from the core business of Berkshire Gas.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.)
WHY WOULD THE NEW HOLDING COMPANY BE ORGANIZED AS A MASSACHUSETTS BUSINESS
TRUST INSTEAD OF A CORPORATION?
The new holding company would be formed as a Massachusetts business trust
rather than a corporation due primarily to the potential Massachusetts
income tax savings to the trust. The parent holding companies of all other
investor-owned Massachusetts utility holding systems are also organized as
business trusts. (Please see pages __ to __ of the Proxy
Statement/Prospectus.)
HOW WOULD MY OWNERSHIP OF BERKSHIRE GAS STOCK BE AFFECTED BY THE NEW
STRUCTURE?
Owners of Berkshire Gas' common stock automatically would become owners of
the holding company's common shares on a share-for-share basis. It is
expected that the holding company's common shares would be traded on the
NASDAQ National Market System under the symbol "BERK." (Please see pages
___ to ___ of the Proxy Statement/Prospectus.)
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HOW WOULD THE HOLDING COMPANY STRUCTURE AFFECT COMMON AND PREFERRED STOCK
DIVIDENDS?
While future dividends on the new holding company's common shares would
depend primarily upon the earnings, financial condition and capital
requirements of its subsidiaries, the trustees of the proposed holding
company have no current intention to change the current Berkshire Gas
dividend policy. In addition, it is expected that such dividends of the
holding company would be declared and paid on approximately the same
schedule of dates as that now followed by Berkshire Gas with respect to its
common stock dividends. The preferred stock would continue to be a security
of Berkshire Gas, not the holding company, and holders of the preferred
stock would continue to have priority as to Berkshire Gas dividends.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.)
WHAT WOULD HAPPEN TO BERKSHIRE GAS' SHARE OWNER DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN?
Berkshire Gas' Share Owner Dividend Reinvestment and Stock Purchase Plan
would be assumed by the holding company. Participants in the Plan
automatically would become participants in the corresponding holding company
plan. (Please see page ___ of the Proxy Statement/Prospectus.)
WOULD SHAREHOLDERS NEED TO TURN IN THEIR CURRENT STOCK CERTIFICATES?
It would not be necessary for holders of Berkshire Gas' common stock to
exchange their stock certificates. Certificates for Berkshire Gas' common
stock automatically would represent the same number of common shares of the
holding company. New certificates bearing the name of the holding company
would be issued in the future as outstanding certificates are presented for
transfer. (Please see page ___ of the Proxy Statement/Prospectus.)
HOW WOULD FORMATION OF A HOLDING COMPANY AFFECT PERSONAL FEDERAL INCOME
TAXES?
Berkshire Gas' management believes that the formation of a holding company
would not affect personal federal income taxes. The proposed transaction
was structured so that there would be no gain or loss to you for federal
income tax purposes on the conversion of your shares of Berkshire Gas common
stock into the holding company shares pursuant to the restructuring. For
capital gain purposes, the tax basis of the holding company shares received
in exchange for shares of Berkshire Gas' common stock would be the same as
the tax basis of your shares in Berkshire Gas, and the holding period of the
holding company shares would include the holding period of your shares of
Berkshire Gas' common stock, provided such stock is held as a capital asset
at the time of the exchange. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
WHAT EFFECT WOULD THERE BE ON HOLDERS OF BERKSHIRE GAS' PREFERRED STOCK AND
DEBT SECURITIES?
Berkshire Gas' preferred stock and long-term debt securities, consisting
primarily of first mortgage bonds and medium-term and senior notes, would be
8
maintained in the reorganization and would remain as preferred stock and
debt securities of Berkshire Gas. Berkshire Gas expects to negotiate
acceptable consents with the holders of its long-term debt securities so as
to effect the reorganization. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
WHAT WOULD THE NEW HOLDING COMPANY BE CALLED?
The name for the holding company is "Berkshire Energy Resources." (Please
see page __ of the Proxy Statement/Prospectus.)
WHO WOULD MANAGE THE HOLDING COMPANY AFTER THE HOLDING COMPANY STRUCTURE IS
APPROVED BY THE SHAREHOLDERS?
The Board of Directors and the principal executive officers of Berkshire Gas
would serve as the trustees and executive officers of the holding company
upon completion of the reorganization. (Please see pages __ to __ of the
Proxy Statement/Prospectus.)
HOW SOON WOULD THE HOLDING COMPANY STRUCTURE BE FORMED IF IT IS APPROVED BY
THE SHAREHOLDERS?
Management intends to form the holding company structure by the end of 1998.
However, any delays in obtaining the required approvals from regulatory
agencies, such as the Massachusetts DTE, could impact that schedule.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.)
WHAT VOTE IS REQUIRED TO APPROVE THE HOLDING COMPANY PROPOSAL?
In order for the holding company proposal to be approved under Massachusetts
law, it must receive favorable votes, in person or by proxy, of the holders
of two-thirds of the outstanding shares of Berkshire Gas' common stock.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.) In
addition, the consent of the holders of at least two-thirds of the total
number of shares of Berkshire Gas' 4.8% Cumulative Preferred Stock then
outstanding will be required in connection with the reorganization.
CAN THE BROKER WHO HOLDS MY SHARES OF BERKSHIRE GAS COMMON STOCK VOTE THOSE
SHARES ON MY BEHALF?
Your broker may not vote your shares without your specific direction because
the National Association of Securities Dealers considers votes to form a
holding company as non-discretionary. Your vote at the Special Meeting is
important regardless of the number of shares that you own. Whether or not
you plan to attend, please sign, date and return your proxy card as soon as
possible in the envelope provided so that your shares can be voted in
accordance with your instructions. (Please see pages ___ to ___ of the
Proxy Statement/Prospectus.)
THE ENCLOSED PROXY STATEMENT/PROSPECTUS
CONTAINS A THOROUGH AND DETAILED DISCUSSION OF
9
BERKSHIRE GAS' PROPOSAL TO FORM A HOLDING COMPANY STRUCTURE.
(Berkshire Gas Logo)
THE BERKSHIRE GAS COMPANY
THE BERKSHIRE GAS COMPANY
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
Notice of Special Meeting of Shareholders
to be held on _________ __, 1998
To the Holders of Common Stock:
The Special Meeting of Shareholders of The Berkshire Gas Company
("Berkshire Gas") will be held at the company's offices, 115 Cheshire Road,
Pittsfield, Massachusetts 01201-1879, on _________, _________ __, 1998 at
10:00 a.m., for the following purposes:
1. To approve a proposal to adopt a holding company structure for
Berkshire Gas, all as more fully described in the accompanying
Proxy Statement/Prospectus.
2. To transact any other business which may properly come before
the Special Meeting or any adjournment thereof.
Further information as to the matters to be considered and acted on at
the Special Meeting can be found in the accompanying Proxy
Statement/Prospectus.
Only the holders of common stock of Berkshire Gas as of the close of
business on _________ __, 1998, are entitled to notice of and to vote at the
Special Meeting or any adjournment thereof.
Please sign, date and return the accompanying proxy in the enclosed
addressed envelope, which requires no postage if mailed in the United
States. Your proxy may be revoked at any time before the vote is taken by
delivering to the Clerk a written revocation or a proxy bearing a later date
or by oral revocation in person to the Clerk at the Special Meeting.
By Order of the Board of Directors,
Cheryl M. Clark
Clerk
Pittsfield, Massachusetts
________ __, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
10
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
THE BERKSHIRE GAS COMPANY
115 Cheshire Road
Pittsfield, Massachusetts 01201-1879
(413) 442-1511
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus, together with the accompanying proxy,
is being furnished to shareholders of The Berkshire Gas Company, a
Massachusetts gas company ("Berkshire Gas"), in connection with solicitation
of proxies by the Board of Directors of Berkshire Gas to be voted at the
Special Meeting of Shareholders to be held on _________, ______ __, 1998 at
Berkshire Gas' offices, 115 Cheshire Road, Pittsfield, Massachusetts (the
"Special Meeting") for the following purposes:
1. To approve a proposal to adopt a holding company structure for
Berkshire Gas, all as more fully described in this Proxy
Statement/Prospectus.
2. To transact any other business which may properly come before
the Special Meeting or any adjournment thereof.
At the Special Meeting, the shareholders will be asked to approve the
formation of a holding company structure for Berkshire Gas. The holding
company structure will be established pursuant to a transaction governed by
an Agreement and Plan of Merger (the "Merger Agreement") among Berkshire
Gas, Berkshire Energy Resources, a Massachusetts business trust formed by
Berkshire Gas ("Holdco"), and Berkshire Gas Mergeco Gas Company, Inc., a
Massachusetts gas company formed by Holdco ("Mergeco"). At the time of the
transaction contemplated within the Merger Agreement, Mergeco will be a
wholly-owned subsidiary of Holdco, formed solely for the purpose of the
transaction necessary to establish a holding company. Pursuant to the
Merger Agreement, Mergeco will (i) merge with and into Berkshire Gas (the
"Merger") with Berkshire Gas being the surviving company and (ii) each
outstanding share of the common stock of Berkshire Gas, $2.50 par value per
share ("Berkshire Gas Common Stock"), will automatically be converted into
one common share of Holdco ("Holdco Common Share"). As a result of the
Merger, Berkshire Gas will therefore become a subsidiary of Holdco and the
holders of Berkshire Gas Common Stock will become holders of Holdco Common
Shares. The outstanding shares of Berkshire Gas 4.8% Cumulative Preferred
Stock will be unchanged and will continue to be outstanding securities of
Berkshire Gas. See "Proposal Regarding Plan of Restructuring -- General."
If the restructuring is implemented, it will not be necessary for
holders of Berkshire Gas Common Stock to surrender their existing stock
certificates for Holdco share certificates. See "Proposal Regarding Plan of
11
Restructuring -- Exchange of Certificates Not Required."
This Proxy Statement/Prospectus also serves as the prospectus for
Holdco under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the issuance of up to 2,385,252 common shares of Holdco in
connection with the restructuring. Further information concerning the
shares offered hereby is contained in "Proposal Regarding Plan of
Restructuring -- Holdco's Declaration of Trust and Comparative Shareholders'
Rights" and "Proposal Regarding Plan of Restructuring -- Holdco Common
Shares."
____________________
NEITHER THE MERGER NOR THE HOLDCO COMMON SHARES TO BE ISSUED IN
CONNECTION WITH THE MERGER PROPOSED HEREIN HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
____________________
The principal executive offices of Berkshire Gas and Holdco are
located at 115 Cheshire Road, Pittsfield, Massachusetts 01201-1879,
telephone number (413) 442-1511. This Proxy Statement/Prospectus and the
accompanying proxy, solicited on behalf of the Board of Directors of
Berkshire Gas, were first mailed to shareholders on or about _________ __,
1998.
The accompanying proxy, if properly executed and delivered by a
shareholder entitled to vote, will be voted at the Special Meeting as
specified in the proxy, but may be revoked at any time before the vote is
taken by the signer delivering to the Clerk of Berkshire Gas a written
revocation or a proxy bearing a later date or by oral revocation in person
to the Clerk at the Special Meeting. If choices are not specified on the
accompanying proxy, the shares will be voted FOR the Proposal Regarding Plan
of Restructuring.
All the costs of preparing, assembling and mailing the enclosed
material and any additional material which may be sent in connection with
the solicitation of the enclosed proxies will be paid by Berkshire Gas, and
no part thereof will be paid directly or indirectly by any other person.
Berkshire Gas has retained Corporate Investor Communications, Inc. to assist
in the solicitation of proxies at a fee of $4,000, plus usual and customary
expenses. Some employees may devote a part of their time to the
solicitation of proxies or for attendance at the Special Meeting but no
additional compensation will be paid to them for the time so employed and
the cost of such additional solicitation will be nominal. Berkshire Gas
will reimburse brokerage firms, banks, trustees and others for their actual
out-of-pocket expenses in forwarding proxy material to the beneficial owners
of Berkshire Gas Common Stock.
On January 31, 1998, there were issued and outstanding 2,269,820
shares of Berkshire Gas Common Stock (and 115,432 shares of Berkshire Gas
Common Stock reserved for issuance pursuant to Berkshire Gas' Share Owner
Dividend Reinvestment and Stock Purchase Plan). Only holders of record of
12
Berkshire Gas Common Stock at the close of business on that date shall be
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof, and those entitled to vote will have one vote for each share held.
