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Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMEREN CORPORATION
(Exact name of Registrant as specified in its charter)
MISSOURI 43-1723446 6719
(State or other (I.R.S Employer (Primary Standard
jurisdiction of Identification No.) Industrial
incorporation or Classification Code
organization) Number)
C/O UNION ELECTRIC COMPANY
1901 CHOUTEAU AVENUE
ST. LOUIS, MISSOURI 63103
314-621-3222
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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WILLIAM E. JAUDES, ESQ.
Ameren Corporation
c/o Union Electric Company
1901 Chouteau Avenue
St. Louis, Missouri 63103
314-621-3222
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
SETH A. KAPLAN, ESQ. WILLIAM A. KOERTNER ROBERT A. YOLLES, ESQ.
Wachtell, Lipton, Rosen & CIPSCO Incorporated Jones, Day, Reavis & Pogue
Katz 607 East Adams Street 77 West Wacker Drive
51 West 52nd Street Springfield, Illinois Chicago, Illinois 60601-
New York, New York 10019 62739 1692
(212) 403-1000 (217) 523-3600 (312) 782-3939
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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Common Stock, $.01 par
value................. 137,357,962(1) (3) (3) $1,830,560(4)
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Common Stock, $.01 par
value, for dividend
reinvestment and stock
purchase plan(2)....... 800,000(2) (3) (3) $10,949(5)
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Total.................. 138,157,962 (3) (3) $1,841,509(6)
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(1) Based upon the sum of (a) 102,266,334, the maximum number of shares
issuable in connection with the merger of Arch Merger, Inc. with and into
Union Electric Company (the "Union Electric Merger") (which number is
equal to the number of outstanding shares of common stock, $5.00 par
value, of Union Electric ("Union Electric Common Stock") (including all
options, whether or not exercisable)), and (b) 35,091,628, the maximum
number of shares issuable in connection with the merger of CIPSCO
Incorporated with and into the Registrant (the "CIPSCO Merger" and
together with the Union Electric Merger, the "Mergers") (which number is
equal to the number of outstanding shares of common stock, without par
value, of CIPSCO ("CIPSCO Common Stock") multiplied by 1.03 (the "Exchange
Ratio")).
(2) To be issued from time to time pursuant to the dividend reinvestment and
stock purchase plan to be established by the Registrant, the opportunity
to participate in which will be offered to the holders of the Registrant's
common stock as well as holders of Union Electric Company's preferred
stock at the effective time of the Mergers. A post-effective amendment on
Form S-3 to this Form S-4 will be filed in connection therewith.
(3) Not applicable.
(4) Computed pursuant to Rule 457(f) under the Securities Act of 1933, as
amended (the "Securities Act"), by multiplying by 1/29 of one percent the
sum of (a) the product of (i) $39 11/16, the average of the high and low
sales price of a share of Union Electric Common Stock as reported on the
New York Stock Exchange ("NYSE") Composite Tape on November 8, 1995, and
(ii) 102,266,334, the number of outstanding shares of Union Electric
Common Stock, assuming the exercise of all options to acquire Union
Electric Common Stock (whether or not currently exercisable), and (b) the
product of (i) $36 11/16, the average of the high and low sales price of a
share of CIPSCO Common Stock as reported on the NYSE Composite Tape on
November 8, 1995, and (ii) 34,069,542, the number of outstanding shares of
CIPSCO Common Stock.
(5) Computed pursuant to Rule 457(c) under the Securities Act by multiplying
by 1/29 of one percent the product of (a) $39 11/16, the average of the
high and low sales price of a share of Union Electric Common Stock as
reported on the NYSE Composite Tape on November 8, 1995, and (b) 800,000.
(6) Pursuant to Rule 457(b) under the Securities Act and Section 14(g) of the
Securities Exchange Act of 1934, as amended and Rule 0-11 thereunder, the
total registration fee of $1,841,509 is offset by the filing fee of
$939,038 previously paid in connection with the filing by Union Electric
Company and CIPSCO Incorporated of preliminary proxy materials on Schedule
14A on September 12, 1995. Accordingly, the fee payable upon the filing of
this Registration Statement is $902,471.
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and the effective time of the Mergers, as described in the Agreement
and Plan of Merger, dated as of August 11, 1995, by and among Union Electric
Company, CIPSCO Incorporated, the Registrant and Arch Merger Inc. attached as
Annex A to the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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<PAGE>
AMEREN CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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LOCATION OR CAPTION IN
FORM S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION.
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus............................ Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................... Available Information; Incorporation by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information... Summary of Joint Proxy
Statement/Prospectus; Selected Historical
and Pro Forma Data
4. Terms of the Transaction.............. Summary of Joint Proxy
Statement/Prospectus; The Mergers;
Regulatory Matters; The Merger Agreement;
The Stock Option Agreements; Description
of Holdings Capital Stock; Comparison of
Shareholder Rights
5. Pro Forma Financial Information....... Unaudited Pro Forma Combined Condensed
Financial Information; Holdings Following
the Mergers
6. Material Contacts with the Company
Being Acquired........................ Summary of Joint Proxy
Statement/Prospectus; The Mergers; The
Merger Agreement; The Stock Option
Agreements; Selected Information
Concerning CIPSCO and Union Electric
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............. *
8. Interests of Named Experts and
Counsel............................... Experts; Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... *
B. INFORMATION ABOUT THE REGISTRANT.
10. Information with Respect to S-3
Registrants........................... *
11. Incorporation of Certain Information
by Reference.......................... *
12. Information with Respect to S-2 or S-3
Registrants........................... *
13. Incorporation of Certain Information
by Reference.......................... *
</TABLE>
<PAGE>
AMEREN CORPORATION
CROSS-REFERENCE SHEET (CONTINUED)
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
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LOCATION OR CAPTION IN
FORM S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
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14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants........................... Summary of Joint Proxy
Statement/Prospectus; Selected Historical
and Pro Forma Data; The Mergers; Unaudited
Pro Forma Combined Condensed Financial
Information; Holdings Following the
Mergers
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED.
15. Information with Respect to S-3
Companies............................. Available Information; Incorporation by
Reference
16. Information with Respect to S-2 or S-3
Companies............................. *
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies....... *
D. VOTING AND MANAGEMENT INFORMATION.
18. Information if Proxies, Consents or
Authorizations are to be Solicited.... Cover Page; Available Information;
Incorporation by Reference; Summary of
Joint Proxy Statement/Prospectus;
Meetings, Voting and Proxies; The Mergers;
Selected Information Concerning CIPSCO and
Union Electric; Election of Holdings
Directors; Holdings Following the Mergers
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer............... *
</TABLE>
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* Not Applicable.
<PAGE>
This Registration Statement contains two forms of the Joint Proxy Statement-
Prospectus to be delivered separately to stockholders of Union Electric Company
("Union Electric") and CIPSCO Incorporated ("CIPSCO") in connection with their
respective Special Meetings of stockholders. The Joint Proxy Statement-
Prospectus to be delivered to Union Electric stockholders in connection with
the mergers described herein will contain a letter to Union Electric
stockholders and a Notice of the Union Electric Special Meeting. Similarly, the
Joint Proxy Statement-Prospectus to be delivered to CIPSCO stockholders in
connection with the mergers will contain a letter to stockholders and a Notice
of the CIPSCO Special Meeting. The Joint Proxy Statement-Prospectus to be
delivered to CIPSCO stockholders is otherwise identical in all respects to the
Joint Proxy Statement-Prospectus to be delivered to Union Electric
stockholders.
<PAGE>
[LOGO OF UNION ELECTRIC]
November 13, 1995
Dear Union Electric Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Union Electric Company, a Missouri corporation ("Union Electric"), which will
be held on Wednesday, December 20, 1995, at The Ritz-Carlton, 100 Carondelet
Plaza, St. Louis, Missouri 63105. The meeting will start at 9:00 a.m., local
time.
At this important meeting, the Union Electric shareholders will be asked to
approve a merger agreement (the "Merger Agreement") relating to a strategic
business combination transaction with CIPSCO Incorporated, an Illinois
corporation ("CIPSCO"). As a result of the mergers contemplated by the Merger
Agreement (the "Mergers"), Ameren Corporation ("Holdings"), a newly formed
company which is currently 50% owned by each of Union Electric and CIPSCO, will
become the holding company for Union Electric and the operating utility and
other subsidiaries of CIPSCO. The headquarters of Holdings will be located in
St. Louis. Pursuant to the Merger Agreement, each outstanding share of Union
Electric common stock will be cancelled and converted into the right to receive
one share (the "Union Electric Ratio") of Holdings common stock, each
outstanding share of Union Electric preferred stock will remain outstanding and
unchanged and will continue to represent one share of preferred stock of Union
Electric and each outstanding share of CIPSCO common stock will be cancelled
and converted into 1.03 shares (the "CIPSCO Ratio," and, together with the
Union Electric Ratio, the "Ratios") of Holdings common stock.
Your Board of Directors believes that the Mergers will create a combined
enterprise well positioned for the increasingly competitive environment facing
the energy industry, benefiting not only shareholders but also customers,
employees and the communities served by our respective utility companies.
Meaningful strategic advantages that Holdings will possess include significant
cost savings from, among other things, decreased electric production and gas
supply costs and reduced corporate and administrative expense. Holdings will
also enjoy increased financial strength as well as greater opportunities for
earnings and dividend growth through cost efficiencies, larger and more diverse
sales markets and the pooling of Union Electric's and CIPSCO's equity,
management, human resources and technical expertise.
Based on the capitalization of Union Electric and CIPSCO as of the date of
the Merger Agreement, the common shareholders of Union Electric and CIPSCO
would each as a group have held approximately 74.4% and 25.6%, respectively, of
the shares of Holdings common stock that would have been outstanding if the
Mergers had been consummated as of such date. Your Board of Directors has
received the opinion of its financial advisor, Goldman, Sachs & Co., that as of
the date hereof and based on the assumptions made, matters considered and the
limits of the review described in such opinion, and in light of the CIPSCO
Ratio, the Union Electric Ratio is fair to the holders of Union Electric common
stock.
Approval of the Merger Agreement by shareholders of Union Electric and CIPSCO
entitled to vote thereon is a condition to the consummation of the transaction.
The transaction will be consummated only after certain regulatory approvals are
received and other conditions are satisfied or waived. It is presently
anticipated that this will occur by the end of 1996.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AGREEMENT, BELIEVES THAT THEY ARE IN THE BEST
INTERESTS OF UNION ELECTRIC AND ITS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
<PAGE>
In considering the recommendation of the Union Electric Board with respect to
the Merger Agreement, shareholders should be aware that certain members of
Union Electric's management and the Union Electric Board have certain interests
in the Mergers which are in addition to the interests of shareholders of Union
Electric generally and which could potentially represent conflicts of interest.
The Union Electric Board was aware of these interests and considered them in
approving the Merger Agreement and the transactions contemplated thereby. See
"THE MERGERS--Potential Conflicts of Interests of Certain Persons in the
Mergers" in the accompanying Joint Proxy Statement/Prospectus.
In entering into a common stock merger with CIPSCO, the Union Electric
shareholders will be assuming the risks, as well as the benefits, associated
with the ongoing business operations of CIPSCO. In the judgement of the Union
Electric Board of Directors, the potential benefits of the Mergers far outweigh
those risks.
As described in the accompanying Joint Proxy Statement/Prospectus, at the
effective time of the Mergers, the Holdings Board of Directors will consist of
15 members, 10 of whom will be directors appointed by the Union Electric Board
of Directors and five of whom will be directors appointed by the CIPSCO Board
of Directors.
Your vote is important no matter how many shares you hold. Even if you plan
to attend the meeting, we urge you to mark, sign and date the enclosed proxy
and return it promptly. You have the option to revoke it at any time, or to
vote your shares personally on request if you attend the meeting. For the
Merger Agreement to be approved, it must have the support of two-thirds of the
votes entitled to be cast by the outstanding shares of Union Electric common
stock and Union Electric preferred stock, voting as a single class.
IF YOU DO NOT RETURN THE PROXY CARD AND DO NOT VOTE AT THE MEETING, IT WILL
HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE MERGER AGREEMENT.
The accompanying Joint Proxy Statement/Prospectus sets forth the voting
rights of holders of Union Electric common and preferred stock with respect to
these matters, and describes the matters to be acted upon at the Special
Meeting. Shareholders are urged to review carefully the attached Joint Proxy
Statement/Prospectus, which contains a detailed description of the Merger
Agreement, the terms and conditions thereof and the transactions contemplated
thereby. If the Mergers are consummated, holders of Union Electric common and
preferred stock who wish to assert such rights and have complied with the
requirements of the Missouri General and Business Corporation Law will have
certain dissenters' rights under Missouri law, as described in more detail in
the accompanying Joint Proxy Statement/Prospectus.
Promptly after the Mergers, a letter of transmittal will be mailed to each
holder of record of shares of Union Electric common stock. PLEASE DO NOT SEND
YOUR UNION ELECTRIC COMMON STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD OR
TO THE EXCHANGE AGENT UNLESS AND UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL,
WHICH WILL INCLUDE INSTRUCTIONS AS TO THE PROCEDURE TO BE USED IN SENDING YOUR
UNION ELECTRIC COMMON STOCK CERTIFICATES. Holders of Union Electric preferred
stock will not have to exchange their stock certificates as a result of the
Mergers.
Sincerely,
/s/ Charles W. Mueller
Charles W. Mueller
President and Chief Executive
Officer
<PAGE>
UNION ELECTRIC COMPANY
(A MISSOURI CORPORATION)
1901 CHOUTEAU AVENUE
ST. LOUIS, MISSOURI 63103
(314) 621-3222
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 20, 1995
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To the Shareholders of
Union Electric Company:
A Special Meeting (the "Special Meeting") of holders of common stock and
preferred stock of Union Electric Company, a Missouri corporation ("Union
Electric"), will be held on Wednesday, December 20, 1995 at The Ritz-Carlton,
100 Carondelet Plaza, St. Louis, Missouri 63105, commencing at 9:00 a.m., local
time. At the Special Meeting, shareholders will be asked to consider and vote
upon the following matters, which are more fully described in the accompanying
Joint Proxy Statement/Prospectus:
1. A proposal to approve the Agreement and Plan of Merger, dated as of
August 11, 1995 (the "Merger Agreement"), by and among Union Electric,
CIPSCO Incorporated, an Illinois corporation ("CIPSCO"), Ameren Corporation
(formerly known as Arch Holding Corp.) ("Holdings"), a Missouri corporation
which is 50% owned by each of Union Electric and CIPSCO, and Arch Merger
Inc., a Missouri corporation and a wholly owned subsidiary of Holdings
("Merger Sub"), pursuant to which, among other things, Merger Sub will be
merged with and into Union Electric and CIPSCO will be merged with and into
Holdings (together, the "Mergers"), with the effect that Holdings will
become the holding company for Union Electric and the utility and other
subsidiaries of CIPSCO. THE MERGERS ARE MORE COMPLETELY DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. A COPY OF THE MERGER
AGREEMENT IS ATTACHED AS ANNEX A THERETO.
2. Such other matters incident to the conduct of the Special Meeting as
may properly come before the Special Meeting or any adjournment or
postponement thereof.
Holders of record of shares of Union Electric common stock and Union Electric
preferred stock at the close of business on October 23, 1995 will be entitled
to notice of and to vote at the Special Meeting or at any adjournment or
postponement thereof. Approval of the Merger Agreement by the requisite vote of
Union Electric's shareholders is a condition to consummation of the
transactions contemplated by the Merger Agreement.
EVEN IF YOU CURRENTLY EXPECT TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED
TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ADDRESSED POSTAGE-PAID ENVELOPE. If you do attend the Special Meeting, you may
vote in person, whether or not you have sent in your proxy.
Pursuant to Section 351.455 of the Missouri General and Business Corporation
Law, holders of Union Electric common and preferred stock have the right to
dissent from the transactions contemplated by the Merger Agreement and, if such
transactions are consummated, to obtain payment of the fair value of their
shares in lieu of the consideration provided for in the Merger Agreement.
Section 351.455 of the Missouri General and Business Corporation Law is
attached in full as Annex H to the accompanying Joint Proxy
<PAGE>
Statement/Prospectus, which includes a description of the procedure to be
followed under that section by a shareholder wishing to dissent.
Questions concerning the proxy and the merger can be made by telephone to
Union Electric at (800) 639-0242.
By Order of the President and the
Board of Directors
/s/ James C. Thompson
James C. Thompson
Secretary
St. Louis, Missouri
November 13, 1995
REMEMBER TO SIGN, DATE AND RETURN YOUR PROXY CARD
<PAGE>
[LETTERHEAD OF CIPSCO INCORPORATED]
November 13, 1995
Dear CIPSCO Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
CIPSCO Incorporated, an Illinois corporation ("CIPSCO"), which will be held on
Wednesday, December 20, 1995, at the Springfield Hilton, 700 East Adams Street,
Springfield, Illinois. The meeting will start at 10:00 a.m., local time.
At this important meeting, the CIPSCO shareholders will be asked to approve a
merger agreement (the "Merger Agreement") relating to a strategic business
combination transaction with Union Electric Company, a Missouri corporation
("Union Electric"). As a result of the mergers contemplated by the Merger
Agreement (the "Mergers"), Ameren Corporation ("Holdings"), a newly formed
holding company which is currently equally owned by CIPSCO and Union Electric,
will become the parent company of Central Illinois Public Service Company
("CIPS") and the other subsidiaries of CIPSCO. The headquarters of Holdings
will be located in St. Louis, Missouri. CIPS will remain headquartered in
Springfield, Illinois. Pursuant to the Merger Agreement, each outstanding share
of CIPSCO common stock will be converted into 1.03 shares (the "CIPSCO Ratio")
of Holdings common stock, each outstanding share of Union Electric common stock
will be converted into one share (the "Union Electric Ratio") of Holdings
common stock and each share of Union Electric preferred stock will remain
outstanding and unchanged. The CIPS preferred stock will not be affected in the
transactions.
Your Board of Directors believes that the Mergers will create a combined
enterprise well positioned for the increasingly competitive environment facing
the energy industry, benefiting not only shareholders but also customers,
employees and the communities served by our respective utility companies.
Meaningful strategic advantages that Holdings will possess include significant
cost savings from, among other things, decreased electric production and gas
supply costs and reduced corporate and administrative expense. Holdings will
also enjoy increased financial strength as well as greater opportunities for
earnings and dividend growth through cost efficiencies, larger and more diverse
sales markets and the pooling of CIPSCO's and Union Electric's equity,
management, human resources and technical expertise.
In addition to these benefits, your Board anticipates that Holdings will
adopt Union Electric's common share dividend payment level at the time the
Mergers are completed. Based on current annual dividend levels, this would
represent a 26 percent increase in the dividend rate for current CIPSCO
shareholders. The CIPSCO Ratio of 1.03 shares of Holdings Common Stock for each
CIPSCO share represents a 23 percent premium per CIPSCO common share, based on
the respective closing market prices of CIPSCO and Union Electric common stock
on the trading day preceding the announcement of the Merger Agreement. Your
Board considers the potential dividend and share value increases as distinct
benefits to CIPSCO shareholders.
Based on the capitalization of CIPSCO and Union Electric as of the date of
the Merger Agreement, the common shareholders of CIPSCO and Union Electric
would each as a group have held approximately 25.6% and 74.4%, respectively, of
the shares of Holdings common stock that would have been outstanding if the
Mergers had been consummated as of such date. Your Board of Directors has
received the opinion of its financial advisor, Morgan Stanley & Co.
Incorporated, that as of the date hereof and based on the factors and
assumptions described in such opinion, taking into account the Union Electric
Ratio, the CIPSCO Ratio is fair from a financial point of view to the holders
of CIPSCO common stock.
Approval of the Merger Agreement by shareholders of CIPSCO and Union Electric
is a condition to the consummation of the transaction. The transaction will be
consummated only after certain regulatory approvals are received and other
conditions are satisfied or waived. It is presently anticipated that this will
occur by the end of 1996.
<PAGE>
As described in the accompanying Joint Proxy Statement/Prospectus, at the
effective time of the Mergers, the Holdings Board of Directors will consist of
15 members, 10 of whom will be directors appointed by the Union Electric Board
of Directors and five of whom will be directors appointed by the CIPSCO Board
of Directors.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AGREEMENT, BELIEVES THAT THEY ARE IN THE BEST
INTERESTS OF CIPSCO AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
In considering the recommendation of the CIPSCO Board with respect to the
Merger Agreement, shareholders should be aware that certain members of CIPSCO's
management and the CIPSCO Board have certain interests in the Mergers which are
in addition to the interests of shareholders of CIPSCO generally and which
could potentially represent conflicts of interest. The CIPSCO Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby. See "THE MERGERS--
Potential Conflicts of Interests of Certain Persons in the Mergers."
In entering into a common stock merger with Union Electric, the CIPSCO
shareholders will be assuming the risks, as well as the benefits, associated
with the ongoing business operations of Union Electric. In the judgement of the
CIPSCO Board of Directors, the potential benefits of the Mergers far outweigh
those risks.
Your vote is important no matter how many shares you hold. Even if you plan
to attend the meeting, we urge you to mark, sign and date the enclosed proxy
and return it promptly. You have the option to revoke it at any time, or to
vote your shares personally on request if you attend the meeting. For the
Merger Agreement to be approved, it must receive the affirmative vote of the
holders of at least two-thirds of the outstanding shares of CIPSCO common
stock.
IF YOU DO NOT RETURN THE PROXY CARD AND DO NOT VOTE AT THE MEETING, IT WILL
HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE MERGER AGREEMENT.
The accompanying Joint Proxy Statement/Prospectus sets forth the voting
rights of holders of CIPSCO common stock with respect to these matters, and
describes the matters to be acted upon at the Special Meeting. Shareholders are
urged to review carefully the attached Joint Proxy Statement/Prospectus, which
contains a detailed description of the Merger Agreement, the terms and
conditions thereof and the transactions contemplated thereby. If the Mergers
are consummated, holders of CIPSCO common stock who wish to assert such rights
and have complied with the requirements of the Illinois Business Corporation
Act will have certain dissenters' rights under Illinois law, as described in
more detail in the accompanying Joint Proxy Statement/Prospectus.
Promptly after the Mergers, a letter of transmittal will be mailed to each
holder of record of shares of CIPSCO common stock. PLEASE DO NOT SEND YOUR
CIPSCO COMMON STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD OR TO THE
EXCHANGE AGENT UNLESS AND UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL, WHICH
WILL INCLUDE INSTRUCTIONS AS TO THE PROCEDURE TO BE USED IN SENDING YOUR CIPSCO
COMMON STOCK CERTIFICATES.
Sincerely,
/s/ Clifford L. Greenwalt
Clifford L. Greenwalt
President and Chief Executive
Officer
<PAGE>
CIPSCO INCORPORATED
607 EAST ADAMS STREET
SPRINGFIELD, ILLINOIS 62739
(217) 523-3600
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 20, 1995
----------------
To the Shareholders of
CIPSCO Incorporated:
A Special Meeting (the "Special Meeting") of shareholders of CIPSCO
Incorporated, an Illinois corporation ("CIPSCO"), will be held on Wednesday,
December 20, 1995 at the Springfield Hilton, 700 East Adams Street,
Springfield, Illinois, at 10:00 a.m., local time. At the Special Meeting,
shareholders will be asked to consider and vote upon the following matters,
which are more fully described in the accompanying Joint Proxy
Statement/Prospectus:
1. A proposal to approve the Agreement and Plan of Merger, dated as of
August 11, 1995 (the "Merger Agreement"), by and among CIPSCO, Union
Electric Company, a Missouri corporation ("Union Electric"), Ameren
Corporation ("Holdings"), a Missouri corporation which is equally owned by
CIPSCO and Union Electric, and Arch Merger Inc., a Missouri corporation and
a wholly owned subsidiary of Holdings ("Merger Sub"), pursuant to which,
among other things, CIPSCO will be merged with and into Holdings and Merger
Sub will be merged with and into Union Electric (together, the "Mergers"),
with the effect that Holdings will become the holding company for Union
Electric and the utility and other subsidiaries of CIPSCO. THE MERGERS ARE
MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS. A COPY OF THE MERGER AGREEMENT IS ATTACHED AS ANNEX A
THERETO.
2. Such other matters incident to the conduct of the Special Meeting as
may properly come before the Special Meeting or any adjournment or
postponement thereof.
Only holders of record of shares of CIPSCO common stock at the close of
business on November 1, 1995 will be entitled to notice of and to vote at the
Special Meeting or at any adjournment or postponement thereof. Approval of the
Merger Agreement by a requisite vote of CIPSCO's shareholders is a condition to
consummation of the transactions contemplated by the Merger Agreement.
EVEN IF YOU CURRENTLY EXPECT TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED
TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ADDRESSED POSTAGE-PAID ENVELOPE. If you do attend the Special Meeting, you may
vote in person, whether or not you have sent in your proxy.
As described under "THE MERGERS--Illinois Dissenters' Rights" in the
accompanying Joint Proxy Statement/Prospectus, any holder of CIPSCO common
stock entitled to vote at the Special Meeting is entitled to dissent, and
obtain payment for his or her shares, if the merger of CIPSCO and Holdings
contemplated by the Merger Agreement is consummated. In order to perfect such
right, a holder of CIPSCO common stock must, pursuant to certain statutory
dissenters' rights provisions arising under applicable Illinois law and set
forth in Annex I to the Joint Proxy Statement/Prospectus, (1) deliver to CIPSCO
at the office of the corporate secretary at 607 East Adams Street, Springfield,
Illinois 62739 prior to the taking of the vote of shareholders upon the
approval of the Merger Agreement a written demand for payment of his or her
shares, (2) not vote his or her shares in favor of the proposed Merger
Agreement and (3) otherwise comply with such statutory provisions.
<PAGE>
Your Board of Directors has approved the Merger Agreement and recommends that
shareholders vote FOR approval of the Merger Agreement.
By Order of the Board of Directors,
/s/ W. A. Koertner
W. A. Koertner
Vice President and Secretary
Springfield, Illinois
November 13, 1995
ALL SHAREHOLDERS, EVEN IF THEY PLAN TO ATTEND THE SPECIAL MEETING IN PERSON,
ARE URGED TO VOTE, DATE AND SIGN THEIR PROXIES AND RETURN THEM TO CIPSCO IN THE
ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE. THE BOARD OF DIRECTORS ENCOURAGES
ALL SHAREHOLDERS TO BE REPRESENTED AT THE SPECIAL MEETING, WHETHER THEIR
SHAREHOLDINGS ARE SMALL OR LARGE.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1995
JOINT PROXY STATEMENT
OF
UNION ELECTRIC COMPANY
AND
CIPSCO INCORPORATED
-----------
PROSPECTUS OF
AMEREN CORPORATION
-----------
This Joint Proxy Statement/Prospectus relates to the proposed mergers and
certain related transactions contemplated by the Agreement and Plan of Merger,
dated as of August 11, 1995 (the "Merger Agreement"), by and among Union
Electric Company, a Missouri corporation ("Union Electric"), CIPSCO
Incorporated, an Illinois corporation ("CIPSCO"), Ameren Corporation (formerly
known as Arch Holding Corp.) ("Holdings"), a Missouri corporation 50% owned by
each of Union Electric and CIPSCO, and Arch Merger Inc., a Missouri corporation
and a wholly owned subsidiary of Holdings ("Merger Sub"). Upon consummation of
the mergers provided for in the Merger Agreement, Holdings will become the
holding company of both Union Electric and the utility and other subsidiaries
of CIPSCO, including Central Illinois Public Service Company, an Illinois
corporation ("CIPS"). Holdings will be a registered public utility holding
company under the Public Utility Holding Company Act of 1935, as amended (the
"1935 Act"). See "REGULATORY MATTERS."
The Merger Agreement provides for: (i) the merger of Merger Sub with and into
Union Electric, with Union Electric as the surviving corporation (the "Union
Electric Merger"), pursuant to which (a) each outstanding share of common
stock, par value $5.00 per share, of Union Electric ("Union Electric Common
Stock") (other than shares with respect to which dissenters' rights are
perfected under applicable state law ("Union Electric Dissenting Shares"), and
other than shares owned by Union Electric as treasury stock or otherwise owned
directly or indirectly by Union Electric, CIPSCO, or any of their respective
wholly owned subsidiaries, which shares will be cancelled) will be converted
into the right to receive one share (the "Union Electric Ratio") of common
stock, par value $.01 per share, of Holdings ("Holdings Common Stock"), (b)
each outstanding share of preferred stock, without par value, of Union Electric
("Union Electric Preferred Stock") (other than Union Electric Dissenting
Shares, and other than shares owned by Union Electric as treasury stock or
otherwise owned directly or indirectly by Union Electric, CIPSCO, or any of
their respective wholly owned subsidiaries, which shares will be cancelled)
will remain outstanding and unchanged; and (ii) the merger of CIPSCO with and
into Holdings, with Holdings as the surviving corporation (the "CIPSCO Merger"
and, together with the Union Electric Merger, the "Mergers"), pursuant to which
each share of Common Stock, without par value, of CIPSCO ("CIPSCO Common
Stock") (including shares with respect to which dissenters' rights are
perfected under applicable state law ("CIPSCO Dissenting Shares"), but
excluding shares owned by CIPSCO as treasury stock or otherwise directly or
indirectly owned by Union Electric, CIPSCO, or any of their respective wholly
owned subsidiaries, which shares will be cancelled) will be converted into the
right to receive 1.03 shares (the "CIPSCO Ratio" and, together with the Union
Electric Ratio, the "Ratios") of Holdings Common Stock (or cash in lieu of
fractional shares otherwise deliverable in respect thereof). Based upon the
capitalization of Union Electric and CIPSCO on August 11, 1995 (the date of the
Merger Agreement), holders of Union Electric Common Stock and CIPSCO Common
Stock would each have held approximately 74.4% and 25.6%, respectively, of the
aggregate number of shares of Holdings Common Stock that would have been
outstanding if the Mergers had been consummated as of such date.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
The date of this Joint Proxy Statement/Prospectus is November 13, 1995. This
Joint Proxy Statement/Prospectus is first being mailed to the shareholders of
Union Electric and CIPSCO on or about November 15, 1995.
<PAGE>
This Joint Proxy Statement/Prospectus constitutes a prospectus of Holdings
filed as part of the Registration Statement (as defined herein) with respect to
up to 138,157,962 shares of Holdings Common Stock to be issued pursuant to or
as contemplated by the Merger Agreement, including 800,000 shares of Holdings
Common Stock to be issued pursuant to the dividend reinvestment plan of
Holdings which will succeed similar plans currently in place at Union Electric
and CIPSCO. See "THE MERGERS--Dividend Reinvestment Plan" herein.
This Joint Proxy Statement/Prospectus is being furnished to the common
shareholders of CIPSCO in connection with the solicitation of proxies by the
Board of Directors of CIPSCO (the "CIPSCO Board") for use at the special
meeting of CIPSCO common shareholders to be held at 10:00 a.m., local time, on
Wednesday, December 20, 1995 at the Springfield Hilton, 700 East Adams Street,
Springfield, Illinois, and at any adjournment or postponement thereof (the
"CIPSCO Meeting"). At the CIPSCO Meeting, holders of CIPSCO Common Stock will
consider and vote upon a proposal to approve the Merger Agreement.
This Joint Proxy Statement/Prospectus is also being furnished to the common
and preferred shareholders of Union Electric in connection with the
solicitation of proxies by the Board of Directors of Union Electric (the "Union
Electric Board") for use at the special meeting of Union Electric common and
preferred shareholders to be held at 9:00 a.m., local time, on Wednesday,
December 20, 1995 at The Ritz-Carlton, 100 Carondelet Plaza, St. Louis,
Missouri, 63105, and at any adjournment or postponement thereof (the "Union
Electric Meeting"). At the Union Electric Meeting, holders of Union Electric
Common Stock and Union Electric Preferred Stock will consider and vote upon a
proposal to approve the Merger Agreement.
All information herein with respect to CIPSCO has been furnished by CIPSCO
and all information herein with respect to Union Electric has been furnished by
Union Electric.
No person is authorized to give any information or to make any representation
other than those contained or incorporated by reference in this Joint Proxy
Statement/Prospectus, and, if given or made, such information or representation
should not be relied upon as having been authorized. This Joint Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Joint Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction, to
or from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction. Neither
the delivery of this Joint Proxy Statement/Prospectus nor any distribution of
securities pursuant to this Joint Proxy Statement/Prospectus shall, under any
circumstances, create an implication that there has been no change in the
affairs of Union Electric or CIPSCO or in the information set forth herein
since the date of this Joint Proxy Statement/Prospectus.
AVAILABLE INFORMATION
Each of CIPSCO and Union Electric is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, accordingly, files reports, proxy statements and other information
with the Securities and Exchange Commission ("SEC"). Such reports, proxy
statements and other information filed with the SEC are available for
inspection and copying at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the SEC's Regional Offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Room of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
any such material and other information concerning Union Electric and CIPSCO
can be inspected at The New York Stock Exchange, Inc. (the "NYSE"), 20 Broad
Street, 7th Floor, New York, New York 10005, on which exchange the Union
Electric Common Stock and the CIPSCO Common Stock are listed, and such material
and other information concerning CIPSCO can also be inspected at the Chicago
Stock Exchange, Inc. (the "CSE"), 440 South LaSalle Street, Chicago, Illinois
60605, on which exchange the CIPSCO Common Stock is listed.
ii
<PAGE>
Holdings has filed a registration statement on Form S-4 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") with
the SEC pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Holdings Common Stock to be issued in
connection with the Mergers. This Joint Proxy Statement/Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. The Registration Statement is available for inspection and copying as set
forth above. Statements contained in this Joint Proxy Statement/Prospectus or
in any document incorporated by reference in this Joint Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference; however, all
elements of the subject documents which the managements of Union Electric and
CIPSCO believe to be material to a decision by the shareholders of Union
Electric and CIPSCO with respect to the Mergers are described herein.
INCORPORATION BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM, IN THE CASE OF DOCUMENTS RELATING TO CIPSCO, W.A.
KOERTNER, VICE PRESIDENT AND SECRETARY, CIPSCO INCORPORATED, 607 EAST ADAMS
STREET, SPRINGFIELD, ILLINOIS 62739, 217-523-3600, AND, IN THE CASE OF
DOCUMENTS RELATING TO UNION ELECTRIC, JAMES C. THOMPSON, SECRETARY, UNION
ELECTRIC COMPANY, P.O. BOX 149, ST. LOUIS, MISSOURI 63166, (314) 621-3222. TO
ENSURE TIMELY DELIVERY OF CIPSCO DOCUMENTS, ANY REQUEST TO CIPSCO SHOULD BE
MADE BY DECEMBER 13, 1995. TO ENSURE TIMELY DELIVERY OF UNION ELECTRIC
DOCUMENTS, ANY REQUEST TO UNION ELECTRIC SHOULD BE MADE BY DECEMBER 13, 1995.
CIPSCO and Union Electric hereby undertake to provide without charge to each
person, including any beneficial owner, to whom a copy of this Joint Proxy
Statement/Prospectus has been delivered, upon the written or oral request of
such person, by first class mail or other equally prompt means within one
business day of receipt of such request, a copy (without exhibits, except those
specifically incorporated by reference) of any and all of the documents
referred to below which have been or may be incorporated in this Joint Proxy
Statement/Prospectus by reference. Requests for such documents should be
directed to the persons indicated above.
The following documents, previously filed with the SEC by CIPSCO (File No. 1-
10628) or Union Electric (File No. 1-2967) pursuant to the Exchange Act, are
hereby incorporated by reference:
1. CIPSCO's Annual Report on Form 10-K for the year ended December 31,
1994.
2. CIPSCO's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, June 30, 1995 (as amended by Form 10-Q/A dated August 15, 1995)
and September 30, 1995.
3. Union Electric's Annual Report on Form 10-K for the year ended
December 31, 1994.
4. Union Electric's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 (as amended by Forms 10-Q/A dated August 15,
1995 and September 7, 1995) and September 30, 1995.
5. Union Electric's Current Report on Form 8-K dated June 12, 1995.
iii
<PAGE>
The information relating to Union Electric and CIPSCO contained in this Joint
Proxy Statement/Prospectus does not purport to be comprehensive and should be
read together with the information in the documents incorporated by reference
herein.
All documents filed by Union Electric and CIPSCO pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
date of the Union Electric Meeting on Thursday, December 14, 1995, and any
adjournment or postponement thereof, or the CIPSCO Meeting on Thursday,
December 14, 1995, and any adjournment or postponement thereof, respectively,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... ii
INCORPORATION BY REFERENCE................................................ iii
INDEX OF DEFINED TERMS.................................................... viii
SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS............................... 1
The Parties............................................................. 1
The Meetings............................................................ 1
Required Vote........................................................... 2
The Mergers............................................................. 3
Exchange of Stock Certificates.......................................... 5
Stock Option Agreements................................................. 5
Treatment of Shares; Ratios............................................. 6
Background.............................................................. 6
Reasons for the Mergers................................................. 6
Recommendations of the Boards of Directors.............................. 7
Opinions of Financial Advisors.......................................... 7
Potential Conflicts of Interests of Certain Persons in the Mergers...... 8
Management of Holdings.................................................. 9
Conditions to the Mergers............................................... 9
Rights to Terminate, Amend or Waive Conditions.......................... 10
Certain Federal Income Tax Consequences................................. 10
Operations After the Mergers............................................ 11
Regulatory Matters...................................................... 11
Accounting Treatment.................................................... 12
Dissenters' Rights...................................................... 13
Dividends............................................................... 13
Comparison of Rights of Shareholders.................................... 14
SELECTED HISTORICAL AND PRO FORMA DATA.................................... 15
Selected Historical Financial and Market Data........................... 15
Selected Unaudited Pro Forma Financial Data............................. 18
Comparative Market Prices and Dividends................................. 20
MEETINGS, VOTING AND PROXIES.............................................. 21
The CIPSCO Meeting...................................................... 21
The Union Electric Meeting.............................................. 22
THE MERGERS............................................................... 24
Background of the Mergers............................................... 24
Reasons for the Mergers; Recommendations of the Boards of Directors..... 29
Opinions of Financial Advisors.......................................... 32
Potential Conflicts of Interests of Certain Persons in the Mergers...... 41
Certain Arrangements Regarding the Directors and Management of Holdings
Following the Mergers.................................................. 44
Holdings Plans.......................................................... 44
Dividend Reinvestment Plan.............................................. 44
Certain Federal Income Tax Consequences................................. 44
Accounting Treatment.................................................... 45
Stock Exchange Listing of Holdings Common Stock......................... 45
Federal Securities Law Consequences..................................... 46
Missouri Dissenters' Rights............................................. 46
Illinois Dissenters' Rights............................................. 47
REGULATORY MATTERS........................................................ 48
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
State Approvals and Related Matters..................................... 48
Public Utility Holding Company Act of 1935.............................. 49
Federal Power Act....................................................... 51
Antitrust Considerations................................................ 51
Atomic Energy Act....................................................... 51
General................................................................. 52
THE MERGER AGREEMENT...................................................... 52
The Mergers............................................................. 52
Effects of the Mergers.................................................. 53
Direct Subsidiaries and Unrestricted Subsidiaries; Investments in
Certain Subsidiaries................................................... 54
Representations and Warranties.......................................... 54
Certain Covenants....................................................... 55
Indemnification......................................................... 56
Employment and Workforce Matters........................................ 57
Stock and Benefit Plans................................................. 58
No Solicitation of Transactions......................................... 59
Additional Agreements................................................... 59
Conditions to Each Party's Obligation to Effect the Mergers............. 60
Termination............................................................. 61
Termination Fees........................................................ 62
Expenses................................................................ 63
Amendment and Waiver.................................................... 64
Standstill Agreement.................................................... 64
THE STOCK OPTION AGREEMENTS............................................... 65
General................................................................. 65
Certain Repurchases..................................................... 65
Voting.................................................................. 66
Restrictions on Transfer................................................ 66
DESCRIPTION OF HOLDINGS CAPITAL STOCK..................................... 66
General................................................................. 66
Holdings Preferred Stock................................................ 67
Holdings Common Stock................................................... 67
Certain Antitakeover Provisions......................................... 68
COMPARISON OF SHAREHOLDER RIGHTS.......................................... 69
Comparison of Holdings Articles and By-laws to CIPSCO Articles and
By-laws................................................................ 69
Comparison of Illinois and Missouri Law................................. 72
Comparison of the Union Electric Articles and By-laws with the Holdings
Articles and By-laws................................................... 76
Anti-Takeover Statutes.................................................. 76
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION.................................................... 78
SELECTED INFORMATION CONCERNING
CIPSCO AND UNION ELECTRIC................................................ 87
Business of CIPSCO...................................................... 87
Business of Union Electric.............................................. 87
Security Ownership of Certain Beneficial Owners and Management.......... 87
Certain Business Relationships Between Union Electric and CIPSCO........ 89
HOLDINGS FOLLOWING THE MERGERS............................................ 89
Management of Holdings.................................................. 89
Operations.............................................................. 89
Dividends............................................................... 90
Holdings Incentive Plans................................................ 90
EXPERTS................................................................... 90
LEGAL MATTERS............................................................. 90
SHAREHOLDER PROPOSALS..................................................... 91
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Annex A --Agreement and Plan of Merger
Annex B --CIPSCO Stock Option Agreement
Annex C --Union Electric Stock Option Agreement
Annex D --Opinion of Goldman, Sachs & Co.
Annex E --Opinion of Morgan Stanley & Co. Incorporated
Annex F --Form of Restated Articles of Incorporation of Holdings
Annex G --Form of By-laws of Holdings
Annex H --Section 351.455 of the Missouri General and Business Corporation Law
Annex I --Sections 11.65 and 11.70 of the Business Corporation Act of 1983 of the State of Illinois
</TABLE>
vii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1935 Act............................ i
Acquisition Proposal................ 64
Antitrust Division.................. 51
Atomic Energy Act................... 11
Business Combination................ 61
Business Combination Proposal....... 59
CIC................................. 1
CIPS................................ i
CIPS ESOP........................... 22
CIPS Savings Plans.................. 22
CIPS Preferred Stock................ 13
CIPSCO.............................. i
CIPSCO Articles..................... 3
CIPSCO Board........................ ii
CIPSCO By-laws...................... 69
CIPSCO Common Stock................. i
CIPSCO Dissenting Shares............ i
CIPSCO Effective Time............... 3
CIPSCO Meeting...................... ii
CIPSCO Merger....................... i
CIPSCO MIP.......................... 58
CIPSCO Option....................... 5
CIPSCO Ratio........................ i
CIPSCO Record Date.................. 2
CIPSCO Reinvestment Plan............ 22
CIPSCO Stock Option Agreement....... 5
CIPSCO Subsidiaries................. 54
Closing............................. 52
Closing Date........................ 52
Code................................ 10
Common Stock Certificates........... 5
Confidentiality Agreement........... 62
CSE................................. ii
Deloitte & Touche................... 25
Direct Subsidiaries................. 54
Division............................ 50
EEI................................. 24
Effective Time...................... 3
Electric Utility Acquisitions....... 35
Electric Utility Comparables........ 33
Electric Utility Mergers............ 34
Engagement Letter................... 41
ERISA............................... 54
Exchange Act........................ ii
Exchange Agent...................... 5
FERC................................ 11
FTC................................. 51
Goldman Sachs....................... 7
Holdings............................ i
Holdings Articles................... 14
Holdings Board...................... 8
Holdings By-laws.................... 67
Holdings Common Stock............... i
Holdings Human Resources Committee.. 58
Holdings Preferred Stock............ 66
Holdings Replacement Plans.......... 58
Holdings Stock Plan................. 58
HSR Act............................. 11
IBCA................................ 3
IBES................................ 37
Illinois Commission................. 11
</TABLE>
<TABLE>
<S> <C>
Illinois PUA...................... 12
Indemnified Parties............... 56
IRS............................... 11
Issuer............................ 65
Merger Agreement.................. i
Merger Sub........................ i
Merger Sub Common Stock........... 6
Mergers........................... i
MGBCL............................. 2
MGBCL Dissenting Shareholder...... 46
MGBCL Fair Value.................. 46
Missouri Commission............... 11
Morgan Stanley.................... 8
Notice Date....................... 66
NRC............................... 11
NYSE.............................. ii
Offer Price....................... 66
Option Holder..................... 65
Option Shares..................... 65
Options........................... 5
Payor............................. 63
Period of Employment.............. 41
Ratios............................ i
Registration Statement............ iii
Representatives................... 59
Repurchase Period................. 65
Restricted Period................. 64
Restricted Shares................. 66
SEC............................... ii
Securities Act.................... iii
Severance Period.................. 42
stock acquisition date............ 76
Stock Option Agreements........... 5
Synergies......................... 37
Synergy Consulting................ 26
UE Mortgage Indenture............. 68
Union Electric.................... i
Union Electric Articles........... 2
Union Electric Board.............. ii
Union Electric By-laws............ 69
Union Electric/CIPS Application... 51
Union Electric Common Stock....... i
Union Electric Dissenting Shares.. i
Union Electric Dividend Units..... 58
Union Electric DRIP............... 23
Union Electric Effective Time..... 3
Union Electric EIP................ 58
Union Electric LTIP............... 43
Union Electric Meeting............ ii
Union Electric Merger............. i
Union Electric Option............. 5
Union Electric Preferred Stock.... i
Union Electric Ratio.............. i
Union Electric Record Date........ 2
Union Electric Severance Plan..... 42
Union Electric Stock Option....... 58
Union Electric Stock Option
Agreement........................ 5
Union Electric Subsidiaries....... 54
Unrestricted Subsidiaries......... 54
Utility Companies................. 38
Written Demand.................... 46
</TABLE>
viii
<PAGE>
SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS
The following is a summary of certain important terms and conditions of the
Mergers and related information. This summary does not purport to be complete
and is qualified in its entirety by reference to the more detailed information
appearing in this Joint Proxy Statement/Prospectus, the Annexes and the
documents incorporated herein by reference; however, all elements of the
subject documents which the managements of Union Electric and CIPSCO believe to
be material to a decision by the shareholders of Union Electric and CIPSCO with
respect to the Mergers are described herein. Shareholders are urged to read
this Joint Proxy Statement/Prospectus and the Annexes in their entirety.
THE PARTIES
Union Electric. Union Electric was incorporated in Missouri in 1922 and is
the successor to a number of companies, the oldest of which was organized in
1881. Union Electric, which is the largest electric utility in the State of
Missouri, supplies electric service in territories in Missouri and Illinois
having an estimated population of 2,600,000 within an area of approximately
24,500 square miles, including the greater St. Louis area. Natural gas
purchased by Union Electric or its customers from non-affiliated pipeline
companies is distributed in 90 Missouri communities and in the City of Alton,
Illinois and vicinity. See "SELECTED INFORMATION CONCERNING UNION ELECTRIC AND
CIPSCO--Business of Union Electric" and "HOLDINGS FOLLOWING THE MERGERS--
Operations."
CIPSCO. CIPSCO was incorporated in 1986 and became the parent holding company
of CIPS, its principal utility operating subsidiary, in 1990. CIPSCO conducts
its non-utility businesses through a second subsidiary, CIPSCO Investment
Company, an Illinois corporation ("CIC"). CIPS, organized in 1902, serves
317,000 retail electricity customers and 166,000 natural gas customers in
Central and Southern Illinois. See "SELECTED INFORMATION CONCERNING UNION
ELECTRIC AND CIPSCO--Business of CIPSCO" and "HOLDINGS FOLLOWING THE MERGERS--
Operations."
Holdings. Holdings is a Missouri corporation which is 50% owned by each of
Union Electric and CIPSCO. Holdings was formed by Union Electric and CIPSCO for
the purpose of effecting the transactions contemplated by the Merger Agreement.
It has, and prior to the Mergers will have, no operations except as
contemplated by the Merger Agreement. Following the Mergers, Holdings will be
the holding company for Union Electric and CIPS and the other subsidiaries of
CIPSCO. Holdings will be a public utility holding company registered under the
1935 Act. See "REGULATORY MATTERS" and "HOLDINGS FOLLOWING THE MERGERS." The
principal executive office of Holdings will be located at 1901 Chouteau Avenue,
St. Louis, Missouri 63103, telephone number (314) 621-3222.
Merger Sub. Merger Sub is a Missouri corporation which was created to effect
the Union Electric Merger. It has, and prior to the Mergers will have, no
operations except as contemplated by the Merger Agreement. Holdings is the only
shareholder of Merger Sub. The principal executive office of Merger Sub is
located at c/o Union Electric Company, P.O. Box 149, St. Louis, Missouri 63166,
telephone number (314) 621-3222. See "THE MERGER AGREEMENT--The Mergers."
THE MEETINGS
Union Electric. At the Union Electric Meeting, the holders of Union Electric
Common Stock and Union Electric Preferred Stock, voting as a single class, will
be asked to consider and vote upon a proposal to approve the Merger Agreement.
Pursuant to the Merger Agreement, consummation of the Mergers is conditioned
upon approval of such proposal. See "MEETINGS, VOTING AND PROXIES--The Union
Electric Meeting."
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The Union Electric Meeting is scheduled to be held at 9:00 a.m., local time,
on Wednesday, December 20, 1995 at The Ritz-Carlton, 100 Carondelet Plaza, St.
Louis, Missouri, 63105. The Union Electric Board has fixed the close of
business on October 23, 1995 as the record date (the "Union Electric Record
Date") for the determination of holders of Union Electric Common Stock and
Union Electric Preferred Stock entitled to notice of and to vote at the Union
Electric Meeting.
The Union Electric Board, by a unanimous vote, has approved and adopted the
Merger Agreement and the transactions contemplated thereby, and recommends that
Union Electric shareholders vote FOR approval of the Merger Agreement.
In considering the recommendation of the Union Electric Board with respect to
the Merger Agreement, shareholders should be aware that certain members of
Union Electric's management and the Union Electric Board have certain interests
in the Mergers which are in addition to the interests of shareholders of Union
Electric generally and which could potentially represent conflicts of interest.
The Union Electric Board was aware of these interests and considered them in
approving the Merger Agreement and the transactions contemplated thereby. See
"THE MERGERS--Potential Conflicts of Interests of Certain Persons in the
Mergers" in the accompanying Joint Proxy Statement/Prospectus.
CIPSCO. At the CIPSCO Meeting, the holders of CIPSCO Common Stock will be
asked to consider and vote upon a proposal to approve the Merger Agreement.
Pursuant to the Merger Agreement, consummation of the Mergers is conditioned
upon approval of such proposal. See "MEETINGS, VOTING AND PROXIES--The CIPSCO
Meeting."
The CIPSCO Meeting is scheduled to be held at 10:00 a.m., local time, on
Wednesday, December 20, 1995 at the Springfield Hilton, 700 East Adams Street,
Springfield, Illinois. The CIPSCO Board has fixed the close of business on
November 1, 1995 as the record date (the "CIPSCO Record Date") for the
determination of holders of CIPSCO Common Stock entitled to notice of and to
vote at the CIPSCO Meeting.
The CIPSCO Board has approved and adopted the Merger Agreement and the
transactions contemplated thereby, and recommends that CIPSCO shareholders vote
FOR approval of the Merger Agreement.
In considering the recommendation of the CIPSCO Board with respect to the
Merger Agreement, shareholders should be aware that certain members of CIPSCO's
management and the CIPSCO Board have certain interests in the Mergers which are
in addition to the interests of shareholders of CIPSCO generally and which
could potentially represent conflicts of interest. The CIPSCO Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby. See "THE MERGERS--
Potential Conflicts of Interests of Certain Persons in the Mergers."
REQUIRED VOTE
Union Electric. As provided under the Missouri General and Business
Corporation Law (the "MGBCL") and the Restated Articles of Incorporation of
Union Electric (the "Union Electric Articles"), the affirmative vote of at
least two-thirds of the votes entitled to be cast by the holders of the
outstanding shares of Union Electric Common Stock and Union Electric Preferred
Stock, voting together as a single class, is required for approval of the
Merger Agreement. On the Union Electric Record Date, there were 102,123,834
shares of Union Electric Common Stock and 3,434,596 shares of Union Electric
Preferred Stock, respectively, outstanding and entitled to vote. As of the
Union Electric Record Date, directors and executive officers of Union Electric,
together with their affiliates as a group, owned less than 1% of the issued and
outstanding shares of Union Electric Common Stock and less than 1% of the
issued and outstanding shares of Union Electric Preferred Stock. See "MEETINGS,
VOTING AND PROXIES--The Union Electric Meeting."
