As filed with the Securities and Exchange Commission on October 5, 2000
(No. 333-46036)
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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NUI CORPORATION
(Exact name of co-registrant as specified in its charter)
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New Jersey 4924 22-1869941
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
NUI HOLDING COMPANY
(Exact name of co-registrant as specified in its charter)
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New Jersey 6719 22-3708029
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
NUI Corporation James R. Van Horn, Esq.
NUI Holding Company Chief Administrative Officer,
550 Route 202-206 General Counsel and Corporate Secretary
P.O. Box 760 550 Route 202-206
Bedminster, New Jersey 07921-0760 P.O. Box 760
(908) 781-0500 Bedminster, New Jersey 07921-0760
(908) 781-0500
(Address, including zip code, and telephone (Name, address, including zip code, and
number, telephone number,
including area code, of co-registrant's including area code, of agent for service)
principal executive offices)
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Copies to:
Gary E. Thompson, Esq. Elizabeth A. McClanahan, Esq. Jane Whitt Sellers, Esq.
Hunton & Williams Penn, Stuart & Eskridge McGuireWoods LLP
Riverfront Plaza, East Tower 208 East Main Street One James Center
951 East Byrd Street Abingdon, Virginia 24212 901 East Cary Street
Richmond, Virginia 23219 (540) 628-5151 Richmond, Virginia 23219
(804) 788-8200 (804) 775-1000
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Approximate date of commencement of proposed sale to the public: as soon as
practicable after this Registration Statement becomes effective.
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 statement number of the earlier effective registration statement
for the same offering: [_]
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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VIRGINIA GAS COMPANY
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
Virginia Gas Company's board of directors has unanimously approved a merger
and a merger agreement with NUI Corporation and is seeking your approval of
this important transaction.
The Virginia Gas board believes that the merger is in your and Virginia
Gas's best interests and unanimously recommends that you vote FOR approval and
adoption of the merger agreement.
If we complete the merger, Virginia Gas's stockholders will receive $4.00
worth of NUI common stock for each Virginia Gas share that they own. The number
of shares of NUI common stock that Virginia Gas's stockholders will receive
will be based on the average trading price of NUI common stock during the 20
trading-day period ending on the seventh trading day prior to the closing of
the merger.
NUI common stock trades on the New York Stock Exchange under the symbol
"NUI." On September 29, 2000, the closing price of NUI common stock was
$30.207. It is intended that Virginia Gas stockholders will not incur federal
income tax as a result of the receipt of shares of NUI common stock.
Please see pages 15 and 16 for detailed information about the exchange of
Virginia Gas common stock, as well as pages 1 and 2 for a description of
additional factors that may affect the value of the NUI common stock to be
issued in the merger, along with several other risk factors pertaining to the
merger that you should consider.
Virginia Gas has scheduled its annual meeting on November 8, 2000, to vote
on the approval and adoption of the merger agreement and to elect two persons
to the Virginia Gas board. Your vote is important, regardless of the number of
shares you own. Please vote as soon as possible to make sure that your shares
are represented at the meeting. To grant your proxy to vote your shares, you
must complete and return the enclosed proxy card. You may also cast your vote
in person at the annual meeting. If you do not vote, it will have the same
effect as voting against the merger.
In the materials accompanying this letter, you will find a Notice of Annual
Meeting, a proxy statement/prospectus relating to the actions to be taken by
Virginia Gas's stockholders at the annual meeting and a proxy card. The proxy
statement/prospectus provides you with detailed information about the merger. I
encourage you to read the entire proxy statement/prospectus and notice
carefully. Should you have questions about the merger, please call Angela
Cvetkovski, Investor Relations, at (540) 676-2380.
On behalf of your board of directors, I thank you for your support and urge
you to vote FOR approval and adoption of the merger agreement and the election
of all nominees to the Virginia Gas board.
/s/ Michael L. Edwards
Michael L. Edwards
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved the NUI or NUI Holding common stock to be issued
under this document or determined if this document is accurate or adequate.
Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated October 5, 2000, and is
first being mailed to stockholders on or about October 6, 2000.
This document is the proxy statement of Virginia Gas Company for its annual
stockholder meeting and the prospectus of NUI Corporation and NUI Holding
Company for the common stock to be issued in the merger. This document gives
you detailed information about the merger. This proxy statement/prospectus
incorporates, by reference to other documents, important business and financial
information about Virginia Gas Company, NUI Corporation and NUI Holding
Corporation that is not included in this proxy statement/prospectus. See "WHERE
YOU CAN FIND MORE INFORMATION" for additional information about the companies
that is on file with the Securities and Exchange Commission. To obtain timely
delivery, Virginia Gas stockholders must request this information no less than
five business days before they make their investment decision. Therefore,
Virginia Gas stockholders must request this information by November 1, 2000.
You may obtain these documents without charge by writing or calling Virginia
Gas or NUI at the following addresses and telephone numbers:
NUI Corporation Virginia Gas Company
Linda Lennox Angela Cvetkovski
Investor Relations Investor Relations
550 Route 202-206 200 East Main Street
P. O. Box 760 Abingdon, Virginia 24210
Bedminster, New Jersey 07921-0760 (540) 676-2380
(908) 781-0500 Telecopy: (540) 619-5230
Telecopy: (908) 781-0718
VIRGINIA GAS COMPANY
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Notice of Annual Meeting of Stockholders
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An annual meeting of stockholders of Virginia Gas Company will be held at
Abingdon's Martha Washington Inn, 150 West Main Street, Abingdon, Virginia, at
10:00 a.m., local time, on November 8, 2000, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Reorganization, dated as of June 13, 2000, among Virginia
Gas, NUI and a wholly-owned subsidiary of NUI, providing for the merger
of the subsidiary of NUI with and into Virginia Gas.
2. To elect two persons to the Virginia Gas board of directors.
3. To act upon any other matters properly coming before the annual meeting
and any adjournment or postponement of the meeting.
Only holders of record of Virginia Gas common stock at the close of business
on September 29, 2000, are entitled to vote at the annual meeting or any
adjournments or postponements thereof. Approval of the merger proposal and the
election of directors at the annual meeting requires the affirmative vote of
the holders of a majority of the outstanding shares of Virginia Gas common
stock.
/s/ James E. Talkington, III
James E. Talkington, III
Corporate Secretary
October 5, 2000
Please mark, sign, date and return your proxy promptly, whether or not you
plan to attend the annual meeting.
The Virginia Gas board of directors unanimously recommends that stockholders
vote FOR the proposal to approve and adopt the merger agreement and FOR the
election of the nominees named in this proxy statement/prospectus to the
Virginia Gas board at the annual meeting.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS...................................................... i
SUMMARY OF PROXY STATEMENT/PROSPECTUS...................................... S-1
General.................................................................. S-1
Parties to the Merger.................................................... S-1
Annual Meeting........................................................... S-1
Required Vote............................................................ S-2
The Merger............................................................... S-2
NUI's Reasons for the Merger............................................. S-2
Virginia Gas's Reasons for the Merger.................................... S-2
Recommendation to Stockholders........................................... S-2
Opinion of Virginia Gas's Financial Advisor.............................. S-2
Merger Consideration..................................................... S-3
Material Federal Income Tax Consequences................................. S-3
Interests of Virginia Gas's Directors and Officers in the Merger......... S-3
Accounting Treatment..................................................... S-3
No Appraisal or Dissenters' Rights....................................... S-3
Regulatory Matters....................................................... S-3
Stockholder's Agreements................................................. S-4
Interim Financing........................................................ S-4
Conditions to the Merger................................................. S-4
No Solicitation of Transactions by Virginia Gas.......................... S-4
Termination of the Merger Agreement...................................... S-4
Termination Fees and Expenses............................................ S-5
COMPARATIVE UNAUDITED PER COMMON SHARE DATA................................ S-6
UNAUDITED SELECTED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS............. S-7
SELECTED CONSOLIDATED FINANCIAL INFORMATION................................ S-12
RISK FACTORS............................................................... 1
A CAUTION ABOUT FORWARD-LOOKING INFORMATION................................ 2
THE ANNUAL MEETING......................................................... 4
PROPOSAL NO. 1: THE MERGER................................................. 6
Description of the Merger................................................ 6
Background of the Merger................................................. 6
Reasons of Virginia Gas for the Merger................................... 9
Reasons of NUI for the Merger............................................ 11
Opinion of Virginia Gas's Financial Advisor.............................. 11
The Effective Time of the Merger......................................... 14
Exchange of Certificates................................................. 15
Treatment of Virginia Gas Stock Options and Warrants..................... 16
No Solicitation of Transactions by Virginia Gas.......................... 16
Representations and Warranties........................................... 17
Covenants Under the Merger Agreement..................................... 18
Conditions to the Merger................................................. 19
Indemnification and Insurance of Directors and Officers.................. 21
Termination of the Merger Agreement...................................... 21
Termination Fees and Expenses............................................ 22
Material Federal Income Tax Consequences................................ 22
Interests of Virginia Gas's Directors and Officers in the Merger........ 23
No Appraisal or Dissenters' Rights...................................... 24
Accounting Treatment.................................................... 25
Regulatory Matters...................................................... 25
STOCKHOLDER'S AGREEMENTS.................................................. 26
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................ 26
INTERIM FINANCING......................................................... 27
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................................. 27
BUSINESS OF VIRGINIA GAS.................................................. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 35
BUSINESS OF NUI........................................................... 37
PENDING NUI HOLDING COMPANY REORGANIZATION................................ 38
DESCRIPTION OF NUI AND NUI HOLDING CAPITAL STOCK.......................... 39
COMPARATIVE RIGHTS OF HOLDERS OF VIRGINIA GAS COMMON STOCK AND NUI AND NUI
HOLDING COMMON STOCK..................................................... 40
Authorized Capital Stock................................................ 40
Stockholder Rights Plans................................................ 40
Directors............................................................... 41
Removal of Directors.................................................... 41
Vacancies on the Board of Directors..................................... 41
Notice of Stockholder Nominations of Directors and Stockholder
Proposals.............................................................. 42
Director Standard of Conduct............................................ 42
Limitations on Director Liability....................................... 42
Indemnification......................................................... 42
Mergers, Share Exchanges and Sales of Assets............................ 43
Anti-Takeover Statutes.................................................. 43
Amendments to Certificate of Incorporation and Bylaws................... 44
Dissenters' Rights...................................................... 45
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION
AGREEMENTS............................................................... 45
LEGAL MATTERS............................................................. 46
EXPERTS................................................................... 46
PROPOSAL NO. 2: ELECTION OF DIRECTORS..................................... 46
STOCKHOLDER PROPOSALS..................................................... 51
OTHER MATTERS............................................................. 51
WHERE YOU CAN FIND MORE INFORMATION....................................... 51
ANNEXES
ANNEX A--Merger Agreement................................................... A-1
ANNEX B--Fairness Opinion of CIBC World Markets............................. B-1
ANNEX C--Fairness Opinion Update of CIBC World Markets...................... C-1
QUESTIONS AND ANSWERS
Q: What am I being asked to vote on?
A: You are being asked to (1) approve and adopt the merger agreement that
provides for the merger of a wholly-owned NUI subsidiary with and into
Virginia Gas, and (2) elect two persons to the Virginia Gas board.
Q: What will I receive when the merger occurs?
A: You will receive in exchange for each of your shares of Virginia Gas common
stock $4.00 worth of NUI common stock. However, in the event that NUI has
completed its planned corporate restructuring (which provides for the
exchange of NUI common stock for NUI Holding Company common stock) prior to
the effective time of the merger, you will receive in exchange for each of
your shares of Virginia Gas common stock $4.00 worth of NUI Holding common
stock.
Q: How do I vote my shares?
A: After carefully reading and considering the information contained in this
document, you should fill out and sign your proxy card. Then mail your
completed, signed proxy card in the enclosed prepaid return envelope as soon
as possible so that your shares can be voted at the annual meeting of
Virginia Gas stockholders.
You should return your proxy card whether or not you plan to attend the
annual meeting. If you attend the annual meeting, you may revoke your proxy
at any time before it is voted and vote in person.
Q: Can I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
annual meeting. You can do this either by (1) submitting to the Secretary of
Virginia Gas a written notice of revocation or a completed, later-dated
proxy card or (2) attending the annual meeting and voting in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will not be able to vote your shares for the merger without
instructions from you. Your broker is allowed to vote your shares for the
Virginia Gas board nominees unless you provide different instructions. You
should follow the directions provided by your broker to vote your shares.
Q: When will the merger be completed?
A: We are working to complete the merger as quickly as possible after the
annual meeting of Virginia Gas stockholders and after all required
regulatory approvals are obtained. We expect to complete the merger during
the fourth quarter of 2000.
Q: To whom should I address questions?
A: If you have questions, you should contact Angela Cvetkovski, Virginia Gas
Investor Relations, at (540) 676-2380.
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SUMMARY OF PROXY STATEMENT/PROSPECTUS
General
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire proxy statement/prospectus and the documents incorporated by reference
in this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION."
Parties to the Merger
NUI Corporation Virginia Gas Company
550 Route 202-206 201 East Main Street
Bedminster, New Jersey 07921 Abingdon, Virginia 24210
(908) 781-0500 (540) 676-2380
NUI is a multi-state energy sales, services and distribution company
incorporated in New Jersey in 1969. NUI distributes natural gas in six eastern
states through operating utilities regulated by state public utility
commissions. NUI also provides retail gas sales, wholesale energy brokerage,
customer information systems, environmental project development, and
telecommunications products and services through its unregulated, wholly-owned
subsidiaries. NUI also provides sales and marketing services through a company
in which it acquired a 49 percent interest in May 1997.
On March 27, 2000, NUI common shareholders approved a proposal to put in
place a holding company structure. Under the holding company reorganization,
NUI Holding Company will become the parent of NUI. The holding company
reorganization will occur as soon as practicable following the receipt of all
required regulatory approvals. If the holding company reorganization occurs
prior to the consummation of the merger proposed in this proxy
statement/prospectus, you will be issued NUI Holding common stock instead of
NUI common stock. See "PROPOSAL NO. 1: THE MERGER--Description of the Merger--
Form of the Merger."
Virginia Gas is an integrated natural gas company whose activities include
gas pipeline operation; natural gas storage; natural gas gathering, marketing
and distribution services; natural gas exploration, production and well
operation; and propane distribution. We conduct our operations primarily in
Virginia.
Annual Meeting (see page 4)
The annual meeting will be held on November 8, 2000, at 10:00 a.m., local
time, at Abingdon's Martha Washington Inn, 150 West Main Street, Abingdon,
Virginia. At the meeting, you will be asked:
1. To consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Reorganization, dated as of June 13, 2000, among Virginia Gas, NUI
and a wholly-owned subsidiary of NUI, providing for the merger of the
wholly-owned subsidiary of NUI with and into Virginia Gas.
2. To elect two persons to the Virginia Gas board to serve until the merger is
effective or, if the merger agreement is not adopted or the merger is not
completed, for a three year term.
3. To transact such other business as may properly come before the annual
meeting and any adjournments thereof.
Only Virginia Gas stockholders of record as of the close of business on
September 29, 2000, will be entitled to notice of, and to vote at, the annual
meeting.
S-1
Required Vote (see page 5)
The affirmative vote of a majority of the shares entitled to vote on the
record date is required to approve and adopt the merger agreement.
Under Virginia Gas's bylaws, the affirmative vote of the holders of a
majority of the shares entitled to vote on the record date is required for the
election of directors.
The Merger (see page 6)
The merger agreement provides that a subsidiary of NUI will merge with and
into Virginia Gas and Virginia Gas will become a wholly-owned subsidiary of
NUI. However, if the NUI holding company reorganization is completed prior to
the merger, at NUI's election, the parties will amend the merger agreement to
provide for the merger of Virginia Gas with and into a wholly-owned NUI Holding
subsidiary, with the NUI Holding subsidiary surviving the merger. The merger
agreement is included in this proxy statement/prospectus as Annex A.
NUI's Reasons for the Merger (see page 11)
NUI believes that Virginia Gas's existing and potential natural gas storage
and pipeline assets should provide NUI with the ability to capitalize upon
advantageous energy trading opportunities. NUI believes that Virginia Gas's
propane and natural gas distribution businesses should complement NUI's
residential and commercial energy delivery operations in an efficient and
profitable manner.
Virginia Gas's Reasons for the Merger (see page 9)
The Virginia Gas board determined to recommend the merger after
consideration of a number of factors. The most important factors included the
Virginia Gas board's belief that the merger will:
. provide the capital needed to complete pipeline and storage expansion
necessary to optimize the value of Virginia Gas's assets;
. provide the capital needed to comply with the financial covenants under
and/or refinance existing Virginia Gas indebtedness;
. enable the combined company to provide better service to Virginia Gas
customers;
. provide access to new markets for Virginia Gas's natural gas storage
services; and
. allow Virginia Gas stockholders to participate in future growth through their
ownership in the combined business.
The Virginia Gas board also took into consideration that the merger
consideration of $4.00 per share of Virginia Gas common stock represented a
premium of approximately 37 percent over the closing sales price of Virginia
Gas common stock on the last trading day prior to the announcement of the
merger, and a premium of approximately 47 percent over the average closing
sales prices of Virginia Gas common stock during the 20 trading days prior to
the announcement of the merger.
After comparing the possible alternatives available or believed likely to be
available to Virginia Gas, including the continued operation of Virginia Gas as
an independent entity, the Virginia Gas board determined that the merger was in
the best interests of Virginia Gas and its stockholders.
Recommendation to Stockholders (see pages 11 and 47)
The Virginia Gas board believes that the merger is in your and Virginia
Gas's best interests and unanimously recommends that you vote FOR approval and
adoption of the merger agreement. The Virginia Gas board also recommends that
you vote FOR the election of the nominees named in this proxy
statement/prospectus to the Virginia Gas board.
Opinion of Virginia Gas's Financial Advisor (see page 11)
On June 13, 2000, CIBC World Markets, Virginia Gas's financial advisor,
delivered an opinion to the Virginia Gas board that, as of the date the
Virginia Gas board approved the merger agreement, the merger consideration was
fair to Virginia Gas stockholders from a financial point of view, subject to
the factors, qualifications and assumptions described in its opinion. The
complete opinion of CIBC, as well as its updated opinion, dated October 3,
2000, are attached as Annexes B and C, respectively. You should read the
opinions in their entirety.
S-2
Merger Consideration (see page 6)
Under the merger agreement, each share of Virginia Gas common stock will be
converted into the number of shares of NUI common stock (or, in the
alternative, NUI Holding common stock if the NUI holding company reorganization
has been completed) having a market value of $4.00, as determined by the
average trading price of NUI or NUI Holding common stock, as applicable, on the
New York Stock Exchange during a 20 trading-day computation period prior to the
closing of the merger.
No fractional shares of NUI or NUI Holding common stock will be issued as
merger consideration. Instead, Virginia Gas stockholders will receive in cash
the value of any fraction of a share that they would otherwise have been
entitled to receive. See "PROPOSAL NO. 1: THE MERGER--Exchange of Certificates"
on page 15.
Material Federal Income Tax Consequences (see page 22)
The obligations of NUI and Virginia Gas to consummate the merger are
conditioned upon their receipt of an opinion from counsel stating that the
merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code.
Provided that the merger qualifies as a reorganization, neither Virginia Gas
nor NUI will recognize any gain or loss for federal income tax purposes as a
result of the merger. The receipt of NUI or NUI Holding common stock in the
merger will generally be tax free to you for United States federal income tax
purposes, except for cash received for fractional shares.
You should consult with your tax advisor about the tax consequences of the
merger in light of your individual circumstances, including the application of
any federal, state, local or foreign law.
Interests of Virginia Gas's Directors and Officers in the Merger (see page 23)
You should be aware that the directors and officers of Virginia Gas have
stock option agreements and, in the case of the officers, employment
agreements, that give them interests in the merger that are different from, or
in addition to, those of other Virginia Gas stockholders. The stock option
agreements will be converted when the merger takes effect into the right to
receive cash in an amount that approximates the value of such awards. Virginia
Gas's chief executive officer has agreed to terminate his employment agreement
when the merger occurs in exchange for severance benefits. He has also agreed
to serve as a consultant to Virginia Gas for three years following the merger.
The other officers' employment agreements entitle them to continued employment
for up to one year following the merger, or compensation in lieu of such
continued employment.
Accounting Treatment (see page 25)
The merger will be accounted for as a purchase for accounting and financial
reporting purposes.
No Appraisal or Dissenters' Rights (see page 24)
Under Delaware law, you are not entitled to appraisal or dissenters' rights
in the merger.
Regulatory Matters (see page 25)
In order to complete the merger, we must receive approval from the Virginia
State Corporation Commission for the change in control of the certificated
public utilities resulting from the merger. Prior to the merger, NUI must also
obtain, and has applied for, approvals from regulatory authorities in certain
other states in which NUI conducts its business.
Under the Hart-Scott-Rodino Antitrust Improvements Act, the merger could not
be completed until NUI and Virginia Gas had furnished required information and
materials to the Antitrust Division of the Department of Justice and to the
Federal Trade Commission and the applicable waiting period was terminated or
expired. NUI and Virginia Gas each filed with the Department of Justice and the
Federal Trade Commission a Notification and Report Form with respect to the
merger on September 14, 2000. We were granted early termination of the
applicable waiting period on September 27, 2000.
As with any merger in the United States, the Department of Justice or the
Federal Trade Commission has the authority to challenge the merger
S-3
on antitrust grounds before or after the merger is completed. We cannot provide
any assurance that the merger will not be challenged on antitrust grounds or,
if challenged, that we would prevail.
While we are not aware of any other material governmental approvals or
actions required to complete the merger, should any approval or action be
required, we anticipate seeking the required governmental approval or action.
We cannot provide any assurance, however, that the approval or action, if
needed, could be obtained within the time frame contemplated by, or on terms
consistent with, the merger agreement.
Stockholder's Agreements (see page 26)
The directors and certain executive officers of Virginia Gas have entered
into stockholder agreements to vote their shares of Virginia Gas common stock
for approval and adoption of the merger agreement.
A total of 507,968 shares of Virginia Gas common stock, representing in the
aggregate approximately 9.23 percent of the outstanding shares of Virginia Gas
common stock, are subject to these stockholder's agreements.
Interim Financing (see page 27)
NUI has agreed to provide Virginia Gas with up to $20 million in interim
financing to provide funding necessary for pipeline and gas storage development
prior to the closing of the merger. The interim financing is in the form of an
unsecured loan. The annual interest rate on the loan is LIBOR plus 3 percent
per year. Accrued interest and principal is due and payable quarterly, except
that all outstanding principal and interest is due and payable upon the first
to occur of (1) March 1, 2002, or (2) the termination of the merger agreement
(for any reason).
In connection with the interim financing made available by NUI, Virginia Gas
has granted NUI options to purchase an aggregate of 1,095,475 shares of
Virginia Gas common stock (representing approximately 19.9 percent of the
outstanding Virginia Gas common stock), which options are only exercisable if
the merger agreement is terminated under circumstances in which NUI is not
entitled to a termination fee or upon an event of a default under the interim
financing agreement.
Conditions to the Merger (see page 19)
NUI's and Virginia Gas's respective obligations to complete the merger are
subject to the prior satisfaction or waiver of a number of customary
conditions, including the following:
. the merger agreement must be approved and adopted by Virginia Gas's
stockholders;
. clearance under the antitrust laws, approval by the Virginia State
Corporation Commission and all other necessary federal and state regulatory
approvals and filings must have been obtained or made;
. the shares of NUI or NUI Holding common stock to be issued in the merger must
be approved for listing on the New York Stock Exchange; and
. there must not have been a material adverse change in the business of NUI or
Virginia Gas between the date of the merger agreement and the date of
closing.
No Solicitation of Transactions by Virginia Gas (see page 16)
The merger agreement includes provisions that prohibit Virginia Gas from
soliciting or encouraging submission of third-party acquisition proposals, but
which permit Virginia Gas to negotiate with and furnish information to a third
party if the Virginia Gas board determines that:
. the third party's unsolicited proposal is at a higher price and more
favorable to Virginia Gas and its stockholders than the merger; and
. failing to negotiate with and provide information to the third party would
result in a breach of the Virginia Gas board's fiduciary duties.
Termination of the Merger Agreement (see page 21)
The merger agreement may be terminated under various circumstances at any
time before completion of the merger, as summarized below. The merger agreement
may be terminated:
. by the mutual consent of NUI and Virginia Gas;
. by NUI if the Virginia Gas stockholders do not approve and adopt the merger
agreement at the annual meeting;
S-4
. by either NUI or Virginia Gas if the merger has not occurred on or before
December 31, 2000 (or June 13, 2001, in the event that specified conditions
to the merger have not been met and the parties are working diligently to
satisfy those conditions);
. by either NUI or Virginia Gas if there is a final, nonappealable governmental
order prohibiting the merger;
. by Virginia Gas if it enters into a binding agreement with a third party
concerning a transaction that the Virginia Gas board determines, in good
faith and in the exercise of reasonable judgment, is at a higher price and is
more favorable to Virginia Gas and its stockholders than the merger
agreement, provided that:
. Virginia Gas complies with requirements to notify NUI of its intent to
enter into the third party agreement;
. NUI does not make, within two business days of receiving notice from
Virginia Gas, an offer to amend the merger agreement that the Virginia Gas
board determines, in good faith after consultation with its financial
advisors, would make the merger agreement as amended at least as favorable,
from a financial point of view; and
. Virginia Gas pays any termination fee required under the merger agreement.
. by Virginia Gas if NUI materially breaches the merger agreement, and the
breach is not cured within ten business days after NUI receives notice of the
breach from Virginia Gas;
. by NUI if Virginia Gas materially breaches the merger agreement, and the
breach is not cured within ten business days after Virginia Gas receives
notice of the breach from NUI;
. by NUI if the average trading price of NUI or NUI Holding common stock, as
applicable, used to compute the merger consideration is less than $19.00 per
share; or
. by NUI if the Virginia Gas board withdraws or adversely modifies its
recommendation of the merger agreement.
Termination Fees and Expenses (see page 22)
Virginia Gas must pay NUI (1) a termination fee of $2.5 million plus an
amount equal to .04 times any additional outstanding debt incurred by Virginia
Gas following the date of the merger agreement and (2) NUI's documented out-of-
pocket expenses if the merger agreement is terminated for any of the following
reasons:
. the merger has not been completed within the time periods contemplated by the
merger agreement due to Virginia Gas's failure to perform its obligations
under the merger agreement;
. Virginia Gas stockholders fail to approve and adopt the merger agreement;
. Virginia Gas enters into an acquisition transaction with a third party;
. Virginia Gas materially breaches the merger agreement, and the breach is not
cured within ten business days after Virginia Gas receives notice of the
breach from NUI; or
. the Virginia Gas board withdraws or adversely modifies its recommendation of
the merger agreement.
Virginia Gas is not obligated to pay NUI a termination fee but must pay NUI
its documented out-of-pocket expenses if the merger agreement is terminated by
NUI because NUI has requested the right to conduct environmental investigations
on properties of Virginia Gas in addition to properties identified in the
merger agreement and Virginia Gas elects to deny such access.
NUI must pay Virginia Gas a termination fee of $2.5 million and Virginia
Gas's documented out-of-pocket expenses if the merger agreement is terminated
for any of the following reasons:
. the merger has not been completed within the time periods contemplated by the
merger agreement due to NUI's failure to perform its obligations under the
merger agreement; or
. NUI materially breaches the merger agreement, and the breach has not been
cured within ten business days after NUI receives notice of the breach from
Virginia Gas.
S-5
COMPARATIVE UNAUDITED PER COMMON SHARE DATA
The following table presents selected comparative unaudited per share data
for NUI on a historical and pro forma combined basis, and for Virginia Gas on a
historical and pro forma equivalent basis, giving effect to the merger using
the purchase method of accounting. The information presented below is derived
from the consolidated historical financial statements of NUI and Virginia Gas,
including the related notes thereto, incorporated by reference into this proxy
statement/prospectus. This information should be read in conjunction with such
historical financial statements and the related notes thereto. See "WHERE YOU
CAN FIND MORE INFORMATION."
The per share data included herein is not necessarily indicative of the
results of future operations of the combined entity or the actual results that
would have been achieved had the merger been consummated prior to the periods
indicated.
The pro forma combined book value per share of NUI common stock is based
upon the pro forma total common equity for NUI, divided by the total pro forma
shares of NUI common stock assuming that the price of NUI common stock is
$26.98, the closing price of NUI common stock on June 30, 2000 (the "Pro Forma
Exchange Ratio"). The pro forma equivalent book value per share of Virginia Gas
common stock represents the pro forma combined amount per share multiplied by
the Pro Forma Exchange Ratio. The pro forma combined dividends declared assume
no changes in the historical dividends declared per share of NUI common stock.
The pro forma equivalent dividends per share of Virginia Gas common stock
represents the cash dividends declared on a share of NUI common stock
multiplied by the Pro Forma Exchange Ratio. The pro forma combined net income
per share has been computed based on the average number of outstanding shares
and common equivalent shares of NUI, and the average number of outstanding
shares of Virginia Gas common stock adjusted for the Pro Forma Exchange Ratio.
The pro forma equivalent net income per share of Virginia Gas common stock
represents the pro forma combined net income per share multiplied by the Pro
Forma Exchange Ratio.
Virginia Gas
NUI Common Stock Common Stock
-------------------- ---------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
Book Value:
As of June 30, 2000................ $19.95 $20.37 $6.00 $3.02
Dividends Declared:
Nine months ended June 30, 2000.... 0.735 0.735 0.00 0.11
Fiscal year 1999(1)................ 0.98 0.98 0.0175 0.15
Net Income--Diluted:
Nine months ended June 30, 2000.... 2.08 1.98 0.05 0.29
Fiscal year 1999(1)................ 1.93 1.84 0.18 0.27
- --------
(1) Virginia Gas's latest fiscal year ended on December 31, 1999. NUI's latest
fiscal year for which information is available ended on September 30, 1999.
S-6
UNAUDITED SELECTED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet as of June 30, 2000, and
the unaudited pro forma consolidated income statements for the nine months
ended June 30, 2000, and the year ended September 30, 1999, combine the
historical information of NUI and Virginia Gas. The unaudited pro forma
consolidated financial statements have been prepared to reflect the merger
under the purchase method of accounting. Under the purchase method of
accounting, assets acquired and liabilities assumed are recorded at their
estimated fair values. The excess of the purchase price, including estimated
fees and expenses directly related to the merger, over the fair value of the
net assets acquired is classified as goodwill. In the merger, the fair value of
the acquired assets and liabilities, and related direct expenses, are estimated
to be more than the purchase price, resulting in "negative" goodwill. The
estimated values and useful lives of assets acquired and liabilities assumed,
and the resulting negative goodwill, are subject to final valuation adjustments
in accordance with generally accepted accounting principles.
The pro forma adjustments reflected in the unaudited pro forma consolidated
balance sheet are as if the transaction had occurred on June 30, 2000. The
unaudited pro forma income statement for the nine months ended June 30, 2000,
assumes that the transaction was completed on October 1, 1999. The unaudited
pro forma consolidated income statement for the year ended September 30, 1999,
assumes that the transaction was completed on October 1, 1998. The unaudited
pro forma consolidated financial statements assume that NUI will purchase all
of the outstanding stock of Virginia Gas for $4.00 per share (payable in NUI
common stock). The proposed transaction is expected to close in the fourth
quarter of calendar year 2000.
The following unaudited consolidated financial statements should be read in
conjunction with the historical consolidated financial statements and related
notes thereto of NUI and Virginia Gas. The accompanying financial statements
are not necessarily indicative of the financial position or operating results
that would have occurred had the proposed transactions been consummated on the
date, or at the beginning of the period, for which the proposed transactions
are being given effect nor are they necessarily indicative of future operating
results or financial position.
S-7
NUI CORPORATION AND SUBSIDIARIES AND VIRGINIA GAS COMPANY AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income (Unaudited)
For the Twelve Months Ended September 30, 1999
Twelve Months Ended September 30, 1999
----------------------------------------------------
NUI Virginia Gas* Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ------------- ----------- -----------
(In thousands, except share data)
Operating margins
Operating revenues.... $828,174 $9,019 $837,193
Less: Purchased gas
and fuel............. 621,363 3,450 624,813
Energy taxes....... 14,148 102 14,250
----------- ------ ------- -----------
192,663 5,467 198,130
----------- ------ ------- -----------
Other operating expenses
Operations and
maintenance.......... 100,490 3,049 103,539
Depreciation and
amortization......... 26,939 1,401 $(178)(1) 28,162
Restructuring and
other non-recurring
items................ (3,954) 1,262 (2,692)
Other taxes........... 9,101 244 9,345
Income taxes.......... 16,604 (84) 16,520
----------- ------ ------- -----------
149,180 5,872 (178) 154,874
----------- ------ ------- -----------
Operating income........ 43,483 (405) 178 43,256
Other income and
expense, net
Equity in earnings of
TIC Enterprises, LLC,
net.................. 1,223 1,223
Other................. 360 2,134 2,494
Income taxes.......... (554) (554)
----------- ------ ------- -----------
1,029 2,134 3,163
Interest expense........ 19,952 1,505 21,457
----------- ------ ------- -----------
Net income.............. $ 24,560 $ 224 $178 $ 24,962
=========== ====== ======= ===========
Net income per share of
common stock (basic and
diluted)............... $ 1.93 $ 1.84
Weighted average number
of shares of common
stock outstanding...... 12,715,300 816,013 13,531,313
- --------
* Virginia Gas has a December 31 fiscal year-end. For purposes of this pro
forma consolidated statement of income, the twelve months ended September 30,
1999, were utilized to correspond to NUI's fiscal year-end.
See accompanying Notes to the Unaudited Selected Pro Forma Consolidated
Financial Statements on Page S-11.
S-8
NUI CORPORATION AND SUBSIDIARIES AND VIRGINIA GAS COMPANY AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income (Unaudited)
For the Nine Months Ended June 30, 2000
Nine Months Ended June 30, 2000
-------------------------------------------------
NUI Virginia Gas Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ------------ ----------- ----------
(In thousands, except share data)
Operating margins
Operating revenues........ $712,724 $7,971 $720,695
Less: Purchased gas and
fuel..................... 531,359 3,442 534,801
Energy taxes............ 11,616 75 11,691
---------- ------ ------- ----------
169,749 4,454 174,203
---------- ------ ------- ----------
Other operating expenses
Operations and
maintenance.............. 80,281 2,714 82,995
Depreciation and
amortization............. 21,912 1,108 $(133)(1) 22,887
Other taxes............... 7,136 379 7,515
Income taxes.............. 18,759 89 18,848
---------- ------ ------- ----------
128,088 4,290 (133) 132,245
---------- ------ ------- ----------
Operating income............ 41,661 164 133 41,958
Other income and expense,
net
Equity in earnings of TIC
Enterprises, LLC, net.... 369 369
Other..................... 65 1,610 1,675
Income taxes.............. (152) (152)
---------- ------ ------- ----------
282 1,610 1,892
Interest expense............ 15,125 1,491 16,616
---------- ------ ------- ----------
Net income.................. $ 26,818 $ 283 $ 133 $ 27,234
========== ====== ======= ==========
Net income per share of
common stock (basic and
diluted)................... $ 2.08 $ 1.98
Weighted average number of
shares of common stock
outstanding................ 12,912,975 816,013 13,728,988
See accompanying Notes to the Unaudited Selected Pro Forma Consolidated
Financial Statements on Page S-11.
S-9
NUI CORPORATION AND SUBSIDIARIES AND VIRGINIA GAS COMPANY AND SUBSIDIARIES
Pro Forma Consolidated Balance Sheet (Unaudited)
As of June 30, 2000
June 30, 2000
---------------------------------------------------
NUI Virginia Gas Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ------------ ----------- ---------
(In thousands)
Assets
Utility plant
Utility plant, at original
cost..................... $808,619 $50,249 $858,868
Accumulated depreciation
and amortization......... (276,060) (4,749) (280,809)
Unamortized plant
acquisition adjustments.. 29,824 29,824
--------- ------- -------- ---------
562,383 45,500 607,883
--------- ------- -------- ---------
Funds for construction held
by trustee................. 29,758 29,758
--------- ------- -------- ---------
Investment in TIC
Enterprises, LLC, net...... 25,285 25,285
--------- ------- -------- ---------
Other investments........... 1,246 4,467 5,713
--------- ------- -------- ---------
Current assets
Cash and cash
equivalents.............. 1,445 898 2,343
Accounts receivable (less
allowance for doubtful
accounts of $1,987 and
$67, respectively)....... 102,015 1,017 103,032
Fuel inventories, at
average cost............. 20,014 182 20,196
Prepayments and other..... 66,866 212 67,078
--------- ------- -------- ---------
190,340 2,309 192,649
--------- ------- -------- ---------
Other assets
Regulatory assets......... 50,143 50,143
Deferred charges
(including goodwill)..... 15,609 12,897 $ (5,334)(1) 23,172
--------- ------- -------- ---------
65,752 12,897 (5,334) 73,315
--------- ------- -------- ---------
$874,764 $65,173 $ (5,334) $934,603
========= ======= ======== =========
Capitalization and
Liabilities
Capitalization
Common shareholders'
equity................... $258,880 $33,020 $(33,020)(1) $280,899
22,019 (1)
Long-term debt............ 268,938 210 30,000 (5) 299,148
--------- ------- -------- ---------
527,818 33,230 18,999 580,047
--------- ------- -------- ---------
Capital lease obligations... 2,639 2,639
--------- ---------
Current liabilities
Notes payable to banks and
current portion of long-
term debt................ 62,240 30,024 (30,000)(5) 62,264
Current portion of capital
lease obligations........ 1,286 1,286
Accounts payable, customer
deposits, and accrued
liabilities.............. 108,042 1,275 5,667 (2,3) 114,984
Overrecovered purchased
gas costs................ 8,229 8,229
Federal income and other
taxes.................... 19,969 (265) 19,704
--------- ------- -------- ---------
199,766 31,034 (24,333) 206,467
--------- ------- -------- ---------
Deferred credits and other
liabilities
Deferred federal income
taxes.................... 73,768 909 74,677
Unamortized investment tax
credits.................. 4,906 4,906
Environmental remediation
reserve.................. 33,560 33,560
Regulatory and other
liabilities.............. 32,307 32,307
--------- ------- -------- ---------
144,541 909 145,450
--------- ------- -------- ---------
$874,764 $65,173 $ (5,334) $934,603
========= ======= ======== =========
See accompanying Notes to the Unaudited Selected Pro Forma Consolidated
Financial Statements on Page S-11.
S-10
NOTES TO THE UNAUDITED SELECTED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Consideration and Estimated Negative Goodwill Related to the Merger
NUI will acquire all of the outstanding common stock of Virginia Gas for
$4.00 per share, payable through the issuance of approximately 816,000 shares
of common stock, based upon the June 30, 2000, closing price of its common
shares ($26.98), and the June 30, 2000, common shares outstanding of Virginia
Gas.
The estimated negative goodwill reflects the recognition of the excess
amount of the estimated fair value of the net assets to be acquired, including
costs to be incurred directly related to the merger, over the estimated
purchase price. The following represents the estimated negative goodwill
calculation:
Common shares of Virginia Gas outstanding at June 30, 2000.... 5,504,906
Share price................................................... $ 4
-----------
Purchase price................................................ $22,019,624
Estimated fair value of net assets to be acquired*............ (33,020,000)
-----------
(11,000,376)
Estimated transaction costs (See Note 2)...................... 751,000
Estimated restructuring and other costs (See Note 3).......... 4,915,795
-----------
Estimated negative goodwill................................... (5,333,581)
Amortization period........................................... 30
-----------
Estimated yearly amortization................................. $ (177,786)
===========
Estimated nine months amortization............................ $ (133,340)
===========
- --------
* For purposes of these pro-forma financial statements, it is assumed that the
carrying value (i.e., book value) of the assets and liabilities of Virginia
Gas approximates fair value. A detailed study of such assets and liabilities
will be conducted prior to the merger to refine the estimate of such fair
values.
A final determination of negative goodwill may also reflect certain purchase
accounting adjustments based on actuarial valuations related to employee
benefit plans, estimates with respect to the effect of consolidation of
certain corporate and administrative functions, possible asset sales and other
adjustments.
Note 2. Estimated Transaction Costs Associated with the Merger
NUI will incur direct expenses related to the merger, including accounting,
legal, investment banking and consulting fees. The pro forma adjustments
include an estimate for NUI's merger-related costs of $0.8 million, which has
served to reduce negative goodwill.
Note 3. Estimated Restructuring and Other Costs
Virginia Gas expects to incur direct expenses related to the merger,
including accounting, investment banking, legal and consulting fees of
approximately $1.0 million. In addition, Virginia Gas expects to incur expenses
of approximately $3.9 million for certain contractual obligations (e.g.,
"change in control" payments) and stock options that will be "cashed out."
These costs will be expensed as incurred by Virginia Gas and have served to
reduce the amount of estimated negative goodwill.
Note 4. Amortization of Negative Goodwill and Income Taxes
Negative goodwill will be amortized over a 30-year period. A tax provision
has not been made for the amortization of negative goodwill since it is not
taxable income.
Note 5. Reclassification of Long-Term Debt
NUI intends to refinance $30 million in debt previously classified as
current by Virginia Gas due to financial covenant defaults.
S-11
SELECTED CONSOLIDATED FINANCIAL INFORMATION
NUI--Before the Merger
The following table sets forth selected consolidated financial information
of NUI. The information set forth below was selected or derived from the
financial statements and notes thereto of NUI. The unaudited interim period
financial information, in the opinion of NUI, includes all adjustments
(consisting of normal recurring accruals, unless otherwise noted) necessary for
a fair presentation for the periods shown. Results for the nine months ended
June 30, 2000, are not necessarily indicative of results to be expected for the
full fiscal year. The information set forth below is qualified in its entirety
by and should be read in conjunction with the detailed information and
consolidated financial statements, including the notes thereto, incorporated by
reference in this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE
INFORMATION."
As of and For the
Nine Months Ended As of and For the Fiscal Year Ended
----------------- --------------------------------------------------
June 30, June 30, Sept. Sept. Sept. Sept. Sept.