To the knowledge of management, no person owns beneficially more than 5
percent of the outstanding voting securities of Berkshire Gas.
The date of this Proxy Statement/Prospectus is _______, 1998.
TABLE OF CONTENTS
AVAILABLE INFORMATION 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 2
SUMMARY OF PROXY STATEMENT/PROSPECTUS 4
Proposal Regarding Plan of Restructuring 4
THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE PROPOSED
RESTRUCTURING TO FORM A HOLDING COMPANY 4
Business of Berkshire Gas 4
Proposed Restructuring 4
Berkshire Gas Shareholders Meeting 5
Special Considerations Applicable to the Restructuring 5
Reasons for the Restructuring 5
Certain Effects on Shareholders 7
Vote Required 8
Exchange of Certificates Not Required 8
Stock Listing 8
Conditions to the Restructuring 8
Dividend Policy 9
Certain Federal Income Tax Consequences 9
No Appraisal Rights 9
PROPOSAL REGARDING PLAN OF RESTRUCTURING 10
General 10
Business of Berkshire Gas 10
The Restructuring 11
Special Considerations Applicable to the Restructuring 13
Reasons for the Restructuring 14
Benefits of Holding Company Structure 16
Recommendations of the Board 17
Vote Required 17
Exchange of Certificates Not Required 18
Merger Agreement 18
Amendment or Termination of Plan of Merger 19
Effectiveness of the Restructuring 19
Certain Federal Income Tax Consequences 19
Treatment of Preferred Stock 21
Treatment of Indebtedness 21
Dividend Policy 21
Stock Listing 22
Regulatory Approval of the Restructuring 22
Regulatory Matters 22
Holdco's Declaration of Trust and Comparative Shareholders' Rights 23
13
Holdco Common Shares 26
Trustees and Management of Holdco 27
No Appraisal Rights 28
Share Owner Dividend Reinvestment and Stock Purchase Plan 28
Price Range of Berkshire Gas Common Stock 28
Stock Ownership by Directors and Executive Officers 29
Transfer Agent and Registrar 30
Financial Statements 31
Legal Opinion 31
Experts 31
OTHER MATTERS 31
Voting Procedures 31
Adjournment of Meeting 32
Independent Accountants 32
Proposals of Shareholders 32
Other Business 32
APPENDICES
A. Agreement and Plan of Merger between and among The Berkshire Gas
Company, Berkshire Energy Resources and Berkshire Gas Mergeco
Gas Company, Inc. A-1
B. Declaration of Trust of Berkshire Energy Resources B-1
C. By-laws of Berkshire Energy Resources C-1
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
THE ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR INCORPORATED HEREIN BY REFERENCE SINCE THE
DATE HEREOF.
AVAILABLE INFORMATION
Berkshire Gas is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports,
proxy statements and other information may be inspected and copied at the
Public Reference Facilities maintained by the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the SEC's
regional offices at 7 World Trade Center, Suite 1300, New York, New York
10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained
at prescribed rates from the Public Reference Facilities maintained by the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
14
20549. Berkshire Gas' common stock is traded on the NASDAQ National Market
System ("NASDAQ-NMS"), where reports, proxy statements and other information
concerning Berkshire Gas may also be inspected. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC,
including Berkshire Gas. The address of such Web site is
http://www.sec.gov. Following completion of the Merger, Holdco will file
such reports and other information as required under the Exchange Act and
the rules of NASDAQ.
Holdco has filed with the SEC a registration statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), registering the Holdco Common Shares that will be issued in exchange
for shares of Berkshire Gas Common Stock pursuant to the Merger described
herein. See "Proposal Regarding Plan of Restructuring." This Proxy
Statement/Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in schedules
and exhibits to the Registration Statement as permitted by the rules and
regulations of the SEC. Statements made in this Proxy Statement/Prospectus
as to the contents of any contract, agreement or other document referred to
are not necessarily complete. With respect to each such contract, agreement
or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Items and information omitted from this Proxy
Statement/Prospectus but contained in the Registration Statement may be
inspected and copied at the Public Reference Facilities maintained by the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549.
Upon completion of the Merger, the Holdco Common Shares will be listed
on the NASDAQ NMS. At the time of such listing, Berkshire Gas Common Stock
will be withdrawn from listing and registration under Section 12 of the
Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF
ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE
SPECIFICALLY INCORPORATED BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO: CHERYL M.
CLARK, CLERK, THE BERKSHIRE GAS COMPANY, 115 CHESHIRE ROAD, PITTSFIELD,
MASSACHUSETTS 01201-1879, TELEPHONE: (413) 442-1511. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY _________
__, 1998.
The following documents filed with the SEC (File No. 0-1857-3)
pursuant to the Exchange Act are incorporated by reference into this Proxy
Statement/Prospectus:
1. Berkshire Gas' Annual Report on Form 10-K for the year ended
June 30, 1997, (and Berkshire Gas' Annual Report to Shareholders
for the year ended June 30, 1997 and Berkshire Gas' definitive
15
proxy statement filed with the SEC on October 3, 1997
incorporated therein); and
2. Berkshire Gas' Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1997 and December 31, 1997.
This Proxy Statement/Prospectus is accompanied by Berkshire Gas'
Annual Report on Form 10-K for the year ended June 30, 1997, Annual Report
to Shareholders for the year ended June 30, 1997, definitive Proxy Statement
filed with the SEC on October 3, 1997 and Quarterly Reports on Form 10-Q for
the quarters ended September 30, 1997 and December 31, 1997.
All other documents filed by Berkshire Gas pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the termination of the offering made
hereby shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing such documents. Any statement contained
herein or in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
of this Proxy Statement/Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is intended as a summary of the information contained in
the Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in,
attached to or incorporated by reference in this Proxy Statement/Prospectus
and the Appendices hereto. Shareholders are urged to read this Proxy
Statement/Prospectus and the Appendices in their entirety.
Proposal Regarding Plan of Restructuring
THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE PROPOSED PLAN OF
RESTRUCTURING TO FORM A HOLDING COMPANY
Business of Berkshire Gas
Berkshire Gas is a Massachusetts gas utility company engaged in the
distribution and sale of natural gas for residential, commercial and
industrial use. Berkshire Gas also markets liquefied petroleum gas and
maintains an appliance division that sells and leases gas burning equipment.
See "Proposal Regarding Plan of Restructuring -- Business of Berkshire Gas."
Proposed Restructuring
The Berkshire Gas Board of Directors has authorized, subject to
shareholder and regulatory approval, a plan to restructure the corporate
16
organization of Berkshire Gas to form a holding company structure. The
result of the restructuring will be to have Berkshire Gas become a separate
subsidiary of a parent holding company, Berkshire Energy Resources
("Holdco").
The holding company structure will be established pursuant to a merger
transaction (the "Merger") governed by an Agreement and Plan of Merger (the
"Merger Agreement") among Berkshire Gas, Holdco, that was organized by
Berkshire Gas as a Massachusetts business trust, and Berkshire Gas Mergeco
Gas Company, Inc., a Massachusetts gas company formed and wholly-owned by
Holdco. The formation of a holding company structure will be achieved by way
of the merger of Mergeco with and into Berkshire Gas, with holders of
Berkshire Gas Common Stock exchanging their shares for Holdco Common Shares
on a share-for-share basis and Holdco becoming the sole holder of Berkshire
Gas Common Stock. Accordingly, the present holders of Berkshire Gas Common
Stock will become holders of Holdco Common Shares. Berkshire Gas' 4.8%
Cumulative Preferred Stock will remain as securities and obligations of
Berkshire Gas. Berkshire Gas will seek to negotiate acceptable consents
with the holders of its long-term debt securities so as to effect the
reorganization. (These proposed changes to the corporate structure of
Berkshire Gas are generally referred to in this Proxy Statement/Prospectus
as the "restructuring.")
Berkshire Gas Shareholders Meeting
Berkshire Gas' shareholders will meet at Berkshire Gas' offices at 115
Cheshire Road, Pittsfield, Massachusetts on ______________, ___________ __,
1998 at 10:00 a.m. The purpose of the meeting is to consider and vote upon
a proposal to adopt a holding company corporate structure, as more fully
described in the Proxy Statement/Prospectus. The record date for
determining shareholders of Berkshire Gas who are entitled to notice of and
to vote at the Berkshire Gas shareholders meeting is __________, 1998 (the
"Record Date'). On the record date there were approximately _______ record
holders of Berkshire Gas Common Stock and _______ shares of Berkshire Gas
Common Stock outstanding. The presence in person or by proxy of the holders
of a majority of the outstanding shares of Berkshire Gas Common Stock
constitutes a quorum.
The affirmative vote of at least two-thirds of the outstanding shares
of Common Stock entitled to vote at the special meeting, in person or by
proxy, is required to adopt and approve the proposed restructuring and the
Merger.
Special Considerations Applicable to the Restructuring
The restructuring proposal involves certain special factors that
should be considered by shareholders, including the fact that non-utility
business opportunities pursued after the restructuring may involve more
risk, initially dividends on Holdco common shares will be dependent upon
common stock dividends paid by Berkshire Gas and from propane operations,
and the potential effects on shareholders of a business trust. See "Proposal
Regarding Plan of Restructuring -- Special Considerations Applicable to the
Restructuring" and "Proposal Regarding Plan of Restructuring -- Holdco's
Declaration of Trust and Comparative Shareholders' Rights."
Reasons for the Restructuring
17
In recent years, many state utility commissions, including the
Massachusetts Department of Telecommunications and Energy ("Massachusetts
DTE"; formerly the Department of Public Utilities), have initiated inquiries
into restructuring the natural gas utility industry with a goal of promoting
competition and extending to all customers the broadest possible choice of
natural gas suppliers. Further in November, 1997 the Massachusetts
legislature recently enacted a comprehensive bill to restructure the
electric utility industry (the "Restructuring Act"), many provisions of
which will affect gas utilities.
The Massachusetts DTE's decisions, as well as the Restructuring Act,
are establishing new competitive markets for energy and other related
services. The Massachusetts DTE's rules and decisions and the Restructuring
Act suggest that the best means for gas utilities to participate in these
competitive markets is through unregulated affiliates. The Massachusetts
DTE has specifically recognized the changing nature of the energy
marketplace and the need for utilities to restructure in order to
participate effectively in these new markets while, at the same time,
protecting ratepayers' interests.
The Massachusetts DTE's decisions regarding the restructuring of the
electricity and natural gas markets as well as the Restructuring Act advance
several central components to seek an appropriate balance of the needs of
all participants in the natural gas market. First, the Massachusetts DTE's
decisions and the Restructuring Act have sought to achieve the "functional
separation" and distinct pricing of the services traditionally provided on a
consolidated or "bundled" basis by gas utilities so as to enhance the
development of certain competitive markets. On July 18, 1997, the
Massachusetts DTE sent a letter to Berkshire Gas and other Massachusetts
local distribution companies mandating the establishment of a collaborative
forum to establish principles and procedures for such functional separation
and pricing, sometimes referred to as "unbundling," of all natural gas and
local distribution companies ("LDC's") services with a goal of creating a
more competitive natural gas market. Such collaborative forum is currently
underway. In addition, in a letter of August 18, 1997, the Massachusetts
DTE stated that each Massachusetts LDC eventually will be required to submit
its own unbundling proposal for Massachusetts DTE review and that, as a
condition precedent to a meaningful unbundling proposal, each LDC will be
required to provide fully unbundled rates for each rate class served by such
local distribution company. Specifically, the Department stated that it
expects that Berkshire Gas will submit, for an effective date no later than
November 1, 1998, such fully unbundled rates for each rate class.
The second component of the above-described utility industry
restructuring initiatives involves the continuing regulation of other
traditional utility activities, such as the distribution function, by the
Massachusetts DTE so as to ensure the continuing provision of safe and
reliable service to customers at reasonable rates. After the proposed
corporate restructuring, Berkshire Gas will continue to provide many
traditional utility services and will be subject to the continuing
regulation of the Massachusetts DTE.