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CIPSCO. Under the Illinois Business Corporation Act of 1983 (the "IBCA") and
the Restated Articles of Incorporation of CIPSCO (the "CIPSCO Articles"), the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of CIPSCO Common Stock is required for approval of the Merger Agreement.
On the CIPSCO Record Date, there were 34,069,542 shares of CIPSCO Common Stock
outstanding and entitled to vote. As of the CIPSCO Record Date, directors and
executive officers of CIPSCO, together with their affiliates as a group, owned
less than 1% of the issued and outstanding shares of CIPSCO Common Stock. See
"MEETINGS, VOTING AND PROXIES--The CIPSCO Meeting."
THE MERGERS
The Merger Agreement provides for (a) the Union Electric Merger in which
Merger Sub will be merged with and into Union Electric with Union Electric to
be the surviving corporation and (b) the CIPSCO Merger in which CIPSCO will be
merged with and into Holdings with Holdings to be the surviving corporation.
Pursuant to the Merger Agreement, (i) (a) each outstanding share of Union
Electric Common Stock (other than Union Electric Dissenting Shares, and other
than shares owned by Union Electric as treasury stock or otherwise owned
directly or indirectly by Union Electric, CIPSCO, or any of their respective
wholly owned subsidiaries, which shares will be cancelled) will be converted
into the right to receive one share (the "Union Electric Ratio") of Holdings
Common Stock, and (b) each outstanding share of Union Electric Preferred Stock
(other than Union Electric Dissenting Shares, and other than shares owned by
Union Electric as treasury stock or otherwise owned directly or indirectly by
Union Electric, CIPSCO, or any of their respective wholly owned subsidiaries,
which shares will be cancelled) will remain outstanding and unchanged; and (ii)
each share of CIPSCO Common Stock (including CIPSCO Dissenting Shares, but
excluding shares owned by CIPSCO as treasury stock or otherwise directly or
indirectly owned by Union Electric, CIPSCO, or any of their respective wholly
owned subsidiaries, which shares will be cancelled) will be converted into the
right to receive 1.03 shares (the "CIPSCO Ratio" and together with the Union
Electric Ratio, the "Ratios") of Holdings Common Stock (or cash in lieu of
fractional shares otherwise deliverable in respect thereof). As a result of the
Mergers, the common shareholders of Union Electric and CIPSCO immediately prior
to the Mergers (except for the holders of Union Electric Dissenting Shares)
will all be common shareholders of Holdings immediately upon the consummation
of the Mergers.
The Union Electric Merger will 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") following the filing of articles of merger
complying with the requirements of the MGBCL with the Secretary of State of the
State of Missouri. The CIPSCO Merger will 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 "CIPSCO Effective Time")
following the filing of articles of merger complying with the requirements of
the MGBCL and the IBCA with the Secretary of State of the State of Missouri and
with the Secretary of State of the State of Illinois. The Union Electric
Effective Time will occur immediately prior to the CIPSCO Effective Time. The
"Effective Time" shall mean the time and date that the CIPSCO Merger becomes
effective.
See "THE MERGER AGREEMENT--The Mergers."
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The following charts set forth the simplified corporate structure immediately
prior to and immediately following the Mergers:
[The printed version of this page contains two charts. One chart depicts the
ownership structure of Union Electric and CIPSCO and their respective
subsidiaries prior to the Mergers. A second chart depicts the ownership
structure of Holdings and its subsidiaries following the Mergers. The first
chart indicates (i) that Union Electric and CIPSCO each own 50% of Holdings,
(ii) that Holdings owns 100% of Merger Sub and (iii) the CIPSCO owns 100% of
each of CIPS and certain "Other CIPSCO Subsidiaries." The second chart indicates
that following the Mergers, each of Union Electric and CIPS will be wholly owned
direct subsidiaries of Holdings, and that Holdings will also own 100% of the
"Other CIPSCO Subsidiaries" referred to in the previous sentence.]
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EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, an exchange agent selected
by Union Electric and CIPSCO (the "Exchange Agent") will mail transmittal
instructions to each holder of record of shares of Union Electric Common Stock
or CIPSCO Common Stock, as the case may be, at the Union Electric Effective
Time or the CIPSCO Effective Time, as the case may be. Such instructions will
advise such holder of the procedure for surrendering such holder's certificates
("Common Stock Certificates"), which immediately prior to the Union Electric
Effective Time or the CIPSCO Effective Time, as the case may be, represented
shares of Union Electric Common Stock or CIPSCO Common Stock, as the case may
be, that were cancelled and became instead the right to receive shares of
Holdings Common Stock, for certificates representing shares of Holdings Common
Stock. Holders of certificates which prior to the Union Electric Effective Time
or the CIPSCO Effective Time, as the case may be, represented shares of Union
Electric Common Stock or CIPSCO Common Stock, as the case may be, will not be
entitled to receive any payment of dividends or other distributions on or
payment for any fractional share with respect to their Common Stock
Certificates until such certificates have been surrendered for certificates
representing shares of Holdings Common Stock. Cash will be paid to CIPSCO
shareholders in lieu of fractional shares of Holdings Common Stock. Holders of
shares of Common Stock Certificates should not submit their stock certificates
for exchange until a form of letter of transmittal and instructions therefor
are received. See "THE MERGER AGREEMENT--Effects of the Mergers."
Holders of Union Electric Preferred Stock are not required to exchange their
existing certificates representing shares of Union Electric Preferred Stock for
new stock certificates. Each outstanding certificate representing shares of
Union Electric Preferred Stock immediately prior to the Union Electric
Effective Time shall, from and after the Union Electric Effective Time, remain
outstanding and unchanged.
STOCK OPTION AGREEMENTS
Pursuant to a Stock Option Agreement, dated as of August 11, 1995, by and
between Union Electric and CIPSCO (the "CIPSCO Stock Option Agreement"), CIPSCO
has granted to Union Electric the right (the "Union Electric Option") to
purchase, under certain circumstances, up to a certain number of authorized but
unissued shares of CIPSCO Common Stock (representing 19.9% of the CIPSCO Common
Stock outstanding on August 11, 1995), at a price of $37.02 per share.
Simultaneously with the execution of the CIPSCO Stock Option Agreement,
pursuant to an additional Stock Option Agreement, dated as of August 11, 1995,
by and between Union Electric and CIPSCO (the "Union Electric Stock Option
Agreement" and together with the CIPSCO Stock Option Agreement, the "Stock
Option Agreements"), Union Electric has granted to CIPSCO the right (the
"CIPSCO Option" and together with the Union Electric Option, the "Options") to
purchase, under certain circumstances, up to a certain number of authorized but
unissued shares of Union Electric Common Stock (representing 6.8% of the Union
Electric Common Stock outstanding on August 11, 1995), at a price of $35.94 per
share. The exercise of the Options is subject to certain conditions described
in the Merger Agreement. See "THE STOCK OPTION AGREEMENTS--General" and "THE
MERGER AGREEMENT--Termination Fees." In addition, the Stock Option Agreements
provide that the holder of an Option has the right to require the issuer
thereof to repurchase from the holder of the Option (i) all or any portion of
the Option at any time the Option is exercisable at a price which is the
difference between the Market/Offer Price (as defined in the Stock Option
Agreements) and the exercise price of the Option, and (ii) on or at any time
prior to August 11, 1997 (which date may be extended to February 11, 1998 under
certain circumstances) all or any portion of any shares purchased pursuant to
the Option. See "THE STOCK OPTION AGREEMENTS--Certain Repurchases."
The Stock Option Agreements are intended to increase the likelihood that the
Mergers will be consummated in accordance with the terms of the Merger
Agreement and may have the effect of discouraging competing offers. See "THE
STOCK OPTION AGREEMENTS." Further, the Stock Option Agreements
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contemplate the continuation of certain standstill provisions and provide that
any shares of the other party acquired or otherwise beneficially owned must be
voted for and against each matter submitted to a shareholder vote in the same
proportion as the other shareholders of the issuer thereof vote for and against
such matter. See "THE MERGER AGREEMENT--Standstill Agreement" and "THE STOCK
OPTION AGREEMENTS--Voting."
TREATMENT OF SHARES; RATIOS
Each share of Union Electric Common Stock issued and outstanding immediately
prior to the Union Electric Effective Time (other than Union Electric
Dissenting Shares and other than shares owned by Union Electric as treasury
stock or otherwise owned directly or indirectly by Union Electric, CIPSCO, or
any of their respective wholly owned subsidiaries, which shares will be
cancelled) will, pursuant to the Merger Agreement, be converted into the right
to receive one share of Holdings Common Stock. Each share of CIPSCO Common
Stock outstanding immediately prior to the CIPSCO Effective Time (including
CIPSCO Dissenting Shares, but excluding shares owned by CIPSCO as treasury
stock or otherwise directly or indirectly owned by Union Electric, CIPSCO, or
any of their respective wholly owned subsidiaries, which shares will be
cancelled) will, pursuant to the Merger Agreement, be converted into the right
to receive 1.03 shares of Holdings Common Stock. Holders of CIPSCO Common Stock
will receive cash in lieu of fractional shares of Holdings Common Stock. Each
share of Union Electric Preferred Stock outstanding immediately prior to the
Union Electric Effective Time (other than Union Electric Dissenting Shares and
other than shares owned by Union Electric as treasury stock or otherwise owned
directly or indirectly by Union Electric, CIPSCO or any of their respective
wholly owned subsidiaries, which shares will be cancelled) will, pursuant to
the Merger Agreement, remain outstanding and unchanged and will continue to
represent one share of preferred stock of the surviving corporation in the
Union Electric Merger. Each share of common stock, par value $5.00 per share,
of Merger Sub ("Merger Sub Common Stock") issued and outstanding immediately
prior to the Union Electric Effective Time will, upon consummation of the Union
Electric Merger, be converted into one share of common stock of the surviving
corporation in the Union Electric Merger. Each issued and outstanding share of
Holdings Common Stock that is owned by CIPSCO, Union Electric or any of their
wholly owned subsidiaries immediately prior to the Effective Time will,
pursuant to the Merger Agreement, be cancelled and cease to exist. See "THE
MERGER AGREEMENT--Effects of the Mergers."
BACKGROUND
For a description of the background of the Mergers, see "THE MERGERS--
Background of the Mergers."
REASONS FOR THE MERGERS
Union Electric and CIPSCO believe that the Mergers offer significant
strategic, operational and financial benefits to each company and to their
respective shareholders, as well as to their employees and customers and the
communities in which they do business. These benefits include, among others:
-- Cost efficiencies that will help to maintain competitive rates, thereby
improving the combined companies' ability to meet the challenges of the
increasingly competitive environment in the utility industry.
-- Integration of corporate and administrative functions, including the
elimination of duplicate positions, limiting expenditures for
administrative programs and information systems, and savings in areas such
as legal, audit, and consulting fees.
-- Greater purchasing power for items such as materials, supplies and
contract services.
-- Electric production savings through joint dispatch and natural gas supply
savings through combined purchasing.
-- Increased geographic diversity of service territories, reducing exposure
to local changes in economic or competitive conditions.
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-- Increased marketing opportunities through interconnections with 28 other
systems.
-- Expanded management resources and ability to select leadership from a
larger and more diverse management pool.
-- Continued ability to play a leadership role in the economic development
efforts of the communities Union Electric and CIPS now serve.
See "THE MERGERS--Reasons for the Mergers; Recommendations of the Boards of
Directors."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Union Electric. The Union Electric Board, by a unanimous vote, has approved
and adopted the Merger Agreement, believes that the terms of the Mergers are
fair to, and in the best interests of, Union Electric's shareholders, and
recommends that the shareholders of Union Electric vote FOR approval of the
Merger Agreement. The Union Electric Board approved and adopted the Merger
Agreement after consideration of a number of factors described under "THE
MERGERS--Reasons for the Mergers; Recommendations of the Boards of Directors."
In considering the recommendation of the Union Electric Board with respect to
the Merger Agreement, shareholders should be aware that certain members of
Union Electric's management and the Union Electric Board have certain interests
in the Mergers which are in addition to the interests of shareholders of Union
Electric generally and which could potentially represent conflicts of interest.
The Union Electric Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby. See "THE MERGERS--Potential Conflicts of Interests of
Certain Persons in the Mergers."
CIPSCO. The CIPSCO Board has approved and adopted the Merger Agreement, and
believes that the terms of the Mergers are fair to, and in the best interests
of, CIPSCO's shareholders and recommends that the shareholders of CIPSCO vote
FOR approval of the Merger Agreement. All members of the CIPSCO Board voted in
favor of approval of the Merger Agreement with the exception of Mr. John L.
Heath. The CIPSCO Board approved and adopted the Merger Agreement after
consideration of a number of factors described under "THE MERGERS--Reasons for
the Mergers; Recommendations of the Boards of Directors."
In considering the recommendation of the CIPSCO Board with respect to the
Merger Agreement, shareholders should be aware that certain members of CIPSCO's
management and the CIPSCO Board have certain interests in the Mergers which are
in addition to the interests of shareholders of CIPSCO generally and which
could potentially represent conflicts of interest. The CIPSCO Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby. See "THE MERGERS--
Potential Conflicts of Interests of Certain Persons in the Mergers."
OPINIONS OF FINANCIAL ADVISORS
Union Electric. Goldman, Sachs & Co. ("Goldman Sachs") delivered its oral
opinion on August 11, 1995 to the Union Electric Board and a written opinion
dated the date of this Joint Proxy Statement/Prospectus to the Union Electric
Board to the effect that, as of the dates of such opinions, and in light of the
CIPSCO Ratio, the Union Electric Ratio is fair to the holders of Union Electric
Common Stock. The full text of the written opinion of Goldman Sachs, dated as
of the date of this Joint Proxy Statement/Prospectus is attached hereto as
Annex D. HOLDERS OF SHARES OF UNION ELECTRIC
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COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. For a
description of the assumptions made, matters considered and limits of review
undertaken by Goldman Sachs in connection with reaching its opinions and the
fees received and to be received by Goldman Sachs, see "THE MERGERS --Opinions
of Financial Advisors" and Annex D.
CIPSCO. Morgan Stanley & Co. Incorporated ("Morgan Stanley") delivered to the
CIPSCO Board its oral and written opinions dated August 11, 1995 and its
written opinion dated the date of this Joint Proxy Statement/Prospectus the
CIPSCO Ratio, taking into account the Union Electric Ratio, is fair from a
financial point of view to the holders of shares of CIPSCO Common Stock. The
written opinion of Morgan Stanley dated the date of this Joint Proxy
Statement/Prospectus is attached hereto as Annex E. HOLDERS OF SHARES OF CIPSCO
COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. For a
description of the assumptions made and matters considered by Morgan Stanley in
reaching its opinions and the fees received and to be received by Morgan
Stanley, see "THE MERGERS --Opinions of Financial Advisors" and Annex E.
POTENTIAL CONFLICTS OF INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Directorships. The Merger Agreement provides that the Board of Directors of
Holdings (the "Holdings Board") will, upon consummation of the Mergers, consist
of 15 individuals, including Charles W. Mueller, President and Chief Executive
Officer of Union Electric, and nine other directors designated by Union
Electric and Clifford L. Greenwalt, President and Chief Executive Officer of
CIPSCO, and four non-management directors designated by CIPSCO. See "THE
MERGERS--Potential Conflicts of Interests of Certain Persons in the Mergers--
Board of Directors."
Severance Policies. CIPSCO has Management Continuity Agreements with each of
nine executives of CIPSCO and/or CIPS which provide that in the event of a
change in control of CIPSCO or CIPS, CIPSCO and/or CIPS or another subsidiary
of CIPSCO will continue to employ the executive for a period of three years
from the date of the change in control, with certain exceptions. In the event
the executive's employment is terminated within the meaning of the Management
Continuity Agreement during that three-year period, the executive will be
entitled to payment of certain severance compensation and benefits. Severance
compensation generally consists of a lump sum payment equal to the present
value of base and incentive compensation that would have accrued over the
remaining portion of the three-year period. Entering into the Merger Agreement
constitutes a "change in control" as defined in the Management Continuity
Agreements. See "THE MERGERS--Potential Conflicts of Interests of Certain
Persons in the Mergers--Employee Plans and Severance Arrangements."
Effective August 11, 1995, the Union Electric Board unanimously approved the
adoption of the Union Electric Company Change of Control Severance Plan,
pursuant to which participants are entitled to receive certain severance
benefits if their employment is terminated under certain circumstances within
three years after the Mergers or another transaction that meets the definition
of "change of control" under the plan. Severance benefits generally consist of
two or three years' compensation (as designated by the Human Resources
Committee of the Union Electric Board). See "THE MERGERS--Potential Conflicts
of Interests of Certain Persons in the Mergers--Employee Plans and Severance
Arrangements."
Employee Plans. Certain supplemental retirement plans and an associated trust
established by CIPS were amended August 8, 1995 to provide that a change in
control as defined therein will not result from and shall not be deemed to have
occurred by reason of any business combination or agreement to enter into a
business combination with Union Electric approved by at least two-thirds of the
directors of CIPSCO in office
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on August 8, 1995. The Merger Agreement was so approved by the CIPSCO Board and
each participant of the plans who was required to consent to such amendment
under the terms of the plans has done so. Consequently, the Mergers will not
constitute a change in control under such plans and trust and accelerated
vesting or payment of certain benefits will not occur as a result of the
Mergers or as a result of entering into the Merger Agreements.
Indemnification. The parties have agreed in the Merger Agreement that
Holdings will indemnify, to the fullest extent permitted by applicable law, the
present and former officers, directors and employees of each of the parties to
the Merger Agreement or any of their subsidiaries against certain liabilities
(i) arising out of actions or omissions occurring at or prior to the Effective
Time that arise from or are based on such service as an officer, director or
employee or (ii) that are based on or arise out of or pertain to the
transactions contemplated by the Merger Agreement, and to maintain policies of
directors' and officers' liability insurance for a period of not less than six
years after the Effective Time. To the fullest extent permitted by law, from
and after the Effective Time, all rights to indemnification existing in favor
of the employees, agents, directors or officers of Union Electric, CIPSCO 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 August 11, 1995, or otherwise in effect on August 11,
1995, shall survive the Mergers and shall continue in full force and effect for
a period of not less than six years from the Effective Time. CIPSCO has entered
into indemnification agreements with each of its directors and CIPSCO and CIPS
have entered into indemnification agreements with each of their executive
officers. These indemnification agreements provide for indemnification
consistent with the requirements of the By-laws of CIPSCO and CIPS and also
provide for additional indemnification as provided in such indemnification
agreements subject to the limitations on the maximum permissible indemnity
which may exist under applicable law at the time of any request for indemnity.
See "THE MERGERS--Potential Conflicts of Interests of Certain Persons in the
Mergers--Indemnification" and "THE MERGER AGREEMENT--Indemnification."
MANAGEMENT OF HOLDINGS
As provided in the Merger Agreement, at the Effective Time, the Holdings
Board will consist of 15 directors, ten designated by Union Electric and five
designated by CIPSCO. At the Effective Time, Mr. Mueller will become Chairman
and Chief Executive Officer of Holdings, and Mr. Greenwalt will become Vice
Chairman of Holdings. See "HOLDINGS FOLLOWING THE MERGERS--Management of
Holdings."
CONDITIONS TO THE MERGERS
The obligations of Union Electric, on the one hand, and CIPSCO, on the other
hand, to consummate the Mergers are subject to the satisfaction of certain
conditions, including the approval of the Merger Agreement by the requisite
vote of shareholders of each of Union Electric and CIPSCO, the receipt of all
material governmental approvals, the absence of any injunction that prevents
the consummation of the Mergers, the listing on the NYSE of the shares of
Holdings Common Stock to be issued pursuant to the terms of the Merger
Agreement, the qualification of the Mergers as a pooling of interests
transaction for accounting purposes, the accuracy of the representations and
warranties of the other party set forth in the Merger Agreement as of the
Closing Date (as defined herein) (except for inaccuracies which would not have
a material adverse effect on such other party), the performance by the other
party in all material respects, or waiver, of all obligations required to be
performed under the Merger Agreement and the Stock Option Agreements (see "THE
STOCK OPTION AGREEMENTS"), the receipt of an officer's certificate from the
other party stating that certain conditions set forth in the Merger Agreement
have been satisfied, there having
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been no material adverse effect on the other party, the receipt of tax opinions
that the Mergers will qualify as tax-free reorganizations, the receipt of
certain material third-party consents, the receipt of letters from affiliates
of the other party with respect to transactions in securities of Union
Electric, CIPSCO or Holdings, the effectiveness of the Registration Statement,
and the number of shares of Union Electric Common Stock and Union Electric
Preferred Stock which are Union Electric Dissenting Shares not constituting
more than five percent of the number of issued and outstanding shares of Union
Electric Common Stock and Union Electric Preferred Stock, taken together as a
single class. See "THE MERGER AGREEMENT--Conditions to Each Party's Obligation
to Effect the Mergers."
RIGHTS TO TERMINATE, AMEND OR WAIVE CONDITIONS
The Merger Agreement may be terminated under certain circumstances,
including: by mutual consent of Union Electric and CIPSCO; by any party if the
Mergers are not consummated by August 11, 1997 (which date may be extended to
February 11, 1998 under certain circumstances); by any party if the requisite
shareholder approvals are not obtained or if any state or federal law or court
order prohibits consummation of the Mergers; by a non-breaching party if there
occurs a material breach of the Merger Agreement which is not cured within 20
days; or by either party, under certain circumstances, as a result of a more
favorable third-party tender offer or business combination proposal with
respect to such party. The Merger Agreement requires that termination fees be
paid under certain circumstances, including if there is a material, willful
breach of the Merger Agreement or if, under certain circumstances, a business
combination with a third party is consummated within two and one-half years of
the termination of the Merger Agreement. See "THE MERGER AGREEMENT--
Termination." The aggregate termination fees under these provisions together
with the amounts payable under certain provisions of the Stock Option
Agreements may not exceed $50,000,000. See "THE MERGER AGREEMENT--Termination
Fees" and "THE STOCK OPTION AGREEMENTS--Certain Repurchases."
The Merger Agreement may be amended by the Boards of Directors of the parties
at any time before or after its approval by the shareholders of Union Electric
and CIPSCO, but after any such approval, no amendment may be made which alters
or changes (i) the amount or kind of shares, rights or proceedings relating to
the manner of conversion of such shares, or (ii) the terms or conditions of the
Merger Agreement, if such alteration or change, alone or in the aggregate,
would materially adversely affect the rights of the Union Electric shareholders
or CIPSCO shareholders, except for alterations or changes that could otherwise
be adopted by the Holdings Board without the further approval of such
shareholders. See "THE MERGER AGREEMENT--Amendment and Waiver."
At any time prior to the Effective Time, to the extent permitted by
applicable law, the conditions to Union Electric's or CIPSCO's respective
obligations to consummate the Mergers may be waived by the party entitled to
the benefit of such condition. Any determination to waive a condition would
depend upon the facts and circumstances existing at the time of such waiver and
would be made by the waiving party's Board of Directors, exercising its
fiduciary duties to such party and its shareholders. See "THE MERGER
AGREEMENT--Amendment and Waiver."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Union Electric's obligation to effect the Union Electric Merger is
conditioned on the receipt of an opinion from Wachtell, Lipton, Rosen & Katz,
counsel for Union Electric, to the effect that the Union Electric Merger will
be treated as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and/or that the Mergers, taken
together, will be treated as an exchange under Section 351 of the Code. The
obligation of CIPSCO to effect the CIPSCO Merger is conditioned on receipt of
an opinion from Jones, Day, Reavis & Pogue, counsel to CIPSCO, to the effect
that the CIPSCO Merger
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will be treated as a tax-free reorganization within the meaning of Section
368(a) of the Code. Each such opinion will be dated as of the Closing Date, and
will be based upon certain customary representations and assumptions set forth
therein. It should be noted that rulings will not be sought from the Internal
Revenue Service (the "IRS") regarding the Mergers and the IRS may disagree with
the conclusions expressed in the opinions of counsel referred to above.
Based on the foregoing, (i) no gain or loss will be recognized by Union
Electric, Merger Sub, Holdings or CIPSCO pursuant to the Mergers; (ii) no gain
or loss will be recognized by holders of Union Electric Common Stock upon the
conversion of their shares into Holdings Common Stock pursuant to the Union
Electric Merger; (iii) no gain or loss will be recognized by holders of Union
Electric Preferred Stock as the result of the Union Electric Merger; and (iv)
no gain or loss will be recognized by shareholders of CIPSCO upon the
conversion of their shares into Holdings Common Stock pursuant to the CIPSCO
Merger. See "THE MERGERS--Certain Federal Income Tax Consequences."
EACH SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE TAX
CONSEQUENCES OF THE MERGERS TO SUCH SHAREHOLDER UNDER FEDERAL, STATE, LOCAL OR
ANY OTHER APPLICABLE LAW.
OPERATIONS AFTER THE MERGERS
Following the Mergers, Holdings will be a registered public utility holding
company under the 1935 Act, and Union Electric and CIPS will operate as its
principal subsidiaries. The headquarters of Holdings will be in St. Louis,
Missouri. The headquarters of the two utility subsidiaries will remain in their
current locations, Union Electric's in St. Louis and CIPS' in Springfield,
Illinois. Holdings' utility subsidiaries will serve approximately 1,442,000
electric customers and 284,000 natural gas customers in portions of Missouri
and Illinois. The business of Holdings will be to operate as a holding company
for its utility subsidiaries and various non-utility subsidiaries. Pursuant to
the Merger Agreement, Union Electric will transfer certain utility assets
located in Illinois to CIPS. Union Electric and CIPSCO recognize that a
divestiture mandated by the SEC of their existing gas operations and certain
non-utility operations is a possibility under the registered holding company
structure, but intend to seek approval from the SEC to maintain such
businesses. See "REGULATORY MATTERS" and "HOLDINGS FOLLOWING THE MERGERS--
Operations."
Pursuant to the Merger Agreement, Holdings and its subsidiaries will continue
to play a leadership role in the economic development efforts of the
communities Union Electric and CIPS now serve. The philanthropic and volunteer
programs currently maintained by the two companies will be continued. See
"HOLDINGS FOLLOWING THE MERGERS--Operations."
REGULATORY MATTERS
The approval of the SEC under the 1935 Act, the Nuclear Regulatory Commission
(the "NRC") under the Atomic Energy Act of 1954, as amended (the "Atomic Energy
Act"), the Federal Energy Regulatory Commission (the "FERC") under the Federal
Power Act, as well as the approval of the Missouri Public Service Commission
(the "Missouri Commission") and the Illinois Commerce Commission (the "Illinois
Commission") under applicable state laws and the expiration or termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), are required in order to
consummate the Mergers.
Upon consummation of the Mergers, Holdings must register as a holding company
under the 1935 Act. The 1935 Act imposes restrictions on the operations of
registered holding company systems. Among these are requirements that
securities issuances, sales and acquisitions of utility assets or of securities
of utility companies and acquisitions of interests in any other business be
approved by the SEC. The 1935 Act also
11
<PAGE>
limits the ability of registered holding companies to engage in non-utility
ventures and regulates holding company system service companies and the
rendering of services by holding company affiliates to the system's utilities.
The SEC may require as a condition to its approval of the Mergers that Union
Electric and CIPS divest their gas utility properties and possibly certain non-
utility ventures of Union Electric and CIPSCO within a reasonable time after
the Mergers. In a few cases, the SEC has allowed the retention of such
properties or deferred the question of divestiture for a substantial period of
time. In those cases in which divestiture has taken place, the SEC has usually
allowed enough time to complete the divestiture so as to allow the applicant to
avoid a "fire sale" of the divested assets. Union Electric and CIPSCO believe
significant policy reasons and prior SEC decisions exist which support their
position that they should be permitted to retain the existing gas utility
properties and non-utility ventures, or, alternatively, which support deferring
the question of divestiture for a substantial period of time. Accordingly,
Union Electric and CIPSCO will request in their 1935 Act application that
Holdings and its subsidiaries be allowed to retain, or in the alternative that
the question of divestiture be deferred with respect to, the existing gas
utility properties and non-utility ventures.
Under the Illinois Public Utilities Act (the "Illinois PUA"), approval of the
Illinois Commission is required for any transaction which, regardless of the
means by which it is accomplished, results in a change in the ownership of a
majority of the voting capital stock of an Illinois public utility or the
ownership or control of any entity which owns or controls a majority of the
voting capital stock of a public utility. After the Mergers, Holdings will
control a majority of the voting stock of CIPS, an Illinois public utility.
Accordingly, any change in the ownership or control, within the meaning of the
Illinois PUA, of Holdings would require Illinois Commission approval. The
Illinois PUA also requires approval by the Illinois Commission of certain
transactions between an Illinois public utility and its "affiliated interests."
After the Mergers, Holdings and its subsidiaries will be "affiliated interests"
and as a result, certain transactions between CIPS, Holdings and Holdings'
subsidiaries will require approval.
Under the Merger Agreement, Union Electric and CIPSCO have agreed to use all
reasonable efforts to obtain all governmental authorizations necessary or
advisable to consummate or effect the transactions contemplated by the Merger
Agreement. Various parties may seek intervention in these proceedings to oppose
the Mergers or to have conditions imposed upon the receipt of necessary
approvals. While Union Electric and CIPSCO believe that they will receive the
requisite regulatory approvals for the Mergers, there can be no assurance as to
the timing of such approvals or the ability of such parties to obtain such
approvals on satisfactory terms or otherwise. It is a condition to the
consummation of the Mergers that final orders approving the Mergers be obtained
from the various federal and state commissions described above on terms and
conditions which would not have, or would not be reasonably likely to have, a
material adverse effect on the business, assets, financial condition or results
of operations of Holdings and its prospective subsidiaries taken as a whole, or
on Holdings' 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 in the Merger Agreement. There can
be no assurance that any such approvals will not contain terms or conditions
that cause such approvals to fail to satisfy such condition to the consummation
of the Mergers. See "REGULATORY MATTERS."
ACCOUNTING TREATMENT
Union Electric and CIPSCO believe that the Mergers will be treated as a
pooling of interests for accounting purposes. See "THE MERGERS--Accounting
Treatment." The receipt by each of CIPSCO and Union Electric of a letter from
their respective independent accountants, stating that the transaction will
12
<PAGE>
qualify as a pooling of interests, is a condition precedent to consummation of
the Mergers. See "THE MERGER AGREEMENT--Conditions to Each Party's Obligation
to Effect the Mergers."
DISSENTERS' RIGHTS
Under Missouri law, holders of record of Union Electric Common Stock and
Union Electric Preferred Stock as of the Union Electric Record Date who object
to the Union Electric Merger have the right to have the fair value of their
Union Electric shares paid to them in cash. Fair value, which is the value of
the shares as of the day prior to the date of the Union Electric Meeting, will
be determined by judicial appraisal in the event Union Electric and the
dissenting shareholder are unable to agree upon an appropriate amount. In order
to perfect such dissenters' rights, holders of Union Electric Stock must comply
with the procedural requirements of the MGBCL, including, without limitation
(i) filing written notice with Union Electric of their objection to the Union
Electric Merger prior to or at the Union Electric Meeting; (ii) not voting in
favor of the Union Electric Merger; (iii) within 20 days after the Effective
Time, making written demand on Union Electric (as the surviving corporation in
the Union Electric Merger) for payment of the fair value of the shares; and
(iv) surrendering the certificate(s) representing said shares. See "THE
MERGERS--Missouri Dissenters' Rights" and Annex H.
Under Illinois law, a holder of record of CIPSCO Common Stock as of the
CIPSCO Record Date who objects to the CIPSCO Merger may demand payment from
Holdings for his or her shares. In order to perfect such right, a shareholder
must (i) deliver to CIPSCO at the office of the corporate secretary, 607 East
Adams Street, Springfield, Illinois 62739, prior to the taking of the vote of
the shareholders upon the approval of the Merger Agreement a written demand for
payment for his or her shares if the CIPSCO Merger is consummated; and (ii) not
vote his or her shares in favor of the proposed Merger Agreement. After the
CIPSCO Merger is consummated, Holdings must elect to (a) make a commitment to
purchase such shares at Holdings' estimated fair value thereof or (b) instruct
such dissenting shareholder to sell his or her shares in accordance with the
IBCA within ten days thereafter. If Holdings elects to direct the dissenting
shareholder to sell and the shareholder does not sell within that ten day
period, the shareholder shall be deemed to have sold his or her shares at the
average closing price of the Holdings Common Stock on the NYSE during that 10
day period. "Fair value" means the value of the shares immediately before the
Effective Time excluding any appreciation or depreciation in anticipation of
the CIPSCO Merger, unless exclusion would be inequitable. See "THE MERGERS--
Illinois Dissenters' Rights" and Annex I.
DIVIDENDS
Union Electric and CIPSCO. Pursuant to the Merger Agreement, each of Union
Electric and CIPSCO shall not, and shall not permit any of its direct
subsidiaries to, declare or pay any dividends on, or make other distributions
in respect of, any of its capital stock, other than to such party or its
wholly-owned subsidiaries and other than dividends required to be paid on any
series of Union Electric Preferred Stock in accordance with the terms thereof,
dividends required to be paid on any shares of preferred stock of CIPS ("CIPS
Preferred Stock") in accordance with the terms thereof, and regular quarterly
dividends to be paid on Union Electric Common Stock and CIPSCO Common Stock,
respectively, not to exceed 104% of the dividends for the prior fiscal year.
Holdings. It is anticipated that Holdings will adopt Union Electric's common
share dividend payment level as of the Effective Time. Union Electric's annual
dividend rate is currently $2.50 per share, and CIPSCO's annual dividend rate
is currently $2.04 per share. The dividend policy of Holdings is subject to
evaluation from time to time by the Holdings Board based on Holdings' results
of operations, financial condition, capital requirements and other relevant
considerations, including regulatory considerations. See "HOLDINGS FOLLOWING
THE MERGERS" and "DESCRIPTION OF HOLDINGS CAPITAL STOCK--Holdings Common
Stock."
13
<PAGE>
COMPARISON OF RIGHTS OF SHAREHOLDERS
As a result of the Mergers, holders of Union Electric Common Stock (other
than Union Electric Dissenting Shares) and CIPSCO Common Stock will become
shareholders of Holdings, a Missouri corporation. Such shareholders will have
certain different rights as Holdings shareholders than they had as shareholders
of Union Electric or CIPSCO because of the differences between the Union
Electric Articles and the CIPSCO Articles, on the one hand, and the Restated
Articles of Incorporation of Holdings ("the Holdings Articles"), on the other
hand, and also, in the case of holders of CIPSCO Common Stock, because of
differences between Missouri and Illinois corporation law. For a comparison of
Missouri and Illinois law, and comparisons of the articles and by-law
provisions of each of Union Electric and CIPSCO against those of Holdings, see
"COMPARISON OF SHAREHOLDER RIGHTS."
14
<PAGE>
SELECTED HISTORICAL AND PRO FORMA DATA
The summary below sets forth selected historical financial and market data
and selected unaudited pro forma financial data. The financial data should be
read in conjunction with the historical financial statements and related notes
thereto of Union Electric and CIPSCO, incorporated herein by reference, and in
conjunction with the unaudited pro forma combined condensed financial
statements and related notes thereto of Holdings included elsewhere in this
Joint Proxy Statement/Prospectus. See "UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION."
SELECTED HISTORICAL FINANCIAL AND MARKET DATA
The selected historical financial data of each of Union Electric and CIPSCO
for the five years ended December 31, 1994, set forth below, have been derived
from audited financial statements. The selected historical financial data of
Union Electric and CIPSCO as of and for the 12-month period ended September 30,
1995, set forth below, have been derived from unaudited financial statements.
The selected historical market data of each of Union Electric and CIPSCO for
the dates indicated below are based on the closing sale prices of Union
Electric Common Stock and CIPSCO Common Stock as reported on the NYSE Composite
Tape for such dates. The Aggregate Market Capitalization represents the product
of the closing sale prices on such dates multiplied by the number of
outstanding shares on such dates.
15
<PAGE>
UNION ELECTRIC COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
12 MONTHS ENDED ------------------------------------------------------
SEPTEMBER 30, 1995(K)(1) 1994 1993 1992(B) 1991 1990
------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues..... $2,081,400 $2,056,116 $2,066,004 $2,015,121 $2,096,940 $2,023,017
Operating Income....... 439,745 450,186 411,297 412,017 482,813 457,540
Allowance for Borrowed
and Other Funds Used
During Construction... 12,522 11,280 11,544 8,022 8,519 14,145
Net Income............. 305,530 320,757 297,160 302,748 321,512 294,219
Preferred Dividend Re-
quirements............ 13,250 13,252 14,087 14,058 14,059 14,693
Earnings Available for
Common Shares(d)...... 292,280 307,505 283,073 288,690 307,453 279,526
Earnings per Common
Share(d).............. $2.86 $3.01 $2.77 $2.83 $3.01 $2.74
Cash Dividends Declared
per Common Share...... $2.44 $2.395 $2.335 $2.26 $2.18 $2.10
Ratio of Earnings to
Fixed Charges(g)...... 4.64X 4.68X 4.66X 4.66X 4.21X 3.57X
Ratio of Earnings to
Fixed Charges Plus
Preferred Dividend
Requirements(g)....... 4.04X 4.09X 4.01X 4.02X 3.72X 3.19X
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------------------ ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets........... $6,854,306 $6,624,701 $6,595,570 $5,797,363 $5,733,479 $5,702,341
Long-Term Debt......... 1,764,343 1,823,489 1,766,655 1,659,553 1,730,277 1,948,024
Short-Term Debt(j)..... 69,295 68,318 90,139 313,169 287,421 197,118
Preferred Stock--
Not Subject to Manda-
tory Redemption....... 218,497 218,497 218,497 217,784 217,784 218,004
Subject to Mandatory
Redemption............ 650 676 702 728 754 780
Common Stock Equity.... 2,359,096 2,269,054 2,206,168 2,164,020 2,106,155 2,021,299
Book Value per Common
Share................. $23.10 $22.22 $21.60 $21.19 $20.62 $19.79
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------------------ ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
MARKET DATA--COMMON
STOCK
Aggregate Market Capi-
talization............ $3,816,878 $3,612,631 $4,008,360 $3,816,878 $3,944,533 $3,038,184
Closing Market Price
per Share............. $37 3/8 $35 3/8 $39 1/4 $37 3/8 $38 5/8 $29 3/4
Ratio of Market Value
to Book Value......... 1.62X 1.59X 1.82X 1.76X 1.87X 1.50X
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
16
<PAGE>
CIPSCO INCORPORATED
<TABLE>
<CAPTION>
12 MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------------
1995(A) 1994 1993 1992 1991 1990
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues..... $ 838,487 $ 844,615 $ 844,760 $ 739,877 $ 722,081 $ 699,721
Operating Income(c).... 166,051 165,345 170,735 142,986 154,820 144,063
Allowance for Borrowed
and Other Funds Used
During Construction... 833 919 2,259 3,226 3,067 1,397
Preferred Dividend
Requirements of
Subsidiary............ 3,838 3,510 3,718 4,549 5,396 5,617
Net Income (d)......... 83,579 83,954 85,498 72,499 72,065 65,756
Earnings per Common
Share(d).............. $2.45 $2.46 $2.51 $2.13 $2.11 $1.92
Cash Dividends Declared
per Common Share...... $2.02 $1.99 $1.95 $1.91 $1.87 $1.83
Ratio of Earnings to
Fixed Charges(g)...... 4.28X 4.38X 4.30X 3.57X 3.19X 2.97X
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets(i)........ $1,813,363 $1,777,357 $1,757,750 $1,725,456 $1,751,574 $1,720,059
Long-Term Debt......... 478,850 459,619 474,323 493,700 496,420 496,319
Short-Term Debt(j)..... -- 29,985 20,000 31,393 -- --
Preferred Stock of
Subsidiary --
Not Subject to
Mandatory Redemption.. 80,000 80,000 80,000 65,000 65,000 65,000
Subject to Mandatory
Redemption............ -- -- -- -- 16,745 19,745
Common Stock Equity.... 664,910 647,613 634,252 616,550 609,105 602,280
Book Value per Common
Share................. $19.52 $19.01 $18.60 $18.08 $17.86 $17.63
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
MARKET DATA--COMMON
STOCK
Aggregate Market
Capitalization........ $1,171,141 $ 919,878 $1,048,812 $1,031,758 $ 950,752 $ 743,238
Closing Market Price $34
per Share............. 3/8 $27 $30 3/4 $30 1/4 $27 7/8 $21 3/4
Ratio of Market Value
to Book Value......... 1.76X 1.42X 1.65X 1.67X 1.56X 1.23X
</TABLE>
See accompanying Notes to Selected Historical and Pro Forma Data.
17
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following selected unaudited pro forma financial information combines the
historical balance sheets and statements of income of Union Electric and
CIPSCO, including their respective subsidiaries, after giving effect to the
Mergers. The unaudited pro forma combined condensed balance sheet data at
September 30, 1995 and December 31, 1994, 1993 and 1992 give effect to the
Mergers as if they had occurred at the respective balance sheet dates. The
unaudited pro forma combined condensed statements of income for each of the
years in the three-year period ended December 31, 1994, and the 12-month period
ended September 30, 1995, give effect to the Mergers as if they had occurred at
January 1, 1992. These statements are prepared on the basis of accounting for
the Mergers as a pooling of interests and are based on the assumptions set
forth in the notes thereto. The following information is not necessarily
indicative of the financial position or operating results that would have
occurred had the Mergers been consummated on the date as of which, or at the
beginning of the periods for which, the Mergers are being given effect nor is
it necessarily indicative of future operating results or financial position.
See "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION."
PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
12 MONTHS ENDED
SEPTEMBER 30,
1995(A)(K)(L) 1994 1993 1992(B)
--------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues........... $3,122,642 $3,146,101 $3,138,944 $2,997,681
Operating Income(c).......... 579,743 589,729 548,481 533,460
Allowance for Borrowed and
Other Funds Used During
Construction................ 13,355 12,199 13,803 11,248
Preferred Dividend Require-
ments of Subsidiaries....... 17,088 16,762 17,805 18,607
Net Income(d)................ 375,859 391,459 368,571 361,189
Earnings Per Common
Share(d)(e)................. $2.74 $2.85 $2.69 $2.63
Cash Dividends Declared per
Common Share(e)(f).......... $2.32 $2.28 $2.22 $2.16
Ratio of Earnings to Fixed
Charges(g).................. 3.99X 4.08X 4.04X 3.90X
EQUIVALENT CIPSCO PRO FORMA
PER SHARE DATA(h)
Earnings per Common Share(d). $2.82 $2.94 $2.77 $2.71
Cash Dividends Declared per
Common Share(f)............. $2.39 $2.35 $2.29 $2.22
DECEMBER 31,
--------------------------------
<CAPTION>
SEPTEMBER 30,
1995 1994 1993 1992
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA
Total Assets(i).............. $8,879,179 $8,629,449 $8,546,365 $7,630,729
Long-Term Debt............... 2,373,193 2,413,108 2,300,978 2,213,253
Short-Term Debt(j)........... 76,095 114,403 150,739 364,362
Preferred Stock of Subsidi-
ary--
Not Subject to Mandatory Re-
demption.................... 298,497 298,497 298,497 282,784
Subject to Mandatory Redemp-
tion........................ 650 676 702 728
Common Stock Equity.......... 3,024,006 2,916,667 2,840,420 2,780,570
Book Value per Common Share.. $22.04 $21.26 $20.69 $20.26
EQUIVALENT CIPSCO PRO FORMA
PER SHARE DATA(h)
Book Value per Common Share.. $22.70 $21.90 $21.31 $20.87
</TABLE>
See accompanying notes to Selected Historical and Pro Forma Data. In
addition, the pro forma financial information does not give effect to the
expected synergies of the transaction. See "THE MERGERS."
18
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA DATA
(a) Net income for the twelve months ended September 30, 1995 includes a pre-
tax charge of $6.3 million for CIPSCO's voluntary separation program
recorded in the first quarter of 1995.
(b) Net income for the fiscal year ended December 31, 1992 includes a gain for
Union Electric on sales of electric distribution properties of $18.1
million, net of income taxes, recorded in the fourth quarter of 1992.
(c) Pro forma operating income includes the deduction for CIPSCO income taxes
to conform reporting presentations. Historically, CIPSCO's income taxes
were not shown as an operating expense. CIPSCO's income taxes for the
twelve months ended September 30, 1995 and for the years ended December 31,
1994, 1993 and 1992 were $48.7 million, $49.1 million, $51.9 million and
$40.8 million, respectively.
(d) Net income (CIPSCO) and earnings available for common shareholders (Union
Electric) and earnings per common share are based on net income after
deducting preferred dividend requirements.
(e) Pro forma per common share amounts give effect to the conversion of each
share of CIPSCO Common Stock into 1.03 shares of Holdings Common Stock and
each share of Union Electric Common Stock into 1 share of Holdings Common
Stock.
(f) Pursuant to SEC requirements, calculated based on historical dividends paid
by Union Electric and CIPSCO combined. It is anticipated that Holdings will
adopt Union Electric's common share dividend payment level.
(g) For purposes of computing the ratios of earnings to fixed charges,
"earnings" consist of net income (after preferred dividend requirements, as
appropriate), plus interest on debt, amortization of debt discount, premium
and expense, a portion of rentals representative of the interest factor,
preferred dividend requirements and income taxes. "Earnings" also include
allowance for borrowed and other funds used during construction. "Fixed
charges" consist of interest charges, amortization of debt discount,
premium and expense, a portion of rentals representative of the interest
factor and the pre-tax dividend requirements on subsidiary preferred stock.
Currently, the Union Electric Preferred Stock is not issued by a
subsidiary; subsequent to the Mergers, the Union Electric Preferred Stock
will be issued by a subsidiary of Holdings.
(h) Represents the pro forma equivalent of one share of CIPSCO Common Stock
calculated by multiplying the pro forma information by the conversion ratio
of 1.03 shares of Holdings Common Stock for each share of CIPSCO Common
Stock.
(i) Pro forma total assets include regulatory assets for deferred income taxes
for CIPSCO to conform to reporting presentations. Historically, CIPSCO's
regulatory assets for deferred income taxes were offset against CIPSCO's
regulatory liabilities. CIPSCO's deferred income tax regulatory assets at
September 30, 1995 and December 31, 1994 and 1993 were $45.6 million, $48.2
million and $51.9 million, respectively.
(j) Includes bank and other notes payable, and current maturity of long-term
debt.
(k) Net income for the twelve months ended September 30, 1995 includes a one-
time credit to Missouri electric customers which reduced revenues and pre-
tax income of Union Electric by $30 million.
(l) Net income for the twelve months ended September 30, 1995 includes a charge
of $9 million, net of income taxes, for merger transaction costs.
19
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
The Union Electric Common Stock and the CIPSCO Common Stock are listed on the
NYSE. The CIPSCO Common Stock is also listed on the CSE. The following table
sets forth, for the periods indicated, the high and low sales prices of Union
Electric Common Stock and CIPSCO Common Stock as reported on the NYSE Composite
Tape and dividends declared.
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO
----------------------- -----------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter................ 40 1/2 35 3/4 $ .58 32 3/4 29 1/4 $.48
Second Quarter............... 41 3/8 38 5/8 $ .58 33 5/8 31 1/4 $.49
Third Quarter................ 44 5/8 40 $ .58 33 3/4 32 $.49
Fourth Quarter............... 44 3/8 38 1/8 $.595 33 3/8 29 1/4 $.49
1994
First Quarter................ 39 1/2 34 3/4 $.595 30 5/8 27 7/8 $.49
Second Quarter............... 35 7/8 30 3/4 $.595 30 1/4 25 1/4 $.50
Third Quarter................ 35 7/8 32 $.595 28 1/2 25 1/2 $.50
Fourth Quarter............... 36 1/2 34 1/2 $ .61 28 3/8 26 1/4 $.50
1995
First Quarter................ 38 1/4 34 3/4 $ .61 29 1/2 27 $.50
Second Quarter............... 37 7/8 35 $ .61 30 3/4 28 1/2 $.51
Third Quarter................ 37 5/8 34 5/8 $ .61 34 1/2 28 3/4 $.51
Fourth Quarter (through No-
vember 10, 1995)............ 40 1/4 37 3/8 $.625 37 1/4 34 3/8 $.51
</TABLE>
On August 11, 1995, the last full trading day before the public announcement
of the execution and delivery of the Merger Agreement, the high, low and
closing sales prices per share of (i) Union Electric Common Stock on the NYSE
Composite Tape were $35 3/8, $35 1/8 and $35 3/8, respectively, and (ii) CIPSCO
Common Stock on the NYSE Composite Tape were $29 3/4, $29 5/8 and $29 5/8,
respectively.
On November 10, 1995, the most recent date for which it was practicable to
obtain market price data prior to printing this Joint Proxy
Statement/Prospectus, the high, low and closing sales prices per share of Union
Electric Common Stock on the NYSE Composite Tape were $39 7/8, $39 3/4 and $39
7/8, respectively, and the high, low and closing sales prices per share of
CIPSCO Common Stock on the NYSE Composite Tape were $36 7/8, $36 3/4 and $36
3/4, respectively. If the Mergers had been consummated on that date and if the
market value per share of the Holdings Common Stock equalled the closing price
per share of Union Electric Common Stock on such date, the market value of the
number of shares of Holdings Common Stock into which each share of CIPSCO
Common Stock would have been converted, based on the CIPSCO Ratio, would have
been $41.07. Union Electric increased its dividend in the fourth quarter of
1995 to an annual rate of $2.50 per share.
The market prices of Union Electric Common Stock and CIPSCO Common Stock are
subject to fluctuation. Union Electric shareholders and CIPSCO shareholders are
urged to obtain current market quotations for Union Electric Common Stock and
CIPSCO Common Stock.
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MEETINGS, VOTING AND PROXIES
This Joint Proxy Statement/Prospectus is being furnished to (i) the holders
of CIPSCO Common Stock in connection with the solicitation of proxies by the
CIPSCO Board from the holders of CIPSCO Common Stock for use at the CIPSCO
Meeting, and (ii) the holders of Union Electric Common Stock and Union Electric
Preferred Stock in connection with the solicitation of proxies by the Union
Electric Board from the holders of Union Electric Common Stock and Union
Electric Preferred Stock for use at the Union Electric Meeting.
THE CIPSCO MEETING
Purpose of the CIPSCO Meeting. The purpose of the CIPSCO meeting is to
consider and vote upon (i) a proposal to approve the Merger Agreement and the
transactions contemplated thereby (including, among other things, the CIPSCO
Merger), and (ii) the transaction of such other business incident to the
conduct of the CIPSCO Meeting as may properly come before the CIPSCO Meeting.
The CIPSCO Board is not aware, as of the date of mailing of this Joint Proxy
Statement/Prospectus, of any other matters which may properly come before the
CIPSCO Meeting. If any such other matters properly come before the CIPSCO
Meeting, or any adjournment or postponement thereof, it is the intention of the
persons named in the CIPSCO proxy to vote such proxies in accordance with their
best judgment on such matters.
THE CIPSCO BOARD HAS APPROVED THE MERGER AGREEMENT, AUTHORIZED THE EXECUTION
AND DELIVERY OF THE MERGER AGREEMENT, AND RECOMMENDS THAT CIPSCO SHAREHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
One director of CIPSCO, Mr. John L. Heath, voted against approval of the
Merger Agreement noting that in light of CIPSCO's strong financial position he
was not in favor of the merger. He indicated that if at a later date it became
desirable for CIPSCO to become larger, he would prefer that CIPSCO pursue a
merger involving an entity smaller than itself.
In considering the recommendation of the CIPSCO Board with respect to the
Merger Agreement, shareholders should be aware that certain members of CIPSCO's
management and the CIPSCO Board have certain interests in the Mergers which are
in addition to the interests of shareholders of CIPSCO generally and which
could potentially represent conflicts of interest. The CIPSCO Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby. See "THE MERGERS--
Potential Conflicts of Interests of Certain Persons in the Mergers."
Date, Place and Time; Record Date. The CIPSCO Meeting is scheduled to be held
on Wednesday, December 20, 1995, at 10:00 a.m., local time, at the Springfield
Hilton, 700 East Adams Street, Springfield, Illinois. Holders of record of
CIPSCO Common Stock at the close of business on November 1, 1995, the CIPSCO
Record Date, will be entitled to notice of and to vote at the CIPSCO Meeting.
