0000860520-95-000021.txt : 19950816
0000860520-95-000021.hdr.sgml : 19950816
ACCESSION NUMBER: 0000860520-95-000021
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CIPSCO INC
CENTRAL INDEX KEY: 0000860520
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931]
IRS NUMBER: 371260920
STATE OF INCORPORATION: IL
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10628
FILM NUMBER: 95563817
BUSINESS ADDRESS:
STREET 1: 607 E ADAMS ST
CITY: SPRINGFIELD
STATE: IL
ZIP: 62739
BUSINESS PHONE: 2175233600
MAIL ADDRESS:
STREET 1: 607 E ADAMS STREET
CITY: SPRINGFIELD
STATE: IL
ZIP: 62739
10-Q
1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
___________ _____________________________ __________________
1-10628 CIPSCO INCORPORATED 37-1260920
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrants were required to
file such reports), and (2) have been subject to such filing
requirements for the past 90 days.
Yes X No
_______ _______
Indicate the number of shares outstanding of each of the issuers'
classes of common stock, as of the latest practicable date:
CIPSCO INCORPORATED Common stock, no par value, 34,069,542
shares outstanding at July 31, 1995
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Common stock, no par value, 25,452,373
shares outstanding and held by
CIPSCO INCORPORATED at July 31, 1995
-1-
CIPSCO INCORPORATED
AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIPSCO INCORPORATED
Consolidated Statements of Income 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Statements of Income 7
Balance Sheets 8
Statements of Cash Flows 9
CONDENSED NOTES TO FINANCIAL STATEMENTS of
CIPSCO Incorporated and Central Illinois
Public Service Company 10 - 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for CIPSCO Incorporated and
Central Illinois Public Service Company 15 - 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 5. Other Information 21 - 24
Item 6. Exhibits and Reports on Form 8-K 24 - 25
Signatures 26 - 27
Exhibit Index 28
Exhibit 12 29
-2-
The unaudited interim financial statements presented herein
include the consolidated statements of CIPSCO Incorporated and
Subsidiaries ("Company") as well as separate financial statements
for Central Illinois Public Service Company ("CIPS"). The
unaudited statements have been prepared by the Company and CIPS,
respectively, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations, although the Company and CIPS believe the
disclosures are adequate to make the information presented not
misleading. Both the Company's consolidated financial statements
and the CIPS financial statements should be read in conjunction
with the financial statements and notes thereto included in the
combined Annual Report on Form 10-K of CIPSCO Incorporated and
CIPS for the year ended December 31, 1994.
In the opinion of the Company and CIPS, their respective interim
financial statements filed as part of this Form 10-Q reflect all
adjustments necessary to present fairly the results for the
respective periods. Due to the effect of weather and other
factors which are characteristic of CIPS' utility operations,
financial results for the periods ended June 30, 1995 and 1994
are not necessarily indicative of trends for any twelve-month
period.
This financial and other information is not given in connection
with any sale or offer to buy any security.
-3-
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
For the Periods Ended June 30, 1995 and 1994
(in thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
__________________ __________________
1995 1994 1995 1994
________ ________ ________ ________
Operating Revenues:
Electric......................... $163,500 $178,914 $316,688 $338,246
Gas.............................. 18,603 21,484 74,290 85,578
Investment....................... 1,841 2,107 3,428 4,303
________ ________ ________ ________
Total operating revenues...... 183,944 202,505 394,406 428,127
________ ________ ________ ________
Operating Expenses:
Fuel for electric generation..... 39,977 50,256 90,856 103,934
Purchased power.................. 19,132 16,152 26,238 26,100
Gas costs........................ 8,937 12,011 43,069 54,613
Other operation.................. 35,012 35,193 76,536 73,061
Maintenance...................... 18,467 16,409 30,672 31,003
Depreciation and amortization.... 20,674 20,037 41,275 40,449
Taxes other than income taxes.... 12,587 12,948 28,349 29,178
________ ________ _______ ________
Total operating expenses...... 154,786 163,006 336,995 358,338
________ ________ _______ ________
Operating Income................... 29,158 39,499 57,411 69,789
________ ________ _______ ________
Interest and Other Charges:
Interest on long-term debt of
subsidiary....................... 8,160 8,215 16,298 16,567
Other interest charges........... (39) 17 360 (3)
Allowance for funds used during
construction..................... (223) (461) (408) (485)
Preferred stock dividends of
subsidiary....................... 971 851 1,939 1,679
Miscellaneous, net............... (1,022) (671) (1,337) (1,791)
________ ________ _______ ________
Total interest and other
charges....................... 7,847 7,951 16,852 15,967
________ ________ _______ ________
Income Before Income Taxes......... 21,311 31,548 40,559 53,822
________ ________ ________ ________
Income Taxes....................... 8,425 12,003 15,105 20,518
________ ________ ________ ________
Net Income......................... $ 12,886 $ 19,545 $ 25,454 $ 33,304
======== ======== ======== ========
Average Shares of Common Stock
Outstanding........................ 34,070 34,108 34,070 34,108
Earnings per Average Share of
Common Stock....................... $ .38 $ .57 $ .75 $ .98
The accompanying condensed notes to financial statements are an integral
part of these statements.
-4-
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
(in thousands)
June 30, December 31,
1995 1994
___________ ____________
(unaudited)
ASSETS
Utility Plant, at original cost:
Electric.......................... $2,275,172 $2,264,930
Gas............................... 222,140 220,347
__________ __________
2,497,312 2,485,277
Less-Accumulated depreciation..... 1,101,169 1,077,533
__________ __________
1,396,143 1,407,744
Construction work in progress..... 46,899 31,816
__________ __________
1,443,042 1,439,560
__________ __________
Current Assets:
Cash.............................. 1,614 1,963
Temporary investments, at cost
which approximates market......... 14,116 5,875
Accounts receivable, net.......... 55,567 67,579
Accrued unbilled revenues......... 21,671 30,484
Materials and supplies, at average
cost.............................. 40,430 39,817
Fuel for electric generation, at
average cost...................... 46,103 30,305
Gas stored underground, at average
cost.............................. 9,382 13,167
Prepayments....................... 12,717 10,925
__________ __________
201,600 200,115
__________ __________
Investments and Other Assets:
Investment in marketable
securities........................ 45,769 43,929
Investment in leveraged leases.... 50,997 49,933
Other............................. 44,643 43,820
__________ __________
141,409 137,682
__________ __________
$1,786,051 $1,777,357
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity....... $ 640,206 $ 649,230
Unrealized investment gains
(losses), net................... 161 (1,617)
Preferred stock of subsidiary..... 80,000 80,000
Long-term debt of subsidiary...... 479,770 459,619
__________ __________
1,200,137 1,187,232
__________ __________
Current Liabilities:
Long-term debt of subsidiary due
within one year................... - 15,000
Short-term borrowings............. 12,793 14,985
Accounts payable.................. 48,763 54,021
Accrued wages..................... 13,467 9,833
Accrued taxes..................... 14,882 12,629
Accrued interest.................. 9,452 9,408
Other............................. 44,974 31,488
__________ __________
144,331 147,364
__________ __________
Deferred Credits:
Accumulated deferred income taxes. 316,963 313,072
Investment tax credits............ 53,914 55,595
Regulatory liabilities, net....... 70,706 74,094
__________ __________
441,583 442,761
__________ __________
$1,786,051 $1,777,357
========== ==========
The accompanying condensed notes to financial statements are an
integral part of these statements.
-5-
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Periods Ended June 30, 1995 and 1994
(in thousands)
(unaudited)
Six Months Ended
June 30,
______________________
1995 1994
__________ __________
Operating Activities:
Net income.............................. $ 25,454 $ 33,304
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization......... 41,275 40,449
Allowance for equity funds used during
construction (AFUDC).................. (377) (332)
Deferred income taxes, net............ 2,619 4,851
Investment tax credit amortization.... (1,681) (1,684)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues..................... 20,825 736
Fuel for electric generation.......... (15,798) (3,132)
Other inventories..................... 3,172 2,920
Prepayments........................... (1,792) 474
Other assets.......................... (823) 4,618
Accounts payable and other............ 8,228 5,666
Accrued wages, taxes and interest..... 5,931 11,118
Other................................... (4,078) (774)
_________ _________
Net cash provided by operating
activities............................ 82,955 98,214
_________ _________
Investing Activities:
Utility construction expenditures,
excluding AFUDC......................... (42,162) (39,969)
Allowance for borrowed funds used
during construction..................... (31) (153)
Change in temporary investments......... (8,241) (1,953)
Long-term investment in marketable
securities.............................. (62) (1,355)
Long-term investment in leveraged
leases.................................. (1,064) (1,753)
_________ _________
Net cash used in investing activities. (51,560) (45,183)
_________ _________
Financing Activities:
Common stock dividends paid............. (34,410) (33,767)
Proceeds from issuance of long-term
debt of subsidiary...................... 20,000 -
Repayment of long-term debt of
subsidiary.............................. (15,000) (20,000)
Repayment of short-term borrowings...... (2,192) -
Issuance expense, discount and premium.. (142) 11
_________ _________
Net cash used in financing activities. (31,744) (53,756)
_________ _________
Net decrease in cash.................... (349) (725)
Cash at beginning of period............. 1,963 4,630
_________ _________
Cash at end of period................... $ 1,614 $ 3,905
========= =========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest, net of amounts capitalized.. $ 15,497 $ 15,605
Income taxes.......................... $ 15,128 $ 11,053
The accompanying condensed notes to financial statements are an
integral part of these statements.
-6-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Statements of Income
For the Periods Ended June 30, 1995 and 1994
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
__________________ __________________
1995 1994 1995 1994
________ ________ ________ ________
Operating Revenues:
Electric......................... $163,506 $178,920 $316,701 $338,261
Gas.............................. 18,604 21,486 74,292 85,581
________ ________ ________ ________
Total operating revenues...... 182,110 200,406 390,993 423,842
________ ________ ________ ________
Operating Expenses:
Fuel for electric generation..... 39,977 50,256 90,856 103,934
Purchased power.................. 19,132 16,152 26,238 26,100
Gas costs........................ 8,937 12,011 43,069 54,613
Other operation.................. 34,708 34,902 75,844 72,385
Maintenance...................... 18,467 16,408 30,672 31,001
Depreciation and amortization.... 20,554 19,878 41,034 40,185
Taxes other than income taxes.... 12,575 12,940 28,326 29,156
Income taxes:
Current........................ 7,097 11,526 16,604 19,936
Deferred, net.................. 1,630 887 (712) 1,262
Deferred investment tax
credits, net................... (840) (842) (1,681) (1,683)
________ ________ ________ ________
Total operating expenses...... 162,237 174,118 350,250 376,889
________ ________ ________ ________
Operating Income................... 19,873 26,288 40,743 46,953
________ ________ ________ ________
Other Income and Deductions:
Allowance for equity funds used
during construction.............. 206 316 377 332
Nonoperating income taxes........ (553) (173) (820) (487)
Miscellaneous, net............... 1,185 818 1,699 2,150
________ ________ ________ ________
Total other income and
deductions.................... 838 961 1,256 1,995
________ ________ ________ ________
Income Before Interest Charges..... 20,711 27,249 41,999 48,948
________ ________ ________ ________
Interest Charges:
Interest on long-term debt....... 8,160 8,215 16,298 16,567
Other interest charges........... (56) 21 337 4
Allowance for borrowed funds used
during construction.............. (17) (145) (31) (153)
________ ________ ________ ________
Total interest charges....... 8,087 8,091 16,604 16,418
________ ________ ________ ________
Net Income......................... 12,624 19,158 25,395 32,530
Preferred Stock Dividends.......... 971 851 1,939 1,679
________ ________ ________ ________
Earnings for Common Stock.......... $ 11,653 $ 18,307 $ 23,456 $ 30,851
======== ======== ======== ========
The accompanying condensed notes to financial statements are an integral
part of these statements.
-7-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Balance Sheets
June 30, 1995 and December 31, 1994
(in thousands)
June 30, December 31,
1995 1994
___________ ____________
(unaudited)
ASSETS
Utility Plant, at original cost:
Electric......................... $2,275,172 $2,264,930
Gas.............................. 222,140 220,347
__________ __________
2,497,312 2,485,277
Less-Accumulated depreciation.... 1,101,169 1,077,533
__________ __________
1,396,143 1,407,744
Construction work in progress.... 46,899 31,816
__________ __________
1,443,042 1,439,560
__________ __________
Current Assets:
Cash............................. 1,500 1,320
Temporary investments, at cost
which approximates market........ 4,215 2,593
Accounts receivable, net......... 55,672 67,686
Accrued unbilled revenues........ 21,671 30,484
Materials and supplies, at average
cost............................. 40,430 39,817
Fuel for electric generation, at
average cost..................... 46,103 30,305
Gas stored underground, at average
cost............................. 9,382 13,167
Prepayments...................... 12,034 10,839
__________ __________
191,007 196,211
__________ __________
Other Assets....................... 43,784 42,879
__________ __________
$1,677,833 $1,678,650
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity...... $ 563,133 $ 574,745
Preferred stock.................. 80,000 80,000
Long-term debt................... 479,770 459,619
__________ __________
1,122,903 1,114,364
__________ __________
Current Liabilities:
Long-term debt due within one
year............................. - 15,000
Short-term borrowings............ 12,793 14,985
Accounts payable................. 48,025 53,900
Accrued wages.................... 13,467 9,833
Accrued taxes.................... 14,019 12,963
Accrued interest................. 9,452 9,408
Other............................ 44,974 31,488
__________ __________
142,730 147,577
__________ __________
Deferred Credits:
Accumulated deferred income
taxes............................ 287,580 287,020
Investment tax credits........... 53,914 55,595
Regulatory liabilities, net...... 70,706 74,094
__________ __________
412,200 416,709
__________ __________
$1,677,833 $1,678,650
========== ==========
The accompanying condensed notes to financial statements are an
integral part of these statements.
-8-
Central Illinois Public Service Company
Statements of Cash Flows
For the Periods Ended June 30, 1995 and 1994
(in thousands)
(unaudited)
Six Months Ended
June 30,
______________________
1995 1994
__________ __________
Operating Activities:
Net income.............................. $ 25,395 $ 32,530
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization......... 41,034 40,185
Allowance for equity funds used during
construction (AFUDC).................. (377) (332)
Deferred income taxes, net............ (712) 3,131
Investment tax credit amortization.... (1,681) (1,684)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues..................... 20,827 773
Fuel for electric generation.......... (15,798) (3,132)
Other inventories..................... 3,172 2,920
Prepayments........................... (1,195) 218
Other assets.......................... (905) 4,437
Accounts payable and other............ 7,611 5,227
Accrued wages, taxes and interest..... 4,734 9,685
Other................................... (3,837) (511)
_________ _________
Net cash provided by operating
activities............................ 78,268 93,447
_________ _________
Investing Activities:
Construction expenditures, excluding
AFUDC................................... (42,162) (39,969)
Allowance for borrowed funds used during
construction............................ (31) (153)
Changes in temporary investments........ (1,622) (1,046)
_________ _________
Net cash used in investing activities. (43,815) (41,168)
_________ _________
Financing Activities:
Proceeds from issuance of long-term
debt.................................... 20,000 -
Repayment of long-term debt............. (15,000) (20,000)
Repayment of short-term borrowings...... (2,192) -
Dividends paid:
Preferred stock....................... (1,939) (1,679)
Common stock.......................... (35,000) (34,200)
Issuance expense, discount and premium.. (142) 11
_________ _________
Net cash used in financing activities. (34,273) (55,868)
_________ _________
Net increase (decrease) in cash......... 180 (3,589)
Cash at beginning of period............. 1,320 4,038
_________ _________
Cash at end of period................... $ 1,500 $ 449
========= =========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest, net of amounts capitalized.. $ 15,497 $ 15,605
Income taxes.......................... $ 18,829 $ 14,047
The accompanying condensed notes to financial statements are an
integral part of these statements.
-9-
CIPSCO INCORPORATED AND SUBSIDIARIES
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(unaudited)
Note 1. GENERAL
________________
The consolidated financial statements presented herein include
the accounts of CIPSCO INCORPORATED (CIPSCO), CENTRAL ILLINOIS
PUBLIC SERVICE COMPANY (CIPS), and CIPSCO INVESTMENT COMPANY AND
SUBSIDIARIES (CIC). CIPSCO and Subsidiaries are referred to as
the "Company." CIPSCO has two first-tier subsidiaries: CIC, an
investment subsidiary, and CIPS, an electric and gas public
utility. Prior year amounts have been reclassified on a basis
consistent with the June 30, 1995 presentation.
The financial statements of CIPS, a subsidiary of CIPSCO, include
only the accounts of CIPS. Prior year amounts have been
reclassified on a basis consistent with the June 30, 1995
presentation.
Note 2. COMMITMENTS AND CONTINGENCIES
______________________________________
ENVIRONMENTAL REMEDIATION COSTS - CIPS and certain of its
predecessors and other affiliates operated facilities in the past
for manufacturing gas from coal. In connection with
manufacturing gas, various by-products were produced, some of
which remain on sites where the facilities were located. CIPS
has identified 13 of these former manufactured gas plant sites
(environmental remediation sites) which contain potentially
harmful materials. Under directives from the Illinois
Environmental Protection Agency (IEPA), CIPS has incurred costs
and associated legal expenses related to the investigation and
remediation of the sites.
One site was added to the United States Environmental Protection
Agency (USEPA) Superfund list on August 30, 1990. On September
30, 1992 the IEPA, in consultation with the USEPA, decided that
the long-term remedial plan for this site should consist of a
ground-water pump-and-treat program. The IEPA and CIPS entered
into an agreement, which received required court approval on
March 14, 1994, for CIPS to carry out the remedial action with
the IEPA providing oversight. It is not known at this time what
specific remedial action will be required at the other 12 sites.
In 1987, CIPS filed a lawsuit against a number of insurance
carriers seeking full indemnification for all costs in connection
with certain environmental sites. On May 10, 1995, the Illinois
-10-
Supreme Court denied CIPS' petition for leave to appeal its
decision upholding an Illinois Appellate Court reversal of a
circuit court verdict in favor of CIPS. As of the date of this
filing, lawsuits against all insurance carriers have either been
settled or dismissed.
The estimated incurred costs relating to studies and remediation
at these 13 sites and associated legal expenses are being accrued
and deferred rather than expensed currently, pending recovery
through rates, or from other parties. At June 30, 1995, $40.8
million has been deferred representing costs incurred and
estimates for costs of completing studies at various sites and an
estimate of remediation costs at the Superfund site. The total
of the costs deferred, net of recoveries from insurers and
through rate riders described below, was $3.4 million at June 30,
1995.
In 1992, the Illinois Commerce Commission (the "Illinois
commission") issued an Order (the "Generic Order") in its
consolidated generic proceeding regarding appropriate ratemaking
treatment of cleanup costs incurred by Illinois utilities with
respect to environmental remediation sites. The Generic Order
indicates that allowed cleanup costs may include prudently
incurred costs of investigation, assessment and cleanup of
environmental remediation sites, as well as litigation costs,
including those involved in insurance recovery claims. The
Generic Order authorizes utilities, including CIPS, to propose a
mechanism to recover cleanup costs which is consistent with the
provisions of the Generic Order. Such a mechanism must, among
other things, provide for (1) recovery of cleanup costs over a
five-year period, excluding carrying costs associated with the
unrecovered balance of cleanup costs from the time that the
recovery mechanism becomes effective; (2) a return to ratepayers
over a five-year amortization period of any reimbursement of
cleanup costs received from insurance carriers or other parties;
and (3) a prudence review of each utility's expenditures. The
Generic Order was upheld on appeal by the Third District Illinois
Appellate Court. That decision held that a rate rider mechanism
is an appropriate means for utilities to recover cleanup costs.
The matter was appealed to the Illinois Supreme Court which, in
April 1995, issued an opinion which held that (i) clean-up costs
are recoverable in rates; and (ii) use of a rider mechanism for
recovery of such costs is appropriate. The Court also held that
the evidence in the generic proceeding did not support the
Illinois commission's decision to deny recovery of carrying costs
associated with the unrecovered balance of clean-up costs.
Accordingly, the Supreme Court reversed the Generic Order of the
Illinois commission with regard to the recovery of carrying costs
and remanded the case to the Illinois commission for further
proceedings consistent with the Court's opinion. The Illinois
commission has instituted such proceedings. Management cannot
predict what further action the Illinois commission will take.
-11-
On March 26, 1993, the Illinois commission approved CIPS'
proposed environmental cost-recovery rate riders, effective with
April 1993 billings to customers. Known as the electric
environmental adjustment clause and the gas environmental
adjustment clause, the riders are designed to enable CIPS to
recover from its customers costs associated with cleanup of the
environmental remediation sites, along with associated legal
expenses, over a five year period on terms consistent with the
Generic Order. The environmental adjustment clause riders
provide for an annual review of amounts recovered through the
riders. Amounts found to have been incorrectly included would be
subject to refund. Through December 31, 1993, CIPS had collected
$2.9 million from its customers pursuant to the riders. Pursuant
to monthly filings made by CIPS under the riders, no additional
amounts have been collected from customers under the riders since
January 1994. On April 6, 1994, the Illinois commission
initiated a reconciliation proceeding to review CIPS'
environmental remediation activities and determine whether the
revenues collected by the riders in 1993 is consistent with the
amount of remediation costs prudently incurred. CIPS has filed
testimony and provided data to the Illinois commission regarding
the reconciliation proceeding. A status hearing is scheduled for
August 1995.
The total costs to be incurred for the cleanup of these sites or
the possible recovery from other parties cannot be estimated.
Management believes that any costs incurred in connection with
the sites that are not recovered from insurance carriers or other
parties will be recovered through utility rates. Accordingly,
management believes that costs incurred in connection with these
sites will not have a material adverse effect on the financial
position or results of operations of the Company or CIPS.
FERC ORDER 636 - During 1992, the Federal Energy Regulatory
Commission ("FERC") issued Order No. 636. This and successor
orders have resulted in substantial restructuring of the service
obligations of interstate pipeline suppliers. Order 636 provided
mechanisms for pipelines to recover transition costs associated
with the restructuring. CIPS has paid substantially all direct
transition costs associated with the pipeline restructuring and
is currently recovering all transition costs in its rates. Any
future transition costs identified and billed from pipeline
suppliers are expected to be recoverable from customers of CIPS.
FERC PROPOSES RULEMAKING TO CREATE OPEN ACCESS TRANSMISSION
SERVICE - In March 1995, the FERC issued a notice of proposed
rulemaking (NOPR) through which the FERC intends to require all
utilities subject to its jurisdiction to provide electric
transmission service on a non-discriminatory basis to all
interested parties. Under the NOPR as currently proposed the
"open access" tariffs which will likely result will be designed
to provide transmission access to other utility systems on a
basis comparable to the way a utility utilizes its own electric
-12-
system. The proposed rules are designed to increase competition
in bulk power markets. CIPS cannot predict when FERC will take
final action on the NOPR or whether it will be adopted in its
present form. The utility does not anticipate that operating
revenues or expenses will change materially as a result of the
NOPR. Accordingly, management believes that the NOPR will not
have a material adverse effect on financial position or results
of operations of the Company or CIPS.
CLEAN AIR ACT - CIPS' current compliance strategy to meet Phase I
and II of the sulfur dioxide emission reduction requirements of
the Clean Air Act Amendments of 1990 (Amendments) is to switch to
a lower sulfur coal at some of its units along with increased
scrubbing with its existing scrubber at Newton Unit 1. The
currently estimated capital costs of compliance based on the
current strategy are included in the five-year construction
forecast. The forecast has an estimate of $40 million for
environmental compliance including compliance with regulations
under the Clean Air Act. However, the five-year construction
costs may increase if studies being undertaken by CIPS indicate
that renovations to the Newton Unit 1 scrubber are required to
allow existing or additional levels of scrubbing or if such
studies indicate that CIPS should change its compliance strategy
to place more reliance on fuel switching.
In 1991, in accordance with the plan to switch some units to
lower sulfur coal, CIPS signed a long-term coal contract with an
existing supplier for lower sulfur Illinois coal. Due to the
magnitude of the supplier's capital investment, the contract
includes a graduated termination charge. In 1995, CIPS can
terminate the contract under certain conditions, and CIPS would
be required to pay approximately $41 million (plus an inflation
adjustment) in termination charges. During 1995, and each
subsequent year, the termination charge is reduced according to a
formula using tons of coal purchased. The termination charge
would not be effective if CIPS terminated the contract due to
failure of the coal to meet quality specifications provided for
in the contract.
LABOR DISPUTES - The International Union of Operating Engineers
Local 148 and the International Brotherhood of Electrical Workers
Local 702 have both filed unfair labor practice charges with the
National Labor Relations Board (NLRB) relating to the legality of
the lockout by CIPS of both unions during 1993. The Peoria
Regional Office of the NLRB has issued complaints against CIPS
concerning its lockout of both unions. Both unions seek, among
other things, back pay and other benefits for the period of the
lockout. CIPS estimates the amount of back pay and other
benefits for both unions to be less than $12 million dollars. A
hearing, before an administrative law judge of the NLRB, was
completed on April 25, 1995. Management believes the lockout was
both lawful and reasonable and that the final resolution of the
disputes will not have a material adverse effect on financial
position or results of operations of the Company or CIPS.
-13-
OTHER ISSUES - CIPS is involved in other legal and administrative
proceedings before various courts and agencies with respect to
rates, taxes, gas and electric fuel cost reconciliations, service
area disputes, environmental torts and other matters. Although
unable to predict the outcome of these matters, management
believes that appropriate liabilities have been established and
that final disposition of these actions will not have a material
adverse effect on financial position or results of operations of
the Company or CIPS.
Note 3. SFAS NO. 121
_____________________
Statement of Financial Accounting Standards (SFAS)No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of, which was issued in March 1995
and will be effective on January 1, 1996, establishes accounting
standards for the impairment of long-lived assets. The SFAS also
requires that regulatory assets which are no longer probable of
recovery through future revenue be charged to earnings. SFAS No.
121 is not expected to have an impact on the financial position
or results of operations of the Company or CIPS upon adoption.
Note 4. VOLUNTARY SEPARATION PROGRAM
_____________________________________
Early in 1995, the Company offered a voluntary separation program
to most of its salaried employees, which was accepted by 151
employees in February 1995. The Company recorded a $6.3 million
one-time charge in the first quarter of 1995 for separation
benefits to be provided under the program. The one-time charge
reduced first quarter 1995 earnings by 11 cents per share. The
Company estimates that the payback period resulting from reduced
operating expenses attributable to the program will be
approximately two years.
Note 5. MERGER AGREEMENT
_________________________
On August 11, 1995, the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Union Electric
Company ("UE"). The Merger Agreement provides for the merger of
the Company with a new holding company, Arch Holding Corp., a
Missouri corporation ("Arch Holding") and the merger of UE with a
subsidiary of Arch Holding with the result that UE and CIPS will
be subsidiaries of Arch Holding. The transactions contemplated
by the Merger Agreement are subject to shareholder and regulatory
approvals. Under the Merger Agreement each outstanding share of
UE common stock will be converted into the right to receive one
share of common stock of Arch Holding and each outstanding share
of CIPSCO common stock will be converted into the right to
receive 1.03 shares of common stock of Arch Holding. Further
information concerning the Merger Agreement is contained in Item
5 - Other Information in this Form 10-Q.
-14-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis of financial condition and
results of operations is for CIPSCO Incorporated and Subsidiaries
("Company") unless otherwise stated.
THE OUTLOOK
CIPS currently estimates that its total construction expenditures
for the 1995-1999 period will be about $449 million, including
about $7 million of allowance for funds used during construction.
In addition to funds for construction, projected capital
requirements for the remainder of 1995 and for the 1996-1999
period include $108 million for scheduled debt retirements.
Capital requirements for the 1995-1999 period are expected to be
met primarily through internally generated funds. External
financing to fund scheduled debt retirements may be required.
Included in the 5-year construction forecast is an estimate of
$40 million for environmental compliance, including compliance
with regulations under the Clean Air Act Amendments of 1990.
CIPS is evaluating alternatives for reducing fuel costs and other
expenses while maintaining environmental compliance. Maintaining
the current compliance strategy, or adoption of certain
alternatives in fuel and/or environmental strategies, could
result in substantial increases in capital expenditures in the
1995-1999 period from the amounts shown above. Additional
external financing could be required.
On June 9, 1995 CIPS issued $20 million First Mortgage Bonds,
Medium-Term Note Series 1995-1, 6.49%, due June 1, 2005. The
proceeds of this issue together with other funds were used for
general corporate purposes, including replacement of funds used
to pay at maturity the Company's $10,000,000 First Mortgage
Bonds, Series I, 4-1/2%, due May 1, 1993 and $20,000,000 First
Mortgage Bonds, Series J, 4-1/2%, due May 1, 1994. CIPS has an
effective shelf registration statement on file with the
Securities and Exchange Commission which permits the issuance
of an aggregate of up to $30 million of first mortgage bonds,
medium-term notes and/or preferred stock. Other financing under
the shelf will be for general corporate purposes including
replacing funds used to pay the $15,000,000 First Mortgage Bonds,
Series K, 4-5/8%, due June 1, 1995.
-15-
FINANCIAL CONDITION
Financial condition and changes in total Shareholder Equity of
the Company and CIPS for the six-month periods ended June 30,
1995 and 1994 are as follows:
Six Months Ended
June 30,
________________________
(in thousands)
The Company: 1995 1994
_________ _________
Common Shareholders' Equity
Net income $ 25,454 $ 33,304
Common stock dividends paid (34,410) (33,767)
Other 1,710 (789)
________ ________
Change in Shareholders' Equity $ (7,246) $ (1,252)
======== ========
Six Months Ended
June 30,
________________________
(in thousands)
CIPS: 1995 1994
_________ _________
Common Shareholder's Equity
Earnings for common stock $ 23,456 $ 30,851
Common stock dividends paid (35,000) (34,200)
Other (68) (52)
________ ________
Change in Shareholder's Equity $(11,612) $ (3,401)
======== ========
-16-
OVERVIEW
The Company's earnings per share were $.38 for the quarter ended
June 30, 1995, compared to $.57 per share earned during the same
period in 1994. The decline primarily reflects lower electric
sales due to mild weather in the second quarter this year
compared to hotter-than-normal conditions a year ago, and lower
revenues from wholesale supply agreements due to the expiration
at year-end 1994 of a portion of a power supply agreement with a
wholesale electric customer. The Company's earnings per share
were $.75 for the six months ended June 30, 1995, compared to
$.98 per share earned during the same period in 1994. The
decrease reflects the previously mentioned milder weather, power
supply agreement expiration, and the one-time cost of a voluntary
separation program.
The following table summarizes the components of consolidated net
income and CIPS earnings for common stock for both the three and
six month periods ended June 30, 1995 and 1994 (see Results of
Operations for further discussion). In this table, electric
operating margin equals electric operating revenues less revenue
taxes, fuel for electric generation and purchased power. Gas
operating margin equals gas operating revenues less revenue taxes
and gas costs.
Second Quarter Six Months Ended
Ended June 30, June 30,
__________________ __________________
1995 1994 1995 1994
________ ________ ________ ________
CIPS
Electric operating
margin $ 99,236 $106,986 $188,449 $196,808
Gas operating margin 8,506 8,062 26,618 25,744
Other deductions and
interest expenses (95,118) (95,890) (189,672) (190,022)
CIPS preferred stock
dividends (971) (851) (1,939) (1,679)
________ ________ ________ ________
Total earnings
for common stock 11,653 18,307 23,456 30,851
________ ________ ________ ________
NON-UTILITY
Investment revenues 1,676 1,958 3,059 3,983
Other deductions
and expenses (443) (720) (1,061) (1,530)
________ ________ ________ ________
Total non-utility
net income 1,233 1,238 1,998 2,453
________ ________ ________ ________
Consolidated net
income $ 12,886 $ 19,545 $ 25,454 $ 33,304
======== ======== ======== ========
-17-
RESULTS OF OPERATIONS
The results of operations of the Company and CIPS for the three
and six months ended June 30, 1995, compared to the same period
in 1994 are presented below.
The Company
Net Income
(in thousands) Earnings Per Share
________________________ ________________________
Three Months Six Months Three Months Six Months
____________ __________ ____________ __________
1995 $12,886 $25,454 $ .38 $ .75
1994 19,545 33,304 .57 .98
_______ _______ _____ _____
Decrease $(6,659) $(7,850) $(.19) $(.23)
======= ======= ===== =====
Percent
Decrease (34)% (24)% (33)% (23)%
CIPS
Earnings for Common Stock
(in thousands)
__________________________________
Three Months Six Months
____________ __________
1995 $11,653 $23,456
1994 18,307 30,851
_______ _______
Decrease $(6,654) $(7,395)
======= =======
Percent
Decrease (36)% (24)%
OPERATING REVENUES
The changes in electric and gas revenues described below are for
the Company. The only differences between changes in electric
and gas operating revenues for the Company and for CIPS are
intercompany revenues that are eliminated in the consolidated
financial statements. These intercompany amounts are immaterial.