2000 1999 30, 1999 30, 1998 30, 1997 30, 1996 30, 1995
-------- -------- -------- -------- -------- -------- --------
(In thousands, except per share data)
Operating revenues...... $712,724 $644,838 $828,174 $828,036 $608,596 $469,499 $376,884
Net income.............. 26,818 27,104(1) 24,560(1) 12,314(2) 19,649 14,896 5,517(3)
Net income per common
share.................. 2.08 2.13 1.93 0.98 1.75 1.52 0.60
Dividends paid per
common share........... 0.735 0.735 0.98 0.98 0.94 0.90 0.90
Total assets............ 874,764 821,067 844,226 776,847 803,665 677,662 610,165
Capital lease
obligations............ 2,639 1,788 2,599 8,566 9,679 10,503 11,114
Long-term debt.......... 268,938 268,902 268,911 229,098 229,069 230,100 222,060
Common shareholders'
equity................. $258,880 $242,154 $237,318 $222,992 $218,291 $179,107 $140,912
Weighted average common
shares outstanding..... 12,957 12,733 12,750 12,680 12,429 11,086 9,201
Notes to the Selected Consolidated Financial Information of NUI:
Note 1. Net income results for both the nine months ended June 30, 1999, and
the fiscal year ended September 30, 1999, include pension settlement
gains and other non-recurring items. The effect of these items
increased net income in both periods by $2.3 million (after tax), or
$0.18 per share.
Note 2. Net income for the fiscal year ended September 30, 1998, includes
restructuring and other non-recurring charges amounting to $5.9 million
(after tax), or $0.47 per share.
Note 3. Net income for the fiscal year ended September 30, 1995, includes
restructuring and other non-recurring charges amounting to $5.6 million
(after tax), or $0.61 per share.
S-12
Virginia Gas--Before the Merger
The following table sets forth selected consolidated financial information
of Virginia Gas. The information set forth below was selected or derived from
the financial statements and notes thereto of Virginia Gas. The unaudited
interim period financial information, in the opinion of Virginia Gas, includes
all adjustments (consisting of normal recurring accruals, unless otherwise
noted) necessary for a fair presentation for the periods shown. Results for the
six months ended June 30, 2000, are not necessarily indicative of results to be
expected for the full fiscal year. The information set forth below is qualified
in its entirety by and should be read in conjunction with the detailed
information and consolidated financial statements, including the notes thereto,
incorporated by reference in this proxy statement/prospectus. See "WHERE YOU
CAN FIND MORE INFORMATION."
As of and For
the Six Months
Ended As of and For the Fiscal Year Ended
------------------ -------------------------------------------------
June June Dec. Dec. Dec. Dec. Dec.
30, 30, 31, 31, 31, 31, 31,
2000 1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(In thousands, except per share data)
Operating revenues...... $ 5,591 $ 4,558 $ 9,403 $ 8,166 $ 7,898 $ 1,773 $ 1,494
Net income (loss)
available to common
shareholders........... 263 926(1) 1,006(1) (1,120)(2) 851 348 428
Net income (loss) per
common share........... 0.05 0.17 0.18 (0.20) 0.22 0.21 0.62
Dividends paid per
common share........... 0.00 0.04 0.04 0.07 0.07 0.02(4) 0.31(4)
Total assets............ 65,173 60,553 64,727 60,462 55,838 33,510 22,356
Long-term debt.......... 210(3) 24,254 210(3) 24,254 19,728 12,138 12,886
Common shareholders'
equity................. $33,020 $32,677 $32,757 $31,944 $33,315 $15,613 $ 3,705
Weighted average common
shares outstanding..... 5,505 5,505 5,505 5,505 3,943 1,638 696
Notes to the Selected Consolidated Financial Information of Virginia Gas:
Note 1. Net income results for both the six months ended June 30, 1999, and the
fiscal year ended December 31, 1999, include Virginia Gas's portion of
the gain on fixed asset sales by a 50 percent owned affiliate. The
effect of these items increased net income in both periods by $401,000
(after tax), or $0.07 per share.
Note 2. Net income for the fiscal year ended December 31, 1998, includes
restructuring and other non-recurring charges of $1.1 million (after
tax), or $0.21 per share. Net income for the fiscal year ended December
31, 1998, also includes Virginia Gas's portion of restructuring and
other non-recurring charges incurred by its two 50 percent owned
affiliates. These charges were $480,000 (after tax), or $0.09 per
share.
Note 3. Long-term debt as of December 31, 1999, and June 30, 2000, does not
include $24 million in debt that was classified as current due to a
debt covenant default.
Note 4. Amounts represent weighted average dividends per common share.
S-13
RISK FACTORS
In addition to the other information included or incorporated by reference
in this proxy statement/prospectus, you should consider carefully the matters
described below in determining whether to approve and adopt the merger
agreement.
Virginia Gas faces significant risks if the merger is not consummated.
The merger and the interim financing made available by NUI (up to $20
million) provide Virginia Gas with the opportunity to optimize the value of its
pipeline and storage assets and to do so without liquidation of its strategic
assets. However, if the merger is not completed, Virginia Gas faces the
following risks:
. Virginia Gas is not in compliance with certain covenants in its principal
debt agreements and, absent an alternative source of financing or a
conversion of a substantial portion of its assets to cash, Virginia Gas
has no present means of curing these covenant defaults, which has
resulted in Virginia Gas's independent auditor expressing uncertainty
regarding Virginia Gas's ability to continue as a going concern. Virginia
Gas's lenders have the right to demand the amounts due (approximately $33
million, including prepayment penalties) at any time. If the lenders
exercise their rights and seek remedies available to them under the loan
documents, NUI has the right to declare amounts outstanding under the
interim financing made available by NUI immediately due and payable. In
the event Virginia Gas's lenders or NUI demand repayment of the amounts
due from Virginia Gas, the forced liquidation or bankruptcy of Virginia
Gas may be necessary. In these circumstances, Virginia Gas stockholders
may lose their entire investment in Virginia Gas.
. The interim financing made available to Virginia Gas by NUI contemplates
that all outstanding amounts will become immediately due and payable in
the event that the merger agreement is terminated for any reason. In such
event, the forced liquidation or bankruptcy of Virginia Gas may be
necessary. In these circumstances, Virginia Gas stockholders may lose
their entire investment in Virginia Gas.
. While the interim financing made available by NUI is expected to provide
the resources initially required for expansion of the pipeline and
storage assets, additional amounts will be needed to complete these
projects to the degree and on the schedule that Virginia Gas's board
believes is necessary to optimize their value. It is unclear whether, on
what terms and how quickly Virginia Gas would be able to attract
additional capital if the merger does not take place.
We may not be able to complete the merger because we may not be able to
obtain the required regulatory approvals on satisfactory terms.
Before we complete the merger, we must make filings with and/or receive
approvals from the Virginia State Corporation Commission. A joint application
has been filed with the Virginia State Corporation Commission requesting that
the Commission review the merger and issue the necessary regulatory approvals.
Prior to the merger, NUI must also obtain, and has applied for, approvals from
regulatory authorities in certain other states in which NUI conducts its
business. While we do not believe that any other formal state public utility
commission approvals are required for the merger, NUI will continue to work
constructively with state regulators regarding their jurisdiction over NUI and
NUI Holding. Obtaining the required regulatory approvals could delay the
closing of the merger for a significant period of time after you have approved
and adopted the merger agreement at the annual meeting. We cannot assure you
that we will obtain the required regulatory approvals or, if obtained, whether
the terms and conditions of the approvals will be satisfactory.
Following NUI's holding company reorganization, dividends on NUI Holding
common stock will depend, in part, on the ability of its subsidiaries to pay
dividends.
In addition to the future financial performance of its subsidiaries, the
ability of NUI Holding's subsidiaries to pay dividends to NUI Holding will
continue to be subject to the limits imposed by:
. state law;
. the provisions of their respective charters and bylaws;
1
. the prior rights of holders of existing and any future preferred stock
issued by those subsidiaries;
. the prior rights of holders of existing and any future bonds issued by
those subsidiaries; and
. the prior rights of holders of existing and future long-term debt, and
other restrictions in connection with other liabilities of those
subsidiaries.
The common stock price of NUI (and NUI Holding following completion of NUI's
holding company reorganization) may fluctuate causing your investment in NUI
and NUI Holding to lose value.
NUI and NUI Holding common stock could experience in the future substantial
price volatility as a result of a number of factors, including the following:
. quarter to quarter variations in actual or anticipated financial results;
. acquisitions or other significant corporate developments;
. other announcements by NUI or NUI Holding, their competitors or their
customers;
. government regulations; and
. industry developments.
In addition, the stock market has experienced extreme price and volume
fluctuations, which have affected the market price of many companies and which,
at times, have been unrelated to the operating performance of the specific
companies whose stock is traded. Broad market fluctuations, as well as economic
conditions, both generally and in NUI's industries specifically, may adversely
affect the market price of NUI and NUI Holding common stock.
A CAUTION ABOUT FORWARD-LOOKING INFORMATION
This proxy statement/prospectus (including information incorporated by
reference) contains forward-looking statements relating to the financial
condition, results of operations, plans, objectives, future performance and
business of NUI, NUI Holding and Virginia Gas, as well as information relating
to the merger, including, without limitation, statements preceded by, followed
by or that include the words "believes," "expects," "anticipates," "estimates"
or similar expressions. These forward-looking statements involve risks and
uncertainties. Actual results may differ materially from those contemplated by
such forward-looking statements due to, among others, the risks described in
"RISK FACTORS," matters described in the documents incorporated by reference
and the following factors:
. governmental policies and regulatory actions including those of the
Federal Energy Regulatory Commission, the Environmental Protection
Agency, the Department of Energy, the SEC and the Virginia State
Corporation Commission;
. legislative and regulatory initiatives that impact the speed and degree
of industry restructuring of the electric utility and natural gas
industries;
. the ability of NUI or NUI Holding to obtain adequate and timely rate
recovery of costs and return on invested capital, including potential
stranded costs arising from industry restructuring and other necessary
regulatory approvals;
. general industry trends and the effects of vigorous competition from
other energy suppliers;
. changes in the economy of geographic regions served by NUI, NUI Holding
and Virginia Gas affecting customer growth and usage;
. customer business and economic conditions, including demand for their
products or services and supply of labor and materials used in creating
their products and services;
2
. weather conditions or catastrophic weather-related damage;
. market demand for energy;
. financial or regulatory accounting principles or policies enacted by the
Financial Accounting Standards Board, the SEC, the Federal Energy
Regulatory Commission and similar agencies with regulatory oversight;
. employee workforce factors, including loss or retirement of key
executives, collective bargaining agreements with union employees or work
stoppages; and
. technological developments resulting in competitive disadvantages and
creating the potential for impairment of existing assets.
These factors are difficult to predict. They also contain uncertainties that
may materially affect actual results and may be beyond the control of NUI, NUI
Holding or Virginia Gas. New factors may emerge from time to time and it is not
possible for us to predict new factors, nor can we assess the effect of any new
factors on either NUI, NUI Holding or Virginia Gas.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference in
this proxy statement/prospectus. Readers are cautioned not to place undue
certainty on these forward-looking statements, since any forward-looking
statement speaks only as of the date on which the statement was made. Neither
NUI, NUI Holding nor Virginia Gas undertakes any obligation to publicly release
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this proxy statement/prospectus or to reflect
the occurrence of unanticipated events. See "WHERE YOU CAN FIND MORE
INFORMATION."
3
THE ANNUAL MEETING
This proxy statement/prospectus and the accompanying proxy are being
furnished to Virginia Gas stockholders in connection with the solicitation of
the enclosed proxy by management on behalf of the Virginia Gas board for use at
the Annual Meeting of Stockholders to be held on November 8, 2000, at 10:00
a.m., local time, at Abingdon's Martha Washington Inn, 150 West Main Street,
Abingdon, Virginia 24210. This proxy statement/prospectus and the accompanying
proxy is being mailed to Virginia Gas stockholders on or about October 6, 2000.
What is the purpose of the annual meeting?
At Virginia Gas's annual meeting, stockholders will act upon the matters
described in the accompanying notice of meeting. This includes the election of
two directors and the approval and adoption of the merger agreement among
Virginia Gas, NUI and NUI's subsidiary. In addition, Virginia Gas's management
will report on the performance of Virginia Gas during fiscal 1999 and fiscal
2000 to date and respond to questions from stockholders.
Who is entitled to vote?
Only stockholders of record at the close of business on the record date,
September 29, 2000, are entitled to receive notice of and to vote at the
meeting, or any postponement or adjournment of the meeting. Each outstanding
share of common stock entitles its holder to cast one vote on each matter to be
voted upon.
Who can attend the meeting?
All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting. Cameras, recording devices and other electronic devices
will not be permitted at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Virginia Gas common stock outstanding on the record
date will constitute a quorum. A quorum is required for business to be
conducted at the meeting. If you submit a properly executed proxy card, even if
you abstain from voting, you will be considered part of the quorum. However,
abstentions are not counted in the tally of votes FOR or AGAINST a proposal. A
WITHHELD vote is the same as an abstention.
How do I vote?
Sign and date each proxy card you receive and return it in the enclosed
prepaid return envelope. If the enclosed proxy is properly signed and returned
to Virginia Gas, the shares represented thereby will be voted at the annual
meeting in accordance with its terms.
If you return your signed proxy card but do not mark the boxes showing how
you wish to vote, your shares will be voted FOR the election of the Virginia
Gas board nominees named in the proxy statement and FOR approval and adoption
of the merger agreement.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised at the meeting. Regardless of the way in
which you submitted your original proxy, you may change it by:
. returning a later-dated signed proxy card;
. delivering a written notice of revocation to the Corporate Secretary in
person, at 200 East Main Street, Abingdon, Virginia 24210 or c/o First
Union National Bank, 1525 West W.T. Harris Boulevard, 3C3, Charlotte,
North Carolina 28288-1153; or
. voting in person at the meeting.
4
What are the Virginia Gas board's recommendations?
The Virginia Gas board's recommendations are set forth after the description
of each item in this proxy statement/prospectus. In summary, the Virginia Gas
board recommends a vote:
. FOR approval and adoption of the merger agreement (see Proposal No. 1 on
page 6); and
. FOR election of the nominated directors (see Proposal No. 2 on page 46).
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Virginia Gas board.
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Virginia Gas board or, if no
recommendation is given, in their own discretion.
What vote is required to approve each item?
For Proposals No. 1 and 2, the affirmative vote of the holders of a majority
of the shares of Virginia Gas common stock entitled to vote on the record date
is required for approval. A properly executed proxy marked "ABSTAIN" with
respect to any item will not be voted, although it will be counted for purposes
of determining whether there is a quorum. Accordingly, an abstention will have
the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee will not be permitted to exercise voting discretion with
respect to the proposal to approve and adopt the merger agreement. Thus, if you
do not give your broker or nominee specific instructions, your shares will not
be voted on Proposal No. 1 and will not be counted in determining the number of
shares necessary for approval for that proposal. Shares represented by such
"broker non-votes" will, however, be counted in determining whether there is a
quorum.
Who will count the vote?
A representative of First Union, our independent stock transfer agent, will
count the votes and act as the inspector of election.
What does it mean if I receive more than one proxy card?
If your shares are registered differently and are in more than one account,
you may receive more than one proxy card. To ensure that all of your shares are
voted, sign and return all proxy cards. We encourage you to have all accounts
registered in the same name and address (whenever possible). You can accomplish
this by contacting our transfer agent, First Union, at (704) 590-7382.
How will voting on any other business be conducted?
Although we do not know of any business to be considered at the 2000 annual
meeting other than the proposals described in this proxy statement/prospectus,
if any other business is presented at the annual meeting, your proxy gives
authority to the persons named as proxy holders on the proxy card to vote on
such matters at their discretion.
Who pays for this proxy solicitation?
The expense of preparing, assembling, printing and mailing the form of proxy
and this proxy statement/prospectus will be shared equally by Virginia Gas and
NUI. Such expenses may also include the charges and expenses of banks,
brokerage houses and other custodians or fiduciaries to transmit the proxy
material to the beneficial owners of shares. Some Virginia Gas officers and
employees may solicit proxies personally, by telephone or by mail, and will not
be additionally compensated. The firm of Corporate Investor Communications,
Inc. has been retained to assist in the solicitation of proxies at a fee
estimated not to exceed $5,000, plus direct out-of-pocket expenses. Brokerage
houses, nominees and fiduciaries have been requested to forward proxy
soliciting material to the beneficial owners of the stock held of record by
them, and Virginia Gas will reimburse them for their charges and expenses.
5
PROPOSAL NO. 1: THE MERGER
The following description of the merger and the merger agreement does not
purport to be complete and is qualified in its entirety by reference to the
full text of the merger agreement, a copy of which is included in this proxy
statement/prospectus as Annex A.
Description of the Merger
Form of the Merger. NUI, a wholly-owned subsidiary of NUI and Virginia Gas
have entered into a merger agreement, which provides that, if all the
conditions set forth in the merger agreement are satisfied or waived, the NUI
subsidiary will merge with and into Virginia Gas. Virginia Gas will be the
surviving corporation in the merger. In the event that the NUI holding company
reorganization is completed prior to the completion of the merger, and at NUI's
election, the parties will amend the merger agreement to provide for the merger
of Virginia Gas with and into a wholly-owned NUI Holding subsidiary, with the
NUI Holding subsidiary surviving the merger.
Consideration to be Received in the Merger. On the date the merger becomes
effective, each issued and outstanding share of Virginia Gas common stock
(excluding shares of Virginia Gas common stock held by NUI) will be converted
into, and become exchangeable for, shares of NUI common stock having a market
value of $4.00. Shares of Virginia Gas common stock held by NUI will be
canceled.
The number of shares of NUI common stock that Virginia Gas stockholders will
receive will be based on the average trading price of NUI common stock during
the 20 trading-day period ending on the seventh trading day prior to the
closing of the merger.
In the event that the NUI holding company reorganization is completed prior
to the effective time of the merger, each issued and outstanding share of
Virginia Gas common stock (excluding shares of Virginia Gas common stock held
by NUI) will be converted into, and become exchangeable for, shares of NUI
Holding common stock having a market value of $4.00. The number of shares of
NUI Holding common stock to be received in the merger will be calculated in the
same manner described above using the price of NUI Holding common stock. See
"PENDING NUI HOLDING COMPANY REORGANIZATION."
Upon the conversion of the shares of Virginia Gas common stock pursuant to
the merger, no Virginia Gas common stock will be outstanding (other than shares
held by NUI). Each certificate representing Virginia Gas common stock will
thereafter represent only (1) the right to receive, upon surrender of the
certificate, the merger consideration and (2) with respect to NUI common stock
to be issued in exchange therefor, the right (a) to receive any dividends or
other distributions, without interest, with a record date at or after the date
the merger becomes effective and (b) to vote at any meeting of NUI or NUI
Holding shareholders the number of whole shares of NUI or NUI Holding common
stock represented by the certificate.
Background of the Merger
From 1987 to 1992, substantially all of Virginia Gas's income was derived
from exploration, development and production of natural gas and from fees
derived from managing natural gas wells. From 1993 to 1996, Virginia Gas's
income increased primarily as a result of the expansion of its natural gas
storage operations. In 1996 and 1997, Virginia Gas initiated its propane
distribution and gas marketing operations. Virginia Gas's propane distribution
operations have grown steadily since then. In 1998, Virginia Gas completed
construction of 35 miles of pipeline and began serving a local distribution
company with transmission services at two delivery points.
During 1998, Virginia Gas's business history, as well as industry
developments relating to deregulation and increased demand for energy services,
led it to conclude that substantial opportunity existed if Virginia Gas could
expand into new markets and better develop its current markets. Virginia Gas
began positioning itself for
6
expansion of its pipeline and storage assets, including possible significant
extension of its pipeline into eastern Virginia. These activities included
exploring sources of additional external capital for the pipeline extension and
related gas storage expansion.
In mid-1998, Virginia Gas retained CIBC World Markets Corp. to assist it in
connection with these initiatives. These efforts were not successful and in the
fall of 1998, the Virginia Gas board determined to focus on a less extensive
project, that is, the extension of its pipeline to Roanoke, Virginia, and
related storage capacity expansion at Saltville, Virginia.
In the spring of 1999, Virginia Gas retained Wachovia Securities, Inc. to
assist with the development of additional financing sources for the Roanoke
expansion (other than through a public offering of equity securities, which the
Virginia Gas board had determined would not be timely). Wachovia Securities
assisted Virginia Gas in preparing an offering memorandum for potential
financing sources and facilitated a road-show for potential investors in the
summer of 1999. These efforts were also unsuccessful.
Meanwhile, in June 1999, Virginia Gas re-engaged CIBC to assist Virginia Gas
in developing strategic alternatives. At approximately the same time, Virginia
Gas received an unsolicited inquiry from a publicly-held energy company that
indicated a possible interest in acquiring Virginia Gas. However, following due
diligence, this company declined to make an offer. In connection with
identifying possible transactions for the sale of Virginia Gas or its assets,
CIBC identified and contacted 166 prospective bidders between August 1999 and
February 2000. CIBC received 23 executed confidentiality agreements from
prospective bidders. Each of the prospective bidders that executed a
confidentiality agreement was provided a Confidential Information Memorandum
that presented an overview of Virginia Gas's financial and operating
performance. CIBC received and forwarded to Virginia Gas indications of
interest from nine prospective bidders that took several forms, including (1)
the sale of all of Virginia Gas's outstanding common stock, (2) the sale of all
of Virginia Gas's assets and (3) the sale of a portion of Virginia Gas's
assets.
At the regular meeting of the Virginia Gas board held on November 3, 1999,
CIBC made a presentation to Virginia Gas's directors on the continued strategic
options available to Virginia Gas. At that time, the Virginia Gas board
determined that none of the indications of interest that had been received to
date represented sufficient value. In particular, none of these indications of
interest exceeded the then-current market value of the Virginia Gas common
stock. The Virginia Gas board was advised at this meeting that a Virginia Gas
management group may have been interested in making a proposal for the purchase
of Virginia Gas. Consequently, the Virginia Gas board formed a special
committee to work with CIBC for further consideration of Virginia Gas's
strategic alternatives.
On December 6, 1999, a management group presented a preliminary, non-binding
indication of interest to the Virginia Gas board for consideration. Under the
management group proposal, each Virginia Gas stockholder, other than members of
the management group and certain other stockholders that indicated an interest
in joining the group, would be offered $4.00 in cash for each share of Virginia
Gas common stock that they owned. This amount represented a 33 percent premium
to the closing price of Virginia Gas's common stock on the day the proposal was
made.
The management group proposal was subject to a number of conditions,
including obtaining acceptable financing. In February 2000, the Virginia Gas
board provided the management group until mid-March 2000 to obtain a financing
commitment and submit a draft definitive agreement. The management group was
unsuccessful in obtaining a financing commitment in this time frame.
Since no firm interim or long-term financing had been located for Virginia
Gas's expansion projects and it was anticipated that approximately $6 million
in debt needed to be repaid by July 1, 2000, on February 22, 2000, the Virginia
Gas board determined that Virginia Gas should investigate the potential sale of
its propane, natural gas exploration and distribution operations. Any sale of
these operations required approvals from
7
Virginia Gas's senior lenders and the 50 percent stockholder of the
distribution entity. Efforts were made by management and CIBC to locate
potential purchasers for these specific operations.
NUI's corporate development program has included an ongoing relationship
with the investment banking firm of Berenson, Minella & Co. In early February
2000, Berenson was notified by CIBC that Virginia Gas was seeking prospective
purchasers for some or all of Virginia Gas's operations. Berenson informed NUI
management of this contact by CIBC, and NUI management requested Berenson to
inform CIBC of NUI's interest in Virginia Gas. As a result of these contacts,
in mid-February 2000, NUI executed a confidentiality agreement with Virginia
Gas and commenced a preliminary review of due diligence materials provided by
CIBC. In addition to reviewing these due diligence materials, NUI management,
as well as Berenson, held discussions with management representatives of
Virginia Gas regarding its operations. On March 13, 2000, NUI submitted a
preliminary, non-binding indication of interest to the Virginia Gas Board with
a value in the range of $3.25-$3.75 per share of Virginia Gas common stock.
By letters dated March 15, 20, and 22, 2000, another publicly-held energy
company submitted a series of preliminary, non-binding indications of interest
for the acquisition of Virginia Gas's Early Grove and Saltville gas storage
fields and Virginia Gas's 35 mile intrastate pipeline system, subject to
certain terms and conditions. The final proposal for these assets, made on
March 22, 2000, was $52 million pre-tax (consisting of the assumption of
approximately $31 million in long term-debt, with the remainder payable to
Virginia Gas in cash). The proposal was contingent, among other things, upon
Virginia Gas's acquisition, at its own expense, of the 50 percent interest in
the storage company that it did not own and Virginia Gas's agreement to deal
exclusively with the bidder regarding the sale of the assets until April 17,
2000.
On March 24, 2000, NUI modified its non-binding proposal to acquire Virginia
Gas in a transaction in which Virginia Gas stockholders would receive $4.00 of
value for each Virginia Gas common share that they owned. Representatives of
NUI indicated their willingness to structure the transaction as a stock-for-
stock exchange or offer Virginia Gas stockholders a combination of both cash
and stock. NUI's proposal was contingent upon the successful renegotiation of
the employment agreement with Michael L. Edwards, Virginia Gas's President and
Chief Executive Officer, and favorable results of a due diligence
investigation.
On March 24, 2000, Virginia Gas learned through CIBC that another publicly
held energy company had indicated an interest in purchasing Virginia Gas in a
transaction in which Virginia Gas stockholders would receive $3.25 of value for
each Virginia Gas common share that they owned. Consideration would be in the
form of the other company's stock or cash or a combination of cash and stock.
This proposal was never confirmed in writing.
The Virginia Gas board determined on March 28, 2000, that the best interests
of Virginia Gas and its stockholders would be served by pursuing the March 24,
2000, NUI non-binding proposal to purchase all of Virginia Gas's outstanding
common stock. Before deciding to proceed with negotiations with NUI, the
Virginia Gas board considered, on a fully informed basis, the likely
consequences of Virginia Gas continuing to operate as an independent entity and
all indications of interest that it had received regarding the acquisition of
the stock or assets of Virginia Gas or its affiliates. The Virginia Gas board
also obtained an independent preliminary financial and tax analysis of the
proposed transactions. The Virginia Gas board believed the NUI proposal was
superior to all other alternatives for several reasons. A great deal of
uncertainty surrounded Virginia Gas continuing to operate independently. No
financing had been obtained for the management buyout proposal. The $3.25
proposal had not been confirmed and was at a lower price per share than the NUI
proposal. Finally, the NUI proposal appeared superior to the proposal to
purchase solely the storage and pipeline assets because the asset purchase
proposal (1) required Virginia Gas to continue to operate and ultimately to
liquidate its other assets with no certainty as to price or timing, (2)
required the purchase of the 50 percent interest in the storage company with no
certainty as to price or timing, (3) required the payment of taxes at the
corporate level as well
8
as the stockholder level, (4) required exclusive negotiations with the bidder
and (5) delivered less economic value to Virginia Gas stockholders than the NUI
proposal, under a best case analysis.
Virginia Gas appointed a special negotiation committee for the purpose of
conducting good faith discussions with NUI in an attempt to reach a definitive
agreement for the sale of all outstanding shares of Virginia Gas common stock
to NUI. The special negotiation committee was comprised of representatives from
CIBC, Virginia Gas's legal advisors and Virginia Gas's management team.
Negotiations relating to the proposed transaction with NUI continued during
April and early May 2000. NUI negotiated directly with Mr. Edwards regarding
his employment contract and, while not a condition to its proposal, NUI also
discussed the purchase of the 50 percent interests not owned by Virginia Gas in
the distribution and storage companies with the owner of those interests.
On April 28, 2000, NUI's legal advisors provided an initial draft of the
merger agreement to Virginia Gas and its legal and financial advisors. On May
16, 2000, CIBC reported to the Virginia Gas board that both management and
counsel for Virginia Gas had provided comments on the draft merger agreement
and that CIBC anticipated a response from NUI in the near future. An agreement
had been reached by NUI with Mr. Edwards concerning his employment contract,
but no agreement was reached by NUI to purchase the 50 percent interests not
owned by Virginia Gas in the distribution and storage companies.
On May 22, 2000, Virginia Gas's legal advisors met with a representative of
NUI and NUI's legal advisors to negotiate the terms of the merger agreement,
including the scope of representations and warranties, the conditions to
closing, the treatment of outstanding Virginia Gas stock options in the
transaction, events permitting either party to terminate the transaction, the
circumstances under which the parties would be required to pay a termination
fee and the size of such fee.
From June 1 through June 12, 2000, representatives of Virginia Gas and its
legal advisors had a series of telephone conversations with representatives of
NUI and its legal advisors concerning certain unresolved issues related to the
draft merger agreement. Certain of those issues were resolved by June 12, 2000,
while negotiations related to other issues, primarily relating to the terms of
any interim financing, the status of the agreement for the expansion of the
Saltville facility and certain environmental matters, continued through
execution of the merger agreement.
On June 13, 2000, the Virginia Gas board convened to discuss and further
evaluate the NUI offer and the proposed definitive merger agreement. After
considering detailed reports from Virginia Gas's management and legal advisors,
and following the receipt of the opinion of CIBC that the NUI merger proposal
was fair to Virginia Gas's stockholders from a financial point of view, and
after thoroughly reviewing the proposed merger agreement between Virginia Gas
and NUI, the Virginia Gas board voted unanimously to enter into the merger
agreement and to recommend that Virginia Gas's stockholders vote to approve and
adopt the merger agreement.
Late in the evening on June 13, 2000, the agreement for the expansion of the
Saltville facility was signed and NUI and Virginia Gas entered into the merger
agreement. On June 14, 2000, NUI and Virginia Gas publicly announced that they
had entered into a definitive merger agreement providing for the merger of a
wholly-owned NUI subsidiary into Virginia Gas.
Reasons of Virginia Gas for the Merger
At its meeting on June 13, 2000, the Virginia Gas board voted unanimously to
enter into the merger agreement and to recommend to Virginia Gas's stockholders
to vote to approve and adopt the merger
9
agreement. The Virginia Gas board made its determination after careful
consideration of, and based on, a number of factors, including the following
material factors:
. Virginia Gas's belief that the merger will:
-- provide access to the capital needed to complete pipeline and storage
expansion deemed necessary by the Virginia Gas board for serving the
best interests of Virginia Gas and its stockholders;
-- provide the capital needed to comply with its financial covenants
and/or refinance existing Virginia Gas indebtedness;
-- enable the combined company to provide better service to Virginia
Gas's customers;
-- provide access to new markets for Virginia Gas's natural gas storage
services;
-- allow Virginia Gas stockholders to participate in future growth
through their ownership in the combined business;
. that the merger consideration of $4.00 per share of Virginia Gas common
stock would provide Virginia Gas stockholders with a premium of
approximately 37 percent over the closing sales price of Virginia Gas
common stock on June 13, 2000, the last trading day prior to the
announcement of the merger, and a premium of approximately 47 percent
over the average closing sales price of Virginia Gas common stock during
the 20 trading days prior to the announcement of the merger;
. the relative resources of Virginia Gas as compared to other providers in
the marketplace, including access to capital, marketing experience and
geographic territory;
. a review of the possible alternatives to the transactions contemplated by
the merger agreement, including the possibilities of continuing to
operate Virginia Gas as an independent entity and a sale or partial sale
of Virginia Gas through a merger or by other means and, with respect to
each alternative, the range of possible benefits to Virginia Gas's
stockholders of such alternative and the timing and likelihood of
accomplishing such alternative;
. the views of management and CIBC regarding the likelihood of other
potential offers for Virginia Gas on terms more favorable to Virginia Gas
stockholders than the merger;
. the views of Virginia Gas's management regarding the likelihood and terms
of other alternatives for access to capital, including the cost and
timing of such alternatives;
. the financial and valuation analyses presented to the Virginia Gas board
by CIBC, including market prices and financial data relating to other
companies engaged in businesses considered comparable to Virginia Gas and
the prices and premiums paid in recent selected acquisitions of companies
engaged in businesses considered comparable to Virginia Gas;
. the written opinion of CIBC that, based on certain assumptions and
subject to certain limitations described below under "--Opinion of
Virginia Gas's Financial Advisor," the consideration to be received by
Virginia Gas's stockholders pursuant to the merger agreement is fair to
Virginia Gas stockholders from a financial point of view;
. the likelihood that the merger would be consummated, including the
experience and financial condition of NUI, and the risks to Virginia Gas
if the merger was not consummated following its public announcement;
. the amount of consideration to be received in the merger by Virginia Gas
stockholders and information on the historical trading ranges of Virginia
Gas common stock; and
. that the merger would be a tax-free transaction for federal income tax
purposes, as described below under "--Material Federal Income Tax
Consequences."
10
In view of the number and wide variety of factors considered in connection
with its evaluation of the merger, and the complexity of these matters, the
Virginia Gas board did not find it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors it
considered. In addition, the Virginia Gas board did not undertake to make any
specific determination as to whether any particular factor was favorable or
unfavorable to the Virginia Gas board's ultimate determination or assign any
particular weight to any factor but, rather, conducted an overall analysis of
the factors described above, including considering the information, opinions,
reports and statements presented by Virginia Gas's management and its legal and
financial advisors. In considering the foregoing factors, individual members of
the Virginia Gas board may have given different weight to different factors.
The Virginia Gas board determined that these factors, considered in their
entirety, were favorable to and supported its determination.
The Virginia Gas board believes that the merger agreement is in your and
Virginia Gas's best interests and unanimously recommends that you
vote "FOR" the approval and adoption of the merger agreement
.
Reasons of NUI for the Merger
NUI believes that the acquisition of Virginia Gas is consistent with its
strategy of developing businesses that complement and enhance the value of
NUI's existing businesses. Virginia Gas's existing and potential natural gas
storage and pipeline assets should provide NUI with the ability to capitalize
upon energy trading opportunities, through its trading and energy management
subsidiary, in an area of the United States where natural gas is typically in
high demand and capacity is generally constrained. Virginia Gas's propane and
natural gas distribution businesses should complement NUI's residential and
commercial energy delivery operations in an efficient and profitable manner.
NUI believes that its financial resources will provide Virginia Gas the capital
needed to fully develop Virginia Gas's natural gas storage and pipeline assets
and to take advantage of the business opportunities noted above.
Opinion of Virginia Gas's Financial Advisor
On June 13, 2000, CIBC delivered its written opinion to Virginia Gas's board
that, as of the date of its opinion, the exchange ratio for the merger was fair
from a financial point of view to Virginia Gas stockholders. CIBC confirmed and
updated its June 13, 2000, opinion by delivering a written opinion to the
Virginia Gas board on October 3, 2000.
WE HAVE ATTACHED AS ANNEXES B AND C TO THIS PROXY STATEMENT/PROSPECTUS, AND
INCORPORATE BY REFERENCE, THE FULL TEXT OF CIBC'S WRITTEN OPINIONS, DATED JUNE
13, 2000, AND OCTOBER 3, 2000, RESPECTIVELY. THE OPINIONS DESCRIBE THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN
IN CONNECTION WITH THE OPINIONS. WE URGE YOU TO READ THE OPINIONS IN THEIR
ENTIRETY. CIBC'S OPINIONS DO NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
VIRGINIA GAS COMMON STOCK AS TO HOW SUCH HOLDER SHOULD VOTE AT THE VIRGINIA GAS
ANNUAL MEETING. CIBC EXPRESSES NO OPINION AS TO THE PRICE AT WHICH NUI COMMON
STOCK WILL TRADE FOLLOWING CONSUMMATION OF THE PROPOSED MERGER. CIBC'S OPINION,
DATED JUNE 13, 2000, AND PRESENTATION TO THE VIRGINIA GAS BOARD ON SUCH DATE
WERE AMONG MANY FACTORS TAKEN INTO CONSIDERATION BY VIRGINIA GAS'S BOARD IN
MAKING ITS DECISION TO APPROVE AND RECOMMEND THE MERGER AS CONTEMPLATED IN THE
MERGER AGREEMENT.
In connection with its opinion, CIBC, among other things:
. reviewed the merger agreement;
. reviewed Virginia Gas's audited financial statements for the fiscal years
ended December 31, 1998, and 1999, and Virginia Gas's unaudited financial
statements for the three months ended March 31, 2000;
11
. reviewed financial projections of Virginia Gas prepared by Virginia Gas
and its management;
. reviewed historical market prices and trading volume for Virginia Gas
common stock;
. held discussions with senior management of Virginia Gas with respect to
the business and prospects for future growth of Virginia Gas;
. reviewed and analyzed certain publicly available financial data for
certain companies that CIBC deemed comparable to Virginia Gas;
. performed discounted cash flow analyses of Virginia Gas using certain
assumptions of future performance provided to CIBC by the management of
Virginia Gas;
. reviewed and analyzed certain publicly available financial information
for transactions that CIBC deemed comparable to the merger; and
. reviewed public information concerning Virginia Gas.
CIBC also held discussions with members of the senior management of Virginia
Gas and NUI regarding the strategic rationale for, and the potential benefits
of, the transactions contemplated by the merger agreement and the past and
current business operations, financial condition and future prospects of their
respective companies. In addition, CIBC performed such other studies and
analyses and took into account such other matters as it considered appropriate.
CIBC relied upon the accuracy and completeness of all of the financial and
other information provided to it by Virginia Gas and has assumed the accuracy
and completeness of this information for purposes of rendering its opinion.
CIBC's review of NUI's future financial performance for purposes of rendering
its opinion was limited to discussions with NUI's management and a review of
various research analysts' estimates of NUI's future financial performance. In
addition, CIBC has not made an independent evaluation or appraisal of the
assets and liabilities of Virginia Gas or NUI or any of their subsidiaries and
CIBC has not been furnished with any such evaluation or appraisal. CIBC also
assumed, with the consent of Virginia Gas, that the transaction contemplated by
the merger agreement will be accounted for using the purchase method under
generally accepted accounting principles. CIBC provided its opinion for the
information and assistance of the Virginia Gas board in connection with its
consideration of the transaction contemplated by the merger agreement. CIBC's
opinion does not constitute a recommendation as to how any Virginia Gas
stockholder should vote with respect to the merger agreement proposal.
The following is a summary of the material financial analyses used by CIBC
in connection with providing its opinion to the Virginia Gas board on June 13,
2000. Some of the summaries of financial analyses include information presented
in tabular format. In order to more fully understand the financial analyses
used by CIBC, the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the financial
analyses.
Historical Exchange Ratio Analysis. CIBC compared historical ratios of the
closing price or average closing trading prices for Virginia Gas common stock
to the closing price or average closing trading prices for NUI common stock for
the period from June 11, 1999, to June 13, 2000. CIBC then calculated the
premium in the merger that would have resulted using the exchange ratio in the
merger. These calculations produced the following results for the average
closing trading prices for the one month, three month and six month trading
periods preceding June 13, 2000.
One Month Three Month Six Month
Trading Period Trading Period Trading Period
-------------- -------------- --------------
Ratio of Virginia Gas common
stock to NUI common stock....... 0.0986 0.1059 0.1128
Premium.......................... 46.4% 36.4% 28.3%
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Comparable Companies Analysis. CIBC compared financial, operating and stock
market data of Virginia Gas to corresponding data of publicly traded natural
gas transmission and storage companies. The companies evaluated were Columbia
Energy Group, Markwest Hydrocarbon, Midcoast Energy Resources, National Fuel
Gas, TransMontaigne Oil Co. and Western Gas Resources. CIBC reviewed equity
value as multiples of estimated earnings per share and cash flow per share for
calendar years 2000 and 2001 and enterprise value as multiples of estimated
calendar years 2000 and 2001 earnings before interest, taxes, depreciation and
amortization, commonly referred to as EBITDA. All multiples were based on
closing stock prices on June 7, 2000. Estimated financial data for the selected
companies was based on publicly available research analysts' estimates and
estimated financial data for Virginia Gas was based on estimates provided by
Virginia Gas's management. CIBC then applied a range of selected multiples for
the selected companies to corresponding data of Virginia Gas. This analysis
indicated an implied equity reference range for Virginia Gas of less than $0.00
per share to approximately $3.89 per share, with an average of $1.11 per share.
Selected Transactions Analysis. Using publicly available information, CIBC
analyzed the implied purchase prices and transaction multiples paid in 27
merger and acquisition transactions in the natural gas transmission and storage
industry since September 1997. CIBC compared the transaction values implied by
the purchase prices as multiples of latest 12 months EBITDA. All multiples were
based on financial information available at the time each transaction was
announced. CIBC then applied a range of selected multiples for the selected
transactions to corresponding financial data of Virginia Gas. This analysis
indicated an implied equity reference range for Virginia Gas of less than $0.00
per share to approximately $4.70 per share, with an average of $1.33 per share.
No company or transaction used in the above comparable companies analysis or
selected transactions analysis is identical to Virginia Gas or the proposed
merger. Accordingly, an analysis of the results of these analyses involves
complex considerations of the companies involved and the transactions and other
factors that could affect the public trading value and acquisition value of the
companies and Virginia Gas.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis based
on forecasts provided by Virginia Gas's management, CIBC estimated the present
value of the future streams of cash flows that Virginia Gas could produce
during the four fiscal years ending December 31, 2003. In this analysis, CIBC
estimated the terminal value based on multiples of 8.0 to 12.0 times Virginia
Gas's estimated EBITDA for the twelve months ended December 31, 2003. The free
cash flows and terminal values were discounted to present values using rates of
10 percent, 11 percent and 12 percent. After deducting debt from, and adding
back cash to, the present value of free cash flows and terminal values, this
analysis produced a range of per common share equity values for Virginia Gas
common stock of approximately $0.53 to $3.02 per share, with an average of
$1.74 per share.
Contribution Analysis. CIBC utilized estimates for the future financial
performance of Virginia Gas and NUI to calculate the relative contributions of
Virginia Gas and NUI to the pro forma combined company with respect to
revenues, EBITDA and net income for the two years ending December 31, 2001.