As of the CIPSCO Record Date, 34,069,542 shares of CIPSCO Common Stock were
issued and outstanding and entitled to vote.
Voting Rights. Each shareholder of record is entitled to one vote for each
share of CIPSCO Common Stock held on each matter submitted to a vote at the
CIPSCO Meeting. A majority of the outstanding shares of CIPSCO Common Stock
entitled to vote on a matter, represented in person or by proxy, constitutes a
quorum for consideration of such matter at the CIPSCO Meeting. If a quorum is
present the affirmative vote of the holders of at least two-thirds of the
outstanding shares of CIPSCO Common Stock will be sufficient to approve the
Merger Agreement. Abstentions and broker non-votes will have the same effect as
votes cast against approval of the Merger Agreement. Failure to return a CIPSCO
proxy or vote in person at the CIPSCO Meeting will have the effect of a vote
against the Merger Agreement.
Proxies. Any holder of CIPSCO Common Stock may vote his or her shares either
in person or by duly authorized proxy. The giving of a proxy by a CIPSCO
shareholder will not affect such shareholder's right to vote such shares if the
shareholder attends the CIPSCO Meeting and desires to vote in person. Prior to
the voting of a CIPSCO proxy, such proxy may be revoked by the shareholder by
delivering written notice of revocation to the Secretary of CIPSCO, by
executing a subsequently dated proxy or by voting in person at
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the CIPSCO Meeting. All shares represented by effective proxies on the enclosed
form of CIPSCO proxy received by CIPSCO will be voted at the CIPSCO Meeting in
accordance with the terms of such proxies. If no instructions are given, the
CIPSCO proxies will be voted FOR the approval of the Merger Agreement.
Each participant in CIPSCO's Automatic Dividend Reinvestment and Stock
Purchase Plan ("CIPSCO Reinvestment Plan") or the CIPS Employee Stock Ownership
Plan (the "CIPS ESOP"), Employee Long-Term Savings Plan, Employee Long-Term
Savings Plan-IUOE No. 148 or Employee Long-Term Savings Plan-IBEW No. 702 (the
"CIPS Savings Plans") will receive a form of proxy by which such participant
may direct the respective agent or trustee under such Plan as to the manner of
voting shares credited to the participant's account under such Plan. CIPSCO
shareholders of record who are participants in the CIPSCO Reinvestment Plan
will receive one form of proxy which will be deemed to include shares held of
record and shares held under the CIPSCO Reinvestment Plan. If a participant in
any of the CIPS Savings Plans does not return a proxy by December 13, 1995, the
trustee under the CIPS Savings Plans will vote such participant's shares under
the CIPS Savings Plans in accordance with the instructions provided by the
Central Illinois Public Service Company Employee Long-Term Savings Plan
Committees, unless the participant votes in person at the CIPSCO Meeting. A
participant in the CIPSCO Reinvestment Plan, the CIPS ESOP or any CIPS Savings
Plan wishing to vote in person at the CIPSCO Meeting may obtain a proxy for
shares credited to his or her account under such plan by making a written
request therefor by December 13, 1995, as follows: for the CIPSCO Reinvestment
Plan, to Illinois Stock Transfer Company, 223 West Jackson Boulevard, Chicago,
Illinois 60606; for the CIPS ESOP, to Boston Safe Deposit and Trust Company,
Attention: Chris D. Kuhn, One Boston Place, Boston, Massachusetts 02116 and for
the CIPS Savings Plans, to Merrill Lynch, Attention: Ramon W. Ortel, Jr., 265
Davidson Ave., Somerset, New Jersey 08873.
CIPSCO will bear the cost of the solicitation of proxies for the CIPSCO
Meeting, except that Union Electric and CIPSCO will share equally expenses
incurred in connection with the printing and filing of this Joint Proxy
Statement/Prospectus. See "THE MERGER AGREEMENT--Expenses." Certain officers,
directors and employees of CIPSCO may solicit CIPSCO proxies by correspondence,
telephone, telegraph, telecopy, or other electronic means or in person, but
without extra compensation. CIPSCO will pay to banks, brokers, nominees and
other fiduciaries their reasonable charges and expenses incurred in forwarding
the proxy soliciting material to their principals. In addition, CIPSCO has
retained Morrow & Co., Inc. New York, New York, to assist CIPSCO in the
solicitation of proxies. Such solicitation may be made by mail,
telecommunication or in person. The estimated aggregate cost of such services
of Morrow & Co., Inc. is $15,000 plus an additional $3.50 per shareholder
contact and reimbursement for reasonable out-of-pocket expenses.
The CIPSCO Meeting may be adjourned to another date and/or place for any
proper purpose (including, without limitation, for the purpose of soliciting
additional proxies).
THE UNION ELECTRIC MEETING
Purpose of the Union Electric Meeting. The purpose of the Union Electric
Meeting is to consider and vote upon: (i) a proposal to approve the Merger
Agreement and the transactions contemplated thereby, and (ii) such other
matters, if any, as may properly be presented for consideration. The Union
Electric Board does not know, as of the date of mailing of this Joint Proxy
Statement/Prospectus, of any other business to be brought before the Union
Electric Meeting. The enclosed proxy card authorizes the voting of shares
represented by the proxy on all matters incident to the conduct of the Union
Electric Meeting that may properly come before the Union Electric Meeting, and
it is the intention of the proxy holders to take such action in connection
therewith as shall be in accordance with their best judgment.
THE UNION ELECTRIC BOARD, BY A UNANIMOUS VOTE, HAS APPROVED THE MERGER
AGREEMENT, AUTHORIZED THE EXECUTION AND DELIVERY OF THE MERGER AGREEMENT, AND
RECOMMENDS THAT UNION ELECTRIC SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
Pursuant to the Merger Agreement, consummation of the Mergers is conditioned
upon, among other things, approval of the proposal described in (i) above.
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In considering the recommendation of the Union Electric Board with respect to
the Merger Agreement, shareholders should be aware that certain members of
Union Electric's management and Union Electric Board have certain interests in
the Mergers which are in addition to the interests of shareholders of Union
Electric generally and which could potentially represent conflicts of interest.
The Union Electric Board was aware of these interests and considered them in
approving the Merger Agreement and the transactions contemplated thereby. See
"THE MERGERS--Potential Conflicts of Interests of Certain Persons in the
Mergers."
Date, Place and Time; Record Date. The Union Electric Meeting is scheduled to
be held on Wednesday, December 20, 1995, at 9:00 a.m., local time, at The Ritz-
Carlton, 100 Carondelet Plaza, St. Louis, Missouri 63105. Holders of record of
shares of Union Electric Common Stock and Union Electric Preferred Stock at the
close of business on October 23, 1995, the Union Electric Record Date, will be
entitled to notice of and to vote at the Union Electric Meeting. At the close
of business on the Union Electric Record Date, 102,123,834 shares of Union
Electric Common Stock and 3,434,596 shares of Union Electric Preferred Stock
were issued and outstanding and entitled to vote.
Voting Rights. Each outstanding share of Union Electric Common Stock is
entitled to one vote and each outstanding share of Union Electric Preferred
Stock is entitled to one vote upon each matter presented at the Union Electric
Meeting.
The holders of a majority of the shares of capital stock of Union Electric
issued and outstanding on the Union Electric Record Date shall constitute a
quorum for the transaction of business at the Union Electric Meeting.
Abstentions will be considered present for the purpose of establishing a
quorum. Broker nonvotes (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owners or other
persons entitled to vote shares as to a matter with respect to which brokers or
nominees do not have discretionary power to vote) will not be considered
present for purposes of establishing a quorum. The affirmative vote of the
holders of two-thirds of the outstanding shares of Union Electric Common Stock
and Union Electric Preferred Stock entitled to vote, voting as a single class,
is required to approve the Merger Agreement. Approval of the Merger Agreement
is a condition to consummation of the Mergers. Under applicable Missouri law,
in determining whether the Merger Agreement has received the requisite number
of affirmative votes, abstentions and broker nonvotes will have the same effect
as votes cast against approval of the Merger Agreement.
The directors and executive officers of Union Electric, together with their
affiliates as a group, own beneficially less than one percent of the issued and
outstanding shares of Union Electric Common Stock and less than one percent of
the issued and outstanding shares of Union Electric Preferred Stock. Except for
Cede & Co., nominee for The Depository Trust Company, and Union Electric, as
agent for the Union Electric dividend reinvestment and stock purchase plan (the
"Union Electric DRIP"), no person holds of record or, to the knowledge of Union
Electric management, owns beneficially more than five percent of any class of
the outstanding voting securities of Union Electric.
If a Union Electric shareholder is a participant in the Union Electric DRIP,
the Union Electric proxy will represent the shares held on behalf of the
participant under the Union Electric DRIP and such shares will be voted in
accordance with the instructions on the Union Electric proxy. If a participant
in the Union Electric DRIP does not return a Union Electric proxy, the
participant's shares will not be voted.
Participants in the Union Electric Company Savings Investment Plan will
receive instruction forms with which to vote the shares in the plan. SHARES
HELD BY MEMBERS WHO DO NOT RETURN AN INSTRUCTION FORM WILL NOT BE VOTED AND
WILL THUS HAVE THE EFFECT OF VOTING "AGAINST" THE UNION ELECTRIC MERGER. ALL
PLAN MEMBERS ARE ENCOURAGED TO RETURN THE FORM AND HAVE THEIR SHARES VOTED.
Proxies. Holders of the Union Electric Common Stock and Union Electric
Preferred Stock may vote either in person or by properly executed proxy. By
completing and returning the form of proxy, the Union
Electric shareholder authorizes the persons named therein to vote all the Union
Electric shareholder's shares
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on his or her behalf. Issued and outstanding shares of Union Electric Common
Stock and Union Electric Preferred Stock which are represented by properly
executed proxies, will, unless such proxies have been revoked, be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR approval of the Merger Agreement.
A Union Electric shareholder may revoke a proxy at any time prior to the Union
Electric Meeting by delivering to the Secretary of Union Electric a notice of
revocation or a duly executed proxy bearing a later date or by attending the
Union Electric Meeting and voting in person. Attendance at the Union Electric
Meeting will not in itself constitute revocation of a proxy.
Union Electric will bear the cost of soliciting proxies for the Union
Electric Meeting, except that Union Electric and CIPSCO shall share equally
expenses incurred in connection with printing and filing this Joint Proxy
Statement/Prospectus. See "THE MERGER AGREEMENT--Expenses." In addition to
soliciting proxies by mail, officers and employees of Union Electric, without
receiving additional compensation therefor, may solicit proxies by telephone,
by telecopy, by telegram or in person. Union Electric has retained Corporate
Investor Communications, Inc. to aid in the solicitation of proxies from the
Union Electric shareholders. The fee for such services of such firm shall be
$7,000 plus an additional $2.60 per shareholder contact and reimbursement for
reasonable out-of-pocket expenses.
The Union Electric Meeting may be adjourned to another date and/or place for
any proper purpose (including, without limitation, for the purpose of
soliciting additional proxies).
THE MERGERS
BACKGROUND OF THE MERGERS
For a description of certain preexisting business relationships between Union
Electric and CIPSCO, see "SELECTED INFORMATION CONCERNING UNION ELECTRIC AND
CIPSCO--Certain Business Relationships Between Union Electric and CIPSCO."
Since the late 1980s, the management of Union Electric has periodically
analyzed various potential strategic options that might be available to Union
Electric, including possible business combinations with other utilities. During
this time since the late 1980s, the management of Union Electric looked at
substantially all of the utilities of significant size and with service areas
proximate to the main service areas of Union Electric, and periodically briefed
the Union Electric Board on such matters. None of the other utilities appeared
to offer strategic and operational synergies as attractive as those that could
be realized through a merger with CIPSCO. The physical proximity of the service
areas of CIPS, the compatibility of and similarity between Union Electric's and
CIPSCO's operations, the familiarity with CIPSCO due to various cooperative
transactions including power purchases and sales and the joint ownership of
Electric Energy, Inc. ("EEI"), and the excellent reputation of CIPSCO's
management made CIPS the natural first choice for a combination partner for
Union Electric. No merger scenarios were seriously considered during this time.
Since the late 1980s, the management of CIPS (and later CIPSCO) has
periodically analyzed various potential strategic options that might be
available, including possible business combinations with other utilities.
CIPSCO management looked at substantially all utilities of significant size and
with service areas proximate to the service area of CIPS, as well as several
other utilities with Midwestern operations, and periodically briefed the Boards
of CIPS and CIPSCO on such matters. During 1994, CIPSCO management and Morgan
Stanley discussed generally the utility merger and acquisition environment with
the CIPSCO Board. The CIPSCO Board was briefed at its December 6, 1994 meeting
with respect to the fact that CIPSCO management was reviewing various strategic
alternatives. As a continuation of such reviews, in May, 1995, CIPSCO
management concluded that no other potential merger partner provided a better
overall strategic fit than did Union Electric on the basis of factors such as:
low cost-structure, competitive energy rates, strong credit ratings, potential
merger-related cost savings, possible economies of scale, marketing potential
and similar common stock trading characteristics. These reasons, combined with
the compatibility of and similarity between CIPS' and Union Electric's
operations, CIPS' prior experience working with Union Electric in the context
of power purchases and sales, service restoration following major storms, joint
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ownership and operation of EEI's Joppa Generating Station and the excellent
reputation of Union Electric's management team made Union Electric the natural
combination partner for CIPSCO.
At its June 6, 1995 Board meeting, CIPSCO management reviewed possible
strategic alternatives for CIPSCO, including a business combination with Union
Electric, the possibility of remaining an independent company and the
possibility of a combination with other Midwestern utilities. There was a
review of the consequences of CIPSCO remaining an independent company.
Management reported that it had sought advice from the investment banking firm
of Morgan Stanley and the law firm of Jones, Day, Reavis & Pogue
with respect to strategic alternatives. At the June 6, 1995 meeting the CIPSCO
Board authorized management to continue further studies regarding a business
combination with Union Electric. After this meeting, no alternative merger
scenarios were seriously considered by CIPSCO management.
Mr. Charles W. Mueller, President and Chief Executive Officer of Union
Electric, and Mr. Clifford L. Greenwalt, President and Chief Executive Officer
of CIPSCO have had for many years a business and social relationship, and have
spoken periodically by telephone and in person at business and social
occasions. Messrs. Greenwalt and Mueller have, in the course of their business
dealings over the years, noted the similarities of Union Electric and CIPSCO
listed above. In June of 1995, a series of discussions occurred between Messrs.
Mueller and Greenwalt which ultimately resulted in a meeting on June 19, 1995
between Messrs. Mueller and Greenwalt, at which the two companies' views of the
future of the utility industry were discussed. The two men discussed in a very
preliminary fashion the concept of a business combination between Union
Electric and CIPSCO. At such meeting, the concept of a holding company
structure for a potential business combination was discussed, and Messrs.
Greenwalt and Mueller also identified the issues of management succession,
board composition and the location of the headquarters as significant points to
be agreed upon.
After the June 19, 1995 meeting, CIPSCO informed Morgan Stanley and Jones,
Day, Reavis & Pogue that CIPSCO was contemplating a business combination with
Union Electric. Additionally, during this period, Mr. Mueller verbally briefed
individual Union Electric directors on the reviews and discussions which had
taken place.
On June 21, 1995, officers of Union Electric and CIPSCO, including Donald E.
Brandt, Senior Vice President, Finance & Corporate Services and William E.
Jaudes, Vice President and General Counsel, of Union Electric, and William A.
Koertner, Vice President and Craig D. Nelson, Treasurer, of CIPSCO, held
discussions with respect to potential synergies that could result from a
potential business combination transaction. Following such meeting the
companies entered into a confidentiality agreement, pursuant to which the
parties agreed to exchange nonpublic information with a view toward exploring a
possible business combination. For a description of certain standstill
provisions contained in such confidentiality agreement, see "THE MERGER
AGREEMENT--Standstill Agreement."
Shortly after the June 21, 1995 meeting, Union Electric engaged the law firm
of Wachtell, Lipton, Rosen & Katz to advise it with respect to the potential
transaction.
The parties agreed that it was desirable to arrange an introductory meeting
of the parties' respective management teams and advisors to discuss, among
other things, the due diligence and negotiation process.
On July 14, 1995, Mr. Brandt, Mr. Jaudes, Mr. Koertner and Mr. Nelson,
together with other personnel from Union Electric and CIPSCO, as well as their
financial and legal advisors, held an introductory meeting to discuss, among
other things, a timetable for accomplishing the tasks required to negotiate,
prepare and execute a merger transaction between the two companies.
Representatives of the Management Consulting Division of Deloitte & Touche LLP
("Deloitte & Touche"), which had been jointly retained by Union Electric and
CIPSCO were also present at such meeting. At the July 14 meeting, working
groups composed of representatives of both companies were formed to examine
various issues, including structure, financial modeling, regulatory
considerations, integration of employee benefit plans, communications and an
analysis of synergies. Deloitte & Touche was engaged to assist the senior
managements of Union Electric and CIPSCO
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and certain employees designated by them in identifying and quantifying the
potential cost savings from synergies resulting from the proposed merger.
On July 26, 1995, Mr. Brandt, Mr. Jaudes, Mr. Koertner and Mr. Nelson, as
well as other personnel from Union Electric and CIPSCO, together with their
respective financial advisors, held a meeting for the purpose of conducting due
diligence and discussing further the potential synergies that could be achieved
by a business combination transaction (such as cost savings from economies of
scale and reduced electric production and gas purchase costs, reduction in
operating and maintenance expenses and elimination of duplicative
administrative expenditures), and the legal and regulatory implications of
alternative combination structures.
On August 1, 1995, CIPSCO management, Morgan Stanley, Deloitte & Touche,
legal counsel and Synergy Consulting Services Corporation ("Synergy
Consulting"), an independent nuclear consultant retained by CIPSCO, briefed the
CIPSCO Board on various matters identified below relating to a business
combination with Union Electric.
At that meeting, management and Deloitte & Touche reported the analyses of
the potential synergies that could be achieved by a combination with Union
Electric presenting assumptions underlying their analyses. This presentation
gave an overview of the types of synergy savings (financial, regulatory and
operational) that could be achieved by a combination and emphasized that the
identified synergies were all directly related to a possible merger and did not
include other types of savings that might be achieved without a merger. An
overview of categories of synergy savings was given which identified the
following areas for potential synergies: personnel reductions, corporate and
administrative programs, electric production and gas supply costs and
purchasing economies for such items as materials, supplies and contract
services. The analyses assumed a period of 1997 to 2006, that the combination
would result in a registered holding company, continuation of current
regulation of the utility industry, that management and operational integration
of corporate, distribution and production support functions would occur without
total physical centralization, that labor savings would be achieved exclusively
through attrition and phased in over time, and that the costs to achieve the
savings would be incurred over the first two years. The synergy analyses was
prepared by management of CIPSCO and Union Electric with the assistance of
Deloitte & Touche based on information provided by each company.
Deloitte & Touche Consulting Group is a division of Deloitte & Touche LLP, an
international accounting firm. Deloitte & Touche is a nationally recognized
consulting firm with experience in utility merger and acquisition transactions.
Deloitte & Touche was selected by CIPSCO and Union Electric based on its
reputation, experience and expertise. CIPSCO and Union Electric will share
equally the fees of Deloitte & Touche which will be based on time devoted to
the project plus expenses. Total fees and expenses are estimated at $300,000.
Deloitte & Touche has also been retained by CIPSCO and Union Electric to
provide expert testimony in proceedings before regulatory commissions relating
to approval of the Mergers.
At the August 1, 1995 meeting of the CIPSCO Board, legal counsel presented
information as to the regulatory approvals that would be required for a
combination with Union Electric, the standards of review to be applied by the
various regulatory bodies, implications under the 1935 Act of various
structures and other matters. Morgan Stanley presented an analysis of Union
Electric and reported on its due diligence activities. Synergy Consulting
presented a report containing the results of its evaluation of the Callaway
nuclear generating station of Union Electric and identified and characterized
for the CIPSCO Board generic nuclear power plant business risks. Synergy
Consulting concluded that the Callaway plant ranked at the top of the
industry's nuclear generating plants in all respects, was in good condition and
was well managed and also concluded that the plans for decommissioning the
plant at the end of its useful life were adequate. In the course of its
evaluation Synergy Consulting reviewed documentation containing relevant
operating statistics (capacity factors, production costs and regulatory
performance) and reviewed external performance evaluations of the plant
including Institute of Nuclear Power Operations (INPO) ratings, NRC Systematic
Assessment of Licensee Performance (SALP) ratings and other ratings based on
publicly available industry benchmarking data of nuclear station performance.
Each of these ratings put the Callaway plant among the
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highest of the applicable rating categories for the past five years. The
Synergy Consulting evaluation took into account specific risks associated with
the Callaway plant in the following categories: production, costs, organization
and management and decommissioning plan. Finally, Synergy Consulting briefed
the CIPSCO Board on the generic risks associated with nuclear generating
plants, including premature permanent plant shutdown, temporary plant shutdown,
uneconomic plant operation, inability to extend plant life, unanticipated
costs, consequences of a nuclear accident, changes in regulations, fuel storage
and fuel disposal and decommissioning costs.
Synergy Consulting is a nationally recognized nuclear consulting firm with
experience in evaluation of the performance of nuclear powered electric
generating stations. Synergy Consulting was selected by CIPSCO based on its
reputation, experience and expertise based on an interview process that
included several candidates. Synergy Consulting prepared its report based on
materials provided to it by Union Electric, a tour of the Callaway plant,
personal interviews, documentation reviews and review of publicly available
materials concerning the Callaway plant and other comparable nuclear generating
stations, including information on file with the NRC. CIPSCO agreed to pay
Synergy Consulting a fee of $37,500 for its services in preparing the report.
Synergy Consulting has also been retained by CIPSCO to provide expert testimony
in proceedings before the Illinois Commission relating to approval of the
Mergers.
In the ten days following August 1, 1995, the representatives of each party
continued their work with respect to the synergies analysis, business plans,
legal structures, regulatory plans, due diligence and employee benefits. In
addition, discussions commenced between the Union Electric management and
Goldman Sachs on the one hand, and CIPSCO management and Morgan Stanley on the
other hand, with respect to negotiation of the exchange ratios, and between
counsel for CIPSCO and counsel for Union Electric, with respect to the terms of
the draft merger agreement and the terms of possible stock option agreements.
On August 8, 1995, the Union Electric Board met and received detailed
information and advice from Goldman Sachs and legal counsel, as well as a
detailed report from management on the merger negotiations. The Union Electric
Board also received a report on the analysis of potential synergies, including
discussions of potential cost savings from economies of scale and decreased
electric production and gas purchase costs and elimination of duplicative
administrative expenses. Goldman Sachs reviewed financial and other information
concerning Union Electric and CIPSCO and the status of negotiations with
respect to an exchange ratio. Counsel outlined in detail the terms and
conditions of the draft merger agreement and proposed stock option agreements.
Counsel also reviewed the handling of various other issues relating to the
transaction, such as the composition of the Holdings Board and the location of
the corporate headquarters of Holdings. Counsel then reviewed the implications
of adopting a registered holding company structure under the 1935 Act,
including the possibility that divestiture of the combined entity's gas and
certain non-utility operations would be required. The Union Electric Board
discussed the significant potential benefits from a combination to shareholders
and customers of CIPSCO and Union Electric. In addition, counsel and management
presented to the Union Electric Board, and the Union Electric Board discussed
in detail, a proposed severance plan for certain Union Electric employees. See
"THE MERGERS--Potential Conflicts of Interest of Certain Persons in the
Mergers--Employee Plans and Severance Arrangements."
On August 8, 1995, the CIPSCO Board met and received detailed advice from
Morgan Stanley and legal counsel. The CIPSCO Board also received an updated
briefing from management and Deloitte & Touche on the analysis of potential
synergies, including discussions of potential cost savings from economies of
scale and decreased electric production and gas purchase costs and the
elimination of duplicative administrative expenses. The potential cost savings,
by category, identified during the briefing by management and Deloitte & Touche
are described under "Reasons for the Mergers; Recommendations of the Boards of
Directors" below. Morgan Stanley reviewed financial and other information
concerning Union Electric and CIPSCO and the status of negotiations with
respect to an exchange ratio. Counsel outlined in detail the terms and
conditions of the draft merger agreement and proposed stock option agreements.
Counsel also reviewed in detail the status of negotiations on the merger
agreement and the due diligence process. Management reported on the handling of
various other issues relating to the transaction, such as the composition of
the Holdings
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Board and the location of the corporate headquarters of Holdings, the transfer
of Union Electric's Illinois utility business to CIPS and communications plans.
Legal counsel then reviewed the implications of adopting a registered holding
company structure under the 1935 Act, including the possibility that
divestiture of the combined entity's gas and certain non-utility operations
would be required. Legal counsel and management described the covenants which
would govern the operations of Union Electric and CIPSCO prior to the Effective
Time and issues relating to employee and workforce matters which would govern
the operations of Holdings and its subsidiaries subsequent to the Effective
Time. The CIPSCO Board discussed the significant potential benefits from a
combination to shareholders and customers of CIPSCO and Union Electric.
The representatives and advisors for both parties met and spoke on numerous
occasions on August 9, 10, and 11, discussing the transaction and the related
documentation negotiating the final terms of the Merger Agreement, including
the conditions to closing, the termination provisions, the breakup fees, the
covenants which would govern the operations of Union Electric and CIPSCO prior
to the Effective Time and various other matters, such as employee benefits and
workforce matters, which would govern the operations of Holdings after the
Effective Time. These discussions also addressed issues relating to composition
of Holdings' management, the Holdings Board and committees of the Holdings
Board. Goldman Sachs and Morgan Stanley held further discussions with respect
to an exchange ratio and, on August 11, decided to present for their respective
clients' consideration a ratio which would result in each share of Union
Electric Common Stock being converted into one share of Holdings Common Stock,
and a ratio which would result in each share of CIPSCO Common Stock being
converted into 1.03 shares of Holdings Common Stock.
On August 11, 1995, at a meeting of the Union Electric Board, Goldman Sachs
and counsel to Union Electric described the status of the merger negotiations
and the changes in the proposed merger agreement and stock option agreements
which had been made since the August 8 meeting of the Union Electric Board.
Counsel also reviewed the handling of the various other issues relating to the
transaction, such as the composition of the Holdings Board and the location of
the headquarters of the combined entity. At the August 11 meeting, Goldman
Sachs delivered its oral opinion to the Union Electric Board that, as of such
date and based upon the assumptions made, matters considered and limits of
review discussed therein, and in light of the proposed exchange ratio of 1.03
shares of Holdings Common Stock per share of CIPSCO Common Stock, the proposed
exchange ratio of one share of Holdings Common Stock per share of Union
Electric Common Stock was fair to the holders of Union Electric Common Stock.
Following discussion, the Union Electric Board unanimously approved the Merger
Agreement and the Stock Option Agreements and authorized their execution.
On August 11, 1995, the CIPSCO Board met and received advice from Morgan
Stanley and legal counsel. Morgan Stanley reviewed various financial and other
information and rendered to the CIPSCO Board its oral opinion, confirmed in a
written opinion dated August 11, 1995, to the effect that, as of the date of
said opinion and based upon and subject to the matters stated therein, the
proposed exchange ratio of 1.03 shares of Holdings Common Stock per share of
CIPSCO Common Stock, in light of the exchange ratio of one share of Holdings
Common Stock to be received by shareholders of Union Electric for each share of
Union Electric Common Stock, was fair to the holders of CIPSCO Common Stock
from a financial point of view. Legal counsel reviewed the final forms of
Merger Agreement and Stock Option Agreements and other transaction documents
with the CIPSCO Board. The CIPSCO Board discussed the advice they had received
at the various CIPSCO Board meetings and the significant potential benefits to
shareholders and customers of CIPSCO which would result from a combination of
CIPSCO and Union Electric. After such discussions, the CIPSCO Board approved
the Merger Agreement and the Stock Option Agreements and authorized their
execution. One director of CIPSCO, Mr. John L. Heath, voted against approval of
the Merger Agreement noting that in light of CIPSCO's strong financial position
he was not in favor of the merger. He indicated that if at a later date it
became desirable for CIPSCO to become larger, he would prefer that CIPSCO
pursue a merger involving an entity smaller than itself.
Following the meetings of the Union Electric Board and the CIPSCO Board, the
Merger Agreement and the Stock Option Agreements were executed.
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REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Union Electric and CIPSCO believe that the Mergers offer the following
significant strategic and financial benefits to each company and to their
respective shareholders, as well as to their employees and customers and the
communities in which they do business:
--COST EFFICIENCIES TO HELP MAINTAIN COMPETITIVE RATES--Holdings will be
more effective in meeting the challenges of the increasingly competitive
environment in the utility industry than either Union Electric or CIPSCO
standing alone. The Mergers will create the opportunity for strategic,
financial and operational benefits for customers in the form of lower
rates over the long term and for shareholders in the form of greater
financial strength and financial flexibility.
--INTEGRATION OF CORPORATE AND ADMINISTRATIVE FUNCTIONS--Holdings will be
able to consolidate certain corporate and administrative functions of
Union Electric and CIPSCO, thereby eliminating duplicative positions,
reducing other non-labor corporate and administrative expenses and
limiting or avoiding expenditures for administrative programs and
information systems. A joint transition task force is examining the manner
in which to best organize and manage the businesses of Holdings and
identify duplicative positions in the corporate and administrative areas.
It is anticipated that, as a result of combining staff and other
functions, Holdings will have somewhat fewer employees within several
years than Union Electric and CIPSCO currently have in the aggregate.
Union Electric and CIPSCO are committed to achieve cost savings in the
area of personnel reductions through attrition, strictly controlled
hiring, and reassignment and retraining. In addition, some savings in
areas such as insurance and regulatory costs and legal, audit and
consulting fees should be realized.
--REDUCED OPERATING COSTS--The combination should result in decreased
electric production costs through the joint dispatch of the systems.
Natural gas supply savings through combined purchasing are also
anticipated.
--PURCHASING ECONOMIES--The combination of the two companies should result
in greater purchasing power for items such as materials, supplies and
contract services.
--INCREASED MARKETING OPPORTUNITIES--The combined companies will have
enhanced opportunities for marketing in the wholesale and interchange
markets. The combined companies will have electric interconnections with
28 other utility systems, enhancing opportunities to make sales
transactions with these systems and others.
--MORE DIVERSE SERVICE TERRITORY--The combined service territories of Union
Electric and CIPS will be larger and more diverse than either of the
service territories of Union Electric or CIPS as independent entities.
This increased geographical diversity will reduce the exposure to changes
in economic or competitive conditions in any given sector of the combined
service territory.
--EXPANDED MANAGEMENT RESOURCES--In combination, Union Electric and CIPSCO
will be able to draw on a larger and more diverse mid- and senior-level
management pool to lead Holdings forward in an increasingly competitive
environment for the delivery of energy and should be better able to
attract and retain the most qualified employees. The employees of Holdings
should also benefit from new opportunities in the expanded organization.
--COMMUNITY INVOLVEMENT--Holdings will continue to play a leadership role
in the economic development efforts of the communities Union Electric and
CIPS now serve. The philanthropic and volunteer programs currently
maintained by the two companies will be continued.
Subject to the qualifications expressed below, Union Electric and CIPSCO
believe that synergies from the Mergers will generate substantial cost savings
to Holdings, which would not be available absent the
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Mergers. Although there can be no assurances that such results will be
achieved, preliminary estimates by the managements of Union Electric and CIPSCO
indicate that the Mergers could result in potential net cost savings (that is,
after taking into account the costs incurred to achieve such savings) of
approximately $570 million during the 10-year period following the Mergers.
Approximately one-third of these savings are expected to be achieved through
personnel reductions involving approximately 300 positions. Other potentially
significant costs savings are reduced corporate and administrative programs
(35% of total potential savings), reduced electric production costs and lower
gas supply costs (20%), and purchasing economies for materials, supplies and
contract services (12%). Achieved savings in costs are expected to inure to the
benefit of both shareholders and customers. The treatment of the benefits and
cost savings will depend on the results of regulatory proceedings in the
jurisdictions in which Union Electric and CIPSCO operate their businesses.
The analyses employed in order to develop estimates of potential savings as a
result of the Mergers were necessarily based upon various assumptions that
involve judgments with respect to, among other things, future national and
regional economic and competitive conditions, technological developments,
inflation rates, regulatory treatment, weather conditions, cost of capital,
future business decisions, and other uncertainties, all of which are difficult
to predict and many of which are beyond the control of Union Electric and
CIPSCO. Accordingly, while Union Electric and CIPSCO believe that such
assumptions are reasonable for purposes of the development of estimates of
potential savings, there can be no assurance that such assumptions will
approximate actual experience or that such savings will be realized.
CIPSCO. The CIPSCO Board has determined that the terms of the proposed
Mergers are fair to, and in the best interests of, CIPSCO's shareholders. At
the meeting held on August 11, 1995, the CIPSCO Board adopted and approved the
Merger Agreement and the transactions contemplated thereby.
The CIPSCO Board believes that the Mergers represent a significant strategic
opportunity for CIPSCO and should offer CIPSCO and its shareholders better
prospects for the future than would be available to CIPSCO as a stand-alone
entity. In addition to the joint benefits described above, the CIPSCO Board
took into account the fact that it is anticipated that Holdings will adopt
Union Electric's common share dividend payment level as of the Effective Time.
Union Electric currently pays $2.50 per share annually. CIPSCO's current
indicated annual dividend rate is $2.04 per share. Thus, the Holdings dividend
would represent a 26% increase in the dividend per share for current CIPSCO
shareholders, taking into account the CIPSCO Ratio. While the dividend policy
actually adopted by Holdings is subject to evaluation from time to time by the
Holdings Board based on Holdings' results of operations, financial condition,
capital requirements and other relevant considerations, the CIPSCO Board
considered this possible dividend increase a distinct benefit to its
shareholders.
In reaching its decision to approve the Merger Agreement, and in addition to
the factors described above, the CIPSCO Board considered the following factors:
(i) the current and historical market prices and dividends on the CIPSCO Common
Stock and the Union Electric Common Stock (as set forth under "SELECTED
HISTORICAL AND PRO FORMA DATA--Comparative Market Prices and Dividends"); (ii)
information concerning the financial performance, condition, business
operations and prospects of each of CIPSCO and Union Electric, which indicate
the compatibility of the two companies and the potential synergies which could
be realized as a result of their combination; (iii) the effects of the Mergers
on CIPSCO's existing shareholders, including the opportunity to share in the
anticipated benefits of ownership of the combined enterprise; (iv) the expected
accounting treatment of the Mergers as a pooling of interests (as discussed
under "--Accounting Treatment"), which avoids the reduction in earnings which
would result from the creation and amortization of goodwill under the purchase
method of accounting; (v) the expected federal income tax treatment of the
Mergers as a tax-free reorganization to shareholders (as described under "--
Certain Federal Income Tax Consequences"); (vi) the proposed structure of the
transaction and the treatment of CIPSCO and Union Electric and their respective
shareholders; (vii) the regulatory treatment to be requested in connection with
the Mergers (as discussed under "REGULATORY MATTERS"); (viii) the terms of the
Merger Agreement and the Stock Option Agreements, which provide for reciprocal
representations and warranties, conditions to closing and rights to
termination, balanced rights and obligations and protection
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for employees of CIPSCO and CIPS and the communities they serve; (ix) the
opinion of Morgan Stanley (see "--Opinions of Financial Advisors--CIPSCO's
Financial Advisor"); (x) the projected pro forma ownership of Holdings by the
shareholders of CIPSCO implied by the Ratios; (xi) its evaluation of Union
Electric's nuclear operations; (xii) the transfer of Union Electric's Illinois
operations to CIPS; (xiii) the terms of the Merger Agreement (as described
under "THE MERGER AGREEMENT" and "HOLDINGS FOLLOWING THE MERGERS--Management of
Holdings"), which provide for an orderly integration of management after the
Effective Time and (xiv) the Stock Option Agreements (as described under "THE
STOCK OPTION AGREEMENTS"). The CIPSCO Board considered the above factors as a
whole, and did not assign specific or relative weights to such factors.
One director of CIPSCO, Mr. John L. Heath, voted against approval of the
Merger Agreement, noting that in light of CIPSCO's strong financial position he
was not in favor of the merger. He indicated that if at a later date it became
desirable for CIPSCO to become larger, he would prefer that CIPSCO pursue a
merger involving an entity smaller than itself.
THE CIPSCO BOARD HAS ADOPTED AND APPROVED THE MERGER AGREEMENT AND BELIEVES
THAT THE TERMS OF THE MERGERS ARE FAIR TO, AND IN THE BEST INTERESTS OF,
CIPSCO'S SHAREHOLDERS. THE CIPSCO BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE
MERGER AGREEMENT.
In considering the recommendation of the CIPSCO Board with respect to the
Merger Agreement, shareholders should be aware that certain members of CIPSCO's
management and the CIPSCO Board have certain interests in the Mergers which are
in addition to the interests of shareholders of CIPSCO generally and which
could potentially represent conflicts of interest. The CIPSCO Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby. See "--Potential
Conflicts of Interests of Certain Persons in the Mergers."
Union Electric. The Union Electric Board believes that the terms of the
Mergers are fair to, and in the best interests of, Union Electric and its
shareholders. Accordingly, the Union Electric Board, by a unanimous vote, has
approved the Merger Agreement and recommends its approval and adoption by Union
Electric's shareholders. The Union Electric Board believes: that Union
Electric's shareholders will benefit by participation in the combined economic
growth of the Union Electric and CIPS service territories, and from the
inherent increase in scale economies, the market diversification and the
resulting increased financial stability and strength; that the Mergers will
result in cost savings from decreased electric production and gas supply costs,
a reduction in operating and maintenance expense and other factors discussed
above; and that the combined enterprise can more effectively participate in the
increasingly competitive market for the generation of power. All of these
factors offer a potential increase in earnings and dividend growth and the
creation of a larger, financially stronger company. In reaching its
conclusions, the Union Electric Board considered (i) the financial performance,
condition, business operations and prospects of each of Union Electric and
CIPSCO and that, on a combined basis, the companies will likely have greater
financial stability and strength due to participation in the combined economic
climate and growth of both the CIPS and Union Electric service territories, the
increase in scale economies, the market diversification resulting from the
combination of customer bases and the impact of the potential operating
efficiencies and other synergies which are expected to reduce operational and
maintenance expenses, as more fully discussed above; (ii) current industry,
economic, market and regulatory conditions which encourage consolidation to
reduce risk and create new avenues for earnings growth; (iii) the anticipated
positive effect of the Mergers on shareholders and customers; (iv) the terms of
the Merger Agreement and the Stock Option Agreements, which provide for
reciprocal representations and warranties, conditions to closing and rights to
termination, balanced rights and obligations and protection for employees of
Union Electric and the communities it serves; (v) the impact of regulation
under various state and federal laws (as described under "REGULATORY MATTERS");
(vi) that the Mergers are expected to be treated as a tax-free reorganization
to shareholders and to be accounted for as a pooling-of-interests transaction
(which avoids the reduction in earnings which would result from the creation
and amortization of goodwill under purchase accounting); and (vii) the opinion
of Goldman Sachs,
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described below, that, in light of the CIPSCO Ratio, the Union Electric Ratio
is fair to holders of Union Electric Common Stock. In determining that the
Mergers are fair to and in the best interests of its shareholders, the Union
Electric Board considered the above factors as a whole and did not assign
specific or relative weights to them.
THE UNION ELECTRIC BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
BELIEVES THAT THE TERMS OF THE MERGERS ARE FAIR TO, AND IN THE BEST INTERESTS
OF, UNION ELECTRIC'S SHAREHOLDERS. THE UNION ELECTRIC BOARD RECOMMENDS A VOTE
FOR APPROVAL OF THE MERGER AGREEMENT.
In considering the recommendation of the Union Electric Board with respect to
the Merger Agreement, shareholders should be aware that certain members of
Union Electric's management and the Union Electric Board have certain interests
in the Mergers which are in addition to the interests of shareholders of Union
Electric generally and which could potentially represent conflicts of interest.
The Union Electric Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby. See "--Potential Conflicts of Interests of Certain
Persons in the Mergers."
OPINIONS OF FINANCIAL ADVISORS
CIPSCO'S Financial Advisor. CIPSCO retained Morgan Stanley to act as its
financial advisor in connection with the Mergers. Morgan Stanley was selected
by the CIPSCO Board to act as CIPSCO's financial advisor based on Morgan
Stanley's qualifications, expertise and reputation, as well as Morgan Stanley's
investment banking relationship and familiarity with CIPSCO.
At the August 11, 1995 meeting of the CIPSCO Board, Morgan Stanley rendered
to the CIPSCO Board its oral opinion that, as of such date, based upon and
subject to the various considerations set forth in the opinion, the CIPSCO
Ratio, taking into account the Union Electric Ratio, is fair from a financial
point of view to holders of shares of CIPSCO Common Stock. Morgan Stanley
delivered to the CIPSCO Board a written opinion dated as of August 11, 1995
confirming its oral opinion. Morgan Stanley also delivered to the CIPSCO Board
a written opinion dated as of the date of this Joint Proxy Statement/Prospectus
which is substantially identical to the August 11, 1995 written and oral
opinions.
THE FULL TEXT OF MORGAN STANLEY'S OPINION DATED THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ATTACHED AS ANNEX E TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. MORGAN STANLEY'S OPINION IS DIRECTED ONLY TO THE FAIRNESS
OF THE CIPSCO RATIO, TAKING INTO ACCOUNT THE UNION ELECTRIC RATIO, FROM A
FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER
OF CIPSCO COMMON STOCK AS TO HOW TO VOTE AT THE CIPSCO MEETING. SHAREHOLDERS
ARE URGED TO READ MORGAN STANLEY'S OPINION IN ITS ENTIRETY.
In connection with rendering its opinion, Morgan Stanley: (i) analyzed
certain publicly available financial statements and other information of CIPSCO
and Union Electric, respectively; (ii) analyzed certain internal financial
statements and other financial and operating data concerning CIPSCO and Union
Electric prepared by their respective managements; (iii) analyzed certain
financial projections of CIPSCO and Union Electric prepared by their respective
managements; (iv) discussed the past and current operations and financial
condition and the prospects of CIPSCO and Union Electric with senior executives
of CIPSCO and Union Electric, respectively; (v) reviewed the reported prices
and trading activity of both the CIPSCO Common Stock and the Union Electric
Common Stock; (vi) compared the financial performance of CIPSCO and Union
Electric and the prices and trading activity of CIPSCO Common Stock and Union
Electric Common Stock with that of certain other comparable publicly traded
companies and their securities; (vii) reviewed the financial terms, to the
extent publicly available, of certain comparable merger or acquisition
transactions; (viii) analyzed the pro forma financial impact of the Mergers on
Holdings; (ix) participated in discussions
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and negotiations among representatives of CIPSCO and Union Electric and their
respective financial and legal advisors; (x) reviewed drafts of the Merger
Agreement and the Stock Option Agreements, and certain related documents; (xi)
participated in discussions with CIPSCO and Union Electric and a third-party
consultant to CIPSCO and Union Electric regarding estimates of cost savings
expected to be derived from the Mergers and participated in a presentation by
CIPSCO's nuclear advisor regarding Union Electric's nuclear operations; and
(xii) performed such other analyses and examinations and considered such other
factors, which are described below, as it deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. In addition, Morgan
Stanley assumed that the financial projections were reasonably prepared on
bases reflecting the best current available estimates and judgments of the
future financial performances of CIPSCO and Union Electric, respectively.
Morgan Stanley did not make any independent valuation or appraisal of the
assets or liabilities of CIPSCO and Union Electric; however, Morgan Stanley
reviewed the presentation of CIPSCO, Union Electric and of the third party
consultant to CIPSCO and Union Electric with respect to estimates of cost
savings expected to be derived from the Mergers and relied without independent
verification upon such estimates for purposes of its opinion. In addition,
Morgan Stanley assumed that the Mergers would be consummated in accordance with
the terms set forth in the Merger Agreement, including, among other things,
that the Mergers will be accounted for as a "pooling of interests" business
combination in accordance with generally accepted accounting principles as in
effect in the United States and that the Mergers will be treated as a tax-free
reorganization and/or exchange, each pursuant to the Code. Morgan Stanley's
opinion was necessarily based on economic, market and other conditions as in
effect on, and the information made available to Morgan Stanley as of, the date
thereof.
In arriving at its opinion, Morgan Stanley further assumed that in connection
with the receipt of all the necessary regulatory and governmental approvals for
the proposed Mergers, no restriction will be imposed that would have a material
adverse effect on the contemplated benefits expected to be derived in the
proposed Mergers. In arriving at its opinion, Morgan Stanley was not authorized
to solicit, and did not solicit, interest from any party with respect to a
merger with or other business combination transaction involving CIPSCO or any
of its assets.
The following is a brief summary of the analyses and examinations performed
by Morgan Stanley in preparation of its opinion letter dated August 11, 1995
and reviewed with the CIPSCO Board on August 8, 1995 and August 11, 1995:
Peer Group Comparison. As part of its analysis, Morgan Stanley compared
certain financial information of CIPSCO and Union Electric with that of a group
of public utility companies, including CILCORP Inc., IPALCO Enterprises, Inc.,
Kansas City Power & Light Company, UtiliCorp United Inc., Western Resources
Inc., WPL Holdings, Inc., and WPS Resources Corporation (collectively, the
"Electric Utility Comparables"). Such financial information included price to
earnings multiple, price to book value multiple, price to operating cash flow
multiple, and dividend yield. In particular, such analyses indicated that as of
August 4, 1995, based on a compilation of earnings projections by securities
research analysts, CIPSCO and Union Electric traded at 12.1 and 12.3 times
forecasted earnings for the calendar year 1995, respectively, 11.7 and 12.0
times forecasted earnings for the calendar year 1996, respectively, 1.57 and
1.63 times book value as of the most recent quarter end, 5.7 and 6.4 times
operating cash flow for the latest reported 12-month period as derived from
publicly available information, and a 6.9% and 6.8% dividend yield,
respectively, compared to a range of 11.0 to 12.9 times 1995 earnings, 10.8 to
12.7 times 1996 earnings, 1.28 to 1.57 times book value, 4.0 to 6.6 times
operating cash flow for the latest reported 12-month period, and 6.3% to 7.1%
dividend yield, for the Electric Utility Comparables. Morgan Stanley noted
that, as of August 4, 1995, both CIPSCO and Union Electric were generally
trading within the range of the Electric Utility Comparables based on the above
financial ratios.
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Historical Exchange Ratio Analysis. Morgan Stanley also reviewed the ratio of
CIPSCO Common Stock to Union Electric Common Stock trading prices over the
latest three years. This ratio ranged from approximately 0.73 to 0.86 times
and, based on the closing price of CIPSCO Common Stock and Union Electric
Common Stock on August 4, 1995, of $29.75 and $35.88, respectively, the ratio
was 0.83 times. Based on the CIPSCO Ratio and the Union Electric Ratio, the
Mergers represent a 24.2% premium to the ratio based on August 4, 1995 closing
prices.
Contribution Analysis. Morgan Stanley analyzed the pro forma contribution of
each of CIPSCO and Union Electric to Holdings. Such analysis included, among
other things, relative contributions of earnings before interest, taxes,
depreciation and amortization, net income, book value, and asset value at or
over various time periods. In particular, such analysis showed that CIPSCO
would contribute approximately 21.0% of the earnings before interest, taxes,
depreciation and amortization for the latest reported 12-month period, 21.9%
and 22.1% of the projected earnings for calendar years 1995 and 1996,
respectively, based on a compilation of earnings estimates by securities
research analysts, and 22.3% and 21.1% of the book value and asset value,
respectively, as of the most recent reported quarter end. Morgan Stanley
observed that the aforementioned contribution percentages implied exchange
ratios between CIPSCO Common Stock and Union Electric Common Stock in the range
of 0.80 to 0.86, as compared to the CIPSCO Ratio of 1.03 (taking into account
the Union Electric Ratio).
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis of CIPSCO and Union Electric based on certain financial
projections prepared by the respective management of each company for the
fiscal years ended 1995 through 1999. Morgan Stanley discounted the unlevered
free cash flows of each company (net income available to common shareholders
plus preferred stock dividends plus depreciation and amortization plus deferred
taxes plus after-tax net interest expense less capital expenditures less
investment in working capital) over the forecast period at a range of discount
rates of 7.3% to 8.3%, representing an estimated range of weighted average cost
of capital range for CIPSCO and Union Electric. The sum of the present values
of such free cash flows for each company was then added to the present value of
each company's terminal value, computed using a forward multiple range of
earnings of 11.5 to 12.5 times, representing an estimated range of forward
price to earnings multiple range for CIPSCO and Union Electric, and discounted
at the aforementioned range of discount rates. Based on this analysis, Morgan
Stanley calculated per share values for CIPSCO ranging from approximately $31
to $35 and for Union Electric ranging from approximately $35 to $39.
Discounted Dividend Analysis. Morgan Stanley performed a discounted dividend
analysis of CIPSCO and Union Electric based on certain dividend projections
prepared by the respective management of each company for the fiscal years
ended 1995 through 1999. Morgan Stanley discounted the dividends of each
company over the forecast period at a range of discount rates of 9.0% to 10.0%,
representing an estimated range of cost of equity for CIPSCO and Union
Electric. The sum of the present values of such dividends was then added to the
present value of each company's terminal value, computed using a perpetual
dividend growth rate range of 2.0% to 3.0%, representing an estimated range of
long-term dividend growth rates for CIPSCO and Union Electric, and discounted
at the aforementioned range of discount rates. Based on this analysis, Morgan
Stanley calculated per share values for CIPSCO ranging from approximately $27
to $35 and for Union Electric ranging from approximately $33 to $42.
Analysis of Selected Precedent Transactions. Morgan Stanley reviewed the
following seven large proposed or completed electric utility merger
transactions announced since 1985: the mergers of Northern States Power Company
with Wisconsin Energy Corporation (pending), Iowa-Illinois Gas and Electric
Company with Midwest Resources Inc. (pending), Sierra Pacific Resources with
The Washington Water Power Company (pending), PSI Resources, Inc. with The
Cincinnati Gas & Electric Company, Midwest Energy Company with Iowa Resources
Inc., San Diego Gas & Electric Company with Tucson Electric Power Company (not
consummated), and The Toledo Edison Company with The Cleveland Electric
Illuminating Company (collectively, the "Electric Utility Mergers"). Morgan
Stanley also reviewed the following nine large proposed or completed electric
utility acquisition transactions announced since 1987: the acquisition of
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PSI Resources, Inc. by IPALCO Enterprises, Inc. (not consummated), Gulf States
Utilities Company by Entergy Corporation, Iowa Southern Inc. by IE Industries
Inc., the electric utility operations of Centel Corporation by UtiliCorp United
Inc., Kansas Gas and Electric Company by The Kansas Power and Light Company,
Kansas Gas and Electric Company by Kansas City Power & Light Company (not
consummated), San Diego Gas & Electric Company by SCEcorp (not consummated),
Savannah Electric and Power Company by The Southern Company, and Utah Power &
Light Company by PacifiCorp (collectively, the "Electric Utility
Acquisitions"). Morgan Stanley compared certain financial and market statistics
of these transactions with those for the Mergers. The analysis showed for the
Electric Utility Mergers and the Electric Utility Acquisitions a median price
to earnings multiple for the latest 12-month period of 12.0 and 12.1 times,
respectively, a median price to book value multiple of 1.37 and 1.80 times,
respectively, a median price to operating cash flow ratio for the latest 12-
month period of 6.1 and 6.4 times, respectively, and a premium to market price
one month prior to the announcement of the transaction of 4.3% and 34.5%,
respectively. These statistics were compared with corresponding multiples of
15.2, 1.95, 7.0 times, and a premium of 24.2% for the Mergers, based on the
CIPSCO Ratio and Union Electric Ratio and based on CIPSCO Common Stock and
Union Electric Common Stock closing share prices on August 4, 1995. Morgan
Stanley observed that the implied multiples and premium for the Mergers, based
on CIPSCO Common Stock and Union Electric Common Stock closing share prices on
August 4, 1995, were higher than all the corresponding median multiples and
premiums for both the Electric Utility Mergers and the Electric Utility
Acquisitions, with the exception of the median premium to market price one
month prior to the announcement of a transaction for the Electric Utility
Acquisitions.