Electric revenues decreased 9% in the second quarter of 1995
compared to the same period in 1994 due to fewer KWH sales caused
by milder weather and lower revenues from power supply agreements
due to expiration at year-end 1994 of a portion of a power supply
agreement with a wholesale electric customer. In addition,
-18-
interchange revenues were down, even though KWH sales increased,
due to lower sales prices on interchange sales in the second
quarter of 1995 compared to the same quarter in 1994.
Electric revenues decreased 6% in the first six months of 1995
compared to the same period in 1994 due to fewer KWH sales caused
by the milder weather and lower revenues due to the expiration of
the power supply agreement discussed previously. In addition,
interchange sales decreased and the sales prices on interchange
sales were lower for the first six months of 1995 compared to
1994 due to changing market conditions between the periods.
These reductions in revenues were partially offset by an increase
in public authority and other revenues due to the inclusion in
this category, in 1995, of gains on the disposition of clean air
emissions credits which are included in revenues. However, these
gains are returned to customers through the fuel adjustment
clause.
The changes in electric revenue and KWH sales are shown below:
CHANGES IN ELECTRIC REVENUE AND KILOWATTHOUR SALES
INCREASE (DECREASE) FROM PRIOR YEAR
(in thousands)
____________________________________________________________________
Second Quarter Six Months
_________________________________ _________________________________
Revenue Rev % KWH KWH % Revenue Rev % KWH KWH %
________ _____ _________ _____ ________ _____ _________ _____
Residential $ (3,447) (7)% (21,234) (4)% $ (1,952) (2)% (39,019) (3)%
Commercial (5,529) (11) (57,425) (8) (3,396) (4) (30,746) (2)
Industrial (1,820) (6) 23,755 4 (1,846) (3) ( 1,372) -
Public Authorities
and Other 835 24 223 1 2,471 36 4,674 6
________ _______ ________ ________
Total Retail $ (9,961) (7)% (54,681) (3)% $ (4,723) (2)% (66,463) (2)%
Power Supply
Agreements $ (3,766) (20)% (65,464) (18)% $ (6,043) (16)% (107,983) (14)%
Interchange Sales
(economy/emergency) (1,087) (5) 179,767 18 (9,867) (26) (110,237) (6)
Cooperatives and
Municipals (600) (11) (5,088) (4) (925) (8) (7,821) (3)
________ _______ ________ ________
Total Sales for
Resale $ (5,453) (12)% 109,215 7 % $(16,835) (19)% (226,041) (8)%
________ _______ ________ ________
Total $(15,414) (9)% 54,534 2 % $(21,558) (6)% (292,504) (4)%
======== ========= ======== ========
-19-
Gas revenues decreased 13% for both the second quarter and the
first six months of 1995 compared to the same period in 1994 due
primarily to milder weather in 1995 and lower purchased gas
costs. Gas transportation revenues decreased 10% in the second
quarter and 7% in the first six months of 1995 even though therms
transported increased 14% for the second quarter and 4% in the
first six months of 1995. The increase in transported therms and
reduced revenue in 1995 is principally due to a change in the
method of billing one large customer where revenues were reduced
with corresponding reductions in amounts charged to gas costs.
The changes in gas revenues and therm sales are shown below.
CHANGES IN GAS REVENUE AND THERM SALES
INCREASE (DECREASE) FROM PRIOR YEAR
(in thousands)
____________________________________________________________________
Second Quarter Six Months
_________________________________ _________________________________
Therms Therms
Revenue Rev % Therms % Revenue Rev % Therms %
________ _____ _________ ______ ________ _____ _________ ______
Residential $ (1,145) (9)% (136) (1)% $ (5,304) (10)% (8,104) (9)%
Commercial (569) (14) (311) (5) (2,562) (14) (3,770) (11)
Industrial (984) (37) (1,886) (26) (3,071) (41) (7,330) (36)
Transportation (160) (10) 3,645 14 (271) (7) 2,577 4
Miscellaneous (23) (20) - - (80) 23 - -
________ ______ ________ ________
Total $ (2,881) (13)% 1,312 2 % $(11,288) (13)% (16,627) (8)%
======== ====== ======== ========
OPERATIONS
__________
Fuel for electric generation declined 20% for the second quarter
and 13% for the first six months of 1995 compared to the same
periods of 1994. The declines correspond to lower sales levels.
Purchased power increased 18% for the second quarter and 1% for
the first six months compared with the same periods in 1994
reflecting greater purchases made for resale to interchange
economy and emergency customers.
Gas costs declined 26% for the second quarter and 21% for the
first six months when compared to the same periods in 1994 due to
declines in gas requirements for the CIPS system resulting from
milder weather and because of a substantially lower average cost
per therm.
Other operation expenses in the second quarter of 1995 were
comparable with 1994, but increased 5% for the first six months
of 1995 compared to the same periods of 1994. The major reason
for the increase in the first six months was a $6.3 million
charge recognized in the first quarter relating to the voluntary
separation program. This charge was partially offset by reduced
operating expenses in the first six months.
-20-
Maintenance expenses increased 13% in the second quarter of 1995
and declined 1% for the first six months of 1995 compared to the
same periods of 1994 due to the timing of major maintenance
projects scheduled in the first half of 1995.
Depreciation and amortization expense increased 3% in the second
quarter and 2% for the first six months of 1995 when compared to
1994 due to normal plant additions.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(1) Reference is made to the fourth paragraph under Item 3.
Legal Proceedings in Part I on page 25 in the CIPSCO
and CIPS combined 1994 Annual Report on Form 10-K (the
"1994 Form 10-K") for information regarding the
settlement agreement dismissing legal claims and other
matters brought against CIPS by Soyland Power
Cooperative ("Soyland") and certain of its distribution
cooperative customers. On May 22, 1995, the settlement
agreement was executed by all parties. The courts have
dismissed the suits and the settlement by CIPS to
Soyland took place in July 1995.
(2) Reference is made to the fifth paragraph under Item 3.
Legal Proceedings in Part I on page 25 in the 1994 Form
10-K for information regarding the May and Hryhorysak
v. Central Illinois Public Service Company and Hanson
Engineers, Inc. complaint. Trial date has been set for
March 1996. CIPS is vigorously defending the action
and believes it has meritorious defenses. Management
believes that final disposition of this matter will not
have a material adverse effect on financial position or
results of operations of the Company or CIPS.
(3) CIPS received a Notice of Tax Liability and Correction
of Return dated June 23, 1995 from the Illinois
Department of Revenue claiming that CIPS owes $2.5
million in invested capital tax, penalty and interest
on a liability for revenue the utility collected
subject to refund during the years 1990, 1991 and 1992.
CIPS plans on filing a protest to this notice and
believes that no additional tax is owed.
Item 5. Other Information
(1) In May 1995 the Illinois General Assembly passed a
resolution establishing a Joint Committee of the House
and Senate for the purpose of developing legislative
proposals for reducing regulation, increasing customer
choice and promoting and facilitating competition in
Illinois' electric utility industry. A progress report
from the Joint Committee is expected in December 1995
followed by a final legislative proposal to be
delivered to the General Assembly in November 1996.
-21-
(2) Reference is made to paragraph 7 under Item 5. Other
Information in Part II on page 21 of the CIPSCO and
CIPS combined Form 10-Q Quarterly Report for the
quarter ended March 31, 1995 ("First Quarter 1994 Form
10-Q") concerning legislative action with regard to
retail competition in the electric utility industry.
In July 1995, the Governor signed Senate Bill 232 which
allows utilities, such as CIPS, to petition the
Illinois commission for approval of alternative forms
of regulation which would differ from the traditional
rate base/rate of return regulation. CIPS is studying
whether to propose an alternative regulation plan to
the Illinois commission.
(3) Reference is made to the second full paragraph under
Item 1. Business - Construction Program and Financing
on page 11 of the 1994 Form 10-K for information
regarding the utility's least cost resource plan. On
June 30, 1995, CIPS filed its most recent 20-year least
cost resource plan (the "Plan") with the Illinois
commission identifying generating unit and other
resource plans. According to the Plan, CIPS will not
require additional generating capacity or demand-side
resources to meet expected load during the 1996-2016
planning period.
(4) On July 10, 1995, CIPS filed a tariff rider with the
Illinois commission applicable to existing electric
service customers billed on certain commercial and
industrial rates. This rider allows the utility to
negotiate contractual rates with customers at rates
equal to or greater than the incremental costs of
serving that customer. Such contracts are intended for
customers having the potential to utilize an energy
source other than CIPS' electric service and/or where
the total or partial loss of customer load is imminent.
This will allow CIPS to maintain a positive
contribution to fixed costs and avoid permanent loss of
revenue.
(5) On August 11, 1995, the Company, Union Electric
Company, a Missouri corporation ("UE"), Arch Holding
Corp., a newly formed Missouri corporation 50% owned by
UE and 50% owned by the Company ("Arch Holding"), and
Arch Merger Inc., a Missouri corporation and wholly owned
subsidiary of Arch Holding ("Merger Sub"), entered into
an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which, among other things,
Merger Sub will be merged with and into UE and the
Company will be merged with and into Arch Holding (the
"Mergers") with the result that UE and CIPS will be
wholly owned operating subsidiaries of Arch Holding.
As a result of the Mergers, each outstanding share of
the Company's Common Stock, without par value ("Company
Common Stock"), will be converted into the right to
receive 1.03 shares of common stock of Arch Holding,
par value $0.01 per share ("Arch Holding Common
Stock") (or cash in lieu of fractional shares otherwise
-22-
deliverable in respect thereof) and each outstanding
share of UE common stock, par value $5.00 per share
("UE Common Stock")(other than shares with respect
to which dissenters' rights are perfected under applicable
State law), will be converted into the right
to receive one share of Arch Holding Common Stock.
After the Mergers, Arch Holding will become a
registered public utility holding company under the
Public Utility Holding Company Act of 1935, as amended.
Under the terms of the Merger Agreement, approximately
63,800 electric and 17,900 natural gas customers of UE
located in Illinois would become customers of CIPS.
Current non-utility operations of the Company will be
conducted through subsidiaries of Arch Holding. The
common stock and preferred stock of CIPS will not be
affected by the Mergers.
The Mergers are conditioned upon, among other things,
approval by holders of two-thirds of the Company's
Common Stock, by holders of two-thirds of the UE Common
Stock and of the preferred stock, without par value, of
UE voting together as a single class and upon receipt
of certain regulatory and governmental approvals. The
foregoing description of the Merger Agreement is qualified
in its entirety by reference to the Merger Agreement, which
is attached as Exhibit 2(a) hereto and incorporated herein
by reference in its entirety.
Simultaneously with their execution and delivery of the
Merger Agreement, the Company and UE entered into stock
option agreements (the "Stock Option Agreements"),
pursuant to one of which the Company granted UE the
right, upon the terms and subject to the conditions set
forth therein, to purchase up to 6,779,838 shares of
Company Common Stock at a price of $37.02 per share,
and pursuant to the other of which UE granted the
Company the right, upon the terms and subject to the
conditions set forth therein, to purchase up to
6,983,234 shares of UE Common Stock at a price of
$35.94 per share. The foregoing description of the Stock
Option Agreements is qualified in its entirety by reference
to the Stock Option Agreements which are attached as
Exhibits 10(a) and 10(b) hereto, respectively,
and incorporated herein by reference in their entirety.
The Merger Agreement provides that, after the
effectiveness of the Mergers, the corporate
headquarters and principal executive offices of Arch
Holding and UE will be located in St. Louis, Missouri,
and the headquarters of CIPS will remain in
Springfield, Illinois. Arch Holding's Board of
Directors will consist of a total of 15 directors, 10
of whom will be designated by UE and 5 of whom will be
designated by the Company. Mr. Charles W. Mueller, the
current President and Chief Executive Officer of UE,
-23-
will serve as Chairman of Arch Holding and
Mr. Clifford L. Greenwalt, the current President and
Chief Executive Officer of the Company, will serve as
Vice-Chairman. CIPS and UE will each retain its board
of directors with Mr. Greenwalt becoming an additional
member of the UE board and Mr. Mueller becoming a
member of the CIPS board. Two additional UE nominees
also will become CIPS directors.
A copy of the Press Release, dated August 14, 1995,
issued by the Company and UE relating to the Mergers
attached as Exhibit 99(a) hereto and is incorporated
herein by reference in its entirety.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
Exhibit 2(a) Agreement and Plan of Merger, dated as
of August 11, 1995, by and among Union
Electric Company, CIPSCO Incorporated,
Arch Holding Corp. and Arch Merger Inc.*
Exhibit 10(a) Stock Option Agreement, dated as of
August 11, 1995, by and between CIPSCO
Incorporated and Union Electric Company
Exhibit 10(b) Stock Option Agreement, dated as of
August 11, 1995, by and between Union
Electric Company and CIPSCO Incorporated
Exhibit 12 Computation of Ratio of
Earnings to Fixed Charges and
Computation of Ratio of
Earnings to Fixed Charges plus
Preferred Stock Dividend
Requirements Before Income
Taxes for CIPS.
Exhibit 27 Financial Data Schedule for
CIPSCO (required for
electronic filing only in
accordance with Item 601(c)(1)
of Regulation S-K). Financial
Data Schedule for CIPS
(required for electronic
filing only in accordance with
Item 601(c)(1) of Regulation
S-K).
Exhibit 99(a) Press Release, dated August 14, 1995,
relating to transactions between CIPSCO
Incorporated and Union Electric Company
* The registrant agrees to furnish supplementally any omitted exhibits to
the Commission upon request.
-24-
(B) Reports on Form 8-K:
Date of Report Item Reported
June 1, 1995 Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
Contains certain exhibits filed in connection
with the Registration Statement of CIPS
(Registration No. 33-56063) which became
effective November 21, 1994.
June 5, 1995 Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
Contains certain exhibits filed in connection
with the Registration Statement of CIPS
(Registration No. 33-56063) which became
effective November 21, 1994.
-25-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant, CIPSCO Incorporated, has duly caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
CIPSCO Incorporated
Date: August 14, 1995 /s/ L. E. Marlett
L. E. Marlett
Controller
(Chief Accounting Officer)
-26-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant, Central Illinois Public Service Company,
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Central Illinois Public Service Company
Date: August 14, 1995 /s/ L. E. Marlett
L. E. Marlett
Controller
(Principal Accounting Officer)
-27-
CIPSCO INCORPORATED AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
Exhibit No. Description
___________ ___________
2(a) Agreement and Plan of Merger, dated as
of August 11, 1995, by and among Union
Electric Company, CIPSCO Incorporated,
Arch Holding Corp. and Arch Merger Inc.
10(a) Stock Option Agreement, dated as of
August 11, 1995, by and between CIPSCO
Incorporated and Union Electric Company
10(b) Stock Option Agreement, dated as of
August 11, 1995, by and between Union
Electric Company and CIPSCO Incorporated
12 Computation of Ratio of Earnings
to Fixed Charges and Computation of
Ratio of Earnings to Fixed Charges
plus Preferred Stock Dividend
Requirements Before Income Taxes for
CIPS.
27 Financial Data Schedule for CIPSCO
Financial Data Schedule for CIPS
99(a) Press Release, dated August 14, 1995,
relating to transactions between CIPSCO
Incorporated and Union Electric Company
-28-
EX-2.A
2
AGREEMENT AND PLAN OF MERGER
EXHIBIT 2.(a)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNION ELECTRIC COMPANY,
CIPSCO INCORPORATED,
ARCH HOLDING CORP.,
AND
ARCH MERGER INC.
DATED AS OF AUGUST 11, 1995
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGERS
SECTION 1.1 The Mergers.................................... 2
SECTION 1.2 Effects of the Mergers......................... 2
SECTION 1.3 Effective Time of the Mergers.................. 3
ARTICLE II
TREATMENT OF SHARES
SECTION 2.1 Effect of the Mergers on Capital Stock......... 3
SECTION 2.2 Dissenting Shares.............................. 5
SECTION 2.3 Exchange of Certificates....................... 6
ARTICLE III
THE CLOSING
SECTION 3.1 Closing........................................ 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CIPSCO
SECTION 4.1 Organization and Qualification................. 8
SECTION 4.2 Subsidiaries................................... 9
SECTION 4.3 Capitalization................................. 10
SECTION 4.4 Authority; Non-Contravention; Statutory
Approvals; Compliance........................ 11
SECTION 4.5 Reports and Financial Statements............... 13
SECTION 4.6 Absence of Certain Changes or Events........... 14
SECTION 4.7 Litigation..................................... 14
SECTION 4.8 Registration Statement and Proxy
Statement.................................... 14
SECTION 4.9 Tax Matters.................................... 15
SECTION 4.10 Employee Matters; ERISA........................ 17
SECTION 4.11 Environmental Protection....................... 20
SECTION 4.12 Regulation as a Utility........................ 23
SECTION 4.13 Vote Required.................................. 23
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SECTION 4.14 Accounting Matters............................. 24
SECTION 4.15 Non-applicability of Certain Illinois
Law.......................................... 24
SECTION 4.16 Opinion of Financial Advisor................... 24
SECTION 4.17 Insurance...................................... 24
SECTION 4.18 Ownership of Union Electric Common Stock....... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UNION ELECTRIC
SECTION 5.1 Organization and Qualification................. 25
SECTION 5.2 Subsidiaries................................... 25
SECTION 5.3 Capitalization................................. 26
SECTION 5.4 Authority; Non-Contravention; Statutory
Approvals; Compliance........................ 27
SECTION 5.5 Reports and Financial Statements............... 29
SECTION 5.6 Absence of Certain Changes or Events........... 30
SECTION 5.7 Litigation..................................... 30
SECTION 5.8 Registration Statement and Proxy
Statement.................................... 30
SECTION 5.9 Tax Matters.................................... 31
SECTION 5.10 Employee Matters; ERISA........................ 33
SECTION 5.11 Environmental Protection....................... 36
SECTION 5.12 Regulation as a Utility........................ 38
SECTION 5.13 Vote Required.................................. 38
SECTION 5.14 Accounting Matters............................. 38
SECTION 5.15 Non-applicability of Certain
Missouri Law................................. 38
SECTION 5.16 Opinion of Financial Advisor................... 38
SECTION 5.17 Insurance...................................... 38
SECTION 5.18 Ownership of CIPSCO Common Stock............... 39
SECTION 5.19 Operations of Nuclear Power Plant.............. 39
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Covenants of the Parties....................... 39
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information.......................... 49
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SECTION 7.2 Joint Proxy Statement and Registration
Statement.................................... 50
SECTION 7.3 Regulatory Matters............................. 51
SECTION 7.4 Shareholder Approval........................... 51
SECTION 7.5 Directors' and Officers'
Indemnification.............................. 52
SECTION 7.6 Disclosure Schedules........................... 54
SECTION 7.7 Public Announcements........................... 55
SECTION 7.8 Rule 145 Affiliates............................ 55
SECTION 7.9 Employee Agreements and Workforce
Matters...................................... 55
SECTION 7.1 Employee Benefit Plans......................... 56
SECTION 7.11 Stock Option and Other Stock Plans............. 58
SECTION 7.12 No Solicitations............................... 60
SECTION 7.13 Company Board of Directors..................... 60
SECTION 7.14 Company Officers............................... 61
SECTION 7.15 Boards of Directors of Subsidiaries............ 61
SECTION 7.16 Post-Merger Operations......................... 62
SECTION 7.17 Expenses....................................... 62
SECTION 7.18 Further Assurances............................. 62
SECTION 7.19 Charter and By-Law Amendments.................. 63
SECTION 7.20 Transfers of Illinois Assets................... 63
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation
to Effect the Mergers........................ 63
SECTION 8.2 Conditions to Obligation of Union Electric
to Effect the Mergers........................ 65
SECTION 8.3 Conditions to Obligation of CIPSCO to
Effect the Mergers........................... 66
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination..................................... 67
SECTION 9.2 Effect of Termination........................... 71
SECTION 9.3 Termination Fee; Expenses....................... 71
SECTION 9.4 Amendment....................................... 73
SECTION 9.5 Waiver.......................................... 74
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival; Effect of Representations
and Warranties.............................. 74
SECTION 10.2 Brokers....................................... 74
SECTION 10.3 Notices....................................... 75
SECTION 10.4 Miscellaneous................................. 76
SECTION 10.5 Interpretation................................ 76
SECTION 10.6 Counterparts; Effect.......................... 76
SECTION 10.7 Parties in Interest........................... 76
SECTION 10.8 Waiver of Jury Trial and Certain
Damages..................................... 77
SECTION 10.9 Enforcement................................... 77
Exhibit A Form of CIPSCO Stock Option Agreement
Exhibit B Form of Union Electric Stock Option Agreement
Exhibit 7.8 Form of Affiliate Agreement
-iv-
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1995 (this
"Agreement"), by and among Union Electric Company, a Missouri corporation
("Union Electric"), CIPSCO Incorporated, an Illinois corporation ("CIPSCO"),
Arch Holding Corp., a Missouri corporation (the "Company") and Arch Merger Inc.,
a Missouri corporation and a wholly owned subsidiary of the Company ("Merger
Sub").
WHEREAS, Union Electric and CIPSCO have determined to engage in a
business combination transaction on the terms stated herein;
WHEREAS, in furtherance thereof, Union Electric and CIPSCO have formed
the Company, the capital stock of which is owned equally by Union Electric and
CIPSCO, the Company has formed Merger Sub, and the respective Boards of
Directors of Union Electric, CIPSCO, the Company and Merger Sub have approved
this Agreement and the transactions contemplated hereby on the terms and
conditions set forth in this Agreement (such transactions referred to herein
collectively as the "Mergers");
WHEREAS, the Board of Directors of Union Electric and the Board of
Directors of CIPSCO have approved and CIPSCO has executed an agreement with
Union Electric in the form of Exhibit A (the "CIPSCO Stock Option Agreement")
whereby CIPSCO has granted Union Electric an option to purchase shares of its
common stock upon the terms and conditions provided in such agreement;
WHEREAS, the Board of Directors of Union Electric and the Board of
Directors of CIPSCO has approved and Union Electric has executed an agreement
with CIPSCO in the form of Exhibit B (the "Union Electric Stock Option
Agreement") whereby Union Electric has granted CIPSCO an option to purchase
shares of its common stock upon the terms and conditions provided in such
agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
parties hereto and their respective stockholders will recognize no gain or loss
for federal income tax purposes as a result of the consummation of the Mergers;
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGERS
Section 1.1 The Mergers. Upon the terms and subject to the conditions of
this Agreement:
(a) At the Union Electric Effective Time (as defined in Section 1.3),
Merger Sub shall be merged with and into Union Electric (the "Union Electric
Merger") in accordance with the laws of the State of Missouri. Union Electric
shall be the surviving corporation in the Union Electric Merger and shall
continue its corporate existence under the laws of the State of Missouri. The
effects and the consequences of the Union Electric Merger shall be as set forth
in Section 1.2(a). Throughout this Agreement, the term "Union Electric" shall
refer to Union Electric prior to the Union Electric Merger or to Union Electric
in its capacity as the surviving corporation in the Union Electric Merger, as
the context requires.
(b) At the Company Effective Time (as defined in Section 1.3), CIPSCO
shall be merged with and into the Company (the "Company Merger") in accordance
with the laws of the State of Missouri and the State of Illinois. The Company
shall be the surviving corporation in the Company Merger and shall continue its
corporate existence under the laws of the State of Missouri. The effects and
the consequences of the Company Merger shall be as set forth in Section 1.2(b).
Section 1.2 Effects of the Mergers.
(a) At the Union Electric Effective Time, (i) the articles of
incorporation of Union Electric, as in effect immediately prior to the Union
Electric Effective Time, shall be the articles of incorporation of the surviving
corporation in the Union Electric Merger until thereafter amended as provided by
law and such articles of incorporation, and (ii) the by-laws of Union Electric,
as in effect immediately prior to the Union Electric Effective Time, shall be
the by-laws of the surviving corporation in the Union Electric Merger until
thereafter amended as provided by law, the articles of incorporation of the
surviving corporation in the Union Electric Merger and such by-laws. Subject to
the foregoing, the additional effects of the Union Electric Merger shall be as
provided in the applicable provisions of the General and Business Corporation
Law of the State of Missouri (the "MGBCL").
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(b) At the Company Effective Time, (i) the articles of incorporation
of the Company, as in effect immediately prior to the Company Effective Time
(which shall be amended and restated in a form agreed to by Union Electric and
CIPSCO pursuant to Section 7.19) shall be the articles of incorporation of the
surviving corporation in the Company Merger (the "Articles of Incorporation")
until thereafter amended as provided by law and the Articles of Incorporation,
and (ii) the by-laws of the Company shall be amended and restated in a form
agreed to by Union Electric and CIPSCO and, as so amended and restated, shall be
the by-laws of the surviving corporation in the Company Merger (the "By-laws")
until thereafter amended as provided by law, the Articles of Incorporation and
the By-laws. Subject to the foregoing, the additional effects of the Company
Merger shall be as provided in the applicable provisions of the MGBCL and the
Business Corporation Act of 1983 of the State of Illinois (the "IBCL").
Section 1.3 Effective Time of the Mergers. On the Closing Date (as
defined in Section 3.1), (a) with respect to the Union Electric Merger, articles
of merger complying with the requirements of the MGBCL shall be filed with the
Secretary of State of the State of Missouri and (b) with respect to the Company
Merger, articles of merger complying with the requirements of the MGBCL and the
IBCL shall be filed with the Secretary of State of the State of Missouri and the
Secretary of State of the State of Illinois. The Union Electric Merger shall
become effective upon the issuance of a certificate of merger by the Secretary
of State of the State of Missouri (the "Union Electric Effective Time"). The
Company Merger shall become effective upon the issuance of a certificate of
merger by the Secretary of State of the State of Missouri or upon the issuance
of a certificate of merger by the Secretary of State of the State of Illinois,
whichever occurs later (the "Company Effective Time" or the "Effective Time").
The Union Electric Effective Time shall be immediately prior to the Company
Effective Time.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Mergers on Capital Stock.
(a) At the Union Electric Effective Time, by virtue of the Union Electric
Merger and without any action on the part of any holder of any capital stock of
Union Electric or Merger Sub:
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(i) Conversion of Merger Sub Stock. Each share of Common Stock, par
value $5.00 per share, of Merger Sub (the "Merger Sub Common Stock") shall be
converted into one share of common stock of the surviving corporation in the
Union Electric Merger.
(ii) Cancellation of Union Electric Treasury Stock. Each share of Union
Electric Common Stock that is owned by Union Electric as treasury stock and all
shares of Union Electric Common Stock that are owned, directly or indirectly, by
Union Electric or CIPSCO or any of their respective wholly owned subsidiaries
shall be cancelled and shall cease to exist and no stock of the Company or other
consideration shall be delivered in exchange therefor.
(iii) Conversion of Union Electric Common Stock. Each issued and
outstanding share of Common Stock, par value $5.00 per share, of Union Electric
(the "Union Electric Common Stock"), other than Union Electric Dissenting Shares
(as defined in Section 2.2) and shares cancelled pursuant to Section 2.1(a)(ii)
of this Agreement, shall be converted into the right to receive one (the "Union
Electric Exchange Ratio") fully paid and non-assessable share of Common Stock,
par value $5.00 per share, of the Company ("Company Common Stock"). Upon such
conversion, each holder of a certificate formerly representing any such shares
of Union Electric Common Stock shall cease to have any rights with respect
thereto, except the right to receive the shares of Company Common Stock to be
issued in consideration therefor upon surrender of such certificate in
accordance with Section 2.3.
(iv) No Change in Union Electric Preferred Stock. Each issued and
outstanding share of Preferred Stock, without par value, of Union Electric (the
"Union Electric Preferred Stock"), other than Union Electric Dissenting Shares,
shall remain outstanding and shall continue to represent one fully paid and non-
assessable share of preferred stock of the surviving corporation with identical
rights (including dividend rates) and designations as were applicable to such
share of Union Electric Preferred Stock immediately prior to the Union Electric
Merger.
(b) At the Company Effective Time, by virtue of the Company Merger
and without any action on the part of any holder of any capital stock of CIPSCO
or the Company:
(i) Cancellation of Certain CIPSCO Stock. Each share of Common Stock,
without par value, of CIPSCO (the "CIPSCO Common Stock") that is owned by CIPSCO
as treasury
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stock, by subsidiaries of CIPSCO or by Union Electric, the Company or any of
their respective subsidiaries shall be cancelled and cease to exist.
(ii) Cancellation of Certain Company Common Stock. Each issued and
outstanding share of Company Common Stock that is owned by CIPSCO, Union
Electric or any of their wholly owned subsidiaries immediately prior to the
Company Effective Time shall be cancelled and cease to exist.
(iii) Treatment of Certain Company Common Stock. Each share of Company
Common Stock issued pursuant to Section 2.1(a)(iii) hereof shall remain
outstanding and shall continue to represent one share of Company Common Stock.
(iv) Conversion of CIPSCO Common Stock. Each issued and outstanding share
of CIPSCO Common Stock (other than shares cancelled pursuant to Section
2.1(b)(i)) shall be converted into the right to receive 1.03 (the "CIPSCO
Exchange Ratio", and together with the Union Electric Exchange Ratio, the
"Exchange Ratios") fully paid and non-assessable shares of Company Common Stock.
Upon such conversion, each holder of a certificate formerly representing any
such shares of CIPSCO Common Stock shall cease to have any rights with respect
thereto, except the right to receive the shares of Company Common Stock to be
issued in consideration therefor upon the surrender of such certificate in
accordance with Section 2.3.
Section 2.2 Dissenting Shares.
(a) Shares of Union Electric Common Stock and Union Electric Preferred
Stock held by any holder entitled to relief as a dissenting shareholder under
Section 351.455 of the MGBCL (the "Union Electric Dissenting Shares") shall not
be converted into the right to receive Company Common Stock or remain
outstanding as preferred stock of the surviving corporation, as the case may be,
in the Union Electric Merger, but shall be converted into such consideration as
may be due with respect to such shares pursuant to the applicable provisions of
the MGBCL, unless and until the right of such holder to receive fair value for
such Union Electric Dissenting Shares terminates in accordance with Section
351.455 of the MGBCL. If such right is terminated otherwise than by the
purchase of such shares by Union Electric, then such shares shall cease to be
Union Electric Dissenting Shares and shall be converted into and represent the
right to receive Company Common Stock or preferred stock of the surviving
corporation in the Union Electric Merger, as provided in Section 2.1(a).
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(b) Shares of CIPSCO Common Stock held by any holder entitled to
relief as a dissenting shareholder under Section 5/11.65 of the IBCL (the
"CIPSCO Dissenting Shares") shall be converted into the right to receive shares
of Company Common Stock in accordance with Section 2.1(b)(iv) of this Agreement
and shall thereafter be subject to sale or purchase as provided in applicable
provisions of the IBCL.
Section 2.3 Exchange of Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, the Company shall deposit with a bank or trust company mutually
agreeable to CIPSCO and Union Electric (the "Exchange Agent"), certificates
representing shares of Company Common Stock required to effect the exchanges
referred to in Section 2.1, together with cash payable in respect of fractional
shares pursuant to Section 2.3(d).
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Union Electric Effective Time
represented outstanding shares of Union Electric Common Stock or CIPSCO Common
Stock (the "Certificates") that were converted (the "Converted Shares") into the
right to receive shares of Company Common Stock (the "Company Shares") pursuant
to Section 2.1 (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Exchange Agent) and (ii)
instructions for effecting the surrender of the Certificates in exchange for
certificates representing Company Shares. Upon surrender of a Certificate to
the Exchange Agent for cancellation (or to such other agent or agents as may be
appointed by agreement of Union Electric and CIPSCO), together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
may require, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole Company Shares
which such holder has the right to receive pursuant to the provisions of this
Article II. In the event of a transfer of ownership of Converted Shares which
is not registered in the transfer records of Union Electric or CIPSCO, as the
case may be, a certificate representing the proper number of Company Shares may
be issued to a transferee if the Certificate representing such Converted Shares
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after
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the Effective Time to represent only the right to receive upon such surrender
the certificate representing Company Shares and cash in lieu of any fractional
shares of Company Common Stock as contemplated by this Section 2.3.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Company Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Company Shares
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.3(d) until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole Company Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Company Common Stock to which such
holder is entitled pursuant to Section 2.3(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole Company Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Company Shares.