CIBC calculated the contributions based on management estimates for the future
financial performance of Virginia Gas and based on third party analyst
estimates for the future financial performance of NUI. CIBC also reviewed the
pro forma stock ownership of the combined company.
2000 2001
---- ----
Virginia Gas contribution:
Percentage of combined revenues.................................... 4.8% 4.6%
Percentage of combined EBITDA...................................... 2.9% 3.1%
Percentage of combined net income.................................. 0.4% 0.3%
Pro forma stock ownership:
Virginia Gas....................................................... 5.8%
NUI................................................................ 94.2%
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Pro Forma Merger Analysis. CIBC analyzed the potential pro forma effect of
the merger on NUI's estimated earnings per share in fiscal years 2000 and 2001,
based on estimates provided by Virginia Gas and publicly available research
analysts' estimates for NUI. Based on the exchange ratio in the merger, this
analysis indicated that, without synergies, the proposed merger would be
dilutive to NUI's earnings per share in fiscal years 2000 and 2001. The actual
results achieved by the combined company may vary from projected results and
the variations may be material.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying CIBC's opinion. In arriving at its fairness determination, CIBC
considered the results of all of these analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to Virginia Gas or
NUI or the contemplated transaction. CIBC prepared the analyses solely for
purposes of allowing it to provide its opinion to the Virginia Gas board as to
the fairness, from a financial point of view, of the exchange ratio for the
merger to Virginia Gas stockholders and these analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses. Because such analyses
are inherently subject to uncertainty, as they are based upon numerous factors
or events beyond the control of the parties or their respective advisors, none
of Virginia Gas, NUI, NUI Holding, CIBC or any other person assumes
responsibility if future results are materially different from those
forecasted. CIBC did not attribute any particular weight to any analysis
considered by it, but rather made judgments as to the significance and
relevance of such analysis. As described above, CIBC's opinion was one of many
factors taken into consideration by the Virginia Gas board in making its
determination to approve the merger agreement. The foregoing summary describes
material financial analyses used by CIBC in connection with providing its
opinion to the Virginia Gas board on June 13, 2000, but does not purport to be
a complete description of the analyses performed by CIBC in connection with its
opinion and is qualified by reference to the CIBC opinion set forth in Annex B
hereto.
As part of its investment banking business, CIBC is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities and other purposes. Virginia
Gas selected CIBC as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the merger.
CIBC provides a full range of financial, advisory and brokerage services and
in the course of its normal trading activities may from time to time effect
transactions and hold positions in the securities or options on securities of
Virginia Gas and/or NUI for its own account and for the account of its
customers.
Pursuant to its engagement letter, dated June 21, 1999, Virginia Gas engaged
CIBC to act as its financial advisor in connection with the contemplated
transaction. Pursuant to the terms of the engagement letter, Virginia Gas has
agreed to pay CIBC a fee equal to 1.25 percent of the transaction value as
defined in the engagement letter. Assuming the merger is consummated at an
exchange ratio based on $4.00 per share, CIBC estimates that its fee will total
approximately $650,000. Virginia Gas has further agreed to reimburse CIBC for
its reasonable out-of-pocket expenses, including attorneys' fees, and to
indemnify CIBC against specified liabilities, including liabilities under the
federal securities laws. In the opinion of the SEC, indemnification for
liabilities arising under the federal securities laws may not be enforceable.
The Effective Time of the Merger
The merger will be effected by the filing, at the time of the closing of the
merger, of a certificate of merger with the Delaware Secretary of State in
accordance with the provisions of the Delaware General Corporation Law. The
merger will become effective at the time the certificate of merger is filed
with the Delaware Secretary of State or at a later date or time specified in
the certificate of merger.
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The closing of the merger will take place on the third business day
following satisfaction or waiver of all of the conditions to consummation of
the merger or on such other date to which NUI and Virginia Gas may mutually
agree. See "--Conditions to the Merger." We anticipate that the merger will be
completed during the fourth quarter of 2000.
Exchange of Certificates
Immediately prior to the effective time of the merger, NUI or NUI Holding,
as applicable, will deposit in trust with American Stock Transfer & Trust
Company (the exchange agent for the merger), for the benefit of holders of
Virginia Gas common stock, (1) certificates representing the number of shares
of NUI or NUI Holding common stock to be issued as merger consideration
pursuant to the merger agreement and (2) any cash to be paid in lieu of
fractional shares. Promptly after the effective time of the merger, the
exchange agent will mail to each holder of record of Virginia Gas common stock
a transmittal form to be used in forwarding certificates representing shares of
Virginia Gas common stock to the exchange agent. The transmittal form will be
accompanied by instructions specifying how to exchange Virginia Gas common
stock for the merger consideration. YOU SHOULD NOT SEND IN YOUR CERTIFICATES
UNTIL YOU RECEIVE A TRANSMITTAL FORM.
Upon surrender of each certificate representing shares of Virginia Gas
common stock with the completed transmittal form, the exchange agent will pay
to the holder of that certificate, as soon as practicable after the effective
time of the merger, the merger consideration (including cash in lieu of
fractional shares) and that certificate will then be canceled. At the effective
time of the merger, certificates representing shares of Virginia Gas common
stock (other than shares held by NUI) will represent solely the right to
receive the merger consideration (including cash in lieu of fractional shares).
No interest will be paid or accrue on the merger consideration.
After the effective time of the merger, there will be no transfers on the
stock transfer books of Virginia Gas of any shares of Virginia Gas common
stock. If, after the effective time of the merger, certificates formerly
representing shares of Virginia Gas common stock are presented to the exchange
agent or Virginia Gas, as the case may be, they will be canceled and (subject
to applicable abandoned property, escheat and similar laws) exchanged for
merger consideration (and cash in lieu of fractional shares), as provided
above.
Neither NUI nor NUI Holding, as applicable, will issue any fractions of a
share as merger consideration. Instead, Virginia Gas stockholders will receive
in cash the value of any fractions of a share that they would otherwise have
been entitled to receive in the merger. A stockholder's cash payment in lieu of
a fractional share will be equal to the product of (1) the average trading
price of NUI or NUI Holding common stock, as appropriate, during the 20
trading-day period ending on the seventh trading day prior to the closing of
the merger and (2) the fractional interest to which the stockholder would
otherwise be entitled.
Virginia Gas stockholders will not be entitled to receive any dividends or
other distributions payable by NUI or NUI Holding until they exchange their
Virginia Gas stock certificates for certificates representing shares of NUI or
NUI Holding common stock. Once they deliver their Virginia Gas stock
certificates to the exchange agent, Virginia Gas stockholders will, subject to
applicable laws, receive any accumulated dividends and distributions, without
interest.
Any merger consideration deposited with the exchange agent that has remained
unclaimed by Virginia Gas stockholders for one year after the effective time of
the merger will be returned to NUI or NUI Holding. Thereafter, Virginia Gas
stockholders that have not previously complied with the exchange procedures
pursuant to the merger agreement may look only to NUI or NUI Holding for
payment of any merger consideration upon surrender of their certificates of
Virginia Gas common stock.
The exchange agent, NUI or NUI Holding will be entitled to deduct and
withhold from the merger consideration any amounts that the exchange agent, NUI
or NUI Holding is required to deduct and withhold
15
under applicable tax laws. Any amounts so withheld will be treated for all
purposes of the merger agreement as having been paid to the holder of the
shares of Virginia Gas common stock in respect of which the deduction and
withholding has been made.
Treatment of Virginia Gas Stock Options and Warrants
As a condition to closing the merger, the merger agreement requires Virginia
Gas to obtain amendments to all outstanding stock option agreements. These
amendments have been obtained and provide, as required by the merger agreement,
that:
. stock options that have a per share exercise price equal to $4.125 will
be terminated as of the effective time of the merger and converted into
the right to receive $1.00 in cash from NUI or NUI Holding, as
applicable; and
. each other Virginia Gas stock option will be canceled as of the effective
time of the merger.
In the event that the NUI holding company reorganization is not completed
prior to the completion of the merger and the NUI subsidiary is merged with and
into Virginia Gas, all outstanding and unexercised warrants to purchase
Virginia Gas common stock will remain outstanding in accordance with their
terms following the merger. In such a case, NUI expects to use its best efforts
to purchase and cancel the outstanding warrants.
In the event that the NUI holding company reorganization is completed prior
to the completion of the merger and Virginia Gas is merged with and into the
NUI subsidiary, all outstanding and unexercised warrants to purchase Virginia
Gas common stock shall be automatically converted into the right to receive,
upon exercise, the number of shares of NUI Holding common stock that the
warrant holder would have received pursuant to the merger if the warrant holder
had exercised the warrant just prior to the merger.
No Solicitation of Transactions by Virginia Gas
Prior to the merger becoming effective, Virginia Gas has agreed not to
solicit, initiate, facilitate or encourage any inquiries or the making of any
proposal with respect to any merger, consolidation or other business
combination and not to negotiate, explore or otherwise engage in discussions
with any person other than NUI with respect to any merger, consolidation or
other business combination, or which may reasonably be expected to lead to a
proposal for a merger, consolidation or other business combination. Virginia
Gas has also agreed to provide NUI with detailed information about any
inquiries or proposals, or indications of desire to make a proposal, that it
receives with respect to a merger, consolidation or other business combination.
Virginia Gas may, however, engage in discussions with and furnish
information to a third party in response to an unsolicited written proposal
from a third party regarding a merger, consolidation or other business
combination that the Virginia Gas board has determined, in good faith and in
the exercise of reasonable judgment, after consultation with its financial
advisors, is at a higher price and more favorable to Virginia Gas and its
stockholders than the merger, but only if the Virginia Gas board determines in
good faith, after consultation with its financial advisors and outside
independent counsel, that the failure to do so would result in a breach of the
Virginia Gas board's fiduciary duties under applicable law.
Virginia Gas's acceptance of a third party proposal could result in the
termination of the merger agreement. See "--Termination of the Merger
Agreement." Virginia Gas may terminate the merger agreement if it enters into a
binding written agreement with a third party relating to a merger,
consolidation or other business combination. In such a circumstance, Virginia
Gas must notify NUI in writing that it intends to enter into the binding
written agreement and provide NUI with the most current version of the
agreement. Under the merger agreement, Virginia Gas may not enter into such an
agreement until at least the third business day after it has provided the
required notice to NUI and Virginia Gas must notify NUI promptly if its
intention to enter into the written agreement referred to in its notification
changes. The merger agreement will not be terminated in connection with a
third-party proposal if, within two business days of receiving the initial
notice from
16
Virginia Gas stating its intention to enter into a binding written agreement
with a third party relating to a merger, consolidation or other business
combination, NUI offers to amend the merger agreement and the Virginia Gas
board determines, in good faith after consultation with its financial advisors,
that the merger agreement as amended would be at least as favorable to Virginia
Gas stockholders as the third-party proposal, from a financial point of view.
Representations and Warranties
The merger agreement contains representations and warranties made by each of
the parties to the agreement. None of these representations and warranties will
survive beyond the time the merger becomes effective.
The merger agreement contains customary representations and warranties of
Virginia Gas and NUI as to, among other things:
. due organization and good standing;
. capitalization;
. corporate authorization of the merger agreement and authorization to
enter into the transactions contemplated thereby;
. the binding effect of the merger agreement;
. governmental approvals required in connection with the transactions
contemplated by the merger agreement;
. conflicts, violations and defaults under its charter and bylaws; any
other agreements or instruments; or any judgments, orders or laws as a
result of the transactions contemplated by the merger agreement;
. filings with the SEC;
. undisclosed liabilities;
. compliance with laws;
. pending actions, suits and proceedings;
. tax matters and compliance with relevant tax laws;
. employee benefit plans;
. brokers fees, commissions or similar fees in connection with the
transactions contemplated by the merger agreement;
. accuracy of information supplied by the parties; and
. absence of material misstatements in or omissions from the information
supplied for use in this proxy statement/prospectus and the related
registration statement.
In addition, the merger agreement contains representations and warranties by
Virginia Gas as to, among other things:
. the required vote of Virginia Gas's stockholders to approve the merger;
. ownership and condition of tangible assets;
. rights to intangible assets;
. transactions with affiliates;
. regulation as a utility and FERC jurisdiction;
17
. environmental matters;
. labor matters;
. the status of permits;
. material adverse changes or effects since the end of its fiscal year
ended December 31, 1998, except as disclosed in prior filings with the
SEC;
. material contracts under which the transactions contemplated by the
merger agreement will constitute a "change of control" or require the
consent from or the giving of notice to any third party;
. receipt of a fairness opinion from its financial advisor; and
. the applicability of state anti-takeover statutes or of anti-takeover
provisions in Virginia Gas's organizational documents to Virginia Gas,
its common stock and the transactions contemplated by the merger
agreement.
In addition, NUI represents and warrants in the merger agreement that it is
authorized to issue the number of shares of its common stock required to be
issued in connection with the merger and that those shares, when issued, will
be validly issued, fully paid, nonassessable and not subject to or issued in
violation of any preemptive rights.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to read carefully the articles of the
merger agreement entitled "Representations and Warranties of NUI" and
"Representations and Warranties of Virginia Gas."
Covenants Under the Merger Agreement
Conduct of Virginia Gas's Business. Virginia Gas has agreed that until the
merger agreement is terminated or the merger becomes effective, or unless NUI
consents in writing, that it will, and will cause each of its wholly-owned
subsidiaries to, conduct its operations according to its ordinary and usual
course of business consistent with past practice and use its reasonable best
efforts to preserve intact its business organizations, keep available the
services of its officers and employees and preserve its relationships with
customers, suppliers and others having business relationships with it. Except
as otherwise permitted or disclosed under the merger agreement, Virginia Gas
and its wholly-owned subsidiaries will conduct their business in compliance
with restrictions relating to the following:
. issuing capital stock, securities convertible into shares of capital
stock, or rights to acquire capital stock;
. amending its certificate of incorporation or bylaws;
. splitting, combining or reclassifying any shares of its capital stock;
. declaring, setting aside or paying dividends or other distributions;
. increasing payments or distributions (other than normal salaries) to any
director, officer or employee of Virginia Gas;
. entering into or modifying contracts;
. entering into employment, severance and consulting agreements;
. increasing the compensation of officers, employees and directors;
. adopting or amending pension, welfare and other plans, arrangements and
policies for the benefit of any director, officer or employee;
. acquiring or disposing of material assets;
. authorizing capital expenditures;
18
. amending accounting policies and procedures;
. incurring or guaranteeing indebtedness;
. making tax elections and settling material tax liabilities;
. making any filings to materially change rates on file;
. holding meetings of stockholders;
. taking any action that could reasonably be expected to change Virginia
Gas's status under PUHCA; and
. taking actions that would result in any of its conditions to closing not
being satisfied.
The covenants in the merger agreement relating to the conduct of Virginia
Gas's business are complicated and not easily summarized. You are urged to read
carefully the section of the merger agreement entitled "Conduct of the
Businesses of NUI and Virginia Gas."
Other Covenants. The merger agreement contains a number of mutual covenants
of Virginia Gas and NUI, including covenants relating to:
. accuracy of information to be supplied for inclusion in this proxy
statement/prospectus and the related registration statement;
. cooperation in obtaining governmental approvals necessary to the
consummation of the merger;
. cooperation in the preparation and filing of the registration statement
and this proxy statement/prospectus;
. keeping each other apprised of the operations and business prospects of
their companies, including the occurrence of any material adverse effect;
. using their respective best efforts to do, or cause to be done, all
things required to consummate and make effective the transactions
contemplated by the merger agreement;
. amending the merger agreement to provide for the substitution of NUI
Holding for NUI as the issuer of the merger consideration, if the NUI
holding company reorganization has been completed prior to the effective
time of the merger; and
. amending the merger agreement to provide for the merger of Virginia Gas
with and into the wholly-owned subsidiary of NUI Holding, with the
subsidiary of NUI Holding as the surviving corporation, at NUI's
election, if the NUI holding company reorganization has been completed
prior to the effective time of the merger.
The merger agreement also contains covenants of Virginia Gas relating to
allowing NUI to perform certain environmental testing and obtaining stockholder
approval and adoption of the merger agreement.
In addition, NUI is required to use its best efforts to cause the shares of
its common stock that are to be issued in the merger to be approved for listing
on the NYSE, subject to official notice of issuance, prior to the date on which
the merger closes.
Conditions to the Merger
The parties' respective obligations to complete the merger are subject to
the satisfaction or waiver of each of the following conditions:
. requisite approval and adoption by Virginia Gas stockholders of the
merger agreement;
. effectiveness of the registration statement filed by NUI and NUI Holding
in connection with the issuance of the common stock in the merger and no
stop order having been issued by the SEC and not withdrawn;
19
. no order, decree or injunction having been enacted, entered or
promulgated that prohibits the consummation of the merger;
. the receipt of an opinion from Hunton & Williams to the effect that the
merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and that no gain or loss will be recognized by a Virginia
Gas stockholder upon the exchange of Virginia Gas common stock for NUI or
NUI Holding common stock in the merger, except with respect to cash
received for a fractional share; and
. any waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act shall have been terminated or expired and all required consents shall
have been made or obtained.
The obligations of NUI to consummate the merger are further subject to the
following conditions:
. (1) Virginia Gas's representations and warranties that are qualified by
materiality must be true and correct at the time the merger is to become
effective and Virginia Gas's representations and warranties not so
qualified must be true and correct in all material respects at the time
the merger is to become effective, as if made at and as of that time, and
(2) Virginia Gas must have performed in all material respects all of its
obligations under the merger agreement required to be performed before
the time of effectiveness of the merger and NUI must have received a
certificate of the president and chief executive officer or the president
and chief financial officer of Virginia Gas to the effect that each of
(1) and (2) have been satisfied;
. during the period from the date of the merger agreement to the date of
the closing of the merger, there must not have occurred any material
adverse change in the business, financial condition or results of
operations of Virginia Gas and its subsidiaries, taken as a whole;
. the Change of Control Agreement, by and among Michael L. Edwards and
Virginia Gas, shall be in full force and effect in accordance with its
terms. See "--Interests of Virginia Gas's Directors and Officers in the
Merger;"
. the Contract of Sale, dated June 13, 2000, by and between the Town of
Saltville, Virginia, the Saltville Industrial Development Authority and
Virginia Gas, relating to the purchase of certain real property, and the
release of leasehold rights with respect to certain real property,
located in Saltville, Virginia, shall have been consummated or be in full
force and effect in accordance with its terms; and
. no default shall exist with respect to the Firm Pipeline Service
Agreements with Roanoke Gas Company and United Cities Gas Company.
The obligations of Virginia Gas to consummate the merger are further
subject to the following conditions:
. (1) the representations and warranties made by NUI that are qualified by
materiality must be true and correct at the time the merger is to become
effective and NUI's representations and warranties not so qualified must
be true and correct in all material respects at the time the merger is to
become effective, as if made at and as of that time, and (2) NUI must
have performed in all material respects all of its obligations under the
merger agreement required to be performed before the time of
effectiveness of the merger and Virginia Gas must have received a
certificate of the president and chief executive officer or senior vice
president and chief operating officer of NUI to the effect that each of
(1) and (2) have been satisfied;
. during the period from the date of the merger agreement to the date of
the closing of the merger, there must not have occurred any material
adverse change in the business, financial condition or results of
operations of NUI and its subsidiaries, taken as a whole; and
. Virginia Gas must have received a satisfactory opinion of CIBC as to the
fairness of the exchange ratio contemplated by the merger agreement, from
a financial point of view, to the stockholders of Virginia Gas.
20
Indemnification and Insurance of Directors and Officers
The merger agreement provides that NUI will cause Virginia Gas, as the
surviving corporation in the merger, to maintain all rights of indemnification
existing in favor of the directors and officers of Virginia Gas, on terms no
less favorable than those available on the date of the merger agreement, and to
maintain the existing directors' and officers' liability insurance policy for a
period of six years from the date of the merger agreement. See "--Interests of
Virginia Gas's Directors and Officers in the Merger."
Termination of the Merger Agreement
The merger agreement may be terminated, and the transactions contemplated by
the merger agreement abandoned, at any time prior to the closing of the merger,
whether before or after approval of the merger agreement by Virginia Gas
stockholders:
. by mutual written agreement of NUI and Virginia Gas;
. by either NUI or Virginia Gas if the merger has not become effective on
or before December 31, 2000 (or June 13, 2001, in the event that certain
conditions to the merger have not been met and the parties are working
diligently to satisfy those conditions), except that the right to
terminate the merger agreement for this reason is not available to any
party whose failure to fulfill any obligation under the merger agreement
has been the cause of or resulted in the failure of the merger to become
effective by such time;
. by NUI or Virginia Gas if there is any final, nonappealable governmental
order or other action restraining, enjoining or otherwise prohibiting the
merger;
. by NUI if the merger agreement fails to receive the requisite vote by
Virginia Gas stockholders at the annual meeting;
. by Virginia Gas if it enters into a binding written agreement with a
third party concerning a transaction that the Virginia Gas board
determines, in good faith and in the exercise of reasonable judgment, is
at a higher price and more favorable to Virginia Gas and its stockholders
than the merger agreement, provided that:
--Virginia Gas complies with requirements to notify NUI of its intent to
enter into the third-party agreement;
--NUI does not make, within two business days of receiving notice from
Virginia Gas, an offer to amend the merger agreement that the Virginia
Gas board determines, in good faith after consultation with its
financial advisors, would make the merger agreement as amended at least
as favorable to Virginia Gas stockholders as the third-party proposal,
from a financial point of view; and
--Virginia Gas pays any termination fees required under the merger
agreement;
. by Virginia Gas if NUI materially breaches any of its representations,
warranties, covenants or other agreements contained in the merger
agreement, which breach is not cured within ten business days after NUI
receives notice of such breach from Virginia Gas;
. by NUI if the average trading price of NUI common stock during the 20
trading-day period ending on the seventh trading day prior to the closing
of the merger is less than $19.00 and NUI provides written notice of
termination to Virginia Gas prior to the close of business on the second
trading day following the end of the 20 trading-day period;
. by NUI if Virginia Gas materially breaches any of its representations,
warranties, covenants or other agreements contained in the merger
agreement, which breach is not cured within ten business days after
Virginia Gas receives notice of such breach from NUI;
. by NUI if the Virginia Gas board withdraws or adversely modifies its
approval or recommendation of the merger agreement; and
21
. by NUI if NUI has requested the right to conduct environmental
investigations on properties of Virginia Gas in addition to properties
identified in the merger agreement and Virginia Gas elects to deny such
access.
In the event of the termination of the merger agreement as described above,
no provision of the merger agreement will survive other than provisions
relating to the obligation of NUI to keep confidential and not to use certain
information obtained from Virginia Gas and each party's obligation to pay a
termination fee to the other party in certain circumstances described below.
Termination Fees and Expenses
Pursuant to the merger agreement, Virginia Gas must promptly pay NUI (1) a
termination fee of $2.5 million, plus an amount equal to .04 times any
additional outstanding debt incurred by Virginia Gas following the date of the
merger agreement and (2) all documented out-of-pocket expenses incurred by NUI
in connection with the merger agreement and the merger if the merger agreement
is terminated:
. because of the failure of Virginia Gas stockholders to approve and adopt
the merger agreement;
. by Virginia Gas if Virginia Gas accepts a third-party acquisition
proposal;
. by NUI because of Virginia Gas's uncured breach of a representation,
warranty, covenant or other agreement contained in the merger agreement;
. by NUI if the merger has not been consummated prior to December 31, 2000
(or June 13, 2001, in the event that specified conditions to the merger
have not been met and the parties are working diligently to satisfy those
conditions), due to Virginia Gas's failure to perform its obligations
under the merger agreement; or
. by NUI if the Virginia Gas board withdraws or adversely modifies its
recommendation of the merger agreement.
Pursuant to the merger agreement, Virginia Gas must promptly pay NUI all
documented out-of-pocket expenses incurred by NUI in the event that NUI
terminates the merger agreement because NUI requests access to locations not
identified in the merger agreement to conduct environmental investigations and
Virginia Gas elects to deny such access.
Pursuant to the merger agreement, NUI must promptly pay Virginia Gas a
termination fee of $2.5 million and all documented out-of-pocket expenses
incurred by Virginia Gas in connection with the merger agreement and the merger
if the merger agreement is terminated:
. by Virginia Gas because of NUI's uncured breach of a representation,
warranty, covenant or other agreement contained in the merger agreement;
or
. by Virginia Gas if the merger has not been consummated prior to December
31, 2000 (or June 13, 2001, in the event that specified conditions to the
merger have not been met and the parties are working diligently to
satisfy those conditions), due to NUI's failure to perform its
obligations under the merger agreement.
Upon receipt of the termination payments, neither party will be entitled to
seek other damages or remedies from the other party in connection with the
merger agreement. Except in connection with the termination fees described
above, if the merger agreement is not consummated, NUI and Virginia Gas will
each bear their respective legal fees and expenses.
Material Federal Income Tax Consequences
Each Virginia Gas stockholder should consult with his or her own tax advisor
about the tax consequences of the merger in light of his or her individual
circumstances, including the application of any federal, state, local or
foreign law.
22
The following summarizes the material federal income tax consequences of the
merger to Virginia Gas stockholders. This summary is based on current law,
which is subject to change at any time, possibly with retroactive effect. This
summary is not a complete description of all tax consequences of the merger
and, in particular, may not address federal income tax consequences applicable
to you if you are subject to special treatment under federal income tax law. In
addition, this summary does not address the tax consequences of the merger
under applicable state, local or foreign laws.
It is a condition to the consummation of the merger that Virginia Gas and
NUI receive the opinion of Hunton & Williams, counsel to NUI, that the merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. The opinion of Hunton & Williams will be based on
customary assumptions and representations. Hunton & Williams' opinion will
represent its best legal judgment and is not binding on the Internal Revenue
Service or any court. If the merger qualifies as a reorganization:
. no gain or loss will be recognized by Virginia Gas upon consummation of
the merger;
. no gain or loss will be recognized by a Virginia Gas stockholder upon the
exchange of Virginia Gas common stock for NUI or NUI Holding common stock
in the merger, except with respect to cash received for a fractional
share;
. the aggregate basis of the shares of NUI or NUI Holding common stock
received by a Virginia Gas stockholder in the merger, including any
fractional share for which the stockholder receives cash, will be the
same as the aggregate basis of the shares of Virginia Gas common stock
surrendered in exchange;
. the holding period of the shares of NUI or NUI Holding common stock
received by a Virginia Gas stockholder in the merger will include the
holding period of the shares of Virginia Gas common stock surrendered in
exchange, if they are held as a capital asset at the effective time of
the merger; and
. a Virginia Gas stockholder who receives cash for any fractional share of
NUI or NUI Holding common stock will recognize gain or loss equal to the
difference between the amount of cash received and the Virginia Gas
stockholder's basis in the fractional share. That basis will be an
allocable portion of the aggregate basis of the NUI or NUI Holding common
stock described above.
If the merger does not qualify as a reorganization, the exchange of stock in
the merger would be taxable to Virginia Gas stockholders.
Interests of Virginia Gas's Directors and Officers in the Merger
Virginia Gas stockholders should be aware that the directors and officers of
Virginia Gas have stock option agreements and, in the case of Virginia Gas's
officers, employment agreements, that give them interests in the merger that
are different from, or in addition to, those of other Virginia Gas
stockholders. In addition, certain aspects of the merger agreement will inure
to the benefit of these individuals. Specifically,
. The directors' and officers' stock option agreements have been amended to
provide that they will be converted when the merger takes effect into the
right to receive cash in an amount that approximates the value of such
awards. These options have a per share exercise price of $4.125 and would
otherwise expire on October 1, 2008. As amended, they will be terminated
as of the effective time of the merger and converted into the right to
receive $1.00 in cash from NUI or NUI Holding, as applicable. The
Virginia Gas board believes, based on several option valuation analyses,
that $1.00 per option is a reasonable approximation of the value of these
options. There are 245,000 options affected by these amendments. Messrs.
Rogers, Allen and Crenshaw each hold 60,000 of such options for a total
of 180,000 options. The executive officers of Virginia Gas as a group
hold 65,000 of such options.
. On May 23, 1996, Virginia Gas entered into a ten-year employment
agreement with Mr. Edwards, which provides for an annual salary of
$155,000. Mr. Edwards is also entitled to receive annual bonuses under
this agreement computed on the basis of 10 percent of Virginia Gas's pre-
tax earnings
23
on all amounts from $1,000,000 to $1,999,999 and 15 percent of Virginia
Gas's pre-tax earnings on all amounts in excess of $2,000,000. The
agreement provides that, in the event Mr. Edwards' employment is
terminated by Virginia Gas for any reason other than for cause during the
term of the employment agreement, at the election of Mr. Edwards,
Virginia Gas will be obligated to purchase all or a portion of the shares
held by him and/or his wife at a price equal to 150 percent of the market
value of Virginia Gas's shares on the date of termination. In addition,
Virginia Gas will be obligated to pay Mr. Edwards a lump sum amount
representing all salary payable to Mr. Edwards through the term of the
employment agreement, plus an additional $2,000,000. Based on the
provisions of this employment agreement, an assumed $4.00 per share
market price for Virginia Gas's common stock and a hypothetical
termination of Mr. Edwards' employment without cause during the fourth
quarter of 2000, Mr. Edwards would be entitled to receive a payment of
approximately $5,300,000 in connection with the termination of his
employment.
Notwithstanding the foregoing, under the Change of Control Agreement that
Mr. Edwards entered into with Virginia Gas on June 13, 2000, Mr. Edwards
agreed to the termination of his employment agreement and to resign from
his positions with Virginia Gas and its subsidiaries when the merger
occurs in exchange for a payment in an amount equal to the product of (x)
the sum of his annual base salary in effect immediately before the
effective time of the merger, plus the amount of his largest bonus in the
five fiscal years then most recently ended, multiplied by (y) three.
Assuming the effective time of the merger occurs during the fourth
quarter of 2000, Mr. Edwards will be entitled to $615,000 under this
agreement. In addition, Mr. Edwards is entitled, for two years after the
effective time of the merger, to participate in Virginia Gas's health and
other benefit plans as in effect at the time of the merger. In the event
that any payments made to Mr. Edwards are determined to be "excess
parachute payments" within the meaning of the Internal Revenue Code, Mr.
Edwards' payments will be reduced so that he receives the maximum value
without such characterization of the payments. Mr. Edwards has also
agreed to serve as a consultant to Virginia Gas for three years following
the merger for an annual fee of $161,666. During this three year period,
he has also agreed not to engage in competition with Virginia Gas in any
business venture located east of the Mississippi River, other than in the
states of Louisiana and Mississippi. The Change of Control Agreement also
provides for the cancellation of a warrant held by Mr. Edwards to
purchase 363,663 shares of Virginia Gas common stock at the effective
time of the merger.
. The executive officers, other than Mr. Edwards, have employment
agreements that entitle them to continued employment for up to one year
following the merger, or compensation in lieu of such continued
employment, if the employee is terminated by Virginia Gas without cause.
Karen K. Edwards, a director, is also an executive officer of Virginia
Gas. Her current annual salary is $25,000.
. The merger agreement provides that NUI will cause Virginia Gas, as the
surviving corporation in the merger, to maintain all rights of
indemnification existing in favor of the directors and officers of
Virginia Gas, on terms no less favorable than those available on the date
of the merger agreement, and to maintain the existing directors' and
officers' liability insurance policy for a period of six years from the
effective time of the merger.
No Appraisal Or Dissenters' Rights
Stockholders of a corporation that is proposing to merge or consolidate
with another entity are sometimes entitled to appraisal or dissenters' rights
in connection with the proposed transaction, depending on the circumstances.
Most commonly, these rights confer on stockholders who oppose the merger or
consolidation the right to receive the fair value for their shares, as
determined in a judicial appraisal proceeding, in lieu of the consideration
being offered in the merger.
Virginia Gas stockholders are not entitled to appraisal or dissenters'
rights under Delaware law in connection with the merger because Virginia Gas
common shares are included for quotation on The Nasdaq SmallCap Market on the
record date for the annual meeting and the NUI or NUI Holding common stock
that Virginia Gas stockholders will receive in the merger will be listed on
the NYSE at the effective time of the merger.
24
Accounting Treatment
The merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the merger will be allocated among
Virginia Gas's consolidated assets and liabilities based on the fair values of
the assets acquired and liabilities assumed as provided for under generally
accepted accounting principles.
Regulatory Matters
Virginia Gas is subject to the jurisdiction of the Virginia State
Corporation Commission. In order to complete the merger, Virginia Gas must
receive approval from the Virginia State Corporation Commission for the change
in control of the certificated public utilities resulting from the merger.
Prior to the merger, NUI must also obtain, and has applied for, approvals from
regulatory authorities in certain other states in which NUI conducts its
business.
Under the Hart-Scott-Rodino Antitrust Improvements Act and the rules
promulgated thereunder by the Federal Trade Commission, certain acquisition
transactions may not be consummated unless notice has been given and certain
information has been furnished to the Antitrust Division of the United States
Department of Justice and the FTC and certain waiting period requirements have
been satisfied. The merger is subject to these requirements.
NUI and Virginia Gas each filed with the Antitrust Division and the FTC a
Notification and Report Form with respect to the merger on September 14, 2000.
Under the Hart-Scott-Rodino Antitrust Improvements Act, the merger could not be
consummated until the expiration of a waiting period of at least 30 days
following the receipt of each filing, unless the waiting period was earlier
terminated. On September 27, 2000, NUI and Virginia Gas received notice that
the FTC had granted early termination of the waiting period.
The FTC and the Antitrust Division frequently scrutinize the legality of
transactions such as the merger under the antitrust laws. Notwithstanding the
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act, at any time before or after the effective time of the merger,
the FTC or the Antitrust Division could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the merger or seeking the divestiture of Virginia Gas by NUI,
in whole or in part, or the divestiture of substantial assets of NUI, Virginia
Gas or their respective subsidiaries. State Attorneys General and private
parties may also bring legal actions under the federal or state antitrust laws
under certain circumstances. Based upon an examination of information available
to NUI and Virginia Gas relating to the businesses in which NUI, Virginia Gas
and their respective subsidiaries are engaged, NUI and Virginia Gas believe
that the consummation of the merger will not violate the antitrust laws.
Nevertheless, we cannot provide any assurance that a challenge to the proposed
merger on antitrust grounds will not be made or, if such a challenge is made,
that NUI and Virginia Gas will prevail.
We are not aware of any other material governmental approvals or actions
that may be required for consummation of the merger except as described above.
Should any such approval or action be required, it is presently contemplated
that such approval or action would be sought. We cannot provide any assurance,
however, that any such approval or action, if needed, could be obtained and
would not be conditioned in a manner that would cause the parties to abandon
the merger.
25
STOCKHOLDER'S AGREEMENTS
Concurrently and in connection with the execution of the merger agreement,
the directors and certain executive officers of Virginia Gas entered into
stockholder's agreements. Pursuant to the stockholder's agreements, the
directors and certain executive officers agreed to vote the shares of Virginia
Gas common stock that they hold of record and beneficially for approval of the
merger and adoption of the merger agreement. The stockholder's agreements
terminate upon the earliest to occur of (1) the termination of the merger
agreement and the payment of any amounts payable by Virginia Gas thereunder or
(2) the conclusion of the annual meeting at which a quorum is present and the
party subject to the stockholder agreement votes in accordance therewith.
A total of 507,968 shares of Virginia Gas common stock, representing in the
aggregate approximately 9.23 percent of the outstanding shares of Virginia Gas
common stock, are subject to stockholder's agreements.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Michael L. Edwards, President and Chief Executive Officer of Virginia Gas,
will resign his positions as an officer and director of Virginia Gas and its
wholly-owned subsidiaries at the effective time of the merger. Mr. Edwards will
remain as an officer and director of Virginia Gas's two 50 percent owned
subsidiaries, Virginia Gas Distribution Company and Virginia Gas Storage
Company, following the merger. He will also serve as a consultant to Virginia
Gas for three years following the merger.
With the exception of Mr. Edwards, NUI has no present intention of making
significant changes to the existing management structure or personnel of
Virginia Gas. As a result of the significant investment being made in the
development of Virginia Gas's natural gas storage and pipeline assets, NUI
intends to provide Virginia Gas with ongoing management support and guidance
following the merger in order to maximize the opportunities from its
investment.
26
INTERIM FINANCING
Pursuant to the merger agreement, NUI has made available up to $20 million
in financing to Virginia Gas in the form of an unsecured credit facility. The
proceeds of the credit facility are to be used exclusively for pipeline and gas
storage construction and other related costs and expenses.
Amounts outstanding under the credit facility bear interest at an annual
rate equal to LIBOR plus 3 percent. Interest is payable quarterly and the
entire outstanding principal amount is payable on the first to occur of
(1) March 1, 2002, or (2) the termination of the merger agreement (for any
reason). Additionally, if an event of default occurs under the NUI credit
facility, including the occurrence of additional events of default under
Virginia Gas's other senior loan agreements, NUI may declare all outstanding
principal and accrued interest immediately due and payable. As of September 29,
2000, Virginia Gas had borrowed $11.0 million under the NUI credit facility.
In connection with the interim financing made available by NUI, Virginia Gas
has granted NUI options to purchase an aggregate of 1,095,475 shares of
Virginia Gas common stock (representing approximately 19.9 percent of the
outstanding Virginia Gas common stock), which options are only exercisable if
the merger agreement is terminated under circumstances in which NUI is not
entitled to a termination fee or upon an event of default under the note
evidencing the interim financing. In such a case, NUI would have the right to
immediately purchase 275,245 shares at an exercise price equal to $3.50 per
share and 820,230 shares at an exercise price equal to $3.5125 per share.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
NUI
NUI common stock is listed on the New York Stock Exchange under the symbol
"NUI." The following table shows, for the periods indicated, the high and low
reported closing sale prices per share of NUI common stock on the New York
Stock Exchange Composite Transactions reporting system and cash dividends
declared per share of NUI common stock.
Price Range of
Common Stock
---------------
Dividends
High Low Declared
------- ------- ---------
Fiscal 1998
First Quarter....................................... $29.620 $21.375 $0.245
Second Quarter...................................... 28.620 25.188 0.245
Third Quarter....................................... 29.430 23.313 0.245
Fourth Quarter...................................... 25.930 20.313 0.245
Fiscal 1999
First Quarter....................................... $27.000 $21.563 $0.245
Second Quarter...................................... 27.060 20.375 0.245
Third Quarter....................................... 25.620 20.813 0.245
Fourth Quarter...................................... 28.060 24.625 0.245
Fiscal 2000
First Quarter....................................... $27.563 $27.563 $0.245
Second Quarter...................................... 28.375 23.188 0.245
Third Quarter....................................... 28.125 25.625 0.245
Fourth Quarter...................................... 31.645 26.375 0.245
On June 13, 2000, the last trading day before NUI and Virginia Gas publicly
announced the execution of the merger agreement, the closing price per share of
NUI common stock on the NYSE Composite Transactions reporting system was
$27.75. On September 29, 2000, the latest practicable date prior to the date of
this proxy statement/prospectus, such price was $30.207. Past price performance
is not necessarily indicative of likely future price performance. Holders of
Virginia Gas common stock are urged to obtain current market quotations for
shares of NUI common stock.
As of September 29, 2000, there were approximately 5,744 record holders of
NUI common stock.
27
Virginia Gas
Virginia Gas common stock is quoted on The Nasdaq SmallCap Market under the
symbol "VGCO." The following table shows, for the periods indicated, the high
and low reported closing sale prices per share of Virginia Gas common stock on
The Nasdaq SmallCap Market and cash dividends declared per share of Virginia
Gas common stock.
Price Range
of Common
Stock
-------------
Dividends
High Low Declared
------ ------ ---------
Fiscal 1998
First Quarter......................................... $9.000 $7.313 $0.0175
Second Quarter........................................ 7.750 6.000 0.0175
Third Quarter......................................... 6.219 4.000 0.0175
Fourth Quarter........................................ 4.500 3.000 0.0175
Fiscal 1999
First Quarter......................................... $3.625 $2.156 $0.0175
Second Quarter........................................ 4.750 2.500 -0-
Third Quarter......................................... 4.375 3.375 -0-
Fourth Quarter........................................ 4.000 2.875 -0-
Fiscal 2000
First Quarter......................................... $3.750 $2.531 $ -0-
Second Quarter........................................ 3.750 2.500 -0-
Third Quarter......................................... 3.750 3.375 -0-
Virginia Gas paid cash dividends on its common stock for each of the fiscal
years 1992 through 1998. During fiscal 1999, the Virginia Gas board reexamined
its dividend policy and determined that the funds would be better used in
support of capital expansion. Accordingly, at this time, Virginia Gas does not
pay cash dividends on its common stock. There can be no assurance that Virginia
Gas will resume dividend payments in the future.
On September 29, 2000, the latest practicable date prior to the date of this
proxy statement/prospectus, the closing price per share of Virginia Gas common
stock on The Nasdaq SmallCap Market was $3.75. As of the record date, there
were approximately 135 record holders of Virginia Gas common stock and 16
record holders of warrants to purchase Virginia Gas common stock.
28
BUSINESS OF VIRGINIA GAS
General
Virginia Gas was organized in 1987 under the laws of Delaware. Virginia Gas,
directly or through its subsidiaries and affiliated companies, is primarily
engaged in the storage, marketing, distribution, gathering, exploration and
production of natural gas, and the distribution of propane gas. Virginia Gas's
principal assets are located in the southwestern counties of Virginia.
Virginia Gas's business has developed in response to the growing need for
natural gas storage, pipelines and distribution in its market area, resulting
principally from economic growth and the impact of deregulation. Deregulation
has given natural gas customers more flexibility in negotiating their natural
gas purchases and transportation contracts. Virginia Gas's pipeline connections
to the East Tennessee Natural Gas, Dominion Transmission and Columbia Gas
Transmission Company interstate pipeline systems, and to Virginia Gas's
adjacent storage facilities, are being combined to create a hub that provides
opportunities for more efficient gas distribution, including to growing local
markets. At present, Virginia Gas's business primarily consists of:
. producing, gathering and marketing natural gas from wells in which
Virginia Gas has an ownership interest to municipal distributors, local
distribution companies and major oil and gas companies;
. storing natural gas for municipal distributors and local distribution
companies that have supplied their own gas, or purchased it from third
parties or Virginia Gas;
. distributing propane and natural gas purchased from third parties or
Virginia Gas to local industrial, commercial and residential customers;
and
. transporting gas through its pipeline to a local distribution company.
Virginia Gas's principal sources of revenue have varied depending on its
level of activity in any given segment of natural gas operations. From 1987 to
1992, substantially all of Virginia Gas's income was derived from exploration,
development and production of natural gas and from fees derived from managing
wells. From 1993 to 1996, Virginia Gas's income increased primarily as a result
of the expansion of its storage operations. In 1996 and 1997, Virginia Gas
initiated its propane distribution and gas marketing operations, respectively.
Virginia Gas's propane distribution operations have grown steadily since then.
In 1998, Virginia Gas completed construction of 35 miles of pipeline and began
serving a local distribution company with transmission services at two delivery
points. During fiscal 1999, the storage business and the pipeline business were
the greatest contributors to net income and also accounted for the largest
concentrations of Virginia Gas's assets.
Management believes that current trends in the economy, a favorable
regulatory environment, the deregulation of the industry--which has resulted in
end-users' ability to purchase gas on a competitive basis from a greater
variety of sources--and the increasing availability of natural gas as a form of
energy for residential, commercial and industrial markets, present
opportunities for Virginia Gas to expand into new markets and to better develop
its current markets. However, Virginia Gas's internal resources are
insufficient at this time to take advantage of these opportunities and, to
date, Virginia Gas's efforts to attract the necessary capital from external
sources have been unsuccessful.
Subsidiaries and Affiliates
Virginia Gas has four consolidated wholly-owned subsidiaries: Virginia Gas
Exploration Company, Virginia Gas Pipeline Company, Virginia Gas Propane
Company and Virginia Gas Marketing Company. In addition, Virginia Gas has two
affiliates--Virginia Gas Distribution Company and Virginia Gas Storage
Company--that are each owned 50 percent by Virginia Gas and 50 percent by Mr.
H.A. Street, an individual investor who has no other material affiliation with
either Virginia Gas, or any executive officer, director or controlling
stockholder of Virginia Gas.
29
The pipeline company, the distribution company and the storage company are
the holders of Certificates of Public Convenience and Necessity issued by the
Virginia State Corporation Commission that are required for these companies to
conduct their businesses. The pipeline company's and the storage company's
storage operations are regulated by both the Virginia State Corporation
Commission and the Federal Energy Regulatory Commission.
Storage Operations
Virginia Gas has the only two underground natural gas storage facilities in
Virginia. One of these facilities, the Saltville facility, is located in Smyth
and Washington counties, while the other facility, the Early Grove field, is
located in Scott and Washington counties. The pipeline company owns and
operates the Saltville facility while the storage company owns and operates the
Early Grove field.
The pipeline company developed the Saltville facility for use as a high
rate, peak usage storage facility. The Saltville facility uses caverns created
in underground salt beds to store natural gas. Virginia Gas's engineering staff
believes the ultimate working gas capacity of the Saltville facility could be
up to 10 billion cubic feet. In June 1996, the pipeline company filed an
application with the Virginia State Corporation Commission for a Certificate of
Public Convenience and Necessity for the operation of the Saltville facility.
In July 1996, the Virginia State Corporation Commission issued an order
authorizing the pipeline company to begin service on an interim basis using the
rates set forth in the application. The Certificate of Public Convenience and
Necessity was issued to the pipeline company in October 1997. In November 1996,
the pipeline company received a limited jurisdiction certificate from the
Federal Energy Regulatory Commission authorizing the pipeline company to engage
in the sale, transportation (including storage) or assignment of natural gas
that is subject to the Federal Energy Regulatory Commission's jurisdiction
under the Natural Gas Act, and to charge rates for its interstate service equal
to the intrastate rates approved by the Virginia State Corporation Commission.
The Saltville facility provides 10-day, 60-day and 90-day service and 20-day
refill capacity. In August 1996, the pipeline company injected the first
working gas into the field. Peak daily withdrawal rates of 49,000 MMBtu were
achieved during 1999. In 1999, Virginia Gas completed construction of an
evaporation facility adjacent to the Saltville facility. The facility will be
used by Virginia Gas to create additional storage space by eliminating brine
from the salt caverns.
Virginia Gas's internal resources are insufficient at this time to provide
to the pipeline company the capital it needs to expand the Saltville facility
as contemplated by Virginia Gas's business plan. Additionally, Virginia Gas has
been unsuccessful to date in attracting outside funding sources. Pursuant to
the merger agreement, NUI has committed to make available to Virginia Gas up to
$20 million in financing. Pursuant to the merger agreement, a portion of the
proceeds of the NUI financing has been used to purchase certain property at the
Saltville facility and additional proceeds are expected to be used for pipeline
and gas storage construction. The NUI financing is described under the heading
"INTERIM FINANCING" on page 27.
The Early Grove field is an underground natural gas storage facility owned
and operated by the storage company. The storage company has received a
Certificate of Public Convenience and Necessity from the Virginia State
Corporation Commission, authorizing it to engage in the sale, transportation
(including storage) or assignment of natural gas and to charge rates approved
by the Virginia State Corporation Commission. The Early Grove field includes 29
storage wells and a certificated area of 2,900 acres. Contracted storage volume
for 60-day, 90-day and 150-day service has increased from 520,000 MMBtu for the
1994/1995 heating season to 1,835,000 MMBtu for the 1999/2000 heating season.
The deliverability of the Early Grove field has been increased by reworking
existing wells, drilling new wells, injecting additional base gas, installing
larger diameter pipe, new compression equipment, and increasing the maximum
operating pressure of the field to 2,000 PSI from 1,400 PSI. Peak field
deliverability has been increased from 1,000 MMBtu in 1992 to over 20,000 MMBtu
per day in 1999.
30
Pipeline Operations
In 1998, Virginia Gas completed construction and began servicing 35 miles of
intrastate pipeline under authority granted in an application for a Certificate
of Public Convenience and Necessity with the Virginia State Corporation
Commission filed in January 1997. Virginia Gas received the Certificate of
Public Convenience and Necessity in December 1997. Virginia Gas has purchased
rights-of-way and obtained all necessary permits for the construction of the
remaining 37 miles of pipeline that will make up Virginia Gas's P-25 pipeline.
When completed, the pipeline will connect the Saltville facility to Radford,
Virginia, and transport natural gas to growing markets in Smyth, Wythe and
Pulaski counties in southwestern Virginia. These areas currently are served
only by East Tennessee Natural Gas's #3300 interstate pipeline, which, Virginia
Gas believes, currently has insufficient capacity to meet the area's needs.
The first phase of construction, completed in October 1998, consisted of
twinning the East Tennessee Natural Gas line to the town of Wytheville,
Virginia, and opening service to that town and Marion, Virginia. The remaining
phase will extend the P-25 pipeline from Wytheville to Radford, Virginia.
Virginia Gas has entered into a 15-year contract with United Cities Gas
Company, the local distribution company that serves Smyth, Wythe and Pulaski
counties, to provide pipeline capacity to supply 20,000 MMBtu per day.
Completion of this phase is expected by late 2000.
In early 1999, Virginia Gas filed an application with the Virginia State
Corporation Commission to extend its P-25 pipeline to Roanoke, Virginia.
Virginia Gas will provide 17,500 MMBtu per day to Roanoke through an additional
58 miles of pipeline. Virginia Gas received a Certificate of Public Convenience
and Necessity to extend its pipeline to Roanoke in December 1999.
The P-25 pipeline has been and will be constructed and maintained consistent
with applicable federal, state and local laws and regulations and accepted
industry practice. Substantially all of the operations conducted through the P-
25 pipeline will constitute common carrier pipeline activities. Such common
carrier activities are those under which transportation in the pipeline is
available at tariffs published with the Virginia State Corporation Commission
to any shipper of natural gas who requests such services, provided that each
product for which transportation is requested satisfies the conditions and
specifications for transportation.
Natural Gas and Propane Distribution Operations
Virginia Gas, through the distribution company, owns and operates 33 miles
of distribution pipeline and provides natural gas service to approximately 300
customers in Russell and Buchanan counties in Virginia. Construction of a 10
mile pipeline providing service to the town of Lebanon, Virginia, in Russell
County was completed in June 1997. The distribution company has a Certificate
of Public Convenience and Necessity authorizing it to provide natural gas
service in these counties. In January 1997, the distribution company filed an
application with the Virginia State Corporation Commission to extend its
service territory to include all of Dickenson and Tazewell counties in
Virginia, with the exception of the service territory in Tazewell County
currently certificated to Commonwealth Public Service Corporation. This
application was subsequently amended to include the town of Saltville,
Virginia, as part of the proposed service territory. In March 1998, the
Virginia State Corporation Commission issued a Certificate of Public
Convenience and Necessity to the distribution company authorizing it to provide
natural gas service to the western portion of Tazewell County, excluding the
service territory allotted to Commonwealth Public Service Corporation, all of
Dickenson County and the town of Saltville. The distribution company's tariff
rates are approved by the Virginia State Corporation Commission. Rates were
last approved for the distribution company in early 2000.
31
The distribution company has a firm transportation service contract for a
ten-year term with East Tennessee Natural Gas for the winter months of November
through March, and an interruptible transportation contract with East Tennessee
Natural Gas for the remainder of the year.
In 1996, Virginia Gas commenced distribution of propane gas in southwestern
Virginia. Because of shared costs and similarities between natural and propane
gas, many natural gas utilities provide both products to their customers.
Customers often do not distinguish between the two forms of gas when used in
the home. Virginia Gas intends, in part, to develop its propane distribution
business through selective acquisitions. In that regard, Virginia Gas acquired
a portion of Blue Grass Oils, Inc.'s existing propane distribution business in
Buchanan, Dickenson and Russell counties and in the western part of Tazewell
County in April 1997. At the end of 1999, Virginia Gas was providing propane
gas service to over 4,400 customers in southwestern Virginia.
Exploration, Production, Gathering and Marketing Operations
Drilling Activity. Virginia Gas did not drill or complete any natural gas
wells during 1998, 1999 or the first nine months of 2000.
Service Operations. Virginia Gas engages in the business of supervising
drilling operations and operating producing wells. As of December 31, 1999,
Virginia Gas operated 72 wells located in Virginia and West Virginia. As an
operator of producing wells, Virginia Gas is responsible for the maintenance
and verification of all production records, distribution of production proceeds
and information, and compliance with various state and federal regulations.
Generally, Virginia Gas provides the routine day-to-day production operations
for producing wells and is paid for such services on a per well, monthly fee
basis.
Gas Gathering Operations. Virginia Gas operates various unregulated natural
gas gathering systems located mainly in Dickenson and Buchanan counties in
Virginia, which connect Virginia Gas's operated wells to interstate pipelines.
The gathering systems consist of approximately 67 miles of pipeline. The
gathering systems connect Virginia Gas's natural gas production to the East
Tennessee Natural Gas, Dominion Transmission and Columbia Gas Transmission
Company interstate pipeline systems and gathering systems as well as to the
distribution company's distribution system.
For such natural gas gathering services, Virginia Gas collects certain
transportation allowances from producers (owners of natural gas).
Transportation allowances vary depending upon contractual arrangements and
currently range from $.05 to $.50 per MMBtu.
Marketing. In 1997, Virginia Gas began marketing natural gas. Virginia Gas
currently markets and sells natural gas provided from company-operated wells
and facilities. Virginia Gas anticipates that future expansion of its marketing
operations will include purchases of natural gas supplies from third party
sources, storing these supplies in its Saltville facility and marketing these
supplies to its customers.
Competition and Customer Base
Virginia Gas competes with major utility companies and pipeline companies in
the areas of utility services and pipeline operations. The deregulation of the
natural gas industry has provided Virginia Gas with marketing and
transportation opportunities; however, other pipeline companies, marketers and
brokers with resources greater than Virginia Gas are also the beneficiaries of
such deregulation. While Virginia Gas, the storage company and the pipeline
company currently own and operate the only underground natural gas storage
facilities in Virginia, it is possible that other companies could develop other
underground natural gas storage facilities, and companies could rely on other
methods of storage, such as above-ground stored liquefied natural gas. Virginia
Gas also competes in the areas of exploration, production, transportation and
marketing of natural gas and distribution of propane with major oil companies,
other independent oil and gas concerns and individual producers and operators.
Many of Virginia Gas's competitors have substantially greater financial and
other resources than Virginia Gas.
32
Virginia Gas has a limited number of customers for its wholesale pipeline
and storage services, as potential customers must have interconnects on the
limited number of pipelines with which Virginia Gas's facilities are connected.
As a result, a majority of Virginia Gas's revenues are earned from a small
group of customers.
Regulation
Virginia State Corporation Commission. The pipeline company's and the
storage company's natural gas storage operations are regulated primarily by the
Virginia State Corporation Commission and the Federal Energy Regulatory
Commission, which has jurisdiction over interstate sales of storage services.
Storage rates are subject to Virginia State Corporation Commission approval and
are based on the cost of service of the facility, which provide for an approved
rate of return. A facility can apply for revised rates based on actual costs if
they are higher than previously anticipated and conversely the Virginia State
Corporation Commission may require a reduction in rates if returns are higher
than anticipated.
The pipeline company's transmission pipeline operations are regulated by the
Virginia State Corporation Commission. Substantially all of the operations
conducted through these pipelines constitute common carrier pipeline
activities. Such common carrier activities are those under which transportation
in the pipeline is available at tariff rates published with the Virginia State
Corporation Commission to any shipper of natural gas who requests such
services, provided that each product for which transportation is requested
satisfies the conditions and specifications for transportation.
The natural gas distribution operations of the distribution company are also
regulated by the Virginia State Corporation Commission, which regulates the
rates that may be charged to end-users, setting them at levels sufficient to
recover the cost of service to its customers, including an approved rate of
return. The distribution company filed for a rate increase late in 1999. The
increase was put in place subject to refund during January 2000. During
February 2000, the Virginia State Corporation Commission approved Virginia
Gas's new rate structure.
The gathering facilities, propane distribution operations, exploration
operations and natural gas marketing operations are not subject to service or
rate regulation by the Virginia State Corporation Commission.
Federal Energy Regulatory Commission. Virginia Gas's operations either are
not governed by, or by virtue of limited jurisdiction certificates having been
issued by the Federal Energy Regulatory Commission, are exempt from further
regulation by, the Federal Energy Regulatory Commission under the Natural Gas
Act.
Environmental and Safety. Virginia Gas's operations are subject to various
federal, state and local environmental laws. In particular, operations in
Virginia are subject to the Virginia Clean Air Act as administered by the
Virginia Department of Environmental Quality. The Virginia Clean Air Act
restricts emissions from wells, pipelines and processing plants, and the
Virginia Department of Environmental Quality may curtail operations not meeting
minimum standards. The design, construction, operation and maintenance of
Virginia Gas's Virginia State Corporation Commission jurisdictional facilities
are subject to the safety regulations established by the United States
Department of Transportation pursuant to the Natural Gas Pipeline Safety Act of
1968 or by state agency regulations meeting the requirements thereunder.
Virginia Gas is also subject to other federal, state and local laws covering
the handling or discharge into the environment of materials used by Virginia
Gas, or otherwise relating to protection of the environment, safety and health.
Expenditures for environmental control facilities and for remediation have
not been material in relation to Virginia Gas's results of operations. Virginia
Gas believes, however, that it is reasonably likely that the trend in
environmental legislation and regulations will continue to be toward stricter
standards. Virginia Gas is unaware of future environmental standards that are
reasonably likely to be adopted that will have a material effect on Virginia
Gas's results of operations, but there can be no assurance such standards will
not be adopted in the future.
33
Title to Properties
Substantially all of the properties comprising the Saltville facility and
the Early Grove field are situated on surface land not currently owned by
Virginia Gas, the pipeline company or the storage company.
The pipeline company's rights to develop and operate the Saltville facility
are currently derived from a deed from the Saltville Industrial Development
Authority. The deed provides the pipeline company with rights to store gas,
rights to use any facilities and surface area for natural gas storage use and
rights to remove salts to create cavities for natural gas storage. The deed
encompasses approximately 11,000 acres of storage rights in Washington and
Smyth counties. By Contract of Sale, dated June 13, 2000, between the town of
Saltville, the Saltville Industrial Development Authority and Virginia Gas,
Virginia Gas agreed to acquire all of the right, title and interest in
approximately 600 acres located in Saltville, including 18 existing high
pressure brine wells located on the property. The sale is subject to, among
other things, (1) regulatory approvals with respect to the pipeline company's
partial release of its rights under an existing oil and gas lease and deed with
the town of Saltville, relating to approximately 10,000 acres contiguous to the
600 acre parcel and the construction of a natural gas distribution pipeline to
the Saltville Industrial Development Park and (2) the acquisition by Virginia
Gas of certain other adjacent residential properties, which have subsequently
been acquired by Virginia Gas.
The storage company's rights to develop and operate the Early Grove field
are derived from its ownership of mineral leasehold rights and from surface
easements.
Most of the existing pipelines, gathering systems and distribution systems
are situated on land not owned by Virginia Gas, its subsidiaries or affiliates
but as to which Virginia Gas, its subsidiaries or affiliates have easements
from the landowners permitting the use of such land for the construction and
operation of pipeline facilities. Virginia Gas, its subsidiaries or affiliates
received or intend to receive franchises, easements, licenses, permits and
other authorizations to construct and operate proposed or future pipelines,
gathering systems and distribution systems within the jurisdiction of various
cities, counties and other government agencies and jurisdictions, as well as
along and across waterways and rights-of-way for federal, state, county and
city highways, streets and roads.
Substantially all of the producing property interests are held pursuant to
leases from third parties. Virginia Gas believes that it or its subsidiaries or
affiliates has satisfactory title to such properties in accordance with
standards generally accepted in the natural gas industry. The producing
properties are subject to customary royalty interests, liens for current taxes
and other burdens that should not materially interfere with the use of or
affect the value of such producing properties.
Employees
As of December 31, 1999, Virginia Gas, its subsidiaries and affiliated
companies employed 55 persons on a full time basis, none of whom are covered by
a collective bargaining agreement.
Virginia Gas's principal executive offices are located at 200 East Main
Street, Abingdon, Virginia 24210 (Telephone: (540) 676-2380).
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of operations
Net Income. During the three months ended June 30, 2000, Virginia Gas
recorded net income of $53,000, compared to net income of $93,000 for the same
period in 1999. Basic and diluted net income per common share for the quarter
was $0.01 compared to $0.02 for the second quarter of 1999. For the six months
ending June 30, 2000, Virginia Gas recorded net income of $263,000 compared to
net income of $926,000 for the same period in 1999. The six months ending June
30, 1999, included approximately $400,000 in net income from Virginia Gas's
share of the storage company's sale of its Haysi gathering system. The sale
resulted in an additional $0.07 of net income per common share. Basic and
diluted net income per common share for the six months ending June 30, 2000,
was $0.05 compared to $0.17 for the same period in 1999.
Revenues. Virginia Gas recorded revenues of $3.1 million for the quarter
ending June 30, 2000, compared to $2.4 million for the same period in 1999,
representing a 30 percent increase. Revenue growth was primarily derived from
Virginia Gas's increased natural gas sales and growth in its propane
distribution operation. Virginia Gas recorded $1,397,000 in gas sales during
the second quarter of 2000 compared to $709,000 for the same period in 1999.
This increase resulted from increased gas prices. The average selling price of
gas per dth increased $1.31 from $2.16 during the second quarter of 1999 to
$3.47 for the same period in 2000. Propane gas sales increased 48 percent to
$298,000 in the second quarter of 2000 from $201,000 for the same period in
1999 as Virginia Gas's customer base increased to 4,800 from 3,500 and gallons
sold increased to 280,000 from 250,000. The largest decline in revenues
occurred in storage revenues, which decreased to $669,000 for the second
quarter of 2000 from $708,000 for the second quarter of 1999. This decline was
due to the expiration of a gas storage contract. For the six months ended June
30, 2000, Virginia Gas had revenues of $6.3 million compared to $5.3 million
for the same period in 1999. The increase in revenues during the six months
ended June 30, 2000, primarily resulted from increased natural gas sales and
growth in propane distribution, offset in part by decreased storage revenues.
Cost of Gas Sold; Propane Gas Expense. During the second quarter of 2000,
the cost of gas sold increased sharply to $1,251,000 compared to $636,000 in
1999, due to rising gas prices and increased gas sales. The amount of gas sold
increased 159,000 dths from 321,000 dths for the three months ending June 30,
1999, to 480,000 dths for the same period in 2000. The cost of gas sold
increased from an average of $1.98 per dth for the second quarter of 1999 to
$2.61 per dth for the second quarter of 2000. Virginia Gas's cost of gas sold
increased from $1.1 million for the six months ended June 30, 1999, to $1.8
million for the same period in 2000 primarily due to increased gas prices and
increased gas sales.
During the second quarter of 2000, cost of propane sold increased to
$157,000 from $101,000 during the second quarter of 1999 as a result of higher
volumes. Propane margins increased $0.04 per gallon from $0.41 for the three
months ended June 30, 1999, to $0.45 for the same period in 2000. Average sales
price per gallon increased to $0.95 for the second quarter of 2000 compared to
$0.82 for the same period of 1999, and the cost per unit also increased to
$0.49 per gallon from $0.40 per gallon. The cost of propane increased to
$655,000 for the six months ended June 30, 2000, from $353,000 for the same
period in 1999 primarily as a result of increased volumes and higher average
sales prices per gallon.
General and Administrative Expense. General and administrative expense
increased during the quarter ended June 30, 2000, to $558,000 compared to
$429,000 for the same period in 1999. This increase is due primarily to (1) an
increase in wages expense, as Virginia Gas hired additional personnel to
operate its evaporator facility, and (2) an increase in professional fees
relating to Virginia Gas's exploration of strategic alternatives. For the six
months ending June 30, 2000, general and administrative expense totaled
$1,084,000 compared to $871,000 during the same period in 1999 primarily due to
increased wage expense and increased professional fees relating to Virginia
Gas's exploration of strategic alternatives.
Income From Affiliates. Income from affiliates improved during the second
quarter of 2000 to $99,000 from a loss of $10,000 during the same period in
1999. Affiliates income declined from $431,000 for the six months ended June
30, 1999, to $124,000 in 2000. The storage company reported net income of
$321,000 during the second quarter of 2000, compared to $107,000 during the
same period in 1999. The improvement
35
resulted from increased gas sales. The storage company had a large non-
recurring gas sale in the second quarter of 2000. For the six months ended June
30, 2000, the storage company had net income of $439,000 compared to $1,069,000
for the first six months of 1999. This decrease is due to the gain that was
recorded from the sale of the Haysi gathering system in the first quarter of
1999. Without the one-time gain related to the sale of the Haysi gathering
system in the first quarter of 1999, the storage company would have recorded
net income of $267,000 for the first six months of 1999. The distribution
company recorded a net loss of $124,000 for the first quarter of 2000 compared
to a net loss of $127,000 for the same period in 1999 as gas sales increased 29
percent to $330,000 from $256,000. However, the distribution company's assets
continued to be underutilized as growth has yet to offset the cost of recent
capital additions. The distribution company reported a net loss of $192,000 for
the six months ended June 30, 2000, compared to a net loss of $208,000 for the
same period in 1999. The small improvement is the result of increased gas
sales.
Outlook
Virginia Gas began construction of segment 4 of its P-25 pipeline system
during the month of July 2000. Segment 4 runs 37 miles from Wytheville to
Radford, Virginia. Virginia Gas anticipates having the segment in service late
in the fourth quarter of 2000. The segment will serve 10,000 dths per day at
three different delivery points pursuant to a contract with Atmos Energy's
United Cities Gas Company. Virginia Gas has also begun the right-of-way
acquisition process for segment 5 of its P-25 pipeline. Segment 5 will run 45
miles from Radford to Roanoke, Virginia.
In June 2000, Virginia Gas entered into a contract to purchase rights
associated with the expansion of its salt cavern storage facility in Saltville,
Virginia. Virginia Gas has begun engineering studies and has developed a
project management plan for the expansion of the facility. Virginia Gas expects
to begin the expansion project in the fourth quarter of 2000.
Financial Condition
Virginia Gas has classified $24 million of long-term debt as current due to
non-compliance with its debt covenants, which has resulted in Virginia Gas's
independent auditor expressing uncertainty regarding Virginia Gas's ability to
continue as a going concern in its report that accompanies Virginia Gas's
Annual Report on Form 10-KSB for the year ended December 31, 1999. Although
Virginia Gas has made all required principal and interest payments when due,
Virginia Gas's covenants require it to maintain certain financial ratios. One
covenant requires Virginia Gas to maintain historical EBITDA of one and three-
quarters times current debt service. Virginia Gas currently is unable to comply
with this covenant and is, therefore, in default under its debt agreements with
John Hancock and Wachovia Bank. Borrowings under the interim financing facility
with NUI will result in additional defaults under these agreements. Absent an
alternative source of financing or a conversion of a substantial portion of its
assets to cash, Virginia Gas has no present means of curing these covenant
defaults. Virginia Gas's lenders have the right to demand the amounts due
(approximately $33 million, including prepayment penalties) at any time.
If Virginia Gas's lenders exercise their rights and seek remedies available
to them under the loan documents, or if NUI declares all amounts outstanding
under the NUI credit facility immediately due and payable, which it would have
the right to do if there are additional defaults under the bank loan
agreements, the forced liquidation or bankruptcy of Virginia Gas may be
necessary. In those circumstances, Virginia Gas stockholders may lose their
entire investment in Virginia Gas. See "INTERIM FINANCING" on page 27.
Forward Looking Statements
Certain of the statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations are forward-looking.
While Virginia Gas believes that these statements are accurate, Virginia Gas's
business is dependent upon general economic conditions and various conditions
specific to its industry, and future trends and these factors could cause
actual results to differ materially from the forward looking statements that
have been made. In particular:
. Virginia Gas's growth plans are contingent on its ability to affordably
finance future capital expenditures through the debt and equity markets.
If Virginia Gas is unable to finance capital expenditures, revenue growth
and earnings will be negatively impacted.
36
. Virginia Gas's revenue growth depends on future demand for pipeline and
storage services. Many factors impact that demand. A continued trend of
warmer than normal winters in Virginia Gas's service area could
substantially curb the demand for natural gas storage and/or pipeline
service. "Unbundling" or deregulation in the natural gas industry could
introduce additional competitors and make the viability of long-term
contracts suspect.
. Virginia Gas derives 52 percent of its revenues from four customers.
Accordingly, the future of Virginia Gas is inexorably linked to these
significant customers. If any of these customers experience liquidity
problems or undergo consolidations, it could negatively impact Virginia
Gas.
BUSINESS OF NUI
NUI was incorporated in New Jersey in 1969 and is a multi-state energy
sales, services and distribution company. NUI's operations are organized and
managed under three primary segments: distribution services, energy sales and
services and customer services.
The distribution services segment distributes natural gas in six states
through NUI's regulated utility divisions, which are regulated as to price,
safety and return by the regulatory commissions of the states in which NUI
operates. The distribution services segment serves approximately 372,000
customers, of which 67 percent are in New Jersey and 33 percent are in other
states.
The energy sales and services segment reflects the operations of the NUI
Energy, NUI Energy Brokers and NUI Energy Solutions subsidiaries, as well as
off-system sales by the utility divisions. This segment offers wholesale and
retail energy sales, energy portfolio management, risk management, utility
asset management, project development and energy consulting services.
The customer services segment is comprised of the Utility Business Service
subsidiary and the appliance business operations. This segment provides
appliance repair, maintenance, installation and leasing; customer information
system services, including bill printing, mailing, collection and payment
processing; network analysis; facilities database management and operations
mapping and field computing for other utilities.
NUI's principal executive offices are located at 550 Route 202-206,
Bedminster, New Jersey 07921 (Telephone: (908) 781-0500).
37
PENDING NUI HOLDING COMPANY REORGANIZATION
On March 27, 2000, holders of NUI common stock approved a proposal to put in
place a holding company structure, which is commonly used throughout the
utility industry, through a share exchange. In the share exchange, NUI common
stock will be converted into new shares of NUI Holding common stock on a share-
for-share basis and NUI will become a wholly-owned subsidiary of NUI Holding.
NUI believes that this holding company structure will help to take full
advantage of federal and state regulatory changes intended to promote
competition among natural gas and electricity suppliers. The holding company
structure should help NUI focus on and develop diversification activities in
areas related to NUI's core business of energy sales and marketing and energy
distribution. NUI believes that the holding company structure will give NUI
more flexibility to pursue unregulated business and financing opportunities and
also help NUI protect its regulated business from the risks and costs
associated with unregulated activities.
These charts show NUI's existing structure and the proposed structure for
NUI Holding:
Current Structure
Current NUI common shareholders
NUI
(including all regulated utilities)
NUI Capital Corp.
Unregulated Subsidiaries
Holding Company Structure
Current NUI common shareholders
NUI Holding Company
(to be renamed NUI Corporation following the restructuring)
------------------------------------------
NUI Utilities, Inc. (current NUI) NUI Capital Corp.
(including all regulated utilities)
Unregulated Subsidiaries
As part of the restructuring, NUI will change its name to NUI Utilities,
Inc. and intends to transfer its ownership interests in NUI Capital Corp. so
that all of its unregulated subsidiaries will become direct or indirect
subsidiaries of NUI Holding.
38
DESCRIPTION OF NUI AND NUI HOLDING CAPITAL STOCK
The following description of the NUI and NUI Holding capital stock does not
purport to be complete and is subject, in all respects, to applicable New
Jersey law and to the provisions of NUI's and NUI Holding's certificates of
incorporation. The terms of NUI Holding capital stock are substantially the
same as those of NUI.
General
NUI's and NUI Holding's authorized capital stock consists of 30,000,000
shares of common stock, without par value, and 5,000,000 shares of preferred
stock, without par value. NUI's board has designated a series of 100,000 shares
of Series A Junior Participating preferred stock, without par value, in
connection with the adoption of its Rights Agreement. Although NUI Holding has
not adopted a shareholder rights plan, it plans to do so and to designate a
series of preferred stock shortly after the holding company reorganization is
completed.
Common Stock
On September 29, 2000, there were 12,969,889 shares of NUI common stock
outstanding. On September 29, 2000, no shares of NUI Holding common stock were
outstanding. All outstanding shares of NUI common stock are, and the shares
offered hereby, when issued, will be, fully paid and nonassessable. All holders
of NUI and NUI Holding common stock have voting rights and are entitled to
one vote for each share held of record on all matters submitted to a vote of
the shareholders. Holders of NUI and NUI Holding common stock do not have the
right to cumulate votes in the election of directors and do not have a right of
redemption or any preferential right of subscription for any securities of NUI
or NUI Holding.
Subject to preferences that may be applicable to any shares of NUI or NUI
Holding preferred stock outstanding at the time, holders of NUI and NUI Holding
common stock are entitled to dividends when and as declared by NUI's or NUI
Holding's board from funds legally available therefor and are entitled, in the
event of liquidation, to share ratably in all assets remaining after payment of
liabilities.
Preferred Stock
On September 29, 2000, there were no shares of Series A preferred stock
outstanding. The Series A preferred stock is issuable under the terms of NUI's
Rights Agreement.
NUI's and NUI Holding's respective boards have the authority, without
further shareholder action, to issue from time to time all or any part of the
authorized NUI and NUI Holding preferred stock. Additional NUI and NUI Holding
preferred stock is issuable in one or more series, and NUI's and NUI Holding's
respective boards are authorized to determine the designation and number of
shares in each series and to fix the dividend, redemption, liquidation,
retirement, conversion and voting rights, if any, of such series, and any other
rights and preferences thereof. Any shares of NUI or NUI Holding preferred
stock that may be issued may have disproportionately high voting rights or
class voting rights, may be convertible into shares of NUI or NUI Holding
common stock, as appropriate, and may rank prior in right to shares of NUI or
NUI Holding common stock as to payment of dividends and upon liquidation.
Although the issuance of additional NUI or NUI Holding preferred stock may have
an adverse effect on the rights (including voting rights) of holders of NUI or
NUI Holding common stock, the consent of the holders of NUI and NUI Holding
common stock would not be required for any such issuance. In addition, the
issuance of additional NUI or NUI Holding preferred stock may have the effect
of delaying, deferring or preventing a change in control of NUI or NUI Holding,
as applicable. NUI has no current plans to issue any new series of NUI
preferred stock. Other than in connection with NUI Holding's proposed
shareholder rights plan, NUI Holding has no current plans to issue any new
series of NUI Holding preferred stock.
39
COMPARATIVE RIGHTS OF HOLDERS OF VIRGINIA GAS COMMON
STOCK AND NUI AND NUI HOLDING COMMON STOCK
The following is a comparison of certain of the rights of holders of
Virginia Gas common stock and those of holders of NUI and NUI Holding common
stock. Because NUI and NUI Holding are organized under the laws of the State of
New Jersey and Virginia Gas is organized under the laws of the State of
Delaware, differences in the rights of holders of Virginia Gas common stock and
those of holders of NUI and NUI Holding common stock arise from differing
provisions of Delaware law and New Jersey law, in addition to differing
provisions of Virginia Gas's and NUI's and NUI Holding's respective
organizational documents. Except as noted below, the organizational documents
of NUI and NUI Holding are substantially the same.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of
Virginia Gas common stock and those of holders of NUI and NUI Holding common
stock. The identification of specific provisions or differences is not meant to
indicate that other equally or more significant differences do not exist. This
summary is qualified in its entirety by reference to New Jersey law and
Delaware law and by the governing corporate instruments of Virginia Gas, NUI
and NUI Holding, to which stockholders are referred.
Authorized Capital Stock
NUI. NUI's and NUI Holding's authorized capital stock consists of 30,000,000
shares of common stock and 5,000,000 shares of preferred stock. On September
29, 2000, 12,969,889 shares of NUI common stock and no shares of NUI preferred
stock were issued and outstanding and 716,800 shares of NUI common stock were
reserved for issuance pursuant to NUI's stock-based benefit plans. On September
29, 2000, no shares of NUI Holding common stock and no shares of NUI Holding
preferred stock were issued and outstanding and no shares of NUI Holding common
stock were reserved for issuance pursuant to NUI Holding's stock-based benefit
plans. The NUI and NUI Holding board may determine the preferences, limitations
and relative rights, to the extent permitted by New Jersey law, of any class or
series of shares of preferred stock before issuance of such shares. The
issuance of such shares does not require the approval of the holders of NUI or
NUI Holding common stock, as applicable.
Virginia Gas. Virginia Gas's authorized capital stock consists of
100,000,000 shares of common stock, $.001 par value, and 1,000,000 shares of
preferred stock, without par value. On September 29, 2000, 5,504,906 shares of
Virginia Gas common stock and no shares of preferred stock were outstanding,
255,000 shares of Virginia Gas common stock were reserved for issuance pursuant
to Virginia Gas's stock-based benefit plans and 943,149 shares of Virginia Gas
common stock were reserved for issuance upon the exercise of outstanding
warrants. The Virginia Gas board may determine the preferences, limitations and
relative rights, to the extent permitted by Delaware law, of any class or
series of shares of Virginia Gas preferred stock before issuance of such
shares. The issuance of such shares does not require the approval of the
holders of Virginia Gas common stock.
Stockholder Rights Plans
NUI. In November 1995, NUI's board adopted a shareholder rights plan under
which holders of NUI common stock were issued as a dividend one "right" to buy
one one-hundredth of a share of Series A Junior Participating Preferred Stock
at a purchase price of $50 for each share of NUI common stock held. The rights
initially attached to the shares of NUI common stock and can be exercised or
transferred only if a person or group, with certain exceptions, acquires, or
commences a tender offer to acquire, beneficial ownership of 15 percent or more
of NUI common stock. The non-acquiring shareholders may use each right, except
any rights held by the acquirer, to purchase, at the right's exercise price,
shares of NUI common stock with a market value equivalent to twice the right's
exercise price. When shareholders exercise their rights in this way, they will
substantially reduce the acquirer's ownership percentage.
40
NUI may redeem the rights at $0.001 per right at any time before any of the
above events take place. All rights expire on November 27, 2005. Immediately
after the NUI holding company reorganization is effective, NUI Holding
anticipates entering into a shareholder rights agreement similar to the one
described above.
Virginia Gas. The Virginia Gas board has not adopted a stockholder rights
plan.
Directors
NUI. New Jersey law allows for a board of one or more members. The
certificates of incorporation of NUI and NUI Holding both provide for between
eight and twenty-five directors, subject to possible variance if the NUI or NUI
Holding board grants some specified rights to preferred shareholders. The NUI
and NUI Holding boards currently consist of eight directors.
Under NUI's and NUI Holding's bylaws, the NUI and NUI Holding boards are
divided into three classes, as nearly equal in number as possible. At each
annual election of directors, the successors to those directors whose term is
expiring are elected to hold office until the annual meeting of shareholders
held in the third year following their election. No decrease in the number of
directors shall shorten the term of any incumbent director.
Directors are elected by a majority vote of shareholders entitled to vote at
a meeting at which a quorum is present. Holders of NUI and NUI Holding common
stock do not have cumulative voting rights in the election of directors.
Virginia Gas. Delaware law provides that the board of directors of a
Delaware corporation shall consist of the number of individuals specified in or
fixed in accordance with the bylaws or the certificate of incorporation of the
corporation. The Virginia Gas board currently consists of five directors.
Under Virginia Gas's bylaws, the Virginia Gas board is divided into three
classes with the number of directors divided equally so far as possible among
the three classes. At each annual election of directors, the successors to the
directors of each class whose term expires in that year are elected to hold
office for a term of three years from their date of election. No decrease in
the number of directors shall have the effect of shortening the term of office
of any incumbent director.
Directors are elected by a majority of the votes cast by holders of Virginia
Gas common stock entitled to vote at a meeting at which a quorum is present.
Holders of Virginia Gas common stock do not have cumulative voting rights in
the election of directors.
Removal of Directors
NUI. The certificates of incorporation of NUI and NUI Holding allow for
removal of directors by the shareholders only for cause. The affirmative vote
of the holders of 75 percent of the then outstanding voting stock, voting as a
single class, is required to remove directors.
Virginia Gas. A member of the Virginia Gas board may be removed with or
without cause by the holders of a majority of shares of Virginia Gas stock then
entitled to vote in the election of directors.
Vacancies on the Board of Directors
NUI. Vacancies on the NUI or NUI Holding boards, and any newly created
directorships resulting from any increase in the size of the NUI or NUI Holding
boards, may only be filled by the majority of directors then holding office,
or, if New Jersey law expressly allows, by a 75 percent vote of the
shareholders at a special meeting.
41
Virginia Gas. Vacancies on the Virginia Gas board and newly created
directorships resulting from an increase in the number of directors may be
filled by a majority of the directors then in office, although less than a
quorum, or by the sole remaining director, and each director so elected shall
serve until the sooner of (1) the unexpired term of the directorship to which
he is elected, (2) until his successor is elected and qualified or (3) until
his earlier resignation or removal.
Notice of Stockholder Nominations of Directors and Stockholder Proposals
NUI. The NUI and NUI Holding bylaws provide that a shareholder may propose
business for consideration, or nominate candidates for director for election,
upon written notice from the shareholder received not less than 90 nor more
than 120 days before the meeting, provided, however, if less than 100 days'
notice or prior public disclosure of the date of the annual meeting is given or
made to shareholders, a shareholder's notice must be received not later than
the tenth day following the day the notice was mailed or publicly disclosed,
whichever occurs earlier.
Virginia Gas. The Virginia Gas bylaws provide that a stockholder may propose
business for consideration, or nominate candidates for director for election,
upon written notice from the stockholder received not less than 90 days before
the date of the meeting, provided, however, if less than 100 days' notice or
prior public disclosure of the date of the annual meeting is given or made to
stockholders, a stockholder's notice must be received not later than the tenth
day following the day the notice was mailed or publicly disclosed, whichever
occurs earlier.
Director Standard of Conduct
NUI. Under New Jersey law, directors and members of any committee designated
by the board of directors shall discharge their duties in good faith and with
that degree of diligence, care and skill which ordinarily prudent people would
exercise under similar circumstances in like positions.
Virginia Gas. Delaware common law requires that a director of a Delaware
corporation discharge his or her duties as a director in accordance with the
fiduciary duties of care and loyalty. The duty of care requires that directors,
in performing their corporate duties, exercise the care that an ordinarily
prudent person would exercise under similar circumstances. The duty of loyalty
prohibits self-dealing by directors.
Limitations on Director Liability
NUI. The NUI and NUI Holding certificates of incorporation provide that a
director shall not be personally liable to the corporation, or to its
shareholders, for monetary damages for breaches of their fiduciary duty of
care, provided, however, that a director or officer cannot be relieved from
liability for any breach of duty based upon an act or omission (1) in breach of
such person's duty of loyalty to the entity or its shareholders, (2) not in
good faith or involving a knowing violation of law or (3) resulting in the
receipt by such person of an improper personal benefit.
Virginia Gas. The Virginia Gas certificate of incorporation provides that a
director shall not be personally liable to Virginia Gas or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to Virginia Gas
or its stockholders, (2) for acts or omissions not in good faith or which
involved intentional misconduct or a knowing violation of law, (3) for any
transaction from which the director derived an improper personal benefit or
(4) under Section 174 of the Delaware General Corporation Law.
Indemnification
NUI. As authorized under New Jersey law, NUI's and NUI Holding's
certificates of incorporation provide that a director or officer shall not be
personally liable to the corporation or its shareholders for
42
monetary damages for a breach of fiduciary duty owed to the corporation, except
to the extent that such exemption from, or a limitation of, liability is not
permitted under the New Jersey Business Corporation Act.
Under their respective certificates of incorporation, NUI and NUI Holding
are required, to the fullest extent permitted by the New Jersey Business
Corporation Act or any other law, to indemnify and hold harmless their
respective directors, officers, employees and agents. The New Jersey Business
Corporation Act provides that a corporation may indemnify its directors,
officers, employees or agents against judgments, fines, penalties, amounts paid
in settlement and expenses, including attorney's fees, resulting from various
types of legal actions or proceedings if the party being indemnified acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and in any criminal proceeding, such
party being indemnified had no reasonable cause to believe his conduct was
unlawful. In proceedings by or in the right of the corporation, a party seeking
to be indemnified, when the above standards of conduct are found as set forth
in the previous sentence, may be indemnified for expenses. However, if a court
judges a party seeking to be indemnified liable to the corporation, no
indemnification shall be provided except as the court deems proper. A party
seeking to be indemnified must be indemnified against expenses by the
corporation to the extent such party has been successful on the merits or
otherwise in a proceeding arising out of such party's duties.
Virginia Gas. The Virginia Gas bylaws provide that Virginia Gas shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was, at any time prior to or during which such provision is
in effect, a director, officer, employee or agent of Virginia Gas, or is or
was, at any time prior to or during which such provision is in effect, serving
at the request of Virginia Gas as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against reasonable expenses (including attorneys' fees),
judgments, fines, penalties, amounts paid in settlement and other liabilities
actually and reasonably incurred by such person in connection with such action,
suit or proceeding to the fullest extent permitted by the Delaware General
Corporation Law, upon such determination having been made as to such person's
good faith and conduct.
Mergers, Share Exchanges and Sales of Assets
NUI. New Jersey law generally requires that any merger, share exchange or
sale of assets of a corporation other than in the regular course of business be
approved by the affirmative vote of a majority of the votes cast by the holders
of shares entitled to vote. The NUI and NUI Holding certificates of
incorporation and bylaws do not contain any provisions that alter this voting
requirement.
Virginia Gas. Delaware law generally requires that any merger or sale of all
or substantially all of the assets of a corporation not in the ordinary course
of business be approved by the affirmative vote of the majority of the issued
and outstanding shares entitled to vote. The Virginia Gas certificate of
incorporation and bylaws do not contain any provisions that alter this voting
requirement.
Anti-Takeover Statutes
NUI. The New Jersey Business Corporation Act provides that in determining
whether a proposal or offer to acquire a corporation is in the best interest of
the corporation, a board of directors may, in addition to considering the
effects of any action on shareholders, consider (1) the effects of the proposed
action on the corporation's employees, suppliers, creditors and customers, (2)
the effects on the community in which the corporation operates and (3) the
longer-term as well as short-term interests of the corporation and its
shareholders, including the possibility that those interests may be served best
by the continued independence of the corporation.
The statute also provides that if, based on those factors, a board
determines that the offer is not in the best interest of the corporation, it
may reject the offer.
43
The New Jersey Stockholders Protection Act prohibits some specified business
combinations between an "interested shareholder" and a "resident domestic
corporation." An "interested shareholder" is one that is directly or indirectly
a beneficial owner of 10 percent or more of the voting power of the outstanding
voting stock of a resident domestic corporation. The prohibitions are as
follows: (1) specified business combinations are prohibited for five years
after the date the interested shareholder acquired its stock, unless the
business combination was approved by the resident domestic corporation's board
of directors before the interested shareholder's stock acquisition date and (2)
after the five-year period, the prohibition on certain business combinations
continues unless (a) the combination is approved by the affirmative vote of
two-thirds of the voting stock not beneficially owned by the interested
shareholder, (b) the combination is approved by the board before the interested
shareholder's stock acquisition date or (3) the corporation's common
shareholders receive payment for their shares that meets standards prescribed
in the statute.
Virginia Gas. Section 203 of the Delaware General Corporation Law provides
that a corporation shall not engage in any "business combination" with any
"interested stockholder" for a period of three years following the time that
such stockholder became an interested stockholder, unless (1) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder, (2) upon consummation of the transaction that resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85 percent of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer
or (c) at or subsequent to such time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock that is not owned by the interested
stockholder. A "business combination" under the Delaware General Corporation
Law is generally defined as any of the following transactions involving the
corporation and an interested stockholder thereof: (1) a merger or
consolidation; (2) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10 percent or more of the corporation's assets; (3) an issuance
or transfer of the corporation's stock; (4) a transaction having the effect of
directly or indirectly increasing the proportionate share of the corporation's
stock held by such interested stockholder; or (5) any receipt by such
interested stockholder of the benefit of any loans, guarantees, pledges or
other financial benefits. An "interested stockholder" under the Delaware
General Corporation Law is generally defined as any person owning 15 percent or
more of the corporation's outstanding voting stock.
Amendments to Certificate of Incorporation and Bylaws
NUI. Under New Jersey law, unless a greater vote is specified in the
certificate of incorporation, the affirmative vote of a majority of the votes
cast by shareholders of the corporation entitled to vote is required for (1)
any amendment to a New Jersey corporation's certificate of incorporation, (2) a
voluntary dissolution of the corporation, (3) a sale or other disposition of
all or substantially all of a corporation's assets other than in the ordinary
course of business or (4) a merger or consolidation of the corporation with
another corporation.
The certificates of incorporation of NUI and NUI Holding contain provisions
specifying that the affirmative vote of holders of at least 75 percent of all
the then outstanding shares of voting stock, voting as a single class, is
required to alter certain provisions of the certificate of incorporation or of
the bylaws having the same effect.
Virginia Gas. Delaware law and Virginia Gas's certificate of incorporation
and bylaws provide that its certificate of incorporation may be amended by the
Virginia Gas board and by the affirmative vote of the holders of a majority of
the outstanding shares entitled to vote. Virginia Gas's bylaws may be made,
repealed, altered, amended or rescinded by a vote of not less than a majority
of the total voting power of all shares of the stock of Virginia Gas entitled
to vote in the election of directors, considered for this purpose as one class.
44
Dissenters' Rights
NUI. Under New Jersey law, any shareholder of a New Jersey corporation has
the right to dissent from, and an appraisal of the "fair value" of his or her
shares in the event of the consummation of a merger, consolidation or sale,
lease, exchange or other disposition of all or substantially all of the
corporation's assets not in the usual or regular course of business, provided
that, unless the certificate of incorporation otherwise provides, a shareholder
shall not have the right to dissent from any merger, consolidation or
disposition of assets with respect to shares of a class or series which is
listed on a national securities exchange or is held of record by not less than
1,000 record shareholders or for which, pursuant to the merger, consolidation
or disposition of assets, he will receive (1) cash, (2) shares, obligations or
other securities which, upon consummation of the merger, consolidation or
disposition of assets, will either be listed on a national securities exchange
or held of record by not less than 1,000 holders or (3) cash and such
securities.
A corporation may provide in its certificate of incorporation that holders
of all classes of its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated above.
Virginia Gas. Under Delaware law, a stockholder of a Delaware corporation is
entitled to an appraisal by the Court of Chancery of the "fair value" of his or
her shares in the event of the consummation of a merger or consolidation to
which the corporation is a party, provided that either (1) approval by the
stockholders of the corporation is required for the merger pursuant to Delaware
law or the corporation's certificate of incorporation and the stockholder is
entitled to vote or (2) the corporation is a subsidiary being merged with its
parent or another subsidiary of the parent pursuant to a particular Delaware
law provision for such transactions and all of the stock of the corporation is
not owned by the parent corporation.
With respect to shares of any class or series that are either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held by at least 2,000 record stockholders, appraisal rights
are not available to the holders of such shares by reason of a merger or
consolidation unless the holders thereof are required by the terms of an
agreement of merger or consolidation to accept for such stock anything except
(1) cash in lieu of fractional shares, (2) shares of the surviving corporation
or shares of any other corporation that are either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the NASD or held by more than 2,000 record
stockholders or (3) a combination of cash in lieu of fractional shares and such
shares.
A Delaware corporation may provide in its certificate of incorporation that
appraisal rights shall be available for the shares of any class or series of
its stock as a result of an amendment to its certificate of incorporation, any
merger or consolidation to which the corporation is a party or the sale of all
or substantially all of the assets of the corporation.
A stockholder who has the right to appraisal in connection with a
transaction and to receive payment of the "fair value" of his or her shares
must follow specific procedural requirements as set forth in Delaware law in
order to maintain such right and obtain such payment.
FEDERAL SECURITIES LAWS CONSEQUENCES;
STOCK TRANSFER RESTRICTION AGREEMENTS
This document does not cover any resales of the NUI or NUI Holding common
stock to be received by Virginia Gas's stockholders upon consummation of the
merger, and no person is authorized to make any use of this document in
connection with any such resale.
All NUI or NUI Holding common stock that Virginia Gas stockholders receive
in the merger will be freely transferable, with the exception of the NUI or NUI
Holding common stock received by persons who are deemed to be "affiliates" of
Virginia Gas under the Securities Act of 1933 at the time of the annual
meeting.
45
These "affiliates" who receive NUI common stock in the merger may only resell
that stock in transactions permitted by Rule 145 under the Securities Act of
1933 or as otherwise permitted under that Act. Persons who may be deemed to be
affiliates of Virginia Gas for such purposes generally include individuals or
entities that control, are controlled by, or are under common control with,
Virginia Gas and may include some officers, directors and principal
stockholders of Virginia Gas. The merger agreement requires Virginia Gas to
seek to deliver or cause to be delivered to NUI on or prior to the effective
time of the merger from each of those affiliates an executed letter agreement
to the effect that those persons will not offer or sell or otherwise dispose of
any NUI or NUI Holding common stock issued to them in the merger in violation
of the Securities Act of 1933.
LEGAL MATTERS
The validity of the common stock to be issued in connection with the merger
will be passed upon by James R. Van Horn, Esq. as counsel for NUI and NUI
Holding. It is a condition to the consummation of the merger that NUI and
Virginia Gas receive an opinion from Hunton & Williams, legal counsel to NUI,
to the effect that the merger will be a reorganization for federal income tax
purposes. We describe the conditions for consummation of the merger under the
heading "PROPOSAL NO. 1: THE MERGER--Conditions to the Merger."
EXPERTS
The consolidated financial statements of NUI as of and for the three fiscal
years in the period ended September 30, 1999, incorporated herein by reference
from the NUI Annual Report (Form 10-K) for the year ended September 30, 1999,
have been audited by Arthur Andersen LLP, independent auditors, as indicated in
their report with respect thereto. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing in giving said
report.
The consolidated financial statements of Virginia Gas as of and for the two
fiscal years in the period ended December 31, 1999, incorporated herein by
reference from the Virginia Gas Annual Report (Form 10-KSB) for the year ended
December 31, 1999, have been audited by Arthur Andersen LLP, independent
auditors, as indicated in their report with respect thereto. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing in giving said report. Reference is made to said report, which
includes an explanatory paragraph with respect to the uncertainty regarding
Virginia Gas's ability to continue as a going concern as discussed in Notes 2
and 8 of the consolidated financial statements.
Representatives of Arthur Andersen LLP are expected to be present at the
annual meeting. These representatives will have the opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
PROPOSAL NO. 2: ELECTION OF DIRECTORS
The Virginia Gas board is divided into three classes of directors, with each
serving staggered three year terms. The Virginia Gas board currently consists
of five directors. The directors nominated for election at the 2000 annual
meeting are Everette G. Allen, Jr. and G. Lee Crenshaw, II. The nominees, if
elected, will serve until the effective time of the merger, or, if the merger
agreement is not approved and adopted or the merger is not completed, until the
annual meeting of stockholders held in 2003 and until their respective
successors are elected and qualified. To be elected as directors, the nominees
must each receive the favorable vote of a majority of the shares represented
and entitled to vote at the meeting. Although the nominees currently intend to
serve on the Virginia Gas board, if the nominees should decline or be unable to
serve, the Virginia Gas board may designate a substitute nominee. Virginia Gas
has no reason to believe that the nominees will decline or be unable to serve.
46
Set forth below for each nominee is information regarding their age, the
periods during which they have served as directors, their business experience
during at least the past five years and other directorships currently held by
the nominees.
Everette G. Allen, Jr., age 59, has served as a director of Virginia Gas
since January 1998. He has served as Chairman of Hirschler, Fleischer,
Weinberg, Cox & Allen, a law firm located in Richmond, Virginia, since 1986,
and has been employed by that firm since 1970. Mr. Allen is a director of
Hersha Hospitality Trust, a publicly traded real estate investment trust
registered on the American Stock Exchange. Mr. Allen has served as a member of
the Board of Trustees for Randolph-Macon College and is a Fellow with the
American College of Trial Lawyers. He is a Phi Beta Kappa graduate of Randolph-
Macon College and a graduate of the University of Virginia School of Law.
G. Lee Crenshaw, II, age 41, has served as a director of Virginia Gas since
January 1998. He has served as a director and Senior Vice President of Anderson
& Strudwick, Inc. since 1994. From 1991 to 1994 he was employed at Scott &
Stringfellow, Inc. as Vice President. Mr. Crenshaw was employed as a
stockbroker at Wheat, First Securities, Inc. from 1982 to 1991. He is a
graduate of Virginia Commonwealth University.
The Virginia Gas board recommends that you
vote "FOR" the election of the nominees.
Continuing Directors
Set forth below is information regarding Virginia Gas's continuing
directors, their ages, the period during which they have served as a director,
their business experience during at least the past five years and other
directorships currently held by them.
Glenn B. Rogers, age 61, served as Senior Vice President of Marketing and
Gas Supply for United Cities Gas Company from 1970 until his retirement in
October 1997. In this position, he was responsible for the propane operations
of United Cities Gas Company. From 1979 to 1987, Mr. Rogers served United
Cities Gas Company as Group Vice President of Gas Supply, Marketing and Rates
and from 1976 to 1979 he served as Vice President of Gas Supply. Mr. Rogers is
a past president of the Southeastern Gas Association. He also serves as a
director of Vietti Food Corporation. Mr. Rogers holds a B.S. degree in
mathematics from Peabody College and a Master's degree in mathematics from
Southeast Oklahoma State College. Mr. Rogers' term as a director expires in
2001. Mr. Rogers was elected Chairman of the Board in April 1999.
Karen K. Edwards, age 42, has served as Vice President and director of
Virginia Gas since its formation in 1987. She served as Treasurer until
September 1995 and as Secretary until March 1998. Mrs. Edwards received a
Bachelor's degree in Business Administration from the University of Colorado
and an MBA from the Colgate Darden Graduate School of Business at the
University of Virginia. Mrs. Edwards' term as a director expires in 2001. She
is the wife of Michael L. Edwards.
Michael L. Edwards, age 47, has served as President and director of Virginia
Gas since its formation in 1987 and Chairman from 1987 to April 1999. He also
serves as President of Virginia Gas Exploration Company, Virginia Gas Pipeline
Company, Virginia Gas Marketing Company, Virginia Gas Propane Company, Virginia
Gas Storage Company and Virginia Gas Distribution Company. From 1983 to 1986,
Mr. Edwards served as Executive Vice President and director of Petroleum
Development Corporation. Mr. Edwards is a Phi Beta Kappa graduate of the
University of California, Berkeley and he received an MBA from the Stanford
University School of Business. Mr. Edwards' term as a director expires in 2002.
He is the husband of Karen K. Edwards.
Additional Information About the Virginia Gas Board of Directors and Committees
The Virginia Gas board held nine meetings during 1999. Each incumbent
director attended more than 75 percent of the aggregate number of meetings of
the Virginia Gas board and the committees on which such director served in
1999. The Virginia Gas board has standing audit, nominating and compensation
committees.
47
The audit committee, composed of Everette G. Allen, Jr., G. Lee Crenshaw, II
and Karen K. Edwards, recommends the independent public accountants to be
appointed by the Virginia Gas board as auditor of Virginia Gas, its
subsidiaries and affiliated companies. The audit committee also reviews the
results, findings and recommendations of audits performed by the independent
public accountants, the significant accounting policies of Virginia Gas and the
system of internal controls. It reports to the Virginia Gas board and makes
such investigations as it deems appropriate. The audit committee met one time
during 1999.
The nominating committee is composed of Michael L. Edwards, G. Lee Crenshaw,
II and Glenn B. Rogers. This committee reviews the qualifications of persons
recommended for membership to the Virginia Gas board and nominates such persons
for election by the stockholders of Virginia Gas. The nominating committee met
one time during 1999. The committee also considers nominees for directors
recommended by stockholders. Such recommendations, with relevant supporting
data, should be submitted to William L. Clear, Chief Financial Officer, at the
Virginia Gas corporate office.
The compensation committee is composed of Michael L. Edwards and Glenn B.
Rogers. This committee reviews compensation paid to employees, officers and
directors of Virginia Gas and presents recommendations to the Virginia Gas
board regarding compensation. The compensation committee met one time during
1999.
Compensation of Directors. During 1999, Virginia Gas directors received
$2,500 for each Virginia Gas board meeting they attended. Virginia Gas
directors also received an additional $2,500 for serving on the audit
committee. As of February 22, 2000, members of a special committee as well as
the audit committee are compensated $1,250 for each meeting attended, up to a
total of eight meetings. All other committee members receive $250 for each
meeting attended. Virginia Gas directors are eligible to participate in
Virginia Gas's 1998 Stock Option Plan. No stock options were granted during
fiscal year 1999 to any directors.
Executive Compensation. The following table presents information concerning
the annual compensation of the Chief Executive Officer. No officer, except Mr.
Edwards, received more than $100,000 in salary and bonus during 1999. This
table presents compensation for services rendered by Mr. Edwards in all
capacities to Virginia Gas in 1999, 1998 and 1997.
Summary Compensation Table
Annual
Compensation
----------------- All Other
Name and Principal Position Year Salary(1) Bonus Compensation
--------------------------- ---- --------- ------- ------------
Michael L. Edwards...................... 1999 $155,000 $ -- $27,364(2)
President and Chief 1998 $155,000 $31,802 $32,441
Executive Officer 1997 $157,917 $50,000 $32,837
- --------
(1) Amounts include cash compensation earned and received by the named officer
as well as amounts deferred under a 401(k) Savings Plan.
(2) Amounts shown include Virginia Gas contributions to a 401(k) Savings Plan
of $10,000, life insurance premiums of $6,500, board fees of $10,000 and
vehicle compensation of $864.
Employment Agreement. On May 23, 1996, Virginia Gas entered into a ten-year
employment agreement with Mr. Edwards, which provides for an annual salary of
$155,000. Mr. Edwards will also receive annual bonuses computed on the basis of
10 percent of Virginia Gas's pre-tax earnings on all amounts from $1,000,000 to
$1,999,999 and 15 percent of Virginia Gas's pre-tax earnings on all amounts in
excess of $2,000,000. Mr. Edwards' bonus for 1996 was $50,000 and was paid in
1997. Mr. Edwards' bonus for 1997 was $31,802 and was paid in 1998. There was
no bonus for 1998. Mr. Edwards' bonus for 1999 was $44,757 and was paid in
2000. In the event Mr. Edwards' employment is terminated by Virginia Gas for
any reason
48
other than for cause during the term of the employment agreement, at the
election of Mr. Edwards, Virginia Gas will be obligated to purchase all or a
portion of the shares held by him and/or his wife at a price equal to 150
percent of the market value of Virginia Gas's shares on the date of
termination. In addition, Virginia Gas will be obligated to pay Mr. Edwards in
a lump sum all salary amounts payable to Mr. Edwards through the term of the
employment agreement, plus an additional $2,000,000. This agreement will be
terminated if the merger occurs and Mr. Edwards will receive a severance
benefit. See "PROPOSAL NO. 1: THE MERGER--Interests of Virginia Gas's Directors
and Officers in the Merger" at page 23.
Security Ownership of Certain Beneficial Owners and Management. The
following table sets forth the beneficial ownership of common stock by Virginia
Gas's directors and executive officers as of September 30, 2000, as well as
additional information about beneficial owners of 5 percent or more of Virginia
Gas's common stock based upon filings with the SEC and to Virginia Gas's
knowledge.
Amount of Percent of
Name and Address of Beneficial Owner(1) Ownership Class
--------------------------------------- ----------- ----------
Dr. James T. Martin................................. 800,058(2) 14.53%
Eagle Top Long Road
Waitesville, Vermont 05673
The Kaufmann Fund, Inc. ............................ 593,000(3) 10.78%
140 East 45th Street
43rd Floor
New York, New York 10017
Edgemont Asset Management Corporation............... 593,000(3) 10.78%
140 East 45th Street
43rd Floor
New York, New York 10017
Lawrence E. Auriana................................. 837,200(3) 15.20%
140 East 45th Street
43rd Floor
New York, New York 10017
Michael L. and Karen K. Edwards..................... 752,576(2)(4) 13.67%
200 East Main Street
Abingdon, Virginia 24210
Michael L. Edwards.................................. 1,568,534(2)(5) 28.49%
Karen K. Edwards.................................... 9,900(2) *
G. Lee Crenshaw, II................................. 53,350(6) *
707 East Main Street
20th Floor
Richmond, Virginia 23219
Everette G. Allen, Jr. ............................. 115,000(7) 2.08%
Federal Reserve Bank Building
701 East Byrd Street
Richmond, Virginia 23219
Glenn B. Rogers..................................... 42,000(8) *
605 Westover Drive
Nashville, Tennessee 37205
All executive officers and directors as a group..... 1,833,021(2)(9) 33.30%
- --------
* Less than 1%.
49
(1) Except as otherwise noted, the address of the holder is in care of Virginia
Gas.
(2) Dr. Martin and Mr. and Mrs. Edwards are parties to a Shareholders Agreement
and Voting Trust with Virginia Gas under which Mr. Edwards, as trustee, is
the sole person authorized to vote the Virginia Gas stock held by the
stockholders party to the agreement, in accordance with the terms of the
agreement, in all elections of directors and on various other matters, not
including the merger. The agreement expires in 2001.
(3) Information concerning Virginia Gas common stock beneficially owned by The
Kaufmann Fund, Inc., Edgemont Asset Management Corporation and Lawrence E.
Auriana as of June 26, 2000, was obtained from a Schedule 13D, dated June
26, 2000, filed by these beneficial owners. According to this filing, The
Kaufmann Fund beneficially owns, and Edgemont and Mr. Auriana are deemed to
beneficially own, 593,000 shares of the common stock. Additionally, Mr.
Auriana reports that he owns another 244,200 shares of Virginia Gas's
common stock. The Kaufmann Fund has sole voting and dispositive power with
respect to 593,000 shares of Virginia Gas common stock. Each of Edgemont
and Mr. Auriana have shared voting and dispositive power with respect to
The Kaufmann Fund's 593,000 shares. Mr. Auriana has sole voting and
dispositive power with respect to 244,200 shares.
(4) Includes 363,663 shares that may be issued to Mr. and Mrs. Edwards upon
exercise of a presently exercisable warrant, the exercise price under which
is $9.90 per share. This warrant will be canceled if the merger occurs
under the terms of the Change of Control Agreement discussed under
"PROPOSAL NO. 1: THE MERGER--Interests of Virginia Gas's Directors and
Officers in the Merger" on page 23.
(5) Includes 6,000 shares owned by Mr. Edwards directly and 1,562,534 shares
which are beneficially owned by persons whose Virginia Gas stock he has the
right to vote under the agreement referred to in footnote (2).
(6) Includes 40,000 shares that may be issued to Mr. Crenshaw upon exercise of
stock options within 60 days of September 29, 2000, the exercise price
under which is $4.125. Mr. Crenshaw also holds options to acquire an
additional 20,000 shares that will become exercisable on October 1, 2001.
All 60,000 of such options will be converted into the right to receive
$1.00 in cash per option if the merger occurs under an amendment agreed to
by Mr. Crenshaw and discussed under "PROPOSAL NO. 1: THE MERGER--Interests
of Virginia Gas's Directors and Officers in the Merger" on page 23.
(7) Includes 40,000 shares that may be issued to Mr. Allen upon exercise of
stock options within 60 days of September 29, 2000, the exercise price
under which is $4.125. Mr. Allen also holds options to acquire an
additional 20,000 shares that will become exercisable on October 1, 2001.
All 60,000 of such options will be converted into the right to receive
$1.00 in cash per option if the merger occurs under an amendment agreed to
by Mr. Allen and discussed under "PROPOSAL NO. 1: THE MERGER--Interests of
Virginia Gas's Directors and Officers in the Merger" on page 23.
(8) Includes 40,000 shares that may be issued to Mr. Rogers upon exercise of
stock options within 60 days of September 29, 2000, the exercise price
under which is $4.125. Mr. Rogers also holds options to acquire an
additional 20,000 shares that will become exercisable on October 1, 2001.
All 60,000 of such options will be converted into the right to receive
$1.00 in cash per option if the merger occurs under an amendment agreed to
by Mr. Rogers and discussed under "PROPOSAL NO. 1: THE MERGER--Interests of
Virginia Gas's Directors and Officers in the Merger" on page 23.
(9) Includes the 483,663 shares referred to in footnotes (4), (6), (7) and (8)
that are subject to options or warrants that are or will become exercisable
within 60 days of September 29, 2000, as well as an additional 43,333
shares that may be issued to other executive officers upon the exercise of
stock options that are or will become exercisable within 60 days of
September 29, 2000.
Certain Relationships and Related Transactions. Robert C. Bright, who served
as Secretary of Virginia Gas from April 1998 through June 1999, is a
stockholder in the Law Offices of Robert C. Bright, a Professional Corporation,
which provides certain legal services to Virginia Gas. During 1998 and 1999,
Mr. Bright's law firm received legal fees from Virginia Gas of approximately
$300,000 and $115,000, respectively.
50
STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in the proxy statement for
Virginia Gas's 2001 annual meeting must comply with the requirements of the
SEC. A stockholder proposal generally will be voted on only if the stockholder
or the stockholder's representative attends the annual meeting and presents the
proposal. In the event that the merger agreement is not approved and adopted or
the merger is not otherwise consummated, stockholder proposals intended to be
presented at Virginia Gas's 2001 annual meeting must be received by Virginia
Gas's Secretary, 200 East Main Street, Abingdon, Virginia 24210, no later than
June 7, 2001, in order to be considered for inclusion in Virginia Gas's proxy
statement related to that meeting.
OTHER MATTERS
Virginia Gas's board does not know of any matters to be presented at the
annual meeting other than those set forth above. However, if any other matters
properly come before the annual meeting, proxies received pursuant to this
solicitation will be voted in accordance with the recommendation of the
Virginia Gas board, and discretionary authority to do so is included in the
proxy.
WHERE YOU CAN FIND MORE INFORMATION
NUI and NUI Holding have filed with the SEC a registration statement under
the Securities Act of 1933 that registers the NUI or NUI Holding common stock
to be issued to Virginia Gas stockholders in connection with the merger. The
registration statement, including the attached exhibits and schedules, contains
additional relevant information about NUI and NUI Holding common stock. The
rules and regulations of the SEC allow us to omit certain information included
in the registration statement from this proxy statement/prospectus.
In addition, NUI and Virginia Gas file reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may
read and copy this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may also obtain filed
documents from commercial document retrieval services (some of which also
provide on-line delivery).
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like NUI and
Virginia Gas, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You may inspect reports, proxy statements and other information about NUI at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. You may inspect reports, proxy statements and other information about
Virginia Gas at the offices of The Nasdaq SmallCap Market, 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878.
The SEC allows NUI and Virginia Gas to "incorporate by reference"
information into this proxy statement/prospectus. This means that NUI and
Virginia Gas can disclose important information to you by
51
referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this proxy
statement/prospectus, except for any information that is superseded by
information that is included directly in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that NUI has previously filed with the SEC. They contain important
information about NUI and its financial condition.
NUI SEC Filings Period
--------------- ------
Annual Report on Form 10-K....... For the fiscal year ended September 30,
1999, as filed on December 21, 1999 (as
amended on January 31, 2000)
Quarterly Reports on Form 10-Q... For the fiscal quarters ended December 31,
1999, March 31, 2000, and June 30, 2000, as
filed on February 14, 2000, May 15, 2000,
and August 14, 2000, respectively
This proxy statement/prospectus incorporates by reference the documents
listed below that Virginia Gas has previously filed with the SEC. They contain
important information about Virginia Gas and its financial condition.
Virginia Gas SEC Filings Period
------------------------ ------
Annual Report on Form 10-KSB..... For the fiscal year ended December 31,
1999, as filed on April 13, 2000 (as
amended on May 1, 2000)
Quarterly Reports on Form 10- For the fiscal quarters ended March 31,
QSB............................. 2000, and June 30, 2000, as filed on May
15, 2000, and August 14, 2000, respectively
Current Reports on Form 8-K...... Dated June 13, 2000, and September 13,
2000, as filed on June 16, 2000, and
September 21, 2000, respectively
NUI and Virginia Gas incorporate by reference additional documents that each
may file with the SEC between the date of this proxy statement/prospectus and
the date of the annual meeting. These documents include periodic reports, such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements. NUI also incorporates by
reference the description of NUI common stock in any of its registration
statements filed by it under the Securities Exchange Act of 1934, including any
amendment or report filed for the purpose of updating such description.
Information Regarding NUI and Virginia Gas
NUI has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to NUI, as well as all pro forma
financial information and Virginia Gas has supplied all information relating to
Virginia Gas.
Documents incorporated by reference by NUI and Virginia Gas are available
from the companies without charge, excluding any exhibits to those documents,
unless the exhibit is specifically incorporated by reference as an exhibit to
this proxy statement/prospectus. You can obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
NUI Corporation Virginia Gas Company
Linda Lennox Angela Cvetkovski
Investor Relations Investor Relations
550 Route 202-206 200 East Main Street
P. O. Box 760 Abingdon, Virginia 24210
Bedminster, New Jersey 07921-0760 (540) 676-2380
(908) 781-0500 Telecopy: (540) 619-5230
Telecopy: (908) 781-0718
52
If you would like to request documents, please do so by November 1, 2000, to
receive them before the annual meeting. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this proxy statement/prospectus or in any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or solicitations of offers
to exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. This proxy statement/prospectus is dated
October 5, 2000. The information contained in this document speaks only as of
such date unless the information specifically indicates that another date
applies.
53
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NUI CORPORATION,
VGC ACQUISITION, INC.
AND
VIRGINIA GAS COMPANY
Dated as of June 13, 2000
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS...................................................... A-1
Section 1.1.Agreement.................................................... A-1
Section 1.2.Average NUI Price............................................ A-1
Section 1.3.Averaging Period............................................. A-1
Section 1.4.Berenson..................................................... A-1
Section 1.5.Certificate of Merger........................................ A-1
Section 1.6.Certificates................................................. A-1
Section 1.7.CIBC......................................................... A-1
Section 1.8.Closing; Closing Date........................................ A-2
Section 1.9.Code......................................................... A-2
Section 1.10.Confidentiality Agreement................................... A-2
Section 1.11.Contract.................................................... A-2
Section 1.12.Conversion Ratio............................................ A-2
Section 1.13.Determination Date.......................................... A-2
Section 1.14.DGCL........................................................ A-2
Section 1.15.Easement.................................................... A-2
Section 1.16.Effective Time.............................................. A-2
Section 1.17.Environmental Laws.......................................... A-2
Section 1.18.ERISA....................................................... A-2
Section 1.19.Exchange Act................................................ A-2
Section 1.20.Exchange Agent.............................................. A-2
Section 1.21.FERC........................................................ A-2
Section 1.22.Funded Debt................................................. A-2
Section 1.23.GAAP........................................................ A-2
Section 1.24.Governmental Authority...................................... A-2
Section 1.25.Hazardous Materials......................................... A-2
Section 1.26.HSR Act..................................................... A-2
Section 1.27.IRS......................................................... A-2
Section 1.28.Joint Proxy Statement/Prospectus............................ A-3
Section 1.29.Knowledge of NUI............................................ A-3
Section 1.30.Knowledge of Virginia Gas................................... A-3
Section 1.31.Law......................................................... A-3
Section 1.32.Material Adverse Effect..................................... A-3
Section 1.33.Merger...................................................... A-3
Section 1.34.Merger Subsidiary........................................... A-3
Section 1.35.Nasdaq...................................................... A-3
Section 1.36.NUI......................................................... A-3
Section 1.37.NUI Benefit Plans........................................... A-3
Section 1.38.NUI Common Stock............................................ A-3
Section 1.39.NUI Companies............................................... A-3
Section 1.40.NUI ERISA Plan.............................................. A-3
Section 1.41.NUI Required Consents....................................... A-3
Section 1.42.NUI SEC Reports............................................. A-3
Section 1.43.NYSE........................................................ A-3
Section 1.44.Other Virginia Gas Interested Person........................ A-3
Section 1.45.Out of Pocket Expenses...................................... A-4
Section 1.46.Partnership; Partnerships................................... A-4
Section 1.47.Permits..................................................... A-4
Section 1.48.Petroleum and Natural Gas Products.......................... A-4
A-i
PAGE
----
Section 1.49.PUHCA....................................................... A-4
Section 1.50.Registration Statement...................................... A-4
Section 1.51.SEC......................................................... A-4
Section 1.52.Securities Act.............................................. A-4
Section 1.53.Special Meeting............................................. A-4
Section 1.54.Subsidiary; Subsidiaries.................................... A-4
Section 1.55.Superior Proposal........................................... A-4
Section 1.56.Tax Returns................................................. A-4
Section 1.57.Taxes....................................................... A-4
Section 1.58.Virginia Gas................................................ A-5
Section 1.59.Virginia Gas Affiliate...................................... A-5
Section 1.60.Virginia Gas Common Stock................................... A-5
Section 1.61.Virginia Gas Companies...................................... A-5
Section 1.62.Virginia Gas Partnerships................................... A-5
Section 1.63.Virginia Gas Required Consents.............................. A-5
Section 1.64.Virginia Gas SEC Reports.................................... A-5
Section 1.65.Virginia Gas Subsidiary..................................... A-5
Section 1.66.VSCC........................................................ A-5
Section 1.67.Warrants; Warrant Agreement................................. A-5
ARTICLE II THE MERGER...................................................... A-5
Section 2.1.The Merger................................................... A-5
Section 2.2.Exchange of Certificates..................................... A-6
Section 2.3.Virginia Gas Stock Options and Warrants...................... A-7
Section 2.4.Virginia Gas Actions......................................... A-7
ARTICLE III SHAREHOLDER APPROVAL; CLOSING.................................. A-8
Section 3.1.Shareholder Approval......................................... A-8
Section 3.2.Time and Place of Closing.................................... A-8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NUI........................... A-8
Section 4.1.Organization and Authority of the NUI Companies.............. A-8
Section 4.2.Capitalization............................................... A-8
Section 4.3.Authority Relative to this Agreement......................... A-9
Section 4.4.Consents and Approvals; No Violations........................ A-9
Section 4.5.Reports...................................................... A-9
Section 4.6.Absence of Certain Events.................................... A-10
Section 4.7.Joint Proxy Statement/Prospectus............................. A-10
Section 4.8.Litigation................................................... A-10
Section 4.9.Employee Benefit Plans....................................... A-10
Section 4.10.Tax Matters................................................. A-11
Section 4.11.Compliance with Law......................................... A-11
Section 4.12.Fees and Expenses of Brokers and Others..................... A-12
Section 4.13.Accuracy of Information..................................... A-12
Section 4.14.Absence of Undisclosed Liabilities.......................... A-12
Section 4.15.Merger Subsidiary........................................... A-12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF VIRGINIA GAS................... A-12
Section 5.1.Organization and Authority of the Virginia Gas Companies..... A-12
Section 5.2.Capitalization............................................... A-12
Section 5.3.Authority Relative to this Agreement......................... A-13
Section 5.4.Consents and Approvals; No Violations........................ A-13
Section 5.5.Reports...................................................... A-14
A-ii
PAGE
----
Section 5.6.Absence of Certain Events................................... A-14
Section 5.7.Joint Proxy Statement/Prospectus............................ A-15
Section 5.8.Litigation.................................................. A-15
Section 5.9.Title to and Sufficiency of Assets; Easements............... A-15
Section 5.10.Contracts.................................................. A-16
Section 5.11.Labor Matters.............................................. A-17
Section 5.12.Employee Benefit Plans..................................... A-17
Section 5.13.Tax Matters................................................ A-18
Section 5.14.Compliance with Law........................................ A-19
Section 5.15.Transactions With Affiliates............................... A-19
Section 5.16.Environmental Conditions................................... A-20
Section 5.17.Insurance.................................................. A-21
Section 5.18.Intellectual Property...................................... A-21
Section 5.19.Fees and Expenses of Brokers and Others.................... A-22
Section 5.20.Regulation as Utility...................................... A-22
Section 5.21.FERC Jurisdiction.......................................... A-22
Section 5.22.Accuracy of Information.................................... A-22
Section 5.23.Absence of Undisclosed Liabilities......................... A-22
Section 5.24.Opinion of Financial Advisor............................... A-23
Section 5.25.Virginia Gas Year 2000 Compliance.......................... A-23
Section 5.26.Vote Required.............................................. A-23
Section 5.27.Section 203 of the DGCL; State Takeover Statutes........... A-23
Section 5.28.Virginia Gas Affiliates and Partnerships................... A-23
Section 5.29.Certain Agreements......................................... A-23
ARTICLE VI COVENANTS...................................................... A-24
Section 6.1.Conduct of the Businesses of NUI and Virginia Gas........... A-24
Section 6.2.No Solicitation............................................. A-25
Section 6.3.The Registration Statement; Listing......................... A-27
Section 6.4.Access to Information; Confidentiality Agreement............ A-27
Section 6.5.Best Efforts................................................ A-28
Section 6.6.Consents.................................................... A-28
Section 6.7.Public Announcements........................................ A-28
Section 6.8.Affiliates.................................................. A-29
Section 6.9.Intentionally Omitted....................................... A-29
Section 6.10.Letter of Virginia Gas' Accountants........................ A-29
Section 6.11.Letter of NUI's Accountants................................ A-29
Section 6.12.Opinions of Financial Advisors............................. A-29
Section 6.13.Indemnification; Insurance................................. A-29
Section 6.14.PUHCA and the Natural Gas Act.............................. A-29
Section 6.15.Interim Financing.......................................... A-30
Section 6.16.Amendment of Agreement in Certain Circumstances............ A-30
ARTICLE VII CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER............ A-30
Section 7.1.Conditions Precedent to Each Party's Obligation to Effect
the Merger............................................................. A-30
Section 7.2.Conditions Precedent to Obligations of Virginia Gas......... A-31
Section 7.3.Conditions Precedent to Obligations of NUI.................. A-31
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER............................... A-32
Section 8.1.Termination................................................. A-32
Section 8.2.Effect of Termination....................................... A-33
Section 8.3.Termination Fee............................................. A-34
A-iii
PAGE
----
Section 8.4.Amendment.................................................... A-34
Section 8.5.Extension; Waiver............................................ A-34
ARTICLE IX MISCELLANEOUS................................................... A-34
Section 9.1.Entire Agreement; Assignment................................. A-34
Section 9.2.Notices...................................................... A-35
Section 9.3.Governing Law................................................ A-35
Section 9.4.Descriptive Headings......................................... A-35
Section 9.5.Parties in Interest.......................................... A-35
Section 9.6.Counterparts................................................. A-36
Section 9.7.Specific Performance......................................... A-36
Section 9.8.Fees and Expenses............................................ A-36
Section 9.9.Severability................................................. A-36
A-iv
EXHIBITS
Exhibit 1.5 Certificate of Merger
Exhibit 1.29 Knowledge of NUI
Exhibit 1.30 Knowledge of Virginia Gas
Exhibit 1.44 Other Virginia Gas Interested Persons
Exhibit 1.59 Virginia Gas Affiliates
Exhibit 1.62 Virginia Gas Partnerships
Exhibit 1.65 Virginia Gas Subsidiaries
Exhibit 3.1A Certain Shareholders of Virginia Gas
Exhibit 3.1B Form of Virginia Gas Shareholder Letter
Exhibit 4.4 NUI Required Consents
Exhibit 4.6 Adverse Changes Affecting NUI
Exhibit 4.8 NUI Litigation
Exhibit 4.10 Tax Matters Concerning NUI
Exhibit 5.2 Virginia Gas Options, Warrants, Subscriptions or Other Rights
Exhibit 5.4 Virginia Gas Required Consents
Exhibit 5.5 Virginia Gas Reports
Exhibit 5.6 Adverse Changes Affecting Virginia Gas
Exhibit 5.8 Virginia Gas Litigation
Exhibit 5.9 Title to and Sufficiency of Assets; Easements
Exhibit 5.10 Virginia Gas Contracts
Exhibit 5.11 Virginia Gas Labor Matters
Exhibit 5.12 Virginia Gas Benefit Plans
Exhibit 5.13 Tax Matters Concerning Virginia Gas
Exhibit 5.15 Transactions With Affiliates by Virginia Gas
Exhibit 5.16 Environmental Conditions
Exhibit 5.20 Virginia Gas Regulated Entities
Exhibit 5.29 Certain Agreements
Exhibit 6.4 Environmental Assessments
Exhibit 6.8 Form of Virginia Gas Affiliate Letter
Exhibit 6.15 Interim Financing
A-v
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 13, 2000, by and
among NUI CORPORATION, a New Jersey corporation ("NUI"), VGC ACQUISITION,
INC., a Delaware corporation and wholly owned subsidiary of NUI ("Merger
Subsidiary") and VIRGINIA GAS COMPANY, a Delaware corporation ("Virginia
Gas").
RECITALS
WHEREAS, the respective Boards of Directors of NUI and Virginia Gas have
determined that it is in the best interests of their respective stockholders
that the businesses and operations of NUI and Virginia Gas be combined; and
WHEREAS, the parties have determined that the most practical manner to give
effect to such combination is through the merger of Merger Subsidiary with and
into Virginia Gas (the "Merger"), with Virginia Gas to be the surviving
corporation of such Merger; and
WHEREAS, pursuant to the Merger, each outstanding share of Virginia Gas
Common Stock (as hereinafter defined) will be converted into shares of NUI
Common Stock (as hereinafter defined) in accordance with the terms hereof; and
WHEREAS, for Federal income tax purposes, it is intended that the
transactions contemplated by this Agreement shall constitute a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
NOW, THEREFORE, in consideration of the premises, which are incorporated
into and made part of this Agreement, and of the mutual representations,
warranties, covenants, agreements and conditions set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Agreement. "Agreement" shall mean this Agreement and Plan of
Reorganization, together with the Certificate of Merger and other Exhibits
attached hereto, as amended from time to time in accordance with the terms
hereof.
Section 1.2. Average NUI Price. "Average NUI Price" shall have the meaning
given in Section 2.1 hereof.
Section 1.3. Averaging Period. "Averaging Period" shall have the meaning
given in Section 2.1 hereof.
Section 1.4. Berenson. "Berenson" shall mean Berenson Minella & Co.,
financial advisors to NUI.
Section 1.5. Certificate of Merger. "Certificate of Merger" shall mean the
Certificate of Merger of Merger Subsidiary with and into Virginia Gas, in
substantially the form attached hereto as Exhibit 1.5.
Section 1.6. Certificates. "Certificates" shall have the meaning given in
Section 2.2 hereof.
Section 1.7. CIBC. "CIBC" means CIBC Oppenheimer, financial advisors to
Virginia Gas.
A-1
Section 1.8. Closing; Closing Date. "Closing" shall mean the closing
conference held pursuant to Section 3.2 hereof, and "Closing Date" shall mean
the date on which the Closing occurs.
Section 1.9. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.10. Confidentiality Agreement. "Confidentiality Agreement" shall
mean the letter agreement, dated February 1, 2000, between Virginia Gas and
NUI.
Section 1.11. Contract. "Contract" shall mean any contract, agreement,
lease, license, arrangement, understanding, relationship and commitment,
whether written or oral (collectively, "Contracts").
Section 1.12. Conversion Ratio. "Conversion Ratio" shall have the meaning
given in Section 2.1 hereof.
Section 1.13. Determination Date. "Determination Date" shall have the
meaning given in Section 2.1 hereof.
Section 1.14. DGCL. "DGCL" shall mean the Delaware General Corporation Law,
as amended.
Section 1.15. Easement. "Easement" shall mean any easement, right-of-way,
permit, servitude, license, leasehold estate and similar rights relating to
real property.
Section 1.16. Effective Time. "Effective Time" shall have the meaning given
in Section 3.1 hereof.
Section 1.17. Environmental Laws. "Environmental Laws" shall have the
meaning given in Section 5.16 hereof.
Section 1.18. ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.19. Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
Section 1.20. Exchange Agent. "Exchange Agent" shall mean the exchange
agent for the Virginia Gas Common Stock pursuant to the Merger, as may be
reasonably appointed by NUI.
Section 1.21. FERC. "FERC" shall mean the Federal Energy Regulatory
Commission.
Section 1.22. Funded Debt. "Funded Debt" shall have the meaning given in
Section 6.1 hereof.
Section 1.23. GAAP. "GAAP" shall mean generally accepted accounting
principles as in effect in the United States of America at the time of the
preparation of the subject financial statement.
Section 1.24. Governmental Authority. "Governmental Authority" shall mean
any federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any court, in each
case whether of the United States, any of its possessions or territories, or
of any foreign nation.
Section 1.25. Hazardous Materials. "Hazardous Materials" shall have the
meaning given in Section 5.16 hereof.
Section 1.26. HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
Section 1.27. IRS. "IRS" shall mean the Internal Revenue Service.
A-2
Section 1.28. Joint Proxy Statement/Prospectus. "Joint Proxy
Statement/Prospectus" shall mean the Proxy Statement/Prospectus of NUI and
Virginia Gas included in the Registration Statement and distributed to the
stockholders of Virginia Gas in connection with the Special Meeting.
Section 1.29. Knowledge of NUI. "Knowledge of NUI" shall mean the actual
knowledge, after due inquiry, of those officers of NUI identified on Exhibit
1.29 attached hereto.
Section 1.30. Knowledge of Virginia Gas. "Knowledge of Virginia Gas" shall
mean the actual knowledge, after due inquiry, of those officers of Virginia Gas
identified on Exhibit 1.30 attached hereto.
Section 1.31. Law. "Law" shall mean any federal, state, provincial, local or
other law or governmental requirement of any kind, and the rules, regulations
and orders promulgated thereunder.
Section 1.32. Material Adverse Effect. "Material Adverse Effect" shall mean,
with respect to any entity or group of entities, a material adverse effect (or
any development which, insofar as reasonably can be foreseen, is reasonably
likely to have a material adverse effect), on the business, assets, financial
or other condition, results of operations or prospects of such entity or group
of entities taken as a whole.
Section 1.33. Merger. "Merger" shall have the meaning given in Section 2.1
hereof.
Section 1.34. Merger Subsidiary. "Merger Subsidiary" shall mean VGC
Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of NUI.
Section 1.35. Nasdaq. "Nasdaq" shall mean The Nasdaq SmallCap Market.
Section 1.36. NUI. "NUI" shall mean NUI Corporation, a New Jersey
corporation.
Section 1.37. NUI Benefit Plans. "NUI Benefit Plans" shall have the meaning
given in Section 4.9 hereof.
Section 1.38. NUI Common Stock. "NUI Common Stock" shall mean the common
stock, no par value, of NUI.
Section 1.39. NUI Companies. "NUI Companies" shall mean NUI, its
Subsidiaries and the Partnerships in which it has an interest.
Section 1.40. NUI ERISA Plan. "NUI ERISA Plan" shall have the meaning given
in Section 4.9 hereof.
Section 1.41. NUI Required Consents. "NUI Required Consents" shall have the
meaning given in Section 4.4 hereof.
Section 1.42. NUI SEC Reports. "NUI SEC Reports" shall mean (a) NUI's Annual
Reports on Form 10-K for the fiscal years ended September 30, 1999, September
30, 1998, and September 30, 1997, and (b) all documents filed by NUI with the
SEC pursuant to Sections 13(a) and 13(c) of the Exchange Act, any definitive
proxy statements filed pursuant to Section 14 of the Exchange Act and any
report filed pursuant to Section 15(d) of the Exchange Act following the filing
of NUI's Annual Report on Form 10-K for the fiscal year ended September 30,
1999.
Section 1.43. NYSE. "NYSE" shall mean The New York Stock Exchange, Inc.
Section 1.44. Other Virginia Gas Interested Person. "Other Virginia Gas
Interested Person" shall mean (a) any holder of 5% or more of the voting
securities of Virginia Gas, (b) any director, officer or employee of any of the
Virginia Gas Companies, (c) any person, firm or corporation that directly or
indirectly
A-3
controls, is controlled by or is under common control with any of the Virginia
Gas Companies or (d) any member of the immediate family of any of such persons
(collectively, "Other Virginia Gas Interested Persons"). For purposes of this
Agreement, the phrase "immediate family" shall be the same as the definition
found in Rule 16a-1(e) of the Securities Exchange Act of 1934. All of the Other
Virginia Gas Interested Persons, with the exception of employees of any
Virginia Gas Company who do not otherwise fall within the definition thereof,
are listed on Exhibit 1.44 attached hereto.
Section 1.45. Out of Pocket Expenses. "Out of Pocket Expenses" shall have
the meaning given in Section 8.3 hereof.
Section 1.46. Partnership; Partnerships. "Partnership" shall mean (a) any
limited or general partnership, joint venture or other business association,
other than a Subsidiary, in which any party has a direct or indirect interest
and (b) each other such entity with respect to which a party has any obligation
or made any commitment to acquire any such interest described in clause (a)
(collectively, "Partnerships").
Section 1.47. Permits. "Permits" shall mean permits, licenses and
governmental authorizations, registrations and approvals.
Section 1.48. Petroleum and Natural Gas Products. "Petroleum and Natural Gas
Products" shall have the meaning given in Section 5.16 hereof.
Section 1.49. PUHCA. "PUHCA" shall mean the Public Utility Holding Company
Act of 1935, as amended.
Section 1.50. Registration Statement. "Registration Statement" shall mean
the Registration Statement on Form S-4, including the Joint Proxy
Statement/Prospectus contained therein, to be filed by NUI with the SEC with
respect to the NUI Common Stock to be offered to the holders of Virginia Gas
Common Stock in the Merger.
Section 1.51. SEC. "SEC" shall mean the Securities and Exchange Commission.
Section 1.52. Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.
Section 1.53. Special Meeting. "Special Meeting" shall mean the annual or
special meeting of stockholders of Virginia Gas referred to in Section 3.1
hereof at which such stockholders shall be asked to consider and adopt this
agreement and the transactions contemplated herein, and any adjournments
thereof.
Section 1.54. Subsidiary; Subsidiaries. "Subsidiary" shall mean (a) each
corporate entity with respect to which a party has the right to vote (directly
or indirectly through one or more other entities or otherwise) shares
representing 50% or more of the votes eligible to be cast in the election of
directors of such entity, (b) each other corporate entity that constitutes a
"significant subsidiary," as defined in Rule 1-02 of Regulation S-X adopted
under the Exchange Act and (c) each other corporate entity with respect to
which a party has any obligation or made any commitment to acquire any such
entity described in clauses (a) and (b) (collectively, "Subsidiaries").
Section 1.55. Superior Proposal. "Superior Proposal" shall have the meaning
given in Section 6.2 hereof.
Section 1.56. Tax Returns. "Tax Returns" shall mean any report, return,
information statement, payee statement or other information required to be
provided to any federal, state, local or foreign Governmental Authority, or
otherwise retained, with respect to Taxes, the NUI Benefit Plans (as defined in
Section 4.9 hereof) or the Virginia Gas Benefit Plans (as defined in Section
5.12 hereof).
Section 1.57. Taxes. "Taxes" shall mean any and all taxes, levies, imposts,
duties, assessments, charges and withholdings imposed or required to be
collected by or paid over to any federal, state, local or
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foreign Governmental Authority or any political subdivision thereof of any kind
whatsoever, and including any interest, penalties, fines, assessments or
additions imposed in respect of the foregoing or in respect of any failure to
comply with any requirement regarding Tax Returns.
Section 1.58. Virginia Gas. "Virginia Gas" shall mean Virginia Gas Company,
a Delaware corporation.
Section 1.59. Virginia Gas Affiliate. "Virginia Gas Affiliate" shall mean a
corporate entity for which Virginia Gas has fifty (50%) percent ownership with
the remaining fifty (50%) percent being owned by a private investor
(collectively, "Virginia Gas Affiliates"). All of the Virginia Gas Affiliates
are listed on Exhibit 1.59 attached hereto.
Section 1.60. Virginia Gas Common Stock. "Virginia Gas Common Stock" shall
mean the common stock, par value $.001 per share, of Virginia Gas.
Section 1.61. Virginia Gas Companies. "Virginia Gas Companies" shall mean
Virginia Gas, the Virginia Gas Subsidiaries and the Virginia Gas Partnerships.
Section 1.62. Virginia Gas Partnerships. "Virginia Gas Partnerships" shall
mean a Partnership in which any Virginia Gas Company has an interest. All of
the Virginia Gas Partnerships are listed on Exhibit 1.62 attached hereto.
Section 1.63. Virginia Gas Required Consents. "Virginia Gas Required
Consents" shall have the meaning given in Section 5.4 hereof.
Section 1.64. Virginia Gas SEC Reports. "Virginia Gas SEC Reports" shall
mean (a) Virginia Gas' Annual Reports on Form 10-KSB for the fiscal years ended
December 31, 1999, December 31, 1998, and December 31, 1997, and (b) all
documents filed by Virginia Gas with the SEC pursuant to Sections 13(a) and
13(c) of the Exchange Act, any definitive proxy statements filed pursuant to
Section 14 of the Exchange Act and any report filed pursuant to Section 15(d)
of the Exchange Act following the filing of Virginia Gas' Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999.
Section 1.65. Virginia Gas Subsidiary. "Virginia Gas Subsidiary" means a
Subsidiary owned by Virginia Gas (collectively, "Virginia Gas Subsidiaries").
All of the Virginia Gas Subsidiaries are listed on Exhibit 1.65 attached
hereto.
Section 1.66. VSCC. "VSCC" shall mean the Virginia State Corporation
Commission.
Section 1.67. Warrants; Warrant Agreement. "Warrants" shall mean those
warrants to purchase shares of Virginia Gas Common Stock listed on Exhibit 5.2
attached hereto, which Warrants were issued pursuant to the Warrant Agreements,
dated October 4, 1996, as previously provided by Virginia Gas to NUI (the
"Warrant Agreement").
ARTICLE II
THE MERGER
Section 2.1. The Merger.
(a) NUI has formed Merger Subsidiary as a wholly-owned subsidiary under
the laws of the State of Delaware. Subject to the terms and conditions of
this Agreement, NUI, as the sole stockholder of Merger Subsidiary, will
approve the execution, delivery and performance of this Agreement by Merger
Subsidiary.
(b) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Subsidiary shall be merged with and into Virginia
Gas in accordance with the provisions of, and with the effects
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provided in, Subchapter IX of the DGCL (the "Merger"). Virginia Gas shall
be the surviving corporation resulting from the Merger and, as a result,
shall become a wholly-owned subsidiary of NUI and shall continue to be
governed by the laws of the State of Delaware.
(c) Pursuant to the Merger, each share of Virginia Gas Common Stock
outstanding immediately prior to the Effective Time (other than shares of
Virginia Gas Common Stock held by NUI, if any, which shares shall be
canceled in the Merger) shall be converted into and become that number of
shares of NUI Common Stock equal to the ratio (rounded to four decimal
points) (the "Conversion Ratio") determined by dividing $4.00 by the
average per share last sales price, regular way (rounded to four decimal
points) (the "Average NUI Price"), of NUI Common Stock as reported on the
NYSE composite transactions reporting system (as reported in the New York
City edition of The Wall Street Journal or, if not reported thereby,
another authoritative source) for the twenty (20) consecutive trading days
(the "Averaging Period") ending on (and including) the seventh trading day
(the "Determination Date") prior to the Closing Date.
(d) No fraction of a share of NUI Common Stock shall be issued in
connection with the conversion of Virginia Gas Common Stock in the Merger
and the distribution of NUI Common Stock in respect thereof but, in lieu of
such fraction, the Exchange Agent shall make a cash payment (without
interest) equal to the same fraction of the market value of a full share of
NUI Common Stock, computed on the basis of the mean of the high and low
sales prices of NUI Common Stock as reported on the NYSE composite tape for
the first full day on which the NUI Common Stock is traded on the NYSE
after the Effective Time.
Section 2.2. Exchange of Certificates.
(a) Prior to the Effective Time, NUI shall appoint the Exchange Agent to
act as the exchange agent in connection with the Merger. Immediately prior
to the Effective Time, NUI will deliver to the Exchange Agent, in trust for
the benefit of the holders of Virginia Gas Common Stock, shares of NUI
Common Stock (together with cash in immediately available funds in an
amount sufficient to pay cash in lieu of fractional shares, as provided in
Section 2.1 hereof) necessary to make the exchanges contemplated by Section
2.1 hereof on a timely basis. To the extent that the estimated amount
provided for the payment of cash in lieu of fractional shares is determined
after the Effective Time to be less than the total amount distributable for
such purpose, NUI will promptly upon notice of the same from the Exchange
Agent deliver the additional amount needed to the Exchange Agent.
(b) From and after the Effective Time, each holder of a certificate
which immediately prior to the Effective Time represented outstanding
shares of Virginia Gas Common Stock (the "Certificates") shall be entitled
to receive in exchange therefor, upon surrender thereof to the Exchange
Agent, a certificate or certificates representing the number of whole
shares of NUI Common Stock into which such holder's shares were converted
in the Merger (together with cash in lieu of fractional shares). Promptly
after the Effective Time, the Exchange Agent shall mail to each record
holder of Virginia Gas Common Stock as of the Effective Time, a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of Certificates in exchange for shares of NUI
Common Stock (together with cash in lieu of fractional shares). Upon
surrender to the Exchange Agent of a Certificate, together with such letter
of transmittal duly executed, and any other required documents, the holder
of such Certificate shall be entitled to receive in exchange therefor
shares of NUI Common Stock as set forth in this Agreement (together with
cash in lieu of fractional shares), and such Certificate shall forthwith be
canceled. No holder of a Certificate or Certificates shall be entitled to
receive any dividend or other distribution from NUI until the surrender of
such holder's Certificate for a certificate or certificates representing
shares of NUI Common Stock. Upon such surrender, there shall be paid to the
holder the amount of any dividends or other distributions (without
interest) which theretofore became payable, but which were not paid by
reason of the foregoing, with respect to the number of whole shares of NUI
Common Stock represented by the certificates issued upon surrender. If
delivery of NUI Common Stock is
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to be made to a person other than the person in whose name the Certificate
surrendered is registered or if any certificate for shares of NUI Common
Stock is to be issued in a name other than that in which the Certificate
surrendered therefor is registered, it shall be a condition of such
delivery or issuance that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person
requesting such delivery or issuance shall pay any transfer or other taxes
required by reason of such delivery or issuance to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of NUI that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.2, each
Certificate shall, after the Effective Time, represent for all purposes
only the right to receive shares of NUI Common Stock (and cash in lieu of
fractional shares) as provided in Section 2.1 hereto, without any interest
thereon.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of Virginia Gas of the shares of Virginia Gas Common Stock
that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to NUI or Virginia Gas for
transfer, they shall be canceled and exchanged for shares of NUI Common
Stock (and cash in lieu of fractional shares) as provided in Section 2.1
hereof, in accordance with the procedures set forth in this Section 2.2.
(d) Any shares of NUI Common Stock (and any accrued dividends and
distributions thereon), and any cash delivered to the Exchange Agent for
payment in lieu of fractional shares, that remain unclaimed by the former
stockholders of Virginia Gas on the first anniversary of the Effective Time
shall be delivered by the Exchange Agent to NUI. Any former stockholders of
Virginia Gas who have not theretofore complied with this Section 2.2 shall
thereafter look only to NUI for satisfaction of their claim for the
consideration set forth in this Agreement, without any interest thereon.
Notwithstanding the foregoing, neither NUI nor Merger Subsidiary shall be
liable to any holder of shares of Virginia Gas Common Stock for any shares
of NUI Common Stock (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 2.3. Virginia Gas Stock Options and Warrants.
(a) Prior to the execution of this Agreement, Virginia Gas has provided
to NUI true and correct copies of amendments to all stock option grant
documents, which amendments are in full force and effect in accordance with
their terms, relating to all currently outstanding options to purchase
shares of Virginia Gas Common Stock issued pursuant to the Virginia Gas
Company 1998 Stock Option Plan or otherwise (including, without limitation,
an option to purchase 10,000 shares of Virginia Gas Common Stock issued to
an executive officer of Virginia Gas pursuant to a letter agreement dated
October 30, 1997), pursuant to which: (i) each option exercisable at $4.125
shall, upon the occurrence of the Effective Time, be terminated and
converted into the right to receive $1.00 in cash from NUI; and (ii) any
other outstanding options shall be canceled without any payment therefor.
(b) At the Effective Time, the Warrants shall remain outstanding in
accordance with the terms of the Warrant Agreements.
Section 2.4. Virginia Gas Actions. Virginia Gas hereby approves of and
consents to the Merger and represents and warrants that (a) Virginia Gas' Board
of Directors (at a meeting duly called and held) has (i) unanimously determined
that each of this Agreement and the transactions contemplated hereby are fair
to and in the best interests of Virginia Gas and its stockholders, (ii)
approved this Agreement and the transactions contemplated hereby, (iii)
resolved to elect not to be subject to any state takeover law that is or
purports to be applicable to the Merger or the transactions contemplated by
this Agreement, (iv) taken all steps necessary to render Section 203 of the
DGCL inapplicable to this Agreement and the transactions contemplated hereby
and (v) subject to the fiduciary duties of the Board of Directors applicable
from time to time, resolved to recommend that the holders of Virginia Gas
Common Stock vote to adopt this Agreement and the transactions contemplated
herein and (b) CIBC has delivered to the Board of Directors of Virginia Gas its
written opinion that the Conversion Ratio as contemplated in this Agreement is
fair, from a financial point of view, to such holders.
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ARTICLE III
SHAREHOLDER APPROVAL; CLOSING
Section 3.1. Shareholder Approval.
(a) This Agreement shall be submitted for consideration and adoption to
the holders of shares of Virginia Gas Common Stock at the Special Meeting.
Each of the stockholders of Virginia Gas identified in Exhibit 3.1A hereto,
being the holders of an aggregate 9.23% of the outstanding shares of
Virginia Gas Common Stock, has duly executed and delivered to NUI a letter
agreement in the form of Exhibit 3.1B hereto with respect to, among other
things, such stockholder's agreement to vote all shares of Virginia Gas
Common Stock over which such stockholder exercises voting control for
adoption of this Agreement at the Special Meeting.
(b) Virginia Gas shall coordinate and cooperate with NUI with respect to
the timing of the Special Meeting and shall endeavor to hold such meeting
as soon as practicable after the date hereof. The Board of Directors of
Virginia Gas shall recommend that its stockholders adopt this Agreement and
the transactions contemplated hereby and thereby, and such recommendation
shall be contained in the Joint Proxy Statement/Prospectus. On the first
business day on or by which (i) this Agreement has been duly adopted by the
requisite vote of the holders of shares of Virginia Gas Common Stock, and
(ii) the Closing of the transactions contemplated by this Agreement shall
have occurred, or such later date as shall be agreed upon by NUI and
Virginia Gas, (y) the Certificate of Merger shall be filed in accordance
with the DGCL and (z) the Merger shall become effective in accordance with
the terms of this Agreement and the Certificate of Merger at the time and
date contemplated therein (such time and date being referred to herein as
the "Effective Time").
Section 3.2. Time and Place of Closing. The Closing of the transactions
contemplated by this Agreement will take place at 11:00 A.M. on the third
business day following the date on which all of the conditions to the
obligations of the parties hereunder set forth in Article VII hereof have been
satisfied or waived or such other time and date as NUI and Virginia Gas may
agree. The place of Closing shall be at such place as may be mutually agreed
upon by NUI and Virginia Gas.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NUI
NUI represents and warrants to Virginia Gas as follows:
Section 4.1. Organization and Authority of the NUI Companies. Each of the
NUI Companies is duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of organization. Each of the NUI
Companies has full corporate, limited liability or partnership power to carry
on its respective business as it is now being conducted and to own, operate and
hold under lease its assets and properties as, and in the places where, such
properties and assets now are owned, operated or held. All of the NUI Companies
which are "significant subsidiaries" (as such term is defined in Rule 1-02 of
Regulation S-X of the SEC) of NUI as of the date of this Agreement are listed
on Exhibit 21 to NUI's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999. The copies of the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of NUI that have been delivered
to Virginia Gas are complete and correct and in full force and effect on the
date hereof.
Section 4.2. Capitalization.
(a) NUI's authorized equity capitalization consists of 30,000,000 shares
of NUI Common Stock and 5,000,000 shares of preferred stock, no par value
per share. As of the close of business on April 30, 2000, 12,968,242 shares
of NUI Common Stock and no shares of NUI preferred stock were issued and
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outstanding. Such shares of NUI Common Stock constituted all of the issued
and outstanding shares of capital stock of NUI as of such date. All issued
and outstanding shares of NUI Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, are not subject to and
have not been issued in violation of any preemptive rights and have not
been issued in violation of any federal or state securities laws. All
outstanding shares of NUI Common Stock are duly listed for trading on the
NYSE.
(b) All of the shares of NUI Common Stock to be issued to holders of
Virginia Gas Common Stock in the Merger have been duly authorized for
issuance out of NUI's authorized and unreserved NUI Common Stock and, when
issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable, and will not be subject to and will
not be issued in violation of any preemptive rights.
Section 4.3. Authority Relative to this Agreement. The execution, delivery
and performance of this Agreement and of all of the other documents and
instruments required hereby by NUI are within the corporate power of NUI. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of NUI and no other corporate proceedings on the part of NUI are
necessary to authorize this Agreement or to consummate the transactions
contemplated herein either under state law or the requirements of the NYSE.
This Agreement and all of the other documents and instruments required hereby
have been or will be duly and validly executed and delivered by NUI and
(assuming the due authorization, execution and delivery hereof and thereof by
Virginia Gas) constitute or will constitute valid and binding agreements of
NUI, enforceable against NUI in accordance with their respective terms.
Section 4.4. Consents and Approvals; No Violations. Except for (a) any
applicable requirements of the Securities Act, the Exchange Act, the HSR Act
and any applicable filings under state securities, "Blue Sky" or takeover laws,
(b) the filing and recordation of the Certificate of Merger as required by the
DGCL, (c) any required approvals of the VSCC and the public service commissions
of any other states where NUI conducts business, and FERC, (d) the filing of an
exemption statement on Form U-3A-2 with the SEC pursuant to PUHCA, and (e)
those required filings, registrations, consents and approvals listed on Exhibit
4.4 attached hereto (the matters referred to in clauses (c), (d) and (e) being
collectively referred to as the "NUI Required Consents"), no filing or
registration with, and no permit, authorization, consent or approval of, any
public body or authority or any third party is necessary or required in
connection with the execution and delivery of this Agreement by NUI or for the
consummation by NUI of the transactions contemplated by this Agreement.
Assuming that all filings, registrations, permits, authorizations, consents and
approvals contemplated by the immediately preceding sentence have been duly
made or obtained, neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby by NUI
will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or bylaws of NUI, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, or otherwise result in any diminution of any of the rights
of NUI with respect to, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, Contract or other instrument or obligation
to which NUI is a party or by which it or any of its properties or assets may
be bound or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to NUI or any of its properties or assets except, in the
case of clauses (ii) or (iii) above, for violations, breaches or defaults that
would not have a Material Adverse Effect on the NUI Companies and that will not
prevent or delay the consummation of the transactions contemplated hereby.
Section 4.5. Reports.
(a) The filings required to be made by NUI since January 1, 1997, under
NYSE rules, the Securities Act, the Exchange Act and applicable state Laws
and regulations have been filed with the NYSE and each applicable
Governmental Authority, including the SEC and FERC, and NUI has complied in
all material respects with all requirements of such acts, laws and rules
and regulations thereunder, except to the extent any such failure to comply
would not have a Material Adverse Effect on the NUI Companies.
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(b) The NUI SEC Reports complied, as of their respective dates of filing
(and any NUI SEC Reports filed after the date hereof will comply), in all
material respects with all applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations of the SEC. As of their
respective dates, none of such forms, reports or documents, including,
without limitation, any financial statements or schedules included therein,
contained (and none of the NUI SEC Reports filed after the date hereof will
contain) any untrue statement of a material fact or omitted (or will omit)
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading in light of the
circumstances under which they were made. Each of the balance sheets
(including the related notes and schedules) included in the NUI SEC Reports
fairly presented the consolidated financial position of NUI as of the
respective dates thereof, and the other related financial statements
(including the related notes and schedules) included therein fairly
presented the results of operations and cash flows of NUI for the
respective fiscal periods or as of the respective dates set forth therein.
Each of the financial statements (including the related notes and
schedules) included in the NUI SEC Reports (a) complied as to form with the
applicable accounting requirements and rules and regulations of the SEC and
(b) was prepared in accordance with GAAP consistently applied during the
periods presented, except as otherwise noted therein and subject to normal
year-end and audit adjustments in the case of any unaudited interim
financial statements. Since September 30, 1999, NUI has timely filed all
reports, registration statements and other filings required to be filed by
it with the SEC.
Section 4.6. Absence of Certain Events. Except as set forth in the NUI SEC
Reports filed prior to the date of this Agreement or as otherwise specifically
disclosed in Exhibit 4.6 attached hereto, since September 30, 1999, NUI has not
suffered any change in its business, financial condition or results of
operations that has had or will have a Material Adverse Effect upon the NUI
Companies.
Section 4.7. Joint Proxy Statement/Prospectus. None of the information with
respect to the NUI Companies to be included in the Joint Proxy
Statement/Prospectus or the Registration Statement will, in the case of the
Joint Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, at the time of the mailing of the Joint Proxy Statement/Prospectus or
any amendments thereof or supplements thereto or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Joint Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation is made by NUI with respect to information supplied by
Virginia Gas or any affiliate of Virginia Gas for inclusion in the Joint Proxy
Statement/Prospectus.
Section 4.8. Litigation. Except as set forth on Exhibit 4.8 attached hereto,
there is no action, suit, proceeding or, to the Knowledge of NUI, investigation
pending or, to the Knowledge of NUI, threatened against or relating to any of
the NUI Companies at law or in equity, or before any federal, state,
provincial, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, whether in the United States or otherwise,
that is expected, in the reasonable judgment of NUI, to have a Material Adverse
Effect upon the NUI Companies or that seeks restraint, prohibition, damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.9. Employee Benefit Plans.
(a) For purposes of this Section, the term "NUI Benefit Plans" shall
mean all material pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other incentive plans, and all other employee programs,
arrangements or agreements, whether arrived at through collective
bargaining or otherwise, all medical, vision, dental and other health
plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including, without limitation, any "employee benefit
plan," as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by any
of the NUI
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Companies or affiliates thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate. Any of the NUI Benefit Plans that is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "NUI ERISA Plan."
(b) As of the date of this Agreement, no NUI Benefit Plan is a
multiemployer plan within the meaning of Section 3(37) of ERISA. All NUI
Benefit Plans are in compliance with the applicable provisions (including,
without limitation, any funding requirements or limitations) of ERISA, the
Code and any other applicable Laws, the breach or violation of which could
have a Material Adverse Effect on the NUI Companies. Except as reflected in
the notes to the financial statements included in the NUI SEC Reports or as
could have a Material Adverse Effect, no NUI ERISA Plan which is a defined
benefit pension plan has any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, and the present fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as
that term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance
with all applicable legal requirements.
Section 4.10. Tax Matters. Except as set forth on Exhibit 4.10:
(a) NUI and each of its Subsidiaries that is incorporated under the laws
of the United States or of any of the United States are members of the
affiliated group, within the meaning of Section 1504(a) of the Code, of
which NUI is the common parent, and such affiliated group files a
consolidated federal income tax return;
(b) each of the NUI Companies has timely filed or caused to be filed all
Tax Returns required to have been filed by or for it, and all information
set forth in such Tax Returns is accurate and complete in all material
respects;
(c) each of the NUI Companies has paid or made adequate provision on its
books and records in accordance with GAAP for all Taxes covered by such Tax
Returns;
(d) there is not a material amount of unpaid Taxes due and payable by
any of the NUI Companies or by any other person that is or could become a
lien on any asset of, or that could otherwise have a Material Adverse
Effect on, the NUI Companies;
(e) each of the NUI Companies has collected or withheld all Taxes
required to be collected or withheld by it, and all such Taxes have been
paid to the appropriate Governmental Authority or set aside in appropriate
accounts for future payment when due;
(f) none of the NUI Companies has granted (or is subject to) any waiver,
which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or
asserted against, or with respect to, any of the NUI Companies by any
Governmental Authority; there are no currently pending administrative or
judicial proceedings, or any deficiency or refund litigation, with respect
to Taxes of any of the NUI Companies, the adverse outcome of which would
have a Material Adverse Effect on the NUI Companies; and any such
assertion, assessment, proceeding or litigation disclosed on Exhibit 4.10
hereto is being contested in good faith through appropriate measures, and
its status is described in Exhibit 4.10 hereto; and
(g) the most recent audited consolidated balance sheet included in the
NUI SEC Reports fully and properly reflects, as of the date thereof, the
liabilities of NUI and its Subsidiaries for all accrued Taxes and deferred
liability for Taxes and, for periods ending after such date, the books and
records of each such corporation fully and properly reflect its liability
for all accrued Taxes.
Section 4.11. Compliance with Law. The conduct of the businesses of the NUI
Companies and their use of their assets does not violate or conflict, and has
not violated or conflicted, with any Law, which violation or conflict could
have a Material Adverse Effect on the NUI Companies.
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Section 4.12. Fees and Expenses of Brokers and Others. None of the NUI
Companies (a) has had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated
by this Agreement, (b) is committed to any liability for any brokers' or
finders' fees or any similar fees in connection with the transactions
contemplated by this Agreement or (c) has retained any broker or other
intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that NUI has engaged Berenson to
represent it in connection with such transactions and shall pay all of
Berenson's fees and expenses in connection with such engagement.
Section 4.13. Accuracy of Information. Neither this Agreement nor any other
document provided by the NUI Companies or their employees or agents to Virginia
Gas in connection with the transactions contemplated herein, when this
Agreement and such documents are considered together in the aggregate, contains
an untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading.
Section 4.14. Absence of Undisclosed Liabilities. None of the NUI Companies
have, as of the date hereof, or will have, as of the Effective Time, any
liabilities or obligations of any kind, whether absolute, accrued, asserted or
unasserted, contingent or otherwise, that would be required to be disclosed on
a consolidated balance sheet of NUI, or reflected in the notes thereto,
prepared as of such date in accordance with GAAP, except liabilities,
obligations or contingencies that were (a) reflected on or accrued or reserved
against in the consolidated balance sheet of NUI as of September 30, 1999,
which is included in the NUI SEC Reports, or reflected in the notes thereto, or
(b) incurred after the date of such balance sheet in the ordinary course of
business and consistent with past practices and which, individually or in the
aggregate, will not have a Material Adverse Effect on the NUI Companies.
Section. 4.15. Merger Subsidiary. All of the issued and outstanding shares
of the capital stock of Merger Subsidiary are (a) owned directly by NUI and (b)
duly authorized, validly issued, fully paid, nonassessable and are not subject
to preemptive rights. Merger Subsidiary is a direct wholly owned subsidiary of
NUI that has been formed for the sole purpose of effecting the Merger and that,
prior to the Effective Time, will (x) have no material assets, (y) engage in no
other material activities and (z) will have no Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF VIRGINIA GAS
Virginia Gas represents and warrants to NUI as follows:
Section 5.1. Organization and Authority of the Virginia Gas Companies. Each
of Virginia Gas and the Virginia Gas Subsidiaries is duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
organization. Each of Virginia Gas and the Virginia Gas Subsidiaries has full
corporate power to carry on its respective business as it is now being
conducted and to own, operate and hold under lease its assets and properties
as, and in the places where, such properties and assets now are owned, operated
or held. Each of Virginia Gas and the Virginia Gas Subsidiaries is duly
qualified as a foreign entity to do business, and is in good standing, in each
jurisdiction where the failure to be so qualified would have a Material Adverse
Effect on the Virginia Gas Companies. Exhibit 1.65 constitutes a true and
complete list of all of the Subsidiaries of Virginia Gas and Exhibit 1.62
constitutes a true and complete list of all of the Virginia Gas Partnerships.
The copies of the Amended and Restated Certificate of Incorporation of Virginia
Gas, the Articles of Incorporation of each Virginia Gas Subsidiary and the
Bylaws of Virginia Gas and each Virginia Gas Subsidiary that have been
delivered to NUI are complete and correct and in full force and effect on the
date hereof.
Section 5.2. Capitalization. Virginia Gas' authorized equity capitalization
consists of 100,000,000 shares of Virginia Gas Common Stock, $.001 par value
per share, and 1,000,000 shares of preferred stock, no par value per share. As
of the close of business on May 23, 2000: (i) 5,504,906 shares of Virginia Gas
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Common Stock and no shares of Virginia Gas preferred stock were issued and
outstanding, (ii) 260,000 shares of Virginia Gas Common Stock were subject to
outstanding options issued pursuant to the Virginia Gas Company 1998 Stock
Option Plan, (iii) 10,000 shares of Virginia Gas Common Stock were subject to
outstanding options issued to an executive officer of Virginia Gas pursuant to
that certain Letter Agreement, dated October 30, 1997, and (iv) warrants to
purchase 943,149 shares of Virginia Gas Common Stock at $9.90 per share were
outstanding. Such shares of Virginia Gas Common Stock constituted all of the
issued and outstanding shares of capital stock of Virginia Gas as of such date.
All issued and outstanding shares of Virginia Gas Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, are not
subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any federal or state securities laws. All
of the outstanding shares of capital stock of the Virginia Gas Subsidiaries are
validly issued, fully paid and nonassessable and are, except as disclosed on
Exhibit 1.65 attached hereto, owned by Virginia Gas, directly or indirectly,
free and clear of all liens, claims, charges or encumbrances. Except for the
declaration and payment of dividends in the ordinary course of business,
Virginia Gas has not, subsequent to December 31, 1999, declared or paid any
dividend on, or declared or made any distribution with respect to, or
authorized or effected any split-up or any other recapitalization of, any of
the Virginia Gas Common Stock, or directly or indirectly redeemed, purchased or
otherwise acquired any of its outstanding capital stock or agreed to take any
such action and will not take any such action during the period between the
date of this Agreement and the Effective Time. Except as set forth on Exhibit
5.2 attached hereto, there are no outstanding options, warrants, subscriptions
or other rights to purchase or acquire any capital stock of Virginia Gas or any
of the Virginia Gas Subsidiaries, and there are no Contracts pursuant to which
Virginia Gas or any of the Virginia Gas Subsidiaries is bound to sell or issue
any shares of its capital stock. Neither Virginia Gas nor any Virginia Gas
Subsidiary is a party to any voting agreement, voting trust or similar
arrangement with respect to Virginia Gas Common Stock or the voting stock of
any Virginia Gas Subsidiary and, except as set forth on Exhibit 5.2 attached
hereto, to the Knowledge of Virginia Gas, no holder of Virginia Gas Common
Stock or the voting stock of any Virginia Gas Subsidiary is a party to any such
arrangement. All outstanding shares of Virginia Gas Common Stock are duly
listed for inclusion on Nasdaq.
Section 5.3. Authority Relative to this Agreement. The execution, delivery
and performance of this Agreement and of all of the other documents and
instruments required hereby by Virginia Gas are, within the corporate power of
Virginia Gas. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by the Board
of Directors of Virginia Gas and no other corporate proceedings on the part of
Virginia Gas are necessary to authorize this Agreement or to consummate the
transactions contemplated herein (other than, with respect to the Merger, the
adoption of this Agreement by a majority of the outstanding shares of Virginia
Gas Common Stock entitled to vote thereon). This Agreement and all of the other
documents and instruments required hereby have been or will be duly and validly
executed and delivered by Virginia Gas and (assuming the due authorization,
execution and delivery hereof and thereof by NUI and Merger Subsidiary as
necessary) constitute or will constitute valid and binding agreements of
Virginia Gas, enforceable against Virginia Gas in accordance with their
respective terms.
Section 5.4. Consents and Approvals; No Violations. Except for (a) any
applicable requirements of the Securities Act, the Exchange Act, the HSR Act,
and any applicable filings under state securities, "Blue Sky" or takeover laws,
(b) the filing and recordation of a certificate of merger as required by the
DGCL, (c) any required approvals of the VSCC and FERC and (d) those required
filings, registrations, consents and approvals listed on Exhibit 5.4 attached
hereto (the matters referred to in clauses (c) and (d) being collectively
referred to as the "Virginia Gas Required Consents"), no filing or registration
with, and no permit, authorization, consent or approval of, any public body or
authority or any third party is necessary or required in connection with the
execution and delivery of this Agreement by Virginia Gas or for the
consummation by Virginia Gas of the transactions contemplated by this
Agreement. Assuming that all filings, registrations, permits, authorizations,
consents and approvals contemplated by the immediately preceding sentence have
been duly made or obtained, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby by
Virginia Gas will (i) conflict with or result in any breach of any provision of
the
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Certificates or Articles of Incorporation, bylaws or other organizational
documents of Virginia Gas or any Virginia Gas Subsidiary, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or otherwise result in any diminution of any of the
rights of Virginia Gas or the Virginia Gas Subsidiaries with respect to, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, Contract or other instrument or obligation to which Virginia Gas or
any Virginia Gas Subsidiary is a party or by which it or any of them or any of
their properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Virginia Gas or
any Virginia Gas Subsidiary or any of their properties or assets except, in the
case of clauses (ii) or (iii) above, for violations, breaches or defaults that
would not have a Material Adverse Effect on the Virginia Gas Companies and that
will not prevent or delay the consummation of the transactions contemplated
hereby.
Section 5.5. Reports.
(a) Except as set forth on Exhibit 5.5 attached hereto, the filings
required to be made by Virginia Gas since January 1, 1997, under Nasdaq
rules, the Securities Act, the Exchange Act, the Natural Gas Act and
applicable Laws and regulations have been filed with Nasdaq and each
applicable Governmental Authority, including the SEC, FERC and the VSCC,
and Virginia Gas has complied in all material respects with all
requirements of such acts, laws and rules and regulations thereunder,
except to the extent any such failure to comply would not have a Material
Adverse Effect on the Virginia Gas Companies.
(b) The Virginia Gas SEC Reports complied, as of their respective dates
of filing (and any Virginia Gas SEC Reports filed after the date hereof
will comply), in all material respects with all applicable requirements of
the Securities Act, the Exchange Act and the rules and regulations of the
SEC. As of their respective dates, none of such forms, reports or
documents, including, without limitation, any financial statements or
schedules included therein, contained (and none of the Virginia Gas SEC
Reports filed after the date hereof will contain) any untrue statement of a
material fact or omitted (or will omit) to state a material fact required
to be stated therein or necessary in order to make the statements therein
not misleading in light of the circumstances under which they were made.
Each of the balance sheets (including the related notes and schedules)
included in the Virginia Gas SEC Reports fairly presented the consolidated
financial position of the Virginia Gas Companies as of the respective dates
thereof, and the other related financial statements (including the related
notes and schedules) included therein fairly presented the results of
operations and cash flows of the Virginia Gas Companies for the respective
fiscal periods or as of the respective dates set forth therein. Each of the
financial statements (including the related notes and schedules) included
in the Virginia Gas SEC Reports (a) complied as to form with the applicable
accounting requirements and rules and regulations of the SEC, and (b) was
prepared in accordance with GAAP consistently applied during the periods
presented, except as otherwise noted therein and subject to normal year-end
and audit adjustments in the case of any unaudited interim financial
statements. Except for Virginia Gas, none of the Virginia Gas Companies is
required to file any forms, reports or other documents with the SEC,
Nasdaq, the NYSE or any other foreign or domestic securities exchange or
Governmental Authority with jurisdiction over securities laws. Except as
set forth on Exhibit 5.5 attached hereto, since December 31, 1998, Virginia
Gas has timely filed all reports, registration statements and other filings
required to be filed by it with the SEC under the Exchange Act.