Pro Forma Analysis of the Mergers. Morgan Stanley analyzed the pro forma
impact of the Mergers on Union Electric's earnings per share for the fiscal
years ended 1997 through 2001. The first year of the analysis period is based
on the assumption that 1997 constitutes the first full year after the Mergers.
Such analysis was based on earnings estimates for fiscal years ended 1997
through 1999 for CIPSCO and Union Electric prepared by the respective company
managements and further projected through to fiscal year ended 2001 based on
the consensus long term earnings growth rate of securities research analysts
for CIPSCO and Union Electric, and a portion of the estimates of cost savings
expected to be derived from the Mergers presented by CIPSCO, Union Electric and
the third party consultant to CIPSCO and Union Electric. Morgan Stanley
observed that, based on the CIPSCO Ratio and Union Electric Ratio, and assuming
that the Mergers would be treated as a pooling of interests for accounting
purposes, the Mergers would result over the analysis period in a significant
increase in pro forma earnings per share to holders of CIPSCO Common Stock (in
the range of approximately 10.7% to 15.8%, depending on the year).
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Morgan Stanley reviewed the analyses used to render its
August 11, 1995 opinion by performing procedures to update certain such
analyses and by reviewing the assumptions upon which such analyses were based
and the factors considered in connection therewith.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, would create a misleading view of the
processes underlying its opinion. The range of valuations resulting from any
particular analysis described above should therefore not be taken to be Morgan
Stanley's view of the actual value of CIPSCO or Union Electric.
The analyses performed by Morgan Stanley are not necessarily indicative of
actual values, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as a part of Morgan
Stanley's analysis of the fairness of the CIPSCO Ratio (taking into account the
Union Electric Ratio) to the holders of CIPSCO Common Stock and were provided
to the CIPSCO Board in connection with the delivery of Morgan Stanley's opinion
dated August 11, 1995. The analyses do not purport to be appraisals or to
reflect the prices at which CIPSCO or Union Electric might actually be sold. In
addition, as described above, Morgan Stanley's opinion and presentation to the
CIPSCO Board was one of the many
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factors taken into consideration by the CIPSCO Board in making its
determination to approve the Mergers. Consequently, the Morgan Stanley analyses
described above should not be viewed as determinative of the CIPSCO Board's or
CIPSCO management's opinion with respect to the value of CIPSCO or of whether
the CIPSCO Board or CIPSCO management would have been willing to agree to a
different CIPSCO Ratio.
The consideration to be received by the stockholders of CIPSCO pursuant to
the Mergers was determined through negotiations between CIPSCO and Union
Electric and was approved by the CIPSCO Board. Morgan Stanley provided advice
to CIPSCO during the course of such negotiations; however, the decision to
enter into the Merger Agreement and to accept to CIPSCO Ratio was solely that
of the CIPSCO Board.
CIPSCO retained Morgan Stanley because of its experience and expertise.
Morgan Stanley is an internationally recognized investment banking and advisory
firm. Morgan Stanley, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the course of its market-
making and other trading activities, Morgan Stanley may, from time to time,
have a long or short position in, and buy and sell, securities of CIPSCO or
Union Electric. In the past, Morgan Stanley and its affiliates have provided
financial advisory and financing services to CIPSCO and CIPS and have received
customary fees in connection with these services.
CIPSCO has agreed to pay Morgan Stanley a fee for its financial advisory
services in connection with the transaction. CIPSCO has agreed to pay Morgan
Stanley (i) a shareholder relations fee of $150,000, (ii) an advisory fee
estimated to be between $100,000 and $250,000 (against which $75,000 of the
shareholder relations fee previously paid will be credited) which is payable in
the event that the Mergers are not consummated, (iii) an announcement fee of
approximately $1.6 million which became payable upon the announcement of the
Mergers, and (iv) if the Mergers are successfully consummated, a transaction
fee of approximately $5.4 million, against which any advisory fee or
announcement fee paid will be credited. In addition, CIPSCO has agreed to
reimburse Morgan Stanley for its out-of-pocket expenses related to the
engagement and to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley, or any of its affiliates against certain liabilities and
expenses, including liabilities under federal securities laws, in connection
with Morgan Stanley's engagement.
Union Electric's Financial Advisor. On August 11, 1995, Goldman Sachs
delivered its oral opinion to the Union Electric Board that, as of the date of
such opinion, and in light of the CIPSCO Ratio, the Union Electric Ratio is
fair to the holders of shares of Union Electric Common Stock. Goldman Sachs has
delivered its written opinion to the Union Electric Board that, as of the date
hereof, in light of the CIPSCO Ratio, the Union Electric Ratio is fair to
holders of Union Electric Common Stock.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AS OF THE DATE OF
THIS JOINT PROXY STATEMENT/PROSPECTUS IS ATTACHED HERETO AS ANNEX D AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF SHARES OF UNION ELECTRIC COMMON
STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. THE OPINION
OF GOLDMAN SACHS IS DIRECTED ONLY TO THE FAIRNESS OF THE UNION ELECTRIC RATIO,
IN LIGHT OF THE CIPSCO RATIO, TO HOLDERS OF SHARES OF UNION ELECTRIC COMMON
STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF UNION ELECTRIC
COMMON STOCK OR PREFERRED STOCK AS TO HOW TO VOTE AT THE UNION ELECTRIC
MEETING. SHAREHOLDERS ARE URGED TO READ GOLDMAN SACHS' OPINION IN ITS ENTIRETY.
In connection with their opinion, Goldman Sachs reviewed, among other things,
the Merger Agreement; Annual Reports to shareholders and Annual Reports on Form
10-K of Union Electric and CIPSCO for the five years ended December 31, 1994;
interim reports to shareholders and Quarterly Reports on Form
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10-Q of Union Electric and CIPSCO; FERC Form 1 of Union Electric and CIPS;
certain other communications from Union Electric and CIPSCO to their respective
shareholders; and certain internal financial analyses and forecasts for Union
Electric and CIPSCO prepared by their respective managements, including
analyses and forecasts of certain operating efficiencies and financial
synergies (the "Synergies") expected to be achieved as a result of the
transactions contemplated by the Merger Agreement which were prepared jointly
by the managements of Union Electric and CIPSCO, with the assistance of a third
party consultant. Goldman Sachs also held discussions with members of the
senior management of Union Electric and CIPSCO regarding the past and current
business operations, financial condition and future prospects of their
respective companies and their analyses of the strategic benefits of the
merger, including, without limitation, the amount and timing of realization of
the Synergies. In addition, Goldman Sachs reviewed the reported price and
trading activity for the Union Electric Common Stock and the CIPSCO Common
Stock, compared certain financial and stock market information for Union
Electric and CIPSCO with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the electric utility industry and
performed such other studies and analyses, which are described below, as
Goldman Sachs considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by them for
purposes of their opinion. In that regard, Goldman Sachs assumed that the
analyses and forecasts of the Synergies provided to Goldman Sachs by Union
Electric, have been reasonably determined on a basis reflecting the best
currently available judgments and estimates of Union Electric and CIPSCO and
that such Synergies will be realized in the amounts and at the times
contemplated thereby. In addition, Goldman Sachs has not made an independent
evaluation or appraisal of the assets and liabilities of Union Electric or
CIPSCO or any of their subsidiaries and Goldman Sachs has not been furnished
with any such evaluation or appraisal. Goldman Sachs has assumed that the
consummation of the transactions contemplated by the Merger Agreement will be
accounted for as a pooling of interests under generally accepted accounting
principles. In addition, Goldman Sachs further assumed that obtaining any
necessary regulatory or third-party approvals for the transactions contemplated
by the Merger Agreement or the creation of a holding company and any possible
divestitures which may be required in connection therewith will not have an
adverse effect on Holdings, Union Electric or CIPSCO. Goldman Sachs is not
expressing any opinion as to the prices at which the Holdings Common Stock may
trade when the transaction is consummated.
The opinions of Goldman Sachs do not consider the relative merits of the
transactions contemplated by the Merger Agreement as compared to any other
business plan or opportunity that might be available to Union Electric or the
effect of any other arrangement in which Union Electric might engage.
In connection with their opinions, Goldman Sachs performed certain financial
analyses, which were reviewed with the Union Electric Board on August 8, 1995
and August 11, 1995. (The analyses reviewed on August 11 were substantially
identical to the analyses reviewed on August 8, except that they reflected the
CIPSCO Ratio and the Union Electric Ratio, which ratios had not been
established as of August 8, and otherwise updated, where appropriate, the
analyses reviewed on August 8.) The following is a summary of these analyses.
Financial Comparison. Goldman Sachs reviewed and compared certain financial
valuation statistics for Union Electric and CIPSCO. This comparison indicated
that (i) estimated earnings per share (based upon a compilation of securities
research analysts (such compilation, "IBES")) for Union Electric were projected
to increase by 3.1% from 1995 to 1996 and those for CIPSCO were projected to
increase by 3.3% from 1995 to 1996, (ii) as of August 4, 1995, estimated
multiples of the market price per share to estimated earnings per share (based
on IBES) for Union Electric Common Stock were approximately 12.4 times for 1995
and 12.0 times for 1996 and for CIPSCO Common Stock were approximately 12.1
times for 1995 and 11.6 times for 1996, (iii) the IBES five year projected
earnings per share growth rate for Union Electric was approximately 3.0% and
for CIPSCO was approximately 2.8%, (iv) the current dividend yields on Union
Electric Common Stock and CIPSCO Common Stock were approximately 6.8% and 6.9%,
respectively, (v) based on IBES estimated 1995 earnings, the dividend payout
rates for Union Electric and CIPSCO were approximately
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83.9% and 83.3%, respectively, (vi) as of August 4, 1995, the ratios of current
market value to book value for each share of Union Electric Common Stock and
CIPSCO Common Stock were approximately 1.63 and 1.58, respectively, and (vii)
the current total return from ownership of Union Electric Common Stock and
CIPSCO Common Stock from January 1, 1995 to August 4, 1995 was 1.1% and 7.7%,
respectively.
Historical Exchange Ratio Analysis. Goldman Sachs also reviewed the ratio of
CIPSCO Common Stock to Union Electric Common Stock daily trading prices from
January 3, 1994 through August 10, 1995. This ratio ranged from approximately
0.74 to 0.86 times with an average over this time period of approximately 0.80
times. A review of the ratio of CIPSCO Common Stock to Union Electric Common
Stock monthly average trading prices for the months ending July 31, 1990
through July 31, 1995 indicated an average of approximately 0.79 times and a
range from approximately 0.72 times to 0.85 times. (The ratio of the closing
market price of CIPSCO Common Stock to Union Electric Common Stock on August 4,
1995 of $29.75 and $35.88, respectively, was approximately 0.83 times.)
Selected Companies Analysis. Goldman Sachs reviewed and compared certain
actual and estimated financial and stock market information of Union Electric
and CIPSCO with that of a group of public utility companies comprised of
CILCORP Inc., CINergy Corp., Illinova Corp., IPALCO Enterprises Inc., KU Energy
Corp., Kansas City Power & Light Company, NIPSCO Industries Inc., UtiliCorp
United Inc., WPL Holdings, Inc., and Western Resources Inc. (the "Utility
Companies"). This analysis indicated that (i) price earnings multiples, based
on estimates of 1996 earnings (based on Goldman Sachs Research estimates), were
approximately 11.9 times and 12.0 times for CIPSCO and Union Electric,
respectively, as compared to an average for the Utility Companies of
approximately 11.6 times (with a range from 10.7 times to 12.4 times), (ii)
return on equity for the latest twelve months was approximately 13.0% and 13.7%
for CIPSCO and Union Electric, respectively, as compared to an average for the
Utility Companies of approximately 11.5% (with a range from 10.1% to 14.0%),
(iii) dividend yield was approximately 6.9% and 6.8% for CIPSCO and Union
Electric, respectively, as compared to an average for the Utility Companies of
approximately 6.2% (with a range from 4.1% to 7.1%), (iv) the ratio of
estimated dividends to be paid in 1995 to estimated earnings for 1995 was
approximately 83.3% and 82.7% for CIPSCO and Union Electric, respectively, as
compared to an average for the Utility Companies of approximately 76.2% (with a
range from 45.5% to 86.7%), (v) the ratio of market value per share of common
stock to book value per share was approximately 1.57 times and 1.65 times for
CIPSCO and Union Electric, respectively, as compared to an average of
approximately 1.48 times for the Utility Companies (with a range from 1.25
times to 1.84 times), and (vi) the ratio of market value to cash flow was
approximately 5.5 times and 6.0 times for CIPSCO and Union Electric,
respectively, as compared to an average of approximately 6.3 times for the
Utility Companies (with a range from 4.5 times to 8.9 times).
Contribution Analysis. Goldman Sachs analyzed and compared the respective
contribution of each of Union Electric and CIPSCO to Holdings based on a
comparison of certain actual and estimated stock market and financial
information for each company as a separate entity on a stand alone basis. This
analysis did not take into account any synergies realizable as a result of, or
any other effects from, the Mergers. This analysis indicated that CIPSCO would
contribute to Holdings approximately (i) 21.4% of aggregate market
capitalization, (ii) 20.7% of aggregate 1994 net income, (iii) 23.8% of
aggregate estimated 1995 net income (based on the internal forecasts of
managements of each of Union Electric and CIPSCO), (iv) 21.9% of aggregate
estimated 1995 net income based on IBES estimates, (v) 24.9% of aggregate 1995
cash flow based on forecasts by managements of each of CIPSCO and Union
Electric, (vi) 22.2% of aggregate 1994 year-end book value, (vii) 21.2% of
aggregate total assets at year-end 1994, and (viii) 29.1% of aggregate revenues
for 1994. The Ratios will result in holders of CIPSCO Common Stock owning
approximately 25.6% of Holdings immediately after consummation of the Mergers.
Discounted Cash Flow Analysis. Based on projections prepared by CIPSCO's
management, Goldman Sachs estimated the net present value of CIPSCO's future
cash flows (after deducting estimated capital expenditures). In conducting this
analysis, Goldman Sachs assumed discount rates ranging from 11% to 13% and a
terminal value multiple of twelve for purposes of calculating the value of cash
flows after 1999. This
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analysis indicated, based upon management's estimates, a range of approximately
$39.72 to $40.79 for each share of CIPSCO Common Stock, representing a premium
of between 34% and 37% to the closing market price of CIPSCO Common Stock on
August 4, 1995 of $29.75, implying a CIPSCO Ratio of between approximately 1.11
and 1.14 (1.13 and 1.16, as of August 10, 1995), given a Union Electric Ratio
of 1.0.
Discounted Dividend Analysis. Goldman Sachs calculated the present value of
the estimated hypothetical future dividends payable on CIPSCO Common Stock. In
conducting this analysis, Goldman Sachs considered potential annual growth
rates of 2%, 3% and 4% for the current dividend of $2.04 per share of CIPSCO
Common Stock and applied discount rates of between 8% and 10%. Based on this
analysis, implied per share values for a share of CIPSCO Common Stock ranging
from approximately $25.50 to $51.00 were obtained. Given a Union Electric Ratio
of 1.0, these values implied a CIPSCO Ratio of between approximately .72 and
1.45, with a midpoint of the range of 1.08 (based upon the closing CIPSCO
Common Stock market price on August 10, 1995).
Selected Transactions Analysis. Goldman Sachs reviewed and analyzed selected
financial, operating and stock market information relating to five merger
transactions involving electric utility companies in which at least 60% of the
resulting combined company's common equity was held by the stockholders of one
of the companies participating in the transaction. These transactions were the
acquisition of Savannah Electric and Power Company by The Southern Company, the
acquisition of Gulf States Utilities Company by Entergy Corporation, the
acquisition of Iowa Southern Inc. by IE Industries Inc., the merger of The
Cincinnati Gas & Electric Company with PSI Resources, Inc., and the merger of
The Washington Water Power Company with Sierra Pacific Resources. This analysis
indicated that the exchange ratio received by stockholders of the smaller
company represented (i) a multiple ranging from 12.1 times to 29.2 times latest
twelve months earnings per share, with a mean of 16.7 times and, given a Union
Electric Ratio of 1.0, implying a CIPSCO Ratio of 1.06 based on this mean, (ii)
a multiple of gross cash flow ranging from 5.6 times to 7.6 times, with a mean
of 6.5 times and, given a Union Electric Ratio of 1.0, implying a CIPSCO Ratio
of .92 based on this mean, (iii) a multiple of book value ranging from 1.2
times to 2.5 times, with a mean of 1.7 times and, given a Union Electric Ratio
of 1.0, implying a CIPSCO Ratio of .93 based on this mean, and (iv) a premium
to market value per common share ranging from 17.4% to 65.0%, with a mean of
44.1% and, given a Union Electric Ratio of 1.0, implying a CIPSCO Ratio of 1.21
based on this mean. The midpoint of the range of implied CIPSCO Ratios derived
from these analyses was 1.07. (Goldman Sachs also reviewed five other public
utility transactions, the mergers of The Kansas Power & Light Company with
Kansas Gas and Electric Company, of PacificCorp. with Utah Power & Light
Company, of Midwest Resources Inc. with Iowa--Illinois Gas and Electric
Company, of Wisconsin Energy Corporation with Northern States Power Company,
and of Midwest Energy Company with Iowa Resources Inc. These transactions
indicated an exchange ratio received by stockholders of the smaller company
representing a multiple ranging from 11.6 times to 20.6 times latest twelve
months earnings per share, from 4.4 times to 7.5 times gross cash flow, from
1.2 times to 1.7 times book value and a premium to market ranging from 0.0% to
62.0%.)
Pro Forma Combination Analysis. Goldman Sachs analyzed the pro forma impact
of the Mergers on the earnings per share of common stock of each of Union
Electric and CIPSCO stockholders for 1997, 1998 and 1999. The first year of the
analysis period is based on the assumption that 1997 constitutes the first full
fiscal year after the consummation of the Mergers. The analysis was based on
earnings estimates for these years for Union Electric and CIPSCO prepared by
their respective managements and includes ten percent per year of the total
synergies expected to result from the Mergers as estimated by managements of
Union Electric and CIPSCO with the assistance of a third party consultant to
Union Electric and CIPSCO. Based on these forecasts and estimates and assuming
the Merger will be accounted for as a pooling of interests, the Ratios would be
slightly accretive to Union Electric stockholders (ranging from approximately
1% to 2.2%, depending upon the year). Based on the same forecasts and
estimates, Goldman Sachs calculated that, given a Union Electric Ratio of 1.0,
a CIPSCO Ratio ranging from 0.99 to 1.12 would result in a pro forma earnings
per share accretion (after giving effect to the Mergers and a portion of the
expected Synergies) for holders of Union Electric Common Stock of between 0% to
2% for the years 1997 and 1998.
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In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Goldman Sachs reviewed the analyses used to render their
August 11, 1995 oral opinion to the Union Electric Board and the assumptions
upon which such analyses were based and the factors considered in connection
therewith.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at their fairness determination,
Goldman Sachs considered the results of all such analyses and did not assign
relative weights to any of the analyses.
The analyses were prepared solely for the purpose of Goldman Sachs providing
their opinion to the Union Electric Board as to the fairness of the Union
Electric Ratio, in light of the CIPSCO Ratio, to holders of Union Electric
Common Stock and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold, which are
inherently subject to uncertainty. Any estimates incorporated in the analyses
performed by Goldman Sachs are not necessarily indicative of actual past or
future values or results, which may be significantly more or less favorable
than any such estimates. No public company utilized as a comparison is
identical to Union Electric, CIPSCO or the business segment for which a
comparison is being made, and none of the comparable acquisition transactions
or other business combinations utilized as a comparison is identical to the
transactions contemplated by the Merger Agreement. Accordingly, an analysis of
publicly traded comparable companies and comparable business combinations
resulting from the transactions is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which they
are being compared. Similarly, analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of Union Electric and CIPSCO or their
respective advisors, none of Union Electric, CIPSCO, Goldman Sachs or any other
person assumes responsibility if future results or actual values are materially
different from these forecasts or assumptions. The foregoing summary does not
purport to be a complete description of the analyses performed by Goldman
Sachs. Shareholders are urged to read in its entirety the written opinion of
Goldman Sachs set forth in Annex D to this Joint Proxy Statement/Prospectus.
As described above, the opinion and presentation of Goldman Sachs to the
Union Electric Board was only one of many factors taken into consideration by
the Union Electric Board in making its determination to approve the Merger
Agreement. In addition, the terms of the Mergers were determined through
negotiations between Union Electric and CIPSCO and were approved by the Union
Electric Board. Although Goldman Sachs provided advice to Union Electric during
the course of these negotiations, the decision to enter into the Merger
Agreement and to accept the Ratios was solely that of the Union Electric Board.
Goldman Sachs, as part of their investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Union Electric, having provided certain investment banking
services to Union Electric from time to time, including acting as managing
underwriter of certain securities offerings of Union Electric, and having acted
as its financial advisor in connection with, and having participated in certain
of the negotiations leading to, the Merger.
Goldman Sachs provide a full range of financial, advisory and brokerage
services and in the course of their normal trading activities may from time to
time effect transactions and hold long or short positions in
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the securities or options on securities of Union Electric, CIPSCO, and their
subsidiaries for their own account and for the account of customers.
Pursuant to a letter agreement dated June 23, 1995, (the "Engagement
Letter"), Union Electric engaged Goldman Sachs to act as its financial advisor
with respect to a possible transaction with CIPSCO. Pursuant to the terms of
the Engagement Letter, Union Electric has agreed to pay Goldman Sachs (i)
monthly fees of $100,000 over a period commencing July 1, 1995 through the
execution of a merger agreement with CIPSCO but not to exceed five months, (ii)
$1,875,000 upon execution of the Merger Agreement (against which fee all
monthly fees are creditable), (iii) $1,875,000 upon approval of the Merger
Agreement by holders of Union Electric Common Stock, and (iv) $1,875,000 upon
consummation of the Mergers. The Engagement Letter also provides for the
payment by Union Electric to Goldman Sachs of 15% of any payment Union Electric
might receive from CIPSCO or a third party if the Mergers are not consummated,
not to exceed $5,000,000 and not including payments received by Union Electric
as reimbursement for out-of-pocket expenses. In addition, Union Electric has
agreed to reimburse Goldman Sachs for their reasonable out-of-pocket expenses,
including the fees and disbursements of their attorneys, plus any sales, use or
similar taxes arising in connection with Goldman Sachs' engagement and to
indemnify Goldman Sachs and certain related persons against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of its engagement.
POTENTIAL CONFLICTS OF INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the recommendations of the Union Electric Board and the CIPSCO
Board with respect to the Mergers, shareholders should be aware that certain
members of Union Electric's and CIPSCO's management and Boards of Directors
have certain interests in the Mergers which are in addition to the interests of
shareholders of Union Electric and CIPSCO generally and which could potentially
represent conflicts of interest. The Union Electric Board and the CIPSCO Board
were aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
Employee Plans and Severance Arrangements. CIPSCO has Management Continuity
Agreements with each of nine executives of CIPSCO and/or CIPS which provide
that, in the event of a change in control of CIPSCO or CIPS, CIPSCO and/or CIPS
or another subsidiary of CIPSCO will continue to employ the executive for a
period of three years from the date of the change in control or to the
executive's earlier death or attainment of age 65 (the "Period of Employment").
In the event of the executive's (i) involuntary termination of employment
during the Period of Employment except by reason of death, disability,
attainment of age 65 or cause (as defined in the Management Continuity
Agreement), or (ii) resignation during the Period of Employment for good reason
(as defined in the Management Continuity Agreement) the executive will be
entitled to payment of severance compensation in an amount equal to the present
value of the executive's base pay and incentive pay (determined as provided in
the Management Continuity Agreement) that would have accrued if the executive
remained employed until the end of the Period of Employment. The executive will
also receive continued welfare benefits and service credits until the end of
the Period of Employment, subject to offset for comparable welfare benefits.
The severance compensation will be increased by an amount necessary to
compensate the executive for any excise tax payable under federal, state or
local tax law as a result of the payment and any other compensation paid by
CIPSCO or any of its affiliates being contingent on a change in control.
Entering into the Merger Agreement constitutes a "change in control" as defined
in the Management Continuity Agreements. If the Mergers occurred on June 30,
1996 and all executives who are parties to a Management Continuity Agreement
were terminated immediately thereafter, it is estimated that, based on current
compensation levels and valuation factors, the aggregate after-tax cost of the
severance benefits under the Management Continuity Agreements would be
approximately $3.8 million.
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Certain supplemental retirement plans and an associated trust established by
CIPS (in which senior executives participate) were amended August 8, 1995 to
provide that a change in control as defined therein will not result from and
shall not be deemed to have occurred by reason of any business combination or
agreement to enter into a business combination with Union Electric approved by
at least two-thirds of the directors of CIPSCO in office on August 8, 1995. The
Merger Agreement was so approved by the CIPSCO Board and each participant of
the plans who was required to consent to such amendment under the terms of the
plans has done so. Consequently, the Mergers will not constitute a change in
control under such plans and trust and the accelerated vesting or payment of
certain benefits, which would have occurred upon a change in control, will not
occur as a result of the Mergers or of entering into the Merger Agreement.
CIPSCO and CIPS each maintain an unfunded deferred compensation plan under
which directors may elect to defer directors' retainers and fees paid by that
company. For each director who elects to participate in a plan, the amount of
his or her director's retainer and fees is accrued in an unfunded account in
the name of the director. Such amount is adjusted in value by an amount
equivalent to the amount which would be available if the director's
compensation were invested in CIPSCO Common Stock and dividends on such stock
were reinvested. The aggregate value of each participant's accounts in the
plans at November 1, 1995 (based on deferred directors' fees paid by CIPSCO and
CIPS) was equivalent to investments in CIPSCO Common Stock as follows: Mr.
Alley, 6,155 shares; Mr. Lohman, 5,468 shares; Mrs. Merriman, 3,842 shares; Mr.
Shade, 3,098 shares; and Mr. Wogsland, 2,234 shares. Amounts accrued in a
director's account will be paid in cash upon his or her retirement as a
director either in a single payment or over a period not to exceed 20 calendar
quarters, with interest. Because officers of CIPSCO or CIPS receive no
compensation for services as directors, any director who is an officer is not
eligible to participate in these plans. Such plans will be modified following
the Merger to use Holdings Common Stock as the measure for the adjustment in
value of the directors' accounts. See "THE MERGER AGREEMENT--Stock and Benefit
Plans."
Effective August 11, 1995, the Union Electric Board approved the adoption of
the Union Electric Company Change of Control Severance Plan (the "Union
Electric Severance Plan"), pursuant to which participants are entitled to
receive certain severance benefits if their employment is terminated under
certain circumstances within three years after the Mergers or another
transaction that meets the definition of "change of control" under the plan.
Terminations of employment that result in the payment of severance benefits
under the Union Electric Severance Plan include a termination by the employer
without "cause" (as defined in the plan) or by the participant for "good
reason" (as defined in the plan, and including a significant diminution of
responsibilities, an assignment to inappropriate duties, a material reduction
in compensation or benefits, or a transfer of more than 50 miles).
Severance benefits under the Union Electric Severance Plan are based upon a
period of either two or three years (as designated by the Human Resources
Committee of the Union Electric Board) (or, if less, the period remaining until
the participant reaches mandatory retirement age) (the "Severance Period"). A
participant who becomes entitled to severance will receive the following: a
lump sum cash payment of salary and unpaid vacation pay through the date of
termination, a pro rata bonus for the year of termination, and the
participant's base salary and bonus for the Severance Period; continued
employee welfare benefits for the Severance Period; a lump sum payment equal to
the actuarial value of the additional benefits under Union Electric's qualified
and supplemental retirement plans the participant would have received had he
remained employed for the Severance Period; and outplacement services at a cost
of not more than $30,000. In addition, the participant will receive an
additional payment, if necessary, to make such participant whole for any excise
tax on excess parachute payments imposed on the participant. However, such
excise tax is not expected to be applicable to payments that become payable
under the Union Electric Severance Plan because of terminations, if any, after
the Mergers.
The Union Electric Board has designated as participants in the plan Union
Electric's chief executive officer, four senior vice presidents, 15 vice
presidents and four other officers. The chief executive officer and four senior
vice presidents have three-year Severance Periods and the other participants
have two-year Severance Periods. If the Mergers occurred on June 30, 1996 and
all participants in the plan were terminated
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immediately thereafter, it is estimated that the aggregate after-tax cost of
the severance benefits under the plan would be approximately $10 million.
Union Electric's Deferred Compensation Plan for Members of the General
Executive Staff contains a provision that causes participants to be vested in a
more favorable interest rate under the plan following a "change of control," as
defined in the plan, which interest rate might not otherwise apply if the
participant's employment had been terminated before the accrual of sufficient
years of participation and/or before reaching retirement eligibility. The
Mergers are likely to constitute a change of control for these purposes and, in
any event, pursuant to the Union Electric Severance Plan, the Mergers will be
deemed to constitute a change of control for these purposes with respect to
participants in the Union Electric Severance Plan.
All stock options to acquire Union Electric Common Stock under the Union
Electric Long-Term Incentive Compensation Plan of 1995 (the "Union Electric
LTIP") that are outstanding at the Effective Time will be converted into
options to buy Holdings Common Stock, and the number of shares and exercise
price under such options will be adjusted so as to preserve both the same
aggregate gain or loss immediately after the Effective Time as existed
immediately before the Effective Time and the ratio of the exercise price per
share subject to the Union Electric stock option to the fair market value per
underlying share. Each performance dividend unit under the Union Electric LTIP
that is outstanding at the Effective Time will be converted into a performance
dividend unit based upon the same number of shares of Holdings Common Stock as
the holder of such Union Electric unit would have received pursuant to the
Mergers if such holder had been the owner of the shares of Union Electric
Common Stock on which such unit was based immediately before the Effective
Time. Holdings will assume the obligation to honor such options and performance
units under the Union Electric LTIP, and the terms and conditions of such
options and units will otherwise remain the same as before the Effective Time
after giving effect to the foregoing adjustments. No such awards under the
Union Electric LTIP will vest or otherwise accelerate as a result of the
Mergers. See "THE MERGER AGREEMENT--Stock and Benefit Plans."
Board of Directors. As provided in the Merger Agreement, at the Effective
Time, the Holdings Board will consist of 15 directors, comprised of ten
individuals designated by Union Electric, including Charles W. Mueller, and
five directors designated by CIPSCO, including Clifford L. Greenwalt and four
non-management directors. See "HOLDINGS FOLLOWING THE MERGERS--Management of
Holdings."
Indemnification. Pursuant to the Merger Agreement, to the extent, if any, not
provided by an existing right of indemnification or other agreement or policy,
from and after the Effective Time, Holdings will, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each person
who, prior to the Effective Time, was an officer, director or employee of Union
Electric or CIPSCO or any of their subsidiaries against all losses, expenses
(including reasonable attorneys' fees), claims, damages or liabilities or,
subject to certain restrictions, amounts paid in settlement, (i) arising out of
actions or omissions occurring at or prior to 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 (ii) based on, arising
out of or pertaining to the transactions contemplated by the Merger Agreement.
CIPSCO has entered into indemnification agreements with each of its directors
and CIPSCO and CIPS have entered into indemnification agreements with each of
their executive officers. These indemnification agreements provide for
indemnification consistent with the requirements of the By-laws of CIPSCO and
CIPS and also provide for additional indemnification as provided in such
indemnification agreements subject to the limitations on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity. See "THE MERGER AGREEMENT-- Indemnification."
CERTAIN ARRANGEMENTS REGARDING THE DIRECTORS AND MANAGEMENT OF HOLDINGS
FOLLOWING THE MERGERS
In connection with the Mergers, the Holdings Board, at the Effective Time,
will consist of 15 persons, ten of whom will be designated by Union Electric
and five of whom will be designated by CIPSCO. See "HOLDINGS FOLLOWING THE
MERGERS--Management of Holdings." In addition, the Merger
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Agreement provides that during the three-year period commencing at the
Effective Time, certain provisions thereof (including provisions relating to
existing employee agreements, workforce matters, benefit plans, stock option
and other plans and certain officer positions of Holdings) may be enforced on
behalf of the officers, directors and employees of Union Electric and CIPSCO,
as the case may be, by the directors of Holdings designated by Union Electric
and CIPSCO, respectively (or their successors).
HOLDINGS PLANS
Pursuant to the terms of the Merger Agreement, Holdings will implement a new
annual bonus plan and a new stock compensation plan, subject to shareholder
approval thereof and effective as of the Effective Time. See "HOLDINGS
FOLLOWING THE MERGERS--Holdings Incentive Plans."
DIVIDEND REINVESTMENT PLAN
It is anticipated that Holdings will adopt a dividend reinvestment plan and
stock purchase plan substantially similar to the Union Electric DRIP Plan.
Following the Effective Time, former common shareholders of Union Electric, and
former common shareholders of CIPSCO, will be able to participate in the
Holdings dividend reinvestment and stock purchase plan with respect to the
shares of Holdings Common Stock that they receive in the Mergers, and to have
their accounts under the Union Electric DRIP Plan or the CIPSCO Automatic
Dividend Reinvestment and Stock Purchase Plan, as the case may be, transferred
to the Holdings dividend reinvestment and stock purchase plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of the material federal
income tax consequences of the Mergers. This summary is not a complete
description of all of the consequences of the Mergers and, in particular, may
not address federal income tax considerations that may affect the treatment of
a shareholder that, at the Effective Time, is not a U.S. person or is a tax-
exempt entity or an individual who acquired Union Electric or CIPSCO Common
Stock pursuant to an employee stock option or otherwise as compensation. In
addition, no information is provided with respect to the tax consequences of
the Mergers under foreign, state or local laws. The discussion is based on the
Code as in effect on the date of this Joint Proxy Statement/Prospectus without
consideration of the particular facts or circumstances of any shareholder. No
information is provided as to the tax consequences of the Mergers to any holder
of CIPSCO Common Stock or Union Electric Common Stock or Union Electric
Preferred Stock who exercises dissenters' rights. EACH SHAREHOLDER IS ADVISED
TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO
HIM OR HER OF THE MERGERS.
The Mergers. Union Electric's obligation to effect the Union Electric Merger
is conditioned on the receipt of an opinion from Wachtell, Lipton, Rosen &
Katz, counsel for Union Electric, to the effect that the Union Electric Merger
will be treated as a tax-free reorganization under Section 368(a) of the Code
and/or that the Mergers, taken together, will be treated as an exchange under
Section 351 of the Code. The obligation of CIPSCO to effect the CIPSCO Merger
is conditioned on an opinion to CIPSCO from Jones, Day, Reavis & Pogue, counsel
to CIPSCO, to the effect that the CIPSCO Merger will be treated as a tax-free
reorganization within the meaning of Section 368(a) of the Code. Each such
opinion will be dated as of the Closing Date, and will be based upon certain
customary representations and assumptions set forth therein. It should be noted
that rulings will not be sought from the IRS regarding the Mergers and the IRS
may disagree with the conclusions expressed in the opinions of counsel referred
to above.
Based on the foregoing, the material federal income tax consequences of the
Mergers will be as follows:
(i) No gain or loss will be recognized by Union Electric, Merger Sub,
Holdings or CIPSCO pursuant to the Mergers;
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(ii) No gain or loss will be recognized by holders of Union Electric
Common Stock or CIPSCO Common Stock upon the conversion thereof into
Holdings Common Stock pursuant to the Mergers. A holder of CIPSCO Common
Stock that receives cash in lieu of a fractional share interest in Holdings
Common Stock will recognize gain or loss equal to the difference between
the cash received and the tax basis allocated to the fractional share
interest;
(iii) The tax basis of the Holdings Common Stock received will be the
same as the exchanging shareholder's tax basis in the Union Electric Common
Stock or CIPSCO Common Stock that was exchanged therefor pursuant to the
Mergers, reduced by the tax basis allocable to any fractional share
interest with respect to which cash is being received;
(iv) The holding period of the Holdings Common Stock received in the
Mergers will include the exchanging shareholder's holding period with
respect to the Union Electric Common Stock or CIPSCO Common Stock that was
cancelled pursuant to the Mergers (provided that such cancelled stock was
held as a capital asset at the Effective Time); and
(v) No gain or loss will be recognized by holders of Union Electric
Preferred Stock as the result of the Union Electric Merger, and their tax
basis and holding period in such stock will not be affected by the Union
Electric Merger.
ACCOUNTING TREATMENT
The Mergers are designed to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of Union Electric and CIPSCO will be carried forward to
the consolidated financial statements of Holdings at their recorded amounts;
income of Holdings will include income of Union Electric and CIPSCO for the
entire fiscal year in which the Mergers occur; and the reported income of the
separate corporations for prior periods will be combined and restated as income
of Holdings. The receipt by each of Union Electric and CIPSCO of a letter from
their respective independent accountants, stating that the transaction will
qualify as a pooling of interests, is a condition precedent to consummation of
the Mergers. Representatives of Price Waterhouse LLP are expected to be present
at the Union Electric Meeting and representatives of Arthur Andersen LLP are
expected to be present at the CIPSCO Meeting and in each case be available to
respond to questions, and will have an opportunity to make a statement if they
desire to do so. See "THE MERGER AGREEMENT--Conditions to Each Party's
Obligation to Effect the Mergers" and "UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION."
STOCK EXCHANGE LISTING OF HOLDINGS COMMON STOCK
Application will be made for the listing on the NYSE of the shares of
Holdings Common Stock to be issued pursuant to the terms of the Merger
Agreement. The listing on the NYSE of such shares, subject to notice of
issuance, is a condition precedent to the consummation of the Mergers. So long
as Union Electric and CIPSCO continue to meet the requirements of the NYSE,
Union Electric Common Stock and CIPSCO Common Stock, as the case may be, will
continue to be listed on the NYSE until the Effective Time. So long as CIPSCO
continues to meet the requirements of the CSE, the other national securities
exchange which lists CIPSCO Common Stock, CIPSCO Common Stock will continue to
be listed on the CSE until the Effective Time.
With respect to the series of Union Electric Preferred Stock currently listed
on the NYSE, for so long as Union Electric and such preferred stock continue to
meet the requirements of the NYSE, the series of Union Electric Preferred Stock
currently listed on the NYSE will continue to be listed on the NYSE after the
Effective Time.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Holdings Common Stock received by shareholders of Union
Electric and CIPSCO in the Mergers will be freely transferable, except that
shares of Holdings Common Stock received by persons who
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are deemed to be "affiliates" (as such term is defined under the Securities
Act) of Union Electric or CIPSCO prior to the Mergers may be resold by them
only in transactions permitted by the resale provisions of Rule 145 promulgated
under the Securities Act (or Rule 144 promulgated under the Securities Act, in
the case of such persons who become affiliates of Holdings) or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of Union Electric, CIPSCO or Holdings generally include individuals or entities
that control, are controlled by, or are under common control with, such party
and may include certain officers and directors of such party as well as
principal shareholders of such party. The Merger Agreement also requires each
of Union Electric and CIPSCO to use all reasonable efforts to cause each of its
affiliates to execute a written agreement to the effect that such affiliate
will not offer or sell or otherwise dispose of (i) any shares of Union
Electric, CIPSCO or Holdings during the period beginning 30 days prior to the
Effective Time and continuing until such time as results covering at least 30
days of post-Effective Time operations of Holdings have been published or (ii)
any of the shares of Holdings Common Stock issued to such affiliate in or
pursuant to the Mergers in violation of the Securities Act or the rules and
regulations promulgated by the SEC thereunder.
This Joint Proxy Statement/Prospectus does not cover resales of Holdings
Common Stock received by any person who may be deemed to be an affiliate of
Union Electric, CIPSCO or Holdings.
MISSOURI DISSENTERS' RIGHTS
Section 351.455 of the MGBCL entitles any holder of Union Electric Common
Stock or Union Electric Preferred Stock who objects to the Union Electric
Merger and who follows the procedures prescribed therein to receive, in lieu of
the consideration proposed under the Merger Agreement, cash equal to the "fair
value" (as defined below) of such shareholder's shares of Union Electric Common
Stock or Union Electric Preferred Stock, as the case may be. Set forth below is
a summary of the procedures relating to the exercise of such dissenters'
rights. This summary does not purport to be a complete statement of dissenters'
rights and is qualified in its entirety by reference to Section 351.455 of the
MGBCL, which is reproduced in full as Annex H attached to this Joint Proxy
Statement/Prospectus and to any amendments to such provisions as may be adopted
after the date of this Joint Proxy Statement/Prospectus.
ANY UNION ELECTRIC SHAREHOLDER CONTEMPLATING THE POSSIBILITY OF DISSENTING
FROM THE MERGERS SHOULD CAREFULLY REVIEW THE TEXT OF ANNEX H (PARTICULARLY THE
SPECIFIED PROCEDURAL STEPS REQUIRED TO PERFECT DISSENTERS' RIGHTS, WHICH ARE
COMPLEX) AND SHOULD ALSO CONSULT SUCH SHAREHOLDER'S LEGAL COUNSEL. SUCH RIGHTS
WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SECTION 351.455 OF THE MGBCL ARE
NOT FULLY AND PRECISELY SATISFIED.
Under Section 351.455 of the MGBCL, any shareholder (for purposes of this
section only, an "MGBCL Dissenting Shareholder") who (i) prior to or at the
Special Meeting to which this Joint Proxy Statement/Prospectus relates, files
with Union Electric a written objection to the Merger Agreement, (ii) does not
vote in favor of approving and adopting the Merger Agreement, and (iii) within
20 days after the Effective Time makes written demand (a "Written Demand") upon
Union Electric (as the surviving corporation in the Union Electric Merger) for
payment of the fair value of his or her shares as of the day prior to the date
of the Special Meeting (the "MGBCL Fair Value"), will be entitled, if the
Mergers are approved and effected, to receive a payment from Union Electric
equal to the MGBCL Fair Value. The Written Demand must state the number and
class of the shares owned by the Dissenting Shareholder. Under the MGBCL, any
shareholder failing to make demand within the 20-day period will be
conclusively presumed to have consented to the Merger Agreement and will be
bound by the terms thereof.
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In the event an MGBCL Dissenting Shareholder becomes entitled to receive
MGBCL Fair Value pursuant to Section 351.455 of the MGBCL and within thirty
days after the Effective Time the Dissenting Shareholder and Union Electric
agree upon the MGBCL Fair Value, Union Electric will make payment to the
Dissenting Shareholder within 90 days of the Effective Time. In the event the
MGBCL Dissenting Shareholder and Union Electric do not agree upon the MGBCL
Fair Value within 30 days of the Effective time, the MGBCL Dissenting
Shareholder may, within 60 days after the expiration of the 30-day period, file
a petition in any court of competent jurisdiction within the county in which
Union Electric maintains its registered office, asking for a finding and
determination of the MGBCL Fair Value, and shall be entitled to judgment
against Union Electric for the amount of such MGBCL Fair Value as of the day
prior to the date on which such vote was taken approving such merger or
consolidation, together with interest thereon to the date of such judgment. In
either case, payment will not be made by Union Electric until the MGBCL
Dissenting Shareholder surrenders the certificate or certificates representing
the shares owned by the MGBCL Dissenting Shareholder. Upon receipt of MGBCL
Fair Value, the MGBCL Dissenting Shareholder will cease to have any interest in
such shares or in Union Electric.
ILLINOIS DISSENTERS' RIGHTS
Sections 11.65 and 11.70 of the IBCA, which are set forth in Annex I hereto,
provide that any holder of CIPSCO Common Stock entitled to vote at the CIPSCO
Meeting who objects to the CIPSCO Merger may demand payment from Holdings (as
the surviving corporation in the CIPSCO Merger) for his or her shares. Set
forth below is a summary of the procedures relating to the exercise of such
dissenters' rights. This summary does not purport to be a complete statement of
dissenters' rights and is qualified in its entirety by reference to Sections
11.65 and 11.70 of the IBCA which are set out in Annex I and to any amendments
to such provisions as may be adopted after the date of this Joint Proxy
Statement/Prospectus.
ANY CIPSCO SHAREHOLDER CONTEMPLATING THE POSSIBILITY OF DISSENTING FROM THE
CIPSCO MERGER SHOULD CAREFULLY REVIEW THE TEXT OF ANNEX I AND SHOULD CONSULT
WITH SUCH SHAREHOLDER'S LEGAL COUNSEL.
In order to perfect dissenters' rights, a CIPSCO shareholder must (1) deliver
to CIPSCO at the office of the corporate secretary, 607 East Adams Street,
Springfield, Illinois 62739, prior to the taking of the vote of the
shareholders upon the approval of the Merger Agreement a written demand for
payment for his or her shares if the CIPSCO Merger is consummated; and (2) not
vote his or her shares in favor of the proposed Merger Agreement.
Within ten days after the CIPSCO Merger becomes effective or 30 days after
delivery of the written demand for payment, whichever is later, Holdings will
advise each former CIPSCO shareholder who perfects his or her right to dissent
of Holdings' estimate of the fair value of the shareholder's shares (which will
have been converted to Holdings Common Stock). At this time, Holdings must
elect to (a) make a commitment to purchase such shares at such estimated fair
value or (b) instruct such dissenting shareholder to sell his or her shares
within ten days thereafter. Holdings may instruct the shareholder to sell
shares only if there is a public market at which the shares may be readily
sold. Such a market will exist for the Holdings Common Stock because it will be
listed on the NYSE immediately following the effectiveness of the CIPSCO
Merger. If Holdings elects to direct the dissenting shareholder to sell and the
shareholder does not sell within that ten day period, the shareholder shall be
deemed to have sold his or her shares at the average closing price of the
Holdings Common Stock on the NYSE during that ten day period. "Fair value"
means the value of the shares immediately before the Effective Time excluding
any appreciation or depreciation in anticipation of the CIPSCO Merger, unless
exclusion would be inequitable.
A shareholder who has made a written demand for payment as described above
will retain all other rights of a shareholder until those rights are cancelled
or modified by the consummation of the CIPSCO Merger. At the Effective Time,
Holdings shall pay to each dissenter who transmits to Holdings his or her stock
certificates the amount Holdings estimates to be the fair value of the shares,
plus accrued interest, less
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the amount of the proceeds of sale, or amount deemed to be proceeds of sale, if
Holdings has directed the shareholder to sell his or her shares as described
above. Any payment will be accompanied by a written explanation of how the
interest was calculated. Interest will accrue from the Effective Time to the
date of payment at the average rate currently paid by Holdings on its principal
bank loans, or, if none, at a rate that is fair and equitable under all the
circumstances.
If the shareholder does not agree with Holdings' estimated fair value or the
amount of interest due, within 30 days after delivery of Holdings' statement of
fair value the shareholder must notify Holdings in writing of the shareholder's
estimated fair value of such shares and the amount of interest due and demand
payment of the difference between the shareholder's estimate of fair value and
interest due and (a) the amount of payment by Holdings or (b) the proceeds (or
the amount deemed to be proceeds) of the sale by the shareholder, which is
applicable because of the option selected by Holdings, as described above. If,
within 60 days after delivery to Holdings of the shareholder's notification of
estimated fair value, Holdings and the shareholder have not agreed in writing
on the fair value of the shares and interest due, Holdings shall either pay the
shareholder the difference in the respective estimated fair values, with
interest, or file a petition in the Circuit Court for the county in which
Holdings has its registered office or principal office, requesting the Court to
determine the fair value of the shares and interest due. If the Court
determines that the fair value of the shares, plus interest, exceeds the amount
paid by Holdings or the proceeds of the sale of shares, as the case may be, the
dissenting shareholder shall be entitled to judgment for the amount of the
excess. The Court may also allow the costs of the proceeding, including fees
and expenses of counsel and experts, to be assessed against Holdings or the
dissenter based on criteria set forth in the IBCA. See Annex I hereto.
In connection with the CIPSCO Merger, Holdings intends to reserve the right
to elect (a) to offer to pay to dissenting shareholders Holdings' original
estimate of the fair value of such shares and to pay any additional amount
agreed upon by Holdings and the shareholder or ordered by the Court to be paid
by Holdings to the shareholder as provided in the IBCA, or (b) to direct a
dissenting shareholder to sell his or her shares and to pay only that amount,
if any, in excess of the proceeds of such sale (or the amount of proceeds
deemed to have been received) as may be agreed upon by Holdings and the
shareholder or ordered by the Court to be paid by Holdings to the shareholder
as provided in the IBCA.
In perfecting a shareholder's right to dissent, neither a vote against the
proposed Merger Agreement nor a proxy directing such a vote will be deemed to
satisfy the requirement that a written demand for payment be delivered to
CIPSCO prior to the taking of the vote thereon. However, a shareholder who has
delivered such written demand before the taking of the vote thereon will not be
deemed to have waived his or her right to dissent either by failing to vote
against the Merger Agreement or by failing to furnish a proxy directing such
vote.
REGULATORY MATTERS
As indicated below, consummation of the Mergers is subject to numerous
regulatory approvals, which are presently anticipated to be received by the end
of 1996. Set forth below is a summary of the material regulatory requirements
affecting the Mergers.
STATE APPROVALS AND RELATED MATTERS
CIPS, the electric utility subsidiary of CIPSCO, is subject to the
jurisdiction of the Illinois Commission with respect to its electric and gas
utility operations in Illinois. Union Electric is currently subject to the
jurisdiction of the Missouri Commission and the Illinois Commission with
respect to its operations in those states.
In Illinois, CIPS and Union Electric will file a joint application seeking
approval of the Illinois Commission for the Mergers and for CIPS' succession to
Union Electric's Illinois operations. The initial rates
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to be charged to the former Union Electric customers to be served by CIPS and
certain other matters related to the transfer of facilities, certificates of
public convenience and necessity and similar matters must also be approved by
the Illinois Commission. In Missouri, Union Electric will file an application
seeking approval of the Missouri Commission for the Mergers and for the
transfer of its retail electric and gas properties within the State of Illinois
to CIPS.
It is anticipated that applications for approval of the Mergers and related
transactions will be filed no later than November, 1995 with the Missouri
Commission and the Illinois Commission.
As part of the regulatory approval process in Illinois, Union Electric will
seek approval of the transfer of its retail electric and gas properties and the
transfer of its related retail customers to CIPS. At that time, Union Electric
will no longer serve any retail electric or gas customers in Illinois. Assuming
the requisite regulatory approvals are obtained, CIPS' utility operations
(including those received from Union Electric) will remain subject to
regulation by the Illinois Commission. Union Electric's utility operations will
remain subject to regulation by the Missouri Commission. Union Electric's
utility operations, as such, will no longer be subject to regulation by the
Illinois Commission.
Under the Illinois PUA, approval of the Illinois Commission is required for
any transaction which, regardless of the means by which it is accomplished,
results in a change in the ownership of a majority of the voting capital stock
of an Illinois public utility or the ownership or control of any entity which
owns or controls a majority of the voting capital stock of a public utility.
After the Mergers, Holdings will control a majority of the voting stock of
CIPS, an Illinois public utility. Accordingly, any change in ownership or
control, within the meaning of the Illinois PUA, of Holdings would require
Illinois Commission approval. The Illinois PUA also requires approval of the
Illinois Commission of certain transactions between an Illinois public utility
and its "affiliated interests." After the Mergers, Holdings and its
subsidiaries (including Union Electric and CIPS) will be "affiliated interests"
and the designated transactions between CIPS, Holdings and Holdings'
subsidiaries will require approval.
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
An application for approval of the transactions related to the Mergers will
be filed with the SEC pursuant to the 1935 Act early in 1996. Under the
applicable standards of the 1935 Act, the SEC is directed to approve a proposed
acquisition unless it finds that (1) the acquisition would tend towards
detrimental interlocking relations or a detrimental concentration of control,
(2) the consideration to be paid in connection with the acquisition is not
reasonable, (3) the acquisition would unduly complicate the capital structure
of the applicant's holding company system or would be detrimental to the proper
functioning of the applicant's holding company system, or (4) the acquisition
would violate applicable state law. In order to approve a proposed acquisition,
the SEC must also find that the acquisition would tend towards the development
of an integrated public utility system and would otherwise conform to the 1935
Act's integration and corporate simplification standards.
CIPSCO is a holding company under the 1935 Act by virtue of owning the common
stock of CIPS. CIPS' and Union Electric are holding companies under the 1935
Act by virtue of owning 20% and 40%, respectively, of the common stock of EEI.