(d) No Fractional Securities. Notwithstanding any other provision of
this Agreement, no certificates or scrip representing fractional shares of
Company Common Stock shall be issued upon the surrender for exchange of
Certificates and such fractional shares shall not entitle the owner thereof to
vote or to any other rights of a holder of Company Common Stock. A holder of
CIPSCO Common Stock who would otherwise have been entitled to a fractional share
of Company Common Stock shall be entitled to receive a cash payment in lieu of
such fractional share in an amount equal to the product of such fraction
multiplied by the average of the last reported sales price, regular way, per
share of CIPSCO Common Stock on the New York Stock Exchange ("NYSE") Composite
Tape for the ten business days prior to and including the last business day on
which such stock was traded on the NYSE, without any interest thereon.
(e) Closing of Transfer Books. From and after the Union Electric
Effective Time or the Company Effective Time, as the case may be, the stock
transfer books of Union Electric and CIPSCO shall be closed and no transfer of
any capital stock of Union Electric or CIPSCO shall thereafter be made. If,
after
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the Effective Time, Certificates are presented to the Company, they shall be
cancelled and exchanged for certificates representing the appropriate number of
Company Shares as provided in Section 2.1 and in this Section 2.3.
(f) Termination of Exchange Agent. Any certificates representing
Company Shares deposited with the Exchange Agent pursuant to Section 2.3(a) and
not exchanged within one year after the Effective Time pursuant to this Section
2.3 shall be returned by the Exchange Agent to the Company, which shall
thereafter act as Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of unsurrendered Certificates and unclaimed at the end of
one year from the Effective Time shall be returned to the Company, after which
time any holder of unsurrendered Certificates shall look as a general creditor
only to the Company for payment of such funds to which such holder may be due,
subject to applicable law. The Company shall not be liable to any person for
such shares or funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Union Electric, 1901 Chouteau Avenue, St. Louis,
Missouri, at 10:00 A.M., local time, on the second business day immediately
following the date on which the last of the conditions set forth in Article VIII
hereof is fulfilled or waived, or at such other time and date and place as Union
Electric and CIPSCO shall mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CIPSCO
CIPSCO represents and warrants to Union Electric as follows:
Section 4.1 Organization and Qualification. Except as set forth in Section
4.1 of the CIPSCO Disclosure Schedule (as defined in Section 7.6(ii)), CIPSCO
and each CIPSCO Subsidiary (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power and authority,
and has been duly authorized by
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all necessary approvals and orders, to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary. As used in this Agreement, (a) the term "subsidiary" of a person
shall mean any corporation or other entity (including partnerships and other
business associations) of which at least a majority of the outstanding capital
stock or other voting securities having voting power under ordinary
circumstances to elect directors or similar members of the governing body of
such corporation or entity shall at the time be held, directly or indirectly, by
such person, (b) the term "CIPSCO Subsidiary" shall mean those of the
subsidiaries, joint ventures or general partnership interests of CIPSCO
identified as CIPSCO Subsidiaries in Section 4.2 of the CIPSCO Disclosure
Schedule and (c) the term "Direct Subsidiary" shall be deemed to mean CIPSCO
Subsidiaries or Union Electric Subsidiaries (as defined in Section 5.1), as the
case may be.
Section 4.2 Subsidiaries. Section 4.2 of the CIPSCO Disclosure Schedule
sets forth a description as of the date hereof, of all subsidiaries and joint
ventures of CIPSCO, including (a) the name of each such entity and CIPSCO's
interest therein, and (b) as to each CIPSCO Subsidiary and CIPSCO Joint Venture
(as defined below), a brief description of the principal line or lines of
business conducted by each such entity. Except as set forth in Section 4.2 of
the CIPSCO Disclosure Schedule, none of the CIPSCO Subsidiaries is a "public
utility company", a "holding company", a "subsidiary company" or an "affiliate"
of any public utility company within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935, as
amended (the "1935 Act"), respectively. Except as set forth in Section 4.2 of
the CIPSCO Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each CIPSCO Subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by CIPSCO free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever and
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
such CIPSCO Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating it to
grant, extend or enter into any such agreement or commitment. As used in this
Agreement, (a) the
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term "joint venture" of a person shall mean any corporation or other entity
(including partnerships and other business associations) that is not a
subsidiary of such person, in which such person or one or more of its
subsidiaries owns an equity interest, other than equity interests held for
passive investment purposes which are less than 5% of any class of the
outstanding voting securities or equity of any such entity and (b) the term
"CIPSCO Joint Venture" shall mean those of the joint ventures of CIPSCO or any
CIPSCO Subsidiary identified as a CIPSCO Joint Venture in Section 4.2 of the
CIPSCO Disclosure Schedule. CIPSCO has no subsidiaries, joint ventures, or
general or limited partnership interests other than those listed as CIPSCO
Subsidiaries on Section 4.2 of the CIPSCO Disclosure Schedule.
Section 4.3 Capitalization. (a) The authorized capital stock of CIPSCO
consists of 100,000,000 shares of CIPSCO Common Stock, and 4,600,000 shares of
CIPSCO Preferred Stock. As of the close of business on August 11, 1995, there
were issued and outstanding 34,069,542 shares of CIPSCO Common Stock and no
shares of CIPSCO Preferred Stock. All of the issued and outstanding shares of
the capital stock of CIPSCO are, and any shares of CIPSCO Common Stock issued
pursuant to the CIPSCO Stock Option Agreement will be, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in
Section 4.3 of the CIPSCO Disclosure Schedule, as of the date hereof, there are
no outstanding subscriptions, options, calls, contracts, voting trusts, proxies
or other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating CIPSCO or any of the CIPSCO
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of CIPSCO, or obligating CIPSCO to
grant, extend or enter into any such agreement or commitment, other than under
the CIPSCO Stock Option Agreement. There are no outstanding stock appreciation
rights of CIPSCO which were not granted in tandem with a related stock option
and no outstanding limited stock appreciation rights or other rights to redeem
for cash options or warrants of CIPSCO.
(b) The authorized capital stock of Central Illinois Public Service Company,
an Illinois corporation and a wholly owned subsidiary of CIPSCO ("CIPS")
consists of 45,000,000 shares of common stock without par value ("CIPS Common
Stock"), 2,000,000 shares of Cumulative Preferred Stock, par value $100 per
share ("CIPS Preferred Stock"), and 2,600,000 shares of Preferred Stock without
par value ("CIPS No-Par Preferred Stock"). As of the close of business on
August 11, 1995, there were issued and outstanding 25,452,373 shares of CIPS
Common
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Stock (all of which were owned by CIPSCO), 800,000 shares of CIPS Preferred
Stock (consisting of 150,000 shares of the 4% series, 50,000 shares of the 4.25%
series, 75,000 shares of the 4.90% series, 50,000 shares of the 4.92% series,
50,000 shares of the 5.16% series, 125,000 shares of the 6.625% series, and
300,000 shares of the 1993 Auction A series), and no shares of CIPS No-Par
Preferred Stock.
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. CIPSCO has all requisite corporate power and authority to
enter into this Agreement and the CIPSCO Stock Option Agreement, and, subject to
the applicable Shareholders' Approval (as defined in Section 4.13) and the
applicable CIPSCO Required Statutory Approvals (as defined in Section 4.4(c)),
to consummate the transactions contemplated hereby or thereby. The execution
and delivery of this Agreement and the CIPSCO Stock Option Agreement and the
consummation by CIPSCO of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of CIPSCO,
subject, in the case of this Agreement, to obtaining the applicable CIPSCO
Shareholders' Approval. Each of this Agreement and the CIPSCO Stock Option
Agreement has been duly and validly executed and delivered by CIPSCO and,
assuming the due authorization, execution and delivery hereof and thereof by the
other signatories hereto and thereto, constitutes the valid and binding
obligation of CIPSCO enforceable against it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Section 4.4(b) of the CIPSCO
Disclosure Schedule, the execution and delivery of this Agreement and the CIPSCO
Stock Option Agreement by CIPSCO do not, and the consummation of the
transactions contemplated hereby or thereby will not, in any material respect,
violate, conflict with, or result in a material breach of any provision of, or
constitute a material default (with or without notice or lapse of time or both)
under, or result in the termination or modification of, or accelerate the
performance required by, or result in a right of termination, cancellation, or
acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any material lien, security interest, charge or
encumbrance ("Liens") upon any of the properties or assets of CIPSCO or any of
the CIPSCO Subsidiaries or CIPSCO Joint Ventures (any such violation, conflict,
breach, default, right of termination, modification, cancellation or
acceleration, loss or creation, a "Violation" with respect to CIPSCO, such term
when used in Article V having a correlative meaning with respect to Union
Electric)
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pursuant to any provisions of (i) the articles of incorporation, by-laws or
similar governing documents of CIPSCO or any of the CIPSCO Subsidiaries or the
CIPSCO Joint Ventures, (ii) subject to obtaining the CIPSCO Required Statutory
Approvals and the receipt of the CIPSCO Shareholders' Approval, any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority (as defined in Section 4.4(c))
applicable to CIPSCO or any of the CIPSCO Subsidiaries or the CIPSCO Joint
Ventures or any of their respective properties or assets or (iii) subject to
obtaining the third-party consents set forth in Section 4.4(b) of the CIPSCO
Disclosure Schedule (the "CIPSCO Required Consents") any material note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which CIPSCO or any of the CIPSCO Subsidiaries or CIPSCO Joint Ventures is a
party or by which it or any of its properties or assets may be bound or
affected.
(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any court, federal, state,
local or foreign governmental or regulatory body (including a stock exchange or
other self-regulatory body) or authority (each, a "Governmental Authority") is
necessary for the execution and delivery of this Agreement or the CIPSCO Stock
Option Agreement by CIPSCO or the consummation by CIPSCO of the transactions
contemplated hereby or thereby, except as described in Section 4.4(c) of the
CIPSCO Disclosure Schedule (the "CIPSCO Required Statutory Approvals", it being
understood that references in this Agreement to "obtaining" such CIPSCO Required
Statutory Approvals shall mean making such declarations, filings or
registrations; giving such notices; obtaining such authorizations, consents or
approvals; and having such waiting periods expire as are necessary to avoid a
violation of law).
(d) Compliance. Except as set forth in Section 4.4(d), Section 4.10 or
Section 4.11 of the CIPSCO Disclosure Schedule, or as disclosed in the CIPSCO
SEC Reports (as defined in Section 4.5) filed prior to the date hereof, neither
CIPSCO nor any of the CIPSCO Subsidiaries nor, to the knowledge of CIPSCO, any
CIPSCO Joint Venture is in material violation of, is under investigation with
respect to any material violation of, or has been given notice or been charged
with any material violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority.
Except as set forth in Section 4.4(d) of the CIPSCO Disclosure Schedule or in
Section 4.11 of the CIPSCO Disclosure Schedule, CIPSCO and the CIPSCO
Subsidiaries and
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CIPSCO Joint Ventures have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted in all material respects. Except as set forth
in Section 4.4(d) of the CIPSCO Disclosure Schedule, CIPSCO and each of the
CIPSCO Subsidiaries is not in material breach or violation of or in material
default in the performance or observance of any term or provision of, and no
event has occurred which, with lapse of time or action by a third party, could
result in a material default under, (i) its articles of incorporation or by-laws
or (ii) any material contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to which it
is a party or by which it is bound or to which any of its property is subject.
Section 4.5 Reports and Financial Statements. The filings required to be
made by CIPSCO and the CIPSCO Subsidiaries since January 1, 1990 under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the 1935 Act, the Federal
Power Act, as amended (the "Power Act"), the Atomic Energy Act of 1954, as
amended (the "Atomic Energy Act") and applicable state public utility laws and
regulations have been filed with the Securities and Exchange Commission (the
"SEC"), the Federal Energy Regulatory Commission (the "FERC"), the Nuclear
Regulatory Commission ("NRC") or the appropriate state public utilities
commission, as the case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their respective dates, in
all material respects with all applicable requirements of the appropriate
statute and the rules and regulations thereunder. CIPSCO has made available to
Union Electric a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by CIPSCO with the SEC since
January 1, 1992 (as such documents have since the time of their filing been
amended, the "CIPSCO SEC Reports"). As of their respective dates, the CIPSCO
SEC Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of CIPSCO included in the CIPSCO SEC Reports
(collectively, the "CIPSCO Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP") (except as may be indicated therein or in the notes thereto and
except with respect to unaudited statements as permitted by Form 10-Q of the
SEC) and fairly
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present the consolidated financial position of CIPSCO as of the dates thereof
and the consolidated results of its operations and cash flows for the periods
then ended. True, accurate and complete copies of the articles of incorporation
and by-laws of CIPSCO and of CIPS, as in effect on the date hereof, have been
made available to Union Electric.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
the CIPSCO SEC Reports filed prior to the date hereof or as set forth in Section
4.6 of the CIPSCO Disclosure Schedule, from December 31, 1994, CIPSCO and each
of the CIPSCO Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice and there has not been, and no
fact or condition exists which would have or, insofar as reasonably can be
foreseen, could have, a material adverse effect on the business, assets,
financial condition, results of operations or prospects of CIPSCO and its
subsidiaries taken as a whole (a "CIPSCO Material Adverse Effect").
Section 4.7 Litigation. Except as disclosed in the CIPSCO SEC Reports filed
prior to the date hereof or as set forth in Section 4.7, Section 4.9 or Section
4.11 of the CIPSCO Disclosure Schedule, (i) there are no material claims, suits,
actions or proceedings, pending or, to the knowledge of CIPSCO, threatened, nor
are there, to the knowledge of CIPSCO, any material investigations or reviews
pending or threatened against, relating to or affecting CIPSCO or any of the
CIPSCO Subsidiaries, (ii) there have not been any significant developments since
December 31, 1994 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews and (iii) there are no material
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
applicable to CIPSCO or any of the CIPSCO Subsidiaries.
Section 4.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of CIPSCO for inclusion
or incorporation by reference in (i) the registration statement on Form S-4 to
be filed with the SEC in connection with the issuance of shares of Company
Common Stock in the Mergers (the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the joint proxy
statement, in definitive form, relating to the meetings of Union Electric and
CIPSCO shareholders to be held in connection with the Merger (the "Proxy
Statement") will not,
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at the dates mailed to shareholders and at the times of the meetings of
shareholders to be held in connection with the Mergers, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Registration
Statement and the Proxy Statement, insofar as they relate to CIPSCO or any
CIPSCO Subsidiary, will comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder.
Section 4.9 Tax Matters. "Taxes", as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such
taxes. "Tax Return", as used in this Agreement, means a report, return or other
information required to be supplied to a governmental entity with respect to
Taxes including, where permitted or required, combined or consolidated returns
for any group of entities that includes CIPSCO or any of its subsidiaries, or
Union Electric or any of its subsidiaries, as the case may be.
Except as set forth in Section 4.9 of the CIPSCO Disclosure Schedule:
(a) Filing of Timely Tax Returns. CIPSCO and each of the CIPSCO
Subsidiaries have filed (or there has been filed on its behalf) all material Tax
Returns required to be filed by each of them under applicable law. All such Tax
Returns were and are in all material respects true, complete and correct and
filed on a timely basis.
(b) Payment of Taxes. CIPSCO and each of the CIPSCO Subsidiaries have,
within the time and in the manner prescribed by law, paid all Taxes that are
currently due and payable except for those contested in good faith and for which
adequate reserves have been taken.
(c) Deferred Taxes. CIPSCO and the CIPSCO Subsidiaries have accounted for
deferred income taxes in accordance with GAAP.
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(d) Tax Liens. There are no Tax liens upon the assets of CIPSCO or any of
the CIPSCO Subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. CIPSCO and each of the CIPSCO Subsidiaries have
complied in all material respects with the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), relating to the withholding of Taxes, as
well as similar provisions under any other laws, and have, within the time and
in the manner prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither CIPSCO nor any of
the CIPSCO Subsidiaries has requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Neither CIPSCO nor any of the CIPSCO
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The statute of limitations for
the assessment of all Taxes has expired for all applicable Tax Returns of CIPSCO
and each of the CIPSCO Subsidiaries or those Tax Returns have been examined by
the appropriate taxing authorities for all periods through the date hereof, and
no deficiency for any Taxes has been proposed, asserted or assessed against
CIPSCO or any of the CIPSCO Subsidiaries that has not been resolved and paid in
full.
(i) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of CIPSCO or any of the CIPSCO Subsidiaries.
(j) Powers of Attorney. No power of attorney currently in force has been
granted by CIPSCO or any of the CIPSCO Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Neither CIPSCO nor any of the CIPSCO Subsidiaries has
received a Tax Ruling (as defined below) or entered into a Closing Agreement (as
defined below) with any taxing authority that would have a continuing adverse
effect after the Closing Date. "Tax Ruling", as used in this Agreement, shall
mean a written ruling of a taxing authority relating to Taxes. "Closing
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Agreement", as used in this Agreement, shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
(l) Availability of Tax Returns. CIPSCO has made available to Union
Electric complete and accurate copies of (i) all Tax Returns, and any amendments
thereto, filed by CIPSCO or any of the CIPSCO Subsidiaries since January 1,
1992, (ii) all audit reports received from any taxing authority relating to any
Tax Return filed by CIPSCO or any of the CIPSCO Subsidiaries and (iii) any
Closing Agreements entered into by CIPSCO or any of the CIPSCO Subsidiaries with
any taxing authority.
(m) Tax Sharing Agreements. Neither CIPSCO nor any CIPSCO Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(n) Code Section 280G. Neither CIPSCO nor any of the CIPSCO Subsidiaries is
a party to any agreement, contract or arrangement that could result, on account
of the transactions contemplated hereunder, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(o) Liability for Others. Neither CIPSCO nor any of the CIPSCO Subsidiaries
has any liability for Taxes of any person other than CIPSCO and the CIPSCO
Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor, (ii) by
contract or (iii) otherwise.
Section 4.10 Employee Matters; ERISA. Except as set forth in Section 4.10
of the CIPSCO Disclosure Schedule:
(a) Benefit Plans. Section 4.10(a) of the CIPSCO Disclosure Schedule
contains a true and complete list of each employee benefit plan covering
employees, former employees, directors or former directors of CIPSCO and each of
the CIPSCO Subsidiaries or their beneficiaries, or providing benefits to such
persons in respect of services provided to any such entity, including, but not
limited to, any employee benefit plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
severance or change in control agreement (collectively, the "CIPSCO Benefit
Plans"). No CIPSCO Benefit Plan is a "multiemployer plan" as defined in Section
3(37) of ERISA.
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(b) Contributions. All material contributions and other payments required
to be made for any period through the date to which this representation speaks,
by CIPSCO or any of the CIPSCO Subsidiaries to any CIPSCO Benefit Plan (or to
any person pursuant to the terms thereof) have been timely made or paid in full,
or, to the extent not required to be made or paid on or before the date to which
this representation speaks, have been reflected in the CIPSCO Financial
Statements.
(c) Qualification; Compliance. Each of the CIPSCO Benefit Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified or an
application for such a determination, which was filed before the expiration of
the applicable remedial amendment period, is pending, and, to the best knowledge
of CIPSCO, no circumstances exist that are reasonably expected by CIPSCO to
result in the revocation of any such determination. CIPSCO and each of its
subsidiaries is in compliance in all material respects with, and each of the
CIPSCO Benefit Plans is and has been operated in all material respects in
compliance with, all applicable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code. Each CIPSCO Benefit Plan
intended to provide for the deferral of income, the reduction of salary or other
compensation, or to afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code or other laws, rules and
regulations required to provide such income tax benefits. There are no pending
or, to the knowledge of CIPSCO, threatened or anticipated claims under or in
respect of any CIPSCO Benefit Plan by or on behalf of any employee, former
employee, director, former director, or beneficiary thereof, or otherwise
involving any CIPSCO Benefit Plan (other than routine claims for benefits).
(d) Liabilities. With respect to the CIPSCO Benefit Plans, individually and
in the aggregate, no event has occurred, and, to the best knowledge of CIPSCO,
there does not now exist any condition or set of circumstances, that could
subject CIPSCO or any of the CIPSCO Subsidiaries to any material liability
arising under the Code, ERISA or any other applicable law (including, without
limitation, any liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity agreement to which CIPSCO or
any subsidiary thereof is a party, excluding liability for benefit claims,
administrative expenses and funding obligations payable in the ordinary course.
No event has occurred, and, to the best
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knowledge of CIPSCO, there does not now exist any condition or set of
circumstances, that could give rise to any material liability of CIPSCO or any
ERISA Affiliate (as hereinafter defined) of CIPSCO under (i) Title IV of ERISA
(other than for PBGC premium payments), (ii) Section 302 of ERISA, (iii)
Sections 412 and 4971 of the Code, or (iv) the continuation coverage
requirements of section 601 et seq. of ERISA and Section 4980B of the Code
(other than the payment of benefits required thereby), that would be a liability
of the Company or any of its ERISA Affiliates following the Closing. The term
"ERISA Affiliate" means, with respect to any entity, trade or business, any
other entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the first entity, trade or business, or that is a member of the same "controlled
group" as the first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA or other applicable laws.
(e) Welfare Plans. Except as set forth in the CIPSCO Financial Statements,
none of the CIPSCO Benefit Plans that are "welfare plans", within the meaning of
Section 3(1) of ERISA, provides for any retiree benefits, other than
continuation coverage required to be provided under Section 4980B of the Code or
Part 6 of Title I of ERISA or other applicable laws.
(f) Documents Made Available. CIPSCO has made available to Union Electric a
true and correct copy of each collective bargaining agreement to which CIPSCO or
any of the CIPSCO Subsidiaries is a party or under which CIPSCO or any of the
CIPSCO Subsidiaries has obligations and, with respect to each CIPSCO Benefit
Plan, where applicable, (i) such plan and the most recent summary plan
description, (ii) the most recent annual report filed with the IRS, (iii) each
related trust agreement, insurance contract, service provider or investment
management agreement (including all amendments to each such document), (iv) the
most recent determination of the IRS with respect to the qualified status of
such CIPSCO Benefit Plan, and (v) the most recent actuarial report or valuation.
(g) Payments Resulting from the Merger. (i) The consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (A) payment (whether of severance pay or otherwise) becoming due from
CIPSCO or any of the
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CIPSCO Subsidiaries to any officer, employee, former employee, director or
former director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any CIPSCO Benefit Plan being established or
becoming accelerated, vested or payable and (ii) neither CIPSCO nor any of the
CIPSCO Subsidiaries is a party to (A) any management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus or other contract for personal services with any
officer, director or employee, (B) any consulting contract with any person who
prior to entering into such contract was a director or officer of CIPSCO, or (C)
any plan, agreement, arrangement or understanding similar to any of the
foregoing.
(h) Labor Agreements. As of the date hereof, neither CIPSCO nor any of the
CIPSCO Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or labor organization. To the best knowledge of
CIPSCO, as of the date hereof, there is no current union representation question
involving employees of CIPSCO or any of the CIPSCO Subsidiaries, nor does CIPSCO
know of any activity or proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees. Except as disclosed
in the CIPSCO SEC Reports filed prior to the date hereof or in Section 4.10(h)
of the CIPSCO Disclosure Schedule, (i) there is no unfair labor practice,
employment discrimination or other material complaint against CIPSCO or any of
the CIPSCO Subsidiaries pending or, to the best knowledge of CIPSCO, threatened,
(ii) there is no strike or lockout or material dispute, slowdown or work
stoppage pending, or to the best knowledge of CIPSCO, threatened, against or
involving CIPSCO, and (iii) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the best knowledge of CIPSCO,
threatened, in respect of which any director, officer, employee or agent of
CIPSCO or any of the CIPSCO Subsidiaries is or may be entitled to claim
indemnification from CIPSCO or such CIPSCO Subsidiary pursuant to their
respective articles of incorporation or by-laws or as provided in the
indemnification agreements listed in Section 4.10(h) of the CIPSCO Disclosure
Schedule.
Section 4.11 Environmental Protection. Except as set forth in Section 4.11
of the CIPSCO Disclosure Schedule or in the CIPSCO SEC Reports filed prior to
the date hereof:
(a) Compliance. CIPSCO and each of the CIPSCO Subsidiaries is in material
compliance with all applicable
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Environmental Laws (as defined in Section 4.11(g)(ii)); and neither CIPSCO nor
any of the CIPSCO Subsidiaries has received any communication (written or oral)
from any person or Governmental Authority that alleges that CIPSCO or any of the
CIPSCO Subsidiaries is not in material compliance with applicable Environmental
Laws.
(b) Environmental Permits. CIPSCO and each of the CIPSCO Subsidiaries has
obtained or has applied for all material environmental, health and safety
permits and governmental authorizations (collectively, the "Environmental
Permits") necessary for the construction of their facilities or the conduct of
their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and CIPSCO and the CIPSCO Subsidiaries are in material
compliance with all terms and conditions of the Environmental Permits, and
CIPSCO reasonably believes that any transfer, renewal or reapplication for any
Environmental Permit required as a result of the Company Merger can be
accomplished in the ordinary course of business.
(c) Environmental Claims. To the best knowledge of CIPSCO, there is no
material Environmental Claim (as defined in Section 4.11(g)(i)) pending (i)
against CIPSCO or any of the CIPSCO Subsidiaries or CIPSCO Joint Ventures, or
(ii) against any real or personal property or operations which CIPSCO or any of
the CIPSCO Subsidiaries owns, leases or manages, in whole or in part.
(d) Releases. CIPSCO has no knowledge of any material Releases (as defined
in Section 4.11(g)(iv)) of any Hazardous Material (as defined in Section
4.11(g)(iii)) that would be reasonably likely to form the basis of any material
Environmental Claim against CIPSCO or any of the CIPSCO Subsidiaries.
(e) Predecessors. CIPSCO has no knowledge of any material Environmental
Claim pending or threatened, or of any Release of Hazardous Materials that would
be reasonably likely to form the basis of any material Environmental Claim, in
each case against any person or entity (including, without limitation, any
predecessor of CIPSCO or any of the CIPSCO Subsidiaries) whose liability CIPSCO
or any of the CIPSCO Subsidiaries has or may have retained or assumed either
contractually or by operation of law or against any real or personal property
which CIPSCO or any of the CIPSCO Subsidiaries formerly owned, leased or
managed, in whole or in part.
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(f) Disclosure. To CIPSCO's best knowledge, CIPSCO has disclosed to Union
Electric all material facts which CIPSCO reasonably believes form the basis of a
material Environmental Claim arising from (i) the cost of CIPSCO pollution
control equipment currently required or known to be required in the future; (ii)
the cost that CIPSCO reasonably expects to incur to comply with the requirements
of the Clean Air Act Amendments of 1990; (iii) current CIPSCO remediation costs
or CIPSCO remediation costs known to be required in the future (including,
without limitation, any payments to resolve any threatened or asserted
Environmental Claim for remediation costs); or (iv) any other environmental
matter affecting CIPSCO.
(g) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any person or entity (including any Governmental Authority) alleging
potential liability (including, without limitation, potential responsibility for
or liability for enforcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural-resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not owned,
operated, leased or managed by CIPSCO or any of the CIPSCO Subsidiaries or
CIPSCO Joint Ventures (for purposes of this Section 4.11), or by Union Electric
or any of the Union Electric Subsidiaries or Union Electric Joint Ventures (for
purposes of Section 5.11); or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law; or (C) any and all
claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local laws, rules
and regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or protection of human health as it relates to the environment
including, without limitation, laws and regulations relating to Releases or
threatened Releases of Hazardous Materials, or otherwise relating to
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the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls ("PCBs") in
regulated concentrations; and (b) any chemicals, materials or substances which
are now defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants", or words
of similar import, under any Environmental Law; and (c) any other chemical,
material, substance or waste, exposure to which is now prohibited, limited or
regulated under any Environmental Law in a jurisdiction in which CIPSCO or any
of the CIPSCO Subsidiaries or CIPSCO Joint Ventures operates (for purposes of
this Section 4.11) or in which Union Electric or any of the Union Electric
Subsidiaries or Union Electric Joint Ventures operates (for purposes of Section
5.11).
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
Section 4.12 Regulation as a Utility. CIPSCO is an exempt public
utility holding company under Section 3(a)(1) of the 1935 Act. CIPS is
regulated as a public utility in the State of Illinois and in no other state and
is an exempt public utility holding company under Sections 3(a)(1) and 3(a)(2)
of the 1935 Act. Except as set forth in the preceding sentence and in Section
4.12 of the CIPSCO Disclosure Schedule, neither CIPSCO nor any "subsidiary
company" or "affiliate" (as those terms are defined in the 1935 Act) of CIPSCO
is subject to regulation as a public utility or public service company (or
similar designation) by any other state in the United States or any foreign
country.
Section 4.13 Vote Required. The approval of the Merger by two-thirds
of the votes entitled to be cast by all holders of CIPSCO Common Stock (the
"CIPSCO Shareholders' Approval") is the only vote of the holders of any class or
series of the capital stock of CIPSCO or any of its subsidiaries required to
approve this Agreement, the Mergers and the other transactions contemplated
hereby.
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Section 4.14 Accounting Matters. Neither CIPSCO, any CIPSCO
Subsidiary nor, to CIPSCO's best knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the transactions to be effected
pursuant to this Agreement from being accounted for as a pooling of interests in
accordance with GAAP and applicable SEC regulations. As used in this Agreement
(except as specifically otherwise defined), the term "affiliate", except where
otherwise defined herein, shall mean, as to any person, any other person which
directly or indirectly controls, or is under common control with, or is
controlled by, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
Section 4.15 Non-applicability of Certain Illinois Law. Assuming the
representation and warranty of Union Electric made in Section 5.18 is correct,
and except as set forth in Section 4.15 of the CIPSCO Disclosure Schedule, none
of the business combination or fair price provisions of Sections 5/11.75 or
5/11.85 of the IBCL or any similar provisions of the IBCL (or, to the best
knowledge of CIPSCO, any other similar state statute) are applicable to the
transactions contemplated by this Agreement, including the granting of the
CIPSCO Stock Option pursuant to the CIPSCO Stock Option Agreement or the
exercise thereof.
Section 4.16 Opinion of Financial Advisor. CIPSCO has received the
oral opinion of Morgan Stanley & Co. Incorporated, to the effect that, as of
August 11, 1995, in light of the Union Electric Exchange Ratio, the CIPSCO
Exchange Ratio is fair from a financial point of view to the holders of CIPSCO
Common Stock.
Section 4.17 Insurance. Except as set forth in Section 4.17 of the
CIPSCO Disclosure Schedule, CIPSCO and each of the CIPSCO Subsidiaries is, and
has been continuously since January 1, 1990, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary in all material respects for companies conducting the business as
conducted by CIPSCO and the CIPSCO Subsidiaries during such time period. Except
as set forth in Section 4.17 of the CIPSCO Disclosure Schedule, neither CIPSCO
nor any of the CIPSCO Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of
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CIPSCO or any of the CIPSCO Subsidiaries. The insurance policies of CIPSCO and
each of the CIPSCO Subsidiaries are valid and enforceable policies in all
material respects.
Section 4.18 Ownership of Union Electric Common Stock. Except
pursuant to the terms of the Union Electric Stock Option Agreement and as set
forth in Section 4.18 of the CIPSCO Disclosure Schedule, CIPSCO does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of Union Electric Common Stock or Union Electric
Preferred Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UNION ELECTRIC
Union Electric represents and warrants to CIPSCO as follows:
Section 5.1 Organization and Qualification. Except as set forth in Section
5.1 of the Union Electric Disclosure Schedule (as defined in Section 7.6(i)),
each of Union Electric and each Union Electric Subsidiary (as defined below) is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has all requisite
corporate power and authority, and has been duly authorized by all necessary
approvals and orders to own, lease and operate its assets and properties to the
extent owned, leased and operated and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification necessary. As
used in this Agreement, the term: (a) "Union Electric Subsidiary" shall mean
those of the subsidiaries and general partnership interests of Union Electric
identified as Union Electric Subsidiaries in Section 5.2 of the Union Electric
Disclosure Schedule; and (b) "Union Electric Joint Venture" shall mean those of
the joint ventures of Union Electric or any Union Electric Subsidiary identified
as a Union Electric Joint Venture in Section 5.2 of the Union Electric
Disclosure Schedule.