Section 5.6. Absence of Certain Events. Except as set forth in the Virginia
Gas SEC Reports filed prior to the date of this Agreement or as otherwise
specifically disclosed in Exhibit 5.6 attached hereto, since December 31, 1998,
neither Virginia Gas nor any of the Virginia Gas Subsidiaries (excluding the
Virginia Gas Affiliates) and, to the Knowledge of Virginia Gas, none of the
Virginia Gas Affiliates, has suffered any change in its business, financial
condition or results of operations that has had or will have a Material Adverse
Effect upon the Virginia Gas Companies. Except as disclosed in the Virginia Gas
SEC Reports filed prior to the date of this Agreement or in Exhibit 5.6
attached hereto, or as otherwise specifically contemplated by this Agreement,
there has not been since December 31, 1998: (a) any entry into any agreement or
understanding or any amendment of any agreement or understanding between
Virginia Gas or any of the Virginia Gas
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Subsidiaries (excluding the Virginia Gas Affiliates) and, to the Knowledge of
Virginia Gas, between any of the Virginia Gas Affiliates, on the one hand, and
any of their respective directors, officers or employees, on the other hand,
providing for employment of any such director, officer or employee or any
general or material increase in the compensation, severance or termination
benefits payable or to become payable by Virginia Gas or any of the Virginia
Gas Subsidiaries to any of their respective directors, officers or employees
(except for normal increases in the ordinary course of business that are
consistent with past practices and that, in the aggregate, do not result in a
material increase in benefits or compensation expense), or any adoption of or
increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement (including, without limitation, the granting of stock
options or stock appreciation rights or the award of restricted stock) made to,
for or with any such director, officer or employee; (b) any labor dispute that
has had or is expected to have a Material Adverse Effect upon the Virginia Gas
Companies; (c) any entry by Virginia Gas or any of the Virginia Gas
Subsidiaries into any material commitment, agreement, license or transaction
(including, without limitation, any borrowing, capital expenditure, sale of
assets or any mortgage, pledge, lien or encumbrances made on any of the
properties or assets of Virginia Gas or any of the Virginia Gas Subsidiaries)
other than in the ordinary and usual course of business; (d) any change in the
accounting policies or practices of Virginia Gas or the Virginia Gas
Subsidiaries; (e) any damage, destruction or loss, whether covered by insurance
or not, which has had or will have a Material Adverse Effect upon the Virginia
Gas Companies; or (f) any agreement to do any of the foregoing.
Section 5.7. Joint Proxy Statement/Prospectus. None of the information with
respect to the Virginia Gas Companies to be included in the Joint Proxy
Statement/Prospectus or the Registration Statement will, in the case of the
Joint Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, at the time of the mailing of the Joint Proxy Statement/Prospectus or
any amendments thereof or supplements thereto, and at the time of the Special
Meeting, or, in the case of the Registration Statement, at the time it becomes
effective and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Virginia Gas with respect to information supplied by NUI or any affiliate of
NUI for inclusion in the Joint Proxy Statement/Prospectus.
Section 5.8. Litigation. Except as set forth in Exhibit 5.8 attached hereto,
there is no action, suit, proceeding or, to the Knowledge of Virginia Gas,
investigation pending or, to the Knowledge of Virginia Gas, threatened against
or relating to Virginia Gas or any of the Virginia Gas Subsidiaries at law or
in equity, or before any federal, state, provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
whether in the United States or otherwise, that is expected, in the reasonable
judgment of Virginia Gas, to have a Material Adverse Effect upon the Virginia
Gas Companies or that seeks restraint, prohibition, damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.9. Title to and Sufficiency of Assets; Easements.
(a) As of the date hereof, Virginia Gas and each of the Virginia Gas
Subsidiaries (other than the Virginia Gas Affiliates), and, to the
Knowledge of Virginia Gas, the Virginia Gas Affiliates, owns, and as of the
Effective Time, Virginia Gas and each of the Virginia Gas Subsidiaries
(other than the Virginia Gas Affiliates) will own, good and marketable
title to all of its assets (excluding, for purposes of this sentence,
assets held under leases), free and clear of any and all mortgages, liens,
encumbrances, charges, claims, restrictions, pledges, security interests or
impositions, except as disclosed on Exhibit 5.9 attached hereto. Except as
set forth on Exhibit 5.9 attached hereto, such assets, together with all
assets held by Virginia Gas and the Virginia Gas Subsidiaries under leases,
include all tangible and intangible assets, Contracts and rights necessary
or required for the operation of the businesses of Virginia Gas and the
Virginia Gas Subsidiaries in accordance with past practice.
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(b) Subject to ordinary wear and tear and to scheduled or necessary
repairs in the ordinary course of business, all tangible assets of Virginia
Gas and the Virginia Gas Subsidiaries are in good operating condition and
repair.
(c) Except as set forth on Exhibit 5.9 attached hereto, the businesses
of Virginia Gas and the Virginia Gas Subsidiaries (other than the Virginia
Gas Affiliates) and, to the Knowledge of Virginia Gas, the businesses of
the Virginia Gas Affiliates are (i) being operated in a manner which does
not violate the terms of any Easements used by Virginia Gas or the Virginia
Gas Subsidiaries in such businesses, (ii) all such Easements are valid and
enforceable and grant the rights purported to be granted thereby and all
rights necessary thereunder for the current operation of such business,
(iii) there are no spatial gaps in such Easements that would impair the
conduct of such business in any manner and (iv) no part of any asset used
in connection with pipeline operations is located on property that is not
owned in fee by Virginia Gas or a Virginia Gas Subsidiary or subject to an
Easement in favor of Virginia Gas or a Virginia Gas Subsidiary.
Section 5.10. Contracts.
(a) Prior to the date hereof, Virginia Gas has provided NUI with a true
and correct list of all of the Contracts to which Virginia Gas or any
Virginia Gas Subsidiary is a party, which list is set forth on Exhibit 5.10
attached hereto, and true and correct copies of each Contract, in the case
of written Contracts, or true and correct summaries thereof, in the case of
oral Contracts, requested by NUI, that constitute: (i) a lease of any
interest in any real property; (ii) a lease of any personal property with
aggregate annual rental payments in excess of $25,000; (iii) an option to
acquire or lease any interest in real property or a right of first refusal
with respect thereto; (iv) an agreement to purchase or sell a capital asset
or an interest in any business entity for a price in excess of $25,000 or a
right of first refusal with respect thereto; (v) an agreement relating to
the borrowing or lending of money or the purchase or sale of securities;
(vi) a guaranty, contribution agreement or other agreement that includes an
indemnification obligation in excess of $25,000 or any contribution or
support obligation; (vii) an agreement limiting in any respect the ability
of any such entity to compete in any line of business or with any person;
(viii) a customer supply or requirements agreement or an agreement with a
vendor with a payment obligation over its term in excess of $25,000 to
which any such entity is a party or by which any such entity is bound; (ix)
an employment, severance, separation, change in control, or consulting
agreement to which any such entity is a party or by which any such entity
is bound; and (x) any other agreement involving an amount over its term in
excess of $25,000. Except as set forth on Exhibit 5.10 attached hereto,
Virginia Gas and each of the Virginia Gas Subsidiaries (other than the
Virginia Gas Affiliates) has performed and, to the Knowledge of Virginia
Gas, the Virginia Gas Affiliates and every other party has performed, each
material term, covenant and condition of each of the Contracts to which
Virginia Gas or any Virginia Gas Subsidiary is a party that is to be
performed by any of them at or before the date hereof. Except as set forth
on Exhibit 5.10 attached hereto, no event has occurred that would, with the
passage of time or compliance with any applicable notice requirements or
both, constitute a default by Virginia Gas or any Virginia Gas Subsidiary
(other than the Virginia Gas Affiliates) or, to the Knowledge of Virginia
Gas, the Virginia Gas Affiliates and any other party under any of the
Contracts to which Virginia Gas or any Virginia Gas Subsidiary is a party,
and, to the Knowledge of Virginia Gas, no party to any of the Contracts to
which Virginia Gas or any Virginia Gas Subsidiary is a party intends to
cancel, terminate or exercise any option under any of such Contracts.
(b) With respect to each customer supply or requirements agreement and
each vendor agreement with a payment obligation over its term in excess of
$25,000 to which Virginia Gas or any Virginia Gas Subsidiary (other than
the Virginia Gas Affiliates) is a party, and, to the Knowledge of Virginia
Gas, to which any Virginia Gas Affiliate is a party, the copy of such
agreement that has been provided by Virginia Gas to NUI accurately
discloses: (i) the remaining term of such agreement; (ii) all incentive or
other payments paid or to be paid thereunder by Virginia Gas or any
Virginia Gas Subsidiary after December 31, 1999; (iii) all purchase
commitments or minimum purchase guarantees binding on Virginia
A-16
Gas or any Virginia Gas Subsidiary for periods after December 31, 1999; and
(iv) any deviation in the economic terms thereof from and after December
31, 1999, from those that were in effect under such agreements (or under
any similar predecessor agreements) over the course of Virginia Gas' entire
fiscal year ended December 31, 1999.
Section 5.11. Labor Matters.
(a) Except as set forth in Exhibit 5.11 attached hereto, with respect to
employees of Virginia Gas and the Virginia Gas Subsidiaries: (i) no senior
executive, key employee or group of employees has, as of the date hereof,
given notice of his or her intention to terminate employment with any of
Virginia Gas or the Virginia Gas Subsidiaries; (ii) there is no unfair
labor practice charge or complaint against Virginia Gas or any Virginia Gas
Subsidiary pending or, to the Knowledge of Virginia Gas, threatened before
the National Labor Relations Board or any other comparable authority; (iii)
no grievance or any arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Knowledge of
Virginia Gas, no claims therefor exist or have been threatened; and (iv)
there is no litigation, arbitration proceeding, governmental investigation,
administrative charge, citation or action of any kind pending or, to the
Knowledge of Virginia Gas, proposed or threatened against Virginia Gas or
any Virginia Gas Subsidiary relating to employment, employment practices,
terms and conditions of employment or wages and hours.
(b) Neither Virginia Gas nor any Virginia Gas Subsidiary (i) has any
collective bargaining relationship or duty to bargain with any Labor
Organization (as such term is defined in Section 2(5) of the National Labor
Relations Act, as amended); (ii) has recognized or has been requested to
recognize any Labor Organization as the collective bargaining
representative of any of its employees; and (iii) is, to the Knowledge of
Virginia Gas, the subject of any active or threatened organizing effort by
any Labor Organization.
Section 5.12. Employee Benefit Plans.
(a) For purposes of this Section, the term "Virginia Gas Benefit Plans"
shall mean all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus or
other incentive plans, and all other employee programs, arrangements or
agreements, whether arrived at through collective bargaining or otherwise,
all medical, vision, dental and other health plans, all life insurance
plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, any "employee benefit plan," as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by Virginia Gas or any
of the Virginia Gas Subsidiaries or affiliates thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate. Any of the Virginia Gas Benefit
Plans which is an "employee pension benefit plan," as that term is defined
in Section 3(2) of ERISA, is referred to herein as a "Virginia Gas ERISA
Plan."
(b) No Virginia Gas Benefit Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA nor has Virginia Gas or any
Virginia Gas Subsidiary participated in or withdrawn from a multiemployer
plan. All Virginia Gas Benefit Plans are in compliance with the applicable
provisions (including, without limitation, any funding requirements or
limitations) of ERISA, the Code and any other applicable Laws, the breach
or violation of which could have a Material Adverse Effect on the Virginia
Gas Companies. No Virginia Gas Benefit Plan provides for post-retirement
medical benefit obligations (without regard to COBRA obligations). No
Virginia Gas ERISA Plan that is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of
any such plan exceeds the plan's "benefit liabilities," as that term is
defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements.
(c) Exhibit 5.12 hereto is a true and correct list of all Virginia Gas
Benefit Plans. Virginia Gas has provided NUI with access to true and
correct copies of each governing document for each Virginia Gas
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Benefit Plan, together with any amendments, trust agreements (if
applicable), insurance contracts, the most recent summary plan description,
annual report and audited financial statement for each such plan and the
actuarial report for any Virginia Gas Benefit Plan that is a defined
benefit pension plan or funded welfare benefit plan. With respect to any
Virginia Gas Benefit Plan, Virginia Gas has retained the right to terminate
such plan at any time for any reason.
(d) Except as set forth on Exhibit 5.12 hereto, (i) with respect to each
Virginia Gas Benefit Plan intended to be qualified under Code Section
401(a), the trust forming a part thereof has received a favorable
determination letter from the IRS as to its qualification under the Code
and no fact or condition has occurred which could reasonably be expected to
result in the disqualification of such Virginia Gas Benefit Plan or
adversely affect the tax-exempt status of such trust, (ii) there are no
pending or, to the Knowledge of Virginia Gas, threatened claims by or on
behalf of any Virginia Gas Benefit Plans (other than routine claims for
benefits) and (iii) all contributions, premiums and benefit payments
required to be made or paid by Virginia Gas or any Virginia Gas Subsidiary
in respect of any Virginia Gas Benefit Plan have been paid within the
earliest time required by Law or by the Virginia Gas Benefit Plan.
Section 5.13. Tax Matters.
(a) Except as set forth on Exhibit 5.13 attached hereto:
(i) Virginia Gas and each Virginia Gas Subsidiary that is
incorporated under the laws of the United States or of any of the
United States are members of the affiliated group, within the meaning
of Section 1504(a) of the Code, of which Virginia Gas is the common
parent, such affiliated group files a consolidated federal income tax
return and neither Virginia Gas nor any of the Virginia Gas
Subsidiaries has ever filed a consolidated federal income tax return
with (or been included in a consolidated return of) a different
affiliated group;
(ii) Virginia Gas and each of the Virginia Gas Subsidiaries has
timely filed or caused to be filed all Tax Returns required to have
been filed by or for it, and all information set forth in such Tax
Returns is accurate and complete in all material respects;
(iii) Virginia Gas and each of the Virginia Gas Subsidiaries has
paid or made adequate provision on its books and records in accordance
with GAAP for all Taxes covered by such Tax Returns;
(iv) Virginia Gas and each of the Virginia Gas Subsidiaries is in
material compliance with, and its records contain all information and
documents necessary to comply with, all applicable information
reporting and tax withholding requirements under federal, state, local
and foreign Laws, and such records identify with specificity all
accounts subject to withholding under Section 1441, 1442 or 3406 of the
Code or similar provisions of state, local or foreign laws;
(v) there is not an amount of unpaid Taxes due and payable by
Virginia Gas or any of the Virginia Gas Subsidiaries or by any other
person that is or could become a lien on any asset of, or that
otherwise could have a Material Adverse Effect on, the Virginia Gas
Companies;
(vi) Virginia Gas and each of the Virginia Gas Subsidiaries has
collected or withheld all Taxes required to be collected or withheld by
it, and all such Taxes have been paid to the appropriate Governmental
Authority or set aside in appropriate accounts for future payment when
due;
(vii) neither Virginia Gas nor any of the Virginia Gas Subsidiaries
has granted (or is subject to) any waiver, which is currently in
effect, of the period of limitations for the assessment of any Tax; no
unpaid Tax deficiency has been assessed or asserted against, or with
respect to, Virginia Gas or any of the Virginia Gas Subsidiaries by any
Governmental Authority; no power of attorney relating to Taxes that is
currently in effect has been granted by, or with respect to, Virginia
Gas or any of the Virginia Gas Subsidiaries; there are no currently
pending administrative or judicial proceedings, or any deficiency or
refund litigation, with respect to Taxes of Virginia Gas or any of the
Virginia Gas Subsidiaries, the adverse outcome of which would have a
Material Adverse Effect on the Virginia
A-18
Gas Companies; and any such assertion, assessment, proceeding or
litigation disclosed in Exhibit 5.13 hereto is being contested in good
faith through appropriate measures, and its status is described in
Exhibit 5.13 hereto;
(viii) neither Virginia Gas nor any of the Virginia Gas Subsidiaries
has made or entered into, or holds any asset subject to, a consent
filed pursuant to Section 341(f) of the Code and the regulations
thereunder or a "safe harbor lease" subject to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended prior to the Deficit
Reduction Act of 1984, and the regulations thereunder;
(ix) neither Virginia Gas nor any of the Virginia Gas Subsidiaries
is required to include in income any amount from an adjustment pursuant
to Section 481 of the Code or the regulations thereunder or any similar
provision of state or local Law, and Virginia Gas has no Knowledge that
any Governmental Authority has proposed any such adjustment;
(x) neither Virginia Gas nor any of the Virginia Gas Subsidiaries is
obligated to make any payments, or is a party to any Contract that
could obligate it to make any payments, that would not be deductible by
reason of Sections 162(m) or 280G of the Code;
(xi) there are no excess loss accounts or deferred intercompany
gains with respect to any member of the affiliated group of which
Virginia Gas is the common parent which would have a Material Adverse
Effect on the Virginia Gas Companies if taken into account;
(xii) the most recent audited consolidated balance sheet included in
the Virginia Gas SEC Reports fully and properly reflects, in all
material respects, as of the date thereof, the liabilities of Virginia
Gas and the Virginia Gas Subsidiaries for all accrued Taxes and
deferred liability for Taxes and, for periods ending after such date,
the books and records of each such corporation fully and properly
reflect its liability for all accrued Taxes;
(xiii) since April 16, 1997, neither Virginia Gas nor any Virginia
Gas Subsidiary has distributed to their respective stockholders or
security holders stock or securities of a controlled corporation in a
transaction to which Section 355(a) of the Code applies; and
(xiv) Virginia Gas is not, and has not been at any time within the
last five years, a "United States real property holding corporation"
for purposes of Section 897 of the Code.
(b) Exhibit 5.13 describes all material and continuing Tax elections,
consents and agreements made by or affecting Virginia Gas or any Virginia
Gas Subsidiary, lists all types of material Taxes paid and Tax Returns
filed by or on behalf of Virginia Gas or any Virginia Gas Subsidiary and
expressly indicates each Tax with respect to which Virginia Gas or any
Virginia Gas Subsidiary is or has been included in a consolidated, unitary
or combined return.
Section 5.14. Compliance with Law. The conduct of the businesses of Virginia
Gas and the Virginia Gas Subsidiaries and their use of their assets does not
violate or conflict, and has not violated or conflicted, with any Law, which
violation or conflict could have a Material Adverse Effect on the Virginia Gas
Companies.
Section 5.15. Transactions With Affiliates. Except as set forth in Exhibit
5.15 attached hereto, since December 31, 1998, neither Virginia Gas nor any of
the Virginia Gas Subsidiaries has, in the ordinary course of business or
otherwise, (i) purchased, leased or otherwise acquired any property or assets
or obtained any services from, (ii) sold, leased or otherwise disposed of any
property or assets or provided any services to (except with respect to
remuneration for services rendered in the ordinary course of business as a
director, officer or employee of one or more of Virginia Gas or any Virginia
Gas Subsidiary), (iii) entered into or modified in any manner any Contract
with, or (iv) borrowed any money from, or made or forgiven any loan or other
advance to, any Other Virginia Gas Interested Person that, considering the
matters set forth in clauses (i) through (iv) in the aggregate, exceeded a
value of $75,000. Except as set forth in Exhibit 5.15, (i) the Contracts of
Virginia Gas and the Virginia Gas Subsidiaries do not include any obligation or
commitment between
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Virginia Gas or any of the Virginia Gas Subsidiaries, on the one hand, and any
Other Virginia Gas Interested Person, on the other hand, (ii) the assets of
Virginia Gas and the Virginia Gas Subsidiaries do not include any receivable or
other obligation or commitment from any Other Virginia Gas Interested Person
that, in the aggregate, exceeds a value of $75,000 and (iii) the liabilities of
Virginia Gas and the Virginia Gas Subsidiaries do not include any payable or
other obligation or commitment to any Other Virginia Gas Interested Person
that, in the aggregate, exceeds a value of $75,000. Except as set forth in
Exhibit 5.15 hereto, no Other Virginia Gas Interested Person is a party to any
Contract with any customer or supplier of Virginia Gas or any Virginia Gas
Subsidiary (excluding the Virginia Gas Affiliates) and, to the Knowledge of
Virginia Gas, no Virginia Gas Affiliate is a party to any such Contract, that
affects in any manner the business, financial condition or results of operation
of any of the Virginia Gas Companies.
Section 5.16. Environmental Conditions.
(a) Definitions. When used in this Section 5.16:
(i) "Environmental Laws" shall mean any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any Governmental
Authority regulating, relating to or imposing liability or standards of
conduct concerning any Hazardous Materials or environmental protection
in effect as of the date of this Agreement or at the Effective Time,
together with any amendment or re-authorization thereto or thereof;
(ii) "Hazardous Materials" shall mean any hazardous material,
hazardous waste, infectious medical waste, Petroleum and Natural Gas
Products, hazardous or toxic substance defined or regulated as such in
or under any Environmental Law, including, without limitation,
materials exhibiting the characteristics of ignitability, corrosivity,
reactivity or extraction procedure toxicity, as such terms are defined
as of the date of this Agreement or at the Effective Time in connection
with hazardous materials or hazardous wastes or hazardous or toxic
substances in any Environmental Law; and
(iii) "Petroleum and Natural Gas Products" shall mean crude oil,
petroleum or fractions thereof, gasoline, diesel fuel, motor oil, waste
or used oil, heating oil, kerosene and any other petroleum products and
natural gas, natural gas liquids, liquefied natural gas or synthetic
gas useable for fuel.
(b) Except as set forth in Exhibit 5.16 attached hereto, and except for
such violations that in the aggregate would not have a Material Adverse
Effect on the Virginia Gas Companies, (i) neither Virginia Gas nor any
Virginia Gas Subsidiary has used, stored, treated, transported,
manufactured, refined, handled, produced, disposed of, managed, spilled or
released any Hazardous Materials on, under, at, from or in any way
affecting any of its properties or assets (including, without limitation,
any properties or assets now or previously used, owned or operated by
Virginia Gas or any Virginia Gas Subsidiary) or otherwise, in any manner
which at the time of the action in question violated any Environmental Law
governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production, disposal, management, spill or release of
Hazardous Materials, and (ii) to the Knowledge of Virginia Gas, no prior
owner of such property or asset or any tenant, subtenant, prior tenant or
prior subtenant thereof has used Hazardous Materials on, from or in any way
affecting any such property or asset, or otherwise, in any manner which at
the time of the action in question violated any Environmental Law governing
the use, storage, treatment, transportation, manufacture, refinement,
handling, production, disposal, management, spill or release of Hazardous
Materials.
(c) Except as set forth in Exhibit 5.16 attached hereto, neither
Virginia Gas nor any Virginia Gas Subsidiary has any obligations or
liabilities, whether absolute or contingent, accrued or unaccrued, asserted
or unasserted, known or unknown, or otherwise, that could have a Material
Adverse Effect on the Virginia Gas Companies, and no claims have been made
against Virginia Gas or any Virginia Gas Subsidiary and no citations or
notices have been issued against Virginia Gas or any Virginia Gas
Subsidiary that could have a Material Adverse Effect on the Virginia Gas
Companies, and that in the case of any of the foregoing, have been or are
imposed by reason of or based upon any provision of any Environmental
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Laws, including, without limitation, any such obligations or liabilities
relating to or arising out of or attributable, in whole or in part, to the
manufacture, processing, distribution, use, treatment, storage, production,
management, spill, release, disposal, arranging for disposal, transport or
handling of any Hazardous Materials by Virginia Gas or any Virginia Gas
Subsidiary or, to the Knowledge of Virginia Gas, by any predecessors in
interest in connection with or in any way arising from or relating to
Virginia Gas or any Virginia Gas Subsidiary or any of their respective
properties, or relating to or arising from or attributable, in whole or in
part, to the manufacture, processing, distribution, use, treatment,
storage, disposal, production, management, spill, release, transport or
handling of any such substance by any other person at or on or under any of
the real properties owned or used by Virginia Gas or any Virginia Gas
Subsidiary.
(d) Except as set forth on Exhibit 5.16 attached hereto, Virginia Gas
and the Virginia Gas Subsidiaries have received all Permits as may be
required of them under applicable Environmental Laws to conduct their
respective businesses, and Virginia Gas and the Virginia Gas Subsidiaries
are in compliance in all material respects with the terms and conditions of
all such Permits. Neither Virginia Gas nor any Virginia Gas Subsidiary has
received any notices or claims, nor, to the Knowledge of Virginia Gas, is
there a factual basis for such a claim, that it is a responsible party in
connection with any claim or notice asserted pursuant to 42 U.S.C. Section
9601 et seq. ("CERCLA"), or any state superfund law.
(e) The operation of the business of Virginia Gas and the Virginia Gas
Subsidiaries has not adversely impacted any "wetlands" (as that term is
currently defined by the U.S. Army Corps of Engineers or any other
regulatory agency) located on any of the real property owned, operated or
leased by Virginia Gas or any of the Virginia Gas Subsidiaries.
(f) There are no (i) underground storage tanks, (ii) asbestos containing
material or (iii) lead containing material on any real property owned,
operated or leased by Virginia Gas or any of the Virginia Gas Subsidiaries,
the presence of which could result in a Material Adverse Effect.
(g) To the Knowledge of Virginia Gas, neither Virginia Gas nor any
Virginia Gas Subsidiary has transported or disposed, or allowed or arranged
for any third parties to transport or dispose, of any Hazardous Material or
other waste to or at a site which, pursuant to CERCLA or any applicable
state law, has been placed on the National Priorities List or its state
equivalent (a "Superfund Site"). Neither Virginia Gas nor any Virginia Gas
Subsidiary has received notice, nor, to the Knowledge of Virginia Gas, do
any facts exist that could give rise to any notice, that Virginia Gas or
any Virginia Gas Subsidiary is a potentially responsible party with respect
to a Federal or state Superfund Site or for corrective action under CERCLA
or any other applicable Law. Neither Virginia Gas nor any Virginia Gas
Subsidiary has submitted or was required to submit any notice pursuant to
Section 103(c) of CERCLA with respect to any real property. Neither
Virginia Gas nor any Virginia Gas Subsidiary has received any written or
oral request for information in connection with any Federal or state
Superfund Site. Neither Virginia Gas nor any Virginia Gas Subsidiary has
been requested to, or has undertaken, any response or remedial actions or
clean-up actions of any kind at the request of any Governmental Authority
or at the request of any other Person.
Section 5.17. Insurance. Except to the extent adequately accrued on the most
recent balance sheet contained in the Virginia Gas SEC Reports, neither
Virginia Gas nor any Virginia Gas Subsidiary has any obligation (contingent or
otherwise) to pay in connection with any insurance policies any retroactive
premiums or "retro-premiums" that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
Section 5.18. Intellectual Property. Neither Virginia Gas nor any Virginia
Gas Subsidiary currently utilizes, or to the Knowledge of Virginia Gas, has in
the past utilized, any existing or pending patent, trademark, trade name,
service mark, copyright, software, trade secret or know-how, except for those
which are owned, possessed or lawfully used by Virginia Gas or any Virginia Gas
Subsidiary in their business operations, and neither Virginia Gas nor any
Virginia Gas Subsidiary infringes upon or unlawfully uses any patent,
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trademark, trade name, service mark, copyright or trade secret owned or validly
claimed by another person except, in each case, as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
Virginia Gas and the Virginia Gas Subsidiaries own, have a valid license to use
or otherwise have the right validly to use all existing and pending patents,
trademarks, tradenames, service marks, copyrights and software necessary to
carry on their respective businesses substantially as currently conducted,
except where the absence of such ownership, valid license or other valid right
to use would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
Section 5.19. Fees and Expenses of Brokers and Others. Neither Virginia Gas
nor any Virginia Gas Subsidiary (other than the Virginia Gas Affiliates) and,
to the Knowledge of Virginia Gas, none of the Virginia Gas Affiliates (a) has
had any dealings, negotiations or communications with any broker or other
intermediary in connection with the transactions contemplated by this
Agreement, (b) is committed to any liability for any brokers' or finders' fees
or any similar fees in connection with the transactions contemplated by this
Agreement or (c) has retained any broker or other intermediary to act on its
behalf in connection with the transactions contemplated by this Agreement,
except that Virginia Gas has engaged CIBC to represent it in connection with
such transactions, and shall pay all of CIBC's fees and expenses in connection
with such engagement.
Section 5.20. Regulation as Utility.
(a) Based solely upon an opinion of counsel with respect to Virginia Gas
that was delivered in connection with a previous transaction (a true and
correct copy of which has been delivered by Virginia Gas to NUI), Virginia
Gas is not a "holding company" within the meaning of Section 2(a)(7) of
PUHCA as a result of Virginia Gas Distribution Company's business
activities. Since the date of such opinion, the business activities of
Virginia Gas Distribution Company have been no less favorable to supporting
such an opinion than the business activities that formed the basis of such
legal opinion.
(b) Except as set forth on Exhibit 5.20 attached hereto, neither
Virginia Gas nor any Virginia Gas Subsidiary is subject to regulation as a
"public utility" as that phrase is defined in Virginia Code Ann. (S) 56-
265.1(b) or "public service corporation" as that phrase is defined in
Virginia Code Ann. (S) 56-1.
(c) Neither Virginia Gas nor any Virginia Gas Subsidiary is subject to
regulation as a public utility or public service company (or similar
designation) in any state other than Virginia.
Section 5.21. FERC Jurisdiction. Neither Virginia Gas nor any Virginia Gas
Subsidiary owns or operates any FERC jurisdictional facilities giving rise to a
requirement for approval of the Merger by FERC.
Section 5.22. Accuracy of Information. Neither this Agreement nor any other
document provided by the Virginia Gas Companies or their employees or agents to
NUI in connection with the transactions contemplated herein, when this
Agreement and such other documents are considered in the aggregate, contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein not misleading.
Section 5.23. Absence of Undisclosed Liabilities. Except as disclosed in the
Virginia Gas SEC Reports filed prior to the date of this Agreement, neither
Virginia Gas nor any Virginia Gas Subsidiary has, as of the date hereof, or
will have, as of the Effective Time, any liabilities or obligations of any
kind, whether absolute, accrued, asserted or unasserted, contingent or
otherwise, that would be required to be disclosed on a consolidated balance
sheet of Virginia Gas, or reflected in the notes thereto, prepared as of such
date, in accordance with GAAP, except liabilities, obligations or contingencies
that were (a) reflected on or accrued or reserved against in the consolidated
balance sheet of Virginia Gas as of December 31, 1999, which is included in the
Virginia Gas SEC Reports, or reflected in the notes thereto, or (b) incurred
after the date of such balance sheet in the ordinary course of business and
consistent with past practices and which, individually or in the aggregate,
would not have a Material Adverse Effect on the Virginia Gas Companies. Neither
Virginia Gas nor any Virginia Gas Subsidiary is a party to any Contract, or
subject to any charter or other corporate or partnership restriction, or
subject to any judgment, order, writ, injunction, decree, rule or regulation,
which will have a Material Adverse Effect on the Virginia Gas Companies.
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Section 5.24. Opinion of Financial Advisor. Virginia Gas has received the
opinion of CIBC to the effect that, as of the date hereof, the exchange ratio
contemplated in this Agreement is fair to the holders of shares of Virginia Gas
Common Stock from a financial point of view.
Section 5.25. Virginia Gas Year 2000 Compliance. The Virginia Gas Companies
did not suffer any Material Adverse Effect in connection with their efforts to
prepare for, or remediation efforts related to, the ability of their computer
applications (including software, firmware, hardware and other similar or
related items of automated computerized or software systems) to perform
properly date sensitive functions for all dates, before and after January 1,
2000 ("Year 2000 Compliance"), or in connection with any failure by any vendor,
customer or other third party to achieve Year 2000 Compliance.
Section 5.26. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Virginia Gas Common Stock entitled to
vote thereon is the only vote of the holders of any class or series of Virginia
Gas' capital stock necessary to adopt this Agreement. The Board of Directors of
Virginia Gas (at a meeting duly called and held) has (a) unanimously approved
this Agreement and the transactions contemplated hereby, (b) determined that
the Merger is fair to and in the best interests of the holders of Virginia Gas
Common Stock, (c) resolved to recommend this Agreement to such holders for
adoption and (d) directed that this Agreement be submitted to holders of
Virginia Gas Common Stock.
Section 5.27. Section 203 of the DGCL; State Takeover Statutes. Prior to the
date hereof, the Board of Directors of Virginia Gas has approved this Agreement
and the transactions contemplated hereby and such approval is sufficient to
render inapplicable to the Merger and any of such other transactions the
provisions of Section 203 of the DGCL. No other state takeover statute or
similar statute or regulation applies or purports to apply to this Agreement,
the Merger or any of the other transactions contemplated hereby and no
provision of the Certificates or Articles of Incorporation, bylaws or other
governing instruments of any of the Virginia Gas Companies would, directly or
indirectly, restrict or impair the ability of NUI to vote, or otherwise to
exercise the rights of a stockholder with respect to, shares of the Virginia
Gas Companies that may be acquired or controlled by NUI as contemplated by this
Agreement.
Section 5.28. Virginia Gas Affiliates and Partnerships.
(a) There are no claims, including, without limitation, claims of breach
of fiduciary duty or unlawful payment of distributions, pending or
threatened by any shareholder of the Virginia Gas Affiliates against the
board of directors or any other shareholder of the Virginia Gas Affiliates.
All borrowings by the Virginia Gas Affiliates have been approved by all
necessary action, including, without limitation, all shareholder action
required by the Bylaws of the Virginia Gas Affiliates.
(b) Virginia Gas has provided NUI with true and correct copies of all
governing documents related to the Virginia Gas Partnerships and of all
other documents relating to the Virginia Gas Partnerships reasonably
requested by NUI that are in the possession of Virginia Gas or which
Virginia Gas has the right to obtain. To the Knowledge of Virginia Gas, no
action has been taken or is pending for the dissolution or liquidation of
any of the Virginia Gas Partnerships. Virginia Gas has not been requested
to make any additional capital contributions that currently remain unfunded
or otherwise outstanding and, to the Knowledge of Virginia Gas, no such
additional capital contribution requests are contemplated with respect to
any Virginia Gas Partnership.
Section 5.29. Certain Agreements.
(a) Virginia Gas and Michael L. Edwards have duly executed and delivered
the Change of Control Agreement, dated as of the date hereof, in the form
previously provided to NUI (the "Edwards Agreement"). The Edwards Agreement
is in full force and effect, constitutes the valid and binding agreement of
the parties thereto and is enforceable against the parties thereto in
accordance with its terms.
(b) Simultaneously with the execution of this Agreement, Virginia Gas,
the Town of Saltville, Virginia, and the Saltville Industrial Development
Authority shall enter into the Contract of Sale in the
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form of Exhibit 5.29 attached hereto (the "Saltville Purchase Agreement").
The Saltville Purchase Agreement, when executed and delivered by the
parties thereto, will be in full force and effect, will constitute the
valid and binding agreement of the parties thereto, and will be enforceable
against the parties thereto in accordance with its terms.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of the Businesses of NUI and Virginia Gas.
(a) Except as otherwise expressly provided in this Agreement, during the
period from the date of this Agreement to the Effective Time, Virginia Gas
and the Virginia Gas Subsidiaries (other than the Virginia Gas Affiliates)
will conduct their respective operations according to their ordinary and
usual course of business and consistent with past practice, and will use
their respective reasonable best efforts to preserve intact their
respective business organizations, to keep available the services of their
officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and
others having material business relationships with them (and, with respect
to the Virginia Gas Affiliates and the Virginia Gas Partnerships, Virginia
Gas will not approve or otherwise take, or refrain from taking, any action
in its capacity as a stockholder or partner that is inconsistent with the
foregoing). Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective
Time, neither Virginia Gas nor any of the Virginia Gas Subsidiaries (other
than the Virginia Gas Affiliates) will, and, with respect to the Virginia
Gas Affiliates and the Virginia Gas Partnerships, Virginia Gas will not
approve or otherwise take, or refrain from taking, any action that may
facilitate or result in the following actions, without the prior written
consent of NUI:
(i) amend its Certificates or Articles of Incorporation, bylaws,
partnership or joint venture agreements or other organizational
documents;
(ii) authorize for issuance or issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class
or any other securities or interests, except as required by the terms
of any Virginia Gas Benefit Plan existing on the date hereof, or any
options, warrants, rights or other securities outstanding as of the
date hereof and disclosed pursuant to this Agreement;
(iii) split, combine or reclassify any shares of its capital stock
or declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any of its
securities or any securities of the Virginia Gas Subsidiaries or the
Virginia Gas Partnerships;
(iv) (A) incur or assume any Funded Debt (as defined below) not
currently outstanding, (B) assume, guarantee, endorse or otherwise
become liable or responsible for the obligations of any person except
Virginia Gas or a Virginia Gas Subsidiary (other than a Virginia Gas
Affiliate), (C) make any loans, advances or capital contributions to,
or investments in, any other person, (D) enter into any Contract, or
alter, amend, modify or exercise any option under any existing
Contract, other than in the ordinary course of business or in
connection with the transactions contemplated by this Agreement, (E)
authorize any single capital expenditure which is in excess of $50,000
or capital expenditures which are, in the aggregate, in excess of
$75,000, other than capital expenditures pursuant to Contracts entered
into prior to the date hereof and reflected in Virginia Gas' fiscal
2000 capital budget furnished to NUI prior to the date hereof or (F)
incur or permit to exist any mortgage, lien, encumbrance, charge,
claim, restriction, pledge, security interest or imposition affecting
any of its assets, except as disclosed on Exhibit 5.9 attached hereto;
(v) adopt or amend (except as may be required by Law or as provided
in this Agreement) any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right,
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restricted stock, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts,
plans, funds or other arrangements for the benefit or welfare of any
director, officer or employee, or (except for normal increases in the
ordinary course of business that are consistent with past practices and
that, in the aggregate, do not result in a material increase in benefits
or compensation expense) increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit
not required by any existing plan or arrangement (including, without
limitation, the granting of stock options, stock appreciation rights,
shares of restricted stock or performance units) or enter into any
Contract, agreement, commitment or arrangement to do any of the
foregoing;
(vi) acquire, sell, lease or dispose of any material assets outside
the ordinary course of business;
(vii) take any action other than in the ordinary course of business
and in a manner consistent with past practice with respect to accounting
policies or practices;
(viii) make any Tax election or settle or compromise any federal,
state, local or foreign income Tax liability involving, in the
aggregate, an amount in excess of $75,000;
(ix) except for the payment of professional fees, pay, discharge or
satisfy any material claims, liabilities or obligations (absolute,
accrued or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in Virginia Gas' audited
consolidated balance sheets as of December 31, 1999, or incurred in the
ordinary course of business since the date thereof;
(x) hold any meeting of its stockholders except to the extent
required by the request of the stockholders entitled to call a meeting
under the Virginia Gas bylaws or the DGCL;
(xi) take any action that would or is reasonably likely to result in
any of the conditions set forth in Article VII not being satisfied as of
the Closing Date;
(xii) make any filing with any Governmental Authority to materially
change rates on file;
(xiii) voluntarily engage in any activities which could be reasonably
expected to cause a change in Virginia Gas' status under PUHCA; or
(xiv) agree in writing or otherwise to take any of the foregoing
actions.
For purposes of this Section, "Funded Debt" shall mean, without
duplication, (i) all indebtedness for borrowed money or which has been
incurred in connection with the acquisition of assets, (ii) all rentals
payable under capitalized leases, and (iii) all guaranties of Funded Debt of
others.
(b) Except as otherwise expressly provided in this Agreement, prior to
the Effective Time, NUI will not, without the prior written consent of
Virginia Gas, take any action that would or is reasonably likely to result
in any of the conditions set forth in Article VII not being satisfied as of
the Closing Date.
(c) NUI and Virginia Gas agree that, during the period from the date of
this Agreement to the Effective Time: (i) they will cause representatives
of their respective companies to meet in person or telephonically, no less
frequently than every two weeks, to discuss the operations and business
prospects of their companies; and (ii) Virginia Gas will promptly advise
NUI of the occurrence of any Material Adverse Effect with respect to the
Virginia Gas Companies, and NUI will promptly advise Virginia Gas of the
occurrence of any Material Adverse Effect with respect to the NUI
Companies.
Section 6.2. No Solicitation.
(a) Prior to the Effective Time, Virginia Gas agrees that neither it nor
any of the Virginia Gas Subsidiaries (other than the Virginia Gas
Affiliates) or any of their respective directors, officers, employees,
agents or representatives will, directly or indirectly, (i) solicit,
initiate, facilitate or encourage (including by way of furnishing or
disclosing non-public information) any inquiries or the making of any
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proposal with respect to any merger, consolidation or other business
combination involving Virginia Gas or any Virginia Gas Subsidiary, or the
acquisition of all or any significant part of the assets or capital stock
of Virginia Gas or any Virginia Gas Subsidiary (an "Acquisition
Transaction") or (ii) negotiate, explore or otherwise engage in discussions
with any individual, partnership, corporation, business trust, limited
liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity (each, a
"Person") (other than NUI and its representatives) with respect to any
Acquisition Transaction, or which may reasonably be expected to lead to a
proposal for an Acquisition Transaction, or enter into any agreement,
arrangement or understanding with respect to any such Acquisition
Transaction; provided, however, that Virginia Gas may, in response to an
unsolicited written proposal from a third party regarding a Superior
Proposal (as hereinafter defined), furnish information to and engage in
discussions and negotiations with such third party, but only if the Board
of Directors of Virginia Gas determines in good faith, after consultation
with its financial advisors and based upon the advice (in the form of a
written reasoned opinion) of outside independent counsel, that failing to
take such action would result in a breach of the fiduciary duties of such
Board of Directors under applicable Law; and provided, further, that with
respect to the Virginia Gas Affiliates, Virginia Gas will not approve or
otherwise take, or refrain from taking, any action in its capacity as a
stockholder that would permit a Virginia Gas Affiliate to take any action
that the Virginia Gas Subsidiaries are prohibited from taking pursuant to
the foregoing. It is understood and agreed, without limitation of Virginia
Gas' obligations, that any violation of this Section 6.2 by any director,
officer, investment banker, financial advisor, attorney or other advisor or
representative of Virginia Gas, whether or not such Person is purporting to
act on behalf of Virginia Gas, or otherwise, shall be deemed to be a breach
of this Section 6.2 by Virginia Gas.