CIPSCO is currently exempt from the registration and other requirements of
the 1935 Act, other than from Section 9(a)(2) thereof, pursuant to an order of
the SEC under Section 3(a)(1) of the 1935 Act. The basis of the exemption under
Section 3(a)(1) of the 1935 Act is that CIPSCO and its public utility
subsidiaries are predominantly intrastate in character and carry on their
businesses substantially in a single state in which they are organized
(Illinois). CIPS is currently exempt from the registration and other
requirements of the 1935 Act, other than from Section 9(a)(2) thereof, pursuant
to Section 3(a)(2). The basis of the exemption under Section 3(a)(2) is that
CIPS is predominantly a public utility which carries on its utility business
only in the state of its incorporation (Illinois). Union Electric is currently
exempt from the registration and other
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requirements of the 1935 Act, other than from Section 9(a)(2) thereof, and
other than Section 11(b)(2) thereof with respect to concluding matters relating
to the 1974 acquisition of the common stock of a former subsidiary, pursuant to
an order of the SEC under Section 3(a)(2) of the 1935 Act. When the SEC
approved such acquisition, it reserved jurisdiction to pass upon the right of
Union Electric to retain its gas properties. The basis of the exemption under
Section 3(a)(2) of the 1935 Act is that Union Electric is predominantly a
public utility which carries on its utility business only in the state of its
incorporation (Missouri) and in states contiguous thereto. Neither the Section
3(a)(1) intrastate exemption nor the Section 3(a)(2) (predominantly an
operating public utility) exemption will be available to Holdings after
consummation of the Mergers. The Section 3(a)(1) exemption will not be
available because Holdings will have a material public utility subsidiary
(CIPS) operating in a state other than the state in which Holdings is organized
(Missouri). The Section 3(a)(2) exemption will not be available because
Holdings will not be an operating public utility company.
Accordingly, upon consummation of the Mergers, Holdings must register as a
holding company under the 1935 Act. The 1935 Act imposes numerous restrictions
on the operations of a registered holding company and its subsidiaries and
affiliates. Subject to limited exceptions, SEC approval is required under the
1935 Act for a registered holding company or any of its subsidiaries to: (i)
issue securities, (ii) acquire utility assets from a third person, (iii)
acquire the stock of another public utility, (iv) amend its articles of
incorporation or (v) acquire stock, extend credit, pay dividends, lend money or
invest in any manner in any other businesses. SEC approval under the 1935 Act
also will be required for certain transactions relating to the Mergers or
proposed to occur shortly after the Effective Time. For example, SEC approval
would be required for Holdings' issuance of securities pursuant to any employee
benefit plan, the transfer by Union Electric of its Illinois electric and gas
distribution properties to CIPS, any transfer by CIPS or Union Electric of
their interest in EEI or in non-utility ventures to Holdings and any
establishment of a service company to provide various administrative and
support services to Holdings and certain of its subsidiaries if Holdings should
decide to do so.
As part of the SEC's approval process, the 1935 Act also limits the ability
of registered holding companies to engage in non-utility ventures and regulates
holding company system service companies and the rendering of services by
holding company affiliates to the system's utilities.
The SEC may require, as a condition to its approval of the Mergers, that
Union Electric and CIPS divest their gas utility properties and possibly
certain non-utility ventures of Union Electric and CIPSCO within a reasonable
time after the Mergers. In a few cases, the SEC has allowed the retention of
such properties or deferred the question of divestiture for a substantial
period of time. In those cases in which divestiture has taken place, the SEC
has usually allowed enough time to complete the divestiture so as to allow the
applicant to avoid a "fire sale" of the divested assets. Union Electric and
CIPS believe significant policy reasons and prior SEC decisions exist which
support their retaining the existing gas utility properties and non-utility
ventures, or, alternatively, which support deferring the question of
divestiture for a substantial period of time. Accordingly, Union Electric and
CIPS will request in their 1935 Act application that Holdings and its
subsidiaries be allowed to retain, or, in the alternative, that the question of
divestiture be deferred with respect to, the existing gas utility properties
and non-utility ventures.
On June 20, 1995, the SEC issued a series of new proposed regulations that
are designed, among other things, to ease the restrictions on and regulation of
the activities of registered holding companies. At the same time, the SEC's
Division of Investment Management (the "Division") issued a report of
legislative recommendations, including the Division's preferred recommendation
that Congress repeal the 1935 Act, subject to the transfer of certain authority
over the books and records of registered holding companies to state utility
commissions and to the FERC. The report also recommended liberalizing the
interpretation of the SEC's regulations to permit registered holding companies
to own both electric and gas utility systems where the affected states agree.
There is no assurance that the regulations proposed by the SEC will be
implemented or that the suggestions made in the Division's report will be
adopted. To the extent that some or all of the regulations and recommendations
are implemented, however, restrictions on and regulation of Holdings'
activities may be scaled back, and the probability of Holdings' being able to
retain ownership of
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the gas utility properties and non-utility ventures currently operated by Union
Electric, CIPSCO and CIPS would be enhanced.
After the consummation of the Mergers, and assuming that CIPS and Union
Electric continue to own the voting stock of EEI, CIPS and Union Electric will
continue to be holding companies under the 1935 Act and will be subject to
regulation by the SEC as such and as part of the Holdings registered holding
company system.
FEDERAL POWER ACT
Section 203 of the Federal Power Act provides that no public utility shall
sell or otherwise dispose of its jurisdictional facilities or, directly or
indirectly, merge or consolidate such facilities with those of any other person
or acquire any security of any other public utility without first having
obtained authorization from the FERC. The approval of the FERC is required in
order to consummate the Mergers. Under Section 203 of the Federal Power Act,
the FERC will approve a merger if it finds the merger "consistent with the
public interest." In reviewing a merger, the FERC generally evaluates: (i)
whether the merger will adversely affect competition, (ii) whether the merger
will adversely affect operating costs and rates, (iii) whether the merger will
impair the effectiveness of regulation, (iv) whether the purchase price is
reasonable, (v) whether the merger is the result of coercion, and (vi) whether
the accounting treatment is reasonable. Union Electric and CIPS will file a
joint application with the FERC in 1995 requesting that the FERC approve the
Mergers under Section 203 of the Federal Power Act (the "Union Electric/CIPS
Application"). In connection with the Union Electric/CIPS Application, Union
Electric and CIPS also will file a comparable transmission service tariff. In
addition, the companies will file, pursuant to Section 205 of the Federal Power
Act, a power purchase agreement between Union Electric and CIPS and agreements
providing for the integrated operation (including joint dispatch) of Union
Electric and CIPS, each of which is to become effective upon consummation of
the Mergers.
ANTITRUST CONSIDERATIONS
The HSR Act and the rules and regulations promulgated thereunder provide that
certain transactions (including the Mergers) may not be consummated until
certain information has been submitted to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and specified HSR Act waiting period requirements have
been satisfied. The expiration or earlier termination of the HSR Act waiting
period would not preclude the Antitrust Division or the FTC from challenging
the Mergers on antitrust grounds. Neither CIPSCO nor Union Electric believes
that the Mergers will violate federal antitrust laws. If the Mergers are not
consummated within 12 months after the expiration or earlier termination of the
initial HSR Act waiting period, Union Electric and CIPSCO would be required to
submit new information to the Antitrust Division and the FTC, and a new HSR Act
waiting period would have to expire or be earlier terminated before the Mergers
could be consummated. Union Electric and CIPSCO intend to file their premerger
notifications pursuant to the HSR Act at such time as they believe will result
in the expiration or termination of the waiting period thereunder within 12
months before the anticipated consummation of the Mergers. Union Electric and
CIPSCO will also file premerger notifications with the Attorneys General of the
States of Missouri and Illinois, respectively, pursuant to the voluntary
premerger disclosure compact among the states. Neither Union Electric nor
CIPSCO believes that the Mergers will violate Missouri or Illinois antitrust
laws.
ATOMIC ENERGY ACT
Union Electric holds an NRC operating license in connection with its
ownership and operation of the Callaway nuclear generating facility. The
operating license authorizes Union Electric to own and operate the facility.
The Atomic Energy Act provides that such a license or any rights thereunder may
not be transferred or in any manner disposed of, directly or indirectly, to any
person through transfer of control unless the NRC finds that such transfer is
in accordance with the Atomic Energy Act and consents to the transfer.
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Pursuant to the Atomic Energy Act, Union Electric will seek approval from the
NRC to reflect the fact that after the Mergers, Union Electric, although
continuing to own and operate the Callaway facility, will become an operating
company subsidiary of Holdings.
GENERAL
Under the Merger Agreement, Union Electric and CIPSCO have agreed to use all
reasonable efforts to obtain all necessary material permits, licenses,
franchises and other governmental authorizations necessary or advisable to
consummate or effect the transactions contemplated by the Merger Agreement.
Various parties may seek intervention in these proceedings to oppose the
Mergers or to have conditions imposed upon the receipt of necessary approvals.
While Union Electric and CIPSCO believe that they will receive the requisite
regulatory approvals for the Mergers, there can be no assurance as to the
timing of such approvals or the ability of such parties to obtain such
approvals on satisfactory terms or otherwise. It is a condition to the
consummation of the Mergers that final orders approving the Mergers be obtained
from the various federal and state commissions described above on terms and
conditions which would not have, or would not be reasonably likely to have, a
material adverse effect on the business, assets, financial condition or results
of operations of Holdings and its prospective subsidiaries taken as a whole, or
on Holdings' 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 in the Merger Agreement. There can
be no assurance that any such approvals will not contain terms or conditions
that cause such approvals to fail to satisfy such condition to the consummation
of the Mergers. See "THE MERGERS--Certain Federal Income Tax Consequences."
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT, WHICH IS ATTACHED AS ANNEX A TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. SUCH SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT.
THE MERGERS
The Merger Agreement provides that, following the approval of the Merger
Agreement by the requisite vote of the shareholders of Union Electric and
CIPSCO, and the satisfaction or waiver of the other conditions to the Mergers,
including obtaining the requisite regulatory approvals, Merger Sub will be
merged with and into Union Electric in the Union Electric Merger, and CIPSCO
will be merged with and into Holdings in the CIPSCO Merger.
If the Merger Agreement is approved by the shareholders of Union Electric and
CIPSCO, and if the other conditions to the Mergers are satisfied or waived, the
closing of the Mergers (the "Closing") will take place on the second business
day immediately following the date on which the last of the conditions referred
to below under "--Conditions to Each Party's Obligation to Effect the Mergers"
is fulfilled or waived, or at such other time and date as Union Electric and
CIPSCO shall mutually agree (the "Closing Date"). On or after the Closing Date,
(i) the Union Electric Merger will become effective upon the issuance of a
certificate of merger by the Secretary of State of the State of Missouri which
will be the Union Electric Effective Time, and (ii) the CIPSCO Merger will
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, which will be the CIPSCO Effective Time. The "Effective Time" shall mean
the time and date that the CIPSCO Merger becomes effective.
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EFFECTS OF THE MERGERS
Effect of the Mergers on Capital Stock. The Merger Agreement provides that at
the Union Electric Effective Time:
(a) each share of Merger Sub Common Stock shall be converted into one
share of common stock of the surviving corporation in the Union Electric
Merger;
(b) 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 will be cancelled;
(c) each issued and outstanding share of Union Electric Common Stock,
other than Union Electric Dissenting Shares and shares cancelled pursuant
to paragraph (b) above, will be converted into the right to receive one
share of Holdings Common Stock; and
(d) each issued and outstanding share of Union Electric Preferred Stock,
other than Union Electric Dissenting Shares, shall remain outstanding and
unchanged and shall continue to represent one fully paid and non-assessable
share of preferred stock of Union Electric as the surviving corporation in
the Union Electric Merger.
The Merger Agreement further provides that at the CIPSCO Effective Time:
(w) each share of CIPSCO Common Stock that is owned by CIPSCO as treasury
stock, by subsidiaries of CIPSCO or by Union Electric, Holdings or any of
their respective subsidiaries shall be cancelled;
(x) each issued and outstanding share of Holdings Common Stock that is
owned by CIPSCO, Union Electric or any of their wholly owned subsidiaries
immediately prior to the CIPSCO Effective Time shall be cancelled;
(y) each share of Holdings Common Stock issued in the Union Electric
Merger will remain outstanding and shall continue to represent one share of
Holdings Common Stock; and
(z) each issued and outstanding share of CIPSCO Common Stock (other than
shares cancelled pursuant to paragraph (w) above) will be converted into
the right to receive 1.03 shares of Holdings Common Stock.
Fractional Shares. If any holder of CIPSCO Common Stock would be entitled to
receive a number of shares of Holdings Common Stock that includes a fraction,
then, in lieu of a fractional share, such holder will be entitled to receive a
cash payment in an amount determined by multiplying the fractional share
interest by the average of the last reported sales price, regular way, per
share of CIPSCO Common Stock on the NYSE Composite Tape for the ten business
days prior to and including the last business day on which CIPSCO Common Stock
was traded on the NYSE, without any interest thereon.
Dissenting Shares. The Merger Agreement provides that Union Electric
Dissenting Shares will not be converted into the right to receive Holdings
Common Stock or remain outstanding as preferred stock of Union Electric, as the
case may be, in the Union Electric Merger, but will 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. See "THE MERGERS--Missouri
Dissenters' Rights" and "--Certain Federal Income Tax Consequences."
Pursuant to the Merger Agreement, CIPSCO Dissenting Shares will be converted
into the right to receive shares of Holdings Common Stock in accordance with
the Merger Agreement and will thereafter be subject to sale or purchase as
provided in applicable provisions of the IBCA. See "THE MERGERS--Illinois
Dissenters' Rights."
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Exchange. The Merger Agreement provides that as soon as practicable after the
Effective Time, the Exchange Agent will mail to each holder of record of Common
Stock Certificates that were converted in the Mergers into the right to receive
shares of Holdings Common Stock (i) a letter of transmittal and (ii)
instructions for effecting the surrender of the Common Stock Certificates in
exchange for certificates representing shares of Holdings Common Stock. Upon
surrender of a Common Stock Certificate to the Exchange Agent for cancellation,
together with a duly executed letter of transmittal and such other documents as
the Exchange Agent may require, the holder of such Common Stock Certificate
will be entitled to receive in exchange therefor a certificate representing
that number of whole shares which such holder has the right to receive pursuant
to the Exchange Ratios.
The letter of transmittal may, at the option of Holdings, provide for the
ability of a holder of one or more Common Stock Certificates to elect that the
shares of Holdings Common Stock to be received in exchange for such surrendered
Common Stock Certificates be issued in uncertificated form or to elect that
such shares be credited to an account established for such holder under a
dividend reinvestment and stock purchase plan to be adopted by Holdings.
Under the Merger Agreement, no dividends or other distributions declared or
made after the Effective Time with respect to shares of Holdings Common Stock
with a record date after the Effective Time will be paid to the holder of any
unsurrendered Common Stock Certificate and no cash payment in lieu of
fractional shares will be paid to any such holder until such Common Stock
Certificate has been surrendered. After such surrender, subject to applicable
law, there will be paid to such holder, without interest, the unpaid dividends
and distributions, and any cash payment in lieu of a fractional share, to which
such holder is entitled.
DIRECT SUBSIDIARIES AND UNRESTRICTED SUBSIDIARIES; INVESTMENTS IN CERTAIN
SUBSIDIARIES
The Merger Agreement designates the direct wholly-owned subsidiaries, general
partnership interests and certain other specified interests of Union Electric
and CIPSCO, respectively, as "Union Electric Subsidiaries" and "CIPSCO
Subsidiaries" (which are collectively referred to as "Direct Subsidiaries").
The remaining subsidiaries, joint venture interests and investments of Union
Electric are referred to as "Unrestricted Subsidiaries." As of the date of the
Merger Agreement, CIPSCO had no Unrestricted Subsidiaries. The representations
and warranties of Union Electric and CIPSCO in the Merger Agreement apply only
to, and the covenants of Union Electric and CIPSCO in the Merger Agreement
apply only to, the parties themselves and their Direct Subsidiaries. Union
Electric has agreed to restrict to a certain dollar figure the amount of
additional investments in, or loans or capital contributions, or guarantees or
obligations that it can allocate to its Unrestricted Subsidiaries between the
date of the Merger Agreement and the Effective Time. CIPSCO has agreed to limit
the aggregate dollar amount of its investments in CIC during the period pending
the Closing, and to cause CIC to conduct its business in accordance with its
practice during the 24-month period preceding the date of the Merger Agreement.
See "--Certain Covenants."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties by
each of Union Electric and CIPSCO relating to, among other things: (a) their
respective organizations, the organization of their respective Direct
Subsidiaries and similar corporate matters; (b) their respective capital
structures; (c) authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (d) required
regulatory approvals; (e) their compliance with applicable laws and agreements;
(f) reports and financial statements filed with the SEC and the accuracy of
information contained therein; (g) the absence of any material adverse effect
on their business, assets, financial condition, results of operations, or
prospects; (h) the absence of adverse material suits, claims, proceedings, or
other litigation; (i) the accuracy of information supplied by each of Union
Electric and CIPSCO for use in the Registration Statement of which this Joint
Proxy Statement/Prospectus forms a part; (j) tax matters; (k) retirement and
other employee benefit plans and matters relating to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
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(l) compliance with all applicable environmental laws, possession of all
material environmental, health, and safety permits and other environmental
issues; (m) the regulation of Union Electric and CIPSCO and their subsidiaries
as public utilities in specified states; (n) the shareholder vote required in
connection with the Merger Agreement and the transactions contemplated thereby
(as set forth in this Joint Proxy Statement/Prospectus) being the only vote
required; (o) that neither Union Electric and CIPSCO nor any of their
respective affiliates have taken or agreed to take any action that would
prevent Holdings from accounting for the Mergers as a pooling of interests; (p)
the non-applicability of certain provisions of Missouri and Illinois law
relating to changes in control; (q) the delivery of fairness opinions by
Goldman Sachs, in the case of Union Electric, and Morgan Stanley, in the case
of CIPSCO; (r) insurance matters; and (s) the absence of any non-disclosed
ownership of each other's stock. In addition, Union Electric has made a
representation relating to the operation of its nuclear generating facility.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, each of Union Electric and CIPSCO has
agreed that, during the period from the date of the Merger Agreement until the
Effective Time, except as permitted by the Merger Agreement (including the
disclosure schedules thereto) or the Stock Option Agreements, or as otherwise
consented to in writing by the other parties, it will (and each of its Direct
Subsidiaries will), subject to certain exceptions specified therein, among
other things: (a) carry on its business in the ordinary course consistent with
prior practice; (b) not declare or pay any dividends on or make other
distributions in respect of any of its capital stock, other than to such party
or its wholly owned subsidiaries, regular quarterly dividends to be paid on
Union Electric Common Stock and CIPSCO Common Stock not to exceed 104% of the
dividends for the prior fiscal year, and regular quarterly dividends on CIPS
Preferred Stock; (c) not split, combine or reclassify any of its 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 its capital stock;
(d) not redeem, repurchase or otherwise acquire any shares of its capital
stock, other than in connection with a refunding of preferred stock at a lower
cost of funds or for the purpose of funding certain Union Electric or CIPSCO
stock plans; (e) not 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
its 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
Stock Option Agreements, other than intercompany issuances of capital stock,
and other than issuances (1) 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 (2)
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 LTIP; (f) not amend its articles of
incorporation or by-laws, or those of its subsidiaries; (g) not engage in
material acquisitions in excess of $50,000,000, in the case of Union Electric,
or $15,000,000, in the case of CIPSCO, in the aggregate over the amounts
budgeted in internal budgets prepared in the ordinary course by their
respective managements; (h) not enter into any written commitments for the
purchase of sulfur dioxide emission allowances as provided for by the Clean Air
Act Amendments of 1990 in excess of an aggregate of $20,000,000, in the case of
Union Electric, or $15,000,000, in the case of CIPSCO; (i) not make any capital
expenditures in excess of $200,000,000, in the case of Union Electric, or
$75,000,000 in the case of CIPSCO, in the aggregate over the amounts budgeted
in internal budgets prepared in the ordinary course by their respective
managements; (j) not sell, lease, encumber or otherwise dispose of material
assets in an aggregate amount equalling or exceeding $50,000,000, in the case
of Union Electric, or $15,000,000, in the case of CIPSCO, other than planned or
ordinary course of business dispositions and encumbrances; (k) not incur
indebtedness (or guarantees thereof), other than (i) short-term indebtedness in
the ordinary course of business consistent with prior practice, (ii)
arrangements between such party and its Direct Subsidiaries or among its Direct
Subsidiaries, (iii) indebtedness not to exceed $200,000,000, in the case of
Union Electric, or $75,000,000, in the case of CIPSCO, in the aggregate, (iv)
in connection with the refunding of existing indebtedness at a lower cost of
funds, or (v) in connection with any permitted refunding of preferred stock;
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(l) not enter into, adopt or amend or increase the amount or accelerate the
payment or vesting of any benefit or amount payable under, any employee benefit
plan or other agreement, commitment, arrangement, plan or policy, except for
normal increases or actions in the ordinary course of business consistent with
current industry practice that, in the aggregate, do not result in a material
increase in benefits; (m) not engage in any activity which would cause a change
in its status under the 1935 Act; (n) not commence construction of or obligate
itself to purchase any additional generating, transmission or delivery capacity
other than in the ordinary course of business consistent with past practice or
pursuant to tariffs on file with the FERC or as budgeted; (o) not make any
material changes in their accounting methods other than as required by law or
in accordance with generally accepted accounting principles; (p) not take any
action to prevent Holdings from accounting for the business combination to be
effected by the Mergers as a pooling of interests; (q) not take any action that
would adversely affect the status of the Mergers as a tax-free transaction; (r)
not enter into agreements with affiliates (other than wholly-owned
subsidiaries) other than on an arm's-length basis; (s) cooperate with the other
parties, provide reasonable access to its books and records and notify the
other parties of any significant changes; (t) discuss with the other parties
any proposed changes in its rates or charges (other than automatic cost pass-
through rate adjustment clauses) or standards of service or accounting; consult
with the other prior to making any filing (or any amendment thereto), or
effecting any agreement, commitment, arrangement or consent with governmental
regulators; and not 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
Mergers; (u) use all commercially reasonable efforts to obtain certain third-
party consents to the Mergers; (v) not take any action that is likely to
jeopardize the qualification of Union Electric's or CIPSCO's outstanding
revenue bonds as tax-exempt industrial revenue bonds; (w) create a joint
transition management task force to examine alternatives to effect the
integration of the parties after the Effective Time; (x) refrain from taking
specified actions relating to tax matters; (y) not discharge or satisfy any
claims, liabilities or obligations, other than discharges in the ordinary
course of business or in accordance with their terms, of liabilities reflected
in the most recent consolidated financial statements; (z) not, except in the
ordinary course of business, change the status of any of its material contracts
or agreements or waive or release or assign any material rights or claims; and
(aa) maintain adequate insurance and use reasonable efforts to maintain all
existing governmental permits.
In addition, Union Electric agreed that it will not make, and will not permit
any of its Direct Subsidiaries to make, any additional investments in, or loans
to, any Union Electric Unrestricted Subsidiary in excess of $50,000,000 (in
addition to the amounts budgeted by Union Electric management in the ordinary
course of preparing its internal budgets for capital expenditures and
acquisitions relating to such Union Electric Unrestricted Subsidiary). CIPSCO
also agreed to take all action necessary to ensure that (i) CIC makes
investments in a manner consistent with its practice during the 24-month period
preceding the date of the Merger Agreement and (ii) other than investments in
marketable securities which are managed by third-party investment managers, the
aggregate amount invested per annum by CIC (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)) shall not exceed $15 million. CIPSCO also
agreed that neither it nor any of its Direct Subsidiaries (other than CIC) will
enter into any guarantee, keep-well or similar arrangements with respect to
CIC, including guarantees of payment and performance.
INDEMNIFICATION
The Merger Agreement provides that, to the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, Holdings will, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who was at, or
who had been at any time prior to, the date of the Merger Agreement, or who
becomes prior to the Effective Time, an officer, director or employee of any of
the parties thereto or any subsidiary (the "Indemnified Parties") against all
losses, expenses (including reasonable attorney's fees and expenses), claims,
damages or liabilities or, subject to the provision of the next 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
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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, and all such indemnified liabilities to the extent they are based on or
arise out of or pertain to the transactions contemplated by the Merger
Agreement. In the event of any such loss, expense, claim, damage or liability
(whether or not arising before the Effective Time), (i) Holdings shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to Holdings, and otherwise
advance to such Indemnified Party upon request reimbursement of documented
expenses reasonably incurred, in either case to the extent not prohibited by
law and upon receipt of any affirmation and undertaking required by law, (ii)
Holdings 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 Holdings Articles or the by-laws of Holdings shall be made by independent
counsel mutually acceptable to Holdings and the Indemnified Party; provided,
however, that Holdings shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld). The
Merger Agreement further provides that the Indemnified Parties as a group may
retain only one law firm with respect to each 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 the positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties.
In addition, the Merger Agreement requires that for a period of six years
after the Effective Time, Holdings 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 were covered by such
policies on the date of the Merger Agreement, on terms no less favorable than
the terms of such insurance coverage, provided that Holdings shall not be
required to expend in any year an amount in excess of 200% of the annual
aggregate premiums currently paid by CIPSCO and Union Electric for such
insurance and, if the annual premiums of such insurance coverage exceed such
amount, Holdings shall be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the Holdings Board, for a cost not
exceeding such amount. Also, the Merger Agreement provides that to the fullest
extent not prohibited by law, from and after the Effective Time, all rights to
indemnification existing in favor of the employees, agents, directors and
officers of Union Electric, CIPSCO 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 of
the Merger Agreement, or otherwise in effect on the date of the Merger
Agreement, shall survive the Mergers and shall continue in full force and
effect for a period of not less than six years from the Effective Time. See
"THE MERGERS--Potential Conflicts of Interests of Certain Persons in the
Mergers."
EMPLOYMENT AND WORKFORCE MATTERS
Employee Agreements. The Merger Agreement provides that Holdings will honor,
without modification, all contracts, agreements, collective bargaining
agreements and commitments of the parties prior to the date thereof which apply
to any current or former employee or current or former director of Union
Electric or CIPSCO; provided, however, that Holdings will not be prevented 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.
Workforce Matters. Union Electric and CIPSCO agreed in the Merger Agreement
that, 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 Holdings will 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 Holdings or
any of its subsidiaries during such period will be entitled to participate on a
fair and equitable basis in the job opportunity and employment placement
programs offered by Holdings or any of its subsidiaries.
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STOCK AND BENEFIT PLANS
Benefit Plans. Except for the benefit plans referred to in the immediately
following paragraph, each of the benefit plans of Union Electric and CIPSCO and
any of their Direct Subsidiaries in effect as of the date of the Merger
Agreement will be continued for the employees or former employees of Union
Electric and CIPSCO and any of their Direct Subsidiaries who are covered by
such plans immediately prior to the Closing Date, until Holdings otherwise
determines after the Effective Time (subject to any reserved right contained in
any such benefit plan to amend, modify, suspend, revoke or terminate such
plan). To the extent such benefit plans are not continued, Holdings or its
subsidiaries have agreed to provide, for at least one year following the
Effective Time, benefits which are no less favorable in the aggregate than the
benefits provided under benefit plans of Union Electric and CIPSCO and any of
their Direct Subsidiaries in effect as of the date of the Merger Agreement with
respect to current or former employees of Union Electric and its Direct
Subsidiaries or CIPSCO and its Direct Subsidiaries, as the case may be. Any
employee first hired after the Closing Date will be eligible to participate in
any benefit plan maintained, or contributed to, by the subsidiary, division or
operation employing such person, so long as such person meets the eligibility
requirements of such plan.
Adoption of Company Replacement Plans. The Merger Agreement provides that
Holdings will adopt replacement plans (collectively, the "Holdings 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"), subject in each case to shareholder
approval. The Merger Agreement further provides that the Union Electric EIP and
the CIPSCO MIP will 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 Holdings Board (the "Holdings Human Resources Committee").
With respect to those participants in the new plan who are, or who the Holdings
Human Resources 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. In addition, the Union Electric LTIP will be
replaced by a stock compensation plan (the "Holdings Stock Plan") providing for
the grant of stock options, stock appreciation rights, restricted stock,
performance units and such other awards based upon the Holdings Common Stock as
the Holdings Board may determine, subject to shareholder approval of the
Holdings Stock Plan. Holdings will reserve four million shares for issuance
pursuant to the Holdings Stock Plan. Holdings will seek shareholder approval of
the Holdings Replacement Plans as soon as reasonably practicable following the
Effective Time.
The Merger Agreement provides that CIPSCO will cause the Special Executive
Retirement Plan, the Excess Benefit Plan and any trusts associated with such
plans to be amended so that the transactions contemplated by the Merger
Agreement will not constitute a "change in control," subject to any required
consents of participants therein, which CIPSCO has agreed to use its best
efforts to obtain. See "THE MERGERS--Potential Conflicts of Interest of Certain
Persons in the Mergers--Employee Plans and Severance Arrangements."
Stock Options. The Merger Agreement provides that Union Electric will amend
the Union Electric LTIP and use its best efforts to amend each underlying stock
award agreement to provide that (i) none of the transactions contemplated by
the Merger Agreement will constitute a change in control for purposes of the
Union Electric LTIP, (ii) each outstanding option to purchase shares of Union
Electric Common Stock (each, a "Union Electric Stock Option") will constitute
an option to acquire shares of Holdings 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 Holdings Common Stock as the holder of such
Union Electric Stock Option would have been entitled to receive pursuant to the
Union Electric Merger in accordance with the Union Electric Ratio had such
holder exercised such option in full immediately prior to the Effective Time,
and (iii) each outstanding performance dividend unit under the Union Electric
Stock Plan ("Union Electric Dividend Units") will constitute a performance
dividend based upon the same number of shares of Holdings Common
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Stock as the holder of such Union Electric Dividend Unit would have been
entitled to receive pursuant to the Union Electric Ratio had such holder been
the 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 Human Resources Committee of the Union Electric Board
shall determine to be fair and equitable in light of the Mergers, and otherwise
on the same terms and conditions as governed such Union Electric Dividend Unit
immediately before the Effective Time.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that Union Electric and CIPSCO will not, and
will cause their Direct Subsidiaries not to, and will not permit any of its
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors and other representatives (collectively, "Representatives")
or subsidiaries that are not Direct Subsidiaries to, and each such party will
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 herein), 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. As used in the
Merger Agreement, "Business Combination Proposal" means any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving any party to the Merger 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 shareholders 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 the Merger Agreement or
any of its material subsidiaries, other than pursuant to the transactions
contemplated by the Merger Agreement.
ADDITIONAL AGREEMENTS
Boards of Directors. The Merger Agreement provides that the Union Electric
Board and the CIPSCO Board will take such action as may be necessary to cause
the number of directors comprising the full Holdings Board at the Effective
Time to be 15 persons, including Mr. Greenwalt and four non-management
directors of CIPSCO to be designated by CIPSCO prior to the Effective Time, and
Mr. 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 Holdings Board
shall be chosen by the Union Electric Board. CIPSCO and Union Electric have
agreed to take such action as may be necessary to cause the committees of the
Holdings Board 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 Auditing
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. See "HOLDINGS FOLLOWING THE MERGERS."
The Merger Agreement further provides that at the Effective Time, the Board
of Directors of CIPS will be expanded to include three additional
directorships, and will consist of (i) the directors serving immediately prior
to the Effective Time and (ii) Mr. Mueller and two additional individuals
designated by Union Electric, which two individuals, together with Mr. Mueller,
shall fill the vacancies created by the expansion of the
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Board of Directors of CIPS. At the Effective Time, the Union Electric Board, as
the surviving corporation in the Union Electric Merger, will consist of Mr.
Mueller, Mr. Greenwalt and such other nominees as shall be determined by
Holdings. See "HOLDINGS FOLLOWING THE MERGERS."
Holdings Officers. In the Merger Agreement, the parties have agreed that at
the Effective Time, Mr. Mueller will be the Chairman of the Board of Directors,
President and Chief Executive Officer of Holdings and Mr. Greenwalt will be
Vice Chairman of the Holdings Board. The other officers of Holdings at the
Effective Time will be such officers as may be designated by the Holdings
Board. See "HOLDINGS FOLLOWING THE MERGERS."
Post-Merger Operations. The parties have agreed in the Merger Agreement that
following the Effective Time: (i) the principal corporate office of Holdings
will be located in St. Louis, Missouri; (ii) from the Effective Time CIPS will
maintain its principal corporate office in Springfield, Illinois; (iii) CIPS
will continue its separate corporate existence, operating under the name
"Central Illinois Public Service Company"; and (iv) Holdings will 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. See
"HOLDINGS FOLLOWING THE MERGERS."
Alternative Structures. The Merger Agreement provides that if the parties are
unable to obtain any of the statutory approvals and other third-party consents
which are necessary to effect the strategic combination of Union Electric and
CIPSCO in the form contemplated by the Merger Agreement, and the adoption of an
alternative structure (that otherwise substantially preserves for Union
Electric and CIPSCO the economic 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 economic benefits.
Transfer of Illinois Assets. In the Merger Agreement, Union Electric agreed
to use reasonable efforts and take necessary actions to transfer substantially
all of its electric and gas distribution assets located in Illinois to CIPS
immediately subsequent to the Effective Time. To the extent that any of such
assets cannot be conveyed to CIPS, the parties have agreed to use reasonable
efforts to effect alternative arrangements (such as licensing arrangements)
with respect to the non-conveyed assets.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS
The respective obligations of Union Electric and CIPSCO to effect the Mergers
are subject to the following conditions: (a) the approval of the Merger
Agreement by the requisite vote of shareholders of CIPSCO and by requisite vote
of the shareholders of Union Electric shall have been obtained; (b) no
temporary restraining order, preliminary or permanent injunction or other order
shall be in effect that prevents consummation of the Mergers; (c) the
Registration Statement shall have become effective and shall not be subject to
any stop order; (d) the shares of Holdings Common Stock issuable in connection
with the Mergers shall have been authorized for listing on the NYSE, upon
official notice of issuance; (e) the receipt of all material governmental
authorizations, consents, orders or approvals which do not impose terms or
conditions which could reasonably be expected to have a material adverse
effect; (f) the receipt by each of Union Electric and CIPSCO of letters from
their independent accountants stating that the Mergers will qualify as a
pooling of interests transaction under generally accepted accounting principles
and applicable SEC regulations; (g) the number of Union Electric Dissenting
Shares not constituting in excess of five percent of the issued and outstanding
shares of Union Electric Common Stock and Union Electric Preferred Stock, taken
together; (h) with respect to each of CIPSCO and Union Electric, the
performance in all material respects of all obligations of the other party
required to be performed under the Merger Agreement and the Stock Option
Agreements; (i) with respect to each of CIPSCO and Union Electric, the accuracy
of the representations and warranties of the other party set forth in the
Merger Agreement as of the date of the
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Merger Agreement and as of the Closing Date (except as would not reasonably be
likely to result in a material adverse effect); (j) Union Electric and CIPSCO
each having received officers' certificates from each other stating that
certain conditions set forth in the Merger Agreement have been satisfied; (k)
with respect to each of CIPSCO and Union Electric, there having been no
material adverse effect on the business, assets, financial condition, results
of operations or prospects of the other party and its subsidiaries taken as a
whole; (l) with respect to each of CIPSCO and Union Electric, the receipt by
the other party of certain material third-party consents; (m) with respect to
each of CIPSCO and Union Electric, the receipt by Holdings of letter agreements
relating to trading in securities of CIPSCO, Union Electric and Holdings
(substantially in the form attached as an exhibit to the Merger Agreement),
duly executed by each affiliate of the other party; and (n) (A) in the case of
Union Electric, the delivery of an opinion to Union Electric from counsel for
Union Electric to the effect that (1) the Union Electric Merger will be treated
as a tax-free reorganization under Section 368(a) of the Code and/or (2) the
Mergers, taken together, will be treated as an exchange under Section 351 of
the Code, and (B) in the case of CIPSCO, the delivery of an opinion to CIPSCO
from counsel for CIPSCO to the effect that the CIPSCO Merger will be treated as
a tax-free reorganization under Section 368(a) of the Code.
In addition, the Merger Agreement provides that it shall be a condition to
the obligation of CIPSCO to hold the CIPSCO Meeting that the opinion of Morgan
Stanley attached hereto as Annex E shall not have been withdrawn, and it shall
be a condition to the obligation of Union Electric to hold the Union Electric
Meeting that the opinion of Goldman Sachs attached hereto as Annex D shall not
have been withdrawn.
At any time prior to the Effective Time, to the extent permitted by
applicable law, any conditions to CIPSCO's or Union Electric's respective
obligations to consummate the Mergers may be waived by the party entitled to
the benefit of such condition. Any determination to waive a condition would
depend upon the facts and circumstances existing at the time of such waiver and
would be made by the waiving party's board of directors, exercising its
fiduciary duties to such party and its shareholders. See "--Amendment and
Waiver."
TERMINATION
The Merger Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval by the shareholders of Union Electric and
CIPSCO: (a) by mutual written consent of the Union Electric Board and the
CIPSCO Board; (b) by any party thereto, if the Effective Time shall not have
occurred on or before August 11, 1997 (which date shall be extended to February
11, 1998 if the required statutory approvals and consents have not been
obtained by August 11, 1997, but all other conditions to Closing have been, or
are capable of being, fulfilled); provided, however, that such right to
terminate the Merger Agreement will not be available to any party whose failure
to fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before that date;
(c) by any party thereto, if any required shareholder approval shall not have
been obtained at a duly held meeting of shareholders or at any adjournment
thereof; (d) by any party thereto, if any state or federal law, order, rule or
regulation is adopted or issued, which has the effect of prohibiting either of
the Mergers, or 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 either of the Mergers, and such order,
judgment or decree shall have become final and nonappealable; (e) by either
Union Electric or CIPSCO, upon two-days' prior notice to the other party, if,
as a result of a tender offer by a person other than Union Electric or CIPSCO,
or any of their affiliates, or any written offer or proposal with respect to a
merger of such party, sale of a material portion of such party's assets or
other business combination involving such party (each, a "Business
Combination") by a person other than Union Electric or CIPSCO, or any of their
affiliates, the board of directors of such party determines in good faith that
its fiduciary obligations under applicable law require that such tender offer
or other written offer or proposal be accepted; provided, however, that (i) the
board of directors of such party shall have been advised in writing by outside
counsel that notwithstanding a binding commitment to consummate an agreement of
the nature of the Merger Agreement entered into in
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the proper exercise of its applicable fiduciary duties and notwithstanding all
concessions which may be offered by the other party, 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, such party shall, and shall cause its respective financial
and legal advisors to, negotiate with the other party to make such adjustments
in the terms and conditions of the Merger Agreement as would enable such party
to proceed with the transactions contemplated thereby on such adjusted terms;
(f) by either Union Electric on the one hand, or CIPSCO, on the other hand, by
written notice to the other, if (x) there exist breaches of the representations
and warranties made by the other in the Merger Agreement as of the date thereof
which breaches, individually or in the aggregate, would or would be reasonably
likely to result in a material adverse effect on the business, assets,
financial condition, results of operations or prospects of such other party and
its subsidiaries taken as a whole, and such breaches shall not have been
remedied within 20 days after receipt by the breaching party of notice in
writing from the non-breaching party, specifying the nature of such breaches
and requesting that they be remedied, (y) the other party (and/or its
appropriate subsidiaries) shall not have performed and complied in all respects
with certain agreements and covenants relating to the absence of changes in
capitalization or issuance of securities or shall have failed to perform and
comply, in all material respects, with its other agreements and covenants under
the Merger Agreement or under the Union Electric Stock Option Agreement or the
CIPSCO Stock Option Agreement, as the case may be, and such failure to perform
or comply shall not have been remedied within 20 days after receipt by the
breaching party of notice in writing from the non-breaching party, specifying
the nature of such failure and requesting that it be remedied, or (z) the board
of directors of the other party or any committee thereof (A) shall withdraw or
modify in any manner adverse to such party its approval or recommendation of
the Merger Agreement or the CIPSCO Merger, (B) shall fail to reaffirm such
approval or recommendation upon such party's request, (C) shall approve or
recommend any acquisition of the other party or a material portion of its
assets or any tender offer for the other party's common stock, in each case by
a party other than such party or any of its affiliates or (D) shall resolve to
take any of the actions specified in clause (A), (B) or (C); or (g) by either
Union Electric or CIPSCO, by written notice to the other party, if (A) a third
party acquires securities representing more than 50% of the voting power of the
outstanding voting securities of such other party or (B) individuals who as of
the date of the Merger Agreement 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.
In the event of termination of the Merger Agreement by either Union Electric
or CIPSCO as provided above, there shall be no liability or obligation on the
part of either Union Electric or CIPSCO or their respective officers or
directors thereunder other than: (i) to hold in strict confidence all documents
furnished to the other in accordance with the Confidentiality Agreement, dated
June 21, 1995, (the "Confidentiality Agreement"); (ii) to pay certain fees and
expenses pursuant to certain specified provisions of the Merger Agreement
described below under "--Termination Fees" and "--Expenses;" and (iii) to
comply with certain other specified provisions of the Merger Agreement.
TERMINATION FEES
The Merger Agreement provides that if the Merger Agreement is terminated at
such time as it is terminable by either (but not both) of Union Electric or
CIPSCO for breaches of any representations or warranties contained in the
Merger Agreement as of the date thereof, or of agreements and covenants
contained in the Merger Agreement or the Union Electric Stock Option Agreement
or CIPSCO Stock Option Agreement, as the case may be, pursuant to the
provisions of the Merger Agreement described in clauses (f)(x) and (f)(y) under
"-- Termination" above, then, if such breach is not willful, the non-breaching
party is entitled to reimbursement of its documented out-of-pocket expenses,
not to exceed $10,000,000. In the event of a termination pursuant to such
provisions as a result of a willful breach, the non-breaching party will be
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entitled to its out-of-pocket expenses (which shall not be limited to
$10,000,000) and any remedies it may have at law or in equity, provided that,
if at the time of a breaching party's willful breach, there has been a third-
party tender offer or proposal with respect to a Business Combination involving
the breaching party or one of its affiliates which at the time of termination
shall not have been rejected by the breaching party and withdrawn by the third
party, and within two and one-half years of any termination by the non-
breaching party, the breaching party accepts an offer to consummate or
consummates a Business Combination with such third party, then such breaching
party, upon the signing of a definitive agreement relating to such a Business
Combination, or, if no such agreement is signed then at the closing of such
Business Combination, will pay to the non-breaching party an additional fee
equal to $30,000,000. The Merger Agreement also requires payment of an
additional termination fee of $30,000,000 (and reimbursement of out-of-pocket
expenses) by one party to the other in certain circumstances, if (i) the Merger
Agreement is terminated (A) as a result of the acceptance by such party of a
third-party tender offer or proposal with respect to a Business Combination
pursuant to the provisions of the Merger Agreement described in clause (e)
under "--Termination" above, (B) following a failure of the shareholders of
such party to grant their approval to the Mergers or (C) as a result of such
party's material breach of its obligations to convene a shareholder meeting,
distribute proxy materials and, subject to its board of directors' fiduciary
duties, recommend the Merger Agreement and the Mergers to its shareholders;
(ii) at the time of such termination or prior to the meeting of such party's
shareholders there has been a third-party tender offer or proposal with respect
to a Business Combination involving such party or any of its affiliates which
has not been rejected by such party and withdrawn by the third party; and (iii)
within two and one-half years of any such termination described in clause (i)
above, such party or such affiliate accepts an offer to consummate or
consummates a Business Combination with the third party. Such termination fee
and out-of-pocket expenses referred to in the previous sentence shall be paid
upon the signing of a definitive agreement between such party and the third
party, or, if no such agreement is signed, then at the closing of such third-
party Business Combination.
In the event that the Merger Agreement becomes terminable under circumstances
in which a $30,000,000 termination fee could be payable by one party (the
"Payor") pursuant to the immediately preceding paragraph, or in the event the
Merger Agreement becomes terminable pursuant to the provisions of the Merger
Agreement described in clause (f)(z) under "--Termination" above (provided that
at the time of such action or inaction by the Payor's board of directors or any
committee thereof there has been a third-party tender offer for shares of, or a
third-party offer or proposal with respect to a Business Combination involving,
the Payor which at the time of such action or inaction has not been rejected by
the Payor's board of directors), such event will also constitute a "Trigger
Event" under the Stock Option Agreement pursuant to which the Payor issued an
Option to the other party, so as to entitle the other party to require the
Payor to repurchase such Option or the Option Shares (as defined herein) issued
upon exercise thereof. The aggregate amount payable by Union Electric or
CIPSCO, as the case may be, pursuant to the provisions described in the
immediately preceding paragraph and upon a required repurchase of an Option or
Option Shares pursuant to the Union Electric Stock Option Agreement or the
CIPSCO Stock Option Agreement, as the case may be, may not exceed $50,000,000
(including reimbursement of fees and expenses). See "THE STOCK OPTION
AGREEMENTS."
The Merger Agreement further provides that all termination fees constitute
liquidated damages and not a penalty and, if one party should fail to pay any
termination fee due, the defaulting party shall pay the cost and expenses in
connection with any action taken to collect payment, together with interest on
the amount of any unpaid termination fee.
EXPENSES
The Merger Agreement provides that except as set forth above, all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expense, except
that those expenses incurred in connection with printing and filing of this
Joint Proxy Statement/Prospectus will be shared equally by Union Electric and
CIPSCO.
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AMENDMENT AND WAIVER
The Merger Agreement provides that the Merger Agreement may be amended by the
directors of the parties thereto, at any time before or after approval thereof
by the shareholders of Union Electric and CIPSCO and prior to the Effective
Time, but after such approvals no such amendment shall alter or change the
amount or kind of shares, rights or manner of conversion of such shares, alter
or change any of the terms and conditions of the Merger Agreement if any of the
alterations or changes, alone or in the aggregate, would materially adversely
affect the rights of holders of Union Electric capital stock or CIPSCO capital
stock, except for such alterations or changes that could otherwise be adopted
by the Holdings Board without the further approval of such shareholders. The
parties to the Merger Agreement may extend the time for the performance of any
of the obligations or other acts of the other parties thereto, waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto, and waive compliance with any of the
agreements or conditions contained in the Merger Agreement to the extent
permitted by law.
STANDSTILL AGREEMENT
Pursuant to the Confidentiality Agreement, Union Electric and CIPSCO have
agreed, among other things, that for a period of two years from the date of the
Confidentiality Agreement (the "Restricted Period"), except as requested in
writing by the other party, neither party will propose or enter into or agree
to enter into, directly or indirectly, (i) any form of business combination,
acquisition or other transaction relating to the other party or (ii) any form
of restructuring, recapitalization or similar transaction with respect to the
other party. In addition, pursuant to the Confidentiality Agreement, Union
Electric and CIPSCO have agreed that, during the Restricted Period, except as
requested in writing by the other party, neither party will, singly or with any
other person or directly or indirectly, (i) acquire, or offer, propose or agree
to acquire any voting securities of the other party, (ii) make or participate
in any solicitation of proxies with respect to such voting securities, (iii)
become a participant in any election contest with respect to the other party,
(iv) seek to influence any person with respect to the voting or disposition of
any such voting securities, (v) demand a copy of the other party's list of
stockholders or its other books and records, (vi) participate in or encourage
the formation of any partnership, syndicate or other group that owns or seeks
or offers to acquire beneficial owner ship of any such voting securities or
that seeks to affect control of the other party or for the purpose of
circumventing any provision of the Confidentiality Agreement or (vii) otherwise
act (including by providing financing for another person) to seek or to offer
to control or influence, in any manner, the management, board of directors or
policies of the other party; provided, however, that the foregoing restrictions
will cease to be binding as to a party if the other party becomes the subject
of an Acquisition Proposal (as defined herein) from an entity not a party to
the Confidentiality Agreement. In addition, subject to certain exceptions,
until such time as a party has told the other party in writing that discussions
with respect to the Mergers have terminated, neither party nor its
representatives will (a) initiate, encourage or solicit, directly or
indirectly, the making of any proposal or offer to acquire all or any material
part of the business and properties or capital stock of such party, whether by
merger, purchase of assets, tender offer or otherwise (an "Acquisition
Proposal"), or initiate, directly or indirectly, any contact with any person in
an effort to or with a view towards soliciting or initiating any Acquisition
Proposal, (b) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, an Acquisition Proposal,
or (c) initiate, encourage or solicit, directly or indirectly, the making of
any proposal or offer to acquire all or any material part of the business and
properties or capital stock of any person or group (other than the other party)
engaged in a business that is competitive with the business of either party,
whether by merger, purchase of assets, tender offer or otherwise. The
restrictions in the immediately preceding sentence do not apply to a party if
such party's board of directors determines, based as to legal matters on the
written advice of outside counsel, that the failure to negotiate or share
information with a third party (other than CIPSCO or Union Electric) would be
inconsistent with the proper exercise of applicable fiduciary duties.
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THE STOCK OPTION AGREEMENTS
THE FOLLOWING IS A BRIEF SUMMARY OF THE MATERIAL TERMS OF THE STOCK OPTION
AGREEMENTS, COPIES OF WHICH ARE ATTACHED AS ANNEX B AND ANNEX C AND WHICH ARE
INCORPORATED HEREIN BY REFERENCE. SUCH SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE STOCK OPTION AGREEMENTS.
The Stock Option Agreements are intended to increase the likelihood that the
Mergers will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreements may
have the effect of discouraging persons who might now or prior to the Effective
Time be interested in acquiring all of or a significant interest in, or
otherwise effecting a business combination with, Union Electric or CIPSCO from
considering or proposing such a transaction, even if such persons were prepared
to offer to pay consideration to shareholders of Union Electric or CIPSCO, as
the case may be, which had a higher value than the shares of Holdings Common
Stock to be received per share of Union Electric Common Stock or CIPSCO Common
Stock, as the case may be, pursuant to the Merger Agreement.
GENERAL
Pursuant to mutual Stock Option Agreements entered into concurrently with the
Merger Agreement, Union Electric has granted to CIPSCO the CIPSCO Option, and
CIPSCO has granted to Union Electric the Union Electric Option. As holders of
such Options (the "Option Holder"), CIPSCO and Union Electric have the right,
under certain circumstances, to purchase, respectively, up to (i) with respect
to the CIPSCO Option, 6,983,233 shares of Union Electric Common Stock, and (ii)
with respect to the Union Electric Option, 6,779,838 shares of CIPSCO Common
Stock (shares of common stock purchasable by the CIPSCO Option and the Union
Electric Option are collectively referred to as the "Option Shares") at a price
of $35.94 per share for Union Electric Common Stock and at a price of $37.02
per share for CIPSCO Common Stock, such prices being equal to the average of
the daily closing sale prices for the Union Electric Common Stock on the NYSE
during the ten NYSE trading days prior to the fifth NYSE trading day preceding
the date of the Merger Agreement, multiplied, in the case of the Union Electric
Option, by the CIPSCO Ratio. The exercise price is payable, at the Option
Holder's option, in cash or, subject to any required governmental approvals,
shares of common stock of the Option Holder.
The Options may be exercised by the Option Holder, in whole or in part, at
any time or from time to time after the Merger Agreement becomes terminable by
such Option Holder as a result of a Trigger Event (as defined in the Stock
Option Agreements and described above under "THE MERGER AGREEMENT-- Termination
Fees"), regardless of whether the Merger Agreement is actually terminated or
whether there occurs a closing of any Business Combination. The Options will
terminate upon the earlier of (i) the Effective Time, (ii) the termination of
the Merger Agreement pursuant to its terms (other than a termination 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 Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, ten 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 August 11, 1998).
Notwithstanding the foregoing, no Option may be exercised (a) if the Option
Holder 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 the applicable Stock Option Agreement or in the Merger Agreement,
or (b) until all necessary regulatory approvals have been obtained for the
acquisition of shares pursuant to such Option.