Section 5.2 Subsidiaries. Section 5.2 of the Union Electric Disclosure
Schedule sets forth a description as of the date hereof of all subsidiaries and
joint ventures of Union Electric, including (a) the name of each such entity and
Union Electric's interest therein, and (b) as to each Union Electric Subsidiary
and Union Electric Joint Venture, a brief description of the principal line or
lines of business conducted by
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each such entity. Except as set forth in Section 5.2 of the Union Electric
Disclosure Schedule, none of the Union Electric Subsidiaries is a "public
utility company", a "holding company", a "subsidiary company" or an "affiliate"
of any public utility company within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8) or 2(a)(11) of the 1935 Act, respectively. Except as set forth in
Section 5.2 of the Union Electric Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Union Electric Subsidiary are
validly issued, fully paid, nonassessable and free of preemptive rights, and are
owned directly or indirectly by Union Electric free and clear of any liens,
claims, encumbrances, security interests, equities, charges and options of any
nature whatsoever and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Union Electric Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of its capital
stock or obligating it to grant, extend or enter into any such agreement or
commitment. With respect to the subsidiaries and joint ventures of Union
Electric that are not Union Electric Subsidiaries (the "Union Electric
Unrestricted Subsidiaries"): (i) except as set forth in Section 5.2 of the
Union Electric Disclosure Schedule, neither Union Electric nor any Union
Electric Subsidiary is liable for any obligations or liabilities of any Union
Electric Unrestricted Subsidiary; (ii) neither Union Electric nor any Union
Electric Subsidiary is obligated to make any loans or capital contributions to,
or to undertake any guarantees or other obligations with respect to, Union
Electric Unrestricted Subsidiaries, except for loans, capital contributions,
guarantees and other obligations not in excess of $20 million in the aggregate
to all such Union Electric Unrestricted Subsidiaries; and (iii) the aggregate
book value as of December 31, 1994, of Union Electric's investment in the Union
Electric Unrestricted Subsidiaries (other than Electric Energy, Inc., an
Illinois corporation) was not in excess of $10 million.
Section 5.3 Capitalization. The authorized capital stock of Union Electric
consists of 150,000,000 shares of Union Electric Common Stock, 25,000,000 shares
of Union Electric Preferred Stock and 7,500,000 shares of preference stock, par
value $1.00 per share ("Union Electric Preference Stock"). As of the close of
business on August 11, 1995, there were issued and outstanding 102,123,834
shares of Union Electric Common Stock, 3,434,596 shares of Union Electric
Preferred Stock and
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no shares of Union Electric Preference Stock. All of the issued and outstanding
shares of the capital stock of Union Electric are, and any shares of Union
Electric Common Stock issued pursuant to the Union Electric Stock Option
Agreement will be, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 5.3 of the Union Electric
Disclosure Schedule, as of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating Union Electric or any of the Union
Electric Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of Union Electric, or
obligating Union Electric to grant, extend or enter into any such agreement or
commitment, other than under the Union Electric Stock Option Agreement. Other
than in connection with the Union Electric Stock Option, there are no
outstanding stock appreciation rights of Union Electric which were not granted
in tandem with a related stock option and no outstanding limited stock
appreciation rights or other rights to redeem for cash options or warrants of
Union Electric.
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. Union Electric has all requisite corporate power and
authority to enter into this Agreement and the Union Electric Stock Option
Agreement, and, subject to the applicable Union Electric Shareholders' Approval
(as defined in Section 5.13) and the applicable Union Electric Required
Statutory Approvals (as defined in Section 5.4(c)), to consummate the
transactions contemplated hereby or thereby. The execution and delivery of this
Agreement and the Union Electric Stock Option Agreement and the consummation by
Union Electric of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of Union Electric,
subject, in the case of this Agreement, to obtaining the applicable Union
Electric Shareholders' Approval. Each of this Agreement and the Union Electric
Stock Option Agreement has been duly and validly executed and delivered by Union
Electric and, assuming the due authorization, execution and delivery hereof and
thereof by the other signatories hereto and thereto, constitutes the valid and
binding obligation of Union Electric enforceable against it in accordance with
its terms.
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(b) Non-Contravention. Except as set forth in Section 5.4(b) of the Union
Electric Disclosure Schedule, the execution and delivery of this Agreement and
the Union Electric Stock Option Agreement by Union Electric does not, and the
consummation of the transactions contemplated hereby or thereby will not, result
in a material Violation pursuant to any provisions of (i) the articles of
incorporation, by-laws or similar governing documents of Union Electric or any
of the Union Electric Subsidiaries or the Union Electric Joint Ventures, (ii)
subject to obtaining the Union Electric Required Statutory Approvals and the
receipt of the Union Electric Shareholders' Approval, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to Union Electric or any of
the Union Electric Subsidiaries or the Union Electric Joint Ventures or any of
their respective properties or assets or (iii) subject to obtaining the third-
party consents set forth in Section 5.4(b) of the Union Electric Disclosure
Schedule (the "Union Electric Required Consents"), any material note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which Union Electric or any of the Union Electric Subsidiaries or Union Electric
Joint Ventures is a party or by which it or any of its properties or assets may
be bound or affected.
(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement or the Union
Electric Stock Option Agreement by Union Electric or the consummation by Union
Electric of the transactions contemplated hereby, except as described in Section
5.4(c) of the Union Electric Disclosure Schedule (the "Union Electric Required
Statutory Approvals", it being understood that references in this Agreement to
"obtaining" such Union Electric Required Statutory Approvals shall mean making
such declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section 5.4(d), Section 5.10 or
Section 5.11 of the Union Electric Disclosure Schedule, or as disclosed in the
Union Electric SEC Reports (as defined in Section 5.5) filed prior to the date
hereof, neither Union Electric nor any of the Union Electric Subsidiaries nor,
to the knowledge of Union Electric, any Union Electric Joint Venture, is in
material violation of, is under investigation with respect to any material
violation of, or has been given notice or been charged with any material
violation
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of, any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law, ordinance or regulation)
of any Governmental Authority. Except as set forth in Section 5.4(d) of the
Union Electric Disclosure Schedule or in Section 5.11 of the Union Electric
Disclosure Schedule, Union Electric and the Union Electric Subsidiaries and
Union Electric Joint Ventures have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted in all material respects. Except as set forth
in Section 5.4(d) of the Union Electric Disclosure Schedule, Union Electric and
each of the Union Electric Subsidiaries is not in material breach or violation
of or in material default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a material default under, (i) its articles of
incorporation or by-laws or (ii) any material contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which it is a party or by which it is bound or to which any
of its property is subject.
Section 5.5 Reports and Financial Statements. The filings required to be
made by Union Electric and the Union Electric Subsidiaries since January 1, 1990
under the Securities Act, the Exchange Act, the 1935 Act, the Power Act, the
Atomic Energy Act and applicable state public utility laws and regulations have
been filed with the SEC, the FERC, the NRC or the appropriate state public
utilities commission, as the case may be, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits, amendments
and supplements appertaining thereto, and complied, as of their respective
dates, in all material respects with all applicable requirements of the
appropriate statute and the rules and regulations thereunder. Union Electric
has made available to CIPSCO a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by Union Electric
with the SEC since January 1, 1992 (as such documents have since the time of
their filing been amended, the "Union Electric SEC Reports"). As of their
respective dates, the Union Electric SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of Union Electric included
in the Union Electric SEC Reports (collectively, the "Union Electric Financial
Statements") have been prepared in accordance with GAAP (except as may be
indicated therein or in the notes
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thereto and except with respect to unaudited statements as permitted by Form 10-
Q of the SEC) and fairly present the financial position of Union Electric as of
the dates thereof and the results of its operations and cash flows for the
periods then ended. True, accurate and complete copies of Union Electric's
Restated Articles of Incorporation and by-laws of Union Electric as in effect on
the date hereof have been made available to CIPSCO.
Section 5.6 Absence of Certain Changes or Events. Except as disclosed in
the Union Electric SEC Reports filed prior to the date hereof or as set forth in
Section 5.6 of the Union Electric Disclosure Schedule, from December 31, 1994,
Union Electric and each of the Union Electric Subsidiaries have conducted their
business only in the ordinary course of business consistent with past practice
and there has not been, and no fact or condition exists which would have or,
insofar as reasonably can be foreseen, could have, a material adverse effect on
the business, assets, financial condition, results of operations or prospects of
Union Electric and its subsidiaries taken as a whole (an "Union Electric
Material Adverse Effect").
Section 5.7 Litigation. Except as disclosed in the Union Electric SEC
Reports filed prior to the date hereof or as set forth in Section 5.7, Section
5.9 or Section 5.11 of the Union Electric Disclosure Schedule, (i) there are no
material claims, suits, actions or proceedings, pending or, to the knowledge of
Union Electric, threatened, nor are there, to the knowledge of Union Electric,
any material investigations or reviews pending or threatened against, relating
to or affecting Union Electric or any of the Union Electric Subsidiaries, (ii)
there have not been any significant developments since December 31, 1994 with
respect to such disclosed claims, suits, actions, proceedings, investigations or
reviews and (iii) there are no material judgments, decrees, injunctions, rules
or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to Union Electric or
any of the Union Electric Subsidiaries.
Section 5.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of Union Electric for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Proxy
Statement will not, at the dates mailed to shareholders and at the times of the
meetings of shareholders to be held in connection
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with the Mergers, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement and the Proxy Statement,
insofar as they relate to Union Electric or any Union Electric Subsidiary, will
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Section 5.9 Tax Matters. Except as set forth in Section 5.9 of the Union
Electric Disclosure Schedule:
(a) Filing of Timely Tax Returns. Union Electric and each of the Union
Electric Subsidiaries have filed (or there has been filed on its behalf) all
material Tax Returns required to be filed by each of them under applicable law.
All such Tax Returns were and are in all material respects true, complete and
correct and filed on a timely basis.
(b) Payment of Taxes. Union Electric and each of the Union Electric
Subsidiaries have, within the time and in the manner prescribed by law, paid all
Taxes that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken.
(c) Deferred Income Taxes. Union Electric and the Union Electric
Subsidiaries have accounted for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of Union Electric or
any of the Union Electric Subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. Union Electric and each of the Union Electric
Subsidiaries have complied in all material respects with the provisions of the
Code relating to the withholding of Taxes, as well as similar provisions under
any other laws, and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither Union Electric nor
any of the Union Electric Subsidiaries has requested any extension of time
within which to file any Tax Return, which Tax Return has not since been filed.
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(g) Waivers of Statute of Limitations. Neither Union Electric nor any of
the Union Electric Subsidiaries has executed any outstanding waivers or
comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The statute of limitations for
the assessment of all Taxes has expired for all applicable Tax Returns of Union
Electric and each of the Union Electric Subsidiaries or those Tax Returns have
been examined by the appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any Taxes has been proposed, asserted or
assessed against Union Electric or any of the Union Electric Subsidiaries that
has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Union Electric or any of the Union
Electric Subsidiaries.
(j) Powers of Attorney. No power of attorney currently in force has been
granted by Union Electric or any of the Union Electric Subsidiaries concerning
any Tax matter.
(k) Tax Rulings. Neither Union Electric nor any of the Union Electric
Subsidiaries has received a Tax Ruling or entered into a Closing Agreement with
any taxing authority that would have a continuing adverse effect after the
Closing Date.
(l) Availability of Tax Returns. Union Electric has made available to
CIPSCO complete and accurate copies of (i) all Tax Returns, and any amendments
thereto, filed by Union Electric or any of the Union Electric Subsidiaries since
January 1, 1992, (ii) all audit reports received from any taxing authority
relating to any Tax Return filed by Union Electric or any of the Union Electric
Subsidiaries and (iii) any Closing Agreements entered into by Union Electric or
any of the Union Electric Subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Neither Union Electric nor any Union Electric
Subsidiary is a party to any agreement relating to allocating or sharing of
Taxes.
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(n) Code Section 280G. Neither Union Electric nor any of the Union Electric
Subsidiaries is a party to any agreement, contract, or arrangement that could
result, on account of the transactions contemplated hereunder, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(o) Liability for Others. Neither Union Electric nor any of the Union
Electric Subsidiaries has any liability for Taxes of any person other than Union
Electric and the Union Electric Subsidiaries (i) under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor, (ii) by contract, or (iii) otherwise.
Section 5.10 Employee Matters; ERISA. Except as set forth in Section 5.10
of the Union Electric Disclosure Schedule:
(a) Benefit Plans. Section 5.10(a) of the Union Electric Disclosure
Schedule contains a true and complete list of each employee benefit plan
covering employees, former employees, directors or former directors of Union
Electric and each of the Union Electric Subsidiaries or their beneficiaries, or
providing benefits to such persons in respect of services provided to any such
entity, including, but not limited to, any employee benefit plans within the
meaning of Section 3(3) of ERISA and any severance or change in control
agreement (collectively, the "Union Electric Benefit Plans"). No Union Electric
Benefit Plan is a "multiemployer plan" as defined in Section 3(37) of ERISA.
(b) Contributions. All material contributions and other payments required
to be made for any period through the date to which this representation speaks,
by Union Electric or any of the Union Electric Subsidiaries to any Union
Electric Benefit Plan (or to any person pursuant to the terms thereof) have been
timely made or paid in full, or, to the extent not required to be made or paid
on or before the date to which this representation speaks, have been reflected
in the Union Electric Financial Statements.
(c) Qualification; Compliance. Each of the Union Electric Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so qualified or an application for
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such a determination, which was filed before the expiration of the applicable
remedial amendment period, is pending, and, to the best knowledge of Union
Electric, no circumstances exist that are reasonably expected by Union Electric
to result in the revocation of any such determination. Union Electric and each
of its subsidiaries is in compliance in all material respects with, and each of
the Union Electric Benefit Plans is and has been operated in all material
respects in compliance with, all applicable laws, rules and regulations
governing such plan, including, without limitation, ERISA and the Code. Each
Union Electric Benefit Plan intended to provide for the deferral of income, the
reduction of salary or other compensation, or to afford other income tax
benefits, complies with the requirements of the applicable provisions of the
Code or other laws, rules and regulations required to provide such income tax
benefits. There are no pending or, to the knowledge of Union Electric,
threatened or anticipated claims under or in respect of any Union Electric
Benefit Plan by or on behalf of any employee, former employee, director, former
director, or beneficiary thereof, or otherwise involving any Union Electric
Benefit Plan (other than routine claims for benefits).
(d) Liabilities. With respect to the Union Electric Benefit Plans,
individually and in the aggregate, no event has occurred, and, to the best
knowledge of Union Electric, there does not now exist any condition or set of
circumstances, that could subject Union Electric or any of the Union Electric
Subsidiaries to any material liability arising under the Code, ERISA or any
other applicable law (including, without limitation, any liability to any such
plan or the PBGC), or under any indemnity agreement to which Union Electric or
any subsidiary thereof is a party, excluding liability for benefit claims,
administrative expenses and funding obligations payable in the ordinary course.
No event has occurred, and, to the best knowledge of Union Electric, there does
not now exist any condition or set of circumstances, that could give rise to any
material liability of Union Electric or any ERISA Affiliate of Union Electric
under (i) Title IV of ERISA (other than for PBGC premium payments), (ii) Section
302 of ERISA, (iii) Sections 412 and 4971 of the Code, or (iv) the continuation
coverage requirements of Section 601 et seq. of ERISA and section 4980B of the
Code (other than for the payment of benefits required thereby), that would be a
liability of the Company or any of its ERISA Affiliates following the Closing.
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(e) Welfare Plans. Except as set forth in the Union Electric Financial
Statements, none of the Union Electric Benefit Plans that are "welfare plans",
within the meaning of Section 3(1) of ERISA, provides for any retiree benefits,
other than continuation coverage required to be provided under Section 4980B of
the Code or Part 6 of Title I of ERISA or other applicable laws.
(f) Documents Made Available. Union Electric has made available to CIPSCO a
true and correct copy of each collective bargaining agreement to which Union
Electric or any of the Union Electric Subsidiaries is a party or under which
Union Electric or any of the Union Electric Subsidiaries has obligations and,
with respect to each Union Electric Benefit Plan, where applicable, (i) such
plan and the most recent summary plan description, (ii) the most recent annual
report filed with the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management agreement (including all
amendments to each such document), (iv) the most recent determination of the IRS
with respect to the qualified status of such Union Electric Benefit Plan, and
(v) the most recent actuarial report or valuation.
(g) Payments Resulting from Merger. (i) The consummation or announcement
of any transaction contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or further acts or events) result in any (A)
payment (whether of severance pay or otherwise) becoming due from Union Electric
or any of the Union Electric Subsidiaries to any officer, employee, former
employee, director or former director thereof or to the trustee under any "rabbi
trust" or similar arrangement, or (B) benefit under any Union Electric Benefit
Plan being established or becoming accelerated, vested or payable and (ii)
neither Union Electric nor any of the Union Electric Subsidiaries is a party to
(A) any management, employment, deferred compensation, severance (including any
payment, right or benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or employee, (B) any
consulting contract with any person who prior to entering into such contract was
a director or officer of Union Electric, or (C) any plan, agreement, arrangement
or understanding similar to any of the foregoing.
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(h) Labor Agreements. As of the date hereof, neither Union Electric nor any
of the Union Electric Subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor organization. To the
best knowledge of Union Electric, as of the date hereof, there is no current
union representation question involving employees of Union Electric or any of
the Union Electric Subsidiaries, nor does Union Electric know of any activity or
proceeding of any labor organization (or representative thereof) or employee
group to organize any such employees. Except as disclosed in the Union Electric
SEC Reports filed prior to the date hereof or in Section 5.10(h) of the Union
Electric Disclosure Schedule, (i) there is no unfair labor practice, employment
discrimination or other material complaint against Union Electric or any of the
Union Electric Subsidiaries pending or, to the best knowledge of Union Electric,
threatened, (ii) there is no strike, or lockout or material dispute, slowdown or
work stoppage pending, or to the best knowledge of Union Electric, threatened,
against or involving Union Electric, and (iii) there is no proceeding, claim,
suit, action or governmental investigation pending or, to the best knowledge of
Union Electric, threatened, in respect of which any director, officer, employee
or agent of Union Electric or any of the Union Electric Subsidiaries is or may
be entitled to claim indemnification from Union Electric or such Union Electric
Subsidiary pursuant to their respective articles of incorporation or by-laws or
as provided in the indemnification agreements listed in Section 5.10(h) of the
Union Electric Disclosure Schedule.
Section 5.11 Environmental Protection. Except as set forth in Section 5.11
of the Union Electric Disclosure Schedule or in the Union Electric SEC Reports
filed prior to the date hereof:
(a) Compliance. Union Electric and each of the Union Electric Subsidiaries
is in material compliance with all applicable Environmental Laws; and neither
Union Electric nor any of the Union Electric Subsidiaries has received any
communication (written or oral) from any person or Governmental Authority that
alleges that Union Electric or any of the Union Electric Subsidiaries is not in
material compliance with applicable Environmental Laws.
(b) Environmental Permits. Union Electric and each of the Union Electric
Subsidiaries has obtained or has applied for all the Environmental Permits
necessary for the construction of their facilities or the conduct of
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their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and Union Electric and the Union Electric Subsidiaries are in
material compliance with all terms and conditions of the Environmental Permits,
and Union Electric reasonably believes that any transfer, renewal or
reapplication for any Environmental Permit required as a result of the Union
Electric Merger can be accomplished in the ordinary course of business.
(c) Environmental Claims. To the best knowledge of Union Electric, there is
no material Environmental Claim pending (i) against Union Electric or any of the
Union Electric Subsidiaries or Union Electric Joint Ventures, or (ii) against
any real or personal property or operations which Union Electric or any of the
Union Electric Subsidiaries owns, leases or manages, in whole or in part.
(d) Releases. Union Electric has no knowledge of any material Releases of
any Hazardous Material that would be reasonably likely to form the basis of any
material Environmental Claim against Union Electric or any of the Union Electric
Subsidiaries.
(e) Predecessors. Union Electric has no knowledge of any material
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any material
Environmental Claim, in each case against any person or entity (including,
without limitation, any predecessor of Union Electric or any of the Union
Electric Subsidiaries) whose liability Union Electric or any of the Union
Electric Subsidiaries has or may have retained or assumed either contractually
or by operation of law or against any real or personal property which Union
Electric or any of the Union Electric Subsidiaries formerly owned, leased or
managed, in whole or in part.
(f) Disclosure. To Union Electric's best knowledge, Union Electric has
disclosed to CIPSCO all material facts which Union Electric reasonably believes
form the basis of a material Environmental Claim arising from (i) the cost of
Union Electric pollution control equipment currently required or known to be
required in the future; (ii) the cost that Union Electric reasonably expects to
incur to comply with the requirements of the Clean Air Act Amendments of 1990;
(iii) current Union Electric remediation costs or Union Electric remediation
costs known to be required in the future (including, without limitation, any
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payments to resolve any threatened or asserted Environmental Claim for
remediation costs); or (iv) any other environmental matter affecting Union
Electric.
Section 5.12 Regulation as a Utility. Union Electric is regulated as a
public utility in the States of Missouri and Illinois and in no other state.
Neither Union Electric nor any "subsidiary company" or "affiliate" of Union
Electric is subject to regulation as a public utility or public service company
(or similar designation) by any other state in the United States or any foreign
country.
Section 5.13 Vote Required. The approval of the Mergers by two-thirds of
the votes entitled to be cast by the holders of the shares of Union Electric
Common Stock and Union Electric Preferred Stock, voting together as a single
class (the "Union Electric Shareholders' Approval"), is the only vote of the
holders of any class or series of the capital stock of Union Electric or any of
its subsidiaries required to approve this Agreement, the Mergers and the other
transactions contemplated hereby.
Section 5.14 Accounting Matters. Neither Union Electric nor, to Union
Electric's best knowledge, any of its affiliates has taken or agreed to take any
action that would prevent the Company from accounting for the transactions to be
effected pursuant to this Agreement as a pooling of interests in accordance with
GAAP and applicable SEC regulations.
Section 5.15 Non-applicability of Certain Missouri Law. Assuming that the
representation and warranty of CIPSCO made in Section 4.18 is correct, and
except as set forth in Section 5.15 of the Union Electric Disclosure Schedule,
none of the control share acquisition provisions of Sections 351.407 and 351.015
of the MGBCL or the business combination provisions of Section 351.459 of the
MGBCL or any similar provisions of the MGBCL (or, to the best knowledge of Union
Electric, any other similar state statute) are applicable to the transactions
contemplated by this Agreement including the granting of the Union Electric
Stock Option pursuant to the Union Electric Stock Option Agreement or the
exercise thereof.
Section 5.16 Opinion of Financial Advisor. Union Electric has received the
oral opinion of Goldman, Sachs & Co. to, the effect that, as of August 11, 1995,
the Exchange Ratios are fair from a financial point of view to the holders of
Union Electric Common Stock.
Section 5.17 Insurance. Except as set forth in Section 5.17 of the Union
Electric Disclosure Schedule, Union
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Electric and each of the Union Electric Subsidiaries is, and has been
continuously since January 1, 1990, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business as conducted by
Union Electric and the Union Electric Subsidiaries during such time period.
Except as set forth in Section 5.17 of the Union Electric Disclosure Schedule,
neither Union Electric nor any of the Union Electric Subsidiaries has received
any notice of cancellation or termination with respect to any material insurance
policy of Union Electric or any of the Union Electric Subsidiaries. The
insurance policies of Union Electric and each of the Union Electric Subsidiaries
are valid and enforceable policies in all material respects.
Section 5.18 Ownership of CIPSCO Common Stock. Except pursuant to the terms
of the CIPSCO Stock Option Agreement, Union Electric does not "beneficially own"
(as such term is defined for purposes of Section 13(d) of the Exchange Act) any
shares of CIPSCO Common Stock.
Section 5.19. Operations of Nuclear Power Plant. Except as set forth in
Section 5.18 of the Union Electric Disclosure Schedule, the operations of the
nuclear power facility owned by Union Electric ("Callaway") have at all times
been conducted in material compliance with applicable health, safety, regulatory
and other legal requirements. Union Electric maintains emergency plans designed
to respond to an unplanned release from Callaway of radioactive materials into
the environment. Union Electric currently maintains (i) customary liability
insurance consistent with industry practice and consistent with Union Electric's
view of the risks inherent to the operation of a nuclear power facility and (ii)
plans for the decommissioning of Callaway and for the short-term storage of
spent nuclear fuel, which plans have at all times been funded consistent with
budget projections for such plans.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of the Parties. After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, Union Electric and
CIPSCO each agree as follows, each as to itself and to each of the Union
Electric Subsidiaries and the CIPSCO Subsidiaries, as the case may be, except as
expressly contemplated or permitted in this Agreement, the Union Electric Stock
Option Agreement or the CIPSCO
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Stock Option Agreement, or to the extent the other parties hereto shall
otherwise consent in writing:
(a) Ordinary Course of Business. Each party hereto shall, and shall cause
its Direct Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to preserve intact their
present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and ongoing programs
currently in force, keep available the services of their present officers and
employees. Except as set forth in Section 6.1(a) of the Union Electric
Disclosure Schedule or the CIPSCO Disclosure Schedule, respectively, no party
shall, nor shall any party permit any of its Direct Subsidiaries to, enter into
a new line of business, or make any change in the line of business it engages in
as of the date hereof involving any material investment of assets or resources
or any material exposure to liability or loss, in the case of CIPSCO, to CIPSCO
and its subsidiaries taken as a whole, and in the case of Union Electric, to
Union Electric and its subsidiaries taken as a whole.
(b) Dividends. No party shall, nor shall any party permit any of its Direct
Subsidiaries to, (i) declare or pay any dividends on or make other distributions
in respect of any of their capital stock other than to such party or its wholly
owned subsidiaries, regular quarterly dividends on Union Electric Common Stock
with usual record and payment dates not, during any fiscal year, in excess of
104% of the dividends for the prior fiscal year, regular quarterly dividends on
Union Electric Preferred Stock with usual record and payment dates, regular
quarterly dividends on CIPSCO Common Stock with usual record and payment dates
not, during any fiscal year, in excess of 104% of the dividends for the prior
fiscal year and regular quarterly dividends on CIPS Preferred Stock with usual
record and payment dates; (ii) split, combine or reclassify any of their capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of their capital stock;
or (iii) redeem, repurchase or otherwise acquire any shares of their capital
stock, other than (A) in connection with refunding of CIPS Preferred Stock or
Union Electric Preferred Stock with preferred stock or debt at a lower cost of
funds (calculating such
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cost on an after-tax basis), (B) in connection with intercompany purchases of
capital stock or (C) for the purpose of funding the Union Electric Dividend
Reinvestment and Stock Purchase Plan, the CIPSCO Automatic Dividend Reinvestment
and Stock Purchase Plan, the CIPS Employee Long-Term Savings Plan, Employee
Long-Term Savings Plan IBEW-702, and Employee Long-Term Savings Plan IUOE-148
(the "CIPS 401(k) Plans"), the Union Electric Savings Investment Plan, and/or
the Union Electric Long-Term Incentive Plan of 1995 ("Union Electric LTIP").
The last record date of each of Union Electric and CIPSCO on or prior to the
Effective Time which relates to a regular quarterly dividend on Union Electric
Common Stock or CIPSCO Common Stock, as the case may be, shall be agreed to by
the parties in advance and shall be the same date and shall be prior to the
Effective Time.
(c) Issuance of Securities. No party shall, nor shall any party permit any
of its Direct Subsidiaries to, issue, agree to issue, deliver, sell, award,
pledge, dispose of or otherwise encumber or authorize or propose the issuance,
delivery, sale, award, pledge, disposal or other encumbrance of, any shares of
their capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or convertible or exchangeable securities, other than pursuant to the CIPSCO
Stock Option Agreement or the Union Electric Stock Option Agreement, other than
intercompany issuances of capital stock, and other than issuances (i) in the
case of CIPSCO and the CIPSCO Subsidiaries, in connection with refunding CIPS
Preferred Stock with preferred stock or debt at a lower cost of funds
(calculating such cost on an after-tax basis); and (ii), in the case of Union
Electric and the Union Electric Subsidiaries (x) in connection with refunding of
Union Electric Preferred Stock with preferred stock or debt at a lower cost of
funds (calculating such cost on an after-tax basis); and (y) up to 500,000
shares of Union Electric Common Stock to be issued pursuant to the Union
Electric Long-Term Incentive Plan of 1995. The parties shall promptly furnish
to each other such information as may be reasonably requested including
financial information and take such action as may be reasonably necessary and
otherwise fully cooperate with each other in the preparation of any registration
statement under the Securities Act and other documents necessary in connection
with issuance of securities as contemplated by this Section 6.1(c), subject to
obtaining customary indemnities.
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(d) Charter Documents. No party shall, and no party shall permit any of its
subsidiaries to, amend or propose to amend its respective articles of
incorporation, by-laws or regulations, or similar organic documents, except as
contemplated herein.
(e) No Acquisitions. Except as set forth in Section 6.1(bb) or 6.1(e) of
the CIPSCO Disclosure Schedule or the Union Electric Disclosure Schedule, other
than (i) acquisitions by CIPSCO and its Direct Subsidiaries not in excess of $15
million, singularly or in the aggregate and (ii) acquisitions by Union Electric
and its Direct Subsidiaries not in excess of $50 million, singularly or in the
aggregate, no party shall, nor shall any party permit any of its Direct
Subsidiaries to, acquire, or publicly propose to acquire, or agree to acquire,
by merger or consolidation with, or by purchase or otherwise, a substantial
equity interest in or a substantial portion of the assets of, any business or
any corporation, partnership, association or other business organization or
division thereof, nor shall any party acquire or agree to acquire a material
amount of assets other than in the ordinary course of business consistent with
past practice.
(f) Capital Expenditures and Emission Allowances. Except as set forth in
Section 6.1(f) of the CIPSCO Disclosure Schedule or the Union Electric
Disclosure Schedule or as required by law, no party shall, nor shall any party
permit any of its Direct Subsidiaries to, (i) (x) in the case of CIPSCO, make
capital expenditures in excess of $75 million over the amount budgeted by CIPSCO
or its Direct Subsidiaries for capital expenditures as set forth in such Section
6.1(f) of the CIPSCO Disclosure Schedule and (y) in the case of Union Electric,
make capital expenditures in excess of $200 million over the amount budgeted by
Union Electric or its Direct Subsidiaries for capital expenditures as set forth
in such Section 6.1(f) of the Union Electric Disclosure Schedule or (ii) enter
into written commitments for the purchase of sulfur dioxide emission allowances
as provided for by the Clean Air Act Amendments of 1990, (x) in the case of
CIPSCO, in excess of $15 million and (y) in the case of Union Electric, in
excess of $20 million, in each case singularly or in the aggregate.
(g) No Dispositions. Except as set forth in Section 6.1(g) of the CIPSCO
Disclosure Schedule or the Union Electric Disclosure Schedule, other than (i)
dispositions by CIPSCO and its Direct Subsidiaries of less than $15
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million, singularly or in the aggregate and (ii) dispositions by Union Electric
and its Direct Subsidiaries of less than $50 million, singularly or in the
aggregate, no party shall, nor shall any party permit any of its Direct
Subsidiaries to, sell, lease, license, encumber or otherwise dispose of, any of
its assets, other than encumbrances or dispositions in the ordinary course of
its business consistent with past practice.
(h) Indebtedness. Except as contemplated by this Agreement, no party shall,
nor shall any party permit any of its Direct Subsidiaries to, incur or guarantee
any indebtedness (including any debt borrowed or guaranteed or otherwise assumed
including, without limitation, the issuance of debt securities or warrants or
rights to acquire debt) or enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing other than (i)
short-term indebtedness in the ordinary course of business consistent with past
practice (such as the issuance of commercial paper or the use of existing credit
facilities); (ii) arrangements between such party and its Direct Subsidiaries or
among its Direct Subsidiaries; (iii) indebtedness in an amount not to exceed in
the aggregate $75 million, in the case of CIPSCO, and indebtedness in an amount
not to exceed in the aggregate $200 million, in the case of Union Electric; or
(iv) in connection with the refunding of existing indebtedness at a lower cost
of funds or the refunding of Preferred Stock as permitted by Section 6.1(b).
(i) Compensation, Benefits. Except as set forth in Section 6.1(i) of the
CIPSCO Disclosure Schedule or the Union Electric Disclosure Schedule, as may be
required by applicable law, as may be required to facilitate or obtain a
determination from the IRS that a plan is "qualified" within the meaning of
Section 401(a) of the Code or as contemplated by this Agreement, no party shall,
nor shall any party permit any of its Direct Subsidiaries to, (i) enter into,
adopt or amend or increase the amount or accelerate the payment or vesting of
any benefit or amount payable under, any employee benefit plan or other
contract, agreement, commitment, arrangement, plan or policy covering employees,
former employees, directors or former directors or their beneficiaries or
providing benefits to such persons that is maintained by, contributed to or
entered into by such party or any of its Direct Subsidiaries, or increase, or
enter into any contract, agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise to extend,
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expand or enhance the engagement, employment or any related rights of, or take
any other action or grant any benefit (including, without limitation, any stock
options or stock option plan) not required under the terms of any existing
employee benefit plan, or other contract, agreement, commitment, arrangement,
plan or policy to or with any director, officer or other employee of such party
or any of its Direct Subsidiaries, except for normal increases or grants or
actions in the ordinary course of business consistent with past practice that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to such party or any of its Direct Subsidiaries or (ii)
enter into or amend any employment, severance or special pay arrangement with
respect to the termination of employment or other similar contract, agreement or
arrangement with any director or officer or other employee other than in the
ordinary course of business consistent with current industry practice.