The third component of Massachusetts DTE and legislative restructuring
initiatives relates to the development of competitive markets for energy and
other related services, with utilities participating in such markets through
affiliates subject to appropriate standards of conduct. Berkshire Gas'
opportunities for long-term growth will, in part, be dependent upon its
18
ability to compete in new competitive markets. The Massachusetts DTE's
rules and the Restructuring Act both include provisions relating to the
specific limitations under which regulated utilities may participate in the
new competitive energy markets so as to avoid unfair competitive advantages
or the cross-subsidization of such activities by utility ratepayers. The
Massachusetts DTE's rules include specific requirements relating to the
functional and legal separation of the activities of regulated utilities and
their competitive affiliates.
Given this emerging regulatory structure, the Massachusetts DTE has
recognized a utility company's need for flexibility and speed in order to
respond in a timely manner to the opportunities and challenges in the
changing energy marketplace. Many competitive opportunities could be
frustrated or lost if pursued by a utility or through a subsidiary of a
utility due to the requirements of the regulatory process, including, for
example, the need to obtain Massachusetts DTE approval for a gas company to
invest in a subsidiary. The Massachusetts DTE has also recognized that
alternative organizational structures may afford a utility the flexibility
to accomplish its objectives while also furthering the Massachusetts DTE's
goals of unbundling and fostering competition, maintaining appropriate
separation between regulated and non-regulated activities and streamlining
regulatory review. The Massachusetts DTE has acknowledged that the holding
company structure is one means by which a utility may achieve these
objectives.
Assuming that natural gas industry restructuring in Massachusetts
continues to proceed consistent with the above described requirements, at a
minimum, Berkshire Gas has identified the need to adopt a corporate
structure that: 1) can facilitate such unbundling; 2) permit the necessary
separation of regulated and competitive operations; and 3) will afford the
appropriate flexibility to pursue opportunities in new competitive markets.
Berkshire Gas' management believes that the increasingly competitive natural
gas industry, together with new energy-related technologies, may create
significant new opportunities for energy service providers like Berkshire
Gas in non-utility business ventures. Berkshire Gas' management believes
that the pursuit of these new opportunities can be well accommodated in a
holding company structure and is a key element of Berkshire Gas' strategy
for long-term growth to benefit its shareholders and customers.
The holding company structure is a well-established form of
organization for companies conducting multiple lines of business,
particularly entities engaging in both regulated and unregulated activities.
Berkshire Gas' management believes that the holding company structure would
provide increased financial, managerial and organizational flexibility in
order to better position Berkshire Gas to operate in this changing natural
gas utility industry. Moreover, the new structure will facilitate
separation of the new holding company's regulated and unregulated lines of
business in a manner consistent with the principles outlined by the
Massachusetts DTE and mandated in applicable legislation and regulation
regarding competitive affiliates of Massachusetts gas companies. See
"Proposal Regarding Plan of Restructuring -- Reasons for Restructuring" and
"Proposal Regarding Plan of Restructuring -- Benefits of Holding Company
Structure."
Certain Effects on Shareholders
Holdco has been formed as a Massachusetts business trust primarily due
19
to the potential Massachusetts income tax savings to the trust. Holdco's
shareholders will have rights and liabilities generally comparable to those
of shareholders of a corporation. Pursuant to certain decisions of the
Massachusetts courts, shareholders of a Massachusetts business trust that
exercise too much control over the affairs of a Massachusetts business trust
may be held personally liable as partners for the obligations of a trust to
the extent not satisfied by the trust. Even if, however, Holdco was held to
be a partnership, the possibility of its shareholders incurring personal
liability is remote because (a) Holdco's Declaration of Trust (as defined
below) contains an express disclaimer of shareholder liability for the
obligations of Holdco, requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by Holdco
and provides that no person has authority to enter into an agreement,
obligation or instrument except in accordance with those requirements, (b)
most of Holdco's operations will be conducted by incorporated subsidiaries
such that the activities of Holdco will be limited to the ownership of
securities rather than the operation of physical assets (c) Holdco will
maintain insurance against tort liability, and (d) Holdco's Declaration of
Trust provides for indemnification out of the trust property for any
shareholder held personally liable for the obligations of Holdco. Use of a
Massachusetts business trust as the parent holding company of a
Massachusetts public utility is a common practice. The parent holding
companies of all other investor-owned Massachusetts utility holding systems
are also organized as business trusts. See "Proposal Regarding Plan of
Restructuring -- Special Considerations Applicable to the Restructuring" and
"Proposal Regarding Plan of Restructuring, Holdco's Declaration of Trust and
Comparative Shareholders' Rights."
Vote Required
Only holders of record of Berkshire Gas Common Stock as of the record
date will be entitled to receive notice of and vote at the Special Meeting
and any adjournments thereof with respect to approval of the Merger
Agreement and the restructuring. Holders of Berkshire Gas Common Stock
entitled to vote will have one vote for each share held. In order for the
holding company proposal to be approved under Massachusetts law, it must
receive the favorable vote, in person or by proxy, of the holders of two-
thirds of the outstanding shares of Berkshire Gas Common Stock. As of the
record date, __________ shares of Berkshire Gas Common Stock were issued and
outstanding. To the knowledge of management, no person owns beneficially
more than 5 percent of the outstanding voting securities of Berkshire Gas.
The consent of the holders of at least two-thirds of the total number of
shares of Berkshire Gas' 4.8% Cumulative Preferred Stock then outstanding
will be required in connection with the reorganization. See "Proposal
Regarding Plan of Restructuring -- Vote Required" and "Proposal Regarding
Plan of Restructuring -- Stock Ownership of Directors and Executive
Officers."
Exchange of Certificates Not Required
If the new holding company structure is implemented, it will not be
necessary for holders of Berkshire Gas Common Stock to surrender their
existing stock certificates for Holdco share certificates. Certificates
representing Berkshire Gas Common Stock will automatically represent the
corresponding number of Holdco Common Shares upon consummation of the
Merger. See "Proposal Regarding Plan of Restructuring -- Exchange of
Certificates Not Required."
20
Stock Listing
Shares of Berkshire Gas Common Stock are currently traded on the
NASDAQ National Market System under the stock symbol "BGAS." Application
will be made so that Holdco Common Shares may be traded on the NASDAQ
National Market System ("NASDAQ-NMS"), with such shares expected to be
traded under the stock symbol "BERK." See "Proposal Regarding Plan of
Restructuring -- Stock Listing."
Conditions to the Restructuring
The Merger Agreement provides that the consummation of the Merger and
the restructuring into a holding company is subject to approval of the
Merger Agreement by the shareholders of Berkshire Gas, Holdco and Mergeco,
as is set forth more fully below under "Proposal Regarding Plan of
Restructuring -- Vote Required," and to the approval by the National
Association of Securities Dealers of Holdco Common Shares for trading on the
NASDAQ-NMS. If the shareholders of Berkshire Gas approve the Merger,
Berkshire Gas will then cause the shares of Holdco and Mergeco to be voted
in favor of the restructuring into a holding company.
In addition, the decision to proceed with the Merger and restructuring
is subject to, among other things, the receipt, on terms satisfactory to the
Board of Directors of Berkshire Gas, of authorization from the Massachusetts
DTE to form a holding company structure for Berkshire Gas and such other
consents and approvals as the Board may deem necessary or appropriate,
including, without limitation, appropriate waivers or consents from the
holders of Berkshire Gas' long-term debt securities. Following the
restructuring, Holdco is expected to qualify for an exemption under the
Public Utility Holding Company Act of 1935 (the "Holding Company Act"). See
"Proposal Regarding Plan of Restructuring -- Regulatory Approval of the
Restructuring" and "Proposal Regarding Plan of Restructuring -- Regulatory
Matters."
Dividend Policy
While future dividends on Holdco Common Shares will depend primarily
upon the earnings, financial condition and capital requirements of its
subsidiaries, it is contemplated that Holdco initially will make dividend
payments on Holdco Common Shares at the rate currently applicable to
Berkshire Gas Common Stock. In addition, it is expected that such dividends
of Holdco will be declared and paid on approximately the same schedule of
dates as that now followed by Berkshire Gas with respect to Berkshire Gas
Common Stock dividends. The most recent dividend declared by the Board of
Directors of Berkshire Gas was $0.285 per share of Berkshire Gas Common
Stock and was paid on January 15, 1998. See "Proposal Regarding Plan of
Restructuring -- Dividend Policy."
Certain Federal Income Tax Consequences
Berkshire Gas' management believes that, for federal income tax
purposes, no gain or loss will be recognized by the holders of shares of
Berkshire Gas Common Stock whose shares are exchanged for Holdco Common
Shares. See "Proposal Regarding Plan of Restructuring -- Certain Federal
Income Tax Consequences."
No Appraisal Rights
21
Under Massachusetts law governing the proposed Merger, neither a
dissenting holder of Berkshire Gas Common Stock nor a holder of Berkshire
Gas 4.8% Cumulative Preferred Stock, has a right to demand payment of the
fair value of his or her shares if the Merger is consummated.
PROPOSAL REGARDING PLAN OF RESTRUCTURING
General
The Board of Directors and management of Berkshire Gas consider it to
be in the best interests of Berkshire Gas and its shareholders to revise its
corporate structure to establish a holding company structure whereby
Berkshire Gas will become a separate, wholly-owned subsidiary of a new
parent company. Pursuant to the proposed restructuring, the present holders
of Berkshire Gas Common Stock will become shareholders of the new parent.
It is currently contemplated that several new subsidiaries will be formed,
that would be legally and functionally separate from Berkshire Gas. See
"Proposal Regarding Plan of Restructuring -- The Restructuring" and
"Proposal Regarding Plan of Restructuring -- Reasons for the Restructuring."
The holding company structure is a well-established form of
organization for companies conducting multiple lines of businesses,
particularly entities engaging in both regulated and unregulated activities.
Nearly all investor-owned Massachusetts electric utilities are currently
organized in a holding company structure, as are several investor-owned
Massachusetts natural gas utilities. The holding company structure is
intended to provide increased financial, managerial and organizational
flexibility in order to better position Berkshire Gas to operate in the
changing natural gas utility industry. Specifically, the new structure
would allow increased flexibility and will facilitate the clear separation
of Holdco's regulated and unregulated lines of business, enabling it to
pursue non-utility business ventures in a manner consistent with the utility
industry restructuring principles outlined by the Massachusetts Department
of Telecommunications and Energy ("Massachusetts DTE") and the Massachusetts
legislature. Such separation will facilitate the financing of each separate
line of business consistent with the requirements of each industry in which
Holdco is engaged. Although Berkshire Gas could seek to continue to pursue
non-utility business opportunities on its own, management and the Board of
Directors believe it is in the best interests of Berkshire Gas and its
shareholders to allow the flexibility to conduct such non-utility activities
through a holding company structure. See "Proposal Regarding Plan of
Restructuring -- Benefits of Holding Company Structure."
Business of Berkshire Gas
Berkshire Gas was incorporated in the Commonwealth of Massachusetts in
1853 and is a publicly-held utility company engaged in the distribution and
sale of natural gas for residential, commercial and industrial use.
Berkshire Gas maintains an appliance rental division that sells and leases
gas burning equipment. Through its Berkshire Propane division, Berkshire
Gas markets liquefied petroleum gas.
Berkshire Gas' utility service territory includes 19 communities in
the western portion of the Commonwealth of Massachusetts, including the
cities of Pittsfield and North Adams, the towns of Adams, Amherst, Great
Barrington, Greenfield and Williamstown, and twelve smaller municipalities.
The population of the area served is approximately 190,000 and is primarily
22
residential in character, but the territory also includes industrial,
agricultural, educational, cultural and resort facilities. Berkshire Gas
also markets propane throughout the western portion of Massachusetts,
eastern New York and southern Vermont. Berkshire Gas currently serves over
32,000 natural gas and 5,000 propane customers.
Berkshire Gas has recently formed a strategic marketing alliance with
Conectiv/CNE, LLC, a joint venture formed by a subsidiary of Connecticut
Energy Corporation, a public utility holding company, and a subsidiary of
Delmarva Power and Light Company, a Delaware public utility, to market
electricity, natural gas and energy-related services to customers in
Massachusetts, Vermont, Connecticut and New York states. Such marketing
alliance is in the start-up phase and has not yet secured any customers.
The new holding company would initially endeavor to develop these
businesses, as well as identify other non-utility businesses which are
related to the provision of energy and energy-related services. The holding
company system would provide the flexibility for the legal and functional
separation of regulated and competitive activities, including the marketing
and sale of propane or other competitive opportunities that may be pursued.