CERTAIN REPURCHASES
Under the terms of the Stock Option Agreements, at any time during which the
Option is exercisable (the "Repurchase Period"), the Option Holder has the
right to require the issuer of the Option (the "Issuer") to repurchase from the
Option Holder all or any portion of the Option or, at any time prior to August
11,
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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 has been extended to February 11, 1998), all or any portion of the
Option Shares purchased pursuant to the exercise of the Option. The amount that
the Issuer will pay to the Option Holder to repurchase the Option is the
difference between the Market/Offer Price (as defined below) for shares of
Issuer common stock as of the date the Option Holder gives notice of its intent
to exercise its repurchase rights (the "Notice Date") and the exercise price
for the Option, multiplied by the number of Option Shares purchasable pursuant
to the Option, or the portion thereof to be so repurchased, but only if the
Market/Offer Price is greater than such exercise price. The amount that the
Issuer will pay to the Option Holder to repurchase the Option Shares is the
exercise price paid by the Option Holder for the Option Shares plus the
difference between the Market/Offer Price and the exercise price paid by the
Option Holder for the Option Shares (but only if the Market/Offer Price is
greater than such exercise price), multiplied by the number of Option Shares to
be so repurchased. The Stock Option Agreements define "Market/Offer Price" as
the higher of (A) the price per share (the "Offer Price") offered as of the
Notice Date pursuant to any tender or exchange offer or other business
combination offer which was made prior to the Notice Date and not terminated or
withdrawn as of such date or (B) the Fair Market Value of Issuer common stock
as of the Notice Date (which is defined in the Stock Option Agreements as the
average of the daily closing sale price for such shares on the NYSE during the
10 NYSE trading days prior to the fifth NYSE trading day preceding such date).
The Offer Price for the repurchase by the Issuer of Option Shares purchased by
the Option Holder pursuant to the Option is the highest price per share offered
pursuant to a tender or exchange offer or other business combination offer
which was made during the Repurchase Period prior to the Notice Date. At any
time prior to August 11, 1997 (which date may be extended to February 11, 1998
under the circumstances described above), the Option Holder may also require
the Issuer to sell to the Option Holder any shares of the Option Holder's
common stock delivered by the Option Holder to the Issuer in payment for the
exercise price of the Option, at the price attributed to such shares for such
purpose plus interest at the rate of 7.5% per annum (from the date of the
delivery of such shares through the date of such repurchase) less any dividends
paid or declared and payable thereon.
VOTING
Each party has agreed to vote, until August 11, 2000, any shares of the
capital stock of the other party acquired pursuant to the Stock Option
Agreements or otherwise beneficially owned 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 is voted for and against such matter.
RESTRICTIONS ON TRANSFER
The Stock Option Agreements provide that, until August 11, 2000, neither
party may sell, assign, pledge or otherwise dispose of or transfer the shares
it acquires pursuant to the Stock Option Agreements (collectively, the
"Restricted Shares") except as specifically provided for in the Stock Option
Agreements. In addition to the repurchase rights described above under "--
Certain Repurchases," subsequent to the termination of the Merger Agreement,
the parties have the right to have such shares of the other party registered
under the Securities Act for sale in a public offering. The Stock Option
Agreements also provide that, following the termination of the Merger
Agreement, either party may sell any Restricted Shares pursuant to a tender or
exchange offer approved or recommended, or otherwise determined to be fair and
in the best interests of such other party's shareholders, by a majority of the
board of directors of such other party.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
GENERAL
The authorized capital stock of Holdings, as of the Effective Time, will
consist of 400,000,000 shares of Holdings Common Stock, and 100,000,000 shares
of preferred stock, par value $.01 per share ("Holdings Preferred Stock"). The
description of Holdings capital stock set forth herein does not purport to be
complete
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and is qualified in its entirety by reference to the Holdings Articles and the
by-laws of Holdings (the "Holdings By-laws"), attached hereto as Annexes F and
G, respectively, as well as applicable statutory or other law.
HOLDINGS PREFERRED STOCK
Under the Holdings Articles, subject to any approval of the SEC which may be
required under the 1935 Act, the Holdings Board will be authorized to divide
the Holdings Preferred Stock into series, to issue shares of any such series
and, within the limitations set forth in the Holdings Articles or prescribed by
law, to fix and determine the relative rights and preferences of the shares of
any series so established, including the dividend rate, redemption price and
terms, amount payable upon liquidation, and any sinking fund provisions,
conversion privileges and voting rights. There are no present plans to issue
any Holdings Preferred Stock.
HOLDINGS COMMON STOCK
The holders of Holdings Common Stock will be entitled to receive such
dividends as the Holdings Board may from time to time declare, subject to any
rights of holders of Holdings Preferred Stock, if any is issued. Each holder of
Holdings Common Stock will be entitled to one vote per share on each matter
submitted to a vote at a meeting of shareholders, subject to any class or
series voting rights of holders of any Holdings Preferred Stock. The holders of
Holdings Common Stock will not be entitled to cumulate votes for the election
of directors. In the event of any liquidation, dissolution or winding up of
Holdings, the holders of Holdings Common Stock, subject to any rights of the
holders of any Holdings Preferred Stock, will be entitled to receive the
remainder, if any, of the assets of Holdings after the discharge of its
liabilities. Holders of Holdings Common Stock will not be entitled to
preemptive rights to subscribe for or purchase any part of any new or
additional issue of stock or securities convertible into stock. The Holdings
Common Stock does not contain any redemption provisions or conversion rights.
Holdings' ability to pay dividends will depend primarily upon the ability of
its subsidiaries to pay dividends or otherwise transfer funds to it. Various
financing arrangements, charter provisions and regulatory requirements will
impose certain restrictions on the ability of Holdings' public utility
subsidiaries to transfer funds to Holdings in the form of cash dividends, loans
or advances.
Whenever dividends on all outstanding shares of CIPS Preferred Stock of all
series for all previous quarter-yearly dividend periods and the current
quarter-yearly dividend period shall have been paid or declared and set apart
for payment, and whenever all amounts required to be set aside for any sinking
fund for the redemption or purchase of shares of the CIPS Preferred Stock for
all previous periods or dates shall have been paid or set aside, and subject to
the limitations summarized below, the Board of Directors of CIPS may declare
dividends on the CIPS Common Stock out of any surplus or net profits of CIPS
legally available for the purpose. The CIPS Mortgage Indenture securing
outstanding first mortgage bonds of CIPS provides, in effect, that CIPS will
not declare or pay any dividends (other than in stock) on its Common Stock, or
make any other distribution on or purchase any CIPS Common Stock, unless the
total amount charged or provided for maintenance, repairs and depreciation of
the mortgaged properties subsequent to December 31, 1940, plus the surplus
earned during the period and remaining after any such dividend, distribution or
purchase, shall equal at least 15% of the total utility operating revenues of
CIPS for the period, after deducting from such revenues the cost of electricity
and gas purchased for resale. The CIPS Restated Articles of Incorporation
provide in effect that, so long as any CIPS Preferred Stock is outstanding, the
total amount of all dividends or other distributions on CIPS Common Stock
(other than in stock) that may be paid, and purchases of CIPS Common Stock that
may be made, during any 12-month period shall not exceed (a) 75% of the net
income of CIPS (as defined) for the 12-month period next preceding each such
dividend, distribution or purchase, if the ratio of "common stock equity" to
"total capital" (as defined) is 20% to 25%, or (b) 50% of such net income if
such ratio is less than 20%. If such ratio is in excess of 25%, no such
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dividends may be paid or distributions or purchases made that would reduce such
ratio to less than 25% except to the extent permitted by clauses (a) and (b).
At June 30, 1995, no amount of retained earnings was restricted as to the
payment of dividends on CIPS Common Stock under the foregoing provisions of the
CIPS Mortgage or the CIPS Restated Articles of Incorporation.
So long as any of Union Electric's First Mortgage Bonds, 7.40% Series due
2020 are outstanding, as well as certain other series of bonds issued under the
same indenture (as amended and supplemented to date, the "UE Mortgage
Indenture") Union Electric may not declare any dividend on Union Electric
Common Stock (other than dividends payable in Union Electric Common Stock), or
make any other distribution on, or acquire for value any shares of, Union
Electric Common Stock (except in exchange for Union Electric Common Stock) if,
after giving effect thereto, the aggregate of all such dividends, distributions
or acquisitions after June 30, 1961 and before the date on which such dividend
or distribution or acquisition is to be made exceeds the sum of $22,700,000
plus the aggregate net income of Union Electric applicable to the Union
Electric Common Stock (as defined in the UE Mortgage Indenture) during such
period. At June 30, 1995, the free and unrestricted amount available for
payments was approximately $989,374,000. Other series of bonds issued, or
financing arrangements entered into, by Union Electric in the future could
contain similar provisions which could place additional limits upon the ability
of Union Electric to pay dividends to Holdings.
In addition, the terms of the Union Electric Preferred Stock, as set forth in
the Union Electric Articles, require that dividends (including accrued and
unpaid dividends) payable in respect of shares of Union Electric Preferred
Stock be paid or provided for prior to the payment of any dividends on Union
Electric Common Stock.
In addition, the SEC, under the 1935 Act, will have the power to preclude the
payment of dividends by Union Electric and CIPS to Holdings. Under the 1935
Act, the SEC will also have the power to preclude the payment of dividends by
Holdings. See "REGULATORY MATTERS."
It is a condition to consummation of the Mergers that the Holdings Common
Stock be approved for listing on the NYSE subject to official notice of
issuance.
CERTAIN ANTITAKEOVER PROVISIONS
The Holdings Articles and Holdings By-laws will contain provisions that may
have the effect of discouraging persons from acquiring large blocks of Holdings
stock or delaying or preventing a change in control of Holdings. The material
provisions which may have such an effect include (i) authorization for the
Holdings Board (subject to any required regulatory approval) to issue Holdings
Preferred Stock in series and to fix rights and preferences of the series
(including, among other things, whether, and to what extent, the shares of any
series will have voting rights and the extent of the preferences of the shares
of any series with respect to dividends and other matters); (ii) advance notice
procedures with respect to nominations of directors or proposals other than
those adopted or recommended by the Holdings Board; (iii) the prohibition of
shareholder action by less than unanimous written consent and (iv) provisions
specifying that only the chief executive officer of Holdings or the Holdings
Board (by a majority vote of the entire Holdings Board) may call special
meetings of stockholders, and that the chairman of the Holdings Board may
adjourn a meeting of stockholders from time to time, whether or not a quorum is
present. In addition, the MGBCL contains certain provisions, including business
combination provisions that would be applicable to certain mergers, share
exchanges or sales of substantially all assets involving Holdings or a
subsidiary and a significant shareholder and which could have the effect of
substantially increasing the cost to the acquiror and thus discourage any such
transaction. See "COMPARISON OF SHAREHOLDER RIGHTS--Antitakeover Statutes."
The MGBCL permits shareholders to adopt an amendment to the articles of
incorporation opting out of the business combination provisions, and the
Holdings Articles opt out of such provisions. See "COMPARISON OF SHAREHOLDER
RIGHTS--Antitakeover Statutes."
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Under the Illinois PUA, approval of the Illinois Commission is required for
any transaction which, regardless of the means by which it is accomplished,
results in a change in the ownership of a majority of the voting capital stock
of an Illinois public utility or the ownership or control of any entity which
owns or controls a majority of the voting capital stock of a public utility.
After the Mergers, Holdings will control a majority of the voting stock of
CIPS, an Illinois public utility. Accordingly, any change in ownership or
control, within the meaning of the Illinois PUA, of Holdings would require
Illinois Commission approval.
Certain acquisitions by any person of outstanding voting shares of Holdings
would also require approval of the SEC under the 1935 Act.
See "REGULATORY MATTERS" and "COMPARISON OF SHAREHOLDER RIGHTS."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of Union Electric Common Stock are currently governed
by the Union Electric Articles, the by-laws of Union Electric (the "Union
Electric By-laws"), and the MGBCL. If the Mergers are consummated, the holders
of Union Electric Common Stock will become holders of Holdings Common Stock,
and their rights will be governed by the Holdings Articles, the Holdings By-
laws, and the MGBCL.
The material differences between the Union Electric Articles and the Union
Electric By-laws, on the one hand, and the Holdings Articles and the Holdings
By-laws, on the other, are described below under "--Comparison of Holdings
Articles and By-laws to Union Electric Articles and By-laws." In addition,
material similarities and differences which exist between the MGBCL and the
IBCA with respect to stockholders' rights are summarized below under "--
Comparison of Illinois and Missouri Law."
The rights of holders of CIPSCO Common Stock are currently governed by the
CIPSCO Articles, the by-laws of CIPSCO (the "CIPSCO By-laws"), and the IBCA. If
the Mergers are consummated, the holders of CIPSCO Common Stock will become
holders of Holdings Common Stock, and their rights will be governed by the
Holdings Articles, the Holdings By-laws, and the MGBCL. The material
differences between the CIPSCO Articles and the CIPSCO By-laws, on the one
hand, and the Holdings Articles and the Holdings By-laws, on the other, are
described below under "--Comparison of Holdings Articles and By-laws to CIPSCO
Articles and By-laws." In addition, material similarities and differences which
exist between the IBCA and the MGBCL with respect to stockholders' rights are
summarized below under "--Comparison of Illinois and Missouri Law."
The following discussion is not intended to be complete and is qualified in
its entirety by reference to the Holdings Articles and the Holdings By-laws,
which are attached to this Joint Proxy Statement/Prospectus as Exhibits F and
G, respectively, and to the MGBCL, the IBCA, the Union Electric Articles, the
Union Electric By-laws, the CIPSCO Articles and the CIPSCO By-laws; however,
all elements of such documents, of the MGBCL and of the IBCA which the
managements of Union Electric and CIPSCO believe to be material to a decision
by the shareholders of Union Electric and CIPSCO with respect to the Mergers
are described herein. See "AVAILABLE INFORMATION."
COMPARISON OF HOLDINGS ARTICLES AND BY-LAWS TO CIPSCO ARTICLES AND BY-LAWS
Board of Directors. The CIPSCO By-laws provide that the CIPSCO Board shall be
composed of between seven and 12 members, as fixed from time to time by a
majority vote of the CIPSCO Board. The CIPSCO Board currently consists of nine
directors. The Holdings Articles provide that the number of directors will be
fixed by the Holdings By-laws which, in turn, provide that the number of
directors will be fixed from time to time by the Holdings Board, but will not
be less than three and not more than 21. The Merger Agreement provides that the
CIPSCO Board and the Union Electric Board will take such action as may be
necessary to cause the number of directors comprising the full Holdings Board
at the Effective Time
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to be 15 individuals, including Mr. Greenwalt and four non-management directors
of CIPSCO to be designated by CIPSCO prior to the Effective Time, and Mr.
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
individual shall designate another individual to serve in such individual's
stead, except that a replacement for the position of Chairman of the Holdings
Board shall be chosen by the Union Electric Board.
Removal of Directors. Both the CIPSCO Articles and By-laws, on the one hand,
and the Holdings Articles and By-laws on the other, are silent as to the
procedure for removing directors. Both the IBCA and the MGBCL provide that the
shareholders may vote to remove one or more directors, with or without cause,
at any meeting of shareholders the notice of which stated that the purpose of
the meeting was to remove directors, provided that if the company has
cumulative voting, a director may not be removed from the board if the votes
cast against such removal would have been sufficient to elect the director at
an election of the entire board under cumulative voting. The provisions of the
MGBCL are substantially similar to those of the IBCA with respect to the
removal of directors, except that they are silent on the issue of removal by a
court. See "--Comparison of Illinois and Missouri Law."
Vacancies on the Board of Directors. Both the CIPSCO By-laws and the Holdings
By-laws provide that vacancies, including vacancies created by newly created
directorships, are to be filled by majority vote of the remaining directors.
Preemptive Rights. The Holdings Articles expressly provide that Holdings
shareholders do not have preemptive rights to acquire shares of capital stock
of Holdings in connection with the issuance by Holdings of previously unissued
shares of capital stock, except in the case of a series of Holdings Preferred
Stock if the terms of such series of Holdings Preferred Stock expressly provide
for preemptive rights.
The CIPSCO Articles do not provide preemptive rights to CIPSCO shareholders,
and the IBCA denies such preemptive rights except to the extent such rights are
expressly granted in the articles of incorporation.
Amendments to Articles of Incorporation. The CIPSCO Articles are silent as to
amendment procedures. The IBCA generally requires that, unless a lesser
proportion is required by the articles, amendments to the articles of
incorporation must be approved by the affirmative vote of the holders of at
least two-thirds of the shares entitled to vote. In certain circumstances, a
vote by class or series is required. Certain procedural amendments may be made
by a majority of the board, without a vote of the shareholders. See "--
Comparison of Illinois and Missouri Law."
The Holdings Articles are silent as to amendment procedures. The MGBCL
provides, however, that amendments to the Holdings Articles require the
affirmative vote of holders of shares representing a majority of the votes
entitled to be cast.
Amendments to By-laws. The CIPSCO By-laws provide, and the IBCA permits, that
the CIPSCO Board shall have the authority to make, alter, and amend the CIPSCO
By-laws, and the Holdings Articles provide, and the MGBCL permits, that the
Holdings Board shall have the power to make, alter, and amend the Holdings By-
laws. Under the IBCA, shareholders may also make, alter or amend by-laws.
Special Meetings of Shareholders; Shareholder Action by Written Consent. The
CIPSCO By-laws and the IBCA provide that special meetings of shareholders may
be called by the President, the CIPSCO Board, the holders of one-fifth of the
outstanding shares of CIPSCO Common Stock entitled to vote at such meeting, or
as provided by the IBCA. The Holdings By-laws provide that the Chief Executive
Officer or a majority of the Holdings Board (assuming no vacancies) may call a
special meeting of the shareholders.
The CIPSCO By-laws are silent as to whether shareholders may take action by
unanimous written consent without a meeting. The IBCA provides that
shareholders may take action without a meeting upon
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the written consent (i) of all the shareholders entitled to vote, or (ii) of
holders of not less than the minimum number of votes that would be necessary to
take such action at a duly called and held meeting of shareholders, provided
that such consent becomes effective only if, at least five days prior to the
execution of the consent, notice is delivered to all the shareholders entitled
to vote with respect to such matter and that prompt notice of the taking of
such action is delivered to those shareholders who have not consented in
writing. The MGBCL provides that shareholders may act without a meeting only by
unanimous written consent of the holders of shares entitled to vote upon the
matter, and the Holdings Articles contain an express provision to the same
effect.
Written Notice of Shareholder Meetings. The CIPSCO By-laws require that
shareholders be given notice of meetings no less than ten and no more than 60
days prior to such meeting, except that the IBCA requires that in the case of a
meeting at which a merger, consolidation or sale of assets is to be acted upon,
notice must be given no less than 20 and no more than 60 days prior to such
meeting. The Holdings By-laws require that shareholders be given notice of
meetings no less than ten and no more than 70 days prior to such meeting.
Notice of Shareholder Proposals/Nominations. The Holdings By-laws require
advance notice of the introduction by shareholders of business at annual
meetings of shareholders. For any such proposal to be properly brought before
an annual meeting, a shareholder must comply with the shareholder proposal
requirements under the federal proxy rules or deliver a written notice to the
Secretary of Holdings not less than 60 days nor more than 90 days prior to the
anniversary of the annual meeting; provided that if the date of such meeting is
more than 30 days before or 60 days after such anniversary, a shareholder
notice will be timely delivered if received by the close of business on the
tenth day following the day on which public disclosure of the meeting date
occurred. The required notice from a shareholder must include (i) as to each
person whom the stockholder proposes to nominate for election or reelection as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to the Exchange Act;
(ii) as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (A) the name and address of such stockholder
and (B) the class and number of shares of Holdings which are owned beneficially
and of record by such stockholder and such beneficial owner. The Holdings By-
laws further provide that in the event the Holdings Board calls a special
meeting of shareholders for the purpose of electing directors, shareholders may
nominate a person to be a director by providing notice in the form described in
the preceding sentence not later than the close of business on the later of the
60th day prior to such special meeting or the tenth day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Holdings Board to be elected at such meeting.
The CIPSCO Articles, the CIPSCO By-laws, and the IBCA are silent on the issue
of shareholder proposals or nomination of directors.
Cumulative Voting. The CIPSCO Articles, consistent with the IBCA, provide for
cumulative voting in connection with the election of directors. The Holdings
Articles do not permit cumulative voting.
Indemnification of Directors and Officers. Both the Holdings By-laws and the
CIPSCO By-laws, consistent with the applicable provisions of the MGBCL and the
IBCA, respectively, provide that the corporation may indemnify a director or
officer against liabilities and expenses if such director or officer acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, in the case of a
criminal action, if the director or officer had no reason to believe his or her
conduct was unlawful. Both the Holdings By-laws and the CIPSCO By-laws,
consistent with the applicable provisions of the MGBCL and the IBCA,
respectively, further provide that, in a proceeding
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brought on by or in the right of the corporation, no indemnification shall be
made with respect to any claim as to which an officer or director has been
adjudged to have been liable to the corporation, unless the court determines
that such a person is reasonably and fairly entitled to indemnification for
expenses. Indemnification shall be made by Holdings or CIPSCO, as the case may
be, only if a determination has been made by a majority vote of a quorum of the
disinterested directors or by the shareholders or by independent legal counsel,
that the director or officer met the required standard of conduct. Both the
Holdings By-laws and the CIPSCO By-laws, consistent with the applicable
provisions of the MGBCL and the IBCA, respectively, provide that Holdings or
CIPSCO, as the case may be, is authorized to purchase liability insurance on
behalf of an officer or director whether or not the corporation would otherwise
have the power to indemnify such a person.
The Holdings By-laws, consistent with the applicable provisions of the MGBCL,
provide that, in addition to the indemnities described in the preceding
paragraph, Holdings will further indemnify its officers and directors to the
maximum extent permitted by law, provided that no indemnity is given for
conduct that is adjudged to be knowingly fraudulent, deliberately dishonest, or
willful misconduct. The CIPSCO By-laws do not contain a similar provision. See
"--Comparison of Illinois and Missouri Law." The CIPSCO Articles, consistent
with the IBCA, provide that, in addition to the indemnities provided in the
preceding paragraph, CIPSCO will indemnify officers, directors and employees to
the full extent permitted by the IBCA or any other applicable laws. Pursuant to
this provision of the CIPSCO Articles, CIPSCO may enter into agreements with
any person which provide for indemnification greater or different than provided
in the CIPSCO Articles.
Certain Share Acquisitions and Business Combinations. Certain provisions of
the IBCA may have the effect of discouraging persons from acquiring large
blocks of CIPSCO stock or delaying or preventing a change of control of CIPSCO.
Under certain circumstances, these provisions could have the effect of, among
other things, (i) prohibiting a 15% shareholder from engaging in a business
combination with CIPSCO for three years following the date of acquisition of
such 15% interest, and (ii) prohibiting a corporation from entering into a
business combination with a 10% shareholder unless a fair price is paid for all
shares acquired. See "--Comparison of Illinois and Missouri Law" below for a
more complete discussion of such provisions, including the circumstances under
which such provisions are triggered.
The MGBCL contains provisions which may have the effect of discouraging
persons from acquiring large blocks of Holdings stock or delaying or preventing
a change of control of Holdings. Under certain circumstances, these provisions
could have the effect of, among other things, (i) reducing the voting power of
shares acquired by a 20% shareholder, and (ii) preventing a 20% shareholder
from engaging in a business combination with the corporation for five years
following the date of acquisition of such 20% interest. The Holdings Articles
expressly provide that certain of such provisions do not apply to Holdings. See
"--Antitakeover Statutes" below for a more complete discussion of such
provisions, including the circumstances under which such provisions are
triggered.
COMPARISON OF ILLINOIS AND MISSOURI LAW
In general, as described below, the MGBCL and the IBCA provide shareholders
with similar rights and protections. A comparison of certain provisions of the
MGBCL as it applies to Holdings and the IBCA as it applies to CIPSCO is set
forth below:
Classified Board of Directors; Removal of Directors; Vacancies. Both the
MGBCL and the IBCA allow the board of directors to be divided into classes.
Under both the MGBCL and the IBCA, a director can be removed with or without
cause by the affirmative vote of the majority of the shares of the class such
director represents. Under the MGBCL, the articles of incorporation or by-laws
may make other provisions for removal, while under the IBCA, a corporation with
a classified board may provide in its articles of incorporation that directors
are removable only for cause. The IBCA also provides for court removal of a
director in a proceeding commenced either by the corporation or holders of 10%
of the outstanding shares of
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<PAGE>
any class if the court finds that the director is engaged in fraudulent or
dishonest conduct or if the court finds removal of the director to be in the
best interests of the corporation. Under both the MGBCL and the IBCA, in a
corporation having cumulative voting, a director may not be removed from the
board if there are cast against removal of such director the votes of a
proportion of the voting power sufficient to elect such director at an election
of the entire board under cumulative voting unless the entire board is removed
simultaneously. The MGBCL also provides that a director may be removed for
cause by a majority of the board of directors if the director to be removed
fails to meet the qualifications for directors stated in the articles of
incorporation or by-laws or if the director has breached any agreement between
the director and the corporation relating to such director's services as a
director or employee of the corporation.
Under the MGBCL, absent provisions to the contrary in the articles of
incorporation or by-laws, vacancies may be filled by a majority of the
directors, even though less than a quorum. Under the IBCA, vacancies may be
filled by election at an annual or special meeting of shareholders; unless the
by-laws provide otherwise, the board of directors may fill vacancies arising
between meetings.
Interested Director Transactions. Under the IBCA, a transaction that is fair
to a corporation may not be invalidated on the grounds that a director of the
corporation is directly or indirectly a party to the transaction. The party
asserting validity has the burden of proving fairness unless the material facts
of the transaction and the director's interest are disclosed and the
transaction is approved either by a majority of disinterested directors or by
the shareholders without counting the vote of any shareholder who is an
interested director.
The MGBCL has similar provisions. The MGBCL provides that no contract or
transaction in which one or more directors is interested shall be void or
voidable solely because of such interest or because such director was present
at the board meeting where such transaction was approved or because his vote is
counted for such purpose if certain conditions are met. If the material facts
of the transaction and the director's interest are disclosed and a vote is
taken in good faith, such transactions may be approved by a majority vote of
the disinterested directors or by shareholder vote. If the contract or
transaction is fair as to the corporation at the time of authorization or
approval, separate disinterested director or shareholder approval is not
required.
Indemnification of Directors and Officers. Both the IBCA and the MGBCL
provide that a corporation may indemnify a director or officer against
liabilities and expenses if such director or officer acted in good faith and in
a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, in the case of a criminal action, if the
director or officer had no reason to believe his or her conduct was unlawful.
Under both the IBCA and the MGBCL, in a proceeding brought by or in the right
of the corporation, no indemnification shall be made with respect to any claim
as to which an officer or director has been adjudged to have been liable to the
corporation, unless the court determines that such a person is reasonably and
fairly entitled to indemnification for expenses. Indemnification shall be made
by a corporation only if a determination has been made, by a majority vote of a
quorum of the disinterested directors or by the shareholders or by independent
legal counsel, that the director or officer met the required standard of
conduct. Both the MGBCL and the IBCA provide that a corporation may purchase
liability insurance on behalf of an officer or director whether or not the
corporation would otherwise have the power to indemnify such a person. Both the
MGBCL and the IBCA provide that a corporation may maintain insurance on behalf
of officers and directors against liabilities asserted against the individual
arising out of his or her status as an officer or director, regardless of
whether the corporation would have the power to indemnify the individual
against such liability under the relevant provisions of the MGBCL or the IBCA,
as the case may be.
The MGBCL provides that the articles of incorporation or by-laws of a
corporation may authorize any further indemnity to an officer or director,
provided that no indemnity is given for conduct that is adjudged to be
knowingly fraudulent, deliberately dishonest, or willful misconduct. The IBCA
does not contain a similar provision.
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<PAGE>
Elimination of Directors' Personal Liability for Monetary Damages. The IBCA
provides that a corporation may eliminate or limit the personal liability of
directors to the corporation or its shareholders for breach of the directors'
fiduciary duties, provided that the corporation adopts a provision to do so in
its articles of incorporation. The provision may not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) for the payment of improper dividends or certain corporate actions
following dissolution, (iv) for transactions from which the director derived an
improper personal benefit, or (v) for any act or omission occurring before the
effective date of the articles provision. Neither CIPSCO nor CIPS has adopted
the required provision in its articles of incorporation to limit the personal
liability of directors, and the MGBCL contains no similar or corresponding
provision permitting Missouri corporations to do so.
Amendment of Articles. The MGBCL and IBCA provide that the board of directors
may propose amendments to a corporation's articles of incorporation. Under the
MGBCL, proposed amendments must be approved by the affirmative vote of the
holders of a majority of the outstanding shares present and entitled to vote on
the amendment, except with respect to an amendment which would have the effect
of opting the company out of the control share acquisition procedures of the
MGBCL, which amendment must be approved by a two-thirds vote.
Under the IBCA, a proposed amendment is adopted if approved by two-thirds of
the outstanding shares of each class entitled to vote unless the articles of
incorporation provide otherwise (but in no event shall the vote needed for
adoption be less than a majority). The IBCA provides that certain procedural
amendments may be made by a majority of the board without a vote of the
shareholders. In addition, both the MGBCL and IBCA require that certain
amendments must be approved by a separate vote of a class or series of stock if
such class or series is entitled to vote as a class or series.
Amendment of By-laws. Under the MGBCL, the power to adopt, amend or repeal
the by-laws is reserved to the shareholders unless vested by the articles in
the board of directors.
Under the IBCA, either the shareholders or the board of directors may make,
amend or repeal by-laws, unless the articles reserve such power to the
shareholders. If the by-laws so provide, no by-law adopted by the shareholders
may be amended or repealed by the board of directors.
Vote Required for Certain Reorganizations or Consolidations. The IBCA and the
MGBCL both provide for a shareholder vote (except as indicated below and for
certain mergers between a parent company and its 90% owned subsidiary) of: (i)
each corporation that is party to a plan of merger or consolidation; (ii) a
corporation that is dissolving; (iii) the selling corporation for the sale by
the corporation of substantially all its assets if not in the usual course of
business. The IBCA also provides for shareholder votes to approve an
acquisition by share exchange. Under the MGBCL and the IBCA, the vote required
to approve a plan of merger, consolidation, statutory share exchange (in the
case of the IBCA), sale of substantially all assets not in the ordinary course
of business or dissolution is two-thirds of the outstanding shares entitled to
vote on the plan. The IBCA provides that the articles of incorporation may
impose a higher or lower vote requirement (but in no event less than a
majority) on any of these transactions. The MGBCL provides that, in the case of
a dissolution, the board of directors or the articles of incorporation may
require a greater vote.
The IBCA does not require the vote of the shareholders of a surviving
corporation in a merger or exchange if (i) the corporation's articles of
incorporation will not be amended in the transaction, (ii) each share of the
corporation outstanding immediately before the effective date of the
transaction will have identical rights immediately after the effective date,
(iii) either no common shares of the surviving corporation, or securities
convertible into such shares, are delivered under the plan of merger or
exchange, or the common shares of the surviving corporation issued or delivered
under the plan plus the common shares issuable upon the conversion of other
securities to be issued under such plan, do not exceed 20% of the
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<PAGE>
common shares of such corporation immediately prior to the effective date of
such merger exchange. The MGBCL does not contain a similar provision.
Class Vote for Certain Reorganizations. The IBCA provides that a class of
shares of a corporation is entitled to vote on a plan of merger or statutory
share exchange as a class or series if any provision of the plan would, if
contained in a proposed amendment to the articles of incorporation, entitle the
class of shares to vote as a class.
The MGBCL does not contain such a provision.
Special Meetings of Shareholders. Under both the MGBCL and the IBCA, a
special meeting of shareholders may be called by the board of directors or by
any person authorized by the articles of incorporation or by-laws to call a
special meeting. The IBCA additionally provides that a special meeting may be
called by the president of the corporation or by the holders of not less than
20% of the votes entitled to be cast at such a meeting.
Shareholder Action by Consent. Both the IBCA and the MGBCL permit
shareholders to take action without a meeting by unanimous written consent.
Additionally, the IBCA allows a corporation to take such action by written
consent of the holders of not less than the minimum number of shares that would
be necessary to take such action at a meeting at which all shares entitled to
vote were present; provided, however, that such consent will only be effective
if notice is given to all shareholders prior to execution of the consent and if
notice is delivered after the execution to all shareholders who have not
consented in writing.
Statutory Shareholder Liability. Both the MGBCL and the IBCA provide that a
shareholder shall have no obligation to the corporation other than to pay to
corporation the full consideration for which the shares were issued.
Distributions. Under the IBCA, the board of directors may authorize and the
corporation may make, subject to any restriction by the articles of
incorporation, distributions to its shareholders unless after such distribution
the corporation would be insolvent or its net assets would be less than zero or
less than the amount needed, if the corporation were to be liquidated, to
satisfy the preferential rights of shareholders.
Under the MGBCL, the board of directors may declare and the corporation may
make, subject to any restriction by the articles of incorporation, dividends
unless the net assets of the corporation are less than stated capital or where
the payment of the dividend would reduce the net assets below the stated
capital. Additionally, if a dividend is declared out of paid-in surplus, no
such dividend shall be paid unless all dividends accrued on shares entitled to
preferential dividends have been fully paid.
Dissenters' Rights. Both the MGBCL and IBCA entitle shareholders of a
corporation to dissent from and obtain fair value for their shares in the event
of certain corporate actions. Subject to certain exceptions, limitations and
conditions, shareholders in both states may dissent from (i) a plan of merger
or consolidation, (ii) a plan of share exchange, (iii) a sale of all or
substantially all of the assets of the corporation, and (iv) in the event of
any amendment to the articles that materially and adversely affects the rights
or preferences of the shares of the dissenting shareholder in certain specified
ways. Under the MGBCL, a dissenting shareholder may also obtain fair value for
their shares in the event of voting rights being accorded to control shares.
Both the MGBCL and IBCA allow corporations to create additional dissenters'
rights in connection with other corporate actions by affirmative provision in
the articles or by-laws or by board resolution. See "THE MERGERS--Missouri
Dissenters' Rights" and "THE MERGERS--Illinois Dissenters' Rights."
Preemptive Rights. The MGBCL states that the preemptive right of a
shareholder to acquire additional shares of a corporation may be limited or
denied to the extent provided for in the articles of incorporation. The IBCA
denies preemptive rights except to the extent such rights are expressly granted
in the articles of incorporation.
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<PAGE>
Director and Officer Discretion. The IBCA provides that, in discharging his
or her duties to the corporation, a director or officer may, in considering the
best long-term and short-term interest of the corporation, consider the effects
of any action (including an action which may involve or relate to a change or
potential change in control of the corporation) on employees, suppliers and
customers of the corporation or its subsidiaries, communities in which the
corporation or its subsidiaries operates, and all other pertinent factors. The
MGBCL provides that, in exercising its business judgment concerning any
acquisition proposal, the board may consider, among other factors, (i) the
future value of the company as an independent entity, (ii) social, legal and
economic effects on employees, suppliers and customers of the company, and the
communities in which the company operates, and (iii) the financial condition,
experience and integrity of the bidder.
COMPARISON OF THE UNION ELECTRIC ARTICLES AND BY-LAWS WITH THE HOLDINGS
ARTICLES AND BY-LAWS
The Union Electric Articles are substantially similar to the Holdings
Articles, except as set forth in this paragraph. First, the authorized capital
stock of Holdings consists of 400,000,000 shares of common stock, $.01 par
value, and 100,000,000 shares of preferred stock, $.01 par value, whereas the
authorized capital stock of Union Electric consists of 150,000,000 shares of
common stock, $5.00 par value, 25,000,000 shares of preferred stock without par
value and 7,500,000 shares of preference stock, $1.00 par value per share; at
present, no shares of preferred stock of Holdings have been designated for
issuance by the Holdings Board. Second, the Holdings Articles expressly provide
that, except as expressly permitted by the terms of a series of preferred stock
authorized by the Holdings Board with respect to such series of preferred
stock, the holders of capital stock of Holdings are not entitled to preemptive
or similar rights with respect to shares of capital stock of Holdings, whereas
the Union Electric Articles provide holders of capital stock of Union Electric
with preemptive or similar rights under certain specified conditions. Third,
the Union Electric Articles provide for cumulative voting in elections of
directors, whereas the Holdings Articles provide that shareholders will not be
entitled to cumulative voting. Fourth, the Holdings Articles provide that the
purpose of Holdings is to engage in any lawful activity for which corporations
may be organized and incorporated under the laws of Missouri, whereas the Union
Electric Articles contain a narrower and more specific purpose clause which is
more closely related to activities traditionally conducted by utility
companies. Fifth, the Holdings Articles, unlike the Union Electric Articles,
specifically provide that the provisions of Section 351.407 of the MGBCL,
relating to control share acquisitions, will not apply to Holdings. See "--
Antitakeover Statutes." Sixth, a provision of the MGBCL specifically provides
that shareholders may act without a meeting only upon unanimous written consent
of holders shares entitled to vote; the Holdings Articles contain an express
provision to the same effect, whereas the Union Electric Articles do not.
The Union Electric By-laws as are currently in effect are substantially
identical to the Holdings By-laws, other than with respect to the current size
of the respective companies' boards of directors.
ANTI-TAKEOVER STATUTES
Business Combination Statutes. The MGBCL and the IBCA both restrict
corporations from engaging in certain enumerated "business combinations"
(generally defined to include a merger or statutory share exchange; sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets
equal to at least 10% of the aggregate market value of all the assets or at
least 10% of the aggregate market value of the outstanding stock or, under the
MGBCL, at least 10% of the earning power or income; the issuance or transfer of
stock to the interested shareholder (under the MGBCL, this restriction only
applies to transactions with a market value equal to at least 5% of outstanding
stock); under the MGBCL, the adoption of a plan or proposal of liquidation or
dissolution, and certain other transactions) involving an "interested
shareholder" (defined generally as a shareholder who beneficially owns at least
20% (15% under the IBCA) of the outstanding voting power or who is an affiliate
or associate of the corporation and beneficially owned 20% (15% under the IBCA)
of the voting power of the then outstanding voting stock within the preceding
five years (three years under the IBCA) for a period of five years (three years
under the IBCA) following the date that the person became an interested
shareholder ("stock acquisition date").
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<PAGE>
Under the MGBCL, this restriction applies unless the business combination or
the acquisition of shares by the interested shareholder is approved by the
board of directors prior to the stock acquisition date. The MGBCL provides that
if the business combination was not approved prior to the interested
shareholder's stock acquisition date, the interested shareholder may effect a
business combination only after the five-year period and only if: (i) the
business combination is approved, not earlier than five years after the stock
acquisition date, by a majority of the voting stock not beneficially owned by
the interested shareholder; or (ii) the consideration to be received by
shareholders is at least equal to the higher of (A) the highest price per share
paid by the interested shareholder while an interested shareholder during the
five-year period prior to the announcement of the business combination or (B)
the higher of the market price of the corporation's shares on the announcement
date or on the interested shareholder's stock acquisition date.
Under the IBCA, this restriction applies for three years unless: (i) the
business combination or the acquisition of shares by the interested shareholder
is approved by the board of directors prior to the share acquisition date; (ii)
after the stock acquisition, the interested shareholder owns at least 85% of
the outstanding voting shares, not including certain categories of employee
owned stock; or (iii) on or after the stock acquisition date, the business
combination is approved by the board of directors and authorized by the
affirmative vote of 66 2/3% of the outstanding voting shares which are not
owned by the interested shareholder. No provision of the articles of
incorporation or by-laws may require a greater vote of shareholders than that
specified in this section.
Control Share Acquisition Statutes. The MGBCL restricts the voting rights of
any person acquiring one-fifth, one-third or a majority of the voting power of
the corporation, absent a shareholder approved plan of merger or certain other
exceptions. Under the MGBCL, control shares only have voting rights to the
extent granted by a resolution approved by the shareholders. Such a resolution
must be approved by a majority vote of all outstanding voting shares and a
majority vote of all outstanding voting shares, excluding interested shares.
Under the MGBCL, the acquiring shareholder may demand that the corporation call
a special meeting for the purpose of considering the voting rights to be
accorded the control shares. The MGBCL permits a corporation to opt out of the
foregoing provisions on control share acquisitions and the Holdings Articles
expressly provide that the foregoing provisions of the MGBCL do not apply to
Holdings.
The IBCA does not contain such a provision.
Fair Price Provisions. The IBCA provides that in addition to any approval
otherwise required, certain mergers, share exchanges or sales, leases,
exchanges or other dispositions involving a public corporation and a 10% holder
or affiliate of the public corporation who was a 10% holder at any time within
the preceding two years (an "interested shareholder") are subject to a
supermajority vote of shareholders, unless certain fair price standards have
been met, specifically, approval of (i) 80% of the total voting power of the
corporation and (ii) a majority of the combined voting power of the then
outstanding voting shares held by disinterested shareholders, unless the
aggregate per share consideration is equal to the greatest of (A) the highest
price paid by such interested shareholder within the prior two-year period, (B)
the price paid by the interested shareholder in the transaction in which it
became an interested shareholder, (C) the market value of the shares on the
first trading day after the date the business combination was announced, or (D)
the market value of the shares on the first trading day after the interested
shareholder became an interested shareholder.
As described above, the MGBCL provides that under certain circumstances, a
corporation may engage in a business combination with a shareholder who owns
20% or more of the outstanding voting power of the corporation provided such
business combination occurs at least five years after such interested
shareholder became such; provided, further, that the consideration received by
shareholders of the corporation in the business combination is at least equal
to the higher of (A) the highest price per share paid by the interested
shareholder while an interested shareholder during the five-year period prior
to the announcement of the business combination or (B) the higher of the market
price of the corporation's shares on the announcement date or on the interested
shareholder's stock acquisition date.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical balance sheets and statements of income of Union Electric and
CIPSCO, including their respective subsidiaries, after giving effect to the
Mergers. The unaudited pro forma combined condensed balance sheet at September
30, 1995 gives effect to the Mergers as if they had occurred at September 30,
1995. The unaudited pro forma combined condensed statements of income for each
of the three years in the period ended December 31, 1994, the nine-month
periods ended September 30, 1995 and 1994, and the 12-month period ended
September 30, 1995 give effect to the Mergers as if they had occurred at
January 1, 1992. These statements are prepared on the basis of accounting for
the Mergers as a pooling of interests and are based on the assumptions set
forth in the notes thereto. In addition, the pro forma financial information
does not give effect to the expected synergies of the transaction.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the historical financial statements and
related notes thereto of Union Electric and CIPSCO, incorporated by reference
herein. The following information is not necessarily indicative of the
financial position or operating results that would have occurred had the
Mergers been consummated on the date, or at the beginning of the periods, for
which the Mergers are being given effect nor is it necessarily indicative of
future operating results or financial position. In addition, due to the effect
of weather on sales and other factors which are characteristic of public
utility operations, financial results for the nine-month periods ended
September 30, 1995 and 1994 are not necessarily indicative of trends for any
twelve-month period.
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AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
AT SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
AS REPORTED (NOTE 1)
--------------------- PRO FORMA
UNION ADJUSTMENTS PRO FORMA
ELECTRIC CIPSCO (NOTES 2, 10) COMBINED
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Property and plant:
Electric..................... $8,441,276 $2,287,538 $ 374,294 $11,103,108
Gas.......................... 169,820 223,660 -- 393,480
Other........................ 35,007 -- -- 35,007
---------- ---------- --------- -----------
8,646,103 2,511,198 374,294 11,531,595
Less accumulated depreciation
and amortization............ 3,454,662 1,115,529 246,430 4,816,621
---------- ---------- --------- -----------
5,191,441 1,395,669 127,864 6,714,974
Construction work in progress:
Nuclear fuel in process...... 109,353 -- -- 109,353
Other........................ 100,187 51,940 1,389 153,516
---------- ---------- --------- -----------
Total property and plant,
net..................... 5,400,981 1,447,609 129,253 6,977,843
Regulatory asset--deferred in-
come taxes (Note 7)........... 726,788 45,589 -- 772,377
Other assets:
Unamortized debt expense..... 45,733 16,813 673 63,219
Nuclear decommissioning trust
fund........................ 69,124 -- -- 69,124
Investments in nonregulated
activities.................. -- 98,539 -- 98,539
Other........................ 22,635 41,332 (2,014) 61,953
---------- ---------- --------- -----------
Total other assets....... 137,492 156,684 (1,341) 292,835
Current assets:
Cash and temporary invest-
ments....................... 75,025 9,185 327 84,537
Accounts receivable, net..... 270,534 78,261 21,665 370,460
Unbilled revenue............. 58,983 16,993 -- 75,976
Materials and supplies, at
average cost--
Fossil fuel................ 55,434 39,595 6,890 101,919
Other...................... 95,038 51,606 5,600 152,244
Other........................ 34,031 13,430 3,527 50,988
---------- ---------- --------- -----------
Total current assets..... 589,045 209,070 38,009 836,124
---------- ---------- --------- -----------
Total Assets................... $6,854,306 $1,858,952 $ 165,921 $ 8,879,179
========== ========== ========= ===========
CAPITAL AND LIABILITIES:
- ------------------------
Capitalization:
Common stock (Note 2)........ $ 510,619 $ 356,812 $(866,059) $ 1,372
Other stockholders' equity
(Note 2).................... 1,848,477 308,098 866,059 3,022,634
---------- ---------- --------- -----------
Total common stockhold-
ers' equity............. 2,359,096 664,910 -- 3,024,006
Preferred stock of subsidi-
ary......................... 219,147 80,000 -- 299,147
Long-term debt............... 1,764,343 478,850 130,000 2,373,193
---------- ---------- --------- -----------
Total capitalization..... 4,342,586 1,223,760 130,000 5,696,346
Minority interest in consoli-
dated subsidiary.............. -- -- 3,534 3,534
Accumulated deferred income
taxes......................... 1,348,881 324,041 (5,842) 1,667,080
Accumulated deferred investment
tax credits................... 168,068 53,074 -- 221,142
Regulatory liability........... 219,525 114,569 -- 334,094
Accumulated provision for nu-
clear decommissioning......... 70,797 -- -- 70,797
Other deferred credits and lia-
bilities...................... 160,417 -- 5,613 166,030
Current liabilities:
Current maturity of long-term
debt........................ 69,295 -- -- 69,295
Short-term debt.............. -- -- 6,800 6,800
Accounts payable............. 107,436 48,955 20,101 176,492
Wages payable................ 33,982 11,260 -- 45,242
Taxes accrued................ 209,132 23,473 86 232,691
Interest accrued............. 57,372 8,610 2,885 68,867
Other........................ 66,815 51,210 2,744 120,769
---------- ---------- --------- -----------
Total current liabili-
ties.................... 544,032 143,508 32,616 720,156
---------- ---------- --------- -----------
Total Capital and Liabilities.. $6,854,306 $1,858,952 $ 165,921 $ 8,879,179
========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO
-------------- ------
(AS REPORTED) PRO FORMA
(NOTES 1,5, (AS REPORTED) ADJUSTMENT PRO FORMA
11) (NOTES 1, 3) (NOTES 2, 10) COMBINED
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric.............. $ 1,613,570 $ 544,886 $ 138,378 $ 2,296,834
Gas................... 60,480 87,523 -- 148,003
Other................. 318 5,860 244 6,422
----------- ---------- --------- -----------
Total operating
revenues......... 1,674,368 638,269 138,622 2, 451,259
OPERATING EXPENSES:
Operations
Fuel and purchased
power.............. 280,690 189,447 74,097 544,234
Gas costs........... 35,051 48,322 -- 83,373
Other............... 277,491 113,897 14,452 405,840
----------- ---------- --------- -----------
593,232 351,666 88,549 1,033,447
Maintenance........... 163,342 46,690 14,038 224,070
Depreciation and
amortization......... 174,369 62,280 11,866 248,515
Income taxes (Note 8). 188,492 41,826 6,208 236,526
Other taxes........... 166,944 43,133 1,496 211,573
----------- ---------- --------- -----------
Total operating
expenses......... 1,286,379 545,595 122,157 1,954,131
OPERATING INCOME........ 387,989 92,674 16,465 497,128
OTHER INCOME AND
DEDUCTIONS:
Allowance for equity
funds used during
construction......... 4,758 600 -- 5,358
Minority interest in
consolidated
subsidiary........... -- -- (3,396) (3,396)
Miscellaneous, net.... (8,772) 1,915 (5,153) (12,010)
----------- ---------- --------- -----------
Total other income
and deductions,
net.............. (4,014) 2,515 (8,549) (10,048)
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS.............. 383,975 95,189 7,916 487,080
INTEREST CHARGES AND
PREFERRED DIVIDENDS:
Interest............... 101,770 25,157 7,916 134,843
Allowance for borrowed
funds used during
construction.......... (4,661) (49) -- (4,710)
Preferred dividends of 9,938 2,896 -- 12,834
subsidiaries (Note 9). ----------- ---------- --------- -----------
Net interest
charges and
preferred
dividends........ 107,047 28,004 7,916 142,967
NET INCOME.............. $ 276,928 $ 67,185 $ -- $ 344,113
=========== ========== ========= ===========
EARNINGS PER SHARE OF
COMMON STOCK
(BASED ON AVERAGE $2.71 $1.97 $2.51
SHARES OUTSTANDING).... =========== ========== ===========
AVERAGE COMMON SHARES 102,123,834 34,069,542 1,022,086 137,215,462
OUTSTANDING (Note 2)... =========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1994
(THOUSANDS OF DOLLARS EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO
-------------- ------ PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS PRO FORMA
(NOTE 1) (NOTE 1) (NOTES 2, 10) COMBINED
-------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric.............. $ 1,586,088 $ 537,013 $ 181,129 $ 2,304,230
Gas................... 62,653 100,724 -- 163,377
Other................. 343 6,660 108 7,111
----------- ---------- --------- -----------
Total operating
revenues......... 1,649,084 644,397 181,237 2,474,718
OPERATING EXPENSES:
Operations
Fuel and purchased
power.............. 256,906 190,014 117,952 564,872
Gas costs........... 45,928 61,835 -- 107,763
Other............... 280,216 109,795 14,380 404,391
----------- ---------- --------- -----------
583,050 361,644 132,332 1,077,026
Maintenance........... 140,105 45,378 13,465 198,948
Depreciation and amor-
tization............. 168,135 60,610 9,035 237,780
Income taxes (Note 8). 194,065 42,247 7,787 244,099
Other taxes........... 165,299 42,972 1,480 209,751
----------- ---------- --------- -----------
Total operating
expenses......... 1,250,654 552,851 164,099 1,967,604
OPERATING INCOME 398,430 91,546 17,138 507,114
OTHER INCOME AND DEDUC-
TIONS:
Allowance for equity
funds used during
construction......... 4,340 504 -- 4,844
Minority interest in
consolidated subsidi-
ary.................. -- -- (4,110) (4,110)
Miscellaneous, net.... 3,259 2,673 (6,193) (261)
----------- ---------- --------- -----------
Total other income
and deductions,
net.............. 7,599 3,177 (10,303) 473
INCOME BEFORE INTEREST
CHARGES
AND PREFERRED DIVI-
DENDS................. 406,029 94,723 6,835 507,587
INTEREST CHARGES AND PREFERRED
DIVIDENDS:
Interest.............. 107,774 24,826 6,835 139,435
Allowance for borrowed
funds used during
construction......... (3,838) (231) -- (4,069)
Preferred dividends of
subsidiaries (Note
9)................... 9,939 2,568 -- 12,507
----------- ---------- --------- -----------
Net interest
charges and
preferred
dividends........ 113,875 27,163 6,835 147,873
NET INCOME.............. $ 292,154 $ 67,560 $ -- $ 359,714
=========== ========== ========= ===========
EARNINGS PER SHARE OF
COMMON STOCK
(BASED ON AVERAGE SHARES $2.86 $1.98 $2.62
OUTSTANDING)........... ===== ===== =====
AVERAGE COMMON SHARES
OUTSTANDING (Note 2)... 102,123,834 34,107,706 1,023,231 137,254,771
=========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
81
<PAGE>
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO
-------------- ------
PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS PRO FORMA
(NOTES 1, 5, 11) (NOTES 1, 3) (NOTES 2,10) COMBINED
---------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric.............. $ 1,997,016 $ 705,300 $ 202,438 $ 2,904,754
Gas................... 83,936 125,218 -- 209,154
Other................. 448 7,969 317 8,734
----------- ---------- --------- -----------
Total operating
revenues......... 2,081,400 838,487 202,755 3,122,642
OPERATING EXPENSES:
Operations:
Fuel and purchased
power.............. 353,345 251,300 113,763 718,408
Gas costs........... 49,218 71,530 -- 120,748
Other............... 372,846 144,170 20,024 537,040
----------- ---------- --------- -----------
775,409 467,000 133,787 1,376,196
Maintenance......... 220,997 66,488 19,649 307,134
Depreciation and am-
ortization......... 232,279 82,769 16,607 331,655
Income taxes (Note
8)................. 200,848 48,661 8,160 257,669
Other taxes......... 212,122 56,178 1,945 270,245
----------- ---------- --------- -----------
Total operating
expenses......... 1,641,655 721,096 180,148 2,542,899
OPERATING INCOME........ 439,745 117,391 22,607 579,743
OTHER INCOME AND DEDUC-
TIONS:
Allowance for equity
funds used during
construction......... 6,186 726 -- 6,912
Minority interest in
consolidated subsidi-
ary.................. -- -- (4,840) (4,840)
Miscellaneous, net.... (11,629) 2,744 (7,257) (16,142)
----------- ---------- --------- -----------
Total other income
and deductions,
net.............. (5,443) 3,470 (12,097) (14,070)
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS.............. 434,302 120,861 10,510 565,673
INTEREST CHARGES AND
PREFERRED
DIVIDENDS:
Interest.............. 135,108 33,551 10,510 179,169
Allowance for borrowed
funds used during
construction......... (6,336) (107) -- (6,443)
Preferred dividends of
subsidiaries (Note
9)................... 13,250 3,838 -- 17,088
----------- ---------- --------- -----------
Net interest
charges and pre-
ferred
dividends........ 142,022 37,282 10,510 189,814
NET INCOME.............. $ 292,280 $ 83,579 $ -- $ 375,859
=========== ========== ========= ===========
EARNINGS PER SHARE OF
COMMON STOCK (BASED ON
AVERAGE SHARES
OUTSTANDING)........... $2.86 $2.45 $2.74
=========== ========== ===========
AVERAGE COMMON SHARES
OUTSTANDING (Note 2)... 102,123,834 34,078,037 1,022,341 137,224,212
=========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
82
<PAGE>
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(THOUSANDS OF DOLLARS EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO PRO FORMA
-------------- ------ ADJUSTMENTS
(AS REPORTED) (AS REPORTED) (NOTES PRO FORMA
(NOTE 1) (NOTE 1) 2,10) COMBINED
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric............... $1,969,533 $697,427 $245,189 $2,912,149
Gas.................... 86,109 138,418 -- 224,527
Other.................. 474 8,770 181 9,425
----------- ---------- --------- -----------
Total operating
revenues.......... 2,056,116 844,615 245,370 3,146,101
OPERATING EXPENSES:
Operations
Fuel and purchased
power............... 329,562 251,867 157,618 739,047
Gas costs............ 60,096 85,043 -- 145,139
Other................ 375,570 140,068 19,952 535,590
----------- ---------- --------- -----------
765,228 476,978 177,570 1,419,776
Maintenance............ 197,760 65,176 19,076 282,012
Depreciation and amor-
tization.............. 226,045 81,099 13,776 320,920
Income taxes (Note 8).. 206,421 49,082 9,739 265,242
Other taxes............ 210,476 56,017 1,929 268,422
----------- ---------- --------- -----------
Total operating ex-
penses............ 1,605,930 728,352 222,090 2,556,372
OPERATING INCOME 450,186 116,263 23,280 589,729
OTHER INCOME AND
DEDUCTIONS:
Allowance for equity
funds used during
construction.......... 5,767 630 -- 6,397
Minority interest in
consolidated subsidi-
ary................... -- -- (5,554) (5,554)
Miscellaneous, net..... 403 3,502 (8,297) (4,392)
----------- ---------- --------- -----------
Total other income
and deductions,
net............... 6,170 4,132 (13,851) (3,549)
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS............... 456,356 120,395 9,429 586,180
INTEREST CHARGES AND
PREFERRED DIVIDENDS:
Interest............... 141,112 33,220 9,429 183,761
Allowance for borrowed
funds used during
construction.......... (5,513) (289) -- (5,802)
Preferred dividends of
subsidiaries (Note 9). 13,252 3,510 -- 16,762
----------- ---------- --------- -----------
Net interest
charges and pre-
ferred
dividends......... 148,851 36,441 9,429 194,721
NET INCOME............... $ 307,505 $ 83,954 $ -- $ 391,459
=========== ========== ========= ===========
EARNINGS PER SHARE OF
COMMON STOCK (BASED ON
AVERAGE SHARES
OUTSTANDING)............ $3.01 $2.46 $2.85
=========== ========== ===========
AVERAGE COMMON SHARES
OUTSTANDING (Note 2).... 102,123,834 34,106,585 1,023,198 137,253,617
=========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
83
<PAGE>
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(THOUSANDS OF DOLLARS EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO
-------------- ------ PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS PRO FORMA
(NOTE 1) (NOTE 1) (NOTES 2, 10) COMBINED
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric.............. $1,965,980 $688,820 $228,178 $2,882,978
Gas................... 99,552 145,702 -- 245,254
Other................. 472 10,238 2 10,712
----------- ---------- --------- -----------
Total operating
revenues......... 2,066,004 844,760 228,180 3,138,944
OPERATING EXPENSES:
Operations
Fuel and purchased
power.............. 413,054 247,119 136,332 796,505
Gas costs........... 66,718 90,097 -- 156,815
Other............... 378,817 142,716 37,981 559,514
----------- ---------- --------- -----------
858,589 479,932 174,313 1,512,834
Maintenance........... 190,097 61,218 18,378 269,693
Depreciation and amor-
tization............. 219,633 78,062 7,094 304,789
Income taxes (Note 8). 179,475 51,861 8,315 239,651
Other taxes........... 206,913 54,813 1,770 263,496
----------- ---------- --------- -----------
Total operating
expenses......... 1,654,707 725,886 209,870 2,590,463
OPERATING INCOME........ 411,297 118,874 18,310 548,481
OTHER INCOME AND DEDUC-
TIONS:
Allowance for equity
funds used during
construction......... 6,418 1,459 -- 7,877
Minority interest in
consolidated subsidi-
ary.................. -- -- (5,204) (5,204)
Miscellaneous, net.... 3,919 3,107 (7,089) (63)
----------- ---------- --------- -----------
Total other income
and deductions,
net.............. 10,337 4,566 (12,293) 2,610
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS.............. 421,634 123,440 6,017 551,091
INTEREST CHARGES AND
PREFERRED
DIVIDENDS:
Interest.............. 129,600 35,024 6,017 170,641
Allowance for borrowed
funds used during
construction......... (5,126) (800) -- (5,926)
Preferred dividends of
subsidiaries (Note
9)................... 14,087 3,718 -- 17,805
----------- ---------- --------- -----------
Net interest
charges and
preferred
dividends........ 138,561 37,942 6,017 182,520
NET INCOME.............. $ 283,073 $ 85,498 $ -- $ 368,571
=========== ========== ========= ===========
EARNINGS PER SHARE OF
COMMON STOCK (BASED ON
AVERAGE SHARES
OUTSTANDING)........... $2.77 $2.51 $2.69
=========== ========== ===========
AVERAGE COMMON SHARES
OUTSTANDING (NOTE 2)... 102,123,834 34,107,706 1,023,231 137,254,771
=========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
84
<PAGE>
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1992
(THOUSANDS OF DOLLARS EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNION ELECTRIC CIPSCO PRO FORMA
-------------- ------------- ADJUSTMENTS
(AS REPORTED) (AS REPORTED) (NOTES 2, PRO FORMA
(NOTES 1, 4) (NOTE 1) 10) COMBINED
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric............... $ 1,929,468 $ 595,619 $ 242,683 $ 2,767,770
Gas.................... 84,159 133,756 -- 217,915
Other.................. 1,494 10,502 -- 11,996
----------- ---------- --------- -----------
Total operating
revenues.......... 2,015,121 739,877 242,683 2,997,681
OPERATING EXPENSES:
Operations
Fuel and purchased
power............... 407,067 193,638 176,821 777,526
Gas costs............ 53,108 82,553 -- 135,661
Other................ 328,582 131,305 15,204 475,091
----------- ---------- --------- -----------
788,757 407,496 192,025 1,388,278
Maintenance............ 187,267 64,092 15,891 267,250
Depreciation and
amortization.......... 246,320 74,170 5,823 326,313
Income taxes (Note 8).. 179,691 40,751 7,898 228,340
Other taxes............ 201,069 51,133 1,838 254,040
----------- ---------- --------- -----------
Total operating
expenses.......... 1,603,104 637,642 223,475 2,464,221
OPERATING INCOME......... 412,017 102,235 19,208 533,460
OTHER INCOME AND
DEDUCTIONS:
Gain on sales of
electric property,
net................... 18,099 -- -- 18,099
Allowance for equity
funds used during
construction.......... 3,115 2,162 -- 5,277
Minority interest in
consolidated
subsidiary............ -- -- (5,334) (5,334)
Miscellaneous, net..... (71) 7,579 (7,817) (309)
----------- ---------- --------- -----------
Total other income
and deductions,
net............... 21,143 9,741 (13,151) 17,733
INCOME BEFORE INTEREST
CHARGES AND
PREFERRED DIVIDENDS..... 433,160 111,976 6,057 551,193
INTEREST CHARGES AND
PREFERRED DIVIDENDS:
Interest............... 135,319 35,992 6,057 177,368
Allowance for borrowed
funds used during
construction.......... (4,907) (1,064) -- (5,971)
Preferred dividends of
subsidiaries (Note 9). 14,058 4,549 -- 18,607
----------- ---------- --------- -----------
Net interest
charges and
preferred
dividends......... 144,470 39,477 6,057 190,004
NET INCOME............... $ 288,690 $ 72,499 $ -- $ 361,189
=========== ========== ========= ===========
EARNINGS PER SHARE OF
COMMON STOCK (BASED ON
AVERAGE SHARES
OUTSTANDING)............ $2.83 $2.13 $2.63
=========== ========== ===========
AVERAGE COMMON SHARES
OUTSTANDING (Note 2).... 102,123,834 34,107,706 1,023,231 137,254,771
=========== ========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
85
<PAGE>
AMEREN CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Ameren Corporation is referred to in these Notes as "Holdings")
1. Reclassifications have been made to certain "as reported" account balances
reflected in Union Electric's and CIPSCO's financial statements to conform
to this reporting presentation (See Notes 7, 8 and 9). All other financial
statement presentation and accounting policy differences are immaterial and
have not been adjusted in the pro forma combined condensed financial
statements.