(j) 1935 Act. Except as set forth in Section 6.1(j) of the CIPSCO
Disclosure Schedule or Union Electric Disclosure Schedule, and except as
required or contemplated by this Agreement, no party shall, nor shall any party
permit any of its Direct Subsidiaries to, engage in any activities which would
cause a change in its status, or that of its subsidiaries, under the 1935 Act.
(k) Transmission, Generation. Except as permitted pursuant to Section
6.1(f) and except as required pursuant to tariffs on file with the FERC as of
the date hereof, in the ordinary course of business consistent with past
practice, or as set forth in Section 6.1(k) of the CIPSCO Disclosure Schedule or
the Union Electric Disclosure Schedule, no party shall, nor shall any party
permit any of its Direct Subsidiaries to, (i) commence construction of any
additional generating, transmission or delivery capacity, or (ii) obligate
itself to purchase or otherwise acquire, or to sell or otherwise dispose of, or
to share, any additional generating, transmission or delivery capacity owned by
Union Electric or CIPS except as set forth in the budgets of CIPSCO and Union
Electric.
(l) Accounting. Except as set forth in Section 6.1(l) of the CIPSCO
Disclosure Schedule or Union Electric Disclosure Schedule, no party shall, nor
shall any party permit any of its Direct Subsidiaries to, make any changes in
their accounting methods, except as required by law, rule, regulation or GAAP.
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(m) Pooling. No party shall, nor shall any party permit any of its
subsidiaries to, take any action which would, or would be reasonably likely to,
prevent the Company from accounting for the transactions to be effected pursuant
to this Agreement as a pooling of interests in accordance with GAAP and
applicable SEC regulations, and each party hereto shall use all reasonable
efforts to achieve such result (including taking such actions as may be
necessary to cure any facts or circumstances that could prevent such
transactions from qualifying for pooling-of-interests accounting treatment).
(n) Tax-Free Status. No party shall, nor shall any party permit any of its
subsidiaries to, take any actions which would, or would be reasonably likely to,
adversely affect the status of the Mergers as a tax-free transaction (except as
to dissenters' rights and fractional shares) under Section 368(a) of the Code,
and each party hereto shall use all reasonable efforts to achieve such result.
(o) Affiliate Transactions. Except as set forth in Section 6.1(o) of each
of the CIPSCO Disclosure Schedule or the Union Electric Disclosure Schedule, no
party shall, nor shall any party permit any of its Direct Subsidiaries to, enter
into any material agreement or arrangement with any of their respective
affiliates (other than wholly owned subsidiaries) on terms materially less
favorable to such party than could be reasonably expected to have been obtained
with an unaffiliated third party on an arm's-length basis.
(p) Cooperation, Notification. Each party shall, and shall cause its Direct
Subsidiaries to, (i) confer on a regular and frequent basis with one or more
representatives of the other party to discuss, subject to applicable law,
material operational matters and the general status of its ongoing operations;
(ii) promptly notify the other party of any significant changes in its business,
properties, assets, condition (financial or other), results of operations or
prospects; (iii) advise the other party of any change or event which has had or,
insofar as reasonably can be foreseen, is reasonably likely to result in, in the
case of CIPSCO, a CIPSCO Material Adverse Effect or, in the case of Union
Electric, a Union Electric Material Adverse Effect; and (iv) promptly provide
the other party with copies of all filings made by such party or any of its
Direct Subsidiaries with any state or federal court, administrative agency,
commission or other Governmental Authority in connection with this Agreement and
the transactions contemplated hereby.
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(q) Rate Matters. Each of CIPSCO and Union Electric shall, and shall cause
its Direct Subsidiaries to, discuss with the other any changes in its or its
Direct Subsidiaries' rates or charges (other than automatic cost pass-through
rate adjustment clauses), standards of service or accounting from those in
effect on the date hereof and consult with the other prior to making any filing
(or any amendment thereto), or effecting any agreement, commitment, arrangement
or consent with governmental regulators, whether written or oral, formal or
informal, with respect thereto, and no party will make any filing to change its
rates on file with the FERC that would have a material adverse effect on the
benefits associated with the business combination provided for herein.
(r) Third-Party Consents. CIPSCO shall, and shall cause its Direct
Subsidiaries to, use all commercially reasonable efforts to obtain all CIPSCO
Required Consents. CIPSCO shall promptly notify Union Electric of any failure
or prospective failure to obtain any such consents and, if requested by Union
Electric, shall provide copies of all CIPSCO Required Consents obtained by
CIPSCO to Union Electric. Union Electric shall, and shall cause its Direct
Subsidiaries to, use all commercially reasonable efforts to obtain all Union
Electric Required Consents. Union Electric shall promptly notify CIPSCO of any
failure or prospective failure to obtain any such consents and, if requested by
CIPSCO, shall provide copies of all Union Electric Required Consents obtained by
Union Electric to CIPSCO.
(s) No Breach, Etc. No party shall, nor shall any party permit any of its
Direct Subsidiaries to, willfully take any action that would or is reasonably
likely to result in a material breach of any provision of this Agreement, the
Union Electric Stock Option Agreement or the CIPSCO Stock Option Agreement, as
the case may be, or in any of its representations and warranties set forth in
this Agreement, the Union Electric Stock Option Agreement or the CIPSCO Stock
Option Agreement, as the case may be, being untrue on and as of the Closing
Date.
(t) Tax-Exempt Status. No party shall, nor shall any party permit any
Direct Subsidiary to, take any action that would likely jeopardize the
qualification of any outstanding revenue bonds of Union Electric, CIPSCO or of
their Direct Subsidiaries which qualify on the date hereof under Section 142(a)
of the Code as "exempt facility bonds" or as tax-exempt industrial development
bonds under
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Section 103(b)(4) of the Internal Revenue Code of 1954, as amended, prior to the
Tax Reform Act of 1986.
(u) Transition Management. As soon as practicable after the date hereof, the
parties shall create a special transition management task force (the "Task
Force"), the co-chairmen of which shall be Mr. Charles W. Mueller and Mr.
Clifford L. Greenwalt. The Task Force shall examine various alternatives
regarding the manner in which to best organize and manage the business of the
Company after the Effective Time, subject to applicable law. Mr. Charles W.
Mueller will manage and be responsible for the day-to-day activities and
operations of the Task Force. Each party will cause the Company to take only
those actions, from the date hereof until the Effective Time, that are required
or contemplated by this Agreement to be so taken by the Company, or as may
otherwise be mutually agreed upon.
(v) Tax Matters. Except as set forth in Section 6.1(v) of the CIPSCO
Disclosure Schedule or the Union Electric Disclosure Schedule, no party shall
make or rescind any material express or deemed election relating to taxes,
settle or compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of its federal income tax return
for the taxable year ending December 31, 1993, except as may be required by
applicable law.
(w) Discharge of Liabilities. No party shall pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
(which includes the payment of final and unappealable judgments) or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of such party included in such party's reports filed with the SEC, or
incurred in the ordinary course of business consistent with past practice.
(x) Contracts. No party shall, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail to use
reasonable business efforts to renew any material contract or agreement to which
such party or any Direct Subsidiary of such
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party is a party or waive, release or assign any material rights or claims.
(y) Insurance. Each party shall, and shall cause its Direct Subsidiaries to,
maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies engaged
in the electric and gas utility industry and employing methods of generating
electric power and fuel sources similar to those methods employed and fuels used
by such party or its Direct Subsidiaries.
(a) Permits. Each party shall, and shall cause its Direct Subsidiaries to,
use reasonable efforts to maintain in effect all existing governmental permits
pursuant to which such party or its Direct Subsidiaries operate.
(aa) Limitation on Investments in Unrestricted Subsidiaries. From and after
the date hereof, (i) except pursuant to Section 6.1(bb), CIPSCO will not make,
and will not permit any CIPSCO Subsidiary to make, any additional investments
in, or loans or capital contributions to, or to undertake any guarantees or
other obligations with respect to, any CIPSCO Unrestricted Subsidiary; and (ii)
Union Electric will not make, and will not permit any Union Electric Subsidiary
to make, any additional investments in, or loans or capital contributions to, or
to undertake any guarantees or other obligations with respect to, any Union
Electric Unrestricted Subsidiary in excess of $50 million (which number shall be
in addition to the amounts budgeted for capital expenditures and acquisitions as
set forth in Section 6.1(e) and (f) of the Union Electric Disclosure Schedule).
(bb) Limitation on Investments by CIPSCO Investment Company. From and after
the date hereof, CIPSCO shall take all action necessary to ensure that (i)
CIPSCO Investment Company, an Illinois corporation and a wholly owned CIPSCO
Subsidiary ("CIC"), makes investments in a manner consistent with its practice
during the 24 month period preceding the date hereof and (ii) other than
investments in marketable securities which are managed by third party investment
managers, the aggregate amount invested per annum by CIC (such investments,
including funds borrowed for the purpose of funding such investments and
including investments in the energy and leveraged leasing areas (but excluding
funds borrowed without recourse to CIPSCO or any CIPSCO Subsidiary), the
"Restricted Investments"), shall not exceed $15 million. In addition, CIPSCO
agrees that neither it nor any of its
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Direct Subsidiaries (other than CIC) shall enter into any guarantee, keep-well
or similar arrangements with respect to CIC, including guarantees of payment and
performance. For the purposes of this Section 6.1(bb), references to CIC shall
include references to direct and indirect subsidiaries, partnerships and joint
ventures of CIC.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice, each party
shall, and shall cause its Direct Subsidiaries to, afford to the officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives of the other (collectively,
"Representatives") reasonable access, during normal business hours throughout
the period prior to the Effective Time, to all of its properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns
and environmental or worker health and safety audits, reports, studies and
investigations, whether draft or final, relating to the party, its Direct
Subsidiaries or any property currently or formerly owned, leased or operated by
the party or its Direct Subsidiaries) and, during such period, each party shall,
and shall cause its Direct Subsidiaries to, furnish promptly to the other (i)
access to each report, schedule and other document filed or received by it or
any of its Direct Subsidiaries pursuant to the requirements of federal or state
securities laws or filed with or sent to the SEC, the FERC, the NRC, the
Department of Justice, the Federal Trade Commission, the Missouri Public Service
Commission, the Illinois Commerce Commission or any other federal or state
regulatory agency or commission, and (ii) access to all information concerning
themselves, their subsidiaries, directors, officers and shareholders and such
other matters as may be reasonably requested by the other party in connection
with any filings, applications or approvals required or contemplated by this
Agreement or for any other reason related to the transactions contemplated by
this Agreement. Each party shall provide access to those premises, documents,
reports and information described above of subsidiaries of such party that are
not Direct Subsidiaries to the extent such party has or is able to obtain such
access. Each party shall, and shall cause its subsidiaries and Representatives
to, hold in strict confidence all Information (as defined in the Confidentiality
Agreement) concerning the other parties furnished to it in connection with the
transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated as of June
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21, 1995, between CIPSCO and Union Electric, as it may be amended from time to
time (the "Confidentiality Agreement").
Section 7.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing. The parties will prepare and file with the SEC
as soon as reasonably practicable after the date hereof the Registration
Statement and the Proxy Statement (together, the "Joint Proxy/Registration
Statement"). The parties hereto shall each use reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing. Each party hereto shall also take
such action as may be reasonably required to cause the shares of Company Common
Stock issuable in connection with the Mergers to be registered or to obtain an
exemption from registration under applicable state "blue sky" or securities
laws; provided, however, that no party shall be required to register or qualify
as a foreign corporation or to take other action which would subject it to
service of process in any jurisdiction where it will not be, following the
Mergers, so subject. Each of the parties hereto shall furnish all information
concerning itself which is required or customary for inclusion in the Joint
Proxy/Registration Statement. The parties shall use reasonable efforts to cause
the shares of Company Common Stock issuable in the Mergers to be approved for
listing on the NYSE upon official notice of issuance. The information provided
by any party hereto for use in the Joint Proxy/Registration Statement shall be
true and correct in all material respects without omission of any material fact
which is required to make such information not false or misleading. No
representation, covenant or agreement is made by or on behalf of any party
hereto with respect to information supplied by any other party for inclusion in
the Joint Proxy Statement/Registration Statement.
(b) Letter of CIPSCO's Accountants. CIPSCO shall use best efforts to cause
to be delivered to Union Electric a letter of Arthur Andersen LLP dated a date
within two business days before the date of the Joint Proxy/Registration
Statement, and addressed to Union Electric, in form and substance reasonably
satisfactory to Union Electric and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements on Form S-4.
(c) Letter of Union Electric's Accountants. Union Electric shall use best
efforts to cause to be delivered to CIPSCO a letter of Price Waterhouse LLP,
dated a date within two business days before the date of the Joint Proxy/
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Registration Statement, and addressed to CIPSCO, in form and substance
reasonably satisfactory to CIPSCO and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements on Form S-4.
(d) Fairness Opinions. It shall be a condition to the mailing of the Joint
Proxy/Registration Statement to the shareholders of CIPSCO and Union Electric
that (i) CIPSCO shall have received an opinion from Morgan Stanley & Co.
Incorporated, dated the date of the Joint Proxy/Registration Statement, to the
effect that, as of the date thereof, the Exchange Ratios are fair, from a
financial point of view, to the holders of CIPSCO Common Stock and (ii) Union
Electric shall have received an opinion from Goldman, Sachs & Co., dated the
date of the Joint Proxy/Registration Statement, to the effect that, as of the
date thereof, the Exchange Ratios are fair from a financial point of view to the
holders of Union Electric Common Stock.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or cause to be filed with the
Federal Trade Commission and the Department of Justice any notifications
required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all commercially reasonable efforts to make such filings promptly and
to respond promptly to any requests for additional information made by either of
such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to consummate the transactions contemplated
by this Agreement, including, without limitation, the CIPSCO Required Statutory
Approvals and the Union Electric Required Statutory Approvals.
Section 7.4 Shareholder Approval.
(a) Approval of Union Electric Shareholders. Subject to the provisions of
Section 7.4(c) and Section 7.4(d), Union Electric shall, as soon as reasonably
practicable after the date hereof (i) take all steps necessary to duly call,
give
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notice of, convene and hold a special meeting of its shareholders (the "Union
Electric Special Meeting") for the purpose of securing the Union Electric
Shareholders' Approval, (ii) distribute to its shareholders the Proxy Statement
in accordance with applicable federal and state law and with its Restated
Articles of Incorporation and by-laws, (iii) subject to the fiduciary duties of
its Board of Directors, recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and (iv) cooperate and
consult with CIPSCO with respect to each of the foregoing matters.
(b) Approval of CIPSCO Shareholders. Subject to the provisions of Section
7.4(c) and Section 7.4(d), CIPSCO shall, as soon as reasonably practicable after
the date hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "CIPSCO Special Meeting")
for the purpose of securing the CIPSCO Shareholders' Approval, (ii) distribute
to its shareholders the Proxy Statement in accordance with applicable federal
and state law and with its Amended and Restated Articles of Incorporation and
by-laws, (iii) subject to the fiduciary duties of its Board of Directors,
recommend to its shareholders the approval of this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult with Union
Electric with respect to each of the foregoing matters.
(c) Meeting Date. The Union Electric Special Meeting for the purpose of
securing the Union Electric Shareholders' Approval and the CIPSCO Special
Meeting for the purpose of securing the CIPSCO Shareholders' Approval shall be
held on such dates as CIPSCO and Union Electric shall mutually determine.
(d) Fairness Opinions Not Withdrawn. It shall be a condition to the
obligation of CIPSCO to hold the CIPSCO Special Meeting that the opinion of
Morgan Stanley & Co. Incorporated, referred to in Section 7.2(d), shall not have
been withdrawn, and it shall be a condition to the obligation of Union Electric
to hold the Union Electric Special Meeting that the opinion of Goldman, Sachs &
Co., referred to in Section 7.2(d), shall not have been withdrawn.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an existing
right of indemnification or other agreement or policy, from and after the
Effective Time, the Company shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless each person who is
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now, or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, an officer, director or employee of any of the parties
hereto or any subsidiary (each an "Indemnified Party" and collectively, the
"Indemnified Parties") against (i) all losses, expenses (including reasonable
attorney's fees and expenses), claims, damages or liabilities or, subject to the
proviso of the next succeeding sentence, amounts paid in settlement, arising out
of actions or omissions occurring at or prior to the Effective Time (and whether
asserted or claimed prior to, at or after the Effective Time) that are, in whole
or in part, based on or arising out of the fact that such person is or was a
director, officer or employee of such party or a subsidiary of such party (the
"Indemnified Liabilities"), and (ii) all Indemnified Liabilities to the extent
they are based on or arise out of or pertain to the transactions contemplated by
this Agreement. In the event of any such loss, expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) the Company
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company, promptly after statements therefor are received and otherwise advance
to such Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, (ii) the Company will cooperate in the defense of any such
matter and (iii) any determination required to be made with respect to whether
an Indemnified Party's conduct complies with the standards set forth under
Missouri law and the Articles of Incorporation or By-laws shall be made by
independent counsel mutually acceptable to the Company and the Indemnified
Party; provided, however, that the Company shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). The Indemnified Parties as a group may retain only one
law firm with respect to each related matter except to the extent there is, in
the opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time, the
Company shall cause to be maintained in effect policies of directors' and
officers' liability insurance maintained by CIPSCO and Union Electric for the
benefit of those persons who are currently covered by such policies on terms no
less favorable than the terms of such current insurance coverage; provided,
however, that the Company shall not be required to expend in any year an amount
in excess of 200% of the annual aggregate premiums currently paid by CIPSCO or
Union Electric, as the case may be, for such insurance; and provided, further,
that if the annual premiums of such insurance coverage
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exceed such amount, the Company shall be obligated to obtain a policy with the
best coverage available, in the reasonable judgment of the Board of Directors of
the Company, for a cost not exceeding such amount.
(c) Successors. In the event the Company or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in either such case, proper provisions shall be made so
that the successors and assigns of the Company shall assume the obligations set
forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent permitted by law,
from and after the Effective Time, all rights to indemnification as of the date
hereof in favor of the employees, agents, directors and officers of CIPSCO,
Union Electric and their respective subsidiaries with respect to their
activities as such prior to the Effective Time, as provided in their respective
articles of incorporation and by-laws in effect on the date hereof, or otherwise
in effect on the date hereof, shall survive the Merger and shall continue in
full force and effect for a period of not less than six years from the Effective
Time.
(e) Benefit. The provisions of this Section 7.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 7.6 Disclosure Schedules. On the date hereof, (i) Union Electric
has delivered to CIPSCO a schedule (the "Union Electric Disclosure Schedule"),
accompanied by a certificate signed by the chief financial officer of Union
Electric stating the Union Electric Disclosure Schedule is being delivered
pursuant to this Section 7.6(i) and (ii) CIPSCO has delivered to Union Electric
a schedule (the "CIPSCO Disclosure Schedule"), accompanied by a certificate
signed by the chief financial officer of CIPSCO stating the CIPSCO Disclosure
Schedule is being delivered pursuant to this Section 7.6(ii). The CIPSCO
Disclosure Schedule and the Union Electric Disclosure Schedule are collectively
referred to herein as the "Disclosure Schedules". The Disclosure Schedules
constitute an integral part of this Agreement and modify the respective
representations, warranties, covenants or agreements of the parties hereto
contained herein to the extent that such representations, warranties, covenants
or agreements expressly refer to the Disclosure Schedules. Anything to the
contrary contained herein or in the Disclosure Schedules notwithstanding, any
and
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all statements, representations, warranties or disclosures set forth in the
Disclosure Schedules shall be deemed to have been made on and as of the date
hereof.
Section 7.7 Public Announcements. Subject to each party's disclosure
obligations imposed by law, CIPSCO and Union Electric will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without the consent of the other party
(which consent shall not be unreasonably withheld).
Section 7.8 Rule 145 Affiliates. Within 30 days after the date of this
Agreement, CIPSCO shall identify in a letter to Union Electric, and Union
Electric shall identify in a letter to CIPSCO, all persons who are, and to such
person's best knowledge who will be at the Closing Date, "affiliates" of CIPSCO
and Union Electric, respectively, as such term is used in Rule 145 under the
Securities Act (or otherwise under applicable SEC accounting releases with
respect to pooling-of-interests accounting treatment). Each of CIPSCO and Union
Electric shall use all reasonable efforts to cause their respective affiliates
(including any person who may be deemed to have become an affiliate after the
date of the letter referred to in the prior sentence) to deliver to the Company
on or prior to the Closing Date a written agreement substantially in the form
attached as Exhibit 7.8 (each, an "Affiliate Agreement").
Section 7.9 Employee Agreements and Workforce Matters.
(a) Certain Employee Agreements. Subject to Section 7.10, Section 7.14 and
Section 7.15, the Company and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements and
commitments of the parties prior to the date hereof which apply to any current
or former employee or current or former director of the parties hereto;
provided, however, that this undertaking is not intended to prevent the Company
from enforcing such contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including, without limitation, any
reserved right to amend, modify, suspend, revoke or terminate any such contract,
agreement, collective bargaining agreement or commitment.
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(b) Workforce Matters. Subject to applicable collective bargaining
agreements, for a period of three years following the Effective Time, any
reductions in workforce in respect of employees of the Company shall be made on
a fair and equitable basis, in light of the circumstances and the objectives to
be achieved, giving consideration to previous work history, job experience, and
qualifications, without regard to whether employment prior to the Effective Time
was with CIPSCO or its subsidiaries or Union Electric or its subsidiaries, and
any employees whose employment is terminated or jobs are eliminated by the
Company or any of its subsidiaries during such period shall be entitled to
participate on a fair and equitable basis in the job opportunity and employment
placement programs offered by the Company or any of its subsidiaries. Any
workforce reductions carried out following the Effective Time by the Company and
its subsidiaries shall be done in accordance with all applicable collective
bargaining agreements, and all laws and regulations governing the employment
relationship and termination thereof including, without limitation, the Worker
Adjustment and Retraining Notification Act and regulations promulgated
thereunder, and any comparable state or local law.
Section 7.10 Employee Benefit Plans.
(a) Maintenance of CIPSCO and Union Electric Benefit Plans. Subject to
Section 7.10(b), Section 7.10(c) and Section 6.1(i), each of the CIPSCO Benefit
Plans and Union Electric Benefit Plans in effect at the date hereof shall be
maintained in effect with respect to the employees or former employees of CIPSCO
and any of its Direct Subsidiaries, on the one hand, and of Union Electric and
any of its Direct Subsidiaries, on the other hand, respectively, who are covered
by any such benefit plan immediately prior to the Closing Date (the "Affiliated
Employees") until the Company otherwise determines after the Effective Time;
provided, however, that nothing herein contained shall limit any reserved right
contained in any such CIPSCO Benefit Plan or Union Electric Benefit Plan to
amend, modify, suspend, revoke or terminate any such plan; provided, further,
however, that the Company or its subsidiaries shall provide benefits to the
Affiliated Employees for a period of not less than one year following the
Effective Time, other than with respect to plans referred to in Section 7.10(b)
and Section 7.11, which are no less favorable in the aggregate than those
provided under the CIPSCO Benefit Plans (with respect to employees and former
employees of CIPSCO and its Direct Subsidiaries), or the Union Electric Benefit
Plans (with respect to employees or former employees of Union Electric and its
Direct Subsidiaries), as the case may be. Without limitation of the foregoing,
each participant in any such CIPSCO Benefit Plan or Union Electric Benefit Plan
shall receive credit for purposes
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of eligibility to participate, vesting, benefit accrual and eligibility to
receive benefits under any benefit plan of the Company or any of its
subsidiaries or affiliates for service credited for the corresponding purpose
under such benefit plan; provided, however, that such crediting of service shall
not operate to duplicate any benefit to any such participant or the funding for
any such benefit or cause any such CIPSCO Benefit Plan or Union Electric Benefit
Plan to fail to comply with the applicable provisions of the Code or ERISA. Any
person hired by the Company or any of its subsidiaries after the Closing Date
who was not employed by any party hereto or its subsidiaries immediately prior
to the Closing Date shall be eligible to participate in such benefit plans
maintained, or contributed to, by the subsidiary, division or operation by which
such person is employed, provided that such person meets the eligibility
requirements of the applicable plan.
(b) Adoption of Company Replacement Plans. With respect to the Union
Electric Executive Incentive Plan (the "Union Electric EIP"), the Union Electric
LTIP and the CIPSCO Management Incentive Plan (the "CIPSCO MIP"), the Company
and its subsidiaries shall adopt replacement plans as set forth in this Section
7.11(b) (collectively, the "Company Replacement Plans"), subject in each case to
shareholder approval prior to the Effective Time and subject to the shareholder
approvals described below, which approvals shall be sought by the Company as
soon as reasonably practicable following the Effective Time. Each Company
Replacement Plan shall amend and supersede the corresponding Union Electric or
CIPSCO plan and such corresponding plan shall, as of the Effective Time, be
merged with and into the appropriate Company Replacement Plan. The Union
Electric EIP and the CIPSCO MIP shall be replaced by a new annual bonus plan
under which cash bonuses, based on percentages of base salaries, are awarded
based upon the achievement of performance goals determined in advance by the
Human Resources Committee of the Board of Directors of the Company (the
"Committee"). With respect to those participants in the new plan who are, or
who the Committee determines are likely to be, "covered individuals" within the
meaning of Section 162(m) of the Code, the performance goals shall be objective
standards that are approved by shareholders in accordance with the requirements
for exclusion from the limits of Section 162(m) of the Code as performance-based
compensation. The Union Electric LTIP shall be replaced by a stock compensation
plan (the "Company Stock Plan") providing for the grant of stock options, stock
appreciation rights, restricted stock, performance units and such other awards
based upon the Company Common Stock as the Board of Directors may determine,
subject to shareholder approval of the Company Stock Plan. The Company shall
reserve 4.0 million shares for issuance under the Company Stock Plan.
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(c) CIPSCO Action. Before the Effective Time, CIPSCO shall take all steps
necessary to amend (i) the CIPSCO Special Executive Retirement Plan, (ii) the
CIPSCO Excess Benefit Plan and (iii) all trusts associated with such plans, so
that none of the transactions contemplated by this Agreement shall constitute a
"change in control" for purposes of said arrangements, subject to any required
consents of participants therein, which CIPSCO shall use its best efforts to
obtain. Prior to or as soon as practicable after the date hereof, Union
Electric shall adopt a severance plan substantially in the form previously
provided to CIPSCO.
Section 7.11 Stock Option and Other Stock Plans.
(a) Amendment of Union Electric LTIP. Effective as of the Effective Time,
Union Electric shall amend the Union Electric LTIP and use its best efforts to
amend each underlying stock award agreement, in each case to the extent
necessary to provide that (i) none of the transactions contemplated by this
Agreement shall constitute a Change in Control for purposes of the Union
Electric LTIP, (ii) each outstanding option to purchase shares of Old Union
Electric Common Stock (each, an "Union Electric Stock Option") shall constitute
an option to acquire shares of Company Common Stock, on the same terms and
conditions as were applicable under such Union Electric Stock Option, based on
the same number of shares of the Company Common Stock as the holder of such
Union Electric Stock Option would have been entitled to receive pursuant to the
Mergers in accordance with Article II had such holder exercised such option in
full immediately prior to the Effective Time; provided that the number of
shares, the option price, and the terms and conditions of exercise of such
option, shall be determined in a manner that preserves both (A) the aggregate
gain (or loss) on the Union Electric Stock Option immediately prior to the
Effective Time and (B) the ratio of the exercise price per share subject to the
Union Electric Stock Option to the fair market value (determined immediately
prior to the Effective Time) per share subject to such option; and provided,
further, that in the case of any option to which Section 421 of the Code applies
by reason of its qualification under any of Sections 422-424 of the Code, the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code; and (iii) each outstanding performance
dividend unit under the Union Electric Stock Plan ("Union Electric Dividend
Units") shall constitute a performance dividend based upon the same number of
shares of Company Common Stock as the holder of such Union Electric Dividend
Unit would have been entitled to receive pursuant to the Union Electric Merger
in accordance with Article II had such holder been the
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absolute owner, immediately before the Effective Time, of the shares of Union
Electric Common Stock on which such Union Electric Dividend Unit is based, with
such adjustments to the performance goals for such Union Electric Dividend Units
as the Union Electric Human Resources Committee shall determine to be fair and
equitable in light of the Merger, and otherwise on the same terms and conditions
as governed such Union Electric Dividend Unit immediately before the Effective
Time. At the Effective Time, the Company shall assume each agreement relating
to Union Electric Stock Options and Union Electric Dividend Units under the
Union Electric Stock Plan, each as amended as previously provided. As soon as
practicable after the Effective Time, the Company shall deliver to the holders
of Union Electric Stock Options and Union Electric Stock Awards appropriate
notices setting forth such holders' rights pursuant to the Company Stock Plan
and each underlying stock award agreement, each as assumed by the Company.
(b) Company Action. With respect to each of the Union Electric LTIP, the
Savings Investment Plan, the CIPS Employee Stock Ownership Plan, the CIPS 401(k)
Plans, and any other plans under which the delivery of Union Electric or CIPSCO
Common Stock is required upon payment of benefits, grant of awards or exercise
of options (the "Stock Plans"), the Company shall take all corporate action
necessary or appropriate to (i) provide for the issuance or purchase in the open
market of Company Common Stock rather than Union Electric Common Stock or CIPSCO
Common Stock, as applicable, pursuant thereto, and otherwise to amend such stock
plans to reflect this Agreement and the Mergers, (ii) obtain shareholder
approval with respect to such Stock Plan to the extent such approval is required
for purposes of the Code or other applicable law, or to enable such Stock Plan
to comply with Rule 16b-3 promulgated under the Exchange Act, (iii) reserve for
issuance under such plan or otherwise provide a sufficient number of shares of
Company Common Stock for delivery upon payment of benefits, grant of awards or
exercise of options under such Stock Plan and (iv) as soon as practicable after
the Effective Time, file registration statements on Form S-3 or Form S-8 or
amendments on such forms to the Form S-4 Registration Statement, as the case may
be (or any successor or other appropriate forms), with respect to the shares of
Company Common Stock subject to such Stock Plan to the extent such registration
statement is required under applicable law, and the Company shall use its best
efforts to maintain the effectiveness of such registration statements (and
maintain the current status of the prospectuses contained therein) for so long
as such benefits and grants remain payable and such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act,
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the Company shall administer the Stock Plans, where applicable, in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act.
Section 7.12 No Solicitations. Each party hereto shall not, and shall cause
its Direct Subsidiaries not to, and shall not permit any of its Representatives
or subsidiaries that are not Direct Subsidiaries to, and shall use its best
efforts to cause such persons not to, directly or indirectly: initiate, solicit
or encourage, or take any action to facilitate the making of any offer or
proposal which constitutes or is reasonably likely to lead to, any Business
Combination Proposal (as defined below), or, in the event of an unsolicited
Business Combination Proposal, except to the extent required by their fiduciary
duties under applicable law if so advised in a written opinion of outside
counsel, engage in negotiations or provide any information or data to any person
relating to any Business Combination Proposal. Each party hereto shall notify
the other party orally and in writing of any such inquiries, offers or proposals
(including, without limitation, the terms and conditions of any such proposal
and the identity of the person making it), within 24 hours of the receipt
thereof, shall keep the other party informed of the status and details of any
such inquiry, offer or proposal, and shall give the other party five days'
advance notice of any agreement to be entered into with or any information to be
supplied to any person making such inquiry, offer or proposal. Each party
hereto shall immediately cease and cause to be terminated all existing
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any Business Combination Proposal. As used in this Section 7.12,
"Business Combination Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving any
party to this Agreement or any of its material subsidiaries, or any proposal or
offer (in each case, whether or not in writing and whether or not delivered to
the stockholders of a party generally) to acquire in any manner, directly or
indirectly, a substantial equity interest in or a substantial portion of the
assets of any party to this Agreement or any of its material subsidiaries, other
than pursuant to the transactions contemplated by this Agreement. Nothing
contained herein shall prohibit a party from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
with respect to a Business Combination Proposal by means of a tender offer.