See "Proposal Regarding Plan of Restructuring -- The Restructuring."
Berkshire Gas is and will remain subject to the regulatory authority
of the Massachusetts DTE with respect to various matters, including rates,
financing, certain gas supply contracts, demand-side management programs and
planning and safety matters. Berkshire Gas is and will remain subject to
standards prescribed by the Secretary of Transportation under the Natural
Gas Pipeline Safety Act of 1968 with respect to the design, installation,
testing, construction and maintenance of pipeline facilities. The
enforcement of these standards has been delegated to the Massachusetts DTE
which has taken an active role in such enforcement. The regulation of
prices, terms and conditions of interstate pipeline transportation and sales
of natural gas is subject to the jurisdiction of the Federal Energy
Regulation Commission (FERC). Berkshire Gas is not under the direct
jurisdiction of FERC, but monitors, and periodically participates in,
proceedings before FERC which involve Berkshire Gas' pipeline gas
suppliers/transporters and other matters pertinent to Berkshire Gas'
business.
The current corporate structure of Berkshire Gas is as follows:
___________________________________________________________________________
| HOLDERS OF COMMON STOCK |
| AND HOLDERS OF 4.8% CUMULATIVE PREFERRED STOCK |
| : |
| : |
| Berkshire Gas |
|___________________________________________________________________________|
The Restructuring
To carry out the restructuring, Berkshire Gas has formed Berkshire
Energy Resources ("Holdco"), a Massachusetts business trust, and Holdco's
wholly-owned subsidiary, Berkshire Gas Mergeco Gas Company, Inc.
("Mergeco"), a Massachusetts utility corporation, neither of which entities
has any present business or operations of its own. The outstanding Holdco
Common Shares are currently owned by Berkshire Gas, while the authorized
23
stock of Mergeco is presently subscribed for by Holdco and will be issued to
Holdco upon approval of the Massachusetts DTE. Berkshire Gas, Mergeco and
Holdco have entered into an Agreement and Plan of Merger (the "Merger
Agreement") under which, subject to certain conditions, including
shareholder approval, as required by Massachusetts law, and approval by the
Massachusetts DTE, Berkshire Gas will become a subsidiary of Holdco through
the merger of Mergeco with and into Berkshire Gas. In the Merger, the
Berkshire Gas Common Stock will be exchanged share-for-share for Holdco
Common Shares. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Appendix A.
After the restructuring, Holdco will also have the flexibility to
engage in non-utility business activities through a new subsidiary or
subsidiaries, as deemed appropriate in the future, in order to separate
legally and functionally its regulated and unregulated businesses. Berkshire
Gas expects that several new subsidiaries could be formed by Holdco that
would be separate from Berkshire Gas, but owned by Holdco. First, the
retail propane operations now pursued through a division of Berkshire Gas
would be transferred to a new subsidiary. Second, a management services
company would be formed to provide certain administrative services to
Berkshire Gas, Holdco or other subsidiaries of Holdco for a charge based
upon the cost attributable to providing such services. Finally, in the
event that new business opportunities in the competitive marketplace are
pursued, a new subsidiary company (or companies) could be formed. If the
proposed restructuring is consummated, it is intended that advances to and
other investments in non-utility businesses will be made primarily by Holdco
rather than by Berkshire Gas and that the proceeds of financings by
Berkshire Gas will be used entirely in the conduct of its natural gas
utility business.
Berkshire Gas' 4.8% Cumulative Preferred Stock will, assuming the
requisite consent of holders thereof, continue to be outstanding securities
and obligations of Berkshire Gas. Berkshire Gas expects to negotiate
acceptable consents with the holders of its long-term debt securities,
consisting primarily of first mortgage bonds and medium-term and senior
notes in order to effect the proposed restructuring. Berkshire Gas'
management and the Board of Directors believe that the restructuring will
have no adverse affect on the holders of its 4.8% Cumulative Preferred Stock
and debt securities. See "Proposal Regarding Plan of Restructuring --
Treatment of Preferred Stock" and "Proposal Regarding Plan of Restructuring
- -- Treatment of Indebtedness."
Except for the contemplated transfer of certain of Berkshire Gas'
propane assets to a subsidiary of Holdco, assets and liabilities of
Berkshire Gas immediately before the Merger and restructuring will be
substantially the same as the assets and liabilities of Berkshire Gas
immediately after the Merger and restructuring.
The reorganized corporate structure of Holdco and Berkshire Gas after
the Merger and completion of the proposed restructuring is expected to be as
follows:
___________________________________________________________________________
| PROPOSED STRUCTURE |
|___________________________________________________________________________|
| |
| HOLDERS OF COMMON SHARES |
24
| : |
| : |
|HOLDERS OF 4.8% CUMULATIVE Holding |
|PREFERRED STOCK Company |
| : : |
| : : |
| : |
| : : : : : |
| : : : : : |
| Berkshire Gas Berkshire Potential New Management Services |
| Propane Subsidiaries Company |
|___________________________________________________________________________|
Special Considerations Applicable to Restructuring
The following factors should be considered carefully in evaluating the
proposal to establish a holding company corporate structure to be considered
at the Special Meeting of Berkshire Gas.
Non-Utility Business Activities May Involve More Risk. The future
performance of Holdco and the future value of Holdco Common Shares cannot be
predicted. Following consummation of the restructuring, Holdco will be able
to make investments in non-utility businesses and issue securities for the
purpose of financing such investments without obtaining the prior approval
of the Massachusetts DTE. The restructuring, therefore, will provide Holdco
with more flexibility to pursue business opportunities that might involve a
higher degree of risk than would be permitted for a regulated utility, but
with the possibility of higher potential returns commensurate with such
risk. Pursuit of business opportunities with greater risk could, in turn,
have either a positive or an adverse effect on the value of a shareholder's
investment, depending upon the return actually realized from such
opportunities. Such business opportunities may encounter competitive and
other business factors not previously experienced by Berkshire Gas to the
same degree and may have different, and perhaps greater, investment risk
than those involved in Berkshire Gas' regulated natural gas supply and
distribution business. There can be no assurance that such businesses will
be successful or, if unsuccessful, that they will not have a direct or
indirect adverse effect on Holdco. Any losses incurred by such businesses
will not be recoverable in Berkshire Gas' regulated rates. To the extent
Holdco becomes increasingly engaged in non-utility business activities, such
activities will have an increasing impact on the market price of Holdco's
Common Shares.
Initially Dividends On Holdco Common Shares Will Be Dependent Upon
Common Stock Dividends Paid By Berkshire Gas and From Propane Operations.
For a period of time following the restructuring, the funds required by
Holdco to enable it to pay dividends on Holdco's Common Shares are expected
to be derived primarily from the dividends paid to Holdco by Berkshire Gas
and from the subsidiary expected to be formed to engage in the non-regulated
sale of liquid propane now performed by a division of Berkshire Gas.
Accordingly, the ability of Holdco to pay such dividends, as a practical
matter, will be governed by the ability of Berkshire Gas and the new
subsidiary of Holdco that will be engaged in propane operations to pay
dividends on their common stock. The ability of Berkshire Gas to pay
dividends on its common stock will continue to be subject to the
preferential dividend rights of the holders of the outstanding Berkshire Gas
4.8% Cumulative Preferred Stock. In addition, although it has no current
25
intention to do so, it is expected that Berkshire Gas may need to issue
additional preferred stock in the future to meet its capital needs. Such
additional preferred stock is likely to also have preferential dividend
rights. The trustees of Holdco have no current intention to change the
current Berkshire Gas dividend policy with respect to the continuing
operations of Berkshire Gas or the subsidiary that will engage in propane
operations.
Potential Effects on Shareholders. Holdco has been formed as a
Massachusetts business trust primarily due to the potential Massachusetts
income tax savings to the trust. Holdco's shareholders will have rights and
liabilities generally comparable to those of shareholders of a corporation.
Pursuant to certain decisions of the Massachusetts courts, shareholders who
exercise too much control over the affairs of a Massachusetts business trust
may be held personally liable as partners for the obligations of a trust to
the extent not satisfied by the trust, with respect to tort claims, contract
claims (where shareholder liability is not negated as described below),
claims for taxes and certain statutory liabilities. Even if, however,
Holdco were held to be a partnership, the possibility of its shareholders
incurring personal liability is remote because (a) Holdco's Declaration of
Trust contains an express disclaimer of shareholder liability for the
obligations of Holdco, requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by Holdco
and provides that no person has authority to enter into an agreement,
obligation or instrument except in accordance with those requirements, (b)
most of Holdco's operations will be conducted by incorporated subsidiaries
such that the activities of Holdco will be limited to the ownership of
securities rather than the operation of physical assets (c) Holdco will
maintain insurance against tort liability, and (d) Holdco's Declaration of
Trust provides for indemnification out of the trust property for any
shareholder held personally liable for the obligations of Holdco. See
Proposal Regarding Plan of Restructuring -- Holdco's Declaration of Trust
and Comparative Shareholders' Rights."
Reasons for the Restructuring
In recent years, many state utility commissions, including the
Massachusetts DTE, have initiated inquiries into restructuring the natural
gas utility industry with a goal of promoting competition and extending to
all customers the broadest possible choice of natural gas suppliers. In
November, 1997 the Massachusetts legislature enacted the comprehensive
Restructuring Act to restructure the electric utility industry, many
provisions of which will affect gas utilities.
The Massachusetts DTE's decisions, as well as the Restructuring Act,
are establishing new competitive markets for energy and other related
services. The Massachusetts DTE has specifically recognized the changing
nature of the energy marketplace and the need for utilities to restructure
in order to participate effectively in these new markets while, at the same
time, protecting ratepayers' interests. Berkshire Gas' management believes
that the Massachusetts DTE's rules and decisions and the Restructuring Act
suggest that an effective means for gas utilities to participate in these
competitive markets is through unregulated affiliates within a holding
company corporate structure.
The Massachusetts DTE's decisions regarding the restructuring of the
electricity and natural gas markets, as well as the Restructuring Act,
26
advance several central components to seek an appropriate balance of the
needs of all participants in the natural gas market. First, the
Massachusetts DTE's decisions and the Restructuring Act have sought to
achieve the "functional separation" and distinct pricing of the services
traditionally provided on a consolidated or "bundled" basis by gas utilities
so as to enhance the development of certain competitive markets. On July
18, 1997, the Massachusetts DTE sent a letter to Berkshire Gas and other
Massachusetts local distribution companies mandating the establishment of a
collaborative forum to establish principles and procedures for such
functional separation and pricing, sometimes referred to as "unbundling," of
all LDC's services with a goal of creating a more competitive natural gas
market. The Massachusetts DTE stated that a more competitive gas market
would: 1) provide the broadest possible customer choice; 2) provide all
customers with an opportunity to share in the benefits of increased
competition; 3) ensure full and fair competition in the gas supply market;
4) functionally separate supply from local distribution services; 5) support
and further the goals of environmental regulation; and, 6) rely on incentive
regulation where a fully competitive market cannot exist, or does not exist.
Such collaborative forum is currently underway. In addition, in a letter of
August 18, 1997 to Massachusetts LDC's, the Massachusetts DTE stated that
each Massachusetts LDC eventually will be required to submit its own
unbundling proposal for the Massachusetts DTE's review and that, as a
condition precedent to a meaningful unbundling proposal, each LDC will be
required to provide fully unbundled rates for each rate class served by such
local distribution company. Specifically, the Department stated that it
expects that Berkshire Gas will submit, for an effective date no later than
November 1, 1998, such fully unbundled rates for each rate class.
The second component of the above-described utility industry
restructuring initiatives involves the continuing regulation of other
traditional utility activities, such as the distribution function, by the
Massachusetts DTE so as to ensure the continuing provision of safe and
reliable service to customers at reasonable rates. After the proposed
corporate restructuring, Berkshire Gas will continue to provide many
traditional utility services and will be subject to the continuing
regulation of the Massachusetts DTE.
The third component of Massachusetts DTE and legislative restructuring
initiatives relates to the development of competitive markets for energy and
other related services, with utilities participating in such markets through
affiliates subject to appropriate standards of conduct. Berkshire Gas'
opportunities for long-term growth will, in part, be dependent upon its
ability to compete in new competitive markets. The Massachusetts DTE's
rules and the Restructuring Act both include provisions relating to the
specific limitations upon which regulated utilities may participate in the
new competitive energy markets so as to avoid unfair competitive advantages
or the cross-subsidization of such activities by utility ratepayers. The
Massachusetts DTE's rules include specific requirements relating to the
functional and legal separation of the activities of regulated utilities and
their competitive affiliates.