2. The pro forma combined condensed financial statements reflect the
conversion of each share of Union Electric Common Stock ($5 par value)
outstanding into one share of Holdings Common Stock ($.01 par value) and
the conversion of each share of CIPSCO Common Stock (no par value)
outstanding into 1.03 shares of Holdings Common Stock, as provided in the
Merger Agreement. The pro forma combined condensed financial statements are
presented as if the companies were combined during all periods included
therein.
3. Net income for the nine months and twelve months ended September 30, 1995
includes a pre-tax charge of $6.3 million for CIPSCO's voluntary separation
program.
4. Net income for the fiscal year ended December 31, 1992 includes a gain for
Union Electric on sales of electric distribution properties of $18.1
million, net of income taxes, recorded in the fourth quarter of 1992.
5. The allocation between Union Electric and CIPSCO and their customers of the
estimated cost savings resulting from the Mergers, net of the costs
incurred to achieve such savings, will be subject to regulatory review and
approval. Transaction costs are currently estimated to be approximately $22
million (including fees for financial advisors, attorneys, accountants,
consultants, filings and printing). None of these estimated cost savings or
the costs to achieve such savings has been reflected in the pro forma
combined condensed financial statements. However, net income for the nine
months and twelve months ended September 30, 1995 includes a charge of $9
million, net of income taxes, for merger transaction costs.
6. Intercompany transactions (including purchased and exchanged power
transactions) between Union Electric and CIPSCO during the periods
presented were not material and, accordingly, no pro forma adjustments were
made to eliminate such transactions.
7. CIPSCO's regulatory asset related to deferred income taxes was reclassified
from the regulatory liability account balance to conform to this reporting
presentation.
8. CIPSCO's income taxes are reflected as operating expenses to conform to
this reporting presentation.
9. Currently, the Union Electric Preferred Stock is not issued by a
subsidiary; subsequent to the Merger, the Union Electric Preferred Stock
will be issued by a subsidiary of Holdings. As a result, Union Electric's
preferred dividend requirements have been reclassified to conform to this
reporting presentation.
10. Pro forma adjustments have been made to consolidate the financial results
of EEI, which will, in substance, be a 60% owned subsidiary of Holdings
subsequent to the Merger. Prior to the Merger, Union Electric and CIPSCO
held 40% and 20% ownership interests, respectively, in EEI and accounted
for these investments under the equity method of accounting. All
intercompany transactions between Union Electric, CIPSCO and EEI have been
eliminated.
11. Net income for the nine and twelve months ended September 30, 1995 includes
a one-time credit to Missouri electric customers which reduced revenues and
pre-tax income of Union Electric by $30 million.
86
<PAGE>
SELECTED INFORMATION CONCERNING CIPSCO AND UNION ELECTRIC
BUSINESS OF CIPSCO
CIPSCO, through its utility subsidiary CIPS, supplies electricity and natural
gas services in a 20,000-square-mile region of central and southern Illinois. A
second subsidiary, CIC, manages CIPSCO's non-utility investments, including
leveraged leases, marketable securities and energy projects. CIPS serves
317,000 retail electricity customers in 557 communities and distributes natural
gas to nearly 166,000 customers in 267 communities. The utility service
territory has an estimated population of 820,000 (about seven percent of
Illinois' population) and contains about 35% of its surface area. Additional
information concerning CIPSCO and its subsidiaries is included in the CIPSCO
documents filed with the SEC which are incorporated by reference herein. See
"INCORPORATION BY REFERENCE."
BUSINESS OF UNION ELECTRIC
Union Electric, incorporated in Missouri in 1922, is the successor to a
number of companies, the oldest of which was organized in 1881. It is the
largest electric utility in the State of Missouri and supplies electric service
in territories in Missouri and Illinois having an estimated population of
2,600,000 within an area of approximately 24,500 square miles, including the
greater St. Louis area. Natural gas purchased by Union Electric or its
customers from non-affiliated pipeline companies is distributed in 90 Missouri
communities and in the City of Alton, Illinois and vicinity. At September 30,
1995, Union Electric had 1,127,000 retail electric customers and distributed
natural gas to 118,000 customers. Additional information concerning Union
Electric is included in the Union Electric documents filed with the SEC which
are incorporated by reference herein. See "INCORPORATION BY REFERENCE."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Union Electric. The following table sets forth, as of November 1, 1995, as to
each class of equity securities of Union Electric, all shares beneficially
owned by (i) directors of Union Electric and certain executive officers of
Union Electric and (ii) all directors and executive officers as a group:
<TABLE>
<CAPTION>
NAME COMMON STOCK*
---- -------------
<S> <C>
Donald E. Brandt............................................... 1,576
William E. Cornelius........................................... 18,126
Thomas A. Hays................................................. 4,299
Thomas H. Jacobsen............................................. 1,746
Richard A. Liddy............................................... 1,435
John Peters MacCarthy.......................................... 2,699
Paul L. Miller, Jr............................................. 922
Charles W. Mueller............................................. 6,530
Robert O. Piening.............................................. 6,226
Robert H. Quenon............................................... 1,634
Harvey Saligman................................................ 1,699
Donald F. Schnell.............................................. 7,501
Charles J. Schukai............................................. 4,088
Janet McAfee Weakley........................................... 2,427
All directors and executive officers as a group................ 121,358
</TABLE>
- --------
* Includes shares held jointly
Reported shares include those for which a director or executive officer has
voting or investment power because of joint or fiduciary ownership of the
shares or a relationship with the record owner, most commonly
87
<PAGE>
a spouse, even if such nominee or executive officer does not claim beneficial
ownership. Shares reported for Mr. Cornelius include 9,916 shares held in a
trust account in his wife's name for which he serves as trustee. In addition to
shares shown, 2,184 shares have been reported as beneficially owned by family
members and/or household members of the parties.
Shares beneficially owned by directors and executive officers as a group do
not exceed one percent of any class of equity securities outstanding.
Except for CEDE & Co., nominee for The Depository Trust Company, and Union
Electric, as agent for the Union Electric DRIP, no person holds of record more
than five percent of any class of the outstanding voting securities of Union
Electric. To the knowledge of Union Electric, no person owns beneficially five
percent or more of any class of the outstanding voting securities of Union
Electric.
CIPSCO. The following table sets forth, as of November 1, 1995, as to each
class of equity securities of CIPSCO, all shares beneficially owned by (i)
directors and certain executive officers of CIPSCO and (ii) all directors and
executive officers as a group:
<TABLE>
<CAPTION>
CIPSCO
DIRECTORS COMMON STOCK
--------- ------------
<S> <C>
William J. Alley................................................ 1,605
Lowell A. Dodd.................................................. 951
Clifford L. Greenwalt........................................... 11,357
John L. Heath................................................... 4,000
Robert W. Jackson............................................... 6,999
William A. Koertner............................................. 3,919
Gordon R. Lohman................................................ 200
Richard A. Lumpkin.............................................. 1,015
Hanne M. Merriman............................................... 1,581
Gilbert W. Moorman.............................................. 1,092
William R. Morgan............................................... 2,074
Thomas L. Shade................................................. 2,633
James W. Wogsland............................................... 1,000
Directors and Executive Officers as a Group..................... 49,054
</TABLE>
Reported shares include all shares of which an officer or director is deemed
to be the beneficial owner including joint or fiduciary ownership of shares,
even if such officer or director does not claim beneficial ownership. Shares
beneficially owned by directors and executive officers as a group do not exceed
one percent of any class of equity securities outstanding. See "THE MERGERS--
Potential Conflicts of Interests of Certain Persons in the Mergers--Employee
Plans and Severance Arrangements" for information regarding the CIPSCO unfunded
director deferred compensation plan, under which deferred amounts are adjusted
in value as if invested in CIPSCO Common Stock, and the equivalent share
investments of certain CIPSCO directors. See "THE STOCK OPTION AGREEMENTS" with
respect to the Union Electric Option. CIPSCO owns 100% of the outstanding
common stock of CIPS.
To CIPSCO's knowledge, the only beneficial owner of more than five percent of
CIPSCO Common Stock as of November 1, 1995 is as set forth in the following
table. This information is based solely upon information set forth in CIPSCO's
shareholder records and in statements filed with the SEC pursuant to Section 13
of the Exchange Act.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ------------------- ---------- --------
<S> <C> <C> <C>
CIPSCO Common Stock Franklin Resources, Inc. 2,139,400 shares 6.28%
777 Mariners Island CIPSCO believes these
Boulevard shares may be held for
San Mateo, CA 94404 Franklin's mutual fund
affiliates
</TABLE>
88
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS BETWEEN UNION ELECTRIC AND CIPSCO
In the normal course of business, Union Electric and CIPS buy and sell
electric power from and to each other in arm's-length transactions pursuant to
filed rate schedules. At various times in the past, CIPS and Union Electric
have assisted one another in service restoration following major storms. On
December 31, 1992, CIPS acquired for $8.5 million certain electric distribution
and transmission properties located in western Illinois and previously owned by
Union Electric. The properties acquired serve approximately 4,200 customers.
CIPS and Union Electric are joint owners of EEI and have cooperated, with EEI's
other owners, in the operation of the 1,000 megawatt generating station owned
by EEI located near Joppa, Illinois. EEI provides power to the uranium
enrichment facility of the United States Department of Energy in Paducah,
Kentucky. Available power is also sold by EEI to the utilities that own its
stock. EEI is owned as follows: Union Electric, 40%, CIPS, 20%, Illinois Power
Company, 20% and Kentucky Utilities Company, 20%.
HOLDINGS FOLLOWING THE MERGERS
At the Effective Time, Holdings will become the parent of both Union Electric
and the operating subsidiaries of CIPSCO, including CIPS. The headquarters of
Holdings will be in St. Louis, Missouri. The utility subsidiaries of Holdings
will serve approximately 1,442,000 electric customers and 284,000 natural gas
customers, and its service territory will include portions of Missouri and
Illinois. The business of Holdings will consist of owning utilities and various
non-utility subsidiaries. Union Electric and CIPSCO recognize that the
divestiture of their existing gas operations and certain non-utility operations
is a possibility under the new registered holding company structure, but will
seek approval from the SEC to maintain such businesses. See "REGULATORY
MATTERS."
MANAGEMENT OF HOLDINGS
Pursuant to the Merger Agreement, at the Effective Time, the Holdings Board
will consist of 15 members, ten members of which will be designated by Union
Electric and five members of which will be designated by CIPSCO. It is
anticipated that, immediately prior to the Mergers, the existing members of the
Holdings Board (which is currently composed of two officers of Union Electric
and two officers of CIPSCO) will resign, and that Union Electric and CIPSCO, as
the sole stockholders of Holdings, will elect ten persons designated by the
Union Electric Board and five members designated by the CIPSCO Board to fill
all 15 vacancies on the Holdings Board. As a result, stockholders of Union
Electric and CIPSCO will not have the opportunity to vote on the initial
composition of the Holdings Board. Mr. Mueller will be Chairman of the Holdings
Board and Chief Executive Officer of Holdings and Mr. Greenwalt will be Vice
Chairman of the Holdings Board. As of the date of this Proxy
Statement/Prospectus, Messrs. Mueller and Greenwalt are the only persons to
have been selected to serve on the Holdings Board following consummation of the
Mergers. None of the other 13 designees is expected to be selected until
shortly before consummation of the Mergers, which could occur a year or more
from the date of the Union Electric Meeting and the CIPSCO Meeting.
OPERATIONS
After the Mergers, Union Electric and CIPS will be the principal subsidiaries
of Holdings. The headquarters of the two utilities will remain in their current
locations, Union Electric's in St. Louis and CIPS' in Springfield, Illinois.
Holdings' headquarters will be located in St. Louis.
Except for the transfer of Union Electric's Illinois utility business to
CIPS, the utility operations of CIPS and Union Electric will continue and will
be unaffected by consummation of the Mergers. The Illinois utility business,
including the electric and natural gas customers and all facilities except
electric transmission facilities and the Venice generating station of Union
Electric will be transferred to CIPS immediately after consummation of the
Mergers. CIPS and Union Electric will enter into a power purchase agreement and
agreements providing for the integrated operation (including joint dispatch) of
their systems.
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Pursuant to the Merger Agreement, Holdings shall continue to provide
charitable contributions and community support within the service areas of CIPS
and Union Electric at comparable levels to those provided by such parties
within the two-year period prior to the Effective Time.
DIVIDENDS
It is anticipated that Holdings will adopt Union Electric's common share
dividend payment level. Union Electric currently pays $2.50 per share annually,
and CIPSCO's annual dividend rate is currently $2.04 per share. However, no
assurance can be given that such dividend rate will be in effect or will remain
unchanged, and Holdings reserves the right to increase or decrease its dividend
as may be required by law or contract or as may be determined by the Holdings
Board, in its discretion, to be advisable. Declaration and timing of dividends
on Holdings Common Stock will be a business decision to be made by the Holdings
Board from time to time based upon the results of operations and financial
condition of Holdings and its subsidiaries and such other business
considerations as the Holdings Board considers relevant in accordance with
applicable laws. For a description of certain restrictions on Holding's ability
to pay dividends on the Holdings Common Stock, see "DESCRIPTION OF HOLDINGS
CAPITAL STOCK."
HOLDINGS INCENTIVE PLANS
As described above in "THE MERGER AGREEMENT--Holdings Plans," the Merger
Agreement provides that Holdings will adopt the Holdings Replacement Plans,
subject in each case, if applicable, to shareholder approval. The Holdings
Replacement Plans will include a new annual bonus plan and a new stock
compensation plan. Under the new annual bonus plan, cash bonuses, based on
percentages of base salaries, will be awarded based upon the achievement of
performance goals determined in advance by the Holdings Human Resources
Committee. With respect to those participants in this plan who are, or who the
Holdings Human Resources Committee determines are likely to be, "covered
individuals" within the meaning of Section 162(m) of the Code, the performance
goals will 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 new stock
compensation plan will provide for the grant of stock options, stock
appreciation rights, restricted stock, performance units and such other awards
based upon the Holdings Common Stock as the Holdings Board may determine,
subject to shareholder approval. Holdings will reserve four million shares for
issuance pursuant to the Holdings Stock Plan. Holdings will seek shareholder
approval of the Holdings Replacement Plans as soon as reasonably practicable
following the Effective Time.
EXPERTS
The consolidated financial statements of CIPSCO Incorporated, as of December
31, 1994 and 1993 and for each of the three years in the period ended December
31, 1994 included in CIPSCO's 1994 Annual Report on Form 10-K incorporated by
reference in this Joint Proxy Statement/Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
The financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K of Union
Electric for the year ended December 31, 1994 have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
William E. Jaudes, Esq., Vice President and General Counsel of Union
Electric, and Secretary and Assistant Treasurer of Holdings, will pass upon the
legality of the shares of Holdings Common Stock to be issued in connection with
the Mergers. Mr. Jaudes owns an aggregate of approximately 5,030 shares of
Union Electric Common Stock.
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SHAREHOLDER PROPOSALS
To be considered for inclusion in the proxy statement for the 1996 annual
meeting of shareholders of Union Electric, a proposal by a shareholder must be
received by the Secretary of Union Electric at 1901 Chouteau Avenue, P.O. Box
149, St. Louis, Missouri 63166, not later than the close of business on
November 17, 1995. Proposals received by that date will be included in the 1996
Proxy Statement if the proposals are proper for consideration at an annual
meeting and are required for inclusion in the proxy statement by, and conform
to, the rules of the SEC.
For a proposal to be properly brought before an annual meeting by a
shareholder, the Union Electric By-laws provide that the Secretary of Union
Electric must have received written notice thereof not less than 60 nor more
than 90 days prior to the meeting. The notice must contain (i) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act and Rule 14a-11 thereunder; (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (a) the name and address of such stockholder, as they appear on Union
Electric's books, and of such beneficial owner and (b) the class and number of
shares of the Company which are owned beneficially and of record by such
stockholder and such beneficial owner.
Any proposal by a shareholder for the CIPSCO annual shareholder meeting in
1996 must have been received by the Secretary of CIPSCO at 607 East Adams
Street, Springfield, Illinois 62739, not later than the close of business on
November 6, 1995. Proposals received by that date will be included in the 1996
Proxy Statement if the proposals are proper for consideration at an annual
meeting and are required for inclusion in the proxy statement by, and conform
to, the rules of the SEC.
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ANNEX 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* NOTE: ARCH HOLDING CORP. HAS BEEN RENAMED AMEREN CORPORATION SINCE THE
EXECUTION OF THIS AGREEMENT.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE MERGERS
<S> <C> <C>
SECTION 1.1 The Mergers.......................................................... A-1
SECTION 1.2 Effects of the Mergers............................................... A-1
SECTION 1.3 Effective Time of the Mergers........................................ A-2
ARTICLE II
TREATMENT OF SHARES
SECTION 2.1 Effect of the Mergers on Capital Stock............................... A-2
SECTION 2.2 Dissenting Shares.................................................... A-3
SECTION 2.3 Exchange of Certificates............................................. A-4
ARTICLE III
THE CLOSING
SECTION 3.1 Closing.............................................................. A-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CIPSCO
SECTION 4.1 Organization and Qualification....................................... A-5
SECTION 4.2 Subsidiaries......................................................... A-6
SECTION 4.3 Capitalization....................................................... A-6
SECTION 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance........ A-7
SECTION 4.5 Reports and Financial Statements..................................... A-8
SECTION 4.6 Absence of Certain Changes or Events................................. A-8
SECTION 4.7 Litigation........................................................... A-9
SECTION 4.8 Registration Statement and Proxy Statement........................... A-9
SECTION 4.9 Tax Matters.......................................................... A-9
SECTION 4.10 Employee Matters; ERISA.............................................. A-11
SECTION 4.11 Environmental Protection............................................. A-12
SECTION 4.12 Regulation as a Utility.............................................. A-14
SECTION 4.13 Vote Required........................................................ A-14
SECTION 4.14 Accounting Matters................................................... A-14
SECTION 4.15 Non-applicability of Certain Illinois Law............................ A-14
SECTION 4.16 Opinion of Financial Advisor......................................... A-15
SECTION 4.17 Insurance............................................................ A-15
SECTION 4.18 Ownership of Union Electric Common Stock............................. A-15
</TABLE>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UNION ELECTRIC
<TABLE>
<S> <C> <C>
SECTION 5.1 Organization and Qualification....................................... A-15
SECTION 5.2 Subsidiaries......................................................... A-15
SECTION 5.3 Capitalization....................................................... A-16
SECTION 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance........ A-16
SECTION 5.5 Reports and Financial Statements..................................... A-17
SECTION 5.6 Absence of Certain Changes or Events................................. A-18
SECTION 5.7 Litigation........................................................... A-18
SECTION 5.8 Registration Statement and Proxy Statement........................... A-18
SECTION 5.9 Tax Matters.......................................................... A-18
SECTION 5.10 Employee Matters; ERISA.............................................. A-19
SECTION 5.11 Environmental Protection............................................. A-21
SECTION 5.12 Regulation as a Utility.............................................. A-22
SECTION 5.13 Vote Required........................................................ A-22
SECTION 5.14 Accounting Matters................................................... A-22
SECTION 5.15 Non-applicability of Certain Missouri Law............................ A-22
SECTION 5.16 Opinion of Financial Advisor......................................... A-22
SECTION 5.17 Insurance............................................................ A-22
SECTION 5.18 Ownership of CIPSCO Common Stock..................................... A-23
SECTION 5.19 Operations of Nuclear Power Plant.................................... A-23
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Covenants of the Parties............................................. A-23
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information................................................ A-28
SECTION 7.2 Joint Proxy Statement and Registration Statement..................... A-29
SECTION 7.3 Regulatory Matters................................................... A-29
SECTION 7.4 Shareholder Approval................................................. A-30
SECTION 7.5 Directors' and Officers' Indemnification............................. A-30
SECTION 7.6 Disclosure Schedules................................................. A-31
SECTION 7.7 Public Announcements................................................. A-32
SECTION 7.8 Rule 145 Affiliates.................................................. A-32
SECTION 7.9 Employee Agreements and Workforce Matters............................ A-32
SECTION 7.10 Employee Benefit Plans............................................... A-32
SECTION 7.11 Stock Option and Other Stock Plans................................... A-34
SECTION 7.12 No Solicitations..................................................... A-35
SECTION 7.13 Company Board of Directors........................................... A-35
SECTION 7.14 Company Officers..................................................... A-35
SECTION 7.15 Boards of Directors of Subsidiaries.................................. A-36
SECTION 7.16 Post-Merger Operations............................................... A-36
SECTION 7.17 Expenses............................................................. A-36
SECTION 7.18 Further Assurances................................................... A-36
SECTION 7.19 Charter and By-Law Amendments........................................ A-36
SECTION 7.20 Transfers of Illinois Assets......................................... A-37
</TABLE>
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ARTICLE VIII
CONDITIONS
<TABLE>
<S> <C> <C>
SECTION 8.1 Conditions to Each Party's Obligation to Effect the Mergers.......... A-37
SECTION 8.2 Conditions to Obligation of Union Electric to Effect the Mergers..... A-38
SECTION 8.3 Conditions to Obligation of CIPSCO to Effect the Mergers............. A-38
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination.......................................................... A-39
SECTION 9.2 Effect of Termination................................................ A-41
SECTION 9.3 Termination Fee; Expenses............................................ A-41
SECTION 9.4 Amendment............................................................ A-42
SECTION 9.5 Waiver............................................................... A-42
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival; Effect of Representations and Warranties............... A-43
SECTION 10.2 Brokers.............................................................. A-43
SECTION 10.3 Notices.............................................................. A-43
SECTION 10.4 Miscellaneous........................................................ A-44
SECTION 10.5 Interpretation....................................................... A-44
SECTION 10.6 Counterparts; Effect................................................. A-44
SECTION 10.7 Parties in Interest.................................................. A-44
SECTION 10.8 Waiver of Jury Trial and Certain Damages............................. A-45
SECTION 10.9 Enforcement.......................................................... A-45
Exhibit A Form of CIPSCO Stock Option Agreement (omitted)
Exhibit B Form of Union Electric Stock Option Agreement (omitted)
Exhibit 7.8 Form of Affiliate Agreement (omitted)
</TABLE>
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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
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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").
(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:
(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
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<PAGE>
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 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).
(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
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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 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
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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
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 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
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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 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, non assessable 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
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("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
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) 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;
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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 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 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,
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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, 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 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.
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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.
(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 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.
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(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 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 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.
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(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.
(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.
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(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 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.
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.
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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 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 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
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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 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.
(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
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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 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
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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 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 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.
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(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.
(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.
(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
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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
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.
(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
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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.
(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 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
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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 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 Electric and each of the Union Electric
Subsidiaries is, and has been continuously since January 1,
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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 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
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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 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.
(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
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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
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, 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,
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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.
(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.
(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
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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 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 party is a party or
waive, release or assign any material rights or claims.
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(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.
(z) 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 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
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those premises, documents, reports and in formation 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 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/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-
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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 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 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,
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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 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,
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warranties, covenants or agreements of the parties hereto contained herein to
the extent that such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedules. Anything to the contrary contained
herein or in the Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the Disclosure
Schedules shall be deemed to have been made on and as of the date hereof.
Section 7.7 Public Announcements. Subject to each party's disclosure
obligations imposed by law, 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.
(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
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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 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.
(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.
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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 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
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prospectuses contained therein) for so long as such benefits and grants
remain payable and such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, the Company shall
administer the 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 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.
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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.
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 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
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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:
(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 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.
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(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.
(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
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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 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;
(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;
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(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 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
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 with draw 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
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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 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
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
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<PAGE>
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.
(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 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.
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
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<PAGE>
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.
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
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<PAGE>
(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
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, 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
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<PAGE>
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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<PAGE>
SIGNATURES
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
/s/ Charles W. Mueller
By:
-----------------------------------
Name: Charles W. Mueller
/s/ James C. Thompson Title: President
Attest:
--------------------------------
Secretary
CIPSCO INCORPORATED
/s/ Clifford L. Greenwalt
By:
-----------------------------------
Name: Clifford L. Greenwalt
/s/ William A. Koertner Title: President
Attest:
--------------------------------
Secretary
ARCH HOLDING CORP.
/s/ Donald E. Brandt
By:
-----------------------------------
Name: Donald E. Brandt
/s/ William E. Jaudes Title: President
Attest:
--------------------------------
Secretary
ARCH MERGER INC.
/s/ Donald E. Brandt
By:
-----------------------------------
Name: Donald E. Brandt
/s/ William E. Jaudes Title: President
Attest:
--------------------------------
Secretary
A-46
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
1935 Act................................................................... A-6
Affiliate Agreement........................................................ A-32
Affiliated Employees....................................................... A-33
Agreement.................................................................. A-1
Articles of Incorporation.................................................. A-2
Atomic Energy Act.......................................................... A-8
Business Combination....................................................... A-40
Business Combination Proposal.............................................. A-35
By-Laws.................................................................... A-2
Callaway................................................................... A-23
Certificates............................................................... A-4
CIPS....................................................................... A-6
CIPS 401(k) Plans.......................................................... A-24
CIPS Common Stock.......................................................... A-6
CIPS No-Par Preferred Stock................................................ A-7
CIPS Preferred Stock....................................................... A-6
CIPSCO..................................................................... A-1
CIPSCO Benefit Plans....................................................... A-11
CIPSCO Common Stock........................................................ A-3
CIPSCO Disclosure Schedule................................................. A-31
CIPSCO Dissenting Shares................................................... A-3
CIPSCO Exchange Ratio...................................................... A-3
CIPSCO Financial Statements................................................ A-8
CIPSCO Joint Venture....................................................... A-6
CIPSCO Material Adverse Effect............................................. A-9
CIPSCO MIP................................................................. A-33
CIPSCO Required Consents................................................... A-7
CIPSCO Required Statutory Approval......................................... A-7
CIPSCO Shareholders' Approval.............................................. A-14
CIPSCO SEC Reports......................................................... A-8
CIPSCO Special Meeting..................................................... A-30
CIPSCO Stock Option Agreement.............................................. A-1
CIPSCO Subsidiary.......................................................... A-6
Closing.................................................................... A-5
Closing Agreement.......................................................... A-10
Closing Date............................................................... A-5
Code....................................................................... A-10
Committee.................................................................. A-33
Company.................................................................... A-1
Company Common Stock....................................................... A-3
Company Effective Time..................................................... A-2
Company Merger............................................................. A-1
Company Replacement Plans.................................................. A-33
Company Shares............................................................. A-4
Company Stock Plan......................................................... A-33
Confidentiality Agreement.................................................. A-29
Converted Shares........................................................... A-4
Direct Subsidiary.......................................................... A-6
Disclosure Schedules....................................................... A-31
Effective Time............................................................. A-2
</TABLE>
A-47
<PAGE>
<TABLE>
<S> <C>
Environmental Claim........................................................ A-13
Environmental Laws......................................................... A-14
Environmental Permits...................................................... A-13
ERISA...................................................................... A-11
ERISA Affiliate............................................................ A-11
Exchange Act............................................................... A-8
Exchange Agent............................................................. A-4
Exchange Ratios............................................................ A-3
FERC....................................................................... A-8
Final Order................................................................ A-37
GAAP....................................................................... A-8
Governmental Authority..................................................... A-7
Hazardous Material......................................................... A-14
HSR Act.................................................................... A-30
IBCL....................................................................... A-2
Indemnified Liabilities.................................................... A-31
Indemnified Parties........................................................ A-30
Indemnified Party.......................................................... A-30
Initial Termination Date................................................... A-39
IRS........................................................................ A-11
Joint Proxy/Registration Statement......................................... A-29
joint venture.............................................................. A-6
Liens...................................................................... A-7
Merger Sub................................................................. A-1
Merger Sub Common Stock.................................................... A-2
Mergers.................................................................... A-1
MGBCL...................................................................... A-2
NRC........................................................................ A-8
NYSE....................................................................... A-5
PBCG....................................................................... A-11
PCBs....................................................................... A-14
Power Act.................................................................. A-8
Proxy Statement............................................................ A-9
Registration Statement..................................................... A-9
Release.................................................................... A-14
Representatives............................................................ A-28
Restricted Investments..................................................... A-28
SEC........................................................................ A-8
Securities Act............................................................. A-8
Stock Plans................................................................ A-34
subsidiary................................................................. A-5
Target Party............................................................... A-42
Task Force................................................................. A-27
Tax Return................................................................. A-9
Tax Ruling................................................................. A-10
Taxes...................................................................... A-9
Three Year Period.......................................................... A-44
Union Electric............................................................. A-1
Union Electric Benefit Plans............................................... A-20
Union Electric Common Stock................................................ A-2
Union Electric Disclosure Schedule......................................... A-31
Union Electric Dissenting Shares........................................... A-3
</TABLE>
A-48
<PAGE>
<TABLE>
<S> <C>
Union Electric Dividend Units.............................................. A-34
Union Electric Effective Time.............................................. A-2
Union Electric EIP......................................................... A-33
Union Electric Exchange Ratio.............................................. A-3
Union Electric Financial Statements........................................ A-18
Union Electric Joint Venture............................................... A-15
Union Electric LTIP........................................................ A-24
Union Electric Material Adverse Effect..................................... A-18
Union Electric Merger...................................................... A-1
Union Electric Preference Stock............................................ A-16
Union Electric Preferred Stock............................................. A-3
Union Electric Required Consents........................................... A-17
Union Electric Required Statutory Approvals................................ A-17
Union Electric SEC Reports................................................. A-17
Union Electric Shareholders' Approval...................................... A-22
Union Electric Special Meeting............................................. A-30
Union Electric Stock Option Agreement...................................... A-1
Union Electric Stock Option................................................ A-34
Union Electric Subsidiary.................................................. A-15
Union Electric Unrestricted Subsidiaries................................... A-16
Violation.................................................................. A-7
</TABLE>
A-49
<PAGE>
ANNEX B
CIPSCO STOCK OPTION AGREEMENT*
* NOTE: THE ENTITY REFERRED TO IN THIS AGREEMENT AS "ARCH HOLDING CORP." HAS
BEEN RENAMED "AMEREN CORPORATION" SINCE THE DATE OF THIS 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
B-1
<PAGE>
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 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 number of Union Electric Shares to be delivered to CIPSCO
shall be equal to the quotient obtained by dividing (i) the
B-2
<PAGE>
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 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
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<PAGE>
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's 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 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
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,
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<PAGE>
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 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
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
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<PAGE>
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 (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
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<PAGE>
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 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).
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
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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 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.
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
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<PAGE>
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):
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
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<PAGE>
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, (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
Agreement, if mutilated, CIPSCO will execute and deliver a new Agreement of
like tenor and date.
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
/s/ Charles W. Mueller
By:
-----------------------------------
Name: Charles W. Mueller
Title: President
CIPSCO INCORPORATED
/s/ Clifford L. Greenwalt
By:
-----------------------------------
Name: Clifford L. Greenwalt
Title: President
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<PAGE>
ANNEX C
UNION ELECTRIC COMPANY STOCK OPTION AGREEMENT*
* NOTE: THE ENTITY REFERRED TO IN THIS AGREEMENT AS "ARCH HOLDING CORP." HAS
BEEN RENAMED "AMEREN CORPORATION" SINCE THE DATE OF THIS 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's 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
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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 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 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
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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 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
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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
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 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
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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;
(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 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.
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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.
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 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)
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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 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.
C-7
<PAGE>
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 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 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
C-8
<PAGE>
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):
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
C-9
<PAGE>
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 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.
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
/s/ Charles W. Mueller
By:
-----------------------------------
Name: Charles W. Mueller
Title: President
CIPSCO INCORPORATED
/s/ Clifford L. Greenwalt
By:
-----------------------------------
Name: Clifford L. Greenwalt
Title: President
C-10
<PAGE>
ANNEX D
[LETTERHEAD OF GOLDMAN SACHS & CO]
November 13, 1995
Board of Directors
Union Electric Company
1901 Chouteau Avenue
St. Louis, MO 63103
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $5.00 per share (the "Common
Stock"), of Union Electric Company (the "Company") of the exchange ratio to be
received by holders of Common Stock in the merger involving the Company
contemplated by the Agreement and Plan of Merger (the "Agreement"), dated as of
August 11, 1995, by and among the Company, CIPSCO Incorporated ("CIPSCO"),
Ameren Corporation (formerly known as Arch Holding Corp.) ("Holding"), and Arch
Merger Inc. ("Merger Sub"), in light of the CIPSCO Exchange Ratio (as defined
below). Pursuant to the Agreement, the Company will merge with Merger Sub and
each outstanding share of Common Stock will be converted into the right to
receive one share of the common stock, par value $.01, of Holding ("Holding
Common Stock") (the "Company Exchange Ratio") and CIPSCO will merge with
Holding and each share of common stock, no par value, of CIPSCO (the "CIPSCO
Common Stock") will be converted into the right to receive 1.03 shares of
Holding Common Stock (the "CIPSCO Exchange Ratio"). As a result of the mergers,
the Company and the operating subsidiaries of CIPSCO will become wholly-owned
subsidiaries of Holding. Capitalized terms used herein but not defined shall
have the meanings ascribed to such terms in the Agreement.
Goldman, Sachs & Co. ("Goldman Sachs"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. We are familiar with the Company having provided certain
investment banking services to the Company from time to time, including acting
as managing underwriter of certain securities offerings of the Company, and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We also
have provided certain investment banking services to CIPSCO from time to time,
including acting as managing underwriter of certain securities offerings of
CIPSCO, and as a dealer in its commercial paper program.
In the ordinary course of the trading activities of Goldman Sachs, the Firm
actively trades the debt and equity securities of the Company and CIPSCO for
its own account and for the accounts of customers of Goldman Sachs and may,
therefore, at any time hold a long or short position in such securities.
D-1
<PAGE>
Union Electric Company
November 13, 1995
Page Two
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to shareholders and Annual Reports on Form 10-K of
the Company and CIPSCO for the five years ended December 31, 1994; certain
interim reports to shareholders and Quarterly Reports on Form 10-Q of the
Company and CIPSCO; certain FERC Forms 1 of the Company and Central Illinois
Public Service Company; certain other communications from the Company and
CIPSCO to their respective shareholders; and certain internal financial
analyses and forecasts for the Company and CIPSCO prepared by their respective
managements, including analyses and forecasts of certain operating efficiencies
and financial synergies (the "Synergies") expected to be achieved as a result
of the Mergers, which were prepared jointly by the managements of the Company
and CIPSCO, with the assistance of a third party consultant. We also have held
discussions with members of the senior management of the Company and CIPSCO
regarding the past and current business operations, financial condition and
future prospects of their respective companies and their analyses of the
strategic benefits of the mergers, including, without limitation, the amount
and timing of realization of the Synergies. In addition, we have reviewed the
reported price and trading activity for the Common Stock and the CIPSCO Common
Stock, compared certain financial and stock market information for the Company
and CIPSCO with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the electric utility industry and performed such other
studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the analyses and forecasts of the Synergies, which were provided to us by
the Company, have been reasonably determined on a basis reflecting the best
currently available judgements and estimates of the Company and CIPSCO and that
such Synergies will be realized in the amounts and at the times contemplated
thereby. In addition, we have not made an independent evaluation or appraisal
of the assets and liabilities of the Company or CIPSCO or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have assumed, with your consent, that the consummation of the
transactions contemplated by the Agreement will be accounted for as a pooling
of interests under generally accepted accounting principles. In addition, we
have further assumed that obtaining any necessary regulatory or third party
approvals for the transactions contemplated by the Agreement or the creation of
a holding company and any possible divestitures which may be required in
connection therewith will not have an adverse effect on Holdings, the Company
or CIPSCO. We are not expressing any opinion herein as to the prices at which
the Holding Common Stock may trade when the transaction is consummated.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof, in light of
the CIPSCO Exchange Ratio, the Company Exchange Ratio is fair to the holders of
the Common Stock.
Very truly yours,
/s/ Goldman, Sachs & Co.
Goldman, Sachs & Co.
D-2
<PAGE>
ANNEX E
[LETTERHEAD OF MORGAN STANLEY & CO]
November 13, 1995
Board of Directors
CIPSCO Incorporated
607 East Adams Street
Springfield, Illinois 62739
Members of the Board of Directors:
We understand that CIPSCO Incorporated ("CIPSCO" or the "Company"), Union
Electric Company ("UE"), Ameren Corporation ("Holdings") and Arch Merger Inc.,
a wholly owned subsidiary of Holdings ("Merger Sub"), have entered into an
Agreement and Plan of Merger, dated as of August 11, 1995 (the "Merger
Agreement"), which provides, among other things, for (i) the merger of the
Company with and into Holdings and (ii) the merger of Merger Sub with and into
UE (collectively, the "Merger"). Pursuant to the Merger, Holdings will be the
surviving corporation and each issued and outstanding share of common stock,
without par value, of the Company (the "Company Common Stock"), other than
shares held in treasury or held by UE or the subsidiaries or affiliates of the
Company or UE, will be converted into the right to receive 1.03 shares (the
"Company Exchange Ratio") of common stock, par value $5.00 per share, of
Holdings (the "Holdings Common Stock") and UE will become a wholly owned
subsidiary of Holdings and each issued and outstanding share of common stock,
par value $5.00 per share, of UE (the "UE Common Stock"), other than shares
held in treasury or held by the Company or the subsidiaries or affiliates of UE
or the Company or as to which dissenters' rights have been perfected, will be
converted into the right to receive one share (the "UE Exchange Ratio") of
Holdings Common Stock. It is also our understanding that the Company and UE
have entered into Stock Option Agreements, each dated as of August 11, 1995
(the "Option Agreements"), which provide, among other things, for the grant by
the Company to UE of an option to acquire certain shares of Company Common
Stock and the grant by UE to the Company of an option to acquire certain shares
of UE Common Stock upon the terms and conditions provided in such agreements
(collectively, the "Options"). The terms and conditions of the Merger and the
Options are more fully set forth in the Merger Agreement and Option Agreements,
respectively.
You have asked for our opinion as to whether the Company Exchange Ratio, taking
into account the UE Exchange Ratio, is fair from a financial point of view to
the holders of shares of the Company Common Stock.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company and UE, respectively;
(ii) analyzed certain internal financial statements and other financial
and operating data concerning the Company and UE prepared by their
respective managements;
(iii) analyzed certain financial projections of the Company and UE
prepared by their respective managements;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company and UE with senior executives of
the Company and UE, respectively;
(v) reviewed the reported prices and trading activity of both the
Company Common Stock and UE Common Stock;
(vi) compared the financial performance of the Company and UE and the
prices and trading activity of the Company Common Stock and UE
Common Stock with that of certain other comparable publicly traded
companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable merger or acquisition transactions;
E-1
<PAGE>
Board of Directors CIPSCO Incorporated
Page 2
(viii) analyzed the pro forma financial impact of the Merger on Holdings;
(ix) participated in discussions and negotiations among representatives
of the Company and UE and their respective financial and legal
advisors;
(x) reviewed the Merger Agreement, the Option Agreements and certain
related documents;
(xi) participated in discussions with the Company, UE and a third party
consultant to the Company and UE regarding estimates of cost savings
expected to be derived from the Merger and participated in a
presentation by the Company's nuclear advisor regarding UE's nuclear
operations; and
(xii) performed such other analyses and examinations and considered such
other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company and
UE, respectively. We have not made any independent valuation or appraisal of
the assets or liabilities of the Company or UE; however, we have reviewed the
presentation of the Company, UE and the third party consultant to the Company
and UE with respect to estimates of cost savings expected to be derived from
the Merger and have relied without independent verification upon such estimates
for purposes of this opinion. In addition, we have assumed that the Merger will
be consummated in accordance with the terms set forth in the Merger Agreement,
including, among other things, that the Merger will be accounted for as a
"pooling-of-interests" business combination in accordance with US GAAP and the
Merger will be treated as a tax-free reorganization and/or exchange, each
pursuant to the Internal Revenue Code of 1986. Our opinion is necessarily based
on economic, market and other conditions as in effect on, and the information
made available to us as of, the date hereof.
In arriving at our opinion, we have assumed that in connection with the receipt
of all the necessary regulatory and governmental approvals for the proposed
Merger, no restriction will be imposed that would have a material adverse
effect on the contemplated benefits expected to be derived in the proposed
Merger. In addition, we were not authorized to solicit, and did not solicit,
interest from any party with respect to a merger with or other business
combination transaction involving the Company or any of its assets.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and have received
fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission
with respect to the Merger and the transaction related thereto. In addition, we
express no recommendation as to how the shareholders of the Company should vote
at the shareholders' meetings held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Company Exchange Ratio, taking into account the UE Exchange Ratio, is fair from
a financial point of view to the holders of shares of the Company Common Stock.
Very truly yours,
Morgan Stanley & Co. Incorporated
/s/ Robert W. Jones
By: ____________________________________
Robert W. Jones
Managing Director
E-2
<PAGE>
ANNEX F
RESTATED
ARTICLES OF INCORPORATION
OF
AMEREN CORPORATION
Pursuant to the provisions of Section 351.107, R.S.Mo. 1986, as amended, the
undersigned Corporation, with the consent of holders of all of the outstanding
shares of the Corporation's capital stock, restates its Articles of
Incorporation as follows:
FIRST
That the name of the Corporation shall be AMEREN CORPORATION.
SECOND
That the registered office of the Corporation in the State of Missouri shall
be 1901 Chouteau Avenue, St. Louis, Missouri 63103, and the name of the
registered agent at such address shall be William E. Jaudes.
THIRD
That the aggregate number of shares which the Corporation has the authority
to issue is 500,000,000 classified into 400,000,000 shares of Common Stock,
$.01 par value per share, and 100,000,000 shares of Preferred Stock, $.01 par
value per share.
(a) Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation (hereinafter
referred to as the "Board") is hereby authorized to fix the voting rights,
if any, designations, powers, preferences and the relative, participating,
optional or other rights, if any, and the qualifications, limitations or
restrictions thereof, of any unissued series of Preferred Stock; and to fix
the number of shares constituting such series, and to increase or decrease
the number of shares of any such series (but not below the number of shares
thereof then outstanding). The number of shares of Preferred Stock may be
increased without the consent of the holders of any class or series of
Preferred Stock unless the resolution creating such class or series of
Preferred Stock specifically provides to the contrary.
(b) Except as otherwise provided by law or by the resolution or
resolutions adopted by the Board designating the rights, powers and
preferences of any series of Preferred Stock, the Common Stock shall have
the exclusive right to vote for the election of directors and for all other
purposes. Each share of Common Stock shall have one vote on all matters,
including the election of directors, and the Common Stock shall vote
together as a single class. The holders of Common Stock (and, unless
specifically provided to the contrary, the holders of any class or series
of Preferred Stock permitted to vote for the election of directors) will
not be entitled to cumulate votes for the election of directors.