Section 7.13 Company Board of Directors. CIPSCO's and Union Electric's
respective Boards of Directors will take such action as may be necessary to
cause the number of directors comprising the full Board of Directors of the
Company at
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the Effective Time to be 15 persons, including Mr. Clifford L. Greenwalt and
four non-management directors of CIPSCO to be designated by CIPSCO prior to the
Effective Time, and Mr. Charles W. Mueller and nine other directors of Union
Electric designated by Union Electric prior to the Effective Time. If, prior to
the Effective Time, any of such designees shall decline or be unable to serve,
the party which designated such person shall designate another person to serve
in such person's stead, except that a replacement for the position of Chairman
of the Board of Directors of the Company shall be chosen by the Board of
Directors of Union Electric. CIPSCO's and Union Electric's respective Boards of
Directors will also take such action as may be necessary to cause the committees
of the Board of Directors of the Company at the Effective Time to consist of (i)
two representatives designated by CIPSCO and six representatives designated by
Union Electric, in the case of the Executive Committee, (ii) one representative
designated by CIPSCO and three representatives designated by Union Electric, in
the case of the Human Resources Committee, (iii) one representative designated
by CIPSCO and three representatives designated by Union Electric, in the case of
the Nominating Committee, (iv) two representatives designated by CIPSCO and four
representatives designated by Union Electric, in the case of the Audit Committee
and (v) two representatives designated by CIPSCO and four representatives
designated by Union Electric, in the case of the Contributions Committee, with
such persons in each case to be designated prior to the Effective Time.
Section 7.14 Company Officers. Mr. Charles W. Mueller shall be the Chairman
of the Board of Directors, President and Chief Executive Officer of the Company
at the Effective Time and Mr. Clifford L. Greenwalt shall be Vice Chairman of
the Company's Board of Directors. The other officers of the Company at the
Effective Time shall be such officers as may be designated by the Board of
Directors of the Company.
Section 7.15 Boards of Directors of Subsidiaries. At the Effective Time,
the Board of Directors of CIPS shall be expanded to include three additional
directorships, and shall initially consist of (i) the directors serving
immediately prior to the Effective Time and (ii) Mr. Charles W. Mueller and two
additional persons designated by Union Electric, which two persons, together
with Mr. Charles W. Mueller, shall fill the vacancies created by the expansion
of the Board of Directors of CIPS. At the Effective Time, the Board of
Directors of Union Electric, as the surviving corporation in the Union Electric
Merger, shall initially consist of Mr. Charles W. Mueller, Mr. Clifford L.
Greenwalt and such other nominees as shall be determined by the Company.
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Section 7.16 Post-Merger Operations. Following the Effective Time, the
Company shall conduct its operations in accordance with the following:
(a) Principal Corporate Offices. The principal corporate office of the
Company shall be located in St. Louis, Missouri. From the Effective Time CIPS
shall maintain its principal corporate office in Springfield, Illinois.
(b) Maintenance of Separate Existence. CIPS shall continue its separate
corporate existence, operating under the name "Central Illinois Public Service
Company".
(c) Charities. After the Effective Time, the Company shall provide
charitable contributions and community support within the service areas of the
parties and each of their respective subsidiaries at levels substantially
comparable to the levels of charitable contributions and community support
provided by the parties and their respective subsidiaries within their service
areas within the two-year period immediately prior to the Effective Time.
Section 7.17 Expenses. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Joint Proxy/Registration
Statement, as well as the filing fee relating thereto, shall be shared equally
by CIPSCO and Union Electric.
Section 7.18 Further Assurances. Each party will, and will cause its Direct
Subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be requested by any other party in order to
consummate the Mergers in accordance with the terms hereof. The parties
expressly acknowledge and agree that, although it is their current intention to
effect a business combination among themselves in the form contemplated by this
Agreement, it may be preferable to effectuate such a business combination by
means of an alternative structure in light of the conditions set forth in
Section 8.1(e), Section 8.2(e), and Section 8.3(e). Accordingly, if the only
conditions to the parties' obligations to consummate the Mergers which are not
satisfied or waived are receipt of any one or more of the CIPSCO Required
Consents, CIPSCO Required Statutory Approvals, Union Electric Required Consents
or Union Electric Required Statutory Approvals, and the adoption of an
alternative structure (that otherwise substantially preserves for CIPSCO and
Union Electric the economic
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benefits of the Mergers) would result in such conditions being satisfied or
waived, then the parties shall use their respective best efforts to effect a
business combination among themselves by means of a mutually agreed upon
structure other than the Mergers that so preserves such benefits; provided that,
prior to closing any such restructured transaction, all material third-party and
Governmental Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary for the effectuation of such
alternative business combination shall have been obtained and all other
conditions to the parties' obligations to consummate the Mergers, as applied to
such alternative business combination, shall have been satisfied or waived.
Section 7.19 Charter and By-Law Amendments. Prior to the mailing of the
Joint Proxy Statement/Prospectus, Union Electric and CIPSCO shall agree upon
amendments to be effected to the articles of incorporation of the Company, and
the by-laws of the Company, and the Company shall take all actions necessary so
that such amendments become effective no later than the Effective Time.
Section 7.20 Transfers of Illinois Assets. Prior to the Closing and subject
to the next sentence of this Section 7.20, Union Electric shall use reasonable
efforts and shall have taken such action as is necessary to effect the transfer
of the assets set forth on Schedule 7.20 of this Agreement to CIPS, which
transfers shall be effected immediately subsequent to the Company Merger. To
the extent any of such assets set forth in Schedule 7.20 cannot be conveyed to
CIPS, the parties hereto shall use reasonable efforts to implement alternative
arrangements (such as licensing arrangements) with respect to such non-conveyed
assets as shall be mutually agreed upon by Union Electric and CIPSCO.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers.
The respective obligations of each party to effect the Mergers shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions,
except, to the extent permitted by applicable law, that such conditions may be
waived in writing pursuant to Section 9.5 by the joint action of the parties
hereto:
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(a) Shareholder Approvals. The Union Electric Shareholders' Approval and
the CIPSCO Shareholders' Approval shall have been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court preventing
consummation of the Mergers shall have been issued and be continuing in effect,
and the Mergers and the other transactions contemplated hereby shall not have
been prohibited under any applicable federal or state law or regulation.
(c) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued and remain in effect.
(d) Listing of Shares. The shares of Company Common Stock issuable in the
Mergers pursuant to Article II shall have been approved for listing on the NYSE
upon official notice of issuance.
(e) Statutory Approvals. The CIPSCO Required Statutory Approvals and the
Union Electric Required Statutory Approvals shall have been obtained at or prior
to the Effective Time, such approvals shall have become Final Orders (as defined
below) and such Final Orders shall not impose terms or conditions which, in the
aggregate, would have, or insofar as reasonably can be foreseen, could have, a
material adverse effect on the business, assets, financial condition or results
of operations of the Company and its prospective subsidiaries taken as a whole
or on the Company prospective utility subsidiaries located in the State of
Missouri taken as a whole, or on its prospective utility subsidiaries located in
the State of Illinois taken as a whole or which would be materially inconsistent
with the agreements of the parties contained herein. A "Final Order" means
action by the relevant regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which any waiting
period prescribed by law before the transactions contemplated hereby may be
consummated has expired, and as to which all conditions to the consummation of
such transactions prescribed by law, regulation or order have been satisfied.
(f) Pooling. Each of CIPSCO and Union Electric shall have received a letter
of its independent public accountants, dated the Closing Date, in form and
substance
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reasonably satisfactory, in each case, to CIPSCO and Union Electric, stating
that the transactions effected pursuant to this Agreement will qualify as a
pooling of interests transaction under GAAP and applicable SEC regulations.
(g) Dissenters' Rights. The number of Union Electric Dissenting Shares
shall not constitute more than 5% of the number of issued and outstanding shares
of Union Electric Common Stock and Union Electric Preferred Stock, taken
together as a single class for this purpose.
Section 8.2 Conditions to Obligation of Union Electric to Effect the
Mergers. The obligation of Union Electric to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by Union Electric in writing pursuant to
Section 9.5:
(a) Performance of Obligations of CIPSCO. CIPSCO (and/or its appropriate
subsidiaries) shall have performed its agreements and covenants contained in
Sections 6.1(b) and 6.1(c) and shall have performed in all material respects its
other agreements and covenants contained in or contemplated by this Agreement
and the CIPSCO Stock Option Agreement required to be performed by it at or prior
to the Effective Time.
(b) Representations and Warranties. The representations and warranties of
CIPSCO set forth in this Agreement and the CIPSCO Stock Option Agreement shall
be true and correct (i) on and as of the date hereof and (ii) on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date (except for representations and
warranties that expressly speak only as of a specific date or time other than
the date hereof or the Closing Date which need only be true and correct as of
such date or time) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without regard to any
materiality qualifications contained therein) which, individually or in the
aggregate, would not be reasonably likely to result in a CIPSCO Material Adverse
Effect.
(c) Closing Certificates. Union Electric shall have received a certificate
signed by the chief financial officer of CIPSCO, dated the Closing Date, to the
effect that, to the best of such officer's knowledge, the conditions set forth
in Section 8.2(a) and Section 8.2(b) have been satisfied.
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(d) CIPSCO Material Adverse Effect. No CIPSCO Material Adverse Effect shall
have occurred and there shall exist no fact or circumstance which is reasonably
likely to have a CIPSCO Material Adverse Effect.
(e) CIPSCO Required Consents. The CIPSCO Required Consents the failure of
which to obtain would have a CIPSCO Material Adverse Effect shall have been
obtained.
(f) Affiliate Agreements. The Company shall have received Affiliate
Agreements, duly executed by each "affiliate" of CIPSCO, substantially in the
form of Exhibit 7.8, as provided in Section 7.8.
(g) Tax Opinion. Union Electric shall have received an opinion of Wachtell,
Lipton, Rosen & Katz satisfactory in form and substance to Union Electric, dated
as of the Closing Date, to the effect that (i) the Union Electric Merger will be
treated as a tax-free reorganization under Section 368(a) of the Code, and/or
(ii) the Mergers, taken together, will be treated as an exchange under Section
351 of the Code.
Section 8.3 Conditions to Obligation of CIPSCO to Effect the Mergers. The
obligation of CIPSCO to effect the CIPSCO Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by CIPSCO in writing pursuant to Section 9.5:
(a) Performance of Obligations of Union Electric. Union Electric (and/or
its appropriate subsidiaries) will have performed its agreements and covenants
contained in Sections 6.1(b) and 6.1(c) and will have performed in all material
respects its other agreements and covenants contained in or contemplated by this
Agreement and the Union Electric Stock Option Agreement required to be performed
at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties of
Union Electric set forth in this Agreement and the Union Electric Stock Option
Agreement shall be true and correct (i) on and as of the date hereof and (ii) on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date
or time other than the date hereof or the Closing Date which need only be true
and correct as of such date or time) except in each of cases (i) and (ii)
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for such failures of representations or warranties to be true and correct
(without regard to any materiality qualifications contained therein) which,
individually or in the aggregate, would not be reasonably likely to result in a
Union Electric Material Adverse Effect.
(c) Closing Certificates. CIPSCO shall have received a certificate signed
by the chief financial officer of Union Electric, dated the Closing Date, to the
effect that, to the best of such officer's knowledge, the conditions set forth
in Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) Union Electric Material Adverse Effect. No Union Electric Material
Adverse Effect shall have occurred and there shall exist no fact or circumstance
which is reasonably likely to have a Union Electric Material Adverse Effect.
(e) Union Electric Required Consents. The Union Electric Required Consents
the failure of which to obtain would have a Union Electric Material Adverse
Effect shall have been obtained.
(f) Affiliate Agreements. The Company shall have received Affiliate
Agreements, duly executed by each "affiliate" of Union Electric substantially in
the form of Exhibit 7.8, as provided in Section 7.8.
(g) Tax Opinion. CIPSCO shall have received an opinion of Jones, Day,
Reavis & Pogue satisfactory in form and substance to CIPSCO, dated as of the
Closing Date, to the effect that the Company Merger will be treated as a tax-
free reorganization under Section 368(a) of the Code.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the shareholders of the
respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of CIPSCO and Union
Electric;
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(b) by any party hereto, by written notice to the other parties, if the
Effective Time shall not have occurred on or before the second anniversary of
the date hereof (the "Initial Termination Date"); provided, however, that the
right to terminate the Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; and provided, further, that if on the
Initial Termination Date the conditions to the Closing set forth in Sections
8.1(e), 8.2(e) and/or 8.3(e) shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then the Initial Termination Date shall be extended to the thirty
month anniversary of the date hereof;
(c) by any party hereto, by written notice to the other parties, if the
Union Electric Shareholders' Approval shall not have been obtained at a duly
held Union Electric Special Meeting, including any adjournments thereof, or the
CIPSCO Shareholders' Approval shall not have been obtained at a duly held CIPSCO
Special Meeting, including any adjournments thereof;
(d) by any party hereto, if any state or federal law, order, rule or
regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger, or
by any party hereto if any court of competent jurisdiction in the United States
or any State shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
(e) by Union Electric, upon two days' prior notice to CIPSCO, if, as a
result of a tender offer by a party other than CIPSCO or any of its affiliates
or any written offer or proposal with respect to a merger, sale of a material
portion of its assets or other business combination (each, a "Business
Combination") by a party other than CIPSCO or any of its affiliates, the Board
of Directors of Union Electric determines in good faith that their fiduciary
obligations under applicable law require that such tender offer or other written
offer or proposal be accepted; provided, however, that (i) the Board of
Directors of Union Electric shall have been advised in a written opinion of
outside counsel that notwithstanding a binding commitment to consummate an
agreement of the nature of
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this Agreement entered into in the proper exercise of their applicable fiduciary
duties, and notwithstanding all concessions which may be offered by CIPSCO in
negotiations entered into pursuant to clause (ii) below, such fiduciary duties
would also require the directors to reconsider such commitment as a result of
such tender offer or other written offer or proposal; and (ii) prior to any such
termination, Union Electric shall, and shall cause its respective financial and
legal advisors to, negotiate with CIPSCO to make such adjustments in the terms
and conditions of this Agreement as would enable Union Electric to proceed with
the transactions contemplated herein on such adjusted terms;
(f) by CIPSCO, upon two days' prior notice to Union Electric, if, as a
result of a tender offer by a party other than Union Electric or any of its
affiliates or any written offer or proposal with respect to a Business
Combination by a party other than Union Electric or any of its affiliates, the
Board of Directors of CIPSCO determines in good faith that their fiduciary
obligations under applicable law require that such tender offer or other written
offer or proposal be accepted; provided, however, that (i) the Board of
Directors of CIPSCO shall have been advised in a written opinion of outside
counsel that notwithstanding a binding commitment to consummate an agreement of
the nature of this Agreement entered into in the proper exercise of their
applicable fiduciary duties, and notwithstanding all concessions which may be
offered by Union Electric in negotiations entered into pursuant to clause (ii)
below, such fiduciary duties would also require the directors to reconsider such
commitment as a result of such tender offer or other written offer or proposal;
and (ii) prior to any such termination, CIPSCO shall, and shall cause its
respective financial and legal advisors to, negotiate with Union Electric to
make such adjustments in the terms and conditions of this Agreement as would
enable CIPSCO to proceed with the transactions contemplated herein on such
adjusted terms;
(g) by CIPSCO, by written notice to Union Electric, if (i) there exist
breaches of the representations and warranties of Union Electric made herein as
of the date hereof which breaches, individually or in the aggregate, would or
would be reasonably likely to result in a Union Electric Material Adverse
Effect, and such breaches shall not have been remedied within 20 days after
receipt by Union Electric of notice in writing from CIPSCO, specifying the
nature of such breaches and requesting that they be remedied, (ii) Union
Electric (and/or its appropriate
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subsidiaries) shall not have performed and complied with its agreements and
covenants contained in Sections 6.1(b) and 6.1(c) or shall have failed to
perform and comply with, in all material respects, its other agreements and
covenants hereunder or under the Union Electric Stock Option Agreement and such
failure to perform or comply shall not have been remedied within 20 days after
receipt by Union Electric of notice in writing from CIPSCO, specifying the
nature of such failure and requesting that it be remedied; or (iii) the Board of
Directors of Union Electric or any committee thereof (A) shall withdraw or
modify in any manner adverse to CIPSCO its approval or recommendation of this
Agreement or the Union Electric Merger, (B) shall fail to reaffirm such approval
or recommendation upon CIPSCO's request, (C) shall approve or recommend any
acquisition of Union Electric or a material portion of its assets or any tender
offer for shares of capital stock of Union Electric, in each case, by a party
other than CIPSCO or any of its affiliates or (D) shall resolve to take any of
the actions specified in clause (A), (B) or (C);
(h) by Union Electric, by written notice to CIPSCO, if (i) there exist
material breaches of the representations and warranties of CIPSCO made herein as
of the date hereof which breaches, individually or in the aggregate, would or
would be reasonably likely to result in a CIPSCO Material Adverse Effect, and
such breaches shall not have been remedied within 20 days after receipt by
CIPSCO of notice in writing from Union Electric, specifying the nature of such
breaches and requesting that they be remedied, (ii) CIPSCO (and/or its
appropriate subsidiaries) shall not have performed and complied with its
agreements and covenants contained in Sections 6.1(b) and 6.1(c) or shall have
failed to perform and comply with, in all material respects, its other
agreements and covenants hereunder or under the CIPSCO Stock Option Agreement,
and such failure to perform or comply shall not have been remedied within 20
days after receipt by CIPSCO of notice in writing from Union Electric,
specifying the nature of such failure and requesting that it be remedied; or
(iii) the Board of Directors of CIPSCO or any committee thereof (A) shall
withdraw or modify in any manner adverse to Union Electric its approval or
recommendation of this Agreement or the CIPSCO Merger, (B) shall fail to
reaffirm such approval or recommendation upon Union Electric's request, (C)
shall approve or recommend any acquisition of CIPSCO or a material portion of
its assets or any tender offer for the shares of capital stock of CIPSCO, in
each case by a party other than Union Electric or any of its affiliates
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or (D) shall resolve to take any of the actions specified in clause (A), (B) or
(C); or
(i) by either Union Electric or CIPSCO, by written notice to the other party,
if (A) a third party acquires securities representing greater than 50% of the
voting power of the outstanding voting securities of such other party or (B)
individuals who as of the date hereof constitute the board of directors of such
other party (together with any new directors whose election by such board of
directors or whose nomination for election by the stockholders of such party was
approved by a vote of a majority of the directors of such party then still in
office who are either directors as of the date hereof or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors of such party then in office.
Section 9.2 Effect of Termination. Subject to Section 10.1(b), in the event
of termination of this Agreement by either CIPSCO or Union Electric pursuant to
Section 9.1 there shall be no liability on the part of either CIPSCO or Union
Electric or their respective officers or directors hereunder, except that
Section 7.17 and Section 9.3, the agreement contained in the last sentence of
Section 7.1, Section 10.2 and Section 10.8 shall survive the termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee upon Breach or Withdrawal of Approval. If this
Agreement is terminated at such time that this Agreement is terminable pursuant
to one (but not both) of (x) Section 9.1(g)(i) or (ii) or (y) Section 9.1(h)(i)
or (ii), then: (i) the breaching party shall promptly (but not later than five
business days after receipt of notice from the non-breaching party) pay to the
non-breaching party in cash an amount equal to all documented out-of-pocket
expenses and fees incurred by the non-breaching party (including, without
limitation, fees and expenses payable to all legal, accounting, financial,
public relations and other professional advisors arising out of, in connection
with or related to the Merger or the transactions contemplated by this
Agreement) not in excess of $10 million; provided, however, that, if this
Agreement is terminated by a party as a result of a willful breach by the other
party, the non-breaching party may pursue any remedies available to it at law or
in equity and shall, in addition to its out-of-pocket expenses (which shall be
paid as specified above and shall not be limited to $10 million), be entitled to
retain such additional amounts as such non-breaching party may be entitled to
receive at law or in equity; and (ii) if (x) at the time of the
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breaching party's willful breach of this Agreement, there shall have been a
third-party tender offer for shares of, or a third party offer or proposal with
respect to a Business Combination involving, such party or any of its affiliates
which at the time of such termination shall not have been rejected by such party
and its board of directors and withdrawn by the third party, and (y) within two
and one-half years of any termination by the non-breaching party, the breaching
party or an affiliate thereof becomes a subsidiary of such offeror or a
subsidiary of an affiliate of such offeror or accepts a written offer to
consummate or consummates a Business Combination with such offeror or an
affiliate thereof, then such breaching party (jointly and severally with its
affiliates), upon the signing of a definitive agreement relating to such a
Business Combination, or, if no such agreement is signed then at the closing
(and as a condition to the closing) of such breaching party becoming such a
subsidiary or of such Business Combination, will pay to the non-breaching party
an additional fee equal to $30 million in cash; provided that in no event shall
the additional termination fee provided for in Section 9.3(b) be payable if the
additional fee referred to in this Section 9.3(a)(ii) has been paid.
(b) Additional Termination Fee. If (i) this Agreement (x) is terminated by
any party pursuant to Section 9.1(e) or Section 9.1(f), (y) is terminated
following a failure of the shareholders of any one of the parties to grant the
necessary approvals described in Section 4.13 and Section 5.13 or (z) is
terminated as a result of such party's material breach of Section 7.4, and (ii)
at the time of such termination or prior to the meeting of such party's
shareholders there shall have been a third-party tender offer for shares of, or
a third-party offer or proposal with respect to a Business Combination
involving, such party or any of its affiliates which at the time of such
termination or of the meeting of such party's shareholders shall not have been
(A) rejected by such party and its board of directors and (B) withdrawn by the
third-party, and (iii) within two and one-half years of any such termination
described in clause (i) above, the party or its affiliate which is the subject
of the tender offer or offer or proposal with respect to a Business Combination
(the "Target Party") becomes a subsidiary of such offeror or a subsidiary of an
affiliate of such offeror or accepts a written offer to consummate or
consummates a Business Combination with such offeror or affiliate thereof, then
such Target Party (jointly and severally with its affiliates), upon the signing
of a definitive agreement relating to such a Business Combination, or, if no
such agreement is signed, then at the closing (and as a condition to the
closing) of such Target Party becoming such a subsidiary or of such Business
Combination, will pay to the other party a termination fee equal
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to $30 million in cash plus the out-of-pocket fees and expenses incurred by the
non-breaching party (including, without limitation, fees and expenses payable to
all legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Merger or the
transactions contemplated by this Agreement).
(c) Expenses. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by the
Agreement and constitute liquidated damages and not a penalty. If one party
fails to promptly pay to the other any fee due hereunder, the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date
such fee was required to be paid.
(d) Limitation of Termination Fees. Notwithstanding anything herein to the
contrary, the aggregate amount payable to Union Electric and its affiliates
pursuant to Section 9.3(a), Section 9.3(b) and the terms of the CIPSCO Stock
Option Agreement shall not exceed $50 million and the aggregate amount payable
to CIPSCO and its affiliates pursuant to Section 9.3(a), Section 9.3(b) and the
terms of the Union Electric Stock Option Agreement shall not exceed $50 million
(including, in each case, reimbursement for fees and expenses payable pursuant
to this Section 9.3). For purposes of this Section 9.3(d), the amount payable
pursuant to the terms of the CIPSCO Stock Option Agreement, as the case may be,
shall be the amount paid pursuant to Section 7(a)(i) and 7(a)(ii) thereof.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the shareholders of CIPSCO and Union Electric and prior to the Effective Time,
but after such approvals, no such amendment shall (i) alter or change the amount
or kind of shares, rights or any of the proceedings of the treatment of shares
under Article II, or (ii) alter or change any of the terms and conditions of
this Agreement if any of the alterations or changes, alone or in the aggregate,
would materially adversely affect the rights of holders of CIPSCO capital stock
or Union Electric capital stock, except for alterations or changes that could
otherwise be adopted by the Board of Directors of the Company, without the
further approval of such shareholders, as applicable. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
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Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties. (a)
All representations, warranties and agreements in this Agreement shall not
survive the Merger, except as otherwise provided in this Agreement and except
for the agreements contained in this Section 10.1 and in Article II, Section
7.5, Section 7.9, Section 7.10, Section 7.11, Section 7.14, Section 7.15,
Section 7.16, Section 7.17 and Section 10.7.
(b) No party may assert a claim for breach of any representation or warranty
contained in this Agreement (whether by direct claim or counterclaim) except in
connection with the cancellation of this Agreement pursuant to Section 9.1(g)(i)
or Section 9.1(h)(i) (or pursuant to any other subsection of Section 9.1, if the
terminating party would have been entitled to terminate this Agreement pursuant
to Section 9.1(g)(i) or Section 9.1(h)(i)).
Section 10.2 Brokers. CIPSCO represents and warrants that, except for
Morgan Stanley & Co., Inc. whose fees have been disclosed to Union Electric
prior to the date hereof, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of CIPSCO. Union Electric represents and warrants that, except
for Goldman, Sachs & Co., whose fees have been disclosed to CIPSCO prior to the
date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Union Electric.
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Section 10.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (i) delivered personally, (ii) sent
by reputable overnight courier service, (iii) telecopied (which is confirmed),
or (iv) five days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to CIPSCO, to:
CIPSCO Incorporated
607 East Adams Street
Springfield, IL 62739
Attention: Craig D. Nelson, Treasurer
Telephone: (217) 525-5315
Telecopy: (217) 535-5067
with a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Robert A. Yolles, Esq.
Telephone: (312) 782-3939
Telecopy: (312) 782-8585
(b) If to Union Electric, to:
Union Electric Company
1901 Chouteau Avenue
P.O. Box 149
St. Louis, MO 63166
Attention: Donald E. Brandt,
Chief Financial Officer
Telephone: (314) 554-2473
Telecopy: (314) 554-3066
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
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Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; (ii) shall not be assigned by
operation of law or otherwise; and (iii) shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed in and to be fully performed in such State, without giving effect to
its conflicts of law, rules or principles and except to the extent the
provisions of this Agreement (including the documents or instruments referred to
herein) are expressly governed by or derive their authority from the MGBCL or
the IBCA.
Section 10.5 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
Section 10.6 Counterparts; Effect. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Notwithstanding the foregoing and any other provision of this Agreement, and in
addition to any other required action of the Board of Directors of the Company
(a) a majority of the directors (or their successors) serving on the Board of
Directors of the Company who are designated by Union Electric pursuant to
Section 7.13 shall be entitled during the three year period commencing at the
Effective Time (the "Three Year Period") to enforce the provisions of Section
7.9, Section 7.10, Section 7.11 and Section 7.14 on behalf of the Union Electric
officers, directors and employees, as the case may be, and (b) a majority of the
directors (or their successors) serving on the Board of Directors of the Company
who are designated by CIPSCO pursuant to Section 7.13 shall be entitled during
the Three Year Period to enforce the provisions of, Sections 7.9,
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Section 7.10, Section 7.11, and Section 7.14 on behalf of the CIPSCO officers,
directors and employees, as the case may be. Such directors' rights and
remedies under the preceding sentence are cumulative and are in addition to any
other rights and remedies they may have at law or in equity, but in no event
shall this Section 10.7 be deemed to impose any additional duties on any such
directors. The Company shall pay, at the time they are incurred, all costs,
fees and expenses of such directors incurred in connection with the assertion of
any rights on behalf of the persons set forth above pursuant to this Section
10.7.
Section 10.8 Waiver of Jury Trial and Certain Damages. Each party to this
Agreement waives, to the fullest extent permitted by applicable law, (i) any
right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement and (ii) without
limitation to Section 9.3, any right it may have to receive damages from any
other party based on any theory of liability for any special, indirect,
consequential (including lost profits) or punitive damages.
Section 10.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of New York.
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IN WITNESS WHEREOF, Union Electric and CIPSCO have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
UNION ELECTRIC COMPANY
By: /s/ Charles W. Mueller
-------------------------
Name: Charles W. Mueller
Attest: /s/ James C. Thompson Title: President
---------------------
Secretary
CIPSCO INCORPORATED
By: /s/ Clifford L. Greenwalt
-------------------------
Name: Clifford L. Greenwalt
Attest: /s/ William A. Koertner Title: President
-----------------------
Secretary
ARCH HOLDING CORP.
By: /s/Donald E. Brandt
-------------------
Name: Donald E. Brandt
Attest:/s/ William E. Jaudes Title: President
---------------------
Secretary
ARCH MERGER INC.
By: /s/Donald E. Brandt
-------------------
Name: Donald E. Brandt
Attest:/s/ William E. Jaudes Title: President
---------------------
Secretary
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INDEX OF DEFINED TERMS
1935 Act................................................... 9
Affiliate Agreement........................................ 55
Affiliated Employees....................................... 56
Agreement.................................................. 1
Articles of Incorporation.................................. 3
Atomic Energy Act.......................................... 13
Business Combination....................................... 68
Business Combination Proposal.............................. 60
By-Laws.................................................... 3
Callaway................................................... 39
Certificates............................................... 6
CIPS....................................................... 10
CIPS 401(k) Plans.......................................... 41
CIPS Common Stock.......................................... 10
CIPS No-Par Preferred Stock................................ 10
CIPS Preferred Stock....................................... 10
CIPSCO..................................................... 1
CIPSCO Benefit Plans....................................... 17
CIPSCO Common Stock........................................ 4
CIPSCO Disclosure Schedule................................. 54
CIPSCO Dissenting Shares................................... 6
CIPSCO Exchange Ratio...................................... 5
CIPSCO Financial Statements................................ 13
CIPSCO Joint Venture....................................... 10
CIPSCO Material Adverse Effect............................. 14
CIPSCO MIP................................................. 57
CIPSCO Required Consents................................... 12
CIPSCO Required Statutory Approval......................... 12
CIPSCO Shareholders' Approval.............................. 23
CIPSCO SEC Reports......................................... 13
CIPSCO Special Meeting..................................... 52
CIPSCO Stock Option Agreement.............................. 1
CIPSCO Subsidiary.......................................... 9
Closing.................................................... 8
Closing Agreement.......................................... 16
Closing Date............................................... 8
Code....................................................... 16
Company.................................................... 1
Company Common Stock....................................... 4
Company Effective Time..................................... 3
Company Merger............................................. 2
Company Replacement Plans.................................. 57
Company Shares............................................. 6
Company Stock Plan......................................... 57
Committee.................................................. 57
Confidentiality Agreement.................................. 49
Converted Shares........................................... 6
Direct Subsidiary.......................................... 9
Disclosure Schedules....................................... 54
Effective Time............................................. 3
Environmental Claim........................................ 22
Environmental Laws......................................... 22
Environmental Permits...................................... 21
ERISA...................................................... 17
ERISA Affiliate............................................ 19
Exchange Act............................................... 13
Exchange Agent............................................. 6
Exchange Ratios............................................ 5
FERC....................................................... 13
Final Order................................................ 64
GAAP....................................................... 13
Governmental Authority..................................... 12
Hazardous Material......................................... 23
HSR Act.................................................... 51
IBCL....................................................... 3
Indemnified Liabilities.................................... 53
Indemnified Parties........................................ 53
Indemnified Party.......................................... 53
Initial Termination Date................................... 68
IRS........................................................ 18
Joint Proxy/Registration Statement......................... 50
Joint Venture.............................................. 9
Liens...................................................... 11
Merger Sub................................................. 1
Merger Sub Common Stock.................................... 4
Mergers.................................................... 1
MGBCL...................................................... 2
NRC........................................................ 13
NYSE....................................................... 7
PBCG....................................................... 18
PCBs....................................................... 23
Power Act.................................................. 13
Proxy Statement............................................ 14
Registration Statement..................................... 14
Release.................................................... 23
Representatives............................................ 49
Restricted Investments..................................... 48
SEC........................................................ 13
Securities Act............................................. 13
Stock Plans................................................ 59
Subsidiary................................................. 9
Target Party............................................... 72
Task Force................................................. 47
Tax Return................................................. 15
Tax Ruling................................................. 16
Taxes...................................................... 15
Three Year Period.......................................... 76
Union Electric............................................. 1
Union Electric Benefit Plans............................... 33
Union Electric Common Stock................................ 4
Union Electric Disclosure Schedule......................... 54
Union Electric Dissenting Shares........................... 5
Union Electric Dividend Units.............................. 58
Union Electric Effective Time.............................. 3
Union Electric EIP......................................... 57
Union Electric Exchange Ratio.............................. 4
Union Electric Financial Statements........................ 29
Union Electric Joint Venture............................... 25
Union Electric LTIP........................................ 41
Union Electric Material Adverse Effect..................... 30
Union Electric Merger...................................... 2
Union Electric Preference Stock............................ 26
Union Electric Preferred Stock............................. 4
Union Electric Required Consents........................... 28
Union Electric Required Statutory Approvals................ 28
Union Electric SEC Reports................................. 29
Union Electric Shareholders' Approval...................... 38
Union Electric Special Meeting............................. 52
Union Electric Stock Option Agreement...................... 1
Union Electric Stock Option................................ 58
Union Electric Subsidiary.................................. 25
Union Electric Unrestricted Subsidiaries................... 26
Violation.................................................. 11
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EX-10.A
3
CIPSCO STOCK OPTION AGREEMENT
EXHIBIT 10(a)
CIPSCO STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 11, 1995 by and between
Union Electric Company, a Missouri corporation ("Union Electric"), and CIPSCO
Incorporated, an Illinois corporation ("CIPSCO").