Given this emerging regulatory structure, the Massachusetts DTE has
recognized a utility company's need for flexibility and speed in order to
respond in a timely manner to the opportunities and challenges in the
changing energy marketplace. Many competitive opportunities could be
frustrated or lost if pursued by a utility or through a subsidiary of a
utility due to the requirements of the regulatory process, including, for
27
example, the need to obtain Massachusetts DTE approval for a gas company to
invest in a subsidiary. The Massachusetts DTE has also recognized that
alternative organizational structures may afford a utility the flexibility
to accomplish its objectives while also furthering the Massachusetts DTE's
goals of unbundling and fostering competition, maintaining appropriate
separation between regulated and non-regulated activities and streamlining
regulatory review. The Massachusetts DTE has acknowledged that the holding
company structure is one means by which a utility may achieve these
objectives.
Assuming that natural gas industry restructuring in Massachusetts
continues to proceed consistent with the above described requirements, at a
minimum, Berkshire Gas has identified the need to adopt a corporate
structure that: 1) can facilitate such unbundling; 2) permits the necessary
separation of regulated and competitive operations; and 3) will afford the
appropriate flexibility to pursue opportunities in new competitive markets.
Berkshire Gas' management believes that the increasingly competitive natural
gas industry, together with new energy-related technologies, may create
significant new opportunities for energy service providers like Berkshire
Gas in non-utility business ventures. Berkshire Gas' management believes
that the pursuit of these new opportunities can be well accommodated in a
holding company structure and is a key element of Berkshire Gas' strategy
for long-term growth to benefit its shareholders and customers.
Benefits of Holding Company Structure
The holding company structure is a well-established form of
organization for companies conducting multiple lines of business,
particularly entities engaging in both regulated and unregulated activities.
The holding company structure would provide increased financial, managerial
and organizational flexibility in order to better position Berkshire Gas to
operate in this changing natural gas utility industry. Moreover, the new
structure will facilitate clear separation of the new holding company's
regulated and unregulated lines of business in a manner consistent with the
principles outlined by the Massachusetts DTE and mandated in applicable
legislation and regulation regarding competitive affiliates of Massachusetts
gas companies.
Many electric and gas utilities have been organized as holding
companies for many years, and other utilities have recently changed their
organization to a holding company structure. While Berkshire Gas could seek
to continue to pursue non-utility business opportunities on its own, the
Board of Directors and management believe it is more desirable in the long-
term to adopt a framework that provides the flexibility to conduct non-
utility activities through a holding company structure. The benefits of a
holding company structure include:
Timely Response to Business Opportunities. The holding company
structure, by providing flexibility to separate non-utility businesses into
corporations that will not be subsidiaries of Berkshire Gas, will enable
Holdco to pursue non-utility business opportunities without the delays
inherent in the regulatory process. For example, the holding company
structure will enable Holdco to make investments in non-utility businesses,
and to issue securities for the purpose of financing such investments,
without obtaining the approval of the Massachusetts DTE. This will allow
Holdco to respond to competitive forces and pursue non-utility businesses in
a more timely and responsive fashion.
28
Flexible Financing Opportunities. The holding company corporate
structure also will permit the use of financings that are more directly
suited to the particular requirements, characteristics and risks of non-
utility operations without affecting the capital structure or
creditworthiness of Berkshire Gas. The holding company structure will allow
the design and implementation of capitalization ratios appropriate for the
capital and business requirements of each industry in which Holdco is
engaged.
Separation. The holding company structure will separate Berkshire
Gas' natural gas utility business from the non-utility businesses of other
Holdco subsidiaries. As a result, it will provide a better structure for
regulators to assure that there is no cross-subsidization of cost or
transfer of business risk from unregulated to regulated lines of business.
In addition, the holding company structure will facilitate the analysis and
valuation of the holding company's individual lines of business by the
investment community. The holding company structure also will mitigate the
potential impact on Berkshire Gas, its preferred stock and debt security
holders and its customers, of the risks of non-utility businesses and will
permit the capital structure of Berkshire Gas to continue to be managed
efficiently.
Recommendations of the Board
The Board of Directors and management of Berkshire Gas recommend the
approval of the restructuring as proposed in the accompanying Notice of
Special Meeting. The Board of Directors and management believe that the
restructuring is in the best interest of Berkshire Gas and its shareholders.
In making its decision to recommend the restructuring to the shareholders,
the Board of Directors considered many factors, including the factors set
forth above under "Proposal Regarding Plan of Restructuring -- Reasons for
the Restructuring" and "Proposal Regarding Plan of Restructuring -- Benefits
of Holding Company Structure."
Vote Required
In order for the restructuring into a holding company to be approved
under Massachusetts law, it must receive favorable votes, in person or by
proxy, of the holders of two-thirds of the outstanding shares of Berkshire
Gas Common Stock. In addition, Berkshire Gas' articles of organization
require that the restructuring be approved by the holders of at least two-
thirds of the outstanding shares of its 4.8% Cumulative Preferred Stock.
See "Other Matters -- Voting Procedures."
The persons named in the accompanying proxy intend to vote such proxy
in favor of the restructuring unless a contrary choice is indicated thereon.
Exchange of Certificates Not Required
If the proposed restructuring is consummated, it will not be necessary
for holders of shares of Berkshire Gas Common Stock to exchange their
existing stock certificates for Holdco share certificates. Holders of
Berkshire Gas Common Stock will automatically become holders of Holdco
Common Shares, and their stock certificates will automatically represent
Holdco Common Shares. After the restructuring, whenever presently
outstanding certificates are presented for transfer, new certificates
bearing the name of Holdco will be issued.
29
Merger Agreement
The Merger Agreement has been unanimously approved by the Boards of
Directors or Trustees of Berkshire Gas, Holdco and Mergeco, and these
companies have executed the Merger Agreement, subject to certain conditions
including the approval and adoption thereof by vote of Berkshire Gas'
shareholders as required by Massachusetts law and described herein. The
Merger Agreement provides that:
(1) Mergeco will merge with and into Berkshire Gas with Berkshire Gas
being the surviving company.
(2) each outstanding share of Berkshire Gas Common Stock, $2.50 par value
per share, will be converted into one Holdco Common Share;
(3) each outstanding share of Berkshire Gas 4.8% Cumulative Preferred
Stock, $100 par value per share, will continue as one issued and
outstanding share of Berkshire Gas 4.8% Cumulative Preferred Stock,
$100 par value per share, with the same preferences, designations,
relative rights, privileges and powers, and subject to the same
restrictions, limitations and qualifications as were applicable to
such stock prior to the Merger;
(4) each outstanding share of Mergeco Common Stock, $1.00 par value per
share, will be converted into one new share of Berkshire Gas Common
Stock, $2.50 par value per share, all of which will then be owned by
Holdco; and
(5) the Holdco Common Shares presently held by Berkshire Gas will be
canceled.
As a result of the Merger, Berkshire Gas will become a subsidiary of
Holdco, and all of the Holdco Common Shares outstanding immediately after
the Merger will be owned by the holders of Berkshire Gas Common Stock
outstanding at the effective time of the Merger.
If and when the Merger becomes effective, holders of Berkshire Gas
Common Stock will automatically become holders of Holdco Common Shares. The
terms, conditions and provisions of Berkshire Gas 4.8% Cumulative Preferred
Stock will not be altered in the Merger. Berkshire Gas will seek to
negotiate acceptable consents with the holders of its long-term debt
securities so as to effect the reorganization.
Amendment or Termination of Plan of Merger
By mutual consent of their respective Boards of Directors or Trustees,
Berkshire Gas, Holdco and Mergeco may amend, modify or supplement the Merger
Agreement in such manner as may be agreed upon by them in writing at any
time before or after approval of the Merger Agreement by the shareholders of
Berkshire Gas; provided, however, that no such amendment, modification or
supplement shall, in the sole judgment of the Board of Directors of
Berkshire Gas, materially and adversely affect the rights of the holders of
Berkshire Gas Common Stock.
The Merger Agreement provides that it may be terminated, and the
Merger and other transactions incident to the restructuring plan abandoned,
at any time, whether before or after approval of the Merger Agreement by the
30
shareholders of Berkshire Gas, by action of the Board of Directors of
Berkshire Gas if the Board determines for any reason that the consummation
of the restructuring would for any reason be inadvisable or not in the best
interests of Berkshire Gas or its shareholders. The Board of Directors of
Berkshire Gas expects to terminate and abandon the restructuring if
Berkshire Gas has not received, within a reasonable period after shareholder
approval, satisfactory approval of the Merger by the Massachusetts DTE as
required by Massachusetts law (see "Proposal Regarding Plan of Restructuring
- -- Regulatory Approval of the Restructuring"), acceptable consents from the
holders of its 4.8% Cumulative Preferred Stock and its long-term debt
securities or approval for the trading of Holdco Common Shares on the
NASDAQ-NMS National Market System (see "Proposal Regarding Plan of
Restructuring -- Stock Exchange Listing"). Berkshire Gas is unable to
predict under what other circumstances the restructuring would be terminated
and abandoned.
Effectiveness of the Restructuring
The Merger Agreement contemplates that the Merger will become
effective, and all other steps in the restructuring plan will be completed,
as soon as practical after the required shareholder and regulatory
approvals, consents and listing authorization for Holdco Common Shares have
been received, unless the Board of Directors of Berkshire Gas theretofore
has elected to abandon such plan.
Certain Federal Income Tax Consequences
General. The following general discussion summarizes certain federal
income tax considerations relating to the Merger. This summary is provided
for general information only, and does not discuss all aspects of income
taxation that may be relevant to a particular holder of Berkshire Gas Common
Stock in light of the holder's personal tax circumstances or to certain
types of holders of Berkshire Gas Common Stock subject to special treatment
under the income tax laws of any jurisdiction including persons who are not
United States persons, dealers in securities, tax-exempt entities, and
shareholders who do not hold Berkshire Gas Common Stock as "capital assets"
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code").
The legal conclusions set forth in this summary reflect the opinion of
Berkshire Gas' counsel, Rich, May, Bilodeau & Flaherty, P.C. No ruling has
been requested from the Internal Revenue Service. EACH HOLDER OF BERKSHIRE
GAS COMMON STOCK SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER, INCLUDING THE
APPLICATION AND EFFECT OF FOREIGN, STATE OR LOCAL INCOME AND OTHER TAX LAWS.
The following discussion is based on existing statutes, existing and
proposed regulations and existing administrative interpretations and court
decisions. Future legislation, regulations, administration interpretations,
or court decisions could significantly change such authorities either
prospectively or retroactively, and could affect the legal conclusions set
forth in the following discussions.
For federal income tax purposes, the Merger is intended to qualify as
a tax-free exchange pursuant to Section 351 of the Internal Revenue Code.
Tax Implications to the Holders of Berkshire Gas Common Stock. For
31
federal income tax purposes, no gain or loss will be recognized by the
holders of Berkshire Gas Common Stock on their exchange of Berkshire Gas
Common Stock for Holdco Common Shares pursuant to the Merger. For federal
income tax purposes, the tax basis of the Holdco Common Shares received by
each such holder pursuant to the Merger will be the same as the holder's
basis in the Berkshire Gas Common Stock surrendered in the Merger, and the
holding period of such Holdco Common Shares will include the period during
which such holder held the Berkshire Gas Common Stock surrendered in the
Merger, provided that such Berkshire Gas Common Stock was held as a capital
asset on the date of the exchange.
Other Tax Aspects. Apart from the federal income tax consequences of
the Merger discussed herein, no attempt has been made to determine the tax
consequences to a holder of Berkshire Gas Common Stock under the laws of any
country, state or jurisdiction. Holders of Berkshire Gas Common Stock may be
subject to special federal income tax treatment or to other taxes, such as
state or local income taxes that may be imposed by various jurisdictions,
and also may be subject to intangible property, estate and inheritance taxes
in their state of domicile. Each holder of Berkshire Gas Common Stock
should consult the holder's own tax advisors to determine the particular tax
consequences of the Merger to the holder.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INTENDED TO
PROVIDE ONLY A GENERAL SUMMARY AND DOES NOT ADDRESS TAX CONSEQUENCES WHICH
MAY VARY WITH, OR ARE CONTINGENT UPON, INDIVIDUAL CIRCUMSTANCES. MOREOVER,
THIS DISCUSSION DOES NOT ADDRESS ANY FOREIGN, FEDERAL, STATE OR LOCAL TAX
CONSEQUENCES OF THE DISPOSITION OF STOCK IN BERKSHIRE GAS BEFORE OR IN
HOLDCO AFTER THE MERGER. ACCORDINGLY, EACH HOLDER OF SUCH STOCK IS STRONGLY
URGED TO CONSULT WITH SUCH HOLDER'S TAX ADVISORS TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES OF THE MERGER OR SUCH DISPOSITION TO SUCH HOLDER.
Treatment of Preferred Stock
Berkshire Gas will seek the requisite consent of the holders of its
4.8% Cumulative Preferred Stock for the proposed restructuring. The
proposed restructuring is not expected to result in any change in Berkshire
Gas' 4.8% Cumulative Preferred Stock. The decision by the Board of
Directors and management to have the 4.8% Cumulative Preferred Stock
continue as securities of Berkshire Gas is based upon, among other factors,
a desire not to alter or potentially alter substantially the nature of the
investment essentially represented by such series of stock, namely
investment in a regulated utility. Subject to the negotiation of acceptable
consents, there will be no change in the preferences, designations, relative
rights, privileges and powers of the 4.8% Cumulative Preferred Stock, and
the shares will be subject to the same restrictions, limitations and
qualifications as were applicable thereto prior to the restructuring.
Treatment of Indebtedness
Berkshire Gas will seek to negotiate acceptable consents with the
holders of its long-term debt securities. Such debt securities contain
covenants or restrictions that directly or indirectly preclude the proposed
restructuring. Subject to the negotiation of acceptable consents, all of
Berkshire Gas' long-term indebtedness outstanding immediately prior to the
Merger, is expected to continue to be outstanding indebtedness of Berkshire
Gas after the Merger. The decision to have the indebtedness of Berkshire
Gas continue as obligations of Berkshire Gas is based upon a desire not to
32
alter, or potentially alter, substantially the nature of the investment
essentially represented by such obligations, namely a direct investment in a
regulated utility, or to require any additional financing by Berkshire Gas.
Dividend Policy
While future dividends on Holdco Common Shares will depend primarily
upon the earnings, financial condition and capital requirements of its
subsidiaries, it is contemplated that Holdco initially will make dividend
payments on Holdco Common Shares at the rate currently applicable to
Berkshire Gas Common Stock. In addition, it is expected that such dividends
of Holdco will be declared and paid on approximately the same schedule of
dates as that now followed by Berkshire Gas with respect to Berkshire Gas
Common Stock dividends. The most recent quarterly dividend declared by the
Board of Directors of Berkshire Gas was $0.285 per share of Berkshire Gas
Common Stock and was paid on January 15, 1998.
Subject to the availability of earnings and the needs of its natural
gas utility business, Berkshire Gas intends to make regular cash payments to
Holdco in the form of dividends on Berkshire Gas Common Stock in amounts
which, to the extent not otherwise provided by Holdco's other subsidiaries,
if any, would be sufficient for Holdco to pay cash dividends on Holdco
Common Shares as referred to above, for operating expenses of Holdco and for
such other purposes as the Board of Trustees of Holdco may determine.
Berkshire Gas does not currently contemplate any material loans or advances
to Holdco in the near future and would not be free to make such loans or
advances without prior approval of the Massachusetts DTE. Berkshire Gas is
not party to any agreement or subject to any laws or regulations which
materially restrict the payment of dividends by it to Holdco, other than
pursuant to its long-term debt obligations and its 4.8% Cumulative Preferred
Stock. Berkshire Gas anticipates negotiating acceptable waivers or consents
with respect to such restrictions. See "Proposal Regarding Plan of
Restructuring -- Treatment of Indebtedness."
Dividends on the Berkshire Gas 4.8% Cumulative Preferred Stock will
continue to be paid at the times and at the rates provided for such stock,
depending upon the earnings, financial condition and other factors affecting
Berkshire Gas.
Stock Listing
Holdco will apply for authorization to trade Holdco Common Shares on
the NASDAQ-NMS. It is expected that such authorization will become
effective on the effective date of the Merger, subject to NASD rules, and
that such shares would be traded under the stock symbol "BERK." At the time
of the listing of Holdco Common Shares, Berkshire Gas Common Stock will be
delisted from trading on NASDAQ-NMS.
Regulatory Approval of the Restructuring
The proposed Merger of Berkshire Gas and Mergeco must be approved by
the Massachusetts DTE before the restructuring can become effective. Under
applicable state law, the application for approval by the Massachusetts DTE
cannot be filed until after the holders of Berkshire Gas Common Stock have
approved the Merger. Upon filing of the application, the Massachusetts DTE,
after notice and a public hearing, must determine that the Merger and the
terms thereof are consistent with the public interest. See "Proposal
33
Regarding Plan of Restructuring -- Regulatory Matters."
Regulatory Matters
After the restructuring, Berkshire Gas will continue to operate its
natural gas utility businesses and will remain subject to regulation by the
Massachusetts DTE. Holdco, however, will not be subject to regulation by
the Massachusetts DTE, except that Holdco will be required to file an annual
statement of ownership of Berkshire Gas with the Massachusetts DTE, which
may examine the books, accounts, contracts, records and memoranda of Holdco
and may require it to furnish reports and information with respect to its
relations and dealings with Berkshire Gas. In addition, the reasonableness
of any payment, charge, contract, purchase, sale, obligation or other
arrangement between Berkshire Gas and Holdco or any subsidiary of Holdco may
come into question in retail rate making and finance proceedings before the
Massachusetts DTE. In that event, Berkshire Gas will have the burden of
establishing and proving such reasonableness.
After the restructuring is completed, Holdco will be a public utility
holding company under the Public Utility Holding Company Act of 1935 (the
"Holding Company Act"). Nevertheless, upon the filing of an appropriate
exemption statement pursuant to Rule U-2 under Section 3(a)(1) of the
Holding Company Act (and subject to the filing of annual exemption
statements thereafter), Berkshire Gas' management believes that Holdco will
be entitled to an exemption from regulation as a "registered holding
company" under the Holding Company Act. The basis of the exemption is that
Berkshire Gas, Holdco's only public utility subsidiary, is organized in the
same state as Holdco (i.e. Massachusetts), and is predominantly intrastate
in character and carries on its business substantially in the state of its
incorporation. The exemption will be available as long as the utility
business of Berkshire Gas, and of any other public utility subsidiary from
which Holdco derives a material portion of its income, are organized in
Massachusetts and remain predominantly intrastate in character.
The exemption from the provisions of the Holding Company Act may be
revoked on a finding by the SEC that such exemption may be detrimental to
the public interests or the interest of investors or consumers. The prior
approval of the SEC under the Holding Company Act would be required if
Holdco proposed the acquisition or creation, directly or indirectly, of
additional utility subsidiaries. Moreover, there also may be limits on the
extent to which Holdco and any non-utility subsidiaries can diversify
without raising questions about Holdco's exempt status. Current SEC
policies regarding the scope of permissible non-utility activities are
subject to change. Holdco intends to rely upon and comply with regulations
relating to the foregoing exemption and has no present intention of becoming
a registered holding company subject to regulation by the SEC under the
Holding Company Act.
In June 1995, the SEC Division of Investment Management issued a
report recommending significant revisions to, or limited repeal of, the
Holding Company Act. Several proposals regarding the repeal or amendment of
the Holding Company Act have been considered in Congressional hearings.
Holdco and Berkshire Gas, however, cannot predict whether Congress will take
any such action. Pending such action, the SEC indicated that it would
revise its rules and interpretations to modernize and simplify holding
company regulation. At this time, however, neither Holdco nor Berkshire Gas
can predict the likelihood, timing or impact of such actions.
34
Following the restructuring, Holdco will be subject to the reporting
requirements of the Exchange Act by virtue of having securities registered
thereunder.
Holdco's Declaration of Trust and Comparative Shareholders' Rights
Holdco has been organized under Chapter 182 of the Massachusetts
General Laws as an unincorporated voluntary association with transferable
shares of beneficial interest, commonly referred to as a "Massachusetts
business trust." Holdco was organized as a Massachusetts business trust,
rather than a corporation, primarily because of the potential Massachusetts
income tax savings to the trust. While a publicly traded parent holding
company formed as a Massachusetts business trust would be taxed as a
corporation for federal tax purposes, it would not be treated as a
corporation for Massachusetts tax purposes and therefore would not be
subject to tax with respect to its income or net worth under the
Massachusetts corporate excise, or subject to the utility franchise tax on
income. Although Massachusetts business trusts are generally subject to the
Massachusetts personal income tax, the personal income tax does not apply at
the entity level to a Massachusetts business trust that qualifies as a
"holding company" under Massachusetts law (the Board of Directors of
Berkshire Gas currently intends to operate Holdco so that it will so
qualify). Instead, dividends paid by such a trust would generally be
subject to tax. This entity-level tax treatment contrasts with the
Massachusetts tax treatment of a parent corporate holding company, which
would be subject to a tax on 5% of dividends received from subsidiaries and
on 100% of any other income (in each case after apportionment, which in the
case of a holding company for Berkshire Gas, would likely be, at least
initially, at or near 100% in Massachusetts) at the rate of 9.5%. In
Massachusetts, corporate holding companies are also subject to a "net worth"
tax. The Board of Directors and management of Berkshire Gas believe that
the extent of potential savings associated with organizing Holdco as a
Massachusetts business trust could be significant since they depend, in
large part, upon the amount and nature of any dividends received by Holdco
from Berkshire Gas. As previously described, at least initially, dividends
from Berkshire Gas and from a subsidiary of Holdco that will engage in
propane operations will be Holdco's primary sources of income for the
payment of dividends to its shareholders.
The following summary should be read in the context of, and is
qualified by reference to, Holdco's Declaration of Trust (the "Declaration
of Trust") and Holdco's By-laws, copies of which substantially in the form
they will be in as of the effective date of the Merger are attached as
Appendices B and C, respectively, to this Proxy Statement/Prospectus and
incorporated herein by reference.
The rights of holders of Berkshire Gas Common Stock are governed by
Chapter 164 of the Massachusetts General Laws governing electric and gas
utilities, and by Berkshire Gas' Articles of Organization and By-laws. If
the Merger is consummated, the rights of the present holders of Berkshire
Gas Common Stock thereafter will be determined by Holdco's Declaration of
Trust and By-laws. Except as noted below, the rights of holders of Holdco
Common Shares will be largely the same as the present rights of the holders
of Berkshire Gas Common Stock.
Pursuant to certain decisions of the Massachusetts courts,
shareholders who exercise too much control over the affairs of a
35
Massachusetts business trust may be held personally liable as partners for
the obligations of a trust to the extent not satisfied by the trust, with
respect to tort claims, contract claims (where shareholder liability is not
negated as described below), claims for taxes and certain statutory
liabilities. Even if, however, Holdco were held to be a partnership, the
possibility of its shareholders incurring personal liability is remote
because (a) Holdco's Declaration of Trust contains an express disclaimer of
shareholder liability for the obligations of Holdco, requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by Holdco and provides that no person has authority to
enter into an agreement, obligation or instrument except in accordance with
those requirements, (b) most of Holdco's operations will be conducted by
incorporated subsidiaries such that the activities of Holdco will be limited
to the ownership of securities rather than the operation of physical assets
(c) Holdco will maintain insurance against tort liability, and (d) Holdco's
Declaration of Trust provides for indemnification out of the trust property
for any shareholder held personally liable for the obligations of Holdco.
Holdco's Declaration of Trust provides that the property and affairs
of Holdco will be held and managed by its trustees who will have all of the
powers and authority necessary and convenient to carry out Holdco's
business. The trustees may appoint officers and agents to carry out
Holdco's business. See "Proposal Regarding Plan of Restructuring --
Trustees and Management of Holdco." The powers and responsibilities of the
trustees and officers of Holdco will be comparable to those of directors and
officers of a corporation with no material differences. The trustees will
be selected by a plurality of the vote of the holders of Holdco Common
Shares properly cast at an annual meeting.
Holdco's Declaration of Trust includes "super-majority" and
"classified board" provisions comparable to those adopted by Berkshire Gas'
shareholders (see "Proposal Regarding Plan of Restructuring -- Holdco Common
Shares" below) and comparable indemnification and limitations on directors'
liability provisions (applicable to the trustees) that were adopted by
Berkshire Gas' shareholders to enhance Berkshire Gas' ability to attract and
retain qualified directors and officers.
Under Chapter 164, Berkshire Gas may be merged with another utility
subject to Chapter 164 upon a two-thirds vote of each class of stock
outstanding and entitled to vote on the matter, and the approval of the
Massachusetts DTE. Subject to the "super-majority" provisions in the
Declaration of Trust, Holdco, like a Massachusetts business corporation, may
be merged with another trust or corporation, or terminated and liquidated,
upon a two-thirds vote of the shares outstanding and entitled to vote
thereon (except that a change of form into another trust or into a
corporation may be done on approval of a majority of the common
shareholders).
Under Chapter 164, shareholders of an natural gas utility company have
no appraisal rights. Similarly, Holdco's Declaration of Trust provides that
shareholders shall have no appraisal rights.
Under Chapter 164, the Articles of Organization of Berkshire Gas may
be amended upon a majority vote of the common shareholders, except with
respect to certain provisions requiring a two-thirds vote of Berkshire Gas'
common shareholders. The Holdco Declaration of Trust may be amended by a
written instrument signed by a majority of the trustees then in office if
36
such amendment has been authorized by a majority vote of Holdco's common
shareholders, and such other vote, if any, as may be required by the rights
and preferences relating to any class or series of shares provided that
amendments which, in the judgment of the trustees, are of a fundamental
character must be approved by a vote of the holders of a majority of the
shares outstanding and entitled to vote thereupon. In addition, the
"classified board" provisions can only be amended upon a vote of 75% of the
outstanding Holdco Common Shares unless such amendment is authorized or
recommended by at least two-thirds of the trustees. Certain other
provisions cannot be changed without a two-thirds vote as provided in the
Declaration of Trust. Amendments for the purpose of changing the name of
Holdco or of supplying any ambiguity or curing, correcting or supplementing
any defective or inconsistent provision contained in the Declaration of
Trust shall not require authorization by vote of the shareholders.
Under Massachusetts law, the authority to adopt, amend or repeal the
bylaws of a Massachusetts corporation is in the shareholders; provided that
if authorized by the Articles of Organization, the By-laws may provide that
the directors may also make, amend or repeal the bylaws. Berkshire Gas' By-
laws provide such authority to the Board of Directors. Holdco's Declaration
of Trust, among other provisions, authorizes the trustees to adopt By-laws
in order to fix the fiscal year; regulate the affairs of the trustees,
including provisions for the nomination thereof; provide for such committees
as the trustees shall deem appropriate, including an executive committee
which shall be vested with all of the powers and authorities of the trustees
when the trustees are not in session; provide for the appointment of a
chairman of the trustees, a president, one or more vice presidents, a
treasurer, a secretary and such other officers as the trustees may deem
appropriate, and the manner of their appointment and removal, and their
respective powers and duties; provide for the appointment of transfer agents
or officers and registrars, and contain such further provisions relating to
the above matters or otherwise, incidental or in addition to but not
inconsistent with the provisions of the Declaration of Trust, as the
trustees shall deem appropriate. The By-laws may only be amended by the
trustees.
Under Massachusetts law and Berkshire Gas' By-laws, the Board of
Directors can act without a meeting only by unanimous written consent.
Under Holdco's Declaration of Trust, the trustees may act without a meeting
only by unanimous written consent of the trustees.
As with a Massachusetts business corporation, Holdco's Declaration of
Trust provides that no action may be brought by a shareholder on behalf of
Holdco unless a prior demand regarding such matter has been made on the
trustees and the shareholders.
Holdco's Declaration of Trust, like the Articles of Organization of
Berkshire Gas, contains certain provisions that may be viewed as having an
anti-takeover effect, including provisions establishing classes of trustees
and requiring a super-majority vote of the disinterested shareholders to
approve certain business transactions. Holdco is also subject to Chapter
110F of the Massachusetts General Laws, which, in general, provides that for
three years after an acquiror has purchased 5% or more of the stock of a
company, the acquiror may not complete the acquisition through merger, sell
or pledge the assets of the company, or engage in other self-dealing
transactions. The Holdco Declaration of Trust will also contain a provision
(substantially the same as provisions of Massachusetts law currently
37
applicable to Berkshire Gas) allowing the trustees to consider various
constituencies and community and societal considerations, as well as the
long-term and short-term interests of the company, in determining what he or
she reasonably believes to be in the best interests of the Holdco.
Holdco Common Shares
Holdco will issue shares of beneficial interest, referred to in this
Proxy Statement as "Holdco Common Shares," and may in the future issue other
equity and debt securities. The initial authorized capital stock of Holdco
will be 10,000,000 common shares, without par value, and 1,000,000 preferred
shares, par value $100 per share. The authorized capital shares may be
issued from time to time by the trustees without the necessity of obtaining
further consent of the shareholders or any approvals from the Massachusetts
DTE. Holdco capital shares may be issued for money, services or property,
or as a distribution to shareholders, and upon such terms as the trustees
may in their absolute discretion determine. Upon consummation of the
Merger, the number of outstanding Holdco Common Shares will be the same as
the number of outstanding shares of Berkshire Gas Common Stock immediately
prior to the Merger and no Holdco preferred shares will be outstanding.
Holdco preferred shares may be issued by the trustees in one or more
classes or series within a class and shall have such designations,
preferences, voting rights, voting powers, full or limited, or no voting
rights, participating, optional or other special rights, and such
preferences, relative rights, qualifications, limitations or restrictions,
all as may be determined by the trustees. Authorization of preferred shares
in addition to the 1,000,000 shares initially authorized in the Declaration
of Trust requires the vote of the holders of two-thirds of the shares
outstanding and entitled to vote thereon. Under current provisions of the
Holding Company Act, and the rules and regulations thereunder, issuance of
Holdco preferred shares may be restricted.
The holders of the Holdco Common Shares, subject to any prior rights
or preferences of Holdco preferred shares outstanding at the time, will be
entitled to such dividends thereon as the trustees in their discretion
lawfully declare (see "Proposal Regarding Plan of Restructuring -- Dividend
Policy" above) and will be vested with all voting rights. Each Holdco
Common Share will be entitled to one vote. The Holdco Common Shares will
not have cumulative voting rights in the election of trustees. In the event
of voluntary or involuntary liquidation or dissolution, the holders of the
Holdco Common Shares, subject to any prior rights or preferences of Holdco
preferred shares outstanding at the time, will share ratably in the assets
of Holdco. Holdco will have no right to call the Holdco Common Shares for
redemption. The holders of the Holdco Common Shares will have no preemptive
rights to subscribe to additional shares issued by Holdco.
Holdco has no agreement, understanding or plan for the issuance of any
Holdco Common Shares, except in connection with the proposed Merger and
except in connection with Holdco's assumption of Berkshire Gas' Share Owner
Dividend Reinvestment and Stock Purchase Plan, or any Holdco preferred
shares. Holdco may issue and sell Holdco Common Shares in connection with
the acquisition of stock or assets of other companies, to finance
expenditures, additions and improvements to the property of Berkshire Gas or
any of its subsidiaries, which have not been financed with other permanent
securities and for other corporate purposes, or to repay or refinance
outstanding indebtedness. Dividend requirements and any redemption, sinking
38
fund or conversion provisions pertaining to Holdco preferred shares, if
authorized and issued, may have an adverse effect on the availability of
earnings for distribution to holders of the Holdco Common Shares and for use
with respect to other corporate purposes. See also "Proposal Regarding
Plan of Restructuring -- Share Owner Dividend Reinvestment and Stock
Purchase Plan" below for information concerning Holdco's intention to issue
additional Holdco Common Shares pursuant to such plan.
Trustees and Management of Holdco
The current directors of Berkshire Gas will be the trustees of Holdco
upon the completion of the restructuring plan. In approving the
restructuring, shareholders will be considered to have ratified the election
of the following persons, now serving as directors of Berkshire Gas, as
trustees of Holdco:
Class A Trustees whose terms expire at the 2000 Annual Meeting.
Paul L. Gioia
Franklin M. Hundley
Scott S. Robinson
Class B Trustees whose terms expire at the 1998 Annual Meeting.
George R. Baldwin
John W. Bond
Class C Trustees whose terms expire at the 1999 Annual Meeting.
James R. Keys
Robert B. Trask
The officers of Holdco, each of whom currently holds a comparable office in
Berkshire Gas, are as follows:
Name Office
- ---- ------
Scott S. Robinson President and Chief Executive Officer
Michael J. Marrone Vice President, Treasurer and Chief Financial Officer
Cheryl M. Clark Secretary
Initially, Holdco does not expect to have any employees of its own and does
not expect to render services to Berkshire Gas or any other subsidiary,
although it may do so in the future.
Following the restructuring and subject to their continuing
qualification for such office, the present officers of Berkshire Gas will,
at least initially, continue to hold their present offices and enjoy
substantially the same remuneration and employee benefits now afforded.
Following the restructuring, most of the present members of Berkshire Gas'
Board of Directors will resign. Michael J. Marrone and Robert M. Allessio,
currently officers of Berkshire Gas, will be elected to serve on the Board
of Directors of Berkshire Gas with Scott S. Robinson. Separate Boards of
Directors and officers will be appointed for the management services
company, the subsidiary for propane operations and any other subsidiary
company established to pursue non-regulated market opportunities. Given
39
that Holdco will be the sole Stockholder of Berkshire Gas and other
subsidiary companies, the Trustees of Holdco will have authority to vote
such shares and to elect the directors of Berkshire Gas and any other
subsidiary company. See "Proposed Regarding Plan of Restructuring -- The
Restructuring."
No Appraisal Rights
Under Massachusetts law governing the proposed Merger, neither a
dissenting holder of Berkshire Gas Common Stock nor the holders of Berkshire
Gas 4.8% Cumulative Preferred Stock has a right to demand payment of the
fair value of his or her shares if the Merger is consummated.
Share Owner Dividend Reinvestment and Stock Purchase Plan
Following the effectiveness of the restructuring, Holdco will assume
Berkshire Gas' existing Share Owner Dividend Reinvestment and Stock Purchase
Plan. Participants in such plan will continue to be able to make initial
purchases of Holdco Common Shares, reinvest their dividends on Holdco Common
Shares to purchase additional Holdco Common Shares and to make optional
payments to acquire additional Holdco Common Shares.
Price Range of Berkshire Gas Common Stock
The Company's Common Stock is traded on the NASDAQ-NMS and quoted
through the NASDAQ System. The table below sets forth the high and low
average of the bid and asked prices for shares of the Company's Common
Stock, as reported by the National Quotation Bureau, Incorporated, for the
periods indicated.
High Low
---- ---
1996: First Quarter $16-3/4 $15
Second Quarter 16 14-3/4
Third Quarter 16-3/4 14-7/8
Fourth Quarter 18 15-1/4
1997: First Quarter 17-1/2 15-1/4
Second Quarter 16 15
Third Quarter 17-3/8 15-1/4
Fourth Quarter 23-1/2 16-1/4
1998: First Quarter 23-1/2 21-1/2
(through February 18,
1998)
These quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not necessarily represent
actual transactions. The daily high and low sales prices on February 18,
1998 were $22-7/8 and $22-1/2, respectively.
Stock Ownership by Directors and Executive Officers
The following table sets forth the number of shares of Berkshire Gas
Common Stock beneficially owned as of January 31, 1998 by each director of
Berkshire Gas as well as the executive officers named in the Summary
40
Compensation Table of the proxy statement for Berkshire Gas' 1997 annual
meeting, and the directors and executive officers of Berkshire Gas as a
group. Except as indicated below, all of the shares listed are held by the
persons named with both sole voting power and sole investment power.