(c) Except as provided by law or by the resolution or resolutions adopted
by the Board designating the rights, powers and preferences of any series
of Preferred Stock, the holders of Preferred Stock shall not be entitled to
any preemptive or preferential right to subscribe to or purchase shares of
any class or series of stock of the Corporation, now or hereafter
authorized, or any series convertible into, or warrants or other evidences
of optional rights to purchase, or subscribe to, shares of any class or
series of stock of the Corporation now or hereafter authorized. The holders
of Common Stock shall not be entitled to any preemptive or preferential
right to subscribe to or purchase shares of any class or series of stock of
the Corporation, now or hereafter authorized, or any series convertible
into, or warrants or other evidences of optional rights to purchase, or
subscribe to, shares of any class or series of stock of the Corporation now
or hereafter authorized.
F-1
<PAGE>
FOURTH
That the name and place of residence of the incorporator is:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Mark Gordon, Esq. c/o Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10010
</TABLE>
FIFTH
That, except as otherwise provided by the resolution or resolutions adopted
by the Board designating the rights, powers and preferences of any series of
Preferred Stock, the number of the Board shall be fixed at fifteen or at the
number and in the manner provided by the By-laws of the Corporation, as
amended, and written notice shall be given to the Secretary of State of
Missouri of the number of the Board within thirty (30) calendar days of the
fixing of such number. The Board shall have the power to make, alter, amend or
repeal the By-laws of the Company. Vacancies in the Board, including vacancies
created by newly created directorships, shall be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director.
SIXTH
That the Corporation shall have perpetual existence.
SEVENTH
That the purpose of the Corporation shall be to engage in any lawful activity
for which corporations may be organized and incorporated under laws of
Missouri.
EIGHTH
That the provisions of Missouri General and Business Corporation Law Section
351.407, "Control Shares Acquisitions Procedures--Exception", shall not apply
to the Corporation.
NINTH
That any action required to be taken by stockholders at any meeting of
stockholders of the Corporation, or any action which may be taken by
stockholders at any such meeting, may be taken without a meeting, provided that
consents in writing, setting forth the action so taken, shall be signed by all
of the shareholders entitled to vote with respect to the subject matter
thereof.
TENTH
That the Restated Articles of Incorporation correctly set forth without
change the corresponding provisions of the Articles of Incorporation as
heretofore amended, and supercede the original Articles of Incorporation and
all amendments thereto.
Dated: October 17, 1995
Ameren Corporation
/s/ Donald E. Brandt
By: _________________________________
President
/s/ William E. Jaudes
And: ________________________________
Secretary
F-2
<PAGE>
STATE OF MISSOURI SS
CITY OF ST. LOUIS
On this 17th day of October, 1995, before me appeared Donald E. Brandt, to me
personally known, who, being by me duly sworn, did say that he is President of
Ameren Corporation, and that said instrument was signed on behalf of said
Corporation by authority of its Board of Directors, and said Donald E. Brandt
acknowledged said instrument to be the free act and deed of said corporation.
/s/ William E. Jaudes
_____________________________________
William E. Jaudes
F-3
<PAGE>
ANNEX G
AMEREN CORPORATION
----------------
BY-LAWS
AS AMENDED AS OF SEPTEMBER 20, 1995
----------------
ARTICLE I
STOCKHOLDERS
Section 1. The annual meeting of the stockholders of the Company, beginning
with the year 1996, shall be held on the fourth Tuesday of April in each year
(or if said day be a legal holiday, then on the next succeeding day not a legal
holiday), at the registered office of the Company in the City of St. Louis,
State of Missouri, or on such other date and at such other place within or
without the state of Missouri as may be stated in the notice of meeting, for
the purpose of electing directors and of transacting such other business as may
properly be brought before the meeting.
Section 2. Special meetings of the stockholders may be called by the Chief
Executive Officer or, if one has not been appointed, by the President, or by
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of directors which the Company would have if there were no
vacancies.
Section 3. Written or printed notice of each meeting of stockholders stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
given not less than ten nor more than seventy days before the date of the
meeting, either personally or by mail, to each stockholder of record entitled
to vote thereat, at his address as it appears, if at all, on the records of the
Company. Such further notice shall be given by mail, publication or otherwise
as may be required by law. Meetings may be held without notice if all the
stockholders entitled to vote thereat are present or represented at the
meeting, or if notice is waived by those not present or represented.
Section 4. The holders of record of a majority of the shares of the capital
stock of the Company issued and outstanding, entitled to vote thereat, present
in person or represented by proxy, shall, except as otherwise provided by law,
constitute a quorum at all meetings of the stockholders. If at any meeting
there be no such quorum, such holders of a majority of the shares so present or
represented may successively adjourn the meeting to a specified date not longer
than ninety days after such adjournment, without notice other than announcement
at the meeting, until such quorum shall have been obtained, when any business
may be transacted which might have been transacted at the meeting as originally
notified. The chairman of the meeting or a majority of shares so represented
may adjourn the meeting from time to time, whether or not there is such a
quorum.
Section 5. Meetings of the stockholders shall be presided over by the Chief
Executive Officer or, if he is not present, or if one has not been appointed,
by the Chairman of the Board of Directors or by the President or, if neither
the Chairman nor the President is present, by such other officer of the Company
as shall be selected for such purpose by the Board of Directors. The Secretary
of the Company or, if he is not present, an Assistant Secretary of the Company
or, if neither the Secretary nor an Assistant Secretary is present, a secretary
pro tem to be designated by the presiding officer shall act as secretary of the
meeting.
Section 6. At all meetings of the stockholders every holder of record of the
shares of the capital stock of the Company, entitled to vote thereat, may vote
either in person or by proxy.
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Section 7. At all elections for directors the voting shall be by written
ballot. If the object of any meeting be to elect directors or to take a vote of
the stockholders on any proposition of which notice shall have been given in
the notice of the meeting, the person presiding at such meeting shall appoint
not less than two persons, who are not directors, inspectors to receive and
canvass the votes given at such meeting. Any inspector, before he shall enter
on the duties of his office, shall take and subscribe an oath, in the manner
provided by law, that he will execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors shall take charge of the polls and after the balloting shall make a
certificate of the result of the vote taken.
Section 8. (a) (1) Nominations of persons for election to the Board of
Directors of the Company and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Company's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Company who was a stockholder of
record at the time of giving of notice provided for in this By-Law, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this By-Law.
(2) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (c) of paragraph (a)(1) of this By-
Law, the stockholder must have given timely notice thereof in writing to the
Secretary of the Company and such other business must otherwise be a proper
matter for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Company
not later than the close of business on the 60th day or earlier than the close
of business on the 90th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of
the annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Company. In no
event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as
described above. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
Rule 14a-11 thereunder (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(b) as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial
owner and (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this By-Law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Company is increased and there is no
public announcement by the Company naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-Law shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Company not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Company.
(b) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Company's notice of meeting. Nominations of persons for election to the
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Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Company's notice of meeting (1) by
or at the direction of the Board of Directors or (2) provided that the Board of
Directors has determined that directors shall be elected at such meeting, by
any stockholder of the Company who is a stockholder of record at the time of
giving of notice provided for in this By-Law, who shall be entitled to vote at
the meeting and who complies with the notice procedures set forth in this By-
Law. In the event the Company calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be), for election
to such positions(s) as specified in the Company's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this By-Law shall be
delivered to the Secretary at the principal executive offices of the Company
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In
no event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as
described above.
(c) (1) Only such persons who are nominated in accordance with the procedures
set forth in this By-Law shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
By-Law. Except as otherwise provided by law, the Articles of Incorporation of
the Company (such articles, as they may be amended and/or restated from time to
time being referred to herein as the "Articles of Incorporation") or these By-
Laws, the chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in this By-Law and, if any proposed nomination or business is not in
compliance with this By-Law, to declare that such defective proposal or
nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the Company
with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d)
of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
By-Law. Nothing in this By-Law shall be deemed to affect any rights (a) of
stockholders to request inclusion of proposals in the Company's proxy statement
pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any
series of Preferred Stock to elect directors under specified circumstances.
ARTICLE II
DIRECTORS
Section 1. The property and business of the Company shall be controlled and
managed by its Board of Directors. The number of directors to constitute the
Board of Directors shall be four; provided, however, that such number may be
fixed by the Board of Directors, from time to time, at not less than a minimum
of three nor more than a maximum of twenty-one (21) (subject to the rights of
the holders of shares of Preferred Stock, if any, as set forth in the Articles
of Incorporation). Any such change shall be reported to the Secretary of State
of the State of Missouri within thirty (30) calendar days of such change.
Except as otherwise provided in the Articles of Incorporation, the directors
shall hold office until the next annual election and until their successors
shall be elected and qualified. A majority of the members of the Board of
Directors shall constitute a quorum for the transaction of business, but if at
any meeting of the Board there shall be less than a quorum
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present, a majority of the directors present may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until such
quorum shall have been obtained, when any business may be transacted which
might have been transacted at the original meeting had a quorum been present.
Section 2. Vacancies in the Board of Directors, including vacancies created
by newly created directorships, shall be filled in the manner provided in the
Articles of Incorporation, as amended, and, except as otherwise provided
therein, the directors so elected shall hold office until their successors
shall be elected and qualified.
Section 3. Meetings of the Board of Directors shall be held at such time and
place within or without the State of Missouri as may from time to time be fixed
by resolution of the Board, or as may be stated in the notice of any meeting.
Regular meetings of the Board shall be held at such time as may from time to
time be fixed by resolution of the Board, and notice of such meetings need not
be given. Special meetings of the Board may be held at any time upon call of
the Chief Executive Officer or, if one has not been appointed, by the
President, or by the Executive Committee, if one shall have been appointed, by
oral, telegraphic or written notice, duly given or sent or mailed to each
director not less than two (2) days before any such meeting. The notice of any
meeting of the Board need not specify the purposes thereof except as may be
otherwise required by law. Meetings may be held at any time without notice if
all of the directors are present or if those not present waive notice of the
meeting, in writing.
Section 4. The Board of Directors, by the affirmative vote of a majority of
the whole Board may appoint an Executive Committee, to consist of two or more
directors, as the Board may from time to time determine. The Executive
Committee shall have and may exercise to the extent permitted by law, when the
Board is not in session, all of the powers vested in the Board, except the
power to fill vacancies in the Board, the power to fill vacancies in or to
change the membership of said Committee, and the power to make or amend By-Laws
of the Company. The Board shall have the power at any time to fill vacancies
in, to change the membership of, or to dissolve, the Executive Committee. The
Executive Committee may make rules for the conduct of its business and may
appoint such committees and assistants as it shall from time to time deem
necessary. A majority of the members of the Executive Committee shall
constitute a quorum.
Section 5. The Board of Directors may also appoint one or more other
committees to consist of such number of the directors and to have such powers
as the Board may from time to time determine. The Board shall have the power at
any time to fill vacancies in, to change the membership of, or to dissolve, any
such committee. A majority of any such committee may determine its action and
fix the time and place of its meetings, unless the Board of Directors shall
otherwise provide.
ARTICLE III
OFFICERS
Section 1. As soon as is practicable after the election of directors at the
annual meeting of stockholders, the Board of Directors shall elect one of its
members President of the Company, and shall elect a Secretary. The Board may
also elect from its members a Chairman of the Board of Directors (which office
may be held by the President) and one or more Vice Chairmen of the Board of
Directors. The Board shall designate either the Chairman, if any, or the
President as the Chief Executive Officer of the Company. In addition, the Board
may elect one or more Vice Presidents (any one or more of whom may be
designated as Senior or Executive Vice Presidents), and a Treasurer, and from
time to time may appoint such Assistant Secretaries, Assistant Treasurers and
other officers, agents, and employees as it may deem proper. The offices of
Secretary and Treasurer may be held by the same person, and a Vice President of
the Company may also be either the Secretary or the Treasurer.
Section 2. Between annual elections of officers, the Board of Directors may
effect such changes in Company offices as it deems necessary or proper.
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Section 3. Subject to such limitations as the Board of Directors may from
time to time prescribe, the officers of the Company shall each have such powers
and duties as generally pertain to their respective offices, as well as such
powers and duties as from time to time may be conferred by the Board of
Directors of the Executive Committee. The Treasurer and the Assistant
Treasurers may be required to give bond for the faithful discharge of their
duties, in such sum and of such character as the Board of Directors may from
time to time prescribe.
ARTICLE IV
INDEMNIFICATION
Each person who now is or hereafter becomes a director (which term as used in
this Article shall include an advisor to the Board of Directors), officer,
employee or agent of the Company, or who now is or hereafter becomes a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise at the request of the Company, shall be
entitled to indemnification as provided by law. Such right of indemnification
shall include, but not be limited to, the following:
Section 1. (a) The Company may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Company, by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Company may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including attorneys' fees, and
amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Company unless and only to the extent that the court in which
the action or suit was brought determines upon application that, despite the
adjudication of liability and in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the Company
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in subsections (a) and (b) above, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection with the action, suit, or proceeding.
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(d) Any indemnification under subsections (a) and (b) above, unless ordered
by a court, shall be made by the Company only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in this Section. The determination
shall be made by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the action, suit, or
proceeding, or if such a quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the stockholders.
Section 2. (a) In addition to the indemnity authorized or contemplated under
other Sections of this Article, the Company shall further indemnify to the
maximum extent permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding (including appeals), whether civil, criminal, investigative
(including private Company investigations), or administrative, including an
action by or in the right of the Company, by reason of the fact that the person
is or was a director, officer, or employee of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, for and against any
and all expenses incurred by such person, including, but not limited to,
attorneys' fees, judgments, fines (including any excise taxes or penalties
assessed on a person with respect to an employee benefit plan), and amounts
paid in settlement actually or reasonably incurred by him in connection with
such action, suit or proceeding, provided that the Company shall not indemnify
any person from or on account of such person's conduct which was finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct.
(b) Where full and complete indemnification is prohibited by law or public
policy, any person referred to in subsection (a) above who would otherwise be
entitled to indemnification nevertheless shall be entitled to partial
indemnification to the extent permitted by law and public policy. Furthermore,
where full and complete indemnification is prohibited by law or public policy,
any person referred to in subsection (a) above who would otherwise be entitled
to indemnification nevertheless shall have a right of contribution to the
extent permitted by law and public policy in cases where said party is held
jointly liable with the Company.
Section 3. The indemnification provided by Sections 1 and 2 shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under the Articles of Incorporation or By-Laws or any agreement,
vote of stockholders or disinterested directors or otherwise both as to action
in his official capacity and as to action in another capacity while holding
such office, and the Company is hereby specifically authorized to provide such
indemnification by any agreement, vote of stockholders or disinterested
directors or otherwise. The indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 4. The Company is authorized to purchase and maintain insurance on
behalf of, or provide another method or methods of assuring payment to, any
person who is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any capacity, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under the
provisions of this Article.
Section 5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Company in advance of the final disposition of
the action, suit, or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Company as authorized
in this Article.
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Section 6. This Article may be hereafter amended or repealed; provided,
however, that no amendment or repeal shall reduce, terminate or otherwise
adversely affect the right of a person who is or was a director, officer,
employee or agent to obtain indemnification with respect to an action, suit, or
proceeding that pertains to or arises out of actions or omissions that occur
prior to the effective date of such amendment or repeal.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. The interest of each stockholder shall be evidenced by
certificates for shares of stock of the Company, in such form as the Board of
Directors may from time to time prescribe. The certificates for shares of stock
of the Company shall be signed by the Chairman, if any, or the President or a
Vice President (including Senior or Executive Vice Presidents) and by the
Secretary or Treasurer or an Assistant Secretary or an Assistant Treasurer of
the Company and sealed with the seal of the Company and shall be countersigned
and registered in such manner, if any, as the Board of Directors may from time
to time prescribe. Any or all of the signatures on the certificate may be
facsimile and the seal may be facsimile, engraved or printed. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may nevertheless be issued by the Company with the same effect as
if the person were an officer, transfer agent or registrar at the date of
issue.
Section 2. The shares of stock of the Company shall be transferable only on
the books of the Company by the holders thereof in person or by duly authorized
attorney, upon surrender for cancellation of certificates for the same number
of shares of the same class of stock, with an assignment and power of transfer
endorsed thereon or attached thereto, duly executed, and with such proof of the
authenticity of the signatures as the Company or its agents may reasonably
require.
Section 3. No certificate for shares of stock of the Company shall be issued
in place of any certificate alleged to have been lost, stolen or destroyed,
except upon production of such evidence of such loss, theft or destruction, and
upon the Company being indemnified to such extent and in such manner as the
Board of Directors in its discretion may require.
ARTICLE VI
CLOSING OF STOCK TRANSFER BOOKS OR FIXING RECORD DATE
The Board of Directors shall have power to close the stock transfer books of
the Company for a period not exceeding seventy days preceding the date of any
meeting of stockholders or the date of payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange
of shares shall go into effect; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding seventy days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or
entitled to any such allotment of rights, or entitled to exercise the rights in
respect of any such change, conversion or exchange of shares. In such case such
stockholders and only such stockholders as shall be stockholders of record on
the date of closing the stock transfer books or on the record date so fixed
shall be entitled to notice of, and to vote at, such meeting, and any
adjournments thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Company after
such date of closing of the transfer books or such record date fixed as
aforesaid.
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ARTICLE VII
CHECKS, NOTES, ETC.
All checks and drafts on the Company's bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be thereunto authorized from time to time
by the Board of Directors. The Board of Directors may authorize any such
officer or agent to sign and, when the Company's seal is on the instrument, to
attest any of the foregoing instruments by the use of a facsimile signature,
engraved or printed or otherwise affixed thereto. In case any officer or agent
who has signed or whose facsimile signature has been placed upon any such
instrument for the payment of money shall have ceased to be such officer or
agent before such instrument is issued, such instrument may nevertheless be
issued by the Company with the same effect as if such officer or agent had not
ceased to be such officer or agent at the date of its issue.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Company shall begin on the first day of January in
each year and shall end on the thirty-first day of December following until
otherwise changed by resolution of the Board, and the Board is authorized at
any time by resolution to adopt and fix a different fiscal year for the
Company.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Company and
the words "Corporate Seal, Missouri".
ARTICLE X
AMENDMENTS
The By-Laws of the Company may be made, altered, amended, or repealed by the
Board of Directors.
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ANNEX H
SECTION 351.455 OF THE MISSOURI GENERAL AND BUSINESS CORPORATION LAW
351.455 SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES, WHEN.--
1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall
not vote in favor thereof, and such shareholder, within twenty days after the
merger or consolidation is effected, shall make written demand on the surviving
or new corporation for payment of the fair value of his shares as of the day
prior to the date on which the vote was taken approving the merger or
consolidation, the surviving or new corporation shall pay to such shareholder,
upon surrender of his certificate or certificates representing said shares, the
fair value thereof. Such demand shall state the number and class of the shares
owned by such dissenting shareholder. Any shareholder failing to make demand
within the twenty day period shall be conclusively presumed to have consented
to the merger or con solidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or consolidation
was effected the value of such shares is agreed upon between the dissenting
shareholder and the surviving or new corporation, payment therefor shall be
made within ninety days after the date on which such merger or consolidation
was effected, upon the surrender of his certificate or certificates
representing said shares. Upon payment of the agreed value the dissenting
shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the share holder and the surviving or
new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in
any court of competent jurisdiction within the county in which the registered
office of the surviving or new corporation is situated, asking for a finding
and determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of
such judgment. The judgment shall be payable only upon and simultaneously with
the surrender to the surviving or new corporations of the certificate or
certificates representing said shares. Upon the payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares, or in
the surviving or new corporation. Such shares may be held and disposed of by
the surviving or new corporation as it may see fit. Unless the dissenting
shareholder shall file such petition within the time herein limited, such
shareholder and all persons claiming under him shall be conclusively presumed
to have approved and ratified the merger or consolidation, and shall be bound
by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon
the merger or consolidation.
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ANNEX I
SECTIONS 11.65 AND 11.70 OF THE ILLINOIS BUSINESS CORPORATION ACT OF 1983
5/11.65 RIGHT TO DISSENT.--(a) A shareholder of a corporation is entitled
to dissent from, and obtain payment for his or her shares in the event of
any of the following corporate actions:
(1) consummation of a plan of merger or consolidation or a plan of
share exchange to which the corporation is a party if (i) shareholder
authorization is required for the merger or consolidation or the share
exchange by Section 11.20 or the articles of incorporation or (ii) the
corporation is a subsidiary that is merged with its parent or another
subsidiary under Section 11.30;
(2) consummation of a sale, lease or exchange of all, or
substantially all, of the property and assets of the corporation other
than in the usual and regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase of such shares;
(iii) in the case of a corporation incorporated prior to January
1, 1982, limits or eliminates cumulative voting rights with respect
to such shares; or
(4) any other corporate action taken pursuant to a shareholder vote
if the articles of incorporation, by-laws, or a resolution of the board
of directors provide that shareholders are entitled to dissent and
obtain payment for their shares in accordance with the procedures set
forth in Section 11.70 or as may be otherwise provided in the articles,
by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating
his or her entitlement unless the action is fraudulent with respect to the
shareholder or the corporation or constitutes a breach of a fiduciary duty
owed to the shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer
than all the shares recorded in such person's name only if such person
dissents with respect to all shares beneficially owned by any one person
and notifies the corporation in writing of the name and address of each
person on whose behalf the record owner asserts dissenters' rights. The
rights of a partial dissenter are determined as if the shares as to which
dissent is made and the other shares recorded in the names of different
shareholders. A beneficial owner of shares who is not the record owner may
assert dissenters' rights as to shares held on such person's behalf only if
the beneficial owner submits to the corporation the record owner's written
consent to the dissent before or at the same time the beneficial owner
asserts dissenters' rights.
5/11.70 PROCEDURE TO DISSENT.--(a) If the corporate action giving rise to
the right to dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to dissent
and the procedure to dissent. If, prior to the meeting, the corporation
furnishes to the shareholders material information with respect to the
transaction that will objectively enable a shareholder to vote on the
transaction and to determine whether or not to exercise dissenters' rights,
a shareholder may assert dissenters' rights only if the shareholder
delivers to the corporation before the
I-1
<PAGE>
vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor
of the proposed action.
(b) If the corporate action giving rise to the right to dissent is not to
be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall
inform the shareholders of their right to dissent and the procedure to
dissent. If, prior to or concurrently with the notice, the corporation
furnishes to the shareholders material information with respect to the
transaction that will objectively enable a shareholder to vote on the
transaction and to determine whether or not to exercise dissenters' rights,
a shareholder may assert dissenters' rights only if he or she delivers to
the corporation within 30 days from the date of mailing the notice a
written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporation action giving
rise to the right to dissent is effective or 30 days after the shareholder
delivers to the corporation the written demand for payment, whichever is
later, the corporation shall send each shareholder who has delivered a
written demand for payment a statement setting forth the opinion of the
corporation as to the estimated fair value of the shares, the corporation's
latest balance sheet as of the end of a fiscal year ending not earlier than
16 months before the delivery of the statement, together with the statement
of income for that year and the latest available interim financial
statements, and either a commitment to pay for the shares of the dissenting
shareholder at the estimated fair value thereof upon transmittal to the
corporation of the certificate or certificates, or other evidence of
ownership, with respect to the shares, or instructions to the dissenting
shareholder to sell his or her shares within 10 days after delivery of the
corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at
which the shares may be readily sold. If the shareholder does not sell
within that 10 day period after being so instructed by the corporation, for
purposes of this Section the shareholder shall be deemed to have sold his
or her shares at the average closing price of the shares, if listed on a
national exchange, or the average of the bid and asked price with respect
to the shares quoted by a principal market maker, if not listed on a
national exchange, during that 10 day period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are cancelled
or modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter
who transmits to the corporation the certificate or other evidence of
ownership of the shares the amount the corporation estimates to be the fair
value of the shares, plus accrued interest, accompanied by a written
explanation of how the interest was calculated.
(e) If the shareholder does not agree with the opinion of the corporation
as to the estimated fair value of the shares or the amount of interest due,
the shareholder, within 30 days from the delivery of the corporation's
statement of value, shall notify the corporation in writing of the
shareholder's estimated fair value and amount of interest due and demand
payment for the difference between the shareholder's estimate of fair value
and interest due and the amount of the payment by the corporation or the
proceeds of sale by the shareholder, whichever is applicable because of the
procedure for which the corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and
interest due, the corporation and the dissenting shareholder have not
agreed in writing upon the fair value of the shares and interest due, the
corporation shall either pay the difference in value demanded by the
shareholder, with interest, or file a petition in the circuit court of the
county in which either the registered office or the principal office of the
corporation is located, requesting the court to determine the fair value of
the shares and interest due. The corporation shall make all dissenters,
whether or not residents of this State, whose demands remain unsettled
parties to the proceeding as an action against their shares and all parties
shall be served with a copy of the petition. Nonresidents may be served by
registered or certified mail or by publication as provided by law. Failure
I-2
<PAGE>
of the corporation to commence an action pursuant to this Section shall not
limit or affect the right of the dissenting shareholders to otherwise
commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced under
subsection (f) by a corporation is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the power described in the
order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to judgment for
the amount, if any, by which the court finds that the fair value of his or her
shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) the court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of the appraisers, if any, appointed by the court under subsection
(g), but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court,
then all or any part of the costs may be assessed against that dissenter. The
court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to that counsel reasonable fees to be paid out of the amounts awarded
to the dissenters who are benefited. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the consummation of the corporate action
to which the dissenter objects excluding any appreciation or depreciation
in anticipation of the corporate action, unless exclusion would be
inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
I-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IV of the Registrant's Bylaws, consistent with the applicable
provisions of the Missouri General and Business Corporation Law (the "MGBCL"),
provides for indemnification of directors and officers. These provisions
provide that any person shall be indemnified for expenses and liabilities
imposed upon such person in connection with any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of the Registrant, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Registrant, or is or was serving at the request of the Registrant
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
In a proceeding brought by or in the right of the Registrant, no
indemnification shall be made with respect to any claim as to which an officer
or director has been adjudged to have been liable to the Registrant, unless the
court determines that such a person is reasonably and fairly entitled to
indemnification for expenses. However, no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Registrant unless and only to the extent that the court in which
the action or suit was brought determines upon application that, despite the
adjudication of liability and in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
The By-laws, consistent with the applicable provisions of the MGBCL, provide
that indemnification shall be made by the Registrant only if a determination
has been made by a majority vote of a quorum of the disinterested directors or
by the shareholders or by independent legal counsel, that the director or
officer met the required standard of conduct. The Registrant is authorized to
purchase liability insurance on behalf of an officer or director whether or not
the corporation would otherwise have the power to indemnify such a person.
The By-laws, consistent with the applicable provisions of the MGBCL, further
provide that, in addition to the indemnities described in the preceding
paragraphs, the Registrant will further indemnify its officers and directors to
the maximum extent permitted by law, provided that no indemnity may be given
for conduct that is adjudged to be knowingly fraudulent, deliberately
dishonest, or willful misconduct.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of Exhibits to this Registration
Statement:
<TABLE>
<C> <S>
2 Agreement and Plan of Merger, dated as of August 11, 1995, by and among
Union Electric Company ("UEC"), CIPSCO Incorporated ("CIPSCO"), the
Registrant and Arch Merger Inc. (included in Part I hereof as Annex A
to the Joint Proxy Statement/Prospectus)
3(i) Restated Certificate of Incorporation of the Registrant (included in
Part I hereof as Annex F to the Joint Proxy Statement/Prospectus)
3(ii) By-laws of the Registrant (included in Part I hereof as Annex G to the
Joint Proxy Statement/Prospectus)
4.01 Reference is made to Article III of the Restated Certificate of
Incorporation of the Registrant (Exhibit 3(i) hereof)
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4.02 Instrument defining the rights of security holders, including indentures (the
Registrant has no instruments defining the rights of holders of equity or debt
securities where the amount of securities authorized thereunder exceeds 10% of the
total assets of the Registrant and its subsidiaries on a consolidated basis. The
Registrant hereby agrees to furnish a copy of any such instrument to the Commission
upon request)
5 Opinion of William E. Jaudes as to legality of securities being issued
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to federal income tax matters
8.02 Opinion of Jones, Day, Reavis & Pogue as to federal income tax matters
12 Computation of ratio of earnings to fixed changes
21 Subsidiaries of the Registrant
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of Goldman, Sachs & Co.
23.04 Consent of Morgan, Stanley & Co.
23.05 Consent of William E. Jaudes (included in Exhibit 5 hereof)
23.06 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.01 hereof)
23.07 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 8.02 hereof)
23.08 Consent of Synergy Consulting Services Corporation
24 Powers of Attorney
99.01 Form of Proxy for UEC
99.02 Form of Proxy for CIPSCO
99.03 Stock Option Agreement, dated as of August 11, 1995, by and between UEC and CIPSCO
(included in Part I hereof as Annex B to the Joint Proxy Statement/Prospectus)
99.04 Stock Option Agreement, dated as of August 11, 1995, by and between CIPSCO and UEC
(included in Part I hereof as Annex C to the Joint Proxy Statement/Prospectus)
99.05 Consent of Charles W. Mueller
99.06 Consent of Clifford L. Greenwalt
</TABLE>
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
The undersigned Registrant hereby undertakes that every prospectus: (i) that
is filed pursuant to the immediately preceding paragraph, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 20 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(5) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Form S-4
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of St. Louis, and State of Missouri, on November
13, 1995.
AMEREN CORPORATION
/s/ Donald E. Brandt
By:--------------------------
Donald E. Brandt
Chairman and
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the dates indicated.
SIGNATURES TITLE DATE
* Chairman and November 13,
- ------------------------------------- President (principal 1995
DONALD E. BRANDT executive and
financial officer)
* Vice President and
Director
(principal accounting officer)
November 13,
- ------------------------------------- 1995
CRAIG D. NELSON
* Secretary and November 13,
- ------------------------------------- Director 1995
WILLIAM E. JAUDES
* Treasurer and November 13,
- ------------------------------------- Director 1995
LOWELL A. DODD
/s/ Donald E. Brandt
*By _________________________________
Donald E. Brandt
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- ----------
<C> <S> <C>
2 Agreement and Plan of Merger, dated as of August 11,
1995, by and among Union Electric Company ("UEC"),
CIPSCO Incorporated ("CIPSCO"), the Registrant and
Arch Merger Inc. (included in Part I hereof as Annex
A to the Joint Proxy Statement/Prospectus)
3(i) Restated Certificate of Incorporation of the
Registrant (included in Part I hereof as Annex F to
the Joint Proxy Statement/Prospectus)
3(ii) By-laws of the Registrant (included in Part I hereof
as Annex G to the Joint Proxy Statement/Prospectus)
4.01 Reference is made to Article III of the Restated
Certificate of Incorporation of the Registrant
(Exhibit 3(i) hereof)
4.02 Instruments defining the rights of security holders,
including indentures (the Registrant has no
instruments defining the rights of holders of equity
or debt securities where the amount of securities
authorized thereunder exceeds 10% of the total assets
of the Registrant and its subsidiaries on a
consolidated basis. The Registrant hereby agrees to
furnish a copy of any such instrument to the
Commission upon request)
5 Opinion of William E. Jaudes as to legality of
securities being issued
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to
federal income tax matters
8.02 Opinion of Jones, Day, Reavis & Pogue as to federal
income tax matters
12 Computation of ratio of earnings to fixed charges
21 Subsidiaries of the Registrant
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of Goldman, Sachs & Co.
23.04 Consent of Morgan, Stanley & Co.
23.05 Consent of William E. Jaudes (included in Exhibit 5
hereof)
23.06 Consent of Wachtell, Lipton, Rosen & Katz (included
in Exhibit 8.01 hereof)
23.07 Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 8.02 hereof)
23.08 Consent of Synergy Consulting Services Corporation
24 Powers of Attorney
99.01 Form of Proxy for UEC
99.02 Form of Proxy for CIPSCO
99.03 Stock Option Agreement, dated as of August 11, 1995,
by and between UEC and CIPSCO (included in Part I
hereof as Annex B to the Joint Proxy Statement-
Prospectus)
99.04 Stock Option Agreement, dated as of August 11, 1995,
by and between CIPSCO and UEC (included in Part I
hereof as Annex C to the Joint Proxy Statement-
Prospectus)
99.05 Consent of Charles W. Mueller
99.06 Consent of Clifford C. Greenwalt
</TABLE>
<PAGE>
Exhibit 5
---------
WILLIAM E. JAUDES
1901 Chouteau
St. Louis, Missouri 63103
Dated the Effective Date
of the Registration Statement
Ameren Corporation
c/o Union Electric Company
1901 Chouteau Avenue
St. Louis, Missouri 63103
Union Electric Company
Arch Holding Corp.
1901 Chouteau Avenue
St. Louis, Missouri 63103
CIPSCO Incorporated
607 East Adams Street
Springfield, Illinois 62739
Subject: Registration Statement on Form S-4
Ladies and Gentlemen:
Reference is made to the registration statement on Form S-4 (the
"Registration Statement") being filed by Ameren Corporation, a Missouri
corporation (the "Company"), with the Securities and Exchange Commission for the
purpose of registering under the Securities Act of 1933, as amended (the
"Securities Act"), 138,157,962 shares of the Company's common stock, $.01 par
value (the "Shares"), to be issued or reserved for issuance in connection with
the mergers (the "Mergers") of Arch Merger Inc., a Missouri corporation and
wholly owned subsidiary of the Company, with and into Union Electric Company, a
Missouri corporation, and of CIPSCO Incorporated, an Illinois corporation, with
and into the Company as described in the Registration Statement.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such corporate records, certificates of public officials,
and other documents as I have deemed necessary or relevant as a basis for my
opinion set forth herein.
Based on the foregoing, it is my opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Missouri.
2. When the Shares have been issued in the Mergers in the manner
contemplated by the Registration Statement, while the Registration Statement is
effective and in compliance with
<PAGE>
Ameren Corporation
Union Electric Company
CIPSCO Incorporated
Page 2
applicable state securities laws, the Shares will be validly issued, fully paid,
and nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Joint Proxy Statement-Prospectus forming a part of the
Registration Statement. In giving this consent, I do not thereby admit that I
am in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ William E. Jaudes
William E. Jaudes, Esq.
<PAGE>
Exhibit 8.01
------------
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
November 13, 1995
Ameren Corporation
c/o Union Electric Company
1901 Chouteau Avenue
St. Louis, Missouri 63103
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Ameren Corporation ("Holdings"), a Missouri
corporation 50% owned by each of Union Electric Company, a Missouri corporation
("Union Electric"), and CIPSCO Incorporated, an Illinois corporation ("CIPSCO"),
relating to (i) the merger of Arch Merger Inc., a Missouri corporation and a
wholly owned subsidiary of Holdings, with and into Union Electric and (ii) the
merger of CIPSCO with and into Holdings (collectively, the "Mergers").
We have participated in the preparation of the discussion set forth
under the heading "THE MERGERS -- Certain Federal Income Tax Consequences" in
the joint proxy statement and prospectus that is part of the Registration
Statement. In our opinion, such discussion, insofar as it relates to the federal
income tax consequences of the Mergers to Union Electric and shareholders of
Union Electric, is accurate in all material respects.
We consent to the use of this opinion as Exhibit 8.01 to the
Registration Statement and to the reference to our firm under the heading "THE
MERGERS -- Certain Federal Income Tax Consequences" in the proxy statement and
prospectus that is part of the Registration Statement. In giving such consent,
we do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
<PAGE>
Exhibit 8.02
------------
[LETTERHEAD OF JONES, DAY, REAVIS & POGUE]
November 13, 1995
Ameren Corporation
c/o Union Electric Company
1901 Chouteau Avenue
St. Louis, Missouri 63103
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Ameren Corporation (formerly Arch Holding Corp.,
"Holdings"), a Missouri corporation 50% owned by each of Union Electric Company,
a Missouri corporation ("Union Electric"), and CIPSCO Incorporated, an Illinois
corporation ("CIPSCO"), relating to (i) the merger of Arch Merger Inc., a
Missouri corporation and a wholly owned subsidiary of Holdings, with and into
Union Electric and (ii) the merger of CIPSCO with and into Holdings
(collectively, the "Mergers").
We have participated in the preparation of the discussion set forth
under the heading "THE MERGERS -- Certain Federal Income Tax Consequences" in
the joint proxy statement and prospectus that is part of the Registration
Statement. In our opinion, such discussion in so far as it relates to the
federal income tax consequences of the Mergers to CIPSCO and the holders of
CIPSCO Common Stock is accurate in all material respects.
We consent to the use of this opinion as Exhibit 8.02 to the
Registration Statement and to the reference to our firm under the heading "THE
MERGERS -- Certain Federal Income Tax Consequences" in the proxy statement and
prospectus that is part of the Registration Statement. In giving such consent,
we do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
<PAGE>
EXHIBIT 12
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
12 MONTHS
ENDED
SEPTEMBER 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- -------------
(THOUSANDS OF DOLLARS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Net income for the
period................. $345,282 $379,518 $361,189 $368,571 $391,459 $375,859
Minority interest net
income................. 4,825 4,550 5,334 5,204 5,554 4,840
Add:
Taxes based on income. 234,675 268,096 245,658 242,892 262,648 253,696
-------- -------- -------- -------- -------- --------
Net income before taxes. 584,782 652,164 612,181 616,667 659,661 634,395
Fixed charges:
Interest on debt....... 225,957 209,716 166,984 163,873 176,579 171,979
Amortization of premium
and discount, less
expense, on debt and
bond defeasance cost.. 4,695 4,486 10,384 6,768 7,182 7,190
Rentals (see note)..... 1,114 1,171 908 1,314 1,299 2,846
Preferred stock dividend 20,310 19,455 18,607 17,805 16,762 17,088
of subsidiaries........ -------- -------- -------- -------- -------- --------
252,076 234,828 196,883 189,760 201,822 199,103
Earnings available for $836,858 $886,992 $809,064 $806,427 $861,483 $833,498
fixed charges.......... ======== ======== ======== ======== ======== ========
Fixed Charges........... $252,076 $234,828 $196,883 $189,760 $201,822 $199,103
Adjustment to pre-tax 11,273 11,398 10,351 9,705 9,314 9,598
basis.................. -------- -------- -------- -------- -------- --------
$263,349 $246,226 $207,234 $199,465 $211,136 $208,701
======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges adjusted 3.18X 3.60X 3.90X 4.04X 4.08X 3.99X
to pre-tax basis....... ===== ===== ===== ===== ===== =====
</TABLE>
- --------
Note: Represents the interest factor applicable to rentals.
<PAGE>
Exhibit 21
----------
Subsidiaries of the Registrant
------------------------------
Subsidiary State of Incorporation
- ---------- ----------------------
Arch Merger Inc. Missouri
<PAGE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Ameren
Corporation of our report dated January 31, 1995, which appears on page 19 of
Union Electric Company's 1994 Annual Report to Shareholders, which is
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1994. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page 13 of such
Annual Report on Form 10-K. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
St. Louis, Missouri
November 13, 1995
<PAGE>
Exhibit 23.02
-------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated January
27, 1995 included in CIPSCO Incorporated's Form 10-K for the year ended December
31, 1994 and to all references to our Firm included in this Registration
Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 13, 1995
<PAGE>
Exhibit 23.03
-------------
[Letterhead of Goldman, Sachs & Co.]
November 13, 1995
Board of Directors
Union Electric Company
1901 Chouteau Avenue
St. Louis, Missouri 63103
Re: Joint Proxy Statement of Union Electric Company
and CIPSCO Incorporated and Registration Statement
on Form S-4 of Arch Holding Corp.
--------------------------------------------------
Gentlemen and Madame:
Reference is made to our opinion letter dated November 13, 1995 with
respect to the fairness to the holders of the outstanding shares of Common
Stock, par value $5.00 per share (the "Common Stock") of Union Electric Company
(the "Company") of the exchange ratio to be received by holders of Common Stock
in the merger involving the Company contemplated by the Agreement and Plan of
Merger (the "Agreement") dated as of August 11, 1995, by and among the Company,
CIPSCO Incorporated, Ameren Corporation (formerly known as Arch Holding Corp.)
and Arch Merger Inc., in light of the CIPSCO Exchange Ratio (as defined in the
Agreement).
The foregoing opinion letter is solely for the information and
assistance of the Board of Directors of Union Electric Company in connection
with its consideration of the transaction contemplated therein and is not to be
used, circulated, quoted or otherwise referred to for any other purpose, nor is
it to be filed with, included in or referred to in whole or in part in any
registration statement, proxy statement or any other document, except in
accordance with our prior written consent.
In that regard, we hereby consent to the reference to the opinion of
our Firm under the captions "Summary of Joint Proxy Statement/Prospectus --
Opinion of Financial Advisors", "The Mergers -- Opinion of Financial Advisors"
and "The Mergers -- Reasons for the Mergers; Recommendations of the Board of
Directors" and to the inclusion of the foregoing opinion in the Joint Proxy
Statement included in the above-mentioned Registration Statement. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
rules and regulations of the Securities and Exchange Commission thereunder, nor
do we thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
Goldman, Sachs & Co.
<PAGE>
Exhibit 23.04
-------------
[Letterhead of Morgan Stanley & Co. Incorporated]
November 9, 1995
Board of Directors
CIPSCO Incorporated
607 East Adams Street
Springfield, Illinois 72739
Re: Joint Proxy Statement of Union Electric Company
and CIPSCO Incorporated and Registration Statement
on Form S-4 of Ameren Corporation
--------------------------------------------------
Members of the Board of Directors:
Reference is made to our opinion letter appearing as Annex E to the
Joint Proxy Statement with respect to the fairness to the holders of the
outstanding shares of Common Stock, without par value (the "Common Stock") of
CIPSCO Incorporated (the "Company") of the exchange ratio to be received by
holders of Common Stock in the merger involving the Company contemplated by the
Agreement and Plan of Merger (the "Agreement") dated as of August 11, 1995, by
and among the Company, Union Electric Company, Ameren Corporation and Arch
Merger Inc., in light of the Union Electric Exchange Ratio (as defined in the
Agreement).
We hereby consent to the reference to the opinion of our Firm under
the captions "Summary of Joint Proxy Statement/Prospectus -- Opinion of
Financial Advisors", "The Mergers -- Opinion of financial Advisors" and "The
Mergers --Reasons for the Mergers; Recommendations of the Board of Directors"
and to the inclusion of the foregoing opinion in the Joint Proxy Statement
included in the above-mentioned Registration Statement. In giving such consent,
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 or the rules
and regulations of the Securities and Exchange Commission thereunder, nor do we
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Robert W. Jones
------------------------
Robert W. Jones
Managing Director
<PAGE>
Exhibit 23.08
-------------
CONSENT OF SYNERGY CONSULTING SERVICES CORPORATION
We hereby consent to the reference to our report containing the
results of our evaluation of the Callaway Nuclear Generating Station of Union
Electric Company referred to in the joint proxy statement/prospectus included in
this registration statement and to all references to our firm included in or
made a part of this registration statement. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations adopted by the Securities and Exchange Commission thereunder.
/s/ John C. Guibert
SYNERGY CONSULTING SERVICES
CORPORATION
Chapel Hill, North Carolina
Date: November 13, 1995
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Donald E. Brandt and William E. Jaudes or any
of them each acting alone, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, in connection with the Registration Statement on Form S-4 (the
"Form S-4") under the Securities Exchange Act of 1934, as amended, relating to
the registration of shares of Common Stock of Arch Holding Corp. (the
"Corporation") including, without limiting the generality of the foregoing, to
sign the Form S-4 in the name and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form S-4 (including post-effective amendments) and any instrument,
contract, document or other writing, of or in connection with the Form S-4 or
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
13th day of November, 1995.
/s/ Donald E. Brandt
--------------------------
Donald E. Brandt
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Donald E. Brandt and William E. Jaudes or any
of them each acting alone, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, in connection with the Registration Statement on Form S-4 (the
"Form S-4") under the Securities Exchange Act of 1934, as amended, relating to
the registration of shares of Common Stock of Arch Holding Corp. (the
"Corporation") including, without limiting the generality of the foregoing, to
sign the Form S-4 in the name and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form S-4 (including post-effective amendments) and any instrument,
contract, document or other writing, of or in connection with the Form S-4 or
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
13th day of November, 1995.
/s/ William E. Jaudes
--------------------------
William E. Jaudes
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Donald E. Brandt and William E. Jaudes or any
of them each acting alone, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, in connection with the Registration Statement on Form S-4 (the
"Form S-4") under the Securities Exchange Act of 1934, as amended, relating to
the registration of shares of Common Stock of Arch Holding Corp. (the
"Corporation") including, without limiting the generality of the foregoing, to
sign the Form S-4 in the name and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form S-4 (including post-effective amendments) and any instrument,
contract, document or other writing, of or in connection with the Form S-4 or
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
13th day of November, 1995.
/s/ Lowell A. Dodd
--------------------------
Lowell A. Dodd
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Donald E. Brandt and William E. Jaudes or any
of them each acting alone, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, in connection with the Registration Statement on Form S-4 (the
"Form S-4") under the Securities Exchange Act of 1934, as amended, relating to
the registration of shares of Common Stock of Arch Holding Corp. (the
"Corporation") including, without limiting the generality of the foregoing, to
sign the Form S-4 in the name and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form S-4 (including post-effective amendments) and any instrument,
contract, document or other writing, of or in connection with the Form S-4 or
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
13th day of November, 1995.
/s/ Craig D. Nelson
--------------------------
Craig D. Nelson
<PAGE>
EXHIBIT 99.01
As filed with the Securities and Exchange Commission on November 13, 1995
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS, DECEMBER 20, 1995
UNION ELECTRIC COMPANY
The undersigned hereby appoints Charles W. Mueller and James C. Thompson as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote all the shares of the common stock, par value $5.00
per share, and the preferred stock, without par value, of Union Electric
Company which the undersigned is entitled to vote at the Special Meeting of
Stockholders to be held at The Ritz-Carlton, 100 Carondelet Plaza, St. Louis,
Missouri 63105, on December 20, 1995 at 9:00 a.m., and at any adjournment or
postponement thereof, (1) as specified below on the matter listed and more
fully described in the Notice of Special Meeting and Proxy Statement of said
meeting, receipt of which is acknowledged, and (2) in their discretion on such
other matters incidental to the conduct of the Special Meeting as may properly
come before the Special Meeting or any adjournment or postponement thereof.
The shares represented by this Proxy will be voted as directed by the
undersigned stockholder. If no direction is given, shares will be voted FOR
the proposal described on the reverse side of this card. Specific choices may
be made on the reverse side of this Proxy.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY
ARE INDICATED. PLEASE NOTE THAT ABSTAINING FROM THE VOTE ON THE PROPOSAL WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE FOLLOWING
PROPOSAL:
1. Approval of an Agreement and Plan of Merger, dated as of August 11, 1995,
by and among Union Electric Company, a Missouri corporation ("Union Elec-
tric"), CIPSCO Incorporated, an Illinois corporation ("CIPSCO"), Ameren
Corporation ("Holdings"), a Missouri corporation which is 50% owned by each
of Union Electric and CIPSCO, and Arch Merger Inc., a Missouri corporation
and a wholly owned subsidiary of Holdings ("Merger Sub"), pursuant to
which, among other things, Merger Sub will be merged with and into Union
Electric and CIPSCO will be merged with and into Holdings, with the effect
that Holdings will become the holding company for Union Electric and the
operating subsidiaries of CIPSCO.
For Against Abstain
[_] [_] [_]
I plan to attend
the meeting
[_]
The undersigned hereby revokes all proxies heretofore given by the undersigned
to vote at said meeting or any adjournments thereof.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
___________________________________________
___________________________________________
Signature(s) Date
- -
- -
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
<PAGE>
EXHIBIT 99.02
As filed with the Securities and Exchange Commission on November 13, 1995
LOGO
PLEASE COMPLETE BOTH SIDES OF PROXY CARD, DETACH AND RETURN IN THE ENCLOSED
ENVELOPE.
If you do not return the proxy card and do not vote at the meeting, it will
have the same effect as if you voted against the Merger Agreement. Thus, it is
important that you promptly mark and return the attached proxy card, even if
you intend to vote in person at the special meeting of shareholders.
Thank you.
SOLICITED BY THE BOARD OF DIRECTORS OF CIPSCO INCORPORATED
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS, DECEMBER 20, 1995
THE UNDERSIGNED APPOINTS, AND DIRECTS THE AGENTS OF THE PLANS IDENTIFIED ON THE
REVERSE HEREOF TO APPOINT, C.L. GREENWALT AND W.A. KOERTNER, AND EACH OF THEM
AS ATTORNEYS AND PROXIES WITH POWER OF SUBSTITUTION TO VOTE, AS INDICATED
HEREON, ALL SHARES OF COMMON STOCK OF CIPSCO INCORPORATED HELD OF RECORD IN THE
NAME OF, OR HELD FOR THE ACCOUNT OF THE UNDERSIGNED IN THE PLANS, AT THE CLOSE
OF BUSINESS ON THE RECORD DATE AND, IN THEIR DISCRETION, TO VOTE ON ALL OTHER
MATTERS INCIDENT TO THE CONDUCT OF THE MEETING WHICH MAY PROPERLY COME BEFORE
THE SPECIAL MEETING OF SHAREHOLDERS OF CIPSCO INCORPORATED AND AT ALL ADJOURNED
SESSIONS THEREOF, ALL AS SET FORTH IN THE NOTICE AND JOINT PROXY
STATEMENT/PROSPECTUS RELATING TO THE MEETING.
IF JOINT ACCOUNT, EACH
JOINT OWNER SHOULD
SIGN. STATE TITLE WHEN
SIGNING AS EXECUTOR,
ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC.
DO NOT FOLD
DATED ____
SIGNED ______________________________
------------------------------
[CIPSCO INCORPORATED LETTERHEAD]
PLEASE COMPLETE BOTH SIDES OF PROXY CARD, DETACH AND RETURN IN THE ENCLOSED
ENVELOPE.
If you do not return the proxy card and do not vote at the meeting, it will
have the same effect as if you voted against the Merger Agreement. Thus, it is
important that you promptly mark and return the attached proxy card, even if
you intend to vote in person at the special meeting of shareholders.
Thank you.
<PAGE>
THE VOTES REPRESENTED BY THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS IN-
DICATED BY YOU. IF YOU SIGN AND RETURN THE PROXY UNMARKED, SUCH VOTES WILL BE
VOTED "FOR" THE APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
DIRECTORS RECOMMEND A VOTE "FOR" MARK YOUR VOTE ON THIS SIDE WITH AN [X].
ITEM 1 DATE PROXY AND SIGN ON REVERSE SIDE EX-
ACTLY AS NAME(S) ARE SHOWN AND RETURN
SIGNED PROXY IN ENCLOSED ENVELOPE.
1. APPROVAL FOR AGAINST ABSTAIN
OF THE
AGREEMENT [_] [_] [_]
AND PLAN
OF MERGER
WITH UNION
ELECTRIC
COMPANY.
PARTICIPANTS IN (I) THE COMPANY'S AUTO-
MATIC DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLAN AND (II) CENTRAL ILLINOIS
PUBLIC SERVICE COMPANY'S EMPLOYEE STOCK
OWNERSHIP PLAN OR ANY OF ITS EMPLOYEE
SAVINGS PLANS, DIRECT ILLINOIS STOCK
TRANSFER COMPANY AND THE RESPECTIVE PLAN
TRUSTEE, RESPECTIVELY, AS AGENT, TO VOTE
AS INDICATED HEREIN.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Exhibit 99.05
-------------
Consent to Be Named as a Prospective Director
---------------------------------------------
The undersigned hereby consents to being named as a prospective director
of Ameren Corporation ("Ameren") in the Registration Statement on Form S-4 filed
with the Securities and Exchange Commission.
/s/ Charles W. Mueller
----------------------
Charles W. Mueller
<PAGE>
Exhibit 99.06
-------------
Consent to Be Named as a Prospective Director
---------------------------------------------
The undersigned hereby consents to being named as a prospective director
by Ameren Corporation of Ameren Corporation in the Registration Statement on
Form S-4 filed by Ameren Corporation with the Securities and Exchange Commission
on November 13, 1995.
/s/ Clifford L. Greenwalt
-------------------------
Clifford L. Greenwalt