(b) Virginia Gas agrees that it and the Virginia Gas Subsidiaries (other
than the Virginia Gas Affiliates), and their respective directors,
officers, employees, agents and representatives, shall immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any Person (other than NUI and its representatives)
conducted heretofore with respect to any Acquisition Transaction. Virginia
Gas agrees to promptly advise NUI in writing of the existence of (y) any
inquiries or proposals (or desire to make a proposal) received by (or
indicated to), any such information requested from, or any negotiations or
discussions sought to be initiated or continued with, Virginia Gas and the
Virginia Gas Subsidiaries, or any of their respective directors, officers,
employees, agents or representatives, in each case from a Person (other
than NUI and its representatives) with respect to an Acquisition
Transaction, and (z) the terms thereof, including the identity of such
third party and the terms of any financing arrangement or commitment in
connection with such Acquisition Transaction, and to update on an ongoing
basis or upon NUI's reasonable request, the status thereof. As used herein,
"Superior Proposal" means a bona fide, written and unsolicited proposal or
offer made by any Person (or group) (other than NUI) with respect to an
Acquisition Transaction on terms which, as determined by the Board of
Directors of Virginia Gas in good faith and in the exercise of reasonable
judgment (based on the written advice of independent financial advisors),
is at a higher price and more favorable to Virginia Gas and its
stockholders than the transactions contemplated hereby.
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Section 6.3. The Registration Statement; Listing.
(a) Virginia Gas and NUI shall, as soon as practicable following the
execution of this Agreement, file with the SEC a draft of the Joint Proxy
Statement/Prospectus (in a form mutually agreeable to Virginia Gas and NUI)
as preliminary proxy materials under the Exchange Act. Virginia Gas and NUI
shall cooperate to respond promptly to any comments made by the SEC with
respect thereto.
(b) Upon resolution of any SEC comments with respect to the draft Joint
Proxy Statement/Prospectus, or at such other time as may be mutually
determined by the parties hereto, NUI shall file the Registration Statement
(including the then-current draft of the Joint Proxy Statement/Prospectus)
with the SEC, and shall:
(i) after consultation with Virginia Gas, respond promptly to any
comments made by the SEC with respect thereto; provided, however, that
NUI will not file any amendment or supplement to the Registration
Statement without first furnishing to Virginia Gas a copy thereof for
its review and will not file any such proposed amendment or supplement
to which Virginia Gas reasonably and promptly objects;
(ii) use its best efforts to cause the Registration Statement to
become effective under the Securities Act as soon as practicable, and
Virginia Gas shall cause the Joint Proxy Statement/Prospectus to be
mailed to its stockholders at the earliest practicable time after
effectiveness of the Registration Statement;
(iii) to the extent required by applicable Law, cause the
registration or qualification of the NUI Common Stock to be issued upon
conversion of shares of Virginia Gas Common Stock in accordance with
this Agreement under the state securities or "Blue Sky" laws of each
state of residence of a record holder of Virginia Gas Common Stock as
reflected in its stock transfer ledger;
(iv) promptly advise Virginia Gas (A) when the Registration
Statement becomes effective, (B) when, prior to the Effective Time, any
amendment to the Registration Statement shall be filed or become
effective, (C) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (D) of the receipt
by NUI of any notification with respect to the suspension of the
registration or qualification of NUI Common Stock for sale in any
jurisdiction or the institution or threatening of any proceeding for
that purpose;
(v) use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal
thereof; and
(vi) use its best efforts to cause the shares of NUI Common Stock to
be issued upon conversion of shares of Virginia Gas Common Stock in
accordance with this Agreement to be listed for trading on the NYSE
upon official notice of issuance.
If, at any time when the Joint Proxy Statement/Prospectus is required to
be delivered under the Securities Act or the Exchange Act, any event occurs
as a result of which the Joint Proxy Statement/Prospectus as then amended
or supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, or if it shall be necessary to amend the Registration Statement
or supplement the Joint Proxy Statement/Prospectus to comply with the
Securities Act or the Exchange Act or the respective rules thereunder,
Virginia Gas and NUI will cooperate to permit NUI promptly to prepare and
file with the SEC, subject to clause ((a)) of this Section 6.3, an
amendment or supplement that will correct such statement or omission or
effect such compliance.
Section 6.4. Access to Information; Confidentiality Agreement.
(a) Between the date of this Agreement and the Effective Time, Virginia
Gas will (i) give to NUI and its authorized representatives reasonable
access during normal business hours to all plants, offices,
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warehouses and other facilities and to all books and records of Virginia
Gas and the Virginia Gas Subsidiaries (other than the Virginia Gas
Affiliates), and will use its best efforts to provide such access with
respect to the Virginia Gas Affiliates, (ii) permit NUI to make such
inspections as it may reasonably request and (iii) cause its officers and
those of the Virginia Gas Subsidiaries (other than the Virginia Gas
Affiliates) to furnish such financial and operating data and other
information in the possession of Virginia Gas or to which Virginia Gas has
the right to obtain with respect to the business and properties of the
Virginia Gas Companies as may from time to time reasonably be requested.
Subject to Section 6.7 hereof, all such information shall be kept
confidential in accordance with the Confidentiality Agreement.
(b) Notwithstanding the execution of this Agreement, the Confidentiality
Agreement shall remain in full force and effect through the Effective Time.
Each party hereto hereby waives the provisions of the Confidentiality
Agreement as and to the extent necessary to permit the solicitation of
votes of the stockholders of Virginia Gas pursuant to the Joint Proxy
Statement/Prospectus and to permit consummation of the transactions
contemplated hereby. Each party further acknowledges that the
Confidentiality Agreement shall survive any termination of this Agreement
pursuant to Section 8.1 hereof.
(c) The Virginia Gas Companies shall provide to NUI and its agents
access to all real property to which any Virginia Gas Company has, or has
the right to obtain, access for the purpose of conducting Phase I
environmental assessments. If the results of any Phase I environmental site
assessment relating to a location set forth on Exhibit 6.4 attached hereto
reasonably indicates that a Phase II environmental site assessment is
prudent under the circumstances, Virginia Gas shall provide to NUI and its
agents access to conduct such Phase II environmental site assessment. If
the results of any Phase I environmental site assessment relating to a
location other than a location set forth on Exhibit 6.4 attached hereto
reasonably indicates that a Phase II environmental site assessment is
prudent under the circumstances, NUI may request that Virginia Gas provide
to NUI and its agents access to conduct such Phase II environmental site
assessment. Subject to the provisions of Section 8.1(d)(iv) hereof,
Virginia Gas may grant or deny such access in its sole discretion.
Section 6.5. Best Efforts. Subject to the terms and conditions herein
provided and subject to fiduciary obligations under applicable Law as advised
by counsel, each of the parties hereto agrees to use its best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, to consummate and make
effective the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall take all such necessary action. NUI and Virginia
Gas will execute any additional instruments necessary to consummate the
transactions contemplated hereby.
Section 6.6. Consents. Virginia Gas and NUI each will use its best efforts
to obtain consents of, and make all required filings with, all third parties
and Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, all consents
required with respect to the HSR Act and the approval of the VSCC.
Section 6.7. Public Announcements. The parties hereto have agreed upon the
text of a joint press release announcing, among other things, the execution of
this Agreement, which joint press release shall be disseminated promptly
following the execution hereof. Virginia Gas and NUI will consult with each
other before issuing any additional press release or otherwise making any
additional public statement with respect to this Agreement, the Merger or the
transactions contemplated herein and shall not issue any such press release or
make any such public statement prior to such consultation or as to which the
other party promptly and reasonably objects, except as may be required by Law
in the written reasoned opinion of such party's counsel or by obligations
pursuant to any listing agreement with any national securities exchange or
inter-dealer quotation system, in which case the party proposing to issue such
press release or make such public announcement shall use its best efforts to
consult in good faith with the other party before issuing any such press
release or making any such public announcements.
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Section 6.8. Affiliates. Virginia Gas shall use its best efforts to cause
each principal executive officer, each director and each other person who may
be deemed to be an "affiliate," for purposes of Rule 145 under the Securities
Act, of Virginia Gas to deliver to NUI at or prior to the Effective Time a
written agreement (substantially in the form of Exhibit 6.8 attached hereto) to
the effect that such person will not offer to sell, sell or otherwise dispose
of any shares of NUI Common Stock issued in the Merger, except, in each case,
pursuant to an effective registration statement or in compliance with Rule 145,
as amended from time to time, or in a transaction which, in the opinion of
legal counsel satisfactory to NUI, is exempt from the registration requirements
of the Securities Act.
Section 6.9. Intentionally Omitted.
Section 6.10. Letter of Virginia Gas' Accountants. Virginia Gas shall use
its best efforts to cause to be delivered to NUI two letters from Arthur
Anderson, LLP, one dated a date within two business days before the date on
which the Registration Statement shall become effective and one dated the
Closing Date, in form and substance reasonably satisfactory to NUI and Virginia
Gas and customary in scope and substance for agreed-upon procedures letters
delivered by independent accountants in connection with registration statements
similar to the Registration Statement.
Section 6.11. Letter of NUI's Accountants. NUI shall use its best efforts to
cause to be delivered to Virginia Gas two letters from Arthur Andersen, LLP,
one dated a date within two business days before the date on which the
Registration Statement shall become effective and one dated the Closing Date,
in form and substance reasonably satisfactory to Virginia Gas and NUI and
customary in scope and substance for agreed-upon procedures letters delivered
by independent accountants in connection with registration statements similar
to the Registration Statement.
Section 6.12. Opinions of Financial Advisors. Virginia Gas shall use its
best efforts to cause CIBC to provide its opinion, as of a date no earlier than
three business days prior to the date that the Joint Proxy Statement/Prospectus
is mailed to stockholders of Virginia Gas, as to the fairness of the exchange
ratio contemplated in this Agreement to the stockholders of Virginia Gas from a
financial point of view, as contemplated by this Agreement, and shall include
such updated opinion in the Joint Proxy Statement/Prospectus.
Section 6.13. Indemnification; Insurance.
(a) Except as may be limited by applicable Law, from the Effective Time
and for a period of six years thereafter, NUI shall cause Virginia Gas to
maintain all rights of indemnification existing in favor of the directors
and officers of Virginia Gas on terms no less favorable than those provided
in the Amended and Restated Certificate of Incorporation and Bylaws of
Virginia Gas on the date of this Agreement with respect to matters
occurring prior to the Effective Time.
(b) NUI shall cause to be maintained in effect for six years from the
Effective Time the current policies for directors' and officers' liability
insurance maintained by Virginia Gas (provided that NUI may substitute
therefor policies of at least the same coverage containing terms and
conditions that are not materially less advantageous) with respect to
matters occurring prior to the Effective Time, to the extent such insurance
is available to NUI in the market.
Section 6.14. PUHCA and the Natural Gas Act.
(a) None of the parties hereto shall, nor shall any party permit any of
its Subsidiaries to, without the other party's consent, which consent shall
not be unreasonably withheld, conditioned or delayed, engage in any
activities that would (i) cause a change in its status or that of its
Subsidiaries under PUHCA, including, without limitation, the registration
by either party under PUHCA or (ii) result in jurisdiction by FERC over the
Merger.
(b) None of the parties hereto shall, nor shall any party permit any of
its Subsidiaries to, without the other party's consent, which consent shall
not be unreasonably withheld, conditioned or delayed, fail to
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take such actions that are necessary to (i) preserve existing exemptions
from registration under PUHCA or (ii) allow the Merger to proceed without a
requirement for approval by FERC.
Section 6.15. Interim Financing.
Attached hereto as Exhibit 6.15 is a term sheet setting forth the
principal terms of certain financing to be provided to Virginia Gas by NUI
Capital Corp., a wholly-owned subsidiary of NUI. Virginia Gas and NUI agree
(and NUI agrees to cause NUI Capital Corp.) to work diligently and in good
faith to complete the financing described in Exhibit 6.15 in accordance
with the terms thereof.
Section 6.16. Amendment of Agreement in Certain Circumstances.
In the event that the transactions contemplated by the Registration
Statement on Form S-4 filed by NUI Holding Company on February 9, 2000
(Registration No. 333-30092), have been consummated prior to the Effective
Time, the parties hereto agree to (i) enter into an amendment to this
Agreement, or to amend and restate this Agreement in its entirety, to
provide for the substitution of NUI Holding Company for NUI herein, and to
amend any other provisions herein that may be required in order to give
full effect to the transactions contemplated herein; and (ii) at the
election of NUI, to enter into an amendment to this Agreement, or to amend
and restate this Agreement in its entirety, to provide for the merger of
Virginia Gas with and into Merger Subsidiary with Merger Subsidiary being
the surviving corporation in the Merger.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions Precedent to Each Party's Obligation to Effect the
Merger.
The respective obligation of each party to consummate the Merger is subject
to the satisfaction at or prior to the Effective Time of the following
conditions precedent:
(a) the transactions contemplated in this Agreement shall have been
adopted by the affirmative vote of the stockholders of Virginia Gas by the
requisite vote in accordance with the DGCL;
(b) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent
jurisdiction or any Governmental Authority which prohibits the consummation
of the Merger; provided, however, that the parties hereto shall use their
best efforts to have any such order, decree or injunction vacated or
reversed;
(c) the Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in effect;
(d) (i) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, (ii) all applicable requirements of the
Exchange Act shall have been satisfied, (iii) all NUI Required Consents and
Virginia Gas Required Consents shall have been made or obtained (as the
case may be) and become final and (iv) any applicable filings under state
securities, "Blue Sky" or takeover laws shall have been made;
(e) the receipt by the parties hereto, based on customary assumptions
and on representations set forth in certificates of officers of NUI and
Virginia Gas, of the opinion of Hunton & Williams addressed to the board of
directors of NUI and the board of directors of Virginia Gas (dated the date
of the Effective Time) to the effect that, for United States federal income
tax purposes, (i) the Merger will constitute a "reorganization" under
Section 368(a) of the Code, (ii) no gain or loss will be recognized by NUI,
Merger Subsidiary or Virginia Gas upon consummation of the Merger, (iii) no
gain or loss will be recognized by stockholders of Virginia Gas upon the
exchange of shares of Virginia Gas Common Stock solely for shares of NUI
Common Stock (including any fractional share interest) in the Merger, (iv)
the
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aggregate basis of shares of NUI Common Stock (including any fractional
share interest) received by a Virginia Gas stockholder in the Merger will
be the same as the aggregate basis of the shares of Virginia Gas Common
Stock exchanged therefor, (v) the holding period for shares of NUI Common
Stock (including any fractional share interest) received by a Virginia Gas
stockholder in the Merger will include the holding period for the shares of
Virginia Gas Common Stock exchanged therefor, if such shares of Virginia
Gas Common Stock are held as a capital asset at the Effective Time and (vi)
cash received in lieu of a fractional share of NUI Common Stock will be
treated as having been received as full payment in exchange for such
fractional share; and
(f) the shares of NUI Common Stock required to be issued hereunder shall
have been listed for trading on the NYSE subject to official notice of
issuance.
Section 7.2. Conditions Precedent to Obligations of Virginia Gas. The
obligations of Virginia Gas to consummate the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions precedent:
(a) there shall have occurred no material adverse change in the
business, financial condition or results of operations of the NUI
Companies, taken as a whole, from the date hereof to the Effective Time;
(b) the representations and warranties of NUI contained in Article IV
shall be true and correct in all respects (as to representations and
warranties qualified or limited by the term "Material Adverse Effect," the
word "material," or phrases of like import), and in all material respects
(as to representations and warranties not so qualified or limited) when
made and at and as of the Effective Time with the same force and effect as
if those representations and warranties had been made at and as of such
time except (i) to the extent such representations and warranties speak as
of a specified earlier date, and (ii) as otherwise contemplated or
permitted by this Agreement;
(c) NUI shall, in all material respects, have performed all obligations
and complied with all covenants necessary to be performed or complied with
by it under this Agreement on or before the Effective Time;
(d) Virginia Gas shall have received a certificate of the President and
Chief Executive Officer or Senior Vice President and Chief Operating
Officer of NUI, in form satisfactory to counsel for Virginia Gas,
certifying fulfillment of the matters referred to in paragraphs ((a))
through ((c)) of this Section 7.2;
(e) Virginia Gas shall have received a satisfactory opinion from CIBC
pursuant to Section 6.12 as to the fairness of the exchange ratio
contemplated in this Agreement, from a financial point of view, to the
stockholders of Virginia Gas;
(f) all proceedings, corporate or other, to be taken by NUI in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Virginia Gas and counsel for Virginia Gas, and NUI shall have
made available to Virginia Gas for examination the originals or true and
correct copies of all documents that Virginia Gas may reasonably request in
connection with the transactions contemplated by this Agreement; and
(g) Virginia Gas shall have received each of the accountants' letters
contemplated by Section 6.11 hereof to be received by it.
Section 7.3. Conditions Precedent to Obligations of NUI. The obligations of
NUI to consummate the Merger are subject to the satisfaction or waiver at or
prior to the Effective Time of the following conditions precedent:
(a) there shall have occurred no material adverse change in the
business, financial condition or results of operations of the Virginia Gas
Companies, taken as a whole, from the date hereof to the Effective Time;
(b) the representations and warranties of Virginia Gas contained in
Article V shall be true and correct in all respects (as to representations
and warranties qualified or limited by the term "Material Adverse
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Effect," the word "material," or phrases of like import), and in all
material respects (as to representations and warranties not so qualified or
limited) when made and at and as of the Effective Time with the same force
and effect as if those representations and warranties had been made at and
as of such time except (i) to the extent such representations and
warranties speak as of a specified earlier date, and (ii) as otherwise
contemplated or permitted by this Agreement;
(c) Virginia Gas shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(d) NUI shall have received a certificate of the President and Chief
Executive Officer or Vice President and Chief Financial Officer of Virginia
Gas, in form satisfactory to counsel for NUI, certifying fulfillment of the
matters referred to in paragraphs ((a)) through ((c)) of this Section 7.3;
(e) The Edwards Agreement shall be in full force and effect in
accordance with its terms and shall not have been amended, modified,
repudiated or rejected;
(f) all proceedings, corporate or other, to be taken by Virginia Gas in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to NUI and NUI's counsel, and Virginia Gas shall have made
available to NUI for examination the originals or true and correct copies
of all documents that NUI may reasonably request in connection with the
transactions contemplated by this Agreement;
(g) NUI shall have received from each person specified in Section 6.8
hereof the written agreement referred to in such Section 6.8;
(h) NUI shall have received each of the accountants' letters
contemplated by Section 6.10 hereof to be received by it;
(i) No event shall have occurred that would, with or without the passage
of time or compliance with any applicable notice requirements or both
constitute a default under or give rise to a right of termination with
respect to (i) the Firm Pipeline Service Agreement, dated as of February 5,
1999, by and between Virginia Gas Pipeline Company and Roanoke Gas Company
and (ii) the Firm Pipeline Service Agreement, dated as of April 17, 1997,
by and between Virginia Gas Pipeline Company and United Cities Gas Company
(collectively, the "Pipeline Company Contracts"), and the Pipeline Company
Contracts shall be in full force and effect in accordance with their terms;
(j) The Saltville Purchase Agreement shall be in full force and effect
and shall not have been amended, modified, repudiated or rejected;
provided, however, that the transactions contemplated by the Saltville
Purchase Agreement may have been consummated prior to the Effective Time in
accordance with the terms thereof; and
(k) No Virginia Gas Affiliate or Virginia Gas Partnership shall have
taken any of the actions described in Section 6.1 hereof which actions,
considered in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Virginia Gas Companies.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding adoption
thereof by the stockholders of Virginia Gas, but prior to the Effective Time:
(a) by mutual written consent of Virginia Gas and NUI;
(b) by Virginia Gas or NUI, if the Effective Time shall not have
occurred on or before December 31, 2000; provided, however, that if all
conditions provided in Article VII hereof, other than one or more of the
conditions provided in Section 7.1((d)) hereof, have been satisfied or
waived, and diligent efforts are
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being undertaken to satisfy such conditions, then the references to
December 31, 2000, in this Section 8.1((b)) shall be deemed to be the date
that is 12 months from the date of this Agreement (provided that the right
to terminate this Agreement under this Section 8.1((b)) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or has resulted in the failure of the
Effective Time to occur on or before such date);
(c) by Virginia Gas if there has been a material breach by NUI of any
representation, warranty, covenant or agreement set forth in this
Agreement, which breach has not been cured within ten business days
following receipt by NUI of notice of such breach;
(d) by NUI if (i) the transactions contemplated in this Agreement shall
have been voted on by holders of Virginia Gas Common Stock at a meeting
duly convened therefor, and the votes shall not have been sufficient to
satisfy the condition set forth in Section 7.1((a)) hereof, (ii) there has
been a material breach by Virginia Gas of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten business days following receipt by Virginia Gas of
notice of such breach, (iii) the Board of Directors of Virginia Gas should
fail to recommend to its stockholders adoption of the transactions
contemplated by this Agreement or such recommendation shall have been made
and subsequently withdrawn, amended or modified in any manner adverse to
NUI, (iv) Virginia Gas elects not to provide to NUI and its agents access
to conduct a Phase II environmental site assessment at a location other
than those set forth in Exhibit 6.4 attached hereto following a request by
NUI for such access pursuant to Section 6.4 hereof, or (v) the Average NUI
Price is less than $19.00 and NUI provides written notice of termination to
Virginia Gas prior to the close of business on the second trading day
following the Determination Date;
(e) by Virginia Gas, if (1) it, based on the advice of outside legal
counsel to Virginia Gas that such action is necessary in order for the
Board of Directors of Virginia Gas to comply with its fiduciary duties
under applicable Law, subject to complying with the terms of this
Agreement, enters into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and Virginia Gas notifies NUI in
writing that it intends to enter into such an agreement, attaching the most
current version of such agreement to such notice, (2) NUI does not make,
within two business days of receipt of Virginia Gas' written notification
of its intention to enter into a binding agreement for a Superior Proposal,
an offer to enter into an amendment to this Agreement such that the Board
of Directors of Virginia Gas determines, in good faith after consultation
with its financial advisors, that this Agreement as so amended is at least
as favorable, from a financial point of view, to the stockholders of
Virginia Gas as the Superior Proposal and (3) Virginia Gas prior to such
termination pays to NUI in immediately available funds any fees required to
be paid pursuant to Section 8.3 hereof. Virginia Gas agrees (A) that it
will not enter into a binding agreement referred to in clause (1) above
until at least the third business day after it has provided the notice to
NUI required thereby and (B) to notify NUI promptly if its intention to
enter into a written agreement referred to in its notification shall change
at any time after giving such notification;
(f) by Virginia Gas or NUI, if any court of competent jurisdiction in
the United States or other United States Governmental Authority shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable; or
(g) by Virginia Gas in the event the financing arrangements contemplated
by Section 6.15 hereof (i) in the case of the Initial Financing (as defined
in Exhibit 6.15) is not consummated within 30 days after the date hereof or
(ii) the Bridge Financing (as defined in Exhibit 6.15) is not consummated
within 90 days after the date hereof (provided that, in each such case, the
right to terminate this Agreement under this Section 8.1(g) shall not be
available to Virginia Gas if an action or failure to act on the part of
Virginia Gas has been the cause of or has resulted in the failure of such
financing to be consummated).
Section 8.2. Effect of Termination. If this Agreement is terminated under
Section 8.1 hereof and the Merger is not consummated, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
either party or its directors, officers or stockholders, other than the
provisions of Section 6.4((b)), this Section 8.2, Section 8.3 and Section 9.8.
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Section 8.3. Termination Fee.
(a) If this Agreement is terminated (i) by NUI pursuant to Section
8.1((b)) hereof, and the failure of the Effective Time to occur has been
caused by or is attributable to any failure by Virginia Gas to fulfill any
of its obligations under this Agreement, (ii) by NUI pursuant to Section
8.1((d))(i) through (iii) hereof or (iii) by Virginia Gas pursuant to
Section 8.1((e)) hereof, and, in the case of any of the foregoing, if
Virginia Gas is not entitled to terminate this Agreement by reason of
Section 8.1((c)) hereof, then Virginia Gas shall promptly (and in any event
within five days of receipt by Virginia Gas of written notice from NUI) pay
to NUI (by wire transfer of immediately available funds to an account
designated by NUI) an amount equal to all documented out of pocket expenses
and fees incurred by NUI in connection with the transactions contemplated
by this Agreement (such expenses to be referred to herein as the "Out of
Pocket Expenses," and to include fees and expenses payable to all legal,
financial, accounting, public relations and other professional advisors)
and a termination fee in an amount equal to (i) $2.5 million, plus (ii) an
amount equal to the product of the amount of additional outstanding debt
incurred by the Virginia Gas Companies following the date of this Agreement
times .04. If this Agreement is terminated by NUI pursuant to Section
8.1(d)(iv) hereof, and if Virginia Gas is not entitled to terminate this
Agreement by reason of Section 8.1(c) hereof, then Virginia Gas shall
promptly (and in any event within five days of receipt by Virginia Gas of
written notice from NUI) pay to NUI (by wire transfer of immediately
available funds to an account designated by NUI) an amount equal to NUI's
Out-of-Pocket Expenses.
(b) If this Agreement is terminated by Virginia Gas (i) pursuant to
Section 8.1((b)) hereof, and the failure of the Effective Time to occur has
been caused by or is attributable to any failure by NUI to fulfill any of
its obligations under this Agreement or (ii) pursuant to Section 8.1((c))
hereof and, in the case of any of the foregoing, if NUI is not otherwise
entitled to terminate this Agreement, then NUI shall promptly (and in any
event within five days of receipt by NUI of written notice from Virginia
Gas) pay to Virginia Gas (by wire transfer of immediately available funds
to an account designated by Virginia Gas) an amount equal to the Out of
Pocket Expenses of Virginia Gas and a termination fee in an amount equal to
$2.5 million.
(c) The termination fees contemplated in this Section 8.3 shall
constitute liquidated damages for any termination of this Agreement in the
circumstances set forth herein, as the actual damages of the parties in
such circumstances would be difficult or impossible to prove. Such
termination fees, together with the expense reimbursement provisions of
this Section 8.3, shall be the sole remedies of the parties hereto in the
event this Agreement is terminated pursuant to Section 8.1 hereof.
Section 8.4. Amendment. This Agreement may be amended by action taken by
NUI, Merger Subsidiary and Virginia Gas at any time before or after adoption of
this Agreement by the stockholders of Virginia Gas but, after any such
adoption, no amendment shall be made that would have any of the effects
specified in DGCL Section 251(d) without the approval of the stockholders
affected thereby. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.5. Extension; Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto by the other parties
hereto or (c) waive compliance with any of the agreements or conditions
contained herein by the other parties hereto. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes, except as set forth in Section 6.4((b)) hereof, all
other prior agreements and understandings, both written and oral, between the
parties or any
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of them with respect to the subject matter hereof, and (b) subject to the
provisions of Section 6.16(a) hereof, shall not be assigned by operation of law
or otherwise.
Section 9.2. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
if to NUI or Merger Subsidiary:
NUI Corporation
550 Route 202-206
P.O. Box 760
Bedminster, New Jersey 07921-0760
Attention: James R. Van Horn, Esq.
Facsimile: (908) 781-0718
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Gary E. Thompson, Esq.
Facsimile: (804) 788-8218
if to Virginia Gas:
Virginia Gas Company
200 East Main Street
Abingdon, Virginia 24210
Attention: Mr. Michael L. Edwards
Facsimile: (540) 619-5254
with a copy to:
Penn, Stuart & Eskridge
P. O. Box 2288
208 East Main Street
Abingdon, Virginia 24210
Attention: Elizabeth A. McClanahan, Esq.
Facsimile: (540) 628-4918
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 9.3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. The parties hereto specifically authorize any action, suit or
proceeding to be instituted and prosecuted in any state or federal court
located in Delaware. The parties hereto, whether or not Delaware residents,
hereby waive any plea or claim of lack of personal jurisdiction or improper
venue in any such action brought to enforce this Agreement.
Section 9.4. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 9.5. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for the rights of
persons entitled to the indemnification and insurance benefits
A-35
pursuant to Section 6.13 hereof, nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 9.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 9.7. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof.
Section 9.8. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the Merger is
consummated, except that the expenses incurred in connection with printing and
mailing the Joint Proxy Statement/Prospectus and printing the Registration
Statement, and the filing fees related to the Registration Statement and the
HSR filing, shall be shared equally by NUI and Virginia Gas.
Section 9.9. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner, to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
[Remainder of page intentionally left blank]
A-36
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf by its officer thereunto duly authorized, all as
of the day and year first above written.
NUI Corporation
/s/ A. Mark Abramovic
By: _________________________________
A. Mark Abramovic
Senior Vice President, Chief
Operating Officer and Chief
Financial Officer
VGC Acquisition, INC.
/s/ A. Mark Abramovic
By: _________________________________
A. Mark Abramovic
Vice President and Chief Financial
Officer
VIRGINIA GAS COMPANY
/s/ Michael L. Edwards
By: _________________________________
Michael L. Edwards
President and Chief Executive
Officer
A-37
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
ANNEX B
June 13, 2000
Personal and Confidential
The Board of Directors
Virginia Gas Company
P. O. Box 2407
Abingdon, VA 24210
Ladies and Gentlemen:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Fairness Opinion") to the Board of Directors as to the
fairness to the shareholders of Virginia Gas Company ("Virginia Gas" or the
"Company"), from a financial point of view, of the Exchange Ratio (as
hereinafter defined) pursuant to the Agreement and Plan of Reorganization dated
as of June 13, 2000 by and among NUI Corporation, VGC Acquisition, Inc. (a
wholly owned subsidiary of NUI Corporation) and Virginia Gas (the
"Reorganization Agreement"). The Reorganization Agreement provides for, among
other things, a transaction whereby VGC Acquisition, Inc. will be merged with
and into Virginia Gas (the "Merger"). Each outstanding share of Virginia Gas
common stock will be converted into the right to receive shares of common stock
of NUI Corporation equal to the quotient of (i) $4.00 (four dollars) divided by
(ii) the average of the per share last sales price, regular way (as defined in
the Reorganization Agreement) of NUI Corporation Shares as reported on the New
York Stock Exchange composite transactions reporting system for the twenty (20)
consecutive trading days ending on (and including) the seventh trading day
prior to the Closing Date (as defined in the Reorganization Agreement) (the
"Exchange Ratio").
In arriving at our Fairness Opinion we:
(a) reviewed the draft of the Reorganization Agreement;
(b) reviewed Virginia Gas' audited financial statements for the fiscal
years ended December 31, 1998 and 1999 and for the three months ended
March 31, 2000;
(c) reviewed financial projections of Virginia Gas prepared by Virginia Gas
and its management;
(d) reviewed the historical market prices and trading volume for Virginia
Gas common stock;
(e) held discussions with senior management of Virginia Gas with respect to
the business and prospects for future growth of Virginia Gas;
(f) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to Virginia Gas;
(g) performed discounted cash flow analyses of Virginia Gas using certain
assumptions of future performance provided to us by the management of
Virginia Gas;
(h) reviewed and analyzed certain publicly available financial information
for transactions that we deemed comparable to the Merger;
(i) reviewed public information concerning Virginia Gas; and
(j) performed such other analyses and reviewed such other information as we
deemed appropriate.
In rendering our Fairness Opinion we relied upon and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information provided to us by Virginia Gas and their
respective employees, representatives and affiliates. With respect to forecasts
of future financial condition and operating results of Virginia Gas provided to
us, we assumed at the direction of
B-1
Virginia Gas' management, without independent verification or investigation,
that such forecasts were reasonably prepared on bases reflecting the best
available information, estimates and judgment of Virginia Gas and Virginia Gas'
respective management. At the direction of representatives of Virginia Gas, we
also assumed that the final terms of the Reorganization Agreement will not vary
materially from those set forth in the draft reviewed by us. We have neither
made nor obtained any independent evaluations or appraisals of the assets or
the liabilities of Virginia Gas or affiliated entities. We are not expressing
any opinion as to the underlying valuation, future performance or long term
viability of Virginia Gas following the Merger, or the price at which NUI
Corporation's common stock will trade subsequent to the Merger. We have not
been asked to consider, and our opinion does not address, the relative merits
of the Merger as compared to any alternative business strategies that might
exist for Virginia Gas or the effect of any other transaction in which Virginia
Gas might engage. Our opinion is necessarily based on the information available
to us and general economic, financial and stock market conditions and
circumstances as they exist and can be evaluated by us on the date hereof. It
should be understood that, although subsequent developments may affect this
opinion, we do not have any obligation to update, revise or reaffirm the
opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We acted as financial advisor to Virginia Gas in connection with the Merger
and to the Board of Directors of Virginia Gas in rendering this opinion and
will receive a fee for our services. CIBC World Markets has performed
investment banking and other services for Virginia Gas in the past and has been
compensated for such services. In the ordinary course of its business, CIBC
World Markets and its affiliates may actively trade securities of Virginia Gas
for their own account and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, and such other factors as we deem
relevant, it is our opinion that, as of the date hereof, the Exchange Ratio
pursuant to the Reorganization Agreement is fair to the shareholders of
Virginia Gas from a financial point of view. This Fairness Opinion is for the
exclusive use of the Board of Directors of Virginia Gas. Neither this Fairness
Opinion nor the services provided by CIBC World Markets in connection herewith
may be publicly disclosed or referred to in any manner by Virginia Gas without
the prior written approval by CIBC World Markets. CIBC World Markets consents
to the inclusion of this opinion in its entirety and any reference to this
opinion in any prospectus, proxy statement or solicitation/recommendation
statement, as the case may be, required to be distributed to the Company's
shareholders in connection with the Merger.
Very truly yours,
/s/ CIBC World Markets Corp.
CIBC World Markets Corp.
B-2
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
ANNEX C
October 3, 2000
Personal and Confidential
The Board of Directors
Virginia Gas Company
P.O. Box 2407
Abingdon, VA 24212
Ladies and Gentlemen:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to update our
written opinion ("Fairness Opinion") dated June 13, 2000 that was delivered to
the Board of Directors as to the fairness to the shareholders of Virginia Gas
Company ("Virginia Gas" or the "Company"), from a financial point of view, of
the Exchange Ratio (as defined in the Agreement and Plan of Reorganization)
pursuant to the Agreement and Plan of Reorganization dated as of June 13, 2000
by and among NUI Corporation, VGC Acquisition, Inc. (a wholly owned subsidiary
of NUI Corporation) and Virginia Gas (the "Reorganization Agreement"). The
Reorganization Agreement provides for, among other things, a transaction
whereby VGC Acquisition, Inc. will be merged with and into Virginia Gas (the
"Merger").
In arriving at our update of the Fairness Opinion, we:
(a) reviewed Virginia Gas' unaudited financial statements for the six
months ended June 30, 2000;
(b) reviewed NUI Corporation's unaudited financial statements for the nine
months ended June 30, 2000;
(c) reviewed the recent historical market prices and trading volume for
both Virginia Gas common stock and NUI Corporation common stock;
(d) held discussions with senior management of Virginia Gas and NUI
Corporation with respect to their businesses and prospects for future
growth;
(e) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to Virginia Gas and NUI
Corporation;
(f) reviewed public information concerning Virginia Gas and NUI
Corporation; and
(g) performed such other analyses and reviewed such other information as we
deemed appropriate.
In rendering our update of the Fairness Opinion, we relied upon and assumed,
without independent verification or investigation, the accuracy and
completeness of all of the financial and other information provided to us by
Virginia Gas and its respective employees, representatives and affiliates. With
respect to forecasts of future financial condition and operating results of
Virginia Gas provided to us, we assumed at the direction of Virginia Gas'
management, without independent verification or investigation, that such
forecasts were reasonably prepared on bases reflecting the best available
information, estimates and judgment of Virginia Gas and Virginia Gas'
respective management. We have neither made nor obtained any independent
evaluations or appraisals of the assets or the liabilities of Virginia Gas or
affiliated entities. We are not expressing any opinion as to the underlying
valuation, future performance or long term viability of Virginia Gas following
the Merger, or the price at which NUI Corporation's common stock will trade
subsequent to the Merger. We have not been asked to consider, and our update of
the Fairness Opinion does not address, the relative merits of the Merger as
compared to any alternative business strategies that might exist for Virginia
Gas or the effect of any other transaction in which Virginia Gas might engage.
Our update of the Fairness Opinion is necessarily based on the information
available to us and general economic, financial and stock market conditions and
circumstances as they exist and can be evaluated by us on the date hereof.
C-1
Based upon and subject to the foregoing, and such other factors as we deem
relevant, it is our opinion that, as of the date hereof, the Exchange Ratio
pursuant to the Reorganization Agreement is fair to the shareholders of
Virginia Gas from a financial point of view. This update of our Fairness
Opinion is for the exclusive use of the Board of Directors of Virginia Gas.
Neither this update of our Fairness Opinion nor the services provided by CIBC
World Markets in connection herewith may be publicly disclosed or referred to
in any manner by Virginia Gas without the prior written approval by CIBC World
Markets. CIBC World Markets consents to the inclusion of this update of the
opinion in its entirety and any reference to this update in any prospectus,
proxy statement or solicitation/recommendation statement, as the case may be,
required to be distributed to the Company's shareholders in connection with the
Merger.
Very truly yours,
s/ CIBC World Markets Corp.
CIBC World Markets Corp.
C-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2.1 Agreement and Plan of Reorganization, dated June 13, 2000, by and between
NUI Corporation, VGC Acquisition, Inc. and Virginia Gas Company (included
in proxy statement/prospectus as Annex A).
NUI agrees to furnish a supplemental copy of omitted schedules to the SEC
upon request.
2.2 Form of Agreement and Plan of Exchange between NUI Corporation and NUI
Holding Company (incorporated by reference to Annex A to NUI Holding's
Registration Statement on Form S-4 (Registration No. 333-30092)).
4.1 Rights Agreement between NUI and Mellon Securities Trust Company, dated
November 28, 1995 (incorporated by reference to NUI's Form 8-K, dated
December 1, 1995).
5.1 Opinion of James R. Van Horn, Esq.
8.1 Tax Opinion of Hunton & Williams.
8.2 Form of Alternate Tax Opinion of Hunton & Williams.
23.1 Consent of James R. Van Horn, Esq. (included in Exhibit 5.1).
23.2 Consent of Hunton & Williams (included in Exhibits 8.1 and 8.2).
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of CIBC World Markets (included in Annexes B and C to proxy
statement/prospectus).
24.1 Power of Attorney (included in signature page).
24.2 Power of Attorney (included in signature page).
99.1 Form of Virginia Gas Company Proxy Card.
99.2 Form of Letter of Transmittal.
II-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NUI CORPORATION
has duly caused this Pre-Effective Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bedminster, State of New Jersey, on October 5, 2000.
NUI CORPORATION
/s/ John Kean, Jr.*
By _________________________________
John Kean, Jr.
President and Chief Executive
Officer
(principal executive officer) and
Director
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to the Registration Statement has been signed by the
following persons on the 5th day of October, 2000 in the capacities indicated.
Signature Title
--------- -----
/s/ John Kean, Jr.* President and Chief Executive Officer
____________________________________ (principal executive officer) and
John Kean, Jr. Director
/s/ A. Mark Abramovic* Senior Vice President, Chief Operating
____________________________________ Officer and Chief Financial Officer
A. Mark Abramovic (principal financial and accounting
officer)
/s/ Vera King Farris* Director
____________________________________
Dr. Vera King Farris
/s/ J. Russell Hawkins* Director
____________________________________
J. Russell Hawkins
/s/ John Winthrop * Director
____________________________________
John Winthrop
/s/ John Kean* Director
____________________________________
John Kean
/s/ Bernard S. Lee* Director
____________________________________
Dr. Bernard S. Lee
/s/ James J. Forese* Director
____________________________________
James J. Forese
/s/ R. Van Whisnand* Director
____________________________________
R. Van Whisnand
*By: /s/ James R. Van Horn
_________________________________
James R. Van Horn
Attorney-in-fact for
the persons indicated
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NUI HOLDING
COMPANY has duly caused this Pre-Effective Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bedminster, State of New Jersey, on October 5, 2000.
NUI HOLDING COMPANY
/s/ John Kean, Jr.*
By _________________________________
John Kean, Jr.
President and Chief Executive
Officer
(principal executive officer) and
Director
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to the Registration Statement has been signed by the
following persons on the 5th day of October, 2000 in the capacities indicated.
Signature Title
--------- -----
/s/ John Kean, Jr.* President and Chief Executive Officer
____________________________________ (principal executive officer) and
John Kean, Jr. Director
/s/ A. Mark Abramovic* Senior Vice President, Chief Operating
____________________________________ Officer, and Chief Financial Officer
A. Mark Abramovic (principal financial and accounting
officer) and Director
/s/ John Kean* Director
____________________________________
John Kean
*By: /s/ James R. Van Horn
____________________________
James R. Van Horn
Attorney-in-fact for
the persons indicated
II-3
EXHIBIT INDEX
Page
----
2.1 Agreement and Plan of Reorganization, dated June 13, 2000, by and between
NUI Corporation, VGC Acquisition, Inc. and Virginia Gas Company (included
in proxy statement/prospectus as Annex A).
NUI agrees to furnish a supplemental copy of omitted schedules to the SEC
upon request.
2.2 Form of Agreement and Plan of Exchange between NUI Corporation and NUI
Holding Company (incorporated by reference to Annex A to NUI Holding
Company's Registration Statement on Form S-4 (Registration No. 333-
30092)).
4.1 Rights Agreement between NUI and Mellon Securities Trust Company, dated
November 28, 1995 (incorporated by reference to NUI's Form 8-K, dated
December 1, 1995).
5.1 Opinion of James R. Van Horn, Esq.
8.1 Tax Opinion of Hunton & Williams.
8.2 Form of Alternate Tax Opinion of Hunton & Williams.
23.1 Consent of James R. Van Horn, Esq. (included in Exhibit 5.1).
23.2 Consent of Hunton & Williams (included in Exhibits 8.1 and 8.2).
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of CIBC World Markets (included in Annexes B and C to proxy
statement/prospectus).
24.1 Power of Attorney (included in signature page).
24.2 Power of Attorney (included in signature page).
99.1 Form of Virginia Gas Company Proxy Card.
99.2 Form of Letter of Transmittal.