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) Union Electric, CIPSCO, Arch Holding Corp., a Missouri
corporation ("Holdings") and Arch Merger Inc., a Missouri corporation ("Merger
Sub"), are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), which provides, among other things, upon the
terms and subject to the conditions thereof, for the merger of Merger Sub with
and into Union Electric and the merger of CIPSCO with and into Holdings (the
"Mergers"); and
WHEREAS, as a condition to Union Electric's willingness to enter into
the Merger Agreement, Union Electric has requested that CIPSCO agree, and CIPSCO
has so agreed, to grant to Union Electric an option with respect to certain
shares of CIPSCO' common stock, on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, to induce Union Electric to enter into the Merger
Agreement, and in consideration of the mutual covenants and agreements set forth
herein and in the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. CIPSCO hereby grants Union Electric an
irrevocable option (the "CIPSCO Option") to purchase up to 6,779,838 shares,
subject to adjustment as provided in Section 11 (such shares being referred to
herein as the "CIPSCO Shares") of common stock, no par value, of CIPSCO (the
"CIPSCO Common Stock") (being 19.9% of the number of shares of CIPSCO Common
Stock outstanding on the date hereof) in the manner set forth below at a price
(the "Exercise Price") per CIPSCO Share of $37.02 (which is equal to the product
of (x) the Fair Market Value (as defined below) of a share of Common Stock, par
value $5.00 per share, of Union Electric (such shares being referred to herein
as the "Union Electric Shares") on the date hereof and (y) the Exchange Ratio),
payable, at Union Electric's option, (a) in cash or (b) subject to the receipt
of the approvals of any Governmental Authority required for the CIPSCO to
acquire the Union Electric Shares from Union Electric, and for Union Electric to
issue the Union Electric Shares to CIPSCO, which approvals CIPSCO and Union
Electric shall use their respective best efforts to obtain, in Union Electric
Shares, in either case in accordance with Section 4 hereof. Notwithstanding the
foregoing, in no event shall the
number of CIPSCO Shares for which the CIPSCO Option is exercisable exceed 19.9%
of the number of issued and outstanding shares of CIPSCO Common Stock. As used
herein, the "Fair Market Value" of any share shall be the average of the daily
closing sales price for such share on the New York Stock Exchange (the "NYSE")
during the 10 NYSE trading days prior to the fifth NYSE trading day preceding
the date such Fair Market Value is to be determined. Capitalized terms used
herein but not defined herein shall have the meanings set forth in the Merger
Agreement.
2. Exercise of Option. The CIPSCO Option may be exercised by Union
Electric, in whole or in part, at any time or from time to time after the Merger
Agreement becomes terminable by Union Electric under circumstances which could
entitle Union Electric to termination fees under either Section 9.3(a) of the
Merger Agreement (provided that the events specified in Section 9.3(a)(ii)(x) of
the Merger Agreement shall have occurred, although the events specified in
Section 9.3(a)(ii)(y) thereof need not have occurred) or Section 9.3(b) of the
Merger Agreement (regardless of whether the Merger Agreement is actually
terminated or whether there occurs a closing of any Business Combination
involving a Target Party or a closing by which a Target Party becomes a
subsidiary), or which could entitle Union Electric to terminate the Merger
Agreement under Section 9.1(h)(iii) thereof (provided that at the time of such
action or inaction by the Board of Directors of CIPSCO or any committee thereof
there shall have been a third-party tender offer for shares of, or a third-party
offer or proposal with respect to a Business Combination involving, CIPSCO which
at the time of such action or inaction shall not have been rejected by the Board
of Directors of CIPSCO), any such event by which the Merger Agreement becomes so
terminable by Union Electric being referred to herein as a "Trigger Event."
CIPSCO shall notify Union Electric promptly in writing of the occurrence of any
Trigger Event, it being understood that the giving of such notice by CIPSCO
shall not be a condition to the right of Union Electric to exercise the CIPSCO
Option. In the event Union Electric wishes to exercise the CIPSCO Option, Union
Electric shall deliver to CIPSCO a written notice (an "Exercise Notice")
specifying the total number of CIPSCO Shares it wishes to purchase. Each closing
of a purchase of CIPSCO Shares (a "Closing") shall occur at a place, on a date
and at a time designated by Union Electric in an Exercise Notice delivered at
least two business days prior to the date of the Closing. The CIPSCO Option
shall terminate upon the earlier of: (i) the Effective Time; (ii) the
termination of the Merger Agreement pursuant to Section 9.1 thereof (other than
upon or during the continuance of a Trigger Event); or (iii) 180 days following
any termination of the Merger Agreement upon or during the continuance of a
Trigger Event (or if, at the expiration of such 180 day period the CIPSCO Option
cannot be exercised by reason of any applicable judgment, decree, order, law or
regulation, 10 business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than the third anniversary of the date hereof).
Notwithstanding the foregoing, the CIPSCO Option may not be exercised if Union
-2-
Electric is in material breach of any of its material representations or
warranties, or in material breach of any of its covenants or agreements,
contained in this Agreement or in the Merger Agreement. Upon the giving by
Union Electric to CIPSCO of the Exercise Notice and the tender of the applicable
aggregate Exercise Price, Union Electric shall be deemed to be the holder of
record of the CIPSCO Shares issuable upon such exercise, notwithstanding that
the stock transfer books of CIPSCO shall then be closed or that certificates
representing such CIPSCO Shares shall not then be actually delivered to Union
Electric.
3. Conditions to Closing. The obligation of CIPSCO to issue the
CIPSCO Shares to Union Electric hereunder is subject to the conditions, which
(other than the conditions described in clauses (i), (iii) and (iv) below) may
be waived by CIPSCO in its sole discretion, that (i) all waiting periods, if
any, under the HSR Act, applicable to the issuance of the CIPSCO Shares
hereunder shall have expired or have been terminated; (ii) the CIPSCO Shares,
and any Union Electric Shares which are issued in payment of the Exercise Price,
shall have been approved for listing on the NYSE upon official notice of
issuance; (iii) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any federal, state or local
administrative agency or commission or other federal state or local Governmental
Authority, if any, required in connection with the issuance of the CIPSCO Shares
hereunder shall have been obtained or made, as the case may be, including,
without limitation, the approval of, if applicable, the issuance of Union
Electric Shares to CIPSCO and the acquisition by CIPSCO of the Union Electric
Shares constituting the Exercise Price hereunder, and approval of the SEC under
the 1935 Act of the acquisition of the CIPSCO Shares by Union Electric; and (iv)
no preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect.
4. Closing. At any Closing, (a) CIPSCO will deliver to Union Electric
or its designee a single certificate in definitive form representing the number
of the CIPSCO Shares designated by Union Electric in its Exercise Notice, such
certificate to be registered in the name of Union Electric and to bear the
legend set forth in Section 12, and (b) Union Electric will deliver to CIPSCO
the aggregate Exercise Price for the CIPSCO Shares so designated and being
purchased by (i) wire transfer of immediately available funds or certified check
or bank check or (ii) subject to the condition in Section 1(b), a certificate or
certificates representing the number of Union Electric Shares being issued by
Union Electric in consideration thereof, as the case may be. For the purposes
of this Agreement, the
-3-
number of Union Electric Shares to be delivered to CIPSCO shall be equal to the
quotient obtained by dividing (i) the product of (x) the number of CIPSCO Shares
with respect to which the CIPSCO Option is being exercised and (y) the Exercise
Price by (ii) the Fair Market Value of the Union Electric Shares on the date
immediately preceding the date the Exercise Notice is delivered to CIPSCO.
CIPSCO shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 4 in
the name of Union Electric or such of its designees as shall have obtained
appropriate regulatory approval.
5. Representations and Warranties of CIPSCO. CIPSCO represents and
warrants to Union Electric that (a) except as set forth in Section 4.1 of the
CIPSCO Disclosure Schedule, CIPSCO is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
CIPSCO and the consummation by CIPSCO of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
CIPSCO and no other corporate proceedings on the part of CIPSCO are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
such corporate action (including the approval of the Board of Directors of
CIPSCO) is intended to render inapplicable to this Agreement and the Merger
Agreement and the transactions contemplated hereby and thereby, the provisions
of the IBCL referred to in Section 4.15 of the Merger Agreement (other than the
provisions described in Section 4.15 of the CIPSCO Disclosure Schedule), (d)
this Agreement has been duly executed and delivered by CIPSCO, constitutes a
valid and binding obligation of CIPSCO and, assuming this Agreement constitutes
a valid and binding obligation of Union Electric, is enforceable against CIPSCO
in accordance with its terms, (e) CIPSCO has taken all necessary corporate
action to authorize and reserve for issuance and to permit it to issue, upon
exercise of the CIPSCO Option, and at all times from the date hereof through the
expiration of the CIPSCO Option will have reserved, 6,779,838 authorized and
unissued CIPSCO Shares, such amount being subject to adjustment as provided in
Section 11, all of which, upon their issuance and delivery in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable, (f) upon delivery of the CIPSCO Shares to Union Electric upon the
exercise of the CIPSCO Option in accordance with its terms, Union Electric will
acquire the CIPSCO Shares free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever, (g) except as
described in Section 4.4(b) of the
-4-
Merger Agreement, the execution and delivery of this Agreement by CIPSCO does
not, and the consummation by CIPSCO of the transactions contemplated hereby will
not, violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss or
creation, a "Violation") of CIPSCO or any of its subsidiaries, pursuant to, (A)
any provision of the Articles of Incorporation or by-laws of CIPSCO, (B) any
provisions of any loan or credit agreement, note, mortgage, indenture, lease,
CIPSCO benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to CIPSCO or its properties or assets,
which Violation, in the case of each of clauses (B) and (C), could reasonably be
expected to have a material adverse effect on CIPSCO and its subsidiaries taken
as a whole, (h) except as described in Section 4.4(c) of the Merger Agreement or
Section 1(b) or Section 3 hereof, the execution and delivery of this Agreement
by CIPSCO does not, and the performance of this Agreement by CIPSCO will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, (i) none of CIPSCO, any of its
affiliates or anyone acting on its or their behalf has issued, sold or offered
any security of CIPSCO to any person under circumstances that would cause the
issuance and sale of the CIPSCO Shares, as contemplated by this Agreement, to be
subject to the registration requirements of the Securities Act as in effect on
the date hereof and, assuming the representations of Union Electric contained in
Section 6(h) hereof are true and correct, the issuance, sale and delivery of the
CIPSCO Shares hereunder would be exempt from the registration and prospectus
delivery requirements of the Securities Act, as in effect on the date hereof
(and CIPSCO shall not take any action which would cause the issuance, sale and
delivery of the CIPSCO Shares hereunder not to be exempt from such
requirements), and (j) any Union Electric Shares acquired pursuant to this
Agreement will be acquired for CIPSCO' own account, for investment purposes only
and will not be acquired by CIPSCO with a view to the public distribution
thereof in violation of any applicable provision of the Securities Act.
6. Representations and Warranties of Union Electric. Union Electric
represents and warrants to CIPSCO that (a) Union Electric is a corporation duly
organized, validly existing and
-5-
in good standing under the laws of the State of Missouri and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by Union
Electric and the consummation by Union Electric of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Union Electric and no other corporate proceedings on the part of Union
Electric are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Union Electric and constitutes a valid and binding obligation of Union Electric,
and, assuming this Agreement constitutes a valid and binding obligation of
CIPSCO, is enforceable against Union Electric in accordance with its terms, (d)
prior to any delivery of Union Electric Shares in consideration of the purchase
of CIPSCO Shares pursuant hereto, Union Electric will have taken all necessary
corporate action to authorize for issuance and to permit it to issue such Union
Electric Shares, all of which, upon their issuance and delivery in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable, and to render inapplicable to the receipt by CIPSCO of the Union
Electric Shares the provisions of the MGBCL referred to in Section 5.15 of the
Merger Agreement (other than the provisions described in Section 5.15 of the
Union Electric Disclosure Schedule), (e) upon any delivery of such Union
Electric Shares to CIPSCO in consideration of the purchase of CIPSCO Shares
pursuant hereto, CIPSCO will acquire the Union Electric Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any nature
whatsoever, (f) except as described in Section 5.4(b) of the Merger Agreement,
the execution and delivery of this Agreement by Union Electric does not, and the
consummation by Union Electric of the transactions contemplated hereby will not,
violate, conflict with, or result in the breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in any Violation by Union Electric or any of its subsidiaries,
pursuant to (A) any provision of the Restated Articles of Incorporation or By-
laws of Union Electric, (B) any provisions of any loan or credit agreement,
note, mortgage, indenture, lease, Union Electric benefit plan or other
agreement, obligation, instrument, permit, concession, franchise, license or (C)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Union Electric or its properties or assets, which Violation, in
the case of each of clauses (B) and/or (C), would have a material adverse effect
on Union Electric and its subsidiaries taken as a whole, (g) except as described
in Section 5.4(c) of the Merger Agreement or Section 1(b) or Section 3 hereof,
the execution and delivery of this Agreement by Union Electric does not, and the
consummation by Union Electric of the transactions contemplated
-6-
hereby will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority and (h) any CIPSCO
Shares acquired upon exercise of the CIPSCO Option will be acquired for Union
Electric's own account, for investment purposes only and will not be, and the
CIPSCO Option is not being, acquired by Union Electric with a view to the public
distribution thereof in violation of any applicable provision of the Securities
Act.
7. Certain Repurchases.
(a) Union Electric Put. At the request of Union Electric by written
notice at any time during which the CIPSCO Option is exercisable pursuant to
Section 2 (the "Repurchase Period"), CIPSCO (or any successor entity thereof)
shall repurchase from Union Electric all or any portion of the CIPSCO Option, at
the price set forth in subparagraph (i) below, or, at the request of Union
Electric by written notice at any time prior to August 11, 1997 (provided that
such date shall be extended to February 11, 1998 under the circumstances where
the date after which either party may terminate the Merger Agreement pursuant to
Section 9.1(b) of the Merger Agreement has been extended to February 11, 1998),
CIPSCO (or any successor entity thereof) shall repurchase from Union Electric
all or any portion of the CIPSCO Shares purchased by Union Electric pursuant to
the CIPSCO Option, at the price set forth in subparagraph (ii) below:
(i) the difference between (x) the "Market/Offer Price" for shares
of CIPSCO Common Stock as of the date Union Electric gives notice of its
intent to exercise its rights under this Section 7 (defined as the higher
of (A) the price per share offered as of such date pursuant to any tender
or exchange offer or other offer with respect to a Business Combination
which was made prior to such date and not terminated or withdrawn as of
such date (the "Offer Price") and (B) the Fair Market Value of CIPSCO
Common Stock as of such date (the "Market Price")) and the (y) Exercise
Price, multiplied by the number of CIPSCO Shares purchasable pursuant to
the CIPSCO Option (or portion thereof with respect to which Union Electric
is exercising its rights under this Section 7), but only if the
Market/Offer Price is greater than the Exercise Price;
(ii) the product of (x) the sum of (A) the Exercise Price paid by
Union Electric per CIPSCO Share acquired pursuant to the CIPSCO Option and
(B) the difference between the Market/Offer Price and the Exercise Price,
but only if the Market/Offer Price is greater than the Exercise Price, and
(y) the number of CIPSCO Shares so to be
-7-
repurchased pursuant to this Section 7. For purposes of this clause (ii),
the Offer Price shall be the highest price per share offered pursuant to a
tender or exchange offer or other Business Combination offer during the
Repurchase Period prior to the delivery by Union Electric of a notice of
repurchase.
(b) Redelivery of Union Electric Shares. If Union Electric elected to
purchase CIPSCO Shares pursuant to the exercise of the CIPSCO Option by the
issuance and delivery of Union Electric Shares, then CIPSCO shall, if so
requested by Union Electric, in fulfillment of its obligation pursuant to clause
(A) of Section 7(a)(ii)(x) (that is, with respect to the Exercise Price only and
without limitation to its obligation to pay additional consideration under
clause (B) of Section 7(a)(ii)(x)), redeliver the certificate for such Union
Electric Shares to Union Electric, free and clear of all liens, claims, damages,
charges and encumbrances of any kind or nature whatsoever; provided, however,
that if less than all of the CIPSCO Shares purchased by Union Electric pursuant
to the CIPSCO Option are to be repurchased pursuant to this Section 7, then
Union Electric shall issue to CIPSCO a new certificate representing those Union
Electric Shares which are not due to be redelivered to Union Electric pursuant
to this Section 7 as they constituted payment of the Exercise Price for the
CIPSCO Shares not being repurchased.
(c) Payment and Redelivery of CIPSCO Option or Shares. In the event
Union Electric exercises its rights under this Section 7, CIPSCO shall, within
10 business days thereafter, pay the required amount to Union Electric in
immediately available funds and Union Electric shall surrender to CIPSCO the
CIPSCO Option or the certificates evidencing the CIPSCO Shares purchased by
Union Electric pursuant thereto, and Union Electric shall warrant that it owns
the CIPSCO Option or such shares and that the CIPSCO Option or such shares are
then free and clear of all liens, claims, damages, charges and encumbrances of
any kind or nature whatsoever.
(d) Union Electric Call. If Union Electric has elected to purchase
CIPSCO Shares pursuant to the exercise of the CIPSCO Option by the issuance and
delivery of Union Electric Shares, notwithstanding that Union Electric may no
longer hold any such CIPSCO Shares or that Union Electric elects not to exercise
its other rights under this Section 7, Union Electric may require, at any time
or from time to time prior to August 11, 1997 (provided that such date shall be
extended to February 11, 1998 under the circumstances where the date after which
either party may terminate the Merger Agreement pursuant to Section 9.1(b) of
the Merger Agreement has been extended to
-8-
February 11, 1998), CIPSCO to sell to Union Electric any such Union Electric
Shares at the price attributed to such Union Electric Shares pursuant to Section
4 plus interest at the rate of 7.5% per annum on such amount from the Closing
Date relating to the exchange of such Union Electric Shares pursuant to Section
4 to the closing date under this Section 7(d) less any dividends on such Union
Electric Shares paid during such period or declared and payable to stockholders
of record on a date during such period.
8. Voting of Shares. Following the date hereof and prior to the fifth
anniversary of the date hereof (the "Expiration Date"), each party shall vote
any shares of capital stock of the other party acquired by such party pursuant
to this Agreement, including any Union Electric Shares issued pursuant to
Section 1(b) ("Restricted Shares") or otherwise beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) by such party on each matter submitted to a vote
of shareholders of such other party for and against such matter in the same
proportion as the vote of all other shareholders of such other party are voted
(whether by proxy or otherwise) for and against such matter.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date, neither
party shall, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7, or (ii)
in accordance with Section 9(b) or Section 10.
(b) Permitted Sales. Following the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares beneficially
owned by it if such sale is made pursuant to a tender or exchange offer that has
been approved or recommended, or otherwise determined to be fair to and in the
best interests of the shareholders of the other party, by a majority of the
members of the Board of Directors of such other party, which majority shall
include a majority of directors who were directors prior to the announcement of
such tender or exchange offer.
10. Registration Rights. Following the termination of the Merger
Agreement, each party hereto (a "Designated Holder") may by written notice (the
"Registration Notice") to the other party (the "Registrant") request the
Registrant to register under the Securities Act all or any part of the
Restricted Shares beneficially owned by such Designated Holder
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(the "Registrable Securities") pursuant to a bona fide firm commitment
underwritten public offering in which the Designated Holder and the underwriters
shall effect as wide a distribution of such Registrable Securities as is
reasonably practicable and shall use their best efforts to prevent any person
(including any Group (as used in Rule 13d-5 under the Exchange Act)) and its
affiliates from purchasing through such offering Restricted Shares representing
more than 1% of the outstanding shares of common stock of the Registrant on a
fully diluted basis (a "Permitted Offering"). The Registration Notice shall
include a certificate executed by the Designated Holder and its proposed
managing underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing (the "Manager"), stating that (i) they have a
good faith intention to commence promptly a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the then Fair Market Value of such shares. The
Registrant (and/or any person designated by the Registrant) shall thereupon have
the option exercisable by written notice delivered to the Designated Holder
within 10 business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable Securities
proposed to be so sold for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities to be so purchased by the
Registrant and (ii) the then Fair Market Value of such shares. Any such purchase
of Registrable Securities by the Registrant (or its designee) hereunder shall
take place at a closing to be held at the principal executive offices of the
Registrant or at the offices of its counsel at any reasonable date and time
designated by the Registrant and/or such designee in such notice within 20
business days after delivery of such notice. Any payment for the shares to be
purchased shall be made by delivery at the time of such closing of the Option
Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to
this Section 10 with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so sold;
provided, however, that (i) neither party shall be entitled to more than an
aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when (A)
the Registrant is in possession of material non-public information which it
reasonably believes
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would be detrimental to be disclosed at such time and, in the opinion of counsel
to the Registrant, such information would have to be disclosed if a registration
statement were filed at that time; (B) the Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) the Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving the Registrant or
any of its affiliates. The Registrant shall use its reasonable best efforts to
cause any Registrable Securities registered pursuant to this Section 10 to be
qualified for sale under the securities or Blue-Sky laws of such jurisdictions
as the Designated Holder may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; provided, however,
that the Registrant shall not be required to qualify to do business in, or
consent to general service of process in, any jurisdiction by reason of this
provision.
The registration rights set forth in this Section 10 are subject to
the condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to such holder
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in such registration statement all material
facts required to be disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to the Designated Holder, and the Registrant
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties agree
(i) to indemnify each other and the underwriters in the customary manner, (ii)
to enter into an underwriting agreement in form and substance customary for
transactions of such type with the Manager and the other underwriters
participating in such offering and (iii) to take all further actions which shall
be reasonably necessary to effect such registration and sale (including, if the
Manager deems it necessary, participating in road-show presentations).
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The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization. Without limitation to
any restriction on CIPSCO contained in this Agreement or in the Merger
Agreement, in the event of any change in CIPSCO Common Stock by reason of stock
dividends, splitups, mergers (other than the Mergers), recapitalizations,
combinations, exchange of shares or the like, the type and number of shares or
securities subject to the CIPSCO Option, and the purchase price per share
provided in Section 1, shall be adjusted appropriately to restore to Union
Electric its rights hereunder, including the right to purchase from CIPSCO (or
its successors) shares of CIPSCO Common Stock representing 19.9% of the
outstanding CIPSCO Common Stock for the aggregate Exercise Price calculated as
of the date of this Agreement as provided in Section 1.
12. Restrictive Legends. Each certificate representing shares of
CIPSCO Common Stock issued to Union Electric hereunder, and Union Electric
Shares, if any, delivered to CIPSCO at a Closing, shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED
AS OF AUGUST 11, 1995, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON
REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Union Electric or CIPSCO, as
the case may be, shall have delivered to the other party a copy of a letter from
the staff of the Securities and Exchange Commission, or an opinion of counsel,
in form and substance satisfactory to the other party, to the effect that such
legend is not required for purposes of the Securities Act; (ii) the reference to
the provisions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this Agreement and
under circumstances that
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do not require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other legend
as may be required by law. Certificates representing shares sold in a registered
public offering pursuant to Section 10 shall not be required to bear the legend
set forth in this Section 12.
13. Binding Effect; No Assignment; No Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or the
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement. Any Restricted Shares
sold by a party in compliance with the provisions of Section 10 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement, unless and until such party shall repurchase or
otherwise become the beneficial owner of such shares, and any transferee of such
shares shall not be entitled to the registration rights of such party.
14. Specific Performance. The parties recognize and agree that if for
any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
15. Entire Agreement. This Agreement, the Confidentiality Agreement
and the Merger Agreement (including the exhibits and schedules thereto)
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof.
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16. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
17. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regulatory agency
determines that Union Electric is not permitted to acquire, or CIPSCO is not
permitted to repurchase pursuant to Section 7, the full number of shares of
CIPSCO Common Stock provided in Section 1 hereof (as the same may be adjusted),
it is the express intention of CIPSCO to allow Union Electric to acquire or to
require CIPSCO to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith, or not take any action required herein, the other
party shall not be entitled to specific performance of such provision or part
hereof or to any other remedy, including but not limited to money damages, for
breach hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
18. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if (i) delivered personally, or (ii) sent
by reputable overnight courier service, or (iii) telecopied (which is
confirmed), or (iv) five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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A. If to Union Electric, to:
Union Electric Company
1901 Chouteau Avenue
P.O. Box 149
St. Louis, MO 63166
Attention: Donald E. Brandt
Telephone: (314) 554-2473
Telecopy: (314) 554-3066
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
B. If to CIPSCO, to:
CIPSCO Incorporated
607 East Adams Street
Springfield, IL 62739
Attention: Craig D. Nelson
Telephone: (217) 525-5315
Telecopy: (217) 535-5067
with a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, IL 60601-1692
Attention: Robert A. Yolles
Telephone: (312) 782-3939
Telecopy: (312) 782-8585
19. Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed entirely within such State and without
regard to its choice of law principles. Each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of any federal court located in
the State of New York or any New York state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement,
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(b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of New York or a New York state court.
20. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". 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.
21. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but both of which, taken
together, shall constitute one and the same instrument.
22. Expenses. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
23. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
24. Extension of Time Periods. The time periods for exercise of
certain rights under Sections 2, 6 and 7 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and for the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid any liability under Section 16(b) of the Exchange Act by
reason of such exercise.
25. Replacement of CIPSCO Option. Upon receipt by CIPSCO of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
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Agreement, if mutilated, CIPSCO will execute and deliver a new Agreement of like
tenor and date.
-17-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
UNION ELECTRIC COMPANY
By: /s/ Charles W. Mueller
----------------------
Name: Charles W. Mueller
Title: President
CIPSCO INCORPORATED
By: /s/ Clifford L. Greenwalt
-------------------------
Name: Clifford L. Greenwalt
Title: President
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EX-10.B
4
UNION ELECTRIC COMPANY STOCK OPTION AGREEMENT
EXHIBIT 10(b)
UNION ELECTRIC COMPANY STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 11, 1995 by and between
Union Electric Company, a Missouri corporation ("Union Electric"), and CIPSCO
Incorporated, an Illinois corporation ("CIPSCO").
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) Union Electric, CIPSCO, Union Electric Holding Corp., a Missouri
corporation ("Holdings") and Union Electric Merger Inc., a Missouri corporation
("Merger Sub"), are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), which provides, among other things,
upon the terms and subject to the conditions thereof, for the merger of Merger
Sub with and into Union Electric and the merger of Holdings with and into CIPSCO
(the "Mergers"); and
WHEREAS, as a condition to CIPSCO' willingness to enter into the
Merger Agreement, CIPSCO has requested that Union Electric agree, and Union
Electric has so agreed, to grant to CIPSCO an option with respect to certain
shares of Union Electric's common stock, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, to induce CIPSCO to enter into the Merger Agreement,
and in consideration of the mutual covenants and agreements set forth herein and
in the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. Union Electric hereby grants CIPSCO an
irrevocable option (the "Union Electric Option") to purchase up to 6,983,233
shares, subject to adjustment as provided in Section 11 (such shares being
referred to herein as the "Union Electric Shares") of common stock, par value
$5.00 per share, of Union Electric (the "Union Electric Common Stock") (being
6.84% of the number of shares of Union Electric Common Stock outstanding on the
date hereof) in the manner set forth below at a price (the "Exercise Price") per
Union Electric Share of $35.94 (which is equal to the Fair Market Value (as
defined below) of a share of Union Electric Common Stock on the date hereof),
payable, at CIPSCO's option, (a) in cash or (b) subject to the receipt of
approvals of any Governmental Authority required for Union Electric to acquire
shares of common stock, no par value per share, of CIPSCO ("CIPSCO Shares") from
CIPSCO, and for CIPSCO to issue the CIPSCO Shares to Union Electric, which
approvals Union Electric and CIPSCO shall use their respective best efforts to
obtain, in CIPSCO Shares, in
either case in accordance with Section 4 hereof. Notwithstanding the foregoing,
in no event shall the number of Union Electric Shares for which the Union
Electric Option is exercisable exceed 5.48% of the number of issued and
outstanding shares of Union Electric Common Stock. As used herein, the "Fair
Market Value" of any share shall be the average of the daily closing sales price
for such share on the New York Stock Exchange (the "NYSE") during the 10 NYSE
trading days prior to the fifth NYSE trading day preceding the date such Fair
Market Value is to be determined. Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Merger Agreement.
2. Exercise of Option. The Union Electric Option may be exercised by
CIPSCO, in whole or in part, at any time or from time to time after the Merger
Agreement becomes terminable by CIPSCO under circumstances which could entitle
CIPSCO to termination fees under either Section 9.3(a) of the Merger Agreement
(provided that the events specified in Section 9.3(a)(ii)(x) of the Merger
Agreement shall have occurred, although the events specified in Section
9.3(a)(ii)(y) thereof need not have occurred) or Section 9.3(b) of the Merger
Agreement (regardless of whether the Merger Agreement is actually terminated or
whether there occurs a closing of any Business Combination involving a Target
Party or a closing by which a Target Party becomes a subsidiary), or which could
entitle CIPSCO to terminate the Merger Agreement under Section 9.1(g)(iii)
thereof (provided that at the time of such action or inaction by the Board of
Directors of Union Electric or any committee thereof there shall have been a
third-party tender offer for shares of, or a third-party offer or proposal with
respect to a Business Combination involving, Union Electric which at the time of
such action or inaction shall not have been rejected by the Board of Directors
of Union Electric), any such event by which the Merger Agreement becomes so
terminable by CIPSCO being referred to herein as a "Trigger Event." Union
Electric shall notify CIPSCO promptly in writing of the occurrence of any
Trigger Event, it being understood that the giving of such notice by Union
Electric shall not be a condition to the right of CIPSCO to exercise the Union
Electric Option. In the event CIPSCO wishes to exercise the Union Electric
Option, CIPSCO shall deliver to Union Electric a written notice (an "Exercise
Notice") specifying the total number of Union Electric Shares it wishes to
purchase. Each closing of a purchase of Union Electric Shares (a "Closing")
shall occur at a place, on a date and at a time designated by CIPSCO in an
Exercise Notice delivered at least two business days prior to the date of the
Closing. The Union Electric Option shall terminate upon the earlier of: (i) the
Effective Time; (ii) the termination of the Merger Agreement pursuant to Section
9.1 thereof (other than upon or during the continuance of a Trigger Event); or
(iii) 180 days following any termination of the Merger Agreement upon or during
the continuance of a Trigger Event (or if, at the expiration of such 180 day
period the Union Electric Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, 10 business days after such
impediment to exercise shall have been removed or shall have become final and
not subject to appeal, but in no event under
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this clause (iii) later than the third anniversary of the date hereof).
Notwithstanding the foregoing, the Union Electric Option may not be exercised if
CIPSCO is in material breach of any of its material representations or
warranties, or in material breach of any of its covenants or agreements,
contained in this Agreement or in the Merger Agreement. Upon the giving by
CIPSCO to Union Electric of the Exercise Notice and the tender of the applicable
aggregate Exercise Price, CIPSCO shall be deemed to be the holder of record of
the Union Electric Shares issuable upon such exercise, notwithstanding that the
stock transfer books of Union Electric shall then be closed or that certificates
representing such Union Electric Shares shall not then be actually delivered to
CIPSCO.
3. Conditions to Closing. The obligation of Union Electric to issue
the Union Electric Shares to CIPSCO hereunder is subject to the conditions,
which (other than the conditions described in clauses (i), (iii) and (iv) below)
may be waived by Union Electric in its sole discretion, that (i) all waiting
periods, if any, under the HSR Act, applicable to the issuance of the Union
Electric Shares hereunder shall have expired or have been terminated; (ii) the
Union Electric Shares, and any CIPSCO Shares which are issued in payment of the
Exercise Price, shall have been approved for listing on the NYSE upon official
notice of issuance; (iii) all consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any federal, state or local
administrative agency or commission or other federal state or local Governmental
Authority, if any, required in connection with the issuance of the Union
Electric Shares hereunder shall have been obtained or made, as the case may be,
including, without limitation, the approval of, if applicable, the issuance of
the CIPSCO Shares to Union Electric and the acquisition by Union Electric of the
CIPSCO Shares constituting the Exercise Price hereunder, and approval of the SEC
under the 1935 Act of the acquisition of the Union Electric Shares by CIPSCO;
and (iv) no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such issuance shall
be in effect.