Percentage of Shares
Shares of Common Stock of Common Stock
Beneficially Owned Outstanding as
Name of Beneficial Owner as of January 31, 1998* of January 31, 1998**
------------------------ ----------------------- ---------------------
George R. Baldwin 2,221 .10%
John W. Bond 4,136 (1) .18
Paul L. Gioia 3,568 (2) .16
Les H. Hotman 220 .01
Franklin M. Hundley 2,642 .11
James R. Keys 1,185 .05
Michael J. Marrone 1,195 .05
Scott S. Robinson 6,591 (3) .29
Robert B. Trask 8,945 (4) .39
All directors and officers of
Berkshire gas, 10 persons as a
group 30,895 (5) 1.36
<F*> As used in this Proxy Statement/prospectus, "beneficial ownership"
means direct or indirect, sole or shared power to vote, or to direct
the voting of, and/or investment power to dispose of, or to direct the
disposition of, shares of the Common Stock of Berkshire Gas. Except
as indicated in the footnotes below, the listed beneficial owners held
direct and sole voting and investment power with respect to the stated
shares.
<F**> As of January 31, 1998 there were 2,269,820 shares of Berkshire Gas
Common Stock outstanding.
<F1> Includes 273 shares held Mr. Bond's spouse, who has sole voting and
investment power over such shares.
<F2> All of Mr. Giola's shares are held jointly with his spouse, with
shared voting and investment power over such shares.
<F3> Comprised of 6,145 shares are held in trust, for which Mr. Robinson
and his spouse are joint Trustees, with shared voting and investment
power.
<F4> 6,045 of Mr. Trask's shares are held jointly with his spouse, with
shared voting and investment power over such shares. 2,900 of Mr.
Trask's shares are owned by a private, non-profit foundation of which
Mr. Trask is a trustee.
<F5> Aggregate record or imputed beneficial ownership, with sole or shared
voting and investment power.
Transfer Agent and Registrar
The State Street Bank and Trust Company, the Transfer Agent and
Registrar of the Berkshire Gas Common Stock, will serve in the same
41
capacities for the Holdco Common Shares.
Financial Statements
No consolidated financial statements of Holdco and its subsidiary are
presented herein since Holdco presently has no assets or liabilities other
than the stock of Mergeco, and any pro forma consolidated financial
statements of Holdco would reflect no change from the financial statements
of Berkshire Gas prior to implementation of the restructuring plan.
Legal Opinion
The validity of the Holdco Common Shares to be issued upon
consummation of the Merger is being passed upon by Rich, May, Bilodeau &
Flaherty, P.C., 294 Washington Street, Boston, Massachusetts 02108.
Franklin M. Hundley, Of Counsel to Rich, May, Bilodeau & Flaherty, P.C., and
formerly a Managing Director of such firm, is Chairman of the Board of
Berkshire Gas.
Experts
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended June 30, 1997 and
the Berkshire Gas Company's Annual Report to Shareholders for the year ended
June 30, 1997 have been audited by Deloitte & Touche LLP independent auditors,
as stated in their reports, which are incorporated herein by reference, and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
OTHER MATTERS
Voting Procedures
Consistent with state law and under Berkshire Gas' Bylaws, a majority
of the shares entitled to be cast on a particular matter, present in person
or represented by proxy, constitutes a quorum as to such matter. Votes cast
by proxy or in person at the Special Meeting will be counted by persons
appointed by Berkshire Gas to act as election inspectors for the meeting.
The Proposal Regarding Plan of Restructuring requires the affirmative
vote of two-thirds of the outstanding Berkshire Gas Common Stock. The
election inspectors will count the total number of votes cast "for" approval
of the Proposal Regarding Plan of Restructuring for purposes of determining
whether sufficient affirmative votes have been cast. The election
inspectors will count shares represented by proxies that reflect abstentions
and "broker non-votes" (i.e., shares represented at the meeting held by
brokers or nominees as to which (i) instructions have not been received from
the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on a particular matter)
only as shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum. For purposes of the
Proposal Regarding Plan of Restructuring, abstentions and broker non-votes
have the effect of votes cast against the proposal.
Adjournment of Meeting
42
If sufficient votes in favor of the proposal set forth in the Notice
of Special Meeting are not received by the time scheduled for the meeting,
the persons named as proxies may propose one or more adjournments of the
meeting to permit further solicitation of proxies with respect to any such
proposal. Any adjournment will require the affirmative vote of a majority of
the votes cast on the question in person or by proxy at the session of the
meeting to be adjourned. The persons named as proxies will vote in favor of
such adjournment those proxies which they are entitled to vote in favor of
such proposal. They will vote against any such adjournment those proxies
required to be voted against such proposal. Berkshire Gas will pay the
costs of any additional solicitation and of any adjourned session.
Independent Accountants
Representatives of Deloitte & Touche, LLP, Berkshire Gas' independent
accountants, will not be present at the Special Meeting.
Proposals of Shareholders
Shareholders' proposals intended to be presented at the 1998 Annual
Meeting must be received by the Office of the Clerk of The Berkshire Gas
Company, 115 Cheshire Road, Pittsfield, Massachusetts 01201-1879 by June 6,
1998.
Other Business
The management has no reason to believe that any other business will
be presented at the Special Meeting, but if any other business shall be
properly presented, votes pursuant to the proxy will be cast thereon in
accordance with the discretion of the persons named in the accompanying
proxy.
The greater part of the stock of Berkshire Gas is widely held in small
lots. It is important, therefore, in order to secure representation at the
Special Meeting of the number of shares necessary to take action, that all
shareholders who cannot be present in person, however small their holdings,
fill in, sign and return the enclosed proxy without delay to State Street
Bank and Trust Company, Corporate Services Department, P.O. Box 592, Boston,
MA 02102. A self-addressed, stamped envelope is enclosed for this purpose.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IF
YOU PLAN TO ATTEND, PLEASE SO INDICATE ON THE ENCLOSED PROXY CARD.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Trustees and Officers.
Holdco's Declaration of Trust (the "Declaration Trust") provides that,
to the extent legally permissible, each of Holdco's Trustees and officers
shall be indemnified by the Trust estate against any loss, liability or
expense, including amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and counsel fees, imposed upon or reasonably
incurred by such person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
person may be involved or with which such person may be threatened, while in
43
office or thereafter, by reason of such person's being or having been such a
Trustee or officer, except with respect to any matter as to which such
person shall have been adjudicated in such action, suit or proceeding not to
have acted in good faith in the reasonable belief that his or her action was
in the best interests of Holdco.
In discharging his or her duties, a Trustee or officer of Holdco, when
acting in good faith, shall be fully protected in relying upon the books of
account of Holdco or of another organization in which he or she serves as
contemplated by the indemnification provisions of the Declaration of Trust,
reports made to the Company or to such other organization by any of its
officers or employees or by counsel, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees or
similar governing body of such other organization, or upon other records of
the Holdco or of such other organization. The rights of indemnification
provided in the Declaration of Trust shall not be exclusive of or affect any
other rights to which any Trustee or officer may be entitled and such rights
shall inure to the benefit of his or her successors, heirs, executors,
administrators and other legal representatives. As used in this provision,
the terms "Trustee" and "officer" include persons who serve at the request
of Holdco as directors, officers, or trustees of another organization in
which Holdco has any direct or indirect interest as a shareholder, creditor
or otherwise.
Expenses, including counsel fees, reasonably incurred by any
Trustee or officer with respect to the defense or disposition of any action,
suit or proceeding referred to in the indemnification provisions of the
Declaration of Trust may be advanced by Holdco prior to the final
disposition of such action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the recipient to repay such amount unless it
is ultimately determined that he or she is entitled to indemnification.
Nothing contained in this provision shall affect any rights to
indemnification to which Holdco personnel other than Trustees and officers
may be entitled by contract or otherwise under law. No Trustee shall be
obligated to give any bond or other security for the performance of any of
his or her duties.
Holdco maintains a policy of insurance covering Trustees' and
officers' liability and reimbursement of Holdco for indemnification of a
Trustee or officer. The policy covering Trustees' and officers' liability
provides for payment on behalf of a Trustee or officer of any Ultimate Net
Loss (defined to include among other things damages, judgments, settlements,
costs and expenses) arising from claims against such Trustee or officer by
reason of any Wrongful Act (as defined therein) subject to certain
exclusions.
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits are being filed herewith:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
2.1 Agreement and Plan of Merger dated as of February 19, 1998 (attached
as Appendix A).
44
3.1.1 Declaration of Trust of Berkshire Energy Resources (attached as
Appendix B).
3.1.2 By-laws of Berkshire Energy Resources (attached as Appendix C).
5.1 Opinion of Rich, May, Bilodeau & Flaherty, P.C. as to the legality of
the securities being issued.
8.1 Form of Opinion of Rich, May, Bilodeau & Flaherty, P.C. as to certain
federal income tax consequences of the Merger.
13.1 Annual report to Berkshire Gas' shareholders on Form 10-K for the
year ended June 30, 1997 (and Berkshire Gas' Annual Report to
Shareholders for the year ended June 30, 1997 incorporated therein).
13.2 Berkshire Gas' definitive Proxy Statement filed with SEC on October
3, 1997.
13.3 Quarterly report to Berkshire Gas' shareholders on Form 10-Q for the
quarter ended September 30, 1997.
13.4 Quarterly report to Berkshire Gas' shareholders on Form 10-Q for the
quarter ended December 31, 1997.
23.1 Consent of Rich, May, Bilodeau & Flaherty, P.C. (included in its
Opinions filed as Exhibits 5.1 and 8.1, respectively).
23.2 Consent of Deloitte & Touche, LLP.
99.1 Form of Proxy.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933 (the "Securities Act"), each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report, to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule14a-3 or Rule 14c-
3 under the Exchange Act; and, where interim financial information required
to be presented by Article 3 of Regulation S-X is not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
45
(3) 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
underwriters, in addition to the information called for by the other items
of the applicable form.
(4) That every prospectus (i) that is filed pursuant to the
immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(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 the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, 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.
(5) That 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
Securities and Exchange 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.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsfield,
46
Commonwealth of Massachusetts, on February 24, 1998.
BERKSHIRE ENERGY RESOURCES
/s/ Scott S. Robinson
_____________________________
Scott S. Robinson
President and Chief Executive Officer
Each person whose signature appears below hereby authorizes each of
Scott S. Robinson and Michael J. Marrone with full power of substitution, to
execute in the name and on behalf of such person any amendment or any post-
effective amendment to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith, making
such changes in this Registration Statement as the Registrant deems
appropriate, and appoints each of Scott S. Robinson and Michael J. Marrone
with full power of substitution, attorney-in-fact to sign any amendment and
any post-effective amendment to this Registration Statement and to file the
same, with exhibits thereto, and other documents in connection therewith.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below on February 24, 1998 by the following
persons in the capacities.
Signature Capacity
- --------- --------
/s/ Scott S. Robinson
___________________________________
Scott S. Robinson Trustee, President, Chief Executive
Officer (principal executive
officer)
/s/ Michael J. Marrone
___________________________________
Michael J. Marrone Trustee, Vice President, Treasurer,
Chief Financial Officer (principal
financial and accounting officer)
/s/ Cheryl M. Clark
___________________________________
Cheryl M. Clark Trustee, Secretary
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------ ----------------------- ----
2.1 Agreement and Plan of Merger dated as of
February 19, 1998 (attached as Appendix A). 48
47
3.1.1 Declaration of Trust of Berkshire Energy Resources
(attached as Appendix B). 56
3.1.2 By-laws of Berkshire Energy Resources (attached as
Appendix C). 84
5.1 Opinion of Rich, May, Bilodeau & Flaherty, P.C.
as to the legality of the securities being issued. 90
8.1 Form of Opinion of Rich, May, Bilodeau &
Flaherty, P.C. as to certain federal income
tax consequences of the Merger. 91
13.1 Annual report to Berkshire Gas' Shareholders
on Form 10-K for the year ended June 30, 1997 (and Berkshire
Gas' Annual Report to Shareholders for the year ended June 30,
1997 incorporated therein). 93
13.2 Berkshire Gas' definitive Proxy Statement filed with the SEC
on October 3, 1997. 154
13.3 Quarterly report to Berkshire Gas' shareholders on Form 10-Q
for the quarter ended September 30, 1997. 169
13.4 Quarterly report to Berkshire Gas' shareholders on Form 10-Q
for the quarter ended December 31, 1997. 183
23.1 Consent of Rich, May, Bilodeau & Flaherty, P.C.
(included in its Opinions filed as Exhibits 5.1
and 8.1, respectively). -
23.2 Consent of Deloitte & Touche, LLP. 199
99.1 Form of Proxy. 200