4. Closing. At any Closing, (a) Union Electric will deliver to
CIPSCO or its designee a single certificate in definitive form representing the
number of the Union Electric Shares designated by CIPSCO in its Exercise Notice,
such certificate to be registered in the name of CIPSCO and to bear the legend
set forth in Section 12, and (b) CIPSCO will deliver to Union Electric the
aggregate Exercise Price for the Union Electric Shares so designated and being
purchased by (i) wire transfer of immediately available funds or certified check
or bank check or (ii) subject to the condition in Section 1(b), a
-3-
certificate or certificates representing the number of CIPSCO Shares being
issued by CIPSCO in consideration thereof, as the case may be. For the purposes
of this Agreement, the number of CIPSCO Shares to be delivered to Union Electric
shall be equal to the quotient obtained by dividing (i) the product of (x) the
number of Union Electric Shares with respect to which the Union Electric Option
is being exercised and (y) the Exercise Price by (ii) the Fair Market Value of
the CIPSCO Shares on the date immediately preceding the date the Exercise Notice
is delivered to Union Electric. Union Electric shall pay all expenses, and any
and all United States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 4 in the name of CIPSCO or such designees of
CIPSCO as shall have obtained appropriate regulatory approval.
5. Representations and Warranties of Union Electric. Union Electric
represents and warrants to CIPSCO that (a) except as set forth in Section 5.1 of
the Union Electric Disclosure Schedule, Union Electric is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Union Electric and the consummation by Union Electric of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Union Electric and no other corporate
proceedings on the part of Union Electric are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) such corporate
action (including the approval of the Board of Directors of Union Electric) is
intended to render inapplicable to this Agreement and the Merger Agreement and
the transactions contemplated hereby and thereby, the provisions of the MGBCL
referred to in Section 5.15 of the Merger Agreement (other than the provisions
described in Section 5.15 of the Union Electric Disclosure Schedule), (d) this
Agreement has been duly executed and delivered by Union Electric, constitutes a
valid and binding obligation of Union Electric and, assuming this Agreement
constitutes a valid and binding obligation of CIPSCO, is enforceable against
Union Electric in accordance with its terms, (e) Union Electric has taken all
necessary corporate action to authorize and reserve for issuance and to permit
it to issue, upon exercise of the Union Electric Option in accordance with its
terms, and at all times from the date hereof through the expiration of the Union
Electric Option will have reserved, 6,983,233 authorized and unissued Union
Electric Shares, such amount being subject to adjustment as provided in Section
11, all of which, upon their issuance and delivery in accordance with the terms
-4-
of this Agreement, will be validly issued, fully paid and nonassessable, (f)
upon delivery of the Union Electric Shares to CIPSCO upon the exercise of the
Union Electric Option in accordance with its terms, CIPSCO will acquire the
Union Electric Shares free and clear of all claims, liens, charges, encumbrances
and security interests of any nature whatsoever, (g) except as described in
Section 5.4(b) of the Merger Agreement, the execution and delivery of this
Agreement by Union Electric does not, and the consummation by Union Electric of
the transactions contemplated hereby will not, violate, conflict with, or result
in a breach of any provision of, or constitute a default (with or without notice
or lapse of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination, cancellation,
or acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") of Union Electric or any of its
subsidiaries, pursuant to, (A) any provision of the Restated Articles of
Incorporation or by-laws of Union Electric, (B) any provisions of any loan or
credit agreement, note, mortgage, indenture, lease, Union Electric benefit plan
or other agreement, obligation, instrument, permit, concession, franchise,
license or (C) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Union Electric or its properties or assets, which
Violation, in the case of each of clauses (B) and (C), could reasonably be
expected to have a material adverse effect on Union Electric and its
subsidiaries taken as a whole, (h) except as described in Section 5.4(c) of the
Merger Agreement or Section 1(b) or Section 3 hereof, the execution and delivery
of this Agreement by Union Electric does not, and the performance of this
Agreement by Union Electric will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, (i) none of Union Electric, any of its affiliates or anyone acting on
its or their behalf has issued, sold or offered any security of Union Electric
to any person under circumstances that would cause the issuance and sale of the
Union Electric Shares, as contemplated by this Agreement, to be subject to the
registration requirements of the Securities Act as in effect on the date hereof
and, assuming the representations of CIPSCO contained in Section 6(h) hereof are
true and correct, the issuance, sale and delivery of the Union Electric Shares
hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof (and Union
Electric shall not take any action which would cause the issuance, sale and
delivery of the Union Electric Shares hereunder not to be exempt from such
requirements), and (j) any CIPSCO Shares acquired pursuant to
-5-
this Agreement will be acquired for Union Electric's own account, for investment
purposes only and will not be acquired by Union Electric with a view to the
public distribution thereof in violation of any applicable provision of the
Securities Act.
6. Representations and Warranties of CIPSCO. CIPSCO represents and
warrants to Union Electric that (a) CIPSCO is a corporation duly organized,
validly existing and in good standing under the laws of the State of Missouri
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by CIPSCO and the consummation by CIPSCO of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of CIPSCO and no other corporate proceedings on the part of CIPSCO
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
CIPSCO and constitutes a valid and binding obligation of CIPSCO, and, assuming
this Agreement constitutes a valid and binding obligation of Union Electric, is
enforceable against CIPSCO in accordance with its terms, (d) prior to any
delivery of CIPSCO Shares in consideration of the purchase of Union Electric
Shares pursuant hereto, CIPSCO will have taken all necessary corporate action to
authorize for issuance and to permit it to issue such CIPSCO Shares, all of
which, upon their issuance and delivery in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, and to render
inapplicable to the receipt by Union Electric of the CIPSCO Shares the
provisions of the MGBCL referred to in Section 4.15 of the Merger Agreement
(other than the provisions described in Section 4.15 of the CIPSCO Disclosure
Schedule), (e) upon any delivery of such CIPSCO Shares to Union Electric in
consideration of the purchase of Union Electric Shares pursuant hereto, Union
Electric will acquire the CIPSCO Shares free and clear of all claims, liens,
charges, encumbrances and security interests of any nature whatsoever, (f)
except as described in Section 4.4(b) of the Merger Agreement, the execution and
delivery of this Agreement by CIPSCO does not, and the consummation by CIPSCO of
the transactions contemplated hereby will not, violate, conflict with, or result
in the breach of any provision of, or constitute a default (with or without
notice or lapse of time, or both) under, or result in any Violation by CIPSCO or
any of its subsidiaries, pursuant to (A) any provision of the Articles of
Incorporation or By-laws of CIPSCO, (B) any provisions of any loan or credit
agreement, note, mortgage, indenture, lease, CIPSCO benefit plan or other
agreement, obligation, instrument, permit, concession, franchise, license or (C)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to CIPSCO or its properties or assets, which Violation, in the case
-6-
of each of clauses (B) and/or (C), would have a material adverse effect on
CIPSCO and its subsidiaries taken as a whole, (g) except as described in Section
4.4(c) of the Merger Agreement or Section 1(b) or Section 3 hereof, the
execution and delivery of this Agreement by CIPSCO does not, and the
consummation by CIPSCO of the transactions contemplated hereby will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority and (h) any CIPSCO Shares acquired
upon exercise of the Union Electric Option will be acquired for CIPSCO's own
account, for investment purposes only and will not be, and the Union Electric
Option is not being, acquired by CIPSCO with a view to the public distribution
thereof in violation of any applicable provision of the Securities Act.
7. Certain Repurchases.
(a) CIPSCO Put. At the request of CIPSCO by written notice at any
time during which the Union Electric Option is exercisable pursuant to Section 2
(the "Repurchase Period"), Union Electric (or any successor entity thereof)
shall repurchase from CIPSCO all or any portion of the Union Electric Option, at
the price set forth in subparagraph (i) below, or, at the request of CIPSCO by
written notice at any time prior to August 11, 1997 (provided that such date
shall be extended to February 11, 1998 under the circumstances where the date
after which either party may terminate the Merger Agreement pursuant to Section
9.1(b) of the Merger Agreement has been extended to February 11, 1998), Union
Electric (or any successor entity thereof) shall repurchase from CIPSCO all or
any portion of the Union Electric Shares purchased by CIPSCO pursuant to the
Union Electric Option, at the price set forth in subparagraph (ii) below:
(i) the difference between (x) the "Market/Offer Price" for
shares of Union Electric Common Stock as of the date CIPSCO gives notice
of its intent to exercise its rights under this Section 7 (defined as
the higher of (A) the price per share offered as of such date pursuant
to any tender or exchange offer or other offer with respect to a
Business Combination which was made prior to such date and not
terminated or withdrawn as of such date (the "Offer Price") and (B) the
Fair Market Value of Union Electric Common Stock as of such date (the
"Market Price")) and the (y) Exercise Price, multiplied by the number of
Union Electric Shares purchasable pursuant to the Union Electric Option
(or portion thereof with respect to which CIPSCO is exercising its
rights under this Section 7), but only if the Market/Offer Price is
greater than the Exercise Price;
-7-
(ii) the product of (x) the sum of (A) the Exercise Price paid by
CIPSCO per Union Electric Share acquired pursuant to the Union Electric
Option and (B) the difference between the Market/Offer Price and the
Exercise Price, but only if the Market/Offer Price is greater than the
Exercise Price, and (y) the number of Union Electric Shares so to be
repurchased pursuant to this Section 7. For purposes of this clause
(ii), the Offer Price shall be the highest price per share offered
pursuant to a tender or exchange offer or other Business Combination
offer during the Repurchase Period prior to the delivery by CIPSCO of a
notice of repurchase.
(b) Redelivery of CIPSCO Shares. If CIPSCO elected to purchase Union
Electric Shares pursuant to the exercise of the Union Electric Option by the
issuance and delivery of CIPSCO Shares, then Union Electric shall, if so
requested by CIPSCO, in fulfillment of its obligation pursuant to clause (A) of
Section 7(a)(ii)(x) (that is, with respect to the Exercise Price only and
without limitation to its obligation to pay additional consideration under
clause (B) of Section 7(a)(ii)(x)), redeliver the certificate for such CIPSCO
Shares to CIPSCO, free and clear of all liens, claims, damages, charges and
encumbrances of any kind or nature whatsoever; provided, however, that if less
than all of the Union Electric Shares purchased by CIPSCO pursuant to the Union
Electric Option are to be repurchased pursuant to this Section 7, then CIPSCO
shall issue to Union Electric a new certificate representing those CIPSCO Shares
which are not due to be redelivered to CIPSCO pursuant to this Section 7 as they
constituted payment of the Exercise Price for the Union Electric Shares not
being repurchased.
(c) Payment and Redelivery of Union Electric Option or Shares. In
the event CIPSCO exercises its rights under this Section 7, Union Electric
shall, within 10 business days thereafter, pay the required amount to CIPSCO in
immediately available funds and CIPSCO shall surrender to Union Electric the
Union Electric Option or the certificates evidencing the Union Electric Shares
purchased by CIPSCO pursuant thereto, and CIPSCO shall warrant that it owns the
Union Electric Option or such shares and that the Union Electric Option or such
shares are then free and clear of all liens, claims, damages, charges and
encumbrances of any kind or nature whatsoever.
(d) CIPSCO Call. If CIPSCO has elected to purchase CIPSCO Shares
pursuant to the exercise of the Union Electric Option by the issuance and
delivery of CIPSCO Shares, notwithstanding that CIPSCO may no longer hold any
such Union Electric Shares or that CIPSCO elects not to exercise its other
rights
-8-
under this Section 7, CIPSCO may require, at any time or from time to time prior
to August 11, 1997 (provided that such date shall be extended to February 11,
1998 under the circumstances where the date after which either party may
terminate the Merger Agreement pursuant to Section 9.1(b) of the Merger
Agreement has been extended to February 11, 1998), Union Electric to sell to
CIPSCO any such CIPSCO Shares at the price attributed to such CIPSCO Shares
pursuant to Section 4 plus interest at the rate of 7.5% per annum on such amount
from the Closing Date relating to the exchange of such CIPSCO Shares pursuant to
Section 4 to the closing date under this Section 7(d) less any dividends on such
CIPSCO Shares paid during such period or declared and payable to stockholders of
record on a date during such period.
8. Voting of Shares. Following the date hereof and prior to the
fifth anniversary of the date hereof (the "Expiration Date"), each party shall
vote any shares of capital stock of the other party acquired by such party
pursuant to this Agreement, including any CIPSCO Shares issued pursuant to
Section 1(b) ("Restricted Shares") or otherwise beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) by such party on each matter submitted to a vote
of shareholders of such other party for and against such matter in the same
proportion as the vote of all other shareholders of such other party are voted
(whether by proxy or otherwise) for and against such matter.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date, neither
party shall, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7, or (ii)
in accordance with Section 9(b) or Section 10.
(b) Permitted Sales. Following the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares beneficially
owned by it if such sale is made pursuant to a tender or exchange offer that has
been approved or recommended, or otherwise determined to be fair to and in the
best interests of the shareholders of the other party, by a majority of the
members of the Board of Directors of such other party, which majority shall
include a majority of directors who were directors prior to the announcement of
such tender or exchange offer.
-9-
10. Registration Rights. Following the termination of the Merger
Agreement, each party hereto (a "Designated Holder") may by written notice (the
"Registration Notice") to the other party (the "Registrant") request the
Registrant to register under the Securities Act all or any part of the
Restricted Shares beneficially owned by such Designated Holder (the "Registrable
Securities") pursuant to a bona fide firm commitment underwritten public
offering in which the Designated Holder and the underwriters shall effect as
wide a distribution of such Registrable Securities as is reasonably practicable
and shall use their best efforts to prevent any person (including any Group (as
used in Rule 13d-5 under the Exchange Act)) and its affiliates from purchasing
through such offering Restricted Shares representing more than 1% of the
outstanding shares of common stock of the Registrant on a fully diluted basis (a
"Permitted Offering"). The Registration Notice shall include a certificate
executed by the Designated Holder and its proposed managing underwriter, which
underwriter shall be an investment banking firm of nationally recognized
standing (the "Manager"), stating that (i) they have a good faith intention to
commence promptly a Permitted Offering and (ii) the Manager in good faith
believes that, based on the then prevailing market conditions, it will be able
to sell the Registrable Securities at a per share price equal to at least 80% of
the then Fair Market Value of such shares. The Registrant (and/or any person
designated by the Registrant) shall thereupon have the option exercisable by
written notice delivered to the Designated Holder within 10 business days after
the receipt of the Registration Notice, irrevocably to agree to purchase all or
any part of the Registrable Securities proposed to be so sold for cash at a
price (the "Option Price") equal to the product of (i) the number of Registrable
Securities to be so purchased by the Registrant and (ii) the then Fair Market
Value of such shares. Any such purchase of Registrable Securities by the
Registrant (or its designee) hereunder shall take place at a closing to be held
at the principal executive offices of the Registrant or at the offices of its
counsel at any reasonable date and time designated by the Registrant and/or such
designee in such notice within 20 business days after delivery of such notice.
Any payment for the shares to be purchased shall be made by delivery at the time
of such closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to
this Section 10 with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so sold;
provided, however, that (i) neither party shall be entitled to more than an
aggregate of two effective registration
-10-
statements hereunder and (ii) the Registrant will not be required to file any
such registration statement during any period of time (not to exceed 40 days
after such request in the case of clause (A) below or 90 days in the case of
clauses (B) and (C) below) when (A) the Registrant is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to the Registrant, such
information would have to be disclosed if a registration statement were filed at
that time; (B) the Registrant is required under the Securities Act to include
audited financial statements for any period in such registration statement and
such financial statements are not yet available for inclusion in such
registration statement; or (C) the Registrant determines, in its reasonable
judgment, that such registration would interfere with any financing, acquisition
or other material transaction involving the Registrant or any of its affiliates.
The Registrant shall use its reasonable best efforts to cause any Registrable
Securities registered pursuant to this Section 10 to be qualified for sale under
the securities or Blue-Sky laws of such jurisdictions as the Designated Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Registrant shall not be
required to qualify to do business in, or consent to general service of process
in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are subject to
the condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to such holder
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in such registration statement all material
facts required to be disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to the Designated Holder, and the Registrant
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties agree
(i) to indemnify each other and the underwriters in the customary manner, (ii)
to enter into an underwriting agreement in form and substance customary for
transactions of such type with the Manager and the other underwriters
participating in such offering
-11-
and (iii) to take all further actions which shall be reasonably necessary to
effect such registration and sale (including, if the Manager deems it necessary,
participating in road-show presentations).
The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization. Without limitation to
any restriction on Union Electric contained in this Agreement or in the Merger
Agreement, in the event of any change in Union Electric Common Stock by reason
of stock dividends, splitups, mergers (other than the Mergers),
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Union Electric Option, and the
purchase price per share provided in Section 1, shall be adjusted appropriately
to restore to CIPSCO its rights hereunder, including the right to purchase from
Union Electric (or its successors) shares of Union Electric Common Stock
representing 6.84% of the outstanding Union Electric Common Stock for the
aggregate Exercise Price calculated as of the date of this Agreement as provided
in Section 1.
12. Restrictive Legends. Each certificate representing shares of
Union Electric Common Stock issued to CIPSCO hereunder, and CIPSCO Shares, if
any, delivered to Union Electric at a Closing, shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF AUGUST 11, 1995, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if CIPSCO or Union Electric, as
the case may be, shall have delivered to the other party a copy of a letter from
the staff of the Securities and Exchange Commission, or an opinion of counsel,
in form and substance satisfactory to the
-12-
other party, to the effect that such legend is not required for purposes of the
Securities Act; (ii) the reference to the provisions of this Agreement in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a registered public
offering pursuant to Section 10 shall not be required to bear the legend set
forth in this Section 12.
13. Binding Effect; No Assignment; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by operation of
law, or with the written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement. Any Restricted Shares
sold by a party in compliance with the provisions of Section 10 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement, unless and until such party shall repurchase or
otherwise become the beneficial owner of such shares, and any transferee of such
shares shall not be entitled to the registration rights of such party.
14. Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
15. Entire Agreement. This Agreement, the Confidentiality Agreement
and the Merger Agreement (including the exhibits and schedules thereto)
constitute the entire agreement
-13-
among the parties with respect to the subject matter hereof and thereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof and
thereof.
16. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
17. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regulatory agency
determines that CIPSCO is not permitted to acquire, or Union Electric is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Union Electric Common Stock provided in Section 1 hereof (as the same may be
adjusted), it is the express intention of Union Electric to allow CIPSCO to
acquire or to require Union Electric to repurchase such lesser number of shares
as may be permissible, without any amendment or modification hereof. Each party
agrees that, should any court or other competent authority hold any provision of
this Agreement or part hereof to be null, void or unenforceable, or order any
party to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
18. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if (i) delivered personally, or (ii) sent
by reputable overnight courier service, or (iii) telecopied (which is
confirmed), or (iv) five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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A. If to Union Electric, to:
Union Electric Company
1901 Chouteau Avenue
P.O. Box 149
St. Louis, MO 63166
Attention: Donald E. Brandt
Telephone: (314) 554-2473
Telecopy: (314) 554-3066
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
B. If to CIPSCO, to:
CIPSCO Incorporated
607 East Adams Street
Springfield, IL 62739
Attention: Craig D. Nelson
Telephone: (217) 525-5315
Telecopy: (217) 535-5067
with a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, IL 60601-1692
Attention: Robert A. Yolles
Telephone: (312) 782-3939
Telecopy: (312) 782-8585
19. Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed entirely within such State and without
regard to its choice of law principles. Each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of any federal court located in
the State of New York or any New York
-15-
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State of New
York or a New York state court.
20. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". 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.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of
which, taken together, shall constitute one and the same instrument.
22. Expenses. Except as otherwise expressly provided herein or in
the Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
23. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
24. Extension of Time Periods. The time periods for exercise of
certain rights under Sections 2, 6 and 7 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and for the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid any liability under Section 16(b) of the Exchange Act by
reason of such exercise.
25. Replacement of Union Electric Option. Upon receipt by Union
Electric of evidence reasonably satisfactory to
-16-
it of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, Union
Electric will execute and deliver a new Agreement of like tenor and date.
-17-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
UNION ELECTRIC COMPANY
By: /s/ Charles W. Mueller
-----------------------
Name: Charles W. Mueller
Title: President
CIPSCO INCORPORATED
By: /s/ Clifford L. Greenwalt
-------------------------
Name: Clifford L. Greenwalt
Title: President
-18-
EX-99.A
5
PRESS RELEASE
MEDIA CONTACTS: INVESTOR CONTACTS:
Susan Gallagher -- Union Electric Carlin Scanlan -- Union Electric
(314) 554-2175 (314) 554-2902
Lynne Galia -- CIPSCO Jim Goff -- CIPSCO
(217) 525-5232 (217) 525-5547
UNION ELECTRIC COMPANY OF MISSOURI AND CIPSCO
INCORPORATED OF ILLINOIS SIGN DEFINITIVE MERGER AGREEMENT
-- $1.2 Billion Transaction Will Create Premier Midwestern Utility With Assets
of More Than $8 Billion; Market Capitalization of the Two Companies Is $4.6
Billion
-- "Merger combines two financially strong, low-cost energy providers with
common visions and strategies and highly compatible operations and managements,"
says Union Electric President and CEO Charles W. Mueller
-- "The two companies' contiguous territories and similar customer-focused
philosophies make the combination a natural," says CIPSCO President and CEO
Clifford L. Greenwalt.
St. Louis, Mo., and Springfield, Ill., Aug. 14, 1995 -- Union Electric Company
(NYSE:UEP) and CIPSCO Incorporated (NYSE:CIP) have signed a definitive merger
agreement in a transaction valued at approximately $1.2 billion. The combined
market capitalization of the two companies is $4.6 billion. The merger will
create a combined company with assets in excess of $8 billion. The agreement
was approved by the boards of directors of both companies.
As a result of this transaction, a new, registered public utility
holding company will be formed as the parent of both Union Electric Company and
Central Illinois Public Service
Company (CIPS). The combined entity will serve 1.4 million electric customers
and 284,000 natural gas customers in a 44,000-square-mile area of Missouri and
Illinois. Under terms of the agreement, all of UE's 80,000 Illinois customers
will become customers of CIPS.
The agreement calls for holders of Union Electric common stock to
receive one share of the new holding company common stock for each Union
Electric share they hold and for holders of CIPSCO common stock to receive 1.03
shares of the new holding company common stock for each of their CIPSCO shares.
It is expected that the transaction will qualify as a tax-free exchange and will
be accounted for as a pooling of interests.
It is anticipated that the new holding company will adopt Union
Electric Company's dividend payment level. Union Electric's current indicated
annual dividend is $2.44 per common share, and CIPSCO's is $2.04. The boards of
both companies have historically increased dividends on a consistent basis.
The parties expect the combined entity to realize $570 million in
savings over 10 years from combining certain operations of the two companies.
Unlike several recent utility combinations, labor savings will not be the
dominant category of savings. Approximately two-thirds of the savings will
-2-
result from eliminating duplication in corporate and administrative programs,
from purchasing economies and reduced electric production and gas costs. About
a third of total savings will come through elimination of around 300 positions -
- essentially through attrition.
The combination joins two of the nation's lowest-cost energy
providers. Both are competitively positioned in the interchange market for the
sale of electricity. Their interconnections with 28 other systems will provide
substantial opportunities for additional interchange energy sales. The combined
companies will also achieve significant savings through the joint dispatch of
energy.
The parties expect that the transaction will be completed by year-end
1996 and that it will not be dilutive to earnings. The new holding company will
be based in St. Louis. The headquarters of Union Electric and CIPS will remain
in St. Louis and Springfield, Ill., respectively.
UE President and Chief Executive Officer Charles W. Mueller will serve
as the new holding company's chairman and chief executive officer. CIPSCO
President and Chief Executive Officer Clifford L. Greenwalt will assume the
title of vice chairman of the holding company.
-3-
The new holding company's 15-member board will include all 10 members
from Union Electric's existing board of directors and five members from CIPSCO's
board.
"The merger combines two financially strong, low-cost energy providers
with common visions and strategies and highly compatible operations and
managements," says Mueller. "This transaction allows us to spread the cost of
advanced energy delivery systems over a larger base, while keeping our rates low
and enhancing our reliability and service quality.
"Moreover, it will enable us to take full advantage of the changing
industry landscape to capitalize on our financial strengths, our service-
oriented cultures and our lean organizational structures. By doing so, we will
be well-positioned to continue to provide superior shareholder returns and
customer benefits, both now and into the next century."
Greenwalt adds, "The two companies' contiguous territories and similar
customer-focused philosophies make the combination a natural -- one that will
bring significant benefits to our respective shareholders, individual and
business customers, employees and the many communities we serve."
With regard to rates, Greenwalt says: "We expect the effect on rates
to be positive for the customer. As synergies
-4-
occur and certain costs of producing energy are reduced, customers will benefit.
The long-term outlook is that rates will be lower than they would have been if
this strategic combination had not occurred."
Mueller adds, "Both UE and CIPS will continue to maintain a strong
corporate presence in the communities we serve and to demonstrate a strong
commitment to economic development and community service. In addition, by
employing our much greater combined resources, we can invest more in advanced
systems, training and facilities to provide even better service, while remaining
a low-cost energy provider."
The agreement is subject to approval by the shareholders of both
companies and by regulatory agencies. Shareholder approval will be sought by
year-end 1995.
As of Aug. 11, 1995, Union Electric Company had 102,123,834 shares of
common stock outstanding, and CIPSCO had 34,069,542 common shares outstanding.
The preferred stock of Union Electric Company and Central Illinois
Public Service Company will remain outstanding after the transaction.
Filings will be submitted to the following government and regulatory
agencies: Illinois Commerce Commission, Missouri Public Service Commission,
Federal Energy Regulatory
-5-
Commission, Nuclear Regulatory Commission and the Securities and Exchange
Commission. In addition, the Federal Trade Commission and the Department of
Justice will review the agreement.
Based in St. Louis, Union Electric provides energy services --
electricity and natural gas -- to 1.2 million customers over a 24,500-square-
mile area in Missouri and Illinois. Based in Springfield, Ill., CIPSCO through
its utility subsidiary, Central Illinois Public Service Company, supplies
electricity to 317,000 customers and natural gas to 166,000 customers over a
20,000-square-mile region of central and southern Illinois. A second
subsidiary, CIPSCO Investment Company, manages CIPSCO's non-utility investments,
including leveraged leases, marketable securities and energy projects.
-6-
TRANSACTION AT A GLANCE
-----------------------
Union Electric Company: (NYSE:UEP) CIPSCO Incorporated: (NYSE:CIP) Current
Market Capitalization of the two companies: $4.6 billion
TERMS:
. UE and CIPSCO to exchange shares with the new holding company.
Transaction valued at approximately $1.2 billion. At date of closing,
UE common shareholders to own 1 share of new holding company common
stock for each share of UE stock; CIPSCO common shareholders to own
1.03 shares of new holding company common stock for each share of
CIPSCO common stock.
. Merger to be accounted for as a pooling of interests; to be a tax-
free reorganization for Federal income tax purposes.
. The new holding company to adopt UE's dividend payment level. UE's
current indicated dividend is $2.44 per common share; CIPSCO's is
$2.04. The boards of both companies have historically increased
dividends on a consistent basis. Preferred stock of UE and CIPS (the
principal utility subsidiary of CIPSCO) to remain outstanding after
the transaction.
. UE/CIPS to be held under a newly created holding company to be based
in St. Louis. The new holding company's chairman and CEO: UE
President and Chief Executive Officer Charles W. Mueller; Vice
Chairman: CIPSCO President and Chief Executive Officer Clifford L.
Greenwalt.
. Anticipated savings: $570 million over 10 years. Achieved through
elimination of duplication in corporate and administrative programs;
purchasing economies; reduced production costs; reduced staffing.
Labor not the dominant category.
TIMING:
. Filing with regulatory authorities: Fall 1995 -- Missouri Public
Service Commission, Illinois Commerce Commission, Federal Energy
Regulatory Commission. Then: Nuclear Regulatory Commission,
Securities and Exchange Commission.
-7-
Department of Justice, Federal Trade Commission to review.
. Anticipated shareholder vote: By year-end 1995.
Anticipated completion of transaction: By year-end 1996.
APPROVALS:
Shareholders of both companies. Regulators (see above).
-8-
COMPANY PROFILES: (AT 6/30/95)
------------------------------
UE CIPSCO
Earnings per share: $2.80 $2.23
Assets: $6.7 billion 1.8 billion
ROE: 12.7% 12.0%
Net Income: $299.4 million $76.1 million
Total
Revenues: $2.0 billion $811 million
Electric Revenues: $1,959 million $676 million
% industrial 19% 17%
% commercial 36% 26%
% residential 40% 31%
% wholesale/other 5% 26%
Gas Revenues: $85 million $127 million
Other Revenues: $0.4 million $8 million
Customers:
Electric 1.1 million 317,000
Gas 118,000 166,000
Reserve Margin: 18% 24%
Employees: 6,300 2,600
Electric generation: 7,800 MW net capacity 2,800 MW net capacity
Five fossil, one nuclear, three hydro plants Five fossil plants
Energy Mix: 70% coal; 25% Nuclear 99% coal; 1% oil
5% Hydro/Other
Bond Ratings:
Moody's A1 Aa1
Standard & Poor's AA- AA+
Common shares: 102,123,834 34,069,542
-9-
EX-12
6
Exhibit 12
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS BEFORE INCOME TAXES
(in thousands)
12 Months Ended
_______________________________________________________________
December 31,
June 30, ________________________________________________
1995 1994 1993 1992 1991 1990
_____________ ________ ________ ________ ________ ________
Net income. . . . . . . . . . . . . . . . . . . $ 74,777 $ 81,913 $ 84,011 $ 72,601 $ 75,683 $ 71,562
Add--Federal and state income taxes:
Current . . . . . . . . . . . . . . . . . . . 34,765 38,097 50,441 6,110 36,316 39,380
Deferred (net). . . . . . . . . . . . . . . . 11,216 13,190 1,674 33,998 7,573 (2,964)
Investment tax credit amortization. . . . . . (3,364) (3,367) (3,366) (3,336) (3,464) (3,306)
Income tax applicable to nonoperating
activities. . . . . . . . . . . . . . . . . 936 603 631 2,989 2,413 2,986
_______ _______ _______ _______ ________ _______
43,553 48,523 49,380 39,761 42,838 36,096
_______ _______ _______ _______ _______ _______
Net income before income taxes. . . . . . . . . 118,330 130,436 133,391 112,362 118,521 107,658
_______ _______ _______ _______ _______ _______
Add--Fixed charges
Interest on long-term debt. . . . . . . . . . 30,893 31,164 32,823 35,534 36,652 36,589
Interest on provision for revenue refunds . . - - - (803) 4,261 3,396
Other interest. . . . . . . . . . . . . . . . 694 358 479 392 1,231 1,070
Amortization of net debt premium and
discount. . . . . . . . . . . . . . . . . . 1,680 1,678 1,598 863 338 326
_______ _______ _______ _______ _______ ________
33,267 33,200 34,900 35,986 42,482 41,381
_______ _______ _______ _______ _______ ________
Earnings as defined . . . . . . . . . . . . . . $151,597 $163,636 $168,291 $148,348 $161,003 $149,039
======= ======= ======= ======= ======= ========
Ratio of earnings to fixed charges. . . . . . . 4.56 4.93 4.82 4.12 3.79 3.60
Earnings required for preferred dividends:
Preferred stock dividends . . . . . . . . . . $ 3,770 $ 3,510 $ 3,718 $ 4,549 $ 5,396 $ 5,617
Adjustment to pre-tax basis*. . . . . . . . . 2,195 2,079 2,185 2,491 3,054 2,833
_______ _______ _______ _______ _______ _______
$ 5,965 $ 5,589 $ 5,903 $ 7,040 $ 8,450 $ 8,450
_______ _______ _______ _______ _______ _______
Fixed charges plus preferred stock
dividend requirements . . . . . . . . . . . . $ 39,232 $ 38,789 $ 40,803 $ 43,026 $ 50,932 $ 49,831
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges plus
preferred stock dividend requirements . . . . 3.86 4.22 4.12 3.45 3.16 2.99
* An additional charge equivalent to earnings required to adjust
dividends on preferred stock to a pre-tax basis (See below.)
{ Net income before income taxes }
{ ______________________________ -100% } X preferred dividends = earnings required for preferred dividends
{ Net income }
-29-
EX-27
7
UT
0000860520
CIPSCO Inc.
1,000
6-MOS
DEC-31-1994
JAN-01-1995
JUN-30-1995
PER-BOOK
1,443,042
96,766
201,600
0
44,643
1,786,051
356,812
0
283,394
640,367
0
80,000
479,770
0
0
12,793
0
0
0
0
573,121
1,786,051
394,406
15,105
336,995
352,100
42,306
1,337
43,643
16,250
27,393
1,939
25,454
34,410
0
82,955
0.75
0.75
INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS
AND NOTES.
INCLUDES INCOME TAX EXPENSE.
NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY